A robust first half trading update is not enough to give Bovis Homes (BVS) a prolonged lift this morning as the shares give up earlier gains to trade flat at £10.14.

The tone of this morning’s statement is positive and there are some encouraging signs but investors may be reacting to the lack of explicit guidance on margins.

For the six-month period ended 30 June, average private sales rate per site per week rose 15% to 0.6 from 0.52 a year earlier.

The group delivered a total of 1,647 homes, up 4% from 1,580 last year. Of this 1,031 were private units and 616 affordable. The company said it expected to deliver a similar number of affordable homes this year compared to last year.

The total average selling price increased by about 3% to £270,000 and the company says build cost inflation pressures have eased slightly.

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Canaccord Genuity analyst Aynsley Lammin says: ‘The turnaround strategy is still clearly on track with improvement showing up in higher sales rates and margins.’

AJ Bell investment director Russ Mould says: ‘There are some neglected areas which may crop up in any survey of the half year numbers when they are announced in full in September.

‘There is no explicit guidance on margin performance in today’s update despite the company setting a target for an 800 basis points improvement in margins from a 2016 nadir.

‘The company has previously outlined increased use of part-exchange deals to stimulate demand and it will be interesting to see if this trend is continuing given the implications for profit and cash flow.’

Shore Capital analyst Robin Hardy reckons profitability is the key concern. He says: ‘Our issue with Bovis has long been that we struggled to see how the promised margin uplift could be delivered into a slowing market and we stick with that view.’


Issue Date: 09 Jul 2019