LONDON -- Bovis Homes Group (LSE:BVS) this morning released a trading update ahead of reporting its preliminary results for 2012, due Feb. 25, and it was good news for shareholders.
Profits were ahead of expectations following a 5% increase in the group's average sales price to 170,700 pounds, compared with 2011's 162,400 pounds. Completions rose 15% (2,355 versus 2,045 the previous year); of these, 1,854 were private, and 501 were social. Additionally, operating profit margin saw a significant rise, up to 13.5% from 10% in 2011. Management said this was driven by an "increasing contribution from legal completions on sites acquired since the housing market downturn, a positive contribution from land sales and improving overhead efficiency."
Bovis has also invested strongly in consented land during 2012 -- about 3,500 plots on 24 sites. Of these, circa 2,650 plots on 18 sites were added to the consented-land bank during 2012, and the balance is expected to be added during the early months of 2013.
Three land sales were legally completed during 2012, generating a total income of 18 million pounds (2011: 38 million pounds) and 5 million pounds of profit (2011: 2 million pounds). These investments resulted in a net cash position at year-end of 19 million pounds; the company started the year with 51 million pounds.
Chief executive David Ritchie commented:
2012 was a successful year for Bovis Homes. We delivered significant growth in profits and returns as a result of our continued strategy for growth through investment in high quality consented and strategic land. This strategy will be further progressed in 2013, which, subject to stable market conditions, should deliver strong improvements in the Group's returns in 2013 and beyond.
Bovis remains positive on the outlook for the year ahead. The group held forward sales for delivery of 778 homes in 2013, 37% up on the 568 homes at the start of 2012.
Despite this update, shares lost 2% in London trade today. Perhaps this positive trend was already priced in. Still, Bovis Homes' recovery has seen its shares rally from a low of 326 in 2011, thereby making the shares almost double for investors smart enough to spot the handsome buying opportunity as recently as two years ago.
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