Bovis Homes expects 'strong increase' in full-year profits

7th Nov 2014 07:55

UK housebuilder Bovis Homes has said it expects a "significant increase" in shareholder returns this year as it noted a recent improvement in conditions after a subdued summer.Chief executive David Ritchie said that the company is "anticipating a strong increase in profit for 2014". Current consensus estimates are for a pre-tax profit of around £135m, up from the £78.8m earned in 2013.In a third-quarter update, the group said it has experienced a more normal seasonal pattern in trading activity this year with a weaker summer period followed by a pick-up in the autumn.It said that its sales rates have remained "robust" despite lower levels of activity in the wider housing market. However, it did note that rates in the second half were still lower year-on-year due to a tough comparative in 2013 after the government launched its 'Help to Buy' scheme.Nevertheless, sales prices are still strong with price gains on private reservations 5% over target sales prices set last year. The company said: "Whilst the group has seen build cost pressures, particularly in labour costs, the sales price gains are expected to fully mitigate the impact of higher build costs during 2014."The average sales prices for legal completions in 2014 is forecast to be 10% ahead of 2013. In the first 10 months of 2014, net private reservations were up 24% year-on-year at 2,886.Meanwhile in the land market, Bovis said purchases are "progressing well" with the company adding 6,000 consented plots on 33 sites to the land bank to date.The average return on capital employed of the land acquired is between 25% and 30%, well above the group's hurdle rate of 20%, it said.Ritchie said: "We are confident of our future prospects and ability to deliver improved shareholder returns through higher return on capital employed and increasing dividends."