Having taken a plunge many house builders are now possibly on the up again.

Feb 25:

Barclays: Underweight - TP up from 807.30p to 835.40p - Reiteration

Citigroup: Neutral - TP up from 940p to 980p - DownGrade

Liberum Capital: Buy - TP up from 911p to 1034p - Reiteration

UBS: Buy - TP up from 1000p to 1050p - Reiteration

Half Yearly Report

· 54% increase in legal completions to 1,487 homes (H1 2013: 963 homes)
· Average sales price on private legal completions, excluding PRS homes, of £239,500, 20% higher than H1 2013 (£200,200), driven by mix and modest improvements in house prices
· A record 4,597 consented plots on 23 sites added to the land bank
· Growing consented land bank of 17,702 plots as at 30 June 2014 (31 December 2013: 14,638 plots)
· 19,608 plots of strategic land (31 December 2013: 20,108)

Current trading and outlook
· Cumulative sales achieved to week 32 for 2014 legal completion of 3,530 homes (2013: 2,505), with the Group being nearly fully sold for legal completions in 2014
· Average sales price for 2014 legal completions expected to be between £210,000 and £215,000
· 2014 operating margin expected to increase to between 17% and 18% (2013: 14.9%)
· Material improvement in ROCE for 2014, now expected to be circa 16.0% (2013: 10.4%)

Updated strategic plan set out to deliver optimal scale and returns
· Growing to an optimal scale with annual volumes of between 5,000 and 6,000 new homes
· Managing the housing cycle to maximise returns, while effectively stewarding shareholders' capital, targeting ROCE of at least 20% by 2016
· With the Board's confidence in the strategic plan, intention to pay an enhanced dividend of 35 pence per share in 2014 and at least 35 pence per share in 2015 (2013: 13.5 pence) and a revised dividend policy thereafter

Final Results

StockMarketWire.com
Bovis Homes reports a record number of first half legal completions, made possible by the high quality land investments made during the last few years.

The group says the average sales price on legal completions increased by 6% to £222,000 (H1 2014: £210,000) and that it is on track to deliver further growth in shareholder returns.

Chief executive David Ritchie said: "We continue to trade well in a positive UK housing market delivering a strong forward sales and build position on an increased number of sales outlets. As a result we are on track to deliver our expected growth for 2015 and a further increase in return on capital employed supported by robust profit margins and improved capital turn.

"Future growth in shareholder returns is being underpinned by further disciplined investment in new consented and strategic land."

The group said that as previously guided in May of this year, its legal completion profile in 2015 is expected to be more weighted to the second half of the year than was the case in the prior year (H1 2014: 41%).

Given the higher proportion of traditional family homes along with robust housing market conditions, the Group's average private sales price increased to £264,000, 10% ahead of the comparative of £240,000 in H1 2014.

Overall, including the increased share of social housing, the Group's average sales price increased by 6% to £222,000 (H1 2014: £210,000). The group has been trading from an average of 100 sales outlets during the year to date which represents an 8% increase on the comparative period. Weekly private sales rates to date have remained robust at an average of 0.63 net private reservations per site against the strong comparative in 2014 of 0.65.

The total forward sales position for 2015 delivery, including legal completions to date, stood at 3,505 homes at 30 June 2015 (30 June 2014: 3,297). Housing production is currently 13% ahead of the prior year which provides a strong base for the planned volume growth for 2015. The Group remains on track to deliver its expected total volume of legal completions for 2015.

Merrill Lynch note:
"We view the fundamentals in the UK House Builders’ sector as positive long term with the four pillars of support, the Government, the Bank of England/ the banks, consumers and the house builders, all pointing to a healthy environment. That said, with the sector performing strongly post the election, we believe valuations are looking stretched and see the chance of an extended correction increasing, given the budget announcements yesterday and the potential for interest rate fears to emerge . We downgrade Bovis Homes to Neutral and adjust POs across the sector

Yesterday’s ‘Summer Budget 2015’ contained a restriction on tax relief on buy to let mortgages which is negative to sector sentiment, and, limitations on non-dom tax status. We believe sentiment could be further dulled by any (fears of) rising interest rate commentary in H2 that could lead to an extended correction (sector fell c12% Oct/Nov ‘03), especially considering the current elevated price levels.

In the last 3 and 12 months ahead of the budget, the sector rose by 25% and 57% respectively, a move that has more than outstripped consensus upgrades, ie the stocks have rerated over the period and now trade on an average forward PER of 10.0x, up from c8x a year ago. At the same time, the market has also rerated, from c13x in mid 2014, to 14x, which implies that the sector discount has closed.

Historically, the UK House Builders sector has performed well from November to March, before performing poorly in May and June. This year, as mentioned above, this traditionally weak period has been strong, in fact, the sector has only declined in absolute terms twice since July 2014, in September (-0.4%), and January ’15 (-2.3%). Bearish interest rate rise comments could be a correction catalyst.

We have downgraded Bovis Homes from Buy to Neutral following its 50% move from its 2015 low, to year high. This is the only recommendation change. We also raise our POs on a number of stocks; Bovis Homes from 1,000p to 1,170p, BDEV from 475p to 540p, Bellway from 2,050p to 2,500p, and Redrow from 450p to 515p.

Our key picks in the sector are Persimmon, where we have raised 2016 EPS forecasts by c6%, Taylor Wimpey which also has very strong cash flow characteristics, and Redrow. We are especially attracted to PSN and TW which offer dividend yields of 5.9%, and 7.9% respectively. Redrow, pays a very modest dividend, but on a PE basis is the cheapest stock in the sector on 8.4x 2016E."

The warning of interest rate rises to come in early 2016 seems to have hit all of the house builders today. Presumably this marks the very early stage of the 'down cycle' of the housing stocks?

sp has been walloped by ~10% this morning on the latest trading update

that looks awfully overdone to me, as it was scarcely poor ..... and other housing stocks have also been hit

i understand the very high end of the market being hit in central london, but recent reactions in the housing sector look very odd to me .... or am i being unusually stupid even by my high standards?

Comment from Deustche Bank:
"Against a tide of positive results in the sector, Bovis trading update feels like a cold shower. FY 15 profitability impacted as planning delays push back completions on its new higher margin sites, although for FY 16 mgmt indicate the increasing build costs should be offset by a greater mix benefit to selling price. Trading at 1.25x 2016 NTAV Bovis is the cheapest stock in the sector, and against bottom end of peer ROCE this is hard to dispute (although dividend yield is becoming increasingly interesting). However for those willing to believe the group can drive towards the 28% ROCE on new land, any weakness as consensus reshuffles following this update could prove a buying opportunity.

1) Robust trading continues. Bovis reports that sales have strengthened into autumn, with a sales rate since the start of September +20% (excluding PRS) to 0.62 reservations per site, with the group 38% sold for next year (+18%).
2) But margin impacted by planning delays on newer sites: DB PBT ests reduced by 6% in FY 15. While Bovis reports it has reservations that cover its planned 8% growth in completions for 2015 (DB ests were 10%), and an average sales price for 2015 in line with guidance (+ 7%), delays in planning and therefore completions on its newer higher margins sites have reduced upside in margins YoY. Reflecting this change in margin guidance we have reduced our PBT est for FY 15 by 6%. For FY 16 management indicates that while the contribution of the new higher margins sites should be captured the upwards creep of build cost inflation (upped from 7% to 7-8%) implies a smaller upside in gross margin YoY than previously indicated. Management believes this downside to margin expectations should be largely offset by a higher than consensus average selling price driven by mix. However while management has retained its target for 20% ROCE in FY 16, and believes there should be little movement in consensus for next year, we have reduced our FY 16 PBT by 8% (moving in line with consensus).
3) Land acquisition slows, but discipline continues. To date Bovis reports it has added 25 sites (c 4,000 plots), and while this is equivalent to replacement it remains short of the 40 new sites targeted. Management indicates that there remains scope to reach its target by YE, although it highlights that progress has been slowed by the uncertainty created by the change in social rent. The group reiterates however that there remains no shortage of opportunities in the land market, and discipline remains (an av ROCE of land in 2015 of c28%).

We set our price target at 1.5x 2017E NTAV discounted back at 8% plus dividends paid out to this date. Downside risks include: lower margins made on the new land, lower volumes seen to leverage Bovis’ operational costs."

on the other hand, barclays was less enthusiastic

i opted for some BDEV in lieu

Due for a rebound!

Bovis Homes unveils record profits

StockMarketWire.com

Bovis Homes Group reports record profits for the year to the end of December with significant revenue growth driven by record legal completions and a strong increase in average sales.

The group generated total revenue of GBP946.5 million, an increase of 17% on the previous year (2014: �809.4 million). Housing revenue was �910.1 million, 16% ahead of the prior year (2014: �783.6 million) and other revenue was �6.4 million (2014: �4.2 million). Land sales revenue, associated with four land sales, was �30.0 million in 2015, compared to three land sales achieved in 2014 with a total revenue of �21.6 million.

The Group delivered a 19% increase in operating profit for the year ended 31 December 2015 to �163.5 million (2014: �137.6 million) at an operating profit margin of 17.3% (2014: 17.0%). Total gross profit was �232.3 million (gross margin: 24.5%), compared with �197.2 million (gross margin: 24.4%) in 2014. The profit on land sales in 2015 was �8.8 million (2014: �3.9 million) as the Group continues its strategy of managing its capital base through the disposal of parcels of land on large sites, often strategically sourced.

Profit before tax increased by 20% to �160.1 million, comprising operating profit of �163.5 million, net financing charges of �5.2 million and a profit from joint ventures of �1.8 million. This compares to �133.5 million of profit before tax in 2014, which comprised �137.6 million of operating profit, �4.4 million of net financing charges and a profit from joint ventures of �0.3 million. The profit from joint ventures in 2015 included the benefits of revaluing both the Bovis Peer LLP and IIH Oak Investors LLP PRS property portfolios in the period. Basic earnings per share for the year improved by 21% to 95.4p compared to 78.6p in 2014. This improvement has resulted in a return on equity of 15% (2014: 13%).

Chief executive David Ritchie said: "We have delivered record profit driven by another year of record volume. We have invested well during 2015 in new consented land and achieved a strong level of conversion from our strategic land bank. While it has been a time of operational challenge with fast moving market conditions, we are delivering our strategic growth plan and have evolved our management and business structure at the start of 2016 to support further growth. Assuming market conditions remain stable we are confident in our ability to improve return on capital employed further in 2016.

"In the current housing market, our plan envisages the business delivering sustainable growth over the next few years to achieve annual volumes of between 5,000 and 6,000 new homes.

"I am pleased to reconfirm that, in line with guidance, the Board is recommending a full year dividend of 40 pence, an increase of 14%, reflecting our confidence in the Group's future growth prospects."

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For those interested from Motley Fool today..........

Value buy or value trap?

Is it too late to put fresh money into housebuilders such as Bovis Homes Group (LSE:BVS)? Bovis shares have fallen by about 30% since last August, while other housing stocks have also fallen. In my view, the market is pricing in a cyclical peak for the housing market. The problem is that at a company-specific level, the outlook still seems very attractive.

Current broker forecasts suggest that Bovis will report a 16 per cent rise in earnings per share this year, with a 14 per cent increase expected in 2017. At 830p, Bovis shares trade on a forecast P/E of just 7.5, falling to 6.5 for 2017.

This looks cheap, but P/E ratings can be misleading for cyclical stocks. If house prices have peaked, then Bovis profits could fall sharply. My preferred measure is the price/book ratio. Bovis shares have a book value of 712.7p per share, giving them a price/book ratio of 1.2. This is much lower than most other housebuilders, and looks quite reasonable.

With a forecast yield of 5.5%, Bovis could be good value -- if you believe that the housing market has further to run.

imo, BVS makes an excellent sipp or similar stock, not only because of the juicy yield, but also because its houses are at the more affordable end of the market

it is indisputable that the country has to build a zillion more homes a year, so one way or another, i am very happy to be holding this in my sipp even if at a rather higher price than today

StockMarketWire.com
Bovis Homes posts first half pre-tax profits of £61.7m - up from £53.8m - after delivering a record number of homes.

Revenues were up 18% at £412.8m and housing gross profits rose by 19%b to £100.3m. Operating profits of £63.9m were up by 18%. Basic earnings per share rose by 14% to 36.5p and the dividend of 15.0p per share is up by 9%.

Chief executive David Ritchie said: "We have delivered a record number of homes in the first half of 2016 which has driven strong profit growth, improved returns and a 9% increase in the interim dividend. Our forward sales position means we are well placed to continue this strong performance through the remainder of the year.

"Whilst it is too early to judge the impact of the EU Referendum and the Bank's monetary policy response on the UK housing market, the underlying market fundamentals for UK housing remain positive. We have been pleased with the resilient level of interest shown by potential home buyers contacting us.

"Our robust balance sheet, with debt lower than last year, means that we are well positioned to continue to take advantage of prime land opportunities at potentially higher returns. Overall, we remain confident in our strategy to deliver long-term growth in shareholder returns."

Speculative interest in BKG acquiring Bovis:

Shore Capital comment:
· Why buy a business in this cycle? – there is little obvious appeal to buying another quoted house builder in this cycle primarily because there is too much land available in the open market. This means that a house builder can buy sites only where it wants to build and that it feels sit well with its brand. The changes to the planning regime under the NPPF means that there are more than 500,000 more plots of land available today than would have been in a previous cycle. New land can be bought at historically low prices and there is ample opportunity to defer payment using land creditors. None of that is possible if buying another business.
· Fighting the damage already done – Bovis has had a tough time recently in the media and could have material reputational damage that could become an albatross around the neck of any bidder.
· Relationships – there appear to be deep rooted problems with sub-contractors that have been pivotal in Bovis being unable to manage build costs or deliver expected unit sales, the reason for the December profit warning. The problem with sub-contrators may also extend to professional posts across the group. If there are fractured relationships, these would be inherited by any buyer and could take a long time to unwind.

Bovis profits fall after difficult year

StockMarketWire.com

Bovis Homes posts a pre-tax profits of �154.7m for the year to the end of December - down from �160.1m last time.

Bovis said it was a difficult year for the group following a period of ambitious growth and weaknesses in its production process and a high level of customer service issues led to a one-off �7m customer care provision.

Revenues rose by 11% to �1,054.8m and the dividend of 45.0p per share is up 13%.

The group said it has embarked on a programme to deliver significant and urgent improvement in underlying processes across the business, focused on the delivery of the highest quality of product and service to customers.

The group says it aims to return to being a top quartile industry performer in customer service, product quality and production efficiency.

Chairman Ian Tyler said: "Despite the difficulties of 2016, the board remains confident in the group's abilities to deliver improved returns to shareholders.

"The process of transformation is already under way under Earl Sibley's interim leadership and I am confident the plans in place will address the operational weaknesses we have seen in our business, and focus us once again on delivering high quality product and service to our customers.

"Further, we are undertaking a strategic and structural review of the business to ensure we meet our commitment to deliver the highest possible returns from our valuable land assets."







Story provided by StockMarketWire.com

hammered on vile results and forecast
i've got them in my sipp and now have to decide whether to ditch or hang on in the hope that they become a target

The rush to get homes on the market has led to shoddy workmanship. Cheaper to spend a few extra days making good. Costs less in the long run.

Manuel,

It depends on how long you expect to live for.

I would think and hope for an early slight rebound.

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I have the misfortune of holding IRV as well.

C'est la vie.

quite so :-)
balanced out in that sector by TW. and RMV

Peel Hunt comment today:
"Full-year results. Full-year PBT of c£155m missed the revised guidance of £160m-170m and compares with £160m in 2015. Operating margins slip 210bp to 15.2%, leaving them 350bp behind the sector average. Revenue was slightly better than expected at £1,055m, although the volumes and ASP were only marginally better, indicating higher other sales than expected. The dividend has been increased 13% to 45p (vs 44p est)
Balance sheet and land bank. The group finished the year with net cash of £39m vs our estimate of £18m. However, the land held in the land bank shrunk by 6% to 18,700, well short of our estimate of over 21,000. The land bank has now shrunk to 4.7 years from 5.0 years and compares with the sector average of over 5.2. On top of this, the group has c25,500 strategic plots.
Outlook and forecasts. Guidance for 2017 has been cut hard with volumes now expected to be 10-15% below this year's level (which implies a 15-20% reduction on our estimates) as the business sorts itself out. We struggle to see how margins can move forward, whilst this process of rectifying the problems is going on, which means PBT forecasts are likely to come back 15-20%. Management has committed to paying the same level of dividend (45p) in 2017.
Performance and valuation. Until today, the shares hadn’t performed that badly vs the sector due to bid speculation offsetting the profit warnings. In our view, the likelihood of the company being bought by any other industry players looks remote giving the liquidity in the land market. Therefore, the key to the shares performing better will be the group’s ability to turn itself around operationally. Without knowing who the CEO will be to lead this charge, we see no need to get involved especially given the wide choice of other attractive housebuilders.