In the six month period to 30th June 2011 Bovis homes has seen an increase in profits of more than 230%. This represents a jump from £3.5 million (about 4 million Euros) to £8.1 million (about 9.19 million Euros) in pre-tax profit. The company also increased its sales by 19% compared to the same period last year, which meant that they sold 1087 properties.
For the last three years Bovis Homes has not been able to pay any interim dividends to shareholders. The scheme was put on hold when a downturn in the building industry meant that Bovis had to cut jobs and reduce production. However, the situation changed this year when the firm was able to declare an interim dividend of 1.5p per share.
Bovis gave two reasons for its massive increase in profits. Firstly, there has been a substantial reduction in construction costs due to lower sub-contractor labour rates. The second reason is down to the company’s programme of land purchasing, which took place in 2010. The Chief Executive of Bovis Homes, Mr David Ritchie commented:
“The group has delivered a strong performance during the first half of 2011 against the backdrop of stable, but challenging, market conditions.
“This increase has been delivered through improved profit margins generated from reduced construction costs on existing sites and the initial contribution from new higher margin sites acquired since the housing market downturn.”
When the price of UK building plots hit a low at the end of 2009, Bovis took the decision to buy, meaning that they spent a total of £203 million in 2010 on 3,700 plots. The company realises that this was a high risk strategy but it hopes to benefit when housing prices begin to rise.
Bovis is the smallest publicly listed building company in the UK based on volume, but is expecting future growth following its new land acquisitions. The company is predicting that it will have 78 outlets open by the end of this year; this compares with 68 at the end of last year. Regarding the company’s future, Mr Ritchie added:
“As a result of opening a significant number of the new, more profitable sites, active sales outlets will grow through 2011, supporting higher sales. Subject to current market conditions continuing, the group’s profit margins will continue to improve, particularly in 2012 when a significant proportion of housing completions will come from these new sites.”