Bovis bucks post-Brexit trend with profits hike
Housebuilder Bovis Homes has shrugged off heightened uncertainty surrounding the Brexit vote to book a double digit rise in profits.
The FTSE 250 firm said the "underlying market fundamentals" for the UK housing market remained positive, as half year pre-tax profits stepped up 15% to 61.7 million to June 30, up from £53.8 million in 2015.
Revenues also climbed 18% to £412.8 million over the period, building on £350.7 million in the first half of 2015.
It added that the number of new homes it completed rose 5% to 1,601 compared to last year, while the average selling price lifted 14% to £254,500 in contrast to £222,300 the year before.
Chief executive David Ritchie said the rise in profits came after the firm built a record number of homes in the first half of 2016.
"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," he added.
"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."
Shares were down more than 1%.
The company said it had already hit more than 90% of planned home sales for this year, with 3,877 sales as of August 12 compared with 3,768 in 2015.
Mr Ritchie added: " Strong housing demand has led to overall market pricing improvements, with the group having experienced pricing ahead of expectations with Help to Buy continuing to be a significant driver of sales.
"Offsetting these pricing improvements is the impact of rising construction costs, although the impact of inflation on our cost base has moderated compared to last year."
The bright performance from the firm comes amid a string of gloomy reports for the construction sector, suggesting the UK economy is in line for an economic slowdown.
The construction industry fell back into recession for the first time in four years in the run-up to Britain's referendum on the European Union.
The Office for National Statistics (ONS) said construction output dropped by 0.7% in the second quarter, following a 0.3% fall in the first quarter, meaning the industry recorded two consecutive quarters of negative growth for the first time since 2012.
Meanwhile, the latest Markit/CIPS construction purchasing managers' index (PMI) showed that the construction industry recorded its fastest fall since June 2009, hitting 45.9 in July, down slightly from 46 in June but above economists' expectations of 44.
Property stocks took a hammering in the wake of the EU referendum result, with Bovis Homes still 18% lower than before the Brexit vote.
George Salmon, equity analyst at Hargreaves Lansdown, said: "Despite selling more houses at higher prices in the first half of the year, the sentiment around Bovis shares remains dominated by the potentially disruptive impact that the Brexit could have on the second half of this year and beyond.
"Recent surveys show confidence in the UK construction sector has fallen sharply since the vote, so it's not hard to see why shares across the housebuilding sector are still well below their pre-referendum levels.
"However, the decision by the Bank of England to lower interest rates should help to keep mortgages affordable, and plenty of other supportive factors will remain. Brits will still want to own homes, whether in or out of the EU, government schemes such as help-to-buy will almost certainly be unaffected, and the UK still faces a major housing shortage."