Housebuiler Bovis Homes (BVS) jumps 2.4% to 922p after posting a strong set of full-year results, showing substantial growth across all the metrics that matter.
Pre-tax for the year to 31 December increased by 48% to £78.8 million. This was also accompanied by a steady uptick in operating margins from 13.3% in 2012 to 14.9% in the year to December 2013.
The stronger property market has clearly helped as the housebuilder enjoyed a 14% rise in average sales prices over the period. Yet Bovis says higher prices were achieved due to mix changes such as a greater focus on larger homes and a greater proportion of higher value southern sites.
Volumes, as expressed in terms of legal completions, rose 19% last year with 2,813 units compared to 2,355 in 2012 while 2013 production also advanced, showing a 26% increase to 2,935 homes.
All of this meant that Bovis was able to post double-digit return-on-capital-employed (ROCE) for the first time in several years, coming in at 10.4% compared to the previous year's 7.7%.
There was also no dearth of good news on the land bank in 2013 with 3,737 plots on 27 sites added to the group's consented land. At the end of the year, the Bovis land bank comprised of 14,638 consented plots, with potential gross profit of £727 million (calculated using current sales prices and current build costs).
Improving visibility seems to be another ongoing trend at Bovis; the group's order book at the end of 2013 was up 178% to 692 homes and the housebuilder was also able to report positive trading up to 21 February in its outlook. The first seven weeks of 2014 saw a 64% increase in private reservations to 468 compared to the same period a year earlier while sales prices are already 2% ahead of group expectations.
Analyst Mark Hughes at Panmure Gordon maintains a 'buy' rating and upgrades the target price from 900p to 923p. Chris Millington at Numis had this to say: 'Bovis has made great strides to close the ROCE gap with peers through improved asset turn and strong margins. Whilst the company still lags the sector on our forecasts we feel this is more than reflected in the valuation and we are increasing our target price to 960p, which equates to 1.35 times Dec 2015 P/NTAV (price to net tangible asset value).'
