Highlights
· Group expects to deliver another record year of profits, slightly ahead of market consensus(1)
· Significant step up in average weekly sales rate to 0.58 for 2019
· Controlled period end with total completions up 3% to 3,867
· Operating margin progression despite backdrop of market uncertainty
· HBF Customer Satisfaction score of above 90% for Q3, equivalent to 5-star rating
· Good progress to date for Vistry Group following transformational acquisition of Linden Homes and Partnerships & Regeneration businesses completed on 3 January 2020
Greg Fitzgerald, Chief Executive commented:
“The Group has made further operational progress over the past 12 months and for 2019 expects to deliver another year of record profit. Building high quality new homes for our customers has been, and remains our priority, and I am confident we will finish the year as an HBF 5-star housebuilder.
We completed the transformational acquisition of the Linden Homes and the renamed Vistry Partnerships at the start of this year; integration is well under way and we are fully focused on delivering the clear and significant benefits from this exciting combination as quickly as possible.”
Trading update
The Group completed a total of 3,867 (2018: 3,759) new homes in the year including 58 (2018: nil) joint venture completions, an increase of 3% on the prior year. Private homes totalled 2,678 (2018: 2,567) units with 1,189 (2018: 1,192) affordable housing units.
Total average selling price on completions in the year was c. £279k (2018: £273.2k) with a private average selling price of c. £341k (2018: £337.4k). As previously reported, market uncertainty surrounding Brexit and the general election led to some increased pressure on pricing in the second half resulting in a c. 1-2% reduction in underlying sales prices for that period. This was, in part, offset by a combination of the Group's own build cost savings and a lack of cost inflation. As a result, the Group expects to deliver a further improvement in operating margin for 2019, with pre-exceptional profit before tax for the year expected to be slightly ahead of market consensus(1).
The Group expects to report exceptional costs relating to the acquisition of Linden Homes and Vistry Partnerships totalling c. £15m (2018: nil) in the year ended 31 December 2019.
The significant step up in the Group's sales rate was maintained in the year with an average sales rate per outlet per week of 0.58 (2018: 0.5). We continue to see a strong level of demand for private units from housing associations. The Group operated from an average of 88 (2018: 87) active sites during 2019.
Customer satisfaction remains our key priority and we are very pleased to have seen further improvement in our HBF Customer Satisfaction rating which was reported at above 90% for Q3, equivalent to a 5-star rating.
We continue to utilise part exchange in a disciplined and well-controlled manner, and our year-end balance sheet value was c. £16m (2018: £16.3m) with no units owned and unsold for more than three months.
The Group made good progress with its Partnerships business during 2019, entering into four new land led partnerships with Housing Associations in the second half. This included the formation of a joint venture with Metropolitan Thames Valley in respect of the Group's strategically sourced land at Cambourne.
Land
We continue to see good opportunities in the land market and acquired a total of 4,351 (2018: 4,164) plots across 16 (2018: 19) developments in the year. Our strategic land bank remains a valuable source of land for the Group and we converted 1,986 (2018: 1,958) plots from it during the year. On average the land acquired is expected to deliver at least a 26% gross margin and 25% ROCE.
Net cash
The group is expected to have a net cash balance as at 31 December 2019 of c. £362m (2018: £126.8m). This includes net proceeds of £150m from the Placing completed on 7 November 2019 to raise funds for the acquisition of Linden Homes and Vistry Partnerships.
Bonus share issue and second interim dividend
As previously announced, the expected special dividend of £60m was returned to shareholders by way of a bonus issue of shares to shareholders of Bovis Homes on the register as at 2 January 2020. On the basis of the Bovis Homes closing share price on that date, the bonus issue totalled c. £75m.
The Group also previously announced that instead of paying the Bovis Homes 2019 final dividend, it would pay a second interim cash dividend of 41 pence per share on 29 May 2020 to shareholders on the register as at 27 December 2019.
Outlook
We are delighted to have completed the transformational acquisition of the Linden Homes and Vistry Partnerships businesses at the start of the year. Our focus is on successfully integrating these businesses and delivering the clear and significant benefits from the combination as quickly as possible.
Whilst it is early in the year to comment on 2020 trading, we have a strong forward sales position and trading to date has been very positive, with consumer confidence returning and industry fundamentals remaining strong. We are excited about the prospects for the enlarged business and expect to report much progress in the year ahead.