Bovis Forecasts Higher Prices as Cheaper Land Lifts Margins

Bovis Homes Plc. said it expects the price of its homes to increase by 10 percent this year, lifting its profit margin as land bought at a discount lowers development costs.

The Kent, England-based homebuilder has planning approval for about 12,000 homes across about 80 sites acquired since the housing downturn in 2008, it said in a statement today. Both greater volume and higher prices will boost full-year revenue and return on investment, it said.

Rising sales “on new, more profitable sites, will enable the group to increase profits significantly in 2013 in line with its expectations, subject to stable market conditions,” Chief Executive David Ritchie said in the statement. The company’s return on capital employed may rise “in the foreseeable future” to 15 percent to 18 percent from 10 percent.

Home buyers have easier access to mortgages and “appear more confident about buying a home” after the U.K. government introduced a program to boost home ownership to help revive the economy, Bovis said. Chancellor of the Exchequer George Osborne is offering homebuyers an equity loan of as much as 20 percent of the value of newly built home valued at 600,000 pounds ($940,000) or less as part of the program.

Bovis fell 1.7 percent in London trading to close at 765 pence. The stock has risen 33 percent this year giving the company a market value to 1.03 billion pounds.

The rate of sales at Bovis sites rose 28 percent in the first half compared with the same period in 2012, the homebuilder said. Net income increased to 14.4 million pounds, or 10.8 pence a share, from a restated 11.5 million pounds, or 8.6 pence, a year earlier. The dividend for the period was increased to 4 pence from 3 pence.