Bovis Homes see their profit double

Graham_Devon

Nothing wrong with profit....

But this does go against everything thats said by others on "builders can't reduce prices".

Obviously they can when, in the words of Lord McTavish, "were in the middle of the deepest recession in a century", and housebuilders are seeing profits rising 100% over the year.

http://www.bbc.co.uk/news/business-19315635

In my opinion this is evidence of who these new buy schemes actually work for. It's also evidence that builders can reduce prices if they so wish. Not that I'm expeting them to, they are selling what they produce.

However, when profits rise 100% over the year, it's time to start looking at cutting the help the builders get and start looking at getting that help towards the buyers.

Bovis are looking at increasing their landbank, with a further 20 plots. Use them to build much needed houses! Bovis themselves expect their prices to increase 6%. At the same time, they call for more government action for "homebuyers" (or in other words, builders).

All these schemes have done so far is increase the price of the house, put the taxpayer at risk, and increase profits for builders. We now need to look at doing something else IMHO.

JonnyBravo

Graham_Devon wrote: »

.
... it's time to start looking at cutting the help the builders get and start looking at getting that help towards the buyers.

Have you not seen the other thread?
There's no need for action from the Govt. Brit is helping everyone else buy. Damn decent of him too.
If you and hsw started to lend a hand I reckon we'd have this problem licked by the end of the year.

System

Did the profit per house increase by 100%, or did they sell 100% more houses at the same profit margin?

Probably somewhere inbetween, but it'd be nice to know.

JonnyBravo

Joeskeppi wrote: »

Did the profit per house increase by 100%, or did they sell 100% more houses at the same profit margin?

Probably somewhere inbetween, but it'd be nice to know.

Or did they sell the same number of houses at the same price but not write down some assets this year?
Can't be ar-$ed to check but I'm sure someone can have a look and let me know what I should be indignant about.

Graham_Devon

Well having a look at their report...it's a mixture of everything really.

Their profit per build is up (20.9%) and they expect this to increase to 22% per build this year. But they have also been selling land which has added to profits.

Reading their operational highlights, most of it is abouttheir landbanks...

Operational highlights
· Legal completions of 944 homes (H1 2011: 801 homes), an increase of 18% with an average sales price of £164,400 (H1 2011: £163,400)
· Average active sales outlets increased by 21% to 82 in H1 2012 from 68 in H1 2011
· Two land sales achieved in H1 2012, delivering a profit of £3.9 million (H1 2011: Nil)
· 1,037 consented plots on eight sites added to the land bank during H1 2012, with a further 419 consented plots on two sites added in H2 to date
· Contracts in place at 20 August 2012 to acquire another circa 1,200 plots on ten sites, the majority of which are expected to be added to the consented land bank in H2 2012
· Terms agreed in principle to acquire a further 20 sites, representing in excess of 3,000 plots
· Consented land bank of 13,620 plots as at 30 June 2012, with potential gross profit of £574 million, calculated using prevailing sales prices and build costs (31 December 2011: 13,723 plots with gross profit potential of £524 million)
· 19,829 potential plots of strategic land (31 December 2011: 18,749 potential plots)

What's clear is their operationg margin has increased significantly.

If they have that number of consented plots, I wonder how many they have with no current consent?

antrobus

According to the BBC report,

Pre-tax profits for the six months to 30 June were £16.2m, up from £8.1m in the same period last year.

Bovis Homes made pre-tax profits of £132m in 2006. Still aways to go yet before they match that.

CLAPTON

Graham_Devon wrote: »

Well having a look at their report...it's a mixture of everything really.

Their profit per build is up (20.9%) and they expect this to increase to 22% per build this year. But they have also been selling land which has added to profits.

Reading their operational highlights, most of it is abouttheir landbanks...

What's clear is their operationg margin has increased significantly.

If they have that number of consented plots, I wonder how many they have with no current consent?

what do you think is the 'right' profit margin for a house building company over the long term?

clearly selling land shows they are in deperate financial situation; while this might nominally increase 'paper' profits it is surely the kiss of death to a building firm.

a bit like selling the family silver

chewmylegoff

Don't get too excited.

Profit per build up....from 20.1% to 20.9%

Two land sales achieved a profit of £4 million (same period last year £0). So that's 1/2 of the increase in profit right there.

Otherwise they have sold 1,968 homes compared to 1,607 in the same period last year.

However, they are probably just taking market share from others who have decided to withdraw from the market - we've all seen the plummeting stats for the number of housing starts.

You can't really make a judgement that house builders' profits are on the rise by looking at the half year accounts for one builder.

Thrugelmir

Graham_Devon wrote: »

It's also evidence that builders can reduce prices if they so wish.

You could apply this logic to any business. I'm sure shareholders would prefer Bovis to maximise their profits.

Wookster

Nice to see that all these government schemes are working well for the builders.

Good on you Mr Shapps.

Graham_Devon

Thrugelmir wrote: »

You could apply this logic to any business. I'm sure shareholders would prefer Bovis to maximise their profits.

I agree with everything people have said, hence why I stated "nothing wrong with a business making profits".

My comments come from the fact that others tell us the business can't lower prices as they hardly make any profit as it is on the properties.

The "they can't ower prices" argument crops up whenever there is talk about low amounts of new housing, and the builders blaming the banks for not advancing the amount of money required for FTB's.

They obviously can lower prices.

The point really should be that they don't have to lower profits currently and neither do they wish to (no one would).

The reason they dont have to lower profits (and can actually see profit per property rise) has got to be partly due to the support builders have found themselves gaining from the taxpayer.

Tat's all I'm saying really, so don't want it taken down the same old route of "you don't understand how business works". I do.

All I'm doing here is backing up previous arguments, mainly with Hamish, over builders being unable to lower profits and build more. They can build more (they have the land as shown in their figures) and they can reduce profits (instead they increase). If they needed to and lost government support, they would do to stop the business going under.