Lower costs help Bovis double profit

Bovis Homes has restored its interim dividend for the first time in three years after a "significant" reduction in construction costs helped it more than double its first-half profits.

But David Ritchie, the chief executive of the house builder, said the property market would remain sluggish until lenders make a greater number of mortgages available to first-time buyers at more affordable loan-to-value ratios.

Bovis has benefited from an aggressive strategy of snapping up quality land – primarily in the south of England – since 2009. It added 1,571 land plots on nine sites in the first half of the year and has agreed to buy a further 2,500 plots on 20 locations.

Pre-tax profits at Bovis soared 131 per cent to £8.1m, on revenues up by 16 per cent to £134m over the six months to 30 June. This was largely driven by a sharp reduction in its construction costs since the end of 2009, with Bovis negotiating prices for sub-contracted labour, such as bricklayers, down by 20 per cent.

Mr Ritchie said: "Any company that can double its profits in the current environment must be pleased." While he also pointed to its acquisition of higher-margin quality sites, Mr Ritchie said "all the improvements in our profits have come from the efforts we have made in reducing our cost base".

The group completed the sale of 801 homes in the first half, compared with 803 last year. But this flat performance was more than offset by a 3.2 per cent rise in average selling prices to £163,400. As a result of the jump in profits, Bovis has reinstated its interim dividend at 1.5p – for the first time since 2008. It paid a final dividend last year.

Bovis also boasted "strong trading" through the first 34 weeks of 2011, with a 19 per cent rise in private reservations to 1,087, compared with 912 homes last year.

However, Bovis said it had received no help from the wider housing market, which "remains significantly constrained by continued restricted mortgage availability at higher loan-to-value rates". Mr Ritchie said: "The mortgage market needs to become more liquid and to support first-time buyers to a greater extent."

But on the wider economy, he said: "I cannot see any reason why we would have a double-dip recession."