Bovis Homes Group struck a bullish tone in their half year results, with growth across a range of metrics. The catch? It's too early to tell the impact of the EU referendum.
Its share price fell by more than two per cent on the news.
Bovis Homes Group posted revenue of £412.8m for the first half of 2016, up 18 per cent on the year prior.
Meanwhile, operating profit also jumped 18 per cent in the six months to 30 June, up to £63.9m, compared to £54.3m a year ago.
Earnings per share rose 14 per cent to 36.5p, up from 32.1p in 2015.
And net debt was reported at £8m, compared to £59m a year ago.
The company will pay a dividend per share of 15p, up from 13.7p last year.
Why it's interesting
The graph above depicts the torrid time enjoyed by housebuilders since the EU referendum result - at least in the eyes of investors.
However, you wouldn't know it in these results. That's probably because, by the own company's volition, it is too early to judge the impact of the vote.
It also says that its too early to know what the impact of the Bank of England's monetary policy response will be on the housing market.
However, Bovis' marketing programme has been reviewed and accelerated to increase sales activity on its new developments.
Fortunately, then, it thinks that it has the resilience to get through the rough waters that may lie ahead.
Bovis hit an upbeat tone, as profit growth itself has been driven by a record number of homes being delivered and the company thinks it is well placed to continue strong performance throughout the rest of the year.
That may contrast to the construction purchasing managers' index for June which plummeted to its lowest level since 2009 and subsequently dropped again in July.
Bovis' shares are down nearly 30 per cent over the last year. But, misery loves company, so Bovis can attempt to console itself alongside Berkeley, Barratt, Taylor Wimpey and Persimmon, which also all plunged after the referendum result.
What Bovis said
David Ritchie, chief executive, said:
We have been pleased with the resilient level of interest shown by potential home buyers contacting us.
Our robust balance sheet, with debt lower than last year, means that we are well positioned to continue to take advantage of prime land opportunities at potentially higher returns. Overall, we remain confident in our strategy to deliver long-term growth in shareholder returns.
What the analysts said
George Salmon, equity analyst at Hargreaves Lansdown:
Despite selling more houses at higher prices in the first half of the year, the sentiment around Bovis shares remains dominated by the potentially disruptive impact that the Brexit could have on the second half of this year and beyond.
Recent surveys show confidence in the UK construction sector has fallen sharply since the vote, so it’s not hard to see why shares across the housebuilding sector are still well below their pre-referendum levels.
However, the decision by the Bank of England to lower interest rates should help to keep mortgages affordable, and plenty of other supportive factors will remain. Brits will still want to own homes, whether in or out of the EU, government schemes such as help-to-buy will almost certainly be unaffected, and the UK still faces a major housing shortage.
Looking forward, the decision to raise the dividend is a sign of the group’s confidence, however investors should be mindful of the group’s struggles with controlling labour costs, which have held back profit margins in recent years, and which look set to continue.