UPDATE 1-Bovis Homes stays on track with 150 pct profit leap

Mon Aug 18, 2014 4:13am EDT

(CEO quotes, details, background)

By Costas Pitas

LONDON Aug 18 (Reuters) - British housebuilder Bovis Homes is on track for a significant rise in full-year profit, it said on Monday after a record number of completions and improved operating margins boosted first-half earnings.

The company had virtually hit its 2014 sales target of 3,650 homes by the half-year mark and said it expects to achieve full-year profit in line with market forecasts. Thomson Reuters data shows that analysts expect a 60 percent rise in Bovis's full-year operating profit.

Bovis, which has focused on more affluent regions in the south of England in recent years, reported operating profit of 51.2 million pounds ($85.7 million) in the six months to June 30, up 150 percent on last year.

The 129-year-old company, one of several builders to benefit from recent government schemes designed to boost the housing sector, lifted pretax profit by 166 percent to 49.4 million pounds.

However, a series of surveys have indicated in recent weeks that the market is beginning to cool, with one showing that the momentum behind the London property boom is fading and another indicating that house prices are stagnating because of tougher mortgage lending rules.

An expected rise in Britain's record low 0.5 percent base lending rate by early next year could also dampen housing demand, but Bovis CEO David Ritchie said the company would regard an interest rate rise as the right step to a more sustainable housing market.

"If house prices (outside London) cool to something more in line with inflation, so 1 to 2 percent per annum, that would be perfect for us," he said. "That gives us the ability to run a long-term sustainable business."

The group said its operating margin is expected to rise to between 17 percent and 18 percent this year, compared with 14.9 percent in 2013.

Bovis increased its interim dividend by 200 percent to 12 pence per share. ($1 = 0.5978 British Pounds) (Editing by Kate Holton and David Goodman)

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