Housebuilder Bovis Homes has swung back into the black and said it would restore its dividend as long as the market continues to stabilise.
The company is investing in new land in the hope that the recovery will take hold. "We're one of the more aggressive builders. We're building substantially more homes and the industry is back building but we're still quite cautious," said David Ritchie, the chairman. "I don't see any reason why prices should fall but equally prices won't rise."
The company's shares dipped on its warning that the housing market became more fragile after the election and the emergency budget, with consumer confidence dented by the government's proposed tax hikes and spending cuts. The shares ended the day 1.6% lower at 342.80p, down 5.6p.
Overall Ritchie painted a stable picture. The industry looks to be on the mend after a collapse in house sales during the recession forced housebuilders to lay off thousands of people and reorganise their businesses.
Bovis bought 1,874 plots with planning permission for £107m in the first six months of the year, increasing its land bank to 13,113 plots – equivalent to one year of land supply. It has also agreed terms on another 3,000 pots. "We're at a low point in terms of land cost and we have the balance sheet to do it," said Ritchie.
The company now has net cash of £79m at its disposal. It raised £60m last year to buy land at rock bottom prices.
Bovis, one of the smaller listed housebuilders, said it would resume paying a dividend to shareholders at the end of the year. It scrapped its dividend during the housing slump which forced it into a debt restructuring and a 60% reduction of its workforce. It also decided to focus more on social housing.
Together with Barclays' mortgage arm Woolwich, the developer recently launched a fixed-rate mortgage aimed at first-time buyers, offering it to people with a 10% deposit who buy a Bovis home.
Bovis sold 803 homes during the first half, up from 754 a year ago, and raised its average price to £163,500 from £160,400. It made a profit before tax of £3.5m, having slumped to a loss of £8.6m a year ago.
Analysts at Shore Capital said: "While we believe that Bovis has relative geographic weakness compared to its peers – the company has no exposure to the housing market within the M25, where the market conditions have been most resilient – the company's strong balance sheet should provide some protection in a challenging housing market."