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Housebuilders hungry for growth as financial muscle returns

Housebuilders Redrow and Bovis have revealed ambitious plans for expanding their capacity after reporting surging profits and revenues.

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Bovis is restructuring its business and expanding its supply chain, creating more regional divisions in order to provide scope to grow and to put “more dots on the map”.

Meanwhile, Redrow plans to expand its operations “across the board”, with headcount increasing rapidly at 20 per cent annually.

Persimmon boosted its land bank by 14,800 additional plots and reported a 10 per cent boost to completions in the first two months of 2013.

The housing market is increasingly catching the spotlight as politicians acknowledge the extent of the shortfall in supply.

“I wouldn’t want [a smaller housebuilder’s] name, I don’t usually want their people, I just want their land”

David Ritchie, Bovis Homes

Bovis chief executive David Ritchie said that although he had “not put a ceiling on our growth”, the business was aiming for around 120-130 outlets producing 3,000 units annually.

In 2012, Bovis increased completions by around 300 to 2,355 and expanded its outlets from 73 to 82.

Mr Ritchie told CN he was looking at a “broadening of the sub-contract population as we grow out business”, with 2012 seeing the supply chain increasing by 15-20 per cent – in line with directly employed headcount.

Bovis’ South-west business was split into two in January, while the South-east division is currently following suit.

“The only region struggling is probably South Wales, and that’s more to do with regulatory issues”

Steve Morgan, Redrow

The Central business, covering the areas around Birmingham and Manchester, will be next, with around 20 outlets planned for each division.

“It’s a massive business to try to control with a central management team,” Mr Ritchie said.

“We’ve got a business model that is very scalable – that’s the way you grow a housebuilder in the current environment.”

Mr Ritchie, who described his firm to CN earlier this year as the UK’s “most aggressive land buyer”, said although he hadn’t yet found any small housebuilders he wanted to purchase, the door remained open.

“There are always opportunities,” he said, but warned smaller housebuilders that “you’re only as good as your land bank”.

“I wouldn’t want their name, I don’t usually want their people, I just want their land,” he added.

Redrow’s results meanwhile revealed a planned increase from 83 outlets to around 90, while its landbank increased by almost 1,000 in the half-year to 31 December 2012.

Asked by CN where the expansion would be targeted, chairman Steve Morgan said he was looking at expanding capacity “across the country.”

“The only region struggling is probably South Wales, and that’s more to do with regulatory issues. Everywhere else we’re growing the number of outlets.”

He said that most of the growth was set for the South but that the Northern and Midlands regions were also growing.

Though Mr Morgan said his focus was on “organic growth”, he didn’t rule out snapping up smaller housebuilders, adding that “we never say never”.

The positive news was reinforced by encouraging signs from the government’s NewBuy initiative, which has reported a gradual acceleration in purchases.

However, an overall drop in starts of 11 per cent tempered enthusiasm that the market was emerging from a period of stagnation.

Major housebuilders post encouraging results

  • Persimmon: Profits boosted by half to £221.83m, with revenues increased to £1.72bn
  • Bovis: Pre-tax profits surged by 69 per cent, revenue jumped by £60m and completions increased by 15 per cent.
  • Redrow: Profits before tax increase by 50 per cent to £23m, as revenue is boosted from £232.8m to £257m.

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