British housebuilder Bovis Homes Group Plc expects a sharp rise in earnings this year, underscoring the effectiveness of its measures to boost profit margins and shift to the more economically buoyant southern parts of Britain.

We should see ongoing growth in volumes, price and margins, and the benefit of compounding those three, your bottom line profit starts moving very quickly, Chief Executive David Ritchie told Reuters.

A focus on margins is helping UK housebuilders recover their footing after several difficult years, supported by lower land prices, cost-cutting and a shift in product mix from apartments towards houses, which is lifting selling prices.

Smaller builders such as Bovis have also been able to adapt more quickly to rocky trading conditions by retrenching out of the north and refocusing on the more prosperous south, as well as ramping up the number of sites it operates from.

This is enabling a profit recovery in the sector, despite flat conditions in the housing market overall and uncertainty around the general economic outlook which is keeping many speculative buyers at home.

Ritchie noted that market activity would remain depressed, but said the fortune of housebuilders was no-longer directly tied to the level of housing transactions.

He added sales had held up in the autumn through to the end of December, a trend which had continued in recent weeks, echoing comments from larger peers Barratt Developments Plc and Persimmon Plc
.

We've had two solid trading weeks in 2012 so far, and I would expect the next few weeks to be very similar. People appear not to be put off from buying a new home, said Ritchie.

BLEAK PROSPECTS

The prospect for homebuyers in the UK however is more bleak, with the number of first-time buyers plummeting to a record low in 2011.

A lack of mortgage availability is constraining the market, a situation which is not expected to change radically in the short-to-mid term, despite government measures such as a mortgage indemnity scheme, expected to be launched in the Spring.

Bovis said it is confident of achieving analysts' consensus for full-year pretax profit of 31 million pounds.

It expects to report overall completions up 8 percent to 2,045 homes in 2011 when it issues its full-year results at the end of February, with private completions up 18 percent in the year, and forward bookings rising by more than a third.

Based on current market conditions ... the group can deliver significantly increased profit and, coupled with improving efficiency of capital employed, a stronger return on capital employed in 2012 and beyond, said Ritchie.

Bovis said its average sale price rose 4.5 percent to 180,100 pounds.

Shares in Bovis were up 0.4 percent at 0905 GMT, outperforming the UK midcap stock index which was down 0.03 percent.

The acceleration of earnings in H211 and 2012 should offer further support to the shares through Q112, said Simon Brown at Northland Capital.

(Editing by Matt Scuffham and David Holmes)