House builder Bovis Homes reported a 74 percent jump in profit and predicted a strong 2012 from its focus on the relatively buoyant market for family homes in the affluent south of England.

However, analysts said other builders, many of whom have also pulled back from investing in more economically depressed regions, offered better returns and shares in the company retreated from recent two and a half year highs.

2011 was a great year in terms of driving profitability back through the business ... and we are expecting a stable market to drive our profitability significantly forward in 2012, chief executive David Ritchie told journalists on a conference call Monday.

We are expecting to see yet again the positive compound effect of a greater number of houses sold at a higher average selling price than the previous year and at a stronger margin.

Many house builders have used the financial crisis as an opportunity to snap up cheaper development land. That, combined with a focus on building in areas where house prices have remained resilient, has helped improve profitability.

Bovis said it expected to have 75 percent of its sales outlets in the south by the end of 2012, compared with 60 percent at the beginning of the year.

The company predicted market conditions would still be tough in 2012 because of continued economic uncertainty in Britain but said it hoped a new government-backed mortgage indemnity scheme would help more first-time buyers get on the property ladder.

It reported a pretax profit of 32.1 million pounds in 2011, up from 18.5 million a year earlier and narrowly beating a consensus forecast of 31.1 million pounds provided by the company.

HIGHER RISK

Bovis' upbeat outlook failed to convince investors who had bought into the stock following a strong trading update in January, making it the worst performer on Britain's FTSE 250 index of mid-sized companies.

The shares were down 4.2 percent to 484.4 pence at 1:02 p.m. It had gained 12 percent since the company predicted significant growth in mid-January and a 55 percent rise from lows hit in August 2011.

It's a classic travel and arrive situation, said Panmure Gordon analyst Mark Hughes, who has a 490 pence target price for Bovis.

Broker Peel Hunt recommended a switch into Bellway or Galliford Try for better value in the sector.

Unlike the other house builders, Bovis presents additional execution risk. It is expanding output whereas others are, generally, simply awaiting margin gains by legacy erosion. That risk, plus lower returns and lower yield income, leaves the shares offering little value at this level, analyst Robin Hardy said in a note.

Panmure's Hughes said Barratt and Galliford offered better value in the sector and said he expected Bovis' shares to trade between 460 and 520 pence over the next few months.

Rivals Barratt and Redrow also reported profit jumps last week and said they expected a pick-up in sales to continue in 2012.

Bovis said the average price of houses sold so far in 2012 was modestly ahead of its expectations and it had entered the year with 568 houses on its order books, a 35 percent increase from the same period last year. The average private selling price of Bovis homes rose 5 percent to 180,100 pounds in 2011.

Bovis is proposing a full-year dividend of 5 pence a share, a 67 percent increase from 2010.

(Editing by Paul Hoskins and Jodie Ginsberg)