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Bovis Homes Group has reported record profits for 2015 as it looks to step up construction amid a favourable climate for UK housebuilding.

The FTSE 250 group, which focuses on southern England, said pre-tax profit rose 20 per cent to £160.1m in the 12 months to the end of December. Revenue was 17 per cent higher at £946.5m, slightly ahead of expectations.

The company will increase its full-year dividend by 14 per cent to 40p a share.

“We’ve seen the housing market move quite significantly in the past couple of years,” said David Ritchie, chief executive. “We are a bigger business with stronger volumes and stronger prices, which is generating stronger returns for our shareholders.”

The Kent-based company built a record 3,934 homes during the year, lifting output 8 per cent; it sold its homes for an average price of £231,600 — 7 per cent higher than a year earlier.

Bovis has battled with build cost inflation, however, saying costs rose 8 per cent per square foot.

“There are a lot of people coming through our sites and they’re taking their opportunities in a rising market to ask for more money. We have to recognise that costs are rising,” said Mr Ritchie.

But that is beginning to moderate, he added. “We don’t believe it will be as high as 8 per cent this year.”

Bovis is seeking to increase output to between 5,000 and 6,000 units a year over the next few years but has struggled to improve margins, resulting in its shares trading more cheaply than the rest of the sector. It has split its operations into eight regional businesses in an effort to improve efficiency.

The group’s operating margin rose from 17 per cent to 17.3 per cent in 2015. Forward sales were 14 per cent higher at 2,003.

The company has also been seeking to expand its consented land bank as overall housebuilding continues to fall short of government targets.

A Westminster drive to boost construction has aided companies such as Bovis through support for homebuyers — for example under the Help to Buy programme — and a rise in planning permissions.

Mr Ritchie said Bovis was “cautious” ahead of June’s referendum on EU membership but had not so far seen any effect on the business. “The consumer continues to be very robust,” he said.