Bovis reveals profits drop

Housebuilder Bovis declared a 80pc drop in six month profits yesterday and revealed that one in three of the homes it sold in the east and south of England in the first half of the year were bought by social housing groups.

Overall, Bovis sold 560 homes in the south and east in the first half of 2008 at an average price of £161,300.

The year before, the firm sold 813 homes at an average of £188,300. But the company's figures reveal that only one in eight of the homes sold in the first half of 2007 went as social housing - compared to one in three this year.

Overall, group revenues were down 43pc at £149.3m. Nationally, Bovis' house sales were down 32pc on the same period in 2007.

Cost cutting measures announced earlier this year has seen the closure of the company's East of England headquarters at Cambourne as part of 400 job losses.

In another move to save cash, the company said it was slashing its interim dividend by more than 70%. As previously announced, it is paying out 5p compared to 17.5p in 2007.

The company said yesterday that the poor performance in the first half of this year had worsened through this summer.

"The group considers that the current difficult trading environment will continue for the foreseeable future with continued poor mortgage liquidity limiting housing market activity,” the firm said.

The company is the second major UK housebuilder to report interims this month, after Persimmon last week which unveiled a 64% profits slump.

Analyst Mark Hughes said the profits drop was "hardly surprising' and "just more confirmation of the very difficult times faced by the housebuilders.'

He is forecasting Bovis to make £31m of pre-tax profits this year, compared to £124m in 2007.

Meanwhile, fellow housebuilder Taylor Wimpey was at the centre of speculation that a deal had been agreed to shore up its finances.

The firm, which has net debts of £1.7b, said in July it faced breaching “one or more” of its banking covenants if the housing market continued to weaken.

But a trade magazine reported yesterday that the housebuilder has agreed a relaxation of its lending covenants without the need to raise fresh cash.

Sources quoted by the magazine said the deal, to be announced with interim results today , would involve an “all-debt solution”. The firm declined to comment. But Barratt agreed a deal with lenders earlier this month, replacing its covenants

on interest payment cover with those measured on its ability to generate cash.

Courtesy of EDP

28 August 2008