Mortgage squeeze causes profits to plunge at Bovis
Housebuilder Bovis yesterday blamed the mortgage squeeze for an 83 per cent slump in first half profit and said it was “the toughest period of trading it has experienced in its life as a public company”.
Pre-tax profits fell to £9.5m, from £58.4m in the first six months of 2007, prompting the housebuilder to take an axe to its own cost base by cutting total staff numbers by an estimated 40 per cent and slashing its interim dividend to just 5p, 75 per cent lower than anticipated. It hopes the cuts will save it in the region of 20 per cent a year, and said yesterday it was largely avoiding new land commitments and had reduced production levels.
“The current difficult trading environment will continue for the foreseeable future with continued poor mortgage liquidity limiting housing market activity,” said chief executive David Ritchie.
Bovis said the average sale price for its homes was £196,700, down four per cent from the first half of 2007.
“The UK housing market has been badly impacted during 2008 as mortgage availability has reduced, following financial market turmoil in the second half of 2007,” Ritchie added.
Kaupthing analyst Kevin Cammack advised investors to sell the shares saying the results were worse than expected.
Citigroup analyst Clyde Lewis said the results were “hardly surprising”, but offered “more confirmation of the very difficult times faced by the housebuilders”.