Bovis Homes issues profit warning

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by Kay Murchie

Bovis Homes has added to the housebuilding sectors troubles after issuing a profit warning.

Malcolm Harris, the company’s chief executive, said conditions in the property market had deteriorated rapidly since March after mortgage lenders withdrew their best offers.

The spring selling period has been absolutely awful said Mr Harris. With ongoing market uncertainties, the outlook for the remainder of 2008 is difficult to predict, he added.

In the eight weeks to 4 May, sales reservations were down 70% compared with the same period last year, while total sales reservations this year so far are 30% lower.

In March, Bovis said profits last year fell from £132 million to £123.6 million as the credit crunch took its toll on the housing market and wider economy.

The warnings follows other bad news within the sector. Last week, housebuilder Persimmon announced it is to stop building on new sites until market conditions improve, which could result in tens of thousands of job losses.

Persimmon said sales in the first four months of 2008 had declined 24%.

Furthermore, Taylor Wimpey, the UK’s largest housebuilder, warned that the fall in property prices is turning into a disaster for housebuilders.

Earlier this week, it was announced that property giant Bellway has approached rival Redrow with proposals for an all-share merger worth £1.3 billion. The deal would produce the country’s second-biggest housebuilder in the UK.

Toscafund, the hedge fund, recently increased its stake in Redrow and Taylor Wimpey, which resulted in speculation that there are more prospects for consolidation in the medium-term.

Merrill Lynch said the statement from Bovis Homes read ‘pretty grimly’ and shares in the company fell 15¾p to 457¼p.

Commenting on the news from Bovis Homes, James Rowlands, public policy officer at the Royal Institution of Chartered Surveyors, said further bad news from housebuilders shows the impact the credit crunch is having on people who want to buy homes, but are no longer able to get a mortgage.