Bovis paints gloomier picture than other housebuilders

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by Kay Murchie

Bovis Homes has announced lower 2007 profits and warned that house sales for the current year are already down 20% and will fall further if interest rates are not cut.

Pre-tax profit fell 6% to £123 million last year as total revenue dropped by 6% to £555 million.

Operating margins at the company, one of the most profitable British housebuilders, fell to 22% from 23% twelve months ago, with administrative expense including sales and marketing costs remaining unchanged at 8.7% of sales.

In a statement, the housebuilder said for the full year as a whole, unless decisive action is taken now to reduce interest rates and more normal conditions return to the mortgage market, it is likely that volumes will be well below those achieved in 2007.

The group said ales reservations to March 7 had fallen 20% to 1,262 units and its performance through the spring selling period remained critical in establishing the likely volume outcome for the 2008 year.

Last week, housebuilder Redrow posted a 35% fall in half-year pre-tax profits and said the markets in which it operates remained ‘clearly’ challenging.

However, in contrast, housebuilders Persimmon posted record profits for last year while Barratt Developments said half-year, pre-tax profits increased by 10% to £194.6 million.

Analysts at Cazenove said Bovis chose to paint a more gloomy picture than Barratt and Persimmon and expect a challenging year with declining volumes.

Bovis is the last major housebuilder to announce 2007 results after Taylor Wimpey last week posted a 19% fall in its forward orders.

After a decade-long housing market boom driven by low interest rates and high employment, Britain’s homebuilders are now set to build fewer homes following tighter mortgage lending and increasing prospects of a house price fall and transaction volumes.

The Halifax said property prices across the UK fell by 0.3% in February, taking the annual rate of inflation down from 4.5% to 4.2%.