Housebuilder hit by plunging demand but says profit still on track to meet expectations
Housebuilder Bovis Homes said it will build 39% fewer homes this year as it battles with the 鈥渨orst trading environment for many years鈥�.
In a statement to the City, Bovis said that while full-year profit is still on course to meet analysts' expectations, the acceleration of the global financial turmoil in recent weeks has contributed to a 鈥渟harp decline in home buying activity鈥�.
Bovis said it will sell 1,800 homes in 2008, compared with 2,930 in 2007, with one-third of the homes being affordable housing. And while it has increased its average monthly sales from 50 to 100 since August, this rise had been solely on the back of selling private homes in bulk deals to social landlords.
The statement said: 鈥淎lmost all home sales achieved since that date have required greater discounts and incentives. As a result, sales prices have endured further downward pressure which is having a detrimental effect on profit margins.鈥�
It said it has stopped both buying and selling land, and has limited discretionary spending on sales and marketing and planning fees.
The firm also warned that it is likely to make a writedown on the value of its strategic land in December.
It said: 鈥淲hilst based on current sales prices such a write-down would not be significant relative to its overall inventory position, the group also needs to take into account house price evolution between now and the date of its preliminary results announcement in March 2009 together with any reliable estimates for price falls beyond this latter date.鈥�
The firm said that, whilst it remained within its banking covenants, discussions had begun with its banks over refinancing as these are due to expire in 2010.
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