By normal standards, Bovis Homes reported a pretty rotten set of 2008 results today: the housebuilder made an annual pre-tax loss of £79m (compared to the previous year’s £124m profit), after being forced to write down the value of its assets by nearly £90m. Even if you strip out these ‘exceptional items’, its profits were down 88% to £14m, so it’s no surprise that it’s decided against a final dividend. However, these are extraordinary times for housebuilders – and because the results were marginally better than expected, and because Bovis is swinging the axe better than most, its share price actually jumped 10%. Clearly someone thinks we’re going to start buying houses again soon…
In the results statement, CEO David Ritchie said the decline in mortgage availability and general lack of confidence had brought about ‘the toughest trading environment for many years’. With revenues down by half, Bovis was forced into some drastic cost-cutting measures: it cut 60% of its workforce during the year, reducing its overheads by almost £9m (with more savings expected this year). And because demand was clearly drying up, it only built only half as many houses as originally planned. So it’s been a painful year – but with costs down, and an eminently manageable net debt of £100m, Ritchie reckons Bovis is now better placed than most to withstand the turmoil.
But although Ritchie admitted the current market was ‘exceedingly weak’, the interesting thing was that Bovis does appear to have seen the odd green shoot of recovery: for instance, its private reservations in the first nine weeks of the year are 22% up on last year’s figure. Ritchie also suggested volumes would start to rise ‘as lower house prices and lower mortgage interest rates feed through into the marketplace’, as long as the credit market starts functioning properly (admittedly a big if).
However, given that Bovis is apparently assuming that the current conditions will continue throughout the coming year, it sounds like we shouldn’t hold our breath...
In today's bulletin:
FTSE hits six-year low as Lloyds sinks again
Bovis Homes cheers despite big loss
MT Special: Ted Turner on the new Depression
Costa gets tongues wagging with £10m taster
Sugaring the pill on apprentices