Housebuilder Bovis turns focus on cheaper housing as profits fall |
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Mon, 12 Sep 2005 15:05
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LONDON: Housebuilder Bovis Homes Group Plc reported a drop in pre-tax profits for the six months to June 30. The company blamed the sluggish housing market and declining sales of bigger, high margin homes.
Declines sales of 4-5 bedroom houses added with increase in sales of social housing could push annual profits back for the first time in eight years, the company’s chief executive Malcolm Harris said. The company sold a total of 1,089 units, down from 1,302 sold in the first six months last year. Revenues had likewise declined from £271.7 million in same period last year to £214.5 million this year.
The company specializes in selling 4 and 5 bedroom detached houses in the commuter-belt and mid-market suburban areas.
From gradual declines the housing sector has now virtually frozen to a standstill over the past many months consequent to a series of interest rate hikes and soaring house prices. Last month, the Bank of England initiated damage control effort with a cut in interest rate for first time in two years.
Nevertheless, the slowdown would continue, the company said, resulting in “considerable uncertainty” for the property market over the next twelve months.
As affordable properties were easier to sell in such a market, Bovis plan to shift focus to this market segment over the coming months in order to buffer the impact of dropping sales. This shift may help keep volumes from plummeting but it won’t prevent average sale price and average profit per unit from declining further.
Average sales price per unit for the six months to June 30 was £179,700, down 11 percent from last year’s £201,100. Construction cost per square foot continued its upward trend and rose 4.2 percent.
Chief Harris said that despite the continuing uncertainty for the market, the company’s outlook for the medium to long term was reasonably good because of its strong land bank. He remained hopeful that consumers would “adapt to the current economic climate” and slowly return to the market.
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