Bovis calls for action on borrowing costs

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The Independent Online

Housebuilder Bovis Homes called for "decisive action" on interest rates today after revealing a 20 per cent drop in sales reservations so far this year.

Without cheaper borrowing costs and more normal conditions in the mortgage market, Bovis said volumes in 2008 were likely to be well down on last year.

It added to the pain of shareholders by revealing a fall in profits for 2007, with the surplus of £123.6m down on the £132m seen in 2006. Shares fell 7 per cent today.

Bovis said: "2007 was a challenging year for the industry following several interest rate increases, allied with a reduction in availability of funding, particularly for first-time buyers."

The company described the current market position as weak and said sales reservations to March 7 stood at 1,262, compared to 1,582 for the same point the previous year.

Chief executive Malcolm Harris said: "Our performance through the spring period remains critical in establishing the likely volume outcome for the current year.

"For the 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."

Bovis said revenues reached £555.7m in 2007, down from £597.3m in 2006, after it legally completed on 2,930 homes - a fall of 193.

The average sale price of private homes grew by 3.8 per cent, although a greater proportion of social housing meant the overall figure fell 2.3 per cent to £179,500.

The company said its operating margin compared well with rivals after a figure of 22.8 per cent in 2007. Strategic land holdings increased slightly to 24,868 potential plots.

Keith Bowman, equity analyst at Hargreaves Lansdown stockbrokers, said the company's call for lower interest rates contrasted with more guarded comments coming from other operators in recent days.

He added: "Despite the challenging conditions, management continue to show their pedigree, with profit margins remaining at the higher end of the industry and long term confidence being expressed by a 16 per cent plus rise in the dividend.

"However, the forthright comments coming from the group's management in relation to the outlook for 2008 will only add to investor nerves across the sector."