Bovis bounces back to the blackbut fears remain over housing market

Published on Sunday 22 August 2010 20:01

Bovis Homes has swung to the black and confirmed plans to resume dividend payments but warned that flagging consumer confidence had left Britain's housing market in a "fragile" state.

Releasing first-half results, the group also said it had added 1,874 consented plots - land with planning permission to build on - to its land bank. The addition represents about 12 months of land supply.

It has also agreed terms on around a further 3,000 plots, which are likely to be bought by the end of 2010.

Housebuilders have seen a steady turnaround in their fortunes since the market hit its nadir in 2008.

Bovis yesterday reported a profit of 3.5 million for the six months to 30 June compared with losses of 8.6m a year earlier. Major rivals are expected to paint a similar picture of financial recovery as the sector's H1 reporting season gathers pace.

However, both the Royal Institution of Chartered Surveyors and lender Nationwide reported seasonally-adjusted falls in selling prices last month.

Asking prices for homes in England and Wales - Bovis does not build north of the Border - fell by 1.7 per cent in August, according to property website Rightmove.

This, alongside retail sales growth slowing, is raising concerns that the recovery may be losing momentum.

Bovis said government measures to slash public spending and impending tax hikes had hit consumer confidence. It also warned that ongoing restrictions on mortgage availability continued to dampen the new homes market, particularly for first-time buyers.

"In the last few weeks of the half year, after the general election and the Budget, the market became more fragile.

"The group, therefore, remains cautious in its expectations of transaction volumes and sales prices in the short term given the low levels of consumer confidence at this time and the ongoing challenges in the mortgage market."

During the first half, the number of private home sales rose 3 per cent with sale prices increasing by a similar level on an underlying basis year-on-year.

The group is taking steps to reduce its reliance on a housing market recovery by snapping up land with residential planning consent at a low point in the cycle.

Improvements in its financial position have also allowed it to push ahead with plans to resume dividend payments to shareholders after an absence of more than two years.Payouts should restart at the end of the financial year.

The city is looking for Bovis to generate a full-year profit of about 13.7m.

Reaction to yesterday's figures was mixed.

Analysts at Liberum noted: "H1 (profit before tax] a little disappointing: made 3.5m against Liberum estimate of 4.6m, as sales a little light."

Jonathan Jackson, head of equities at Killik & Co, said they were in line with hopes and Bovis remained "our housebuilder of choice". Reiterating his "buy" recommendation on the shares, Jackson added: "The next key newsflow will be the trading update in September which will provide guidance on the key autumn selling season."