British housebuilder Bovis Homes reported a slump in first-half profit and slashed its interim dividend on Tuesday following "the toughest period of trading it has experienced in its life as a public company". Bovis reported an adjusted pretax profit of 11.7 million pounds ($21.65 million) for the six months to June 30, compared with 58.4 million in the same period the previous year, as revenues fell to 149.3 million pounds from 259.9 million.
Britain's fifth-biggest housebuilder said the housing market had been badly impacted during 2008 as mortgage availability had reduced, following financial market turmoil in the second half of 2007. It blamed the challenging market for its dividend cut. Shareholders will receive 5 pence a share, down from 17.5 pence last year. The company had previously indicated that it intended to pay 20 pence per share.
"In light of the current difficult trading conditions, the board considers this reduction to be a prudent action to take," Bovis said in a statement. British mortgage approvals for house purchases fell 65 percent on a year ago in July to remain near the record low set in June, the British Bankers' Association said on Tuesday.
House prices have fallen by almost 10 percent from their peak last August as the credit crunch has made it harder and more expensive to get finance. In a telephone interview with Reuters, Bovis Chief Executive David Ritchie called on the British government to support the housing market by examining ways to unlock mortgage liquidity.
"People need to be able to access finance to buy property, and anything we can do to assist people getting on the housing ladder must be good," he said. Britain is considering various alternatives for assisting the market, particularly with respect to improving mortgage availability for first-time buyers.
"While cost saving measures, for instance a stamp duty holiday, would be very welcome and would allow the cost of moving house to be reduced, if you can't get a mortgage to support your transaction, you're not going to get off the starting blocks," said Ritchie. He added that a further cut in interest rates from the current 5 percent would "clearly be welcome".
Bovis has cut 400 jobs, representing 40 percent of its workforce, this year as it looked to mitigate the impact of the market slowdown by cutting operating costs and reducing production levels. Ritchie told Reuters he couldn't guarantee that will be the end of the job cuts. Shares in Bovis, which have underperformed the FTSE All Share Construction & Materials Index by 18 percent since the year began, were down 1.8 percent at 436 pence at 1010 GMT.
Numis retained its 'reduce' recommendation and 360 pence price target, saying the results "clearly show the tough trading conditions witnessed during the first half". Citigroup analysts described the profit decline as "hardly surprising but just more confirmation of the very difficult times faced by the housebuilders". Last week, rival Persimmon reported a sharp fall in first-half profit, blaming the difficulty in getting mortgages.
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