Bovis to focus cash on buying land instead of selling homes

Published 09th Mar 2010

Bovis hopes that its robust financial position will allow it to buy more land but said it would not pay a final dividend for 2009


Bovis Homes will plough money into buying land instead of selling homes as it expects the housing market recovery to flatten out this year.

Reporting a return to full-year profits, David Ritchie, the housebuilder’s chief executive, said that he expected house price rises to remain constrained as purchasers, especially first-time buyers, struggled to obtain a mortgage.

Mr Ritchie said that Bovis would focus on opportunities to increase the amount of available land it owns that it can develop quickly.

The Kent-based group made full-year pre-tax profits of £4.8 million in 2009 as demand for housing recovered and its cost-cutting strategy took effect, up from a loss of £78.7 million in 2008.

The company, which specialises in building properties with two to five bedrooms, said that the number of people reserving new homes had increased by 82 per cent last year to 1,801. It said that the sales recovery had continued in 2010, with a sales rate 8 per cent higher than in the first nine weeks of 2009.

However, Bovis added: “The group expects that the pricing environment in 2010, while potentially volatile month by month, will be relatively stable taking the year as a whole.”

The collapse in the housing market during 2008 forced Bovis to take radical action. It shed about 60 per cent of its workforce and shut down building projects. As a result, the company completed only 911 homes last year but sold 1,803 properties, which resulted in a cash inflow of £221 million, allowing it to strengthen its balance sheet and cut debt.

Its position has been further strengthened by a £60 million rights issue last year and the renegotiation of debt terms on a more favourable basis. Bovis is hoping that its robust financial position will allow it to buy more land.

Mr Ritchie said: “The group has recommenced investment in land and is pleased with the progress made to date, with four consented sites acquired in the last quarter of 2009 and terms agreed in principle at the end of the year on a further 15 sites.”

Bovis said that it would not pay a final dividend for 2009, but it hopes to restart payments in the future.

The company said: “In 2009 the group’s strategy was clear: control of working capital and cash-generation. The strategy for 2010 is equally clear: investment in new land to generate strong future returns.”

Source: ' Times '

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