Bovis and Westbury latest to suffer in housing downturn

This week analysts cut their forecasts for Bovis Homes and Westbury after the housebuilders posted poor six-month results.

The move comes a week after Wilson Bowden and George Wimpey turned in poor results and shows that the market has not shown the post-election, post-summer bounce-back the housebuilders were hoping for.

Their financial situation was not helped by the decision made by the Bank of England’s monetary policy committee last Thursday to hold the base interest at 4.5%.

On Monday, shares in Bovis Homes dropped 17.5p, or almost 3%, to 599.5p when it announced results that were worse than the market was expecting. The mood at the analysts’ results briefing was pessimistic as Bovis reported a 32% fall in pre-tax profit to £45m for the six months to 30 June 2005.

Turnover dropped 21% to £214m and earnings per share fell from 39.9p in the same period last year to 26.7p.

Like Wimpey and Taylor Woodrow last week, Bovis Homes sought to reassure investors by raising the interim dividend 30% to 8.3p a share. Overall completions were down 16% to 1089.

Analysts at Dresdner Kleinwort Wasserstein said they were cutting forecasts for 2006 and 2007 because of a predicted decrease in margins.

Malcolm Harris, the chief executive of Bovis Homes, said of the results: “Looking forward to the second half of 2005, there remains considerable uncertainty over the robustness of the housing market but the medium to long-term prospects are good.”

Harris also confirmed that chairman Sir Nigel Mobbs had informed the board he was retiring from the board with immediate effect. Harris will be acting chairman until a successor is appointed.

Westbury reflected Bovis’ view that there had been no recovery in the housing market, despite an increased use of incentives. A trading update for the first six months of the year, published last Friday, was negative.

The company sold 7% fewer units in the first half of the year than in the same period last year, a total of 1934. Mark Howson, analyst at ABN Amro said it showed Westbury was “not immune to the current malaise in the UK housing market”. However, he added: “We believe there is much still to play for in the second half.”

David Wilson, chairman of Wilson Bowden, told analysts it would consider freezing its full-year dividend in 2005 if the market did not improve. It would be only the second time in the past 20 years that it had done so.

Wilson was also the most downbeat of the housebuilders when he said the market was not just weak, but “in recession”.

It seems stranger, then, that Galliford Try’s housebuilding arm reported a 4% increase in operating profit, to £26m, for the year to 30 June. Greg Fitzgerald, chief executive, said the company had benefited from its increased exposure to affordable housing and the fact that its individually designed houses were still in demand.