Today’s downbeat trading statement from housebuilder Bovis sets a dismal backdrop for other builders reporting over the next two weeks. The final dividend has been scrapped, following the lead of rival Persimmon, which also binned its dividend in a trading statement issued yesterday.
Bovis continues to cut costs elsewhere, announcing that 200 more jobs will be shed in addition to the 400 announced in July, making a £5m provision for restructuring. An unspecified writedown to its landbank will be made at its preliminary results in March.
The cut backs come in the face of what chief executive David Ritchie describes as the worst trading conditions in many years. Forward sales are 48 per cent down on a year ago, and the average selling price has dropped 16 per cent to £150,800, in line with the annual fall in the Nationwide Index for 2008, and reflecting a bias towards lower-margin social housing.
However, the news that will really stick in the throats of rivals Taylor Wimpey and Persimmon is the terms of Bovis's £220m refinancing, conducted at the turn of the year.
This is the first significant housebuilder refinancing since Redrow's deal in August, and analysts were shocked by the size of the arrangement fee Bovis has paid, which at £8m is 3.5 per cent of the loan. Debt has to be reduced by £60m by the time of expiry in 2011, and despite a spate of interest rate cuts, the average cost of debt is 6 per cent.
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