6th Nov 2008 07:00
Bovis Homes Group PLC Interim Management Statement 6 November 2008 Bovis Homes Group PLC is today issuing its third quarter 2008 Interim ManagementStatement. The developments in financial markets over the last year, with theiracceleration over the recent past, have generated the worst trading environmentin the housebuilding market for many years. The lack of mortgage finance, asevidenced by the 70% year over year decline in mortgage approvals for homepurchase reported for the third quarter of 2008, has led to a sharp decline inhome buying activity. This, together with the general economic outlook, hasweakened the confidence of prospective home buyers which is now creating furtherdrag on housing transaction activity and placing downward pressure on houseprices. The Group anticipates that the results for the 2008 financial year will bebroadly in line with analysts' consensus expectations. Based on the currentlevel of reservations achieved, the Group anticipates legally completing circa1,800 homes in 2008, of which circa 600 units will be social and partnershiphomes. The Group commented in August that it would be competitive in its pricingto ensure volume and cashflow delivery. Given this, together with significantpricing pressure in competitive local marketplaces, almost all home salesachieved since that date have required greater discounts and incentives. As aresult, sales prices have endured further downward pressure which is having adetrimental effect on profit margins. Given the present uncertainty within the residential land market, with a lowvolume of land transactions, the Group intends to defer land sales previouslytargeted for the second half of 2008 and, therefore, the Group's profits fromland sales are expected to end the year at a level similar to the profitdeclared in the interim results. Having undertaken a major restructuring of the Group announced earlier in theyear, the Group has identified further overhead savings. These savings, combinedwith the benefit of the restructuring already achieved, have generated aposition where general overheads for 2008 are expected to be below £45 million. The Group has taken decisive action to limit its new investment both in land fordevelopment and in work-in-progress. There have been no purchases of land in thesecond half of 2008 to date and the Group has restricted commencement of newsites and new build releases on existing sites. Homes under construction havebeen held at a predetermined stage unless a reservation has been achieved. Aspreviously indicated, the Group expects that production in 2008 will be at alevel comparable with the volume of legal completions in the year. The Groupremains focused on selling its current finished stock units, which generate afull cash margin on sale, the majority of which are houses rather thanapartments. At the time of its interim results, the Group guided that net debt was expectedto be circa £150-160 million at 31 December 2008 with an average net debt of£110-120 million over the year as a whole. Based on the success of the positivemeasures above, the Group expects to improve on this guidance in terms of bothyear-end net debt and average net debt, albeit the actual net debt position at31 December will be influenced by the timing of a number of social housingreceipts around the year end. The Group remains in compliance with its existingbanking covenants: net debt as at the date of this statement is £124 million. Asplanned, discussions have commenced with the Group's relationship banks onrefinancing the Group's facilities given their natural maturity date of February2010. At each period-end, the Group is required to assess the carrying value of itsinventory and now anticipates that an inventory write-down will be required atDecember 2008. Whilst based on current sales prices such a write-down would notbe significant relative to its overall inventory position, the Group also needsto take into account house price evolution between now and the date of itspreliminary results announcement in March 2009 together with any reliableestimates for price falls beyond this latter date, and will provide furtherinformation with its preliminary results announcement. During the current difficult market, the Group is focusing its efforts ontrading in a manner that generates cash through the orderly sale of homes, manyof which are at an advanced stage of construction, whilst also continuing toreduce its operating costs. The Group aims to position itself in the mid termwith the balance sheet capacity to exploit good value development opportunitieswhich may arise near the nadir of the current downturn, building on its strongrecord of prudent land acquisition. Conference Call for Analysts and Investors David Ritchie, Chief Executive and Neil Cooper, Group Finance Director of BovisHomes will host a conference call at 08:15am today, Thursday 6 November 2008, todiscuss the interim management statement. To access the call, please dial 020 7138 0818. Please dial in 5 minutes prior tothe start of the conference call to allow time for registration. A recording ofthe conference call will be available until midnight on 13 November 2008,accessible on 020 7806 1970, passcode: 9994541#. Certain statements maybe forward looking statements. Forward looking statementsinvolve evaluating a number of risks, uncertainties or assumptions that couldcause actual results to differ materially from those expressed or implied bythose statements. Forward looking statements regarding past trends, results oractivities should not be taken as a representation that such trends, results oractivities will continue in the future. Undue reliance should not be placed onforward looking statements. Enquiries: Bovis Homes Group PLCDavid Ritchie, Chief ExecutiveNeil Cooper, Group Finance DirectorTel: 01474 876200 Shared Value LimitedEmily BruningTel: 0207 321 5027 Copyright Business Wire 2008Related Shares:
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