Bovis Homes sounded a note of caution on the housing market as it reported an £8.6 million loss in the first half of the year.
The firm said while there had been improvements in the number of mortgage approvals and the rate of house price decline, a lack of loan availability and rising unemployment could continue to constrain prices.
Bovis’s pre-tax loss for the six months to June 30 includes write-downs of £9.8 million relating to its land portfolio and contracts.
Stripping this out, the company behind the Nether Hall Park development, in Great Barr, and Oxford Place, in Walsall, reported a pre-tax profit of £1.2 million.
The firm said it had made “good progress” despite a significant fall in house prices, with private completions up 18 per cent and overheads slashed by 48 per cent.
Sharp falls saw the average sales price of private homes decline from £196,700 in the first six months of 2008 to £164,700 in the second half of last year. In the first six months of this year, Bovis said the average price was £160,400.
And, while house prices have fallen as the property market stagnated, Bovis said the size of the homes it offered for sale had increased.
Private homes legally completed during the first half of this year were an average 996 square feet, compared with 964 square feet in the first half of 2008 and 980 square feet in the second half of 2008. Bovis said this reflected a 21 per cent fall in price per square foot from the peak early last year.
Group revenues were down 18 per cent in the period to £122.6 million as housing revenue fell by 16 per cent to £120.4 million and Bovis suspended its land sales.
Bovis legally completed 754 homes compared with 851 in the same period last year.
Private reservations were up 92 per cent in the first half, to 901, which Bovis said reflected its aim “to drive volume more assertively” this year.
By the end of the first half Bovis had slashed net debt to £14 million after paying off £94 million following a period of strong net cash inflow.
The firm said it expects to be cash positive at the end of 2009 as it continues to reduce work levels. Bovis said it had taken actions to shore up the business in response to the sharp downturn in the housing market, including a significant cut in head-count costs.
It said it was now well-positioned to take advantage of future opportunities.
Analyst Imran Akram, of Collins Stewart, said: “Bovis is now very well-placed to ride out any further weakness in UK housing.’’
But, despite signs of stabilisation, the company said margins are not expected to improve in the second half, staying in line with the first half at 5.9 per cent, reflecting the impact of falling average sales prices.
“It’s not so much a market recovery; we’ve exploited the opportunities,” chief executive David Ritchie said.
The builder is cautious on pricing in the short-term “given the continuing challenges”.