More job cuts at UK housebuilders

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Bovis Homes and Redrow have become the latest UK housebuilders to announce a sweeping reduction in their workforces.

Staff numbers will be cut by 40% compared with the beginning of the year at both firms.

A credit crunch and drop in the number of affordable mortgages are to blame for the market problems, they said.

Bovis said it would shed about 400 office and site-based jobs, while Redrow said that some 550 jobs will go as part of broad cost-cutting measures.

Low confidence

The whole property industry is reeling from low homebuyer confidence.

"Managements are switching their focus from profits to cashflow"
Keith Bowman, analyst, Hargreaves Lansdown

Housebuilder shares rise

Persimmon, Taylor Wimpey and Barratt Developments have all announced job cuts and warned on the outlook for the housing market for 2008.

"Sales revenues have taken a dramatic downturn, whilst the overall financial picture is further complicated by the need for just about all the builders to write down the value of previously purchased land," said Keith Bowman, an analyst at Hargreaves Lansdown stockbrokers.

"Banking covenants are now coming dangerously close to being breached and managements across the board are switching their focus from profits to cashflow - heightening investor concerns that the fight has now become one of survival," he added.

But the stock market welcomed the news from Redrow and Bovis, which show that the companies are taking serious action to minimise their losses.

Bovis Homes shares rose 5.5 pence, or 1.7% to 323p, while shares in Redrow gained 3.6% to close at 100p. Redrow shares rose as much as 14% earlier in the session before dropping back to close 3.6% higher.

'Worst for years'

Bovis said the market for selling homes was the "worst that the group has seen for years", while Redrow called the sharp decline "unprecedented".

Sales completions at Bovis for the six months to the end of June were down 32%.

Of the homes that were completed, 27% was social housing, rather than private homes, more than double the amount in the same period last year.

Bovis said it would continue to seek opportunities in social housing as it expects private home sales to remain low for the rest of 2008.

As part of its cost-saving drive, Bovis said it was closing one of its offices and merging a number of key functions of its northern region with its central region.

It will also cut its interim dividend to 5 pence per share. The company said that it had expected to pay shareholders a dividend of 20p per share.

Redrow is also making moves to manage its cost base, closing two of its 10 offices.

It is carrying out a review of the value of inventory and land not in development. It warned that this review may lead to it cutting the value of its holdings.

Both Redrow and Bovis were pessimistic about the short-term outlook for the property market.

Earlier on Wednesday, Redrow had said that as many as 850 jobs would go as part of its cost cutting measures. The company later clarified its position.