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Bovis Sales Target Under Threat As U.k. Market Slows

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Bovis Sales Target Under Threat as U.K. Market Slows (Update1)

By Sophie Kernon

July 9 (Bloomberg) -- Bovis Homes Group Plc, a U.K. homebuilder, may cut its annual sales target after increased interest rates and mortgage costs led to a drop in the number of potential buyers visiting sites. The stock had its sharpest decline in almost a decade.

``We believe we can increase our volume, but if the market slows any further, we have to bring our target down,'' Chief Executive Officer Malcolm Harris said in an interview today. ``We need our sales rate to pick up and we will introduce new incentives to do that.''

Bovis said visitors to developments have plummeted in the past six weeks and a planned 10 percent gain in sales for 2007 now hinges on consumer confidence in the summer and fall. The Bank of England, which has raised interest rates five times since August, has sought to slow the economy as rising property values encourage consumer spending and London's financial services industry booms.

First-half reservations at the Longfield, southeast England-based company were little changed at 2,282 and buyers are now taking longer to complete transactions, Harris said. Bovis's average selling price held steady at about 189,000 pounds ($380,000) in the first half.

Shares of Bovis fell as much as 8.4 percent, or 77 pence, to 843.5 pence and they traded at 845 pence as of 10:35 a.m. in London, their sharpest intraday fall since Dec. 9, 1997. Prior to today, they had declined 15 percent this year, giving a market value of 1.11 billion pounds. The stock gained for four straight years through 2006.

Other U.K. homebuilders also fell, including market leader Taylor Wimpey Plc, down 4.4 percent, and Persimmon Plc, which had slipped 2.8 percent.

`Most Cautious'

``Management's housing market commentary is the most cautious provided so far in the reporting season,'' Cazenove analyst Jeremy Withersgreen and colleagues said in a note. Cazenove has a ``neutral'' rating on the stock. ``It does appear increasingly likely the autumn selling season will be subdued.''

Bovis aims to introduce a new range of incentive packages within weeks to help counter the extra financial burden that higher borrowing costs place on home seekers, Harris said.

Taylor Wimpey, formed through the merger of Taylor Woodrow Plc and George Wimpey Plc, said June 27 the British housing market is poised to deteriorate, with ``less buoyant'' demand for the second half.

London `Strong'

``Bovis is suggesting that the summer and autumn selling periods will be key to them securing their volume growth,'' said Colette Ord, an analyst at Numis Securities in London, with a ``neutral'' rating in the stock. ``They are going to have to have a good second half.''

Ord had predicted a 12 percent gain in Bovis's 2007 sales.

U.K. house-price inflation accelerated in June, as the average cost of a home in Britain rose 0.4 percent to 197,461 pounds, according to HBOS Plc, the U.K.'s biggest mortgage lender.

Harris said ``strong'' markets in London and Scotland and a shortage in housing in the U.K. mean prices are likely to remain stable. Bovis isn't pushing for price increases and the incentives offered so far have already been in place a year.

Bovis's operations are split into five regions offering apartments to six-bedroom family homes. The company built 16 percent more homes last year. Completions of apartments jumped by two-thirds, while it constructed 13 percent more three- bedroom homes to cater for families. The amount of so-called social housing or lower-cost subsidized properties slipped by more than a third.

Pretax profit met management forecasts, the company said, without giving a figure. It will report first-half earnings on Sept. 10.

Source: http://www.bloomberg.com/apps/news?pid=206...JE&refer=uk

Edited by studdymx

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