Bovis Homes, the housebuilder, said today that it had reached agreement with its banks over a £150 million debt refinancing to reduce its interest costs and give it the firepower to invest in residential land.
The group, which in September announced a £60 million equity fundraising, revealed that it was in discussions with its banking syndicate at the end of last year.
Its new £150 million syndicated facility would mature in September 2013.
It said that the refinancing would support its strategy “to grow output capacity through the acquisition of residential land, providing an increase in sales outlets to support volume growth: and, in so doing, contributing to growth in profits and improved financial returns”.
Bovis, which specialises in two to five-bedroom homes in the South of England, said that it had re-entered the residential land market during the latter part of last year, having acquired four sites and agreed terms in principle on a further 15 sites.
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Robin Hardy, a KBC Peel Hunt analyst, welcomed the removal of “a major headache”, pointing out that the previous facility was “very expensive and had covenants that did not allow negative working capital movements. In other words, Bovis could not buy any land.”
But Mr Hardy said that he was concerned at the group’s ability to resurrect its growth plans given its inactivity in building and buying land in the open market for more than two years,
“Bovis cut the headcount by 60 per cent, including key land-buying staff,” he said. “The group must now prove that it gets the re-engagement with the supply chain and the land market right.”
In a full-year trading update, Bovis said that it had completed 1,803 homes in 2009, slightly down on the 1,817 completed the year before, although the proportion of private homes versus social housing was up by 25 per cent to 1,527, pushing the average sale price 2.5 per cent higher to £154,600.
The average sale price of its private homes was £165,500, down from £181,000 in 2008.
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Bovis said that it had sustained its strong performance in private home reservations, achieving 1,801 reservations during the year, up 82 per cent.
The group ended the year with a sales order book for delivery this year of 643 homes, some 218 more than 12 months earlier.
The company said that it expected pre-tax profits before exceptionals to be in line with expectations, although it expected trading conditions this year to be “subdued relative to historical levels, given ongoing economic uncertainty”.
It said that although mortgage approval volumes were slowly rising, the market was being held back by the requirement by mortgage providers for “record high levels of deposits, particularly from first-time buyers”.
However, it added: “Longer-term market demand and supply trends remain positive. With a strong balance sheet and a clear strategy, the group is confident of its ability to create value for its shareholders into the future.”
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Shares of Bovis fell by 1.2p to 452.9p in early trading.