Bovis begs for rate cut as profits tumble 6%

Reporting a 6% slide in profits for the year to December, the industry bellwether pleaded for action from the Bank of England as orders for new homes sink because customers can't borrow enough money to fund deals.

In his final results announcement after ten years in charge, chief executive Malcolm Harris said the company was poised to suffer one of its most challenging periods.

"Unless decisive action is taken now to reduce interest rates, and more normal conditions return to the mortgage market, it is likely that volumes will be well below those achieved in 2007," he said.

Interest rates have already been cut twice lately, but this has failed to spark a recovery in the housing market.

Bovis has made just 1262 sales so far this year, compared with 1582 by the same period 12 months ago.

The starkness of the warning may put pressure on Chancellor Alistair Darling to offer incentives to homebuilders in this week's Budget.

"Although the long-term position relating to supply and demand has not changed, the current housing market is weak," added Harris.

Bovis profits dipped from £132 million to £123.6 million - worse than the City expected - but it has enough cash on hand to lift the dividend by 17% to 35p. The extra dividend payment will be small comfort to shareholders who have seen the value of their investments plummet. Bovis shares were well above £11 last year, but have more than halved as the extent of the credit crunch and the wider financial crisis emerged.

They fell another 47½p to 530p this morning.

One analyst said: "Essentially, the outlook for the group is awful."

Harris is to become non-executive chairman in July - a controversial move that has drawn criticism from corporate governance watchers who argue this is not best practice.

Bovis addressed this issue in its statement to the stock market, saying it "recognises that the appointment of the new chairman diverges from...recommended practice", but claims it has the support of shareholders.

Tim Melville-Ross, the current chairman, is stepping down.

Harris will be replaced as chief executive by David Ritchie, 39, the former finance director, who will become one of the youngest chief executives of a FTSE 250 company.

The Government has set high targets for building new homes in recognition that demand dwarfs supply, but the banking crisis could throw these plans into disarray. A report by Hometrack today warns that Britain will be building fewer homes in five years than it does now.

Bovis says its mid-market positions and investment in land leave it well placed for the long term. It has nearly 25,000 potential plots in its land bank.