Redrow axes 350 jobs and Warrington office

Jul 9 2008

Housebuilders Bovis Homes and Redrow today said around 750 jobs were being axed as part of their efforts to ride out the property slump.

The cuts - meaning the two companies will have reduced their workforces by 40% since the start of the year - bring the total of job losses to at least 4,650 for Britain’s biggest housebuilders after Persimmon, Taylor Wimpey and Barratt Developments also announced restructuring moves in recent days.

Kent-based Bovis will shut its eastern regional office in Cambourne, Cambridgeshire as part of its plans to trim some 400 jobs.

And Redrow is closing two of its 10 offices - in Warrington and Basingstoke - as it reduces its headcount by around 350 to 850, having already seeing staff numbers decline by 150 since the start of the year.

The job cuts come as housebuilders struggle against plunging sales and property price values.

Yesterday Persimmon said 1,100 office jobs and 900 on-site jobs had gone so far this year.

Redrow, headquartered in Ewloe, Flintshire, said it had seen an “unprecedented decline in the fortunes of the UK housing market”, with sales of new homes down by 19% to 3,925 in the year to the end of June.

Keith Bowman, equity analyst at Hargreaves Lansdown Stockbrokers, said: “The picture across the housebuilding sector is bleak.”

He added that investors were concerned that “the fight has now become one of survival”.

Redrow’s forward sales as at the end of June have nearly halved from 2,148 this time last year to 1,189, according to the group.

The firm added that it expected to take a “significant” hit on the value of land and work in progress due to sharp property price falls, while it was also in negotiations over its banking agreements.

But Redrow said it had not breached any agreements with its banks as at June and reassured that full-year trading was set to be in line with its expectations.

Bovis, meanwhile, reiterated a warning that half-year profits would be hit by the decline in trading as it said sales plummeted by 32% in the six months to June 30.

The group said average selling prices across private and social housing had dropped from £189,600 in the first six months of 2007 to £167,500 in the first half of 2008.

But Bovis hoped that the job losses announced today and other cost saving measures would cut overheads by a fifth, although it would also take a one-off £2 million charge.

The group said it was merging the key functions of its northern and central regions, among other steps being taken to save cash.

Bovis said it did not expect to make any ``material'' write-downs on its landbank for the first half of the year.

David Ritchie, chief executive of Bovis, said the group was giving incentives to help drum up sales, such as offering first-time buyers the opportunity to pay for 75% of the property now and the remainder in 10 years’ time.

But he said buyers were being frustrated by a lack of mortgage availability and the fear of falling into negative equity if they bought as prices continued to drop.

“Even if liquidity came back to the mortgage market tomorrow, it would take some time to persuade consumers to buy a property in the current market,” he warned.

Shares in Bovis and Redrow rose despite the news of home sales troubles, up 1% and 13% respectively as the wider market also saw strong gains.

But Redrow’s update was given a less positive reaction by analysts at Numis Securities, who said in a note that it was “one of the weakest statements in the sector”.

The builder is facing a grim combination of high debt, low margins and large write-downs to landholdings, according to Numis.