Bovis Homes posts 3% drop in FY profit
Housebuilder Bovis Homes reported a 3% drop in pre-tax profit as the company was forced to compensate customers for poorly built homes, and said it had begun a strategic review.
FTSE 250
19,391.30
17:09 19/04/24
FTSE 350
4,341.08
17:09 19/04/24
FTSE All-Share
4,296.41
17:08 19/04/24
Household Goods & Home Construction
12,287.29
17:10 19/04/24
Vistry Group
1,114.00p
17:03 19/04/24
Pre-tax profit fell to £154.7m from £160.1m, missing analysts’ expectations of £170m and the company’s guidance of between £160m and £170m.
Bovis said weaknesses in its production process and a high level of customer service issues led to a one-off £7m customer care provision.
The company said customer service standards "fell significantly" in 2016 and homes were completed, in particular at the year end, "which fell materially short of the high standard expected". Bovis said it has a customer service task force in place to address these issues and the customer care provision will cover the cost of the required remedial work and appropriate compensation for affected customers.
Meanwhile, revenue rose 11% to £1.05bn, while legal completions nudged up 1% to 3,977 and the company declared a dividend per share of 45p, up from 40p in 2015.
Bovis said it is focused on making 2017 the year when it re-sets the business and delivers on its operational priorities. As a result, it is slowing its rate of production and targeting completion volumes for 2017 to be around 10% to 15% below the 2016 level, before a return to normal industry production levels.
The average selling price is expected to increase again, reflecting the mix coming through the company’s landbank and Bovis said it continues to see market inflation impacting both the cost of subcontract labour and material supplies.
Chairman Ian Tyler said: “Despite the difficulties of 2016, the board remains confident in the group's abilities to deliver improved returns to shareholders. The process of transformation is already underway under Earl Sibley's interim leadership and I am confident the plans in place will address the operational weaknesses we have seen in our business, and focus us once again on delivering high quality product and service to our customers.
“Further, we are undertaking a strategic and structural review of the business to ensure we meet our commitment to deliver the highest possible returns from our valuable land assets."
George Salmon, equity analyst at Hargreaves Lansdown, said: “2016 has seen quite a number of dissatisfied buyers, serving as tangible examples of the group’s recent failings. The previous CEO has left, so the measures to resolve the problems are coming from an interim leadership team. The sooner the group can find the right person to take the reins permanently, the better.
"While Bovis has its own issues to deal with, a chunky 10% increase in average prices and continued strong demand from buyers show the sector as a whole is proving resilient despite fears over the effect of the UK’s withdrawal from the EU, though it is still of course early days in this process.”
At 0910 GMT, the shares were down 7.3% to 779.50p.