Bovis profits crumble amid customer complaints compensation headache

● Despite slump CEO confident that new strategy will lead to ‘sustainable’ growth

Profits at Bovis Homes have fallen by almost a third after the housebuilder was stung by costs relating to customer complaints over the quality of its homes.

The company saw pre-tax profits for the six months to 30 June plummet 31 per cent to £42.7 million, with the firm also booking exceptional advisory costs linked to defending itself from two aborted takeover attempts from rivals Galliford Try and Redrow.

The group, which focuses its activities on England and Wales, has so far set aside £10.5m to cover remedial work and compensation for affected customers after it was dogged bycomplaintsoverhomesthat were sold unfinished and had electrical and plumbing faults.

Revenue for the period rose 4 per cent to £427.8m, with the average price of the firm’s homes rising 9 per cent to £277,400.

But completions fell 6 per cent to 1,512 following a pledge to slow the rate at which it builds homes in 2017 as part of a “re-set” under new boss Greg Fitzgerald. Bovis is aiming to build 4,000 homes per year, lower than previous targets of 5,000 to 6,000.

Thechiefexecutivedescribed the first half as a “period of stabilisation and strategic reorganisation” as he looks to get the business back on track.

He added: “I have visited all our offices and the vast majority of our developments, and have been hugely impressed by the desire of our dedicated staff to address and rectify the challenges faced by the business. As a result I am confident that our new strategy will set the group on the path to sustainable, profitable growth.

“The new strategy of disciplined volume growth, allied with a renewed focus on customer satisfaction and build quality, will deliver the homes that are required in the locations where people want to live.”

As part of Fitzgerald’s shakeup, he will reduce headcount at the business, with 120 jobs already axed.

Bovis said that it has seen “a good pick-up in sales” in the traditionally quieter months of July and August and a “significant improvement” in its customer satisfaction score.

George Salmon, equity analyst at financial services group Hargreaves Lansdown, said: “The new strategy seems sensible enough. It even includes pledges to return the cash generated from slimming down non-core operations to shareholders.

“However, it seems fairly apt that the new CEO’S plans include instilling a culture of ‘getting it right first time’. The tailwinds in the sector… won’t last forever.”