Payouts hit Bovis profits, but growth promised for 2018
PROFITS AT Bovis Homes tumbled last year after the housebuilder was stung by a string of costs that included compensation payouts for poor-quality homes.
The group reported a 26 per cent fall in pre-tax profit to £114m in 2017, booking exceptional items – those compensation payouts – totalling £10.3m.
This included £3.5m in customer care provision, £4m in restructuring costs and £2.8m advisory fees linked to defending itself from two aborted takeover attempts from rivals Galliford Try and Redrow.
In 2016, it was revealed that Bovis had been hitting completion targets by rushing the completion of some of its homes, and offering customers incentives to move into unfinished properties, some of which had electrical and plumbing problems.
As a result, boss David Ritchie resigned, and the company had to set aside millions of pounds to deal with the fallout.
However, the firm said that, since the débacle, it has presided over a “step change” in quality and service, with customer satisfaction levels now trending above 80 per cent.
Bovis completed 3,645 homes in 2017, 8 per cent lower than the previous year, confirming a building slowdown as it focuses on quality.
Revenue fell 3 per cent to £1bn, while the average selling price on completion increased 7 per cent to £272,400. Stripping out exceptional items, operating profit was down 19 per cent to £128m.
Boss Greg Fitzgerald, who left Galliford Try to take the reins at Bovis last April, said: “I am very pleased with the level of operational progress the group has made during the year.
“We have significantly improved our customer satisfaction through a series of initiatives and controlled period ends.”
Bovis also shrugged off economic uncertainty and a weak housing market by pointing to a hefty rise in profit in 2018.
The company said strong customer demand, attractive mortgage rates and government initiatives – in particular Help to Buy – were helping to drive sales.
“The group fundamentals are strong, and, with the business turning around, I am excited about future years,” said Mr Fitzgerald.
“In 2018, we will deliver a controlled increase in volume, continue to build upon our high level of customer service, drive profitability, and complete our balance sheet optimisation.”