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Profits hit by customer issues

Bovis Homes unveils review after ‘difficult year’

BovisHousebuilder Bovis Homes was the FTSE 250’s biggest faller in early trading after admitting that 2016 was a “difficult” year for the business. Its shares fell 9%.

The company suffered a “high level of customer service issues” leading to a one-off £7m customer care provision.

However, group fundamentals remain strong with more than 3,000 plots added to its consented land bank and the financial position has been strengthened, with year end net cash increasing to £38.6m

Profit before tax fell 3% to £154.7 million (2015: $160.1m) on an 11% rise in revenue to £1.05bn (2015: £946.5m).

The group said it is now focused on making 2017 the year to “re-set the business” and deliver on its operational priorities.

It is slowing its rate of production and targeting completion volumes for 2017 to be c.10% to 15% below the 2016 level, before a return to normal industry production levels.

Production rate in early January has been slowed to support the focus on customer service, and current production programmes have been extended.

The average selling price is again expected to increase, reflecting the mix coming through our landbank. Bovis continues to see market inflation impacting both the cost of subcontract labour and material supplies. To deliver on its operational priorities it will also see an increased level of investment in 2017 across the business.

The company says there will inevitably be an impact on earnings and cashflow from the actions being taken in 2017. Even so, the board intends to recommend a 13% rise in the final dividend to 45p per share (2015: 40p), confirming its confidence in the future potential of the business.

Earl Sibley, interim chief executive, said: “We have a clear set of operational priorities for 2017 and are fully committed to improving our levels of customer service and delivering high quality homes this year and in the future.

“The fundamentals of the business remain strong with a robust financial position and high quality land bank. With our focus on higher levels of customer service, improved build efficiency, and a refreshed culture, we are confident we will generate enhanced shareholder returns over the medium term.”

Ian Tyler, chairman, 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.”

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