“Under-pressure housebuilder Bovis Homes PLC (LON:BVS), whose boss quit in January just days after the firm warned it would not meet market expectations, saw its 2016 profits fall by 3% after a “difficult year” and said it will build fewer homes in 2017
The FTSE 250-listed firm saw its pre-tax profits fall to £154.7mln for the full-year to December 31, down from £160.1mln a year earlier and below the firm’s own forecast of £160mln-£170mln, even though revenues rose by 11% to £1.054bn.
In reaction to the profits fall, Bovis shares dropped over 9% in early trading, down 75.5p to 765.5p, dragging other houserbuilders lower in its wake.
Bovis surprised the market at the end of December by saying it would miss market forecasts after failing to build the volume of homes it anticipated in 2016.
The group built nearly 4,000 homes last year but said it expected volumes to fall by between 10% and 15% in 2017 before a return to “normal industry production,” despite almost all its peers building more homes and posting bumper profits.
Earl Sibley, Bovis’s 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.”
In a note to clients, analysts at Liberum pointed out: “Management has warned that to resolve the quality issues that hit 2016, it will slow production down by 10-15% in 2017 and that costs will rise as it invests in its processes once again.
“This suggests that 2017 consensus EPS estimates could fall by around 25%.”
However, repeating a ‘hold’ rating and 775p price target on the stocks, they added: “The 2016 NAV of 757p should act as a support for the shares, and management has pledged to maintain the 45p dividend in 2017.”
Despite the 2016 profits fall, Bovis still raised its dividend to 45p per share, up 13% from the 40p paid in 2015.
In its statement, he firm said: “Whilst there will inevitably be an impact on our earnings and cashflow from the actions we are taking in 2017, the Board intends to recommend maintaining the dividend at the level declared for 2016, confirming its confidence in the future potential of the business.”