“The City gave the thumbs-up to new boss Greg Fitzgerald’s “small is beautiful” turnaround plans for struggling Bovis Homes on Thursday, marking the shares up 8% despite a slump in first-half profits.
Bovis sacked its previous chief executive David Ritchie in January after profit warnings and controversy over “bribes” for buyers to move into barely finished homes — triggering opportunisitic takeover bids from rivals Redrow and Galliford Try.
Fitzgerald’s medicine involves rebuilding the business’s scarred reputation with customers and scaling back its growth plans, now aiming to sell 4000 homes a year instead of 6000 by 2020.
The firm has also shed 120 jobs to cut costs by merging two of its regional businesses.
But the payouts are getting bigger, with investors in line for £180 million in special dividends, funded by cutting exposure and investment on its larger sites, and selling some developments.
The ordinary dividend is jacked up 5% this year, with the promise of an extra 20% in 2018.
Shares jumped 8% or 85.7p to 1140p despite a 31% slide in profits to £42.7 million in the first half of the year.
The ex-Galliford boss, who took over in April, said the housebuilder’s woes were “very fixable”.
He said: “I’ve got a great hand of cards, we’ve just got to play that hand of cards better than we have in the past.
“Our strategy represents the minimal risk for the maximum shareholder return. Where Bovis is at the moment, that’s the right thing to do instead of charging on to get to 10,000 units. We’re well on the way to fixing Bovis but it is going to take more than a day.”
Jefferies analyst Anthony Codling called the strategy a “new dawn” and upgraded his estimates for the firm’s annual profits.”