Bovis Homes repairs reputation and balance sheet after faulty homes scandal
Bovis Homes built a lower number of homes in 2017 but reported much improvement in its balance sheet and in customer satisfaction after the controversy over putting customers in faulty homes last year.
Profit before tax and exceptional items for 2017 is anticipated to be in-line with expectations, meaning the housebuilder avoided an ignominious triple after New Year profit warnings in the past two years.
Bovis reported that it has a strong forward orders of 2,656 homes and expects a "significant improvement" in profitability for 2018.
After the scandal blew up over Bovis's hurried attempts to complete houses saw customers given incentives to move into properties that were still unfinished and sometimes had electrical and plumbing problems, by the end of December 3,645 completions were recorded, down 8% from the 3,977 the year before. Average selling prices rose 7% to around £272,000.
The sales rate fell to 0.48 average net private reservations per active outlet per week from 0.58 a year earlier, though a trend to a more normal sales rate is expected in 2018.
Greg Fitzgerald, the former Galliford Try chief who was brought in to turn the business around, said the year was completed "very disciplined" manner, with "a step change in the quality of our homes delivered on completion" that has seen a big improvement in customer satisfaction.
A one-off £3.5m 'customer care' cost from the scandal and a £4m restructuring charge were the main components of the £10.3m of exceptional items in the year, with the remainder being £2.8m of advisory fees.
Restructuring the balance sheet was another key aim for Fitzgerald and by the end of December, there was net cash of circa £145m, significantly ahead of expectations. This was achieved by the £27.6m sale of the group's shared equity portfolio, reducing the level of part exchange properties by around £30m in the year, five land sales contributing £30.5m and the disposal of three owned offices for close to £9m.
Fitzgerald said he will continue to review the land bank, with a particular focus on our larger owned sites, as he targets a reduction to 3.5-4.0 years of owned land, around 14,000-16,000 plots.
"Our forward order position is strong, and with robust industry fundamentals, we expect the Group to deliver a significant improvement in profitability in 2018," Fitzgerald said.