Cautionary outlook as Bovis profits hammered by delays

Bovis Homes has cautioned investors over profits, warning that build delays in the run-up to Christmas will impact sales.

Bovis Homes warned that its profits would fall short of City hopes. Picture: Chris Radburn/PA
Bovis Homes warned that its profits would fall short of City hopes. Picture: Chris Radburn/PA

The housebuilder blamed “slower-than-expected build production” during December for a year-end knock to its sales rate, with completions on some 180 homes set to be delayed into early in the new year.

The group now expects to complete between 3,950 and 4,000 homes in 2016, which will leave it nursing lower profits than previously forecast.

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Bovis, which focuses much of its activity on the south of England, is pencilling in pre-tax profits for 2016 of between £160 million and £170.1m.

This is down from previous City expectations of more than £180m and would mark a sharp slowdown on earnings growth seen in 2015, when bottom-line profits jumped by a fifth to £160.1m.

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Numis analyst Chris Millington, who had an “add” recommendation on Bovis’ shares, said: “We are leaving 2017 estimates unchanged reflecting the expected completion of the deferred units and a better position with regard to planning and production.”

In its trading update yesterday, Bovis stressed that it was in a good position for 2017, with 900 forward sales against 840 a year earlier, while it added that 2016 shareholder dividend payouts were not expected to be impacted by the profit blow.

The FTSE-250 group’s alert comes just over a month after it said it was on track for bumper annual revenues. It has shrugged off Brexit uncertainty in recent months, with the housebuilding sector overcoming a brief slowdown in the property market in the weeks surrounding June’s EU referendum vote.

Bovis said in November that, apart from a blip after the Brexit vote, sales had followed the “normal seasonal pattern”.

Meanwhile, John Tutte, the chief executive of housebuilding peer Redrow, yesterday outlined his predictions for the property market in 2017.

He said commuter locations were likely to outperform central areas as families favour value for money and the “community benefits” of suburban living. He also warned that an industry skills gap was likely to worsen in the year ahead.

“Demand for new homes continues to outweigh supply,” noted Tutte. “Record low interest rates, a competitive mortgage market and government incentives such as Help-to-Buy have boosted demand. Our focus in 2017 and beyond is to create better places for people to live.”