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Bovis Homes up as first half trading in-line with its reduced expectations, but increases legacy provisions

Last updated: 17:40 06 Jul 2017 AEST, First published: 16:51 06 Jul 2017 AEST

Bovis homes
Bovis has taken a further £3.5mln provision in the first half, taking the total one-off costs related to legacy customer satisfaction issues to £10.5mln

Bovis Homes Group PLC (LON:BVS) saw its shares rise today as the under-pressure housebuilder - which lost its CEO at the start of the year after a surprise profit warning - said trading in the first half has been in-line with its reduced expectations, although it also raised its provisions for legacy customer issues

In a trading update for the six months ended 30 June 2017, the FTSE 250-listed firm said, as announced in February, it has slowed its rate of production for 2017 and continues to expect to deliver completion volumes for the full year around 10% to 15% below the 2016 level.

READ: Bovis Homes to take around a £2.8mln one-off charge for failed takeover talks, strategic review

The group – which rejected two takeover bids in April - said in the first half it delivered 1,512 completions, down from 1,601 a year earlier, of which 1,140 were private units.

Bovis said it continued to see an improvement in its average selling price, increasing by around 9% in the first half to circa £277,000, up from £255,000 in 2016, driven by changes in mix and a modest increase in average underlying prices.

The group's sales rate of 0.48 net private reservations per site per week in the first half was down from 0.62 a year earlier, in-line with its 2017 production plans.

It said it had opened 15 new sites in the period and operated from an average of 96 active sales outlets, down from 100 in 2016.

New boss confident he can deliver a successful turnaround

Greg Fitzgerald, Bovis’s recently-appointed group CEO said: "The trading performance in the first half of our financial year is in-line with management expectations. “

He added: “In the past 11 weeks I have spent a good amount of time with each of our operating regions, visited 85 sites and met the vast majority of our people. 

“We continue to identify and implement operational improvements and I am very confident we can deliver a successful turnaround, returning Bovis Homes to being a leading UK housebuilder. “

Further provision for legacy customer satisfaction issues

The group said that following the CEO's review of the business, it has taken a further £3.5mln provision in the first half, taking the total one-off costs related to legacy customer satisfaction issues to £10.5mln, of which £7.0mln was provided for in 2016. 

The firm’s net debt was around £33mln as at 30 June 2017, up from net debt £7.6mln a year earlier.

In a note to clients, Liberum Capital analyst Charlie Campbell said Bovis’s first-half update “shows improvement work is underway”.

He added: “A further £3.5m provision has been taken to resolve customer issues (after the £7m already taken), but this is probably a positive as management is signalling a determination to accelerate the rate at which these problems are addressed.

“Management starting to signal that ROCE improvement will be boosted by rationalising landbank as well as growing margins.”

The analyst reiterated a ‘buy’ rating and 940p price target on Bovis shares, which in early morning trading were up 1.6%, or 15.5p to 985.0p.

 Bovis will report its half year results and the outcome of its strategic review on September 7.

 -- Adds analyst comment, share price --

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