Bovis Homes is on track to deliver a hefty profit rise in 2018, driven by strong customer demand, attractive mortgage rates and the government’s Help to Buy scheme.
The housebuilding giant’s boss Greg Fitzgerald said that this year’s pre-tax profit and one-off and exceptional items are in line with forecasts, while the company is set to for a big boost in 2019.
However, the group added that its pre-tax profit would fall around 25 per cent to around £115million after one-off charges linked to restructuring and extra work it is undertaking to improve its homes and merger talks.
Strong base: Bovis Homes is on track to deliver a hefty profit rise in 2018, driven by strong customer demand, attractive mortgage rates and the government’s Help to Buy scheme
‘The group had a very disciplined year end and delivered against all of its financial and operational targets for 2017,’ he said.
‘Our forward order position is strong, and with robust industry fundamentals, we expect the group to deliver a significant improvement in profitability in 2018.’
It marks a big turnaround from a year ago when former chief executive David Ritchie resigned in the wake of a profit warning, after which the company has seen off takeovers from competitors Galliford Try and Redrow.
Bovis, which had been dogged by complaints over unfinished homes with electrical and plumbing faults, also said that it has seen a significant improvement in customer satisfaction.
‘There has been a step change in the quality of our homes delivered on completion and I’m pleased to see this reflected in our level of customer satisfaction which continues to improve,’ added Fitzgerald, who came out of retirement in April last year to help overhaul the company.
Bovis completed 3,645 homes in 2017, down eight per cent from 3,977 in 2016, confirming a building slowdown as it focuses on quality.
Better service: Bovis, which had been dogged by complaints over unfinished homes with electrical and plumbing faults, also said that it has seen a significant improvement in customer satisfaction
Broken down, private home completions fell from 2,903 in 2016 to 2,573 in 2017, while affordable housing declined marginally from 1,074 to 1,072 over the same period.
The average selling price on completion increased seven per cent to £272,000 with private average selling prices climbing nine per cent to £334,000.
The company added that its forward sales position was ‘excellent’, with 2,656 units sold and a £518m value at year end – £418m of which was for delivery in 2018.
It confirmed that operating margins impacted plans to ‘re-set’ the business by driving sales from older lower margin sites, significantly reducing its stock and ploughing ahead with customer service initiatives.
Bovis said that the development of a new range of ‘margin-enhancing’ homes ready to launch in the next six months and for delivery in 2019 was ‘progressing well’.
The company will book exceptional one-off items totalling £10.3m, including a £3.5m customer care cost, £2.8m advisory fees and a £4m restructuring charge.
Its net cash position was £145m at the end of 2017, substantially ahead of its £100m target and ‘significantly ahead of expectations’, said Fitzgerald, leaving it on track to increase its dividend by 20 per cent in 2018.
Bovis shares were up three per cent at 1,187.75p in early morning trading.