Shares in house builder Bovis Homes (LON:BVS) dived on Monday morning, after the group reported a “difficult year” dogged by slow production and poor customer service.
In a trading statement the group said pre-tax profits were likely to be flat on last year total at between £160 million and £170 million, well below analysts’ previous predictions of £183 million.
However, net cash rose by £8.6 million to 38.6, with revenue up 11 percent to £1,054.8 million. The number of completions also rose 1 percent to 3,977, with the average sales price of houses boosted by 10 percent.
The figures were hit by a one-off £7 million customer care provision, after its customer service was found to need “urgent improvement”. The group added that it had “continued to see market inflation impacting both the cost of subcontract labour and material supplies”, and said that “there will inevitably be an impact on our earnings and cashflow from the actions we are taking in 2017”.
Shares fell sharply on the news as investors noted that a slowdown in both the rate of building and sales in December would leave the company 180 homes short of its forecast completions. THe company have been hit by several difficulties in the last coup of months, including an unexpected profit warning in late December after its chief executive, David Ritchie, stepped down.
Commenting on the results, Bovis Homes’ chairman Ian Tyler said:
“Despite the difficulties of 2016, the Board remains confident in the Group’s abilities to deliver improved returns to shareholders. The process of transformation is already underway under Earl Sibley’s interim leadership and I am confident the plans in place will address the operational weaknesses we have seen in our business, and focus us once again on delivering high quality product and service to our customers.
“Further, we are undertaking a strategic and structural review of the business to ensure we meet our commitment to deliver the highest possible returns from our valuable land assets.”
Analysts at Deutsche Bank commented on the results: “In hindsight, widespread press reports suggest even this result was a struggle. From here we believe Bovis will need to reassure confidently on future guidance.”
Bovis Homes shares fell nearly 8 percent in early trading, currently down 7.33 percent at 779.39 (0903GMT).