Bovis new chief exec sets out strategy to fix the beleaguered company

(qlmbusinessnews.com via telegraph.co.uk – – Thu, 7 Sept 2017) London, Uk – –

Bovis Homes’ share price has soared more than 8pc as its new chief executive updated investors on his strategic review, which will include building fewer homes and paying out more cash to shareholders, in an attempt to get the beleaguered housebuilder back on track.

Greg Fitzgerald, who joined the company in May, described Bovis’s problems as “very fixable”.

In his plans for the overhaul, he said that he would streamline the business and its balance sheet, reducing the number of employees, disposing of developments outside its core areas, and lowering infrastructure spending.

He also added that the company would merge operating regions to create seven key areas, and that the business would aim to build just 4,000 homes a year, a step down from the high-volume model in which the company aimed to build up to 6,000 per annum.

To please investors, the company will hike its dividend and plans to pay out special dividends totalling £180m by 2020, as well as promising to raise the margins from 11.4pc in the first half of this year to 23.5pc.

George Salmon, an analyst at Hargreaves Lansdown said: “[The plan] even includes pledges to return the cash generated from slimming down non-core operations to shareholders. In a big way too: the plans suggest around a third of Bovis’ current market cap will be in shareholders’ pockets by 2020.

“However, it seems fairly apt that the new CEO’s plans include instilling a culture of ‘getting it right first time’. The tailwinds in the sector, namely the combination of low interest rates and supportive government policy won’t last forever.”

 It came as it reported its pre-tax profits have fallen by a third in the six months to June as it reduced volumes in an attempt to repair damage to the company’s brand and the homes it built.

Bovis said there was a 6pc fall in the number of homes it built, as it had warned in a previous update, with pre-tax profit down 31pc to £42.7m from £61.7m in the same period last year. Revenues were up 4pc to £427.8m.

The company said that this profitability was impacted by “by legacy customer service costs, overweight operating structure, investment to change the business, and defence costs,” and it had warned that it set aside more than £10m to attempt to fix the problems that emerged earlier this year.

Bovis’s problems started when it ­issued a profit warning last December due to production delays, before it was revealed that the company was offering incentives to persuade home buyers to move into unfinished properties.

The company faced further reports of low-quality homes and service, while in March housebuilders Redrow and Galliford Try tabled takeover bids, although these were ultimately rejected.

Its average selling price increased by 9pc to £277,000, driven by an increase in building more upmarket homes in the south of England. Other measures to change the direction of the company include an increased focus on affordable housing, teaming up with housing associations.

 Mr Fitzgerald, who was previously chief executive at Galliford Try, said: “The new strategy of disciplined volume growth, allied with a renewed focus on customer satisfaction and build quality, will deliver the homes that are required in the locations where people want to live. The group’s strong balance sheet and valuable land bank mean we are well set to provide the stable returns to shareholders that their patience and support have deserved.”

By