September 7, 2017 / 7:45 AM / a year ago

UPDATE 2-UK builder Bovis reins in growth targets as part of turnaround

* Cuts target to 4,000 homes per year

* Headcount to fall by 120, will cut land bank

* Firm hit by customer complaints, subject to takeover bids

* Shares finish up 10 pct at highest since Aug 2015 (Adds CEO comments, details)

By Costas Pitas

LONDON, Sept 7 (Reuters) - British housebuilder Bovis , the subject of two failed takeover bids this year, said on Thursday it would rein in growth plans, reduce its land bank and cut staff under its new boss as profits fell nearly a third.

Chief Executive Greg Fitzgerald took over in April aiming to turn around a business hurt by critical media coverage in Britain prompted by complaints about the quality of its homes.

First-half pretax profit fell 31 percent to 42.7 million pounds ($55.66 million) as completions declined 6 percent to 1,512 units, in line with expectations, as the firm slows its building this year to focus on improving quality.

While nearly all of Britain’s major housebuilders have posted bumper profits in recent years, Bovis has suffered as buyers complained about issues ranging from a lack of sealant in bathrooms to nails poking through walls.

The firm said on Thursday it aimed to build 4,000 homes per year, significantly lower than a previous target of 5,000-6,000, and that it would focus more on delivering affordable housing.

“If we were going to go to 6,000 ... I would probably need to open about four new offices. Opening four new offices in regions where we are not established and have no links to any supply chain, would be counterproductive,” Fitzgerald said.

“It would lose us money, it would lose us definitely margin and it would be more of the same, giving poor properties over to our customers, which is what Bovis experienced far too many times,” he told Reuters.

Investors welcomed the plans with shares in the firm ending the day up 10 percent at their highest level since August 2015.


The firm’s headcount is being cut by about 120 members of staff after a review of operations including planning and design. Bovis will also reduce its land bank - generally a builder’s highest cost - at two of its biggest sites.

Fitzgerald said he would shift half of the plots of land at its central English location of Wellingborough and the southern area of Sherford into a joint venture with a partner.

“We’ll take our land bank down by about 1,600 plots ... so that will in one fell swoop deal with those two very, very large sites,” he said.

The firm also aimed to improve relations with subcontractors, who had worked to tight deadlines to meet strict targets under the previous management, by paying them more quickly, and in some cases raising their rates, Fitzgerald said.

Full-year volumes will end 2017 down nearly 10 percent at about 3,600 units, before growing next year and reaching 4,000 homes in 2019.

Bovis has failed to capitalise on Britain’s new home market which has been strongly supported by the government’s ‘Help to Buy’ scheme in recent years, allowing younger people to get onto the property ladder with a smaller deposit.

Fitzgerald said the government was consulting with builders over its future and did not want to do anything that would harm efforts to deal with a chronic housing shortage by cutting volumes.

“All they’re really interested in is: if we did this, this and this, will you build less houses?” he said.

$1 = 0.7672 pounds Editing by James Davey and Edmund Blair

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