Bovis Homes profits fall 3% as it sets aside £7m to compensate homebuyers angry at poorly-built homes

Kent-based housebuilder Bovis Homes saw profits decline last year as it saw a spike in costs relating to remedial work and compensation for customers who complained about the poor quality of their homes.

The housebuilder said it had set aside £7million for customer care after it admitted that the quality of the homes completed in 2016, especially towards the end of the year, ‘fell materially short of the high standard expected’.

Pre-tax profits in the year to December 31 fell 3 per cent to £154.7million, below its expectations of £160 to £170million. The results sent shares diving more than 7 per cent, or 62p , to 778p, making it the worst performer on the FTSE 250 today.

Bovis admitted the quality of its homes ‘fell materially short of the high standard expected’

It comes as Bovis recently admitted offering some housebuyers thousands of pounds to persuade them to move into unfinished homes in a desperate bid to hit sales targets.

That outraged buyers, who complained about everything from claiming wrong kitchen units had been installed to unfinished driveways, and claims of leaking pipes and dodgy wiring.

Despite the fall in profits, revenues rose 11 per cent to £1.1billion as Bovis completed 3,977 homes, a 1 per cent increase from a year earlier, when it completed 3,934 homes. The average home selling price increased by 10 per cent to £254,900, Bovis said.

The housebuilder, which has focused on more affluent regions in the south of England in recent years, also said it will increase its dividend by 13 per cent to 45p a share.

Interim chief executive Earl Sibley, who took over from David Ritchie in January after his surprise resignation, said the company’s ‘ambitious growth strategy’ had helped it almost double house completions, but also led to progressively ‘operational challenges’.

‘Whilst we achieved strong growth in the first half of the year we were unable to deliver our planned level of completions for the second half, with a shortfall of 180 private homes in December. This reflected underlying weaknesses in our production processes and resulted in higher than expected costs,’ he said.

‘Our customer service standards have been declining for some time and combined with the delays to production towards the year end, we have entered 2017 with a high level of customer service issues,’ Sibley added.

Bovis announced a raft of measures to improve service, including taking on more staff to deal with complaints, the creation of a dedicated homebuyers’ panel and an improved quality assurance process.

David Ritchie stepped down after nine years at the helm following a Christmas profits warning

However, it said profits will continue to fall this year as it plans to build fewer homes and that it continued to struggle to find skilled workers.

It also said that the search for a permanent chief executive was under way after the resignation of Ritchie in January.

Ritchie, who joined Bovis Homes in 1998, was chief executive since 2008, but stepped down after nine years at the helm following a shock Christmas profits warning.

George Salmon, equity analyst at Hargreaves Lansdown said: ‘While Bovis has its own issues to deal with, a chunky 10 per cent increase in average prices and continued strong demand from buyers show the sector as a whole is proving resilient despite fears over the effect of the UK’s withdrawal from the EU, though it is still of course early days in this process.’

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