Bovis profits hit by service and process issues

by: Edward Murray
  • 20/02/2017
  • 0
Bovis profits hit by service and process issues
Bovis Homes Group has reported a 3% drop in profit before tax for the year ending 31 December 2016, and has said completion volumes for 2017 will be 10% to 15% below those of last year.

The group reported a profit before tax of £154.7m, down from £160.1m the previous year. The results included a one-off ‘customer care provision’ of £7m, and the firm said this related to customer service issues and weaknesses in its production processes.

The Guardian reported that more than 1,400 disgruntled customers had joined the ‘Bovis Homes Victims Group’ on Facebook, while others had take to YouTube to post videos detailing their problems. The issued raised, according to the publication, included poor plumbing, no guttering and half-finished tiling.

In January 2017, David Ritchie stepped down from the role of chief executive officer. Earl Sibley, the group finance director, has taken on the role of interim chief executive officer.

Explaining the service and process issues in more detail, Sibley said: “Bovis Homes has pursued an ambitious growth strategy over the past five years with completions almost doubling over this period. This fast growth has led to progressively developing operational challenges across the business.”

He added: “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. Our customer service proposition has failed to ensure that all of our customers receive the expected high standard of care. The group has taken a one-off £7m customer care provision in 2016 to address this high level of customer issues.”

In 2016, Sibley said the group delivered 3,977 homes, up from the 3,934 recorded for 2015. Private legal completions (excluding PRS) decreased by 1% to 2,884. Legal completions of social homes for 2016 were 1,074, representing 27% of total legal completions. This was up from 22% in 2015.

The average sales price in 2016 increased by 10% to £254,900, while the average sales price of private legal completions (excluding PRS) was also 10% higher at £306,000. However, the group’s operating profit margin reduced from 17.3% in 2015, to 15.2% in 2016.

Commenting on the UK housing market, Ian Tyler, chairman of Bovis Homes Group, said: “The fundamental lack of supply in the UK housing market and the current strong demand from customers together provide a robust footing for the business. The positive government support for house building was reconfirmed in the recent Housing White Paper. In particular the residential planning regime is ensuring that land supply to the market is ahead of production rates and the Help to Buy scheme provides confidence for our customers to invest in new homes.”

However, he also acknowledged there were market issues to overcome, citing the shortage of skilled labour as an example. He said: “The current shortage of skilled construction labour in the industry remains an operational challenge for the industry as a whole. This constraint has continued to impact our business during 2016.”

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