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| Bovis profit warning takes investors by surprise Bovis profit warning takes investors by surprise | |
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| A profit warning from Bovis Homes, one of Britain’s largest housebuilders, has sent shivers through the sector. | A profit warning from Bovis Homes, one of Britain’s largest housebuilders, has sent shivers through the sector. |
| Bovis said it would complete about 180 fewer homes than expected this year, blaming operational issues. It now expects 3,950-4,000 completions rather than the 4,170 forecast by the City, a drop that will hit profits. Bovis expects pre-tax profit for 2016 to come in at £160m-£170m, compared with analysts’ forecasts of around £183m. | Bovis said it would complete about 180 fewer homes than expected this year, blaming operational issues. It now expects 3,950-4,000 completions rather than the 4,170 forecast by the City, a drop that will hit profits. Bovis expects pre-tax profit for 2016 to come in at £160m-£170m, compared with analysts’ forecasts of around £183m. |
| “We have experienced slower-than-expected build production across the group’s sites during December, resulting in approximately 180 largely built and sold private homes which were expected to complete in 2016 being deferred into early 2017.” | “We have experienced slower-than-expected build production across the group’s sites during December, resulting in approximately 180 largely built and sold private homes which were expected to complete in 2016 being deferred into early 2017.” |
| The unscheduled stock market announcement took investors by surprise. Shares in Bovis fell 4.7% to 816p, making it the biggest faller on the FTSE 250 index. Other housebuilders suffered declines of 1%-2%, including Persimmon, Barratt, Crest Nicholson and Berkeley Group. | The unscheduled stock market announcement took investors by surprise. Shares in Bovis fell 4.7% to 816p, making it the biggest faller on the FTSE 250 index. Other housebuilders suffered declines of 1%-2%, including Persimmon, Barratt, Crest Nicholson and Berkeley Group. |
| “A profit warning from FTSE 250 firm Bovis is another crack in the wall when it comes to the housebuilders sector,” said Russ Mould, investment director at stockbroker AJ Bell. | “A profit warning from FTSE 250 firm Bovis is another crack in the wall when it comes to the housebuilders sector,” said Russ Mould, investment director at stockbroker AJ Bell. |
| Bovis said there was no impact from the Brexit vote in June. A spokesman said there had been delays in getting the final sign-off for 180 houses before the end of the year. The production delays mean that instead of 5% growth in house completions this year there will be 0-2% growth. | Bovis said there was no impact from the Brexit vote in June. A spokesman said there had been delays in getting the final sign-off for 180 houses before the end of the year. The production delays mean that instead of 5% growth in house completions this year there will be 0-2% growth. |
| Mould said the numbers implied that completions in the second half fell by 1% to 2% year on year, “raising questions as to whether the market is slowing down in a post-Brexit world after all”. | Mould said the numbers implied that completions in the second half fell by 1% to 2% year on year, “raising questions as to whether the market is slowing down in a post-Brexit world after all”. |
| Bovis said its average sale price was up around 10% this year to £255,000. Mould said this implied a “marked second-half deceleration, as prices rose 14% to an average of £254,500 in the first six months of this year”. | Bovis said its average sale price was up around 10% this year to £255,000. Mould said this implied a “marked second-half deceleration, as prices rose 14% to an average of £254,500 in the first six months of this year”. |
| The house broker Numis cut its 2016 profit forecast by 11% to £165m but left its 2017 estimate unchanged at £196m. Analyst Chris Millington said: “Obviously it is disappointing to reduce forecasts again and in our view this reflects company specific factors, with the fundamentals of the new build market remaining robust (although with flatter house price inflation and some cost inflation) due to the Help to Buy scheme and low mortgage rates.” | The house broker Numis cut its 2016 profit forecast by 11% to £165m but left its 2017 estimate unchanged at £196m. Analyst Chris Millington said: “Obviously it is disappointing to reduce forecasts again and in our view this reflects company specific factors, with the fundamentals of the new build market remaining robust (although with flatter house price inflation and some cost inflation) due to the Help to Buy scheme and low mortgage rates.” |
| Just before the EU referendum, a group of 17 UK housebuilders (including Berkeley, Barratt and Crest Nicholson but not Bovis) warned that a vote to leave the EU would make it harder and more expensive to build new homes. | Just before the EU referendum, a group of 17 UK housebuilders (including Berkeley, Barratt and Crest Nicholson but not Bovis) warned that a vote to leave the EU would make it harder and more expensive to build new homes. |
| The property market slowed straight after the Brexit vote, but has held up better than expected along with the rest of the economy in the months since June. However, analysts expect the economy and house price growth to slow sharply next year. Savills, the upmarket estate agent, is forecasting that house prices will flatline next year after five years of increases, while Britain’s biggest mortgage lender, Halifax, is predicting growth of between 1% and 4% for the UK and price falls in London. | The property market slowed straight after the Brexit vote, but has held up better than expected along with the rest of the economy in the months since June. However, analysts expect the economy and house price growth to slow sharply next year. Savills, the upmarket estate agent, is forecasting that house prices will flatline next year after five years of increases, while Britain’s biggest mortgage lender, Halifax, is predicting growth of between 1% and 4% for the UK and price falls in London. |