Housebuilder Bovis Homes (BVS) has issued a profit warning after saying it built and sold fewer houses in December than forecast. That could result in earnings being up to 13% lower than previously expected.
The company says it expects to report full year pre-tax profit in the range of £160m to £170m.
The consensus analyst forecast ahead of the profit warning was £184.12m, according to Reuters data.
MILD REACTION
The shares fall 3.4% to 827p which seems a muted reaction to the negative news. This might be down to fewer people trading the markets over the holiday period, so the shares could see further weakness as the day or week progresses.
Bovis’ trading update has been issued two weeks earlier than previous guidance. In November it said trading was in line with expectations and that it would update again on 13 January 2017.
DIVIDEND UNDER THREAT?
Investors will be asking whether the profit warning will result in the company paying a lower dividend than expected by analysts.
Bovis today reiterates it has a strong balance with a net cash position expected at the close of the year. It also says it is confident of delivering its plan for the final dividend of 2016.
Exact details for the dividend and the precise full year profit figure will be confirmed when results are published on 20 February 2017.
WHAT WENT WRONG?
Commenting on the profit warning, the company says it expects volume delivery for 2016 will be lower than previously anticipated at between 3,950 and 4,000 homes.
‘The exact number depending on the extent of legal completions in the remaining days of the year,’ adds Bovis.
The housebuilder says it has experienced slower than expected build production across its 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 average sales price of the homes legally completing in 2016 is expected to increase by around 10% (2015: £231,600), driven by improved mix and increased underlying market pricing, adds the company.
Interestingly, Bovis has been closing numerous sales outlets in 2016 as a result of strong sales rates.
