Bovis shares plunge after housebuilding slows in December

Bovis’ failure to hit its sales targets might be a sign that the UK housing sector is suffering from the Brexit vote, analysts say

The update from Bovis weighed on the share prices of rival firms with Crest Nicholson, Berkeley Group and John Laing all falling (Reuters)

Shares in Bovis homes, one of Britain’s largest housebuilders, have plunged after the company warned its full-year profit will be lower than expected due to building delays in the run-up to Christmas.

The FTSE 250 listed housebuilder said that the number of homes built for the year would be lower than previously anticipated at between 3,950 and 4,000 homes, as it experienced slower-than-expected build rates during December.

It said profits before tax for the year to 31 December would be lower than forecast at between £160m and £170m. Analysts on average were expecting profit to be £183m.

Shares dropped nearly 5 per cent in early trading on the news before recovering slightly. At market closing time shares were down by more than 5 per cent.

(Investing (Investing)

The profit warning from Bovis weighted on the shares prices of rival buildings firms Crest Nicholson, Berkeley Group and John Laing, which were all down in early trade.

Bovis said there was no impact from the Brexit vote.

“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 company said in a statement.

However, analyst Russ Mould of stockbrokers AJ Bell said Bovis’s failure to hit its sales targets this year could be a sign that the UK housing sector is starting to suffer from the UK's vote to leave the EU.

He said: "A profit warning from FTSE 250 firm Bovis is another crack in the wall when it comes to the housebuilders sector".

"Bovis has today stated that legal completion volumes will rise by just 1 per cent to 2 per cent in 2016 year, rather than the targeted 5 per cent as the sale of 180 homes has slipped from this year to next, owing to slower-than-expected build production in December."

"This means completion volumes fell by 1 per cent to 2 per cent year on year in the second half, raising questions as to whether the market is slowing down in a post-Brexit world after all."

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The company's profit warning also comes on the day the latest numbers from the British Bankers' Association showed the number of new mortgages approved in the UK fell last month, in another sign that the property sector is slowing.

High-street banks approved 40,659 new loans for home purchases in November, down from 40,835 in October, and 9 per cent lower than a year ago.

According to an annual forecast by Halifax, house prices will rise by between 1 per cent and 4 per cent in 2017, marking a sharp deceleration from the previous year as a slowdown in economic growth and pressure on household incomes will put a brake on the property market.