Bovis rejects Galliford offer and hires its ex-boss

Embattled housebuilder Bovis Homes has rejected two buyout proposals while hiring a new chief executive who previously ran one of its would-be suitors.

Greg Fitzgerald is the former boss of Galliford Try, which has been in talks with Bovis over a takeover after its initial bid for the business, an all-shares offer worth £1.2bn, was knocked back.

However, Galliford this morning said it has been "unable to reach an agreement that would benefit its shareholders", says the BBC.

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Last month, Bovis also revealed it had refused a cash-and-shares takeover offer from Redrow that valued the company at £1.1bn.

Bovis's two rivals "sensed an opportunity" after the housebuilder issued a shock profit warning in December, on the back of missing its target for completions for last year, adds the BBC.

In February, the company revealed the true extent of its earnings "miss" was £30m, which included £7m in compensation for buyers who had, in some cases, been offered incentives to move into unfinished homes to accelerate completion.

The company has since announced that profits will be lower for 2017 as it slows housebuilding to focus on customer service.

Fitzgerald, whose appointment was also announced today, will be leading this turnaround.

The company's new boss is well-regarded sector stalwart who The Guardian says is "credited with correctly calling the housing cycle"

He founded two housebuilders, Midas and Gerald Wood Homes, which were later bought by Galliford.

During his 30 years with the company, Fitzgerald oversaw a 200 per cent increase in profit. His new role could see him earn up to £8.1m, with everything bar a £650,000 salary in the form of share incentives.

Bovis Homes subject of a £2.5bn buyout battle

13 March

Embattled housebuilder Bovis Homes has become the subject of a £2.5bn takeover battle involving at least two rivals.

In an announcement this weekend, the company said it had rejected initial proposals from both Galliford Try and Redrow as neither proposal "reflected the underlying value of the Bovis business", says the Financial Times.

It added that it remains in discussions with Galliford, which had made an all-share offer of around 886p per share, a seven per cent premium on the company's closing price on Friday that would have valued the business at £1.2bn and the combined entity at £2.5bn.

However, talks with Redrow had been "terminated" after it indicated it was not willing to improve a cash-and-shares proposal worth 814p per share, added Bovis.

Sky News says shareholders in the housebuilder would also have received "dividends" from the combined group and that the company had said shareholders investors would ultimately have received back only the equivalent of its current share price.

Its position was backed by analysts at Canaccord Genuity, who said an offer for Bovis worth somewhere between 920p and 1033p "would seem a sensible level" at which to move forward.

The FT adds that "analysts at Liberum said there was 'scope to improve operating margins at Bovis significantly' and that there could be other potential buyers".

Last month, Bovis revealed it had missed its profits guidance for last year by £30m, in part because of a £7m compensation fund for homeowners who had moved into houses that were unfinished.

The company had been accused of paying cash incentives to encourage buyers to take up early residency in order to meet completion targets and has said it will build up to 15 per cent fewer homes this year while it focuses on improving customer service.

Any deal would mark the first big tie-up in the sector since 2007, when George Wimpey and Taylor Woodrow combined to create Taylor Wimpey, the UK's largest housebuilder.

Bovis's shares rose 7.5 per cent to 890p this morning.

Bovis to spend £7m on compensation for unfinished homes

20 February

Bovis Homes' shares have taken a fresh pummelling today, after the British housebuilding company released annual results that showed lower-than-expected earnings for last year.

The company revealed it made profit of £155m for the 2016 calendar year, which is £5m below even the bottom end of a forecast range of £160m to £170m set out in a shock profit warning in December, the Financial Times says.

Prior to that alert, the company had been expected by analysts to generate pre-tax earnings of £183m.

This shortfall is mostly down to a £7m provision that has been set aside to compensate customers who moved into Bovis homes that were not finished.

Last month the company made headlines after it emerged that some buyers were offered financial rewards running into the thousands of pounds to move into unfinished homes before the end of the year, to help to firm hit completion targets.

At the time Bovis conceded that some customers were "offered an incentive to complete before the year end" but insisted that all of the homes were "habitable", says The Guardian.

Today Bovis's interim chief executive, Earl Sibley, who stood in after David Richie stood down last month, apologised to customers and launched a plan to improve the company's battered reputation.

He announced an "end-to-end review" of the company’s whole production process and a "customer service task force" to urgently fix faulty homes, says the Guardian.

The £7m fund will be used to repay customers who have already paid for remedial work, cover any outstanding work, and offer compensation over and above the cost of repairs for those who were worst affected.

Sibley also said he would set up a panel and roll out staff training on customer service – and seek to improve relationships with contractors, says the FT.

"We are fully committed to putting our customers back at the centre of everything we do and to delivering a much improved level of customer service," he said.

But despite these measures, and the company upping its dividend to 45p per share on higher revenues, its share price tumbled 10 per cent to 755p.

In part that reflects another plank of Sibley's plan: to build 10-15 per cent less property this year and improve the quality of its work. That will be welcomed by the eventual homeowners, but analysts fear it will drag profits down to below £135m.