Bovis Falls Most Since 2008 as Building Costs to Curb MarginsBy
Bovis Homes Group Plc slumped the most since 2008 after the builder said profit margins will be curbed by rising construction costs and after planning approvals for new projects were delayed.
The lack of permits held up work on an undisclosed number of high-margin plots, the Longfield, England-based homebuilder said in a statement on Thursday. The shares dropped as much as 13 percent to 860 pence ($13.11), while the Bloomberg U.K. Homebuilder Index, which has 10 members, was little changed.
“Whilst our operating profit margin is now expected to be only marginally ahead of the prior year, the group remains on track to deliver a further increase in return on capital employed in 2015,” Chief Executive Officer David Ritchie said in the statement.
Construction costs in the U.K. have been rising amid a shortage of skilled labor, causing some projects to be delayed. The volume of home sales at Bovis’s developments will rise about 8 percent this year, the company said, below the 10 percent previously estimated by securities firm Davy.
“The performance on the margin front has come in below expectations,” Peel Hunt LLP analysts Clyde Lewis and Gavin Jago said in a note to clients. “This is down to some additional cost pressure as well as problems in bringing new, more profitable, sites through planning.”
The London-based analysts cut their pretax profit forecasts for Bovis this year by 7 percent.
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