British builder Bovis faces further profit fall after complaints about quality

By Costas Pitas and Esha Vaish

LONDON (Reuters) - British builder Bovis (BVS.L) said it will slow construction this year as it moves to improve the quality of its homes, after a backlash from some buyers helped push down profits in 2016 with a further fall expected this year.

Some buyers of Bovis homes have complained about issues ranging from a lack of sealant in bathrooms to the heads of nails poking through some walls.

Late completions and perceived shortcuts on quality prompted some buyers to go public, including through the Facebook group 'Bovis Homes Victims' which has over 1,400 members, harming the builder's reputation.

The company, which is looking for a new CEO after David Ritchie quit in January following a profit warning and has become the subject of takeover speculation, failed to complete around 180 homes last year.

Interim CEO Earl Sibley said that some properties not finished last year had yet to be handed over to buyers, leading to delays for customers and potential costs for the firm.

Bovis's shares tumbled 10 percent as it reported a 3 percent drop in 2016 annual pretax profit and warned that profits would fall again this year as it builds fewer homes.

That puts it at odd with rivals who have posted bumper profits in recent months as housing demand outstrips supply across much of Britain.

Bovis built nearly 4,000 homes last year but said it expected volumes to fall between 10 and 15 percent in 2017.

It said it had spent 7 million pounds to fix substandard work on existing houses, denting its annual pretax profit, which came in at 155 million pounds, below its forecast of between 160 million and 170 million pounds.

Last month, Bovis shareholder Schroders (SDR.L) wrote to London builder Berkeley (BKGH.L) asking it to consider a merger, but sources told Reuters they saw little logic in such a tie-up.

Asked about whether the firm was involved in any M&A activity, Sibley said he was focused on improving quality to turn the business around.

"If there was something to say, we would have to say it publicly in the normal way, following the rules."

The company announced other measures on Monday, including additional staff to deal with customer enquiries, more ground operatives and plans to recruit a customer services director to oversee a wide-ranging overhaul.

"Through the beginning of 2017, we've done a thorough review across the business to make sure we've captured those issues and captured the cost in 2016," Sibley told Reuters.

"We are extending some of our development programmes ... to ensure that we do have sufficient time from the final certification that we get to deliver a quality home to our customers."

(Reporting by Costas Pitas and Esha Vaish; Editing by Keith Weir and Susan Fenton)