Bovis plots own future as Galliford Try walks away from takeover

It says much about the plight of Bovis Homes (Frankfurt: 911164 - news) that, while all of the UK's housebuilders were making hay on the back of a big mismatch between demand and supply, the Kent-based company actually suffered a 3% fall in full year pre-tax profits in 2016.

By the time those results were announced on 20 February, the chief executive, David Ritchie, had resigned, following a profits warning in which Bovis admitted to delays in the run-up to Christmas.

Days after his departure, it emerged the company had been offering customers as much as £3,000 each to move into unfinished homes before Christmas, in order to meet sales targets. Some of the homes had unpainted walls, no carpets and no turf in the garden.

In the meantime, Bovis had been linked with a series of would-be buyers. The excitement began when it was revealed that Andy Brough of Schroders (Frankfurt: 929969 - news) , one of the City's best-known and influential fund managers, had written to Berkeley Homes, the UK's fourth-largest housebuilder, urging it to take over Bovis.

Berkeley rejected the idea but news of Mr Brough's initiative prompted Redrow (LSE: RDW.L - news) , the UK's sixth-largest player, to propose a combination with Bovis that would have created a £3bn player in the market.

And that, in turn, flushed out news that Galliford Try (Stuttgart: 0GF.SG - news) , the number eight player, was also interested in buying Bovis.

Bovis rejected both approaches and Redrow's no-nonsense chief executive, John Tutte, walked away last week after concluding that the price being sought was too high.

That left Galliford Try - and it, too, walked away this morning after failing to reach agreement with Bovis.

The news came as Bovis announced it had recruited Greg Fitzgerald, ironically the former chief executive of Galliford Try, to come and run it. Mr Fitzgerald, who spent more than 30 years at Bovis's erstwhile suitor, will take the helm just after Easter.

He will face plenty of challenges. Bovis's production and operational performance has been, in the words of Peel Hunt analyst Clyde Lewis, "materially worse than the sector". The company's initial response to those difficulties has been to deliberately slow production in order to sort itself out.

But the reaction in Bovis shares, which had been valued by Galliford Try's offer at 886p each and which shot up by almost 5% to hit that level, suggests investors have confidence Mr Fitzgerald can pull off a turnaround.

And with good cause. Mr Fitzgerald's personal story is nothing short of inspirational. He left Cuthbert Mayne School in Torquay at 16 with just three 'O' levels and his first job was washing dishes at the Dart Marina Hotel in nearby Dartmouth.

After six months of working as a kitchen porter, he got a job at Midas Construction, for whom he set up a housebuilding division that ended up being bought by Galliford Try. He repeated the trick in 1998 when with a friend, Dave Wood, he set up Gerald Wood Homes.

They sold that business to Galliford Try just over two years later. In all, Mr Fitzgerald spent 35 years at the company, including nearly 10 as chief executive and another as chairman, during which time he garnered huge respect in the City for being able to judge the timing of property cycles but also for the entrepreneurial flair he brought to the job. The share price more than quadrupled during his time as chief executive.

Investors will be delighted if Mr Fitzgerald, who still lives in Devon and is a youthful 52, can achieve a similar performance at Bovis Homes.

The UK's 10 largest housebuilders by market capitalisation:

:: Persimmon £6.5bn.

:: Taylor Wimpey (LSE: TW.L - news) £6.5bn.

:: Barratt Developments (Frankfurt: 859551 - news) £5.6bn.

:: Berkeley Group £4.4bn.

:: Bellway £3.3bn.

:: Redrow £1.9bn.

:: Crest Nicholson (Frankfurt: A1KCZN - news) £1.4bn.

:: Galliford Try £1.2bn.

:: Bovis Homes £1.1bn.

:: Countryside Properties £1bn.