Annual Financial Report

RNS Number : 8228A

Bovis Homes Group PLC

25 March 2013

 



Bovis Homes Group PLC - Annual Report and Accounts 2012

Annual Report and Accounts 2012, Notice of Annual General Meeting, Proxy Card

Copies of the above documents have been submitted to the National Storage Mechanism and will shortly be available for inspection at www.hemscott.com/nsm.do

The documents are being mailed to shareholders and are available on the Company's website at www.bovishomesgroup.co.uk/annualreport2012

Amendment to Articles of Association

It is proposed that the Articles of Association be amended at the Company's forthcoming Annual General Meeting to be held on 16 May 2013 to increase the overall limit on the remuneration of all non-executive directors from £350,000 to £500,000 per annum.  This will provide the Board with flexibility in succession planning and an explanation of the proposed change is set out in the Notice of Annual General Meeting.  In accordance with DTR 6.1.2, a copy of the Articles of Association containing the draft amendment has been submitted to the National Storage Mechanism and will shortly be available for inspection at www.hemscott.com/nsm.do

Annual Report and Accounts 2012 - publication required by DTR 6.3.5

The Company published its Preliminary Results for the year ended 31 December 2012 on 25 February 2013.  In order to comply with DTR 6.3.5 it is now publishing, in unedited full text, information contained in the annual financial report of a type required to be disseminated in a half-yearly financial report.  For coherence, this repeats some of the information contained in the Preliminary Results announcement. 

The full annual financial report is available on the Company's website at www.bovishomesgroup.co.uk/annualreport2012

Bovis Homes Group PLC - Annual Report and Financial Statements 2012

Chairman's statement

The Group has successfully deployed a growth strategy for the last four years following the housing market downturn. This is delivering significant benefits to the Group, despite operating in a tough economic climate and experiencing a difficult mortgage market.

The Board is, however, confident of future growth based on the excellent investments already made and on the assumption of an ongoing stable housing market. Future growth in shareholder returns is therefore not reliant on a housing market recovery.

The economic backdrop remains challenging and the housing market continues to face constraints on activity, primarily due to the restricted availability of mortgage finance especially for first time buyers struggling to raise the necessary deposit to allow them to participate in the market. Consumer confidence remains fragile after the negative impacts from the Euro crisis, UK corporate failures and recessionary GDP concerns. As a result, house prices remain subdued with nominal house price stability.

Against this external backdrop, the performance of Bovis Homes has been very strong. The Group is now benefiting from the compound positive effects of stronger volumes, higher average sales price and significantly improving profit margins. This in turn is providing a strong impetus to both profits and shareholder returns.

Financial performance

The Group delivered a 68% increase in profits before taxation to £54.1 million and increased return on capital employed by 2.7 ppts to 7.7% in 2012. Revenue increased by 17% and the operating margin improved from 10.0% in 2011 to 13.4% in 2012. These results demonstrate clearly the growth in the business. The Group continues to be well capitalised with a strong balance sheet with net cash at the end of 2012 of £18.8 million.

Earnings per share and dividends

Basic earnings per share for the year have grown by 75% to 30.7p. Consistent with the intention to increase dividends progressively as earnings per share increase, the Board will be recommending a final dividend of 6.0p per share, which, when combined with the 2012 interim dividend of 3.0p, totals 9.0p for the year, an increase of 80% on the 2011 dividend. The final dividend will be payable on 24 May 2013 to shareholders on the register on 2 April 2013. It is the Board's intention to continue to pursue this progressive dividend approach.

Future prospects

The Group invested strongly during 2012 in consented land to support future growth in sales outlets. The prime nature of these new sales outlets is expected to further increase the Group's average sales price, profit margins and returns.

People

The Board of directors has been delighted with the commitment and skill shown by all of the Group's employees in delivering the growth during 2012 and, on behalf of the Board, I would like to thank them all. The Board would also like to extend its thanks to its subcontractors and suppliers.

Corporate governance

Bovis Homes is committed to high standards of corporate governance, including those related to the role and effectiveness of the Board and compliance with the UK Corporate Governance Code. Details are set out in the corporate governance section on pages 31 to 37 of the annual report.

Corporate responsibility

I am pleased to report the good progress against the targets laid out within our Corporate Social Responsibility report, in particular the improvements in our health and safety performance, a critical area where the Group will continue to target improvements. This progress has once again been recognised by the Group's inclusion in the independently assessed FTSE4Good Index.

The Board

It is with confidence in the progress achieved by Bovis Homes that I have decided to retire as non-executive Chairman at the end of November 2013, having been Chairman for five and a half years. It has been a pleasure and a privilege to chair the Board during what has been a challenging period for the industry. I have been fortunate in the calibre of both the executive team and the non-executive directors and I would like to thank them for their collective support during my Chairmanship. I would also like to thank shareholders for their confidence in the Group and for their support.

Summary

Bovis Homes is well positioned to grow and drive enhanced shareholder returns over the coming years, based on stable housing market conditions. The business has delivered an excellent result in 2012 and has invested well to provide a strong base for delivering continuing improvements in 2013 and beyond.

Malcolm Harris

Chairman

Chief Executive's report

The Group has continued to acquire high quality consented land and has consequently grown active sales outlets, leading to higher volumes, increased average sales price and higher profit margins. Having delivered an improvement in the efficiency of capital employed, both by managing working capital tightly and through the sale of selected land parcels, the Group has increased its capital turn. The combination of improved profitability and increased capital turn has delivered a strong improvement in the Group's return on capital employed.

Bovis Homes aims to be a quality housebuilder delivering high returns generated from a strong land bank, much of it strategically sourced, and a quality product sold at a premium price. In order to deliver improved returns, the following clear strategic objectives for 2012 were set out and have been delivered:

·      Increase operating profits

·      Build future margin potential in the land bank

·      Improve efficiency of capital employed

Additionally the Group has demonstrated significant progress against the following objectives:

·      Deliver strong health, safety and environmental standards

·      Deliver a strong customer service experience

Increase operating profits

Operating profit increased in the year by 56% to £56.8 million, as a result of the compound positive effect of an increased volume of legal completions at a higher average sales price with an improved margin.

Volume growth was driven from the increased number of active sales outlets in 2012. The average number of active sales outlets grew to 82 from 73 in the prior year and the Group finished 2012 with 90 active sales outlets.

The increase in active sales outlets contributed to the delivery of 2,355 legal completions during 2012, 15% ahead of the previous year (2011: 2,045). The Group legally completed 1,854 private homes (2011: 1,624), an increase of 14%. Legal completions of social homes increased by 19% to 501 (2011: 421), representing 21% of total volume (2011: 21%).

In addition to increased volume, the Group's average sales price increased by 5% to £170,700 in 2012 (2011: £162,400). For private homes, the average sales price in 2012 was 5% higher at £188,700 (2011: £180,100), in line with Group expectations. This uplift was almost entirely due to the mix of homes legally completed as the Group increased the proportion of family homes sold in the south of England.

Gross profit margin (excluding land sales) increased to 22.6% in 2012 from 20.8% in 2011, resulting from the increased contribution from legal completions on stronger margin sites acquired post the housing market downturn.

As a result of the compound positive effect of volume growth, higher average sales price and improved gross profit margin, gross profit (excluding land sales) increased by 33% to £92.1 million (2011: £69.5 million). Combined with land sales profits of £4.8 million (2011: £2.7 million) and with overheads well controlled, the significant growth in operating profit to £56.8 million (2011: £36.4 million) was achieved at an operating margin of 13.4% (2011: 10.0%).

Build future margin potential in the land bank

During 2012, the Group invested in 3,501 plots of consented land, of which 2,651 consented plots on 18 sites were added to the consented land bank at a cost of £161 million (2011: 2,552 consented plots at a cost of £134 million). Approximately 86% of these plots are located in the south of England, where the housing market continues to show greater robustness. The plots added have an estimated future revenue of £561 million and an estimated future gross profit potential of £146 million, based on current sales prices and current build costs, and are expected to deliver a gross margin of over 25%.

The remaining 850 consented plots were contracted during 2012 and were awaiting satisfaction of legal conditions as at 31 December 2012. Of these, three sites containing 408 consented plots have been added to the land bank during the first eight weeks of 2013. The balance of these consented plots are expected to be added to the land bank in early 2013.

The consented land bank amounted to 13,776 plots as at 31 December 2012, marginally above the 13,723 plots held at 31 December 2011, with plots added being roughly equivalent to legal completions combined with plots sold through land sales. The Group estimates that the gross profit potential on the plots within the consented land bank at the 2012 year end, based on current sales prices and current build costs, was £600 million with a gross margin of 22.7% (31 December 2011: gross profit potential of £524 million with a gross margin of 21.4%). The increase during 2012 of £76 million arose from the land additions (£146 million) less utilisation from home sales (£84 million) and land sales (£12 million). The balancing positive value of £26 million reflects other profit enhancing, added value changes delivered by the Group, including improvements in planning, enhanced sales prices and cost efficiencies.

Of the 13,776 plots, 74% are located in the south of England (2011: 72%). At the year end, the consented land bank included 7,368 consented plots (54% of total), which have been acquired since the housing market downturn (2011: 5,797, 42% of total). The average consented land plot cost was £42,100 at the start of 2012 and increased over the year to £45,800, as a result of a lower number of written down plots held in the land bank (13% of land plots versus 17% at the start of the year) and the addition of new prime southern traditional housing sites where the average plot cost is higher.

The strategic land bank at 31 December 2012 stood at 19,318 potential plots as compared to 18,749 potential plots at 31 December 2011. The Group continues to invest in new strategic land assets and has strong visibility on the potential to convert a number of sizeable strategic land holdings into consented opportunities during 2013 and 2014.

Improve efficiency of capital employed

The Group has controlled the size and value of the consented land bank during 2012, with a similar number of consented plots in the land bank at the start and end of the year. This has been achieved, at the same time as increasing the level of legal completions and operating from a higher number of active sales outlets, being 90 outlets at 31 December 2012 compared to 80 outlets a year earlier.

The Group has tightly controlled work in progress, with the number of units of production held at the end of 2012 reduced to 918 units (2011: 949). The overall value of work in progress has increased to £172.7 million from £166.5 million. Work in progress turn increased to 2.5 times in 2012 from 2.2 in 2011, marking a further positive step in improving capital efficiency.

Overall capital turn has increased to 0.6 in 2012, up from 0.5 in 2011 and 0.4 in 2010. With the investment undertaken to date and the strength of the ongoing land pipeline, the output capacity of the business is expected to increase, which, on the basis of stable market conditions, should improve capital turn further in 2013 and beyond.

Improve returns

During 2012 Bovis Homes has delivered on the three strategic objectives set out above, which has resulted in a significant increase in return on capital employed to 7.7% in 2012 from 5% in 2011.

The Group strongly believes that, based on stable market conditions, return on capital employed will improve further in 2013, driven by the compound positive effect on profit of higher volume, increase in average sales price and improved profit margin. Whilst future output capacity will grow, capital employed will remain tightly controlled.

Deliver strong health, safety and environmental standards

The Group is committed to delivering strong health and safety standards for its employees, subcontractors and other site visitors. It maintains a high level of organisational focus on its health and safety regime through comprehensive staff training, clear and accountable management processes and through regular and transparent reporting of performance.

This is overseen, firstly, through the operational line, which takes day to day accountability for this area and, secondly, via a Group-wide oversight committee with nominated regional directors responsible for safety, run by the Group Director of Health and Safety and chaired by a senior Group manager. The Group also seeks to ensure that all of its employees and subcontractors who operate at or visit sites carry a CSCS card, indicating its commitment to a fully trained workforce.

Notwithstanding the increase in the Group's build activity during 2012, the Group's NHBC risk score for the year was 0.61, which compares favourably to the industry peer group average. Additionally, the risk incident rate was 23.

During the last 12 months the Group has continued to focus efforts on the key areas of significant risk, being working at heights, PPE and slips, trips and falls in order to raise awareness in these areas. Whilst the Group's health and safety performance is relatively strong versus external benchmarks, the Group cannot be complacent. Health and Safety will remain a key area of focus for regional and Group management.

The Group continues to regard sustainable development as critical to the long term creation of value for its shareholders. The housebuilding industry has an important role to play both in mitigating the impact of its building activities on the local environment and in the evolution of building techniques and advances, which reduce the carbon usage from new build developments.

During 2012, the Group has significantly increased the focus on waste in order to drive down the quantity of waste produced in building a home. The quantity of active waste generated per home in 2012 was reduced by 24% to 3.1 tonnes and the amount sent to landfill was reduced by 42%.

The Group works with a range of external stakeholders to agree and carry out development in a mutually acceptable manner, thereby ensuring that its developments take place in a way which mitigates the impact on the local environment, thereby balancing the needs of local communities for new housing with the requirement to avoid environmental damage.

Looking forward, the Group is focusing on ways to ensure that its products conform to good environmental standards, including both to EcoHomes standards and to emerging standards under the Code for Sustainable Homes. Reflecting the existing contribution that the Group makes to the communities and environments in which it operates, the Group is proud to say that it is a member of the FTSE4Good index.

Further details of the Group's efforts and achievements during 2012 in regards to Corporate Social Responsibility will be published in a separate report, available from the Company's website (www.bovishomesgroup.co.uk).

Deliver a strong customer service experience for Bovis Homes customers

The Group continues to invest in delivering its customer charter, which sets the expectations in relation to the quality of the product it delivers and the manner in which the sales transaction is serviced. The Group has been recognised independently by the achievement of a five star builder rating by the Home Builder Federation. Additionally, the Group is pleased to see the key internal scoring metrics of 'recommend a friend' and 'purchase another Bovis home' continuing to generate strong satisfaction scores during 2012 of 94% and 92% respectively.

The focus of the Group's customer communication has remained digitally based during 2012, with the Group using the power of the internet to directly market its products to consumers, utilising internally generated mailing lists as well as via intermediaries such as rightmove and Zoopla. Over 70% of customer enquires originate via the web.

The sales structure has evolved into a blended solution of both hubs and standalone sites, based upon geographic, product and competitor criteria. This ensures that the sales resource is deployed in the most appropriate manner. IT connectivity is provided to all of the sales operations, enabling efficient and effective customer communication and the utilisation of an integrated CRM system. The selling process is supported by the Group's bespoke prospect management system, which delivers on-site technology whilst integrating the Group's prospect database with brochure fulfilment.

Market conditions

Overall market conditions were challenging but stable during 2012. Sales prices were generally stable with some regional variations. A continuing lack of availability during the year of high loan to value mortgage products constrained market activity for new build homes. This was particularly an issue for first time buyers, who, since the financial crisis, have had to provide a higher level of deposit for their home purchase than had historically been the case. Monthly mortgage approval levels were stable throughout 2012, but at significantly lower levels than historically would have been viewed as "normal" market activity.

With a backdrop of continuing economic and employment uncertainty, trading conditions in 2013 are expected to remain similar to 2012. Although the market remains challenging and customer confidence and commitment levels remain subdued, the Group currently believes that the pricing environment will be broadly stable during 2013.

A range of Government initiatives are beginning to provide impetus to the housing market and in particular the new build market. The Government's NewBuy scheme has been in operation for nearly one year and, after a period of awareness building and reductions in interest rates attaching to lenders' NewBuy mortgage products, NewBuy activity is increasing. The Government's FirstBuy scheme has entered its second phase of delivery with allocations awarded to housebuilders for use in 2013 and early 2014. This will provide further support for first time buyers in obtaining finance from lenders.

Whilst not a housing initiative, the Government's Funding for Lending Scheme is providing assistance to banks in the form of more cost effective finance, which in turn will support these banks in lending mortgages at higher loan to value ratios and at cheaper rates of interest. The positive effect of the Funding for Lending Scheme has not yet been evidenced in published mortgage approval statistics, but there is a growing consensus that such a positive effect will be seen in mortgage approval data over the coming months. Increased mortgage approvals will support an improvement in housing transactions, including activity in the new homes market.

Current trading

The Group entered 2013 with a forward sales order position of 778 homes, a 37% improvement on the 568 homes brought forward at the start of 2012.

The Group has delivered 350 private reservations in the first eight weeks of 2013 (2012: 320), an increase of 9%. Operating from an average of 90 active sales outlets during this period (2012: 83), the Group has achieved a sales rate per site per week of 0.49, in line with the comparable period in 2012. Sales rates in recent weeks have exceeded 0.5 sales per site, indicating an encouraging start to the spring selling season and providing confidence that the Group is on target to deliver its anticipated volumes in 2013. Encouragingly, NewBuy has contributed circa 10% of 2013 private reservations to date.

Sales prices achieved to date have been in line with Group expectations, with an increase in the average private sales price to circa £200,000, driven by the improving mix with more family homes in southern England.

As at 22 February 2013, the Group held 1,198 net sales for legal completion in 2013, as compared to 926 net sales at the same point in 2012, an increase of 29%. Of these, private sales amounted to 599 homes (2012: 550) and social housing sales amounted to 599 homes (2012: 376).

Outlook

As a result of the strong consented investment in land in recent years, the Group expects to continue to increase its number of active sales outlets during 2013 from the opening position of 90 active sales outlets. Given the focus on acquiring land in the south of England, it is anticipated that more than 70% of the active sales outlets at the end of 2013 will be in southern locations versus two thirds at the start of 2013. As the Group opens more new sales outlets than it closes, absolute weekly reservation levels are expected to increase.

The Group anticipates that during 2013 it will take the opportunity to invest significantly in promoting a number of strategic land holdings where there is strong visibility of achieving planning during 2013 or 2014, a number of which were discussed at the Group's Analyst and Investor Presentation held on 24 October 2012. The Group estimates the cost of promoting strategic land during 2013 will, therefore, be circa £3.5 million higher than in 2012. This significant investment for future value generation will impact the profits deliverable in 2013 and will constrain the rate of growth in housing gross margin in 2013, compared to 2012, but will support further growth thereafter.

The continued growth in active sales outlets should enable the Group to deliver increased volumes, at a higher average sales price with improved margins. With a clear focus on controlling the capital employed of the Group through rigorous management of the landbank and tight control of work in progress, on the basis of stable market conditions, the Group will deliver strongly increasing returns on capital employed in 2013, with the expectation of continuing progress for the foreseeable future.

David Ritchie

Chief Executive

Financial review

Revenue

During 2012, the Group generated total revenue of £425.5 million, an increase of 17% on the previous year (2011: £364.8 million). Housing revenue in 2012 was £402.0 million, 21% ahead of the prior year (2011: £332.1 million) and other income was £5.7 million (2011: £2.7 million). Three land sales were achieved in 2012, with a total revenue of £17.8 million (2011: four land sales with £30.0 million of recognised revenue).

Operating profit

The Group delivered an operating profit for the year ended 31 December 2012 of £56.8 million at an operating margin of 13.4%, as compared to £36.4 million in the previous year, at an operating margin of 10.0%.

Gross margin (excluding land sales) increased to 22.6% in 2012 from 20.8% in 2011, with the gross margin (excluding land sales) in H2 2012 increasing to 23.6% from 21.2% in H2 2011. The gross margin benefited from the increased contribution from legal completions on sites acquired post the housing market downturn. Subject to stable market conditions continuing, with an increasing proportion of legal completions coming from sites acquired since the housing market downturn, the gross margin achieved in 2012 should improve further in 2013, even after absorbing the incremental investment in strategic land promotion costs.

The profit on land sales was £4.8 million, a margin of 27.0% (2011: £2.7 million at a margin of 9.0%), which resulted in a total gross profit of £96.9 million at a gross margin of 22.8%, compared with £72.2 million and 19.8% in 2011.

Overheads, including all sales and marketing costs, increased in 2012 by 11.7%, as the Group invested early to support the large number of land assets acquired and the increased number of sales outlets. The overheads to revenue (excluding land sales) ratio improved to 9.9% in 2012 from 10.7% in 2011.

Profit before tax and earnings per share

Profit before tax increased by 69% to £54.1 million, comprising operating profit of £56.8 million, net financing charges of £2.9 million and a profit from joint ventures of £0.2 million. This compares to £32.1 million of profit before tax in 2011, comprising £36.4 million of operating profit, £4.5 million of net financing charges and a profit from joint venture of £0.2 million. Basic earnings per share for the year improved by 75% to 30.7p compared to 17.5p in 2011.

Financing

The Group incurred net financing charges of £2.9 million during 2012 (2011: £4.5 million). With an average net debt position of £12 million during 2012 (2011: average net cash £5 million), net bank charges for 2012 were £2.6 million (2011: £2.8 million), which included the amortisation of arrangement fees (£0.8 million) and interest and fee charges (£1.8 million). The Group incurred a £3.1 million finance charge (2011: charge of £4.3 million), reflecting the difference between the cost and the nominal price of land bought on deferred terms which is charged to the income statement over the life of the deferral of the consideration payable. The Group benefited from a £0.7 million (2011: £0.6 million) net pension financing credit during 2012, as a result of the expected return on scheme assets being in excess of the interest on the scheme obligations. With the changes in pension accounting, this credit will not recur in 2013. The Group also benefited from a finance credit of £1.7 million (2011: £1.6 million) arising from the unwinding of the discount on its available for sale financial assets during 2012. There were £0.4 million of other financing credits during the year (2011: £0.4 million of other credits).

Taxation

The Group has recognised a tax charge of £13.3 million on profit before tax of £54.1 million at an effective tax rate of 24.5% (2011: tax charge of £8.8 million at an effective rate of 27.5%). The effective rate is in line with the statutory corporation tax rate of 24.5%. The Group has recognised a current tax liability of £5.9 million in its closing balance sheet as at 31 December 2012 (2011: current tax liability of £4.0 million).

Dividends

In the light of the ongoing material improvement in the performance of the Group and the Board's confidence in the continued delivery of Group's strategy, the Board has proposed a 2012 final dividend of 6.0p per share. This dividend will be paid on 24 May 2013 to holders of ordinary shares on the register at the close of business on 2 April 2013. The dividend reinvestment plan, introduced in 2012, gives shareholders the opportunity to reinvest their dividends.

Combined with the interim dividend paid of 3.0p, the dividend for the full year totals 9.0p compared to a total of 5.0p paid in 2011, an increase of 80%. The Board expects to grow dividends progressively as earnings per share increase.

Net assets

Net assets per share as at 31 December 2012 was 567p as compared to 545p at 31 December 2011.

Analysis of net assets
		2012		2011
		£m		£m
Net assets at 1 January		728.6		710.8
Profit after tax for the year		40.9		23.3
Share capital issued		0.6		1.9
Net actuarial movement on pension scheme through reserves		(3.4	)	(2.5	)
Deferred tax recognised on other employee benefits		(0.1	)	-
Adjustment to reserves for share based payments		0.9		1.1
Dividends paid to shareholders		(8.7	)	(6.0	)
Net assets at 31 December		758.8		728.6

Net assets were £758.8 million as at 31 December 2012, £30.2 million higher than at the start of the year. Inventories increased during the year by £65.8 million to £863.6 million, mainly due to an increase of £51.9 million in the value of residential land, as the Group invested in land ahead of usage during 2012. Other movements in inventories relate to an increase in part exchange properties of £7.8 million and an increase in work in progress of £6.2 million. Trade and other receivables reduced by £12.6 million, primarily as a result of a reduction in debtors related to land sales of £9.1 million. Available for sale financial assets held as current assets of £7.2 million (2011: Nil) related to units held in an investment fund into which the Group sold show home properties. Trade and other payables totalling £249.3 million (2011: £248.1 million) comprised land creditors of £123.8 million (2011: £128.8 million) and trade and other creditors of £125.5 million (2011: £119.3 million). Net cash reduced by £32.0 million.

Pensions

Taking into account the latest estimates provided by the Group's actuarial advisors, the Group's pension scheme had a deficit of £3.2 million at 31 December 2012, a deterioration of £0.8 million on the opening deficit of £2.4 million at 31 December 2011. Scheme assets grew over the year to £85.2 million from £76.7 million and the scheme liabilities increased to £88.4 million from £79.1 million. The increase in liabilities was primarily a result of a fall in bond yields. Scheme assets benefited from a £2.8 million special cash contribution made by the Group into the scheme in July 2012.

Net cash and cash flow

Having started the year with a net cash balance of £50.8 million, the Group generated an operating cash inflow pre land expenditure of £130 million (2011: £114 million), demonstrating the strong underlying cash generation from the Group's existing assets. Net cash payments in 2012 for land investment were £139 million (2011: £96 million). Non-trading cash outflow was £23 million. As at 31 December 2012 the Group's net cash balance was £18.8 million with £24.4 million of cash in hand, offset by £5.2 million of loans received from the Government and £0.4 million representing the fair value of an interest rate swap.

At the 31 December 2012, the Group had in place a £150 million syndicated facility, which was committed to September 2013. On 30 January 2013, the Group announced the replacement of this facility with a £125 million committed revolving credit facility, expiring in March 2017 and a three year term loan of £25 million.

Financial risk and liquidity

The Group largely sees three categories of financial risk: interest rate risk, credit risk and liquidity risk. Currency risk is not a consideration as the Group trades exclusively in the UK.

With regard to interest rate risk, the Group from time to time will enter into hedge instruments to ensure that the Group's exposure to excessive fluctuations in floating rate borrowings is adequately hedged. The Group does not have a defined policy for interest rate hedging.

Credit risk is largely mitigated by the fact that the Group's sales are generally made on completion of a legal contract at which point monies are received in return for transfer of title. During 2012, the Group continued to make a number of sales with the provision of a shared equity investment by the Group as a key part of the Group's sales incentive packages, either via the Government 'FirstBuy' scheme or via the Group's own 'Jumpstart' scheme. This has led to an increase in the size of the Group's long term receivable Available for Sale Financial Asset balance which at 31 December 2012 was £43.9 million versus £38.7 million at 31 December 2011. Whilst this does represent an increase in credit risk in total, each individual credit exposure is small given the high number of counter parties. On average, individual shared equity exposure amounts to £20,000 (2011: £23,000).

Details of the Group's financing arrangements are included on page 27 of the annual report. The Group regards this new facility as adequate in terms of both flexibility and liquidity to cover its medium term cash flow needs.

Financial reporting

There have been no changes to the Group's accounting policies during 2012.

Jonathan Hill

Group Finance Director

Statement of directors' responsibilities in respect of the annual report and the financial statements

The directors are responsible for preparing the annual report and the Group and Parent Company financial statements, in accordance with applicable law and regulations.

Company law requires the directors to prepare Group and Parent Company financial statements for each financial year. Under that law the directors are required to prepare the Group financial statements in accordance with IFRSs as adopted by the EU and applicable law and have elected to prepare the Parent Company financial statements on the same basis.

Under company law, the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and Parent Company and of their profit or loss for that period.

In preparing each of the Group and Parent Company financial statements, the directors are required to:

·      select suitable accounting policies and then apply them consistently;

·      make judgments and estimates that are reasonable and prudent;

·      for the Group and Parent Company financial statements, state whether they have been prepared in accordance with IFRSs as adopted by the EU;

·      prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group and the Parent Company will continue in business.

The directors are responsible for keeping proper accounting records that are sufficient to show and explain the Parent Company's transactions and disclose with reasonable accuracy at any time the financial position of the Parent Company and enable them to ensure that its financial statements comply with the Companies Act 2006. They have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Group and to prevent and detect fraud and other irregularities.

Under applicable law and regulations, the directors are also responsible for preparing a directors' report, report on directors' remuneration and report on corporate governance that comply with that law and those regulations.

The directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Each of the directors, whose names and functions are listed on page 30 of the annual report confirm that, to the best of their knowledge:

a)   the Group and Parent Company financial statements in this report, which have been prepared in accordance with IFRS as adopted by the EU, IFRIC interpretation and those parts of the Companies Act 2006 applicable to companies reporting under IFRS, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and of the Group taken as a whole; and

b)   the management report contained in this report includes a fair review of the development and performance of the business and the position of the Company and the Group taken as a whole, together with a description of the principal risks and uncertainties they face.

By Order of the Board

M T D Palmer

Company Secretary

22 February 2013

Bovis Homes Group PLC
Group income statement

For the year ended 31 December		2012		2011
		£000		£000
Revenue		425,533		364,782
Cost of sales		(328,634	)	(292,546	)
Gross profit		96,899		72,236
Administrative expenses		(40,086	)	(35,876	)
Operating profit before financing costs		56,813		36,360
Financial income		2,933		2,843
Financial expenses		(5,876	)	(7,349	)
Net financing costs		(2,943	)	(4,506	)
Share of profit of joint venture		254		243
Profit before tax		54,124		32,097
Income tax expense		(13,267	)	(8,831	)
Profit for the period attributable to equity holders of the parent		40,857		23,266
Earnings per share
Basic		30.7p		17.5p
Diluted		30.6p		17.5p

Group statement of comprehensive income

For the year ended 31 December			2012		2011
			£000		£000
Profit for the period			40,857		23,266
Actuarial losses on defined benefit pension scheme			(4,380	)	(3,390	)
Deferred tax on actuarial movements on defined benefit pension scheme			1,013		851
Total comprehensive income for the period attributable to equity holders of the parent			37,490		20,727

Bovis Homes Group PLC

Group balance sheet

As at 31 December			2012		2011
			£000		£000
Assets
Property, plant and equipment			11,910		11,614
Investments			5,387		5,327
Restricted cash			1,152		659
Deferred tax assets			3,097		3,498
Trade and other receivables			1,930		2,017
Available for sale financial assets			43,869		38,653
Total non-current assets			67,345		61,768
Inventories			863,597		797,756
Trade and other receivables			64,844		77,422
Available for sale financial assets			7,119		-
Cash and cash equivalents			24,396		56,177
Total current assets			959,956		931,355
Total assets			1,027,301		993,123
Equity
Issued capital			66,908		66,836
Share premium			212,550		212,064
Retained earnings			479,391		449,671
Total equity attributable to equity holders of the parent			758,849		728,571
Liabilities
Bank and other loans			5,606		5,402
Other financial liabilities			706		1,243
Trade and other payables			50,681		45,451
Retirement benefit obligations			3,171		2,444
Provisions			1,668		1,776
Total non-current liabilities			61,832		56,316
Trade and other payables			198,620		202,665
Provisions			2,065		1,535
Current tax liabilities			5,935		4,036
Total current liabilities			206,620		208,236
Total liabilities			268,452		264,552
Total equity and liabilities			1,027,301		993,123

These financial statements were approved by the Board of directors on 22 February 2013.               

Bovis Homes Group PLC

Group statement of changes in equity

	Total		Issued	Share	Total
	retained earnings		capital	premium
	£000		£000	£000	£000
Balance at 1 January 2011	433,799		66,609	210,409	710,817
Total comprehensive income and expense	20,727		-	-	20,727
Issue of share capital	-		227	1,655	1,882
Share based payments	1,121		-	-	1,121
Dividends paid to shareholders	(5,976	)	-	-	(5,976	)
Balance at 31 December 2011	449,671		66,836	212,064	728,571
Balance at 1 January 2012	449,671		66,836	212,064	728,571
Total comprehensive income and expense	37,490		-	-	37,490
Issue of share capital	-		72	486	558
Deferred tax on other employee benefits	33		-	-	33
Share based payments	861		-	-	861
Dividends paid to shareholders	(8,664	)	-	-	(8,664	)
Balance at 31 December 2012	479,391		66,908	212,550	758,849

Bovis Homes Group PLC

Group statement of cash flows

For the year ended 31 December		2012		2011
		£000		£000
Cash flows from operating activities
Profit for the year		40,857		23,266
Depreciation		906		747
Adjustment for sale of assets to joint venture		-		234
Impairment of available for sale financial assets		889		1,274
Financial income		(2,933	)	(2,843	)
Financial expense		5,876		7,349
Profit on sale of property, plant and equipment		(14	)	(33	)
Equity-settled share-based payment expense		861		1,121
Income tax expense		13,267		8,831
Share of result of joint venture		(254	)	(243	)
Increase in trade and other receivables		(3,587	)	(37,951	)
Increase in inventories		(65,841	)	(33,396	)
Increase in trade and other payables		1,093		47,517
Decrease in provisions and retirement benefit obligations		(2,501	)	(3,484	)
Cash generated from operations		(11,381	)	12,389
Interest paid		(1,707	)	(2,311	)
Income taxes paid		(9,922	)	(5,085	)
Net cash from operating activities		(23,010	)	4,993
Cash flows from investing activities
Interest received		773		420
Acquisition of property, plant and equipment		(1,213	)	(1,073	)
Proceeds from sale of plant and equipment		25		52
Investment in joint venture		-		(500	)
Movements in loans with joint venture		-		(125	)
Dividends received from joint venture		243		200
Investment in restricted cash		(493	)	(522	)
Net cash from investing activities		(665	)	(1,548	)
Cash flows from financing activities
Dividends paid		(8,664	)	(4,146	)
Proceeds from the issue of share capital		558		52
Repayment of borrowings		-		(10,177	)
Net cash from financing activities		(8,106	)	(14,271	)
Net decrease in cash and cash equivalents		(31,781	)	(10,826	)
Cash and cash equivalents at 1 January		56,177		67,003
Cash and cash equivalents at 31 December		24,396		56,177

Notes to the financial statements

Bovis Homes Group PLC (the "Company") is a company domiciled in the United Kingdom. The consolidated financial statements of the Company for the year ended 31 December 2012 comprise the Company and its subsidiaries (together referred to as the "Group") and the Group's interest in associates and joint ventures.

The financial statements were authorised for issue by the directors on 22 February 2013.  The financial statements were audited by KPMG Audit Plc.

The financial information set out above does not constitute the company's statutory financial statements for the years ended 31 December 2012 or 2011 but is derived from those financial statements.  Statutory financial statements for 2011 have been delivered to the registrar of companies, and those for 2012 will be delivered in due course. The auditors have reported on those financial statements; their reports were (i) unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.

1. Statement of compliance

The consolidated financial statements of the Company and the Group have been prepared in accordance with International Financial Reporting Standards as adopted by the EU (adopted IFRS) and its interpretations as adopted by the International Accounting Standards Board (IASB). On publishing the Company financial statements here together with the Group financial statements, the Company is taking advantage of the exemption in s408 of the Companies Act 2006 not to present its individual income statement and related notes that form a part of these approved financial statements.

2. Basis of preparation

The financial statements are prepared on the historical cost basis except for derivative financial instruments and available for sale assets.

The preparation of financial statements in conformity with adopted IFRSs requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

Judgements made by management in the application of adopted IFRSs that have significant effect on the financial statements and estimates with a significant risk of material adjustment in the next year are discussed in note 26 in the Annual Report.

The accounting policies set out below have been applied consistently to all relevant periods presented in these consolidated financial statements.

The accounting policies have been applied consistently to the Company and the Group where relevant.

Going concern

The Directors are satisfied that the Group has sufficient resources to continue in operation for the foreseeable future. The Directors reviewed detailed financial forecasts and covenant compliance covering the period to December 2013 and summary financial forecasts for the following two years.

As at 31 December 2012 the Group held cash and cash equivalents of £24.4 million and had total borrowings of £5.6 million. After the year end the Group has entered into a £125 million committed revolving credit facility expiring in March 2017 and a three year term loan of £25 million. This financing arrangement replaced the Group's previous £150 million committed revolving credit facility.

For these reasons, the Directors consider it appropriate to prepare the financial statements of the Group on a going concern basis.

Impact of standards and interpretations effective for the first time

The following new standards, amendments to standards or interpretations are mandatory for the first time for the Company's year ended 31 December 2012. They have had no material impact on the Group's financial statements.

Amendment to IFRS 7 - 'Transfers of Financial Assets'. The Amendments require additional disclosures about transfers of financial assets, e.g, securitisations and should enable users to understand the possible effects of any risks that may remain with the transferor. The amendments also require additional disclosures if a disproportionate amount of transfer transactions are undertaken around the end of a reporting period.

Amendment to IAS 12 - 'Deferred Tax: Recovery of Underlying Assets'. The Amendment introduces an exception to the current measurement principles of deferred tax assets and liabilities arising from investment property measured using the fair value model in accordance with IAS 40 Investment Property. The exception also applies to investment properties acquired in a business combination accounted for in accordance with IFRS 3 Business Combinations provided the acquirer subsequently measure these assets applying the fair value model.

The other standards and interpretations that are applicable for the first time in the Group's financial statements for the year ended 31 December 2012, have no effect on these financial statements.

3. Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries) made up to 31 December. Control is achieved where the Company has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases.

Associates are those entities in which the Group has significant influence, but not control, over the financial and operating policies. The consolidated financial statements include the Group's share of the total recognised gains and losses of associates on an equity accounted basis, from the date that significant influence commences until the date that significant influence ceases.

Joint ventures are those entities in which the Group has joint control over the financial and operating policies. The consolidated financial statements include the Group's share of the total recognised gains and losses of joint ventures on an equity accounted basis, from the date that joint control commenced until joint control ceases.

4. Accounting policies

Revenue

Revenue comprises the fair value of consideration received or receivable, net of value-added tax, rebates and discounts. Revenue does not include the value of the onward legal completion of properties accepted in part exchange against a new property. The net gain or loss arising from the legal completion of these part exchange properties is recognised in cost of sales.

Revenue is recognised once the value of the transaction can be reliably measured and the significant risks and rewards of ownership have been transferred. Revenue is recognised on house sales at legal completion. Revenue is recognised on land sales and commercial property sales from the point of unconditional exchange of contracts. For affordable housing sales in bulk, revenue is recognised upon practical completion.

Rental income is recognised in the income statement on a straight-line basis over the term of the lease. Lease incentives granted are recognised as an integral part of the total rental income.

Operating leases

Rentals payable under operating leases are charged to income on a straight-line basis over the term of the relevant lease. Lease incentives received are recognised as an integral part of the total lease expenditure.

Net financing costs

Net finance costs comprise:

·      interest payable on borrowings, including any premiums payable on settlement or redemption and direct issue costs, accounted for on an accrual basis to the income statement using the effective interest method;

·      interest receivable on funds invested accounted for on an accrual basis to the income statement using the effective interest method;

·      imputed interest on available-for-sale financial assets, fair valued interest free loans and on deferred terms land payables;

·      pension finance costs or benefits being the net of interest costs on liabilities and expected return on assets linked to the Defined Benefit Scheme; and

·      gains and losses on hedging instruments that are recognised in the income statement.

Finance costs are included in the measurement of borrowings at their amortised cost to the extent that they are not settled in the period in which they arise.

The Group is required to capitalise borrowing costs directly attributable to the acquisition, construction and production of a qualifying asset, as part of the costs of that asset. Inventories which are produced in large quantities on a repetitive basis over a short period of time are not qualifying assets. The Group does not generally produce qualifying assets.

Taxation

Income tax comprises the sum of the tax currently payable or receivable and deferred tax. Income tax is recognised in the income statement except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity.

The tax currently payable or receivable is based on taxable profit or loss for the year and any adjustment to tax payable or receivable in respect of previous years. Taxable profit or loss differs from net profit or loss as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group's liability or asset for current tax is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date.

Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from non-tax deductible goodwill, from the initial recognition of assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit, and from differences relating to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable future.

The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in the income statement, except when it relates to items charged or credited directly to reserves, in which case the deferred tax is also dealt with in reserves.

Derivative financial instruments and hedge accounting

The Group's activities expose it primarily to the financial risks of changes in interest rates. The Group uses interest rate swap contracts where deemed appropriate to hedge these exposures. The Group does not use derivative financial instruments for speculative purposes. The use of financial derivatives is governed by the Group's policies approved by the Board of directors, which provide written principles on the use of financial derivatives.

Derivative financial instruments are recognised at fair value. The fair value of interest rate swaps is the estimated amount that the Group would receive or pay to terminate the swap at the balance sheet date, taking into account interest rates and the current creditworthiness of the swap counterparties.

Changes in the fair value of derivative financial instruments that do not qualify for hedge accounting and any ineffectiveness in the hedge relationship are recognised in the income statement as they arise.

Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated, or exercised, or no longer qualifies for hedge accounting. At that time, any cumulative gain or loss on the hedging instrument recognised in reserves is retained in reserves until the forecasted transaction occurs. If a hedged transaction is no longer expected to occur, the net cumulative gain or loss recognised in reserves is transferred to net profit or loss for the period.

Property, plant and equipment

Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses. Certain property that had been revalued to fair value on or prior to 1 January 2004, the date of transition to adopted IFRS, are measured on the basis of deemed cost, this being the revalued amount at the date of that revaluation less any subsequent accumulated depreciation and subsequent accumulated impairment losses. Regular reviews of the carrying values of property are completed to assess any impairment in value. When impairment is identified, the asset's recoverable amount is assessed and any shortfall is written off through the income statement.

Depreciation is charged so as to write off the cost less residual value (which is reassessed annually) of assets over their estimated useful lives. Depreciation is charged on property in respect of the value of the building. Land is not depreciated. The basis of depreciation for each class of asset is as follows:

·      Buildings                        straight line over 50 years

·      Plant and machinery        33.3% reducing balance

·      Computer equipment        straight line over 3 years

·      Office equipment             25% reducing balance

The gain or loss arising on the disposal or retirement of an asset is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in the income statement.

Fixed asset investments

Investments in subsidiaries are carried at cost less impairment. Following the issue of IFRIC11 in 2007, the Parent Company accounts for the share-based payments granted to subsidiary employees as an increase in the cost of its investment in subsidiaries.

Listed investments are stated at fair value.

Trade and other receivables

Trade receivables do not carry any interest and are stated at their nominal value as reduced by appropriate allowances for estimated irrecoverable amounts.

Receivables on extended terms granted as part of a sales transaction are secured by way of a legal charge on the relevant property, categorised as an available for sale financial asset and are stated at fair value as described in note 13. Gains and losses arising from changes in fair value are recognised directly in equity in retained earnings, with the exceptions of impairment losses, the impact of changes in future cash flows and interest calculated using the 'effective interest rate' method, which are recognised directly in the income statement. Where the investment is disposed of, or is determined to be impaired, the cumulative gain or loss previously recognised in equity is included in the income statement for the period. Given its materiality, this item is being disclosed separately on the face of the balance sheet.

Inventories

Inventories are stated at the lower of cost and net realisable value. Cost comprises direct materials and, where applicable, direct labour costs and those overheads, not including any general administrative overheads, that have been incurred in bringing the inventories to their present location and condition. Net realisable value represents the estimated net selling price less estimated total costs of completion of the finished goods.

Land held for development, including land in the course of development until legal completion of the sale of the asset, is initially recorded at cost along with any expected overage. Where, through deferred purchase credit terms, cost differs from the nominal amount which will actually be paid in settling the deferred purchase terms liability, an adjustment is made to the cost of the land, the difference being charged as a finance cost.

Options purchased in respect of land are capitalised initially at cost. Regular reviews are completed for impairment in the value of these options, and provisions made accordingly to reflect loss of value. The impairment reviews consider the period elapsed since the date of purchase of the option given that the option contract has not been exercised at the review date. Further, the impairment reviews consider the remaining life of the option, taking account of any concerns over whether the remaining time available will allow successful exercise of the option. The carrying cost of the option at the date of exercise is included within the cost of land purchased as a result of the option exercise.

Investments in land without the benefit of planning consent, either through purchase of freehold land or non refundable deposits paid on land purchase contracts subject to residential planning consent, are capitalised initially at cost. Regular reviews are completed for impairment in the value of these investments, and provision made to reflect any irrecoverable element. The impairment reviews consider the existing use value of the land and assesses the likelihood of achieving residential planning consent and the value thereof.

Ground rents are held at an estimate of cost based on a multiple of ground rent income, with a corresponding credit created against cost of sales, in the year in which the ground rent first becomes payable by the leasehold purchaser.

Cash and cash equivalents

Cash and cash equivalents comprises cash balances and call deposits. Bank overdrafts that are repayable on demand and form an integral part of the Group's cash management are included as a component of cash and cash equivalents for the purpose of the statement of cash flows.

Bank borrowings

Interest-bearing bank loans and overdrafts are initially recorded at fair value, net of direct issue costs, and subsequently at amortised cost. Finance charges are accounted for on an accrual basis to the income statement using the effective interest method and are added to the carrying amount of the instrument to the extent that they are not settled in the period in which they arise.

Government grants

Government grants are recognised in the income statement so as to match with the related costs that they are intended to compensate. Government grants are included within deferred income. The benefit on loans with an interest rate below market is calculated as the difference between interest at a market rate and the below market interest. The benefit is treated as a Government grant.

Kickstart

The Group has been granted assistance for the development of a number of sites under the Homes and Communities Agency ('HCA') 'Kickstart' scheme. Where receipts under the Kickstart scheme relate to grants they are accounted for in accordance with the policy for government grants stated above.

In addition the Group has received cash upon specific sites under the 'Kickstart equity' scheme which may be repayable in future periods, as the sites to which it relates are developed, along with the share of the profits or losses attributable to the HCA arising from the sites. This grant element is included within deferred income to the extent that it is currently estimated that future economic benefit will be derived and will be released to the income statement in line with sales from the relevant site. If part or all the equity schemes are expected to be repaid these are shown in other creditors.

Trade payables

Trade payables on normal terms are not interest bearing and are stated at their nominal value.

Trade payables on extended terms, particularly in respect of land, are recorded at their fair value at the date of acquisition of the asset to which they relate. The discount to nominal value which will be paid in settling the deferred purchase terms liability is recognised over the period of the credit term and charged to finance costs using the effective interest rate method.

Provisions

A provision is recognised in the balance sheet when the Group has a present legal or constructive obligation as a result of a past event, and it is probable that an outflow of economic benefits will be required to settle the obligation. If the effect is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability.

Equity instruments

Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs.

Own shares held by ESOP trust

Transactions of the Group-sponsored ESOP trust are included in the Group financial statements. In particular, the trust's purchases of shares in the Company are debited directly to equity through an own shares held reserve.

Employee benefits

The Group accounts for pensions and similar benefits under IAS 19 (Revised): "Employee benefits". In respect of defined benefit schemes, the net obligation is calculated by estimating the amount of future benefit that employees have earned in return for their service in the current and prior periods, such benefits measured at discounted present value, less the fair value of the scheme assets. The discount rate used to discount the benefits accrued is the yield at the balance sheet date on AA credit rated bonds that have maturity dates approximating to the terms of the Group's obligations. The calculation is performed by a qualified actuary using the projected unit method. The operating and financing costs of such plans are recognised separately in the income statement; service costs are spread systematically over the lives of employees and financing costs are recognised in the periods in which they arise. All actuarial gains and losses are recognised immediately in the Group statement of comprehensive income.

Payments to defined contribution schemes are charged as an expense as they fall due.

Share-based payments

The Group has applied the requirements of IFRS2: "Share-based payments".

The Group issues equity-settled share-based payments to certain employees in the form of share options over shares in the Parent Company. Equity-settled share-based payments are measured at fair value at the date of grant calculated using an independent option valuation model, taking into account the terms and conditions upon which the options were granted. The fair value is expensed on a straight line basis over the vesting period, based on the Group's estimate of shares that will eventually vest, with a corresponding credit to equity except when the share-based payment is cancelled where the charge will be accelerated.

Segment reporting

As the Group's main operation is that of a housebuilder and it operates entirely within the United Kingdom, there are no separate segments, either business or geographic, to disclose, having taken into account the aggregation criteria provisions of IFRS8.

Exceptional items

Items that are both material in size and unusual or infrequent in nature are presented as exceptional items in the income statement. The Directors are of the opinion that the separate recording of exceptional items provides helpful information about the Group's underlying business performance. Examples of events that, inter alia, may give rise to the classification of items as exceptional are the restructuring of existing and newly-acquired businesses, gains or losses on the disposal of businesses or individual assets and asset impairments, including currently developable land, work in progress and goodwill.

Impact of standards and interpretations in issue but not yet effective

A number of new standards, amendments to standards and interpretations are not yet effective for the year ended 31 December 2012, and have not been applied in preparing these consolidated financial statements. Comments on specific new standards or amendments are as follows:

Amendment to IFRS7 'Financial Instrument Disclosures'. This amends the disclosure requirements in respect of financial instruments that are set-off in accordance with guidance in IAS32 'Financial Instruments: Presentation'. The amendment applies to the Group from 1 January 2013 and is expected to impact upon the Group by requiring additional disclosures in the annual financial statements.

IFRS10 'Consolidated Financial Statements' will apply to the Group from 1 January 2013. The new standard was issued in May 2011 to establish principles for the presentation and preparation of consolidated financial statements when an entity controls one or more other entities. The Group is currently assessing the impact of the standard on the Group's results and financial position.

IFRS11 'Joint Arrangements' will apply to the Group from 1 January 2013. The new standard was issued in May 2011 and requires that a party to a joint arrangement determines the type of joint arrangement in which it is involved by assessing its rights and obligations and accounts for those rights and obligations in accordance with that type of joint arrangement. The Group is currently assessing the impact of the standard on the Group's results and financial position.

IFRS12 'Disclosure of Interest in Other Entities' will apply to the Group from 1 January 2013. The new standard was issued in May 2011 and requires the disclosure of information that enables users of financial statements to evaluate the nature of, and risks associated with, its interests in other entities and the effects of those interests on its financial position, financial performance and cash flows. The Group is currently assessing the impact of the standard on the financial statements of the Group.

IFRS13 'Fair Value Measurement' will apply to the Group from 1 January 2013. The new standard was issued in May 2011 and defines fair value, sets out in a single IFRS a framework for measuring fair value and requires disclosures about fair value measurements. The Group is currently assessing the impact of the standard on the Group's results and financial position.

IAS19 (Revised) 'Employee Benefits' will apply to the Group from 1 January 2013. It principally revises existing accounting treatment for pensions and other post-employment benefits and termination benefits. The Group is currently assessing the impact of the standard on the Group's results and financial position.

IAS27 (Revised) 'Separate Financial Statements' will apply to the Group from 1 January 2013. The Group is currently assessing the impact of the amendment on the financial statements of the Group.

IAS28 (Revised) 'Investments in Associates and Joint Ventures' will apply to the Group from 1 January 2013. The Group is currently assessing the impact of the amendment on the financial statements of the Group.

Amendment to IAS32 will apply to the Group from 1 January 2014. This amendment provides guidance on the application of offsetting in financial statements. The Group is currently assessing the impact of the standard on the Group's results and financial position.

Amendment to IFRS1 'Government Loans' (Amendments to IFRS1) will apply to the Group from 1 January 2013. This amends IFRS1 'First-time Adoption of International Financial Reporting Standards' to address how a first-time adopter would account for a Government loan with a below-market rate of interest when transitioning to IFRSs. This amendment is not expected to impact the Group.

IFRS9 'Financial Instruments' is likely to apply to the Group from 1 January 2013. The standard was reissued in October 2010 as the second step in the IASB project to replace IAS39 'Financial Instruments: Recognition and Measurement'. IFRS9 (2010) now includes new requirements for classifying and measuring financial assets and financial liabilities and the derecognition of financial instruments. The IASB is continuing the process of expanding IFRS9 to add new requirements for impairment and hedge accounting. The Group is currently assessing the impact of the standard on the Group's results and financial position and will continue to assess the impact as the standard is revised by the IASB.

The Group has not early adopted any standard, amendment or interpretation. Of the above, IFRS9 'Financial Instruments' and 'Government Loans' (Amendments to IFRS1) have not yet been endorsed by the EU.

5. Reconciliation of net cash flow to net cash

		2012		2011
		£000		£000
Net decrease in net cash and cash equivalents		(31,781	)	(10,826	)
Repayment of borrowings		-		10,177
Fair value adjustments to interest rate swaps		(9	)	(315	)
Fair value adjustment to interest free loans		(195	)	61
Net cash at start of period		50,775		51,678
Net cash at end of period		18,790		50,775
Analysis of net cash:
Cash and cash equivalents		24,396		56,177
Unsecured loans		(5,190	)	(4,995	)
Fair value of interest rate swaps		(416	)	(407	)
Net cash		18,790		50,775

6. Income taxes

Current tax

Current tax is the expected tax payable or receivable on the taxable income or loss for the year, calculated using a corporation tax rate of 24.5% applied to the pre-tax income or loss, adjusted to take account of deferred taxation movements and any adjustments to tax payable for previous years.  Current tax receivable for current and prior years is classified as a current asset.

7. Dividends

The following dividends were declared by the Group:

			2012		2011
			£000		£000
Prior year final dividend per share of 3.5p (2011: 3.0p)			4,663		3,982
Current year interim dividend per share of 3.0p (2011: 1.5p)			4,001		1,994
Dividends declared			8,664		5,976

The Board has decided to propose a final dividend of 6.0p per share in respect of 2012.

8. Earnings per share

Basic earnings per share

The calculation of basic earnings per share at 31 December 2012 was based on the profit attributable to ordinary shareholders of £40,857,000 (2011: £23,266,000) and a weighted average number of ordinary shares outstanding during the year ended 31 December 2012 of 133,294,726 (2011: 132,860,480), calculated as follows:

Profit attributable to ordinary shareholders

	2012		2011
	£000		£000
Profit for the period attributable to ordinary shareholders	40,857		23,266

Weighted average number of ordinary shares

	2012		2011
Issued ordinary shares at 1 January	133,860,480		133,218,325
Effect of own shares held	(445,306	)	(474,109	)
Effect of shares issued in year	879,552		116,264
Weighted average number of ordinary shares at 31 December	133,294,726		132,860,480

Diluted earnings per share

The calculation of diluted earnings per share at 31 December 2012 was based on the profit attributable to ordinary shareholders of £40,857,000 (2011: £23,266,000) and a weighted average number of ordinary shares outstanding during the year ended 31 December 2012 of 133,432,911 (2011: 132,944,264).

The average number of shares is diluted by reference to the average number of potential ordinary shares held under option during the period. This dilutive effect amounts to the number of ordinary shares which would be purchased using the aggregate difference in value between the market value of shares and the share option exercise price. The market value of shares has been calculated using the average ordinary share price during the period. Only share options which have met their cumulative performance criteria have been included in the dilution calculation.

Weighted average number of ordinary shares (diluted)                                                      

	2012	2011
Weighted average number of ordinary shares at 31 December	133,294,726	132,860,480
Effect of share options in issue which have a dilutive effect	138,185	83,784
Weighted average number of ordinary shares (diluted) at 31 December	133,432,911	132,944,264

9. Related Party transactions

Transactions between fellow subsidiaries, which are related parties, have been eliminated on consolidation, as have transactions between the Company and its subsidiaries during this period.

Transactions between the Group, Company and key management personnel in the year ending 31 December 2012 were limited to those relating to remuneration, which are disclosed in the Report on director's remuneration and note 6 which can be found in the full annual report available on the Group's website.

Malcolm Harris, a Group Director, is a non-executive Director of the Home Builders Federation (HBF).  The Group pays subscription fees and fees for research as required to the HBF.

Total net payments were as follows:

	2012	2011
	£000	£000
HBF	93	85

There have been no related party transactions in the current financial year which have materially affected the financial performance or position of the Group, and which have not been disclosed.

Transactions with Joint Venture

Bovis Homes Limited are contracted to provide Property and Letting Management services to the Bovis Peer LLP. Fees charged in the period ended 31 December 2012 in respect of these services totalled £144,000 (inclusive of VAT) (2011: £133,200).  During the year ended 31 December 2011, inventory was transferred to Bovis Peer LLP for a cash consideration of £2,156,438.

Loans totalling £1,575,355 were provided in prior years at an annual interest rate of LIBOR plus 2.4%.  No other loans or sales of inventory have taken place.  Interest charges made in respect of the loans were £49,000 (2011: £46,000)

 

END

 

 

FR JAMFTMBTTBRJ