Annual Financial Report

RNS Number : 2321I

Bovis Homes Group PLC

23 March 2015

 



Bovis Homes Group PLC - Annual Report and Accounts 2014

Annual Report and Accounts 2014, 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/annualreport2014

Annual Report and Accounts 2014 - publication required by DTR 6.3.5

The Company published its Preliminary Results for the year ended 31 December 2014 on 23 February 2015.  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.  To maintain 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/annualreport2014

Bovis Homes Group PLC - Annual Report and Financial Statements 2014

Chairman's statement

Having completed my first full year as Chairman, I have been pleased with the Group's excellent progress during 2014. While the market moderated during 2014 to a more sustainable level, the Group has delivered a strong result with an increase in earnings per share of 75% and achieved our targeted return on capital employed.

The ambitious strategic plan laid out during 2014 provides real clarity as to the future direction of the Group. Delivery of this plan is on track and I see considerable opportunity for the Group going forward.

A robust market

While the UK economic backdrop has remained relatively robust throughout 2014, the housing market has evolved during the year, with strong demand and pricing in the first half of the year, followed by more moderate activity in the second half.

Demand has been impacted by the mortgage market in the year. Whilst mortgage rates are increasingly competitive and are approaching historic lows, mortgage underwriting standards have become more disciplined following the Mortgage Market Review, leading in turn to a modest reduction in mortgage approvals. However, we continue to believe that a disciplined mortgage market is a prerequisite for a healthy housing market in the long term.

The key challenge for the industry during 2014 was the availability and cost of subcontract labour. The increase in activity in the new homes market, combined with the exit of skills in certain trades over recent years has led to resource shortages and resulted in cost increases for key trades, although this pressure seems to be abating.

The land market remains positive, with participants demonstrating discipline and planning providing an increasing number of consented sites, combined with ongoing constraints for smaller housebuilders to access funding.

Improving performance

During 2014, the Group has made significant improvements in returns, both profit margins and capital turn contributed positively. In a year of record legal completions, the targeted return on capital employed has been achieved with a 53% improvement year on year to 16.2%.

While delivering these excellent results in 2014, the Group is in a strong position for 2015, continuing to be well capitalised with a strong balance sheet. In line with our strategy, the record year of land investment in 2014 and the pipeline of land for acquisition in 2015 will lead to growth in business capacity during 2015 and 2016. The Board has confidence that, assuming a stable market, this will deliver further strong growth in capital turn, profitability, and ultimately shareholder returns.

Updated strategic plan

During 2014, the Group laid out a clear and robust strategic plan. The Board recognises the fact that the housing market is cyclical in nature and that our strategic plan needs, therefore, to deliver strong returns across the cycle. We continue to view this as being an early point in the housing cycle and believe that this is an excellent time to invest positively in a disciplined manner to grow towards our optimal scale. Our business model is clear with a well defined geographic and product focus. Above all, we recognise that our success depends on delivering high quality homes to our customers, built in a safe way by motivated employees and suppliers.

Dividends

In light of the Group's strong performance in 2014 and our confidence in the progress in delivering the strategic plan, as previously indicated, a final dividend of 23.0 pence per share will be recommended, which, when combined with the interim dividend, totals 35.0 pence for the year, an increase of 159% on the 2013 dividend. The final dividend will be payable on 22 May 2015 to shareholders on the register on 27 March 2015.

The Board is also maintaining its guidance for 2015 with the intention to recommend a dividend of at least 35 pence per share. Thereafter, in this phase of the cycle the Board plans to operate a regular payout ratio of one third of earnings with supplementary dividend payments to shareholders of cash surplus to requirements as we move towards optimal scale.

People

As a Board, we have continued to be impressed with the commitment and skill shown by the Group's employees in delivering the growth during 2014 and, on behalf of the Board, I would like to thank them all for their dedication and hard work. I would also like to extend its thanks to our subcontractors and suppliers who are such a key component of our business.

The Board

Having joined the Board in November 2013 I would like to thank my colleagues for their support and positive challenge during this period. I would like to welcome Chris Browne, who joined the Board in September 2014 and also thank John Warren, who will retire from the Board at the AGM, for his service to Bovis Homes both as a non executive director and as Audit Committee Chairman. He will be replaced by Ralph Findlay, currently Chief Executive Officer of Marston's PLC, who will join the Board on 7 April 2015 and will chair the Audit Committee from the conclusion of the 2015 AGM.

I would also thank Jonathan Hill, who is leaving the Group in March, for his huge contribution to the Group during his time as Group Finance Director.

While it has been a time of change, the Board is confident that the Group is well positioned to deliver growth and value to shareholders as we implement our strategic plan.

Ian Tyler

Chairman

Chief Executive's Statement

Bovis Homes has made considerable progress during 2014, achieving a record number of legal completions with a strong improvement in profit and driving a further significant improvement in return on capital employed.  Profit before tax has increased by 69% to £133.5 million and the Group has achieved a return on capital employed of 16.2%, 53% higher than 2013.  Basic earnings per share has increased by 75% to 78.6 pence (2013: 44.9 pence).

The Group has delivered a record year, acquiring high quality land assets in its target areas, while maintaining a robust balance sheet with year end net cash of £5.2 million.

The strategic plan communicated at the time of the 2014 Half Year Results laid out the ambitions for the Group.  The Group aims to deliver market leading performance over the cycle from long term land investment with a focus on building and selling quality family homes.  The Group's strategies to achieve this are as follows:

·      Acquiring, designing and developing quality traditional housing sites, focusing primarily in the south of England (excluding London)

·      Creating aspirational homes using its well specified Portfolio traditional housing range in desirable settings, delivered with excellent customer service

·      Growing to an optimal scale to suit the selected geography and product range, which enables ongoing high quality management of risk and reward through short lines of management control

·      Managing the business across the housing cycle to maximise returns, while effectively stewarding shareholders' capital

·      Enabling motivated and engaged employees and business partners to work ethically within a safe and healthy environment

With the excellent progress made during 2014 delivering on these strategies, the Group is confident that its strategic plan is on track.

Acquiring, designing and developing quality traditional housing sites, focusing primarily in the south of England (excluding London)

2014 was the Group's most successful year for land investment, acquiring high quality consented land assets focused on specific search areas in the south of England and prime locations in the midlands and northwest.  The Group has maintained strong discipline in its approach to land investment and applies rigorous criteria for the acquisition of consented land, reflecting not only the anticipated profit margin and return on capital employed, but also site specific risks and geographic concentration risk.

During the year the Group added 7,300 plots on 42 sites to the consented land bank at a cost of £340 million (2013: 3,737 plots on 27 sites at a cost of £225 million).  The plots added have an estimated future revenue of £1,717 million and an estimated future gross profit potential of £447 million, based on appraisal sales prices and build costs.  On average the plots are expected to deliver a gross margin of circa 26% and a return on capital employed between 25% and 30%.  Of these plots, 82% were located in the south of England, taking the proportion of plots in the consented land bank to 75% in the south.  On the sites acquired during 2014, traditional homes represented 86% of the private homes to be built.

The strong performance in purchasing land has continued in 2015, with 575 consented plots on four sites added to date in 2015, and a significant pipeline of sites with terms agreed being positively progressed.

In order to drive improved use of capital, the Group completed three land sales totalling 237 plots during 2014.  The selected land sale parcels were on some of the Group's larger sites.  Further land sales are planned in 2015.

The consented land bank was approximately five years supply at 2014 legal completion volume, amounting to 18,062 plots as at 31 December 2014 (2013: 14,638).  The gross profit potential on these consented plots at the 2014 year end, based on current sales prices and current build costs, was estimated at £1,017 million with a gross margin of 25.2% (2013: £727 million at 24.2%).  At that point, the consented land bank contained 128 sites with 25 of these sites still to be launched for sale.  This provides confidence in the Group's growth for 2015 as these sites progress to being active sales outlets.

Creating aspirational homes using its well specified Portfolio traditional housing range in desirable settings, delivered with excellent customer service

During 2014 the Group achieved record production of circa 3,500 homes, a 20% increase on 2013 to support the delivery of new homes, whilst effectively managing housing work in progress.  Work in progress turn increased to 3.6 times (2013: 2.7).  Housing work in progress ended 2014 at 923 units worth of production (2013: 1,040), equivalent to less than one quarter's worth of anticipated volume at the start of 2015.

During 2010, the Group reviewed its private housing range and designed the "Portfolio" range of traditional homes for modern living, incorporating great space with efficient design and build.  Not only have these homes been excellently received by customers, but they are also highly efficient to build.  The Group has migrated across to the Portfolio range, where planning allows.  During 2014, 38% of the private homes legally completed were from the Portfolio range, up from 23% in 2013.  This percentage is expected to grow further in 2015.

The Portfolio range is ideally suited to edge of town and village locations, which are precisely the locations where the Group has invested in 2014, including attractive market towns from Bovey Tracy and Ottery St Mary in Devon and Tetbury and Kemble in Gloucestershire, to Godalming in Surrey, Salisbury and Bursledon in Hampshire and Elsenham and Takeley in Essex.

As a result of moving towards a more traditional housing mix, the proportion of traditional private homes sold has increased to 66% in 2014 from 59% in 2013.  Three storey homes reduced to 21% of legal completions (2013: 22%) and apartments have decreased to 13% (2013: 19%).

In 2014, the average sales price of homes legally completed increased by 11% to £216,600 (2013: £195,100).  The average sales price of private legal completions, excluding private rental sector ("PRS"), was 18% higher at £250,800 (2013: £212,700), benefiting from the mix effect of higher sales prices on new sites and market pricing improvements of circa 5% ahead of expectations set prior to the start of 2014.  The average sales price for PRS homes was £166,900, reflecting their location and the smaller product delivered under these agreements.

Improving activity levels and higher sales prices in the new homes market has led to increasing construction costs, with the main driver being subcontract labour.  The Group's average construction cost for legal completions in 2014 was 12% higher than in 2013, compared to an increase in private sales prices of 14%.  The Group estimates the market driven element of this build cost increase to be circa 7% with other cost increases arising from the increasing size of the Group's average home, specification improvements and the ongoing impact of switching the mix of homes to the south of England where subcontractor rates are higher.

As well as cost increases, the industry has faced challenges to deliver adequate levels of production during the last eighteen months.  This has resulted primarily from shortages in subcontract labour, which has impacted Bovis Homes, given the Group's significant growth.  Production delays have also had an adverse effect on the customer experience leading to the Group's internal "recommend a friend" score reducing to 82% in 2014 from 90% in 2013.  Actions plans have been put in place to improve performance in this important area.

Growing to an optimal scale to suit the selected geography and product range, which enables ongoing high quality management of risk and reward through short lines of management control

The Group has laid out its ambitious plan to grow annual volume to between 5,000 and 6,000 homes, through an increase in active sales outlets which can be delivered through the acquisition of circa 40 consented sites annually.

In 2014 the Group has taken a major step forward in scale, delivering a 29% increase in legal completions to 3,635 homes (2013: 2,813).  Private legal completions, including 286 PRS homes, increased by 26% to 2,931 (2013: 2,330).  Legal completions of social homes were 704 (2013: 483), representing 19% of total legal completions (2013: 17%).

Average active sales outlets of 97 were 8% higher than the 90 in 2013.  This combination of active sales outlet growth in 2014 supported by PRS reservations enabled the Group to achieve 3,218 private reservations, a 16% increase on the 2,773 achieved in 2013.  Net private reservations per site per week was 0.64 and, excluding the PRS reservations, was 0.54 (2013: 0.59).  This reduction resulted from a more normal seasonal market during the summer period of 2014 compared to 2013, which benefited from the first year of Help to Buy, as well as a moderating of the overall housing market in the second half of the year.

This level of private reservations enabled the Group to carry forward into 2015 a significantly enhanced private forward order book of 979 private reservations (2014: 692).  When combined with increased active sales outlets of 103 at the start of 2015 and the expected site openings in 2015 driven by the 42 consented sites acquired in 2014, the Group is confident that further growth towards its optimal scale can be achieved during 2015.  The sites acquired in 2015 to date and the pipeline of further sites either already contracted or at an advanced stage of negotiation should support further growth into 2016.

The Group's new organisational structure which became effective at the start of 2014 has bedded in well and the six operating businesses are functioning effectively.  The two developing businesses in Thames Valley and South Midlands, which continue to be run on modest overheads, are progressing towards being fully operational and are expected to deliver their first legal completions during 2016.

Managing the business across the housing cycle to maximise returns, while effectively stewarding shareholders' capital

Driving shareholder value across the housing cycle requires strong land acquisition at the bottom of the cycle and slowing investment before the peak.  The Group continues to view the housing market, excluding London, as being at an early stage of its growth phase in this cycle.  After a long period of stable pricing and activity between 2009 and H1 2013, significant market house price increases have only occurred in the last year and a half.  While there continues to be a shortage of credit to smaller housebuilders, discipline is being demonstrated by those participating in the consented land market.  This is evidenced by the recently published view by Knight Frank that greenfield residential land values increased by only 2.3% in 2014, reflecting the interplay between sales prices and build costs and the competitive landscape.  The Group continues to believe that this is the right time to be investing assertively in consented land.

Demand for new housing remains strong with UK household formation continuing to be projected above 200,000 per annum and new housing targeted by the Government for delivery above this number while completions fall significantly short of this target.  The UK planning system has increased its delivery of planning consents leading to an improving flow of available, cost effective residential consented land.  The opportunity exists for well capitalised housebuilders to invest in this land to increase housing supply.

Strategic land is critical to the Group to contribute to the supply of land into the consented land bank through the housing cycle.  During 2014 the Group made a strong investment in new strategic land with the addition of circa 4,500 new plots to the strategic land bank.  Circa 3,000 plots were converted to the consented land bank, making up 41% of plots added during the year.

As a result, the strategic land bank at 31 December 2014 had increased to 21,350 potential plots (2013: 20,108).  These plots are spread across 76 sites.  The Group's long-term investment in and promotion of strategic land has resulted in the consented land bank as at 31 December 2014 having been sourced 45% from the strategic land bank (2013: 49%).  Within the Group's strategic land bank are 2,900 plots across nine sites where residential planning consent has already been agreed and progress is being made by the Group to finalise planning agreements and acquire these sites.  Additionally, a plan for the Group's controlled land for 3,200 plots at Wellingborough, Northamptonshire is being developed.  This is expected to lead to site development commencing with the first new homes being completed in 2016.

The Group continues to promote effectively its existing strategic sites, working with local stakeholders to secure planning consent.  A good proportion of the Group's existing strategic land is approaching a point where planning consents are expected to be achieved.  This strategic land will allow the Group to continue to be highly selective in the consented land market, especially important as and when this market shows signs of increased competition.  The Group anticipates that circa 50% of its land bank in the future is likely to be sourced from strategic land.  The combined effect of consented land market investment with strategic land conversion is expected to provide the Group with a strong pipeline of sites with profit margins and returns at the point of investment above its existing hurdle rates.

Enabling motivated and engaged employees and business partners to work ethically within a safe and healthy environment

The Group recognises the critical role that its people play in the delivery of the strategic plan.  The increased activity in the new build market has made attracting and retaining talent ever more important.  With a growing business, employees have increased from 771 at the start of 2014 to 928 at the end 2014, which has been supported by higher levels of investment to support recruitment, training and development.

In the build department where staff turnover is most pronounced, a site manager training programme has been established during 2014, which welcomed its first cohort of trainees primarily from military backgrounds with further programmes to be run in the future.  Additionally, the apprentice programme is being expanded in 2015 to increase the intake across the business.

The Board

Jonathan Hill, the Group Finance Director, announced his intention in September 2014 to leave the Group in order to pursue other career options.  Jonathan will continue serving with the Group until 6 March 2015.  The Board would like to thank Jonathan for his significant contribution to both the Board and to the strong performance of the Group during his period of service.  The Board is pleased to confirm that the search process for Jonathan's replacement is close to finalisation.  An announcement is expected to be made in the near future.

John Warren will retire from the Board at the 2015 AGM to be held on 15 May 2015 after the allotted nine years as a non-executive director and eight years as Audit Committee Chairman. The Board would like to thank John for his valuable contribution during his time on the Board.  The Board is pleased to announce that Ralph Findlay, currently Chief Executive of Marston's PLC, will be appointed as a non-executive director with effect from 7 April 2015 and will chair the Audit Committee from the conclusion of the 2015 AGM.

Market conditions

The first half of 2014 was a period of strong levels of customer demand in the housing market supported by good availability of mortgage finance.  Monthly mortgage approvals, according to the Bank of England, averaged 67,500 during the first half of 2014.  The summer period returned to a more typical seasonal pattern with lower activity during July and August.  At the same time consumer confidence reduced resulting in a weaker autumn trading period.  During the second half of 2014, monthly mortgage approvals reduced to an average of 61,700.

The extension of Help to Buy through to 2020, announced in March 2014, provided the industry with increased certainty of support in the medium term.  The Group views this development positively, providing further time for the mortgage market to develop under the positive control delivered by the Mortgage Market Review.

House prices have been rising at a positive rate across many regional markets with stronger rises in the south of England, offset by more modest changes in the midlands and north of England.  The Group experienced an increase in sales prices during 2014 compared to its expectations set prior to the start of the year of circa 5% due to market pricing improvements.

With the improvements in activity levels and higher sales prices, the cost of building new homes has increased and the supply of additional labour to fully support the higher production levels remained constrained in 2014.  The main driver of the increase in costs has been subcontract labour, but material prices have also contributed to the increase.  The pressure experienced during 2014 seems to be reducing at the start of 2015.

Customer demand appears robust at the start of 2015.  Mortgage rates are at historic low rates and real wages are growing, supporting affordability.  The changes to stamp duty announced by the Government in 2014 are also positive for consumers.  The forthcoming general election brings a period of uncertainty.  History would suggest that sales activity will moderate for a few weeks before the election, followed by a rebound after.  The Group is aware of this likely impact and is presently working to maximise the current positive sales activity to grow the order book.

Current trading

The Group entered 2015 with forward sales of 1,752 homes, a 27% improvement on the 1,377 homes brought forward at the start of 2014.  Of these, 979 were private homes (2014: 692) and 773 were social (2014: 685).

The Group has delivered 479 private reservations in the first seven weeks of 2015, modestly ahead of the 468 private reservations achieved in the strong market conditions enjoyed in early 2014.  Operating from an average of 101 active sales outlets during this period (2014: 93), the Group has achieved a sales rate per site per week of 0.68 (2014: 0.72).  Sales prices achieved on these private reservations to date have been ahead of the Group's expectations set prior to the start of 2015 by circa 2%.

As at 20 February 2015, the Group held 2,336 sales for legal completion in 2015, as compared to 1,875 sales at the same point in 2014, an increase of 25%.  Of these, private sales amounted to 1,458 homes (2014: 1,160), with social housing sales of 878 homes (2014: 715).

Overall this represents a robust start to 2015.

Outlook

The strong sales position brought forward from 2014 combined with robust trading in the first seven weeks of 2015 has positioned the Group well for 2015.  With the expectation of further growth in active sales outlets during 2015 driven by the land acquisitions achieved in 2014, the Group is confident that it can deliver its expected legal completion growth in 2015.

The housing market is demonstrating a strong correlation between sales prices and costs, such that further increases in build costs are expected to be at least covered by increases in sales prices.  The Group continues to benefit from an increasing proportion of legal completions from post downturn sites which are in better locations with a stronger product offering and have higher returns.  These legal completions are expected to contribute to a stronger profit margin.  With firm control of capital employed, capital turn is expected to improve to in excess of 1.0 in 2015.  Based on stable market conditions, the Group expects to deliver a further positive step in 2015 towards its ambition of at least 20% return on capital employed in 2016.

The Group anticipates 2015 being another successful year of growth and strong returns.

David Ritchie
Chief Executive

Financial Review

The Group has delivered an excellent financial performance, with profits and earnings growing strongly and capital turn increasing.  This has resulted in the Group achieving its target for return on capital employed.

Revenue

During 2014, the Group generated total revenue of £809.4 million, an increase of 46% on the previous year (2013: £556.0 million).  Housing revenue was £783.6 million, 43% ahead of the prior year (2013: £548.7 million) and other income was £4.2 million (2013: £4.3 million).  Land sales revenue, associated with three land sales, was £21.6 million in 2014, compared to one land sale achieved in 2013 with a total revenue of £3.0 million.

Profit before interest and tax

The Group delivered a 66% increase in profit before interest and tax for the year ended 31 December 2014 to £137.9 million (2013: £83.1 million) at a net profit margin of 17.0% (2013: 14.9%). Housing net profit margin in 2014 was 17.0% (2013: 15.0%) and reached 17.7% in the second half of 2014.

Housing gross margin increased to 24.5% in 2014 from 23.5% in 2013, in line with the circa 1% improvement expected by the Group.  The gross margin benefited from the increased contribution from legal completions on sites acquired post the housing market downturn.  During 2014, market sales price gains enabled the Group to cover construction cost increases, supporting a continuing strong profit margin.

Total gross profit was £197.2 million (gross margin: 24.4%), compared with £130.3 million (gross margin: 23.4%) in 2013.  The profit on land sales in 2014 was £3.9 million (2013: £0.1 million).

Overheads, including sales and marketing costs, increased by 26% in 2014, as the Group invested early to support the large number of land assets acquired and the increased number of sales outlets. The overheads to housing revenue ratio improved to 7.5% in 2014 from 8.5% in 2013.

Profit before tax and earnings per share

Profit before tax increased by 69% to £133.5 million, comprising operating profit of £137.6 million, net financing charges of £4.4 million and a profit from joint ventures of £0.3 million.  This compares to £78.8 million of profit before tax in 2013, which comprised £82.8 million of operating profit, £4.3 million of net financing charges and a profit from joint ventures of £0.3 million.  Basic earnings per share for the year improved by 75% to 78.6p compared to 44.9p in 2013.

Financing

Net financing charges during 2014 were £4.4 million (2013: £4.3 million).  Net bank charges were £4.5 million (2013: £3.5 million), as a result of higher net debt during 2014 compared to 2013.  The Group incurred a £3.0 million finance charge (2013: £3.1 million charge), reflecting the imputed interest on land bought on deferred terms.  The Group also benefited from a finance credit of £3.0 million (2013: £2.3 million) arising from the unwinding of the discount on its available for sale financial assets during 2014 and other credits of £0.1 million.

Taxation

The Group has recognised a tax charge of £28.3 million at an effective tax rate of 21.2% (2013: tax charge of £18.7 million at an effective rate of 23.7%).  The Group has a current tax liability of £14.0 million in its balance sheet as at 31 December 2014 (2013: current tax liability of £9.2 million).

Dividends

As previously communicated the Board will propose a 2014 final dividend of 23.0p per share.  This dividend will be paid on 22 May 2015 to holders of ordinary shares on the register at the close of business on 27 March 2015. The dividend reinvestment plan gives shareholders the opportunity to reinvest their dividends in ordinary shares.  Combined with the interim dividend paid of 12.0p, the dividend for the full year totals 35.0p compared to a total of 13.5p paid in 2013, an increase of 159%.

Net assets

				2014			2013
				£m			£m
Net assets at 1 January					810.3		758.8
Profit after tax for the year					105.2		60.1
Share capital issued					0.5		1.0
Net actuarial movement on pension scheme through reserves					(5.7	)	2.9
Deferred tax on other employee benefits					0.3		-
Adjustment to reserves for share based payments					0.8		0.8
Net movement in shared equity					(3.5	)	-
Dividends paid to shareholders					(28.8	)	(13.3
Net assets at 31 December					879.1		810.3

As at 31 December 2014 net assets of £879.1 million were £68.8 million higher than at the start of the year.  Net assets per share as at 31 December 2014 were 655p (2013: 604p).

Inventories increased during the year by £154.5 million to £1,125.5 million.  The value of residential land, the key component of inventories, increased by £124.3 million, as the Group invested ahead of usage.  At the end of 2014, the remaining provision held against land carried at net realisable value was £12.9 million, after utilisation of £6.7 million during the year.  Other movements in inventories were an increase in work in progress of £23.3 million and an increase in part exchange properties of £6.9 million.

Trade and other receivables increased by £18.1 million, primarily due to higher amounts owing from housing associations.   Trade and other payables totalled £360.5 million (2013: £242.6 million).  Land creditors increased to £198.2 million (2013: £123.8 million) with the Group taking advantage of the opportunity to defer payments to land vendors.  Trade and other creditors increased to £162.3 million (2013: £118.8 million), with higher build activity leading to increased amounts owed to subcontractors and material suppliers.

Pensions

Taking into account the latest estimates provided by the Group's actuarial advisors, the Group's pension scheme on an IAS19R basis had a deficit of £0.7 million at 31 December 2014 (2013: surplus of £3.2 million).  Scheme assets grew over the year to £103.3 million from £94.7 million and the scheme liabilities increased to £104.0 million from £91.5 million.

Net cash and cashflow

Having started the year with net debt of £18.0 million, the Group generated an increased operating cash inflow before land expenditure of £336 million (2013: £204 million), owing to higher profitability and increased land recovery on record legal completions.  Net cash payments for land investment grew to £246 million (2013: £203 million), as a result of the increased land investment offset by higher land creditors. Non-trading cash outflow increased to £67 million (2013: £38 million) with the greater dividend and corporation tax payments.  As at 31 December 2014 the Group's net cash balance was £5.2 million with £52.3 million of cash in hand, offset by bank loans of £43.0 million, £4.0 million of loans received from the Government and £0.1 million being the fair value of an interest rate swap.

At 31 December 2014, the Group had in place a committed revolving credit facility of £175 million, of which £50 million expires in December 2015 and £125 million in March 2017.  Additionally, the Group had a fully drawn three year term loan of £25 million, repayable in January 2016.

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, the directors' remuneration 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 confirm that they have complied with the above requirements in preparing the financial statements. The directors also confirm that they consider the annual report and accounts, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Group and Parent Company's performance, business model and strategy.

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 strategic report, a directors' report, a directors' remuneration report and a 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 34 of the annual report confirm that, to the best of their knowledge:

a) the Group and Parent Company financial statements, 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 strategic report includes a fair, balanced and understandable 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
Group Company Secretary

20 February 2015

Bovis Homes Group PLC
Group income statement

For the year ended 31 December		2014		2013
		£000		£000
Revenue		809,365		556,000
Cost of sales		(612,129	)	(425,693	)
Gross profit		197,236		130,307
Administrative expenses		(59,672	)	(47,476	)
Operating profit before financing costs		137,564		82,831
Financial income		3,360		2,815
Financial expenses		(7,727	)	(7,134	)
Net financing costs		(4,367	)	(4,319	)
Share of profit of joint venture		287		283
Profit before tax		133,484		78,795
Income tax expense		(28,276	)	(18,727	)
Profit for the period attributable to equity holders of the parent		105,208		60,068
Earnings per share
Basic		78.6	p	44.9	p
Diluted		78.2	p	44.8	p

Group statement of comprehensive income

			2014 £000		2013 £000
Profit for the period			105,208		60,068
Other comprehensive income Items that will be reclassified to profit and loss: Shared equity movement Deferred tax on shared equity movement			(2,887) (621)		- -
Items that will not be reclassified to profit and loss:
Actuarial (losses) / gains on defined benefit pension scheme			(7,166)		3,693
Deferred tax on actuarial movements on defined benefit pension scheme			1,421		(748	)
Total comprehensive income for the period attributable to equity holders of the parent			96,015		63,013

Bovis Homes Group PLC

Group balance sheet

At 31 December			2014		2013
			£000		£000
Assets
Property, plant and equipment			13,634		13,526
Investments			8,107		5,089
Restricted cash			1,426		1,823
Deferred tax assets			2,645		1,451
Trade and other receivables			2,534		1,560
Available for sale financial assets			39,433		44,844
Retirement benefit asset			-		3,237
Total non-current assets			67,779		71,530
Inventories			1,125,518		971,016
Trade and other receivables			58,862		41,713
Cash and cash equivalents			52,257		12,025
Total current assets			1,236,637		1,024,754
Total assets			1,304,416		1,096,284
Equity
Issued capital			67,114		67,048
Share premium			213,850		213,428
Retained earnings			598,154		529,786
Total equity attributable to equity holders of the parent			879,118		810,262
Liabilities
Bank and other loans			47,010		30,064
Trade and other payables			99,092		29,631
Retirement benefit obligations			668		-
Provisions			1,840		2,052
Total non-current liabilities			148,610		61,747
Trade and other payables			261,436		212,926
Other financial liabilities			-		784
Provisions			1,236		1,411
Current tax liabilities			14,016		9,154
Total current liabilities			276,688		224,275
Total liabilities			425,298		286,022
Total equity and liabilities			1,304,416		1,096,284

These financial statements were approved by the Board of directors on 20 February 2015.                            

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 2013	479,391		66,908	212,550	758,849
Total comprehensive income and expense	63,013		-	-	63,013
Issue of share capital	-		140	878	1,018
Deferred tax on other employee benefits	(23	)	-	-	(23)
Share based payments	766		-	-	766
Dividends paid to shareholders	(13,361	)	-	-	(13,361	)
Balance at 31 December 2013	529,786		67,048	213,428	810,262
Balance at 1 January 2014	529,786		67,048	213,428	810,262
Total comprehensive income and expense	96,015		-	-	96,015
Issue of share capital	-		66	422	488
Deferred tax on other employee benefits	304		-	-	304
Share based payments	838		-	-	838
Dividends paid to shareholders	(28,789	)	-	-	(28,789	)
Balance at 31 December 2014	598,154		67,114	213,850	879,118

Bovis Homes Group PLC

Group statement of cash flows

For the year ended 31 December		2014		2013 restated - note 8
		£000		£000
Cash flows from operating activities
Profit for the year		105,208		60,068
Depreciation		1,853		1,180
Impairment of available for sale financial assets		(1,288	)	(47	)
Financial income		(3,360	)	(2,815	)
Financial expense		7,727		7,134
Profit on sale of property, plant and equipment		(115	)	(24	)
Equity-settled share-based payment expense		838		766
Income tax expense		28,276		18,727
Share of result of joint venture		(287	)	(283	)
(Increase)/decrease in trade and other receivables		(13,956	)	28,737
Increase in inventories		(154,501	)	(107,419	)
Increase/(decrease) in trade and other payables		116,475		(4,911	)
Decrease in provisions and retirement benefit obligations		(3,795	)	(2,845	)
Cash generated from operations		83,075		(1,732	)
Interest paid		(3,746	)	(5,781	)
Income taxes paid		(23,708	)	(14,634	)
Net cash from operating activities		55,621		(22,147	)
Cash flows from investing activities
Interest received		107		269
Acquisition of property, plant and equipment		(2,084	)	(2,802	)
Proceeds from sale of plant and equipment		238		30
Movement in loans with Joint Venture		(2,751	)	360
Purchase of investment in Joint Ventures (373 ) -		(373	)	-
Dividends received from Joint Venture		283		267
Reduction / (investment) in restricted cash		397		(671	)
Net cash from investing activities		(4,183	)	(2,547	)
Cash flows from financing activities
Dividends paid		(28,789	)	(13,361	)
Proceeds from the issue of share capital		488		1,018
Increase in borrowings		17,095		24,666
Net cash from financing activities		(11,206	)	12,323
Net increase/(decrease) in cash and cash equivalents		40,232		(12,371	)
Cash and cash equivalents at 1 January		12,025		24,396
Cash and cash equivalents at 31 December		52,257		12,025

Notes to the financial statements

1       General information

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 2014 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 20 February 2015.

The financial information set out above does not constitute the company's statutory financial statements for the years ended 31 December 2014 or 2013 but is derived from those financial statements.  Statutory financial statements for 2013 have been delivered to the registrar of companies, and those for 2014 will be delivered in due course. The auditors have reported on those financial statements; their reports were (i) unmodified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without modifying their report and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.

2       Basis of accounting

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.

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.

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

3       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 and covenant compliance forecasts covering the period to December 2015 and summary financial forecasts for the following two years.

As at 31 December 2014 the Group held cash and cash equivalents of £52.3 million and had total borrowings of £47.0 million. On 29 January 2013 the Group entered into a £125 million committed revolving credit facility expiring in March 2017 and a three year term loan of £25 million expiring in January 2016. This financing arrangement replaced the Group's previous £150 million committed revolving credit facility. During August 2013, the committed revolving credit facility was increased by an additional £50 million, expiring on 31 December 2015. As at 31 December 2014, £157 million of the committed revolving credit facility was available for drawdown.

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

4       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. Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. In assessing control, the Group takes into consideration potential voting rights that are currently exercisable.  The acquisition date is the date on which control is transferred to the acquirer. 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.

A joint arrangement is an arrangement over which the Group and one or more third parties have joint control. 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. These joint arrangements are in turn classified as:

Joint ventures whereby the Group has rights to the net assets of the arrangement, rather than rights to its assets and obligations for its liabilities; and

Joint operations whereby the Group has rights to the assets and obligations for the liabilities relating to the arrangement.

5       Critical accounting judgements and key sources of estimation uncertainty

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 below.

Key sources of estimation uncertainty          

Land held for development and housing work in progress

The Group holds inventories which are stated at the lower of cost and net realisable value. To assess the net realisable value of land held for development and housing work in progress, the Group completes a financial appraisal of the likely revenue which will be generated when these inventories are combined as residential properties for sale and sold. Where the financial appraisal demonstrates that the revenue will exceed the costs of the inventories and other associated costs of constructing the residential properties, the inventories are stated at cost. Where the assessed revenue is lower, the extent to which there is a shortfall is written off through the income statement leaving the inventories stated at a realisable value. To the extent that the revenues which can be generated change, or the final cost to complete for the site varies from estimates, the net realisable value of the inventories may be different.

A review taking into account estimated achievable net revenues, actual inventory and costs to complete as at 20 February 2015 has been carried out, which has identified no material net movement in the carrying value of the provision. These estimates were made by local management having regard to actual sales prices, together with competitor and marketplace evidence, and were further reviewed by Group management. Should there be a future significant decline in UK house pricing, then further write-downs of land and work in progress may be necessary. Further details on the carrying value of inventories is laid out in note 3.1 of the annual report.

Available for sale financial assets

The estimation of the fair value of available for sale financial assets requires judgement and estimation as to the quantum, timing and value of repayment of the Group's receivable, as well as to the choice of instrument-specific market-assessed interest rate used to determine a discount rate. Note 4.6 of the annual report contains a sensitivity analysis showing the impact of a change in the major judgement factors applied in the valuation of these instruments.

6       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.

7       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 land, work in progress and goodwill.

8       Impact of standards and interpretations effective for the first time

The Group has adopted the following new standards and amendments to standards, including any consequential amendments to other standards, with a date of initial application of 1 January 2014:

IFRS10 'Consolidated Financial Statements', IFRS11 'Joint Arrangements', IFRS12 'Disclosure of interest in Other Entities' all cover various aspects of Group Financial Statements but have not had a significant impact on the Group.

Amendment to IAS 32 provides guidance on the application of offsetting in Financial Statements. This has not had a significant impact on the Group.

The other standards and interpretations that are applicable for the first time in the Group's financial statements for the year ended 31 December 2014, have no effect on these financial statements.

9       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 2014, and have not been applied in preparing these consolidated financial statements. Comments on specific new standards or amendments are as follows:

IFRS9 'Financial Instruments' was reissued in 2014 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. IFRS 9 is not effective until 2018 (subject to EU endorsement). 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.

IFRS15 'Revenue from contracts with customers' was issued in May 2014 and will apply to the Group from 1 January 2017. The Group is currently assessing the impact of the standard on the Group's results and financial position.

The Group has not early adopted any standard, amendment or interpretation. Of the above, IFRS9 'Financial Instruments' has not yet been endorsed by the EU.

10     Accounting Policies

Revenue

Revenue comprises the fair value of consideration received or receivable, net of value-assessed 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.

Where land is sold with material development obligations, the recognition of revenue and profit is deferred until the work is complete.

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.

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.

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.

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.

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.

Bank and other loans

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.

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.

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.

Available for sale assets

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. 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.

Available for sale financial assets relate to legal completions where the Group has retained an interest through agreement to defer recovery of a percentage of the market value of the property, together with a legal charge to protect the Group's position. The Group participates in three schemes. 'Jumpstart' schemes are receivable 10 years after recognition with 3% interest charged between years 6 to 10. The 'HomeBuy Direct' and 'FirstBuy' schemes are operated together with the Government. Receivables are due 25 years after recognition with interest charged from year 6 onwards at a base value of 1.75% plus annual RPI increments. These assets are held at fair value being the present value of expected future cash flows taking into account the estimated market value of the property at the estimated date of recovery.

Net financing costs

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.

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.

Hedging

Derivative financial instruments are recognised at fair value.

Income Tax

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.

Tax assets and liabilities

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.

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.

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.

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.

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.

11     Reconciliation of net cash flow to net cash

		2014		2013
		£000		£000
Net increase /(decrease) in net cash and cash equivalents		40,232		(12,371	)
Increase in borrowings		(17,095	)	(24,546	)
Fair value adjustments to interest rate swaps		149		209
Fair value adjustment to interest free loans		-		(121	)
Net (debt)/cash at start of period		(18,039	)	18,790
Net cash/(debt) at end of period		5,247		(18,039	)
Analysis of net cash:
Cash and cash equivalents		52,257		12,025
Unsecured loans		(46,951	)	(29,856	)
Fair value of interest rate swaps		(59	)	(208	)
Net cash/(debt)		5,247		(18,039	)

12     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 21.5% 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.

13     Dividends

The following dividends were declared by the Group:

			2014		2013
			£000		£000
Prior year final dividend per share of 9.5p (2013: 6.0p)			12,715		8,010
Current year interim dividend per share of 12.0p (2013: 4.0p)			16,074		5,351
Dividends declared			28,789		13,361

The Board has decided to propose a final dividend of 23.0p per share in respect of 2014.

14     Earnings per share

Basic earnings per share

The calculation of basic earnings per share at 31 December 2014 was based on the profit attributable to ordinary shareholders of £105,208,000 (2013: £60,068,000) and a weighted average number of ordinary shares outstanding during the year ended 31 December 2014 of 133,902,247 (2013: 133,643,311), calculated as follows:

Profit attributable to ordinary shareholders

	2014		2013
	£000		£000
Profit for the period attributable to ordinary shareholders	105,208		60,068

Weighted average number of ordinary shares

	2014		2013
Issued ordinary shares at 1 January	133,643,311		133,294,726
Effect of own shares held	(241,111	)	(288,388
Effect of shares issued in year	500,047		636,973
Weighted average number of ordinary shares at 31 December	133,902,247		133,643,311

Diluted earnings per share

The calculation of diluted earnings per share at 31 December 2014 was based on the profit attributable to ordinary shareholders of £105,208,000 (2013: £60,068,000) and a weighted average number of ordinary shares outstanding during the year ended 31 December 2014 of 134,573,167 (2013: 133,933,279).

The average number of shares is increased by reference to the average number of potential ordinary shares held under option during the period. This reflects 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)                                                                               

	2014	2013
Weighted average number of ordinary shares at 31 December	133,902,247	133,643,311
Effect of share options in issue which have a dilutive effect	670,920	289,968
Weighted average number of ordinary shares (diluted) at 31 December	134,573,167	133,933,279

15     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 2014 were limited to those relating to remuneration, which are disclosed in the director's remuneration report and in note 5.3 of the annual report.

Transactions between the Group, Company and joint ventures are in note 5.5 of the annual report.

Transactions with Bovis Peer LLP and IIH Oak Investors LLP

Bovis Homes Limited is contracted to provide property and letting management services to Bovis Peer LLP. Fees charged in the period, inclusive of VAT, were £148,000 (2013: £147,000).

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 £37,000 (2013: £46,000).

In 2014, Bovis Homes Limited entered into a Joint Venture arrangement with IIH Oak Investors LLP to hold 190 homes under a private rental scheme. During the year 129 homes were sold to the Joint Venture for cash consideration of £28,787,381 and 13% (representing the Group's effective interest) of the revenue and profit in respect of this sale has been eliminated from the Group results in accordance with IFRS11. A loan of £2,901,109 was provided to IIH Oak Investors at an interest rate of 6%.

 

END

 

 

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