Annual Financial Report

RNS Number : 8069S

Bovis Homes Group PLC

21 March 2016

 

Bovis Homes Group PLC - Annual Report and Accounts 2015

Annual Report and Accounts 2015, 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/annualreport2015

Annual Report and Accounts 2015 - publication required by DTR 6.3.5

The Company published its Preliminary Results for the year ended 31 December 2015 on 22 February 2016.  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/annualreport2015

Bovis Homes Group PLC - Annual Report and Financial Statements 2015

Chairman's statement

During last year Bovis Homes made good progress against its ambitious strategic plan. I am pleased to report that, once again, through delivering a record volume of homes, the Group has driven growth in revenue leading to a 21% increase in earnings per share and achieving our targeted growth in return on capital employed.

Growth strategy supported by a robust market

Our strategic plan, first communicated during 2014, remains unchanged. The Board continues to review conditions in the UK housing market as we progress through the cycle and we believe that the key factors which supported the positive market conditions in 2015 remain in place.

Whilst the UK financial markets have seen the impact of growing uncertainty in the global economy, the fundamental lack of supply in the UK housing market and the current strong demand from customers provides a robust back drop to our growth strategy. The Government support for the housebuilding industry remains positive. In particular the residential planning regime is ensuring that land supply to the market is ahead of production rates and the extension of the Help to Buy scheme provides confidence for our customers to invest in new homes. The ongoing benign land market means it is an excellent time to invest strongly in a disciplined manner.

Consistent with the period since 2010, our carefully targeted land investment has delivered significant future value into our consented land bank. This investment has been concentrated on good quality sites in areas of strategic focus where we will be able to deliver our standard high quality Portfolio range of homes that our customers demand.

We saw a steady rise in house prices throughout 2015 and the early signs in 2016 remain positive. The current constraints in the availability of skilled labour in the industry remains the major short term operational challenge for the industry as a whole. We are focused on further developing the quality of our own construction teams and working closely in partnership with our suppliers and sub-contractors. Across the country we are working hard to bring new people into the sector to address the shortage.

Operational and capital effectiveness

The Board recognises the inevitable challenges the Group faces as we progress through the growth phase of our plans and are focused on delivering a high level of operational effectiveness across the enlarged business. We have further developed our management structures during the year to support an increase in volumes towards our targeted steady state of between 5,000 and 6,000 new homes each year and I have every confidence in our ability to deliver that ambition. We continue to invest in our people and with two additional operating regions in place from the start of 2016 we are able to apply greater management focus across our operating area. We recognise that our success depends on safely building quality homes on time for our customers.

I am pleased to confirm that the Group has made further improvements in shareholder returns in 2015. Combining a capital turn which exceeded one times for the first time with an improvement in operating margin, the Group achieved its target return on capital employed for 2015 at 18.3%.

The increased size of the land bank including our valuable strategic holdings highlights the strong position of the Group for 2016. The Group has between four and five years of owned consented land supply and this is supported by over five years of supply of strategic land for future delivery. The Group has retained the strength of its balance sheet during 2015 with, once again, net cash at year end. The Board remains confident that, assuming a stable market, this will be the base for further growth in capital turn, profitability, and ultimately shareholder returns.

Dividends and earnings per share

Driven by a record number of new homes in 2015 and the ongoing trend of increasing average sales prices, the Group delivered a 21% improvement in earnings per share to 95.4p. Given the good progress made in 2015 and our ongoing confidence in delivering the longer term strategic plan, as previously indicated, a final dividend for 2015 of 26.3 pence per share will be recommended. When combined with the interim dividend this provides a total dividend of 40 pence for the year, an increase of 14% on 2014. The final dividend will be payable on 20 May 2016 to shareholders on the register on 29 March 2016.

The Board intends to recommend a progressive dividend for 2016 which is likely to again be ahead of our base dividend policy of a regular payout ratio of one third of earnings per share. In the long term as we approach our planned steady state activity levels and invest in land to replenish rather than grow our land bank, we expect to generate cash surplus to our requirements which will further enhance cash returns for shareholders.

People

I have continued to be impressed with the commitment and skill shown by the Group's employees in delivering the growth during 2015 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 my thanks to our subcontractors and suppliers who are such a key component of our business.

The Board

I would like to thank my colleagues for another year of support and positive challenge. In particular, I would like to thank John Warren, who stepped down from the Board this year, for his service to Bovis Homes over many years both as a non executive director and as Audit Committee Chairman. Ralph Findlay joined the Board during the year and has taken over chairmanship of the Audit Committee. I would also like to express my thanks to Jonathan Hill, our previous Group Finance Director, who left the Group back in March after four years of valued service. His successor, Earl Sibley, joined the Board in April 2015.

The future

While it has been a time of operational challenge with fast moving market conditions, the Board is confident that the Group's long term growth plan remains appropriate in the current market and that our positive investment in land has ensured we are well placed to further enhance value to our shareholders.

Ian Tyler

Chairman

Chief Executive's Statement

Bovis Homes is delivering its growth strategy, achieving a record number of legal completions during 2015 while investing in high quality land assets in its target areas and delivering further increases in shareholder returns.

The increase in volume, aligned with higher average sales prices, delivered a strong improvement in operating profit. Our capital turn in 2015 exceeded one times and this along with an increase in operating margin led to a further improvement in return on capital employed. Profit before tax increased by 20% to £160.1 million and return on capital employed was 18.3%, 2.1 percentage points higher than 2014. Our balance sheet remains robust with year end net cash of £30 million.

The strategic plan communicated during 2014 laid out the ambitions for the Group. We aim to deliver market leading performance over the cycle from long term land investment with a focus on building and selling quality family homes.

The positive housing market conditions in the UK continue, with growth in both transaction levels and sales prices. Housing demand continues to run ahead of new housing supply with the availability of development land supported by increasing levels of planning permissions. The Government has an ambition for the industry to build over 200,000 new homes a year and is supporting new housebuilding through its renewed commitment to Help to Buy, Starter Homes and driving land supply through the planning process. The Group is wholly aligned with this strategy to deliver the homes the nation needs as it steadily grows its capacity and output year on year.

Strategic plan

The Group's strategic plan remains to deliver growth in shareholder returns from:

·      Disciplined land investment, both consented and strategic, to grow the business in a controlled way towards a steady state of between 5,000 and 6,000 new homes per annum

·      Investment in people to underpin the continuous evolution of the Group's structure to manage the future growth

·      Ongoing assessment of the housing cycle ensuring flexibility to adapt the plan to changes in the market

·      Execution of the plan which has been further evidenced by the performance during 2015

Land investment supporting future growth

The Group continues to implement its disciplined land investment strategy, including strong levels of conversion from strategic land, to provide growth in volume at strong sales prices and high profit margins. We acquired 35 sites during 2015 following the acquisition of 42 sites in 2014, in line with our ambition to acquire around 40 new sites per year. This growth is further supported by the good progress we have made in the year with many key sites in our strategic land portfolio. As at 31 December 2015, the Group owned 142 consented sites and remains on track to increase further its number of owned consented sites during the next few years. Our strategic ambition of delivering between 5,000 and 6,000 new homes per annum will be achieved by operating around 150 sales outlets at steady state. Average sales outlet numbers will increase towards this level over time with land investment.

This investment is focused in the Group's targeted, primarily Southern, geographies within which the Group believes there is strong market demand for housing and sufficient supply of land to fulfil its strategic ambitions. Our rigorous acquisition criteria are applied to every proposal, reflecting not only the anticipated profit margin and return on capital employed, but also site specific risks and geographic concentration risk. 

		2015		2014
Consented plots added		6,058		7,300
Sites added		35		42
Sites owned at period end		142		128
Plots in consented land bank at period end		19,814		18,062
Average consented land plot cost		£49,200		£46,600
Proportion in South of England		76%		75%

In the year the Group added to the land bank 6,058 consented plots on 35 sites at a cost of £343 million. These plots have an estimated future revenue of c£1,700 million and an estimated future gross profit potential of c£440 million based on sales prices and build costs at the point of appraisal, delivering an estimated future gross margin of 26.4%. The average return on capital employed of the land acquired based on investment appraisal at the time of acquisition is c28%.

The estimated gross profit potential of the Group's consented land bank plots as at 31 December 2015, based on prevailing sales prices and build costs, has increased to £1,247 million with a gross margin of 25.5% (31 December 2014: £1,017 million at 25.2%). Written down land in the land bank at 31 December 2015 made up only 2% of plots (31 December 2014: 6%).

The successful conversion of strategic land continues to be a key driver of value for the Group. New strategic land investments added 3,827 plots into the strategic land bank, giving a total of 23,083 strategic plots at the year end across 80 strategic sites. The strategic land bank reflects positively the Group's strategy of land acquisition with 68% of the strategic plots in the South of England. During 2015, the Group converted 2,217 plots from the strategic land bank into the consented land bank.

The Group has either secured or is in the final stages of securing planning consent on eight major strategic sites: Bishop's Stortford (where the first 180 plots have already been added to the consented land bank), North Whiteley, Bexhill, Witney, Edwalton, Gravesend, Taunton and Tavistock. In total, these sites will deliver over 5,000 consented plots with high profit margins and returns above existing hurdle rates. These sites will be acquired once valuation and option exercise processes are complete. The sites generally benefit either from significant deferred terms on purchase or the ability to add the land over a number of years through tranche drawdown. Our site at Wellingborough obtained revised planning consent in December 2015 for 3,650 plots which supports the start of housebuilding on site during 2016 with the expectation of achieving a profit margin in excess of our hurdle rates. Overall, around 8,000 plots of the strategic land bank have planning agreed. In a number of cases, development partners are being identified for these larger sites, in line with the Group's aims for capital efficiency.

An example of working with a development partner is on our strategic site at North Wokingham which was acquired in December and is included within the year end land bank. We sold a parcel of the development to a Registered Social Landlord (RSL) in December and have entered into a contract with the same RSL to develop a mix of private and social dwellings. This development has already commenced construction on the key infrastructure roads in the early weeks of 2016.

In pursuit of capital efficiency the Group completed in 2015 the sale of 4 parcels of land on strategically sourced sites, and further land sales are planned in 2016.

The successful execution of our plan in respect of our key strategic sites has the potential to deliver a significant long term benefit to the business. The Group's strategic land assets represent one of its key differentiators. We expect these assets will provide strong replenishment for the consented land bank over the coming years. The size of this opportunity supports the Group's aim for 50% of its consented land bank to be sourced through strategic means in the future.

Evolving Group structure to better manage a bigger business

As planned, in order to manage effectively the increased annual volume and support growth the Group has been operating as eight regional businesses since 1 January 2016. The changes have seen the formation both of our West Midlands and East Midlands regions from splitting our existing Central region and of the fledgling Thames Valley region, which is planning to deliver its first new homes during 2016. The evolved structure ensures greater management focus in our regional geographies and maintains our ability to make the right business choices in an agile manner, whilst managing risk effectively through short lines of management control. The eight regions are structured in two operating divisions, each overseeing four regions. In line with our strategy this operating structure provides the platform to deliver between 5,000 and 6,000 homes per annum.

In order to manage this growth, the management team has been strengthened through promotions from within the business. Keith Carnegie, previously Central Division Managing Director and with over 15 years' experience with the Group, has taken up the new role of Chief Operating Officer from 1 January 2016. Keith is responsible for how the business operates across all its regional businesses and also oversees the key Group wide support functions. The Group is clear on its operating priorities going forward and in particular is focused on how we safely build quality homes, ensuring each of our developments is set up to deliver our production plans and that we follow consistently our robust processes and procedures from site acquisition through planning and construction onto sales. Keith is also leading a review of the Group support functions to assess how these need to evolve to support our future growth.

The Group recognises the critical role that our people play in the delivery of the strategic plan. In particular, we are investing in our leadership team through formal development programmes accompanying more informal mentoring across all our business operations. Overall, our employee base continues to grow with the scale of the business. We closed the year with 1,062 employees having increased from 928 at the start of 2015. This growth has been supported by higher levels of investment to support recruitment, training and development.

Given the current labour constraints impacting the sector, staff turnover remains most pronounced in our build department. During the year, we recruited 192 new employees into our construction teams including 37 new apprentices. Our Build Academy programme first developed in 2014 has been a key part of our approach to supporting new members of our construction team.

Continually assessing the housing cycle

The Group continues to view the housing market as being supportive of growth during the current upswing in the cycle. There continue to be constraints on capital available to smaller housebuilders and discipline is being demonstrated in the consented land market. Demand for new housing remains strong with increasing housing transaction levels and higher sales prices (the Halifax house price index rose over 9% in 2015). Demand is supported by an active mortgage market and low interest rates. The planning system is delivering an increased level of planning consents underpinning our investment in strategic land and providing a good supply of consented land into the market. However, the level of new build homes being supplied continues to be below Government targets. As a result, we believe a good opportunity remains for well capitalised housebuilders to invest in land to increase housing supply.

Robust discipline in our investment strategy is demonstrated by our record of land acquisitions made at above hurdle rate margins and our improving capital turn. We continue to assess the housing cycle and have the ability to adapt quickly. We have processes in place that enable the Group to stop its land investment quickly when required and adjust the length of its overall land holdings as the cycle evolves. Our long term investment strategy, including our ambition to source around 50% of consented land from strategic land, provides greater flexibility of land supply in a changing economic environment whilst contributing sites with strong sales prices and high profit margins.

Execution of the plan

In 2015, the Group has taken another step forward in scale, delivering an 8% increase in legal completions to 3,934 homes (2014: 3,635). Private legal completions (excluding PRS) increased by 10% to 2,901 (2014: 2,645). Legal completions of social homes were 848 (2014: 704), representing 22% of total legal completions (2014: 19%) more in line with the proportion of social housing plots in our land bank.

Average active sales outlets of 102 were 6% higher than the 97 in 2014, although this increase reflects delays to sales launches of some new higher margin sites. The combination of active sales outlet growth in 2015 and a greater southern focus enabled the Group to achieve 2,986 private reservations (excluding PRS), a 10% increase on the 2,709 achieved in 2014. Net private reservations (excluding PRS) per site per week was 0.56 compared to 0.54 in 2014. Whilst this represents a robust sales rate it also reflects the Group's ambition to match sales rates more closely with production rates and the availability of finished homes.

Our average sales price increased by 7% to £231,600 (2014: £216,600) with the average sales price of private legal completions (excluding PRS) 8% higher at £272,100 (2014: £250,800). These average prices benefit both from the improved geographical and product mix on new sites driving higher sales prices and estimated annual market pricing improvements of circa 4-5%.

During 2015, 55% of the private homes legally completed were from the "Portfolio" range, up from 38% in 2014. This percentage is expected to grow further in 2016. The "Portfolio" range of homes continues to be excellently received by customers and they are also highly efficient to build. In addition, as planned, the proportion of traditional private homes sold increased to 70% in 2015 from 66% in 2014. Three storey homes reduced to 18% of legal completions (2014: 21%) and apartments have decreased to 12% (2014: 13%).

The Group achieved production levels 12% ahead of 2014. Work in progress turn remained high at 3.5 times (2014: 3.6). Housing work in progress ended 2015 at 929 units worth of production (2014: 923), equivalent to less than one quarter's worth of our 2015 volume. Looking forward through 2016 we aim to align our production rates further with our sales rates and target a more even flow of production.

Activity levels continue to increase across the sector and in the near term the availability of skilled labour remains a constraint. This labour shortage has driven higher than expected levels of construction cost inflation. In addition, we have seen additional cost pressure in the business as we drive increased activity levels on site from higher prelim costs and the impact of replacing underperforming sub-contractors. The Group's average construction cost per square foot in 2015 was 8% higher than in 2014. Whilst we continue to see signs of these cost increases moderating, managing our construction cost base remains a key priority for the business. We are seeking to develop further our strategic partnerships with our key sub-contractors, manage our materials costs through Group-wide agreements, in addition to driving continuous review and improvements across all sites and all areas of spend.

Market conditions

The housing market in 2015 represented a positive trading environment. Customer demand was strong throughout the year with weekly prospect levels running ahead of 2014. Monthly mortgage approvals, according to the Bank of England, were 18% higher in the year supported by unchanged interest rates.

The Government's support for the housebuilding sector has continued during the year through driving the UK planning system to deliver consented land, the extension of Help to Buy through to 2021, and the initiatives announced in respect of Starter Homes. Whilst we welcome the news on Help to Buy which provides greater certainty and confidence in the market, the proposals in respect of Starter Homes are still developing and their effect will become clearer in time.

House prices continue to rise across many regional markets with stronger growth in the south of England. Whilst there are signs that cost pressure is moderating in 2016, continuing rising activity levels in the sector may drive ongoing constraints in labour supply. As a result, the cost of building new homes is expected to increase further.

Current trading

The Group entered 2016 with a strong forward sales position with 2,003 total reservations, a 14% improvement on 2015.

	2015	2014	Change
Private	841	756	+11%
PRS	38	223	-83%
Social	1,124	773	+45%
Total forward sales at 31 December	2,003	1,752	+14%

The Group is currently trading on 102 sales outlets (2015: 99). The pipeline of new sites controlled by the Group currently being managed through the planning, procurement and early phases of construction is expected to increase this level further through 2016.

The Group has delivered 429 private reservations in the first seven weeks of 2016, this equates to a sales rate per site per week of 0.60 compared to 0.68 in 2015 which benefited from some bulk investor reservations. Sales prices achieved on these private reservations to date have been ahead of the Group's expectations set prior to the start of 2016.

Outlook

In the current cycle the Group has increased its investment in land with strong profit margins and increased capital turn whilst maintaining a robust balance sheet position.

The strong sales position brought forward from 2015 combined with the strong pipeline of new sites expected to commence trading in the next few months provides a solid platform from which to expect further growth in 2016. The profile of our anticipated sales outlet launches means that legal completions in 2016 will be weighted to the second half year in a similar manner to 2015. In contrast, the increased overhead costs being incurred to manage the enlarged Group will be evenly spread over the year.

The average sales price continues to improve due to further product and site mix improvements and market-wide house price rises. As a result, the Group expects a further improvement in capital turn for 2016. We expect to see growth in gross profit margin in 2016 driven by a greater proportion of new higher profit margin sites in the mix. We expect further modest improvements in overhead efficiency, despite investing in the Group's evolving structure, which together with higher gross profit margins are expected to underpin our operating profit margin progression. Given the increased capital turn and the improving profit margin, we maintain our ambition to drive continued growth in return on capital employed. The Group has seen strong forward sales and robust trading in early 2016 in line with our expectations and anticipates 2016 being another successful year of growth and strong returns.

David Ritchie

Chief Executive

Financial Review

The Group has delivered a robust financial performance with earnings growing strongly and capital turn improving. This along with a strong balance sheet has resulted in the Group achieving its target for return on capital employed.

Revenue

The Group generated total revenue of £946.5 million, an increase of 17% on the previous year (2014: £809.4 million).  Housing revenue was £910.1 million, 16% ahead of the prior year (2014: £783.6 million) and other revenue was £6.4 million (2014: £4.2 million).  Land sales revenue, associated with four land sales, was £30.0 million in 2015, compared to three land sales achieved in 2014 with a total revenue of £21.6 million.

Operating profit

The Group delivered a 19% increase in operating profit for the year ended 31 December 2015 to £163.5 million (2014: £137.6 million) at an operating profit margin of 17.3% (2014: 17.0%).

Total gross profit was £232.3 million (gross margin: 24.5%), compared with £197.2 million (gross margin: 24.4%) in 2014.  The profit on land sales in 2015 was £8.8 million (2014: £3.9 million) as the Group continues its strategy of managing its capital base through the disposal of parcels of land on large sites, often strategically sourced.

Housing gross margin was 24.4% in 2015, broadly in line with 24.5% in 2014.  During 2015, the Group's construction costs increased by 8% per square foot, ahead of sales price gains of 4% per square foot, although these gains largely ensured the housing gross margin was maintained.  In addition, the housing gross margin in the year was impacted by delays in completions of new higher margin sites resulting in the overall mix of homes being more weighted to existing sites.

Overheads, including sales and marketing costs, increased by 15% in 2015, as the Group invested early to advance the delivery of the large number of land assets under its control and to support the enlarged structure of the Group.  The overheads to revenue ratio improved to 7.3% in 2015 from 7.4% in 2014.

Profit before tax and earnings per share

Profit before tax increased by 20% to £160.1 million, comprising operating profit of £163.5 million, net financing charges of £5.2 million and a profit from joint ventures of £1.8 million.  This compares to £133.5 million of profit before tax in 2014, which comprised £137.6 million of operating profit, £4.4 million of net financing charges and a profit from joint ventures of £0.3 million.  The profit from joint ventures in 2015 included the benefits of revaluing both the Bovis Peer LLP and IIH Oak Investors LLP PRS property portfolios in the period.

Basic earnings per share for the year improved by 21% to 95.4p compared to 78.6p in 2014.  This improvement has resulted in a return on equity of 15% (2014: 13%).

Financing

Net financing charges during 2015 were £5.2 million (2014: £4.4 million).  Net bank charges were £3.3 million (2014: £4.5 million), as a result of modestly higher net debt during 2015 than 2014 outweighed by a lower level of commitment fees and issue costs amortised in 2015.  The Group incurred a £4.9 million finance charge (2014: £3.0 million charge), reflecting the imputed interest on land bought on deferred terms.  The Group also benefited from a finance credit of £2.9 million (2014: £3.0 million) arising from the unwinding of the discount on its available for sale financial assets during 2015 as well as other credits of £0.1 million.

Taxation

The Group has recognised a tax charge of £32.1 million at an effective tax rate of 20.0% (2014: tax charge of £28.3 million at an effective rate of 21.2%).  The Group has a current tax liability of £16.9 million in its balance sheet as at 31 December 2015 (2014: current tax liability of £14.0 million).

Dividends

As previously communicated the Board will propose a 2015 final dividend of 26.3p per share.  This dividend will be paid on 20 May 2016 to holders of ordinary shares on the register at the close of business on 29 March 2016. The dividend reinvestment plan gives shareholders the opportunity to reinvest their dividends in ordinary shares.  Combined with the interim dividend paid of 13.7p, the dividend for the full year totals 40p and compares to a total of 35p for 2014, an increase of 14%.  Maintaining a level of dividend ahead of our base policy of one-third of retained earnings is a sign of the Board's continued confidence in the Group's strategic plan.

Net assets	2015			2014
	£m			£m
Net assets at 1 January		879.1		810.3
Profit after tax for the year		128.0		105.2
Share capital issued		0.6		0.5
Purchase of own shares		(2.4	)	-
Net actuarial movement on pension scheme through reserves		0.2		(5.7	)
Deferred tax on other employee benefits		-		0.3
Adjustment to reserves for share based payments		1.5		0.8
Net movement in shared equity		-		(3.5	)
Dividends paid to shareholders		(49.2	)	(28.8	)
Net assets at 31 December		957.8		879.1

As at 31 December 2015 net assets of £957.8 million were £78.7 million higher than at the start of the year.  Net assets per share as at 31 December 2015 were 714p (2014: 655p).

Inventories increased during the year by £193.0 million to £1,318.5 million.  The value of residential land, the key component of inventories, increased by £139.0 million, as the Group invested ahead of usage.  At the end of 2015, the remaining provision held against land carried at net realisable value was £6.7 million, after utilisation of £5.5 million during the year.  Other movements in inventories were an increase in work in progress of £49.8 million and an increase in part exchange properties of £4.2 million.

Trade and other receivables increased by £34.6 million, primarily due to higher amounts owing from housing associations and amounts receivable relating to land sales completed in 2015.   Trade and other payables totalled £535.2 million (2014: £360.5 million).  Land creditors increased to £322.9 million (2014: £198.2 million) with the Group taking advantage of the opportunity to negotiate deferred payments to land vendors.  Trade and other creditors increased to £212.3 million (2014: £162.3 million), with a 12% increase in build activity leading to increased amounts owed to subcontractors and materials 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 surplus of £7.1 million at 31 December 2015 (2014: deficit of £0.7 million).  Scheme assets grew over the year to £109.3 million from £103.4 million and the scheme liabilities decreased to £102.2 million from £104.0 million.  The movements on the scheme in the period include a special contribution from the Group into the scheme of £7.8 million and an increase in the discount rate applied to liabilities as a result of changes in bond yields.

Net cash and cashflow

Having started the year with net cash of £5.2 million, the Group generated an operating cash inflow before land expenditure of £329.1 million (2014: £336.1 million), reflecting higher profitability and increased land cost attributable to legal completions outweighed by increased construction expenditure.  Net cash payments for land investment reduced to £230.6 million (2014: £265.8 million), reflecting the increase in land investment being more than offset by higher land creditors.  Non-trading cash outflow increased to £98.4 million (2014: £66.7 million) with greater dividends, higher corporation tax payments and a special contribution to the pension scheme.  As at 31 December 2015 the Group's net cash balance was £30.0 million with £32.0 million cash in hand, offset by £2.0 million loans received from the Government.

At 31 December 2015, the Group had in place a committed revolving credit facility of £250 million which expires in December 2020. 

Earl Sibley
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 financial statements in accordance with applicable law and regulations.

Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have prepared the Group and Parent company financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union. 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 the Company and of the profit or loss of the Group for that period.

In preparing these financial statements, the directors are required to:

·      select suitable accounting policies and then apply them consistently;

·      make judgements and accounting estimates that are reasonable and prudent;

·      state whether applicable IFRSs as adopted by the European Union have been followed, subject to any material departures disclosed and explained in the financial statements;

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

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and the Group and enable them to ensure that the financial statements and the Directors' Remuneration Report comply with the Companies Act 2006 and, as regards the Group financial statements, Article 4 of the IAS Regulation. They are also responsible for safeguarding the assets of the Company and the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

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

The directors consider that the Annual Report and Accounts, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess a Company's performance, business model and strategy.

Each of the directors, whose names and functions are listed on pages 44 to 45 of the Annual Report confirm that, to the best of their knowledge:

·      the Group financial statements, which have been prepared in accordance with IFRSs as adopted by the EU, give a true and fair view of the assets, liabilities, financial position and profit of the Group; and

·      the Strategic Report contained in the Annual report includes a fair review of the development and performance of the business and the position of the Group, together with a description of the principal risks and uncertainties that it faces.

By Order of the Board

M T D Palmer

Group Company Secretary

19 February 2016

Bovis Homes Group PLC
Group income statement

For the year ended 31 December		2015		2014
		£000		£000
Revenue		946,504		809,365
Cost of sales		(714,196	)	(612,129	)
Gross profit		232,308		197,236
Administrative expenses		(68,778	)	(59,672	)
Operating profit before financing costs		163,530		137,564
Financial income		3,348		3,360
Financial expenses		(8,583	)	(7,727	)
Net financing costs		(5,235	)	(4,367	)
Share of profit of Joint Ventures		1,770		287
Profit before tax		160,065		133,484
Income tax expense		(32,057	)	(28,276	)
Profit for the year attributable to equity holders of the parent		128,008		105,208
Earnings per share
Basic		95.4	p	78.6	p
Diluted		95.2	p	78.2	p

Group statement of comprehensive income

			2015		2014
			£000		£000
Profit for the year			128,008		105,208
Other comprehensive income/(expense)
Items that may be subsequently reclassified to profit and loss:
Shared equity movement			-		(2,887	)
Deferred tax on shared equity movement			-		(621	)
Items that will not be reclassified to profit and loss:
Remeasurements on defined benefit pension scheme			182		(7,166	)
Deferred tax on remeasurements on defined benefit pension scheme			(17	)	1,481
Total comprehensive income for the year attributable to equity holders of the parent			128,173		96,015

Bovis Homes Group PLC

Group balance sheet

At 31 December			2015		2014
			£000		£000
Assets
Property, plant and equipment			13,982		13,634
Investments			8,987		8,107
Restricted cash			1,451		1,426
Deferred tax assets			2,160		2,645
Trade and other receivables			1,166		2,534
Available for sale financial assets			35,303		39,433
Retirement benefit asset			7,117		-
Total non-current assets			70,166		67,779
Inventories			1,318,520		1,125,518
Trade and other receivables			94,843		58,862
Cash and cash equivalents			31,990		52,257
Total current assets			1,445,353		1,236,637
Total assets			1,515,519		1,304,416
Equity
Issued capital			67,190		67,114
Share premium			214,368		213,850
Retained earnings			676,201		598,154
Total equity attributable to equity holders of the parent			957,759		879,118
Liabilities
Bank and other loans			-		47,010
Trade and other payables			171,306		99,092
Retirement benefit obligations			-		668
Provisions			1,327		1,840
Total non-current liabilities			172,633		148,610
Bank and other loans			1,999		-
Trade and other payables			363,936		261,436
Provisions			2,245		1,236
Current tax liabilities			16,947		14,016
Total current liabilities			385,127		276,688
Total liabilities			557,760		425,298
Total equity and liabilities			1,515,519		1,304,416

These financial statements were approved by the Board of directors on 19 February 2016.                            

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 2014	529,786		67,048	213,428	810,262
Total comprehensive income	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
Balance at 1 January 2015	598,154		67,114	213,850	879,118
Total comprehensive income	128,173		-	-	128,173
Issue of share capital	-		76	518	594
Deferred tax on other employee benefits	(31	)	-	-	(31)
Purchase of own shares	(2,386	)	-	-	(2,386	)
Share based payments	1,531		-	-	1,531
Dividends paid to shareholders	(49,240	)	-	-	(49,240	)
Balance at 31 December 2015	676,201		67,190	214,368	957,759

Bovis Homes Group PLC

Group statement of cash flows

For the year ended 31 December		2015		2014
		£000		£000
Cash flows from operating activities
Profit for the year		128,008		105,208
Depreciation		2,065		1,853
Revaluation of available for sale financial assets		67		(1,288	)
Financial income		(3,348	)	(3,360	)
Financial expense		8,583		7,727
Profit on sale of property, plant and equipment		(43	)	(115	)
Equity-settled share-based payment expense		1,531		838
Income tax expense		32,057		28,276
Share of result of Joint Ventures		(1,770	)	(287	)
Increase in trade and other receivables		(28,031	)	(13,956	)
Increase in inventories		(193,000	)	(154,501	)
Increase in trade and other payables		168,773		116,475
Decrease in provisions and retirement benefit obligations		(7,003	)	(3,795	)
Cash generated from operations		107,889		83,075
Interest paid		(2,470	)	(3,746	)
Income taxes paid		(28,515	)	(23,708	)
Net cash from operating activities		76,904		55,621
Cash flows from investing activities
Interest received		75		107
Acquisition of property, plant and equipment		(2,424	)	(2,084	)
Proceeds from sale of plant and equipment		55		238
Movement in loans with Joint Ventures		358		(2,751	)
Movement in investment in Joint Ventures		397		(373	)
Dividends received from Joint Ventures		377		283
(Investment) / reduction in restricted cash		(25	)	397
Net cash used in investing activities		(1,187	)	(4,183	)
Cash flows from financing activities
Dividends paid		(49,240	)	(28,789	)
Proceeds from the issue of share capital		594		488
Purchase of own shares		(2,386	)	-
Drawdown of bank and other loans		-		17,095
Repayment of bank and other loans		(44,952	)	-
Net cash from financing activities		(95,984	)	(11,206	)
Net (decrease) / increase in cash and cash equivalents		(20,267	)	40,232
Cash and cash equivalents at 1 January		52,257		12,025
Cash and cash equivalents at 31 December		31,990		52,257

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 2015 comprise the Company and its subsidiaries (together referred to as 'the Group') and the Group's interest in associates and joint ventures.

The consolidated financial statements were authorised for issue by the directors on 19 February 2016.  The financial statements were audited by PriceWaterhouseCoopers LLP.

The financial information set out above does not constitute the Company's statutory financial statements for the years ended 31 December 2015 or 2014 but is derived from those financial statements.  Statutory financial statements for 2014 have been delivered to the registrar of companies, and those for 2015 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.

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 2016 and summary financial forecasts for the following two years.

Having started the year with net cash of £5.2 million, the Group generated increased operating cash flow during 2015, increasing the net cash position to £30.0 million. As at 31 December 2015, the Group held cash and cash equivalents of £32.0 million and had total borrowings of £2.0 million, which were repaid on 5 January 2016. On 3 December 2015, the Group entered into a new £250 million committed revolving credit facility, expiring in December 2020, all of which was available for drawdown at 31 December 2015.

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 arrangement 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 31 December 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.

Defined Benefit Pension Scheme

The Group has an active Defined Benefit Pension Scheme, which is subject to estimation uncertainty. Note 5.7 of the annual report outlines the way in which this Scheme is recognised in the Group's Financial Statements, the associated risks and sensitivity analysis showing the impact of a change in key variables on the defined benefit obligation.

6       Segment reporting

The Chief Operating Decision Maker, which is the Board, notes that 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       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 2015:

IFRIC21 'Levies' and Amendment to IAS 19 'Employee benefits' on defined benefit plans have both come into effect, with no significant impact on the Group.

Other changes recommended in 'Annual Improvements 2011', 'Annual Improvements 2012' and 'Annual Improvements 2013' have also been implemented with no significant impact on the Group.

8       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 2015, and have not been applied in preparing these consolidated financial statements. The Group is currently assessing the impact of these standards, with the following changes being those that may potentially have a future impact:

IFRS9 'Financial Instruments' is not effective until 2018 (subject to EU endorsement) and 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. However, it is possible that this amendment may impact upon the way the Group recognises fair value gains and losses on its Available for Sale assets.

IFRS 15 'Revenue from contracts with customers' was issued in May 2014 and will apply to the Group from 1 January 2018

IFRS 16 'Leases' will apply to the Group from 1 January 2019

Amendment to IFRS 11 'Joint arrangements on acquisition of an interest in a joint operation' (effective 1 January 2016)

Amendment to IAS 16 'Property, Plant and Equipment' and IAS 38 'Intangible Assets' (effective 1 January 2016)

Amendment to IFRS 10 'Consolidated financial statements' and IAS 28 'Investments in associates and joint ventures' (effective 1 January 2016)

At this stage, it is not felt that any of these changes would have a significant impact on the Group's financial statements, and the Group has not early-adopted any standard, amendment or interpretation.

9       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 units.

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 and written down on a straight-line basis over the life of the option. Should planning permission be granted and the option be exercised, the option is not amortised during that year and its carrying value is included within the cost of land purchased.

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. Other debtors include amounts receivable from the Government in relation to the Help To Buy scheme.

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. 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.

10     Reconciliation of net cash flow to net cash

			2015			2014
			£000			£000
Net (decrease) / increase in net cash and cash equivalents			(20,267		)	40,232
Decrease / (Increase) in borrowings			44,952			(17,095			)
Fair value adjustments to interest rate swaps			59			149
Net cash / (debt) at start of period			5,247			(18,039			)
Net cash at end of period			29,991			5,247
Analysis of net cash:
Cash and cash equivalents			31,990			52,257
Unsecured loans			(1,999		)	(46,951			)
Fair value of interest rate swaps			-			(59			)
Net cash			29,991			5,247

11     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 20% 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. 

12     Dividends

The following dividends were declared by the Group:			2015		2014
			£000		£000
Prior year final dividend per share of 23.0p (2014: 9.5p)			30,838		12,715
Current year interim dividend per share of 13.7p (2014: 12.0p)			18,402		16,074
Dividends declared			49,240		28,789

The Board has decided to propose a final dividend of 26.3p per share in respect of 2015.

13     Earnings per share

Basic earnings per share

The calculation of basic earnings per share at 31 December 2015 was based on the profit attributable to ordinary shareholders of £128,008,000 (2014: £105,208,000) and a weighted average number of ordinary shares outstanding during the year ended 31 December 2015 of 134,194,203 (2014: 133,902,247).

Profit attributable to ordinary shareholders

	2015		2014
	£000		£000
Profit for the period attributable to ordinary shareholders	128,008		105,208

Weighted average number of ordinary shares

	2015		2014
Weighted average number of ordinary shares at 31 December	134,194,203		133,902,247

Diluted earnings per share

The calculation of diluted earnings per share at 31 December 2015 was based on the profit attributable to ordinary shareholders of £128,008,000 (2014: £105,208,000) and a weighted average number of ordinary shares outstanding during the year ended 31 December 2015 of 134,428,802 (2014: 134,573,167).

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)                                                                               

	2015	2014
Weighted average number of ordinary shares at 31 December	134,194,203	133,902,247
Effect of share options in issue which have a dilutive effect	234,599	670,920
Weighted average number of ordinary shares (diluted) at 31 December	134,428,802	134,573,167

14     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 year.

 Transactions between the Group, Company and key management personnel in the year ending 31 December 2015 were limited to those relating to remuneration, which are disclosed in the director's remuneration report (which can be found on pages 57 to 72 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.

In January 2015 Bovis Homes Limited entered into a contract with the Bovis Homes Pension Scheme for the sale of a portfolio of homes. During the twelve months to December 2015 all 54 homes under the contract were legally completed for a total consideration of £10,719,500.

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 £153,000 (2014: £148,000). Loans totalling £1,575,355 were provided in prior years at an annual interest rate of LIBOR plus 2.4%. No additional loans or sales of inventory have taken place and all existing loans were repaid in the period. Interest charges made in respect of the loans up to the repayment date were £12,000 (2014: £37,000).

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 55 homes were sold to the Joint Venture for cash consideration of £11,328,431 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. Loans of £3,667,675 have been provided to IIH Oak Investors at an interest rate of 6%.

 

END

 

 

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