Final Results

RNS Number : 8414C

Bovis Homes Group PLC

14 March 2011

 

14 March 2011

BOVIS HOMES GROUP PLC

PRELIMINARY RESULTS FOR THE YEAR ENDED 31 DECEMBER 2010

STRONG IMPROVEMENT IN PROFITS: SIGNIFICANT PROGRESS IN GROWTH STRATEGY

Bovis Homes Group PLC today announced its preliminary results for the financial year ended 31 December 2010 which have been prepared in accordance with International Financial Reporting Standards as adopted by the EU ('IFRS').

	2010	2009
Revenue	£298.6m	£281.5m
Operating Profit	£21.6m	£17.4m
Operating Margin	7.2%	6.2%
Profit Before Tax	£18.5m	£7.5m
Earnings per Share	10.6p	4.4p
Dividend per Share	3.0p	Nil
Net Cash	£51.7m	£112.3m

Prior year numbers are stated pre exceptional items. There were no exceptional items in the current year.

Financial Highlights:

·      Pre tax profit increased to £18.5 million (2009: £7.5 million pre exceptional items)

·      Basic earnings per share increased to 10.6p (2009: 4.4p pre exceptional items)

·      Recommencement of dividends with a proposed payment of 3.0p for 2010 (2009: Nil)

·      Improvement in gross margin at 17.9% (2009 pre exceptional items: 16.1%)

·      Increase in operating margin to 7.2% (2009 pre exceptional items: 6.2%)

·      £52 million of net cash at 31 December 2010 (2009: £112 million)

·      Strong trading cash inflows during 2010 of £93 million

·      Net land expenditure of £137 million

Land Highlights:

·      Significant progress with land investment strategy with acquisitions located mainly in the south of England:

·      c3,700 consented plots added in the year

·      Terms agreed at 31 December 2010 to acquire a further 2,500 plots, of which 875 plots have been acquired as at the date of this announcement

·      Strong land bank with significant future margin potential:

·      13,766 plots of land with planning consent as at 31 December 2010, with potential gross profit of £461 million, calculated using current sales prices and current build costs (31 December 2009: 12,042 plots)

·      17,325 potential plots of strategic land (2009: 16,363 potential plots) with 822 plots converted to consented land bank in 2010

Outlook

·      Encouraging start in the first 9 weeks of 2011 for enquiries and visitors, with reservations up 11% on a similar number of active sales outlets

·      33 new sales outlets expected to open in 2011 representing the most significant site launch programme for many years

·      A 15% increase expected in average number of active outlets to 76 in 2011 from 66 in 2010

·      Improving return on capital employed through growth in profits and enhanced capital turn

Commenting on the results, David Ritchie, the Chief Executive of Bovis Homes Group PLC said:

"The Group has delivered a strong improvement in profit in 2010, driven by increased volumes, stronger sales prices and delivery of cost savings.

The Group has also made significant progress with its growth strategy through substantial land investment, a strong pipeline of further land acquisition opportunities and a strong expected increase in active sales outlets. Based on a continuation of current market conditions, this growth strategy gives the Group confidence in delivering greater volumes and increased profits.

The Group is focused on enhancing shareholder returns through increased profitability and improved efficiency of its capital employed.  To this end, the Group anticipates selling land on a number of its larger sites and combining the cash generated with its existing strong financial resources to support further land acquisitions. This will enhance the spread of land controlled by the Group leading to an increase in active sales outlets in the future.

Given the sustainable improvement in the performance of the Group and the Board's confidence in the Group's growth strategy, it has taken the important step of resuming the payment of dividends.

After a challenging but rewarding year, I would like to thank all of our employees for their hard work and commitment during 2010."

Enquiries:	David Ritchie, Chief Executive	Results issued by	Andrew Jaques / Reg Hoare / James White
	Jonathan Hill, Finance Director
	Bovis Homes Group PLC		MHP Communications
	On 14 March- tel: [phone]		On 14 March - tel: [phone]
	Thereafter - tel: [phone]

Certain statements in this press release are forward looking statements.  Forward looking statements involve evaluating a number of risks, uncertainties or assumptions that could cause actual results to differ materially from those expressed or implied by those statements.  Forward looking statements regarding past trends, results or activities should not be taken as a representation that such trends, results or activities will continue in the future.  Undue reliance should not be placed on forward looking statements.

Introduction

Bovis Homes is pleased to report on a successful year in 2010 with strong improvement in profits and earnings and with significant progress in the acquisition of high quality consented land.  Importantly, the Group operated successfully and grew its business without reliance on improving general market conditions.  The Group's performance during 2010 was particularly positive given the continuation of challenging conditions within the UK housing market, with the constrained level of high loan to value mortgage finance available to new build customers, many of whom have limited deposit funding.

The Group legally completed a greater number of home sales during the year and, in respect of private homes, increased the average sales price achieved, reduced the average construction cost and hence improved the average profit generated per private home by 13%.  These achievements have contributed to the strong increase in pre tax profits.

The Group's strategy is to increase investment in quality residential land in order to grow sales outlets and thus volume, revenues and margins. Having avoided buying significant amounts of land at the peak of the market and with land values having reduced considerably since the downturn, the Group has adopted an assertive land acquisition strategy since the end of 2009. With the supply of consented land likely to be constrained in the future, given the planning environment, and the current reduced level of competition to acquire residential land, the Group believes that this is an excellent time to invest.  Moreover, the robust profit margins at which the Group has acquired consented land provide returns capable of enhancing shareholder value whilst being sufficient to withstand general fluctuations in the housing market.  Assuming the continuation of current market conditions, the Group can increase significantly its returns on both capital employed and equity over the coming years.

Revenue

During 2010 the Group generated total revenue of £298.6 million, compared to total revenue in 2009 of £281.5 million.

Housing revenue in 2010 was £305.6 million, 9.6% ahead of the prior year (2009: £278.8 million).  Of this revenue, £12.9 million has not been recognised in the financial statements in 2010.  This is due to the fact that the Group holds a 50% equity stake in a private rental joint venture into which the Group has sold a portfolio of 215 new homes.  This revenue and associated profit will be recognised as and when the joint venture investment is disposed or the homes in the joint venture are sold.  As a result, the Group's reported housing revenue for 2010 was £292.7 million (2009: £278.8m).  Other income was £5.9 million (2009: £2.7 million).  The Group chose not to sell any consented residential development land in either 2009 or 2010.

With 1,901 legal completions achieved during 2010, the Group's volume performance was 5% ahead of the previous year (2009: 1,803 legal completions).  The volume of private homes in 2010 increased by 4%, with 1,592 legal completions in 2010 versus 1,527 units in 2009.  The volume of social homes legally completed increased to 309 units from 276 units (16% of total volume, compared to 15% in 2009).

The Group's average sales price in 2010 increased by 3.9% to £160,700 (2009: £154,600).  This was primarily due to the average sales price of the Group's private legal completions increasing to £172,300 in 2010 from £165,500 in 2009.  Excluding the 215 units sold into the joint venture, which were typically small units in lower price locations, and which were sold at a modest discount to market value, the private average sales price increased by 9.1% to £180,600.  Of this increase, the Group considers around 3% to reflect market price movements with the balance delivered through the improving mix of products in terms of size, type and location.

The average size of the Group's private homes grew by 1.0% to 1,004 square feet in 2010 from 993 square feet in 2009 and the sales price per square foot increased by 3.1%.  The Group's social homes also increased in average size to 792 square feet in 2010 from 762 square feet in 2009.  Overall, the average size of the Group's legally completed homes increased by 1.3% to 970 square feet in 2010 from 958 square feet in 2009 and the sales price per square foot increased by 2.7%.

 
Operating profit

The Group delivered an operating profit for the year ended 31 December 2010 of £21.6 million at an operating margin of 7.2%, as compared to £17.4 million, before exceptional items, in the previous year, at an operating margin of 6.2%.  There were no exceptional items in the current year.

Gross margin increased to 17.9% in 2010 from 16.1% (pre exceptional gains) in 2009.  Stronger average sales prices combined with the initial benefit of construction cost savings in the second half of 2010 contributed strongly to the gross margin, more than offsetting the negative impact of a higher cost of land after the 2009 year end land write back.  The negative impact of this change in land cost lowered the achieved gross margin by over one percentage point.  The Group has delivered a materially improved gross margin in H2 2010 of 18.9%, compared to 16.3% in H1 2010.  With sales prices expected to remain stable during 2011, the positive effect of the build cost savings achieved in H2 2010 will contribute throughout 2011. Subject to current market conditions continuing, this provides confidence that the gross margin achieved in the second half of 2010 can at least be sustained in 2011.

As anticipated, overheads increased in 2010 by 14%.  Underlying overheads increased year on year by 3%, as the Group invested in supporting the growing activity levels, with the remainder of the increase arising from the increase in staff bonus charge, reflecting the strong performance of the Group.  As a result, the overheads to revenue ratio increased from 9.9% in 2009 to 10.6% in 2010.  Pre the effect of staff bonus, the overheads to revenue ratio was 9.3%, compared to 9.6% in 2009.

 
Pre tax profit and earnings per share

The Group achieved profit before tax of £18.5 million, comprising operating profit of £21.6 million, net financing charges of £3.2 million and a profit from the joint venture of £0.1 million.  This compares to £17.4 million of pre-exceptional operating profit and £9.9 million of net financing charges in 2009 which generated £7.5 million of pre-exceptional profit before tax in that year.  The Group had no exceptional items in 2010 (2009: £2.7 million exceptional charge).  After accounting for exceptional charges, the Group achieved a pre tax profit of £4.8 million in 2009.

Basic earnings per share for the year was significantly improved at 10.6p compared to pre exceptional basic earnings per share of 4.4p and basic earnings per share after exceptional charges of 2.8p in 2009.

Dividends

In the light of the sustained improvement in the performance of the Group and the Board's confidence in the Group's growth strategy, the Board has proposed a full year dividend of 3.0p per share.  This is equivalent to an interim dividend of 1.0p per share and a final dividend of 2.0p per share, had both an interim and a final dividend been declared in 2010.  In future years the Board expects to grow dividends progressively, as earnings per share increase.

Financing & cashflow

The Group incurred net financing charges of £3.2 million in 2010 (2009: £9.9 million pre exceptional charges).  This reduction in finance costs arose, firstly, from the strong average net cash position of the Group throughout 2010 (the Group had an average of £78 million of net cash during 2010, as compared to an average net debt of £9 million in 2009), and, secondly, from the significantly more cost effective bank facilities agreed in January 2010.  Net bank charges for 2010 were £2.2 million (2009: £8.6 million), which included the amortisation of arrangement fees (£0.6 million) and commitment fee charges (£2.0 million).  The Group incurred a £2.7 million finance charge (2009: charge of £1.7 million), reflecting the difference between the cost and nominal price of land bought on deferred terms which is charged to the income statement over the life of the deferral of the consideration payable.  The Group benefited from a £0.2 million (2009: £0.2 million) net pension financing credit during 2010.  This credit arose as a result of the expected return on scheme assets being in excess of the interest on the scheme obligations.   The Group also benefited from a finance credit of £1.2 million (2009: £0.6 million) arising from the unwinding of the discount on its available-for-sale financial assets during 2010.  There were also £0.3 million of other financing credits during the year (2009: £0.4 million of other charges).

Having started the year with a net cash balance of £112.3 million, as at 31 December 2010 the Group's net cash balance was £51.7 million with £67.0 million of cash in hand, offset by £15.2 million of loans received primarily as part of the Government's Kickstart programme and a £0.1 million interest rate derivative fair value adjustment. 

In line with expectations, the Group generated operating cash inflow pre land expenditure of £93 million.  This demonstrates the strong underlying cash generation from the Group's existing assets.  Net cash payments in 2010 for land investment were £137 million.

Taxation

The Group has recognised a tax charge of £4.5 million on pre tax profits of £18.5 million at an effective tax rate of 24.1% (2009: tax charge of £1.3 million at an effective rate of 27.1%).  The effective rate is below that expected owing to the benefit of land remediation allowances and the finalisation of prior years' tax submissions.  The Group has recognised a current tax liability of £1.5 million in its closing balance sheet as at 31 December 2010 (2009: current tax asset of £0.8 million).

Pensions

Following a roll-forward of the valuation of the Group's pension scheme, with latest estimates provided by the Group's actuarial advisors, the Group's pension scheme had a deficit of £2.9 million at 31 December 2010, a decrease of £6.0 million on the opening deficit of £8.9 million at 31 December 2009.  Scheme assets grew strongly over the year to £73.5 million from £67.6 million and the scheme liabilities decreased to £76.4 million from £76.5 million, reduced by the use of CPI rather than RPI where relevant (£4.6 million), offset by a fall in bond yields and improved mortality assumptions.  As well as benefiting from a generally stronger stock market in 2010, scheme assets benefited from a £1.5 million special cash contribution made by the Group into the scheme in December 2010.

The Board

During 2010, Neil Cooper, the Group Finance Director, left the Group in order to take up the position of Group Finance Director at William Hill PLC.  The Board would like to thank Neil for his significant contribution to the Board and to the robust performance achieved by the Group through an extremely challenging period.  The Board would also like to thank Lesley MacDonagh, who stepped down as a non executive director at the last AGM, for her contribution to the success of the Group since 2003.

On 23 August 2010 Jonathan Hill joined as Group Finance Director and became a member of the Board on that date. Jonathan joined Bovis Homes from TUI Travel Group and brings considerable experience and expertise to his new role.

Net assets

Net assets per share as at 31 December 2010 was 533p as compared to 520p at 31 December 2009.

Analysis of net assets
					2010			2009
					£m			£m
Net assets at 1 January						692.6		632.3
Pre-exceptional profit after tax for the year						14.0		5.5
Exceptional charges net of tax						-		(2.0)
Share capital issued						0.3		59.1
Net actuarial movement on pension scheme through reserves						3.0		(3.0)
Deferred tax recognised on share based payments						(0.2)		-
Current tax recognised on share based payments						0.2		-
Adjustment to reserves for share based payments						0.9		0.7
Net assets at 31 December						710.8		692.6

Land

The Group has been successful with land investment in 2010 with the addition of c3,700 high quality consented plots to the land bank at a cost of £203 million. Approximately 80% of these plots are located in the south of England.  These plots have an estimated future revenue of £711 million and an estimated future gross profit potential of £181 million based on current sales prices and current build costs, delivering an estimated future gross margin of over 25%.  Of the plots added to the consented land bank, 822 plots were delivered through conversion of strategic land.

The Group held a consented land bank of 13,766 plots at 31 December 2010, an increase of 1,724 plots from 12,042 plots held at 31 December 2009.  Of the 13,766 plots, 69% are located in the south of England, where the housing market continues to show greater robustness.  At the year end, the consented land bank included 3,931 consented plots which have been acquired since the nadir of house prices in the current downturn.  The Group estimates that the gross profit potential on the plots within the consented land bank at the 2010 year end, based on current sales prices and current build costs, has increased to £461 million with a gross margin of 20.0%, compared to the position at 30 June 2010, when the gross profit potential was £412 million with a gross margin of 19.2%.  The increase of £49 million demonstrates the contribution to the Group's future profits from its recent land acquisitions.

The average consented land plot cost at the start of 2010 was £35,200.  This has increased over the year to £41,000 at 31 December 2010 as a result of a lower number of written down plots held in the land bank at the end of the year (26% of land plots versus 36% at the start of the year) and the addition of new prime southern traditional housing sites where the average plot cost is higher.

As at 31 December 2010, the Group had agreed terms for the acquisition of an additional c2,500 plots.  Of these, 875 plots have been acquired since the year end at a cost of £57 million and with a gross profit potential of £51 million, based on current sales prices and current build costs, delivering a gross margin of over 25%.

Looking forward, the Group's strong balance sheet, with net cash as at 31 December 2010 of £52 million, together with the Group's existing £150 million committed bank facility, provides it with the ability to continue its land investment strategy. Further, the Group anticipates selectively selling some of its consented land, particularly on those sites which have a longer trade out period by virtue of their size. This will assist in the funding of new land acquisitions and will improve the spread of the Group's land bank, which will enhance capital turn and increase return on capital employed in the future.

The further execution of the Group's land strategy will support the Group in achieving its medium term aspiration of operating from over 100 active sales outlets with consequential growth in volumes and profit margins, based on current market conditions, and thus materially improving shareholder returns.

The strategic land bank at 31 December 2010 amounted to 17,325 potential plots as compared to 16,363 potential plots at 31 December 2009.  The Group added c1,800 potential plots to the strategic land bank during 2010, thus enabling the strategic land bank to grow in size notwithstanding the successful conversion of over 800 plots into the consented land bank.  The Group has for a long time recognised the potential of strategic land investment and, as visibility over the effects of the changes to the planning environment improves, the Group intends to increase its investment in strategic land.

Market conditions

The housing market continued to suffer in 2010 from a lack of mortgage availability at the level of loan to value ratios required by first time buyers, which has constrained demand for new build homes, many of which are small and affordable, targeted at the first time buyer market.  Monthly mortgage approval levels appear to have stabilised during 2010, but at levels representative of less than half of a normal market.  In tackling the issue of the lack of availability of high loan to value mortgages, the Group has launched Perfect 10, a 90% loan to value mortgage product with Barclays Bank, exclusive to the Group.  The Group will continue to find innovative ways to enable its customers to access appropriate mortgage finance.

After having made some positive progress in H1 2010, sales prices stabilised during H2 2010.  Although the market remains challenging and customer confidence and commitment levels remain subdued, the Group currently believes that the pricing environment will be stable for 2011 as a whole.  A limited supply of homes for sale will not satisfy demand from purchasers.  However, buyers are likely to remain constrained by mortgage availability and continue to struggle to raise finance. It is anticipated that sales prices will be more robust in the south of England compared to the north of England, which will assist the Group given its southern bias of sites.

Current Trading

The Group entered 2011 with a forward sales order position of 420 homes for 2011 delivery.  The forward sales position at the start of 2010 was 643 homes, including the non-recurring sale of 215 homes sold to the joint venture.  Excluding this from the comparative, the 2011 forward sales position was consistent with the prior year, notwithstanding the lower number of active outlets: 66 on average during 2010 versus 85 on average during 2009.

The Group has made an encouraging start to trading in the first nine weeks of 2011. Sales enquiries and site visitors in the period to 4 March 2011 have increased by 24% and 28% respectively, compared to the same period in 2010 from a similar number of sales outlets.  From these enhanced visitor levels, the Group achieved an average private sales rate of 0.45 net reservations per site per week, compared with an average in the first nine weeks of 2010 of 0.41 and an average of 0.36 during H2 2010. The Group has achieved 268 net private reservations in the first nine weeks of 2011 against 242 net private reservations in the comparative period in 2010, an increase of 11%.  Pricing has been stable, consistent with levels achieved in the second half of 2010.

As at 4 March 2011, the Group held 715 net sales for legal completion in 2011, as compared to 969 net sales at the same point in 2010.  Within the current year total, private sales amount to 469 units (2010: 701 units) and social sales amount to 246 units (2010: 268 units).

Outlook

As a result of the investment in land in 2010, the Group expects to launch 33 new sales outlets during 2011, 23 of which are expected to open in the first half of the year.  Taking into account 21 sales outlets which are expected to close through the year, it is anticipated that the Group will trade from an average of 76 sales outlets in 2011 versus 66 sales outlets in 2009, an increase of 15%.

Given the focus on acquiring land in the south of England, it is anticipated that two thirds of the active sales outlets at the end of the 2011 will be southern located versus just over half of the active sales outlets at the start of the year.  As new sales outlets are opened by the Group, absolute weekly reservation levels are anticipated to increase and the sales rates on new predominantly southern sites are expected to be stronger than the Group's recent weekly average sales rate. This will contribute to improvements in both volumes and profit margins.

The Group is strongly placed with the financial capability to continue its consented land acquisition strategy, enabling it to grow its output capacity.  In 2010 the Group's strategic priority was clear: invest in new land to generate strong outlet growth.  The strategic priorities for 2011 are equally clear: open the recently acquired sites quickly, acquire more land, and drive improved efficiency within the Group's capital employed. This will be assisted by selectively selling consented land on some of the Group's larger sites, thus contributing to the funding of new land acquisitions.  The resulting improved spread of land assets will lead to the increase in active sales outlets, which will deliver increased volumes, without relying on improving conditions in the housing market, thus increasing revenue, profit and returns in the mid term.

The Board is confident about the Group's prospects for 2011, assuming a continuation of current market conditions, and continues to believe that the growth strategy will materially improve shareholder returns.

Bovis Homes Group PLC
Group income statement

For the year ended 31 December	2010		2009
					Before exceptional items	Exceptional items
		£000			£000	£000	£000
Revenue		298,635			281,505	-	281,505
Cost of sales		(245,218		)	(236,339)	1,471	(234,868)
Gross profit		53,417			45,166	1,471	46,637
Administrative expenses		(31,784		)	(27,769)	-	(27,769)
Operating profit before financing costs		21,633			17,397	1,471	18,868
Financial income		2,406			2,304	-	2,304
Financial expenses		(5,614		)	(12,178)	(4,197)	(16,375)
Net financing costs		(3,208		)	(9,874)	(4,197)	(14,071)
Share of profit of joint venture		76			-	-	-
Profit/(loss) before tax		18,501			7,523	(2,726)	4,797
Income tax (expense)/credit		(4,463		)	(2,070)	763	(1,307)
Profit/(loss) for the period attributable to equity holders of the parent		14,038			5,453	(1,963)	3,490
Earnings/(loss) per share
Basic		10.6p			4.4p	(1.6p)	2.8p
Diluted		10.6p			4.4p	(1.6p)	2.8p

Bovis Homes Group PLC

Group statement of comprehensive income

For the year ended 31 December
			2010		2009
			£000		£000
Profit for the period			14,038		3,490
Actuarial gains / (losses) on defined benefit pension scheme			4,320		(4,210	)
Deferred tax on actuarial movements on defined benefit pension scheme			(1,255	)	1,179
Total comprehensive income for the period attributable to equity holders of the parent			17,103		459

Bovis Homes Group PLC

Group balance sheet

At 31 December			2010		2009
			£000		£000
Assets
Property, plant and equipment			11,307		11,574
Investments			4,847		22
Restricted cash			138		-
Deferred tax assets			3,899		6,446
Trade and other receivables			12,087		2,213
Available for sale financial assets			31,147		21,291
Total non-current assets			63,425		41,546
Inventories			764,360		630,709
Trade and other receivables			37,271		30,771
Cash and cash equivalents			67,003		114,595
Current tax assets			-		831
Total current assets			868,634		776,906
Total assets			932,059		818,452
Equity
Issued capital			66,609		66,570
Share premium			210,409		210,181
Retained earnings			433,799		415,815
Total equity attributable to equity holders of the parent			710,817		692,566
Liabilities
Bank and other loans			15,233		2,337
Other financial liabilities			2,686		-
Trade and other payables			56,004		23,077
Retirement benefit obligations			2,870		8,910
Provisions			1,995		1,700
Total non-current liabilities			78,788		36,024
Bank and other loans			92		-
Trade and other payables			139,215		87,698
Provisions			1,604		2,164
Current tax liabilities			1,543		-
Total current liabilities			142,454		89,862
Total liabilities			221,242		125,886
Total equity and liabilities			932,059		818,452

These accounts were approved by the Board of directors on 11 March 2011.                      

Bovis Homes Group PLC

Group statement of changes in equity

	Total		Issued	Share	Total
For the year ended 31 December	retained earnings		capital	premium
	£000		£000	£000	£000
Balance at 1 January 2009	414,654		60,497	157,127	632,278
Total comprehensive income and expense	459		-	-	459
Deferred tax on other employee benefits	(2	)	-	-	(2	)
Issue of share capital	-		6,073	53,054	59,127
Share based payments	704		-	-	704
Balance at 31 December 2009	415,815		66,570	210,181	692,566
Balance at 1 January 2010	415,815		66,570	210,181	692,566
Total comprehensive income and expense	17,103		-	-	17,103
Deferred tax on other employee benefits	36		-	-	36
Issue of share capital	-		39	228	267
Share based payments	845		-	-	845
Deferred tax on share based payments	(160	)	-	-	(160	)
Current tax on share based payments	160		-	-	160
Balance at 31 December 2010	433,799		66,609	210,409	710,817

Bovis Homes Group PLC

Group statement of cash flows

For the year ended 31 December		2010		2009
		£000		£000
Cash flows from operating activities
Profit for the year		14,038		3,490
Depreciation		636		769
Adjustment for sale of assets to joint venture		963		-
Impairment of available for sale assets		713		245
Financial income		(2,406	)	(2,304	)
Financial expense		5,614		16,375
Loss on sale of property, plant and equipment		8		3
Equity-settled share-based payment expense		845		704
Income tax expense		4,463		1,307
Share of result of joint venture		(76	)	-
Release of inventory provisions		-		(2,664	)
Increase in trade and other receivables		(23,951	)	(7,555	)
(Increase) / decrease in inventories		(133,650	)	152,762
Increase / (decrease) in trade and other payables		84,335		(17,173	)
Decrease in provisions and employee benefits		(1,731	)	(611	)
Cash (outflow) / inflow generated from operations		(50,199	)	145,348
Interest paid		(3,028	)	(6,684	)
Income taxes (paid) / received		(762	)	21,688
Net cash (outflow) / inflow from operating activities		(53,989	)	160,352
Cash flows from investing activities
Interest received		660		1,481
Acquisition of property, plant and equipment		(402	)	(44	)
Proceeds from sale of plant and equipment		24		45
Investment in joint venture		(4,228	)	-
Movements in loans with joint venture		(1,451	)	-
Investment in restricted cash		(138	)	-
Net cash (outflow) / inflow from investing activities		(5,535	)	1,482
Cash flows from financing activities
Proceeds from the issue of share capital		267		60,662
Costs associated with share placing		-		(1,535	)
Drawdown / (repayment) of borrowings		13,706		(118,000	)
Costs associated with refinancing		(2,041	)	-
Net cash inflow / (outflow) from financing activities		11,932		(58,873	)
Net (decrease) / increase in cash and cash equivalents		(47,592	)	102,961
Cash and cash equivalents at 1 January		114,595		11,634
Cash and cash equivalents at 31 December		67,003		114,595

Notes to the accounts

1     Basis of preparation

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 2010 comprise the Company and its subsidiaries (together referred to as 'the Group') and the Group's interest in associates.

The consolidated financial statements were authorised for issue by the directors on 11 March 2011.  The accounts were audited by KPMG Audit Plc.

The financial information set out above does not constitute the company's statutory accounts for the years ended 31 December 2010 or 2009 but is derived from those accounts.  Statutory accounts for 2009 have been delivered to the registrar of companies, and those for 2010 will be delivered in due course. The auditors have reported on those accounts; 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.

The consolidated financials statements have been prepared in accordance with IFRS as adopted by the EU, and the accounting policies have been applied consistently for all periods presented in the consolidated financial statements.

The preparation of financial statements in conformity with IFRS 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 judgements about carrying values of assets and liabilities that are not readily apparent from other sources.  Actual results may differ from these estimates.

2          Basis of consolidation

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

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.

Entities which are controlled with another party or parties ("joint ventures") are accounted for using the equity method of accounting. The results attributable to the Group's holding in joint ventures are shown separately in the consolidated income statement. The amount included in the consolidated balance sheet is the Group's share of the net assets of the joint ventures plus net loans receivable.

3          Accounting policies

There have been no changes to the Group's accounting policies.  These accounting policies will be disclosed in full within the Group's forthcoming financial statements.

Notes to the accounts (cont)

4          Exceptional items

Inventory carrying value

The Group has reviewed the carrying value of its inventory items at the reporting date, comparing the carrying cost of the asset against estimates of net realisable value.  Net realisable value has been arrived at using the Board's estimates of achievable sales prices taking into account current market conditions, and after deduction of an appropriate amount for selling costs.  This has given rise to no exceptional items relating to the carrying value of inventory as at 31 December 2010 (2009: £2.7 million net release).

Financing charge

There was no charge in 2010 (2009: £4.2 million).

Other exceptional items

There was no charge in 2010 (2009: £1.2 million).

In total there were no exceptional charges or releases for 2010 (2009 exceptional charge: £2.7 million).  

5          Reconciliation of net cash flow to net cash

		2010		2009
		£000		£000
Net (decrease) / increase in net cash and cash equivalents		(47,592	)	102,961
(Drawdown) / repayment of borrowings		(13,706	)	118,000
Fair value adjustments to interest rate swaps		245		(337	)
Fair value adjustment to interest free loans		473		-
Movement in financing costs included in loans		-		(8,270	)
Net cash / (debt) at start of period		112,258		(100,096	)
Net cash at end of period		51,678		112,258
Analysis of net cash:
Cash and cash equivalents		67,003		114,595
Unsecured loans		(15,233	)	(2,000	)
Fair value of interest rate swaps		(92	)	(337	)
Net cash		51,678		112,258

6          Income taxes

Current tax

Current tax is the expected tax payable or receivable on the taxable income or loss for the year, calculated using a corporation tax rate of 28.0% 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.

Notes to the accounts (cont)

7          Dividends

There were no dividends paid in the current or prior year by the Group. The Board has decided to propose a full year dividend of 3.0p per share in respect of 2010.

8          Earnings or Loss per share

Basic earnings per share

The calculation of basic earnings per share at 31 December 2010 was based on the profit attributable to ordinary shareholders of £14,038,000 (2009: £3,490,000) and a weighted average number of ordinary shares outstanding during the year ended 31 December 2010 of 132,664,656 (2009: 124,179,686), calculated as follows:

Profit attributable to ordinary shareholders

	2010	2009
	£000	£000
Profit for the period attributable to ordinary shareholders	14,038	3,490

Weighted average number of ordinary shares

	2010	2009
Issued ordinary shares at 1 January	133,138,968	120,994,753
Effect of own shares held	(528,808)	(621,297)
Effect of shares issued in year	54,496	3,806,230
Weighted average number of ordinary shares at 31 December	132,664,656	124,179,686

Basic earnings per ordinary share before exceptional items for the year ended 31 December 2009 was calculated on the pre-exceptional profit after tax of £5,453,000. Basic loss per share on exceptional items for the year ended 31 December 2009 was calculated on the exceptional loss after tax of £1,963,000. In both cases this is expressed on a per share basis using the weighted average share information disclosed above.

Diluted earnings per share

The calculation of diluted earnings per share at 31 December 2010 was based on the profit attributable to ordinary shareholders of £14,038,000 (2009: £3,490,000) and a weighted average number of ordinary shares outstanding during the year ended 31 December 2010 of 132,685,679 (2009: 124,203,192).

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

However, as a loss per share cannot be reduced through dilution, this dilution adjustment has not been applied to the calculation of diluted loss per share arising from exceptional items in 2009. This dilution adjustment has been applied to the calculation of diluted earnings per share before exceptional items and diluted earnings per share after exceptional items for 2009.

Notes to the accounts (cont)

The calculation of diluted loss on exceptional items per share at 31 December 2009 was based on the exceptional loss attributable to ordinary shareholders of £1,963,000 and a weighted average number of ordinary shares outstanding during the year ended 31 December 2009 of 124,179,686.

Weighted average number of ordinary shares (diluted)                                                      

	2010	2009
Weighted average number of ordinary shares at 31 December	132,664,656	124,179,686
Effect of share options in issue which have a dilutive effect	21,023	23,506
Weighted average number of ordinary shares (diluted) at 31 December	132,685,679	124,203,192

Diluted earnings before exceptional items

Diluted earnings per ordinary share before exceptional items for the year ended 31 December 2009 is calculated on the pre-exceptional profit after tax of £5,453,000 and a weighted average number of ordinary shares outstanding during the year ended 31 December 2009 of 124,203,192.

9          Circulation to shareholders

The consolidated financial statements will be sent to shareholders on or about 6 April 2011.  Further copies will be available on request from the Company Secretary, Bovis Homes Group PLC, The Manor House, North Ash Road, New Ash Green, Longfield, Kent  DA3 8HQ.

Further information on Bovis Homes Group PLC can be found on the Group's corporate website www.bovishomesgroup.co.uk, including the slide presentation document which will be presented at the Group's results meeting on 14 March 2011.

 

END

 

 

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