Half-year Report

RNS Number : 1202H

Bovis Homes Group PLC

15 August 2016

 



15 August 2016

BOVIS HOMES GROUP PLC

RESULTS FOR THE HALF YEAR ENDED 30 JUNE 2016

Bovis Homes Group PLC today announces its half year results for the six months ended 30 June 2016.

	H1 2016	H1 2015	Change
Revenue	£412.8m	£350.7m	+18%
Housing gross profit *	£100.3m	£84.1m	+19%
Operating profit	£63.9m	£54.3m	+18%
Operating profit margin	15.5%	15.5%
Profit before tax	£61.7m	£53.8m	+15%
Basic earnings per share	36.5p	32.1p	+14%
Dividend per share	15.0p	13.7p	+9%
Return on capital employed **	18.1%	15.5%	+2.6ppts
Net debt	£8m	£59m

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

"We have delivered a record number of homes in the first half of 2016 which has driven strong profit growth, improved returns and a 9% increase in the interim dividend.  Our forward sales position means we are well placed to continue this strong performance through the remainder of the year.

Whilst it is too early to judge the impact of the EU Referendum and the Bank's monetary policy response on the UK housing market, the underlying market fundamentals for UK housing remain positive.  We have been pleased with the resilient level of interest shown by potential home buyers contacting us.  Our robust balance sheet, with debt lower than last year, means that we are well positioned to continue to take advantage of prime land opportunities at potentially higher returns.  Overall, we remain confident in our strategy to deliver long-term growth in shareholder returns."

Operational highlights for H1 2016

·	Growth in legal completions of 5% to 1,601 new homes (H1 2015: 1,525)
·	Average sales price on legal completions increased by 14% to £254,500 (H1 2015: £222,300)
·	1,267 plots of consented land acquired across 11 new sites
·	Consented land bank of 19,477 plots across 138 sites at 30 June 2016 (31 December 2015: 19,814 plots; 142 sites)
·	Strategic land bank of 25,484 plots across 90 sites at 30 June 2016 (31 December 2015: 23,083 plots; 80 sites)

Current trading

·	Over 90% of planned home sales for 2016 achieved as at 12 August
·	Successful launch of new show homes in recent weeks with strong customer interest
·	Resilient level of prospects recorded during the summer period
·	Reservation rates improving after a short term slow down in July
·	Weekly private sales rate per site year to date of 0.59 (2015 comparative period: 0.61) with sales rates since the half year averaging 0.5 reflective of the summer period (2015 comparative period: 0.58)
·	Close monitoring of market conditions ongoing to assess any impact of the EU referendum

* Housing gross profit is calculated as gross profit excluding the impact from sales of development land

** ROCE is calculated as operating profit for the 12 months to 30 June divided by average opening and closing capital employed during the same period excluding net cash and investment in joint ventures

Enquiries:	David Ritchie, Chief Executive	Results issued by:	Reg Hoare / James White
	Earl Sibley, Finance Director		/ Giles Robinson
	Bovis Homes Group PLC		MHP Communications
	On 15 August - tel: [phone]		On 15 August - tel: [phone]
	Thereafter - tel: [phone]

Analysts wishing to remotely listen in to the presentation at 09.00 am may dial [phone] followed by the participant code 64426608.

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.

Context and market conditions

We have delivered further growth during the first half of 2016 and are well positioned to deliver strong returns through the housing cycle.  We have a sustainable strategy which has focused our land bank on prime south of England locations outside London.  Our traditional family homes with high quality specification remain in high demand from home buyers.  We continue to operate with a robust balance sheet and an operational structure that enables us to make swift and efficient decisions.

The underlying market fundamentals for UK housebuilding remain positive with high levels of demand for new homes and ongoing under supply.  There is a robust pipeline of consented land available for development with enhanced levels of planning permissions sustaining an orderly land market.  The demand for homes in the market is strengthened by low interest rates and good mortgage availability.  The level of ongoing support from the Government, with the Help to Buy scheme and the overall positive influence of planning policy, remains high at this important time to drive new build activity for the country.

It remains too early to assess the effect of the EU referendum on the new build housing market and the activity in the second hand market will play its part in setting new home sales rates going forward.  Our marketing programme has been reviewed and accelerated to increase sales activity on our developments.  We continue to see robust levels of customer confidence and have been encouraged by the resilient level of prospects generated in what is traditionally a quieter time of the year, with a strong increase on the prior year.

Our production programmes are being maintained to deliver an appropriate level of work in progress going into 2017 and we have reassured our subcontractor base with the positive message that we are continuing with our production across all geographical regions.  We remain disciplined in our land investment and will continue to purchase land in good locations on increased return hurdle rates in order to mitigate any potential downside risk.  We are continuing to invest in our people and the infrastructure required by our enlarged business whilst applying appropriate caution in our immediate decisions.

Current trading and outlook

Sales rates for the year to date stand at 0.59 net private reservations per site per week (2015: 0.61).  Sales rates since the half year have trended at around 0.5 (2015 comparative period: 0.58) which reflects the summer period.  The reservations achieved since the half year have sales prices similar to those achieved during the first six months of the year.  We are reassured that with prospect numbers continuing ahead of the prior year, there are opportunities to drive better sales rates during the autumn selling period in line with normal seasonal patterns.  As at 12 August 2016, we have achieved over 90% of the targeted sales volume for 2016 delivery with circa 3,877 sales (2015: 3,768).  This has been achieved from a similar number of sales outlets to last year averaging 100 in the year to date with 21 new sales outlets opened in the first half year and some existing sites closing earlier than expected.

Strong housing demand has led to overall market pricing improvements, with the Group having experienced pricing ahead of expectations with Help to Buy continuing to be a significant driver of sales.  Offsetting these pricing improvements is the impact of rising construction costs, although the impact of inflation on our cost base has moderated compared to last year.  The combination of pricing gains and cost increases implies relatively stable land values and site profit margins.

The Group's structure allows agile decisions to be made as market conditions evolve.  The Group is trading in high quality locations outside of London where the demand for its homes remains robust and support from lenders is strong.  We remain confident of our ability to trade well across these sites delivering strong returns on capital.

Strategic plan

The Group's long term strategic plan remains consistent with the underlying imbalance of demand and supply in the UK housing market and our implementation of the strategy will flex to reflect changing market conditions.  Our strategy remains to drive shareholder returns from:

·      Disciplined land investment, both consented and strategic, to grow the business in a controlled way

·      Investment in people and infrastructure to allow the progressive evolution of the Group's structure

·      Robust operational execution of the plan which has been further evidenced by the first half performance

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

Land investment

At 30 June 2016, the Group owned 19,477 consented land plots across 138 sites which represents a strong land supply of between four and five years.  The Group continues to acquire high quality land at above hurdle rate margins and returns, with a focus on traditional housing sites in the south of England and outside London.  In the first half of 2016 we invested in 1,267 consented plots across 11 new sites in strong capital growth locations with robust customer demand.  At this time we own all the land we require to deliver on our plans for both 2016 and 2017.

We have remained disciplined in our land investment in recent weeks and will look to take advantage of land acquisition opportunities in the market, where a good supply of consented land remains.  We have increased our investment hurdle rates in terms of both the required profit margin and return on capital to mitigate potential downside and ensure the commercial returns reflect the uncertainty currently in the market place.  We continue to drive good returns by taking advantage of deferred payment terms available supported by our strong balance sheet position.  At this time, we anticipate a lower level of land investment than previously planned during the year as a whole as we continue to assess the housing market's longer term prospects, although this will not impact our short term delivery plans.  Land sales remain part of our longer term strategy and these are likely to arise predominantly on strategically sourced sites.

Our strength in strategic land provides flexibility of land supply into our consented land bank.  There has been good progress made on driving individual sites through the planning process and towards acquisition.  We continue to invest in new strategic opportunities for the future with 12 new contracts representing control over a further 2,858 plots being entered into in the period taking the total number of strategic plots under control to 25,484.  This is a strong base to achieve our ambition of delivering 50% of our consented land from strategic sources.

Investment in people and business infrastructure

As planned, the enlarged Group is now operating through eight geographical regions, the East Midlands and West Midlands regions having been formed from by splitting our existing Central region in order to manage and deliver future growth.  We are particularly pleased to report that our fledgling region in Thames Valley has become well established and has commenced construction on its first three developments in the period.  The region has had success in planning decisions to enable further developments to commence during the remainder of 2016 and it delivered its first legal completion in June. 

The leadership team has been further strengthened in the first six months of 2016, with James Watson joining us as our new East Division Managing Director, completing the five strong Executive Leadership Team overseeing the Group with its eight operating regions.  Keith Carnegie, our Chief Operating Officer, is driving incremental improvement across our business with investment in our operational systems, learning and people development and communication.

We have launched our vision across the business - "Proud of Every Home; Built by People who Care" and we continue to follow the mantra of Safely Building Quality on Time.  In order to support our construction teams we have invested in enhanced systems to support development programming and improve communication between our construction sites and regional offices.  Our investment in people continues with ongoing leadership training as well as our Build Academy and now Group wide apprenticeship programmes.

Robust operational execution

We delivered a further period of growth in legal completions during the first half of 2016.  Our strategy of investing in land with a greater Southern focus and a mix of product appealing to our customers, is reflected in the significant growth in our average sales price in the period with some support from market house price rises.  This has driven significant increase in revenue, in turn delivering a further increase in profit in the period.

We are focused on continuous improvement in our business and in particular on driving new sites through to active sales outlets.  Following the acquisition of 35 new sites in 2015 we have launched 21 new sites for sale during the first half of 2016 demonstrating the momentum we have achieved and we have further launches planned in the second half of the year.  The key factors driving the increase in our build costs are the mix of sites in terms of geographical location, product and the external finish of our homes, these factors increasing our costs in line with the movement in average sales price associated with these higher value homes.  In addition, as the market remains labour constrained with house prices rising, our cost base continues to increase although we see cost inflation running at a lower level than during 2015. 

Proactive management through the cycle

The short term messages into our operational business are straight forward.  The first half performance demonstrates the continued growth potential in positive housing market conditions.  Customer demand remains high, seen through our weekly prospects which are supported by Help to Buy and good mortgage availability.  We remain in a period of production constraint driven by skilled labour shortages, so we continue to drive construction across all our active sites in order to deliver the production required for this year and to support a sustainable level of work in progress across the business. 

We will exercise robust discipline with our land investment and have increased return hurdle rates to reflect the market uncertainty.  Whilst we continue to invest in our people and infrastructure to support the enlarged business, we will retain an element of caution as we monitor the market closely.

Operational Review

Revenue

The Group generated total revenue of £412.8 million during the first half of 2016, an increase of 18% compared to £350.7 million in H1 2015.

Units		H1 2016		H1 2015
Private legal completions		1,212		1,079
Private Rental Sector legal completions		19		101
Social legal completions		370		345
Total legal completions		1,601		1,525
Revenue (£m)
Private legal completions (including PRS)		362.6		299.1
Social legal completions		44.9		39.9
Revenue from legal completions		407.5		339.0
Other revenue		5.3		3.5
Housing revenue		412.8		342.5
Land sales revenue		-		8.2
Total revenue		412.8		350.7

Revenue from legal completions in H1 2016 was £407.5 million, 20% ahead of the same period in the prior year.  With other revenue of £5.3 million (H1 2015: £3.5 million), housing revenue was £412.8 million (H1 2015: £342.5 million).  There were no land sales in the first half of 2016 compared to two in H1 2015 with revenue of £8.2 million.

The Group achieved a record number of 1,601 legal completions in H1 2016, a 5% increase on the first half of 2015 (1,525 homes), which is ahead of the 3% growth delivered in H1 2015.  Subject to market conditions and as previously guided, the Group's legal completion profile in 2016 is expected to be weighted to the second half of the year in a similar way to last year.  Completions of private homes grew strongly by 12% to 1,212 (H1 2015: 1,079 homes) and a further 19 homes completed under Private Rental Sector (PRS) transactions.  Social homes comprised 23% of total legal completions (370 homes) in line with H1 2015, reflecting the prevailing mix of social units in the land bank.

In the first half of 2016 the average sales price of homes legally completed increased by 14% to £254,500 (H1 2015: £222,300).  The average sales price of private legal completions, excluding PRS, was 12% higher at £296,800 (H1 2015: £264,200), benefiting both from the mix effect from our ongoing strategy of predominantly investing in two storey product in prime southern biased locations and from market house price improvements.  The average private sales price per square foot increased by 12% in H1 2016 compared to that achieved in H1 2015.  We estimate the impact of market price increases in the year to 30 June 2016 to be around 4% to 5%.

Operating profit

The Group increased operating profit for the six months ended 30 June 2016 by 18% to £63.9 million at an operating profit margin of 15.5% (H1 2015: £54.3 million at an operating profit margin of 15.5%).

Housing gross profit increased by 19% to £100.3 million (H1 2015: £84.1 million), with a housing gross margin of 24.3%, in line with the second half of 2015 (H1 2015: 24.6%).  The effects of house price inflation across the market offset the impact of increased build costs, enabling the profit margin to be maintained.  Construction costs for legal completions in the first half of 2016 increased from £117,300 to £132,900 per unit reflecting the higher value site locations, product and external specification of our homes, as well as the inflationary impact of labour and materials which has moderated to an assessed 4% to 5% in the year to June.

There have been no land sales in the first half of 2016 compared to two in H1 2015 which recognised profit of £4.0 million.

Overheads constituted 8.8% of revenue in the first half of 2016 (H1 2015: 9.6%) with the revenue growth in the Group more than offsetting the continued investment in structure and people to support volume growth.  The planned growth in overhead costs of 8% resulted from increased staff costs to support the larger business, and the associated costs including training and additional office costs.

Profit before tax

Profit before tax of £61.7 million comprised operating profit of £63.9 million, net financing charges of £2.4 million and the Group's share of profit in joint ventures £0.2m.  This compares to a profit before tax in H1 2015 of £53.8 million, resulting from £54.3 million of operating profit, £2.2 million of net financing charges and £1.7 million from the Group's share in joint ventures.

The Group's share of interest in joint ventures in 2015 included the benefit from the revaluation of both the Bovis Peer LLP and IIH Oak Investors LLP PRS property portfolios in the period.

Interim dividend

In accordance with the Group's stated intention to maintain a progressive dividend policy, an interim dividend of 15.0 pence per share has been declared (2015 interim dividend: 13.7 pence).

The interim dividend will be paid on 18 November 2016 to holders of ordinary shares on the register at the close of business on 23 September 2016.  The dividend reinvestment plan, introduced in 2012, gives shareholders the opportunity to reinvest their dividends.

Financing and cashflow

The Group incurred net financing charges of £2.4 million in the first half of 2016 (H1 2015: £2.2 million).

Having started the year with net cash of £30.0 million, land investment and additional work in progress has resulted in net debt as at 30 June 2016 of £7.6 million (30 June 2015: £58.8 million).

In the first six months of 2016, the Group generated an operating cash inflow before land expenditure of £135.2 million (H1 2015: £79.0 million), demonstrating strong underlying cash generation from the Group's asset base and the volume growth delivered.  As a result of the Group's land investments, payments in H1 2016 associated with land purchases less cash recoveries on land sales were £120.0 million (H1 2015: £95.3 million). With a cash outflow from non-trading items totalling £52.8 million including the dividend payment of £35.3 million (H1 2015 dividend payment: £30.8m), the overall net cash outflow for the six months ended 30 June 2016 was £37.6 million (H1 2015: £64.0 million).

Taxation

The tax charge was £12.8 million on profit before tax of £61.7 million, representing an effective tax rate of 20.8% (H1 2015: tax charge of £10.8 million at an effective rate of 20.1%).

Land

		H1 2016		H1 2015
Consented plots added		1,267		2,687
Sites added		11		15
Sites owned at period end		138		135
Plots in consented land bank at period end		19,477		19,081
Average consented land plot cost		£50,700		£48,600
Proportion in south of England outside London		76%		77%

The Group continues to follow its long term investment strategy with acquisitions made in prime locations focused in the south of England outside London.  We have increased our return hurdle rates to mitigate potential downside risk and, with 19,477 consented plots in the land bank, we have good visibility on delivering our plans for the foreseeable future.

In the six months ended 30 June 2016 the Group added 1,267 consented plots on 11 sites to the land bank at a cost of £105 million.  These plots have an estimated future revenue of £387 million and an estimated future gross profit potential of £99 million based on appraisal point sales prices and build costs, delivering an estimated future gross margin of 25.7%.  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 on the consented land bank plots as at 30 June 2016, based on prevailing sales prices and build costs, is £1,286 million with a gross margin of 25.6% (31 December 2015: £1,247 million at 25.5%).

Written down land in the land bank at 30 June 2016 is represented by 338 plots (31 December 2015: 441 plots).  The remaining provision on written down plots as at 30 June 2016 was £4.3 million (31 December 2015: £6.7 million).

Strategic land

The successful conversion of strategic land continues to be a key driver of value for the Group.  New strategic land investments in the first half of 2016 added 2,858 plots into the strategic land bank, giving a total of 25,484 strategic plots at the half year controlled across 90 strategic sites.  During the first half of 2016, by virtue of the timing of delivery of planning consents and some caution associated with the EU referendum, the Group converted a modest 192 plots from the strategic land bank into the consented land bank.  A further circa 9,000 plots across 14 sites controlled in the strategic land bank have planning agreed.  The strategic land bank reflects positively the Group's strategy of investment with 67% of the strategic plots being in the south of England.

Going forward, the Group anticipates reaching agreement to acquire its strategic land holdings which already have planning consent in place at Bishops Stortford (546 plots), Witney (257 plots), Basingstoke (90 plots), Petersfield (102 plots), Tavistock (726 plots), Gravesend (197 plots), Didcot (80 plots), Worcester (90 plots) and Wotton (200 plots).  We continue to work with land owners to make progress on key strategic sites where planning is agreed.  These include Edwalton, North Whiteley, Taunton, and Bexhill which collectively will deliver over 4,000 consented plots.

The revised planning consent on our major strategic asset at Stanton Cross, Wellingborough, has been agreed delivering 3,650 new homes across this 714 acre site to the East of Wellingborough.  The Group owns around one third of the development land on the site and controls the balance of the site under option.  Detailed planning consent is in place for the initial 521 units on the site which will provide early access to commence housebuilding whilst the major infrastructure works are undertaken.  The Group has entered into a partnership agreement with St Modwen to control and deliver the commercial elements on the site.  The nature of the Stanton Cross development allows the capital for the project to be deployed progressively as homes are delivered. 

The Group expects its strategic land 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 over time.

Pensions

The Group had a pension scheme deficit of £2.3 million as at 30 June 2016 (31 December 2015: surplus of £7.1 million).  Scheme assets grew over the six months to £112.8 million from £109.3 million.  Scheme liabilities increased to £115.1 million from £102.2 million.  The movement on the scheme in the six months primarily relates to a decrease in the discount rate applied to liabilities, as a result of decreases in bond yields.

Net assets

Net assets per share as at 30 June 2016 were 719p as compared to 666p at 30 June 2015.

		2016		2015
		£m		£m
Net assets at 1 January		957.8		879.1
Profit after tax for the six months		48.9		43.0
Share capital issued		0.5		0.4
Purchase of own shares		-		(0.1	)
Net actuarial movement on pension scheme through reserves		(7.6	)	2.3
Adjustment to reserves for share based payments		0.7		0.7
Dividends paid		(35.3	)	(30.8	)
Net assets at 30 June		965.0		894.6

As at 30 June 2016, net assets were £7.2 million higher than at the start of the year.  Inventories increased during the six months by £49.9 million to £1,368.4 million.  As a result of the investment in consented land, the land bank increased by £13.4 million to £1,027.1 million.  Work in progress increased from the start of 2016 by £26.1 million to £301.4 million, as the Group invested in sites delivering legal completions in H2 2016, as well as investing in infrastructure on new sites.  Trade and other receivables decreased by £23.5 million to £72.6 million, as a result of improved working capital management from lower receivables due from Housing Associations and a reduction in VAT debtor related to land acquisitions compared to 2015.

Trade and other payables totalled £507.9 million (31 December 2015: £535.2 million).  Land creditors represented £311.6 million (31 December 2015: £322.9 million), reflecting the investment in new land benefiting from good levels of deferral, with around half of the total (£154 million) being payable in the next 12 months.  Trade and other creditors were £196.3 million (31 December 2015: £212.3 million), reflecting the timing of payments to the Group's supply chain partners.  Net cash reduced by £37.6 million.

Principal risks and uncertainties

The Group is subject to a number of risks and uncertainties as part of its activities.  The Board regularly considers these and seeks to ensure that appropriate processes are in place to manage, monitor and mitigate these risks.  The directors consider that the principal risks and uncertainties facing the Group are those outlined on pages 26 to 30 of the Annual Report and Accounts 2015, which is available from www.bovishomesgroup.co.uk.  The Group has in place processes to monitor and mitigate these risks.  In addition the directors are constantly reviewing the potential impacts from the result of the EU referendum and believe the company is well positioned to mitigate proactively the potential downside risks that may arise, these risks are captured by those highlighted in the Annual Report and Accounts.

Going Concern

As stated in note 1 to the condensed consolidated interim financial statements, the directors are satisfied that the Group has sufficient resources to continue in operation for the foreseeable future, a period of not less than 12 months from the date of this report.  Accordingly they continue to adopt the going concern basis in preparing the condensed consolidated interim financial statements.

Bovis Homes Group PLC
Group income statement

		Six months ended 30 June 2016		Six months ended 30 June 2015		Year ended 31 Dec 2015
		£000 (unaudited)		£000 (unaudited)		£000 (audited)
Revenue		412,797		350,702		946,504
Cost of sales		(312,472	)	(262,596	)	(714,196	)
Gross profit		100,325		88,106		232,308
Administrative expenses		(36,397	)	(33,800	)	(68,778	)
Operating profit before financing costs		63,928		54,306		163,530
Financial income		1,694		2,205		3,348
Financial expenses		(4,091	)	(4,372	)	(8,583	)
Net financing costs		(2,397	)	(2,167	)	(5,235	)
Share of profit of Joint Ventures		201		1,687		1,770
Profit before tax		61,732		53,826		160,065
Income tax expense		(12,824	)	(10,809	)	(32,057	)
Profit for the period attributable to equity holders of the parent		48,908		43,017		128,008
Earnings per share
Basic		36.5p		32.1p		95.4p
Diluted		36.4p		32.0p		95.2p

Group statement of comprehensive income

		Six months ended 30 June 2016		Six months ended 30 June 2015		Year ended 31 Dec 2015
		£000 (unaudited)		£000 (unaudited)		£000 (audited)
Profit for the period		48,908		43,017		128,008
Other comprehensive income		-		-			-
Items that will not be reclassified to profit and loss
Remeasurements on defined benefit pension scheme		(9,403	)	2,847		182
Deferred tax on actuarial remeasurements on defined benefit pension scheme		1,827		(550)		(17	)
Total comprehensive income for the period attributable to equity holders of the parent		41,332		45,314		128,173

Bovis Homes Group PLC

Group balance sheet

		30 June 2016 £000 (unaudited)		30 June 2015 £000 (unaudited)		31 Dec 2015 £000 (audited)
Assets
Property, plant and equipment		13,471		14,024		13,982
Investments		8,771		8,721		8,987
Restricted cash		1,444		1,426		1,451
Deferred tax assets		3,680		1,200		2,160
Trade and other receivables		1,100		1,166		1,166
Available for sale financial assets		31,070		38,559		35,303
Retirement benefit assets		-		9,812		7,117
Total non-current assets		59,536		74,908		70,166
Inventories		1,368,389		1,282,363		1,318,520
Trade and other receivables		71,449		72,067		94,843
Cash and cash equivalents		17,420		28,176		31,990
Total current assets		1,457,258		1,382,606		1,445,353
Total assets		1,516,794		1,457,514		1,515,519
Equity
Issued capital		67,234		67,174		67,190
Share premium		214,769		214,238		214,368
Retained earnings		683,045		613,202		676,201
Total equity attributable to equity holders of the parent		965,048		894,614		957,759
Liabilities
Bank and other loans		-		60,000		-
Trade and other payables		166,162		127,119		171,306
Retirement benefit obligations		2,312		-		-
Provisions		812		1,840		1,327
Total non-current liabilities		169,286		188,959		172,633
Bank and other loans		25,000		26,975		1,999
Trade and other payables		341,694		335,576		363,936
Provisions		1,366		1,237		2,245
Current tax liabilities		14,400		10,153		16,947
Total current liabilities		382,460		373,941		385,127
Total liabilities		551,746		562,900		557,760
Total equity and liabilities		1,516,794		1,457,514		1,515,519

These condensed consolidated interim financial statements were approved by the Board of directors on 15 August 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 2016		676,201		67,190		214,368		957,759
Total comprehensive income and expense		41,332		-		-		41,332
Issue of share capital		-		44		401		445
Deferred tax on other employee benefits		36		-		-		36
Share based payments		749		-		-		749
Dividends paid to shareholders		(35,273	)	-		-		(35,273	)
Balance at 30 June 2016 (unaudited)		683,045		67,234		214,769		965,048
Balance at 1 January 2015		598,154		67,114		213,850		879,118
Total comprehensive income and expense		45,314		-		-		45,314
Issue of share capital		-		60		388		448
Purchase of own shares		(173	)	-		-		(173	)
Share based payments		745		-		-		745
Dividends paid to shareholders		(30,838	)	-		-		(30,838	)
Balance at 30 June 2015 (unaudited)		613,202		67,174		214,238		894,614
Balance at 1 January 2015		598,154		67,114		213,850		879,118
Total comprehensive income and expense		128,173		-		-		128,173
Issue of share capital		-		76		518		594
Purchase of own shares		(2,386	)	-		-		(2,386	)
Deferred tax on other employee benefits		(31	)	-		-		(31	)
Share based payments		1,531		-		-		1,531
Dividends paid to shareholders		(49,240	)	-		-		(49,240	)
Balance at 31 December 2015 (audited)		676,201		67,190		214,368		957,759

Bovis Homes Group PLC

Group statement of cash flows

		Six months ended		Six months ended		Year ended
		30 June 2016		30 June 2015		31 Dec 2015
		£000 (unaudited)		£000 (unaudited)		£000 (audited)
Cash flows from operating activities
Profit for the period		48,908		43,017		128,008
Depreciation		1,001		996		2,065
Revaluation of available for sale assets		-		(224	)	67
Financial income		(1,694	)	(2,205	)	(3,348	)
Financial expense		4,091		4,372		8,583
Loss/(profit) on sale of property, plant and equipment		87		(43	)	(43	)
Equity-settled share-based payment expense		749		573		1,531
Income tax expense		12,824		10,809		32,057
Share of results of Joint Ventures		(201	)	(1,687	)	(1,770	)
Decrease/(increase) in trade and other receivables		29,107		(9,036	)	(28,031	)
Increase in inventories		(49,871	)	(156,844	)	(193,000	)
(Decrease)/increase in trade and other payables		(28,174	)	100,067		168,773
Increase in provisions and employee benefits		(1,232	)	(7,575	)	(7,003	)
Net cash generated from/(used in) operations		15,595		(17,780	)	107,889
Interest paid		(3,150	)	(2,317	)	(2,470	)
Income taxes paid		(15,028	)	(13,547	)	(28,515	)
Net cash (used in)/generating from operating activities		(2,583	)	(33,644	)	76,904
Cash flows from investing activities
Interest received		213		37		75
Acquisition of property, plant and equipment		(578	)	(1,395	)	(2,424	)
Proceeds from sale of plant and equipment		-		52		55
Movement in loans with Joint Ventures		30		512		358
Movement in investment in Joint Ventures		168		473		397
Dividends received from Joint Ventures		-		250		377
Reduction/(investment) in restricted cash		7		-		(25	)
Net cash used in investing activities		(160	)	(71	)	(1,187	)
Cash flows from financing activities
Dividends paid		(35,273	)	(30,838	)	(49,240	)
Proceeds from the issue of share capital		445		448		594
Purchase of own shares		-		-		(2,386	)
Drawdown of borrowings		25,000		40,024		-
Repayment of bank and other loans		(1,999)		-		(44,952	)
Net cash (used in)/generated from financing activities		(11,827	)	9,634		(95,984	)
Net decrease in cash and cash equivalents		(14,570	)	(24,081	)	(20,267	)
Cash and cash equivalents at start of period		31,990		52,257		52,257
Cash and cash equivalents at end of period		17,420		28,176		31,990

Notes to the condensed consolidated interim financial statements

1              Basis of preparation

Bovis Homes Group PLC ('the Company') is a company domiciled in the United Kingdom. The condensed consolidated interim financial statements of the Company for the six months ended 30 June 2016 comprise the Company and its subsidiaries (together referred to as 'the Group') and the Group's interest in associates and joint ventures.

The condensed consolidated interim financial statements were authorised for issue by the directors on 15 August 2016. The financial statements are unaudited but have been reviewed by PricewaterhouseCoopers LLP the Company's auditors.

The condensed consolidated interim financial statements do not constitute statutory accounts within the meaning of Section 434 of the Companies Act 2006.

The figures for the half years ended 30 June 2016 and 30 June 2015 are unaudited. The comparative figures for the financial year ended 31 December 2015 are an extract from the Group's statutory accounts for that financial year. Those accounts have been reported on by the Company's auditors and delivered to the Registrar of Companies. The report of the auditors was (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 preparation of a condensed set of financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amount of assets, liabilities, income and expenses. Actual results may differ from these estimates.

Judgements made by management in the application of adopted IFRSs that have a significant effect on the financial statements and estimates with a significant risk of material adjustment in following years have been reviewed by the directors and remain those published in the Company's consolidated financial statements for the year ended 31 December 2015.

The condensed consolidated interim financial statements have been prepared in accordance with IAS34 'Interim Financial Reporting' as endorsed by the EU. As required by the Disclosure and Transparency Rules of the Financial Conduct Authority, the condensed consolidated interim financial statements have been prepared by applying the accounting policies and presentation that were applied in the preparation of the Company's published consolidated financial statements for the year ended 31 December 2015, which were prepared in accordance with IFRSs as adopted by the EU.

The directors are satisfied that the Group has sufficient resources to continue in operation for the foreseeable future, a period of not less than 12 months from the date of this report.  Accordingly they continue to adopt the going concern basis in preparing the condensed consolidated interim financial statements.

2              Seasonality

In common with the rest of the UK housebuilding industry, activity occurs year round, but there are two principal selling seasons: spring and autumn. As these fall into two separate half years, the seasonality of the business is not pronounced, although it is biased towards the second half of the year under normal trading conditions.

3              Segmental reporting

All revenue and profit disclosed relate to continuing activities of the Group and are derived from activities performed in the United Kingdom.

The Chief 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 of IFRS8.

4              Earnings per share

		Six months ended		Six months ended		Year ended
		30 June 2016		30 June 2015		31 Dec 2015
		Pence (unaudited)		Pence (unaudited)		Pence (audited)
Basic earnings per share		36.5		32.1		95.4
Diluted earnings per share		36.4		32.0		95.2

Basic earnings per share

Basic earnings per ordinary share for the six months ended 30 June 2016 is calculated on a profit after tax of £48,908,000 (six months ended 30 June 2015: profit after tax of £43,017,000; year ended 31 December 2015: profit after tax of £128,008,000) over the weighted average of 134,135,345 (six months ended 30 June 2015: 134,081,809; year ended 31 December 2015: 134,194,203) ordinary shares in issue during the period.

Diluted earnings per share

The calculation of diluted earnings per share at 30 June 2016 was based on the profit attributable to ordinary shareholders of £48,908,000 (six months ended 30 June 2015: profit after tax of £43,017,000; year ended 31 December 2015: profit after tax of £128,008,000).

The Group's diluted weighted average ordinary shares potentially in issue during the six months ended 30 June 2016 was 134,288,101 (six months ended 30 June 2015: 134,342,093 year ended 31 December 2015: 134,428,802).

5              Dividends

The following dividends per qualifying ordinary share were settled by the Group.

		Six months ended		Six months ended		Year ended
		30 June 2016		30 June 2015		31 Dec 2015
		£000 (unaudited)		£000 (unaudited)		£000 (audited)
May 2016: 26.3p (May 2015: 23.0p)		35,273		30,838		30,838
November 2015: 13.7p		-		-		18,402
		35,273		30,838		49,240

The Board determined on 15 August 2016 that an interim dividend of 15.0p for 2016 be paid.  The dividend will be settled on 18 November 2016 to shareholders on the register at the close of business on 23 September 2016.  This dividend has not been recognised as a liability at the balance sheet date.

6              Available for sale assets

Available for sale financial assets - shared equity

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.

		30 June 2016		30 June 2015		31 Dec 2015
		£000		£000		£000
Non-current asset - Available for sale assets		31,070		38,559		35,303

Key assumptions

		30 June 2016		30 June 2015		31 Dec 2015
Discount rate, incorporating default rate		9.0%		9.0%		9.0%
Average house price inflation per annum for the next three years		3.4%		3.4%		3.4%

Reconciliation of shared equity asset

		2016 £000
Balance at 1 January		35,303
Redemptions		(5,594	)
Imputed interest		1,361
Balance at 30 June		31,070

Sensitivity - available for sale financial assets

				2016 increase		2015 increase
				assumptions by 1%		assumptions by 1%
Discount rate, incorporating default rate				(1,475	)	(2,161)
House price inflation				1,750		2,796

7              Related party transactions

Transactions between fellow subsidiaries, which are related parties, during the first half of 2016 have been eliminated on consolidation, as have transactions between the Company and its subsidiaries during this period.  The Group's associates and joint ventures are disclosed in the Group's Annual Report and Accounts 2015.

Transactions between the Group and key management personnel in the first half of 2016 were limited to those relating to remuneration, previously disclosed as part of the Group's Report on directors' remuneration published with the Group's Annual Report and Accounts 2015. No material change has occurred in these arrangements in the first half of 2016.

Transactions with Joint Ventures

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 £77,000 (six months ended 30 June 2015: £76,000; year ended 31 December 2015: £153,000).

Bovis Homes Limited is part of a Joint Venture, IIH Oak Investors LLP, to invest in 190 private rental homes.  As at 30 June 2016 loans of £3,638,034 (30 June 2015: £3,363,908; 31 December 2015: £3,667,675) were in place with IIH Oak Investors LLP at an interest rate of 6%.  Interest charges made in respect of the loans were £110,000 (six months ended 30 June 2015: £152,000; year ended 31 December 2015: £249,000).

8              Reconciliation of net cash flow to net cash

		Six months ended		Six months ended		Year ended
		30 June 2016		30 June 2015		31 Dec 2015
		£000 (unaudited)		£000 (unaudited)		£000 (audited)
Net decrease in cash and cash equivalents		(14,570	)	(24,081	)	(20,267	)
Drawdown of borrowings/(Repayment) of loans		(23,001	)	(40,024	)	44,952
Fair value adjustments to interest rate swaps		-		59		59
Net cash at start of period		29,991		5,247		5,247
Net cash at end of period		(7,580	)	(58,799	)	29,991
Analysis of net cash:
Cash		17,420		28,176		31,990
Bank and other loans		(25,000	)	(86,975	)	(1,999	)
Net cash		(7,580	)	(58,799	)	29,991

9              Circulation to shareholders

Copies of this interim statement are 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 analyst presentation document which will be presented at the Group's results meeting on 15 August 2016.

Statement of directors' responsibility

We confirm to the best of our knowledge:

·      the condensed set of financial statements has been prepared in accordance with IAS34 Interim Financial Reporting as adopted by the EU;

·      the interim management report includes a fair review of the information required by:

(a) DTR 4.2.7.R of the Disclosure and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year; and

(b) DTR 4.2.8.R of the Disclosure and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the entity during that period; and any changes in the related party transactions described in the last annual report that could do so.

For and on behalf of the Board,

David Ritchie        Earl Sibley
Chief Executive     Group Finance Director

15 August 2016

Independent review report to Bovis Homes Group PLC

Report on the condensed consolidated interim financial statements

Our conclusion

We have reviewed Bovis Homes Group PLC's condensed consolidated interim financial statements (the "interim financial statements") in the half year report of Bovis Homes Group PLC for the 6 month period ended 30 June 2016. Based on our review, nothing has come to our attention that causes us to believe that the interim financial statements are not prepared, in all material respects, in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union and the Disclosure Rules and Transparency Rules of the United Kingdom's Financial Conduct Authority.

What we have reviewed

The interim financial statements comprise:

·      the Group balance sheet as at 30 June 2016;

·      the Group income statement and Group statement of comprehensive income for the period then ended;

·      the Group statement of cash flows for the period then ended;

·      the Group statement of changes in equity for the period then ended; and

·      the explanatory notes to the interim financial statements.

The interim financial statements included in the half year report have been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union and the Disclosure Rules and Transparency Rules of the United Kingdom's Financial Conduct Authority. 

As disclosed in note 1 to the interim financial statements, the financial reporting framework that has been applied in the preparation of the full annual financial statements of the Group is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union. 

Responsibilities for the interim financial statements and the review

Our responsibilities and those of the directors

The half year report, including the interim financial statements, is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half year report in accordance with the Disclosure Rules and Transparency Rules of the United Kingdom's Financial Conduct Authority. 

Our responsibility is to express a conclusion on the interim financial statements in the half year report based on our review. This report, including the conclusion, has been prepared for and only for the company for the purpose of complying with the Disclosure Rules and Transparency Rules of the United Kingdom's Financial Conduct Authority and for no other purpose.  We do not, in giving this conclusion, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing. 

What a review of interim financial statements involves

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. 

A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and, consequently, does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

We have read the other information contained in the half year report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the interim financial statements.

PricewaterhouseCoopers LLP

Chartered Accountants

15 August 2016

London

Notes:

(a)   The maintenance and integrity of the Bovis Homes Group PLC website is the responsibility of the directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the interim financial statements since they were initially presented on the website.

(b)   Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

 

END

 

 

IR SFWFAEFMSEIA