HALF-YEARLY FINANCIAL REPORT

RNS Number : 9473B

Bovis Homes Group PLC

26 August 2008

 



BOVIS HOMES GROUP PLC

HALF-YEARLY FINANCIAL REPORT
for the six months ended 30 June 2008

Issued 26 August 2008

The Board of Bovis Homes Group PLC today announces its interim results for 2008.

• Revenue generated of £149.3 million (2007 H1: £259.9 million)

• Adjusted profit before tax* of £11.7 million (2007 H1: £58.4 million) 

• Adjusted earnings per share* of 7.1p (2007 H1: 34.2p)

• Interim dividend declared of 5p per share, reflective of challenging market conditions

• Gross margin of 26.3% (2007 H1: 32.6%) with adjusted operating margin at 10.0%* (2007 H1: 22.5%), significantly impacted by loss of scale benefits on general overhead  

• Restructuring undertaken with an anticipated 20% (circa £10 million) reduction in general overhead cost base on annualised basis

• 3,735 land plots successfully converted from strategic land in the first half of 2008 leading to consented land bank at 30 June 2008 of 14,294 plots (31 December 2007: 11,413 plots)

• Strategic landholdings of 20,982 potential plots (31 December 2007: 24,868 potential plots)

• Net debt of £93 million, 13% geared, with £220 million of total bank facilities in place until 2010

• No land write-downs required as at 30 June 2008

 * 2008 figures adjusted for restructuring cost of £2.2 million (2007: £nil). 

Commenting on the results, David Ritchie, Chief Executive of Bovis Homes Group PLC said: 'The Group has taken decisive action in response to the toughest period of trading it has experienced in its time as a public company. It has largely avoided new investments in consented land, has reduced production levels and has restructured to cut operating costs. Having done so, the Group is well positioned to deal with prevailing market conditions.  The Group has a high quality land bank, largely sourced strategically, which has not required write-downs in the half year and gearing remained low at 13%. The underlying profitability of private homes sales remained good in the first half year with average sales price and gross margin reduced by just 4% and 2% respectively.

The Group's strategic land successes in the first half of 2008 have reduced the average plot cost of the consented land bank as a whole, essential in supporting future profitability during a period when the outlook for house prices is highly uncertain.

The Group considers that the current difficult trading environment will continue for the foreseeable future with continued poor mortgage liquidity limiting housing market activity. Actions continue to be taken to conserve cash and a realistic approach is being taken in respect of achievable net prices for the Group's available homes to facilitate delivery of required volumes for the remainder of 2008.'

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.

Enquiries:    
David Ritchie, Chief Executive       
Neil Cooper, Group Finance Director         

Bovis Homes Group PLC               

Tel: [phone]

Results issued by:  

Andrew Best / Emily Bruning    
Shared Value Limited
Tel: [phone] / 5027

Interim Management Report

These interim results for the six months ended 30 June 2008 have been delivered against the backdrop of the worst market the Group has traded in for many years.  The Group has sought to deliver a good quality of profit on the private homes it legally completed during the first half of 2008, however a reduction in the volume of private homes legally completed has led to a much reduced level of absolute profit.  The Group gross margin has reduced, reflecting this lower private volume combined with an increase in the proportion of social and partnership homes legally completed.  Combined with an overhead base largely fixed in the short term, albeit 7% below the previous year, the operating profit margin of the Group was sharply down on the prior year.

The Group has not only taken steps to reduce its overhead cost base but also to ensure that it conserves cash.  It has reduced production levels, is largely avoiding new land commitments and has acted quickly in reducing its cost base.  Notwithstanding the fact that gearing, at 13%, remained relatively low at the half year, this level of gearing is likely to increase in the current challenging market, with average net debt for the year as a whole expected to be in the range £110-£120 million.  The Group has also announced that it intends to pay an interim dividend for 2008 of 5p net per share, a substantial reduction from the 20p per share previously anticipated to be paid at this stage. 

The Group has been cautious in recent years in regard to investing in land with residential planning consent in place, given prevailing costs. This caution has been allied with a focus on delivery of planning consent on strategic land already owned or controlled by the Group. Success in conversion of this strategic land has been significant in recent years, leading to a position where the majority of the Group's current consented land bank, some 58%, has been converted from the Group's strategic land bank.  This long term activity has assisted the Group in maintaining a low cost land bank on which it can develop new homes in the future, and it remains a key strategic priority for the Group going forward.

Market conditions

The UK housing market has been badly impacted during 2008 as mortgage availability has reduced, following financial market turmoil in the second half of 2007.  As an example, according to the Bank of England, seasonally adjusted house purchase mortgage approvals in June 2008 were down by 68% against the prior year. As the vast majority of potential customers in the market require mortgage finance, this has had a negative impact on the Group's levels of reservations and legal completions. Further exacerbating this impact has been a rise in mortgage interest rates, despite a falling trend in the Bank of England base rate, and a reduction in loan-to-value ratios, both of which impact critically on the ability of first-time buyers to proceed, given their general lack of equity. As first time buyers represent the first rung on the ladder for housing chains, this is a particularly damaging development for the market.

This impact is clearly evident in market statistics.  Firstly, transaction volumes across the market have declined. The latest government data suggests that completed residential property transactions in England and Wales in June were 45% below the prior year.  Secondly, sentiment is now poor, as evidenced by a number of consumer confidence surveys.  Accordingly, Nationwide and Halifax house price indices suggest that market pricing is now falling as a result of reducing demand and falling confidence, and it is likely to take some time for these conditions to stabilise or improve.

Results

The Group generated £149.3 million of revenue in the first half of 2008, a fall of 43% versus the comparable period (2007: £259.9 million).  Housing revenue fell by 40%, contributed to by a 32% reduction in legal completions from 1,256 homes legally completed in 2007 to 851 homes legally completed in 2008.  Of the Group's legal completions in 2008, 624 (73%) were of private homes and 227 (27%) were of social and partnership homes. These proportions are as compared to 87% and 13% respectively over the same period in 2007. Private homes legal completions fell by 43%, and social and partnership homes legal completions grew by 38%, albeit from a much smaller base.

In the first half of 2008, the Group delivered a private home average sales price of £196,700, some 4% lower than the average sales price delivered for private homes in the first half of 2007 of £204,500. With the average size of private homes legally completed falling from 1,021 square feet to 964 square feet as a result of an increase in the selling mix of smaller homes, the underlying average sales price per square foot for private homes increased by around 2%.  The social and partnership homes average sales price for the first half of 2008 was £87,800, a 3% decline on the previous year (2007: £90,400). In total, the Group's average sales price for the first half of 2008, at £167,600, was 12% lower than that of the previous year (2007: £189,600), primarily from the impact of social housing increasing in the selling mix from 13% to 27%.

Land sales reduced substantially compared to the prior year, with revenue of £4.9 million, and profits, less option costs, of £2.1 million, as compared to revenue of £19.1 million and profits, less option costs, of £8.6 million in the first half of 2007. Given uncertainties on house pricing, the land market has been subdued in the first half of the year.  

The Group's underlying private housing margins fell by approximately 2%. Allied with other factors, including an increase in the proportion of social and partnership homes sold which generate lower profit margins, reduced scale economies in semi-fixed site management charges and cost increases in strategic planning fees and part-exchange provisions, the gross profit margin fell to 26.3% in the first half of 2008 (2007: 32.6%).  

Whilst overhead costs fell by 7% to £24.4 million, the impact of lower revenues, taken together with the gross margin decline, has been to sharply reduce the operating margin, which was 10.0% for the half year before taking into account a £2.2 million one-off restructuring charge incurred as a result of the cost reduction programme undertaken by the Group during the half (8.5% including this charge). This is as compared to 22.5% in 2007 for the comparable period.

Following this cost reduction programme, the Group's Eastern regional office has been closed and a number of key functions of its Northern region have been amalgamated with its Central region.  Total staff numbers, both office and site-based, have been reduced by around 40% compared to those employed at the start of the year. The Group anticipates the annualised saving in respect of general overheads from these actions to be around 20% of its general overhead cost base (circa £10 million). Savings have also been made to direct site based costs and the Group has reduced the level of subcontract labour working on its sites.

For the six months ended 30 June 2008 the Group achieved a pre-tax profit of £11.7 million before restructuring costs (£9.5 million after restructuring costs) as compared to £58.4 million in the same period in 2007. Basic earnings per share has decreased in the half year from 34.2p in 2007 to 7.1p in 2008 before restructuring charges (5.7p after restructuring charges).

Dividends

The interim dividend of the Company will amount to 5p net per share, compared to the 17.5p interim dividend declared and paid for 2007.  This dividend will be paid on 21 November 2008 to holders of ordinary shares on the register at the close of business on 26 September 2008.  The Group recognises that it had previously indicated an intention to pay 20p per share at this time, dependent on the prevailing business environment. In light of current difficult trading conditions, the Board considers this reduction to be a prudent action to take.  The Board intends to offer a scrip dividend alternative, pursuant to which the shareholders may elect to receive the whole or part of their dividend in new ordinary shares credited as fully paid instead of cash, for the 2008 interim dividend.

Borrowings and financing

As at 30 June 2008, the Group had net debt of £93 million, representing gearing of 13%. The Group's average net borrowings for the first half year were £81 million, and the Group now anticipates that average net debt for the year as a whole will be in the range £110 - £120 million. The Group has bilateral committed facilities of £220 million in place which do not mature until early 2010 and it will be discussing its longer term banking arrangements with its bankers well ahead of that maturity.

This first half average borrowing position gave rise to total financing charges of £3.2 million, substantially higher than the comparable period at £0.1 million.  Of this total financing charge, cash interest expenses were £2.4 million (2007: £1.9 million income) and £1.3 million (2007: £2.4 million) related to non-cash imputed interest expenses arising from land creditors, a reduction on the prior year as the Group has seen a decline in the level of land creditors held on the balance sheet as at 30 June 2008 versus June 2007.  The Group also generated £0.5 million of non-cash pension financing interest income in the first half of 2008, as compared to £0.4 million income in the first half of 2007. 

Land

The Group has been successful in the first half of 2008 in converting strategic land, having obtained outline planning consent for both Wellingborough and Filton. As a result, the Group's controlled and consented landbank has risen from 11,413 plots at the end of 2007 to 14,294 plots at the end of June 2008, of which approximately 58% was converted from the strategic land bank, and only 11% has been acquired in the consented market since the start of 2007. Within this total are 2,200 plots at Filton and 900 plots at Wellingborough, both owned and paid for. The balance of the plots with consent at Wellingborough remain controlled under a call option which can be exercised by the Group in the future. The pace of material investment in these major and important projects remains under the control of the Group and is being adjusted in light of market conditions. 

The strategic land bank at 30 June 2008 stood at 20,982 potential plots as compared to 24,868 potential plots held at the start of the year.  This reduction is primarily due to the successful conversion of 3,735 plots into the consented land bank. The Group continues to maintain a suitable organisational infrastructure to enable it to replenish this strategic land bank, which represents a key source of value for the Group. 

Having regard both to its carrying costs of land, and to reliable estimates at the balance sheet date of sales prices given prevailing market conditions, no land provisions or write-downs have been necessary in this half year.

Pensions

As at 30 June 2008, the Group's actuary estimated that the Group's defined benefits pension scheme had moved from a surplus of £1.0m at the end of 2007 to a deficit of £1.5 million. The main driver of this adverse movement has been the impact of poor investment conditions in the equity markets reducing the value of the scheme's assets. This was partially offset by favourable changes in actuarial assumptions applied to estimates of the Group's liabilities arising principally from increases in bond yields.

Principal risks and uncertainties

In a manner consistent with the Disclosure and Transparency Rules, the Board has formally identified a number of principal risks and uncertainties that may impact the business, reporting on this in full in its 2007 Annual report and accounts. The purpose of doing so is to ensure that the Group is able to arrange its affairs such that it can avoid the risk, or mitigate the impact of the risk occurring. A number of these risks relate to the Group's day to day operations, such as the risk of accidents occurring as a result of breaches of health and safety standards or of environmental damage arising. Other risks and uncertainties are inherent in the activity of speculative housebuilding and are principally commercial in nature, such as the risk of trading worsening as a result of fast moving developments in credit markets.   

Notwithstanding the tougher trading environment at present, the Board has continued to ensure that operational risks remain a key focus of management throughout the business: in particular in regard to risks that may result in injury or harm to individuals or to the environment. It continues to manage these risks robustly and in a proactive manner.

More widely, the present trading environment gives rise to a number of material uncertainties which necessarily carry risk with them, and which may have a material impact on the Group's performance over the next six months of the year. The more significant of these include the volume of mortgage finance being made available, the direction and speed of national house price changes and the relative levels of consumer confidence. The Group has outlined above a number of the activities it has taken, such as its overhead reduction programme, a reduction in discretional purchasing and a reduction in dividend, which it regards as prudent given historically high levels of uncertainty in the marketplace at present. It continues to monitor marketplace developments very carefully, to enable it to react accordingly, in particular in terms of its cashflow. 

Cumulative reservations

Cumulative sales achieved to 30 June 2008 for 2008 legal completion stood at 1,482 homes as compared to 2,282 homes at the same point in 2007 which represented a 35% decline in volume.  Within this, the Group held 687 reservations for social and partnership homes (2007: 661 reservations) and 795 reservations for private homes (2007: 1,621 reservations). 

Prospects

Looking forward to the full year, the Group's reservation levels since 30 June 2008 have continued to be notably lower than the previous year. Cumulative sales achieved to 22 August 2008 for 2008 legal completion stood at 1,574 homes as compared to 2,592 homes at the same point last year, a 39% decline year over year.

The Group anticipates private home sales volumes continuing at the current absolute level for the remainder of 2008.  In response to current market uncertainties, the Group is committed to competitive net pricing such that it can achieve volume delivery. Given current sentiment, this is likely to further reduce private sales prices and profit margins achievable on incremental reservations over the remainder of 2008.

The Group has consistently invested on a long term basis enabling it to purchase a large proportion of its residential land through conversion of its strategic land investments. Allied to this, the Group has a well designed product range focused towards low-rise, mid-market housing, and has developed good expertise in the social and partnership housing sector. Having restructured the business to help mitigate the impact from current housing market conditions, the Group will be able to exploit its strong asset base as and when the market returns to more normal conditions.
 

Malcolm Harris

Chairman

  Bovis Homes Group PLC

Group income statement

For the six months ended 30 June 2008 (unaudited)	Six months ended 30 June 2008		Six months ended 30 June 2007		Year ended  31 Dec 2007
	£000		£000		£000
Revenue	149,288		259,931		555,702
Cost of sales	(109,965	)	(175,301	)	(382,659	)
Gross profit	39,323		84,630		173,043
Administrative expenses before restructuring costs	(24,356	)	(26,116	)	(48,653	)
Restructuring costs	(2,248	)	-		-
Operating profit before financing costs	12,719		58,514		124,390
Financial income	608		3,258		6,158
Financial expenses	(3,823	)	(3,363	)	(6,962	)
Net financing costs	(3,215	)	(105	)	(804	)
Profit before tax	9,504		58,409		123,586
Income tax expense	(2,616	)	(17,361	)	(36,727	)
Profit for the period attributable to equity holders of the parent	6,888		41,048		86,859
Earnings per share
Basic	5.7p		34.2p		72.4p
Diluted	5.7p		34.1p		72.2p
Dividend per share charged in period
2007 final paid May 2008	17.5p		-		-
2007 interim paid November 2007	-		-		17.5p
2006 final paid May 2007	-		20.0p		20.0p
	17.5p		20.0p		37.5p

  Bovis Homes Group PLC

Group balance sheet

At 30 June 2008 (unaudited)	30 June 2008		30 June 2007		31 Dec 2007
	£000		£000		£000
Assets
Goodwill	9,176		-		9,176
Property, plant and equipment	13,915		14,581		14,451
Available for sale financial assets	3,789		-		1,085
Investments	22		22		22
Deferred tax assets	3,761		3,187		3,233
Trade and other receivables	6,222		2,734		2,589
Retirement benefit asset	-		2,830		1,010
Total non-current assets	36,885		23,354		31,566
Inventories	887,893		745,898		870,550
Trade and other receivables	34,082		42,378		52,725
Cash	4,006		132,829		346
Total current assets	925,981		921,105		923,621
Total assets	962,866		944,459		955,187
Equity
Issued capital	60,482		60,376		60,415
Share premium	157,054		156,290		156,734
Hedge reserve	-		4		-
Retained earnings	489,403		483,121		506,594
Total equity attributable to equity holders of the parent	706,939		699,791		723,743
Liabilities
Bank loans	25,000		24,995		25,000
Trade and other payables	28,891		35,358		28,816
Retirement benefit obligations	1,530		-		-
Provisions	562		2,004		1,463
Total non-current liabilities	55,983		62,357		55,279
Bank overdraft	1,015		-		3,588
Bank loans	71,383		-		16,000
Trade and other payables	125,353		165,480		142,291
Provisions	728		-		500
Tax liabilities	1,465		16,831		13,786
Total current liabilities	199,944		182,311		176,165
Total liabilities	255,927		244,668		231,444
Total equity and liabilities	962,866		944,459		955,187

These condensed consolidated interim financial statements were approved by the Board of directors 
on 22 August 2008

  Bovis Homes Group PLC

Group statement of cash flows

For the six months ended 30 June 2008	Six months ended		Six months ended		Year ended
(unaudited)	30 June 2008		30 June 2007		31 Dec 2007
	£000		£000		£000
Cash flows from operating activities
Profit for the period	6,888		41,048		86,859
Depreciation	644		698		1,421
Financial income	(608	)	(3,258	)	(6,158	)
Financial expenses	3,823		3,363		6,962
Profit on sale of property, plant and equipment	(33	)	(1	)	(43	)
Equity-settled share-based payment expenses	(402	)	(319	)	133
Income tax expense	2,616		17,361		36,727
Available for sale financial assets	(2,704	)	-		(1,085	)*
Other non cash items	147		-		996
Operating profit before changes in working capital and provisions	10,371		58,892		125,812
Decrease/(increase) in trade and other receivables	14,993		(19,962	)	(28,736	)
(Increase)/decrease in inventories	(17,488	)	12,180		(42,195	)
Decrease in trade and other payables	(18,206	)	(2,998	)	(39,519	)
Decrease in provisions and employee benefits	(673	)	(1,760	)	(6,301	)
Cash generated from operations	(11,003	)	46,352		9,061
Interest paid	(2,564	)	(2,475	)	(4,812	)
Income taxes paid	(14,942	)	(18,257	)	(39,052	)
Net cash from operating activities	(28,509	)	25,620		(34,803	)
Cash flows from investing activities
Interest received	78		2,960		5,420
Acquisition of property, plant and equipment	(143	)	(520	)	(879	)
Proceeds from sale of plant and equipment	68		20		106
Acquisition of subsidiary net of cash acquired	-		-		(73,304	)
Net cash from investing activities	3		2,460		(68,657	)
Cash flows from financing activities
Dividends paid	(21,031	)	(23,976	)	(44,990	)
Proceeds from the issue of share capital	387		884		1,367
Drawdown/(repayment) of borrowings	55,383		(15,000	)	1,000
Net cash from financing activities	34,739		(38,092	)	(42,623	)
Net increase/(decrease) in cash and cash equivalents	6,233		(10,012	)	(146,083	)
Cash and cash equivalents at the start of period	(3,242	)	142,841		142,841
Cash and cash equivalents at the end of period	2,991		132,829		(3,242	)

*Previously reported as a component of trade and other receivable movement  Bovis Homes Group PLC

Group statement of recognised income and expense

For the six months ended 30 June 2008	Six months ended		Six months ended		Year ended
(unaudited)	30 June 2008		30 June 2007		31 Dec 2007
	£000		£000		£000
Revaluation of available for sale financial assets	(17	)	-		-
Deferred tax on revaluation of available for sale financial assets	5		-		-
Effective portion of changes in fair value of interest rate cash flow hedges	-		165		160
Deferred tax on changes in fair value of interest rate cash flow hedges	-		(49	)	(48	)
Actuarial (loss)/gain on defined benefit pension scheme	(3,100	)	5,770		3,750
Deferred tax on actuarial movements on defined benefit pension scheme	868		(1,886	)	(1,325	)
Deferred tax on other employee benefits	(402	)	(471	)	(790	)
Net income recognised directly in equity	(2,646	)	3,529		1,747
Profit for the period	6,888		41,048		86,859
Total recognised income and expense for the period attributable to equity holders of the parent	4,242		44,577		88,606

Notes to the accounts

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 2008 comprise the Company and its subsidiaries (together referred to as 'the Group') and the Group's interest in associates.

The condensed consolidated interim financial statements were authorised for issue by the directors on 22 August 2008.  The financial statements are unaudited but have been reviewed by KPMG Audit Plc.

The condensed 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 Services Authority, the condensed consolidated interim financial statements have been prepared 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 2007, which were prepared in accordance with IFRSs as adopted by the EU.   

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

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.

The condensed interim financial statements do not constitute statutory accounts within the meaning of Section 240 of the Companies Act 1985.  The figures for the half years ended 30 June 2008 and 30 June 2007 are unaudited. The comparative figures for the financial year ended 31 December 2007 are not the Company'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 237 (2) or (3) of the Companies Act 1985.

2    Earnings per share

Basic earnings per ordinary share for the six months ended 30 June 2008 is calculated on profit after tax of £6,888,000 (six months ended 30 June 2007: £41,048,000; year ended 31 December 2007: £86,859,000) over the weighted average of 120,194,838 (six months ended 30 June 2007: 119,880,594; year ended 31 December 2007: 119,984,811) ordinary shares in issue during the period.  For presentation purposes, an earnings per share statistic has been disclosed in the interim management report after adjusting for restructuring costs incurred in the year. This adjustment was made by adding an additional £1,619,000 to the Group's profit after tax, being the Group's 2008 restructuring charge of £2,248,000 tax-effected at 28%.

Diluted earnings per ordinary share is calculated on profit after tax of £6,888,000 (six months ended 30 June 2007: £41,048,000; year ended 31 December 2007: £86,859,000) over the diluted weighted average of 120,298,768 (six months ended 30 June 2007: 120,229,838; year ended 31 December 2007: 120,244,911) ordinary shares potentially in issue during the period. 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.

3    Dividends

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

(unaudited)	Six months ended		Six months ended		Year ended
	30 June 2008		30 June 2007		31 Dec 2007
May 2008: 17.5p (May 2007: 20.0p)	21,031		23,976		23,976
November 2007: 17.5p	-		-		21,014
	21,031		23,976		44,990

An interim dividend in respect of 2008 of 5.0p per share, amounting to a total dividend of £6,048,000 based on the shares in issue as at 30 June 2008, was declared by the Board on 22 August 2008. This interim dividend will be paid on 21 November 2008 to shareholders on the register at the close of business on 26 September 2008. This dividend has not been recognised as a liability at the balance sheet date.

4    Income taxes

Current tax

Current tax expense for the interim periods presented is the expected tax payable on the taxable income for the period, calculated using a corporation tax rate of 30% up to 5 April 2008, and 28% thereafter,  adjusted to take account of deferred taxation movements.  

Current tax for current and prior periods is classified as a current liability to the extent that it is unpaid.  Amounts paid in excess of amounts owed are classified as a current asset.

Deferred tax

The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities using tax rates enacted or substantively enacted at the balance sheet date.

5    Related party transactions

Transactions between fellow subsidiaries, which are related parties, during the first half of 2008 have been eliminated on consolidation, as have transactions between the Company and its subsidiaries during this period.  The Group's associates are disclosed in the Group's Annual report and accounts 2007.

Transactions between the Group and key management personnel in the first half of 2008 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 2007. No material change has  occurred in these arrangements in the first half of 2008.   

Mr Malcolm Harris, a Group Director, is a non-executive Director of the National House Builders Council (NHBC), and the House Builders Federation. The Group trades in the normal course of business, on an arms-length basis, with the NHBC for provision of a number of building-related services, most materially for provision of warranties on new homes sold and for performance bonding on infrastructure obligations. The Group pays subscription fees and fees for research as required to the House Builders Federation.

Total net payments were as follows:

(unaudited)	Six months ended		Six months ended
	30 June 2008		30 June 2007
	£000's		£000's
NHBC	813		1,298
HBF	57		58

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

6    Reconciliation of net cash flow to net (debt)/cash

(unaudited)	Six months ended		Six months ended		Year ended
	30 June 2008		30 June 2007		31 Dec 2007
	£000		£000		£000
Net increase/(decrease) in cash and cash equivalents	6,233		(10,012	)	(146,083	)
(Drawdown)/Repayment of borrowings	(55,383	)	15,000		(1,000	)
Fair value adjustments to interest rate swaps	-		165		160
Net (debt)/cash at start of period	(44,242	)	102,681		102,681
Net (debt)/cash at end of period	(93,392	)	107,834		(44,242	)
Analysis of net (debt)/cash:
Cash	4,006		132,829		346
Bank overdraft	(1,015	)	-		(3,588	)
Bank loans	(96,383	)	(25,000	)	(41,000	)
Fair value of interest rate swaps	-		5		-
Net (debt)/cash	(93,392	)	107,834		(44,242	)

7    Group statement of changes in equity

(unaudited)	Total		Issued	Share	Hedge		Total
	retained		capital	premium	reserve
	earnings
For the six months ended 30 June 2008	£000		£000	£000	£000		£000
Balance at 1 January 2007	462,162		60,288	155,494	(112	)	677,832
Total recognised income and expense	44,461		-	-	116		44,577
Issue of share capital	-		88	796	-		884
Share based payments	474		-	-	-		474
Dividends paid to shareholders	(23,976	)	-	-	-		(23,976	)
Balance at 30 June 2007	483,121		60,376	156,290	4		699,791
Balance at 1 January 2007	462,162		60,288	155,494	(112	)	677,832
Total recognised income and expense	88,494		-	-	112		88,606
Issue of share capital	-		127	1,240	-		1,367
Share based payments	928		-	-	-		928
Dividends paid to shareholders	(44,990	)	-	-	-		(44,990	)
Balance at 31 December 2007	506,594		60,415	156,734	-		723,743
Balance at 1 January 2008	506,594		60,415	156,734	-		723,743
Total recognised income and expense	4,242		-	-	-		4,242
Issue of share capital	-		67	320	-		387
Share based payments	(402	)	-	-	-		(402	)
Dividends paid to shareholders	(21,031	)	-	-	-		(21,031	)
Balance at 30 June 2008	489,403		60,482	157,054	-		706,939

8    Circulation to shareholders

The interim report will be sent to shareholders. 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.bovishomes.co.uk/plc including the analyst presentation document which will be presented at the Group's results meeting on 26 August 2008.

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 transaction described in the last annual report that could do so.
  
  
  For and on behalf of the Board,
  
  David Ritchie Neil Cooper
  Chief Executive Finance Director
  
  22 August 2008
  
  
  
  
  
  
  Independent review report by KPMG Audit Plc to Bovis Homes Group PLC
  
  Introduction
  
  We have been instructed by the Company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2008 which comprises the Group income statement, Group balance sheet, Group statement of cash flows, Group statement of recognised income and expense and the related explanatory notes. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.
  
  This report is made solely to the Company in accordance with the terms of our engagement to assist the Company in meeting the requirements of the Disclosure and Transparency Rules (“the DTR”) of the UK’s Financial Services Authority (“the UK FSA”). Our review has been undertaken so that we might state to the Company those matters we are required to state to it in this report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company for our review work, for this report, or for the conclusions we have reached.
  
  Directors' responsibilities
  
  The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the DTR of the UK FSA.
  
  As disclosed in note 1, the annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the EU. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU.
  
  Our responsibility
  
  Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.
  
  
  Scope of review
  
  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 UK. A review of interim financial information consists of making enquiries, principally 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.
  
  Conclusion
  
  Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2008 is not prepared, in all material respects, in accordance with IAS 34 as adopted by the EU and the DTR of the UK FSA.

          KPMG Audit Plc
          Chartered Accountants
          London

          22 August 2008

 

END

 

 

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