Interim Results

Bovis Homes Group PLC 06 September 2004 BOVIS HOMES GROUP PLC INTERIM RESULTS for the six months ended 30 June 2004 Issued 6 September 2004 The Board of Bovis Homes Group PLC today announced its interim results for 2004. • Pre tax profit increased by 46% to £67.2 million showing a 26% compound annual increase over the last five years • Earnings per share increased by 45% to 40.1p showing a 25% compound annual increase over the last five years • Period end net borrowings of £5.5 million (1.1% gearing) • Annualised return on average capital employed increased to 24.9% • Operating margin maintained at 25.6% • Interim dividend increased by 21% to 6.4 pence net per ordinary share • Strategic landholdings increased to 23,053 potential plots after transferring 473 plots to consented landholdings during the first six months • Plots with planning consent at 10,796 plots (owned: 10,391 plots/ controlled: 405 plots) Commenting on the results, Malcolm Harris, Chief Executive of Bovis Homes Group PLC said: 'The Group has delivered a strong set of results for the six month period with further progress made relating to the objective of moving towards a more even weighting of profits between the half and full year trading periods. The solid performance resulted in a high return on average capital employed and a positive operating cash flow of £79.7m. The period end net debt/equity ratio stood at 1.1%. The new management structure announced on 2 August 2004 will provide the framework to enable the planned increase in volume to be delivered together with improved levels of quality, customer satisfaction and cost control. Based upon current market conditions we are confident of the prospects for the Group for the full year.' Enquiries: Malcolm Harris, Results issued by: Andrew Best /Emily Bruning Chief Executive Shared Value Limited Bovis Homes Group PLC Tel: 020 7321 5022/5027 On Monday 6 September Tel: 020 7321 5022/5027 Thereafter Tel: 01474 872427 Chairman's interim statement The Group has delivered excellent results during the first half of 2004. A substantial increase in pre tax profits has been achieved, continuing the strong momentum of the second half of 2003. The market is now showing signs of returning to a more normal level of activity following interest rate increases in recent months. The Group expects the profit generated in the first half of 2004 to provide a more balanced weighting between the first and second half year profits compared to that achieved in 2003. The Group has maintained its focus on delivering sustainable shareholder returns and has once again achieved a strong operating margin, in line with the first half of 2003. It has added to its strategic land bank, further improved return on capital employed compared to the first half of 2003, and generated a strong positive cash flow. Results For the six months ended 30 June 2004 the Group achieved a pre tax profit of £67.2 million, representing an increase of 46% over the pre tax profit of £46.0 million for the same period in 2003. Earnings per share improved by 45% to 40.1 pence. The Group's operating margin was 25.6%, in line with the first six months of 2003. The increase in profits was generated from a turnover of £271.7 million compared with £190.6 million in the equivalent prior year period. Included in this year's figure were land sales income and other income of £13.1 million compared with £9.3 million for the first six months of 2003. As indicated in the Group's trading update on 5 July 2004, the half year results were generated from a higher volume of legal completions than the prior year. In the first six months of 2004, the Group legally completed 1,252 homes compared with 950 legal completions in the same period last year. The Group's average sales price per unit increased to £206,500 for the current year compared to £190,800 for the comparable six months of 2003. This represented an increase year on year of 8.2%. The average size of unit legally completed decreased by 1.8%. Hence, the average sales price per square foot increased by 10.1%. This increase reflected changes in the mix and location of homes legally completed as well as house price increases year on year. Dividends The interim dividend of the Company will amount to 6.4 pence net per share, an increase of 21% over 2003's interim dividend of 5.3 pence. This dividend will be paid on 26 November 2004 to holders of ordinary shares on the register at the close of business on 29 October 2004. Cash flow and borrowings The Group generated positive cash flow from operating activities during the six months ended 30 June 2004 of £79.7 million compared with an outflow of £59.0 million in the comparable period of 2003. The Group has reduced its net borrowings at 30 June 2004 to £5.5 million compared to the opening net borrowings of £45.3 million at 1 January 2004. This level of net borrowing represented a net debt/equity ratio of 1.1%. During the six months ended 30 June 2004, the average net borrowings were £70.4 million and the average debt/equity ratio was 14.7%. Land The strategic land bank increased to 23,053 potential plots at 30 June 2004 compared to 22,152 potential plots held at the start of the year. This increase was after successfully converting 473 plots from the strategic to consented land bank at a discount to market value. The Group's consented landholdings stood at 10,796 plots (10,391 owned plots and 405 controlled third party owned plots) at 30 June 2004 compared with 10,878 plots (10,468 owned plots and 410 controlled third party owned plots) at the start of the year. The Group believes land prices are near their peak and is employing greater caution in respect of purchases of land with planning consent. The substantial strategic landholdings controlled by the Group with short term potential for planning consent provide the opportunity for the Group to curtail purchases of land with consent without reducing its ability to target volume growth over the next few years. Management Stephen Brazier resigned from the Board and the position of Group Operations Director on 31 July 2004. On behalf of the Board I would like to express my thanks to Stephen for his service to the Group and the Board. The Board now comprises four independent non executive directors and two executive directors. The two new and recently announced appointments to the operational board of Bovis Homes Limited, namely Mr Michael Black and Mr Alastair Thomas, will add strength and experience to facilitate the Group's planned growth. Market conditions Housing market activity in the first half of 2004 was strong, continuing the favourable conditions in the second half of 2003. Since the end of June of this year, the housing market has begun to return to a more stable level of activity following interest rate rises in recent months. Increases in house sales prices are expected to moderate in the second half of 2004, generating price improvements at more sustainable levels. The fundamentals of the housing market remain solid. Despite interest rate rises to date, affordability is good with demand exceeding supply for new housing. Prospects The Group has focused on delivering sustainable shareholder returns and has applied its strategies consistently, utilising its landholdings effectively and maximising profit. Shareholder value has been improved by the Group's continued emphasis upon enhancing returns through strong margins and high return on capital employed. The half year performance together with reservations ahead of the comparative period last year provide a sound base for the second half of 2004. Based upon current market conditions and a continuing stable economic environment, the Board is confident of the prospects of the Group for the full year. Nigel Mobbs Chairman 3 September 2004 Bovis Homes Group PLC Group profit and loss account For the six months ended 30 June 2004 Six months Six months ended ended Year ended 30 June 2004 30 June 2003 31 Dec 2003 (unaudited) (unaudited) (audited) £000 £000 £000 ________________________________________________________________________________________________ Turnover - continuing operations 271,672 190,620 478,424 Cost of sales (178,575) (123,070) (308,442) ________________________________________________________________________________________________ Gross profit 93,097 67,550 169,982 Administrative expenses (23,436) (18,663) (40,749) ________________________________________________________________________________________________ Operating profit - continuing operations 69,661 48,887 129,233 Interest receivable and similar income 137 103 145 Interest payable and similar charges (2,613) (2,982) (6,365) ________________________________________________________________________________________________ Profit on ordinary activities before taxation 67,185 46,008 123,013 Tax on profit on ordinary activities (20,200) (13,900) (36,500) ________________________________________________________________________________________________ Profit on ordinary activities after taxation 46,985 32,108 86,513 Dividends proposed/paid (7,525) (6,191) (19,187) ________________________________________________________________________________________________ Retained profit for the financial period 39,640 25,917 67,326 ________________________________________________________________________________________________ ________________________________________________________________________________________________ Basic earnings per ordinary share 40.1p 27.6p 74.2p ________________________________________________________________________________________________ Diluted earnings per ordinary share 39.2p 27.5p 73.8p ________________________________________________________________________________________________ In both the current and preceding financial years there were no other recognised gains or losses. In both the current and preceding financial periods there was no material difference between the historical cost profits and losses and those reported in the profit and loss account. Bovis Homes Group PLC Group balance sheet At 30 June 2004 30 June 2004 30 June 2003 31 Dec 2003 restated (see note 1) (unaudited) (unaudited) (audited) £000 £000 £000 ____________________________________________________________________________________________________________________ Fixed assets Tangible assets 13,129 8,581 8,238 Investments 23 23 23 ____________________________________________________________________________________________________________________ 13,152 8,604 8,261 ____________________________________________________________________________________________________________________ Current assets Stocks and work in progress 640,399 592,314 645,922 Debtors due within one year 18,910 20,166 14,848 Debtors due after more than one year 5,828 5,226 5,577 Cash and short term deposits 69,510 4 30,005 ____________________________________________________________________________________________________________________ 734,647 617,710 696,352 ____________________________________________________________________________________________________________________ Creditors: amounts falling due within one year (138,795) (107,790) (141,915) ____________________________________________________________________________________________________________________ Net current assets 595,852 509,920 554,437 ____________________________________________________________________________________________________________________ Total assets less current liabilities 609,004 518,524 562,698 Creditors: amounts falling due after more than one year (102,164) (93,877) (95,703) Provisions for liabilities and charges (1,469) (1,675) (1,516) ____________________________________________________________________________________________________________________ Net assets 505,371 422,972 465,479 ____________________________________________________________________________________________________________________ Capital and reserves Called up share capital 59,070 58,735 58,870 Share premium 142,151 140,444 141,033 Revaluation reserve 203 203 203 Profit and loss account 303,947 223,590 265,373 ____________________________________________________________________________________________________________________ Equity shareholders' funds 505,371 422,972 465,479 ____________________________________________________________________________________________________________________ These interim accounts were approved by the board of directors on 3 September 2004. Bovis Homes Group PLC Group cash flow statement For the six months ended 30 June 2004 Six months Six months ended ended Year ended 30 June 2004 30 June 2003 31 Dec 2003 (unaudited) (unaudited) (audited) £000 £000 £000 ____________________________________________________________________________________________________ Net cash inflow/(outflow) from operating activities 79,696 (58,978) 7,808 Returns on investments and servicing of finance Interest received 135 262 155 Interest paid (2,565) (2,935) (6,146) ____________________________________________________________________________________________________ (2,430) (2,673) (5,991) ____________________________________________________________________________________________________ Taxation paid (19,000) (17,000) (35,000) ____________________________________________________________________________________________________ Capital expenditure and financial investment Purchase of fixed assets (5,654) (1,048) (1,752) Sale of fixed assets 29 108 424 Purchase of own shares (1,351) (828) (828) Sale of own shares held 180 - - ____________________________________________________________________________________________________ (6,796) (1,768) (2,156) ____________________________________________________________________________________________________ Equity dividends paid (13,004) (10,920) (17,118) ____________________________________________________________________________________________________ Cash inflow/(outflow) before management of liquid resources and financing 38,466 (91,339) (52,457) Management of liquid resources and financing (Increase)/decrease in short term deposits (36,500) 81,544 51,544 Issue of ordinary share capital 1,318 1,846 2,570 ____________________________________________________________________________________________________ (35,182) 83,390 54,114 ____________________________________________________________________________________________________ Increase/(decrease) in cash 3,284 (7,949) 1,657 ____________________________________________________________________________________________________ Bovis Homes Group PLC Group reconciliation of movements in shareholders' funds For the six months ended 30 June 2004 Six months Six months ended ended 30 June 2003 Year ended 30 June 2004 restated (see note 1) 31 Dec 2003 (unaudited) (unaudited) (audited) £000 £000 £000 _________________________________________________________________________________________________________________ Opening shareholders' funds as previously stated 465,479 396,974 396,974 Prior year adjustment to reflect own shares netted against equity - (1,100) (1,100) _________________________________________________________________________________________________________________ Opening shareholders' funds 465,479 395,874 395,874 Purchase of own shares (1,351) (828) (828) Sales of own shares held 218 - - UITF expense of own shares held 247 163 537 Issue of ordinary shares 1,318 1,846 2,570 Total recognised gains and losses for the period 46,985 32,108 86,513 Dividends paid and proposed (7,525) (6,191) (19,187) _________________________________________________________________________________________________________________ Closing shareholders' funds 505,371 422,972 465,479 _________________________________________________________________________________________________________________ Bovis Homes Group PLC Group reconciliation of operating profit to operating cash flows For the six months ended 30 June 2004 Six months Six months ended ended Year ended 30 June 2004 30 June 2003 31 Dec 2003 (unaudited) (unaudited) (audited) £000 £000 £000 _____________________________________________________________________________________________________ Operating profit 69,661 48,887 129,233 Depreciation and amortisation 945 743 1,881 Loss/(profit) on disposal of tangible fixed assets 37 (6) (38) Decrease/(increase) in stocks 5,524 (47,818) (101,426) Increase in debtors (4,447) (7,277) (2,219) Increase/(decrease) in creditors 7,976 (53,507) (19,623) _____________________________________________________________________________________________________ Net cash inflow/(outflow) from operating activities 79,696 (58,978) 7,808 _____________________________________________________________________________________________________ Group reconciliation and analysis of net debt For the six months ended 30 June 2004 Six months Six months ended ended Year ended 30 June 2004 30 June 2003 31 Dec 2003 (unaudited) (unaudited) (audited) £000 £000 £000 _____________________________________________________________________________________________________ Increase/(decrease) in cash 3,284 (7,949) 1,657 Cash outflow/(inflow) from change in net debt 36,500 (81,544) (51,544) _____________________________________________________________________________________________________ Change in net debt 39,784 (89,493) (49,887) Opening net (debt)/funds (45,274) 4,613 4,613 _____________________________________________________________________________________________________ Closing net debt (5,490) (84,880) (45,274) _____________________________________________________________________________________________________ Analysis of net funds/(debt): Cash 3,010 4 5 Bank overdraft - (9,884) (279) Short term deposits 66,500 - 30,000 Borrowings (75,000) (75,000) (75,000) _____________________________________________________________________________________________________ (5,490) (84,880) (45,274) _____________________________________________________________________________________________________ Notes to the accounts 1 Basis of preparation The interim accounts have been prepared on a basis consistent with the accounting policies adopted for the year ended 31 December 2003. These policies are set out in the Group's Annual Report and Accounts. The interim accounts do not constitute statutory accounts within the meaning of Section 240 of the Companies Act 1985. The interim accounts for the six months ended 30 June 2003 and 30 June 2004 have not been audited. The interim accounts for the six months ended 30 June 2004 have been independently reviewed by the Group's auditors, KPMG Audit Plc, and their independent review report is included within these interim results. The abridged information in these interim accounts relating to the year ended 31 December 2003 is derived from the full accounts upon which the auditors issued an unqualified opinion and which have been delivered to the Registrar of Companies. The Group early adopted Urgent Issues Task Force Abstract 38: 'Accounting for ESOP trusts' with effect from the 2003 year end. As a result of the implementation of the requirement of this Abstract, shares in the Company held through Group controlled employee share scheme trusts, which were previously reported as investments, are now recorded as a deduction in equity. At 30 June 2004, the carrying value of these shares was £2,277,000 (June 2003: £1,765,000; December 2003: £1,390,000) which has been set against the profit and loss reserve in the balance sheet. Changes in own shares held and UITF17 expense charges are recorded in the Group reconciliation of movements in shareholders' funds. The comparative figures included in the Group reconciliation of movements in shareholders' funds have been restated in a prior year adjustment to reflect this changed treatment such that shareholders' funds at 1 January 2003 were reduced by £1,100,000. 2 Earnings per share Basic earnings per ordinary share for the six months ended 30 June 2004 is calculated on profit after tax of £46,985,000 (six months ended 30 June 2003: £32,108,000; year ended 31 December 2003: £86,513,000) over the weighted average of 117,048,745 (six months ended 30 June 2003: 116,223,056; year ended 31 December 2003: 116,523,457) ordinary shares in issue during the period. Diluted earnings per ordinary share is calculated on profit after tax of £46,985,000 (six months ended 30 June 2003: £32,108,000; year ended 31 December 2003: £86,513,000) over the diluted weighted average of 119,990,423 (six months ended 30 June 2003: 116,487,860; year ended 31 December 2003: 117,267,429) ordinary shares potentially in issue during the period. The diluted average number of shares is calculated in accordance with FRS 14 'Earnings Per Share'. The dilutive effect relates 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. There is no dilutive effect on the profit after tax used in the diluted earnings per share calculation. Notes to the accounts (continued) 3 Dividends The interim dividend of 6.4 pence net per ordinary share will be paid on 26 November 2004 to holders of ordinary shares on the register at the close of business on 29 October 2004. 4 Taxation The rate of corporation tax applied was 30% for the six months to 30 June 2004 and for the six months ended 30 June 2003, as adjusted to take account of deferred taxation movements. Independent review report by KPMG Audit Plc to Bovis Homes Group PLC Introduction We have been engaged by the Company to review the financial information which comprises the Group profit and loss account, balance sheet, cash flow statement and related notes. We have read the other information contained in the interim report and considered whether it contains any apparent misstatements or material inconsistencies with the financial information. 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 Listing Rules of the Financial Services Authority. 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 interim report, including the financial information contained therein, is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the interim report in accordance with the Listing Rules which require that the accounting policies and presentation applied to the interim figures should be consistent with those applied in preparing the preceding annual accounts except where they are to be changed in the next annual accounts in which case any changes, and the reasons for them, are to be disclosed. Review work performed We conducted our review in accordance with the guidance contained in Bulletin 1999/4: Review of interim financial information issued by the Auditing Practices Board for use in the United Kingdom. A review consists principally of making enquiries of group management and applying analytical procedures to the financial information and underlying financial data and, based thereon, assessing whether the accounting policies and presentation have been consistently applied unless otherwise disclosed. A review is substantially less in scope than an audit performed in accordance with Auditing Standards and therefore provides a lower level of assurance than an audit. Accordingly, we do not express an audit opinion on the financial information. Review conclusion On the basis of our review we are not aware of any material modifications that should be made to the financial information as presented for the six months ended 30 June 2004. KPMG Audit Plc Chartered Accountants London 3 September 2004 This information is provided by RNS The company news service from the London Stock Exchange IR QKNKKQBKDFCK

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