PRELIMINARY RESULTS FOR THE Y

RNS Number : 5034O

Bovis Homes Group PLC

09 March 2009

 



BOVIS HOMES GROUP PLC

PRELIMINARY RESULTS FOR THE YEAR ENDED 31 DECEMBER 2008

Issued 9 March 2009

The Board of Bovis Homes Group PLC today announced its preliminary results for 2008 which have been prepared in accordance with International Financial Reporting Standards as adopted by the EU ('IFRS').

• Pre-exceptional pre-tax profit of £14.4* million (2007: £123.6 million)

• Pre-exceptional basic earnings per share of 9.2p* (2007: 72.4p per share)

• Pre-tax loss for the year of £78.7 million (2007: profit of £123.6 million) 

• Successful renewal of Group's banking arrangements, with committed syndicated facility in place until 2011, and revised covenant package in place

• £108 million of year end net debt** with modest year end gearing of 17% (2007: £44 million of net debt; 6% gearing)

• Inventory provisions of £75.2 million, plus restructuring charges of £5.7 million and goodwill and other impairment charges of £12.2 million: totalling £93.1 million of exceptional items

• Reduction in overhead to £42.0*** million following restructuring (2007: £48.7 million), with further savings in 2009 expected to reduce overhead by 40-50% from 2008 starting point

• Total dividend for the year of 5.0p net per ordinary share (2007: 35.0p), with final dividend passed, reflecting focus on cash generation

• 13,545 plots of land with planning consent (2007: 11,413 plots) and 18,972 potential plots of strategic land (2007: 24,868 potential plots) 

*   Before exceptional items of £93.1 million (2007: £nil)

**  £100.1 million net debt including issue costs of £8.3 million

*** Before exceptional overhead items of £16.6 million (2007: £nil)

Commenting on the results, David Ritchie, the Chief Executive of Bovis Homes Group PLC said:
'2008 has been an unprecedented year. Declining mortgage finance availability and poor economic conditions, allied with low consumer confidence, brought about the toughest trading environment for many years. In response to this, during the year the Group has restructured its operations, sharply reduced its expenditure on land and production, renegotiated its banking agreements and focused its management on the need to manage cashflow in trading conditions which lack good forward visibility.  

The Group has positioned itself well with low year end net debt and commences 2009 with a good number of unsold finished stock homes which it can sell to generate a strong cash margin. The Group will also benefit from a much lower overhead cost base, limited cash commitments on land and an expectation of positive tax cashflow.

Looking forward, the Group expects net debt to reduce, allowing the Group to manage effectively the trading assets on its balance sheet.  The Group's current organisational structure retains capacity to manage greater levels of activity, and through orderly trading during the current challenging conditions, the Group anticipates being well placed to exploit land investment opportunities as improved activity in the housing market emerges.' 

Enquiries:	David Ritchie, Chief Executive	Results issued by:	Andrew Best / Emily Bruning
	Neil Cooper, Finance Director		Shared Value Limited
	Bovis Homes Group PLC		tel: [phone]
	On Monday 9 March - tel: [phone]
	Thereafter - tel: [phone]

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

  Developments in the wider economy have adversely impacted the housebuilding marketplace during 2008. Mortgage availability for home purchase has fallen by around 70%, transaction volumes and house prices have fallen, and consumer confidence is low.  Recognising this, the Group acted quickly and decisively during 2008 to ensure that it is well placed to see through the downturn in an orderly manner.

Results overview

For the year ended 31 December 2008, the Group achieved a pre-exceptional pre-tax profit of £14.4 million, as against £123.6 million in 2007. Pre-exceptional basic earnings per share was 9.2p in 2008 as compared to 72.4p per share in 2007.  Total revenue generated was £282.3 million (2007: £555.7 million), and the Group legally completed 1,817 homes (2007: 2,930 homes).  

 
On a pre-exceptional basis, the Group's operating margin reduced to 7.5% (2007: 22.4%). This reduction reflected a fall in private home sales prices, a shift in the selling mix towards social homes and away from private homes and the de-leveraging impact on cost recovery from the sharp fall in revenues.

In the light of reductions in activity levels and falls in house prices in the current market, the Group has reviewed its asset base, and is charging provisions against the carrying value of some Group assets totalling £77.4 million.  Given provisions made against inventory acquired as part of the Elite Homes acquisition in 2007 as well as the subsequent restructuring of the Northern business, the Group is writing off the goodwill arising from its acquisition of Elite Homes, totalling £10.0 million. Given the scale and unusual nature of these charges, these costs have been disclosed as exceptional. The Group has also charged £5.7 million relating to the restructuring activities it has carried out in the year. Taken together, this has generated a pre-tax exceptional charge of £93.1 million.

After taking into account this charge, the Group made a pre-tax loss of £78.7 million and a basic loss per share of 49.1p in 2008.  

Group net assets reduced by £91.4 million, from £723.7 million to £632.3 million, equivalent to £5.23 per share at the year end. This reduction in net assets was driven primarily by the Group's retained loss in the year, inclusive of exceptional items, and an adverse movement in value of the pension scheme of £7.8 million.  

Net debt before issue costs was £108 million at the year end, and year end gearing was a modest 17%, with net borrowing utilisation less than half of the Group's committed loan facility.

The Group successfully refinanced its banking arrangements during 2008, providing it with £220 million of committed funds, reducing over the life of the agreement, which ends in March 2011, to £160 million. The covenant package in this agreement has also been renegotiated, allowing the Group to focus on managing its cashflow through the removal of an interest cover covenant, and its replacement with a cashflow cover covenant.

Arising from this focus on managing cashflow, the Group reviewed its pricing policies during the year, and was more aggressive in seeking to hit its internal volume targets through discounting prices and agreeing bulk sales through the Government's house buying programme over the second half of the year. Whilst this has necessarily impacted both average sales price and profit margin, it has been significantly cash generative.

The Group has also reduced its overhead cost base, with assertive cost reduction and its regional structure rationalised from five to three active regions.  After starting the year with 1,039 employees, the Group reduced its headcount by circa 60% to 441 employees in March 2009, through a recruitment freeze and two restructuring events.  At £42.0 million, pre exceptional items, Group overhead in 2008 has reduced by 14% from the prior year (2007: £48.7 million). Looking ahead, the Group expects that its overhead during 2009 will be in a range 40%-50% lower than its start point in 2008 following these actions.  Notwithstanding this significant saving in overheads, the Group has retained an organisational structure which will facilitate growth in business activity levels as market conditions improve.

Finally, the Group has also reduced housing production sharply to limit the level of working capital in this area. Despite starting the year with a build programme designed to construct around 3,500 units of production, the Group was able to reduce activity to only 1,782 units of production, less than the number of homes legally completed and a 39% reduction on the previous year (2007: 2,923 units of production). New unit starts fell further, from 3,406 units in 2007 to 1,179 units in 2008, a 65% decrease in activity.  Land purchasing activities have also been reduced significantly, with only 173 plots added to the consented land bank during 2008 through purchase in the consented land market.  

Revenue

Total revenue for the Group was £282.3 million in 2008 as compared to £555.7 million in 2007. The key component of revenue for the Group is housing revenue, which was £274.0 million for the year ended 31 December 2008, as compared to £525.9 million for the prior year. The Group legally completed 1,817 homes in 2008 compared to 2,930 legal completions in 2007.  Of these, 594 were social homes (2007: 637) and 1,223 were private homes (2007: 2,293), a social mix of 33% as compared to 22% in 2007.

The average sales price of legal completions fell over the year, from £179,500 in 2007 to £150,800 in 2008.  This fall was driven by a combination of factors. Firstly, the average sales price of private homes fell by 12%, from £206,200 to £181,000 as the Group responded to a weaker market to deliver the Group's volume aspirations and as the average size of private homes legally completed reduced.  Secondly, there was a shift in selling mix towards social housing, from 22% in 2007 to 33% of legal completions in 2008. With an average sales price of £88,500 in 2008 (2007: £83,400), the increase in the mix of this category diluted the overall average sales price achieved.

The average size of the Group's private homes fell by 5% in 2008 to 972 square feet as compared to 1,023 square feet in 2007.  Taking this into account, the Group's private sales price per square foot fell by less than the average sales price, an 8% fall from £202 per square foot to £186 per square foot. Overall, the Group's legally completed homes reduced in size from 969 square feet in 2007 to 909 square feet, a fall of 6%.  

Given the dearth of activity in the consented land market and uncertainty over achievable values, the Group limited disposals of land during 2008 to £4.9 million, as compared to £25.1 million in 2007. Other income at £3.4 million for 2008 was slightly behind that of the prior year.

Pre exceptional operating profit

The Group achieved £21.3 million of operating profit, before exceptional items, for the year ended 31 December 2008, at an operating margin of 7.5%.  This was a sharp reduction on the previous year's operating profit of £124.4 million and operating margin of 22.4%. Gross margins have fallen by around 9 ppts, reflective primarily of an underlying reduction in private home profit margins as prices fell, but also of an increase in the social mix and a loss of scale-benefits on strategic planning fees and other costs charged as incurred against gross profit.  Despite a 14% absolute reduction in overhead, from £48.7 million in 2007 to £42.0 million in 2008, excluding exceptional items, the operating margin was further impacted by the lower recovery of overhead as the ratio to revenue grew from 8.7% in 2007 to 14.9% in 2008.

Profit from land sales, less option costs, was £1.3 million in 2008, as compared with £10.0 million in 2007.

Exceptional and non-recurring costs

The Group discloses items as exceptional when the Board deems them material by size or nature, non-recurring and of such significance that they require separate disclosure.  

The Group has reviewed the carrying value of its assets and liabilities as at 31 December 2008. Following this review, the Group has charged an exceptional provision against the carrying value of inventory and an impairment charge for available-for-sale financial assets and fixed assets.  The Group has also written off the goodwill arising from the acquisition of Elite Homes in 2007.

The Group has reviewed its inventory carrying values on a site by site basis, taking into account local management and the Board's estimates of current achievable pricing in local markets.  Where this gave rise to a situation where the current carrying costs of the asset were higher than the estimated net realisable value, a provision has been recognised for the difference. This provision includes allowance for both land and part-exchange assets.  In total, £75.2 million has been provided.

Prior to the expiry of the 12 month review period for fair value adjustments relating to the acquisition of Elite Homes in October 2007, the Group revised its fair value estimates downwards by £0.8 million, reflecting finalisation of estimates for liabilities existing at the point of acquisition. This adjustment increased the cost of acquired goodwill by £0.8 million, to £10.0 million in total. Subsequently at the year end, the Group has reviewed the goodwill it is carrying and, given the fact that provisions have been recognised relating to the carrying value of land acquired by the Group as part of the Elite acquisition and given that the Group has restructured its Northern regional business, the Group has fully impaired this goodwill reflecting the Board's current view of the value of this intangible asset.

The Group has reviewed the carrying values of its available-for-sale financial assets, revisiting the long term growth assumptions built into its valuation model, and in particular the likelihood of a short-term decline in pricing, with a longer term return to trend. This has given rise to an impairment charge of £1.2 million.  An impairment charge of £1.0 million has also been made relating to the Group's freehold offices, given the fall in commercial property values during 2008.

The Group has also charged restructuring costs of £5.7 million reflecting the one-off costs of two restructuring events that took place during the year. These costs include redundancies as well as costs relating to office closures.

Pre-tax loss and loss per share

Together with £21.3 million of pre-exceptional operating profit (2007: £124.4 million), the Group incurred £6.9 million of net financing charges (2007: £0.8 million) and £93.1 million of exceptional items (2007: £nil), resulting in a pre-tax loss of £78.7 million (2007: pre-tax profit of £123.6 million). 

Before exceptional items, the Group delivered basic earnings per share of 9.2p. However, after exceptional items, basic loss per share was 49.1p. This is as compared to basic earnings per share of 72.4p in 2007.

Land 

The Group's consented land bank grew by 2,132 plots from 11,413 plots at 1 January 2008 to 13,545 plots at 31 December 2008, a closing land bank representing 7.5 years of supply at 2008 activity levels.  The vast majority of land bank additions during the year related to successful transfers from the strategic land bank, including 2,200 plots at Filton near Bristol and the first 900 plots at Wellingborough. The Group limited acquisitions in the consented land market to 173 plots during the year.  The strategic land bank as at 31 December 2008 was 18,972 potential plots (2007: 24,868 potential plots). The Group transferred 3,830 plots into the consented land bank during 2008 and saw a further net movement of 2,066 potential plots reflecting updated views on the likelihood of or quantum of viable residential planning consents being achieved given current conditions in the housing market.  Prior to the inventory provision taken in 2008, the average consented land plot cost was £40,200 with the equivalent figure for 2007 being £43,400.  Adjusting for the inventory provision, the average plot cost reduced to £35,000.  

Financing & cashflow

Net financing charges were £6.9 million in 2008 (2007: £0.8 million).  Net bank interest charges for 2008 were £5.6 million, which included the amortisation of arrangement fees and commitment fee charges. This was as compared to £2.4 million of net income in 2007.  On average during 2008, the Group had £97 million of net debt, as compared to an average net cash in hand of £49 million in 2007.  The Group incurred a £2.5 million finance charge (2007: £4.1 million), reflecting the difference between the cost and nominal price of land bought on deferred terms and which is charged to the income statement over the life of the deferral of the consideration payable.  This year over year reduction was largely driven by a corresponding fall in land creditors.  

The Group benefited from a £1.1 million net pension financing credit during 2008. This credit arose as a result of the expected return on scheme assets being in excess of the interest on the scheme obligations. The equivalent credit in 2007 was £0.9 million.  The Group also benefited from a finance credit of £0.1 million arising from the unwinding of the discount on its available-for-sale financial assets during 2008. 
 

Over the year, the Group managed to limit the net cash outflow from operations to only £4 million, reflecting positively on the actions of the Group in reducing cash outflows, despite sharply falling revenues. The Group's net debt before issue costs increased by £64 million, from £44 million to £108 million, the bulk of this increase arising during the first half of 2008.  In addition to the modest cash outflow from operations, the Group paid £17 million of tax largely relating to 2007's profits, £27 million of dividends and £17 million of interest and related charges, including £8.3 million of arrangement fees and related costs linked to its successful bank facility refinancing.

As at 31 December 2008, the Group had £11.6 million of cash in hand, and borrowings of £120 million. The Group has in place a £220 million committed syndicated banking facility, which steps down to £180 million in February 2010 and to £160 million in September 2010 and which matures in March 2011.  Looking ahead, the Group anticipates around £50 million of net debt by the end of 2009.

Taxation

The Group has accounted for a tax credit of £19.7 million in 2008 (2007: tax charge of £36.7 million). Of this, a £3.3 million charge has arisen on pre-exceptional pre-tax profits of £14.4 million, and a £23.0 million tax credit has arisen on pre tax exceptional items of £93.1 million.  This equates to an effective tax rate of 25.1% (2007: 29.7%). The major contributor to this lowered effective rate has been the £10.0 million impairment of goodwill arising on acquisition which is a non-deductible charge. The Group has also benefited from a £1.0 million overprovision of tax charge relating to prior years.

As a result of the tax credit arising from the exceptional items taken in 2008, the Group has recognised a tax asset of £23.6 million on its closing balance sheet as at 31 December 2008.

Pensions

At the start of 2008, the Group enjoyed a surplus on its pension scheme of £1.0 million, but following a roll-forward of the valuation, with latest estimates provided by the Group's actuarial advisors, the Group's pension scheme had a deficit of £6.8 million at 31 December 2008. This adverse movement has arisen from a combination of a reduction in value of the scheme's assets, partially offset by a favourable movement in the discount rate applicable to the scheme's liabilities.  

Net assets

The Group's net assets at 31 December 2008 were £632.3 million, £91.4 million lower than the net asset position as at 31 December 2007.  This was primarily as a result of an £86.0 million retained loss, together with a movement in the value of the pension scheme reserve by £6.4 million. 

Net assets per share as at 31 December 2008 was £5.23 as compared to £5.99 at 31 December 2007.

Analysis of net assets
					2008		2007
					£m		£m
Net assets at 1 January					723.7		677.8
Pre-exceptional profit after tax for the year					11.1		86.9
Exceptional charges net of tax					(70.1	)	-
Dividends					(27.0	)	(45.0	)
Share capital issued					0.5		1.4
Net actuarial movement on pension scheme through reserves					(6.4	)	2.4
Deferred tax on other employee benefits					-		(0.8	)
Current tax recognised directly in equity					0.5		-
Adjustment to the fair value of cash flow hedges					-		0.1
Adjustment to reserves for share based payments					-		0.9
Net assets at 31 December					632.3		723.7

Dividends

During 2008, the Group paid the 2007 final dividend of 17.5p per share and the 2008 interim dividend of 5.0p per share. In total, this equated to £27.0 million (2007: £45.0 million).  As previously announced, the Board has decided not to recommend payment of a final dividend for 2008, having regard to trading conditions.

Employees and the Board

2008 has been a difficult year for the employees, suppliers and sub-contractors of the Group. The Group has seen two restructuring events leading to more than half its employees leaving the business during the year.  The Board took these necessary and essential decisions after consideration of alternative courses of action, and recognises the significant impact its decisions have had on many individuals, which is regrettable. The Board would also like to recognise the commitments and contribution of those colleagues who have been made redundant during the year and would like to wish them every success in their future employment.

Whilst distressing for those individuals leaving, it is often also difficult for those employees remaining, who may have to take on additional tasks in a more uncertain environment.  In reducing production activity and seeking savings throughout the business, the Group also recognises that this has been very challenging for the many suppliers and sub-contractors who provide services to the business.

The Board would like to thank its employees, suppliers and sub-contractors for their continued hard work and commitment during a year that has been very challenging for a great many individuals connected to the Group in many respects.

The Board would also like to thank Mr Geoff Coleman, the regional Managing Director of South East region, who retired during the year after more than 20 years service.

During a year of major changes in the marketplace, the Group was pleased that the retiring Chief Executive, Mr Malcolm Harris, remained a member of the Board and became non-executive Chairman in July 2008. On this date, Mr David Ritchie was appointed Chief Executive, having previously been Group Managing Director, a role which was not thereafter retained. As part of these changes, Mr Alastair Lyons joined the Group as non-executive Deputy Chairman and Senior Independent Director in October 2008.

Market conditions & prospects

As has been well reported, the current market for housebuilders is exceedingly weak, and accordingly, the Group's priorities are to manage through the current downturn in an orderly way. The Group commenced 2009 with a healthy number of unsold finished stock homes which it can sell to generate a strong cash margin, preserving the value in the balance sheet whilst continuing to maintain a relatively low level of indebtedness.  Through its efforts to date, as at 6 March 2009, the Group has secured 772 net reservations for legal completion in 2009, as compared to 1,262 net reservations at the same point in 2008.  Whilst this represents a decrease year over year of 39%, the 330 private net reservations achieved in the first nine weeks of the year represents a 22% increase on the prior year's comparative of 271 net reservations.

Looking ahead, the Group expects that transaction volumes will begin to improve as lower house prices and lower mortgage interest rates feed through into the marketplace. This pick up in activity does, however, depend on the credit market being capable of funding increased transactional growth.  With improved volume, market pricing will begin to stabilise. However, visibility on the timing of these likely market developments is not good and for the present, the Group is positioning itself assuming a continuation in 2009 of current market conditions.

With low levels of debt and a largely strategically sourced and long consented land bank the Group anticipates being well placed in terms of balance sheet capability for this eventuality.

  Bovis Homes Group PLC
Group income statement

For the year ended 31 December 2008	Before exceptional items		Exceptional items		Continuing operations
	2008		2008		2008		2007
	£000		£000		£000		£000
Revenue - continuing operations	282,326		-		282,326		555,702
Cost of sales	(219,011	)	(76,487	)	(295,498	)	(382,659	)
Gross profit / (loss)	63,315		(76,487	)	(13,172	)	173,043
Administrative expenses	(42,018	)	(16,641	)	(58,659	)	(48,653	)
Operating profit / (loss) before financing costs	21,297		(93,128	)	(71,831	)	124,390
Financial income	1,389		-		1,389		6,158
Financial expenses	(8,292	)	-		(8,292	)	(6,962	)
Net financing costs	(6,903	)	-		(6,903	)	(804	)
Profit / (loss) before tax	14,394		(93,128	)	(78,734	)	123,586
Income tax	(3,319	)	23,058		19,739		(36,727	)
Profit / (loss) for the period attributable to equity holders of the parent	11,075		(70,070	)	(58,995	)	86,859
Basic earnings/(loss) per ordinary share	9.2p		(58.3p	)	(49.1p	)	72.4p
Diluted earnings/(loss) per ordinary share	9.2p		(58.3p	)	(49.1p	)	72.2p

  Bovis Homes Group PLC

Group balance sheet

At 31 December 2008			2008		2007
			£000		£000
					Restated
Assets
Goodwill			-		10,036
Property, plant and equipment			12,347		14,451
Available for sale financial assets			6,030		1,085
Investments			22		22
Deferred tax assets			5,548		3,568
Trade and other receivables			2,418		2,589
Retirement benefit asset			-		1,010
Total non-current assets			26,365		32,761
Inventories			780,808		869,355
Trade and other receivables			37,947		52,725
Cash			11,634		346
Current tax assets			23,550		-
Total current assets			853,939		922,426
Total assets			880,304		955,187
Equity
Issued capital			60,497		60,415
Share premium			157,127		156,734
Retained earnings			414,654		506,594
Total equity attributable to equity holders of the parent			632,278		723,743
Liabilities
Bank loans			111,730		25,000
Trade and other payables			24,907		28,816
Retirement benefit obligations			6,790		-
Provisions			1,623		1,463
Total non-current liabilities			145,050		55,279
Bank overdraft			-		3,588
Bank loans			-		16,000
Trade and other payables			101,964		142,291
Provisions			1,012		500
Current tax liabilities			-		13,786
Total current liabilities			102,976		176,165
Total liabilities			248,026		231,444
Total equity and liabilities			880,304		955,187

These accounts were approved by the Board of directors on 6 March 2009.        

  Bovis Homes Group PLC

Group statement of cash flows

For the year ended 31 December 2008
			2008		2007
			£000		£000
					Restated
Cash flows from operating activities
(Loss) / profit for the year			(58,995	)	86,859
Depreciation			1,168		1,421
Impairment of goodwill			10,036		-
Impairment of assets			2,241		-
Financial income			(1,389	)	(6,158	)
Financial expense			8,292		6,962
Profit on sale of property, plant and equipment			(146	)	(43	)
Equity-settled share-based payment (credit) / expense			(22	)	133
Income tax (credit) / expense			(19,739	)	36,727
Write-down of inventories			75,202		-
Other non-cash items			-		996
Operating profit before changes in working capital and provisions			16,648		126,897
Decrease / (increase) in trade and other receivables			8,924		(29,821	)
Decrease / (increase) in inventories			13,345		(42,195	)
Decrease in trade and other payables			(43,444	)	(44,149	)
Increase / (decrease) in provisions and employee benefits			702		(1,671	)
Cash generated from operations			(3,825	)	9,061
Interest paid			(8,769	)	(4,812	)
Income taxes paid			(16,924	)	(39,052	)
Net cash from operating activities			(29,518	)	(34,803	)
Cash flows from investing activities
Interest received			187		5,420
Acquisition of property, plant and equipment			(143	)	(879	)
Proceeds from sale of plant and equipment			214		106
Acquisition of subsidiary net of cash acquired			-		(73,304	)
Net cash from investing activities			258		(68,657	)
Cash flows from financing activities
Dividends paid			(27,049	)	(44,990	)
Proceeds from the issue of share capital			475		1,367
Drawdown of borrowings			79,000		1,000
Costs associated with refinancing			(8,290	)	-
Net cash from financing activities			44,136		(42,623	)
Net increase / (decrease) in cash and cash equivalents			14,876		(146,083	)
Cash and cash equivalents at 1 January			(3,242	)	142,841
Cash and cash equivalents at 31 December			11,634		(3,242	)

         Bovis Homes Group PLC

         Group statement of recognised income and expense

For the year ended 31 December 2008
			2008		2007
			£000		£000
Effective portion of changes in fair value of interest rate cash flow hedges			-		160
Deferred tax on changes in fair value of interest rate cash flow hedges			-		(48	)
Actuarial (loss) / gain on defined benefits pension scheme			(8,820	)	3,750
Deferred tax on actuarial movements on defined benefits pension scheme			2,470		(1,325	)
Current tax on share-based payments recognised directly in equity			498		-
Deferred tax on other employee benefits			(22	)	(790	)
Net (expense) / income recognised directly in equity			(5,874	)	1,747
(Loss) / profit for the period			(58,995	)	86,859
Total recognised income and expense for the period attributable to equity holders of the parent			(64,869	)	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 consolidated financial statements of the Company for the year ended 31 December 2008 comprise the Company and its subsidiaries (together referred to as 'the Group') and the Group's interest in associates.

The consolidated financial statements were authorised for issue by the directors on 6 March 2009. The accounts were audited by KPMG Audit Plc.

The financial information included within this statement does not constitute the Company's statutory accounts for the year ended 31 December 2007 or 2008. The information contained in this statement has been extracted from the statutory accounts of Bovis Homes Group PLC for the year ended 31 December 2008, which have not yet been filed with the Registrar of Companies, on which the auditors have given an unqualified audit report, not containing statements under section 237(2) or (3) of the Companies Act 1985.

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

The preparation of financial statements in conformity with IFRS requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

2    Basis of consolidation

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

Associates are those entities in which the Group has significant influence, but not control, over the financial and operating policies. The consolidated financial statements include the Group's share of the total recognised gains and losses of associates on an equity accounted basis, from the date that significant influence commences until the date that significant influence ceases.

3    Accounting policies

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

4    Prior year restatements

In 2007, the cashflow statement movement in trade and other payables was understated by £4,630,000 and the movement in provisions and employee benefits was overstated by an equal and opposite amount. In the 2008 Report and Accounts, in the prior year cashflow statement comparatives, the movement in trade and other payables is now £44,149,000 (previously £39,519,000) and the movement in provisions and other employee benefits is now £1,671,000 (previously £6,301,000).

Finalisation of the fair valuation exercise arising on acquisition of Elite Homes Group Ltd in 2007 has now taken place. This has had the effect of increasing goodwill arising on acquisition as at 31 December 2007 from the previously reported £9,176,000 to £10,036,000, reducing inventories to £869,355,000 (previously reported £870,550,000) and increasing deferred tax to £3,568,000 (previously £3,233,000).

5    Exceptional items

Write-down of inventories

The Group has reviewed the carrying costs of its inventory items, comparing the carrying costs of the asset against estimates of net realisable value. Net realisable value has been arrived at using the Board's estimates of achievable selling prices taking into account current market conditions, and after deduction of an appropriate amount for selling costs. This has given rise to a land write-down totalling £69.9 million and a write-down of £5.3 million on unsold part-exchange properties: a provision of £75.2 million in total.

Impairment of goodwill

At 31 December 2008 the Group conducted an impairment review of its goodwill. This resulted in a £10.0 million write-down, reflecting the write-off of all goodwill held at the balance sheet date.

Restructuring costs

During the year ended 31 December 2008 the Group incurred £5.7 million (2007: £nil) of costs in relation to reorganising and restructuring the Group. Of this total, £4.6 million related to staff redundancies.

Other exceptional items

The Group has reviewed the carrying value of its fixed assets, and has made a £1.0 million provision to reflect the impairment to carrying values of its freehold offices following a fall in commercial property values during 2008. The Group has also taken an impairment charge to income relating to the impairment of its available-for-sale financial assets, totalling £1.2 million. 

6    Reconciliation of net cash flow to net debt 

			2008		2007
			£000		£000
Net increase / (decrease) in net cash and cash equivalents			14,876		(146,083	)
Drawdown of borrowings after issue costs			(70,730	)	(1,000	)
Fair value adjustments to interest rate swaps			-		160
Net (debt)/cash at start of period			(44,242	)	102,681
Net debt at end of period			(100,096	)	(44,242	)
Analysis of net debt:
Cash and cash equivalents			11,634		(3,242	)
Unsecured bank loan			(120,000	)	(41,000	)
Issue Costs			8,270		-
Net debt			(100,096	)	(44,242	)

7    Income taxes

Income tax is the expected tax payable or receivable on the taxable income or loss for the year, calculated using a corporation tax rate of 28.5% applied to the pre-tax income or loss, adjusted to take account of deferred taxation movements and any adjustments to tax payable for previous years.  Tax receivable for current and prior years is classified as a current asset.

8    Dividends

The following dividends were paid by the Group.

			2008		2007
			£000		£000
Prior year final dividend per share of 17.5p (2007: 20.0p)			21,031		23,976
Current year interim dividend per share of 5.0p (2007: 17.5p)			6,018		21,014
Dividend cost			27,049		44,990

The Board has decided not to propose a final dividend in respect of 2008.

9        Earnings or Loss per share

Basic earnings per ordinary share before exceptional items for the year ended 31 December 2008 is calculated on profit after tax of £11,075,000 (year ended 31 December 2007 profit: £86,859,000) over the weighted average of 120,268,986 (year ended 31 December 2007: 119,984,811) ordinary shares in issue during the period.

Basic loss per ordinary share on exceptional items for the year ended 31 December 2008 is calculated on an exceptional loss after tax of £70,070,000 for 2008 (2007: £nil) over the weighted average of 120,268,986 (year ended 31 December 2007: 119,984,811) ordinary shares in issue during the period.

Basic loss per ordinary share for the year ended 31 December 2008 is calculated on loss after tax of £58,995,000 (year ended 31 December 2007 profit: £86,859,000) over the weighted average of 120,268,986 (year ended 31 December 2007: 119,984,811) ordinary shares in issue during the period.

Diluted earnings per ordinary share before exceptional items for the year ended 31 December 2008 is calculated on profit after tax of £11,075,000 (year ended 31 December profit: £86,859,000) expressed over the diluted weighted average of 120,314,451 (year ended 31 December 2007: 120,244,911) ordinary shares potentially in issue during the period. Diluted loss per ordinary share on exceptional items for the year ended 31 December 2008 is calculated on an exceptional loss after tax of £70,070,000 for 2008 (2007: £nil) and diluted loss per ordinary share is calculated on loss after tax of £58,995,000 (year ended 31 December 2007 profit: £86,859,000) both expressed over the weighted average of 120,268,986 ordinary shares 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.  A loss per share cannot be further reduced through dilution.  

10    Circulation to shareholders

The consolidated financial statements will be sent to shareholders on or about 3 April 2009. 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 slide presentation document which will be presented at the Group's results meeting on 9 March 2009.

 

END

 

 

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