Half Yearly Report

RNS Number : 9438L

Bovis Homes Group PLC

19 August 2013

 



19 August 2013

BOVIS HOMES GROUP PLC

RESULTS FOR THE HALF YEAR ENDED 30 JUNE 2013

50% INCREASE IN HOUSING PROFIT AND ACCELERATING GROWTH IN RETURNS EXPECTED

Bovis Homes Group PLC today announces its half year results for 2013.

Financial and operational highlights for H1 2013

	H1 2013	H1 2012	Change
Housing revenue **	£183.2m	£157.1m	+17%
Housing operating profit **	£20.4m	£13.6m *	+50%
Housing operating margin **	11.1%	8.7% *	+2.4ppts
Operating profit	£20.5m	£17.5m *	+17%
Operating margin	11.1%	10.3% *	+0.8ppts
Profit before tax	£18.6m	£15.6m *	+19%
Earnings per share	10.8p	8.6p *	+26%
Dividend per share	4.0p	3.0p	+33%
Net (debt) / cash	£(48.4)m	£22.2m

·     With market house price increases estimated at 1% to 2% to date, average sales price increased by 15% to £188,500 (H1 2012: £164,400) primarily due to mix, modestly ahead of Group's expectations

·     Legal completions of 963 homes (H1 2012: 944 homes)

·     Average active sales outlets increased by 11% to 91 in H1 2013 (2012: 82)

·     2,767 consented plots on 18 sites added to the land bank during H1 2013

·     Contracts in place as at 30 June 2013 to acquire another 1,018 plots on 11 sites, the majority of which are expected to be added to the consented land bank in H2 2013

·     Consented land bank of 15,579 plots as at 30 June 2013, with potential gross profit of £733 million, calculated using prevailing sales prices and build costs (31 December 2012: 13,776 plots with gross profit potential of £600 million)

·     19,341 potential plots of strategic land (31 December 2012: 19,318 potential plots)

Current trading and outlook

·     Strong trading in the 32 weeks to 9 August 2013 with a 43% increase in private reservations to 1,712 homes (2012: 1,195)

·     Sales rate improvement of 28% to 0.59 net private reservations per site per week (2012: 0.46)

·     Cumulative sales achieved to 9 August for 2013 legal completion of 2,505 homes (2012: 1,844), with the Group now circa 90% sold for legal completions in 2013

·     Average sales price for 2013 legal completions expected to be at least 10% greater than 2012, primarily reflecting mix benefits with modest market price improvements

·     Housing gross margin expected to be between 23% and 24% for 2013 full year (2012: 22.6%), with an expected operating margin approaching 15% (2012*: 13.3%)

·     Further significant improvement in return on capital employed for the 2013 full year, now expected to be at least 10.0% (2012*: 7.7%)

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

"The Group has performed strongly during the first half of 2013 and has delivered a 50% increase in housing operating profit. This significant increase is a result of the ongoing successful execution of the Group's strategy reflecting the compound positive effect of increased volumes, improved average sales price and stronger profit margins.

"The Group has delivered a 43% increase in private reservations in the year to date, resulting from the improving quality and increasing number of active sales outlets. This improvement has been further assisted by the positive effect of stronger home buyer sentiment, supported by the Help to Buy scheme launched in April 2013.

"The Group is circa 90% sold for the current financial year. This will allow the Group to deliver the required remaining reservations over the next few weeks and to build a significantly enhanced forward order book for 2014.

"The positive trading position, combined with an increasing proportion of legal completions on new, more profitable sites, will enable the Group to increase profits significantly in 2013 in line with its expectations, subject to stable market conditions. With a further increase in capital turn, this strong profit is expected to generate a return on capital for 2013 of at least 10%.

"The success of the Group in acquiring high quality, consented residential land, combined with the strong pipeline of future land opportunities, will support further sales outlet growth into 2014 and beyond.  This in turn is expected to lead to further strong improvements in return on capital employed going forward.

"With the progressive, sustainable improvement in the Group's profits and the Board's confidence in the Group's growth strategy, the interim dividend has been increased by 33% to 4.0 pence per share."

* 2012 has been restated following the adoption of IAS19R "Employee Benefits"

** Housing revenue, Housing operating profit and Housing operating margin exclude revenue and profit from land sales

Enquiries:	David Ritchie, Chief Executive	Results issued by	Andrew Jaques / Reg Hoare /
	Jonathan Hill, Finance Director		James White / Giles Robinson
	Bovis Homes Group PLC		MHP Communications
	On 19 August - tel: [phone]		On 19 August - tel: [phone]
	Thereafter - tel: [phone]

Analysts wishing to remotely listen in to the presentation at 09:30am may dial [phone] followed by the participant code 97251425#.

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

 Introduction

During the first half of 2013, Bovis Homes has made significant progress in the ongoing delivery of its strategy to improve shareholder returns with a strong improvement in housing profit, an increase in the number of active sales outlets, a material improvement in the rate of sale per site and the successful continuation of investment in consented and strategic land.

The general UK economy remains weak, but is showing initial signs of a recovery in growth. In the first half of 2013 the UK housing market has been measurably stronger than in 2012. Home buyers have greater access to mortgages and appear more confident about buying a home. This has been supported by the Help to Buy shared equity scheme, launched by the Government in April 2013.

Strategy

The focus of the Group's strategy remains to deliver material improvements in shareholder returns by increasing profitability whilst improving the efficiency of capital employed.

The Group will deliver enhanced profits from the compound positive effect of:

·     Volume growth from a greater number of sales outlets, primarily in the south of England, and improving the sales rate per site.

·     Higher average sales price from traditional homes on better located sales outlets.

·     Stronger profit margins from an increasing proportion of legal completions from new higher margin sites.

Building the future profit potential in the land bank will be delivered by:

·     Adding new consented sites to the land bank which will achieve higher profit margins.

·     Continuing investment in strategic land and delivering strategic land conversion through achievement of residential planning consent.

·     Progressively trading through older, lower margin sites.

Greater efficiency of capital employed will be delivered by:

·     Efficient cash utilisation with more sites being acquired on deferred terms.

·     Maintaining tight control of work in progress.

·     Managing the land bank through acquiring smaller sites on average and selectively selling consented plots on larger sites.

Significant progress has been made in the delivery of this growth strategy with c12,000 consented plots across c80 new sites acquired since the housing market downturn. The majority of these new sites are in the south of England and are expected to deliver stronger sales prices and profit margins. These new sites are contributing to an increase in the number of sales outlets operated by the Group, which reached 92 during the first half of 2013, an increase of over 50% compared to the low point of 60 sales outlets reached during the first half of 2010.

The ongoing successful execution of this strategy will enable the Group, assuming the continuation of current market conditions, to continue to increase output capacity and, therefore increase revenue and further improve profit margins in the full year 2013. As a result, return on capital employed is now expected to increase to at least 10.0% in 2013. In the foreseeable future, with capital turn and margins expected to continue to improve, the Group believes that the return on capital employed can achieve a level within the range of 15% to 18%, assuming current market conditions continue.

Revenue

The Group generated total revenue of £184.4 million during the first half of 2013, compared to total revenue in H1 2012 of £170.3 million.

Units		H1 2013		H1 2012
Private legal completions		839		806
Social legal completions		124		138
Total legal completions		963		944
Revenue (£m)
Private legal completions		168.0		141.1
Social legal completions		13.6		14.1
Revenue from legal completions		181.6		155.2
Other revenue		1.6		1.9
Housing revenue		183.2		157.1
Land sales revenue		1.2		13.2
Total revenue		184.4		170.3

Revenue from legal completions in the first six months of 2013 was £181.6 million, 17% ahead of the same period in the prior year. With other revenue of £1.6 million (H1 2012: £1.9 million), housing revenue was £183.2 million (H1 2012: £157.1 million). The land sales revenue during H1 2013 related to the recognition of deferred land sales income, associated with the delivery of services to a parcel of land sold in 2011 (H1 2012: £13.2 million).

The Group legally completed 963 homes in the first six months of 2013 (H1 2012: 944). Of these, 839 were private homes (H1 2012: 806 homes), an increase of 4%.  Social homes comprised 13% of total legal completions (124 homes), compared to 15% (138 homes) in the first half of 2012.

In the first six months of 2013 the average sales price of homes legally completed increased by 15% to £188,500 (H1 2012: £164,400), reflecting an improving mix of homes.  The average sales price of the Group's private legal completions was 14% higher at £200,200 (H1 2012: £175,000), benefiting from stronger sales prices on new sites. The underlying year to date increase in housing market prices is considered to have been modest at some 1% to 2%.

Operating profit

The Group delivered an operating profit for the six months ended 30 June 2013 of £20.5 million at an operating margin of 11.1% (H1 2012*: £17.5 million at an operating margin of 10.3%). Excluding land sales, the Group increased operating profit by 50% to £20.4 million with an operating margin of 11.1% (H1 2012*: £13.6 million at an operating margin of 8.7%).

The gross margin achieved in the first half of 2013 was 23.0%, which compared to 21.6% in H1 2012. The land sales profit recognised during H1 2013 was £0.1 million, compared to £3.9 million in H1 2012.  Housing gross margin increased to 23.1% (H1 2012: 20.9%), which was generated by an increasing contribution from the higher margin sites acquired since the downturn.

As anticipated, overheads increased by 13% and constituted 12.0% of housing revenue in the first half of 2013 (H1 2012*: 12.2%). The Group has invested in sales and marketing activity, given the increasing number of active sales outlets, and in progressing newly acquired sites through the detailed planning and design phases to start work on site.  All such costs are written off as incurred.  The Group expects that overheads as a percentage of revenue will reduce from 9.5% in 2012* to below 9% for the 2013 full year.

* 2012 has been restated following the adoption of IAS19R "Employee Benefits"

Profit before tax

The Group achieved profit before tax of £18.6 million, comprising operating profit of £20.5 million, net financing charges of £2.0 million and a profit from joint ventures of £0.1 million.  This compares to £17.5 million of operating profit, £2.0 million of net financing charges and a profit from the joint venture of £0.1 million in the first six months of 2012, generating a profit before tax of £15.6 million in that period, restated for IAS19R.  There were no exceptional items in the first six months of either 2013 or 2012.

Dividends

With the accelerating delivery of the Group's growth strategy and a strong improvement in the performance and future prospects of the Group, an interim dividend of 4.0p per share has been declared (2012 interim dividend: 3.0p).  The Board expects to continue to increase dividends progressively as earnings per share increase.

The interim dividend will be paid on 22 November 2013 to holders of ordinary shares on the register at the close of business on 27 September 2013.  The dividend reinvestment plan, introduced in 2012, gives shareholders the opportunity to reinvest their dividends.

Financing & cashflow

The Group incurred net financing charges of £2.0 million in the first half of 2013 (H1 2012*: £2.0 million).  The effect of IAS19R on the H1 2012 finance charge was an increased charge of £0.5 million.

Having started the year with a net cash balance of £18.8 million, significant land investment has resulted in net debt outstanding as at 30 June 2013 of £48.4 million.  This comprised £11.7 million of cash in hand, offset by £55.0 million of bank debt, £4.8 million of loans received from the Government and a £0.3 million liability, representing the fair market value of an interest rate swap.

In the first six months of 2013, the Group generated an operating cash inflow before land expenditure of £51.1 million (H1 2012: £33.8 million), continuing to demonstrate strong underlying cash generation from the Group's existing assets. As a result of the Group's assertive land investments, payments in H1 2013 associated with land purchases less cash recoveries on land sales were £107.7 million (H1 2012: £50.9 million). With a cash outflow from non-trading items of £10.6 million, the overall net cash outflow for the six months ending 30 June 2013 was £67.2 million (H1 2012: £28.6 million).

Taxation

The Group has recognised a tax charge of £4.2 million on profit before tax of £18.6 million at an effective tax rate of 22.6% (H1 2012*: tax charge of £4.1 million at an effective rate of 26.3%).

Pensions

The Group had a pension scheme surplus of £1.8 million as at 30 June 2013, compared to a deficit of £3.2 million at 31 December 2012.  Scheme assets grew over the six months to £87.3 million from £85.2 million.  Scheme liabilities decreased to £85.5 million from £88.4 million, primarily due to an increase in the discount rate applied to liabilities, as a result of rising bond yields.

Net assets

Net assets per share as at 30 June 2013 was 577p as compared to 547p at 30 June 2012.

Analysis of net assets		2013		2012*
		£m		£m
Net assets at 1 January		758.8		728.6
Profit after tax for the six months		14.4		11.5
Share capital issued		0.9		0.3
Net actuarial movement on pension scheme through reserves		3.8		(4.1)
Adjustment to reserves for share based payments		0.3		0.2
Dividends settled		(8.0)		(4.7)
Net assets at 30 June		770.2		731.8

As at 30 June 2013 net assets were £11.4 million higher than at the start of the year.  Inventories increased during the six months by £142.6 million to £1,006.2 million. As a result of the strong investment in consented land, the land bank increased by £119.2 million.  Work in progress increased from the start of 2013 by £27.7 million, as the Group built a larger number of homes on a greater number of sites for legal completion in H2 2013. Other movements in inventories relate to a decrease in part exchange properties of £4.3 million.  Trade and other receivables reduced by £21.2 million, as a result of a reduction in debtors related to land sales of £8.9 million and recovery of amounts due from housing associations at the 2012 year end.  Available for sale financial assets held as current assets at the 2012 year end of £7.2 million have reduced to Nil, with the full recovery of cash on units held in an investment fund into which the Group had sold show home properties. Trade and other payables totalling £291.3 million (31 December 2012: £249.3 million) comprised land creditors of £169.8 million (31 December 2012: £123.8 million) and trade and other creditors of £121.5 million (31 December 2012: £125.5 million). Net cash reduced by £67.2 million.

Land

Land investments

The Group has continued to take advantage of opportunities to acquire high quality consented land. In the six months ended 30 June 2013, the Group added 2,767 consented plots on 18 sites to the land bank at a cost of £166 million.  These plots have an estimated future revenue of £629 million and an estimated future gross profit potential of £163.3 million based on prevailing sales prices and build costs, delivering an estimated future gross margin of 26.0%.  Of these, 866 plots were delivered through conversion of strategic land.

As at 30 June 2013, the Group held contracts to acquire 1,018 plots on 11 sites, the majority of which are expected to be added to the consented land bank in H2 2013.

Land bank

The Group held 15,579 consented plots in its land bank at 30 June 2013 (31 December 2012: 13,776).  73% of the plots within the land bank were located in the south of England, where the housing market continues to show greater strength, and 61% of the consented land bank (9,522 plots) has been added since the low point of house prices in the market downturn.  The Group estimates that the gross profit potential on the plots within the consented land bank at 30 June 2013, based on prevailing sales prices and build costs, has increased to £733 million with a gross margin of 23.5% (31 December 2012: gross profit of £600 million at a gross margin of 22.7%).

The average consented land plot cost at the start of 2013 was £45,800.  This has increased to £48,200 at 30 June 2013 as a result of the addition of new traditional housing sites in higher value locations, where the average plot cost is higher, and a lower number of written down plots held in the land bank at the end of the half year (11% of land plots versus 13% at the start of the year). The remaining provision on written down plots as at 30 June 2013 was £25.3 million.

The Group continues to recognise the importance of strategic land. During the first half of 2013, the Group has continued to invest in strategic land and also to convert strategic land into the consented land bank. Good progress is being made in the promotion of a number of major strategic sites with potential to obtain planning in the near term. As at 30 June 2013, the Group's strategic land bank stood at 19,341 potential plots, compared to 19,318 potential plots at 31 December 2012.

Principal risks and uncertainties

The Group is subject to a number of risks and uncertainties as part of its activities. The Board regularly considers these and seeks to ensure that appropriate processes are in place to manage, monitor and mitigate these risks. The directors consider that the principal risks and uncertainties facing the Group are those which were outlined on page 22 of the Annual report and accounts 2012, which is available from www.bovishomesgroup.co.uk, and additionally risks relating to the supply chain in respect of the availability and cost of labour and materials, which have heightened in recent months. The Group has in place processes to monitor and mitigate these risks.

Market conditions

In the first half of 2013, the UK housing market has demonstrated signs of improvement with evidence of increased mortgage availability and stronger home buyer confidence.  Monthly mortgage approvals which were previously steady at circa 50,000 approvals per month have increased to circa 58,000 approvals in both May and June 2013, representing a significant increase in the rate of approvals.  Given the long standing constraint on activity in the housing market arising from low levels of mortgage finance, this recent increase is a positive indicator for the market.

The launch of the Government's Help to Buy shared equity scheme on 1 April 2013 added to what was already a more confident housing market backdrop and early signs are that this shared equity product is having a positive effect on transactional activity in the new homes market.

As a result of these market positives, trading across the new build sector has been strong during the first half of 2013 and in the early weeks of the third quarter, with good sales rates and a less pronounced summer lull in reservations than in previous years.  As such, the trading environment appears robust at this time and is creating a growing sense of confidence in the market.

With the increase in home buyer confidence and a greater ability to transact, overall market pricing is showing an increased level of resilience with marginal market sales price increases becoming evident in certain locations, particularly in the south of England.

Current trading

The Group has experienced strong trading in the year to date with an increase in private reservations over the 32 trading weeks to 9 August 2013 of 43% to 1,712 homes (2012: 1,195 homes). In this period, the average private sales rate has been 0.59 net reservations per site per week, 28% ahead of the sales rate of 0.46 achieved in the same period of the prior year.  The growth in reservations has also been delivered through an 11% increase in active sales outlets, which have averaged 91 to date, compared to an average of 82 in the prior period. Sales prices achieved to date have been modestly ahead of the Group's expectations.  Circa 500 customers have reserved using the Government's Help to Buy shared equity scheme since its launch.

As at 9 August 2013, the Group had achieved 2,505 net sales for legal completion in 2013, as compared to 1,844 net sales at the same point in 2012, an increase of 661 homes.

Outlook

The Group is now around 90% sold for the current financial year. Given stable market conditions, reservations achieved over the next few weeks will deliver the targeted volume for 2013. This will enable the Group to build a significantly enhanced forward order book for 2014 from an earlier date than in prior years.  The delivery of an enhanced forward order book will provide a strong base on which volume growth for the first half of 2014 can be achieved. This is also expected to enable the Group to deliver a more even balance of legal completions between the first and second half years in 2014.

For 2013, the combination of the expected legal completion volume and an expected increase of at least 10% in average sales price will deliver strong year on year revenue growth.

The Group has achieved a strong profit margin improvement in the first half of 2013 over H1 2012 and expects that, on the basis of current reservations and subject to stable market conditions, the housing gross margin for the full year will be between 23% and 24%.  

With overheads as a percentage of total revenue expected to reduce to below 9% for 2013 (2012*: 9.5%), the Group expects to deliver an operating margin approaching 15% (2012*: 13.3%).  Return on capital employed for 2013 is now expected to be at least 10.0% (2012*: 7.7%), representing a further significant improvement arising from the Group's growth strategy.

Looking ahead to 2014, given the strong land acquisitions achieved during 2013 to date, many of which were added early in the year, the Group is confident that it can deliver another strong year of sales outlet growth. Furthermore the strength of the pipeline of further land acquisition opportunities gives the Group confidence that sales outlet growth can continue through 2014 and into 2015. 

With an increasing proportion of legal completions expected from sites acquired since the housing market downturn and with a greater number of active sales outlets, the Group expects that, based on stable market conditions, volumes, average sales price and profit margins will continue to increase in 2014. This is expected to deliver another strong increase in return on capital employed and enable the Group to achieve a shareholder return in excess of the Group's WACC.  The Group considers that it has the resources and opportunities to continue its strong growth beyond 2014 and, subject to current market conditions continuing, the Group is well positioned to further enhance shareholder returns.

Bovis Homes Group PLC
Group income statement

For the six months ended 30 June 2013 (unaudited)		Six months ended		Six months ended		Year ended
		30 June 2013		30 June 2012 restated - note 1		31 Dec 2012 restated - note 1
		£000		£000		£000
Revenue		184,412		170,275		425,533
Cost of sales		(141,999)		(133,516)		(328,634)
Gross profit		42,413		36,759		96,899
Administrative expenses		(21,896)		(19,307)		(40,186)
Operating profit before financing costs		20,517		17,452		56,713
Financial income		1,175		1,375		2,933
Financial expenses		(3,110)		(3,319)		(6,656)
Net financing costs		(1,935)		(1,944)		(3,723)
Share of profit of Joint Venture		59		127		254
Profit before tax		18,641		15,635		53,244
Income tax expense		(4,238)		(4,125)		(13,051)
Profit for the period attributable to equity holders of the parent		14,403		11,510		40,193
Earnings per share
Basic		10.8p		8.6p		30.2p
Diluted		10.8p		8.6p		30.1p

Group statement of comprehensive income

For the six months ended 30 June 2013 (unaudited)		Six months ended		Six months ended		Year ended
		30 June 2013		30 June 2012 restated - note 1		31 Dec 2012 restated - note 1
		£000		£000		£000
Profit for the period		14,403		11,510		40,193
Actuarial gains/(losses) on defined benefit pension scheme		4,930		(5,420)		(3,500)
Deferred tax on actuarial movements on defined benefit pension scheme		(1,134)		1,278		797
Total comprehensive income for the period attributable to equity holders of the parent		18,199		7,368		37,490

Bovis Homes Group PLC

Group balance sheet

As at 30 June 2013 (unaudited)		30 June 2013		30 June 2012		31 Dec 2012
		£000		£000		£000
Assets
Property, plant and equipment		12,155		11,521		11,910
Investments		5,126		5,236		5,387
Restricted cash		1,567		770		1,152
Deferred tax assets		2,411		4,435		3,097
Trade and other receivables		1,833		2,146		1,930
Available for sale financial assets		45,113		41,098		43,869
Retirement benefit assets		1,760		-		-
Total non-current assets		69,965		65,206		67,345
Inventories		1,006,208		820,460		863,597
Trade and other receivables		42,538		79,446		64,844
Available for sale financial assets		-		-		7,119
Cash and cash equivalents		11,706		27,794		24,396
Total current assets		1,060,452		927,700		959,956
Total assets		1,130,417		992,906		1,027,301
Equity
Issued capital		67,024		66,871		66,908
Share premium		213,287		212,318		212,550
Retained earnings		489,912		452,620		479,391
Total equity attributable to equity holders of the parent		770,223		731,809		758,849
Liabilities
Bank and other loans		60,096		5,606		5,606
Other financial liabilities		599		1,102		706
Trade and other payables		81,006		65,888		50,681
Retirement benefit obligations		-		7,980		3,171
Provisions		1,863		1,859		1,668
Total non-current liabilities		143,564		82,435		61,832
Trade and other payables		210,282		173,090		198,620
Provisions		1,413		1,535		2,065
Current tax liabilities		4,935		4,037		5,935
Total current liabilities		216,630		178,662		206,620
Total liabilities		360,194		261,097		268,452
Total equity and liabilities		1,130,417		992,906		1,027,301

These condensed consolidated interim financial statements were approved by the Board of directors on 16 August 2013. 

Bovis Homes Group PLC

Group statement of changes in equity

For the six months ended 30 June 2013		Total		Issued		Share		Total
(unaudited)		retained earnings		capital		premium
		£000		£000		£000		£000
Balance at 1 January 2013		479,391		66,908		212,550		758,849
Total comprehensive income and expense		18,199		-		-		18,199
Deferred tax on other employee benefits		51		-		-		51
Issue of share capital		-		116		737		853
Share based payments		281		-		-		281
Dividends to shareholders		(8,010)		-		-		(8,010)
Balance at 30 June 2013		489,912		67,024		213,287		770,223
Balance at 1 January 2012		449,671		66,836		212,064		728,571
Total comprehensive income and expense		37,490		-		-		37,490
Deferred tax on other employee benefits		33		-		-		33
Issue of share capital		-		72		486		558
Share based payments		861		-		-		861
Dividends paid to shareholders		(8,664)		-		-		(8,664)
Balance at 31 December 2012		479,391		66,908		212,550		758,849
Balance at 1 January 2012		449,671		66,836		212,064		728,571
Total comprehensive income and expense		7,368		-		-		7,368
Deferred tax on other employee benefits		14		-		-		14
Issue of share capital		-		35		254		289
Share based payments		230		-		-		230
Dividends to shareholders		(4,663)		-		-		(4,663)
Balance at 30 June 2012		452,620		66,871		212,318		731,809

Bovis Homes Group PLC

Group statement of cash flows

For the six months 30 June 2013 (unaudited)		Six months ended		Six months ended		Year ended
		30 June 2013		30 June 2012 restated - note 1		31 Dec 2012 restated - note 1
		£000		£000		£000
Cash flows from operating activities
Profit for the period		14,403		11,510		40,193
Depreciation		491		435		906
Impairment of available for sale assets		87		490		889
Financial income		(1,175)		(1,375)		(2,933)
Financial expense		3,110		3,319		6,656
Profit on sale of property, plant and equipment		(19)		(7)		(14)
Equity-settled share-based payment expense		281		230		861
Income tax expense		4,238		4,125		13,051
Share of results of Joint Venture		(59)		(127)		(254)
Decrease/(increase) in trade and other receivables		30,809		(5,243)		(3,587)
Increase in inventories		(142,611)		(22,701)		(65,841)
Increase/(decrease) in trade and other payables		40,599		(10,781)		1,093
Decrease/(increase) in provisions and employee benefits		(457)		139		(2,401)
Cash generated from operating activities		(50,303)		(19,986)		(11,381)
Interest paid		(3,519)		(863)		(1,707)
Income taxes paid		(5,635)		(3,770)		(9,922)
Net cash generated from operating activities		(59,457)		(24,619)		(23,010)
Cash flows from investing activities
Interest received		95		813		773
Acquisition of property, plant and equipment		(744)		(350)		(1,213)
Proceeds from sale of plant and equipment		27		15		25
Dividends received from Joint Venture		417		243		243
Investment in restricted cash		(415)		(111)		(493)
Net cash generated from investing activities		(620)		610		(665)
Cash flows from financing activities
Dividends paid		(8,010)		(4,574)		(8,664)
Proceeds from the issue of share capital		853		200		558
Drawdown of borrowings		54,544		-		-
Net cash generated from financing activities		47,387		(4,374)		(8,106)
Net decrease in cash and cash equivalents		(12,690)		(28,383)		(31,781)
Cash and cash equivalents at start of period		24,396		56,177		56,177
Cash and cash equivalents at end of period		11,706		27,794		24,396

Notes to the condensed consolidated interim financial statements

1       Basis of preparation

Bovis Homes Group PLC ('the Company') is a company domiciled in the United Kingdom. The condensed consolidated interim financial statements of the Company for the six months ended 30 June 2013 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 16 August 2013. The financial statements are unaudited but have been reviewed by KPMG LLP.

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

The figures for the half years ended 30 June 2013 and 30 June 2012 are unaudited. The comparative figures for the financial year ended 31 December 2012 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 498 (2) or (3) of the Companies Act 2006.

The preparation of a condensed set of financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amount of assets, liabilities, income and expenses. Actual results may differ from these estimates.

Judgements made by management in the application of adopted IFRSs that have significant effect on the financial statements and estimates with a significant risk of material adjustment in following years have been reviewed by the directors and remain those published in the Company's consolidated financial statements for the year ended 31 December 2012, with the exception of the application of new accounting standards.

The Group has adopted the following new standards and amendments to standards, including any consequential amendments to other standards, with a date of initial application of 1 January 2013:

IFRS 13 establishes a single framework for measuring fair value and making disclosures about fair value measurements, when such measurements are required or permitted by other IFRSs. In particular, it unifies the definition of fair value as the price at which an orderly transaction to sell an asset or to transfer a liability would take place between market participants at the measurement date. In accordance with the transitional provisions of IFRS 13, the Group has applied the new fair value measurement guidance prospectively, and has not provided any comparative information for new disclosures.

IAS 19 (Revised 2011) "Employee Benefits" outlines the accounting requirements for employee benefits. The Standard establishes the principle that the cost of providing employee benefits should be recognised in the period in which the benefit is earned by the employee, rather than when it is paid or payable, and outlines how each category of employee benefits are measured, providing detailed guidance in particular about post-employment benefits. This impacts the measurement of various components representing movements in the defined benefit pension obligation and associated disclosures, but not the Group's total obligation.

The application of IAS 19 (Revised 2011) has resulted in the interest cost and expected return on assets being replaced by a net interest charge/credit on the net defined benefit pension liability/surplus. Certain costs previously recorded as part of finance costs or other comprehensive income have now been presented within administrative expenses.

The comparative period and full year have been restated with profit being £0.4 million lower and £0.7 million lower respectively, and other comprehensive income is £0.4 million higher and £0.7 million higher including the tax impact of the changes. The Group records actuarial adjustments immediately so there has been no affect on the prior year pension deficit.

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 Conduct 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 2012, which were prepared in accordance with IFRSs as adopted by the EU.

2              Seasonality

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

3              Segmental reporting

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

4              Earnings per share

(Unaudited)		Six months ended		Six months ended		Year ended
		30 June 2013		30 June 2012 restated - note 1		31 Dec 2012 restated - note 1
		pence		pence		pence
Basic earnings per share		10.8		8.6		30.2
Diluted earnings per share		10.8		8.6		30.1

Basic earnings per share

Basic earnings per ordinary share for the six months ended 30 June 2013 is calculated on a profit after tax of £14,403,000 (six months ended 30 June 2012 restated: profit after tax of £11,510,000; year ended 31 December 2012 restated: profit after tax of £40,193,000) over the weighted average of 133,464,080 (six months ended 30 June 2012: 133,248,378; year ended 31 December 2012: 133,294,726) ordinary shares in issue during the period.

Diluted earnings per share

The calculation of diluted earnings per share at 30 June 2013 was based on the profit attributable to ordinary shareholders of £14,403,000 (six months ended 30 June 2012 restated: profit after tax of £11,510,000; year ended 31 December 2012 restated: profit after tax of £40,193,000).

The Group's diluted weighted average ordinary shares potentially in issue during the six months ended 30 June 2013 was 133,719,575 (six months ended 30 June 2012: 133,372,229; year ended 31 December 2012: 133,432,911).

5              Dividends

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

(Unaudited)		Six months ended		Six months ended		Year ended
		30 June 2013		30 June 2012		31 Dec 2012
		£000		£000		£000
May 2013: 6.0p (May 2012: 3.5p)		8,010		4,663		4,663
November 2012: 3.0p		-		-		4,001
		8,010		4,663		8,664

The Board determined on 16 August 2013 that an interim dividend of 4.0p for 2013 be paid.  The dividend will be settled on 22 November 2013 to shareholders on the register at the close of business on 27 September 2013.  This dividend has not been recognised as a liability at the balance sheet date.

6              Related party transactions

Transactions between fellow subsidiaries, which are related parties, during the first half of 2013 have been eliminated on consolidation, as have transactions between the Company and its subsidiaries during this period. The Group's associates and joint ventures are disclosed in the Group's Annual report and accounts 2012.

Transactions between the Group and key management personnel in the first half of 2013 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 2012. No material change has occurred in these arrangements in the first half of 2013.

Mr Malcolm Harris, a Group Director, is a non-executive director of the Home Builders Federation (HBF), to whom the Group pays subscription fees and fees for research as required. Net amounts payable for each period were as follows:

(Unaudited)		Six months ended		Six months ended		Year ended
		30 June 2013		30 June 2012		31 Dec 2012
		£000		£000		£000
HBF		59		47		93

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.

Transactions with Joint Venture

Bovis Homes Limited is contracted to provide property and letting management services to Bovis Peer LLP. Fees charged in the period, inclusive of VAT, were £73,000 (six months ended 30 June 2012: £72,000; year ended 31 December 2012: £144,000).

Loans totalling £1,575,355 were provided in prior years at an annual interest rate of LIBOR plus 2.4%. No other loans or sales of inventory have taken place.

Interest charges made in respect of the loans were £24,000 (six months ended 30 June 2012: £26,000; year ended 31 December 2012: £49,000).

7              Reconciliation of net cash flow to net cash

(Unaudited)		Six months ended		Six months ended		Year ended
		30 June 2013		30 June 2012		31 Dec 2012
		£000		£000		£000
Net decrease in cash and cash equivalents		(12,690)		(28,383)		(31,781)
Drawdown of borrowings		(54,544)		-		-
Fair value adjustments to interest rate swaps		115		(76)		(9)
Fair value adjustment to interest free loans		(61)		(128)		(195)
Net cash at start of period		18,790		50,775		50,775
Net cash at end of period		(48,390)		22,188		18,790
Analysis of net cash:
Cash		11,706		27,794		24,396
Bank and other loans		(59,795)		(5,123)		(5,190)
Fair value of interest rate swaps		(301)		(483)		(416)
Net cash		(48,390)		22,188		18,790

8              Circulation to shareholders

This interim report is sent to shareholders.  Further copies are available on request from the Company Secretary, Bovis Homes Group PLC, The Manor House, North Ash Road, New Ash Green, Longfield, Kent  DA3 8HQ. Further information on Bovis Homes Group PLC can be found on the Group's corporate website www.bovishomesgroup.co.uk, including the analyst presentation document which will be presented at the Group's results meeting on 19 August 2013.

 

END

 

 

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