Results for the six months ended 30 June 2018

RNS Number : 9192Z

Bovis Homes Group PLC

06 September 2018

 

6 September 2018

BOVIS HOMES GROUP PLC

Half Year Results for the six months ended 30 June 2018

H1 Highlights

·     Strong H1 performance with a 41% increase in profit before tax, ahead of our expectations

·     Controlled volume growth resulting in another disciplined and orderly period end

·     HBF Customer Satisfaction score continues to trend at well above 80% (1 Oct 2017 to date) as Group consistently delivers high levels of customer service

·     Launch of market leading Phoenix housing range giving customers greater value and driving profitability

·     Progress with balance sheet initiatives including contracts exchanged for the formation of 50:50 joint venture at Sherford, Plymouth with Clarion Housing Group

·     Further strengthened balance sheet with a move to an average net cash position in the period of £6m (2017: average net debt £96m) and a period end net cash position of £42.8m (2017: net debt £32.4m)

·     Interim dividend increased by 27% to 19 pence per share and first special dividend of 45 pence per share to be paid with the interim in November

	H1 2018	H1 2017	Change
Total completions	1,580	1,512	+4%
Private average selling price	£334.7k	£334.7k	0%
Group revenue	£432.2m	£427.8m	+1%
Gross margin	20.9%	18.1%	280bps
Profit before tax(1)	£60.2m	£42.7m	+41%
Earnings per share(1)	36.1p	25.7p	+40%
Dividend per share	19p	15p	+27%
Net cash (debt)	£42.8m	£(32.4)m	-

Note: (1) Profit before tax and earnings per share for H1 2017 after one-off costs totalling £6.3m including £3.5m customer care provision and £2.8m exceptional advisory costs related to bid approaches

Current trading and FY18 outlook

·     Group focused on price optimisation, controlled volume growth and margin enhancement

·     Strong sales position with 96% of 2018 sales secured

·     Underlying pricing remains firm with some positive momentum driven by price optimisation initiatives

·     Following robust summer trading and with increased visibility on margin improvement, the Group now expects profits for FY18 to be at the top end of the Board's expectations

·     On track to deliver minimum of £180m total cash proceeds from balance sheet optimisation initiatives by end of 2018

Greg Fitzgerald, Chief Executive commented,

"We delivered a strong performance in the half with a more than 40% increase in profits.  This reflects the excellent progress made across all business areas over the past 18 months and a step change in the quality of the homes we are building and level of service we are providing our customers.  We are confident in the outlook for the business and are targeting a record year of profits in 2018, at the top end of the Board's expectations."

There will be a meeting for analysts and investors at 9:00am today at Numis, The London Stock Exchange Building, 10 Paternoster Square, London, EC4M 7LT.  The presentation will be audiocast live on the Bovis Homes corporate website, www.bovishomesgroup.co.uk from 9:00am.  A playback facility will be available shortly after the presentation has finished.

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 representation that such trends, results or activities will continue in the future. Undue reliance should not be placed on forward looking statements.

For further information please contact:

Bovis Homes Group PLC Earl Sibley, Group Finance Director Susie Bell, Head of Investor Relations	07921 107717 07811 988617
Maitland Neil Bennett James McFarlane	020 7379 5151

Chief Executive's review

Half year performance

The Group delivered a strong performance in the first half with profits ahead of our expectations.

Total completions increased by 4% to 1,580 (2017: 1,512) of which 1,030 (2017: 1,140) were private units and 550 (2017: 372) affordable.  The higher percentage of completions from affordable homes, 34.8% (2017: 24.6%), reflects the planned build programme across our developments in the period.  For the full year we expect this percentage to be c. 30% of total completions, a similar level to 2017.

Private average selling price was £334,700 (2017: £334,700), with underlying prices remaining firm and some positive momentum from our price optimisation initiative launched in January this year.  This was offset by changes in mix and, in particular, a lower proportion of completions from higher priced product in the period as compared to the prior year.  Total average selling price decreased to £262,700 (2017: £277,400), the decline reflecting the higher percentage of affordable completions in the period.

The Group's profitability increased significantly in the first half as we start to see the financial benefits from the changes implemented across the business over the past 18 months.  Gross margin increased by 280 basis points to 20.9% (2017: 18.1%) driven by controlled delivery and the underlying margin in our land bank.  Profit before tax increased by 41% to £60.2m (2017: £42.7m).

Our balance sheet strengthened further with a move to an average net cash position in the period of £6m (2017: average net debt £96m), and a net cash position as at 30 June 2018 of £42.8m (2017: net debt £32.4m).  This significant improvement was delivered through better working capital management in the period including a further £10m reduction in our part exchange balance, whilst committing the appropriate level of investment in our sites to ensure the successful delivery of the higher weighting of private completions in H2.

We are pleased to report we have conditionally exchanged contracts with Clarion Housing Group for the formation of our development at Sherford near Plymouth with a total of c. 1,500 plots to be developed, into a 50:50 joint venture ('JV').  Bovis Homes will build, promote and sell the new homes for the JV for which it will receive a fee.

Operational update

Strong sales position

We are focused on optimising prices whilst delivering controlled volume growth.  In the first half we introduced a revised sales specification designed to best meet our customers' needs and drive profitability.

We have significantly reduced our use of part exchange with 8% (2017: 28%) of reservations in the period utilising the scheme.  Help to Buy remains at a similar level to the prior year with 36% (2017: 34%) of reservations using it in the first half.

We are on track to deliver completions in-line with our expectations for FY18 and are in a strong position, with 96% of expected 2018 completions now secured.

High levels of customer service

Delivering quality new homes to our customers and a high level of customer service that meets their expectations throughout their entire journey with Bovis Homes remains a key strategic priority for the Group.

We are pleased to report that our HBF Customer Satisfaction score (1 October 2017 to date) has continued to trend at well above 80%.  We continue to invest in customer service including a new Customer Relationship Management Solution and recent membership of the Institute of Customer Service.

Step change in build quality

Improving our build standards and delivering these higher standards consistently across all our developments remains a key priority, and over the past 18 months we have invested in high quality construction directors, site managers and site teams.  Our regional management teams have embedded a far greater 'hands on' approach and best practice is now promoted and shared across our seven regions.

We have seen our NHBC reportable items decrease by 66% since December 2016, and they are now slightly lower than the industry average.  We are proud to disclose that our recent NHBC Construction Quality Review highlighted a significant step up in our build quality and in 'getting it right first time', with the Group now aligned to industry standards.

We are very pleased to report that six of our site managers and site teams have been awarded NHBC Price in the Job Quality Awards this year, up from two awards in 2017 and in-line with our highest number since 2004.

Health and safety has also been a key area of focus and investment and we have brought our health and safety function in-house.  This has facilitated more regular and transparent reporting which has successfully promoted an improved culture across the business.

People

We are committed to investing in our people and maintaining a high quality, skilled workforce.

Most recently we launched our new trainee assistant site manager programme which will see 12 trainees who have been selected through our assessment process, receive an 18 month programme covering all aspects of site management.  The trainees will also receive leadership development as part of our new bespoke Bovis Homes Leadership Development Framework.  We continue with our apprenticeship scheme and recently recruited 36 new apprentices, taking our total to over 80 across multidisciplinary areas.

We are delighted that the excellent work of our Training and Learning and Development Centre has been shortlisted for a Housebuilder Award.

High quality land supply

The Group has a high quality owned land bank with strong fundamentals.  We build traditional, standard housing in prime locations on predominantly greenfield sites, with no exposure within the M25.  The average selling price of our owned plots is £294k (2017: £276k), with 87% of the plots having a selling price of less than £500k.

More recently, our land acquisition strategy has focused on developing fewer larger, high value units.  This will be reflected in the average selling price within our owned land bank in the medium term.

We continue to see good opportunities in the land market and have been investing in our land teams as we increase our land acquisition activity.  In the first half we secured a total of 828 plots across five developments, of which 167 plots were sourced from our strategic land bank.  Since the start of July, we have secured 243 plots on two developments and agreed terms on a further eight developments.  The land acquired in the year to date is expected to deliver a gross margin of at least 26%.

Our strategic land bank remains an important supply of high quality land for the Group and totalled 21,116 plots as at 30 June 2018 (30 June 2017: 21,297 plots). In the year to date, we have secured options over 944 plots across six development opportunities and achieved planning on 678 plots in the strategic land bank.

We have excellent visibility on our land supply which is a key strength of the Group, with 99% and 78% of plots secured for 2019 and 2020 respectively.

New housing range

The Phoenix Collection, our new market leading housing range, was launched in April this year.  This range will not only deliver far greater value to our customers, it will allow us to optimise our pricing, reduce production costs and improve our build efficiency.  It will also allow us to be more competitive in the land market.

We are replanning 61 of our developments with the new Phoenix Collection and are making good progress, with a number of sites already completed.  First completions with the Phoenix house types will be in Spring 2019.

Commercial

The investment in efficient systems and processes, and the development of our commercial teams is a key priority for 2018.  The Group successfully moved on to the COINS reporting system in April which allows for more comprehensive and consistent cost reporting and forecasting.  It increases the commercial visibility across our sites, giving our surveyors a greater ability to pro-actively manage costs.

Medium term targets

We are making good progress against our medium term targets which we set 12 months ago to be achieved by 2020.  We are on track to achieve a number of these targets as early as December 2018.

Target	Progress to date	Timing
4* HBF customer satisfaction rating	-      Trending at 4 star for HBF year 1 Oct 2017 to date	HBF year to 30 Sept 2018
4,000 completions p.a.	-      Restructuring complete -      Maximising economies of scale from current structure -      Controlled volume growth	FY20
3.5 to 4.0 year owned land bank	-      Contracts exchanged to divest Sherford into JV -      On track to divest Wellingborough into JV by end of 2018	Dec 2018
23.5% gross margin with further opportunity beyond 2020 from new land	-      Significant increase in margin in H1 18 -      Further potential from specific margin initiatives	FY20
5% administrative expense as a % of revenue	-      On track to deliver target in FY18	FY18
Min £180m net cash from balance sheet restructuring	-      On track to deliver min. £180m by Dec 2018 -      Special dividend of £60m to be paid in November this year	Dec 2018
25% return on capital employed	-      14.5% (12 mths to end of June 2018), up 80 bps compared to FY17 -      Driven by increased profitability and reduced capital employed	FY20

Margin initiatives

We are also making good progress with our four major margin initiatives which were announced in March of this year:

1.    Price optimisation

-      Driving price optimisation across all our products and developments reflecting priority of controlled volume growth, high levels of customer satisfaction and increased profitability

-      New commission structure introduced for Sales Advisors at start of 2018 which is aligned to optimising prices

2.    Specification review

-      New sales specification launched in March 2018 - better meeting our customer needs whilst driving profitability

-      Amendments to our build specification resulting in improved quality at a lower cost

3.    Cost reduction

-      Costs reduced through getting it right first time, improved build processes and better quality management

-      Targeting c. 1% non-utilisation of contingency

4.    New Phoenix housing range

-      New housing range will both optimise prices and drive a reduction in production costs across the Group

-      Average c. 3% margin upside on re-planned units

-      More competitive in the land market

Balance sheet optimisation

We have made further progress with our programme of balance sheet optimisation and are on track to deliver a minimum of £180m additional cash into the business from these initiatives by December 2018.

We have optimised our land bank to deliver in line with our medium term strategic plan of a 3.5 to 4.0 years owned land bank.  We are pleased to have conditionally exchanged contracts for the disposal of our development at Sherford totalling c. 1,500 plots into a joint venture, and expect to also dispose of a few remaining developments that are out of our core geographic area in the second half.

We have agreed heads of terms on a joint venture for our development at Wellingborough which will further reduce both our land bank and work-in-progress balances at the year-end.

Enhanced returns to shareholders

The Board is committed to maximising sustainable ordinary dividends to shareholders.  For the half year, the interim dividend payable will be 19 pence per share, an increase of 27%.  For FY18, the Board expects to increase the total ordinary dividend by 20% to c. 57 pence per share, reflecting the expected improvement in profitability and strong outlook.

In addition, the Board has announced its intention to return surplus cash to shareholders totalling £180m or c.134 pence per share in the three years to 2020.  The first 45 pence per share totalling £60m will be paid to shareholders as a special dividend along with the interim dividend in November 2018.

The Group will continue to be strongly cash generative and given the balance sheet position, the Board is committed to reviewing capacity for further returns to shareholders over time.

Market

The market fundamentals remain strong and we continue to see good levels of demand for new homes across all our regions with underlying pricing firm.  Interest rates continue to be at historic lows with good competition in the mortgage lending market.  The Government remains committed to increasing the supply of new homes in the UK reflected in its policy on housing and planning and commitment to Help to Buy.

Current trading and outlook

We expect to deliver another controlled and disciplined year end for 2018, maintaining high levels of customer satisfaction and are confident of delivering completions in line with our expectations.

Following robust summer trading and with increased visibility on margin improvement, the Group is targeting profits for FY18 to be at a record level and at the top end of the Board's expectations.

We are on track to deliver a minimum of £180 million of net cash from our balance sheet optimisation initiatives by December 2018.  Combined with increased profits, we expect to see a step up in the Group's return on capital employed going forwards as we move towards our FY20 target of 25%.

Financial review

Revenue

The Group generated first half total revenue of £432.2m (H1 2017: £427.8m), an increase of 1% on the prior year.  Housing revenue from legal completions was £415.0m (H1 2017: £419.4m) with a £7.9m release of deferred revenue from the first disposal of properties within our PRS JV's and other revenue of £3.0m (H1 2017: £1.5m).  Land sales revenue of £6.3m (H1 2017: £6.9m) arose from one sale completed in the period.

	H1 2018	H1 2017
Units
Private legal completions	1,030	1,140
Affordable legal completions	550	372
Total legal completions	1,580	1,512
Revenue (£m)
Private legal completions	344.7	381.5
Affordable legal completions	70.3	37.9
Revenue from legal completions	415.0	419.4
Other revenue	3.0	1.5
Release of deferred JV revenue	7.9	-
Total housing revenue	425.9	420.9
Land sales revenue	6.3	6.9
Total revenue	432.2	427.8

The Group delivered a total of 1,580 legal completions (H1 2017: 1,512) of which 1,030 (H1 2017: 1,140) were private completions.  Affordable units totalled 550 (H1 2017: 372) and represented 34.8% (H1 2017: 24.6%) of total completions reflecting the planned build programme across our developments in the first half.  We expect this percentage to be c. 30% for the full year, a similar level to FY17.The private average selling price in the period was £334,700 (H1 2017: £334,700), with underlying prices remaining firm and some positive movement from our price optimisation initiative launched in January, offset by changes in mix with a lower proportion of high-end product compared to the prior year.

The total average selling price was £262,700 (H1 2017: £277,400), reflecting the higher contribution from affordable homes in the period.

Operating profit

Housing gross profit increased to £90.4m (H1 2017: £77.2m) with a housing gross margin of 21.2% (H1 2017: 18.3%) reflecting the improving operational performance of the business, our margin initiatives and improving underlying margin in the landbank.  Construction cost increased by 6.6% to £146 (H1 2017: £137) per square foot in the first half of which we estimate an increase of approximately 4% from labour and material cost inflation.

The land sale completed in the period related to our development in Barming, releasing capital back into the business.  Further land sales are expected in the second half of FY18 focused on optimising our land bank and capital returns, including the first land sale at our Wellingborough site which completed during July.

Administrative expenses totalled £27.3m (H1 2017: £28.8m pre-exceptionals) representing 6.3% (H1 2017: 6.7%) of Group revenue.  This reduced level of administrative costs reflects a stable business and the restructuring in the second half of 2017 to reduce from 8 operating regions to 7.

The Group operating profit in the first half was £63.1m (H1 2017: £48.6m pre-exceptionals) with an operating profit margin of 14.6% (H1 2017: 11.4% pre-exceptionals).

Financing

Net finance costs for the period were £2.9m (H1 2017: £3.2m).  This reduction was driven by a significant reduction in the Group's borrowings in the period reflecting our balance sheet optimisation initiatives, offset by the removal of imputed interest income following disposal of the Group's shared equity portfolio in 2017.

Profit before tax and earnings per share

Profit before tax of £60.2m (H1 2017: £42.7m) comprised operating profit of £63.1m (H1 2017: £45.8m), net financing charge of £2.9m (H1 2017: £3.2m) with no profit from the Group's share of joint ventures (H1 2017: £0.1m).

Taxation

The tax charge was £11.5m (H1 2017: £8.2m) representing an effective tax rate of 19% (H1 2017: 19%), in line with the underlying corporation tax rate.

Dividends

An interim dividend of 19.0 pence per share (H1 2017: 15.0p) has been declared along with a special dividend of £60m (45 pence per share).  Both dividends will be paid on 23 November 2018 to holders of ordinary shares on the register at the close of business on 28 September 2018.  The dividend reinvestment plan, introduced in 2012, gives shareholders the opportunity to reinvest their dividend. 

Land

	H1 2018	H1 2017
Consented plots added	505	2,337
Sites added	4	9
Sites owned at period end	107	123
Plots in consented land bank at period end	16,107	19,341
Average consented land plot ASP	£294,000	£276,000
Average consented land plot cost	£51,000	£52,000

We continue to have good visibility on our land supply with 505 plots on four sites added to our consented land bank in the first half with a further 323 plots on one site secured at the period end. 

The estimated embedded gross margin in the consented land bank as at 30 June 2018, based on prevailing sales prices and build costs is 23.6% (31 December 2017: 23.2%).

Our strategic landbank remains a valuable source of land.  In the first half we gained planning consent on a total of 678 plots and we entered into five new options with a further new option now secured.

Net assets

Net assets per share as at 30 June 2018 were 787p as compared to 756p at 30 June 2017.

£m	2018	2017
Net assets at 1 January	1,056.6	1,015.9
Profit after tax for the six months	48.7	34.5
Share capital issued	0.8	0.1
Purchase of own shares	0.0	(2.6)
Net actuarial movement on pension scheme through reserves	(1.9)	6.1
Adjustment to reserves for share-based payments	0.7	0.2
Shared equity reserve movement	0.0	0.2
Dividends paid	(43.6)	(40.3)
Net assets at 30 June	1,061.3	1,014.1

As at 30 June 2018, net assets were £4.7m higher than at the start of the year.  Inventories decreased during the six months by £17.0m to £1,305.0m, with the value of the land bank decreasing by £81.5m to £831.9m partially offset by work in progress increasing by £64.5m to £473.1m driven by continued investment at Wellingborough and investment to deliver the higher weighting of completions in H2. Trade and other receivables increased by £21.3m to £98.9m due to increases in land sale debtors, monies owed by Housing Associations, and other debtors.

Investments reduced by £1.6m to £7.1m following two bulk disposals within our PRS Joint Ventures as we pursue our strategy to exit these two ventures.

Trade and other payables totalled £382.8m (31 December 2017: £478.2m).  Land creditors represented £195.6m (31 December 2017: £246.7m), with £107.7m being payable in the next 12 months (31 December 2017: £168.3m).

Trade and other creditors were £187.2m (31 December 2017: £231.5m), reflecting the timing of payments to the Group's supply chain partners.

Pensions

The Group closed its defined benefit pension scheme to new accrual on 28 February 2018. It has an IAS 19 pension scheme surplus of £4.8m as at 30 June 2018 (31 December 2017: £2.1m surplus).  Scheme assets grew over the six months to £127.7m from £126.4m.  Scheme liabilities decreased to £122.9m from £124.3m.  The movement on the scheme in the six months primarily relates to a £5.5m special contribution agreed along with the closure of the scheme.

Cash

The Group had net cash as at 30 June 2018 of £42.8m (30 June 2017: £32.4m net debt). In the first six months the Group generated an operating cash inflow before land expenditure of £41.5m (H1 2017: £100.4m) reflecting a £58.9m reduction in housing receipts largely due to the timing of cash received from our affordable completions.  Net payments in H1 2018 associated with land purchases less cash recoveries on land sales were £80.7m (H1 2017: £120.1m).  With a cash outflow from non-trading activities totalling £62.9m (H1 2017: £51.3m) including the dividend payment of £43.6m (H1 2017: £40.3m), the overall net cash outflow for the six months ended 30 June 2018 was £102.1m (H1 2017: £71.0m).

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 remain those that are outlined on pages 30 to 33 of the Annual Report and Accounts 2017, including the ongoing negotiations regarding a final Brexit deal, which is available from www.bovishomesgroup.co.uk. The Group has in place processes to monitor and mitigate these risks.

Group income statement

	Six months ended	Six months ended	Year ended
	30 June 2018	30 June 2017	31 Dec 2017
	£000	£000	£000
	(unaudited)	(unaudited)	(audited)
Revenue	432,223	427,791	1,028,223
Cost of sales	(341,826)	(350,362)	(843,572)
Gross profit	90,397	77,429	184,651
Administrative expenses before exceptional items	(27,276)	(28,854)	(56,619)
Exceptional administrative expenses (1)	-	(2,800)	(6,812)
Administrative expenses	(27,276)	(31,654)	(63,431)
Operating profit before exceptional items	63,121	48,575	128,032
Exceptional items	-	(2,800)	(6,812)
Operating profit	63,121	45,775	121,220
Financial income	301	1,218	1,337
Financial expenses	(3,225)	(4,409)	(8,536)
Net financing costs	(2,924)	(3,191)	(7,199)
Share of profit of Joint Ventures	-	131	(20)
Profit before tax	60,197	42,715	114,001
Income tax expense	(11,523)	(8,209)	(22,706)
Profit for the period attributable to equity holders of the parent	48,674	34,506	91,295
Earnings per share
Basic	36.1p	25.7p	68.0p
Diluted	36.0p	25.7p	67.8p

(1) Exceptional administrative items of £6,812,000 were incurred during the period to 31 December 2017 (six months ended 30 June 2017:

£2,800,000). These costs related to the advisory fees resulting from the approaches from Redrow Plc and Galliford Try Plc and costs related to the strategic restructuring of the business. Further details can be found on page 122 of the Group's Annual Report and Accounts 2017. There were no exceptional administrative items for the period to 30 June 2018.

Group statement of comprehensive income	Six months ended	Six months ended	Year ended
	30 June 2018 £000 (unaudited)	30 June 2017 £000 (unaudited)	31 Dec 2017 £000 (audited)
Profit for the period	48,674	34,506	91,295
Other comprehensive income
Items that will not be reclassified to the income statement
Remeasurements on defined benefit pension scheme	(2,358)	7,361	9,286
Deferred tax on actuarial remeasurements on defined benefit pension scheme	456	(1,263)	(1,630)
Items reclassified to the income statement
Available for sale reserve movement	-	227	1,696
Deferred tax on available for sale reserve movement	-	(38)	(288)
Total comprehensive income for the period attributable to equity holders of the parent	46,772	40,793	100,359

	30 June 2018 £000 (unaudited)	30 June 2017 £000 (unaudited)	31 Dec 2017 £000 (audited)
Assets
Property, plant and equipment	4,758	10,505	2,603
Investments	7,135	8,931	8,717
Restricted cash	1,412	1,444	1,414
Trade and other receivables	1,426	5,675	832
Retirement benefit asset	4,783	451	2,111
Total non-current assets	19,514	27,006	15,677
Inventories	1,305,014	1,492,206	1,321,952
Trade and other receivables	97,420	84,522	76,686
Available for sale financial assets	-	23,821	-
Cash and cash equivalents	78,598	52,566	170,062
Total current assets	1,481,032	1,653,115	1,568,700
Total assets	1,500,546	1,680,121	1,584,377
Equity
Issued capital	67,388	67,273	67,330
Share premium	216,769	215,164	215,991
Retained earnings	777,114	731,670	773,255
Total equity attributable to equity holders of the parent	1,061,271	1,014,107	1,056,576
Liabilities
Bank and other loans	35,807	-	25,209
Deferred tax liability	1,023	1,584	570
Trade and other payables	105,233	141,080	93,089
Provisions	-	812	812
Total non-current liabilities	142,063	143,476	119,680
Bank loans	-	84,949	-
Trade and other payables	277,618	420,653	385,079
Provisions	5,563	6,316	6,187
Current tax liabilities	14,031	10,620	16,855
Total current liabilities	297,212	522,538	408,121
Total liabilities	439,275	666,014	527,801
Total equity and liabilities	1,500,546	1,680,121	1,584,377

These condensed consolidated interim financial statements were approved by the Board of directors on 6 September 2018.

	Total retained earnings	Issued capital	Share premium	Total
	£000	£000	£000	£000
Balance at 1 January 2018	773,255	67,330	215,991	1,056,576
Total comprehensive income and expense	46,772	-	-	46,772
Issue of share capital	-	58	778	836
Share based payments	707	-	-	707
Deferred tax on share based payments	25	-	-	25
Dividends paid to shareholders	(43,645)	-	-	(43,645)
Balance at 30 June 2018 (unaudited)	777,114	67,388	216,769	1,061,271
Balance at 1 January 2017	733,609	67,261	215,057	1,015,927
Total comprehensive income and expense	40,793	-	-	40,793
Issue of share capital	-	12	107	119
Purchase of own shares	(2,575)	-	-	(2,575)
Share based payments	127	-	-	127
Deferred tax on share based payments	16	-	-	16
Dividends paid to shareholders	(40,300)	-	-	(40,300)
Balance at 30 June 2017 (unaudited)	731,670	67,273	215,164	1,014,107
Balance at 1 January 2017	733,609	67,261	215,057	1,015,927
Total comprehensive income and expense	100,359	-	-	100,359
Issue of share capital	-	69	934	1,003
Purchase of own shares	(2,575)	-	-	(2,575)
Share based payments	2,243	-	-	2,243
Deferred tax on share based payments	49	-	-	49
Dividends paid to shareholders	(60,430)	-	-	(60,430)
Balance at 31 December 2017 (audited)	773,255	67,330	215,991	1,056,576

	Six months ended	Six months ended	Year ended 31 Dec 2017
	30 June 2018	30 June 2017	£000
	£000	£000	(audited)
Cash flows from operating activities
Profit for the period	48,674	34,506	91,295
Depreciation	241	761	1,514
Revaluation of available for sale assets	-	1,355	1,355
Available for sale reserve reclassified on disposal	-	227	1,696
Financial income	(301)	(1,218)	(1,337)
Financial expense	3,225	4,409	8,536
Loss/(profit) on sale of property, plant and equipment	68	(1,057)	(4,117)
Equity-settled share-based payment expense	685	127	2,243
Income tax expense	11,523	8,209	22,706
Share of results of Joint Venture	-	(131)	20
Decrease in available for sale financial assets	-	-	27,577
(Increase)/decrease in trade and other receivables	(21,638)	4,309	13,232
Decrease/(increase) in inventories	15,197	(45,845)	122,097
(Decrease) in trade and other payables	(95,989)	(21,098)	(104,664)
(Decrease) in provisions and employee benefits	(6,410)	(3,731)	(3,685)
Net cash (used in)/generated from operations	(44,725)	(19,177)	178,468
Interest paid	(1,306)	(1,540)	(3,250)
Income taxes paid	(13,437)	(9,215)	(19,074)
Net cash (used in)/generated from operating activities	(59,468)	(29,932)	156,144
Cash flows from investing activities
Interest received	221	92	142
Acquisition of property, plant and equipment	(2,452)	(589)	(1,371)
Proceeds from sale of plant and equipment	-	2,250	13,237
Movement in loans with Joint Ventures	1,895	-	-
Movement of investment in Joint Ventures	528	-	32
Dividends received from Joint Ventures	-	-	119
Net cash generated from investing activities	192	1,753	12,159
Cash flows from financing activities
Dividends paid	(43,645)	(40,300)	(60,430)
Proceeds from the issue of share capital	859	119	1,003
Purchase of own shares	-	(2,575)	(2,575)
Drawdown of borrowings	10,598	84,949	25,209
Net cash (used in)/generated from financing activities	(32,188)	42,193	(36,793)
Net (decrease)/increase in cash and cash equivalents	(91,464)	14,014	131,510
Cash and cash equivalents at start of period	170,062	38,552	38,552
Cash and cash equivalents at end of period	78,598	52,566	170,062

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 2018 comprise the Company and its subsidiaries (together referred to as 'the Group') and the Group's interest in joint ventures.

The condensed consolidated interim financial statements were authorised for issue by the directors on 6 September 2018. The financial statements are unaudited but have been reviewed by PricewaterhouseCoopers LLP the Company's auditors.

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

The figures for the half years ended 30 June 2018 and 30 June 2017 are unaudited. The comparative figures for the financial year ended 31 December 2017 are an extract from the Group's statutory accounts for that financial year. Those accounts have been reported on by the

Company's auditors and delivered to the Registrar of Companies. The report of the auditors was (i) unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under Section 498 (2) or (3) of the Companies Act 2006.

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

Judgements made by management in the application of adopted International Financial Reporting Standards (IFRSs) that have a significant effect on the financial statements and estimates with a significant risk of material adjustment in following years have been reviewed by

the directors and, other than the estimated half year income tax expense, remain those published in the Company's consolidated financial statements for the year ended

31 December 2017.

The condensed consolidated interim financial statements have been prepared in accordance with IAS34 'Interim Financial Reporting' as endorsed by the EU. As required by the Disclosure and Transparency Rules of the Financial Conduct Authority, and with the exception of the changes in accounting policies outlined below, the condensed consolidated interim financial statements have been prepared by applying the accounting policies and presentation that were applied in the preparation of the Company's published consolidated financial statements for the year ended 31 December 2017, which were prepared in accordance with IFRSs as adopted by the EU.

As set out on page 121 in the Group's 2017 Annual Report and Accounts, the following standards became effective for the first time for the period beginning 1 January 2018 without material impact on the Group's reported results:

•      IFRS9 'Financial instruments' replaces IAS39 'Financial Instruments: Recognition and Measurement': the Group has reviewed its receivables and is comfortable that no further credit loss provision is required as a result of the new standard.

•      IFRS 15, 'Revenue from contracts with customers' replaces IAS 18 'Revenue' and IAS 11 'Construction contracts', setting out new revenue recognition criteria particularly with regard to performance obligations: the Group has reviewed its revenue from contracts, particularly those with housing associations, during the period and the new standard has not had a significant impact on reported revenue.

•     Amendment to IFRS 2 'Share-based payments'

•     Amendment to IFRS 4 'Insurance Contracts' regarding the implementation of IFRS 9 'Financial Instruments'

•     Amendment to IAS 40 'Investment Property'

•     Annual Improvements 2014-2016

As also set out in the Group's 2017 Annual Report and Accounts, IFRS16 'Leases' replaces IAS17 'Leases' and is effective from 1 January 2019. The new standard requires all assets held by the Group under lease agreements of greater than 12 months in duration to be recognised as assets within the Balance Sheet, unless they are considered to be of low value. Similarly, the present value of future payments to be made under those lease agreements must be recognised as a liability. It is expected that the implementation of the standard will increase both the assets and liabilities of the Group but will not have a material impact on its net assets. The Group will continue to work on preparing for the implementation of the new standard and further disclosure will be made in the 2018 Annual Report and Accounts.

Exceptional items are those which, in the opinion of the Board, are material by size and non-recurring in nature and therefore require separate disclosure within the income statement in order to assist the users of the financial statements in understanding the underlying business performance of the Group.

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

2 Seasonality

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

3 Segmental reporting

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

The Chief Operating Decision Maker, which is the Board, notes that the Group's main operation is that of a housebuilder and it operates entirely within the United Kingdom. There are no separate segments, either business or geographic to disclose, having taken into account the aggregation criteria of IFRS8.

4 Earnings per share

	Six months ended	Six months ended	Year ended
	30 June 2018	30 June 2017	31 Dec 2017
	Pence	Pence	Pence
	(unaudited)	(unaudited)	(audited)
Basic earnings per share	36.1	25.7	68.0
Diluted earnings per share	36.0	25.7	67.8

Basic earnings per share

Basic earnings per ordinary share for the six months ended 30 June 2018 is calculated on a profit after tax of £48,674,000 (six months ended 30 June 2017: profit after tax of £34,506,000; year ended 31 December 2017: profit after tax of £91,295,000) over the weighted average of 134,856,833 (six months ended 30 June 2017: 134,202,914; year ended 31 December 2017: 134,246,134) ordinary shares in issue during the period.

Diluted earnings per share

The calculation of diluted earnings per share at 30 June 2018 was based on the profit attributable to ordinary shareholders of £48,674,000 (six months ended 30 June 2017: profit after tax of £34,506,000; year ended 31 December 2017: profit after tax of £91,295,000).

The Group's diluted weighted average ordinary shares potentially in issue during the six months ended 30 June 2018 was 135,102,116 (six months ended 30 June 2017: 134,337,216 year ended 31 December 2017: 134,566,722).

5 Dividends

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

	Six months ended	Six months ended	Year ended 31 Dec 2017
	30 June 2018	30 June 2017	£000
	£000	£000	(audited)
May 2018: 32.5p (May 2017: 30.0p)	43,645	40,300	40,300
November 2017: 15.0p	-	-	20,130
	43,645	40,300	60,430

The Board determined on 6 September 2018 that an interim dividend of 19.0p for 2018 be paid, along with a special dividend of 45.0p]. Both dividends will be settled on 23 November 2018 to shareholders on the register at the close of business on 28 September 2018. These dividends have not been recognised as a liability at the balance sheet date.

6 Available for sale assets

Available for sale financial assets - shared equity

As detailed on pages 125 and 126 of the Group's 2017 Annual Report and Accounts, the entire available for sale portfolio of assets was disposed during the year ended 31 December 2017.

7 Related party transactions

Transactions between fellow subsidiaries, which are related parties, during the first half of 2018 have been eliminated on consolidation, as have transactions between the Company and its subsidiaries during this period. The Group's joint ventures are disclosed in the Group's Annual Report and Accounts 2017.

Transactions between the Group and key management personnel in the first half of 2018 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 2017.

Mr Greg Fitzgerald, appointed Group Chief Executive on 18 April 2017, is non-executive Chairman of Ardent Hire Solutions ("Ardent"). The Group hires forklift trucks from Ardent and also undertook a sale of forklift trucks to Ardent during the year ended 31 December 2017 as part of its balance sheet optimisation initiatives.

The total net value of transactions with Ardent were as follows:

	Six months ended	Six months ended	Year ended
	30 June 2018	30 June 2017	31 Dec 2017
	£000	£000	£000
	(unaudited)	(unaudited)	(audited)
Rental expenses paid to Ardent	875	704	1,413
Income received from Ardent for sale of forklifts	-	2,250	2,287

The balance of income receivable from Ardent at 30 June 2018 is £nil (30 June 2017: £2,000,000; 31 December 2017: £nil). The balance of rental expenses payable to Ardent at 30 June 2018 was £4,000 (30 June 2017: £127,000; 31 December 2017: £160,000).

There have been no other 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 Ventures

Bovis Homes Limited is contracted to provide property and letting management services to Bovis Peer LLP. Fees charged in the period, inclusive

of VAT, were £65,771 (six months ended 30 June 2017: £80,000; year ended 31 December 2017: £169,000). None of these fees are outstanding at 30 June 2018 (30 June 2017: nil; 31 December 2017: nil).

Bovis Homes Limited is part of a Joint Venture, IIH Oak Investors LLP, to invest in private rental homes. As at 30 June 2018 loans of £1,668,414 (30 June 2017: £3,503,504; 31 December 2017: £3,714,314) were in place with IIH Oak Investors LLP at an interest rate of 6%. Interest charges made in respect of the loans were £67,000 (six months ended 30 June 2017: £106,000; year ended 31 December 2017: £214,000).

8 Reconciliation of net cash flow to net cash

	Six months ended	Six months ended	Year ended 31 Dec 2017
	30 June	30 June	£000
	2018	2017	(audited)
Net (decrease)/increase in cash and cash equivalents	(91,464)	14,014	131,510
Drawdown of borrowings	(10,598)	(84,949)	(25,209)
Net cash at start of period	144,853	38,552	38,552
Net cash/(debt) at end of period	42,791	(32,383)	144,853
Analysis of net cash:
Cash	78,598	52,566	170,062
Bank and other loans	(35,807)	(84,949)	(25,209)
Net cash/(debt)	42,791	(32,383)	144,853

9 Further information

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 6 September 2018.

Statement of directors' responsibilities

The directors' confirm that these condensed interim financial statements have been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union and that the interim management report includes a fair review of the information required by DTR 4.2.7 and DTR 4.2.8, namely:

•      an indication of important events that have occurred during the first six months and their impact on the condensed set of financial statements, and a description of the principal risks and uncertainties for the remaining six months of the financial year; and

•      material related-party transactions in the first six months and any material changes in the related-party transactions described in the last annual report.

The directors of Bovis Homes Group PLC are listed in the Bovis Homes Group PLC Annual Report for 31 December 2017, with the exception of the following change in the period: Alastair Lyons retired from the Board at the Company's AGM on 23 May 2018. A list of current directors is maintained on the Bovis Homes Group PLC website: www.bovishomesgroup.co.uk.

For and on behalf of the Board,

Greg Fitzgerald       Earl Sibley

Chief Executive       Group Finance Director

6 September 2018

Report on the condensed consolidated interim financial statements

Our conclusion

We have reviewed Bovis Homes Group PLC's condensed consolidated interim financial statements (the "interim financial statements") in the Half Year report of Bovis Homes Group PLC for the six month period ended 30 June 2018. Based on our review, nothing has come to our attention that causes us to believe that the interim financial statements are not prepared, in all material respects, in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union and the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority.

What we have reviewed

The interim financial statements comprise:

•     the Group balance sheet as at 30 June 2018;

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

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

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

•     the explanatory notes to the interim financial statements.

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

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

Responsibilities for the interim financial statements and the review

Our responsibilities and those of the directors

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

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

What a review of interim financial statements involves

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

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

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

PricewaterhouseCoopers LLP Chartered Accountants

London-

6 September 2018

 

END

 

 

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