Bovis Homes Group PLC Final Results (6950A)

TIDMBVS

RNS Number : 6950A

Bovis Homes Group PLC

24 February 2014

24 February 2014

BOVIS HOMES GROUP PLC

FINAL RESULTS FOR THE YEAR ENDED 31 DECEMBER 2013

GROWTH STRATEGY DELIVERING STRONGLY IMPROVING RETURNS

Bovis Homes Group PLC today announced its final results for the financial year ended 31 December 2013 which have been prepared in accordance with International Financial Reporting Standards as adopted by the EU ('IFRS').

 
 Financial and operational 
  highlights                      2013       2012 *      Change 
 Revenue                      GBP556.0m    GBP425.5m     +31% 
 Operating profit              GBP82.8m    GBP56.7m      +46% 
 Operating margin               14.9%        13.3%     +1.6ppts 
 Profit before tax             GBP78.8m    GBP53.2m      +48% 
 Basic earnings per share       44.9p        30.2p       +49% 
 Dividend per share             13.5p        9.0p        +50% 
 ROCE                           10.4%        7.7%      +2.7ppts 
 Net (debt) / cash            GBP(18.0)m   GBP18.8m 
 

* Adjusted for IAS19R

   --      Profit growth reflects continuing benefit of the Group's growth strategy: 
   --      19% growth in legal completions to 2,813 homes (2012: 2,355) 

-- 14% increase in average sales price to GBP195,100 (2012: GBP170,700), primarily due to mix of larger homes and a greater proportion of higher value southern sites

   --      Operating profit margin increased to 14.9% (2012*: 13.3%) 
   --      Enhanced forward order book at end of 2013: 
   --      178% increase in private forward reservations to 692 homes (2012: 249) 
   --      26% increase in production in 2013 to 2,935 homes (2012: 2,322 homes) 
   --      Strong, geographically targeted investment in land during 2013: 
   --      3,737 plots on 27 sites added to the consented land bank during the year 
   --      Circa 2,800 plots on 12 sites legally contracted, awaiting satisfaction of conditions 

-- Land bank of 14,638 consented plots at 31 December 2013, with potential gross profit of GBP727 million, calculated using current sales prices and current build costs

-- Planning approved on three major strategic projects at Witney, Winnersh and Bishops Stortford which will deliver, in aggregate, over 1,200 plots to consented land in the future

Positive current trading (to 21 February 2014)

-- 468 private reservations achieved in first seven weeks of 2014 (2013: 285), an increase of 64%

   --      1,875 cumulative sales achieved to 21 February 2014 for 2014 legal completion (2013: 1,064) 

-- Advanced stage of agreement on two private rental sector ("PRS") transactions for circa 500 homes, of which approximately 250 would legally complete in 2014

   --      Sales prices achieved to date circa 2% ahead of Group expectations 

-- Circa 2,300 plots on nine sites added to the consented land bank during the first seven weeks of 2014, including a major investment in a new settlement at Sherford in Devon

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

"The Group has a clear and robust growth strategy, which has enabled the delivery of an excellent performance in 2013, with strong growth in profit and return on capital employed. A rigorous focus on targeted land acquisition, together with tight management of costs and capital have enabled the Group to take full advantage of the more favourable market conditions to increase volumes, improve sales prices and strengthen margins.

"I would like to recognise the considerable effort, commitment and hard work of our employees during 2013 and to thank them all for their contribution to the Group's success.

"The Group is focused on delivering further improvements in shareholder returns through material growth in profits and capital turn. The housing market is recovering with higher activity levels and improving house prices expected to more than compensate for supply chain cost increases. This positive market is acting as a welcome backdrop for the Group's continued successful execution of its growth strategy.

"With the current strong sales position and assuming current market conditions continue, the Group is confident of its ability to deliver strong increases in volume, revenue and profit in 2014 with the aim of achieving a return on capital employed for the year of at least 14%."

 
 Enquiries:   David Ritchie, Chief Executive   Results issued   Reg Hoare / 
                                                by 
              Jonathan Hill, Finance                            James White 
               Director 
              Bovis Homes Group PLC                             MHP Communications 
              On 24 February -                                  On 24 February - 
               tel: [phone]                                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.

Chief Executive's Statement

Bovis Homes has made significant progress in 2013, delivering a strong improvement in revenue, profits and return on capital employed.

The Group has continued to acquire high quality land assets in the south of England and in prime locations in the midlands and northwest, where it is considered the housing market will be more robust. As a result, the Group has grown active sales outlets, leading to higher volumes. With an increasing proportion of legal completions from post downturn sites, average sales price and profit margins have improved.

Furthermore through an improvement in the efficiency of capital employed by active management of the land bank and work in progress, the Group has increased its capital turn. The combination of improved profitability and increased capital turn has delivered a strong improvement in the Group's return on capital employed.

Bovis Homes aims to be a quality housebuilder delivering high returns generated from a strong land bank, much of it strategically sourced, and quality homes sold at a premium price. In order to deliver improved returns, the following clear strategic objectives for 2013 were set out and have been delivered:

   1.     Increase operating profits 
   2.     Enhance future returns through targeted land investment 
   3.     Improve efficiency of capital employed 

As a result of delivering against these three strategic objectives, the Group has achieved a significant increase in return on capital employed to 10.4% in 2013 from 7.7% in 2012.

   1.     Increase operating profits 

Operating profit increased in 2013 by 46% to GBP82.8 million, as a result of the compound positive effect of an increased volume of legal completions sold at a higher average sales price generating a stronger profit margin.

During 2013, the Group achieved 2,773 private reservations, a 48% increase on the 1,873 achieved in 2012. Net private sales per site per week increased by 34% to 0.59 (2012: 0.44), as a result of the improving quality of the Group's active sales outlets and the benefit of a recovering housing market. Active sales outlets averaged 90 during 2013, an increase of 10% on the 82 achieved during 2012.

One effect of the positive sales rate was that some sites were completed more quickly than expected. Also certain sites were launched later than anticipated due to planning delays. These two factors led to the Group achieving a marginally lower average number of active sales outlets than had been expected at the start of 2013.

The higher level of private reservations enabled the Group to deliver a 26% increase in private legal completions to 2,330 (2012: 1,854), as well as carrying forward a significantly enhanced private forward order book of 692 private reservations, up from 249 at the beginning of 2013. This improved forward order book will support the Group's volume ambitions for 2014 and enable the Group to deliver a more balanced profile of legal completions through the year, with an increased proportion of its full year legal completions in the first half. Additionally, this will assist in improving the working capital cycle of the Group through the year.

During 2013, the Group supported new customers accessing the housing market using the Government's Help to Buy shared equity scheme. In the year new homes were handed over to 872 customers who were able to use shared equity products, including the Help to Buy scheme, as part of their home purchase. During 2012, shared equity products (including Government backed schemes) were used to support customers buying 535 new homes. The Group sees the Help to Buy scheme as an attractive replacement for other shared equity products.

483 social homes were legally completed in 2013 (2012: 501), constituting 17% of total legal completions (2012: 21%). The Group decided to prioritise private build over social, particularly during Q4 2013, to ensure that private production was not constrained by tightness in the supply of sub-contract labour or materials lead times. At the beginning of 2014 the Group held 685 forward social reservations (2013: 529).

In aggregate the Group delivered 2,813 legal completions in 2013, a 19% increase on the 2,355 in 2012. To support this significant increase in new home delivery, the Group increased its construction output in 2013 by 26% to 2,935 homes (2012: 2,322).

The Group achieved a 13% increase in private average sales price to GBP212,700 in 2013 (2012: GBP188,700). This has been driven primarily by changes in the Group's product mix of private legal completions with an increase in larger traditional two storey homes and a decrease in townhouses. The Group considers that in its areas of operation sales prices have increased by between 2% and 3% with stronger gains in the south of England offset by modest movements in the midlands and north of England. Including social homes, the Group's average sales price was 14% higher at GBP195,100 (2012: GBP170,700).

Housing gross margin increased from 22.6% in 2012 to 23.5% in 2013, resulting from the increased contribution from legal completions on stronger margin sites acquired post the housing market downturn. This margin progression was impacted by the planned incremental year on year cost of circa GBP3.5 million to promote strategic land assets.

The housing gross margin was also affected for the first time in many years by increases in build costs, mainly from labour rates. Increased activity in the new homes market has led to demand for subcontract labour exceeding supply. As a result, subcontractors have seen the ability to renegotiate at higher rates. Given the timing of such increases, the Group has been able to limit the cost impact well within the benefit from increasing sales prices.

As a result of the compound positive effect of volume growth, higher average sales price and improved gross profit margin, housing gross profit increased by 41% to GBP130.2 million (2012: GBP92.1 million). With overheads well controlled, the operating margin increased to 14.9% (2012*: 13.3%).

   2.     Enhance future returns through targeted land investment 

The Group applies rigorous criteria for the acquisition of consented land, reflecting not only the anticipated margin and return on capital, but also site specific risks and geographic concentration risk.

2013 was a successful year for land investment. The Group continued to invest in high quality consented land assets, retaining its focus on specific areas of search in the south of England and prime locations in the midlands and northwest. During the year the Group added 3,737 plots on 27 sites to the consented land bank at a cost of GBP225 million (2012: 2,651 consented plots at a cost of GBP161 million). The plots added have an estimated future revenue of GBP841 million and an estimated future gross profit potential of GBP216 million, based on current sales prices and current build costs, and are expected to deliver a gross margin of over 25% and a ROCE well in excess of the Group's 20% hurdle rate. A further circa 2,800 plots on 12 sites were contracted at the end of 2013, awaiting satisfaction of legal conditions.

In 2014 to date, circa 2,300 consented plots on nine sites have been added to the consented land bank, many of these plots arising from the successful completion of the contracts secured during 2013.

Included in the sites added to date in 2014 is a major new settlement at Sherford in Devon, where the Group owns 1,658 consented plots. The land cost of this site is very low, due to the high level of infrastructure spend which is phased over the life of the site. As a result, the peak funding on this long term major project is expected to be between 1% and 2% of the Group's net assets. Sherford will be an anchor site within the South West region over many years and is expected to deliver a strong margin and an excellent return on capital employed.

The consented land bank amounted to 14,638 plots as at 31 December 2013 (2012: 13,776). The Group estimates that the gross profit potential on these consented plots at the 2013 year end, based on current sales prices and current build costs, was GBP727 million with a gross margin of 24.2% (2012: GBP600 million at 22.7%).

At the year end, the consented land bank included 9,197 consented plots (63% of total), which have been acquired since the housing market downturn (2012: 7,368 plots and 54% of total). The average consented land plot cost was GBP45,800 at the start of 2013 and increased over the year to GBP48,900, as a result of a lower number of written down plots held in the land bank (10% of land plots versus 13% at the start of the year) and the addition of new prime traditional housing sites where the average plot cost is higher.

The strategic land bank at 31 December 2013 contained 20,108 potential plots (2012: 19,318). The Group converted circa 1,200 plots of strategic land having achieved consent during 2013. The Group has continued to invest in new strategic land assets to assist in replenishing its consented land bank at strong margins in the future.

In addition, the Group has secured resolution to grant planning consent on three of its major strategic land assets at Winnersh, Witney and Bishops Stortford. These sites will deliver in aggregate over 1,200 consented plots at a significant discount to market value. Planning consents will be formally released once the planning agreements for each site are signed. Good progress continues to be made on a number of other major strategic projects, where material promotion costs are being incurred to achieve planning consents. This is expected to deliver significant numbers of consented plots over the next few years.

   3.     Improve efficiency of capital employed 

Improving capital turn is critical to the Group's ability to deliver material growth in return on capital employed. Capital turn has continued to improve from 0.5 in 2011 to 0.7 in 2013. The consented land bank is the key element of capital employed. While this has grown in size with the investments made by the Group, the average number of plots per active sales outlet has continued to decrease from 188 in 2011 to 158 in 2013. The average number of plots per site acquired in 2013 was 138 plots, compared to 147 in 2012.

Work in progress turn increased to 2.7 times in 2013 from 2.5 in 2012. Notional units of production at the end of 2013 increased to 1,040 (2012: 918), as a result of the increase in active sales outlets and to facilitate higher legal completion volumes in the first half of 2014 over the first half of 2013. The value of work in progress has increased to GBP202.3 million from GBP172.7 million.

With the land investment undertaken to date and the strength of the ongoing land pipeline, the output capacity of the business is expected to increase. On the basis of current market conditions, capital turn should improve further in 2014 and beyond.

Structure

In anticipation of increasing activity levels in 2014 and beyond, the Group is now operating from six regions in two divisions with plans for two further regions to become operational in the foreseeable future (previously the Group operated through a three region structure). This new structure will provide the Group with a business capacity of between 4,000 and 5,000 homes per annum, whilst maintaining close alignment to the localities in which it operates with significant local knowledge. The geographical focus of the Group remains exactly as before, being in the south of England and in prime locations in the midlands and northwest. Although this change will lead to a limited increase in the Group's overhead expenditure in absolute terms, overhead efficiency is expected to continue to improve in 2014 and beyond.

The two divisions, South and Central, are led by Divisional Managing Directors, Malcolm Pink and Keith Carnegie respectively. The strength and experience of the Group's existing senior management is demonstrated by six of the eight regional managing directors being internal appointments.

The Board

Colin Holmes has decided to retire from the Board at the 2014 Annual General Meeting to be held on 16 May 2014 after seven and a half years as a non-executive director and seven years as Remuneration Committee chairman. The Board would like to thank Colin for his valuable contribution during his time on the Board. Alastair Lyons will succeed as Remuneration Committee chairman following the AGM.

Market conditions

Housing market conditions improved materially during 2013. An increase in the number of mortgage products including a greater availability of high loan to value mortgages has supported a greater number of housing transactions. Bank of England mortgage approvals statistics show a significant increase during the second half of 2013 with monthly figures approaching a level more reflective of a healthy housing market.

Homebuyer confidence appears to have improved materially with more positive views on the future direction of house prices, employment and security of earnings. With this improving backdrop, trading conditions are expected to remain broadly positive during 2014, supporting sales rates and sales prices.

House prices have been rising at a modest rate across many regional markets with stronger rises in the south of England, offset by more modest changes in the midlands and north of England. As expected, with activity and sales prices rising, the cost of building houses is also rising as material suppliers enjoy increased demand for their products and subcontractors see an ability to increase rates.

The Government's Help to Buy shared equity product, launched in April 2013, has provided strong impetus to the new build industry, supporting first time buyers in particular. The Help to Buy mortgage indemnity product was also launched in Q4 2013 and, given it assists not just new build customers, the Group considers this Government backed product to be further support to activity in the wider housing market.

As a result of the positive activity in the housing market, the support provided to banks to facilitate cost effective mortgage lending via the Government's Funding for Lending Scheme is being withdrawn. The Group views this development positively, as it signals that the mortgage market is beginning to operate more effectively without assistance.

Current trading

The Group entered 2014 with a forward sales order position of 1,377 homes, a 77% improvement on the 778 homes brought forward at the start of 2013. Of these, 692 were private homes (2013: 249) and 685 were social (2013: 529).

The Group has delivered 468 private reservations in the first seven weeks of 2014 (2013: 285), an increase of 64%. Operating from an average of 93 active sales outlets during this period (2013: 90), the Group has achieved a sales rate per site per week of 0.72, a 60% improvement on the 0.45 achieved in the comparable period in 2013. Sales prices achieved on these private reservations to date have been ahead of the Group's expectations by circa 2%.

As at 21 February 2014, the Group held 1,875 sales for legal completion in 2014, as compared to 1,064 sales at the same point in 2013, an increase of 76%. Of these, private sales amounted to 1,160 homes (2013: 534), with social housing sales of 715 homes (2013: 530).

Build to Rent scheme - private rental sector

In 2012, the Government announced its Build to Rent scheme, with the intention of providing funding support to assist in the establishment of PRS vehicles. Whilst not yet contracted, the Group has agreed terms and is at an advanced stage in finalising agreements to deliver new homes under two separate PRS transactions on sites owned by the Group, each using support from the Government's scheme.

The two transactions involve approximately 500 homes, of which circa 250 would legally complete in 2014 with the remainder in 2015. The profit delivery combined with the acceleration of capital turn enabled by these transactions would act as a further positive contributor to increasing the Group's return on capital employed in both 2014 and 2015.

Outlook

The successful continued execution of the growth strategy in 2013 has positioned the Group strongly to continue to grow in 2014 and beyond.

The sales achieved in 2014 to date combined with the expected growth in active sales outlets should enable the Group to deliver a strong increase in total reservations during 2014, assuming current market conditions continue. From these reservations excluding any potential volume arising from the PRS transactions (250 homes in 2014), the Group aims to deliver between 3,400 and 3,600 legal completions in 2014 and a stronger forward order book for 2015.

This legal completion volume will represent major growth in the Group's output and will require a material increase in build activity compared to 2013. During a period of constrained capacity in the material and labour supply markets, build costs for 2014 legal completions are expected to increase by between 3% and 5%. However with a continuing tight focus on the Group's operational performance, market rises in sales prices are expected to at least cover such cost increases.

The Group expects further growth in the proportion of legal completions from post downturn sites to increase both the average sales price and housing gross margin in 2014. When combined with improving overhead efficiency, the operating margin is expected to increase to approximately 17%.

With a clear focus on controlling the capital employed of the Group through management of the land bank and control of working capital, improving capital turn is expected to be at least 0.8 in 2014. Based on current market conditions continuing and excluding any potential volume arising for the PRS transactions, the Group expects to deliver a strong increase in return on capital employed to at least 14% in 2014 with the expectation of further progress thereafter.

Financial Review

Revenue

During 2013, the Group generated total revenue of GBP556.0 million, an increase of 31% on the previous year (2012: GBP425.5 million). Housing revenue in 2013 was GBP548.7 million, 36% ahead of the prior year (2012: GBP402.0 million) and other income was GBP4.3 million (2012: GBP5.7 million). Land sales revenue, associated with one land sale and the recognition of deferred income on land sales legally completed in prior years, was GBP3 million in 2013, compared to three land sales achieved in 2012 with a total revenue of GBP17.8 million.

Operating profit

The Group delivered a 46% increase in operating profit for the year ended 31 December 2013 to GBP82.8 million (2012*: GBP56.7 million) at an operating margin of 14.9% (2012*: 13.3%). Housing operating margin in 2013 was 15.0% (2012: 12.7%) and reached 16.8% in the second half of 2013.

Housing gross margin increased to 23.5% in 2013 from 22.6% in 2012. The gross margin benefited from the increased contribution from legal completions on sites acquired post the housing market downturn. As previously disclosed, the Group increased the promotional expenditure on strategic land by circa GBP3 million in 2013 over 2012, which held back the year on year margin growth. This level of cost incurred in 2013 to promote strategic land is expected to remain relatively stable during 2014.

The profit on land sales in 2013 was GBP0.1 million (2012 benefited from a material profit of GBP4.8 million at a margin of 27%). Total gross profit was GBP130.3 million (gross margin: 23.4%), compared with GBP96.9 million (gross margin: 22.8%) in 2012.

Overheads, including all sales and marketing costs, increased in 2013 by 18%, as the Group invested early to support the large number of land assets acquired and the increased number of sales outlets. The overheads to revenue ratio improved to 8.5% in 2013 from 9.5% in 2012*.

Profit before tax and earnings per share

Profit before tax increased by 48% to GBP78.8 million, comprising operating profit of GBP82.8 million, net financing charges of GBP4.3 million and a profit from joint ventures of GBP0.3 million. This compares to GBP53.2 million of profit before tax in 2012*, comprising GBP56.7 million of operating profit, GBP3.7 million of net financing charges and a profit from joint ventures of GBP0.2 million. Basic earnings per share for the year improved by 49% to 44.9p compared to 30.2p in 2012*.

Financing

Net financing charges during 2013 were GBP4.3 million (2012*: GBP3.7 million). Net bank charges were GBP3.5 million (2012: GBP2.6 million), as a result of higher net debt during 2013 compared to 2012. The Group incurred a GBP3.1 million finance charge (2012: GBP3.1 million charge), reflecting the imputed interest on land bought on deferred terms. The Group also benefited from a finance credit of GBP2.3 million (2012: GBP1.7 million) arising from the unwinding of the discount on its available for sale financial assets during 2013. There were GBP0.3 million of other financing credits during 2012.

Taxation

The Group has recognised a tax charge of GBP18.7 million at an effective tax rate of 23.7% (2012*: tax charge of GBP13.1 million at an effective rate of 24.5%). The Group has a current tax liability of GBP9.2 million in its balance sheet as at 31 December 2013 (2012*: current tax liability of GBP5.7 million).

Dividends

Given the ongoing material improvement in the Group's performance and the confidence of the Board in the continued delivery of the Group's strategy, the Board has proposed a 2013 final dividend of 9.5p per share. This dividend will be paid on 23 May 2014 to holders of ordinary shares on the register at the close of business on 28 March 2014. The dividend reinvestment plan gives shareholders the opportunity to reinvest their dividends in ordinary shares.

Combined with the interim dividend paid of 4.0p, the dividend for the full year totals 13.5p compared to a total of 9.0p paid in 2012, an increase of 50%. The Board expects to grow dividends progressively as earnings per share increase.

Net assets

 
                                                    2013   2012* 
                                                    GBPm    GBPm 
------------------------------------------------  ------   ----- 
Net assets at 1 January                            758.8   728.6 
Profit after tax for the year                       60.1    40.2 
Share capital issued                                 1.0     0.6 
Net actuarial movement on pension scheme 
 through reserves                                    2.9    (2.7) 
Deferred tax on other employee benefits                -    (0.1) 
Adjustment to reserves for share based payments      0.8     0.9 
Dividends paid to shareholders                     (13.3)   (8.7) 
-------------------------------------------------  -----   ----- 
Net assets at 31 December                          810.3   758.8 
-------------------------------------------------  -----   ----- 
 

As at 31 December 2013 net assets of GBP810.3 million were GBP51.5 million higher than at the start of the year. Inventories increased during the year by GBP107.4 million to GBP971.0 million. The value of residential land, the key component of inventories, increased by GBP84.2 million, as the Group invested ahead of usage. At the end of 2013, the remaining provision held against land carried at net realisable value was GBP19.9 million, after utilisation of GBP8.7 million during the year. Other movements in inventories were an increase in work in progress of GBP29.5 million, offset by a decrease in part exchange properties of GBP6.3 million.

Trade and other receivables reduced by GBP23.1 million, with a reduction in debtors related to land sales of GBP12.7 million and lower amounts owing from housing associations. Available for sale financial assets held as current assets at 2012 year end of GBP7.2 million, relating to units held in an investment fund into which the Group sold show home properties, were fully recovered during 2013. Trade and other payables totalling GBP242.6 million (2012: GBP249.3 million) comprised land creditors of GBP123.8 million (2012: GBP123.8 million) and trade and other creditors of GBP118.8 million (2012: GBP125.5 million). Net assets per share as at 31 December 2013 were 604p (2012: 567p).

Pensions

Taking into account the latest estimates provided by the Group's actuarial advisors, the Group's pension scheme on an IAS19R basis had a surplus of GBP3.2 million at 31 December 2013 (2012*: deficit of GBP3.2 million). Scheme assets grew over the year to GBP94.7 million from GBP85.2 million and the scheme liabilities increased to GBP91.5 million from GBP88.4 million. Scheme assets benefited from a GBP2.8 million special cash contribution made by the Group in December 2013.

As at 30 June 2013, an actuarial valuation was undertaken on behalf of the pension scheme trustee, which showed a deficit of GBP12.8 million at that date. The difference to the IAS19R basis results from more conservative assumptions on discount rate and mortality, as well as the additional special cash contribution of GBP2.8 million made during December 2013. A new schedule of contributions is in the process of being agreed between the Group and the pension scheme trustee.

Net cash and cashflow

Having started the year with a net cash balance of GBP18.8 million, the Group generated an operating cash inflow before land expenditure of GBP204 million (2012: GBP130 million), demonstrating the strong underlying cash generation from the Group's existing assets. Net cash payments for land investment were GBP203 million (2012: GBP139 million). Non-trading cash outflow was GBP38 million. As at 31 December 2013 the Group's net debt balance was GBP18.0 million with GBP12.0 million of cash in hand, offset by a drawn term loan of GBP25.0 million, GBP4.8 million of loans received from the Government and GBP0.2 million being the fair value of an interest rate swap.

At the 31 December 2013, the Group had in place a committed revolving credit facility of GBP175 million, of which GBP50 million expires in December 2015 and GBP125 million in March 2017. Additionally the Group had a fully drawn three year term loan of GBP25 million, repayable in January 2016.

Bovis Homes Group PLC

Group income statement

 
For the year ended 31 December                            2012 
                                              2013    restated 
                                                      - note 3 
                                            GBP000      GBP000 
----------------------------------------  --------   --------- 
 
Revenue                                    556,000     425,533 
Cost of sales                             (425,693)   (328,634) 
----------------------------------------  --------   --------- 
Gross profit                               130,307      96,899 
Administrative expenses                    (47,476)    (40,186) 
----------------------------------------  --------   --------- 
Operating profit before financing costs     82,831      56,713 
Financial income                             2,815       2,203 
Financial expenses                          (7,134)     (5,926) 
----------------------------------------  --------   --------- 
Net financing costs                         (4,319)     (3,723) 
Share of profit of joint venture               283         254 
Profit before tax                           78,795      53,244 
Income tax expense                         (18,727)    (13,051) 
----------------------------------------  --------   --------- 
Profit for the period attributable 
 to equity holders of the parent            60,068      40,193 
----------------------------------------  --------   --------- 
 
Earnings per share 
----------------------------------------  --------   --------- 
Basic                                         44.9p      30.2p 
Diluted                                       44.8p      30.1p 
----------------------------------------  --------   --------- 
 
 

Group statement of comprehensive income

 
For the year ended 31 December                                         2012 
                                                           2013    restated 
                                                                   - note 3 
                                                         GBP000      GBP000 
-------------------------------------------------------  ------   --------- 
 
Profit for the period                                    60,068      40,193 
Other comprehensive income 
Items that will not be reclassified to profit 
 and loss: 
Actuarial gains / (losses) on defined benefit 
 pension scheme                                           3,693      (3,500) 
Deferred tax on actuarial movements on defined 
 benefit pension scheme                                    (748)        797 
Total comprehensive income for the period attributable 
 to equity holders of the parent                         63,013      37,490 
-------------------------------------------------------  ------   --------- 
 

Bovis Homes Group PLC

Group balance sheet

 
At 31 December                                        2012 
                                           2013   restated 
                                                  - note 3 
                                         GBP000     GBP000 
------------------------------------  ---------  --------- 
Assets 
Property, plant and equipment            13,526     11,910 
Investments                               5,089      5,387 
Restricted cash                           1,823      1,152 
Deferred tax assets                       1,451      2,881 
Trade and other receivables               1,560      1,930 
Available for sale financial assets      44,844     43,869 
Retirement benefit asset                  3,237          - 
Total non-current assets                 71,530     67,129 
------------------------------------  ---------  --------- 
 
Inventories                             971,016    863,597 
Trade and other receivables              41,713     64,844 
Available for sale financial assets           -      7,119 
Cash and cash equivalents                12,025     24,396 
Total current assets                  1,024,754    959,956 
------------------------------------  ---------  --------- 
Total assets                          1,096,284  1,027,085 
------------------------------------  ---------  --------- 
 
Equity 
Issued capital                           67,048     66,908 
Share premium                           213,428    212,550 
Retained earnings                       529,786    479,391 
------------------------------------  ---------  --------- 
Total equity attributable to equity 
 holders of the parent                  810,262    758,849 
------------------------------------  ---------  --------- 
 
Liabilities 
Bank and other loans                     30,064      5,606 
Other financial liabilities                   -        706 
Trade and other payables                 29,631     50,681 
Retirement benefit obligations                -      3,171 
Provisions                                2,052      1,668 
------------------------------------  ---------  --------- 
Total non-current liabilities            61,747     61,832 
------------------------------------  ---------  --------- 
 
Trade and other payables                212,926    198,620 
Other financial liabilities                 784          - 
Provisions                                1,411      2,065 
Current tax liabilities                   9,154      5,719 
Total current liabilities               224,275    206,404 
------------------------------------  ---------  --------- 
Total liabilities                       286,022    268,236 
------------------------------------  ---------  --------- 
 
Total equity and liabilities          1,096,284  1,027,085 
------------------------------------  ---------  --------- 
 

These financial statements were approved by the Board of directors on 21 February 2014.

Bovis Homes Group PLC

Group statement of changes in equity

 
                                     Total    Issued    Share    Total 
For the year ended 31 December    retained   capital  premium 
                                  earnings 
                                    GBP000    GBP000   GBP000   GBP000 
-------------------------------  ---------   -------  -------  ------- 
Balance at 1 January 2012          449,671    66,836  212,064  728,571 
Total comprehensive income 
 and expense                        37,490         -        -   37,490 
Issue of share capital                   -        72      486      558 
Deferred tax on other employee 
 benefits                               33         -        -       33 
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 2013          479,391    66,908  212,550  758,849 
Total comprehensive income 
 and expense                        63,013         -        -   63,013 
Issue of share capital                   -       140      878    1,018 
Deferred tax on other employee 
 benefits                              (23)        -        -      (23) 
Share based payments                   766         -        -      766 
Dividends paid to shareholders     (13,361)        -        -  (13,361) 
Balance at 31 December 
 2013                              529,786    67,048  213,428  810,262 
-------------------------------  ---------   -------  -------  ------- 
 

Bovis Homes Group PLC

Group statement of cash flows

 
For the year ended 31 December                    2013      2012 
                                                GBP000    GBP000 
-------------------------------------------  ---------  -------- 
 
Cash flows from operating activities 
Profit for the year                             60,068    40,193 
Depreciation                                     1,180       906 
Impairment of available for sale financial 
 assets                                           (47)       889 
Financial income                               (2,815)   (2,203) 
Financial expense                                7,134     5,926 
Profit on sale of property, plant and 
 equipment                                        (24)      (14) 
Equity-settled share-based payment 
 expense                                           766       861 
Income tax expense                              18,727    13,051 
Share of result of joint venture                 (283)     (254) 
Decrease / (increase) in trade and 
 other receivables                              28,737   (3,587) 
Increase in inventories                      (107,419)  (65,841) 
(Decrease) / increase in trade and 
 other payables                                (4,911)     1,093 
Decrease in provisions and retirement 
 benefit obligations                           (2,845)   (2,401) 
-------------------------------------------  ---------  -------- 
Cash generated from operations                 (1,732)  (11,381) 
 
Interest paid                                  (5,781)   (1,707) 
Income taxes paid                             (14,634)   (9,922) 
-------------------------------------------  ---------  -------- 
Net cash from operating activities            (22,147)  (23,010) 
-------------------------------------------  ---------  -------- 
 
Cash flows from investing activities 
Interest received                                  269       773 
Acquisition of property, plant and 
 equipment                                     (2,802)   (1,213) 
Proceeds from sale of plant and equipment           30        25 
Movement in loans with Joint Venture               360         - 
Dividends received from Joint Venture              267       243 
Investment in restricted cash                    (671)     (493) 
Net cash from investing activities             (2,547)     (665) 
-------------------------------------------  ---------  -------- 
 
Cash flows from financing activities 
Dividends paid                                (13,361)   (8,664) 
Proceeds from the issue of share capital         1,018       558 
Increase in borrowings                          24,666         - 
Net cash from financing activities              12,323   (8,106) 
-------------------------------------------  ---------  -------- 
 
Net decrease in cash and cash equivalents     (12,371)  (31,781) 
Cash and cash equivalents at 1 January          24,396    56,177 
-------------------------------------------  ---------  -------- 
Cash and cash equivalents at 31 December        12,025    24,396 
-------------------------------------------  ---------  -------- 
 

Notes to the financial statements

   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 2013 comprise the Company and its subsidiaries (together referred to as 'the Group') and the Group's interest in associates and joint ventures.

The consolidated financial statements were authorised for issue by the directors on 21 February 2014. The financial statements were audited by KPMG LLP.

The financial information set out above does not constitute the company's statutory financial statements for the years ended 31 December 2013 or 2012 but is derived from those financial statements. Statutory financial statementsfor 2012 have been delivered to the registrar of companies, and those for 2013 will be delivered in due course. The auditors have reported on those financial statements; their reports were (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 consolidated financial 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 financial statements 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. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases.

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.

Joint ventures are those entities in which the Group has joint control over the financial and operating policies. The consolidated financial statements include the Group's share of the total recognised gains and losses of joint ventures on an equity accounted basis, from the date that joint control commenced until joint control ceases.

   3              Accounting policies 

The Group has adopted IAS19 (Revised 2011) "Employee Benefits", which outlines the accounting requirements or employee benefits. The application of IAS19 (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 has been restated with profit being GBP0.7 million lower and other comprehensive income GBP0.7 million higher including the tax impact of the changes. The impact on both basic and diluted earnings per share was a reduction of 0.5 pence. The Group records actuarial adjustments immediately so there has been no effect on the prior year pension deficit.

Other than IAS19R, 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              Reconciliation of net cash flow to net cash 
 
                                        2013      2012 
                                      GBP000    GBP000 
-----------------------------------  -------   ------- 
 
Net decrease in net cash and cash 
 equivalents                         (12,371)  (31,781) 
Increase in borrowings               (24,546)        - 
Fair value adjustments to interest 
 rate swaps                              209        (9) 
Fair value adjustment to interest 
 free loans                             (121)     (195) 
Net cash at start of period           18,790    50,775 
-----------------------------------  -------   ------- 
Net (debt) / cash at end of period   (18,039)   18,790 
-----------------------------------  -------   ------- 
 
Analysis of net cash: 
Cash and cash equivalents             12,025    24,396 
Unsecured loans                      (29,856)   (5,190) 
Fair value of interest rate swaps       (208)     (416) 
Net cash                             (18,039)   18,790 
-----------------------------------  -------   ------- 
 
   5              Income taxes 

Current tax

Current tax is the expected tax payable or receivable on the taxable income or loss for the year, calculated using a corporation tax rate of 23.25% 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. Current tax receivable for current and prior years is classified as a current asset.

   6              Dividends 

The following dividends were declared by the Group:

 
                                            2013    2012 
                                          GBP000  GBP000 
 
Prior year final dividend per share 
 of 6.0p (2012: 3.5p)                      8,010   4,663 
Current year interim dividend per share 
 of 4.0p (2012: 3.0p)                      5,351   4,001 
----------------------------------------  ------  ------ 
Dividends declared                        13,361   8,664 
----------------------------------------  ------  ------ 
 

The Board has decided to propose a final dividend of 9.5p per share in respect of 2013.

   7              Earnings per share 

Basic earnings per share

The calculation of basic earnings per share at 31 December 2013 was based on the profit attributable to ordinary shareholders of GBP60,068,000 (2012: GBP40,193,000) and a weighted average number of ordinary shares outstanding during the year ended 31 December 2013 of 133,643,311 (2012: 133,294,726), calculated as follows:

Profit attributable to ordinary shareholders

 
                                         2013     2012 
                                       GBP000   GBP000 
------------------------------------  -------  ------- 
 Profit for the period attributable 
  to ordinary shareholders             60,068   40,193 
 

Weighted average number of ordinary shares

 
                                               2013          2012 
-------------------------------------  ------------  ------------ 
 Issued ordinary shares at 1 January    133,294,726   132,860,480 
 Effect of own shares held                (288,388)     (445,306) 
 Effect of shares issued in year            636,973       879,552 
-------------------------------------  ------------  ------------ 
 Weighted average number of ordinary 
  shares at 31 December                 133,643,311   133,294,726 
-------------------------------------  ------------  ------------ 
 

Diluted earnings per share

The calculation of diluted earnings per share at 31 December 2013 was based on the profit attributable to ordinary shareholders of GBP60,068,000 (2012: GBP40,193,000) and a weighted average number of ordinary shares outstanding during the year ended 31 December 2013 of 133,933,279 (2012: 133,432,911).

The average number of shares is increased by reference to the average number of potential ordinary shares held under option during the period. This reflects 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.

Weighted average number of ordinary shares (diluted)

 
                                                  2013          2012 
----------------------------------------  ------------  ------------ 
 Weighted average number of ordinary 
  shares at 31 December                    133,643,311   133,294,726 
 Effect of share options in issue which 
  have a dilutive effect                       289,968       138,185 
----------------------------------------  ------------  ------------ 
 Weighted average number of ordinary 
  shares (diluted) at 31 December          133,933,279   133,432,911 
----------------------------------------  ------------  ------------ 
 
   8              Circulation to shareholders 

The consolidated financial statements will be sent to shareholders on or about 24 March 2014. 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.bovishomesgroup.co.uk, including the slide presentation document which will be presented at the Group's results meeting on 24 February 2014.

This information is provided by RNS

The company news service from the London Stock Exchange

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