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Bovis Homes Group (VTY)

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Monday 17 August, 2015

Bovis Homes Group

Half Yearly Report

RNS Number : 1621W
Bovis Homes Group PLC
17 August 2015
 

17 August 2015

BOVIS HOMES GROUP PLC

RESULTS FOR THE HALF YEAR ENDED 30 JUNE 2015

                 Strong financial performance and dividend growth reflect successful delivery of strategy

 

Bovis Homes Group PLC today announces its half year results for the six months ended 30 June 2015.

 

Financial and operational highlights for H1 2015

 

H1 2015

H1 2014

Change

Revenue

£350.7m

£322.1m

+9%

Operating profit

£54.3m

£51.2m

+6%

Net profit *

£56.0m

£51.3m

+9%

Net profit margin

16.0%

15.9%

+0.1ppts

Profit before tax

£53.8m

£49.4m

+9%

Basic earnings per share

32.1p

28.8p

+11%

Dividend per share

13.7p

12.0p

+14%

Return on capital employed **

15.6%

13.4%

+2.2ppts

Net debt

£58.8m

£45.3m

 

 

* Net profit is operating profit plus Group share of joint venture profits

** Return on capital employed ("ROCE") is net profit for 12 months to 30 June divided by average of actual opening and closing invested capital

 

 
 
·
Record number of legal completions at 1,525 homes (H1 2014: 1,487 homes)
·
Average sales price on private legal completions, excluding PRS homes, of £264,200, 10% higher than H1 2014 (£239,500)    driven by mix and improvements in market house prices
·
2,687 consented plots on 15 sites added to the land bank in the first half with a further 573 plots on five sites added since 30  June 2015
·
Consented land bank of 19,081 plots on 135 sites at 30 June 2015 (31 December 2014: 18,062 plots; 128 sites)
·
Strong investment in strategic land with the Group holding 23,287 strategic plots across 86 sites (31 December 2014: 21,350  strategic plots; 76 sites)
·
Average active sales outlets in the first half year of 100 (H1 2014: 93), an 8% increase
 
 
Current trading and outlook
·
Cumulative sales achieved to 14 August for 2015 delivery of 3,768 homes, with the Group on track to achieve expected volume   for full year
·
Production achieved to 14 August 11% ahead of the same period in 2014 provides strong base for delivery of the planned volume for 2015 and work in progress for 2016
·
Capital turn in 2015 expected to be in excess of 1.0 times with improving net profit margin, leading to strong increase in ROCE
 
 
Flexible strategy to deliver strong returns and reach steady state output
·
Focused on growth during positive housing market conditions with continuous assessment of housing cycle
·
Taking advantage of significant land acquisition opportunities at higher ROCE
·
Evolving Group structure to manage future growth
·
Increased revenue with improved capital efficiency driving higher financial returns
·
Confidence in delivery of strategy supports intention to pay a dividend of 40 pence per share in 2015 (2014: 35 pence)
 

 

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

"We have delivered a strong first half performance in 2015 with a record number of legal completions and a further improvement in return on capital employed.  Our long term land investment in high quality locations, including delivery from strategic land, is providing a consented land bank which supports growth in active sales outlets leading to increased volumes.

 

I am pleased to report that significant land opportunities continue to be available at higher returns meaning disciplined investment in consented land should underpin future growth in shareholder returns.  With positive market conditions prevailing, we continue to assess the housing cycle and will adapt our strategy appropriately.  We anticipate that the addition of around 40 sites per annum will support our medium term growth strategy to deliver volumes of between 5,000 and 6,000 new homes each year.

 

For 2015, we are on track to deliver our expected volume of new homes and remain confident in our outlook for the year as a whole.  The combination of strong revenue growth and higher profit margins with improved capital efficiency will drive higher capital turn and return on capital employed.  With this anticipated improvement in returns, the Board intends to increase the full year dividend to 40 pence per share."

 

 

Enquiries:

David Ritchie, Chief Executive

Results issued by

Reg Hoare / James White

 

Earl Sibley, Finance Director

 

/ Giles Robinson

 

Bovis Homes Group PLC

 

MHP Communications

 

On 17 August - tel: 020 3128 8788

On 17 August - tel: 020 3128 8756

 

Thereafter - tel: 01474 876200

 

 

Analysts wishing to remotely listen in to the presentation at 09.30am may dial +44 (0)20 3139 4830 followed by the participant code 66871234#.

 

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

 

Introduction

 

Bovis Homes continues to deliver successfully its growth strategy and is on track to deliver increased shareholder returns during the current financial year.  The Group's high quality land bank, including conversion from strategic land, is facilitating volume growth at strong sales prices and high profit margins.  This, combined with higher capital turn, underpins achievement of the Group's growth objectives.

 

The positive housing market conditions in the UK continue with growth in both transaction levels and sales prices.  Housing demand continues to run ahead of new housing supply with the availability of development land supported by increasing levels of planning permissions.  The Government has an ambition for the country to build over 200,000 new homes a year and is supporting new housebuilding through its commitment to Help to Buy and driving land supply through the planning process.

 

Strategic plan

 

The Group's strategic plan remains to deliver growth in shareholder returns from:

 

·      Disciplined land investment, both consented and strategic, to grow the business in a controlled way towards a steady state of between 5,000 and 6,000 new homes per annum

·      Investment in people to allow the continuous evolution of the Group's structure to manage this future growth

·      Ongoing assessment of housing cycle with flexibility to adapt the plan to changes in the market

·      Strong operational execution of the plan which has been further evidenced by the first half performance

 

Land investment

 

The Group continues to implement its land investment strategy, including strong levels of conversion from strategic land, to provide growth in volume at strong sales prices and high profit margins.  The aim to acquire c40 new sites each year is supported by the rate of land acquisitions during 2014 and H1 2015.  As a result the Group remains on track to increase its number of owned consented sites during the next few years.  Ongoing investment at this rate each year will enable the Group to operate from the required average number of sales outlets to deliver around 5,000 to 6,000 new homes annually.

 

The investment is focused in the Group's targeted, primarily Southern, geographies within which the Group believes there is strong market demand for housing and sufficient supply of land to fulfil its growth ambitions in the current market environment. 

 

Evolving Group structure to manage future growth

 

As planned, in order to effectively manage the increased annual volume and support growth the current structure of six operating regions will be increased to eight regions in 2016.  Firstly, the existing Central region will be split into a West Midlands region and an East Midlands region and secondly, the fledgling Thames Valley region will become operational during 2016.

 

In order to manage this growth, the management team will be strengthened through promotions from within the business.  Keith Carnegie (currently Central Division Managing Director) will take up the new role of Chief Operating Officer from 1 January 2016 reporting to David Ritchie.  Keith will oversee the key Group wide functions to maintain the required level of support to the more extensive operations.  The two operating divisions, each overseeing four regions, will continue to report directly to David Ritchie and will be headed up by existing members of the Group's senior management team. 

 

The evolved structure will ensure the Group continues to operate a decision making and control environment that aims to make high quality business choices in an agile manner, while managing risk effectively through short lines of management control.

 

Continually assessing the housing cycle

 

The growth strategy is progressing well during the current positive housing market conditions.  The Group continues to assess the housing cycle and has the ability to adapt quickly.  Robust discipline in the investment strategy is demonstrated by the acquisitions made at above hurdle rate margins and the improving capital turn.  The processes in place enable the Group to stop its land investment quickly when required and adjust the overall land holdings as the cycle evolves.  The long term investment strategy, including the ambition to source around 50% of consented land from strategic land, provides greater flexibility of land supply in a changing economic environment as well as contributing sites with strong sales prices and high profit margins.

 

Strong operational execution

 

In the current cycle the Group has increased investment in land with strong profit margins and increased capital turn.  The record investment in 42 sites during 2014 has been followed by a strong level of investment in the current year to date.  This investment in the land bank is delivering additional sales outlets and growth in volume in line with the strategy.

 

The Group is on track to deliver its expected volume of legal completions in 2015.  The average sales price is improving due to further mix improvements and market-wide house price rises.  The Group expects its capital turn to be in excess of 1.0 times for 2015.  Looking further forward with net profit margins improving towards 20%, a ROCE of at least 20% is expected to be achieved in 2016.

 

Given the Group's progress in executing its strategy, its confidence in delivering strong growth in returns and having considered the current modest levels of net debt, the Board intends to pay total dividends for 2015 of 40 pence per share. 

 

Operational Review

 

Revenue

 

The Group generated total revenue of £350.7 million during the first half of 2015, an increase of 9% compared to £322.1 million in H1 2014.

 

Units

 

H1 2015

 

H1 2014

 

Private legal completions

 

1,079

 

1,107

 

Private Rental Sector legal completions

 

101

 

106

 

Social legal completions

 

345

 

274

 

Total legal completions

 

1,525

 

1,487

 

Revenue (£m)

 

 

 

 

 

Private legal completions (including PRS)

 

299.1

 

282.9

 

Social legal completions

 

39.9

 

29.3

 

Revenue from legal completions

 

339.0

 

312.2

 

Other revenue

 

3.5

 

2.9

 

Housing revenue

 

342.5

 

315.1

 

Land sales revenue

 

8.2

 

7.0

 

Total revenue

 

350.7

 

322.1

 

 

Revenue from legal completions in H1 2015 was £339.0 million, 9% ahead of the same period in the prior year.  With other revenue of £3.5 million (H1 2014: £2.9 million), housing revenue was £342.5 million (H1 2014: £315.1 million).  Two land sales were achieved during H1 2015 with revenue of £8.2 million (H1 2014: £7.0 million).

 

The Group achieved a record number of 1,525 legal completions in H1 2015, a 3% increase on the first half of 2014 (1,487 homes).  As previously guided, the Group's legal completion profile in 2015 is expected to be more weighted to the second half of the year than was the case in the prior year (H1 2014: 41%).  Of total legal completions, 1,079 were private homes (H1 2014: 1,107 homes) and a further 101 homes were completed under Private Rental Sector (PRS) transactions.  Social homes comprised 23% of total legal completions (345 homes), compared to 18% (274 homes) in H1 2014, reflecting the prevailing mix of social units in the land bank.

 

In the first half of 2015 the average sales price of homes legally completed increased by 6% to £222,300 (H1 2014: £210,000).  The average sales price of private legal completions, excluding PRS, was 10% higher at £264,200 (H1 2014: £239,500), benefiting from the mix effect of higher sales prices on new sites and market house price improvements.  The average private sales price per square foot increased by 5% in H1 2015 compared to that achieved in H1 2014.  The average sales price for PRS homes was £138,300 (H1 2014: £167,500), reflecting their location and the smaller product delivered under these deals.
 

Net profit

 

The Group increased net profit for the six months ended 30 June 2015 by 9% to £56.0 million at a net profit margin of 16.0% (H1 2014: £51.3 million at a net profit margin of 15.9%).  Net profit included £1.7 million related to profits from the Group's interest in joint ventures (H1 2014: £0.1 million).


The gross margin achieved in H1 2015 was 25.1% (H1 2014: 24.8%) and included the contribution from two land sales.  Housing gross margin was 24.6% (H1 2014: 25.0%) which was generated by an increasing contribution from sites acquired since the downturn, offset by the increased proportion of lower margin social units in the mix in the first half year.  The effects of house price inflation across the market offset the impact of increased build costs, enabling profit margins on sites to be maintained.  Construction costs for legal completions in the first half of 2015 increased to £117,300 per unit, circa 10% higher than H1 2014, reflecting the ongoing increase in average size of product and geographic mix, as well as the inflationary impacts of labour and materials.  The average construction cost per square foot increased by 6% in H1 2015 compared to H1 2014 reflecting market cost movements.  The land sales profit recognised during H1 2015 was £4.0 million, compared to £1.0 million in H1 2014.

 

Overheads constituted 9.6% of revenue in the first half of 2015 (H1 2014: 8.9%) with the Group investing to support volume growth.  The planned growth in overhead costs of 18% resulted from increased staff costs to support the larger business, increased sales and marketing activity supporting the increasing number of active sales outlets, and the cost of progressing newly acquired sites through the detailed planning and design phases to start work on site.  All such costs are written off as incurred. 

 

The Group's share of interest in joint ventures includes the benefit from the revaluation of both the Bovis Peer LLP and IIH Oak Investors LLP PRS property portfolios in the period ended 30 June 2015.

 

Profit before tax

 

Profit before tax of £53.8 million comprised net profit of £56.0 million and net financing charges of £2.2 million.  This compares to a profit before tax in H1 2014 of £49.4 million, resulting from £51.3 million of net profit and £1.9 million of net financing charges.  There were no exceptional items in the first six months of either 2015 or 2014.

 

Interim dividend

 

In accordance with the Group's stated intention in respect of dividends, an interim dividend of 13.7 pence per share has been declared (2014 interim dividend: 12.0 pence).  This represents slightly over one third of the intended total dividend for 2015 of 40.0 pence per share.

 

The interim dividend will be paid on 20 November 2015 to holders of ordinary shares on the register at the close of business on 25 September 2015.  The dividend reinvestment plan, introduced in 2012, gives shareholders the opportunity to reinvest their dividends.

 

Financing and cashflow

 

The Group incurred net financing charges of £2.2 million in the first half of 2015 (H1 2014: £1.9 million).

 

Having started the year with net cash of £5.0 million, significant land investment and additional work in progress has resulted in net debt as at 30 June 2015 of £58.8 million (30 June 2014: £45.3 million).  This comprised £28.2 million of cash in hand, offset by £85.0 million of bank debt and £2.0 million of Government loans.

 

In the first six months of 2015, the Group generated an operating cash inflow before land expenditure of £79.0 million (H1 2014: £107.9 million), demonstrating strong underlying cash generation from the Group's asset base and investment in work in progress to support growth.  As a result of the Group's land investments, payments in H1 2015 associated with land purchases less cash recoveries on land sales were £95.3 million (H1 2014: £106.8 million). With a cash outflow from non-trading items of £47.7 million including the dividend payment of £30.8 million (H1 2014: £12.7m), the overall net cash outflow for the six months ended 30 June 2015 was £64.0 million (H1 2014: £27.3 million).

 

Taxation

 

The tax charge was £10.8 million on profit before tax of £53.8 million, representing an effective tax rate of 20.1% (H1 2014: tax charge of £10.8 million at an effective rate of 21.9%).
 

Land

 

 

 

H1 2015

 

H1 2014

 

Consented plots added

 

2,687

 

4,597

 

Sites added

 

15

 

23

 

Sites owned at period end

 

135

 

121

 

Plots in consented land bank at period end

 

19,081

 

17,702

 

 

Average consented land plot cost

 

 

£48,600

 

 

£45,900

 

Proportion in South of England

 

77%

 

71%

 

 

The Group has continued to follow its long term investment strategy with acquisitions made in prime locations focused in the South of England.  These acquisitions further strengthen the consented land bank and the Group has strong visibility on delivering its planned growth for the foreseeable future.

 

In the six months ended 30 June 2015 the Group added 2,687 consented plots on 15 sites to the land bank at a cost of £154 million.  These plots have an estimated future revenue of £704 million and an estimated future gross profit potential of £183 million based on appraisal point sales prices and build costs, delivering an estimated future gross margin of 25.9%.  The average return on capital employed of the land acquired based on investment appraisal at the time of acquisition is c29%.

 

As at 30 June 2015, the Group held conditional contracts to acquire 1,692 plots on 13 sites, the majority of which are expected to be added to the consented land bank in the near term.  Since 30 June 2015, the Group has added a further 573 consented plots across five sites, taking the year to date additions to 3,260 consented plots across 20 sites.

 

The estimated gross profit potential on the consented land bank plots as at 30 June 2015, based on prevailing sales prices and build costs, has increased to £1,134 million with a gross margin of 25.5% (31 December 2014: £1,017 million at 25.2%).

 

Written down land in the land bank at 30 June 2015 made up 5% of plots (31 December 2014: 6%) and only 3% of the estimated future revenue from the land bank.  The remaining provision on written down plots as at 30 June 2015 was £9.8 million (31 December 2014: £12.9 million).

 

Strategic land

 

The successful conversion of strategic land continues to be a key driver of value for the Group.  New strategic land investments added 2,299 plots into the strategic land bank, giving a total of 23,287 strategic plots at the half year controlled across 86 strategic sites.  During the first half of 2015, by virtue of the timing of delivery of planning consents, the Group converted a modest 229 plots from the strategic land bank into the consented land bank.

 

Good progress has been made on a number of significant strategic land holdings.  These are expected to provide a valuable source of development land, primarily in the South of England, as planning consents are achieved.  In particular, the Group has either secured or is in the final stages of securing planning consent on six major strategic sites at Bishops Stortford (where the first 180 plots have already been added to the consented land bank), North Wokingham, Witney, Edwalton, Gravesend and Tavistock.  In total these sites will deliver c3,000 future consented plots to the land bank with high profit margins and returns above existing hurdle rates.  These sites will be added to the consented land bank once price notice/option exercise processes are complete and generally benefit either from significant deferred terms on purchase or the ability to add the land over a number of years through tranche drawdown.  The strategic land bank reflects positively the Group's strategy of investment with 68% of the strategic plots being in the South of England.

 

The Group has made good progress with its major strategic asset at Wellingborough.  Work has commenced on the initial stages of the infrastructure project related to the delivery of over 3,000 homes on the site.  The Group owns c1,000 plots within its consented land bank and controls the balance of in excess of 2,000 plots of land with planning consent in its strategic land bank.  Improvements to the site's planning consent, combined with amendments to the relationship with landowners, has enabled the Group to take positive steps towards a housing start expected in late 2015.  The nature of the Wellingborough development allows the capital for the project to be deployed progressively through the project.  This investment profile combined with plans by the Group to invite development partners on to the site are expected to deliver strong returns for the Group.

 

The Group expects its strategic land assets will provide strong replenishment for the consented land bank over the coming years.  The size of this opportunity supports the Group's aim for 50% of its consented land bank to be sourced through strategic means over time.

 

Pensions

 

The Group had a pension scheme surplus of £9.8 million as at 30 June 2015 (31 December 2014: deficit of £0.7 million).  Scheme assets grew over the six months to £111.8 million from £103.4 million.  Scheme liabilities decreased to £102.0 million from £104.0 million.  The movement on the scheme in the six months primarily relates to a special contribution from the Group into the scheme of £7.8 million and an increase in the discount rate applied to liabilities, as a result of changes in bond yields.

 

Net assets

 

Net assets per share as at 30 June 2015 were 666p as compared to 624p at 30 June 2014.

 

 

 

Analysis of net assets

 

2015

 

2014

 

 

 

£m

 

£m

 

 

 

 

 

 

 

Net assets at 1 January

 

879.1

 

810.3

 

Profit after tax for the six months

 

43.0

 

38.6

 

Share capital issued

 

0.4

 

0.2

 

Purchase of own shares

 

(0.1

)

-

 

Net actuarial movement on pension scheme through reserves

 

2.3

 

(1.7

)

Adjustment to reserves for share based payments

 

0.7

 

0.7

 

Dividends paid

 

(30.8

)

(12.7

)

Net assets at 30 June

 

894.6

 

835.4

 

 

As at 30 June 2015, net assets were £15.5 million higher than at the start of the year.  Inventories increased during the six months by £156.9 million to £1,282.4 million. As a result of the investment in consented land, the land bank increased by £91.0 million to £965.7 million.  Work in progress increased from the start of 2015 by £62.2 million to £287.7 million, as the Group built a larger number of homes on a greater number of sites for legal completion in H2 2015, as well as investing in infrastructure for this greater number of sites.  Trade and other receivables increased by £11.8 million to £73.2 million, as a result of increased receivables due from Housing Associations on a higher number of social legal completions, and a substantial VAT debtor related to land acquisitions at the half year.

 

Trade and other payables totalled £462.7 million (31 December 2014: £360.5 million).  Of these, land creditors increased to £264.4 million (31 December 2014: £198.2 million), reflecting the investment in new land benefiting from greater levels of deferral, and trade and other creditors were £198.3 million (31 December 2014: £162.3 million), increasing with higher levels of build activity. Net cash reduced by £64.0 million.

 

Market conditions
 

In the first half of 2015, the UK housing market has continued to be robust, with a solid level of mortgage availability and positive home buyer confidence.  The extension of the Government's Help to Buy scheme has also assisted in maintaining a level of consumer confidence in the housing market and this shared equity product continues to have a positive effect on transactional activity in the new homes market.  Mortgage lending is also supporting activity with monthly approvals reaching a level which supports over one million housing transactions per year.

 

The Group supports the recent focus from the Government on housebuilding, including the continued push to drive the required level of planning permissions through the system, recognising that this in turn helps the market for new land to remain disciplined.  The land market continues to be active and the Group continues to purchase land at, or above, required hurdle rate profit margins and returns.  The recent changes announced by the Government to control future movements in social affordable rental values are being reviewed to assess the potential effect on future values available for affordable rented tenure social housing.

 

 

Strong housing demand is leading to overall market pricing improvements, with the Group having experienced pricing ahead of expectations across its portfolio of sites.  This is most pronounced in the South East of England and particularly areas with a proximity to London.  Offsetting these pricing improvements is the impact of rising construction costs.  The combination of pricing gains and cost increases imply relatively stable land values and sustainable site profit margins.

 

Current trading

 

The Group traded from an average of 100 sales outlets during the first half of 2015 which represented an 8% increase on the comparative period last year.  Weekly private sales rates in the period remained robust at an average of 0.63 net private reservations per site against the strong comparative in 2014 of 0.65.  The total forward sales position for 2015 delivery, including legal completions to date, stood at 3,505 homes at 30 June 2015 (30 June 2014: 3,297).  At 30 June 2015 the Group was operating from 102 sales outlets as compared to 98 at the same date in 2014.

 

As at 14 August 2015, the Group had achieved 3,768 sales for legal completion in 2015.  In recent weeks, the Group has also commenced the building of its private forward order book for 2016.  Sales rates in the summer since the half year have been robust at 0.58 net reservations per site per week compared to 0.45 in the comparative period of 2014.  The average private sales price of private homes sold for 2015 delivery currently stands at c£260,000 which represents an increase of 8% over the comparable price at this point in 2014. 

 

Housing production to 14 August 2015 was 11% ahead of the prior year which provides a strong base for the delivery of the planned volume for 2015 and a higher level of work in progress for 2016.  Levels of build activity continue to increase and as a result there is short term excess of demand in the supply chain with resultant increases in cost.  The Group's national agreements with key material suppliers ensure a steady supply of the required materials at the agreed prices for this year.  Subcontract labour rates have been increasing ahead of house price increases to date, although this is considered a short term effect which can be controlled.  The Group is pro-actively addressing the demand for labour through its apprentice programmes and targeted recruitment, for example personnel leaving the military.  Overall (materials and labour combined) the annual build cost inflation impacting the current pipeline of homes for 2015 delivery is estimated at around 7%.

 

Outlook

 

The Group remains confident that 2015 will be another successful year of growth and strong returns. Given the current sales position and prevailing sales rates, the Group is on track to deliver its expected volume of legal completions for 2015.  The Group expects to deliver an increase in average sales price and an improvement in net profit margin in 2015 compared to the prior year.  Capital turn in 2015 is expected to be in excess of 1.0 times. 

 

Looking out to 2016, further growth in profit with an improvement in net profit margin towards 20%, combined with capital turn over 1.0 times, is expected to generate a ROCE of at least 20%.

 

Strong dividends will complement growing ROCE, highlighted by the Board's intention to pay a dividend of 40 pence per share for 2015.  Thereafter, the Board intends to pay approximately one third of earnings as a dividend with any cash surplus to requirements contributing to additional dividend payments.

 

Principal risks and uncertainties

 

The Group is subject to a number of risks and uncertainties as part of its activities.  The Board regularly considers these and seeks to ensure that appropriate processes are in place to manage, monitor and mitigate these risks.  The directors consider that the principal risks and uncertainties facing the Group are those outlined on pages 28 to 31 of the Annual Report and Accounts 2014, which is available from www.bovishomesgroup.co.uk.  The Group has in place processes to monitor and mitigate these risks.

 

Going Concern

 

As stated in note 1 to the condensed consolidated interim financial statements, 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.

 

 

Bovis Homes Group PLC
Group income statement

For the six months ended 30 June 2015 (unaudited)

 

Six months

ended

30 June 2015

 

Six months

ended

30 June 2014

 

Year

ended

31 Dec 2014

 

 

 

£000

 

£000

 

£000

 

 

 

 

 

 

 

 

 

Revenue

 

350,702

 

322,060

 

809,365

 

Cost of sales

 

(262,596

)

(242,272

)

(612,129

)

Gross profit

 

88,106

 

79,788

 

197,236

 

Administrative expenses

 

(33,800

)

(28,637

)

(59,672

)

Operating profit before financing costs

 

54,306

 

51,151

 

137,564

 

Financial income

 

2,205

 

1,778

 

3,360

 

Financial expenses

 

(4,372

)

(3,706

)

(7,727

)

Net financing costs

 

(2,167

)

(1,928

)

(4,367

)

Share of profit of Joint Ventures

 

1,687

 

145

 

287

 

Profit before tax

 

53,826

 

49,368

 

133,484

 

Income tax expense

 

(10,809

)

(10,757

)

(28,276

)

Profit for the period attributable to equity holders of the parent

 

43,017

 

38,611

 

105,208

 

 

 

 

 

 

 

 

 

Earnings per share

 

 

 

 

 

 

 

Basic

 

32.1p

 

28.8p

 

78.6p

 

Diluted

 

32.0p

 

28.7p

 

78.2p

 

 

 

 

 

 

 

 

 

 

Group statement of comprehensive income

For the six months ended 30 June 2015 (unaudited)

 

Six months

ended

30 June 2015

 

Six months

ended

30 June 2014

 

Year

ended

31 Dec 2014

 

 

 

£000

 

£000

 

£000

 

 

 

 

 

 

 

 

 

Profit for the period

 

43,017

 

38,611

 

105,208

 

Other comprehensive income

 

 

 

 

 

 

 

Items that will be reclassified to profit and loss

 

 

 

 

 

 

 

Shared equity movement

 

-

 

-

 

(2,887

)

Deferred tax on shared equity movement

 

-

 

-

 

(621

)

Items that will not be reclassified to profit and loss

 

 

 

 

 

 

 

Remeasurements on defined benefit pension scheme

 

2,847

 

(2,254

)

(7,166

)

Deferred tax on actuarial remeasurements on defined benefit pension scheme

 

  (550)

 

575

 

1,481

 

Total comprehensive income for the period attributable to equity holders of the parent

 

45,314

 

36,932

 

96,015

 

 

Bovis Homes Group PLC

Group balance sheet

As at 30 June 2015 (unaudited)

 

30 June 2015

£000

 

30 June 2014

£000

 

31 Dec 2014

£000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets

 

 

 

 

 

 

 

Property, plant and equipment

 

14,024

 

13,594

 

13,634

 

Investments

 

8,721

 

6,983

 

8,107

 

Restricted cash

 

1,426

 

1,995

 

1,426

 

Deferred tax assets

 

1,200

 

2,100

 

2,645

 

Trade and other receivables

 

1,166

 

2,158

 

2,534

 

Available for sale financial assets

 

38,559

 

43,445

 

39,433

 

Retirement benefit assets

 

9,812

 

1,030

 

-

 

Total non-current assets

 

74,908

 

71,305

 

67,779

 

 

 

 

 

 

 

 

 

Inventories

 

1,282,363

 

1,097,311

 

1,125,518

 

Trade and other receivables

 

72,067

 

72,520

 

58,862

 

Cash and cash equivalents

 

28,176

 

56,710

 

52,257

 

Total current assets

 

1,382,606

 

1,226,541

 

1,236,637

 

Total assets

 

1,457,514

 

1,297,846

 

1,304,416

 

 

 

 

 

 

 

 

 

Equity

 

 

 

 

 

 

 

Issued capital

 

67,174

 

67,076

 

67,114

 

Share premium

 

214,238

 

213,610

 

213,850

 

Retained earnings

 

613,202

 

554,713

 

598,154

 

Total equity attributable to equity holders of the parent

 

894,614

 

835,399

 

879,118

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

Bank and other loans

 

60,000

 

102,034

 

47,010

 

Trade and other payables

 

127,119

 

93,328

 

99,092

 

Retirement benefit obligations

 

-

 

-

 

668

 

Provisions

 

1,840

 

2,084

 

1,840

 

Total non-current liabilities

 

188,959

 

197,446

 

148,610

 

 

 

 

 

 

 

 

 

Bank and other loans

 

26,975

 

-

 

-

 

Trade and other payables

 

335,576

 

253,052

 

261,436

 

Provisions

 

1,237

 

1,413

 

1,236

 

Current tax liabilities

 

10,153

 

10,536

 

14,016

 

Total current liabilities

 

373,941

 

265,001

 

276,688

 

Total liabilities

 

562,900

 

462,447

 

425,298

 

 

 

 

 

 

 

 

 

Total equity and liabilities

 

1,457,514

 

1,297,846

 

1,304,416

 

 

These condensed consolidated interim financial statements were approved by the Board of directors on 14 August 2015.                    

 

Bovis Homes Group PLC

Group statement of changes in equity

For the six months ended 30 June 2015

 

Total

 

Issued

 

Share

 

Total

 

(unaudited)

 

retained

earnings

 

capital

 

premium

 

 

 

 

 

£000

 

£000

 

£000

 

£000

 

Balance at 1 January 2015

 

598,154

 

67,114

 

213,850

 

879,118

 

Total comprehensive income and expense

 

45,314

 

-

 

-

 

45,314

 

Issue of share capital

 

-

 

60

 

388

 

448

 

Purchase of own shares

 

(173

)

-

 

-

 

(173

)

Share based payments

 

745

 

-

 

-

 

745

 

Dividends paid to shareholders

 

(30,838

)

-

 

-

 

(30,838

)

Balance at 30 June 2015

 

613,202

 

67,174

 

214,238

 

894,614

 

 

 

 

 

 

 

 

 

 

 

Balance at 1 January 2014

 

529,786

 

67,048

 

213,428

 

810,262

 

Total comprehensive income and expense

 

96,015

 

-

 

-

 

96,015

 

Issue of share capital

 

-

 

66

 

422

 

488

 

Deferred tax on other employee benefits

 

304

 

-

 

-

 

304

 

Share based payments

 

838

 

-

 

-

 

838

 

Dividends paid to shareholders

 

(28,789

)

-

 

-

 

(28,789

)

Balance at 31 December 2014

 

598,154

 

67,114

 

213,850

 

879,118

 

 

 

 

 

 

 

 

 

 

 

Balance at 1 January 2014

 

529,786

 

67,048

 

213,428

 

810,262

 

Total comprehensive income and expense

 

36,932

 

-

 

-

 

36,932

 

Issue of share capital

 

-

 

28

 

182

 

210

 

Share based payments

 

710

 

-

 

-

 

710

 

Dividends paid to shareholders

 

(12,715

)

-

 

-

 

(12,715

)

Balance at 30 June 2014

 

554,713

 

67,076

 

213,610

 

835,399

 

 

Bovis Homes Group PLC

Group statement of cash flows

For the six months ended 30 June 2015 (unaudited)

 

Six months

ended

 

Six months

ended

 

Year

ended

 

 

 

30 June 2015

 

30 June 2014

 

31 Dec 2014

 

 

 

£000

 

£000

 

£000

 

 

 

 

 

 

 

 

 

Cash flows from operating activities

 

 

 

 

 

 

 

Profit for the period

 

43,017

 

38,611

 

105,208

 

Depreciation

 

996

 

899

 

1,853

 

Revaluation of available for sale assets

 

(224

)

(172)

 

(1,288

)

Financial income

 

(2,205

)

(1,778

)

(3,360

)

Financial expense

 

4,372

 

3,706

 

7,727

 

Profit on sale of property, plant and equipment

 

(43

)

(115

)

(115

)

Equity-settled share-based payment expense

 

573

 

710

 

838

 

Income tax expense

 

10,809

 

10,757

 

28,276

 

Share of results of Joint Ventures

 

(1,687

)

(145

)

(287

)

Increase in trade and other receivables

 

(9,036

)

(26,913

)

(13,956

)

Increase in inventories

 

(156,844

)

(126,295

)

(154,501

)

Increase in trade and other payables

 

100,067

 

99,687

 

116,475

 

(Increase)/decrease in provisions and employee benefits

 

(7,575

)

57

 

(3,795

)

Net cash from operations

 

(17,780

)

(991

)

83,075

 

 

 

 

 

 

 

 

 

Interest paid

 

(2,317

)

(1,530

)

(3,746

)

Income taxes paid

 

(13,547

)

(9,595

)

(23,708

)

Net cash from operating activities

 

(33,644

)

(12,116

)

55,621

 

 

 

 

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

 

 

 

Interest received

 

37

 

13

 

107

 

Acquisition of property, plant and equipment

 

(1,395

)

(1,090

)

(2,084

)

Proceeds from sale of plant and equipment

 

52

 

238

 

238

 

Movement in loans with Joint Ventures

 

512

 

(1,295

)

(2,751

)

Movement in investment in Joint Ventures

 

473

 

(718

)

(373

)

Dividends received from Joint Ventures

 

250

 

283

 

283

 

(Investment)/reduction in restricted cash

 

-

 

(172

)

397

 

Net cash from investing activities

 

(71

)

(2,741

)

(4,183

)

 

 

 

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

 

 

 

Dividends paid

 

(30,838

)

(12,715

)

(28,789

)

Proceeds from the issue of share capital

 

448

 

210

 

488

 

Drawdown of borrowings

 

40,024

 

72,047

 

17,095

 

Net cash from financing activities

 

9,634

 

59,542

 

(11,206

)

 

 

 

 

 

 

 

 

Net (decrease)/increase in cash and cash equivalents

 

(24,081

)

44,685

 

40,232

 

Cash and cash equivalents at start of period

 

52,257

 

12,025

 

12,025

 

Cash and cash equivalents at end of period

 

28,176

 

56,710

 

52,257

 

 

Notes to the condensed consolidated interim financial statements

1              Basis of preparation

Bovis Homes Group PLC ('the Company') is a company domiciled in the United Kingdom. The condensed consolidated interim financial statements of the Company for the six months ended 30 June 2015 comprise the Company and its subsidiaries (together referred to as 'the Group') and the Group's interest in associates and joint ventures.

The condensed consolidated interim financial statements were authorised for issue by the directors on 14 August 2015. The financial statements are unaudited but have been reviewed by PwC LLP the Company's auditors who were appointed on 15 May 2015.

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 2015 and 30 June 2014 are unaudited. The comparative figures for the financial year ended 31 December 2014 are an extract from the Group's statutory accounts for that financial year. Those accounts have been reported on by the Company's auditors, at the time KPMG LLP, and delivered to the Registrar of Companies. The report of the auditors was (i) unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under Section 498 (2) or (3) of the Companies Act 2006.

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

Judgements made by management in the application of adopted IFRSs that have 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 remain those published in the Company's consolidated financial statements for the year ended 31 December 2014.

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, 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 2014, which were prepared in accordance with IFRSs as adopted by the EU.

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

 

 

 

 

Notes to the condensed consolidated interim financial statements continued

4              Earnings per share

 

 

Six months ended

 

Six months ended

 

Year

ended

 

 

 

30 June 2015

 

30 June 2014

 

31 Dec 2014

 

(Unaudited)

 

pence

 

pence

 

pence

 

Basic earnings per share

 

32.1

 

28.8

 

78.6

 

Diluted earnings per share

 

32.0

 

28.7

 

78.2

 

 

Basic earnings per share

Basic earnings per ordinary share for the six months ended 30 June 2015 is calculated on a profit after tax of £43,017,000 (six months ended 30 June 2014: profit after tax of £38,611,000; year ended 31 December 2014: profit after tax of £105,208,000) over the weighted average of 134,081,809 (six months ended 30 June 2014: 133,845,797; year ended 31 December 2014: 133,902,247) ordinary shares in issue during the period.

Diluted earnings per share

The calculation of diluted earnings per share at 30 June 2015 was based on the profit attributable to ordinary shareholders of £43,017,000 (six months ended 30 June 2014: profit after tax of £38,611,000; year ended 31 December 2014: profit after tax of £105,208,000).

The Group's diluted weighted average ordinary shares potentially in issue during the six months ended 30 June 2015 was 134,342,093 (six months ended 30 June 2014: 134,489,646; year ended 31 December 2014: 134,573,167).

5              Dividends

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

(Unaudited)

 

Six months ended

 

Six months ended

 

 

Year ended

 

 

 

30 June 2015

 

30 June 2014

 

31 Dec 2014

 

 

 

£000

 

£000

 

£000

 

May 2015: 23.0p (May 2014: 9.5p)

 

30,838

 

12,715

 

12,715

 

November 2014: 12.0p

 

-

 

-

 

16,074

 

 

 

30,838

 

12,715

 

28,789

 

 

The Board determined on 14 August 2015 that an interim dividend of 13.7p for 2015 be paid.  The dividend will be settled on 20 November 2015 to shareholders on the register at the close of business on 25 September 2015.  This dividend has not been recognised as a liability at the balance sheet date.

 

 

 

Notes to the condensed consolidated interim financial statements continued

 

6              Available for sale assets

Available for sale financial assets - shared equity

Receivables on extended terms granted as part of a sales transaction are secured by way of a legal charge on the relevant property, categorised as an available for sale financial asset, and are stated at fair value. Gains and losses arising from changes in fair value are recognised directly in equity in retained earnings, with the exceptions of impairment losses, the impact of changes in future cash flows and interest calculated using the 'effective interest rate' method, which are recognised directly in the income statement. Where the investment is disposed of, or is determined to be impaired, the cumulative gain or loss previously recognised in equity is included in the income statement for the period. Given its materiality, this item is being disclosed separately on the face of the balance sheet.

Available for sale financial assets relate to legal completions where the Group has retained an interest through agreement to defer recovery of a percentage of the market value of the property, together with a legal charge to protect the Group's position. The Group participates in three schemes. 'Jumpstart' schemes are receivable 10 years after recognition with 3% interest charged between years 6 to 10. The 'HomeBuy Direct' and 'FirstBuy' schemes are operated together with the Government. Receivables are due 25 years after recognition with interest charged from year 6 onwards at a base value of 1.75% plus annual RPI increments. These assets are held at fair value being the present value of expected future cash flows taking into account the estimated market value of the property at the estimated date of recovery.

 

 

30 June 2015

 

30 June 2014

 

31 Dec 2014

 

 

 

£000

 

£000

 

£000

 

Non-current asset - Available for sale assets

 

38,559

 

43,445

 

39,433

 

 

Key assumptions

 

 

30 June 2015

 

30 June 2014

 

31 Dec 2014

 

Discount rate, incorporating default rate

 

9.0%

 

7.9%

 

9.0%

 

Average house price inflation per annum for the next three years

 

3.4%

 

3.2%

 

3.3%

 

 

Reconciliation of shared equity asset

 

 

2015

£000

 

Balance at 1 January

 

39,433

 

Redemptions

 

(2,689

)

Revaluation taken through income statement

 

224

 

Imputed interest

 

1,591

 

Balance at 30 June

 

38,559

 

 

Sensitivity - available for sale financial assets

 

 

 

 

2015 increase

 

2014 increase

 

 

 

 

 

assumptions

by 1%

 

assumptions

by 1%

 

Discount rate, incorporating default rate

 

(2,161

)

(2,844)

 

House price inflation

 

2,796

 

1,458

 

 

 

 

 

Notes to the condensed consolidated interim financial statements continued

 

7              Related party transactions

Transactions between fellow subsidiaries, which are related parties, during the first half of 2015 have been eliminated on consolidation, as have transactions between the Company and its subsidiaries during this period.  The Group's associates and joint ventures are disclosed in the Group's Annual Report and Accounts 2014.

Transactions between the Group and key management personnel in the first half of 2015 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 2014. No material change has occurred in these arrangements in the first half of 2015.

In January 2015 Bovis Homes Limited entered into a contract with the Bovis Homes Pension Scheme for the sale of a portfolio of homes.  During the six month ended June 2015 all 54 homes under the contract were legally completed for a total consideration of £10,719,500.

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 £76,000 (six months ended 30 June 2014: £73,000; year ended 31 December 2014: £148,000).

Loans totalling £1,575,355 were provided to Bovis Peer LLP in prior years at an annual interest rate of LIBOR plus 2.4%. During the period these were reduced to £150,000.  No other loans or sales of inventory have taken place.  Interest charges made in respect of the loans were £9,406 (six months ended 30 June 2014: £19,000; year ended 31 December 2014: £37,000).

Bovis Homes Limited is part of a Joint Venture, IIH Oak Investors LLP, to invest in 190 private rental homes.  During the period 18 homes were sold to the Joint Venture (six months ended 30 June 2014: 46; year ended 31 December 2014: 129) for cash consideration of £4,780,302 (six months ended 30 June 2014: £11,136,143; year ended 31 December 2014: £28,787,381).  13% of the revenue and profit in respect of these sales has been eliminated from the Group results in accordance with IFRS 11.

 

As at 30 June 2015 loans of £3,363,908 were in place with IIH Oak Investors LLP at an interest rate of 6%.  Interest charges made in respect of the loans were £152,000 (six months ended 30 June 2014: nil; year ended 31 December 2014: nil).

 

8              Reconciliation of net cash flow to net cash

 

 

Six months

ended

 

Six months

ended

 

 

Year ended

 

 

 

30 June 2015

 

30 June 2014

 

31 Dec 2014

 

(Unaudited)

 

£000

 

£000

 

£000

 

 

 

 

 

 

 

 

 

Net (decrease)/increase in cash and cash equivalents

 

(24,081

)

44,685

 

40,232

 

Drawdown of borrowings

 

(40,024

)

(71,999

)

(17,095

)

Fair value adjustments to interest rate swaps

 

59

 

77

 

149

 

Fair value adjustment to interest free loans

 

-

 

(48

)

-

 

Net cash at start of period

 

5,247

 

(18,039

)

(18,039

)

Net cash at end of period

 

(58,799

)

(45,324

)

5,247

 

 

 

 

 

 

 

 

 

Analysis of net cash:

 

 

 

 

 

 

 

Cash

 

28,176

 

56,710

 

52,257

 

Bank and other loans

 

(86,975

)

(101,903

)

(46,951

)

Fair value of interest rate swaps

 

-

 

(131

)

(59

)

Net cash

 

(58,799

)

(45,324

)

(5,247

)

 

 

Notes to the condensed consolidated interim financial statements continued

9              Circulation to shareholders

This interim report is sent to shareholders.  Further copies are available on request from the Company Secretary, Bovis Homes Group PLC, The Manor House, North Ash Road, New Ash Green, Longfield, Kent DA3 8HQ. Further information on Bovis Homes Group PLC can be found on the Group's corporate website www.bovishomesgroup.co.uk, including the analyst presentation document which will be presented at the Group's results meeting on 17 August 2015.


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