RNS Number:7085S
Bovis Homes Group PLC
11 March 2002
BOVIS HOMES GROUP PLC
PRELIMINARY RESULTS
FOR THE YEAR ENDED 31 DECEMBER 2001
Issued 11 March 2002
The Board of Bovis Homes Group PLC today announced its preliminary
results for 2001.
* Operating profit increased by 20.5% to £85.2 million (2000: £70.7
million)
* Pre tax profit increased by 19.2% to £80.0 million (2000: £67.1
million)
* Earnings per share increased by 18.3% to 49.7p (2000: 42.0p)
* Operating margin increased to 23.8% (2000: 23.2%)
* Return on average capital employed of 23.0% (2000: 23.2%)
* Plots with planning consent at 10,326 plots (4.3 years' supply on
2001 completions)
* Strategic landholdings of 19,847 potential plots (8.2 years' supply
on 2001 completions)
* Final dividend of 8.5p net per ordinary share making 12.7p for the
year (3.9 times covered)
* Year end net borrowings of £57.2 million (17.1% gearing)
Commenting on the results, Malcolm Harris, the Chief Executive of Bovis
Homes Group PLC said:
'The Group has delivered another excellent set of results, improving
profits, operating margins and earnings per share. Additional
investments in prime landholdings during the year have further
strengthened the Group's consented and strategic landholdings, providing
a firm base to expand the business.
The current year has started well with cumulative sales reservations
over 10% ahead in terms of volume compared with 2001. Sales prices
achieved to date are above budget and the comparable period last year.
Housing affordability remains good due to low interest rates and a
competitive mortgage market.
Based upon our trading experience to date and the current economic
outlook, the Board is confident of 2002 being another successful year.'
Enquiries:
Malcolm Harris, Chief Executive
Bovis Homes Group PLC
Tel: 020 7321 5010 on Monday 11 March
Tel: 01474 872427 thereafter
Andrew Best / Emily Bruning
Shared Value Limited
Tel: 020 7321 5010
Chairman's statement
The Group achieved a further year of strong performance reacting quickly
to changes in market conditions and managing effectively the period of
uncertainty arising from the tragic events on 11 September in the United
States. The solid progress reported at the interim stage of 2001 was
enhanced with a strong second half year.
Results
Profit on ordinary activities before taxation for the year ended 31
December 2001 rose by 19.2% to £80.0 million, compared with £67.1
million in 2000. This result was achieved from total turnover of £358.5
million, 17.5% greater than the previous year primarily from a 3%
increase in volume of legal completions and a 14% increase in average
selling price.
For the year, the operating margin was increased to 23.8% and return on
capital employed, which has again surpassed the Group's minimum target,
stood at 23.0%. Basic earnings per share increased by 18.3% in 2001 to
49.7 pence.
Dividend
The Board proposes a final dividend for the year ended 31 December 2001
of 8.5 pence to be paid on 24 May 2002 to shareholders on the register
at the close of business on 26 April 2002. This dividend when added to
the interim dividend of 4.2 pence paid on 23 November 2001 totals 12.7
pence for the year and is covered 3.9 times by the basic earnings per
share of 49.7 pence. The total dividend per share for the year
represents an increase of 8.5% over the total dividend for 2000.
Market conditions
The housing market remained buoyant during 2001, notwithstanding the
potential for decline raised by the terrorist attacks in the United
States. Significant forecasting by market commentators of a UK
recession only threatened to damage consumer confidence which remained
resilient assisted by the 200 basis point interest rate reduction during
2001.
The reduction in interest rates fed through rapidly to mortgage rates
and reduced the share of household disposable income being used to
service the home mortgage. At the end of the third quarter of 2001,
affordability trend indicators reported that the first year mortgage
interest payments as a percentage of average net earnings for a two
income couple were 18%. As a result of reduced mortgage payments, house
affordability has remained strong even after the reported increases in
house prices.
In January 2002 the Halifax reported annual growth in new house prices
of 9.5% for the year ended 31 December 2001.
Strategy
In 2001 the Group was successful in growing its operating margins and at
the same time increasing its volume of legal completions. The Board has
established an expansion plan which it has started to implement. From 1
January 2002, the Northern area of operation has been launched as a new
region. Further regional launches are planned, subject to market
conditions, which will further expand the Group's geographic coverage.
The Group's strategy is to grow its activity levels through regional
expansion whilst retaining its well established financial objectives.
The Group will continue to employ its core strategies across the
expanded Group, focusing on consistent investment in prime land and
continuous improvement programmes in respect of products and processes.
Research and development into new build techniques and materials will
continue in the Group's pursuit of multi-skilling the work force to
improve the build process and delivering to customers a quality product
which is synonymous with the Bovis Homes' name.
The Group anticipates through its regional expansion to permit high
calibre management within the Group to advance to positions of increased
responsibility, gaining good experience whilst adding value in new,
challenging and exciting roles.
The Board
The Board has been reconstituted and now comprises three executive
directors; Malcolm Harris, Chief Executive; Ron Walford, Finance
Director; and Stephen Brazier, Group Operations Director, and three non
executive directors including myself as Chairman. During 2001, Jim
Ditheridge retired from office and Mike Johnson resigned from the Board,
whilst retaining operational responsibility for Central region. Since
the year end, Mike Sharpe has retired from office and Peter Baker has
resigned from the Board, whilst retaining operational responsibility for
South West region. John Emery retired on 3 January 2002 after 25 years
service with the Group.
Ron Walford has notified the Board of his intention to retire from the
Company effective from 30 June 2002. Ron has been with the Group for
30 years and was appointed Finance Director in 1974. I am pleased
to advise that from 1 July 2002, David Ritchie will be appointed as
Finance Director. David has been the Group's Financial Controller since
1998, having joined the Group soon after flotation.
On behalf of the Board I would like to express my thanks to Ron Walford,
John Emery and Mike Sharpe for their service with the Group and
contribution to the Board. I would also like to thank Mike Johnson and
Peter Baker for their contribution as Board members and look forward to
their continuing support as Managing Directors of their respective
regions.
Employees
These results could not have been achieved without a great deal of hard
work and effort from our employees, for which the Board expresses
thanks. Such dedication provides great confidence for the future.
After careful consideration, the Board decided to introduce a new
defined contribution pension scheme effective from 1 January 2002. New
employees joining the Group after that date are being offered membership
of the new scheme. Existing members of the defined benefit scheme
continue to be members of that scheme.
The Group has for many years advanced the concept of employee share
ownership through the Inland Revenue approved Profit Sharing Scheme.
This scheme has been phased out by the Government, however, the Group
intends to launch a new Share Incentive Plan (SIP), subject to Inland
Revenue approval. At the forthcoming annual general meeting the Board
will seek approval from the shareholders to do this.
Prospects
The UK economy to date has surprised many with its resilience against
recession. Consumer confidence has been reported recently as having
recovered to levels comparable with the record levels reached in July
2001, before the tragedies unfolded in the United States. However,
latest GDP forecasts suggest limited output growth during 2002 with the
manufacturing sector being more susceptible to contraction.
Underlying inflation is forecast for 2002 to remain below the 2.5%
benchmark rate used by the Monetary Policy Committee which may lead to
reticence in respect of increases in interest rates. This along with
earnings growth forecasts as published by the Halifax in its February
2002 Economic Outlook of 4.0% for 2002 will assist in maintaining
affordability in the housing market.
In the same Economic Outlook, the Halifax has forecast a reduction in
house price increases during 2002 compared with 2001 which should assist
stability in the housing market.
Given the Group's trading experience to date in 2002 with reservations
and site visitors ahead of the same period in 2001 and the prevailing
economic picture, the Board is confident that 2002 will be another
successful year.
Nigel Mobbs
Chairman
Chief Executive's operational review
Trading environment
The United Kingdom's overall economy performed remarkably well during
2001 particularly when compared with the world economic climate.
Underlying inflation ended the year considerably below the Government's
target of 2.5%. Bank base interest rates remained at 6.0% until
February before decreasing steadily to a low of 4.0% in November where
they remained until the end of the year. Strong growth in high street
spending and increases in average earnings and employment provided a
strong consumer base.
Consumer confidence was adversely affected by the outbreak and
protraction of the foot and mouth epidemic which caused restrictions on
the movement of people and vehicles and severe hardship in areas
dependant upon farming and tourist activity. The poor weather
conditions experienced during 2000 continued through the first quarter
of 2001 resulting in extensive flooding in many parts of the country
which impacted upon the Group's production resulting in the profit split
being strongly biased towards the second half of the year.
The tragedies experienced in the United States on 11 September had a
world-wide impact, the consequences of which will take time to fully
evaluate.
Affordability remained good throughout 2001 due to low interest rates,
improvements in average earnings and a very competitive mortgage market.
The average house price increase for new homes for the year ended 31
December 2001, as reported by the Halifax, was 9.5% with significant
regional price variations.
Group performance
Operating in a reasonable, but challenging, housing market the Group
produced an excellent performance further strengthening the operating
base to facilitate the planned expansion of the business. The Group's
operating margin improved to 23.8% from 23.2% in 2000 as a result of the
combined effects of new products, process improvements, specification
changes and increased volumes. The Group legally completed 2,429
houses, a 3% increase in unit throughput whilst at the same time it
pursued opportunities to trade commercial landholdings and successfully
completed a sale at Cambourne near Cambridge.
The Group's average house sales price increased by 14% compared with
2000. After taking account of an 8% increase in the average size of
unit to 1,053 square feet, sales price per square foot, net of
incentives, increased by 6%. By comparison, construction costs per
square foot increased by 7% including specification upgrades. The
significant increase in average unit size reflects the ongoing increase
in contribution from the Group's range of three storey townhouses and
room in the roof homes, which contributed 15% of the legal completions
during 2001 (2000: 4%). This contribution is demonstrated in the
product mix of the Group's legal completions where five bedroom units
have increased to 8% of total legal completions reflective of the
flexible room in the roof space designed over a traditional two storey
four bed unit.
Product mix and average
sales price 2001 2000
% Units Average % Units Average
Year ended 31 December sales sales
price price
£ £
House type
---- ---- ------- ---- ------ ------
Two bedroom 17 420 97,100 17 416 84,700
Three bedroom 26 636 118,600 25 592 105,600
Four bedroom 34 834 165,400 38 890 152,200
Five or more bedroom 8 200 275,700 4 98 249,600
Social Housing 10 229 63,900 10 230 57,600
Retirement Homes 5 110 160,200 6 134 150,200
---- ---- -------- ---- ------ ------
Group 100 2,429 140,600 100 2,360 123,300
---- ----- -------- ---- ------ ------
Regional performance
The planned growth within Central region facilitated the first stage of
the expansion plan with the launch of the Northern region on 1 January
2002. The Central region results included 156 legal completions from
the Northern area with a gross housing profit contribution of £4.0
million (2000: 120 legal completions and £3.2 million gross housing
profit).
Unit completions and average sales price
Year ended 31 December 2001 2000
Units Average Units Average
sales sales
price price
£ £
------ -------- ------ -------
Central 769 150,000 650 135,200
South East 867 149,500 931 124,600
South West 683 115,600 645 103,800
Retirement Homes 110 160,200 134 150,200
------ ------ ------ -------
Group 2,429 140,600 2,360 123,300
------ ------- ------ -------
Operating margins
Year ended 31 December 2001 2000
% %
-------- --------
Central 26.4 22.7
South East 25.1 26.4
South West 16.9 18.1
Retirement Homes 25.6 25.8
-------- --------
Group 23.8 23.2
--------- ---------
The South West region results included 107 social housing units, 45
units more than the previous year representing a far greater percentage
of the region's activity and contributing more significantly to the
Group's social housing throughput. Of these, 92 units were built on
land that was not in the region's ownership.
Land and planning
The cost of processing planning applications and the time periods
involved have increased considerably. Despite these impositions, the
Group managed to increase its landholdings with planning consent to
10,326 plots as at 31 December 2001 which represented 4.3 years' supply
based upon 2001 legal completion levels.
The re-positioning of the Group's land bank continued during the year
with a significant investment at Hatfield where the Group intends
building the major part of a new village which will consist of a minimum
of 1,000 homes.
The average plot cost of the consented land bank (excluding social
housing) was £36,300 which represented 24.4% of the average selling
price in the year of £148,600 (excluding social housing). The plots
held with consent at 31 December 2001 are anticipated to generate a
higher average sales price as new products are developed in prime
locations.
The strategic landholdings as at the end of the financial year improved
to 19,847 potential plots after transferring 411 plots from strategic to
consented land during the year at a 15.0% discount to market value.
Despite continuing planning difficulties a large number of strategic
schemes are now at an advanced stage. Therefore, it is anticipated that
there will be a substantial increase in the transfer of plots to
consented land during 2002/2003. Unit completions originating from
strategic land contributed 52% (2000: 49%) of the Group's development
profit in the year. 28% (2000: 31%) of the unit completions in the year
were built on previously used land.
Consented land bank
Total plots as at 31 December 2001 2000
Plots Plots
--------- --------
Central 4,288 4,294
South East 3,470 3,385
South West 2,200 2,083
Retirement Homes 368 371
-------- --------
Group 10,326 10,133
-------- --------
Years' supply based upon completions in 4.3 4.3
the year -------- --------
Strategic land bank
Total potential plots as at 31 December 2001 2000
Plots Plots
------- --------
Central 4,103 3,495
South East 11,259 10,446
South West 4,485 4,000
Retirement Homes - 75
--------- ---------
Group 19,847 18,016
-------- --------
Years' potential supply based upon 8.2 7.6
completions in the year
--------- ---------
Included in strategic landholdings are 8,327 potential plots in
strategic "growth locations". Growth locations are areas designated for
development within draft or adopted development plans by local, county
or unitary planning authorities.
Total potential plots in "growth 2001 2000
locations" as at 31 December Plots Plots
Central 1,507 1,128
South East 5,334 5,439
South West 1,486 2,014
Retirement Homes - 75
--------- ---------
Group 8,327 8,656
--------- ---------
Pursuant to the publication of PPG3 the Group has acquired a number of
investments which are potential re-development sites not allocated for
residential use in the current plan which should receive planning
consent in the short to medium term.
Research and development
The Group undertakes continuous reviews of all of its activities with an
objective of achieving a safe working environment whilst maximising
efficiency and profitability. In addition to process reviews, an
extensive research and development programme is underway relating to
site based activities, the objective of which is to:
* achieve construction in all weather conditions;
* attain consistent high quality;
* maximise mechanical handling and use of factory finished components;
* minimise waste by utilising lean, efficient construction techniques;
* develop multi-skilled team working and new trade sequencing;
* achieve partnering agreements involving suppliers, skilled tradesmen,
industry bodies and Government, to develop new products and methods
of operating.
During 2001 significant progress has been made by the Group in these
areas with increased usage of pre-assembled and pre-finished components
and targets have been established for 2002.
Component usage Average Target Average Target
total total
Year Year Year Year
2000 2001 2001 2002
------ ------ ------ ------
Factory pre-finished, pre glazed
windows 31% 85% 87% 95%
Factory pre-finished soffits,
fascias, barge boards 30% 85% 87% 95%
Factory pre-assembled, pre-finished
GRP porches 97% 97% 98% 99%
Factory pre-assembled, pre-finished
GRP dormers 2% 83% 46% 81%
Factory assembled pre-glazed
external steel doorsets 14% 74% 81% 99%
Factory assembled internal
doorsets - 25% 16% 62%
Factory assembled pre-glazed
cassette doorsets 4% 66% 71% 88%
Factory assembled pre-glazed
external feature doorsets 58% 85% 77% 92%
Factory pre-finished garage doors 100% 100% 100% 100%
Factory pre-fabricated engineered
joist sets - 57% 62% 91%
Factory finished radiators 100% 100% 100% 100%
Factory pre-assembled stair
parts/balusters 57% 100% 98% 100%
New technology snap fit plumbing 48% 86% 82% 97%
Factory pre-plumbed thermal
store cylinders 61% 81% 82% 91%
------ ------ ------ ------
A new dimension in mechanical handling has been extensively trialled in
the form of a unique rough terrain telescopic forklift truck with 360
degrees rotational ability, giving the operatives on-site ability to
handle heavy materials including autoclaved aerated concrete components
being developed in partnership with one of the Group's suppliers.
The Group is participating in several Partners In Innovation (P.I.I.)
projects in various stages of completion. These projects, part funded
by Government, are designed to promote innovation and continuous
improvement:
* Using superdried timber in construction (Lead Partner: BRE, Centre
for Timber Technology & Construction)
* New environmentally friendly exterior building components for Medium
Density Fibreboard (MDF) (Lead Partner: BRE, Centre for Timber
Technology & Construction)
* Adding value to UK timber: Development and demonstration of glued
laminated products (Lead Partner: BRE, Centre for Timber Technology &
Construction)
* Development of a new energy efficient system for the whole house
(a.a.c.) (Lead Partner: Leading aircrete manufacturer)
The erection of a demonstration unit for the whole house (a.a.c.)
partnership will form part of the prestigious ZETHUS project, a
collection of innovative dwelling constructions being erected during
2002 at the University of Greenwich (Faculty of Build Environment).
Ahead of the ZETHUS project, the Group trialled the use of aircrete
components in the South West region utilising aircrete storey height
panels, floor beams and stair components. Finishing works are
progressing and trials have commenced with thin coat spray plasters.
The Group is currently experimenting with innovative construction
sequences, utilising multi-skilled labour for superstructure erection
and finishing teams.
The Group is working with major supply chain partners in many areas
including the development of solid wall constructions and modular pre-
fabricated brickwork.
Social housing
The Group provides quality homes serving a wide socio-economic customer
base and is focusing upon the social housing sector as an area of
expansion. Partnership agreements with housing associations offer
significant benefits in terms of price, build quality, low maintenance
and deliverability within short time scales. Additional resources are
being deployed to this sector of the business. Details relating to a
number of the schemes that the Group has been involved in during the
past twelve months are presented within the 2001 report and accounts.
Health, safety and environment
Best practice in health, safety and environmental awareness and
management is an important element in the continuing success of the
Group. The objective is to maintain the highest practical levels of
health and safety and effective environmental policies.
The Health, Safety and Environmental Consultative Committee oversees
these important matters, formulating and promulgating policy to all
stakeholders. The Committee is chaired by a Bovis Homes Limited
director by annual rotation to ensure that fresh ideas and initiatives
are constantly introduced, assessed and, where appropriate, implemented
on a consistent basis. The Chairman is supported by a committee
comprising Group employees from numerous disciplines complemented by the
Health and Safety Director and external independent professional
advisers.
During 2001 the Committee instigated a new S.M.A.R.T. audit regime,
covering every site, which allows detailed, progressive and cumulative
analysis of performance and focus for constant improvement.
A revitalised health and safety competition was launched in 2001
entitled the "Bovis Homes Health and Safety Marathon". The high profile
competition is progressively and cumulatively judged to stimulate,
motivate and improve health and safety standards.
Whether on site or at its offices, Bovis Homes promotes all aspects of
safety and environmental management throughout its operations in the
interests of all stakeholders. Its record of success was once again
recognised in 2001 with the Gold Medal Award from the Royal Society for
the prevention of Accidents and the National Award from the British
Safety Council.
Bovis Homes' objective is to achieve sustainable construction and reduce
environmental impact. The Group seeks to protect and, wherever
possible, improve the environment by retaining mature landscaping and
introducing new planting and habitats. It is also committed to planning
for the most efficient and effective use of development land. The Group
has introduced higher density properties with flexible accommodation
which addresses the changing lifestyles of its customers including the
ability to work from home.
The Group has issued to employees within the Group an Environmental
Management Manual containing the Environmental Policy, Environmental
Effects Document and Best Practice Checklists. It is a comprehensive
approach consolidating policies, procedures and systems, explaining how
all employees can assist the Group in achieving its environmental aims
and make a positive contribution to the environment.
Further information in respect of health and safety, environmental
management, sustainable development and detailed progress against
previously set environmental targets can be found in the Group's
inaugural free standing Corporate Report on policies, procedures and
performance.
Group and management structure
A framework has been established to enable the Group to expand. David
Durling has been appointed as Managing Director of the new Northern
region which is based at Wilmslow and covers the north west and north
east of England. Geoff Coleman has been appointed as Managing Director
of the South East region following Mike Sharpe's retirement from office.
Regardless of where and when elements of the Group's expansion plan
occur, all systems, methods of operating, procurement and processes are
standardised in line with the Group operational model which is subject
to regular review and, where appropriate, improvement.
The operational model is founded upon the concept of empowerment,
fostering regional management's entrepreneurial flair within a
prescribed method of operating, to purchase land in the right location
using local knowledge, to specify products to meet local needs, to
market these products to the identified customer base and maximise
profitability.
As part of the expansion plan and to further improve the Group's
efficiency, Castle Bromwich Hall, the regional office for the Central
operation, was sold in 2001 and a new purposely designed office is being
built at Coleshill, near Birmingham, which will be occupied in the
summer of 2002. The relocation will provide space for expansion, a net
cash saving for the business, improve operating efficiency and reduce
office running costs compared with the previous location.
Further area and regional offices will be opened as and when
appropriate. The effect of these changes will add volume and profit,
improving the overall overhead recovery level of the Group.
Turning to the management of the growing business, the Board of the
Company has been reconstituted since the 2001 year end to three
executive directors and three non executive directors. These changes
have focused all regional Managing Directors efforts to the main
operating company whilst I, along with the Group Operations Director and
Finance Director concentrate on overseeing the entire Group activity.
The expansion plan of the Group will be assisted by the new Board
structure.
The framework outlined for expansion will be underpinned by the Group's
ability to sustain the business long term and to consistently improve
the level of earnings per share. Structural and operational changes
will continue to be made only where there is a sound business case for
such actions.
Employees
Bovis Homes is a people business. It is essential therefore that the
right individuals are recruited, trained and motivated. The objective
is to ensure that the Group employs the highest calibre of employees who
add value to the business and are sensitive to the demands and
requirements of the Group's customers whilst having the entrepreneurial
drive and flair to move the operation forward without compromising good
corporate governance.
Training is an essential element of the Group's business strategy.
Employees have a personal development plan which is formulated in
consultation with their manager to support their individual aspirations
whilst matching and complementing the needs of the Group. Once the plan
has been formulated there is further appraisal to ensure that the aims
and objectives are successfully achieved.
An action plan has been formulated to facilitate the development of key
staff in the business to allow both succession for current executives
and the fulfilment of new senior positions arising from the proposed
expansion. It is hoped that the majority of future senior appointments
will be resourced through promotion from within the Group. All
appointments, however, will be made upon merit, ability and experience
and progress maintained to ensure that the business does not, and will
not, rely upon any particular individual for its future success.
On 1 January 2002, the Group launched a new defined contribution pension
scheme which will be offered to new employees joining the Group. The
Scheme is intended to offer these employees the surety of a pension and
provide the Group with certainty of contribution levels. All employees
currently in the existing Bovis Homes' defined benefit pension scheme
continue to be members of that scheme.
Planning legislation
The further deterioration in the planning system has been acknowledged
by the Government who published a Planning Green Paper on 12 December
2001, the objective of which is to deliver a fundamental change to the
planning system in England. The Group previously responded positively
to the opportunities that arose pursuant to the publication of PPG3. It
welcomes the review and trusts that the Green Paper will provide
opportunities for government at local and national level to work with
the industry to find practical solutions to improve the planning system.
Taxation
The housebuilding industry continues to be adversely affected by new or
increased Government taxes.
Aggregate tax
A new levy on aggregate materials is to be implemented in April 2002 set
at £1.60 per tonne. This additional burden will add considerable cost
to all infrastructure, roads and sewers as well as construction work.
Landfill tax
The current tax cost is £2 per tonne for inactive and £12 per tonne for
active waste. During 2002 the active waste tax is to be increased by £1
per tonne. Further increases are proposed for 2003 and 2004.
Climate change levy
Additional taxes have been imposed on electricity, gas, liquefied
petroleum gas and solid fuels:
* Electricity 0.43 pence per kWh
* Gas 0.15 pence per kWh
* LPG 0.96 pence per kg (0.07 pence per kWh)
* Solid fuel 1.17 pence per kg (0.15 pence per kWh)
These taxes make British made products more expensive to manufacture and
adds further costs to the housebuilding industry.
The Group has budgeted in 2002 for an additional £2 per square foot,
representing over 3% of budgeted construction costs, to allow for the
aforementioned tax increases and building regulation changes.
Outlook for 2002
Bovis Homes commenced the new year in a strong position with an
excellent land bank and product range, efficient processes and a good
forward sales position. The new Northern region has started strongly
supporting the Group's plans to add further operations to improve
shareholder value.
Most importantly the Group is supported by able, enthusiastic, committed
employees led by a very capable management team, confident of their
ability to deliver ongoing, positive results for the Group's
shareholders.
Malcolm Harris
Chief Executive
Financial review
Overview
2001 was a year of good growth for the Group notwithstanding the tragic
events in the United States on 11 September 2001 and the aftermath.
Turnover increased by 17.5% and pre tax profit was raised by 19.2%.
Earnings per share increased by 18.3% to 49.7 pence. The balance sheet
ended the year in very sound condition with a strong land bank and low
borrowings relative to shareholders' funds and total bank facilities.
Review of results
The profit on ordinary activities before taxation for the year ended 31
December 2001 amounted to £80.0 million inclusive of a profit arising on
the sale of freehold property of £1.2 million. This compares with £67.1
million in the previous year and excluding this year's exceptional
profit represents an increase of 17.4% year on year.
Total turnover rose from £305.0 million in 2000 to £358.5 million in
2001. 2,429 profit units were completed at an average selling price of
£140,600 compared with 2,360 units and £123,300 in the previous year.
The 14% increase in average selling price reflected the larger
proportion of three storey and room in the roof properties which
represented 15% of unit output in the year, against 4% in the previous
year. Overall, the average selling price per square foot increased by
6% and the average size of unit increased by 8%.
Operating profit increased by 20.5% to £85.2 million (2000: £70.7
million), and showed an enhanced operating margin of 23.8% on turnover,
compared with 23.2% in the previous year. Land sale and other income
accounted for £17.0 million turnover compared with £14.0 million in
2000. Land sales contributed a profit less option costs of £2.7 million
in 2001 (2000: £2.3 million).
A profit of £1.2 million arose from the sale of a regional office near
Birmingham.
Net interest payable amounted to £6.4 million, and was covered 13 times
by profit before interest.
The net corporation tax charge for the year amounting to £23.4 million,
was after crediting an adjustment in respect of prior years amounting to
£0.3 million.
Dividends paid and proposed totalled £14.5 million (2000: £13.3 million)
resulting in a retained profit for the financial year of £42.1 million
(2000: £34.1 million).
Review of balance sheet
Shareholders' funds increased during the year by £44.8 million to £334.9
million and net borrowings reduced by £3.8 million to £57.2 million.
The additional capital employed was essentially invested in land held
for development, offset by an increase in land creditors and relatively
small reductions in work in progress and part exchange properties, as
follows:
As at 31 December 2001 2000 Increase/
(decrease)
£m £m £m
-------- -------- --------
Land held for development 397.9 309.6 88.3
Land creditors (102.9) (62.7) (40.2)
--------- -------- --------
Net investment in land 295.0 246.9 48.1
Raw materials and work in progress 120.2 121.2 (1.0)
Part exchange properties 23.7 27.3 (3.6)
-------- -------- --------
The Group has maintained over 4 years' supply of land, based on the
previous year's profit unit output, negotiating deferred land payment
terms wherever possible. Closing work in progress has been held at a
similar level to that at the beginning of the year, whilst the book
value of part exchange properties has been reduced by 13%. The
strategies applied during the year, including the level of investment in
land and work in progress, have enabled the Group to achieve a return on
average capital employed of 23.0%.
Review of cash flow
Cash inflow from operating activities amounted to £43.9 million,
compared with an outflow of £23.4 million in 2000. The strength of the
cash flow in the year allowed the Group to reduce its net borrowings at
31 December 2001 by £3.8 million to £57.2 million. This represented a
net debt/equity ratio of 17.1%, compared with 21.0% at the start of the
year. This level of debt is well below the bank facilities now
available to the Group. It currently has total bank facilities
amounting to £224.0 million, of which £5.0 million is an overdraft
facility, and £219.0 million is comprised of a number of bilateral
revolving credit facilities of which £20.0 million matures on 2 November
2002, £35 million on 10 December 2005, £124 million on 9 January 2007,
£20 million on 5 February 2007 and £20 million on 10 December 2007.
Accounting standards
The Group has adopted the new accounting standard FRS 18: "Accounting
Policies", and commenced the implementation of FRS 17: "Retirement
Benefits", in accordance with the standard.
Under FRS 18 the Group has reviewed its accounting policies to ensure
that they remain the most appropriate to its particular circumstances
for the purpose of giving a true and fair view.
In respect of FRS 17 an independent actuary has valued the Group's
defined benefit scheme, as at 31 December 2001, in accordance with the
standard. The valuation shows a gross deficit in the scheme of £3.97
million, with a deferred tax asset of £1.19 million leaving a net
pension deficit of £2.78 million. This is a disclosure item only in the
2001 report and accounts as required by the standard.
Pensions
A triennial valuation of the Group's defined benefit pension scheme as
at 30 June 2001 showed that the total market value of the assets was
sufficient to cover 97.5% of the benefits that had accrued to members at
that date, after allowing for assumed future increases in earnings. On
the basis of this valuation and advice from the scheme's independent
actuary the Group increased its contribution rate from 15% to 20% of
pensionable earnings (less one and a half times the lower earnings limit
where appropriate) with effect from 1 July 2001. The Group's pension cost
was calculated under the existing accounting standard SSAP 24.
Ron Walford
Finance Director
Group profit and loss account
Continuing operations
For the year ended 31 December 2001 2001 2000
£000 £000
-------- --------
Turnover 358,543 304,996
Cost of sales (243,284) (207,170)
-------- --------
Gross profit 115,259 97,826
Administrative expenses (30,034) (27,135)
-------- ---------
Operating profit 85,225 70,691
Profit on sale of freehold property 1,213 -
-------- --------
Profit before interest 86,438 70,691
Interest receivable and similar income 172 88
Interest payable and similar charges (6,604) (3,710)
-------- --------
Profit on ordinary activities before
taxation 80,006 67,069
Taxation on profit on ordinary activities (23,400) (19,700)
--------- --------
Profit on ordinary activities after
taxation 56,606 47,369
Dividends paid and proposed (14,549) (13,252)
-------- ---------
Retained profit for the financial year 42,057 34,117
======== =======
Basic earnings per ordinary share 49.7p 42.0p
-------- --------
Diluted earnings per ordinary share 49.1p 41.5p
-------- --------
In both the current and preceding financial periods there were no other
recognised gains or losses.
Note of Group historical cost profit and losses
Continuing operations
For the year ended 31 December 2001 2001 2000
£000 £000
-------- --------
Profit on ordinary activities before
taxation 80,006 67,069
Realisation of property revaluation gains
of previous years 614 -
-------- --------
Historical cost profit on ordinary
activities before taxation 80,620 67,069
-------- --------
Historical cost profit for the year
retained after taxation and dividends 42,671 34,117
-------- --------
Group balance sheet
As at 31 December 2001 2001 2000
£000 £000
-------- --------
Fixed assets
Tangible assets 6,844 8,584
Investments 1,356 1,051
-------- --------
8,200 9,635
-------- --------
Current assets
Stock and work in progress 544,000 458,585
Debtors due within one year 10,134 8,671
Debtors due after more than one year 7,851 4,884
Cash and short term deposits 6,386 1,039
-------- --------
568,371 473,179
-------- ---------
Creditors: amounts falling due within one
year (128,810) (113,428)
--------- --------
Net current assets 439,561 359,751
-------- --------
Total assets less current liabilities 447,761 369,386
Creditors: amounts falling due after more
than one year (111,305) (77,861)
Provisions for liabilities and charges (1,552) (1,473)
-------- --------
Net assets 334,904 290,052
======== ========
Capital and reserves
Called up share capital 57,444 56,785
Share premium 135,571 133,435
Revaluation reserve 203 817
Profit and loss account 141,686 99,015
-------- --------
Equity shareholders' funds 334,904 290,052
======== ========
Group cash flow statement
For the year ended 31 December 2001 2001 2000
£000 £000
-------- --------
Net cash inflow/(outflow) from operating
activities 43,908 (23,395)
Returns on investments and servicing of
finance
Interest received 172 88
Interest paid (6,720) (3,424)
-------- --------
(6,548) (3,336)
-------- ---------
Taxation paid (23,491) (18,096)
-------- --------
Capital expenditure and financial
investment
Purchase of tangible fixed assets (3,368) (2,040)
Sale of tangible fixed assets 4,797 234
Purchase of investments (668) (586)
Sale of fixed asset investments 36 5
--------- ---------
797 (2,387)
-------- --------
Equity dividend paid (13,678) (12,518)
--------- ---------
Cash inflow/(outflow) before management of 988 (59,732)
liquid resources and financing
Management of liquid resources and
financing
Increase in short term deposits (6,000) -
Increase in borrowings 2,000 61,000
Issue of ordinary share capital 2,795 1,000
-------- --------
(1,205) 62,000
--------- --------
(Decrease)/increase in cash (217) 2,268
========= ========
Group reconciliation of movements in shareholders' funds
For the year ended 31 December 2001 2001 2000
£000 £000
-------- --------
Opening shareholders' funds 290,052 254,935
Issue of ordinary shares 2,795 1,000
Total recognised gains and losses for the
year 56,606 47,369
Dividends paid and proposed (14,549) (13,252)
-------- --------
Closing shareholders' funds 334,904 290,052
======== ========
Group reconciliation of operating profit to operating cash flows
For the year ended 31 December 2001 2001 2000
£000 £000
-------- --------
Operating profit 85,225 70,691
Depreciation and amortisation 2,050 1,831
Profit on disposal of non property tangible (67) (13)
fixed assets
Increase in stocks (85,415) (98,310)
Increase in debtors (4,430) (374)
Increase in creditors 46,545 2,780
---------- ---------
Net cash inflow/(outflow) from operating 43,908 (23,395)
activities =========== =========
Group reconciliation and analysis of net debt
For the year ended 31 December 2001 2001 2000
£000 £000
-------- --------
(Decrease)/increase in cash in the year (217) 2,268
Cash outflow/(inflow) from change in debt 4,000 (61,000)
-------- --------
Change in net debt 3,783 (58,732)
Opening net debt (61,011) (2,279)
--------- --------
Closing net debt (57,228) (61,011)
======== ========
Analysis of net debt:
Cash 386 1,039
Short term deposits 6,000 -
Bank overdraft (614) (1,050)
Borrowings (63,000) (61,000)
-------- --------
(57,228) (61,011)
======== ========
Notes to the accounts
1. Basis of preparation
The Group accounts include the accounts of the Company and its
subsidiary undertakings all of which are made up to 31 December 2001.
The financial information included within this statement does not
constitute the Company's statutory accounts for the year ended 31
December 2001 or 2000. The information contained in this statement has
been extracted from the statutory accounts of Bovis Homes Group PLC for
the year ended 31 December 2001, which have not yet been filed with the
Registrar of Companies, on which the auditors have given an unqualified
audit report, not containing statements under section 237(2) or (3) of
the Companies Act 1985.
The Group has adopted the new accounting standard FRS 18: "Accounting
Policies" during the year. There has been no material effect on the
Group's results in the year arising from the implementation of this
standard. The Group has implemented stage one of the transitional rules
of FRS 17: "Retirement Benefits" during the year. Required disclosures
arising from this implementation are included in the Company's statutory
accounts for the year ended 31 December 2001.
In line with the Urgent Issues Task Force Information Sheet No. 48 dated
5 July 2001, assets related to long term incentive plans have been
classified in investments for the current and prior year results.
2. Earnings per ordinary share
Basic earnings per ordinary share for the year ended 31 December 2001 is
calculated on profit after tax of £56,606,000 (2000: £47,369,000) over
the weighted average of 113,977,097 (2000: 112,735,747) ordinary shares
in issue during the year.
Diluted earnings per ordinary share is calculated on profit after tax of
£56,606,000 (2000: £47,369,000) over the diluted weighted average of
115,391,819 (2000: 114,184,319) ordinary shares potentially in issue
during the year. The diluted average number of shares is calculated in
accordance with FRS 14: "Earnings Per Share". The dilutive effect
relates to the average number of potential ordinary shares held under
option during the year. This dilutive effect amounts to the number of
ordinary shares which would be purchased using the aggregate difference
in value between the market value of shares and the share option
exercise price. The market value of shares has been calculated using
the average ordinary share price during the year. Only share options
which have met their cumulative performance criteria have been included
in the dilution calculation. There is no dilutive effect on the profit
after tax used in the diluted earnings per share calculation.
The weighted average number of shares excludes shares held in employee
share trusts where dividends have been waived.
3. Taxation
2001 2000
£000 £000
-------- --------
Current tax for the year 23,728 20,200
Adjustment in respect of prior years (328) (500)
-------- --------
23,400 19,700
======== ========
The rate of corporation tax applied was 30% for the year to 31 December
2001 and the year to 31 December 2000. During the year prior year tax
positions were finalised leading to the release of a tax provision
amounting to £328,000 (2000: £500,000).
4. Dividends
The proposed final dividend of 8.5 pence net per ordinary share will be
paid on 24 May 2002 to holders of ordinary shares on the register at the
close of business on 26 April 2002. The dividend when added to the
already paid interim dividend of 4.2 pence, totals 12.7 pence for the
year.
This information is provided by RNS
The company news service from the London Stock Exchange
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