TIDMBVS
RNS Number : 0929Q
Bovis Homes Group PLC
03 April 2009
Bovis Homes Group PLC - Annual Report and Accounts 2008
Annual Report and Accounts 2008, Notice of Annual General Meeting, Proxy Card
Copies of the above documents will shortly be available for inspection at the UK
Listing Authority's Document Viewing Facility, which is situated at:
Financial Services Authority
25 The North Colonnade
Canary Wharf
London E14 5HS
Tel No: 020 7066 1000
The documents are being mailed to shareholders and are available on the
Company's website at www.bovishomes.co.uk/plc/annualreport2008
Amendments to Articles of Association
The Company further announces that, in accordance with DTR 6.1.2, it's Articles
of Association, showing amendments to be proposed at the Company's forthcoming
Annual General Meeting on 7 May 2009, have been lodged with the UK Listing
Authority for publication through the Document Viewing Facility. An explanation
of the proposed changes is set out in the Notice of Annual General Meeting and
they are as follows:
Authorised Share Capital - The 2006 Act abolishes the requirement for a company
to have an authorised share capital and the new Articles of Association reflect
this. The Company will still be limited as to the number of shares which it can
at any time allot because allotment authority continues to be required under the
2006 Act, save in respect of employee share schemes.
Notice of General Meetings - Certain provisions in the current Articles of
Association dealing with the convening of general meetings and the length of
notice required to convene general meetings are being removed in the new
Articles of Association because the relevant matters are provided for in the
2006 Act. In particular, a general meeting to consider a special resolution can
be convened on 14 days' notice whereas previously 21 days' notice was required.
It is also proposed that the Company's Articles of Association be amended with
effect from 00.01 a.m. on 1 October 2009 by deleting all the provisions in the
Company's Memorandum of Association which, by virtue of section 28 of the
Companies Act 2006, are to be treated as provisions of the Company's Articles of
Association.
Annual Report and Accounts 2008 - publication required by DTR 6.3.5
The Company published its Preliminary Results for the year ended 31 December
2008 on 9 March 2009. In order to comply with DTR 6.3.5 it is now publishing in
unedited full text information contained in the annual financial report of a
type required to be disseminated in a half-yearly financial report. For
coherence, this repeats some of the information contained in the Preliminary
Results announcement.
The full annual financial report is available on the Company's website at
www.bovishomes.co.uk/plc/annualreport2008
Annual report and accounts 2008
Bovis Homes Group PLC
Chairman's statement
2008 was a challenging year for the housebuilding industry. The poor economic
conditions encountered, including the lack of mortgage availability, had a
negative impact on volumes with first time purchasers in particular being
adversely affected by an increased requirement for deposits. This culminated in
total mortgage lending for new home purchase falling by 70% towards the end of
the year.
Faced with this deteriorating economic background, Bovis Homes acted decisively
in substantially reducing its overhead, controlling work in progress and
negotiating new banking arrangements. The Group has reviewed the carrying value
of its assets and liabilities and has taken a provision against carrying values
of inventory as well as fully writing off goodwill arising on acquisition.
Whilst the Group's net assets have fallen during 2008, gearing remains low, at
17%. The business is now well positioned to manage its balance sheet in an
effective manner and to be able to take advantage of future investment
opportunities.
Results
For the year ended 31 December 2008, the Group achieved a pre-exceptional
pre-tax profit of GBP14.4 million, as against GBP123.6 million in 2007.
Pre-exceptional basic earnings per share was 9.2p in 2008 as compared to 72.4p
per share in 2007. After taking into account GBP93.1 million of exceptional
charges, the Group made a pre-tax loss of GBP78.7 million and basic loss per
share of 49.1p in 2008.
Total revenue generated was GBP282.3 million (2007: GBP555.7 million), and the
Group legally completed 1,817 homes (2007: 2,930 homes).
On a pre-exceptional basis, the Group's operating margin reduced to 7.5% (2007:
22.4%). This reduction reflected a fall in private home sales prices, a shift in
the selling mix towards social homes and away from private homes and the
de-leveraging impact on cost recovery from the sharp fall in revenues.
Group net assets reduced by GBP91.4 million, from GBP723.7 million to GBP632.3
million, equivalent to GBP5.23 per share at the year end. This reduction in net
assets was driven primarily by the Group's retained loss in the year, inclusive
of exceptional items, and an adverse movement in value of the pension scheme of
GBP7.8 million.
Net debt before issue costs was GBP108 million at the year end, and year end
gearing was a modest 17%, with net borrowing utilisation less than half of the
Group's committed loan facility.
Dividend
During 2008, the Group paid the 2007 final dividend of 17.5p per share, and the
2008 interim dividend of 5.0p per share. Given the challenging trading
conditions and the importance of conserving cash the Group is not recommending
payment of a final dividend for 2008.
The Board
Whilst the Group has seen major changes during the year, changes also related to
the Boardroom, where I became non-executive Chairman in July 2008 following my
retirement as Chief Executive, to be replaced by Mr David Ritchie, who was
previously Group Managing Director, this role not being retained.
The Board would like to thank Mr Tim Melville-Ross, my immediate predecessor,
for his significant contribution to the Group's development since 1997, first as
a non-executive director and then as Chairman of the Group. The Board would also
like to welcome Mr Alastair Lyons who joined the Group as Deputy Chairman and
Senior Independent Director in October 2008.
Employees
2008 has been a difficult year for the employees, suppliers and sub-contractors
of the Group. The Group has seen two restructuring events leading to more than
half its employees leaving the business during the year. The Board took these
necessary and essential decisions after consideration of alternative courses of
action, and recognises the significant impact its decisions have had on many
individuals, which is regrettable. The Board would also like to recognise the
commitments and contribution of those colleagues who have been made redundant
during the year and would like to wish them every success in their future
employment.
Whilst distressing for those individuals leaving, it is often also difficult for
those employees remaining, who may have to take on additional tasks in a more
uncertain environment. In reducing production activity and seeking savings
throughout the business, the Group also recognises that this has been very
challenging for the many suppliers and sub-contractors who provide services to
the business.
The Board would like to thank its employees, suppliers and sub-contractors for
their continued hard work and commitment during a year that has been very
challenging for a great many individuals connected to the Group in many
respects.
The Board would also like to thank Mr Geoff Coleman, the regional Managing
Director of South East region, who retired during the year after more than 20
years service.
Market conditions and prospects
As has been well reported, the current market for housebuilders is exceedingly
weak, and accordingly, the Group's priorities are to manage through the current
downturn in an orderly way. The Group commenced 2009 with a healthy number of
unsold finished stock homes which it can sell to generate a strong cash margin,
preserving the value in the balance sheet whilst continuing to maintain a
relatively low level of indebtedness. Through its efforts to date, as at 6 March
2009, the Group has secured 772 net reservations for legal completion in 2009,
as compared to 1,262 net reservations at the same point in 2008. Whilst this
represents a decrease year over year of 39%, the 330 private net reservations
achieved in the first nine weeks of the year represents a 22% increase on the
prior year's comparative of 271 net reservations.
Looking ahead, the Group expects that transaction volumes will begin to improve
as lower house prices and lower mortgage interest rates feed through into the
marketplace. This pick up in activity does, however, depend on the credit market
being capable of funding increased transactional growth.
With improved volume, market pricing will begin to stabilise. However,
visibility on the timing of these likely market developments is not good and for
the present, the Group is positioning itself assuming a continuation in 2009 of
current market conditions.
With low levels of debt and a largely strategically sourced and long consented
land bank the Group anticipates being well placed in terms of balance sheet
capability for this eventuality.
Malcolm Harris
Chairman
Report of the directors - Business review
The marketplace and Group performance
Bovis Homes Group PLC's (Bovis Homes) business remains designing, building and
selling homes for both private and public sector, operating in England and
Wales. Mixed use schemes involving retail, commercial and office, in addition to
residential, are also undertaken by the Group. The key steps in the value
delivery chain for the Group remain the sourcing of land, achievement of an
appropriate planning consent, physical construction of property and its
subsequent sale.
Marketplace demand during 2008
Longer term demand drivers in the UK housebuilding market include household
formation, population growth and societal changes such as increased longevity
and higher divorce rates: all of which drive an increased requirement for
housing. Based on Government forecasts which allow for the impact of these, the
industry should be building 240,000 homes each year to meet the country's
housing needs. This said, in the shorter term, it is self evident that demand
can be strongly influenced by consumer sentiment, affordability and availability
of mortgage financing.
During 2008, marketplace demand has been badly affected by two developments.
Firstly, the availability of mortgage finance has reduced following the
liquidity crisis affecting the banking sector in late 2007 and into 2008. As
well as a sharp reduction in the number of mortgage products available from
15,599 in July 2007 to 1,542 in January 2009, the absolute number of mortgages
being approved has fallen, with year over year mortgage approvals falling by 43%
in Q1, 61% in Q2, 70% in Q3 and 63% in Q4: 59% overall across the year.
Secondly, the onset of the recession together with bleak economic news, a sharp
retrenchment in corporate lending and further crises in banking requiring
Government bailouts has impacted consumer confidence, such that in the latest
consumer confidence survey by the Nationwide, 82% of respondents feel the
current economic situation is bad.
The combination of these factors has led to a significant decrease in
residential transaction volumes, down 44% in 2008 against the prior year
according to the HMRC. Further, the lower number of buyers able to obtain
mortgage finance has led to lower levels of demand and a sharp fall in achieved
house pricing across the marketplace over the year, with the Nationwide
reporting a 15.9% fall during 2008 and the Halifax a 16.2% fall over the same
period. This scale of fall over a one year period is unprecedented, and has
further dented confidence. The lower activity trend is likely to worsen in the
short term as mortgage approval data runs ahead of transactions, and the
absolute level of mortgage approvals indicates a further step down in
transaction volumes.
The two developments over the year that bear within them the potential for
recovery are the movements downwards in base interest rates, currently at 0.5%,
and the general improvement in affordability metrics as house prices fall. The
timing of this recovery is largely dependent on mortgage availability, which is
extremely difficult to forecast.
Marketplace supply in 2008
As sale volumes across the housebuilding sector have fallen, construction
volumes have reduced as individual companies seek to conserve cash. Bovis Homes
has not differed in this respect: the Group has limited construction to 1,782
units of production in 2008, a decrease of 39% compared to 2007's 2,923 units of
production. New starts have been limited to 1,179 homes compared to 3,406 homes
in 2007, a 65% decrease. In the marketplace as a whole, data for England for the
year to the end of quarter 3 2008 would suggest a fall in new starts against the
prior comparable of some 31% for the year, with quarter 3 in isolation down 48%
against the prior comparable and down 33% against the previous quarter. Whilst
this is a logical response by individual housebuilders, it is at odds with
Government objectives for construction of new homes, and is therefore indicative
of a continuation of a longer term supply and demand imbalance. Such an
imbalance continues to suggest that demand for new housing will remain robust
over the long term.
Competition
In normal markets, the main competitor for Bovis Homes is the second hand
market, with over 90% of residential transactions being second hand, and with
pricing in the new build sector being set by reference to that market. During
2008, however, the pricing dynamic has changed somewhat, and with thin second
hand volumes, the impact of new-build competitors discounting has been to place
downwards pressure on achievable pricing for Bovis Homes where the Group trades
in close proximity: both directly as customers shop around and indirectly via
comparative mortgage valuations.
Group performance in 2008
The Group legally completed 1,817 homes in 2008 compared to 2,930 legal
completions in 2007. Of these, 594 were social homes ( 2007: 637) and 1,223 were
private homes (2007: 2,293), a social mix of 33% as compared to 22% in 2007.
The average sales price of legal completions fell over the year, from GBP179,500
in 2007 to GBP150,800 in 2008. This fall was driven by a combination of factors.
Firstly, the average sales price of private homes fell by 12%, from GBP206,200
to GBP181,000 as the Group responded to a weaker market to deliver the Group's
volume aspirations and as the average size of private homes legally completed
reduced.
Secondly, there was a shift in selling mix towards social housing, from 22% in
2007 to 33% of legal completions in 2008. With an average sales price of
GBP88,500 in 2008 (2007: GBP83,400), the increase in the mix of this category
diluted the overall average sales price achieved.
The average size of the Group's private homes fell by 5% in 2008, to 972 square
feet as compared to 1,023 square feet in 2007. Taking this into account, the
Group's private sales price per square foot fell by less than the average sales
price, an 8% fall from GBP202 per square foot to GBP186 per square foot.
Overall, the Group's homes legally completed reduced in size from 969 square
feet in 2007 to 909 square feet, a fall of 6%.
Strategy and objectives
The Group's long-held strategic objectives are as follows:
* The Group seeks to achieve a minimum return on capital employed (ROCE) of 20%
over the cycle, and seeks to maximise operating margin whilst doing so
* The Group seeks to ensure growth in profits and in earnings per share
* The Group seeks to maintain the highest levels of awareness and practical
implementation of health, safety and environmental standards
Largely arising as a result of the marketplace conditions during 2008, progress
against a number of these strategic objectives has been disappointing during the
year.
The Group remains committed to its ROCE target of 20% over the business cycle,
although the impact of current market conditions is likely to mean that the
Group will perform well below the target in the short term. During 2008
operational margins suffered from the impact of an increased social mix and a
reduction in average sales price for private sales with input costs remaining
relatively fixed. Given falling sales, there was also a reduction in overhead
recovery as a result of loss of scale.
Pre-exceptional profits have fallen sharply against prior year, as sales revenue
has reduced by 49%. This has also impacted earnings per share. Following the
completion of carrying value reviews on inventory valuations, the Group has also
charged write-downs in carrying values of assets, leading to an overall retained
loss for the Group during 2008.
Performance against the Group's non-financial objectives will be covered in more
detail throughout the operating performance section of this review.
Operating performance
During what has been an untypical year requiring a number of difficult actions,
the Group has ensured that its operations continue to be managed and measured in
a timely and consistent manner; that key activities occur as planned and that
the Group is performing well having regard to the constraints imposed by the
economic backdrop. The Group also seeks to manage its operations such that it
can assure itself that its activities are ethically based, environmentally
sustainable and that it is ensuring the highest practical standards of health
and safety for its employees, subcontractors and all visitors.
Further details of the Group's efforts and achievements during 2008 in regards
to Corporate Social Responsibility are published in a separate report, available
from the Company's website (www.bovishomes.co.uk/plc), but the following brief
review highlights the key operational performance matters together with
objective data assessing progress achieved.
Employees
Construction is by its nature an activity that carries with it some physical
risk, and accordingly, the Group regards the health and safety of its employees,
subcontractors and all visitors to its sites of paramount importance.
Comprehensive staff training, management processes and regular and comprehensive
accident and incident reporting ensure that the Group is aware of all material
matters pertaining to health and safety, and it seeks to ensure that this
reporting is at the cornerstone of a system which uses high quality information
to address risk, preventing injury or recurrence. The Group also seeks to ensure
that its site workforce is fully CSCS carded, a goal achieved during 2008.
As well as being a key item on the agenda of all regular senior management
meetings, the Group seeks to ensure that its health and safety regime is
independently monitored via external advisors, and uses the services of the
National House Building Council to effect this.
In absolute terms, the performance of the Group has improved in 2008, with
reportable accidents under the Reporting of Injuries, Diseases and Dangerous
Occurrences Regulations (RIDDOR) falling by 13% in the year to 27 (2007: 31).
Minor injuries have also fallen by 41%, from 246 occurrences in 2007 to 144 in
2008. The outcome from external monitoring and inspection also confirms this
trend, with NHBC priority A scores showing a fall of 79%, and priority B scores
a fall of 41%. Despite this absolute fall, the reduction in activity on site
means that the Group's accident incidence rate has increased, from 945 in 2007
to 1,024 in 2008. This rate is ahead of the HSE Construction accident incidence
rate of 906, and is indicative of the fact that the Group cannot be complacent
about the positive trend of falling absolute scores.
Notwithstanding changes in overhead structure and staffing levels during the
year, the Group has continued to ensure that staff are being trained and that
they are capable of doing their jobs well and in a safe way. Absolute levels of
training have remained high as has the proportion of staff being trained.
Customers
The Group's objective is to provide customers with a high quality product and
service, something outlined in its customer charter. The Group has focused on
this area intensively in 2008, building on work done in 2007 to improve process
around its customer satisfaction surveys. Internal scoring demonstrates the
success of this with improvements in both 'recommend to a friend' and 'purchase
another Bovis Home' responses.
Customer communication has continued to be supported via the web, with ongoing
developments to ensure that the Group website is a key selling tool. For
instance, floor plans are now available on the Group website to allow potential
consumers to better visualise their Bovis home. The Group is also using the
power of the internet to directly market its products to consumers, utilising
internally generated mailing lists as well as via intermediaries such as 'smart
new homes.com' or 'right move.com'.
Given the present level of price competition, the Group remains focused on
designing sales packages which provide customers with a strong motivation to
transact with Bovis Homes.
'Jumpstart' remains a strong sales aid, allowing the Group to overcome the issue
that many first time buyers are now finding, namely that mortgages for those
without substantial deposits are difficult to obtain. 'Home-exchange' also
remains an important tool in the context of a second hand market in which
transaction levels are very low.
Shareholders
The value chain for Bovis Homes over the long term business cycle remains the
sourcing of land, achievement of an appropriate planning consent, physical
construction of property and its subsequent sale.
This said, the nature of the current downturn has forced Bovis Homes to take a
number of shorter term steps to mitigate the impact the sharp downturn has had
on mortgage finance, consumer sentiment and ultimately Group sales revenue.
These mitigating actions have been taken to protect the shareholder value
represented by the Group's balance sheet.
Actions have been taken to ensure that the Group is able to pass through the
current low ebb of the cycle in a controlled and orderly way from a cashflow
perspective, as well as ensuring that the impact of current marketplace
conditions on its financing arrangements are addressed.
Firstly, and regrettably as regards the impact on its employees, the Group has
taken action to reduce its overhead cost base during 2008, as falling volume and
prices have reduced the sales revenue generated by the Group. In June 2008, the
Group reviewed its structure and closed its Eastern regional office, one of its
five regional offices at that time, as well as seeking to make savings in
headcount across the Group. In December 2008 the Group acted again, closing its
Northern regional office. The Group now trades from three regional office bases
- South West based in Cheltenham; South East based in New Ash Green, Kent and
Central based in Coleshill, near Birmingham. Northern activity is being managed
by the Central region, and Eastern largely by the South East region. This
structure replicates the organisation of the Group after flotation and the Group
is confident that it will be a suitable regional structure to support volume
growth in the short term. Effected through the restructuring, around 60% of the
Group's work force in place at the start of the year have left the business.
As a result, the Group expects that overhead costs in 2009 will be between
40-50% below peak levels in late 2007.
Secondly, as outlined earlier in this review, production levels have been
reduced significantly, reflective of the need to conserve cash and the Group's
generally high stock levels.
Thirdly, the Group has cut back its land expenditure, seeking to cancel or delay
previous commitments. The impact of this is not immediately evident from the
Group's consented land bank position which has benefited from a strong year of
pull-through from its strategic land bank. The Group's consented land bank grew
from 11,413 plots at 31 December 2007 to 13,545 plots at 31 December 2008. Of
the 4,026 plots added, 96% or 3,853 plots were pulled through from the strategic
land bank, and 173 plots were added through acquisition of land in the consented
market. At current activity levels, this consented land bank represents 7.5
years of supply. Prior to the inventory write-downs taken in 2008, the average
consented land plot cost was GBP40,200 with the equivalent figure for 2007 being
GBP43,400. Adjusting for the carrying value provisions, the average balance
sheet plot cost was GBP35,000.
The strategic land bank reduced over the year primarily because of the transfer
of plots into the consented land bank. The potential plots at 31 December 2008
were 18,972 as compared to 24,868 potential plots at 31 December 2007.
The 2008 year end potential plots include 2,200 plots at Wellingborough,
controlled via an option, which have the benefit of outline planning consent but
which have not yet been called down by the Group. The Group added 966 net
potential plots to the strategic land bank during 2008 and adjusted 3,032
potential plots out of the strategic land bank reflecting updated views on the
likelihood of or quantum of viable residential planning consents achievable
given current conditions in the housing market.
Finally, the Group was successful in refinancing its banking arrangements during
the second half of 2008, extending its committed facility through to 2011.
Whilst the bank pricing margin has increased, underlying LIBOR has reduced, and
so the effective interest rate prior to amortisation of the one-off fees and
commitment fees, is not anticipated to be materially greater than that paid in
2008.
Environment and sustainability
The Group continues to regard sustainable development as critical to the long
term creation of value for its shareholders.
Given the continuing focus on climate change, the role of the housebuilding
industry is highly important in terms of both the mitigation of the impact of
its near term building developments on the local environment, and in playing its
part in the evolution of building techniques and advances which reduce the
carbon arising from new housebuilding developments.
Ensuring that its developments take place in a manner which mitigates the impact
of its operations on its local environment, balancing the needs of local
communities for new housing with the requirement to avoid environmental damage,
the Group works with a range of external stakeholders to agree and carry out
development in a mutually acceptable manner.
Looking forward, the Group is keen to ensure that its products conform to good
environmental standards, including both to Ecohomes standards and to emerging
standards under the Code for Sustainable Homes.
Reflecting the existing contribution that the Group makes to the communities and
environments in which it operates, the Group is proud to say that it is a member
of the FTSE4Good index.
The Group's Corporate Social Responsibility report outlines this key area for
the Group in more detail, and is available on the Group's website
(www.bovishomes.co.uk/plc).
Main Trends and factors looking forward
The outlook for the housing market, combined with that of the wider economy
appears to be challenging at present.
The Government and the Bank of England together have taken a number of actions
including a reduction in bank lending base rates to historical lows, money
market innovations designed to increase liquidity, recapitalisation of clearing
banks, and the nationalisation of a number of former building societies: all
actions which it is hoped will begin to reverse the impact of the 'credit
crisis'.
Notwithstanding these actions, the Group expects that de-leveraging from
corporate and personal balance sheets will continue during 2009, leading to a
generally low level of personal confidence as weak economic news prevails in the
short term. The key financial trend remains the quantum of mortgage
availability. As prices fall, so affordability improves, making the market more
attractive to new entrants, but this can only improve if mortgage finance
increases in availability.
Accordingly, visibility remains poor, and the Group will remain focused during
2009 on managing in a manner which prioritises cashflow and in preserving the
value inherent within the Group's balance sheet.
David Ritchie
Chief Executive
Financial performance during the year
Revenue
Total revenue for the Group in 2008 was GBP282.3 million as compared to GBP555.7
million in 2007.
The main component of revenue for the Group is housing revenue which, at
GBP274.0 million, was well below the prior year (2007: GBP525.9 million) arising
from a combination of a fall in average sales price and a reduction in the
volume of homes legally completed. Given the dearth of activity in the consented
land market and uncertainty over achievable values, the Group limited disposals
of land during 2008 to GBP4.9 million, as compared to GBP25.1 million in 2007.
Other income at GBP3.4 million for 2008 was slightly behind that of the prior
year.
Pre-exceptional operating profit
The Group achieved GBP21.3 million of operating profit, before exceptional
items, for the year ended 31 December 2008, at an operating margin of 7.5%. This
was a sharp reduction on the previous year's operating profit of GBP124.4
million and operating margin of 22.4%. Gross margins have fallen by around 9
ppts, reflective primarily of an underlying reduction in private home profit
margins as prices fell, but also of an increase in the social mix and a loss of
scale-benefits on strategic planning fees and other costs charged as incurred
against gross profit. Despite a 14% absolute reduction in overhead, from GBP48.7
million in 2007 to GBP42.0 million in 2008, excluding exceptional items, the
operating margin was further impacted by the lower recovery of overhead as the
ratio to revenue grew from 8.7% in 2007 to 14.9% in 2008.
Profit from land sales, less option costs, was GBP1.3 million in 2008, as
compared with GBP10.0 million in 2007.
Exceptional and non-recurring costs
The Group discloses items as exceptional when the Board deems them material by
size or nature, non-recurring and of such significance that they require
separate disclosure.
The Group has reviewed the carrying value of its assets and liabilities as at 31
December 2008. Following this review, the Group has charged an exceptional
provision against the carrying value of inventory and an impairment charge for
available-for-sale financial assets and fixed assets. The Group has also written
off the goodwill arising from the acquisition of Elite Homes in 2007.
The Group has reviewed its inventory carrying values on a site by site basis,
taking into account local management and the Board's estimates of current
achievable pricing in local markets. Where this gave rise to a situation where
the current carrying costs of the asset were higher than the estimated net
realisable value, a provision has been recognised for the difference. This
provision includes allowance for both land and part-exchange assets. In total,
GBP75.2 million has been provided.
Prior to the expiry of the 12 month review period for fair value adjustments
relating to the acquisition of Elite Homes in October 2007, the Group revised
its fair value estimates downwards by GBP0.8 million, reflecting finalisation of
estimates for liabilities existing at the point of acquisition. This adjustment
increased the cost of acquired goodwill by GBP0.8 million, to GBP10.0 million in
total.
Subsequently at the year end, the Group has reviewed the goodwill it is carrying
and, given the fact that provisions have been recognised relating to the
carrying value of land acquired by the Group as part of the Elite acquisition
and given that the Group has restructured its Northern regional business, the
Group has fully impaired this goodwill reflecting the Board's current view of
the value of this intangible asset.
The Group has reviewed the carrying values of its available-for-sale financial
assets, revisiting the long term growth assumptions built into its valuation
model, and in particular the likelihood of a short-term decline in pricing, with
a longer term return to trend. This has given rise to an impairment charge of
GBP1.2 million. An impairment charge of GBP1.0 million has also been made
relating to the Group's freehold offices, given the fall in commercial property
values during 2008.
The Group has also charged restructuring costs of GBP5.7 million reflecting the
one-off costs of two restructuring events that took place during the year. These
costs include redundancies as well as costs relating to office closures.
Pre tax loss and loss per share
Together with GBP21.3 million of pre-exceptional operating profit (2007:
GBP124.4 million), the Group incurred GBP6.9 million of net financing charges
(2007: GBP0.8 million) and GBP93.1 million of exceptional items (2007: GBPnil),
resulting in a pre-tax loss of GBP78.7 million (2007: pre-tax profit of GBP123.6
million).
Before exceptional items, the Group delivered basic earnings per share of 9.2p.
However, after exceptional items, basic loss per share was 49.1p. This is as
compared to basic earnings per share of 72.4p in 2007.
Financing
Net financing charges were GBP6.9 million in 2008 (2007: GBP0.8 million). Net
bank interest charges for 2008 were GBP5.6 million, which included the
amortisation of arrangement fees and commitment fee charges. This was as
compared to GBP2.4 million of net income in 2007. On average during 2008, the
Group had GBP97 million of net debt, as compared to an average net cash in hand
of GBP49 million in 2007. The Group incurred a GBP2.5 million finance charge
(2007: GBP4.1 million), reflecting the difference between the cost and nominal
price of land bought on deferred terms and which is charged to the income
statement over the life of the deferral of the consideration payable.
This year over year reduction was largely driven by a corresponding fall in land
creditors.
The Group benefited from a GBP1.1 million net pension financing credit during
2008. This credit arose as a result of the expected return on scheme assets
being in excess of the interest on the scheme obligations. The equivalent credit
in 2007 was GBP0.9 million. The Group also benefited from a finance credit of
GBP0.1 million arising from the unwinding of the discount on its
available-for-sale financial assets during 2008.
Taxation
The Group has accounted for a tax credit of GBP19.7 million in 2008 (2007: tax
charge of GBP36.7 million). Of this, a GBP3.3 million charge has arisen on
pre-exceptional pre-tax profits of GBP14.4 million, and a GBP23.0 million tax
credit has arisen on pre tax exceptional items of GBP93.1 million. This equates
to an effective tax rate of 25.1% (2007: 29.7%). The major contributor to this
lowered effective rate has been the GBP10.0 million impairment of goodwill
arising on acquisition which is a non-deductible charge. The Group has also
benefited from a GBP1.0 million overprovision of tax charge relating to prior
years.
As a result of the tax credit arising from the exceptional items taken in 2008,
the Group has recognised a tax asset of GBP23.6 million on its closing balance
sheet as at 31 December 2008.
Dividends
During 2008, the Group paid the 2007 final dividend of 17.5p per share and the
2008 interim dividend of 5.0p per share. In total, this equated to GBP27.0
million (2007: GBP45.0 million). As previously announced, the Board has decided
not to recommend payment of a final dividend for 2008, having regard to trading
conditions.
Net assets
The Group's net assets at 31 December 2008 were GBP632.3 million, GBP91.4
million lower than the net asset position as at 31 December 2007. This was
primarily as a result of an GBP86.0 million retained loss, together with a
movement in the value of the pension scheme reserve by GBP6.4 million.
Net assets per share as at 31 December 2008 was GBP5.23 as compared to GBP5.99
at 31 December 2007.
Pensions
At the start of 2008, the Group enjoyed a surplus on its pension scheme of
GBP1.0 million, but following a roll-forward of the valuation, with latest
estimates provided by the Group's actuarial advisors, the Group's pension scheme
had a deficit of GBP6.8 million at 31 December 2008. This adverse movement has
arisen from a combination of a reduction in value of the scheme's assets,
partially offset by a favourable movement in the discount rate applicable to the
scheme's liabilities.
Cash flow
Over the year, the Group managed to limit the net cash outflow from operations
to only GBP4 million, reflecting positively on the actions of the Group in
reducing cash outflows, despite sharply falling revenues. The Group's net debt
before issue costs increased by GBP64 million, from GBP44 million to GBP108
million, the bulk of this increase arising during the first half of 2008. In
addition to the modest cash outflow from operations, the Group paid GBP17
million of tax largely relating to 2007's profits, GBP27 million of dividends
and GBP17 million of interest and related charges, including GBP8.3 million of
arrangement fees and related costs linked to its successful bank facility
refinancing.
Borrowings
As at 31 December 2008, the Group had GBP11.6 million of cash in hand, and
borrowings of GBP120 million. The Group has in place a GBP220 million committed
syndicated banking facility, which steps down to GBP180 million in February 2010
and to GBP160 million in September 2010 and which matures in March 2011. Looking
ahead, the Group anticipates around GBP50 million of net debt by the end of
2009.
On average the Group had net borrowings of GBP97 million in 2008 (2007: Net cash
in hand GBP49 million). Average gearing was 14% and year end gearing 17%.
The difference between the average and the year end gearing is largely due to an
asset provision made in December 2008 relating to the carrying value of
inventories.
Financial risk and liquidity
The Group largely sees three categories of financial risk: interest rate risk,
credit risk and liquidity risk. Currency risk is not a consideration as the
Group trades exclusively in England and Wales.
In regards to interest rate risk, the Group from time to time will enter into
hedge instruments to ensure that the Group's exposure to excessive fluctuations
in floating rate borrowings is adequately hedged. The Group allowed its existing
hedges to expire in 2007, but with the commencement of a new banking
arrangement, the Group has in February 2009 entered into a GBP50 million collar
and floor hedge arrangement, ensuring that variable rates on GBP50 million of
the Group's floating rate debt are held within a pre-determined range. This
prevents the Group from suffering material adverse floating rate increases
beyond the agreed cap level.
In regard to credit risk, this is largely mitigated by the nature of the Group's
business in which the majority of its sales are made on completion of a legal
contract at which point completion monies are received in return for transfer of
title.
During 2008, the Group successfully refinanced its banking arrangements, putting
in place a GBP220 million syndicated facility which is committed to 2011, and
which features covenants more appropriate to the current trading environment.
This ensures that the Group has adequate cash facilities in terms of both
flexibility and liquidity to cover its medium term cash flow needs.
Financial reporting
There have been no changes to the Group's accounting policies during 2008.
Principal risks and uncertainties
The Group formally considers risk on a regular basis with the Board annually
reviewing the dimensions of risk that exist for the Group as well as the
mitigation plans and processes that the Group may have in place to reduce the
likelihood of the risk emerging and or to lessen the impact of the risk on the
business. The Board has also focused on individual risk areas during 2008, with
specific areas being discussed at each meeting.
The risks that the Group face generally fall into a number of categories: these
include commercial risks (market, liquidity etc), social risks, environmental
risk and ethical risks.
With regard to commercial risk, the trading environment has markedly worsened
during 2008, and the Group has formally re-assessed the likelihood and impact of
risk occurring in this changed business environment. For example, perhaps not
surprisingly, risks that the Group assessed as more remote in earlier years such
as the risk of inadequate working capital resources being available have
increased greatly both in likelihood and impact. An environment of falling sales
prices also has wider ramifications looking forwards, for example in terms of
the affordability both of planning gain packages and of the affordability of
cost changes driven by primary legislation as well as in terms of the viability
of purchased land.
Currently, the Group assesses the following to be the principal commercial
risks:
* Market driven risks, such as a risk to revenue levels from an ongoing downturn
in trade or falling house prices impacting the commercial assumptions on which
key assets are acquired
* Legislative risks, such as the risk of planning/legislative changes driving
costs ahead of sales prices and reducing shareholder returns
* Liquidity risks, both in terms of financing availability and in terms of the
Group's ability to sell stock at acceptable prices in a tough market
* Organisational risk, with additional stresses placed on key individuals or teams
as a result of downsizing
Risks are not limited to these and the Group remains intent on continuing to
manage risks across all risk dimensions, notwithstanding a worsening commercial
risk environment. The principal social, environmental and ethical risks and
uncertainties remain the following:
* Existing land contamination is not identified pre-acquisition
* Wildlife habitats are not identified resulting in planning difficulties
* Sustainable development requirements are not addressed, leading to planning
delays and the loss of potential efficiencies
* Failure to design for social inclusion, and for use of appropriate materials
* Environmental pollution occurs on a construction site and is not swiftly
controlled
* Health and safety standards are breached, leading to injury
* A significant environmental, health and safety, social or ethical event impacts
on the Group's reputation or Brand
The importance of risk assessment is that it allows the Group to reflect on what
might happen, and how the adverse impact of events can be mitigated. In all the
areas that the Group regards as potential risks, the Group has reviewed the
likelihood and impact of a problem occurring and has identified suitable
controls and processes to manage, monitor and mitigate these risks. Now, more
than ever, it is important to recognise that the trading environment remains
highly uncertain, with unprecedented developments in financial markets having a
profound impact on the risks that the Group faces.
Neil Cooper
Group Finance Director
Statement of directors' responsibilities
We confirm that to the best of our knowledge:
* the Group and Parent Company financial statements in this report and in the full
Annual Report and Accounts, which have been prepared in accordance with IFRS as
adopted by the EU, IFRIC interpretation and those parts of the Companies Act
1985 applicable to companies reporting under IFRS, give a true and fair view of
the assets, liabilities, financial position and profit or loss of the Company
and of the Group taken as a whole; and
* the management report contained in this report includes a fair review of the
development and performance of the business and the position of the Company and
the Group taken as a whole, together with a description of the principal risks
and uncertainties they face.
For and on behalf of the Board
David Ritchie
Chief Executive
Neil Cooper
Finance Director
Bovis Homes Group PLC
Group income statement
+----------------------------+-------------+-+-------------+-+-------------+-+-----------+-+
| For the year ended 31 | Before | | Exceptional | | Continuing | | | |
| December 2008 | exceptional | | items | | operations | | | |
| | items | | | | | | | |
+----------------------------+-------------+-+-------------+-+-------------+-+-----------+-+
| | 2008 | | 2008 | | 2008 | | 2007 | |
+----------------------------+-------------+-+-------------+-+-------------+-+-----------+-+
| | GBP000 | | GBP000 | | GBP000 | | GBP000 | |
+----------------------------+-------------+-+-------------+-+-------------+-+-----------+-+
| | | | | | | | | |
+----------------------------+-------------+-+-------------+-+-------------+-+-----------+-+
| Revenue - continuing | 282,326 | | - | | 282,326 | | 555,702 | |
| operations | | | | | | | | |
+----------------------------+-------------+-+-------------+-+-------------+-+-----------+-+
| Cost of sales | (219,011 | )| (76,487 | )| (295,498 | )| (382,659 | )|
+----------------------------+-------------+-+-------------+-+-------------+-+-----------+-+
| Gross profit / (loss) | 63,315 | | (76,487 | )| (13,172 | )| 173,043 | |
+----------------------------+-------------+-+-------------+-+-------------+-+-----------+-+
| Administrative expenses | (42,018 | )| (16,641 | )| (58,659 | )| (48,653 | )|
+----------------------------+-------------+-+-------------+-+-------------+-+-----------+-+
| Operating profit / (loss) | 21,297 | | (93,128 | )| (71,831 | )| 124,390 | |
| before financing costs | | | | | | | | |
+----------------------------+-------------+-+-------------+-+-------------+-+-----------+-+
| Financial income | 1,389 | | - | | 1,389 | | 6,158 | |
+----------------------------+-------------+-+-------------+-+-------------+-+-----------+-+
| Financial expenses | (8,292 | )| - | | (8,292 | )| (6,962 | )|
+----------------------------+-------------+-+-------------+-+-------------+-+-----------+-+
| Net financing costs | (6,903 | )| - | | (6,903 | )| (804 | )|
+----------------------------+-------------+-+-------------+-+-------------+-+-----------+-+
| Profit / (loss) before tax | 14,394 | | (93,128 | )| (78,734 | )| 123,586 | |
+----------------------------+-------------+-+-------------+-+-------------+-+-----------+-+
| Income tax | (3,319 | )| 23,058 | | 19,739 | | (36,727 | )|
+----------------------------+-------------+-+-------------+-+-------------+-+-----------+-+
| Profit / (loss) for the | 11,075 | | (70,070 | )| (58,995 | )| 86,859 | |
| period attributable to | | | | | | | | |
| equity holders of the | | | | | | | | |
| parent | | | | | | | | |
+----------------------------+-------------+-+-------------+-+-------------+-+-----------+-+
| | | | | | | | | |
+----------------------------+-------------+-+-------------+-+-------------+-+-----------+-+
| Basic earnings/(loss) per | 9.2p | | (58.3p | )| (49.1p | )| 72.4p | |
| ordinary share | | | | | | | | |
+----------------------------+-------------+-+-------------+-+-------------+-+-----------+-+
| Diluted earnings/(loss) | 9.2p | | (58.3p | )| (49.1p | )| 72.2p | |
| per ordinary share | | | | | | | | |
+----------------------------+-------------+-+-------------+-+-------------+-+-----------+-+
Bovis Homes Group PLC
Group balance sheet
+---------------------------------+----------+--+-----------+--+-----------+--+
| At 31 December 2008 | | | 2008 | | 2007 | |
+---------------------------------+----------+--+-----------+--+-----------+--+
| | | | GBP000 | | GBP000 | |
+---------------------------------+----------+--+-----------+--+-----------+--+
| | | | | | Restated | |
+---------------------------------+----------+--+-----------+--+-----------+--+
| Assets | | | | | | |
+---------------------------------+----------+--+-----------+--+-----------+--+
| Goodwill | | | - | | 10,036 | |
+---------------------------------+----------+--+-----------+--+-----------+--+
| Property, plant and equipment | | | 12,347 | | 14,451 | |
+---------------------------------+----------+--+-----------+--+-----------+--+
| Available for sale financial | | | 6,030 | | 1,085 | |
| assets | | | | | | |
+---------------------------------+----------+--+-----------+--+-----------+--+
| Investments | | | 22 | | 22 | |
+---------------------------------+----------+--+-----------+--+-----------+--+
| Deferred tax assets | | | 5,548 | | 3,568 | |
+---------------------------------+----------+--+-----------+--+-----------+--+
| Trade and other receivables | | | 2,418 | | 2,589 | |
+---------------------------------+----------+--+-----------+--+-----------+--+
| Retirement benefit asset | | | - | | 1,010 | |
+---------------------------------+----------+--+-----------+--+-----------+--+
| Total non-current assets | | | 26,365 | | 32,761 | |
+---------------------------------+----------+--+-----------+--+-----------+--+
| Inventories | | | 780,808 | | 869,355 | |
+---------------------------------+----------+--+-----------+--+-----------+--+
| Trade and other receivables | | | 37,947 | | 52,725 | |
+---------------------------------+----------+--+-----------+--+-----------+--+
| Cash | | | 11,634 | | 346 | |
+---------------------------------+----------+--+-----------+--+-----------+--+
| Current tax assets | | | 23,550 | | - | |
+---------------------------------+----------+--+-----------+--+-----------+--+
| Total current assets | | | 853,939 | | 922,426 | |
+---------------------------------+----------+--+-----------+--+-----------+--+
| Total assets | | | 880,304 | | 955,187 | |
+---------------------------------+----------+--+-----------+--+-----------+--+
| Equity | | | | | | |
+---------------------------------+----------+--+-----------+--+-----------+--+
| Issued capital | | | 60,497 | | 60,415 | |
+---------------------------------+----------+--+-----------+--+-----------+--+
| Share premium | | | 157,127 | | 156,734 | |
+---------------------------------+----------+--+-----------+--+-----------+--+
| Retained earnings | | | 414,654 | | 506,594 | |
+---------------------------------+----------+--+-----------+--+-----------+--+
| Total equity attributable to | | | 632,278 | | 723,743 | |
| equity holders of the parent | | | | | | |
+---------------------------------+----------+--+-----------+--+-----------+--+
| | | | | | | |
+---------------------------------+----------+--+-----------+--+-----------+--+
| Liabilities | | | | | | |
+---------------------------------+----------+--+-----------+--+-----------+--+
| Bank loans | | | 111,730 | | 25,000 | |
+---------------------------------+----------+--+-----------+--+-----------+--+
| Trade and other payables | | | 24,907 | | 28,816 | |
+---------------------------------+----------+--+-----------+--+-----------+--+
| Retirement benefit obligations | | | 6,790 | | - | |
+---------------------------------+----------+--+-----------+--+-----------+--+
| Provisions | | | 1,623 | | 1,463 | |
+---------------------------------+----------+--+-----------+--+-----------+--+
| Total non-current liabilities | | | 145,050 | | 55,279 | |
+---------------------------------+----------+--+-----------+--+-----------+--+
| Bank overdraft | | | - | | 3,588 | |
+---------------------------------+----------+--+-----------+--+-----------+--+
| Bank loans | | | - | | 16,000 | |
+---------------------------------+----------+--+-----------+--+-----------+--+
| Trade and other payables | | | 101,964 | | 142,291 | |
+---------------------------------+----------+--+-----------+--+-----------+--+
| Provisions | | | 1,012 | | 500 | |
+---------------------------------+----------+--+-----------+--+-----------+--+
| Current tax liabilities | | | - | | 13,786 | |
+---------------------------------+----------+--+-----------+--+-----------+--+
| Total current liabilities | | | 102,976 | | 176,165 | |
+---------------------------------+----------+--+-----------+--+-----------+--+
| Total liabilities | | | 248,026 | | 231,444 | |
+---------------------------------+----------+--+-----------+--+-----------+--+
| | | | | | | |
+---------------------------------+----------+--+-----------+--+-----------+--+
| Total equity and liabilities | | | 880,304 | | 955,187 | |
+---------------------------------+----------+--+-----------+--+-----------+--+
These accounts were approved by the board of Directors on 6 March 2009 and were
signed on its behalf: D Ritchie and N Cooper, Directors.
Bovis Homes Group PLC
Group statement of cash flows
+----------------------------------------+---+--+----------+--+----------+--+
| For the year ended 31 December 2008 | | | 2008 | | 2007 | |
+----------------------------------------+---+--+----------+--+----------+--+
| | | | GBP000 | | GBP000 | |
+----------------------------------------+---+--+----------+--+----------+--+
| | | | | | Restated | |
+----------------------------------------+---+--+----------+--+----------+--+
| Cash flows from operating activities | | | | | | |
+----------------------------------------+---+--+----------+--+----------+--+
| (Loss) / profit for the year | | | (58,995 | )| 86,859 | |
+----------------------------------------+---+--+----------+--+----------+--+
| Depreciation | | | 1,168 | | 1,421 | |
+----------------------------------------+---+--+----------+--+----------+--+
| Impairment of goodwill | | | 10,036 | | - | |
+----------------------------------------+---+--+----------+--+----------+--+
| Impairment of assets | | | 2,241 | | - | |
+----------------------------------------+---+--+----------+--+----------+--+
| Financial income | | | (1,389 | )| (6,158 | )|
+----------------------------------------+---+--+----------+--+----------+--+
| Financial expense | | | 8,292 | | 6,962 | |
+----------------------------------------+---+--+----------+--+----------+--+
| Profit on sale of property, plant and | | | (146 | )| (43 | )|
| equipment | | | | | | |
+----------------------------------------+---+--+----------+--+----------+--+
| Equity-settled share-based payment | | | (22 | )| 133 | |
| (credit) / expense | | | | | | |
+----------------------------------------+---+--+----------+--+----------+--+
| Income tax (credit) / expense | | | (19,739 | )| 36,727 | |
+----------------------------------------+---+--+----------+--+----------+--+
| Write-down of inventories | | | 75,202 | | - | |
+----------------------------------------+---+--+----------+--+----------+--+
| Other non-cash items | | | - | | 996 | |
+----------------------------------------+---+--+----------+--+----------+--+
| Operating profit before changes in | | | 16,648 | | 126,897 | |
| working capital and provisions | | | | | | |
+----------------------------------------+---+--+----------+--+----------+--+
| | | | | | | |
+----------------------------------------+---+--+----------+--+----------+--+
| Decrease / (increase) in trade and | | | 8,924 | | (29,821 | )|
| other receivables | | | | | | |
+----------------------------------------+---+--+----------+--+----------+--+
| Decrease / (increase) in inventories | | | 13,345 | | (42,195 | )|
+----------------------------------------+---+--+----------+--+----------+--+
| Decrease in trade and other payables | | | (43,444 | )| (44,149 | )|
+----------------------------------------+---+--+----------+--+----------+--+
| Increase / (decrease) in provisions | | | 702 | | (1,671 | )|
| and employee benefits | | | | | | |
+----------------------------------------+---+--+----------+--+----------+--+
| Cash generated from operations | | | (3,825 | )| 9,061 | |
+----------------------------------------+---+--+----------+--+----------+--+
| | | | | | | |
+----------------------------------------+---+--+----------+--+----------+--+
| Interest paid | | | (8,769 | )| (4,812 | )|
+----------------------------------------+---+--+----------+--+----------+--+
| Income taxes paid | | | (16,924 | )| (39,052 | )|
+----------------------------------------+---+--+----------+--+----------+--+
| Net cash from operating activities | | | (29,518 | )| (34,803 | )|
+----------------------------------------+---+--+----------+--+----------+--+
| | | | | | | |
+----------------------------------------+---+--+----------+--+----------+--+
| Cash flows from investing activities | | | | | | |
+----------------------------------------+---+--+----------+--+----------+--+
| Interest received | | | 187 | | 5,420 | |
+----------------------------------------+---+--+----------+--+----------+--+
| Acquisition of property, plant and | | | (143 | )| (879 | )|
| equipment | | | | | | |
+----------------------------------------+---+--+----------+--+----------+--+
| Proceeds from sale of plant and | | | 214 | | 106 | |
| equipment | | | | | | |
+----------------------------------------+---+--+----------+--+----------+--+
| Acquisition of subsidiary net of cash | | | - | | (73,304 | )|
| acquired | | | | | | |
+----------------------------------------+---+--+----------+--+----------+--+
| Net cash from investing activities | | | 258 | | (68,657 | )|
+----------------------------------------+---+--+----------+--+----------+--+
| | | | | | | |
+----------------------------------------+---+--+----------+--+----------+--+
| Cash flows from financing activities | | | | | | |
+----------------------------------------+---+--+----------+--+----------+--+
| Dividends paid | | | (27,049 | )| (44,990 | )|
+----------------------------------------+---+--+----------+--+----------+--+
| Proceeds from the issue of share | | | 475 | | 1,367 | |
| capital | | | | | | |
+----------------------------------------+---+--+----------+--+----------+--+
| Drawdown of borrowings | | | 79,000 | | 1,000 | |
+----------------------------------------+---+--+----------+--+----------+--+
| Costs associated with refinancing | | | (8,290 | )| - | |
+----------------------------------------+---+--+----------+--+----------+--+
| Net cash from financing activities | | | 44,136 | | (42,623 | )|
+----------------------------------------+---+--+----------+--+----------+--+
| | | | | | | |
+----------------------------------------+---+--+----------+--+----------+--+
| Net increase / (decrease) in cash and | | | 14,876 | | (146,083 | )|
| cash equivalents | | | | | | |
+----------------------------------------+---+--+----------+--+----------+--+
| Cash and cash equivalents at 1 January | | | (3,242 | )| 142,841 | |
+----------------------------------------+---+--+----------+--+----------+--+
| Cash and cash equivalents at 31 | | | 11,634 | | (3,242 | )|
| December | | | | | | |
+----------------------------------------+---+--+----------+--+----------+--+
Bovis Homes Group PLC
Group statement of recognised income and expense
+--------------------------------------+----------+--+----------+--+----------+--+
| For the year ended 31 December 2008 | | | 2008 | | 2007 | |
+--------------------------------------+----------+--+----------+--+----------+--+
| | | | GBP000 | | GBP000 | |
+--------------------------------------+----------+--+----------+--+----------+--+
| | | | | | | |
+--------------------------------------+----------+--+----------+--+----------+--+
| Effective portion of changes in fair value of | - | | 160 | |
| interest rate cash flow hedges | | | | |
+----------------------------------------------------+----------+--+----------+--+
| Deferred tax on changes in fair value of interest | - | | (48 | )|
| rate cash flow hedges | | | | |
+----------------------------------------------------+----------+--+----------+--+
| Actuarial (loss) / gain on defined benefits | (8,820 | )| 3,750 | |
| pension scheme | | | | |
+----------------------------------------------------+----------+--+----------+--+
| Deferred tax on actuarial movements on defined | 2,470 | | (1,325 | )|
| benefits pension scheme | | | | |
+----------------------------------------------------+----------+--+----------+--+
| Current tax on share-based payments recognised | 498 | | - | |
| directly in equity | | | | |
+----------------------------------------------------+----------+--+----------+--+
| Deferred tax on other employee benefits | (22 | )| (790 | )|
+----------------------------------------------------+----------+--+----------+--+
| Net (expense) / income recognised directly in | (5,874 | )| 1,747 | |
| equity | | | | |
+----------------------------------------------------+----------+--+----------+--+
| (Loss) / profit for the period | (58,995 | )| 86,859 | |
+----------------------------------------------------+----------+--+----------+--+
| Total recognised income and expense for the period | (64,869 | )| 88,606 | |
| attributable to equity holders of the parent | | | | |
+--------------------------------------+----------+--+----------+--+----------+--+
Notes to the financial statements
Bovis Homes Group PLC (the "Company") is a company domiciled in the United
Kingdom. The consolidated financial statements of the Company for the year ended
31 December 2008 comprise the Company and its subsidiaries (together referred to
as the "Group") and the Group's interest in associates.
The financial statements were authorised for issue by the directors on 6 March
2009. The accounts were audited by KPMG Audit Plc.
The financial information included within this statement does not constitute the
Company's statutory accounts for the year ended 31 December 2007 or 2008. The
information contained in this statement has been extracted from the statutory
accounts of Bovis Homes Group PLC for the year ended 31 December 2008, 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.
1. Statement of compliance
The consolidated financial statements of the Company and the Group have been
prepared in accordance with International Financial Reporting Standards as
adopted by the EU (adopted IFRS) and its interpretations as adopted by the
International Accounting Standards Board (IASB). On publishing the Company
financial statements in the Group's full Report and Accounts together with the
Group financial statements, the Company is taking advantage of the exemption in
s230 of the Companies Act 1985 not to present its individual income statement
and related notes that form a part of these approved financial statements.
2. Basis of preparation
The financial statements are prepared on the historical cost basis except for
derivative financial instruments, available for sale assets and certain items of
inventory which are stated at their fair value.
The preparation of financial statements in conformity with adopted IFRSs
requires management to make judgements, estimates and assumptions that affect
the application of policies and reported amounts of assets and liabilities,
income and expenses. The estimates and associated assumptions are based on
historical experience and various other factors that are believed to be
reasonable under the circumstances, the results of which form the basis of
making the judgements about carrying values of assets and liabilities that are
not readily apparent from other sources. Actual results may differ from these
estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis.
Revisions to accounting estimates are recognised in the period in which the
estimate is revised if the revision affects only that period, or in the period
of the revision and future periods if the revision affects both current and
future periods.
Judgements made by management in the application of adopted IFRSs that have
significant effect on the financial statements and estimates with a significant
risk of material adjustment in the next year are discussed in note 31 of the
full Annual Report and Accounts, available from the Group's website.
The accounting policies set out below have been applied consistently to all
periods presented in these consolidated financial statements. The accounting
policies have been applied consistently to the Company and the Group where
relevant.
3. Basis of consolidation
The consolidated financial statements incorporate the financial statements of
the Company and entities controlled by the Company (its subsidiaries) made up to
31 December. Control is achieved where the Company has the power to govern the
financial and operating policies of an entity so as to obtain benefits from its
activities. The existence and effect of potential voting rights that are
currently exercisable or convertible are considered when assessing whether the
Group controls another entity. The financial statements of subsidiaries are
included in the consolidated financial statements from the date that control
commences until the date that control ceases.
Associates are those entities in which the Group has significant influence, but
not control, over the financial and operating policies. The consolidated
financial statements include the Group's share of the total recognised gains and
losses of associates on an equity accounted basis, from the date that
significant influence commences until the date that significant influence
ceases.
4. Accounting policies
Business combinations
The purchase method of accounting is used to account for the acquisition of
subsidiary undertakings by the Group. The cost of or consideration for an
acquisition is measured as the fair value of the assets given and liabilities
taken on or assumed in return for the acquisition plus costs directly
attributable to the acquisition. On acquisition, identifiable assets and
liabilities are measured initially at fair value, with any excess of
consideration being recognised as goodwill. Accounting policies of subsidiary
undertakings have been changed where necessary to ensure consistency with those
adopted by the Group.
Revenue
Revenue is recognised in the income statement when the significant risks and
rewards of ownership have been transferred to the purchaser. Revenue comprises
the fair value of the consideration received or receivable, net of value-added
tax, rebates and discounts. Revenue in respect of the sale of residential
properties and land is recognised at the fair value of the consideration
received or receivable on legal completion of the sale transaction. Revenue does
not include the value of the onward legal completion of properties accepted in
part exchange against a new property. The net gain or loss arising from the
legal completion of these part exchange properties is recognised in cost of
sales.
Rental income is recognised in the income statement on a straight-line basis
over the term of the lease. Lease incentives granted are recognised as an
integral part of the total rental income.
Operating leases
Rentals payable under operating leases are charged to income on a straight-line
basis over the term of the relevant lease. Lease incentives received are
recognised as an integral part of the total lease expenditure.
Net financing costs
Net finance costs comprise:
* interest payable on borrowings, including any premiums payable on settlement or
redemption and direct issue costs, accounted for on an accrual basis to the
income statement using the effective interest method;
* interest receivable on funds invested accounted for on an accrual basis to the
income statement using the effective interest method;
* dividend income recognised on the date the right to receive payments is
established;
* imputed interest on available-for-sale financial assets and on deferred terms
land payables;
* pension finance costs or benefits being the net of interest costs on liabilities
and expected return on assets linked to the Defined Benefit Scheme; and
* gains and losses on hedging instruments that are recognised in the income
statement.
Finance costs are included in the measurement of borrowings at their amortised
cost to the extent that they are not settled in the period in which they arise.
Taxation
Income tax comprises the sum of the tax currently payable or receivable and
deferred tax. Income tax is recognised in the income statement except to the
extent that it relates to items recognised directly in equity, in which case it
is recognised in equity.
The tax currently payable or receivable is based on taxable profit or loss for
the year and any adjustment to tax payable or receivable in respect of previous
years. Taxable profit or loss differs from net profit or loss as reported in the
income statement because it excludes items of income or expense that are taxable
or deductible in other years and it further excludes items that are never
taxable or deductible. The Group's liability or asset for current tax is
calculated using tax rates that have been enacted or substantively enacted by
the balance sheet date.
Deferred tax is the tax expected to be payable or recoverable on differences
between the carrying amounts of assets and liabilities in the financial
statements and the corresponding tax bases used in the computation of taxable
profit, and is accounted for using the balance sheet liability method. Deferred
tax liabilities are generally recognised for all taxable temporary differences
and deferred tax assets are recognised to the extent that it is probable that
taxable profits will be available against which deductible temporary differences
can be utilised. Such assets and liabilities are not recognised if the temporary
difference arises from non-tax deductible goodwill, from the initial recognition
of assets and liabilities in a transaction that affects neither the tax profit
nor the accounting profit, and from differences relating to investments in
subsidiaries to the extent that they will probably not reverse in the
foreseeable future.
The carrying amount of deferred tax assets is reviewed at each balance sheet
date and reduced to the extent that it is no longer probable that sufficient
taxable profits will be available to allow all or part of the asset to be
recovered. Deferred tax is calculated at the tax rates that are expected to
apply in the period when the liability is settled or the asset is realised.
Deferred tax is charged or credited in the income statement, except when it
relates to items charged or credited directly to reserves, in which case the
deferred tax is also dealt with in reserves.
Derivative financial instruments and hedge accounting
The Group's activities expose it primarily to the financial risks of changes in
interest rates. The Group uses interest rate swap contracts where deemed
appropriate to hedge these exposures. The Group does not use derivative
financial instruments for speculative purposes. The use of financial derivatives
is governed by the Group's policies approved by the Board of directors, which
provide written principles on the use of financial derivatives.
Derivative financial instruments are recognised at fair value. The fair value of
interest rate swaps is the estimated amount that the Group would receive or pay
to terminate the swap at the balance sheet date, taking into account interest
rates and the current creditworthiness of the swap counterparties.
Where the derivative instrument, typically an interest rate swap, is deemed an
effective hedge over the exposure being hedged, the derivative instrument is
treated as a cash flow hedge and hedge accounting applied. Under a cash flow
hedge, gains and losses on the effective portion of the change in the fair value
of the derivative instrument are recognised directly in equity.
Changes in the fair value of derivative financial instruments that do not
qualify for hedge accounting and any ineffectiveness in the hedge relationship
are recognised in the income statement as they arise.
Hedge accounting is discontinued when the hedging instrument expires or is sold,
terminated, or exercised, or no longer qualifies for hedge accounting. At that
time, any cumulative gain or loss on the hedging instrument recognised in
reserves is retained in reserves until the forecasted transaction occurs. If a
hedged transaction is no longer expected to occur, the net cumulative gain or
loss recognised in reserves is transferred to net profit or loss for the period.
Goodwill
Where the fair value of consideration paid for an acquisition exceeds the fair
value of the net assets acquired, the excess is recognised as goodwill arising
on consolidation and is capitalised as an asset. Once capitalised, this asset is
reviewed for impairment on an annual basis with any impairment arising requiring
immediate recognition in the income statement.
For the purpose of impairment testing, goodwill is allocated to each of the
cash-generating units of the Group at acquisition. Cash-generating units to
which goodwill has been allocated are tested for impairment at least annually.
If the recoverable amount of the cash-generating unit is less than the carrying
amount of the unit, the impairment loss is allocated first to reduce the
carrying amount of any goodwill allocated to the unit and then, where
appropriate, to the other assets of the unit pro-rata on the basis of the
carrying amount of each asset in the unit. Any impairment is recognised
immediately in the income statement and is not subsequently reversed.
Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation
and impairment losses. Certain property that had been revalued to fair value on
or prior to 1 January 2004, the date of transition to adopted IFRS, are measured
on the basis of deemed cost, this being the revalued amount at the date of that
revaluation less any subsequent accumulated depreciation and subsequent
accumulated impairment losses. Regular reviews of the carrying values of
property are completed to assess any impairment in value. When impairment is
identified, the asset's recoverable amount is assessed and any shortfall is
written off through the income statement.
Depreciation is charged so as to write off the cost less residual value (which
is reassessed annually) of assets over their estimated useful lives.
Depreciation is charged on property in respect of the value of the building.
Land is not depreciated. The basis of depreciation for each class of asset is as
follows:
+---+----------------------+--------------------------------------------------+
| - | Buildings | straight line over 50 years |
+---+----------------------+--------------------------------------------------+
| - | Plant and machinery | 33.3% reducing balance |
+---+----------------------+--------------------------------------------------+
| - | Computer equipment | straight line over 3 years |
+---+----------------------+--------------------------------------------------+
| - | Office equipment | 25% reducing balance |
+---+----------------------+--------------------------------------------------+
The gain or loss arising on the disposal or retirement of an asset is determined
as the difference between the sales proceeds and the carrying amount of the
asset and is recognised in the income statement.
Fixed asset investments
Investments in subsidiaries are carried at cost less impairment. Following the
issue of IFRIC11 in 2007, the Parent Company accounts for the share-based
payments granted to subsidiary employees as an increase in the cost of its
investment in subsidiaries.
Trade receivables
Trade receivables do not carry any interest and are stated at their nominal
value as reduced by appropriate allowances for estimated irrecoverable amounts.
Inventories
Inventories are stated at the lower of cost and net realisable value. Cost
comprises direct materials and, where applicable, direct labour costs and those
overheads, not including any general administrative overheads, that have been
incurred in bringing the inventories to their present location and condition.
Net realisable value represents the estimated net selling price less estimated
total costs of completion of the finished goods.
Land held for development, including land in the course of development until
legal completion of the sale of the asset, is initially recorded at cost. Where,
through deferred purchase credit terms, cost differs from the nominal amount
which will actually be paid in settling the deferred purchase terms liability,
no adjustment is made to the cost of the land, the difference being charged as a
finance cost.
Options purchased in respect of land are capitalised initially at cost. Regular
reviews are completed for impairment in the value of these options, and
provisions made accordingly to reflect loss of value. The impairment reviews
consider the period elapsed since the date of purchase of the option given that
the option contract has not been exercised at the review date. Further, the
impairment reviews consider the remaining life of the option, taking account of
any concerns over whether the remaining time available will allow successful
exercise of the option. The carrying cost of the option at the date of exercise
is included within the cost of land purchased as a result of the option
exercise.
Investments in land without the benefit of planning consent, either through
purchase of freehold land or non refundable deposits paid on land purchase
contracts subject to residential planning consent, are capitalised initially at
cost. Regular reviews are completed for impairment in the value of these
investments, and provision made to reflect any irrecoverable element. The
impairment reviews consider the existing use value of the land and assesses the
likelihood of achieving residential planning consent and the value thereof.
Ground rents are held at an estimate of cost based on a multiple of ground rent
income, with a corresponding credit created against cost of sales, in the year
in which the ground rent first becomes payable by the leasehold purchaser.
Cash and cash equivalents
Cash and cash equivalents comprises cash balances and call deposits. Bank
overdrafts that are repayable on demand and form an integral part of the Group's
cash management are included as a component of cash and cash equivalents for the
purpose of the statement of cash flows.
Bank borrowings
Interest-bearing bank loans and overdrafts are initially recorded at fair value,
net of direct issue costs, and subsequently at amortised cost. Finance charges
are accounted for on an accrual basis to the income statement using the
effective interest method and are added to the carrying amount of the instrument
to the extent that they are not settled in the period in which they arise.
Trade payables
Trade payables on normal terms are not interest bearing and are stated at their
nominal value.
Trade payables on extended terms, particularly in respect of land, are recorded
at their fair value at the date of acquisition of the asset to which they
relate. The discount to nominal value which will be paid in settling the
deferred purchase terms liability is amortised over the period of the credit
term and charged to finance costs using the effective interest rate method.
Available for sale financial assets
Gains and losses arising from changes in fair value are recognised directly in
equity in retained earnings, with the exceptions of impairment losses 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.
Provisions
A provision is recognised in the balance sheet when the Group has a present
legal or constructive obligation as a result of a past event, and it is probable
that an outflow of economic benefits will be required to settle the obligation.
If the effect is material, provisions are determined by discounting the expected
future cash flows at a pre-tax rate that reflects current market assessments of
the time value of money and, where appropriate, the risks specific to the
liability.
Equity instruments
Equity instruments issued by the Company are recorded at the proceeds received,
net of direct issue costs.
Own shares held by ESOP trust
Transactions of the Group-sponsored ESOP trust are included in the Group
financial statements. In particular, the trust's purchases of shares in the
Company are debited directly to equity through an own shares held reserve.
Employee benefits
The Group accounts for pensions and similar benefits under IAS 19 (Revised):
"Employee benefits". In respect of defined benefit schemes, the net obligation
is calculated by estimating the amount of future benefit that employees have
earned in return for their service in the current and prior periods, such
benefits measured at discounted present value, less the fair value of the scheme
assets. The discount rate used to discount the benefits accrued is the yield at
the balance sheet date on AA credit rated bonds that have maturity dates
approximating to the terms of the Group's obligations. The calculation is
performed by a qualified actuary using the projected unit method. The operating
and financing costs of such plans are recognised separately in the income
statement; service costs are spread systematically over the lives of employees
and financing costs are recognised in the periods in which they arise. All
actuarial gains and losses are recognised immediately in the statement of
recognised income and expense.
Payments to defined contribution schemes are charged as an expense as they fall
due.
Share-based payments
The Group has applied the requirements of IFRS2: "Share-based payments". In
accordance with the transitional provisions of IFRS1, IFRS2 has been applied to
all grants of equity instruments after 7 November 2002 that were unvested as of
1 January 2005.
The Group issues equity-settled share-based payments to certain employees in the
form of share options over shares in the Parent Company. Equity-settled
share-based payments are measured at fair value at the date of grant calculated
using an independent option valuation model, taking into account the terms and
conditions upon which the options were granted. The fair value is expensed on a
straight line basis over the vesting period, based on the Group's estimate of
shares that will eventually vest, with a corresponding credit to equity.
Segment reporting
A segment is a distinguishable component of the Group that is engaged either in
providing products and services (business segment), or in providing products and
services within a particular economic environment (geographical segment), which
is subject to risks and rewards that are different from those of other segments.
As the Group's main operation is that of a housebuilder and it operates entirely
within the United Kingdom, there are no separate segments, either business or
geographic, to disclose.
Exceptional items
Items that are both material in size and unusual or infrequent in nature are
presented as exceptional items in the income statement. The Directors are of the
opinion that the separate recording of exceptional items provides helpful
information about the Group's underlying business performance. Examples of
events that, inter alia, may give rise to the classification of items as
exceptional are the restructuring of existing and newly-acquired businesses,
gains or losses on the disposal of businesses or individual assets and asset
impairments, including currently developable land, work in progress and
goodwill.
Restructuring costs
Restructuring costs are recognised in the income statement when the Group has a
detailed plan that has been communicated to the affected parties. A liability is
accrued for unpaid restructuring costs.
Impact of standards and interpretations in issue but not yet effective
At the date of authorisation of these financial statements there are a number of
standards, amendments and interpretations that have been published. All of these
have been endorsed by the EU with the exception of the revisions to IAS27, IAS39
and IFRS3, IFRIC12, IFRIC15 and IFRIC16, and are therefore mandatory for the
Group's accounting periods beginning on or after 1 January 2009. The Group has
not early-adopted any standard, amendment or interpretation.
The standards, amendments and interpretations that are expected to impact upon
the Group are:
* IFRS8 'Operating Segments'. IFRS8 amends the current segmental reporting
requirements of IAS14 and requires a 'management approach' to be adopted so that
segment information is presented on the same basis as that used for internal
reporting purposes. This standard will apply to the Group from the accounting
period commencing 1 January 2009 and is not expected to impact upon the Group's
current segmental reporting approach.
* Amendment to IAS23 'Borrowing Costs'. This amendment requires an entity to
capitalise borrowing costs directly attributable to the acquisition,
construction or production of a qualifying asset as part of the cost of the
asset. The option of immediately expensing these borrowing costs is removed.
This amendment will apply to the Group from the accounting period commencing 1
January 2009 and the Group is assessing whether the amendment is applicable to
the Group, and if so, its likely effect.
* IFRIC14 - IAS19 - 'The Limit on a Defined Benefit Asset, Minimum Funding
Requirements and their interaction'. IFRIC14 states when refunds or reductions
in future contributions can be treated as available under IAS19 and how a
minimum funding requirement affects future contributions or may give rise to a
liability. This interpretation applies to the Group from the accounting period
commencing on 1 January 2009, however the Group anticipates that no additional
liabilities will be recognised upon the adoption of IFRIC14.
* IFRS2 'Share-based Payments (amendment)'. Non-vesting conditions are to be taken
into account in the estimate of the fair value of the equity instruments;
vesting conditions that are not market conditions are not taken into account.
This amendment will apply to the Group from 1 January 2009; its impact is
currently being assessed.
* Revision of IAS1 'presentation of financial statements'. This revision to IAS1
is applicable from 1 January 2009, and is expected to affect the presentation
and classification of certain items within the Group's financial statements.
* Revision of IFRS3 'Business Combinations'. Following this revision, transaction
costs must be expensed, rather than included as costs of acquisition, and
contingent consideration will require to be fair valued. In addition, there will
be a choice of two goodwill measurement methods where less than 100% of the
entity is acquired. This revision will apply to the Group from 1 January 2010,
and although it will have no impact on implementation, it will have an impact on
any future acquisitions.
* An amendment to IAS39 'Eligible hedged items'. The amendment makes two
significant changes. It prohibits designating inflation as a hedgeable component
of a fixed rate debt. It also prohibits including time value in the one-sided
hedged risk when designating options as hedges. The amendment will apply to the
Group from 1 January 2010, and its impact is expected to be minimal until the
Group enters into any cash flow hedges.
* Part 1 of the improvements to IFRS project has a number of smaller amendments to
existing IAS and IFRS, which have implementation dates at various points during
2009. The impact of these amendments is currently being assessed.
* IFRIC15 'Agreements for the construction of real estate'. IFRIC15 provides
guidance on whether the construction of real estate should be accounted for
under IAS11 or IAS18. The Group already accounts for the construction of real
estate in accordance with IFRIC15 and accordingly this interpretation, which is
effective from 1 January 2009, will have no impact upon the Group.
The adoption of the following standards, amendments and interpretations are not
expected to have any material impact on the financial statements of the Group:
* lFRIC13 'Customer Loyalty Programmes'. IFRIC13 requires the credits given as
part of customer loyalty schemes to be recognised at their fair value as a
separate component of revenue. The revenue related to these schemes should only
be recognised when the entity's obligations are fulfilled. This interpretation
applies to the Group from 1 January 2009.
* IFRIC16 'Hedges of a net investment in a foreign operation'. IFRIC 16 guides an
investing company on the designation of, and accounting for, hedges in foreign
operations. This interpretation will apply to the Group from 1 January 2009.
* Amendments to IAS32 'Financial Instruments: Presentation' and IAS1 'Presentation
of financial statements for certain puttable financial instruments and
obligations arising on liquidation' require some financial instruments that meet
the definition of a financial liability to be classified as equity, where
certain strict criteria are met. These amendments will apply to the Group from 1
January 2009.
* IAS27 (revised) 'Consolidated and separate financial statements'. The amendments
relate, primarily, to accounting for non-controlling interests and the loss of
control of a subsidiary, and will apply to the Group from 1 January 2010.
5. Prior year restatement
In 2007, the cashflow statement movement in trade and other payables was
understated by GBP4,630,000 and the movement in provisions and employee benefits
was overstated by an equal and opposite amount. In the 2008 Report and Accounts,
in the prior year cashflow statement comparatives, the movement in trade and
other payables is now GBP44,149,000 (previously GBP39,519,000) and the movement
in provisions and other employee benefits is now GBP1,671,000 (previously
GBP6,301,000).
Finalisation of the fair valuation exercise arising on acquisition of Elite
Homes Group Ltd in 2007 has now taken place. This has had the effect of
increasing goodwill arising on acquisition as at 31 December 2007 from the
previously reported GBP9,176,000 to GBP10,036,000, reducing inventories to
GBP869,355,000 (previously reported GBP870,550,000) and increasing deferred tax
to GBP3,568,000 (previously GBP3,233,000).
6. Exceptional items
Write-down of inventories
The Group has reviewed the carrying costs of its inventory items, comparing the
carrying costs of the asset against estimates of net realisable value. Net
realisable value has been arrived at using the Board's estimates of achievable
selling prices taking into account current market conditions, and after
deduction of an appropriate amount for selling costs. This has given rise to a
land write-down totalling GBP69.9 million and a write-down of GBP5.3 million on
unsold part-exchange properties: a provision of GBP75.2 million in total.
Impairment of goodwill
At 31 December 2008 the Group conducted an impairment review of its goodwill.
This resulted in a GBP10.0 million write-down, reflecting the write-off of all
goodwill held at the balance sheet date.
Restructuring costs
During the year ended 31 December 2008 the Group incurred GBP5.7 million (2007:
GBPnil) of costs in relation to reorganising and restructuring the Group. Of
this total, GBP4.6 million related to staff redundancies.
Other exceptional items
The Group has reviewed the carrying value of its fixed assets, and has made a
GBP1.0 million provision to reflect the impairment to carrying values of its
freehold offices following a fall in commercial property values during 2008. The
Group has also taken an impairment charge to income relating to the impairment
of its available-for-sale financial assets, totalling GBP1.2 million.
7. Earnings or Loss per share
Basic earnings per ordinary share before exceptional items for the year ended 31
December 2008 is calculated on profit after tax of GBP11,075,000 (year ended 31
December 2007 profit: GBP86,859,000) over the weighted average of 120,268,986
(year ended 31 December 2007: 119,984,811) ordinary shares in issue during the
period.
Basic loss per ordinary share on exceptional items for the year ended 31
December 2008 is calculated on an exceptional loss after tax of GBP70,070,000
for 2008 (2007: GBPnil) over the weighted average of 120,268,986 (year ended 31
December 2007: 119,984,811) ordinary shares in issue during the period.
Basic loss per ordinary share for the year ended 31 December 2008 is calculated
on loss after tax of GBP58,995,000 (year ended 31 December 2007 profit:
GBP86,859,000) over the weighted average of 120,268,986 (year ended 31 December
2007: 119,984,811) ordinary shares in issue during the period.
Diluted earnings per ordinary share before exceptional items for the year ended
31 December 2008 is calculated on profit after tax of GBP11,075,000 (year ended
31 December profit: GBP86,859,000) expressed over the diluted weighted average
of 120,314,451 (year ended 31 December 2007: 120,244,911) ordinary shares
potentially in issue during the period. Diluted loss per ordinary share on
exceptional items for the year ended 31 December 2008 is calculated on an
exceptional loss after tax of GBP70,070,000 for 2008 (2007: GBPnil) and diluted
loss per ordinary share is calculated on loss after tax of GBP58,995,000 (year
ended 31 December 2007 profit: GBP86,859,000) both expressed over the weighted
average of 120,268,986 ordinary shares in issue during the period. The average
number of shares is diluted in reference to the average number of potential
ordinary shares held under option during the period. 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 period. Only share options which have
met their cumulative performance criteria have been included in the dilution
calculation. A loss per share cannot be further reduced through dilution.
8. Dividends
The following dividends were paid by the Group.
+---------------------------------------------+----+-----+----------+--+-----------+
| | | | 2008 | | 2007 |
+---------------------------------------------+----+-----+----------+--+-----------+
| | | | GBP000 | | GBP000 |
+---------------------------------------------+----+-----+----------+--+-----------+
| | | | | | |
+---------------------------------------------+----+-----+----------+--+-----------+
| Prior year final dividend per share of | | | 21,031 | | 23,976 |
| 17.5p (2007: 20.0p) | | | | | |
+---------------------------------------------+----+-----+----------+--+-----------+
| Current year interim dividend per share of | | | 6,018 | | 21,014 |
| 5.0p (2007: 17.5p) | | | | | |
+---------------------------------------------+----+-----+----------+--+-----------+
| Dividend cost | | | 27,049 | | 44,990 |
+---------------------------------------------+----+-----+----------+--+-----------+
The Board has decided not to propose a final dividend in respect of 2008.
9. Income taxes
Income tax is the expected tax payable or receivable on the taxable income or
loss for the year, calculated using a corporation tax rate of 28.5% applied to
the pre-tax income or loss, adjusted to take account of deferred taxation
movements and any adjustments to tax payable for previous years. Tax receivable
for current and prior years is classified as a current asset.
10. Reconciliation of net cash flow to net debt
+----------------------------------------+---+--+-----------------+-+-----------+-+
| | | | 2008 | | 2007 | |
+----------------------------------------+---+--+-----------------+-+-----------+-+
| | | | GBP000 | | GBP000 | |
+----------------------------------------+---+--+-----------------+-+-----------+-+
| | | | | | | |
+----------------------------------------+---+--+-----------------+-+-----------+-+
| Net increase / (decrease) in net cash | | | 14,876 | | (146,083 | )|
| and cash equivalents | | | | | | |
+----------------------------------------+---+--+-----------------+-+-----------+-+
| Drawdown of borrowings after issue | | | (70,730 | )| (1,000 | )|
| costs | | | | | | |
+----------------------------------------+---+--+-----------------+-+-----------+-+
| Fair value adjustments to interest | | | - | | 160 | |
| rate swaps | | | | | | |
+----------------------------------------+---+--+-----------------+-+-----------+-+
| Net (debt)/cash at start of period | | | (44,242 | )| 102,681 | |
+----------------------------------------+---+--+-----------------+-+-----------+-+
| Net debt at end of period | | | (100,096 | )| (44,242 | )|
+----------------------------------------+---+--+-----------------+-+-----------+-+
| | | | | | | |
+----------------------------------------+---+--+-----------------+-+-----------+-+
| Analysis of net debt: | | | | | | |
+----------------------------------------+---+--+-----------------+-+-----------+-+
| Cash and cash equivalents | | | 11,634 | | (3,242 | )|
+----------------------------------------+---+--+-----------------+-+-----------+-+
| Unsecured bank loan | | | (120,000 | )| (41,000 | )|
+----------------------------------------+---+--+-----------------+-+-----------+-+
| Issue Costs | | | 8,270 | | - | |
+----------------------------------------+---+--+-----------------+-+-----------+-+
| Net debt | | | (100,096 | )| (44,242 | )|
+----------------------------------------+---+--+-----------------+-+-----------+-+
11. Related party transactions
Transactions between fellow subsidiaries, which are related parties, have been
eliminated on consolidation, as have transactions between the Company and its
subsidiaries during this period.
Transactions between the Group and key management personnel in the year ending
31 December 2008 were limited to those relating to remuneration, which are
disclosed in the Report on directors' remuneration which can be found in the
full Report and Accounts available on the Group's website.
Mr Malcolm Harris, a Group Director, is a non-executive Director of the National
House Building Council (NHBC), and the Home Builders Federation (HBF). The Group
trades in the normal course of business, on an arms-length basis, with the NHBC
for provision of a number of building-related services, most materially for
provision of warranties on new homes sold and for performance bonding on
infrastructure obligations, The Group pays subscription fees and fees for
research as required to the HBF.
Total net payments were as follows:
+---------------------------------------------+----+-----+----------+--+-----------+
| | | | 2008 | | 2007 |
+---------------------------------------------+----+-----+----------+--+-----------+
| | | | GBP000 | | GBP000 |
+---------------------------------------------+----+-----+----------+--+-----------+
| NHBC | | | 1,258 | | 2,346 |
+---------------------------------------------+----+-----+----------+--+-----------+
| HBF | | | 92 | | 119 |
+---------------------------------------------+----+-----+----------+--+-----------+
There have been no related party transactions in the current financial year
which have materially affected the financial performance or position of the
Group, and which have not been disclosed.
12. Capital and reserves
Reconciliation of movement in capital and reserves - Group
+------------------------------+---------+-------------+----------+----------+----------+---------+---------+---------+------------+
| Attributable to equity holders of the parent |
| |
+----------------------------------------------------------------------------------------------------------------------------------+
| For the year ended 31 | Own | Retirement | Other | Other | Total | Issued | Share | Hedge | Total |
| December 2008 | shares | benefit | reserves | retained | retained | capital | premium | reserve | GBP000 |
| | held* | obligations | GBP000 | earnings | earnings | GBP000 | GBP000 | GBP000 | |
| | GBP000 | GBP000 | | GBP000 | GBP000 | | | | |
+------------------------------+---------+-------------+----------+----------+----------+---------+---------+---------+------------+
| Balance at 1 January 2007 | (3,380) | (11,060) | 1,290 | 475,312 | 462,162 | 60,288 | 155,494 | (112) | 677,832 |
+------------------------------+---------+-------------+----------+----------+----------+---------+---------+---------+------------+
| Total recognised income | | | | | | | | | |
+------------------------------+---------+-------------+----------+----------+----------+---------+---------+---------+------------+
| and expense | - | 2,425 | (790) | 86,859 | 88,494 | - | - | 112 | 88,606 |
+------------------------------+---------+-------------+----------+----------+----------+---------+---------+---------+------------+
| Issue of share capital | - | - | - | - | - | 127 | 1,240 | - | 1,367 |
+------------------------------+---------+-------------+----------+----------+----------+---------+---------+---------+------------+
| Own shares disposed | 422 | - | - | (422) | - | - | - | - | - |
+------------------------------+---------+-------------+----------+----------+----------+---------+---------+---------+------------+
| Share-based payments | - | - | - | 928 | 928 | - | - | - | 928 |
+------------------------------+---------+-------------+----------+----------+----------+---------+---------+---------+------------+
| Dividends paid to | - | - | - | (44,990) | (44,990) | - | - | - | (44,990) |
| shareholders | | | | | | | | | |
+------------------------------+---------+-------------+----------+----------+----------+---------+---------+---------+------------+
| Balance at 31 December 2007 | (2,958) | (8,635) | 500 | 517,687 | 506,594 | 60,415 | 156,734 | - | 723,743 |
+------------------------------+---------+-------------+----------+----------+----------+---------+---------+---------+------------+
| | | | | | | | | | |
+------------------------------+---------+-------------+----------+----------+----------+---------+---------+---------+------------+
| Balance at 1 January 2008 | (2,958) | (8,635) | 500 | 517,687 | 506,594 | 60,415 | 156,734 | - | 723,743 |
+------------------------------+---------+-------------+----------+----------+----------+---------+---------+---------+------------+
| | | | | | | | | | |
+------------------------------+---------+-------------+----------+----------+----------+---------+---------+---------+------------+
| Total recognised income and | - | (6,350) | 476 | (58,995) | (64,869) | - | - | - | (64,869) |
| expense | | | | | | | | | |
+------------------------------+---------+-------------+----------+----------+----------+---------+---------+---------+------------+
| Issue of share capital | - | - | - | - | - | 82 | 393 | - | 475 |
+------------------------------+---------+-------------+----------+----------+----------+---------+---------+---------+------------+
| Own shares disposed | 154 | - | - | (154) | - | - | - | - | - |
+------------------------------+---------+-------------+----------+----------+----------+---------+---------+---------+------------+
| Revaluation reserve movement | - | - | (202) | 202 | - | - | - | - | - |
+------------------------------+---------+-------------+----------+----------+----------+---------+---------+---------+------------+
| Share-based payments | - | - | - | (22) | (22) | - | - | - | (22) |
+------------------------------+---------+-------------+----------+----------+----------+---------+---------+---------+------------+
| Dividends paid to | - | - | - | (27,049) | (27,049) | - | - | - | (27,049) |
| shareholders | | | | | | | | | |
+------------------------------+---------+-------------+----------+----------+----------+---------+---------+---------+------------+
| Balance at 31 December 2008 | (2,804) | (14,985) | 774 | 431,669 | 414,654 | 60,497 | 157,127 | - | 632,278 |
+------------------------------+---------+-------------+----------+----------+----------+---------+---------+---------+------------+
*Own shares held totalled 643,176 at 31 December 2008 (2007: 678,571).
This information is provided by RNS
The company news service from the London Stock Exchange
END
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