TIDMBVS
RNS Number : 0972A
Bovis Homes Group PLC
26 March 2012
Bovis Homes Group PLC - Annual Report and Accounts 2011
Annual Report and Accounts 2011, Notice of Annual General
Meeting, Proxy Card
Copies of the above documents have been submitted to the
National Storage Mechanism and will shortly be available for
inspection at www.hemscott.com/nsm.do
The documents are being mailed to shareholders and are available
on the Company's website at
www.bovishomesgroup.co.uk/annualreport2011
Annual Report and Accounts 2011 - publication required by DTR
6.3.5
The Company published its Preliminary Results for the year ended
31 December 2011 on 27 February 2012. 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.bovishomesgroup.co.uk/annualreport2011
Bovis Homes Group PLC - Annual Report and Financial Statements
2011
Chairman's statement
The Group has achieved excellent progress during the past year,
especially in the context of a challenging market environment.
Mortgage availability continued to be heavily constrained,
particularly in respect of first time buyers. Consumer confidence
was adversely affected due to rising unemployment, high inflation
and ongoing political and economic issues within Europe.
The Group's profitability has increased significantly in 2011
with the benefit of increasing revenue, strong cost control and an
increase in sales outlets.
The future profit potential of the Group's land bank continues
to be improved with further high quality land investments in the
year improving both the consented and strategic land holdings. The
drive to improve the efficiency of capital employed was assisted by
land sales and strong control over work in progress.
The consented land investments made by the Group in the last two
years have increased the number of active sales outlets and
positioned the Group to be able to significantly grow returns in
2012 and beyond, based on current market conditions continuing.
Whilst the trading environment is expected to remain challenging
during 2012, the Group welcomes the Government's initiatives for
the housing market and, in particular, is encouraged by the
Government backed mortgage indemnity scheme, which will hopefully
unlock the ability of aspiring homeowners to get onto the housing
ladder.
Financial position
Profit before tax increased by 74% to GBP32.1 million as a
result of a greater number of legal completions at an increased
average sales price and an improved profit margin. With a strong
balance sheet with net cash of GBP50.8 million, the Group has an
excellent platform from which to grow significantly the returns to
our shareholders.
Earnings per share and dividends
Earnings per share for the year have grown by 65% to 17.5p.
Consistent with the intention to increase dividends progressively
as earnings per share increase, the Board will be recommending a
final dividend of 3.5p per share, which, when combined with the
2011 interim dividend of 1.5p, totals 5.0p for the year. The final
dividend will be payable on 25 May 2012 to shareholders on the
register on 30 March 2012. It is the Board's intention to continue
to pursue this progressive dividend approach.
People
On behalf of the Board, I would like to thank all of the
employees of Bovis Homes for their efforts and commitment during
another challenging year. The Board would also like to extend its
thanks to our subcontractors and suppliers.
Corporate governance
Bovis Homes is committed to the highest standards of corporate
governance, including those related to the role and effectiveness
of the Board and compliance with the UK Corporate Governance Code.
Details are set out in the corporate governance section in the
Annual Report.
Corporate responsibility
I am pleased to report good progress against the targets laid
out within our Corporate Social Responsibility report, in
particular the improvements in our health and safety performance, a
critical area where the Group will continue to target improvements.
This progress has once again been recognised by the Group's
inclusion in the independently assessed FTSE4Good Index.
Summary
Bovis Homes has delivered a strong result in 2011 and is
excellently positioned to build returns into 2012 and beyond, with
its quality land assets, robust balance sheet and strong growth
potential.
Malcolm Harris
Chairman
Chief Executive's report
Bovis Homes has made significant progress in 2011, delivering a
strong improvement in profits and earnings against a backdrop of
challenging, but stable, market conditions.
The Group has continued to position itself for significant
improvement in returns through the continued acquisition of high
quality consented sites in order to grow active sales outlets,
leading to higher volumes, increased average sales price and higher
profit margins.
Additionally, the Group has taken steps to improve the
efficiency of capital employed, both through the sale of consented
plots on selected sites and by managing working capital
tightly.
Bovis Homes aims to be a quality housebuilder delivering high
returns generated from a strong land bank, much of it strategically
sourced, and a quality product sold at a premium price. In order to
deliver improved returns, the following clear strategic objectives
for 2011 were set out and have been delivered:
-- Increase operating profits
-- Build future margin potential in the land bank
-- Improve efficiency of capital employed
Additionally the Group is progressing the following ongoing
objectives:
-- Deliver strong health, safety and environmental standards
-- Deliver strong customer satisfaction
Increase operating profits
Operating profit increased in the year by 69% to GBP36.4
million. This resulted from the compound positive effect of an
increased volume of legal completions at a higher average sales
price with an improved profit margin.
Volume growth was driven from the increased number of active
sales outlets in 2011. Having opened 33 sales outlets during the
year, the average number of active sales outlets grew to 73 from 66
in the prior year and the Group finished 2011 with 80 active sales
outlets.
The increase in active sales outlets contributed to the delivery
of 2,045 legal completions during 2011, 8% ahead of the previous
year (2010: 1,901). The Group legally completed 1,624 private homes
(2010: 1,592, including the 215 home joint venture deal), with an
underlying increase, excluding the joint venture deal, of 18%. As a
result of the quantity of new site openings during the year, legal
completions of social homes increased by 36% to 421 (2010: 309),
21% of total volume, compared to 16% in 2010.
In addition to increased volume, the Group's average sales price
also increased. The average sales price of private homes was 5%
higher at GBP180,100 in 2011 (2010: GBP172,300). This uplift was
almost entirely due to the mix of homes as the Group increased the
contribution from family homes in the south of England. Taking
private and social homes together, the overall average sales price
in 2011 was GBP162,400 (2010: GBP160,700).
Gross profit margin (excluding land sales) increased to 20.8% in
2011 from 17.9% in 2010. This resulted from two factors: the full
year benefit of construction cost savings in 2011 and the increased
contribution from legal completions on stronger profit margin sites
acquired post the housing market downturn.
As a result of the compound positive effect of volume growth,
higher average sales price and improved gross profit margin, gross
profit (excluding land sales) increased by 30% to GBP69.5 million.
Combined with land sales profits of GBP2.7 million and with
overheads well controlled, the significant growth in operating
profit to GBP36.4 million (2010: GBP21.6m) was achieved at an
operating margin of 10% (2010: 7.2%).
Build future margin potential in the land bank
During 2011, 2,552 plots were added to the consented land bank
at a cost of GBP134 million (2010: 3,690 consented plots at a cost
of GBP203 million). Approximately 88% of these plots are located in
the south of England, where the housing market continues to show
greater robustness. The plots added have an estimated future
revenue of GBP542 million and an estimated future gross profit
potential of GBP137 million, based on current sales prices and
current build costs, and are expected to deliver an estimated gross
margin of over 25%. Of the plots added to the consented land bank,
circa 1,000 plots were delivered through conversion of strategic
land.
The Group has agreed terms for the acquisition of more than
2,000 further plots. Of these, circa 750 consented plots on five
sites are at an advanced stage in the acquisition process with a
targeted acquisition date in H1 2012. An additional circa 500 plots
on five sites are contracted, subject to planning, with planning
expected in 2012.
The consented land bank amounted to 13,723 plots as at 31
December 2011, marginally below the 13,766 plots held at 31
December 2010. The Group estimated that the gross profit potential
on the plots within the consented land bank at the 2011 year end,
based on current sales prices and current build costs, was GBP524
million with a gross margin of 21.4% (31 December 2010: gross
profit potential of GBP461 million with a gross margin of 20.0%).
The increase in 2011 of GBP63 million arose from the land additions
(GBP137 million) less utilisation from home sales (GBP69 million)
and land sales (GBP26 million). The balancing positive value of
GBP21 million reflects other added value changes delivered by the
Group in respect of improving gross profit, including cost savings
and site replans.
Of the 13,723 plots, 72% are located in the south of England
(2010: 69%). At the year end, the consented land bank included
5,797 consented plots (42% of total), which have been acquired
since the housing market downturn (2010: 3,931, 29% of total). The
average consented land plot cost was GBP39,800 at the start of 2011
and increased over the year to GBP42,100, as a result of a lower
number of written down plots held in the land bank (17% of land
plots versus 26% at the start of the year) and the addition of new
prime southern traditional housing sites where the average plot
cost is higher.
The Group intends to increase its investment in strategic land
as visibility over the effects of the changes to the planning
environment improves. The strategic land bank at 31 December 2011
stood at 18,749 potential plots as compared to 17,325 potential
plots at 31 December 2010. The Group added circa 2,400 potential
plots to the strategic land bank during the year, thus enabling the
strategic land bank to grow in size notwithstanding the successful
conversion of circa 1,000 plots into the consented land bank.
Improve efficiency of capital employed
The Group has controlled the size and value of the consented
land bank during 2011, with a lower number of plots being acquired
than in 2010, whilst legal completions have increased and a number
of land sales have been successfully delivered. At the same time
the Group is increasing the number of active sales outlets, thus
employing its capital more effectively.
In order to improve the spread of the Group's land bank to
enhance capital turn, the Group has achieved its five targeted
consented land sales on selected sites in 2011, particularly on
those sites which have a longer trade out period by virtue of their
size. Of these, four land sales completed in 2011 and the fifth
completed in early January 2012. As a result of the four completed
sales, the land bank reduced in size by 532 consented plots.
The Group has tightly controlled work in progress, with the
number of units of production held at the end of 2011 reduced to
949 units (2010: 1,093). Additionally, work in progress associated
with infrastructure, roads and sewers has been reduced.
Improve returns
Strong growth in profits during 2011 combined with improved
efficiency of capital employed has resulted in a significant
increase in return on capital employed to 5% in 2011 from 3% in
2010.
The Group is firmly of the view that, based on current market
conditions continuing, return on capital employed will further
improve in 2012, fuelled by the aforementioned compound positive
effect on profit of volume improvement, growth in average sales
price and increase in profit margin. Whilst future output capacity
will grow, the capital base will remain tightly controlled in
respect of land and work in progress. Therefore, assuming current
market conditions continue, the Group anticipates achieving a
return on capital employed of at least 7% in 2012.
Deliver strong health, safety and environmental standards
The Group is committed to delivering strong health and safety
standards for its employees, subcontractors and other site
visitors. It maintains a high level of organisational focus on its
health and safety regime through comprehensive staff training,
clear and accountable management processes and through regular and
transparent reporting of performance.
This is overseen, firstly, through the operational line, which
takes day to day accountability for this area and, secondly, via a
Group-wide oversight committee with nominated regional directors
responsible for safety, run by the Group Director of Health and
Safety and chaired by a senior Group manager. The Group also seeks
to ensure that all of its employees and subcontractors who operate
at or visit sites carry a CSCS card, indicating its commitment to a
fully trained workforce.
Notwithstanding the increase in the Group's build activity
during 2011, the Group's NHBC risk score for the year was 0.44,
which compares favourably to the industry peer group average.
Additionally, the risk incident rate decreased to 21, a 33%
improvement over 2010.
During the last 12 months the Group has continued to focus
efforts on the key areas of significant risk, being working at
heights, PPE and slips, trips and falls in order to raise awareness
in these areas. Whilst the Group's health and safety performance is
relatively strong versus external benchmarks, the Group cannot be
complacent. Health and Safety will remain a key area of focus for
regional and Group management.
The Group continues to regard sustainable development as
critical to the long term creation of value for its shareholders.
The housebuilding industry has an important role to play both in
mitigating the impact of its building activities on the local
environment and in the evolution of building techniques and
advances, which reduce the carbon usage from new build
developments.
The Group works with a range of external stakeholders to agree
and carry out development in a mutually acceptable manner, thereby
ensuring that its developments take place in a way which mitigates
the impact on the local environment, thereby balancing the needs of
local communities for new housing with the requirement to avoid
environmental damage.
Looking forward, the Group is focusing on ways 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.
Further details of the Group's efforts and achievements during
2011 in regards to Corporate Social Responsibility will be
published in a separate report, available from the Company's
website (www.bovishomesgroup.co.uk).
Deliver a strong customer service experience for Bovis Homes
customers
The Group continues to invest in delivering its customer
charter, which sets the expectations in relation to the quality of
the product it delivers and the manner in which the sales
transaction is serviced. The Group has been recognised
independently by the achievement of a four star builder rating by
the Home Builder Federation. Additionally, the Group is pleased to
see the key internal scoring metrics of 'recommend a friend',
'purchase another Bovis home' and 'overall quality of the new home'
continuing to generate strong satisfaction scores during 2011, at
95%, 94% and 94% respectively.
The focus of the Group's customer communication has remained web
based during 2011, with the Group 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' or 'Right Move'. Over 70% of customer enquires
originate via the web.
The sales hub structure remains successful. Given the prevalence
of the web as the primary enquiry origination point for our
customers, the Group has been able to provide its customers with
the convenience of appointments to view homes at their preferred
site. Whilst providing customers with improved convenience, the
Group has reduced its cost of sales per transaction and increased
its rate of successful sales conversion. Additionally, sales hubs
are capable of being manned more efficiently on a seven day opening
basis and also into the evening cost effectively. This selling
process is supported by the Group's bespoke prospect management
system, which delivers on-site technology whilst integrating the
Group's prospects database with brochure fulfilment.
Market conditions
A lack of availability in 2011 of high loan to value mortgage
products continued to constrain market demand for new build homes.
This was particularly an issue for first time buyers, who, since
the financial crisis, have had to provide a higher level of deposit
for their home purchase than had historically been the case.
Monthly mortgage approval levels have been stable throughout 2011,
but at significantly lower levels than the position
historically.
With a backdrop of continuing economic and employment
uncertainty, trading conditions are expected to remain challenging
during 2012. However, the Group regards positively the anticipated
launch of the Government backed mortgage indemnity scheme and
welcomes the stimulus that this scheme can provide to activity in
the new build homes market through the availability of 95% loan to
value mortgages. The mortgage indemnity scheme is expected to work
in a similar way to the Group's existing Perfect 10 product and the
Group will work with the industry, lenders and the Government with
the aim of launching the new scheme in good time for the spring
market this year. As well as working with the industry, the Group
will continue to seek innovative ways to enable its customers to
access appropriate mortgage finance.
During 2011, sales prices have been stable with some regional
variations. Although the market remains challenging and customer
confidence and commitment levels remain subdued, the Group
currently believes that the pricing environment will be broadly
stable for 2012 as a whole, on the expectation that a limited
supply of homes for sale will not satisfy demand from purchasers.
At the same time, buyers are likely to remain constrained by
mortgage availability. It is anticipated that sales prices will
continue to be more robust in the south of England than in the
north, which will assist the Group given the southern bias of its
sites.
Current trading
The Group entered 2012 with a forward sales order position of
568 homes, a 35% improvement on the 420 homes brought forward at
the start of 2011. This improvement was contributed to by the
increase in average active sales outlets to 73 in 2011 from 66
during 2010.
Active sales outlets were 83 in the eight weeks to 24 February
2012, up by 28% from 65 in the same period in 2011. This increase
has been instrumental in delivering the robust trading achieved in
the period to 24 February 2012, with sales enquiries and site
visitors higher by 26% and 32% respectively. From these enhanced
visitor levels, the Group has achieved 320 net private reservations
in the first eight weeks of 2012 against 227 in the comparative
period in 2011, an increase of 41%.
During this eight week period, the average private sales rate
was 0.48 net reservations per site per week, an improvement of 10%
on the sales rate of 0.44 in the same period in 2011. Sales prices
achieved to date have been modestly ahead of Group
expectations.
As at 24 February 2012, the Group held 926 net sales for legal
completion in 2012, as compared to 647 net sales at the same point
in 2011, an increase of 37%. Of these, private sales amounted to
550 units (2011: 428 units) and social housing sales amounted to
376 units (2011: 219 units).
Outlook
As a result of the robust investment in land in 2010 and 2011,
the Group expects to trade from an average of 85 sales outlets in
2012 versus 73 in 2011, an increase of 16%. With 83 active sales
outlets currently open, the Group is confident that the 85 target
can be achieved.
Given the focus on acquiring land in the south of England, it is
anticipated that 75% of the active sales outlets at the end of the
2012 will be southern located versus 60% at the start of 2012. As
new sales outlets are opened by the Group, absolute weekly
reservation levels are anticipated to increase.
The continued growth in active sales outlets should, based on
stable market conditions, enable the Group to deliver increased
volumes, at a higher average sales price with improved profit
margins. With a clear focus on controlling the capital employed of
the Group through rigorous management of the landbank and tight
control of work in progress, the Group expects to deliver a strong
improvement in returns in 2012 and beyond.
The Board is confident in the Group's prospects for 2012,
assuming a continuation of current market conditions. The Board
continues to believe that the Group's growth strategy will increase
profits, which, combined with improving capital efficiency, will
materially improve shareholder returns.
David Ritchie
Chief Executive
Financial review
The Group has delivered a strong financial performance, with
profits and earnings growing significantly and with capital
employed under control, delivering improved shareholder returns. At
the same time the Group has maintained a prudent balance sheet
position.
Revenue
During 2011, the Group generated total revenue of GBP364.8
million, 22% up on 2010 at GBP298.6 million. Housing revenue in
2011 was GBP332.1 million, 13% ahead of the prior year (2010:
GBP292.7 million). Other income was GBP2.7 million (2010: GBP5.9
million). Four land sales (representing 532 consented plots)
legally completed in 2011, with a total income of circa GBP38
million. With one of these land sales being a land swap, GBP30.0
million was recognised as revenue in 2011. There were no land sales
in 2010.
Operating profit
The Group delivered an operating profit for the year ended 31
December 2011 of GBP36.4 million at an operating margin of 10.0%,
as compared to GBP21.6 million in the previous year, at an
operating margin of 7.2%.
Gross margin (excluding land sales) increased to 20.8% in 2011
from 17.9% in 2010, with the gross margin (excluding land sales) in
H2 2011 increasing to 21.2% from 18.9% in H2 2010.
The gross margin benefited from the full year positive effect of
construction cost savings in 2011 combined with the increased
contribution from legal completions on sites acquired post housing
market downturn. Subject to current market conditions continuing,
with an increasing proportion of legal completions coming from
sites acquired since the housing market downturn, the gross margin
achieved in 2011 can be further improved in 2012. The profit on
land sales was GBP2.7 million, a margin of 9.0%, which resulted in
a total gross profit of GBP72.2 million at a gross margin of
19.8%.
Overheads, including sales and marketing costs, increased in
2011 by 13%, as the Group invested to support the growing activity
levels. The overheads to revenue ratio improved to 9.8% in 2011
from 10.7% in 2010.
Profit before tax and earnings per share
The Group achieved a profit before tax of GBP32.1 million,
comprising operating profit of GBP36.4 million, net financing
charges of GBP4.5 million and a profit from the joint venture of
GBP0.2 million. This compares to GBP21.6 million of operating
profit, GBP3.2 million of net financing charges and a profit from
the joint venture of GBP0.1 million, which generated GBP18.5
million of profit before tax in 2010. Profit before tax increased
by 74%. Basic earnings per share for the year improved by 65% to
17.5p compared to 10.6p in 2010.
Financing
The Group incurred net financing charges of GBP4.5 million in
2011 (2010: GBP3.2 million). With a reduced average net cash
position (average net cash of GBP5 million during 2011, compared to
average net cash of GBP78 million in 2010), net bank charges for
2011 were GBP2.8 million (2010: GBP2.2 million), which included the
amortisation of arrangement fees (GBP0.8 million) and commitment
fee charges (GBP2.0 million).
The Group incurred a GBP4.3 million finance charge (2010: charge
of GBP2.7 million), reflecting the difference between the cost and
nominal price of land bought on deferred terms which is charged to
the income statement over the life of the deferral of the
consideration payable.
The Group benefited from a GBP0.6 million (2010: GBP0.2 million)
net pension financing credit during 2011, as a result of the
expected return on scheme assets being in excess of the interest on
the scheme obligations. The Group also benefited from a finance
credit of GBP1.6 million (2010: GBP1.2 million) arising from the
unwinding of the discount on its available-for-sale financial
assets during 2011. There were GBP0.4 million of other financing
credits during the year (2010: GBP0.3 million of other
credits).
Taxation
The Group has recognised a tax charge of GBP8.8 million on
profit before tax of GBP32.1 million at an effective tax rate of
27.5% (2010: tax charge of GBP4.5 million at an effective rate of
24.1%). The effective rate is above the underlying rate, due to the
effects on the deferred tax asset of the reduction of the statutory
corporation tax rate. The prior year benefited from land
remediation allowances and the finalisation of prior years' tax
submissions. The Group has recognised a current tax liability of
GBP4.0 million in its closing balance sheet as at 31 December 2011
(2010: current tax liability of GBP1.5 million).
Dividends
In the light of the ongoing improvement in the performance of
the Group and the Board's confidence in the delivery of Group's
strategy, the Board has proposed a 2011 final dividend of 3.5p per
share. This dividend will be paid on 25 May 2012 to holders of
ordinary shares on the register at the close of business on 30
March 2012. The Board intends to offer a scrip dividend
alternative, pursuant to which the shareholders may elect to
receive the whole or part of their 2011 final dividend in new
ordinary shares credited as fully paid instead of cash.
Combined with the interim dividend paid of 1.5p, the dividend
for the full year totals 5.0p compared to a total of 3.0p paid in
2010. The Board expects to grow dividends progressively as earnings
per share increase.
Net assets
Net assets per share as at 31 December 2011 was 545p as compared
to 533p at 31 December 2010.
Analysis of net assets
2011 2010
GBPm GBPm
----------------------------------------- ----- -----
Net assets at 1 January 710.8 692.6
Profit after tax for the year 23.3 14.0
Share capital issued 1.9 0.3
Net actuarial movement on pension scheme
through reserves (2.5) 3.0
Deferred tax recognised on share based
payments - (0.2)
Current tax recognised on share based
payments - 0.2
Adjustment to reserves for share based
payments 1.1 0.9
Dividends paid to shareholders (6.0) -
----------------------------------------- ----- -----
Net assets at 31 December 728.6 710.8
----------------------------------------- ----- -----
Pensions
Taking into account the latest estimates provided by the Group's
actuarial advisors, the Group's pension scheme had a deficit of
GBP2.4 million at 31 December 2011, an improvement of GBP0.5
million on the opening deficit of GBP2.9 million at 31 December
2010. Scheme assets grew over the year to GBP76.7 million from
GBP73.5 million and the scheme liabilities increased to GBP79.1
million from GBP76.4 million. The increase in liabilities was
primarily a result of a fall in bond yields. Scheme assets
benefited from a GBP2.8 million special cash contribution made by
the Group into the scheme in July 2011.
Net cash and cash flow
Having started the year with a net cash balance of GBP51.7
million, the Group generated operating cash inflow pre land
expenditure of GBP114 million (2010: GBP93 million), demonstrating
the strong underlying cash generation from the Group's existing
assets.
Net cash payments in 2011 for land investment were GBP96 million
(2010: GBP137 million). Non-trading cash outflow was GBP19 million.
As at 31 December 2011 the Group's net cash balance was GBP50.8
million with GBP56.2 million of cash in hand, offset by GBP5.0
million of loans received from the Government and GBP0.4 million
representing the fair value of an interest rate swap. At the end of
the year, the Group had in place a GBP150 million committed
syndicated facility, maturing in September 2013, with flexible
borrowing terms at a low cost.
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 the
UK.
With regard 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. With the commencement of a new banking
arrangement in late 2008, the Group entered into a GBP50 million
zero cost cap and floor collar hedge arrangement in February 2009
with expiry in March 2011, ensuring that variable rates on up to
GBP50 million of the Group's floating rate debt were held within a
pre-determined range. This prevented the Group from suffering
material adverse floating rate increases beyond an agreed level
('the cap') in return for which the Group accepted a minimum
payment cost ('the floor').
With unprecedently low LIBOR rates, the variable cost of
borrowings was below the floor and therefore ongoing costs were
being incurred. As the Group had no debt during the period of the
hedge, these hedge instruments were regarded as ineffective and
thus all costs were taken directly through income. With the expiry
of the hedge in March 2011, the Group assessed its future expected
debt profile and, having quantified its interest rate risk, decided
not to put in place a new hedge instrument for this facility. The
Group does not have a defined policy for interest rate hedging.
Credit risk is largely mitigated by the fact that the Group's
sales are generally made on completion of a legal contract at which
point monies are received in return for transfer of title. During
2011, the Group continued to make a number of sales with the
provision of a shared equity investment by the Group as a key part
of the Group's sales incentive packages, either via the Government
'Home Buy Direct' scheme or via the Group's own 'Jumpstart' scheme.
This has led to an increase in the size of the Group's long term
receivable Available for Sale Financial Asset balance which at 31
December 2011 was GBP38.7 million versus GBP31.1 million at 31
December 2010. Whilst this does represent an increase in credit
risk in total, each individual credit exposure is small given the
high number of counter parties. On average, individual shared
equity exposure totals GBP23,000 (2010: GBP24,000).
The Group has a GBP150 million syndicated facility which is
committed to September 2013. The Group regards this facility as
adequate 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 2011.
Jonathan Hill
Group Finance Director
Statement of directors' responsibilities in respect of the
annual report and the financial statements
The directors are responsible for preparing the annual report
and the Group and Parent Company financial statements, in
accordance with applicable law and regulations.
Company law requires the directors to prepare Group and Parent
Company financial statements for each financial year. Under that
law the directors are required to prepare the Group financial
statements in accordance with IFRSs as adopted by the EU and
applicable law and have elected to prepare the Parent Company
financial statements on the same basis.
Under company law, the directors must not approve the financial
statements unless they are satisfied that they give a true and fair
view of the state of affairs of the Group and Parent Company and of
their profit or loss for that period.
In preparing each of the Group and Parent Company financial
statements, the directors are required to:
-- select suitable accounting policies and then apply them consistently;
-- make judgments and estimates that are reasonable and prudent;
-- for the Group and Parent Company financial statements, state
whether they have been prepared in accordance with IFRSs as adopted
by the EU;
-- prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Group and the Parent
Company will continue in business.
The directors are responsible for keeping proper accounting
records that are sufficient to show and explain the Parent
Company's transactions and disclose with reasonable accuracy at any
time the financial position of the Parent Company and enable them
to ensure that its financial statements comply with the Companies
Act 2006. They have general responsibility for taking such steps as
are reasonably open to them to safeguard the assets of the Group
and to prevent and detect fraud and other irregularities.
Under applicable law and regulations, the directors are also
responsible for preparing a directors' report, report on directors'
remuneration and report on corporate governance that comply with
that law and those regulations.
The directors are responsible for the maintenance and integrity
of the corporate and financial information included on the
Company's website. Legislation in the UK governing the preparation
and dissemination of financial statements may differ from
legislation in other jurisdictions.
Each of the directors, whose names and functions are listed in
the annual report confirm that, to the best of their knowledge:
a) the Group and Parent Company financial statements in this
report, which have been prepared in accordance with IFRS as adopted
by the EU, IFRIC interpretation and those parts of the Companies
Act 2006 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
b) 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.
By Order of the Board
M T D Palmer
Company Secretary
24 February 2012
Bovis Homes Group PLC Group income statement
For the year ended 31 December 2011 2010
GBP000 GBP000
---------------------------------------- --------- ---------
Revenue 364,782 298,635
Cost of sales (292,546) (245,218)
---------------------------------------- --------- ---------
Gross profit 72,236 53,417
Administrative expenses (35,876) (31,784)
---------------------------------------- --------- ---------
Operating profit before financing costs 36,360 21,633
Financial income 2,843 2,406
Financial expenses (7,349) (5,614)
---------------------------------------- --------- ---------
Net financing costs (4,506) (3,208)
Share of profit of joint venture 243 76
Profit before tax 32,097 18,501
Income tax expense (8,831) (4,463)
---------------------------------------- --------- ---------
Profit for the period attributable
to equity holders of the parent 23,266 14,038
---------------------------------------- --------- ---------
Earnings per share
---------------------------------------- --------- ---------
Basic 17.5p 10.6p
Diluted 17.5p 10.6p
---------------------------------------- --------- ---------
Group statement of comprehensive income
For the year ended 31 December 2011 2010
GBP000 GBP000
------------------------------------------------------- ------- -------
Profit for the period 23,266 14,038
Actuarial (losses) / gains on defined benefit
pension scheme (3,390) 4,320
Deferred tax on actuarial movements on defined
benefit pension scheme 851 (1,255)
Total comprehensive income for the period attributable
to equity holders of the parent 20,727 17,103
------------------------------------------------------- ------- -------
Bovis Homes Group PLC
Group balance sheet
At 31 December 2011 2010
GBP000 GBP000
------------------------------------ ------- -------
Assets
Property, plant and equipment 11,614 11,307
Investments 5,327 4,847
Restricted cash 659 138
Deferred tax assets 3,498 3,899
Trade and other receivables 2,017 12,087
Available for sale financial assets 38,653 31,147
Total non-current assets 61,768 63,425
------------------------------------ ------- -------
Inventories 797,756 764,360
Trade and other receivables 77,422 37,271
Cash and cash equivalents 56,177 67,003
Total current assets 931,355 868,634
------------------------------------ ------- -------
Total assets 993,123 932,059
------------------------------------ ------- -------
Equity
Issued capital 66,836 66,609
Share premium 212,064 210,409
Retained earnings 449,671 433,799
------------------------------------ ------- -------
Total equity attributable to equity
holders of the parent 728,571 710,817
------------------------------------ ------- -------
Liabilities
Bank and other loans 5,402 15,233
Other financial liabilities 1,243 2,686
Trade and other payables 45,451 56,004
Retirement benefit obligations 2,444 2,870
Provisions 1,776 1,995
------------------------------------ ------- -------
Total non-current liabilities 56,316 78,788
------------------------------------ ------- -------
Bank and other loans - 92
Trade and other payables 202,665 139,215
Provisions 1,535 1,604
Current tax liabilities 4,036 1,543
Total current liabilities 208,236 142,454
------------------------------------ ------- -------
Total liabilities 264,552 221,242
------------------------------------ ------- -------
Total equity and liabilities 993,123 932,059
------------------------------------ ------- -------
These financial statements were approved by the Board of
directors on 24 February 2012.
Bovis Homes Group PLC
Group statement of changes in equity
Total Issued Share Total
For the year ended 31 December retained capital premium
earnings
GBP000 GBP000 GBP000 GBP000
------------------------------- --------- ------- ------- -------
Balance at 1 January 2010 415,815 66,570 210,181 692,566
Total comprehensive income
and expense 17,103 - - 17,103
Deferred tax on other employee
benefits 36 - - 36
Issue of share capital - 39 228 267
Share based payments 845 - - 845
Deferred tax on share based
payments (160) - - (160)
Current tax on share based
payments 160 - - 160
Balance at 31 December
2010 433,799 66,609 210,409 710,817
------------------------------- --------- ------- ------- -------
Balance at 1 January 2011 433,799 66,609 210,409 710,817
Total comprehensive income
and expense 20,727 - - 20,727
Issue of share capital - 227 1,655 1,882
Share based payments 1,121 - - 1,121
Dividends paid to shareholders (5,976) - - (5,976)
Balance at 31 December
2011 449,671 66,836 212,064 728,571
------------------------------- --------- ------- ------- -------
Bovis Homes Group PLC
Group statement of cash flows
For the year ended 31 December 2011 2010
GBP000 GBP000
------------------------------------------------------ -------- ---------
Cash flows from operating activities
Profit for the year 23,266 14,038
Depreciation 747 636
Adjustment for sale of assets to joint venture 234 963
Impairment of available for sale assets 1,274 713
Financial income (2,843) (2,406)
Financial expense 7,349 5,614
(Profit) / loss on sale of property, plant and
equipment (33) 8
Equity-settled share-based payment expense 1,121 845
Income tax expense 8,831 4,463
Share of result of joint venture (243) (76)
Increase in trade and other receivables (37,951) (23,951)
Increase in inventories (33,396) (133,650)
Increase in trade and other payables 47,517 84,335
Decrease in provisions and retirement benefit
obligations (3,484) (1,731)
------------------------------------------------------ -------- ---------
Cash inflow / (outflow) generated from operations 12,389 (50,199)
------------------------------------------------------ -------- ---------
Interest paid (2,311) (3,028)
Income taxes paid (5,085) (762)
------------------------------------------------------ -------- ---------
Net cash inflow / (outflow) from operating activities 4,993 (53,989)
------------------------------------------------------ -------- ---------
Cash flows from investing activities
Interest received 420 660
Acquisition of property, plant and equipment (1,073) (402)
Proceeds from sale of plant and equipment 52 24
Investment in joint venture (500) (4,228)
Movements in loans with joint venture (125) (1,451)
Dividends received from joint venture 200 -
Investment in restricted cash (522) (138)
Net cash outflow from investing activities (1,548) (5,535)
------------------------------------------------------ -------- ---------
Cash flows from financing activities
Dividends paid (4,146) -
Proceeds from the issue of share capital 52 267
(Repayment) / drawdown of borrowings (10,177) 13,706
Costs associated with refinancing - (2,041)
Net cash (outflow) / inflow from financing activities (14,271) 11,932
------------------------------------------------------ -------- ---------
Net decrease in cash and cash equivalents (10,826) (47,592)
Cash and cash equivalents at 1 January 67,003 114,595
------------------------------------------------------ -------- ---------
Cash and cash equivalents at 31 December 56,177 67,003
------------------------------------------------------ -------- ---------
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 2011 comprise the Company
and its subsidiaries (together referred to as the "Group") and the
Group's interest in associates and joint ventures.
The financial statements were authorised for issue by the
directors on 24 February 2012. The financial statements were
audited by KPMG Audit Plc.
The financial information set out above does not constitute the
company's statutory financial statements for the years ended 31
December 2011 or 2010 but is derived from those financial
statements. Statutory financial statements for 2010 have been
delivered to the registrar of companies, and those for 2011 will be
delivered in due course. The auditors have reported on those
financial statements; their reports were (i) unqualified, (ii) did
not include a reference to any matters to which the auditors drew
attention by way of emphasis without qualifying their report and
(iii) did not contain a statement under section 498 (2) or (3) of
the Companies Act 2006.
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 here together with the Group financial statements, the
Company is taking advantage of the exemption in s408 of the
Companies Act 2006 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 and available for
sale assets.
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 27 in the Annual Report.
The accounting policies set out below have been applied
consistently to all relevant periods presented in these
consolidated financial statements.
The accounting policies have been applied consistently to the
Company and the Group where relevant.
Impact of standards and interpretations effective for the first
time
The following new standards, amendments to standards or
interpretations are mandatory for the first time for the Company's
year ended 31 December 2011. They have had no material impact on
the Group's financial statements.
Amendment to IFRIC 14 'Prepayments of a Minimum Funding
Requirement'. The amendment to IFRIC 14 removes unintended
consequences arising from the treatment of prepayments when there
is a minimum funding requirement. The amendment results in
prepayments of contributions in certain circumstances being
recognised as an asset rather than an expense.
Amendment to IFRS 7 'Financial Instruments: Disclosure'. The
amendment provides clarification of the standard and requires
additional disclosures in relation to financial instruments.
IAS24 (Revised) 'Related Party Transactions'. The revised
standard relates mainly to the related party disclosure
requirements for government-related entities, and the definition of
a related party.
The other standards and interpretations that are applicable for
the first time in the Group's financial statements for the year
ended 31 December 2011, have no effect on these financial
statements.
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.
Joint ventures are those entities in which the Group has joint
control over the financial and operating policies. The consolidated
financial statements include the Group's share of the total
recognised gains and losses of joint ventures on an equity
accounted basis, from the date that joint control commenced until
joint control ceases.
4. Accounting policies
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;
-- imputed interest on available-for-sale financial assets, fair
valued interest free loans 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.
The Group is required to capitalise borrowing costs directly
attributable to the acquisition, construction and production of a
qualifying asset, as part of the costs of that asset. Inventories
which are produced in large quantities on a repetitive basis over a
short period of time are not qualifying assets. The Group does not
generally produce qualifying assets.
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.
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.
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
financial statements for the share-based payments granted to
subsidiary employees as an increase in the cost of its investment
in subsidiaries.
Trade and other receivables
Trade receivables do not carry any interest and are stated at
their nominal value as reduced by appropriate allowances for
estimated irrecoverable amounts.
Receivables on extended terms granted as part of a sales
transaction are secured by way of a legal charge on the relevant
property, categorised as an available for sale financial asset and
are stated at fair value as described in note 14. Gains and losses
arising from changes in fair value are recognised directly in
equity in retained earnings, with the exceptions of impairment
losses, the impact of changes in future cash flows and interest
calculated using the 'effective interest rate' method, which are
recognised directly in the income statement. Where the investment
is disposed of, or is determined to be impaired, the cumulative
gain or loss previously recognised in equity is included in the
income statement for the period. Given its materiality, this item
is being disclosed separately on the face of the balance sheet.
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 along with any expected overage. Where,
through deferred purchase credit terms, cost differs from the
nominal amount which will actually be paid in settling the deferred
purchase terms liability, an 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.
Joint ventures
Entities which are jointly controlled with another party or
parties ("joint ventures") are accounted for using the equity
method of accounting. The results attributable to the Group's
holding in joint ventures are shown separately in the consolidated
income statement. The amount included in the consolidated balance
sheet is the Group's share of the net assets of the joint ventures
plus net loans receivable.
Government grants
Government grants are recognised in the income statement so as
to match with the related costs that they are intended to
compensate. Government grants are included within deferred income.
The benefit on loans with an interest rate below market is
calculated as the difference between interest at a market rate and
the below market interest. The benefit is treated as a Government
grant.
Kickstart
During the year, the Group has been granted assistance for the
development of a number of sites under the Homes and Communities
Agency ('HCA') 'Kickstart' scheme. Where receipts under the
Kickstart scheme relate to grants they are accounted for in
accordance with the policy for government grants stated above.
In addition the Group has received cash upon specific sites
under the 'Kickstart equity' scheme which may be repayable in
future periods, as the sites to which it relates are developed,
along with the share of the profits or losses attributable to the
HCA arising from the sites. This grant element is included within
deferred income to the extent that it is currently estimated that
future economic benefit will be derived and will be released to the
income statement in line with sales from the relevant site. If part
or all the equity schemes are expected to be repaid these are shown
in other creditors.
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 recognised over the period of the credit term and
charged to finance costs using the effective interest rate
method.
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 financial statements 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 except when the share-based payment is cancelled
where the charge will be accelerated.
Segment reporting
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, having taken
into account the aggregation criteria provisions of IFRS8.
Impact of standards and interpretations in issue but not yet
effective
A number of new standards, amendments to standards and
interpretations are not yet effective for the year ended 31
December 2011, and have not been applied in preparing these
consolidated financial statements. None of these are expected to
have an effect on the consolidated financial statements of the
Group. Comments on specific new standards or amendments are as
follows:
IFRS9 'Financial Instruments' will apply to the Group from 1
January 2015. The International Accounting Standards Board ("IASB")
is in the process of replacing IAS39 'Financial Instruments:
Recognition and Measurement' with IFRS9. The IASB intends to expand
IFRS9 to add new requirements for classifying and measuring
financial liabilities, derecognition of financial instruments,
impairment and hedge accounting. The Group is currently assessing
the impact of IFRS9 and will continue to do so as the IASB expands
IFRS9.
IFRS10 'Consolidated Financial Statements' will apply to the
Group from 1 January 2013. The new standard establishes principles
for the presentation and preparation of consolidated financial
statements when an entity controls one or more other entities. The
Group is currently assessing the impact of the standard on the
Group's results and financial position.
IFRS11 'Joint Arrangements' will apply to the Group from 1
January 2013. The new standard requires that a party to a joint
arrangement determines the type of joint arrangement in which it is
involved by assessing its rights and obligations and accounts for
those rights and obligations in accordance with that type of joint
arrangement. The Group is currently assessing the impact of the
standard on the Group's results and financial position.
IFRS12 'Disclosure of Interest in Other Entities' will apply to
the Group from 1 January 2013. IFRS12 requires the disclosure of
information that enables users of financial statements to evaluate
the nature of, and risks associated with, its interests in other
entities and the effects of those interests on its financial
position, financial performance and cash flows. The Group is
currently assessing the impact of the standard on the Group's
results and financial position.
IFRS13 'Fair Value Measurement' will apply to the Group from 1
January 2013. IFRS 13 defines fair value, sets out in a single IFRS
a framework for measuring fair value and requires disclosures about
fair value measurements.
IAS19 (Revised) 'Employee Benefits' will apply to the Group from
1 January 2013. IAS19 will require net interest income or expense
to be calculated using the discount rate used to measure the
defined benefit asset or liability. The Group is currently
assessing the impact of the standard on the Group's results and
financial position.
IAS27 (Revised) 'Separate Financial Statements' will apply to
the Group from 1 January 2013. The Group is currently assessing the
impact of the standard on the Group's results and financial
position.
IAS28 (Revised) 'Investments in Associates and Joint Ventures'
will apply to the Group from 1 January 2013. The Group is currently
assessing the impact of the standard on the Group's results and
financial position.
The Group has not early adopted any standard, amendment or
interpretation.
5. Reconciliation of net cash flow to net cash
2011 2010
GBP000 GBP000
------------------------------------- -------- --------
Net decrease in net cash and cash
equivalents (10,826) (47,592)
Repayment / (drawdown) of borrowings 10,177 (13,706)
Fair value adjustments to interest
rate swaps (315) 245
Fair value adjustment to interest
free loans 61 473
Net cash at start of period 51,678 112,258
------------------------------------- -------- --------
Net cash at end of period 50,775 51,678
------------------------------------- -------- --------
Analysis of net cash:
Cash and cash equivalents 56,177 67,003
Unsecured loans (4,995) (15,233)
Fair value of interest rate swaps (407) (92)
Net cash 50,775 51,678
------------------------------------- -------- --------
6. Income taxes
Current tax
Current tax is the expected tax payable or receivable on the
taxable income or loss for the year, calculated using a corporation
tax rate of 26.5% 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. Current tax receivable for
current and prior years is classified as a current asset.
7. Dividends
The following dividends were declared by the Group:
2011 2010
GBP000 GBP000
Prior year final dividend per share
of 3.0p (2010: GBPnil) 3,982 -
Current year interim dividend per share
of 1.5p (2010: GBPnil) 1,994 -
---------------------------------------- ------ ------
Dividends declared 5,976 -
---------------------------------------- ------ ------
The Board has decided to propose a final dividend of 3.5p per
share in respect of 2011.
8. Earnings or Loss per share
Basic earnings per share
The calculation of basic earnings per share at 31 December 2011
was based on the profit attributable to ordinary shareholders of
GBP23,266,000 (2010: GBP14,038,000) and a weighted average number
of ordinary shares outstanding during the year ended 31 December
2011 of 132,860,480 (2010: 132,664,656), calculated as follows:
Profit attributable to ordinary shareholders
2011 2010
GBP000 GBP000
------------------------------------ ------- -------
Profit for the period attributable
to ordinary shareholders 23,266 14,038
Weighted average number of ordinary shares
2011 2010
------------------------------------- ------------ ------------
Issued ordinary shares at 1 January 133,218,325 133,138,968
Effect of own shares held (474,109) (528,808)
Effect of shares issued in year 116,264 54,496
------------------------------------- ------------ ------------
Weighted average number of ordinary
shares at 31 December 132,860,480 132,664,656
------------------------------------- ------------ ------------
Diluted earnings per share
The calculation of diluted earnings per share at 31 December
2011 was based on the profit attributable to ordinary shareholders
of GBP23,266,000 (20010: GBP14,038,000) and a weighted average
number of ordinary shares outstanding during the year ended 31
December 2011 of 132,944,264 (2010: 132,685,679).
The average number of shares is diluted by 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.
Weighted average number of ordinary shares (diluted)
2011 2010
-------------------------------------------- ------------ ------------
Weighted average number of ordinary shares
at 31 December 132,860,480 132,664,656
Effect of share options in issue which
have a dilutive effect 83,784 21,023
-------------------------------------------- ------------ ------------
Weighted average number of ordinary shares
(diluted) at 31 December 132,944,264 132,685,679
-------------------------------------------- ------------ ------------
9. 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, Company and key management
personnel in the year ending 31 December 2011 were limited to those
relating to remuneration, which are disclosed in the Report on
director's remuneration which can be found in the full Report and
Financial statements available on the Group's website.
Malcolm Harris, a Group Director, is a non-executive Director of
the Home Builders Federation (HBF) and was a non-executive Director
of the National House Building Council (NHBC) until 26 June
2010.
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:
2011 2010
------ ------- -------
GBP000 GBP000
NHBC n/a 1,454
HBF 85 124
------ ------- -------
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.
Transactions with Joint Venture
In the period the Group entered into the following transactions
with Bovis Peer LLP. During the financial year, inventory was
transferred to Bovis Peer LLP for a cash consideration of
GBP2,156,438. In addition, a loan of GBP125,000 was provided to
Bovis Peer LLP in December 2011 at an annual interest rate of LIBOR
plus 2.4%.
Bovis Homes Limited are contracted to provide Property and
Letting Management services to the Partnership. Fees charged in the
period ended 31 December 2011 in respect of these services totalled
GBP133,200 (inclusive of VAT) (2010: GBP99,964).
This information is provided by RNS
The company news service from the London Stock Exchange
END
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