11th Sep 2006 07:00
Bovis Homes Group PLC11 September 2006 BOVIS HOMES GROUP PLC INTERIM RESULTS for the six months ended 30 June 2006 Issued 11 September 2006 The Board of Bovis Homes Group PLC today announced its interim results for 2006. • Pre tax profit* increased by 18% to £53.1 million (2005: £45.1 million) • Earnings per share* increased by 18% to 31.4 pence (2005: 26.7 pence) • Interim dividend increased by 20% to 10.0 pence net per ordinary share (2005: 8.3 pence) • Period end net borrowings of £30.6 million (4.9% gearing) • Operating margin* at 22.7% (2005: 23.0%) • Plots with planning consent at 12,524 plots (owned: 12,132 plots/ controlled third party owned: 392 plots) • Strategic landholdings at 23,098 potential plots after transferring 350 plots to consented landholdings during the first six months * stated before a one off pension credit of £3.5 million (2005: £nil) Commenting on the results, Malcolm Harris, Chief Executive of Bovis Homes GroupPLC said: "Bovis Homes has delivered a good set of half year results. The Group hassuccessfully increased the volume of legal completions year on year by 16% andthe operating margin has been sustained broadly in line with that achieved inthe comparable period of 2005. The steady housing market experienced during the first six months has continuedthrough July and August, with sales reservation levels ahead of thecorresponding period in 2005. Looking forward, based upon the Group's trading experience to date, the Board'sexpectations remain unchanged in respect of profits for the full year." Enquiries: Results issued by: Malcolm Harris, Chief Executive Andrew Best/Emily BruningBovis Homes Group PLC Shared Value LimitedOn Monday 11 September Tel: 020 7321 5022/5027Tel: 020 7321 5022/5027ThereafterTel: 01474 876200 Chairman's interim statement Bovis Homes Group PLC is pleased to announce its interim results for the sixmonths ended 30 June 2006. Operating in a stable UK housing market, the Grouphas succeeded in improving its pre tax profits through an increase in the volumeof legal completions whilst maintaining its strong housing profit margins. Results For the six months ended 30 June 2006 the Group achieved a pre tax profit of£53.1 million (stated before a one off pension credit of £3.5 million),representing an increase of 18% over the pre tax profit of £45.1 million in thecorresponding period of 2005. Earnings per share improved by 18% to 31.4 pence(stated before the one off pension credit) compared with 26.7 pence in the firstsix months of 2005. Total Group revenue increased by 17% to £250.5 million compared with £214.5million in the equivalent prior year period, with housing revenue increased by22% to £238.1 million from £195.7 million. Land sales income and other incomeamounted to £12.4 million compared with £18.8 million for the first six monthsof 2005. The half year results were generated from a higher volume of legal completionsthan the prior year. In the first six months of 2006, the Group legallycompleted 1,262 homes compared with 1,089 legal completions in the same periodlast year. As expected, there was a reduced contribution from social housing inthe first half of 2006 with 141 social units (11.2% of total legal completions).This compared with 246 social units in the first half of 2005 (22.6% of totallegal completions). The Group's average sales price for the first half of 2006 was £188,700 comparedto £179,700 for the comparable six months of 2005. This represented an increaseyear on year of 5%. The average size of home legally completed decreased by 3%to 1,028 square feet compared with 1,060 square feet in the equivalent period of2005. Hence, the average sales price per square foot increased by 8.3%. Theincrease in sales price per square foot was positively affected by the reductionin contribution from social housing year on year. For private homes, the averagesales price per square foot increased by 4.4%. The Group's gross margin for the first half of 2006 was 33.2%, in line with2005's half year gross margin of 33.3%. After adjusting for the lowercontribution from social housing, which generates more modest profit margins,private housing gross margins reduced year on year by 0.9 percentage points.This reduction was in line with Group expectations due to cost pressures inexcess of sales price improvements. The Group's operating margin, stated beforethe one off pension credit, was 22.7% compared to 23.0% achieved in the firsthalf of 2005. Dividends The interim dividend of the Company will amount to 10.0 pence net per share, anincrease of 20% over 2005's interim dividend of 8.3 pence. This dividend will bepaid on 24 November 2006 to holders of ordinary shares on the register at theclose of business on 29 September 2006. The interim dividend represents thenormal one third ratio relative to the Group's anticipated 2006 full yeardividend of 30.0 pence net per share. The Board remains content with the previously advised statement in respect ofdividends. It intends, conditional on any necessary approvals required at futuregeneral meetings, to increase the full year dividend for 2006 to 30.0 pence netper share followed by a 5.0 pence per share increase in both 2007 and 2008. Thiscommitment, which is subject to a stable business environment, will double thefull year dividend to 40.0 pence net per share from its 2004 base of 20.0 pence. The Board intends to offer a scrip dividend alternative, pursuant to which theshareholders may elect to receive the whole or part of their dividend in newordinary shares credited as fully paid instead of cash, for the 2006 interimdividend. Borrowings and financing The Group's net borrowings at 30 June 2006 stood at £30.6 million compared withopening net borrowings of £61.8 million. This level of net borrowing representeda net debt/equity ratio of 4.9%. During the six months ended 30 June 2006, theaverage net borrowings were £92.5 million and the average debt/equity ratio was15.4%. Net financing costs, which amounted to £3.8 million, included £1.1 million inrespect of imputed interest arising on deferred land creditors. The remaining£2.7 million of net finance costs reflected interest charges arising on theGroup's fixed and floating interest rate borrowings net of interest incomearising on money market deposits. Land The Group ended the first half of 2006 with 12,524 controlled plots withresidential planning consent in the land bank (12,132 owned plots and 392controlled third party owned plots). This compared with 13,138 plots (12,696owned plots and 442 controlled third party owned plots) at 31 December 2005. Theland bank provides the Group with approximately four years of land supply atcurrent year activity levels. The Group remained cautious in the first half of2006 in respect of purchases of consented land given the consistent strength ofprices for land which has an implementable residential planning consent. Thesubstantial strategic landholdings controlled by the Group with short termpotential for gaining residential planning consent provide the opportunity forthe Group to curtail purchases of land with consent without reducing its abilityto target volume growth over the next few years. The strategic land bank at 30 June 2006 stood at 23,098 potential plots comparedto 22,166 potential plots held at the start of the year. The Group added afurther 1,282 potential plots having successfully converted 350 plots into theconsented land bank at a discount to market value. In addition to the 350 plotsconverted, on 8 March 2006, the Group secured a resolution to grant outlineplanning consent, subject to signing the necessary legal documents, for thefirst phase of the site controlled by the Group at Wellingborough. This consent,when released, will provide the Group the ability to construct over 3,000 homestogether with substantial commercial development. Pensions As at 30 June 2006, the Group's actuary estimated that the Group's definedbenefits pension scheme deficit had reduced to £7.7 million compared with thedeficit at 1 January 2006 of £22.4 million. This reduction arose primarily froma special contribution paid by the Group in April 2006 of £5.5 million, a oneoff IAS 19 pension credit of £3.5 million and a market movement in the bond raterequired to be used to discount the pension scheme liabilities. Cumulative reservations As at 30 June 2006, the Group held cumulative reservations totalling 2,273 homes(excluding forward sales for 2007) compared to 2,038 homes (excluding forwardsales for 2006) at the same time in 2005. This represented an increase of 11.5%year on year. Due to the timing of finalising housing association contracts,social housing reservations formed a lower percentage of total reservations thanat the same time in 2005. By the end of the first half of 2006 the Group hadsecured reservations on 492 social housing units compared with 639 socialhousing units in the comparable period of 2005. This lower contribution fromsocial housing will be redressed in part during the second half of 2006,although the overall contribution for the full year 2006 is likely to be lowerthan in 2005. Private reservations were well advanced at 30 June 2006,reflective of the Group's broader product offering to the market and recognitionof the need to secure reservations at an earlier stage of development.Importantly, the Group has secured housing gross margins within its forwardorder book which are in line with those housing gross margins on legalcompletions achieved in the first half of 2006. Market conditions The UK housing market has demonstrated stability after a year of uncertainty in2005. The fundamentals of the UK housing market remain sound. Consumerconfidence has been robust during the first half of 2006, in contrast to thefirst half of 2005. House price increases to June 2006 reported by a number ofexternal market commentators have suggested year on year price increases between5% and 8%. Consequently, affordability continues to remain a constraint in theUK housing market. Notwithstanding this constraint, the Bank of England baseinterest rate, whilst increased by the Monetary Policy Committee in August by 25basis points, continues to be low relative to the long term average and buying ahouse using a mortgage remains affordable. Prospects The Group continues to focus on delivering sustainable shareholder returns,utilising its landholdings effectively and increasing profits. Land continues tobe the key supply chain input for any housebuilder and the land market, throughsignificant undersupply, has witnessed price increases far in excess of thepublicised increases in house prices. The Group will continue to focus onprocuring land through strategic means which will provide for delivery ofsustainable shareholder returns in the medium to long term. In the first half of 2006, the Group has delivered growth in the volume of legalcompletions whilst improving underlying prices and sustaining its high operatingprofit margin. This robust half year performance combined with the strongforward order book provides a sound base for the 2006 full year. Tim Melville-Ross Chairman 11 September 2006 Bovis Homes Group PLCGroup income statement For the six months ended 30 June 2006 Six months ended Six months ended Year ended 30 June 2006 30 June 2005 31 Dec 2005 (unaudited) (unaudited) (audited) £000 £000 £000-------------------------- --------- --------- ---------Revenue - continuingoperations 250,495 214,492 521,194Cost of sales (167,402) (143,165) (351,997)-------------------------- --------- --------- ---------Gross profit 83,093 71,327 169,197Administrative expenses (22,748) (21,925) (44,120)-------------------------- --------- --------- ---------Operating profit before financing costs 60,345 49,402 125,077Financial income 74 488 557Financial expenses (3,860) (4,808) (9,556)-------------------------- --------- --------- ---------Net financing costs (3,786) (4,320) (8,999)-------------------------- --------- --------- ---------Profit before tax 56,559 45,082 116,078Income tax expense (16,862) (13,600) (34,603)-------------------------- --------- --------- ---------Profit for the period 39,697 31,482 81,475========================== ========= ========= ========= Earnings per share-------------------------- --------- --------- ---------Basic 33.4p 26.7p 69.0pDiluted 33.3p 26.5p 68.9p-------------------------- --------- --------- --------- Dividend per sharecharged in period -------------------------- --------- --------- ---------2005 final paid May 2006 16.7p - -2005 interim paid November 2005 - - 8.3p2004 final paid May 2005 - 13.6p 13.6p-------------------------- --------- --------- --------- 16.7p 13.6p 21.9p-------------------------- --------- --------- --------- Bovis Homes Group PLCGroup balance sheet At 30 June 2006 30 June 2006 30 June 2005 31 Dec 2005 (unaudited) (unaudited) (audited) £000 £000 £000-------------------------- --------- --------- ---------AssetsProperty, plant andequipment 14,669 13,033 14,663Investments 23 23 23Deferred tax assets 6,952 10,719 11,447Trade and otherreceivables 3,301 5,924 5,727-------------------------- --------- --------- ---------Total non-current assets 24,945 29,699 31,860 -------------------------- --------- --------- --------- Inventories 775,121 752,837 781,373Trade and other receivables 36,826 37,837 70,523Cash 9,816 23,650 344-------------------------- --------- --------- ---------Total current assets 821,763 814,324 852,240-------------------------- --------- --------- --------- -------------------------- --------- --------- ---------Total assets 846,708 844,023 884,100========================== ========= ========= ========= EquityIssued capital 60,027 59,545 59,699Share premium 151,118 145,202 146,849Hedge reserve (292) (909) (561)Retained earnings 416,195 351,470 392,160-------------------------- --------- --------- ---------Total equity 627,048 555,308 598,147========================== ========= ========= ========= LiabilitiesBank loans 20,265 41,106 40,802Trade and other payables 23,384 15,328 32,666Retirement benefitobligations 7,740 20,950 22,370Provisions 1,157 1,273 1,345-------------------------- --------- --------- ---------Total non-currentliabilities 52,546 78,657 97,183-------------------------- --------- --------- --------- Bank overdraft - - 6,367Bank loans 20,152 35,193 15,000Trade and other payables 132,612 161,582 151,493Tax liabilities 14,350 13,283 15,910-------------------------- --------- --------- ---------Total current liabilities 167,114 210,058 188,770-------------------------- --------- --------- --------- -------------------------- --------- --------- ---------Total liabilities 219,660 288,715 285,953========================== ========= ========= ========= ========================== ========= ========= =========Total equity andliabilities 846,708 844,023 884,100========================== ========= ========= ========= These interim financial statements were approved by the Board of directors on 8September 2006. Bovis Homes Group PLCGroup statement of cash flows For the six months ended 30 June 2006 Six months ended Six months ended Year ended 30 June 2006 30 June 2005 31 Dec 2005 (unaudited) (unaudited) (audited) £000 £000 £000-------------------------- --------- --------- ---------Cash flows from operating activitiesProfit for the period 39,697 31,482 81,475Depreciation 727 750 1,509Investment income (74) (488) (557)Interest expense 3,860 4,808 9,556Profit on sale of property, plant and equipment (102) (14) (56)Equity-settled share-basedpayment expenses (29) (130) 423Income tax expense 16,862 13,600 34,603-------------------------- --------- --------- ---------Operating profit before changes in working capitaland provisions 60,941 50,008 126,953-------------------------- --------- --------- --------- Decrease/(increase) in trade and other receivables 36,123 (1,746) (34,442)Decrease/(increase) in inventories 6,252 (52,920) (81,456)(Decrease)/increase in trade and other payables (28,538) 9,583 18,154Decrease in provisions andemployee benefits (9,000) (1,433) (990)-------------------------- --------- --------- ---------Cash generated from operations 65,778 3,492 28,219-------------------------- --------- --------- --------- Interest paid (3,313) (4,365) (10,467)Income taxes paid (15,840) (21,450) (39,450)-------------------------- --------- --------- ---------Net cash from operatingactivities 46,625 (22,323) (21,698)========================== ========= ========= ========= Cash flows frominvesting activitiesInterest received 74 582 651Acquisition of property, plant and equipment (764) (887) (3,303)Proceeds from saleof plant and equipment 133 29 97Purchase of own shares - (352) (351)Sale of own shares - 127 128-------------------------- --------- --------- ---------Net cash from investingactivities (557) (501) (2,778)========================== ========= ========= ========= Cash flows from financing activitiesDividends paid (19,826) (16,036) (25,858)Proceeds from the issue of share capital 4,597 3,024 4,825Repayment of borrowings (15,000) - (20,000)-------------------------- --------- --------- ---------Net cash from financingactivities (30,229) (13,012) (41,033)========================== ========= ========= ========= Net increase/(decrease) in cash and cash equivalents 15,839 (35,836) (65,509)Cash and cash equivalents at the start of period (6,023) 59,486 59,486-------------------------- --------- --------- ---------Cash and cashequivalents at theend of period 9,816 23,650 (6,023)========================== ========= ========= ========= Bovis Homes Group PLCGroup statement of recognised income and expense For the six months ended 30 June 2006 Six months ended Six months ended Year ended 30 June 2006 30 June 2005 31 Dec 2005 (unaudited) (unaudited) (audited) £000 £000 £000-------------------------- --------- --------- ---------Effective portion of changes in fair value of interest rate cash flowhedges 385 (29) 468Deferred tax on changes in fair value of interest rate cash flow hedges (116) 9 (140)Actuarial gains/(losses) ondefined benefits pension scheme 5,990 (1,560) (2,850)Deferred tax on actuarialgains/(losses) on defined benefits pension scheme (1,797) 468 855Deferred tax on other employee benefits - - 869-------------------------- --------- --------- ---------Net income/(expense)recognised directly in equity 4,462 (1,112) (798)Profit for the period 39,697 31,482 81,475-------------------------- --------- --------- ---------Total recognised income and expense for the periodattributable to equity holders of the parent 44,159 30,370 80,677========================== ========= ========= ========= Notes to the accounts 1 Basis of preparation Bovis Homes Group PLC ('the Company') is a company domiciled in the UnitedKingdom. The consolidated interim financial statements of the Company for thesix months ended 30 June 2006 comprise the Company and its subsidiaries(together referred to as 'the Group') and the Group's interest in associates. The interim financial statements were authorised for issue by the directors on 8September 2006. The financial statements are unaudited but have been reviewed byKPMG Audit Plc. The interim financial statements have been prepared on the basis of therecognition and measurement requirements of International Financial ReportingStandards as adopted by the EU (IFRS) and its interpretations as adopted by theInternational Accounting Standards Board (IASB), and comply with therequirements of the Listing Rules issued by the Financial Services Authority. The interim financial statements have been prepared on a basis consistent withthe accounting policies adopted for the year ended 31 December 2005. Thesepolicies are set out in the Group's Annual Report and Accounts 2005. The interim financial statements do not constitute statutory accounts within themeaning of Section 240 of the Companies Act 1985. The figures for the half yearsended 30 June 2006 and 30 June 2005 are unaudited. The figures for the yearended 31 December 2005 have been derived from the Company's statutory accountsfor the year ended 31 December 2005 upon which the auditors issued anunqualified opinion and which have been delivered to the Registrar of Companies. No adjustments have been made for any changes in estimates made at the time ofapproval of the 2005 statutory accounts. 2 Earnings per share Basic earnings per ordinary share for the six months ended 30 June 2006 iscalculated on profit after tax of £39,697,000 (six months ended 30 June 2005:£31,482,000; year ended 31 December 2005: £81,475,000) over the weighted averageof 118,792,999 (six months ended 30 June 2005: 117,840,652; year ended 31December 2005: 118,119,910) ordinary shares in issue during the period. Analysis of effect of one off IAS 19 pension credit on basic earnings per share Six months ended Six months ended Year ended 30 June 2006 30 June 2005 31 Dec 2005 (unaudited) (unaudited) (audited)-------------------------- --------- --------- ---------Basic earnings per share 33.4p 26.7p 69.0pEffect of one off IAS 19pension credit, net ofrelated tax (2.0p) - --------------------------- --------- --------- ---------Earnings per sharestated before pensioncredit, net of relatedtax 31.4p 26.7p 69.0p-------------------------- --------- --------- --------- Diluted earnings per ordinary share is calculated on profit after tax of£39,706,000 (six months ended 30 June 2005: £31,482,000; year ended 31 December2005: £81,691,000) over the diluted weighted average of 119,232,829 (six monthsended 30 June 2005: 118,791,437; year ended 31 December 2005: 118,595,375)ordinary shares potentially in issue during the period. The diluted averagenumber of shares is calculated in accordance with IAS 33 "Earnings Per Share".The dilutive effect relates to the average number of potential ordinary sharesheld under option during the period. This dilutive effect amounts to the numberof ordinary shares which would be purchased using the aggregate difference invalue between the market value of shares and the share option exercise price.The market value of shares has been calculated using the average ordinary shareprice during the period. Only share options which have met their cumulativeperformance criteria have been included in the dilution calculation. The profitafter tax used in the diluted earnings per share calculation includes anadjustment to reverse the charge within the income statement in respect of thefair value of share options in issue. The reversal for the six months ended 30June 2006 was £9,000 (six months ended 30 June 2005: £nil; year ended 31December 2005: £216,000). Analysis of effect of one off IAS 19 pension credit on diluted earnings pershare Six months ended Six months ended Year ended 30 June 2006 30 June 2005 31 Dec 2005 (unaudited) (unaudited) (audited)-------------------------- --------- --------- ---------Diluted earnings per share 33.3p 26.5p 68.9pEffect of one off IAS 19pension credit, net ofrelated tax (2.1p) - --------------------------- --------- --------- ---------Diluted earnings pershare stated beforepension credit, net ofrelated tax 31.2p 26.5p 68.9p-------------------------- --------- --------- --------- 3 Dividends The following dividends per qualifying ordinary share were paid by the Group. Six months ended Six months ended Year ended 30 June 2006 30 June 2005 31 Dec 2005 (unaudited) (unaudited) (audited)-------------------------- --------- --------- ---------May 2006: 16.7p (May 2005: 13.6p) 19,826 16,036 16,036November 2005: 8.3p - - 9,822-------------------------- --------- --------- --------- 19,826 16,036 25,858-------------------------- --------- --------- --------- An interim dividend in respect of 2006 of 10.0 pence per share, amounting to atotal dividend of £11,929,000 based on the shares in issue as at 8 September2006, was declared by the Board on 8 September 2006. This interim dividend willbe paid on 24 November 2006 to shareholders on the register at the close ofbusiness on 29 September 2006. This dividend has not been recognised as aliability at the balance sheet date. 4 Income taxes Current tax Current tax expense for the interim periods presented is the expected taxpayable on the taxable income for the period, calculated using a corporation taxrate of 30%, adjusted to take account of deferred taxation movements. Current tax for current and prior periods is classified as a current liabilityto the extent that it is unpaid. Amounts paid in excess of amounts owed areclassified as a current asset. Deferred tax The amount of deferred tax provided is based on the expected manner ofrealisation or settlement of the carrying amount of assets and liabilities usingtax rates enacted or substantially enacted at the balance sheet date. 5 Reconciliation of net cash flow to net debt Six months ended Six months ended Year ended 30 June 2006 30 June 2005 31 Dec 2005 (unaudited) (unaudited) (audited) £000 £000 £000-------------------------- --------- --------- ---------Net increase/(decrease) in net cash and cash equivalents 15,839 (35,836) (65,509)Repayment of borrowings 15,000 - 20,000Fair value adjustments tointerest rate swaps 385 (29) 468Net debt at start of period (61,825) (16,784) (16,784)-------------------------- --------- --------- ---------Net debt at end of period (30,601) (52,649) (61,825)========================== ========= ========= ========= Analysis of net debt:Cash 9,816 23,650 344Bank overdraft - - (6,367)Bank loans (40,000) (75,000) (55,000)Fair value of interest rateswaps (417) (1,299) (802)-------------------------- --------- --------- ---------Net debt (30,601) (52,649) (61,825)========================== ========= ========= ========= 6 Circulation to shareholders The interim report will be sent to shareholders. Further copies will beavailable on request from the Company Secretary, Bovis Homes Group PLC, TheManor House, North Ash Road, New Ash Green, Longfield, Kent DA3 8HQ. Further information on Bovis Homes Group PLC can be found on the Group'scorporate website www.bovishomesgroup.plc.uk, including the slide presentationdocument which will be presented at the Group's results meeting on 11 September2006. Independent review report by KPMG Audit Plc to Bovis Homes Group PLC Introduction We have been instructed by the Company to review the financial information forthe six months ended 30 June 2006 which comprises the Group income statement,Group balance sheet, Group statement of cash flows, Group statement ofrecognised income and expense and notes to the accounts. We have read the otherinformation contained in the interim report and considered whether it containsany apparent misstatements or material inconsistencies with the financialinformation. This report is made solely to the Company in accordance with theterms of our engagement to assist the Company in meeting the requirements of theListing Rules of the Financial Services Authority. Our review has beenundertaken so that we might state to the Company those matters we are requiredto state to it in this report and for no other purpose. To the fullest extentpermitted by law, we do not accept or assume responsibility to anyone other thanthe Company for our review work, for this report, or for the conclusions we havereached. Directors' responsibilities The interim report, including the financial information contained therein, isthe responsibility of, and has been approved by, the directors. The directorsare responsible for preparing the interim report in accordance with the ListingRules of the Financial Services Authority which require that the accountingpolicies and presentation applied to the interim figures should be consistentwith those applied in preparing the preceding annual accounts except where anychanges, and the reasons for them, are disclosed. Review work performed We conducted our review in accordance with guidance contained in Bulletin 1999/4issued by the Auditing Practices Board for use in the UK. A review consistsprincipally of making enquiries of management and applying analytical proceduresto the financial information and underlying financial data and, based thereon,assessing whether the accounting policies and presentation have beenconsistently applied unless otherwise disclosed. A review excludes auditprocedures such as tests of controls and verification of assets, liabilities andtransactions. It is substantially less in scope than an audit performed inaccordance with International Statements on Auditing (UK and Ireland) andtherefore provides a lower level of assurance than an audit. Accordingly, we donot express an audit opinion on the financial information. Review conclusion On the basis of our review we are not aware of any material modifications thatshould be made to the financial information as presented for the six monthsended 30 June 2006. KPMG Audit PlcChartered AccountantsLondon 8 September 2006 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Vistry Grp