TIDMBVS
RNS Number : 7403L
Bovis Homes Group PLC
10 September 2019
10 September 2019
Continued excellent operational progress delivers record
profits
Bovis Homes Group PLC (the 'Group') is today issuing its half
year results for the six months ended 30 June 2019.
H1 Highlights
- Record profits with profit before tax increasing by 20% to GBP72.4m
- Step up in profitability including 140 basis points improvement in operating margin to 16%
- 15% increase in private sales rate to 0.6 per site per week
despite an uncertain market backdrop
- Further strong improvement in customer satisfaction with Group
trending at 5-star HBF customer satisfaction score for the year to
date
- High quality land acquisitions in the year to date totalling 2,007 plots across 12 sites
- Further strengthened balance sheet with increase in net cash as at 30 June 2019 to GBP102.4m
- Interim dividend up 8% to 20.5p per share reflecting confidence in the business
H1 2019 H1 2018 Change
------------------------------- ---------- ---------- -------
Total completions(1) 1,647 1,580 +4%
Total average selling
price GBP269.2k GBP262.7k +2%
Group revenue GBP472.3m GBP432.2m +9%
Operating margin 16.0% 14.6% 140bps
Profit before tax GBP72.4m GBP60.2m +20%
Earnings per share 43.7p 36.1p +21%
Ordinary dividend per
share 20.5p 19.0p +8%
Net cash GBP102.4m GBP42.8m +139%
Return on capital employed(2) 19.8% 14.5% 530bps
------------------------------- ---------- ---------- -------
Strong outlook for full year
- Continue to develop strategy of controlled volume growth
whilst driving margin and ROCE progression
- Expect to make further good progress against our medium term
targets in the year, with a number already achieved
- Strong sales position with 96% of FY19 total completions and
c.10% of FY20 private units secured
- Further GBP60m of capital to be returned to shareholders in second half
- Well positioned to deliver another strong performance in 2019
Notes: (1) Includes JV completions in the period of 3 (2018:
nil) (2) Return on capital employed has been calculated as the
total operating profit for the 12 month rolling period to 30 June
2019 (GBP186.9m), divided by the average of opening and closing
shareholders' funds, plus net debt or less net cash, excluding
investment in JVs for the 12 month rolling period to 30 June 2019
(GBP942.2m).
Potential combination with Galliford Try's Linden Homes and
Partnership & Regeneration divisions (the "Potential
Transaction")
We have announced today that we have re-engaged in preliminary
discussions with Galliford Try plc regarding a potential
combination between Bovis Homes and Galliford Try's Linden Homes
and Partnerships & Regeneration divisions, and have agreed
high-level terms upon which the Potential Transaction would be
implemented. There remains significant work to be completed before
definitive transaction documentation can be agreed, including
agreement of detailed commercial terms, completion of due diligence
and arranging transaction funding. Further details are included in
a separate statement issued today by the Group and Galliford
Try.
Greg Fitzgerald, Chief Executive commented,
"We delivered an excellent first half performance with a
significant step up in our sales rate, record profits and a further
strengthening of our balance sheet. The Group has transformed over
the past two years and we are consistently delivering high quality
new homes with very high levels of customer satisfaction, as
demonstrated by the significant improvement in our HBF rating over
the past 12 months. The fact that we are now trending at a 5-star
level is testament to the continued hard work and dedication of our
team.
"We are very well positioned for the second half and expect to
deliver another strong performance in the year."
There will be a meeting for analysts and investors at 9:00am
today at The London Stock Exchange, The London Stock Exchange
Building, 10 Paternoster Square, London, EC4M 7LS. The presentation
will be audiocast live on the Bovis Homes corporate website
www.bovishomesgroup.co.uk from 9:00am. A playback facility will be
available shortly after the presentation has finished.
Certain statements in this press release are forward looking
statements. Forward looking statements involve evaluating a number
of risks, uncertainties or assumptions that could cause actual
results to differ materially from those expressed or implied by
those statements. Forward looking statements regarding past trends,
results or activities should not be taken as representation that
such trends, results or activities will continue in the future.
Undue reliance should not be placed on forward looking
statements.
For further information please contact:
Bovis Homes Group PLC
Earl Sibley, Group Finance Director
Susie Bell, Head of Investor Relations 01732 280272
Powerscourt
Justin Griffiths
Nick Dibden
Victoria Heslop 020 7250 1446
Chief Executive's Review
Half year update
The Group reports a strong first half performance with a
significantly improved operating performance and a step up in our
financial results.
The Group's private sales rate increased by 15% in the first
half, operating margin was up by 140 basis points to 16% (2018:
14.6%) and profit before tax increased by 20% to GBP72.4m (2018:
GBP60.2m) - a record level for Bovis Homes. The Group's balance
sheet strengthened further with a net cash position of GBP102.4m as
at 30 June (2018: GBP42.8m).
Building high quality new homes that meet our customers' needs
and expectations remains at the core of our business and I am
delighted the Group's customer satisfaction score continues to
reflect this, now trending at a 5-star HBF customer satisfaction
rating (above 90%).
Over the last two years, we have transformed our build processes
and are proud of the homes we build. Last year we launched our new
'Phoenix' housing range and we saw the first completions from the
range in June this year, with excellent feedback from our customers
and visitors.
Our new Partnerships business has made strong progress with six
of our larger developments now in partnership with Housing
Associations, including the joint venture of Stanton Cross,
Wellingborough with Riverside.
Our strategy remains focused on controlled volume growth whilst
driving profitability and return on capital employed. We are
committed to increasing the supply of quality new homes in the UK
and with the growth of our Partnerships business, see the
opportunity to grow our volumes beyond our 2020 target of 4,000
units p.a.
Operating performance
Strong sales performance
We are pleased to report a 15% increase in our private sales
rate in the first half to 0.60 (2018: 0.52) sales per active site
per week. This reflects a step change in the Group's performance
achieved against a backdrop of ongoing market uncertainty.
Help to Buy remains an important scheme and 25% of total
completions utilised it in the first half. We have also seen a
controlled increase in our use of part exchange, with 9% of
completions on this basis in the period. We maintain very tight
controls around our part exchange stock levels and had held no
properties for longer than three months as at 30 June.
The Group delivered a total of 1,647 (2018: 1,580) new homes in
the half year, a 4% increase, and a total average selling price up
2% to GBP269,200 (2018: GBP262,700). The increase in pricing
reflects an improved geographical spread of sales outlets with
overall underlying pricing broadly flat.
We opened 10 new developments in the first half and expect to
open a total of 24 new developments this year. We are currently
operating from 87 sites and expect this to remain relatively
stable.
High levels of customer satisfaction
Customer satisfaction is a key priority and we are delighted to
report continued improvement in our customer satisfaction rating,
with our HBF score since 1 October 2018 trending at above 90%, the
equivalent of a 5-star housebuilder.
We continue to invest in our customer service and in May
launched our new customer relationship management system 'Keys'. It
is designed to enhance further our customers' 'Bovis Homes'
journey, giving them greater access and transparency throughout the
build, sales and after sales process. As an industry first, our
customers are able to self-report snags and track progress with
24/7 contact.
We were delighted to have recently received the Ministry of
Defence's Gold Award in their Employer Recognition Scheme. Bovis
Homes first signed the Armed Forces Covenant in 2016 and has since
worked to ensure that past and present members of the Forces along
with their families receive outstanding support, from mentoring
placements and trainee programmes to assist military personnel
looking to get on to the property ladder. We are proud to be the
only housebuilder to have achieved the Gold Award status.
Transformation of our build processes
The Group delivered another controlled period end and this is
reflected in the high standard of build quality of our new homes.
We have seen further improvement in our build quality metrics which
are tracking in-line or ahead of industry benchmarks. We have a
high quality team of construction directors and site managers and
have seen a further reduction in site manager headcount turnover to
below 15%. A special congratulations to our six site managers who
were winners of NHBC Pride in the Job Quality Awards this year.
We have launched a programme of initiatives targeting savings
across all areas of build. In particular, we are working closely
with our supply chain to counter build cost inflation and are
introducing group wide specification changes where appropriate. We
have seen build cost inflation running at around 3% to 4% in the
year to date, with some reduction in inflationary pressure seen
recently.
Phoenix housing range
Following the launch of our new housing range, the Phoenix
Collection, in April last year, we have successfully replanned our
owned land bank and implemented build of the new range, with 880
Phoenix designed units currently under construction. We completed
the first new 'Phoenix' homes in June with excellent feedback from
customers. The modern design and open plan living meet today's
customer needs, while the design and specification allow us to
drive efficiency and cost reductions. We expect the Phoenix
Collection to account for c. 15% of our total completions in 2019,
with this percentage increasing rapidly in future years.
Ongoing investment in our business
We continue to invest in our systems and processes to drive
efficiency and best practice across all business areas and to
position the Group successfully for the future. We are in the
process of re-launching the Bovis Homes brand and modernising our
sales and commercial websites, alongside the launch of our CRM,
Keys. We continue to invest in our management reporting system with
COINS, and through Access Systems are investing in our HR
platform.
People
People remain a key priority for the Group and we are delighted
that our investment is reflected in consistently high levels of
engagement and a much reduced level of headcount turn. We have a
full range of training and development programmes, and the first
half saw the roll-out of the final module of our bespoke Leadership
Development Programme.
We continue to support the development of skilled labour within
our industry, in particular with our apprenticeship and assistant
site manger programmes.
High quality land supply
We have excellent visibility on our land supply and have all of
our units for 2020 secured and 79% for 2021. We continue to see
good opportunities in the land market that meet our minimum hurdle
rates and strategy of increasing our proportion of smaller
properties, reducing our average selling price. We expect to
maintain a 3.5 to 4.0 year owned land bank and in the year to date
have acquired 2,007 plots across 12 sites.
We have good momentum on our strategic land and in the year to
date have pulled through 372 plots on three sites from our
strategic land bank. We have also entered into four new option
agreements for a total of 865 plots, with a strong pipeline for the
rest of this year and going into 2020.
Partnerships
We launched our Partnerships business in February this year to
work alongside our operating regions. It brings a less cyclical and
more resilient revenue and profit stream, and reflects our
significantly improved relationships with Housing Associations.
This is a land led strategy allowing us to optimise returns from
our land investment, in particular our larger sites pulled through
from our strategic land bank, and will facilitate better working
capital management.
We have made good progress in the year to date with six
partnership developments now established including our joint
ventures with Riverside Housing Association at Stanton Cross,
Wellingborough completed in April, and with LiveWest at Alphington,
Exeter completed in July.
The partnerships are typically structured such that we transfer
all or part of the land for development, often arising from our
strategic land bank, to a partner or into a joint arrangement. In
the first half, revenue of GBP15.4m (2018: nil) was recognised from
partnership land transactions. Bovis Homes will then develop out
the site for our partner or on behalf of the joint venture. The
partnership land transactions were recognised using the site wide
development margin, in the same way as our standard housing
business.
Strategy update
The Group strategy remains focused on delivering controlled
volume growth while driving margin progression. With the
development of our Partnerships business, we believe the Group has
the ability to drive volumes beyond our medium term target of 4,000
units p.a.
The increased investment in our Partnerships business results in
us now expecting to achieve our ROCE target of 25% by 2022.
On margin, our specific margin initiatives include the roll-out
of our new Phoenix housing range and increasing the use of our
Select extras range. We have also implemented a programme of cost
saving initiatives across all areas of build including working with
our supply chain to counter build cost inflation and Group wide
specification changes where appropriate.
Medium term targets
We have made further good progress against our medium term
targets in the period with a number already achieved
Target Progress to date Timing / outlook
4-star HBF Achieved
customer * Trending at 5-star rating * Maintain 4-star rating
satisfaction
rating
* 4 star HBF customer satisfaction score for 2018
------------------------------------------------------------------ ---------------------------------------------------------------
4,000 Targeted for 2020
completions * 3,759 completions in FY18 * Controlled volume growth from existing structure
p.a.
* 4% increase in completions in H1 19 * Delivery of more than 4,000 new homes p.a. beyond
2020 through investment in Partnerships business
* Launch of Partnerships business
------------------------------------------------------------------ ---------------------------------------------------------------
3.5 to 4.0 Achieved
year * Divestment of sites outside of our core operating * Maintain 3.5 to 4.0 year owned land bank
owned land areas
bank
* Wellingborough and Sherford JVs completed
------------------------------------------------------------------ ---------------------------------------------------------------
Min. 23.5% Targeted for 2020
gross * 70 basis point improvement in gross margin in H1 19 * Margin initiatives underpin 2020 gross margin target
margin to 21.6%
* Programme of cost saving initiatives
* Embedded land gross margin at 24.9% will drive
further improvements over time
------------------------------------------------------------------ ---------------------------------------------------------------
5% admin Targeted for 2019
expense * Effective operating structure in place with continued
as % of investment in process and systems to deliver
revenues efficiency
------------------------------------------------------------------ ---------------------------------------------------------------
Min. GBP180m Achieved
net * Balance sheet initiatives delivered in excess of * Ongoing active balance sheet optimisation and review
cash from GBP250m net cash benefit of capital returns
balance
sheet
optimisation
------------------------------------------------------------------ ---------------------------------------------------------------
25% return Targeted for 2022
on capital * Increase in Group ROCE to 19.8% in H1 19 * Targeting 25% for 2022 reflecting increased
employed investment in Partnership business
------------------------------------------------------------------ ---------------------------------------------------------------
Potential combination with Galliford Try's Linden Homes and
Partnership & Regeneration divisions
We have announced today that we have re-engaged in preliminary
discussions with Galliford Try plc regarding a potential
combination between Bovis Homes and Galliford Try's Linden Homes
and Partnerships & Regeneration divisions, and have agreed
high-level terms upon which the Potential Transaction would be
implemented. There remains significant work to be completed before
definitive transaction documentation can be agreed, including
agreement of detailed commercial terms, completion of due diligence
and arranging transaction funding. Further details are included in
a separate statement issued today by the Group and Galliford
Try.
Enhanced returns to shareholders
The Board is committed to maximising ordinary dividends to
shareholders and for the first half year the interim dividend,
payable on 22 November, will be 20.5 pence per share, an increase
of 8% on H1 2018.
In 2017, the Board stated that it intended that surplus capital
totalling GBP180m or c.134p per share will be returned to
shareholders in the three years to 2020. If the Potential
Transaction proceeds, the GBP60 million of capital return expected
to be paid in 2019 would, subject to shareholder approval, be
returned by way of a bonus issue (the "Bonus Issue") settled at
completion of the Potential Transaction through the issue of fully
paid Bovis Homes shares to Bovis Homes shareholders. The Bonus
Issue would equate to 5,665,723 shares (in aggregate) valued at
GBP60 million based on a Bovis Homes share price of 1059p, being
the closing share price on 9 September 2019.
If the Potential Transaction does not complete, the second
capital return of GBP60m equating to c.45p per share is expected to
be paid to shareholders as a cash dividend.
Market
Despite wider market uncertainty around Brexit, the market
fundamentals remain supportive with high employment levels,
interest rates at historic lows, and good competition in the
mortgage lending market place. Both of the two key political
parties remain committed to increasing the supply of new homes in
the UK and supportive of the housing industry. We are pleased to
have clarity on Help to Buy with the scheme confirmed to 2023.
Outlook
We are very pleased with the significant progress the Group has
made over the past two years and see the operational turnaround as
nearly complete. We continue to invest in the business and are
fully committed to improving further the way we operate, to
adopting modern methods of construction where appropriate, and
ensuring we are best positioned to deliver high quality new homes
to the market in the years ahead.
We have a strong sales position with 96% of total sales for 2019
secured, and c. 10% of private sales for 2020 already secured.
While we are having to work hard in the current market, we are
confident of delivering completions in-line with our expectations
for the year and deliver another strong performance.
Financial Review
Trading Performance
In line with our strategy, the Group delivered controlled volume
growth during the first half of 2019 resulting in a 4% increase in
legal completions(1) to 1,647 (H1 2018: 1,580). This included 616
affordable homes representing 37% of total completions (H1 2018:
35%). Total revenue was GBP472.3m, an increase of 9% on the
previous year (H1 2018: GBP432.2m).
Volume H1 2019 H1 2018
====================================== ============ ============
Private legal completions 1,028 1,030
====================================== ============ ============
Affordable legal completions 616 550
====================================== ============ ============
Total legal completions 1,644 1,580
====================================== ============ ============
JV legal completions 3 -
====================================== ============ ============
Total legal completions including
JVs 1,647 1,580
====================================== ============ ============
Revenue (GBPm)
====================================== ============ ============
Private legal completions 352.3 344.7
====================================== ============ ============
Affordable legal completions 90.2 70.3
====================================== ============ ============
Revenue from legal completions 442.5 415.0
====================================== ============ ============
Other revenue 7.9 10.9
====================================== ============ ============
Partnership land transactions revenue 15.4 -
====================================== ============ ============
Total development revenue 465.8 425.9
====================================== ============ ============
Land sales revenue 6.5 6.3
====================================== ============ ============
Total revenue 472.3 432.2
====================================== ============ ============
Housing revenue from legal completions was GBP442.5m (H1 2018:
GBP415.0m), 7% ahead of the prior year. The average sales price for
our private homes increased 2% to GBP342,800 (H1 2018: GBP334,700)
and our overall average sales price increased by 2% to GBP269,200
(H1 2018: GBP262,700).
Other revenue was GBP7.9m (H1 2018: GBP10.9m) and includes the
release of GBP4.1m (H1 2018: GBP7.9m) in deferred revenue from PRS
joint ventures as we dispose of properties as part of our strategy
to exit these joint ventures.
In February this year we announced the launch of our new
Partnerships Housing Division which is pursuing a land led
strategy, working alongside housing associations to increase output
and deliver best returns from our development land, in particular
our larger, strategic land sites.
Partnership land transactions revenue of GBP15.4m was from three
land sales in the period to housing associations, where Bovis Homes
will develop the land in partnership with the housing associations.
The partnership land transactions were recognised using the site
wide development margin, in the same way as our standard housing
business.
Land sales revenue of GBP6.5m in H1 2019 primarily relates to
the disposal of the final out-of-operating area site in the period
at Penwortham near Preston, realising GBP6.4m of cash and
contributing GBP0.1m in profit.
Construction costs per square foot have increased by 6% over the
last 12 months, reflecting the inflationary impact of labour and
materials that we estimate to be around 3 to 4% during the year, as
well as the geographical mix of product delivered during the
period. This has been partially offset by reductions in our cost
base as we delivered production in a controlled manner, changes in
specification and the under-utilisation of contingency.
Development gross margin was 21.9% in the first half of 2019,
ahead of the 21.2% achieved in the same period in 2018 driven by
the increasing embedded gross margin in our land bank, broadly flat
market pricing and our ongoing operational improvements including
the initial impacts from our margin initiatives.
Total gross profit was GBP101.8m (gross margin: 21.6%), compared
with GBP90.4m (gross margin: 20.9%) in H1 2018.
Operating profit increased to GBP75.8m (H1 2018: GBP63.1m) at an
operating profit margin of 16.0% (H1 2018: 14.6%). Administrative
expenses decreased in 2019 to GBP26.0m (H1 2018: GBP27.3m)
reflecting the Group's efficient operating structure, offset by
higher employee costs and the ongoing investment in new processes,
systems and training. This investment is beginning to deliver
further benefits to our operations which will have a greater impact
in future periods. We note that first half margins are impacted by
the completion profile, and therefore revenue profile, being more
heavily weighted into the second half of the financial year, with
certain costs being equally phased across the year.
The Group delivered a record profit before tax for the six
months ended 30 June 2019 of GBP72.4m, comprising operating profit
of GBP75.8m, net financing charges of GBP2.8m and GBP0.6m of share
in JV losses. This compares to GBP60.2m of profit before tax in H1
2018, which comprised GBP63.1m of operating profit and GBP2.9m of
net financing costs.
Financing and Taxation
Net financing charges during the first half of 2019 were GBP2.8m
(H1 2018: GBP2.9m) reflecting the marginally lower net debt in the
period, a consistent level of commitment fees, and issue costs
amortised, as well as the impact of implementing IFRS 16 in the
period, disclosed in note 9 to the financial statements.
The Group has recognised a tax charge of GBP13.7m at an
effective tax rate of 18.9% (H1 2018: tax charge of GBP11.5m at an
effective rate of 19.1%). The Group has a current tax liability of
GBP14.3m on its balance sheet as at 30 June 2019 (H1 2018:
GBP14.0m).
Dividends
An interim dividend of 20.5 pence per share (H1 2018: 19.0
pence) has been declared and will be paid on 22 November 2019 to
holders of ordinary shares on the register at the close of business
on 27 September 2019. The dividend reinvestment plan, introduced in
2012, gives shareholders the opportunity to reinvest their
dividend.
Net Assets and Cash flow
As at 30 June 2019 net assets of GBP1,073.8m were GBP12.7m
higher than at the start of the year. Net assets per share as at 30
June 2019 were 796 pence (H1 2018: 787 pence).
Investments increased by GBP32.4m since the start of the year,
primarily driven by the investment made into the joint venture with
Riverside Housing Limited for the development of Stanton Cross,
Wellingborough.
Retirement benefit assets increased by GBP9.8m primarily as a
result of higher than expected returns on the scheme's assets and
contributions to the fund in the period. This has resulted in a
pension surplus of GBP11.1m at 30 June 2019 (H1 2018: GBP4.8m).
Inventories decreased during the half year by GBP50.0m to
GBP1,270.0m. The value of residential land, the key component of
inventories, decreased by GBP88.9m. This reflects a relatively
lower level of investment in the first half of the year and the
sale of our Stanton Cross development at Wellingborough into a
joint venture. Other movements in inventories included an increase
in work in progress of GBP38.3m driven by the infrastructure
investment on a number of our new or significant strategically
sourced developments in the first half, including Wokingham, North
Whiteley, and Bishops Stortford. We have also increased the level
of housing work in progress to support our expected higher delivery
volume in the second half of 2019. Our part exchange properties
balance has increased by GBP1.2m, as we make greater use of this as
a sales tool, in a controlled and disciplined manner, with no
properties held for more than three months unsold at the end of the
period.
Trade and other receivables increased by GBP26.8m, driven by
increased balances receivable from housing associations from 31
December 2018. Trade and other payables increased by GBP13.7m,
predominantly reflecting increased accruals and trade creditors
from production offset by GBP43.9m net settlement of land
creditors. Land creditors decreased to GBP249.4m (31 December 2018:
GBP293.3m) representing 32% of our gross land investment and
includes significant balances in respect of longer-term schemes at
North Whiteley and Alphington, Exeter purchased in 2018.
As at 30 June 2019 the Group's net cash balance, which reflects
cash and cash equivalents less bank and other loans, was GBP102.4m
(H1 18: GBP42.8m). Net cash is quoted excluding the lease
liabilities arising on adoption of IFRS 16, the impact of which is
clearly disclosed in note 9 to the financial statements. The Group
started the year with net cash of GBP126.8m and generated an
operating cash inflow before land expenditure of GBP64.7m (H1 2018:
GBP41.5m) and recognised a reduction of GBP36.4m in loans. The loan
reduction arose as a result of the movement of funding from Homes
England into the newly formed joint venture with Riverside at
Stanton Cross, Wellingborough. Net cash payments for land
investment increased to GBP95.9m (H1 2018: GBP81.2m), reflecting
the timing of land acquisitions and reduction in land creditors.
Cash inflows from joint ventures were GBP37.2m (H1 2018: nil),
primarily generated on the sale of land and inventory into the
Stanton Cross, Wellingborough joint venture, and non-trading cash
outflow increased to GBP21.9m (H1 2018: GBP19.3m) with increased
corporation tax payments; payments relating to dividends were
GBP51.1m (H1 2018: GBP43.6m).
We have a committed revolving credit facility of GBP250m in
place which expires in December 2022.
Land Bank
H1 2019 H1 2018
================================= ============== ==============
Consented plots added 1,004 505
================================= ============== ==============
Sites added 8 4
================================= ============== ==============
Sites owned at period end 115 107
================================= ============== ==============
Total consented land bank 16,215 16,107
================================= ============== ==============
Joint venture plots 3,054 -
================================= ============== ==============
Owned land bank plots 13,161 16,107
================================= ============== ==============
Average consented land plot ASP GBP316,000 GBP294,000
================================= ============== ==============
Average consented land plot cost GBP58,000 GBP51,000
================================= ============== ==============
The Group's total consented land bank including joint ventures
was 16,215 plots as at 30 June 2019. Including our share of joint
venture plots (1,527) and assuming our target of 4,000 total
completions p.a., the Group's land bank has reduced to 3.7 years as
at the 30 June 2019, in line with our strategy of maintaining a 3.5
to 4.0 years owned land bank.
The 1,644 plots that legally completed, excluding JVs, in the
year were replaced by a combination of site acquisitions and
conversions from our strategic land pipeline. In the year to date,
we have acquired 2,007 plots across 12 developments. Based on our
appraisal at the time of acquisition, the new additions, on
average, are expected to deliver a future gross margin and ROCE of
at least 25%.
Strategic land continues to be an important source of supply and
the Group had a total of 19,745 plots (31 December 2018: 19,278) at
30 June 2019. During the year to date 372 plots have been converted
from the strategic land pipeline into the consented landbank.
The average selling price of all units within the consented land
bank decreased over the year to GBP316,000, 1% lower than the
GBP319,000 at 31 December 2018, reflecting our strategy of
acquiring land with lower average selling price. The estimated
embedded gross margin in the consented land bank as at 30 June
2019, based on prevailing sales prices and build costs is
24.9%.
Impact of new accounting standards
The Group implemented IFRS 16 'Leases' for the first time from 1
January 2019, applying the modified retrospective approach,
resulting in the recognition of GBP21.8m in right-of-use assets at
30 June 2019, and GBP22.4m in lease liabilities.
The application of IFRS 16 had an immaterial impact on key
metrics for the 6 months ended 30 June 2019.
Principal risks and uncertainties
The Group is subject to a number of risks and uncertainties as
part of its activities. The Board regularly considers these and
seeks to ensure that appropriate processes are in place to manage,
monitor and mitigate these risks. The directors consider that the
principal risks and uncertainties facing the Group remain those
that are outlined on pages 32 to 35 of the Annual Report and
Accounts 2018, which is available from
www.bovishomesgroup.co.uk.
The Group has reconsidered the risks and uncertainties posed by
Brexit, in light of the continued uncertainty in UK politics and
note that we have not experienced any significant change in
customer behaviour, and we do not expect the political situation to
have a material impact on our expected results for 2019. The
mortgage market remains competitive, with the Help to Buy scheme
continuing to assist many first-time buyers to purchase a new build
property as supported by both Labour and Conservative political
parties. A significant proportion of our building materials are UK
sourced and we are in regular contact with our suppliers regarding
material availability, with no significant issues anticipated on
exit from the EU. The vast majority of our workforce, which
comprises both Bovis employees and sub-contractors, is UK domiciled
providing further protection from the impact of Brexit. The Group
has in place processes to monitor and mitigate these risks.
Group income statement
Six months Six months Year ended
ended ended
30 June 30 June 2018 31 Dec
2019 2018
GBP'000 GBP'000 GBP'000
(unaudited) (unaudited) (audited)
================================= ============= ============== ===========
Revenue 472,343 432,223 1,061,396
================================= ============= ============== ===========
Cost of sales (370,553) (341,826) (830,505)
================================= ============= ============== ===========
Gross profit 101,790 90,397 230,891
================================= ============= ============== ===========
Administrative expenses (25,993) (27,276) (56,723)
================================= ============= ============== ===========
Operating profit 75,797 63,121 174,168
================================= ============= ============== ===========
Financial income 466 301 481
================================= ============= ============== ===========
Financial expenses (3,218) (3,225) (6,585)
================================= ============= ============== ===========
Net financing costs (2,752) (2,924) (6,104)
================================= ============= ============== ===========
Share of (loss)/ profit of Joint
Ventures (569) - 5
================================= ============= ============== ===========
Profit before tax 72,476 60,197 168,069
================================= ============= ============== ===========
Income tax expense (13,727) (11,523) (31,499)
================================= ============= ============== ===========
Profit for the year attributable
to ordinary shareholders 58,749 48,674 136,570
================================= ============= ============== ===========
Earnings per share (pence)
================================= ============= ============== ===========
Basic 43.7p 36.1p 101.6p
================================= ============= ============== ===========
Diluted 43.7p 36.0p 101.5p
================================= ============= ============== ===========
Group statement of comprehensive income
Six months Six months Year ended
ended ended
30 June 30 June 2018 31 Dec
2019 2018
GBP'000 GBP'000 GBP'000
(unaudited) (unaudited) (audited)
============================================ ============= ============== ===========
Profit for the year 58,749 48,674 136,570
============================================ ============= ============== ===========
Other comprehensive (expense) / income
============================================ ============= ============== ===========
Items that will not be reclassified
to the income statement
============================================ ============= ============== ===========
Remeasurements on defined benefit
pension scheme 4,418 (2,358) (5,781)
============================================ ============= ============== ===========
Deferred tax on remeasurements on
defined benefit pension scheme (644) 456 1,083
============================================ ============= ============== ===========
Total other comprehensive income
/ (expense) 3,774 (1,902) (4,698)
============================================ ============= ============== ===========
Total comprehensive income for the
year attributable to ordinary shareholders 62,523 46,772 131,872
============================================ ============= ============== ===========
Group balance sheet
30 June 30 June 31 December
2019 2018 2018
GBP'000 GBP'000 GBP'000
(unaudited) (unaudited) (audited)
==================================== ============= ============= ============
Assets
==================================== ============= ============= ============
Intangible fixed assets 2,104 - 1,079
==================================== ============= ============= ============
Property, plant and equipment 3,064 4,758 2,181
==================================== ============= ============= ============
Right-of-use assets 21,848 - -
==================================== ============= ============= ============
Investments 61,408 7,135 28,992
==================================== ============= ============= ============
Restricted cash 1,747 1,412 1,381
==================================== ============= ============= ============
Trade and other receivables 563 1,426 611
==================================== ============= ============= ============
Retirement benefit asset 11,134 4,783 1,381
==================================== ============= ============= ============
Total non-current assets 101,868 19,514 35,625
==================================== ============= ============= ============
Inventories 1,269,646 1,305,014 1,320,229
==================================== ============= ============= ============
Trade and other receivables 91,351 97,420 64,505
==================================== ============= ============= ============
Cash and cash equivalents 102,397 78,598 163,217
==================================== ============= ============= ============
Total current assets 1,463,394 1,481,032 1,547,951
==================================== ============= ============= ============
Total assets 1,565,262 1,500,546 1,583,576
==================================== ============= ============= ============
Equity
==================================== ============= ============= ============
Issued capital 67,424 67,388 67,398
==================================== ============= ============= ============
Share premium 217,227 216,769 216,907
==================================== ============= ============= ============
Retained earnings 789,140 777,114 776,762
==================================== ============= ============= ============
Total equity attributable to equity
holders of the parent 1,073,791 1,061,271 1,061,067
==================================== ============= ============= ============
Liabilities
==================================== ============= ============= ============
Bank and other loans - 35,807 36,401
==================================== ============= ============= ============
Lease liabilities 17,272 - -
==================================== ============= ============= ============
Deferred tax liability 2,214 1,023 730
==================================== ============= ============= ============
Trade and other payables 97,457 105,233 183,769
==================================== ============= ============= ============
Total non-current liabilities 116,943 142,063 220,900
==================================== ============= ============= ============
Trade and other payables 351,332 277,618 278,706
==================================== ============= ============= ============
Lease Liabilities 5,107 - -
==================================== ============= ============= ============
Provisions 3,825 5,563 4,843
==================================== ============= ============= ============
Current tax liabilities 14,264 14,031 18,060
==================================== ============= ============= ============
Total current liabilities 374,528 297,212 301,609
==================================== ============= ============= ============
Total liabilities 491,471 439,275 522,509
==================================== ============= ============= ============
Total equity and liabilities 1,565,262 1,500,546 1,583,576
==================================== ============= ============= ============
These condensed consolidated financial statements were approved
by the Board of Directors on 10 September 2019.
Group statement of changes in equity
Total
retained Issued Share Total
earnings capital premium GBP'000
GBP'000 GBP'000 GBP'000
====================================== ========= ========= ========= =========
Balance at 1 January 2019 776,762 67,398 216,907 1,061,067
====================================== ========= ========= ========= =========
IFRS 16 application adjustment
at 1 January 2019 63 - - 63
====================================== ========= ========= ========= =========
Total comprehensive income 62,523 - - 62,523
====================================== ========= ========= ========= =========
Issue of share capital - 26 320 346
====================================== ========= ========= ========= =========
Share based payments 833 - - 833
====================================== ========= ========= ========= =========
Deferred tax on share based payments 37 - - 37
====================================== ========= ========= ========= =========
Dividends paid to shareholders (51,078) - - (51,078)
====================================== ========= ========= ========= =========
Balance at 30 June 2019 (unaudited) 789,140 67,424 217,227 1,073,791
====================================== ========= ========= ========= =========
Balance at 1 January 2018 773,255 67,330 215,991 1,056,576
====================================== ========= ========= ========= =========
Total comprehensive income 46,772 - - 46,772
====================================== ========= ========= ========= =========
Issue of share capital - 58 778 836
====================================== ========= ========= ========= =========
Share based payments 707 - - 707
====================================== ========= ========= ========= =========
Deferred tax on share based payments 25 - - 25
====================================== ========= ========= ========= =========
Dividends paid to shareholders (43,645) - - (43,645)
====================================== ========= ========= ========= =========
Balance at 30 June 2018 (unaudited) 777,114 67,388 216,769 1,061,271
====================================== ========= ========= ========= =========
Balance at 1 January 2018 773,255 67,330 215,991 1,056,576
====================================== ========= ========= ========= =========
Total comprehensive income 131,872 - - 131,872
====================================== ========= ========= ========= =========
Issue of share capital - 68 916 984
====================================== ========= ========= ========= =========
Deferred tax on other employee
benefits (113) - - (113)
====================================== ========= ========= ========= =========
Share based payments 1,413 - - 1,413
====================================== ========= ========= ========= =========
Dividends paid to shareholders (129,665) - - (129,665)
====================================== ========= ========= ========= =========
Balance at 31 December 2018 (audited) 776,762 67,398 216,907 1,061,067
====================================== ========= ========= ========= =========
Group statement of cash flows
Six months Six months Year ended
ended ended
30 June 30 June 2018 31 Dec
2019 2018
GBP'000 GBP'000 GBP'000
(unaudited) (unaudited) (audited)
============================================= ============= ============== ===========
Cash flows from operating activities
============================================= ============= ============== ===========
Profit for the year 58,748 48,674 136,570
============================================= ============= ============== ===========
Depreciation and amortisation 3,045 241 905
============================================= ============= ============== ===========
Financial income (466) (301) (481)
============================================= ============= ============== ===========
Financial expense 3,218 3,225 6,585
============================================= ============= ============== ===========
Profit/(loss) on sale of property, plant
and equipment - 68 (450)
============================================= ============= ============== ===========
Equity-settled share-based payment expense 833 685 1,413
============================================= ============= ============== ===========
Income tax expense 13,727 11,523 31,499
============================================= ============= ============== ===========
Share of results of Joint Ventures 569 - (5)
============================================= ============= ============== ===========
Profit on sale of assets from Joint
Ventures (401) - (1,197)
============================================= ============= ============== ===========
(Increase)/decrease in trade and other
receivables (39,697) (21,638) 12,402
============================================= ============= ============== ===========
Decrease/(increase) in inventories 50,847 15,197 (1,891)
============================================= ============= ============== ===========
(Decrease)/increase in trade and other
payables (2,311) (95,989) (15,692)
============================================= ============= ============== ===========
Decrease in provisions and increase
in retirement benefit obligations (8,886) (6,410) (7,042)
============================================= ============= ============== ===========
Net cash generated from/(used in) operations 79,226 (44,725) 162,616
============================================= ============= ============== ===========
Interest paid (896) (1,306) (2,773)
============================================= ============= ============== ===========
Income taxes paid (16,645) (13,437) (29,165)
============================================= ============= ============== ===========
Net cash inflow/(outflow) from operating
activities 61,685 (59,468) 130,678
============================================= ============= ============== ===========
Cash flows from investing activities
============================================= ============= ============== ===========
Interest received 105 221 278
============================================= ============= ============== ===========
Acquisition of intangible fixed assets - - (1,213)
============================================= ============= ============== ===========
Acquisition of property, plant and equipment (2,527) (2,452) (1,876)
============================================= ============= ============== ===========
Proceeds from sale of property, plant
and equipment - - 1,977
============================================= ============= ============== ===========
Movement of investment in Joint Ventures (36,693) 2,423 (20,300)
============================================= ============= ============== ===========
Dividends received from Joint Ventures 4,110 - 1,067
============================================= ============= ============== ===========
(Increase)/decrease in restricted cash (366) - 33
============================================= ============= ============== ===========
Net cash (outflow)/generated from investing
activities (35,371) 192 (20,034)
============================================= ============= ============== ===========
Cash flows from financing activities
============================================= ============= ============== ===========
Dividends paid (51,078) (43,645) (129,665)
============================================= ============= ============== ===========
Proceeds from the issue of share capital 345 859 984
============================================= ============= ============== ===========
(Repayment)/drawdown of bank and other
loans (36,401) 10,598 11,192
============================================= ============= ============== ===========
Net cash used in financing activities (87,134) (32,188) (117,489)
============================================= ============= ============== ===========
Net decrease in cash and cash equivalents (60,820) (91,464) (6,845)
============================================= ============= ============== ===========
Cash and cash equivalents at 1 January 163,217 170,062 170,062
============================================= ============= ============== ===========
Cash and cash equivalents at the end
of the period 102,397 78,598 163,217
============================================= ============= ============== ===========
1 Basis of preparation
Bovis Homes Group PLC (the "Company") is a company domiciled in
the United Kingdom. The consolidated financial statements of the
Company for the six months ended 30 June 2019 comprise the Company
and its subsidiaries (together referred to as the "Group") and the
Group's interest in Joint Ventures.
The condensed consolidated interim financial statements were
authorised for issue by the directors on 10 September 2019. The
financial statements are unaudited but have been reviewed by
PricewaterhouseCoopers LLP, the Company's auditors.
The condensed consolidated interim financial statements do not
constitute statutory accounts within the meaning of Section 434 of
the Companies Act 2006.
The figures for the half years ended 30 June 2019 and 30 June
2018 are unaudited. The comparative figures for the financial year
ended 31 December 2018 are an extract from the Group's statutory
accounts for that financial year. Those accounts have been reported
on by the Company's auditors and delivered to the Registrar of
Companies. The report of the auditors was (i) unqualified, (ii) did
not include a reference to any matters to which the auditors drew
attention by way of emphasis without qualifying their report and
(iii) did not contain a statement under Section 498 (2) or (3) of
the Companies Act 2006.
The preparation of a condensed set of financial statements
requires management to make judgements, estimates and assumptions
that affect the application of accounting policies and the reported
amount of assets, liabilities, income and expenses. Actual results
may differ from these estimates.
Judgements and estimates made by management in the application
of adopted International Financial Reporting Standards (IFRSs) that
have a significant effect on the financial statements and estimates
with a significant risk of material adjustment in following years
have been reviewed by the directors and, other than the estimated
half year income tax expense and application of IFRS16, remain
those published in the Company's consolidated financial statements
for the year ended 31 December 2018.
The condensed consolidated interim financial statements have
been prepared in accordance with IAS34 'Interim Financial
Reporting' as endorsed by the EU. As required by the Disclosure and
Transparency Rules of the Financial Conduct Authority, and with the
exception of the changes in accounting policies outlined below, the
condensed consolidated interim financial statements have been
prepared by applying the accounting policies and presentation that
were applied in the preparation of the Company's published
consolidated financial statements for the year ended 31 December
2018, which were prepared in accordance with IFRSs as adopted by
the EU.
As set out on page 124 in the Group's 2018 Annual Report and
Accounts, the following standards became effective for the first
time for the period beginning 1 January 2019 without material
impact on the Group's reported results:
- Amendment to IAS28 'Investments in Associates and joint
ventures', which has not had a significant impact on reported
results or position.
- IFRIC23 Uncertainty over income tax treatments, which has not
had a significant impact on reported results or position.
Also effective for the first time for the period beginning 1
January 2019 is IFRS16 'Leases' which replaces IAS17 'Leases',
requiring all assets held by the Group under lease agreements of
greater than 12 months in duration to be recognised as assets
within the Balance Sheet, unless they are considered to be of low
value (less than GBP3,000 in total payments). Similarly, the
present value of future payments to be made under those lease
agreements must be recognised as a liability. The Group has
reviewed its leasing arrangements and the impact on reported
results are disclosed in note 9.
The directors are satisfied that the Group has sufficient
resources to continue in operation for the foreseeable future, a
period of not less than 12 months from the date of this report.
Accordingly they continue to adopt the going concern basis in
preparing the condensed consolidated interim financial
statements.
2 Seasonality
In common with the rest of the UK housebuilding industry,
activity occurs year round, but there are two principal selling
seasons: spring and autumn. As these fall into two separate half
years, the seasonality of the business is not pronounced, although
it is biased towards the second half of the year under normal
trading conditions.
3 Segmental reporting
All revenue and profits disclosed relate to continuing
activities of the Group and are derived from activities performed
in the United Kingdom.
The Chief Operating Decision Maker, which is the Board, notes
that 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 of IFRS8.
4 Earnings per share
Profit attributable to ordinary shareholders
Six months Six months Year ended
ended ended 31 Dec 2018
30 June 2019 30 June Pence (audited)
Pence (unaudited) 2018
Pence (unaudited)
=========================== ================== =================== ================
Basic earnings per share 43.7 36.1 101.6
=========================== ================== =================== ================
Diluted earnings per share 43.7 36.0 101.5
=========================== ================== =================== ================
Basic earnings per share
Basic earnings per ordinary share for the six months ended 30
June 2019 is calculated on a profit after tax of GBP58,749,000 (six
months ended 30 June 2018: profit after tax of GBP48,674,000; year
ended 31 December 2018: profit after tax of GBP136,570,000) over
the weighted average of 134,423,488 (six months ended 30 June 2018:
134,856,833; year ended 31 December 2018: 134,555,573) ordinary
shares in issue during the period.
Diluted earnings per share
The calculation of diluted earnings per share at 30 June 2019
was based on the profit attributable to ordinary shareholders of
GBP58,749,000 (six months ended 30 June 2018: profit after tax of
GBP48,674,000; year ended 31 December 2018: profit after tax of
GBP136,570,000).
The Group's diluted weighted average ordinary shares potentially
in issue during the six months ended 30 June 2019 was 134,571,685
(six months ended 30 June 2018: 135,102,116, year ended 31 December
2018: 134,557,450).
5 Dividends
The following dividends per qualifying ordinary share were
settled by the Group:
Six months Six months Year ended
ended ended 31 Dec
30 June 2019 30 June 2018 2018
GBP'000 GBP'000 GBP'000
================================== ============== ============== ============
May 2019: 38.0p (May 2018: 32.5p) 51,078 43,645 43,645
================================== ============== ============== ============
November 2018: 64.0p - - 86,020
================================== ============== ============== ============
Total 51,078 43,645 129,665
================================== ============== ============== ============
The Board determined on 10 September 2019 that an interim
dividend of 20.5p for the first half of 2019 be paid. The dividend
will be settled on 22 November 2019 to shareholders on the register
at the close of business on 27 September 2019. The dividend has not
been recognised as a liability at the balance sheet date.
6 Interest in associates and joint ventures
In April 2019, Bovis Homes Limited entered into a joint venture
at Wellingborough, near Northampton, with Riverside Housing
Limited. As part of the initial transaction, land owned by the
Group was sold into the joint venture, Stanton Cross Developments
LLP. As disclosed in the full year annual report, the Group also
entered into another joint venture at Sherford, near Plymouth, in
December 2018 with Clarion Housing Group. Both Sherford and
Wellingborough developments are in their infancy and are undergoing
significant investment with limited trading; this is reflected in
the share of loss for the period which is primarily driven by
interest costs incurred.
Dividends received relate to the Group's investments in PRS
joint ventures which are in the process of disposing of their
property portfolios.
The carrying amount of equity-accounted investments has changed
as follows in the six months to 30 June 2019:
Six months Six months Year ended
ended ended 31 Dec
30 June 2019 30 June 2018
GBP'000 2018 GBP'000
GBP'000
============================= ============= ========== ==========
Beginning of the period 28,992 8,717 8,717
============================= ============= ========== ==========
Additions 35,821 - -
============================= ============= ========== ==========
Loans made/(repaid) 1,274 (2,113) 20,300
============================= ============= ========== ==========
(Loss)/profit for the period (569) 1,060 1,321
============================= ============= ========== ==========
Dividends paid (4,110) (528) (1,346)
============================= ============= ========== ==========
End of the period 61,408 7,136 28,992
============================= ============= ========== ==========
7 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
year.
Transactions between the Group, Company and key management
personnel in the first half of 2019 were limited to those relating
to remuneration, previously disclosed as part of the Group's Report
on directors' remuneration published with the Group's Annual Report
and Accounts 2018.
Mr Greg Fitzgerald, Group Chief Executive, is non-executive
Chairman of Ardent Hire Solutions ("Ardent"). The Group hires
forklift trucks from Ardent and the total net value of transactions
with this related party were as follows:
Six months Six months Year ended
ended ended 31 Dec
30 June 2019 30 June 2018
GBP'000 2018 GBP'000
GBP'000
=============================== ============== ========== ==========
Rental expenses paid to Ardent 1,302 875 2,059
=============================== ============== ========== ==========
The balance of rental expenses payable to Ardent at 30 June 2019
was GBP202,148 (30 June 2018: GBP4,000; 31 December 2018:
GBP155,000).
Transactions with Joint Ventures
Bovis Homes Limited is contracted to provide property and
letting management services to Bovis Peer LLP. Fees charged in the
period, inclusive of VAT, were GBP15,120 (six months ended 30 June
2018: GBP65,771; year ended 31 December 2018: GBP109,000). GBP6,720
of these fees are outstanding at 30 June 2019 (30 June 2018: nil;
31 December 2018: nil).
Bovis Homes Limited is part of a Joint Venture, IIH Oak
Investors LLP, to invest in private rental homes. As at 30 June
2019 loans of GBP1,616,089 (30 June 2018: GBP1,668,414; 31 December
2018: GBP1,598,319) were in place with IIH Oak Investors LLP at an
interest rate of 6%. Interest charges made in respect of the loans
were GBP47,281 (six months ended 30 June 2018: GBP67,000; year
ended 31 December 2018: GBP118,000).
Bovis Homes Limited is part of a Joint Venture, Bovis Latimer
(Sherford) LLP, to build houses in Sherford. As at 30 June 2019
loans of GBP23,566,947 (30 June 2018: GBPnil, 31 December 2018:
GBP22,256,000) were in place with an interest rate of 5%. Interest
charges made in respect of the loans were GBP242,117 (six months
ended 30 June 2018: GBPnil, year ended 31 December 2018: GBPnil).
Bovis Homes Limited also provides ongoing services to the LLP for
construction, management, accounting, company secretariat, sales
and marketing services; charges made in respect of these services
were GBP99,558 inclusive of VAT (six months ended 30 June 2018:
GBPnil, year ended 31 December 2018: GBPnil).
In April 2019, Bovis Homes Limited entered into a Joint Venture,
Stanton Cross Developments LLP, with Riverside Housing Limited,
with the LLP purchasing the Group's interest in its land and
infrastructure at Wellingborough, near Northampton. Bovis Homes
Limited provides ongoing services to the LLP for construction,
sales and company secretariat support; charges made in respect of
these services were GBP575,809 inclusive of VAT (six months ended
30 June 2018: GBPnil, year ended 31 December 2018: GBPnil).
There have been no other related party transactions in the first
six months of the current financial year which have materially
affected the financial performance or position of the Group, and
which have not been disclosed.
8 Reconciliation of net cash flow to net cash
Six months Six months Year ended
ended ended 31 Dec
30 June 30 June 2018 2018
2019 GBP'000 GBP'000
GBP'000
========================================== =========== ============== ==========
Net decrease in cash and cash equivalents (60,820) (91,464) (6,845)
========================================== =========== ============== ==========
Decrease/(increase) in borrowings 36,401 (10,598) (11,192)
========================================== =========== ============== ==========
Net cash at start of period 126,816 144,853 144,853
========================================== =========== ============== ==========
Net cash at end of period 102,397 42,791 126,816
========================================== =========== ============== ==========
Analysis of net cash:
========================== ======= ======== ========
Cash and cash equivalents 102,397 78,598 163,217
========================== ======= ======== ========
Bank and other loans - (35,807) (36,401)
========================== ======= ======== ========
Net cash at end of period 102,397 42,791 126,816
========================== ======= ======== ========
9 Change in accounting policies
This note explains the impact of the adoption of IFRS 16
'Leases' on the Group's financial statements and discloses the new
accounting policies that have been applied from 1 January 2019.
The Group has adopted IFRS 16 prospectively from 1 January 2019
and has not restated comparatives for the 2018 reporting period, as
permitted under the specific transitional provisions in the
standard. The reclassifications and the adjustments arising from
the new leasing rules are therefore recognised in the opening
balance sheet on 1 January 2019.
9a. Adjustments recognised on adoption of IFRS 16
On adoption of IFRS 16, the Group recognised lease liabilities
in relation to leases which had previously been classified as
'operating leases' under the principles of IAS 17 Leases. These
liabilities were measured at the present value of the remaining
lease payments, discounted using the lessee's incremental borrowing
rate as of 1 January 2019. The weighted average lessee's
incremental borrowing rate applied to the lease liabilities on 1
January 2019 was 2.5%.
2019
GBP000
======================================================== ========
Operating lease commitments disclosed as at 31 December
2018 25,103
======================================================== ========
Discounted using the lessee's incremental borrowing
rate of at the date of initial application (1,287)
======================================================== ========
(Less): short-term leases recognised on a straight-line
basis as expense (156)
======================================================== ========
(Less): low-value leases recognised on a straight-line
basis as expense (1,281)
======================================================== ========
Lease liability recognised as at 30 June 2019 22,379
======================================================== ========
Of which are:
======================================================== ========
Current lease liabilities 5,107
======================================================== ========
Non-current lease liabilities 17,272
======================================================== ========
The associated right-of-use assets for the Group's leases were
measured on a prospective basis, applying the new rules from 1
January 2019. Where relevant, right-of-use assets have been
adjusted for onerous lease contracts at the date of initial
application.
The recognised right-of-use assets relate to the following types
of assets:
30 June 2019 1 January 2019
GBP'000 GBP'000
========================== ============ ===============
Office properties 13,296 14,165
========================== ============ ===============
Show home properties 1,643 1,831
========================== ============ ===============
Site cabins 4,928 5,632
========================== ============ ===============
Office equipment 162 205
========================== ============ ===============
Motor vehicles 1,819 2,150
========================== ============ ===============
Total right-of-use assets 21,848 23,983
========================== ============ ===============
The change in accounting policy affected the following items in
the balance sheet on 1 January 2019:
-- Right-of-use assets - increase by GBP24.0m
-- Lease liabilities - increase by GBP24.6m
-- Provisions - decrease by GBP0.6m
-- Creditors - decrease by GBP0.1m
The net impact on retained earnings on 1 January 2019 was an
increase of GBP0.1m.
Practical expedients applied
In applying IFRS 16 for the first time, the Group has used the
following practical expedients permitted by the standard:
-- the use of a single discount rate to a portfolio of leases
with reasonably similar characteristics
-- reliance on previous assessments on whether leases are onerous
-- the accounting for operating leases with a remaining lease
term of less than 12 months as at 1 January 2019 as short-term
leases
-- the exclusion of initial direct costs for the measurement of
the right-of-use asset at the date of initial application, and
-- the use of hindsight in determining the lease term where the
contract contains options to extend or terminate the lease.
9b. The Group's leasing activities and how these are accounted
for
The Group leases various offices, site cabins, office equipment,
cars and show homes. Rental contracts are typically made for fixed
periods of 1 to 4 years but may be for longer or include extension
options. Lease terms are negotiated on an individual basis and
contain a wide range of different terms and conditions. The lease
agreements do not impose any covenants, but leased assets may not
be used as security for borrowing purposes.
Until the 2019 financial year, leases of property, plant and
equipment were classified as either finance or operating leases.
Payments made under operating leases (net of any incentives
received from the lessor) were charged to profit or loss on a
straight-line basis over the period of the lease.
From 1 January 2019, leases are recognised as a right-of-use
asset and a corresponding liability at the date at which the leased
asset is available for use by the Group. Each lease payment is
allocated between the liability and finance cost. The finance cost
is charged to profit or loss over the lease period so as to produce
a constant periodic rate of interest on the remaining balance of
the liability for each period. The right-of-use asset is
depreciated over the shorter of the asset's useful life and the
lease term on a straight-line basis.
Assets and liabilities arising from a lease are initially
measured on a present value basis. Lease liabilities include the
net present value of the following lease payments:
-- fixed payments (including in-substance fixed payments), less
any lease incentives receivable
-- variable lease payments that are based on an index or a fixed annual rate increase
The lease payments are discounted using lessee's incremental
borrowing rate, being the rate that the lessee would have to pay to
borrow the funds necessary to obtain an asset of similar value in a
similar economic environment with similar terms and conditions.
Right-of-use assets are measured at cost comprising the
following:
-- the amount of the initial measurement of lease liability
-- any lease payments made at or before the commencement date
less any lease incentives received
Payments associated with short-term leases and leases of
low-value assets are recognised on a straight-line basis as an
expense in profit or loss. Short-term leases are leases with a
lease term of 12 months or less. Low-value assets comprise site
equipment and other items less than GBP3,000 in total lease
costs.
10 Further information
Further information on Bovis Homes Group PLC can be found on the
Group's corporate website www.bovishomesgroup.co.uk, including the
analyst presentation document which will be presented at the
Group's results meeting on 10 September 2019.
Statement of directors' responsibilities
The directors' confirm that these condensed interim financial
statements have been prepared in accordance with International
Accounting Standard 34, 'Interim Financial Reporting', as adopted
by the European Union and that the interim management report
includes a fair review of the information required by DTR 4.2.7 and
DTR 4.2.8, namely:
-- an indication of important events that have occurred during
the first six months and their impact on the condensed set of
financial statements, and a description of the principal risks and
uncertainties for the remaining six months of the financial year;
and
-- material related-party transactions in the first six months and any material changes in the related-party transactions described in the last annual report.
The directors of Bovis Homes Group PLC are listed in the Bovis
Homes Group PLC Annual Report for 31 December 2018. A list of
current directors is maintained on the Bovis Homes Group PLC
website: www.bovishomesgroup.co.uk.
For and on behalf of the Board,
Greg Fitzgerald Earl Sibley
Chief Executive Group Finance Director
10 September 2019
(1) Inclusive of joint venture completions
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR SFISSSFUSELU
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September 10, 2019 02:02 ET (06:02 GMT)
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