Annual Report and Accounts 2007 and Accounts Annual Report
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R&A 07 cover TPC.qxd:Layout 1 27/3/08 12:23 Page 1 Bovis Homes Group PLC Homes Group Bovis Annual report and accounts 2007 Annual report Annual report and accounts 2007 Bovis Homes Group PLC Bovis Homes Group PLC, The Manor House, North Ash Road, New Ash Green, Longfield, Kent DA3 8HQ. www.bovishomes.co.uk/plc Designed and produced by the Bovis Homes Graphic Design Department. Printed by Tewkesbury Printing Co. Limited accredited with ISO 14001 Environmental Certification. Printed using bio inks formulated from sustainable raw materials. The paper used for this report is from a mixed sources product, it is produced using 20% recycled wood and fibre, 60% de-inked fibre recovered from post-consumer sources, 10% virgin TCF fibre and 10% virgin fibre from forests. The manufacturers of the paper are accredited with the ISO 14001 Environmental Management System. www.bovishomes.co.uk/plc Cert no. TT-COC-002496 Contents 01 Financial highlights 03 Chairman’s statement 09 Report of the directors Business review 28 Directors and officers 29 Report of the directors 32 Corporate governance policy guidelines 33 Report on corporate governance 36 Report on the activities of the Audit Committee 37 Report on the activities of the Nomination Committee 38 Report on directors’ remuneration 47 Statement of directors’ responsibilities in respect of the annual report and accounts and the financial statements 48 Independent auditors’ report to the members of Bovis Homes Group PLC 49 Group income statement 49 Group statement of recognised income and expense 50 Balance sheets 51 Statement of cash flows 52 Notes to the financial statements 72 Five year record 73 Notice of meeting 76 Explanatory notes to the notice of meeting 79 Shareholders’ information 80 Principal offices Annual report and financial statements 2007 1 Financial highlights Pre tax profit* £123.6m 2007 decreased 6% to £123.6m (2006: £132.0m) 2007 £123.6m 2006 £132.0m Earnings per share* 72.4p 2007 decreased 7% to 72.4p (2006: 77.8p) 2007 72.4p 2006 77.8p Operating margin* 22.4% 2007 decreased to 22.4% (2006: 23.1%) 2007 22.4% 2006 23.1% Dividends per share 35p 2007 increased 17% to 35p (2006: 30p) 2007 35p 2006 30p *2006 Pre tax profit, earnings per share and operating margin are stated before a one-off pension credit of £3.5 million Bovis Homes has delivered a good performance whilst maintaining a sector-high operating profit margin Chairman’s statement 3 Chairman’s statement With activity in the housing marketplace Total revenue generated was £555.7 million slowing during 2007, Bovis Homes has (2006: £597.3 million), and the Group legally delivered a good performance whilst completed on 2,930 homes (2006: 3,123) maintaining a sector-high operating in the year. profit margin. The average sales price of private homes grew During 2007, the Group continued to focus on by 3.8% year against year. However, the overall its long term investment programme, and was average sales price fell by 2.3%, from £183,700 successful in the second half of 2007 in both in 2006 to £179,500 in 2007. The main factor gaining a ‘resolution to grant’ planning behind this movement was mix, with social permission at its major project in Filton, Bristol housing taking a greater proportion of the Tim Melville-Ross and in subsequently acquiring this key site. whole in 2007, as compared to 2006. Good progress has also been made at Chairman The operating margin of the Group remained Wellingborough. After receiving a ‘resolution to strong at 22.4%. This was somewhat diluted by grant’ planning permission in December 2006, the impact of one-off restructuring and other this major project received its outline planning fair value adjustments associated with the consent in January 2008. Whilst the Group acquisition of Elite Homes. Adjusting for these, remained cautious in investing in consented the underlying operating margin was 22.8%, land during 2007, it is well positioned to take only marginally behind the prior year: advantage of opportunities to acquire 23.1% pre one-off pension credit. consented land that may arise during 2008. Dividend The Group successfully acquired Elite Homes The Group remains committed to its existing Group Ltd, a regional housebuilder, during the guidance on dividends, which is that second half of 2007, which complements the dependent on business environment, and Group’s existing activities in the north of conditional on any necessary approvals, the England. Physical integration is now complete, Group will double its dividend from 20.0p per as is the re-branding of existing outlets, and share in 2004 to 40.0p per share in 2008. the land bank acquired is enabling the region Looking beyond 2008, the Board remains intent to deliver against its existing growth plans, in a on a progressive dividend policy over the long geography where land acquisition has been term, business environment permitting. difficult given planning constraints. Consistent with the Group’s existing guidance, Whilst the Group made several large but also reflecting the changes in interim investments during the year, the Group exited payout ratio announced and made at the half 2007 with low gearing, and only £44 million of year 2007, the Group is proposing a final net debt, leaving it well placed to continue to dividend for the year of 17.5p per share. In develop going forward. total, taken together with the interim dividend Results of 17.5p per share paid in November 2007, the For the year ended 31 December 2007, the Group’s total dividend for 2007 is 35.0p per Group achieved a pre-tax profit of £123.6 share, a year on year increase of 16.7%. million, as against a comparable £132.0 million This dividend is covered 2.1 times by the in 2006 (stated before a one-off non-cash basic earnings per share of 72.4p. pension credit of £3.5 million). Earnings per share was 72.4p in 2007 as compared to 77.8p per share before pension credit in 2006. The Board remains committed to its existing guidance on dividends The proposed final dividend of 17.5p per non-executive Chairman by Mr Malcolm Harris, Employees share for 2007 will be paid on 23 May 2008 to the current Chief Executive. Mr David Ritchie, The Board would like to thank its employees shareholders on the register at the close of the current Group Managing Director will step and sub-contractors for their efforts and business on 28 March 2008. The Board intends up as Chief Executive, and his current position achievements during a year that has been to offer a scrip dividend alternative. will cease to exist. challenging in many respects. In particular, the Shareholders will be able to choose between Board would like to thank Mr Peter Baker, the Whilst the Group recognises that the new ordinary shares or cash, for some or all regional Managing Director of South West appointment of the new chairman diverges of their dividend under this programme. region who retired during the year after from the Combined Code’s recommended 26 years service and its Northern regional team The Board practice, the Group has actively canvassed its for its efforts in support of the Elite Homes Following the retirement of Mr Mark Nicholls major shareholders and is therefore confident acquisition, as well as welcoming Elite Homes from the Board at the AGM in 2007, the make- that this change is not only in the best employees to the Bovis Homes Group. up of the Board has remained stable: with four interests of the Group but is also strongly non-executive directors including myself, and supported by shareholders. The Group is in the three executive directors. process of appointing an independent non-executive deputy Chairman as part of Looking ahead, on 2 July 2008 I shall be these changes. standing down and will be succeeded as Chairman’s statement 5 Market conditions and prospects However, the Group also recognises that the The housing market during 2007 has been short term outlook for the market remains impacted by the tightening of interest rates uncertain. Notwithstanding this, the Group is over the first half of 2007, and then the well placed to trade across a range of differing banking crisis during the second half, which market conditions: with its good quality has had an impact in terms both of availability mid-market product mix, long term investment of credit and consumer confidence. In fact, the programme in strategic land, and present low ongoing GfK NOP omnibus survey on consumer gearing. As a result, the Group remains confidence suggested that the consumer confident in its ability to deliver shareholder climate for major purchases was at its lowest value over the mid and long term. ebb for 15 years in December 2007. Tim Melville-Ross The Group remains confident in the long term Chairman prospects for housebuilding in the UK, and notes the announcement of Government targets for housebuilding well in excess of current rates of development: an indicator of a long term excess of demand over supply. The Board remains confident in the long term prospects for housebuilding in the UK Chairman’s statement 7 Family growth and increases in household income are key motivations behind the desire to buy new property Report of the directors Business review 9 Business review The marketplace and Group performance Bovis Homes Group PLC’s (Bovis Homes) The Group’s trading activity in 2007 was business is designing, building and selling heavily influenced by the significant increase homes for both the private and public sector, in the UK bank base interest rates, which operating in England and Wales.