bovishomesgroup.co.uk Bovis Homes Group PLC Annual report and accounts Bovis Homes Group PLC, The Manor House, North Ash Road, New Ash Green, Longfield, Kent DA3 8HQ. www.bovishomesgroup.co.uk 2016 Designed and produced by the Bovis Homes Graphic Design Department. Printed by Tewkesbury Printing Company Limited accredited with ISO 14001 Environmental Certification. Printed using bio inks formulated from sustainable raw materials. Printed on Cocoon 50:50 silk a recycled paper containing 50% recycled waste and 50% virgin fibre and manufactured at a mill certified with ISO 14001 environmental management standard. The pulp used in this product is bleached using an Elemental Chlorine Free process (ECF). When you have finished with this pack please recycle it. Annual report and accounts 2016 Bovis Homes Group PLC When you have finished with this pack please recycle it. Annual report and accounts Strategic report Business overview 4 2 2016 highlights Chairman’s statement A review of our business 4 Chairman’s statement model, strategy and Ian Tyler discusses how the 6 What we do summary financial and Group is well placed for 7 Reasons to invest operational performance the future 10 Housing market overview Our business and strategy 12 Interim Chief Executive’s report 18 Our business model 20 Strategic priorities 26 Principal risks and uncertainties 30 Risk management 12 Corporate social responsibility Interim Chief Executive’s report 32 Our CSR priorities Earl Sibley provides an overview of the year and Our financial performance discusses the plans ahead 46 Financial review Our governance 48 Directors and officers 51 Corporate governance report Detailed discussion of our 59 Remuneration report governance framework and 81 Audit Committee report remuneration policy 86 Nomination Committee report 88 Directors’ report 94 Auditor’s report 46 Financial review 101 Group income statement Financial Earl Sibley reports on the 101 Group statement of financial performance for statements comprehensive income the year Financial statements 102 Balance sheets - and notes Group and Company 103 Group statement of changes in equity 104 Statement of cash flows - Group and Company 105 Notes to the financial statements 131 Five year record Supplementary 132 2017 AGM Notice 136 Explanatory notes to the information AGM Notice 139 Shareholder information 140 Principal offices Contents 2016 highlights Financial highlights 11% s in revenues 6% s in net assets per share 13% s in dividends to 757p Revenue (£m) Profit before tax (£m) Active sales outlets Private reservations £1,054.8m £154.7m 99 2,960 (excluding PRS) 1054.80 160.100 101.999999 2986.0 8 99 97 102 843.84 54. 160.1 0 90 120.075 76.499999 2239.5 2,986 2,960 154.7 , 82 2,773 1 946.5 2,709 632.88 133.5 809.4 80.050 50.999999 1493.0 421.92 1,873 556.0 40.025 78.8 25.500000 746.5 210.96 425.5 53.2 0.00 0.000 0.000000 0.0 2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 Gross margin (%) Operating margin (%) Average sales price (£) Legal completions 22.3% 15.2% £254,900 3,977 24.500 17.300 254899.996470 3934.0 17.3 24.4 24.5 17.0 3,977 23.4 2950.5 3,934 12.975 4,900 18.375 22.8 191174.997352 22.3 5 15.2 3,635 14.9 2 13.3 231,600 12.250 8.650 127449.998235 1967.0 216,600 2,813 195,100 2,355 170,700 6.125 4.325 63724.999117 983.5 Business overview | 0.000 0.000 0.000000 0.0 2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 ROCE (%) Earnings per share (p) Consented land bank Strategic land bank 17.0% 90.1p 18,704 plots 25,494 plots 18.300 95.40 19814.0 25494.0 4 0 95.4 18.3 13.725 71.55 90.1 14860.5 19120.5 17.0 19,814 16.2 25,494 18,7 78.6 18,062 23,083 9.150 47.70 9907.0 12747.0 21,350 20,108 19,318 14,638 13,776 10.6 8.0 4.575 23.85 44.9 4953.5 6373.5 30.2 0.000 0.00 0.0 0.0 2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 Strategic report 2 | Annual report and accounts | Strategic report | Business overview The Group’s fundamentals remain strong Operational highlights 10% s increase in average 4% s private sales per active selling price sales outlet per week to 0.58 RevenueRevenue (£m) (£m) Profit beforeProfit taxbefore (£m) tax (£m) Active salesActive outlets sales outlets Private reservationsPrivate reservations £1,054£1.,80m54.8m £154.£71m54.7m 99 99 2,9602 ,(excluding960 (excluding PRS) PRS) 1054.80 1054.80 160.100 160.100 101.999999101.999999 2986.0 2986.0 8 8 99 99 97 97 102 102 843.84 843.84 54. 54. 160.1 160.1 0 0 90 90 120.075 120.075 76.499999 76.499999 2239.5 2239.5 2,986 2,986 2,960 2,960 154.7 154.7 , , 82 82 2,773 2,773 1 1 946.5 946.5 2,709 2,709 632.88 632.88 133.5 133.5 809.4 809.4 80.050 80.050 50.999999 50.999999 1493.0 1493.0 421.92 421.92 1,873 1,873 556.0 556.0 40.025 40.025 78.8 78.8 25.500000 25.500000 746.5 746.5 210.96 210.96 425.5 425.5 53.2 53.2 0.00 0.00 0.000 0.000 0.000000 0.000000 0.0 0.0 2012 20132012 20142013 20152014 20162015 2016 2012 2013201220142013 2015201420162015 2016 2012 20132012 20142013 20152014 20162015 2016 2012 20132012 20142013 20152014 20162015 2016 Gross marginGross margin(%) (%) OperatingOperating margin margin(%) (%) AverageAverage sales price sales (£) price (£) Legal completionsLegal completions 22.3%22.3% 15.2%15.2% £254,900£254,900 3,9773 ,977 24.500 24.500 17.300 17.300 254899.996470254899.996470 3934.0 3934.0 17.3 17.3 24.4 24.5 24.4 24.5 17.0 17.0 3,977 3,977 23.4 23.4 2950.5 2950.5 3,934 3,934 12.975 12.975 4,900 4,900 18.375 18.37522.8 22.8 191174.997352191174.997352 22.3 22.3 5 5 15.2 15.2 3,635 3,635 14.9 14.9 2 2 13.3 13.3 231,600 231,600 12.250 12.250 8.650 8.650 127449.998235127449.998235 1967.0 1967.0 216,600 216,600 2,813 2,813 195,100 195,100 2,355 2,355 170,700 170,700 6.125 6.125 4.325 4.325 63724.99911763724.999117 983.5 983.5 0.000 0.000 0.000 0.000 0.000000 0.000000 0.0 0.0 2012 20132012 2014201320152014 20162015 2016 2012 20132012 201420132015 2014 20162015 2016 2012 20132012 20142013 20152014 20162015 2016 2012 20132012 20142013 20152014 20162015 2016 ROCE (%ROCE) (%) EarningsEarnings per share per (p) share (p) ConsentedConsented land bank land bank StrategicStrategic land bank land bank 17.0%17.0% 90.1p90.1p 18,70184 plots,704 plots 25,49425 ,494plots plots 18.300 18.300 95.40 95.40 19814.0 19814.0 25494.0 25494.0 4 4 0 0 95.4 95.4 18.3 18.3 13.725 13.725 71.55 71.55 90.1 90.1 14860.5 14860.5 19120.5 19120.5 17.0 17.0 19,814 19,814 16.2 16.2 25,494 25,494 18,7 18,7 78.6 78.6 18,062 18,062 23,083 23,083 9.150 9.150 47.70 47.70 9907.0 9907.0 12747.0 12747.0 21,350 21,350 20,108 20,108 19,318 19,318 14,638 14,638 13,776 13,776 10.6 10.6 8.0 8.0 4.575 4.575 23.85 23.85 44.9 44.9 4953.5 4953.5 6373.5 6373.5 30.2 30.2 0.000 0.000 0.00 0.00 0.0 0.0 0.0 0.0 2012 20132012 2014201320152014 20162015 2016 2012 20132012 20142013 20152014 20162015 2016 2012 20132012 20142013 20152014 20162015 2016 2012 20132012 20142013 20152014 20162015 2016 Bovis Homes Group PLC | 3 Chairman’s statement The housing market The Board closely monitors UK housing market conditions as we progress through the cycle. We believe that the key factors which supported the positive market conditions in 2016 remain in place for 2017. The fundamental lack of supply in the UK housing market and the current strong demand from customers together provide a robust footing for the business. The positive Government support for house building was reconfirmed in the recent Housing White Paper. In particular the residential planning regime is ensuring that land supply to the market is ahead of production rates and the Help to Buy scheme provides Ian Tyler confidence for our customers to invest in new homes. Chairman We paused our land investment around the time of the EU referendum vote but have subsequently continued to 2016 was a difficult year for Bovis Homes with operational invest in land in a disciplined manner to take advantage of challenges following a period of ambitious growth.