BOVIS HOMES GROUP PLC

FINAL RESULTS FOR THE YEAR ENDED 31 DECEMBER 2016

A clear set of priorities to deliver operational improvements and a 'customer first' culture

Overview

·      A difficult year for the Group following a period of ambitious growth

·      Weaknesses in our production process and a high level of customer service issues leading to a one-off £7m customer care provision

·      2017 focused on re-setting the business and delivering on our clear operational priorities resulting in a deliberate slowing of our rate of production

·      Group fundamentals remain strong with over 3,000 plots added to our high quality consented landbank

·      Financial position strengthened with year end net cash increasing to £38.6m

·      Strategic and structural review to ensure we deliver the highest possible future returns from our valuable land assets

·      Dividend of 45.0 pence per share, an increase of 13%, reflecting the Group's strong financial position and the Board's confidence in future prospects

* ROCE is calculated as operating profit divided by average opening and closing capital employed excluding net cash and investment in joint ventures

2017 priorities

We have embarked on a programme to deliver significant and urgent improvement in underlying processes across the business, focused on the delivery of the highest quality of product and service to our customers. We aim to return to being a top quartile industry performer in customer service, product quality and production efficiency. Our priorities for 2017 are:

Developing to programme

-      End to end review of production process and phasing of completions

-      Strengthening of operational capability

Transforming customer service

-      Customer task force in place with immediate priority of addressing outstanding customer concerns

-      Overhaul of and investment in our customer service function, procedures and controls

-      Reinforcing a 'customer first' culture across the business

Leadership and operational excellence

-      Strengthening of regional management teams

-      Establishing functional excellence and consistent best practice across the Group

-      Alongside these operational priorities we remain focused on progressing balance sheet opportunities in 2017 to improve capital efficiency and deliver enhanced shareholder returns. These include the sale of part or all of our shared equity assets, a reduction in part exchange assets, and the continuation of land sales where appropriate. We are also undertaking a detailed review of the ways in which we can maximise capital efficiency on some of our larger strategic sites including Wellingborough, in particular the potential for strategic partnerships.

2017 outlook

The Group is focused on making 2017 the year when we re-set the business and deliver on our operational priorities. Reflecting this we are slowing our rate of production and targeting completion volumes for 2017 to be c. 10% to 15% below the 2016 level, before a return to normal industry production levels. Our production rate in early January has been slowed to support our priority focus on customer service, and current production programmes have been extended to allow sufficient time to ensure each home is delivered to the high standard of quality that we and our customers expect.

The average selling price is again expected to increase reflecting the mix coming through our landbank. We continue to see market inflation impacting both the cost of subcontract labour and material supplies. To deliver on our operational priorities we will also see an increased level of investment in 2017 across the business.

We will continue to invest in high quality land opportunities that meet our minimum acquisition hurdle rates but will maintain our consented land bank at broadly current levels.

Whilst there will inevitably be an impact on our earnings and cashflow from the actions we are taking in 2017, the Board intends to recommend maintaining the dividend at the level declared for 2016, confirming its confidence in the future potential of the business.

Strategic and structural review

Given the clear need to ensure we optimise the returns achieved on the Group's high quality land assets, we are commencing a fundamental review of our strategy and structure, including our medium term aspirations for growth, the basis of capital allocation to our land bank and other assets, our geographic coverage and our organisation design.

Commenting, Ian Tyler, Chairman of Bovis Homes Group PLC said:

"Despite the difficulties of 2016, the Board remains confident in the Group's abilities to deliver improved returns to shareholders. The process of transformation is already underway under Earl Sibley's interim leadership and I am confident the plans in place will address the operational weaknesses we have seen in our business, and focus us once again on delivering high quality product and service to our customers. Further, we are undertaking a strategic and structural review of the business to ensure we meet our commitment to deliver the highest possible returns from our valuable land assets."

Commenting, Earl Sibley, Interim Chief Executive of Bovis Homes Group PLC said:

"We have a clear set of operational priorities for 2017 and are fully committed to improving our levels of customer service and delivering high quality homes this year and in the future. The fundamentals of the business remain strong with a robust financial position and high quality land bank. With our focus on higher levels of customer service, improved build efficiency, and a refreshed culture, we are confident we will generate enhanced shareholder returns over the medium term."

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 a representative on that such trends, results or activities will continue in the future. Undue reliance should not be placed on forward looking statements.

There will be a meeting for analysts and investors at 0900 today at RBS, 250 Bishopsgate, London, EC2M 4AA. To listen remotely to the presentation, please dial 020 3139 4830 followed by the participant code 51059881#. A playback facility will be available shortly after the presentation has finished. An audiocast of the presentation will be available from mid-afternoon today at www.bovishomesgroup.co.uk.

Chairman's statement

2016 was a difficult year for Bovis Homes with operational challenges following a period of ambitious growth. Whilst we achieved strong growth in the first half of 2016, we were unable to deliver our anticipated unit sales and customer service performance in the second half. As a result, we saw earnings fall year on year.

This shortfall in performance had two underlying causes which inevitably have their origins in preceding periods. Firstly, our production processes have not been sufficiently robust to cope with the twin pressures of our growth strategy and the resource shortages across the industry. Secondly, we have not designed and resourced our customer service proposition and processes appropriately to deliver a 'customer first' culture.

In order to address both of these we have embarked on a programme to deliver significant and urgent improvement in underlying processes across the business, focused on the delivery of the highest quality of product and service to our customers. In taking these actions we will slow the Group's rate of production for 2017 and are targeting completions volumes for the year to be c. 10% to 15% below prior year's level, before a return to normal industry production levels.

The fundamentals of the business remain strong with our market positioning reflected in our high quality southern biased land bank. The land additions executed in 2016 have further enhanced our land bank and ensured we hold over four years of owned consented land supply together with substantial further opportunity in our strategic land interests.

Given the clear need to ensure we optimise the returns achieved on the Group's high quality land assets, we are commencing a fundamental review of our strategy and structure, including our medium term aspirations for growth, the basis of capital allocation to our land bank and other assets, our geographic coverage and our organisation design.

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 confidence for our customers to invest in new homes.

We paused our land investment around the time of the EU referendum vote but have subsequently continued to invest in land in a disciplined manner to take advantage of the continued strength in demand in our core regional markets combined with a continuing flow of good land acquisition opportunities.

The current shortage of skilled construction labour in the industry remains an operational challenge for the industry as a whole. This constraint has continued to impact our business during 2016. We are working hard to bring new people into the sector and we continue to invest in developing our own construction teams and support our subcontractors through apprenticeship schemes.

Dividends and earnings per share

The Group has retained the strength of its balance sheet during 2016 with an improved net cash position at year end. We delivered earnings per share of 90.1p with full year profits impacted by the shortfall in completions and increased costs including a one-off £7 million customer care provision. Given the strength of our balance sheet and our confidence in the future prospects of the business, a final dividend for 2016 of 30.0 pence per share will be recommended. When combined with the interim dividend this provides a total dividend of 45.0 pence for the year, an increase of 13% on 2015. The final dividend will be payable on 19 May 2017 to shareholders on the register on 24 March 2017.

Whilst there will inevitably be an impact on our earnings and cash flow from the actions we are taking in 2017, the Board intends to recommend maintaining the dividend for 2017 at the declared level for this year confirming its confidence in the future potential of the business

People

We continue to invest in our people, and our training and development programmes will be extended further in 2017, supported by the launch of the national Bovis Homes Training Centre.

The commitment and skill shown by the Group's employees despite the difficulties faced during 2016 continues to impress me and, on behalf of the Board, I would like to thank them all for their dedication and hard work. I would also like to extend my thanks to our subcontractors and suppliers who are such a key component of our business.

The Board

I would like to thank my colleagues for another year of support and positive challenge. Nigel Keen joined the Board during the year and we have already benefitted substantially from his insight and experience. I would also like to express my thanks to David Ritchie, our previous Chief Executive, who stepped down in January 2017 after eighteen years of valued service. Earl Sibley, the Group Finance Director, has taken on the role of Interim Chief Executive and the search for a permanent Chief Executive Officer is underway.

The future

Despite the difficulties of 2016, the Board remains confident in the Group's abilities to deliver improved returns to shareholders. The process of transformation is already underway under Earl Sibley's interim leadership and I am confident the plans in place will address the operational weaknesses we have seen in our business, and focus us once again on delivering high quality product and service to our customers. Further, we are undertaking a strategic and structural review of the business to ensure we meet our commitment to deliver the highest possible returns from our valuable land assets.

Ian Tyler
Chairman

Interim Chief Executive's statement

Bovis Homes has pursued an ambitious growth strategy over the past five years with completions almost doubling over this period. This fast growth has led to progressively developing operational challenges across the business.

Whilst we achieved strong growth in the first half of the year we were unable to deliver our planned level of completions for the second half, with a shortfall of 180 private homes in December. This reflected underlying weaknesses in our production processes and resulted in higher than expected costs.

Our customer service standards have been declining for some time and combined with the delays to production towards the year end, we have entered 2017 with a high level of customer service issues. Our customer service proposition has failed to ensure that all of our customers receive the expected high standard of care. The Group has taken a one-off £7 million customer care provision in 2016 to address this high level of customer issues. After taking this provision, the Group delivered a profit before tax of £154.7 million, below our previously stated range of £160 to £170 million.

The fundamentals of our business remain strong. We have continued to invest in our consented land bank which stands at £1,020.6 million, representing over four years of high quality land supply, and our balance sheet remains robust with increased year end net cash of £38.6 million.

Having assumed the role of Interim Chief Executive on 9 January 2017, I have established a clear set of operational priorities for 2017 and actions are already being taken. We are performing an end to end review of our production processes to ensure we develop to programme and deliver our customers the high quality homes they expect. We are fully committed to putting our customers back at the centre of everything we do and to delivering a much improved level of customer service. We will strengthen both our regional management teams and functional leadership, and continue to invest in our people to establish consistent best practice across all regions of the Group.

2017 operational priorities

The implementation of our operational priorities has commenced in the early weeks of 2017 and is focused on:

o  Developing to programme

o  Transforming customer service

o  Leadership and operational excellence

Developing to programme

The business has suffered from weakness in our production processes which has manifested in our development programmes not delivering to plan, in particular around the half year and year end periods when we have had a heavy weighting of completions.

We have commenced an end to end review of our build process from the point we acquire a development to the timing of the final completion. We will bring in external best practice to complement good internal procedures where appropriate, and will benchmark across all our regions. In particular we are focused on:

•     Adding new senior operational resource to target a reduction in build times, improve build quality and ensure we have the optimum resourcing models

•     Investment in resourcing of and training in our build management system

•     Improved communication with our supply chain, working as a collaborative partnership throughout the build process

•     Ensuring common understanding and adherence to our best practices across all regions

•     Formal cross functional development project teams to bring effective collaboration and a high level of internal customer service

Achieving better management of our build programme and developing to plan will result in a significant improvement to our build efficiency.

Transforming customer service

The Group's customer service levels have experienced a decline in recent years, as evidenced by our HBF customer satisfaction rating. At the beginning of this year we commenced a clear programme of actions to arrest this decline and to progressively return our HBF rating to the top quartile of listed housebuilders. A customer service task force has been established with its immediate priority to address outstanding concerns from customers within our two year warranty period.

We are increasing the resource across our customer service function to improve both our project management capability and our day to day operational capacity. We have additional staff dealing with customer enquiries and more operatives on the ground working in customers' homes.

We are reviewing all of our customer service procedures and controls to ensure best practice across all regions, and are already progressing with:

•     Improved customer service training for all staff

•     Enhanced quality assurance processes prior to homes being handed over, making our customers an integral part of that process

•     Improvements to our customer responsiveness and communication

•     Review of complaints procedures for the periods both pre and post legal completion

•     The formation of a Homebuyers Panel composed of customers who will provide advice and challenge as we review all aspects of our customer service in the coming months

Leadership and operational excellence

Last year we saw an increased level of investment in our people through training and development programmes and this will be extended further during 2017, supported by the opening of the Bovis Homes Training Centre.

The improvement of both external and internal customer service and the driving of a cultural change in how we operate, are at the core of our leadership development programme. Our values of quality, caring and integrity should stand at the centre of our decision making and inform how we effect operational changes.

As we commence 2017 our eight regional businesses are fully operational, having opened three new office locations in close proximity to our developments during 2016. We are focused on strengthening our regional management teams and establishing functional excellence across the Group. To further develop our functional leadership, our group commercial function introduced in 2016 will be complemented by new senior leadership positions for both customer service and development activities.

Improving capital efficiency

Alongside these operational priorities we remain focused on progressing balance sheet opportunities in 2017 to improve capital efficiency and deliver enhanced shareholder returns.  These include the sale of part or all of our shared equity assets, a reduction in part exchange assets, and the continuation of land sales where appropriate.  We are also undertaking a detailed review of the ways in which we can maximise capital efficiency on some of our larger strategic sites including Wellingborough, in particular the potential for strategic partnerships.

Land investment strategy

We continue to pursue a low risk approach to land investment targeting greenfield, traditional, two storey, family housing in Southern biased locations, sourced from both the consented land and strategic land markets.

In 2016, we acquired 27 sites following the acquisition of 35 sites in 2015, with the Group having deliberately paused its investment in land around the time of the EU referendum. We took the opportunity to increase our land acquisition hurdle rates in June to levels which have since been maintained

The 3,047 plots added to the land bank in 2016 have an estimated future revenue of c. £950 million and an estimated future gross profit potential of c. £260 million based on sales prices and build costs at the point of appraisal, delivering an estimated future gross margin of 27.2%. The average return on capital employed of the land acquired based on investment appraisal at the time of acquisition is c. 30%.

The estimated gross profit potential of the Group's total consented land bank plots as at 31 December 2016, based on prevailing sales prices and build costs, has increased to c. £1,300 million with a gross margin of 25.6% (31 December 2015: £1,247 million at 25.5%).

The successful conversion of strategic land continues to be a key driver of value for the Group. New strategic land investments added 3,346 plots into the strategic land bank, giving a total of 25,494 strategic plots at the year end across 89 strategic sites. The strategic land bank reflects positively the Group's strategy of land acquisition with 67% of the strategic plots in the South of England.

During 2016, the Group converted 562 plots from the strategic land bank into the consented land bank. This was a lower number of plots than in prior years due to timings of consents but we are already seeing success early in 2017 on a number of sites including 503 additional plots at Bishops Stortford transferring into the consented land bank.

We have signed the revised s106 for our key site at Wellingborough which represents the largest single investment on our balance sheet (c. £50 million). We have progressed well with the main infrastructure road into the housing area and will commence building houses later this year. We are currently looking to identify partners for this development.

We continue to develop our key strategic site at Wokingham with the first homes legally completing during the year and a further land sale going ahead as planned. The proceeds from this land sale largely covered the latest deferred land payment for the site thereby managing the capital employed on this key scheme.

In pursuit of capital efficiency the Group completed the sale of three parcels of land during 2016, and further land sales are planned in 2017.

2016 Housing delivery

In 2016 the Group delivered 3,977 homes (2015: 3,934). Private legal completions (excluding PRS) decreased by 1% to 2,884 (2015: 2,901) reflecting the shortfall in private completions at the year end. Legal completions of social homes were 1,074 (2014: 848), representing 27% of total legal completions (2015: 22%).

Average active sales outlets of 99 were lower than the 102 in 2015, with the Group having closed more sites than previously anticipated. Despite this reduction in active sales outlets, an increase in net private reservations per site per week to 0.58 (2015: 0.56) enabled the Group to achieve 2,960 private reservations, broadly in line with the 2,986 achieved in 2015.

Our average sales price increased by 10% to £254,900 (2015: £231,600) with the average sales price of private legal completions (excluding PRS) 10% higher at £306,000 (2015: £272,100). These average prices benefitted both from the improved geographical and product mix on new sites driving higher sales prices and some modest price inflation. The increased total revenue supported an improvement in capital turn to 1.12 (2015:1.05).

Despite the slippage in production that caused difficulties towards the end of 2016, the overall production levels during the year were over 4,200 notional units of build, 7% ahead of 2015. Housing work in progress ended 2016 higher at 1,166 units worth of production (2015: 929), with work in progress turn as a result reducing to 2.8 times (2015: 3.5). Looking forward through 2017 we aim to align our production rates better with our sales rates and target a more even flow of production and completions through the year.

The Group's average construction cost per square foot in 2016 excluding the one off customer care provision was 11% higher than in 2015. We continue to see constraints on the availability of skilled labour across the sector resulting in increased market labour costs, and for the year inflationary pressures increased our total build costs by c. 5%. Product mix and the delivery of completions in higher value locations also increased our average build cost, whilst inefficiencies in our production processes and phasing, in particular the heavy weighting of completions to the year end, were also a factor.

Managing our construction cost base remains a key focus for management and delivering on our operational priority of developing to programme will result in improved build efficiency across the Group. We are focused on strengthening our relationships with key subcontractors, working in closer partnership with them throughout the production process, and will continue to optimise materials costs through Group-wide purchase agreements.

The Group recognised a one off £7 million customer care provision at the year end as a result of a much higher level of customer service issues. Customer service standards fell significantly during 2016 and homes were completed, in particular at the year end, which fell materially short of the high standard expected. We have a customer service task force in place whose absolute focus is to address these issues and the customer care provision will cover the cost of the required remedial work and appropriate compensation for affected customers.

Outlook

The Group is focused on making 2017 the year when we re-set the business and deliver on our operational priorities. Reflecting this we are slowing our rate of production and targeting completion volumes for 2017 to be c. 10% to 15% below the 2016 level, before a return to normal industry production levels. Our production rate in early January has been slowed to support our priority focus on customer service, and current production programmes have been extended to allow sufficient time to ensure each home is delivered to the high standard of quality that we and our customers expect.

The average selling price is again expected to increase reflecting the mix coming through our landbank. We continue to see market inflation impacting both the cost of subcontract labour and material supplies. To deliver on our operational priorities we will also see an increased level of investment in 2017 across the business.

We will continue to invest in high quality land opportunities that meet our minimum acquisition hurdle rates but will maintain our consented land bank at broadly current levels.

Whilst there will inevitably be an impact on our earnings and cashflow from the actions we are taking in 2017, the Board intends to recommend maintaining the dividend at the level declared for 2016, confirming its confidence in the future potential of the business.

Financial Review

Revenue

The Group generated total revenue of £1,054.8 million, an increase of 11% on the previous year (2015: £946.5 million). Housing revenue was £1,022.8 million, 12% ahead of the prior year (2015: £910.1 million) with our average sales price increased by 10% to £254,900 (2015: £231,600). Other revenue was £6.2 million (2015: £6.4 million) and land sales revenue, associated with three land sales, was £25.8 million in 2016, compared to four land sales achieved in 2015 with a total revenue of £30.0 million.

Gross Profit

Total gross profit was £235.7 million (gross margin: 22.3%), compared with £232.3 million (gross margin: 24.5%) in 2015. The profit on land sales in 2016 was £7.7 million (2015: £8.8 million) as we continue the strategy of managing our capital base through the disposal of parcels of land on large sites.

Housing gross margin was 22.2% in 2016, below the 24.4% achieved in 2015. This was largely due to the deferral of circa 180 private completions into 2017 which resulted in an increase in the proportion of social completions in the year to 27% (2015: 22%) these having lower profit margins, as well as reflecting the one off £7.0 million customer care provision. This provision reflects additional costs expected to be incurred across the business as we conclude a higher than expected level of outstanding remedial items on homes completed in the last two years, as well as the costs to rectify a limited number of homes with more significant issues and the associated compensation costs.

During 2016, our construction costs increased by 12% per square foot, reflecting higher value site locations, the inflationary impact of labour and materials, additional costs related to delivering our production at peak times and the impact of the one off customer care provision.

Operating Profit

The Group delivered an operating profit for the year ended 31 December 2016 of £160.0 million (2015: £163.5 million) at an operating profit margin of 15.2% (2015: 17.3%).

Overheads, including sales and marketing costs, increased by 10% in 2016, as we invested in our enlarged operating structure with average headcount growing 15% over the year and three new offices opening to support our eight operating regions. The overheads to revenue ratio reduced slightly to 7.1% in 2016 (2015: 7.2%) with the further efficiencies from growing the scale of the business not being realised due to the deferral of volume and therefore revenue into 2017.

Profit before tax and earnings per share

Profit before tax reduced to £154.7 million, comprising operating profit of £160.0 million, net financing charges of £5.6 million and a profit from joint ventures of £0.3 million. This compares to £160.1 million of profit before tax in 2015, which comprised £163.5 million of operating profit, £5.2 million of net financing charges and a profit from joint ventures of £1.8 million. The profit from joint ventures in 2015 included the benefits of revaluing both the Bovis Peer LLP and IIH Oak Investors LLP PRS property portfolios in the period.

Basic earnings per share for the year were 90.1p compared to 95.4p in 2015. This has resulted in a return on equity of 13% (2015: 15%).

Financing

Net financing charges during 2016 were £5.6 million (2015: £5.2 million). Net bank charges were £3.3 million (2015: £3.3 million), as a result of modestly lower net debt during 2016 than 2015 offset by a higher level of commitment fees and issue costs amortised in 2016. We incurred a £5.0 million finance charge (2015: £4.9 million charge), reflecting the imputed interest on land bought on deferred terms. The Group benefited from a finance credit of £2.4 million (2015: £2.9 million) arising from the unwinding of the discount on its available for sale financial assets during 2016 as well as other credits of £0.3 million (2015: £0.1 million).

Taxation

The Group has recognised a tax charge of £33.9 million at an effective tax rate of 21.9% (2015: tax charge of £32.1 million at an effective rate of 20.0%). The increased tax rate is driven by a prior year deferred tax adjustment relating to the transition of our subsidiaries from UK GAAP to FRS 101. The Group has a current tax liability of £13.9 million in its balance sheet as at 31 December 2016 (2015: current tax liability of £16.9 million).

Dividends

As previously communicated the Board will propose a 2016 final dividend of 30.0p per share. This dividend will be paid on 19 May 2017 to holders of ordinary shares on the register at the close of business on 24 March 2017. The dividend reinvestment plan gives shareholders the opportunity to reinvest their dividends in ordinary shares. Combined with the interim dividend paid of 15.0p, the dividend for the full year totals 45.0p and compares to a total of 40.0p for 2015, an increase of 13%.

Net assets

As at 31 December 2016 net assets of £1,015.9 million were £58.1 million higher than at the start of the year. Net assets per share as at 31 December 2016 were 757p (2015: 714p).

Inventories increased during the year by £130.6 million to £1,449.2 million. The value of residential land, the key component of inventories, increased by £6.9 million, as we invested in line with usage. At the end of 2016, the remaining provision held against land carried at net realisable value was £3.0 million, after utilisation of £4.2 million during the year. Other movements in inventories were an increase in work in progress of £104.6 million driven by an increase in the underlying level of ongoing production, the deferral of c. 180 almost complete homes into 2017 and an increase in part exchange properties of £19.1 million due to the high volume of legal completions in December.

Trade and other receivables decreased by £5.2 million, primarily due to lower amounts owing from land sales. Trade and other payables totalled £582.8 million (2015: £535.2 million). Land creditors increased to £343.3 million (2015: £322.9 million) as we continue to take advantage of the opportunity to negotiate deferred payment terms with our land vendors. Trade and other creditors increased to £239.5 million (2015: £212.3 million), driven by a 7% increase in build activity over 2016 leading to a higher level of closing work in progress and an increase in the amounts we owe to subcontractors and materials suppliers.

Pensions

Taking into account the latest estimates provided by the Group's actuarial advisors, our pension scheme on an IAS19 basis had a deficit of £6.6 million at 31 December 2016 (2015: surplus of £7.1 million). The scheme's assets grew over the year to £119.0 million from £109.3 million and the scheme liabilities increased to £125.6 million from £102.2 million. The movements in the liabilities in the period are driven largely by a reduction in the discount rate applied to those liabilities as a result of changes in bond yields.

Net cash and cashflow

Having started the year with net cash of £30.0 million, the Group generated an operating cash inflow before land expenditure of £307.5 million (2015: £329.0 million), reflecting higher profitability and increased recovery of land cost attributable to legal completions net of increased construction expenditure. Net cash payments for land investment was £205.6 million (2015: £205.8 million). Non-trading cash outflow reduced to £93.3 million (2015: £98.4 million) with greater dividends offset by lower corporation tax payments and there were no special contributions to the pension scheme in the year (2015: £7.8 million). As at 31 December 2016 the Group's net cash balance was £38.6 million.

We have a committed revolving credit facility of £250 million in place which was extended for one year during 2016 and now expires in December 2021.

Bovis Homes Group PLC

Group income statement

Group statement of comprehensive income

Bovis Homes Group PLC

Group balance sheet

These financial statements were approved by the Board of directors on 20 February 2017.

Bovis Homes Group PLC

Group statement of changes in equity

Notes to the financial statements

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 year ended 31 December 2016 comprise the Company and its subsidiaries (together referred to as 'the Group') and the Group's interest in associates and joint ventures.

The consolidated financial statements were authorised for issue by the directors on 20 February 2017. The financial statements were audited by PriceWaterhouseCoopers LLP.

The financial information set out above does not constitute the Company's statutory financial statements for the years ended 31 December 2016 or 2015 but is derived from those financial statements. Statutory financial statements for 2015 have been delivered to the registrar of companies, and those for 2016 will be delivered in due course. The auditors have reported on those financial statements; their reports were (i) unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.

The consolidated financial statements have been prepared in accordance with the International Financial Reporting Standards (IFRS) and IFRS interpretations Committee (IFRS IC) interpretations as adopted by the European Union and Companies Act 2006 applicable to companies reporting under IFRS, and the accounting policies have been applied consistently for all periods presented in the consolidated financial statements.

The preparation of financial statements in conformity with IFRS requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making judgements about carrying values of assets and liabilities that are not readily apparent from other sources.  Actual results may differ from these estimates.

2              Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries) made up to 31 December. Control is achieved where the Company has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases.

Associates are those entities in which the Group has significant influence, but not control, over the financial and operating policies. The consolidated financial statements include the Group's share of the total recognised gains and losses of associates on an equity accounted basis, from the date that significant influence commences until the date that significant influence ceases.

Joint ventures are those entities in which the Group has joint control over the financial and operating policies. The consolidated financial statements include the Group's share of the total recognised gains and losses of joint ventures on an equity accounted basis, from the date that joint control commenced until joint control ceases.

3              Accounting policies

There have been no changes to the Group's accounting policies. These accounting policies will be disclosed in full within the Group's forthcoming financial statements.

Notes to the financial statements (cont)

4              Reconciliation of net cash flow to net cash

5              Income taxes

Current tax

Current tax is the expected tax payable or receivable on the taxable income or loss for the year, calculated using a corporation tax rate of 20% applied to the pre-tax income or loss, adjusted to take account of deferred taxation movements and any adjustments to tax payable for previous years.

6              Dividends

The following dividends were declared by the Group:

The Board has proposed a final dividend of 30.0p per share in respect of 2016.

Notes to the financial statements (cont)

7              Earnings per share

Basic earnings per share

The calculation of basic earnings per share at 31 December 2016 was based on the profit attributable to ordinary shareholders of £120,848,000 (2015: £128,008,000) and a weighted average number of ordinary shares outstanding during the year ended 31 December 2016 of 134,178,673 (2015: 134,194,203).

Profit attributable to ordinary shareholders

Weighted average number of ordinary shares

Diluted earnings per share

The calculation of diluted earnings per share at 31 December 2016 was based on the profit attributable to ordinary shareholders of £120,848,000 (2015: £128,008,000) and a weighted average number of ordinary shares outstanding during the year ended 31 December 2016 of 134,322,449 (2015: 134,428,802).

The average number of shares is increased by reference to the average number of potential ordinary shares held under option during the period. This reflects the number of ordinary shares which would be purchased using the aggregate difference in value between the market value of shares and the share option exercise price. The market value of shares has been calculated using the average ordinary share price during the period. Only share options which have met their cumulative performance criteria have been included in the dilution calculation.

Weighted average number of ordinary shares (diluted)

8              Circulation to shareholders

The consolidated financial statements will be sent to shareholders on or about 20 March 2017. Further copies will be available on request from the Company Secretary, Bovis Homes Group PLC, The Manor House, North Ash Road, New Ash Green, Longfield, Kent, DA3 8HQ.

Further information on Bovis Homes Group PLC can be found on the Group's corporate website www.bovishomesgroup.co.uk, including the slide presentation document which will be presented at the Group's results meeting on 20 February 2017.