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Bovis Homes Group PLC press release

Pre close update

28 December 2016

Bovis Homes Group PLC

Pre close update

Bovis Homes Group PLC is today issuing the following pre close update ahead of reporting its final results for the year ending 31 December 2016 on Monday 20 February 2017.

2016 outturn

We expect the volume delivery for 2016 will be lower than previously anticipated at between 3,950 and 4,000 homes, the exact number depending on the extent of legal completions in the remaining days of the year. We have experienced slower than expected build production across the Group's sites during December, resulting in approximately 180 largely built and sold private homes which were expected to complete in 2016 being deferred into early 2017. The average sales price of the homes legally completing in 2016 is expected to increase by around 10% (2015: £231,600), driven by improved mix and increased underlying market pricing.

As expected, the Group has achieved land sales in 2016 generating revenue of circa £26 million and profit of circa £7 million (2015: revenue of £30 million and profit of £7.8 million).

Total revenue is expected to be in a range between £1.04 billion and £1.06 billion delivering an improvement in capital turn (2015: 1.05 times). Whilst the operating profit margin is expected to reduce modestly compared to the prior year, this improved capital turn will assist in supporting return on capital employed in 2016.

Given the above, the profit before tax for the year ending 31 December 2016 is expected to be within a range of £160 million to £170 million (2015: £160.1 million) depending on the final volume delivery.

Commencing 2017

As previously indicated, the Group has been selling from a lower number of sales outlets during 2016 with site closures exceeding new site openings. Whilst we have sold at a weekly sales rate per site slightly ahead of the prior year's rate of 0.56, taking into account the circa 180 deferred private homes above, the Group is expecting to hold around 900 private forward sales at the start of 2017 (2016: 841).

The Group has built over 4,200 units worth of production during 2016, representing an increase of circa 7%. This level of production will provide a greater expected work in progress position for the start of 2017. The spread of work in progress includes both a greater number of homes in production than at the start of 2016 and these being more evenly distributed across the active sites. Importantly, the Group has already secured detailed planning for all homes expected to legally complete in 2017, an improved position on the start of 2016.

Disciplined land investment

We have remained disciplined in our land investment during the year, continuing to focus our buying on high quality consented land in prime locations outside London. In June of this year we increased our hurdle rates for investment and have subsequently approved 19 new sites taking our total approved new sites to 30 sites and about 4,000 plots. Of these, we expect 27 sites and 3,047 consented plots to be added to our consented land bank in 2016. The average return on capital employed of the land added in 2016 based on investment appraisal at the time of acquisition is circa 30%, supported by a gross margin of over 27%. The remaining three approved acquisitions are strategic sites where the returns are expected to be superior to current investment hurdle rates and they are expected to be added to the consented land bank in early 2017.

Dividends

The Group has a strong balance sheet with a net cash position expected at the close of the year. The Board is confident of delivering its plan for the final dividend of 2016, details of which will be disclosed at the time of announcing the final results for 2016 on 20 February 2017.

Enquiries:

David Ritchie, Chief Executive
Earl Sibley, Group Finance Director
Bovis Homes Group PLC
Tel: 020 3128 8788 (today)

Reg Hoare, James White, Giles Robinson
MHP Communications
Tel: 020 3128 8788
Email: bovis@mhpc.com

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

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