The strategy behind Bovis Homes

Like all housebuilders, Bovis Homes Group PLC delivers shareholder value through the identification, acquisition and residential development of land and the subsequent sale of new homes to customers. More distinctively, Bovis Homes Group PLC executes this partly through a focus on long term investment in land without a residential planning consent, termed strategic land. This longer term investment strategy enables Bovis Homes, on a portion of the land it requires, to achieve its own planning consent at a discount to residential market value, thus reducing costs and helping maintain strong profits.

Strategic objectives

The Group looks to achieve its results in a manner consistent with its long-held strategic objectives laid out below:

• Achieve a minimum return on capital employed of 20% and maximise the operating margin
• Ensure growth in profits and earnings per share
• Ensure that the Group maintains the highest level of awareness and practical implementation of health, safety and environmental standards.

A minimum return on capital employed of 20% whilst maximising operating margin

Land supply is a fundamental requirement of a housebuilding business; its purchase and management are key to the success of the operation. Bovis Homes has a consistent land investment policy relating to purchase and management of its land holdings. An important aspect of this strategy is in the long term assembly of large developments through strategic land holdings, assisted by the Group's land directors, land managers and town planners in both obtaining and promoting the Group's land resouces in an effective manner. Its strategic land holdings have grown substantially over the years and help underpin the future profitability and growth of earnings and dividends, as promotion of strategic land through to a residential planning status allows the Group to add to its consented land bank without having to pay an open market price - particularly effective where land inflation is moving sharply ahead.

Growth in profits and earnings per share

Planned sustainable expansion in volume and revenue is a major factor in the delivery of this key objective. The Group has set expansion targets which will be met through the establishment of new regions providing wider geographic coverage. The Group believes, for reasons of geographic focus and cost effective and efficient management, that this model offers the right level of cost efficiency and will deliver long term added value.

The Board believes that shareholders should benefit from the Group's success in this objective. A reflection of this is the progressive dividend policy, whereby subject to a stable business environment and necessary shareholder approval, the Board announced it would double the dividend between 2004 and 2008.

The dividend per share has increased from 14.0p per share in 2002 to 30.0p per share in 2006.

Maintaining the highest level of awareness and practical implementation of health, safety and environmental standards

Best practice in health, safety and environmental awareness and management is an important element in the continuing success of the Group. The Health, Safety and Environmental Consultative Committee oversees these important matters, formulating and promoting policy to all stakeholders. The Committee is chaired by a Bovis Homes Limited director by annual rotation to ensure that fresh ideas and initiatives are constantly introduced, assessed and where appropriate, implemented on a consistent basis. The chairman is supported by a committee comprising Group employees from numerous disciplines complemented by the Health and Safety Director and external independent professional advisers. The chairman reports formally to the Board through submission of a Health and Safety report tabled at each Board meeting.

Bovis Homes promotes all aspects of safety and environmental management throughout its operations in the interests of all stakeholders. Its record of success was recognised in 2006 with the Royal Society for the Prevention of Accidents (RoSPA) President's Award which was given to Bovis Homes Group PLC for an outstanding performance in occupational health and safety over a period of ten years.

Our objective is to achieve sustainable construction and reduce environmental impact. Bovis Homes seeks to protect and wherever possible, improve the environment by retaining mature landscaping and introducing new planting and habitats, and is working with Government and their agencies to ensure that any potential adverse environmental impacts of development are addressed fully.