Interim Results
Bellway PLC
04 April 2006
NATIONAL HOUSEBUILDER BELLWAY p.l.c. TODAY, TUESDAY 4 APRIL 2006, ANNOUNCE THEIR
INTERIM RESULTS FOR THE SIX MONTHS TO 31 JANUARY 2006
HIGHLIGHTS Six Months to
31 January
2006 2005
• Turnover - £m 507.5 493.9 + 2.8%
• Operating profit - £m 96.2 96.6 - 0.4%
• Profit before taxation - £m 87.8 89.7 - 2.1%
• Basic earnings per ordinary share - pence 54.1 56.1 - 3.6%
• Dividend per ordinary share - pence 14.3 13.0 + 10.0%
• Net asset value per ordinary share - pence 722 610
• Homes sold - no. 2,958 2,930
• Average selling price - £000 166.6 167.0
• Operating margin - % 19.0 19.6
• Return on average capital employed - % 23.2 27.8
• Land bank - plots with planning permission 23,000 21,200
• Shareholders' funds - £m 820.7 706.4
CHAIRMAN, HOWARD DAWE SAID 'THE HOUSING MARKET IN 2005 WAS CHALLENGING AND I AM
PLEASED TO REPORT THAT BELLWAY PERFORMED WELL IN THESE CONDITIONS'.
FURTHERMORE 'OUR ORDER BOOK REMAINS EXTREMELY STRONG AT CIRCA £715 MILLION WITH
OVER 92% OF THIS YEAR'S TARGET SECURED AND MORE THAN 1,500 HOMES OF NEXT YEAR'S
PLANNED PRODUCTION RESERVED OR CONTRACTED'.
HE ADDED 'FEBRUARY AND MARCH HAVE SHOWN EARLY SIGNS OF IMPROVEMENT IN THE MARKET
WITH SALES NOT BEING AS INCENTIVE LED AS IN 2005 AND WE REMAIN CAUTIOUSLY
OPTIMISTIC AT THIS STAGE'.
HE CONCLUDED 'THE BOARD REMAINS CONFIDENT OF THE GROUP'S FUTURE PROSPECTS'.
FOR FURTHER INFORMATION, PLEASE CONTACT JOHN WATSON, CHIEF EXECUTIVE OR
ALISTAIR LEITCH, FINANCE DIRECTOR
TUESDAY 4 APRIL - THURSDAY 6 APRIL
J WATSON: 07855 337007
A LEITCH: 07855 337001
THEREAFTER: 0191 217 0717
CHAIRMAN'S STATEMENT
The housing market in 2005 was challenging and I am pleased to report that
Bellway performed well in these conditions as can be seen from our results for
the six months ended 31 January 2006. These results are the first to be
reported in accordance with International Financial Reporting Standards ('IFRS')
and a full restatement of previous results is appended to this statement.
In the period we increased the number of homes sold for the fifteenth
consecutive year to 2,958 with an average sales price of £166,600. Turnover
increased by almost 3% and exceeded £1/2 billion for the first time. Operating
profit remained broadly similar at £96.2 million despite margins easing to
19.0%, a good performance given market conditions. Increased work in progress
as a result of our healthy order book and increased investment in land to fund
our growth plans resulted in net interest increasing to £8.4 million. Gearing
has increased from 26% to 36%, a level the Board remains comfortable with. A
creditable return on average capital employed of 23.2% was achieved. Net profit
before tax and earnings per share have dipped only slightly to £87.8 million and
54.1p respectively.
Dividend
The Board is committed to a progressive dividend policy and I am pleased to
announce an increase in the interim dividend of 10% to 14.3 pence from 13 pence.
The dividend will be paid on Monday 3 July 2006 to ordinary shareholders on the
company's Register of Members at the close of business on Friday 9 June 2006.
The ex-dividend date is Wednesday 7 June 2006.
Trading
Bellway's policy of forward selling in the current market gives both
transparency of margin and continuity of work. Our order book remains extremely
strong at circa £715 million with over 92% of this year's target secured and
more than 1,500 homes of next year's planned production reserved or contracted.
We will, in the coming weeks, start to market from 10% more outlets and although
these will not contribute to this year's results, they will enable us to lay the
foundations for next year's planned growth.
Our Scottish, North East and Thames Gateway divisions have thrived in their
local markets and we continue to invest in expanding our divisional network. A
South Midlands division will be formed to cater both for the Warwickshire area
and our major regeneration scheme which has just commenced at North Solihull.
Our City Solutions team continues to procure more regeneration opportunities and
I am delighted to announce that we have been given preferred developer status at
East Leeds and South Kilburn in London. These regeneration schemes, and those
already secured, will form the backbone of the Group's planned growth in the
coming years.
As mentioned already, the Group has further invested in its land bank and our
plots with planning permission have increased to 23,000. This, combined with
our plots pending planning permission of 16,000, gives the Group a total land
bank of 39,000 plots, more than five year's supply at today's volumes. Of
particular note in the period is our site at the former RAF Cardington base in
Bedfordshire, purchased in 2001, where planning permission was obtained in
October for circa 650 homes. Additionally, Bellway controls more than 6,500
plots, primarily held on brownfield land, where we hope to receive planning
permissions in the next few years.
CHAIRMAN'S STATEMENT (CONTINUED)
People
As ever, Bellway's employees, sub-contractors, suppliers and partners have
contributed greatly to these results. The Board is extremely grateful for the
efforts and enthusiasm of all involved and would like to place on record its
sincere thanks.
Future Prospects
February and March have shown early signs of improvement in the market with
sales not being as incentive led as in 2005 and we remain cautiously optimistic
at this stage. Bellway has in place the people, the divisional network and the
land to continue delivering volume growth in both this and coming years and the
Board remains confident of the Group's future prospects.
H C Dawe
Chairman
3 April 2006
CONSOLIDATED INCOME STATEMENT
(unaudited)
Half year Half year Year
ended ended ended
31 January 31 January 31 July
2006 2005 2005
(restated) (restated)
£m £m £m
Revenue 507.5 493.9 1,178.1
Cost of sales (384.1) (372.5) (896.2)
Gross profit 123.4 121.4 281.9
Administrative expenses (27.2) (24.8) (51.6)
Operating profit 96.2 96.6 230.3
Finance income 1.2 1.4 2.2
Finance expenses (9.6) (8.3) (18.6)
Profit before taxation 87.8 89.7 213.9
Income tax expense (26.6) (27.0) (64.7)
Profit for the period 61.2 62.7 149.2
Earnings per ordinary share - Basic 54.1p 56.1p 133.1p
- Diluted 53.6p 55.6p 131.8p
Consolidated Statement of Recognised Income and Expense
(unaudited) Half year Half year Year
ended ended ended
31 January 31 January 31 July
2006 2005 2005
(restated) (restated)
£m £m £m
Actuarial losses on defined benefit pension scheme (4.8) (3.0) (5.0)
Tax on items taken directly to equity 1.4 0.9 1.5
Net expense recognised directly in equity (3.4) (2.1) (3.5)
Profit for the period 61.2 62.7 149.2
Total recognised income for the period 57.8 60.6 145.7
CONSOLIDATED BALANCE SHEET
(unaudited)
At At At
31 January 31 January 31 July
2006 2005 2005
(restated) (restated)
£m £m £m
ASSETS
Non-current assets
Property, plant and equipment 18.5 16.2 17.6
Investment property 3.0 - -
Investments in associates - - 0.1
Other receivables 7.9 1.3 7.5
Deferred tax assets 14.6 11.3 11.5
44.0 28.8 36.7
Current assets
Inventories 1,358.9 1,098.9 1,238.4
Trade and other receivables 54.8 28.7 31.6
Cash and cash equivalents 9.0 57.9 66.4
1,422.7 1,185.5 1,336.4
Total assets 1,466.7 1,214.3 1,373.1
LIABILITIES
Non-current liabilities
Interest bearing loans and borrowings (256.0) (193.0) (256.0)
Retirement benefit obligations (17.2) (10.1) (12.1)
Other payables (28.4) (18.2) (19.3)
(301.6) (221.3) (287.4)
Current Liabilities
Interest bearing loans and borrowings (48.9) (49.0) (2.0)
Trade and other payables (268.1) (210.0) (271.6)
Current tax liabilities (27.4) (27.6) (32.3)
(344.4) (286.6) (305.9)
Total liabilities (646.0) (507.9) (593.3)
Net assets 820.7 706.4 779.8
EQUITY
Issued capital 14.2 14.1 14.2
Share premium 110.5 106.3 108.9
Other reserves 1.5 1.5 1.5
Retained earnings 694.6 584.6 655.3
Total equity attributable to equity holders of the parent 820.8 706.5 779.9
Minority interest (0.1) (0.1) (0.1)
Total equity 820.7 706.4 779.8
CONSOLIDATED CASH FLOW STATEMENT
(unaudited)
Half year Half year Year
ended ended ended
31 January 31 January 31 July
2006 2005 2005
(restated) (restated)
£m £m £m
Cash flows from operating activities
Profit for the period 61.2 62.7 149.2
Depreciation charge 1.5 1.6 3.3
Profit on sale of property, plant and equipment - (0.1) (0.2)
Finance income (1.2) (1.4) (2.2)
Finance expenses 9.6 8.3 18.6
Share based payment charge 1.1 0.7 1.6
Income tax expense 26.6 27.0 64.7
Increase in inventories (120.5) (79.5) (219.1)
Increase in trade and other receivables (23.6) (2.8) (11.9)
Increase / (decrease) in trade and other payables 4.4 (60.2) 0.7
Cash from operations (40.9) (43.7) 4.7
Interest paid (8.1) (6.5) (15.4)
Income tax paid (32.1) (35.2) (68.1)
Net cash outflow from operating activities (81.1) (85.4) (78.8)
Cash flows from investing activities
Acquisition of property, plant and equipment (2.9) (1.6) (5.1)
Acquisition of investment property (3.0) - -
Proceeds from sale of property, plant and equipment 0.5 0.5 1.1
Interest received 1.2 1.4 2.3
Net cash (outflow) / inflow from investing activities (4.2) 0.3 (1.7)
Cash flows from financing activities
Increase in bank borrowings 45.0 - 63.0
Proceeds from the issue of share capital on exercise of share 1.6 1.8 4.5
options
Purchase of own shares by employee share option plans (0.1) (0.1) (0.3)
Dividends paid (20.5) (17.6) (32.2)
Net cash inflow / (outflow) from financing activities 26.0 (15.9) 35.0
Net decrease in cash and cash equivalents (59.3) (101.0) (45.5)
Cash and cash equivalents at beginning of period 66.4 111.9 111.9
Cash and cash equivalents at end of period 7.1 10.9 66.4
NOTES
1. Consolidated Statement of Changes in Equity
(unaudited)
Half year ended 31 January 2006
Attributable to equity holders of the parent
Ordinary Share
Share Premium Other Retained Minority Total
capital reserves earnings Total Interest equity
£m £m £m £m £m £m £m
At 1 August 2005 14.2 108.9 1.5 655.3 779.9 (0.1) 779.8
Total recognised income and expense 57.8 57.8 57.8
Dividends on equity shares (20.7) (20.7) (20.7)
Shares issued 1.6 1.6 1.6
Charge in relation to share options
and tax thereon 2.3 2.3 2.3
Exercise of share options / share (0.1) (0.1) (0.1)
awards
At 31 January 2006 14.2 110.5 1.5 694.6 820.8 (0.1) 820.7
2. Basis of preparation
EU law (IAS Regulation EC 1606/2002) requires that the next annual consolidated
financial statements of the Group, for the year ending 31 July 2006, be prepared
in accordance with International Financial Reporting Standards ('IFRS') adopted
for use in the EU ('Adopted IFRS').
This interim financial information has been prepared on the basis of the
recognition and measurement requirements of Adopted IFRS that are effective (or
available for early adoption) at 31 July 2006, the Group's first annual
reporting date at which it is required to use Adopted IFRS. Based on these
Adopted IFRS, the Directors have applied the accounting policies, as set out in
the attached restatement document, which they expect to apply when the first
annual IFRS financial statements are prepared for the year ending 31 July 2006.
In selecting accounting policies from the Adopted IFRS available at 31 July
2006, the Group has chosen to apply early the amendments made to IAS 19 in
respect of actuarial gains and losses published by the IASB in December 2004
ahead of their effective date.
However, the Adopted IFRS that will be effective (or available for early
adoption) in the financial statements for the year ending 31 July 2006 are still
subject to change and to additional interpretations and therefore cannot be
determined with certainty. Accordingly, the accounting policies for that annual
period will be determined finally only when the financial statements are
prepared for the year ending 31 July 2006.
The preparation of this financial information resulted in changes to the
accounting policies as compared with the most recent annual financial statements
prepared under previous Generally Accepted Accounting Practice (GAAP). The
revised accounting policies have been applied consistently to all periods
presented in this financial information.
NOTES (continued)
2. Basis of preparation (continued)
IFRS 1 - 'First Time Adoption of International Financial Reporting
Standards' mandates that most IFRS are applied fully retrospectively, meaning
that the opening balance sheet at 1 August 2004 is restated as if those
accounting policies had always been applied. IFRS 1 permits companies to apply
certain exemptions from the full requirements of IFRS during transition. Details
of the exemptions applied by the Group are outlined in the attached restatement
document.
A detailed review of the changes in our accounting policies and
reconciliations of our financial statements from UK GAAP to IFRS at key dates
was published to the London Stock Exchange on 31 March 2006, a copy of this
document is appended to the interim report.
3. Accounting policies
The accounting policies that the Group intends to apply for the year ending 31
July 2006 are set out in the document referred to in note 2.
4. Status of financial information
The comparative figures for the year ended 31 July 2005 are not the Group's
statutory financial statements for that year. Those financial statements, which
were prepared under UK GAAP, have been reported on by the Group's auditors and
delivered to the Registrar of Companies. The report of the auditors was
unqualified and did not contain statements under section 237(2) or (3) of the
Companies Act 1985.
The interim information for the half years ended 31 January 2006 and 31 January
2005 is unaudited. This information does not constitute statutory accounts
within the meaning of the Companies Act 1985. In relation to the financial
statements for the year ended 31 July 2005, this has been extracted from a
restatement of the financial information taken from the Group's statutory
financial statements for that year.
5. Taxation
The taxation charge for the half years ended 31 January 2006 and 31 January 2005
is calculated by applying the Directors' best estimate of the annual effective
tax rate to the profit for the period.
6. Interim report
The interim accounts were approved by the Board of Directors on 3 April 2006 and
copies are being posted to all shareholders. Further copies are available on
application to the Company Secretary, Bellway plc, Seaton Burn House, Dudley
Lane, Seaton Burn, Newcastle upon Tyne, NE13 6BE and are also available on our
website at www.bellway.co.uk
Bellway plc
Restatement of financial information under Adopted International Financial
Reporting Standards
Introduction
Bellway plc (the Group) has, historically, prepared its consolidated financial
statements under UK Generally Accepted Accounting Principles (UK GAAP). For
accounting periods beginning on or after 1 January 2005, the Group is required
to prepare its consolidated financial statements in accordance with
International Financial Reporting Standards (IFRS) as adopted by the European
Union (Adopted IFRS).
The Group's first published information prepared on the basis of Adopted IFRS
will be in respect of its interim results for the half year ended 31 January
2006. The results for this half year will be announced on Tuesday 4 April 2006.
The Group's first annual report under Adopted IFRS will be for the year ending
31 July 2006. As comparative figures are provided, the effective date for
transition to Adopted IFRS is 1 August 2004. Accordingly the financial
information for the half year ended 31 January 2005 and the year ended 31 July
2005 has been restated.
This report summarises, for the half year ended 31 January 2005 and the year
ended 31 July 2005, the effects of the change from UK GAAP to Adopted IFRS on
the Group's financial statements. The contents of the report are:
• Outline of the basis used for the preparation of the IFRS information
• Overview of the impact of IFRS adoption
• Significant changes in accounting policies and impact on the financial
statements
• Significant accounting policies applied under IFRS
• (Appendix 1) Restated primary statements for the half year ended 31
January 2005 and the year ended 31 July 2005
• (Appendix 2) Reconciliations of profit and equity for the half year
ended 31 January 2005 and the year ended 31 July 2005
• (Appendix 3) Reconciliation of equity at 1 August 2004
Basis of preparation of transitional information under Adopted IFRS
The financial information has been prepared on the recognition and measurement
basis of IFRS adopted by the EU and in accordance with the accounting policies
that the Group expects to apply in its first IFRS financial statements.
The significant accounting policies applied are set out below. These are
preliminary accounting policies pending finalisation at the year end.
Transitional arrangements
IFRS 1 - 'First Time Adoption of International Financial Reporting Standards'
permits companies to apply certain exemptions from the full requirements of IFRS
during transition.
No adjustments have been made for any changes in estimates that were made at the
time of approval of the UK GAAP financial statements on which the preliminary
IFRS financial information is based. The Group has applied the following key
exemptions :
IFRS 2 - 'Share-based Payment'
The Group has elected to apply IFRS 2 only to share-based payment transactions
granted after 7 November 2002 which had not fully vested at 1 January 2005.
IFRS 3 - 'Business Combinations'
The Group has chosen not to restate business combinations prior to the
transition date on an IFRS basis.
Overview of the impact of IFRS adoption
Certain key areas of the Group's activities will remain unaffected by the
adoption of IFRS. Most notably :
• Dividend policy
• Cashflow
• Effective tax rate
• Banking arrangements
• Group strategy and processes for decision making
Based on the accounting policies detailed in the subsequent section, the effect
of the transition on key reported results is as follows:
Half year ended Year ended
31 January 2005 31 July 2005
UK GAAP IFRS UK GAAP IFRS
£m £m £m £m
Operating profit 96.2 96.6 229.7 230.3
Profit for the period 64.2 62.7 152.8 149.2
Basic EPS 56.5p 56.1p 134.6p 133.1p
Net assets 725.9 706.4 796.1 779.8
Appendices 2 and 3 provide detailed reconciliations of the movements for the
Income Statement and Balance Sheet.
The most significant changes in the Group's financial statements, resulting from
the transition to IFRS are in the following areas :
• The reclassification of the preference shares in the balance sheet, out
of equity and into non-current liabilities.
• The recognition of the pension scheme deficit in the balance sheet, and
the corresponding increases in administrative expenses and finance expenses in
the income statement and the actuarial loss in the Statement of Recognised
Income and Expense (SORIE).
• The exclusion of proposed equity dividends from the income statement
and from liabilities in the balance sheet. Applying Adopted IFRS, an interim
equity dividend is not recorded until it is paid, also a final equity dividend
is not recorded until it is approved by shareholders. Under Adopted IFRS, the
dividend is presented as a movement in equity.
• Land creditors are now discounted to fair value with a corresponding
reduction in inventories. The discount represents notional interest and this is
reflected as increased financing costs over the deferral period. The reduction
in the inventory results in reduced cost of sales and a higher operating margin
over the life of a development.
• There is now a change to the basis of measurement of the charge to the
income statement in relation to share based payments.
Significant changes in accounting policies and impact on the financial
information
The following narrative covers the half year to 31 January 2005 ('the half
year') and the year to 31 July 2005 ('the year end').
IAS 32 and IAS 39 - 'Financial Instruments'
Preference dividends expensed are now disclosed within financing costs rather
than as dividends. This results in finance costs increasing by £0.9m for the
half year ended 31 January 2005 and by £1.9m for the year ended 31 July 2005.
The preference shares of £20.0m are removed from equity and shown within
non-current liabilities. The £0.6m preference dividend, which is accrued using
the effective interest rate method at each balance sheet date, is recognised
within interest bearing loans and borrowings.
IAS 2 - 'Inventories'
Land purchased on deferred terms is measured at fair value. The associated land
creditor is reduced by an amount of notional interest; the liability is then
increased to the settlement value over the period of deferral. The net effect is
a reduction in the creditor of £2.2m at the half year and £2.9m at the year end.
The corresponding inventory is also reduced by the notional interest; the lower
land value results in a reduced charge to cost of sales as the profit is taken
on a development. The net effect on inventories is a reduction of £6.8m at the
half year and £8.0m at the year end.
Cost of sales is reduced by £0.6m and £1.5m respectively.
The increased interest is charged to financing costs over the deferral period
and amounts to £1.3m at the half year and £2.7m at the year end.
The differing rate at which the finance costs and cost of sales are recognised
in the income statement produces a deferred tax credit shown in income tax
expense.
IAS 10 - 'Events After the Balance Sheet Date'
Under IAS 10 only dividends which are approved at the balance sheet date are
shown as a liability.
Dividends are recognised as an appropriation of equity when they are paid, for
an interim dividend, or approved by shareholders at the AGM, for a final
dividend. Amounts previously accrued in the balance sheet are now removed,
resulting in reduced liabilities at the half year of £14.7m and £20.7m at the
year end. The net increase in equity is shown within the Statement of Changes in
Equity.
IAS 19 - 'Employee Benefits'
Under UK GAAP the Group accounted for the defined benefit pension scheme in
accordance with SSAP 24. A pension prepayment was held in the balance sheet
representing the difference between pension contributions and the regular
pension cost established actuarially. The Group made a special contribution of
£9.8m to the scheme to address the deficit identified in the actuarial valuation
in 2002 and this accounted for a large part of the total pension prepayment.
Under IFRS this prepayment reverses, reducing trade and other receivables by
£8.4m at the half year and £9.1m at the year end.
IAS 19, as amended in 2004, provides an option for companies to account for
actuarial gains and losses in full in the SORIE. The Group has adopted this
approach from the date of transition.
The Group's full year financial statements under UK GAAP disclosed defined
benefit pension scheme assets and liabilities under FRS 17 within a note to the
financial statements. The valuation approach used under FRS 17 is similar to
that used for IAS 19 with the exception that IAS 19 requires the market
valuation of scheme assets is carried out on a bid basis rather than a
mid-market basis. The deficit under IAS 19 is disclosed within retirement
benefit obligations on the balance sheet. The deficit is £10.1m at the half year
and £12.1m at the year end.
Under IAS 19, the current service cost (which is the increase in the present
value of the defined benefit obligation as a result of employee service in the
current period) is recognised within the income statement. Past service costs
(which arise when the employer makes a commitment to provide an increased level
of benefit) are also recognised within the income statement. The SSAP 24 pension
charge has been reversed. The net effect is an increased charge to the income
statement of £0.2m for the half year and £0.6m for the full year.
The interest charge (which is the increase during the period in the present
value of defined benefit obligations) is recognised in financing costs. For the
half year the charge was £0.2m and for the full year it was £0.3m.
IFRS 2 - 'Share-based Payments'
In accordance with IFRS 2, the Group has recognised a charge to the income
statement in relation to equity settled share options granted after 7 November
2002 which had not fully vested at 1 January 2005. The corresponding entry is
recognised directly in equity. Fair values have been calculated for the Group's
various option schemes using an appropriate option pricing model. For the
savings related share option schemes, a method using the Black-Scholes formula
has been used due to the relatively short exercise window. For the employee
share option schemes, a lattice model has been used. This enables early exercise
behaviour to be modelled in a more sophisticated manner than the Black-Scholes
formula. For the performance share plan, a Monte Carlo simulation technique has
been applied since the performance test measures the Group's total shareholder
return relative to the appropriate peer group.
The charges calculated for the schemes are spread over the period in which the
options vest. Adjustments are made to allow for actual and expected levels of
vesting.
Charges made previously under UK GAAP, have been reversed (to the extent that
they related to options now incorporated into the IFRS 2 calculation) and an
IFRS 2 charge has been recognised. The net effect is a £nil charge to
administrative expenses for the half year and £0.3m for the full year.
The corresponding liability under UK GAAP (which is part of retained earnings)
for options now dealt with under IFRS 2 has also been reversed.
An estimate of the tax base at each balance sheet date is established by
multiplying the option's intrinsic value, which is the difference between the
exercise price and the market value at the balance sheet date, by the vesting
period that has lapsed. The temporary difference resulted in a deferred tax
asset of £2.6m at the half year and £2.4m at the year end.
Conclusion
Adopting IFRS has not affected the Group's operations in terms of strategy.
Also, cash flows and banking arrangements are unaffected, and there is no
material impact on the effective tax rate.
ACCOUNTING POLICIES
The preliminary restated financial information ('the financial information') has
been prepared in accordance with the recognition and measurement requirements of
International Financial Reporting Standards (IFRS) as adopted by the European
Union and IFRS 1 - 'First time adoption of IFRS'.
IAS 19, as amended in 2004, provides an option for companies to account for
actuarial gains and losses in full in the SORIE. The Group has adopted this
approach from the date of transition.
A summary of the significant accounting policies adopted and consistently
applied in the preparation of the financial information is shown below :
(a) Consolidation
The consolidated financial information incorporates the financial statements of
the Company and all its subsidiary undertakings.
The consolidated financial information includes the Group's share of costs and
subsequent share of profits of associates on an equity accounted basis and for
jointly controlled entities, includes the Group's proportionate share of the
entity's assets, liabilities, revenues and expenses.
(b) Goodwill
The Group's policy up to and including 1997 was to eliminate goodwill arising
upon acquisitions against reserves. Under IFRS 1 and IFRS 3, such goodwill will
remain eliminated against reserves.
(c) Property, plant and equipment
Items are stated at cost less accumulated depreciation and impairment losses.
(d) Investment property
Investment property is initially recognised at cost. Subsequent to recognition,
investment property is measured using the cost model and is carried at cost less
any accumulated depreciation and any accumulated impairment losses.
The residual values and useful lives of investment properties are reviewed at
each financial year end. No depreciation is charged where the residual value is
equal to, or greater than, the carrying amount of the asset.
(e) Inventories
Inventories, including part exchange properties, are stated at the lower of cost
and estimated net realisable value, less payments on account and related grants.
Housebuilding work in progress includes direct material and labour costs and
site overheads.
(f) Trade and other receivables
Trade receivables are stated at their fair value at the date of initial
recognition and subsequently at amortised cost less allowances for impairment.
(g) Trade and other payables
Trade payables on normal terms are not interest bearing and are stated at their
fair value at the point of initial recognition and subsequently at amortised
cost. Trade payables on deferred terms, most notably in relation to land
purchases, are recorded at their fair value and subsequently at amortised cost.
(h) Share capital
I. Preference share capital
Preference share capital is redeemable and is classified as a liability.
Dividends thereon are recognised in the income statement as interest expense.
II. Dividends
Dividends on redeemable preference shares are recognised as a liability and
accrued using the effective interest rate method.
Other dividends are recognised as a liability in the period in which they are
approved.
(i) Grants
Grants are included within work in progress and stocks in the balance sheet and
are credited to the profit and loss account over the life of the developments to
which they relate.
(j) Revenue recognition
Revenue from private housing sales is recognised when transactions have legally
completed. Sales of part exchange properties are not included in revenue. The
net result of these transactions is classified as a cost of sale.
(k) Depreciation
Freehold land is not depreciated. Buildings held as fixed assets are depreciated
in equal annual instalments over 40 years. Vehicles, plant and equipment are
depreciated on a straight line basis at rates which are calculated to write off
the cost of those assets over their useful lives, which are estimated at between
three and ten years.
(l) Taxation
The charge for taxation is based on the profit for the year and takes into
account current and deferred taxation. The charge is recognised in the income
statement except to the extent that it relates to items recognised in equity, in
which case it is recognised in equity.
Deferred taxation is provided for all temporary differences between the carrying
amounts of assets and liabilities in the financial statements and the
corresponding tax bases.
(m) Employee benefits - retirement benefit costs
For the defined benefit scheme, the liability is calculated as the present value
of the defined benefit obligation at the balance sheet date. The fair value of
scheme assets are then deducted. The calculation is performed by a qualified
actuary using the projected unit credit method. All actuarial gains and losses
are recognised immediately in the Statement of Recognised Income and Expense
(SORIE).
Defined contribution pension costs are charged to the income statement in the
period for which contributions are payable.
(n) Employee benefits - share-based payment
In accordance with IFRS 2, the fair value of equity settled share options
granted is recognised as an employee expense with a corresponding increase in
equity. The fair value is measured as at the date the options are granted.
Various option pricing models are used according to the terms of the option
scheme under which the options were granted. The fair value is spread over the
period during which the employees become unconditionally entitled to the
options. The amount recognised as an expense is adjusted to reflect the actual
number of options that vest.
IFRS 2 has been applied to options granted after 7 November 2002, which had not
vested at 1 January 2005.
(o) Operating leases
Operating lease rentals are charged to the Income Statement on a straight line
basis over the period of the lease.
(p) Finance income and expenses
Finance expenses includes interest on bank borrowings and dividends on
redeemable preference shares. The discounting of the deferred payments for land
purchases produces a notional interest payable amount and this is also charged
to finance expenses.
Finance income includes interest receivable on bank deposits.
Appendix 1
Consolidated Income Statement
(unaudited) Half year Year
ended ended
31 January 31 July
2005 2005
(restated) (restated)
£m £m
Revenue 493.9 1,178.1
Cost of sales (372.5) (896.2)
Gross profit 121.4 281.9
Administrative expenses (24.8) (51.6)
Operating profit 96.6 230.3
Finance income 1.4 2.2
Finance expenses (8.3) (18.6)
Profit before taxation 89.7 213.9
Income tax expense (27.0) (64.7)
Profit for the period 62.7 149.2
Earnings per ordinary share - Basic 56.1p 133.1p
- Diluted 55.6p 131.8p
Consolidated Statement of Recognised Income and Expense
(unaudited) Half year Year
ended ended
31 January 31 July
2005 2005
(restated) (restated)
£m £m
Actuarial losses on defined benefit pension scheme (3.0) (5.0)
Tax on items taken directly to equity 0.9 1.5
Net expense recognised directly in equity (2.1) (3.5)
Profit for the period 62.7 149.2
Total recognised income for the period 60.6 145.7
Appendix 1
Consolidated Balance Sheet
(unaudited) At At
31 January 31 July
2005 2005
(restated) (restated)
£m £m
ASSETS
Non-current assets
Property, plant and equipment 16.2 17.6
Investments in associates - 0.1
Other receivables 1.3 7.5
Deferred tax assets 11.3 11.5
28.8 36.7
Current assets
Inventories 1,098.9 1,238.4
Trade and other receivables 28.7 31.6
Cash and cash equivalents 57.9 66.4
1,185.5 1,336.4
Total assets 1,214.3 1,373.1
LIABILITIES
Non-current liabilities
Interest bearing loans and borrowings (193.0) (256.0)
Retirement benefit obligations (10.1) (12.1)
Other payables (18.2) (19.3)
(221.3) (287.4)
Current Liabilities
Interest bearing loans and borrowings (49.0) (2.0)
Trade and other payables (210.0) (271.6)
Current tax liabilities (27.6) (32.3)
(286.6) (305.9)
Total liabilities (507.9) (593.3)
Net assets 706.4 779.8
EQUITY
Issued capital 14.1 14.2
Share premium 106.3 108.9
Other reserves 1.5 1.5
Retained earnings 584.6 655.3
Total equity attributable to equity holders of the parent 706.5 779.9
Minority interest (0.1) (0.1)
Total equity 706.4 779.8
Appendix 1
Group Cash Flow Statement
(unaudited) Half year Year
ended ended
31 January 31 July
2005 2005
(restated) (restated)
£m £m
Cash flows from operating activities
Profit for the period 62.7 149.2
Depreciation charge 1.6 3.3
Profit on sale of property, plant and equipment (0.1) (0.2)
Finance income (1.4) (2.2)
Finance expenses 8.3 18.6
Share based payment charge 0.7 1.6
Income tax expense 27.0 64.7
Increase in inventories (79.5) (219.1)
Increase in trade and other receivables (2.8) (11.9)
(Decrease) / increase in trade and other payables (60.2) 0.7
Cash from operations (43.7) 4.7
Interest paid (6.5) (15.4)
Income tax paid (35.2) (68.1)
Net cash outflow from operating activities (85.4) (78.8)
Cash flows from investing activities
Acquisition of property, plant and equipment (1.6) (5.1)
Proceeds from sale of property, plant and equipment 0.5 1.1
Interest received 1.4 2.3
Net cash inflow / (outflow) from investing activities 0.3 (1.7)
Cash flows from financing activities
Increase in bank borrowings - 63.0
Proceeds from the issue of share capital on exercise of share options 1.8 4.5
Purchase of own shares by employee share option plans (0.1) (0.3)
Dividends paid (17.6) (32.2)
Net cash (outflow) / inflow from financing activities (15.9) 35.0
Net decrease in cash and cash equivalents (101.0) (45.5)
Cash and cash equivalents at beginning of period 111.9 111.9
Cash and cash equivalents at end of period 10.9 66.4
Appendix 1
Consolidated Statement of Changes in Equity
(unaudited)
Half year ended 31 January 2005
Attributable to equity holders of the parent
Ordinary
share Share Other Retained Total Minority Total
capital premium reserves earnings Interest equity
£m £m £m £m £m £m £m
At 1 August 2004 14.0 104.5 1.5 540.8 660.8 (0.1) 660.7
Total recognised 60.6 60.6 60.6
income and
expense
Dividends on (17.6) (17.6) (17.6)
equity shares
Shares issued 0.1 1.8 1.9 1.9
Charge in relation 1.0 1.0 1.0
to share options and
tax thereon
Exercise of share (0.2) (0.2) (0.2)
options / share
awards
At 31 January 2005 14.1 106.3 1.5 584.6 706.5 (0.1) 706.4
Year ended 31 July 2005
Attributable to equity holders of the parent
Ordinary
share Share Other Retained Total Minority Total
capital premium reserves earnings Interest equity
£m £m £m £m £m £m £m
At 1 August 2004 14.0 104.5 1.5 540.8 660.8 (0.1) 660.7
Total recognised 145.7 145.7 145.7
income and
expense
Dividends on (32.2) (32.2) (32.2)
equity shares
Shares issued 0.2 4.4 4.6 4.6
Charge in relation 1.4 1.4 1.4
to share options and
tax thereon
Exercise of share (0.4) (0.4) (0.4)
options / share
awards
At 31 July 2005 14.2 108.9 1.5 655.3 779.9 (0.1) 779.8
Appendix 2
Reconciliation of Profit (unaudited)
Half year ended 31 January 2005
Previously
reported IFRS 2 IAS 19 IAS 2 IAS 32 Effect of Restated
under UK Share-based Employee Inventories Financial transition under IFRS
GAAP payment benefits instruments to IFRS
£m £m £m £m £m £m £m
Revenue 493.9 - - - - 0.0 493.9
Cost of sales (373.1) - - 0.6 - 0.6 (372.5)
Gross profit 120.8 0.0 0.0 0.6 0.0 0.6 121.4
Administrative (24.6) - (0.2) - - (0.2) (24.8)
expenses
Operating profit 96.2 0.0 (0.2) 0.6 0.0 0.4 96.6
Finance income 1.4 - - - - - 1.4
Finance expenses (5.9) - (0.2) (1.3) (0.9) (2.4) (8.3)
Profit before 91.7 0.0 (0.4) (0.7) (0.9) (2.0) 89.7
taxation
Income tax (27.5) 0.2 0.1 0.2 - 0.5 (27.0)
expense
Profit for the 64.2 0.2 (0.3) (0.5) (0.9) (1.5) 62.7
period
Earnings per
ordinary share
- Basic 56.5p 56.1p
- Diluted 56.0p 55.6p
Appendix 2
Reconciliation of Profit (unaudited)
Year ended 31 July 2005
Previously
reported IFRS 2 IAS 19 IAS 2 IAS 32 Effect of Restated
under UK Share-based Employee Inventories Financial transition under IFRS
GAAP payment benefits instruments to IFRS
£m £m £m £m £m £m £m
Revenue 1,178.1 - - - - 0.0 1,178.1
Cost of sales (897.7) - - 1.5 - 1.5 (896.2)
Gross profit 280.4 0.0 0.0 1.5 0.0 1.5 281.9
Administrative (50.7) (0.3) (0.6) - - (0.9) (51.6)
expenses
Operating profit 229.7 (0.3) (0.6) 1.5 0.0 0.6 230.3
Finance income 2.2 - - - - - 2.2
Finance expenses (13.7) - (0.3) (2.7) (1.9) (4.9) (18.6)
Profit before 218.2 (0.3) (0.9) (1.2) (1.9) (4.3) 213.9
taxation
Income tax (65.4) 0.1 0.3 0.3 - 0.7 (64.7)
expense
Profit for the 152.8 (0.2) (0.6) (0.9) (1.9) (3.6) 149.2
period
Earnings per
ordinary share
- Basic 134.6p 133.1p
- Diluted 133.3p 131.8p
Appendix 2
Reconciliation of Equity (unaudited)
At 31 January 2005
Previously IFRS 2 IAS 19 IAS 2 IAS 10 IAS 32 Effect of Restated
reported Share-based Employee Inventories Events Financial transition under
under UK payment benefits after instruments to IFRS
GAAP the IFRS
balance
sheet
date
£m £m £m £m £m £m £m £m
ASSETS
Non-current
assets
Property, 16.2 - - - - - - 16.2
plant and
equipment
Investments - - - - - - - -
in associates
Other 1.3 - - - - - - 1.3
receivables
Deferred tax 2.4 2.0 5.5 1.4 - - 8.9 11.3
assets
19.9 2.0 5.5 1.4 - - 8.9 28.8
Current
assets
Inventories 1,105.7 - - (6.8) - - (6.8) 1,098.9
Trade and 37.1 - (8.4) - - - (8.4) 28.7
other
receivables
Cash and cash 57.9 - - - - - - 57.9
equivalents
1,200.7 - (8.4) (6.8) - - (15.2) 1,185.5
Total assets 1,220.6 2.0 (2.9) (5.4) - - (6.3) 1,214.3
LIABILITIES
Non-current
liabilities
Interest (173.0) - - - - - - (173.0)
bearing loans
and
borrowings
Preference - - - - - (20.0) (20.0) (20.0)
shares
Retirement - (10.1) (10.1) (10.1)
benefit
obligations
Land (19.9) - - 1.7 - - 1.7 (18.2)
creditors
-
(192.9) - (10.1) 1.7 - (20.0) (28.4) (221.3)
Current
Liabilities
Interest (49.0) - - - - - - (49.0)
bearing loans
and
borrowings
Trade and (143.6) - - - - (0.6) (0.6) (144.2)
other
payables
Land (66.3) - - 0.5 - - 0.5 (65.8)
creditors
Dividends (15.3) - - - 14.7 0.6 15.3 -
Current tax (27.6) - - - - - - (27.6)
liabilities
(301.8) - - 0.5 14.7 - 15.2 (286.6)
Total (494.7) - (10.1) 2.2 14.7 (20.0) (13.2) (507.9)
liabilities
Net assets 725.9 2.0 (13.0) (3.2) 14.7 (20.0) (19.5) 706.4
EQUITY
Non-equity 20.0 - - - - (20.0) (20.0) -
share capital
- preference
shares
Issued 14.1 - - - - - - 14.1
capital
Share premium 106.3 - - - - - - 106.3
Other 1.5 - - - - - - 1.5
reserves
Retained 584.1 2.0 (13.0) (3.2) 14.7 - 0.5 584.6
earnings
Total equity 726.0 2.0 (13.0) (3.2) 14.7 (20.0) (19.5) 706.5
attributable
to equity
holders of
the parent
Minority (0.1) - - - - - - (0.1)
interest
Total equity 725.9 2.0 (13.0) (3.2) 14.7 (20.0) (19.5) 706.4
Appendix 2
Reconciliation of Equity (unaudited)
At 31 July 2005
Previously IFRS 2 IAS 19 IAS 2 IAS 10 IAS 32 Effect of Restated
reported Share-based Employee Inventories Events Financial transition under
under UK payment benefits after instruments to IFRS
GAAP the IFRS
balance
sheet
date
£m £m £m £m £m £m £m £m
ASSETS
Non-current
assets
Property, 17.6 - 17.6
plant and
equipment
Investments 0.1 - 0.1
in associates
Other 7.5 - 7.5
receivables
Deferred tax 2.2 1.4 6.4 1.5 - - 9.3 11.5
assets
27.4 1.4 6.4 1.5 - - 9.3 36.7
Current
assets
Inventories 1,246.4 (8.0) (8.0) 1,238.4
Trade and 40.7 (9.1) (9.1) 31.6
other
receivables
Cash and cash 66.4 - 66.4
equivalents
1,353.5 - (9.1) (8.0) - - (17.1) 1,336.4
Total assets 1,380.9 1.4 (2.7) (6.5) - - (7.8) 1,373.1
LIABILITIES
Non-current
liabilities
Interest (236.0) - (236.0)
bearing loans
and
borrowings
Preference - (20.0) (20.0) (20.0)
shares
Retirement - (12.1) (12.1) (12.1)
benefit
obligations
Land (21.5) 2.2 2.2 (19.3)
creditors
(257.5) - (12.1) 2.2 - (20.0) (29.9) (287.4)
Current
Liabilities
Interest (2.0) - (2.0)
bearing loans
and
borrowings
Trade and (167.5) (0.6) (0.6) (168.1)
other
payables
Land (104.2) 0.7 0.7 (103.5)
creditors
Dividends (21.3) 20.7 0.6 21.3 -
Current tax (32.3) - (32.3)
liabilities
(327.3) - - 0.7 20.7 - 21.4 (305.9)
Total (584.8) - (12.1) 2.9 20.7 (20.0) (8.5) (593.3)
liabilities
Net assets 796.1 1.4 (14.8) (3.6) 20.7 (20.0) (16.3) 779.8
EQUITY
Non-equity 20.0 (20.0) (20.0) -
share capital
- preference
shares
Issued 14.2 - 14.2
capital
Share premium 108.9 - 108.9
Other 1.5 - 1.5
reserves
Retained 651.6 1.4 (14.8) (3.6) 20.7 - 3.7 655.3
earnings
Total equity 796.2 1.4 (14.8) (3.6) 20.7 (20.0) (16.3) 779.9
attributable
to equity
holders of
the parent
Minority (0.1) - - - - - - (0.1)
interest
Total equity 796.1 1.4 (14.8) (3.6) 20.7 (20.0) (16.3) 779.8
Appendix 3
Reconciliation of Equity (unaudited)
At 1 August 2004
Previously IFRS 2 IAS 19 IAS 2 IAS 10 IAS 32 Effect of Restated
reported Share-based Employee Inventories Events Financial transition under
under UK payment benefits after instruments to IFRS
GAAP the IFRS
balance
sheet
date
£m £m £m £m £m £m £m £m
ASSETS
Non-current
assets
Property, 16.6 - 16.6
plant and
equipment
Investments 0.1 - 0.1
in associates
Other 0.3 - 0.3
receivables
Deferred tax 2.4 1.4 4.6 1.2 7.2 9.6
assets
19.4 1.4 4.6 1.2 - - 7.2 26.6
Current
assets
Inventories 1,025.8 (6.4) (6.4) 1,019.4
Trade and 35.5 (8.5) (8.5) 27.0
other
receivables
Cash and cash 111.9 - 111.9
equivalents
1,173.2 - (8.5) (6.4) - - (14.9) 1,158.3
Total assets 1,192.6 1.4 (3.9) (5.2) - - (7.7) 1,184.9
LIABILITIES
Non-current
liabilities
Interest (160.0) - (160.0)
bearing loans
and
borrowings
Preference - (20.0) (20.0) (20.0)
shares
Retirement - (6.8) (6.8) (6.8)
benefit
obligations
Land (20.8) 1.2 1.2 (19.6)
creditors
(180.8) - (6.8) 1.2 - (20.0) (25.6) (206.4)
Current
Liabilities
Interest (15.0) - (15.0)
bearing loans
and
borrowings
Trade and (153.1) (0.6) (0.6) (153.7)
other
payables
Land (115.2) 1.3 1.3 (113.9)
creditors
Dividends (18.3) 17.7 0.6 18.3 -
Current tax (35.2) - (35.2)
liabilities
(336.8) - - 1.3 17.7 - 19.0 (317.8)
Total (517.6) - (6.8) 2.5 17.7 (20.0) (6.6) (524.2)
liabilities
Net assets 675.0 1.4 (10.7) (2.7) 17.7 (20.0) (14.3) 660.7
EQUITY
Non-equity 20.0 (20.0) (20.0) -
share capital
- preference
shares
Issued 14.0 - 14.0
capital
Share premium 104.5 - 104.5
Other 1.5 - 1.5
reserves
Retained 535.1 1.4 (10.7) (2.7) 17.7 - 5.7 540.8
earnings
Total equity 675.1 1.4 (10.7) (2.7) 17.7 (20.0) (14.3) 660.8
attributable
to equity
holders of
the parent
Minority (0.1) - - - - - - (0.1)
interest
Total equity 675.0 1.4 (10.7) (2.7) 17.7 (20.0) (14.3) 660.7
This information is provided by RNS
The company news service from the London Stock Exchange
Latest directors dealings
- 1 day ago The Renewables Infrastructure Group Limited
- 1 day ago The Renewables Infrastructure Group Limited
- 1 day ago Smurfit Westrock (DI)
- 1 day ago Menhaden Resource Efficiency
- 1 day ago BP