Final Results

Galliford Try PLC 09 September 2004 GALLIFORD TRY PLC PRELIMINARY STATEMENT FOR THE YEAR ENDED 30 JUNE 2004 FINANCIAL HIGHLIGHTS • Group turnover up 8% to £687 million (2003: £638 million) • Profit before tax up 32% to £22.7 million (2003 pre exceptional profit of £17.2 million: up 71% on 2003 post exceptional profit of £13.3 million) • Earnings per share up 27% at 6.9p (2003: pre exceptional 5.4p; post exceptional 4.2p) • Strong cash flow, year end gearing down to 17% (2003: 30%) • Dividend increased 13% to 1.7p (2003: 1.5p) OPERATIONAL HIGHLIGHTS Construction • £92 million of NHS 'LIFT' contracts financially closed; preferred bidder for £232 million of health and education frameworks • Margin growth on course to achieve 2% by year end 2006 • Work in hand £621 million - 89% secured on non-price competitive basis Housebuilding • Operating profit, including joint ventures, at a record £25.5 million • Current sales in hand up 42% at £95.3 million (2003: £67.1 million) • Expansion plan underway to increase homes sold by 50% in next 3 years Commenting today, Tony Palmer, Chairman said: 'I am delighted to report that we have had an excellent year. We have achieved our financial targets and are on course to deliver increased margins in construction and a structured expansion of housebuilding. The Group enters the new year in an extremely strong financial position with good opportunities in both its divisions.' For further enquiries please contact: David Calverley, Chief Executive Telephone: 01895 855219 Frank Nelson, Finance Director Telephone: 01895 855226 Ann-marie Wilkinson, Bell Pottinger Corporate & Financial Telephone: 020 7861 3232 CHAIRMAN'S STATEMENT I am delighted to report that we have had an excellent year. We have achieved our financial targets and are on course to deliver increased margins in construction and a structured expansion of housebuilding. FINANCIAL REVIEW Profit before tax of £22.7 million has increased 32% on last year's pre exceptional profit of £17.2 million (71% on the post exceptional profit of £13.3 million). Group turnover was up by 8% to £687 million (2003: £638 million). The construction operating profit for the year of £4.2 million (2003 pre exceptional loss of £0.4million: post exceptional loss of £3.8 million) was achieved on a turnover, including joint ventures, of £513 million (2003: £480 million). Housebuilding operating profits reached a record £25.5 million (2003: £24.1 million) on a turnover, including joint ventures, of £182 million (2003: £159 million). We had planned for an increase in pension costs this year, and group profits were achieved after charging £6.4 million (2003: £3.0 million) of which £2.7 million is in respect of funding the past service deficits in the Group's final salary pension schemes. The management of cash is a high priority throughout the Group and we achieved strong positive cash flows in construction, while carefully controlling the increase in housebuilding investment. Net interest costs for the year were £3.0 million compared to £3.2 million in the previous year, and at 30 June 2004 net borrowings stood at £12.3 million compared to £17.8 million at 30 June 2003, representing gearing of 17% (2003: 30%). Shareholders' funds have risen to £72.3 million from £59.7 million at 30 June 2003. Earnings per share for the period were 6.9p compared to 5.4p (pre exceptional; 4.2p post exceptional) the previous year. DIVIDEND The directors are committed to a progressive dividend policy that takes into account earnings growth as well as the need for continued investment in the business. Accordingly, the directors are recommending a final dividend of 1.15p per share, resulting in a total for the year of 1.7p per share, a 13% increase compared to 2003. CONSTRUCTION Our objective in construction is to increase profit margins on tightly controlled turnover growth in our core markets. With the full benefit of recent contract awards yet to impact financially, the division is on course to meet its profit margin target of 2% by the end of our financial year in 2006. Excellent progress has been made during the year in establishing Galliford Try as a major construction provider in its selected markets. Profitability is growing as the percentage of business carried out under our preferred procurement methods of framework and partnering agreements increases. Our focus on design and risk management enables us to analyse opportunities to ensure that they fit our criteria, and we then have the experience and ability to work with framework teams that can include client, designers and other contractors to deliver best value. In health and education, significant public investment is projected to continue. Much of this is being managed through long term collaborative frameworks that encompass a large number of medium sized projects, ideally suited to Galliford Try's project management and delivery expertise. NHS Local Improvement Finance Trusts (LIFTs) are delivering primary health care improvements across the country. In the last six months we have achieved financial close of LIFT projects for Liverpool and Sefton Health Partnership and for Barnet, Enfield and Haringey Primary Care Trusts. The first phases of these two projects alone will generate £92 million of business, with further work to be awarded under future phases of the 20 year framework agreements. We are currently working towards financial close on a LIFT project for the Coventry Primary Care Trust which is expected to generate £42 million of work in its first phase. We are delighted to announce today our selection as preferred bidder on a two year, £150 million PFI framework for work on 47 schools for Northamptonshire County Council. This award builds on our successful track record in multi-school PFI programmes, which encompasses projects such as in Birmingham where we are in the operational phase and Bedford, where construction is nearing completion. Most recently we were awarded the first contract to be let as part of the Government's 'Building Schools for the Future' initiative, at Kingsdale School in Southwark. We are preferred bidder on a project in Coventry and are on the final shortlist for two multi-school PFI projects. In water and rail we have also further advanced our position as a national provider of infrastructure services through framework agreements. We continue to work for Dwr Cymru Welsh Water and United Utilities as well as for Scottish Water, for whom turnover is increasing significantly under the framework agreement secured at the beginning of the financial year. We were also awarded a £35 million project in June by Dwr Cymru Welsh Water to design and construct waste water treatment works at Holyhead in Anglesey. We have renewed framework agreements worth £24 million for the British Waterways Board and have secured a further £50 million for Network Rail, where we are undertaking the next phase of their bridge strengthening and replacement programme. There are good opportunities in affordable housing and we are using both our construction and housebuilding expertise to grow the business. Maryland Point in east London is an excellent example, with The Toynbee housing association and the Boleyn and Forest, part of East Thames Housing Group, forming a joint venture with Galliford Try to construct an apartment block of 55 units, split between affordable and homes for sale. With East Thames we are now working on a new scheme for 152 units, including 60 homes for private sale. We have recently signed a 5 year partnering framework with Swan Housing Association and are preferred bidder, with Swan, for a £17 million project for key worker accommodation for the Mid Essex NHS Trust. Commercial and interiors work in the south of England and the midlands provides a mix of stand alone project and long term collaborative work. We have commenced the pre construction works for the retractable roof on centre court at Wimbledon for the All England Lawn Tennis Club, with whom we have a long-standing relationship. Other projects include a £16 million multiplex centre in West Bromwich, a £29 million study centre in Oxford, and project SLAM, the Ministry of Defence accommodation framework agreement. We are pleased that we have now reached a satisfactory settlement with both the client and structural engineer that has ended the litigation process resulting from the defective floor at the Daventry distribution centre for which we originally provided in 2001. We remain a market leader in providing construction services to the telecommunications market. Working for all the UK mobile phone operators, we have extended our services which now include site acquisition, design, construction and rigging as well as value added products such as pre-fabricated units and monopoles for rapid deployment when required. With increasing demand for network capacity, albeit with some delays on the roll-out of 3G, prospects are encouraging. Our ground engineering business continues to perform well and expand the range of piling solutions for its developer clients in the south east of England. Construction work in hand currently stands at £621 million of which 89% has been secured on a non price competitive basis. The opportunities that we have in the pipeline and our recent success in winning work in our chosen sectors will impact positively on profit as we go forward. HOUSEBUILDING Galliford Try operates as a regional housebuilder with strong local brands in the south west, eastern counties and the south east of England. The number of homes completed during the year was 761 compared to 741 the previous year at an average selling price that increased from £200,000 to £224,000. Markets remained generally good for most of the financial year, however there have been recent signs that the rate of increase in house prices has slowed. This has been most apparent at the top end of the new homes market, where we have restricted our exposure, and in the second hand market. Demand for new homes in the mainstream market, where we are focused, has been resilient and it is this sector that we expect will continue to provide the best opportunities in the current tighter market. We have planned our production accordingly and in the new financial year expect our average sales price to remain at around current levels. We entered the new financial year with record forward sales in hand of £74 million representing 35% of the year's projected sales compared to 20% a year ago, and current sales in hand of £95.3 million are up 42% on last year (2003: £67.1 million). The landbank of plots owned or controlled at the year end was 2,333 compared to 2,236 a year ago. Since then we have successfully acquired a number of sites that meet the more stringent investment criteria we are applying in the current land market and at the end of August it totalled 2,520 plots (2003: 2,055). Our strategic landbank comprises long term options over 660 acres from which we anticipate securing over 2,000 plots. During the year we announced an expansion plan to increase the total number of homes sold over the next three years by 50% to 1,250. We aim to achieve this by growing our regional businesses organically though increased market share and geographic coverage and, where appropriate, by acquisition. Our reputation and expertise in brownfield land development and building conversion frequently gives us a competitive edge as we assess site acquisition opportunities. Midas Homes, operating in the south west, had another very good year. Profit growth was supported by strong economic factors in the region, and we have been successful in securing significant land holdings for future expansion. We have secured a site in Helston for over 100 homes to be developed in phases and, in joint venture with the Devon and Cornwall Housing Association, we are to develop 170 homes in Truro, half of which are for private sale. Under the Gerald Wood brand we develop a small number of luxury homes in attractive village locations for which there is strong demand. In the south east all of Try Homes' sales in the year were from brownfield developments. With the mainstream market being predominantly urban, and sustained demand from purchasers for new homes, whether conversions or new build, the business continues to generate good growth opportunities. Our approach to treating each site individually enables us to develop across a wide range. We are converting Edwardian hospital buildings at Epsom into 61 homes and have constructed 34 apartments to a striking modern design on the site of an old garage in Croydon. In the eastern counties Stamford Homes, under a new managing director, embarked on a transition process during the year to improve margins by moving away from predominantly lower value greenfield developments to a business model more in line with our other regional brands. We have secured new sites at a number of attractive locations, including brownfield urban developments for 82 homes in Ely and over 100 plots in Lincoln. Stamford has also made good progress with its joint venture to develop and project manage the 44 acre site at Fairfield. The infrastructure to service the site is in place, and the programme of land sales to the developing housebuilders is underway with the first homes now sold. PEOPLE Across the Group I have been encouraged by the quality and enthusiasm of the people I meet. In a business that depends upon imaginative solutions and collaborative working it is crucial we have the right team who are well trained and motivated to deliver results. We also need experienced and effective management throughout our businesses to provide leadership and direction. We have made a number of key appointments this year to give us the strength and depth of management across all our business units to deliver our growth plans. As announced last year, Hugh Try retired from the board on 31 December 2003 after 48 years with the business, and Jonathan Dawson, a managing director of investment bank Lazard and a non executive director of Next plc, joined the board as a non executive director on 1 January 2004. Mike Jackson, a non executive director since 1997, will be stepping down from the board at this year's annual general meeting. His contribution to our strategy over a period of significant growth has been highly valued, and we wish him well for the future. The board intends to appoint a new non executive director in due course. OUTLOOK The construction division has met its objectives for the year and continues to push margins upwards in markets that have growth potential and in which we have been successful in securing long term workload. Housebuilding has consistently delivered profit increases. With a plan in place to implement a structured expansion over the next three years, the business is focused on the mainstream market, which we expect to remain the most resilient in the current tighter conditions, and where we have good growth opportunities for the future. The Group enters the new year in an extremely strong financial position, with good opportunities in both its divisions and a management team that has the ability and determination to deliver a robust performance. Tony Palmer Chairman 9 September 2004 CONSOLIDATED PROFIT AND LOSS ACCOUNT for the year ended 30 June 2004 2004 2003 restated Note £000 £000 Turnover Continuing operations 695,400 640,380 Less share of joint ventures' turnover (7,902) (2,555) --------- ----------- Group turnover 2 687,498 637,825 Cost of sales (629,197) (587,040) Exceptional cost of sales - (2,228) --------- ----------- Total cost of sales (629,197) (589,268) Gross profit 58,301 48,557 Net operating expenses (33,850) (31,553) Exceptional operating expenses - (1,644) --------- ----------- Total operating expenses (33,850) (33,197) Group operating profit 24,451 15,360 Share of profits in joint ventures 1,324 279 (Loss)/profit on sale of fixed asset investments (27) 916 --------- ----------- Profit on ordinary activities before interest 2 25,748 16,555 Net interest payable - Group (2,224) (2,534) - Joint ventures (820) (676) --------- ----------- (3,044) (3,210) --------- ----------- Profit on ordinary activities before tax 22,704 13,345 Tax (7,084) (3,898) --------- ----------- Profit on ordinary activities after tax 15,620 9,447 Dividends 6 (3,756) (3,312) --------- ----------- Retained profit for the period 11,864 6,135 --------- ----------- Earnings per ordinary share - before exceptional items 7.2p 5.6p - after exceptional items 7.2p 4.4p --------- ----------- Diluted earnings per ordinary share - before exceptional items 6.9p 5.4p - after exceptional items 6.9p 4.2p --------- ----------- Dividend per ordinary share 1.7p 1.5p --------- ----------- All of the Group's activities are continuing. There was no material difference between the profit on ordinary activities before tax and the retained profit for the year stated above and their historical cost equivalents. CONSOLIDATED BALANCE SHEET at 30 June 2004 2004 2003 restated £000 £000 Fixed assets Intangible assets - 167 Tangible assets 11,936 12,208 Investments in joint ventures: Share of gross assets 10,739 13,895 Share of gross liabilities (8,480) (11,730) ------------ ---------- 2,259 2,165 Investments in associates 31 48 Other investments 608 507 ------------ ---------- 14,834 15,095 Current assets Stocks 795 448 Developments 177,392 148,552 Debtors 107,932 116,619 Cash at bank & in hand 2,570 11,377 ------------ ---------- 288,689 276,996 Creditors: amounts falling due within one year Borrowings falling due within one year (13,648) (24,151) Other amounts falling due within one year (211,552) (195,132) ------------ ---------- Net current assets 63,489 57,713 ------------ ---------- Total assets less current liabilities 78,323 72,808 Creditors: amounts falling due after more than one year (3,108) (9,719) Provisions for liabilities and charges (2,928) (3,358) ------------ ---------- Net assets 72,287 59,731 ------------ ---------- Capital and reserves Called up share capital 11,239 11,058 Share premium account 2,196 1,767 Merger reserve 4,687 4,687 Revaluation reserve 1,909 1,912 Profit and loss account 52,256 40,307 ------------ ---------- Equity shareholders' funds 72,287 59,731 ------------ ---------- CONSOLIDATED CASH FLOW STATEMENT for the year ended 30 June 2004 2004 2003 restated Note £000 £000 £000 £000 Net cash inflow from operating activities 5(a) 17,107 7,229 Dividends from joint ventures - 75 Returns on investments and servicing of finance: Interest received 660 689 Interest paid (2,299) (2,899) Loan note interest paid (328) (305) Interest element of finance lease rentals - (9) ------- ------- ------- ------- Net cash outflow from returns on investments and servicing of finance (1,967) (2,524) Taxation (5,620) (4,174) Capital expenditure and financial investment: Purchase of tangible fixed assets (1,821) (1,747) Sale of tangible fixed assets 601 23 ------- ------- ------- ------- Net cash outflow for capital expenditure and financial investment (1,220) (1,724) Acquisitions and disposals: Increase in investment in joint ventures - (2,370) Increase in other investments (103) - Realisation of investment in joint ventures 115 24 Realisation of investment in associates 17 33 Realisation of other investments - 1,579 ------- ------- ------- ------- Net cash inflow/(outflow) for acquisitions and disposals 29 (734) Equity dividends paid 3,423) (3,300) ------- ------- ------- ------- Net cash inflow/(outflow)before use of liquid resources and financing 4,906 (5,152) Financing: Issue of ordinary share capital 610 248 Capital element of finance lease rental payments - (29) (Decrease)/ increase in bank loans (24,151) 22,933 Repayment of loan notes (16) (42) ------- ------- (23,557) 23,110 ------- ------- ------- ------- (Decrease)/ increase in cash in the period (18,651) 17,958 ------- ------- ------- ------- Reconciliation of net cash flow to movement in net debt (Decrease)/ increase in cash in the period (18,651) 17,958 Decrease/ (increase) in debt and lease financing 24,167 (22,862) ------- ------- ------- ------- Change in net debt in the period 5,516 (4,904) Net debt at start of (17,825) (12,921) period ------- ------- ------- ------- Net debt at 5(b) (12,309) 17,825) end of period ------- ------- ------- ------- STATEMENT OF GROUP TOTAL RECOGNISED GAINS AND LOSSES for the year ended 30 June 2004 -------- 2004 2003 restated £000 £000 Profit for the financial year 15,620 9,447 -------- Prior year adjustment (note 3) (166) -------- Total gains and losses recognised since last annual report 15,454 -------- NOTES TO THE PRELIMINARY STATEMENT 1. Basis of Preparation This preliminary statement has been agreed with the Company's auditors, and does not constitute statutory accounts for the Company. It has been extracted from the annual accounts of Galliford Try plc, which have not yet been filed with the Registrar of Companies. The financial information for the year ended 30 June 2003 has been extracted from the statutory accounts for that year on which the auditors gave an unqualified audit report and which have been filed with the Registrar of Companies. The comparative figures for 30 June 2003 have been restated to reflect the changes noted below in note 3. 2. Segmental analysis Turnover 2004 Turnover 2003 including Joint Group including Joint Group joint ventures turnover joint ventures turnover ventures turnover £000 ventures turnover £000 £000 £000 £000 £000 Construction 512,905 1,610 511,295 480,284 939 479,345 Housebuilding 182,031 6,292 175,739 159,447 1,616 157,831 Group 464 - 464 649 - 649 -------- -------- -------- -------- -------- ------- Total 695,400 7,902 687,498 640,380 2,555 637,825 -------- -------- -------- -------- -------- ------- All turnovers arose in the United Kingdom Profit/(loss) before Profit/(loss) Net assets/(liabilities) exceptional items and before interest interest 2004 2003 2004 2003 2004 2003 £000 restated £000 restated £000 restated £000 £000 £000 Construction 4,218 (407) 4,218 (3,754) (16,934) (16,551) Housebuilding 25,470 24,061 25,470 24,061 103,590 103,723 Group (3,940) (3,227) (3,940) (3,752) (2,060) (9,616) -------- -------- -------- -------- -------- --------- Sub-total 25,748 20,427 25,748 16,555 84,596 77,556 -------- -------- -------- -------- -------- --------- Net debt (12,309) (17,825) -------- -------- -------- -------- -------- --------- 72,287 59,731 -------- -------- -------- -------- -------- --------- The share of profits/(losses) in the joint ventures relating to construction of £297,000 (2003: (£7,000)) and housebuilding of £1,027,000 (2003: £286,000) is included in profit/(loss) before interest. The share of net assets relating to the joint ventures included in construction and housebuilding is £273,000 (2003: £210,000) and £1,986,000 (2003: £1,955,000) respectively. 3. Prior year adjustment As a result of the revisions of UITF Abstract 13, 'Accounting for ESOP Trusts', (now UITF Abstract 38 of the same name) and UITF Abstract 17, 'Employee share schemes', a prior year adjustment has been made to reflect the adjustments required. The impact has been that own shares held by the Galliford Employee Share Trust ('The Trust') are no longer shown as the sponsoring company's assets but are instead shown, at cost less any permanent diminution in value, as a deduction from the profit and loss account reserve. In addition the charge made to the profit and loss account for employee share awards and options is now based on the intrinsic value of the award spread over the performance period. The adoption of UITF 38 has resulted in a decrease in other investments of £320,000 (30 June 2003: £567,000). The adoption of UITF 17 (revised) and UITF 38 has resulted in a decrease in administration costs of £376,000 (30 June 2003: increase £166,000), a decrease in accruals of £374,000 (30 June 2003: £28,000) and a reduction in the opening profit and loss account reserves at 1 July 2003 of £539,000. 4. Earnings per share Basic earnings per share is calculated using the profit on ordinary activities after tax and the weighted average number of ordinary shares in issue during the year less the weighted average number of shares held by the Galliford Try Employee Share Trust which have not unconditionally vested in employees. For diluted earnings per share the weighted average number of ordinary shares is adjusted to assume conversion of all dilative potential ordinary shares. For the year ended 30 June 2003, in addition to the above the directors considered it appropriate to show alternative calculations based on profits on ordinary activities excluding exceptional items, of £12,157,000. 5. Notes to the cash flow statement a) Reconciliation of operating profit to cash flows 2004 2003 restated £000 £000 Operating profit 24,451 19,232 Exceptional restructuring costs - (3,872) Depreciation 1,642 1,588 Charge/(credit) for employee share options 82 (96) (Profit)/loss on disposal on tangible fixed assets (150) 15 Amortisation of goodwill 167 256 Increase in stocks (347) (90) Increase in developments (28,840) (20,077) Decrease/(increase) in debtors 8,423 (5,203) Increase in creditors 11,679 15,476 ---------- ---------- Net cash inflow from operating activities 17,107 7,229 ---------- ---------- The operating cash flows above include the following cash flows in respect of the exceptional items: 2004 2003 £000 £000 Cost of sales - 1,798 Administrative expenses - 1,019 ---------- ---------- - 2,817 ---------- ---------- b) Analysis of changes in net debt At 1 July Cash At 30 June 2003 flow 2004 £000 £000 £000 Cash at bank and in hand 11,377 (8,807) 2,570 Overdrafts - (9,844) (9,844) ---------- ---------- ---------- 11,377 (18,651) (7,274) Loan Notes (5,051) 16 (5,035) Bank loans (24,151) 24,151 - ---------- ---------- ---------- Net debt (17,825) 5,516 (12,309) ---------- ---------- ---------- 6. Final Dividend The directors are recommending a final dividend of 1.15p per share (2003: 1.0p) which, together with the interim dividend paid of 0.55p per share (2003: 0.5p), brings the total dividend in respect of 2004 to 1.7p (2003: 1.5p). Subject to approval at the Annual General Meeting to be held on Friday 29 October 2004, the final dividend of 1.15p per share will be paid on 5 November 2004 to shareholders on the register on 8 October 2004. This information is provided by RNS The company news service from the London Stock Exchange ND FR LPMPTMMTMBJI

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