Final Results

RNS Number : 6898S

Galliford Try PLC

15 September 2010

 



07:00 A.M. WEDNESDAY 15 SEPTEMBER 2010

GALLIFORD TRY PLC

ANNUAL RESULTS STATEMENT FOR THE YEAR ENDED 30 JUNE 2010

First stage of transformational housebuilding strategy progressing well.

Construction maintaining its performance

Financial Highlights		2010 £m	2009 £m
·      Group revenue ¹		1,222	1,461
·      Profit before tax	- pre exceptional	26.1	24.5
	- post exceptional ²	19.2	(26.9)
·      Net cash at year end		76.5	34.1
		pence	pence
·      Earnings per share	- pre exceptional	24.6	³ 35.8
	- post exceptional ²	14.7	(34.4)
·      Dividend per share		12.5	³ 10.9

Operational Highlights

·      Execution of housebuilding expansion plan on track.

·      58% of current 9,700 plot land bank acquired at current market values.

·      100% of plots for planned production in 2011 now secured with 93% for 2012.

·      30% increase in sales currently reserved, contracted or completed at £263 million (2009: £202 million).

·      2.4% construction margin and year end cash balance of £207 million: (2009: 2.4% and £237 million).

·      6% increase in contracting order book to £1.8 billion.  All five year water frameworks renewed until 2015.

¹   Group revenue excludes joint ventures.  Revenue where stated includes share of joint ventures.

²   Stated after net exceptional charges of £6.9 million (2009: £51.4 million) comprising a fine imposed by the Office of Fair Trading of  £8.3 million and a net credit on reassessment of the carrying value of housing related assets of £1.4 million.

³   2009 restated following the 1 for 10 share consolidation and subsequent 7 for 6 rights issue in October 2009.

Commenting on the results, Greg Fitzgerald, Chief Executive, said:

"We are on track to deliver the housebuilding expansion plan we set out at the time of the rights issue in September 2009.  We have been encouraged by the level of sales and prices achieved since the start of our new financial year when set against the backdrop of the effect on consumer confidence of the current economic uncertainty.  Our presence across the more resilient markets in the South, and the opportunities we continue to generate from our leading position in affordable housing and on regeneration schemes underpin our progress.

We have maintained a quality construction order book in increasingly challenging market conditions and anticipated reductions in public sector work.

The strength of the group's finances and the spread of its activities leaves us, subject to economic uncertainties, well positioned to deliver our planned progress."

For further enquiries please contact:

Galliford Try -	Greg Fitzgerald, Chief Executive Frank Nelson, Finance Director	01895 855001
Tulchan Communications -	Mal Patel, Matthieu Roussellier	020 7353 4200

CHIEF EXECUTIVE'S REVIEW

We have made excellent progress in implementing our housebuilding expansion strategy and secured a strong order book to underpin construction. 

Strategy

The group's strategy is to grow profits by delivering a transformational housebuilding expansion plan while maintaining a profitable market position in construction.  At the beginning of the financial year the housing market was starting to stabilise.  With housing sales and prices showing an element of recovery and mortgage lending increasing from a very low base, we also saw the early signs of a reviving land market with a number of attractive land acquisition opportunities developing. 

Accordingly, we took the decision to secure additional funding through a rights issue, which was completed in October last year and raised a net £119.3 million, to invest in a plan to approximately double the size of the housebuilding business over a three year period, with the objective of delivering a significant enhancement to earnings per share from 2012. 

Progress to date has been excellent, with our strong market position across the South of England in particular, and our industry leading expertise in affordable housing and on regeneration schemes, generating the land opportunities.  This has resulted in our landbank increasing from 7,850 a year ago to a current total of 9,700 plots, 58% of which has been acquired at current market, as compared to higher historic, values.  We are opening new offices on schedule and our management team is up to full strength.  We are therefore on track with the delivery of our plan.

As the UK emerged from the financial crisis of 2008/9, it was clear that there would be increasing pressure on capital investment, both initially by private clients and then in the public sector, which would impact the demand for construction projects.  We determined that our strategy would be to maintain the quality of our order book in more competitive markets, focusing our efforts on our long term client relationships and framework agreements, which give visibility of future work, and controlling the level of work secured by straightforward competitive tender.

This strategy will lead to a reduction in overall construction revenues in the short term, however by securing work in those market sectors that continue to have an acceptable profit and risk profile during this period, we will maintain a level of business that will enable us to take advantage of the opportunities that will ultimately arise when markets improve.  During the year we succeeded in increasing our order book by 6% to £1.8 billion, and have maintained this position, with a diverse spread encompassing 40% in the regulated sector, 51% in the public and 9% in the private sector. 

Dividend

On announcing the rights issue in September 2009, the directors stated they would take into account the effect of the rights issue in implementing a progressive dividend policy over the medium term. Having carefully considered the Group's performance during the past year and the progress it has made towards delivering the objectives outlined at the time of the rights issue, the directors are recommending a final dividend of 9.2 pence per share which, with the interim dividend of 3.3 pence per ordinary share paid in April, will result in a total dividend of 12.5 pence per share. This is a 15% increase on the total dividend of 10.9 pence per share declared last year, which has been restated to take account of the share consolidation and rights issue.

Outlook

We are on track to deliver the housebuilding expansion plan we set out at the time of the rights issue in September 2009.  Our results have been achieved against a backdrop of an improving market in the early months of 2010 and we have been encouraged by the level of sales and prices achieved since the start of our new financial year, when set against the backdrop of the effect on consumer confidence of the current economic uncertainty.  We adopt an appropriate level of prudence in our land buying and continue to manage closely the increased investment in housebuilding required to deliver our plan.  Our presence across the more resilient markets in the South, and the opportunities we continue to generate from our leading position in affordable housing and on regeneration schemes underpin our progress.

We have maintained a quality construction order book in increasingly challenging market conditions and anticipated reductions in public sector work, although uncertainty over the extent and focus remains as we await the outcome of the Government's autumn spending review.  Construction continues to generate profits and cash balances, albeit we have anticipated absolute levels will reduce due to the effect of a more competitive market.   

The strength of the group's finances and the spread of its activities leaves us, subject to economic uncertainties, well positioned to deliver our planned progress.

Greg Fitzgerald

Chief Executive

15 September 2010

BUSINESS REVIEW

Finance

Group revenue was £1,222 million (2009: £1,461 million), down 16%.  The pre exceptional profit before tax was up 6.5% to £26.1 million (2009: £24.5 million), and the post exceptional profit before tax was £19.2 million (2009 loss: £26.9 million).

A net exceptional cost of £6.9 million (2009: £51.4 million) has been accounted for in the results.  As detailed in the half year statement, in September 2009 Galliford Try was one of 103 companies found by the Office of Fair Trading to be in breach of the 1998 competition act through three instances of "cover pricing" that had taken place between the years 2001 and 2004, and that it was being fined £8.3 million.  The Group has submitted an appeal to the Competition Appeal Tribunal in respect of the size of the penalty imposed, however an outcome is not expected until late in 2010.  Accordingly, an exceptional provision for the full amount has been made in the financial statements.  In addition, a review of the carrying value of housing related assets in light of the limited recovery in the housing market since the downturn in the previous financial year has been undertaken.  This result is an adjustment to the carrying value of a number of our development sites, resulting in a net exceptional credit in respect of market movements of £1.4 million.

Basic pre exceptional earnings per share are 24.6 pence (2009 restated: 35.8 pence) with post exceptional earnings per share of 14.7 pence (2009 restated loss: 34.4 pence).

During the year the Group undertook a share consolidation of one new ordinary share of 50p for every 10 ordinary shares of 5p previously held, and a rights issue of 7 new ordinary shares for each 6 held (taking account of the share consolidation) at a subscription price of £2.85 per new ordinary share.  The rights issue raised a net £119.3 million enabling the Group to commence its housebuilding expansion plan.  At 30 June 2010 shareholders funds stood at £423.2 million, £128.6 million up on a year ago (2009: £294.6 million).

The Group has maintained its strong focus on cash management throughout the year.  Our construction businesses continue to hold significant cash balances which, although reduced from previous highs, exceeded our forecasts and stood at £206.8 million at 30 June (2009: £237.1 million).  The increase in investment in land and work in progress during the year from implementing the first stage of our housebuilding expansion plan was £81.3 million.  At the year end, the Group had a net cash position of £76.5 million (2009: £34.1 million).  The Group's bank facilities, with HSBC, Barclays, Royal Bank of Scotland and Lloyds Banking Group stood at £390 million at the year end.  Having been entered into in February 2007, they do not mature until 2012.

The Group embarked on a plan to expand its contracting activities for the affordable housing market during the year, creating a Partnerships division as part of the Group's construction activities, where affordable housing contracting results are now reported.  Housebuilding therefore encompasses all private housing, including that previously reported under regeneration, together with affordable housing development.  Prior year comparatives have been restated accordingly.

Housebuilding

Profit from operations (stated before finance costs, amortisation, share of joint ventures interest and tax, exceptional items and tax) was up 56% to £17.6 million on revenue, including joint ventures, of £316.0 million, representing a margin of 5.6% (2009: £11.3 million on £306.7 million, representing 3.7%).

As the market stabilised during the year, prices firmed and we achieved better than anticipated sales. As we anticipated, completions were higher in the second half of the year bringing the total to 1,705, 1,624 net of the proportionate share of our partners in joint venture developments (2009: 1,825 and 1,769).  Average sales prices were up 10% on last year at £190,000 (2009: £172,000) reflecting both prices achieved and a change in sales mix. 

Private housing completions, including those on regeneration projects, accounted for 1,287 of the total, generating a profit from operations of £14.3 million, representing a margin of 5.2% on revenue of £273.8 million.  The average selling price was £207,000 (2009: £193,000).  Affordable housing completions were 337 generating a profit from operations of £3.3 million, representing a margin of 7.8% on revenue of £42.2 million.  The average selling price was £124,000 (2009: £115,000).

We entered our new financial year with £201 million of sales carried forward, 25% up on last year.  We have been encouraged by both the level and value of sales achieved since the start of the year, with sales reserved, contracted or completed now standing at £263 million, up 30% compared to last year, with £168 million for the current financial year.  During the second half of the year sales rates averaged 27 a week, although consumer confidence has been affected following the political and economic uncertainty surrounding both the general election in May and the Government's autumn spending review and there has been the expected slow down in visitor levels and reservations.  Since the start of the year sales have averaged 21 per week and the cancellation rate has increased from historically low levels to around the long term average at 16%.

Significant progress has been made towards delivery of our three year expansion plan.  The first stage was to expand our southern biased land bank, based on strict criteria on margin, return on capital and achievable selling prices.  Our land bank currently stands at 9,700 Plots (2009: 7,850 Plots) with 58% of our land bank now having been secured at current market values, in line with our plan forecast.  During the year we acquired 147 plots by purchasing the residential assets of Wrights of Hull, 156 plots with the acquisition of award winning Cornish housebuilder, Rosemullion Homes and 146 plots for buying out our partners share in the joint venture at the SS Great Britain site on Bristol docks.  In addition, we acquired the Bank of Scotland's share in our London based joint ventures.  With our original share comprising 370 plots, we concluded the transaction with 742 plots in our land bank at an attractive land cost to gross development value ratio of 18% at minimal acquisition risk due to our in-depth knowledge of the sites.  We have also acquired land in joint venture with housing associations such as the two sites in Kent and Sussex for 111 and 185 plots respectively, purchased in partnership with leading affordable housing provider, Affinity Sutton.  We have also now opened a new regional office in Oxford.

The availability of opportunities to acquire land continues to improve, and there has been an increase in disposals by administrative receivers.  However the new Government's localist policies have caused confusion in planning authorities, with the results already of additional delays in obtaining consents for development and uncertainty over the long term effect on the number of homes that will be built.  In this context, our access to public land for regeneration projects and our market position will mitigate the effect.  We have over 1,300 acres of strategic land holdings which could generate up to 8,000 plots.

Our industry leading position in affordable housing and regeneration was significantly strengthened during the year by our selection as one of only 6 delivery partners on all 3 Homes and Communities Agency's development partner panels.  Established to develop new affordable and private housing on public sector sites across England we are seeing a number of significant opportunities, both through the HCA and other public sector bodies that are using the panel.  We have participated in Government housing stimulus packages, with contracted awards totalling £39.0 million.  We anticipated reduced public investment in the sector at an early stage and, although the extent of future support will remain uncertain until after the Government's autumn spending review, our site acquisition strategy and planning negotiations have taken this into account. 

Construction

Total construction revenue was £936.5 million, including joint ventures, compared to £1,175.7 million the previous year, and the division achieved a strong trading performance with excellent cash balances that stood at £206.8 million at 30 June (2009: £237.1 million).  The profit from operations of £22.8 million represented a margin of 2.4% (2009: £27.9 million representing 2.4%). 

Our order book rose 6% in the year to £1.8 billion which we have maintained during the first two months of the year.  The spread of work, with 40% in the regulated, 51% in the public and 9% in the private sectors represents a defensive and diverse portfolio.  Our strong track record in collaborative frameworks, significantly boosted in the period with the renewal of our five year frameworks with all our water industry clients, underlines the resilience of our market position in the regulated sector.  Public sector work is more uncertain and dependent on the Government's autumn spending review, however we are seeing some limited signs of increased activity amongst our blue-chip private sector clients.  We have 88% of our projected revenue for the new financial year secured.

Building - The division delivered a consistently good profit and cash performance during the year.  Profit from operations was £10.8 million on the revenue of £445.3 million, representing a margin of 2.4% (2009: £11.9 million on £528.7 million, 2.3%). 

We continued to secure a steady flow of projects from the public sector, particularly in our health frameworks, for the Ministry of Justice and for the education market.  We recently completed agreements to undertake a 10 year framework for £300 million of community facilities for the Scottish South East Hub territory partnering board which includes the Scottish Futures Trust, local Councils, NHS Health Boards and the emergency services.  We are also on the shortlist for the North East hub.  In education we have a significant presence in the market through direct contracting for primary, secondary and tertiary facilities with limited involvement in Building Schools for the Future.  Projects awarded during the period included work for Lancaster University and the Cambridge Education Authority.

We have a strong presence in the resilient London commercial market and are making good progress towards completion of our major project at St Pancras Chambers where we are converting the listed Victorian building into 68 apartments and a 244 bedroom luxury hotel under a £103 million contract.  In leisure, we completed the contract to rebuild the Leicester Tigers Rugby Stadium, were appointed to substantially redevelop the Edgbaston International Cricket Stadium in Warwickshire and negotiated further work for the All England Lawn Tennis Club at Wimbledon to follow on from the construction of new courts 2 and 3.  With an order book currently standing at £638 million the building division has secured 97% of the new financial year's planned workload. 

Partnerships - A profit from operations of £1.3 million on revenue of £93.8 million, represented a margin of 1.4% (2009: £2.1 million on £130.4 million representing 1.6%).

We launched an expansion plan for our affordable housing contracting business as our major housing association clients restarted their redevelopment programmes during the year.  With a strong presence and track record in the south east and north east of England, our objective is to extend our services in this sector across other areas of the country in which the Group has a presence. 

Partnerships works in framework agreements for many of its housing association clients including Swan, Family Mosaic and Circle Anglia and has an order book of £198 million with 61% of the new financial year's planned workload secured.

Infrastructure - The division maintained its operating margin, delivering a strong profit and cash performance.  The profit from operations of £10.7 million on revenues of £397.4 million represented a margin of 2.7% (2009: £13.9 million on £516.6 million representing 2.7%). 

The benefit of our strong presence in the regulated sector stood us in good stead in a more competitive market.  Predominant amongst these is water, where we have maintained our position as the sector's leading contractor, having renewed framework agreements until 2015 with all of our clients.  We also carry out one off projects outside the asset management frameworks, such as a £28 million project for Thames Water at Longreach won during the year.  We also completed the £58 million clean water plant for Anglian Water at Wing during the year.

Major contracts performed well during the year.  Our projects for the Olympic Delivery Authority, comprising infrastructure works at Olympic Park, the white water canoeing centre at Broxbourne and the rowing lake at Eton Dorney are nearing completion.  The M74 highways project in Glasgow, a £450 million contract being undertaken in four party consortium, is progressing well as is the £31.5 million A96 highways contract in Fochabers, Scotland.  We secured a number of contracts under our Environment Agency framework, including the second phase of flood alleviation works in Wigan and improvements to the Thames Barrier in London.  Based on our track record in water, we are developing civil engineering services for the waste industry and are carrying out our first energy from waste project, a £20 million contract in Cannock.  We are on Network Rail's multi asset framework, in addition to which we undertook the redevelopment of Rotherham Station for the south Yorkshire PTE and, for Network Rail, and are completing a £13 million regeneration project at Newport Station in south Wales in preparation for the 2010 Ryder Cup. 

We have a growing business in renewable energy, with a 25 year energy services contract secured in the last month to provide energy to the 800 home net carbon neutral Affinity Sutton and Linden Homes joint venture at Graylingwell Park near Chichester.

With a total infrastructure order book of £922 million, of which 62% is in the regulated sector, 79% of the current year's planned workload has been secured.

PPP Investments

Total revenue, including joint ventures, was £3.5 million (2009: £27.4 million).  The profit from operations was £2.4 million (2009: £10.2 million).  The profit from joint ventures was £1.1 million on revenue of £2.1 million.  In 2009 joint venture profit was £7.9 million on £25.8 million of revenue, which included a profit of £7.1 million from the Highland Schools joint venture, the investment in which was sold in July 2009.  The director's valuation of the Group's PFI/PPP portfolio as at 30 June 2010 was carried out, as in previous years, on a discounted cash flow basis.  The result showed a valuation of £6.9 million, which compares to the value invested of £2.8 million (2009: valuation of £19.2 million and value invested of £10.2 million)

At the start of the financial year the Group sold its remaining investment in the Highland Schools project to an investment company managed by HSBC Infrastructure Fund.  We achieved financial close on the £60 million Worcester Library and History Centre project, in which we own 100% of the equity.  We are the largest equity holder in Space Consortium which was selected as preferred private sector partner for the development of £300 million of community facilities across South East Scotland over the next 10 years for the South East hub initiative, and are on a short-list for the North Hub which has a potential capital expenditure of around £400 million.  We are on a short-list of two for Kent's affordable housing project and, in partnership with United Utilities, have reached the final two bidders for the South Tyne & Wear Waste Management scheme.

Health and Safety

Our strongest focus remains on health and safety.  During the year we achieved a small improvement in our measured performance, with our accident incident rate falling from 5.7 to 5.3 reportable accidents per 1,000 people at risk.  Regrettably we did suffer one fatality on one of our sites during the year.  We are extremely conscious of maintaining everyone's concentration on health and safety.  During the year we implemented the second phase of our behavioural safety programme, and are on track for 1,000 employees to have participated in the initiative by the end of 2010.  We also carried out a number of one off events such as a 'Stop the Job' day across our entire business to promote safer working.

CONSOLIDATED INCOME STATEMENT

For the year ended 30 June 2010

		2010				2009
		Before exceptional items	Exceptional items	Total		Before exceptional items	Exceptional items	Total
	Note	£m	£m	£m		£m	£m	£m
Continuing operations
Revenue	2	1,221.9	-	1,221.9		1,461.2	-	1,461.2
Cost of sales		(1,104.6)	1.4	(1,103.2)		(1,344.9)	(40.6)	(1,385.5)
Gross profit/(loss)		117.3	1.4	118.7		116.3	(40.6)	75.7
Administrative expenses		(87.1)	(8.3)	(95.4)		(83.4)	(10.8)	(94.2)
Share of post tax losses from joint ventures		(0.8)	-	(0.8)		(1.0)	-	(1.0)
Profit/(loss) before finance costs		29.4	(6.9)	22.5		31.9	(51.4)	(19.5)
Profit/(loss) from operations	2	35.2	(6.9)	28.3		43.4	(51.4)	(8.0)
Share of joint ventures' interest and tax		(4.5)	-	(4.5)		(9.5)	-	(9.5)
Amortisation of intangibles		(1.3)	-	(1.3)		(2.0)	-	(2.0)
Profit/(loss) before finance costs		29.4	(6.9)	22.5		31.9	(51.4)	(19.5)
Finance income	4	4.4	-	4.4		3.8	-	3.8
Finance costs	4	(7.7)	-	(7.7)		(11.2)	-	(11.2)
Profit/(loss) before income tax		26.1	(6.9)	19.2		24.5	(51.4)	(26.9)
Income tax (expense)/income	5	(8.0)	(0.4)	(8.4)		(6.0)	15.1	9.1
Profit/(loss) for the year		18.1	(7.3)	10.8		18.5	(36.3)	(17.8)
Earnings/(loss) per share	7
- basic		24.6p		14.7p		35.8p*		(34.4)p*
- diluted		24.6p		14.7p		35.8p*		(34.4)p*
Dividend per share - declared				12.5p				10.9p*

* Restated following the 1 for 10 share consolidation and subsequent 7 for 6 rights issue in October 2009

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME for the year ended 30 June 2010
		2010 £m	2009 £m
Profit/(loss) for the year		10.8	(17.8)
Actuarial gains and losses recognised on retirement benefit obligations		4.8	(6.5)
Deferred tax on items recognised in equity		(1.3)	1.8
Other comprehensive income/(expense)		3.5	(4.7)
Total comprehensive income/(expense) for the year		14.3	(22.5)

CONSOLIDATED BALANCE SHEET 

at 30 June 2010

	Note	2010 £m	2009 £m
Assets
Non current assets
Intangible assets		6.9	8.2
Goodwill	8	115.0	115.0
Property, plant and equipment		7.6	8.3
Investments in joint ventures		2.1	0.7
Financial assets
- Available for sale financial assets		15.7	9.4
Trade and other receivables		38.2	40.3
Deferred income tax assets		11.2	12.0
Total non current assets		196.7	193.9
Current assets
Inventories		1.1	0.9
Developments		528.9	447.6
Trade and other receivables		227.7	213.5
Cash and cash equivalents	9	166.7	159.5
		924.4	821.5
Non current assets classified as held for sale		0.5	12.1
Total current assets		924.9	833.6
Total assets		1,121.6	1,027.5
Liabilities
Current liabilities
Financial liabilities  - borrowings	9	(1.0)	(13.0)
Trade and other payables		(563.0)	(546.2)
Current income tax liabilities		(5.9)	(4.6)
Provisions for other liabilities and charges		(8.6)	(0.6)
Total current liabilities		(578.5)	(564.4)
Net current assets		346.4	269.2
Non  current liabilities
Financial liabilities
- Borrowings	9	(89.2)	(112.4)
- Derivative financial liabilities		(2.1)	(2.8)
Retirement benefit obligations		(17.3)	(27.5)
Deferred income tax liabilities		-	(14.3)
Other non current liabilities		(10.7)	(11.4)
Provisions for other liabilities and charges		(0.6)	(0.1)
Total non current liabilities		(119.9)	(168.5)
Total liabilities		(698.4)	(732.9)
Net assets		423.2	294.6
Shareholders' equity
Ordinary shares		40.9	18.9
Share premium		190.8	190.8
Other reserves		5.3	5.3
Retained earnings		186.2	79.6
Total  shareholders' equity		423.2	294.6

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY

for the year ended 30 June 2010

	Share capital £m	Share premium £m	Other reserves £m	Retained earnings £m	Total shareholders' equity £m
At 1 July 2008	18.9	190.8	5.3	110.3	325.3
Loss for the year	-	-	-	(17.8)	(17.8)
Other comprehensive expense	-	-	-	(4.7)	(4.7)
Transactions with owners:
Dividends paid	-	-	-	(9.6)	(9.6)
Share based payments	-	-	-	1.4	1.4
At 1 July 2009	18.9	190.8	5.3	79.6	294.6
Profit for the year	-	-	-	10.8	10.8
Other comprehensive income	-	-	-	3.5	3.5
Transactions with owners:
Dividends paid	-	-	-	(6.7)	(6.7)
Share based payments	-	-	-	1.8	1.8
Purchase of own shares	-	-	-	(0.1)	(0.1)
Issue of shares	22.0	-	-	97.3	119.3
At 30 June 2010	40.9	190.8	5.3	186.2	423.2

CONSOLIDATED CASH FLOW STATEMENT

for the year ended 30 June 2010

	Notes	2010 £m	2009 £m
Cash flows from operating activities
Continuing operations
Profit/(loss) before finance costs		22.5	(19.5)
Adjustments for:
Depreciation and amortisation		3.3	4.4
Profit on sale of property, plant and equipment		(0.1)	(0.1)
Profit on sale of investments		(4.4)	(4.2)
Share based payments		1.8	1.4
Share of post tax losses from joint ventures		0.8	1.0
Movement on provisions		8.5	(2.2)
Other non cash movements		(5.5)	(6.0)
Net cash generated from/(used in) operations before pension deficit payments and changes in working capital		26.9	(25.2)
Deficit funding payments to pension schemes		(7.3)	(7.2)
Net cash generated from/(used in) operations before changes in working capital		19.6	(32.4)
(Increase)/decrease in inventories		(0.2)	0.8
(Increase)/decrease in developments		(25.1)	162.7
(Increase)/decrease in trade and other receivables		(20.9)	79.1
Increase/(decrease) in payables		9.0	(162.8)
Net cash (used in)/generated from operations		(17.6)	47.4
Interest received		3.6	3.0
Interest paid		(4.6)	(6.3)
Income tax (paid)/received		(7.5)	0.8
Net cash (used in)/generated from operations		(26.1)	44.9
Cash flows from investing activities
Dividends received from joint ventures		0.1	2.8
Acquisition of subsidiaries (net of cash and borrowings acquired)	10	(55.7)	-
Acquisition of investments in joint ventures		(2.4)	(5.1)
Acquisition of available for sale financial assets		(1.0)	-
Acquisition of non-current assets held for sale		(0.5)	-
Proceeds from non-current assets held for sale		16.5	5.2
Proceeds from available for sale financial assets		0.2	0.2
Acquisition of property, plant and equipment		(1.6)	(3.4)
Proceeds from sale of property, plant and equipment		0.4	0.8
Net cash (used in)/generated from investing activities		(44.0)	0.5
Cash flows from financing activities
Net proceeds from issue of ordinary share capital		119.3	-
Purchase of own shares		(0.1)	-
Repayment of borrowings		(35.2)	(14.8)
Increase in borrowings		-	4.1
Dividends paid to Company shareholders	6	(6.7)	(9.6)
Net cash generated from/(used in) financing activities		77.3	(20.3)
Net increase in cash and cash equivalents		7.2	25.1
Cash and cash equivalents at 1 July		159.5	134.4
Cash and cash equivalents at 30 June	9	166.7	159.5

NOTES TO THE ANNUAL RESULTS STATEMENT

1   Basis of preparation

This consolidated financial information has been prepared in accordance with the Listing Rules of the Financial Services Authority and uses EU adopted International Accounting Standards (IASs), International Financial Reporting Standards (IFRSs), IFRIC Interpretations and those parts of the Companies Act 2006 applicable to companies reporting under IFRS. The accounting policies adopted are consistent with those described in the Annual Report and Financial Statements 2009 which have not changed significantly, except as explained in note 2. The financial information set out in this document does not constitute statutory accounts for the years ended 30 June 2009 or 30 June 2010 but is derived from the Annual Report and Financial Statements 2010. The Annual Report and Financial Statements for 2009 have been delivered to the Registrar of Companies and the Annual Report and Financial Statements for 2010 will be delivered to the Registrar of Companies in due course. The auditors have reported on those accounts and have given an unqualified report which does not contain a statement under Chapter 3 of Part 16 of the Companies Act 2006.

Full financial statements that comply with IFRS are included in the Annual Report and Financial Statements 2010 which will be circulated to shareholders in October 2010 and will be made available at www.gallifordtry.co.uk.

2   Segmental reporting

Segment reporting is presented in the consolidated financial statements in respect of the Group's business segments, which are the primary basis of segment reporting. The business segment reporting reflects the Group's management and internal reporting structure. Segment results include items directly attributable to the segment as well as those that can be allocated on a reasonable basis. As the Group has no material activities outside the UK, segmental reporting is not required by geographical region. Inter-segment revenue is not material.

The chief operating decision-maker ("CODM") has been identified as the Chief Executive and the Group Finance Director. The CODM review the group's internal reporting in order to assess performance and allocate resources.  Management has determined the operating segments based on these reports. Following decisions made by management to embark on plans to expand its contracting business for the affordable housing market within the Partnerships division the group's internal reporting was changed to reflect the new management structure. As a result management has reconsidered the segmental disclosure made in the Interim Statement and has concluded that it is more appropriate to disclose five main operating segments, namely Housebuilding, Building, Partnerships, Infrastructure and PPP investments as this better reflects how information is now presented to the CODM. The housebuilding segment encompasses all private housing development, including that previously reported under regeneration.

The CODM assess the performance of the operating segments based on a measure of adjusted earnings before net finance costs, tax and amortisation.  This measurement basis excludes the effects of non-recurring expenditure from the operating segments, such as restructuring costs and impairments when the impairment is the result of an isolated, non-recurring event.  Interest income and expenditure are included in the result for each operating segment that is reviewed by the CODM.  Other information provided to them is measured in a manner consistent with that in the financial statements.

Following the adoption of IFRS8, the segmental reporting below includes profit from operations which is stated before finance costs, amortisation of intangible assets, share of joint ventures' interest and tax, exceptional items and tax. This reflects the  principal internal reporting measure used by the CODM. As at 30 June 2010, the operating segments reported are different to those previously reported and hence the comparative information provided for the year ended 30 June 2009 has been restated accordingly. In addition, profit from operations in the Annual Report and Financial Statements 2009 was stated including the Group's share of joint ventures' interest hence the presentation has also been amended in line with the current disclosures. Central costs relate to head office costs that cannot be allocated to the operating segments.

Primary reporting format - business segments

						Construction
				House-building		Building	Partner-ships**		Infrastructure	Total	PPP Investments	Central costs	Total
				£m		£m	£m		£m	£m	£m	£m	£m
Year ended 30 June 2010
Group revenue and share of joint ventures' revenue				316.0		445.3	93.8		397.4	936.5	3.5	0.4	1,256.4
Share of joint ventures' revenue				(21.8)		(0.2)	-		(10.4)	(10.6)	(2.1)	-	(34.5)
Revenue				294.2		445.1	93.8		387.0	925.9	1.4	0.4	1,221.9
Segment result:
Profit/(loss) from operations before share of joint ventures' profit				15.2		10.6	1.3		10.7	22.6	1.3	(7.6)	31.5
Share of joint ventures' profit				2.4		0.2	-		-	0.2	1.1	-	3.7
Profit/(loss) from operations *				17.6		10.8	1.3		10.7	22.8	2.4	(7.6)	35.2
Share of joint ventures' interest and tax				(2.0)		(0.2)	-		-	(0.2)	(2.3)	-	(4.5)
Profit/(loss) before finance costs, amortisation, net exceptional items and taxation				15.6		10.6	1.3		10.7	22.6	0.1	(7.6)	30.7
Net finance (costs)/income				(11.0)		0.8	-		(0.4)	0.4	-	7.3	(3.3)
Profit before amortisation, net exceptional items and taxation				4.6		11.4	1.3		10.3	23.0	0.1	(0.3)	27.4
Amortisation of intangibles													(1.3)
Profit/(loss) before net exceptional items and taxation													26.1
Net exceptional  items													(6.9)
Income tax expense													(8.4)
Profit for the year													10.8
	Year ended 30 June 2009 (restated)
	Group revenue and share of joint ventures' revenue				306.7	528.7		130.4	516.6	1,175.7	27.4	0.5	1,510.3
	Share of joint ventures' revenue				(12.0)	(0.5)		-	(10.8)	(11.3)	(25.8)	-	(49.1)
	Revenue				294.7	528.2		130.4	505.8	1,164.4	1.6	0.5	1,461.2
	Segment result:
	Profit/(loss) from operations before share of joint ventures' profit				11.0	11.6		2.1	13.9	27.6	2.3	(6.0)	34.9
	Share of joint ventures' profit				0.3	0.3		-	-	0.3	7.9	-	8.5
	Profit/(loss) from operations *				11.3	11.9		2.1	13.9	27.9	10.2	(6.0)	43.4
	Share of joint ventures' interest and tax				(0.3)	(0.2)		-	-	(0.2)	(9.0)	-	(9.5)
	Profit/(loss) before finance costs, amortisation and net exceptional items and taxation				11.0	11.7		2.1	13.9	27.7	1.2	(6.0)	33.9
	Net finance (costs)/ income				(23.0)	3.0		(1.3)	1.0	2.8	(0.4)	13.2	(7.4)
	Profit/(loss) before amortisation, net exceptional items and taxation				(12.0)	14.7		0.8	14.9	30.5	0.8	7.2	26.5
	Amortisation of intangibles												(2.0)
	Profit before net exceptional items and taxation												24.5
	Net exceptional items												(51.4)
	Income tax expense												9.1
	Loss for the year												(17.8)

 * Profit from operations is stated before finance costs, amortisation, share of joint ventures' interest and tax, exceptional items and taxation.

** Revenue in this segment includes £7.5 million (2009: £19.3 million) relating to work done for joint venture undertakings at cost.

						Construction
			House-building			Building	Partner- ships	Infrastructure	Total	PPP Investments	Central costs	Total
			£m			£m	£m	£m	£m	£m	£m	£m
Year ended 30 June 2010
Assets
Net cash/(debt)				(467.9)	140.4		23.3	43.1	206.8	2.1	335.5	76.5
Other assets												943.7
Borrowings												90.2
Deferred income tax assets												11.2
Total assets												1,121.6
Year ended 30 June 2009 (restated)
Assets
Net cash/(debt)				(433.7)	152.2		10.4	74.5	237.1	(8.8)	239.5	34.1
Other assets												856.0
Borrowings												125.4
Deferred income tax assets												12.0
Total assets												1,027.5

3   Net exceptional item

A net exceptional cost of £6.9 million (2009: £51.4 million) has been accounted for in the income statement for the year.  On 22 September 2009 the Company announced that it, along with 102 other companies in the industry, had been found by the Office of Fair Trading to be in breach of the 1998 Competition Act through three instances of "cover pricing" that had taken place between the years 2001 and 2004, and that it was being fined £8.3 million.  The Group does not condone any form of anti competitive activity and, after it was first made aware of the allegations in 2007, it reviewed and updated its competition law policies and procedures and instigated an employee training programme and compliance regime.  The Group has submitted an appeal to the Competition Appeal Tribunal in respect of the size of the penalty imposed, however the outcome is not expected until late in 2010.  Accordingly, an exceptional provision for the full amount has been made in the financial statements. 

We have reviewed the carrying value of housing related assets in light of the limited recovery in the housing market since the downturn in our previous financial year.  This has resulted in adjustments to the carrying value of a number of our development sites, in circumstances where the original estimates have been changed, resulting in a net exceptional credit in respect of market movements of £1.4 million at 30 June 2010.

4   Net finance costs

		2010	2009
		£m	£m
Interest receivable on bank deposits		0.6	1.5
Interest receivable from joint ventures		2.4	2.2
Unwind of discount on shared equity receivables		0.4	-
Fair value profit on financing activities  - interest rate swaps		0.7	-
Other		0.3	0.1
Finance income		4.4	3.8
Interest payable on borrowings		(4.5)	(5.4)
Unwind of discounted payables		(1.1)	(1.5)
Fair value losses on financing activities - interest rate swaps		-	(3.5)
Net finance cost on retirement benefit obligations		(2.0)	(0.8)
Other		(0.1)	-
Finance costs		(7.7)	(11.2)
Net finance costs		(3.3)	(7.4)

5   Income tax expense/(income)

	2010				2009
Analysis of expense/(income) in year	Before exceptional items	Exceptional items	Total		Before exceptional items	Exceptional items	Total
	£m	£m	£m		£m	£m	£m
Current year's income tax
Current tax	8.7	0.4	9.1		8.3	(15.1)	(6.8)
Deferred tax	0.6)	-	(0.6)		(2.3)	-	(2.3)
Adjustment in respect of prior years
Current tax	(0.3)	-	(0.3)		0.3	-	0.3
Deferred tax	0.2	-	0.2		(0.3)	-	(0.3)
Income tax expense/(income)	8.0	0.4	8.4		6.0	(15.1)	(9.1)
Tax on items recognised in equity
Deferred tax expense/(income) on retirement benefit obligations	1.3	-	1.3		(1.8)	-	(1.8)
Total taxation	9.3	0.4	9.7		4.2	(15.1)	(10.9)

The total income tax expense for the year of £8.4 million (2009: income £9.1 million) is higher (2009: higher) than the year end standard rate of corporation tax in the UK of 28% (2009: 28%). The differences are explained below:

	2010				2009
	Before exceptional items	Exceptional items	Total		Before exceptional items	Exceptional items	Total
	£m	£m	£m		£m	£m	£m
Profit/(loss) before income tax	26.1	(6.9)	19.2		24.5	(51.4)	(26.9)
Profit/(loss) before income tax multiplied by the year end standard rate in the UK of 28% (2009: 28%)	7.3	(1.9)	5.4		6.8	(14.4)	(7.6)
Effects of:
Permanent differences	2.7	2.3	5.0		0.4	-	0.4
Non taxable income	(1.9)	-	(1.9)		(1.2)	-	(1.2)
Change in rate of current income tax	-	-	-		-	(0.7)	(0.7)
Adjustments in respect of prior years	(0.1)	-	(0.1)		-	-	-
Income tax expense/(income)	8.0	0.4	8.4		6.0	(15.1)	(9.1)

A number of changes to the UK Corporation tax system were announced in the June 2010 Budget Statement. The Finance (No 2) Act 2010 included legislation to reduce the main rate of corporation tax from 28% to 27% from 1 April 2011. Further reductions to the main rate are proposed to reduce the rate by 1% per annum to 24% by 1 April 2014. The changes had not been substantively enacted at the balance sheet date and, therefore, are not included in these financial statements.

The effect of the changes to be enacted in the Finance (No 2) Act 2010 would be to reduce the deferred tax asset provided at 30 June 2010 by £0.3 million. This £0.3 million decrease in the deferred tax asset would decrease profit for the year by £0.3 million. This decrease in the deferred tax asset is due to the reduction in the corporation tax rate from 28% to 27% with effect from 1 April 2011.

The proposed reductions of the main rate of corporation tax by 1% per year to 24% by 1 April 2014 are expected to be enacted separately each year. The overall effect of the further changes from 27% to 24%, if these applied to the deferred tax balance at 30 June 2010, would be to reduce the deferred tax asset by £1.0 million (being £0.3 million recognised in 2012, £0.3 million recognised in 2013 and £0.3 million recognised in 2014).

6   Dividends

The dividend per ordinary share amounts shown in the table below have been restated by dividing those previously reported by an adjusting factor of 0.1381 to reflect the share consolidation and bonus element in the shares issued under the rights issue which completed on 22 October 2009.

			2010		2009 (restated)
			£m	Pence per share	£m	Pence per share
Previous year final			4.0	7.6	7.9	15.2
Current period interim			2.7	3.3	1.7	3.3
Dividend recognised in the year			6.7	10.9	9.6	18.5
The following dividends were declared by the Company in respect of each accounting period presented:
			2010		2009 (restated)
			£m	Pence per share	£m	Pence per share
Interim			2.7	3.3	1.7	3.3
Final			7.5	9.2	4.0	7.6
Dividend relating to the year			10.2	12.5	5.7	10.9

The directors are proposing a final dividend in respect of the financial year ended 30 June 2010 of 9.2p per share bringing the total dividend in respect of 2010 to 12.5p per share (2009: 10.9p). The final dividend will absorb approximately £7.5 million of shareholders' funds. Subject to shareholder approval at the Annual General Meeting to be held on 5 November 2010, the final dividend will be paid on 12 November 2010 to shareholders on the register at the close of business on 8 October 2010.

7   Earnings/(loss) per share

a)            Basic and diluted earning/(loss) per share

Basic earnings/(loss) per share is calculated by dividing the earnings/(loss) attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the year, excluding those held by the employee share trust, which are treated as cancelled.

The weighted average number of shares used for 2009 in the calculation of earnings per share information shown in the table below has been restated by adjusting those previously reported by an adjusting factor of 0.1381 to reflect the share consolidation and bonus element in the shares issued under the rights issue which completed on 22 October 2009.

Under normal circumstances, the average number of shares is diluted by reference to the average number of potential ordinary shares held under option in the period. The dilutive effect amounts to 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 price. Only shares that have met their cumulative performance criteria are included in the dilution calculation. The Group has two classes of potentially dilutive ordinary shares: those share options granted to employees where the exercise price is less than the average market price of the Company's ordinary shares during the year and the contingently issuable shares under the Group's long term incentive plan. A loss per share cannot be reduced through dilution, hence this dilution is only applied where the Group has reported a profit. As at 30 June 2009 and 30 June 2010 there are no potentially dilutive shares as the employee share options have an exercise price greater than the current share price.

The earnings/(loss) and weighted average number of shares used in the calculations are set out below.

		2010				2009 (restated)
	Profit £m		Weighted average number  of shares	Per share amount  pence	Loss £m		Weighted  average  number of shares	Per share amount pence
Basic EPS
Earnings/(loss) attributable to ordinary shareholders	10.8		73,598,363	14.7	(17.8)		51,673,188	(34.4)
Effect of dilutive securities:
Options			-	-			-	-
Diluted EPS	10.8		73,598,363	14.7	(17.8)		51,673,188	(34.4)

(b)           Adjusted earnings per share

Adjusted earnings per share based on the earnings before net exceptional items of £7.3 million (2009: £36.3 million) for the year are set out below:

		2010				2009 (restated)
	Earnings £m		Weighted average number  of shares	Per share amount  pence	Earnings £m		Weighted  average  number of shares	Per share amount pence
Basic EPS
Earnings attributable to ordinary shareholders	18.1		73,598,363	24.6	18.5		51,673,188	35.8
Effect of dilutive securities:
Options			-	-			-	-
Diluted EPS	18.1		73,598,363	24.6	18.5		51,673,188	35.8

8   Goodwill

Goodwill is allocated to the Group's cash-generating units (CGUs) identified according to business segment. The goodwill is attributable to the following business segments:

	2010 £m	2009 (restated) £m
Housebuilding	52.2	52.2
Building	17.9	17.9
Partnerships	5.8	5.8
Infrastructure	37.2	37.2
PPP Investments	1.9	1.9
Total	115.0	115.0

The allocation of goodwill to segments in 2009 has been restated in line with the segmental reporting as explained in note 2.

Key assumptions

The recoverable amount of a CGU is determined based on value in use calculations. These calculations use pre tax cash flow projections based on future financial budgets approved by the Board based on past performance and its expectation of market developments. The key assumptions within these budgets relate to revenue growth and the future profit margin achievable. Future budgeted revenue is based on management's knowledge of actual results from prior years, latest forecasts for the current year along with the existing secured work and management's future expectation of the level of work available within the market sector and expected changes in selling volumes and prices for completed houses. In establishing future profit margins, the margins currently being achieved are considered in conjunction with expected inflation rates in each cost category and to reflect the current market value of land being acquired. Budgeted profit margins in housebuilding are in line with expectations included within the strategic plan set out at the time of the rights issue to double the size of the housebuilding business, increasing the number of house completions from the current level of around 1,700 to around 3,500 in 2012.

Cash is monitored very closely on a daily, weekly and monthly basis for the purposes of managing both treasury and the business as a whole. Details of the Group's treasury management are included within the Business Review of the Annual Report. The assumptions used are reviewed regularly and differences between forecast and actual results are closely monitored with variances being investigated fully. The knowledge gained from this past experience is used to ensure that the future assumptions used are consistent with past actual outcomes and are management's best estimate of the future cash flows of each business unit.  Cash flows beyond the budgeted three year period are extrapolated using an estimated growth rate of 3% per annum within building, partnerships and infrastructure and 2.5% per annum within housebuilding. The growth rate used is the Group's estimate of the average long term growth rate for the market sectors in which the CGU operates. Pre tax discount rates of 12.8% (2009: 11.3%) in housebuilding, 12.0% (2009: 11.9%) in building, 12.7% (2009: 11.3%) in partnerships, 13.1% (2009: 11.9%) in infrastructure and 11.8% (2009: 10.5%) in investments have been applied to the future cash flows.

Sensitivities

The fair values of the goodwill in all CGU's are substantially in excess of book value. Sensitivity analysis has been undertaken on each goodwill impairment review, by changing the discount rates, profit margins, growth rates and other variables applicable to each CGU. Taking into account current market conditions within the construction and housebuilding markets, none of these sensitivities, either individually or combined, resulted in the carrying value of these businesses being reduced to its recoverable amount.

The impairment review relating to Linden Homes goodwill, which is included within the housebuilding segment, could be impacted by the uncertainty over future trading conditions within the housing market. The detailed sensitivity analysis indicates that an increase of more than 33 per cent (2009: 27%) in the pre tax discount rate or a reduction of 40% (2009: 41%) in the forecast operating profits of the CGU would give rise to an impairment.

9   Net cash

		2010 £m	2009 £m
Cash and cash equivalents		166.7	159.5
Current borrowings
Bank loan		-	(11.5)
Unsecured loan notes		(1.0)	(1.5)
Non current borrowings
Bank loans		(89.2)	(112.4)
Net cash		76.5	34.1

10   Acquisitions

On 14 October 2009, the Group acquired the remaining 50% shareholding in its joint venture Linden Properties Western Limited, taking the Group's ownership to 100%.  With effect from this date, Linden Properties Western Limited is treated as a subsidiary undertaking. The total consideration payable was £1. At completion, the development loan provided to the joint venture by Bank of Scotland was settled by a cash payment of £8.5 million. In addition loan notes with a nominal value of £1.2 million were acquired for £0.5 million. Developments have been written down to their estimated fair market value at the date of acquisition. No goodwill arose on this acquisition. Details of the assets acquired are set out in the table below:

	Carrying value pre acquisition	Fair value adjustments	Provisional fair value
	£m	£m	£m
Developments	15.8	(2.9)	12.9
Trade and other receivables	0.5	-	0.5
Deferred tax asset	-	0.8	0.8
Bank loans and overdrafts	(11.2)	2.7	(8.5)
Trade and other payables	(3.3)	-	(3.3)
Financial liabilities - borrowings	(2.4)	0.7	(1.7)
Deferred tax liabilities	-	(0.7)	(0.7)
Net assets acquired	(0.6)	0.6	-
Goodwill			-
Consideration			-

The outflow of cash and cash equivalents and borrowings on the acquisition is calculated as follows:

			£m
Cash consideration			-
Borrowings acquired			(10.2)
Net cash outflow			(10.2)

On 1 December 2009, the Group acquired the entire share capital of Rosemullion Property Company Limited and its subsidiary companies (Rosemullion), a housing developer based in the south west of England. The total consideration payable was £0.1 million which was settled in cash. No goodwill arose on this acquisition. Details of the assets acquired are set out in the table below. The fair value adjustments relate to the alignment of accounting policies and an adjustment to bring developments to their estimated fair market value at the date of acquisition.

	Carrying value pre acquisition	Fair value adjustments	Provisional fair value
	£m	£m	£m
Developments	3.8	(0.2)	3.6
Trade and other receivables	0.1	-	0.1
Bank loans and overdrafts	(3.1)	-	(3.1)
Trade and other payables	(0.5)	-	(0.5)
Net assets acquired	0.3	(0.2)	0.1
Goodwill			-
Consideration			0.1

The outflow of cash and cash equivalents and borrowings on the acquisition is calculated as follows:

			£m
Cash consideration			(0.1)
Borrowings acquired			(3.1)
Net cash outflow			(3.2)

On 12 February 2010, the Group acquired the remaining 50% shareholding held by Bank of Scotland in its joint ventures undertaking residential development in the south east area, taking Group's ownership to 100%. The joint ventures were Sentient Ventures LLP, Linden Homes Eastern Newhall Limited, Linden London LLP, Linden London (Hammersmith) Limited and Linden St Albans LLP. With effect from this date, these companies are treated as subsidiary undertakings. The companies are developing residential sites in Colchester, Harlow, Hammersmith and St Albans.  The consideration, which was settled in cash, totalled a nominal £4. The development loans provided to the joint ventures by Bank of Scotland were settled by a cash payment of £42.5 million. Developments have been written down to their estimated fair market value at the date of acquisition. Details of the assets acquired are set out in the table below:

	Carrying value pre acquisition	Fair value adjustments	Provisional fair value
	£m	£m	£m
Developments	76.8	(37.1)	39.7
Trade and other receivables	4.2	-	4.2
Deferred tax asset	3.6	10.4	14.0
Cash and cash equivalents	0.2	-	0.2
Bank loans and overdrafts	(42.5)	-	(42.5)
Trade and other payables	(7.2)	-	(7.2)
Net assets acquired	35.1	(26.7)	8.4
Negative goodwill			(8.4)
Consideration			-

The negative goodwill represents the carrying value of the investment in joint ventures held prior to the acquisition of the remaining 50% share. Amounts recognised in the income statement are as follows:

			£m
Loss on investment in joint ventures			(8.4)
Negative goodwill			8.4
Total			-

The outflow of cash and cash equivalents and borrowings on the acquisition is calculated as follows:

			£m
Cash consideration			-
Cash acquired			0.2
Borrowings acquired			(42.5)
Net cash outflow			(42.3)

Total acquisition costs of £0.3 million were incurred relating to acquisitions during the year which have been written off in the income statement.

11   Guarantees and contingent liabilities

Galliford Try plc has entered into financial guarantees and counter indemnities in respect of bank and performance bonds issued on behalf of Group undertakings, including joint arrangements and joint ventures, in the normal course of business amounting to £120.7 million (2009: £113.5 million).

Disputes arise in the normal course of business, some of which lead to litigation or arbitration procedures.  The directors make proper provision in the financial statements when they believe a liability exists.  Whilst the outcome of disputes and arbitration is never certain, the directors believe that the resolution of all existing actions will not have a material adverse effect on the Group's financial position.

12   Post balance sheet events

No matters have arisen since the year end that require disclosure in the annual financial statements.

PRINCIPAL RISKS

Identifying, evaluating and managing the principal risks and uncertainties facing the Group is an integral part of the way we do business. We have policies and procedures in place throughout our operations that enable us to do so, embedded within our management structure and part of our normal operating processes.

The Group keeps a register detailing the identified risks, relating them to the Group's objectives and rating them based on their likelihood and their potential impact should they materialise. This is then linked to how the risk is managed, the responsibility for its management and the way in which this is monitored through the checks and balances in place.

As well as regular updating as risks change, the Group carries out an annual review where management stands back and looks at general market developments, Group strategy and projects being secured in the context of its risk management processes to ensure they are adapted to meet changing requirements and new measures can be put in place if required. Carrying out this exercise in co-ordination with the Board's annual review of internal controls and their effectiveness helps to ensure the management of risk remains up to date and relevant.

The principal risks, their impact and their mitigation, are as follows: 

Health, safety and environmental - Incidents that occur in construction operations can affect our employees, all others who work on our sites and members of the public. Secondarily, they affect our reputation and have a direct cost on the business and management resources.

We recognise the need to provide a safe working environment and promote health, safety and environmental issues with a comprehensive policy and framework in place to manage the risks.

Changes to the UK housing market and the economic cycle- Consumer confidence and the state of the housing market impacts the ultimate price that our purchasers are prepared to pay for their homes and, by deducting the building and all other costs of development, the price and terms under which the Group purchases land for development.

We monitor Government and industry data on housing prices, sales volumes and construction commencement data, enabling us to anticipate market changes and adjust our land acquisition plans, build programmes, sales releases and purchaser incentives accordingly.

Availability of mortgage finance - The availability, cost and terms under which our purchasers can secure mortgage finance impacts both their ability to purchase and the price they are able to pay.

We monitor published statistics on mortgage approvals and lending statistics, analysing the impact on potential customers across the different market sectors and the prices of the properties we sell. We then adjust our development plans and our purchaser incentives, such as part exchange facilities and shared equity.

Availability of developable land - A healthy land market provides us with the raw material on which to build. A general market downturn, reducing the value of land, affects land owners' willingness to sell and uncertainty in the planning system reduces our ability to obtain the required supply of developable land.

We aim to maintain a landbank comprising a balance of plots with full planning consent, with outline consent and zoned for residential development. We also have strategic land holdings held primarily under options to purchase in the future. Public sector planning strategies are monitored both nationally and locally in the regions where we operate and our plans for future development adjusted accordingly.

Land acquisition - Acquiring land at the wrong price, or underestimating development costs, could affect the Group's return on development projects.

We have a rigorous pre acquisition site appraisal process with tight auditing levels covering purchase, construction and sales, enabling us to alter plans and adapt to changes where necessary.

Availability of financing - Funding not available to finance the Group's strategy to expand its housebuilding activities.

Funding is provided by shareholders' equity and bank borrowings. We constantly monitor levels of available funding and compliance with our bank covenants. We have established longstanding relationships with all our bankers and will commence discussions to renew our facilities well ahead of their expiry in February 2012.

The level of public sector spending - Public sector spending in the investment programmes of the regulated infrastructure sectors affects the amount of work available and the degree of competition for that work, potentially affecting both the absolute level of revenues and profit margins achievable.

We gather published and informal intelligence on our markets, monitoring closely our order book and pipeline of potential opportunities. Our business planning process forecasts future market trends, enabling us to match resources to projected workloads.

Confidence and the availability of project finance- Confidence in the economy, combined with our private sector clients' ability to secure development finance, affects their level of spend on construction projects.

Our business planning and annual budgeting process analyses data on forthcoming projects and we monitor the spending programmes of our major clients, adapting our marketing and allocation of resources to those clients and markets where we see the best opportunities.

Contract acquisition - Securing construction contracts at a price and under terms that deliver an acceptable return for the risk undertaken.

As a project based business, we take commercial risk on each construction contract which includes credit and counterparty risk, pricing and the technical ability to deliver.  We have a rigorous approach to contract selection covering our capabilities and resources, the terms under which we carry out the work, and that the responsibility for delivery and approval to enter into the contract is given by the right level of management.

Project delivery - Failure to deliver projects to time, quality or budget, contractual disputes can arise over the scope and/or valuation of contracts, making forecasting the ultimate outcome of contracts uncertain.

We have business information systems providing profit margin and cash forecasting by contract. We monitor construction progress against programme in order to re-plan and reassess resources where applicable.

People - Attracting, developing and retaining talented individuals in the business at all levels is crucial to our success.

Our human resources policies are based on the Investors in People principles under which all of our businesses are accredited. We carry out annual succession planning, and have a training and development programme designed to ensure that individuals receive the support they require to contribute to the needs of the business.

DIRECTORS' RESPONSIBILITY STATEMENT

The directors' responsibility statement prepared in connection with the annual report for the year ended 30 June 2010 is included in full within the annual report.  It includes the following extract:

Each of the directors confirms that to the best of his and her knowledge:

·  the Group's financial statements, which have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and profit of the Group as taken as a whole; and

·  the Business Review includes a fair review of the development and performance of the business and the position of the Group, together with a description of the principal risks and uncertainties that it faces.

The directors at the date of the report are:

David Calverley	Non-executive Chairman
Greg Fitzgerald	Chief Executive
Frank Nelson	Finance Director
Amanda Burton	Senior Independent director
Peter Rogers	Non-executive director
Andrew Jenner	Non-executive director

Signed on behalf of the board

Greg Fitzgerald	Frank Nelson
Chief Executive	Finance Director

The 2010 annual report and financial statements will be posted to shareholders early in October 2010 and made available at www.gallifordtry.co.uk.  Copies of this Annual Results Statement can be obtained from the Company Secretary at Galliford Try plc, Cowley Business Park, Cowley, Uxbridge, Middlesex, UB8 2AL.

The Annual General Meeting will be held at 11:00 a.m. on Friday 5th November at the offices of Royal Bank of Scotland, 3^rd Floor Conference Centre, 250 Bishopsgate, London EC2M 4AA.

The final dividend timetable is:

Ex dividend:	6 October
Record date:	8 October
AGM:	5 November
Payment date:	12 November

 

END

 

 

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