Final Results

RNS Number : 1206O

Galliford Try PLC

17 September 2013

 



07:00 AM TUESDAY 17 SEPTEMBER 2013

GALLIFORD TRY PLC

ANNUAL RESULTS STATEMENT FOR THE YEAR ENDED 30 JUNE 2013

Highlights

Financial	2013	2012	Change
·      Group revenue¹	£1,467m	£1,504m	- 2%
·      Profit before tax	£74.1m	£63.1m	+17%
·      Earnings per share	71.7p	60.9p	+18%
·      Dividend per share	37.0p	30.0p	+23%
·      Group return on net assets²	16.6%	15.1%	+1.5ppts

Group

·      Record profits achieved through successful execution of strategy

·      Record earnings per share, increasing by 18% to 71.7p

·      Return on net assets improved to 16.6%

·      23% increase in full year dividend payment reflecting our strong financial position and the board's confidence in the future

·      Modest net debt of £14.4 million at 30 June 2013 (2012: net cash of £22.5 million)

Housebuilding

·      Strong margin performance with 11% increase in housebuilding operating margin to 13.1% (2012: 11.8%)

·      Revenue in line with last year despite a small reduction in the number of completions (inclusive of joint ventures) to 2,932, consistent with our focus on developments offering superior returns on capital (2012: 3,039)

·      Strengthening market demand, assisted by the Government's Help to Buy scheme and greater availability of funding, supports 16% increase in sales currently reserved, contracted or completed at £405 million (2012: £350 million)

·      Record 11,300 plot landbank with 86% now acquired at current market values (2012: 81% of 10,500).  Good performance from strategic land

·      100% of land required for 2014 financial year in place, 90% of land secured for 2015

Construction

·      Order book maintained at £1.7 billion (2012: £1.65 billion) with pipeline of opportunities increasing

·      In continuing challenging market conditions, a robust construction margin of 1.7% in line with our expectations (2012: 2.0%)

·      Strong cash management with a year end construction cash balance of £145 million (2012: £146 million)

·      87% of current year's planned revenue secured (2012: 86%)

Greg Fitzgerald, Chief Executive, commented:

"We have made excellent progress as a group in the financial year and delivered a record profit before tax. We have also significantly increased the full year dividend reflecting the board's confidence in the future.

Housebuilding has delivered another very strong year of trading. This has been achieved in a disciplined manner following a doubling in size of the business in the preceding three years. Our deliberate investment in high return land opportunities, particularly in the South and South East, together with a greater focus on margin performance and efficiency gains and an improving market means we are well placed to deliver further good growth.

Construction has achieved another impressive performance against the background of a market that remains challenging, by focusing on its principles of disciplined contract selection, protecting margin and prioritising cash management.  There are encouraging signs of an improving market on which we are well positioned to capitalise."

Enquiries:

Galliford Try                                                      Greg Fitzgerald, Chief Executive                                      01895 855001

                                                                            Graham Prothero, Finance Director                              

Tulchan Communications                            Christian Cowley                                                                 0207 353 4200

                                                                           James Macey White

¹  Group revenue excludes share of joint ventures' revenue of £92.1 million (2012: £72.2 million).  Revenue where stated includes share of joint ventures.

²   Group return on net assets represents profit before tax, finance costs and amortisation compared to average net assets.

Galliford Try will hold its results presentation at 9:30 am on Tuesday, 17 September 2013 at the London Stock Exchange, 10 Paternoster Square, London EC4M 7LS.  A live audio webcast will be available at www.gallifordtry.co.uk/investors.  A recorded interview with Greg Fitzgerald, Chief Executive, regarding the full year results is available on the company website: www.gallifordtry.co.uk.

OVERVIEW

2013 represents the first year of implementation of the board's disciplined growth strategy following the very significant and successful expansion achieved in the three years to June 2012. Record group profit before tax and earnings per share reflect the strong performance of our housebuilding division and represent good progress against our objective of a 17-18% housebuilding operating margin by 2018. Our housebuilding business is improving its margin performance through maximising the efficiency and effectiveness of its operations, and in parallel our construction business is actively protecting its margin, order book, risk profile and cash balances with the intention of resuming growth when conditions improve. There are encouraging signs in both markets that give the board greater confidence for the forthcoming financial year and beyond.

Continuing strong performance has enabled the board to deliver a further significant increase in the final dividend payable to shareholders in November, in line with the progressive and sustainable policy outlined in 2012.

STRATEGY

Housebuilding - Disciplined growth strategy with focus on improving margins

The executive management team is successfully implementing a disciplined growth strategy for housebuilding, focusing on the more robust southern market, where we currently have around 75% of our business.  This is resulting in higher average selling prices, a trend which is expected to continue.  We are beginning to fully leverage our Linden Homes brand, which is recognised for high-quality and individually designed developments.  We are boosting strategic land development activities, minimising our reliance on consortium or major greenfield sites and reducing execution risk, by focusing on areas with greater demand and higher selling prices.  Affordable housing and production efficiencies are critical to margin enhancement.  We are on course to deliver a housebuilding operating margin of 17-18% by 2018.

Construction - Focus on protecting margins and positioning the business to benefit from improved markets

In construction, market conditions have continued to be challenging as we expected. Our strategy continues to be based on winning work in markets where there are barriers to entry and we are able to add value for our clients, thus earning an appropriate margin.

Construction performed well, focusing on careful management of margins and cash balances, with the order book largely unchanged at £1.7 billion.  We have won a number of important and prestigious contracts, and are beginning to secure repeat work under the AMP6 framework awards for our water clients, maintaining our position as a key infrastructure supplier to the UK utility sectors.  The business is well positioned to benefit from improvements in construction markets and to grow when markets allow.

DIVIDEND

The board announced an enhanced progressive and sustainable dividend policy in 2012.  Successful execution of our strategy in the financial year means that, subject to approval by shareholders of the final dividend of 25 pence to be paid in November 2013, the Group's full year distribution of 37 pence to shareholders represents an increase of 23% and cover of 1.9x (2012: 2.0x).

OUTLOOK

Each of our businesses has a clear strategy and strong leadership team, and both are well placed to further benefit from the improving outlooks in their markets.

Following an encouraging summer our housebuilding business had record sales in hand of £405 million as at 1 September 2013.  The business also has a record landbank with all the land it needs for 2014 and, following a decision to increase land buying to take into account continuing stable conditions, currently has 90% of its 2015 requirements. 

Construction enjoys good levels of visibility following a number of major project wins.  While margins are expected to reduce, the business currently has secured 87% of its projected workload for 2014, whilst maintaining its order book at £1.7 billion.

Both businesses are, against a background of some labour and supply challenges, maximising production to respond to strengthening customer demand and improved conditions.

The board is optimistic that the improved opportunities being experienced will continue through into 2014. We will continue our strategy of disciplined growth, to benefit from the opportunity to strengthen our market position and performance in both sectors.  The prospects for both businesses are encouraging for the next financial year.

FINANCIAL REVIEW

Record profits before tax of £74.1 million (2012: £63.1 million) were driven primarily by an improved margin in housebuilding of 13.1% (2012: 11.8%).  The reduction in construction margin to 1.7% (2012: 2.0%) was constrained by our disciplined approach in continuing challenging markets.

Cash retained by construction remained strong at £145 million, representing 16% of turnover, with average balances during the year of £93 million. This performance contributed to a low Group net debt figure at financial year end of £14.4 million (2012: net cash of £22.5 million), with the overall increased level of debt reflecting higher investment in land. 

The balance sheet is strong, with negligible gearing at 30 June of 3% (2012: n/a).  Average net debt during the year was £134 million.  Our bank facility of £325 million, provided by HSBC, Barclays and The Royal Bank of Scotland, is in place to May 2015, and covenant compliance continues to be comfortable.  We are progressing positive discussions with our lenders with a view to refinancing, and will update the market in due course.  Return on net assets continued to improve both in housebuilding and across the Group as a whole.  Overall the Group achieved a return of 16.6% (2012: 15.5%), with housebuilding at 16.5% (2012: 15.1%).

The effective tax rate reduced to 21.5% from 21.9% in 2012, as we continued to benefit from acquired losses in some joint venture projects.

Earnings per share improved by 18% to 71.7p, from 60.9p in 2012.  In line with our sustainable and progressive dividend policy, the directors are recommending a final dividend of 25 pence per share.  This amounts to a full year dividend of 37 pence per share (2012: 30 pence per share), representing an increase of 23% on the previous year.  Subject to approval at the Annual General Meeting, the final dividend will be paid on 29 November 2013 to shareholders on the register at 18 October 2013.

OPERATIONAL REVIEW

Housebuilding

	2013	2012
Revenue (£m)	639.6	636.7
Profit from operations (£m)	83.5	75.1
Operating profit margin (%)	13.1	11.8
Completions	2,932	3,039

Andrew Richards was appointed Managing Director of Housebuilding (Linden Homes) from 1 July 2013.

The UK housing market improved during the year. Mortgage availability and affordability steadily increased, and the Government introduced its Help to Buy scheme on 1 April 2013, to expand the supply of new housing. Help to Buy is a shared-equity scheme which gives buyers Government loans of up to 20% of the purchase price, allowing them to buy new-build houses worth up to £600,000 with a minimum 5% deposit. Unlike the previous First Buy scheme, which was restricted to first-time buyers, Help to Buy is open to all.  We expect consumer confidence to slowly increase.

We had previously only promoted shared-equity schemes for sites where houses were harder to sell, so as not to tie up our capital. Help to Buy requires no capital from us, making it suitable for all our developments. We have seen a marked uplift in reservations since 1 April, with around 31% of buyers using Help to Buy.

The south east remains the strongest market and has led pricing growth. However, we are seeing improving demand in some regional centres.  The average private selling price increased by 5% to £262,000 (2012: £250,000).

Our gross margin improved from 17.6% to 19.6%, leading to an operating margin up from 11.8% to 13.1%. The improved margin resulted from greater efficiency, including standardising processes, better procurement and introducing The Linden Way initiative, which pulls together customer service best practice from across our business. We are also benefiting from our strategic land development and our requirement for a higher hurdle rate for land acquisitions. Our focus on disciplined growth also allows us to spend time optimising our plans for each site, to achieve better returns.

Important developments in the year included opening a new office for the east of England, in Chelmsford. We are also working more closely with the construction division, with a number of flagship schemes typically involving apartments and complex sites. For example, our Building business in the south west is delivering 147 apartments for housebuilding at Gloucestershire County Cricket Club, where it is also carrying out improvements to the cricket ground.

At 30 June 2013, our landbank was a record 11,300 plots.  This represents the total number of plots owned and controlled, including sites held under option, but excluding longer term strategic options.  Of this, 86% was held at current market prices, compared with 81% at June 2012. The gross development value of our landbank increased 14% to £2.76 billion (2012: £2.43 billion). Our strategic land holdings stood at 1,522 acres at the year end (2012: 1,285 acres). We continue to see opportunities to acquire land at improved margins and we are continuing to invest in the south and south east, as well as looking at key regional centres.

We regularly commission independent customer satisfaction surveys. This year 93% of our customers said they would recommend us (2012: 94%), maintaining our high levels of satisfaction. In the Home Builders Federation annual customer satisfaction survey, we achieved a four star award. We continue to target five stars.

We were delighted that the industry also recognised the quality of our homes. Awards included 'Best Large Housebuilder 2012' from 'What House?' and 'Housebuilder of the Year 2013' in the Ideal Homes Show Blue Ribbon Awards.

Our affordable housing business also had a good year. We continued to deliver under the Homes and Communities Agency's (HCA) Affordable Homes Programme, meeting all of its targets for the midpoint of the programme, which runs to 2015. This reflects our strong client relationships and active management of our £17 million direct funding award, and has further strengthened our reputation with the HCA. Our knowledge and presence in the sector has contributed to growth in average affordable price net of grant to £119,000 (2012: £104,000). We were successfully reappointed to the HCA's Delivery Partner Panel in all clusters under the 'DPP 2' reprocurement and by the Greater London Authority to join the new London Development Panel.  This runs from April 2013 to March 2017. Further public land releases have been secured within these frameworks, enhancing our landbank on deferred payment terms.

Construction

Construction	2013	2012
Revenue (£m)	912.7	924.8
Profit from operations (£m)	15.1	18.9
Operating profit margin (%)	1.7	2.0
Order book (£bn)	1.7	1.65

We have maintained and enhanced our core skills and are protecting margins, while managing our planned reduction in turnover. Our strong focus on projects with appropriate returns enabled us to deliver a margin of 1.7% (2012: 2.0%).

While we won important new contracts, revenue was down marginally by 1.3% to £912.7 million, in line with our expectations. We managed our cash carefully and ended the year with construction cash balances of £145 million, representing 16% of revenue (2012: £146 million and 16%).

The public sector market remains difficult as a result of Government spending cuts. While the economic benefits of infrastructure are well known, central government remains focused on deficit reduction. Given the timescale to procure large projects, this is likely to lead to a thinner medium-term public sector pipeline. Affordable housing, through our Partnerships business, is seeing increasing activity. The public sector market in Scotland remains stronger, with the Scottish government continuing to invest and creating opportunities which we benefit from.

The regulated market remains active as a result of the utility companies' five-year expenditure plans. Work continues to come through as expected and Galliford Try has a strong position. We were pleased to be re-appointed by Yorkshire Water as a contractor for its AMP6 framework in July.

The private sector is becoming more important and is showing initial signs of slowly improving. Leisure and hotel companies are leading the way and we are also seeing more work related to housing developments. More generally, businesses remain cautious for reasons ranging from concerns about consumer spending to ability to finance their projects.

At the year end, our order book was £1.7 billion, compared with £1.65 billion at 30 June 2012. Of this, 41% was in the public sector, 38% was in regulated industries and 21% was in the private sector. Importantly, 53% of our order book is in frameworks and 58% has been secured on a basis other than price competition, showing the continued success of our strategy.

We continued to deliver high levels of client satisfaction, with overall satisfaction standing at 83% compared with 82% the previous year.

Building

	2013	2012
Revenue (£m)	406.4	363.5
Profit from operations (£m)	6.5	8.4
Operating profit margin (%)	1.6	2.3
Order book (£m)	635	471

Building's most successful markets continued to be in southern England, the midlands and in Scotland, where we have a significant presence and a strong track record. During the year, we reached financial close on an £89 million contract with Genting UK to build a major leisure and retail development at the National Exhibition Centre in Birmingham. We also continued to secure numerous other projects around the country. These included contracts to construct retail and leisure facilities, hotels, office space, apartments and education centres.

We also stepped up our work with our housebuilding division. For example, as part of a £5 million contract with Gloucestershire County Cricket Club to construct a new media centre, conferencing and banqueting facilities, we are providing 147 new homes for Linden Homes.

Alongside our Investments business, our Building division won 'Sustainable Project of the Year' for The Hive in Worcester, at the Building Awards 2012.

Partnerships

	2013	2012
Revenue (£m)	90.0	90.4
Profit from operations (£m)	2.2	1.7
Operating profit margin (%)	2.4	1.9
Order book (£m)	494	368

The Partnerships division continued to secure new work around the country.

Major new wins in the year included a £52 million contract with the Greater London Authority to redevelop the old St Clements Hospital site in east London, which includes the construction of 223 new homes, and a £38 million contract to regenerate the Brook House site in North London, on behalf of Newlon Housing Trust.

As part of the S4B consortium, Partnerships was appointed preferred bidder for the £100 million Brunswick regeneration scheme, which aims to transform the Brunswick area of east Manchester. The scheme includes 522 new homes, associated community facilities and extensive infrastructure works.

Partnerships was also appointed preferred bidder for a wide range of other contracts. These will see it develop affordable homes and other facilities on the same sites, such as retail and commercial units, for clients across England.

Partnerships won 'Main Contractor of the Year (over £40million)' at the Builder & Engineer Awards 2012, demonstrating its high standing in the industry. It also received 'Most Innovative Use of Renewable Technology' at the Housing Innovation Award 2013, for Sinclair Meadows, and 'Best Designed Project' for Finchley Memorial Hospital, at the Partnerships Bulletin Awards 2013.

Infrastructure

	2013	2012
Revenue (£m)	416.3	470.9
Profit from operations (£m)	6.4	8.8
Operating profit margin (%)	1.5	1.9
Order book (£m)	579	811

Our Infrastructure division continued to deliver work for regulated businesses during the year and also has a number of major UK projects in progress.

Our four-party consortium constructing the new Forth Replacement Crossing is making good progress, with the bridge pier foundation work and the north and south approaches under way. We are also progressing work on the £80 million A380 South Devon link road for Devon County Council and Torbay Council, with the contract due to be completed in 2015.

During the year, Morrison Construction was awarded a £28 million contract to upgrade flood defences at Forres in northern Scotland. The project is part of the wider £177 million Moray Flood Alleviation scheme to solve flooding issues across Moray. The contract is due to complete in spring 2015.

Our joint venture with Black & Veatch also secured one of six places on part of the Environment Agency's Water and Environment Management framework 2013-17. This will see us serving the Environment Agency's flood and coastal erosion risk management function, as well as being available to risk management authorities, Defra delivery bodies, local authorities, internal drainage boards and the Welsh government.

PPP Investments

	2013	2012
Revenue (£m)	6.7	13.8
Loss from operations (£m)	(3.2)	(1.1)
Directors Valuation (£m)	4.5	4.9

The directors' valuation of our PPP portfolio at 30 June 2013 on a discounted cash flow basis was £4.5 million, compared to a valued invested of £2.9 million (2012: valuation £4.9 million; value invested £2.9 million).

During the year, we sold our remaining equity interest in the Ealing Care Homes project.  In Scotland, we have a 49% share of the £300 million South East Scotland hub and are making good progress with a number of 'design and build' and 'design, build, finance, maintain' projects. To date, more than £40 million of projects have been completed or are under construction, and we are developing solutions through the hub for more than £110 million of other projects. We were pleased that our Alliance Community Partnerships consortium with Equitix Holdings Ltd, Kier Projects Investments Ltd and John Graham Holdings Ltd, reached financial close on the hub South West Scotland initiative, to deliver £600 million of public sector infrastructure projects over the next ten years.  We are also in joint venture with Balfour Beatty and Carillion, as one of three bidders for the £550 million Aberdeen Western Peripheral Route.

HEALTH, SAFETY AND ENVIRONMENT

Health and safety is of paramount importance to Galliford Try and the Group is committed to a policy of effectively managing and improving all aspects of health, safety and welfare.  The total number of reportable accidents, and group-wide health and safety performance generally, improved significantly during the financial year. The Group accident frequency rate reduced from 0.16 to 0.10, reflecting the priority given to safety related performance during the year.

Our behavioural safety programme, Challenging Beliefs, Affecting Behaviour, continues to be a central part of our health and safety approach.  More than 4,000 people have attended at least one of the safety leadership workshops, and over 55,000 safety briefings were conducted during the financial year.

We provided our fifth annual submission to the Carbon Disclosure Project. The submission, verified by TÜV NORD, showed that our emissions intensity measure, per £100,000 revenue, reduced from 3.41 to 2.83 during the year.  We have continued to drive further performance improvements and have made significant progress against our carbon strategy by achieving a 26% reduction in emissions from our 2008 baseline per £100,000 revenue (against a target 15% reduction by 2013).

BOARD

Graham Prothero was appointed to the board as finance director on 1 February 2013 following the retirement of Frank Nelson on 30 September 2012. Ken Gillespie was appointed as construction division chief executive and as an executive director of Galliford Try plc with effect 1 March 2013. Both are already making effective contributions in their new roles.

Consolidated income statement

for the year ended 30 June 2013

	Notes	2013 £m	2012 £m
Group revenue	2	1,467.3	1,504.1
Cost of sales		(1,288.4)	(1,320.7)
Gross profit		178.9	183.4
Administrative expenses		(105.4)	(115.8)
Share of post tax profits from joint ventures		6.9	3.7
Profit before finance costs		80.4	71.3
Profit from operations	2	84.1	77.1
Share of joint ventures' interest and tax		(2.7)	(4.8)
Amortisation of intangibles		(1.0)	(1.0)
Profit before finance costs		80.4	71.3
Finance income	3	4.0	2.6
Finance costs	3	(10.3)	(10.8)
Profit before income tax		74.1	63.1
Income tax expense	4	(15.9)	(13.8)
Profit for the year		58.2	49.3
Earnings per share
- Basic	6	71.7p	60.9p
- Diluted	6	69.8p	59.7p

Consolidated statement of comprehensive income

for the year ended 30 June 2013

	Notes	2013 £m	2012 £m
Profit for the year		58.2	49.3
Other comprehensive (expense)/income:
Items that will not be reclassified to profit or loss
Actuarial (losses) recognised on retirement benefit obligations		(6.5)	(10.7)
Deferred tax on items recognised in equity that will not be reclassified	4	1.7	3.7
Total items that will not be reclassified to profit or loss		(4.8)	(7.0)
Items that may be reclassified subsequently to profit or loss
Movement in fair value of derivative financial instruments:
- Movement arising during the financial year		0.2	(1.6)
- Reclassification adjustments for amounts included in profit or loss		0.3	-
Reclassification adjustment for gains on available for sale financial assets		(0.5)	-
Deferred tax on items recognised in equity that may be reclassified	4	0.3	-
Total items that may be reclassified subsequently to profit or loss		0.3	(1.6)
Other comprehensive (expense) for the year net of tax		(4.5)	(8.6)
Total comprehensive income for the year		53.7	40.7

Consolidated balance sheet

at 30 June 2013

	Notes	2013 £m	2012 £m
Assets
Non-current assets
Intangible assets		13.4	11.8
Goodwill	7	115.0	115.0
Property, plant and equipment		9.7	10.0
Investments in joint ventures		6.0	5.4
Financial assets - Available for sale financial assets		26.8	26.5
Trade and other receivables		45.2	35.9
Retirement benefit asset	9	0.5	-
Deferred income tax assets		2.7	7.7
Total non-current assets		219.3	212.3
Current assets
Inventories		0.4	0.4
Developments		748.2	719.8
Trade and other receivables		300.6	281.6
Cash and cash equivalents	8	57.9	95.8
Total current assets		1,107.1	1,097.6
Total assets		1,326.4	1,309.9
Liabilities
Current liabilities
Financial liabilities - Borrowings	8	(72.3)	(73.3)
Trade and other payables		(648.6)	(660.6)
Current income tax liabilities		(6.6)	(8.8)
Provisions for other liabilities and charges		(0.6)	(0.7)
Total current liabilities		(728.1)	(743.4)
Net current assets		379.0	354.2
Non-current liabilities
Financial liabilities - Derivative financial liabilities		(1.1)	(1.6)
Retirement benefit obligations		-	(0.2)
Deferred income tax liabilities		(2.1)	(0.2)
Other non-current liabilities		(91.2)	(83.0)
Provisions for other liabilities and charges		(2.5)	(3.1)
Total non-current liabilities		(96.9)	(88.1)
Total liabilities		(825.0)	(831.5)
Net assets		501.4	478.4

Equity
Ordinary shares		40.9	40.9
Share premium		190.9	190.8
Other reserves		4.8	5.3
Retained earnings		264.8	241.4
Total equity attributable to owners of the Company		501.4	478.4

Consolidated statement of changes in equity

for the year ended 30 June 2013

	Notes	Ordinary shares £m	Share premium £m	Other reserves £m	Retained earnings £m	Total shareholders' equity £m
At 1 July 2011		40.9	190.8	5.3	218.1	455.1
Profit for the year		-	-	-	49.3	49.3
Other comprehensive (expense)		-	-	-	(8.6)	(8.6)
Total comprehensive income for the year		-	-	-	40.7	40.7
Transactions with owners:
Dividends	5	-	-	-	(16.8)	(16.8)
Share based payments	10	-	-	-	8.5	8.5
Purchase of own shares		-	-	-	(9.1)	(9.1)
At 1 July 2012		40.9	190.8	5.3	241.4	478.4
Profit for the year		-	-	-	58.2	58.2
Other comprehensive (expense)		-	-	(0.5)	(4.0)	(4.5)
Total comprehensive (expense)/income for the year		-	-	(0.5)	54.2	53.7
Transactions with owners:
Dividends	5	-	-	-	(26.9)	(26.9)
Share based payments	10	-	-	-	3.8	3.8
Purchase of own shares		-	-	-	(7.7)	(7.7)
Issue of shares		-	0.1	-	-	0.1
At 30 June 2013		40.9	190.9	4.8	264.8	501.4

Consolidated statement of cash flows

for the year ended 30 June 2013

	Notes	2013 £m	2012 £m
Cash flows from operating activities
Continuing operations
Profit before finance costs		80.4	71.3
Adjustments for:
Depreciation and amortisation		3.8	3.5
Profit on sale of property, plant and equipment		-	(0.1)
Profit on sale of investments in joint ventures and non-current assets held for sale		-	(2.6)
Profit on sale of available for sale financial assets		(0.8)	(0.1)
Share-based payments	10	3.8	8.5
Share of post tax profits from joint ventures		(6.9)	(3.7)
Movement on provisions		(0.7)	(1.8)
Other non-cash movements		(1.8)	(6.4)
Net cash generated from operations before pension deficit payments and changes in working capital		77.8	68.6
Deficit funding payments to pension schemes		(7.3)	(7.3)
Net cash generated from operations before changes in working capital		70.5	61.3
(Increase) in inventories		-	(0.2)
(Increase) in developments		(28.4)	(104.2)
(Increase) in trade and other receivables		(28.3)	(12.8)
(Decrease)/increase in trade and other payables		(3.8)	89.1
Net cash generated from operations		10.0	33.2
Interest received		2.0	1.1
Interest paid		(8.6)	(8.0)
Income tax paid		(9.2)	(10.1)
Net cash (used in)/generated from operating activities		(5.8)	16.2
Cash flows from investing activities
Dividends received from joint ventures		6.3	0.3
Acquisition of investments in joint ventures		-	(0.1)
Acquisition of available for sale financial assets		(0.6)	-
Proceeds from investments in joint ventures and non-current assets held for sale		-	2.6
Proceeds from available for sale financial assets		2.9	0.9
Purchase of intangible assets		(2.6)	(3.8)
Acquisition of property, plant and equipment		(3.2)	(4.5)
Proceeds from sale of property, plant and equipment		0.7	0.5
Net cash generated from/(used in) investing activities		3.5	(4.1)

Cash flows from financing activities
Purchase of own shares		(7.7)	(9.1)
(Repayment of)/increase in borrowings		(1.0)	72.7
Dividends paid to Company shareholders	5	(26.9)	(16.8)
Net cash (used in)/generated from financing activities		(35.6)	46.8
Net (decrease)/increase in cash and cash equivalents		(37.9)	58.9
Cash and cash equivalents at 1 July		95.8	36.9
Cash and cash equivalents at 30 June	8	57.9	95.8

 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 2012 which have not changed significantly. The financial information set out in this document does not constitute statutory accounts for the years ended 30 June 2012 or 30 June 2013 but is derived from the Annual Report and Financial Statements 2013. The Annual Report and Financial Statements for 2012 have been delivered to the Registrar of Companies and the Annual Report and Financial Statements for 2013 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 2013 which will be circulated to shareholders in October 2013 and will be made available at www.gallifordtry.co.uk.

2 Segmental reporting

Segmental reporting is presented in the consolidated financial statements in respect of the Group's business segments, which are the primary basis of segmental reporting. The business segmental reporting reflects the Group's management and internal reporting structure. Segmental 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, segment reporting is not required by geographical region.

The chief operating decision-makers (CODM) have been identified as the Group's chief executive and 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 as housebuilding, building, partnerships, infrastructure and PPP investments. The Group's internal reporting structure and determination of operating segments is kept under review and changed when a new structure is more appropriate.  In particular, the Group is currently reviewing the reporting structure of our partnerships and affordable homes business.

The CODM assess the performance of the operating segments based on a measure of adjusted earnings before finance costs, amortisation, exceptional items and taxation. 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.

2 Segmental reporting continued

Primary reporting format - business segments

					Construction
Year ended 30 June 2013	Housebuilding £m	Building £m	Partner-ships £m	Infrastructure £m	Total £m	PPP Investments £m	Central costs £m	Total £m
Group revenue and share of joint ventures' revenue	639.6	406.4	90.0	416.3	912.7	6.7	0.4	1,559.4
Share of joint ventures' revenue	(76.8)	(0.1)	-	(10.5)	(10.6)	(4.7)	-	(92.1)
Group revenue	562.8	406.3	90.0	405.8	902.1	2.0	0.4	1,467.3
Segment result:
Profit/(loss) from operations before share of joint ventures' profit	74.3	6.4	2.2	6.3	14.9	(3.4)	(11.3)	74.5
Share of joint ventures' profit	9.2	0.1	-	0.1	0.2	0.2	-	9.6
Profit/(loss) from operations*	83.5	6.5	2.2	6.4	15.1	(3.2)	(11.3)	84.1
Share of joint ventures' interest and tax	(2.6)	(0.1)	-	-	(0.1)	-	-	(2.7)
Profit/(loss) before finance costs, amortisation and taxation	80.9	6.4	2.2	6.4	15.0	(3.2)	(11.3)	81.4
Net finance (costs)/income	(33.2)	0.7	(0.1)	0.8	1.4	(0.1)	25.6	(6.3)
Profit/(loss) before amortisation and taxation	47.7	7.1	2.1	7.2	16.4	(3.3)	14.3	75.1
Amortisation of intangibles								(1.0)
Profit before taxation								74.1
Income tax expense								(15.9)
Profit for the year								58.2

2 Segmental reporting continued

Year ended 30 June 2012
Group revenue and share of joint ventures' revenue	636.7	363.5	90.4	470.9	924.8	13.8	1.0	1,576.3
Share of joint ventures' revenue	(62.8)	(0.1)	-	(9.3)	(9.4)	-	-	(72.2)
Group revenue	573.9	363.4	90.4	461.6	915.4	13.8	1.0	1,504.1
Segment result:
Profit/(loss) from operations before share of joint ventures' profit	66.8	8.2	1.7	8.8	18.7	(1.1)	(15.8)	68.6
Share of joint ventures' profit	8.3	0.2	-	-	0.2	-	-	8.5
Profit/(loss) from operations*	75.1	8.4	1.7	8.8	18.9	(1.1)	(15.8)	77.1
Share of joint ventures' interest and tax	(4.7)	(0.1)	-	-	(0.1)	-	-	(4.8)
Profit/(loss) before finance costs, amortisation and taxation	70.4	8.3	1.7	8.8	18.8	(1.1)	(15.8)	72.3
Net finance (costs)/income	(37.5)	0.7	0.1	0.5	1.3	(0.1)	28.1	(8.2)
Profit/(loss) before amortisation and taxation	32.9	9.0	1.8	9.3	20.1	(1.2)	12.3	64.1
Amortisation of intangibles								(1.0)
Profit before taxation								63.1
Income tax expense								(13.8)
Profit for the year								49.3

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

 Inter-segment revenue eliminated from Group revenue above amounted to £54.7 million (2012: £51.5 million) of which £26.6 million (2012: £22.0 million) was in building, £25.8 million (2012: £27.3 million) was in infrastructure, £1.0 million was in PPP Investments (2012: £Nil), £Nil million (2012: £1.0 million) was in housebuilding, and £1.3 million (2012: £1.2 million) was in central costs.

2 Segmental reporting continued

					Construction
Year ended 30 June 2013	Housebuilding £m	Building £m	Partner-ships £m	Infrastructure £m	Total £m	PPP Investments £m	Central costs £m	Total £m
Assets
Net (debt)/cash	(514.2)	94.8	13.0	37.3	145.1	(1.4)	356.1	(14.4)
Other assets								1,265.8
Borrowings								72.3
Deferred income tax assets								2.7
Total assets								1,326.4
Year ended 30 June 2012
Assets
Net (debt)/cash	(469.5)	88.1	15.0	42.4	145.5	0.6	345.9	22.5
Other assets								1,206.4
Borrowings								73.3
Deferred income tax assets								7.7
Total assets								1,309.9

3 Net finance costs

Group	2013 £m	2012 £m
Interest receivable on bank deposits	0.4	0.2
Interest receivable from joint ventures	1.2	-
Unwind of discount on shared equity receivables	1.8	1.6
Fair value profit on financing activities - interest rate swaps	0.2	-
Other	0.4	0.8
Finance income	4.0	2.6
Interest payable on borrowings	(9.5)	(8.4)
Unwind of discounted payables	(0.5)	(1.9)
Net finance cost on retirement benefit obligations	(0.2)	(0.1)
Other	(0.1)	(0.4)
Finance costs	(10.3)	(10.8)
Net finance costs	(6.3)	(8.2)

 

 4 Income tax expense

		2013 £m	2012 £m
Analysis of expense in year
Current year's income tax:
Current tax		12.6	15.9
Deferred tax expense/(income)		3.4	(0.8)
Adjustments in respect of prior years:
Current tax		(5.6)	(3.8)
Deferred tax		5.5	2.5
Income tax expense		15.9	13.8
Tax on items recognised in other comprehensive income
Deferred tax (credit) for share-based payments		-	(1.2)
Deferred tax (credit) on derivative financial instruments and AFS assets		(0.3)	-
Deferred tax (credit) on retirement benefit obligations		(1.7)	(2.5)
Total deferred tax		(2.0)	(3.7)
Total taxation		13.9	10.1

The standard rate of Corporation Tax in the UK changed from 26% to 24% with effect from 1 April 2012. Accordingly, the Group's profits for the accounting period to 30 June 2012 were taxed at an effective rate of 25.5%. The standard rate of Corporation Tax in the UK changed from 24% to 23% with effect from 1 April 2013. Accordingly, the Group's profits for the accounting period to 30 June 2013 are taxed at an effective rate of 23.75%.

 5 Dividends

	2013		2012
	£m	pence per share	£m	pence per share
Previous year final	17.2	21.0	9.4	11.5
Current period interim	9.7	12.0	7.4	9.0
Dividend recognised in the year	26.9	33.0	16.8	20.5

The following dividends were declared by the Company in respect of each accounting period presented:

	2013		2012
	£m	pence per share	£m	pence per share
Interim	9.7	12.0	7.4	9.0
Final	20.5	25.0	17.2	21.0
Dividend relating to the year	30.2	37.0	24.6	30.0

The directors are proposing a final dividend in respect of the financial year ended 30 June 2013 of 25.0 pence per share, bringing the total dividend in respect of 2013 to 37.0 per share (2012: 30.0 pence). The final dividend will absorb approximately £20.5 million of equity. Subject to shareholder approval at the Annual General Meeting to be held on 19 November 2013, the dividend will be paid on 29 November 2013 to shareholders who are on the register of members on 18 October 2013.

6 Earnings per share

Basic and diluted earnings per share

Basic earnings per share is calculated by dividing the earnings 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.

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.

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

	2013			2012
	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	58.2	81,184,221	71.7	49.3	80,919,341	60.9
Effect of dilutive securities:
Options		2,182,343			1,643,319
Diluted EPS	58.2	83,366,564	69.8	49.3	82,562,660	59.7

7 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:

	2013 £m	2012 £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
	115.0	115.0

The recoverable value of all CGU's are substantially in excess of the carrying value of goodwill. 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 fair value of the goodwill being reduced to below its current book value amount.

8 Cash and cash equivalents

	2013 £m	2012 £m
Cash at bank and in hand	56.0	95.8
Short term bank deposit	1.9	-
Cash and cash equivalents for cash flow purposes	57.9	95.8
Current borrowings	(72.3)	(73.3)
Net (debt)/cash	(14.4)	22.5

9 Retirement benefit obligations

 Pension costs for the schemes were as follows:

	2013 £m	2012 £m
Defined benefit schemes - Expense recognised in the income statement	0.2	0.1
Defined contribution schemes	12.6	14.2
Total included within employee benefit expenses	12.8	14.3

The principal actuarial assumptions used in the calculation of the defined benefit pension liabilities are as follows:

	2013	2012
Rate of increase in pensionable salaries	n/a	n/a
Rate of increase in pensions in payment	3.30%	2.90%
Discount rate	4.50%	4.50%
Retail price inflation	3.40%	2.90%
Consumer price inflation	2.40%	1.90%

The amounts recognised in the balance sheet in relation to defined benefit pension schemes are as follows:

	2013 £m	2012 £m
Fair value of plan assets	188.6	173.5
Present value of defined benefit obligations	(188.1)	(173.7)
Surplus/(deficit) in scheme recognised as non-current asset/(liability)	0.5	(0.2)

10 Share-based payments

The Company operates employee sharesave schemes and performance related share incentive plans for executives, details of which are set out in the directors' remuneration report. The Company also operates sharesave schemes. The total charge for the year relating to employee share-based payment plans was £3.8 million (2012: £8.5 million), all of which related to equity settled share-based payment transactions. After deferred tax, the total charge was £3.8 million (2012: £8.0 million).

The performance period for the awards made under the Company's long term incentive plan on 10 March 2009 ended on 30 June 2011, and the awards vested in March 2012. This award was subject to a relative total shareholder return condition and two underpins based on cash performance and absolute share price performance. Following consultation with major shareholders, the remuneration committee exercised its discretion for the assessment of the share price target, using an approach consistent with the averaging period used for assessment of the relative total shareholder return condition. Full details are set out in the 2012 Annual Report.

The decision to use an alternative averaging period to that originally envisaged in the grant date valuation gave rise to an additional IFRS 2 fair value accounting charge of £5.1 million in the financial year to 30 June 2012, which had no incremental effect on either cash or the balance sheet. There is no impact in the financial year to 30 June 2013.

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 £155.2 million (2012: £135.3 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 financial statements.

 

END

 

 

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