Final Results

RNS Number : 7426R

Galliford Try PLC

16 September 2014

 



07:00 AM TUESDAY 16 SEPTEMBER 2014

GALLIFORD TRY PLC

ANNUAL RESULTS STATEMENT FOR THE YEAR ENDED 30 JUNE 2014

CONTINUING TO DELIVER RECORD RESULTS FROM OUR DISCIPLINED GROWTH STRATEGY

Highlights

Financial	2014	2013	Change
·      Group revenue¹	£1,768m	£1,467m	+ 21%
·      Profit before tax	£95.2m	£74.1m	+ 28%
·      Earnings per share	94.6p	71.7p	+ 32%
·      Dividend per share	53.0p	37.0p	+ 43%
·      Group return on net assets²	20.8%	16.6%	+ 25%

Group

·      Record profit achieved through strong performance across the Group and successful delivery of disciplined growth strategy

·      Record earnings per share, increasing by 32% to 94.6 pence

·      Return on net assets improved to 20.8%

·      43% increase in full year dividend payment to 53.0 pence

·      Minimal net debt of £5.1 million at 30 June 2014 (2013: net debt of £14.4 million)

·      £400 million five year unsecured bank facility

Housebuilding³

·      Strong increase in revenue to £1,002 million (2013: £730 million), on an increase in the number of completions (inclusive of joint ventures) to 3,107 (2013: 2,932) and average Linden Homes selling price rising to £305,000 (2013: £266,000)

·      Improved margin performance with 13% increase in Linden Homes' operating margin to 15.1% (2013: 13.3%)

·      Strong forward sales position with 3% increase in sales currently reserved, contracted or completed at £419 million (2013: £405 million)

·      Record 14,000 plot landbank with 91% now acquired at current market values (2013: 87% of 11,400)

·      100% of land required for 2015 financial year in place, 90% of land secured for 2016

·      Galliford Try Partnerships revenue up 150% to £242.8 million; business performing strongly in a growing market with contracting order book of £0.6 billion (2013: £0.5 billion)

Construction³

·      Construction operating margin robust at 1.0% as we deliver work won in more difficult market conditions (2013: 1.6%)

·      Exceptional cash management with a year end construction cash balance of £151 million (2013: £132 million)

·      A number of major project wins in the period with an encouraging pipeline of future opportunities reflecting improving market conditions

·      Miller Construction acquisition accelerates growth plans, provides access to new frameworks and more than doubles the size of our order book to £3.0 billion (2013: £1.2 billion)

·      88% of current year's planned revenue secured (2013: 87%)

Greg Fitzgerald, Chief Executive, commented:

"We have made excellent progress during the year against our strategy of disciplined growth with principal focus on margin.  Linden Homes achieved an improved margin, ahead of our expectations, and significantly stronger average selling prices, reflecting the quality of our homes, our prime locations and the backdrop of improved consumer confidence.  As we have gone through the quieter summer period, sales have been in line with our expectations.

Galliford Try Partnerships delivered outstanding growth with revenues more than doubling and margins improving.

Construction continued to perform well, maintaining a profitable result as we work through contracts won in a difficult market, and start to deliver new work secured on more robust terms in improving conditions.  We are very pleased to have acquired Miller Construction which more than doubles the size of our order book, adds several strategically important frameworks and also brings additional talent to the enlarged Group.  Integration is proceeding very well and ahead of expectations.

With a record landbank in housebuilding, a larger and stronger construction business and a robust balance sheet, the Group is in an excellent position. Whilst we continue to recognise the challenges around the supply chain and the time required to convert outline planning permissions into detailed consents, we look forward to the year ahead with confidence."

Enquiries:

Galliford Try                               Greg Fitzgerald, Chief Executive                         01895 855001

                                                Graham Prothero, Finance Director                     

Tulchan Communications            Christian Cowley                                                020 7353 4200

                                                James Macey White

                                                Giles Kernick

¹  Group revenue excludes share of joint ventures' revenue of £83.0 million (2013: £92.1 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.

³  Comparative figures throughout this statement have been restated for the new segmental reporting of Galliford Try Partnerships as set out in note 2 of the financial information.

Galliford Try will hold its results presentation at 09:30 am on Tuesday, 16 September 2014 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 will be available on the company website: www.gallifordtry.co.uk from 18 September 2014.

OVERVIEW

2014 represents the first year of implementation of the Board's five year disciplined growth strategy following the very significant and successful expansion of housebuilding 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 increasing Linden Homes' operating margin towards 18% by 2018.

Our housebuilding business is improving its margin performance through maximising the efficiency and effectiveness of its operations. We have successfully realigned our partnerships business within our housebuilding division and are excited about the long term growth opportunities in affordable housing markets.  In parallel, our construction business is working hard to protect its margin on contracts won in more difficult times, whilst focusing on a disciplined growth in our order book as conditions improve.  We continue to maintain our strict focus on risk management and cash.  The acquisition of Miller Construction, which completed in July 2014, accelerates our growth strategy in construction, doubling the size of our order book and giving us access to new clients and long term frameworks. 

There are encouraging signs in both the housebuilding and construction markets that give the Board continued confidence in the Group's prospects for the forthcoming financial year.  The continuing strong performance has enabled the Board to recommend a further significant increase in the final dividend, up 43% for the full year, payable to shareholders in November 2014, in line with our progressive and sustainable policy.

STRATEGY TO 2018

At the start of 2014 the Board reviewed its strategy against a backdrop of an improving and recovering economy concluding that a continuation of the Group's disciplined approach to growth would create further substantial value for shareholders. Across all of our businesses we identified disciplined growth opportunities over the next five years and have implemented operational and financial strategies to achieve these growth objectives. At the year end we remain on track to deliver our long term growth objectives and the acquisition of Miller Construction has accelerated our growth plans for our construction business.

The plan to 2018 assumes no material early tightening of the private housing market, with mortgage availability and flexibility continuing to grow. More broadly, it presumes continuation of Central Government support for affordable housing and a steady recovery in the wider construction market.  We have also assumed a continuation of the current tougher building environment initially, stabilising towards the end of the period.

Housebuilding

Linden Homes

The business continues to focus on its margin enhancement programme and we expect operating margin to rise towards 18%.  For the year to 30 June 2014 margin of 15.1% was ahead of our expectations.  We are also targeting a disciplined expansion in volumes to increase revenue by circa 50% from the record FY13 level.  The business will continue to focus on well-located sites principally in the south and south east and its increasing bias towards houses over apartments.

Galliford Try Partnerships

To respond to the demand for and growth in affordable housing, our partnerships business has been realigned within housebuilding so as to create a regeneration and land led contractor/developer with a refocused management team.  The business will target an increase in mixed tenure turnover to in excess of £60 million, with revenue from the contracting business increasing by 200% over FY13 to fund future regeneration and land led activities.  We expect the blended operating margin to increase to 3.5 - 4.0%.

In a land market that continues to be generally positive, we have now acquired a circa 14,000 unit landbank early in the period, across Linden Homes and Partnerships; it is intended that this will remain stable and provide a comfortable 3½ - 4 year supply. 

Construction

Our construction business has seen improved levels of opportunity over the last year.  In February 2014 we set out our plan to grow our building and infrastructure businesses by circa 50% with revenue of £1.25 billion by 2018. Following the highly complementary acquisition of Miller Construction in July 2014 we have already delivered this objective, more than doubling the size our order book and as a result increased our revenue target to £1.5 billion by 2018.

Our clear focus in the near term is the smooth integration of Miller Construction and delivering the expected synergies.  We are very pleased with the first stages of the integration, which is proceeding ahead of our expectations.  Across all our construction businesses we will maintain our focus on risk management and continue to prioritise margin and strict cash management.  We expect margins to rise towards 2.0% by 2018.

Our investments business will continue to promote its PFI/PPP investment capabilities to support our construction and partnerships businesses.

Group

The business plan maintains our normal discipline around working capital, and is comfortably accommodated by the Group's new £400 million unsecured five year credit facility.  We are targeting period-end gearing of no more than 30% through the cycle with average and peak levels well below covenant levels.

In parallel with our disciplined growth plans for all businesses we are maintaining our progressive dividend policy, with cover reducing to 1.7x from 2015 through to 2018 (2014: 1.8x).

Our strategy is expected to more than double FY13's profit before tax and earnings per share by 2018, with a greater increase in the dividend.

DIVIDEND

The Board announced an enhanced progressive and sustainable dividend policy in 2012 and reaffirmed this in its February 2014 strategic update.  Our record performance in the financial year means that, subject to approval by shareholders of the final dividend of 38 pence to be paid in November 2014, the Group's full year distribution of 53 pence to shareholders represents an increase of 43% and cover of 1.8x (2013: 1.9x).

OUTLOOK

The housing market continues to be positive with Help to Buy, mortgage availability and consumer confidence all contributing to rising selling prices, the rate of which appears to be moderating to more sustainable levels.  Our landbank in housebuilding is at record levels. We own or control all the land we need for the current year and have a very strong position for the year after. At 30 June 2014, we had a record carried forward position, with 34% of sales for 2015 already reserved or exchanged. The land market continues to provide attractive opportunities for us and we increased our hurdle rate from 22% to 23% on 1 July 2014.

At 30 June 2014, we had already secured 84% of our projected workload for 2015 in construction. We are seeing opportunities coming through at improving margins, allowing us to remain selective about the work we take on.

We are delighted to welcome Miller Construction to the Group following the acquisition of the business on 9 July 2014. The acquisition brings together two construction businesses with a clear strategic fit and together makes our Construction division stronger.

Tight supply chain conditions mean that one of the key challenges will be carrying out the work we are planning. We continue to manage our supply chain relationships carefully, to mitigate this risk and with a view to ensuring we achieve our objectives for the coming year.

FINANCIAL REVIEW

The record profit before tax of £95.2 million (2013: £74.1 million) principally reflected the increase in Linden Homes' operating profit to £114.9 million, driven primarily by the higher average private selling price of £305,000 (2013: £266,000) and improved margin of 15.1% (2013: 13.3%).  Galliford Try Partnerships also increased operating profits to £5.0 million (2013: £1.4 million), reflecting turnover increased by two and a half times and margin improved to 2.1% (2013: 1.4%).

Construction continued to be profitable, though, as anticipated, margins fell to 1.0%, mainly reflecting the challenge of delivering contracts won in more difficult economic conditions in the current environment of increasing input costs.  Nevertheless, the business remains strong, and cash retained by construction was exceptional at £151 million, representing 18% of turnover, with average balances during the year of £98 million.  

The effective tax rate reduced to 18.9% from 21.5% in 2014, as we continued to benefit from acquired losses in some joint venture projects, investment sales and land remediation relief.

Earnings per share improved by 32% to 94.6p, from 71.7p in 2013. In line with our sustainable and progressive dividend policy, the directors are recommending a final dividend of 38 pence per share.  This amounts to a full year dividend of 53 pence per share (2013: 37 pence per share), representing an increase of 43% on the previous year.  Subject to approval at the Annual General Meeting, the final dividend will be paid on 28 November 2014 to shareholders on the register at 17 October 2014.

The balance sheet is strong, with net asset value increasing to £534.2 million (2013: £501.4 million) and negligible gearing at 30 June of 1% (2013: 3%).  Average net debt during the year was £161 million.  Our new bank facility of £400 million, provided by HSBC, Barclays, Santander and The Royal Bank of Scotland, is in place to February 2019, and covenant compliance continues to be comfortable. 

Investment in working capital in housebuilding increased to £717 million (2013: £621 million), principally reflecting the larger landbank.  We are still able to acquire land on deferred terms, and land creditors increased to £233 million (2013: £198 million).

Return on net assets continued to improve both in housebuilding and across the Group as a whole.  Overall the Group achieved a return of 20.8% (2013: 16.6%), with housebuilding at 22.4% (2013: 16.7%).

OPERATIONAL REVIEW

HOUSEBUILDING

Linden Homes

	2014	2013
Revenue (£m)	759.6	632.6
Profit from operations (£m)	114.9	83.8
Operating profit margin (%)	15.1	13.3
Completions	2,887	2,806

The housing market continues to be positive, with Help to Buy, mortgage availability and consumer confidence all contributing to rising selling prices. Despite the UK housing shortage, in recent years completions have been well below the 250,000 per annum required to meet demand.  The planning environment is currently positive, although a shortage of planning officers in local authorities is leading to some delays getting started on site.

Since its launch, customers have used Help to Buy for 32% of our plots but only 26% of sales by value. Fewer of our customers are using Help to Buy in the South and South East, where we are strongest, with a greater proportion in the Midlands and East of England, where affordability is often more of an issue.

Revenue increased by £127.0 million to £759.6 million, with completions of 2,887 compared with 2,806 in 2013. The average private selling price rose by 15% to £305,000, reflecting the strong demand for homes on our prime southern sites, the high proportion of houses in our sales mix and the increased average size of the houses we are producing.

Our gross margin improved from 19.8% to 21.4%, with the operating margin up from 13.3% to 15.1% and return on capital increased to 22.4%. The operating margin benefited from using more land bought at current prices; operational efficiency driven by The Linden Way, which standardises our processes by pulling together best practice from across our business; and increased revenues from our affordable housing developments. Whilst we have seen cost increases in our supply chain, this has been offset by sales price increases.

At 30 June 2014, our landbank stood at a record 12,400 plots. Including 1,500 plots in Partnerships, our total housebuilding landbank was a record 13,900 plots. The figure represents the number of plots we own and control, including sites under option but excluding longer-term strategic options. Of the total, 91% was held at current market prices, up from 86% at 30 June 2013.

Galliford Try Partnerships

	2014	2013
Revenue (£m)	242.8	97.0
Profit from operations (£m)	5.0	1.4
Operating profit margin (%)	2.1	1.4
Completions	220	126
Order book (£m)	610	545

Partnerships has been successfully integrated into our housebuilding division, alongside Linden Homes. This will help us to capture the significant growth opportunities in this key market. We began planning this move at the start of the financial year, with the result that we have already started to see the benefits. For example, Partnerships is able to use Linden Homes' systems and experience of selling homes to support its mixed tenure developments, and is adopting the principles of The Linden Way.

Partnerships grew revenue from £97.0 million to £242.8 million, an increase of 150%. Of this, £22.3 million came from mixed tenure developments, with £220.5 million from contracting. Profit from operations rose to £5.0 million (2013: £1.4 million), representing a margin of 2.1% (2013: 1.4%).

This growth reflects our strong performance in favourable market conditions. An increase in land-led and mixed-tenure developments also contributed, enabling clients to get projects on to site more quickly and improving our margins.

During the year, as part of the consortium S4B, Partnerships reached financial close on the circa £100 million Brunswick regeneration scheme. This aims to transform the Brunswick area of East Manchester, through a project which includes 520 new homes, community facilities and enabling infrastructure.

In East London, Partnerships secured two housing contracts totalling £60 million for the registered provider Peabody. Following appointment as preferred bidder, Partnerships achieved financial close on the 25 year £100 million Kent 'Excellent Homes for All' scheme. In addition, Partnerships announced Extra Care and affordable housing contracts totalling £55 million in Coventry, Dunstable and Taunton.

Partnerships' contracting order book is currently £610 million (2013: £545 million).  The business currently has £43.4 million of unit sales in hand.

CONSTRUCTION

Construction	2014	2013
Revenue (£m)	832.9	822.7
Profit from operations (£m)	8.0	12.9
Operating profit margin (%)	1.0	1.6
Order book (£bn)	3.0	1.2

The UK construction market has remained challenging during the last 12 months but we are seeing more opportunities across the country and an improving order book.

In the regulated sector, business has come through consistently as expected, although we are seeing strong competition from new entrants for work in the water sector on AMP6 programmes. The public sector has been weak but opportunities are beginning to appear with the Government unveiling investment plans as the general election approaches. In the private sector, we are seeing a steady increase in opportunities, particularly around London where we have a strong presence, although market improvement is still at an early stage. The PPP market in England has remained quiet with PF2 failing to take off, although the £700 million procurement initiative, the Priority Schools Building Programme, is delivering substantial opportunities. As in previous years, the market in Scotland remains positive with a strong pipeline of opportunities.

We have continued to follow our strategy of being selective about the work we bid for in order to protect our margins and maintain our focus on cash.

We won important new contracts during the year contributing to revenue that was up by 1% at £832.9 million (2013: £822.7 million). Margins declined to 1.0%. We had anticipated that margins would be lower in 2014, owing to challenging conditions in the supply chain, notably in Building, leading to higher costs than we expected at the time we bid for some contracts. The effect was mitigated by profits of £3.1 million on disposal of three investments, held and managed within the Building division. This resulted in a reduced margin in the second half of the year and a margin for the full year that was in line with our expectations.

We continued to manage our cash carefully and had a cash balance in construction of £151 million at the year end (2013: £132 million), representing 18% of revenue. At the year end, our order book was £1.4 billion (2013: £1.2 billion).  Importantly, 56% of our order book is in frameworks.  Construction's order book has now increased to £3.0 billion following the acquisition of Miller Construction.

On 9 July 2014 we acquired the Miller Construction business, a UK only contractor which delivers building and infrastructure projects to both the public and private sectors. The acquired business brings a strong strategic fit and accelerates our strategy of growth into an improving marketplace. In the year to 31 December 2013, Miller Construction reported revenue of £409 million.

We are seeing increased opportunities across our construction business. The division is winning work with appropriate margin and inflation protection and continues its focus on risk management and cash. We have a well-balanced business with strong sectoral capabilities. The diversity of our order book continues to support us and helps to protect us from weakness in any particular market. Supply chain conditions remain challenging, particularly in Building, and we continue to manage them. We expect to hold our construction margin steady during 2015.

Building

	2014	2013
Revenue (£m)	458.3	406.4
Profit from operations (£m)	3.0	6.5
Operating profit margin (%)	0.7	1.6
Order book (£m)	2,080	635

During the year, Building secured or was appointed preferred bidder for a number of key projects. These included in education, the £48 million appointment by hub South East Scotland to develop two new high schools in Kelso and Newbattle.  In commercial, construction of the Forbury Place office project in Reading, for M&G Real Estate and Bell Hammer (£38 million).  In health, the first phase of the £41 million redevelopment of the Royal Edinburgh Hospital.

In addition, Building was appointed to both regional segments of the new four-year Education Funding Agency contractors' framework. We are one of ten contractors appointed and one of eight on both the North and South sectors. The framework is potentially worth £4 billion in total.

Infrastructure

	2014	2013
Revenue (£m)	374.6	416.3
Profit from operations (£m)	5.0	6.4
Operating profit margin (%)	1.3	1.5
Order book (£m)	920	579

Our infrastructure business continued to deliver work for regulated businesses and has a number of major UK projects in progress. In particular, our four-party consortium constructing the new Queensferry Crossing is on programme, with the critical marine based bridge pier foundation work complete.  The business has also been appointed as a framework contractor to both Lots 1 and 2 of the Midlands Highway Alliance framework.

Yorkshire Water appointed our joint venture with AECOM Design Build to continue as a contractor for its AMP6 framework. The framework will run from 2015 to 2020 and we expect it to be worth at least £110 million to Galliford Try over this period. The framework is similar in value and scope to the current AMP5 contract.

We also won our first contract in the airport sector, for Manchester Airports Group. The contract, worth £80 million, is part of the client's £500 million Capital Delivery Programme, which we were appointed to in June 2013. This is a difficult sector to enter and we expect to win further work on the back of this success.

PPP Investments

	2014	2013
Revenue (£m)	15.1	6.7
Loss from operations (£m)	(1.8)	(3.2)
Directors Valuation (£m)	1.8	4.5

The directors' valuation of our PPP portfolio was £1.8 million at 30 June 2014, compared with a value invested of £1.1 million (2013: valuation £4.5 million; value invested £2.9 million). We use discounted cash flows to value our portfolio.

We are particularly active in Scotland, where there are a number of PPP projects in progress. We are part of the Alliance Community Partnerships consortium on the hub South West Scotland initiative, and are also part of the South East Scotland hub. During the year, our construction business in Scotland won a number of contracts to build or refurbish schools and hospitals through these hub initiatives.

Together with Infrastructure, the business secured as part of the Connect Roads Consortium, preferred bidder status for the design, build, finance and operation of the £745 million Aberdeen Western Peripheral Route.

Together with Galliford Try Partnerships, we achieved financial close on the Kent 'Excellent Homes for All' project, which includes a £38 million construction contract and associated facilities management services.

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.  After an outstanding performance in 2013 our internally measured Accident Frequency Risk rose slightly this year.  The Group RIDDOR accident frequency rate was maintained at 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 75,000 safe behaviour discussions were conducted during the financial year.

We provided our sixth 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 2.83 to 2.25 during the year.

BOARD

As announced separately today after 33 years with the company and acquired businesses, Greg Fitzgerald indicated to the Board his wish to retire as Chief Executive no later than the end of 2015. The Board has begun the process to appoint his successor. The Board thanks Greg for his excellent leadership and vision over the last nine years in his role as Chief Executive. Greg is committed to ensuring that a smooth transition takes place during 2015.

Terry Miller and Ishbel Macpherson both joined the Board as non-executive directors with effect from 1 February 2014, increasing the diversity of and improving the gender balance of the Board.  Both Terry and Ishbel have joined the Audit and Remuneration Committees and will join the Nomination Committee from 16 September 2014.

Amanda Burton has stepped down from the Board on 16 September 2014 following nine years as non-executive director. Following Amanda's departure, Ishbel will chair the Remuneration Committee, Peter Rogers will become the Senior Independent Director and Ian Coull will become chair of the Nomination Committee.

Consolidated income statement

for the year ended 30 June 2014

	Notes	2014 £m	2013 £m
Group revenue	2	1,767.8	1,467.3
Cost of sales		(1,545.6)	(1,288.4)
Gross profit		222.2	178.9
Administrative expenses		(119.3)	(105.4)
Share of post tax profits from joint ventures		3.1	6.9
Profit before finance costs		106.0	80.4
Profit from operations	2	110.5	83.6
Share of joint ventures' interest and tax		(3.2)	(2.7)
Exceptional items	2	0.3	0.5
Amortisation of intangibles		(1.6)	(1.0)
Profit before finance costs		106.0	80.4
Finance income	3	3.7	4.0
Finance costs	3	(14.5)	(10.3)
Profit before income tax		95.2	74.1
Income tax expense	4	(18.0)	(15.9)
Profit for the year		77.2	58.2
Earnings per share
- Basic	6	94.6p	71.7p
- Diluted	6	93.0p	69.8p

Consolidated statement of comprehensive income

for the year ended 30 June 2014

	Notes	2014 £m	2013 £m
Profit for the year		77.2	58.2
Other comprehensive (expense)/income:
Items that will not be reclassified to profit or loss
Actuarial (losses) recognised on retirement benefit obligations		(5.3)	(6.5)
Deferred tax on items recognised in equity that will not be reclassified	4	1.1	1.7
Current tax through equity	4	1.4	`-
Total items that will not be reclassified to profit or loss		(2.8)	(4.8)
Items that may be reclassified subsequently to profit or loss
Movement in fair value of derivative financial instruments:
- Movement arising during the financial year		0.8	0.2
- Reclassification adjustments for amounts included in profit or loss		0.3	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		1.1	0.3
Other comprehensive (expense) for the year net of tax		(1.7)	(4.5)
Total comprehensive income for the year		75.5	53.7

Balance sheet

at 30 June 2014

	Notes	2014 £m	2013 £m
Assets
Non-current assets
Intangible assets		13.1	13.4
Goodwill	7	115.0	115.0
Property, plant and equipment		12.2	9.7
Investments in subsidiaries		-	-
Investments in joint ventures		4.6	6.0
Financial assets
- Available for sale financial assets		23.4	26.8
Trade and other receivables	10	55.4	45.2
Retirement benefit asset	13	1.0	0.5
Deferred income tax assets		4.8	2.7
Total non-current assets		229.5	219.3
Current assets
Inventories		0.3	0.4
Developments	9	847.2	748.2
Trade and other receivables	10	415.0	300.6
Current income tax assets		-	-
Cash and cash equivalents	8	140.4	57.9
Total current assets		1,402.9	1,107.1
Total assets		1,632.4	1,326.4
Liabilities
Current liabilities
Financial liabilities
- Borrowings	8	-	(72.3)
Trade and other payables	11	(803.3)	(648.6)
Current income tax liabilities		(12.6)	(6.6)
Provisions for other liabilities and charges		(0.5)	(0.6)
Total current liabilities		(816.4)	(728.1)
Net current assets		586.5	379.0
Non-current liabilities
Financial liabilities
- Borrowings	8	(145.5)	-
- Derivative financial liabilities		-	(1.1)
Deferred income tax liabilities		(2.4)	(2.1)
Other non-current liabilities	12	(131.5)	(91.2)
Provisions for other liabilities and charges		(2.4)	(2.5)
Total non-current liabilities		(281.8)	(96.9)
Total liabilities		(1,098.2)	(825.0)
Net assets		534.2	501.4
Equity
Ordinary shares		41.1	40.9
Share premium		191.8	190.9
Other reserves		4.8	4.8
Retained earnings		296.5	264.8
Total equity attributable to owners of the Company		534.2	501.4

Consolidated statement of changes in equity

for the year ended 30 June 2014

	Notes	Ordinary shares £m	Share premium £m	Other  reserves £m	Retained earnings £m	Total shareholders' equity £m
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	14	-	-	-	3.8	3.8
Purchase of own shares		-	-	-	(7.7)	(7.7)
Issue of shares		-	0.1	-	-	0.1
At 1 July 2013		40.9	190.9	4.8	264.8	501.4
Profit for the year		-	-	-	77.2	77.2
Other comprehensive (expense)		-	-	-	(1.7)	(1.7)
Total comprehensive income for the year		-	-	-	75.5	75.5
Transactions with owners:
Dividends	5	-	-	-	(32.8)	(32.8)
Share-based payments	14	-	-	-	3.4	3.4
Purchase of own shares		-	-	-	(14.4)	(14.4)
Issue of shares		0.2	0.9	-	-	1.1
At 30 June 2014		41.1	191.8	4.8	296.5	534.2

Statement of cash flows

for the year ended 30 June 2014

	Notes	2014 £m	2013 £m
Cash flows from operating activities
Continuing operations
Profit/(loss) before finance costs		106.0	80.4
Adjustments for:
Depreciation and amortisation		4.5	3.8
Profit on sale of investments in joint ventures and non-current assets held for sale		(2.0)	-
Profit on sale of available for sale financial assets		(2.4)	(0.8)
Share-based payments	14	3.4	3.8
Share of post-tax profits from joint ventures		(3.1)	(6.9)
Movement on provisions		(0.2)	(0.7)
Other non-cash movements		1.8	(1.8)
Net cash generated from/(used in) operations before pension deficit payments and changes in working capital		108.0	77.8
Deficit funding payments to pension schemes		(6.1)	(7.3)
Net cash generated from/(used in) operations before changes in working capital		101.9	70.5
Decrease in inventories		0.1	-
(Increase) in developments	9	(99.0)	(28.4)
(Increase)/decrease in trade and other receivables	10	(124.6)	(28.3)
Increase/(decrease) in trade and other payables	11, 12	193.2	(3.8)
Net cash generated from/(used in) operations		71.6	10.0
Interest received		2.0	2.0
Interest paid		(10.3)	(8.6)
Income tax (paid)/received		(11.3)	(9.2)
Net cash generated from/(used in) operating activities		52.0	(5.8)
Cash flows from investing activities
Dividends received from joint ventures		3.5	6.3
Acquisition of available for sale financial assets		(0.4)	(0.6)
Proceeds from investments in joint ventures		3.0	-
Proceeds from available for sale financial assets		6.2	2.9
Purchase of intangible assets		(1.3)	(2.6)
Capital contribution to subsidiary companies		-	-
Loan from subsidiary companies		-	-
Loans to subsidiaries		-	-
Acquisition of property, plant and equipment		(5.5)	(3.2)
Proceeds from sale of property, plant and equipment		0.1	0.7
Net cash generated from investing activities		5.6	3.5
Cash flows from financing activities
Net proceeds from issue of ordinary share capital		1.1	-
Purchase of own shares		(14.4)	(7.7)
Increase in/(repayment of) borrowings		71.0	(1.0)
Dividends paid to Company shareholders		(32.8)	(26.9)
Net cash generated from/(used in) financing activities		24.9	(35.6)
Net increase/(decrease) in cash and cash equivalents		82.5	(37.9)
Cash and cash equivalents at 1 July		57.9	95.8
Cash and cash equivalents at 30 June	8	140.4	57.9

Notes to the annual results

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 2013 which have not changed significantly. The financial information set out in this document does not constitute statutory accounts for the years ended 30 June 2013 or 30 June 2014 but is derived from the Annual Report and Financial Statements 2014. The Annual Report and Financial Statements for 2013 have been delivered to the Registrar of Companies and the Annual Report and Financial Statements for 2014 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 2014 which will be available to shareholders in October 2014 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. As set out in the financial review, in the year to 30 June 2014 the Group has reviewed its internal reporting structure and now reports Galliford Try Partnerships separately to Linden Homes and the construction businesses. Accordingly, management has determined the operating segments as housebuilding, including Linden Homes and Partnerships; construction, including building and infrastructure; and PPP investments. The Group's segmental reporting has been revised, and the comparative disclosures as at 30 June 2013 restated, to reflect the new structure.

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.

Primary reporting format - business segments

	Housebuilding			Construction
	Linden Homes £m	Partnerships £m	Total £m	Building £m	Infrastructure £m	Total £m	PPP Investments £m	Central costs £m	Total £m
Year ended 30 June 2014
Group revenue and share of joint ventures' revenue	759.6	242.8	1,002.4	458.3	374.6	832.9	15.1	0.4	1,850.8
Share of joint ventures' revenue	(50.4)	(8.9)	(59.3)	(0.1)	(11.2)	(11.3)	(12.4)	-	(83.0)
Group revenue	709.2	233.9	943.1	458.2	363.4	821.6	2.7	0.4	1,767.8
Segment result:
Profit/(loss) from operations before exceptional items and share of joint ventures' profit	109.3	4.4	113.7	2.9	5.0	7.9	(1.8)	(15.6)	104.2
Share of joint ventures' profit	5.6	0.6	6.2	0.1	-	0.1	-	-	6.3
Profit/(loss) from operations1	114.9	5.0	119.9	3.0	5.0	8.0	(1.8)	(15.6)	110.5
Exceptional items	0.3	-	0.3	-	-	-	-	-	0.3
Share of joint ventures' interest and tax	0.9	(4.2)	(3.3)	-	-	-	0.1	-	(3.2)
Profit/(loss) before finance costs, amortisation and taxation	116.1	0.8	116.9	3.0	5.0	8.0	(1.7)	(15.6)	107.6
Finance income	3.2	0.1	3.3	0.3	0.5	0.8	-	(0.4)	3.7
Finance (costs)	(40.6)	(0.1)	(40.7)	-	-	-	(0.1)	26.3	(14.5)
Profit/(loss) before amortisation and taxation	78.7	0.8	79.5	3.3	5.5	8.8	(1.8)	10.3	96.8
Amortisation of intangibles									(1.6)
Profit before taxation									95.2
Income tax expense									(18.0)
Profit for the year									77.2
Year ended 30 June 2013 (restated)
Group revenue and share of joint ventures' revenue	632.6	97.0	729.6	406.4	416.3	822.7	6.7	0.4	1,559.4
Share of joint ventures' revenue	(76.8)	-	(76.8)	(0.1)	(10.5)	(10.6)	(4.7)	-	(92.1)
Group revenue	555.8	97.0	652.8	406.3	405.8	812.1	2.0	0.4	1,467.3
Segment result:
Profit/(loss) from operations before exceptional items and share of joint ventures' profit	74.8	1.4	76.2	6.4	6.3	12.7	(3.4)	(11.3)	74.2
Share of joint ventures' profit	9.2	-	9.2	0.1	0.1	0.2	0.2	-	9.6
Profit/(loss) from operations1	83.8	1.4	85.2	6.5	6.4	12.9	(3.2)	(11.3)	83.6
Exceptional items	0.5	-	0.5	-	-	-	-	-	0.5
Share of joint ventures' interest and tax	(2.6)	-	(2.6)	(0.1)	-	(0.1)	-	-	(2.7)
Profit/(loss) before finance costs, amortisation, exceptional items and taxation	81.7	1.4	83.1	6.4	6.4	12.8	(3.2)	(11.3)	81.4
Finance income	3.2	-	3.2	0.7	0.8	1.5	-	(0.7)	4.0
Finance (costs)	(36.4)	(0.1)	(36.5)	-	-	-	(0.1)	26.3	(10.3)
Profit/(loss) before amortisation, exceptional items and taxation	48.5	1.3	49.8	7.1	7.2	14.3	(3.3)	14.3	75.1
Amortisation of intangibles									(1.0)
Profit before exceptional items and taxation									74.1
Income tax expense									(15.9)
Profit for the year									58.2

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

Inter-segment revenue, which is priced on an arm's length basis, is eliminated from Group revenue above. In the year to 30 June 2014 this amounted to £92.6 million (2013: £54.7 million) of which £52.1 million (2013: £26.6 million) was in building, £39.3 million (2013: £25.8 million) was in infrastructure, £Nil million was in PPP Investments (2013: £1.0 million), and £1.2 million (2013: £1.3 million) was in central costs.

In light of the Financial Reporting Council's press release of December 2013 the Group has classified the reversal of inventory provisions as exceptional items to the extent that they relate to provisions previously recognised as exceptional losses.

		Housebuilding			Construction
Balance Sheet	Notes	Linden Homes £m	Partnerships £m	Total £m	Building £m	Infrastructure £m	Total  £m	PPP Investments £m	Central costs £m	Total £m
Year ended 30 June 2014
Net cash/(debt)	8	(536.4)	28.4	(508.0)	98.6	52.7	151.3	2.0	349.6	(5.1)
Borrowings										145.5
Other net assets										1,502.9
Total assets										1,643.3
Year ended 30 June 2013 (restated)
Net cash/(debt)	8	(509.1)	7.9	(501.2)	94.8	37.3	132.1	(1.4)	356.1	(14.4)
Borrowings										72.3
Other net assets										1,268.5
Total assets										1,326.4

3 Net finance costs

Group	2014 £m	2013 £m
Interest receivable on bank deposits	0.3	0.4
Interest receivable from joint ventures	1.3	1.2
Net finance income on retirement benefit obligations	0.1	-
Unwind of discount on shared equity receivables	1.6	1.8
Fair value profit on financing activities - interest rate swaps	-	0.2
Other	0.4	0.4
Finance income	3.7	4.0
Interest payable on borrowings	(12.4)	(9.5)
Unwind of discounted payables	(2.0)	(0.5)
Net finance cost on retirement benefit obligations	-	(0.2)
Other	(0.1)	(0.1)
Finance costs	(14.5)	(10.3)
Net finance costs	(10.8)	(6.3)

4 Income tax expense

		2014 £m	2013 £m
Analysis of expense in year
Current year's income tax
Current tax		21.1	12.6
Deferred tax		(0.9)	3.4
Adjustments in respect of prior years
Current tax		(2.4)	(5.6)
Deferred tax		0.2	5.5
Income tax expense		18.0	15.9
Tax on items recognised in other comprehensive income
Deferred tax (credit) for share-based payments		(0.2)	-
Current tax (credit) for share-based payments		(1.4)	-
Deferred tax expense/(credit) on derivative financial instruments and AFS financial assets		0.2	(0.3)
Deferred tax (credit) on retirement benefit obligations		(1.1)	(1.7)
Tax recognised in other comprehensive income		(2.5)	(2.0)
Total taxation		15.5	13.9

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 were taxed at an effective rate of 23.75%. The standard rate of corporation tax in the UK changed from 23% to 21% with effect from 1 April 2014. Accordingly, the Group's profits for the accounting period to 30 June 2014 are taxed at an effective standard rate of 22.5%.

5 Dividends

	2014		2013
	£m	pence per share	£m	pence per share
Previous year final	20.5	25.0	17.2	21.0
Current period interim	12.3	15.0	9.7	12.0
Dividend recognised in the year	32.8	40.0	26.9	33.0

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

	2014		2013
	£m	pence per share	£m	pence per share
Interim	12.3	15.0	9.7	12.0
Final	31.3	38.0	20.5	25.0
Dividend relating to the year	43.6	53.0	30.2	37.0

The directors are proposing a final dividend in respect of the financial year ended 30 June 2014 of 38 pence per share, bringing the total dividend in respect of 2014 to 53 pence per share (2013: 37 pence). The final dividend will absorb approximately £31.3 million of equity. Subject to shareholder approval at the annual general meeting to be held on 7 November 2014, the dividend will be paid on 28 November 2014 to shareholders who are on the register of members on 17 October 2014.

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.

	2014			2013
	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	77.2	81,639,900	94.6	58.2	81,184,221	71.7
Effect of dilutive securities:
Options		1,376,512			2,182,343
Diluted EPS	77.2	83,016,412	93.0	58.2	83,366,564	69.8

7 Goodwill

	£m
Cost
At 1 July 2012, 1 July 2013 and 30 June 2014	115.7
Aggregate impairment at 1 July 2012, 1 July 2013 and 30 June 2014	(0.7)
Net book amount
At 30 June 2014	115.0
At 30 June 2013 and 30 June 2012	115.0

Impairment review of 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:

	2014 £m	2013 £m
Linden Homes	52.2	52.2
Galliford Try Partnerships	5.8	5.8
Building	17.9	17.9
Infrastructure	37.2	37.2
PPP Investments	1.9	1.9
	115.0	115.0

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 and latest forecasts for the current year, along with the existing secured works, management's expectation of the future 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 the current market value of land being acquired.

8 Cash and cash equivalents

	2014  £m	2013 £m
Cash and cash equivalents excluding bank overdrafts	140.4	57.9
Current borrowings	-	(72.3)
Non-current borrowings	(145.5)	-
Net (debt)	(5.1)	(14.4)

9 Developments

	2014 £m	2013 £m
Land	607.6	521.8
Work in progress	239.6	226.4
	847.2	748.2

10 Trade and other receivables

			2014 £m	2013 £m
Amounts falling due within one year:
Trade receivables			125.9	110.8
Less: Provision for impairment of receivables			(1.4)	(0.7)
Trade receivables - net			124.5	110.1
Amounts recoverable on construction contracts			149.5	105.1
Amounts owed by subsidiary undertakings			-	-
Amounts due from joint venture undertakings			55.6	27.3
Other receivables			37.2	30.9
Prepayments and accrued income			48.2	27.2
			415.0	300.6

			2014 £m	2013 £m
Amounts falling due in more than one year:
Amounts due from joint venture undertakings			52.9	44.7
Other receivables			2.5	0.5
			55.4	45.2

11 Trade and other payables

			2014 £m	2013 £m
Payments received on account on construction contracts			35.7	33.4
Trade payables			206.2	159.4
Development land payables			116.0	111.4
Amounts due to subsidiary undertakings			-	-
Amounts due to joint venture undertakings			10.0	6.8
Other taxation and social security payable			15.7	9.1
Other payables			6.3	24.5
Accruals and deferred income			413.4	304.0
			803.3	648.6

12 Other non-current liabilities

			2014 £m	2013 £m
Development land payables			117.4	87.4
Amounts due to joint venture undertakings			3.2	-
Other payables			0.4	0.8
Accruals and deferred income			10.5	3.0
			131.5	91.2

13 Retirement benefit obligations

Pension costs for the schemes were as follows:

	2014 £m	2013 £m
Defined benefit schemes - Expense recognised in the income statement	0.3	0.2
Defined contribution schemes	13.3	12.6
Total included within employee benefit expenses	13.6	12.8

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

	2014	2013
Rate of increase in pensionable salaries	n/a	n/a
Rate of increase in pensions in payment	3.30%	3.30%
Discount rate	4.20%	4.50%
Retail price inflation	3.40%	3.40%
Consumer price inflation	2.40%	2.40%

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

	2014 £m	2013 £m
Fair value of plan assets	202.7	188.6
Present value of defined benefit obligations	(201.7)	(188.1)
Surplus in scheme recognised as non-current asset	1.0	0.5

14 Share-based payments

The Company operates 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 £3.4 million (2013: £3.8 million), all of which related to equity settled share-based payment transactions. After deferred tax, the total charge was £3.8 million (2013: £3.8 million).

15 Guarantees and contingent liabilities

Galliford Try plc has entered into financial guarantees and counter indemnities in respect of bank and performance bonds issued in the normal course of business on behalf of Group undertakings, including joint arrangements and joint ventures, amounting to £201.0 million (2013: £155.2 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.

16 Post balance sheet events

On 16 September 2014, the Chief Executive, Greg Fitzgerald, indicated his intention to retire in 2015.

On 9 July 2014 the Group acquired the Miller Construction business (Miller Construction) from Miller Group Holdings (UK) Limited for a total price of £16.57 million. The acquisition is cash accretive and will be earnings enhancing in the year ending 30 June 2015 (including one-off restructuring costs). Miller Construction had gross assets of £232 million at 31 December 2013. Under the terms of the acquisition, the Miller Group has agreed to transfer Miller Construction with a nil net assets balance, including a cash balance of £23 million. The Group has not yet concluded its accounting for the acquisition.

Miller Construction is a UK only construction business which delivers building and infrastructure projects to both the public and private sectors. In the year to 31 December 2013, Miller Construction reported revenue of £409 million and a loss before interest and tax of £4 million.

As of 9 July 2014, the acquired order book of £1.4 billion doubles the Group's 30 June 2014 order book to £2.8 billion.

 

END

 

 

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