Final Results

RNS Number : 1310Z
Galliford Try PLC
16 September 2015
 



GALLIFORD TRY PLC

ANNUAL RESULTS STATEMENT FOR THE YEAR ENDED 30 JUNE 2015

 

RECORD RESULTS FROM OUR DISCIPLINED GROWTH STRATEGY

 

Highlights

 

Financial

 

2015

 

2014

 

Change

 

·      Revenue 1 (including joint ventures)

£2,431m

£1,851m

+31%

·      Group revenue 1

£2,348m

£1,768m

+33%

·      Profit before tax

£114.0m

£95.2m

+20%

·      Earnings per share

112.8p

94.6p

+19%

·      Dividend per share

68.0p

53.0p

+28%

·      Net debt

£17.3m

£5.1m

+£12.2m

·      Group return on net assets 2

23.3%

20.8%

+2.5 ppt





·      Profit before tax, pre-exceptional 3

£117.7m

£94.9m

+24%

·      Earnings per share, pre-exceptional 3

116.3p

94.2p

+23%

 

Group

 

·      Record profit following another strong year for the Group

·      Earnings per share increased by 19% to 112.8 pence

·      Return on net assets improved to 23.3% from 20.8%

·      Final dividend of 46 pence, giving 28% increase in full year dividend payment to 68 pence covered at 1.7x pre-exceptional items

·      Net debt of £17.3 million at 30 June 2015 (2014: £5.1 million) despite increase in landbank

·      All businesses managed high levels of build cost inflation during the financial year

·      Continued excellent progress against our strategy to 2018

 

Housebuilding

 

·      11% increase in revenue to £1,108 million from £1,002 million.  3,177 completions with a further 1,800 equivalent contracting units in Galliford Try Partnerships (2014: 3,107 and 1,500 respectively)

·      Landbank increased to 15,750 plots (2014: 14,000 plots)

·      Linden Homes margin increased to 16.0% (2014: 15.1%)

·      Restructure implemented in the South to improve overhead leverage and generate annualised savings of up to £2 million

·      Linden Homes average private selling price rose by 7% to £327,000 (2014: £305,000).  Current sales per outlet is up 20% on last year and conditions remain positive, with 8% growth in sales reserved contracted or completed to £413 million (2014: £384 million)

·      Acquisition of Shepherd Homes for £31 million accelerates our growth in the North

·      Sale of shared equity portfolio at balance sheet value of £18.6 million

·      100% of Linden Homes land required for 2016 financial year in place, with 90% of land secured for 2017

·      Galliford Try Partnerships revenue increased by 36% to £329 million, with margin improving to 2.9% (2014: 2.1%)

·      Galliford Try Partnerships contracting order book of £850 million (2014: £610 million)

 

Construction

 

·      Timely acquisition of Miller Construction has accelerated growth in an improving market

·      Capitalised on broader client base and frameworks to achieve a number of major project wins

·      Construction margin up at 1.2% (2014: 1.0%) with 1.5% for the second half of the financial year as we complete older projects

·      £173 million year end cash balance in Construction, demonstrating continued strong cash management (2014: £151 million)

·      £3.8 billion order book (2014: £3.0 billion)

·      90% of this year's planned revenue now secured (2014: 88%)

 

Greg Fitzgerald, Executive Chairman, commented:

 

"I am delighted to announce another record year at Galliford Try with all of our businesses buoyed by encouraging market trends. In Housebuilding we have achieved progress on margins, and made strides towards further enhancement, implementing some operational restructuring and other business improvement initiatives.  We are very pleased to have acquired the Shepherd Homes business, which will accelerate our growth in the North. We have achieved a significant increase in the landbank with market conditions remaining positive.  We are continuing to see strong demand for our Partnerships affordable housing offering. 

 

Our Construction division has made excellent progress in closing out older contracts, and won significant new work in an improving market, strongly assisted by the timely acquisition and swift integration of Miller Construction.

 

All businesses saw high levels of build cost inflation but early signs indicate the situation may be moderating. 

 

Reflecting the delivery of record results and our continued confidence in the business, we have increased our full year dividend by 28%. We have refreshed the board with strong executive and non-executive appointments and from 1 October 2015 I look forward to welcoming Peter Truscott as the Group's new Chief Executive.  Following a three month handover, and as previously announced, I will take up the role of Non-Executive Chairman from 1 January 2016."

 

 

Enquiries:

 

Galliford Try                               Greg Fitzgerald, Executive Chairman                   01895 855001

                                                   Graham Prothero, Finance Director                     

 

Tulchan Communications           Martin Pengelley                                                020 7353 4200

                                                   James Macey White

                                                   Giles Kernick

 

¹  'Revenue' includes share of joint ventures' revenue of £83 million (2014: £83 million).  'Group revenue', where stated, excludes share of joint ventures. 

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

³  Exceptional costs in 2015 of £3.7 million represent the integration of Miller Construction.

 

 

Galliford Try will hold its results presentation at 09:30 am on Wednesday 16 September 2015 at the London Stock Exchange, 10 Paternoster Square, London EC4M 7LS. A live audio webcast will be available at http://www.investis-live.com/galliford-try/55ddc40b114aff0c00cfcb0d/ar15.  A recorded interview with Graham Prothero, regarding the full year results will be available on the company website: www.gallifordtry.co.uk from Wednesday 16 September 2015.

 

Notes to Editors:

 

Galliford Try plc is a leading UK housebuilding and construction group. It is listed on the London Stock Exchange and a member of the FTSE 250. The housebuilding business - through its Linden Homes brand - sells distinctive homes to the public and affordable homes to housing associations and local authority providers.  The construction business carries out building and infrastructure work across the UK with clients ranging from major Government departments through to regulated utilities and private sector companies. In the financial year to 30 June 2015, the Group generated revenues of £2.3 billion. 

  

OVERVIEW

 

The year to 30 June 2015 has been another record year for Galliford Try, with momentum across the Group continuing, supported by encouraging market trends for all our businesses. The two important acquisitions of Miller Construction and Shepherd Homes have further increased the Group's opportunities and capacity. Whilst labour availability and costs remain challenging, we continue to manage this effectively, working closely with our supply chain.

 

Housing market conditions remain positive and Linden Homes is making good progress in improving its margin towards 18% by 2018, with a rise in margin to 16.0% (2014: 15.1%). Galliford Try Partnerships has also improved its margin to 2.9% (2014: 2.1%). Demand amongst Registered Provider clients for mixed-tenure opportunities remains strong.  The directors are encouraged for the future by the significant increase in the Group's landbank, ensuring all land requirements for the 2015/2016 year are secure.

 

Improving market conditions create an excellent platform for our enlarged Construction business. We have successfully integrated Miller Construction, thereby accelerating our growth plans, and have won a number of major projects during the year. Construction's margin has improved to 1.2% (2014: 1.0%), whilst the order book has shown impressive growth to £3.8 billion (2014: £3.0 billion).  90% of this year's revenue is already secured (2014: 88%).

 

This performance has enabled the Board to recommend a further increase in the final dividend to 46 pence, resulting in a full year dividend up 28% to 68 pence, in line with our progressive and sustainable dividend policy. 

 

During the year we announced that Peter Truscott would join our strong management team as Chief Executive from 1 October 2015, with the Board further strengthened by two new non-executive appointments.

 

Robust demand in both the housebuilding and construction markets gives the Board continued confidence in the Group's prospects for the forthcoming financial year.

 

STRATEGY TO 2018

 

At the start of 2014 the Board reviewed its strategy against a backdrop of an improving and recovering economy and concluded 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 those five years, some of which we enhanced in February 2015, and operational and financial strategies have been implemented to achieve these growth objectives.

 

Eighteen months after this strategy was adopted we have made excellent progress and remain on track to deliver our growth and margin objectives in each of our housebuilding and construction businesses.

 

The plan to 2018 is based upon certain assumptions. Whilst there have been variations around the detail of government policy, the economic environment in the first eighteen months has been broadly consistent with that assumed under the strategy. Those assumptions were no material early tightening of the private housing market, with mortgage availability and flexibility continuing to grow. More broadly, the plan assumed continuation of Central Government support for the supply of affordable housing including support for first time buyers and a steady recovery in the wider construction market.  We also assumed a tougher building environment in the early years, stabilising towards the end of the period.

 

DIVIDEND

 

The directors are proposing a final dividend of 46 pence per share, an increase of 21%. This follows the interim dividend of 22 pence per share, 47% higher than the prior year, giving a total dividend for the year of 68 pence per share, up 28%. With earnings per share pre-exceptional items up 23% to 116.3 pence per share, this results in a total dividend covered 1.7 times by pre-exceptional earnings.  Looking forward we have enhanced our progressive dividend policy, aiming to reduce our target earnings cover for the dividend from 1.7 to 1.5 times.

 

OUTLOOK

 

Housebuilding and Construction are in a position to grow with a significant landbank and order book.

 

In Housebuilding, the UK's supply of new homes continues to fall significantly short of demand, underpinning the growth aspirations of both Linden Homes and Galliford Try Partnerships. The outlook for Linden Homes remains strong, with the mortgage and land markets and the planning environment all positive. The main issue is building to schedule, given the shortage of skilled people.

 

In Galliford Try Partnerships, affordable housing remains high on the political agenda with renewed emphasis on home ownership products. Despite the challenges of welfare reform and the recent rent cuts, housing associations remain financially robust and are continuing to leverage their balance sheets to support mixed-tenure developments. This makes us confident of continued growth in Galliford Try Partnerships and will support longer term margin improvement as clients require mixed-tenure expertise.

 

Construction's markets are improving and, with increasing opportunities for new work, we remain confident that margins will move up towards our 2018 target.

 

FINANCIAL REVIEW

 

Galliford Try had another strong year, with profit before tax and earnings per share reaching new records and a robust return on net assets. We remain on track to achieve our enhanced 2018 targets.

 

Revenue including joint ventures rose 31% to £2,431 million (2014: £1,851 million). Group revenue, excluding our share of joint ventures, was 33% higher at £2,348 million (2014: £1,768 million). The acquisition of Miller Construction in July 2014 added around £400 million to revenue this year.

 

Profit from operations, which is stated before finance costs, exceptional items, tax and our share of joint ventures' interest and tax, rose 26% to £138.9 million (2014: £110.5 million). This resulted in another record profit before tax and exceptional costs of £117.7 million, up 24% from £94.9 million in 2014, reflecting revenue growth and improving margins across the Group.

 

Earnings per share pre-exceptional items increased by 23% to 116.3 pence (2014: 94.2 pence). Net of exceptional items, earnings per share were 112.8 pence.  (2014: 94.6 pence)

 

In line with our strategy we have increased our use of debt to fund growth of our housebuilding operations increasing our investment in work in progress and expanding the landbank to 15,750 units.  Average net debt during the year was £168 million and year end net debt was £17.3 million, both of which were lower than planned as the benign land market enabled us to take further advantage of deferred land payments, increasing our land creditors to £391 million (2014: £233 million). 

 

During the year we extended our five year, £400 million bank facility for a further year to February 2020, on improved terms.

 

Group return on net assets increased to 23.3% from 20.8%, reflecting disciplined profit growth in all our divisions.

 

The directors are recommending a final dividend of 46 pence per share which, subject to approval at the AGM, will be paid on 25 November 2015 to shareholders on the register at 23 October 2015.

 

Together with the interim dividend of 22 pence per share paid in April, this will result in a total dividend in respect of the year of 68 pence per share, an increase of 28% over the previous year.  The total dividend is 1.7 times covered by pre-exceptional earnings, in line with our strategy.

 

OPERATIONAL REVIEW

 

HOUSEBUILDING

 

Linden Homes

 

2015

2014

Revenue (£m)

779.0

759.6

Profit from operations (£m)

124.3

114.9

Operating profit margin (%)

16.0

15.1

Completions

2,769

2,887

 

The housing market remains positive.  The UK has a growing population and a rising proportion of single-person households, with the result that around 250,000 new homes are needed each year to meet demand. 

 

Linden Homes revenue increased by £19 million to £779 million, with completions of 2,769 compared with 2,887 in 2014, from average outlets of 62 (2014: 70). Excluding our joint venture partners' share, completions were 2,566 against 2,748 in 2014.  Private housing completions accounted for 2,059 of the total (2014: 2,244). The average selling price of these units rose by 7% to £327,000, principally because our mix of product changed towards more expensive houses but this also reflects some price inflation across the geographies.

 

Linden Homes achieved a gross margin of 22.5%, compared with 21.4% in 2014. Profit from operations increased by 8% to £124.3 million (2014: £114.9 million). The operating margin rose from 15.1% in 2014 to 16.0%. Following an operating margin in the first half of the year of 15.1%, the margin achieved in the second half of the year was 16.7%. The result includes sales of land of £51.1 million (2014: £7.2 million) predominantly into strategic joint ventures. Excluding land sales, the operating margin for the year was 14.7% (2014: 14.6%). Return on net assets remained robust at 22.5%, compared with 22.4% in 2014.

 

During the year we made good progress on our margin improvement plan, which will yield further benefits in the current and future years.  We have a number of initiatives to improve processes, from land buying through to customer care, and we are now deploying the first site plans using our Linden Homes Layouts, bringing some of the benefits of standard procurement and construction to a proportion of our homes.  We are pleased to see higher margin sites coming through from our strategic land portfolio, and a continued reduction in the proportion of legacy land.  In July 2015, we implemented an operational restructuring in the South in order to improve our overhead leverage, generating savings in 2016 of £0.5 million and annualised savings thereafter of up to £2 million.

 

The acquisition of Shepherd Homes, bringing 515 plots and 59 people, accelerates our planned growth in the North.

 

On 30 June 2015 we completed the sale of Linden Homes' shared equity portfolio for proceeds of £18.6 million, representing 76 pence per £1, considerably higher than previous benchmark portfolio disposals.  This was in line with the carrying amount in our balance sheet and represented excellent value for us. The sale allows us to redeploy the capital to support our growth.

 

At 30 June 2015, Linden Homes' landbank stood at a record 13,550 plots. Including 2,200 plots in Galliford Try Partnerships, our total housebuilding landbank was 15,750. The figure represents the number of plots we own and control, including sites under option but excluding longer-term strategic options.

 

Galliford Try Partnerships

 

2015

2014

Revenue (£m)

329.4

242.8

Profit from operations (£m)

9.4

5.0

Operating profit margin (%)

2.9

2.1

Completions

408

220

Equivalent contracting units

1,800

1,500

Order book (£m)

850

610

 

The underlying fundamentals for the UK affordable homes market continue to be strong, with a continuing and cumulative shortfall between supply and demand.  The changes to social rent setting policy announced in the recent budget will have an impact on the tenure profile of affordable housing, but will not reduce underlying demand.  We anticipate some uncertainty in the short term, as registered providers assess the impact and local authorities consider the potential in alternative tenures.

 

Procurement of affordable homes relies on a range of mechanisms of supply. Our contracting business incorporates tendered work, land-led projects (whereby we introduce a site to a registered provider), and contracting with development joint ventures.  Mixed-tenure incorporates direct development and development of affordable schemes in joint venture, sales of land into such joint ventures, and development and contracting revenues on mixed-tenure sites.  The use of joint ventures with registered providers is an important element of our strategy and likely to grow in future.

 

Galliford Try Partnerships continued to achieve excellent growth, with a 36% increase in its revenue, from £242.8 million in 2014 to £329.4 million in 2015. Of this, £56 million came from mixed-tenure developments (up 152%) and £273 million from contracting (up 24%).  We completed 408 private units and around 1,800 equivalent contracting units.  This growth reflects our strong position in favourable markets in which we secured a number of major project wins.

 

Galliford Try Partnerships contributed profit from operations of £9.4 million, up from £5.0 million in 2014. This represented a blended operating margin of 2.9% (2014: 2.1%).

 

Net cash in Galliford Try Partnerships stood at £15 million at 30 June 2015 (2014: £28 million), with the movement reflecting our investment of cash to fund mixed-tenure developments.  Looking forward, our intention is to allow Galliford Try Partnerships to operate in a net debt position of up to £30 million to accelerate its mixed-tenure growth.

 

Galliford Try Partnerships contracting order book is currently £850 million (2014: £610 million).  The business currently has £51 million of unit sales in hand.

 

CONSTRUCTION

 

Construction

2015

2014

Revenue (£m)

1,293.2

832.9

Profit from operations (£m)

15.7

8.0

Operating profit margin (%)

1.2

1.0

Order book (£bn)

3.8

3.0

 

The UK construction market has continued to recover and is generating an improving pipeline of projects at appropriate margins.

 

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 significantly enhanced our business by acquiring Miller Construction in July 2014.

 

Revenue increased by 55% to £1,293.2 million (2014: £832.9 million) benefitting from the new contract wins and the contribution of Miller Construction, which added around £400 million to revenue during the year. 

 

Margins were up at 1.2% compared with 1.0% in 2014, with 1.5% for the second half of the financial year.

 

We continued to manage our cash carefully and had a cash balance in Construction of £173 million at the year-end (2014: £151 million) representing 13% of revenue.

 

Our order book is £3.8 billion (2014: £3.0 billion). Of the total order book, 72% was in the public sector (2014: 58%), 16% was in regulated industries (2014: 23%) and 12% was in the private sector (2014: 19%). Importantly, 69% of our order book is in frameworks (2014: 56%). The Miller Construction acquisition contributed to the increase in the size of our order book and the positive change in its sectoral split. 

 

Building

 

2015

2014

Revenue (£m)

906.9

458.3

Profit from operations (£m)

8.0

3.0

Operating profit margin (%)

0.9

0.7

Order book (£m)

2,570

2,080

 

The acquisition of Miller Construction substantially increased the scale of our Building division.  During the year, Building also secured a number of key projects including the Scottish hubs, the Education Funding Agency and Next Generation Estates contract framework.  In particular, its performance showed the benefit of pursuing frameworks with public sector partners, allowing us to build long-term relationships with them. 

 

Building delivered profit from operations of £8.0 million (2014: £3.0m), with a margin of 0.9% (2014: 0.7%). Cost inflation continued to impair profitability on contracts priced before current supply chain constraints arose. The result in 2014 included the benefit of £3.1 million from disposing of three investments, which were managed and delivered within the Building division.

 

Infrastructure

 

2015

2014

Revenue (£m)

386.3

374.6

Profit from operations (£m)

7.7

5.0

Operating profit margin (%)

2.0

1.3

Order book (£m)

1,230

920

 

Our infrastructure business continued to secure substantial new contracts.  In December 2014, as part of the Connect Roads consortium, we were appointed to design, build, finance and operate the £550 million Aberdeen Western Peripheral Route.

 

Two further major highways wins included our appointment by Highways England to its Collaborative Delivery Framework, where we are one of six contractors due to deliver up to £1.15 billion of work over five years, and our appointment as part of a joint venture, to its Smart Motorways programme worth a total of £1.55 billion. 

 

In regulated markets our joint venture with MWH Treatment and Black & Veatch was appointed preferred bidder by Scottish Water for its non-infrastructure Quality and Standards IV framework.  This award is worth approximately £560 million to the joint venture over six years.

 

Infrastructure's profit from operations was £7.7 million (2014: £5.0 million), representing a margin of 2.0% (2014: 1.3%).

 

PPP Investments

 

2015

2014

Revenue (£m)

28.8

15.1

Profit/(loss) from operations (£m)

3.7

(1.8)

Directors Valuation (£m)

18.1

1.8

 

During the year, we made new equity investments totalling £11.7 million including the purchase of the Miller Construction portfolio as part of the wider acquisition and disposed of four investments generating an aggregate profit on disposal of £6.6 million. The directors' valuation of our total PPP portfolio was £18.1 million at 30 June 2015, compared with a value invested of £10.2 million (2014: valuation £1.8 million; value invested £1.1 million).  We use discounted cash flows to value our portfolio. The average discount rate we have used to value our portfolio is 9%.

 

PPP Investments continued to provide good opportunities for our Construction, Partnerships and Facilities Management businesses, with projects closed during the year adding around £600 million to the order books for these divisions.  These projects included the Aberdeen Western Peripheral Route and our first ever PF2 contract with the EFA. 

 

The acquisition of Miller Construction gave us a place on the hub North Scotland framework, to add to our existing positions on the South East and South West hubs.  These programmes continue to produce a healthy pipeline of work, as a result of our collaborative approach. 

 

HEALTH, SAFETY AND ENVIRONMENT

 

We place the highest priority on health and safety.  Our commitment to managing effectively all aspects of health, safety and general well-being extends to all those who work for us or come into contact with our sites and operations.  Our OHSAS 18001 certified management system ensures we have processes in place to minimise risk, and our award winning behavioural safety programme, 'Challenging Beliefs, Affecting Behaviour', embeds safety to the core of our culture.  Although it remains in line with the industry average, our number of reportable RIDDOR accidents increased in the year and we are working hard to improve this.  During the first half of the year, we spent significant time aligning Miller Construction's approach, while in the second half we rolled out a Group-wide Drug and Alcohol policy, delivered new Challenging Beliefs, Affecting Behaviour Leadership Update training and launched a 'back to basics' communications campaign and a Group-wide shutdown day. 

 

BOARD

 

Peter Truscott has been appointed as Chief Executive from 1 October 2015 with Greg Fitzgerald becoming Non-Executive Chairman on 1 January 2016.  Ken Gillespie was appointed as Chief Operating Officer from 30 April 2015. 

 

Peter Ventress and Gavin Slark were appointed as non-executive directors from 30 April 2015 and 13 May 2015 respectively. Since 30 April 2015, Peter Ventress has also been Deputy Chairman and Senior Independent Director.

 

Ishbel Macpherson and Terry Miller were appointed Chairs of the Remuneration and Nomination committees on 16 September and 21 October 2014 respectively.

 

Amanda Burton, Ian Coull and Peter Rogers stepped down from the Board on 16 September, 21 October 2014 and 30 April 2015, respectively.  Greg Fitzgerald has indicated his intention to retire as Chairman at the 2017 Annual General Meeting.

 

Consolidated income statement

for the year ended 30 June 2015

 

Consolidated statement of comprehensive income

for the year ended 30 June 2015


Balance sheet at 30 June 2015

 

 

Consolidated statement of changes in equity

for the year ended 30 June 2015

 

Statements of cash flows

for the year ended 30 June 2015

 

 

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), IFRS Interpretations committee 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 2014 which have not changed significantly. The financial information set out in this document does not constitute statutory accounts for the years ended 30 June 2014 or 30 June 2015 but is derived from the Annual Report and Financial Statements 2015. The Annual Report and Financial Statements for 2014 have been delivered to the Registrar of Companies and the Annual Report and Financial Statements for 2015 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 2015 which will be made available to shareholders in October 2015 and will be 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 Executive Chairman 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 as Housebuilding, including Linden Homes and Galliford Try Partnerships; Construction, including Building and Infrastructure; and PPP Investments.

 

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

 

 

 

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 2015 this amounted to £97.9 million (2014: £92.6 million) of which £43.1 million (2014: £52.1 million) was in Building, £53.5 million (2014: £39.3 million) was in Infrastructure and £1.3 million (2014: £1.2 million) was in central costs.

 

 

3. Net finance costs

 

Interest payable on borrowings in the year ended 30 June 2014 included a £1.2 million non-cash write-off of unamortised loan fees following the renegotiation of the Group's bank facility in February 2014.

 

4. Income tax expense

 

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 were taxed at a blended standard rate of 22.5%. The standard rate of corporation tax in the UK changed from 21% to 20% with effect from 1 April 2015. Accordingly, the Group's profits for the accounting period to 30 June 2015 are taxed at a blended standard rate of 20.75%.

 

5. Dividends

 

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

 

 

The directors are proposing a final dividend in respect of the financial year ended 30 June 2015 of 46 pence per share, bringing the total dividend in respect of 2015 to 68 pence per share (2014: 53 pence). The final dividend will absorb approximately £38 million of equity. Subject to shareholder approval at the Annual General Meeting to be held on 13 November 2015, the dividend will be paid on 25 November 2015 to shareholders who are on the register of members on 23 October 2015.

 

6. Earnings per share

Basic and diluted earnings per share (EPS)

Basic EPS 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 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 Plans. 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.

 

2015

2014


Earnings
£m

Weighted average
number of
shares

Per share amount pence

Earnings
£m

Weighted

average
number of

shares

Per share amount pence

Basic EPS - pre-exceptional







Earnings attributable to ordinary shareholders

pre-exceptional items

95.2

81,833,586

116.3

76.9

81,639,900

94.2

Basic EPS







Earnings attributable to ordinary shareholders

post-exceptional items

92.3

81,833,586

112.8

77.2

81,639,900

94.6

Effect of dilutive securities:







Options


 1,400,331



 1,376,512


Diluted EPS

92.3

 83,233,917

110.9

77.2

83,016,412

93.0

 

7. Goodwill

 

The increase in goodwill in the year to 30 June 2015 arises from the acquisition of Miller Construction and Shepherd Homes. This has been allocated to the Building and Housebuilding segments.

  

The goodwill is attributable to the following business segments:

 

 

Goodwill is reviewed for impairment at least annually. 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 and the future profit margin achievable, in line with our strategy as set out in the Strategic Report. 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 to reflect the current market value of land being acquired.

 

8.  Cash and cash equivalents

 

9.  Developments

 

 

10.  Trade and other receivables

 

 

 

Amounts fully due in more than one year

2015

£m

2014

£m

Amounts due from joint venture undertaking

27.8

52.9

Other receivables

0.5

2.5


28.3

55.4

  

11. Trade and other payables

2015

£m

2014

£m

Payments received on account on construction contracts

32.1

35.7

Trade payables

270.6

206.2

Development land payables

190.2

116.0

Amounts due to subsidiary undertakings

-

-

Amounts due to joint venture undertakings

15.9

10.0

Other taxation and social security payable

25.2

15.7

Other payables

3.3

6.3

Accruals and deferred income

542.5

413.4


1,079.8

803.3

 

12. Other non-current liabilities

 

13. Retirement benefit obligations

 

Pension costs for the schemes were as follows:

 

The principal actuarial assumptions used in the calculation of the disclosure items are as follows:

 

 

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

 

 

14. Business combinations

 

(i) Miller Construction

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 was of the entire share capital and control of Construction Holdco 2 Limited, Miller Construction Holdings Limited, Miller Construction Limited, Miller Integrated Services Limited and Schools for the Community Limited. Construction Holdco 2 Limited is the Parent Company of Miller Construction (UK) Limited and other companies that, together, comprise Miller Construction. The Group has also entered into an agreement to purchase The Miller Group Limited for £1 at a future date. The Miller Group Limited is not expected to have any identifiable assets or liabilities at the date of acquisition.

 

Miller Construction is a UK only construction business which delivers building and infrastructure projects to both the public and private sectors. The tactical acquisition of Miller Construction is consistent with Galliford Try's stated strategy of disciplined and selective growth in its construction business, with a particular focus on developing our positions on regional and national frameworks. The transaction accelerates the growth in construction turnover towards £1.25 billion, and increases the 2018 target to circa £1.5 billion. The acquired order book of £1.4 billion doubled the Group's 30 June 2014 order book to £2.8 billion.

 

The goodwill of £20.2 million arising from the acquisition is attributable to the acquired workforce of Miller Construction and annual cost synergies identified by Galliford Try. None of the goodwill recognised is expected to be deductible for income tax purposes.

 

The following table summarises the consideration paid for Miller Construction, and the fair value of the assets acquired and liabilities assumed:

 

 

£m

Recognised amounts of identifiable assets acquired and liabilities assumed


Cash and cash equivalents

 23.6

Property plant and equipment

 6.1

Intangible assets1

 12.1

Available for sale financial assets

 10.3

Trade and other receivables2

 60.8

Trade and other payables

(113.9)

Deferred tax liabilities3

(2.6)

Total identifiable net liabilities

(3.6)

Goodwill

20.2

Total

 16.6



Consideration at 9 July 2014


Cash4

 16.6

Total

 16.6

 

1   Intangible assets of £12.1 million comprise customer relationships and contracts.

2   The fair value of trade and other receivables of £60.8 million includes trade receivables with a fair value of £23.0 million. The gross contractual amount for trade receivables is £23.2 million of which £0.2 million is not expected to be collected.

3   Deferred tax liabilities recognised on the acquisition relate to the fair value of intangible assets acquired and other fair value adjustments on acquisition.

4   Cash consideration included £2.0 million paid into an escrow account until 31 October 2014. The consideration was subject to the satisfactory resolution of certain customer contract matters that were fully resolved prior to 31 October 2014.

 

The Group assumed responsibility for £44.6 million guarantees and contingent liabilities in relation to performance bonds issued in the normal course of business. While the outcome of disputes arising in the normal course of business is never certain, the directors have made proper provision in the acquired balance sheet for liabilities they believe exist.

 

The Group has completed the operational integration of Miller Construction, and as a result, it is impractical to accurately represent and report the post-acquisition performance of Miller Construction. Based on its performance in its last full financial year before acquisition, the Group estimates that the consolidated income statement for the year ended 30 June 2015 includes approximately £400 million of revenue contributed by Miller Construction, which is predominately in the Building segment. In addition, the Group's consolidated income statement includes £2.2 million amortisation of intangible assets and £3.7 million exceptional costs related to Miller Construction. The exceptional costs comprise mainly redundancy and other restructuring costs, generating synergy savings in excess of £8 million per annum.

 

Given that the acquisition occurred on 9 July 2014, the Group's consolidated income statement would not be significantly different had the acquisition occurred at the beginning of the reporting period. Acquisition-related costs of £0.6 million were charged to administrative expenses in the consolidated income statement for the year ended 30 June 2014, being the period that the costs were incurred.

 

(ii) Shepherd Homes

On 12 May 2015, Linden Homes exchanged contracts with Shepherd Homes to acquire its Yorkshire-based housebuilding land assets comprising six current sites and five sites in planning totalling a landbank of 515 plots. The Group also took on 59 employees from Shepherd Homes. The acquisition has been treated as a business combination with an effective date of 12 May 2015.

 

The acquisition consideration of £30.9 million is subject to finalisation based on actual results, and £25.9 million remained unpaid at 30 June 2015. The outstanding consideration relates to land assets and so is included within development land payables in notes 11 and 12. The consideration has been allocated to the provisional fair value of assets and liabilities assumed, as set out below. The goodwill of £0.3 million arising from the acquisition is attributable to the acquired workforce of Shepherd Homes. None of the goodwill recognised is expected to be deductible for income tax purposes.

 

 

The acquisition contributed £12.8 million revenue and £1.7 million gross profit in the period to 30 June 2015, less acquisition expenses of £0.3 million. Had the acquisition occurred at the beginning of the reporting period, the revenue from the acquired sites would have been £26.6 million and gross profit £4.9 million.

 

15. 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 £3.9 million (2014: £3.4 million), all of which related to equity settled share-based payment transactions. After deferred tax, the total charge was £4.9 million (2014: £3.8 million).

16. 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 £312.3 million (2014: £201.0 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.

17. Post balance sheet events

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

 

 

 


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