Interim Results

Galliford Try PLC 26 February 2001 GALLIFORD TRY PLC INTERIM STATEMENT FOR THE SIX MONTHS TO 31 DECEMBER 2000 FINANCIAL HIGHLIGHTS * Turnover including share of joint ventures and associates up 28% to £265.7m (1999 : £208.2m) * Profit before tax and exceptional items up 16% to £6.5m (1999 : £5.6m) * Earnings per share before exceptional items up 3% to 2.2p (1999 : 2.1p) * Interim dividend declared of 0.5p per share (1999 : 0.5p) * After exceptional merger and rationalisation costs the profit before tax was £3.2m (1999 : £5.6m) with earnings per share of 0.8p (1999 : 2.1p) OPERATIONAL HIGHLIGHTS * Successful merger has created greater business opportunities and brought significant economies of scale * Construction operating profits increase by 61% on turnover up 34% * Strong construction order book of £404m * Housebuilding sales since new year up by 23% Commenting today, Tony Palmer, Chairman said: 'The new group has made an excellent start. Good progress has been made in achieving the benefits of our merger last September and we are encouraged by the opportunities it is bringing and the synergy savings already coming through. We have created a business which is of a size and strength to be a significant force in the construction market and has a focused approach to niche regional housebuilding. We expect the second half to show further good progress.' For further information please contact: David Calverley, Chief Executive 020 7398 3300 (morning only) George Marsh, Deputy Chief Executive 020 7398 3300 (morning only) Ann-marie Wilkinson, Beattie Financial 020 7398 3300/ 07730 415 019 CHAIRMANS STATEMENT I am delighted to report that the first half year results of Galliford Try have met our expectations and that we are making good progress in achieving the benefits of our merger. Turnover for the six months, including our share of joint ventures and associates was £266m. Before exceptional items the profit before tax was £ 6.5m and after exceptional merger and rationalisation costs it was £3.2m. Earnings per share shows a small increase due to the lower tax charge in the previous year. The profits from both our construction and housebuilding businesses met their targets for the period. We have continued to increase our investment in housebuilding land and at 31 December net borrowings were £10.7m compared to £4.2m the previous year. Shareholders funds now stand at £45.9m and we are therefore in a strong financial position. DIVIDEND The directors have declared an interim dividend of 0.5p per share which will be paid on 12 April 2001 to shareholders on the register on 23 March 2001. When recommending the final dividend the directors will take into account the Board's policy to provide growth in dividend per share that recognises the growth of long term sustainable earnings whilst maintaining an appropriate level of dividend cover. BUSINESS REVIEW It is now 5 months since Galliford and Try Group merged to form Galliford Try. The process of bringing the two companies together has gone well, and we are encouraged by the business opportunities it is bringing and by the synergy savings already coming through. Our construction business has strong local relationships combined with the resources and national coverage that is proving attractive to major UK clients for their ongoing construction programmes. Our new financial strength has increased the scope we have to take on more substantial projects and the geographical spread of our activities has enabled us to better service our key clients. Our regional housebuilding companies, concentrating on individually designed brownfield conversions as well as the smaller traditional sites, positions us with homes that meet the aspirations of today's discerning purchasers. We are already realising significant economies of scale from our merger. We are on course to deliver the original cost savings identified, and are working on a number of purchasing initiatives with our supply chain that will generate ongoing economies. CONSTRUCTION Construction operating profits have risen 61% to £3.1m on a turnover up 34% at £215m as we have focused on our partnerships and specific market sectors. Our businesses concentrate on long term relationships with clients and it is very encouraging that as our total order book has risen to £404 million we have continued to secure 70% of our workload outside the purely competitive tender market. This will contribute to the progress we are making in increasing our operating margin, currently up from 1.2% to 1.4%. Our objective is to make consistent profit improvements and, although the exceptionally wet winter conditions have not helped on some sites, we have achieved slightly increased margins on the new work. We are developing our track record in specific areas of construction and our prospects in these sectors are most encouraging. Our long term partnerships encompass commercial businesses, industrial clients and the utilities, where investment in upgrading and maintenance continues to grow. We can now offer clients a total service from initial planning and budgeting through the construction phase to interior fit out and facilities management, increasing our opportunities to add value. The investment of the telecommunications industry in its infrastructure continues and the good performance achieved by our communications business in serving their needs looks likely to continue. We are well positioned to benefit from increased spending on social housing and private finance initiative projects, both sectors in which we have a growing record. We are now entering the operational phase of our multiple schools PFI project in Birmingham, are currently the preferred bidder for the £18m Newbury College PFI and are on the shortlist for a series of PFI opportunities in the health and education sectors. Our £62m Millennium Point project in Birmingham is progressing well and due for completion in late summer. HOUSEBUILDING The company's housebuilding businesses performed in line with our expectations during the first half with a number of new sites currently coming on stream which will benefit the full year. Operating profits of £5.4m were earned on a turnover of £40.7 million. The total number of homes sold was 283 at an average selling price of £137,000. We have made a good start in 2001 and sales for the first two months are up 23% on a year ago. We have continued to invest selectively and our land bank of plots owned or controlled at 31 December totalled 2,114 at an average plot cost of £34,000. In London and the south east the market slowed significantly throughout the autumn and reservations were lower. However since the beginning of January we have seen a marked increase in activity and sales. A recent sales launch at Leatherhead, where we are converting the old Royal School for the Blind into 40 homes has been very promising. Our markets in the west of England and the eastern counties have remained more consistent. We have negotiated a fourth tranche of land for 68 homes at a major new settlement near Peterborough under our partnership agreement with the landowners. Our strategy is to grow regional businesses that concentrate on individually designed developments which attract today's more discerning purchasers. Our expertise in urban and brownfield conversions complements this approach, which enables us to generate higher sales values. In addition it gives us a competitive advantage in the process of acquiring quality sites and optimising their value. We have negotiated an improved planning consent at Oakwood in Maidstone, where we are now converting a stone built listed hospital into 82 apartments. The first homes were released this month and sales are exceeding our expectations. OUTLOOK The new group has made an excellent start. We have created a business which is of a size and strength to be a significant force in the construction market, and has a focused approach to niche regional housebuilding. We are actively pursuing our strategy to grow the business both organically and through acquisition where the opportunities arise. We are delivering the synergies that underpinned our merger and we expect the second half to show further good progress. Tony Palmer Chairman 26 February 2001 CONSOLIDATED PROFIT AND LOSS ACCOUNT Half Year Half year ended year ended 31 December 2000 ended 30 June Pre- 31 Dec 2000 exceptional Exceptional Total 1999 items Total Total £000 £000 £000 £000 £000 Turnover Group and share of joint ventures 208,202 458,374 265,660 - 265,660 and associates less share of joint ventures' and associates' turnover (1,823) (3,872) (9,797) - (9,797) Group turnover 206,379 454,502 255,863 - 255,863 Operating costs (200,272) (441,004) (248,909) (1,581) (250,490) Group operating profit 6,107 13,498 6,954 (1,581) 5,373 Share of (losses)/profits in joint ventures 37 337 (130) - (130) Share of profits in associates 64 148 78 - 78 Merger expenses - - - (1,716) (1,716) Profit on ordinary activities 6,208 13,983 6,902 (3,297) 3,605 before interest Net interest (payable)/ receivable - Group (549) (1,099) (398) - (398) - Joint ventures (6) (56) 71 - 71 - Associates (56) (116) (60) - (60) ________ _________ ______ _______ ________ (611) (1,271) (387) - (387) Profit on ordinary activities 5,597 12,712 6,515 (3,297) 3,218 before tax Tax (1,041) (2,922) (1,824) 300 (1,524) Profit on ordinary activities after tax 4,556 9,790 4,691 (2,997) 1,694 Dividends (1,069) (2,264) (1,075) Profit for the period 3,487 7,526 619 Earnings per ordinary share (pence) 2.12 4.56 2.18 (1.39) 0.79 Diluted earnings per share (pence) 2.02 4.33 2.07 (1.32) 0.75 CONSOLIDATED BALANCE SHEET 31 Dec 30 June 31 Dec 1999 2000 2000 £000 £000 £000 Fixed assets Tangible assets 10,852 10,908 11,157 Investments in joint ventures Goodwill 285 278 271 Share of gross assets 2,381 2,599 2,470 Share of gross liabilities (2,357) (2,541) (2,471) Loan to joint venture 1,900 1,900 1,955 2,209 2,236 2,225 Investments in associates 103 101 81 Other investments 263 461 827 13,427 13,706 14,290 Current assets Developments 89,818 91,413 108,423 Debtors 67,825 73,054 81,541 Cash at bank & in hand 10,840 11,092 8,488 168,483 175,559 198,452 Creditors: amounts falling due within one year (133,480) (135,341) (160,095) Net current assets 35,003 40,218 38,357 Total assets less current liabilities 48,430 53,924 52,647 Creditors: amounts falling due after more than one year (5,382) (6,436) (4,573) Provisions for liabilities and charges (1,897) (2,216) (2,216) 41,151 45,272 45,858 Capital and reserves Called up share capital 10,688 10,703 10,742 Share premium account 477 519 547 Merger reserve 4,618 4,618 4,687 Revaluation reserve 1,927 1,923 1,923 Other reserves 179 204 35 Profit and loss account 23,262 27,305 27,924 Equity shareholders' funds 41,151 45,272 45,858 CONSOLIDATED CASH FLOW STATEMENT Half year Year Half year ended ended ended 31 Dec 30 June 31 Dec 1999 2000 2000 £000 £000 £000 Net cash (outflow)/inflow from operating 4,845 20,346 (11,738) activities Dividends from joint ventures 4 144 - Net interest paid (600) (1,285) (352) Taxation (166) (1,217) (884) Capital expenditure and financial investment (1,303) (2,143) (1,435) Acquisitions and disposals - (1,350) - Exceptional merger expenses - - (1,716) Equity dividends paid (1,047) (2,116) (1,195) Net cash (outflow)/inflow before use of liquid resources and financing 1,733 12,379 (17,320) Management of liquid resources Decrease/(increase) in short term deposits with (227) 1,151 1,222 banks Financing Issue of ordinary share capital - 57 136 Capital element of finance lease rental payments (19) (23) (16) Increase/(decrease) in bank loans (2,756) (6,246) 14,616 Repayment of loan notes (26) (50) (20) Borrowings acquired with subsidiary - 1,350 - Funding of associated undertakings losses (117) (117) - (2,918) (5,029) 14,716 (Decrease)/increase in cash in the period (1,412) 8,501 (1,382) Reconciliation of net cash flow to movement in net debt (Decrease)/increase in cash in the period (1,412) 8,501 (1,382) Increase in bank loans - - (14,616) Cash used to repay debt and lease financing 2,801 6,319 36 Borrowings acquired with subsidiary - (1,350) - Decrease/(increase) in short term deposits with 227 (1,151) (1,222) banks Change in net cash/(debt) in the period 1,616 12,319 (17,184) Net cash/(debt) at start of period (5,800) (5,800) 6,519 Net (debt)/cash at end of period (4,184) 6,519 (10,665) NOTES 1 Segmental analysis Half year ended 31 December Proft/(loss) Group Group Before exceptional Turnover Turnover items and interest 1999 2000 1999 2000 £000 £000 £000 £000 Construction 160,028 214,861 1,926 3,103 Housebuilding 46,351 40,696 5,647 5,394 Group and other - 306 (1,365) (1,595) 206,379 255,863 6,208 6,902 Less net interest payable (611) (387) Profit before exceptional items 5,597 6,515 In addition to the above the turnover in the joint ventures amounted to £ 9,278,000 (1999: £28,000) in construction £14,000 (1999: £1,074,000) in housebuilding and in respect of the associates £505,000 (1999: £721,000) in Group and other. The profit/(loss) before exceptional items and interest in respect of joint ventures amounted to a loss of £147,000 (1999: £58,000 profit) in construction, £17,000 profit (1999: £21,000 loss) in housebuilding and in respect of associates £78,000 profit (1999: £64,000) in Group and other. 2 Basis of preparation The interim financial information has been prepared on the basis of the accounting policies set out in Galliford plc's statutory financial statements for the year ended 30 June 2000 and in accordance with applicable UK accounting standards. All the figures are consolidated and for the six months ended 31 December 2000 have been reviewed by the auditors. The figures for 1999 are unaudited. The figures for the year ended 30 June 2000 have been extracted from the financial statements of Galliford plc, on which the auditors gave an unqualified audit report and which have been delivered to the Registrar of Companies, and from the interim statement of Try Group PLC which was reviewed by the auditors. The foregoing financial information does not constitute statutory financial statements. 3 Earnings per share Basics earnings per share is calculated using the profit on ordinary activities after tax and the weighted average number of ordinary shares in issue during the period less the weighted average number of ordinary shares held by the Galliford Employee Share Trust. For diluted earnings per share, the weighted average number of ordinary shares is adjusted to assume conversion of all dilutive potential ordinary shares. The number of shares used in calculating the earnings per share has been restated to reflect the shares issued as a result of the merger as though they had been in issue since the start of the previous year. 4 Taxation The tax charge for the period reflects the estimated effective rate for the full year to 30 June 2001 and takes account of tax losses brought forward and the utilisation of advance corporation tax written off in previous years. No tax relief has been assumed in respect of merger expenses. 5 Interim dividend The directors have declared an interim dividend of 0.5p per share (2000: 0.5p) which will be paid on 12 April 2001 to shareholders on the register on 23 March 2001. 6 Reconciliation of operating profit to cash flows Half year Year Half year ended ended ended 31 Dec 30 June 31 Dec 1999 2000 2000 £000 £000 £000 Operating profit 6,107 13,498 6,954 Exceptional operating expenses - - (1,581) Depreciation 793 1,453 653 Loss/(profit) on disposal of tangible fixed assets 2 (18) 31 (Profit) on disposal of investments (185) (185) - Amortisation of own shares held 40 81 80 Restricted share scheme 37 62 (169) Amounts written off investments - - 20 Amortisation of goodwill 8 15 7 (Increase) in developments (3,166) (8,874) (17,010) (Increase) in debtors (6,124) (5,449) (8,492) Increase in creditors 7,333 19,763 7,769 4,845 20,346 (11,738) 7 Analysis of changes in net debt At 1 July Cash At 31 Dec 2000 flow 2000 £000 £000 £000 Cash at bank and in hand 9,870 (1,382) 8,488 Loan Notes (1,052) 20 (1,032) Bank loans (3,431) (14,616) (18,047) 5,387 (15,978) (10,591) Finance lease obligations (90) 16 (74) 5,297 (15,962) (10,665) Liquid resources 1,222 (1,222) - Net cash/(debt) 6,519 (17,184) (10,665) 8 Merger with Try Group PLC Galliford plc merged with Try Group PLC on 15 September 2000 and the name of the company was changed to Galliford Try plc. The combination has been accounted for using merger accounting and the consideration was satisfied by the issue of £5,219,000 of equity shares of five pence. The fair value of the consideration was £22,442,775 based on the market value of Galliford plc shares at 15 September 2000. No significant adjustments were made to the assets and liabilities of Try Group PLC other than those necessary to align the accounting policies of the two groups in respect of revenue recognition in the housing business, as analysed in note 9 below. The book value of the net assets of Galliford Try plc and Try Group PLC at the date of the combination were estimated to be £23,931,000 and £21,460,000 respectively. The difference of £4,687,000 arising on consolidation between the nominal value of Galliford Try shares issued and the nominal value of the Try Group PLC shares acquired plus the related share premium has been credited to reserves. Try Group PLC's financial year began on 1 January 2000. The exceptional operating costs in the profit and loss account represent mainly redundancy and associated costs incurred post merger in the Group and other segment. 9 Analysis of principal components of the profit and loss account Half year to 31 December 2000 Galliford Try Group Accounting Galliford Galliford plc PLC policy Try plc Try plc pre-merger pre-merger alignment post merger Total £000 £000 £000 £000 £000 Group turnover 59,592 38,118 (250) 158,403 255,863 Group operating profit 196 908 (72) 5,870 6,902 Profit before exceptional items 90 832 (72) 5,665 6,515 Exceptional items (949) (767) - (1,581) (3,297) Profit before tax (859) 65 (72) 4,084 3,218 Tax (25) (234) 20 (1,285) (1,524) Profit after tax (884) (169) (52) 2,799 1,694 Year to 30 June 2000 Galliford plc Try Group PLC Accounting policy Galliford alignment Try plc Total £000 £000 £000 £000 Group turnover 278,690 170,299 5,513 454,502 Group operating profit 6,954 6,024 1,005 13,983 Profit before tax 6,025 5,682 1,005 12,712 Tax (1,856) (766) (300) (2,922) Profit after tax 4,169 4,916 705 9,790 Half year to 31 December 1999 Galliford Try Group PLC Accounting policy Galliford plc alignment Try plc Total £000 £000 £000 £000 Group turnover 122,300 81,802 2,277 206,379 Group operating profit 2,477 3,400 331 6,208 Profit before tax 2,087 3,179 331 5,597 Tax (626) (315) (100) (1,041) Profit after tax 1,461 2,864 231 4,556 Independent Review Report to Galliford Try plc Introduction We have been instructed by the company to review the financial information on pages 4 to 10 and we have read the other information contained in the interim report for any apparent misstatements or material inconsistencies with the financial information. Director's responsibilities The interim report, including the financial information contained therein, is the responsibility of, and has been approved by the directors. The Listing Rules of the Financial Services Authority require that the accounting policies and presentation applied to the interim figures should be consistent with those applied in preparing the preceding annual accounts except where any changes, and the reasons for them, are disclosed. Review work performed We conducted our review in accordance with guidance contained in Bulletin 1999/4 issued by the Auditing Practices Board. A review consists principally of making enquiries of group management and applying analytical procedures to the financial information and underlying financial data and based thereon, assessing whether the accounting policies and presentation have been consistently applied unless otherwise disclosed. A review excludes audit procedures such as tests of controls and verification of assets, liabilities and transactions. It is substantially less in scope than an audit performed in accordance with Auditing Standards and therefore provides a lower level of assurance than an audit. Accordingly we do not express an audit opinion on the financial information. Review conclusion On the basis of our review we are not aware of any material modifications that should be made to the financial information as presented for the six months ended 31 December 2000. PricewaterhouseCoopers Chartered Accountants and Registered Auditors London 26 February 2001 Copies of this statement will be sent to all holders of the Company's listed securities. Copies are available to the public at the registered office of the Company; The Secretary, Galliford Try plc, Cowley Business Park, Cowley, Uxbridge, Middlesex, UB8 2AL

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