Interim Results

Galliford Try PLC 25 February 2002 EMBARGOED NOT FOR RELEASE BEFORE 0700 on 25th February 2002 GALLIFORD TRY PLC INTERIM REPORT FOR THE SIX MONTHS TO 31 DECEMBER 2001 FINANCIAL HIGHLIGHTS • Turnover up 18% to £312 million (2000: £264 million) • Profit before interest up 10.2% to £7.6 million (2000: pre-exceptional £6.9 million) • Profit before tax of £6.6 million (2000: pre-exceptional £6.5 million) • Interim dividend of 0.5p per share (2000: 0.5p) • Housebuilding operating profit increased 46% OPERATIONAL HIGHLIGHTS • Successful acquisitions of Knapp, Gerald Wood and Burton Communications • Awarded £215 million contract by United Utilities in joint venture with Costain • Construction order book up 8% at £438 million • Housebuilding sales in hand up 49% on last year Commenting today, Tony Palmer, Chairman said: 'I am pleased to report continued progress in the first half of the year. Housebuilding has performed above expectations and the market fundamentals remain strong. We are encouraged by the outlook for construction and we expect that the Group will show further progress in the second half.' For further information please contact: David Calverley, Chief Executive 020 7398 3300 (morning only) George Marsh, Deputy Chief Executive 020 7398 3300 (morning only) Frank Nelson, Finance Director 020 7398 3300 (morning only) Ann-marie Wilkinson, Beattie Financial 020 7398 3300 / 07730 415 019 CHAIRMAN'S STATEMENT I am pleased to report a sound financial performance for the first half of this financial year and further progress made in achieving our strategic objectives. These results again reflect the strength and depth of the Group's skills and experience in construction and housebuilding. The acquisitions we have made in the last 12 months have all performed better than expected. The integration of Knapp Group, acquired in July 2001, into the south west housebuilding business has been extremely successful. Added to the Gerald Wood Homes and Burton Communications acquisitions, the last twelve months has seen the Group strengthen its market share in line with our strategic focus on specific sector strengths in construction and regional brands in housebuilding. Financial Results Profit before interest increased by 10.2% to £7.6 million and turnover rose by 18% to £312 million. Profit before tax for the six months was £6.6 million compared to last years' pre exceptional profit of £6.5 million (post exceptional profit of £3.2 million). We have increased our investment in the planned expansion of our housebuilding business to generate future profit, and this has resulted in a higher interest charge. As part of our financial planning strategy we have taken out an interest rate fix for our anticipated core borrowings for a period of five years. Net borrowings at 31 December stood at £15.4 million compared to £10.7 million the previous year. Earnings per share were 2.1p. Dividend The directors have declared an interim dividend of 0.5p per share. When recommending the final dividend the directors will take into account the board's policy to provide a progressive dividend that recognises the growth of long term sustainable earnings whilst maintaining an appropriate level of dividend cover. Construction We are making good progress on our strategy of repositioning ourselves to deliver a complete construction service through a partnership approach with a strong sector focus, where the profit potential is higher than in general contracting. Although our overall profit margin in the first half reduced as we started work on a number of new projects which produce lower profits in their early stages, and as we now write off PFI bid costs as incurred, we anticipate an improvement in the second half and the full benefit in the next financial year. Operating profits were £1.02 million on a turnover of £249 million compared to £3.1 million on a turnover of £223 million last year. Our order book was up 8% to £438 million at the end of December, now substantially augmented by the recent United Utilities contract win. We were delighted to announce last week that we have been awarded a three-year asset management framework contract for United Utilities southern region (Cheshire and South Manchester) in joint venture with Costain. Services provided will include the detailed design and construction of water and wastewater treatment works with revenues likely to be in excess of £215 million. This important contract is testimony to our experience in the sector and underlines our reputation as a partner of choice for the water industry. Our infrastructure skills remain in demand and we are working in long-term partnerships with clients such as Dwr Cymru Welsh Water, Railtrack and British Waterways. The telecommunications industry continues to invest in its infrastructure and we have developed new services to maintain our position as a market leader in this sector. The Group's strengths in the health, education and social housing sectors have enabled us to take advantage of increased spending in these markets. We are currently working on 32 school and college projects through our PFI projects, partnership schemes and direct contracts. In the commercial and industrial markets our focus is on serving the construction needs of blue chip businesses with long term building programmes and, although there was a slowdown in these markets during the latter part of 2001, a satisfactory level of activity has been maintained. Remedial works are being implemented to the high specification floor at the distribution depot in Daventry that had not met its performance criteria and for which we provided in the last financial year. We are midway through a testing programme, and subject to any unforeseen issues we expect to hand over the completed project to the client shortly. Housebuilding Housebuilding performed ahead of expectations during the first half of the year. We expanded the business in line with our strategy to be a leading regional developer with strong local brands, specialising in individually designed developments with an expertise in brownfield and conversion. Operating profits rose 46% to £7.9 million on turnover of £62.6 million, up 54% on last year. The total number of homes sold increased from 283 to 359 at an average selling price of £173,000 up from £137,000 last year. The land bank of plots owned or controlled totalled 2,180 at an average plot cost of £39,000. The strength of our business is not only the location, design, build quality and appeal to customers but its geographic spread across the southern half of the country. In the south west of England, Midas Homes has performed ahead of expectations and its focus on high specification properties in good locations has enabled it to take advantage of a rising market. In the eastern counties, sales of Stamford homes have continued to grow. We are increasing the proportion of its higher value homes and directing land acquisition towards the more urban based developments where there is significant scope to increase margins. Although it was a quieter period in the south east during the first half, since the new year we have been encouraged by the return of the market to a much improved level of activity. We have limited exposure to the more volatile central London market, and Try Homes in the south east has continued to perform well. There is substantial scope for improving our market share in all three of our operating regions, and we entered 2002 with sales in hand up 49% on a year ago. Outlook The second half has started well. Housebuilding has performed above expectations and market fundamentals remain strong. We are encouraged by the outlook for construction and we expect that the Group will show further progress in the second half. Our acquisitions have been successful, delivering both profit and increased market share. Our strategy to grow the business both organically, and through selective acquisition to help drive shareholder value, remains our key focus. Tony Palmer Chairman 25 February 2002 CONSOLIDATED PROFIT AND LOSS ACCOUNT Half year Half year Year Ended Ended Ended 31 Dec 31 Dec 30 June 2001 2000 2001 £000 £000 £000 (restated) Turnover Continuing operations 308,127 265,660 568,740 Acquisitions 4,453 - 1,933 Total continuing operations 312,580 265,660 570,673 Less share of joint ventures' and associates' turnover (613) (1,526) (2,115) Group turnover 311,967 264,134 568,558 Cost of sales (288,122) (242,655) (524,400) Exceptional cost of sales - - (6,500) Gross profit 23,845 21,479 37,658 Net operating expenses (16,286) (14,609) (28,185) Exceptional operating expenses - (1,581) (1,996) Continuing operations 6,933 5,289 7,230 Acquisitions 626 - 247 Group operating profit 7,559 5,289 7,477 Share of profits in joint ventures 45 (46) 218 Share of profits in associates - 78 228 Merger expenses - (1,716) (1,716) Profit on ordinary activities before interest 7,604 3,605 6,207 Net interest (payable)/receivable - Group (1,009) (314) (1,187) - Joint ventures (41) (13) 12 - Associates - (60) (118) (1,050) (387) (1,293) Profit on ordinary activities before tax 6,554 3,218 4,914 Tax (1,969) (1,524) (1,781) Profit on ordinary activities after tax 4,585 1,694 3,133 Dividends (1,092) (1,075) (3,026) Retained profit for the period 3,493 619 107 Earnings per ordinary share - before exceptional items 2.2p 2.2p 5.1p - after exceptional items 2.2p 0.8p 1.5p Diluted earnings per share - before exceptional items 2.1p 2.1p 5.0p - after exceptional items 2.1p 0.8p 1.4p CONSOLIDATED BALANCE SHEET 31 Dec 31 Dec 30 June 2001 2000 2001 £000 £000 £000 (restated) Fixed assets Intangible assets: goodwill 562 - 698 Tangible assets 12,069 11,157 12,032 Investments in joint ventures: Share of gross assets 2,143 1,531 2,020 Share of gross liabilities (1,780) (1,214) (1,670) 363 317 350 Investments in associates 81 81 81 Other investments 1,363 827 990 14,438 12,382 14,151 Current assets Stocks 630 323 337 Developments 127,172 108,423 113,300 Debtors 99,399 81,218 102,361 Cash at bank & in hand 2,331 8,488 22,371 229,532 198,452 238,369 Creditors: amounts falling due within one year (186,121) (160,095) (196,340) Net current assets 43,411 38,357 42,029 Total assets less current liabilities 57,849 50,739 56,180 Creditors: amounts falling due after more than one year (8,676) (4,573) (10,555) Provisions for liabilities and charges (1,586) (2,216) (1,586) 47,587 43,950 44,039 Capital and reserves Called up share capital 10,871 10,742 10,845 Share premium account 1,074 547 1,045 Merger reserve 4,687 4,687 4,687 Revaluation reserve 1,917 1,923 1,919 Other reserves 35 35 35 Profit and loss account 29,003 26,016 25,508 Equity shareholders' funds 47,587 43,950 44,039 CONSOLIDATED CASH FLOW STATEMENT Half year Half year Year Ended Ended Ended 31 Dec 31 Dec 30 June 2001 2000 2001 £000 £000 £000 (restated) Net cash inflow/(outflow) from operating activities 7,737 (11,822) (7,761) Dividends from joint ventures - - 100 Net interest paid (813) (268) (1,277) Taxation (111) (884) (2,880) Capital expenditure and financial investment (652) (1,435) (2,680) Acquisitions and disposals (463) - (888) Exceptional merger expenses - (1,716) (1,716) Equity dividends paid (1,952) (1,195) (2,269) Net cash inflow/(outflow) before use of liquid resources and financing 3,746 (17,320) (19,371) Management of liquid resources Decrease in short term deposits with banks - 1,222 1,222 Financing Issue of ordinary share capital 55 136 438 Capital element of finance lease rental payments (16) (16) (60) (Decrease)/increase in bank loans (23,766) 14,616 30,306 Repayment of loan notes (59) (20) (34) (23,786) 14,716 30,650 (Decrease)/increase in cash in the period (20,040) (1,382) 12,501 Reconciliation of net cash flow to movement in net debt (Decrease)/increase in cash in period Decrease/(increase) in debt and lease financing (20,040) (1,382) 12,501 Borrowings acquired with subsidiary 20,164 (14,580) (30,408) Decrease in short term deposits with banks (1,431) - (1,474) - (1,222) (1,222) Change in net (debt)/cash in the period (1,307) (17,184) (20,603) Net (debt)/cash at start of period (14,084) 6,519 6,519 Net debt at end of period (15,391) (10,665) (14,084) NOTES 1. Segmental analysis Half year ended 31 December Profit/(loss) Profit/(loss) Group Group Before Before Turnover Turnover Interest Interest 2001 2000 2000 2000 £000 £000 £000 £000 (restated) (restated) Construction 249,123 222,955 1,022 3,103 Housebuilding 62,556 40,710 7,864 5,394 Group 288 469 (1,282) (1,595) Group exceptional items - (3,297) 311,967 264,134 7,604 3,605 Less net interest payable (1,050) (387) Profit after exceptional items 6,554 3,218 In addition to the above the turnover in joint ventures amounted to £613,000 (2000: £1,007,000) in construction, £Nil (2000: £14,000) in housebuilding and in respect of associates £Nil (2000 £505,000) in Group. The profit/(loss) before interest in joint ventures included £45,000 (2000: £63,000 loss) in construction, £Nil profit (2000: £17,000) in housebuilding and in respect of associates £Nil profit (2000: £78,000) in Group. Turnover of £8,271,000 in the half year to December 2000 relating to the Millennium Point contract has been reclassified from joint ventures' to group turnover in line with the treatment at 30 June 2001. 2. Basis of preparation The interim financial information has been prepared on the basis of the accounting policies set out in Galliford Try plc's statutory financial statement for the year ended 30 June 2001 and in accordance with applicable UK accounting standards. The comparative figures for 31 December 2000 have been restated to reflect the change in accounting policy regarding investments in PFI/PPP projects detailed in the financial statements for the year ended 30 June 2001. All the figures are consolidated and for both the six month periods ended 31 December have been reviewed by the auditors. The interim report was approved by the directors on 25 February 2002. The figures for the year ended 30 June 2001 have been extracted from the financial statements of Galliford Try plc, on which the auditors gave an unqualified audit report and which have been delivered to the Registrar of Companies. The foregoing information does not constitute statutory financial statements. 3. Earnings per share Basic 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 Try 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. 4. Taxation The tax charge for the period reflects the estimated effective rate for the full year to 30 June 2002 and takes account of tax losses brought forward and the utilisation of advance corporation tax written off in previous years. 5. Interim dividend The directors have declared an interim dividend of 0.5p per share (2000: 0.5p) which will be paid on 11 April 2002 to shareholders on the register on 15 March 2002. 6. Reconciliation of operating profit to cash flows Half year Half year Year Ended Ended Ended 31 Dec 31 Dec 30 June 2001 2000 2001 £000 £000 £000 (restated) Operating profit before exceptional items 7,559 6,870 15,973 Exceptional operating expenses - (1,581) (8,496) Depreciation 750 653 1,293 Loss on disposal of tangible fixed assets 2 31 25 Amortisation of own shares held 63 80 214 Restricted share scheme - (169) (169) Amounts written off investments 50 20 20 Amortisation of goodwill 136 7 37 (Increase) in stocks (293) (14) (28) (Increase) in developments (6,885) (17,010) (18,829) Decrease/(increase) in debtors 3,104 (8,478) (29,308) Increase in creditors 3,251 7,769 31,507 7,737 (11,822) (7,761) 7. Analysis of changes in net debt Borrowings acquired At 1 July Cash with At 31 Dec 2001 flow subsidiary 2001 £000 £000 £000 £000 Cash at bank and in hand 22,371 (20,040) - 2,331 Loan Notes (1,214) (3,589) - (4,803) Bank loans (35,211) 23,766 (1,431) (12,876) (14,054) 137 (1,431) (15,348) Finance lease obligations (30) (13) - (43) Net debt (14,084) 124 (1,431) (15,391) 8. Major non-cash transaction The Company acquired the entire issued share capital of Knapp Group Limited in the period for a consideration of £4,050,000 which was partly satisfied by the issue of £3,648,000 loan notes. INDEPENDENT REVIEW REPORT TO GALLIFORD TRY PLC Introduction We have been instructed by the company to review the financial information which comprises the consolidated profit and loss account, consolidated balance sheet, consolidated cash flow statement and the related notes numbered 1 to 8. We have read the other information contained in the interim report and considered whether it contains any apparent misstatements or material inconsistencies with the financial information. Directors' responsibilities The interim report, including the financial information contained therein, is the responsibility of, and has been approved by the directors. The directors are responsible for preparing the interim report in accordance with the Listing Rules of the Financial Services Authority which 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 for use in the United Kingdom. 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 United Kingdom 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 2001. PricewaterhouseCoopers Chartered Accountants London 25 February 2002 DISTRIBUTION Copies of the interim report will be distributed to all holders of the Company's ordinary shares and will also be available at the Company's registered office: Cowley Business Park, Cowley, Uxbridge, Middlesex UB8 2AL. In addition this report will be available on the Company's website: www.gallifordtry.co.uk This information is provided by RNS The company news service from the London Stock Exchange

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