Interim Results

Galliford Try PLC 23 February 2006 GALLIFORD TRY PLC INTERIM REPORT FOR THE SIX MONTHS ENDED 31 DECEMBER 2005 HIGHLIGHTS 2005 2004 Increase Group revenue Â£372m Â£347m 7% Profit before tax Â£14.0m Â£12.7m 10% Earnings per share 4.4p 4.0p 10% Dividend per share 0.7p 0.6p 17% â€¢ Construction profit margin of 2% â€¢ Construction work in hand Â£1.1 billion - 90% on non-price competitive basis â€¢ Financial close achieved on Â£192 million Northamptonshire Schools PFI â€¢ Â£67 million acquisition of Chartdale Homes completed - increases landbank by 1,350 units â€¢ Housebuilding profit at record Â£13.9 million, margin maintained at 14.1% â€¢ Current housebuilding sales in hand at record high of Â£191 million, 15% up on a year ago â€¢ Net debt at 31 December of Â£8.9 million representing gearing of 15% (2004: Â£10.1m and 21%) Commenting today, David Calverley, Chairman said: 'I am delighted to report another record set of first half results. Our construction profit margin of 2% clearly demonstrates our ability to deliver profitable growth from a consistent focus on selected work in key markets. The results also reflect a good performance from our housebuilding business despite a tough market, and the acquisition of Chartdale represents a significant contribution towards our expansion objectives. The board is very confident of reporting further progress at the full year.' Enquiries to: Greg Fitzgerald , Chief Executive Galliford Try plc 01895 855 219 Frank Nelson, Finance Director Galliford Try plc 01895 855 226 Ann-marie Wilkinson Bell Pottinger Financial 020 7861 3232 Geoff Callow Bell Pottinger Financial 020 7861 3232 CHAIRMAN'S STATEMENT I am delighted to report another set of record results for the first half of our financial year, demonstrating our ability to deliver profitable growth from construction and a good performance from our housebuilding business, despite a tough market. Financial Review Profit before tax for the 6 months ended 31 December 2005 was Â£14.0 million, an increase of 10% (2004: Â£12.7 million) with Group revenue up 7% at Â£372 million (2004: Â£347 million). This is the first set of results we have reported under the new International Financial Reporting Standards. The construction division is generating strong profits, and a cash flow that significantly contributes towards the financing of our investment in housebuilding. Net debt at 31 December was Â£8.9 million representing gearing of 15% (Â£10.1 million and 23% at 31 December 2004). Since the half year end we have taken advantage of the strong market for commercial property investments and entered into two sale and leaseback arrangements on our offices at Uxbridge and Newton Abbot, which will generate cash proceeds of Â£11.2 million and a one off profit of Â£3.8 million. Earnings per share for the period were 4.4p compared to 4.0p for the same period last year. Shareholders' funds have risen to Â£58.2 million compared to Â£48.3 million at 31 December 2004. Dividend The directors have declared an interim dividend of 0.7p per share, a 17% increase on last year, which will be paid on 13 April 2006 to shareholders on the register at 17 March 2006. Having rebased the dividend with a 24% increase in the total for the last financial year, the directors are committed to a progressive dividend policy that takes into account both earnings growth and the need for continuing investment in the business. Construction The construction division achieved an operating profit of Â£5.6 million on revenue of Â£273 million, representing a profit margin of 2%. With our construction business well established in its selected markets, our objective is now to deliver higher profits by controlled growth in revenue. In December we announced that we had reached financial close on the UK's largest education PFI scheme for Northamptonshire County Council. Over the next three years, we will carry out Â£192 million of construction work at 41 schools as an integral part of Northamptonshire County Council's transition to a new two tier educational system. The project adds to the significant experience Galliford Try has in education, a sector with good prospects as Government investment continues. We maintain a high quality workload in our selected markets. We have secured our first framework agreement for Anglian Water as one of two contractor partnerships appointed to carry out a total of Â£70 million of water infrastructure works in the east of England over the next five years. With much of our existing water operations based in the North West and Scotland, this award extends both our client base and geographic presence. The commercial market is also providing a number of good opportunities, particularly in the West End of London. In communications infrastructure we have secured our first fully integrated contract since the acquisition of Pentland Limited. The skills of our business are in demand across the global mobile communications market, and we have recently formed a joint venture with a well established local business in Ukraine to provide infrastructure services into a market that has good growth opportunities. Following the award of the Northamptonshire Schools PFI, the construction order book exceeded Â£1 billion for the first time, and currently stands at Â£1.1 billion. 88% is in the public and regulated sectors and 90% has been secured on a non price competitive basis. PPP Investments Our objective with PPP investments is to take an active equity participation in public / private partnership arrangements for public sector work, with the objective of providing negotiated contracts for the construction division. As well as the closure of the Northamptonshire Schools PFI, we achieved financial close on a second phase project in the Barnet, Enfield and Haringey LIFT, a Â£5 million health centre, and are currently working on further opportunities within our other existing LIFT frameworks. There are also good opportunities under the Building Schools for the Future programme in the pipeline. Housebuilding The housebuilding division achieved profit of Â£13.9 million on revenue of Â£98 million. The market remains tough but showed a marked improvement compared to the same period last year. Completions for the half year were up 25% at 484 units on an average selling price of Â£203,000, reduced from Â£228,000 a year ago in line with our strategy of concentrating on the mainstream market. The start of 2006 has seen further buyer confidence returning to the market with sales rates, based on limited incentives and marketing support, significantly better than the latter part of 2005. The division has currently reserved, contracted or completed a record level of sales with a value of Â£191 million, a 15% increase on last year. This represents approximately 75% of planned sales for the year to 30 June 2006. Visitor levels are also encouraging, up 29% compared to last year. On 15 February we completed the Â£67 million acquisition of Chartdale Homes. Based in Lincolnshire and covering an area to the north of, and adjacent to, Stamford Homes, the acquisition represents a significant contribution towards the Group's expansion plan to increase the number of units sold by its housebuilding division to 1,500 per annum. Approximately 95% of Chartdale's landbank of 1,350 plots are expected to be developed as houses, with the balance to be developed as apartments. This reduces our overall exposure to the market for apartments which represents less than 25% of units within the enlarged landbank, currently standing at 3,800 units, compared to 2,464 a year ago. The market for land is highly competitive and obtaining planning consents, particularly in the south east, remains a lengthy and difficult process. The addition of the Chartdale landbank, substantially all of which has planning permission, will therefore contribute considerably to the growth of the business. Affordable Housing Our framework agreements with our key affordable housing clients continue to generate increasing levels of work. As announced in January, Stephen Teagle, formally Development Director of the Devon and Cornwall Housing Association and Managing Director of Westco, the association's commercial development arm, has joined the Group as Affordable Housing Director to ensure we maximise our potential for growth in this sector. Prospects With our strong position in selected construction markets and a workload well spread across the public and regulated sectors, we are looking to grow profits through a controlled increase in revenue. In housebuilding we are encouraged by the level of sales since the New Year and by the increasing confidence returning to the market. Boosted by the acquisition of Chartdale, we are confident that we are on track to deliver our expansion plan. The board is very confident of reporting further progress at the full year. David Calverley Chairman 23 February 2006 Consolidated Income Statement for the Half Year Ended 31 December 2005 (unaudited) Notes Half Year Half Year Year to to to 31 Dec 31 Dec 30 June 2005 2004 2005 Â£'000 Â£'000 Â£'000 Continuing operations Revenue 372,194 347,166 718,494 Cost of sales (336,199) (312,647) (651,675) --------- --------- --------- Gross profit 35,995 34,519 66,819 Administrative expenses (19,485) (19,567) (35,596) Share of post tax losses from joint ventures (212) (201) (219) --------- --------- --------- Profit before finance costs 16,298 14,751 31,004 --------- --------- --------- Profit before finance costs includes: Profit on sale of fixed asset investments - - 1,562 --------- --------- --------- Interest receivable 316 294 664 Interest payable 2 (2,649) (2,299) (4,411) Income from other participating interest - - 100 --------- --------- --------- Profit on ordinary activities before tax 13,965 12,746 27,357 Taxation 3 (4,117) (3,860) (8,312) --------- --------- --------- Profit for the financial period 9,848 8,886 19,045 ========= ======== ========= Dividend per ordinary share - paid per share 1.6p 1.15p 1.75p - total value 3,342 2,545 3,875 - proposed per share 0.7p 0.6p 1.6p - total value 1,560 1,330 3,342 Earnings per ordinary share 4 - basic 4.4p 4.0p 8.6p - diluted 4.3p 3.9p 8.3p Consolidated Statement of Recognised Income and Expense for the Half Year Ended 31 December 2005 (unaudited) Half Year to Half Year to Year to 31 Dec 2005 31 Dec 2004 30 June 2005 Â£'000 Â£'000 Â£'000 Profit for the financial period 9,848 8,886 19,045 Actuarial losses in pension scheme (3,120) (10,667) (15,175) Deferred tax on actuarial losses taken directly to equity 936 3,200 4,552 ---------- ---------- ---------- Net losses not recognised in the income statement (2,184) (7,467) (10,623) ---------- ---------- ---------- Total recognised income for the period 7,664 1,419 8,422 ========== ========== ========== Consolidated Balance Sheet at 31 December 2005 (unaudited) 31 Dec 2005 31 Dec 2004 30 June 2005 Â£'000 Â£'000 Â£'000 Non-current assets Intangible assets Goodwill 643 - - Property, plant and equipment 11,580 12,011 11,630 Financial assets - Available for sale investments 468 608 468 Investments accounted for using equity method 1,864 2,054 2,111 Trade and other receivables 253 225 245 Deferred tax assets 16,358 13,625 15,187 ----------- ----------- --------- Total non-current assets 31,166 28,523 29,641 Current assets Inventories 2,074 1,642 613 Developments 202,473 183,436 206,171 Trade and other receivables 93,162 82,607 100,204 Available for sale financial assets 4,829 1,676 3,412 Derivative financial assets 53 145 139 Cash and cash equivalents 3,747 8,444 2,007 ----------- ----------- --------- Total current assets 306,338 277,950 312,546 ----------- ----------- --------- Total assets 337,504 306,473 342,187 ----------- ----------- --------- Current liabilities Financial liabilities - Borrowings (16,424) (19,240) (16,769) Trade and other payables (195,240) (190,328) (215,465) Current tax liabilities (4,566) (3,125) (3,549) ----------- ----------- --------- Total current liabilities (216,230) (212,693) (235,783) Non- current liabilities Financial liabilities - Borrowings (1,035) (1,023) (1,013) Retirement benefit obligations (48,137) (40,615) (46,168) Deferred tax liabilities (3,207) (2,528) (2,837) Other liabilities (10,658) (1,286) (2,682) ----------- ----------- --------- Total non-current liabilities (63,037) (45,452) (52,700) ----------- ----------- --------- Total liabilities (279,267) (258,145) (288,483) ----------- ----------- --------- Net assets 58,237 48,328 53,704 ----------- ----------- --------- Shareholders' equity Share capital 11,341 11,259 11,340 Share premium 2,300 2,246 2,295 Merger reserves 4,687 4,687 4,687 Retained earnings 39,909 30,136 35,382 ----------- ----------- --------- Total shareholders' equity 58,237 48,328 53,704 =========== =========== ========= Consolidated Cash Flow Statement for the half year ended 31 December 2005 (unaudited) Notes Half Year Half Year Year to to to 31 Dec 31 Dec 30 June 2005 2004 2005 Â£'000 Â£'000 Â£'000 Cashflows from operating activities: Net cash from operations 9 14,134 11,386 15,608 Net interest paid (2,568) (1,538) (3,299) Tax paid (2,975) (4,546) (8,472) --------- --------- --------- Net cash from operating activities 8,591 5,302 3,837 Cash flows from investing activities: Acquisition of investments accounted for using equity method - - (75) Proceeds from investments accounted for using equity method 35 35 35 Available for sale investments - - (69) Proceeds from sale of available for sale investment - - 1,771 Acquisition of subsidiary (net of cash acquired) (1,097) - - Purchases of property, plant and equipment (648) (910) (1,598) Proceeds from sale of property, plant and equipment 5 22 29 --------- --------- --------- Net cash (used in)/from investing activities (1,705) (853) 93 Cash flows from financing activities: Purchase of treasury shares - - (450) Repayment of borrowings (66) (83) (144) Borrowing acquired with subsidiary (48) - - Exercise of share options 6 70 200 Dividends paid to group shareholders (3,342) (2,545) (3,875) Available for sale financial asset (1,417) (1,676) (3,412) --------- --------- --------- Net cash used in financing activities (4,867) (4,234) (7,681) --------- --------- --------- Increase/(decrease) in net cash and cash equivalents 2,019 215 (3,751) --------- --------- --------- Net cash and cash equivalents at beginning of period (13,733) (9,982) (9,982) --------- --------- --------- Net cash and cash equivalents at end of period 9 (11,714) (9,767) (13,733) ========= ======== ========= Notes to the Interim Report 1 Basis of Preparation The results for the half year ended 31 December 2005 and the half year ended 31 December 2004 are unaudited. The financial information set out above, including the restated comparative figures for the year ended 30 June 2005 which are also unaudited, does not constitute statutory accounts within the meaning of Section 240 of the Companies Act 1985. The Group's published accounts, prepared under UK Generally Accepted Accounting Principles ('UK GAAP') for the year ended 30 June 2005 have been reported on by the Company's auditors and filed with the Registrar of Companies. The report of the auditors' was unqualified and did not contain a statement under section 237 (2) or (3) of the Companies Act 1985. The interim financial information is prepared on a historical cost basis except that as required by International Financial Reporting Standards certain assets are included at fair value. The preparation of financial statements in conformity with generally accepted accounting principles requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Although these estimates are based on management's best knowledge of the amount, event or actions, actual results ultimately may differ from those estimates. Galliford Try plc ('the Group') has adopted International Financial Reporting Standards ('IFRS') with effect from 1 July 2005, in accordance with the European Union Regulations. The first Annual Report prepared under IFRS will be for the year ended 30 June 2006. The interim financial information has been prepared on the basis of the recognition and measurement requirements of IFRS in issue that, either are endorsed by the EU and effective (or available for early adoption) as at 31 December 2005 or are expected to be endorsed and effective (or available for early adoption) at 30 June 2006, the Group's first full annual reporting date at which it is required to adopt IFRS. Based on this information, the directors have made assumptions about the accounting policies that are expected to be applied. Details of significant changes to the Group's accounting policies (as set out in the 2005 Annual Report) resulting from the adoption of IFRS are set out in note 10. In addition, the adopted IFRS that will be effective (or available for early adoption) in the Annual Report for the year ending 30 June 2006 are still subject to change and to additional interpretations and therefore cannot be determined with certainty. Accordingly the accounting policies for that annual period will be determined finally only when the Annual Report is prepared for the year ending 30 June 2006. An explanation of how the transition to IFRS has affected the reported financial position and financial performance of the Group is provided in note 10. The note includes reconciliations of equity and profit for comparative periods reported under UK GAAP to these reported for those periods under IFRS. IFRS 1 'First time adoption of IFRS' sets out the procedures that companies should follow on adopting IFRS for the first time. There are a number of optional exemptions to the retrospective application of these accounting policies offered by IFRS 1. The Group has taken advantage of the following key exemptions: â€¢IFRS 3 'Business Combinations'. The Group has elected not to apply IFRS 3 retrospectively to business combinations that took place before 1 July 2004. â€¢IAS 16 'Property, plant and equipment'. The Group has elected not to revalue property, plant and equipment to fair value on transition and therefore adopted the exemption to use a value that is not depreciated cost as deemed cost on transition to IFRS. â€¢IFRS 2 'Share Based Payments' IFRS 2 has been adopted from the transition date and is only being applied to equity instruments granted on or after 7 November 2002 which had not been vested on the effective date of the standard. The Group has elected not to take up the option of full retrospective application of the standard. 2 Interest Payable Half Year to Half Year to Year to 31 Dec 2005 31 Dec 2004 30 June 2005 Â£'000 Â£'000 Â£'000 Bank interest 937 781 1,603 Interest on unwinding of discounted creditors 1,351 1,106 1,985 Net return on assets of pension fund 361 412 823 ----------- ----------- --------- Total interest payable 2,649 2,299 4,411 ----------- ----------- --------- 3 Taxation The tax charge for the period reflects the estimated effective rate for the full year to 30 June 2006 of 29% (30 June 2005: 30%). 4 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 amounting to 222,802,899 shares (31 December 2004: 221,356,179). For diluted earnings per share, the weighted average number of ordinary shares is adjusted to assume conversion of all dilutive potential ordinary shares giving a total of 231,391,326 (31 December 2004: 228,521,010). 5 Dividends The final dividend for 2005 of 1.6p was approved by shareholders during the period and Â£3,342,000 (2004: Â£2,545,000) was deducted from reserves. The directors propose an interim dividend of 0.7p per share (2005: 0.6p). No deduction has yet been made for this dividend in accordance with IAS 10 as this amount is not yet committed. 6 Consolidated Statement of Changes in Shareholders' Equity Half Year to Half Year to Year to 31 Dec 2005 31 Dec 2004 30 June 2005 Â£'000 Â£'000 Â£'000 Balance at start of period 53,704 49,133 49,133 Actuarial losses in pension scheme (3,120) (10,667) (15,175) Deferred tax on actuarial losses in pension scheme 936 3,200 4,552 ----------- ----------- --------- Net expense recognised directly in equity (2,184) (7,467) (10,623) Profit for the year 9,848 8,886 19,045 Dividends (3,342) (2,545) (3,875) Issue of shares 6 70 200 Purchase of own shares - - (450) Share based payments 205 251 274 ----------- ----------- --------- Balance at end of period 58,237 48,328 53,704 ----------- ----------- --------- 7 Business Segment Reporting Segment information is presented in the consolidated interim accounts in respect of the Group's business segments which are the primary basis of segment reporting. The business segment reporting reflects the Group's management and internal reporting structure. Segment results include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Half Year 31 December 2005 PPP Â£'000 Construction investments Housebuilding Group Total Revenue 272,803 750 98,366 275 372,194 --------- --------- ---------- ------ ------ Segment result 5,497 (473) 14,156 (2,670) 16,510 Share of post tax results of joint ventures 88 - (300) - (212) --------- --------- ---------- ------ ------ Profit before finance costs 5,585 (473) 13,856 (2,670) 16,298 Net finance costs (2,333) --------- --------- ---------- ------ ------ Profit before tax 13,965 Taxation (4,117) --------- --------- ---------- ------ ------ Profit for the half year from continuing operations 9,848 --------- --------- ---------- ------ ------ Half Year 31 December 2004 PPP Â£'000 Construction investments Housebuilding Group Total Revenue 255,757 - 91,147 262 347,166 --------- --------- ---------- ------ ------ Segment result 5,237 (1,254) 13,025 (2,056) 14,952 Share of post tax results of joint ventures 111 (312) (201) --------- --------- ---------- ------ ------ Profit before finance costs 5,348 (1,254) 12,713 (2,056) 14,751 Net finance costs (2,005) --------- --------- ---------- ------ ------ Profit before tax 12,746 Taxation (3,860) --------- --------- ---------- ------ ------ Profit for the half year from continuing operations 8,886 --------- --------- ---------- ------ ------ 8 Net Debt Net debt is made up as follows: 31 Dec 2005 31 Dec 2004 30 June 2005 Â£'000 Â£'000 Â£'000 Available for sale financial assets 4,829 1,676 3,412 Cash and cash equivalents 3,747 8,444 2,007 Financial liabilities: Bank overdrafts (15,461) (18,211) (15,740) Other current (963) (1,029) (1,029) Non current (1,035) (1,023) (1,013) ----------- ----------- ---------- Net debt (8,883) (10,143) (12,363) ----------- ----------- ---------- 9 Notes to the Cash Flow Statement Half Year to Half Year to Year to 31 Dec 2005 31 Dec 2004 30 June 2005 Â£'000 Â£'000 Â£'000 Cash flows from operating activities: Net profit after income taxes 9,848 8,886 19,045 Adjustments for: Tax 4,117 3,860 8,312 Depreciation 806 833 1,821 (Profit) / loss on disposal of property, plant and equipment (2) (20) 54 Profit on disposal of available for sale investment - - (1,562) Net finance costs 2,333 2,005 3,747 Share based payment charge 205 251 274 Share of post tax profits from joint venture 212 201 219 ----------- ----------- ---------- 17,519 16,016 31,910 Changes in working capital: (Increase)/decrease in inventories (678) (847) 182 Decrease/(increase) in developments 3,698 (9,367) (32,102) Decrease in trade and other receivables 7,429 23,620 6,083 (Decrease)/increase in trade and other payables (12,683) (14,620) 11,906 Decrease in retirement benefit obligation (1,151) (3,416) (2,371) ----------- ----------- ---------- Net cash from operations 14,134 11,386 15,608 ----------- ----------- ---------- Half Year to Half Year to Year to 31 Dec 2005 31 Dec 2004 30 June 2005 Â£'000 Â£'000 Â£'000 Cash and cash equivalents 3,747 8,444 2,007 Bank overdrafts (15,461) (18,211) (15,740) ----------- ----------- ---------- Net cash and cash equivalents (11,714) (9,767) (13,733) ----------- ----------- ---------- 10 Explanation of Transition to IFRS As previously stated these are the Group's first consolidated interim accounts for part of the period to be covered by the first IFRS Annual Report prepared on the recognition and measurement requirements of IFRS. The Group has applied consistent accounting policies in preparing the consolidated interim accounts for the half year ended 31 December 2005, the comparative information for the half year ended 31 December 2004, the accounts for the year ended 30 June 2005 and the preparation of the opening IFRS balance sheet at 1 July 2004, the date of transition for the Group. In preparing the opening IFRS balance sheet, comparative information for the half year to 31 December 2004 and the accounts for the year ended 30 June 2005, the Group has adjusted the amounts reported previously in accounts prepared in accordance with UK GAAP. The following tables show the adjustments made. Full details of the impact of first time adoption of IFRS and the accounting policies adopted for Galliford Try plc were issued on 5th January 2006 and can be found on the Company's website at www.gallifordtry.co.uk Reconciliation of Profit for the Half Year Ended 31 December 2004 Effect of transition to Â£'000 UK GAAP IFRS IFRS Continuing operations Revenue 347,166 - 347,166 Cost of sales (314,876) 2,229 (312,647) --------- ---------- ---------- Gross profit 32,290 2,229 34,519 Administrative expenses (19,567) - (19,567) Share of post tax profit/(losses) from joint ventures 104 (305) (201) --------- ---------- ---------- Profit before finance costs 12,827 1,924 14,751 Interest receivable 294 - 294 Interest payable (1,075) (1,224) (2,299) Joint ventures (310) 310 - Income from other participating interest - - - --------- ---------- ---------- Profit on ordinary activities before tax 11,736 1,010 12,746 Taxation (3,629) (231) (3,860) --------- ---------- ---------- Profit for the financial period 8,107 779 8,886 ========= ========== ========== Reconciliation of Profit for the Year Ended 30 June 2005 Effect of transition to Â£'000 UK GAAP IFRS IFRS Continuing operations Revenue 718,494 - 718,494 Cost of sales (654,464) 2,789 (651,675) --------- ---------- ---------- Gross profit 64,030 2,789 66,819 Administrative expenses (35,601) 5 (35,596) Share of post tax profit/(losses) from joint ventures 26 (245) (219) --------- ---------- ---------- Profit before finance costs 28,455 (2,549) 31,004 --------- ---------- ---------- Profit before finance costs includes: Profit on sale of fixed asset investments 1,562 - 1,562 --------- ---------- ---------- Interest receivable 664 - 664 Interest payable (2,267) (2,144) (4,411) Joint ventures (622) 622 - Income from other participating interest 100 - 100 --------- ---------- ---------- Profit on ordinary activities before tax 26,330 1,027 27,357 Taxation (7,738) (574) (8,312) --------- ---------- ---------- Profit for the financial year 18,592 453 19,045 ========= ========== ========== Reconciliation of Shareholders' Equity at 1 July 2004 Effect of transition to Â£'000 UK GAAP IFRS IFRS Non-current assets Property, plant and equipment 11,936 - 11,936 Financial assets - Available for sale investments 608 - 608 Investments accounted for using equity method 2,290 - 2,290 Trade and other receivables 369 (152) 217 Deferred tax assets - 11,311 11,311 --------- ---------- ---------- Total non-current assets 15,203 11,159 26,362 Current assets Inventories 795 - 795 Developments 177,392 (3,323) 174,069 Trade and other receivables 107,563 (1,161) 106,402 Derivative financial assets - 151 151 Cash and cash equivalents 2,570 - 2,570 --------- ---------- ---------- Total current assets 288,320 (4,333) 283,987 --------- ---------- ---------- Total assets 303,523 6,826 310,349 Current liabilities Financial liabilities - Borrowings (13,648) - (13,648) Trade and other payables (207,616) 3,316 (204,300) Current tax liabilities (4,037) - (4,037) --------- ---------- ---------- Total current liabilities (225,301) 3,316 (221,985) Non- current liabilities Financial liabilities - Borrowings (1,231) 184 (1,047) Retirement benefit obligations - (33,364) (33,364) Deferred tax liabilities (2,928) (258) (3,186) Other liabilities (1,776) 142 (1,634) --------- ---------- ---------- Total non-current liabilities (5,935) (33,296) (39,231) --------- ---------- ---------- Total liabilities (231,236) (29,980) (261,216) --------- ---------- ---------- Net assets 72,287 (23,154) 49,133 ========= ========== ========== Shareholders' equity Share capital 11,239 - 11,239 Share premium 2,196 - 2,196 Merger reserves 4,687 - 4,687 Retained earnings 54,165 (23,154) 31,011 --------- ---------- ---------- Total shareholders' equity 72,287 (23,154) 49,133 ========= ========== ========== Reconciliation of Shareholders' Equity at 31 December 2004 Effect of transition to Â£'000 UK GAAP IFRS IFRS Non-current assets Property, plant and equipment 12,011 - 12,011 Financial assets - Available for sale investments 608 - 608 Investments accounted for using equity method 2,054 - 2,054 Trade and other receivables 369 (144) 225 Deferred tax assets - 13,625 13,625 --------- ---------- ---------- Total non-current assets 15,042 13,481 28,523 Current assets Inventories 1,642 - 1,642 Developments 186,597 (3,161) 183,436 Trade and other receivables 86,430 (3,823) 82,607 Available for sale financial assets 1,676 - 1,676 Derivative financial assets - 145 145 Cash and cash equivalents 8,444 - 8,444 --------- ---------- ---------- Total current assets 284,789 (6,839) 277,950 --------- ---------- ---------- Total assets 299,831 6,642 306,473 Current liabilities Financial liabilities - Borrowings (19,240) - (19,240) Trade and other payables (192,632) 2,304 (190,328) Current tax liabilities (3,125) - (3,125) --------- ---------- ---------- Total current liabilities (214,997) 2,304 (212,693) Non- current liabilities Financial liabilities - Borrowings (1,215) 192 (1,023) Retirement benefit obligations - (40,615) (40,615) Deferred tax liabilities (2,928) 400 (2,528) Other liabilities (1,305) 19 (1,286) --------- ---------- ---------- Total non-current liabilities (5,448) (40,004) (45,452) --------- ---------- ---------- Total liabilities (220,445) (37,700) (258,145) --------- ---------- ---------- Net assets 79,386 (31,058) 48,328 ========= ========== ========== Shareholders' equity Share capital 11,259 - 11,259 Share premium 2,246 - 2,246 Merger reserves 4,687 - 4,687 Retained earnings 61,194 (31,058) 30,136 --------- ---------- ---------- Total shareholders' equity 79,386 (31,058) 48,328 ========= ========== ========== Reconciliation of Shareholders' Equity at 30 June 2005 Effect of transition to Â£'000 UK GAAP IFRS IFRS Non-current assets Property, plant and equipment 11,630 - 11,630 Financial assets - Available for sale investments 468 - 468 Investments accounted for using equity method 2,111 - 2,111 Trade and other receivables 369 (124) 245 Deferred tax assets - 15,187 15,187 --------- ---------- ---------- Total non-current assets 14,578 15,063 29,641 Current assets Inventories 613 - 613 Developments 209,247 (3,076) 206,171 Trade and other receivables 102,859 (2,655) 100,204 Available for sale financial assets 3,412 - 3,412 Derivative financial assets - 139 139 Cash and cash equivalents 2,007 - 2,007 --------- ---------- ---------- Total current assets 318,138 (5,592) 312,546 --------- ---------- ---------- Total assets 332,716 9,471 342,187 Current liabilities Financial liabilities - Borrowings (16,769) - (16,769) Trade and other payables (219,134) 3,669 (215,465) Current tax liabilities (3,549) - (3,549) --------- ---------- ---------- Total current liabilities (239,452) 3,669 (235,783) Non- current liabilities Financial liabilities - Borrowings (1,154) 141 (1,013) Retirement benefit obligations - (46,168) (46,168) Deferred tax liabilities (3,059) 222 (2,837) Other liabilities (2,815) 133 (2,682) --------- ---------- ---------- Total non-current liabilities (7,028) (45,672) (52,700) --------- ---------- ---------- Total liabilities (246,480) (42,003) (288,483) --------- ---------- ---------- Net assets 86,236 (32,532) 53,704 ========= ========== ========== Shareholders' equity Share capital 11,340 - 11,340 Share premium 2,295 - 2,295 Merger reserves 4,687 - 4,687 Retained earnings 67,914 (32,532) 35,382 --------- ---------- ---------- Total shareholders' equity 86,236 (32,532) 53,704 ========= ========== ========== Principal Differences Between UK GAAP and IFRS The principal differences which give rise to changes in the Group's reported profit for the year ended 30 June 2005 and half year ended 31 December 2004 and net assets at 30 June 2005 and 31 December 2004 are as follows: â€¢ Employee Benefits â€¢ Share based payments â€¢ Deferred tax â€¢ Dividend Recognition â€¢ Inventories - deferred land payments â€¢ Financial instrument - interest rate swap â€¢ Discounting In addition the disclosure of interests in the results of joint venture is different under IFRS but this has no impact on net assets or net profit. Employee Benefits Under UK GAAP the Group's defined benefit schemes were accounted for in accordance with SSAP 24 'Accounting for pension costs' and additional information was provided under the FRS 17 transitional disclosures. The cost of providing defined benefit pensions was charged in arriving at operating profit with surpluses and deficits arising in the funds, as calculated by qualified independent actuaries, being amortised over the remaining service lives of participating employees. The Group has adopted IAS 19 'Employee benefits' in preparing the opening balance sheet, including the amendment to IAS 19 issued by the IASB on 16 December 2004 which allows all actuarial gains and losses to be charged or credited to equity through the statement of recognised income and expense. Since the Group has adopted this approach, all cumulative actuarial gains and losses in relation to employee benefit schemes have been recognised as at 30 June 2004. Under IAS 19 the cost of providing pension benefits (current service cost) for defined benefit pension schemes is recognised in the income statement, together with the interest cost arising on the projected obligations and the returns on scheme assets. The impact on the opening balance sheet is to recognise a net deficit of Â£23.4 million, being a gross deficit of Â£33.4 million offset by a deferred tax asset of Â£10.0 million. In addition the prepayment of Â£1.1 million recognised under UK GAAP has been reversed. At 30 June 2005 a net deficit of Â£32.3 million (31 December 2004: Â£28.4 million) is recognised comprising a gross deficit of Â£46.2 million (31 December 2004:Â£40.6 million) and a deferred tax asset of Â£13.9 million (31 December 2004: Â£12.2 million). An actuarial loss of Â£10.6 million (net of the deferred tax asset) has been taken to reserves in the year ended 30 June 2005 (31 December 2004: Â£7.5 million). Additionally under IAS 19 holiday pay is specifically stated as being an employee benefit, for which a fair value liability is required to be recognised. The impact of recognising a liability for holiday pay is Â£0.6 million as at 30 June 2004 and Â£0.7 million as at 30 June 2005 (31 December 2004: Â£0.3 million). Share Based Payments In accordance with IFRS 2 'Share based payments', the Group has elected to follow the transitional arrangements and hence it has not been applied to share options granted on or prior to 7 November 2002 that had not vested by 1 January 2005. IFRS 2 requires that share based payments should be valued at the fair value of the shares at the date of grant. The fair value is expensed on a straight line basis over the vesting period, based on the Group's estimate of shares that will eventually vest. This affects the Group's save as you earn schemes and the long term incentive plans. The impact of the application of IFRS 2 has been to reduce operating profit by Â£0.1 million for the year ended 30 June 2005 (31 December 2004: Â£nil). Deferred Tax IAS 12 'Accounting for income taxes' requires that full provision be made for all timing differences between the carrying value of assets and the tax bases of assets and liabilities. In addition deferred tax assets and liabilities must be disclosed separately on the balance sheet. The opening balance sheet includes additional deferred tax assets of Â£10.0 million in relation to the pension fund deficit, Â£0.6 million relating to deferred land payments, Â£0.7m relating to share based payments, a Â£0.3 million reduction in deferred tax liability in relation to the reversal of the pension prepayment and an increase in deferred tax liabilities of Â£0.6 million relating to the revaluation of land and buildings. Dividend Recognition IAS 10 'Events after the balance sheet date' requires that dividends approved after the balance sheet date should not be recognised as a liability at that balance sheet date since the liability did not represent a present obligation at that date. The final dividend of Â£2.5 million in respect of the year ended 30 June 2004 has been reversed in the opening balance sheet at 30 June 2004 and the final dividend of Â£3.3 million in respect of the year ended 30 June 2005 have been reversed from the 30 June 2005 balance sheet. Inventories - Deferred Land Payments Under UK GAAP deferred land payments (land creditors) are included in creditors at their gross value. Under IAS 2 'Inventories', deferred payments are held at discounted present value, thereby recognising notional imputed interest on such payments. As a result the land creditors are carried in the balance sheet at net present value and the value of land held on the balance sheet in inventories is reduced accordingly. The unwinding of the imputed interest on the land creditors is charged to finance costs and the reduction in land values in inventories results in a reduction in the cost of sales as the land is traded out. Over time this does not affect net profit or net assets but gives rise to a timing difference in the profit recognition and is likely to increase operating profit. The effect on the opening balance sheet is to reduce the long term and current land creditor by Â£1.4 million, reduce the inventories balance by Â£3.3 million, recognise a deferred tax asset of Â£0.6 million and reduce opening reserves by Â£1.3 million. For the year ended 30 June 2005 the adoption of IAS 2 resulted in an increase in operating profit of Â£1.1 million (31 December 2004: Â£0.6 million) and the inclusion of notional interest of Â£1.2 million (31 December 2004: Â£0.6 million) together with a related tax credit of Â£0.1 million (31 December 2004: Â£nil). As at 30 June 2005 the long term and current land creditor is reduced by Â£1.0 million (31 December 2004: Â£1.2 million), inventories by Â£3.1 million (31 December 2004: Â£3.2 million) and recognise a deferred tax asset of Â£0.6 million (31 December 2004: Â£0.6 million). Financial Instruments - Interest Rate Swap The Group made use of an interest rate swap in order to reduce the risk of exposure to changes in interest rates. This has the effect of fixing interest on Â£20 million of borrowings at 5.2% for a period of 5 years from November 2001. Under IAS 39 'Financial instruments recognition and measurement' this interest rate swap is recognised and measured at fair value. Any change in fair value is accounted for in the income statement. The recognition of the interest rate swap has increased net assets at 30 June 2004, 31 December 2004 and 30 June 2005 by Â£0.2 million, Â£0.1 million and Â£0.1 million respectively and marginally reduced profit for the year ended 30 June 2005 and 31 December 2004. Discounting In accordance with IAS 39 'Financial Instruments: recognition and measurement', the Group has discounted its long term debtors and creditors. This has the effect of reducing net assets at 30 June 2004, 31 December 2004 and 30 June 2005 by Â£nil, Â£0.1million and Â£0.1 million respectively and reducing profit by Â£0.1 million for the year ended 30 June 2005 (31 December 2004: Â£0.1 million). Reclassification of UK GAAP Balances When reclassifying the UK GAAP balance sheet in accordance with IFRS, long term trade debtors and creditors relating to retention balances have been classified as current assets on the basis that they are within the normal operating cycle of the business. Independent Review Report to Galliford Try plc Introduction We have been instructed by the company to review the financial information for the six months ended 31 December 2005 which comprises consolidated interim balance sheet as at 31 December 2005 and the related consolidated interim statements of income, cash flows and changes in shareholders' equity for the six months then ended and related notes. 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. As disclosed in note 1, the next annual financial statements of the group will be prepared in accordance with International Financial Reporting Standards. This interim report has been prepared in accordance with the basis set out in Note 1. The accounting policies are consistent with those that the directors intend to use in the next annual financial statements. As explained in note 1, there is, however, a possibility that the directors may determine that some changes are necessary when preparing the full annual financial statements for the first time in accordance with International Financial Reporting Standards. The IFRS standards and IFRIC interpretations that will be applicable and adopted for use in the European Union at 30 June 2006 are not known with certainty at the time of preparing this interim financial information. 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 disclosed accounting policies have been applied. 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 and therefore provides a lower level of assurance. Accordingly we do not express an audit opinion on the financial information. This report, including the conclusion, has been prepared for and only for the company for the purpose of the Listing Rules of the Financial Services Authority and for no other purpose. We do not, in producing this report, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing. 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 2005. PricewaterhouseCoopers LLP Chartered Accountants West London 23rd February 2006 Notes: (a) The maintenance and integrity of the Galliford Try plc web site is the responsibility of the directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the interim report since it was initially presented on the web site. (b) Legislation in the United Kingdom governing the preparation and dissemination of financial information may differ from legislation in other jurisdictions. This information is provided by RNS The company news service from the London Stock Exchange

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