Final Results
Keller Group PLC
07 March 2005
For immediate release Monday, 7 March 2005
Keller Group plc
Preliminary results for the year ended 31 December 2004
Keller Group plc ('Keller' or 'the Group'), the international ground engineering
specialist, is pleased to announce its preliminary results for the year ended 31
December 2004.
Highlights include:
• Turnover of £595.9m (2003: £567.5m) up 11% on a constant currency basis,
representing strong organic growth across our international markets
• Profit before tax* up 3% to £29.6m (2003: £28.7m), despite adverse
currency fluctuations of £2.3m
• Strong US performance on the back of restored Suncoast margins
• Improved UK performance following Makers recovery
• Earnings per share* increased to 25.1p (2003: 24.1p)
• Total dividend per share increased by 5% to 10.9p (2003: 10.4p)
• Record order book, boosted by recent large US contract wins
* before amortisation of intangibles and 2003 exceptional items, together
totalling £3.0m (2003: £13.9m)
Justin Atkinson, Keller Chief Executive said:
'I am pleased to report that in 2004 we met our immediate objectives of
consolidating and strengthening our existing businesses, returning Makers to
profitability and improving Suncoast's margins. Now our focus is on continuing
the Group's long-term track record of growth through a combination of organic
growth and targeted acquisitions.'
'Looking ahead, the good order intake in the final quarter of 2004 has continued
into 2005. Our current order book represents over four months' sales, giving us
a sound base from which to progress.'
For further information, please contact:
Keller Group plc www.keller.co.uk
Justin Atkinson, Chief Executive
James Hind, Finance Director
Smithfield 020 7360 4900
Reg Hoare/Rupert Trefgarne
A presentation for analysts will be held at 9.15 for 9.30am at The Theatre &
Gallery, London Stock Exchange, 10 Paternoster Square, London, EC4M 7LS
Print resolution images are available for the media to download from
www.vismedia.co.uk
Preliminary Announcement
Chairman's Statement
Results
The results for the 2004 financial year show a strong recovery, reflecting our
success in implementing the strategy which I set out in my Chairman's Statement
a year ago. I am pleased to report that Makers has put behind it the issues
which held back performance in 2003, to report a small profit in 2004. Suncoast
has seen a significant increase in volumes which, together with selling price
increases and operating cost efficiencies, have combined to restore margins.
Elsewhere, our specialist ground engineering businesses have given another
robust performance overall.
Group sales rose to £595.9m (2003: £567.5m). On a constant currency basis, sales
increased by 11%, representing strong organic growth across our international
markets. Profit before tax, exceptional items and amortisation of intangibles
was up 3% to £29.6m (2003: £28.7m). This result includes a net adverse impact
from exchange rate fluctuations of £2.3m, mainly reflecting the weaker dollar.
Earnings per share before exceptional items and the amortisation of intangibles
increased by 4% to 25.1p (2003: 24.1p).
Cash flow and net debt
Net cash inflow from operating activities was £33.6m (2003: £40.0m) and net debt
at the end of the year was £60.0m (2003: £60.7m). Both reflect the higher
working capital needed to service increased turnover, particularly in our
Suncoast business. EBITDA interest cover remains strong at over 10 times.
Financing
During the year the Group's debt was refinanced to reduce the cost of borrowing
and diversify our sources of funding, as well as to increase our committed
facilities to support the Group's continued growth plans. In October, $100m of
long-term debt was raised through a private placement with US institutions. In
addition, in December, the Group negotiated a new £80m, five-year syndicated
revolving credit facility.
Dividends
The Board is recommending an increased final dividend of 7.3p per share (2003:
6.95p). This brings the total dividend for the year to 10.9p (2003: 10.4p), an
increase of 5%, which is covered 2.3 times by earnings per share before
amortisation of intangibles. The final dividend will be paid on 28 June 2005 to
shareholders on the register at 27 May 2005. This increase reflects our
continuing policy of reinvesting our cash flow in the growth of the Group,
whilst maintaining a healthy dividend cover and seeking to reward shareholders
with above inflation increases.
Board
As previously announced, Tom Dobson retired as chief executive and as a director
at the end of March 2004. As planned, he was replaced by Justin Atkinson, who
was previously chief operating officer, and before that finance director.
People
The success of our business depends on the delivery of quality solutions for our
customers around the world. On behalf of the board, I would like to thank all of
our employees for the quality of work and high standards they have delivered day
in, day out in order that such success can be maintained. Their commitment to
the further achievements of Keller will continue to be matched by the board's
commitment to providing excellent job support, good reward and recognition and
opportunities for career growth.
Strategy
In 2004 we met our immediate objectives of consolidating and strengthening our
existing businesses, returning Makers to profitability and improving Suncoast's
margins. Now our focus is on continuing the Group's long-term track record of
growth within our core competence of specialist ground engineering. This will be
achieved, as it has been successfully in the past, through a combination of
organic growth, both in existing and new markets, and targeted acquisitions.
Outlook
The good order intake in the final quarter of 2004, which was boosted by several
large US contract wins, has continued into 2005. Our current order book
represents over four months' sales, giving us a sound base from which to
progress.
With our businesses well positioned to take advantage of new opportunities as
they emerge, and no major changes anticipated in our markets, the Board is
confident that the Group will deliver further performance improvement and growth
in 2005.
Operating Review
2004 saw a return to good organic sales growth across the Group, demonstrating
once again the strong underlying fundamentals of our international businesses.
Conditions in our major markets
In North America, the very buoyant housing market held up well, whilst public
infrastructure remained robust and commercial construction showed signs of
improvement. In Europe, German construction output continued to fall,
contrasting with our other principal markets, such as Spain, UK, and Poland,
which remained strong and France, where market conditions firmed up. The Middle
East saw increased levels of investment, but in the Far East there were fewer
major projects in our markets.
Operations
North America
The North American operations overall had a record year, with particularly
strong performances from Suncoast and McKinney. Sales of £280.2m (2003: £270.4m)
were 16% ahead on a constant currency basis. Operating profit before
amortisation of intangibles of £21.0m (2003: £19.3m) was 22% ahead on a constant
currency basis.
Suncoast
Suncoast increased its sales in the year by more than 30%, reflecting both
higher volumes and increased selling prices. This, together with operating cost
efficiencies, resulted in restored margins.
Combined sales from California and Arizona increased by more than 60%, marking
further progress in the strategy of increasing the proportion of sales outside
Suncoast's original, core Texan market through targeted growth in Western
States. Revenues from outside Texas now represent nearly 40% of total sales,
compared to less than 30% in 2002, the first full year following Suncoast's
acquisition.
The recent expansion of Suncoast's operations on the West Coast is expected to
continue, assisted by the issue of new code standards by the Post-Tensioning
Institute. These standards, which will gradually be introduced into building
codes around the country over the coming years, are expected to be an important
development in the advancement of post-tension slab on grade foundations. Over
time they are expected to raise the design standard for all slab-on-grade
foundations, making post-tensioning the preferred choice when compared to
alternatives with which our products currently compete.
Whilst Suncoast may face further volatility in the price of steel strand, the
fundamentals of the business remain strong and good opportunities exist going
forward.
Hayward Baker
After a sluggish start, Hayward Baker recovered as the year progressed and has
entered 2005 with a strong order book. Changes to the operational management and
a reduction in overheads in the western region paid dividends and this region
made a strong contribution to the full-year result. This was helped by the
Marina Del Ray project in Los Angeles, where Hayward Baker performed soil mixing
and vibro-replacement for the construction of a new waterfront condominium
development. Amongst the 1,100 contracts completed during the year, Hayward
Baker was responsible for installing retaining walls to provide excavation
support for the Saluda Dam in South Carolina; the provision of compaction
grouting for a sink-hole remediation project in Mulberry, Florida; and the
installation of rock bolts and soil nails to stabilise rocky ground for the safe
construction of luxury villas on Peter Island in the British Virgin Islands.
In the final quarter of 2004, Hayward Baker won two significant tunnel-related
projects in Los Angeles, where the company has a solid track record of
performance on similar projects. The $10.2m (£5.4m) Lower North Outfall Sewer
Rehabilitation contract is for specialty grouting services to stabilise the soil
above an existing sewer tunnel for the City of Los Angeles. Similar services
will be provided for twin underground tunnels under construction for the Los
Angeles County Metropolitan Transportation Authority. This $9.4m (£5m) contract
commenced at the start of January and should be completed by the end of 2005.
Hayward Baker was also awarded an $11.6m (£6.2m) contract for soil stabilisation
by the Florida Department of Transportation. This project is Keller's first
application in the US of the dry soil mixing technology acquired by the Group
through the acquisition of LCM in Sweden. The technology will be used to
stabilise extremely soft and wet soils next to the existing US Route 1 in South
Florida, so allowing the only road serving the Florida Keys to be widened from
two to four lanes.
Case
Case started the year well but the momentum slowed a little in the second half,
partly due to the four hurricanes that struck Florida, where the majority of
Case Atlantic's work was performed in 2004. The contract for the expansion of
the McCormick Place Convention Center in Chicago, where Case installed just over
1,000 caissons in six months, was a major contributor. Other notable contracts
in the year included the installation of drilled shafts for an office
development at One South Dearborn in Chicago and the TVA Paradise Fossil Plant
in Drakesboro, Kentucky, where caissons were socketed into bedrock for the
foundations of an addition to this coal-fired powerplant.
Towards the end of the year, Case was awarded contracts for two landmark
projects in New York and Chicago. The $12.6m (£6.7m) contract to install caisson
foundations for the new Goldman Sachs headquarters building in Lower Manhattan
will start during March 2005. In Chicago, Case is providing foundations and
excavation support for the new, 92-storey Trump International Hotel and Tower.
This $17.2m (£9.1m) contract is underway and should be completed by autumn 2005.
McKinney
McKinney had a very successful second year under Keller ownership, with both
sales and operating margin up on the previous year. Although the vast majority
of contracts undertaken during the year had a value of less than £250,000,
consistent with McKinney's market niche, its 2004 results were bolstered by
several higher value contracts which all performed well, including work on the
Seneca Niagara Falls Casino, which McKinney undertook in joint venture with
Case.
Continental Europe & Overseas
Our Continental Europe & Overseas business produced a steady performance,
despite challenging conditions in some of its markets. Sales of £175.0m (2003:
£165.2m) were some 8% above the previous year on a constant currency basis.
Operating profit before amortisation of intangibles was £11.9m (2003: £13.8m),
12% below the previous year's strong result on a constant currency basis. This
lower profit principally reflects the continuing difficult market conditions in
Germany.
Keller-Terra had another good year, increasing its sales in all major product
areas, with its ground improvement techniques, in particular, continuing to gain
market share. An increase in production capacity, to keep pace with the growth
in the business, enabled as many as 30 sites across Spain to be operational at
one time. Over 300 contracts were completed during the year, across a wide range
of market sectors: from the A-3 highway in Madrid, where Keller-Terra undertook
repairs to stabilise the embankment; to Zaragoza's Presa de Caspe Dam, where
micro-cement grouting of the foundation was used to reduce water seepage.
Our French business performed well in its home market and made good progress in
expanding its operations in North Africa. This resulted in the award of several
contracts in Algeria, including the first phase of a ground improvement project
at Bejaia harbour and the installation of stone columns for a new railway line
near Oran. High levels of infrastructure investment are planned for the region
which, coupled with Keller's growing presence and reputation in Algeria, Morocco
and Tunisia, are expected to result in a growing contribution from these markets
in 2005. In addition, a new branch was established in the French West Indies,
introducing ground improvement technologies into this region of high seismic
risk.
Our operations in Austria and Italy had a good year, with advances made in the
introduction of Keller's specialty grouting techniques to the Italian market on
metro projects in Turin and Bologne. Further progress was made in Eastern
Europe, particularly Poland which had a strong year and where we expect a
continued high level of investment spend to offer good opportunities going
forward. LCM, our Swedish lime column subsidiary, in which we acquired the
remaining 50% minority interest in January 2004, had a slow start to the year,
recovering well in the second half.
Against a further decline in both the public and private sectors of the German
construction market, sales and profit in our German operation were down on last
year, reducing Germany's contribution to total Group sales to 7%. Work on the
major underground rail link project in Cologne got underway satisfactorily and
other noteworthy contracts undertaken included flood protection work on the
River Rhine and ground improvement work for a road bypass in the Lausitz region.
However, in order to remain profitable in this competitive market, a programme
of initiatives to reduce costs and improve efficiencies commenced in 2004 and
will be completed in the first quarter of 2005. As reported in our interim
results announcement, cost reductions in response to soft market conditions were
also instigated in our Portuguese operation, which saw an improvement in
performance in the second half of the year. The redundancy costs incurred in
both Portugal and Germany have been included in these results.
Within the Overseas division, the Middle East had a good result reflecting both
a strong contribution from Saudi Arabia, where we completed the foundations for
several industrial plants, and a good performance from Dubai where our work on
the first prestigious Palm Island contract was completed on time in August.
Within the Far East, although our results were below those of last year, our
operations in Singapore performed well due to a large ground improvement
contract for land reclamation in the Pulau Ubin region and Malaysia continued
its strategy of introducing grouting products into the market.
UK
Sales in the year were up 4% on the previous year at £108.3m (2003: £103.9m),
with operating profit before exceptional items and amortisation of intangibles
increased to £1.7m (2003: £0.5m).
Makers
At Makers, following the management changes in December 2003, initial steps were
taken to stabilise the business, reduce its cost base and refocus on its areas
of core competence - social housing refurbishment in the South East, together
with concrete repair work, principally in the car park and water markets. The
disposal of Makers' specialist stone masonry business, A J Woods, in October
2004 formed part of this overall strategy. In the second half, the management
team was reorganised and further strengthened and, going into 2005, the business
is now in much better shape to take advantage of the opportunities it faces.
Despite first-half losses in discontinued areas of the business which were being
run off, Makers returned to profitability in the second half and reported a
small profit for the year as a whole, compared with a loss of £0.9m in 2003.
Operating in an extremely buoyant market, the social housing division remained
profitable throughout the year, working with a number of local authorities and
housing associations to meet the government's Decent Homes Standard. One of the
flagship contracts completed in 2004 was the restoration of the 1934 Grade 1
listed Isokon Building in Camden, London. Makers was awarded a Certificate of
Excellence from the Concrete Society for this project, which involved extensive
concrete repairs as well as external and internal refurbishment.
KGE
Keller Ground Engineering (KGE) had a satisfactory year overall, on lower sales
following the withdrawal from heavy piling in 2003. The foundations support
division responded well to the organisational changes introduced that year.
KGE's range of techniques enabled it to take on several design and construct
projects, where different solutions were packaged to address customer problems
in a technically efficient and cost-effective way. An example of this
'value-engineering' approach was at Londonderry in Northern Ireland, where the
original plans for foundations for a new retail warehouse were changed from an
expensive and protracted pile-only scheme to a combination of vibro concrete
columns and vibro stone columns with a load transfer platform. The work was
completed, including testing, in just six weeks, representing a saving in both
time and direct cost of around 50% against the original piled scheme.
KGE's specialist grouting and dry soil mixing systems were employed on a wide
range of contracts during the year, including the installation of a cut-off
curtain for a new dam at Kingairloch in Scotland; rock grouting and shaft
consolidation for a rail tunnel at Strood; and stabilisation of Scarborough's
East Pier.
Australia
Sales of £32.4m (2003: £27.9m) were some 16% above the previous year whilst
operating profit before amortisation of intangibles of £1.7m (2003: £2.0m) was
15% below.
The new ground engineering business, which commenced operations in January 2004
to promote the full range of ground improvement and specialty grouting
solutions, started to establish itself and is expected to make a positive
contribution in 2005.
International collaboration between our Australian businesses and Hayward Baker
in the US was the hallmark of the Martha Cove project in Victoria, in which
Keller introduced techniques not previously used in the Australian market to
construct retaining walls for the excavation of an underpass.
Maintaining our competitive edge
The development of our products and processes to improve our productivity and
capability is continuous; it relies on excellent co-operation and communication
between employees across our businesses from sales teams to research and
development staff, design engineers and site personnel. Examples of innovations
in 2004, which will help to maintain our competitive edge in the future,
include:
• further investment in advanced equipment, such as state-of-the-art
rock excavation tooling which enabled Case to remove granite- and
quartz-based rock on a drop shaft project at Fall River in
Massachusetts;
• the manufacture by McKinney's equipment division of its first
hydraulic rigs;
• the development of a remote controlled shuttle as a feeding device and
carrier of materials for the production of dry soil mixed columns;
• in France, the introduction of composite columns, comprising a lower
part in concrete and a traditional bottom-feed stone column on top;
this new product, will have applications for heavy buildings or
organic soils, as an alternative to traditional piling;
• a jetted Soilcrete contiguous piled retaining wall system, developed
and introduced in Australia, as an economic alternative to diaphragm
walls;
• the development of a prototype minicat in the UK with combined
capability for preboring and vibro stone columns;
• the further development at our German workshops of our latest vibrator
systems; and
• improvements to our jet grouting equipment, designed to reduce
mobilisation and maintenance costs.
We are confident that these and other ongoing improvements in our equipment,
techniques and systems of work mean that we will continue to find the best
solutions to our customers' needs and maintain our competitive positions around
the world.
Financial Review
Trading results
The Group's sales at £595.9m were 5% higher than in 2003. Movements in reported
sales and profits were adversely influenced by fluctuations in foreign currency
exchange rates. The average US dollar exchange rate against sterling was
US$1.83, 12% weaker than in 2003, while the average euro exchange rate weakened
by 2%. Stripping out the effects of currency movements, the Group's 2004 sales
were 11% up on 2003.
Operating profit before exceptional items and the amortisation of intangibles
was £33.7m, compared to £32.8m in 2003. The 2004 result is stated after a £2.3m
net adverse currency impact, primarily due to the weaker US dollar. On a
constant currency basis, operating profit was also up 11% year on year.
The Group's trading performance is discussed in more detail in the Chairman's
Statement and the Operating Review.
Interest
The net interest charge changed little from £4.2m in 2003 to £4.1m in 2004.
EBITDA interest cover remains comfortable at over 10 times.
Tax
The Group's effective tax rate, before exceptional items and amortisation of
intangibles, was 38%, down slightly from 39% in 2003. The effective rate
reflects the fact that the vast majority of the Group's profits are earned in
relatively high tax jurisdictions, in particular the United States where the
effective combined federal and state tax rates are nearly 40%. The reduction in
the effective rate in 2004 is due to lower taxable losses in the UK (after
central costs and interest).
Earnings and dividends
Earnings per share before exceptional items and the amortisation of intangibles
increased by 4% to 25.1p. Following the recommendation of an increased final
dividend of 7.3p per share, the total dividend for the year is 10.9p, an
increase of 5% on 2003. This is covered 2.3 times by adjusted earnings per
share.
Cash flow and net debt
Net cash inflow from operating activities was £33.6m, representing 75% of the
Group's EBITDA. This compares to £40.0m and 98% in 2003. Year-end working
capital was higher than last year's level, reflecting the significantly higher
cost of Suncoast's raw materials and the strong organic growth across the Group.
Capital expenditure decreased by 17% in the year, although the proceeds from the
sale of fixed assets also fell. Net capital expenditure in the year was £11.8m,
which represents 1.1 times depreciation.
After paying tax, interest and dividends, year-end net debt decreased marginally
from £60.7m at 31 December 2003 to £60.0m at the end of 2004. Net debt at the
year-end represents 1.3 times EBITDA. Based on net assets of £101.4m, gearing
was 59%, down from 62% at the beginning of the year.
Refinancing
During the year the Group's debt was refinanced to reduce the cost of borrowing
and diversify our sources of funding, as well as to increase our committed
facilities to support the Group's continued growth. In October, US$100m was
raised through a private placement with US institutions. The proceeds of the
issue of $30m 5.05% notes due 2011 and $70m 5.48% notes due 2014 were used to
refinance existing debt. In December, the Group negotiated a new £80m, five-year
syndicated revolving credit facility at a reduced margin.
The $100m fixed rate private placement liabilities were immediately swapped into
floating rates, $75m by means of US dollar interest rate swaps and $25m through
a dollar:euro cross currency and interest rate swap. These, together with other
borrowings, are held as hedges against the Group's dollar and euro denominated
net assets.
Pensions
The Group offers defined benefit pension arrangements in the UK, Germany and
Austria. The last actuarial valuation of the UK scheme, which has been closed to
new members since 1999, was as at 5 April 2002. At this date, the market value
of the scheme's assets was £14.6m and the valuation concluded that the scheme
was 79% funded on an ongoing basis. In order to reduce the deficit, the Group
subsequently increased both the employee and employer contribution rates. The
next actuarial valuation is as at 5 April 2005.
The transitional disclosures required by FRS 17, which will be set out in note
29 of the accounts, show that, as at 31 December 2004, the pre-tax deficit in
the UK scheme was £8.2m on an FRS 17 basis, up from £6.0m at the end of 2003.
In Germany and Austria, there are no segregated funds to cover defined benefit
retirement obligations for the German and Austrian employees. Instead, the
respective liabilities are included within provisions on the Group balance
sheet. All other pension provisions in the Group are of a defined contribution
nature.
Accounting standards
The Group's 2004 results have been prepared in accordance with applicable UK
accounting standards (UK GAAP). They have not been significantly impacted by any
new accounting standards.
As noted in the 2003 Annual Report, the Group is required to produce financial
statements for accounting periods beginning on or after 1 January 2005 in
accordance with International Financial Reporting Standards ('IFRS'). The 2005
accounts will also require the 2004 comparative numbers to be restated to comply
with IFRS.
Keller has undertaken a detailed review of the impact that IFRS will have on its
financial results and balance sheet. The Group can confirm that it expects the
main areas of impact on its financial results to be:
• non-amortisation of goodwill, to be replaced with annual impairment
testing (IFRS 3);
• pensions accounting (IAS 19);
• the timing of accruals for dividends (IAS 10);
• share based payments (IFRS 2); and
• financial instruments (IAS 39).
In order to assist an understanding of the likely impact of IFRS adoption, an
estimate of the effect of these items on the Group's 2004 results and net assets
is summarised below.
--------------------------------------------------------------------------------
Profit before tax Net assets
£000 £000
--------------------------------------------------------------------------------
As reported under UK GAAP (post amortisation) 26,638 101,427
Adjustments to comply with IFRS:
Goodwill 2,877 (7,630)
Pensions 136 (6,541)
Dividends - 4,771
Share based payments 97 -
--------------------------------------------------------------------------------
Restated to comply with IFRS 29,748 92,027
--------------------------------------------------------------------------------
Goodwill amortisation will no longer be allowed and companies will instead be
required to assess at each reporting date whether there is an indication that an
asset may be impaired. In addition, IAS 21 requires goodwill to be denominated
in local currencies and retranslated at each reporting date at closing exchange
rates.
The Group currently applies SSAP 24 to account for defined benefit pension
schemes and complies with the FRS 17 transitional arrangements. IAS 19 is
broadly consistent with FRS 17 except that that it provides the option not to
recognise actuarial gains and losses below a threshold while spreading forward
those above this threshold over the average remaining service life of the
employees in the scheme. If the spreading option is not adopted then the effect
of adopting IAS 19 is broadly the same as FRS 17. The Group pension deficit, net
of deferred tax, will be debited to equity at the date of transition.
Under existing UK GAAP, dividends are included in the financial statements on an
accruals basis when proposed. Under IAS 10 dividends are not permitted to be
recognised unless there is a commitment to pay them at the balance sheet date.
In accordance with UITF 17, the intrinsic value of share awards granted under
employee share schemes is recognised as a cost in the profit and loss account,
spread over the performance period. The provisions of IFRS 2 require recognition
of the fair value rather than the intrinsic value of options and performance
shares.
IAS 39 requires derivative financial instruments to be included on the balance
sheet at fair value. Significantly more onerous criteria will need to be met
before companies are entitled to apply hedge accounting to their financial
instruments and offset changes in the fair value of hedging instruments with
changes in the fair value of the hedged items. This could potentially increase
the volatility of companies' results, however it is envisaged that the Group's
hedge accounting practices will meet the criteria stipulated by IAS 39 and the
introduction of the standard is not expected to have a significant impact on the
Group's 2005 results.
In addition to the above, there will be a number of changes to the format and
disclosures of the 2005 interim and full year financial statements resulting
from the adoption of IFRS. The 2005 accounts will include a detailed
reconciliation of its 2004 financial results and position as previously reported
under UK GAAP, to its 2004 financial results and position adjusted to comply
with IFRS.
Consolidated Profit and Loss account
for the year ended 31 December 2004
2004 2003
------------------------------------------------------------------------------------------------------------------------
Before Exceptional
exceptional items and
Before Amortisation items and amortisation
amortisation of amortisation of
of intangibles of intangibles
intangibles (note 1) Total intangibles (note 1) Total
Note £000 £000 £000 £000 £000 £000
------------------------------------------------------------------------------------------------------------------------
Turnover 1 595,856 - 595,856 567,505 - 567,505
Operating costs* (562,107) (2,964) (565,071) (534,667) (13,881) (548,548)
------------------------------------------------------------------------------------------------------------------------
Operating profit 1 33,749 (2,964) 30,785 32,838 (13,881) 18,957
Net interest payable (4,147) - (4,147) (4,151) - (4,151)
------------------------------------------------------------------------------------------------------------------------
Profit on ordinary activities before taxation 29,602 (2,964) 26,638 28,687 (13,881) 14,806
Taxation 2 (11,130) - (11,130) (11,211) 510 (10,701)
------------------------------------------------------------------------------------------------------------------------
Profit on ordinary activities after taxation 18,472 (2,964) 15,508 17,476 (13,371) 4,105
Equity minority interests (2,131) - (2,131) (1,846) - (1,846)
------------------------------------------------------------------------------------------------------------------------
Profit for the financial year 16,341 (2,964) 13,377 15,630 (13,371) 2,259
Dividends paid and proposed 3 (7,121) - (7,121) (6,768) - (6,768)
------------------------------------------------------------------------------------------------------------------------
Retained profit/(loss) for the financial year 9,220 (2,964) 6,256 8,862 (13,371) (4,509)
------------------------------------------------------------------------------------------------------------------------
Basic earnings per share 4 20.5p 3.5p
Diluted earnings per share 4 20.5p 3.5p
Adjusted earnings per share** 4 25.1p 24.1p
Dividends per share 3 10.9p 10.4p
------------------------------------------------------------------------------------------------------------------------
* Operating costs in 2003 include exceptional items of £10,444,000
** Adjusted earnings per share is calculated before exceptional items and
amortisation of intangibles
The Group's 2004 results shown above are derived from continuing operations.
There were no material acquisitions or discontinued operations in the year.
The difference between the reported and historical cost profits for each of the
years reported above is not material.
Consolidated Statement of Total Recognised Gains and Losses
for the year ended 31 December 2004
-------------------------------------------------------------------------------
2004 2003
£000 £000
-------------------------------------------------------------------------------
Profit for the financial year 13,377 2,259
Currency translation differences on overseas investments (2,695) (136)
-------------------------------------------------------------------------------
Total recognised gains and losses relating to the year 10,682 2,123
-------------------------------------------------------------------------------
Consolidated Balance Sheet
As at 31 December 2004
-------------------------------------------------------------------------------
2004 2003
£000 £000
-------------------------------------------------------------------------------
Fixed assets
Positive goodwill 57,771 57,493
Negative goodwill (92) (734)
-------------------------------------------------------------------------------
57,679 56,759
Other intangible assets 211 287
-------------------------------------------------------------------------------
Intangible assets 57,890 57,046
Tangible assets 80,937 82,169
-------------------------------------------------------------------------------
138,827 139,215
-------------------------------------------------------------------------------
Current assets
Stocks 24,319 16,885
Debtors 144,518 137,855
Cash at bank and in hand 16,416 21,511
-------------------------------------------------------------------------------
185,253 176,251
Creditors: amounts falling due within one year (140,848) (147,047)
-------------------------------------------------------------------------------
Net current assets 44,405 29,204
-------------------------------------------------------------------------------
Total assets less current liabilities 183,232 168,419
Creditors: amounts falling due after more than one year (68,161) (58,438)
Provisions for liabilities and charges (13,644) (12,358)
-------------------------------------------------------------------------------
Net assets 101,427 97,623
-------------------------------------------------------------------------------
Capital and reserves
Called up share capital 6,536 6,507
Share capital to be issued - 680
Share premium account 36,027 35,374
Capital redemption reserve 7,629 7,629
Profit and loss account 45,624 41,849
-------------------------------------------------------------------------------
Equity shareholders' funds 95,816 92,039
Equity minority interests 5,611 5,584
-------------------------------------------------------------------------------
101,427 97,623
-------------------------------------------------------------------------------
Consolidated Cash Flow Statement
for the year ended 31 December 2004
----------------------------------------------------------------------------------------------
2004 2004 2003 2003
£000 £000 £000 £000
----------------------------------------------------------------------------------------------
Net cash inflow from operating activities 33,577 39,951
Returns on investment and servicing of finance
Interest received 339 259
Interest paid (4,281) (4,300)
Interest element of finance lease rental payments (87) (222)
Payments to minority interests (2,473) (690)
----------------------------------------------------------------------------------------------
(6,502) (4,953)
Taxation
UK corporation tax received/(paid) 461 (608)
Overseas tax paid (7,800) (12,187)
----------------------------------------------------------------------------------------------
(7,339) (12,795)
Capital expenditure
Purchase of intangible fixed assets (15) (48)
Purchase of tangible fixed assets (13,887) (16,670)
Sale of tangible fixed assets 2,063 3,300
----------------------------------------------------------------------------------------------
(11,839) (13,418)
Acquisitions and disposals
Acquisition of subsidiary undertakings (3,422) 421
----------------------------------------------------------------------------------------------
(3,422) 421
Equity dividends paid (6,872) (6,534)
----------------------------------------------------------------------------------------------
Net cash (outflow)/inflow before management of (2,397) 2,672
liquid resources and financing
Management of liquid resources
Repayments from short term bank deposits 1,002 885
Financing
Issue of new shares 15 90
New bank and other loans drawn 55,982 5,640
Repayment of bank loans and loan notes (52,498) (11,552)
Sale and leaseback transactions 229 377
Capital element of finance lease rental payments (602) (1,547)
----------------------------------------------------------------------------------------------
Net cash inflow/(outflow) from financing 3,126 (6,992)
----------------------------------------------------------------------------------------------
Increase/(decrease) in cash in the year 1,731 (3,435)
----------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------
2004 2003
Reconciliation of net cash flow to movement in net debt £000 £000
----------------------------------------------------------------------------------------------
Increase/(decrease) in cash in the year 1,731 (3,435)
Cash flow from debt and lease financing (3,111) 7,081
Cash flow from short-term bank deposits (1,002) (885)
----------------------------------------------------------------------------------------------
Change in net debt resulting from cash flows (2,382) 2,761
Exchange differences 3,087 4,570
----------------------------------------------------------------------------------------------
Movement in net debt in the year 705 7,331
Net debt at 1 January (60,664) (67,995)
----------------------------------------------------------------------------------------------
Net debt at 31 December (59,959) (60,664)
----------------------------------------------------------------------------------------------
1. Segmental analysis
Turnover and operating profit may be analysed as follows:
2004 2003
------------------------------------------------------------------------------------------------------------
Operating Operating
profit before profit before
exceptionals exceptionals
and Operating and Operating
Turnover amortisation profit Turnover amortisation profit
£000 £000 £000 £000 £000 £000
------------------------------------------------------------------------------------------------------------
United Kingdom 108,263 1,707 1,690 103,976 538 (10,317)
The Americas 280,212 21,048 18,780 270,447 19,305 16,890
Continental Europe and Overseas 175,024 11,920 11,198 165,204 13,812 13,180
Australia 32,357 1,671 1,714 27,878 2,004 2,025
------------------------------------------------------------------------------------------------------------
595,856 36,346 33,382 567,505 35,659 21,778
Less: Unallocated central costs - (2,597) (2,597) - (2,821) (2,821)
------------------------------------------------------------------------------------------------------------
595,856 33,749 30,785 567,505 32,838 18,957
------------------------------------------------------------------------------------------------------------
In the opinion of the directors the Group operates only one class of business
and turnover by destination is not materially different from turnover by origin.
The exceptional items and amortisation of intangibles comprise:
---------------------------------------------------------------------------------------------------
2004 2003
£000 £000
---------------------------------------------------------------------------------------------------
Amortisation of intangibles: recurring 2,964 3,437
exceptional impairment provision - 7,372
UK restructuring costs - 3,072
---------------------------------------------------------------------------------------------------
2,964 13,881
---------------------------------------------------------------------------------------------------
As a result of the Group's Makers business incurring a loss in 2003, an
exceptional impairment provision was charged in 2003 amounting to the
unamortised capitalised goodwill associated with that business. The 2003
exceptional restructuring costs related to both the Group's UK businesses,
Makers and Keller Ground Engineering, and mainly comprised redundancy costs, the
write-down of tangible fixed assets and office closure costs.
Capital employed may be analysed as follows:
---------------------------------------------------------------------------------------------------
2004 2003
£000 £000
---------------------------------------------------------------------------------------------------
United Kingdom 6,802 7,141
The Americas 116,121 114,851
Continental Europe and Overseas 49,410 43,008
Australia 7,554 7,323
---------------------------------------------------------------------------------------------------
179,887 172,323
---------------------------------------------------------------------------------------------------
Capital employed shown above excludes items of a financing nature and
corporation tax balances. Capital employed is reconciled to Group net assets as
follows:
---------------------------------------------------------------------------------------------------
2004 2003
£000 £000
---------------------------------------------------------------------------------------------------
Net assets 101,427 97,623
Net debt 59,959 60,664
Deferred purchase consideration 2,235 2,133
Dividends payable 4,771 4,522
Corporation tax payable 5,538 2,509
Deferred tax provision 5,957 4,872
---------------------------------------------------------------------------------------------------
Capital employed 179,887 172,323
---------------------------------------------------------------------------------------------------
2. Taxation
The taxation charge comprises:
---------------------------------------------------------------------------------------------------
2004 2003
£000 £000
---------------------------------------------------------------------------------------------------
Current tax:
UK corporation tax on the profits of the period - -
Overseas tax 10,480 8,990
Adjustments in respect of previous periods (850) (423)
---------------------------------------------------------------------------------------------------
Total current tax 9,630 8,567
---------------------------------------------------------------------------------------------------
Deferred tax:
Current year 721 1,901
Prior year 779 233
---------------------------------------------------------------------------------------------------
Total deferred tax 1,500 2,134
---------------------------------------------------------------------------------------------------
11,130 10,701
---------------------------------------------------------------------------------------------------
3. Dividends
---------------------------------------------------------------------------------------------------
2004 2003
£000 £000
---------------------------------------------------------------------------------------------------
Interim paid 2,350 2,246
Final proposed 4,771 4,522
---------------------------------------------------------------------------------------------------
7,121 6,768
---------------------------------------------------------------------------------------------------
An interim ordinary dividend of 3.6p (2003: 3.45p) per share was paid on 1 November
2004. The final proposed ordinary dividend of 7.3p (2003: 6.95p) per share will be
paid on 28 June 2005 to holders on the register at 27 May 2005.
4. Earnings per share
Adjusted earnings per share of 25.1p (2003: 24.1p) is calculated based on
profit after tax and minority interests before exceptional items and
amortisation of intangibles of £16,341,000 (2003: £15,630,000) and the
weighted average number of ordinary shares in issue during the year of
65,129,000 (2003: 64,918,500).
Basic and diluted earnings per share are calculated as follows:
2004 2004 2003 2003
Basic Diluted Basic Diluted
£000 £000 £000 £000
-----------------------------------------------------------------------------------------------------------------
Profit after tax and minority interests 13,377 13,377 2,259 2,259
-----------------------------------------------------------------------------------------------------------------
No. of No. of No. of No. of
shares shares shares shares
000s 000s 000s 000s
-----------------------------------------------------------------------------------------------------------------
Weighted average of ordinary shares in issue during the year 65,129 65,129 64,919 64,919
Add: Weighted average of shares under option during year - 1,678 - 1,550
Add: Weighted average of own shares held - 83 - 118
Less: no. of shares assumed issued at fair value during year - (1,509) - (1,484)
-----------------------------------------------------------------------------------------------------------------
Adjusted weighted average ordinary shares in issue 65,129 65,381 64,919 65,103
-----------------------------------------------------------------------------------------------------------------
Pence Pence Pence Pence
-----------------------------------------------------------------------------------------------------------------
Earnings per share 20.5 20.5 3.5 3.5
-----------------------------------------------------------------------------------------------------------------
5. Reconciliation of operating profit to net cash inflow from operating
activities
---------------------------------------------------------------------------------------------------
2004 2003
£000 £000
---------------------------------------------------------------------------------------------------
Operating profit 30,785 18,957
Depreciation charge 10,992 10,897
Amortisation of goodwill and intangibles 2,964 3,437
Exceptional impairment provision - 7,372
Profit on sale of fixed assets (727) (716)
Other non-cash movements 214 -
Movement in long-term provisions 206 328
Increase in stocks (8,559) (2,040)
(Increase)/decrease in debtors (10,846) 3,351
Increase/(decrease) in creditors 8,548 (1,635)
---------------------------------------------------------------------------------------------------
Net cash inflow from operating activities 33,577 39,951
---------------------------------------------------------------------------------------------------
6. Foreign Currencies
The exchange rates used in respect of principal currencies are:
---------------------------------------------------------------------------------------------------
2004 2003
---------------------------------------------------------------------------------------------------
US dollar: average for year 1.83 1.64
US dollar: year end 1.93 1.78
Australian dollar: average for year 2.49 2.52
Australian dollar: year end 2.47 2.38
Euro: average for year 1.47 1.45
Euro: year end 1.41 1.42
---------------------------------------------------------------------------------------------------
7. Basis of preparation
The financial information set out above does not constitute the Company's
statutory accounts for the years ended 31 December 2004 or 2003 but is
derived from those accounts. Statutory accounts for 2003 have been
delivered to the Registrar of Companies and those for 2004 will be
delivered following the Company's Annual General Meeting. The auditors have
reported on those accounts. Their reports were unqualified and did not
contain statements under section 237 (2) or (3) of the Companies Act 1985.
Accounts will be posted to shareholders by 8 April 2005. The Annual General
Meeting will be held on 23 June 2005.
This information is provided by RNS
The company news service from the London Stock Exchange
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