Final Results
Kier Group PLC
16 September 2004
16 September 2004
KIER GROUP PLC
PRELIMINARY RESULTS FOR THE YEAR ENDED 30 JUNE 2004
• Pre-tax profit up 26.3% to £43.2m* (2003: £34.2m)
• Earnings per share up 21.8% to 87.2p* (2003: 71.6p)
• Dividend per share up 15.9% to 19.0p (2003: 16.4p)
• Construction & Services order books at £1.75 bn with improving quality
and higher proportion of negotiated and partnered contracts
• Homes order book and completions for the two months to 31 August 2004
43% ahead of last year
• Continuing good opportunities in Property
* Results above are shown after adding back £2.6m (2003: £0.9m) relating to
goodwill amortisation. After deducting goodwill amortisation results are:
• Pre-tax profit up 21.9% to £40.6m (2003: £33.3m)
• Earnings per share up 17.3% to 81.5p (2003: 69.5p)
Commenting on the results, John Dodds, Chief Executive, said:
"All of our operating companies have had a tremendous year which has lead to
this record result. Our business model enables us to offer fully integrated
services to clients throughout the UK which is becoming increasingly popular.
The quality of the projects in the pipeline, solid order books and the strength
of our management teams puts us in an excellent position to deliver another
strong performance next year."
John Dodds, Chief Executive
Deena Mattar, Finance Director
Kier Group plc Tel: 01767 640111
John Coles
Sarah Landgrebe
Bell Pottinger Corporate & Financial Tel: 020 7861 3232
CHAIRMAN'S STATEMENT
Overview
This is the last set of results upon which I shall report before I retire from
the Board at the Annual General Meeting in November 2004 and I am pleased to
announce that Kier Group has delivered another record level of turnover and
profit for the year to 30 June 2004, its twelfth year of continuous profits
growth since our employee buy-out in 1992 and a year in which Kier was awarded
Building Magazine's 'Major Contractor of the Year' for the fourth time in the
last six years.
Financial performance
A strong financial performance was achieved across all reporting segments.
Overall operating profits, after deducting goodwill amortisation of £2.6m (2003:
£0.9m), rose 25.7% to £42.6m (2003: £33.9m). Turnover grew by 2.1% to £1,476.5m
(2003: £1,445.6m) and profit before tax increased by 21.9% to £40.6m (2003:
£33.3m). Basic earnings per share at 81.5p rose 17.3% (2003: 69.5p) and, after
adding back goodwill amortisation, adjusted earnings per share rose 21.8% to
87.2p (2003: 71.6p).
The Board proposes a final dividend for the year ended 30 June 2004 of 13.0p
(2003: 11.2p) making 19.0p for the year (2003: 16.4p) an increase of 15.9% and
covered 4.3 times by basic earnings per share. The dividend will be paid on 7
December 2004 to shareholders on the register on 1 October 2004 and there will
be a scrip alternative.
A good cash performance was achieved in the Regional business which recorded
annual average cash balances ahead of last year. Overall Group net cash (after
borrowings) reduced, as anticipated, by £54.4m to £7.6m at 30 June 2004 (2003:
£62.0m). The outflow represents an expected increase in working capital brought
about by an unwinding of the advance cash held at 30 June 2003 on the sale of
the office development at Whitehall, further investment in housing and property
development, a planned reduction in turnover in the National construction
business and the cash effect of the losses reported in Kier Partnership Homes
and Kier National last year. Since 30 June 2004 Kier Property has completed the
sale of National Trust's headquarters building to private investors, ahead of
construction completion, and we have refinanced one of our early PFI projects,
Hairmyres Hospital. Together these transactions provided £26m of cash which,
along with strong trading, has resulted in Group net funds of £41.6m at 31
August 2004. During the year we increased our unsecured borrowing facilities by
an additional £30m to £80m to provide flexibility for seasonal and monthly
working capital requirements.
Shareholders' funds increased by £23.7m to £116.4m (2003: £92.7m). Pre-tax
return on shareholders' funds was 38.8% having been at around this level for
seven consecutive years.
Pensions
The FRS 17 deficit in the Kier Group Pension Scheme, after accounting for
deferred tax, has reduced during the year from a net £79.7m to £67.2m at 30 June
2004. The market value of scheme assets rose by 11% whilst liabilities increased
by 4%, resulting from a combination of increases in the assumptions regarding
salary and price inflation offset by a marginal upward movement in yields. The
Group's strategy continues to be to address the deficit over time and recent
changes have included increases in pension contributions, changes in early
retirement terms and a revised approach to investment strategy. Given that the
Scheme is likely to enjoy positive net cash flows, excluding sales of
investments, for some years, the Group plans to continue to take a considered
and measured approach to future funding requirements. The Group also
participates in another defined benefit scheme on behalf of its employees in
Kier Sheffield LLP. At 30 June 2004 this scheme showed a surplus, after deferred
tax, of £6.4m (2003: £5.1m).
The Board
I shall be retiring from the Board and leaving the Group in the autumn after 35
years with Kier. During that time Kier has been through many ownership changes
both private and public. In 1992 I was privileged, along with my Board
colleagues at the time, to have led Kier in the first true employee buy-out of a
major construction business and, in 1996, to its flotation. Since then the
business has evolved into a multi-disciplinary Group with strong management
teams.
Over the years I have been fortunate to have worked with some very talented
people throughout our organisation many of whom have risen to senior positions.
Managing succession has been crucial and I am pleased that I am leaving a
balanced Board, ably led by Group Chief Executive John Dodds, which has the
skills, talent and vision to take the business forward to the next stages. The
Group is in good financial shape and in safe hands.
I am handing over my non-executive Chairmanship to non-executive director Peter
Warry who joined the Board in 1998. Peter, aged 55, is also Chairman of Victrex
PLC and BSS Group PLC. He has a good understanding of the workings of Kier and
will continue to provide sound advice and guidance in his new role. I wish him
every success.
I should like to thank my colleagues and fellow employees for all their hard
work and the shareholders for their support over the years and I wish the Group
a successful and prosperous future.
Prospects
Our order books in Construction & Services have been maintained at around
£1.75bn containing a higher proportion of negotiated and partnered contracts,
and hence are of a better quality, than ever before. In Homes the order book
together with unit completions to 31 August 2004 were 43% ahead of last year.
Our property development business continues to attract good opportunities to
fuel its portfolio. A number of Private Finance Initiative opportunities are
available and are being selectively pursued.
All of our markets remain sound. In Construction & Services the market continues
to benefit from increased government investment in education, health and
affordable housing as well as ample private sector opportunities. In housing the
fundamental shortage of new homes continues and demand is supported by high
employment and a strong economy. However we are beginning to see signs of the
upward trend in interest rates returning the market to more sustainable levels
of house price inflation. The Property business will expand further as the
portfolio is developed; and there are plenty of opportunities available to
enhance the business.
Kier's businesses are well positioned to take advantage of market opportunities
as they emerge; prospects are good and the Board is confident that the Group
will continue to deliver further improved performance and growth into 2005 and
beyond.
Colin Busby
Chairman
CHIEF EXECUTIVE'S REVIEW
Overview
Kier has had another successful year to 30 June 2004 and has once again achieved
excellent results providing compound annual growth in earnings per share of
23.5% (before goodwill amortisation) since its flotation on the London Stock
Exchange in 1996.
This is the twelfth year in succession in which Kier has delivered increased
profit brought about through both organic growth and acquisition. Twelve years
ago our profits arose almost exclusively from construction activities. By
undertaking strategic investments in housing, property, support services and the
Private Finance Initiative and investing in our people we have developed a
business model comprising complementary activities. They provide a balanced cash
profile enabling the funds generated by construction operations to be invested
in the cash consuming activities, while operationally we are able to combine
complementary skills to offer a fully integrated service to clients throughout
the UK. In 2004 we have again seen many examples in which our businesses have
worked together to provide a total in-house solution for the delivery of
mixed-use developments. As one of the few Groups able to do this we intend to
continue to use our skills to generate profit growth from these markets.
Construction & Services
Construction & Services recorded an operating profit of £15.6m (2003: £12.9m) an
increase of 20.9% on marginally lower turnover of £1,205.0m (2003: £1,237.9m).
Growth in turnover from Kier Regional and Kier Support Services was offset by a
planned reduction in Kier National's turnover, largely within the major building
projects business. The operating margin of 1.3% (after deducting goodwill
amortisation) continues to grow. After adding back goodwill amortisation
(largely arising within Kier Support Services) we have achieved our previously
stated short-term target of 1.5%.
Construction
Kier Regional achieved another strong financial performance in the year;
turnover increased by 9.4% to £862.0m (2003: £787.6m) and cash was, on average,
£12m ahead of the previous year, reaching a record year-end balance of £169m.
The strength of the Regional business lies in its ability to operate on a local
level, through 31 offices, as well as nationally for major clients in both the
private and public sectors. This provides flexibility allowing the business to
respond quickly to changing local markets as well as providing a nationally
co-ordinated service through Kier Retail, Kier Health and Kier Custodial.
The year to 30 June 2004 saw a record £849m of awards (2003: £760m) of which 36%
were for the public sector (2003: 31%) particularly education (21%) and health
(7%). Further awards for Kier Health under the ProCure21 initiative for NHS
Estates are pending finalisation of contract negotiation. Kier Custodial has
been appointed as preferred contractor for new-build prison work under the HM
Prisons framework; one of the few selected for all six regions, and is well
placed to benefit from a good proportion of the £150m of work expected to be
awarded annually for the next 10 years.
Progress continues to be made in Kier Partnership Homes, our social housing
business which we acquired in November 2002, following the losses it reported in
the year to 30 June 2003. We have implemented management changes and a
geographic realignment of the business which is now well positioned to take
advantage of the growing level of government spending on social housing and to
work with other Kier businesses on urban regeneration projects. Whilst Kier
Partnership Homes made a modest loss in the year we are confident that the
changes that have been implemented will result in a business that will make a
worthwhile contribution to Group profit.
The majority of the turnover in Regional comprises contracts with a value of
less than £10m, on average £1.9m. These relatively low value contracts, 52% of
which are negotiated or partnered (2003: 42%), continue to improve the quality
of the forward workload, which stood at £512m at 30 June 2004 (2003: £430m), and
will maintain Kier Regional's robust and consistent financial performance.
Turnover within our major projects business continued its planned reduction in
line with a lower risk profile to £168.7m (2003: £334.9m). Within the major
building business the focus during the last year has been on closing out current
contracts and rebuilding the order book with higher quality contracts taken on
under two-stage tender, negotiated or partnered terms where the risks can be
more appropriately identified and managed.
The civil engineering and overseas business has continued to make good progress
on its two major contracts for the Channel Tunnel Rail Link. Our framework
agreement for United Utilities is progressing well and we are hopeful of further
work under their Asset Management Programme 4. A good result was, once again,
achieved overseas. In Hong Kong, Mei Foo, a major station for the Kowloon Canton
Railway Corporation, is now complete winning 'International Performance of the
year' in the 'Quality in Construction Awards 2004'. Through a continuing process
of selective tendering we have developed a higher quality, albeit smaller, order
book both overseas and in the UK.
Support Services
Our Support Services business operates through two divisions: Building
Maintenance and Managed Services, which together provided £174.3m of turnover,
51% ahead of last year. The growth is largely attributed to the Building
Maintenance division which recorded a full year's turnover of £64.7m from the
10-year outsourcing contract for Sheffield City Council. The operation is
providing a greatly improved service to the tenants of the 60,000 housing units
we repair and maintain. In addition to our £640m contract we have been announced
as one of the preferred bidders for a further £1bn of additional work for
Sheffield under the Government's 'Decent Homes' initiative. We anticipate being
awarded one-fifth of the work to be carried out over six years to 2010.
Although there have been fewer new opportunities for local authority outsourcing
contracts than anticipated we were pleased to have been selected as preferred
bidder on two housing repairs and maintenance contracts for Leeds South and
Leeds North West with a combined value of £10m per annum for five years
extendable for a further five years.
The Managed Services division has also seen an increase in turnover during the
year. Contracts have been awarded with Corby Borough Council, Eastbourne Council
and the Department of the Environment, Food and Rural Affairs and we have
retained existing contracts with key clients. Contracts under the PFI are
continuing to grow in number and value with a further £150m secured during the
year to be carried out over periods of 25 to 30 years. We are committed to
improving margins within this business in what remains a very competitive
market.
Homes
The strong demand for housing continued through the second half of the year and
provided Kier Residential with a 19.8% increase in turnover to £215.7m (2003:
£180.1m) arising from a 17% increase in housing completions to 1,158 (2003: 990)
and a 2.4% increase in average selling price from £181,900 to £186,300 with a
reduction in average house size generating an increase in average income per
square foot.
Operating profit increased by 20.9% to £31.8m (2003: £26.3m) lifting the margin
to 14.7% (2003: 14.6%). The margin achieved from private housing increased year
on year but was dampened by an increase in the proportion of lower margin
affordable homes which represented 5% of total unit sales in 2004 (2003: 2%).
During the year £56m was spent on selective land purchases and in January 2004
we acquired the business of Tudor Homes, based in Lincolnshire, at market value
for £15.5m providing 350 plots with planning consent and a further 75 strategic
plots. At 30 June 2004 we held 4,961 consented plots (2003: 3,700 plots) in the
land-bank enabling us to achieve our target holding of over four years' supply
of land. We also control 15,000 plots of strategic land, mostly under option,
which we are progressing through the planning system. Strategic sites are
becoming an increasing feature with 18% of unit sales emanating from the
strategic land-bank compared with 13% in 2003.
Kier Residential has made progress on a number of sites during the year
including mixed-use and urban regeneration schemes. In April 2004 it acquired an
eight acre site at Aylesbury for approximately 400 units from a joint venture
within Kier Property and is close to exchanging contracts for a six acre site in
Poole Harbour with Network Rail which will provide 260 residential units and
involve the redevelopment of the railway station and some commercial
development. A combination of Kier Residential, Kier Rail and Kier Property will
develop this site over a four year period.
Since the year-end, we have seen a lower level of visitors to our developments
than in the same period last year however reservations remain at acceptable
levels and selling prices are holding up without the requirement to provide
additional incentives. We are selling units from 18% more sites than at the same
period last year. This has contributed to the order book, together with the
number of unit completions for the two months to 31 August 2004, being 43% ahead
of last year providing a good start to the new financial year.
We anticipate the market returning to lower levels of price inflation over the
forthcoming year which should produce a more consistent and sustainable market.
Our approach to assessing viability of land for acquisition remains cautious and
we have a land bank containing good quality sites, held at prudent values, in
desirable locations which will provide us with a product range for which we
believe demand will continue.
Property
The Property division had another very busy year with turnover growing by 119.8%
to £46.6m (2003: £21.2m). Operating profit increased by 32.8% to £8.1m (2003:
£6.1m) including £1.5m of intra-Group profit made on the sale of land at
Aylesbury to Kier Residential which has been eliminated on consolidation. Good
progress has been made on the office development at Whitehall which was sold in
December 2002 in advance of construction by Kier Build. Completion will be
achieved by the end of September 2004 at which point it will be occupied by the
Department of Environment, Food and Rural Affairs and serviced by Kier Support
Services. Two similarly structured advance sales were achieved in recent months;
one in June 2004 for the sale of a headquarters office development for a
subsidiary of BAe Systems by our property joint venture with the Bank of
Scotland; and the other in July 2004 for a headquarters building for the
National Trust being constructed by Kier Regional and adding an £18m cash
advance to Group funds in July 2004. In total during the last three years
advance property sales have generated over £100m of early cash to the Group and
the joint venture.
In the retail sector we completed the acquisition of six development sites from
J Sainsbury in March 2004 for £32m. One of the properties was sold in a
profitable back-to-back transaction almost immediately and contracts have been
exchanged on another with completion expected in the autumn. A regenerative
mixed-use scheme is being promoted on a 17 acre site of former railway works at
Ashford for some 700 residential units together with leisure and retail uses.
The business continues to benefit from opportunities in the three main sectors
of office, industrial and retail schemes, including mixed-use and regeneration
projects. Good returns are being achieved and, unusually for property
development, the business was cash positive for most of the year, returning to
overdraft temporarily at 30 June 2004 prior to the cash receipt on the sale of
the National Trust development in July 2004.
Infrastructure Investment
Our Infrastructure Investment business has had a successful year with PFI awards
having achieved financial close on our second schools project, this time, for
Waltham Forest, our fourth hospital project which is at Hinchingbrooke,
Cambridgeshire and our second library project, at Oldham with a combined capital
value of £83m, all being constructed and serviced in-house. We were also
selected preferred bidder on four schools in Sheffield which will provide Kier
Regional with a £50m construction contract and Kier Support Services with a 25
year service contract.
In August 2004 we refinanced our first PFI project, Hairmyres Hospital which won
the 'Public Private Finance Award' for 'Best Major Hospital in Operation 2004'.
After a contribution to the Lanarkshire Health Board of 30% of the gain, the
refinancing provided us with £8.1m of cash. Although no profit can be recognised
on the gain until a disposal of the investment, costs of £1.5m have been
incurred in connection with the transaction and charged against profit for the
year to 30 June 2004.
Our committed investment to the portfolio of ten projects is £18m, with an
expected long-term average yield of around 15%. A secondary market for PFI
investments is developing with prices beginning to reflect values in line with
our own assessment.
We remain committed to a focused, cautious approach to PFI investment and are
keen to take advantage of further opportunities as they emerge.
Health & Safety
Our management teams have focused throughout the year on continuous improvement
in all aspects of health and safety in the Group. As part of the overall
strategy to raise standards and improve communication within the supply chain we
have targeted areas which are of concern to both the industry and Kier. The
overall commitment and enthusiasm emanating from the Board and through our
management teams ensure the delivery of high standards of health and safety.
This has resulted in a 21% reduction in our Accident Incidence Rate to 588 per
100,000 staff and subcontractors measured against the Health & Safety Executive
benchmark of 1,172 for the sector.
The achievements of Kier Group companies have been recognised by the award of 14
gold, four silver and one merit RoSPA awards and 21 British Safety Council
awards. The Group's Health & Safety strategy is to continue to raise supply
chain awareness using the 'Don't Walk By' campaign and to ensure that we reduce
accidents and incidents through good communication.
Kier People
I am proud of Kier's achievements and of everyone in the Group who has worked
hard to make this year a success. Wherever I go in the Group I am continually
impressed by the skills, commitment, professionalism and ingenuity of our people
and I thank everyone for their efforts in contributing to an excellent
performance, once again, in 2004.
The Board
As announced in July, Colin Busby, the Group's Chairman, has decided to retire
from the Group and will step down from the Board at the Company's Annual General
Meeting in November. Colin, who joined Kier in 1969, led the employee buy-out of
the Group in 1992 as Chairman and Chief Executive, and later its flotation on
the London Stock Exchange. Since that time the shape of the Group has developed
from pure contracting to a business which now includes support services, homes,
property and PFI activities. It has achieved compound annual growth in earnings
per share of 23.5% since flotation and seen equity shareholders' funds increase
from £2.4m to £116.4m.
Colin will leave the Group with a very strong financial base providing an
excellent foundation for future growth. He has the Board's sincere gratitude for
his contribution and every good wish for his retirement.
Summary
The Group is in good shape; the risk profile of the Construction businesses has
been improving over the last few years through a combination of better contract
terms and more focused activities providing us with higher quality order books;
our Support Services business is growing steadily through an increasing number
of building maintenance contracts and by taking advantage of Government spending
on social housing; in Homes we have been focusing on a product range in line
with demand in our traditional areas of operation, which excludes London, and on
selectively replenishing the land bank; and in Property there are many
opportunities for non-speculative development in the office, retail and
industrial sectors. Overall the businesses are working well together on
mixed-use development opportunities where we have a competitive advantage.
With strong order books, plentiful opportunities and talented, high quality
management teams the Group is well placed to move forward and to deliver further
improved performance and growth.
John Dodds
Chief Executive
Consolidated profit and loss account
for the year ended 30 June 2004
Notes 2004 2003
£m £m
Turnover - Continuing operations
Group and share of joint ventures 2 1,476.5 1,445.6
Less share of joint ventures' turnover (32.4) (27.9)
------------ ------------
Group turnover 1,444.1 1,417.7
Cost of sales (1,315.1) (1,307.2)
------------ ------------
Gross profit 129.0 110.5
Administrative expenses (89.6) (77.4)
------------ ------------
Group operating profit - Continuing
operations 39.4 33.1
Share of operating profit - joint
ventures 3.2 3.1
Share of operating loss - associates
(Belan) - (2.3)
------------ ------------
Operating profit: Group and share of
joint ventures 2 42.6 33.9
Net interest (payable)/receivable -
Group (0.2) 0.6
Net interest payable - joint ventures (1.8) (1.2)
------------ ------------
Profit on ordinary activities before
taxation 2 40.6 33.3
Taxation on profit on ordinary
activities 3 (12.0) (9.5)
------------ ------------
Profit for the year 28.6 23.8
Dividends 4 (6.8) (5.6)
------------ ------------
Retained profit for the Group and its
share of joint 21.8 18.2
ventures and associates
------------ ------------
Earnings per Ordinary Share 5
- basic 81.5p 69.5p
- diluted 80.8p 68.2p
------------ ------------
Adjusted Earnings per Ordinary Share 5
(excluding goodwill amortisation)
- basic 87.2p 71.6p
- diluted 86.4p 70.2p
------------ ------------
Dividend per Ordinary Share 19.0p 16.4p
------------ ------------
All items in the profit and loss account relate to operations continuing as at
30 June 2004.
Group operating profit includes a charge of £2.6m for the amortisation of
goodwill (2003: £0.9m).
Consolidated balance sheet
at 30 June 2004
Notes 2004 Restated
2003
£m £m
Fixed assets
Intangible assets - goodwill 18.6 21.1
Tangible assets 68.9 53.0
Investments
Investments in joint ventures
Share of gross assets 194.8 159.1
Share of gross liabilities (190.7) (155.8)
Loans provided to joint ventures 28.1 27.4
------------- -------------
Investment in joint ventures 32.2 30.7
------------- -------------
119.7 104.8
------------- -------------
Current assets
Stock 328.6 261.3
Debtors 231.2 205.2
Cash at bank and in hand 41.4 92.5
------------- -------------
601.2 559.0
------------- -------------
Current liabilities
Creditors - amounts falling due within
one year (530.7) (495.3)
------------- -------------
Net current assets 70.5 63.7
------------- -------------
Total assets less current liabilities 190.2 168.5
Creditors - amounts falling due after
more (58.5) (62.7)
than one year
Provisions for liabilities and charges (15.3) (13.1)
------------- -------------
Net assets 2 116.4 92.7
============= =============
Capital and reserves
Called up share capital 0.4 0.3
Share premium account 17.1 15.2
Capital redemption reserve 2.7 2.7
Share scheme reserve (0.4) (0.7)
Profit and loss account 96.6 75.2
------------- -------------
Equity shareholders' funds 6 116.4 92.7
============= =============
The balance sheet at 30 June 2003 has been restated in accordance with UITF 17
(Revised 2003) and
UITF 38 which require investment in own shares and the provision for share based
payments to be shown as a deduction within shareholders' funds.
Consolidated cash flow statement
for the year ended 30 June 2004
Notes 2004 2003
£m £m
Net cash (outflow)/inflow from operating
activities 7(a) (3.7) 53.5
------------ ------------
Dividends received from joint ventures 0.3 1.1
------------ ------------
Returns on investments and servicing of
finance
Interest received 1.4 0.9
Interest paid (2.8) (1.3)
Interest from joint ventures 2.0 0.7
------------ ------------
0.6 0.3
------------ ------------
Taxation paid (11.5) (7.7)
------------ ------------
Capital expenditure and financial
investment
Purchase of tangible fixed assets (21.5) (10.8)
Sale of tangible fixed assets 2.8 2.2
------------ ------------
(18.7) (8.6)
------------ ------------
Acquisitions and disposals 7(c) (17.2) (19.0)
------------ ------------
Equity dividends paid (5.5) (3.8)
------------ ------------
Cash (outflow)/inflow before use of liquid
resources and financing (55.7) 15.8
Management of liquid resources
Net decrease/(increase) in short-term bank
deposits 20.7 (34.3)
------------ ------------
Financing
Issue of ordinary share capital 1.4 0.2
Purchase of own shares (0.1) (0.4)
Net proceeds of private placement of loan
notes - 30.1
------------ ------------
1.3 29.9
------------ ------------
(Decrease)/increase in cash during the
year (33.7) 11.4
------------ ------------
Reconciliation of net cash flow to
movement in net funds
(Decrease)/increase in cash (33.7) 11.4
(Decrease)/increase in liquid resources (20.7) 34.3
Increase in long-term borrowings - (30.1)
------------ ------------
Movement in net funds in the year (54.4) 15.6
Cash, net of debt on 1 July 62.0 46.4
------------ ------------
Cash, net of debt at 30 June 7(b) 7.6 62.0
============= =============
1. Accounting policies
The Group has adopted UITF 17 (Revised 2003) and UITF 38 which require
investment in own shares and the provision for share based payments to be shown
within shareholders' funds.
This has resulted in a restatement of the balance sheet at 30 June 2003 through
a transfer of £1.5m from fixed assets, and £0.8m from creditors resulting in a
net restatement of £0.7m to shareholders' funds. There is no material difference
to the charge to the profit and loss account under the new and old basis.
There have been no other changes to accounting policies in these financial
statements.
2. Turnover, profit and segmental information
Segmental analysis of the results is shown below:
Turnover Operating profit Profit before tax
2004 2003 2004 2003 2004 2003
£m £m £m £m £m £m
Construction &
Services 1,205.0 1,237.9 15.6 12.9 23.2 21.2
Homes 215.7 180.1 31.8 26.3 24.5 19.9
Property 46.6 21.2 6.6 6.1 5.0 4.6
Infrastructure
Investment 9.2 6.4 (1.9) (0.5) (1.3) 0.7
Corporate
Overhead/Finan
ce - - (9.5) (8.6) (10.8) (10.8)
Investment in
Belan - - - (2.3) - (2.3)
----------- ----------- ----------- ----------- ----------- -----------
1,476.5 1,445.6 42.6 33.9 40.6 33.3
=========== =========== =========== ========== =========== ===========
Construction & Services operating profit and profit before tax is after
deducting £2.6m for the amortisation of goodwill (2003: £0.9m).
Net operating assets Net assets
2004 2003 2004 2003
£m £m £m £m
Construction &
Services (122.0) (143.8) 66.3 63.5
Homes 201.3 179.2 53.6 43.5
Property 24.8 (14.2) 8.1 5.3
Infrastructure
Investment 9.0 11.1 (1.8) (0.9)
Corporate
Overhead/Finance (4.3) (1.6) (9.8) (18.7)
------------ ------------ ------------ ------------
108.8 30.7 116.4 92.7
============ ============ ============ ============
Geographical analysis of the results is as follows:
Turnover Operating profit Profit before tax
2004 2003 2004 2003 2004 2003
£m £m £m £m £m £m
United 1,430.3 1,368.2 40.7 26.1 38.6 25.4
Kingdom
Rest of 46.2 77.4 1.9 7.8 2.0 7.9
World
----------- ----------- ----------- ----------- ----------- -----------
1,476.5 1,445.6 42.6 33.9 40.6 33.3
=========== =========== =========== =========== =========== ===========
Net operating assets Net assets
2004 2003 2004 2003
£m £m £m £m
United Kingdom 114.4 40.7 113.5 86.6
Rest of World (5.6) (10.0) 2.9 6.1
----------- ----------- ----------- -----------
108.8 30.7 116.4 92.7
=========== =========== =========== ===========
The above analysis of turnover shows the geographical segments from which the
products or services are supplied and is not materially different from the
geographical segments to which products or services are supplied.
Net operating assets represent assets excluding cash, bank overdrafts, long-term
borrowings and Interest-bearing inter-company loans.
Net operating assets and net assets at 30 June 2003 have been restated in
accordance with UITF 17 (Revised 2003) and UITF 38.
3. Analysis of taxation charge
2004 2003
£m £m
Current tax
UK corporation tax on profits for the year
at 30% 10.8 9.0
Adjustments in respect of previous years 0.6 (0.4)
Joint venture tax 0.1 0.3
Overseas tax 0.5 0.9
------------ ------------
Total current tax 12.0 9.8
------------ ------------
Deferred tax
Origination and reversal of timing
differences 0.3 (0.2)
Adjustments in respect of previous years - (0.5)
Joint venture tax (0.3) 0.4
------------ ------------
Total deferred tax - (0.3)
------------ ------------
Total tax on profit on ordinary activities 12.0 9.5
------------ ------------
4. Dividends
2004 2003
£m £m
Ordinary Shares
Paid 6.0 pence (2003: 5.2 pence) 2.2 1.8
Proposed 13.0 pence (2003: 11.2 pence) 4.6 3.8
------------ ------------
6.8 5.6
============ ============
5. Earnings per share
Earnings per
share is
calculated as
follows: 2004 2003
Basic Diluted Basic Diluted
£m £m £m £m
Profit after
tax 28.6 28.6 23.8 23.8
Add: goodwill
amortisation 2.6 2.6 0.9 0.9
Less: tax on
goodwill
amortisation (0.6) (0.6) (0.2) (0.2)
------------ ------------ ------------ ------------
Adjusted profit
after tax 30.6 30.6 24.5 24.5
------------ ------------ ------------ ------------
million million million million
Weighted
average number
of shares 35.1 35.1 34.2 34.2
Weighted
average number
of unexercised
options -
dilutive effect - 0.1 - 0.3
Weighted
average impact
of Long-Term
Incentive Plan - 0.2 - 0.4
------------ ------------ ------------ ------------
Weighted
average number
of shares used
for EPS 35.1 35.4 34.2 34.9
------------ ------------ ------------ ------------
pence pence pence pence
Earnings per
share 81.5 80.8 69.5 68.2
------------ ------------ ------------ ------------
Adjusted
earnings per
share (after
excluding
goodwill
amortisation) 87.2 86.4 71.6 70.2
------------ ------------ ------------ ------------
6. Reconciliation of movements in shareholders' funds
£m
Profit for the year 28.6
Dividends (6.8)
------------
Retained profit for the year 21.8
Currency translation (0.4)
Issue of shares 2.0
Movement in share scheme reserve 0.3
------------
Net additions to shareholders' funds 23.7
------------
Opening shareholders' funds as previously reported 93.4
Prior year adjustment (note 1) (0.7)
------------
Opening shareholders' funds as restated 92.7
------------
Closing shareholders' funds 116.4
------------
7. Cash flow notes
a) Reconciliation of operating profit to operating
cash flows
2004 2003
£m £m
Group operating profit 39.4 33.1
Amortisation of goodwill 2.6 0.9
Depreciation charges 8.1 8.1
Profit on sale of fixed assets (1.3) (0.8)
Increase in stocks (52.1) (5.8)
(Increase)/decrease in debtors (26.2) 13.1
Increase in creditors 27.9 1.5
(Decrease)/Increase in provisions (2.1) 3.4
----------- -----------
Net cash (outflow)/inflow from operating
activities (3.7) 53.5
=========== ===========
b) Analysis of changes in net 1 July 2003 Cash flows 30 June 2004
funds
£m £m £m
Cash at bank and in hand 41.5 (30.4) 11.1
Bank overdrafts (0.4) (3.3) (3.7)
Short-term bank deposits 51.0 (20.7) 30.3
Long-term borrowings (30.1) - (30.1)
------------- ------------- -------------
Cash, net of debt 62.0 (54.4) 7.6
============= ============= =============
Cash, net of debt includes £10.2m (2003: £12.5m) being the Group's share of cash
and liquid resources held by joint arrangements and £13.6m (2003: £12.6m) of
cash not readily available to the Group.
c) Acquisitions and disposals 2004 2003
£m £m
Investment in subsidiary undertakings (17.0) (11.8)
Investment in subsidiary undertaking
(overdraft) - (1.9)
Investment in joint ventures (0.2) (5.3)
------------- -------------
(17.2) (19.0)
============= =============
8. Statutory Accounts
The financial information set out above does not constitute statutory accounts
for the years ended 30 June 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.
This information is provided by RNS
The company news service from the London Stock Exchange
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