Final Results
Taylor Woodrow PLC
04 March 2003
Embargoed: 07.00 hrs 4 March 2003
TAYLOR WOODROW plc PRELIMINARY RESULTS STATEMENT
(for the year ended 31 December 2002)
Real change, real growth
Operational Highlights
• UK business realigned to provide more efficient and cost effective
structure - nineteen regions consolidated into ten
• Housing represents 90 per cent of operating profit (2001: 78 per cent)
• UK Housing operating profit up 39 per cent to £177.6 million (2001:
£127.7 million)
• Confirm on track to realise £21 million of cost savings in the full
fiscal year 2003, rising to £30 million in 2004, from UK refocusing
• Worldwide housing completions up 18 per cent to 8,370 (2001: 7,096)
• Acquired Journey Homes in US, expanding our business into Arizona
Financial Highlights
• Operating profits up 15 per cent to £257.7 million (2001: £224.2
million)
• Profit before tax up 15 per cent to £233.1 million (2001: £202.3
million)
• Adjusted earnings per share up 12 per cent to 29.8 pence (2001: 26.6
pence) *
• Dividends per share up 10 per cent to 7.4 pence (2001: 6.7 pence)
• Return on capital employed, pre goodwill and exceptional items, up 1.8
per cent to 20.1 per cent (2001: 18.3 per cent)
• Confirm intention for £50 million share buy back this year at
appropriate time
Dr Robert Hawley, Chairman of Taylor Woodrow, said today:
'The last year has been one of decisive action for Taylor Woodrow and the
continued implementation of a strategy which has provided a clear focus and
steadfast objectives for our business, which together with our operations in
North America and Spain, has made us one of the UK's largest housebuilders.'
* Adjusted for exceptional restructuring costs (2001: integration costs and
losses on disposal of business) as detailed in note 5.
Iain Napier, Chief Executive of Taylor Woodrow, subsequently commented:
'2002 was a landmark year for Taylor Woodrow - a year of considerable progress,
improvement and growth and I am pleased to be able to report excellent results
across our business. Taylor Woodrow is a very different company than a year
ago, and one in better shape than ever for future success.
'We have a strong land bank in excess of 3 years output. In addition our
overall strategic land holdings, which do not currently have planning
permission, represent some 57,000 potential plots, the majority of which are
held under option and all at discount to market values. This source of land will
continue to assist us in our overall objective of delivering good margins.
'In recognition of the importance of a national strategy for land acquisition we
have restructured our resources and have introduced a Core Land & Planning Team
to apply disciplined process and asset management to optimise the quality and
supply of our land. We are involved in two of the Government's major growth
areas, namely Stansted in Essex and Ashford in Kent where we have significant
land holdings under option. We also acquired a development site for up to 1,100
homes at Church Crookham, Fleet, where we expect to obtain planning permission
later this year. In addition to our residential land bank, we also have
commercial land capable of supporting 4.1 million sq ft of accommodation.
'We start 2003 in good shape with solid demand for our product across all
markets. Last year, we estimate new house price inflation to have been between
8 and 12 per cent, depending on geography and type of home. In 2003 we expect
this to fall to more sustainable levels. In North America the outlook remains
good and we anticipate house price inflation of between 3 and 5 per cent over
the year.
'There is a new energy at Taylor Woodrow. We have accomplished a great deal in
the past year and have a positive view of the future. We have undergone radical
and meaningful changes and I look forward to building on these in 2003 and
beyond.'.
- ends -
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A presentation to analysts will be made at 10.30 hrs. This presentation will be
broadcast live on taylorwoodrow.com.
For further information, please contact
Ian Morris 0121 600 8520 / 07816 518 767
Taylor Woodrow Public Relations
Jonathan Murrin 0121 600 8521 / 07816 518 718
Taylor Woodrow Investor Relations
Scott Fulton 020 7269 7130 / 07788 144 993
Peter Otero 020 7269 7121 / 07979 537 408
Financial Dynamics
Operating and Financial Review
Highlights
Taylor Woodrow delivered strong profit growth during 2002 with operating profit
increasing by 14.9% to £257.7 million. Pre tax profit was 15.2% higher at £233.1
million.
A £12 million exceptional charge was included in the results for the
reorganisation of the UK business announced during the year. In 2003, cost
savings of £21 million are expected rising to an annually recurring £30 million
of savings.
Return on average capital employed, pre goodwill and exceptional items,
increased to 20.1 per cent (2001: 18.3 per cent). The balance sheet remains
strong, with gearing at 17.6 per cent (2001: 21.9 per cent). Shareholder funds
increased by £49.7 million during 2002, to end the year at £1,405.9 million,
representing 254.4p per share.
Total Housing
2002 2001
Average Capital Employed * £m 1,177.5 1,142.9
Operating Profit ** £m 255.4 190.8
Return on Average Capital Employed % 21.7 18.6
Operating Margin (%) ** % 14.6 12.5
* pre average goodwill of £244.2 million (2001: £252.4 million)
** pre goodwill amortisation of £13.1 million (2001:£10.7 million) and
exceptional items of £10.4 million (2001: £8.4 million)
The housing businesses located in the United Kingdom, North America, Spain and
Gibraltar all had a successful 2002. Worldwide housing completions rose 18 per
cent to 8,370 (2001: 7,096) with operating profits, pre goodwill amortisation
and exceptional items, increasing 34 per cent per cent to £255.4 million, (2001:
£190.8 million).
UK Housing
2002 2001
Average Capital Employed * £m 844.2 793.0
Operating Profit ** £m 177.6 127.7
Return on Average Capital Employed % 21.0 18.9
Operating Margin ** % 15.0 14.4
Home Completions 6,238 5,226
* pre average goodwill of £240.6 million (2001: £252.4 million)
** pre goodwill amortisation of £12.9 million (2001: £10.7 million) and
exceptional items of £10.4 million (2001: £8.4 million)
The UK housing division, which accounts for 63 per cent of Group operating
profit pre exceptional items and goodwill amortisation, benefited from strong
markets in 2002. Bryant Homes, acquired in March 2001, achieved good volume
growth with 6,025 home completions (2001: 5,115) and 444 lot completions (2001:
657). The average sales price increased by 12 per cent to £176,000 (2001:
£157,000).
Bryant Homes contributed £171.9 million to Group operating profit and achieved
an operating margin of 15.6 per cent compared to 14.8 per cent in 2001.
Capital Developments, which will no longer be reported separately, completed 213
homes (2001: 111) with an average selling price of £354,000 (2001: £333,000).
Operating margins were 7.4 per cent (2001: 5.3 per cent). All UK homes in the
future will be sold under the Bryant Homes brand.
At the year end the UK Housing land bank consisted of 20,657 owned or controlled
plots with outline planning permission, representing some 3.1 years' supply. In
addition to this there is a strategic land portfolio of approximately 12,700
acres.
Following stronger than expected growth in 2002, a slowing in UK house price
inflation is expected in 2003 to more sustainable levels. In London and the
South East house prices have already been falling at the upper end of the
market. Taylor Woodrow's exposure to this segment is limited and it is expected
that the broader market will continue to be supported by low interest rates and
the long term national imbalance of supply and demand.
At the end of the year the UK Housing business had a strong forward order book
of £260 million - up 25 per cent on the previous year.
North America Housing
2002 2001
Average Capital Employed * £m 306.7 308.5
Operating Profit ** £m 66.2 53.4
Return on Average Capital Employed % 21.6 17.3
Operating Margin ** % 12.7 9.2
Home Completions 1,839 1,569
* pre average goodwill of £3.6 million (2001: £Nil)
** pre goodwill amortisation of £0.2 million (2001: £Nil)
Total housing completions for the North American operations reached 1,839 (2001:
1,569). At the same time we successfully repositioned our product mix toward
high opportunity segments in the low and mid market. Underlying operating profit
was £69.1 million before allowing for currency fluctuations.
Most of the increase in completions is due to the inclusion of Journey Homes,
which was acquired for £29.7 million in August. The existing management team
joined Taylor Woodrow thus facilitating an easy integration and the business has
performed in line with expectations. This business is anticipated to move into
the mid market over the next few years and is now utilising the Taylor Woodrow
brand in common with the other US businesses. Since acquisition in August 2002,
211 homes have been sold at an average selling price of £80,000.
North American housing operating profit, pre goodwill amortisation, increased to
£66.2 million (2001: £53.4 million) with return on capital increasing to 21.6
per cent from 17.3 per cent.
Operations in Florida enjoyed strong sales in line with our own expectations at
all sites. In 2002 305 homes were completed (2001: 316) at an average selling
price of £378,000 (2001: £393,000).
In Canada, operating under the Monarch name, another year of strong performance
was delivered, as we repositioned our product mix towards lower price points.
Completions in 2002 were 1,030 homes (2001: 871) at an average selling price of
£112,000 (2001: £130,000).
The Californian business has been making good progress following operating
losses recorded in 2001. Whilst average selling prices have not significantly
changed this year as the land bank was built out, it is anticipated that average
selling prices will reduce by approximately 25 per cent in 2003 as the business
completes its repositioning into the mid market. To achieve this change,
investments have been made in mid market land during 2002. At the end of the
year the Californian land bank consisted of 706 lots (2001: 438 lots)
representing 2.7 years supply. Completions in 2002 were 241 homes (2001: 340) at
an average selling price of £709,000 (2001: £742,000).
Taylor Woodrow operates from two sites in Texas - Avalon, Houston and Steiner
Ranch, Austin. 2002 home completions were 52 (2001: 42) at an average selling
price of £287,000 (2001: £264,000).
The total North American land bank, with planning permission, now contains
14,954 lots compared to 9,800 lots at the end of 2001, which reflects a 3.3 year
supply.
Going into 2003 the total order book for North America was £329 million - up 31
per cent on the previous year.
Spain and Gibraltar Housing
2002 2001
Average Capital Employed £m 27.3 23.8
Operating Profit £m 11.6 8.7
Return on Average Capital Employed % 42.5 36.6
Operating Margin % 24.0 20.7
Home Completions 293 301
Housing operations in Spain and Gibraltar continue to perform well. Taylor
Woodrow is principally active in Mallorca, Costa Blanca and the Costa Del Sol,
and achieved an operating profit of £11.6 million (2001: £8.7 million) at a
margin of 24 per cent. The second home market in Spain is holding up well, with
demand particularly strong from the UK on the back of a strong pound and low
interest rates. Return on average capital employed for these housing operations
increased to 42.5 per cent (2001: 36.6 per cent).
Going into 2003 the order book for Spain and Gibraltar was £46 million - up from
the £31 million at the same time last year. The land bank at the end of the year
consisted of 1,508 units (2001: 1,581).
Trading Property
2002 2001
Average Capital Employed £m 94.8 78.4
Operating Profit * £m 4.6 25.0
Return on Average Capital Employed % 4.9 31.9
Operating Margin * % 5.3 17.8
* pre exceptional items of £1.0 million (2001: £Nil)
Compared to 2001, operating profit fell £20.4 million due to lower trading
development profits in the UK and rental incomes from development properties.
Profits are likely to remain at this subdued level until exposure is increased
to the trading development sector and profits can be recognised from the K2
development at St Katharine's Dock.
Commercial development capital employed has increased in 2002 but is distorted
by several large developments, including K2, currently under construction and
the underlying business has been reduced due to poor market conditions.
Investment Property
2002 2001
Average Capital Employed £m 196.4 306.2
Operating Profit £m 11.1 16.7
Return on Average Capital Employed % 5.7 5.5
Taylor Woodrow has continued to divest the global investment property portfolio
with the sale of four properties during the year generating proceeds of £59.7
million. The portfolio, with a year-end value of £183.9 million (2000: £259.9
million), now mainly comprises St Katharines Dock Estate.
Construction
2002 2001
Operating Profit * £m 11.7 12.2
Operating Margin * % 3.2 2.8
Profit before tax £m 21.1 22.8
* pre exceptional items of £0.6 million (2001: £1.4 million)
Taylor Woodrow Construction has continued its good performance following the
refocus of the business in previous years. Key external areas for the business
remain repeat work from blue chip customers, healthcare PFI and facilities
management. However the fastest growing part of the business is supporting the
house building and commercial property activities. In 2002 £82.4 million of
internal work was completed, approximately 18 per cent of the construction
business' total workload - up 48 per cent on last year.
In 2003 internal workload is expected to grow to around 25 per cent as the
construction business delivers the large and complex mixed use schemes for the
group. Operating profit was £11.7 million (2001: £12.2 million) and profit
before tax £21.1 million (2001: £22.8 million).
The construction order book, which includes internal work, stood at £673 million
at the year end - up 13 per cent on the previous year.
Shareholders' Funds
Total shareholders' funds at the end of 2002 increased from £1,335.1 million to
£1,405.9 million. The implementation of FRS 19 -Deferred Tax - brought a prior
year adjustment of £21.1 million to the opening shareholders funds, which were
increased to £1,356.2 million. This new accounting standard has not had a
significant effect on the ongoing tax charge in the profit and loss account.
Retained profit for the year of £114.5 million was offset by currency
translation differences of £25.0 million due to a revaluation deficit of £20.5
million on investment properties and currency translation differences caused by
the weakening of both the US and Canadian dollars over the year. There was a
further reduction in shareholders' funds of £19.8 million as previously revalued
fixed asset properties, mainly the Southall complex in West London, were
transferred to stock from fixed assets since they are undergoing redevelopment
pending a future sale.
At the end of the year, £241.4 million of goodwill remained on the balance
sheet. The Journey Homes acquisition added £7.5 million of goodwill to the
balance sheet. The amortisation charge for the year was £13.1 million in total -
£12.9 million relating to the Bryant Homes acquisition and £0.2 million to the
Journey Homes acquisition.
Shareholders' Returns
Adjusted earnings per share increased by 12.0 per cent from 26.6 pence to 29.8
pence. The proposed final dividend of 5.2 pence produces a total for the year
of 7.4 pence, an increase of 10.4 per cent over last year, and reflects the
Board's confidence in Taylor Woodrow's continuing strong profit performance and
cash generation. The dividend was covered 3.8 times by earnings - the same
level as the previous year. The share price at 31 December 2002 was 169.5 pence
and trading at a 33.4 per cent discount to shareholders' funds per share.
Cash Flow
In 2002 there was a £12.3 million increase in cash compared to a £37.7 million
outflow of cash in 2001. The cash inflow from operating activities of £147.4
million (2001: £219.0 million) was significantly lower than operating profit as
working capital increased. Land stocks increased by £158.3 million and work in
progress by £99.4 million. These increases were partly offset by an increase in
trade creditors of £117.1 million.
The net cash outflow from returns on investment and servicing of finance of
£17.9 million (2001: £39.3 million) were lower than the previous year largely
due to the timing of interest payments in 2002.
The net cash inflow from capital expenditure and financial investment of £61.5
million (2001: £129.0 million) was sharply lower than the previous year due to a
lower level of investment property sales in 2002.
The £29.7 million acquisition in the cash flow statement refers to the Journey
Homes acquisition.
The net cash inflow from financing of £32.6 million (2001: net outflow £3.0
million) largely reflects the surplus on refinancing existing facilities with
the bonds issued in February 2002.
Treasury Management and Funding
Net debt stood at £247.8 million (2001: £297.6 million) equivalent to a net
gearing of 17.6 per cent (2001: 21.9 per cent). During the year net debt peaked
at £429 million, and averaged £366 million during the year. This was reduced at
year end due to the timing of house sales and land payments. Net interest cost
for the year rose slightly to £34.7 million (2001: £33.1 million).
At the year end Taylor Woodrow had undrawn committed facilities totalling £305.2
million.
The weakening of both the US dollar and the Canadian dollar over 2002 lowered
reported profit before tax by £2.8 million. Net assets also reduced by £25
million due to the weakening of these currencies.
Shareholder Information
The 2002 final dividend will be paid on Tuesday 1 July 2003 to shareholders
whose names appear on the register of members at the close of business on Friday
30 May 2003.
The company offers a Dividend Re-Investment Plan which provides shareholders
with a facility to use their cash dividends to purchase Taylor Woodrow plc
shares in the market. Details will be sent to ordinary shareholders with the
2002 annual report and accounts which will be posted on 4 April 2003. Copies of
the 2002 annual report and accounts will also be available from that date on the
Company's website taylorwoodrow.com and from the registered office at 2 Princes
Way, Solihull, West Midlands, B91 3ES.
Group profit and loss account
for the year ended 31 December 2002
Notes Before goodwill Goodwill amortisation 2002 2001
amortisation & & exceptional item £m As restated
exceptional item (note 1) (note 8)
£m £m £m
Continuing operations
Turnover: Group and share of joint ventures 2,215.8 - 2,215.8 2,149.9
Less: share of joint ventures' turnover (7.2) - (7.2) (11.5)
Group turnover 1 2,208.6 - 2,208.6 2,138.4
Cost of sales (1,797.9) - (1,797.9) (1,772.5)
Gross profit 410.7 - 410.7 365.9
Administrative expenses (127.9) (25.1) (153.0) (141.7)
Group operating profit 1 282.8 (25.1) 257.7 224.2
Share of operating profit in 2.0 - 2.0 3.3
joint ventures
284.8 (25.1) 259.7 227.5
Profit on disposal of 2 8.1 7.9
investments and properties
Profit on ordinary activities 267.8 235.4
before interest
Interest receivable 4.5 5.2
Interest payable: Group (35.9) (34.3)
Joint ventures (3.3) (4.0)
(39.2) (38.3)
Profit on ordinary activities 233.1 202.3
before taxation
Tax on profit on ordinary 3 (76.9) (64.8)
activities
Profit on ordinary activities 156.2 137.5
after taxation
Minority equity interests (1.1) (2.5)
Profit for the financial year 155.1 135.0
Dividends paid and proposed 4 (40.6) (37.2)
Profit retained 114.5 97.8
Basic earnings per share 5 28.2p 25.3p
Diluted earnings per share 5 28.1p 25.2p
Adjusted basic earnings per 5 29.8p 26.6p
share
Group statement of total recognised gains and losses
for the year ended 31 December 2002
Notes 2002 2001
£m As restated
(note 8)
£m
Profit for the financial year 155.1 135.0
Unrealised deficit on revaluation of properties (20.7) (2.5)
Revaluation reversed on fixed asset properties transferred to stocks (19.8) -
Tax on realised revaluation surplus (1.0) (1.3)
113.6 131.2
Currency translation differences on foreign currency net investments (25.0) (1.1)
Total recognised gains and losses relating to the year 88.6 130.1
Prior year adjustment 8 21.1
Total recognised gains and losses recognised since last annual report and financial 109.7
statements
Reconciliation of movements in group shareholders' funds
for the year ended 31 December 2002
2002 2001
£m As restated
(note 8)
£m
Profit for the financial year 155.1 135.0
Dividends (40.6) (37.2)
114.5 97.8
Other recognised gains and losses relating to the year (net) (66.5) (4.9)
New share capital subscribed 1.7 406.5
Shares repurchased - (50.3)
Net increase in shareholders' funds 49.7 449.1
Opening shareholders' funds as previously stated 1,335.1 887.7
Prior year adjustment (note 8) 21.1 19.4
Opening shareholders' funds as restated 1,356.2 907.1
Closing shareholders' funds 1,405.9 1,356.2
Balance sheet
at 31 December 2002
Group
£m 2002 2001
£m As restated
(note 8)
£m
Fixed assets
Intangible assets
Goodwill 241.4 247.0
Tangible assets
Investment properties 183.9 259.9
Other 21.1 71.9
Investments
Joint ventures
Share of gross assets (2001: £37.1m) 27.2
Share of gross liabilities (2001: £36.8m) (27.2)
- 0.3
Other 3.2 -
449.6 579.1
Current assets
Stocks 1,707.0 1,441.4
Debtors 212.5 210.1
Current asset investments 12.6 4.3
Cash at bank and in hand 180.6 116.5
2,112.7 1,772.3
Creditors: amounts falling due within one year (632.3) (756.1)
Net current assets 1,480.4 1,016.2
Total assets less current liabilities 1,930.0 1,595.3
Creditors: amounts falling due after more than one year (497.4) (211.6)
Provisions for liabilities and charges (26.7) (26.9)
1,405.9 1,356.8
Represented by:
Capital and reserves - equity
Called up ordinary share capital 138.2 137.9
Share premium account 591.2 590.5
Revaluation reserve 63.4 134.2
Capital redemption reserve 21.5 21.5
Profit and loss account 591.6 472.1
Shareholders' funds 1,405.9 1,356.2
Minority interests in equity of subsidiary undertakings - 0.6
1,405.9 1,356.8
Group cash flow statement
for the year ended 31 December 2002
Notes £m 2002 £m 2001
£m £m
Operating activities
Cash inflow from operating activities 6 147.4 219.0
Dividends from joint ventures - 1.0
Returns on investments and servicing of finance
Interest received 4.4 5.5
Interest paid (20.7) (34.9)
Dividends paid by subsidiary undertakings to minority shareholders (1.6) (9.9)
Net cash outflow from returns on investments and servicing of finance (17.9) (39.3)
Taxation
UK Corporation tax paid (51.2) (48.2)
Overseas tax paid (23.3) (30.3)
Tax paid (74.5) (78.5)
Capital expenditure and financial investment
Purchase of fixed assets and properties (8.8) (11.4)
Sale of fixed assets and properties 70.3 140.4
Net cash inflow from capital expenditure and financial investment 61.5 129.0
Acquisitions and disposals
Purchase of subsidiary undertakings 7 (29.7) (222.3)
Net overdrafts acquired with subsidiary - (58.0)
Net cash outflow from acquisitions and disposals (29.7) (280.3)
Equity dividends paid (37.8) (36.4)
Net cash inflow/(outflow) before use of liquid resources and 49.0 (85.5)
financing
Management of liquid resources
Cash (placed on)/withdrawn from short-term deposit (61.0) 47.9
(Purchase)/sale of current asset investments (8.3) 2.9
Net cash (outflow)/inflow from management of liquid resources 6 (69.3) 50.8
Financing
Issue of ordinary share capital by Taylor Woodrow plc 1.7 2.3
Repurchase of ordinary share capital - (50.3)
Debt due within one year:
new loans 2.9 286.8
repayment of loans (207.4) (120.8)
Debt due after one year:
new loans 263.3 141.4
repayment of loans (27.9) (262.4)
Net cash inflow/(outflow) from financing 32.6 (3.0)
Increase/(decrease) in cash in the year 6 12.3 (37.7)
Notes to the preliminary accounts
1. Segmental analysis
Group turnover 2001 Group operating 2001 Capital As restated
by origin £m profit £m employed 2002 (note 8)
2002 2002 £m 2001
£m £m £m
By activity
Housing 1,751.8 1,523.0 245.0 182.4 1,225.4 1,129.6
Property development and 92.9 176.7 14.7 41.7 234.5 347.8
investment
Construction 363.9 438.7 11.1 10.8 (47.6) (70.0)
2,208.6 2,138.4 270.8 234.9 1,412.3 1,407.4
Goodwill (13.1) (10.7) 241.4 247.0
amortisation/goodwill - 257.7 224.2 1,653.7 1,654.4
housing
By market
North America 544.3 611.0 66.5 58.1 337.8 310.6
Rest of the World 98.5 134.4 23.3 18.8 7.2 (15.4)
Total overseas 642.8 745.4 89.8 76.9 345.0 295.2
United Kingdom 1,565.8 1,393.0 181.0 158.0 1,067.3 1,112.2
2,208.6 2,138.4 270.8 234.9 1,412.3 1,407.4
Goodwill (13.1) (10.7) 241.4 247.0
amortisation/goodwill
257.7 224.2 1,653.7 1,654.4
Net debt (247.8) (297.6)
Minority interests - (0.6)
Equity shareholders' funds 1,405.9 1,356.2
Turnover by origin represents sales to third parties and is not materially different from turnover to third parties
by destination.
Operating profit for construction excludes its share of the construction joint ventures and interest. Profit before
taxation for construction is £21.1m (2001: £22.8m) including these items.
Operating profit for 2002 in the United Kingdom is stated after deduction of exceptional administrative expenses of
£12.0m for restructuring, mainly redundancies and office relocations, being Housing £10.4m, Property £1.0m and
Construction £0.6m (2001: £9.8m being £8.4m in respect of the integration of Bryant and Taywood Homes housing
operations and £1.4m in respect of the integration of Taylor Woodrow and Bryant Construction operations).
The charge for goodwill amortisation of £13.1m (2001: £10.7m) is in respect of United Kingdom £12.9m (2001: £10.7m)
and North America £0.2m (2001: £nil). Goodwill of £241.4m (2001: £247.0m) is in respect of United Kingdom £234.1m
(2001: £247.0m) and North America £7.3m (2001: £nil).
2. Profit on ordinary activities before taxation
2002 2001
£m £m
Ordinary profit before taxation includes
Rents on investment properties, less outgoings 13.9 18.3
Profit on disposal of businesses - 1.1
Profit on sale of investments 3.9 3.3
Profit on disposal of investment and fixed asset properties 4.2 3.5
Profit on disposal of investments and properties 8.1 7.9
Notes to the preliminary accounts (continued)
3. Tax on profit on ordinary activities
2002 2001
£m As restated (note 8)
£m
United Kingdom tax
Corporation tax : Current year 53.1 52.9
Prior year (5.3) -
Relief for overseas tax (3.8) (9.0)
Deferred tax : Current year 3.9 -
Prior year 4.2 (11.1)
Joint ventures 0.7 (0.2)
Overseas tax
Current : Current year 22.2 35.1
Prior year (4.7) -
Deferred : Current year 6.2 3.4
Prior year 0.4 (6.3)
76.9 64.8
The differences between the total current tax shown above and the amount calculated
by applying the standard rate of UK corporation tax to the profit before tax are as
follows:
Profit on ordinary activities before tax 233.1 202.3
Add: share of joint ventures' loss before tax 1.3 0.7
Group profit on ordinary activities before tax 234.4 203.0
Tax on Group profit on ordinary activities at standard UK corporation tax rate of 70.3 60.9
30% (2001: 30%)
Effects of:
(Over)/under provision in respect of prior years (10.0) -
Amortisation of goodwill and fair value adjustments 6.7 6.8
Other permanent disallowable expenditure 0.5 3.7
Non taxable income (3.2) (2.4)
Overseas income receivable 3.9 9.2
Double tax relief for overseas tax (3.8) (9.0)
Higher rates of tax on overseas earnings 5.2 12.2
Capital allowances for the period in excess of depreciation 2.5 3.9
Short-term timing differences (10.3) (1.1)
Pension provision (0.4) (2.7)
Tax trading losses carried forward (0.6) (2.8)
Other 0.7 0.3
Group current tax charge for year 61.5 79.0
There is no material difference between the tax rates on ordinary activities and exceptional items.
4. Ordinary dividends on equity shares
2002 2001
£m £m
Interim of 2.2p per share (2001: 2.0p) 12.2 11.6
Proposed final of 5.2p per share (2001: 4.7p) 28.4 25.6
40.6 37.2
Notes to the preliminary accounts (continued)
5. Earnings per share
2002 2001
£m As restated (note 8)
£m
Earnings per share have been calculated by dividing:
Profit for the financial year 155.1 135.0
by the weighted average number of shares for basic earnings per share 549.3m 534.3m
weighted average of dilutive options 2.8m 1.8m
weighted average of dilutive awards under the Group Executive Bonus Plan 0.3m 0.5m
for diluted earnings per share 552.4m 536.6m
Adjusted basic earnings per share adjusts profit for financial year as follows:
add: exceptional restructuring (2001: integration) costs (net of tax effect) 8.4 6.6
add: losses on disposal of businesses (net of tax effect) - 0.3
for adjusted basic earnings per share 163.5 141.9
6. Group cash flow statement
2002 2001
£m £m
Reconciliation of operating profit to net cash flow from operating activities
Operating profit 257.7 224.2
Depreciation and amortisation 20.3 22.0
(Increase)/decrease in stocks (253.6) 78.6
Increase in debtors (20.9) (26.2)
Increase/(decrease) in creditors 140.6 (75.7)
Exchange adjustments 3.3 (3.9)
Net cash inflow from operating activities 147.4 219.0
Reconciliation of net cash flow to movement in net debt
Increase/(decrease) in cash in year 12.3 (37.7)
Cash inflow from increase in debt (30.9) (45.0)
Cash outflow/(inflow) from increase/(decrease) in liquid resources 69.3 (50.8)
Change in net debt resulting from cash flows 50.7 (133.5)
Amortisation of discount on issue of debt and expenses of issue for the year (0.7) (0.3)
Loan notes issued as part of consideration for acquisition - (5.4)
Debt acquired with subsidiary - (116.5)
Exchange movement (0.2) 2.0
Movement in net debt in the year 49.8 (253.7)
Net debt at 1 January (297.6) (43.9)
Net debt at 31 December (247.8) (297.6)
Notes to the preliminary accounts (continued)
6. Group cash flow statement (continued)
Analysis of net debt
At Cash Non-cash changes Exchange movement At
1 January flow £m £m 31 December 2002
2002 £m £m
£m
Cash at bank and in hand 116.5 68.1 - (4.0) 180.6
Less: Deposits due after one day (52.6) (61.0) - 0.5 (113.1)
Overdrafts on demand (7.9) 5.2 - 0.1 (2.6)
12.3
Debt due after one year
Debenture loans (198.8) (234.6) 5.5 3.5 (424.4)
Bank loans (0.5) (0.8) 0.7 0.1 (0.5)
Debt due within one year
Debenture loans (11.2) 6.7 (6.2) 0.2 (10.5)
Bank loans and overdrafts (207.9) 203.0 (0.7) - (5.6)
Add back overdrafts on demand 7.9 (5.2) - (0.1) 2.6
(30.9)
Liquid resources
Deposits due after one day 52.6 61.0 - (0.5) 113.1
Current asset investments 4.3 8.3 - - 12.6
69.3
Total (297.6) 50.7 (0.7) (0.2) (247.8)
7. Acquisition of the business and net assets of Journey Homes
On 15 August 2002, the Group acquired the business and net assets of Journey
Homes of Arizona, United States of America, for £29.7m cash. The net assets
acquired included stocks of £25.4m including a fair value uplift of £6m.
Goodwill was £7.5m. The profit and cash flow of Journey Homes were not material
to the Group profit and loss account or cash flow.
8. Prior year adjustment
The adoption of FRS 19 - 'Deferred Tax' has required a change to the accounting
treatment of deferred tax and the prior year results have been restated
accordingly. Under FRS 19 the company is required to make full provision for
deferred tax in respect of timing differences recognising in total the potential
future tax impact of past transactions. Under SSAP 15 provision for deferred tax
was only required if it was expected that timing differences would reverse in
the foreseeable future. The Group's deferred tax asset and provision at 31
December 2001 have been restated to £30.2m and £1.1m respectively including the
recognition of an additional deferred tax asset of £20.6m and reducing the
Group's deferred tax provision by £0.5. The total adjustment of £21.1m has been
credited to the profit and loss account as a prior year adjustment, which
includes £2.0m credited to profit and loss account in respect of the year ended
31 December 2001. The total adjustment includes £3.3m credited to the Company's
profit and loss account as a prior year adjustment.
9. General
The preliminary accounts have been prepared on a basis which is consistent with
the accounting policies adopted for the year to 31 December 2001 except in
respect of Deferred Tax as described in note 8.
The preliminary accounts were approved by the Board of Directors on 4 March
2003.
These accounts do not constitute the company's statutory accounts for the years
ended 31 December 2002 or 2001 but are derived from those accounts. Statutory
accounts for 2001 have been delivered to the Registrar of Companies and those
for 2002 will be delivered following the company's annual general meeting. The
auditors have reported on these accounts; their reports were unqualified and did
not contain a statement under section 237 (2) or (3) of the Companies Act 1985.
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