Final Results
Keller Group PLC
12 March 2004
For immediate release Friday, 12 March 2004
Keller Group plc
Preliminary results for the year ended 31 December 2003
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 2003.
Highlights include:
•Turnover up 11% at £567.5m (2002: £511.0m), benefiting from first full
year contributions from McKinney and Keller-Terra
•Profit before tax* down 6% to £28.7m (2002: £30.4m), impacted by adverse
currency fluctuations of £0.9m
•Earnings per share* reduced to 24.1p (2002: 32.7p), reflecting in part an
increased minority interest and a higher tax charge
•Total dividend per share increased by 5% to 10.4p (2002: 9.9p)
•Strong cash performance, resulting in a fall in net debt to £60.7m (2002:
£68.0m)
•Makers expected to recover in 2004
•Current order book remains good, representing over four months' sales
•Justin Atkinson takes over as Chief Executive at end of March, following
the retirement of Tom Dobson
* before exceptional items of £10.5m and amortisation of intangibles of £3.4m
(2002: nil and £3.1m)
Justin Atkinson, Keller Chief Executive designate said:
'The 2003 results mark a disappointing pause in the Group's long-term track
record of growth. Our current focus is to consolidate and strengthen our
existing businesses, returning Makers to profitability and improving Suncoast's
margins during the course of 2004.'
'Looking ahead, we are confident of restoring our successful track record of
growing the business through a combination of organic expansion, both in
existing and new markets, and targeted bolt on acquisitions.'
For further information, please contact:
Keller Group plc www.keller.co.uk
____________________
Tom Dobson, Chief Executive 020 8341 6424
Justin Atkinson, Chief Operating Officer
James Hind, Finance Director
Smithfield 020 7390 4600
Reg Hoare/Anna Rainbow
A presentation for analysts will be held at 9.15 for 9.30am at Butcher's Hall,
87-88 Bartholomew Close, EC1
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 2003 financial year mark a disappointing pause in the
Group's long-term track record of growth. In general, our specialist ground
engineering businesses performed ahead of the previous year and in line with our
expectations at the start of the year, but the Group result was held back by
reduced margins in our US post-tensioning business, Suncoast, and by a poor
result from Makers in the UK.
Sales at £567.5m were up 11% (2002: £511.0m), with profit before tax,
exceptional items and amortisation of intangibles down 6% to £28.7m (2002:
£30.4m). The results include an underlying loss of £0.9m at Makers (which
compares to a £2.8m operating profit in the previous year) and the adverse net
impact of exchange rate fluctuations of £0.9m. Earnings per share before
exceptional items and amortisation of intangibles reduced to 24.1p (2002:
32.7p).
Exceptional costs of £3.1m were incurred in connection with the restructuring of
our UK businesses. Makers' weak performance also resulted in an exceptional
goodwill impairment charge of £7.4m. Profit before tax after exceptional items
and amortisation of intangibles totalled £14.8m (2002: £27.3m).
We announced in December 2003, following a strategic review, that the Group
would focus on its core specialist ground engineering activities worldwide and
that its management and reporting would be structured along geographic, rather
than product, lines. We believe that these actions will strengthen the Group in
2004.
Cash flow and net debt
Net cash inflow from operating activities was £40.0m, representing 98% of the
Group's EBITDA. This compares to £43.2m and 100% in 2002. This strong cash
performance, including a particularly good inflow in the last quarter, resulted
in net debt at the end of the year of £60.7m (2002: £68.0m). Interest cover
remains comfortable at over 10 times EBITDA.
Dividends
In recognition of the strong fundamentals of our core business and our
confidence in the future performance of the Group, the Board is recommending an
increased final dividend of 6.95p per share (2002: 6.6p), bringing the total
dividend for the year to 10.4p (2002: 9.9p), an increase of 5%. This will be
paid on 28 June 2004 to shareholders on the register at 28 May 2004. This
increase is in line with our policy of reinvesting our strong cash flow in the
continued growth of the Group, whilst at the same time maintaining a healthy
dividend cover and seeking to reward shareholders with above inflation
increases.
Board
During the year, we completed our management succession planning. Following the
appointment in March 2003 of Justin Atkinson (43) as Chief Operating Officer, we
were pleased to welcome James Hind to succeed Justin as Finance Director in
July. James, 39, joined the Group from D S Smith plc, the international
packaging manufacturer and office products wholesaler, where he had been group
financial controller since 1997.
The board was further strengthened during the year by the appointments of Bob
Rubright (51) in March and Dr Wolfgang Sondermann (53) in November, who between
them have careers spanning 38 years with the Keller Group. Rob Ewen stood down
in November, following the decision to change the Group's strategic focus and
its management and reporting structure.
With the new executive team secured, Tom Dobson, who joined the Group in 1966
and has been Chief Executive for the past six years, will retire from his
position and from the Board at the end of March 2004. We are indebted to Tom for
his enormous contribution to the Group and we will continue to benefit from his
wisdom and experience, as he will remain an adviser to the Group for a further
three years. Justin Atkinson will succeed Tom as Chief Executive.
Mr Pedro Lopez Jimenez joined the board as a non-executive director in January
2003 and in October we welcomed Dr Kevin Bond back to the board as a
non-executive director, following his two-year assignment at the Home Office.
People
May 2004 will mark the tenth anniversary of Keller's listing on the London Stock
Exchange. Since our flotation, we have delivered to shareholders compound annual
growth in earnings per share of 10%. At the heart of this track record is a team
of quality people with huge expertise and an in-depth knowledge of our industry,
many of whom have served with us throughout this period. On behalf of the board,
I would like to thank all our employees for their hard work and to reiterate our
commitment to rewarding their achievements and loyalty with excellent training
and development opportunities in an environment where they can fulfil their
potential.
Strategy
Our current focus is to consolidate and strengthen our existing businesses,
returning Makers to profitability and improving Suncoast's margins during the
course of 2004. Looking ahead, we continue to see significant growth
opportunities within our core competence of specialist ground engineering in the
United States, Europe and South East Asia. We are therefore confident of
restoring our successful track record of growing the business through a
combination of organic growth, both in existing and new markets, and targeted
bolt on acquisitions.
Outlook
The current year has started somewhat slowly, which is likely to mean that
profit will be more second-half weighted than in 2003, consistent with earlier
years. However, order intake in the first two months of 2004 was good,
especially in Continental Europe & Overseas, where prospects are encouraging. In
North America, we foresee little change in our major markets, but a continuing
weakness in the US dollar will affect the result in sterling terms. We
anticipate another good year in Australia and, in the UK, we expect Makers to
return to profitability during the course of 2004, the benefit of which will
come through in the second half. Our current order book remains good,
representing over four months' sales, giving us a sound platform from which to
go forward.
Operating Review
2003 was a demanding year for Keller, with a robust performance from all our
specialist ground engineering businesses with the exception of Suncoast, which
suffered from rising costs following the introduction of US tariffs on steel
strand. This generally good performance was overshadowed by a disappointing
result from Makers, reflecting poor contracting margins in its infrastructure
business and low volume in social housing.
Conditions in our major markets
Given our broad geographic spread, we were once again subject to a variety of
market conditions: US construction continued to be characterised by a healthy
residential sector, broadly flat investment in public infrastructure and
softness in the commercial sector. In Europe, we saw a further reduction in
construction volumes in Germany and France, whilst public infrastructure
spending sustained demand in our other principal European markets such as
Austria, Poland and the UK. Australia, which continued its post-Olympics
recovery, remained buoyant during the year. Whilst the Middle and Far East
markets were generally subdued, there were several large projects which offered
good opportunities.
Strategic developments
In December we announced our decision to concentrate on our core specialist
ground engineering activities worldwide and to restructure our management and
reporting along geographic, rather than product, lines. In the UK, we
restructured the Keller Ground Engineering (KGE) business to focus on its higher
value-added geotechnical and ground improvement solutions, streamline its
processes and improve margins. Following weak trading at Makers, a new
management was appointed in December 2003 to refocus the business and ensure its
return to profitability.
The acquisitions of Keller-Terra and McKinney, both made in December 2002, were
consolidated during the course of 2003. McKinney started the year slowly, with
severe weather experienced in its principal trading areas, but recovered well
and had an excellent second half. Keller-Terra traded very strongly, exceeding
our expectations.
Following the successful formula of extending our reach and introducing our
market leading technologies into new geographic regions, we progressed a number
of initiatives which pave the way for future organic growth, including:
• the acquisition in January 2004 of the remaining 50% minority stake in
LCM for up to £2.7m, which will enable us to continue the transfer of its
lime column technology into Keller markets outside Sweden, with a number of
interesting potential applications in the UK and North America;
• the formation of a new subsidiary in Australia, offering ground
improvement and geotechnical solutions which are gaining growing acceptance
in Australia as an alternative to traditional piling; and
• the award of four contracts in North Africa, marking the introduction of
stone column techniques to Morocco and compaction grouting to Algeria.
Operations
North America
The North American operations had a satisfactory year in challenging conditions.
Sales of £270.4m (2002: £242.6m) were 11% ahead of the previous year, whilst
operating profit before amortisation of intangibles of £19.3m (2002: £22.3m) was
slightly behind the previous year, reflecting the £1.9m adverse impact of
movements in the US dollar against sterling and reduced margins at Suncoast.
Case had another good year, with a particularly strong result from Case
Atlantic. Significant contributors to its result were the design and build
contract to install a reinforced concrete diaphragm wall and internal bracing
system to allow construction of an underground storage facility at the Field
Museum in Chicago; and the Cross-town Expressway in Tampa, Florida. Case's
involvement in the latter project began in April 2003 and involves the
installation of 220 large-diameter drilled shafts to support a five mile
elevated highway over the existing Cross-town Expressway.
The second quarter improvement in the performance of McKinney was maintained
throughout the second half, producing an encouraging result for McKinney's first
full year in the Group. During the year, McKinney successfully completed some
1300 contracts, with an average contract value of £31k. The integration process
has progressed well.
2003 proved to be a demanding year for Hayward Baker, whose results were held
back towards the end of the year by a weak performance from its western region,
where steps have since been taken to strengthen the operational management and
to reduce overheads. The new branch office established in Boston at the end of
2002 made good progress during the year.
Hayward Baker successfully completed a number of large and complex contracts
during the year. These included a ground improvement contract at the George W.
Bush Turnpike project in Houston, using a combination of compaction grouting and
lime injection on a landfill site to support construction of a new turnpike; a
major soil mixing project for fuel storage tank support in Louisiana; and jet
grout underpinning at the Supreme Court building in Washington DC. In contrast
to its capacity to win and undertake these large, high profile contracts,
Hayward Baker's sales continue to be dominated by lower-risk, small and medium
sized contracts, to which its regional structure is well suited.
Suncoast increased its sales in the year by around 20%, including an increase of
nearly 50% in combined sales from California and Arizona, marking progress in
the strategy of reducing its reliance on the business's traditional Texas
market.
During the year, the business faced material cost increases of 30% as a result
of the tariffs on steel strand introduced in July and other price pressures in
the steel industry. The full impact could only be partly mitigated by selling
price increases and by manufacturing efficiency gains, leading to an erosion in
Suncoast's operating margin of around three percentage points. The material cost
increases caused some competitor fall-out in the Florida and Georgia markets,
which strengthened Suncoast's market position on the East Coast. A more
aggressive approach to pricing in 2004, together with further initiatives to
reduce costs, is planned to help to restore margins going forward.
The new Sacramento office, which became full operational early in 2003, is
enabling the business to expand further its operations on the West Coast and is
expected to be a significant contributor in 2004. With a high proportion of
housing starts still using traditional foundation methods, we believe that
significant opportunities exist to gain further market share.
Continental Europe & Overseas
Our Continental Europe & Overseas business produced another very good
performance, including an excellent first year contribution from Keller-Terra.
Sales of £165.2m (2002: £135.6m) and operating profit before amortisation of
intangibles of £13.8m (2002: £8.0m) were respectively some 22% and 72% ahead of
the previous year's strong results.
Against a further decline in the German construction market, sales and profit in
our German operation were broadly flat, although we detected signs of increased
public infrastructure spending in Germany and the Netherlands towards the end of
the year. The weak construction volumes in Switzerland, France and Portugal
reported at the half year continued throughout the second half. Our operations
in Austria and Italy achieved good results and we made further progress in
penetrating the small, but growing, Eastern European market. In 2004, a new
office in Poznan will become operational, giving us full territorial coverage in
Poland.
Keller-Terra, our 51%-owned Spanish subsidiary acquired in December 2002, had a
very good first year, with an encouraging take up of soil improvement techniques
that were not previously well known in the Spanish market. The business
undertook over 260 contracts during the year, spanning the residential,
commercial, industrial, utility and infrastructure sectors. Significant
contributions came from contracts related to highways, dam rehabilitation and
slope repair.
2003 was another successful year for LCM, the Swedish lime column business. LCM
sales increased by 36% and the transfer of the technology into new markets made
good headway.
Within the Overseas division, the Far East maintained its excellent performance,
with good sales volume and productivity, despite the delayed start of two major
ground improvement projects in Singapore. A significant contribution came from
Malaysia, where we are undertaking grouting during the construction of storm
water tunnels in Kuala Lumpur. The twin tunnels are thought to be the third
largest in the world and will feature triple decks carrying both storm water and
road vehicles.
Our Middle East businesses generally performed in line with our expectations,
with a good result from Egypt. Since the end of the year we have been awarded a
€12m ground improvement contract at Palm Island - a prestigious development of
hotels, shops and luxury homes to be built on a reclaimed island off the coast
of Dubai. Keller's work will involve densifying the sand, thereby improving the
stability of the island to support utilities and structures.
UK
Sales in the year were £103.9m (2002: £106.7m), with operating profit before
exceptionals and amortisation of intangibles of £0.5m (2002: £4.3m),
respectively some 3% and 88% below the previous year.
As we announced in our trading update on 1 December 2003, despite the actions
taken earlier in the year, the weak first-half trading at Makers continued into
the second half of the year. The disappointing result from Makers was mainly
attributable to poor contracting margins in its infrastructure business,
particularly in the highways division; weak trading from social housing outside
the South East; and disappointing spend, leading to lower than anticipated
volumes, in social housing refurbishment in London. As a result, Makers made a
loss in the full year prior to exceptional items for restructuring and goodwill
impairment.
A new managing director, Peter Davis, with almost 20 years' experience with the
Keller Group, was appointed to Makers in December 2003, reporting directly to
Justin Atkinson. Going forward, Makers will concentrate on social housing
refurbishment in the South East, together with water and car park related
concrete repair work. Since the appointment of Peter Davis, the business is
stabilising and certain business lines that were loss making in 2003 have been
discontinued, which has led to a further reduction in the cost base. Work in
hand for the South East social housing business, which remained profitable
throughout 2003, has improved recently. This should underpin a return to
profitability for Makers during the course of 2004.
As announced in June 2003, KGE's mid-year withdrawal from large diameter bored
piling, focusing the business on its higher value-added ground improvement and
geotechnical solutions, resulted in improved margins in the second half of the
year.
The restructured KGE business has retained some capacity in augercast and
cast-in-situ piling, enabling the ground improvement division to continue its
offering of integrated solutions. The success of this approach was illustrated
in many of the contracts undertaken in the year, such as Cheetham Hill Retail
Park, where a combination of vibro replacement, cast-in-situ piling and dynamic
compaction was employed to provide effective and economic foundation support.
The bulk of KGE's ground improvement work comprised relatively small contracts
for a wide range of house builders and property developers.
KGE's geotechnical division made good progress with its permeable reactive
barrier system for the control of contaminated groundwater, with two large
projects commencing towards the end of the year. 2003 also saw the
identification of new applications for its soil mixing systems, such as quay
wall remediation projects at Barking and Tilbury and a land rehabilitation
project at Bow. In the slope stability arena, we carried out a number of
contracts including soil nails for the M42 widening scheme, whilst the Comtec
division installed temporary bunds at the Heathrow Terminal 5 project - at 18
metres high, the tallest bunds constructed in Britain.
Australia
Franki, which celebrated its 50th anniversary in 2003, ended the year with
another strong performance, including a sound contribution from its Indonesian
subsidiary. Major contracts included the foundations for 'The Circle on Cavill',
a residential, retail and cultural development on Queensland's Gold Coast;
retaining walls for an access road to a new apartment block at Martha Cove in
New South Wales; and a major pre-cast piling project at 'Waterfront City' in
Victoria's Docklands.
During the year Franki undertook a contract to supplement and underpin deficient
foundations at the Gold Coast Convention Centre. This was the largest compaction
grouting project ever carried out in Australia, for which Franki drew on
technology developed elsewhere in the Keller Group. The success of this project
illustrates the growing acceptance of ground modification techniques as an
alternative to traditional piling in Australia and bodes well for Keller's new
ground improvement operations in the region.
Vibropile, which completed its first full year within the Group, was affected by
an over-heated property market mid-year, but finished the year on a positive
note. Known for its market-leading deep continuous flight augur techniques,
Vibropile secured foundation contracts for major developments such as the
'Victoria Points' apartments in Victoria's Docklands and a new engine plant for
General Motors in Port Melbourne.
Maintaining our Competitive Edge
Throughout 2003, Group companies have continued to modernise their systems of
work and their equipment fleets to maintain their competitive edge through
increased productivity and capability, for example:
• the drilling capability of Case was extended by the acquisition of a new
top drive, reverse circulation drill, which enabled Case to drill the
hardest rock it has ever encountered;
• Hayward Baker developed mobile, high capacity grout mixing systems to
deliver productivity improvement on jet grouting and soil mixing contracts;
• our German workshops built for our exclusive use and commercial advantage
six of the new generation 'TR05' Vibrocats. Technical innovations include a
new feed system designed to increase the feed rate by around 25%, together
with various control system developments, which are expected to give further
productivity improvements. Information on the status of the equipment can be
relayed automatically to our workshops, enabling problems to be detected and
diagnosed before they impact on production and resulting in a significant
reduction in maintenance costs; and
• Germany also produced a new vibrator designed to improve productivity and
quality for sand compaction jobs. Two of the new models are currently on
site in Singapore and the initial results are showing promising productivity
improvements.
These and other ongoing improvements in productivity and capability, combined
with our planned further geographic expansion, will be key to securing our
future growth.
Financial Review
Trading Results
The Group's sales at £567.5m were 11% higher than in 2002. This increase
reflects a full year's contribution from the acquisitions completed in 2002,
most notably McKinney and Keller-Terra, both of which were not acquired until
December 2002.
Movements in reported sales and profits were also significantly influenced by
fluctuations in foreign currency exchange rates. The average US dollar exchange
rate against sterling weakened by 9% in the year, while the average euro
exchange rate strengthened by 9%. Stripping out the effects of both acquisitions
and currency movements, the Group's like for like 2003 sales were 1% down on
2002.
Operating profit before exceptional items and the amortisation of intangibles
was £32.8m, compared to £34.3m in 2002, despite an encouraging first year
contribution from both McKinney and Keller-Terra which, taken together, exceeded
our expectations. The 2003 result is stated after a £0.9m net adverse currency
impact, primarily due to the weaker US dollar, and an underlying loss at the
Group's Makers business of £0.9m. The Makers loss compares to a £2.8m operating
profit in the previous year, despite having acquired Accrete in August 2002.
Excluding the impact of both acquisitions and currency, the operating profit of
the Group's core specialist ground engineering businesses was slightly down on
2002.
As a result of the disappointing year at Makers, an exceptional goodwill
impairment charge of £7.4m has been charged to the profit and loss account,
representing all of the remaining capitalised goodwill relating to Makers. The
results also include £3.1m of exceptional restructuring costs associated with
the Group's two UK businesses, mainly comprising redundancy costs, the
write-down of fixed assets and office closure costs. Of this amount, £1.4m
relates to Makers.
Interest
The net interest charge increased from £3.9m in 2002 to £4.2m in 2003. This
increase reflects higher average net debt, as a result of the acquisitions in
the second half of 2002, partly offset by lower average interest rates. Around
half of the Group's net debt is subject to floating rates with the other half
subject to fixed rates until September 2004. Interest cover remains comfortable
at over 10 times EBITDA.
Tax
The Group's average effective tax rate, before exceptional items and
amortisation of intangibles, was 39%, up from 35% in 2002. This is relatively
high compared to most UK-based groups reflecting the fact that the vast majority
of the Group's profits are earned in higher tax jurisdictions, in particular the
United States where the effective combined federal and state tax rates are
nearly 40%. The increase in the effective rate from 2002 is mainly due to
incurring unrelieved 2003 taxable losses in the UK, as a result of the
disappointing trading performance at Makers and the exceptional restructuring
costs.
Earnings and dividends
The minority interest charge increased from £0.2m to £1.8m, reflecting the 49%
minority in Keller-Terra and, to a lesser extent, an excellent year at LCM which
was only 50% owned until the Group acquired the other half in January 2004. The
weighted average number of shares in issue increased by 9% as a result of the
shares issued in December 2002 in connection with the acquisitions of
Keller-Terra and McKinney. These, combined with the lower Group profits,
resulted in a decrease of 26% in adjusted earnings per share (before exceptional
items and amortisation of intangibles).
Following the recommendation of an increased final dividend of 6.95p per share,
the total dividend for the year is 10.4p, an increase of 5% on 2002. This is
covered 2.3 times by adjusted earnings per share or 1.8 times if the recurring
amortisation of intangibles is deducted.
Cash flow and net debt
Net cash inflow from operating activities was £40.0m, representing 98% of the
Group's EBITDA. This compares to £43.2m and 100% in 2002. This is a pleasing
outcome in a difficult year and is a testament to the ongoing strength of the
Group's cash conversion and the continuing focus on cash generation. Year-end
working capital was maintained at last year's levels, despite the significantly
higher cost of Suncoast's raw materials and strong growth in geographies, such
as southern Europe, which traditionally have higher working capital
requirements.
Capital expenditure decreased marginally in the year, although the proceeds from
the sale of fixed assets also fell. Net capital expenditure in the year was
£13.4m, which represents 1.2 times depreciation.
After paying tax, interest and dividends, year-end net debt decreased from
£68.0m at 31 December 2002 to £60.7m at the end of 2003. Of this reduction,
£4.6m is due to exchange differences, mainly on the retranslation of the Group's
US dollar denominated debt. This is held as a hedge against the Group's dollar
denominated net assets. At the year end US dollar denominated net assets were
about 80% hedged.
Net debt at the year end represents 1.5 times EBITDA. Based on net assets of
£97.6m, gearing was 62%, down from 68% at the beginning of the year.
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
increased both the employee and employer contribution rates with effect from 6
April 2002.
The transitional disclosures required by FRS 17 are shown in note 29 of these
financial statements. These show that, as at 31 December 2003, the pre-tax
deficit in the UK scheme was £6.0m on an FRS 17 basis, down from £6.5m at the
end of 2002.
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 creditors on the Group balance sheet.
All other pension provisions in the Group are of a defined contribution nature.
Accounting standards
The Group's report and accounts have been prepared in accordance with applicable
UK accounting standards (UK GAAP). These accounts have not been significantly
impacted by any new accounting standards.
Looking forward, the Group's accounts must comply with International Financial
Reporting Standards (IFRS) with effect from 2005. The Group has performed an
initial review of the extent to which the differences between UK GAAP and IFRS
might impact its accounts. This exercise indicates that, while there will be
some significant changes in disclosure, the impact of differences between
existing UK and IFRS is not likely to be material to the Group's results.
However, the International Accounting Standards Board, which develops and issues
IFRSs, has significant ongoing projects that could affect the differences
between current UK GAAP and IFRS. The actual impact on the Group's financial
statements of the adoption of IFRS will therefore depend on the standards
applicable and the particular circumstances prevailing on 1 January 2005.
Consolidated Profit and Loss account
for the year ended 31 December 2003
2003 2002
Before Exceptional Before Exceptional
exceptional items and exceptional items and
items and amortisation items and amortisation
amortisation of intangibles amortisation of intangibles
of intangibles (note 1) Total of intangibles (note 1) Total
Note £000 £000 £000 £000 £000 £000
____________________________________________________________________________________________________________________
Turnover 1 567,505 - 567,505 510,971 - 510,971
Operating costs (534,667) (13,881) (548,548) (476,627) - (479,727)
____________________________________________________________________________________________________________________
Operating profit 1 32,838 (13,881) 18,957 34,344 (3,100) 31,244
Net interest
payable (4,151) - (4,151) (3,914) - (3,914)
____________________________________________________________________________________________________________________
Profit on
ordinary activities
before taxation 28,687 (13,881) 14,806 30,430 (3,100) 27,330
Taxation 2 (11,211) 510 (10,701) (10,684) - (10,684)
____________________________________________________________________________________________________________________
Profit on ordinary
activities after
taxation 17,476 (13,371) 4,105 19,746 (3,100) 16,646
Equity minority
interests (1,846) - (1,846) (233) - (233)
____________________________________________________________________________________________________________________
Profit for the
financial year 15,630 (13,371) 2,259 19,513 (3,100) 16,413
Dividends paid
and proposed (6,768) - (6,768) (6,284) - (6,284)
____________________________________________________________________________________________________________________
Retained loss/profit
for the financial
year 8,862 (13,371) (4,509) 13,229 (3,100) 10,129
____________________________________________________________________________________________________________________
Basic earnings
per share 4 3.5p 27.5p
Diluted earnings
per share 4 3.5p 27.3p
Adjusted
earnings per
share* 4 24.1p 32.7p
Dividend per 3
share 10.4p 9.9p
____________________________________________________________________________________________________________________
* Adjusted earnings per share is calculated before exceptional items and
amortisation of intangibles
The Group's 2003 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 2003
2003 2002
£000 £000
_______________________________________________________________________
Profit for the financial year 2,259 16,413
Currency translation differences on overseas
investments (136) (107)
_______________________________________________________________________
Total recognised gains and losses relating to the
year 2,123 16,306
_______________________________________________________________________
Consolidated Balance Sheet
As at 31 December 2003
2003 2002
£000 £000
_______________________________________________________________________
Fixed assets
Positive goodwill 57,493 68,529
Negative goodwill (734) (2,239)
_______________________________________________________________________
56,759 66,290
Other intangible assets 287 374
_______________________________________________________________________
Intangible assets 57,046 66,664
Tangible assets 82,169 79,815
_______________________________________________________________________
139,215 146,479
_______________________________________________________________________
Current assets
Stocks 16,885 15,147
Debtors 137,855 143,897
Cash at bank and in hand 21,511 16,206
_______________________________________________________________________
176,251 175,250
Creditors: amounts falling due within one year (147,047) (141,404)
_______________________________________________________________________
Net current assets 29,204 33,846
_______________________________________________________________________
Total assets less current liabilities 168,419 180,325
Creditors: amounts falling due after more than
one year (58,438) (72,341)
Provision for liabilities and charges (12,358) (7,840)
________________________________________________________________________
Net assets 97,623 100,144
_______________________________________________________________________
Capital and reserves
Called up share capital 6,507 6,498
Share capital to be issued 680 -
Share premium account 35,374 35,293
Capital redemption reserve 7,629 7,629
Profit and loss account 41,849 46,494
_______________________________________________________________________
92,039 95,914
_______________________________________________________________________
Equity shareholders' funds
Equity minority interests 5,584 4,230
_______________________________________________________________________
97,623 100,144
_______________________________________________________________________
Consolidated Cash Flow Statement
for the year ended 31 December 2003
2003 2003 2002 2002
£000 £000 £000 £000
_____________________________________________________________________________
Net cash inflow from operating
activities 39,951 43,171
Returns on investment and
servicing of finance
Interest received 259 288
Interest paid (4,300) (4,370)
Interest element of finance
lease rental payments (222) (104)
Payments to minority
interests (690) (172)
_____________________________________________________________________________
(4,953) (4,358)
Taxation
UK corporation tax paid (608) (403)
Overseas tax paid (12,187) (8,572)
_____________________________________________________________________________
(12,795) (8,975)
Capital expenditure
Purchase of intangible
fixed assets (48) (82)
Purchase of tangible fixed
assets (16,670) (16,868)
Sale of tangible fixed
assets 3,300 4,250
_____________________________________________________________________________
(13,418) (12,700)
Acquisitions and disposals
Acquisition of subsidiary
undertakings 421 (32,941)
Net cash acquired with
subsidiary undertakings - 899
_____________________________________________________________________________
421 (32,042)
Equity dividends paid (6,534) (5,609)
_____________________________________________________________________________
Net cash inflow/(outflow)
before management of liquid
resources and financing 2,672 (20,513)
Management of liquid resources
Repayments from/(payments
into) short term bank deposits 885 (61)
Financing
Issue of new shares 90 13,621
New bank loans drawn 5,640 72,555
Repayment of bank loans and
loan notes (11,552) (54,759)
Sale and leaseback
transactions 377 739
Capital element of finance
lease rental payments (1,547) (902)
_____________________________________________________________________________
Net cash (outflow)/inflow
from financing (6,992) 31,254
_____________________________________________________________________________
(Decrease)/increase in cash
in the year (3,435) 10,680
_____________________________________________________________________________
2003 2002
Reconciliation of net cash flow to movement in net debt £000 £000
_____________________________________________________________________________
(Decrease)/increase in cash in the year (3,435) 10,680
Cash flow from debt and lease financing 7,081 (17,336)
Cash flow from short-term bank deposits (885) 61
_____________________________________________________________________________
Change in net debt resulting from cash flows 2,761 (6,595)
Net debt acquired with subsidiary undertakings - (1,687)
New loan notes - (1,400)
Exchange differences 4,570 4,889
_____________________________________________________________________________
Movement in net debt 7,331 (4,793)
Net debt at 1 January (67,995) (63,202)
_____________________________________________________________________________
Net debt at 31 December (60,664) (67,995)
_____________________________________________________________________________
1. Segmental analysis
Turnover and operating profit may be analysed by geography as follows:
2003 2002
Operating
profit before
exceptionals Operating
and Operating profit before Operating
Turnover amortisation profit Turnover amortisation profit
£000 £000 £000 £000 £000 £000
_____________________________________________________________________________________________
United Kingdom 103,976 538 (10,317) 106,738 4,323 3,947
The Americas 270,447 19,305 16,890 242,567 22,338 19,536
Continental Europe
and overseas 165,204 13,812 13,180 135,599 8,042 7,920
Australia 27,878 2,004 2,025 26,067 1,804 2,004
_____________________________________________________________________________________________
567,505 35,659 21,778 510,971 36,507 33,407
Less: Unallocated
central costs - (2,821) (2,821) - (2,163) (2,163)
_____________________________________________________________________________________________
567,505 32,838 18,957 510,971 34,344 31,244
______________________________________________________________________________________________
In the opinion of the directors turnover by destination is not materially
different from turnover by origin.
The exceptional items and amortisation of intangibles comprise:
2003 2002
£000 £000
_______________________________________________________________________
Amortisation of
intangibles: recurring 3,437 3,100
exceptional impairment provision 7,372 -
UK restructuring costs 3,074 -
_______________________________________________________________________
13,881 3,100
_______________________________________________________________________
As a result of the Group's Makers business incurring a loss in the year, an
exceptional impairment provision has been charged in 2003 amounting to the
unamortised capitalised goodwill associated with the business. The exceptional
restructuring costs relate to both the Group's UK businesses, Makers and Keller
Ground Engineering, and mainly comprise redundancy costs, the write-down of
tangible fixed assets and office closure costs.
Capital employed may be analysed as follows:
2003 2002
£000 £000
______________________________________________________________________
United Kingdom 7,141 20,036
The Americas 114,851 119,460
Continental Europe and overseas 43,008 39,013
Australia 7,323 4,879
______________________________________________________________________
172,323 183,388
______________________________________________________________________
Capital employed shown above excludes items of a financing nature and
corporation tax balances. Capital employed is reconciled to Group net
assets as follows:
2003 2002
£000 £000
______________________________________________________________________
Net assets 97,623 100,144
Net debt 60,664 67,995
Deferred purchase consideration 2,133 4,076
Dividends payable 4,522 4,294
Corporation tax payable 2,509 5,704
Deferred tax provision 4,872 1,175
______________________________________________________________________
Capital employed 172,323 183,388
______________________________________________________________________
2003 2002
2. Taxation £000 £000
The taxation charge comprises:
________________________________________________________________________
Current tax
UK corporation tax on the profits of the period - 342
Overseas tax 8,990 9,555
Adjustments in respect of previous periods (423) (1,030)
________________________________________________________________________
8,567 8,867
________________________________________________________________________
Deferred tax
Current year 1,901 359
Prior year 233 1,458
________________________________________________________________________
Total deferred tax 2,134 1,817
________________________________________________________________________
10,701 10,684
________________________________________________________________________
2003 2002
3. Dividends paid and proposed £000 £000
________________________________________________________________________
Interim paid 2,246 1,995
Final proposed 4,522 4,289
________________________________________________________________________
6,768 6,284
________________________________________________________________________
An interim ordinary dividend of 3.45p (2002: 3.3p) per share was paid on
31 October 2003. The final proposed ordinary dividend of 6.95p (2002:
6.6p) per share will be paid on 28 June 2004 to holders on the register at
28 May 2004.
4. Earnings per share
Adjusted earnings per share of 24.1p (2002: 32.7p) is calculated based on
earnings before exceptional items and amortisation of intangibles of £15,630,000
(2002: £19,513,000) and the weighted average number of ordinary shares in issue
during the year of 64,918,500 (2002: 59,749,130).
Basic and diluted earnings per share are calculated as follows:
________________________________________________________________________________________________
2003 2003 2002 2002
Basic Diluted Basic Diluted
£000 £000 £000 £000
________________________________________________________________________________________________
Profit after tax and minority interests 2,259 2,259 16,413 16,413
________________________________________________________________________________________________
No. of No. of No. of No. of
shares shares shares shares
000's 000's 000's 000's
________________________________________________________________________________________________
Weighted average of ordinary shares
in issue during the year 64,919 64,919 59,749 59,749
________________________________________________________________________________________________
Add: Weighted average of shares under
option during the year - 1,550 - 993
________________________________________________________________________________________________
Add: Weighted average of own shares held - 118 - 219
________________________________________________________________________________________________
Subtract: Number of shares assumed issued at
fair value during the year - (1,484) - (828)
________________________________________________________________________________________________
Adjusted weighted average ordinary
shares in issue 64,919 65,103 59,749 60,133
________________________________________________________________________________________________
pence pence pence pence
________________________________________________________________________________________________
Earnings per share 3.5 3.5 27.5 27.3
________________________________________________________________________________________________
5. Reconcilliation of operating profit to net cash inflow from operating
activities
______________________________________________________________________
2003 2002
£000 £000
______________________________________________________________________
Operating profit 18,957 31,244
Depreciation charge 10,897 8,755
Amortisation of goodwill and intangibles 3,437 3,207
Exceptional impairment provision 7,372 -
Profit on sale of fixed assets (716) (752)
Movement in long-term provisions 328 130
Increase in stocks (2,040) (197)
Decrease/(increase) in debtors 3,351 (3,190)
(Decrease)/increase in creditors (1,635) 3,974
______________________________________________________________________
Net cash inflow from operating activities 39,951 43,171
______________________________________________________________________
6. Foreign Currencies
Balance sheet items in foreign currencies are translated into sterling at
closing rates of exchange at the balance sheet date. However, if amounts
receivable and payable in foreign currencies are covered by a forward contract,
the contract rate of exchange is used for translation. Profit and loss accounts
and cash flows of overseas subsidiary undertakings are translated into Sterling
at average rates for the year.
Exchange differences arising from the retranslation of opening net assets and
profit and loss accounts at closing rates of exchange are dealt with as
movements on reserves. All other exchange differences are charged to the profit
and loss account.
The exchange rates used in respect of principal currencies are:
2003 2002
US dollar: average for year 1.64 1.50
US dollar: year end 1.78 1.60
Australian dollar: average for year 2.52 2.77
Australian dollar: year end 2.38 2.84
euro: average for year 1.45 1.59
euro: year end 1.42 1.53
7. Basis of preparation
The financial information set out above does not constitute the Company's
statutory accounts for the years ended 31 December 2003 or 2002 but is derived
from those accounts. Statutory accounts for 2002 have been delivered to the
Registrar of Companies and those for 2003 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 16 April 2004. The Annual General
Meeting will be held on 25 June 2004.
This information is provided by RNS
The company news service from the London Stock Exchange
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