Final Results
Galliford Try PLC
11 September 2003
EMBARGOED UNTIL 07:00 A.M. ON THURSDAY 11 SEPTEMBER 2003
GALLIFORD TRY PLC
PRELIMINARY STATEMENT FOR THE YEAR ENDED 30 JUNE 2003
Tony Palmer, Chairman of Galliford Try, said today:
'I am pleased to report strong results from housebuilding and good progress in
construction following the restructuring announced earlier in the year. It is
very encouraging that housebuilding has consents in place on all its planned
production for the new financial year and construction, having achieved cost
savings of £4 million per annum through the restructuring, has secured 80% of
its projected workload.'
FINANCIAL HIGHLIGHTS
• Group turnover of £638 million (2002: £649 million)
• Profit before tax and exceptional items of £17.4 million (2002: £18.0
million)
• Profit before tax of £13.5 million (2002: £18.0 million)
• Unchanged dividend of 1.5p (2002: 1.5p)
• Pre exceptional earnings per share of 5.7p, and post exceptional of
4.5p (2002: 5.8p)
• Borrowings of £17.8 million representing gearing of 30% (2002: £12.9
million, 24%)
• Shareholders funds rise to £60.3 million (2002: £53.7 million)
OPERATIONAL HIGHLIGHTS
• Board structure streamlined and strengthened
• Housebuilding profit before interest rises to record £24.1 million
• Construction returns to pre exceptional profit before interest of £1.6
million (post exceptional £0.3 million) in second half and
restructuring delivers £4 million of annual cost savings
• Scottish Water project consolidates position as leading water framework
contractor
• Housebuilding consents in place for all 2003/4 production
• 80% of 2003/4 construction workload in hand; Housebuilding order book
up 8% at £67 million.
For further enquiries please contact:
David Calverley, Chief Executive Telephone: 01895 855219
Frank Nelson, Finance Director Telephone: 01895 855226
Ann marie Wilkinson, Beattie Financial Telephone: 020 7398 3300
CHAIRMAN'S STATEMENT
I am pleased to report strong results from housebuilding and good progress in
construction following the restructuring announced earlier in the year. It is
very encouraging that housebuilding has consents in place on all its planned
production for the new financial year and construction, having achieved cost
savings of £4 million per annum through the restructuring, has secured 80% of
its projected workload.
FINANCIAL REVIEW
The profit before tax for the year amounted to £17.4 million before exceptional
items and £13.5 million after exceptional restructuring costs of £3.9m, in line
with the provision previously announced, compared to £18.0 million last year.
Turnover was £638 million compared to £649 million the previous year.
The construction division made a pre exceptional profit before interest in the
second half of the year of £1.6 million (post exceptional £0.3 million), which
reduced the pre exceptional loss before interest for the year to £0.4 million
(post exceptional £3.8 million) compared to a profit of £0.4 million last year.
Housebuilding continued to show good growth and achieved a profit before
interest of £24.1 million compared to £22.5 million last year.
The increased investment in housebuilding has resulted in a higher interest
charge for the year and net borrowings at 30 June 2003 stood at £17.8 million
compared to £12.9 million at 30 June 2002, representing gearing of 30% (2002:
24%).
Shareholders funds have risen to £60.3 million from £53.7 million at 30 June
2002. Earnings per share for the period were 5.7p (pre exceptional) and 4.5p
(post exceptional) compared to 5.8p last year.
As previously stated, our financial planning has taken into account our
increased cost base due to the higher insurance costs that are affecting our
industry and the additional costs that we will incur going forward to fund the
deficits in the group's final salary pension schemes which were closed to new
entrants in 2001.
DIVIDEND
The directors are recommending a final dividend of 1.0p per share, making an
unchanged total for the year of 1.5p. On the basis that the Group continues to
make its anticipated progress, the directors expect to pay a progressive
dividend in the new financial year.
THE BOARD
Over the past year we have made a number of significant changes to the board.
We have reduced the number of executive directors to four, comprising the Chief
Executive and Finance Director, together with the newly appointed Managing
Directors of our two divisions.
In November 2002 we took action to restructure the construction division. Andy
Sturgess, previously the director responsible for all UK building operations at
Skanska, joined us as Managing Director of the division in January this year.
His brief is to ensure that the construction division is focused on its core
markets where acceptable margins can be obtained, with a cost effective
structure and risk management processes that will deliver sustainable
construction profits. The restructuring of the business announced in May, the
cost base reduction and the re-branding as Galliford Try Construction
demonstrate significant progress in our plans to realise the full potential of
the division.
Greg Fitzgerald joined the board as Managing Director of the housebuilding
division in July. He was one of the founders of Midas Homes in 1992 and was
Managing Director when the company was acquired in 1997, since when he has been
responsible for our significant profitable growth in the south west. His
objective is to maximise future profit growth by expanding the current highly
successful division.
At the end of December, Hugh Try, former Chairman of Try Group and non executive
Deputy Chairman of the company since 2000, will be retiring. Hugh has made an
inestimable contribution to the growth of the company over 48 years, as well as
to the construction industry, and we will miss his wise counsel.
We are delighted to announce that Jonathan Dawson, a Managing Director of
Lazard, the merchant bank, has agreed to join the board as a non executive
director in January 2004. His wide ranging experience and business acumen will
stand the board in good stead as the Company enters its next phase of growth.
CONSTRUCTION
Following the restructuring announced in May, Galliford Try Construction now
operates out of three centres in Warrington, Wolvey and Uxbridge, and delivers a
nationwide construction service in infrastructure and major building projects.
In addition, three specialist businesses provide construction services in
telecommunications, affordable housing and ground engineering. Galliford Try
branding has been implemented throughout the division and with shorter reporting
lines and the cost reductions achieved, the division is in a strong position as
we move forward with our determination to deliver sustainable profits.
Our strategy is to direct our workload toward clients that procure construction
on a value basis, particularly in the public and regulated sectors where we see
good scope for growth and as illustrated by the increasing proportion of our
work carried out under long term framework agreements. We are at the forefront
of many of the Government's procurement initiatives, for which our partnering
and relationship contracting skills are proving invaluable.
We are one of the country's leading providers of construction services to the
water industry. As well as continuing programmes for United Utilities and Welsh
Water, we were delighted to have announced earlier this week that we have signed
contracts with Scottish Water to deliver part of their four year £1.8 billion
capital investment programme up until 2006. Work will commence immediately.
We have three framework agreements with Network Rail for building and
infrastructure works, and we continue to provide construction services to train
operators such as EWS and M40 Trains as well as securing our first contract with
Virgin Trains.
We will continue to bid for PFI projects that meet our core business criteria
and are currently working towards financial close on two PFI projects worth £32
million, for schools in Bedford and health projects in Ealing. Our Birmingham
Schools PFI, now in the operational phase, won the best operational education
project award during the year in the public private finance awards and was also
commended in the best partnership category. In health, we have completed a
number of contracts for hospitals and primary care trusts, and have been
shortlisted as one of the potential construction providers for the Procure 21
health sector procurement programme under which the NHS estates will be letting
the bulk of health sector work in the future.
Key frameworks for our interiors business include participation in the Ministry
of Defence's Project SLAM, the five year nationwide fit out of single living
accommodation for the military, as well as a programme of fit outs for Job
Centres nationwide.
Although there has been a downturn in private commercial work, our key clients
provide an important level of work. Projects include a further five year
development agreement with the All England Lawn Tennis Club at Wimbledon,
completion of the £45 million Grove Hotel near Watford, the construction of a
£35 million study centre in Oxford and a £16 million landmark arts centre in
West Bromwich.
Our affordable housing business, strategically located to take advantage of the
expansion of work in the Thames corridor and east London, has long term
partnering relationships with housing associations and trusts with good growth
prospects.
Galliford Try Communications, our specialist provider of telecoms
infrastructure, has increased its market share in the provision of base stations
for all the mobile phone operators and continues to construct over 1,000 sites
annually, despite some industry slowdown in the 3G roll out.
The construction division has already secured 80% of its projected workload for
the coming financial year and overall, the order book has increased to £673
million of which 84% has been secured on a value basis. With the business now
focused on the market sectors and procurement methods that can provide
sustainable profits, the prospects for construction are encouraging.
HOUSEBUILDING
Our geographic spread across the south west, eastern counties and the south east
of England enabled us to take advantage of the markets in which demand was
strong and demonstrated the benefit of our decision last year to reduce our
dependence on higher value properties in the south east. Our concentration on
the quality end of the mainstream market has seen our average selling price
increase from £177,000 a year ago to £200,000, and we sold 741 homes compared to
899 last year. In recent months we have been more selective in site
acquisitions and our land bank of plots owned or controlled at the year end
totalled 2,236 (2002: 2,252) with an average plot cost of £43,000. Our
strategic land bank comprises long term options over 612 acres, from which we
anticipate securing over 2,000 plots.
Midas Homes, operating in the south west, had an extremely good year. Growth in
turnover and profits was accompanied by a successful programme of land
purchases, ranging from smaller high specification sites to schemes of over 100
units comprising mixtures of house types on both greenfield and brownfield
sites. Our scheme in partnership with the Prince of Wales Foundation to deliver
the St. Austell urban village, a 10 acre brownfield development which includes
148 homes for both affordable housing and private sale has commenced. We are
expanding the business eastwards from its current base in Devon.
Stamford Homes, operating in the eastern counties, has made excellent progress
in its joint venture to develop and project manage the 44 acre site at
Fairfield. Following the receipt of detailed planning consent earlier this year
and with the infrastructure programme well underway, serviced sites will start
to be delivered to the acquiring housebuilders in the autumn of this year, and
the first homes are expected to be completed in mid 2004. In April, Wiggins
sold its share of the joint venture to Linden Homes with whom Galliford Try has
successfully collaborated on a number of projects.
Try Homes, which operates in the south east, continues to concentrate on
conversions and brownfield projects which represented 100% of its production in
the year. It has an increasing number of development opportunities underway
that include elements of commercial or retail outlets and affordable housing in
locations such as St. Albans and Stratford.
As each of our businesses concentrates on the more individual sites out of
competition with the major housebuilders, we have a track record in generating
imaginative and sympathetic schemes for planning authorities and the relevant
heritage bodies. Current projects include the conversion of a school within the
setting of Lincoln Cathedral, an exceptional streetscape scene incorporating the
restoration of a grade II listed building in the centre of Winchester, and a
development on a prominent waterside site at Shaldon on the Teign estuary in
Devon. Our ability to secure planning consents that maximise land values gives
us an important edge with landowners.
The first few weeks of this financial year have shown increased visitor levels
and sales during the usually quiet summer period, particularly in the mainstream
market where we continue to see the best opportunities. At the end of August
our order book was £67 million, up 8% on last year.
PROSPECTS
The economic forecasts for the UK construction industry are broadly optimistic,
particularly for the public and regulated sectors which comprise the majority
and a growing proportion of our workload. We are encouraged by the progress we
are making towards our objective of delivering acceptable, sustainable
construction profits.
Following the corrections in the high value markets of London and the south east
we anticipate that the rate of house price growth will be modest over the coming
year. However the continuing low interest rates mean that overall prospects for
affordability remain good and the demographic projections continue to indicate
demand will exceed supply. Our successful housebuilding formula puts us in a
good position to deliver long term growth.
We enter our new financial year in a considerably strengthened position. We
have an experienced and ambitious board of directors, a streamlined structure
and two divisions focused on the specific markets where they can grow their
profits.
Tony Palmer
Chairman
11th September 2003
CONSOLIDATED PROFIT AND LOSS ACCOUNT
For the year ended 30 June 2003
Exceptional
Pre- items
Exceptional (Note 3) 2003 2002
£000 £000 £000 £000
Turnover 640,380 640,380 649,783
Less share of joint ventures' turnover (2,555) (2,555) (881)
Group turnover 637,825 637,825 648,902
Cost of sales (587,040) (2,228) (589,268) (598,697)
Gross profit 50,785 (2,228) 48,557 50,205
Net operating expenses (31,387) (1,644) (33,031) (30,458)
Group operating profit 19,398 (3,872) 15,526 19,747
Share of profits/(losses) in joint ventures 279 279 (217)
Profit on sale of fixed asset investments 916 916 483
Income from other fixed asset investments - - 155
Profit on ordinary activities before 20,593 (3,872) 16,721 20,168
interest
Net interest payable
Group (2,534) (2,534) (2,078)
Joint ventures (676) (676) (75)
(3,210) (3,210) (2,153)
Profit on ordinary activities before tax 17,383 (3,872) 13,511 18,015
Tax (5,060) 1,162 (3,898) (5,728)
Profit on ordinary activities after tax 12,323 (2,710) 9,613 12,287
Dividends (3,312) (3,312) (3,292)
Retained profit for the year 9,011 (2,710) 6,301 8,995
Basic earnings per ordinary share 5.7p 4.5p 5.8p
Diluted earnings per ordinary share 5.5p 4.3p 5.6p
All of the Group's activities are continuing.
There were no gains or losses in the period other than those shown in the profit
and loss account above.
There was no material difference between the profit on ordinary activities
before tax and the retained profit for the year stated above and their
historical cost equivalents.
CONSOLIDATED BALANCE SHEET
As at 30 June 2003
2003 2002
£000 £000
Fixed assets
Intangible assets 167 423
Tangible assets 12,208 12,087
Investments in joint ventures:
Share of gross assets 13,895 660
Share of gross liabilities (11,730) (442)
2,165 218
Investments in associates 48 81
Other investments 1,074 1,737
15,662 14,546
Current assets
Stocks 448 358
Developments 148,552 128,475
Debtors 116,619 111,316
Cash at bank & in hand 11,377 1,757
276,996 241,906
Creditors: amounts falling due within one year:
Bank loans and overdrafts (24,151) (9,556)
Other amounts falling due within one year (195,160) (174,368)
Net current assets 57,685 57,982
Total assets less current liabilities 73,347 72,528
Creditors: amounts falling due after more than one year (9,719) (15,902)
Provisions for liabilities and charges (3,358) (2,905)
Net assets 60,270 53,721
Capital and reserves
Called up share capital 11,058 10,999
Share premium account 1,767 1,578
Merger reserve 4,687 4,687
Revaluation reserve 1,912 1,915
Profit and loss account 40,846 34,542
Equity shareholders' funds 60,270 53,721
CONSOLIDATED CASH FLOW STATEMENT
For the year ended 30 June 2003
2003 2002
£000 £000
Net cash inflow from operating activities 7,229 16,351
Dividends from joint ventures 75
Returns on investments and servicing of finance:
Interest received 689 292
Interest paid (2,899) (1,889)
Loan note interest paid (305) (207)
Interest element of finance lease rentals (9) (5)
Net cash outflow from returns on investments and servicing
of finance (2,524) (1,809)
Taxation (4,174) (3,446)
Capital expenditure and financial investment:
Purchase of tangible fixed assets (1,747) (1,597)
Sale of tangible fixed assets 23 105
Net cash outflow for capital expenditure and financial
investment (1,724) (1,492)
Acquisitions and disposals:
Increase in investment in joint ventures (2,370) (60)
Increase in other investments - (872)
Purchase of subsidiary undertakings - (400)
Net cash acquired with subsidiary undertakings - 433
Realisation of investment in joint ventures 24 66
Realisation of investment in associates 33 -
Realisation of other investments 1,579 -
Net cash outflow for acquisitions and disposals (734) (833)
Equity dividends paid (3,300) (3,044)
Net cash (outflow)/inflow before use of liquid resources
and financing (5,152) 5,727
Financing:
Issue of ordinary share capital 248 687
Capital element of finance lease rental payments (29) (1)
Increase/(decrease) in bank loans 22,933 (35,424)
Issue of loan notes - 159
Repayment of loan notes (42) (100)
23,110 (34,679)
Increase/(decrease) in cash in the period 17,958 (28,952)
Reconciliation of net cash flow to movement in net debt
Increase/(decrease) in cash in the period 17,958 (28,952)
(Increase)/decrease in debt and lease financing (22,862) 35,366
Borrowings acquired with subsidiary - (1,431)
Loan notes issued in respect of acquisition - (3,820)
Change in net debt in the period (4,904) 1,163
Net debt at start of period (12,921) (14,084)
Net debt at end of period (17,825) (12,921)
NOTES TO THE PRELIMINARY STATEMENT
1. Basis of Preparation
This preliminary statement has been agreed with the Company's auditors, and does
not constitute statutory accounts for the Company. It has been extracted from
the annual accounts of Galliford Try plc, which have not yet been filed with the
Registrar of Companies. The financial information for the year ended 30 June
2002 has been extracted from the statutory accounts for that year on which the
auditors gave an unqualified audit report and which have been filed with the
Registrar of Companies.
2. Segmental analysis
Turnover Turnover
including Joint including Joint
joint ventures Group joint ventures Group
ventures turnover turnover ventures turnover turnover
2003 2003 2003 2002 2002 2002
£000 £000 £000 £000 £000 £000
Construction 480,284 939 479,345 487,296 881 486,415
Housebuilding 159,447 1,616 157,831 161,959 - 161,959
Group 649 - 649 528 - 528
Total 640,380 2,555 637,825 649,783 881 648,902
Profit/(loss) before Profit/(loss) before Net assets/(liabilities)
exceptional items and
interest interest
2003 2002 2003 2002 2003 2002
£000 £000 £000 £000 £000 £000
Construction (407) 411 (3,754) 411 (16,551) (6,428)
Housebuilding 24,061 22,487 24,061 22,487 103,723 74,045
Group (3,061) (2,730) (3,586) (2,730) (9,077) (975)
Sub-total 20,593 20,168 16,721 20,168 78,095 66,642
Net debt (17,825) (12,921)
60,270 53,721
All turnover arose in the United Kingdom
The share of (losses)/profits in the joint ventures relating to construction of
(£7,000) (2002: £217,000) and housebuilding of £286,000 (2002: £Nil) is included
in profit before interest.
The share of net assets relating to the joint ventures included in construction
and housebuilding is £210,000 (2002: £199,000) and £1,955,000 (2002: £19,000)
respectively.
3. Exceptional Items
During the year the decision was taken to restructure the construction division.
As a result of this decision parts of the business operations have been
closed, the Group has withdrawn from certain of its maintenance and smaller
build contracts and the division has been reorganised. These actions have
resulted in exceptional costs being incurred in respect of the withdrawal from
certain contract activities, redundancies and other directly attributable costs
of the restructuring. These have been separately disclosed in the profit and
loss account as follows:
2003 2002
£000 £000
Cost of sales:
Contract withdrawal costs 1,497 -
Redundancies 531 -
Other directly attributable costs 200 -
2,228 -
Administration expenses:
Redundancies 1,356 -
Other directly attributable costs 288 -
1,644 -
Total 3,872 -
4. Earnings per share
Basic earnings per share is calculated using the profit on ordinary activities
after tax and the weighted average number of ordinary shares in issue during the
year less the weighted average number of shares held by the Galliford Try
Employee Share Trust which have not unconditionally vested in employees. For
diluted earnings per share the weighted average number of ordinary shares is
adjusted to assume conversion of all dilutive potential ordinary shares.
5. Notes to the cash flow statement
a) Reconciliation of operating profit to cash flows
2003 2002
£000 £000
Operating profit 19,398 19,747
Exceptional restructuring costs (3,872) -
Depreciation 1,588 1,552
Loss on disposal on tangible fixed assets 15 23
Amortisation of own shares held - 125
Amortisation of goodwill 256 275
(Increase) in stocks (90) (21)
(Increase) in developments (20,077) (8,188)
(Increase) in debtors (5,203) (8,305)
Increase in creditors 15,214 11,143
Net cash inflow from operating activities 7,229 16,351
The operating cash flows above include the following cash flows in respect of the exceptional items:
2003 2002
£000 £000
Cost of sales 1,798 5,200
Administrative expenses 1,019 315
2,817 5,515
b) Analysis of changes in net debt
At 1 July Cash At 30 June
2002 flow 2003
£000 £000 £000
Cash at bank and in hand 1,757 9,620 11,377
Overdrafts (8,338) 8,338 -
(6,581) 17,958 11,377
Loan Notes (5,093) 42 (5,051)
Bank loans (1,218) (22,933) (24,151)
(12,892) (4,933) (17,825)
Finance lease obligations (29) 29 -
Net debt (12,921) (4,904) (17,825)
6. Final Dividend
The directors are recommending a final dividend of 1.0p per share (2002: 1.0p)
which, together with the interim dividend of 0.5p per share (2002: 0.5p), brings
the total dividend in respect of 2003 to 1.5p(2002: 1.5p).
Subject to approval at the Annual General Meeting to be held on Friday 31
October 2003, the final dividend of 1.0p per share will be paid on 7 November
2003 to shareholders on the register on 10 October 2003.
-ends-
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