Interim Results

Galliford Try PLC 21 February 2008 GALLIFORD TRY PLC - INTERIM STATEMENT FOR THE SIX MONTHS ENDED 31 DECEMBER 2007 (UNAUDITED) HIGHLIGHTS 2007 2006 Increase £m £m • Revenue 897.9 606.8 48% • Profit before tax - Pre exceptional * 33.8 20.7 63% - Post exceptional 33.8 21.6 56% • Earnings per share pence pence - Pre exceptional * 6.4 5.3 21% - Post exceptional 6.4 5.6 14% • Dividend per share 0.9 0.8 12.5% • Contracting order book of £2.1 billion, £1.9 billion in Construction and £153 million in affordable housing and regeneration. • Strong growth in affordable housing and regeneration, £9.3 million acquisition of Kendall Cross. • Linden Homes successfully integrated with synergy savings exceeding forecasts. • 1,174 homes completed - 890 in housebuilding, 284 in affordable housing and regeneration. • £480 million of house sales in hand for full year - £393 million in housebuilding, £87 million in affordable housing and regeneration. • Net debt at £45.7 million, representing gearing of 14%. * An exceptional gain of £0.9 million arose in 2006 from a profit on the sale and leaseback of Group property. Commenting on the results, Greg Fitzgerald, Chief Executive, said: 'The Group has delivered record first half results and has positioned itself strategically across its markets to mitigate the effects of a more difficult economic period. Our building and infrastructure divisions have a strong spread of work across the public, regulated and private sectors which is encouraging as the prospects for commercial building work ease. We are also making good progress in developing our affordable housing and regeneration business. The housebuilding market remains challenging, although the resilience of our business model and our good cash management have mitigated the effects as the market has worsened. We remain cautious on the outlook for the division, particularly if current market conditions persist throughout the spring selling season. While the Board views the economic outlook with some caution, the Group's financial strength and broad sector exposure will stand it in good stead during challenging times.' For further enquiries: Greg Fitzgerald, Chief Executive Galliford Try plc 01895 855219 Frank Nelson, Finance Director Galliford Try plc 01895 855226 Ann marie Wilkinson / Dan de Belder Bell Pottinger Corporate & Financial 020 7861 3232 CHIEF EXECUTIVES REVIEW Overview I am pleased to report record first half results, substantially ahead of last year. Our building and infrastructure divisions are delivering profit growth with cash generation. We are driving forward our growth in the affordable housing and regeneration market and have successfully integrated Linden Homes, consolidating our position in housebuilding across the south and east of England. We are therefore in a good position to manage the business through a more difficult economic period. Financial Results The Group's profit before tax of £33.8 million was up 63% on last year's pre exceptional profit before tax (£20.7 million) and 56% on last year's post exceptional profit before tax (£21.6 million). Group revenue was up 48% at £897.9 million (2006: £606.8 million). The results include a full six months contribution from Linden Homes. Profit from operations, stated before finance costs, exceptional items, amortisation of intangible assets and share of joint ventures' interest and tax, was 100% up on the same period last year at £47.2 million (2006: £23.6 million). Construction profit from operations was up 43% to £12.7 million (2006: £8.9 million) with a combined margin for our building and infrastructure divisions of 2.2% (2006: 2.0%). Our PPP Investments business recorded a profit from operations of £0.4 million (2006: loss of £1.6 million). The rapidly growing affordable housing and regeneration division, now reported separately, achieved a profit from operations of £5.7 million (2006: £2.6 million), and a margin of 6.0% (2006: 4.7%). Last year's building and housebuilding comparatives have been restated accordingly. Housebuilding profit from operations was up 93% to £32.6 million (2006: £16.9 million) with the profit margin at 14.2% (2006: 14.5%). The earnings per share of 6.4p represents a 21% increase on last year's pre exceptional earnings per share of 5.3p and 14% on last year's post exceptional earnings per share of 5.6p. Total shareholders equity now stands at £317.1 million compared to £306.6 million at 30 June 2007. Our trading results have been underpinned in the period by continued cash generation in our construction divisions. In the six months there was a £53.0 million reduction in net debt to £45.7 million at 31 December 2007 compared to net debt of £98.7 million at 30 June 2007 and a net cash balance of £26.6 million at 31 December 2006. Dividend The directors have declared an interim dividend of 0.9p per share, a 12.5% increase on last year, which will be paid on 14 April 2008 to shareholders on the register on 14 March 2008. The directors remain committed to a progressive dividend policy that takes into account earnings growth and the need for ongoing investment. Building The building division achieved a profit from operations up 35% at £6.5 million on revenue including joint ventures of £339.2 million, representing a margin of 1.9% (2006: 1.8%). Cash generation has continued to be particularly good during the period. The division's current order book has been maintained at £0.9 billion, 95% of which has been secured on criteria other than on a pure price competitive basis. Markets for the division's businesses across England and Scotland have been good. We have secured a spread of projects in the Midlands and Scotland that will follow on from our multi school PFI projects in Northamptonshire and the Highlands of Scotland which will largely complete during 2008. The division's key markets are education, commercial, health, custodial, interiors, leisure and facilities management. 73% of the current order book is for the public and regulated sectors, thereby limiting the effect of a downturn in the commercial market in a more difficult economic environment. Progress is being made in developing our facilities management business. We have recently secured a contract for Circle Healthcare under which we will initially provide services to two primary care centres with the potential to service up to 25 private hospitals and 50 clinics. In the north of England our major project for the new National Museum of Liverpool is progressing to plan. We continue to secure repeat projects from long standing clients, and have recently been selected as one of four contractors to work on a new £120 million four year framework agreement with the Home Office. We will also be rebuilding Courts 2 and 3 for the All England Lawn Tennis Club at Wimbledon to be completed before the London Olympics in 2012. Infrastructure The division achieved a profit from operations up 51% at £6.2 million on revenue including joint ventures of £250.1 million, representing a margin for the period of 2.5% (2006: 2.4%). With 97% of its order book for the public and regulated sectors where demand is strong, the division is benefiting from its leading market presence in the water, highways, rail, remediation, flood alleviation and renewable energy sectors. The division's order book has been maintained at £1.0 billion, 92% secured on other than a pure price competitive basis and 90% in framework contracts for key clients. Our major framework contract for remediation works at Olympic Park is performing well and likely to generate more work than initially expected, and progress on the construction of Europe's largest on shore windfarm at Whitelee, south of Glasgow, is ahead of programme. Whilst the telecommunications market has been difficult we reinforced our position in this sector through securing a £40 million framework with BT. From an industry leading position we are delivering a strong performance in water as we move towards the peak of the water utilities AMP4 framework cycle, and we continue to secure significant new contract awards in addition to our framework projects. In the renewable energy sector we are continuing to develop our track record for positive environmental projects with a number of contract wins for clients including Marks & Spencer, Tesco and McCain. PPP Investments The Group has a strong presence in education, health and defence accommodation PFI projects. A profit from operations of £0.4 million (2006 loss: £1.6 million) was earned on revenue, including joint ventures, of £2.4 million following the financial close of the £100 million South East Essex LIFT and the £32 million St. Andrews hospital and healthcare PFI during the half year. We were also shortlisted as one of three bidders to proceed to the next stage of the Birmingham Building Schools for the Future project. The Group has established a policy to retain 50% of the equity in a project post financial close, with the aim of an ultimate disposal of our remaining interest when construction is complete and projects are well into the operational phase. The Group's objective is to grow its portfolio and we are encouraged by the continuing strength of the secondary market for long term PFI investments. Affordable Housing and Regeneration We have made good progress in the affordable housing and regeneration market. We carried out £94.5 million, including joint ventures, of work in the period on which a profit from operations of £5.7 million was achieved, representing a margin of 6.0% (2006: 4.7%). The total number of completions was up 170% to 284, with an average selling price of £118,000. Having established a competitive edge in bringing together our construction and housebuilding skills to undertake large projects, we are now working on eight major regeneration schemes. Six of these are with English Partnerships, with whom we are also in early discussions over a number of future projects. Following our award of preferred bidder status, we have now exchanged contracts with English Partnerships to develop the first major net zero carbon site at Graylingwell, Chichester where we will be developing up to 800 units over five years in joint venture with Affinity Sutton Housing Association. We have also established a presence in the north east of England, a region where significant public sector housing expenditure is planned, with the £9.3 million acquisition in November of Kendall Cross Holdings Limited, a long established affordable housing contractor based in Newcastle upon Tyne. We now have two regeneration projects in our joint venture with Bank of Scotland and the division's land bank currently stands at 4,100 plots compared to 3,500 at 30 June 2007. The division has currently reserved, contracted or completed sales with a value of £135.1 million (2006: £48.2 million). £87.0 million (2006: £29.5 million) is for the current financial year to 30 June 2008, representing 83% of projected sales for the year compared with 95% at the same point last year. In addition, the division's current contracting order book stands at £153 million. Housebuilding The housebuilding division has been trading in an increasingly difficult market during the period as the tightening of the credit markets and lower consumer confidence took hold. We started the financial year with record sales carried forward and have benefited from our policy of forward selling, our concentration on individually designed developments and our minimal exposure to consortium sites. With a full six months' contribution from Linden Homes, acquired in March 2007, the division achieved a profit from operations of £32.6 million representing a margin of 14.2% (2006: 14.5%). Completions were up 82% to 890 and the average selling price of £231,000 compared with £238,000 a year ago. The market to date in 2008 has continued to be difficult, with the change to a reducing interest rate environment having little effect on consumer confidence so far. With selective discounting and maximising our points of sale, which currently stand at 74, the division has currently reserved, contracted or completed sales with a value of £414.9 million (2006: £202.8 million). £392.7 million (2006: £196.7 million) is for the current financial year to 30 June 2008, representing 75% of projected sales compared with 79% at the same point last year. Despite short term market fluctuations the underlying imbalance remains between the supply and demand for homes in our geographical areas across the south and east of England which will support future growth in our business when conditions improve. We are driving reductions in our cost base, directly and through our supply chain, are taking advantage of the enhanced purchasing power of our larger business and are achieving greater synergy savings than forecast from the Linden acquisition. As part of our strategy to optimise our land holdings following the Linden acquisition we made land sales totalling £23.0 million in the period, and with a softening land market we have implemented a highly selective programme to continue to acquire good quality sites. The division's landbank currently stands at 7,000 plots compared to 7,600 at 30 June 2007. Health Safety and Environment We remain committed to achieving high standards of health and safety as an integral part of our business performance. We recognise the need for, and set targets for, continuous improvement across the Group. During the 12 months to 31 December 2007 our accident incident rate was 6.47 per 1,000 people (2006: 7.21) which is well below the industry average. Following the acquisition of Linden Homes, we have reorganised and strengthened our health, safety and environmental team to ensure all our operations receive a high quality service. We launched a completely revised Health and Safety Policy and associated standards in line with the increased capabilities of the Group. We held our first national H&S Climate Survey, receiving over 4,500 responses from employees and subcontractors giving us comprehensive feedback on the status of our health and safety culture. We have also embarked upon a behavioural strategy programme to underpin a continuous improvement culture. Management Chris Coates, a member of the executive board and managing director of the south east housebuilding division, who was a director of Linden Homes pre acquisition, has decided to pursue his career outside the corporate sector and will be leaving the Group on 30 June 2008. The board is delighted that the Group will retain his services as a consultant on a part time basis and will appoint a successor in due course. Outlook The Group has delivered record first half results and has positioned itself strategically across its markets to mitigate the effects of a more difficult economic period. Our building and infrastructure divisions have a strong spread of work across the public, regulated and private sectors which is encouraging as the prospects for commercial building work ease. We are also making good progress in developing our affordable housing and regeneration business. The housebuilding market remains challenging, although the resilience of our business model and our good cash management are mitigating the effects as the market has worsened. We remain cautious on the outlook for the division, particularly if current market conditions persist throughout the spring selling season. While the Board views the economic outlook with some caution, the Group's financial strength and broad sector exposure will stand it in good stead during challenging times. Greg Fitzgerald 21 February 2008 Consolidated income statement for the half year ended 31 December 2007 (unaudited) Note Half Year to Half Year to Year to 31 Dec 2007 31 Dec 2006 30 June 2007 £m £m £m ------ --------- --------- --------- Continuing operations Revenue 3 897.9 606.8 1,409.7 Cost of sales (807.7) (550.2) (1,275.8) ------ --------- --------- --------- Gross profit 90.2 56.6 133.9 Administrative expenses (48.3) (32.4) (67.0) Share of post tax profit/(losses) from joint ventures 0.6 (0.2) 1.4 ------ --------- --------- --------- Profit before finance costs 3 42.5 24.0 68.3 ------ --------- --------- --------- Profit before finance costs, amortisation and exceptional item 43.5 23.4 62.5 Amortisation of intangibles (1.0) (0.3) (1.4) Net exceptional item 4 - 0.9 7.2 Profit before finance costs 42.5 24.0 68.3 ------ --------- --------- --------- Finance income 5 3.6 0.5 9.3 Finance costs 5 (12.3) (2.9) (17.4) ------ --------- --------- --------- Profit before taxation 33.8 21.6 60.2 Income tax expense 6 (9.9) (6.3) (16.6) ------ --------- --------- --------- Profit for the period from continuing operations 23.9 15.3 43.6 ------ --------- --------- --------- Earnings per share 7 Post exceptional - basic 6.4p 5.6p 14.3p - diluted 6.3p 5.5p 14.1p Pre exceptional - basic 6.4p 5.3p 12.5p - diluted 6.3p 5.2p 12.3p ------ --------- --------- --------- The notes on pages 10 to 19 are an integral part of this condensed consolidated interim financial information. Consolidated statement of recognised income and expense for the half year ended 31 December 2007 (unaudited) Half Year to Half Year to Year to 31 Dec 2007 31 Dec 2006 30 June 2007 £m £m £m --------- --------- --------- Profit for the financial period 23.9 15.3 43.6 Gains on revaluation of available for sale investments taken to equity - - 2.0 Actuarial gains and losses in pension scheme (7.0) (3.5) 3.9 Deferred tax on items charged to equity 3.5 2.3 (1.9) Current tax on items charged to equity - - 0.9 --------- --------- --------- Net (losses)/gains recognised directly in equity (3.5) (1.2) 4.9 --------- --------- --------- Total recognised income for the period 20.4 14.1 48.5 --------- --------- --------- The notes on pages 10 to 19 are an integral part of this condensed consolidated interim financial information. Consolidated balance sheet at 31 December 2007 (unaudited) Note 31 Dec 2007 31 Dec 2006 30 June 2007 £m £m £m ----- --------- ---------- --------- Non current assets Intangible assets 11.2 2.0 12.0 Goodwill 114.4 57.2 109.2 Property, plant and equipment 7.1 7.3 5.8 Investments in joint ventures 8.9 5.5 6.4 Financial assets - Available for sale investments 3.9 1.2 3.2 - Derivative financial assets - - 1.0 Trade and other receivables 3.1 0.2 4.7 Deferred tax assets 9.8 18.7 10.0 Retirement benefit asset 14 1.3 - - ----- --------- ---------- --------- Total non current assets 159.7 92.1 152.3 Current assets Inventories 0.8 1.9 0.6 Developments 678.8 325.2 704.9 Trade and other receivables 291.2 180.7 278.5 Financial assets - Derivative financial assets - - 0.4 Cash and cash equivalents 12 86.3 34.0 39.5 ----- --------- ---------- --------- 1,057.1 541.8 1,023.9 Non current assets classified as held for sale 16 4.5 - - ----- --------- ---------- --------- Total current assets 1,061.6 541.8 1,023.9 ----- --------- ---------- --------- Total assets 1,221.3 633.9 1,176.2 ----- --------- ---------- --------- Current liabilities Financial liabilities - borrowings 12 (17.3) (6.3) (50.0) Trade and other payables (686.5) (391.6) (653.4) Current tax liabilities (8.2) (7.4) (6.2) Provisions for liabilities and charges 15 (1.7) (1.0) (2.3) ----- --------- ---------- --------- (713.7) (406.3) (711.9) Liabilities directly associated with non current assets classified as held for sale 16 (4.5) - - ----- --------- ---------- --------- Total current liabilities (718.2) (406.3) (711.9) ----- --------- ---------- --------- Net current assets 343.4 135.5 312.0 ----- --------- ---------- --------- Non current liabilities Financial liabilities - borrowings 12 (114.7) (1.1) (88.2) Retirement benefit obligations 14 (28.1) (49.7) (25.0) Deferred tax liabilities (17.5) (13.5) (20.3) Other non current liabilities (25.4) (34.2) (24.0) Provisions for liabilities and charges 15 (0.3) (0.4) (0.2) ----- --------- ---------- --------- Total non current liabilities (186.0) (98.9) (157.7) ----- --------- ---------- --------- Total liabilities (904.2) (505.2) (869.6) ----- --------- ---------- --------- Net assets 317.1 128.7 306.6 ----- --------- ---------- --------- Shareholders' equity Ordinary shares 9 18.8 13.8 18.8 Share premium 9 190.7 49.0 190.6 Other reserves 10 6.7 4.7 6.7 Retained earnings 10 100.9 61.2 90.5 ----- --------- ---------- --------- Total shareholders' equity 10 317.1 128.7 306.6 ----- --------- ---------- --------- The notes on pages 10 to 19 are an integral part of this condensed consolidated interim financial information. Consolidated cash flow statement for the half year ended 31 December 2007 (unaudited) Note Half Year to Half Year to Year to 31 Dec 2007 31 Dec 2006 30 June 2007 £m £m £m ------ --------- --------- --------- Cash flows from operating activities Net cash from operations 11 86.0 25.6 10.4 Net interest paid (5.9) (1.1) (8.3) Tax paid (6.7) (2.8) (10.0) ------ --------- --------- --------- Net cash generated from/(used in) operating activities 73.4 21.7 (7.9) Cash flows from investing activities Acquisition of subsidiaries (net of cash acquired) (6.0) (1.9) 40.1 Acquisition of investments in joint ventures (1.9) (2.4) (2.7) Acquisition of available for sale investments (0.7) - - Income from investments in joint ventures - - 0.2 Proceeds from disposal of joint venture - - 0.3 Purchases of property, plant and equipment (1.1) (0.9) (2.0) Proceeds from sale of property, plant and equipment - - 19.6 ------ --------- --------- --------- Net cash (used in)/generated from investing activities (9.7) (5.2) 55.5 Cash flows from financing activities Net proceeds from issue of ordinary share capital 0.1 0.4 147.0 Purchase of own shares (2.5) (1.3) (3.0) Repayment of borrowings (34.7) (0.9) (1.7) Increase in borrowings 28.5 - 99.7 Repayment of borrowings acquired with subsidiary - - (261.0) Dividends paid to Group shareholders (8.3) (5.0) (7.1) ------ --------- --------- --------- Net cash used in financing activities (16.9) (6.8) (26.1) ------ --------- --------- --------- Net increase in cash and cash equivalents 46.8 9.7 21.5 ------ --------- --------- --------- Net cash and cash equivalents at beginning of period 39.5 18.0 18.0 ------ --------- --------- --------- Net cash and cash equivalents at end of period 11 86.3 27.7 39.5 ------ --------- --------- --------- The notes on pages 10 to 19 are an integral part of this condensed consolidated interim financial information. Notes to the Condensed Consolidated Interim Financial Information 1 Basis of preparation The company is a public limited company incorporated and domiciled in the UK. The address of its registered office is Cowley Business Park, Cowley, Uxbridge, Middlesex, UB8 2AL. The company has its primary listing on the London Stock Exchange. This condensed consolidated interim financial information was approved for issue on 21 February 2008. This condensed consolidated interim financial information for the half year ended 31 December 2007 has been prepared in accordance with the Disclosure and Transparency Rules of the Financial Services Authority and with IAS 34, 'Interim financial reporting' as adopted by the European Union. The condensed consolidated interim financial information should be read in conjunction with the annual financial statements for the year ended 30 June 2007, which have been prepared in accordance with IFRSs and IFRICs as adopted by the European Union and the Companies Act 1985 applicable to companies reporting under IFRS. This condensed consolidated interim financial information does not constitute statutory accounts for the purposes of Section 240 of the Companies Act 1985. A copy of the statutory accounts for the year ended 30 June 2007 were approved by the Board of directors on 6 September 2007 and delivered to the Registrar of Companies. The report of the auditors on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under Section 237 of the Companies Act 1985. 2 Accounting policies The accounting policies and critical accounting estimates and judgements applied are consistent with those described in the Annual Report and Financial Statements for the year ended 30 June 2007. The same accounting policies and methods of computation are followed in the condensed consolidated interim financial information as in the Annual Report and Financial Statements for the year ended 30 June 2007 with the exception that IFRS 7, 'Financial instruments: disclosures', IFRIC 9, 'Reassessment of embedded derivatives', IFRIC10, 'Interim financial reporting and impairment' and IFRIC14, 'IAS19 - The limit on a defined benefit asset, minimum funding requirements and their interaction' have been adopted where applicable to the Group. At the date of signing this condensed consolidated interim financial information IFRS 8, 'Operating segments', IFRIC 11, 'IFRS2 - Group treasury share transactions' and IFRIC 12, 'Service concession agreements', which have not been applied, were in issue but not yet effective. The directors anticipate that the adoption of these standards and interpretations in future years will have no material impact on the Group's financial statements. The Group's principal risks and uncertainties are consistent with those disclosed in the Annual Report and Financial Statements for the year ended 30 June 2007. 3 Business segment reporting Segment reporting is presented in the condensed consolidated interim financial information in respect of the Group's business segments which are the primary basis of segment reporting. The business segment reporting reflects the Group's management and internal reporting structure. Segment results include items directly attributable to the segment as well as those that can be allocated on a reasonable basis. With effect from 1 July 2007, the Group has changed its management and internal reporting structure to include an affordable housing and regeneration segment. The comparative figures for the period ended 31 December 2006 have been restated accordingly. As the Group has no material activities outside the UK, segmental reporting is not required by geographical region. Inter-segment revenue is not material. Building Infrastructure Construction PPP Investments Affordable House-building Group Total Total housing & regeneration £m £m £m £m £m £m £m £m Half year ended 31 December 2007 Group revenue and share of joint venture revenue 339.2 250.1 589.3 2.4 94.5 230.0 0.2 916.4 Share of joint ventures' revenue (2.1) (3.1) (5.2) (1.5) (1.2) (10.6) - (18.5) ------------------------------------------------------------------------------------------------- Segment revenue 337.1 247.0 584.1 0.9 93.3 219.4 0.2 897.9 ------------------------------------------------------------------------------------------------- Segment result: Profit before joint ventures 6.4 6.2 12.6 (0.7) 5.7 29.5 (4.2) 42.9 Share of joint ventures' profit 0.1 - 0.1 1.1 - 3.1 - 4.3 ------------------------------------------------------------------------------------------------ Profit from operations * 6.5 6.2 12.7 0.4 5.7 32.6 (4.2) 47.2 Share of joint ventures' interest and tax - - - (1.6) - (2.1) - (3.7) ----------------------------------------------------------------------------------------------- Profit before finance costs, amortisation and exceptional item 6.5 6.2 12.7 (1.2) 5.7 30.5 (4.2) 43.5 Amortisation and exceptional item (0.1) (0.2) (0.3) - - (0.7) - (1.0) ----------------------------------------------------------------------------------------------- Profit before finance costs 6.4 6.0 12.4 (1.2) 5.7 29.8 (4.2) 42.5 Net finance costs 2.7 0.6 3.3 (0.3) (2.2) (15.9) 6.4 (8.7) ----------------------------------------------------------------------------------------------- Profit before taxation 9.1 6.6 15.7 (1.5) 3.5 13.9 2.2 33.8 expense (9.9) ----------------------------------------------------------------------------------------------- Profit for the period from continuing operations 23.9 ----------------------------------------------------------------------------------------------- Half year ended 31 December 2006 (Restated) Group revenue and share of joint venture revenue 266.7 171.4 438.1 0.2 54.9 116.4 3.3 612.9 Share of joint ventures' revenue (0.9) (5.2) (6.1) - - - - (6.1) ------------------------------------------------------------------------------------------------- Segment revenue 265.8 166.2 432.0 0.2 54.9 116.4 3.3 606.8 ------------------------------------------------------------------------------------------------- Segment result: Profit before joint ventures 4.8 4.1 8.9 (1.6) 2.6 16.9 (3.2) 23.6 Share of joint ventures' profit - - - - - - - - ------------------------------------------------------------------------------------------------- Profit from operations * 4.8 4.1 8.9 (1.6) 2.6 16.9 (3.2) 23.6 Share of joint ventures' interest and tax - - - (0.1) - (0.1) - (0.2) ------------------------------------------------------------------------------------------------- Profit before finance costs, amortisation and exceptional item 4.8 4.1 8.9 (1.7) 2.6 16.8 (3.2) 23.4 Amortisation and exceptional item (0.2) (0.1) (0.3) - - - 0.9 0.6 ------------------------------------------------------------------------------------------------- Profit before finance costs 4.6 4.0 8.6 (1.7) 2.6 16.8 (2.3) 24.0 Net finance costs 1.2 0.3 1.5 (0.1) (0.8) (6.6) 3.6 (2.4) ------------------------------------------------------------------------------------------------- Profit before taxation 5.8 4.3 10.1 (1.8) 1.8 10.2 1.3 21.6 Income tax expense (6.3) ------------------------------------------------------------------------------------------------- Profit for the period from continuing operations 15.3 ------------------------------------------------------------------------------------------------- * Profit from operations is stated before finance costs, exceptional items, amortisation of intangible assets and share of joint ventures' interest and tax. 4 Net exceptional item There were no exceptional items in the period. The net exceptional credit for the year ended 30 June 2007 was made up of the following: a)Net profit from property rationalisation of £3.9 million (31 Dec 2006: £0.9 million) which includes the profit on sale and leaseback of Group property net of the cost of terminating operating leases relating to Group properties that were no longer required. b)Restructuring costs of £1.9 million (31 Dec 2006: £nil) which relate to the costs associated with the restructuring of the Group following the acquisition of Linden Homes in March 2007. c)A curtailment credit of £5.2 million (31 Dec 2006: £nil) resulting from the changes in actuarial assumptions which arose on the closure of the Galliford Try Final Salary Pension Scheme on 31 March 2007. These amounts have been treated as exceptional items in accordance with the Group's accounting policy. The income tax expense associated with the net exceptional item amounted to £1.8 million (31 Dec 2006: £0.2 million). 5 Net finance costs Half Year to Half Year to 31 Dec 2007 31 Dec 2006 £m £m --------- ---------- Interest payable on borrowings (7.2) (0.2) Unwinding of discounted payables (3.1) (2.4) Net finance cost on retirement benefit obligations - (0.3) Other (2.0) - --------- ---------- Finance costs (12.3) (2.9) Finance income 3.6 0.5 --------- ---------- Net finance costs (8.7) (2.4) --------- ---------- The other finance costs represent the movement in the fair value of interest rate swaps. 6 Income tax expense The income tax expense for the period reflects the estimated effective rate for the full financial year to 30 June 2008 of 29% (30 June 2007: 29%). 7 Earnings per share Basic earnings per share is calculated using the profit after taxation and the weighted average number of ordinary shares in issue during the period 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 potentially dilutive ordinary shares. 31 Dec 2007 31 Dec 2006 Earnings Weighted Per share Earnings Weighted Per share amount amount £m average pence £m average pence number number of shares of shares ------- -------- -------- ------- -------- ------- Basic Earnings attributable to ordinary shareholders 23.9 373,538,911 6.4 15.3 273,865,542 5.6 Effect of dilutive securities Options 4,227,065 4,868,276 ------- -------- -------- ------- -------- ------- Diluted 23.9 377,765,976 6.3 15.3 278,733,818 5.5 ------- -------- -------- ------- -------- ------- Earnings adjusted for post tax exceptional items of £nil (2006:£0.7million) amount to £23.9 million (2006: £14.6 million). The basic earnings per share calculated on this adjusted basis is 6.4p (2006: 5.3p) (diluted 6.3p (2006: 5.2p)). 8 Dividends The following dividends were paid by the Company: Half Year to 31 Half Year to 31 Year to 30 June Dec 2007 Dec 2006 2007 £m Pence per share £m Pence per share £m Pence per share -------- -------- -------- -------- ------- --------- Previous period final 8.3 2.2 5.0 1.8 5.0 1.8 Current period interim - - - - 2.1 0.8 -------- -------- -------- -------- ------- --------- 8.3 2.2 5.0 1.8 7.1 2.6 -------- -------- -------- -------- ------- --------- The following dividends were declared by the Company in respect of each accounting period presented: Half Year to 31 Half Year to 31 Year to 30 June Dec 2007 Dec 2006 2007 £m Pence per share £m Pence per share £m Pence per share -------- -------- -------- -------- ------- --------- Interim 3.4 0.9 2.1 0.8 2.1 0.8 Final - - - - 8.3 2.2 -------- -------- -------- -------- ------- --------- 3.4 0.9 2.1 0.8 10.4 3.0 -------- -------- -------- -------- ------- --------- The interim dividend for 2008 of 0.9 pence per share was approved by the Board on 21 February 2008 and has not been included as a liability as at 31 December 2007. This interim dividend will be paid on 14 April 2008 to shareholders on the register at the close of business on 14 March 2008. 9 Share capital Number of Number of Ordinary shares Share premium Total shares shares issued authorised (thousands) (thousands) £m £m £m --------- --------- ------- ------- --------- At 1 July 2006 360,000 274,798 13.7 48.7 62.4 Issue of shares - 1,467 0.1 0.3 0.4 --------- --------- ------- ------- --------- At 31 December 2006 360,000 276,265 13.8 49.0 62.8 Increase in authorised share capital 145,000 - - - - Issue of shares - 100,248 5.0 141.6 146.6 --------- --------- ------- ------- --------- At 1 July 2007 505,000 376,513 18.8 190.6 209.4 Issue of shares - 68 - 0.1 0.1 --------- --------- ------- ------- --------- At 31 December 2007 505,000 376,581 18.8 190.7 209.5 --------- --------- ------- ------- --------- 10 Statement of changes in shareholders' equity Share capital Share premium Other reserves Retained Total earnings shareholders' equity £m £m £m £m £m ------- --------- ------- ------- --------- At 1 July 2006 13.7 48.7 4.7 53.0 120.1 Profit for the period - - - 15.3 15.3 Dividends - - - (5.0) (5.0) Proceeds from shares issued 0.1 0.3 - - 0.4 Purchase of own shares - - - (1.3) (1.3) Share based payments - - - 0.4 0.4 Actuarial losses recognised in retirement benefit obligations - - - (3.5) (3.5) Deferred tax on movements in equity - - - 2.3 2.3 ------- --------- ------- ------- --------- At 31 December 2006 13.8 49.0 4.7 61.2 128.7 Profit for the period - - - 28.3 28.3 Dividends - - - (2.1) (2.1) Proceeds from shares issued 5.0 141.6 - - 146.6 Purchase of own shares - - - (1.7) (1.7) Share based payments - - - 0.7 0.7 Actuarial gains recognised in retirement benefit obligations - - - 7.4 7.4 Revaluation of available for sale investments - - 2.0 - 2.0 Deferred tax on movements in equity - - - (4.2) (4.2) Current tax on movement in equity - - - 0.9 0.9 ------- --------- ------- ------- --------- At 30 June 2007 18.8 190.6 6.7 90.5 306.6 Profit for the period - - - 23.9 23.9 Dividends - - - (8.3) (8.3) Proceeds from shares issued - 0.1 - - 0.1 Purchase of own shares - - - (2.5) (2.5) Share based payments - - - 0.8 0.8 Actuarial losses recognised in retirement benefit obligations - - - (7.0) (7.0) Deferred tax on movements in equity - - - 3.5 3.5 ------- --------- ------- ------- --------- At 31 December 2007 18.8 190.7 6.7 100.9 317.1 ------- --------- ------- ------- --------- 11 Notes to the cash flow statement Half Year to Half Year to Year to 31 Dec 2007 31 Dec 2006 30 June 2007 £m £m £m --------- --------- --------- Cash flows from operating activities Profit for the period 23.9 15.3 43.6 Adjustments for: Income tax 9.9 6.3 16.6 Depreciation 0.9 1.4 2.3 Amortisation of intangible assets 1.0 0.3 1.4 Share based payments 0.8 0.4 1.1 Profit on sale and leaseback of property, plant and equipment - - (4.8) Profit on disposal of property, plant and equipment - - (0.6) Profit on sale of joint venture - - (0.5) Net finance costs 8.7 2.4 8.1 Share of post tax (profits)/losses from joint ventures (0.6) 0.2 (1.4) Movement in retirement benefit obligations (4.0) (0.8) (18.2) (Decrease)/increase in provisions for liabilities and charges (0.5) (1.0) 0.1 --------- --------- --------- 40.1 24.5 47.7 Changes in working capital: (Increase)/decrease in inventories (0.2) (1.0) 0.3 Decrease/(increase) in developments 26.1 (40.0) (98.1) (Increase)/decrease in trade and other receivables (5.1) 3.6 (73.2) Increase in payables 25.1 38.5 133.7 --------- --------- --------- Net cash generated from continuing operations 86.0 25.6 10.4 --------- --------- --------- Half Year to 31 Half Year to 31 Year to Dec 2007 Dec 2006 30 June 2007 £m £m £m --------- --------- --------- Cash and cash equivalents 86.3 34.0 39.5 Bank overdrafts - (6.3) - --------- --------- --------- Net cash and cash equivalents 86.3 27.7 39.5 --------- --------- --------- 12 Net (debt)/cash Net (debt)/cash is made up as follows: Half Year to Half Year to Year to 31 Dec 2007 31 Dec 2006 30 June 2007 £m £m £m ---------- --------- --------- Cash and cash equivalents 86.3 34.0 39.5 Financial liabilities: Bank overdrafts - (6.3) - Other current (17.3) - (50.0) Non current (114.7) (1.1) (88.2) ---------- --------- --------- Net (debt)/cash (45.7) 26.6 (98.7) ---------- --------- --------- 13 Borrowings and loans Half Year to Half Year to Year to 31 Dec 2007 31 Dec 2006 30 June 2007 £m £m £m ----------- ----------- ---------- Non-current 114.7 1.1 88.2 Current 17.3 6.3 50.0 ----------- ----------- ---------- 132.0 7.4 138.2 ----------- ----------- ---------- The movement in borrowings is analysed as follows: £m --------- At 1 July 2006 5.7 Increase in overdraft 2.6 Repayment of borrowings (0.9) --------- At 31 December 2006 7.4 Decrease in overdraft (6.3) Repayment of borrowings (0.8) Increase in borrowings 99.7 Increase due to acquisition of subsidiary 38.2 --------- At 30 June 2007 138.2 Repayment of borrowings (34.7) Increase in borrowings 28.5 --------- At 31 December 2007 132.0 --------- 14 Defined benefit plans The amounts recognised in the income statement were as follows: Half Year to Half Year to 31 Dec 2007 31 Dec 2006 £m £m --------- --------- Current service costs - (1.7) Interest costs (4.4) (4.0) Expected return on plan assets 4.8 3.7 --------- --------- Credit/(charge) to income statement 0.4 (2.0) --------- --------- An actuarial loss of £7.0 million (2006: £3.5 million) has been taken to the consolidated statement of recognised income and expense. The amounts recognised in the balance sheet were as follows: Half Year to Half Year to Year to 31 Dec 2007 31 Dec 2006 30 June 2007 £m £m £m --------- --------- --------- Present value of funded obligations (3.9) - - Fair value of plan assets 5.2 - - --------- --------- --------- Asset in the balance sheet 1.3 - - --------- --------- --------- Half Year to Half Year to Year to 31 Dec 2007 31 Dec 2006 30 June 2007 £m £m £m --------- --------- --------- Present value of funded obligations (162.8) (165.8) (156.4) Fair value of plan assets 134.7 116.1 131.4 --------- --------- --------- Liability in the balance sheet (28.1) (49.7) (25.0) --------- --------- --------- The retirement benefit asset arose as a result of the acquisition of Kendall Cross Holdings Limited (see note 17). 15 Provisions for liabilities and charges Restructuring Onerous leases Total £m £m £m -------------- ------- -------- At 1 July 2006 1.9 0.5 2.4 Utilised in period (1.0) - (1.0) -------------- ------- -------- At 31 December 2006 0.9 0.5 1.4 Charged to income statement 1.9 0.9 2.8 Utilised in period (1.3) (0.4) (1.7) -------------- ------- -------- At 30 June 2007 1.5 1.0 2.5 Utilised in period (0.1) (0.4) (0.5) -------------- ------- -------- At 31 December 2007 1.4 0.6 2.0 -------------- ------- -------- 16 Non current assets classified as held for sale At 31 December 2007, the Group held an investment in a PFI project which is classified as held for sale in line with the Group's policy to sell down equity investments in PFI projects to 50% of the project equity post financial close. The investment had the following assets and liabilities: £m Trade receivables 4.2 Cash in hand 0.3 -------- Non current assets classified as held for sale 4.5 -------- Borrowings 4.1 Other payables 0.4 -------- Liabilities directly associated with non current assets classified as held for sale 4.5 -------- 17 Acquisitions On 14 November 2007, the Group acquired 100% of the share capital of Kendall Cross Holdings Limited, an affordable housing contractor based in the north east of England. The total consideration payable, including expenses, was £9.3 million in cash, of which £1.9 million is on deferred terms. At completion, Kendall Cross held positive cash balances amounting to £1.4 million, resulting in a net initial cash outlay of £6.0 million. The Group has yet to finalise the fair value of the identifiable assets and liabilities acquired and the goodwill recognised of £5.2 million is provisional. The goodwill relates to the acquired workforce and the expected synergy savings. Details of the assets acquired are set out in the table below. Carrying value Fair value Provisional pre acquisition adjustments fair value £m £m £m -------- -------- -------- Intangibles - 0.2 0.2 Property, plant and equipment 1.1 - 1.1 Retirement benefit asset 1.3 - 1.3 Trade and other receivables 5.4 - 5.4 Cash and cash equivalents 2.1 - 2.1 Bank loans and overdrafts (0.7) - (0.7) Trade and other payables (5.3) - (5.3) -------- -------- -------- Net assets acquired 3.9 0.2 4.1 Goodwill 5.2 -------- -------- -------- Consideration 9.3 -------- -------- -------- The revenue and net profit for the six week period since acquisition was £2.7 million and £0.1 million respectively. If the company had been acquired on 1 July 2007 its revenue and net profit would have been £12.6 million and £0.4 million respectively. 18 Contingent liabilities Disputes arise in the normal course of business, some of which lead to litigation or arbitration procedures. The directors make proper provision in the financial statements when they believe a liability exists. Whilst the outcome of disputes and arbitration is never certain, the directors believe that the resolution of all existing actions will not have a material adverse effect on the Group's financial position. Galliford Try plc has entered into guarantees and counter indemnities in respect of bank and performance bonds issued on behalf of Group undertakings in the normal course of business amounting to £174.0 million (2006: £169.8 million). 19 Related party transactions Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not included within this note. Transactions between the Group and its joint ventures and jointly controlled operations and assets are disclosed as follows: Trading transactions Sales to Purchases from Amounts owed by Amounts owed to related parties related parties related parties related parties 2007 2006 2007 2006 2007 2006 2007 2006 £m £m £m £m £m £m £m £m Joint ventures 33.0 5.5 - - 2.9 0.9 2.0 - Jointly controlled operations and assets 32.5 10.9 0.7 1.2 11.5 1.6 11.1 2.0 ------ ------- ------- ------- ------- ------- ------ ------ Non- trading transactions Loans to Loans from Injection of related parties related parties equity funding 2007 2006 2007 2006 2007 2006 £m £m £m £m £m £m Joint ventures 9.3 - - - 1.9 - Jointly controlled operations and assets - - 4.9 1.2 - - ------ ------- ------- ------- ------- ------- ------ ------ Statement of directors' responsibilities The directors' confirm that this condensed consolidated interim financial information has been prepared in accordance with IAS 34 as adopted by the European Union, and that the interim management report herein includes a fair review of the information required by DTR 4.2.7 and DTR 4.2.8. The directors of Galliford Try plc are listed in the Annual Report for 30 June 2007 since when there have been no changes to the board. Signed on behalf of the Board Greg Fitzgerald Chief Executive Frank Nelson Finance Director 21 February 2008 Independent review report to Galliford Try plc Introduction We have been engaged by the company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 31 December 2007, which comprises the consolidated income statement, consolidated balance sheet, consolidated statement of recognised income and expense, consolidated cash flow statement and related notes. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements. Directors' responsibilities The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority. As disclosed in note 1, the annual financial statements of the group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union. Our responsibility Our responsibility is to express to the company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review. This report, including the conclusion, has been prepared for and only for the company for the purpose of the Disclosure and Transparency Rules of the Financial Services Authority and for no other purpose. We do not, in producing this report, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing. Scope of review We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. Conclusion Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 31 December 2007 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority. PricewaterhouseCoopers LLP Chartered Accountants London 21 February 2008 Notes: (a) The maintenance and integrity of the Galliford Try plc website is the responsibility of the directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the interim report since it was initially presented on the website. (b) Legislation in the United Kingdom governing the preparation and dissemination of financial information may differ from legislation in other jurisdictions. This information is provided by RNS The company news service from the London Stock Exchange

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