Interim Results

Galliford Try PLC 24 February 2005 GALLIFORD TRY PLC INTERIM RESULTS FOR THE HALF YEAR ENDED 31 DECEMBER 2004 Financial Highlights • Turnover steady at £347 million (2003: £354 million) • Profit before tax up 22% at £11.7 million (2003: £9.6 million) • Earnings per share up 19% at 3.7p (2003: 3.1p) • Interim dividend up 9% at 0.6p per share (2003: 0.55p) • Net debt of £10.3 million represents gearing of 13% (2003: £11.6 million, 18%) Operational Highlights • Construction operating profit up 45% to £3.0m • Housebuilding operating profit up 8% to a record £12.1 million • Shortlisted for United Utilities AMP4 framework • £957 million construction order book with over 90% secured on non price competitive basis • 79% of housebuilding sales secured for full year Commenting today, Tony Palmer, Chairman said: 'Our construction prospects are underpinned by improving profit margins and a balanced future workload. Our positioning in the housebuilding market, combined with some strengthening in purchaser confidence, means we are well placed to achieve our targets. We look forward to reporting further progress at the full year.' Enquiries to: D M Calverley, Chief executive Galliford Try plc 01895 855 219 F E Nelson, Finance director Galliford Try plc 01895 855 226 A M Wilkinson Bell Pottinger Financial 020 7861 3232 G Callow Bell Pottinger Financial 020 7861 3232 CHAIRMAN'S STATEMENT I am delighted to report record results for the first half of our financial year. Profit margins in construction have again increased and housebuilding has delivered higher profits despite slower market conditions. Financial Review Profit before tax for the six months ended 31 December 2004 was £11.7m, an increase of 22% (2003: £9.6m) and Group turnover was steady at £347m (2003: £354m). Strong cash flow generated from the construction division and period end completions in the housebuilding division contributed to net debt at 31 December of £10.3m, representing gearing of 13%, (£11.6m and 18% at 31 December 2003 and £12.3m and 17% at 30 June 2004). Earnings per share for the period were 3.7p compared to 3.1p for the same period last year. Shareholders funds have risen to £79.4m compared to £65.5m last year and £72.3m at 30 June 2004. Dividend The directors have declared an interim dividend of 0.6p per share, a 9% increase on last year, which will be paid on 12 April 2005 to shareholders on the register at 18 March 2005. The directors reiterate their commitment to a progressive dividend policy that for each financial year takes into account earnings growth as well as the need for continuing investment in the business. Construction The construction division achieved an operating profit up 45% on last year to £3m on a turnover of £256m. This represents an increase in profit margin to 1.2%, in line with our objective to achieve industry upper quartile levels. We have succeeded in positioning construction as a leading provider in a number of market sectors with good opportunities, and in securing work where the risk and rewards of the project are fairly shared between client and contractor. Further underpinning our position as a leading contractor to the water industry, we have been shortlisted by United Utilities plc for selection as a preferred bidder partner for the delivery of water and waste water infrastructure works for AMP4 in the North West of England. An announcement on the appointment of preferred bidders is expected shortly. In joint venture with Costain and Atkins, we will, if successful be one of two construction partners to deliver an estimated £940 million of work over a five year period commencing in April 2005, out of which we expect to carry out around a quarter. This builds on the three year framework for projects carried out for United Utilities under AMP3. In Scotland, our three year framework agreement with Scottish Water is performing well. In the health sector we achieved financial close on NHS LIFTs at Coventry, which has an initial contract value of £42 million and at Barnet, Enfield and Haringey with an initial contract value of £32 million. Including Liverpool and Sefton LIFT, which closed in the last financial year, we have a total of £134m of LIFT projects underway and are encouraged by the scope for further work in later phases. We are also selectively targeting the opportunities that will arise from the next release of LIFT schemes. In education we achieved financial close on the £45m Caludon Schools PFI at Coventry. Having been appointed preferred bidder, we are working towards financial close on the £150m Northampton Schools PFI project and have been shortlisted for multi-school projects in Rochdale and Bromsgrove which each have a construction value of over £50 million. Our expertise and recent track record in this sector puts us in a good position to benefit from the Government's 'Building Schools for the Future' initiative. In October we announced that we had won a number of new affordable housing contracts that boosted our order book, which currently stands at £104 million. We are pursuing several new opportunities in this growth market, primarily through the strategic alliances we have with housing associations. We are seeing growth in rail, with increasing demand for the buildings and infrastructure services we provide for Network Rail and the train operating companies. Our telecommunications business is benefiting from the recently increased pace of the roll out of 3G by the mobile phone operators. In the private commercial sector, there is some evidence of an increase in activity, particularly for offices in the West End of London, an area in which we have a strong presence and where we have recently won three contracts worth £28.4 million. Overall, we have a well balanced order book that now totals £957m, of which 84% is in the public and regulated sectors and over 90% has been secured on a non price competitive basis. Housebuilding The housebuilding division achieved an operating profit of £12.1m on a turnover of £91.1m. Whilst sales growth during the period was held back by the process of a return to more sustainable market conditions, completions for the half year at 387 were 5% up on the previous half year's total of 367. The average sales price remained unchanged at £228,000, reflecting our concentration on the mainstream market. All of our regional brands have benefited from our focus on individually designed developments for the mainstream market, with a particular strength in conversions and brownfield development. We have no large apartment developments and do not depend on major consortium sites. In a purchaser driven market it is particularly clear that offering more interesting homes for sale on smaller developments gives us an advantage. We have a long track record in converting attractive but redundant buildings into desirable homes including a number of schools and hospitals. We are currently on site with such schemes in Epsom and Shepton Mallet, and are negotiating good opportunities for the future. In affordable housing we have built strong relationships with social housing providers to supply mixed developments which meet planning requirements for affordable homes as well as outright private purchases. A good example of this is our joint venture with Westco, part of the Devon & Cornwall Housing Group, to develop over 180 homes on the former city centre hospital site in Truro, where up to 50% of the new requirement is for affordable housing. We can bring the right architectural skills to these projects, which can often be a mixture of conversion and new build, undertake the value engineering appraisals required to meet all parties' objectives, deal with complex planning briefs and provide funding expertise. We have a number of such collaborative projects currently under development and are encouraged by the scope for increasing our activities in this area. As part of our overall strategy on cost control we have implemented a series of initiatives to reduce our overall cost base and improve efficiencies in design and support services. We are also seeing some easing in sub-contract prices. We have been successful in achieving a moderate increase in our landbank under our tighter investment criteria, and the number of plots currently owned or controlled at 2,464 is up 5% on a year ago. We anticipate securing in excess of a further 2000 plots from our strategic land bank from 2006 onwards. Since the New Year we have been encouraged by a return to a more normal sales pattern and we remain on track to achieve our planned expansion of the business in the medium term. The division has currently reserved, contracted or completed sales with a value of £166 million and has secured 79% of planned sales for the year to 30 June 2005. Directors We announced earlier today that Greg Fitzgerald, currently Managing director of the housebuilding division, will take over from David Calverley as Chief executive on 1 July this year. With a background in both construction and housebuilding, Greg has the ability and drive to generate increasing shareholder value. David Calverley will become Non-executive from that date, and will take over as Chairman of the Company on my retirement from the board at the annual general meeting scheduled for October this year. Chris Bucknall, currently our Senior independent non-executive director, will become Deputy chairman at the same time. Greg Fitzgerald is an outstanding businessman and the Board is also delighted to retain the experience and skills of David Calverley in his new role. I have said before that we have a first class team and these appointments enable us to build on our proven management strength to take the business into the future. Prospects In construction, we have a strong position in our selected markets, particularly those in the public and regulated sectors where there are good growth opportunities. Our prospects are underpinned by improving profit margins and a balanced future workload. In housebuilding, we are encouraged by the level of sales since the New Year. Our positioning in the market, combined with some strengthening in purchaser confidence, means we are well placed to achieve our targets. We look forward to reporting further progress at the full year. Tony Palmer Chairman 24 February 2005 CONSOLIDATED PROFIT AND LOSS ACCOUNT Half year Half year Year ended ended ended 31 Dec 31 Dec 30 June 2004 2003 2004 Turnover Note £000 £000 £000 Total continuing operations 347,554 356,431 695,400 Less share of joint ventures' turnover (388) (2,897) (7,902) --------- --------- --------- Group turnover 1 347,166 353,534 687,498 Cost of sales (314,876) (325,456) (629,197) --------- --------- --------- Gross profit 32,290 28,078 58,301 Net operating expenses (19,567) (17,050) (33,850) --------- --------- --------- Group operating profit 12,723 11,028 24,451 Share of profits in joint ventures 104 445 1,324 Loss on sale of fixed asset investments - (22) (27) --------- --------- --------- Profit on ordinary activities before interest 1 12,827 11,451 25,748 Net interest payable - Group (781) (1,392) (2,224) - Joint ventures (310) (425) (820) --------- --------- --------- (1,091) (1,817) (3,044) --------- --------- --------- Profit on ordinary activities before tax 11,736 9,634 22,704 Tax 4 (3,629) (2,987) (7,084) --------- --------- --------- Profit on ordinary activities after tax 8,107 6,647 15,620 Dividends 5 (1,330) (1,198) (3,756) --------- --------- --------- Retained profit for the period 6,777 5,449 11,864 ========= ========= ========= Earnings per ordinary share 3.7p 3.1p 7.2p Diluted earnings per share 3.5p 2.9p 6.9p Dividend per share 0.60p 0.55p 1.70p ========= ========= ========= CONSOLIDATED BALANCE SHEET 31 Dec 31 Dec 30 June 2004 2003 2004 £000 £000 £000 Fixed assets Intangible assets - goodwill - 84 - Tangible assets 12,011 11,703 11,936 Investments in joint ventures: Share of gross assets 10,596 10,749 10,739 Share of gross liabilities (8,573) (8,652) (8,480) --------- --------- --------- 2,023 2,097 2,259 Investments in associates 31 48 31 Other investments 608 607 608 --------- --------- --------- 14,673 14,539 14,834 Current assets Stocks 1,642 415 795 Developments 186,597 154,652 177,392 Debtors 86,799 115,060 107,932 Cash at bank & in hand 10,120 5,572 2,570 --------- --------- --------- 285,158 275,699 288,689 Creditors: amounts falling due within one year Bank loans and overdrafts (19,240) (12,138) (13,648) Other amounts falling due within one year (195,757) (203,843) (211,552) --------- --------- --------- Net current assets 70,161 59,718 63,489 --------- --------- --------- Total assets less current liabilities 84,834 74,257 78,323 Creditors: amounts falling due after more than one year (2,520) (5,438) (3,108) Provisions for liabilities and charges (2,928) (3,340) (2,928) --------- --------- --------- 79,386 65,479 72,287 ========= ========= ========= Capital and reserves Called up share capital 11,259 11,076 11,239 Share premium account 2,246 1,824 2,196 Merger reserve 4,687 4,687 4,687 Revaluation reserve 1,907 1,910 1,909 Profit and loss account 59,287 45,982 52,256 --------- --------- --------- Equity shareholders' funds 79,386 65,479 72,287 ========= ========= ========= CONSOLIDATED CASH FLOW STATEMENT Half Half year year Year ended ended ended 31 Dec 31 Dec 30 June 2004 2003 2004 Note £000 £000 £000 Net cash inflow from operating activities 6 10,529 11,833 17,107 Returns on investments and servicing of finance (681) (1,215) (1,967) Taxation (4,546) (2,064) (5,620) Capital expenditure and financial investment (888) (259) (1,220) Acquisitions and disposals 35 50 29 Equity dividends paid (2,545) (2,212) (3,423) --------- --------- --------- Net cash inflow before use of liquid resources and financing 1,904 6,133 4,906 Financing Issue of ordinary share capital 70 75 610 Increase/(decrease) in bank loans 18,017 (15,000) (24,151) Repayment of loan notes (3,820) - (16) --------- --------- --------- 14,267 (14,925) (23,557) --------- --------- --------- Increase/(decrease) in cash in the period 16,171 (8,792) (18,651) --------- --------- --------- Reconciliation of net cash flow to movement in net debt Increase/(decrease) in cash in period 16,171 (8,792) (18,651) (Increase)/decrease in debt and lease financing (18,017) 15,000 24,167 Decrease in loan notes 3,820 - - --------- --------- --------- Change in net debt in the period 1,974 6,208 5,516 Net debt at start of period (12,309) (17,825) (17,825) --------- --------- --------- Net debt at end of period 7 (10,335) (11,617) (12,309) ========= ========= ========= NOTES 1 Segmental analysis Turnover half year ended 31 December 2004 2003 Including Including joint Joint joint Joint ventures ventures Group ventures ventures Group £000 £000 £000 £000 £000 £000 Construction 256,145 388 255,757 268,663 843 267,820 Housebuilding 91,147 - 91,147 87,578 2,054 85,524 Group 262 - 262 190 - 190 --------- -------- ------- -------- -------- -------- Total 347,554 388 347,166 356,431 2,897 353,534 ========= ======== ======= ======== ======== ======== Profit/(loss) for half year ended 31 December 2004 2003 £000 £000 Construction 2,951 2,032 Housebuilding 12,097 11,161 Group (2,221) (1,742) ---------------- ------------- 12,827 11,451 ---------------- ------------- Less: net interest payable (1,091) (1,817) ---------------- ------------- 11,736 9,634 ================ ============= The profit in respect of joint ventures amounted to £104,000 (2003: £72,000) in construction and £nil (2003: £373,000) in housebuilding. 2 Basis of preparation The interim financial information has been prepared on the basis of the accounting policies set out in Galliford Try plc's statutory financial statements for the year ended 30 June 2004 and in accordance with applicable UK accounting standards. All the figures are consolidated and for both the six months ended 31 December have been reviewed by the auditors. The figures for the year ended 30 June 2004 have been extracted from the financial statements of Galliford Try plc, on which the auditors gave an unqualified audit report and which have been delivered to the Registrar of Companies. The foregoing financial information does not constitute statutory financial statements. 3 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 period less the weighted average number of ordinary shares held by the Galliford Try Employee Share Trust. For diluted earnings per share, the weighted average number of ordinary shares is adjusted to assume conversion of all dilutive potential ordinary shares. 4 Taxation The tax charge for the period reflects the estimated effective rate for the full year to 30 June 2005 of 31.0% (30 June 2004: 31.0%). 5 Interim dividend The directors have declared an interim dividend of 0.6p per share (2004: 0.55p) which will be paid on 12 April 2005 to shareholders on the register on 18 March 2005. 6 Reconciliation of operating profit to cash flows Half year Half year Year ended ended ended 31 Dec 31 Dec 30 June 2004 2003 2004 £000 £000 £000 Operating profit 12,723 11,028 24,451 Depreciation 833 808 1,642 Profit on disposal of tangible fixed assets (20) (144) (150) Charge for employee share options 252 224 82 Amortisation of goodwill - 83 167 (Increase)/decrease in stocks (847) 33 (347) Increase in developments (9,205) (6,100) (28,840) Decrease in debtors 21,123 1,672 8,423 (Decrease)/ increase in creditors (14,330) 4,229 11,679 ---------- ---------- --------- Net cash inflow from operating activities 10,529 11,833 17,107 ========== ========== ========= 7 Analysis of changes in net debt At 1 July Cash At 31 Dec 2004 flow 2004 £000 £000 £000 Cash at bank and in hand 2,570 7,550 10,120 Overdrafts (9,844) 8,621 (1,223) ----------- ---------- --------- (7,274) 16,171 8,897 Loan notes (5,035) 3,820 (1,215) Bank loans - (18,017) (18,017) ----------- ---------- --------- Net debt (12,309) 1,974 (10,335) =========== ========== ========= INDEPENDENT REVIEW REPORT TO GALLIFORD TRY PLC Introduction We have been instructed by the Company to review the financial information which comprises the consolidated profit and loss account, consolidated balance sheet, consolidated cash flow statement, and the related notes numbered 1 to 7. We have read the other information contained in the interim report and considered whether it contains any apparent misstatements or material inconsistencies with the financial information. Directors' responsibilities The interim report, including the financial information contained therein, is the responsibility of, and has been approved by the directors. The directors are responsible for preparing the interim report in accordance with the Listing Rules of the Financial Services Authority which require that the accounting policies and presentation applied to the interim figures should be consistent with those applied in preparing the preceding annual accounts except where any changes, and the reasons for them, are disclosed. Review work performed We conducted our review in accordance with guidance contained in Bulletin 1999/4 issued by the Auditing Practices Board for use in the United Kingdom. A review consists principally of making enquiries of group management and applying analytical procedures to the financial information and underlying financial data and, based thereon, assessing whether the accounting policies and presentation have been consistently applied unless otherwise disclosed. A review excludes audit procedures such as tests of controls and verification of assets, liabilities and transactions. It is substantially less in scope than an audit performed in accordance with United Kingdom Auditing Standards and therefore provides a lower level of assurance than an audit. Accordingly we do not express an audit opinion on the financial information. This report, including the conclusion, has been prepared for and only for the Company for the purpose of the Listing 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. Review conclusion On the basis of our review we are not aware of any material modifications that should be made to the financial information as presented for the six months ended 31 December 2004. PricewaterhouseCoopers LLP Chartered Accountants London 24 February 2005 This information is provided by RNS The company news service from the London Stock Exchange

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