Interim Results
Taylor Woodrow PLC
10 September 2002
Embargoed: 07.00 hrs 10 September 2002
TAYLOR WOODROW plc INTERIM RESULTS STATEMENT
(for the six months to 30 June 2002)
13 per cent rise in operating profit to £122.4m with Bryant operating profit up
39 per cent
Highlights
• Operating profits up 13 per cent to £122.4 million (2001: £108.7 million)
• Profit before tax up 4 per cent to £108.1 million (2001: £103.8 million)
• Worldwide housing operating profits up 29 per cent to £108.3 million on the sale of 4,460 homes and lots
• Bryant operating profits up 39 per cent to £70.4 million (2001: £50.6 million)
• Basic earnings per share are 12.7 pence
• US housing business bolstered by the acquisition in August of Journey Homes in Phoenix, Arizona for £28.7 million
• UK business refocused
• £21 million cost benefit in 2003 rising to £30 million in 2004, at a cost of £12 million charged in H2 2002
• Simplified business refocused around key value added processes
Dr Robert Hawley, Chairman of Taylor Woodrow, commented:
'The first half of 2002 has been one of continued progress, reflected in the
delivery of strong financial results for this period. Our refocusing will
ensure we move successfully on to the next phase of our strategic journey.'
Iain Napier, Chief Executive of Taylor Woodrow, commented:
'Taylor Woodrow has undergone some fundamental changes over recent years as we
realigned our business towards a strategy of stable and sustainable growth and a
clear focus on house building activities in the UK, North America and other
chosen markets. We are financially very strong and our construction and
property expertise provides us with the competitive advantage of a broad base of
skills unique amongst our house building peer group.
'We have delivered excellent results in the first half, and I am confident we
will continue to make good progress to the end of 2002'.
- ends -
Shareholder Information
The interim dividend will be paid on Friday 1 November 2002 to shareholders
whose names appear on the register of members at the close of business on Friday
20 September 2002.
The company offers a Dividend Re-Investment Plan which provides shareholders
with a facility to use their cash dividends to purchase Taylor Woodrow plc
shares in the market. Details will be sent to ordinary shareholders with the
Interim Report which will be posted on 17 September 2001. Copies of the Interim
Report will also be available from that date on the Company's website
taylorwoodrow.com and from the registered office at Venture House, 42-54 London
Road, Staines, Middlesex, TW18 4HF.
Notes to editors
Attached is:
Financial and Business Review
Group Profit & Loss Account for the half year ended 30 June 2002.
Group Balance Sheet for the half year ended 30 June 2002.
Group Cash Flow Statement for the half year ended 30 June 2002.
Notes to the Interim Accounts.
High-resolution photographs of Taylor Woodrow's Chairman, Dr Robert Hawley and
Chief Executive, Iain Napier are available to the media, free of charge at
www.newscast.co.uk. For any queries, please contact Rachael Morgan (01784
428773/07904 528106).
A presentation to analysts will be made at 10.30 hrs. This presentation will be
broadcast live on taylorwoodrow.com.
For further information, please contact
Ian Morris 01784 428767/07816 518767
Miranda Bellord 01784 428768/07946 722381
Taylor Woodrow Public Relations
Jonathan Murrin 01784 428718 / 07816 518718
Taylor Woodrow Investor Relations
Scott Fulton 020 7269 7130 / 07788 144993
Peter Otero 020 7269 7121 / 07979 537408
Financial Dynamics
Financial and business review
Financial results
Group turnover for the six months ending 30 June 2002 was £984.3 million.
Operating profit rose to £122.4 million (2001: £108.7 million), up 13 per cent,
with operating margins rising to 12.4 per cent (2001: 11.1 per cent).
Profit before tax rose 4 per cent to £108.1 million (2001: £103.8 million).
Underlying Profit before tax, excluding asset disposals, grew by 13 per cent to
£106.5m (2001: £94.5m). Basic earnings per share are 12.7 pence (2001: 13.9
pence). Annualised return on capital employed increased to 15 per cent (2001:
12.2 per cent).
The Board has declared an interim dividend of 2.2 pence per share (2001: 2.0
pence), an increase of 10 per cent. This dividend will be paid on 1 November
2002 to shareholders on the register at close of business on 20 September 2002.
At 30 June 2002, total shareholders' funds were £1,389.4 million (December 2001:
£1,356.2 million), equivalent to 251.5 pence per share. Net debt was £239.6
million (2001: £297.6 million). At the half year, net gearing was 17.2 per
cent (2001: 21.9 per cent) giving a sound financial base for further growth.
The market
Strong market conditions have benefited our UK and North American housing
businesses and, overall, we have delivered another good set of financial
results.
In the UK, underlying market conditions remain favourable as demand for new
housing is still under supplied. Interest rates remain at 38 year lows and
levels of employment are high. Also the mortgage market is significantly more
competitive than even a couple of years ago. In terms of disposable income,
housing also remains relatively affordable compared to long term trends.
Whilst we have seen strong growth in selling prices this first half, many
commentators are now pointing to a slowing down in sales prices in the second
half. A return to more stable house price inflation seems likely.
Housing
Our housing operations worldwide, predominantly focused in the UK and North
America, recorded a 29 per cent rise in operating profit to £108.3 million on
the sale of 4,460 homes and lots.
Bryant Homes 2002 - H1 2001 - H1
Operating profit £70.4 million £50.6 million
Home completions 2,476 2,121
Lots completions 392 331
Average home selling price £173,000 £152,000
Operating margin 15.2% 14.7%
In the UK, Bryant Homes has experienced strong growth in selling prices and
volumes. Operating profit in the first half rose by 39 per cent to £70.4
million reflecting the full six months' contribution and also the Taywood Homes/
Bryant merger synergies. Bryant's operating margins increased to 15.2 per cent.
Our Bryant forward order book reached record levels at £399 million, 38 per cent
higher than last year and we are currently experiencing high levels of visitors
and rates of reservation.
In the first half of 2002, 2,476 home sales were completed and average selling
prices increased to £173,000, a rise of 13.6 per cent. We remain on track to
deliver 6,000 completions by the year end.
Bryant has just completed its largest ever land purchase - 193 acres, of which
60 acres is developable land, in Church Crookham, near Fleet in Hampshire. We
will develop 1100 units on the site, a superstore, medical facility, schools and
shops. The first sales will come on line in late 2003, early 2004.
The Bryant land bank remains strong with just under three and a half years of
supply and strategic land of 13,000 acres. Overall, our total UK land bank
stands at 21,842 homes, a rise of 23 per cent against June 2001.
North American housing 2002 - H1 2001 - H1
Operating profit £35.1 million £36.1 million
Home completions 902 714
Lot completions 473 1,821
Average home selling price £216,000 £318,000
Operating margin 15.9% 12.4%
Reported falls in American consumer confidence are not affecting demand in our
markets. Although profit performance at £35.1 million is nominally flat compared
to last year, this is because of two large bulk lot sales at Mirasol in Florida
and Steiner Ranch in Texas last year which contributed £6.2 million in profits.
At 30th June, the North American order book stood at £331 million. Ninety per
cent of the budgeted completions for the second half of 2002 are reserved.
Following last year's disappointing performance, it is pleasing to report that
our Californian operation has returned a small operating profit of £3.1 million
six months ahead of schedule. We have been reinvesting capital in California
buying land with planning permission in the middle market.
Our activities in Canada, which operate under the Monarch brand, enjoyed an
excellent first half. The high rise city centre apartment market in Toronto
remains buoyant justifying our decision to buy-out the Monarch minority in 2000
and focus our activities on the high rise market. Toronto is now one of the
fastest growing cities in North America providing consistent demand.
Our North American strategy centres around our ability to identify growth
markets and manage them through local, entrepreneurial teams. In August, we
extended our operations in the US through the acquisition of the business and
assets of Journey Homes of Phoenix, Arizona for £28.7 million. The Phoenix new
home market is the second largest in the United States with some 35,000 housing
starts each year.
Journey Homes is a highly respected business whose management has an excellent
reputation for land acquisition and development expertise. We are currently
projecting over 700 home sales in 2003.
Other housing 2002 - H1 2001 - H1
Operating profit £4.3 million £4.3 million
Home completions 153 92
Lot completions 2 262
Average home selling price £139,000 £154,000
Operating margin 19.7% 16.2%
Our business in Spain and Gibraltar has continued to perform well with operating
margins of just under 20 per cent.
Other businesses
Property 2002 - H1 2001 - H1
Operating profit £15.2 million £23.7 million
Rental income £8.2 million £14.1 million
Operating margin 19.4% 28.8%
Today our commercial property is almost entirely UK based following the disposal
of our assets in Canada. Sales of commercial properties delivered £12 million of
profits. Total operating profits fell against last year as investment rental
incomes declined by 33 per cent following our planned investment property
disposals.
In the second half we expect to sell another two or three commercial properties.
We sold investment property, which had a net book value of £32 million in the
period, and our only significant remaining investment is St Katharine's. The
sale of St Katharine's is now simply a timing issue and not a strategic issue.
Construction 2002 - H1 2001 - H1
Operating profit £5.3 million £6.4 million
Order book £593 million £591 million
Operating margin 3.0% 2.9%
The construction business, which currently accounts for only 4 per cent of
operating profit, has continued to perform well in the first half with operating
margins of 3 per cent. Our objective to ensure a greater percentage of its
workload supports our house building and commercial property activities is on
track. The proportion of work on internal projects currently stands at 20 per
cent from 12 per cent last year. We intend to grow this to around 30 per cent
in the next two years.
Future strategy
In March, we instigated a review of the key value drivers and structure of
Taylor Woodrow. This will result in a simplification of our organisation to
provide shorter reporting lines and clearer responsibilities as well as
significant cost synergies. We expect to deliver savings of £21 million in
2003, rising to an annually recurring £30 million in 2004.
The company's UK operations will, in future, be organised through ten Taylor
Woodrow regions combining our house building and commercial property businesses
to reflect our skills in the areas of residential, mixed use and urban
regeneration projects. We will continue to market homes under the Bryant brand
in the UK.
Our North American and UK site based operations are unaffected by the review.
The construction business will continue to operate separately but will not take
on new international contracts or high risk projects where we cannot guarantee
the right level of return.
The senior management structure has been streamlined and two Operations
Directors now provide joint leadership of the regional network responsible for
project delivery. A Commercial Director will be appointed to work with them
delivering land and planning, sales and marketing and supply chain management.
As part of the refocusing, we will establish one central office, based in
Solihull and all senior management will be located there, reducing on-going
costs through the rationalisation of our office network. This office will open
in October, with relocation completed by the end of the year.
Outlook
Taylor Woodrow has undergone some fundamental changes over recent years as we
realigned our business towards a strategy of stable and sustainable growth and a
clear focus on house building activities in the UK, North America and other
chosen markets. We are financially very strong and our construction and
property expertise provides us with the competitive advantage of a broad base of
skills unique amongst our house building peer group.
The realignment of our organisation will ensure we channel our resources
effectively and efficiently, work more closely to fully exploit all our
expertise and invest wisely so we are always in the best position to take
advantage of opportunities that may arise.
Summary Group profit and loss account
for the six months to 30 June 2002
Goodwill Six months Six months Year to 31
amortisation to 30 June to 30 June December
Before 2002 2001 2001
goodwill (unaudited) (unaudited)
amortisation As restated As restated
(Note 3) (Note 3)
Notes £m £m £m £m £m
Turnover: Group and share of joint 988.3 983.7 2,149.9
ventures
Less: share of joint (4.0) (6.5) (11.5)
ventures' turnover
Group turnover 1 984.3 - 984.3 977.2 2,138.4
Group operating profit 1 128.8 (6.4) 122.4 108.7 224.2
Share of operating profit in joint ventures 1.8 - 1.8 2.1 3.3
130.6 (6.4) 124.2 110.8 227.5
Profit on disposal of investments and 1.6 9.3 7.9
properties
Profit on ordinary activities before 125.8 120.1 235.4
interest
Interest receivable 2.4 2.7 5.2
Interest payable: Group (18.3) (16.9) (34.3)
Joint ventures (1.8) (2.1) (4.0)
(20.1) (19.0) (38.3)
Profit on ordinary activities before 108.1 103.8 202.3
taxation
Tax on profit on ordinary activities 3 (37.8) (34.2) (64.8)
Profit on ordinary activities after 70.3 69.6 137.5
taxation
Minority equity interests (0.4) (1.2) (2.5)
Profit for the period 69.9 68.4 135.0
Dividends paid and proposed (12.2) (11.6) (37.2)
Profit retained 57.7 56.8 97.8
Basic earnings per share 4 12.7p 13.9p 25.3p
Diluted earnings per share 4 12.7p 13.8p 25.2p
Adjusted basic earnings per share 4 12.7p 14.9p 26.4p
Group statement of total recognised gains and losses
for the six months to 30 June 2002
Six months Six months Year to 31
to 30 June to 30 June December
2002 2001 2001
(unaudited) (unaudited)
As restated As restated
(Note 3) (Note 3)
£m £m £m
Notes
Profit for the period 69.9 68.4 135.0
Unrealised (deficit)/ surplus on revaluation of properties - - (2.5)
Revaluation reversed on fixed asset properties transferred to (19.2) - -
stocks
Tax on realised revaluation surplus (1.0) (1.4) (1.3)
49.7 67.0 131.2
Currency translation differences on foreign currency net (5.8) 13.5 (1.1)
investments
Total recognised gains and losses relating to the period 43.9 80.5 130.1
Prior year adjustment 3 21.1
Total recognised gains and losses recognised since last annual 65.0
report
Summary Group balance sheet
as at 30 June 2002
30 June 30 June 31 December
2002 2001 2001
(unaudited) (unaudited)
As restated As restated
(Note 3) (Note 3)
£m £m £m
Fixed assets
Intangible assets
Goodwill 240.5 250.3 247.0
Tangible assets
Investment properties 228.5 285.5 259.9
Other 38.3 91.9 71.9
Investments
Joint ventures
Share of gross assets (30 June 2001,£36.4m
31 December 2001, £37.1m) 35.4
Share of gross liabilities (30 June 2001,£36.1m
31 December 2001, 36.8m)) (35.0)
0.4 0.3 0.3
507.7 628.0 579.1
Current assets
Stocks 1,577.7 1,573.4 1,441.4
Debtors 215.1 217.8 210.1
Current asset investments 4.1 5.5 4.3
Cash at bank and in hand 207.9 104.4 116.5
2,004.8 1,901.1 1,772.3
Creditors: amounts falling due within one year (650.8) (615.1) (756.1)
Net current assets 1,354.0 1,286.0 1,016.2
Total assets less current liabilities 1,861.7 1,914.0 1,595.3
Non-current creditors and provisions (472.1) (529.2) (238.5)
1,389.6 1,384.8 1,356.8
Represented by:
Capital and reserves - equity
Called up ordinary share capital 138.1 145.1 137.9
Share premium account 591.5 590.3 590.5
Revaluation reserve 102.1 151.8 134.2
Capital redemption reserve 21.5 14.2 21.5
Profit and loss account 536.2 480.7 472.1
Shareholders' funds 1,389.4 1,382.1 1,356.2
Minority interests in equity of subsidiary 0.2 2.7 0.6
undertakings
1,389.6 1,384.8 1,356.8
Summary Group cash flow statement
for the six months ended 30 June 2002
Six months to Six months to Year to 31
30 June 2002 30 June 2001 December
(unaudited) (unaudited) 2001
£m £m £m
Group operating profit 122.4 108.7 224.2
Depreciation and amortisation 10.5 9.5 22.0
(Increase)/ decrease in stocks (137.0) 2.4 78.6
Increase in debtors (8.9) (38.4) (26.2)
Increase/ (decrease) in creditors 80.1 (31.7) (75.7)
Exchange differences 1.7 (2.7) (3.9)
Net cash inflow from operating activities 68.8 47.8 219.0
Net cash inflow from operating activities 68.8 47.8 219.0
Dividends from joint ventures - 1.0 1.0
Returns on investments and servicing of finance (9.7) (20.3) (39.3)
Taxation (37.3) (38.0) (78.5)
Capital expenditure and financial investment 35.5 63.6 129.0
Acquisitions and disposals - (280.3) (280.3)
Equity dividends paid - - (36.4)
Net cash inflow/(outflow) before use of liquid 57.3 (226.2) (85.5)
resources and financing
Cash (outflow)/inflow from (increase)/decrease in (44.1) 71.9 50.8
liquid resources
Net cash inflow/(outflow) from financing 35.7 119.3 (3.0)
Increase/ (decrease) in cash in the period 48.9 (35.0) (37.7)
Movement in net debt
Increase/ (decrease) in cash in the period 48.9 (35.0) (37.7)
Cash inflow from increase in debt (34.2) (117.5) (45.0)
Cash outflow/(inflow) from increase/(decrease) in 44.1 (71.9) (50.8)
liquid resources
Decrease/(increase) in net debt resulting from cash 58.8 (224.4) (133.5)
flows
Debt of acquired subsidiary undertaking (excluding bank - (116.5) (116.5)
overdrafts)
Exchange/ other non-cash changes in net debt (0.8) (8.8) (3.7)
Decrease/(Increase) in net debt in the period 58.0 (349.7) (253.7)
Net debt at the beginning of the period (297.6) (43.9) (43.9)
Net debt at the end of the period (239.6) (393.6) (297.6)
Notes to the interim accounts
for the six months ended 30 June 2002
1. Segmental analysis
Capital
Group employed
Group operating 31
turnover profit December
(by origin) (by origin) 30 June 2001
Six months Six months 2002 As
to 30 June to 30 June As restated restated
2002 2001 2002 2001 (Note 3) (Note 3)
£m £m £m £m £m £m
By activity
Housing 726.6 673.2 108.3 83.7 1,155.7 1,129.6
Property development and investment 78.3 82.4 15.2 23.7 282.4 347.8
Construction 179.4 221.6 5.3 5.6 (49.4) (70.0)
Continuing operations 984.3 977.2 128.8 113.0 1,388.7 1,407.4
Goodwill amortisation/goodwill - (6.4) (4.3) 240.5 247.0
housing
122.4 108.7 1,629.2 1,654.4
By market
United States of America 151.3 240.0 23.5 28.8 238.0 207.5
Canada 91.2 76.6 12.6 12.2 75.2 103.1
Rest of World 48.3 73.9 13.1 12.3 (1.6) (15.4)
Total overseas 290.8 390.5 49.2 53.3 311.6 295.2
United Kingdom 693.5 586.7 79.6 59.7 1,077.1 1,112.2
984.3 977.2 128.8 113.0 1,388.7 1,407.4
Goodwill amortisation/goodwill - United (6.4) (4.3) 240.5 247.0
Kingdom
122.4 108.7 1,629.2 1,654.4
Net debt (239.6) (297.6)
Minority interests (0.2) (0.6)
Equity shareholders' funds 1,389.4 1,356.2
Turnover by origin represents sales to third parties and is not materially
different from turnover to third parties by destination.
Operating profit for construction excludes its share of the construction joint
ventures and interest. Profit before taxation for construction for the six
months to 30 June 2002 is £8.1m (2001 interim: £8.0m) including these items.
Notes to the interim accounts
for the six months ended 30 June 2002
2. Basis of preparation of the interim accounts
The interim accounts have been prepared on a basis which is consistent with the
accounting policies adopted for the year to 31 December 2001, with the exception
that deferred taxation is now stated in accordance with FRS 19, 'Deferred
Taxation' on a full liability basis and comparative information has been
restated as necessary. In accordance with our stated accounting policy,
investment properties are valued annually and were last valued at 31 December
2001, fixed asset properties are valued every three years and have not been
valued since 31 December 2000. Investment properties will next be valued at 31
December 2002 and fixed asset properties will be valued at 31 December 2003.
The interim accounts were approved by the board of directors on 10 September
2002.
These interim accounts do not constitute statutory accounts. Comparative
figures for the year to 31 December 2001 have been extracted from the latest
published accounts as restated for FRS 19 'Deferred Taxation'. The report of
the auditors on the 2001 annual accounts was unqualified and did not contain a
statement made under section 237 (2) or section 237 (3) of the Companies Act
1985. The 2001 annual accounts have been delivered to the Registrar of
Companies.
3. Tax on profit on ordinary activities
Six months Six months Year to 31
to 30 June to 30 June December
2002 2001 2001
As restated As restated
£m £m £m
United Kingdom
Corporation tax 23.8 19.7 52.9
Deferred tax (0.8) (8.8) (11.1)
Overseas tax
Tax payable 11.4 22.7 26.1
Deferred tax 3.4 0.6 (2.9)
Joint ventures - - (0.2)
37.8 34.2 64.8
United Kingdom corporation tax has been charged at 30% (2001: 30%). The
effective tax rate is higher than this rate due to higher rates of tax on
overseas profits and the Bryant goodwill charge and fair value adjustments.
FRS 19 'Deferred Taxation' has been adopted with a consequent restatement of
prior periods. FRS 19 requires that deferred tax is recognised in respect of
all timing differences that have originated but not reversed by the balance
sheet date.
The effect of the restatement in 2001 is to decrease the effective tax rate by
1.0%. This equates to £2.0m in the year to 31 December 2001 and £0.6m in the
half year to 30 June 2001. The effect of the restatement in the six months to
30 June 2002 is to decrease the effective tax rate by 0.5%. This equates to
£0.6m.
4. Earnings per share
Six months Six months Year to 31
to 30 June to 30 June December
2002 2001 2001
As restated As restated
(Note 3) (Note 3)
£m £m £m
Earnings per share have been calculated by dividing: 69.9 68.4 135.0
Profit for the period
by the weighted average number of shares for basic earnings per share 549.8m 492.5m 534.3m
weighted average of dilutive options 2.4m 2.3m 1.8m
weighted average of dilutive awards under the Group Executive Bonus 0.4m 0.9m 0.5m
Plan
for diluted earnings per share 552.6m 495.7m 536.6m
Adjusted basic earnings per share adjusts profit for period as
follows:
add: exceptional integration costs (net of tax effect) - 5.0 6.6
less: losses / (profits) on sale of businesses (net of tax effect) - - 0.3
for adjusted basic earnings per share 69.9 73.4 141.3
Independent review report to Taylor Woodrow plc
Introduction
We have been instructed by the company to review the financial information for
the six months ended 30 June 2002 which comprises the summary Group profit and
loss account, the Group statement of total recognised gains and losses, the
summary Group balance sheet, the summary Group cash flow statement and related
notes 1 to 4. 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.
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 30 June 2002.
Deloitte & Touche
Chartered Accountants
London
10 September 2002
This information is provided by RNS
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