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Galliford Try PLC (GFRD)

  Print      Mail a friend       Annual reports

Wednesday 13 September, 2017

Galliford Try PLC

Final Results

RNS Number : 5627Q
Galliford Try PLC
13 September 2017
 

07:00 AM WEDNESDAY 13 SEPTEMBER 2017

 

GALLIFORD TRY PLC

ANNUAL RESULTS STATEMENT FOR THE YEAR ENDED 30 JUNE 2017

 

STRONG UNDERLYING PERFORMANCE

 

Highlights

 

Financial

 

2017

 

2016

 

Change

 

·        Revenue1 (including joint ventures)

£2,820m

£2,670m

6%

·        Group revenue1

£2,662m

£2,495m

7%

·        Profit before tax

£58.7m

£135.0m

(57)%

·        Pre-exceptional profit before tax2,3

£147.6m

£135.0m

9%

·        Earnings per share

59.1p

132.5p

(55)%

·        Pre-exceptional earnings per share2,3

145.8p

132.5p

10%

·        Full year dividend per share

96.0p

82.0p

17%

·        Net cash/(debt)

£7.2m

£(8.7)m

£15.9m

·        Group return on net assets4

14.0%

26.9%

(12.9) pts

·        Pre-exceptional Group return on net assets5

27.5%

26.9%

0.6 pts

 

Group

·      Strong underlying performance across all three businesses

·      Profit impact of the one-off charge of £98.3 million announced in May unchanged; a charge of £87.9 million in respect of two infrastructure joint ventures has been classified as exceptional 

·      17% increase in full year dividend payment to 96.0 pence per share

·      Net cash of £7.2 million at 30 June 2017 (2016: net debt £8.7 million)

·      Pre-exceptional return on net assets improved to 27.5% from 26.9%

·      Good progress against strategy to 2021, as set out in February 2017

 

Linden Homes

·     Further progress on process efficiency and standard layouts, contributing to improved operating margin of 18.2%  (2016: 17.5%) and operating profit up 16% to £170.3 million (2016: £147.2)

·     3,296 completions6 (2016: 3,078) producing revenue of £937 million (2016: £841 million), up 11%

·     Sales per outlet per week stable at 0.62 (2016: 0.62) with sales reserved, contracted or completed of £545 million7 (2016: £510 million)

·      Landbank of 11,250 plots7,8 (2016: 11,700), in line with strategy of maintaining around 3.5 years' supply

 

Partnerships & Regeneration

·     Mixed-tenure revenue increased by 23% to £82 million, from 594 completions6 (2016: £67 million and 526 completions respectively)

·     Contracting revenue of £248 million (2016: £234 million)

·     Margin improved to 4.5% (2016: 3.9%) and operating profit up 27% to £14.9 million (2016: £11.7 million)

·     Contracting order book increased significantly to £1,050 million7 (2016: £865 million) and mixed-tenure sales reserved, contracted or completed of £93 million7 (2016: £73 million)

·     Landbank stable at 2,700 plots7 (2016: 2,800)

·     Further progress on regional expansion, including the acquisition of mixed-tenure developer, Drew Smith Group, in Hampshire, which is accelerating growth across the southern region

 

Construction

·     Order book of £3.6 billion7 (2016: £3.5 billion)

·     Pre-exceptional Construction margin of 0.0%, on revenue of £1,527 million (2016: 1.1% and £1,503 million respectively)

·     Cash of £137 million (2016: £161 million), with the reduction primarily reflecting cash funding of two infrastructure joint ventures

·     Good progress in resolving legacy contracts, whilst some risks remain, and continuing benefit to underlying business from improved risk management and project selection processes

 

Peter Truscott, Chief Executive, commented:

 

"I am pleased to announce strong operating progress in the financial year, which has been supported by robust market conditions. Our reorganised management teams in Linden Homes and Partnerships & Regeneration have achieved excellent revenue and margin growth and continue to enhance their operating effectiveness as described in our strategy presentation in February.  While the one-off costs relating to legacy contracts in Construction have impacted the reported financial performance, we remain confident in the prospects for the business, with the underlying portfolio of newer contracts performing well, and simplified and strengthened processes proving effective. Reflecting our strong underlying performance we are proposing an increase in our full year dividend of 17% to 96.0 pence per share.

 

Entering the new financial year, we remain cautious about the impact of the current political uncertainty and the medium-term outlook for the macro economy. However, all three businesses have clearly defined plans as part of our 2021 strategy, providing the Group with confidence in its ability to deliver a strong performance even in a period of lower growth in the wider economy. Our strong Group order book and disciplined approach to land acquisition and contract selection provide us with solid foundations to deliver further growth in FY 2018."

 

This announcement contains inside information.

 

Enquiries:

 

Galliford Try plc:      Peter Truscott, Chief Executive                      01895 855001

                             Graham Prothero, Finance Director                 01895 855001

 

Tulchan Communications:        James Macey White                       020 7353 4200

                                             Martin Pengelley                             020 7353 4200

                                   

1   'Revenue' includes share of joint ventures' revenue of £158.1 million (2016: £175.5 million).  'Group revenue' where stated excludes share of joint ventures. 

2    Pre-exceptional measures exclude exceptional costs as described in note 3. All future references to pre-exceptional data or ratios are consistent with this definition.

3    Exceptional costs in 2017 were £88.9 million.  There were no exceptional costs in 2016.

4    Group return on net assets represents profit before tax, finance costs and amortisation divided by average net assets.

5    Pre-exceptional Group return on net assets represents pre-exceptional profit before tax, finance costs and amortisation divided by average pre-exceptional net assets.

6    Completions net of joint venture partner share were 2,876 (2016: 2,691) for Linden Homes and 444 (2016: 394) for Partnerships and Regeneration.

7    As at 11 September 2017.  All future references to this data is for the same period.

8    Linden Homes landbank includes 2,737 plots (2016: 2,449) representing Linden Homes share of plots held in joint ventures.

 

Galliford Try will hold its results presentation at 09:30 am on Wednesday 13 September 2017 at the London Stock Exchange, 10 Paternoster Square, London EC4M 7LS.  A live audio webcast will be available at http://webcast.openbriefing.com/gallifordtry_fyr_13092017/Recorded interviews with Peter Truscott and Graham Prothero, regarding the full year results will be available on the Group's website: www.gallifordtry.co.uk from Wednesday 13 September 2017. 

 

 

CURRENT TRADING AND OUTLOOK

 

Linden Homes has made a good start to the new financial year, with encouraging levels of visitors and reservations. The land market remains benign and the housing market continues to enjoy good mortgage availability, low interest rates and the Help to Buy scheme remains popular. We have a solid forward order book and expect to deliver both further improvements in the operating margin and volume growth in the next financial year, remaining on track to achieve our financial targets by 2021.

 

Partnerships & Regeneration is benefiting from a wide range of opportunities to expand its business, both in the range of partners and products, and geographically.  Affordable housing rightly remains high on the political agenda. Mortgage availability remains healthy and there is sustained demand for affordable housing from individual customers, housing associations and local authorities.  We expect further volume growth in the financial year from organic expansion, including our new East Midlands office and our recent acquisition of the Drew Smith Group, and we enter the new financial year with a significantly increased order book. We have been successful in developing and recruiting the right people to achieve the fast growth we foresee, and are confident of at least hitting our 2021 targets.

 

The construction market remains largely positive, as the UK continues to require substantial investment in its social and economic infrastructure. As a result, the order book in our Construction business remains strong and we have already secured a significant proportion of work for the financial year, and much of the following year 2019. Our focus is on contract quality and risk management, and we will continue to be rigorous in our project selection, with revenue expected to remain broadly stable year-on-year as a result. Our newer work has been operating under these parameters and performance to date has been encouraging and is supportive of our target margins. As our legacy positions close out we expect margins to improve as we work towards our 2021 target of at least 2.0%.

 

While we will continue to monitor market conditions, particularly in light of the current political and macro-economic uncertainty in the UK, we consider that the outlook remains positive for all three of our businesses and we are excited about the opportunities our new strategy to 2021 identifies. Continued strong demand in housebuilding, stable construction markets, a Group total order book of £5.3 billion, and our strengthened balance sheet give the Board continued confidence in the Group's prospects for the forthcoming year.

 

 

STRATEGY TO 2021

 

In February we set out our new strategy to 2021 with three central themes:

 

1.   Drive operating efficiencies

 

Across the Group, we are streamlining our operations to increase margins, enable us to respond faster as markets change and ensure we have strong foundations for top-line growth.

 

2.   Maintain capital discipline           

 

We will continue to manage capital prudently and intend to pay an attractive dividend, while reinvesting appropriately in growing the business.  The Group has a resilient and flexible balance sheet and continues to target period-end gearing of no more than 30% through the cycle with average and peak levels well below our covenant levels.

 

3.   Operate sustainably

 

Our two main sustainability priorities are health and safety and people.  We are focused on implementing policies and programmes to ensure safe working practices for everyone and to improve employee and subcontractor behaviours around safety through our leadership and culture.

 

Summary Financial Targets to 2021

 

As part of the strategy, we set out new Group financial targets for the five years to 2021, based on the results for FY 2016.  These include:

 

·      60% growth in profit before tax to FY 2021;

·      a five year CAGR on dividend of at least 5% whilst rebuilding dividend cover to 2.0x; and

·      a Group return on net assets in FY 2021 of at least 25%.

 

The specific strategic priorities and targets for each business, are summarised below:

 

Linden Homes

FY17

Actuals

FY21

Targets

Units (per annum)

3,296

4,750 - 5,000

Revenue

£937m

£1.25bn - £1.35bn

Operating profit margin

18.2%

19% - 20%

 

Partnerships & Regeneration

FY17

FY21

Units (per annum)

2,594

4,200

Revenue

£330m

£650m

Operating profit margin

4.5%

6%-7%

 

Construction

FY17

FY21

Pre-exceptional revenue

£1.57bn

£1.8bn

Pre-exceptional operating profit margin

0.0%

>2.0%

Cash

£137m

£200m

 

 

DIVIDEND

 

We have indicated to the market that it is our intention to pay the dividend based upon earnings before the one-off charge of £98.3 million which we announced in May, and in line with our guidance of earnings cover of 1.6x.  We are therefore using a notional profit before tax figure of £157.0 million, being the sum of reported profits before tax of £58.7 million and the one-off charge of £98.3 million, which equates to an earnings per share figure of 154.0p.

 

Hence the directors are recommending a final dividend of 64.0 pence per share which, subject to approval at the AGM, will be paid on 22 November 2017 to shareholders on the register at 27 October 2017. Together with the interim dividend of 32.0 pence per share paid in April, this will result in a total dividend for 2017 of 96.0 pence per share, an increase of 17% on the previous year.

 

 

FINANCIAL REVIEW

 

Underlying trading performance was strong and, excluding exceptional items, we delivered growth in profit before tax and earnings per share, and a further increase in return on net assets. We therefore have an excellent platform for achieving our financial targets to 2021.

 

Revenue including joint ventures rose 6% to £2,820 million (2016: £2,670 million).  Group revenue, which excludes our share of joint ventures, was up 7% at £2,662 million (2016: £2,495 million).

 

Pre-exceptional profit from operations, which is stated before finance costs, tax and our share of joint ventures' interest and tax, rose 9% to £171.2 million (2016: £157.5 million). This resulted in pre-exceptional profit before tax of £147.6 million, up 9% from £135.0 million in 2016, reflecting revenue growth and improved margins in Linden Homes and Partnerships & Regeneration. 

 

A charge of £88.9 million has been classified as exceptional.  This primarily comprises losses of £87.9 million in respect of two major joint venture infrastructure projects, both contracted on fixed-price terms, respectively in 2011 and 2014.  One of these projects is now largely complete; the other, which represents the larger proportion of the non-recurring costs, is scheduled to complete in mid-2018.  Of these costs, £79.3 million was included within the charge of £98.3 million announced in our trading update in May (the other £19.0 million being charged to pre-exceptional costs of sales in Construction), and £8.6 million represents other amounts in respect of those contracts recognised in the period, mainly prior to that announcement.  The balance of £1.0 million represents professional fees incurred in respect of the abortive merger proposal with Bovis Homes Group plc.

 

After the exceptional charge profit before tax was £58.7 million (2016: £135.0 million).

 

Average net debt during the year was £240 million and year end net cash was £7.2 million (2016: net debt of £8.7 million). The year end cash balance in Construction was £137.4 million (2016: £161.1 million) with the reduction primarily reflecting cash funding in the two infrastructure joint ventures mentioned above. 

 

 

OPERATIONAL REVIEW

LINDEN HOMES

 

 

2017

2016

Revenue (£m)

937.4

840.8

Profit from operations (£m)

170.3

147.2

Operating profit margin (%)

18.2

17.5

Completions

3,296

3,078

 

The EU referendum resulted in uncertainty in the housing market in the early weeks of the financial year. However, confidence returned to the market and Linden Homes enjoyed good trading conditions overall, while at the same time improving its performance through the successful implementation of its strategy. We increased our revenue and margins, benefiting from continued rationalisation of our operating processes, and maintained our landbank at an appropriate level. Although the general election in June resulted in further political instability, and consumer confidence indicators have weakened in recent weeks, we are seeing no material change in our markets. Underlying demand continues to be strong and mortgage availability remains positive.

 

Revenue increased by 11% to £937.4 million (2016: £840.8 million), with completions 7% higher at 3,296 (2016: 3,078). Private housing completions accounted for 2,537 of the total (2016: 2,487) and there were 759 affordable housing completions (2016: 591). Excluding our joint venture partners' share, completions were 2,876, up from 2,691 in 2016.

 

Our average selling price for private housing rose by 6% to £354,000 (2016: £335,000), while our average selling price for affordable homes was £121,000 (2016: £113,000). We expect average selling prices to reduce over the strategy period to 2021, reflecting increased standardisation and the mix shift away from the south east as we grow into new regions.

 

There were 77 active selling sites on average during the year, in line with the average of 80 in 2016. Sales per site per week remained stable at 0.62. Cancellation rates were largely steady at 19% (2016: 17%). The business has sales in hand of £545 million, compared to £510 million in the prior year.

 

Driving margin improvement is a fundamental part of Linden Homes' strategy. Profit from operations increased by 16% to £170.3 million (2016: £147.2 million), resulting in an operating margin of 18.2%, up from 17.5% in 2016. Overheads reduced to 4.8% of revenue (2016: 6.3%), as we continued to rationalise our operating processes. Following an operating margin in the first half of the year of 18.2%, the margin achieved in the second half of the year was 18.1%. Excluding profits from land sales into joint ventures, the operating margin for the year was 17.0% (2016: 16.2%). Return on net assets was 37.1%, compared with 31.7% in 2016.

 

We have a landbank of 11,250 plots (2016: 11,700), which we estimate is equivalent to around 3.5 years' supply. The figure represents sites we own and control, including sites under option, but excluding our longer-term options on strategic land. Around 82% of Linden Homes' landbank relates to houses with the remainder apartments. The gross development value of our landbank is £3.4 billion, compared with £3.6 billion a year earlier. At 30 June 2017 the average cost per plot is £71,000 and the expected average selling price per plot is £305,000.

 

We continue to invest in our strategic land team, under the leadership of a dedicated national managing director. Our strategic land holdings stand at 2,396 acres (2016: 1,775 acres), and we expect to generate in excess of 11,875 plots from this land.  Looking ahead, 100% of land required for the 2018 financial year is in place and 90% of land secured for 2019.

 

Standardisation of layouts is an important driver of margin improvement. Around 60-65% of Linden Homes' current consented schemes are standard products. We are currently developing the third generation of standard layouts, with a target of 80% of our planning applications using these layouts by 2021. In addition, we have unified our approach to branding and all new sites now make consistent use of the Linden Homes brand. We have also increased the productivity of each of our business units, reducing head count at the same time as increasing turnover, leading to greater profitability.

 

 

PARTNERSHIPS & REGENERATION

 

 

2017

2016

Revenue (£m)

330.2

300.6

Profit from operations (£m)

14.9

11.7

Operating profit margin (%)

4.5

3.9

Completions

594

526

Equivalent contracting units

2,000

1,600

Order book (£m)

1,050

865

 

Partnerships & Regeneration delivered strong growth in mixed-tenure revenue and margin. Revenue grew by 10% to £330.2 million (2016: £300.6 million), with an important proportional increase in mixed-tenure revenues, which were 23% higher at £82.2 million (2016: £66.7 million). Contracting revenues were also higher at £248.0 million (2016: £233.9 million).

 

Profit from operations rose by 27% to £14.9 million (2016: £11.7 million), resulting in a blended operating margin of 4.5% (2016: 3.9%). The increase resulted primarily from the growing proportion of higher-margin mixed-tenure work. Return on net assets was 40.7% (2016: 42.3%).

 

Partnerships & Regeneration completed 594 private units at an average selling price of £186,000 (2016: 526 units and £166,000). We also completed around 2,000 equivalent contracting units, compared with 1,600 in the previous year.

 

During the year, Partnerships & Regeneration secured an award of £18.8 million under the Home and Communities Agency's (HCA) Affordable Homes Programme, to deliver shared ownership homes.  This allows us to provide with-grant solutions to our Registered Provider partners. Through Linden Homes and Partnerships & Regeneration, we have more than £3 billion (gross development value) of joint ventures with Registered Providers. These operations have grown substantially in recent years, as clients have moved towards increasing percentages of mixed-tenure delivery. We were also re-appointed to the HCA Delivery Partner Panel, covering all five regional lots over a four-year framework agreement.

 

Important contract wins during the year included Partnerships & Regeneration's largest-ever standalone contract, to build phase two of the Great Eastern Quays development at the Royal Docks in London. The contract with Notting Hill Housing is valued at £128 million. The business also signed two contracts, each worth £44 million, to build retirement villages in Bristol and Bedfordshire for the ExtraCare Charitable Trust, as we continued to strengthen our relationship with this long-standing client.

 

We are making excellent progress with our strategic aim of increasing regional coverage. Our new Bristol office is already performing well. In addition to the contract with the ExtraCare Charitable Trust noted above, the business unit secured mixed-tenure and contracting opportunities at good margins and is progressing other regeneration schemes, which include open-market and affordable homes and private rented accommodation. There is significant ongoing investment in Bristol, which will provide a pipeline of further opportunities.

 

In May 2017, we announced the acquisition of the Drew Smith Group, a leading contractor and mixed-tenure developer in the south of England. This is an excellent operational fit with our existing business and opens up the Southern region for us, in line with our stated strategy.  In September we opened a new office in the East Midlands, leveraging the excellent position established by our West Midlands business over the past five years.  We are also finalising plans to open further businesses to serve Yorkshire and to increase our development profile in London.

 

Housing association clients and local authorities have adjusted their business plans to accommodate Government rent reforms.  Housing associations remain financially robust and are continuing to leverage their balance sheets to support mixed-tenure developments and respond to the need to lift the supply of affordable homes. Our experience and relationships with public sector commissioners positions our business extremely well in meeting the significant demand for low-cost, intermediate and rented affordable homes.  We believe that further geographic expansion and an increase in mixed-tenure revenues will drive growth in both the top line and margins.

 

We have mixed-tenure sales carried forward of £93 million, up from £73 million in the prior year, having obtained planning consent on 8 mixed-tenure sites during the year. The contracting order book stands at £1,050 million, up from £865 million a year earlier, and the landbank stands at 2,700 plots (2016: 2,800).

 

 

CONSTRUCTION

 

Construction

Pre-exceptional 2017

2017

2016

Revenue (£m)

1,569.3

1,526.9

1,503.4

(Loss)/profit from operations (£m)

(0.9)

(88.8)

15.8

Operating profit margin (%)

0.0

(5.8)

1.1

Order book (£bn)

3.6

3.6

3.5

 

In May, we announced a one-off charge of £98.3 million, following a thorough reappraisal of the costs to complete and expected recoveries on legacy contracts. There has been no material movement in this position and we have taken a proactive approach towards managing these legacy contracts through to completion, with significant involvement of the executive team. We have made good progress in resolving legacy projects during the period, and pleasingly no further contracts have been added to that list. Most of these contracts are now complete on site, with continuing uncertainties relating to final settlements and claim recoveries. Of the two large infrastructure joint ventures which gave rise to the exceptional item, one is largely practically complete, whilst the other is expected to conclude in mid 2018. We have reasonable confidence around the cost position on these projects, but inevitable intrinsic uncertainty around amounts to be recovered from some significant claims.

 

We have put into place rigorous processes to ensure a more disciplined approach towards project selection. Today, we are focusing on lower-risk public and regulated sectors and two-stage negotiated work, rather than large infrastructure projects on fixed-price, all-risk contracts which these legacy projects were. As these challenging contracts draw closer to completion, we are encouraged by the performance of our new contracts.  During the year, we improved our risk management process for project selection, increasing our rigour in choosing which projects to take on. This selectivity is increasingly reflected in our culture and is resulting in more projects being ruled out earlier in the selection process.

 

Revenue was £1,526.9 million, up 2% (2016: £1,503.4 million), with pre-exceptional loss from operations of £0.9 million (2016: profit of £15.8 million). This resulted in a pre-exceptional operating margin of 0.0%, compared with 1.1% in the previous year. Reported loss from operations was £88.8 million. The prior year operating profit included the sale of our site accommodation portfolio to a third party equipment hirer, generating a profit of £5.2 million.

 

The result continues to be affected by the settlement of legacy contracts, negotiated in more difficult market conditions prior to Q4 2014.  The portfolio of newer work, which represents more than three quarters of revenue continues to perform well, reflecting appropriate terms, cost estimates and margins.

 

Cash remains a prime focus in Construction and we continued to manage it carefully. Year end cash balances were £137.4 million, representing 9% of revenue (2016: £161.1million and 11%).

 

During the year, we continued to benefit from areas such as defence which are now starting to see long-term capital funding programmes come to fruition and sectors such as education and highways, where longstanding framework positions have allowed us to capitalise on the greater opportunities coming forward. The main NHS procurement vehicle ProCure22 was renewed in 2017, and already an increase in pipeline is occurring despite the financial pressures on the health service. Scotland remains a key market for our business with the Scottish government and local authorities continuing to provide a consistent pipeline, particularly through our positions on the regional Hub procurement vehicles.

 

Our order book is £3.6 billion from £3.5 billion a year earlier. Of this, 74% is in the public sector (2016: 73%), 13% is in regulated industries (2016: 16%) and 13% is in the private sector (2016: 11%). The business has secured 89% of planned revenue for the 2018 financial year.

 

 

Building

 

2017

2016

Revenue (£m)

1,014.1

1,013.8

(Loss)/profit from operations (£m)

(12.0)

9.0

Operating profit margin (%)

(1.2)

0.9

Order book (£m)

2,579

2,350

 

Building won new work totalling more than £1,233 million during the year and generated a loss from operations of £12.0 million (2016: profit of £9.0 million), with a margin of (1.2)% (2016: 0.9%). This result included £16.0 million of charges included in the one-off £98.3 million announced on 3 May.

 

Key framework positions and contract wins included:

·      £72 million contract for the East Lothian Community Hospital in Haddington, Scotland

·      One of six principal supply chain partners on the Department of Health's new ProCure 22 framework which runs from 2016 to 2020 and has a total pipeline value of £4 billion

·      £68 million Park View Student Village for Newcastle University

·      £49 million apartment development for St Modwen, at the former RAF Uxbridge base

·      £40 million, 323-apartment private rental sector scheme for Dandara

·      £47 million contract to build the 50-60 Station Road commercial office space development in Cambridge, on behalf of developer Brookgate

 

Infrastructure

 

Pre-exceptional 2017

2017

2016

Revenue (£m)

555.2

512.8

489.6

Profit/(loss) from operations (£m)

11.1

(76.8)

6.8

Operating profit margin (%)

2.0

(15.0)

1.4

Order book (£m)

1,028

1,028

1,150

 

The infrastructure market remained positive across transport, energy and water, with the business steadily increasing its portfolio of framework positions. Pre-exceptional profit from operations was £11.1 million (2016: £6.8 million), representing a pre-exceptional margin of 2.0% (2016: 1.4%). Reported operating loss was £76.8 million.

 

Key framework positions and contract wins included:

·     Appointed to Lot 1 of the Natural Resources Wales framework, delivering coastal and river defence schemes. The total value of the framework is up to £70 million over four years, while Lot 1 is valued at £45 million

·     Confirmed as a Tier 1 alliance partner for Scottish Water, responsible for delivering its Quality and Standards IV Capital Investment Programme for the regulatory period 2015-2021 which has a value of approximately £50 million

·     Awarded a place on North Yorkshire County Council's carriageway planning and surfacing framework, which is valued at up to £200 million over two years

·     Joint venture with Costain was awarded a £96 million contract to upgrade 12km of the M1 to a smart motorway

·     Appointed to Gatwick Airport's Capital Delivery Framework, on three lots valued at up to £300 million

 

 

PPP Investments

 

2017

2016

Revenue (£m)

25.0

25.0

Profit/(loss) from operations (£m)

2.4

(1.4)

Directors valuation (£m)

31.3

21.5

 

PPP Investments reported revenue of £25.0 million (2016: £25.0 million), with a profit from operations of £2.4 million (2016: £1.4 million loss).

 

During the year, we invested £8.6 million in equity and disposed of investments that generated an aggregate profit on disposal of £2.6 million, compared to a £0.5 million profit on disposal in 2016.  The directors' valuation of our PPP portfolio was £31.3 million at 30 June 2017, compared with a value invested of £24.3 million (2016 valuation: £21.5 million, value invested: £16.2 million).

 

In addition to making its own investments, PPP Investments generates work for our Building, Infrastructure and facilities management businesses. Significant projects closed during the year included East Lothian Community Hospital, West Calder High School, two health centres in Aberdeenshire and Cumbernauld Academy. In total, PPP Investments added more than £250 million to the order books of our other divisions.

 

In Scotland, public sector accounting issues led to a hiatus in new projects coming forward under the Non-Profit Distribution Model. As a result, public sector bodies are looking to procure through the existing Hub frameworks. Galliford Try has positions on three of these frameworks.  Our traditional project finance markets are now showing signs of recovery with PF2 in England and the Mutual Investment Model in Wales both promoting projects.

 

 

HEALTH, SAFETY AND ENVIRONMENT

 

Keeping our people safe and healthy is our number one priority. Our centralised Health, Safety and Sustainability (HS&S) function is independent of our business units and reports directly to the Executive Board. Its work is supported by a Group-wide BS OHSAS 18001 certified management system.

 

We take a proactive approach to HS&S, with monthly performance reviews and forward planning at every site. 'Challenging Beliefs, Affecting Behaviour' is our industry-leading behavioural safety programme. A refresh of the programme is already underway aiming to ensure it remains at the forefront of industry practice.

 

Safe behaviour requires effective and visible leadership and we achieved a record number of director safety tours this year. We also launched a guide for our leaders, to help them have effective safety conversations on site and maximise the value of the tours.

 

 

BOARD

 

Peter Ventress became Chairman upon Greg Fitzgerald stepping down from the Board and Terry Miller was appointed as Senior Independent Director, both with effect from 11 November 2016. Ken Gillespie stepped down from the Board on 31 July 2016.

 

As previously announced, Andrew Jenner, Chair of the Audit Committee, is stepping down from the Board after the 2017 AGM. Following a formal search process to find his replacement, Jeremy Townsend joined the Board on 1 September 2017. Jeremy Townsend will take over as Chair of the Audit Committee on Andrew Jenner stepping down. Also with effect from 1 September 2017, Peter Ventress took over from Terry Miller as Chair of the Nomination Committee.

 

 

Consolidated income statement

for the year ended 30 June 2017

 

Notes

2017

2016

Pre-exceptional 

items
£m

 

Exceptional

items
£m

(note 3)

Total
£m

 

Total
£m

 

Group revenue

2

2,704.5

(42.4)

2,662.1

2,494.9

 

 

 

 

 

 

Cost of sales

 

(2,407.0)

(45.5)

(2,452.5)

(2,223.2)

Gross profit

 

297.5

(87.9)

209.6

271.7

 

 

 

 

 

 

Administrative expenses

 

(152.1)

(1.0)

(153.1)

(152.3)

Profit on disposal of property plant and equipment

 

0.1

-

0.1

5.2

Share of post tax profits from joint ventures

 

14.0

-

14.0

19.2

Profit/(loss) before finance costs

 

159.5

(88.9)

70.6

143.8

 

 

 

 

 

 

Profit/(loss) from operations

2

171.2

(88.9)

82.3

157.5

Share of joint ventures' interest and tax

 

(8.5)

-

(8.5)

(9.4)

Amortisation of intangibles

 

(3.2)

-

(3.2)

(4.3)

Profit/(loss) before finance costs

 

159.5

(88.9)

70.6

143.8

 

 

 

 

 

 

Finance income

4

5.3

-

5.3

7.6

Finance costs

4

(17.2)

-

(17.2)

(16.4)

 

 

 

 

 

 

Profit/(loss) before income tax

 

147.6

(88.9)

58.7

135.0

Income tax expense

5

(27.4)

               17.4

(10.0)

(26.1)

Profit/(loss) for the year

 

120.2

(71.5)

48.7

108.9

 

 

 

 

 

 

Earnings per share

 

 

 

 

 

 

 

 

 

 

 

- Basic

7

145.8p

 

59.1p

132.5p

- Diluted

7

145.0p

 

58.7p

131.3p

 

Consolidated statement of comprehensive income

for the year ended 30 June 2017

 

 

2017
£m

2016
£m

Profit for the year

 

                48.7

108.9

 

 

 

 

Other comprehensive (expense)/income:

 

 

 

 

 

 

 

Items that will not be reclassified to profit or loss

 

 

 

Acturial losses recognised on retirement benefit obligations

 

(5.0)

(11.9)

Deferred tax on items recognised in equity that will not be reclassified

 

(0.2)

    1.0

Current tax through equity

 

            2.8

             2.3

Total items that will not be reclassified to profit or loss

 

(2.4)

(8.6)

 

 

 

 

Items that may be reclassified subsequently to profit or loss

 

 

 

Movement in fair value of cash flow hedges:

 

 

 

 - Movement arising during the financial year

 

                  3.2

           (5.4)

 - Reclassification adjustments for amounts included in profit or loss

 

(0.7)

             1.2

Deferred tax on items recognised in equity that may be reclassified

 

(0.4)

(1.0)

Total items that may be reclassified subsequently to profit or loss

 

                  2.1

(5.2)

 

 

 

 

Other comprehensive expense for the year net of tax

 

(0.3)

(13.8)

 

 

 

 

Total comprehensive income for the year

 

48.4

95.1

 

Balance sheet

at 30 June 2017

 

Notes

2017
£m

 

2016
£m

(Restated - note1)

Assets

 

 

 

Non-current assets

 

 

 

Intangible assets

 

18.8

16.7

Goodwill

8

160.3

135.5

Property, plant and equipment

 

16.2

19.1

Investments in joint ventures

 

31.4

24.8

PPP and other investments

 

25.0

16.9

Trade and other receivables

11

111.7

75.8

Deferred income tax assets

 

2.0

2.2

Total non-current assets

 

365.4

291.0

Current assets

 

 

 

Inventories

 

0.6

0.1

Developments

10

722.6

820.8

Trade and other receivables

11

809.5

718.0

Cash and cash equivalents

9

765.8

599.8

Total current assets

 

2,298.5

2,138.7

Total assets

 

2,663.9

2,429.7

Liabilities

 

 

 

Current liabilities

 

 

 

Financial liabilities

 

 

 

 - Borrowings

9

(562.4)

(433.8)

Trade and other payables

12

(1,220.1)

(1,059.2)

Current income tax liabilities

 

(6.1)

(12.2)

Provisions for other liabilities and charges

 

(0.3)

(0.3)

Total current liabilities

 

(1,788.9)

(1,505.5)

Net current assets

 

509.6

633.2

Non-current liabilities

 

 

 

Financial liabilities

 

 

 

 - Borrowings

9

(196.2)

(174.7)

 - Derivative financial liabilities

 

(2.0)

(4.5)

Retirement benefit obligations

14

(3.2)

(4.3)

Other non-current liabilities

13

(96.9)

(139.1)

Provisions for other liabilities and charges

 

(1.2)

(1.6)

Total non-current liabilities

 

(299.5)

(324.2)

Total liabilities

 

(2,088.4)

(1,829.7)

Net assets

 

575.5

600.0

Equity

 

 

 

Ordinary shares

 

41.4

41.4

Share premium

 

194.5

194.4

Other reserves

 

4.8

4.8

Retained earnings

 

334.8

359.4

Total shareholders' equity

 

575.5

600.0

 

Consolidated and Company statements of changes in equity

for the year ended 30 June 2017

 

Notes

Ordinary
shares
£m

Share
premium
£m

Other
reserves
£m

Retained

earnings

£m

Total
shareholders'
equity
£m

Consolidated statement

 

 

 

 

 

 

At 1 July 2015

 

41.1

191.8

4.8

            331.5

             569.2

 

 

 

 

 

 

 

Profit for the year

 

-

-

-

             108.9

             108.9

Other comprehensive (expense)

 

-

-

-

(13.8)

(13.8)

Total comprehensive income for the year

 

-

-

-

               95.1

95.1

Transactions with owners:

 

 

 

 

 

 

Dividends

6

-

-

-

              (59.3)

(59.3)

 

 

 

 

 

 

 

Share-based payments

 

-

-

-

                4.0

4.0

Purchase of own shares

 

-

-

-

             (11.9)

(11.9)

Issue of shares

 

0.3

2.6

-

-

2.9

 

 

 

 

 

 

 

At 30 June 2016

 

41.4

194.4

4.8

            359.4

             600.0

 

 

 

 

 

 

 

Profit for the year

 

-

              48.7

               48.7

Other comprehensive (expense)

 

-

(0.3)

(0.3)

Total comprehensive income for the year

 

 

 

 

               48.4

               48.4

Transactions with owners:

 

 

 

 

 

 

Dividends

6

  -

  -

             (72.8)

     (72.8)

Share-based payments

 

 -

               1.8

                1.8

Purchase of own shares

 

 -

                (2.0)

               (2.0)

Issue of shares

 

0.1

 -

-

                0.1

 

 

 

 

 

 

 

At 30 June 2017

 

41.4

194.5

4.8

             334.8

             575.5

 

Statement of cash flows

for the year ended 30 June 2017

 

Notes

2017
£m

2016
£m

Cash flows from operating activities

 

 

 

Continuing operations

 

 

 

Pre-exceptional profit before finance costs

 

             159.5

           143.8

Exceptional items

 

(88.9)

-

Profit before finance costs

 

               70.6

            143.8

Adjustments for:

 

 

 

Depreciation and amortisation

 

                 6.6

                8.6

Profit on sale of property, plant and equipment

 

(0.1)

(5.2)

Profit on sale of subsidiaries

 

(2.6)

Profit on sale of PPP and other investments

 

                  -

              (0.5)

Share-based payments

 

                 1.8

                4.0

Share of post tax profits from joint ventures

 

(14.0)

             (19.2)

Movement on provisions

 

(0.4)

               (0.4)

Other non-cash movements

 

                 0.3

                0.4

Net cash generated from/(used in) operations before pension deficit payments and changes in working capital

 

               62.2

            131.5

Deficit funding payments to pension schemes

 

(6.4)

(6.6)

Net cash generated from/(used in) operations before changes in working capital

 

               55.8

             124.9

(Increase)/decrease in inventories

 

(0.5)

                 0.2

Decrease/(increase) in developments

 

             107.3

(7.5)

(Increase) in trade and other receivables

 

(118.9)

(54.0)

Increase/(decrease) in trade and other payables

 

               85.5

               46.1

Net cash generated from/(used in) operations

 

             129.2

             109.7

Interest received

 

                 5.3

                 7.6

Interest paid

 

(15.3)

(14.6)

Income tax paid

 

(12.9)

(25.3)

 

 

 

 

Net cash generated from operating activities

 

             106.3

               77.4

Cash flows from investing activities

 

 

 

Dividends received from joint ventures

 

                 7.4

                 3.6

Acquisition of PPP and other investments

 

(8.6)

(6.6)

Proceeds from PPP and other investments

 

                 0.5

                 1.2

Proceeds from disposal of subsidiaries

 

                 2.6

-

Purchase of intangible assets

 

-

(0.1)

Business combinations

 

(12.8)

-

(Debt) acquired with acquired subsidiary undertakings

 

(2.8)

-

Acquisition of property, plant and equipment

 

(5.1)

               (7.8)

Proceeds from sale of property, plant and equipment

 

                  0.7

             10.4

 

 

 

 

Net cash (used in)/generated from investing activities

 

(18.1)

                0.7

Cash flows from financing activities

 

 

 

Net proceeds from issue of ordinary share capital

 

                   0.1

                 2.9

Purchase of own shares

 

(2.0)

              (11.9)

Increase/(decrease) in borrowings

 

                23.9

                (8.4)

Dividends paid to Company shareholders

 

(72.8)

             (59.3)

 

 

 

 

Net cash (used in) financing activities

 

(50.8)

             (76.7)

 

 

 

 

Net increase in cash and cash equivalents

 

                37.4

                 1.4

 

 

 

 

Cash and cash equivalents at 1 July

9

              166.3

             164.9

 

 

 

 

Cash and cash equivalents at 30 June

9

             203.7

             166.3

 

Notes to the consolidated financial statements

1 Basis of preparation

This consolidated financial information has been prepared in accordance with the Listing Rules of the Financial Conduct Authority and uses EU adopted International Accounting Standards (IASs), International Financial Reporting Standards (IFRSs), IFRS Interpretations committee and those parts of the Companies Act 2006 applicable to companies reporting under IFRS. The accounting policies adopted are consistent with those described in the Annual Report and Financial Statements 2016 which have not changed significantly. The financial information set out in this document does not constitute statutory accounts for the years ended 30 June 2016 or 30 June 2017 but is derived from the Annual Report and Financial Statements 2017. The Annual Report and Financial Statements for 2016 have been delivered to the Registrar of Companies and the Annual Report and Financial Statements for 2017 will be delivered to the Registrar of Companies in due course. The auditors have reported on those accounts and have given an unqualified report which does not contain a statement under Chapter 3 of Part 16 of the Companies Act 2006.

In 2016, the IFRS Interpretations Committee released an update in respect of IAS32 'Financial instruments: presentation' specifically in relating to offsetting and cash pooling.  This clarified that in order to offset bank account balances, an entity must have both a legally enforceable right and an intention to do so.  As the Group maintains separate bank accounts with both cash and overdrawn balances, the Group's consolidated financial statements have been prepared without offsetting these balances with positive cash balances included within cash and cash equivalents (see note 9) and overdrawn balances included within financial liabilities - current borrowings.  This had the effect of increasing both cash and cash equivalents and bank overdrafts by £562.1 million at 30 June 2017.  The Group has restated its 30 June 2016 financial statements with the cash and cash equivalent and bank overdrafts balances increasing by £433.5 million.

Full financial statements that comply with IFRS are included in the Annual Report and Financial Statements 2017 which will be made available to shareholders in October 2017 and will be available at www.gallifordtry.co.uk.

2 Segmental reporting

Segmental reporting is presented in the consolidated financial statements in respect of the Group's business segments, which are the primary basis of segmental reporting. The business segmental reporting reflects the Group's management and internal reporting structure. Segmental results include items directly attributable to the segment as well as those that can be allocated on a reasonable basis. As the Group has no material activities outside the UK, segment reporting is not required by geographical region.

The chief operating decision-makers (CODM) have been identified as the Group's Chief Executive and Finance Director. The CODM review the Group's internal reporting in order to assess performance and allocate resources. Management has determined the operating segments as Linden Homes; Partnerships & Regeneration; Construction, including Building and Infrastructure; and PPP Investments. The business of each segment is described in the Strategic Report.

The CODM assess the performance of the operating segments based on a measure of adjusted earnings before finance costs, amortisation, exceptional items and taxation. This measurement basis excludes the effects of non-recurring expenditure from the operating segments, such as restructuring costs and impairments when the impairment is the result of an isolated, non-recurring event. Interest income and expenditure are included in the result for each operating segment that is reviewed by the CODM. Other information provided to them is measured in a manner consistent with that in the financial statements.

 

Primary reporting format - business segments

 

Linden
Homes
£m

Partnerships & Regeneration £m

Construction

PPP Investments
£m

Central
£m

Total
£m

Building
£m

Infrastructure
£m

Total
£m

Year ended 30 June 2017

 

 

 

 

 

 

 

 

Pre-exceptional Group revenue and share of joint ventures' revenue

937.4

330.2

1,014.1

       555.2

1,569.3

25.0

           0.7

    2,862.6

Exceptional items

(see note 3)

              -

              -

-

(42.4)

(42.4)

-

-

(42.4)

Group revenue and share of joint ventures' revenue

       937.4

        330.2

     1,014.1

        512.8

     1,526.9

          25.0

           0.7

    2,820.2

Share of joint ventures' revenue

(132.6)

(10.8)

(0.8)

-

(0.8)

(13.9)

-

(158.1)

Group revenue

 804.8

 319.4

 1,013.3

        512.8

 1,526.1

 11.1

           0.7

    2,662.1

Segment result:

 

 

 

 

 

 

 

 

Pre-exceptional profit/(loss) from operations before share of joint ventures' profit

148.9

          14.0

(12.1)

          11.1

(1.0)

            2.3

(15.5)

       148.7

Share of joint ventures' profit

21.4

            0.9

           0.1

-

          0.1

            0.1

-

         22.5

Pre-exceptional profit/(loss) from operations *

170.3

          14.9

(12.0)

         11.1

(0.9)

           2.4

(15.5)

      171.2

Exceptional items

(see note 3)

-

-

-

(87.9)

(87.9)

-

(1.0)

(88.9)

Share of joint ventures' interest and tax

(8.0)

          (0.4)

-

-

 -

(0.1)

-

(8.5)

Profit/(loss) before finance costs, amortisation and taxation

 162.3

 14.5

(12.0)

(76.8)

(88.8)

           2.3

(16.5)

         73.8

Finance income

4.2

          0.7

-

          0.2

           0.2

-

          0.2

           5.3

Finance (costs)

(44.5)

         (3.1)

(0.2)

(0.8)

(1.0)

(0.8)

         32.2

(17.2)

Profit/(loss) before amortisation and taxation

 122.0

         12.1

(12.2)

(77.4)

(89.6)

           1.5

         15.9

         61.9

Amortisation of intangibles

(0.9)

(0.2)

(1.0)

-

(1.0)

-

(1.1)

(3.2)

Profit before taxation

121.1

11.9

(13.2)

(77.4)

(90.6)

           1.5

         14.8

         58.7

Income tax expense

 

 

 

 

 

 

 

(10.0)

Profit for the year

 

 

 

 

 

 

 

        48.7

 

 

 

 

 

 

 

 

 

 

Year ended 30 June 2016

 

 

 

 

 

 

 

 

Pre-exceptional Group revenue and share of joint ventures' revenue

840.8

300.6

1,013.8

489.6

1,503.4

25.0

0.6

2,670.4

Exceptional items

-

-

-

-

-

-

-

-

Share of joint ventures' revenue

(132.3)

(15.5)

(0.7)

(9.8)

(10.5)

(17.2)

-

(175.5)

Group revenue

708.5

285.1

1,013.1

479.8

1,492.9

7.8

0.6

2,494.9

Segment result:

 

 

 

 

 

 

 

 

Pre-exceptional profit/(loss) from operations before share of joint ventures' profit

120.8

9.6

8.9

6.8

15.7

(1.4)

(15.8)

128.9

Share of joint ventures' profit

26.4

2.1

0.1

-

0.1

-

-

28.6

Pre-exceptional profit/(loss) from operations *

147.2

11.7

9.0

6.8

15.8

(1.4)

(15.8)

157.5

Share of joint ventures' interest and tax

(8.7)

(0.7)

-

-

-

-

-

(9.4)

Profit/(loss) before finance costs, amortisation and taxation

138.5

11.0

9.0

6.8

15.8

(1.4)

(15.8)

148.1

Finance income

6.4

0.3

-

0.5

0.5

           0.8

(0.4)

7.6

Finance (costs)

(46.6)

(0.8)

(0.2)

-

(0.2)

          (1.1)

32.3

(16.4)

Profit/(loss) before amortisation and taxation

98.3

10.5

8.8

7.3

16.1

(1.7)

16.1

139.3

Amortisation of intangibles

(1.0)

-

(2.2)

-

(2.2)

-

(1.1)

(4.3)

Profit before taxation

97.3

10.5

6.6

7.3

13.9

(1.7)

15.0

135.0

Income tax expense

 

 

 

 

 

 

 

(26.1)

Profit for the year

 

 

 

 

 

 

 

108.9

* Pre-exceptional profit from operations is stated before finance costs, amortisation, exceptional items, share of joint ventures' interest and tax and taxation.

 

Inter-segment revenue, which is priced on an arm's length basis, is eliminated from Group revenue above. In the year to 30 June 2017 this amounted to £84.7 million (2016: £79.9 million) of which £28.0 million (2016: £35.7 million) was in Building, £33.3 million (2016: £42.9 million) was in Infrastructure and £23.4 million (2016: £1.3 million) was in Central.

Balance Sheet

 

Notes

Linden
Homes
£m

Partnerships & Regeneration
£m

Construction

PPP Investments
£m

Central
£m

Total
£m

Building
£m

Infrastructure
£m

Total
£m

30 June 2017

 

 

 

 

 

 

 

 

 

Goodwill & intangible assets

 

52.5

35.8

46.6

37.2

83.8

-

7.0

179.1

Working capital employed

 

619.9

44.9

(122.9)

(20.6)

(143.5)

20.6

(152.7)

389.2

Net (debt)/cash

9

(500.8)

(39.3)

131.9

5.5

137.4

(11.8)

421.7

            7.2

Net assets

 

171.6

41.4

55.6

22.1

77.7

8.8

276.0

575.5

Total Group liabilities

 

 

 

 

 

 

 

 

(2,088.4)

Total Group assets

 

 

 

 

 

 

 

 

 2,663.9

 

 

 

 

 

 

 

 

 

 

30 June 2016

(Restated - note 1)

 

 

 

 

 

 

 

 

Goodwill & intangible assets

 

53.4

6.0

47.7

37.2

84.9

-

7.9

152.2

Working capital employed

 

601.7

38.0

(81.6)

(74.0)

(155.6)

15.4

(43.0)

456.5

Net (debt)/cash

9

(525.0)

(12.1)

90.1

71.0

161.1

(7.8)

375.1

(8.7)

Net assets

 

130.1

31.9

56.2

34.2

90.4

7.6

340.0

600.0

Total Group liabilities

 

 

 

 

 

 

 

 

(1,829.7)

Total Group assets

 

 

 

 

 

 

 

 

2,429.7

Return on net assets for Linden Homes is calculated as Linden Homes EBITA divided by average of the aggregate of Linden Homes and Central net assets.

3 Exceptional items

Year ended 30 June 2017

 

Charge on legacy contracts
£m

Abortive merger costs
£m

Total
£m

Group revenue and share of joint ventures' revenue

 

(42.4)

-

(42.4)

Share of joint ventures' revenue

 

-

-

-

Group revenue

 

(42.4)

-

(42.4)

 

 

 

 

 

Cost of sales

 

(45.5)

-

(45.5)

Administrative expenses

 

-

(1.0)

(1.0)

Loss from operations

 

(87.9)

(1.0)

(88.9)

 

In May 2017, the Group released an update in respect of Group trading and legacy contracts in Construction. This indicated that following a thorough reappraisal of the costs to complete and recoveries from these contracts, it was established that there was an increased anticipated liability to conclude these contracts and consequently, a one-off charge of £98.3 million had been incurred, of which approximately 80% was in respect of two major infrastructure joint venture projects (contracted in 2014 and earlier). One of these projects is largely practically complete, while the other, which represents the larger proportion of the estimated charge, is scheduled to complete in mid-2018. A charge of £87.9 million in respect of these two projects has been classified as an exceptional item comprising all costs and provisions for those projects in the year.  This comprises £79.3 million of the £98.3 million identified within the trading update in May 2017 plus £5.0 million included in the six months to 31 December 2016 and £3.6 million charged since 3 May 2017.

In March 2017, the Group announced that it had approached the Board of Bovis Homes Group Plc (Bovis) and had proposed an all share merger between Galliford Try plc and Bovis. Subsequently, in April 2017, the Group announced that this proposal was no longer being considered. During this period, £1.0 million of professional fees were incurred in respect of the proposal and these have been treated as an exceptional item.

4 Net finance costs

Group

2017
£m

2016
£m

Interest receivable on bank deposits

0.2

0.1

Interest receivable from joint ventures

4.9

7.0

Net finance income on retirement benefit obligations

-

0.2

Other

0.2

0.3

Finance income

5.3

7.6

 

 

 

Interest payable on borrowings

(16.4)

(15.5)

Unwind of discounted payables

(0.7)

(0.8)

Other

(0.1)

(0.1)

Finance costs

(17.2)

(16.4)

 

 

 

Net finance costs

(11.9)

(8.8)

5 Income tax expense

 

 

2017
£m

2016
£m

Analysis of expense in year

 

 

 

Current year's income tax

 

 

 

Current tax

 

12.6

24.4

Deferred tax

 

0.6

-

Adjustments in respect of prior years

 

 

 

Current tax

 

(2.8)

0.9

Deferred tax

 

(0.4)

0.8

Income tax expense

 

10.0

26.1

 

 

 

 

Tax on items recognised in other comprehensive income

 

 

 

Current tax (credit) for retirement benefit obligations

 

(1.2)

(1.3)

Current tax (credit) for share-based payments

 

(0.5)

(1.0)

Current tax (credit) for share-based payments - prior year adjustment

 

(1.1)

-

Deferred tax (credit)/expense for share-based payments

 

(0.1)

1.8

Deferred tax expense/(credit) on derivative financial instruments

 

                0.5

(0.8)

Deferred tax expense/(credit) on retirement benefit obligations

 

                0.2

(1.0)

Tax recognised in other comprehensive income

 

                (2.2)

(2.3)

 

 

 

 

Total taxation

 

7.8

23.8

The standard rate of corporation tax in the UK changed from 20% to 19% with effect from 1 April 2017. Accordingly, the Group's profits for the accounting period to 30 June 2017 were taxed at a blended standard rate of 19.75%; and for the period to 30 June 2016 were taxed at the standard rate of 20.0%.

6 Dividends

Group and Company

2017

2016

£m

pence per share

£m

pence per share

 

 

 

 

 

Previous year final

46.4

56.0

37.8

46.0

Current period interim

26.4

32.0

21.5

26.0

Dividend recognised in the year

72.8

88.0

59.3

72.0

The following dividends were declared by the Company in respect of each accounting period presented:

 

2017

2016

£m

pence per share

£m

pence per share

Interim

26.4

32.0

21.5

26.0

Final

53.0

64.0

46.4

56.0

Dividend relating to the year

79.4

96.0

67.9

82.0

 

The directors are proposing a final dividend in respect of the financial year ended 30 June 2017 of 64.0 pence per share, bringing the total dividend in respect of 2017 to 96.0 pence per share (2016: 82.0 pence). The final dividend will absorb approximately £53.0 million of equity. Subject to shareholder approval at the AGM to be held on 10 November 2017, the dividend will be paid on 22 November 2017 to shareholders who are on the register of members on 27 October 2017.

7 Earnings Per Share

Basic and diluted earnings per share (EPS)

Basic EPS is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the year, excluding those held by the Trust, which are treated as cancelled.

Under normal circumstances, the average number of shares is diluted by reference to the average number of potential ordinary shares held under option in the period. The dilutive effect amounts to the number of ordinary shares which would be purchased using the aggregate difference in value between the market value of shares and the share option price. Only shares that have met their cumulative performance criteria are included in the dilution calculation. The Group has two classes of potentially dilutive ordinary shares: those share options granted to employees where the exercise price is less than the average market price of the Company's ordinary shares during the year and the contingently issuable shares under the Group's long-term incentive plans. A loss per share cannot be reduced through dilution, hence this dilution is only applied where the Group has reported a profit.

 

The earnings and weighted average number of shares used in the calculations are set out below.

 

2017

2016

Earnings
£m

Weighted
average
number of
shares

Per share
amount
pence

Earnings
£m

Weighted
average
number of
shares

Per share
amount
pence

Basic EPS - pre-exceptional

 

 

 

 

 

 

Pre-exceptional earnings attributable to ordinary shareholders

120.2

82,464,513

145.8

108.9

82,166,065

132.5

 

 

 

 

 

 

 

Basic EPS

 

 

 

 

 

 

Earnings attributable to ordinary shareholders post-exceptional items

48.7

82,464,513

59.1

108.9

82,166,065

132.5

 

 

 

 

 

 

 

Effect of dilutive securities:

 

 

 

 

 

 

Options

 

430,141

 

 

 748,016

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted EPS - pre-exceptional

120.2

82,894,654

145.0

108.9

82,914,081

131.3

Diluted EPS

48.7

82,894,654

58.7

108.9

82,914,081

131.3

8 Goodwill

 

£m

Cost

 

At 1 July 2015 and 1 July 2016

136.2

Additions in year to 30 June 2017

24.8

At 30 June 2017

161.0

 

 

Aggregate impairment at 1 July 2015, 1 July 2016 and 30 June 2017

(0.7)

 

 

Net book amount

 

At 30 June 2017

160.3

 

 

At 30 June 2015 and 30 June 2016

135.5

The increase in goodwill in the year to 30 June 2017 arose from the acquisition of Drew Smith (see note 17). This was allocated to the Partnerships & Regeneration segment.

Goodwill is allocated to the Group's CGUs identified according to business segment. The goodwill is attributable to the following business segments:

 

2017
£m

2016
£m

Linden Homes

52.5

52.5

Partnerships & Regeneration

30.6

5.8

Building

40.0

40.0

Infrastructure

37.2

37.2

 

160.3

135.5

Impairment review of goodwill and key assumptions

Goodwill is tested for impairment at least annually. The recoverable amount of a CGU is determined based on value in use calculations. These calculations use pre-tax cash flow projections based on future financial budgets approved by the Board, based on past performance and its expectation of market developments. The key assumptions within these budgets relate to revenue and the future profit margin achievable, in line with our strategy as set out in the Strategic Report. Future budgeted revenue is based on management's knowledge of actual results from prior years and latest forecasts for the current year, along with the existing secured works, management's expectation of the future level of work available within the market sector and expected changes in selling volumes and prices for completed houses. In establishing future profit margins, the margins currently being achieved are considered in conjunction with expected inflation rates in each cost category and to reflect the current market value of land being acquired.

9 Cash and cash equivalents

 

2017
£m

 

2016
£m

(Restated - note 1)

Net cash/(debt)

 

 

Cash and cash equivalents excluding bank overdrafts

765.8

599.8

Current borrowings - bank overdrafts

(562.1)

(433.5)

 

              203.7

              166.3

Current borrowings - obligations under finance leases and hire purchase contracts

                 (0.3)

                 (0.3)

Non-current borrowings

(196.2)

(174.7)

 

 

 

Net cash/(debt)

7.2

(8.7)

The restatement in 2016 is explained in note 1.

10 Developments

Group

2017
£m

  
2016
£m

Land

456.6

538.7

Work in progress

266.0

282.1

 

722.6

820.8

11 Trade and other receivables

 

2017
£m

2016
£m

Amounts falling due within one year:

 

 

Trade receivables

             214.1

             162.6

Less: provision for impairment of receivables

(0.3)

(0.8)

Trade receivables - net

              213.8

             161.8

Amounts recoverable on construction contracts

              274.0

             283.7

Amounts due from joint ventures

              141.7

              125.3

Other receivables

                27.5

                49.6

Prepayments and accrued income

              152.5

                97.6

 

              809.5

              718.0

 

 

2017
£m

2016
£m

Amounts falling due in more than one year:

 

 

Amounts due from joint ventures

106.9

75.4

Other receivables

4.8

0.4

 

111.7

75.8

12 Trade and other payables

 

2017
£m

2016
£m

Payments received on account on construction contracts

109.4

77.8

Trade payables

375.0

296.6

Development land payables

98.2

104.2

Amounts due to joint ventures

31.8

31.9

Other taxation and social security payable

18.3

17.0

Other payables

11.4

7.0

Accruals and deferred income

576.0

524.7

 

1,220.1

1,059.2

13 Other non-current liabilities

 

2017
£m

2016
£m

Development land payables

46.3

98.6

Other payables

0.1

0.6

Accruals and deferred income

50.5

39.9

 

96.9

139.1

14 Retirement benefit obligations

All employees are entitled to join the Galliford Try Pension Scheme, a defined contribution scheme established as a stakeholder plan, with a company contribution based on a scale dependent on the employee's age and the amount they choose to contribute. The Group also operates three defined benefit pension schemes, all of which are closed to future service accrual.

Pension costs for the schemes were as follows:

 

2017
£m

2016
£m

Defined benefit schemes - expense recognised in the income statement

0.3

0.2

Defined contribution schemes

16.3

17.1

Total included within employee benefit expenses

16.6

17.3

The principal assumptions used in the calculation of the defined benefit schemes are as follows:

 

2017

2016

Rate of increase in pensionable salaries

n/a

n/a

Rate of increase in pensions in payment

3.10%

2.90%

Discount rate

2.65%

3.00%

Retail price inflation

3.25%

3.00%

Consumer price inflation

2.25%

2.00%

 

The fair value of the assets and present value of the obligations at 30 June of the Group's defined benefit arrangements are as follows:

 

 

2017
£m

2016
£m

Fair value of plan assets

             242.9

             231.4

Present value of defined benefit obligations

(246.1)

(235.7)

Deficit in scheme recognised as non-current liability

               (3.2)

                (4.3)

15 Share-based payments

The Company operates performance-related share incentive plans for executives, details of which are set out in the Directors' Remuneration Report. The Company also operates sharesave schemes. The total charge for the year relating to employee share-based payment plans was £1.8 million (2016: £4.0 million), all of which related to equity-settled share-based payment transactions. After deferred tax, the total charge was £1.8 million (2016: £1.4 million).

16 Guarantees and contingent liabilities

Galliford Try plc has entered into financial guarantees and counter indemnities in respect of bank and performance bonds issued in the normal course of business on behalf of Group undertakings, including joint arrangements and joint ventures, amounting to £353.3 million (2016: £313.8 million).

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. While 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.

17 Business Combinations

On 12 May 2017, the Group acquired Drew Smith business from its owners for an estimated total price of £27.1 million. The acquisition was of the entire share capital and control of Drew Smith Limited and Drew Smith Homes Limited.

Drew Smith is a mixed-tenure developer with relationships with the Registered Provider and regeneration markets; it has operations in Hampshire, Dorset, Surrey, Sussex and Berkshire, with strong contracting, housebuilding and land acquisition capabilities. The business has a strong contracting order book and a number of land assets in planning as well as approximately 70 employees. The tactical acquisition of Drew Smith is consistent with Galliford Try's stated strategy of national footprint growth through expansion into new geographies and margin improvement through leveraging mixed tenure expertise; the transaction accelerates the growth in the southern region where mixed-tenure housing demand is generally high.

The goodwill of £24.8 million arising from acquisition is attributable to the acquired workforce of Drew Smith. None of the goodwill recognised is expected to be deductible for income tax purposes.

The following table summarises the consideration paid for Drew Smith, and the fair value of the assets acquired and liabilities assumed:

 

 

£m

Recognised amounts of identifiable assets acquired and liabilities assumed

 

 

Net cash/(debt) and cash equivalents

 

(2.8)

Property plant and equipment

 

                 0.8

Intangible assets1

 

                 5.3

Trade and other receivables

 

               17.6

Trade and other payables

 

(19.2)

Net deferred tax assets2

 

                 0.6

Total identifiable net assets

 

                 2.3

Goodwill

 

                24.8

Total

 

                27.1

 

 

 

Consideration

 

 

Cash

 

12.8

Deferred consideration3

 

12.8

Deferred contingent consideration4

 

1.5

Total

 

27.1

1   Intangible assets of £5.3 million comprise customer relationships and contracts.

2   Deferred tax asset recognised on the acquisition relate to the fair value adjustments on acquisition.

3   Deferred cash consideration included £2.0 million deferred until May 2018 (£1.0 million) and May 2019 (£1.0 million) and is payable subject to the satisfactory resolution of certain customer contract matters.

4   The contingent consideration is payable on the achievement of certain profit targets by the acquired businesses during 2017 and 2018.

The Group assumed responsibility for £2.7 million guarantees and contingent liabilities in relation to performance bonds issued in the normal course of business. While the outcome of disputes arising in the normal course of business is never certain, the directors have made proper provision in the acquired balance sheet for liabilities they believe exist.

The acquisition contributed £13.0 million revenue and £1.3 million profit before tax in the period to 30 June 2017. Acquisition related costs of £0.7 million were charged to administrative expenses in the consolidated income statement in the period. Had the acquisition occurred at the beginning of the reporting period, the revenue and profit before tax of the Group would have been £2,734.2 million and £64.0 million respectively.

18 Post balance sheet events

No matters have arisen since the year end that require disclosure in the financial statements.


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