Regulatory Story
Go to market news section View chart   Print
RNS
Galliford Try PLC  -  GFRD   

Final Results

Released 07:00 12-Sep-2018

RNS Number : 4687A
Galliford Try PLC
12 September 2018
 

07:00 AM WEDNESDAY 12 SEPTEMBER 2018

 

GALLIFORD TRY PLC

ANNUAL RESULTS STATEMENT FOR THE YEAR ENDED 30 JUNE 2018

 

STRONG UNDERLYING PERFORMANCE DRIVEN BY PROGRESS AGAINST STRATEGIC OBJECTIVES

 

Highlights

 

Financial

 

2018

2017

 

Change

 

Revenue1 (including share of joint ventures)

£3,132m

£2,820m

+11%

Group revenue1

£2,932m

£2,662m

+10%

Pre-exceptional profit before tax2,3

£188.7m

£147.6m

+28%

Profit before tax

£143.7m

£58.7m

+145%

Pre-exceptional earnings per share2,3,4

158.4p

131.1p

+21%

Earnings per share4

121.1p

53.1p

+128%

Full year dividend per share5

77.0p

86.0p

-10%

Net cash

£98.2m

£7.2m

+£91.0m

Group return on net assets6

24.9%

14.0%

+10.9pts

Pre-exceptional Group return on net assets7

29.2%

27.5%

+1.7pts

 

Group

·      Very strong underlying performance reflecting excellent progress made against strategy to 2021

·      6,193 total new homes built by Linden Homes and Partnerships & Regeneration (2017: 5,490)

·      Sales order books in Linden Homes and Partnerships & Regeneration robust at £698m (2017: £638m)

·      Successful 1 for 3 rights issue in April 2018 resulting in net proceeds of £150m

·      Average net debt at £227m (excluding the rights issue proceeds)

·      Full year dividend payment of 77.0p (2017 restated: 86.0p), covered 2.0x by pre-exceptional profits in line with policy announced at the rights issue

·      Pre-exceptional return on net assets improved to 29.2% from 27.5%

·      On track to achieve Group 2021 strategic targets with adjustments to divisional targets

 

Linden Homes

·    Excellent progress against our objectives, generating an improved operating margin of 19.5% (2017: 18.2%) and operating profit up 8% to £184.4m (2017: £170.3m)

·      3,442 completions8 (2017: 3,296), revenue up to £947m (2017: £937m)

·    0.59 sales rate per outlet per week (2017: 0.62) with sales reserved, contracted or completed of £510m9 (2017:  £545m)

·      11,830 plot landbank9,10 (2017: 11,250), estimated to be around 3.5 years' supply

 

Partnerships & Regeneration

·    Continuing strong profitable growth with mixed-tenure revenue up 51% to £124m, from 751 completions7 (2017:   £82m and 594 completions respectively) and contracting revenue of £351m, up 42% (2017: £248m)

·     Operating margin improved to 5.0% (2017: 4.5%), generating a 58% increase in operating profit to £23.6m (2017:   £14.9m)

·   £1.2bn9 contracting order book (2017: £1.05bn) and mixed-tenure sales reserved, contracted or completed of   £188m9 (2017: £93m)

·      3,760 plot landbank9, up 39% (2017: 2,700)

 

Construction

·      Pre-exceptional margin improved to 0.9%, on revenue of £1,687m (2017: 0% and £1,527m respectively)

·     £26m net debt (2017: net cash £137m), reduction primarily reflecting cash funding of Aberdeen Western Peripheral Route (AWPR)

·    Good progress on the AWPR contract, with the vast majority of the road complete, significant sections already opened to traffic and final completion expected in late Autumn.  Construction result impacted by exceptional charge of £45.0m from the contract, in line with earlier guidance

·      £3.3bn9 risk managed high-quality order book (2017: £3.6bn)

 

"We have delivered a very strong underlying performance during the year, driven by excellent progress towards our strategic objectives across all three businesses.

 

Linden Homes continued to prioritise margin growth, benefiting from further standardisation and the robust control of overheads. This resulted in increased profitability in a year with modest house price inflation. Volumes also grew reflecting the strength of our product offering, and with the sector supported by Help to Buy, good mortgage availability and the cut in stamp duty for first-time buyers. The land market continues to be favourable, allowing us to buy land at robust margins, in the right locations for our new standardised product.

 

Partnerships & Regeneration achieved strong growth in both revenue and margin, with excellent contributions from the new businesses in Southampton, Bristol and East Midlands.  The business has a strong order book and continues to see growing demand across all regions with opportunities in both contracting and mixed-tenure.

 

The underlying Construction business performed well and continues to see a pipeline of suitable opportunities, with new projects delivering improved margins. We have made good progress towards completion of the AWPR contract, with significant sections of the road open to traffic and the final section expected to be open by late Autumn 2018.

 

The rights issue in April has strengthened the balance sheet and ensures that the Group's businesses are well positioned, with the appropriate capital, to deliver on their respective growth opportunities in line with our Strategy to 2021."

 

This announcement contains inside information.

 

 

Galliford Try plc                       Peter Truscott, Chief Executive                             01895 855001

                                                Graham Prothero, Finance Director                      01895 855001

 

Tulchan Communications        James Macey White / Martin Pengelley /              020 7353 4200

                                                Elizabeth Snow 

 

1   'Revenue' includes share of joint ventures' revenue of £200.7m (2017: £158.1m).  '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 2018 were £45.0m.  Exceptional costs in 2017 of £88.9m.

4    2017 restated due to rights issue (note 7)

5   2017 restated due to rights issue (note 6)

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

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

8    Completions net of joint venture partner share were 2,903 (2017: 2,876) for Linden Homes and 564 (2017: 444) for Partnerships & Regeneration.

9    As at 10 September 2018.  All future references to this data is for the same period.

10  Linden Homes landbank includes 3,276 plots (2017: 2,737) representing Linden Homes share of plots held in joint ventures.

 

Analyst Presentation

Galliford Try will hold its results presentation at 09:30 am on Wednesday 12 September 2018 at the London Stock Exchange, 10 Paternoster Square, London EC4M 7LS.  A live audio webcast will be available at http://webcast.openbriefing.com/galliford_FY18/. 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 12 September 2018. 

 

Capital Markets Day

The housebuilding businesses, Linden Homes and Partnerships & Regeneration, will host a Capital Markets Day for institutional investors and analysts in London on 11 October 2018.

 

CURRENT TRADING AND OUTLOOK

 

The Group's private and affordable homes businesses continue to benefit from good market fundamentals, with sales reserved, contracted and completed in Linden Homes and Partnerships & Regeneration of £698m (2017: £638m). The market is characterised by a continuing strength in the regions and for units below the Help-to-Buy threshold, with higher price points and the South East seeing some weakening in buyer confidence.  The Government's commitment to the housing market, combined with the relaxation of stamp duty for first-time buyers, good mortgage availability and historically low interest rates, continues to support the sector, despite the ongoing macroeconomic uncertainty.

 

Linden Homes has made a good start to the new financial year. The business has a solid forward order book, which is lower than last year's strong comparative but in line with 2016, an optimal-length landbank equivalent to 3.5 years, and a growing strategic landbank. As part of the strategy to 2021, the business remains focused on delivering higher margins through continued process improvement, the benefits of product standardisation and enhancing our strategic landbank.

 

Partnerships & Regeneration continues to pursue its vigorous growth, benefiting from excellent demand and opportunities across all aspects of the business, from the partners and types of products to the increasing reach of the business nationally. The business continues to focus on regional expansion, and remains confident in reaching its target for 2021, with strong growth in the order books for both mixed-tenure and contracting.

 

Construction, which continues to operate predominantly in the public and regulated sectors, benefits from the substantial current and planned investment in the nation's infrastructure. As the AWPR contract progresses to completion, and the few remaining legacy project negotiations are concluded, the business is focused on winning projects of the right quality and risk profile, through a rigorous project selection process. The performance of newer projects, which are aligned to the business's project selection parameters, is encouraging.

 

The Group remains positive about the opportunities for each business, supported by a strengthened balance sheet, a strong forward order book and robust demand across our sectors. Collectively these provide the Board with confidence in the Group's prospects for the forthcoming year.

 

DIVIDEND

 

The Board is committed to a dividend strategy which fairly and prudently allocates profits between returns to shareholders and further investing in the growth potential of the businesses and maintaining a strong balance sheet, which protects against the risks in cyclical markets.  We approach this by setting a target level of dividend cover.  In our strategy document, published in February 2017, we indicated our intention to increase this cover up to two times during the strategy period.  We took the opportunity of the rights issue to accelerate this adjustment, moving immediately to cover of 2.0x, which both provides clarity and enables the dividend to progress in line with profits after the current year.

 

The directors are recommending a final dividend of 49.0 pence per share which, subject to approval at the AGM, will be paid on 5 December 2018 to shareholders on the register at 9 November 2018. Together with the interim dividend of 28.0 pence per share paid in April, this will result in a total dividend for 2018 of 77.0 pence per share.

 

STRATEGY TO 2021

 

In February 2017, we set out our three-part strategy for sustainable growth:

 

1.   Drive operating efficiencies by streamlining our operations to increase margins, so we may respond faster as markets change and ensure we have strong foundations for top-line growth.

 

2.  Maintain capital discipline by continuing to manage capital prudently, reinvesting appropriately in growing the business and continuing to pay attractive dividends. 

 

3.   Operating sustainably is fundamental to everything that we do, with a principal focus on health and safety and the development and well-being of our people. 

 

As part of the strategy, the Board set out Group financial targets for the five years to 2021, based on the results for FY 2016. The rights issue in April, together with the acceleration of the higher dividend cover, require a rebasing of the prospective targets for dividend CAGR, with the Group targets otherwise remaining as:

 

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

·      a five year CAGR on dividend of at least 5%1; and

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

 

The Group is making strong progress towards its objectives, with each business working towards individual financial targets to drive Group profit and returns. In Linden Homes, reflecting a slightly more cautious outlook for the wider economy, the business is now focused on delivering more prudent volume growth, but a stronger improvement in margins. The business has therefore adjusted its unit volume target to a range of 4,200 - 4,500 units, and its revenue target to £1.25bn in FY 2021, but has reached its 2021 margin target (19%-20%), and expects to achieve an operating margin at the upper end of the previously guided range. Partnerships & Regeneration is performing ahead of expectations and has increased its unit volume range to 4,200 - 4,400 and revenue target to a range of £700m-£750m. Reflecting these adjustments, the business targets by which the Group targets will be achieved, have been updated as set out below:

 

Original

Target

FY18

Actual

FY21

Target

4,750-5,000

3,442

4,200-4,500

£1.25bn-£1.35bn

£947m

£1.25bn

19%-20%

19.5%

20%

Original

Target

FY18

Actual

FY21

Target

4,200

2,751

4,200-4,400

£650m

£475m

£700m-£750m

6%-7%

5.0%

6% - 7%

Construction

Original

Target

FY18

Actual

FY21

Target

Pre-exceptional revenue

£1.8bn

£1.7bn

£1.8bn

Pre-exceptional operating profit margin

>2.0%

0.9%

>2.0%

(Debt)/cash

£200m

£(26)m

£200m

 

1 As a result of the rights issue in April 2018 this has been rebased with the 2016 reference dividend per share recalculated using the revised number of shares.

 

FINANCIAL REVIEW

 

The Group delivered a very strong underlying performance, which saw increased pre-exceptional margins in all three businesses, resulting in a record level of both pre-exceptional and post-exceptional profit and ending the year with a strong balance sheet and continued confidence in our strategy to 2021.

 

Revenue including joint ventures rose 11% to £3,132m (2017: £2,820m). Group revenue, which excludes our share of joint ventures, was up 10% at £2,932m (2017: £2,662m).

 

Pre-exceptional profit from operations, which is stated before finance costs, tax and our share of joint ventures' interest and tax, rose 24% to £213.1m (2017: £171.2m). This contributed to pre-exceptional profit before tax of £188.7m, up 28% from £147.6m in 2017, reflecting revenue growth and improved pre-exceptional margins across the Group. Profit before tax was £143.7m (2017: £58.7m), after the exceptional charge relating to the AWPR contract.

 

As previously indicated, we have taken a further exceptional charge in the year in respect of our share of the additional costs on the AWPR joint venture, the effect of which has been exacerbated by the failure of Carillion in January.  The project was originally a three-party joint venture (between Balfour Beatty, Carillion and the Group), with the two remaining parties being obliged to fund Carillion's one third share since January 2018.  We announced a charge of £25m in the first half, as a direct reflection of absorbing Carillion's share of the prospective loss estimated at that time.  In May we indicated a further deterioration in the anticipated net cost, principally reflecting significant weather delays in the Spring, with our half share of that now appraised at £20m. 

 

Further comments relating to specific projects are provided in the Construction section below.

 

The table below reconciles profit before income tax to our alternative performance measure of pre-exceptional profit before income tax, which is a key metric for us when monitoring performance of the business.

  

 

2018

£m

2017

£m

Profit before income tax

143.7

58.7

Charge on legacy contracts

45.0

87.9

Professional costs on aborted merger proposal with Bovis Homes plc

-

1.0

Pre-exceptional profit before income tax

188.7

147.6

 

The balance sheet has been significantly strengthened by the successful rights issue in April, which raised net proceeds of £150m.  Average net debt during the year excluding the net cash received from the rights issue was £227m, which was below our guidance of circa £240m and reflects our rigorous focus on cash management. Year-end net cash was £98.2m (2017: £7.2m).

 

Pre-exceptional return on net assets improved to 29.2% (2017: 27.5%), with the post-exceptional return showing a strong improvement to 24.9% (2017: 14.0%).

 

Throughout this statement the Group has presented financial performance measures which are used to manage the Group's performance.  These measures are chosen to provide a balanced view of the Group's operations and are considered useful to investors as they provide relevant information on the Group's performance and are aligned to measures used internally to assess business performance in the Group's budgeting process and when determining compensation.

LINDEN HOMES

 

2018

2017

Revenue (£m)

947.3

937.4

Profit from operations (£m)

184.4

170.3

Operating profit margin (%)

19.5

18.2

Completions

3,442

3,296

 

The business increased completions to 3,442 units (2017: 3,296), with private housing accounting for 2,587 (2017: 2,537) and affordable housing accounting for 855 (2017: 759).  Excluding our joint venture partners' share, completions rose from 2,876 in 2017 to 2,903 in 2018.

Average selling prices were £367,000 for private housing, up 4% (2017: £354,000) and £134,000 for affordable homes, up 11% (2017: £121,000). The slightly higher private average selling price principally reflected sales in London in the year, which made up a relatively small proportion of our units but had much higher than average selling prices. We continue to expect average selling prices to reduce over the strategy period to 2021, reflecting increased standardisation and the growth in regions away from the South East. In the year only 9% of Linden Homes' units had selling prices in excess of £600,000.

There were 85 active selling sites on average during the year, up from 77 in 2017. Sales per site per week of 0.59, compared with 0.62 in the previous year. Cancellation rates were steady at 19% (2017: 19%).  The business has sales in hand of £510m (2017: £545m).

During the year, we introduced our third generation of standard layouts. Our target is for 80% of our planning applications to use these layouts by 2021 and we reached 64% third generation during the year. The plots being built using these layouts are showing the expected benefits in reduced build costs.

Reflecting increased process standardisation and reduced overheads, which were 4.1% of revenue in 2018 (2017: 4.8%), the operating margin increased to 19.5%, up from 18.2% in 2017. Excluding realised profits from land sales into joint ventures, the operating margin for the year was 19.0% (2017: 17.0%).

The land market remains favourable, allowing us to secure the plots we need at attractive margins. We have a landbank of 11,830 plots (2017: 11,250), which we estimate is equivalent to around 3.5 years' supply and provides a sustainable business platform. The figure represents sites we own and control, including sites under option but excluding our longer-term options on strategic land. 100% of required land for the 2019 financial year is in place and 83% is secured for 2020.

 

Around 87% of Linden Homes' landbank relates to houses, with the remainder apartments. The average cost per plot is £69,000 and the expected average selling price per plot is £292,000. The gross development value of our landbank is £3.4bn (2017: £3.4bn).

Our strategic land team continues to identify attractive opportunities. At 30 June 2018, our strategic land holdings stood at 2,730 acres (2017: 2,396 acres) and we expect to generate more than 13,270 plots from this land. 

We continue to be rated four stars in the National House Building Council (NHBC) customer satisfaction survey. While this is good, we are striving for five-star status and reward our staff on the high levels of customer satisfaction achieved in their business units.

For the third year in a row, Linden Homes was rated Silver for its sustainability performance in NextGeneration's independent sustainability benchmark of the top 25 housebuilders. We were also awarded NextGeneration's Innovation Award for Inclusion and Diversity for going "far beyond" the criteria set by the benchmark.

 

Strategic use of Joint Ventures

 

Working together with select partners remains a core part of the strategy for Linden Homes.  Our joint ventures enable the business to secure larger sites for investment and provide additional points of sale, while at the same time enabling us to share location risk and invest less capital upfront.  Reflecting this, we include our share of joint ventures in our key reporting metrics, however for clarity, we separate out the gross and net values in the table below:

 

 

Completions (units)

Revenue (Linden Homes share only) £m

Average selling price £000

 

Gross

Net of JV partner

 

 

Direct - private

1,794

1,794

646

360

Direct - affordable

569

569

72

127

Other direct income, including land sales

-

-

45

-

JOs1 - private

74

37

6

168

 

 

 

 

 

JVs2 - private

719

360

152

422

JVs2- affordable

286

143

24

167

Other JV income, including land sales

-

-

2

-

TOTAL

3,442

2,903

947

310

 

1  Joint operations (JOs) proportionally consolidated within Linden Homes under IFRS11.

2  JVs equity accounted under IFRS11.

 

 

PARTNERSHIPS & REGENERATION

 

 

2018

2017

Revenue (£m)

475.2

330.2

Profit from operations (£m)

23.6

14.9

Operating profit margin (%)

5.0

4.5

Equivalent contracting units

2,000

1,600

Mixed-tenure units

751

594

 

Partnerships & Regeneration grew revenue by 44% to £475.2m (2017: £330.2m), benefiting from increased client investment and further geographic expansion. Revenue from mixed-tenure developments rose by 51% to £123.9m (2017: £82.2m), while contracting revenues were 42% higher at £351.3m (2017: £248.0m). Reflecting the growing proportion of higher-margin mixed-tenure work, supported by improved contracting margins, the operating margin improved further to 5.0% (2017: 4.5%).

 

The business completed 751 mixed-tenure units at an average selling price of £220,000 (2017: 594 units and £186,000). We also completed around 2,000 equivalent contracting units, compared with 1,600 in the previous year. We have mixed-tenure sales carried forward of £188m (2017: £93m) and a landbank, up 39% to 3,760 plots (2017: 2,700). The contracting order book stands at £1.2bn (2017: £1.05bn), giving the business a record total order book of £1.39bn (2017: £1.14bn), providing strong visibility of future work.

 

During the year, Partnerships & Regeneration secured a number of major projects. These included a new joint venture with Trafford Housing Trust, to deliver a £100m, 600-home regeneration scheme in Partington, Greater Manchester; an extension of three sites to our existing joint venture with Gateshead Council; and selection as a development partner by Ealing Council, for an estimated £275m regeneration scheme to create 471 new homes and a new council headquarters. The business was also appointed by Eastleigh Borough Council to project-manage the delivery of 1,400 new homes, in an innovative development model, and formed its first mixed-tenure joint venture with Metropolitan Housing Trust, on a site in Nottingham.

 

On a contracting basis, the business will deliver a £120m, 440-home buy-to-rent scheme in Walthamstow for Legal & General; will collaborate with Sigma Capital Group to deliver high-quality homes for private rent; and was appointed by a joint venture between Genesis Housing Association and Queens Park Rangers Football Club to construct a £155m scheme for 605 new homes in West London. Partnerships & Regeneration has also begun work on site on its largest-ever contract to build 975 mixed-tenure homes at the Brunel Street Works site off Silvertown Way in Canning Town, London, on behalf of Opal, a joint venture between Galliford Try and Thames Valley Housing.

 

In July 2017, Partnerships & Regeneration was reappointed to Homes England's Delivery Partner Panel 3. This four-year framework agreement is used by Homes England, local authorities, Registered Providers and other public sector bodies to streamline their procurement processes, by providing access to pre-qualified housing developers.

 

The geographical expansion of the business is progressing well and we remain on track to open a new office in Yorkshire by the end of 2018.  We have also been highly successful at recruiting people to support our growth and have doubled the number of employees in the business to 864 over the last two years.

The business has increased its focus on customer service, introducing processes at site level and at the development and planning stages to ensure continuous improvement in the customer journey and customer satisfaction.

 

Total residential properties completed:

 

 

Private

Affordable

Mixed-tenure

Contracting

Total

  Linden Homes

2,587

855

 

 

3,442

  Partnerships & Regeneration

 

 

751

2,000

2,751

 

 

 

 

 

6,193

 

CONSTRUCTION

 

Pre-exceptional 2018

 

 

2018

Pre-exceptional 2017

 

 

2017

Revenue (£m)

1,687.4

1,687.4

1,569.3

1,526.9

(Profit)/loss from operations (£m)

15.9

(29.1)

(0.9)

(88.8)

Operating profit margin (%)

0.9

(1.7)

0.0

(5.8)

Order book (£bn)

3.3

3.3

3.6

3.6

 

Construction delivered a strong underlying performance, maintaining a high-quality order book and focusing on its selective bidding process.

 

Revenue grew by 11% to £1,687.4m (2017: £1,526.9m), as the business continued to prioritise selective bidding and margin enhancement over turnover growth. The pre-exceptional profit from operations was £15.9m (2017: loss of £0.9m), representing a margin of 0.9% (2017: 0.0%). This represents a noteworthy improvement, given some continuing costs from legacy projects, and the absorption of circa £8.0m of defects claims.  The loss from operations was £29.1m (2017: £88.8m), after the additional costs to complete the AWPR contract.

 

We have made good progress towards completion of AWPR.  The majority of the route is now complete with significant sections open to the public, and completion of the remaining bridge expected in late Autumn.  During the year, we reported a further exceptional charge of £45.0m, which reflected the additional share of costs taken on following the insolvency of Carillion, one of our two joint venture partners, and further cost rises in the second half of the financial year, driven mainly by poor weather conditions.  The total additional charge to date is £123m, which has not increased beyond previous guidance, of which £120m has been classified as exceptional.  Our provisioning for the loss on this project reflects our current estimate of the final costs, and is reduced by an estimate of our share of significant claims against the client and others, which are yet to be agreed and concluded.  This inherent uncertainty will be resolved only when the project is complete and the claims finally settled.

 

The business made further progress with its other legacy contracts during the year with these contracts being materially finished on the ground by the date of this report.  We continue to work to finalise the commercial accounts on these contracts.

 

In our infrastructure business, we are in a process to recover entitlement to work in progress of circa £30m in respect of three contracts for a single client. The costs associated with these projects have been significantly impacted by client driven scope changes and, based on two favourable adjudications, we remain confident of recovery of our entitlement, although delays in resolving this have reduced our anticipated cash in the year.

 

We have continued to enhance our project approval process, ensuring we only take on projects with appropriate levels of risk and anticipated profit.  The portfolio of newer work is performing well and delivering appropriate margins that reflect the associated risk profile.

 

Both the Building and Infrastructure divisions were successful at winning new work during the year and were appointed to contracts and frameworks worth over £1.05bn and £548m respectively.

 

Our order book is £3.3bn (2017: £3.6bn). Of this, 75% is in the public sector (2017: 74%), 9% is in regulated industries (2017: 13%) and 16% is in the private sector (2017: 13%). The business currently has secured 89% of planned revenue for the 2019 financial year (2017: 89%). Generating a high level of work through frameworks is an important part of our business model and they provide 77% of our order book (2017: 74%).

 

 

2018

2017

Revenue (£m)

1,038.0

1,014.1

Profit/(loss) from operations (£m)

11.6

(12.0)

Operating profit margin (%)

1.1

(1.2)

Order book (£m)

2,423

2,579

 

Significant wins for Building included being appointed to all six lots it bid for on the Education and Skills Funding Agency's new school-building framework, worth up to £3.1bn in total; a place on the £750m North Eastern Universities Purchasing Consortium major capital projects framework; and being appointed primary contractor on the £250m University of Strathclyde major building works framework.

 

Infrastructure

 

Pre-exceptional 2018

 

 

2018

Pre-exceptional

2017

 

 

2017

Revenue (£m)

649.4

649.4

555.2

512.8

Profit/(loss) from operations (£m)

4.3

(40.7)

11.1

(76.8)

Operating profit margin (%)

0.7

(6.2)

2.0

(15.0)

Order book (£m)

876

876

1,028

1,028

 

Major wins for Infrastructure included places on four lots of the £1bn YORCivil2 framework and the new Highways and Infrastructure Construction Works framework, worth a potential £200m in total, as well as a £67m Smart Motorways contract with Highways England.

 

 

2018

2017

Revenue (£m)

21.7

25.0

Profit from operations (£m)

6.8

2.4

Directors' valuation (£m)

32.6

31.3

 

PPP Investments reported revenue of £21.7m (2017: £25.0m), with a profit from operations of £6.8m (2017: £2.4m).

 

During the year, PPP Investments invested £10.9m in equity and disposed of investments that generated an aggregate profit on disposal of £5.5m, compared with a £2.6m profit on disposal in 2017. The directors' valuation of our PPP portfolio was £32.6m at 30 June 2018, compared with a value invested of £26.1m (2017 valuation: £31.3m, value invested: £24.3m).

 

In addition to making its own investments, PPP Investments generates work for our Building, Infrastructure and facilities management businesses. In total, PPP investments added around £89m to the order books of our other divisions. Substantial projects included South Queensferry High School, which was valued at around £50m.

 

In response to a slow market for public/private partnership projects, we have continued to progress development-style projects in sectors such as private rented, student accommodation and, in conjunction with the Infrastructure business, rail. We have a number of projects in the pipeline.

 

HEALTH, SAFETY AND ENVIRONMENT

 

Health and safety remains the Group's top priority and we are committed to achieving industry leading health, safety and environmental standards. Our systems are fully accredited to both BS 18001 and ISO 14001 and are subject to regular third party independent audits.

 

Regrettably the company was found guilty regarding a health and safety incident at the Tarporley Wastewater Treatment Works in 2015.  As a result, we have reviewed our already rigorous health and safety procedures and continue to stress the importance of following them.  Our behavioural safety programme 'Challenging Beliefs, Affecting Behaviour' has now trained more than 1,850 behavioural coaches across the Group and its supply chain trained in its principles. Visible leadership is important to maintain high standards and we doubled safety director tours from six last year to 12, completing 1,898 tours in the year.

 

This year, we have reinforced our approach to employee wellbeing, a key area for our industry, with the launch of our 'Be Well' programme which focuses on the physical and mental wellbeing of our people. As part of Be Well, we have signed up as a business champion of Mates in Mind, the mental health charity for the construction industry. Early successes include awards for 'Most Inspiring Mental Health Initiative' at the Inspire Awards and 'Best Mental Health Strategy' at the Employee Benefit Awards.

 

OPERATING SUSTAINABLY

 

Underpinning our strategy to 2021 is our recognition that longer-term value creation must balance financial performance with the Group's obligations to all stakeholders, including clients, customers, employees and the communities and environment in which we operate.

 

Our Sustainability and Social Value Policy guides our overall approach and is owned by the Executive Board, which executes its responsibility through a newly-formed SHELT (Safety, Health & Environment Leadership Team), comprising Health, Safety and Sustainability heads from our three businesses. SHELT is chaired by the SHELT director who ensures Group mandates, policies and standards, while supporting the businesses to tailor their approach to their needs.

 

Our key areas of focus are Health & Safety, Environment & Climate Change, Our People, Communities, Customers and Supply Chain. We remain committed to the principles of the FTSE4Good index, as demonstrated by our reaccreditation to the index.  We have also been externally evaluated as fourth out of the top 25 housebuilders in the NextGeneration sustainability benchmark and achieved Gold status in the Supply Chain Sustainability School.

 

We recognise the important role our developments play in shaping communities, and the planning obligations which we contribute also shape and help to develop these communities. In the last financial year, we have committed over £19m through planning obligations, which have been used to fund community infrastructure projects, covering critical areas such as public transport, homes and vital community facilities.

 

We are committed to a policy of effectively managing our environmental performance to minimise the impact of our business processes on the natural environment and the community at large. Our environmental impacts are identified, managed and mitigated from project to business level through our ISO 14001 certified management system.

 

Our people play a critical role in achieving our vision, strategy and objectives. We therefore ensure we select and retain the right talent that helps to drive our business forward. A key area is understanding our values and the behaviours we expect, which we reinforce through our Code of Conduct. We aim to be a people-orientated, progressive company and this year, launched an agile working initiative which improves our ability to attract people from more diverse talent pools and create a more inclusive culture.

 

Delivering high-quality homes, buildings and infrastructure coupled with good customer service is fundamental to how we operate in each of our businesses and manage our approach through a number of quality assurance systems. We strive for repeat work with the right clients, and high levels of customer satisfaction.

 

BOARD

 

On 1 September 2017 Peter Ventress, Chairman, became Chair of the Nomination Committee.

 

Jeremy Townsend joined the Board as a Non-executive Director on 1 September 2017 and took over Chair of the Audit Committee on Andrew Jenner stepping down on 10 November 2017.  Ishbel Macpherson also stepped down as a Non-executive Director on 10 November with Terry Miller becoming interim Chair of the Remuneration Committee from that date.

 

Marisa Cassoni joined as a Non-executive Director on 1 September 2018 and it is intended that Marisa will become Chair of the Remuneration Committee following publication of the Group's Half Year results in February 2019.

 

Consolidated income statement

 

for the year ended 30 June 2018

 

Notes

2018

2017

Pre-exceptional items
£m

Exceptional items
£m
(note 3)

Total
£m

Pre-exceptional items
£m

Exceptional items
£m
(note 3)

Total
£m

Group revenue

2

2,931.6

-

2,931.6

2,704.5

(42.4)

2,662.1

 

 

 

 

 

 

 

 

Cost of sales

 

(2,601.4)

(45.0)

(2,646.4)

(2,407.0)

(45.5)

(2,452.5)

Gross profit

 

330.2

(45.0)

285.2

297.5

(87.9)

209.6

 

 

 

 

 

 

 

 

Administrative expenses

 

(154.6)

-

(154.6)

(152.1)

(1.0)

(153.1)

Profit on disposal of property, plant and equipment

 

-

-

-

0.1

-

0.1

Share of post tax profits from joint ventures

 

20.6

-

20.6

14.0

-

14.0

Profit/(loss) before finance costs

 

196.2

(45.0)

151.2

159.5

(88.9)

70.6

 

 

 

 

 

 

 

 

Profit/(loss) from operations

2

213.1

(45.0)

168.1

171.2

(88.9)

82.3

Share of joint ventures' interest and tax

 

(13.4)

-

(13.4)

(8.5)

-

(8.5)

Amortisation of intangibles

 

(3.5)

-

(3.5)

(3.2)

-

(3.2)

Profit/(loss) before finance costs

 

196.2

(45.0)

151.2

159.5

(88.9)

70.6

 

 

 

 

 

 

 

 

Finance income

4

10.2

-

10.2

5.3

-

5.3

Finance costs

4

(17.7)

-

(17.7)

(17.2)

-

(17.2)

 

 

 

 

 

 

 

 

Profit/(loss) before income tax

 

188.7

(45.0)

143.7

147.6

(88.9)

58.7

Income tax expense

5

(34.0)

8.6

(25.4)

(27.4)

17.4

(10.0)

Profit/(loss) for the year

 

154.7

(36.4)

118.3

120.2

(71.5)

48.7

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share (2017 restated - note 7)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

- Basic

7

158.4p

 

121.1p

131.1p

 

53.1p

- Diluted

7

157.8p

 

120.6p

130.5p

 

52.9p

 

Consolidated statement of comprehensive income

for the year ended 30 June 2018

 

Notes

2018
£m

2017
£m

Profit for the year

 

118.3

48.7

 

 

 

 

Other comprehensive income/(expense):

 

 

 

 

 

 

 

Items that will not be reclassified to profit or loss

 

 

 

Actuarial gains/(losses) recognised on retirement benefit obligations

 

4.0

(5.0)

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

5

(1.9)

(0.2)

Current tax through equity

5

1.2

2.8

Total items that will not be reclassified to profit or loss

 

3.3

(2.4)

 

 

 

 

Items that may be reclassified subsequently to profit or loss

 

 

 

Movement in fair value of cash flow hedges:

 

 

 

- Movement arising during the financial year

 

1.9

3.2

- Reclassification adjustments for amounts included in profit or loss

 

(0.8)

(0.7)

Deferred tax on items recognised in equity that may be reclassified

5

(0.3)

(0.4)

Total items that may be reclassified subsequently to profit or loss

 

0.8

2.1

 

 

 

 

Other comprehensive income/(expense) for the year net of tax

 

4.1

(0.3)

 

 

 

 

Total comprehensive income for the year

 

122.4

48.4

 

Balance sheet

at 30 June 2018

 

 

2018
£m

2017
£m

Assets

 

 

 

Non-current assets

 

 

 

Intangible assets

 

15.3

18.8

Goodwill

8

159.6

160.3

Property, plant and equipment

 

16.7

16.2

Investments in joint ventures

 

49.9

31.4

PPP and other investments

 

26.8

25.0

Trade and other receivables

10

148.9

111.7

Retirement benefit asset

15

7.0

-

Deferred income tax assets

 

-

2.0

Total non-current assets

 

424.2

365.4

Current assets

 

 

 

Inventories

 

0.2

0.6

Developments

9

724.9

722.6

Trade and other receivables

10

838.6

809.5

Cash and cash equivalents

11

912.4

1,145.9

Total current assets

 

2,476.1

2,678.6

Total assets

 

2,900.3

3,044.0

Liabilities

 

 

 

Current liabilities

 

 

 

Financial liabilities

 

 

 

- Borrowings

11

(617.1)

(942.5)

Trade and other payables

12

(1,174.6)

(1,220.1)

Current income tax liabilities

 

(10.0)

(6.1)

Provisions for other liabilities and charges

 

(0.3)

(0.3)

Total current liabilities

 

(1,802.0)

(2,169.0)

Net current assets

 

674.1

509.6

Non-current liabilities

 

 

 

Financial liabilities

 

 

 

- Borrowings

11

(197.1)

(196.2)

-Derivative financial liabilities

 

(0.9)

(2.0)

Retirement benefit obligations

15

-

(3.2)

Deferred income tax liabilities

 

(0.7)

-

Other non-current liabilities

13

(122.3)

(96.9)

Provisions for other liabilities and charges

 

(0.8)

(1.2)

Total non-current liabilities

 

(321.8)

(299.5)

Total liabilities

 

(2,123.8)

(2,468.5)

Net assets

 

776.5

575.5

 

Equity

 

 

 

Ordinary shares

 

55.5

41.4

Share premium

 

197.6

194.5

Other reserves

 

4.8

4.8

Retained earnings

 

518.6

334.8

Total shareholders' equity

 

776.5

575.5

 

Consolidated statement of changes in equity

for the year ended 30 June 2018

 

Notes

Ordinary shares
£m

Share premium
£m

Other
reserves
£m

Retained earnings
£m

Total shareholders' equity
£m

Consolidated statement

 

 

 

 

 

 

At 1 July 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

 

 

 

 

 

 

 

Profit for the year

 

-

-

-

118.3

118.3

Other comprehensive income

 

-

-

-

4.1

4.1

Total comprehensive income for the year

 

-

-

-

122.4

122.4

Transactions with owners:

 

 

 

 

 

 

Dividends

6

-

-

-

(75.9)

(75.9)

Share-based payments

 

-

-

-

2.8

2.8

Purchase of own shares

 

-

-

-

(1.5)

(1.5)

Issue of shares

 

14.1

3.1

-

136.0

153.2

 

 

 

 

 

 

 

At 30 June 2018

 

55.5

197.6

4.8

518.6

776.5

 

 

 

 

 

 

 

 

Statement of cash flows

for the year ended 30 June 2018

 

Notes

2018
£m

2017
£m

Cash flows from operating activities

 

 

 

Continuing operations

 

 

 

Pre-exceptional profit before finance costs

 

196.2

159.5

Exceptional items

3

(45.0)

(88.9)

Profit before finance costs

 

151.2

70.6

Adjustments for:

 

 

 

Depreciation and amortisation

 

7.1

6.6

Profit on sale of property, plant and equipment

 

-

(0.1)

Profit on sale of subsidiaries

 

(2.1)

(2.6)

Share-based payments

14

2.8

1.8

Share of post-tax profits from joint ventures

 

(20.6)

(14.0)

Movement on provisions

 

(0.4)

(0.4)

Other non-cash movements

 

0.6

0.3

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

 

138.6

62.2

Deficit funding payments to pension schemes

15

(6.8)

(6.4)

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

 

131.8

55.8

Decrease/(increase) in inventories

 

0.4

(0.5)

(Increase)/decrease in developments

 

(2.3)

107.3

(Increase) in trade and other receivables

 

(65.8)

(127.0)

(Decrease)/increase in trade and other payables

 

(12.1)

85.5

Net cash generated from/(used in) operations

 

52.0

121.1

Interest received

 

10.2

5.3

Interest paid

 

(16.2)

(15.3)

Income tax (paid)/received

 

(15.6)

(12.9)

 

 

 

 

Net cash generated from operating activities

 

30.4

98.2

Cash flows from investing activities

 

 

 

Dividends received from joint ventures

 

2.1

7.4

Proceeds from disposal of subsidiaries

 

2.1

2.6

Business combinations

 

(13.7)

(12.8)

(Debt) acquired with acquired subsidiary undertakings

 

-

(2.8)

Acquisition of property, plant and equipment

 

(4.6)

(5.1)

Proceeds from sale of property, plant and equipment

 

0.5

0.7

 

 

 

 

Net cash (used in)/generated from investing activities

 

(13.6)

(10.0)

Cash flows from financing activities

 

 

 

Net proceeds from issue of ordinary share capital

 

153.2

0.1

Purchase of own shares

 

(1.5)

(2.0)

(Decrease)/increase in borrowings

 

(0.9)

23.9

Dividends paid to Company shareholders

6

(75.9)

(72.8)

 

 

 

 

Net cash generated from/(used in) financing activities

 

74.9

(50.8)

 

 

 

 

Net increase in cash and cash equivalents

 

91.7

37.4

 

 

 

 

Cash and cash equivalents at 1 July

11

203.7

166.3

 

 

 

 

Cash and cash equivalents at 30 June

11

295.4

203.7

 

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 2017 which have not changed significantly. The financial information set out in this document does not constitute statutory accounts for the years ended 30 June 2017 or 30 June 2018 but is derived from the Annual Report and Financial Statements 2018. The Annual Report and Financial Statements for 2017 have been delivered to the Registrar of Companies and the Annual Report and Financial Statements for 2018 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.

Full financial statements that comply with IFRS are included in the Annual Report and Financial Statements 2018 which will be made available to shareholders in October 2018 and will be available at www.gallifordtry.co.uk.

IFRS 9 addresses the classification, measurement, impairment and derecognition of financial assets and liabilities, introducing new rules for hedge accounting and a new impairment model for financial assets. The standard requires the Group to make an election on whether gains and losses on equity instruments measured at fair value should be recognised in the income statement or other comprehensive income, with no recycling.

On adoption of the standard, the Group expects to account for its financial assets to be classified as at 'amortised cost', 'fair value through profit and loss', or 'fair value through other comprehensive income'. The Group has reviewed its existing classification and confirmed that most financial assets will continued to be recognised at amortised cost. Equity investments, previously classified as available for sale will be classified as financial assets at fair value through other comprehensive income, with no recycling of gains and losses. The new impairment model will be applied to trade receivables and other financial assets and the Group expects the impact to be immaterial.

IFRS15 'Revenue from contracts with customers' replaces IAS 18 'Revenue' and IAS 11 'Construction contracts' and sets out new revenue recognition criteria, using a five-step model to apportion revenue to individual performance obligations, within a contract. The new standard is based on the principal that revenue is recognised when control of a good or service transfers to a customer.

The Group has completed their assessment of the effects of applying the new standard on its financial statements. Currently, the Group recognises revenue at the fair value of the consideration received or receivable on the legal completion of a residential property while Registered Providers sales are recognised over time; both of these policies are consistent with the new standard and are therefore not expected to change. Revenues associated with the sale of part exchange properties are currently included as a reduction in cost of sales. Applying IFRS15 will result in presentational changes with an increase to both revenue and cost of sales, and hence a decrease in the reported operating margin, although there will be no impact on the reported profit from operations or the Group's cashflows.

Additionally, there is a potential impact on adopting IFRS 15 from unbundling contracts due to the Group's assessment of its performance obligation to be delivered to its customers. However, the Group's assessment concluded that this impact was immaterial and therefore no overall transition adjustment to equity as at 1 July 2018 will be required.

Were IFRS 15 applied to the year ended 30 June 2018, both revenue and cost of sales would have increased by £83.5m and reported margin from operations of the Linden Homes segment would have decreased from 19.5% to 17.9%. There would have been no impact on the retained earnings as at 30 June 2018. The Group does not expect to have any impact IFRS 15 on current assets and current liabilities as at 30 June 2018.  The Group does not expect that IFRS 15 adoption would have a material impact on its Construction and Investments businesses.

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, one-off 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 2018

 

 

 

 

 

 

 

 

Pre-exceptional Group revenue and

 

 

 

 

 

 

 

 

share of joint ventures' revenue

947.3

475.2

1,038.0

649.4

1,687.4

21.7

0.7

3,132.3

Exceptional items (see note 3)

-

-

-

-

-

-

-

-

Group revenue and share of joint

 

 

 

 

 

 

 

 

ventures' revenue

947.3

475.2

1,038.0

649.4

1,687.4

21.7

0.7

3,132.3

Share of joint ventures' revenue

(178.0)

(15.5)

(1.1)

-

(1.1)

(6.1)

-

(200.7)

Group revenue

769.3

459.7

1,036.9

649.4

1,686.3

15.6

0.7

2,931.6

Segment result:

 

 

 

 

 

 

 

 

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

152.1

22.3

11.4

4.3

15.7

6.6

(17.6)

179.1

Share of joint ventures' profit

32.3

1.3

0.2

-

0.2

0.2

-

34.0

Pre-exceptional profit/(loss) from operations*

184.4

23.6

11.6

4.3

15.9

6.8

(17.6)

213.1

Exceptional items (see note 3)

-

-

-

(45.0)

(45.0)

-

-

(45.0)

Share of joint ventures' interest and tax

(13.1)

(0.1)

-

-

-

(0.2)

-

(13.4)

Profit/(loss) before finance costs,

 

 

 

 

 

 

 

 

amortisation and taxation

171.3

23.5

11.6

(40.7)

(29.1)

6.6

(17.6)

154.7

Finance income

7.4

1.8

-

-

-

2.1

(1.1)

10.2

Finance (costs)

(41.6)

(5.5)

-

(5.4)

(5.4)

(1.6)

36.4

(17.7)

Profit/(loss) before amortisation and taxation

137.1

19.8

11.6

(46.1)

(34.5)

7.1

17.7

147.2

Amortisation of intangibles

-

(1.4)

(1.0)

-

(1.0)

-

(1.1)

(3.5)

Profit/(loss) before income tax

137.1

18.4

10.6

(46.1)

(35.5)

7.1

16.6

143.7

Income tax expense

 

 

 

 

 

 

 

(25.4)

Profit for the year

 

 

 

 

 

 

 

118.3

 

 

 

 

 

 

 

 

 

 

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

-

-

-

(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/(loss) before income tax

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

* 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 2018 this amounted to £93.6m (2017: £84.7m) of which £17.8m (2017: £28.0m) was in Building, £35.5m (2017: £33.3m) was in Infrastructure, £17.9m (2017: £nil) was in Partnerships & Regeneration and £22.3m (2017: £23.4m) 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 2018

 

 

 

 

 

 

 

 

 

Goodwill & intangible assets

 

52.5

33.7

45.6

37.2

82.8

-

5.9

174.9

Working capital employed

 

623.1

64.7

(82.3)

119.0

36.7

26.0

(247.1)

503.4

Net (debt)/cash

11

(463.1)

(41.8)

101.0

(127.0)

(26.0)

(11.2)

640.3

98.2

Net assets

 

212.5

56.6

64.3

29.2

93.5

14.8

399.1

776.5

Total Group liabilities

 

 

 

 

 

 

 

 

(2,123.8)

Total Group assets

 

 

 

 

 

 

 

 

2,900.3

 

 

 

 

 

 

 

 

 

 

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

11

(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

 

 

 

 

 

 

 

 

(2,468.5)

Total Group assets

 

 

 

 

 

 

 

 

3,044.0

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

 

Charge on legacy contracts
£m

Total
£m

Year ended 30 June 2018

 

 

Group revenue and share of joint ventures' revenue

-

-

Share of joint ventures' revenue

-

-

Group revenue

-

-

 

 

 

Cost of sales

(45.0)

(45.0)

Administrative expenses

-

-

Loss from operations

(45.0)

(45.0)

 

During the year we reported a further exceptional charge in respect of the Aberdeen Western Peripheral Route (AWPR) joint venture of £45.0m which reflected the additional share of costs taken on following the insolvency of Carillion, one of our two joint venture partners, and further cost rises in the second half of the financial year, driven mainly by poor weather conditions. The charge increased both cash outflows in the year and the net debt balance in Construction at the year end. Our provisioning for the loss on this project reflects our current estimate of the final costs, and is reduced by a estimate of our share of significant claims against the client and others, which are yet to be agreed and concluded. This inherent uncertainty will be resolved only when the project is complete and the claims finally settled.

 

Charge on legacy contracts £m

Abortive merger costs £m

Total £m

Year ended 30 June 2017

 

 

 

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 the year ended 30 June 2017, the Group reported an exceptional charge of £87.9m, the majority of which was in respect of AWPR, and the balance arising from the Queensferry Crossing.  During the year ended 30 June 2018 there were some modest additional costs in respect of the Queensferry Crossing.

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 the period, £1.0m of professional fees were incurred in respect of the proposal and these were treated as an exceptional item.

4 Net finance costs

 

2018
£m

2017
£m

Interest receivable on bank deposits

-

0.2

Interest receivable from joint ventures

10.1

4.9

Other

0.1

0.2

Finance income

10.2

5.3

 

 

 

Interest payable on borrowings

(17.3)

(16.4)

Unwind of discounted payables

(0.4)

(0.7)

Other

-

(0.1)

Finance costs

(17.7)

(17.2)

 

 

 

Net finance costs

(7.5)

(11.9)

5 Income tax expense

 

 

2018
£m

2017
£m

Analysis of expense in year

 

 

 

Current year's income tax

 

 

 

Current tax

 

25.3

12.6

Deferred tax

 

(0.1)

0.6

Adjustments in respect of prior years

 

 

 

Current tax

 

0.2

(2.8)

Deferred tax

 

-

(0.4)

Income tax expense

 

25.4

10.0

 

 

 

 

Tax on items recognised in other comprehensive income

 

 

 

Current tax (credit) for retirement benefit obligations

 

(1.3)

(1.2)

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

 

0.1

(0.5)

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

 

-

(1.1)

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

 

0.1

(0.1)

Deferred tax expense on derivative financial instruments

 

0.2

0.5

Deferred tax expense on retirement benefit obligations

 

1.9

0.2

Tax recognised in other comprehensive income

 

1.0

(2.2)

 

 

 

 

Total taxation

 

26.4

7.8

The standard rate of Corporation Tax in the UK changed from 20% to 19% with effect from 1 April 2017. Accordingly, the Group's blended profits for the financial year to 30 June 2018 are taxed at a standard rate of 19.0%; and for the period to 30 June 2017 were taxed at a blended standard rate of 19.75%.

The UK corporation tax rate is due to be reduced to 17% in April 2020. We have recognised deferred tax at 19% as it is likely that most assets and liabilities will have reversed within two years. Had the 17% rate been applied to those balances that may reverse post April 2020 then the effect on the deferred tax balances would not have been significant.

6 Dividends

The dividends per ordinary share for 2017 in the tables below have been restated by adjusting those previously reported by an adjusting factor of 0.11147 to reflect the bonus element of the shares issued under the rights issue which completed on 16 April 2018.

Group and Company

2018

 

2017

(Restated)

£m

pence per share

£m

pence per share

Previous year final

52.6

64.0

46.4

50.0

Current year interim

23.3

28.0

26.4

29.0

Dividend recognised in the year

75.9

92.0

72.8

79.0

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

 

2018

 

2017

(Restated)

£m

pence per share

£m

pence per share

Interim

23.3

28.0

26.4

29.0

Final

54.4

49.0

53.0

57.0

Dividend relating to the year

77.7

77.0

79.4

86.0

The directors are proposing a final dividend in respect of the financial year ended 30 June 2018 of 49.0 pence per share, bringing the total dividend in respect of 2018 to 77.0 pence per share (2017 restated: 86.0p). The final dividend will absorb approximately £54.4m of equity. Subject to shareholder approval at the AGM to be held on 9 November 2018, the dividend will be paid on 5 December 2018 to shareholders who are on the register of members on 9 November 2018.

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.

The weighted average number of shares used for 2017 in the calculation of earnings per share information shown in the table below has been restated by adjusting those previously reported by an adjusting factor of 0.11147 to reflect the bonus element in the shares issued under the rights issue which completed on 16 April 2018.

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 year. 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.

 

2018

2017 (Restated)

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

 

 

 

 

 

 

Earnings attributable to ordinary shareholders
pre-exceptional items

154.7

97,695,511

158.4

120.2

91,656,795

131.1

 

 

 

 

 

 

 

Basic EPS

 

 

 

 

 

 

Earnings attributable to ordinary shareholders
post-exceptional items

118.3

97,695,511

121.1

48.7

91,656,795

53.1

 

 

 

 

 

 

 

Effect of dilutive securities:

 

 

 

 

 

 

Options

 

 378,183

 

 

 430,141

 

 

 

 

 

 

 

 

Diluted EPS - pre-exceptional

154.7

98,073,694

157.8

120.2

92,086,936

130.5

Diluted EPS

118.3

98,073,694

120.6

48.7

92,086,936

52.9

8 Goodwill

 

£m

Cost

 

At 1 July 2016

136.2

Additions in year to 30 June 2017

24.8

At 30 June 2017

161.0

Adjustment in respect of acquisition completed in 2017

(0.7)

At 30 June 2018

160.3

 

 

Aggregate impairment at 1 July 2016, 1 July 2017 and 30 June 2018

(0.7)

 

 

Net book amount

 

At 30 June 2018

159.6

 

 

At 30 June 2017

160.3

At 30 June 2016

135.5

The change in goodwill in the year to 30 June 2018 arose from the finalisation of the acquisition accounting in respect of the acquisition of Drew Smith completed in May 2017.

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

 

2018
£m

2017
£m

Linden Homes

52.5

52.5

Partnerships & Regeneration

29.9

30.6

Building

40.0

40.0

Infrastructure

37.2

37.2

 

159.6

160.3

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 Developments

 

2018
£m

 2017
£m

Land

465.8

456.6

Work in progress

259.1

266.0

 

724.9

722.6

10 Trade and other receivables

 

2018
£m

2017
£m

Amounts falling due within one year:

 

 

Trade receivables

198.7

214.1

Less: Provision for impairment of receivables

(0.1)

(0.3)

Trade receivables - net

198.6

213.8

Amounts recoverable on construction contracts

349.7

274.0

Amounts owed by subsidiary undertakings

-

-

Amounts due from joint ventures

166.3

141.7

Other receivables

13.7

27.5

Prepayments and accrued income

110.3

152.5

 

838.6

809.5

 

 

2018
£m

2017
£m

Amounts falling due in more than one year:

 

 

Amounts due from joint ventures

144.9

106.9

Other receivables

4.0

4.8

 

148.9

111.7

11 Cash and cash equivalents

 

2018
£m

2017
£m

Net cash/(debt)

 

 

Cash and cash equivalents excluding bank overdrafts

912.4

1,145.9

Current borrowings - bank overdrafts

(617.0)

(942.2)

Cash and cash equivalents per the statements of cash flows

295.4

203.7

 

 

 

Current borrowings - obligations under finance leases and hire purchase contracts

(0.1)

(0.3)

Non-current borrowings

(197.1)

(196.2)

 

 

 

Net cash

98.2

7.2

12 Trade and other payables

 

2018
£m

2017
£m

Payments received on account on construction contracts

83.6

109.4

Trade payables

433.8

375.0

Development land payables

65.6

98.2

Amounts due to subsidiary undertakings

-

-

Amounts due to joint ventures

18.0

31.8

Other taxation and social security payable

13.9

18.3

Other payables

25.4

11.4

Accruals and deferred income

534.3

576.0

 

1,174.6

1,220.1

13 Other non-current liabilities

 

2018
£m

2017
£m

Development land payables

78.8

46.3

Other payables

-

0.1

Accruals and deferred income

43.5

50.5

 

122.3

96.9

14 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 £2.8m (2017: £1.8m), all of which related to equity-settled share-based payment transactions. After deferred tax, the total charge was £2.5m (2017: £1.8m).

15 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, as detailed below.

Pension costs for the schemes were as follows:

 

2018
£m

2017
£m

Defined benefit schemes - expense recognised in the income statement

0.6

0.3

Defined contribution schemes

18.7

16.3

Total included within employee benefit expenses

19.3

16.6

 

The principal actuarial assumptions used in the calculation of the disclosure items are as follows:

 

2018

2017

Rate of increase in pensionable salaries

n/a

n/a

Rate of increase in pensions in payment

3.00%

3.10%

Discount rate

2.70%

2.65%

Retail price inflation

3.15%

3.25%

Consumer price inflation

2.15%

2.25%

 

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:

 

2018
£m

2017
£m

Fair value of plan assets

235.6

242.9

Present value of defined benefit obligations

(228.6)

(246.1)

 

 

 

Surplus/(deficit) in scheme recognised as non-current asset/(liability)

7.0

(3.2)

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 £381.3m (2017: £353.3m).

17 Post balance sheet events

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


This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
 
END
 
 
FR LBMFTMBMBBIP
Close


London Stock Exchange plc is not responsible for and does not check content on this Website. Website users are responsible for checking content. Any news item (including any prospectus) which is addressed solely to the persons and countries specified therein should not be relied upon other than by such persons and/or outside the specified countries. Terms and conditions, including restrictions on use and distribution apply.

 


Final Results - RNS