REG - Galliford Try PLC - Final Results <Origin Href="QuoteRef">GFRD.L</Origin> - Part 2
13/09/2017 07:06
- Part 2: For the preceding part double click ID:nRSM5627Qa
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 Partnerships & Regeneration Construction PPP Investments Central Total
Homes £m £m £m £m
£m
Building Infrastructure Total
£m £m £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 Abortive merger costs Total
£m £m £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 2016
£m £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 2016
£m £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 Weighted Per share Earnings Weighted Per share
£m average amount £m average amount
number of pence number of pence
shares shares
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 2016
£m £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 2016
£m £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 2016
£m £m
Land 456.6 538.7
Work in progress 266.0 282.1
722.6 820.8
11 Trade and other receivables
2017 2016
£m £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 2016
£m £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 2016
£m £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 2016
£m £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 2016
£m £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 2016
£m £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.
This information is provided by RNS
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