2nd Mar 2006 07:22
Galliford Try PLC02 March 2006 Galliford Try plc ("Galliford Try" or "the Company") Proposed Acquisition of the Morrison Construction Division and Proposed Placing and Open Offer of 46,834,753 New Ordinary Shares at 107 pence per share Summary - Galliford Try has entered into a conditional agreement to acquire the Morrison Construction Division for approximately £42.0 million in cash on a debt-free basis from AWG plc ("AWG"). - The Morrison Construction Division comprises: • Morrison Construction, a UK based construction business delivering building and infrastructure projects in both the public and private sectors with an annual turnover of approximately £330 million; • the business of Morrison Project Investments Limited comprising 15 employees based in Edinburgh undertaking PFI investments; and • two early stage PFI investments. - Galliford Try also announces that it proposes to raise £50.1 million by way of a Placing and Open Offer of 46,834,753 New Ordinary Shares at an offer price of 107 pence. - The Placing and Open Offer has been fully underwritten by KBC Peel Hunt. - Morrison Construction will form part of Galliford Try's enlarged construction division. The two businesses have an excellent strategic fit - they have complementary skills and market strengths but operate in different geographical regions and for different clients. - The Directors believe the Acquisition of the Morrison Construction Division will create additional value for shareholders through: • the creation of a UK construction business with the critical mass, financial strength and depth of expertise to become a dominant force in the market for larger, higher margin projects, and with significant penetration in the public and water sectors; • the realisation of operating cost savings from the enlarged construction division of approximately £2 million per annum* in the year ending 30 June 2007; • the creation of a number of revenue synergies through the sharing of best practice and the recruitment and supply of operational personnel; • the provision of additional opportunities for participating in PFI projects through the acquisition of the successful Morrison PFI Business based in Edinburgh; and • enhanced earnings per share** in the medium term. - The Acquisition is conditional on, inter alia, Shareholder approval at an Extraordinary General Meeting. Commenting on the Acquisition, Greg Fitzgerald, Chief Executive of GallifordTry, said today: "We are delighted to announce the acquisition of the Morrison Constructionbusiness which we believe will create additional value for Shareholders bybringing together two construction businesses with an excellent strategic fit.The businesses have complementary skills and market strengths, particularly ininfrastructure projects and public sector projects, and their combination willcreate a UK construction business of significant scale and market presence. Thisis the second major acquisition we have announced this year and we are thereforetaking this opportunity to raise additional equity through the Placing and OpenOffer in order to provide a suitable capital structure for our enlargedoperations." This summary should be read in conjunction with the full text of the followingannouncement. The Appendix contains the definitions of certain terms used in this summary andthe full announcement. Enquiries: Galliford Try plcGreg Fitzgerald, Chief Executive +44 (0) 18 9585 5220Frank Nelson, Finance Director +44 (0) 18 9585 5221 PricewaterhouseCoopers LLP (Financial Adviser)Simon Boadle +44 (0) 20 7583 5000Gerry Young +44 (0) 20 7583 5000Jonathan Raggett +44 (0) 20 7583 5000 KBC Peel Hunt (Broker and Underwriter)Simon Hayes +44 (0) 20 7418 8900Julian Blunt +44 (0) 20 7418 8900 Bell Pottinger Corporate & Financial (PR adviser)David Rydell +44 (0) 20 7861 3232Geoff Callow +44 (0) 20 7861 3232 A presentation for sell-side analysts will be held at 10.30am this morning atthe offices of Bell Pottinger Corporate & Financial, 6th Floor, Holborn Gate,330 High Holborn, London WC1V 7QD. Please call Kate Ruck-Keane on 020 7861 3888to confirm attendance. PricewaterhouseCoopers LLP, which is authorised and regulated in the UnitedKingdom by the Financial Services Authority for designated investment business,is acting exclusively for Galliford Try plc and for no one else in relation tothe Acquisition and the Placing and Open Offer and will not be responsible toanyone other than Galliford Try plc for providing the protections afforded toclients of PricewaterhouseCoopers LLP or for giving advice in relation to theAcquisition, the Placing and Open Offer, or any other matter referred to in thisannouncement. KBC Peel Hunt Ltd, which is regulated in the United Kingdom by the FinancialServices Authority, is acting as corporate broker to Galliford Try plc inrelation to the Placing and is not acting for any other person and will not beresponsible to any other person for providing the protections afforded tocustomers of KBC Peel Hunt nor for advising them on the contents of thisannouncement or any other matter in relation to the Placing and Open Offer. * The expected operational cost savings have been calculated on the basis of theexisting cost and operating structures of the Galliford Try Group and theMorrison Construction Division. These statements of estimated cost savings andone-off costs for achieving them relate to future actions and circumstanceswhich, by their nature, involve risks, uncertainties and other factors. Becauseof this, the cost savings referred to may not be achieved, or those achievedcould be materially different from those estimated. This statement is notintended to be a profit forecast and should not be interpreted to mean that theearnings per share in the year ending 30 June 2007 or in any subsequentfinancial period, would necessarily match or be greater than those for therelevant preceding financial period. ** The statement that the Acquisition is expected to be earnings enhancing forGalliford Try in the medium term relates to future actions and circumstances,which, by their nature, involve risks, uncertainties and other factors. Thesestatements do not constitute a profit forecast and should not be interpreted tomean that earnings for any future financial period would necessarily match or begreater than those for any preceding financial period. Earnings in this contextrepresent net after tax earnings on an IFRS basis, excluding the amortisation ofintangible assets and any exceptional items. 2 March 2006 Galliford Try plc ("Galliford Try" or "the Company") Proposed Acquisition of the Morrison Construction Division and Proposed Placing and Open Offer of 46,834,753 New Ordinary Shares at 107 pence per share 1. Introduction Galliford Try has today entered into a conditional agreement to acquire theMorrison Construction Division from AWG for a cash consideration of £42.0million on a debt-free basis, subject, inter alia, to Shareholder approval. TheMorrison Construction Division comprises Morrison Construction, a UK basedconstruction business delivering building and infrastructure projects in boththe public and private sectors, the Morrison PFI Business, and two early stagePFI investments: the Defence Housing Executive (DHE) Portsmouth project and theHighland Schools project, together comprising the Morrison PFI Investments. It was also announced that in order, inter alia, to finance the Acquisition theCompany proposes to raise £50.1 million by way of: (i) an Open Offer of9,451,576 New Ordinary Shares (representing 3.5 per cent. of the Enlarged ShareCapital) to raise £10.1 million; and (ii) a placing of 37,383,177 New OrdinaryShares (representing 13.7 per cent. of the Enlarged Share Capital) to raise£40.0 million. Qualifying Shareholders can apply for Open Offer Shares on the basis of 1 OpenOffer Share(s) for every 24 Existing Ordinary Shares held. The Placing Sharesand the Open Offer Shares have been placed conditionally by KBC Peel Hunt withinstitutional and other investors, the Open Offer Shares being subject to recallto satisfy valid applications by Qualifying Shareholders under the Open Offer.The Placing and Open Offer have been underwritten fully by KBC Peel Hunt. The Morrison Construction Division will form part of Galliford Try's enlargedconstruction division. The Board believes the Acquisition will create additionalvalue for Shareholders by bringing together two construction businesses with anexcellent strategic fit. The two businesses have complementary skills and marketstrengths, particularly in infrastructure projects and public sector projects,and their combination will create a UK construction business of significantscale and market presence. Due to the size of the Acquisition, it is conditional upon the approval ofShareholders at an Extraordinary General Meeting. Shareholder approval is alsobeing sought to implement the Placing and Open Offer. Full details of theAcquisition and the Placing and Open Offer will be set out in the Prospectus tobe published and sent to Shareholders shortly. 2. Information on the Morrison Construction Division Galliford Try is acquiring Morrison Construction Services Limited and MorrisonHighway Maintenance Limited (together with certain of their subsidiaries,Morrison Construction) plus the business of Morrison Project Investments Limited(the holding company for AWG's investments in PFI projects) and two of its earlystage PFI investments (respectively the Morrison PFI Business and the MorrisonPFI Investments). The aggregate purchase consideration of £42.0 million on adebt-free basis comprises £38.0 million for Morrison Construction, £0.5 millionfor the Morrison PFI Business and approximately £3.5 million for the MorrisonPFI Investments. The Morrison Construction Division forms part of the largerMorrison division of AWG. Morrison was purchased by AWG in September 2000. Morrison Construction Founded in 1948, Morrison Construction is one of the UK's leading building andinfrastructure contractors. Morrison Construction has approximately 1,500 employees based in eight principaloffices throughout the UK and provides services in the areas of building andinfrastructure (including highways maintenance), to both public and privatesector clients. Morrison Construction operates through three business streams: Building,Infrastructure and Water Frameworks. Building operates through six regionaloperating units throughout the UK supporting framework contracts in the prisonservice and health sector, and in connection with PFI projects. Water Frameworksdeliver capital projects in the water industry. Infrastructure is principallyfocused in the Highways sector (capital works and maintenance), renewable energyand flood alleviations. Key clients of Morrison Construction include British Waterways, the HighwaysAgency, HM Prison Service, the Department of Environment, health and educationauthorities, the Scottish Executive, Thames Water, Welsh Water, Yorkshire Waterand National Grid. Summary financial information relating to Morrison Construction for the threeyears ended 31 March 2005 is set out in the table below: Year ended Year ended Year ended 31 March 31 March 31 March 2003 2004 2005 £'000 £'000 £'000 UK GAAP UK GAAP UK GAAPTurnover oncontinuingoperations(includingassociates andjointventures) 393,053 341,617 332,633Profit/(loss)on ordinaryoperationsbeforeinterest, taxandexceptionalitems(continuingoperations) 2,290 (12,276) 1,257Operatingprofit margin 0.6% (3.6%) 0.4%Gross assets 148,208 149,127 125,639 Following a strategic review of the business in 2004, Morrison Construction hasprogressively changed shape and has been refocused on lower risk constructionopportunities including framework agreements and work procured through long-termrelationships with key clients and has moved away from higher risk large scaleprojects, including shopping centres and residential development work performedfor AWG Property Developments Limited which resulted in a significant loss inthe year ending 31 March 2004. Consequently, Morrison Construction has experienced a decrease in turnover overthe period with the business moving back into profitability in the year ending31 March 2005. Further financial information relating to Morrison Construction will be set outin the Prospectus to be published and sent to Shareholders shortly. The Morrison PFI Business Morrison Projects Investments Limited ("MPIL") was established in 1994 to securework for Morrison Construction on PFI projects. MPIL is based in Edinburgh andhas 15 employees. It focuses on bidding for PFI projects in the education,accommodation, infrastructure and healthcare sectors. Following success in bidding for a project, MPIL typically holds up to a 50 percent. equity interest in the special purpose vehicle established for the projectand generally realises value through disposing of its investment following thecompletion of the construction phase of the project. MPIL has demonstrated a high bid conversion ratio (39 per cent.) since Morrisonplc started bidding for PFI projects and MPIL has generated a return of overfour times its aggregate initial investment on investment disposals. Recentdivestments by MPIL include stakes in the Tay Wastewater, A69, New EdinburghRoyal Infirmary and Defence Housing Executive (DHE) Bristol projects. Galliford Try is purchasing the Morrison PFI Business from MPIL for aconsideration of £0.5 million. The Morrison PFI Business comprises principallythe 15 MPIL employees and the lease on the Edinburgh offices occupied by MPIL. The Morrison PFI Investments Galliford Try is purchasing two early-stage PFI investments from MPIL for aconsideration of approximately £3.5 million: The DHE Portsmouth project will provide married quarters for officers and otherranks of the Ministry of Defence near HM Naval Base in Portsmouth. The projectreached financial close on 28 October 2005 and currently construction work isunderway to provide 148 units of serviced accommodation. The investment in thisproject is a 50 per cent. equity interest in the special purpose vehicle set upfor the project. The Highland Schools project incorporates the design, construction and financingof eleven schools for the Highland Council. The buildings, which consist of fournew secondary schools, six new primary schools and one new special school, willalso be fully serviced for 30 years. The project is at the final stages ofpreferred bidder negotiations and the investment proposed to be made atfinancial close will represent a 50 per cent. equity interest in the specialpurpose vehicle set up for the project. 3. Background to and reasons for the Acquisition Galliford Try operates through two divisions: construction and housebuilding.The Morrison Construction Division will form part of Galliford Try's enlargedconstruction division. Galliford Try's construction division has a track record of profitable growthsince the division was restructured in 2003. Growth in the construction divisionover the past three years has been combined with improving operating profitmargins. As announced in Galliford Try's unaudited interim results for the sixmonths ended 31 December 2005, the construction division reported an operatingprofit margin of 2.0 per cent in that period. In December 2005 the Companyreached financial close on the £192 million contract for the UK's largesteducation PFI scheme for Northamptonshire County Council, contributing to arecord construction order book of £1.1 billion as at 31 December 2005 (source:unaudited management accounts). Galliford Try's strategy for its construction division is to focus on specifickey areas of expertise, particularly in infrastructure (water and rail), publicsector projects (affordable housing, health and education), commercial buildingand telecommunications, and to invest in PFI projects with the objective ofsecuring negotiated work for the construction division. The strategy is to growthe division organically, at a rate that does not compromise margin, and byselective acquisition. Morrison Construction has been a strategic acquisition target for Galliford Tryfor nearly two years. The Company identified the business as having a uniquelycomplementary fit with Galliford Try's construction division. The businessoperates principally in the same markets - infrastructure and public projects -but in different geographical regions and for different clients. Both GallifordTry's construction division and Morrison Construction secure a considerableproportion of their turnover from public and regulated markets and have forgedlong-term relationships with water utilities clients for which work is performedunder lower-risk framework agreements. Galliford Try believes that the Acquisition will create a UK constructionbusiness with the critical mass, financial strength and depth of expertise tobecome a dominant force in the market for larger, higher margin projects forwhich the technical and financial barriers to entry preclude smallercompetitors. Galliford Try's construction operations had a turnover, includingjoint ventures' turnover, of £538 million for the year ended 30 June 2005 and asset out in the unaudited interim results for the six months ended 31 December2005 had an order book of £1.1 billion at 31 December 2005. MorrisonConstruction had a turnover of £333 million for the year ended 31 March 2005 andhad an order book of £1.2 billion at 31 December 2005 (source: unauditedmanagement accounts). In addition to the expected benefits of the Acquisition referred to above, thereis the potential to generate significant synergy benefits. Galliford Try believes it can achieve an annual running rate of operating costsavings* in the enlarged construction division of approximately £2.0 million forthe year ending 30 June 2007, which will broadly equal the one-off costs ofdelivering those savings. Cost savings are expected to arise from therestructuring of regional offices, from improved supply chain management andfrom savings in support functions, insurances, information technology, propertyand other costs. Galliford Try also believes that the Acquisition will create a number ofcross-selling opportunities within the enlarged construction division andgenerate revenue synergies through the sharing of best practice and clientcontacts and the recruitment and supply of operational personnel. Following the Acquisition, the construction division's operations will be splitinto building and infrastructure: (i) building will focus on public sectorprojects and PFI projects and will be run by Andy Sturgess; (ii) infrastructurewill focus on civil engineering projects in the water, rail and road markets andwill be run by Ken Gillespie. Ken Gillespie is currently Managing Director ofMorrison Construction and has agreed to join the Galliford Try Board onCompletion. The new structure for Galliford Try's enlarged construction division willfacilitate the integration of Morrison Construction and produce flexible, marketfacing businesses which specialise in key markets. The Morrison PFI Business will form part of Galliford Try's PPP Investments.Frank Nelson will head this business unit. * The expected operational cost savings have been calculated on the basis of theexisting cost and operating structures of the Galliford Try Group and theMorrison Construction Division. These statements of estimated cost savings andone-off costs for achieving them relate to future actions and circumstanceswhich, by their nature, involve risks, uncertainties and other factors. Becauseof this, the cost savings referred to may not be achieved, or those achievedcould be materially different from those estimated. This statement is notintended to be a profit forecast and should not be interpreted to mean that theearnings per share in the year ending 30 June 2007 or in any subsequentfinancial period, would necessarily match or be greater than those for therelevant preceding financial period. 4. Principal terms of the Acquisition Sale and Purchase Agreement Under the terms of the Sale and Purchase Agreement, Galliford Try ConstructionLimited will purchase in cash the entire issued share capital of MorrisonConstruction Services Limited and Morrison Highway Maintenance Limited (togetherMorrison Construction) from AWG Group Limited ("AGL"). The purchase price payable under the Sale and Purchase Agreement for MorrisonConstruction will be: (i) £38.0 million; and(ii) a balancing payment reflecting any surplus of net currentassets at Completion above the average annual working capital balances of theMorrison Construction business ("Surplus Cash Adjustment")Galliford Try and AGL expect that the Surplus Cash Adjustment will be no greaterthan £15 million. Of the consideration payable, £33.5 million plus the Surplus Cash Adjustmentwill be payable in cash at Completion and £4.5 million will be deferred. Of thedeferred consideration, £2.5 million will become payable upon the recovery ofcertain work-in-progress balances due to Morrison Construction and £2.0 millionwill become payable upon financial close of the Highland Schools PFI project. Under the terms of the Sale and Purchase Agreement, Galliford Try Investmentshas agreed to purchase the Morrison PFI Business and the Morrison PFIInvestments from MPIL. The consideration payable for the Morrison PFI Business is £0.5 million. Thetransfer of the Morrison PFI Business is to be effected by a business transferof certain assets and liabilities of MPIL, comprising principally the transferof employees and the lease on the Edinburgh offices currently occupied by MPIL. The consideration payable for the Morrison PFI Investments is approximately £3.5million, comprising £0.75 million for the DHE Portsmouth project andapproximately £2.75 million for the Highland Schools project. The transfer ofMorrison PFI Investments will be effected by the transfer to Galliford Try PPPInvestments of the equity stakes held by MPIL in the special purpose PFIvehicles set up in respect of the DHE Portsmouth project and the HighlandSchools project. Such sale is subject to and conditional upon: (i) in respect ofHighland Schools, financial close, expected shortly; and (ii) the relevantpre-emption rights not being exercised or substitution rights being obtained;and (iii) the change of control consents under the relevant financing andproject agreements being obtained. Completion of the Sale and Purchase Agreement is conditional upon the approvalof Shareholders at the EGM, clearance by the Pensions Regulator of the pensionarrangements described in paragraph 9 below, the Placing Agreement becomingunconditional and Admission. The Sale and Purchase Agreement will automaticallyterminate if these conditions are not fulfilled on or before 30 April 2006. AGL has given certain warranties in favour of Galliford Try Construction thatare usual for a transaction of this nature, including warranties relating totitle to assets, accounts, trading and taxation. An indemnity against certaincontractual liabilities incurred by Morrison Construction prior to Completionand an indemnity against historic pension liabilities have also been granted byAGL in favour of Galliford Try Construction. Other agreements Galliford Try, AGL and MPIL have also entered into other agreements under whichGalliford Try has agreed to manage and dispose of certain PFI investments to beretained by MPIL and under which AGL has agreed to provide transitional servicesto Galliford Try in respect of, inter alia, IT and plant and vehicle hire. Further details of the Sale and Purchase Agreement and the other ancillaryagreements entered into in connection with the Acquisition will be set out inthe Prospectus to be published and sent to Shareholders shortly. 5. Reasons for the Placing and Open Offer On 15 February 2006, Galliford Try completed the purchase of Chartdale, aregional housebuilder operating throughout Lincolnshire, for £67 million incash, payable over a two year period. The Company increased its bank facilitiesby £40 million to meet the funding requirement of the Chartdale acquisition andof the Group's enlarged business. As the Company is now making anothersignificant acquisition it is taking the opportunity to raise additional equityto provide a suitable capital structure for its enlarged operations. The Placing and Open Offer are expected to raise approximately £50.1 million.The net proceeds of £47.3 million are being applied to: • provide additional equity funding to the Group following the acquisition of Chartdale; • fund the acquisition of the Morrison Construction Division; and • provide additional working capital for the Enlarged Group. Galliford Try believes that interest payable by the Galliford Try Group willcontinue to be no less than five times covered by operating profit (on an IFRSbasis) after taking into account the effect of the acquisitions and theassociated debt and equity fundraisings. 6. Information on the Placing and Open Offer The Company is proposing to raise approximately £47.3 million net of expenses byway of a pre-emptive offering, the Open Offer, and a non pre-emptive placing. Inorder to facilitate the introduction of new institutional investors capable ofsupporting the long-term development of the Company as shareholders in GallifordTry, the size of the placing has been set at 37,383,177 New Ordinary Shares,representing 16.5 per cent. of the Company's existing issued share capital. Under the terms of the Placing Agreement, KBC Peel Hunt has conditionally placedthe Placing Shares and the Open Offer Shares at the Offer Price of 107 pence pershare (representing a discount of 1.8 per cent. to the Company's share price of109p on 1 March 2006, the day before the announcement of the Acquisition). TheOpen Offer Shares are subject to clawback to satisfy valid applications fromQualifying Shareholders under the Open Offer. The Placing and the Open Offerhave been fully underwritten by KBC Peel Hunt. The Open Offer Shares The Open Offer Shares represent approximately 20 per cent. of the New OrdinaryShares. The Open Offer Shares have been conditionally placed by KBC Peel Huntwith institutional and other investors subject to clawback to satisfy validapplications from Qualifying Shareholders under the Open Offer. Qualifying Shareholders are being given the opportunity to subscribe under theOpen Offer for Open Offer Shares at the Offer Price payable in full onapplication and free of expenses, pro rata to their existing shareholdings, onthe following basis: 1 Open Offer Share for every 24 Existing Ordinary Shares held by them and registered in their names on the Record Date and so inproportion to any other number of Existing Ordinary Shares then held, roundeddown to the nearest whole number of Open Offer Shares. Qualifying Shareholders may apply for any whole number of Open Offer Shares.Excess applications will be satisfied only to the extent that correspondingapplications by other Qualifying Shareholders are not made or are made for lessthan their pro rata entitlements. If there is an oversubscription resulting fromexcess applications, allocations in respect of such excess applications will bescaled back and made pro rata to the number of excess Open Offer Shares appliedfor. Qualifying Shareholders should note that the Open Offer is not a rights issueand that Open Offer Shares not applied for under the Open Offer will not be soldin the market for the benefit of Qualifying Shareholders who do not apply underthe Open Offer. Open Offer Entitlements are not transferable unless to satisfy abona fide market claim and the Application Forms, not being documents of title,cannot be traded. Further details of the Open Offer and the terms and conditions on which it isbeing made, including the procedure for application and payment, are containedin the Prospectus to be published and sent to Shareholders shortly. The Placing Shares The Placing Shares, which represent approximately 80 per cent. of the NewOrdinary Shares, have been placed firm by KBC Peel Hunt at the Offer Price withinstitutional and other investors, conditional, inter alia, upon Admission. ThePlacing Shares will not be subject to clawback from Qualifying Shareholders. General The Placing Shares and the Open Offer Shares will, when issued and fully paid,rank pari passu in all respects with the Existing Ordinary Shares, save that thePlacing Shares and the Open Offer Shares will not be eligible for the interimdividend of 0.7p per Ordinary Share declared on 23 February 2006 in respect ofthe six month period ended 31 December 2005 payable to Shareholders on theregister at 17 March 2006. Applications will be made to the Financial Services Authority for the NewOrdinary Shares to be admitted to the Official List and to the London StockExchange for the New Ordinary Shares to be admitted to trading on the LondonStock Exchange's main market for listed securities. The Open Offer will not be made to certain Overseas Shareholders. The Placing and Open Offer are conditional, inter alia, upon the following: (i) the passing of the Resolutions;(ii) the Sale and Purchase Agreement becoming unconditional in allrespects (other than any condition relating to the Placing Agreement becomingunconditional) and having completed save for the transfer of the consideration;(iii) Admission becoming effective on or before 8.00 a.m. on 31 March2006 (or such later date and/or time as the Company and KBC Peel Hunt may agree,being no later than 3.00 p.m. on 30 April 2006; and(iv) the Placing Agreement having become unconditional in all otherrespects and not having been terminated in accordance with its terms prior toAdmission.Application will be made for the Open Offer Entitlements of Qualifying CRESTShareholders to be admitted to CREST. The Open Offer Entitlements will also beenabled for settlement in CREST. Applications through the CREST system will onlybe made in respect of the Qualifying CREST Shareholder originally entitled or bya person entitled by virtue of bona fide market claims. If the conditions of the Placing Agreement are not fulfilled or (where capableof waiver) waived on or before 8.00 a.m. on 31 March 2006 (or such later timeand date as the Company and KBC Peel Hunt may agree being not later than 3.00p.m. on 30 April 2006), the Placing and Open Offer will not become unconditionaland application monies will be returned to applicants, without interest, as soonas practicable thereafter. 7. Current trading and prospects Investors were provided with an update on current trading in the Company'sinterim results statement that was released on the London Stock Exchange'sRegulatory News Service on 23 February 2006. The Directors confirm that thetrading of the Group, as enlarged by the acquisition of Chartdale whichcompleted on 15 February 2006, continues to be in line with the Board'sexpectations for the year to 30 June 2006. Since April 2005, Morrison Construction has traded satisfactorily, continuing toreposition its business in lower risk, long-term framework contracts for keyclients. The absence of a substantial loss in one major project incurred in theyear ended 31 March 2005, combined with the continuing improving trend inunderlying trading, will have a beneficial impact on the operating profit marginof the business in the current year. The Directors are confident of the financial and trading prospects of theEnlarged Group due both to the encouraging state of the order book in GallifordTry's construction division and of sales in hand in the housebuilding division,as described in the Company's interim results statement, and also due to thebenefits that are expected to accrue as a result of the Acquisition as describedin paragraphs 3 and 8 of this announcement. 8. Financial effects of the Acquisition Galliford Try is purchasing Morrison Construction for £38.0 million on adebt-free basis which represents a multiple of 0.11 times historic turnover of£332.6 million for the business for the year ending 31 March 2005. The Board believes this represents a reasonable purchase price for MorrisonConstruction given the medium term potential to improve the level of operatingprofit margin currently being earned in the business. The Morrison PFI Business and the Morrison PFI Investments are being purchasedfor £0.5 million and approximately £3.5 million respectively. The Board believesthat the track record and experience of the Morrison PFI Business employees willdeliver a pipeline of profitable PFI projects, particularly in Scotland. TheBoard intends to realise value in excess of the purchase price from the MorrisonPFI Investments once the construction phase on these projects has beencompleted. The Board expects the Acquisition to enhance Galliford Try's earnings per share*in the medium-term. * The statement that the Acquisition is expected to be earnings enhancing forGalliford Try in the medium-term relates to future actions and circumstances,which, by their nature, involve risks, uncertainties and other factors. Thesestatements do not constitute a profit forecast and should not be interpreted tomean that earnings for any future financial period would necessarily match or begreater than those for any preceding financial period. Earnings in this contextrepresent net after tax earnings on an IFRS basis, excluding the amortisation ofintangible assets and any exceptional items. 9. Pensions Morrison Construction Services Limited is the principal employer of the MorrisonPension and Life Assurance Plan, a defined benefit pension scheme (the "MorrisonScheme"). Under the terms of the Sale and Purchase Agreement, AGL has agreed toreplace Morrison Construction Services Limited as the principal employer of theMorrison Scheme and to indemnify Galliford Try against any liability in respectof the Morrison Scheme prior to Completion. Therefore, liability for fundingpension entitlements accrued prior to Completion by current and past employeesof the Morrison Construction Division will remain with AGL. As the principal employer to the Morrison Scheme is being replaced, thesearrangements are subject to clearance by the Pensions Regulator. An applicationhas been made seeking clearance for these arrangements by AGL, MorrisonConstruction and their directors. Clearance from the Pensions Regulator isexpected to be received prior to the EGM. Following Completion, the active members of the Morrison Scheme employed in theMorrison Construction Division will become eligible to participate in thedefined contribution pension arrangements operated by Galliford Try. 10. Dividend policy The Directors intend that the Group will continue to adopt a progressivedividend policy and the Directors anticipate that dividends will grow in linewith earnings per share. However, as any dividends will be dependent upon theperformance of the underlying businesses of the Enlarged Group, this should notbe construed as either a dividend forecast or as a guarantee that any dividendswill be paid in the future. 11. Recommendation The Board, which has been provided with financial advice in connection with theAcquisition and the Placing and Open Offer by PricewaterhouseCoopers LLP,considers that the Acquisition and the Placing and Open Offer are in the bestinterests of the Company and its Shareholders as a whole. In advising the Board,PricewaterhouseCoopers LLP has placed reliance on the Board's commercialassessment of the Acquisition. Accordingly, the Directors unanimously recommend you to vote in favour of theResolutions to be proposed at the Extraordinary General Meeting, as they intendto do in respect of the 5,198,584 Shares in which they are beneficiallyinterested, representing approximately 2.3 per cent. of the issued share capitalof the Company. Greg Fitzgerald, Chief Executive, intends to subscribe for hisfull entitlement to 74,680 New Ordinary Shares under the terms of the Open Offerrepresenting an investment of approximately £80,000. General This announcement has been issued by and is the sole responsibility of GallifordTry plc and has been approved solely for the purposes of section 21 of theFinancial Services and Markets Act 2000 by PricewaterhouseCoopers LLP. PricewaterhouseCoopers LLP, which is authorised and regulated in the UnitedKingdom by the Financial Services Authority for designated investment business,is acting exclusively for Galliford Try plc and for no one else in relation tothe Acquisition and the Placing and Open Offer and will not be responsible toanyone other than Galliford Try plc for providing the protections afforded toclients of PricewaterhouseCoopers LLP or for giving advice in relation to theAcquisition, the Placing and Open Offer, or any other matter referred to in thisannouncement. KBC Peel Hunt Limited, which is regulated in the United Kingdom by the FinancialServices Authority, is acting as corporate broker to Galliford Try plc inrelation to the Placing and is not acting for any other person and will not beresponsible to any other person for providing the protections afforded tocustomers of KBC Peel Hunt nor for advising them on the contents of thisannouncement or any other matter in relation to the Placing and Open Offer. This announcement does not constitute or form part of an offer, or anysolicitation of an offer to subscribe or buy, any of the New Ordinary Shares tobe issued in relation to the Placing and Open Offer. Any purchase of orapplication for shares under or in connection with the Placing and Open Offershould only be made on the basis of information contained in the Prospectus tobe published in connection with the Acquisition, the Placing and Open Offer andany supplement thereto. The Prospectus containing details of, inter alia, the Acquisition, the Placingand Open Offer and a notice of an Extraordinary General Meeting of the Company,to be held at the offices of CMS Cameron McKenna LLP, Mitre House, 160Aldersgate Street, London EC1A 4DD, is expected to be posted to QualifyingShareholders shortly, together with the application forms and separate form ofproxy for use at the Extraordinary General Meeting. Copies of the Prospectuswill also be available to the public, free of charge, from the offices of CMSCameron McKenna LLP and the registered office of the Company up until Admission. The distribution of this announcement in certain jurisdictions may be restrictedby law and therefore persons into whose possession this announcement comesshould inform themselves about and observe any such restrictions. Any failure tocomply with these restrictions may constitute a violation of the securities lawsof any such jurisdiction. The information contained herein is not for publication or distribution in orinto the United States of America, Canada, Australia or Japan. These materialsare not an offer of securities for sale in the United States of America, Canada,Australia or Japan. The securities referred to herein have not been and will notbe registered under the U.S. Securities Act of 1933 (the "Securities Act"), asamended, and may not be offered or sold in the United States absent registrationunder the Securities Act or an available exemption from registration. No publicoffering of the securities referred to herein will be made in the United States. Certain statements in this announcement are forward looking statements. By theirnature, forward looking statements involve a number of risks, uncertainties andassumptions because they relate to events and/or depend on circumstances thatmay or may not occur in the future and could cause actual results to differmaterially from those expressed in, or implied by, the forward lookingstatements. These include, among other factors: the Group's ability to obtaincapital/additional finance; a reduction in demand by customers; the limitationsof the Group's internal financial controls; an increase in competition; anunexpected decline in turnover; legislative, fiscal and regulatory developmentsincluding, but not limited to, changes in environmental and safety regulations;currency and interest rate fluctuations and the introduction of IFRS. These andother factors could adversely affect the outcome and financial effects of theplans and events described herein. Forward looking statements contained in thisannouncement based on past trends or activities should not be taken as arepresentation that such trends or activities will continue in the future.Subject to any requirement under the Listing Rules of the UK Listing Authority,neither the Company nor PricewaterhouseCoopers LLP nor KBC Peel Hunt undertakesany obligation to update or revise any forward looking statements, whether as aresult of new information, future events or otherwise. You should not placeundue reliance on forward looking statements, which speak only as of the date ofthis announcement. Appendix: Definitions The following definitions apply throughout this announcement unless the contextrequires otherwise: ''Acquisition'' the proposed acquisition of the Morrison Construction Division''Admission'' admission of the New Ordinary Shares to (i) the Official List; and (ii) trading on the London Stock Exchange's main market for listed securities becoming effective in accordance with, respectively, the Listing Rules and the Admission and Disclosure Standards''AGL'' AWG Group Limited, a wholly owned subsidiary of AWG''Application the application forms to be despatched with the ProspectusForms'' through which Qualifying Shareholders may apply for Open Offer Shares''AWG'' AWG plc''Chartdale'' Chartdale Limited''Completion'' the completion of the Acquisition pursuant to the terms of the Sale and Purchase Agreement''CREST'' the relevant system (as defined in the CREST Regulations) in respect of which CRESTCo is the operator (as defined in the CREST Regulations)''CRESTCo'' CRESTCo Limited''CREST the Uncertificated Securities Regulations 2001 (SI 2001 No.Regulations'' 3755), as amended from time to time''DHE'' Defence Housing Executive"Enlarged the Group as enlarged by the AcquisitionGroup"''Enlarged Share the issued ordinary share capital of the Company,Capital'' immediately following Admission''Excluded United States, Canada, Japan and AustraliaTerritories''''Existing the Ordinary Shares in issue at the date of thisOrdinary announcementShares''''Extraordinary the extraordinary general meeting to be convened by theGeneral Company to approve the Acquisition and the Placing and Open Offer, notice of which will be set out in the ProspectusMeeting'' or''EGM''''FRS'' Financial Reporting Standard''FSMA'' Financial Services and Markets Act 2000 (as amended)"financial in relation to a PFI project, the date on which the principalclose" agreements are signed, equity is subscribed in the PFI project special purpose vehicle and the construction phase of the project commences''Galliford Try'' Galliford Try plcor ''Company''''Galliford Try Galliford Try Construction Limited, a wholly owned subsidiaryConstruction'' of Galliford Try"Galliford Try Galliford Try and its subsidiariesGroup" or"Group"''IFRS'' International Financial Reporting Standards maintained by the International Accounting Standards Board and which are in force from time to time, as adopted by the European Union''KBC Peel KBC Peel Hunt Ltd of 111 Old Broad Street, London EC2N 1PHHunt''''London Stock London Stock Exchange plcExchange''''Morrison together Morrison Construction Services Limited, MorrisonConstruction'' Highway Maintenance Limited and certain of their subsidiaries''Morrison together Morrison Construction, the Morrison PFI Business andConstruction theDivision'' Morrison PFI Investments''Morrison PFI the business of Morrison Project Investments Limited to beBusiness'' transferred to Galliford Try pursuant to the Sale and Purchase Agreement''Morrison PFI the interests of MPIL in the special purpose vehicles set upInvestments'' in relation to the DHE Portsmouth PFI project and the Highland Schools PFI project, comprising the 200,000 A ordinary shares of £1 each in the share capital of Tricomm Defence Housing (Portsmouth) Holdings Limited and the obligation to subscribe for £1.7 million of loan notes to be issued by Tricomm Defence Housing (Portsmouth) Holdings Limited and 50 percent of the ordinary shares of Alpha Schools (Highlands) Holdings Limited to be issued at financial close, together with the obligation to subscribe for 50 per cent of the total loan note subscription amount of Alpha Schools (Highlands) Holdings Limiited to be committed to at financial close.''MPIL'' Morrison Projects Investments Limited, a wholly owned subsidiary of AWG''New Ordinary the Placing Shares and the Open Offer SharesShares''''Offer Price'' 107 pence per New Ordinary Share''Open Offer'' the conditional offer inviting Qualifying Shareholders to subscribe for the Open Offer Shares at the Offer Price, on the terms and subject to the conditions which will be set out in the Prospectus and the Application Forms "Open Offer the pro rata entitlements to subscribe for Open Offer SharesEntitlements" allocated to Qualifying Shareholders pursuant to the Open Offer''Open Offer 9,451,576 New Ordinary Shares which are being made availableShares'' to Qualifying Shareholders under the Open Offer, less, where the context requires, 75,525 New Ordinary Shares, representing the entitlements of certain directors of the Company under the Open Offer which are not being taken up and have been placed firm by KBC Peel Hunt''Overseas Qualifying Shareholders with registered addresses in, or whoShareholders'' are citizens, residents or nationals of, jurisdictions outside the United Kingdom"the Pensions the Pensions Regulator, the regulator of work-based pensionRegulator" schemes in the UK created under the Pensions Act 2004''PFI'' Private Finance Initiative''Placing'' the conditional placing by KBC Peel Hunt on behalf of the Company pursuant to the terms and conditions of the Placing Agreement, of (i) the Placing Shares and (ii) the Open Offer Shares, subject to clawback to satisfy valid applications made by Qualifying Shareholders under the Open Offer''Placing the conditional agreement entered into on the date hereofAgreement'' between the Company (1) KBC Peel Hunt (2) and PricewaterhouseCoopers LLP (3) relating to the Placing and Open Offer and Admission, details of which will be set out in the Prospectus''Placing 37,383,177 New Ordinary Shares which have been conditionallyShares'' placed firm by KBC Peel Hunt on behalf of the Company pursuant to the Placing Agreement''Prospectus'' the Prospectus, prepared in accordance with the Prospectus Rules and the Listing Rules of the UKLA and containing details of, inter alia, the Acquisition, the Placing and Open Offer and a notice of an Extraordinary General Meeting of the Company''Qualifying Shareholders on the register of members of the Company at theShareholders'' Record Date except for Overseas Shareholders with registered addresses in an Excluded Territory''Record Date'' the close of business on 1 March 2006 being the latest time by which transfers of Existing Ordinary Shares must be received for registration by the Company in order to allow transferees to be recognised as Qualifying Shareholders''Resolutions'' the resolutions to be set out in the notice of EGM contained in the Prospectus''Sale and the agreement dated 2 March 2006 and entered into between,Purchase inter alia, AGL, MPIL, Galliford Try Construction andAgreement'' Galliford Try for the acquisition of Morrison Construction, the Morrison PFI Business and the Morrison PFI Investments, a summary of the principal terms of which will be contained in the Prospectus ''Shareholders" holders of Ordinary Shares"Surplus Cash a balancing payment payable by Galliford Try ConstructionAdjustment" under the terms of the Sale and Purchase Agreement reflecting any surplus of net current assets at Completion above the average annual working capital balances of the Morrison Construction business ''UK GAAP'' the Generally Accepted Accounting Principles in the UK which are in force from time to time This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Galliford Try