23rd Feb 2006 07:01
Galliford Try PLC23 February 2006 GALLIFORD TRY PLC INTERIM REPORT FOR THE SIX MONTHS ENDED 31 DECEMBER 2005 HIGHLIGHTS 2005 2004 IncreaseGroup revenue £372m £347m 7%Profit before tax £14.0m £12.7m 10%Earnings per share 4.4p 4.0p 10%Dividend per share 0.7p 0.6p 17% • Construction profit margin of 2% • Construction work in hand £1.1 billion - 90% on non-price competitive basis • Financial close achieved on £192 million Northamptonshire Schools PFI • £67 million acquisition of Chartdale Homes completed - increases landbank by 1,350 units • Housebuilding profit at record £13.9 million, margin maintained at 14.1% • Current housebuilding sales in hand at record high of £191 million, 15% up on a year ago • Net debt at 31 December of £8.9 million representing gearing of 15% (2004: £10.1m and 21%) Commenting today, David Calverley, Chairman said: "I am delighted to report another record set of first half results. Our construction profit margin of 2% clearly demonstrates our ability to deliverprofitable growth from a consistent focus on selected work in key markets. The results also reflect a good performance from our housebuilding businessdespite a tough market, and the acquisition of Chartdale represents asignificant contribution towards our expansion objectives. The board is very confident of reporting further progress at the full year." Enquiries to: Greg Fitzgerald , Chief Executive Galliford Try plc 01895 855 219Frank Nelson, Finance Director Galliford Try plc 01895 855 226Ann-marie Wilkinson Bell Pottinger Financial 020 7861 3232Geoff Callow Bell Pottinger Financial 020 7861 3232 CHAIRMAN'S STATEMENT I am delighted to report another set of record results for the first half of ourfinancial year, demonstrating our ability to deliver profitable growth fromconstruction and a good performance from our housebuilding business, despite atough market. Financial Review Profit before tax for the 6 months ended 31 December 2005 was £14.0 million, anincrease of 10% (2004: £12.7 million) with Group revenue up 7% at £372 million(2004: £347 million). This is the first set of results we have reported underthe new International Financial Reporting Standards. The construction division is generating strong profits, and a cash flow thatsignificantly contributes towards the financing of our investment inhousebuilding. Net debt at 31 December was £8.9 million representing gearing of15% (£10.1 million and 23% at 31 December 2004). Since the half year end we havetaken advantage of the strong market for commercial property investments andentered into two sale and leaseback arrangements on our offices at Uxbridge andNewton Abbot, which will generate cash proceeds of £11.2 million and a one offprofit of £3.8 million. Earnings per share for the period were 4.4p compared to 4.0p for the same periodlast year. Shareholders' funds have risen to £58.2 million compared to £48.3million at 31 December 2004. Dividend The directors have declared an interim dividend of 0.7p per share, a 17%increase on last year, which will be paid on 13 April 2006 to shareholders onthe register at 17 March 2006. Having rebased the dividend with a 24% increasein the total for the last financial year, the directors are committed to aprogressive dividend policy that takes into account both earnings growth and theneed for continuing investment in the business. Construction The construction division achieved an operating profit of £5.6 million onrevenue of £273 million, representing a profit margin of 2%. With ourconstruction business well established in its selected markets, our objective isnow to deliver higher profits by controlled growth in revenue. In December we announced that we had reached financial close on the UK's largesteducation PFI scheme for Northamptonshire County Council. Over the next threeyears, we will carry out £192 million of construction work at 41 schools as anintegral part of Northamptonshire County Council's transition to a new two tiereducational system. The project adds to the significant experience Galliford Tryhas in education, a sector with good prospects as Government investmentcontinues. We maintain a high quality workload in our selected markets. We have secured ourfirst framework agreement for Anglian Water as one of two contractorpartnerships appointed to carry out a total of £70 million of waterinfrastructure works in the east of England over the next five years. With muchof our existing water operations based in the North West and Scotland, thisaward extends both our client base and geographic presence. The commercialmarket is also providing a number of good opportunities, particularly in theWest End of London. In communications infrastructure we have secured our first fully integratedcontract since the acquisition of Pentland Limited. The skills of our businessare in demand across the global mobile communications market, and we haverecently formed a joint venture with a well established local business inUkraine to provide infrastructure services into a market that has good growthopportunities. Following the award of the Northamptonshire Schools PFI, the construction orderbook exceeded £1 billion for the first time, and currently stands at £1.1billion. 88% is in the public and regulated sectors and 90% has been secured ona non price competitive basis. PPP Investments Our objective with PPP investments is to take an active equity participation inpublic / private partnership arrangements for public sector work, with theobjective of providing negotiated contracts for the construction division. Aswell as the closure of the Northamptonshire Schools PFI, we achieved financialclose on a second phase project in the Barnet, Enfield and Haringey LIFT, a £5million health centre, and are currently working on further opportunities withinour other existing LIFT frameworks. There are also good opportunities under theBuilding Schools for the Future programme in the pipeline. Housebuilding The housebuilding division achieved profit of £13.9 million on revenue of £98million. The market remains tough but showed a marked improvement compared to the sameperiod last year. Completions for the half year were up 25% at 484 units on anaverage selling price of £203,000, reduced from £228,000 a year ago in line withour strategy of concentrating on the mainstream market. The start of 2006 has seen further buyer confidence returning to the market withsales rates, based on limited incentives and marketing support, significantlybetter than the latter part of 2005. The division has currently reserved,contracted or completed a record level of sales with a value of £191 million, a15% increase on last year. This represents approximately 75% of planned salesfor the year to 30 June 2006. Visitor levels are also encouraging, up 29%compared to last year. On 15 February we completed the £67 million acquisition of Chartdale Homes.Based in Lincolnshire and covering an area to the north of, and adjacent to,Stamford Homes, the acquisition represents a significant contribution towardsthe Group's expansion plan to increase the number of units sold by itshousebuilding division to 1,500 per annum. Approximately 95% of Chartdale'slandbank of 1,350 plots are expected to be developed as houses, with the balanceto be developed as apartments. This reduces our overall exposure to the marketfor apartments which represents less than 25% of units within the enlargedlandbank, currently standing at 3,800 units, compared to 2,464 a year ago. The market for land is highly competitive and obtaining planning consents,particularly in the south east, remains a lengthy and difficult process. Theaddition of the Chartdale landbank, substantially all of which has planningpermission, will therefore contribute considerably to the growth of thebusiness. Affordable Housing Our framework agreements with our key affordable housing clients continue togenerate increasing levels of work. As announced in January, Stephen Teagle,formally Development Director of the Devon and Cornwall Housing Association andManaging Director of Westco, the association's commercial development arm, hasjoined the Group as Affordable Housing Director to ensure we maximise ourpotential for growth in this sector. Prospects With our strong position in selected construction markets and a workload wellspread across the public and regulated sectors, we are looking to grow profitsthrough a controlled increase in revenue. In housebuilding we are encouraged by the level of sales since the New Year andby the increasing confidence returning to the market. Boosted by the acquisitionof Chartdale, we are confident that we are on track to deliver our expansionplan. The board is very confident of reporting further progress at the full year. David CalverleyChairman23 February 2006 Consolidated Income Statementfor the Half Year Ended 31 December 2005 (unaudited) Notes Half Year Half Year Year to to to 31 Dec 31 Dec 30 June 2005 2004 2005 £'000 £'000 £'000Continuing operationsRevenue 372,194 347,166 718,494Cost of sales (336,199) (312,647) (651,675) --------- --------- ---------Gross profit 35,995 34,519 66,819Administrativeexpenses (19,485) (19,567) (35,596) Share of post taxlosses from jointventures (212) (201) (219) --------- --------- ---------Profit beforefinance costs 16,298 14,751 31,004 --------- --------- ---------Profit before finance costs includes:Profit on sale offixed assetinvestments - - 1,562 --------- --------- --------- Interestreceivable 316 294 664Interest payable 2 (2,649) (2,299) (4,411)Income from otherparticipatinginterest - - 100 --------- --------- ---------Profit onordinaryactivities beforetax 13,965 12,746 27,357Taxation 3 (4,117) (3,860) (8,312) --------- --------- ---------Profit for thefinancial period 9,848 8,886 19,045 ========= ======== ========= Dividend per ordinary share- paid per share 1.6p 1.15p 1.75p- total value 3,342 2,545 3,875 - proposed per share 0.7p 0.6p 1.6p - total value 1,560 1,330 3,342Earnings perordinary share 4- basic 4.4p 4.0p 8.6p- diluted 4.3p 3.9p 8.3p Consolidated Statement of Recognised Income and Expensefor the Half Year Ended 31 December 2005 (unaudited) Half Year to Half Year to Year to 31 Dec 2005 31 Dec 2004 30 June 2005 £'000 £'000 £'000Profit for the financial period 9,848 8,886 19,045 Actuarial losses in pension scheme (3,120) (10,667) (15,175)Deferred tax on actuarial lossestaken directly to equity 936 3,200 4,552 ---------- ---------- ----------Net losses not recognised in theincome statement (2,184) (7,467) (10,623) ---------- ---------- ----------Total recognised income for theperiod 7,664 1,419 8,422 ========== ========== ========== Consolidated Balance Sheetat 31 December 2005 (unaudited) 31 Dec 2005 31 Dec 2004 30 June 2005 £'000 £'000 £'000Non-current assetsIntangible assets Goodwill 643 - -Property, plant and equipment 11,580 12,011 11,630Financial assets - Available forsale investments 468 608 468Investments accounted for usingequity method 1,864 2,054 2,111Trade and other receivables 253 225 245Deferred tax assets 16,358 13,625 15,187 ----------- ----------- ---------Total non-current assets 31,166 28,523 29,641Current assetsInventories 2,074 1,642 613Developments 202,473 183,436 206,171Trade and other receivables 93,162 82,607 100,204Available for sale financial assets 4,829 1,676 3,412Derivative financial assets 53 145 139Cash and cash equivalents 3,747 8,444 2,007 ----------- ----------- ---------Total current assets 306,338 277,950 312,546 ----------- ----------- ---------Total assets 337,504 306,473 342,187 ----------- ----------- --------- Current liabilitiesFinancial liabilities - Borrowings (16,424) (19,240) (16,769)Trade and other payables (195,240) (190,328) (215,465)Current tax liabilities (4,566) (3,125) (3,549) ----------- ----------- ---------Total current liabilities (216,230) (212,693) (235,783)Non- current liabilitiesFinancial liabilities - Borrowings (1,035) (1,023) (1,013)Retirement benefit obligations (48,137) (40,615) (46,168)Deferred tax liabilities (3,207) (2,528) (2,837)Other liabilities (10,658) (1,286) (2,682) ----------- ----------- ---------Total non-current liabilities (63,037) (45,452) (52,700) ----------- ----------- ---------Total liabilities (279,267) (258,145) (288,483) ----------- ----------- ---------Net assets 58,237 48,328 53,704 ----------- ----------- --------- Shareholders' equityShare capital 11,341 11,259 11,340Share premium 2,300 2,246 2,295Merger reserves 4,687 4,687 4,687Retained earnings 39,909 30,136 35,382 ----------- ----------- ---------Total shareholders' equity 58,237 48,328 53,704 =========== =========== ========= Consolidated Cash Flow Statementfor the half year ended 31 December 2005 (unaudited) Notes Half Year Half Year Year to to to 31 Dec 31 Dec 30 June 2005 2004 2005 £'000 £'000 £'000Cashflows from operating activities:Net cash from operations 9 14,134 11,386 15,608Net interest paid (2,568) (1,538) (3,299)Tax paid (2,975) (4,546) (8,472) --------- --------- ---------Net cash from operatingactivities 8,591 5,302 3,837 Cash flows from investing activities:Acquisition of investmentsaccounted for using equitymethod - - (75)Proceeds from investmentsaccounted for using equitymethod 35 35 35Available for sale investments - - (69)Proceeds from sale of availablefor sale investment - - 1,771Acquisition of subsidiary (netof cash acquired) (1,097) - -Purchases of property, plant andequipment (648) (910) (1,598)Proceeds from sale of property,plant and equipment 5 22 29 --------- --------- ---------Net cash (used in)/frominvesting activities (1,705) (853) 93 Cash flows from financing activities:Purchase of treasury shares - - (450)Repayment of borrowings (66) (83) (144)Borrowing acquired withsubsidiary (48) - -Exercise of share options 6 70 200Dividends paid to groupshareholders (3,342) (2,545) (3,875)Available for sale financialasset (1,417) (1,676) (3,412) --------- --------- ---------Net cash used in financingactivities (4,867) (4,234) (7,681) --------- --------- ---------Increase/(decrease) in net cashand cash equivalents 2,019 215 (3,751) --------- --------- --------- Net cash and cash equivalents atbeginning of period (13,733) (9,982) (9,982) --------- --------- ---------Net cash and cash equivalents atend of period 9 (11,714) (9,767) (13,733) ========= ======== ========= Notes to the Interim Report 1 Basis of Preparation The results for the half year ended 31 December 2005 and the half year ended 31December 2004 are unaudited. The financial information set out above, includingthe restated comparative figures for the year ended 30 June 2005 which are alsounaudited, does not constitute statutory accounts within the meaning of Section240 of the Companies Act 1985. The Group's published accounts, prepared under UK Generally Accepted AccountingPrinciples ("UK GAAP") for the year ended 30 June 2005 have been reported on bythe Company's auditors and filed with the Registrar of Companies. The report ofthe auditors' was unqualified and did not contain a statement under section 237(2) or (3) of the Companies Act 1985. The interim financial information is prepared on a historical cost basis exceptthat as required by International Financial Reporting Standards certain assetsare included at fair value. The preparation of financial statements inconformity with generally accepted accounting principles requires the use ofestimates and assumptions that affect the reported amounts of assets andliabilities at the date of the financial statements and the reported amounts ofrevenues and expenses during the reporting period. Although these estimates arebased on management's best knowledge of the amount, event or actions, actualresults ultimately may differ from those estimates. Galliford Try plc ("the Group") has adopted International Financial ReportingStandards ("IFRS") with effect from 1 July 2005, in accordance with the EuropeanUnion Regulations. The first Annual Report prepared under IFRS will be for theyear ended 30 June 2006. The interim financial information has been prepared on the basis of therecognition and measurement requirements of IFRS in issue that, either areendorsed by the EU and effective (or available for early adoption) as at 31December 2005 or are expected to be endorsed and effective (or available forearly adoption) at 30 June 2006, the Group's first full annual reporting date atwhich it is required to adopt IFRS. Based on this information, the directorshave made assumptions about the accounting policies that are expected to beapplied. Details of significant changes to the Group's accounting policies (asset out in the 2005 Annual Report) resulting from the adoption of IFRS are setout in note 10. In addition, the adopted IFRS that will be effective (or available for earlyadoption) in the Annual Report for the year ending 30 June 2006 are stillsubject to change and to additional interpretations and therefore cannot bedetermined with certainty. Accordingly the accounting policies for that annualperiod will be determined finally only when the Annual Report is prepared forthe year ending 30 June 2006. An explanation of how the transition to IFRS has affected the reported financialposition and financial performance of the Group is provided in note 10. The noteincludes reconciliations of equity and profit for comparative periods reportedunder UK GAAP to these reported for those periods under IFRS. IFRS 1 "First time adoption of IFRS" sets out the procedures that companiesshould follow on adopting IFRS for the first time. There are a number ofoptional exemptions to the retrospective application of these accountingpolicies offered by IFRS 1. The Group has taken advantage of the following keyexemptions: •IFRS 3 "Business Combinations". The Group has elected not to apply IFRS 3 retrospectively to business combinations that took place before 1 July 2004. •IAS 16 "Property, plant and equipment". The Group has elected not to revalue property, plant and equipment to fair value on transition and therefore adopted the exemption to use a value that is not depreciated cost as deemed cost on transition to IFRS. •IFRS 2 "Share Based Payments" IFRS 2 has been adopted from the transition date and is only being applied to equity instruments granted on or after 7 November 2002 which had not been vested on the effective date of the standard. The Group has elected not to take up the option of full retrospective application of the standard. 2 Interest Payable Half Year to Half Year to Year to 31 Dec 2005 31 Dec 2004 30 June 2005 £'000 £'000 £'000 Bank interest 937 781 1,603Interest on unwinding ofdiscounted creditors 1,351 1,106 1,985Net return on assets ofpension fund 361 412 823 ----------- ----------- ---------Total interest payable 2,649 2,299 4,411 ----------- ----------- --------- 3 Taxation The tax charge for the period reflects the estimated effective rate for the fullyear to 30 June 2006 of 29% (30 June 2005: 30%). 4 Earnings Per Share Basic earnings per share is calculated using the profit on ordinary activitiesafter tax and the weighted average number of ordinary shares in issue during theperiod less the weighted average number of ordinary shares held by the GallifordTry Employee Share Trust amounting to 222,802,899 shares (31 December 2004:221,356,179). For diluted earnings per share, the weighted average number ofordinary shares is adjusted to assume conversion of all dilutive potentialordinary shares giving a total of 231,391,326 (31 December 2004: 228,521,010). 5 Dividends The final dividend for 2005 of 1.6p was approved by shareholders during theperiod and £3,342,000 (2004: £2,545,000) was deducted from reserves. The directors propose an interim dividend of 0.7p per share (2005: 0.6p). Nodeduction has yet been made for this dividend in accordance with IAS 10 as thisamount is not yet committed. 6 Consolidated Statement of Changes in Shareholders' Equity Half Year to Half Year to Year to 31 Dec 2005 31 Dec 2004 30 June 2005 £'000 £'000 £'000 Balance at start of period 53,704 49,133 49,133Actuarial losses in pension scheme (3,120) (10,667) (15,175)Deferred tax on actuarial losses inpension scheme 936 3,200 4,552 ----------- ----------- ---------Net expense recognised directly inequity (2,184) (7,467) (10,623)Profit for the year 9,848 8,886 19,045Dividends (3,342) (2,545) (3,875)Issue of shares 6 70 200Purchase of own shares - - (450)Share based payments 205 251 274 ----------- ----------- ---------Balance at end of period 58,237 48,328 53,704 ----------- ----------- --------- 7 Business Segment Reporting Segment information is presented in the consolidated interim accounts in respectof the Group's business segments which are the primary basis of segmentreporting. The business segment reporting reflects the Group's management andinternal reporting structure. Segment results include items directlyattributable to a segment as well as those that can be allocated on a reasonablebasis. Half Year 31 December 2005 PPP £'000 Construction investments Housebuilding Group Total Revenue 272,803 750 98,366 275 372,194 --------- --------- ---------- ------ ------ Segment result 5,497 (473) 14,156 (2,670) 16,510Share of posttax results ofjoint ventures 88 - (300) - (212) --------- --------- ---------- ------ ------Profit beforefinance costs 5,585 (473) 13,856 (2,670) 16,298Net financecosts (2,333) --------- --------- ---------- ------ ------Profit beforetax 13,965Taxation (4,117) --------- --------- ---------- ------ ------Profit for thehalf year fromcontinuingoperations 9,848 --------- --------- ---------- ------ ------ Half Year 31 December 2004 PPP £'000 Construction investments Housebuilding Group Total Revenue 255,757 - 91,147 262 347,166 --------- --------- ---------- ------ ------ Segment result 5,237 (1,254) 13,025 (2,056) 14,952Share of posttax results ofjoint ventures 111 (312) (201) --------- --------- ---------- ------ ------Profit beforefinance costs 5,348 (1,254) 12,713 (2,056) 14,751Net financecosts (2,005) --------- --------- ---------- ------ ------Profit beforetax 12,746 Taxation (3,860) --------- --------- ---------- ------ ------Profit for thehalf year fromcontinuingoperations 8,886 --------- --------- ---------- ------ ------ 8 Net Debt Net debt is made up as follows: 31 Dec 2005 31 Dec 2004 30 June 2005 £'000 £'000 £'000 Available for sale financialassets 4,829 1,676 3,412Cash and cash equivalents 3,747 8,444 2,007Financial liabilities:Bank overdrafts (15,461) (18,211) (15,740)Other current (963) (1,029) (1,029)Non current (1,035) (1,023) (1,013) ----------- ----------- ----------Net debt (8,883) (10,143) (12,363) ----------- ----------- ---------- 9 Notes to the Cash Flow Statement Half Year to Half Year to Year to 31 Dec 2005 31 Dec 2004 30 June 2005 £'000 £'000 £'000Cash flows from operating activities:Net profit after income taxes 9,848 8,886 19,045 Adjustments for:Tax 4,117 3,860 8,312Depreciation 806 833 1,821(Profit) / loss on disposal ofproperty, plant and equipment (2) (20) 54Profit on disposal of available forsale investment - - (1,562)Net finance costs 2,333 2,005 3,747Share based payment charge 205 251 274Share of post tax profits fromjoint venture 212 201 219 ----------- ----------- ---------- 17,519 16,016 31,910Changes in working capital:(Increase)/decrease in inventories (678) (847) 182Decrease/(increase) in developments 3,698 (9,367) (32,102)Decrease in trade and otherreceivables 7,429 23,620 6,083(Decrease)/increase in trade andother payables (12,683) (14,620) 11,906Decrease in retirement benefitobligation (1,151) (3,416) (2,371) ----------- ----------- ----------Net cash from operations 14,134 11,386 15,608 ----------- ----------- ---------- Half Year to Half Year to Year to 31 Dec 2005 31 Dec 2004 30 June 2005 £'000 £'000 £'000 Cash and cash equivalents 3,747 8,444 2,007Bank overdrafts (15,461) (18,211) (15,740) ----------- ----------- ----------Net cash and cash equivalents (11,714) (9,767) (13,733) ----------- ----------- ---------- 10 Explanation of Transition to IFRS As previously stated these are the Group's first consolidated interim accountsfor part of the period to be covered by the first IFRS Annual Report prepared onthe recognition and measurement requirements of IFRS. The Group has applied consistent accounting policies in preparing theconsolidated interim accounts for the half year ended 31 December 2005, thecomparative information for the half year ended 31 December 2004, the accountsfor the year ended 30 June 2005 and the preparation of the opening IFRS balancesheet at 1 July 2004, the date of transition for the Group. In preparing the opening IFRS balance sheet, comparative information for thehalf year to 31 December 2004 and the accounts for the year ended 30 June 2005,the Group has adjusted the amounts reported previously in accounts prepared inaccordance with UK GAAP. The following tables show the adjustments made. Full details of the impact offirst time adoption of IFRS and the accounting policies adopted for GallifordTry plc were issued on 5th January 2006 and can be found on the Company'swebsite at www.gallifordtry.co.uk Reconciliation of Profit for the Half Year Ended 31 December 2004 Effect of transition to£'000 UK GAAP IFRS IFRSContinuing operationsRevenue 347,166 - 347,166Cost of sales (314,876) 2,229 (312,647) --------- ---------- ----------Gross profit 32,290 2,229 34,519 Administrative expenses (19,567) - (19,567)Share of post taxprofit/(losses) from jointventures 104 (305) (201) --------- ---------- ----------Profit before finance costs 12,827 1,924 14,751 Interest receivable 294 - 294Interest payable (1,075) (1,224) (2,299)Joint ventures (310) 310 -Income from other participating interest - - - --------- ---------- ----------Profit on ordinary activitiesbefore tax 11,736 1,010 12,746Taxation (3,629) (231) (3,860) --------- ---------- ----------Profit for the financialperiod 8,107 779 8,886 ========= ========== ========== Reconciliation of Profit for the Year Ended 30 June 2005 Effect of transition to £'000 UK GAAP IFRS IFRSContinuing operationsRevenue 718,494 - 718,494Cost of sales (654,464) 2,789 (651,675) --------- ---------- ----------Gross profit 64,030 2,789 66,819 Administrative expenses (35,601) 5 (35,596)Share of post taxprofit/(losses) from jointventures 26 (245) (219) --------- ---------- ---------- Profit before finance costs 28,455 (2,549) 31,004 --------- ---------- ----------Profit before finance costs includes:Profit on sale of fixed assetinvestments 1,562 - 1,562 --------- ---------- ---------- Interest receivable 664 - 664Interest payable (2,267) (2,144) (4,411)Joint ventures (622) 622 -Income from otherparticipating interest 100 - 100 --------- ---------- ----------Profit on ordinary activitiesbefore tax 26,330 1,027 27,357Taxation (7,738) (574) (8,312) --------- ---------- ----------Profit for the financial year 18,592 453 19,045 ========= ========== ========== Reconciliation of Shareholders' Equity at 1 July 2004 Effect of transition to £'000 UK GAAP IFRS IFRS Non-current assetsProperty, plant and equipment 11,936 - 11,936Financial assets - Availablefor sale investments 608 - 608Investments accounted forusing equity method 2,290 - 2,290Trade and other receivables 369 (152) 217Deferred tax assets - 11,311 11,311 --------- ---------- ----------Total non-current assets 15,203 11,159 26,362Current assetsInventories 795 - 795Developments 177,392 (3,323) 174,069Trade and other receivables 107,563 (1,161) 106,402Derivative financial assets - 151 151Cash and cash equivalents 2,570 - 2,570 --------- ---------- ----------Total current assets 288,320 (4,333) 283,987 --------- ---------- ----------Total assets 303,523 6,826 310,349Current liabilitiesFinancial liabilities -Borrowings (13,648) - (13,648)Trade and other payables (207,616) 3,316 (204,300)Current tax liabilities (4,037) - (4,037) --------- ---------- ----------Total current liabilities (225,301) 3,316 (221,985)Non- current liabilitiesFinancial liabilities -Borrowings (1,231) 184 (1,047)Retirement benefit obligations - (33,364) (33,364)Deferred tax liabilities (2,928) (258) (3,186)Other liabilities (1,776) 142 (1,634) --------- ---------- ----------Total non-current liabilities (5,935) (33,296) (39,231) --------- ---------- ----------Total liabilities (231,236) (29,980) (261,216) --------- ---------- ----------Net assets 72,287 (23,154) 49,133 ========= ========== ==========Shareholders' equityShare capital 11,239 - 11,239Share premium 2,196 - 2,196Merger reserves 4,687 - 4,687Retained earnings 54,165 (23,154) 31,011 --------- ---------- ----------Total shareholders' equity 72,287 (23,154) 49,133 ========= ========== ========== Reconciliation of Shareholders' Equity at 31 December 2004 Effect of transition to £'000 UK GAAP IFRS IFRSNon-current assetsProperty, plant and equipment 12,011 - 12,011Financial assets - Availablefor sale investments 608 - 608Investments accounted forusing equity method 2,054 - 2,054Trade and other receivables 369 (144) 225Deferred tax assets - 13,625 13,625 --------- ---------- ----------Total non-current assets 15,042 13,481 28,523Current assetsInventories 1,642 - 1,642Developments 186,597 (3,161) 183,436Trade and other receivables 86,430 (3,823) 82,607Available for sale financialassets 1,676 - 1,676Derivative financial assets - 145 145Cash and cash equivalents 8,444 - 8,444 --------- ---------- ----------Total current assets 284,789 (6,839) 277,950 --------- ---------- ----------Total assets 299,831 6,642 306,473Current liabilitiesFinancial liabilities -Borrowings (19,240) - (19,240)Trade and other payables (192,632) 2,304 (190,328)Current tax liabilities (3,125) - (3,125) --------- ---------- ----------Total current liabilities (214,997) 2,304 (212,693)Non- current liabilitiesFinancial liabilities -Borrowings (1,215) 192 (1,023)Retirement benefit obligations - (40,615) (40,615)Deferred tax liabilities (2,928) 400 (2,528)Other liabilities (1,305) 19 (1,286) --------- ---------- ----------Total non-current liabilities (5,448) (40,004) (45,452) --------- ---------- ----------Total liabilities (220,445) (37,700) (258,145) --------- ---------- ----------Net assets 79,386 (31,058) 48,328 ========= ========== ==========Shareholders' equityShare capital 11,259 - 11,259Share premium 2,246 - 2,246Merger reserves 4,687 - 4,687Retained earnings 61,194 (31,058) 30,136 --------- ---------- ----------Total shareholders' equity 79,386 (31,058) 48,328 ========= ========== ========== Reconciliation of Shareholders' Equity at 30 June 2005 Effect of transition to £'000 UK GAAP IFRS IFRS Non-current assetsProperty, plant and equipment 11,630 - 11,630Financial assets - Availablefor sale investments 468 - 468Investments accounted forusing equity method 2,111 - 2,111Trade and other receivables 369 (124) 245Deferred tax assets - 15,187 15,187 --------- ---------- ----------Total non-current assets 14,578 15,063 29,641Current assetsInventories 613 - 613Developments 209,247 (3,076) 206,171Trade and other receivables 102,859 (2,655) 100,204Available for sale financialassets 3,412 - 3,412Derivative financial assets - 139 139Cash and cash equivalents 2,007 - 2,007 --------- ---------- ----------Total current assets 318,138 (5,592) 312,546 --------- ---------- ----------Total assets 332,716 9,471 342,187Current liabilitiesFinancial liabilities -Borrowings (16,769) - (16,769)Trade and other payables (219,134) 3,669 (215,465)Current tax liabilities (3,549) - (3,549) --------- ---------- ----------Total current liabilities (239,452) 3,669 (235,783)Non- current liabilitiesFinancial liabilities -Borrowings (1,154) 141 (1,013)Retirement benefit obligations - (46,168) (46,168)Deferred tax liabilities (3,059) 222 (2,837)Other liabilities (2,815) 133 (2,682) --------- ---------- ----------Total non-current liabilities (7,028) (45,672) (52,700) --------- ---------- ----------Total liabilities (246,480) (42,003) (288,483) --------- ---------- ----------Net assets 86,236 (32,532) 53,704 ========= ========== ==========Shareholders' equityShare capital 11,340 - 11,340Share premium 2,295 - 2,295Merger reserves 4,687 - 4,687Retained earnings 67,914 (32,532) 35,382 --------- ---------- ----------Total shareholders' equity 86,236 (32,532) 53,704 ========= ========== ========== Principal Differences Between UK GAAP and IFRS The principal differences which give rise to changes in the Group's reportedprofit for the year ended 30 June 2005 and half year ended 31 December 2004 andnet assets at 30 June 2005 and 31 December 2004 are as follows: • Employee Benefits • Share based payments • Deferred tax • Dividend Recognition • Inventories - deferred land payments • Financial instrument - interest rate swap • Discounting In addition the disclosure of interests in the results of joint venture isdifferent under IFRS but this has no impact on net assets or net profit. Employee Benefits Under UK GAAP the Group's defined benefit schemes were accounted for inaccordance with SSAP 24 "Accounting for pension costs" and additionalinformation was provided under the FRS 17 transitional disclosures. The cost ofproviding defined benefit pensions was charged in arriving at operating profitwith surpluses and deficits arising in the funds, as calculated by qualifiedindependent actuaries, being amortised over the remaining service lives ofparticipating employees. The Group has adopted IAS 19 "Employee benefits" in preparing the openingbalance sheet, including the amendment to IAS 19 issued by the IASB on 16December 2004 which allows all actuarial gains and losses to be charged orcredited to equity through the statement of recognised income and expense. Sincethe Group has adopted this approach, all cumulative actuarial gains and lossesin relation to employee benefit schemes have been recognised as at 30 June 2004.Under IAS 19 the cost of providing pension benefits (current service cost) fordefined benefit pension schemes is recognised in the income statement, togetherwith the interest cost arising on the projected obligations and the returns onscheme assets. The impact on the opening balance sheet is to recognise a net deficit of £23.4million, being a gross deficit of £33.4 million offset by a deferred tax assetof £10.0 million. In addition the prepayment of £1.1 million recognised under UKGAAP has been reversed. At 30 June 2005 a net deficit of £32.3 million (31December 2004: £28.4 million) is recognised comprising a gross deficit of £46.2million (31 December 2004:£40.6 million) and a deferred tax asset of £13.9million (31 December 2004: £12.2 million). An actuarial loss of £10.6 million(net of the deferred tax asset) has been taken to reserves in the year ended 30June 2005 (31 December 2004: £7.5 million). Additionally under IAS 19 holiday pay is specifically stated as being anemployee benefit, for which a fair value liability is required to be recognised.The impact of recognising a liability for holiday pay is £0.6 million as at 30June 2004 and £0.7 million as at 30 June 2005 (31 December 2004: £0.3 million). Share Based Payments In accordance with IFRS 2 "Share based payments", the Group has elected tofollow the transitional arrangements and hence it has not been applied to shareoptions granted on or prior to 7 November 2002 that had not vested by 1 January2005. IFRS 2 requires that share based payments should be valued at the fairvalue of the shares at the date of grant. The fair value is expensed on astraight line basis over the vesting period, based on the Group's estimate ofshares that will eventually vest. This affects the Group's save as you earnschemes and the long term incentive plans. The impact of the application of IFRS2 has been to reduce operating profit by £0.1 million for the year ended 30 June2005 (31 December 2004: £nil). Deferred Tax IAS 12 "Accounting for income taxes" requires that full provision be made forall timing differences between the carrying value of assets and the tax bases ofassets and liabilities. In addition deferred tax assets and liabilities must bedisclosed separately on the balance sheet. The opening balance sheet includes additional deferred tax assets of £10.0million in relation to the pension fund deficit, £0.6 million relating todeferred land payments, £0.7m relating to share based payments, a £0.3 millionreduction in deferred tax liability in relation to the reversal of the pensionprepayment and an increase in deferred tax liabilities of £0.6 million relatingto the revaluation of land and buildings. Dividend Recognition IAS 10 "Events after the balance sheet date" requires that dividends approvedafter the balance sheet date should not be recognised as a liability at thatbalance sheet date since the liability did not represent a present obligation atthat date. The final dividend of £2.5 million in respect of the year ended 30June 2004 has been reversed in the opening balance sheet at 30 June 2004 and thefinal dividend of £3.3 million in respect of the year ended 30 June 2005 havebeen reversed from the 30 June 2005 balance sheet. Inventories - Deferred Land Payments Under UK GAAP deferred land payments (land creditors) are included in creditorsat their gross value. Under IAS 2 "Inventories", deferred payments are held atdiscounted present value, thereby recognising notional imputed interest on suchpayments. As a result the land creditors are carried in the balance sheet at netpresent value and the value of land held on the balance sheet in inventories isreduced accordingly. The unwinding of the imputed interest on the land creditorsis charged to finance costs and the reduction in land values in inventoriesresults in a reduction in the cost of sales as the land is traded out. Over timethis does not affect net profit or net assets but gives rise to a timingdifference in the profit recognition and is likely to increase operating profit. The effect on the opening balance sheet is to reduce the long term and currentland creditor by £1.4 million, reduce the inventories balance by £3.3 million,recognise a deferred tax asset of £0.6 million and reduce opening reserves by£1.3 million. For the year ended 30 June 2005 the adoption of IAS 2 resulted inan increase in operating profit of £1.1 million (31 December 2004: £0.6 million)and the inclusion of notional interest of £1.2 million (31 December 2004: £0.6million) together with a related tax credit of £0.1 million (31 December 2004:£nil). As at 30 June 2005 the long term and current land creditor is reduced by£1.0 million (31 December 2004: £1.2 million), inventories by £3.1 million (31December 2004: £3.2 million) and recognise a deferred tax asset of £0.6 million(31 December 2004: £0.6 million). Financial Instruments - Interest Rate Swap The Group made use of an interest rate swap in order to reduce the risk ofexposure to changes in interest rates. This has the effect of fixing interest on£20 million of borrowings at 5.2% for a period of 5 years from November 2001.Under IAS 39 "Financial instruments recognition and measurement" this interestrate swap is recognised and measured at fair value. Any change in fair value isaccounted for in the income statement. The recognition of the interest rate swaphas increased net assets at 30 June 2004, 31 December 2004 and 30 June 2005 by£0.2 million, £0.1 million and £0.1 million respectively and marginally reducedprofit for the year ended 30 June 2005 and 31 December 2004. Discounting In accordance with IAS 39 "Financial Instruments: recognition and measurement",the Group has discounted its long term debtors and creditors. This has theeffect of reducing net assets at 30 June 2004, 31 December 2004 and 30 June 2005by £nil, £0.1million and £0.1 million respectively and reducing profit by £0.1million for the year ended 30 June 2005 (31 December 2004: £0.1 million). Reclassification of UK GAAP Balances When reclassifying the UK GAAP balance sheet in accordance with IFRS, long termtrade debtors and creditors relating to retention balances have been classifiedas current assets on the basis that they are within the normal operating cycleof the business. Independent Review Report to Galliford Try plc Introduction We have been instructed by the company to review the financial information forthe six months ended 31 December 2005 which comprises consolidated interimbalance sheet as at 31 December 2005 and the related consolidated interimstatements of income, cash flows and changes in shareholders' equity for the sixmonths then ended and related notes. We have read the other informationcontained in the interim report and considered whether it contains any apparentmisstatements or material inconsistencies with the financial information. Directors' Responsibilities The interim report, including the financial information contained therein, isthe responsibility of, and has been approved by the directors. The directors areresponsible for preparing the interim report in accordance with the ListingRules of the Financial Services Authority. As disclosed in note 1, the next annual financial statements of the group willbe prepared in accordance with International Financial Reporting Standards. Thisinterim report has been prepared in accordance with the basis set out in Note 1. The accounting policies are consistent with those that the directors intend touse in the next annual financial statements. As explained in note 1, there is,however, a possibility that the directors may determine that some changes arenecessary when preparing the full annual financial statements for the first timein accordance with International Financial Reporting Standards. The IFRSstandards and IFRIC interpretations that will be applicable and adopted for usein the European Union at 30 June 2006 are not known with certainty at the timeof preparing this interim financial information. Review Work Performed We conducted our review in accordance with guidance contained in Bulletin 1999/4issued by the Auditing Practices Board for use in the United Kingdom. A reviewconsists principally of making enquiries of group management and applyinganalytical procedures to the financial information and underlying financial dataand, based thereon, assessing whether the disclosed accounting policies havebeen applied. A review excludes audit procedures such as tests of controls andverification of assets, liabilities and transactions. It is substantially lessin scope than an audit and therefore provides a lower level of assurance.Accordingly we do not express an audit opinion on the financial information.This report, including the conclusion, has been prepared for and only for thecompany for the purpose of the Listing Rules of the Financial Services Authorityand for no other purpose. We do not, in producing this report, accept or assumeresponsibility for any other purpose or to any other person to whom this reportis shown or into whose hands it may come save where expressly agreed by ourprior consent in writing. Review Conclusion On the basis of our review we are not aware of any material modifications thatshould be made to the financial information as presented for the six monthsended 31 December 2005. PricewaterhouseCoopers LLPChartered AccountantsWest London23rd February 2006 Notes: (a) The maintenance and integrity of the Galliford Try plc web site is theresponsibility of the directors; the work carried out by the auditors does notinvolve consideration of these matters and, accordingly, the auditors accept noresponsibility for any changes that may have occurred to the interim reportsince it was initially presented on the web site. (b) Legislation in the United Kingdom governing the preparation anddissemination of financial information may differ from legislation in otherjurisdictions. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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