RNS Number:3341N
Birse Group PLC
5 July 2000
Contact: Peter Watson, Chief Executive Telephone: 01652 633222
Martin Budden, Finance Director
Birse Group plc
Charles Watson/Charles Armitstead Telephone: 020 7831 3113
Financial Dynamics
RE-ORGANISED BIRSE REPORTS STRONG RISE IN PROFITS
Birse Group plc, the leading UK construction group, today announces
preliminary results for the year ended 30 April 2000.
These may be summarised as follows:
- Operating profit rose to #4.6m (1999: #3.7m) + 26%
- Pre-tax profits increased to #4.2m (1999: #2.2m) + 91%
- Earnings per ordinary share of 1.7 pence (1999: 1.1 pence) + 55%
- Total dividend for the year per ordinary share of 1.0 pence + 25%
(1999: 0.8 pence)
- #9.5m raised through the successful disposal of Epping investment property
and non-core Plant Hire activities
- Reorganisation of Birse Construction into 3 divisions focused on core
competencies; Civil Engineering, Building and Process Engineering
- Strong performance from Building division and Plant Hire
Commenting on the results, Chief Executive Peter Watson said:
"We have made good progress this year in aligning our core competencies with
the needs of our customers. Margins have improved, and there are signs within
the construction market that further progress can be made by companies that
are successfully generating production efficiencies for customers.
Consequently, I am encouraged at the opportunities for further profit growth
and the continued generation of shareholder value"
PRELIMINARY STATEMENT
Results
The Group's pre-tax profits rose by 91% to #4.2million (1999: #2.2million).
Earnings per ordinary share increased by 55% to 1.7p (1999: 1.1p). Group
turnover remained relatively static at #370million (1999: #358million).
Birse Construction delivered significantly improved net margins of 0.86% in
the year when compared with corresponding margins of 0.5% achieved in 1999.
Plant Hire also produced improved results, increasing operating profits to
#0.933 million from #0.472 million earned in the previous year. The loss of
rental income from properties disposed of has given rise to the lower level of
profits produced from the Group's Commercial Property activities.
The net interest charge fell from #1.493million in 1999 to #0.523 million in
the current year. Average borrowings were reduced as a result of both
stronger operational cash flows and the proceeds arising from asset disposals.
The Group had a net cash position of #8.8 million at 30 April 2000 (30 April
1999: net debt of #5.3million).
The Board is recommending an increased final dividend of 0.625p per ordinary
share (1999: 0.5p) making a total dividend for the year up 25% to 1p per
ordinary share (1999: 0.8p). Subject to the approval of Shareholders at the
Annual General Meeting the final dividend is payable on 2 November 2000 to
shareholders appearing on the register at the close of business on 6 October
2000. Dividend cover, at this higher level of dividend, increased to 1.7
times (1999: 1.3 times).
Disposals
During the year we have pursued vigorously the disposal of those assets that
were either generating an unacceptable return with no prospects of
improvement, or were not reflective of our core competencies.
In June 1999 the Group completed the sale of its investment property at Epping
for its book value of #5.1million. On 31 October 1999 BPH completed the
disposal of its offshore equipment hire and diesel refurbishment division at
Aberdeen for a consideration of #2.5million. BPH was also involved in two
further transactions; on 22 February 2000 it completed the sale of its fleet
of wheel cleaning units for #340,000 and on 28 April 2000 it disposed of the
remainder of its non operated division, along with its site services
operations, for a consideration of #1.55million. In the aggregate, the BPH
transactions gave rise to a profit on disposal of #77,000.
Birse Construction Limited
2000 1999
Turnover Operating Turnover Operating
Profit Profit
#'000 #'000 #'000 #'0000
Civil
Engineering147,817 2,769 138,592 4,027
Building 169,824 2,728 158,373 (2,613)
Process
Engineering 45,535 (2,359) 49,421 463
363,176 3,138 346,386 1,877
Although turnover increased by 4.8% operating profit increased by 67% to
#3.138million. Net margins improved to 0.86% (1999: 0.5%). The improved
performance was led by the Building Division which not only benefited from
improving market conditions but also from the appointment of a specialist
management team led by Martin Peat as Managing Director and the closure of its
loss making South West operations in the previous year.
On balance conditions in the Civil Engineering market remained relatively
stable although a reduction in opportunities was experienced in the regulated
sectors. Process Engineering suffered from losses on a small number of
industrial projects and a falling demand in the water sector. Furthermore,
given the stage that the Water industry has reached relative to its regulatory
cycle and the potential restructuring of those regulated activities turnover
in the Process Division is likely to be significantly lower in the forthcoming
year. Although overheads will be reduced losses in this Division are likely
to continue during 2000/2001. The key action taken in the light of this set of
circumstances has been to appoint a new Divisional Managing Director in the
form of John Ruane. John comes with over twenty years experience much of it in
a senior capacity in the Process industry.
Order Book
At the end of May 2000 secured workload amounted to #306 million (1999:
#289million). The fall off in the volume of work available in the Water
sector for both Civils and Process Engineering is at present more than offset
by improved demand in the Building sector and elsewhere in the Civils market.
Re-organisation
In my statement accompanying the Group's interim results I said that Birse
Construction would be organised into three distinct operating divisions; Civil
Engineering (to include Birse Rail), Building and Process Engineering. I am
pleased to report that that restructuring was completed in line with the
planned timetable and has been fully effective from 1 May 2000. The
reorganisation was put in place to address a number of issues:-
- Accountability: in its formative years Birse Construction grew by devolving
management autonomy to the lowest level possible. I am a firm supporter of
this principal and believe that groups should be structured by specialist
activity and that the management of those businesses be made responsible for
all aspects of operations. Only those activities effecting the integrity of
the whole group should be managed centrally.
It is my belief that this form of structure allows subsidiary management to be
more fully held to account for their performance.
- Customer relationships: organising the company into smaller specialist units
allows divisional directors more time to dedicate to customers. This more
focused approach will lead to a better understanding of customer needs and
requirements which as key drivers of any business will lead to improved
performance.
- Production efficiencies: similarly a concentration upon specialist
activities will promote production efficiencies. Each of the three divisions
are different businesses with different operational requirements. It is,
therefore, essential that construction procedures and practices are allowed to
develop separately if efficiencies are to be optimised.
The divisional structure will allow us to be more demanding of divisional
management. However, it is important that if we are to be more demanding that
we are also more supportive. To this extent a team from a leading UK Business
School has been engaged to design a director development programme bespoke to
Birse Construction. This programme will marry the development needs of each
divisional director with the business results that have to be delivered. It
is my experience that there are many talented individuals in the construction
industry but that often the all round business potential inherent in this
talent is neglected due to the emphasis placed upon technical building
capabilities. I am determined that this will not happen within Birse and that
each of the divisional directors is developed to his/her full potential. It
is anticipated that after the first year of implementation of the Birse
director development scheme that this programme will form the bedrock of a
wider executive education initiative.
BPH Equipment
2000 1999
Turnover Operating Turnover Operating
Profit Profit
#'000 #'000 #'000 #'000
Crawler Cranes3,399 699 2,833 94
Piling 1,061 299 721 129
Equipment
Divisions 2,869 (65) 5,291 249
Sold
7,329 933 8,845 472
Although improved prices were obtained in the crane sector and demand improved
for piling the increase in profits derives from management concentrating upon
the company's core competencies. Prospects for further improvements are,
therefore, encouraging.
Business Disposals
It is pleasing to note that the disposals in this division referred to earlier
in my statement were completed within pre-set timescales and in the aggregate
were sold for prices ahead of book value. The businesses were sold because
they were not generating an acceptable return and under our ownership there
was little prospect of improving those returns to the level required. Clearly
BPH was not the best parent of those divisions. These are the two fundamental
tests that will form the basis of any future expansion; is the return on
capital acceptable and is BPH the best parent for the business/activity? Only
where the answer to those questions is in the affirmative will opportunities
be pursued.
Capital Investment
Since the year-end six new crawler cranes in the 55-85 tonne range have been
purchased for an aggregate consideration of #1.2million. Our recent
experience with machines of this quality is that returns on capital in excess
of 20% can be achieved. Additional funds are available for further expansion
provided that the returns on investment meet our pre-set criteria.
Commercial Property
2000 1999
Turnover* Operating Turnover Operating
#'000 Profit #'000 Profit
#'000 #'000
1,177 1,023 3,582 1,479
* Turnover excludes the proceeds arising from the sale of the Epping
investment property.
During the year the sale of the Epping investment property was completed for a
consideration of #5.1million and three acres of land were sold at Warrington.
The fall in profits is caused by the loss of rental income on those investment
properties sold in the year and in the previous year.
Following the sale of the investment property at Epping the Group's property
activities are confined to the optimum realisation of the profit inherent in
its Warrington based business park where, at 30 April 2000, 19 acres remained
undeveloped. Interest in the site remains high as a result of which sales in
the current year are expected to at least match those achieved in 1999/2000.
Strategy and Prospects
The focus of the Group is to align its core competencies with the needs of its
customers. This approach requires a clear understanding of both our own
capabilities and our customers' objectives. In pursuit of this strategy Birse
Construction has been re-organised into three distinct operating divisions;
Civil Engineering (to include Birse Rail), Building and Process Engineering.
There are signs beginning to emerge within the Construction market that higher
net margins are available. However, it is clear that those higher margins can
only be generated through production efficiencies that benefit the customer.
BPH's activities now comprise its mainstay crane and piling divisions.
Further investment in its crane fleet will facilitate additional profit
growth. Cash raised from the sale of the Group's property assets at Warrington
will release capital and improve liquidity.
Consequently I am encouraged at the opportunities for further profit growth,
improved performance and the generation of shareholder value.
Peter Watson, Chief Executive 5 July 2000
CONSOLIDATED PROFIT AND LOSS ACCOUNT
for the year ended 30 April 2000
Note 2000 1999
#'000 #'000
Turnover 1 370,336 357,525
Cost of Sales (345,489) (334,128)
Gross Profit 24,847 23,397
Administrative (20,213) (19,715)
expenses
Operating profit 1 4,634 3,682
Profit on 2 77 -
disposal of
businesses
Net interest (523) (1,493)
Profit on 1 4,188 2,189
ordinary
activities
before taxation
Taxation 3 (994) (158)
Profit for the 3,194 2,031
financial year
Dividends on 4 (1,924) (1,542)
equity shares
Transferred to 1,270 489
reserves
Earnings per 5 1.7p 1.1p
ordinary share -
basic
- diluted 5 1.7p 1.1p
The above figures relate exclusively to continuing operations.
There is no material difference between the results disclosed and the results
on an unmodified historical cost basis.
CONSOLIDATED BALANCE SHEET
As at 30 April 2000
2000 1999
#'000 #'000
Fixed Assets
Tangible assets 11,598 16,469
Investments - 5,091
11,598 21,560
Current Assets
Stocks 4,406 4,415
Debtors 147,51 125,13
7 7
Investments 2,586 -
Cash at bank and 6,201 3,856
in hand
160,71 133,40
0 8
Creditors: Amounts
falling due within
one year 134,51 117,48
4 8
Net Current Assets 26,196 15,920
Total Assets Less
Current 37,794 37,480
Liabilities
Creditors: Amounts
falling due after (3,727) (4,848)
more than one year
Provisions for
Liabilities and (265) (100)
Charges
Net Assets 33,802 32,532
Capital and
Reserves
Called up share 19,239 19,239
capital
Share premium 93 93
account
Special reserve 308 308
Revaluation 607 607
reserve
Profit and loss 13,555 12,285
account
Shareholders'
Funds - equity 33,802 32,532
interest
CONSOLIDATED CASH FLOW STATEMENT
For the year ended 30 April 2000
2000 1999
#'000 #'000 #'000 #'000
Net cash
inflow/(outflow
from
operating 8,963 (6,755)
activities
Returns on
investments
and
servicing of
finance
Interest 199 313
received
Interest (790) (1,597)
paid
Interest
element of
finance
lease
rentals and (24) (36)
hire
purchase
contracts
Net cash
outflow from
returns on
investments
and (615) (1,320)
servicing of
finance
Taxation
UK
Corporation (331) (803)
tax paid
Capital
expenditure
and
financial
investment
Purchase of
tangible
fixed assets (1,541) (4,391)
Purchase of
fixed asset - (349)
investments
Sale of
tangible 252 248
fixed assets
Sale of
fixed asset 5,008 2,061
investments
Net cash
inflow/(outflow
from
investing 3,719 (2,431)
activities
Disposal of
businesses 3,920 -
Dividends
paid to
equity (1,539) (1,537)
shareholders
Cash
inflow/(outflow
before
management
of liquid
resources 14,117 (12,846)
and
financing
Management
of liquid
resources
Movement in
cash held on
short term (2,297) 742
deposits
Movement in (2,586) -
cash
deposits
with terms
in excess of
seven days
Net cash
(outflow)/in
flow from
management
of liquid (4,883) 742
resources
Financing
Issue of
ordinary - 112
shares
Loan - 1,600
advances
Loan (9,140) (4,442)
repayments
Capital
element of
finance
lease
rentals and (46) (31)
hire
purchase
contracts
Net cash
outflow from (9,186) (2,761)
financing
Increase/
(decrease) in
cash in the year 48 (14,865)
NOTES TO THE PRELIMINARY ANNOUNCEMENT OF RESULTS
For the year ended 30 April 2000
1.
Segment
information
(a)
Turnover
and
results
Turnover Operating
Profit
2000 1999 2000 1999
#'000 #'000 #'000 #'000
(As restated)
Contracti 363,176 346,386 3,138 1,877
ng
Plant 7,329 8,845 933 472
hire
Commercial 1,177 3,582 1,023 1,479
property
Housing - 41 - -
Group - - (460) (146)
centre
Intra- (1,346) (1,329) - -
group
370,336 357,525 4,634 3,682
Profit on
disposal
of 77 -
businesses
Profit
before 4,711 3,682
interest
Net (523) (1,493)
interest
Profit on
ordinary
activities
before
taxation 4,188 2,189
So as to provide a better indication of
the volume of plant hire business
undertaken by the Group inter company
car hire turnover of #5,689,000 (1999:
#5,486,000) has been excluded from both
the intra-group and plant hire segments
and the prior year figures restated
accordingly. This restatement has no
effect on reported profits.
(b) Net
assets
2000 1999
#'000 #'000
Contracting 18,949 20,647
Plant 4,886 9,866
hire
Commercial 4,538 9,593
property
Housing - -
Group (461) (429)
centre
27,912 39,677
Unallocated
net assets/
(liabilities) 5,890 (7,145)
33,802 32,532
The above analysis reflects the segments by which the Group is managed. All
turnover arises from work performed within the United Kingdom.
2000 1999
#'000 #'000
Unallocated net
assets/(liabilities)
comprise:
Net cash at 8,787 (5,284)
bank/(bank borrowings)
Obligations under (138) (150)
finance leases and
hire purchase
contracts
Corporation tax (570) (72)
Deferred taxation (265) (100)
Dividends payable on (1,924) (1,539)
equity shares
5,890 (7,145)
Net assets for each segment represents non-interest bearing operating assets
less non-interest bearing operating liabilities
2. Disposal of Businesses
On 31 October 1999 BPH Equipment Limited completed the sale of its offshore
equipment hire and diesel engine refurbishment division based at Aberdeen. On
22 February 2000 it sold that part of its non-operated activities represented
by its fleet of wheel cleaning units. On 28 April 2000 it sold the remainder
of its non-operated division along with its site services operations.
The financial effects of these transactions are summarised below:-
2000 1999
#'000 #'000
Gross 4,390 -
consideration
Costs of (320) -
disposal
Net 4,070 -
consideration
Assets disposed
of:
Fixed assets (3,893) -
Debtors (100) -
Profit on
disposal of 77 -
businesses
The net
consideration
is made up as
follows:-
Cash received 3,920 -
Deferred 150 -
consideration
4,070 -
In the year ended 30 April 2000 the businesses sold contributed #581,000 to
net operating cash flows and utilised #207,000 for capital expenditure. The
amount of tax attributable to the profit on disposal is #7,000.
3. Taxation
2000 1999
#'000 #'000
United Kingdom
corporation
tax at 30% 828 286
(1999: 31%)
Deferred tax 165 (150)
993 136
Adjustment to
prior years'
tax provision
Corporation 1 22
tax
994 158
The tax charge for the year is reduced below the expected rate of 30% as a
result of timing differences relating to unrelieved losses not previously
recognised for deferred tax purposes net of certain expenditure disallowed for
corporation tax. These losses relate to the Group's commercial property
activities. Unrelieved tax losses available for relief against future profits
generated by that business amount to #5.9million.
4. Dividends on equity shares
2000 1999
#'000 #'000
Interim
0.375p per
ordinary
share (1999 721 577
- 0.3p)
Final
proposed
0.625p per
ordinary 1,203 965
share (1999
- 0.5p)
1,924 1,542
The interim dividend was paid on 4 May 2000. Subject to the approval of
shareholders at the Annual General Meeting the final dividend will be paid on
2 November 2000 to shareholders appearing on the register at the close of
business on 6 October 2000.
5.
Earnings per ordinary share
2000 1999
#'000 #'000
Earnings for
basic and
diluted 3,194 2,031
earnings per
share calculation
2000 1999
Thousands Thousands
Weighted average
number of shares
used in basic
earnings 192,390 192,322
per share
calculation
Dilutive effect of - -
options
Weighted average
number of shares
used in diluted
earnings per share 192,390 192,322
calculation
6. Net cash at bank/(bank borrowings)
2000 1999
#'000 #'000
Net cash at
bank/(bank
borrowings)
comprise:
Cash at bank - 1,068 1,020
on demand
- on short term 5,133 2,836
deposit
- on deposit with
terms in excess of 2,586 -
seven days
Bank loans and
overdrafts:
Due within one year - (8,338)
Due after one year - (802)
8,787 (5,284)
7. Financial information
The financial information incorporated in this announcement does not
constitute full statutory accounts within the meaning of the Companies Act
1985. Full accounts for the year ended 30 April 1999 upon which Deloitte &
Touche have given an unqualified audit report have been filed with the
Registrar of Companies. Full accounts for the year ended 30 April 2000 upon
which Deloitte & Touche have given an unqualified audit report will be filed
with the Registrar of Companies in due course. Neither report contained
statements under Section 237(2) or (3) of the Companies Act 1985.
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