RNS Number:2609G
Birse Group PLC
3 July 2001
PRELIMINARY ANNOUNCEMENT
Embargoed until 7.00am 3rd July 2001
Contact:
Peter Watson, Chief Executive Telephone: 01652 633222
Martin Budden, Finance Director
Birse Group plc
Scott Fulton Telephone: 0207 831 3113
Financial Dynamics
BIRSE REPORTS STRONG SECOND HALF RECOVERY
Birse Group plc today announces preliminary results for the year ended 30
April 2001.
These may be summarised as follows:-
o Pre-tax profits, before exceptional items, of #4.6million in second
half reduce full year pre-exceptional loss to #2.1million (2000: profit of
#4.2million).
o Exceptional items total #27.7million as exposure to litigation
contracts is significantly reduced.
o Birse Construction leads improvement in second half.
o BPH Equipment increases profit to #1.3million (2000: #933,000).
o Rising land prices at Warrington drive up Birse Properties' profits
to #2million (2000: #1million).
o Record Construction order book; #420million at 31 May 2001 (2000: #
306million).
o Net cash at #9.1million (2000: #8.8million).
o Dividend maintained at 1p per share.
Commenting on the results, Chief Executive Peter Watson said:
"An eventful year that began on a negative note has ended positively. The
improved performance in the second half led by a strong recovery in Birse
Construction combined with record order levels is encouraging. With
conditions in each of the sectors in which we operate better than at any time
in recent years I believe that we now have a platform for positive progress."
PRELIMINARY STATEMENT
Results
Pre-tax profits, before exceptional operating items, of #4.6million generated
in the second half have reduced the loss reported at the interim stage from #
6.7million to #2.1million for the full year (2000: profits of #4.2million).
Exceptional operating items amount to #27.7million and accrue from litigation
involving Birse Construction mainly in relation to the Priory Meadow Shopping
Centre and Lower Rhymney Valley Relief Road projects. Group turnover
increased from #370million to #423million.
Birse Construction was the main driver behind the improvement in the second
half delivering an operating profit before exceptional operating items in that
period of #3.2million despite continued losses in its Process Engineering
Division of #3.4million. Its full year operating loss before exceptionals of
#4.6million (2000: profit of #3.1million) includes a loss of #9.4million
attributable to Process Engineering. Plant Hire improved results increasing
operating profits to #1.3million from #0.933million earned in the previous
year. Favourable market conditions assisted the Group's Commercial Property
activities in increasing operating profits to #2million (2000: #1million).
The net interest charge fell to #0.159million (2000: #0.523million) reflecting
a fall in average net borrowings. At 30 April 2001 the Group had a net cash
position of #9.1million including amounts held on deposit as investments (30
April 2000: #8.8million).
The Board is recommending a final dividend of 0.625p per ordinary share (2000:
0.625p) maintaining the total dividend for the year at 1p per ordinary share
(2000: 1p). Subject to the approval of shareholders at the Annual General
Meeting the final dividend is payable on 1 November 2001 to shareholders
appearing on the register at the close of business on 5 October 2001.
Operational Overview
The first half of the year was dominated by the losses accruing from the
litigation involving Birse Construction in relation to the Priory Meadow
Shopping Centre, Hastings and the Lower Rhymney Valley Relief Road projects.
Both projects have been the subject of announcements to the London Stock
Exchange and were commented upon in some detail in my interim report. At that
time I referred to a number of issues that remained unresolved in respect of
the Rhymney Project. I am pleased to report that all outstanding matters in
relation to that case have now been settled. Of the seven other contracts
which were the subject of arbitration or equivalent proceedings at the half
year four have since been resolved. The settlement of these disputes not only
reduces risk but also raises cash and most importantly releases management
resource that can be assigned to the development of future business rather
than dealing with the past.
A strong second half performance was based upon each Group Company trading
profitably despite continued losses in the Process Engineering Division of
Birse Construction. Curtailing losses in that Division is one of my prime
objectives for 2001/2002 and I am satisfied that the worst is now behind us in
this respect.
BPH Equipment increased its operating profits from #933,000 in 2000 to #
1.3million with its Crawler Crane Division leading the way by contributing #
890,000 of that profit. During the year the crawler crane fleet was increased
by six machines at a cost of #1.2million. Investment in piling equipment
amounted to #350,000. Since the year end further amounts of #500,000 and #
244,000 have been invested in the crawler crane and piling fleets
respectively. I consider that improving the quality of our fleets is the best
way to take advantage of increasing demand and thereby optimise the
performance of the business. Substantially increasing the size of those
fleets will only happen when a simultaneous increase in market share is
secured.
Land sales at Warrington continue to complete at an accelerating rate with
just over eight acres sold in the year compared with two and a half acres in
1999/2000. Prices secured for this land have also been increasing.
Activities and results continue to flow from our guiding strategy of aligning
core competencies with the needs of customers. Understanding our customers
combined with a focus on these competencies will generate future growth and
improved results.
The re-organisation of Birse Construction into three distinct operating
divisions instigated from 1 May 2000 is now embedded in operations. We are
beginning to see some of the benefits anticipated from specialisation. As a
result of getting closer to our markets and having a better understanding of
our customers the Divisions have created specialist capabilities. Within the
Civil Engineering Division we have Birse Rail and a dedicated London
Underground operation. The Building Division has specialist sub divisions for
logistics and sports stadia. In addition Ian Russell has been recruited as
director responsible for Hotels and Leisure. These initiatives provide even
greater impetus in developing the standard of market knowledge and
understanding of customers' needs that our business requires. At the
appropriate time I intend to progress further the Divisional re-organisation
by establishing the three businesses as independent corporate entities.
Incorporation will provide further autonomy, a platform for expansion and a
framework within which more challenges can be made of divisional directors
thereby increasing the pace of development of their businesses.
Birse Construction Limited
2001 2000
Turnover Operating Turnover Operating
(loss)/profit* profit/(loss)
#'000 #'000 #'000 #'000
Civil Engineering 168,646 826 147,817 2,769
Building 221,626 3,941 169,824 2,728
Process Engineering 24,647 (9,374) 45,535 (2,359)
414,919 (4,607) 363,176 3,138
Analysed between:-
First Half 190,383 (7,776) 176,287 1,713
Second Half 224,536 3,169 186,889 1,425
414,919 (4,607) 363,176 3,138
* Before exceptional operating items.
The strong second half performance was led by the Building Division.
Increased turnover giving rise to a more efficient recovery of overheads and
the absence of loss making contracts were the main reasons for the
improvement. Performance in the Civil Engineering Division was held back by
low margins on some of its larger contracts. The rate of losses incurred by
the Process Engineering Division slowed down in the second half. However, the
full benefit of the actions taken to turnaround that business will not be seen
until a critical mass of turnover is secured.
Given the investment planned for the rail and London Underground networks and
with the capital budgets of a number of Government Departments set to
increase, more infrastructure opportunities should be available to the Civil
Engineering Division in the year ahead particularly bearing in mind the
present low level of new build spend in the Water sector. Any uplift in
investment in this sector should be of even more benefit to the Process
Engineering Division. An expansion of opportunities will allow each business
to concentrate on the type of project where historically superior margins have
been available. Favourable conditions in the property development market and
the shortage of suitable industrial and office space have fuelled an increase
in business in the Building sector. We have not detected any signs that these
positive features are likely to change in 2001/2002.
Order Book
At the end of May 2001 secured workload stood at #420million (2000: #
306million).
Amounts Recoverable on Contracts
At the interim stage it was reported that Birse Construction had seven old
contracts that remained the subject of arbitration or equivalent proceedings.
I am pleased to report that four of these cases have reached a negotiated
settlement. Furthermore, all of the outstanding matters in relation to the
Rhymney project have now been resolved. Whilst a negotiated settlement is not
always possible if the company's commercial interests are to be upheld I still
favour strongly this approach.
We are now close to the point where this legacy from the past will be well and
truly behind us. The exceptional operating losses of #27.7million represent
the losses incurred in relation to the Hastings and Rhymney projects together
with the un-recovered costs in relation to the four settlements negotiated
since the half year and a net realisable value provision.
Plant Hire
2001 2000
Turnover Operating Turnover Operating
profit profit
#'000 #'000 #'000 #'000
Crawler Cranes 3,554 890 3,399 699
Piling Equipment 1,077 443 1,061 299
Divisions Sold - - 2,869 (65)
4,631 1,333 7,329 933
Analysed between:-
First Half 2,467 717 4,405 627
Second Half 2,164 616 2,924 306
4,631 1,333 7,329 933
Traditionally second half performance deteriorates compared with the first
half due to the reduction of available hires in and around the Christmas and
New Year industry holiday period.
The results achieved in the year represent a 26.0% return on average capital
employed compared with 12.6% in 1999/2000. This reflects the benefits arising
from the concentration upon the company's mainstay crawler crane and piling
operations. Demand for piling equipment was particularly strong in the early
part of the year. Good utilisation has been achieved on the six new crawler
cranes acquired part way through this year and on the ten acquired last year.
We will continue the policy of improving the quality of the fleet so as to
minimise downtimes, maximise utilisations and therefore optimise returns in
busier periods.
With effect from 1 May 2001 the Group's internal site accommodation hire
division has been set up as an independent operation trading as The Cabin
Company Limited. In future periods its results will be reported as part of
the plant hire sector.
Commercial Property
2001 2000
Turnover Operating Turnover Operating
profit profit
#'000 #'000 #'000 #'000
4,409 1,965 1,177 1,023
Analysed between:-
First Half 1,696 793 1,177 401
Second Half 2,713 1,172 - 622
4,409 1,965 1,177 1,023
Reported turnover represents the aggregate of the initial consideration on
land sales transacted in the year and contingent consideration in respect of
earlier completions. All turnover relates to the Group's Warrington site.
During the year 8.2 acres of land were sold (2000: 2.5 acres) for a total
initial consideration of #3million (2000: #615,000). Contingent consideration
crystallising in the year amounted to #1.409million (2000: #562,000). As at
30 April 2001 there remains ten acres of land to be sold.
Outlook
An eventful year that began on a negative note has ended positively. The
improved performance in the second half led by a strong recovery in
Construction combined with record order levels is encouraging. The conditions
in each of the sectors in which we operate are better than at any time in
recent years. Many of our major operational problems are behind us. I
believe that we now have a platform for positive progress.
Peter Watson, Chief Executive 3 July 2001
CONSOLIDATED PROFIT AND LOSS ACCOUNT
For the Year Ended 30 April 2001
Before Exceptional 2001 2000
Exceptional Items Total (Restated)
Items
Note #'000 #'000 #'000 #'000
Turnover 1 423,423 - 423,423 370,336
Cost of sales:
Ordinary trading (403,963) -(403,963)(345,489)
Exceptional operating 3
items - (27,663) (27,663) -
(403,963) (27,663)(431,626)(345,489)
Gross (loss)/profit 19,460 (27,663) (8,203) 24,847
Administrative expenses (21,371) (20,213)
Operating (loss)/profit 1 (29,574) 4,634
Profit on disposal of businesses 4 - 77
Net interest (159) (523)
(Loss)/profit on ordinary
activities before taxation (29,733) 4,188
Taxation 5 3,525 (1,076)
(Loss)/profit for the financial (26,208) 3,112
year
Dividends on equity shares 6 (1,924) (1,924)
(Withdrawn from)/transferred to
reserves (28,132) 1,188
(Loss)/earnings per ordinary
share
basic 7 (13.6)p 1.6p
diluted 7 (13.8)p 1.6p
- before exceptional items
basic 7 0.2p 1.6p
diluted 7 0.2p 1.6p
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 2001
2001 2000
(Restated)
#'000 #'000
Fixed Assets
Tangible assets 12,241 11,598
Current Assets
Stocks 2,714 4,406
Debtors 127,789 147,517
Investments 3,743 2,586
Cash at bank and in hand 6,890 6,201
141,136 160,710
Creditors: Amounts falling due within one year 142,461 134,514
Net Current (Liabilities)/Assets (1,325) 26,196
Total Assets Less Current Liabilities 10,916 37,794
Creditors: Amounts falling due after more than one year (5,156) (3,727)
Provisions for Liabilities and Charges - (175)
Net Assets 5,760 33,892
Capital and Reserves
Called up share capital 19,239 19,239
Share premium account 93 93
Special reserve 308 308
Revaluation reserve 607 607
Profit and loss account (14,487) 13,645
Shareholders' Funds - equity interest 5,760 33,892
CONSOLIDATED CASH FLOW STATEMENT
For the year ended 30 April 2001
2001 2001 2000 2000
#'000 #'000 #'000 #'000
Net cash inflow from operating activities 5,591 8,963
Returns on investments and servicing of finance
Interest received 281 199
Interest paid (457) (790)
Interest element of finance lease rentals and
hire purchase contracts (18) (24)
Net cash outflow from returns on investments and
servicing of finance (194) (615)
Taxation
UK Corporation tax paid (90) (331)
Capital expenditure and financial investment
Purchase of tangible fixed assets (2,653) (1,541)
Increase in current asset investments (1,000) -
Sale of tangible fixed assets 522 252
Sale of fixed asset investments - 5,008
Net cash (outflow)/inflow from investing
activities (3,131) 3,719
Disposal of businesses 150 3,920
Dividends paid to equity shareholders (1,924) (1,539)
Cash inflow before management of liquid resources
and financing 402 14,117
Management of liquid resources
Movement in cash held on short term deposits (7,375) (2,297)
Movement in cash deposits with terms in excess of
seven days (157) (2,586)
Net cash outflow from management of liquid
resources
(7,532) (4,883)
Financing
Loan advances 1,200 -
Loan repayments (700) (9,140)
Capital element of finance lease rentals and hire
purchase contracts (56) (46)
Net cash inflow/(outflow) from financing 444 (9,186)
(Decrease)/increase in cash in the year (6,686) 48
NOTES TO THE PRELIMINARY ANNOUNCEMENT OF RESULTS
For the year ended 30 April 2001
1. Segment Information
(a) Turnover and results: Turnover Operating (loss)/
profit
2001 2000 2001 2000
#'000 #'000 #'000 #'000
Contracting 414,919 363,176 (4,607) 3,138
Plant hire 4,631 7,329 1,333 933
Commercial property 4,409 1,177 1,965 1,023
Group centre - - (602) (460)
Intra-Group (536) (1,346) - -
423,423 370,336 (1,911) 4,634
Exceptional operating items - Contracting (27,663) -
Operating (loss)/profit (29,574) 4,634
Profit on disposal of businesses - 77
(Loss)/profit before interest (29,574) 4,711
Net interest (159) (523)
(Loss)/profit on ordinary activities (29,733) 4,188
before taxation
(b) Net assets: 2001 2000
#'000 #'000
Contracting (15,378) 18,949
Plant hire 5,364 4,886
Commercial property 5,515 4,538
Group centre (522) (461)
(5,021) 27,912
Unallocated net assets 10,781 5,980
5,760 33,892
The above analysis reflects the segments by which the Group is managed. All
turnover arises from work performed within the United Kingdom.
2001 2000
#'000 #'000
Unallocated net assets comprise:
Current asset investments 3,743 2,586
Net cash at bank 6,390 6,201
Obligations under finance leases and hire purchase contracts (298) (138)
Corporation tax 240 (570)
Deferred taxation 2,630 (175)
Dividends payable on equity shares (1,924) (1,924)
10,781 5,980
Net assets for each segment represents non-interest bearing operating assets
less non-interest bearing operating liabilities.
2. Prior Year Adjustment
The adoption of Financial Reporting Standard ("FRS") 19 'Deferred Tax' has
resulted in the comparatives being restated as follows:
Deferred Shareholders'
Taxation Funds
#'000 #'000
2000 as previously reported (265) 33,802
Adoption of FRS 19 90 90
2000 as restated (175) 33,892
The effects on the profit and loss account in the current and previous years
arising from the adoption of FRS 19 are as follows:-
2001 2000
#'000 #'000
Deferred taxation credit/(charge) 2,630 (82)
Other than as described above the consolidated profit and loss account,
balance sheet and cash flow statement have been prepared on the basis of the
accounting policies set out in the Group's accounts for the year ended 30
April 2000.
3. Exceptional Operating Items
Exceptional operating items comprise non-recoverable costs arising in relation
to the following projects in respect of which Birse Construction Limited
issued proceedings for the recovery of amounts due under the respective
contracts.
2001 2000
#'000 #'000
Lower Rhymney Valley Relief Road 7,500 -
Priory Meadow Shopping Centre, Hastings 16,000 -
Other 4,163 -
27,663 -
In the case of the Rhymney contract the losses are largely in consequence of
the level of award made by the arbitrator and in the case of the Hastings
contract the losses arise as a direct result of the settlement made by the
parties. The loss on the other contracts represents the financial effect of
settlement and includes a net realisable value provision of #755,000 in
respect of those cases awaiting settlement. The amount of the tax credit for
the year attributable to these exceptional losses is #1,000,000.
4. 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 2001 2000
below:
#'000 #'000
Gross consideration - 4,390
Costs of disposal - (320)
Net consideration - 4,070
Assets disposed of:
Fixed assets - (3,893)
Debtors - (100)
Profit on disposal of businesses - 77
The net consideration is made up as follows:
Cash received - 3,920
Deferred consideration - 150
- 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 of #77,000 was #7,000.
The deferred consideration of #150,000 was received in the year ended 30 April
2001.
5. Taxation 2001 2000
#'000 #'000
Corporation Tax
United Kingdom corporation tax at 30% on (losses)/
profits of the year 720 (828)
Under provision for prior years - (1)
720 (829)
Deferred Tax
Timing differences, origination and reversal 1,775 (247)
Adjustments to estimated recoverable amounts of
deferred tax assets arising in previous years' 1,030 -
2,805 (247)
Tax on (loss)/profit on ordinary activities 3,525 (1,076)
The tax credit for the year is below the expected rate of 30% - the
differences are explained below:
2001 2000
#'000 #'000
(Loss)/profit on ordinary activities before tax (29,733) 4,188
Expected tax credit/(charge) at 30% 8,920 (1,256)
Expenses not deductible for tax purposes (216) (234)
Tax losses for which no deferred tax asset recognised (5,228) 377
Overseas earnings not subject to tax 49 38
Adjustment to previous years' tax charge - (1)
_____ ______
Tax credit/(charge) on (loss)/profit on ordinary activities 3,525 (1,076)
Deferred taxation
Deferred tax liability at 1 May 2000 (175)
Profit and loss account 2,805
Deferred tax asset at 30 April 2001 2,630
The amounts of deferred taxation assets/(liabilities) provided and unprovided
in the accounts at the rate of 30% (2000: 30%) are:-
Provided Unprovided
2001 2000 2001 2000
#'000 #'000 #'000 #'000
Tax losses 2,630 - 6,230 -
Timing differences relating to Birse - (75) (130) (90)
Insurance
Capital allowances - (150) 1,025 300
Other short term timing differences - 50 - -
2,630 (175) 7,125 210
The deferred tax asset recognised is based upon the estimated tax losses of
the relevant businesses that can be relieved in the foreseeable future after
taking into account the historical performance of those businesses.
6. Dividends on equity shares 2001 2000
#'000 #'000
Interim: 0.375p per ordinary share (2000: 0.375p) 721 721
Final proposed: 0.625p per ordinary share (2000: 0.625p) 1,203 1,203
1,924 1,924
7. (Loss)/earnings per ordinary share 2001 2000
#'000 #'000
The calculation of (loss)/earnings per ordinary share is
based on:
(Loss)/earnings for basic and diluted (loss)/earnings per
ordinary share calculation (26,208) 3,112
Exceptional items 27,663 (77)
Tax on exceptional items (1,000) 7
_______ _______
Earnings before exceptional items per ordinary share 455 3,042
calculation
2001 2000
Thousands Thousands
Weighted average number of shares used in basic earnings
per ordinary share calculation 192,390 192,390
Dilutive effect of options (2,470) -
Weighted average number of shares used in diluted earnings
per ordinary share calculation 189,920 192,390
8. Net cash at bank 2001 2000
#'000 #'000
Net cash at bank comprises:
Cash at bank on demand (5,618) 1,068
on short term deposit 12,508 5,133
on deposit with terms in excess of 2,743 2,586
seven days
Bank loans:
Due within one year (400) -
Due after one year (100) -
9,133 8,787
9. Debtors; uncertainty relating to amounts recoverable on contracts
Included in debtors is an aggregate value of #6.7million attributable to
contractual amounts relating to three contracts which are the subject of
arbitration or equivalent proceedings.
In consequence of the losses suffered on the Hastings and Rhymney contracts
(see Note 3) the Directors have re-considered the recoverability of the
amounts attributable to these and other old contracts. Whilst the Directors
believe that they are justified in concluding that these amounts will be
realised, the Directors acknowledge that there remains uncertainty. However,
it is not possible to quantify the effects.
10. 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 2000 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 2001 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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