RNS Number:1036Y
Birse Group PLC
3 July 2002
Date: Embargoed until 7.00am 3rd July 2002
Contact: Peter Watson, Chairman Telephone: 01652 633222
Martin Budden, Group Managing Director
Heather Appleford, Group Finance Director
Birse Group plc
Scott Fulton Telephone: 0207 831 3113
Financial Dynamics
BIRSE GROUP plc - PRELIMINARY ANNOUNCEMENT
Birse Group plc, the construction, plant hire and property group today announces
preliminary results for the year ended 30 April 2002.
These may be summarised as follows:-
Pre-tax profits of £6.7million (2001: loss of £29.7million).
Exceptional credit of £1.5million (2001: exceptional operating losses of
£27.7million).
Pre-tax profits of £5.2million before exceptional item (2001: Pre-tax loss of
£2.1million).
Improvement led by Birse Construction - operating profit of £2.4million (2001:
loss of £5.3million before exceptional operating items).
Plant Hire increases profit to £2.4million (2001: £2million).
Record Construction order book; £470million at 31 May 2002 (2001: £420million).
Net cash at £12.7million (2001: £9.1million).
Dividend 1p per share (2001: 1p per share).
"The turnaround in Birse's results this year has been particularly pleasing
after the difficult period in the previous year. With our main markets expected
to remain steady, Birse is well positioned to progress further."
M Budden P G Watson
CHAIRMAN'S STATEMENT
Results
Pre-tax profits of £6.7million compare with pre-tax losses of £29.7million
incurred in 2000/2001. The former figure has benefited from an exceptional
credit of £1.5million relating to the sale of Birse Homes Limited in 1995; the
comparative figure is after charging exceptional contract losses of
£27.7million. Eliminating the effects of these non-recurrring items gives rise
to a pre-tax pre exceptional profit of £5.2million in the year under review
compared with a corresponding loss of £2.1million in the preceding year.
The improved Group performance is mirrored in the performance of Birse
Construction. That company delivered an operating profit of £2.4million
compared with an operating loss before exceptionals of £5.3million in 2000/2001.
A reduction of operating profit in its Building Division was more than offset
by an increase in profits in its Civil Engineering business (2001/2002 operating
profit of £4.9million; 2000/2001 operating profit £528,000). There was also a
significant reduction in the losses incurred by its Process Engineering
Division. In the previous year that business produced an operating loss of
£9.5million compared with £2.7million in the current year of which £2.2million
was incurred in the first half. These results reflect the considerable progress
made in turning round that operation. Plant Hire improved results for the third
year running increasing operating profits to £2.4million from £2million. The
Group's Commercial Property activities reported an operating profit of £762,000
(2000/2001: £2million) reflecting a more selective approach to sales with a view
to optimising returns.
The exceptional credit of £1.5million relates to the disposal of Birse Homes
Limited. The sale of that company was completed in 1995 on terms involving
deferred consideration dependent upon the satisfaction of certain conditions.
Those conditions were satisfied in the second half of the year giving rise to a
cash receipt net of related costs of the amount in question in April 2002.
The net interest credit of £179,000 (2000/2001: charge of £159,000) reflects the
trend established by the Group over the last six years of managing a reduction
of its net borrowings. At 30 April 2002 the Group had a net cash position of
£12.7million including amounts held on deposit as investments (30 April 2001:
£9.1million).
Dividend
The Board is recommending a final dividend of 0.625p per ordinary share (2001:
0.625p) maintaining the total dividend for the year at 1p per ordinary share
(2001: 1p). Subject to the approval of shareholders at the Annual General
Meeting the final dividend is payable on 1 November 2002 to shareholders
appearing on the register at the close of business on 4 October 2002.
The Board
On 16 August 2001 the Board announced the retirement of Peter Birse and the
consequent appointments of myself as Chairman, Martin Budden as Group Managing
Director and Heather Appleford as Group Finance Director. At the same time John
Elders, the Managing Director of Birse Construction Limited, left the Group.
David Goose subsequently left the Group with effect from 28 May 2002.
It would be remiss of me not to pay tribute to Peter upon his retirement. Peter
founded the Group some thirty years ago and oversaw its development from those
humble beginnings to flotation in 1989. His energy, integrity, professionalism
and entrepreneurial spirit are values that are embedded in the business today.
He can be rightly proud of his achievements as we are proud of the business that
still bears his name.
On 23 April 2002 the Group's team of Non Executive Directors reverted to three
in number following the appointment of David Cotterill. David brings with him
extensive experience at senior levels in various engineering businesses. He is
currently a Non-Executive Director of British Vita plc and was formerly Chief
Executive of Renold plc and a Director of Senior Engineering Group plc.
Outlook
At the end of 2001 it was reported that we had a platform for positive progress.
Evidence of further progress was reported at the half year despite
uncertainties emerging in relation to the macro economic picture and the future
of Railtrack. By and large those uncertainties have diminished as a result of
which there is no reason to expect any significant change in the Group's main
markets. The Group is, therefore, in a position to progress further
particularly given the turnaround of results achieved in the year under review.
GROUP MANAGING DIRECTOR'S REVIEW AND REVIEW OF OPERATIONS
Overview
Following a difficult 2001 it was important that the Group returned to
profitability in 2002 and more particularly that Birse Construction delivered a
profit. Fundamental to the turnaround of that company was a turnaround of its
Process Engineering Division. Operating losses incurred by that business in
2000/2001 amounted to £9.5million. Losses have been reduced to £2.7million in
the present year with the business effectively performing at break-even level in
the last quarter. More importantly that business is now run by a competent and
professional management team and has blue-chip customers willing to award it
work. More detailed commentary upon the performance of Birse Construction is
provided below. Suffice to say that its Civil Engineering Division produced a
strong performance while market conditions proved very demanding in relation to
its Building Division.
BPH Equipment's operating profit fell from £1.3million to £1.1million after a
strong performance from its hydraulic crane fleet was more than absorbed by a
fall in demand for mechanical crawler cranes. It remains a priority for the
business that the quality of its hire fleet is improved by investing new money
in hydraulic cranes whilst at the same time reducing the number of mechanical
machines in its portfolio. Investment in hydraulic cranes in the year amounted
to £0.5 million whilst disposals of mechanical machines amounted to four in
number. Overall the results of the Plant Hire sector increased due to a strong
performance from The Cabin Company Limited, the Group's site accommodation hire
business. Operating profits increased to £1.3million from £716,000 achieved in
2000/2001.
Land sales at Warrington fell due to the more selective approach adopted with a
view to optimising prices and maximising future development opportunities.
During the year five acres of land adjacent to the existing site were acquired.
Opportunities to add further to our Warrington landbank will only be exploited
where value opportunities are clearly visible. Warrington remains the Group's
only development site.
The Group's activities are now structured around three areas of operation,
Construction, Plant Hire and Commercial Property Development. In addition each
central service function has been set up on the basis of a supplier/customer
relationship with the operations it services. Not only does this structure
engender a focus on the customer attitude which is a fundamental requirement of
all our businesses but it also allows us to incubate potential new trading
ventures. This was the model adopted with regard to The Cabin Company Limited
which for the first three years of its life traded as the Group's internal Site
Accommodation Division. Now established as an independent operating unit, it is
trading with customers external to the Group. We will remain alert for
opportunities to repeat this model albeit on a selective basis.
Further alignment of the Group's organisational structure with its strategic
objectives was achieved in the year with the incorporation on 30 April 2002 of
the various operating businesses which previously comprised the trading
divisions of Birse Construction. As a result the Construction Division now has
independent corporate entities dedicated to civil engineering, rail, London
Underground, build, stadia, process and water engineering. Each of these
businesses has its own board of directors focused upon specific customers and
markets delivering products aligned with core competencies in a safe manner all
in tandem with a business unit strategy aimed at either creating or maintaining
a competitive advantage.
It is a fundamental value of this Group that all its business is undertaken in a
manner that protects the safety of everyone associated with our operations
whether they be customers, suppliers or our own staff.
Having surpassed all previous achievements in 2001 with the accreditation of
twelve gold awards and one silver award from the Royal Society for the
Prevention of Accidents this record was broken again in 2002 with the allocation
of thirteen gold awards.
Whilst we are rightly proud of our achievements resulting in these awards we
cannot be satisfied until all accidents are eliminated from our operations.
This will involve not only appropriate management at a functional level but also
the strategic intent and commitment from top management and the embedding of an
attitude in all our staff, customers and supplier colleagues that one accident
is one too many.
Birse Construction Limited
2002 2001
Turnover Operating Turnover Operating
profit/(loss) (loss)/profit*
£'000 £'000 £'000 £'000
Civil Engineering 214,868 4,888 168,646 528
Building 246,127 269 221,626 3,643
Process Engineering 20,837 (2,745) 24,647 (9,494)
481,832 2,412 414,919 (5,323)
Analysed between:-
First Half 244,263 154 190,383 (8,085)
Second Half 237,569 2,258 224,536 2,762
481,832 2,412 414,919 (5,323)
* Before exceptional operating items.
The Civil Engineering Division comprises Birse Rail Limited, Birse Metro Limited
(a dedicated London Underground business) and Birse Civils Limited. Its strong
profit performance derives from buoyant demand from the rail and infrastructure
markets and a more effective performance by management. Market demand remains
relatively strong and with the water sector expected to place orders at a higher
aggregate value than in the year under review 2002/2003 should see demand
increase. However, a feature of a number of market sectors has been for major
customers to bundle together projects that previously would have been let as
individual contracts under one framework type arrangement. These arrangements
thereby produce somewhat of an 'all or nothing' situation in terms of job
awards. It is, therefore, important that we are competitive under these new
customer procurement practices.
The results reported by the Building Division were depressed because of poor
returns on two of its larger projects and a negative contribution of £335,000 in
relation to an under priced contract. Furthermore, this division experienced a
fall off in the level of enquiries from around the end of September and had
difficulties with matching operational resources and capabilities with activity
levels particularly in the South where it has clearly been over-stretched.
Whilst enquiry levels outside the sports stadia sector have returned to pre
September levels prices remain tight. Considerable uncertainty exists in
relation to the stadia market directly consequent upon the well documented
financial problems in the football industry. Given this uncertainty, the low
margins available generally, the impact of falling enquiries in the middle of
the year (this will effect adversely workload in 2002/2003) and resource
allocation issues this Division is expected to trade at a loss in 2002/2003
despite the mitigating actions of management.
By any standard the results achieved by the Process Engineering Division
indicate a material turnaround of operations. Further evidence that this
business has established credibility with the market place was provided
following the award and successful completion of a small number of major
contracts from blue-chip customers in the water industry. With this sector
about to increase significantly its capital and maintenance spend market
conditions should continue to improve.
With Birse Construction facing relatively strong demand in each of its areas of
operations managing resources will be a challenge facing management that has not
had to be dealt with in the immediate past. It will be essential that we remain
selective if we are to meet the requirements of our customers. It is only
through meeting those requirements that results will improve.
Order Book
At the end of May 2002 secured workload stood at £470 million (2001:
£420million).
Amounts Recoverable on Contracts
Included in debtors at 30 April 2002 is an aggregate value of £6.2 million
(2001: £6.7million) attributable to two (2001: three) contracts which remain the
subject of arbitration or equivalent proceedings. The case settled in the year
was resolved by way of negotiation. The two outstanding cases at this point in
time remain subjects of due process. Consequently as described in Note 8 to
this announcement recoverability of value remains uncertain.
Plant Hire
2002 2001
Turnover Operating Turnover Operating
profit profit
£'000 £'000 £'000 £'000
Crawler Cranes 3,508 849 3,554 890
Piling Equipment 942 259 1,077 443
Site Accommodation 4,142 1,277 1,263 716
8,592 2,385 5,894 2,049
Analysed between:-
First Half 4,157 1,215 3,104 1,026
Second Half 4,435 1,170 2,790 1,023
8,592 2,385 5,894 2,049
With effect from 1 May 2001 the Group's internal Site Accommodation Division was
incorporated and commenced trading as an independent operating unit under the
name of The Cabin Company Limited. All comparative figures have been restated
on a pro-forma basis as though The Cabin Company Limited had operated
independently from 1 May 2000. During the second half of the year The Cabin
Company commenced trading with its first external customers. Whilst operational
efficiencies still remain to be secured the Company's longer term growth in
profits will only be achieved if it is successful in serving the external
market. To support this expansion capital expenditure of £2million for the
forthcoming year has been approved.
Upon the departure of David Goose from the Group, Graham Booth was appointed
Managing Director of BPH Equipment. Graham, aged 55, has been in plant hire all
his working life and had been Operations Director of BPH since 1989. The
Crawler Cranes and Piling Equipment operations continue to trade as divisions of
BPH. The downward trend in demand for mechanical crawler cranes continued
albeit it at a faster rate than anticipated thereby depressing performance
compared with the previous year. With this worsening trend we are accelerating
our medium term objective to build a fleet comprising exclusively of hydraulic
machines. The Piling business suffered from a lack of orders for its larger
hammers. Given that these assets tend to be employed on major construction
projects the increased number of those contracts expected in future years should
benefit BPH.
Commercial Property
2002 2001
Turnover Operating Turnover Operating
profit profit
£'000 £'000 £'000 £'000
1,217 762 4,409 1,965
Analysed between:-
First Half - 114 1,696 793
Second Half 1,217 648 2,713 1,172
1,217 762 4,409 1,965
Reported turnover represents the aggregate of the initial consideration on land
sales transacted in the year and contingent consideration in respect of earlier
completions. During the year 1.4 acres of land were sold (2001: 8.2acres) for
an initial consideration of £0.6million (2001: £3million). Although more sales
could have been achieved in the circumstances this would have had the effect of
either depressing future prices or restricting the development potential of the
remaining land. Contingent consideration crystallising in the year amounted to
£0.6million (2001: £1.4million). Following the purchase of an additional five
acres of land there remains 14 acres of land to be sold or developed.
CONSOLIDATED PROFIT AND LOSS ACCOUNT
For the Year Ended 30 April 2002
2002 2001
Note £'000 £'000
Turnover 1 487,238 423,423
Cost of sales:
Ordinary trading (458,773) (403,963)
Exceptional operating items 2 - (27,663)
(458,773) (431,626)
Gross profit/(loss) 28,465 (8,203)
Administrative expenses (23,414) (21,371)
Operating profit/(loss) 1 5,051 (29,574)
Profit on disposal of subsidiary undertaking 3 1,499 -
Net interest 179 (159)
Profit/(loss) on ordinary activities before
taxation 1 6,729 (29,733)
Taxation 4 (400) 3,525
Profit/(loss) for the financial year 6,329 (26,208)
Dividends on equity shares 5 (1,924) (1,924)
Transferred to/(withdrawn from) reserves 4,405 (28,132)
Earnings/(loss) per ordinary share
- basic 6 3.3p (13.6)p
- diluted 6 3.3p (13.8)p
- before exceptional items
- basic 6 2.5p 0.2p
- diluted 6 2.5p 0.2p
The above figures relate exclusively to continuing operations except for the
profit on disposal of subsidiary undertaking (Note 3).
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 2002
2002 2001
£'000 £'000
Fixed Assets
Tangible assets 14,187 12,241
Current Assets
Stocks 3,246 2,714
Debtors 146,712 127,789
Investments 3,814 3,743
Cash at bank and in hand 10,482 6,890
164,254 141,136
Creditors: Amounts falling due within one year 161,667 142,461
Net Current Assets/(Liabilities) 2,587 (1,325)
Total Assets Less Current Liabilities 16,774 10,916
Creditors: Amounts falling due after more than one year (6,055) (5,156)
Provisions for Liabilities and Charges (554) -
Net Assets 10,165 5,760
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 (10,082) (14,487)
Shareholders' Funds - equity interest 10,165 5,760
CONSOLIDATED CASH FLOW STATEMENT
For the year ended 30 April 2002
2002 2002 2001 2001
£'000 £'000 £'000 £'000
Net cash inflow from operating
activities 7,419 5,591
Returns on investments and servicing
of finance
Interest received 468 281
Interest paid (259) (457)
Interest element of finance lease rentals
and hire purchase contracts (42) (18)
Net cash inflow/(outflow) from returns
on investments and servicing of finance 167 (194)
Taxation
UK Corporation tax received/(paid) 2 (90)
Capital expenditure and financial
investment
Purchase of tangible fixed assets (4,072) (2,653)
Increase in current asset investments - (1,000)
Sale of tangible fixed assets 618 522
Net cash outflow from investing
activities (3,454) (3,131)
Disposal of subsidiary undertaking 1,499 -
Disposal of businesses - 150
Dividends paid to equity shareholders (1,924) (1,924)
Cash inflow before management of
liquid resources and financing 3,709 402
Management of liquid resources
Movement in cash held on short term
deposits 12,508 (7,375)
Movement in cash deposits with terms in
excess of seven days (71) (157)
Net cash inflow/(outflow) from
management of liquid resources 12,437 (7,532)
Financing
Loan advances 478 1,200
Loan repayments (400) (700)
Capital element of finance lease rentals
and hire purchase contracts (124) (56)
Net cash (outflow)/inflow from
financing (46) 444
Increase/(decrease) in cash in the year 16,100 (6,686)
NOTES TO THE PRELIMINARY ANNOUNCEMENT OF RESULTS
For the year ended 30 April 2002
Segment Information
(a) Turnover and results: Turnover Operating profit/(loss)
2002 2001 2002 2001
£'000 £'000 £'000 £'000
(As (As
restated) restated)
Contracting 481,832 414,919 2,412 (5,323)
Plant hire 8,592 5,894 2,385 2,049
Commercial property 1,217 4,409 762 1,965
Group centre - - (508) (602)
Intra-group (4,403) (1,799) - -
487,238 423,423 5,051 (1,911)
Exceptional operating items -
Contracting - (27,663)
Operating profit/(loss) 5,051 (29,574)
Profit on disposal of subsidiary
undertaking 1,499 -
Profit/(loss) before interest 6,550 (29,574)
Net interest 179 (159)
Profit/(loss) on ordinary activities
before taxation 6,729 (29,733)
(b) Net assets: 2002 2001
£'000 £'000
(As restated)
Contracting (18,386) (16,179)
Plant hire 7,936 6,165
Commercial property 7,318 5,515
Group centre (567) (522)
(3,699) (5,021)
Unallocated net assets 13,864 10,781
10,165 5,760
The above analysis reflects the segments by which the Group is managed. All
turnover arises from work performed within the United Kingdom.
2002 2001
£'000 £'000
Unallocated net assets comprise:
Current asset investments 3,814 3,743
Net cash at bank 9,904 6,390
Obligations under finance leases and hire (398) (298)
purchase contracts
Corporation tax 238 240
Deferred taxation 2,230 2,630
Dividends payable on equity shares (1,924) (1,924)
13,864 10,781
Net assets for each segment represents non-interest bearing operating assets
less non-interest bearing operating liabilities.
With effect from 1 May 2001 the Group's internal site accommodation hire
division was incorporated as an independent operation trading under the name of
The Cabin Company Limited. Its results are reported as part of the plant hire
sector with prior period results restated accordingly.
The adjustments made to the segmental analysis are summarised below:-
Turnover Operating Net
profit/(loss) Assets
£'000 £'000 £'000
Contracting - (716) (801)
Plant hire 1,263 716 801
Intra-group (1,263) - -
- - -
2. Exceptional Operating Items
2002 2001
£'000 £'000
Losses on contracts subject to litigation - 27,663
The amount of the tax (charge)/credit for the year attributable to these
exceptional losses is nil (2001: £1,000,000).
3. Profit on disposal of subsidiary undertaking
On 24 April 1995 the Company sold its entire shareholding in Birse Homes
Limited. During the year, under the terms of the sale agreement the Company
received deferred consideration net of related costs of £1,499,000. There are
no further amounts due under the terms of this sale agreement.
There is no tax charge in respect of this exceptional receipt
4. Taxation 2002 2001
£'000 £'000
Corporation Tax
United Kingdom corporation tax at 30% on
profits/(losses) of the year - 720
Under provision for prior years - -
- 720
Deferred Tax
Timing differences, origination and reversal (1,014) 1,775
Adjustments to estimated recoverable
amounts of deferred tax assets arising in
previous years' 614 1,030
(400) 2,805
Tax (charge)/credit on profit/(loss) on
ordinary activities (400) 3,525
The corporation tax (charge)/credit for the year is below the expected rate of
30% - the differences are explained below:
2002 2001
£'000 £'000
Profit/(loss) on ordinary activities before tax 6,729 (29,733)
Expected corporation tax (charge)/credit at 30% (2,019) 8,920
Expenses not deductible for tax purposes (149) (216)
Tax losses 2,452 (7,858)
Capital allowances in excess of depreciation 615 (175)
Exceptional tax free item 450 -
Other timing differences ( 1,349) 49
Current year corporation tax (charge)/credit - 720
Deferred taxation
Asset Liability Net
£'000 £'000 £'000
At 1 May 2001 2,630 - 2,630
Profit and loss account 154 (554) (400)
At 30 April 2002 2,784 (554) 2,230
The amounts of deferred taxation assets/(liabilities) provided and unprovided in
the accounts at the rate of 30% (2001: 30%) are:-
Provided Unprovided
2002 2001 2002 2001
£'000 £'000 £'000 £'000
Tax losses 790 2,630 5,620 6,230
Timing differences relating to Birse Insurance - - - (130)
Capital allowances 206 - 55 1,025
Other short term timing differences 1,234 - - -
2,230 2,630 5,675 7,125
The deferred tax assets recognised are based either upon the estimated tax
losses of the relevant businesses that can be relieved or upon those timing
differences that will reverse in the foreseeable future after taking into
account the historical performance of those businesses.
5. Dividends on equity shares 2002 2001
£'000 £'000
Interim: 0.375p per ordinary share (2001: 0.375p) 721 721
Final proposed: 0.625p per ordinary share (2001: 0.625p) 1,203 1,203
1,924 1,924
The interim dividend was paid on 3 May 2002. Subject to the approval of
shareholders at the Annual General Meeting the final dividend will be paid on 1
November 2002 to shareholders appearing on the register at the close of business
on 4 October 2002.
6. Earnings/(loss) per ordinary share 2002 2001
£'000 £'000
The calculation of earnings/(loss) per ordinary share is
based on:
Earnings/(loss) for basic and diluted earnings/(loss) per
ordinary share calculation 6,329 (26,208)
Exceptional items ( 1,499) 27,663
Tax on exceptional items - (1,000)
Earnings before exceptional items per ordinary share
calculation 4,830 455
2002 2001
Thousands Thousands
Weighted average number of shares used in basic earnings per ordinary share 192,390 192,390
calculation
Dilutive effect of options - (2,470)
Weighted average number of shares used in diluted
earnings per ordinary share calculation 192,390 189,920
7. Net cash at bank 2002 2001
£'000 £'000
Net cash at bank comprises:
Cash at bank - on demand 10,482 (5,618)
- on short term deposit - 12,508
- on deposit with terms in excess of seven days 2,814 2,743
Bank loans:
Due within one year (378) (400)
Due after one year (200) (100)
12,718 9,133
8. Debtors; uncertainty relating to amounts recoverable on contracts
Included in debtors is an aggregate value of £6.2million (2001: £6.7million)
attributable to contractual amounts relating to two (2001: three) contracts
which are the subject of arbitration or equivalent proceedings.
In consequence of the losses suffered on contracts subject to litigation in the
previous year (see Note 2) the Directors have reconsidered 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.
9. 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 2001 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 2002 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.
This information is provided by RNS
The company news service from the London Stock Exchange
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