TIDMGFRD
RNS Number : 0977Z
Galliford Try Holdings PLC
16 September 2020
07:00 AM WEDNESDAY 16 SEPTEMBER 2020
GALLIFORD TRY HOLDINGS PLC
ANNUAL RESULTS STATEMENT FOR THE YEARED 30 JUNE 2020
A PROGRESSIVE WELL-CAPITALISED CONSTRUCTION BUSINESS
Highlights - Financial and Operational (continuing
operations)
-- Final results in line with expectations; business well-placed for new financial year
-- Pre-exceptional revenue of GBP1,090m, reflecting the
business' focus on core sectors and the impact of Covid-19 (2019:
GBP1,403m)
-- Rapid and effective response to Covid-19; all sites across
the UK fully operational and successfully implementing new working
practices
-- Focus on cost management and commercial discipline
-- Well-capitalised debt-free balance sheet, with cash at 30
June 2020 of GBP197m (2019: net debt of GBP57m) and PPP portfolio
of GBP41m
Highlights - Strategy and Outlook
-- Successful strategic disposal of Linden Homes and
Partnerships housing divisions completed 3 January 2020
-- Strategy in place to deliver long-term value; restructured
and refocused business to deliver improved performance
-- Disciplined approach to risk management and contract selection
-- High quality GBP3.2bn order book (2019: GBP2.9bn) in focused
sectors with 90% of revenue secured for FY21 (2019: 89%)
-- Reinstating financial guidance, with strong platform for return to profitability in FY21
Financial (continuing operations) Pre-exceptional(1,2) Post-exceptional
2020 2019 2020 2019
Revenue GBP1,090m GBP1,403m GBP1,122m GBP1,400m
Loss from operations(3) GBP(62.4)m GBP(16.9)m GBP(37.3)m GBP(64.2)m
Loss before tax GBP(59.7)m GBP(17.2)m GBP(34.6)m GBP(64.5)m
Loss per share (47.7)p (10.7)p (29.4)p (44.7)p
Net cash/(debt) GBP197.2m GBP(56.6)m GBP197.2m GBP(56.6)m
Order book GBP3.2bn GBP2.9bn GBP3.2bn GBP2.9bn
Bill Hocking, Chief Executive, commented:
"This year has been a period of significant change for the
Group. We have successfully transitioned to a well-capitalised UK
construction business and I am confident about our future.
The Group responded rapidly and effectively to the challenge of
the Covid-19 pandemic and I have been particularly impressed by,
and thankful for, the outstanding efforts of our staff throughout
this period. All of our construction sites are now operational, and
productivity is close to normal levels. Working with all
stakeholders we will continue to maintain the highest safety,
wellbeing and Covid-19 secure practices throughout all aspects of
our operations.
The Group is performing well and focusing on its core strengths
of building, highways and environment. In recent months we have
secured a number of significant project wins and we are well placed
to benefit from planned future investment in our areas of
operation.
Our strategy is focused on sustainable growth, careful cash
management and margin progression. This strategy is underpinned by
our commitment to operating sustainably, balancing financial
performance with our obligations to all stakeholders, in order to
drive long-term value creation.
The Group is well capitalised with a strong order book. We are
well positioned to make progress on our strategic priorities and
margin improvement targets.
The management team and Board look forward to the new financial
year with confidence."
Enquiries:
Bill Hocking, Chief Executive
Andrew Duxbury, Finance
Galliford Try Director 01895 855001
James Macey White
Giles Kernick
Tulchan Communications Amber Ahluwalia 020 7353 4200
This announcement contains inside information for the purposes
of article 7 of EU Regulation 596/2014. The person responsible for
making this announcement on behalf of Galliford Try is Kevin
Corbett, General Counsel & Company Secretary.
(1) Pre-exceptional measures exclude exceptional items as
described in note 5. All future references to pre-exceptional data
or ratios are consistent with this definition.
(2) Exceptional profit in 2020 was GBP25.1m (2019: costs of
GBP47.3m).
(3) Loss from operations stated before net finance income,
amortisation and share of joint ventures' interest and tax.
Analyst Presentation
A conference call for Analysts and Investors will be held at
09:30am BST today, Wednesday 16 September 2020. To register for
this event please follow this link:
https://webcasting.brrmedia.co.uk/broadcast/5f3e53a2b14d87262643a355
STRATEGY
The Group is focussed on construction in the public and
regulated sectors, and for high-quality private sector clients,
though our regional building businesses and national highways and
environment businesses. We are focused on:
-- Strong relationships on national frameworks and with local
clients and suppliers, with a consistent strategy across our
network
-- Markets that have significant opportunity and in which we have proven strengths
-- A robust and flexible balance sheet, with high visibility of
future workload and a financial structure designed for our
requirements
-- A values-driven, people-orientated progressive culture.
Alongside our core Building and Infrastructure businesses, we
continue to develop capabilities in our Facilities Management,
Investments and co-development businesses which provide lower risk
margin enhancing returns. Our PPP Investments portfolio of GBP40.7m
generates annual interest income. We also continue to review and
challenge operating costs across the business.
The Group's three-part strategy has been reviewed following the
disposal of the Group's housebuilding businesses and comprises:
(1) Retain our solid platform for sustainable growth. We intend
to build on our strengths, including our skilled people, health and
safety record, national coverage with local delivery, excellent
position on frameworks, and focus on the public and regulated
sectors.
(2) Improve our operations to drive margin progression. To
support our margin progression, we will continue to: improve our
risk management; attract, retain and develop a diverse workforce;
further enhance our investment in digital technologies, systems and
communication tools; and align the supply chain with our
operations.
(3) Deliver strong, predictable cash flows and margin
improvement. Ensuring we only bid for high-quality work with
appropriate margins, while continuing to improve the way we work,
will enhance our margins. This, in turn, will help us to deliver
consistent and growing cash flows.
Fully underpinning this strategy is our commitment to operating
sustainably, by balancing financial performance with our
obligations to all stakeholders, so we create long-term value.
Our strategy and sector focus mean that the Group is well
positioned to emerge strongly from the Covid-19 pandemic. Subject
to any new restrictions imposed in response to Covid-19, this
strategy will enable the Group to meet its strategic targets
outlined in March 2020. Specifically, the Group's financial targets
are:
- Revenue: Target range GBP1.2bn to GBP1.5bn, based on disciplined contract selection
- Divisional operating margin: Minimum 2% across building and
infrastructure, pre-central costs, by 2022; targeting Group
operating margin, after all central cost, of 2% in the medium
term
- Cash generative, with positive average month-end cash
- Reinstate dividend following return to profitability
In line with these targets, the Group expects to return to
profitability in the financial year to 30 June 2021 with operating
margins, pre-central costs of circa GBP10m, expected to be 1.4% to
1.6% on revenues of GBP1.1bn to GBP1.3bn. Average month end cash is
expected to be in the range GBP125m to GBP145m.
GROUP ORDER BOOK
The Group has a strict and disciplined approach to bidding for
new contracts.
Our current order book is GBP3.2bn (2019: GBP2.9bn). Of this,
68% is in the public sector (2019: 79%), 13% is in regulated
industries (2019: 5%) and 19% is in the private sector (2019:
16%).
Both the Building and Infrastructure divisions were successful
at winning new work during the year and were appointed to contracts
and frameworks worth over GBP1,021m and GBP377m respectively.
Frameworks are an important part of our business model and they
provide 90% of our order book (2019: 81%). The Group has high
visibility of future revenues, and currently has secured 90% of
planned revenue for the 2021 financial year (2019: 89%).
CURRENT TRADING AND OUTLOOK
The Group has continued to trade well, against a background of
difficult circumstances, and entered the new financial year with a
high-quality, carefully risk managed order book of GBP3.2bn, and
with 90% of the new financial year's planned revenue secured.
The Group responded quickly and decisively to the Covid-19
pandemic, prioritising the safety of all employees and
stakeholders. We made use of the Government's Job Retention Scheme,
although have now ceased making claims under the scheme, and
implemented temporary salary reductions for our most senior
employees whilst protecting our lower paid employees. We continued
to invest in our important early careers programme, for new
graduates, apprentices and trainees.
All of the Group's construction sites are now operational under
strict Covid-19 secure measures and in accordance with Government
and industry guidance. Productivity has significantly improved and
is close to normal levels across all our sites.
Our balance sheet is strong. We had net cash of GBP197m at 30
June 2020, a PPP portfolio of GBP41m and no defined pension scheme
liabilities to fund. Our average month-end net cash, for the six
months since the disposal of housebuilding, was GBP141m.
Our strong balance sheet and quality order book, with 81% in the
public and regulated sectors, and recent Government announcements
on capital expenditure, mean that the Group is well placed to
contribute to the UK's economic recovery from Covid-19 and to
benefit from opportunities in our chosen sectors. Throughout the
lockdown we were encouraged by the pipeline of new opportunities
across our chosen sectors in the public, regulated and private
markets together with a number of significant contract wins.
The Group is confident in the future as we look to increase
operating margins, capitalise on the actions taken to reduce costs
and maintain our disciplined approach to contract selection.
Subject to any new Covid-19 restrictions that may be introduced,
the strong outlook has allowed the Group to reinstate its financial
targets, which are consistent with its expectations
pre-Covid-19.
DIVID
In light of the coronavirus pandemic, the Board considered it
prudent to cancel the previously announced Interim dividend in
March 2020. The Board continues to recognise the importance of
dividends to all its shareholders, however, given the significant
impact of Covid-19 and the importance of maintaining our strong
balance sheet, is not proposing a final dividend for the year ended
30 June 2020. The Group has a strong outlook and the Board
anticipates reinstating dividend payments, following a return to
profitability.
BREXIT
The Group has continued to review the potential effects on our
business of the end of the UK's exit transition period from the
European Union, under various scenarios. Such preparedness measures
include developing long-term relationships with key subcontractors
to ensure that we remain a priority customer. Maintaining the
supply of materials, especially those sourced indirectly by
subcontractors, was one of the most acute challenges during the
pandemic. We are therefore reviewing the measures we can take to
improve the resilience of our materials supply chain. These include
further developing our long-term relationships with key suppliers
and subcontractors to ensure that we remain a priority customer
when resources and materials are in short supply. The Group's
Advantage through Alignment programme facilitates greater
engagement with our key supply chain members and provides them with
greater visibility of our pipeline of projects.
FINANCIAL REVIEW
The Group delivered good underlying performance during the year
and, following the disposal of the housebuilding divisions earlier
in the year, completed the successful transition to a
well-capitalised UK construction focused business. Our core
business was performing well ahead of the Covid-19 outbreak and we
can see the benefits of our strict risk management and
people-focused values coming through.
The Group's pre-exceptional revenue for the year was GBP1,090m
(2019: GBP1,403m). The Group's loss from operations (stated before
exceptional items, finance costs, amortisation, tax and share of
joint ventures' interest and tax), was GBP62.4m (2019: GBP16.9m).
Building and Infrastructure incurred pre-exceptional losses from
operations of GBP51.9m and GBP1.8m respectively (2019: GBP9.5m and
GBP5.5m respectively). These performances were adversely impacted
by Covid-19 and associated project delays, contract settlements and
legal costs. In particular, Covid-19 reduced gross margin due to
the impact of lower revenue, lower site productivity and the cost
of implementing the new operating procedures. There was a GBP8.7m
net loss in Central Costs and PPP Investments (2019: GBP1.9m).
After exceptional profits of GBP25.1m (see below), the Group's
net loss from operations was GBP37.3m (2019: GBP64.2m), with
Building incurring a loss of GBP53.9m (2019: GBP10.4m) and
Infrastructure recording a profit of GBP25.5m (2019: loss of
GBP51.0m).
The table below reconciles profit before income tax to our
alternative performance measure of pre-exceptional profit before
income tax, which is a key metric for us when monitoring
performance of the business.
2020 2019
GBPm GBPm
--------------------------------------- ------ ------
Pre-exceptional loss before income tax (59.7) (17.2)
Exceptional profits/(losses) 25.1 (47.3)
Loss before income tax (34.6) (64.5)
---------------------------------------- ------ ------
Exceptional items in the year totalled a profit of GBP25.1m,
including a GBP28.0m net gain on the settlement of the Aberdeen
Western Peripheral Route (AWPR) final account less GBP2.9m of
restructuring costs incurred in the year.
As set out in our half year report, following discussion with
the Corporate Reporting Review Team of the Financial Reporting
Council, the Group wrote down the AWPR asset as an opening balance
sheet adjustment at 30 June 2018 on the basis that the value to be
recovered could not previously be measured reliably. This results
in the settlement in the financial year being recognised as
exceptional income. Further details on prior year adjustments and
exceptional items are set out in notes 24 and 5 to the financial
information.
As previously disclosed, the Group provided services in respect
of three contracts with entities owned by a major infrastructure
fund of a blue-chip listed company. Our work on these contracts
formally ceased on their termination in August 2018. Costs were
significantly impacted by client-driven scope changes and the Group
has submitted claims and variations to the value of GBP95m in
respect of these costs (2019: GBP54m). The Group has taken
extensive legal advice on our entitlement and we have been
successful in two adjudications supporting the validity of the
Group's position. Taking into account the requirements of IFRS 15,
the Group had constrained the revenue recognised in prior periods
to the extent that it was highly probable not to result in a
significant reversal in the future. At 30 June 2020 the Group has
updated its assessed recoverability in accordance with IFRS 15 and
expected credit loss provision in accordance with IFRS 9, both of
which assessments are unchanged in the year.
The Group is well-capitalised to support its future plans, and
our balance sheet and liquidity remain strong. The Group's bank
facilities of GBP450m were repaid and cancelled on 3 January 2020
following the completion of the disposal of the Group's
housebuilding divisions and the Group's GBP100m private placement
debt was transferred to Vistry Group plc on 3 January 2020. The
Group's defined benefit pension obligations were transferred to
Vistry Group plc on 3 January 2020.
At 30 June 2020 the Group had net cash of GBP197.2m and a PPP
portfolio of GBP40.7m using a 9% discount rate (2019: net debt of
GBP56.6m and GBP41.6m). The PPP portfolio generates annuity
interest income for the Group expected to be in the range GBP1m to
GBP3m annually. Our average month-end cash from January to June
2020 was GBP141m.
OPERATIONAL REVIEW - CONTINUING GROUP
BUILDING
Building operates through nine regional businesses, serving a
range of public and private sector clients across the UK, with a
focus on the Education, Defence and Health sectors, where we have
core and proven strengths. Building retains a substantial presence
in Scotland, operating as Morrison Construction.
Pre-exceptional Post- Pre- Post-
2020 exceptional exceptional exceptional
2020 2019 2019
Revenue (GBPm) 719.9 719.9 858.3 858.3
Loss from operations
(GBPm) (51.9) (53.9) (9.5) (10.4)
Operating profit margin
(%) (7.2)% (7.5)% (1.1)% (1.2)%
Order book (GBPm) 2,152 2,152 2,045 2,045
Building generated revenue of GBP719.9m (2019: GBP858.3m), which
equates to 66% of the Group's pre-exceptional revenue. The
pre-exceptional loss from operations was GBP51.9m (2019: GBP9.5m),
resulting in a (7.2)% margin (2019: (1.1)%). The margin reduction
reflects the impact of Covid-19 and the settlement of final
accounts on legacy contracts, with current projects delivering an
encouraging performance.
During the year, Building won contracts and positions on
frameworks worth over GBP1,021m. This included securing a place on
11 lots across the UK for the Crown Commercial Services
Construction Works and Associated Services major framework. The
framework is available to all public sector organisations to
procure construction services and has a total value of
approximately GBP20bn.
Other notable contracts secured during the year included
framework contracts with the University of Glasgow and the
University of Birmingham; contracts for Castlebrae High School in
Scotland, a new education campus in Hexham for Northumberland
County Council and The Exchange for the University of Birmingham;
and a contract to build a new women's prison in Scotland. The
division also won a contract for the 1-4 Marble Arch mixed-use
development and two mixed-use residential schemes for an urban
development specialist, both in London.
Building currently has an order book of GBP2.2bn, with 25% in
Education, 23% in Defence and Custodial, 12% in Health, and 18% in
Facilities Management.
INFRASTRUCTURE
Infrastructure carries out civil engineering projects across the
UK, focused on Highways and Environment (incorporating our
activities in water, wastewater and flood alleviation).
Pre-exceptional Post-exceptional Pre-exceptional Post-
2020 2020 2019 exceptional
2019
Revenue (GBPm) 357.1 389.1 527.0 524.2
(Loss)/profit from operations
(GBPm) (1.8) 25.5 (5.5) (51.0)
Operating profit margin
(%) (0.5)% 6.6% (1.0)% (9.7)%
Order book (GBPm) 1,010 1,010 825 825
Infrastructure's pre-exceptional revenue was GBP357.1m (2019:
GBP527.0m), which equates to 33% of the Group's pre-exceptional
revenue. The pre-exceptional loss from operations was GBP1.8m
(2019: GBP5.5m), resulting in a (0.5)% margin (2019: (1.0)%). There
is an improvement in pre-exceptional profit despite the effect of
legal costs and final account settlements, and the impact of
Covid-19.
Infrastructure won contracts and positions on frameworks worth
over GBP377m during the year. These included the Highways business
being appointed to two schemes by Highways England, under the new
Regional Delivery Partnerships Framework. The larger of these
schemes is a series of five projects to upgrade the A47. The other
major scheme is to upgrade the A303 in Somerset. Highways was also
appointed to the YORcivil major works framework, which enables
northern local authorities to procure maintenance and construction
and has a total value of GBP2bn.
The Environment business was appointed to AMP7 frameworks for
Southern Water, Yorkshire Water and Thames Water. The appointment
by Southern Water is for two of its design and build frameworks,
with Galliford Try's share of the business expected to be worth
approximately GBP240m. Environment also expects to secure around
GBP100m of work over the five years of Yorkshire Water's
framework.
Infrastructure currently has an order book of GBP1.0bn,
comprising 59% in Highways and the remainder in Environment.
PPP INVESTMENTS
PPP Investments delivers major building and infrastructure
projects through public-private partnerships, generating work for
the wider Group in the process. Our Facilities Management business
provides FM services predominantly to projects which Galliford Try
have constructed and invested in.
2020 2019
Revenue (GBPm) 8.2 17.0
(Loss)/profit from operations
(GBPm) (0.5) 4.5
Directors' valuation
(GBPm) 40.7 41.6
PPP Investments reported revenue of GBP8.2m (2019: GBP17.0m),
with a loss from operations of GBP0.5m (2019: profit of GBP4.5m).
PPP Investments also generated GBP4.3m of interest income.
During the year, we invested GBP6.6m in equity in three schemes
in Scotland and sold three non-core investments that generated a
profit on disposal of GBP0.6m (2019: GBP6.9m). At the year end, the
directors' valuation of our PPP portfolio was GBP40.7m (2019:
GBP41.6m), which represents the fair value included in the balance
sheet. The valuation compared with a value invested of GBP34.9m
(2019: GBP34.9m). The valuation is calculated using a 9.0% discount
rate.
PPP Investments continues to be a good source of work for the
rest of the Group. In line with our strategy, PPP Investments
continues to move its focus towards co-development projects and at
the year-end it was preferred bidder on two PRS (private rented
sector) schemes with a gross development value of GBP117m.
DISPOSAL OF HOUSEBUILDING DIVISIONS
At the General Meeting of Galliford Try plc, held on 29 November
2019, the shareholders approved the implementation of the Scheme of
Arrangement (the scheme), the proposed company restructuring and
the disposal of the Linden Homes and Partnership & Regeneration
divisions (the housebuilding businesses). On 2 January 2020,
Galliford Try plc announced that that the scheme in connection with
the disposal of the housebuilding businesses had become
effective.
On 3 January 2020, the Group announced the completion of the
disposal of the housebuilding divisions, the completion of the
company restructuring in accordance with the scheme, the delisting
of shares in Galliford Try plc on the London Stock Exchange and the
admission of new shares in the Group were listed for trading on the
London Stock Exchange.
Consequently, the results and net assets of the housebuilding
divisions have been reported as discontinued operations and assets
held for sale, in accordance with IFRS 5. Full details are included
in the accompanying financial information. A summary of the results
of the discontinued operations for the period until disposal is set
out below.
LINDEN HOMES
2020 2019
Adjusted revenue* (GBPm) 333.8 820.4
Profit from operations (GBPm) 50.1 160.5
Profit from operations was GBP50.1m (2019: GBP160.5m) with an
operating profit margin of 15.0% (2019: 19.6%). Adjusted revenue*
of GBP333.8m (2019: GBP820.4m) was generated from 1,293 (2019:
3,229) completions. The average number of outlets during the period
was 82 (2019: 80).
PARTNERSHIPS & REGENERATION
2020 2019
Adjusted Revenue* (GBPm) 370.0 623.2
Profit from operations
(GBPm) 18.7 34.8
Partnerships & Regeneration's adjusted revenue* was
GBP370.0m (2019: GBP623.2m), with an operating margin of 5.0%
(2019: 5.6%).
From 3 January 2020 the Linden Homes and Partnerships &
Regeneration divisions were transferred to Vistry Group plc.
* Adjusted revenue, including share of joint venture revenue and
excluding part-exchange revenue.
HEALTH & SAFETY
We place the highest priority on health and safety and are
committed to a policy of effectively managing all aspects of
health, safety and environmental performance. Our systems are both
OHSAS 18001 and ISO 14001 compliant and are subject to regular
audit.
Our approach is guided by our industry-leading behavioural
safety programme 'Challenging Beliefs, Affecting Behaviour' through
which our objective is to create and maintain an environment where
care for our people and those who work with us is our top priority,
and the belief that all accidents are preventable prevails.
During the second half of the year, our activities were
dominated by the Covid-19 pandemic. To ensure the safety of all
employees, subcontractors and others attending our sites we risk
assessed our sites and offices and modified or curtailed activities
to ensure that no work was undertaken if we were unable to comply
with hygiene and social distancing guidelines or in line with
Government advice on construction works and the Site Operating
Procedures issued by the Construction Leadership Council. Our 'Back
to Basics' approach additionally ensured that works were carried
out with the right person, right planning, right equipment, and in
the right workplace. We also established a Covid-19 Working Group
to develop clear new working practices and share good practice
across the Group.
We reduced our Accident Frequency Rate (AFR) from 0.10 in the
last financial year to 0.07. Several of our teams achieved an AFR
of zero, and we secured eight awards from RoSPA (The Royal Society
for the Prevention of Accidents), which includes an Order of
Distinction for our Building London business's eighteenth
consecutive Gold Award.
OPERATING SUSTAINABLY
We recognise that being sustainable makes us more efficient,
helps us to win work, engages our employees and benefits the
communities and the environment we work in. We therefore look to
operate sustainably, balancing our financial performance with our
obligations to all our stakeholders to create long-term value, as
set out in our Sustainability and Social Value Policy, which is
owned by the Executive Board.
We assess our sustainability risks and opportunities in relation
to six fundamental areas: health and safety, environment and
climate change, our people, clients, supply chain, and
communities.
Our overall performance as a responsible business is reflected
in our membership of the FTSE4Good Index, an exclusive investor
index consisting only of companies that effectively manage their
environmental, social and governance risks. We were independently
assessed to have achieved a score of 3.3 out of 5 (2019: 3.2),
firmly securing a place in the top third of the index and scoring
well above the heavy construction sector average of 1.5. We
achieved the top rating possible for corporate governance and
anti-corruption as well as scoring highly on environmental supply
chain and community matters.
Success comes from our people. We therefore focus on attracting
and retaining the right talent for our business and create an
inclusive environment in which they are enabled to thrive. We
prioritise inclusivity, knowing that it facilitates the diversity
of thought, innovative approaches and experiences that create
stronger, better balanced teams.
We are proud to be a Disability Confident Employer, an
accreditation given to organisations that pledge to actively seek
out and hire skilled disabled people, and to positively change
attitudes, behaviours and cultures, within their businesses, supply
chain and local communities.
We were delighted to be recognised as both a 'Top Graduate
Employer' and 'Top Apprentice Employer' in the Construction &
Civil Engineering sector, once again featuring in TheJobCrowd's
league table - the UK's only graduate and apprentice employer
ranking system based on employee feedback.
Two-way communication is central to a robust culture and the
Board is benefiting from Terry Miller's role as our designated
Non-executive Director with responsibility for engaging with the
workforce as chair of the Employee Forum. Terry is also helping to
shape our approach to stakeholder engagement through chairing our
Stakeholder Steering Committee.
We also take part in the Considerate Constructors Scheme (CCS),
which assesses sites on criteria including being considerate of
local neighbourhoods and the public. The Group achieved an average
CCS score of 41.1 (2019: 40.5), which continues to exceed the
industry average of 37.1 (2019: 36.5). We donated more than
GBP195,000 in time, materials and money to charitable causes (2019:
GBP142,198) and we were pleased to mark 21 years of supporting
CRASH, which assists homelessness and hospice charities with
construction-related projects.
We continue to retain Gold status from the Supply Chain
Sustainability School.
AUDITOR
At the AGM held on 12 November 2019 shareholders appointed BDO
LLP as the Group's auditors.
BOARD
On 3 January 2020, as previously announced, Graham Prothero
resigned from the Board and Bill Hocking was appointed Chief
Executive. On 6 July 2020 we announced that Jeremy Townsend,
Non-executive Director and Chair of the Audit Committee, will step
down from the Group later in the year. Jeremy will not stand for
re-election as a director at the AGM in November 2020.
Consolidated income statement
for the year ended 30 June 2020
2020 2019
-------------------------------------------------------- ----- --------------------------------------- ---------------------------------------
Exceptional
items
Pre-exceptional (note Exceptional
items 5) Total Pre-exceptional items
Unaudited Unaudited Unaudited items (note Total
Notes GBPm GBPm GBPm GBPm 5) GBPm GBPm
-------------------------------------------------------- ----- --------------- ----------- --------- --------------- ----------- ---------
Revenue 4 1,089.6 32.0 1,121.6 1,402.9 (2.8) 1,400.1
Cost of sales(1) (1,085.9) (6.3) (1,092.2) (1,348.4) (42.0) (1,390.4)
-------------------------------------------------------- ----- --------------- ----------- --------- --------------- ----------- ---------
Gross profit 3.7 25.7 29.4 54.5 (44.8) 9.7
Administrative expenses(1) (68.0) (0.6) (68.6) (74.1) (2.5) (76.6)
Share of post tax (losses)/profits
from joint ventures (0.2) - (0.2) 0.4 - 0.4
-------------------------------------------------------- ----- --------------- ----------- --------- --------------- ----------- ---------
(Loss)/profit before finance
costs (64.5) 25.1 (39.4) (19.2) (47.3) (66.5)
Finance income(1) 6 5.8 - 5.8 3.6 - 3.6
Finance costs 6 (1.0) - (1.0) (1.6) - (1.6)
(Loss)/profit before income
tax (59.7) 25.1 (34.6) (17.2) (47.3) (64.5)
Income tax credit/(expense)(1) 7 6.8 (4.8) 2.0 5.4 9.6 15.0
-------------------------------------------------------- ----- --------------- ----------- --------- --------------- ----------- ---------
(Loss)/profit from continuing
operations for the year (52.9) 20.3 (32.6) (11.8) (37.7) (49.5)
Profit from discontinued
operations, net of income
tax for the year 8 353.0 - 353.0 139.9 (3.5) 136.4
-------------------------------------------------------- ----- --------------- ----------- --------- --------------- ----------- ---------
Profit for the year 300.1 20.3 320.4 128.1 (41.2) 86.9
-------------------------------------------------------- ----- --------------- ----------- --------- --------------- ----------- ---------
(Loss)/earnings per share
Basic
* Profit from continuing operations attributable to
ordinary shareholders 10 (47.7)p (29.4)p (10.7)p (44.7)p
* Profit attributable to ordinary shareholders 10 270.9p 289.2p 115.7p 78.5p
Diluted
* Profit from continuing operations attributable to
ordinary shareholders 10 (47.7)p (29.4)p (10.6)p (44.7)p
* Profit attributable to ordinary shareholders 10 270.9p 289.2p 115.6p 78.4p
-------------------------------------------------------- ----- --------------- ----------- --------- --------------- ----------- ---------
1 The Group adopted IFRS 16 Leases on 1 July 2019 using the
modified retrospective approach with any reclassification and
adjustments arising from the initial application recognised as an
adjustment to opening equity. This results in a reduction in
operating lease costs within cost of sales and administrative
expenses and an increase in depreciation charge and interest
expense (notes 1 & 23).
Consolidated statement of comprehensive income
for the year ended 30 June 2020
2020
Unaudited 2019
Notes GBPm GBPm
------------------------------------------------------------ ----- ---------- -----
Profit for the year 320.4 86.9
Other comprehensive income/(expense):
Items that will not be reclassified to profit or
loss
Remeasurement of retirement benefit obligations
- discontinued operations 2.0 (2.4)
Current tax through equity - continuing operations 7 - 0.3
Current tax through equity - discontinued operations - 0.4
Total items that will not be reclassified to profit
or loss 2.0 (1.7)
Items that may be reclassified subsequently to
profit or loss
Movement in fair value of cash flow hedges:
* Movement arising during the financial year -
discontinued operations 0.8 0.9
* Reclassification adjustments for amounts included in
profit or loss - discontinued operations (0.4) (0.4)
Net movement in fair value of PPP and other investments
- continuing operations 12 (1.8) 0.8
Deferred tax on items recognised in equity that
may be reclassified - discontinued operations (0.1) (0.1)
Total items that may be reclassified subsequently
to profit or loss (1.5) 1.2
Other comprehensive income/(expense) for the year
net of tax 0.5 (0.5)
------------------------------------------------------------ ----- ---------- -----
Total comprehensive income for the year 320.9 86.4
------------------------------------------------------------ ----- ---------- -----
Balance sheet
30 June 2019 1 July 2018
30 June (restated (restated
2020 - notes 1 - notes
Unaudited & 24) 1 & 24)
GBPm GBPm GBPm
---------------------------------------- ---------- ------------ -----------
Assets
Non-current assets
Intangible assets 7.8 11.8 15.3
Goodwill 11 77.2 159.6 159.6
Property, plant and equipment 3.8 16.2 16.7
Right of use assets(1) 22.8 - -
Investments in subsidiaries - - -
Investments in joint ventures 0.2 67.0 49.9
PPP and other investments 12 40.7 41.6 26.8
Trade and other receivables 13 - 238.4 148.9
Retirement benefit asset 21 1.0 7.0 7.0
Deferred income tax assets 18 4.3 1.3 -
---------------------------------------- ---------- ------------ -----------
Total non-current assets 157.8 542.9 424.2
Current assets
Developments - 876.7 724.9
Trade and other receivables 13 247.5 674.3 731.6
Current income tax assets 23.1 8.7 12.3
Cash and cash equivalents 14 197.2 591.2 912.4
---------------------------------------- ---------- ------------ -----------
Total current assets 467.8 2,150.9 2,381.2
---------------------------------------- ---------- ------------ -----------
Total assets 625.6 2,693.8 2,805.4
---------------------------------------- ---------- ------------ -----------
Liabilities
Current liabilities
Borrowings 14 - (547.8) (617.1)
Trade and other payables(1) 15 (458.8) (1,262.5) (1,184.0)
Lease liabilities(1) (9.5) - -
Provisions for other liabilities
and charges (13.9) (0.4) (0.3)
---------------------------------------- ---------- ------------ -----------
Total current liabilities (482.2) (1,810.7) (1,801.4)
Non-current liabilities
Financial liabilities
* Borrowings 14 - (100.0) (197.1)
* Derivative financial liabilities - (0.4) (0.9)
Deferred income tax liabilities - - (0.7)
Other non-current liabilities 16 - (103.0) (122.3)
Lease liabilities(1) (12.8) - -
Provisions for other liabilities
and charges (10.1) (0.4) (0.8)
---------------------------------------- ---------- ------------ -----------
Total non-current liabilities (22.9) (203.8) (321.8)
Total liabilities (505.1) (2,014.5) (2,123.2)
---------------------------------------- ---------- ------------ -----------
Net assets 120.5 679.3 682.2
---------------------------------------- ---------- ------------ -----------
Equity
Ordinary shares 55.5 55.5 55.5
Share premium - 197.7 197.6
Other reserves 20 85.7 4.8 4.8
Retained earnings 20 (20.7) 421.3 424.3
---------------------------------------- ---------- ------------ -----------
Total equity attributable to owners
of the Company 120.5 679.3 682.2
---------------------------------------- ---------- ------------ -----------
1 The Group adopted IFRS 16 Leases on 1 July 2019 using the
modified retrospective approach with any reclassification and
adjustments arising from the initial application recognised as an
adjustment to opening equity (notes 1 & 23). This is in
addition to the prior year adjustments detailed in notes 1 and
24.
Consolidated statement of changes in equity
for the year ended 30 June 2020
Total
Ordinary Share Other Retained shareholders'
shares premium reserves earnings equity
Unaudited Unaudited Unaudited Unaudited Unaudited
Notes GBPm GBPm GBPm GBPm GBPm
-------------------------------------- ------ ---------- ---------- ---------- ---------- --------------
Consolidated statement
At 30 June 2018 (as originally
reported) 55.5 197.6 4.8 518.6 776.5
Restatement as a result of correction
of previous error 24 - - - (94.3) (94.3)
-------------------------------------- ------ ---------- ---------- ---------- ---------- --------------
At 30 June 2018 (restated) 55.5 197.6 4.8 424.3 682.2
Adjustment as a result of transition
to IFRS 9 and IFRS 15 on 1 July
2018 - - - (10.4) (10.4)
-------------------------------------- ------ ---------- ---------- ---------- ---------- --------------
Adjusted equity at 1 July 2018 55.5 197.6 4.8 413.9 671.8
Profit for the year - - - 86.9 86.9
Other comprehensive (expense) - - - (0.5) (0.5)
-------------------------------------- ------ ---------- ---------- ---------- ---------- --------------
Total comprehensive income for
the year - - - 86.4 86.4
Transactions with owners:
Dividends 9 - - - (79.9) (79.9)
Share-based payments 19 - - - 0.9 0.9
Issue of shares - 0.1 - - 0.1
-------------------------------------- ------ ---------- ---------- ---------- ---------- --------------
At 30 June 2019 (restated) 55.5 197.7 4.8 421.3 679.3
Adjustment as a result of transition
to IFRS 16 on 1 July 2019(1) 1 & 23 - - - (1.0) (1.0)
-------------------------------------- ------ ---------- ---------- ---------- ---------- --------------
Adjusted equity at 1 July 2019 55.5 197.7 4.8 420.3 678.3
Profit for the year - - - 320.4 320.4
Other comprehensive expense - - - 0.5 0.5
-------------------------------------- ------ ---------- ---------- ---------- ---------- --------------
Total comprehensive income for
the year - - - 320.9 320.9
Transactions with owners:
Dividends 9 - - - (38.9) (38.9)
Distribution of Galliford Try
Homes Ltd 1 & 8 - - - (840.0) (840.0)
Capital reorganisation(2,3) 1 & 8 - (197.7) 80.9 116.8 -
Share-based payments - discontinued
operations - - - 0.2 0.2
-------------------------------------- ------ ---------- ---------- ---------- ---------- --------------
At 30 June 2020 55.5 - 85.7 (20.7) 120.5
-------------------------------------- ------ ---------- ---------- ---------- ---------- --------------
1 The Group adopted IFRS 16 Leases on 1 July 2019 using the
modified retrospective approach with any reclassification and
adjustments arising from the initial application recognised as an
adjustment to opening equity (notes 1 & 23). This is in
addition to the prior year adjustments detailed in notes 1 and
24.
2 Galliford Try Holdings plc was incorporated on 19 September
2019. On 3 January 2020 its entire share capital was admitted to
the premium listing segment of the Official List of the FCA and its
trading on the main market for listed securities of the London
Stock Exchange (notes 1 & 8).
3 On 3 January 2020, as part of the overall process to dispose
of the Group's housebuilding operations to Vistry Group plc, a
scheme of arrangement was completed under section 26 of the
Companies Act 2006 which resulted in the admission of Galliford Try
Holdings plc to the premium listing segment of the Official List of
the FCA and its trading on the main market for listed securities of
the London Stock Exchange (see above). Consequently, the previously
consolidated share premium and merger reserve balances of Galliford
Try Limited (previously known as Galliford Try plc) were replaced
by the equivalent balances of Galliford Try Holdings plc (notes 1
& 8).
Statement of cash flows
for the year ended 30 June 2020
2020
Unaudited 2019
GBPm GBPm
------------------------------------------------- ---------- -------
Cash flows from operating activities
Pre-exceptional profit for the year 300.1 128.1
Exceptional profit for the year 5 20.3 (41.2)
---------- -------
Profit for the year 320.4 86.9
Adjustments for:
Profit for the year from discontinued operations 8 (353.0) (136.4)
Income tax credit - continuing operations 7 (2.0) (15.0)
Net finance income - continuing operations 6 (4.8) (2.0)
---------- -------
(Loss) before finance costs for continuing
operations (39.4) (66.5)
Adjustments for continuing operations:
Depreciation and amortisation 13.8 5.0
Loss on sale of property, plant and equipment - 0.2
Profit on sale of PPP and other investments (0.6) (6.9)
Share-based payments - 0.5
Share of post-tax losses/(profits) from
joint ventures 0.2 (0.4)
Movement on provisions 23.2 (0.3)
Other non-cash movements - 0.1
------------------------------------------------- ---------- -------
Net cash used in operations before changes
in working capital (2.8) (68.3)
Decrease in trade and other receivables 128.5 31.7
Decrease in trade and other payables (257.1) (92.6)
------------------------------------------------- ---------- -------
Net cash used in operations (131.4) (129.2)
Interest received 4.9 5.0
Interest paid (1.0) (2.1)
Income tax received 7.5 16.6
------------------------------------------------- ---------- -------
Net cash used in operating activities from
continuing operations (120.0) (109.7)
Net cash (used in)/generated from operating
activities from discontinued operations (32.1) 50.1
------------------------------------------------- ---------- -------
Net cash used in operating activities (152.1) (59.6)
Cash flows from investing activities
Dividends received from joint ventures - 0.4
Movement in net working capital balances
due from joint ventures (2.4) 0.1
Acquisition of PPP and other investments (6.6) (22.7)
Proceeds from disposal of PPP and other
investments 5.8 21.1
Acquisition of property, plant and equipment (1.4) (2.7)
Proceeds from sale of property, plant and
equipment - 0.5
------------------------------------------------- ---------- -------
Net cash used in investing activities from
continuing operations (4.6) (3.3)
Net cash generated from/(used in) investing
activities from discontinued operations 362.6 (11.0)
------------------------------------------------- ---------- -------
Net cash generated from/(used in) investing
activities 358.0 (14.3)
Cash flows from financing activities
Net proceeds from issue of ordinary share
capital - 0.1
Repayment of lease liabilities(1) (10.0) -
Decrease in borrowings - (0.1)
Net dividends paid to Company shareholders 9 (38.9) (79.9)
------------------------------------------------- ---------- -------
Net cash used in financing activities from
continuing operations (48.9) (79.9)
Net cash generated from financing activities
from discontinued operations (101.4) -
------------------------------------------------- ---------- -------
Net cash used in financing activities (150.3) (79.9)
Net increase/(decrease) in cash and cash
equivalents 55.6 (153.8)
------------------------------------------------- ---------- -------
Cash and cash equivalents at 1 July 14 141.6 295.4
------------------------------------------------- ---------- -------
Cash and cash equivalents at 30 June 14 197.2 141.6
------------------------------------------------- ---------- -------
1 The Group adopted IFRS 16 Leases on 1 July 2019 using the
modified retrospective approach with any reclassification and
adjustments arising from the initial application recognised as an
adjustment to opening equity (notes 1 & 23).
Notes to the consolidated financial statements
1 Basis of preparation
General information
The unaudited financial information set out above does not
constitute the statutory accounts of Galliford Try Holdings plc for
the year ended 30 June 2020, but is derived from those statutory
accounts, which have been prepared in accordance with International
Financial Reporting Standards (IFRSs) adopted by the European Union
and therefore they comply with Article 4 of the EU IAS Regulation.
Statutory financial statements for 2019 have been delivered to the
Registrar of Companies and those for 2020 will be delivered
following the Company's Annual General Meeting. The auditors'
reports on both the 30 June 2020 and 30 June 2019 financial
statements were unqualified; did not draw attention to any matters
by way of emphasis; and did not contain statements under section
498 (2) or (3) of the Companies Act 2006.
Following the disposal of the Linden Homes and Partnerships
& Regeneration divisions of Galliford Try Limited (formerly
Galliford Try plc), effective from 3 January 2020, the entire
issued share capital of Galliford Try Holdings plc, was admitted to
the premium listing segment of the Official List of the FCA and to
trading on the main market for listed securities of the London
Stock Exchange with a corresponding cancellation of trading in all
shares of Galliford Try Limited (formerly Galliford Try plc).
The disposal of the housebuilding divisions of the Group was a
complex transaction incorporating a court-approved scheme of
arrangement under Part 26 of the Companies Act 2006, by which the
ultimate result was that Galliford Try Limited (formerly Galliford
Try plc):
> distributed the Linden Homes assets and its 100% investment
in the various Linden legal entities to its shareholders (who
received 0.57406 shares in Vistry Group plc in addition to 1.0
shares in Galliford Try Holdings plc for each share they held in
Galliford Try Limited). In these consolidated accounts, this
resulted in a debit to equity equal to the fair value of assets
distributed of GBP840m, de-recognition of the net assets of Linden
Homes of GBP862m and a loss recognised in the income statement of
GBP22m (being the difference).
> sold its 100% investment in the various Partnerships &
Regeneration legal entities for GBP300m in cash and the transfer of
the GBP100m Pricoa Private Placement debt (ie GBP400m of net
value). In these consolidated accounts, this resulted in the
de-recognition of the net assets relating to these entities of
GBP107m and recognition of a gain on disposal of GBP293m.
> received a working capital adjustment of GBP76.3m which has
been included within profit on disposal in the discontinued
operations line of the income statement.
In addition, a new entity, Galliford Try Holdings plc, was
established and acquired 100% of the share capital of Galliford Try
Limited and as noted above, became the parent of the overall
continuing Galliford Try Group, with its entire issued share
capital admitted to the London Stock Exchange.
In effect, the substance of the transaction is that the Linden
Homes operations were distributed to the shareholders of Galliford
Try Limited and then the newly incorporated Galliford Try Holdings
plc has issued shares to its shareholders in exchange for their
shares in Galliford Try Limited and has subsequently sold the
Partnerships & Regeneration operations for cash and the
transfer of debt.
Further details on this transaction are included in note 8.
Basis of consolidation and discontinued operations
The Linden Homes and Partnerships & Regeneration segments
(which comprise the housebuilding operations) and certain other
assets and liabilities were transferred to Vistry Group plc on 3
January 2020 (including the GBP100m Private Placement notes and two
of the Group's defined benefit pension schemes) and therefore have
been treated as discontinued operations in accordance with IFRS 5:
Non-Current Assets Held for Sale and Discontinued Operations.
Accordingly, prior periods in the income statement and the
statement of cash flows have been restated to show separately those
transactions in respect of discontinued operations; these are also
disclosed in detail in note 8.
As the transaction does not represent either a common-control
transaction nor a business combination as defined by IFRS 3
Business Combinations it has been accounted for as a reorganisation
using merger accounting principles. Consequently, these
consolidated financial statements have been prepared with the
consolidated Group balances of the retained businesses unchanged
from the transaction. The consolidated total equity reflects the
legal position of the Group, reflecting the share capital and
merger reserve of the parent, Galliford Try Holdings plc and
retained earnings representing the balance. Therefore, these
financial statements are a continuation of the prior year's and the
previous Group's (ie Galliford Try Limited) consolidation
reflecting historical balances previously disclosed.
Following the completion of the transaction, the ultimate
holding company for the Group is Galliford Try Holdings plc (of
which Galliford Try Limited (formerly Galliford Try plc) is now a
wholly owned subsidiary) and therefore, it is for this entity that
the Company financial statements are shown within these accounts.
This entity was incorporated on 19 September 2019 and hence there
are no prior year comparative balances.
The Group has adopted IFRS 16 Leases from 1 July 2019. IFRS 16
eliminates the classification of leases as either operating leases
or finance leases and instead introduces a single lessee accounting
model. The Group, as lessee, has recognised a long-term
depreciating right of use asset and corresponding lease liability.
The leases were previously categorised as either operating leases
or finance leases.
The Group has adopted the modified retrospective approach for
IFRS 16, recognising the right of use asset as if IFRS 16 had
always been applied (but using the incremental borrowing rate as at
the date of initial application of 1 July 2019), with a resulting
transition adjustment recognised to opening equity. The weighted
average incremental borrowing rate applied was 3.77%.
The Group has used the following practical expedients permitted
by the standard on transition to IFRS 16:
> the treatment of leases with a remaining term of less than
12 months at 1 July 2019 as short-term leases
> the use of hindsight in determining the lease term where
the contract contains options to extend or terminate the lease
> the use of a single discount rate to a portfolio of leases
with reasonably similar characteristics
> the reliance on assessments made under IAS 37 prior to
transition as to whether leases are onerous as an alternative to
performing an impairment review.
Payments associated with short-term leases (with a lease term of
12 months or less) and leases of low-value assets are recognised as
an expense on a straight-line basis over the lease term.
In line with the requirements of the standard with regards to
the transition option adopted, the Group has not restated its
comparative information which continues to be reported under
previous leasing standards, IAS 17. As required by IFRS 16, the
Group has provided a reconciliation of the lease commitment
disclosed as at 30 June 2019 to the opening lease liability under
IFRS 16 as at 1 July 2019 (in note 23).
The financial impact on transition (for the total Group) is as
follows:
GBPm
----------------------------------------------- ------
Right of use assets 42.1
Prepayment assets derecognised (0.7)
Lease liabilities (43.5)
Accrual liabilities derecognised 0.9
Deferred tax asset recognised on transition 0.2
Retained earnings on transition at 1 July 2019 (1.0)
----------------------------------------------- ------
Prior year adjustments
The Group has a number of prior year adjustments, primarily as a
result of revisiting the initial application of the accounting
standards IFRS 9 and 15 and as a result of discussions with the
FRC's Corporate Reporting Review Team ('CRRT') following the
conclusion of their review of the Group's 2018 financial
statements. Details of these adjustments is included in note
24.
2 Accounting policies
Adoption of new and received standards by the Group
Except as described below, the accounting policies applied are
consistent with those of the annual financial statements for the
year ended 30 June 2019.
(i) IFRS 16 Leases
Prior to 1 July 2019 leases in which a significant portion of
the risks and rewards of ownership are retained by the lessor were
classified as operating leases. Rentals under operating leases were
charged to the income statement on a straight-line basis over the
lease term.
From 1 July 2019, leases are recognised as a right-of-use asset
and a corresponding liability at the date at which the leased asset
is available for use by the Group. Each lease payment is allocated
between the liability and finance cost. The finance cost is charged
to profit or loss over the lease term at a constant periodic rate
of interest on the remaining balance of the liability. The
right-of-use asset is depreciated over the lease term on a
straight-line basis, unless the useful life of the asset is shorter
than the lease term.
A contract is or contains a lease if the contract conveys the
right to control the use of an identified asset for a period of
time in exchange for consideration.
The Group leases a variety of property, plant and equipment,
such as offices, site plant and accommodation and cars. Rental
contracts are usually made for fixed periods of 1 to 5 years but
may be for longer or shorter periods or include extension options
or break clauses. Leases of site plant and accommodation are not
made for fixed periods but can be terminated when no longer
required. Leases are negotiated on an individual basis and contain
a wide range of different terms and conditions. The lease
agreements do not impose any covenants, but leased assets may not
be used as security for borrowing purposes.
Payments associated with short-term leases and leases of
low-value assets (defined as those with a weekly lease payment of
less than GBP25) are recognised on a straight-line basis as an
expense.
Assets and liabilities arising from a lease are initially
measured on a net present value basis. Lease liabilities comprise
the net present value of the following lease payments:
> fixed payments (including in-substance fixed payments),
less any lease incentives receivable
> variable lease payments that depend on an index or a
rate
The lease payments are discounted using the appropriate
incremental borrowing rate specific to each lease within each asset
class.
The incremental borrowing rate is the rate of interest that a
lessee would have to pay to borrow over a similar term, with
similar security, the funds necessary to obtain an asset of similar
value to the right-of-use assets in a similar economic
environment.
Right-of-use assets are initially measured at cost, which
comprises the initial amount of the lease liability adjusted for
any lease payments made at or before the commencement date, plus
any direct costs incurred or expected to dismantle and remove the
underlying asset, less any lease incentives received.
Covid-19
The Covid-19 outbreak has developed rapidly in 2020. Measures
taken to contain the virus have affected the wider economy and
directly impacted on the Group's trading results (as detailed
further in the Strategic Report in the Annual Report). The Group
continued to operate sites where possible, in a safe and
appropriate manner and strictly in accordance with both Government
and the Construction Leadership Council health and safety
guidelines and regulations. In light of the pandemic, the Group has
performed a further review of its accounting policies and consider
they remain appropriate. Some of the key points and clarifications
resulting from this review are highlighted below:
> The main impact to the trading results has been to the
revenue and margin shortfall due to lockdown and to the ongoing
costs incurred on projects which ultimately have not fulfilled
performance obligations under IFRS 15 as efficiently as expected
(or not at all). The Group continues to recognise these costs as
incurred (in accordance with IFRS 15 paragraph 98), and the
associated revenue to the extent it is highly probable not to
result in a significant reversal, adjusting for the measure of
progress in accordance with IFRS 15: B19 (a). When measuring
progress towards completion of a performance obligation recognised
over time, future costs include costs associated with the new
working guidelines in respect of Covid-19 secure environment,
providing such costs are expected to contribute to the satisfaction
of the performance obligation. Inefficient costs and any costs that
are not expected to contribute to the satisfaction of the
performance obligation are excluded when measuring progress and are
expensed through the trading results (not exceptional items).
> The Group has utilised the Government's Job Retention
Scheme. The grant income received has been accounted for in
accordance with IAS 20, and has been offset against the costs
incurred in line with our existing accounting policy in the Income
Statement.
> The Group has reviewed any potential impairment indicators
of both financial and non-financial assets (in accordance with IAS
36 and IFRS 9 in particular), especially where operations have been
curtailed or customers are in financial distress. This has been
further incorporated into the impairment reviews and sensitivity
analysis over goodwill which is detailed in note 11. As detailed in
the Strategic Report, the Group benefits from a customer base
predominantly within the public sector, which the Group considers
provides greater financial security over the balances held within
trade and other receivables.
> The Group has successfully negotiated a limited number of
rent concessions on leased properties. The practical expedient
available from the recently endorsed amendment to IFRS 16 -
'Covid-19-Related Rent Concessions' has not been utilised on the
basis it does not have a material impact to the Group and its
application is optional.
3 Segmental reporting
Segmental reporting is presented in the consolidated financial
statements in respect of the Group's business segments, which are
the primary basis of segmental reporting. The business segmental
reporting reflects the Group's management and internal reporting
structure. Segmental results include items directly attributable to
the segment as well as those that can be allocated on a reasonable
basis. As the Group has no material activities outside the UK,
segment reporting is not required by geographical region.
The chief operating decision-makers ('CODM') have been
identified as the Group's Chief Executive and Finance Director. The
CODM review the Group's internal reporting in order to assess
performance and allocate resources. Following the disposal of the
Group's housebuilding operations to Vistry Group plc on 3 January
2020 (notes 1 & 8), management has determined the operating
segments of the resulting Group to be Building, Infrastructure, PPP
Investments and Central (primarily representing central overheads).
Previously, they were assessed as Linden Homes, Galliford Try
Partnerships and Regeneration, Construction, including Building and
Infrastructure, PPP Investments and Central.
The CODM assess the performance of the operating segments based
on a measure of adjusted earnings before finance costs,
amortisation, exceptional items and taxation. This measurement
basis excludes the effects of non-recurring expenditure from the
operating segments, such as restructuring costs and impairments
when the impairment is the result of an isolated, non-recurring
event. Interest income and expenditure are included in the result
for each operating segment that is reviewed by the CODM. Other
information provided to them is measured in a manner consistent
with that in the financial statements.
Year ended 30 June 2020 - continuing Building Infrastructure PPP Investments Central Total
operations GBPm GBPm GBPm GBPm GBPm
-------------------------------------- -------- -------------- --------------- ------- -------
Pre-exceptional revenue 719.9 357.1 8.2 4.4 1,089.6
Exceptional items (note 5) - 32.0 - - 32.0
-------------------------------------- -------- -------------- --------------- ------- -------
Revenue 719.9 389.1 8.2 4.4 1,121.6
Pre-exceptional loss from operations
(1,2) (51.9) (1.8) (0.5) (8.2) (62.4)
Exceptional items (note 5) (2.0) 27.3 - (0.2) 25.1
Share of joint ventures' interest and
tax - - - - -
-------------------------------------- -------- -------------- --------------- ------- -------
(Loss)/profit before finance costs,
amortisation and taxation (53.9) 25.5 (0.5) (8.4) (37.3)
Finance income - - 4.3 1.5 5.8
Finance costs(1) (2.7) (5.8) (1.4) 8.9 (1.0)
-------------------------------------- -------- -------------- --------------- ------- -------
(Loss)/profit before amortisation and
taxation (56.6) 19.7 2.4 2.0 (32.5)
Amortisation of intangibles (1.0) - - (1.1) (2.1)
-------------------------------------- -------- -------------- --------------- ------- -------
(Loss)/profit before taxation (57.6) 19.7 2.4 0.9 (34.6)
Income tax credit 2.0
-------------------------------------- -------- -------------- --------------- ------- -------
(Loss) for the year (32.6)
-------------------------------------- -------- -------------- --------------- ------- -------
Year ended 30 June 2019 - continuing Building Infrastructure PPP Investments Central Total
operations GBPm GBPm GBPm GBPm GBPm
-------------------------------------- -------- -------------- --------------- ------- -------
Pre-exceptional revenue 858.3 527.0 17.0 0.6 1,402.9
Exceptional items (note 5) - (2.8) - - (2.8)
-------------------------------------- -------- -------------- --------------- ------- -------
Revenue 858.3 524.2 17.0 0.6 1,400.1
Pre-exceptional profit/(loss) from
operations(2) (9.5) (5.5) 4.5 (6.4) (16.9)
Exceptional items (note 5) (0.9) (45.5) - (0.9) (47.3)
Share of joint ventures' interest and
tax (0.1) - (0.1) - (0.2)
-------------------------------------- -------- -------------- --------------- ------- -------
(Loss)/profit before finance costs,
amortisation and taxation (10.5) (51.0) 4.4 (7.3) (64.4)
Finance income - - 3.4 0.2 3.6
Finance costs (1.4) (7.0) (1.6) 8.4 (1.6)
-------------------------------------- -------- -------------- --------------- ------- -------
(Loss)/profit before amortisation and
taxation (11.9) (58.0) 6.2 1.3 (62.4)
Amortisation of intangibles (1.0) - - (1.1) (2.1)
-------------------------------------- -------- -------------- --------------- ------- -------
(Loss)/profit before taxation (12.9) (58.0) 6.2 0.2 (64.5)
Income tax credit 15.0
-------------------------------------- -------- -------------- --------------- ------- -------
(Loss) for the year (49.5)
-------------------------------------- -------- -------------- --------------- ------- -------
1 The Group adopted IFRS 16 Leases on 1 July 2019 using the
modified retrospective approach with any reclassification and
adjustments arising from the initial application recognised as an
adjustment to opening equity (notes 1 & 23).
2 Pre-exceptional profit from operations is stated before
finance costs, amortisation, exceptional items, share of joint
ventures' interest and tax and taxation.
Inter-segment revenue, which is priced on an arm's length basis,
is eliminated from revenue above. In the year to 30 June 2020 this
amounted to GBP51.8m (2019: GBP57.3m) for continuing operations, of
which GBP16.9m (2019: GBP23.2m) was in Building, GBP21.9m (2019:
GBP22.1m) was in Infrastructure and GBP13.0m (2019: GBP12.0m) was
in central costs.
Balance Sheet
Building Infrastructure PPP Investments Central Total
30 June 2020 GBPm GBPm GBPm GBPm GBPm
------------------------------- -------- -------------- --------------- ------- -------
Goodwill and intangible assets 43.9 37.2 - 3.9 85.0
Working capital employed(1) (160.7) (26.1) 37.7 (12.6) (161.7)
Net cash/(debt) 111.1 (66.3) (10.0) 162.4 197.2
------------------------------- -------- -------------- --------------- ------- -------
Net (liabilities)/assets (5.7) (55.2) 27.7 153.7 120.5
Total Group liabilities (505.1)
------------------------------- -------- -------------- --------------- ------- -------
Total Group assets 625.6
------------------------------- -------- -------------- --------------- ------- -------
1 Includes lease liabilities as per IFRS 16. The Group adopted
IFRS 16 Leases on 1 July 2019 using the modified retrospective
approach with any reclassification and adjustments arising from the
initial application recognised as an adjustment to opening equity
(notes 1 & 23).
Linden Partnerships
30 June 2019 (Restated - Building Infrastructure PPP Investments Central Homes & Regeneration Total
note 24) GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------------- -------- -------------- --------------- ------- ------- --------------- ---------
Goodwill and intangible
assets 44.6 37.2 - 4.8 52.5 32.3 171.4
Working capital employed (73.5) (17.8) 47.6 (208.0) 759.2 57.0 564.5
Net cash/(debt) 77.4 (93.2) (22.2) 557.8 (567.1) (9.3) (56.6)
------------------------- -------- -------------- --------------- ------- ------- --------------- ---------
Net assets 48.5 (73.8) 25.4 354.6 244.6 80.0 679.3
Total Group liabilities (2,014.5)
------------------------- -------- -------------- --------------- ------- ------- --------------- ---------
Total Group assets 2,693.8
------------------------- -------- -------------- --------------- ------- ------- --------------- ---------
4 Revenue
Nature of revenue streams - continuing operations
(i) Building and Infrastructure segments
Our Construction business operates nationwide, working with
clients predominantly in the public and regulated sectors, such as
health, education and defence markets within the Building segment
and road, rail, airports, water and flood alleviation markets
within the Infrastructure segment (as well as private commercial
clients). Projects include the construction of assets (with
services including design and build, construction only and
refurbishment) in addition to the maintenance, renewal, upgrading
and managing of services across utility and infrastructure
assets.
Revenue stream Nature, timing of satisfaction of performance obligations
and significant payment terms
----------------- ----------------------------------------------------------------
Fixed price A number of projects within these segments are undertaken
using fixed-price contracts.
Contracts are typically accounted for as a single performance
obligation; even when a contract (or multiple combined
contracts) includes both design and build elements,
they are considered to form a single performance obligation
as the two elements are not distinct in the context
of the contract given that each is highly interdependent
on the other.
The Group typically receives payments from the customer
based on a contractual schedule of value that reflects
the timing and performance of service delivery. Revenue
is therefore recognised over time (the period of construction)
based on an input model (reference to costs incurred
to date). Un-invoiced amounts are presented as contract
assets.
Management does not expect a financing component to
exist.
----------------- ----------------------------------------------------------------
Cost-reimbursable A number of projects within these segments are undertaken
using open-book/cost-plus (possibly with a pain/gain
share mechanism) contracts.
Contracts are typically accounted for as a single performance
obligation with the majority of these contracts including
a build phase only.
The Group typically receives payments from the customer
based on actual costs incurred. Revenue is therefore
recognised over time (the period of construction) based
on an input model (reference to costs incurred to date).
Un-invoiced amounts are presented as contract assets.
Management does not expect a financing component to
exist.
----------------- ----------------------------------------------------------------
Framework Projects within the Building and Infrastructure segment
can be undertaken under an overall framework agreement
(possibly granted on a regulatory cycle, such as for
water contracts), with work performed under individual
work orders submitted by the customer and governed by
the terms of the framework agreement (often including
a schedule of rates and a pain/gain element).
Individual work orders will typically consist of a single
deliverable or job and are anticipated to comprise only
a single deliverable (and consequently performance obligation).
Revenue is therefore recognised over time based on an
input model (reference to costs incurred to date).
----------------- ----------------------------------------------------------------
(ii) Investments segment
Through public private partnerships, the business leads bid
consortia and arranges finance, makes debt and equity investments
(which are recycled) and manages construction through to
operations.
Revenue stream Nature, timing of satisfaction of performance obligations
and significant payment terms
--------------- -----------------------------------------------------------
PPP Investments The Group has investments in a number of PPP Special
Purpose Vehicles (SPVs), delivering major building and
infrastructure projects.
The business additionally provides management services
to the SPVs under Management Service Agreements (MSA).
Revenue for these services is typically recognised over
time as and when the service is delivered to the customer.
Revenue for reaching project financial close (such as
success fees) are recognised at a point in time, at
financial close (when control is deemed to pass to the
customer).
--------------- -----------------------------------------------------------
Disaggregation of revenue
The Group derives its revenue from contracts with customers for
the transfer of goods and services, both at a point in time and
over time. The split is disclosed in the table below, which is
consistent with the revenue information that is disclosed for each
reportable segment of the Group (of the continuing operations) as
per IFRS 8 'Operating Segments'.
Building Infrastructure PPP Investments Central
Year ended 30 June 2020 GBPm GBPm GBPm GBPm Total
------------------------ -------- -------------- --------------- ------- -------
Over time 719.9 389.1 7.4 4.4 1,120.8
Point in time - - 0.8 - 0.8
------------------------ -------- -------------- --------------- ------- -------
Revenue 719.9 389.1 8.2 4.4 1,121.6
------------------------ -------- -------------- --------------- ------- -------
Building Infrastructure PPP Investments Central
Year ended 30 June 2019 GBPm GBPm GBPm GBPm Total
------------------------ -------- -------------- --------------- ------- -------
Over time 858.3 524.2 12.1 0.6 1,395.2
Point in time - - 4.9 - 4.9
------------------------ -------- -------------- --------------- ------- -------
Revenue 858.3 524.2 17.0 0.6 1,400.1
------------------------ -------- -------------- --------------- ------- -------
Revenue on existing contracts, where performance obligations are
unsatisfied or partially unsatisfied at the balance sheet date, is
expected to be recognised as follows:
2023
2021 2022 onwards Total
Revenue - year ended 30 June 2020 GBPm GBPm GBPm GBPm
------------------------------------------------- ----- ----- -------- -------
Building 519.3 172.9 10.3 702.5
Infrastructure 203.1 49.6 27.3 280.0
------------------------------------------------- ----- ----- -------- -------
Total Construction 722.4 222.5 37.6 982.5
PPP Investments 1.9 1.6 25.1 28.6
Central - - - -
------------------------------------------------- ----- ----- -------- -------
Total transaction price allocated to performance
obligations yet to be satisfied 724.3 224.1 62.7 1,011.1
------------------------------------------------- ----- ----- -------- -------
2022
2020 2021 onwards Total
Revenue - year ended 30 June 2019 GBPm GBPm GBPm GBPm
------------------------------------------------- ----- ----- -------- -------
Building 575.9 128.5 4.8 709.2
Infrastructure 316.1 75.4 1.0 392.5
------------------------------------------------- ----- ----- -------- -------
Total Construction 892.0 203.9 5.8 1,101.7
PPP Investments 2.1 1.8 25.4 29.3
Central - - - -
------------------------------------------------- ----- ----- -------- -------
Total transaction price allocated to performance
obligations yet to be satisfied 894.1 205.7 31.2 1,131.0
------------------------------------------------- ----- ----- -------- -------
Any element of variable consideration is estimated at a value
that is highly probable not to result in future reversal.
5 Exceptional items
2020 2019
GBPm GBPm
----------------------------------------------------- ----- ------
Revenue - Impact of legacy contracts(1) 32.0 -
Revenue - expected credit loss per IFRS 9 in respect
of legacy contract(2) - (2.8)
Cost of sales - charge on legacy contracts(1,2) (4.0) (39.0)
Cost of sales - restructure costs(3) (2.3) (3.0)
Administrative expenses - restructure costs(3) (0.6) (1.6)
Administrative expenses - pension costs(4) (note 21) - (0.9)
----------------------------------------------------- ----- ------
Profit/(loss) from operations 25.1 (47.3)
----------------------------------------------------- ----- ------
1 On 23 December 2019, the Group announced that following a
lengthy period of negotiation, the AWPR joint venture had
substantially agreed settlement terms with the client in respect of
the final account of this major infrastructure project. Together
with an adverse adjudication award on an unrelated historical
project, the Group announced that it expected to receive a cash
payment of GBP32.0m. After discussion with the Corporate Reporting
Review Team of the FRC (as stated in notes 1 & 24), the Group
has treated the write down of the AWPR asset as a prior period
adjustment, with the settlement income of GBP32.0m recognised (in
revenue) net of final cost estimates of GBP4.0m (in cost of sales)
as exceptional items in the current year.
2 In the prior year, exceptional items of GBP32.3m were in
relation to additional costs to complete the AWPR contract, of
which GBP26.0m was for additional costs to complete the project as
accrued in the first half of the year and GBP6.3m resulted from the
impact of our updated accounting policy on claims from other
parties. Both of these items were recorded within cost of sales.
The exceptional charge in the prior year also included GBP6.7m in
respect of other legacy contracts (recorded within cost of sales).
In accordance with IFRS 9 Financial Instruments (which was adopted
on 1 July 2018), the Group had performed an assessment of the
expected credit loss on both adoption of the standard (at 1 July
2018) and at the closing balance sheet date (30 June 2019), based
on estimated provision matrices. This resulted in an exceptional
impairment charge of GBP2.8m incurred in the year to 30 June
2019.
3 During the year and following the disposal of the
housebuilding operations to Vistry Group plc on 3 January 2020 and
the impact of the Covid-19 pandemic during 2020, the Group
completed a restructure exercise to reflect the revised size and
structure of the business, resulting in GBP2.9m of redundancy costs
(of which GBP2.3m was recorded in cost of sales and GBP0.6m was
recorded in administrative expenses). In the prior year, redundancy
costs of GBP4.6m were recorded in respect of the restructure
announced in May 2019 completed within the Construction business,
(of which GBP3.0m was recorded in cost of sales and GBP1.6m was
recorded in administrative expenses).
4 In July 2018, the Galliford Group Special Scheme completed a
GBP7m insurance bulk annuity buyout transaction, securing the
pensioner liabilities of the scheme. The premium paid was GBP0.9m
higher than the IAS 19 liabilities discharged and therefore, a
settlement charge of GBP0.9m was recorded within administrative
expenses in the income statement. Of the total reported exceptional
costs of GBP4.5m relating to defined benefit pension schemes in the
year to 30 June 2019, the remaining GBP3.5m has been classified as
part of discontinued operations.
2020 2019
GBPm GBPm
--------------------------------------------------- ------ ------
Loss before income tax (34.6) (64.5)
Expected credit loss in respect of legacy contract - 2.8
Net (income)/charge on legacy contracts (28.0) 39.0
Pension costs - 0.9
Restructure costs 2.9 4.6
--------------------------------------------------- ------ ------
Pre-exceptional loss before income tax (59.7) (17.2)
--------------------------------------------------- ------ ------
6 Net finance income
2020 2019
Group GBPm GBPm
------------------------------------------------------------ ----- -----
Interest receivable on bank deposits 0.3 0.2
Interest receivable from PPP investments and joint ventures 5.4 3.4
Net finance income on retirement benefit obligations 0.1 -
------------------------------------------------------------ ----- -----
Finance income 5.8 3.6
Other (including interest on lease liabilities(1) ) (1.0) (1.6)
------------------------------------------------------------ ----- -----
Finance costs (1.0) (1.6)
Net finance income 4.8 2.0
------------------------------------------------------------ ----- -----
1 The Group adopted IFRS 16 Leases on 1 July 2019 using the
modified retrospective approach with any reclassification and
adjustments arising from the initial application recognised as an
adjustment to opening equity (notes 1 & 23). This resulted in
the recognition of a lease liability for leases that were
previously recognised as operating leases and therefore captured
off-balance sheet. Interest expense is charged on the lease
liability and included within Other finance costs above.
7 Income tax credit
2020 2019
Group - continuing operations Note GBPm GBPm
----------------------------------------------- ---- ----- ------
Analysis of expense in year
Current year's income tax
Current tax (7.1) (20.4)
Deferred tax 18 0.3 4.5
Adjustments in respect of prior years
Current tax 8.2 0.9
Deferred tax 18 (3.4) -
----------------------------------------------- ---- ----- ------
Income tax credit (2.0) (15.0)
----------------------------------------------- ---- ----- ------
Tax on items recognised in other comprehensive
income
Current tax (credit) for share-based payments - (0.3)
Tax recognised in other comprehensive income - (0.3)
Total taxation (2.0) (15.3)
----------------------------------------------- ---- ----- ------
The total income tax credit for the year of GBP2.0m (2019:
GBP15.0m) is lower (2019: higher) than the blended standard rate of
corporation tax in the UK of 19.0% (2019: 19.0%).
We have recognised deferred tax at 19.0% as it is likely that
most assets and liabilities will have reversed within one year.
8 Discontinued operations
On 3 January 2020, the Group completed the disposal of the
Linden Homes and Partnerships & Regeneration divisions of
Galliford Try plc (in addition to certain other assets and
liabilities transferred to Vistry Group plc as part of this
transaction) following the implementation of a Group restructuring
and scheme of arrangement under Part 26 of the Companies Act 2006
becoming effective on 2 January 2020. Additionally, with effect
from 8:00 a.m. on 3 January 2020, 111,053,489 Galliford Try
Holdings plc shares with a nominal value of 50p each, being the
entire issued share capital of Galliford Try Holdings plc, was
admitted to the premium listing segment of the Official List of the
FCA and to trading on the main market for listed securities of the
London Stock Exchange with a corresponding cancellation of all
shares of Galliford Try plc.
Further information on the nature and steps required to complete
the transaction are included in note 1.
As a result of this disposal, the Linden Homes and Partnerships
& Regeneration segments have been classified as discontinued
operations in accordance with IFRS 5: Non-Current Assets Held for
Sale and Discontinued Operations. Accordingly, prior periods in the
income statement and the statement of cash flows have been restated
to show separately those balances in respect of discontinued
operations.
The profit for the year (and associated comparative periods) of
these discontinued operations are as follows:
Linden Partnerships
Homes & Regeneration Central Total
Year ended 30 June 2020 - discontinued operations(1) GBPm GBPm GBPm GBPm
----------------------------------------------------- ------ --------------- ------- -----
Revenue 303.1 348.8 - 651.9
Profit/(loss) from operations 50.1 18.7 (27.9) 40.9
Share of joint ventures' interest and tax (6.6) - - (6.6)
----------------------------------------------------- ------ --------------- ------- -----
Profit/(loss) before finance costs, amortisation
and tax 43.5 18.7 (27.9) 34.3
Net finance (costs)/income (17.5) (0.7) 17.5 (0.7)
Amortisation costs - (1.0) - (1.0)
----------------------------------------------------- ------ --------------- ------- -----
Profit/(loss) before taxation 26.0 17.0 (10.4) 32.6
Income tax expense (7.8)
----------------------------------------------------- ------ --------------- ------- -----
Profit after tax of discontinued operations 24.8
----------------------------------------------------- ------ --------------- ------- -----
1 The Group adopted IFRS 16 Leases on 1 July 2019 using the
modified retrospective approach with any reclassification and
adjustments arising from the initial application recognised as an
adjustment to opening equity. This resulted in the recognition of a
lease liability for leases that were previously recognised as
operating leases and therefore captured off-balance sheet. Interest
expense is charged on the lease liability and included within net
finance (costs)/income above.
Linden Partnerships Central
Homes & Regeneration Restated Total
Year ended 30 June 2019 - discontinued operations GBPm GBPm GBPm GBPm
-------------------------------------------------- ------ ---------------- --------- -------
Revenue 758.7 551.9 - 1,310.6
Profit from operations 160.5 34.8 (0.6) 194.7
Share of joint ventures' interest and tax (9.3) (3.4) - (12.7)
-------------------------------------------------- ------ ---------------- --------- -------
Profit before finance costs, amortisation
and tax 151.2 31.4 (0.6) 182.0
Net finance (costs)/income (36.2) (1.8) 30.2 (7.8)
Exceptional items - - (3.5) (3.5)
Amortisation costs - (1.4) - (1.4)
-------------------------------------------------- ------ ---------------- --------- -------
Profit before taxation 115.0 28.2 26.1 169.3
Income tax expense (32.9)
-------------------------------------------------- ------ ---------------- --------- -------
Profit for the period 136.4
-------------------------------------------------- ------ ---------------- --------- -------
The Linden Homes and Partnerships & Regeneration segments
(which comprise the housebuilding operations) and certain other
assets and liabilities were transferred to Vistry Group plc on 3
January 2020 (including the GBP100m Private Placement notes and two
of the Group's defined benefit pension schemes).
2020
Gain on sale and distribution of the discontinued operations GBPm
---------------------------------------------------------------- -------
Net proceeds 476.3
Transaction costs (18.9)
---------------------------------------------------------------- -------
Total net disposal consideration 457.4
Carrying amount of net assets disposed and distributed (969.2)
---------------------------------------------------------------- -------
(511.8)
Fair value of distribution of Galliford Try Homes Limited 840.0
---------------------------------------------------------------- -------
Net gain on sale before income tax 328.2
Income tax expense on gain -
---------------------------------------------------------------- -------
Net gain on sale after income tax 328.2
---------------------------------------------------------------- -------
Net profit from discontinued operations for the year per Income
Statement 353.0
---------------------------------------------------------------- -------
The transaction has been described in detail in note 1 with the
businesses sold on a cash-free debt-free basis with Linden Homes
being distributed to shareholders (plus a further cash working
capital adjustment being paid by the buyer to the Group) and the
Partnerships & Regeneration business being sold for cash.
The total proceeds received of GBP476.3m consist of GBP300.0m in
cash, the transfer of the GBP100.0m Private Placement 10-year
sterling notes to the buyer and a further provisional working
capital adjustment of GBP76.3m. The Group incurred total
third-party advisor fees, professional fees and stamp duty in
respect of the transaction of GBP18.9m resulting in net disposal
proceeds of GBP457.4m. The carrying amount of net assets
immediately prior to the disposal in respect of the discontinued
operations was GBP969.2m, as noted in the table below.
As indicated above, Linden Homes was disposed via a distribution
to shareholders. The owner of each Galliford Try share (in
Galliford Try Limited, formerly Galliford Try plc) received 0.57406
shares in Vistry Group plc (formerly Bovis Homes plc) as well as
one replacement share in Galliford Try Holdings plc. Under IFRIC 17
Distributions of Non-cash Assets to Owners, this distribution is
reflected at fair value, with the difference between the fair value
of the assets distributed and their carrying value (within the
total housebuilding net assets carrying value of GBP969.2m)
reflected in profit or loss. Based on the market value of the
shares in Vistry Group plc at the time of completion (of GBP13.12),
the fair value of the assets distributed was GBP840.0m.
Finally, as a result of the transaction, incorporating the
disposal of the housebuilding divisions, the completion of the
court-approved scheme of arrangement, reorganisation of the Group
structure with the insertion of Galliford Try Holdings plc as the
ultimate parent of the Group (under Part 26 of the Companies Act
2006) and the subsequent capital reduction of Galliford Try
Limited, the Group's consolidated share premium and other reserves
were reduced by GBP197.7m to nil and increased by GBP80.9m to
GBP85.7m respectively, with the net balance recycled through
retained earnings (see note 20).
This resulted in a net gain on sale from the transaction of
GBP328.2m which in addition to the trading profit for the year of
GBP24.8m resulted in a net profit for the year from discontinued
operations of GBP353.0m, as reflected in the Income Statement.
The carrying amounts of assets and liabilities as at the date of
disposal and the distribution of Galliford Try Homes Ltd (3 January
2020) were:
3 January
2020
GBPm
----------------------------------- ---------
Goodwill and intangible assets 92.8
Property, plant & equipment 3.6
Right of use assets(1) 16.3
Investments in joint ventures 71.8
Developments 821.6
Trade and other receivables 595.3
Cash and cash equivalents 869.9
Retirement benefit assets 12.0
----------------------------------- ---------
Total assets 2,483.3
Trade and other payables (626.2)
Lease liabilities(1) (16.7)
Borrowings (869.9)
Deferred income tax liabilities(1) (1.3)
----------------------------------- ---------
Total liabilities (1,514.1)
Net assets 969.2
----------------------------------- ---------
1 The Group adopted IFRS 16 Leases on 1 July 2019 using the
modified retrospective approach with any reclassification and
adjustments arising from the initial application recognised as an
adjustment to opening equity.
The assets noted above include items previously segmented to
Central that were transferred to Vistry Group plc as part of the
sale of the housebuilding division completed on 3 January 2020,
such as the GBP100m Private Placement notes and GBP12.0m in respect
of two of the Group's defined benefit pension schemes.
9 Dividends
2020 2019
-------------------------------- ---------------- ----------------
pence pence
Group GBPm per share GBPm per share
-------------------------------- ---- ---------- ---- ----------
Previous year final 38.9 35.0 54.4 49.0
Current year interim - - 25.5 23.0
-------------------------------- ---- ---------- ---- ----------
Dividend recognised in the year 38.9 35.0 79.9 72.0
-------------------------------- ---- ---------- ---- ----------
The following dividends were declared by the Company in respect
of each accounting period presented:
2020 2019
------------------------------ ---------------- ----------------
pence pence
GBPm per share GBPm per share
------------------------------ ---- ---------- ---- ----------
Interim - - 25.5 23.0
Final - - 38.9 35.0
------------------------------ ---- ---------- ---- ----------
Dividend relating to the year - - 64.4 58.0
------------------------------ ---- ---------- ---- ----------
The directors are not proposing a final dividend in respect of
the financial year ended 30 June 2020 (2019: 35.0p), bringing the
total dividend in respect of 2020 to nil pence per share (2019:
58.0p).
The Company became the ultimate holding company of the Group on
3 January 2020 and paid no dividends in the year (2019: n/a).
10 Earnings Per Share
Basic and diluted earnings/(losses) per share (EPS)
Basic EPS is calculated by dividing the earnings attributable to
ordinary shareholders by the weighted average number of ordinary
shares outstanding during the year, excluding those held by the
Trust, which are treated as cancelled.
Under normal circumstances, the average number of shares is
diluted by reference to the average number of potential ordinary
shares held under option in the year. The dilutive effect amounts
to the number of ordinary shares which would be purchased using the
aggregate difference in value between the market value of shares
and the share option price. Only shares that have met their
cumulative performance criteria are included in the dilution
calculation. The Group has two classes of potentially dilutive
ordinary shares: those share options granted to employees where the
exercise price is less than the average market price of the
Company's ordinary shares during the year and the contingently
issuable shares under the Group's long-term incentive plans. A loss
per share cannot be reduced through dilution, hence this dilution
is only applied where the Group has reported a profit.
The earnings and weighted average number of shares used in the
calculations are set out below.
2020 2019
---------------------------------- -------------------------------- --------------------------------
Weighted Weighted
average Per share average Per share
Earnings number amount Earnings number amount
GBPm of shares pence GBPm of shares pence
---------------------------------- -------- ----------- --------- -------- ----------- ---------
Continuing operations
---------------------------------- -------- ----------- --------- -------- ----------- ---------
Basic EPS - pre-exceptional
Earnings attributable to ordinary
shareholders pre-exceptional
items (52.9) 110,798,602 (47.7) (11.8) 110,704,829 (10.7)
Basic EPS
Earnings attributable to ordinary
shareholders post-exceptional
items (32.6) 110,798,602 (29.4) (49.5) 110,704,829 (44.7)
Effect of dilutive securities:
Options n/a - n/a n/a 94,166 n/a
---------------------------------- -------- ----------- --------- -------- ----------- ---------
Diluted EPS - pre-exceptional (52.9) 110,798,602 (47.7) (11.8) 110,798,995 (10.6)
Diluted EPS (32.6) 110,798,602 (29.4) (49.5) 110,798,995 (44.7)
---------------------------------- -------- ----------- --------- -------- ----------- ---------
Total operations
---------------------------------- -------- ----------- --------- -------- ----------- ---------
Basic EPS - pre-exceptional
Earnings attributable to ordinary
shareholders pre-exceptional
items 300.1 110,798,602 270.9 128.1 110,704,829 115.7
Basic EPS
Earnings attributable to ordinary
shareholders post-exceptional
items 320.4 110,798,602 289.2 86.9 110,704,829 78.5
Effect of dilutive securities:
Options n/a - n/a n/a 94,166 n/a
---------------------------------- -------- ----------- --------- -------- ----------- ---------
Diluted EPS - pre-exceptional 300.1 110,798,602 270.9 128.1 110,798,995 115.6
Diluted EPS 320.4 110,798,602 289.2 86.9 110,798,995 78.4
---------------------------------- -------- ----------- --------- -------- ----------- ---------
Discontinued operations
---------------------------------- -------- ----------- --------- -------- ----------- ---------
Basic EPS - pre-exceptional
Earnings attributable to ordinary
shareholders pre-exceptional
items 353.0 110,798,602 318.6 139.9 110,704,829 126.4
Basic EPS
Earnings attributable to ordinary
shareholders post-exceptional
items 353.0 110,798,602 318.6 136.4 110,704,829 123.2
Effect of dilutive securities:
Options n/a - n/a n/a 94,166 n/a
Diluted EPS - pre-exceptional 353.0 110,798,602 318.6 139.9 110,798,995 126.3
Diluted EPS 353.0 110,798,602 318.6 136.4 110,798,995 123.1
---------------------------------- -------- ----------- --------- -------- ----------- ---------
11 Goodwill
Group GBPm
-------------------------------------------------------------- ------
Cost
At 30 June 2018, 1 July 2018 and 30 June 2019 160.3
Addition 6.9
Disposal (90.0)
-------------------------------------------------------------- ------
At 30 June 2020 77.2
-------------------------------------------------------------- ------
Aggregate impairment at 30 June 2018, 1 July 2018 and 30 June
2019 (0.7)
Disposal 0.7
-------------------------------------------------------------- ------
At 30 June 2020 -
-------------------------------------------------------------- ------
Net book amount
At 30 June 2020 77.2
-------------------------------------------------------------- ------
At 30 June 2019 159.6
-------------------------------------------------------------- ------
At 30 June 2018 159.6
-------------------------------------------------------------- ------
The addition in the year related to the acquisition of STG and
the disposal was in respect of the sale of the Group's
housebuilding divisions to Vistry Group plc on 3 January 2020
(notes 1 & 8).
Goodwill is allocated to the Group's CGUs identified according
to business segment. The goodwill is attributable to the following
business segments:
2020 2019
GBPm GBPm
---------------------------- ----- -----
Linden Homes - 52.5
Partnerships & Regeneration - 29.9
Building 40.0 40.0
Infrastructure 37.2 37.2
---------------------------- ----- -----
77.2 159.6
---------------------------- ----- -----
Impairment review of goodwill and key assumptions
Goodwill is tested for impairment at least annually. The
recoverable amount of a CGU is determined based on value in use
calculations. These calculations use pre-tax cash flow projections
based on future financial budgets approved by the Board, based on
past performance and its expectation of market developments. The
key assumptions within these budgets relate to revenue and the
future profit margin achievable, in line with our strategy and
targets as set out in the Strategic report. Future budgeted revenue
is based on management's knowledge of actual results from prior
years and latest forecasts for the current year, along with the
existing secured works and management's expectation of the future
level of work available within the market sector. In establishing
future profit margins, the margins currently being achieved are
considered in conjunction with expected inflation rates in each
cost category. In Building and Infrastructure, the margins
currently being achieved are expected to increase in line with the
strategy set out in the Strategic Report in the Group's annual
report.
Cash is monitored very closely on a daily, weekly and monthly
basis for the purposes of managing both treasury and the business
as a whole. Details of the Group's treasury management are included
within the financial review in the Strategic report of the Annual
Report. The assumptions used are reviewed regularly and differences
between forecast and actual results are closely monitored with
variances being investigated fully. The knowledge gained from this
past experience is used to ensure that the future assumptions used
are consistent with past actual outcomes and are management's best
estimate of the future cash flows of each business unit.
Cash flows beyond the budgeted three-year period are
extrapolated using an estimated growth rate within each segment.
The growth rate used is the Group's estimate of the average
long-term growth rate for the market sectors in which the CGU
operates. Furthermore, sensitivity analysis has been undertaken on
each goodwill impairment review, by changing the discount rates,
profit margins, growth rates and other variables applicable to each
CGU, and the results are noted below.
The pre-tax discount rates for each CGU are noted below and the
significant increase in these rates compared to the prior year
reflects the change in the Group's capital and debt structure
following the disposal of the housebuilding operations as well as
reflecting the current uncertainty and risk premium inherent in the
capital markets with the ongoing Covid-19 pandemic.
The impact of Covid-19 has been reflected in the Group's
approved budgets for the next three years with budgeted operating
margins updated on a contract by contract basis to reflect new
standard operating procedures and potential increased costs to
reflect revised government and industry health and safety
guidelines as well as any delays to existing projects due to site
curtailments or closures in early 2020.
Building CGU
A pre-tax discount rate of 14.5% (2019: 8.7%) in Building has
been applied to the future cash flows, based on an estimate of the
weighted average cost of capital of that division.
A long-term growth rate of 2.0% per annum has been applied to
the budgeted cash flows (reflecting the board approved budget
operating margins and working capital cashflows) into perpetuity
and these assumptions result in the recoverable value of this CGU
being significantly in excess of the carrying value of the CGU
assets.
The Building CGU is not sensitive to changes in key assumptions
and management does not consider that any reasonable possible
change in any single assumption would give rise to an impairment of
the carrying value of goodwill and intangibles.
Infrastructure CGU
A pre-tax discount rate of 14.7% (2019: 9.4%) in Infrastructure
has been applied to the future cash flows, based on an estimate of
the weighted average cost of capital of that division.
A long-term growth rate of 2.0% per annum has been applied to
the budgeted cash flows (reflecting the board approved budget
operating margins and working capital cashflows) into perpetuity
and these assumptions result in the recoverable value of this CGU
being in excess of the carrying value of the CGU assets (by
GBP19m).
However, the headroom resulting from the value in use
calculations indicates that this CGU is sensitive to changes in the
key assumptions and management considers that a reasonably possible
change in any single assumption could give rise to an impairment of
the carrying value of goodwill and intangibles.
The detailed sensitivity analysis indicates that the following
changes in each of these key assumptions would result in an
impairment:
> Budgeted revenue annual growth rates across the three years
of the budget period, range from nil to 14% at an average of 5.8%.
A reduction of this rate to 2.6% per annum would result in the
headroom being eliminated.
> A long term growth rate of 2.0% has been applied. Even if
this was reduced to nil, the headroom would remain greater than
GBP9m.
> Gross operating margins (before divisional and central
overheads and contingencies) are forecast to range from 2.3% to
over 3.0% across the three years of the budget period, at an annual
average of over 3.0%. These margins would need to reduce to an
average of approximately 2.5% per annum to eliminate the
headroom.
> The pre-tax discount rate is 14.7% and an increase of more
than 26% to 18.6% would eliminate the headroom. This increase in
discount rate would reflect an additional risk premium in respect
of the current growth assumptions.
> A reduction of 27% in the overall forecast operating cash
flows of the CGU would eliminate the headroom.
It should be noted that a deterioration in a combination of
these key assumptions (especially the WACC) would result in a
larger reduction in assessed headroom.
12 PPP and other investments
2020 2019
Group GBPm GBPm
--------------------------------------------------- ----- ------
At 1 July 41.6 26.8
Effect of change in accounting policy(1) - 5.5
--------------------------------------------------- ----- ------
Restated at 1 July 41.6 32.3
Additions 6.6 22.7
Disposals of housebuilding divisions (notes 1 & 8) (0.5) -
Disposals and subordinated loan repayments (5.2) (14.2)
Movement in fair value (1.8) 0.8
--------------------------------------------------- ----- ------
At 30 June 40.7 41.6
--------------------------------------------------- ----- ------
1 The Group adopted IFRS 9 Financial Instruments on 1 July 2018
using the modified retrospective approach with the cumulative
effect of initial application recognised as an adjustment to
opening equity.
These comprise PPP/PFI investments, shared equity receivables
(disposed of during the year) and investments in other listed
securities (acquired during the year as a result of the shares held
in the Employee Benefit Trust in Galliford try Limited, formerly
Galliford Try plc which resulted in the receipt of shares in Vistry
Group plc, held at fair value, following the sale of the
housebuilding divisions to Vistry Group plc on 3 January 2020).
13 Trade and other receivables
2019
(Restated
- note
2020 24)
GBPm GBPm
---------------------------------------------- ----- ----------
Amounts falling due within one year:
Trade receivables 49.4 169.6
Less: provision for impairment of receivables (1.6) (0.4)
---------------------------------------------- ----- ----------
Trade receivables - net 47.8 169.2
Contract assets(1) (note 17) 172.0 332.8
Amounts due from joint ventures 0.9 93.5
Other receivables 9.8 4.9
Prepayments 17.0 73.9
---------------------------------------------- ----- ----------
247.5 674.3
---------------------------------------------- ----- ----------
1 Contract assets of GBP172.0m at 30 June 2020 includes a
life-time expected credit loss allowance of GBP14.0m (2019:
GBP14.0). The contract asset as at 30 June 2019 has been restated
(notes 1 and 24).
2020 2019
GBPm GBPm
------------------------------------------- ----- -----
Amounts falling due in more than one year:
Amounts due from joint ventures - 238.1
Other receivables - 0.3
------------------------------------------- ----- -----
- 238.4
------------------------------------------- ----- -----
14 Cash and cash equivalents
2020 2019
Group GBPm GBPm
---------------------------------------------------------- ----- -------
Net cash/(debt)
Cash and cash equivalents excluding bank overdrafts 197.2 591.2
Current borrowings - bank overdrafts - (449.6)
---------------------------------------------------------- ----- -------
Cash and cash equivalents per the statements of cashflows 197.2 141.6
Current borrowings - bank loans(1) - (98.2)
Non-current borrowings - debt private placement(1) - (100.0)
Net cash/(debt) 197.2 (56.6)
---------------------------------------------------------- ----- -------
1 On completion of the disposal of Group's housebuilding
divisions on 3 January 2020, the Company received GBP300m of cash,
transferred the GBP100m debt private placement 10-year sterling
notes to Vistry Group plc and received a further working capital
cash adjustment. This has resulted in the Group holding a net cash
position at all times since the transaction.
Net cash excludes IFRS 16 lease liabilities.
15 Trade and other payables
2019
2020 (Restated)
GBPm GBPm
------------------------------------------- ----- -----------
Trade payables 108.1 284.9
Development land payables - 150.5
Contract liabilities (note 17) 112.3 237.9
Amounts due to joint ventures - 24.8
Other taxation and social security payable 18.6 11.1
Other payables 1.2 25.0
Accruals 218.6 528.3
------------------------------------------- ----- -----------
458.8 1,262.5
------------------------------------------- ----- -----------
16 Other non-current liabilities
2020 2019
GBPm GBPm
-------------------------- ----- -----
Development land payables - 66.4
Contract liabilities - 26.1
Accruals - 10.5
-------------------------- ----- -----
- 103.0
-------------------------- ----- -----
17 Contract balances
Contract assets and liabilities are included within "trade and
other receivables" and "trade and other payables" respectively on
the face of the balance sheet. Where there is a corresponding
contract asset and liability in relation to the same contract, the
balance shown is the net position. The timing of work performed
(and thus revenue recognised), billing profiles and cash
collection, results in trade receivables (amounts billed to date
and unpaid), contract assets (unbilled amounts where revenue has
been recognised) and customer advances and deposits (contract
liabilities), where no corresponding work has yet to be performed,
being recognised on the Group's balance sheet.
The reconciliation of the opening to closing contract balances
is shown below:
Contract Contract
asset liability
GBPm GBPm
---------------------------------------------------------- --------- ----------
As 30 June 2019 as reported 412.8 (254.6)
Restatement (note 24) (80.0) (9.4)
---------------------------------------------------------- --------- ----------
At 30 June 2019 and 1 July 2019 332.8 (264.0)
Balances removed due to business disposals(1) (68.3) 127.6
Revenue recognised in the year (continuing operations)(2) 1,051.3 70.3
Net cash received in advance of performance obligations
being fully satisfied - (46.2)
Transfers in the period from contract assets to trade
receivables (1,143.8) -
30 June 2020 172.0 (112.3)
---------------------------------------------------------- --------- ----------
1 Disposal of housebuilding divisions (note 8). The balances reflect those at 30 June 2019.
2 Of the revenue recognised, GBP32.0m is in respect of the final
agreement for AWPR. The revenue was previously constrained due to
uncertainty of the ongoing negotiation as at 30 June 2019
18 Deferred income tax
Deferred income tax is calculated in full on temporary
differences under the liability method, using a tax rate of 19.0%
(2019: 19.0%).
Deferred income tax assets and liabilities are offset when there
is a legally enforceable right to offset current income tax assets
against current income tax liabilities. The net deferred tax
position at 30 June was:
2020 2019
GBPm GBPm
---------------------------------------------- ----- -----
Deferred income tax assets - non-current 5.3 5.7
---------------------------------------------- ----- -----
Deferred income tax assets 5.3 5.7
---------------------------------------------- ----- -----
Deferred income tax liabilities - non-current (1.0) (4.4)
---------------------------------------------- ----- -----
Deferred income tax liabilities (1.0) (4.4)
---------------------------------------------- ----- -----
Net deferred income tax 4.3 1.3
---------------------------------------------- ----- -----
The movement for the year in the net deferred income tax account
is as shown below:
2020 2019
GBPm GBPm
------------------------------------------------------------- ----- -----
At 30 June 1.3 (0.7)
Effect of transition to IFRS 9 and IFRS 15 - 8.8
------------------------------------------------------------- ----- -----
Restated at 1 July 1.3 8.1
Current year's deferred income tax - continuing operations (0.3) (6.6)
Current year's deferred income tax - discontinued operations 0.3 -
Adjustment in respect of prior years - continuing operations 3.4 (0.1)
Adjustment in respect of prior years - discontinued
operations (0.1) -
(Expense) recognised in equity - continuing operations - (0.1)
(Expense) recognised in equity - discontinued operations (0.1) -
Acquisition of subsidiaries(1) (1.0) -
Disposal of subsidiaries(2) 0.8 -
------------------------------------------------------------- ----- -----
At 30 June 4.3 1.3
------------------------------------------------------------- ----- -----
1 Acquisition of STG.
2 Disposal of housebuilding divisions on 3 January 2020.
19 Share-based payments
The Company operates performance-related share incentive plans
for executives, details of which are set out in the Directors'
remuneration report in the Annual Report. The Company also operates
sharesave schemes although there are no live grants as at 30 June
2020. The total charge for the year relating to employee
share-based payment plans for continuing operations was GBPnil
(2019: GBP0.9m), all of which related to equity-settled share-based
payment transactions. After deferred tax, the total charge was
GBPnil (2019: GBP0.8m).
Following the disposal of the housebuilding operations to Vistry
Group plc on 3 January 2020 (notes 1 & 8) and the associated
scheme of arrangement resulting in Galliford try Holdings plc
becoming the ultimate holding company of the Galliford Try Group,
all existing savings related share options and performance-related
long-term incentive plans vested or expired. Following the
completion of the transaction, a new performance-related long-term
incentive plan was established and 2.2m options were granted to the
members of the Executive Board. As at 30 June 2020, these are
therefore the sole in-flight share options.
20 Other reserves and retained earnings
Other Retained
reserves earnings
Notes GBPm GBPm
-------------------------------------------------------- ------ --------- ---------
At 30 June 2018 (as originally reported) 4.8 518.6
Restatement(1) - (94.3)
-------------------------------------------------------- ------ --------- ---------
Restated at 1 July 2018 4.8 424.3
Adjustment as a result of transition to IFRS 9
and IFRS 15 on 1 July 2018 (restated) - (10.4)
-------------------------------------------------------- ------ --------- ---------
Adjusted at 1 July 2018 4.8 413.9
Profit for the year - 86.9
Movement in fair value of PPP and other investments
- continuing operations 12 - 0.8
Deferred and current tax on movements in equity
- continuing operations 18 - (0.1)
Actuarial losses recognised related to retirement
benefit obligations - discontinued operations - (2.4)
Deferred and current tax on movements in equity
- discontinued operations - 0.7
Movement in fair value of derivative financial
instruments - discontinued operations - 0.5
Dividends paid 9 - (79.9)
Share-based payments 19 - 0.9
Restated at 30 June 2019 4.8 421.3
Adjustment as a result of transition to IFRS 16
on 1 July 2019 1 & 23 - (1.0)
-------------------------------------------------------- ------ --------- ---------
Restated at 1 July 2019 4.8 420.3
Profit for the year - 320.4
Dividends paid 9 - (38.9)
Actuarial gains recognised related to retirement
benefit obligations - discontinued operations - 2.0
Share-based payments - continuing and discontinued
operations 19 - 0.2
Movement in fair value of PPP and other investments 12 - (1.8)
Movement in fair value of derivative financial
instruments - 0.4
Deferred and current tax on movements in equity 18 - (0.1)
Capital reorganisation(1) 1 & 8 227.4 (29.7)
Disposal of housebuilding operations to Vistry
Group plc 1 & 8 - (840.0)
Impairment of investment in Galliford Try Limited
and associated recycling of merger reserve to retained
earnings (146.5) 146.5
At 30 June 2020 85.7 (20.7)
-------------------------------------------------------- ------ --------- ---------
The Group's other reserves relates to a merger reserve amounting
to GBP85.7m (2019: GBP4.7m) and the movement on PPP and other
investments amounting to GBPnil (2019: GBP0.1m).
1 Following the disposal of the housebuilding divisions of
Galliford Try Limited (formerly Galliford Try plc), effective from
3 January 2020, the entire issued share capital of Galliford Try
Holdings plc, was admitted to the premium listing segment of the
Official List of the FCA and to trading on the main market for
listed securities of the London Stock Exchange with a corresponding
cancellation of all shares of Galliford Try Limited (formerly
Galliford Try plc).
21 Retirement benefit assets
All employees are entitled to join the Galliford Try Pension
Scheme, a defined contribution scheme established as a stakeholder
plan, with a company contribution based on a scale dependent on the
employee's age and the amount they choose to contribute. Since 1
July 2013 all non-participating and newly-employed staff have been
auto-enrolled into the separate stakeholder plan and are entitled
to increase their contribution rates in line with existing members.
Since 1 April 2009, the Group has operated a pension salary
sacrifice scheme which means that all employee pension
contributions are paid as employer contributions on their
behalf.
Pension costs for the schemes were as follows:
2020 2019
GBPm GBPm
---------------------------------------------------- ----- -----
Defined benefit schemes - expense recognised in the
income statement - -
Defined contribution schemes 15.5 15.2
---------------------------------------------------- ----- -----
Total included within employee benefit expenses 15.5 15.2
---------------------------------------------------- ----- -----
Of the total charge for all schemes GBP8.2m (2019: GBP7.3m) and
GBP7.3m (2019: GBP7.9m) were included, respectively, within cost of
sales and administrative expenses. GBPnil (2019: nil) was included
within net finance costs.
Defined benefit schemes
Historically, the Group has also operated three defined benefit
pension schemes under the UK regulatory framework that pay out
pensions at retirement based on service and final pay, each with
assets held in separate trustee administered funds: the Galliford
Try Final Salary Pension Scheme, the Galliford Group Special Scheme
and the Kendall Cross (Holdings) Ltd Assurance & Pension
Scheme.
The prior year balance sheet (for 2019) includes all three of
these arrangements. However, the Group's two principal funded
pension schemes (being the Galliford Try Final Salary Pension
Scheme and the Kendall Cross (Holdings) Ltd Assurance & Pension
Scheme) were transferred to Vistry Group plc as part of the
disposal of the Linden Homes and Partnerships & Regeneration
divisions to Vistry Group plc on 3 January 2020 (see notes 1 &
8).
The most recent actuarial valuation of the Galliford Group
Special Scheme was prepared using the defined accrued benefit
method as at 1 April 2016. No further contributions are expected to
be required for this Scheme and in July 2018, an insurance bulk
annuity buyout transaction was completed for GBP7m, securing the
pensioner liabilities of the scheme. Options for winding-up the
scheme are now being reviewed and it is expected that this will be
completed during the coming financial year, at which time it is
expected that the remaining surplus assets will be returned to the
Group. Therefore, the balances detailed below represent the current
value of these remaining surplus assets.
2020 2019
GBPm GBPm
-------------------------------------------------------- ----- -------
Fair value of plan assets 1.0 245.7
Present value of defined benefit obligations - (238.7)
-------------------------------------------------------- ----- -------
Net surplus in scheme recognised as a non-current asset
30 June 1.0 7.0
-------------------------------------------------------- ----- -------
22 Guarantees and contingent liabilities
Galliford Try Holdings plc has entered into financial guarantees
and counter indemnities in respect of bank and performance bonds
issued in the normal course of business on behalf of Group
undertakings, including joint arrangements, amounting to GBP157.4m
(2019: GBP239.2m).
23 Impact of the adoption of IFRS 16 Leases
The following is the impact of transition on the individual
balance sheet accounts:
As originally As at
stated 1 July
at 30 Impact Impact 2019
June on Continuing on Discontinued Group
2019 operations operations total
GBPm GBPm GBPm GBPm
---------------------------------------------- ------------- -------------- ---------------- -------
Right of use assets - 25.5 16.6 42.1
Lease prepayment assets (de-recognised) 0.7 (0.4) (0.3) -
Lease liabilities - (25.6) (17.9) (43.5)
Lease accrual liabilities (de-recognised) (0.9) 0.2 0.7 -
Deferred tax (associated with leases) - - 0.2 0.2
---------------------------------------------- ------------- -------------- ---------------- -------
Net impact on retained earnings on transition
at 1 July 2019 (0.2) (0.3) (0.7) (1.2)
---------------------------------------------- ------------- -------------- ---------------- -------
The following is a reconciliation of the operating lease
commitment disclosed at 30 June 2019 to opening lease liability at
1 July 2019:
GBPm
------------------------------------------------------------- -----
Operating lease commitment disclosed at 30 June 2019 41.6
Less: short term leases(1) (1.9)
------------------------------------------------------------- -----
Balance of commitment 39.7
Discounted at the incremental borrowing rate(2) (2.6)
Adjustments as a result of a different lease term under IFRS
16 6.4
------------------------------------------------------------- -----
Lease liability recognised at 1 July 2019 43.5
------------------------------------------------------------- -----
1 short term leases and leases of low value assets are expensed
on a straight-line basis over the term of the lease.
2 the weighted average borrowing rate was 3.77%, with a range of values between 3.10% and 5.98%.
Impact in the period
As a result of the application of IFRS 16, the operating lease
rental expense previously charged to operating profit in the income
statement is replaced by an amortisation charge for the 'right of
use' assets recognised in operating profit and an interest charge
on the lease liabilities recognised in finance costs. During the
year ended 30 June 2020, for the total Group including continuing
and discontinued operations, the depreciation charge relating to
right of use assets was GBP9.3m and the interest charge was
GBP1.0m. Further lease charges have been recognised as operating
expenses of GBP12.1m in respect of exempt short term leases and
GBP0.4m in respect of exempt low value long term leases.
24 Prior year adjustments
The Group has a number of prior year adjustments, primarily as a
result of revisiting the application of the accounting standards
IFRS 9 and 15 and as a result of discussions with the FRC's
Corporate Reporting Review Team ('CRRT') following the conclusion
of their review of the Group's 2018 financial statements.
Their review was based on the Group's annual report and accounts
and did not benefit from detailed knowledge of Galliford Try's
business or an understanding of the underlying transactions entered
into. It was, however, conducted by staff of the FRC who have an
understanding of the relevant legal and accounting framework.
As a result of the opening net assets for the comparative year
being adjusted following the application of these prior year
adjustments, an additional prior year comparative consolidated
balance sheet for (as at 30 June 2018) has also been disclosed.
The prior year adjustments relate to:
> AWPR contract accounting
> Accounting for downstream claims
> Accounting for other legacy contracts
The total impact of these adjustments is summarised below:
(i) AWPR contract
As at 30 June 2018 and 30 June 2019, the Group had recognised an
asset (within 'Trade and Other Receivables') in relation to the
AWPR contract, in respect of the amount assessed to be recoverable
from claims against the client, Transport Scotland (TS). The Group
had previously considered that this balance was assessed in
accordance with the appropriate accounting standard (IAS 11
Construction Contracts) as at 30 June 2018. Reference to these
expected recoveries was included in the Annual Report at 30 June
2018 and 30 June 2019.
As disclosed in the Group's 30 June 2019 financial statements,
the CRRT undertook a review of the Group's 30 June 2018 financial
statements. Following this review and discussions held between the
CRRT and the Group, the Group has revised its assessment as to
whether negotiations with TS had reached a sufficiently advanced
stage to allow the Directors to reliably assess the amount of
revenue expected to be recovered and concluded that it was
incorrect to recognise revenue and the associated contract asset in
respect of the claim under IAS 11 as at 30 June 2018, or under IFRS
15 as at 30 June 2019.
The Group has therefore undertaken a prior year adjustment to
reverse the recognition of the Trade and Other Receivables balance
of GBP80.0m (and the associated tax liability), reduce those items
to nil and to restate retained earnings by GBP64.8m as at 30 June
2018 and 30 June 2019. This adjustment would have reduced revenue
and profit before tax in the years to 30 June 2017 and 30 June 2018
by GBP62.5m and GBP17.5m respectively.
As a result of the above adjustments, following settlement with
the client, the Group has recognised exceptional income of GBP32.0m
(net of final cost estimates of GBP4.0m) in the year to 30 June
2020 (note 5).
(ii) Downstream claims
On adoption of IFRS 15 from 1 July 2018, as disclosed in the 30
June 2019 financial statements, the Group concluded that the
recognition of expected reimbursements resulting from certain
third-party claims (previously accounted for under IAS 11
Construction Contracts) would now be accounted for under IAS 37
Provisions, Contingent Liabilities and Contingent Assets. The
requirements of IAS 37 are more stringent than IAS 11, requiring
recovery to be 'virtually certain' before an asset can be
recognised. Accordingly, in the 30 June 2019 financial statements,
the Group included GBP28.7m as a net IFRS 15 transition
adjustment.
As part of its review of the financial statements for the year
ended 30 June 2018, the CRRT challenged the Group as to whether or
not it was in sufficiently advanced negotiations with third parties
over certain downstream claims to warrant recognising an asset
under the previous IAS 11 accounting standard. The Group has
reviewed its accounting at 30 June 2018 and concluded that it had
incorrectly recognised net assets of GBP21.9m at 30 June 2018
relating to these downstream claims under IAS 11. Therefore, the
Group is now of the opinion that GBP21.9m of the total net balance
of GBP28.7m that was derecognised on transition to IFRS 15 on 1
July 2018 should have been presented as the correction of an error
under IAS 11 at 30 June 2018. This adjustment would have increased
cost of sales and reduced profit before tax in the years to 30 June
2016 and earlier, 30 June 2017 and 30 June 2018 by GBP13.8m,
GBP8.7m and GBP4.6m respectively.
(iii) Other contract assets
On 23 December 2019, the Group announced that an adverse
adjudication on a historical contract had resulted in a loss of
GBP9.4m. On reviewing this adjudication decision, the Group has
reconsidered whether or not the amount of revenue previously
recognised in relation to this contract met the criteria for
recognition under IAS 11 and IFRS 15. As a result, the Group is now
of the opinion that it had overstated revenue by GBP8.0m and had
understated costs by GBP1.4m as at 30 June 2018 and 30 June 2019.
The impact of the correction of this error is to reduce retained
earnings at 30 June 2018 and 30 June 2019 by GBP7.6m, increase
trade and other payables by GBP9.4m and to reduce the corporation
tax creditor by GBP1.8m. This adjustment would have reduced revenue
by GBP8.0m, increased cost of sales by GBP1.4m and reduced profit
before tax by GBP9.4m in the year ended 30 June 2018.
The impact of these adjustments to the reported prior year net
assets can be summarised as below:
30 June 30 June
2019 2018
GBPm GBPm
------------------------------------------ ------- -------
Closing net assets as originally reported 751.7 776.5
Net asset restatement in respect of:
(i) AWPR contract (64.8) (64.8)
(ii) Downstream claims - (21.9)
(iii) Other contracts assets (7.6) (7.6)
------------------------------------------ ------- -------
Total net asset restatement (72.4) (94.3)
------------------------------------------ ------- -------
Restated closing net assets 679.3 682.2
------------------------------------------ ------- -------
The impact on the individual balances in the balance sheet as at
30 June 2019 is shown below:
30 June 30 June
2019 Adjustment Adjustment Adjustment 2019
as reported (i) (ii) (iii) restated
GBPm GBPm GBPm GBPm GBPm
------------------------------------- ------------ ---------- ---------- ---------- ---------
Assets
Non-current assets
Intangible assets 11.8 - - - 11.8
Goodwill 159.6 - - - 159.6
Property, plant and equipment 16.2 - - - 16.2
Investments in joint ventures 67.0 - - - 67.0
PPP and other investments 41.6 - - - 41.6
Trade and other receivables 238.4 - - - 238.4
Retirement benefit asset 7.0 - - - 7.0
Deferred income tax assets 1.3 - - - 1.3
------------------------------------- ------------ ---------- ---------- ---------- ---------
Total non-current assets 542.9 - - - 542.9
Current assets
Developments 876.7 - - - 876.7
Trade and other receivables 754.3 (80.0) - - 674.3
Current income tax assets - 6.9 - 1.8 8.7
Cash and cash equivalents 591.2 - - - 591.2
------------------------------------- ------------ ---------- ---------- ---------- ---------
Total current assets 2,222.2 (73.1) - 1.8 2,150.9
------------------------------------- ------------ ---------- ---------- ---------- ---------
Total assets 2,765.1 (73.1) - 1.8 2,693.8
------------------------------------- ------------ ---------- ---------- ---------- ---------
Liabilities
Current liabilities
Financial liabilities
- Borrowings (547.8) - - - (547.8)
Trade and other payables (1,253.1) - - (9.4) (1,262.5)
Current income tax liabilities (8.3) 8.3 - - -
Provisions for other liabilities and
charges (0.4) - - - (0.4)
------------------------------------- ------------ ---------- ---------- ---------- ---------
Total current liabilities (1,809.6) 8.3 - (9.4) (1,810.7)
------------------------------------- ------------ ---------- ---------- ---------- ---------
Non-current liabilities
Financial liabilities
- Borrowings (100.0) - - - (100.0)
- Derivative financial liabilities (0.4) - - - (0.4)
Other non-current liabilities (103.0) - - - (103.0)
Provisions for other liabilities and
charges (0.4) - - - (0.4)
------------------------------------- ------------ ---------- ---------- ---------- ---------
Total non-current liabilities (203.8) - - - (203.8)
------------------------------------- ------------ ---------- ---------- ---------- ---------
Total liabilities (2,013.4) 8.3 - (9.4) (2,014.5)
------------------------------------- ------------ ---------- ---------- ---------- ---------
Net assets 751.7 (64.8) - (7.6) 679.3
------------------------------------- ------------ ---------- ---------- ---------- ---------
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