Annual Report and Financial Statements 2012 Strength in diversity Highlights: Year ended 30 June 2012 70 60.9 £1,504m £63.1m 60 Group Profit 50 1 revenue before tax 40 32.2 Up 17% (2011: £1,284m) Up 80% (2011: £35.1m 2) 24.6 30 20 10 0 60.9p 30.0p 20102 20112 2012 Earnings per share (p) Earnings Dividend per share per share Up 89% (2011: 32.2p 2) Up 88% (2011: 16.0p) 30.0 30 25 20 16.0 12.5 15 10 5 0 2010 2011 2012 Dividend per share (p) Group • Strong balance sheet with £23 million net cash at year end (2011: £36 million). Housebuilding • 40% increase in completions to 3,039 (2011: 2,170); • 11.8% housebuilding margin shows strong progress (2011: 8.1%); • 7% increase in sales currently reserved, contracted or completed at £350 million (2011: £328 million); • 81% of 10,500 plot landbank now acquired at current market values (2011: 72% of 10,400); • 100% of land required for 2013 financial year in place, 90% of land secured for 2014. Construction • 2.0% construction margin remained robust (2011: 2.4%); • Year end construction cash balance of £146 million (2011: £217 million); • £1.65 billion current construction order book underpinned by major long term projects (2011: £1.7 billion); • 86% of this year’s planned revenue secured (2011: 90%). 1 Group revenue excludes share of joint ventures’ revenue of £72 million (2011: £52 million). Revenue where stated throughout the business review on pages 02 to 41 includes share of joint ventures. 2 Stated before a net exceptional credit in 2011 of £6.6 million and net exceptional loss in 2010 of £7.3 million. Galliford Try plc Annual Report and Financial Statements 2012 01 Contents PERFORMANCE KEY READING PERFORMANCE 02 The Group at a glance 04 Chairman’s statement 04 Chairman’s statement 06 Chief executive’s review Our chairman, Ian Coull, provides an overview of: our financial performance, our updated 08 Finance review strategy, the issues considered by the board and our prospects. 12 Business review: Overview 18 Business review: Housebuilding 06 Chief executive’s review 26 Business review: Construction Our chief executive, Greg Fitzgerald, discusses: our strategy and progress, the 33 Business review: PPP Investments importance of sustainability, our people and culture and the outlook for the Group. 34 Business review: Principal risks 36 Business review: Sustainability 12 Business review A detailed explanation of our business, our divisional performance, our approach to risk management and sustainability. GOVERNANCE GOVERNANCE 42 Directors and executive board 44 Governance 44 Governance How we ensure high standards of corporate governance and our report on the 50 Remuneration report board’s remuneration. 57 Directors’ report and other statutory information FINANCIALS FINANCIALS 61 Independent auditors’ report 104 Shareholder information to the members of Galliford Try plc Useful information for shareholders, including our financial calendar, contact details for 62 Consolidated income statement shareholder enquiries and share dealing service. 62 Consolidated statement of comprehensive income 63 Balance sheet 64 Consolidated statement of changes in equity 64 Company statement of changes in equity 65 Statement of cash flows 66 Notes to the consolidated financial statements 103 Five year record 104 Shareholder information Galliford Try plc Annual Report and Financial Statements 2012 02 The Group at a glance A strong, diverse and well-balanced business Housebuilding Galliford Try is a top five UK housebuilder. We create distinctive homes in prime locations, under the Linden Homes brand. We are primarily focused on the South of England and also build homes in the Eastern counties. We pride ourselves on our attention to £637m £75.1m 3,039 detail, design, local knowledge and expertise in developing a high-quality Revenue Profit from operations Home completions up 64% up 138% up 40% offering. Most of our homes are on brownfield sites and, by drawing on the skills 2 of our construction division, we are able to take on the most complex developments. 2 Commitment to our customers has led to £637m 3,039 our strong reputation for the quality of our homes and customer service. The value of our approach is reflected in the awards we 1 win, including Building magazine’s 2012 1 “Housebuilder of the Year” award. Revenue by sector Completions by sector 1 Private Housing £567m 1 Private Housing 2,272 Our affordable housing business transforms 2 Affordable Housing £70m 2 Affordable Housing 767 lives and builds vibrant, sustainable communities. We work closely with the Homes and Communities Agency, local authorities and housing associations to 11.8 12 ensure their needs are met. We pride 2 10 ourselves on our service and build quality. 8.1 8 5.6 10,500 6 4 1 2 0 2010 2011 2012 Landbank by sector Operating profit margin (%) 1 Private Housing 8,400 2 Affordable Housing 2,100 3,039 3,500 3,000 2,170 2,500 1,705 2,000 1,500 1,000 For more information about housebuilding see pages 18 to 25. 500 0 For more detailed information 2010 2011 2012 go to: www.gallifordtry.co.uk Completions UK coverage Galliford Try plc Annual Report and Financial Statements 2012 03 Galliford Try is a leading UK housebuilding and construction group. Our strength is the diversity of our operations. We provide whole-life solutions, delivering housing and regeneration schemes and major construction projects, ranging from public and commercial buildings to civil engineering works. We are listed on the London Stock Exchange and are a member of the FTSE 250. Construction PERFORMANCE Our construction business is in the top 10 in the UK and operates mainly under the Galliford Try and Morrison Construction brands. It is founded on long term client relationships, working with them to deliver best-value projects. Across construction, our spread of public £925m £18.9m £1.65bn and private sector work is well balanced and extensive. We are renowned for our Revenue Profit from operations Order book down 1% down 15% down 6% ability to provide whole-life solutions, our high standards of project delivery, innovation and the diversity of our activities. 3 The construction business is organised into 1 3 building, partnerships and infrastructure 1 £925m £18.9m divisions: • Building provides a national service to the health, education and commercial markets; • Partnerships is our specialist affordable 2 2 housing contractor, with a strong business Revenue by activity Profit by activity in the South East and North East regions 1 Building £364m 1 Building £8.4m and a growing presence elsewhere; 2 Partnerships £90m 2 Partnerships £1.7m • Infrastructure carries out civil engineering 3 Infrastructure £471m 3 Infrastructure £8.8m projects, primarily in the water, highways, remediation and energy from waste markets. 3 The construction division also includes 3 1 Regeneco, our renewable energy services business; Pentland, our multi-disciplined 1 group of chartered surveyors; and Rock & £1.65bn £1.65bn Alluvium, our national piling specialists. 2 We also invest in public private 2 partnerships through our Investments Order book by activity Order book by sector business, providing funding, construction 1 Building £471m 1 Regulated £699m and facilities management services from 2 Partnerships £368m 2 Public £729m within the Group. 3 Infrastructure £811m 3 Private £222m For more information about construction see pages 26 to 33. For more detailed information go to: www.gallifordtry.co.uk UK coverage Galliford Try plc Annual Report and Financial Statements 2012 04 Chairman’s statement Delivering value for shareholders Performance and dividend The Group achieved an outstanding financial performance during the year, with significant increases in revenues and profits and a strong financial position at the year end. This is the result of our three-year housebuilding expansion plan coming to fruition. At the time of our rights issue in 2009, many considered this plan to be ambitious. Its successful delivery is testament to the vision and skill of Greg Fitzgerald and our executive team. It also reflects our prudent approach in construction, where we continue to focus on projects that allow us to achieve acceptable margins and generate cash. The Group’s strong financial performance has led to an 89% increase in earnings per share. This higher level of earnings, coupled with the expected rise in cash generation resulting from the new housebuilding strategy discussed below, gives us the opportunity to significantly increase the dividend payout. The board is therefore recommending a final dividend of 21 pence per share, to be paid on 16 November 2012 to shareholders on the register at 5 October 2012. Together with the interim dividend of 9 pence per share, this gives a total dividend of 30 pence for With excellent performance, a disciplined the year, up 88% compared with last year. strategy and an increased and sustainable The total dividend is approximately twice covered by earnings. The board will pursue dividend, Galliford Try is well placed to a progressive and sustainable policy for future generate further value for shareholders. dividend payments. Galliford Try plc Annual Report and Financial Statements 2012 05 Strategy and risk manager has joined the business, Conclusion and outlook PERFORMANCE With the housebuilding expansion plan now helping us to enhance our risk management This year’s excellent performance sets complete, the board intends to continue to processes. Risk will remain an important the baseline for the future. The board has focus this business on the regions and focus for the board going forward. a clear strategy in both housebuilding and market segments where it has significant construction, which will serve us well in the expertise and experience. This will deliver We continue to follow the debate regarding market conditions we expect to face in the disciplined growth and allow us to expand executive remuneration and firmly support coming years.