Galliford Try Regulatory News (GFRD)

07:00 A.M. WEDNESDAY 14 SEPTEMBER 2011

GALLIFORD TRY PLC

ANNUAL RESULTS STATEMENT FOR THE YEAR ENDED 30 JUNE 2011

Strong financial performance achieved; excellent position to deliver objectives for 2012 and beyond.

·; £36 million net cash at year end, ahead of expectations. (2010: £77 million)

Housebuilding

·; 27% increase in completions to 2,170. (2010: 1,705)

·; 8.1% housebuilding margin shows strong progress (2010: 5.6%), 9.2% achieved in second half.

·; 25% increase in sales currently reserved, contracted or completed at £328 million (2010: £263 million), following resilient summer market.

·; 72% of 10,400 plot landbank now acquired at current market values. (2010: 58% of 9,700)

·; 100% of land required for 2012 financial year in place with detailed planning, 80% land secured for 2013.

Construction

·; 2.4% Construction margin remains robust. (2010: 2.4%)

·; Strong year end construction cash balance of £217 million. (2010: £207 million)

·; £1.7 billion current construction order book underpinned by major long term projects, 90% of current year's planned revenue secured. (2010: £1.8 billion; 88%)

Commenting on the results, Greg Fitzgerald, Chief Executive, said:

"We exceeded our profit expectations during the year as growth in housebuilding accelerated in the second half, testimony to our strategic focus on southern England. We also maintained a higher than anticipated margin in construction.

As a result we enter the final year of our three year transformational expansion plan for housebuilding in a strong position to deliver on the objectives we set for 2012 and to drive further growth thereafter."

¹ Group revenue excludes share of joint ventures' revenue of £52 million (2010: £35 million). Revenue where stated includes share of joint ventures.

² Stated after a net exceptional credit of £6.6 million (2010 net charge: £6.9 million).

CHIEF EXECUTIVE'S REVIEW

We exceeded our profit expectations during the year as growth in housebuilding accelerated in the second half and we maintained a higher margin in construction than anticipated. As we enter the final year of our three year transformational expansion plan for housebuilding we are in a strong position to deliver on the objectives we set for 2012 and to drive further growth thereafter.

Second Consecutive Year of Strategic Progress

In 2009 we laid out our plan to double the size of our housebuilding business over three years based on a strategic focus on southern England. £119.3 million was raised by way of rights issue with the intention of acquiring land at the attractive prices we foresaw would be available, building up our management resources and strengthening our market coverage within our southern biased business so that by the third year we could deliver around 3,000 units. We forecast that earnings per share would reduce as we made the investment required during the first two years of the plan before materially increasing in 2012 as we delivered the resultant revenues and profits.

At the end of the second year we have made significant progress. We have exceeded our profit forecasts in each of the first two years. We have managed our cash to both invest in land and maintain a robust financial position. By the year end we had secured all the land we need to deliver our planned production in 2012, with every plot having a detailed planning consent.

During the year we increased the number of active selling sites from 59 to 78, and opened new regional offices in Guildford and the Thames Valley. We completed 2,170 homes, 27% up on the previous year and brought all our housebuilding businesses together under the Linden Homes brand, which is driving improvements in cost effectiveness, brand recognition and consistent marketing. At the year end, 70% of our landbank of 10,250 plots had been acquired at current market values on which profit margins are materially higher than on legacy land. The housing market in our southern biased area of operation has generally remained stable, and although there remains a significant amount of production to deliver, and sales to achieve, we are in a strong position to meet our objectives. We will then drive forward further growth towards 4,000 annual completions in the medium term to firmly establish ourselves as a top five housebuilder.

Our plan took account of construction markets that we anticipated would become more difficult as economic conditions hardened. We set a clear strategy to focus on profit margin and cash performance, the two key measures determining the success of a contracting business. We planned for the absolute level of our construction revenues to fall as we were not prepared to acquire work in highly competitive markets where price levels or contract conditions were unacceptable.

Although the market held up longer than we expected, the effect of public sector spending constraints is impacting the construction industry's future pipeline of work and continuing to drive further intense competitiveness. Our strategy has held up well with a maintained margin of 2.4%, excellent cash balances generated from our construction activities and a year end order book of £1.75 billion. This demonstrates success in winning work in our chosen sectors, particularly as we move towards carrying out larger projects such as the recently awarded £790 million Forth Road Crossing, being carried out in a four party consortium, where specific skills and organisational strengths are required that mitigate against selection on price criteria alone. We therefore have visibility on revenues in the immediate future which enables us to maintain the resources we need to ultimately grow the business again when economic conditions and markets improve.

Outlook

Sales during the summer period have been resilient, with £328 million currently reserved, contracted or completed, 25% ahead of last year. Since the year end our landbank has risen to 10,400 plots of which 72% have been acquired at current market values and we now have 81 active selling sites. Our southern biased markets are remaining stable, giving us the backdrop to deliver significant growth in the new financial year and to drive further expansion in the medium term towards 4,000 annual completions.

We have maintained a high quality construction order book, currently standing at £1.7 billion. After securing a number of valuable projects in the second half of the year our forecasts take account of the effect of the increasingly competitive market over the next one to two years. With 90% of our planned revenue for the new financial year secured, and our continued focus on delivering optimum margins and industry leading cash balances, we are well placed to work through the downturn.

Although the economic outlook in the UK remains uncertain, in the absence of a material effect on our markets we remain confident of delivering our planned progress.

Greg Fitzgerald

Chief Executive

BUSINESS REVIEW

Finance

Revenues and Profits - For the year to 30 June 2011 Group revenue was up 5% to £1,284 million (2010: £1,222 million) and revenue, including share of joint ventures, up 6.5% to £1,336 million (2010: £1,256 million). Revenues grew sharply in housebuilding as we delivered the second year of our expansion plan, new sites came on stream and the number of completions increased. Housebuilding revenue was up 23% to £388.5 million (2010: £316 million). Our concentration in Construction is on margin and cash, with revenue remaining little changed during the year at £936.9 million (2010: £936.5 million).

The Group achieved a profit from operations (stated before finance costs, share of joint ventures' interest and tax, exceptional items and tax) of £43.6 million (2010: £35.2 million) within which housebuilding profit from operations was up 80% to £31.6 million (2010: £17.6 million) with construction profit from operations of £22.2 million (2010: £22.8 million). The housebuilding margin grew by 45% to 8.1% (2010: 5.6%) notwithstanding we have already put the cost base in place to deliver the significantly higher revenues forecast for our new financial year. Construction margin was maintained at a better than expected 2.4%, as we reduced our cost base ahead of anticipated lower revenues.

Overall, Group pre exceptional profit before tax was up 34% to £35.1 million (2010: £26.1 million) with post exceptional profit before tax up 117% to £41.7 million (2010: £19.2 million).

Exceptional Items - On 24 March 2011 a Competition Appeal Tribunal judgement reduced the quantum of the fine imposed by the Office of Fair Trading in 2009 for cover pricing during the period from 2001 to 2004 from £8.3 million to £1.4 million. The net £6.6 million reduction, after costs, is reflected in the Group's results as an exceptional item credited to profit before tax.

Tax - The pre exceptional tax rate is 25.4% (2010: 30.7%) which has been reduced as a result of utilising unrecognised tax losses. In addition, the exceptional income of £6.6 million is non taxable as it is reversing the non deductable treatment of the exceptional loss in 2010.

Earnings and Dividend - The financial results achieved this year represent an increase in pre exceptional earnings per share of 31% to 32.2p (2010: 24.6p) and on a post exceptional basis were up 174% to 40.3p (2010: 14.7p).

The directors are recommending a final dividend of 11.5 pence per share which, subject to approval at the annual general meeting, will be payable on 18 November 2011 to shareholders on the register on 7 October 2011. With the interim dividend of 4.5 pence per share paid in April, this will result in a total dividend of 16.0 pence per share, an increase of 28% over the previous year. The board reviewed its dividend policy during the year and has stated its intention that, subject to the performance and prospects of the business, the Group will on an annual basis pay a total dividend that represents around one third of profits before tax.

Banking and Cash - In 2010 the Group has maintained a strong focus on cash management demonstrated by the £36 million of net cash held at the year end. Construction continued to maintain significant cash balances throughout the year with a positive cash balance of £216.7 million as at 30 June 2011 (2010: £206.8 million). Housebuilding requires net investment with a cash outflow of £83 million of the £141 million committed on land acquisitions in the year leading to a net year end investment in developments and housebuilding joint ventures of £571 million.

In May 2011 the Group successfully completed the refinancing of its bank facilities, agreeing a four year £325 million revolving credit facility with HSBC Bank plc, Barclays Bank plc and The Royal Bank of Scotland plc. The new facility replaced the facility entered into in 2007, which was due to expire in February 2012. The new facility provides long term finance and bonding facilities at market competitive rates, providing working capital with a comfortable margin over the Group's projected requirements until 2015. The new facility is subject to covenants over interest cover, gearing, adjusted gearing taking account of land creditor debt and minimum consolidated tangible assets as well as security against the Group's housebuilding development sites. Interest is calculated by aggregating margin, LIBOR and relevant costs. The refinancing extends the Group's debt maturity profile substantially, from February 2012 to May 2015.

Pension and Share Scheme Costs - The total cost of pensions charged to the income statement in the financial year amounted to £10.4 million (2010: £12.8 million). Under IAS19 'Employee Benefits' a small surplus has arisen in the Group's final salary pension schemes. This was calculated, as at 30 June 2011, by an independent qualified actuary and the gross surplus recognised on the balance sheet is £3.2 million (2010: deficit £17.3 million).

Amounts charged to the income statement in respect of employee share schemes during the year amounted to £2.5 million. Following consultation with major shareholders, the remuneration committee has determined that the awards made under the Company's Long Term Incentive Plan with a vesting date of March 2012 will vest in full. This gives rise to an additional IFRS 2 fair value accounting charge of £5.3 million in the financial year to 30 June 2012, which has no incremental effect on either cash or the balance sheet. Further details are in note 11.

Housebuilding

Substantial progress has been made as we complete the second year of our three year expansion plan. Profit from operations was up 80% with operating profit margin up 45% as completions started to rise during the second year of the plan. We achieved a gross margin during the year of 16.1%, with both gross and operating margins expected to increase further in the new financial year as the proportion of completions from new land continues to rise and the cost base already in place delivers a significantly increased planned output.

We entered our new financial year with £247 million of sales carried forward, 23% up on last year. The level and value of sales achieved since the start of the year have been resilient, with sales reserved, contracted or completed now standing at £328 million, up 25% compared to last year, with £254 million for the current financial year.

The housing market during the financial year went through two distinct phases. Until December 2010, purchaser confidence was poor and sales levels disappointing although prices remained stable. However, in January 2011 there was a significant upturn in visitor levels and then sales rates which continued throughout the spring selling season. The market was, and continues to be, strongest in the south east of England, reflected in both sales rates and prices achieved. From the position early in the financial year, when mortgage availability was extremely restricted and lenders were seeking significant deposits, there has been some easing during 2011 although affordability remains dependent on the ratio of the size of the loan to the property value.

Following the improvement in the market during the second half of the year when a number of new sites came on stream, completions rose bringing the total to 2,170, 1,988 net of the proportionate share of our partners in joint venture developments (2010: 1,705 and 1,624). Private housing completions accounted for 1,446 of the total, with an average selling price, reflecting an increased proportion of sales in the south east of England of £227,000 (2010: £207,000). Affordable housing completions were 724 with an average selling price of £106,000 (2010: £124,000).

The number of active selling sites increased during the year from 59 to 78. Although less than originally forecast, we completed a number of legacy sites earlier than anticipated by selling stock in hand at a faster rate than expected during the second half of the financial year. The current number of sales outlets is 81 with sales per week per site since 1 July averaging 0.43 and the cancellation rate remaining broadly similar at 18%. We have opened new offices in Guildford and the Thames Valley and have recruited additional staff across our existing regions so that we now employ 770 people compared to 650 a year ago.

On 30 June 2011 our landbank stood at 10,250 plots, up 7% in the year. Importantly, 70% was held at current market values, up from 56% the previous year. The proportion of land remaining at historic prices, on which profit margins and return on capital are lower, is therefore steadily reducing. Our strategic land holdings stand at 1,200 acres.

The affordable housing market has gone through a fundamental restructuring since the Government's comprehensive spending review changed the financing model from capital subsidy to capitalised revenue streams. This has the effect of significantly reducing public sector capital investment over the next four years, although using the new rental model the Government now expects 170,000 affordable homes to be delivered from 2011 to 2015. Housing associations have recommenced their development programmes using the flexibilities of the new regime. We have secured partner status on the Homes and Communities Agency's 2011 to 2015 framework and have been awarded £3 million for delivery of 200 homes under the Government's new FirstBuy direct scheme. Public land disposals are expected to continue, with authorities using the delivery partner panel, on which we are represented in all three regions, to select private sector partners using a wider range of delivery models.

Construction

The division delivered a strong trading performance with a maintained margin on unchanged revenue. We achieved excellent cash balances that stood at £216.7 million at 30 June 2011 (2010: £206.8 million), representing 23% of revenue.

The construction market in the UK remained challenging throughout the financial year. The Government's comprehensive spending review in the autumn of 2010 has had a significant effect on reducing the pipeline of future public sector work, particularly in England and Wales. However, we have continued to secure projects through our LIFT (Local Improvement Finance Trust) frameworks in health, limited Building Schools for the Future work and a number of other education projects. In Scotland an ongoing programme in health, education and in major infrastructure projects such as the Forth Road Crossing, recently secured in a four party consortium, remains in place. With a significant amount of work already let under long term frameworks in the infrastructure sector, specifically in the water industry, there is more visibility to future opportunities, and we have been successful in supplementing our five year AMP5 work with additional projects.

Private sector opportunities for building projects are showing signs of improvement, albeit primarily focused on London and the south east of England. Work for the retail, leisure and hospitality sectors is continuing, there are opportunities in affordable housing contracting across the country, and some commercial office investment is evident. However, across all our markets competition for new work is intense.

Our objective is to target work in sectors where we have specialist expertise and where clients work with their construction partners to develop best value solutions. This focus on markets where there are barriers to entry reduces the proportion of work that we secure on the basis of price competition alone. Of our total £1.75 billion year end order book 42% is in the regulated sector, 40% in the public and 18% in the private sector. Importantly, 50% of our order book is in frameworks and 63% has been secured on a basis other than through pure price competition. Since the year end our order book has reduced marginally to £1.7 billion, in line with our policy of focusing on work that will support our profit and cash objectives, not on maintaining past revenue levels.

Building

Major projects completed during the year included the £103 million St Pancras Chambers refurbishment and conversion into a luxury hotel which has rapidly become an iconic London destination. We also completed the latest phase of our long term work at Wimbledon, with the new number 3 court completed for the 2011 championships. Work continues on our Athletes Village block project at Olympic Park.

Health and education projects continued to provide work during the year. In Scotland we are working on the £300 million ten year framework for the Scottish NHS Trust, new contracts were awarded under our LIFT primary care frameworks in the Midlands and north west of England and we secured the £58 million schools investment programme for the Orkney Islands Council. We also won the £50 million Halton schools BSF project which we are carrying out in joint venture.

From a low base the previous year, we have seen signs of limited improvement in the private sector market particularly in the commercial and hospitality sectors. Examples of work secured are £9 million of work for Moto Hospitality on the M40, a £39 million commercial and apartments scheme in Wandsworth for Fraser Projects and a £16 million hotel in Birmingham for Hotel de la Tour. We have established a new base in Bristol which has secured its first contracts including a £7 million project to refit the Bristol Old Vic theatre. Going forward we see some further recovery in the London commercial market.

Partnerships

The affordable housing contracting market started to improve as, following the Government's comprehensive spending review, housing associations adjusted their development models to their new affordable rent funding regime. The limited recovery in the opportunities available is most evident in the south east with opportunities expected to further improve as southern based housing associations in particular will benefit from the new funding regime. In the north east, we were successful in securing the £347 million Gateshead regeneration programme in joint venture with Home Group, one of the country's largest housing associations. Over the period to 2026, 19 sites across the Gateshead area will be regenerated, providing Galliford Try with both contracting and development revenues.

We opened a new office in the south west of England, taking advantage of the opportunities arising from the demise of a competitor. In Birmingham, we have been appointed on the £9 million public land initiative south to construct 79 homes. We added to our frameworks by selection as one of the delivery partners on the £400 million L&Q framework in London and the south, the £144 million 'Create' framework in north London for three affordable housing providers and for the £40 million Estuary Housing Association framework to the south east of London. We see the use of local asset backed vehicles by public sector bodies to deliver development as an area of growth and our objective is to build on our contracting and framework skills with the Group's development expertise to generate opportunities.

Infrastructure

Having secured the largest proportion of any contractor of the five year AMP5 water programmes in 2010, on which we work for seven water utilities, and additional frameworks from the Environment Agency, we have both visibility of future work and a base that qualifies us for securing projects let outside the frameworks. Examples of work secured by our water joint ventures included the £200 million Liverpool waste water scheme as part of our process alliance framework with United Utilities in the year, and £90 million of additional waste water treatment works for Thames Water. Revenues in water started to build up during the second year of the AMP programmes, with £597 million of water and flood alleviation work in our order book at the year end.

We have built on our expertise in water treatment processes to develop a business in energy from waste schemes and during the year completed a £22 million project for Biffa Waste in Cannock. We have also secured a £33 million project for Northumbrian water to construct an energy from waste scheme at Howden in Northumberland. Our highways business completed the £55 million M40 junction ahead of schedule, and our four party consortium constructing the £445 million M74 interlink contract in Glasgow handed over the project in June ahead of programme and within budget. In April, again in a four party joint venture, we secured the £790 million Forth Road Crossing scheme which will provide revenues for the next five years.

We completed the Rothes flood alleviation scheme in Scotland, following which we were awarded a further £50 million scheme at Elgin for Moray council. We handed over the first Olympic Park venue to be completed, the white water canoe centre at Broxborne and secured a £50 million contract to construct the infrastructure for Petrofac's gas plant in Shetland. We are on track to complete the £22 million Halley 6 research station for the British Antarctic Survey in Antarctica during the forthcoming winter weather window. New work for our telecommunications infrastructure clients has been secured and we have won our first contract at Gatwick Airport, providing security infrastructure.

PPP Investments

The director's valuation of the Group's PPP portfolio as at 30 June 2011 was carried out, as in previous years, on a discounted cash flow basis. The result showed a valuation of £4.4 million, which compares to the value invested of £1.9 million (2010: valuation of £6.9 million and value invested of £2.8 million).

During the year we sold our interest in the Worcester Library and History Centre to release funds for future bidding and further investment. We are on the short-list of two on both the Kent "Excellent Homes for All" project and the Brunswick Neighbourhood Regeneration project in Manchester. We also formalised our position as the private sector partner for the development of £300 million of community facilities across South East Scotland over the next 10 years under the Scottish Futures Trust's hub initiative as part of the SPACE consortium. Financial close on the £50 million Halton BSF was achieved by our consortium and we are now carrying out the redevelopment of two schools.

Our renewables business secured its first community and district energy scheme, which is a combined gas and biomass energy centre for 800 homes. We now have option agreements covering over 250 megawatts of wind generation.

We remain in a strong position to take advantage of the opportunities in the sectors where the Group has the track record and resources. We will be maintaining our focus on the growing and evolving renewable energy market alongside our existing PPP sectors, where we see infrastructure, specifically roads and bridges, and mixed use schemes delivered through asset backed vehicles having a higher profile.

Health, Safety and Environment

Health and safety is of paramount importance to Galliford Try, and the Group is committed to a policy of effectively managing all aspects of health, safety and welfare. The total number of reportable accidents reduced by 5.1% during the year, bringing the Group accident frequency rate down from 0.22 to 0.19. Following 400 of the Group's senior management participating in the leadership workshop of our behavioural safety programme 'Challenging Beliefs, Affecting Behaviour', over 1,500 operational managers have attended the equivalent operational workshop and a further 1,000 managers are scheduled to attend the course during the new financial year.

We completed our third annual submission to the carbon disclosure project and our emissions intensity measure, per £100,000 revenue, reduced from 3.74 to 3.63 during the year. We have established a new group carbon task force with a strategy to reduce carbon emissions per unit of revenue by 15% by the end of 2013.

CONSOLIDATED INCOME STATEMENT

For the year ended 30 June 2011

CONSOLIDATED BALANCE SHEET

at 30 June 2011

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

for the year ended 30 June 2011

CONSOLIDATED CASH FLOW STATEMENT

for the year ended 30 June 2011

For the purpose of the cash flow statement, cash and cash equivalents are reported net of bank overdrafts. Bank overdrafts are excluded from the definition of cash and cash equivalents in the balance sheet.

* Interest paid includes the new bank facility arrangement fee of £4.1 million

NOTES TO THE ANNUAL RESULTS STATEMENT

1 Basis of preparation

This consolidated financial information has been prepared in accordance with the Listing Rules of the Financial Services Authority and uses EU adopted International Accounting Standards (IASs), International Financial Reporting Standards (IFRSs), IFRIC Interpretations and those parts of the Companies Act 2006 applicable to companies reporting under IFRS. The accounting policies adopted are consistent with those described in the Annual Report and Financial Statements 2010 which have not changed significantly, except as explained in note 2. The financial information set out in this document does not constitute statutory accounts for the years ended 30 June 2010 or 30 June 2011 but is derived from the Annual Report and Financial Statements 2011. The Annual Report and Financial Statements for 2010 have been delivered to the Registrar of Companies and the Annual Report and Financial Statements for 2011 will be delivered to the Registrar of Companies in due course. The auditors have reported on those accounts and have given an unqualified report which does not contain a statement under Chapter 3 of Part 16 of the Companies Act 2006.

Full financial statements that comply with IFRS are included in the Annual Report and Financial Statements 2011 which will be circulated to shareholders in October 2011 and will be made available at www.gallifordtry.co.uk.

2 Segment reporting

Segment reporting is presented in the consolidated financial statements in respect of the Group's business segments, which are the primary basis of segment reporting. The business segment reporting reflects the Group's management and internal reporting structure. Segment 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. Inter-segment revenue is not material.

The chief operating decision-maker ("CODM") has been identified as the Chief Executive and the Group Finance Director. The CODM review the group's internal reporting in order to assess performance and allocate resources. Management has determined the operating segments based on these reports as Housebuilding, Building, Partnerships, Infrastructure and PPP Investments.

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.

Primary reporting format - business segments

 * Profit from operations is stated before finance costs, amortisation, share of joint ventures' interest and tax, exceptional items and taxation.

3 Exceptional items

On 24 March 2011 a Competition Appeal Tribunal judgement reduced the quantum of the fine imposed by the Office of Fair Trading in 2009 for cover pricing between 2001 and 2004 from £8.3 million to £1.4 million. The net £6.6 million reduction, after costs, is reflected in the Group's results as an exceptional item credited to profit before tax. The exceptional credit is non taxable as it is reversing the non deductible treatment of the exceptional loss in 2010.

The exceptional item in 2010 of £6.9 million comprised the original fine imposed by the Office of Fair Trading of £8.3 million and a net credit on reassessment due to market movements of the carrying value of housing related assets of £1.4 million where the original estimates were taken as an exceptional charge.

4 Net finance costs

5 Income tax expense

The total income tax expense for the year of £8.9 million (2010: £8.4 million) is lower (2010: higher) than the year end standard rate of corporation tax in the UK of 26% (2010: 28%). The differences are explained below:

The standard rate of Corporation Tax in the UK changed from 28% to 26% with effect from 1 April 2011. Accordingly, the Group's profits for this accounting period are taxed at an effective rate of 27.5% and will be taxed at 26% in the future. 

In addition to the changes in rates of Corporation tax disclosed above a number of further changes to the UK Corporation tax system were announced in the March 2011 UK Budget Statement. Legislation to reduce the main rate of corporation tax from 26% to 25% from 1 April 2012 is expected to be included in the Finance Act 2011. Further reductions to the main rate are proposed to reduce the rate by 1% per annum to 23% by 1 April 2014. None of these further changes had been substantively enacted at the balance sheet date and, therefore, are not included in these financial statements.

The effect of the changes expected to be enacted in the Finance Act 2011 would be to reduce the deferred tax asset provided at the balance sheet date by £0.2 million. This £0.2 million decrease in the deferred tax asset would decrease profit by £0.2 million with no change to other comprehensive income. This decrease in the deferred tax asset is due to the reduction in the corporation tax rate from 26 per cent to 25 per cent with effect from 1 April 2012.

The proposed reductions of the main rate of corporation tax by 1% per year to 23% by 1 April 2014 are expected to be enacted separately each year. The overall effect of the further changes from 25% to 23%, if applied to the deferred tax balance at the balance sheet date, would be to reduce the deferred tax asset by £0.4 million (being £0.2 million recognised in 2013 and £0.2 million recognised in 2014).

6 Dividends

The directors are proposing a final dividend in respect of the financial year ended 30 June 2011 of 11.5p per share bringing the total dividend in respect of 2011 to 16.0p per share (2010: 12.5p). The final dividend will absorb approximately £9.4 million of equity. Subject to shareholder approval at the Annual General Meeting to be held on 11 November 2011, the final dividend will be paid on 18 November 2011 to shareholders on the register at the close of business on 7 October 2011.

7 Earnings per share

a) Basic and diluted earning per share

Basic earnings per share 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 employee share 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 period. 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 plan. 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.

(b) Adjusted earnings per share

Adjusted earnings per share based on the earnings before exceptional income of £6.6 million (2010: expense £7.3 million) for the year are set out below:

8 Goodwill

Goodwill is allocated to the Group's cash-generating units (CGUs) identified according to business segment. The goodwill is attributable to the following business segments:

Key assumptions

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 growth and the future profit margin achievable. Future budgeted revenue is based on management's knowledge of actual results from prior years, latest forecasts for the current year along with the existing secured work and management's future expectation of the level of work available within the market sector and expected changes in selling volumes and prices for completed houses. In establishing future profit margins, the margins currently being achieved are considered in conjunction with expected inflation rates in each cost category and to reflect the current market value of land being acquired. Budgeted profit margins in housebuilding are in line with the expectation in the division's expansion strategy, which is based on increasing the number of house completions from around 3,000 in 2012 towards 4,000 at a sustainable rate thereafter.

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 Business Review 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 of 3% per annum within building, partnerships and infrastructure and 2.5% per annum within housebuilding. 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. A pre tax discount rate of 14.3% (2010: 12.8%) in housebuilding, 10.9% (2010: 12.0%) in building, 11.2% (2010: 12.7%) in partnerships, 13.2% (2010: 13.1%) in infrastructure and 10.0 % (2010: 11.8%) in investments has been applied to the future cash flows.

Sensitivities

The fair values of the goodwill in all CGU's are substantially in excess of book value. 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. Taking into account current market conditions within the construction and housebuilding markets, none of these sensitivities, either individually or combined, resulted in the carrying value of these businesses being reduced to its recoverable amount.

The impairment review relating to Linden Homes goodwill, which is included within the housebuilding segment, could be impacted by the uncertainty over future trading conditions within the housing market. The detailed sensitivity analysis indicates that an increase of more than 26% (2010: 33%) in the pre tax discount rate or a reduction of 27% (2010: 40%) in the forecast operating profits of the CGU would give rise to an impairment.

9 Net cash

10 Retirement benefit obligations

The amounts recognised in the income statement are as follows:

The principal actuarial assumptions used to calculate the liabilities as at 30 June 2011 are as follows:

During the year the Company undertook an Enhanced Transfer Value (ETV) exercise in relation to deferred members of the Galliford Try Final Salary Scheme. The impact of the exercise has been recognised as a settlement gain of £1.4 million through the income statement with the amount recorded equal to the difference between the actual ETV payments made (£8.7m) and the IAS 19 reserve discharge (£10.1 million). No special one-off contributions were made to the Scheme in relation to this exercise. As at 30 June 2011, around £3.8 million of the payments due were unpaid. The 30 June 2011 asset values therefore include a current liability of £3.8 million to reflect the payments due.

On 8 July 2010, the UK Government announced that the statutory measure to be used for indexing pensions payable for occupational pension schemes was to change from RPI to CPI. The Rules of the Galliford Try Final Salary Pension Scheme and the Kendall Cross (Holdings) Ltd Pensions and Assurance Scheme provide the deferred revaluation in line with the statutory provisions and hence benefits payable under these schemes will be revalued in deferment in line with CPI in the future. This change has led to a reduction in the Company's obligations in respect of the Galliford Try and Kendall Cross pension schemes of £9.7 million and £0.25 million respectively at 30 June 2011, and the impact of the change has been recognised as an actuarial gain through Other Comprehensive Income. The increases provided to pensions in payment under Galliford Try's three defined benefit pension arrangements are explicitly linked to RPI under the schemes' Rules and are therefore not affected by the Government's announcement.

The amounts recognised in the balance sheet are as follows:

11 Share based payments

The Company operates performance related share incentive plans for executives, details of which are set out in the Annual Report and Financial Statement 2011. The Company also operates savings related option schemes ("SAYE"). The total charge for the year relating to employee share based payment plans was £2.5 million (2010: £1.8 million), all of which related to equity settled share based payment transactions. After deferred tax, the total charge was £2.0 million (2010: £1.6 million).

The performance period for the awards made under the Company's long term incentive plan on 10 March 2009 ended on 30 June 2011. This award was subject to a relative total shareholder return condition and two underpins based on cash performance and absolute share price performance. The Company achieved a 105% total shareholder return for the three year period placing it in first place against its peer group. It also significantly bettered its cash underpin targets for the period, however there was a 2% shortfall on the share price underpin target when measured on a three month average price basis, which was the assumed methodology when the IFRS 2 valuation for this award was carried out at the original grant date. Following consultation with major shareholders, the remuneration committee has exercised its discretion to alternatively use a 30 day average for the assessment of the share price target as this is consistent with the averaging period used for assessment of the relative total shareholder return condition. The share price underpin target was significantly exceeded on this basis which means that the awards will vest to the maximum level in March 2012. The decision to use an alternative averaging period to that originally envisaged in the grant date valuation gives rise to an additional IFRS 2 fair value accounting charge of £5.3 million in the financial year to 30 June 2012, which has no incremental effect on either cash or the balance sheet.

12 Guarantees and contingent liabilities

Galliford Try plc has entered into financial guarantees and counter indemnities in respect of bank and performance bonds issued on behalf of Group undertakings, including joint arrangements and joint ventures, in the normal course of business amounting to £125.5 million (2010: £120.7 million).

Disputes arise in the normal course of business, some of which lead to litigation or arbitration procedures. The directors make proper provision in the financial statements when they believe a liability exists. Whilst the outcome of disputes and arbitration is never certain, the directors believe that the resolution of all existing actions will not have a material adverse effect on the Group's financial position.

13 Post balance sheet events

No matters have arisen since the year end that require disclosure in the annual financial statements.

PRINCIPAL RISKS

Identifying, evaluating and managing the principal risks and uncertainties facing the Group is an integral part of the way we do business. The principal risks, their impact and their mitigation, are as follows:

Health, safety and environmental - Incidents that occur in construction operations can affect our employees, all others who work on our sites and members of the public. Secondarily, they affect our reputation and have a direct cost on the business and management resources.

We recognise the need to provide a safe working environment and promote health, safety and environmental issues with a comprehensive policy and framework in place to manage the risks.

Changes to the UK housing market and the economic cycle - Consumer confidence and the state of the housing market impacts the ultimate price that our purchasers are prepared to pay for their homes and, by deducting the building and all other costs of development, the price and terms under which the Group purchases land for development.

We monitor Government and industry data on housing prices, sales volumes and construction commencement data, enabling us to anticipate market changes and adjust our land acquisition plans, build programmes, sales releases and purchaser incentives accordingly.

Availability of mortgage finance- The availability, cost and terms under which our purchasers can secure mortgage finance impacts both their ability to purchase and the price they are able to pay.

We monitor published statistics on mortgage approvals and lending, analysing the impact on potential customers across the different market sectors and the prices of the properties we sell. We then adjust our development plans and our purchaser incentives, such as part exchange facilities and shared equity.

Availability of developable land- A healthy land market provides us with the raw material on which to build. A general market downturn, reducing the value of land, affects land owners' willingness to sell and uncertainty in the planning system reduces our ability to obtain the required supply of developable land.

We aim to maintain a landbank comprising a balance of plots with full planning consent, with outline consent and zoned for residential development. We also have strategic land holdings held primarily under options to purchase in the future. Public sector planning strategies are monitored both nationally and locally in the regions where we operate and our plans for future development adjusted accordingly.

Land acquisition - Acquiring land at the wrong price, or underestimating development costs, could affect the Group's return on development projects.

We have a rigorous pre acquisition site appraisal process with tight authority levels covering purchase, construction and sales, enabling us to alter plans and adapt to changes where necessary.

Availability of financing- Funding not available to finance the Group's strategy to expand its housebuilding activities.

Funding is provided by equity and bank borrowings. We constantly monitor levels of available funding and compliance with our bank covenants, and have renewed our facilities until 2015.

The level of public sector spending- Public sector spending in the investment programmes of the regulated infrastructure sectors affects the amount of work available and the degree of competition for that work, potentially affecting both the absolute level of revenues and profit margins achievable.

We gather published and informal intelligence on our markets, monitoring closely our order book and pipeline of potential opportunities. Our business planning process forecasts future market trends, enabling us to match resources to projected workloads.

Confidence and the availability of project finance - Confidence in the economy, combined with our private sector clients' ability to secure development finance, affects their level of spend on construction projects.

Our business planning and annual budgeting process analyses data on forthcoming projects and we monitor the spending programmes of our major clients, adapting our approach to those sectors and clients where we see the best opportunities.

Contract acquisition - Securing construction contracts at a price and under terms that deliver an acceptable return for the risk undertaken.

As a project based business, we take commercial risk on each construction contract which includes credit and counterparty risk, pricing and the technical ability to deliver. We have a rigorous approach to contract selection covering our capabilities and resources, as well as the terms under which we carry out the work. An authorities matrix ensured the responsibility for entering into a contract and delivering the project by right level of management.

Project delivery - Failure to deliver projects to time, quality or budget, contractual disputes can arise over the scope and/or valuation of contracts, make the ultimate outcome of contracts uncertain.

We have business information systems providing profit margin and cash forecasting by contract. We monitor construction progress against programme in order to re-plan and reassess resources where applicable.

People - Attracting, developing and retaining talented individuals in the business at all levels is crucial to our success.

Our human resources policies are based on the Investors in People principles under which all of our businesses are accredited. We carry out annual succession planning, and have a training and development programme designed to optimise career satisfaction.

Sustainability - Failure to meet increasing sustainability regulations on homes for sale or being unable to deliver sustainable solutions in line with our construction clients' requirements will affect our ability to sell homes or secure projects

We have a programme to develop sustainable homes in accordance with projected requirements and a strategy to improve our understanding of construction clients' changing aspirations.

DIRECTORS' RESPONSIBILITY STATEMENT

The statement of directors' responsibilities prepared in connection with the annual report for the year ended 30 June 2011 is included in full within the annual report. It includes the following extract:

Each of the directors confirms that to the best of his and her knowledge:

·; the Group's financial statements, which have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and profit of the Group as taken as a whole; and

·; the Business Review includes a fair review of the development and performance of the business and the position of the Group, together with a description of the principal risks and uncertainties that it faces.

The directors at the date of the report are:

Ian Coull Non-executive Chairman

Greg Fitzgerald Chief Executive

Frank Nelson Finance Director

Amanda Burton Senior Independent director

Peter Rogers Non-executive director

Andrew Jenner Non-executive director

Signed on behalf of the board

Greg Fitzgerald Frank Nelson

Chief Executive Finance Director

The 2011 annual report and financial statements will be posted to shareholders early in October 2011 and made available at www.gallifordtry.co.uk. Copies of this Annual Results Statement can be obtained from the Company Secretary at Galliford Try plc, Cowley Business Park, Cowley, Uxbridge, Middlesex, UB8 2AL.

The Annual General Meeting will be held at 11:15 a.m. on Friday 11th November 2011 at the offices of Royal Bank of Scotland, 3rd Floor Conference Centre, 250 Bishopsgate, London EC2M 4AA.

The final dividend timetable is:

Ex dividend: 5 October

Record date: 7 October

AGM: 11 November

Payment date: 18 November