Galliford Try plc (GFRD) 2018年年度報告「LSE」.pdf

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1、Galliford Try plc Annual Report and Financial Statements 2018One Group Three strong businessesStrategic ReportOur business2 Our businesses at a glance4 Our business modelStrategic review8 Chairmans statement 10 Chief Executives review12 Key trends14 Strategy to 2021,targets and performance16 Strateg

2、y in action:Linden Homes18 Strategy in action:Partnerships&Regeneration20 Strategy in action:Construction22 Principal risks26 Financial reviewBusiness review30 Linden Homes33 Partnerships&Regeneration36 Construction40 Operating sustainablyGovernance50 Directors and Executive Board52 Chairmans review

3、54 Governance review57 Audit Committee report59 Nomination Committee report60 Remuneration Committee report65 Annual report on remuneration73 Directors report76 Statement of directors responsibilitiesFinancial information77 Independent auditors report82 Consolidated income statement83 Consolidated s

4、tatement of comprehensive income84 Balance sheets85 Consolidated and Company statements of changes in equity86 Statementsofcashflows87 Notestotheconsolidatedfinancialstatements132 Five-year record133 Shareholder informationTop left We make an important contribution to meeting the demand for new home

5、s through developments such as Boorley Park in Botley,Hampshire,by Linden Homes Southern.Top right We regenerate neighbourhoods and build sustainable communities,delivering schemes that meet local and national needs,such as the Quayside Extra Care scheme in Totnes,Devon for those aged 55 or over,by

6、Partnerships&Regeneration South West.Bottom right We construct high-quality buildings and infrastructure for our clients and the communities we work in,as demonstrated at the Royal Birmingham Conservatoire.This world-class facility by Galliford Try Building West Midlands is the firstofitskindintheUK

7、.See Our businesses at a glance p02Learn more about us at gallifordtry.co.uk1Annual Report and Financial Statements 2018Our businessStrategic reviewBusiness reviewFinancial informationGovernanceFinancial highlightsRevenue13,132m+11%Group revenue12,932m+10%Pre-exceptional profit before tax2188.7m+28%

8、Pre-exceptional earnings per share2158.4p+21%3Profit before tax143.7m+145%Earnings per share121.1p+128%3Dividend per share477.0p-10%Net cash 98.2m+91.0mPre-exceptional Group return on net assets2,529.2%+1.7 pptsGroup return on net assets624.9%+10.9 pptsGroup highlightsPlots in Linden Homes landbank1

9、1,400Plots in Partnerships&Regenerations landbank 3,300Construction order book3.3bn Accident Frequency Rate down from 0.12 in 2017 to0.11Reduction in greenhouse gas emissions since 201158%Training days for employees14,388 See Operating sustainably p40QAAn insight into a selection of questions our se

10、nior team has been asked over the last year.Throughout this report we address some key questions from our stakeholders about areas they have been interested in to provide a deeper insight into our business.1 Revenue includes share of joint ventures revenue of 200.7m (2017:158.1m).Group revenue,where

11、 stated,excludes share of joint ventures.2 Pre-exceptional measures exclude exceptional costs as described in the Financial review on page 26 and in note 3.All future references to pre-exceptional data and ratios are consistent with this definition.3 Restated due to rights issue(notes 9 and 27).4 Re

12、stated due to rights issue(notes 8 and 27).5 Pre-exceptional Group return on net assets represents profit before tax,exceptional items,finance costs and amortisation divided by average pre-exceptional net assets.6 Group return on net assets represents profit before tax,finance costs and amortisation

13、 divided by average net assets.Galliford Try is a FTSE 250 company and one of the UKs leading housebuilding,regeneration and construction groups.We have three strong and complementary businesses,which together transform lives and landscapes.The breadth and scale of our work means that we have an exc

14、eptional impact on the people and fabric of the UK,delivering positive and lasting change.Why are we different?Resilience Our businesses operate in different markets and have different customers,with different sources of funding.This helps us to perform,whatever the economic conditions.Returns Our m

15、ix of capital-light and capital-intensive businesses delivers excellent returns on the funds we invest.We balance this investment with a clear commitment to rewarding shareholders.Reliability We work hard to build responsibly and to treat all our stakeholders fairly.We care about satisfying our cust

16、omers and clients and protecting our reputation,so we focus on doing the right thing and maintaining our stakeholders trust in us as a valued partner.Where are we going?Our ambitious strategy,which charts our path to 2021,is making us simpler,leaner,more profitable and more sustainable.We are invest

17、ing to make the most of our leading positions in growing markets,and devolving responsibility so our decision-making is faster and more efficient.Read more about our Strategy p142Galliford Try plc Linden Homes develops high-quality homes for first-time buyers and families.We have a strong presence i

18、n the South and East of England,with a growing footprint in the North and the Midlands,and the potential for further expansion.Our sites are in good locations,close to transport links and local amenities.We create sustainable developments by building homes which complement their surroundings,while m

19、aximising the benefits of internal standardisation.Where the market requires,we have a proven ability to create bespoke designs.Business review p30A top UK housebuilderKey strengths Disciplined approach to producing quality homes,with predominantly standard layouts.Ability to deliver bespoke product

20、s on suitable sites.10 strong business units,with potential for further geographical expansion.Committed to high levels of customer satisfaction.Revenue947m+1%A leading UK regeneration specialistKey strengths Distinctive platform,combining contracting,regeneration and mixed-tenure development.Nation

21、al scale and proven track record of delivery and quality.Long-term partnerships with Homes England,the Greater London Authority,private rent clients and a significant number of active developing Registered Providers.Expertise in extra care markets.Revenue475m+44%Our businesses at a glanceThree stron

22、g businesses,led by an effective GroupOur businesses span housebuilding,regeneration and construction.Each business is led by its own management team.Devolved responsibility enables them to make faster and more efficient decisions,within our overall Group strategy and governance framework.Our busine

23、sses work together to achieve our vision,with common values underpinning everything we do.Linden HomesPartnerships&Regeneration 3Annual Report and Financial Statements 2018Our businessStrategic reviewBusiness reviewFinancial informationGovernancePartnerships&Regeneration is our specialist regenerati

24、on business,which carries out contracting,land-led solutions and development.We have excellent relationships with Homes England and the Greater London Authority and provide contracting services to local authorities and Registered Providers,while working in joint venture to develop mixed-tenure proje

25、cts,providing private housing for sale on regeneration-led sites.We use the Linden Homes brand to differentiate our developments and draw on Linden Homes retail expertise to deliver these projects successfully.Our ability to provide development solutions across all tenures and work with clients as c

26、ontractor,developer and investor distinguishes us from others.We have a strong track record of delivery and a growing national footprint.Business review p33Construction operates nationwide,primarily under the Galliford Try and Morrison Construction brands.Our network of regional offices is a key adv

27、antage,enabling us to deploy our national strength using a local approach.The business is organised into three divisions:Building,Infrastructure and PPP Investments.These include facilities management,telecommunications,dry lining and our national piling specialists,Rock&Alluvium.Building serves a r

28、ange of clients across the UK,with a substantial presence in Scotland.We work with clients in the public and regulated sectors,in particular the health,education and defence markets.We also serve commercial clients,mainly in the South East and the Midlands.Infrastructure carries out civil engineerin

29、g projects.We have strong positions in key sectors such as transport(including road,rail and airports),water and wastewater,and flood alleviation.PPP Investments PPP Investments delivers major building and infrastructure projects through public private partnerships.The business leads bid consortia a

30、nd arranges finance,making equity investments,and manages construction through to operations.Business review p36A major national contractorKey strengths National presence with local delivery.Strong client relationships,based on collaborative working.Presence on numerous major frameworks with public

31、sector and regulated clients.Revenue1,687m+11%ConstructionOur vision To be leaders in the construction of a sustainable future.Our values Excellence,Passion,Integrity and Collaboration.4Galliford Try plc High investment up frontSome up-front investmentHigher-margin development revenue received as ho

32、mes are soldLower-margin contracting revenue received regularly as the project progressesContracting revenue received regularly as the project progressesAdd value to land through planning and promotionStrong margins achieved on sale of homesTypically cash positiveLower margins achieved How our busin

33、esses make moneyLinden HomesHousebuilding requires up-front investment in land and development,with cash received as the resulting homes are sold.We ensure a profit by buying land in good locations at the right prices,offering high-quality homes to our customers and standardising as many aspects of

34、our products,processes and procedures as we can to maximise efficiency.Contribution to the Groups economic model:Linden Homes has the highest margin of our three businesses,as well as the greatest capital requirements.Partnerships&RegenerationThis business generates cash from its contracting activit

35、ies,which it uses to fund cash-consuming but higher-margin mixed-tenure developments.We ensure we earn a profit through careful selection and delivery of our contracting projects,while sharing risk and using the Groups housebuilding skills and brand to successfully deliver our mixed-tenure developme

36、nts.Contribution to the Groups economic model:Partnerships&Regeneration requires relatively little capital,resulting in high returns.Its margin is lower than that of a pure developer but its profitability is increasing as its development activities expand.ConstructionOur Construction business receiv

37、es regular payments from its clients as work progresses.We generate a profit by carefully assessing the risk and margin of each project,building strong relationships with our clients,collaborating with our supply chain,and delivering repeat work through frameworks.Contribution to the Groups economic

38、 model:Construction has the lowest margin of our three businesses but its cash flow characteristics typically help to fund higher-margin development activities elsewhere in the Group.Our business model offers significant insulation against the cyclical peaks and troughs in performance faced by our h

39、ousebuilding and construction peers.Each of our businesses has a different capital requirement and makes an important contribution to our bottom line.The role of the GroupSet strategyThe Group sets overall strategic direction,within which our three businesses develop their own strategies,reflecting

40、the specific opportunities and challenges they face.See Strategy p14Allocate capitalThe Group,via the Executive Board and in accordance with the overall strategy set by the Board,allocates capital between our businesses,taking into account their different capital requirements,their strategies and th

41、e size of returns available to them.Deliver centralised services Our businesses deliver many support functions themselves,so they can tailor them to their precise needs.The Group provides a number of key services that are best delivered centrally and maintains small functional teams to support the G

42、roups own activities.Mitigate riskThe Board has ultimate responsibility for risk management,including determining our risk appetite and the extent and nature of our systems of risk management and internal control,working through the Executive team to implement them within the businesses.See Principa

43、l risks p22Embed cultureThe Board defines the Groups culture,including our values of Excellence,Passion,Integrity and Collaboration,sets the behaviours we want to see in Galliford Try,and promotes that culture within our businesses through our Executive team.See Our people p44Govern effectivelyOur a

44、pproach to corporate governance provides a robust framework of oversight and control,within which our businesses can implement their strategies.See Governance p50Our business modelThree strong businesses5Annual Report and Financial Statements 2018PeopleHaving the right people is vital to our success

45、 and we look to recruit and retain the very best talent across the Group.See Our people p44Our impactWe develop our people so they can progress their careers.We also reward them appropriately,promote inclusion and diversity,and work hard to keep everyone healthy and safe.We have a Group-level health

46、 and safety policy and common minimum standards,with each business increasingly adopting an approach tailored to its needs.How we manage itEach of our businesses is responsible for recruiting and developing its own talent,while working closely together on Group-wide initiatives such as wellbeing and

47、 agile working,which helps us to attract and retain a more diverse workforce.Financial resourcesWe invest in land and development using cash generated by contracting,as well as employing different types of debt financing.See Financial review p26Our impactCarefully managing our financial resources he

48、lps to ensure that shareholders benefit from rising earnings and dividends,while we reinvest for further growth.How we manage itEach business has its own finance team,which is responsible for day-to-day financial decisions.We also have a Group finance function,including specialists in areas such as

49、treasury and tax.Natural and manufactured resourcesOur building processes use natural resources including land,materials and energy.We also employ plant and equipment on our sites.See Environment and climate change p47Our impactWe plan to minimise our environmental impact and waste production by loo

50、king to reduce our carbon emissions year-on-year,maximise the waste diverted from landfill and use timber verified as coming from legal and sustainable sources.We support jobs and local economies through our supply chain.How we manage itWe have a network of national preferred suppliers,which we mana

51、ge through our procurement function,as well as a locally managed subcontractor supply chain.We collaborate with strategic subcontractors through our Advantage through Alignment programme in Construction.Land purchases and strategic land are managed through dedicated teams.CommunitiesWe aim to have a

52、 positive impact on the communities we operate in,both through the way we work and the legacy we leave in the form of homes,buildings,infrastructure and other key physical assets.See Stakeholder relationships p48Our impactWe deliver high-quality and functional homes,buildings and infrastructure,whic

53、h benefit the people living in and around them,whether by providing homes to buy or rent,schools for children,offices to work in,transport projects for travel or recreational facilities for leisure.How we manage itWe manage our community relationships at a local level through our businesses and by s

54、upporting relevant and national charities,as well as local groups.We use the Considerate Constructors Scheme to measure and assess the local community impact of our sites.PartnersAll three of our businesses work with carefully chosen Joint Venture(JV)partners on selected projects.See Stakeholder rel

55、ationships p48Our impactBy working with other organisations,we can take on a broader range of projects,while sharing risk and rewards and reducing our capital investment compared with undertaking the project alone.How we manage itWe carefully select partners who are financially strong and who share

56、our values and ethics.We work closely together in critical areas such as health and safety,so we maintain the high standards we look to achieve in our own business.Customers and clientsEach of our businesses is committed to delivering high levels of customer service.See Business review p30Our impact

57、Our customers and clients trust us to deliver high-quality homes,buildings and infrastructure that form the fabric of our society.How we manage it We have rigorous procedures in place including The Linden Way which defines our approach in housebuilding.In Construction and Partnerships&Regeneration,q

58、uality control is embedded in the business management system,policies and procedures.5,485people employed across our Group92.5%of the timber we use is FSC/PEFC certified29.2%Pre-exceptional Group return on net assets98.2mnet cash29Considerate Constructors Scheme awards won19m+committed to communitie

59、s through planning obligations200.7mshare of joint ventures revenueFourstars in the NHBC customer satisfaction surveyExcellentnet promoter score in ConstructionOur businessStrategic reviewBusiness reviewFinancial informationGovernanceOur business modelThe key resources and stakeholder relationships

60、we rely on6Galliford Try plc Key activitiesInvest:maintain landbank of prime plots in good locations.Design and planning:create new communities through careful master planning using standard house types,with the ability to alter elevations to complement the local vernacular.Build:construct high-qual

61、ity,sustainable homes,with a culture and commitment to health and safety principles.Sales and aftercare:deliver a consistent customer journey and high standards of customer service.Who our customers are We primarily sell to first-time buyers and families who want mid-market homes in vibrant and sust

62、ainable communities.The affordable housing elements of our developments are typically acquired by Registered Providers.How we engage with our customers Our approach to customer service The Linden Way ensures we share best practice across the business and follow the right procedures and processes thr

63、oughout the purchasing journey.Our Customer Charter sets out our commitment to first-class service and what our customers should expect from us.Each development typically has an on-site sales team and show home,supported by traditional and digital marketing.We have strong relationships with Register

64、ed Providers throughout the country and maintain these through our regional offices.We adopt a partnering approach to affordable housing delivery,often selecting a development partner prior to the commencement of development to ensure the timely delivery of low-cost homes alongside our open-market h

65、omes.Our strengths A key strength is our people.The structure and culture we have put in place ensures that responsibility and ownership of our business is devolved throughout the workforce,with our site teams playing a pivotal role.Our approach to standardising layouts and streamlining processes is

66、 an important strength,allowing our people to focus on delivering high-quality,well-designed homes and achieving a good customer journey.Approximately 84%of homes on our sites with planning consent are based on our standard layouts.This supports our ability to continue to grow our operating margin a

67、nd unit numbers sustainably.Some sites,for example inner-city projects on brownfield land or refurbishment projects,require the ability to design bespoke products.We retain the skillsets needed to deliver these projects and this helps to differentiate us from other housebuilders.The discipline creat

68、ed by our standard processes helps us to deliver these more complex developments successfully.We have a strong landbank of prime plots to meet our expected needs for the next 3.0 to 3.5 years and we are increasing our investment in strategic land.As a responsible developer,we deliver public spaces t

69、hat support sustainable communities.This can range from streetscapes that reduce vehicle speeds to incorporating cycle routes,woodlands and recreational areas within our developments.Key activitiesEvaluate opportunities:rigorously review each opportunity to ensure it offers an appropriate balance of

70、 risk,return and cash generation or investment.Develop solutions:identify local housing demand and assemble the right combination of tenures and financing partners to meet that demand.Create design:design housing that suits the local area and creates communities with a strong sense of place.Build an

71、d sell:use housebuilding and contracting skills to deliver solutions.Who our customers are Our clients vary across our projects and could,for example,be a Registered Provider for affordable homes or a financial institution in the private rented sector.We also help local authorities to meet their sig

72、nificant housing needs.In addition,we develop homes for private sale and sell them directly to consumers.How we engage with our customers Our regional businesses give us excellent local knowledge,which enhances our client relationships,such as those with Registered Providers.Across our many developm

73、ents,we use the Linden Homes brand and capitalise on our sales and marketing expertise.We follow The Linden Way to offer excellent customer service.Linden HomesPartnerships&Regeneration Our business modelHow each of our businesses creates value for us See Strategy in action p16 See Strategy in actio

74、n p187Annual Report and Financial Statements 2018Key activitiesManage risk:carefully select work,emphasising quality over quantity,and effectively identify and manage risk at every stage.Work with our supply chain:build successful,long-term relationships with our supply-chain partners to support del

75、ivery.Deliver:focus on quality,using our expertise and technology to deliver superior construction projects.Client and community focus:seek clients who value collaboration and create strong community relationships.Who our customers are Our clients are primarily public sector and regulated organisati

76、ons.We also work with key private sector companies.How we engage with our customers We aim to become our clients long-term partners.Our approach to collaboration has been accredited to BS 11000 and makes us an attractive partner.We operate through a network of regional offices,giving us in-depth kno

77、wledge of local markets and enabling us to build strong local and national client relationships.We employ our Delivering Excellence framework,where we can,to achieve high levels of client satisfaction.Our strengths Our national scale with local delivery is an important strength.It enables us to comb

78、ine our deep local knowledge and supply chain with expertise from all over the country.Our focus on the public and regulated sectors and our presence on numerous frameworks allows us to learn about our clients needs and become experts in delivering repeat projects for them.This,in turn,helps to redu

79、ce our risk profile.We employ skilled,talented and professional people,who reflect our values throughout the country,and we prioritise their retention,ensuring we develop them,provide the tools they need to work effectively and protect their health,safety and wellbeing.We build successful relationsh

80、ips with our supply chain partners.Our Advantage through Alignment scheme increases engagement with key supply chain members,improves communication and gives them insight into our pipeline of work and our operations.It also allows them to benefit from our training programmes and practices,including

81、our award-winning health and safety programme.Our strengths Our breadth of capabilities across contracting,land-led commissioning and through our joint venture development model is unique in the market,making us an attractive partner to our clients and opening up a greater range of opportunities for

82、 us.This variety also allows us to reinvest cash generated by contracting and commissioning in suitable development opportunities.We are well established,with a track record of delivering performance,and have built up broad geographic coverage,with plans to expand into new areas.We are one of the fa

83、stest-growing regeneration businesses in the country.We now have eight regional offices,which are able to respond to client needs across most of England.We have been highly successful at recruiting people to support our growth,inducting them into our business and developing them using our Leaders in

84、 Regeneration training platform.Our long-term partnering arrangements are a significant strategic asset.The strength of these relationships allows us to unlock the capacity among our clients,which enables both parties to deliver in line with their own business plans,securing work for the present and

85、 future.We work with around 68 Registered Providers.ConstructionSCHOOLOur businessStrategic reviewBusiness reviewFinancial informationGovernance See Strategy in action p208Galliford Try plc PerformanceThe Board remains pleased with the Groups operational and financial performance.We have three stron

86、g businesses and each made further progress towards achieving its strategic targets.Linden Homes continued to increase volumes and improve its margins,while Partnerships&Regeneration continues to benefit from strong demand and opportunity to grow both its mixed-tenure and contracting offering.Constr

87、uctions underlying performance continues to improve,as it maintains its disciplined approach to bidding,while working through the diminishing legacy contracts.Reflecting this performance,we have updated our targets as outlined on pages 14 and 15.Rights issue and dividendDuring the year,we took decis

88、ive action to reinforce the balance sheet,as a consequence of the increased cash commitments we faced on the Aberdeen Western Peripheral Route(AWPR)legacy contract.Our total cash commitments(before any recovery)are expected to exceed the original budget by more than 150m,as a result of cost over-run

89、s and the compulsory liquidation of Carillion plc,one of our two joint venture partners on this major project.While we were operating well within our financial covenants and had sufficient resources to meet our obligations,restoring our financial position without raising capital would have meant cut

90、ting investment in the material growth opportunities in Linden Homes and Partnerships&Regeneration.The Board concluded that shareholders interests were best served by continuing to implement our strategy and therefore we announced a rights issue on 14 February 2018,which raised gross proceeds of 157

91、.6m when it completed in April.On behalf of the Board,I want to thank shareholders for their strong support.The Board also understands the importance of balancing investment with returns to shareholders.We therefore decided to bring The Group has performed well,while dealing professionally and dilig

92、ently with resolving the legacy and exceptional contracts in Construction.The Board has been proactive in taking the necessary steps to reinforce the Groups financial position,ensuring we can continue to successfully implement our strategy to 2021.Peter Ventress Chairman77.0pChairmans statementEmbed

93、ding good governance principlesSite visits such as the one to West Calder School in West Lothian help the Board to shape culture within our Group forward the planned increase in dividend cover to 2.0 times pre-exceptional earnings per share,which we had intended to achieve by 2021.Reflecting this,th

94、e Board declared an interim dividend of 28.0p per share for the first half(2017 restated:29.0p)and is recommending a final dividend of 49.0p per share(2017 restated:57.0p)to give a total dividend for the year of 77.0p.This is 2.0 times cover using pre-exceptional earnings of 154.7m.The final dividen

95、d will be paid on 5 December 2018 to shareholders on the register at 9 November 2018.Annual strategy review The Board conducts an annual strategy review in conjunction with the wider Executive team.This exercise confirmed that the strategy continues to serve us well and that the Group is delivering

96、against its strategic goals.The review provided further support to the Boards decision to raise fresh equity so we could continue to implement the strategy in full.Board changes and performance As previously announced,Jeremy Townsend joined the Board as a Non-executive Director on 1 September 2017.A

97、t the same date,I assumed the chairmanship of the Nomination Committee with the previous chair,Terry Miller,remaining a member of the Committee.Andrew Jenner retired as a Non-executive Director following the Annual General Meeting(AGM)on 10 November 2017,having completed nine years on the Board.Ishb

98、el Macpherson also stepped down as a Non-executive Director after the AGM,due to her other business and personal commitments.I want to thank both Andrew and Ishbel for their important contributions to the Board.Jeremy Townsend took up Andrews chairmanship of the Audit Committee,while Terry Miller to

99、ok over from Ishbel as interim chair of the Remuneration Committee.Marisa Cassoni joined the Board as a Non-executive Director on 1 September 2018.It is intended that Dividend per share Our businessStrategic reviewBusiness reviewFinancial informationGovernance9Annual Report and Financial Statements

100、2018Creating value for our stakeholders26,000+homes delivered by Linden Homes and Partnerships&Regeneration in the last five years,including 5,359 sold under Help to Buy,enabling people to get on the property ladder or to move within it.4.4bnof contracts undertaken for public and regulated sector cu

101、stomers over the last five years,supporting services and infrastructure that are critical to our way of life.62,198training days provided to our people over the last five years,helping them to develop professionally and personally.7.5bnspent with our subcontractors over the last five years,helping t

102、o support jobs in our local communities.See Operating sustainability p402.3m+of time,money and materials donated to charities over the last five years,supporting vital work in our communities.80m+committed to communities through planning obligations in the past five years.250m+of corporation tax and

103、 other taxes paid over the last five years,contributing to the UKs public finances.326.7mof dividends paid to shareholders over the last five years.Through our work,we create both financial and non-financial value for a wide range of stakeholders.Terry Miller will step down as interim chair of the R

104、emuneration Committee following publication of the Groups half year results in February 2019,wherein Marisa will become the new Chair of the Remuneration Committee.We have continued to formally review the Boards performance.The results of this years Board and Committee evaluation survey,my individua

105、l meetings with the directors and the way the Board has worked together this year have confirmed to me that we have a strong Board,with good people who are willing to go the extra mile to steer the Group through important decisions.People and cultureHaving the right culture is one of the keys to sus

106、tainable success.The Board therefore spends time with the Executive team to understand what they are doing to develop the Groups culture,to provide support and advice and to monitor progress.Each year,there are at least two Board visits to parts of the business,which help us to test the culture with

107、 the people we meet.It is evident from these discussions that Peter Truscotts planned changes are bearing fruit.More information on our culture can be found in Peters statement on page 10.On behalf of the Board,I want to thank everyone in Galliford Try for their contribution to a successful year.Con

108、clusionWe remain confident that Galliford Try has the right strategy and is implementing it successfully,while the actions we have taken this year will ensure we have the financial resources required.The Board looks forward to further success in the future.Peter Ventress Chairman10Galliford Try plc

109、PerformanceEach of our three businesses further improved performance this year.Linden Homes continued to prioritise margin growth and benefited from further standardisation and robust control of overheads.This enabled it to increase profitability in a year with modest house price inflation.The busin

110、ess also grew volumes in line with its plan,in a housing market that remains supported by Help to Buy,good mortgage availability and the cut in stamp duty for first-time buyers.The land market is favourable,allowing us to buy land at robust margins,in the right locations for our standardised product

111、.At the year end,the business had an order book of 366m(2017:373m).Partnerships&Regeneration is seeing strong demand,resulting in a record year for revenue and operating profit.The business is also benefiting from its expansion into Bristol and Southampton last year and its new office in the East Mi

112、dlands.Its margin progression in the year was largely driven by higher mixed-tenure revenues,and the business ability to work in long-term partnering arrangements with clients is also benefiting contracting margins.Partnerships&Regeneration is also carrying out more land-led contracting,where we bui

113、ld for a third party on land we control.The underlying Construction business is performing well and it continues to see a pipeline of suitable opportunities,although some larger public sector projects have been slower than expected to come to fruition.The business continued to work through its legac

114、y contracts,which had a lower impact on margins this year.However,following the compulsory liquidation of Carillion and a reassessment of the likely out-turn of the AWPR joint venture,we have incurred further exceptional charges totalling 45.0m,as we previously indicated would be the case.As at the

115、date of this report,the vast majority of the AWPR is complete,with significant sections of the road open to traffic,and other legacy contracts have also completed on site.The final section of AWPR is expected to be completed by late Autumn.We continue to work with our clients to finalise the account

116、s on these contracts.There are shortages in parts of the supply chain,particularly for some masonry products,but in general we are seeing a dampening of cost inflation,reflecting more subdued growth in the wider economy.Capital raising The Group has a strong focus on maintaining prudent financing,wh

117、ich was why we had the financial strength to manage the additional costs on legacy contracts.However,Carillions failure increased the financial obligations on the Group.We therefore faced the choice of reducing investment in the business or raising additional capital.Recognising that the underlying

118、performance and potential of the business was strong,we concluded that the best thing for all our stakeholders was to raise new equity through a fully underwritten rights issue.We were delighted with an excellent take-up of the issue,and grateful to our existing and new shareholders for the strong s

119、upport that they demonstrated.Further details of the rights issue are set out in the Financial review on page 26.Implementing our strategyLast year,we set out a three-part strategy to drive operating efficiencies,maintain capital discipline and operate sustainably.We continued to make progress on al

120、l fronts and have updated our targets to reflect this,as set out on pages 14 to 15.Driving operating efficiencies We continued to make the business more efficient during the year,reflecting our focus on streamlining and simplifying our operations across the Group.In Linden Homes,we increased our use

121、 of standardised house types and reduced overheads as a proportion of revenue,demonstrating our ability to grow volumes without a proportionate increase in costs.Partnerships&Regeneration has continued to invest in people and land to expand its growth platform and is delivering excellent results in

122、both its established and newer businesses.Construction remains focused on improving its operations in a number of areas,all of which support its margin progression.In addition,we continue to ensure we have a lean overhead at Group level.Maintaining capital discipline The rights issue has reinforced

123、our platform for growth but,in an uncertain world,we will always prioritise the quality of revenue over the quantity,and this will influence how we allocate capital within the Group.Our belief is that margins in the construction industry need to rise to ensure contractors are adequately rewarded for

124、 the risk they take on,and we will allow some shrinkage in the business if suitable opportunities are not available.Similarly,in Linden Homes,we will always put margin ahead of scale.The Group continues to deliver strong underlying performance and we are making good progress against our growth plans

125、 to 2021.Following the successful rights issue,we have a robust balance sheet to support our planned growth.Peter Truscott Chief ExecutiveChief Executives reviewA strategy for sustainable growth5.0bnorder book0.11Accident Frequency RateOur businessStrategic reviewBusiness reviewFinancial information

126、Governance11Annual Report and Financial Statements 2018To maximise capital efficiency,we also want to control no more land than is necessary.In the past,faced with an inefficient and unpredictable planning system,housebuilders naturally required larger landbanks to ensure that sufficient schemes wit

127、h planning consent came through each year.While the planning process remains too slow,improvements achieved through the National Planning Policy Framework have significantly alleviated this issue,which has allowed us to set our target for our landbank at 3.5 years.The challenge for the government is

128、 to make the planning process more efficient,if it is to reach its ambition for more than 300,000 new homes to be delivered each year.Operating sustainably Longer-term value creation requires us to balance our financial performance with our obligations to all our stakeholders.These include our clien

129、ts,customers and employees,and the communities and environment in which we operate.Health and safety remains our top priority and we were pleased to reduce our Accident Frequency Rate to 0.11 from 0.12 in 2017.We are investing in new tools to support training,as well as our industry-leading Challeng

130、ing Beliefs,Affecting Behaviour safety programme.One of our most significant programmes this year is Be Well,which supports our peoples wellbeing and mental health.We believe it is industry-leading and it has already won a number of awards.From 1 July 2018,we have realigned the health and safety tea

131、m to match our business structure and allow our businesses the flexibility to tailor their management of health and safety to their own needs.We continue to set policy and minimum standards at a Group level.Regrettably,the Company was found guilty in regard to an incident at the Tarporley Wastewater

132、 Treatment Works in 2015.Our first priority as a business is to ensure that everyone goes home safely at the end of each day.As a result,we have reviewed our already rigorous health and safety procedures and policies and continue to stress the importance of following them.We strive to consistently m

133、eet the needs of our customers and clients.Linden Homes retained its four-star National House Building Council(NHBC)customer satisfaction rating,while Partnerships&Regeneration and Construction continued to generate high levels of repeat business through strong client relationships.However,we recogn

134、ise that customer and client expectations are rising and that we need to further improve our performance.Having the right people is fundamental and to succeed in the long term,we need to attract and retain a more diverse workforce,which in turn requires us to adapt how we work,so we can appeal to th

135、e broadest range of potential employees.Our approach to smart working,using digital communication tools to reduce travel to meetings,is reaping benefits.Our people spend less time travelling,so they have better worklife balance and more time to be productive,while also reducing our costs and carbon

136、emissions.In the first year,we have made significant savings in travel costs alone.Smart working in turn supports agile working,which gives our people flexibility over when,where and how they work.This year we launched an agile working initiative.The case study on page 45 explains more about this im

137、portant initiative.Our culture is also key to making us a great place to work.Devolving decision-making is empowering our people,making them responsible for their own businesses and their own decisions.Our employee survey gives us a valuable insight into what we are doing well and where we need to i

138、mprove.The survey had a 73%response rate,well above the average of 51%for companies of our size.We were also accredited by Best Companies as One to Watch.OutlookMarket conditions are generally good across our businesses but we recognise that there are risks to the UK economy as we leave the EU.Our s

139、trong balance sheet means we can continue to grow but it is essential that we maintain our capital discipline and strive to make each of our businesses as efficient as possible,so we can drive performance through self-help.In summary,we remain confident that our strategy to 2021 is the right one for

140、 the Group and we remain on track to reach our adjusted financial targets.Peter Truscott Chief ExecutiveWhy did you opt for a capital raise after the demise of Carillion?Although we had sufficient financial resources to meet our obligations,this would have involved diverting capital away from our bu

141、siness plans,reducing our ability to take advantage of the material growth opportunities we would otherwise be well positioned to exploit.This applies in particular to our Linden Homes and Partnerships&Regeneration businesses,where we plan volume growth from existing and new geographies,strategic la

142、nd opportunities and increased investment in the provision of mixed-tenure housing.See Strategy p14 and Financial review p26QAGroup highlights Very strong performance,reflecting the excellent progress made towards strategy to 2021.6,193 new homes built by Linden Homes and Partnerships&Regeneration(2

143、017:5,490).Sales order books in Linden Homes and Partnerships&Regeneration robust at 526m(2017:450m).Successful one for three rights issue in April 2018 resulting in net proceeds of 150m.Average net debt of 227m(excluding the rights issue proceeds).Full year dividend payment of 77.0p per share(2017

144、restated:86.0p),covered 2.0 x by pre-exceptional profits.Pre-exceptional return on net assets improved to 29.2%from 27.5%.12Galliford Try plc Key trendsWe are responding to key trends within our marketsStructural undersupply of housing Government policy and planningA number of significant trends are

145、 driving long-term demand in the markets for each of our three businesses.The long-term demand for housing is driven by the UKs rising population,which is projected to continue growing to over 74 million by 2039(Office for National Statistics).For more than three decades,the UK has built too few hom

146、es to meet demand.Although output has increased from 119,000 in 2012/13,reaching 184,000 homes in 2016/17,the government estimates that 300,000 new homes are needed each year(2017 Autumn Budget).In Linden Homes and Partnerships&Regeneration,we have increased the total number of completions from 4,50

147、7 in 2014 to 6,193 this year,representing a growth of 37%.Our strategy to 2021 will see us increase output from both businesses,both through our existing business units and through further geographical expansion.The governments stated commitment to the housing market,including extending Help to Buy

148、beyond 2016 to 2021,the relaxation of stamp duty for first-time buyers on homes under 500,000,along with good mortgage availability and low interest rates,benefit both private and affordable homes businesses.Many of our schemes are eligible for Help to Buy.To date,more than 5,300 of our homes have b

149、een sold under it by Linden Homes and Partnerships&Regeneration.We continue to promote it and other assistance schemes to our customers and have independent financial advisers available to explain the process and offer advice.All of the main political parties support an expansion of the supply of af

150、fordable homes in the UK.In addition,the UK government is consulting on proposed changes to the National Planning Policy Framework(NPPF)which would lead to local authorities being required to ensure that more houses are delivered to their areas.There is also growing provision for Registered Provider

151、s and a wave of consolidation,which is enabling the enlarged organisations to significantly increase their output.These Registered Providers rely on the private sector to deliver this supply for them.This is a key focus of our strategy in Partnerships&Regeneration and we have established strong rela

152、tionships with around 68 Registered Providers and many long-term partnering arrangements positioning us to support their growth.The 2017 Housing White Paper additionally confirmed commitment to increasing housing supply by creating better plans for housing need and tackling delays in the planning sy

153、stem.While the quantity of land being released for housing is generally growing,the planning system is still less responsive in its ability to deal with the clearance of conditions and other pre-start requirements efficiently.We see the potential for the growing use of off-site production,but for th

154、is to be truly effective,the planning system must be better aligned so as to create more certainty for developers and producers of off-site homes and components.Too often the planning system favours differentiation of design,which can be inconsistent with the goals of greater use of standardised mod

155、els.We welcome the findings from the Letwin Review,which recognise market constraints and supply chain are factors in the delivery of homes to market and that wider tenure delivery and investment in the supply chain help to alleviate this.The review also set out that a larger number of smaller to me

156、dium sites would help to increase building rates.Our businessStrategic reviewBusiness reviewFinancial informationGovernance13Annual Report and Financial Statements 2018Significant need for infrastructure investmentConstraints on the labour supplyThere is underlying demand for more and better social

157、and economic infrastructure in the UK,much of which is in need of upgrading.The extent of the investment required is shown by the 2016 National Infrastructure Delivery Plan,which set out the governments intention to spend 100bn by 2020/21.Investment in this area is a stimulant for economic growth an

158、d has to happen,regardless of Brexit or the performance of the wider economy.This investment will also help to tackle the UKs poor productivity.We specialise in critical areas in need of investment,including health,education,defence,transport(road,rail and air),water and wastewater,and flood allevia

159、tion.Our position on numerous frameworks (page 39)puts us in place to benefit from future work in these areas.Skilled and experienced people are in strong demand.There is heavy reliance on EU nationals to meet this demand in London and the South East,although the proportion of workers from the EU is

160、 much lower elsewhere in the country.Potential post-Brexit immigration restrictions could limit the labour supply.To remedy any potential impact,we have increased our number of apprenticeships and continue to work with our supply chain partners to encourage more young people into the construction in

161、dustry.14Galliford Try plc StrategyAcross the Group,we are streamlining our operations to make us a leaner and more resilient business,while supporting our ability to grow.ProgressAchieved further strong top-line growth and increased pre-exceptional operating margins across the Group,resulting in re

162、cord pre-exceptional profit before tax.Targets and performancePre-exceptional profit before tax mActual2017Actual2018Target2021147.6188.760%growthStrategy1 Increase standardisation of layouts and processes.2 Grow volumes and operating margins from existing and new geographies.3 Maintain an appropria

163、te landbank commensurate with market conditions,while increasing delivery from strategic land and reducing average sales values.Progress1 Introduced the third generation of standard layouts,with 84%of units in planning now using standard designs.2 Grew volumes by 4%to 3,442 units and increased the o

164、perating margin from 18.2%to 19.5%.3 Maintained a landbank of 3.0 to 3.5 years (11,400 plots)and made further progress with strategic land,with further investment increasing the portfolio of unallocated land with no planning status by 2,730 acres with the potential of 13,270 plots.Targets and perfor

165、mance1Operatingmargin%Actual2017Actual2018Target202118.219.520.0Revenue mActual2017Actual2018Target20219379471,250UnitsActual2017Actual2018Target20213,2963,4424,200-4,500Strategy1 Grow national footprint by expanding into new geographies.2 Drive margin improvement by leveraging mixed-tenure expertis

166、e.3 Unlock partners capacity in sub-markets.Progress1 Opened the East Midlands office and delivered good performance from the new platforms in Bristol and Southampton.2 Grew mixed-tenure revenues to 123.9m,representing 26%of the total,and expanded the blended margin from 4.5%to 5.0%.3 Continued to w

167、ork with partners in new markets such as buy-to-rent and the private rented sector.Targets and performance2Operating margin%Actual2017Actual2018Target20214.55.06.0-7.0Revenue mActual2017Actual2018Target2021330475700-750UnitsActual2017Actual2018Target20212,1942,7514,200-4,400Strategy1 Retain existing

168、 platform for sustainable growth.2 Improve operations to drive margins.3 Deliver strong,predictable cash flows and margin improvement.Progress1 Maintained strong position on key frameworks and focus on public and regulated sectors,and further enhanced our management of risks.2 Continued to invest in

169、 our people,enhanced our processes and systems and actively engaged with our supply chain.3 Delivered improved margins on newly-won work,although cash performance and overall margins were held back by legacy issues.Targets and performanceCash/(debt)mActual2017Actual2018Target2021137(26)200Actual2017

170、Actual2018Target20210.00.92.0Pre-exceptionaloperating margin%Revenue bnActual2017Actual2018Target20211,5271,6871,800GroupLinden HomesPartnerships&RegenerationConstructionStrategic priority oneDrive operating efficiencies so we increase margins,respond faster to changing market conditions and have st

171、rong foundations for delivering further top-line growth.Strategy to 2021,targets and performanceA three-part strategy for sustainable growthIn February 2017,we set out our three-part strategy for sustainable growth focusing on driving operating efficiencies,maintaining capital discipline and operati

172、ng sustainably.We are making strong progress towards our objectives,with each business working towards individual financial targets to drive Group profit and returns.Reflecting this and market conditions,the business targets by which the Group targets will be achieved,have been updated.Business revi

173、ew p30 Business review p33 Business review p36Our businessStrategic reviewBusiness reviewFinancial informationGovernance15Annual Report and Financial Statements 2018Strategy The Group has a resilient and flexible balance sheet.We will continue to manage capital prudently and intend to continue our r

174、ecord of paying good dividends while reinvesting appropriately in growing the business.Progress Invested 892m in developments in Linden Homes and Partnerships&Regeneration.Raised gross proceeds of 157.6m through a one for three rights issue to ensure we have the resources to implement our growth str

175、ategy.Brought forward the planned increase to 2.0 x dividend cover.Targets and performanceGearing%Actual2017Actual2018Target20210025.0Pre-exceptionalreturn on net assets%Dividend per share4 pActual2017Actual2018Target202186.0CAGR5%77.0 A five-year CAGR3(Compound Annual Growth Rate)on dividend of at

176、least 5%.Rebuild dividend cover to 2.0 x.StrategyHealth and safety Enhance policies and procedures to ensure safe working practices for everyone,driving them through leadership and culture.Implement programmes to improve employee and subcontractor safety behaviours.Work with our employees to ensure

177、we maintain our culture of care.Progress Launched Be Well,our award-winning wellbeing and mental health programme.Launched innovative virtual reality training modules.Began a refresh of our behavioural safety programme.Doubled the number of safety tours for each director,resulting in a record total

178、of 1,898.Introduced a new protocol to investigate high-potential near-miss incidents.PerformanceAccident Frequency RateActual2017Actual20180.120.11GroupGroupStrategic priority twoMaintain capital discipline so we appropriately invest in growth opportunities,maintain a robust balance sheet and contin

179、ue to pay strong dividends.Strategic priority threeOperate sustainably so we create longer-term value by balancing financial performance with our obligations to all our stakeholders.Operating sustainably p40People Implement policies and procedures aiming to ensure we have competent and capable emplo

180、yees who demonstrate our values.Engage with our employees to identify training and development needs and opportunities to improve business performance.Implement programmes to drive fairness,inclusion and respect across the Group.Launched agile working practices to create a more inclusive working env

181、ironment and empower employees to work in ways they find most productive,while also helping to attract and retain talent.Refreshed induction booklet and continued face-to-face induction days,reinforcing our Code of Conduct.Reviewed policies with a diversity lens.Rolled out values-based interview ski

182、lls.Strengthened business focus on learning and development offering.Employee churn rate%Actual2017Actual201818.316.61 Linden Homes,reflecting market conditions,is now focused on delivering more prudent volume growth,but a stronger improvement in margins.The volume target has therefore been adjusted

183、 from 4,750-5,000 to 4,200-4,500 units.The business has already reached its 2021 margin target(19-20%),and expects to achieve an operating margin at the upper end of the previously guided range.The revenue target is 1,250m(previously 1,250m to 1,350m).2 Partnerships&Regeneration is performing ahead

184、of expectations and now expects to exceed its original revenue target,which is increased from 650m to 700m-750m.The volume target range is increased from 4,200 to 4,200-4,400.3 As a result of the rights issue in April 2018,the five-year CAGR on dividend of at least 5%has been rebased with the 2016 r

185、eference dividend per share recalculated using the revised number of shares.4 2017 restated due to rights issue(note 8).16Galliford Try plc Strategy in actionLinden HomesIncrease standardisation of layouts and processesOur strategy We continue to increase the use of standardised layouts and improve

186、processes,allowing our teams to build more efficiently,quickly,to a higher quality,at a lower cost and with shorter lead times.This approach helps us to attract and retain staff and subcontractors,benchmark performance and increase customer satisfaction.Our progress We have embraced standardisation

187、and benchmarking across the business.In particular,we have introduced The Linden Collection,the third generation of standard house types.The aim is to further optimise development layouts and reduce both our build costs and build programmes,while achieving consistency of design and providing the bes

188、t space for family living.Our original target was for 80%of our homes to be delivered from standard house types.Within 18 months of launch,84%of units contained in our current planning applications are based on standard house types.Of these,64%of the total are from The Linden Collection.The use of s

189、tandard house types is not restricted to new planning applications.The substitution of our standard product on existing schemes is also delivering increased margins.The Copperfields development in Malton is just one example of the difference standardisation has made.By re-planning the 66 plots using

190、 The Linden Collection,we were able to reduce our build costs,increase productivity and,at the same time,offer a better and more saleable home.1123Linden Homes made further strong progress this year,delivering on its strategic objectives,achieving record financial performance,and preparing for furth

191、er growth and margin progression.84%of our homes will use The Linden CollectionThe Copperfields development in Malton is just one example of how we are implementing The Linden CollectionAnother important initiative is the introduction of a new IT system.COINS(Construction Industry Solutions)is a ful

192、ly integrated system offering numerous efficiencies by giving Linden Homes complete visibility of the plot throughout its life cycle,from land acquisition,through build and sales,to the end of the customer care warranty period.The system is currently being tested on a number of live sites,with a tar

193、get of rolling it out across the business by the end of 2019.See Business review p3025standard house types make up The Linden CollectionSOLDOur businessStrategic reviewBusiness reviewFinancial informationGovernance17Annual Report and Financial Statements 2018Grow volumes and operating margins from e

194、xisting and new geographiesOur strategy Our current 10 business units each have the capacity to deliver 500 to 600 homes a year,with limited additional overhead.We therefore have the capacity to deliver our strategic growth plans from our existing office locations.As previously stated,however,we con

195、tinue to see scope to extend our geographical coverage,although this is not necessary to achieve our targets to 2021 and will therefore be opportunity led.Our progress We increased volumes by 4%to 3,442 units,while reducing overheads as a percentage of revenue from 4.8%to 4.1%,as we benefit from the

196、 capacity within our structure and reflecting growth from individual businesses across our operating areas.We successfully increased our average number of active selling sites from 77 to 85.Implement our land strategyOur strategy We intend to maintain a landbank commensurate with market conditions.W

197、e believe that,in the current climate,a landbank of between 3.0 and 3.5 years is appropriate.We have a target for 2025%of our plots to be delivered from our strategic land portfolio by 2021.We will also continue to selectively use joint ventures,with Registered Providers and other development partne

198、rs.This approach enables us to increase our market coverage over a larger number of developments using the same level of investment.Our progress We have maintained our landbank at circa 3.5 years delivery,with strategic land contributing around 1015%of the current landbank.The Orchards,Thornbury,exe

199、mplifies our approach to strategic land,with a landowner and local community benefiting from proactive promotion by Linden Homes,a developer partner focused on delivering homes.Having acquired an option on this site in 2014,our planning team identified an opportunity to submit an early planning appl

200、ication due to our detailed understanding of the local authoritys housing need and projected delivery numbers.Following a period of extensive consultation with all stakeholders,including the town council and the wider local community,a planning application for 125 homes was submitted in January 2015

201、.Planning consent was achieved in May 2016 and,because of our control over the site via an option agreement which reflected the investment risk of non-allocated land,we were able to agree terms with the landowner at a discount to open market value.Work on the scheme commenced on site in 2017.2500 to

202、 600We have the capacity to deliver 500 to 600 units each per year,per business unitCouncillors on the planning committee stated that Linden Homes was a developer that actually listened.318Galliford Try plc Strategy in actionPartnerships&RegenerationPartnerships&Regeneration continued to successfull

203、y implement its strategy during the year,helping the business to deliver rapid growth and an improved margin.1,400new homes to be built in partnership with Eastleigh Borough Council1231 See Business review p33Potential operating areas1.North East2.North West3.West Midlands4.East Midlands5.South West

204、6.West7.South(Drew Smith)8.South East12475863We are setting ambitious plans to take advantage of the significant opportunities in the private rental,mixed-tenure,affordable housing and regeneration sectors to support our strategy for growth.Stephen Teagle Partnerships&Regeneration Chief Executive Gr

205、ow national footprint Our strategy We intend to increase our national footprint by expanding into new geographies,with the aim of establishing a presence in Yorkshire in the 2018 calendar year.Our progress The acquisition of Drew Smith in May 2017 gave us a high-quality platform in the Southern regi

206、on.We are delighted with the progress the business has made since the acquisition last year and,in particular,our success in crystallising the long-term land interests Drew Smith held in Eastleigh.This has enabled us to enter what we believe is a unique partnering arrangement with Eastleigh Borough

207、Council,through which we will act as master developer and help the council to deliver more than 1,400 new homes.The innovative model allows the council to take a direct role in new housing delivery,accelerating the building of new homes for local people.Our businessStrategic reviewBusiness reviewFin

208、ancial informationGovernance19Annual Report and Financial Statements 2018This partnership is the first major contract for our recently established East Midlands team,helping us to further strengthen our national footprint as a leading regeneration specialist.James Warrington Partnerships&Regeneratio

209、n BoardWe are very pleased to be working with Galliford Try Partnerships on our first project together.Galliford Try Partnerships and Linden Homes have a well-established reputation for delivering high-quality new homes and we believe that there will be further opportunities to unlock additional dev

210、elopment projects,especially as we continue our roll-out strategy for The PRS REIT plc.Graham Barnet Sigma Capital GroupWere very pleased to be working alongside Galliford Try Partnerships and Rushcliffe Borough Council,helping to meet local housing need with high-quality new homes.Geeta Nanda Metro

211、politan Drive margin improvement by leveraging mixed-tenure expertiseOur strategy We will grow our mixed-tenure development revenues by continuing to partner with Registered Provider clients and leveraging Linden Homes brand and development skills.To fund these developments,we will use cash generate

212、d by our contracting activities,along with external debt.Our progress We have further extended our platform of joint ventures working with resourced,regionally-focused Registered Providers to establish strategic partnerships.As an example,we entered into a joint venture with Trafford Housing Trust t

213、o deliver 600 homes in Manchester and with Metropolitan Housing Trust for 171 homes in Nottingham.Unlock partners capacity in sub-marketsOur strategy We aim to access the markets for specific tenure products by joining with partners who have the capacity to fund projects,allowing us to share risk.Ar

214、eas of opportunity include the private rented sector,private affordable housing,public sector direct commissioning and housing solutions for older people.Our progress We had two notable successes in working with partners in attractive sub-markets.In September 2017,Legal&General appointed us to build

215、 a 120m buy-to-rent project in Walthamstow,creating 440 one-,two-and three-bedroom homes in a rapidly growing area of London.In February 2018,we announced our first collaboration with Sigma Capital Group,a leading provider of large-scale family housing schemes for the private rented sector.We will s

216、ource sites for Sigma in the West and South West of England and take them through planning and construction,creating many hundreds of homes available for private rent.120mbuy-to-rent project in Walthamstow,creating 440 one-,two-and three-bedroom homes in a rapidly growing area of London2320Galliford

217、 Try plc The three elements of our Construction strategy complement each other.We made good progress with retaining and improving our platform this year,with higher margins coming through on new work.Strategy in actionConstructionRetain our solid platform for sustainable growthWe intend to maintain

218、and 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.Our strategyOur progressImproving risk managementThis year,we further strengthened our project approva

219、l process by introducing a new heat map approach,which appraises a project based on its inherent risk.The assessment covers a wide range of technical and other factors,including the project location,the type of work,the terms and conditions and the availability of people.Any project with a red flag

220、must be approved by the Construction board.The project approval process is now separate from the regular monthly board meeting to ensure the directors can apply dedicated focus to considering the merits of each project.Improve our operations to drive margin progressionTo support our margin progressi

221、on,we will continue to:improve our risk management;attract,retain and develop a diverse workforce;further enhance our systems and communication tools;and align our supply chain with our operations.Focusing on our peopleOur people strategy includes a strong Equality,Diversity and Inclusion(EDI)focus

222、on areas including gender,ethnicity and disability.This will help us to meet our business needs for and beyond our strategy period(page 44).This is supported by agile working arrangements and an EDI Action Plan targeted at continually improving the inclusivity of our governance,procedures,behaviours

223、 and resourcing.This year,we have additionally developed a Leadership Framework which provides a foundation for career paths throughout the business.The core capabilities link to the values and behaviours required for leaders,showcasing what great leadership looks like.The framework forms a cornerst

224、one of our approach to key processes such as succession planning,development,high potential identification and recruitment.Deliver strong,predictable cash flows and margin improvementEnsuring we only bid for high-quality work with appropriate margins,while continuing to improve the way we work,will

225、enhance our margins over the period to 2021.This,in turn,will help us to deliver consistent and growing cash flows.SCHOOL123 See Business review p36Our businessStrategic reviewBusiness reviewFinancial informationGovernance21Annual Report and Financial Statements 2018Focusing on qualityQuality is cri

226、tical for client satisfaction and for preventing additional costly work in rectifying problems.We are focusing on improving quality in two ways.First,we are using our experts to give practical on-site teach-ins on subjects such as fire stopping,so our people understand what they need to do to achiev

227、e the best result.Second,we are using technology to document and photograph our on-site quality control and upload the records centrally.This ensures we have the evidence that we are building to the right quality and makes the task much faster and simpler for our people.We have improved our customer

228、 satisfaction score to eight this year,out of a total of 10.Our Net Promoter Score is 59.This score can be as low as-100 if every customer is unhappy or as high as+100 if every customer is a promoter of the business.A score of above 50 is generally considered excellent,reflecting the progress we are

229、 making through our focus on quality and client satisfaction.8/10Our customer satisfaction score was 8 out of 10 this year,up from 7.93 the previous year59We have a Net Promoter Score of 59,which is considered excellent22Galliford Try plc Business BoardsLinden HomesPartnerships&RegenerationConstruct

230、ionBusiness unit BoardsLinden HomesPartnerships&RegenerationConstructionPrincipal risksManaging risk and uncertainty to deliver business performance Risk and Internal Audit functionplc BoardExecutive BoardExecutive Risk CommitteeGroup ServicesAudit CommitteeRisk management governance structure and p

231、rocessThe Groups risk management and governance structure,as shown below,highlights the way in which risks are identified,reported and managed within the frameworks set out by the Board.It is designed to facilitate both a bottom-up and top-down view of risk.The Board has delegated implementation of

232、risk management and internal control,together with their day-to-day operation,to the Groups Executive management.The process is overseen by the Executive Risk Committee,which is chaired by the General Counsel and Company Secretary,and is managed on a day-to-day basis by the Director of Risk and Inte

233、rnal Audit.The Risk and Internal Audit function plays an integral role in facilitating the identification,reporting and management of risk throughout the governance structure.Each business unit maintains a risk register,which captures the principal risks applicable to that business,the key mitigatio

234、ns in place and what further action is required to manage the risk.The business unit Board reviews the risk register twice a year.One of these reviews is facilitated by the Group Risk and Internal Audit function and includes an assessment of the likelihood and impact of each risk using defined risk

235、assessment criteria and interactive voting software.The same methodology and review process is used to identify and assess the key risks at a business level.The Executive Risk Committee meets three times a year and reviews the latest versions of each of the three business risk registers.Following ea

236、ch Risk Committee,the Group risk register is updated by the Director of Risk and Internal Audit and reviewed by the Executive Board and plc Board.Risk management governance structureOur approach to risk and internal controls Risks and uncertainties are inherent to the markets in which we compete,the

237、 regulatory environment in which we operate and the operational activities we perform in pursuit of our strategy.Our risk appetite,defined as the nature and level of risks that we are prepared to be exposed to,is discussed and agreed by the Board and is expressed in our Group strategy.This attitude

238、to risk is then applied by the businesses and business units in their annual business plans and day-to-day operations.For example,at Group level,we have stated that we will not bid for large,fixed-price construction contracts that carry an unacceptable level of risk.At the business unit level,this a

239、ppetite informs how opportunities are assessed and is enforced through the governance and review controls over bidding.The Board also has overall responsibility for maintaining oversight of the Groups processes for identifying,assessing,managing and reporting on principal risks and the system of int

240、ernal controls designed to manage them.The Board has reviewed the principal risks and uncertainties,including those that would threaten its business model,future performance,solvency or liquidity,together with the key mitigations in place,and the most significant risks are presented on pages 24 and

241、25.There may be other risks and uncertainties besides those listed which may also adversely affect the Group and its performance.In addition to the ongoing processes for monitoring our principal risks,during the year,the Board also carried out a comprehensive assessment of the general risk factors r

242、elating to the Group,which were included in the rights issue prospectus.The Audit Committee has reviewed the risk management process and internal control framework,together with the findings of the Internal Audit function over the past year,which may indicate weaknesses that have had,could have had,

243、or may have in the future,a material impact on the results,and remedial actions taken.Based on these assessments,the Board is satisfied with the effectiveness of the Groups systems of risk management and internal control.The ability to identify,assess and manage risks and uncertainties is critical t

244、o achieving our strategy of sustainable growth and is an integral element of our management processes.Responsibility,policy,oversight and reviewIdentification,management,monitoring and reportingOur businessStrategic reviewBusiness reviewFinancial informationGovernance23Annual Report and Financial St

245、atements 2018Viability statement In accordance with provision C.2.2 of the UK Corporate Governance Code,the Board has assessed the prospects of the Group over a period of three years in line with its typical business planning and risk management review period.The Groups budget includes information i

246、n relation to the Groups revenues,profits,cash flows,dividends,net debt and other key financial and non-financial metrics.The plan considers the potential impact of the principal risks to the business as described overleaf,the cyclical nature of the markets in which the Group operates,and incorporat

247、es an appropriate level of flexibility to mitigate against these risks.This is achieved through the preparation of sensitivity analyses on a range of scenarios,including variations in revenue,house prices,sales rates,build costs,cash generation and access to financing.Based on the results of its rev

248、iew and analysis,the Board has a reasonable expectation that the Group will be able to continue in operation and meet its liabilities as they fall due over the three-year period of its assessment.The Audit Committee is responsible for keeping under review the adequacy and effectiveness of the Groups

249、 risk management processes and systems of internal control,and for reviewing and approving statements included in the Annual Report concerning internal controls,risk management and the Viability statement.Internal control frameworkThe day-to-day management of our principal risks is supported by an i

250、nternal control framework which is embedded in our management and operational processes.The most significant elements of the Groups internal control framework include the following:Organisational structure:each business unit is led by a managing director and management team providing a clear hierarc

251、hy and accountabilities.Code of Conduct:the Group promotes a culture of acting ethically and with demonstrable integrity.Group standards are set out in a Code of Conduct which is communicated to all employees and supported by specific training modules in key areas.Contractual review and commitments:

252、the Group has clearly defined policies and procedures for entering into contractual commitments which apply across its business units and operations and are enforced through the Groups legal authorities matrix.Investment in land and development:land expenditure approval is subject to clearly defined

253、 policies and procedures,with significant investments approved at Executive Board and Board levels under Group policies and procedures.Operational activity:site operations are performed in line with established business management systems and processes that incorporate all operational activities,inc

254、luding health,safety and environmental procedures,regular performance monitoring,quality management and external accountability to stakeholders.Financial planning framework:a detailed annual budget is prepared for each financial year,which is approved by the Board.Operational and financial reporting

255、:an exacting profit and cash reporting and forecasting regime is in place across the Group.As well as the emphasis placed on cash flow,income and balance sheet reporting,health,safety and environmental matters are prioritised within monthly operational reports.Internal Audit:the Group Internal Audit

256、 function develops and delivers an annual programme of internal audits,which includes business unit key controls reviews,audits of business and Group processes and targeted risk reviews.Assurance provided by non-audit functions:a number of other Group functions provide assurance in areas including,b

257、ut not limited to,health,safety and environment,legal contract reviews and compliance,and construction industry regulation.Pension plan administration:review of the funding position of the Groups defined benefit pension scheme and consideration of cash contributions by the Group are the responsibili

258、ty of the Board.The administration of the Groups fully closed final salary and ongoing defined contribution pension plan is outsourced to professional service providers.Each of the final salary schemes has an independent scheme secretary and a proportion of independent trustees to provide additional

259、 layers of external scrutiny.24Galliford Try plc 2Strategic priority3Strategic priority1Strategic priorityPrincipal risks continuedDescription of inherent risks The Groups businesses could be adversely affected by any macro-economic factors that reduce sales prices or transaction volumes in the UK r

260、esidential property market or cause a reduction or deferment in construction activity.Mitigation We manage the potential impact of economic downturn by building a strong order book in our contracting businesses and maintaining an appropriately-sized landbank.Hurdle rates on land acquisitions are str

261、ictly applied and are regularly reviewed.Where appropriate,we use joint ventures to reduce capital employed and share risks.We manage our financial gearing by setting a maximum period-end level of net debt,and minimum facility headroom buffers,at all times,which we monitor continually.Key risk indic

262、ators Interest rate increases.Consumer spending decreases.Unemployment increases.Actions in 2017/18 Continued to monitor the likelihood of interest rate rises,sales rates and visitor levels.Developed and rolled out standard house types to reduce costs and protect margins.Conducted early equity raisi

263、ng to pre-empt potential gearing issues arising from AWPR.Description of inherent risks A reduction in direct government spending on infrastructure projects such as schools,hospitals and transport,a reduction in indirect funding of social housing development or the withdrawal of schemes such as Help

264、 to Buy would directly affect our businesses.Other government policy initiatives,such as reform of the planning system,changes to public sector procurement or changes in tax policy also have the potential to cause disruption in our markets and increase the cost of doing business.Mitigation The Group

265、 regularly engages with the government and Homes England,both directly and via our membership of industry bodies.Prudent pricing models,increased hurdle rates and other contingencies are built into our land appraisal process,including the removal of any government support.The Help to Buy scheme has

266、been extended until at least 2021.Key risk indicators Removal of the Help to Buy scheme.A slowdown in public sector tenders.Actions in 2017/18 Met with key clients and bodies such as the Ministry of Housing,Communities and Local Government and Homes England to feed back on emerging policy and potent

267、ial and current issues.Participated in government initiatives including its leasehold consultation,the Letwin review and new National Planning Policy framework.Sought to influence plant procurement routes through trade bodies such as Build UK and CECA.Description of inherent risks The legal and regu

268、latory environment in which the Group operates is complex with the business required to comply with the legislation in relation to a wide range of areas,including bribery and corruption,competition,money laundering,health and safety,and building regulations.The introduction of the General Data Prote

269、ction Regulation(GDPR)and new sentencing guidelines for health and safety breaches further increase the risk and consequences of non-compliance.Mitigation The Group has comprehensive policies and guidance at every level including the Groups Code of Conduct,mandatory e-learning for all employees,regu

270、lar legal updates and briefings,six-monthly compliance declarations,and conflicts of interest registers and authorisations.In addition,an anonymous and independent whistleblowing helpline is available to all staff.Key risk indicators Increases in whistleblowing.Increases in health and safety near mi

271、sses.Actions in 2017/18 Continued embedding of the Groups Code of Conduct,including quarterly messages from the Chief Executive.Established a GDPR steering group to manage our programme of activity to address the requirements of the regulation.Description of inherent risks A significant safety incid

272、ent at one of the Groups developments or a general deterioration in the Groups H&S standards could put the Groups employees,subcontractors or the general public at risk of injury or death and could lead to litigation,significant penalties or damage to the Groups reputation.Mitigation We have operati

273、onal controls in place,including an H&S site risk assessment for every site.We have processes in place which allow us to respond promptly and appropriately to incidents.Both the Golden Rules and H&S database implemented in 2015/16 and the award-winning Challenging Beliefs,Affecting Behaviour safety

274、programme help to reduce risk in this area.Key risk indicators Increase in near misses and injuries.Actions in 2017/18 Restructured the H&S function so that it is aligned with each of our three businesses.This will facilitate the delivery of a service that is more tailored to each business needs,sup

275、porting them to meet their objectives.Health and Safety (H&S)Movement in the year Link to strategy3EconomicMovement in the year Link to strategy1 2 3GovernmentMovement in the year Link to strategy1 3Legal and regulatoryMovement in the year Link to strategy3Drive operating efficiencies,so we increase

276、 margins,respond faster to changing market conditions and have strong foundations for delivering further top-line growth.Maintain capital discipline,so we appropriately invest in growth opportunities,maintain a robust balance sheet and continue to pay strong dividends.Operate sustainably,so we creat

277、e longer-term value by balancing financial performance with our obligations to all our stakeholders.Our businessStrategic reviewBusiness reviewFinancial informationGovernance25Annual Report and Financial Statements 2018Description of inherent risks Failure to meet the build quality and service expec

278、tations of our contracting clients or home buyers may damage our reputation and therefore have an adverse effect on our private sales rates,or ability to win new work,especially in markets where we are reliant on repeat business with key clients.Mitigation There are rigorous quality control procedur

279、es in place in all three of our businesses.The Linden Way defines our approach to delivering an excellent customer experience at each stage in the housebuilding process.Within our Construction and Partnerships&Regeneration businesses,quality control is embedded within the business management system

280、policies and procedures.Key risk indicators Customer satisfaction scores decline.Failure to hit key milestones in project plan.Decreased level of client retentions.Actions in 2017/18 Developed and implemented a Delivering Excellence quality and client satisfaction framework within Construction.Conti

281、nued the focus on customer satisfaction in all divisional and business unit Board meetings.Refocused incentive schemes in Linden Homes and Partnerships&Regeneration to emphasise this priority.Description of inherent risks The ability to attract,develop,retain and build relationships with a diverse r

282、ange of high-quality employees impacts every level of the Group,from developing and building our products to succession planning for the Board,and is particularly important during a period of growth.Mitigation The Group has an established HR strategy based on best practice,Investors in People princi

283、ples and relevant legislation which,among other things,includes the regular review of remuneration and benefits packages to ensure we remain competitive.Our succession planning and talent management processes enable continuity and identification of future leaders.Key risk indicators Increase in staf

284、f churn.Actions in 2017/18 Made a further review of succession plans.Proactively targeted recruitment into key positions.Launched agile working practices.Description of inherent risks A lack of capacity in key subcontractor trades or materials markets can cause delays in construction programmes,redu

285、ced quality and increased costs.Mitigation The Group aims to develop 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 Advantage through Alignment programme in our Construction business faci

286、litates greater engagement with our key supply chain partners and provides them with greater visibility of our pipeline of projects.Key risk indicators Materials and trades shortages.Actions in 2017/18 Continued to embed Advantage through Alignment.Description of inherent risks A failure to agree ap

287、propriate commercial terms or to manage fixed-price contracts effectively can result in costs not being recovered from our clients and therefore reduced profits or,in some cases,losses on projects.Mitigation We continue to provide management focus on our existing fixed-price contracts,no longer unde

288、rtake infrastructure contracts on a fixed-price all-risk basis,and have robust review and approval controls for bids and contracts of this kind.We have enhanced our risk management procedures,bringing greater rigour around contract selection.Key risk indicators Profit margins.Slow or difficult cash

289、recovery.Actions in 2017/18 Developed and implemented a risk-based heat map tool to support contract selection and bid approval.Introduced more rigorous controls at the contract acceptance and project completion stage gates within our business management system.Description of inherent risks Given th

290、e nature of our three businesses,cash forecasting inevitably includes subjective estimates which carry intrinsic risk of error.Poor cash forecasting can impact business planning,investments and reporting of financial information.Mitigation Each business unit reviews its cash forecast monthly and the

291、 Group prepares a detailed daily cash book for the following eight-week period to highlight any risk of intra-month fluctuations.These forecasts are reviewed at business unit,business and Group level.Key risk indicators Monthly/weekly cash forecasts prove to be inaccurate.Actions in 2017/18 Our cash

292、 position and forecasts were subject to significant internal and external review as part of the process to prepare for the rights issue.The eight-week cash forecasting process was the subject of a review by Group Internal Audit.Dividend cover was increased,strengthening the balance sheet.CommercialM

293、ovement in the year Link to strategy1 3Customer satisfaction and quality controlMovement in the year Link to strategy1 2 3PeopleMovement in the year Link to strategy3Supply chainMovement in the year Link to strategy1 3Balance sheet strengthMovement in the year Link to strategy1 2 326Galliford Try pl

294、c IntroductionThe Group delivered excellent results at the pre-exceptional level,with all three businesses showing improved margins as a result of progress against their strategic objectives.We were disappointed to incur further costs and cash outflows on the AWPR contract which,exacerbated by the f

295、ailure of Carillion,prompted us to propose a rights issue in February.We are grateful for shareholders robust support for the equity raise.We ended the year with a strong balance sheet and continued confidence in our strategy to 2021.ResultsRevenue including joint ventures rose 11%to 3,132m(2017:2,8

296、20m).Group revenue,which excludes our share of joint ventures,was up 10%at 2,932m(2017:2,662m).Pre-exceptional profit from operations,which is stated before finance costs,tax and our share of joint ventures interest and tax,rose 24%to 213.1m(2017:171.2m).This contributed to pre-exceptional profit be

297、fore tax of 188.7m,up 28%from 147.6m in 2017,reflecting revenue growth and improved pre-exceptional margins across the Group.Profit before tax was 143.7m(2017:58.7m),after the exceptional charge relating to the AWPR contract(see note 3 and Exceptional items for more information).The table below reco

298、nciles 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.2018 m2017 mProfit before income tax143.758.7Charge on legacy contracts45.087.9Abortive merger costs1.0Pre-excep

299、tional profit before income tax188.7147.6Average net debt during the year,excluding the net cash received from the rights issue,was 227m,which was below our guidance of circa 240m and reflects our rigorous focus on cash management.Year-end net cash was 98.2m(2017:7.2m).Throughout this report,the Gro

300、up has included alternative financial performance indicators alongside standard measures,which are used to manage performance.These measures are chosen to provide a balanced view of the Groups operations and are considered useful to investors.An explanation of these measures and reconciliation to it

301、s statutory measures are detailed in note 36.Linden HomesLinden Homes continued to increase unit numbers and benefited from a higher average selling price,resulting in revenue up 1%to 947.3m(2017:937.4m).This included sales of land into joint ventures of 8.6m (2017:24.3m).Linden Homes gross margin w

302、as 23.6%,up from 23.0%in 2017.Realised profits from land sales to joint ventures were 6.5m(2017:14.6m).Excluding these,the gross margin from house sales was 23.0%(2017:21.3%),beginning to demonstrate the benefits of increased standardisation.Profit from operations rose by 8%to 184.4m(2017:170.3m),re

303、sulting in an operating margin of 19.5%,up from 18.2%in 2017.Our work to rationalise our processes meant overheads continued to reduce and were 4.1%of revenue in 2018(2017:4.8%).This resulted in an operating margin of 19.5%,up from 18.2%in 2017,producing an 8%increase in profit from operations to 18

304、4.4m(2017:170.3m).Excluding profits from land sales into joint ventures,the operating margin for the year was 19.0%(2017:17.0%).Return on net assets was 30.5%,up from 28.0%in 2017.Partnerships&RegenerationPartnerships&Regeneration grew revenue by 44%to 475.2m(2017:330.2m),benefiting from increasing

305、client investment and our geographic expansion,including a full year contribution from Drew Smith.Revenue from mixed-tenure developments rose by 51%to 123.9m(2017:82.2m),while contracting revenues were 42%higher at 351.3m (2017:248.0m).Profit from operations rose by 58%to 23.6m(2017:14.9m).The blend

306、ed operating margin improved further to 5.0%(2017:4.5%),primarily due to the growing proportion of higher-margin mixed-tenure work,supported by improved contracting margins.Our increased investment in mixed-tenure developments contributed to net debt in the business of 41.8m at 30 June 2018 (2017:39

307、.3 m).We intend to continue with modest investment in working capital in Partnerships&Regeneration,as it seeks growth in higher margin mixed-tenure projects,recognising always that the key measure of success in this business is the return generated on the capital we invest.Return on net assets was 4

308、8.2%(2017:40.7%).ConstructionRevenue grew by 11%to 1,687.4m (2017:1,526.9m).The business continued to prioritise selective bidding and margin enhancement over turnover growth.The pre-exceptional profit from operations was 15.9m(2017:loss of 0.9m),representing a margin of 0.9%(2017:0.0%).The loss fro

309、m operations was 29.1m(2017:88.8m),after the additional costs to complete the AWPR contract.The portfolio of newer work is performing well and delivering appropriate margins that reflect the associated risk profile.This was another good year for the Groups underlying performance,which saw us deliver

310、 increased pre-exceptional margins from all three businesses,resulting in a record level of pre-exceptional profit.Graham Prothero Finance DirectorFinancial reviewMaintaining our strong platform for sustainable growthOur businessStrategic reviewBusiness reviewFinancial informationGovernance27Annual

311、Report and Financial Statements 20182018201720162015201418.219.517.516.015.1Linden Homes operating margin%201820172016201520144.55.03.92.92.1Partnerships&Regenerationoperating margin%201820172016201520140.01.10.91.21.0Construction pre-exceptional operating margin%11 The reported margin in 2017 was(5

312、.8)%.Group financial performance Revenue up 11%to 3,132m (2017:2,820m)Pre-exceptional profit before tax up 28%to 188.7m (2017:147.6m)Profit before tax up 145%to 143.7m (2017:58.7m)Pre-exceptional Group return on net assets increased to 29.2%(2017:27.5%)Exceptional charge of 45.0m (2017:88.9m)Strong

313、financial position,with Group year-end net cash of 98.2m (2017:7.2m)Investment in Linden Homes developments,including joint ventures,up to 752.5m (2017:733.8m)Margin in Partnerships&Regeneration up from 4.5%to 5.0%Construction cash balance reduced to net debt of 26.0m,as a result of legacy contracts

314、 (2017:cash of 137.4m)Equity up by 201.0m to 776.5m (2017:575.5m)Net tangible assets up by 52%to 601.6m (2017:396.4m)The Building division generated a profit from operations of 11.6m(2017:loss of 12.0m),with a margin of 1.1%.Infrastructures pre-exceptional profit from operations was 4.3m(2017:11.1m)

315、,representing a pre-exceptional margin of 0.7%(2017:2.0%).After the exceptional charge,Infrastructures operating loss was 40.7m(2017:76.8m).Further comments relating to specific projects are provided in the Construction business review.PPP InvestmentsPPP Investments reported revenue of 21.7m(2017:25

316、.0m),with a profit from operations of 6.8m(2017:2.4m),reflecting profits on sales of investments.Exceptional itemsAs described in the Chief Executives review on page 10,we have made very good progress towards completion of the AWPR.During the year we reported a further exceptional charge of 45.0m,wh

317、ich reflected the additional share of costs taken on following the insolvency of Carillion,one of our two joint venture partners,and further cost rises in the second half of the financial year,driven mainly by poor weather conditions.The total additional charge to date is 123m,of which 120m has been

318、 classified as exceptional.Our provisioning for the loss on this project reflects our current estimate of the final costs,and is reduced by an estimate of our share of significant claims against the client and others,which are yet to be agreed and concluded.This inherent uncertainty will be resolved

319、 only when the project is complete and the claims finally settled.Exceptional items in 2017 totalled 88.9m.Of this,87.9m was in respect of losses on two major infrastructure projects,with the larger proportion relating to AWPR.A further 1.0m represented professional fees in respect of the abortive m

320、erger proposal with Bovis Homes Group plc.TaxationThe pre-exceptional items effective tax rate was 18.0%(2017:18.6%),which compares with the standard corporation tax rate of 19.0%.We believe our effective tax rate will remain just below the headline rate of corporation tax for the foreseeable future

321、.After exceptional items,the effective rate was 17.7%(2017:17.0%).We have published our tax strategy,which is available from our website at www.gallifordtry.co.uk.In summary,we look to comply with both the letter and spirit of relevant regulations while minimising the Groups tax burden.We also aim t

322、o have an open,honest and positive relationship with HMRC.Earnings and dividendPre-exceptional earnings per share increased by 21%to 158.4p(2017 restated:131.1p).After exceptional items,earnings per share were 121.1p(2017:53.1p).Details of the calculation of earnings per share can be found in note 9

323、 to the financial statements.The directors are recommending a final dividend of 49.0p per share which,subject to approval at the AGM,will be paid on 5 December 2018 to shareholders on the register at 9 November 2018.Together with the interim dividend of 28.0p per share paid in April,this will result

324、 in a total dividend in respect of the year of 77.0p per share(2017 restated:86.0p per share).The reduction in the dividend is a result of the Boards decision to bring forward plans to increase dividend cover to 2.0 times,based on pre-exceptional earnings,as announced at the time of the rights issue

325、,in addition to the impact of the new shares issued as a result of the rights issue.The total dividend in 2017 was 1.6 times covered by pre-exceptional earnings.The cost of the final dividend is 54m,resulting in a total dividend cost relating to the year of 78m(2017:79m).28Galliford Try plc Financia

326、l review continuedWhy was the dividend cover increased to 2.0 times?The Board is committed to a dividend strategy which fairly and prudently allocates profits between,on the one hand,providing returns to our shareholders and,on the other hand,further investing in the growth potential of the business

327、es and strengthening the balance sheet which protects against the risks in cyclical markets.We approach this by setting a target level of dividend cover.In our strategy document,published in February 2017,we indicated our intention to increase this cover up to two times during the strategy period.We

328、 took the opportunity of the rights issue to accelerate this adjustment,moving immediately to cover of 2.0 x,which both provides clarity and enables the dividend to progress in line with profits after the current year.QACash and equityNet cash at the year end was 98.2m(2017:7.2m).Group average net d

329、ebt excluding the benefit of the proceeds from the rights issue during the year was 227m(2017:240m).Cash remains a prime focus in Construction and we continue to prioritise cash profile as part of our contract bidding process.The business had an average net debt balance of 44m during the year.At the

330、 year end,net debt balances in Construction stood at 26.0m(2017:net cash of 137.4m),with the reduction principally reflecting the burden of AWPR.The year-end net capital employed in developments and joint ventures was 753m(2017:734m)in Linden Homes and 139m(2017:93m)in Partnerships&Regeneration.We c

331、ontinue to purchase land on deferred payment terms where possible.Land creditors remained steady at 144m.Total equity increased by 201.0m to 776.5m(2017:575.5m),while tangible net assets increased by 205.3m to 601.6m(2017:396.4m).This represented net assets per share at 30 June 2018 of 6.99(2017:6.9

332、4)and tangible net assets per share of 5.42(2017:4.78).Return on net assetsGroup return on net assets is a key measure for assessing our performance.It is calculated as profit before tax,finance costs and amortisation,divided by average net assets.On a pre-exceptional basis,it increased to 29.2%from

333、 27.5%,reflecting pre-exceptional profit growth across the Group.On a reported basis,Group return on net assets was 24.9%(2017:14.0%).Pension and share scheme costsThe Group operates a single defined contribution pension scheme which all employees can join,as well as three closed defined benefit schemes(as set out in note 31).The total pension cost charged to the income statement was 19.3m(2017:16