Interim Results
July 29 2002 - 3:00AM
UK Regulatory
RNS Number:2056Z
Aggregate Industries PLC
29 July 2002
Embargoed until 7:00am, Monday, 29 July 2002
AGGREGATE INDUSTRIES PLC
Interim results for the six months ended 30 June 2002
Aggregate Industries plc, the international aggregates group, announces its
interim results for the six months ended 30 June 2002.
Half year ended
30.6.02 30.6.01 Increase
£m £m %
• Turnover 620.9 584.3 6
Continuing 614.2
Acquisitions 6.7
• EBITDA 93.7 86.4 8
• PBIT 59.5 56.0 6
Continuing 58.6
Acquisitions 0.9
• PBT 41.4 35.1 18
• EPS 1.9p 1.7p 12
• DPS 1.03p 0.98p 5
• Gearing 63% 74%
Peter Tom, Aggregate Industries' Group Chief Executive, comments:-
"I am very pleased to report another half-year of record profits, the result of
a solid trading performance and lower debt resulting from improved cash
generation. The second half has started well and we remain confident of
achieving another year of improved profit."
Further information about Aggregate Industries can be found at www.aggregate.com
Contacts: Peter Tom, Group Chief Executive
Chris Bailey, Group Finance Director Tel: 020 7831 3113 (on 29/7/02)
Aggregate Industries plc Tel: 01530 816600 (thereafter)
Steve Jacobs/Jon Simmons
Financial Dynamics Tel: 020 7831 3113
GROUP CHIEF EXECUTIVE'S REVIEW
The Group continued to make further progress in the first six months of 2002.
Earnings increased over the corresponding period last year, principally due to
the strong UK markets and a reduction in borrowing costs.
Results
Turnover increased by 6% to £620.9m (2001 £584.3m) and earnings before interest,
tax, depreciation and amortisation rose by 8% to £93.7m (2001 £86.4m).
Operating profit rose to £59.5m (2001 £56.0m), an increase of 6%, and the total
Group margin on sales was maintained at 9.6%.
A strong level of trading was achieved in the UK in the first 5 months, but June
proved to be disappointing as a number of trading days were lost due to the
combined effects of poor weather, the Jubilee celebrations and the World Cup.
Notwithstanding this, overall sales volumes for the 6 months increased in the
majority of product groups.
Although, as anticipated, US markets have slowed, demand remains firm,
particularly from the infrastructure sector. Earlier favourable weather
conditions were interrupted during March and April by colder conditions, which
delayed activities in the West and North Central Regions, but we have not
suffered from the flooding experienced last year in Minnesota.
The net cash inflow from operations was £21.9m (2001 £5.1m outflow). Better
working capital management resulted in reduced outflow of funds, capital
expenditure was broadly maintained at £38m (2001 £36m) and 7 further bolt-on
acquisitions were concluded at a cost of £25m. This improvement resulted in a
reduction in debt and a lower interest charge which fell £2.8m to £18.1m.
Group profit on ordinary activities before taxation was £41.4m (2001 £35.1m), an
increase of 18%.
FRS19 - Deferred Tax has been adopted with effect from 1 January 2002 using the
discounting method and with the prior year's figures being restated. The
effective rate of taxation expected to apply for 2002 using current discount
rates is 33%. The adoption of this standard did not materially increase the
estimated rate for the year, but the prior-year adjustment increased the rate
for 2001 from 28% to 32%. The cash tax rate for the current year is expected to
be 29% but this is the last year for which the cash tax rate is expected to be
significantly lower than the rate charged in the accounts.
Net assets at 30 June 2002 were £863m (2001 £825m, as restated) and net debt
stood at £539m (2001 £610m) resulting in gearing of 63% (2001 74%, as restated).
Because Group activities are impacted by seasonality, working capital demand
fluctuates and net debt is traditionally significantly higher at the mid-point
of the year.
Dividend
The Board has proposed that for the fifth year in succession the interim
dividend is raised by 5% to 1.03 pence per share. The dividend is covered 1.9
times by reported earnings.
REVIEW OF OPERATIONS
UNITED KINGDOM OPERATIONS
Aggregates
Turnover £254m (2001 £217m)
Trading in the first quarter reflected a continuation of the firm market
conditions experienced at the end of 2001. A number of larger infrastructure
projects, particularly in the second quarter, boosted demand. In the Midlands
Region, work on the Silverstone Bypass has continued and elsewhere the level of
project activity and housing demand more than offset any weakness in commercial
and industrial construction. Crushed rock volumes were unchanged in the
half-year while sand and gravel and ready-mixed concrete recorded improvements
and the 17% increase in asphalt volume was particularly encouraging. This is
despite a poor June, due to the reduced operating days occasioned by the Jubilee
celebrations and the World Cup. Prices were increased in March by between 5%
and 7% and the Government's aggregates levy was applied from the beginning of
April.
Ready-mixed concrete operations in all areas performed well and profitability
improved. On 1 July London Concrete opened its new Heathrow plant. Located in
this strategically important development area, the plant will produce 600 cu
metres an hour and is believed to be the largest plant in Europe.
All regions performed well throughout the UK, although there were delays in the
release of some highway maintenance work.
The businesses acquired in the Greater Manchester area, in Essex and in Chester
have all been integrated into operations and are performing well.
On 27 June the Group increased its interest in Paragon Materials Ltd (Paragon)
with the purchase of an additional 35% of the issued share capital, which brings
the Group's interest to 55%. Through its cement import facilities at Chatham,
Paragon will provide Aggregate Industries with an additional secure source of
this important raw material for its ready-mixed concrete and pre-cast concrete
operations.
Also, on 8 July we acquired certain assets and subsidiary interests from the
Receiver of Stenoak Associated Services plc. These interests constitute road
surfacing operations located in the south east and on the south coast of the UK,
together with a traffic management operation based in Huddersfield.
Operations in the Channel Islands performed well in the first half and the
recently-acquired asphalt and contracting operations are now fully integrated.
The Halsvik operation in Norway continues to make excellent progress, with
increased supplies to northern European markets.
Bradstone and Charcon
Turnover £89m (2001 £82m)
All operations had an excellent start to the year and the fine weather over the
Easter period stimulated strong demand, particularly for Bradstone premium
products. The Masterblock operations, which have experienced margin pressure in
previous years, made a good start and performance has improved in this
operation. Prices have increased and we anticipate further improvements in
operating performance from both the Bradstone and Charcon businesses.
In April we opened a new concrete block paving operation at Burton-on-Trent.
This new facility, located at our own sand and gravel operation, will enable us
to increase our supply to this rapidly expanding market.
UNITED STATES OPERATIONS
Residential work remains at high levels in all regions and infrastructure work
continues at record levels. It is pleasing to note the Senate's confirmation of
the reversal of the negative Revenue Aligned Budget Authority (RABA) effect on
TEA-21 expenditure for 2003.
As expected, ready-mixed concrete volumes declined in line with the anticipated
slowdown in the commercial market.
Generally prices have achieved our expectations in all regions.
East Coast
Turnover $191m (2001 $186m)
The operations on the East Coast made an excellent start to the year following a
milder winter, but this was followed by wetter conditions in the second quarter
which delayed deliveries to some projects. Asphalt margin was also held back by
continued high liquid asphalt prices on the East Coast, caused by delivery
delays at the Venezuelan refineries.
Good results from Massachusetts were aided by an open start to the year,
improved cost control at aggregate operations, a high level of ready-mixed
concrete demand in the suburban markets and sustained highway and airport
infrastructure demand.
Operations in the Mid Atlantic Region made a good start to the year and the
business has made excellent progress in developing its recently-acquired asphalt
operations. Major infrastructure projects continue, including work on the $2bn
Woodrow Wilson Bridge.
Mid West
Turnover $210m (2001 $225m)
After an excellent start to the year following a mild winter, colder, snowier
conditions developed in April and May and activity slowed. Colorado ready-mixed
concrete was particularly affected, although activity has now recovered to
anticipated levels. Supplies of aggregate and ready-mixed concrete to the I-25
T-REX contract in Denver have now started.
In contrast, North Central operations had an excellent first half. Improved
cost control and more normal weather conditions combined to produce a rebound in
profit from the levels achieved in the first six months of last year, despite
June being the wettest month on record.
Michigan continues to perform as expected and the outlook remains firm.
OUTLOOK
We have made an excellent start to 2002 with an improvement in first-half
profits.
Activity in the UK has been strong and we are pleased both by the current level
of activity and by future order enquiries. The current programme of new bypass
schemes is well underway and we were encouraged by Chancellor Gordon Brown's
2002 Spending Review which included a 12% pa increase in the Transport Budget by
2006. However, it will be essential that the programme is maintained and that
the next tranche of projects identified in the Spending Review is advanced
through the planning and procurement stages.
We remain confident that the medium-term outlook for the UK is somewhat better
than we have experienced for a number of years.
In the US, the year commenced as we anticipated and results in the first half
have met our expectations. The underlying level of trading remains firm and we
continue to benefit from our involvement in a number of substantial
infrastructure projects within the TEA-21 programme.
We are encouraged by the restoration of the original estimate of TEA-21 spending
in 2003 and by the fact that discussions are already underway to develop a new
programme to follow the current TEA-21 arrangement when it ends in 2003.
The major trading season in the US occurs in the second half of our financial
year and we are pleased with the way it has commenced.
For the Group as a whole we anticipate a strong performance from the UK, more
than offsetting any potential weakness in the US, providing as always, that we
experience a normal weather pattern on both sides of the Atlantic. This
outlook, coupled with a reduction in the cost of debt funding, gives us
confidence that another year of improved profit will be achieved.
Peter Tom
Group Chief Executive 29 July 2002
Consolidated profit and loss account
Half year Half year ended Year ended
ended 30 June 2001 31 December 2001
30 June 2002 Restated Restated
Note £m £m £m
Turnover 1
Continuing operations 614.2 584.3 1,306.9
Acquisitions 6.7 - -
620.9 584.3 1,306.9
Operating profit 2
Continuing operations 58.6 56.0 165.8
Acquisitions 0.9 - -
59.5 56.0 165.8
Net interest payable (18.1) (20.9) (41.7)
Profit on ordinary activities before taxation 41.4 35.1 124.1
Tax on profit on ordinary activities (13.7) (11.2) (39.5)
Profit on ordinary activities after taxation 27.7 23.9 84.6
Equity minority interests (1.3) (0.8) (2.1)
Profit attributable to shareholders 26.4 23.1 82.5
Dividends (15.1) (14.4) (34.9)
Retained profit for the period 11.3 8.7 47.6
Earnings per ordinary share 4
Basic 1.9p 1.7p 6.3p
Diluted 1.9p 1.7p 6.2p
Dividend per ordinary share 5 1.03p 0.98p 2.43p
Consolidated statement of total recognised gains and losses
Half year Half year ended Year ended
ended 30 June 2001 31 December 2001
30 June 2002 Restated Restated
£m £m £m
Profit attributable to shareholders 26.4 23.1 82.5
Currency translation on foreign currency net investments (16.2) 19.7 7.5
Total recognised gains and losses for the period 10.2 42.8 90.0
Prior year adjustment (note 6) (0.2)
Total recognised gains and losses since last report 10.0
Prior year comparative figures have been restated to reflect the effect of FRS
19 - Deferred Taxation
Consolidated balance sheet
30 June 30 June 31 December
2002 2001 2001
Restated Restated
£m £m £m
Fixed assets 1,375.0 1,406.4 1,379.7
Net current assets
Stocks 110.1 99.6 99.7
Debtors 317.7 307.9 248.8
Creditors due within one year (300.4) (289.3) (306.2)
127.4 118.2 42.3
Net borrowings (539.2) (610.2) (460.9)
Creditors
Provisions and amounts due after one year (100.6) (89.2) (101.5)
Net assets 862.6 825.2 859.6
Capital and reserves
Share capital and share premium 458.8 443.3 452.2
Reserves 396.9 376.9 401.5
Minority interests 6.9 5.0 5.9
862.6 825.2 859.6
Consolidated statement of cash flows
Half year ended Half year ended Year ended
30 June 2002 30 June 2001 31 December 2001
£m £m £m
Operating profit 59.5 56.0 165.8
Depreciation and amortisation 34.2 30.4 66.3
Working capital movements (69.9) (89.8) (22.1)
Other movements (1.9) (1.7) (1.1)
Net cash inflow/(outflow) from operating activities 21.9 (5.1) 208.9
Dividends from joint ventures - - 0.1
Returns on investments and servicing of finance (24.3) (20.7) (48.6)
Taxation (11.8) (10.5) (21.3)
Capital expenditure and financial investment (34.6) (33.0) (67.3)
Acquisitions and disposals (24.9) (39.9) (36.6)
Equity dividends paid (12.2) (11.5) (28.7)
Net cash inflow/(outflow) before financing (85.9) (120.7) 6.5
Issue of ordinary shares 3.3 5.5 12.5
Purchase of preference shares - (2.4) (2.4)
Loans & finance leases acquired with subsidiary
undertakings (3.1) (0.9) (0.9)
New finance leases and deferred acquisition debt (0.3) (0.4) (0.8)
Exchange movement 7.7 (25.6) (10.1)
Movement in net borrowings (78.3) (144.5) 4.8
Net borrowings at beginning of period (460.9) (465.7) (465.7)
Net borrowings at end of period (539.2) (610.2) (460.9)
Notes to the Interim Report
Half year Half year ended Year ended
ended 30 June 2001 31 December
30 June 2002 2001
1. Turnover £m £m £m
Continuing operations:
United Kingdom 339.7 298.8 587.1
United States 274.5 285.5 719.8
614.2 584.3 1,306.9
Acquisitions:
United Kingdom 3.4 - -
United States 3.3 - -
Total 620.9 584.3 1,306.9
2. Operating profit
Continuing operations:
United Kingdom 41.9 36.1 70.3
United States 16.7 19.9 95.5
58.6 56.0 165.8
Acquisitions:
United Kingdom 0.3 - -
United States 0.6 - -
Total 59.5 56.0 165.8
3. Joint ventures
Operating profit contributed by joint ventures has not been separately
identified as the amounts are not material.
4. Earnings per ordinary share
Earnings per ordinary share for the period to 30 June 2002 have been calculated
on earnings of £24.4m (2001 £20.9m, as restated) and on a weighted average of
1,259.9m (2001 1,241.8m) ordinary shares in issue during the period. Diluted
earnings per share has been calculated using a weighted average number of
ordinary shares of 1,274.6m (2001 1,255.8m) which takes into account the number
of dilutive shares which would be issued on the assumed exercise of all options
and warrants.
5. Dividend per ordinary share
The interim dividend of 1.03p per ordinary share will be paid on 3 January 2003
to ordinary shareholders on the register at the close of business on 13 December
2002.
The dividend reinvestment plan will continue to be available this year.
6. Deferred tax
The Group has adopted FRS 19 - Deferred Tax with effect from 1 January 2002 and
prior year comparative figures have been restated. FRS 19 requires deferred tax
to be recognised on a full provision basis on all timing differences that have
originated but not reversed at the balance sheet date. Such timing differences
are the accumulated difference between the profit in the financial statements
and the profit for tax purposes and arise principally from the difference
between accelerated capital allowances and depreciation. In adopting FRS 19 the
Group has chosen to discount deferred tax balances to present value.
The effect of this change in accounting policy on profit after taxation, net
assets and earnings per share is as follows:
Half year ended Half year ended Year ended
30 June 2002 30 June 2001 31 December
2001
£m £m £m
Decrease in profit after taxation - (1.4) (4.9)
Increase/(decrease) in net assets - 3.9 (0.2)
Decrease in basic EPS (pence) - (0.1p) (0.4p)
7. Basis of preparation
This interim financial information has been prepared on the basis of the
accounting policies set out in the Company's statutory accounts for the year
ended 31 December 2001 with the exception of a change in accounting policy
resulting from the adoption of FRS 19 'Deferred Tax' (note 6).
The results for the half years ended 30 June 2001 and 2002 are unaudited and do
not constitute statutory accounts as defined in section 240 of the Companies Act
1985. The figures for the year ended 31 December 2001 are abridged and have
been extracted from the Company's statutory accounts for that year. Those
accounts, on which the auditors' report was unqualified, have been filed with
the Registrar of Companies.
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