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Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
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Birse Grp. | LSE:BIE | London | Ordinary Share | GB0001005684 | ORD 10P |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
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0.00 | 0.00% | 14.40 | 0.00 | 01:00:00 |
Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
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0 | 0 | N/A | 0 |
RNS Number:8740X Birse Group PLC 26 January 2001 Friday 26 January 2001 BIRSE GROUP plc INTERIM RESULTS Birse Group plc, the UK construction group, today announces results for the six months ended 31 October 2000. These may be summarised as follows: * Exceptional items totalling #24m relating to litigation, as previously announced * Pre-tax losses, before exceptional operating items, of #6.7 million, (1999: profit of #2.1 million) mainly due to restructuring costs and loss provisions in respect of Process Engineering business * Strong construction order book; #386million at 31 December 2000 (1999: # 293million) * Continued good progress at BPH Equipment and Birse Properties * Dividend maintained at 0.375p per share Commenting on the results, Chief Executive Peter Watson said: "Birse today is all about partnership with its customers and it is therefore a great sadness to all of us that the underlying potential of the Group has been so badly restricted during the first half by historic disputes relating to old contracts. As foreshadowed, the Process Engineering Division had a tough first half but we are confident that the investment we have made in rationalising and restructuring it will deliver an improving performance going forward. Birse Plant Hire continues to perform well and we will redouble our efforts in the second half in respect of a number of promising opportunities to realise maximum value from non-core property assets." Contacts: Birse Group plc 01652 633222 Peter Watson, Chief Executive Martin Budden, Finance Director Financial Dynamics 020 7831 3113 Tom Baldock CHIEF EXECUTIVE'S STATEMENT The results reported are dominated by exceptional operating items amounting in the aggregate to #24 million. These losses accrue from the litigation involving Birse Construction and relate to the Priory Meadow Shopping Centre, Hastings and the Lower Rhymney Valley Relief Road projects. Both projects have been the subject of earlier announcements made to the London Stock Exchange. These two cases exemplify everything that was wrong with the Construction Industry in the early to mid nineties and clearly illustrate why industry wide attitude changes have been necessary and why we have been progressively moving the business towards partnering and long term client and supplier relationships. Pre-tax losses, before exceptional operating items, of #6.7 million compare with profits for the corresponding period last year of #2.1 million. These results derive from losses of #7.8 million in the Construction business which are mainly as a result of the previously announced restructuring and rationalisation of its Process Engineering Division together with the closing out of problem contracts inherited by the new management of that business. The costs associated with the turnaround of that Division combined with loss provisions in respect of three contracts in the Building Division mean that the results reported by Birse Construction are adversely affected by factors not present in previous periods which masks the progress that continues to be made in improving the underlying quality of the company. Plant Hire results continue to improve with profits increasing to #717,000 compared with #627,000 earned in the six months ended 31 October 1999. The Group's Commercial Property activities increased profits to #793,000 (31 October 1999: #401,000). The net interest charge for the period fell by #316,000 to #133,000. In line with the trend established over the last five years average net borrowings continue to fall. At 31 October 2000 the Group had a net cash position of #7.5 million including amounts held on deposit as investments (31 October 1999: # 5.7 million). The achievement of our stated objective to eliminate the net interest charge is now in sight. Exceptional Operating Items #' million Lower Rhymney Valley Relief Road 8 Priory Meadow Shopping Centre, Hastings 16 24 The Lower Rhymney Valley Relief Road contract was awarded to Birse Construction at the commencement of the 1990's; the Hastings contract was awarded in 1995. From the early days both contracts were characterised by disputes over monies due under the contract. Despite extensive efforts and initiatives those disputes were not resolved. As a result the Rhymney project was referred to arbitration and the Hastings dispute to litigation in 1996 and 1998 respectively. With regard to the Rhymney arbitration on 12 July 2000 the arbitrator published an award which dealt with all matters excluding interest and finance and costs in the action. Birse Construction was awarded further monies amounting in the aggregate to #0.5 million giving rise to the exceptional loss set out above. Certain elements of that award have been referred to Appeal, however, collectively they will not alter its substance. Given these outstanding Appeal matters and the fact that the issues of interest, finance and costs remain to be determined, I am restricted from commenting beyond the facts outlined. In contrast the Hastings litigation has been settled and subject to the completion of certain modification works is now behind us. I am concerned by the level at which we were obliged to settle the dispute and shall be considering further how the need to settle in this way came about and what lessons the Group can learn from the experience. I re-emphasise that these disputes originated many years ago and that they most definitely are not a feature of work secured in recent years. Included in debtors as at 31 October 2000 is an aggregate value of # 15.6million attributable to seven old contracts which remain the subject of arbitration or equivalent proceedings. Construction Six months ended 31 October Year ended 2000 1999 30 April 2000 Turnover Operating Turnover Operating Turnover Operating (loss)/profit* (loss)/profit (loss)/profit #'000 #'000 #'000 #'000 #'000 #'000 Civil 93,258 52 85,854 1,591 147,817 2,769 Engineering Building 82,920 (1,903) 68,668 1,372 169,824 2,728 Process 14,205 (5,925) 21,765 (1,250) 45,535 (2,359) Engineering 190,383 (7,776) 176,287 1,713 363,176 3,138 * Before exceptional operating items. In my statement incorporated in the accounts for the year ended 30 April 2000 I warned that losses in the Process Engineering Division would continue into the period under review. Following the appointment of John Ruane as Divisional Managing Director at the end of the 1999/2000 financial year the following actions have been put in place and by the end of the current financial year the planned re-organisation of the business will be complete:- i. a cut in overhead costs from an annual rate of around #4million to # 2million involving a reduction in staff numbers from 208 at the end of April 2000 to 119. The related redundancy costs of #0.5million have been charged in full in the figures shown above. All of this was achieved by 31 October 2000; ii. a re-organisation of the technical engineering function whereby that activity has been removed from sites and concentrated centrally thereby allowing better use of expertise and ensuring that tighter technical and commercial controls are exercised over the fundamental elements of the contracting process; iii. the introduction of an incentive scheme for the Division's Directors whereby they have invested their own money in the business; and iv. a restriction on contract selection to those projects where a track record of technical and commercial performance is evident. The results of the Building Division were depressed by losses on three contracts amounting in the aggregate to #2.2million. These contracts, which were awarded prior to the appointment of the current Divisional Board, are largely complete and fully provided for; therefore these losses will not recur in the second half. The Civil Engineering Division benefited from a strong performance from Birse Rail which returned an operating profit for the period of #771,000 on turnover of #16million. With increased levels of business available in this sector and more opportunities expected in the Division's established operating areas the foundations are in place for an improved performance in the second half of the year. The reorganisation of Birse Construction into three distinct operating divisions is starting to bear fruit. A more focused customer approach is evident in the present order book which at the end of December 2000 stood at # 386million (1999: #293million). The first phase of our director development programme conducted by a leading UK Business School will shortly be finished. The emphasis now is to concentrate exclusively on what the company is good at, that is its core competencies so as to allow a step change in production and cost efficiencies to take effect. Plant Hire Six months ended 31 October Year ended 2000 1999 30 April 2000 Turnover Operating Turnover Operating Turnover Operating profit profit profit/(loss) #'000 #'000 #'000 #'000 #'000 #'000 Crawler Cranes 1,911 517 1,793 455 3,399 699 Piling Equipment 556 200 508 120 1,061 299 Divisions Sold - - 2,104 52 2,869 (65) 2,467 717 4,405 627 7,329 933 Management's concentration upon its core competencies continues to be the main driver behind the improvement in the results achieved. The aggregate return on capital now exceeds 20%. The six new crawler cranes purchased in the period (cost #1.2million) went on hire in August/September and further capital expenditure for new piling equipment has been approved. Market demand remains strong in each of BPH's operating sectors, therefore, prospects for further improvements remain encouraging. Commercial Property Six months ended 31 October Year ended 2000 1999 30 April 2000 Turnover Operating Turnover Operating Turnover Operating profit profit profit #'000 #'000 #'000 #'000 #'000 #'000 1,696 793 1,177 401 1,177 1,023 During the period sales at Warrington of 2.9 acres were achieved for a consideration of #1.14million which when combined with the #556,000 earned by way of contingent consideration in respect of earlier completions gives rise to the turnover reported, the entire proceeds of which were not received until after the period end. Current interest in the site from a number of parties should ensure a steady stream of future completions. Dividend An interim dividend of 0.375p per ordinary share (1999: 0.375p) will be paid on 3 May 2001 to shareholders on the register on 6 April 2001. Outlook Key to the prospects of Birse Construction is the effectiveness of the actions taken to turnaround its Process Engineering Division. Early indications are positive. The completion of the loss making contracts referred to in relation to the Building Division, the increased volume of rail and other favoured opportunities in the Civil Engineering Division combined with the overall strength of the company's order book should allow those businesses to improve results in the second half. BPH will continue to concentrate upon its core crawler crane and piling activities which should benefit further from the capital expenditure made earlier in the year. The receipt of the proceeds from the sales of land at Warrington (#1.696million) after the period end will make a positive contribution to our objective of eliminating the net interest charge and further improve liquidity. Prospects for further land sales in the second half are very encouraging. Consolidated Results for the 6 months ended 31 October 2000 Note 6 Months 6 Months Year Ended Ended Ended 31.10.00 31.10.99 30.4.00 #'000 #'000 #'000 Turnover 2 194,242 181,105 370,336 Operating (loss)/profit before exceptional operating items 2 (6,522) 2,572 4,634 Exceptional operating items 3 (23,994) - - Operating (loss)/profit (30,516) 2,572 4,634 Profit on disposal of businesses 4 - 300 77 (Loss)/ profit before interest (30,516) 2,872 4,711 Net interest (133) (449) (523) (Loss)/ profit on ordinary activities before taxation 2 (30,649) 2,423 4,188 Taxation 5 1,006 (600) (994) (Loss)/ profit for the financial period (29,643) 1,823 3,194 Dividends on equity shares 6 (721) (721) (1,924) (Withdrawn from)/ transferred to reserves (30,364) 1,102 1,270 (Loss)/earnings per ordinary share - basic 7 (15.4)p 0.9p 1.7p - diluted 7 (15.6)p 0.9p 1.7p - before exceptional items - basic 7 (2.9)p 0.8p 1.6p - diluted 7 (3.0)p 0.8p 1.6p The above figures relate exclusively to continuing operations. Consolidated Balance Sheet as at 31 October 2000 Note As at As at As at 31.10.00 31.10.99 30.4.00 #'000 #'000 #'000 Fixed Assets Tangible Assets 12,127 14,249 11,598 Current Assets Stocks 3,825 3,826 4,406 Debtors 8 128,131 144,413 147,517 Investments 3,663 - 2,586 Cash at bank and in hand 5,532 6,774 6,201 141,151 155,013 160,710 Creditors: Amounts falling due within one year Bank loans and overdrafts (700) (534) - Other creditors (144,596)(129,866) (134,514) (145,296)(130,400) (134,514) Net Current (Liabilities)/Assets (4,145) 24,613 26,196 Total Assets Less Current Liabilities 7,982 38,862 37,794 Creditors: Amounts falling due after more than one year Bank loans and overdrafts - (534) - Other creditors (4,544) (4,344) (3,727) (4,544) (4,878) (3,727) Provisions for Liabilities and Charges - (350) (265) Net Assets 3,438 33,634 33,802 Capital and Reserves Called up share capital 19,239 19,239 19,239 Share premium account 93 93 93 Special reserve 308 308 308 Revaluation reserve 607 607 607 Profit and loss account (16,809) 13,387 13,555 Shareholders' Funds - equity interest 3,438 33,634 33,802 Consolidated Cash Flow Statement for the 6 months ended 31 October 2000 6 months 6 months Year Ended Ended Ended 31.10.00 31.10.99 30.4.00 #'000 #'000 #'000 Net cash inflow from operating activities 2,289 5,589 8,963 Returns on investments and servicing of finance (120) (522) (615) Taxation (327) - (331) Capital expenditure and financial investment (2,389) 4,368 3,719 Acquisitions and disposals - 2,119 3,920 Dividends paid to equity shareholders (722) (577) (1,539) Cash (outflow)/inflow before management of liquid resources and financing (1,269) 10,977 14,117 Management of liquid resources 3,536 (3,564) (4,883) Financing 677 (8,059) (9,186) Increase/ (decrease) in cash in the period 2,944 (646) 48 Consolidated Cash Flow Statement for the 6 months ended 31 October 2000 6 months 6 months Year Ended Ended Ended 31.10.00 31.10.99 30.4.00 #'000 #'000 #'000 Reconciliation of operating (loss)/profit to net cash inflow from operating activities Operating (loss)/profit (30,516) 2,572 4,634 Depreciation net of profit on disposal of fixed assets 860 1,224 2,301 Loss on disposal of fixed asset investments - - 83 Decrease in stocks 581 589 9 Decrease/(increase) in debtors 19,386 (19,376) (22,330) Increase in creditors 11,978 20,580 24,266 Net cash inflow from operating activities 2,289 5,589 8,963 Analysis of net funds Cash at bank on demand 4,012 374 1,068 Cash at bank on short term deposit 1,520 6,400 5,133 Cash at bank on deposit with terms in excess of seven days 2,663 - 2,586 Debt due within one year (700) (534) - Debt due after one year - (534) - Finance leases (115) (163) (138) 7,380 5,543 8,649 Reconciliation of cash flows to movements in net funds/(debt) Increase/(decrease) in cash in the period 2,944 (646) 48 Cash outflows from reduction in debt and lease financing 523 8,059 9,186 Cash (inflow)/outflow from management of liquid resources (3,536) 3,564 4,883 New finance leases and hire purchase contracts - - (34) New loans (1,200) - - Movement in net funds/(debt) in the period (1,269) 10,977 14,083 Net funds/(debt) at 1 May 2000 8,649 (5,434) (5,434) Net funds at 31 October 2000 7,380 5,543 8,649 Notes to the Interim Accounts 1. Preparation of Interim Accounts The interim accounts, which relate exclusively to continuing operations, have been prepared on the basis of the accounting policies set out in the Group's statutory accounts for the year ended 30 April 2000. The Group's auditors, Deloitte & Touche, have carried out a review of the interim accounts, which were approved by the Board of Directors on 26 January 2001, and their report is reproduced on page 14. The financial information presented is unaudited and does not amount to full statutory accounts within the meaning of the Companies Act 1985. Full accounts for the year ended 30 April 2000, upon which Deloitte & Touche gave an unqualified audit report, have been delivered to the Registrar of Companies. 2. Segment Information 6 Months 6 Months Year Ended Ended Ended 31.10.00 31.10.99 30.4.00 #'000 #'000 #'000 Turnover Contracting 190,383 176,287 363,176 Plant Hire 2,467 4,405 7,329 Commercial Property 1,696 1,177 1,177 Intra-group (304) (764) (1,346) 194,242 181,105 370,336 Results Contracting (7,776) 1,713 3,138 Plant Hire 717 627 933 Commercial Property 793 401 1,023 Group Centre (256) (169) (460) (6,522) 2,572 4,634 Exceptional operating items - Contracting (23,994) - - Operating (loss)/profit (30,516) 2,572 4,634 Profit on disposal of businesses - 300 77 (Loss)/profit before interest (30,516) 2,872 4,711 Net interest (133) (449) (523) (Loss)/profit on ordinary activities before taxation (30,649) 2,423 4,188 3. Exceptional Operating Items Exceptional operating items comprise non-recoverable costs arising in relation to the following projects in respect of which Birse Construction Limited issued proceedings for the recovery of amounts due under the respective contracts:- 6 Months 6 Months Year Ended Ended Ended 31.10.00 31.10.99 30.4.00 #'000 #'000 #'000 Lower Rhymney Valley Relief Road 7,994 - - Priory Meadow Shopping Centre, Hastings 16,000 - - 23,994 - - In the case of the Rhymney contract the losses are in consequence of the level of award made by the arbitrator and in the case of the Hastings contract the losses arise as a direct result of the settlement made by the parties. No tax credit or deferred tax asset has been recognised in respect of these losses. 4. Disposal of Businesses On 31 October 1999 BPH Equipment Limited completed the sale of its offshore equipment hire and diesel engine refurbishment division based at Aberdeen. On 22 February 2000 it sold that part of its non-operated activities represented by its fleet of wheel cleaning units. On 28 April 2000 it sold the remainder of its non-operated division along with its site services operations. In aggregate the gross consideration of these transactions was #4,390,000 and the amount of tax attributable to the profit on disposal of #77,000 was #7,000. 5. Taxation The tax credit for the period has been calculated by reference to the projected rate for the full year and incorporates the maximum potential recovery from the carry back of tax losses. 6. Dividends on Equity shares An interim dividend of 0.375p per ordinary share (1999 - 0.375p) will be paid on 3 May 2001 to shareholders on the register on 6 April 2001. 7. (Loss)/Earnings per Ordinary Share 6 Months 6 Months Year Ended Ended Ended 31.10.00 31.10.99 30.4.00 #'000 #'000 #'000 The calculation of (loss)/earnings per ordinary share is based on: (Loss)/earnings for basic and diluted (loss)/earnings per ordinary share (29,643) 1,823 3,194 calculation Exceptional items 23,994 (300) (77) Tax on exceptional items - 90 7 (Loss)/earnings before exceptional items per ordinary share calculation (5,649) 1,613 3,124 Thousands Thousands Thousands Weighted average number of shares used in basic (loss)/earnings per ordinary share calculations 192,390 192,390 192,390 Adjustment to reflect dilutive shares under options (2,840) - - Weighted average number of shares used in diluted (loss)/earnings per ordinary share calculation 189,550 192,390 192,390 8. Debtors; Uncertainty Relating to Amounts on Contracts Included in debtors is an aggregate value of #15,643,000 attributable to contractual amounts relating to seven contracts which are the subject of arbitration or equivalent proceedings. In consequence of the losses suffered on the Hastings and Rhymney contracts (see Note 3) the Directors have re-considered the recoverability of the amounts attributable to these and other old contracts. Whilst the Directors believe that they are justified in concluding that these amounts will be realised, the Directors acknowledge that there remains significant uncertainty. However, it is not possible to quantify the effects. Independent review report to Birse Group plc Introduction We have been instructed by the company to review the financial information set out on pages 7-13 and we have read the other information contained in the interim report and considered whether it contains any apparent misstatements or material inconsistencies with the financial information. Directors' responsibilities The interim report, including the financial information contained therein, is the responsibility of, and has been approved by the Directors. The Listing Rules of the UK Listing Authority require that the accounting policies and presentation applied to the interim figures should be consistent with those applied in preparing the preceding annual accounts except where any changes, and the reasons for them, are disclosed. Review work performed We conducted our review in accordance with guidance contained in Bulletin 1999 /4 issued by the Auditing Practices Board. A review consists principally of making enquiries of group management and applying analytical procedures to the financial information and underlying financial data and based thereon, assessing whether the accounting policies and presentation have been consistently applied unless otherwise disclosed. A review excludes audit procedures such as tests of controls and verification of assets, liabilities and transactions. It is substantially less in scope than an audit performed in accordance with Auditing Standards and therefore provides a lower level of assurance than an audit. Accordingly, we do not express an audit opinion on the financial information. Uncertainty relating to amounts on contracts In arriving at our review conclusion we have considered the accuracy of disclosure made in Note 8 to the financial information concerning uncertainty relating to amounts on contracts. In view of the significance of this uncertainty, we consider it should be brought to your attention. Review conclusion On the basis of our review we are not aware of any material modifications that should be made to the financial information as presented for the six months ended 31 October 2000. Deloitte & Touche Chartered Accountants 10-12 East Parade Leeds LS1 2AJ 26 January 2001
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