Interim Results
July 28 2003 - 3:00AM
UK Regulatory
RNS Number:9980N
Aggregate Industries PLC
28 July 2003
Embargoed until 7:00am, Monday, 28 July 2003
AGGREGATE INDUSTRIES PLC
Interim results for the six months ended 30 June 2003
Aggregate Industries plc, the international aggregates group, announces its
interim results for the six months ended 30 June 2003.
Half year ended
30.6.03 30.6.02 Change
#m #m %
* Turnover 670.0 620.9 8
Continuing 669.0
Acquisitions 1.0
* EBITDA 89.8 93.7 (4)
* PBIT 54.8 59.5 (8)
Continuing 54.7
Acquisitions 0.1
* PBT 40.2 41.4 (3)
* EPS 1.9p 1.9p -
* DPS 1.13p 1.03p 10
* Gearing 64% 63%
Peter Tom, Aggregate Industries' Group Chief Executive, comments:-
"The UK market remains firm, with a healthy backlog of publicly-funded
infrastructure and public works projects. We expect the UK business to continue
to improve profits this year.
"In the US, with the major trading season still largely ahead of us, we remain
confident that our full year performance in dollar terms will be broadly in line
with the prior year.
"We continue to expect that the Group will make further progress in 2003."
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 28/7/03)
Aggregate Industries plc Tel: 01530 816600 (thereafter)
Meg Baker/Scott Fulton
Financial Dynamics Tel: 020 7831 3113
GROUP CHIEF EXECUTIVE'S REVIEW
Strong trading and excellent results in the UK, coupled with good management of
cashflow on a like-for-like basis and reduced borrowing costs, were offset by
the slow, weather-delayed start to our US operating season and the effect of US
dollar depreciation on translated US profit. Accordingly, as we predicted
earlier in the year, our overall results for the first half showed a modest
year-on-year reduction.
Results
Group turnover in the six months to 30 June 2003 of #670m (2002 #620.9m) was 8%
ahead of the comparable period and generated profit before taxation of #40.2m
(2002 #41.4m).
Earnings before interest, tax, depreciation and amortisation were #89.8m (2002
#93.7m) and after deducting goodwill amortisation of #3.5m (2002 #3.3m) and
depreciation, the Group reports an operating profit of #54.8m (2002 #59.5m). The
Group operating margin on sales is 8.2%.
UK operating profit increased by 14% to #48.3m (2002 #42.2m), a significant
improvement on the prior year. Turnover was up 25% to #427.3m (2002 #343.1m),
including a full half-year of aggregates levy and six months' turnover from the
asphalt contracting interests of Associated Asphalt, acquired in July 2002.
These activities yield a lower margin on sales and, together with the impact of
the aggregates levy, account for the slightly lower overall UK margin.
Results from the US reflect the seasonality of this business, with the major
trading activity and profit generation occurring during the second half of the
year. In the first six months of 2003 this trend was exacerbated by the adverse
weather conditions which, unusually, impacted all the regions in which we
operate. Reported results were further reduced by the 10% decline in the value
of the US dollar. As a consequence, we expect first-half US profit to be a
smaller percentage of the year's result, compared with 21% in 2002.
The interest charge fell 19% to #14.6m (2002 #18.1m) and the tax rate was 33%
(2002 33%), which is the rate we anticipate for the year as a whole. Basic
earnings per ordinary share were 1.9 pence (2002 1.9 pence).
The net cash outflow from operations was #4.9m (2002 #21.9m inflow). Capital
expenditure increased to #43m (2002 #38m) at the half year and we completed two
bolt-on acquisitions at a cost of #3.2m during the period. Net assets at 30
June 2003 were #888m (2002 #863m) and net debt stood at #566m (2002 #539m),
resulting in gearing of 64% (2002 63%).
Dividend
The Board has proposed that the interim dividend is raised by 10% to 1.13 pence
per share. This increase reflects the Board's confidence that Aggregate
Industries will make further progress in 2003. In each of the five preceding
financial years the dividend was increased by 5%.
REVIEW OF OPERATIONS
UK AND CHANNEL ISLANDS
Aggregate, asphalt, ready-mixed concrete and contracting
Turnover #325m (2002 #254m)
The combination of a good level of publicly-funded projects and increased
highway maintenance spending, together with a stable residential market,
contributed to a markedly improved performance in the first six months. The
increase in profit was further supported by a sharp focus on cost-control and
improved operating practices designed to reduce waste.
Aggregate and asphalt
The UK aggregate and asphalt operations continued to experience firm demand
throughout the first six months, supported by a good level of demand from
publicly-funded projects.
Benign weather, aided by the Company's strong presence in the Midlands, the
North and Scotland, where activity is particularly buoyant, also benefited
results. Aggregate price increases were implemented in March and have been
maintained.
Asphalt volume was up 7% but, as expected, aggregate volume was unchanged
reflecting an increase in secondary and recycled materials offsetting a decline
in primary aggregate sales.
Ready-mixed concrete
Total ready-mixed concrete volume increased by 21% in the first six months,
reflecting the benefit of several acquisitions, refurbishments and improvements
made to our facilities during late 2002. Acquisitions completed during 2002
were all integrated and further progress was made with the development of the
Elite and Alba mini-mix businesses. London Concrete had a particularly
successful first six months.
Contracting
The successful integration of the Associated Asphalt activities enabled the
contracting business to expand its position as a leading UK road-surfacing
contractor. Resurfacing work on the M11 was successfully completed during the
six months and contracts recently awarded include the reconstruction and
resurfacing of the southbound carriageway of the M1 between junctions 13 and 15;
and, jointly with Fitzpatrick Contractors, the reconstruction of the M25 between
junctions 26 and 27.
Building Materials
Turnover #102m (2002 #89m)
Bradstone saw strong demand in the first quarter, which also benefited from
particularly favourable weather at Easter. Sales of premium products continued
to outperform and this further improved the margin on sales achieved. Although
second-quarter volume growth slowed, volume for the six months as a whole was 5%
ahead.
Charcon volumes rose 10% during the six months. A combination of increased
spending on infrastructure projects and participation in a number of Transport
for London schemes contributed to this improvement. Results also benefited from
a full six-month contribution from Burton Concrete Block Paving Plant, which was
commissioned during the first half of 2002.
Masterblock sales volume was 19% ahead of the prior year. Several measures were
implemented to enhance customer support which, coupled with improved
manufacturing performance and the benefit of a price increase, contributed to
the improved profit.
UK acquisitions
The purchase of the share capital of Three Counties Concrete Ltd, based at
Upton-upon-Severn in Worcestershire, was completed at the beginning of the year,
enhancing Bardon Concrete's ability to supply ready-mixed concrete to the
southern West Midlands market.
In June the sand and gravel quarry, aggregate merchanting, ready-mixed concrete
and mini-mix operations of Brown & Potter Limited were purchased. Based at
Ripon in North Yorkshire, this bolt-on acquisition will provide an excellent
footprint in this region.
UNITED STATES
The first six months of 2003 were characterised by particularly adverse weather
conditions which, unusually, affected all regions. As reported in March,
early-season activity levels were sharply curtailed by the harsh winter and this
was followed on the East Coast by a very wet spring. First-half profits reduced
accordingly, but backlogs are strong, cost controls are in place and, given that
the majority of US activity occurs in the second half, we anticipate that the
dollar shortfall will be recovered by the year-end.
East Coast
Turnover $199m (2002 $191m)
In contrast to last year's mild winter, operations on the East Coast were held
back by adverse weather conditions throughout the six months. However, backlogs
are strong, price increases have been achieved and costs are being tightly
controlled. First-half results in Massachusetts also include the winter costs
of the Wakefield operations purchased in September 2002. This acquisition is
now fully integrated into the business and will contribute significantly in the
second half. We also anticipate that the second half will benefit from
increased asphalt demand on the delayed Route 3 highway reconstruction project.
Backlogs in the Mid Atlantic (Maryland/North Virginia) region look particularly
strong, underpinned by large infrastructure projects including phase two of the
Woodrow Wilson Bridge and a number of commercial and residential projects in
Washington DC.
The Mid Atlantic Region continues to expand its Asphalt Division, with the
acquisition of Prince George's Contractors earlier this month. This investment
is in line with Aggregate Industries' strategy of bolt-on acquisitions and will
improve our service to customers in central and southern Maryland. Prince
George's Contractors operates three asphalt plants at Clinton, Waldorf and
Hollywood in Prince George's and St Mary's counties in Maryland, together with
road-surfacing capability.
Mid West
Turnover $192m (2002 $210m)
Results in Colorado were impacted by a subdued market and weather-related
delays. Despite this, volume was firm due to good demand from the major I-25
T-REX project. Costs were further reduced, limiting margin reduction, and a
more stable pattern is emerging in the market.
The Michigan operations experienced similar weather patterns to those on the
East Coast, but despite this, ready-mixed concrete volume proved resilient.
The North Central (Minnesota/North Dakota) operations made a good start to the
year, continuing the progress made in 2002. Volume and backlog remain strong
and a number of large infrastructure projects such as the I-494 interstate
bridge crossing the Mississippi river are under way.
OUTLOOK
UK markets remain firm, with the strong flow of publicly-funded infrastructure
and public works projects expected to continue. We welcome the announcement on
9 July by the Transport Secretary of a #7bn programme of road schemes on
England's major routes to tackle congestion which continues to restrict economic
growth in the UK. The residential market remains stable and is expected to
continue at current levels, benefiting from low interest rates. We expect the
UK business to continue to improve profits this year.
In the US we are encouraged that the housing market remains buoyant and that
economic indicators generally are stable or trending upwards. Weather patterns
have returned to normal, operating conditions have been restored and activity in
each region has returned to anticipated levels. With the major trading season
still largely ahead of us, we remain confident that our full year performance in
dollar terms will be broadly in line with the prior year.
Looking further ahead, we note that President Bush's proposed replacement for
the $218bn TEA-21, the Safe Accountable Flexible and Efficient Transportation
Equity Act for the 21st Century (SAFETEA), is under discussion in Congress and
the House of Representatives has already recommended a budget of $375bn, rather
than President Bush's budget proposal of $247bn. While we anticipate that
completion of this legislation will be delayed, it does imply that for the next
six years a stable funding programme will replace TEA-21.
The Group continues to focus on minimising costs and strengthening cashflow
while maintaining its policy of adding bolt-on acquisitions where they
contribute further to Group earnings. We continue to expect that the Group will
make further progress in 2003.
Peter Tom
Group Chief Executive 28 July 2003
Consolidated profit and loss account
Half year Half year Year ended
ended ended 31 December
30 June 2003 30 June 2002 2002
Note #m #m #m
Turnover 1
Continuing operations 669.0 620.9 1,378.2
Acquisitions 1.0 - -
670.0 620.9 1,378.2
Operating profit 2
Continuing operations 54.7 59.5 168.2
Acquisitions 0.1 - -
54.8 59.5 168.2
Net interest payable (14.6) (18.1) (33.7)
Profit on ordinary activities before taxation 40.2 41.4 134.5
Tax on profit on ordinary activities (13.3) (13.7) (43.0)
Profit on ordinary activities after taxation 26.9 27.7 91.5
Equity minority interests (1.5) (1.3) (2.3)
Profit attributable to shareholders 25.4 26.4 89.2
Dividends (16.3) (15.1) (36.7)
Retained profit for the period 9.1 11.3 52.5
Earnings per ordinary share 4
Basic 1.9p 1.9p 6.7p
Diluted 1.8p 1.9p 6.7p
Dividend per ordinary share 5 1.13p 1.03p 2.55p
Consolidated statement of total recognised gains and losses
Half year Half year Year ended
ended ended 31 December
30 June 2003 30 June 2002 2002
#m #m #m
Profit attributable to shareholders 25.4 26.4 89.2
Currency translation on foreign currency net investments (8.6) (16.2) (36.2)
Total recognised gains and losses for the period 16.8 10.2 53.0
Consolidated balance sheet
30 June 30 June 31 December
2003 2002 2002
#m #m #m
Fixed assets 1,403.3 1,375.0 1,412.4
Net current assets
Stocks 112.3 110.1 109.2
Debtors 381.2 317.7 290.0
Creditors due within one year (327.6) (300.4) (329.2)
165.9 127.4 70.0
Net borrowings (566.5) (539.2) (481.9)
Creditors
Provisions and amounts due after one year (114.3) (100.6) (113.4)
Net assets 888.4 862.6 887.1
Capital and reserves
Share capital and share premium 463.8 458.8 463.6
Reserves 417.1 396.9 416.5
Minority interests 7.5 6.9 7.0
888.4 862.6 887.1
Consolidated statement of cash flows
Half year ended Half year ended Year ended
30 June 2003 30 June 2002 31 December
2002
#m #m #m
Operating profit 54.8 59.5 168.2
Depreciation and amortisation 35.0 34.2 72.6
Working capital movements (93.1) (69.9) (12.1)
Other movements (1.6) (1.9) (2.5)
Net cash inflow/(outflow) from operating activities (4.9) 21.9 226.2
Dividends from joint ventures 0.6 - -
Returns on investments and servicing of finance (20.7) (24.3) (39.9)
Taxation (6.2) (11.8) (30.5)
Capital expenditure and financial investment (39.7) (34.6) (78.6)
Acquisitions (3.2) (24.9) (88.8)
Equity dividends paid (13.0) (12.2) (30.6)
Net cash outflow before financing (87.1) (85.9) (42.2)
Issue of ordinary shares 0.3 3.3 9.3
Loans & finance leases acquired with subsidiary undertakings (0.4) (3.1) (4.4)
New finance leases (0.4) (0.3) (0.7)
Exchange movement 3.0 7.7 17.0
Movement in net borrowings (84.6) (78.3) (21.0)
Net borrowings at beginning of period (481.9) (460.9) (460.9)
Net borrowings at end of period (566.5) (539.2) (481.9)
Notes to the Interim Report
Half year Half year Year ended
ended ended 31 December
30 June 2003 30 June 2002 2002
1. Turnover #m #m #m
Continuing operations:
United Kingdom 426.3 343.1 717.1
United States 242.7 277.8 661.1
669.0 620.9 1,378.2
Acquisitions:
United Kingdom 1.0 - -
United States - - -
Total 670.0 620.9 1,378.2
2. Operating profit
Continuing operations:
United Kingdom 48.2 42.2 86.3
United States 6.5 17.3 81.9
54.7 59.5 168.2
Acquisitions:
United Kingdom 0.1 - -
United States - - -
Total 54.8 59.5 168.2
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 2003 have been calculated
on earnings of #23.6m (2002 #24.4m) and on a weighted average of 1,273.6m (2002
1,259.9m) ordinary shares in issue during the period. Diluted earnings per
share has been calculated using a weighted average number of ordinary shares of
1,280.1m (2002 1,274.6m) which takes into account the number of dilutive shares
which would be issued on the assumed exercise of all options.
5. Dividend per ordinary share
The interim dividend of 1.13p per ordinary share will be paid on 6 January 2004
to ordinary shareholders on the register at the close of business on 12 December
2003. The dividend reinvestment plan will continue to be available this year.
6. Deferred tax
The Company's policy under FRS19 is to discount the deferred tax provision. The
half year results assume no significant change in long term interest rates for
the year as a whole.
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 2002. The results for the half years ended 30 June 2002 and
2003 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 2002 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.
This information is provided by RNS
The company news service from the London Stock Exchange
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