TIDMMGNS
RNS Number : 8961K
Morgan Sindall Group PLC
05 August 2013
5 August 2013
MORGAN SINDALL GROUP PLC
('Morgan Sindall' or 'Group')
The Construction & Regeneration Group
RESULTS FOR THE HALF YEAR (HY) ENDED 30 JUNE 2013
Results at a glance:
HY 2013 HY 2012 % Change
Revenue GBP1,019m GBP1,000m +2%
Operating profit - adjusted(1) GBP16.2m GBP20.8m -22%
Profit before tax - adjusted(1) GBP15.4m GBP20.3m -24%
Earnings per share - adjusted(1) 31.5p 38.4p -18%
Period end net cash/(net debt) GBP40m (GBP12m) n/a
Average (net debt)/net cash (GBP32m) (GBP36m) +11%
Interim dividend per share 12.0p 12.0p -
Operating profit - reported GBP1.8m GBP19.3m -91%
Profit before tax - reported GBP1.0m GBP18.8m -95%
Basic earnings per share - reported 5.4p 35.8p -85%
---------------------------------------- ----------- ----------- ----------
(1) 'Adjusted' is defined as before intangible amortisation (GBP1.4m)
and exceptional operating items (GBP13.0m) (HY 2012: intangible
amortisation GBP1.5m and exceptional operating items GBPnil).
HY 2013 highlights:
-- Revenue of GBP1,019m, up 2% on prior year (HY 2012:
GBP1,000m). Order book up 1% from FY 2012.
-- Adjusted(1) operating profit of GBP16.2m (HY 2012: GBP20.8m),
with adjusted operating margin(1) of 1.6% (HY 2012: 2.1%).
-- Adjusted(1) EPS down 18% to 31.5p (HY 2012: 38.4p).
-- Good progress on cash management, with net cash of GBP40m and
improved average daily net debt of GBP32m (HY 2012: net debt of
GBP12m and average daily net debt of GBP36m).
-- Exceptional charge of GBP13.0m taken as a provision against
amounts recoverable on a small number of older construction
contracts. There are no associated cash outflows with the
provision.
-- Interim dividend of 12.0p per share, level with prior year (HY 2012: 12.0p per share).
Commenting on today's results, Chief Executive, John Morgan
said:
"The first half has seen difficult market conditions across all
of our markets, with competitive pressures impacting on margins and
profitability. The improved positive cash position, however,
demonstrates the underlying strength of the business and the
benefit of a sustained focus on cash management, which will
remain.
Looking ahead to the second half, overall market conditions are
not expected to significantly improve. The business will continue
to focus on cash management and will look to improve the order book
selectively, such that it is well-positioned to take advantage of
the growth and investment opportunities in its markets as they
arise."
Basis of Preparation
The term 'adjusted' excludes the impact of intangible
amortisation and exceptional operating items. Exceptional operating
items are items of financial performance which the Group believes
should be separately identified on the face of the income statement
to assist in the understanding of the financial performance of the
Group.
In HY 2013, intangible amortisation was GBP1.4m (HY 2012:
GBP1.5m) and exceptional operating items were GBP13.0m (HY 2012:
GBPnil).
Group Operating Review
Revenue for the period was 2% up on the prior year at GBP1,019m.
The Group order book as at 30 June 2013 was GBP3.1bn, an increase
of 1% since the year end. The regeneration pipeline was GBP2.2bn,
up on the year end by 5%.
The adjusted(1) gross margin reduced 120bps to 8.1% (HY 2012:
9.3%), significantly impacted by increased competitive market
pressures across all the operating divisions.
Adjusted(1) operating profit of GBP16.2m was 22% down on the
prior year, with adjusted(1) operating margin of 1.6% (HY 2012:
2.1%). This included profit from the sale of investments in the
Access for Wigan scheme (GBP1.5m) and the Miles Platting PFI scheme
(GBP4.4m).
The net finance expense increased to GBP0.8m (HY 2012: GBP0.5m)
driven by a reduction in the interest received from joint ventures.
The effective tax rate reduced to 14% (HY 2012: 20%), as the profit
on the sale of investments is treated as non-taxable.
As a result, adjusted(1) earnings per share of 31.5p was 18%
down on the prior year; fully diluted adjusted(1) earnings per
share of 31.3p was 16% down on the prior year.
Exceptional operating items of GBP13.0m have been charged in the
period as a provision against amounts recoverable in relation to a
small number of construction contracts held on the balance sheet
under Amounts Due From Construction Contract Customers and Trade
Receivables.
The Board, having received legal advice and opinion, believes
that these amounts are recoverable. However, based upon an
assessment of current progress made towards recovering these
amounts and the expected time, cost and associated risk of pursuing
legal remedies to achieve recovery, the Board believes it is now
appropriate to provide against these balances to an amount it
considers is a prudent estimate of overall likely resolution.
This charge is non-cash in nature, such that there are no
associated cash outflows.
The result is that after charging exceptional operating items,
the reported profit before tax for the period was GBP1.0m (HY 2012:
GBP18.8m). Basic earnings per share was 5.4p (HY 2012: 35.8p).
The key focus on cash flow over the period has seen positive
benefits, with the average daily net debt for the period of GBP32m
being an improvement on the same period last year (GBP36m) and on
the second half of last year (GBP45m). The Group had net cash of
GBP40m as at 30 June 2013, again a significant improvement on the
prior year when the Group was in a net debt position of GBP12m.
During the period, the Group has increased its committed banking
facilities to provide additional headroom as well as providing
available facilities to take advantage of strategic investments as
they arise. Total committed facilities are now GBP125m, of which
GBP110m expire in September 2015 and GBP15m in May 2016.
The interim dividend of 12.0p per share has been held level with
the prior year (HY 2012: 12.0p).
Business Review
The following Business Review is given on an adjusted basis,
unless otherwise stated.
Order book
The total Group committed order book at 30 June 2013 was
GBP3.1bn, an increase of 1% since the year end. The divisional
split is shown below.
Additionally, the regeneration pipeline for the Group was
GBP2.2bn (being the Group's share of the gross development value of
committed schemes), an increase from the year end of 5%.
HY 2013 FY 2012 % change
GBPm GBPm
------------------------------- ------- ------- --------
Construction & Infrastructure 1,558 1,520 +3%
------------------------------- ------- ------- --------
Fit Out 136 170 -20%
------------------------------- ------- ------- --------
Affordable Housing 1,294 1,302 -1%
------------------------------- ------- ------- --------
Urban Regeneration 91 65 +40%
------------------------------- ------- ------- --------
Total Group order book 3,079 3,057 +1%
------------------------------- ------- ------- --------
Regeneration pipeline 2,219 2,119 +5%
------------------------------- ------- ------- --------
Construction & Infrastructure
HY 2013 HY 2012 % change
GBPm GBPm
-------------------------------- ------- ------- --------
Revenue 593 583 +2%
-------------------------------- ------- ------- --------
Operating profit - adjusted(1) 6.4 8.5 -25%
-------------------------------- ------- ------- --------
Operating margin - adjusted(1) 1.1% 1.5% -40bps
-------------------------------- ------- ------- --------
As expected, Construction & Infrastructure has experienced
challenging market conditions throughout the period, with
significant competitive pressure impacting on gross margin.
Although divisional revenue of GBP593m was 2% up on the prior year
(HY 2012: GBP583m), operating margin reduced to 1.1%. The ongoing
management of overheads and the benefit of the cost reductions
announced in November 2012 could only mitigate in part the full
impact of market pressures at the gross margin level.
The order book has increased 3% since the year end, which
provides confidence in future volumes and activity. Of the total,
the second half of 2013 is fully committed, with 43% of 2014
already committed, this being ahead of the same time last year (HY
2012: 41%). The division's commitment to Perfect Delivery and
operational excellence, as well as robust bid selection, should
enable it to generate appropriate returns moving forward.
Across the division, Transport (Rail, Aviation, Roads), at 26%
of divisional revenue, is a key strategic growth area, with the
construction of the Network Rail operating centres in Manchester
and Rugby in Rail utilising the division's capabilities in this
market. Similarly for Roads, the division maintains a key strategic
relationship with the Highways Agency, implementing a number of
managed motorway and other schemes, whilst the division's existing
specialist expertise in Aviation was reinforced in the period by
the commencement of the high profile Heathrow Airport runway
refurbishment project. Education remains one of the largest served
markets (26% of revenue), with other significant markets being
Water (14% of revenue) and Commercial (10% of revenue).
By type of activity, the Construction business, which accounts
for 56% of the total revenue of the division (HY 2012: 58%), has
seen significant regional variation in activity levels, with London
and the South benefiting whilst the North has been impacted by
lower volumes and increased competition. In Infrastructure (44% of
divisional revenue) (HY 2012: 42%), growth has been driven by
tunnelling activities, primarily as a result of a full period of
activity on Crossrail as well as on the Lee Tunnel project for
Thames Water. Work has commenced at the Sellafield site following
the award made in December 2012 to Morgan Sindall, in joint
venture, to provide a range of infrastructure asset services to the
Sellafield site worth up to a potential GBP1.1bn. The joint venture
took over responsibility for a number of projects on site in May
2013 and master planning and studies work has commenced on a range
of these.
Exceptional operating items of GBP13.0m have been charged in the
period as a provision against amounts recoverable in relation to a
small number of construction contracts held on the balance sheet
under Amounts Due From Construction Contract Customers and Trade
Receivables.
Looking ahead, it is not expected that general market conditions
will significantly improve throughout the second half of 2013 and
focus will remain on operational delivery and informed bid
selection.
Fit Out
HY 2013 HY 2012 % change
GBPm GBPm
-------------------------------- ------- ------- --------
Revenue 203 191 +6%
-------------------------------- ------- ------- --------
Operating profit - adjusted(1) 5.0 5.5 -9%
-------------------------------- ------- ------- --------
Operating margin - adjusted(1) 2.5% 2.9% -40bps
-------------------------------- ------- ------- --------
There has been no significant change in the Fit Out market
conditions throughout the period, with strong market competition at
the tender stage impacting on divisional margin. Revenue was up 6%
on the prior year, however operating margin of 2.5%, was down 40bps
(HY 2012: 2.9%). The order book of GBP136m is down 20% from the
year end although this is considered to be just short-term timing
issues at the period end rather than any longer-term trend.
Activity has been weighted towards refurbishment in occupation
work, compared to new office fit outs. The London office market,
which accounts for broadly two thirds of divisional revenue, has
seen the technology and media sectors being the most active in
taking up office space.
Besides the traditional office corporate business, the division
has also seen solid growth in the university sector, and whilst
public sector work has generally been relatively slow, the division
has increased its presence with a number of notable local authority
project wins.
During the period, two workplace consultancy projects have
converted into higher margin full service design and build projects
and this innovative approach to value generation is a key
differentiator and strategic focus for the division. Further, the
division has gained its first fit out project as a result of a
referral through its international alliances and this new business
channel using a network of overseas alliances is seen as an
important opportunity for future growth.
Looking forward, there is emerging evidence of an increasing
level of pre-lets, with larger corporates securing office space for
2015-6 occupation. Although 2013 is expected to remain challenging,
the strong market position of the division and the focus on
operational delivery and contract selectivity provides confidence
for when its markets recover.
Affordable Housing
HY 2013 HY 2012 % change
GBPm GBPm
-------------------------------- ------- ------- --------
Revenue 185 202 -8%
-------------------------------- ------- ------- --------
Operating profit - adjusted(1) 2.7 7.5 -64%
-------------------------------- ------- ------- --------
Operating margin - adjusted(1) 1.5% 3.7% -220bps
-------------------------------- ------- ------- --------
Affordable Housing revenue of GBP185m was down 8% (HY 2012:
GBP202m), whilst operating profit of GBP2.7m was down 64% (HY 2012:
GBP7.5m). The significant reduction in overall divisional margin
was driven by ongoing competition in the New Build Housing
Contracting activities and a lower margin contribution from the
Planned and Response Maintenance activities, offset in part by
positive revenue and margin growth from mixed-tenure schemes.
The mixed-tenure activities account for 24% of divisional
revenue. Within these mixed-tenure schemes, open market sales
completions have increased 36% compared to the first half last
year, supported by the UK Government's Help to Buy scheme. The
average sales price also increased, up 11%, to GBP172,000 (compared
to the full year average for 2012 of GBP155,000), however the full
benefit of this increase in sales activity and price has been
diluted by sales from some older, lower return sites.
Strategically, complex mixed-tenure schemes, such as the
recently announced GBP269m Woolwich redevelopment programme and the
GBP63m Lymington Fields, Dagenham scheme, are the major area of
future focus for the division and where positive returns can be
generated.
In contrast, New Build Housing Contracting (24% of revenue) has
suffered a significant decline in both revenue and margin as a
result of general competitive pressures in the contract new build
social housing market. The Planned Maintenance business (34% of
revenue) has experienced a reduction as the Decent Homes programme
has tailed off, whilst the Response Maintenance business (18% of
revenue) requires new contract wins to replace contract expiries
and to provide the critical mass to fully leverage the benefits of
scale.
The second half of 2013 is not expected to show any significant
change in market conditions, with expected continued growth in
mixed-tenure schemes being offset by pressures in New Build Housing
Contracting, Planned Maintenance and Response Maintenance.
Urban Regeneration
HY 2013 HY 2012 % change
GBPm GBPm
------------------------------------ ------- ------- --------
Capital employed 64 58 +10%
(excluding goodwill and intangible
assets)
------------------------------------ ------- ------- --------
Revenue 34 23 +48%
------------------------------------ ------- ------- --------
Operating profit - adjusted(1) 0.4 1.5 -73%
------------------------------------ ------- ------- --------
Urban Regeneration has made positive progress over the first
half. Activity on a range of its schemes has significantly
increased, thereby driving the increase in revenue to GBP34m
(HY2012: GBP23m), however due to timing of profit recognition from
the current mixture of schemes, operating profit has reduced to
GBP0.4m. The regeneration pipeline remains strong at GBP2.2bn, up
5%, which is the division's share of the gross development value of
committed schemes.
Against the positive backdrop of the Government focus on
residential development and the emerging private rental sector
investment market, there has been increased activity over the
period on a number of the division's pipeline schemes.
Operational site starts on schemes in Leeds, Doncaster, Salford,
Canning Town, Manchester, Reading, Plymouth and Stockport have been
supported by pre-letting and forward funding in Leeds and Stockport
and the forward sale of residential units in Reading. Planning has
also been secured for new projects in Lewisham and Chester which,
together with the existing schemes on site, will require working
capital investment over the next 18 months and a likely increase in
capital employed through the second half of 2013.
Looking ahead, it is anticipated that the division is
well-placed to benefit from these positive developments in 2014 and
beyond and to move towards its longer-term target of achieving a
15% return on capital employed over the course of the cycle.
Investments
HY 2013 HY 2012 % change
GBPm GBPm
-------------------------------- ------- ------- --------
Directors' portfolio valuation 24 56 -57%
-------------------------------- ------- ------- --------
Investments carrying value 13 32 -59%
-------------------------------- ------- ------- --------
Operating profit - adjusted(1) 4.6 1.3 +254%
-------------------------------- ------- ------- --------
The strategic rationale for the Investments division remains the
creation of investments which will provide prime long-term
construction opportunities for other divisions within the
Group.
The success of this strategy has been clearly demonstrated in
the first half of 2013 through the positive pipeline of
opportunities for investment and construction afforded through its
strategic partnerships with the public sector, specifically LABVs
(Local Asset Backed Vehicles) at Slough and Bournemouth.
The recycling of capital from mature investments has also
continued, with the successful disposals of interests in the Access
for Wigan scheme for GBP6.6m (profit: GBP1.5m) and the Miles
Platting social housing PFI scheme for GBP8.4m (profit: GBP4.4m).
Suitable future opportunities to recycle its investments will be
reviewed as they arise.
The division retains a positive pipeline of opportunities based
around its core skills of innovative structuring and financing of
deals, which allow its partners to realise the potential of
under-utilised property assets, secure efficiencies and promote
economic growth.
Other Financial Information
Net finance expense. Net finance expense was GBP0.8m, a GBP0.3m
increase versus HY 2012 which is broken down as follows:
HY 2013 HY 2012 % change
GBPm GBPm
--------------------------------- ------- ------- --------
Net interest charge on net debt (1.4) (1.7) +18%
Amortisation of bank fees (0.2) (0.1) -100%
Interest from JVs 0.6 0.9 -33%
IAS 19 pension finance charge (0.1) - -100%
Other 0.3 0.4 -25%
Total net finance expense (0.8) (0.5) -60%
--------------------------------- ------- ------- --------
Tax. A tax credit of GBP1.2m is shown for the six month period
(HY 2012: charge of GBP3.6m, FY 2012: charge of GBP3.5m). This tax
credit has arisen because no tax liability is expected upon the
gains on disposals of investments which occurred during the six
months, whilst the remaining net income will attract tax relief
with an effective tax rate approximating to the UK statutory
rate.
The tax credit for the six month period does not take into
account the expected reductions in the UK statutory tax rate to
20%, which is expected to create a GBP2.5m tax credit for 2013
during the second half of the year. The tax credit will arise
through revaluation of the Group's net deferred tax
liabilities.
HY 2013 HY 2012
GBPm GBPm
---------------------------------- ------- -------
Profit before tax 1.0 18.8
Less: share of net profit of
joint ventures (0.4) (3.7)
Less: gains on disposal of joint
ventures (5.9) -
(Loss)/profit subject to tax (5.3) 15.1
Statutory tax rate 23% 24%
Tax credit/(charge) 1.2 (3.6)
---------------------------------- ------- -------
Net working capital. 'Net Working Capital' is defined as
'Inventories plus Amounts Due from Construction Contract Customers
plus Trade & Other Receivables, less Trade & Other
Payables, less Amounts Due to Construction Contract Customers'.
HY 2013 HY 2012
GBPm GBPm
--------------------------------------- -------- --------
Inventories 151.3 158.9
Amounts Due From Construction 264.8 241.2
Contract Customers
(excluding exceptional operating
items)
Trade & Other Receivables
(excluding exceptional operating
items) 169.2 202.7
Trade & Other Payables (569.2) (569.6)
Amounts Due to Construction Contract (44.1) (56.8)
Customers
Net Working Capital - adjusted (28.0) (23.6)
Exceptional operating items (13.0) -
Net Working Capital - reported (41.0) (23.6)
--------------------------------------- -------- --------
Cash flow. Operating cash flow improved significantly to an
outflow of GBP19.2m. Likewise, free cash flow improved to an
outflow of GBP21.1m.
HY 2013 HY 2012 % change
GBPm GBPm GBPm
----------------------------------------- -------- -------- ---------
Operating profit - adjusted 16.2 20.8 -22%
Depreciation 2.3 3.0 -23%
Share option expense 0.8 0.8 -
Movement in fair value of shared
equity loans 0.2 - +100%
Gains on disposal of joint ventures (5.9) (1.8) -228%
Share of net profit of joint
ventures (0.4) (3.7) +89%
Gain on disposal of PPE - (0.2) +100%
Pension contributions in excess
of charge (0.3) (0.3) -
Change in working capital (excluding
exceptional operating items) (30.9) (116.0) +73%
Net capital expenditure (including
repayment of finance leases) (2.2) (2.0) -10%
Dividends and interest received
from joint ventures 1.0 1.3 -23%
Operating cash flow (19.2) (98.1) +80%
Income taxes paid (0.9) (5.3) +83%
Net interest paid (non-joint
venture) (1.0) (1.2) +17%
Free cash flow (21.1) (104.6) +80%
----------------------------------------- -------- -------- ---------
Net cash. Net cash at the end of the period was GBP39.7m, a
reduction of GBP10.7m from 1 January 2013.
GBPm
--------------------------------- -------------
Net cash as at 1 January
2013 50.4
Free cash flow (21.1)
Dividends (6.4)
Disposals of joint ventures 14.8
Other 2.0
Net cash as at 30 June
2013 39.7
--------------------------------- -------------
Pensions. As at 30 June 2013, the Group's IAS 19 gross pension
liability was GBP9.9m (HY 2012: GBP9.4m) with a net liability of
GBP1.4m (HY 2012: GBP1.0m). The deficit has been calculated after
updating the asset values and certain assumptions as at 30 June
2013.
Dividends. The Board of Directors has approved an interim
dividend of 12.0p per share (HY 2012: 12.0p), level with the prior
year.
Board appointment. Steve Crummett was appointed to the Board as
Finance Director, with effect from 25 February 2013. David Mulligan
stood down from the Board on 25 February 2013 and left the Group on
10 April 2013.
Principal risks and uncertainties. The principal risks and
uncertainties that the directors consider may have a material
impact on the Group's performance in the remaining six months of
the year are unchanged from those described in the Risk Review
section on pages 36 to 41 of the Group's most recent Annual Report
and Accounts. These risks are:
-- Markets - the markets in which the Group operates are
affected to varying degrees by general macroeconomic conditions.
The Group is particularly focussed at present on managing the
impact of the challenging economic conditions, changes in
Government spending priorities and the increasing emphasis on
infrastructure investment.
-- Strategy - the Group's strategy needs to be clearly
articulated and understood to ensure successful outcomes are
achieved.
-- Capable teams - the Group's health, safety and environmental
performance and business conduct affects employees, subcontractors
and the public and, in turn, can affect its reputation and
commercial performance. In a challenging climate, it can become
increasingly difficult to retain key employees, especially those
targeted by competitors.
-- Select right opportunities - the Group undertakes several
hundred contracts each year and it is important that contractual
terms reflect risks arising from the nature and complexity of the
works and the duration of the contract.
-- Distinctive approach - the Group has a unique and
differentiating approach. If employees are not properly engaged
with the culture of the business, clients are less likely to
receive exceptional levels of service.
-- Successful outcomes - the terms on which the Group trades
with counterparties affect its liquidity. Without sufficient
liquidity, the Group's ability to meet its liabilities as they fall
due would be compromised, which could ultimately lead to its
failure to continue as a going concern.
The directors have considered these risks in the context of the
current economic conditions in the Eurozone. They are satisfied
that the Group does not have significant direct exposure to the
Eurozone as the majority of its operations are carried out in UK
markets and its financing arrangements are predominantly with UK
financial institutions.
Outlook
Looking ahead to the second half, overall market conditions are
not expected to significantly improve. The business will continue
to focus on cash management and will look to improve the order book
selectively, such that it is well-positioned to take advantage of
the growth and investment opportunities in its markets as they
arise.
Enquiries
Morgan Sindall Group Tel: 020 7307 9200
John Morgan, Chief Executive
Steve Crummett, Finance Director Tel: 020 7404 5959
Brunswick
Jonathan Glass
Nina Coad
Presentation
1. A copy of these results is available on www.morgansindall.com
2. A recording of today's presentation of these results to
investors and analysts will be available on
www.morgansindall.com.
Cautionary forward-looking statement
These results contain forward-looking statements based on
current expectations and assumptions. Various known and unknown
risks, uncertainties and other factors may cause actual results to
differ from any future results or developments expressed or implied
from the forward-looking statements. Each forward-looking statement
speaks only as of the date of this document. The Group accepts no
obligation to publicly revise or update these forward-looking
statements or adjust them to future events or developments, whether
as a result of new information, future events or otherwise, except
to the extent legally required.
Notes to Editors
Morgan Sindall Group
Morgan Sindall Group plc is a leading UK construction and
regeneration group with a turnover of GBP2 billion, employing
around 6,400 employees and operating in the public and commercial
sectors. It operates through five divisions of construction and
infrastructure, fit out, affordable housing, urban regeneration and
investments.
Condensed consolidated income statement
For the six months ended 30 June 2013
Six months to Six months to Year ended
30 June 2013 (unaudited) 30 June 2012 (unaudited) 31 Dec 2012 (audited)
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
----------- ----------- -------- ----------- ----------- -------- ----------- ----------- ----------
Exceptional Exceptional Exceptional
Before operating Before operating Before operating
Notes exceptional items exceptional items exceptional items
(note (note (note
items 3) Total items 3) Total items 3) Total
---------------- ----- ----------- ----------- -------- ----------- ----------- -------- ----------- ----------- ----------
Continuing
operations
Revenue 2 1,019.0 - 1,019.0 1,000.0 - 1,000.0 2,047.1 - 2,047.1
Cost of sales (936.4) (13.0) (949.4) (907.3) - (907.3) (1,860.4) - (1,860.4)
---------------- ----- ----------- ----------- -------- ----------- ----------- -------- ----------- ----------- ----------
Gross profit 82.6 (13.0) 69.6 92.7 - 92.7 186.7 - 186.7
---------------- ----- ----------- ----------- -------- ----------- ----------- -------- ----------- ----------- ----------
Administrative
expenses (72.7) - (72.7) (77.4) - (77.4) (153.7) (10.0) (163.7)
Share of net
profit
of equity
accounted
joint ventures 2 0.4 - 0.4 3.7 - 3.7 5.7 - 5.7
Other gains and
losses 6 5.9 - 5.9 1.8 - 1.8 9.4 - 9.4
---------------- ----- ----------- ----------- -------- ----------- ----------- -------- ----------- ----------- ----------
Operating profit
before
amortisation
of intangible
assets 2 16.2 (13.0) 3.2 20.8 - 20.8 48.1 (10.0) 38.1
---------------- ----- ----------- ----------- -------- ----------- ----------- -------- ----------- ----------- ----------
Amortisation of
intangible
assets 2 (1.4) - (1.4) (1.5) - (1.5) (2.9) - (2.9)
---------------- ----- ----------- ----------- -------- ----------- ----------- -------- ----------- ----------- ----------
Operating profit 2 14.8 (13.0) 1.8 19.3 - 19.3 45.2 (10.0) 35.2
---------------- ----- ----------- ----------- -------- ----------- ----------- -------- ----------- ----------- ----------
Finance income 0.9 - 0.9 1.3 - 1.3 2.3 - 2.3
Finance costs (1.7) - (1.7) (1.8) - (1.8) (3.3) - (3.3)
---------------- ----- ----------- ----------- -------- ----------- ----------- -------- ----------- ----------- ----------
Net finance
expense 2 (0.8) - (0.8) (0.5) - (0.5) (1.0) - (1.0)
---------------- ----- ----------- ----------- -------- ----------- ----------- -------- ----------- ----------- ----------
Profit before
tax 2 14.0 (13.0) 1.0 18.8 - 18.8 44.2 (10.0) 34.2
---------------- ----- ----------- ----------- -------- ----------- ----------- -------- ----------- ----------- ----------
Tax 1 (1.8) 3.0 1.2 (3.6) - (3.6) (5.9) 2.4 (3.5)
---------------- ----- ----------- ----------- -------- ----------- ----------- -------- ----------- ----------- ----------
Profit for the
period 12.2 (10.0) 2.2 15.2 - 15.2 38.3 (7.6) 30.7
---------------- ----- ----------- ----------- -------- ----------- ----------- -------- ----------- ----------- ----------
Attributable to:
Owners of the
Company 12.3 (10.0) 2.3 15.2 - 15.2 38.4 (7.6) 30.8
Non-controlling
interests (0.1) - (0.1) - - - (0.1) - (0.1)
---------------- ----- ----------- ----------- -------- ----------- ----------- -------- ----------- ----------- ----------
12.2 (10.0) 2.2 15.2 - 15.2 38.3 (7.6) 30.7
---------------- ----- ----------- ----------- -------- ----------- ----------- -------- ----------- ----------- ----------
Earnings per
share
From continuing
operations:
Basic 5 5.4p 35.8p 72.5p
Diluted 5 5.4p 34.6p 72.0p
---------------- ----- ----------- ----------- -------- ----------- ----------- -------- ----------- ----------- ----------
There were no discontinued operations in either the current or
comparative periods.
Condensed consolidated statement of comprehensive income
For the six months ended 30 June 2013
Six months Six months
to to Year ended
30 June 2013 30 June 2012 31 Dec 2012
(unaudited) (unaudited) (audited)
GBPm GBPm GBPm
------------------------------------------------- ------------ ------------ -----------
Profit for the period 2.2 15.2 30.7
------------------------------------------------- ------------ ------------ -----------
Items that will not be reclassified subsequently
to profit or loss:
Actuarial (loss)/gain arising on defined benefit
obligation (0.1) - (0.8)
Income tax relating to items not reclassified - - 0.1
------------------------------------------------- ------------ ------------ -----------
(0.1) - (0.7)
------------------------------------------------- ------------ ------------ -----------
Items that may be reclassified subsequently
to profit or loss:
Movement on cash flow hedges in equity accounted
joint ventures 0.1 - (0.4)
Reclassification adjustments for loss on cash
flow hedges included in profit 1.4 - 2.1
Other movement on cash flow hedges (0.1) - -
1.4 - 1.7
------------------------------------------------- ------------ ------------ -----------
Other comprehensive income for the period,
net of income tax 1.3 - 1.0
------------------------------------------------- ------------ ------------ -----------
Total comprehensive income for the period 3.5 15.2 31.7
------------------------------------------------- ------------ ------------ -----------
Attributable to:
Owners of the Company 3.6 15.2 31.8
Non-controlling interests (0.1) - (0.1)
------------------------------------------------- ------------ ------------ -----------
3.5 15.2 31.7
------------------------------------------------- ------------ ------------ -----------
Condensed consolidated balance sheet
At 30 June 2013
30 June 2013 30 June 2012 31 Dec 2012
(unaudited) (unaudited) (audited)
Notes GBPm GBPm GBPm
--------------------------------------- ----- ------------ ------------ -----------
Non-current assets
Goodwill 213.9 214.1 213.9
Other intangible assets 7.9 11.0 9.3
Property, plant and equipment 19.2 20.5 20.1
Investment property 11.1 11.8 11.3
Investments in equity accounted joint
ventures 6 52.9 44.3 62.2
Investments 0.4 0.4 0.4
Shared equity loan receivables 7 19.2 18.0 19.2
324.6 320.1 336.4
--------------------------------------- ----- ------------ ------------ -----------
Current assets
Inventories 151.3 158.9 159.4
Amounts due from construction contract
customers 251.8 241.2 217.3
Trade and other receivables 169.2 202.7 187.6
Cash and cash equivalents 8 77.3 35.9 50.4
Non-current assets classified as held
for sale - 14.3 -
--------------------------------------- ----- ------------ ------------ -----------
649.6 653.0 614.7
--------------------------------------- ----- ------------ ------------ -----------
Total assets 974.2 973.1 951.1
--------------------------------------- ----- ------------ ------------ -----------
Current liabilities
Trade and other payables (569.2) (569.6) (572.1)
Amounts due to construction contract
customers (44.1) (56.8) (47.4)
Current tax liabilities (3.1) (7.8) (5.2)
Finance lease liabilities (1.4) (1.0) (1.2)
Provisions (2.5) (4.2) (3.0)
(620.3) (639.4) (628.9)
--------------------------------------- ----- ------------ ------------ -----------
Net current assets/(liabilities) 29.3 13.6 (14.2)
--------------------------------------- ----- ------------ ------------ -----------
Non-current liabilities
Trade and other payables (23.3) (0.2) (22.9)
Finance lease liabilities (4.3) (3.9) (5.0)
Borrowings 8 (33.0) (47.9) -
Non-recourse project financing 8 (4.6) - -
Retirement benefit obligation (1.4) (1.0) (1.5)
Deferred tax liabilities (19.0) (19.0) (19.0)
Provisions (21.0) (22.8) (24.5)
--------------------------------------- ----- ------------ ------------ -----------
(106.6) (94.8) (72.9)
--------------------------------------- ----- ------------ ------------ -----------
Total liabilities (726.9) (734.2) (701.8)
--------------------------------------- ----- ------------ ------------ -----------
Net assets 247.3 238.9 249.3
--------------------------------------- ----- ------------ ------------ -----------
Equity
Share capital 2.2 2.2 2.2
Share premium account 26.8 26.7 26.7
Capital redemption reserve 0.6 0.6 0.6
Own shares (4.8) (5.5) (5.6)
Hedging reserve 6 (0.9) (4.0) (2.3)
Retained earnings 223.9 219.2 228.1
--------------------------------------- ----- ------------ ------------ -----------
Equity attributable to owners of the
Company 247.8 239.2 249.7
Non-controlling interests (0.5) (0.3) (0.4)
--------------------------------------- ----- ------------ ------------ -----------
Total equity 247.3 238.9 249.3
--------------------------------------- ----- ------------ ------------ -----------
Condensed consolidated cash flow statement
For the six months ended 30 June 2013
Six months Six months
to to Year ended
30 June 2013 30 June 2012 31 Dec 2012
(unaudited) (unaudited) (audited)
GBPm GBPm GBPm
----------------------------------------------- ------------ ------------ -----------
Operating profit for the period 1.8 19.3 35.2
Adjusted for:
Amortisation of fixed life intangible
assets 1.4 1.5 2.9
Share of net profit of equity accounted
joint ventures (0.4) (3.7) (5.7)
Depreciation of property, plant and equipment 2.3 3.0 6.5
Expense in respect of share options 0.8 0.8 0.2
Defined benefit obligation payment (0.3) (0.3) (0.7)
Defined benefit obligation charge - - 0.1
Net gain on disposal of interests in
joint ventures 6 (5.9) (1.8) (8.8)
Gain on disposal of property, plant and
equipment - (0.2) (0.6)
Revaluation of investment properties - - 0.5
Movement in fair value of shared equity
loan receivables 0.2 - (0.2)
Operating cash flows before movements
in working capital (0.1) 18.6 29.4
----------------------------------------------- ------------ ------------ -----------
Decrease/(increase) in investment properties 0.2 (0.8) (0.7)
Increase in shared equity loan receivables (0.4) (0.4) (1.5)
Redemptions of shared equity loan receivables 0.2 - 0.1
Decrease/(increase) in inventories 8.1 (12.9) (10.9)
(Increase)/decrease in receivables (16.2) (28.9) 10.8
(Decrease)/increase in payables and short-term
provisions (6.3) (73.8) (78.4)
(Decrease)/increase in non-current provisions (3.5) 0.8 2.5
----------------------------------------------- ------------ ------------ -----------
Movements in working capital (17.9) (116.0) (78.1)
----------------------------------------------- ------------ ------------ -----------
Cash utilised in operations (18.0) (97.4) (48.7)
----------------------------------------------- ------------ ------------ -----------
Income taxes paid (0.9) (5.3) (8.1)
Interest paid (1.4) (1.7) (3.0)
----------------------------------------------- ------------ ------------ -----------
Net cash outflow from operating activities (20.3) (104.4) (59.8)
----------------------------------------------- ------------ ------------ -----------
Cash flows from investing activities
Interest received 1.0 1.4 2.2
Dividend from joint ventures 0.4 0.4 1.3
Proceeds on disposal of property, plant
and equipment 0.4 0.4 1.6
Purchases of property, plant and equipment (1.9) (1.9) (4.0)
Net repayment/(payments) to acquire or
increase interests in joint ventures 1.9 (7.4) (7.0)
Proceeds on disposal of interests in
joint ventures 6 14.8 3.8 26.2
Payment for the acquisition of subsidiaries
and other businesses - - (0.1)
----- ------ ------
Net cash inflow/(outflow) from investing
activities 16.6 (3.3) 20.2
------------------------------------------- ----- ------ ------
Cash flows from financing activities
Drawdown of borrowings 8 37.6 47.9 -
Dividends paid 4(6.4) (12.7) (17.8)
Repayments of obligations under finance
leases (0.7) (0.5) (1.1)
Proceeds on issue of share capital 0.1 - -
------------------------------------------- ----- ------ ------
Net cash inflow/(outflow) from financing
activities 30.6 34.7 (18.9)
------------------------------------------- ----- ------ ------
Net increase/(decrease) in cash and cash
equivalents 26.9 (73.0) (58.5)
Cash and cash equivalents at the beginning
of the period 50.4 108.9 108.9
------------------------------------------- ----- ------ ------
Cash and cash equivalents at the end
of the period
Bank balances and cash net of short term
borrowings 8 77.3 35.9 50.4
------------------------------------------- ----- ------ ------
Condensed consolidated statement of changes in equity
For the six months ended 30 June 2013
Attributable to owners of the Company
-------------------------------------------------------------- -----
Reserve
Share Capital for own
Share premium redemption shares Hedging Retained Non-controlling Total
capital account reserve held reserve earnings Total interests equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
--------------------- -------- -------- ----------- -------- -------- --------- ----- --------------- -------
Balance at 1 January
2013 2.2 26.7 0.6 (5.6) (2.3) 228.1 249.7 (0.4) 249.3
--------------------- -------- -------- ----------- -------- -------- --------- ----- --------------- -------
Total comprehensive
income for the
period:
Net profit - - - - - 2.3 2.3 (0.1) 2.2
Actuarial
(loss)/gain
arising on defined
benefit obligation - - - - - (0.1) (0.1) - (0.1)
Movement on cash
flow
hedges in equity
accounted
joint ventures - - - - 0.1 - 0.1 - 0.1
Reclassification
adjustments
for gains/(losses)
included in profit - - - - 1.4 - 1.4 - 1.4
Other movement on
cash flow hedges - - - - (0.1) - (0.1) - (0.1)
--------------------- -------- -------- ----------- -------- -------- --------- ----- --------------- -------
Total comprehensive
income for the
period,
net of income tax - - - - 1.4 2.2 3.6 (0.1) 3.5
--------------------- -------- -------- ----------- -------- -------- --------- ----- --------------- -------
Share-based payments - - - - - 0.8 0.8 - 0.8
Issue of shares at
a premium - 0.1 - - - - 0.1 - 0.1
Exercise of share
options - - - 0.8 - (0.8) - - -
Dividends paid:
Final dividend for
2012 - - - - - (6.4) (6.4) - (6.4)
--------------------- -------- -------- ----------- -------- -------- --------- ----- --------------- -------
Balance at 30 June
2013 (unaudited) 2.2 26.8 0.6 (4.8) (0.9) 223.9 247.8 (0.5) 247.3
--------------------- -------- -------- ----------- -------- -------- --------- ----- --------------- -------
Condensed consolidated statement of changes in equity
For the six months ended 30 June 2012
Attributable to owners of the Company
-------------------------------------------------------------- ------
Reserve
Share Capital for own
Share premium redemption shares Hedging Retained Non-controlling Total
capital account reserve held reserve earnings Total interests equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
-------------------- -------- -------- ----------- -------- -------- --------- ------ --------------- -------
Balance at 1 January
2012 2.2 26.7 0.6 (5.8) (4.0) 216.2 235.9 (0.3) 235.6
-------------------- -------- -------- ----------- -------- -------- --------- ------ --------------- -------
Total comprehensive
income for the
period:
Net profit - - - - - 15.2 15.2 - 15.2
Other comprehensive
income:
Total comprehensive
income for the
period,
net of income tax - - - - - 15.2 15.2 - 15.2
-------------------- -------- -------- ----------- -------- -------- --------- ------ --------------- -------
Share-based payments - - - - - 0.8 0.8 - 0.8
Exercise of share
options - - - 0.3 - (0.3) - - -
Dividends paid:
Final dividend for
2011 - - - - - (12.7) (12.7) - (12.7)
-------------------- -------- -------- ----------- -------- -------- --------- ------ --------------- -------
Balance at 30 June
2012 (unaudited) 2.2 26.7 0.6 (5.5) (4.0) 219.2 239.2 (0.3) 238.9
-------------------- -------- -------- ----------- -------- -------- --------- ------ --------------- -------
Condensed consolidated statement of changes in equity
For the year ended 31 December 2012
Attributable to owners of the Company
-------------------------------------------------------------- ------
Reserve
Share Capital for own
Share premium redemption shares Hedging Retained Non-controlling Total
capital account reserve held reserve earnings Total interests equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
-------------------- -------- -------- ----------- -------- -------- --------- ------ --------------- -------
Balance at 1 January
2012 2.2 26.7 0.6 (5.8) (4.0) 216.2 235.9 (0.3) 235.6
-------------------- -------- -------- ----------- -------- -------- --------- ------ --------------- -------
Total comprehensive
income for the year:
Net profit - - - - - 30.8 30.8 (0.1) 30.7
Other comprehensive
income:
Actuarial loss
arising
on defined
benefit
obligation - - - - - (0.8) (0.8) - (0.8)
Deferred tax on
defined
benefit
obligation - - - - - 0.1 0.1 - 0.1
Movement on cash
flow
hedges in equity
accounted
joint ventures - - - - (0.4) - (0.4) - (0.4)
Reclassification
adjustments
for gains/(losses)
included in profit - - - - 2.1 - 2.1 - 2.1
-------------------- -------- -------- ----------- -------- -------- --------- ------ --------------- -------
Total comprehensive
income for the
year,
net of income tax - - - - 1.7 30.1 31.8 (0.1) 31.7
-------------------- -------- -------- ----------- -------- -------- --------- ------ --------------- -------
Share-based payments - - - - - 0.2 0.2 - 0.2
Exercise of share
options - - - 0.2 - (0.2) - - -
Movement on deferred
tax asset on
share-based
payments - - - - - (0.4) (0.4) - (0.4)
Dividends paid:
Final dividend for
2011 - - - - - (12.7) (12.7) - (12.7)
Interim dividend
for
2012 - - - - - (5.1) (5.1) - (5.1)
-------------------- -------- -------- ----------- -------- -------- --------- ------ --------------- -------
Balance at 31
December
2012 2.2 26.7 0.6 (5.6) (2.3) 228.1 249.7 (0.4) 249.3
-------------------- -------- -------- ----------- -------- -------- --------- ------ --------------- -------
Share premium account
The share premium account represents the difference between the
fair value of consideration received and the nominal value of the
shares issued.
Capital redemption reserve
The capital redemption reserve was created on the redemption of
preference shares in 2003.
Reserve for own shares held
The shares are held as 'treasury shares' and represent the cost
to Morgan Sindall Group plc of shares purchased in the market and
held by the Morgan Sindall Employee Benefit Trust (the 'Trust') to
satisfy options under the Group's share incentive schemes.
The number of shares held by the Trust at 30 June 2013 was
641,618 (30 June 2012: 729,688, 31 December 2012: 723,970).
Hedging reserve
Under cash flow hedge accounting, movements on the effective
portion of hedges are recognised through the hedging reserve,
whilst any ineffectiveness is taken to the income statement.
Cumulative movements recognised through the hedging reserve are
recycled through the income statement on disposal of the associated
joint venture.
Notes to the condensed consolidated financial statements
For the six months ended 30 June 2013
1 Basis of preparation
General information
The financial information set out in this half year report does
not constitute the Company's statutory accounts for the year ended
31 December 2012. A copy of the statutory accounts for that year
was delivered to the Registrar of Companies. The auditor reported
on those accounts: their report was unqualified, did not draw
attention to any matters by way of emphasis without qualifying
their report and did not contain a statement under s498(2) or (3)
of the Companies Act 2006. This half year report has not been
audited or reviewed by the auditor pursuant to the Auditing
Practices Board guidance on the Review of Interim Financial
Information. Figures as at 30 June 2013 and 2012 and for the six
months ended 30 June 2013 and 2012 are therefore unaudited.
Basis of preparation
The annual financial statements of Morgan Sindall Group plc are
prepared in accordance with IFRSs as adopted by the European Union.
The condensed consolidated financial statements included in this
half year report were prepared in accordance with IAS 34 'Interim
Financial Reporting'. While the financial information included in
this half year report was prepared in accordance with the
recognition and measurement criteria of International Financial
Reporting Standards ('IFRS'), this half year report does not itself
contain sufficient information to comply with IFRS.
Going concern
The directors are satisfied that the Group has sufficient
resources to continue in operation for the foreseeable future, a
period of not less than 12 months from the date of this report.
Accordingly, they continue to adopt the going concern basis in
preparing the condensed consolidated financial statements.
Changes in accounting policies
In the current financial year, the Group has adopted the
amendments to IAS 1 "Presentation of Items of Other Comprehensive
Income", IAS 19 (revised 2011) "Employee Benefits" and IFRS 13
"Fair Value Measurement". Otherwise, the same accounting policies,
presentation and methods of computation are followed in the
condensed consolidated financial statements as applied in the
Group's latest annual audited financial statements.
Tax
A tax credit of GBP1.2m is shown for the six month period (30
June 2012: charge of GBP3.6m, 31 December 2012: charge of GBP3.5m).
This tax credit has arisen because no tax liability is expected
upon the gains on disposals of joint ventures which occurred during
the period, whilst the remaining net income will attract tax relief
with an effective tax rate approximating to the UK statutory
rate.
The tax credit does not take into account the expected reduction
in the UK statutory tax rate from 23% to 20% as it was not
substantively enacted at the balance sheet date. We estimate that
this future change will reduce our deferred tax liability by
GBP2.5m in 2013, giving rise to a deferred tax credit in the second
half of the year.
Seasonality
The Group's activities are generally not subject to significant
seasonal variation.
2 Business segments
For management purposes, the Group is organised into five
operating divisions: Construction and Infrastructure, Fit Out,
Affordable Housing, Urban Regeneration and Investments. The
divisions' activities are as follows:
-- Construction and Infrastructure: offers national design,
construction and infrastructure services to private and public
sector clients. The division works on projects and frameworks of
all sizes across a broad range of sectors including commercial,
defence, education, energy, healthcare, industrial, leisure,
retail, transport, and water.
-- Fit Out: specialises in fit out and refurbishment projects in
the commercial and government office, education, retail, technology
and leisure markets. Overbury operates as a national fit out
company through multiple procurement routes and Morgan Lovell
specialises in the design and build of offices.
-- Affordable Housing: specialises in the design and build,
refurbishment and maintenance of homes and the regeneration of
communities across the UK. The division operates a full
mixed-tenure model creating homes for rent, shared ownership and
open market sale.
-- Urban Regeneration: works with landowners and public sector
partners to unlock value from under-developed assets to bring about
sustainable regeneration and urban renewal through the delivery of
mixed-use projects. Typically creating commercial, retail,
residential, leisure and public realm facilities.
-- Investments: facilitates project development, primarily in
the public sector, by providing flexible financing solutions and
development expertise. The division covers a wide range of markets
including urban regeneration, education, healthcare, housing,
emergency services, defence and infrastructure.
Group Activities represents costs and income arising from
corporate activities which cannot be allocated to the operating
segments. These include costs such as treasury management,
corporate tax coordination, insurance management, pension
administration and company secretarial services. The divisions are
the basis on which the Group reports its segmental information as
presented below:
Six months to
30 June 2013
--------------- -------------- ------- ---------- --------------- ----------- ----------- ------------ -------
Construction
and Affordable Urban Group
Infrastructure Fit Out Housing Regeneration Investments Activities Eliminations Total
Revenue GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
--------------- -------------- ------- ---------- --------------- ----------- ----------- ------------ -------
Revenue:
external 592.6 202.6 185.2 34.1 4.5 - - 1,019.0
Revenue:
inter-segment - 10.7 1.2 - - - (11.9) -
--------------- -------------- ------- ---------- --------------- ----------- ----------- ------------ -------
Profit/(loss)
--------------- -------------- ------- ---------- --------------- ----------- ----------- ------------ -------
Included in profit/(loss)
below:
Share of
results
of equity
accounted
joint ventures - - (0.1) (0.2) 0.7 - - 0.4
--------------- -------------- ------- ---------- --------------- ----------- ----------- ------------ -------
Operating
profit/(loss)
before
amortisation
of intangible
assets and
exceptional
operating
items 6.4 5.0 2.7 0.4 4.6 (2.9) - 16.2
Amortisation
of intangible
assets - - (0.4) (1.0) - - - (1.4)
Exceptional
operating
items (note 3) (13.0) - - - - - - (13.0)
--------------- -------------- ------- ---------- --------------- ----------- ----------- ------------ -------
Operating
profit/(loss) (6.6) 5.0 2.3 (0.6) 4.6 (2.9) - 1.8
=============== ============== ======= ========== =============== =========== =========== ============
Net finance
expense (0.8)
-------
Profit before tax 1.0
=======
Balance sheet GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
--------------- -------------- ------- ---------- --------------- ----------- ----------- ------------ -------
Total assets 521.6 132.0 269.6 103.9 29.1 (82.0) - 974.2
Total
liabilities (398.3) (108.2) (176.8) (41.7) (17.6) 15.7 - (726.9)
During the six months to 30 June 2013, six months to 30 June
2012 and the year ended 31 December 2012, inter-segment sales were
charged at prevailing market prices and significantly all of the
Group's operations were carried out in the UK.
Six months to
30 June 2012
--------------- -------------- ------- ---------- --------------- ----------- ----------- ------------ -------
Construction
and Affordable Urban Group
Infrastructure Fit Out Housing Regeneration Investments Activities Eliminations Total
Revenue GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
--------------- -------------- ------- ---------- --------------- ----------- ----------- ------------ -------
Revenue:
external 582.9 191.1 202.0 23.1 0.9 - - 1,000.0
Revenue:
inter-segment - 6.2 0.6 - - - (6.8) -
--------------- -------------- ------- ---------- --------------- ----------- ----------- ------------ -------
Profit/(loss)
--------------- -------------- ------- ---------- --------------- ----------- ----------- ------------ -------
Included in profit/(loss)
below:
Share of
results
of equity
accounted
joint ventures - - (0.1) (0.3) 4.1 - - 3.7
--------------- -------------- ------- ---------- --------------- ----------- ----------- ------------ -------
Operating
profit/(loss)
before
amortisation
of intangible
assets and
exceptional
operating
items 8.5 5.5 7.5 1.5 1.3 (3.5) - 20.8
Amortisation
of intangible
assets - - (0.4) (1.1) - - - (1.5)
Exceptional
operating
items (note 3) - - - - - - - -
--------------- -------------- ------- ---------- --------------- ----------- ----------- ------------ -------
Operating
profit/(loss) 8.5 5.5 7.1 0.4 1.3 (3.5) - 19.3
=============== ============== ======= ========== =============== =========== =========== ============
Net finance
expense (0.5)
-------
Profit before tax 18.8
=======
Balance sheet GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
--------------- -------------- ------- ---------- --------------- ----------- ----------- ------------ -------
Total assets 490.4 79.1 268.8 86.3 39.9 8.6 - 973.1
Total
liabilities (364.1) (54.3) (172.5) (23.2) (42.2) (77.9) - (734.2)
Year ended 31
December 2012
--------------- -------------- ------- ---------- --------------- ----------- ----------- ------------ -------
Construction
and Affordable Urban Group
Infrastructure Fit Out Housing Regeneration Investments Activities Eliminations Total
Revenue GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
--------------- -------------- ------- ---------- --------------- ----------- ----------- ------------ -------
Revenue:
external 1,168.1 426.8 385.8 62.3 4.1 - - 2,047.1
Revenue:
inter-segment 0.1 10.0 - - - - (10.1) -
--------------- -------------- ------- ---------- --------------- ----------- ----------- ------------ -------
Profit/(loss)
--------------- -------------- ------- ---------- --------------- ----------- ----------- ------------ -------
Included in profit/(loss)
below:
Share of
results
of equity
accounted
joint ventures - - (0.3) 0.3 5.7 - - 5.7
--------------- -------------- ------- ---------- --------------- ----------- ----------- ------------ -------
Operating
profit/(loss)
before
amortisation
of intangible
assets and
exceptional
operating
items 19.7 11.3 11.5 2.7 7.4 (4.5) - 48.1
Amortisation
of intangible
assets - - (0.8) (2.1) - - - (2.9)
Exceptional
operating
items (note 3) (6.8) - (2.5) - (0.2) (0.5) - (10.0)
--------------- -------------- ------- ---------- --------------- ----------- ----------- ------------ -------
Operating
profit/(loss) 12.9 11.3 8.2 0.6 7.2 (5.0) - 35.2
=============== ============== ======= ========== =============== =========== =========== ============
Net finance
expense (1.0)
-------
Profit before tax 34.2
=======
Balance sheet GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
--------------- -------------- ------- ---------- --------------- ----------- ----------- ------------ -------
Total assets 533.2 123.2 250.1 114.3 22.9 (92.6) - 951.1
Total
liabilities (403.8) (101.8) (125.8) (51.7) (17.8) (0.9) - (701.8)
3 Exceptional operating items
Six months Six months
to to Year ended
30 June 2013 30 June 2012 31 Dec 2012
GBPm GBPm GBPm
------------------------------------------------ ------------ ------------ -----------
Provision against amounts due from construction
contract customers and trade receivables 13.0 - -
Reorganisation costs - - 10.0
------------------------------------------------ ------------ ------------ -----------
Total exceptional operating items 13.0 - 10.0
------------------------------------------------ ------------ ------------ -----------
Total exceptional operating items post tax 10.0 - 7.6
------------------------------------------------ ------------ ------------ -----------
An exceptional charge has been taken in the period as a
provision against amounts due from construction contract customers
and trade receivables in relation to a small number of construction
contracts. The Board, having received legal advice and opinion,
believes that these amounts are recoverable. However, based upon an
assessment of current progress made towards recovering these
amounts and the expected time, cost and associated risk of pursuing
legal remedies to achieve recovery, the Board believes it is now
appropriate to provide against these balances to an amount it
considers is a prudent estimate of overall likely resolution.
In 2012, the Group undertook a reorganisation. The exceptional
items relate to the cost of reorganising its network of offices and
comprise redundancy and property related costs.
4 Dividends
Amounts recognised as distributions to equity
holders in the period:
------------------------------------------------ ------------ ------------ -----------
Six months Six months
to to Year ended
30 June 2013 30 June 2012 31 Dec 2012
GBPm GBPm GBPm
------------------------------------------------ ------------ ------------ -----------
Final dividend for the year ended 31 December
2012 of 15.0p per share 6.4 - -
Interim dividend for the year ended 31 December
2012 of 12.0p per share - - 5.1
Final dividend for the year ended 31 December
2011 of 30.0p per share - 12.7 12.7
------------------------------------------------ ------------ ------------ -----------
6.4 12.7 17.8
------------------------------------------------ ------------ ------------ -----------
Six months Six months
Proposed dividend: to to Year ended
30 June 2013 30 June 2012 31 Dec 2012
GBPm GBPm GBPm
------------------------------------------------ ------------ ------------ -----------
Interim dividend for the period to 30 June 2013
of 12.0p per share 5.1
Final dividend for the year ended 31 December
2012 of 15.0p per share - - 6.4
Interim dividend for the period to 30 June 2012
of 12.0p per share - 5.1 -
------------------------------------------------ ------------ ------------ -----------
The proposed interim dividend was approved by the Board on 5
August 2013 and was not included as a liability at 30 June 2013.
The interim dividend of 12.0p per share will be paid on 24 October
2013 to shareholders on the register at 27 September 2013. The
ex-dividend date will be 25 September 2013.
5 Earnings per share
There are no discontinued operations in either the current or
comparative periods.
The calculation of the basic and diluted earnings per share is
based on the following data:
Six months Six months
to to Year end
30 June 30 June
2013 2012 31 Dec 2012
Earnings GBPm GBPm GBPm
-------------------------------------------------- ---------- ---------- -----------
Earnings for the purposes of basic and dilutive
earnings per share being net profit attributable
to owners of the Company 2.3 15.2 30.8
Add back:
exceptional operating items after tax 3 10.0 - 7.6
amortisation of intangible assets after
tax 1.1 1.1 2.2
-------------------------------------------------- ---------- ---------- -----------
Earnings for the purposes of adjusted basic
and dilutive earnings per share 13.4 16.3 40.6
-------------------------------------------------- ---------- ---------- -----------
30 June 30 June
2013 2012 31 Dec 2012
Number of shares No. '000s No. '000s No. '000s
-------------------------------------------------- ---------- ---------- -----------
Weighted average number of ordinary shares
for the purposes of basic earnings per share 42,590 42,490 42,497
Effect of dilutive potential ordinary shares:
Share options 181 524 238
Conditional shares not vested - 855 45
-------------------------------------------------- ---------- ---------- -----------
Weighted average number of ordinary shares
for the purposes of diluted earnings per
share 42,771 43,869 42,780
-------------------------------------------------- ---------- ---------- -----------
The average market value of the Company's shares for the purpose
of calculating the dilutive effect of share options and long-term
incentive plan shares was based on quoted market prices for the
period that the options were outstanding. The weighted average
share price for the period was GBP5.59 (30 June 2012: GBP6.59, 31
December 2012: GBP6.41).
Earnings per share as calculated in accordance with IAS 33,
'Earnings per Share' are disclosed below:
Six months Six months
to to Year ended
30 June 30 June
2013 2012 31 Dec 2012
------------------------------------------ ----------- ----------- -----------
Basic earnings per share 5.4p 35.8p 72.5p
Diluted earnings per share 5.4p 34.6p 72.0p
------------------------------------------ ----------- ----------- -----------
Earnings per share adjusted for exceptional operating items and
amortisation of intangible assets after tax:
Six months Six months
to to Year ended
30 June 30 June
2013 2012 31 Dec 2012
------------------------------------------ ----------- ----------- -----------
Adjusted basic earnings per share 31.5p 38.4p 95.5p
Adjusted diluted earnings per share 31.3p 37.2p 94.9p
------------------------------------------ ----------- ----------- -----------
A total of 865,304 share options that could potentially dilute
earnings per share in the future were excluded from the above
calculations because they were anti-dilutive at 30 June 2013 (30
June 2012: 1,034,265, 31 December 2012: 1,030,688).
6 Investments in equity accounted joint ventures
Disposals
During the period, the Group has made two disposals:
-- On 28 March 2013 the Group sold its 50% interest in Access for Wigan (Holdings) Limited, a PPP scheme for
developing the Wigan Life Centre, for total cash consideration of GBP6.6m. The gain on disposal was GBP1.5m,
comprising a gain of GBP1.7m in respect of the investments and a loss of GBP0.2m in respect of the hedging
reserve which was recycled to the income statement.
-- On 27 June 2013 the Group sold its 33.3% interest in Renaissance Miles Platting Limited, a PFI social housing
scheme, for total consideration of GBP8.4m, of which GBP8.2m was received as cash. The gain on disposal was
GBP4.4m, comprising a gain of GBP5.6m in respect of the investments and a loss of GBP1.2m in respect of the
hedging reserve which was recycled to the income statement.
The gains on disposal are included within other gains and losses
in the income statement.
The Group's share of the results of these joint ventures up to
the dates of their disposal is included within the Investments
operating segment as the criteria to be included as discontinued
operations were not met.
7 Financial instruments
The only financial instruments at fair value through profit or
loss held by the Group at 30 June 2013 are the shared equity loan
receivables, for which the fair value is determined using level 3
inputs as defined by IFRS 7 'Financial Instruments:
Disclosures'.
There are no non-recurring fair value measurements. All other
financial assets and financial liabilities are carried at a value
which is a reasonable approximation of fair value.
30 June 30 June
2013 2012 31 Dec 2012
GBPm GBPm GBPm
---------------------------------------------- ------- ------- -----------
Opening balance 19.2 17.6 17.6
Additions arising from the sale of properties 0.4 0.4 1.5
Net change in fair value recognised in the
income statement (0.2) - 0.2
Repayments (0.2) - (0.1)
---------------------------------------------- ------- ------- -----------
Closing balance 19.2 18.0 19.2
---------------------------------------------- ------- ------- -----------
The Group has elected to recognise the shared equity loan
receivables at fair value through profit or loss under IAS 39. This
is an irrevocable election and results in all movements in the fair
value of the loans being recognised in profit or loss. The net
change in fair value shown above includes accreted interest.
During the period, there were repayments of shared equity loan
receivables of GBP0.2m (30 June 2012: GBPnil, 31 December 2012:
GBP0.1m). All repayments were at values at or above the values held
in the accounts.
The Group's maximum credit exposure is limited to the carrying
value of the shared equity loan receivables granted. The Group's
credit risk is partially mitigated as the shared equity loan
receivables are secured by way of a second charge over the
property. The change in the fair value attributed to a change in
credit risk during the period was GBPnil (30 June 2012: GBPnil, 31
December 2012: GBP0.2m). There were no defaults on any of the
shared equity loans during the period (30 June 2012: no defaults,
31 December 2012: one default).
Basis of valuation and assumptions made
Because there is no directly observable fair value for
individual loans arising from the sale of specific properties under
the scheme, the Group has developed a model for determining the
fair value of the portfolio of loans based on national property
prices, expected property price increases, expected loan defaults
and a discount factor which reflects the interest rate expected on
an instrument of similar risk and duration in the market. Details
of the key assumptions made in this valuation are as follows:
30 June 30 June
2013 2012 31 Dec 2012
------------------------------------------------- -------- -------- -----------
Assumption
Period over which shared equity loan receivables
are discounted - First Buy and Home Buy
schemes 20 years 25 years 25 years
Period over which shared equity loan receivables
are discounted - other schemes 8 years 7 years 7 years
Weighted average nominal annual property
price increase 3.1% 2.5% 2.5%
Nominal discount rate applied to initial
shared equity receivable 6.4% 5.8% 6.4%
Rate of delinquency assumed in valuation
of shared equity loan portfolio 1.0% 0.0% 1.0%
Weighted average shared equity loan as a
proportion of selling price 24.0% 24.0% 24.0%
------------------------------------------------- -------- -------- -----------
At 30 June 2013, a total of 761 (30 June 2012: 656, 31 December
2012: 730) properties had been sold under the shared equity scheme
for which a loan was outstanding at the year end.
Sensitivity analysis
At 30 June 2013, if the nominal interest rate had been 1.1%
higher at 7.5%, and all other variables were held constant, the
shared equity loan receivables would decrease in value, excluding
the effects of tax, by GBP1.1m with a corresponding reduction in
both the result for the year and equity.
At 30 June 2013, if the period over which the shared equity loan
receivables are discounted had been 25 years for the First Buy and
Home Buy schemes and 10 years for the other scheme, and all other
variables were held constant, the shared equity loan receivables
would decrease in value, excluding the effects of tax, by GBP1.3m
with a corresponding reduction in both the result for the year and
equity.
8 Net cash/(debt)
30 June 30 June
2013 2012 31 Dec 2012
GBPm GBPm GBPm
----------------------------------------- ------- ------- -----------
Cash and cash equivalents 77.3 35.9 50.4
Borrowings due after one year (33.0) (47.9) -
Non-recourse project financing due after
one year (4.6) - -
----------------------------------------- ------- ------- -----------
Net cash/(debt) 39.7 (12.0) 50.4
----------------------------------------- ------- ------- -----------
Borrowings of GBP33.0m (30 June 2012: GBP47.9m, 31 December
2012: GBPnil) were drawn down under the Group's existing loan
facilities. Whilst the amounts drawn down at the period end are
technically due for repayment within 12 months by virtue of the
drawdown mechanism, the Group may renew these loans at its own
discretion. The directors therefore consider that classification of
the loan as non-current most accurately reflects the substance of
the arrangement. The balance sheet as at 30 June 2012 has been
restated to reclassify the borrowings at that date from current
liabilities to non-current liabilities.
During the period, the Group accepted a GBP15m three-year term
loan issued from Lloyds Bank as part of the UK Government's Funding
for Lending Scheme. Total committed banking facilities are
therefore increased to GBP125m, expiring between September 2015 and
May 2016.
9 Related party transactions
During the period, Group companies entered into transactions to
provide construction and property development services with related
parties, all of which were joint ventures, not members of the
Group. All transactions were made on an arm's length basis. Other
than these transactions and the compensation of key management, the
Group has not entered into any material transactions with related
parties since the last annual report.
10 Contingent liabilities
Group banking facilities and surety bond facilities are
supported by cross guarantees given by the Company and
participating companies in the Group. There are contingent
liabilities in respect of surety bond facilities, guarantees and
claims under contracting and other arrangements, including joint
arrangements and joint ventures entered into in the normal course
of business.
11 Subsequent events
There were no subsequent events that affected the financial
statements of the Group.
Responsibility statement
The directors confirm that to the best of their knowledge:
(a) the condensed consolidated financial statements have been
prepared in accordance with IAS 34 'Interim Financial Reporting' as
adopted by the European Union;
(b) the half year report includes a fair review of the
information required by DTR 4.2.7R (indication of important events
during the first six months and description of principal risks and
uncertainties for the remaining six months of the year); and
(c) the half year report includes a fair review of the
information required by DTR 4.2.8R (disclosure of related parties'
transactions and changes therein)
By order of the Board
John Morgan Steve Crummett
Chief Executive Finance Director
5 August 2013
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR BLGDIBXGBGXD
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