TIDMMGNS
RNS Number : 9506U
Morgan Sindall Group PLC
04 August 2015
4 August 2015
MORGAN SINDALL GROUP PLC
('Morgan Sindall' or 'Group')
The Construction & Regeneration Group
RESULTS FOR THE HALF YEAR (HY) ENDED 30 JUNE 2015
HY 2015 HY 2014 % change
Revenue GBP1,152m GBP998m +15%
Profit before tax -
adjusted(1) GBP13.3m GBP14.2m -6%
Earnings per share
- adjusted(1) 24.5p 28.6p -14%
Period end net cash/(debt) (GBP8m) GBP34m
Average net debt (GBP35m) (GBP6m)
Interim dividend per
share 12.0p 12.0p -
(Loss)/profit before
tax - reported (GBP27.2m) GBP13.0m -309%
Basic (loss)/earnings
per share - reported (49.4p) 26.5p -286%
------------------------------ ------------ ---------- ----------
(1) 'Adjusted' is defined as before intangible
amortisation (GBP1.1m) and exceptional operating
items (GBP39.4m) (HY 2014: before intangible amortisation
(GBP1.2m))
Group highlights:
-- Group revenue up 15%, adjusted operating profit up 2%. Full
year expectations remain unchanged
-- Strong performance from Fit Out, with operating profit up 89%
to GBP10.4m (HY 2014: GBP5.5m) and good growth expected to continue
through the second half
-- Construction & Infrastructure adjusted operating profit
down to GBP0.3m (HY 2014: GBP5.9m), impacted by continued
challenges from older construction contracts in London and the
South. Completion taking longer than previously expected
-- Urban Regeneration operating profit up to GBP5.0m (HY 2014:
GBP3.5m) as a consequence of the ongoing and focused, long-term
investment in the development portfolio
-- Improved performance from response maintenance in Affordable
Housing, with loss reduced to GBP0.8m (HY 2014: loss GBP1.7m) and
further progress expected in the second half towards its target
break-even position by 2016
-- Further to the trading update on 7(th) May, an exceptional
charge of GBP39.4m taken as a write-down against amounts
recoverable on two old construction contracts. The charge is
non-cash in nature and commercial settlement 'in principle' reached
on one of the contracts
-- Average net debt of GBP35m reflecting the expected increase
in investment in Urban Regeneration and the regeneration activities
of Affordable Housing
-- Interim dividend held at 12.0p per share (HY 2014: 12.0p)
Commenting on today's results, Chief Executive, John Morgan
said:
"We've seen a strong performance from Fit Out in the first half
and Urban Regeneration continues to deliver good growth as a result
of our focused and long-term investment in the development
portfolio. Construction & Infrastructure continues to be
impacted by the poor performance of its older and lower margin
construction contracts in London and the South and, whilst these
are working through to completion, this is happening at a slower
rate than previously anticipated which will hold back the
divisional performance in the second half of the year. However, it
is expected that Fit Out will produce a further strong performance
in the second half, with Urban Regeneration and Affordable Housing
both making good progress.
Consequently, the Group remains on track to deliver results for
the full year in line with the Board's expectations and the outlook
for 2016 and beyond remains unchanged."
Enquiries
Morgan Sindall Group Tel: 020 7307
John Morgan 9200
Steve Crummett
Brunswick
Jonathan Glass Tel: 020 7404
Alison Kay 5959
Presentation
-- There will be an analyst and investor presentation today at
09.00 at Numis Securities Limited, The London Stock Exchange
Building, 10 Paternoster Square, London EC4M 7LT. Coffee and
registration will be from 08.45
-- A copy of these results is available at www.morgansindall.com
-- A recording of today's presentation of these results to
investors and analysts will be available at
www.morgansindall.com
Note to Editors
Morgan Sindall Group
Morgan Sindall Group plc is a leading UK Construction &
Regeneration group with a turnover of GBP2.2bn, employing around
5,700 employees and operating in the public, regulated and private
sectors. It reports through five divisions of Construction &
Infrastructure, Fit Out, Affordable Housing, Urban Regeneration and
Investments.
Group Strategy
Morgan Sindall Group's strategy is focused on two distinct but
complementary business activities: Construction and
Regeneration.
Construction activities comprise the following operations:
-- Construction & Infrastructure: Focused on the commercial,
defence, education, energy, healthcare, industrial, leisure,
retail, transport and water markets
-- Fit Out: Focused mainly on the fit out of office space with
opportunities in commercial, central and local government offices,
further education and retail banking
-- Construction and Services work within Affordable Housing:
Focused on new build house contracting and planned and response
maintenance
Regeneration activities comprise the following operations:
-- Regeneration mixed-tenure developments within Affordable
Housing: Focused on building and developing homes for open market
sale and for social/affordable rent
-- Urban Regeneration: Focused on transforming the urban
landscape through partnership working and the development of
multi-phase sites and mixed-use regeneration
-- Investments: Focused on strategic partnerships to develop
under-utilised property assets and provide the Group with
construction and regeneration opportunities
Basis of Preparation
The term 'adjusted' excludes the impact of intangible
amortisation of GBP1.1m and exceptional operating items of GBP39.4m
(HY 2014: intangible amortisation of GBP1.2m)
Group Operating Review
Revenue for the period was up 15% on the prior year at
GBP1,152m, driven by strong revenue growth in Fit Out (up 53%) and
supported by growth in Construction & Infrastructure (up 10%)
and Affordable Housing (up 5%).
The Group's total committed order book(*) as at 30 June 2015 was
GBP2.6bn, a decrease of 3% since the previous year end. Whilst
Affordable Housing grew its order book by 9% up to GBP732m, Fit Out
was down as expected from its high year end position of GBP241m, to
GBP201m. The Construction & Infrastructure order book was down
8% to GBP1,414m reflecting greater selectivity in tendering and the
transition towards more two-stage tendering work, where the
extended procurement process takes longer to convert into a signed
contract and therefore meet the strict criteria for inclusion as a
committed order. The regeneration & development pipeline(**)
remained broadly level with the year end position at GBP3.2bn.
Adjusted operating profit of GBP15.5m was 2% up on the prior
year, with adjusted operating margin of 1.3% (HY 2014: 1.5%).
There were strong profit performances from Fit Out, with an
increase in operating profit of 89% to GBP10.4m and an operating
margin of 3.5%, and Urban Regeneration which delivered an operating
profit of GBP5.0m compared to GBP3.5m in the prior year. Affordable
Housing performed in line with expectations delivering a profit of
GBP3.0m (HY 2014: GBP2.7m) and included an improved performance
from its response maintenance activities which reduced its losses
to GBP0.8m, from a GBP1.7m loss in the prior year.
Construction & Infrastructure was again impacted by lower
returns from its construction activities in London and the South,
as lower margin construction contracts procured during the more
difficult pricing environment of 2012-2013 continue being worked
through to delivery and completion. Completion of these
construction contracts has been more difficult and at a slower rate
than previously anticipated, with construction programmes now
extending into the second half. As a result, Construction &
Infrastructure delivered a significantly lower operating profit in
the period of GBP0.3m (HY 2014: GBP5.9m).
Net finance expense increased to GBP2.2m (HY 2014: GBP1.0m) due
mainly to higher net interest on a higher level of average net debt
and an increase in the amortisation of bank fees and
non-utilisation charges. This resulted in an adjusted profit before
tax of GBP13.3m (HY 2014: GBP14.2m).
It was announced in May that the Group result would include an
exceptional operating item of approximately GBP35m relating to the
impairment of trade and other receivables on two construction
contracts, both of which were transferred as part of the
acquisition of the design and project services division of Amec in
2007. Since then, commercial resolution 'in principle' has been
achieved on one of those contracts and based upon this and the
Board's best current assessment of the likely outcome on the other
contract, an exceptional item of GBP39.4m has been charged in the
period which is non-cash in nature.
After charging this exceptional operating item, the statutory
loss before tax was GBP27.2m, compared to a statutory profit before
tax in the prior year period of GBP13.0m. As a result, there is a
tax credit for the period of GBP5.5m, which is broadly in line with
the UK statutory rate.
Adjusted earnings per share of 24.5p and fully diluted adjusted
earnings per share of 24.2p were both down 14% on the prior
year.
There was an operating cash outflow of GBP53.3m in the period,
which resulted in a free cash outflow of GBP56.1m (HY 2014: outflow
of GBP39.8m). The main driver of this was the expected outflow of
working capital of GBP62.7m, which included an increase in
inventories of GBP54.2m in the regeneration activities of
Affordable Housing and in Urban Regeneration.
Consequently, the average daily net debt for the period
increased to GBP35m (HY 2014: GBP6m), of which GBP18m (HY 2014:
GBP14m) was non-recourse debt. This increase was as expected and in
line with the strategy of investing in the regeneration activities
of Urban Regeneration and Affordable Housing. The Group had net
debt of GBP8m as at 30 June 2015 (HY 2014: net cash GBP34m), which
included GBP19m of non-recourse debt (HY 2014: GBP18m).
Further continued investment is expected in the second half and
at a rate slightly higher than previously anticipated as schemes
accelerate ahead of previous plans. It is now expected that the
average daily net debt for the full year will be in the range of
GBP50m-GBP60m.
The interim dividend of 12.0p per share has been held level with
the prior year (HY 2014: 12.0p).
Outlook
There has been a strong performance from Fit Out in the first
half and Urban Regeneration continues to deliver good growth as a
result of the focused and long-term investment in the development
portfolio. Construction & Infrastructure continues to be
impacted by the poor performance of its older and lower margin
construction contracts in London and the South and, whilst these
are working through to completion, this is happening at a slower
rate than previously anticipated which will hold back the
divisional performance in the second half of the year. However, it
is expected that Fit Out will produce a further strong performance
in the second half, with Urban Regeneration and Affordable Housing
both making good progress.
Consequently, the Group remains on track to deliver results for
the full year in line with the Board's expectations and the outlook
for 2016 and beyond remains unchanged.
Business Review
The following Business Review is given on an adjusted basis,
unless otherwise stated.
Order book and regeneration & development pipeline
The Group's committed order book(*) at 30 June 2015 was
GBP2,572m, a decrease of 3% from the previous year end. The
divisional split is shown below.
Order book HY 2015 FY 2014 % change
GBPm GBPm
------------------------------- ------- ------- --------
Construction & Infrastructure 1,414 1,537 -8%
Fit Out 201 241 -17%
Affordable Housing -
construction & services 732 673 +9%
Urban Regeneration 212 197 +8%
Investments 17 19 -11%
Inter-divisional elims (4) (9)
------------------------------- ------- ------- --------
Group committed order
book 2,572 2,658 -3%
------------------------------- ------- ------- --------
(*) "Committed order book" comprises the secured order book and
framework order book. The secured order book represents the Group's
share of future revenue that will be derived from signed contracts
or letters of intent. The framework order book represents the
Group's expected share of revenue from the frameworks on which the
Group has been appointed. This excludes prospects where
confirmation has been received as preferred bidder only, with no
formal contract or letter of intent in place.
In addition, the Group's regeneration & development
pipeline(**) was GBP3,209m, a decrease of 1% on the previous year
end.
Regeneration & development HY 2015 FY 2014
pipeline GBPm GBPm % change
---------------------------- ------- ------- --------
Affordable Housing -
mixed-tenure 761 770 -1%
Urban Regeneration 2,245 2,215 +1%
Investments 203 242 -16%
---------------------------- ------- ------- --------
Group regeneration &
development pipeline 3,209 3,227 -1%
---------------------------- ------- ------- --------
(**) "Regeneration & development pipeline" represents the
Group's share of the gross development value of secured schemes
including the development value of open market housing schemes.
Construction & Infrastructure
HY 2015 HY 2014 % change
GBPm GBPm
------------------------------ ------- ------- --------
Revenue 623 567 +10%
Operating profit - adjusted 0.3 5.9 -95%
Operating margin - adjusted - 1.0% -100bps
------------------------------ ------- ------- --------
The Construction & Infrastructure result for the period was
down significantly on the prior year and was again adversely
impacted by the poor performance of the London and South
construction activities.
Divisional revenue of GBP623m was up 10% on the prior year (HY
2014: GBP567m). Split by type of activity, Construction accounted
for 56% of divisional revenue at GBP348m, which was up 20% compared
to the prior year, whilst Infrastructure was 44% of divisional
revenue at GBP275m, down 1% on the prior year.
Within Construction, Scotland and the North have both performed
well compared to prior year with the current higher quality work
starting to deliver margin improvements, whilst the East region has
maintained its already strong margin performance and is
experiencing similar increases in overall activity. The South West
region has also seen an upturn in activity, albeit from a
relatively low base, however London and the South East have
continued to significantly underperform.
London and the South East construction revenue in the period was
GBP48m, down 7% on prior year. At the full year results in
February, it was announced that delivery pressures during the
second half of 2014 had resulted in an escalation of costs and
increased forecast costs to complete which had adversely impacted
profitability and margin. These related mainly to a small number of
construction contracts which were due to complete within the first
half of 2015 and which had experienced programme slippage and
increases in costs. In addition, generally lower returns were
expected for at least the first half as the lower margin
construction contracts procured during the more difficult pricing
environment of 2012-2013 were being worked through to delivery and
completion.
Since then, although completion has been successfully achieved
on many of these contracts and particularly on some of the larger,
more difficult and complex projects, some final accounts still
require settlement and progress on others has been slower than
expected, with further delays now extending into the second half.
As a result, the continued low margin returns from these contracts
as they work through will more than off-set the benefit of improved
margins being produced elsewhere in the construction activities,
thereby impacting the overall divisional performance.
As a result of the ongoing poor performance, activities in the
London and the South East region have been reduced, with new
business activity being limited to mainly frameworks or bidding
opportunities involving either Investments or Urban Regeneration.
The combined order book for London and the South East at 30 June
was GBP58m, down 22% from the year end position and the regional
overhead has been reduced accordingly to match this level of
activity to improve performance and provide a competitive and
sustainable platform for the business going forward.
Due to the timing and localised nature of the issues in London
and the South East, together with the improving performance in the
other regional construction activities, confidence remains that
2016 and beyond will see a gradual reversion back to more
normalised construction margins.
In Infrastructure, activity levels on the division's existing
Utility Services frameworks in Water and Energy have increased and
at Sellafield, the provision of a range of new build and
decommissioning services through its joint venture Infrastructure
Strategic Alliance contract continues to progress. In other
activities, further progress has been made in pursuing
opportunities in Transport (Highways, Aviation and Rail) and
Tunnelling; in Transport, the division was appointed by Heathrow
Airport to work on the GBP16m improvement project on phase one of
the Sierra Taxiway, which runs just off the Southern Runway and
connects the cargo areas at Heathrow and the runway to Terminal 4;
in Highways, the division commenced work in joint venture on the
GBP290m A6 Manchester Airport Relief Road to provide c10km of dual
carriageway; and in Tunnelling, the division was awarded preferred
bidder status, in joint venture, on the GBP300m-GBP500m West
section of the Thames Tideway Tunnel.
The committed order book for the division at the period end was
GBP1,414m, down 8% since the start of the year. The movement
reflects the greater selectivity in tendering and the transition
towards more two-stage tendering work, where the extended
procurement process takes longer to convert into a signed contract
and therefore meet the strict criteria for inclusion as a committed
order. As at 30 June, 86% by value of the order book is derived
through negotiated/framework/two-stage bidding procurement
processes.
It was announced in May that the results would include an
exceptional operating item of approximately GBP35m relating to the
impairment of trade and other receivables on two construction
contracts, both of which were transferred as part of the
acquisition of the design and project services division of Amec in
2007. Both contracts have the Secretary of State for Defence as the
overall employing party. One contract relates to the design and
construction of a floating jetty, the other to the design and
construction of living accommodation and infrastructure, both
around the Faslane Naval Base in West Scotland.
Since May, commercial resolution 'in principle' has been
achieved on one of those contracts, being the design and
construction of living accommodation and infrastructure. Based upon
this and the Board's best current assessment of the likely outcome
on the other contract, an exceptional item of GBP39.4m has been
charged in the period which is non-cash in nature.
Fit Out
HY 2015 HY 2014 % change
GBPm GBPm
----------------------------- ------- ------- --------
Revenue 299 195 +53%
Operating profit - adjusted 10.4 5.5 +89%
Operating margin - adjusted 3.5% 2.8% +70bps
----------------------------- ------- ------- --------
Fit Out delivered a very strong performance in the period, with
revenue of GBP299m (HY 2014: GBP195m) up 53%, with operating margin
increasing to 3.5%, resulting in operating profit of GBP10.4m (HY
2014: GBP5.5m), up 89%.
The fit out market has experienced significant activity during
the period and there remain attractive tendering opportunities
going into the second half, although bidding remains competitive.
The margin increase of 70bps, up to 3.5% in the period, has been
driven primarily by improved operational efficiency in project
delivery, however supported also by a general improvement in
negotiated terms on some projects.
The London region remains the most significant, accounting for
73% of revenue (HY 2014: 75%), with other regions at 27% (HY 2014:
25%). Split by type of work, 81% of revenue was traditional fit out
work (HY 2014: 79%), compared to 19% 'design and build' (HY 2014:
21%), whilst 76% of revenue related to fitting out of existing
space (34% refurbishment 'in occupation'), compared to 24% which
was new office fit out.
There have been no material changes to end market sectors
served, with commercial offices (82% of revenue) remaining the most
important market. Higher education at 8% of revenue is the second
largest, with retail banking, government and local authority work
and work for charitable organisations being the others. Examples of
projects delivered in the period are the Cat A and Cat B fit out
for Microsoft in Paddington, London and the 20 week fit out of
players' facilities and media areas for The All England Lawn Tennis
Club in Wimbledon, London, ahead of The Championships 2015.
The committed order book as at 30 June was GBP201m, 17% down
from the high year end position. Due to the relatively short term
nature of the order book, this decrease is not indicative of any
underlying trends and looking ahead to the second half, the overall
level of secured revenue together with the operational delivery
capability provides confidence of a continued strong
performance.
Affordable Housing
HY 2015 HY 2014 % change
GBPm GBPm
----------------------------- ------- ------- --------
Revenue 202 193 +5%
Operating profit - adjusted 3.0 2.7 +11%
Operating margin - adjusted 1.5% 1.4% +10bps
----------------------------- ------- ------- --------
Total divisional revenue of GBP202m was up 5% (HY 2014:
GBP193m), whilst operating profit of GBP3.0m was up 11% on the
prior year (HY 2014: GBP2.7m).
Affordable Housing's activities are divided into two main
categories: Regeneration (22% of revenue) which refers to the
division's mixed-tenure regeneration housing schemes; and
Construction & Services (78% of revenue) which includes new
build housing contracting and planned and response maintenance
services. Together, the division delivers a full range of housing
solutions for its partners and customers.
On the Regeneration side, revenue was down 8% to GBP44.0m (HY
2014: GBP47.8m) with an operating profit of GBP3.3m. 76% of this
revenue related to 195 (HY 2014: 233) open market sales completions
at an average sales price of GBP171k, whilst 24% of revenue related
to approximately 100 units through the social housing contracting
element of the mixed-tenure schemes. The lower level of open market
sales compared to the prior year was expected and is a result of
the current phases of the mixed-tenure developments. The second
half of the year is expected to see a significant increase in unit
sales, as construction completions accelerate through the third
quarter to deliver sales completions in the fourth quarter.
Capital employed in the Regeneration activities at the period
end was GBP150m, up from GBP123m at the year end, with GBP23m of
this increase being the investment in development schemes for
future open market sales in the second half of 2015 but also into
2016 and beyond. The regeneration and development pipeline at the
period end was GBP761m (FY 2014: GBP770m).
In Construction & Services, the increase in new-build
housing contracting revenue of GBP77.1m (HY 2014: GBP57.0m)
compared to prior year was driven by a full period of activity at
MOD Stafford, a GBP51m contract for 346 new homes for Army families
returning to the UK. Tender margins remain highly competitive in
contracting, whilst planned maintenance revenue of GBP49.8m (HY
2014: GBP55.1m) remains broadly steady and an important offering to
local authorities and housing associations.
Although response maintenance revenue was down 6% to GBP31.5m
(HY 2014: GBP33.5m), the operating losses have reduced
significantly to a loss of GBP0.8m (HY 2014: loss GBP1.7m).
Improvements have been based primarily on operational efficiency,
contract management and overhead management, supported by the
investment made in a new business system which is now live in the
market. The key focus for the second half of the year is on winning
new business at appropriate margins to build the critical mass and
the business remains on track to deliver its plan to achieve a
minimum of break-even by 2016.
The committed order book for Construction & Services at the
period end was GBP732m (FY 2014: GBP673m), an increase of 9%. Of
this, response maintenance accounted for GBP366m (FY 2014:
GBP355m). Notable wins include a GBP20m home improvement planned
maintenance programme for Chevin Housing Association in Yorkshire
and a GBP24m new-build contract for 221 new council homes for North
Lanarkshire Council.
Urban Regeneration
HY 2015 HY 2014 % change
GBPm GBPm
----------------------------- ------- ------- --------
Average capital employed(1)
(last 12 months) 58.3 51.0
Capital employed(1)
at period end 83.5 39.0
Revenue 26 42 -38%
Operating profit - adjusted 5.0 3.5 +43%
----------------------------- ------- ------- --------
Urban Regeneration has delivered a further strong performance in
the period, with operating profit up to GBP5.0m (HY 2014: GBP3.5m),
reflecting the benefit derived from the ongoing investment
programme in the development portfolio.
Capital employed(1) at the period end was GBP83.5m, up from
GBP49.4m at the year end. This is calculated after deducting
non-recourse debt of GBP18.5m and deferred consideration on the
purchase of interests in the ISIS Waterside Regeneration Joint
Venture (ISIS) of GBP13.8m. Average capital employed(1) for the
trailing twelve month period ('LTM') was GBP58.3m, with the overall
LTM Return On Average Capital Employed(2) of 16%.
Major contributors in the period include completions in the
first phase of the ISIS residential scheme Brentford Lock West (a
joint venture with the Canal and River Trust), further residential
sales from the Vimto Gardens development (part of English Cities
Fund's (ECf) Salford Central regeneration scheme - a joint venture
with Legal and General and the Homes and Communities Agency) and
the sale of remaining units in phase two of ECf's Rathbone Market
scheme in Canning Town.
The regeneration and development pipeline as at the period end
was GBP2,245m, up 1% from the year end and from this pipeline, the
division is expected to continue delivering strong profits as
schemes develop and as further working capital is invested through
the second half of 2015 and 2016
(1) Capital employed is calculated as total assets (excluding
goodwill, intangibles and cash) less total liabilities (excluding
corporation tax, deferred tax and inter-company financing). At the
period end, non-recourse debt was GBP18.5m (HY 2014: 18.3m) and
deferred consideration was GBP13.8m (HY 2014: GBP18.0m). LTM
average non-recourse debt was GBP18.2m (HY 2014: GBP10.9m) and LTM
average deferred consideration was GBP13.6m (HY 2014:
GBP18.0m).
(2) Return On Average Capital Employed = (Adjusted operating
profit less interest on non-recourse debt less unwind of discount
on deferred consideration) divided by (average capital employed).
LTM interest on non-recourse debt was GBP1.5m (HY 2014: LTM
GBP0.5m) and the unwind of discount on deferred consideration was
LTM GBP0.5m (HY 2014: LTM GBP0.5m).
Investments
HY 2015 HY 2014 % change
GBPm GBPm
----------------------------- ------- ------- --------
Average capital employed(1)
(last 12 months) 19.0 18.9
Capital employed(1)
at period end 15.4 14.8
Operating profit - adjusted 0.4 1.3 -69%
----------------------------- ------- ------- --------
The strategic rationale for Investments is to unlock prime
long-term construction and regeneration opportunities for other
divisions and create value from investments for the Group. For
2015, approximately GBP150m of construction work is targeted to be
secured for Group divisions, primarily for Construction &
Infrastructure but also opportunities for Affordable Housing.
During the period, Investments made a small profit of GBP0.4m
generated principally from its interests in joint ventures and
Local Asset Backed Vehicle (LABV) schemes. This included achieving
legal completion on c60 residential units in the Bournemouth Town
Centre LABV and reaching financial close on a number of sites in
the division's HB Villages 'supported living' joint venture. The
second half is expected to show an operating loss due to the
phasing of schemes, with the overall result for the year expected
to be an operating loss of between GBP1m-GBP2m.
Capital employed at the period end was GBP15.4m, slightly up on
the prior year position, however down from GBP20.2m at the year
end. The reduction in the period was primarily due to achieving
practical completion on the Towcester mixed-use Regeneration and
Civic Accommodation project. LTM average capital employed was
GBP19.0m.
(1) Capital employed = total assets (excluding goodwill,
intangibles, corporation tax credit and cash) less total
liabilities.
Note: Capital is invested in a number of schemes including
GBP5.6m in HB Villages (a joint venture focused on care and
supported living), GBP4.4m in regeneration projects (including
GBP2.2m in LABVs), GBP3.0m in PFI-type investments and GBP2.2m in
the Wellspring Partnership, which is delivering public sector
healthcare and education projects in Scotland.
Directors' valuation of investments can only be made in
circumstances where future cash flows are near certain. The
Investments division holds a number of interests in developments,
arrangements and schemes which are included in "capital employed".
Where directors' valuation is appropriate, current valuation is
GBP3.0m relating to 2 investments with carrying value of
GBP3.0m.
Other Financial Information
Net finance expense. Net finance expense was GBP2.2m, a GBP1.2m
increase versus HY 2014 which is broken down as follows:
HY 2015 HY 2014 % change
GBPm GBPm
--------------------------- ------- ------- --------
Net interest charge
on net debt (1.2) (0.7) -71%
Amortisation of bank
fees & non-utilisation
fees (1.0) (0.6) -67%
Interest from JVs 0.4 0.3 +33%
Other (0.4) - -
Total net finance expense (2.2) (1.0) -120%
--------------------------- ------- ------- --------
Tax. A tax credit of GBP5.5m is shown for the six month period
(HY 2014: charge of GBP1.8m).
HY 2015 HY 2014
GBPm GBPm
-------------------------------- -------- -------
(Loss)/profit before
tax (27.2) 13.0
Less: share of net profit
in taxed joint ventures(#) (0.5) (0.5)
Less: gains on disposal
of joint ventures - (1.7)
(Loss)/profit subject
to tax (27.7) 10.8
Statutory tax rate 20.25% 21.5%
Current tax credit/(charge)
at statutory rate 5.6 (2.3)
Other adjustments (0.1) 0.5
Tax credit/(charge) 5.5 (1.8)
-------------------------------- -------- -------
(#) certain of the Group's joint ventures
are reported net of tax. Other joint ventures
are partnerships where profits are taxed
within the Group rather than the joint
venture
Net working capital. 'Net Working Capital' is defined as
'Inventories plus Trade & Other Receivables, less Trade &
Other Payables, adjusted to exclude deferred consideration payable,
accrued interest and capitalised arrangement fees.
HY 2015 HY 2014
GBPm GBPm
-------------------------------- ------- -------
Inventories 256.4 182.6
Trade & Other Receivables 455.0 422.3
Trade & Other Payables (703.9) (630.9)
Net working capital - adjusted 7.5 (26.0)
Exceptional operating items (39.4) -
Net working capital - reported (31.9) (26.0)
-------------------------------- ------- -------
Cash flow. Operating cash flow was an outflow of GBP53.3m, with
a free cash outflow of GBP56.1m.
HY 2015 HY 2014
GBPm GBPm
------------------------------------------ ------- -------
Operating profit - adjusted 15.5 15.2
Depreciation 2.6 2.3
Share option expense 0.8 0.8
Movement in fair value of shared
equity loans (0.6) (0.6)
Gains on disposal of joint ventures - (1.7)
Share of net profit of joint
ventures (5.1) (2.5)
Gain on disposal of PPE - (0.2)
Other operating items* (0.6) (5.8)
Change in working capital (62.7) (41.2)
Net capital expenditure (including
repayment of finance leases) (4.1) (4.3)
Dividends and interest received
from joint ventures 0.9 0.9
Operating cash flow (53.3) (37.1)
Income taxes paid (1.3) (1.8)
Net interest paid (non-joint
venture) (1.5) (0.9)
Free cash flow (56.1) (39.8)
------------------------------------------ ------- -------
*Other operating items in 2014 includes property dilapidation
provisions released to the income statement within the
Construction
& Infrastructure division
Net debt. Net debt at the end of the period was GBP7.6m, as a
result of a net cash outflow of GBP63.3m from 1 January 2015.
GBPm
-------------------------- ------
Net cash as at 1 January
2015 55.7
Free cash flow (56.1)
Dividends (6.6)
Other (0.6)
Net debt as at 30
June 2015 (7.6)
-------------------------- ------
Capital employed by strategic activity.
An analysis of the negative capital employed in the Construction
activities shows a decrease of GBP27.1m since the year end, split
as follows:
Capital employed(1) HY 2015 FY 2014 Change
in Construction GBPm GBPm GBPm
------------------------------- -------- -------- ---------
Construction & Infrastructure (132.9) (102.7) -30.2(2)
Fit Out (39.6) (41.6) +2.0
Affordable Housing -
Construction & Services (30.6) (31.7) +1.1
------------------------------- -------- -------- ---------
(203.1) (176.0) -27.1
------------------------------- -------- -------- ---------
An analysis of capital employed in the Regeneration activities
shows an increase of GBP56.5m since the year end, split as
follows:
Capital employed HY 2015 FY 2014 Change
in Regeneration GBPm GBPm GBPm
----------------------- -------- -------- -------
Affordable Housing
- mixed tenure(1) 149.9 122.7 +27.2
Urban Regeneration(3) 83.5 49.4 +34.1
Investments(1) 15.4 20.2 -4.8
----------------------- -------- -------- -------
248.8 192.3 +56.5
----------------------- -------- -------- -------
1 Definition as per the Investments section in the Business
Review
2 includes the impact of the exceptional operating item of
GBP39.4m
3 Definition as per the Urban Regeneration section in the
Business Review
Dividends. The Board of Directors has approved an interim
dividend of 12.0p per share (HY 2014: 12.0p), level with the prior
year.
Principal risks and uncertainties.
The Group has a clear and established risk framework in place
for managing its risks. The framework is designed and operated to
identify, control and mitigate any threat to the Group achieving
its goals. The framework and the risks including details of the
mitigations taken to manage them are set out more fully in the risk
review in the Group's 2014 annual report and have not changed since
then. A summary of the principal risks and uncertainties that the
directors consider may have a material impact on the Group's
performance are:
-- Markets: The markets in which the Group operates are affected to varying degrees by general macro-economic conditions. The Group is therefore focused on capitalising on the improving economic conditions and shaping the business to take account of future growth indicators. However, there is a risk that business opportunities within the Group's strategy may be delayed.
-- People: The Group's performance and business conduct affects
employees, subcontractors and the public and, in turn, can affect
its reputation and commercial performance. The Group prides itself
on its industry-leading practices and works in some high profile
and technically challenging environments. As markets emerge from
recession employee turnover has increased. If the Group does not
succeed in attracting and retaining the right talent for its future
needs it will not be able to develop the business as
anticipated.
-- Winning in our markets: 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 contracts and that these risks are
effectively managed.
-- Maximise efficiency: If employees are not properly engaged
with the culture of the business, clients are less likely to
receive exceptional levels of service.
-- Disciplined use of capital: 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. In a rising market there is an increased risk
that the Group's counterparties overtrade which could affect their
liquidity.
-- Pursue innovation: The Group is committed to offering
customers innovative and cost-effective solutions. If it fails to
encourage an innovative approach across the Group it will lose its
competitive edge and suffer reputational damage. This is coupled
with the risk that the Group's systems will not provide appropriate
security levels or resilience needed to ensure reliable levels of
business continuity.
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.
Condensed consolidated income statement
For the six months ended 30 June 2015
Six months
Six months to to Year ended
30 June 31 Dec
30 June 2015 (unaudited) 2014 2014
Before Exceptional (unaudited) (audited)
exceptional operating
items items Total Total Total
Notes GBPm GBPm GBPm GBPm GBPm
-------------------------------- ----- ----------- ----------- --------- ----------- ----------
Revenue 1,152.0 - 1,152.0 998.5 2,219.8
Cost of sales (1,056.1) (39.4) (1,095.5) (914.9) (2,038.8)
-------------------------------- ----- ----------- ----------- --------- ----------- ----------
Gross profit 95.9 (39.4) 56.5 83.6 181.0
Administrative expenses (85.5) - (85.5) (72.6) (160.3)
Share of net profit of
joint ventures 5.1 - 5.1 2.5 6.3
Other gains and losses - - - 1.7 1.9
-------------------------------- ----- ----------- ----------- --------- ----------- ----------
Operating (loss)/profit
before intangible amortisation 15.5 (39.4) (23.9) 15.2 28.9
-------------------------------- ----- ----------- ----------- --------- ----------- ----------
Intangible amortisation (1.1) - (1.1) (1.2) (2.4)
-------------------------------- ----- ----------- ----------- --------- ----------- ----------
Operating (loss)/profit 14.4 (39.4) (25.0) 14.0 26.5
Finance income 0.5 - 0.5 0.8 1.0
Finance costs (2.7) - (2.7) (1.8) (4.7)
-------------------------------- ----- ----------- ----------- --------- ----------- ----------
(Loss)/profit before
tax 12.2 (39.4) (27.2) 13.0 22.8
Tax 1 (2.5) 8.0 5.5 (1.8) (4.8)
-------------------------------- ----- ----------- ----------- --------- ----------- ----------
(Loss)/profit for the
period 9.7 (31.4) (21.7) 11.2 18.0
-------------------------------- ----- ----------- ----------- --------- ----------- ----------
Attributable to:
Owners of the Company 9.8 (31.4) (21.6) 11.3 18.1
Non-controlling interests (0.1) - (0.1) (0.1) (0.1)
-------------------------------- ----- ----------- ----------- --------- ----------- ----------
(Loss)/profit for the
period 9.7 (31.4) (21.7) 11.2 18.0
-------------------------------- ----- ----------- ----------- --------- ----------- ----------
(Loss)/earnings per share
Basic 5 (49.4p) 26.5p 42.3p
Diluted 5 (48.9p) 26.0p 41.6p
-------------------------------- ----- ----------- ----------- --------- ----------- ----------
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 2015
Six months Six months
to to Year ended
30 June 30 June 31 Dec
2015 2014 2014
(unaudited) (unaudited) (audited)
GBPm GBPm GBPm
----------------------------------------- ----------- ----------- ----------
(Loss)/profit for the period (21.7) 11.2 18.0
Items that will not be reclassified
subsequently to profit or loss:
Actuarial gain arising on defined
benefit obligation 0.1 - 0.1
Income tax relating to items not
reclassified - - (0.2)
Items that may be reclassified
subsequently to profit or loss:
Movement on cash flow hedges in
equity accounted joint ventures - (0.1) (0.2)
Foreign exchange movement on translation
of overseas operation 0.1 (0.1) (0.2)
0.1 (0.2) (0.4)
----------------------------------------- ----------- ----------- ----------
Other comprehensive income/(expense) 0.2 (0.2) (0.5)
----------------------------------------- ----------- ----------- ----------
Total comprehensive (expense)/income (21.5) 11.0 17.5
----------------------------------------- ----------- ----------- ----------
Attributable to:
Owners of the Company (21.4) 11.1 17.6
Non-controlling interests (0.1) (0.1) (0.1)
----------------------------------------- ----------- ----------- ----------
Total comprehensive (expense)/income (21.5) 11.0 17.5
----------------------------------------- ----------- ----------- ----------
Condensed consolidated balance sheet
At 30 June 2015
30 June 30 June 31 Dec
2015 2014 2014
(unaudited) (unaudited) (audited)
Notes GBPm GBPm GBPm
------------------------------- ----- ----------- ----------- ---------
Assets
Goodwill and other intangible
assets 217.7 219.3 218.1
Property, plant and equipment 19.8 19.8 19.2
Investment property 9.5 9.8 9.5
Investments in joint ventures 61.5 47.2 55.0
Other investments - 0.4 0.3
Shared equity loan receivables 6 20.6 20.1 20.4
Retirement benefit asset 1.2 0.3 0.8
------------------------------- ----- ----------- ----------- ---------
Non-current assets 330.3 316.9 323.3
Inventories 256.4 182.6 202.2
Trade and other receivables 7 416.8 422.4 442.4
Cash and cash equivalents 8 84.9 72.4 87.6
Current assets 758.1 677.4 732.2
------------------------------- ----- ----------- ----------- ---------
Total assets 1,088.4 994.3 1,055.5
------------------------------- ----- ----------- ----------- ---------
Liabilities
Trade and other payables 9 (696.0) (628.2) (690.1)
Current tax liabilities (3.9) (5.6) (5.2)
Finance lease liabilities (1.7) (1.5) (1.6)
Borrowings 8 (18.5) - -
Provisions (0.7) (1.5) (1.2)
Current liabilities (720.8) (636.8) (698.1)
------------------------------- ----- ----------- ----------- ---------
Trade and other payables (22.3) (20.8) (22.0)
Finance lease liabilities (2.2) (3.2) (2.5)
Borrowings 8 (74.0) (38.3) (31.9)
Deferred tax liabilities (11.0) (15.7) (16.5)
Provisions (16.4) (17.0) (16.6)
------------------------------- ----- ----------- ----------- ---------
Non-current liabilities (125.9) (95.0) (89.5)
------------------------------- ----- ----------- ----------- ---------
Total liabilities (846.7) (731.8) (787.6)
------------------------------- ----- ----------- ----------- ---------
Net assets 241.7 262.5 267.9
------------------------------- ----- ----------- ----------- ---------
Equity
Share capital 2.2 2.2 2.2
Share premium account 31.9 27.0 30.9
Other reserves (0.7) (0.6) (0.8)
Retained earnings 209.0 234.5 236.2
------------------------------- ----- ----------- ----------- ---------
Equity attributable to owners
of the Company 242.4 263.1 268.5
Non-controlling interests (0.7) (0.6) (0.6)
------------------------------- ----- ----------- ----------- ---------
Total equity 241.7 262.5 267.9
------------------------------- ----- ----------- ----------- ---------
Condensed consolidated cash flow statement
For the six months ended 30 June 2015
Six months Six months
to to Year ended
30 June 30 June 31 Dec
2015 2014 2014
(unaudited) (unaudited) (audited)
Notes GBPm GBPm GBPm
-------------------------------------- ------ ----------- ----------- ----------
Operating activities
Operating (loss)/profit (25.0) 14.0 26.5
Adjusted for:
Amortisation of intangible assets 1.1 1.2 2.4
Share of net profit of equity
accounted joint ventures (5.1) (2.5) (6.3)
Depreciation 2.6 2.3 4.8
Share option expense 0.8 0.8 0.7
Profit on disposal of interests
in joint ventures - (1.7) (1.9)
Gain on disposal of property,
plant and equipment - (0.2) (0.2)
Movement in fair value of shared
equity loan receivables (0.6) (0.6) (1.8)
Non-cash impairment of investments - - 1.0
Non-cash exceptional operating
items 39.4 - -
Additional pension contributions (0.3) (0.3) (0.7)
Disposals of investment properties - 0.2 0.5
Disposal of shared equity loan
receivables 0.4 0.2 1.1
Decrease in provisions (0.7) (5.9) (6.6)
---------------------------------------------- ----------- ----------- ----------
Operating cash flows before
movements in working capital 12.6 7.5 19.5
Increase in inventories (54.2) (21.6) (41.2)
Increase in receivables (14.1) (37.3) (55.7)
Increase in payables 5.6 17.7 85.1
---------------------------------------------- ----------- ----------- ----------
Movements in working capital (62.7) (41.2) (11.8)
---------------------------------------------- ----------- ----------- ----------
Cash (outflow)/inflow from operations (50.1) (33.7) 7.7
---------------------------------------------- ----------- ----------- ----------
Income taxes paid (1.3) (1.8) (4.4)
---------------------------------------------- ----------- ----------- ----------
Net cash (outflow)/inflow from
operating activities (51.4) (35.5) 3.3
---------------------------------------------- ----------- ----------- ----------
Investing activities
Interest received 0.5 0.8 0.9
Dividend from joint ventures 0.5 0.6 0.8
Proceeds on disposal of property,
plant and equipment - 0.3 0.4
Purchases of property, plant
and equipment (3.5) (3.8) (5.7)
Net payments to acquire or increase
interests in joint ventures (2.0) - (6.0)
Proceeds on disposal of interests
in joint ventures - 4.6 5.9
Proceeds on disposal of other
investments - 5.9 0.3
Net cash (outflow)/inflow from
investing activities (4.5) 8.4 (3.4)
------------------------------------ ----- ------ ------
Financing activities
Interest paid (1.6) (1.4) (4.9)
Dividends paid 4(6.6) (6.4) (11.5)
Repayments of obligations under
finance leases (0.6) (0.8) (1.5)
Proceeds from long-term borrowings 8 60.6 15.2 8.8
Proceeds on issue of share capital 1.0 0.1 4.0
Proceeds on exercise of share
options 0.4 - -
------------------------------------ ----- ------ ------
Net cash inflow/(outflow) from
financing activities 53.2 6.7 (5.1)
------------------------------------ ----- ------ ------
Net decrease in cash and cash
equivalents (2.7) (20.4) (5.2)
Cash and cash equivalents at
the beginning of the period 87.6 92.8 92.8
------------------------------------ ----- ------ ------
Cash and cash equivalents at
the end of the period 8 84.9 72.4 87.6
------------------------------------ ----- ------ ------
Condensed consolidated statement of changes in equity
For the six months ended 30 June 2015
Share
Share premium Other Retained Non-controlling Total
capital account reserves earnings Total interests equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------- -------- -------- --------- --------- ------ --------------- -------
1 January 2015 2.2 30.9 (0.8) 236.2 268.5 (0.6) 267.9
Total comprehensive expense - - 0.1 (21.5) (21.4) (0.1) (21.5)
Share option expense - - - 0.8 0.8 - 0.8
Issue of shares at a premium - 1.0 - - 1.0 - 1.0
Exercise of share options - - - 0.1 0.1 - 0.1
Dividends paid - - - (6.6) (6.6) - (6.6)
30 June 2015 (unaudited) 2.2 31.9 (0.7) 209.0 242.4 (0.7) 241.7
------------------------------- -------- -------- --------- --------- ------ --------------- -------
Share
Share premium Other Retained Non-controlling Total
capital account reserves earnings Total interests equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------- -------- -------- --------- --------- ----- --------------- -------
1 January 2014 2.2 26.9 (0.4) 228.8 257.5 (0.5) 257.0
Total comprehensive income - - (0.2) 11.3 11.1 (0.1) 11.0
Share option expense - - - 0.8 0.8 - 0.8
Issue of shares at a premium - 0.1 - - 0.1 - 0.1
Dividends paid - - - (6.4) (6.4) - (6.4)
------------------------------- -------- -------- --------- --------- ----- --------------- -------
30 June 2014 (unaudited) 2.2 27.0 (0.6) 234.5 263.1 (0.6) 262.5
------------------------------- -------- -------- --------- --------- ----- --------------- -------
Share
Share premium Other Retained Non-controlling Total
capital account reserves earnings Total interests equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------- -------- -------- --------- --------- ------ --------------- -------
1 January 2014 2.2 26.9 (0.4) 228.8 257.5 (0.5) 257.0
Total comprehensive income - - (0.4) 18.0 17.6 (0.1) 17.5
Share option expense - - - 0.7 0.7 - 0.7
Tax relating to share option - - - 0.2 0.2 - 0.2
Issue of shares at a premium - 4.0 - - 4.0 - 4.0
Dividends paid - - - (11.5) (11.5) - (11.5)
------------------------------- -------- -------- --------- --------- ------ --------------- -------
31 December 2014 (audited) 2.2 30.9 (0.8) 236.2 268.5 (0.6) 267.9
------------------------------- -------- -------- --------- --------- ------ --------------- -------
Other reserves
Other reserves include:
-- Capital redemption reserve of GBP0.6m (30 June 2014: GBP0.6m,
31 December 2014: GBP0.6m) which was created on the redemption of
preference shares in 2003.
-- Hedging reserve of (GBP0.8m) (30 June 2014: (GBP0.7m), 31
December 2014: (GBP0.8m)) arising 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 ventures.
-- Translation reserve of (GBP0.5m) (30 June 2014: (GBP0.5m), 31
December 2014: (GBP0.6m)) arising on the translation of overseas
operations into the Group's functional currency.
Retained earnings
Retained earnings include shares that 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 2015 was 487,668 (30 June 2014: 545,767, 31
December 2014: 545,767) with a cost of GBP3.7m (30 June 2014:
GBP4.1m, 31 December 2014: GBP4.1m).
Notes to the condensed consolidated financial statements
For the six months ended 30 June 2015
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 2014 as defined in section 434 of the Companies Act
2006. 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 section 498(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 2015 and 2014 and for the six months ended 30 June 2015
and 2014 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 year, the Group has adopted Annual Improvements
2011 - 2013 Cycle which has not had a material impact on the
Group's results. 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 GBP5.5m is shown for the six month period (six
months to 30 June 2014: charge of GBP1.8m, year ended 31 December
2014: charge of GBP4.8m). This tax credit is recognised based upon
the best estimate of the average income tax rate on profit/(loss)
before tax expected for the full financial 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 & Infrastructure, Fit Out,
Affordable Housing, Urban Regeneration and Investments. The
divisions' activities are as follows:
-- Construction & Infrastructure: offers national design,
construction and infrastructure services to private and public
sector clients. The division works on projects, and in frameworks
and strategic alliances of all sizes across a broad range of
markets including commercial, defence, education, energy,
healthcare, industrial, leisure, retail, transport and water.
-- Fit Out: specialises in fit out and refurbishment projects in
the commercial, central and local government office, further
education and retail banking markets. Overbury operates as a
national fit out company through multiple procurement routes and
Morgan Lovell offers a turnkey design and build service in office
interior design, fit out and refurbishment.
-- Affordable Housing: specialises in the design and build,
planned and response 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 and residential-led projects. Typically creates
commercial, retail, residential, leisure and public realm
facilities.
-- Investments: realises the potential for under-utilised
property assets and promotes economic growth, primarily through
strategic partnerships with the public sector, by providing
flexible structuring and funding solutions and development
expertise. The division covers a wide range of markets including
asset backed, education, health and social care, residential,
student accommodation, leisure and infrastructure.
Group Activities represents costs and income arising from
corporate activities which cannot be meaningfully allocated to the
operating segments. These include costs such as treasury
management, corporate tax coordination, insurance management 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
2015
----------------- ---------------- ----- ---------- ------------- ----------- ----------- ------------ -------
Construction Fit Affordable Urban Group
& Infrastructure Out Housing Regeneration Investments Activities Eliminations Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
----------------- ---------------- ----- ---------- ------------- ----------- ----------- ------------ -------
External revenue 621.4 293.4 202.4 25.8 9.0 - - 1,152.0
Inter-segment
revenue 1.8 5.2 - - - - (7.0) -
----------------- ---------------- ----- ---------- ------------- ----------- ----------- ------------ -------
Total revenue 623.2 298.6 202.4 25.8 9.0 - (7.0) 1,152.0
Operating
profit/(loss)
before
amortisation
of intangible
assets and
exceptional
operating
items 0.3 10.4 3.0 5.0 0.4 (3.6) - 15.5
----------------- ---------------- ----- ---------- ------------- ----------- ----------- ------------ -------
Amortisation
of intangible
assets - - (0.3) (0.8) - - - (1.1)
Exceptional
operating
items (39.4) - - - - - - (39.4)
----------------- ---------------- ----- ---------- ------------- ----------- ----------- ------------ -------
Operating
(loss)/profit (39.1) 10.4 2.7 4.2 0.4 (3.6) - (25.0)
----------------- ---------------- ----- ---------- ------------- ----------- ----------- ------------ -------
Six months
to 30 June
2014
-------------- -------------- ----- ---------- ------------ ----------- ---------- ------------ -------
Construction
& Fit Affordable Urban Group
Infrastructure Out Housing Regeneration Investments Activities Eliminations Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
-------------- -------------- ----- ---------- ------------ ----------- ---------- ------------ -------
External
revenue 562.5 193.7 191.7 41.8 8.8 - - 998.5
Inter-segment
revenue 4.5 1.7 1.7 - - - (7.9) -
-------------- -------------- ----- ---------- ------------ ----------- ---------- ------------ -------
Total revenue 567.0 195.4 193.4 41.8 8.8 - (7.9) 998.5
Operating
profit/(loss)
before
amortisation
of intangible
assets and
exceptional
operating
items 5.9 5.5 2.7 3.5 1.3 (3.7) - 15.2
-------------- -------------- ----- ---------- ------------ ----------- ---------- ------------ -------
Amortisation
of intangible
assets - - (0.3) (0.9) - - - (1.2)
Exceptional
operating
items - - - - - - - -
-------------- -------------- ----- ---------- ------------ ----------- ---------- ------------ -------
Operating
profit/(loss) 5.9 5.5 2.4 2.6 1.3 (3.7) - 14.0
-------------- -------------- ----- ---------- ------------ ----------- ---------- ------------ -------
Year ended
31 December
2014
-------------- -------------- ----- ---------- ------------ ----------- ---------- ------------ ---------
Construction
& Fit Affordable Urban Group
Infrastructure Out Housing Regeneration Investments Activities Eliminations Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
-------------- -------------- ----- ---------- ------------ ----------- ---------- ------------ ---------
External
revenue 1,159.0 503.6 419.6 112.7 24.9 - - 2,219.8
Inter-segment
revenue 12.7 3.3 3.0 - - - (19.0) -
-------------- -------------- ----- ---------- ------------ ----------- ---------- ------------ ---------
Total revenue 1,171.7 506.9 422.6 112.7 24.9 - (19.0) 2,219.8
Operating
profit/(loss)
before
amortisation
of intangible
assets and
exceptional
operating
items 3.5 15.0 6.0 10.0 0.9 (6.5) - 28.9
-------------- -------------- ----- ---------- ------------ ----------- ---------- ------------ ---------
Amortisation
of intangible
assets - - (0.6) (1.8) - - - (2.4)
Operating
profit/(loss) 3.5 15.0 5.4 8.2 0.9 (6.5) - 26.5
-------------- -------------- ----- ---------- ------------ ----------- ---------- ------------ ---------
During the six months to 30 June 2015, six months to 30 June
2014 and the year ended 31 December 2014, inter-segment sales were
charged at prevailing market prices and significantly all of the
Group's operations were carried out in the UK.
3 Exceptional operating items
Six months Six months
to to Year ended
30 June 30 June 31 Dec
2015 2014 2014
GBPm GBPm GBPm
------------------------------------------ ---------- ---------- ----------
Impairment of trade and other receivables 39.4 - -
------------------------------------------ ---------- ---------- ----------
The exceptional operating item of GBP39.4m relates to the
impairment of trade and other receivables on two construction
contracts, both of which were transferred as part of the
acquisition of the design and project services division of Amec plc
in 2007. Both contracts have the Secretary of State for Defence as
the overall employing party. One contract relates to the design and
construction of a floating jetty, the other to the design and
construction of living accommodation and infrastructure, both
around the Faslane Naval Base in West Scotland.
Commercial resolution 'in principle' has been achieved on the
contract for the design and construction of living accommodation
and infrastructure during the period. Based upon this and the
Board's best current assessment of the likely outcome on the other
contract, an exceptional item has been charged, which is non-cash
in nature.
4 Dividends
Amounts recognised as distributions
to equity holders in the period:
------------------------------------- ---------- ---------- ----------
Six months Six months
to to Year ended
30 June 30 June 31 Dec
2015 2014 2014
GBPm GBPm GBPm
------------------------------------- ---------- ---------- ----------
Final dividend for the year ended
31 December 2014 of 15.0p per share 6.6 - -
Interim dividend for the year ended
31 December 2014 of 12.0p per share - - 5.1
Final dividend for the year ended
31 December 2013 of 15.0p per share - 6.4 6.4
------------------------------------- ---------- ---------- ----------
6.6 6.4 11.5
------------------------------------- ---------- ---------- ----------
Proposed dividends:
------------------------------------- ---------- ---------- ----------
Six months Six months
to to Year ended
30 June 30 June 31 Dec
2015 2014 2014
GBPm GBPm GBPm
------------------------------------- ---------- ---------- ----------
Interim dividend for the year ending
31 December 2015 of 12.0p per share 5.3
Final dividend for the year ended
31 December 2014 of 15.0p per share - - 6.6
Interim dividend for the year ending
31 December 2014 of 12.0p per share - 5.1 -
------------------------------------- ---------- ---------- ----------
The proposed interim dividend of 12.0p per share was approved by
the Board on 4 August 2015 and will be paid on 23 October 2015 to
shareholders on the register at 2 October 2015. The ex-dividend
date will be 1 October 2015.
5 (Loss)/earnings per share
Six months Six months
to to Year end
30 June 30 June 31 Dec
2015 2014 2014
GBPm GBPm GBPm
----------------------------------- ---------- ---------- --------
(Loss)/earnings attributable to
the owners of the Company (21.6) 11.3 18.1
Adjustments:
Exceptional operating items net
of tax 31.4 - -
Intangible amortisation net of
tax 0.9 0.9 1.9
Adjusted Earnings 10.7 12.2 20.0
------------------------------------ ---------- ---------- --------
Basic weighted average ordinary
shares (m) 43.7 42.7 42.8
Dilutive effect of share options
and conditional shares not vested
(m) 0.5 0.8 0.7
------------------------------------ ---------- ---------- --------
Diluted weighted average ordinary
shares (m) 44.2 43.5 43.5
------------------------------------ ---------- ---------- --------
Basic (loss)/earnings per share (49.4p) 26.5p 42.3p
Diluted (loss)/earnings per share (48.9p) 26.0p 41.6p
Adjusted earnings per share 24.5p 28.6p 46.7p
Diluted adjusted earnings per
share 24.2p 28.0p 46.0p
----------------------------------- ------- ----- -----
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 average share price
for the period was GBP7.56 (30 June 2014: GBP7.89, 31 December
2014: GBP7.70).
A total of 917,350 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 2015 (30
June 2014: 276,056, 31 December 2014: 268,056).
6 Shared equity loan receivables
30 June 30 June 31 Dec
2015 2014 2014
GBPm GBPm GBPm
------------------------------------ ------- ------- ------
1 January 20.4 19.7 19.7
Net change in fair value recognised
in the income statement 0.6 0.6 1.8
Repayments (0.4) (0.2) (1.1)
------------------------------------- ------- ------- ------
End of period 20.6 20.1 20.4
------------------------------------- ------- ------- ------
Basis of valuation and assumptions made
There is no directly observable fair value for individual loans
arising from the sale of specific properties under the scheme, and
therefore 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 31 Dec
2015 2014 2014
--------------------------------------- -------- -------- --------
Assumption
Period over which shared equity
loan receivables are discounted:
First Buy and Home Buy schemes 20 years 20 years 20 years
Other schemes 9 years 8 years 9 years
Nominal discount rate 6.7% 7.0% 6.7%
Weighted average nominal annual
property price increase 3.2% 2.2% 3.2%
Forecast default rate 2.0% 2.0% 2.0%
Number of properties sold under
the shared equity scheme for which
a loan was outstanding at the
year end 705 743 709
Weighted average shared equity
loan contribution (being the Group's
weighted average loan as a proportion
of the selling price of a property) 24% 24% 24%
---------------------------------------- -------- -------- --------
Sensitivity analysis
At 30 June 2015, if the nominal discount rate had been 100bps
higher at 7.7% and all other variables were held constant, the fair
value of the shared equity loan receivables would decrease by
GBP0.7m with a corresponding reduction in both the result for the
period and equity (excluding the effects of tax).
At 30 June 2015, if the period over which the shared equity loan
receivables (excluding those relating to the First Buy and Home Buy
schemes) are discounted had been 10 years and all other variables
were held constant, the fair value of the shared equity loan
receivables would decrease by GBP0.8m with a corresponding
reduction in both the result for the period and equity (excluding
the effects of tax).
7 Trade and other receivables
30 June 30 June 31 Dec
2015 2014 2014
GBPm GBPm GBPm
------------------------------- ------- ------- ------
Amounts due from construction
contract customers 246.9 256.8 241.5
Trade receivables 147.0 141.1 176.7
Amounts owed by joint ventures 0.6 7.6 3.3
Prepayments 13.0 9.0 11.9
Other receivables 9.3 7.9 9.0
-------------------------------- ------- ------- ------
416.8 422.4 442.4
------------------------------- ------- ------- ------
8 Net (debt)/cash
30 June 30 June 31 Dec
2015 2014 2014
GBPm GBPm GBPm
------------------------------- ------- ------- ------
Cash and cash equivalents 84.9 72.4 87.6
Non-recourse project financing
due in less than one year (18.5) - -
Borrowings due after one year (74.0) (20.0) (15.0)
Non-recourse project financing
due after one year - (18.3) (16.9)
-------------------------------- ------- ------- ------
Net (debt)/cash (7.6) 34.1 55.7
-------------------------------- ------- ------- ------
Borrowings of GBP74.0m were drawn down under the Group's
committed bank loan facilities. Additional project finance
borrowings of GBP18.5m (30 June 2014: GBP18.3m, 31 December 2014:
GBP16.9m) were drawn from separate facilities to fund specific
projects. These project finance borrowings are without recourse to
the remainder of the Group's assets.
9 Trade and other payables
30 June 30 June 31 Dec
2015 2014 2014
GBPm GBPm GBPm
------------------------------------- ------- ------- ------
Trade payables 209.7 187.6 167.7
Amounts due to construction contract
customers 43.3 49.1 48.9
Amounts owed to joint ventures 0.2 0.2 0.2
Other tax and social security 17.7 12.5 17.0
Accrued expenses 396.9 348.2 429.2
Deferred income 8.9 7.4 8.6
Other payables 19.3 23.2 18.5
-------------------------------------- ------- ------- ------
696.0 628.2 690.1
------------------------------------- ------- ------- ------
Current and non-current other payables include nil and GBP13.8m
respectively (30 June 2014: GBP4.7m and GBP13.3m, 31 December 2014
nil and GBP13.6m) related to the discounted deferred consideration
due on the acquisition of an additional interest in ISIS Waterside
Regeneration Partnership.
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.
The directors confirm that to the best of their knowledge:
-- the unaudited condensed consolidated financial statements
have been prepared in accordance with IAS 34 'Interim Financial
Reporting' as adopted by the European Union required by DTR
4.2.4R;
-- 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
-- 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
4 August 2015
This information is provided by RNS
The company news service from the London Stock Exchange
END
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