TIDMMGNS
RNS Number : 4748H
Morgan Sindall Group PLC
04 August 2021
4 August 2021
MORGAN SINDALL GROUP PLC
('Morgan Sindall' or 'Group')
The Construction & Regeneration Group
RESULTS FOR THE HALF YEAR (HY)ED 30 JUNE 2021
HY 2021 HY 2020 Change HY 2019(3) Change(3)
Revenue GBP1,559m GBP1,363m +14% GBP1,421m +10%
Operating profit - adjusted(1) GBP54.8m GBP18.1m +203% GBP37.5m +46%
Profit before tax - adjusted(1) GBP53.1m GBP15.7m +238% GBP36.3m +46%
Earnings per share -
adjusted(1) 93.1p 27.4p +240% 64.2p +45%
Period end net cash GBP337m GBP146m +GBP191m GBP114m +GBP223m
Interim dividend per
share 30.0p 21.0p(2) +43% 21.0p +43%
Operating profit - reported GBP54.1m GBP16.0m +238% GBP36.7m +47%
Profit before tax - reported GBP52.4m GBP13.6m +285% GBP35.5m +48%
Basic earnings per share
- reported 87.6p 23.7p +270% 62.9p +39%
----------------------------------- ----------- ----------- --------- ------------ ----------
(1) 'Adjusted' is defined as before intangible amortisation
of GBP0.7m and (in the case of earnings per share) deferred
tax charge for future changes in tax rates of GBP1.9m
(HY 2020: before intangible amortisation of GBP2.1m, HY
2019: before intangible amortisation of GBP0.8m)
(2) Declared in November 2020
(3) HY 2019 and % change against HY 2019 numbers are provided
as a more relevant trading comparative
(4) Divisional comparatives have been restated to reflect
the reorganisation of the Investments business. See Other
Financial Information
HY 2021 summary:
-- Trading substantially ahead of 'pre-pandemic' 2019(3) levels
o Revenue up 10% and adjusted profit before tax up 46% on HY
2019(3)
-- Balance sheet further strengthened
o Net cash of GBP337m (HY 2020: GBP146m, HY 2019: GBP114m)
o Average daily net cash increased significantly to GBP294m (HY
2020: GBP153m, HY 2019: GBP123m)
-- Well-positioned for future growth
o High quality order book with maintained secured workload of
GBP8.3bn, level with year end
-- Interim dividend up 43% to 30.0p per share (HY 2020: 21.0p)
-- Capital Allocation framework formalised including revised
dividend policy with dividend cover expected to be in the range of
2.0x-2.5x on an annual basis
-- Divisional highlights
o Operating margin of 2.9% in Construction & Infrastructure;
operating profit up to GBP22.6m (HY 2019: GBP13.9m, HY 2020:
GBP11.5m)
o Excellent performance from Fit Out; operating profit up to
GBP19.3m (HY 2019: GBP16.4m, HY 2020: GBP10.9m)
o Property Services' volumes back to normalised levels;
operating profit(1) of GBP2.4m (HY 2019: GBP1.6m, HY 2020: loss of
GBP0.5m)
o Partnership Housing demonstrating significant strategic and
operational progress; operating margin(4) up to 4.5% (HY 2019:
2.6%, HY 2020: 1.2%) and operating profit(4) of GBP12.1m (HY 2019:
GBP6.1m, HY 2020: GBP2.1m)
o Good contribution from Urban Regeneration with long-term
regeneration schemes progressing; operating profit(4) of GBP8.7m
(HY 2019: GBP8.3m, HY 2020: GBP2.2m)
Commenting on today's results, Chief Executive, John Morgan
said:
"We've had a very strong first half in which we've upgraded our
profit guidance three times. We continue to make significant
operational and strategic progress across the Group. With such
positive momentum across all our activities, I am excited by the
opportunities ahead.
As ever, we are extremely focused on our cash generation and
cash position. Maintaining a strong balance sheet including a
substantial net cash position provides a significant competitive
advantage for us. It enables us to continue making the right
decisions for the business and to best position us in our markets
for continued sustainable long-term growth.
Today's results, combined with the current visibility for the
rest of the year, gives us every confidence of another strong
performance by the Group in the second half."
Enquiries
Morgan Sindall Group Tel: 020 7307 9200
John Morgan
Steve Crummett
Instinctif Partners Tel: 020 7457 2020
Matthew Smallwood
Rosie Driscoll
Presentation
-- There will be an analyst and investor presentation at 09.00
at Numis Securities Limited, the London Stock Exchange Building, 10
Paternoster Square, London EC4M 7LT. Coffee and registration will
be from 08.30
-- A copy of these results is available at: www.morgansindall.com
-- Today's presentation will be available via live webcast from 09.00 at www.morgansindall.com
-- T he presentation will be available via playback on our website in the afternoon.
Note to Editors
Morgan Sindall Group
Morgan Sindall Group plc is a leading UK Construction &
Regeneration group with annual revenue of GBP3.0bn, employing
around 6,600 employees and operating in the public, regulated and
private sectors. It reports through five divisions of Construction
& Infrastructure, Fit Out, Property Services, Partnership
Housing and Urban Regeneration.
Group Strategy
The Group's strategy is focused on its well-established core
strengths of Construction and Regeneration in the UK. The Group has
a balanced business which is geared toward the increasing demand
for affordable housing, urban regeneration and infrastructure and
construction investment.
Morgan Sindall's recognised expertise and market positions in
affordable housing (through its Partnership Housing division) and
in mixed-use regeneration development (through its Urban
Regeneration division) reflect its deep understanding of the built
environment developed over many years and its ability to provide
solutions for complex regeneration projects. As a result, its
capabilities are aligned with sectors of the UK economy which are
expected to see increasing opportunities in the medium to long term
and which support the UK's current and future regeneration and
affordable housing needs.
Through its Construction & Infrastructure division, the
Group is also well positioned to meet the demand for ongoing
investment in the UK's infrastructure, while its geographically
diverse construction activities are focused on key areas of
education, healthcare and commercial.
The Fit Out business is the market leader in its field and
delivers a consistently strong operational performance. Fit Out,
together with the Construction & Infrastructure division,
generates cash resources to support the Group's investment in
affordable housing and mixed-use regeneration. The Group also has
an operation in Property Services which is focused on response and
planned maintenance activities provided to the social housing and
the wider public sector.
The Group is committed to delivering economic, social and
environmental value to its stakeholders. Its approach is embodied
in its responsible business strategy, which is built around its
Five Total Commitments: Protecting people, Developing people,
Improving the environment, Working together with our supply chain
and Enhancing communities. These Commitments have been in place
since 2008 and are aligned to its purpose, the needs of its
stakeholders and its obligations towards society. Its Commitments
support the UN Sustainable Development Goals and each Commitment
has clear targets and KPIs set to monitor progress which are
supported by its divisions.
To provide a framework for future performance, each division
operates to a medium-term financial target. These targets were set
at the start of 2021 and relate to either operating margin, return
on capital employed and/or profit and are referenced in the
divisional sections of the Business review.
Group Structure
Under the two strategic lines of business of Construction and
Regeneration, the Group is organised into five reporting divisions
as follows:
Construction activities comprise the following operations:
-- Construction & Infrastructure : Focused on the education,
healthcare, commercial, defence, industrial, leisure and retail
markets in Construction; and on the highways, rail, aviation,
energy, water and nuclear markets in Infrastructure. Infrastructure
also includes the Baker Hicks design activities based out of the UK
and Switzerland
-- Fit Out : Focused on the fit out of office space with
opportunities in commercial, central and local government offices
and further education
-- Property Services : Focused on response and planned
maintenance activities provided to the social housing and the wider
public sector
Regeneration activities comprise the following operations:
-- Partnership Housing : Focused on working in partnerships with
local authorities and housing associations. Activities include
mixed-tenure developments, building and developing homes for open
market sale and for social/affordable rent, 'design & build'
house contracting and planned maintenance & refurbishment
-- Urban Regeneration : Focused on transforming the urban
landscape through partnership working and the development of
multi-phase sites and mixed-use regeneration
The prior year results for Partnership Housing, Urban
Regeneration and Group Activities have been restated for
comparative purposes to reflect revised segmental reporting adopted
from 1 January 2021 and as previously disclosed (see Section 8 of
Other Financial Information - Reporting Segments).
Capital Allocation Framework
The Board's single, overarching principle governing capital
allocation is a commitment to maintain a strong balance sheet and
to hold significant net cash balances at all times.
In support of this principle, the Group's capital allocation
framework comprises:
-- Maintaining balance sheet strength to enhance our competitive advantage and win future work
Fundamental to the Group's organic strategy is engaging in long
term partnerships with its public and private sector clients,
whether it be through joint ventures or other arrangements in its
Regeneration activities, or through frameworks in its Construction
activities.
When assessing the suitability of long-term partners, potential
clients are increasingly looking for security and assurance of
long-term solvency and the availability of cash resources to ensure
their partners can fulfil their long-term contractual obligations.
A strong balance sheet and significant levels of net cash are
considered by the Group as a market differentiator and a
competitive advantage when bidding and winning future work to
support the future growth of the business.
-- Ensuring downside protection - maintaining a 'buffer' in the event of a macro downturn
Maintaining significant levels of net cash is considered as key
to offsetting any potential consequence of a future downturn in the
economy and reduction in revenue in the Construction activities of
Construction & Infrastructure and Fit Out.
These activities operate with a negative working capital model,
which in turn can lead to cash outflows in the event of declines in
revenue. Maintaining a net cash 'buffer' therefore allows the Group
to continue with its strategy of disciplined contract selectivity
and prudent approach to risk management throughout the whole
economic cycle.
-- Maximising investment in the current business to drive growth
As detailed in the Group Strategy section above, the Group's
capabilities are aligned with sectors of the UK economy which are
expected to see increasing opportunities in the medium to long term
and which support the UK's current and future regeneration and
affordable housing needs, as well as being well positioned to meet
the demand for ongoing investment in the UK's physical and social
infrastructure. Consequently, s ignificant opportunities are
expected to arise through the medium and long-term to invest in the
business to support and accelerate the organic growth of these
activities.
Specifically, investment in the regeneration activities is a
strategic priority:
Ø For Partnership Housing, the growth potential remains
substantial. The stated medium-term target is for an operating
margin of 6% and for return on capital to be in excess of 20% on an
annual basis. Investment returns at this level and above are
targeted for its next phase of growth and the scalability of the
partnership housing model provides the potential to significantly
increase the capital employed above current levels over the medium
to long term.
Ø Within Urban Regeneration, its development activities across
multi-phase sites and mixed-use regeneration are targeted to
generate an average return on capital of up to 20% on a three- year
basis over the medium term. Based on the identified pipeline of
future opportunities as well as the investment profile of schemes
already secured, the capital employed in the division is expected
to increase over the medium term.
Within the overall investment programme for the Regeneration
activities, the Group may occasionally identify opportunities to
complement the existing growth strategy by acquiring pre-existing
development schemes or positions in existing schemes from third
parties. Any such acquisition opportunities would only be
considered where they would accelerate the strategic growth through
the Group's existing divisional structure and capabilities.
-- Maintaining an attractive dividend policy
Dividends are considered by the Board to be an important
component of shareholder returns. The Board has formally adopted a
dividend policy such that dividend cover is expected to be in the
range of 2.0x-2.5x on an annual basis. This revised policy is
effective from the current year onwards.
This capital allocation framework is designed to balance the
needs of all stakeholders whilst enhancing the Group's market
competitiveness and capabilities and maintaining its financial
strength. The Board will prioritise attractive investment
opportunities in the business to support and accelerate growth,
generate the best returns for shareholders and ensure the continued
support of the ordinary dividend. The Board will continue to assess
the needs of the business and the optimum balance sheet structure
within the context of the principle and framework described above,
and any capital then deemed surplus above these requirements may be
returned to shareholders.
Basis of Preparation
In addition to presenting the financial performance of the
business on a statutory basis, adjusted performance measures are
also disclosed. Refer to the Other Financial Information section
which sets out the basis for the calculations. These measures are
not an alternative or substitute to statutory UK IAS measures but
are seen as more useful in assessing the performance of the
business on a comparable basis and are used by management to
monitor the performance of the Group.
In all cases the term 'adjusted' excludes the impact of
intangible amortisation of GBP0.7m (HY 2020: GBP2.1m, HY 2019:
GBP0.8m) .
Group Operating Review
Overview
The positive momentum across the Group coming into 2021
following the operational disruption experienced in 2020, has
continued throughout the first half and has driven a very strong
period of growth .
Group revenue increased by 14% up to GBP1,559m (HY 2020:
GBP1,363m), while adjusted operating profit increased 203% to
GBP54.8m (HY 2020: GBP18.1m). Operating margin increased to 3.5%,
up 220bps from the prior year period (HY 2020: 1.3%).
Referencing the results to the Group's 2019 'pre-pandemic'
performance provides a more meaningful indicator of the
considerable operational and strategic progress made. Against this
comparative period, Group revenue was 10% higher (HY 2019:
GBP1,421m), while adjusted operating profit was up 46% (HY 2019:
GBP37.5m) and operating margin increased by 90bps (HY 2019:
2.6%).
On a divisional basis, Construction & Infrastructure made
significant progress by continuing its disciplined focus on
operational delivery and contract selectivity, with its margin
nearly doubling to 2.9% (HY 2020: 1.5%) and operating profit of
GBP22.6m, up 97%. Fit Out delivered another excellent performance,
with revenue, profit, and margin all increasing. Revenue grew 20%
to GBP380m, while profit increased by 77% to GBP19.3m at a margin
of 5.1% (HY 2020: 3.4%). Property Services saw its v olumes
normalise in the period, with revenue increasing 30% to GBP69m. In
turn, this resulted in the operating profit increasing to GBP2.4m
(HY 2020: loss of GBP0.5m) with an operating margin of 3.5% (HY
2020: -0.9%).
Of the Group's regeneration divisions, Partnership Housing
experienced significant demand across the period, which together
with its focus on operational delivery, resulted in operating
profit increasing to GBP12.1m (HY 2020: GBP2.1m) at an operating
margin of 4.5% (HY 2020: 1.2%). Its return on capital improved
significantly, up to 17% for the last 12 months. Ur ban
Regeneration made good progress with its development activity,
delivering operating profit of GBP8.7m (HY 2020: GBP2.2m).
During the first half, there have been some increases in lead
times for product deliveries to site and a limited number of
significant price increases in certain product categories where
there is greatest scarcity of supply. In most instances, the impact
of this has been managed at a divisional and local level without
any consequent disruption to operations. The additional costs
attached to sourcing some materials have generally been offset by a
combination of contractual protection, operational efficiencies and
(in the case of Partnership Housing) by house sales price
inflation. It is expected that these pressures will normalise in
the medium term and that any disruption can be minimised through
focused sourcing through the supply chain and ongoing operational
efficiency.
The net finance expense reduced to GBP1.7m (HY 2020: GBP2.4m),
primarily as a result of the prior year period including the costs
of drawing down the facility in full during the early stages of the
pandemic.
This resulted in adjusted profit before tax of GBP53.1m, up 238%
(HY 2020: GBP15.7m). The statutory profit before tax was GBP52.4m,
an increase of 285% (HY 2020: GBP13.6m).
The tax charge for the period was GBP12.0m, an effective rate of
22.9%. The tax charge is based upon the expected effective tax rate
for the full year. The expected effective tax rate for the full
year is higher than the UK statutory rate of 19% due to the effect
of changing the tax rate used to calculate deferred tax to account
for the announced future increase in the UK statutory rate to 25%
from 1 April 2023.
The adjusted earnings per share increased to 93.1p (HY 2020:
27.4p), with the statutory earnings per share of 87.6p (HY 2020:
23.7p).
Maintaining contract selectivity and bidding discipline to
ensure the appropriate risk balance in the order book remains of
critical importance to the future success of the Group. The total
secured workload for the Group at the period end was GBP8,324m,
level with the year-end position (FY 2020: GBP8,290m) and 5% higher
than at the same time last year (HY 2020: GBP7,962m). Of particular
note was Fit Out's order book, which was up 42% from the year end
position to GBP581m, an all-time record high for the division.
The Group's relationships with its supply chain partners are
also of major strategic importance and the prompt payment of its
suppliers remains a key component of this. Strong supply chain
relationships can provide a competitive advantage and support
superior operational delivery. For the formal Payment Practices
Reporting period of 1 January 2021 to 30 June 2021, Construction
& Infrastructure, the largest operating division by revenue,
maintained its average time taken to pay invoices at 27 days, with
98% of its invoices paid within 60 days. Fit Out reported its
average time taken to pay invoices at 22 days, with 97% of invoices
paid within 60 days, while Partnership Housing reported 33 days as
its average time to pay, an improvement of 2 days from the last
reporting period. 95% of its invoices were paid within 60 days.
Property Services reported an average of 38 days to pay invoices, a
deterioration of 2 days from the prior reporting period, with 93%
of invoices paid within 60 days.
Operating cash for the period was an inflow of GBP44.1m (HY
2020: outflow of GBP15.3m). Net cash at the period end increased to
GBP337m, an increase of GBP191m on the prior year (HY 2020:
GBP146m). Of this total, GBP64m was held in jointly controlled
operations or held for future payment to designated suppliers
(JVs/PBAs).
The average daily net cash for the period was GBP294m (including
GBP71m in JVs/PBAs), up from GBP153m in the prior year period.
The Group's cash balances benefited from the introduction of the
reverse charge VAT scheme, introduced on 1(st) March 2021; at the
period end, cGBP67m was the incremental benefit of additional VAT
held for payment in the third quarter, while the incremental
benefit to the average daily net cash position was cGBP20m.
Looking ahead, based upon the current anticipated cash movements
over the rest of the year, the Group expects that the average daily
net cash for the full year will be broadly similar to that reported
for the first half.
The interim dividend has been increased by 43% to 30.0p per
share (HY 2020: 21.0p). This reflects the increase in profit in the
period, the strong balance sheet and the Board's confidence in the
future prospects of the Group. As detailed in the Capital
Allocation Framework section above, the Board has formally adopted
a dividend policy such that dividend cover is expected to be in the
range of 2.0x-2.5x on an annual basis. This revised policy is
effective from the current year onwards.
Outlook
These first half results, combined with the current visibility
for the rest of the year, gives the Group every confidence of
another strong performance in the second half.
Business & Divisional Review
The following Business & Divisional Review is given on an
adjusted basis, unless otherwise stated. Refer to Note 3 of the
consolidated financial statements for appropriate reconciliations
to the comparable UK IAS measures.
Headline results by business segment (vs HY 2020)
Revenue Operating Profit Operating Margin
GBPm Change GBPm Change % Change
------ ------- --------- -------- ------- ----------
Construction & Infrastructure 774 -2% 22.6 +97% 2.9% +140bps
Fit Out 380 +20% 19.3 +77% 5.1% +170bps
Property Services 69 +30% 2.4 +580% 3.5% +440bps
Partnership Housing(1) 270 +53% 12.1 +476% 4.5% +330bps
Urban Regeneration(1) 68 +94% 8.7 +295% n/a n/a
Group/Eliminations(1) (2) n/a (10.3) n/a n/a n/a
------ ------- --------- -------- ------- ----------
Total 1,559 +14% 54.8 +203% 3.5% +220bps
------ ------- --------- -------- ------- ----------
(1) Prior year HY 2020 comparative numbers have been restated -
see Other Financial Information Section 8 - Reporting Segments
Results compared to the reported 2019 'pre-pandemic' half year
results (HY 2019)
Due to the prior year HY 2020 results being significantly
impacted by the pandemic, HY 2019 is viewed as being more relevant
and informative for comparative purposes. On this basis, the
movement by division compared to the HY 2019 results is shown
below, together with the actual HY 2019 reported results shown in
italics. These are reproduced in the tables of the divisional
commentaries in the sections below.
Revenue HY 2019(1) Operating HY 2019(1) Operating HY
Profit margin 2019(1)
Construction & Infrastructure +14% 679 +63% 13.9 +90bps 2.0%
Fit Out -7% 407 +18% 16.4 +110bps 4.0%
Property Services +25% 55 +50% 1.6 +60bps 2.9%
Partnership Housing(1) +13% 239 +98% 6.1 +190bps 2.6%
Urban Regeneration(1) +51% 45 +5% 8.3 n/a n/a
Group/Eliminations(1) n/a (4) n/a (8.8) n/a n/a
Total +10% 1,421 +46% 37.5 +90bps 2.6%
-------- ---------- ----------
(1) The 2019 HY comparative numbers have been restated to take
into account the impact of change in reporting segments. The impact
of the restatement is to increase Partnership Housing and Urban
Regeneration revenue by GBP1m and to decrease Partnership Housing
operating profit by GBP0.3m. All other 2019 results of the
Investments division are included in Group/Eliminations
Group secured workload(1) by division
The Group's secured workload(1) at 30 June 2021 was GBP8,324m,
level with the previous year end and up 5% compared to the prior
year (HY 2020: GBP7,962m). The divisional split is shown below.
HY 2021 FY 2020 Change
GBPm GBPm
------------------------------- ------- -------- ------
Construction & Infrastructure 2,542 2,537 -
Fit Out 581 410 +42%
Property Services 973 970 -
------------------------------- ------- -------- ------
'Construction' secured order
book(2) 4,096 3,917 +5%
------------------------------- ------- -------- ------
Partnership Housing 1,478 1,445(3) +2%
Urban Regeneration 2,759 2,929(3) -6%
------------------------------- ------- -------- ------
'Regeneration' secured order
book(2) 4,237 4,374 -3%
------------------------------- ------- -------- ------
Inter-divisional eliminations (9) (1)
------------------------------- ------- -------- ------
Group secured workload(1) 8,324 8,290 -
------------------------------- ------- -------- ------
(1) The Group secured workload is the sum of the Construction
secured order book and the Regeneration secured order book, less
any inter-divisional eliminations
(2) The 'Secured order book' is the sum of the 'committed order
book', the 'framework order book' and (for the Regeneration
businesses only) the Group's share of the gross development value
of secured schemes (including the development value of open market
housing schemes)
The 'committed 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.
(3) FY 2020 comparative numbers have been restated following the
change in reporting segments
Construction & Infrastructure
HY 2021 HY 2020 Change HY 2019 % Change
GBPm HY 2021
GBPm GBPm vs 2019
---------------------- -------- ------- -------- ------- ---------
Revenue 774 789 -2% 679 +14%
Operating profit 22.6 11.5 +97% 13.9 +63%
Operating margin 2.9% 1.5% +140bps 2.0% +90bps
---------------------- -------- ------- -------- ------- ---------
During the period, divisional revenue reduced slightly to
GBP774m (HY 2020: GBP789m), however operating profit increased
significantly to GBP22.6m, up 97% (HY 2020: GBP11.5m). Operating
margin improved to 2.9%, up 140bps (HY 2020: 1.5%). Both the
Construction and Infrastructure ( including Design)(1) activities
performed well.
Split by activity, Construction revenue increased 17% to GBP339m
(HY 2020: GBP290m) and accounted for 44% of divisional revenue.
Infrastructure revenue (56% of divisional revenue) reduced 13% to
GBP435m (HY 2020: GBP499m) primarily due to the timing of its
project workload.
In line with the strategy of focusing on contract selection,
operational delivery and quality of earnings, both activities
delivered significant profit and margin growth. Construction's
operating margin for the period was 2.4%, up 200bps from 0.4% in
the prior year period, with operating profit of GBP8.1m, up from
GBP1.2m in the prior year. Infrastructure delivered operating
profit of GBP14.5m in the period, up 41% despite of the lower
revenue, with its operating margin of 3.3%, up 120bps (HY 2020:
2.1%).
The secured order book for the division at the period end was
GBP2,542m, level with both the year end and the prior period end
position.
(i) Construction
In Construction, the focus remains on improving its overall
quality of earnings through contract selectivity and operational
delivery.
Construction's order book of GBP648m was up 27% from the year
end position and up 17% from the prior year. c100% of the order
book value is derived through either negotiated, framework or
two-stage bidding procurement processes, in line with the preferred
risk profile of work undertaken. In addition to this, Construction
also had GBP648m of work at preferred bidder stage, up 5% compared
to the same time last year (HY 2020: GBP620m in preferred
bidder).
Work won in the period included: the GBP56m facility for the
School of Chemistry at Birmingham University where the focus will
be on post-graduate research in chemical, environmental and
biomolecular science; a GBP44m secondary school for Kenilworth
Multi-Academy Trust; a GBP39m mixed use scheme as part of the of St
Albans District Council city centre redevelopment; a new GBP37m
secondary school for Buckinghamshire County Council; and a GBP16m
joint primary school campus and early years facility in
Prestwick.
The medium-term target for Construction is an operating margin
of between 2.5% and 3% per annum. Based upon the current
operational performance and the quality of its order book, it is
expected that the full year margin will be around the top end of
this range.
(ii) Infrastructure(1)
In Infrastructure, the focus remains on the key sectors of
highways, rail, nuclear, energy and water.
Infrastructure's order book of GBP1,894m was down 6% compared to
the year end and down 5% from the prior year. Around 95% of the
order book value is derived through existing frameworks and with
53% of the order book for 2023 and beyond, this demonstrates the
long-term nature of the work streams and client relationships.
In Highways, work won in the period included the appointment by
Highways England to the Concrete Roads Programme - Reconstruction
Works Framework, a four-year programme worth cGBP130m to repair or
replace the concrete surface of motorways or major A roads in
England, as well as the detailed design for the Carlisle Southern
Link Road by Cumbria County Council.
In Rail, the division secured a position as one of three
partners on the London Rail Infrastructure Improvement Framework
for Transport for London, and was awarded a project by Network Rail
to construct an extension to the rockfall shelter over the railway
line between Dawlish and Holcombe in Devon.
In Energy, National Grid awarded the division a place on their
RIIO-2 electricity construction Engineer, Procure and Construct
(EPC) framework. The initial term of the framework which involves
the construction, refurbishment and decommissioning of both
overhead line (OHL) and underground cable systems operating between
33kV to 400kV across National Grid's transmission network is five
years, with a further option for a two-year extension. It is
estimated that over the lifetime of the framework approximately
GBP1bn to GBP1.5bn will be invested in delivering these works.
Additional work has also been secured as part of the Scottish &
Southern Electricity Networks overhead lines framework.
Work continues in Water as part of a long-term framework with
Welsh Water, and in Nuclear, the division continues to deliver the
Infrastructure Strategic Alliance and the GBP1.6bn Programme and
Project Partners contract which is currently in year 3 of the
20-year programme, both for Sellafield Ltd.
The medium-term target for Infrastructure is an operating margin
of 3.5%. Based upon its first half performance and the current
visible work mix and volumes through its existing frameworks for
the rest of the year, it is expected that Infrastructure will at
least achieve this margin target for the full year.
(1) D esign results are reported within Infrastructure
Fit Out
HY 2021 HY 2020 Change HY 2019 % Change
GBPm HY 2021
GBPm GBPm vs 2019
------------------ ------- ------- -------- ------- ---------
Revenue 380 317 +20% 407 -7%
Operating profit 19.3 10.9 +77% 16.4 +18%
Operating margin 5.1% 3.4% +170bps 4.0% +110bps
------------------ ------- ------- -------- ------- ---------
Fit Out delivered an excellent result in the period, with
significant growth in revenue, profit and margin. Revenue increased
by 20% to GBP380m (HY 2020: GBP317m), with operating profit up 77%
to GBP19.3m (HY 2020: GBP10.9m) and operating margin increasing to
5.1% (HY 2020: 3.4%). Again, the key drivers of performance were
strong operational delivery, a high-quality workload and a focus on
customer experience.
During the period, there was no significant change to the market
sectors served by the division. The commercial office market
remained the largest, contributing 73% of revenue (HY 2020: 77%),
with government/local authority, higher education and retail
banking accounting for the majority of the remainder.
Revenue outside of the London region increased strongly to 46%
of the total, up from 20% in the prior period. However, the London
region remained the division's largest market at 54% of revenue (HY
2020: 80%) and this proportion is expected to increase back to more
normalised levels in the second half.
Split by type of work, there was a slightly higher weighting
towards 'design and build' work, equating to 20% of revenue (HY
2020: 12%), with traditional fit out work accounting for the
remaining 80% of work (HY 2020: 88%).
In terms of the nature of work undertaken, the balance remained
broadly unchanged with the proportion of revenue generated from the
fit out of existing office space at 73% of the total (HY 2020: 70%)
and new office fit out at 27% of the total (HY 2020: 30%). Of the
fit out of existing office space, 62% related to refurbishment 'in
occupation'.
At the period end, the secured order book stood at GBP581m, an
all-time record high for the division and represented an increase
of 42% from the year end position (FY 2020: GBP410m) and an
increase of 25% from the prior year position (HY 2020: GBP466m). In
addition to these secured orders, the division had GBP370m of work
at preferred bidder stage.
Of the secured order book, GBP321m (55%) relates to the second
half of the year, which was broadly level with the equivalent
amount as at 30 June 2020 of GBP318m. On this basis, the division
has a similar level of visibility of second half volumes as it did
at the same time last year.
Projects won during the period include; a 366,000 sq. ft. office
fit out at Five Bank Street in Canary Wharf; a 186,457 sq. ft.
workspace for BT at 3 Snowhill in Birmingham; BP's new 200,000 sq.
ft. space in the North Colonnade building in Canary Wharf; the
design and build of Hutchinson 3G UK/Three's new 117,000 sq. ft.
workspace in Longwater, Reading; the Cat A fit out of 180,000 sq.
ft. at Campus Reading (one of the largest office developments in
the Thames Valley); and, under a framework for The Mayor's Office
for Policing and Crime (MOPAC), 11 projects to the value of
GBP116.3m.
Looking ahead to the second half, based upon the current order
book and the level of work at preferred bidder stage, a further
strong performance is expected. The medium-term target for Fit Out
is for operating profit of cGBP35m per annum and as previously
reported, the division is expected to be materially ahead of this
in 2021.
Property Services
HY 2021 HY 2020 Change HY 2019 % Change
GBPm HY 2021
GBPm GBPm vs 2019
------------------------- ------- ------- -------- ------- ---------
Revenue 69 53 +30% 55 +25%
Operating profit/(loss)
(1) 2.4 (0.5) +580% 1.6 +50%
Operating margin(1) 3.5% -0.9% +440bps 2.9% +60bps
------------------------- ------- ------- -------- ------- ---------
Volumes in Property Services normalised throughout the first
half, with revenue increasing 30% to GBP69m (HY 2020: GBP53m). At
this level of activity and with the current operating model and
overhead structure in place, the operating profit increased to
GBP2.4m (HY 2020: loss of GBP0.5m) with an operating margin of 3.5%
(HY 2020: -0.9%).
During the period, the division has continued to focus on
delivering repairs and planned maintenance with a strong social
value offering, servicing public sector housing through its
integrated contracts with housing associations and local
authorities. Ongoing investment is continuing in its technology
offering for managing repairs and maintenance and planned
activities, with a significant focus on the provision of data
insight and the improvement of the all-round customer
experience.
At the period end, the secured order book was GBP973m, level
with the year-end position (FY 2020: GBP970m) and 12% higher than
at the same time last year (HY 2020: GBP867m). Contracts tend to be
long term in nature and over 80% of the order book by value is for
2023 and beyond.
The medium-term target for Property Services is to generate a
minimum GBP10m operating profit per annum. Based upon the first
half performance and with slightly higher revenue expected in the
second half due to higher planned maintenance activity, the
division is on track to make good progress towards this target in
2021.
(1) before intangible amortisation of GBP0.7m (HY 2020: GBP0.6m,
HY 2019: GBP0.8m)
Partnership Housing
HY 2021 HY 2020(1) Change HY 2019(1) % Change
GBPm HY 2021
GBPm GBPm vs 2019
------------------------------ ------- ---------- ---------- ---------- ---------
Revenue 270 176 +53% 239 +13%
Operating profit 12.1 2.1 +476% 6.1 +98%
Operating margin 4.5% 1.2% +330bps 2.6% +190bps
------------------------------ ------- ---------- ---------- ---------- ---------
Average capital employed(2) 158.3 169.7 -GBP11.4m
(last 12 months)
Capital employed(2)
- at period end 146.3 168.7 -GBP22.4m
ROCE(3) (last 12
months) 17% 9%
------------------------------ ------- ---------- ----------
Partnership Housing has seen high levels of market demand across
the first half, with revenue up 53% to GBP270m (HY 2020(1) :
GBP176m). Split by type of activity, Mixed-tenure revenue was up
79% to GBP159m (59% of divisional revenue) and Contracting revenue
(including planned maintenance and refurbishment) was up 28% to
GBP111m (41% of divisional total) compared to the prior year
period.
In Mixed-tenure, 815 units were completed across open market
sales and social housing (including through its joint ventures)
compared to 412 in the prior year period. The average sales price
was GBP232k compared to the prior year average of GBP217k.
Operating profit of GBP12.1m was up 476% on the prior year (HY
2020(1) : GBP2.1m) and up 98% on the comparative period in 2019 (HY
2019(1) : GBP6.1m), driven by the higher mixed-tenure revenue. The
operating margin increased to 4.5% (HY 2020(1) : 1.2%).
Significant strategic progress is being made with developing and
formalising partnerships. During the period, the division commenced
or continued joint venture opportunities with Walsall Housing
Group, Trafford Housing Group, Hertfordshire County Council, Abri,
Together Housing Group, Flagship Housing Group, Riverside and West
Sussex County Council.
During the period, the division has experienced some increases
in lead times for product deliveries to site and a limited number
of significant price increases in certain product categories where
there was greatest scarcity of supply. Any additional costs
attached to sourcing some materials have generally been offset by a
combination of operational savings and sales price inflation.
The secured order book at the period end was GBP1,478m, an
increase of 2% on the prior year end (FY 2020(1) : GBP1,445m). Of
this total, the order book relating to the Mixed-tenure activities
was 1% lower than the year end position at GBP896m (FY 2020(1) :
GBP907m). In addition, the amount of mixed-tenure business in
preferred bidder status or already under development agreement but
where land has not been drawn down was cGBP700m at the period end.
The Contracting secured order book increased 8% to GBP582m (FY
2020(1) : GBP538m).
In mixed-tenure, work won included a GBP120m joint venture with
Abri to build 500 homes in Weymouth and an GBP85m, 528-unit scheme
to build one of Wales largest regeneration schemes on the former
Whiteheads steelworks in Newport. Key contracting schemes awarded
in the period include: a GBP50m, 211 unit scheme at Tolworth for
Guinness Partnerships, a JV with Together Housing Group to deliver
650 units in Pendleton, Salford; a contract with Norfolk County
Council-owned Repton to build 400 plus homes in Norfolk; and the
appointment onto the Your Housing Group framework, including the
initial award of a GBP25m, 216 unit scheme at Edge Lane,
Openshaw.
The capital employed(2) at period end was GBP146.3m (HY 2020(1)
: GBP168.7m), while the average capital employed(2) for the last
12-month period was GBP158.3m (HY 2020(1) : GBP169.7m). This
resulted in an overall ROCE(3) of 17% for the last 12-month period,
a significant improvement on the prior year(1) ROCE(3) of 9%.
Average capital employed for the full year is expected to be
cGBP155m.
Partnership Housing's medium-term targets are to generate a
return on average capital employed(2) of over 20% and to deliver an
operating margin of 6%. Looking ahead to the rest of the year, the
secured order book and operational delivery are expected to drive
further margin and profit growth towards its medium-term
targets.
(1) Restated - see Other Financial Information Section 8 -
Reporting Segments. All HY 2020, HY 2019 and FY 2020 comparative
numbers, including order book and capital employed, have been
restated to include the impact of the revised reporting
segments
(2) Capital employed is calculated as total assets (excluding
goodwill, intangibles and cash) less total liabilities (excluding
corporation tax, deferred tax, inter-company financing and
overdrafts)
(3) Return On Average Capital Employed = (Adjusted operating
profit plus interest from JVs) divided by average capital
employed
Urban Regeneration
HY 2021 HY 2020(1) Change HY 2019(1) % Change
GBPm HY 2021
GBPm GBPm vs 2019
------------------------------ ------- ---------- ---------- ---------- ---------
Revenue 68 35 +94% 45 +51%
Operating profit 8.7 2.2 +295% 8.3 +5%
------------------------------ ------- ---------- ---------- ---------- ---------
Average capital employed(2) 110.0 123.4 -GBP13.4m
(last 12 months)
Capital employed(2)
at period end 96.6 130.9 -GBP34.3m
ROCE(3) (last 12
months) 14% 11%
ROCE(3) (average
last 3 years) 15%
------------------------------ ------- ---------- ----------
Urban Regeneration performed well in the period as its
development schemes progressed as planned and delivered an
operating profit of GBP8.7m (HY 2020(1) : GBP2.2m). The higher
profit helped increase the ROCE (3) for the last 12 months to 14%
and the average for the last 3 years up to 15%.
Capital employed(2) at the period end was GBP96.6m (HY 2020(1) :
GBP130.9m), however the average capital employed over the last 12
months was higher at GBP110.0m (HY 2020(1) : GBP123.4m). Based upon
the current profile and type of scheme activity across the
portfolio, the average capital employed(2) for the full year is
expected to be cGBP110m.
Profits were generated in the period from the sale of over 250
new homes at a number of locations including Hale Wharf, Tottenham
Hale; Wapping Wharf, Bristol and Griffon Fields, Hucknall. Good
progress continues to be made in the development of Lewisham
Gateway and New Victoria in Manchester, both subject to forward
funding deals signed in 2020. Also contributing to performance in
the half year is the Salford Central regeneration scheme, being
developed by The English Cities Fund (a joint venture with Legal
& General and Homes England), where five new developments were
active in the period.
At the period end, the division's regeneration order book
amounted to GBP2.8bn, a reduction of 6% on the prior year end.
Within this, there remains a diverse geographic and sector
split:
-- by value, 56% is in London and the South East, 35% in the
North West, 8% in Yorkshire and the North East and 1% in the rest
of the UK; and
-- by sector, 52% by value relates to residential, 34% to
offices, and the remainder is broadly split between retail,
leisure, and industrial.
The medium-term target for Urban Regeneration is to increase its
rolling three-year average ROCE(3) up towards 20%. Based upon the
current profile of scheme completions throughout the second half,
ROCE(3) in the mid-teens is expected for the full year.
(1) Restated - see Other Financial Information Section 8 -
Reporting Segments. All HY 2020, HY 2019 and FY 2020 comparative
numbers, including order book and capital employed, have been
restated to include the impact of the revised reporting
segments
(2) Capital employed is calculated as total assets (excluding
goodwill, intangibles and cash) less total liabilities (excluding
corporation tax, deferred tax, inter-company financing and
overdrafts)
(3) Return On Average Capital Employed = (Adjusted operating
profit plus interest from JVs) divided by average capital
employed
Other Financial Information
1. Net finance expense. The net finance expense was GBP1.7m, a
reduction of GBP0.7m compared to HY 2020.
HY 2021 HY 2020 Change
GBPm GBPm GBPm
--------------------------------------- ------- ------- ------
Interest payable on drawings
on bank facilities - (1.1) 1.1
Amortisation of bank fees &
non-utilisation fees (1.3) (0.5) (0.8)
Interest expense on lease liabilities (0.7) (0.8) 0.1
Interest from JVs 0.4 0.2 0.2
Other (0.1) (0.2) 0.1
Total net finance expense (1.7) (2.4) 0.7
--------------------------------------- ------- ------- ------
2. Tax. A tax charge of GBP12.0m is shown for the period (HY
2020: GBP2.9m). This equates to an effective tax rate of 22.9% on
profit before tax. The adjusted tax charge is GBP10.2m (HY 2020:
GBP3.3m).
HY 2021 HY 2020
GBPm GBPm
--------------------------------------------- ------- -------
Profit before tax 52.4 13.6
Less: share of net (profit)/losses in
joint ventures (5.7) 0.3
Profit before tax excluding joint ventures 46.7 13.9
Statutory tax rate 19.0% 19.0%
Current tax charge at statutory rate (8.9) (2.6)
Tax on joint venture profits (1) (1.0) -
Effect of change in tax rate used to
calculate deferred tax (1.9) -
Other adjustments (0.2) (0.3)
Tax charge as reported (12.0) (2.9)
--------------------------------------------- ------- -------
Tax on amortisation (0.1) (0.4)
Effect of change in tax rate used to
calculate deferred tax 1.9 -
Adjusted tax charge (10.2) (3.3)
--------------------------------------------- ------- -------
(1) Most of the Group's joint ventures are partnerships
where profits are taxed within the Group rather than the
joint venture
3. Net working capital. ' Net Working Capital' is defined as
'Inventories plus Trade & Other Receivables (including Contract
Assets), less Trade & Other Payables (including Contract
Liabilities)' adjusted as below and is stated on a constant
currency basis.
Change
HY 2021 HY 2020 GBPm
GBPm GBPm
--------------------------- ------- -------
Inventories 284.8 352.9 -68.1
Trade & Other Receivables
(1) 479.9 410.9 +69.0
Trade & Other Payables(2) (947.6) (813.6) -134.0
Net working capital (182.9) (49.8) -133.1
--------------------------- ------- ------- -------
(1) Adjusted to exclude capitalised arrangement fees of GBP0.9m
(HY 2020: GBP0.4m) and accrued interest receivable of GBPnil (HY
2020: GBP0.1m)
(2) Adjusted to exclude accrued interest payable of GBP0.4m (HY
2020: GBP0.4m)
4. Cash flow. The o perating cash flow for the 12 months to 30
June 2021 was an inflow of GBP238.1m and a free cash inflow of
GBP217.0m. For the half year period, there was an operating cash
inflow of GBP44.1m (HY 2020: outflow of GBP15.3m).
HY 2021 HY 2020 Last 12
GBPm GBPm months
-------------------------------------- ------- -------- -------
Operating profit - adjusted 54.8 18.1 105.2
Depreciation 10.0 11.3 20.7
Share option expense 4.6 0.1 4.4
Movement in fair value of shared
equity loans - - 0.5
Share of net loss/(profit)
of joint ventures (5.7) 0.3 (8.3)
Other operating items (1) 2.5 6.6 2.3
Change in working capital (2) (13.2) (42.1) 131.5
Net capital expenditure (including
repayment of finance leases) (9.3) (9.8) (19.0)
Dividends and interest received
from joint ventures 0.4 0.2 0.8
Operating cash flow 44.1 (15.3) 238.1
Income taxes paid (11.3) (13.2) (18.0)
Net interest paid (non-joint
venture) (1.0) (1.1) (3.1)
Free cash flow 31.8 (29.6) 217.0
-------------------------------------- ------- -------- -------
(1) 'Other operating items' includes shared equity redemptions
(GBP1.1m), disposal of investment properties (GBP1.6m) less gain on
disposal of property, plant & equipment (GBP0.2m)
(2) The cash flow due to change in working capital for the HY
2021 period excludes a total GBP0.5m of non-cash movements relating
to the unwinding of discounting on land creditors and other
non-cash working capital movements (Last 12 months: GBP1.6m)
5. Net cash. Net cash at the period end was GBP337.1m.
GBPm
------
Net cash as at 1 January
2021 332.8
Free cash flow (as above) 31.8
Dividends (18.5)
Other(1) (9.0)
Net cash as at 30 June 2021 337.1
-------------------------------- ------
(1) 'Other' includes the purchase of shares in the Company by
the employee benefit trust (GBP12.3m) less net loan receipts from
joint ventures (GBP1.7m), proceeds from the issue of new shares
(GBP0.1m) and proceeds from the exercise of share options
(GBP1.5m)
6. Capital employed by strategic activity. An analysis of the
capital employed in the Construction activities shows a decrease of
GBP101.4m since the prior period, split as follows:
Capital employed(1) in Construction HY 2021 HY 2020 Change
GBPm GBPm GBPm
-------- --------
Construction & Infrastructure (278.8) (204.8) -74.0
Fit Out (68.5) (19.7) -48.8
Property Services 30.8 9.4 +21.4
------------------------------------- -------- -------- -------
(316.5) (215.1) -101.4
------------------------------------- -------- -------- -------
An analysis of capital employed in the Regeneration activities
shows a decrease of GBP56.7m since the prior period, split as
follows:
Capital employed(1) in Regeneration HY 2021 HY 2020(2) Change
GBPm GBPm GBPm
-------- -----------
Partnership Housing(2) 146.3 168.7 -22.4
Urban Regeneration(2) 96.6 130.9 -34.3
242.9 299.6 -56.7
-------- -----------
1 Total assets (excluding goodwill, intangibles, inter-company
financing and cash) less total liabilities (excluding corporation
tax, deferred tax, inter-company financing and overdrafts)
2 Restated - see Other Financial Information Section 8 -
Reporting Segments
7. Dividends. The Board of Directors has proposed an interim
dividend of 30.0p per share, an increase of 43% on the prior year
interim dividend. This will be paid on 26 October 2021 to
shareholders on the register at 8 October 2021. The ex-dividend
date will be 7 October 2021. In 2020, the interim dividend of 21.0p
per share was proposed in November and paid in December 2020.
8. Reporting segments. From 1 January 2021, the Group reports
five operating segments plus the Group activities. For prior
periods, a further operating segment for Investments was separately
reported. The responsibility of the operations of the Investments
division was divided and allocated between Partnership Housing,
Urban Regeneration and Group Activities from 1 January 2021.
The unaudited reallocation of the 2020 Investments segment for
the full year and the half year are presented below and these
allocations are included for comparative purposes in 2021
reporting.
Reallocation of Investments
- 30 June 2020 Partnership Group
GBPm Investments Housing Urban Regeneration Activities
Revenue 12.2 11.3 0.9 -
------------ ------------ ------------------- ------------
Adjusted Operating Loss (3.2) (0.9) 0.1 (2.4)
------------ ------------ ------------------- ------------
Amortisation of Intangible Assets (1.5) - - (1.5)
------------ ------------ ------------------- ------------
Operating Loss (4.7) (0.9) 0.1 (3.9)
------------ ------------ ------------------- ------------
Capital employed at 30 June
2020 (GBPm) 27.8 15.2 13.6 (1.0)
------------ ------------ ------------------- ------------
Reallocation of Investments
- 31 December 2020 Partnership Group
GBPm Investments Housing Urban Regeneration Activities
Revenue 34.2 32.5 1.7 -
------------ ------------ ------------------- ------------
Adjusted Operating Loss (6.9) (0.1) (0.4) (6.4)
------------ ------------ ------------------- ------------
Amortisation of Intangible Assets (1.9) - - (1.9)
------------ ------------ ------------------- ------------
Operating Loss (8.8) (0.1) (0.4) (8.3)
------------ ------------ ------------------- ------------
Capital employed at 31 December
2020 (GBPm) 21.9 8.4 15.7 (2.2)
------------ ------------ ------------------- ------------
As a result of this restatement, the revised comparative numbers
for Partnership Housing, Urban Regeneration and Group Activities
are as follows:
Restated comparatives - 30 June
2020 Partnership Group
GBPm Housing Urban Regeneration Activities
Revenue - as reported 165.0 34.5 -
------------ ------------------- ------------
Revenue - as restated 176.3 35.4 -
------------ ------------------- ------------
Adjusted Operating Profit/(Loss)
- as reported 3.0 2.1 (5.7)
------------ ------------------- ------------
Adjusted Operating Profit/(Loss)
- as restated 2.1 2.2 (8.1)
------------ ------------------- ------------
Capital employed - as reported 153.5 117.3 n/a
------------ ------------------- ------------
Capital employed - as restated 168.7 130.9 n/a
------------ ------------------- ------------
Restated comparatives - 31 December
2020 Partnership Group
GBPm Housing Urban Regeneration Activities
Revenue - as reported 441.4 122.8 -
------------ ------------------- ------------
Revenue - as restated 473.9 124.5 -
------------ ------------------- ------------
Adjusted Operating Profit/(Loss)
- as reported 16.1 9.2 (18.7)
------------ ------------------- ------------
Adjusted Operating Profit/(Loss)
- as restated 16.0 8.8 (25.1)
------------ ------------------- ------------
Capital employed - as reported 122.2 85.1 n/a
------------ ------------------- ------------
Capital employed - as restated 130.6 100.8 n/a
------------ ------------------- ------------
9. Principal risks and uncertainties. The Board continues to
take a proactive approach to recognising and mitigating risk with
the aim of protecting and safeguarding the interests of the Group
and its shareholders in the changing environment in which it
operates.
Details of the principal risks facing the Group and mitigating
actions are included on pages 38 to 47 of the 2020 Annual Report.
These are still considered to be relevant risks and uncertainties
for the Group at this time and are summarised below (in no order of
magnitude):
Covid-19 - If unanticipated events arise, we must adapt quickly
and rapidly to new ways of working and have sufficient financial
resources to ensure the business can continue to operate
effectively.
Changes in the economy - If profitable opportunities in our
chosen markets reduce, we need to ensure that we carefully allocate
resources and capital to minimise reductions in our profitability
and cash generation.
Exposure to UK housing market - If mortgage availability and
affordability are reduced this could make existing schemes
difficult to sell and future developments unviable, reducing
profitability and tying up capital.
Poor contract selection - Failure to fully understand the risks
on projects may lead to poor delivery and ultimately result in
reputational damage and loss of opportunities.
Responsible business - Failure to embed our Total Commitments
across the business may result in incidents occurring that could
lead to legal actions, project delays and damage to the Group's
reputation which could affect our ability to secure future work and
achieve targets.
Health and safety - If we fail to protect the health, safety and
wellbeing of our key stakeholders, we could hurt individuals which
could damage the Group's reputation as a responsible employer and
affect our ability to secure future work.
Climate change - Failure to protect the environment in which we
work by reducing carbon emissions and waste and to fully consider
potential environmental risks on projects could cause delays to
projects and damage the Group's reputation.
Failure to attract and retain talented people - Talented people
are needed to provide excellence in project delivery and customer
service. Skills shortages in the construction industry remain an
issue for the foreseeable future.
Insolvency of key client, subcontractor, joint venture partner
or supplier - An insolvency could disrupt project works, cause
delay and incur the costs of finding a replacement, resulting in
significant financial loss. There is a risk that credit checks
undertaken in the past may no longer be valid.
Inadequate funding - A lack of liquidity could impact our
ability to continue to trade or restrict our ability to achieve
market growth or invest in regeneration schemes.
Mismanagement of working capital and investments - Poor
management of working capital and investments leads to insufficient
liquidity and funding problems.
Mispricing a contract - If a contract is incorrectly costed this
could lead to contract losses and an overall reduction in gross
margin. It might also damage the relationship with the client and
supply chain.
Changes to contracts and contract disputes - Changes to
contracts and contract disputes could lead to costs being incurred
that are not recovered, loss of profitability and delayed receipt
of cash.
Poor project delivery - Failure to meet client expectations
could incur costs that erode profit margins, lead to the
withholding of cash payments and impact working capital. It may
also result in reduction of repeat business and client
referrals.
Failure to innovate - A failure to produce or embrace new
products and techniques could diminish our delivery to clients and
reduce our competitive advantage, as well as making us less
attractive to existing or prospective employees.
UK cyber activity and failure to invest in information
technology - Investment in IT is necessary to meet the future needs
of the business in terms of expected growth, security, and
innovation, and enables its long-term success. It is also essential
in order to avoid reputational and operational impacts and loss of
data that could result in significant fines and/or prosecution.
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 2021
Six months Six months
to to Year ended
30 June 2021 30 June 2020 31 Dec 2020
(unaudited) (unaudited) (audited)
Notes GBPm GBPm GBPm
------------------------------------- ----- ------------ ------------ -----------
Revenue 2 1,558.6 1,363.1 3,034.0
Cost of sales (1,383.0) (1,225.3) (2,718.2)
------------------------------------- ----- ------------ ------------ -----------
Gross profit 175.6 137.8 315.8
Administrative expenses (126.5) (119.4) (252.3)
Share of net profit of joint
ventures 5.7 (0.3) 2.3
Other gains and losses - - 2.7
------------------------------------- ----- ------------ ------------ -----------
Operating profit before amortisation
of intangible assets 54.8 18.1 68.5
------------------------------------- ----- ------------ ------------ -----------
Amortisation of intangible assets (0.7) (2.1) (3.1)
------------------------------------- ----- ------------ ------------ -----------
Operating profit 54.1 16.0 65.4
Finance income 0.4 0.6 0.9
Finance costs (2.1) (3.0) (5.5)
------------------------------------- ----- ------------ ------------ -----------
Profit before tax 52.4 13.6 60.8
Tax (12.0) (2.9) (15.4)
------------------------------------- ----- ------------ ------------ -----------
Profit for the period 40.4 10.7 45.4
------------------------------------- ----- ------------ ------------ -----------
Attributable to:
Owners of the Company 40.4 10.7 45.4
------------------------------------- ----- ------------ ------------ -----------
Earnings per share
Basic 5 87.6p 23.7p 99.8p
Diluted 5 85.1p 23.0p 98.1p
------------------------------------- ----- ------------ ------------ -----------
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 2021
Six months Six months
to to Year ended
30 June 2021 30 June 2020 31 Dec 2020
(unaudited) (unaudited) (audited)
GBPm GBPm GBPm
------------------------------------- ------------ ------------ -----------
Profit for the period 40.4 10.7 45.4
Items that will not be reclassified
subsequently to profit or loss:
Items that may be reclassified
subsequently to profit or loss:
Foreign exchange movement on
translation of overseas operation (0.1) 0.2 (0.2)
Gains arising during the period
on net investment hedge (0.4) 0.5 0.2
(0.5) 0.7 -
------------------------------------- ------------ ------------ -----------
Other comprehensive (expense)/income (0.5) 0.7 -
-------------------------------------- ------------ ------------ -----------
Total comprehensive income 39.9 11.4 45.4
-------------------------------------- ------------ ------------ -----------
Attributable to:
Owners of the Company 39.9 11.4 45.4
-------------------------------------- ------------ ------------ -----------
Condensed consolidated statement of financial position
At 30 June 2021
30 June 2021 30 June 2020 31 Dec 2020
(unaudited) (unaudited) (audited)
Notes GBPm GBPm GBPm
------------------------------- ----- ------------ ------------ -----------
Assets
Goodwill and other intangible
assets 222.2 222.1 222.1
Property, plant and equipment 62.7 72.9 65.8
Investment property 1.1 3.8 2.7
Investments in joint ventures 95.4 94.1 91.4
Other investments - 0.2 -
Shared equity loan receivables 6 4.4 6.9 5.5
Non-current assets 385.8 400.0 387.5
------------------------------- ----- ------------ ------------ -----------
Inventories 284.8 352.9 294.2
Contract assets 213.5 199.6 171.8
Trade and other receivables 7 267.3 211.8 234.6
Current tax assets 0.2 0.7 -
Cash and cash equivalents 8 414.2 266.0 400.5
Current assets 1,180.0 1,031.0 1,101.1
------------------------------- ----- ------------ ------------ -----------
Total assets 1,565.8 1,431.0 1,488.6
------------------------------- ----- ------------ ------------ -----------
Liabilities
Contract liabilities (53.9) (50.6) (55.6)
Trade and other payables 9 (894.1) (759.6) (838.0)
Current tax liabilities - - (1.0)
Lease liabilities (12.1) (12.3) (12.1)
Borrowings 8 (76.7) (119.9) (67.3)
Provisions (3.4) (7.5) (4.9)
------------------------------- ----- ------------ ------------ -----------
Current liabilities (1,040.2) (949.9) (978.9)
------------------------------- ----- ------------ ------------ -----------
Net current assets 139.8 81.1 122.2
------------------------------- ----- ------------ ------------ -----------
Trade and other payables - (3.8) (1.7)
Lease liabilities (37.8) (43.1) (38.9)
Borrowings 8 (0.4) - (0.4)
Retirement benefit obligation (0.2) - (0.2)
Deferred tax liabilities (14.4) (8.1) (12.5)
Provisions (27.5) (23.1) (26.0)
------------------------------- ----- ------------ ------------ -----------
Non-current liabilities (80.3) (78.1) (79.7)
------------------------------- ----- ------------ ------------ -----------
Total liabilities (1,120.5) (1,028.0) (1,058.6)
------------------------------- ----- ------------ ------------ -----------
Net assets 445.3 403.0 430.0
------------------------------- ----- ------------ ------------ -----------
Equity
Share capital 2.3 2.3 2.3
Share premium account 45.6 42.2 45.5
Other reserves (1.3) (0.1) (0.8)
Retained earnings 398.7 358.6 383.0
------------------------------- ----- ------------ ------------ -----------
Equity attributable to owners
of the Company 445.3 403.0 430.0
Total equity 445.3 403.0 430.0
------------------------------- ----- ------------ ------------ -----------
The prior year balances for cash and cash equivalents and bank
overdrafts have been re-presented in accordance with IAS 32 (see
the Basis of Preparation for details). There is no impact on the
net assets of the Group or net cash and cash equivalents.
Condensed consolidated cash flow statement
For the six months ended 30 June 2021
Six months Six months
to to Year ended
30 June 2021 30 June 2020 31 Dec 2020
(unaudited) (unaudited) (audited)
Notes GBPm GBPm GBPm
-------------------------------------- ----- ------------ ------------ -----------
Operating activities
Operating profit 54.1 16.0 65.4
Adjusted for:
Amortisation of intangible
assets 0.7 2.1 3.1
Share of net (profit)/loss
of equity accounted joint ventures (5.7) 0.3 (2.3)
Depreciation 10.0 11.3 22.0
Share option expense/(credit) 4.6 0.1 (0.1)
Gain on disposal of interest
in joint ventures - - (2.7)
Gain on disposal of property,
plant and equipment (0.2) (0.6) (1.0)
Revaluation of investment properties - - 0.6
Movement in fair value of shared
equity loan receivables 6 - - 0.5
Impairment of investments - 2.7 3.3
Proceeds on disposals of investment
properties 1.6 1.3 1.8
Repayment of shared equity loan
receivables 6 1.1 1.5 2.4
Increase in provisions - 1.7 2.0
Operating cash inflow before
movements in working capital 66.2 36.4 95.0
Decrease/(increase) in inventories 9.4 (14.8) 43.9
(Increase)/decrease in contract
assets (41.7) (12.8) 15.0
(Increase)/decrease in receivables (33.0) 63.6 41.6
Decrease in contract liabilities (1.7) (5.6) (0.6)
Increase/(decrease) in payables 53.8 (72.5) 2.7
-------------------------------------- ----- ------------ ------------ -----------
Movements in working capital (13.2) (42.1) 102.6
-------------------------------------- ----- ------------ ------------ -----------
Cash inflow/(outflow) from operations 53.0 (5.7) 197.6
-------------------------------------- ----- ------------ ------------ -----------
Income taxes paid (11.3) (13.2) (19.9)
-------------------------------------- ----- ------------ ------------ -----------
Net cash inflow/(outflow) from
operating activities 41.7 (18.9) 177.7
-------------------------------------- ----- ------------ ------------ -----------
Investing activities
Interest received 0.4 0.6 1.2
Proceeds on disposal of property,
plant and equipment 0.6 0.6 1.4
Purchases of property, plant
and equipment (1.7) (2.6) (4.2)
Purchases of intangible fixed
assets (0.8) (0.6) (1.6)
Net decrease/(increase) in loans
to joint ventures 1.7 (11.7) (12.9)
Payment for the acquisition
of subsidiaries, joint ventures
and other businesses - - (0.1)
Proceeds from the disposal of
other investments - - 0.5
Proceeds on disposal of interests
in joint ventures - - 8.3
-------------------------------------- ----- ------------ ------------ -----------
Net cash inflow/(outflow) from
investing activities 0.2 (13.7) (7.4)
-------------------------------------- ----- ------------ ------------ -----------
Financing activities
Interest paid (1.0) (1.5) (3.8)
Dividends paid 4 (18.5) - (9.6)
Repayments of lease liabilities (7.4) (7.2) (15.1)
Proceeds from borrowings 8 - 180.0 180.4
Repayment of borrowings 8 - (120.0) (180.0)
Proceeds on issue of share capital 0.1 3.7 7.0
Payments by the Trust to acquire
shares in the Company (12.3) (9.4) (9.6)
Proceeds on exercise of share
options 1.5 0.4 0.9
-------------------------------------- ----- ------------ ------------ -----------
Net cash (outflow)/inflow from
financing activities (37.6) 46.0 (29.8)
-------------------------------------- ----- ------------ ------------ -----------
Net increase in cash and cash
equivalents 4.3 13.4 140.5
Cash and cash equivalents at
the beginning of the period 333.2 192.7 192.7
-------------------------------------- ----- ------------ ------------ -----------
Cash and cash equivalents at
the end of the period 8 337.5 206.1 333.2
-------------------------------------- ----- ------------ ------------ -----------
Cash and cash equivalents presented in the consolidated cash
flow statement include bank overdrafts. See note 8 for a reconciliation
to cash and cash equivalents presented in the consolidated statement
of financial position.
Condensed consolidated statement of changes in equity
For the six months ended 30 June 2021
Share Share premium Other Retained Total
capital account reserves earnings equity
GBPm GBPm GBPm GBPm GBPm
------------------------------- -------- ------------- --------- --------- -------
1 January 2021 2.3 45.5 (0.8) 383.0 430.0
Profit for the period - - - 40.4 40.4
Other comprehensive income - - (0.5) - (0.5)
------------------------------- -------- ------------- --------- --------- -------
Total comprehensive income - - (0.5) 40.4 39.9
Share option expense - - - 4.6 4.6
Issue of shares at a premium - 0.1 - - 0.1
Exercise of share options - - - 1.5 1.5
Purchase of shares in
the Company by the Trust - - - (12.3) (12.3)
Dividends paid - - - (18.5) (18.5)
------------------------------- -------- ------------- --------- --------- -------
30 June 2021 (unaudited) 2.3 45.6 (1.3) 398.7 445.3
------------------------------- -------- ------------- --------- --------- -------
Share Share premium Other Retained Total
capital account reserves earnings equity
GBPm GBPm GBPm GBPm GBPm
------------------------------- -------- ------------- --------- --------- -------
1 January 2020 2.3 38.5 (0.8) 356.8 396.8
Profit for the period - - - 10.7 10.7
Other comprehensive income - - 0.7 - 0.7
------------------------------- -------- ------------- --------- --------- -------
Total comprehensive income - - 0.7 10.7 11.4
Share option expense - - - 0.1 0.1
Issue of shares at a premium - 3.7 - - 3.7
Exercise of share options - - - 0.4 0.4
Purchase of shares in
the Company by the Trust - - - (9.4) (9.4)
30 June 2020 (unaudited) 2.3 42.2 (0.1) 358.6 403.0
------------------------------- -------- ------------- --------- --------- -------
Share Share premium Other Retained Total
capital account reserves earnings equity
GBPm GBPm GBPm GBPm GBPm
------------------------------- -------- ------------- --------- --------- -------
1 January 2020 2.3 38.5 (0.8) 356.8 396.8
Profit for the year - - - 45.4 45.4
Total comprehensive income - - - 45.4 45.4
Share option credit - - - (0.1) (0.1)
Tax relating to share
option expense - - - (0.8) (0.8)
Issue of shares at a premium - 7.0 - - 7.0
Exercise of share options - - - 0.9 0.9
Purchase of shares in
the Company by the Trust - - - (9.6) (9.6)
Dividends paid - - - (9.6) (9.6)
------------------------------- -------- ------------- --------- --------- -------
31 December 2020 (audited) 2.3 45.5 (0.8) 383.0 430.0
------------------------------- -------- ------------- --------- --------- -------
Other reserves
Other reserves include:
-- Capital redemption reserve of GBP0.6m (30 June 2020: GBP0.6m,
31 December 2020: GBP0.6m) which was created on the redemption of
preference shares in 2003.
-- Hedging reserve of (GBP1.0m) (30 June 2020: (GBP0.3m), 31
December 2020: (GBP0.6m)) arising under cash flow and net
investment hedge accounting. Movements on the effective portion of
hedges are recognised through the hedging reserve, whilst any
ineffectiveness is taken to the income statement.
-- Translation reserve of (GBP0.9m) (30 June 2020: (GBP0.4m), 31
December 2020: (GBP0.8m)) arising on the translation of overseas
operations into the Group's functional currency.
Retained earnings
Retained earnings include shares in Morgan Sindall Group plc
purchased in the market and held by the Morgan Sindall Employee
Benefit Trust ('the Trust') to satisfy options under the Company's
share incentive schemes. The number of shares held by the Trust at
30 June 2021 was 271,678 (30 June 2020: 349,359, 31 December 2020:
278,383) with a cost of GBP6.3m (30 June 2020: GBP2.8m, 31 December
2020: GBP5.3m).
Notes to the consolidated financial statements
For the six months ended 30 June 2021
1 Basis of preparation
General information
The financial information for the year ended 31 December 2020
set out in this half year report does not constitute the Company's
statutory accounts as defined by 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 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
2021 and 2020 and for the six months ended 30 June 2021 and 2020
are therefore unaudited.
Basis of preparation
The annual financial statements of Morgan Sindall Group plc are
prepared in accordance with UK adopted International Accounting
Standards. The condensed consolidated financial statements included
in this half year report were prepared in accordance with UK
adopted 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 UK
adopted International Accounting Standards ('UK IAS'), this half
year report does not itself contain sufficient information to
comply with UK IAS.
Going concern
As at 30 June 2021 , the Group had net cash and cash equivalents
of GBP414.2m and total loans and borrowings of GBP77.1m, including
GBP76.7m of overdrafts repayable on demand (together net cash of
GBP337.1m). Should further funding be required the Group has total
committed banking facilities of GBP180m which are in place for
greater than one year. The directors have reviewed the Group's
forecasts and projections and have modelled certain downside
scenarios which show that the Group will have a sufficient level of
headroom within facility limits and covenants for the foreseeable
future. After making enquiries the directors have a reasonable
expectation that the Company and the Group have adequate resources
to continue in operational existence for the foreseeable future.
Accordingly, they continue to adopt the going concern basis in
preparing the condensed consolidated financial statements.
Tax
A tax charge of GBP12.0m is shown for the six-month period (six
months to 30 June 2020: GBP2.9m, year ended 31 December 2020:
GBP15.4m). This tax charge is recognised based upon the best
estimate of the average effective income tax rate on profit before
tax for the full financial year.
Changes in accounting policies
There have been no significant changes to accounting policies,
presentation or methods of preparation since the Group's latest
annual audited financial statements for the year ended 31 December
2020 other than those disclosed below and in note 3 'Business
Segments'.
IAS 32 'Financial Instruments: Presentation'
The Group's bank overdrafts and certain cash balances are
subject to cash pooling arrangements where both the Group and the
bank have rights to offset credit balances within the cash pool
against overdrafts within the cash pool. In accordance with IAS 32:
'Financial Instruments: Presentation', cash balances are presented
gross within cash and cash equivalents and bank overdrafts are
presented gross within current loans and other borrowings. In the
prior year, it was determined that the Group's cash and overdrafts
within cash pooling arrangements did not meet the requirements for
offsetting in accordance with IAS 32: 'Financial Instruments:
Presentation' and should not have been presented net in cash and
cash equivalents in the statement of financial position in prior
periods. For presentational purposes, the balances have been
re-presented as at 30 June 2020. The impact of this change is to
increase both cash and cash equivalents and bank overdrafts within
current loans and other borrowings as at 30 June 2020 by GBP59.9m.
This has had no impact on net assets or net cash and cash
equivalents.
Seasonality
The Group's activities are generally not subject to significant
seasonal variation.
2 Revenue
An analysis of the Group's revenue which depicts the nature,
timing and uncertainty of the different revenue streams is as
follows:
Six months Six months Year ended
to to
30 June 2021 30 June 2020 31 Dec 2020
restated(1) restated(1)
GBPm GBPm GBPm
-------------------------------- ------------ ------------ -----------
Construction 338.6 290.1 670.3
Infrastructure and design 435.4 499.4 966.5
-------------------------------- ------------ ------------ -----------
Construction and Infrastructure 774.0 789.5 1,636.8
Traditional fit out 303.3 277.8 600.6
Design and build 77.1 38.9 99.5
-------------------------------- ------------ ------------ -----------
Fit Out 380.4 316.7 700.1
Property Services 69.4 52.8 111.7
Contracting 111.1 87.1 195.9
Mixed tenure 158.9 89.2 278.0
-------------------------------- ------------ ------------ -----------
Partnership Housing 270.0 176.3 473.9
Urban Regeneration 68.0 35.4 124.5
Eliminations (3.2) (7.6) (13.0)
-------------------------------- ------------ ------------ -----------
Total revenue 1,558.6 1,363.1 3,034.0
-------------------------------- ------------ ------------ -----------
(1) The prior period comparatives have been restated to reflect
the Investments division reorganisation as described in Note 3.
3 Business segments
For management purposes, the Group is organised into five
operating divisions: Construction & Infrastructure, Fit Out,
Property Services, Partnership Housing and Urban Regeneration. The
divisions' activities are as follows:
-- Construction & Infrastructure: provides infrastructure
services in the highways, rail, aviation, energy, water and nuclear
markets, including tunnel design; and construction services in
education, healthcare, defence, commercial, industrial, leisure and
retail. BakerHicks offers a multidisciplinary design and
engineering consultancy.
-- Fit Out: Overbury specialises in fit out and refurbishment in
commercial, central and local government offices, further education
and retail banking. Morgan Lovell provides design and build
services for the office sector.
-- Property Services: provides planned asset management and
responsive maintenance to social housing and the wider public
sector.
-- Partnership Housing: works in partnerships with local
authorities and housing associations. Activities include
mixed-tenure developments, building and developing homes for open
market sale and affordable rent, design and build contracting and
planned maintenance and refurbishment.
-- Urban Regeneration: works with landowners and public sector
partners to transform the urban landscape through the development
of multi-phase sites and mixed-use regeneration, including
residential, commercial, retail and leisure.
Group Activities represents costs and income arising from
corporate activities which cannot be meaningfully allocated to the
operating segments. These include the costs of the Group Board,
treasury management, corporate tax coordination, Group finance and
internal audit, insurance management, company secretarial services,
and information technology services. The divisions are the basis on
which the Group reports its segmental information as presented
below.
As from 1 January 2021, the activities of the former Investments
division were reorganised with it no longer operating as a separate
division. The operational management of the joint venture property
partnerships and Later Living business formerly reported within
Investments were transferred to Partnership Housing, Urban
Regeneration and Group Activities. The prior year comparatives have
been restated to reflect this reorganisation.
Six months to
30 June 2021
---------------- ---------------- ------- --------- ----------- ------------- ----------- ------------ -------
Construction Property Partnership Urban Group
& Infrastructure Fit Out Services Housing Regeneration Activities Eliminations Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
---------------- ---------------- ------- --------- ----------- ------------- ----------- ------------ -------
External revenue 771.0 380.3 69.4 270.0 68.0 - - 1,558.6
Inter-segment
revenue 3.0 0.1 - - - - (3.2) -
---------------- ---------------- ------- --------- ----------- ------------- ----------- ------------ -------
Total revenue 774.0 380.4 69.4 270.0 68.0 - (3.2) 1,558.6
Operating
profit/(loss)
before
amortisation
of intangible
assets 22.6 19.3 2.4 12.1 8.7 (10.3) - 54.8
---------------- ---------------- ------- --------- ----------- ------------- ----------- ------------ -------
Amortisation
of intangible
assets - - (0.7) - - - - (0.7)
Operating
profit/(loss) 22.6 19.3 1.7 12.1 8.7 (10.3) - 54.1
---------------- ---------------- ------- --------- ----------- ------------- ----------- ------------ -------
Six months to 30
June 2020 (restated)
------------------------------ ----- -------- ----------- ------------ ----------- ---------- ------------ -------
Construction
& Fit Property Partnership Urban Group
Infrastructure Out Services Housing Regeneration Investments Activities Eliminations Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
-------------- -------------- ----- -------- ----------- ------------ ----------- ---------- ------------ -------
External
revenue 781.9 316.7 52.8 176.3 35.4 - - - 1,363.1
Inter-segment
revenue 7.6 - - - - - - (7.6) -
-------------- -------------- ----- -------- ----------- ------------ ----------- ---------- ------------ -------
Total revenue 789.5 316.7 52.8 176.3 35.4 - - (7.6) 1,363.1
Operating
profit/(loss)
before
amortisation
of intangible
assets 11.5 10.9 (0.5) 2.1 2.2 - (8.1) - 18.1
-------------- -------------- ----- -------- ----------- ------------ ----------- ---------- ------------ -------
Amortisation
of intangible
assets - - (0.6) - - - (1.5) - (2.1)
Operating
profit/(loss) 11.5 10.9 (1.1) 2.1 2.2 - (9.6) - 16.0
-------------- -------------- ----- -------- ----------- ------------ ----------- ---------- ------------ -------
Six months to 30
June 2020 (as reported)
------------------------------ ----- -------- ----------- ------------ ----------- ---------- ------------ -------
Construction
& Fit Property Partnership Urban Group
Infrastructure Out Services Housing Regeneration Investments Activities Eliminations Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
-------------- -------------- ----- -------- ----------- ------------ ----------- ---------- ------------ -------
External
revenue 781.9 316.7 52.8 165.0 34.5 12.2 - - 1,363.1
Inter-segment
revenue 7.6 - - - - - - (7.6) -
-------------- -------------- ----- -------- ----------- ------------ ----------- ---------- ------------ -------
Total revenue 789.5 316.7 52.8 165.0 34.5 12.2 - (7.6) 1,363.1
Operating
profit/(loss)
before
amortisation
of intangible
assets 11.5 10.9 (0.5) 3.0 2.1 (3.2) (5.7) - 18.1
-------------- -------------- ----- -------- ----------- ------------ ----------- ---------- ------------ -------
Amortisation
of intangible
assets - - (0.6) - - (1.5) - - (2.1)
Operating
profit/(loss) 11.5 10.9 (1.1) 3.0 2.1 (4.7) (5.7) - 16.0
-------------- -------------- ----- -------- ----------- ------------ ----------- ---------- ------------ -------
Year ended 31 December
2020 (restated)
------------------------------------- -------- ----------- ------------ ----------- ---------- ------------ -------
Construction
& Fit Property Partnership Urban Group
Infrastructure Out Services Housing Regeneration Investments Activities Eliminations Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
-------------- -------------- ----- -------- ----------- ------------ ----------- ---------- ------------ -------
External
revenue 1,623.8 700.1 111.7 473.9 124.5 - - - 3,034.0
Inter-segment
revenue 13.0 - - - - - - (13.0) -
-------------- -------------- ----- -------- ----------- ------------ ----------- ---------- ------------ -------
Total revenue 1,636.8 700.1 111.7 473.9 124.5 - - (13.0) 3,034.0
Operating
profit/(loss)
before
amortisation
of intangible
assets 35.7 32.1 1.0 16.0 8.8 - (25.1) - 68.5
-------------- -------------- ----- -------- ----------- ------------ ----------- ---------- ------------ -------
Amortisation
of intangible
assets - - (1.2) - - - (1.9) - (3.1)
Operating
profit/(loss) 35.7 32.1 (0.2) 16.0 8.8 - (27.0) - 65.4
-------------- -------------- ----- -------- ----------- ------------ ----------- ---------- ------------ -------
Year ended
31 December
2020 (as
reported)
-------------- -------------- ----- -------- ----------- ------------ ----------- ---------- ------------ -------
Construction
& Fit Property Partnership Urban Group
Infrastructure Out Services Housing Regeneration Investments Activities Eliminations Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
-------------- -------------- ----- -------- ----------- ------------ ----------- ---------- ------------ -------
External
revenue 1,623.8 700.1 111.7 441.4 122.8 34.2 - - 3,034.0
Inter-segment
revenue 13.0 - - - - - - (13.0) -
-------------- -------------- ----- -------- ----------- ------------ ----------- ---------- ------------ -------
Total revenue 1,636.8 700.1 111.7 441.4 122.8 34.2 - (13.0) 3,034.0
Operating
profit/(loss)
before
amortisation
of intangible
assets 35.7 32.1 1.0 16.1 9.2 (6.9) (18.7) - 68.5
-------------- -------------- ----- -------- ----------- ------------ ----------- ---------- ------------ -------
Amortisation
of intangible
assets - - (1.2) - - (1.9) - - (3.1)
Operating
profit/(loss) 35.7 32.1 (0.2) 16.1 9.2 (8.8) (18.7) - 65.4
-------------- -------------- ----- -------- ----------- ------------ ----------- ---------- ------------ -------
During the period ended 30 June 2021, the period ended 30 June
2020 and the year ended 31 December 2020, inter-segment sales were
charged at prevailing market prices and significantly all of the
Group's operations were carried out in the UK.
4 Dividends
Amounts recognised as distributions to equity
holders in the period:
--------------------------------------------------- -----------
Six months
to Year ended
30 June 2021 31 Dec 2020
GBPm GBPm
------------------------------------- ------------ -----------
Final dividend for the year ended
31 December 2020 of 40.0p per share 18.5 -
Interim dividend for the year ended
31 December 2020 of 21.0p per share - 9.6
------------------------------------- ------------ -----------
18.5 9.6
------------------------------------- ------------ -----------
A proposed interim dividend of 30p per share for 2021 was
approved by the Board on 4 August 2021 and will be paid on 26
October 2021 to shareholders on the register at 8 October 2021. The
ex-dividend date is 7 October 2021.
5 Earnings per share
Six months Six months
to to Year ended
30 June 2021 30 June 2020 31 Dec 2020
GBPm GBPm GBPm
----------------------------------- ------------ ------------ -----------
Profit attributable to the owners
of the Company 40.4 10.7 45.4
Adjustments:
Amortisation of intangible
assets net of tax 0.6 1.7 2.5
Deferred tax charge arising
due to change in UK corporation
tax rates 1.9 - 1.5
------------------------------------ ------------ ------------ -----------
Adjusted earnings 42.9 12.4 49.4
------------------------------------ ------------ ------------ -----------
Basic weighted average ordinary
shares (m) 46.1 45.2 45.5
Dilutive effect of share options
and conditional shares not vested
(m) 1.4 1.3 0.8
------------------------------------ ------------ ------------ -----------
Diluted weighted average ordinary
shares (m) 47.5 46.5 46.3
------------------------------------ ------------ ------------ -----------
Basic earnings per share 87.6p 23.7p 99.8p
Diluted earnings per share 85.1p 23.0p 98.1p
Adjusted earnings per share 93.1p 27.4p 108.6p
Diluted adjusted earnings per
share 90.3p 26.7p 106.7p
------------------------------------ ------------ ------------ -----------
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 GBP18.76 (30 June 2020: GBP14.61, 31
December 2020: GBP13.60).
A total of 2,497,229 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 2021 (30
June 2020: 783,723, 31 December 2020: 1,724,145).
6 Shared equity loan receivables
30 June 2021 30 June 2020 31 Dec 2020
GBPm GBPm GBPm
------------------------------------ ------------ ------------ -----------
1 January 5.5 8.4 8.4
Net change in fair value recognised
in the income statement - - (0.5)
Repayments by borrowers (1.1) (1.5) (2.4)
------------------------------------ ------------ ------------ -----------
End of period 4.4 6.9 5.5
------------------------------------ ------------ ------------ -----------
Basis of valuation and assumptions made
There is no directly observable fair value for individual loans
arising from the sale of 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 2021 30 June 2020 31 Dec 2020
----------------------------------------- ------------ ------------ -----------
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 9 years 9 years
Nominal discount rate 5.3% 5.3% 5.3%
Weighted average nominal annual property
price increase 3.0% 2.4% 3.0%
Forecast default rate 28.0% 13.0% 27.0%
Number of loans under the shared equity
scheme outstanding at the period end 178 236 211
----------------------------------------- ------------ ------------ -----------
Sensitivity analysis
At 30 June 2021, if the nominal discount rate had been 100bps
higher at 6.3% and all other variables were held constant, the fair
value of the shared equity loan receivables would be unchanged.
At 30 June 2021, 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 less than GBP0.1m with a
corresponding reduction in both the result for the period and
equity (excluding the effects of tax).
At 30 June 2021, if the forecast default rate had been 100bps
higher at 29.0% and all other variables were held constant, the
fair value of the shared equity loan receivables would decrease by
GBP0.1m 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 2021 30 June 2020 31 Dec 2020
GBPm GBPm GBPm
------------------------------- ------------ ------------ -----------
Trade receivables 219.5 174.4 202.9
Amounts owed by joint ventures 0.3 4.2 0.9
Prepayments 22.4 21.4 11.3
Other receivables 25.1 11.8 19.5
-------------------------------- ------------ ------------ -----------
267.3 211.8 234.6
------------------------------- ------------ ------------ -----------
8 Net cash
30 June 2021 30 June 2020 31 Dec 2020
re-presented
GBPm GBPm GBPm
----------------------------------- ------------ ------------ -----------
Cash and cash equivalents 414.2 266.0 400.5
Bank overdrafts presented as
borrowings due within one year (76.7) (59.9) (67.3)
------------------------------------ ------------ ------------ -----------
Cash and cash equivalents reported
in the consolidated cash flow
statement 337.5 206.1 333.2
Borrowings due in less than
one year (60.0) -
Borrowings due between two and
five years (0.4) - (0.4)
Net cash 337.1 146.1 332.8
------------------------------------ ------------ ------------ -----------
The prior year balance for cash and cash equivalents has been
re-presented in accordance with IAS 32 (see the basis of preparation
for details). There is no impact on the net assets of the Group
or net cash and cash equivalents.
Included within cash and cash equivalents is GBP61.3m which is
the Group's share of cash held within jointly controlled operations
(30 June 2020: GBP54.1m, 31 December 2020: GBP53.8m).There is
GBP8.0m included within cash and cash equivalents held for future
payments to designated suppliers (30 June 2020: GBP7.8m, 31
December 2020: GBP7.5m).
9 Trade and other payables
30 June
30 June 2021 2020 31 Dec 2020
GBPm GBPm GBPm
------------------------------- ------------ ------- -----------
Trade payables 172.9 171.1 189.2
Amounts owed to joint ventures 0.2 0.2 0.2
Other tax and social security 97.4 42.7 40.5
Accrued expenses 590.4 527.5 577.9
Deferred income 15.4 - 17.7
Other payables 17.8 18.1 12.5
-------------------------------- ------------ ------- -----------
894.1 759.6 838.0
------------------------------- ------------ ------- -----------
10 Retirement benefit schemes
The Morgan Sindall Retirement Benefits Plan ('the Retirement
Plan') was established on 31 May 1995 and currently operates on
defined contribution principles for employees of the Group. The
Retirement Plan also includes a defined benefit section comprising
liabilities and transfers of funds representing the accrued benefit
rights of active and deferred members and pensioners of pension
plans of companies which are now part of the Group. These include
salary related benefits for members in respect of benefits accrued
before 31 May 1995 (and benefits transferred in from The Snape
Group Limited Retirement Benefits Scheme accrued up to 1 August
1997). No further defined benefit membership rights can accrue
after those dates. The scheme duration is an indicator of the
weighted-average time until benefit payments are expected to be
made. For the scheme as a whole, the duration is around 15
years.
On 23 May 2018 the Trustees of the Retirement Plan completed a
buy-in transaction with Aviva to insure the benefits of the Defined
Benefit members. The buy-in policy is an asset of the Plan that
provides payments that are an exact match to the pension payments
made to the Defined Benefit members covered by the policy. During
the year ended 31 December 2020, additional liabilities were
considered due to a court ruling on 20 November 2020 in respect of
a guaranteed minimum pension (GMP) equalisation for past transfers
out. A liability of GBP0.2m (31 December 2020: GBP0.2m) is
recognised as a result of this ruling.
11 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.
Provision has been made for the Directors' best estimate of
known legal claims, investigations and legal actions in progress.
The Group takes legal advice as to the likelihood of success of
claims and actions and no provision is made where the Directors
consider, based on that advice, that the action is unlikely to
succeed, or that the Group cannot make a sufficiently reliable
estimate of the potential obligation.
12 Subsequent events
There have not been any significant subsequent events to
report.
The directors confirm that to the best of their knowledge:
-- the unaudited condensed consolidated financial statements,
which have been prepared in accordance with IAS 34 'Interim
Financial Reporting' as adopted by the European Union, give a true
and fair view of the assets, liabilities, financial position and
profit or loss of the Group as 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)
This responsibility statement was approved by the Board on 4(th)
August 2021 and is signed on its behalf by:
John Morgan Steve Crummett
Chief Executive Finance Director
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END
IR FLFITTSIVIIL
(END) Dow Jones Newswires
August 04, 2021 02:00 ET (06:00 GMT)
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