Full Year Results To 31 December 2019 20 February 2020
Agenda Introduction | John Morgan FY 2019 Financial & Operational Review | Steve Crummett Strategy: Medium-Term Targets and 2020 Outlook | John Morgan
Introduction Strong set of results Strategic focus on Construction and Regeneration Cash and balance sheet allow investment in the business for the long-term Positive momentum across the Group 3
FY 2019 Financial & Operational Review Steve Crummett
Financial Highlights £ 3.1 bn + 11 % £ 109 m + 11 % Revenue Profit before tax 1 Average daily Total dividend net cash up 3% to £3.1bn up 11% to £90.4m up 11% to 59p per share of £109m, up £10m Eps 1 up 6% £193m closing net cash 1 Adjusted 5
Summary Income Statement £m FY 2019 FY 2018 % change Revenue 3,071 2,972 +3% Operating profit 1 93.1 85.5 +9% Operating margin 1 3.0% 2.9% +10bps Profit before tax 1 90.4 81.6 +11% Earnings per share 1 161.2p 151.8p +6% Total dividend per share 59.0p 53.0p +11% 1 Adjusted - Before intangible amortisation of £1.8m (FY 2018: intangible amortisation of £1.0m) 6
Summary by division Operating Operating Margin 1 £m Revenue Profit/(Loss) 1 FY 2019 FY 2019 FY 2019 % % bps Construction & Infrastructure 1,486 32.3 2.2% +11% +20% +20bps Fit Out 839 36.9 4.4% +1% -16% -90bps Property Services 115 4.3 3.7% +15% +115% +170bps Partnership Housing 513 18.3 3.6% -1% +50% +120bps Urban Regeneration 119 19.4 n/a -36% -1% n/a Investments 8 (2.4) n/a n/a n/a n/a Elims/Central (9) (15.7) Total 3,071 93.1 3.0% +3% +9% +10bps 1 Adjusted - Before intangible amortisation of £1.8m (FY 2018: intangible amortisation of £1.0m) 7
› Cash Flow Working capital increase includes net investment in Regeneration activities of c£33m › Total working capital movement includes a reduction of £42m in Contract (61.9) (30.1) 21.5 Liabilities £m 93.1 › No other material changes to working (32.6) capital metrics (29.3) (0.6) 12.8 35.4 (12.8) 22.0 Working capital Free Other Operating Operating Non-cash Net capex & investment in Net interest Other 3 Working Tax cash Profit 1 adjmts 2 finance leases Regeneration cash flow (non JV) Capital flow activities 1 Before intangible amortisation of £1.8m 2 ‘Non-cash adjustments’ include depreciation £21.3m and share option charge £5.9m, shared equity valuation movements £0.4m, revaluation of investment properties £0.4m, less share of JV profits £6.5m 3 ‘Other’ includes provision movements £5.0m, proceeds on disposal of service contracts £4.4m, shared equity redemptions £4.2m, JV dividend and interest income £3.8m, less other gains and losses £4.4m and gain on disposals £0.2m 8
Payment Practices Payment practices reporting for Construction activities Invoices not Average Invoices › Continued improvement in average time to pay 6m to 31 st December 2019 paid within time to pay paid within agreed invoices in Construction & Infrastructure invoices 60 days terms Reduced to 32 days. 97% of invoices paid within 60 days 97% Construction & 32 days 12% Infrastructure › Fit Out – invoices paid on average in 20 days 4 days 7% 12% Reduced by 4 days 20 days 8% 97% Overbury (Fit Out) › Significant improvement in average time to pay 4 days 2% 1% invoices in Property Services 29 days 13% 91% Property Services Reduced by 16 days to 29 days 16 days 1% 2% Note: movements are shown compared to the prior reporting period of the 6 months to 30 June 2019 9
£ 109 m Daily Net Cash Profile Average daily net cash (2018: £99m) £250 2019 MAX: £207m Bank facilities of £180m through to £200 2022 £150 Significant headroom against £m £100 committed facilities. Facilities £50 undrawn 2019 MIN: £63m £0 £0 Group is committed to maintaining (£50) average daily net cash position for foreseeable future (£100) (£150) > £60m average daily net cash expected for 2020 given (£200) investment in Partnership Housing (£250) Jan Jan Mar Apr May May Jun Jul Aug Sep Oct Nov Dec 2017 2018 2019 Facilities 10
Net Cash Movement (24.8) 22.0 £m £ 193 m 207.0 Year end (11.5) net cash 192.7 Opening Closing Free cash Other 1 Dividends flow net cash net cash 1 ‘Other’ includes net loans advanced to JVs (£3.3m), payment to acquire an additional interest in a JV (£1.6m), and purchase of shares in the Company by the employee benefit trust (£9.1m); less proceeds from the issue of new shares (£0.2m) and proceeds from the exercise of share options (£2.3m) 11
Balance Sheet £m FY FY 2019 2018 Strong balance sheet Intangibles 223.6 216.4 Net cash and significant undrawn PP&E 79.5 62.6 committed facilities Investments (including JVs) 90.7 88.5 No pension liability Shared equity loan receivables 8.4 13.0 Net working capital (91.9) (153.2) Tangible net assets of £173m Current and deferred tax (17.7) (17.8) Pension scheme - - Net cash 192.7 207.0 Lease liabilities (59.7) (46.9) Other 1 (28.8) (23.0) Net assets - reported 396.8 346.6 1 ‘ Other’ includes provisions, capitalised fees, accrued interest and deferred consideration 12
Secured Workload +14% £ 7.6 bn Total secured workload on FY 2018 £ 3.7 bn Construction £ 3.9 bn Regeneration +17% +11% on FY 2018 on FY 2018 › › Includes Construction & Infrastructure, Fit Out, Includes Partnership Housing, Urban Regeneration, Property Services Investments › › Growth from all divisions. No compromise on Long term in nature with 80% for 2021 onwards quality of work secured consistent with the strategy › Only includes secured schemes (no preferred bidder › Strict definition where projects only included when or ‘prospectives’) signed contract or letter of intent in place 13
Divisional performances
Revenue split (by activity) Construction & Infrastructure 42 % Construction 58 % Infrastructure £m FY 2019 FY 2018 Change Revenue 1,486 1,343 +11% Revenue growth (vs FY 2018) Operating profit 32.3 27.0 +20% + 4 % Margin % 2.2% 2.0% +20bps Construction (at £619m) + 16 % Infrastructure (at £867m) Performance reflects the consistent focus on operational delivery, contract selectivity and risk management Margin growth (vs FY 2018) + 40 bps Strategy delivering ongoing margin progression Construction to 2.8% › Strong improvement in Construction, up to 2.8% + 10 bps Infrastructure to 1.8% › Infrastructure up 10bps to 1.8%. More cautious view taken on end performance of certain projects 15
Construction & Infrastructure Order book £2,271m + 18% Strong period of work winning. Divisional order book of £2.3bn £514m £1,922m on FY 2018 Up 18% from the year end › £405m Construction up 27%, Infrastructure up 16% (vs FY 2018) Continued focus on quality Order book › 98% of Construction order book by value derived through negotiated/framework/two-stage bidding processes Infrastructure £1,757m £1,517m › In addition, c£675m of work as ‘preferred bidder’ in Construction Construction › 97% of Infrastructure revenue secured for 2020. >90% of value being derived through frameworks FY 18 FY 19 16
Fit Out Revenue split 70 % London £m FY 2019 FY 2018 Change 30 % Other Regions Revenue 839 831 +1% Operating profit 36.9 43.8 -16% Margin % 4.4% 5.3% -90bps 81 % Traditional Fit Out 19 % ’Design & Build’ Demand remains strong with revenue up to £839m Margin robust at 4.4% despite general tightening of overall market 73 % Existing Office Space conditions › 27 % New Office Space Market leading position › Strong project delivery, with focus on enhanced customer experience No material changes to geographical balance, type of business or sector balance 17
Fit Out Order book + 2% Order book of £480m at year end £480m on FY 2018 £470m › Up 2% on FY 2018, up 3% from HY19 Order Book Secured workload indicates good H1 2020 volumes £468m £439m › £419m £419m is secured for FY 2020, but 5% lower than at the same point last year £439m › no significant change to the balance of the order book in terms Next 12 months of geographical split and type of work Beyond 12 months › average value of enquiries received through the year remained £31m £61m £32m £31m at around £2m. FY 19 FY 18 18
Property Services Order book £ 904 m Up 25% from FY 2018 £m FY 2019 FY 2018 Change Revenue 115 100 +15% plus £1.5bn pipeline of tendering opportunities Operating profit 1 4.3 2.0 +115% Margin % 1 3.7% 2.0% +170bps Revenue growth driven by increasing scope of existing contracts and three new contract wins. Margin up 170bps to 3.7% › improved operational efficiency at contract level › benefit of ‘scale’ › IT platform provides data insight into service delivery and customer satisfaction 1 Adjusted 19
Partnership Housing Revenue split (by activity) 52 % Mixed-tenure £m FY 2019 FY 2018 Change 48 % Contracting Revenue 513 519 -1% Operating profit 18.3 12.2 +50% Margin % 3.6% 2.4% +120bps Revenue growth (vs FY 2018) + 21 % Mixed-tenure Positive progress for Partnership Housing - 18 % › Contracting Management team appointed in 2018 now firmly established › Renewed momentum across the business Profit up 50%. Driven by a number of the immediate actions focused mainly on operational delivery and quality › Growth in higher margin mixed-tenure business 20
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