HALF YEAR RESULTS to 30 June 2018 AUGUST 2018
Agenda Introduction | John Morgan HY 2018 Financial & Operational Review | Steve Crummett Strategy & Prospects | John Morgan
Highlights Strategic and operational progress delivers another strong period of growth Positive momentum set to deliver further growth in the second half Good progress against our medium-term targets 1 Strength of balance sheet gives flexibility to invest 1 Medium-term targets as set out in February 2017 3
HY 2018 Financial & Operational Review Steve Crummett
HY 2018 Financial Highlights £ 1.4 bn 27 % £ 113 m 19 % Profit before tax 1 Revenue up Average daily Interim dividend 9% up 27% to £30.2m net cash up 19% to 19p per share £97m closing net cash 1 Adjusted 5
Summary Income Statement £m HY 2018 HY 2017 % change Revenue 1,423 1,307 +9% Operating profit 1 31.9 24.9 +28% Operating margin 1 2.2% 1.9% +30bps Profit before tax 1 30.2 23.7 +27% Earnings per share 1 55.6p 43.6p +28% Interim dividend per share 19.0p 16.0p +19% 1 Before intangible amortisation of £0.3m (HY 2017: intangible amortisation of £0.6m) 6
Divisional performance Operating Margin 1 £m Revenue Operating Profit/(Loss) 1 HY 2018 % HY 2018 % HY 2018 bps Construction & Infrastructure 662 -5% 11.3 +49% 1.7% +60bps Fit Out 426 +26% 18.8 +29% 4.4% +10bps Property Services 49 +58% 0.5 +67% 1.0% - Partnership Housing 231 +16% 4.6 -16% 2.0% -80bps Urban Regeneration 62 -13% 6.1 +205% n/a n/a Investments 3 n/a (1.1) n/a n/a n/a Elims/Central (10) (8.3) Total 1,423 +9% 31.9 +28% 2.2% +30bps 1 Before intangible amortisation of £0.3m (HY 2017: intangible amortisation of £0.6m) 7
Cash flow – six months to June 2018 Reflects usual working • (8.9) 10.3 capital movements from £m 31.9 year end Includes increase in capital • 0 employed in regeneration activities of c£60m 3.6 (1.3) (6.6) No material change to • (57.9) pattern of receivables or (94.8) (65.8) payables Net capex & Operating Operating Free cash Non-cash Working Net interest Other 3 finance Tax Profit 1 adjmts 2 Capital cash flow (non JV) flow leases 1 Before intangible amortisation of £0.3m 2 ‘Non-cash adjustments’ include depreciation £8.5m and share option charge £3.1m, less shared equity valuation movements £0.2m and share of JV profits £1.1m 3 ‘Other’ includes JV dividends and interest income £1.0m, provision movements £1.7m, shared equity redemptions £1.1m less gain on disposals £0.2m 8
Cash flow – last 12 months £ 69.6 m Operating cash flow 14.6 (13.3) £m 92 % (15.8) Cash 75.6 8.5 69.6 (2.1) (9.9) conversion 57.6 0 Operating Operating Free cash Non-cash Net capex & Working Net interest Other 3 Tax Profit 1 adjmts 2 finance leases Capital cash flow (non JV) flow 1 Before intangible amortisation of £0.9m 2 ‘Non-cash adjustments’ include depreciation £11.6m and share option charge £6.6m, less shared equity valuation movements £0.4m and share of JV profits £3.2m 3 ‘Other’ includes JV dividends and interest income £4.1m, provision movements £1.6m, shared equity redemptions £2.6m, investment property disposals £0.4m less gain on disposals £0.2m 9
Trade payables & other items ( £ 81 m ) Total net working capital at HY 2018 £ 98 m Contract Liabilities at HY 2018 £ 202 m Trade Payables • Vs contract asset of £237m at HY 2018 • Increase of £2m since HY 2017 £ 5 m Net retentions 28 ‘Trade Payable Days’ 1 at HY 2018 receivable at HY 2018 • Reduction of two days from HY 2017 (30 days) • No change to Trade Receivable Days – 18 days 1 Trade Payable Days = (Trade Payables/Cost of Sales) x 365 2 Trade Receivable Days = (Trade Receivables less retentions due)/Revenue) x 365 10
Net cash movement £ 113 m Average daily net cash 193.4 (65.8) £m £ 97 m Period end net cash (12.9) (17.8) 96.9 Total bank facilities of £180m expiring in • 2022 FY 2018 average daily net cash expected • to be > £80m Opening Closing net Free cash Other 1 Dividends net cash flow cash 1 ‘Other’ includes net loans advanced to JVs (£11.6m), deferred consideration paid in relation to the acquisition of a joint venture and other investment (£2.2m), purchase of shares in the Company by the employee benefit trust (£9.5m), proceeds from the issue of new shares (£3.8m), and proceeds from the exercise of share options (£1.7m) 11
Balance sheet £m HY FY 2018 2017 Strong balance sheet Intangibles 215.5 215.8 Net cash and significant undrawn PP&E 57.3 14.4 committed facilities Investments (incl JVs) 94.7 83.9 Shared equity loan receivables 14.7 15.6 Pension risk eliminated Net working capital (81.4) (164.2) ‘Buy-in’ completed with Aviva in H1 to Current and deferred tax (18.9) (22.8) insure the benefits of the defined benefit members Pension scheme 0.1 2.8 Net cash 96.9 193.4 IFRS 16 Lease liabilities (44.2) (0.9) Other 1 (21.8) (21.4) Inclusion of Lease liabilities arising from IFRS 16 adoption. Corresponding Net assets - reported 312.9 316.6 increase in PP&E 1 ‘Other’ includes provisions, deferred consideration, accrued/prepaid interest, derivative financial assets and liabilities 12
Order book/regeneration & development pipeline £ 3.6 bn £ 3.4 bn Regeneration & Order book development pipeline Down 6% from FY 2017 Up 5% from FY 2017 • • Aggregate of various divisional Only includes secured schemes (no • • movements preferred bidder or ‘prospectives’) Common theme across Group is the Our share of Gross Development Value of • • focus on quality of earnings and risk schemes management Long-term in nature. 91% is for 2020 • Projects only included in order book onwards • when signed contract or letter of intent in place 13
Divisional performances
Revenue split Construction & Infrastructure 52 % Construction 48 % Infrastructure £m HY 2018 HY 2017 Change Revenue 662 694 -5% Revenue vs HY 2017 Operating profit 1 11.3 7.6 +49% - 16 % Construction (at £342m) Margin % 1.7% 1.1% +60bps + 12 % Infrastructure (at £320m) Performance again reflects the focus on operational Margin vs HY 2017 delivery, risk management and quality of earnings + 70 bps Construction (at 1.7%) Further margin progression expected in H2 + 50 bps Infrastructure (at 1.7%) 1 Adjusted 15
Construction & Infrastructure £1,855m £1,761m Divisional order book of £1.76bn £478m £452m Down 5% from year end with continued focus on quality Order book 93% of Construction order book by value continuing £1,377m £1,309m to be derived through negotiated/framework/two-stage bidding processes Infrastructure Construction FY 17 HY 18 16
Revenue split Fit Out 80 % London 20 % Other regions £m HY 2018 HY 2017 Change Revenue 426 339 +26% Operating profit 1 18.8 14.6 +29% 87 % Traditional fit out Margin % 4.4% 4.3% +10bps 13 % ‘Design & build’ Record H1 revenue and profit Further margin improvement, up to 4.4% 55 % Existing office space Driven by operational delivery, focus on customer experience • and a high quality workload 45 % New office space 1 Adjusted 17
Fit Out Order Book of £528m £568m Down 7% on HY 2017’s record order book • £528m Up 6% compared to year end • Order Book £325m £320m Work load indicates a strong H2 £320m orders for H2. Similar to last year • FY performance likely higher than expected • £243m Next six months £208m Beyond six months Order Book beyond six months of £208m Down 14% from £243m at HY 2017 • Relatively short-term visibility • HY 17 HY 18 18
Property Services £m HY 2018 HY 2017 Change £ 777 m Order book Revenue 49 31 +58% Up 10% from HY 2017 Operating profit 1 0.5 0.3 +67% • Down 7% from FY 2017 • Margin % 1.0% 1.0% - Significant revenue growth, up 58% Driven by new contract wins and increase of scope on various existing contracts • Revenue expected to be > £100m for FY 2018 • Profit up 67% Operational leverage benefit coming through, plus more efficient overhead structure from • previous restructuring 1 Adjusted 19
Partnership Housing Revenue split 38 % Mixed-tenure (up 50%) £m HY 2018 HY 2017 Change Revenue 231 200 +16% Operating profit 1 4.6 5.5 -16% 62 % Contracting (up 1%) Margin % 2.0% 2.8% -80bps Profit down 16%, impacted by Contracting activities Mixed-tenure performing as planned • Operational delivery issues in Contracting • One under-performing ‘design & build’ contract subject to further delays Cost escalation and penalties; due to complete in Q3 • New management team appointed Immediate focus on operational improvement • 1 Adjusted 20
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