Transcript Slide 1

Interim Results Presentation, Half Year to 31 December 2008
Greg Fitzgerald - Chief Executive
Frank Nelson - Finance Director
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Interim Results Presentation – February 2009
Disclaimer
This presentation is being made only to and is directed at (a) persons who have professional
experience in matters relating to investments falling within Article 19(1) of the Financial
Services and Markets Act 2000 (Financial Promotion) Order 2005 (the “Order”) or (b) any
other persons to who it may otherwise lawfully be communicated, falling within Article 49(2) of
the Order (all such persons being referred to as “relevant persons”).
Any person who is not a relevant person should not act or rely on this presentation or any of
its comments.
The financial information set out in this document does not constitute the Company’s statutory
accounts. Statutory accounts for 2008, which received an auditors’ report that was unqualified
and did not contain any statement concerning accounting records or failure to obtain
necessary information and explanations, have been filed with the Registrar of Companies.
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Interim Results Presentation – February 2009
Agenda
• Highlights
• Financial Review
• Operating Review
• Key Strengths and Outlook
Bermondsey Square, London
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Interim Results Presentation – February 2009
Highlights
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Interim Results Presentation – February 2009
Highlights
• Operational strengths from hybrid model
• Record profits and strong cash generation from construction
• Net cash at period end
• In compliance with bank covenants
• Significant cost reductions achieved
• Construction market more competitive
• Construction order book 90% public and regulated
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Interim Results Presentation – February 2009
Highlights
• Difficult housing market
• £48m housing write down
• Reduced land bank and number of stock properties
• Geographic coverage maintained in Housebuilding
• Excellent relationship with Homes and Communities Agency
• New divisional management in place
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Interim Results Presentation – February 2009
Highlights
Group Structure
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Interim Results Presentation – February 2009
Financial Review
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Interim Results Presentation – February 2009
Financial Review
Highlights
• Group revenue £774m, down 14%
• Profit before tax
• Pre-exceptional £11.2m profit, down 67%
• Post-exceptional £37.5m loss
• Earnings per share
• Pre-exceptional 2.2p, down 66%
• Post-exceptional (7.0)p
• Net cash £2m (Dec 2007: £46m net debt)
• Interim dividend 0.45p per share
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Interim Results Presentation – February 2009
Financial Review
Financing
• Total bank facility £432m
• £300m until 2012
• £132m amortising to £90m in 2012
• Significant headroom over projected requirements
• Projections within banking covenants
• Substantial contract bonding facilities
• Rigorous working capital management
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Interim Results Presentation – February 2009
Financial Review
Income Statement
2008
2007
£m
£m
Revenue
773.8
897.9
Profit from operations*
23.5
47.2
JV interest and tax
(5.3)
(3.7)
Profit before finance costs, amortisation and exceptionals
18.2
43.5
Intangibles amortisation
(1.0)
(1.0)
Profit before exceptionals and finance costs
17.2
42.5
Net finance costs
(6.0)
(8.7)
Profit before exceptionals
11.2
33.8
Exceptional items
(48.7)
-
(Loss)/profit before tax
(37.5)
33.8
* Profit from operations is stated before finance costs, exceptional items, amortisation and share of joint ventures’ interest and tax
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Interim Results Presentation – February 2009
Financial Review
Exceptional loss
• £48.7m exceptional loss taking account of:
• Sites (including JVs) with negative margins
• Further deflationary price assumptions
• Abortive costs relating to conditional contracts
• Reorganisation costs
• Land write down equivalent to 14% of land bank
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Interim Results Presentation – February 2009
Financial Review
Segmental Analysis: Profit from Operations
Revenue (including JVs)
£m
Profit/(Loss)
£m
2008
2007
2008
2007
Building
274.6
339.2
6.7
6.5
Infrastructure
265.4
250.1
7.8
6.2
Construction
540.0
589.3
14.5
12.7
PPP Investments
4.9
2.4
1.9
0.4
Affordable Housing & Regeneration
99.5
94.5
6.7
5.7
Housebuilding
141.7
230.0
3.5
32.6
0.9
0.2
(3.1)
(4.2)
787.0
916.4
23.5*
47.2*
Intangibles amortisation
(1.0)
(1.0)
Less JV interest and tax
(5.3)
(3.7)
Net interest payable
(6.0)
(8.7)
Profit before exceptionals
11.2
33.8
Exceptional items
(48.7)
-
(Loss)/profit before tax
(37.5)
33.8
Group
*Profit from Operations
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Interim Results Presentation – February 2009
Financial Review
Segmental Analysis: Profit Before Tax
Revenue (including JVs)
£m
Profit/(Loss)
£m
2008
2007
2008
2007
Building
274.6
339.2
9.1
9.2
Infrastructure
265.4
250.1
8.8
6.8
Construction
540.0
589.3
17.9
16.0
PPP Investments
4.9
2.4
1.6
0.1
Affordable Housing & Regeneration
99.5
94.5
3.0
3.5
Housebuilding
141.7
230.0
(8.3)
16.7
0.9
0.2
3.3
2.2
787.0
916.4
17.5*
38.5*
Intangibles amortisation
(1.0)
(1.0)
Less JV interest and tax
(5.3)
(3.7)
Profit before exceptionals
11.2
33.8
Exceptional items
(48.7)
-
(Loss)/profit before tax
(37.5)
33.8
Group
*PBT is stated before intangibles amortisation and JV interest and tax
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Interim Results Presentation – February 2009
Financial Review
Finance Costs
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Half year to
31 Dec 2008
Half year to
31 Dec 2007
Year to
30 June 2008
£m
£m
£m
Net interest payable
0.9
4.0
6.3
On unwinding of discount on creditors
0.9
3.1
4.7
Net return on asset of pension fund
0.5
(0.4)
(0.9)
Fair value losses on financial activities
– interest rate swaps
3.7
2.0
0.7
6.0
8.7
10.8
Interim Results Presentation – February 2009
Financial Review
Balance Sheet Highlights
Half year to
31 Dec 2008
Half year to
31 Dec 2007
Year to
30 June 2008
302.8 *
317.1*
325.3*
Net cash/(debt) £m
1.8
(45.7)
(1.7)
Gearing
n/a
14%
0.5%
Interest cover - total (inc IFRS and swap)
3x
5x
6.6 x
19 x
10 x
8.4 x
Shareholders’ funds £m
- bank
Land pre June 08 £m
292.4
Land post June 08 £m
50.2**
Total Land
342.6
498.2
426.5
Work in progress £m
146.0
180.6
183.8
Land creditors £m
(33.2)
(122.4)
(76.5)
Net Developments
455.4
556.4
533.8
-
(42.9)
(0.8)
Deferred payment – Linden Homes & Chartdale £m
* Includes £6m net pension deficit (Dec 2007: £19m, June 2008: £20m)
**Includes land agreed & acquired, replanned, renegotiated
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Interim Results Presentation – February 2009
Financial Review
Cash Flow Summary
2008
2007
£m
£m
Operating cash flow
12.5
86.0
Interest, tax and dividends
(5.0)
(20.9)
Net proceeds from issue of shares
-
0.1
Acquisitions (net of cash acquired)
-
(6.0)
(6.5)
(3.7)
Other
2.5
(2.5)
Net cash inflow
3.5
53.0
(1.7)
(98.7)
1.8
(45.7)
Capital expenditure and investments
Opening net debt
Closing net cash/(debt)
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Interim Results Presentation – February 2009
Financial Review
Land Payments Profile
Actual ytd
Dec 2008
£m
Payments made to date
36.7
Total
2008/9
£m
Estimated
2009/10
£m
36.7
Expected payments in respect of
existing contracts
14.9
14.9
16.4
Forecast payments in respect of
uncommitted land
1.4
1.4
55.1
16.3
53.0
71.5
Total
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Estimated
H2 2008/9
£m
36.7
Interim Results Presentation – February 2009
Financial Review
Balance Sheet/Debt Profile by Sector – Illustrative Only
Construction
Affordable Housing
Investments
Housebuilding and Group
(NAV after deduction of debt)
* Total net assets per B/S
Less intangibles
Net tangible assets
Tangible
Net Assets
£m
Cash/(Debt)
£m
Accepted
Valuation
Methodology
(60)
200
P/E
40
(40)
P/E
-
(10)
Directors’
Valuation
200
(210)
Discount to NAV
180*
(60)**
£m
303
(123)
180
** Assume average net debt £60m
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Interim Results Presentation – February 2009
Financial Review
Cost Savings
• Strong focus on business efficiency and cost savings
• Housebuilding £19m
• 4 day week
• 43% head count reduction
• Office and overhead savings
• Construction £2.6m
• Overhead savings
• Group £3.4m
• IT and communication costs
• Corporate and central costs
• Vehicle fleet expenses
• National Insurances savings
• Total targeted annualised savings £25m to meet current market
conditions
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Interim Results Presentation – February 2009
Operating Review - Building
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Interim Results Presentation – February 2009
Operating Review - Building
Highlights
• Strong trading performance
• Excellent cash generation
• Successful completion of
Highland & Northampton Schools
PFIs
• Key projects progressing well
• Market conditions more
competitive
• Easing in supply chain
Museum of Liverpool
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Interim Results Presentation – February 2009
Operating Review - Building
Highlights
• Selected for Scottish Health
framework
• Appointed on £103m St Pancras
contract
• 45% of workload secured for next
year
• 80% of order book within public
and regulated sectors
Wimbledon
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Interim Results Presentation – February 2009
Operating Review - Building
Forward Order Book: February 2009
Sectors
£m
Health
123
Education
129
Prisons
155
Commercial
112
Interiors
17
FM
146
Other Public Sector
89
771
NB - Excludes £200m at preferred bidder stage
- Excludes affordable housing contracting
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Interim Results Presentation – February 2009
Operating Review - Infrastructure
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Interim Results Presentation – February 2009
Operating Review - Infrastructure
Highlights
• Strong trading performance
• Excellent cash generation
• Renewables prospects good
• Industry leading performance
in Water
• AMP 5 procurement process
underway
Spen Valley Waste Water Treatment Works, Yorkshire
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Interim Results Presentation – February 2009
Operating Review - Infrastructure
Highlights
• Whitelee Windfarm and A595
successfully completed
• Good progress at Olympic Park
and on M74
• 52% of workload secured for
next year
• Over 95% of order book within
public and regulated sectors
A595 Parton to Lillyhall, West Cumbria
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Interim Results Presentation – February 2009
Operating Review - Infrastructure
Forward Order Book: February 2009
Sectors
£m
Water
315*
Highways
234
Flood Alleviation
98
Rail
5
Waterways
7
Remediation
53
Communications
23
Renewable Energy
34
International
10
Ground Engineering
1
780
* Excludes AMP5 renewals
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Interim Results Presentation – February 2009
Operating Review - Investments
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Interim Results Presentation – February 2009
Operating Review - Investments
Highlights
•
Investments in projects
performing well
•
Bid decisions expected shortly
•
•
Belmarsh and Maghull
prisons
•
Worcester Library &
History Centre
•
Moray Schools, Scotland
Good pipeline of future projects
in longer term
Milburn Academy, Inverness
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Interim Results Presentation – February 2009
Operating Review Affordable Housing and Regeneration
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Interim Results Presentation – February 2009
Operating Review - Affordable Housing and Regeneration
Highlights
• Excellent relationships with Homes and
Communities Agency (HCA)
• £28m of National Affordable Housing
Programme grant
• £10m (419 plots) HomeBuy Direct
awarded
• Secured first HCA site disposal
Homes and Communities Agency
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Interim Results Presentation – February 2009
Operating Review - Affordable Housing and Regeneration
Highlights
• Speculative sales to Registered
Social Landlords (RSLs) continuing
• Re-planning schemes for current
market
• Contracting market subdued
• Good position to gain accelerated
and gap funding from HCA
TR1, Truro, Cornwall
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Interim Results Presentation – February 2009
Operating Review - Affordable Housing and Regeneration
Key Statistics: excluding spec sales to RSLs, including share of joint ventures
6 months to December 2008
2008
2007
Increase/
(decrease) %
Total
292
284
3%
- Affordable
216
248
(13)%
- Regeneration
76
36
111%
Total
125
118
6%
-Affordable
115
113
2%
- Regeneration
153
183
(16)%
Total
99.5
94.5
5%
- Affordable
24.7
27.0
(9)%
- Regeneration
11.7
18.0
(35)%
- Contracting
63.1
49.5
28%
6.7
5.7
17%
Margin %
6.7%
6.0%
-
In hand position Feb 09 £m - Afford. & Regeneration
101.0
135.1
(26)%
- Contracting Order Book
156.6
153.1
2%
2,788
4,100
(32)%
Units
Av. Selling Price £000
Revenue £m
Profit/loss from Operations before exceptionals £m
Land bank February 09 units
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Interim Results Presentation – February 2009
Operating Review - Housebuilding
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Interim Results Presentation – February 2009
Operating Review - Housebuilding
Market Conditions
• Difficult market conditions
• Consumer confidence and
mortgage availability key
constraints
• No new build premium
• House price deflation from peak
to trough of circa 25%
• Sub-contract cost reductions
from peak to trough circa 12%
• Significant reduction in land
prices
• Cancellation rates stabilised
Banstead Wood, Surrey
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Interim Results Presentation – February 2009
Operating Review - Housebuilding
Highlights
• Aggressive sales policy
maintained
• 43% reduction in head count
• Successful implementation
of 4 day working week
• Geographical coverage
maintained
• Land spend and work in
progress strictly controlled.
Whittington’s Meadow, Nassington, Northants
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Interim Results Presentation – February 2009
Operating Review - Housebuilding
Highlights
• Renegotiations of major land
acquisitions and existing
planning approvals ongoing
• Industry leading customer
satisfaction maintained
• Part exchange and stock
levels at historically low levels
Market Quarter, Chippenham, Wiltshire
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Interim Results Presentation – February 2009
Operating Review - Housebuilding
Key Statistics: including share of joint ventures
6 months to December 2008
2008
2007
Increase/
(Decrease)
%
Units
671
890
(25)%
Average Selling Price £000
201
231
(13)%
Income per sq. ft £
219
259
(15)%
141.7
230.0
(38)%
3.5
32.6
(89)%
2.5%
14.2%
-
ROCE % *
4%
18%
-
In hand position February 09 £m
205
415
(51)%
Land bank February 09 units
4,840
7,000
(31)%
Strategic land February 09 acres
1,313
1,512
(13)%
Revenue £m
Profit from operations £m
Margin %
*Includes private housing, S106 and regeneration (excluding contracting)
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Interim Results Presentation – February 2009
Operating Review - Housebuilding
Market Outlook
• Continue to reduce exposure
to the apartment market
• Strong cash management
being maintained
• Prudent land procurement
policy to continue
• Well positioned to take
advantage of opportunities
• Evidence of investors
returning to the market
• Encouraging start to 2009
Watercolour, Redhill, Surrey
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Interim Results Presentation – February 2009
Key Strengths and Outlook
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Interim Results Presentation – February 2009
Key Strengths and Outlook
• £432m banking facility negotiated in early 2007 - runs to 2012
• Continue to work within bank covenants
• Low levels of debt with ability to gear up
• Interim dividend declared
• Construction
• 90% in public and regulated sector
• Industry leader in water
• Upper quartile cash generation
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Interim Results Presentation – February 2009
Key Strengths and Outlook
• Housebuilding
• Maintained geographic coverage with southern bias
• Low levels of stock
• Leader in affordable housing
• Greater revenues from lower land bank than key competitors
• Well placed to take advantage of opportunities
• Experienced management team
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Interim Results Presentation – February 2009
Interim Results Presentation, Half Year to 31 December 2008
Greg Fitzgerald - Chief Executive
Frank Nelson - Finance Director
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Interim Results Presentation – February 2009