year end preliminary results – september 20081 preliminary results presentation, year to 30 th...

Year End Preliminary Results – September 20081

Preliminary Results Presentation, Year to 30th June 2008

Greg Fitzgerald - Chief Executive

Frank Nelson - Finance Director


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 2007, 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.

Disclaimer


Agenda

• Key Highlights

• Financial Overview

• Operating Review

• Summary and Outlook


Key Highlights


Key Highlights

• Record profits in difficult economic environment

• Excellent performance from Building, Infrastructure and Affordable Housing

• Total housing completions up on previous year despite market conditions

• Housebuilding supported by strength in Affordable Housing


Key Highlights

• Linden integration complete - savings ahead of forecast

• Acquisition of Kendall Cross

• Industry leading Health and Safety performance

• Management succession implemented

• Financial strength improved


Key Highlights

New Structure and Succession


Financial Overview


• Group revenue £1,832m, up 30%

• Profit before tax

• Pre exceptional £71.8m, up 35%

• Post exceptional £60.3m, unchanged

• Earnings per share

• Pre exceptional 13.6p, up 9%

• Post exceptional 11.4p, down 20%

• Net Debt at 30 June 2008, £2m (2007: £99m)

• Total Dividend 3p, unchanged

• Return on average shareholders’ funds, 19% (2007: 28%)

Highlights

Financial Overview


• Total Bank Facility £450m• £300m until 2012• £150m amortising to £90m in 2012

• Significant headroom over projected requirements

• Projections well within banking covenants

• Substantial contract bonding facilities

• Rigorous working capital management

Financing

Financial Overview


Goodwill and Exceptional Items

• Linden Goodwill £52.3m • Strategic purchase adding critical mass to South East• Synergy savings achieved £3m• Additional purchasing power• Brand and office bases intact • Impairment calculations support carrying value

• Conservative profit recognition

• Exceptional Items £11.5m

• Restructuring costs £2.4m

• Land write downs and abortive costs £9.1m• Independent valuations on substantial part of portfolio• Independent review of build costs• Provisions on sites with negative margins• Overall assessment against a break even contribution

Financial Overview


Income Statement

2008 2007

£m £m

Revenue 1,831.9 1,409.7

Profit from operations* 89.3 62.8

JV interest and tax (4.7) (0.3)

Profit before finance costs, amortisation and exceptionals 84.6 62.5

Intangibles amortisation (2.0) (1.4)

Profit before exceptionals and finance costs 82.6 61.1

Net finance costs (10.8) (8.1)

Profit before exceptionals 71.8 53.0

Exceptional items

- land write downs and abortive costs (9.1) -

- restructuring costs (2.4) (1.9)

- property rationalisation - 3.9

- pensions, actuarial gain - 5.2

Profit before tax 60.3 60.2

* Profit from operations is stated before finance costs, exceptional items, amortisation and share of joint ventures’ interest and tax

Financial Overview


Segmental Analysis to 30th June 2008 – Profit from Operations

Revenue (including JVs) £m

Profit/(Loss)£m

2008 2007 2008 2007

Building 605.4 580.1 11.9 11.0

Infrastructure 541.3 410.7 13.8 9.8

Construction 1,146.7 990.8 25.7 20.8

PPP Investments 5.0 3.5 2.9 (1.1)

Affordable Housing & Regeneration 230.4 128.4 13.8 6.1

Housebuilding 486.3 304.4 53.8 44.1

Group 0.3 1.1 (6.9) (7.1)

1,868.7 1,428.2 89.3 62.8


Less JV interest and tax (4.7) (0.3)

Net interest payable (10.8) (8.1)


Exceptional items (11.5) 7.2


Financial Overview


Segmental Analysis to 30th June 2008 – Profit Before Tax

Revenue (including JVs)£m

Profit/(Loss)£m

2008 2007 2008 2007

Building 605.4 580.1 17.4 14.0

Infrastructure 541.3 410.7 15.1 10.5

Construction 1,146.7 990.8 32.5 24.5

PPP Investments 5.0 3.5 2.4 (1.4)

Affordable Housing & Regeneration 230.4 128.4 9.3 4.3

Housebuilding 486.3 304.4 24.6 23.8

Group 0.3 1.1 9.7 3.5

1,868.7 1,428.2 78.5 54.7


Less JV interest and tax (4.7) (0.3)


Exceptional items (11.5) 7.2


Financial Overview


Share of the Cake – Profit Before Tax

20072008

Excludes Group and PPP Investments

Building (26%)

Infrastructure (23%)

Affordable andregeneration (14%)

Housebuilding (37%)

Building (27%)

Infrastructure (20%)

Affordable andregeneration (8%)

Housebuilding (45%)

Financial Overview


Finance Costs - Net

2008

£m

2007

£m

Net interest payable 7.9 1.6

On unwinding of discount on creditors 4.7 5.1

Net return on asset of pension fund (0.9) 0.7

Other (0.9) 0.7

10.8 8.1

Financial Overview


Balance Sheet Highlights

2008 2007

Shareholders’ funds £m * 325.3 306.6

Net debt £m (1.7) (98.7)

Gearing 0.5% 32%

Interest cover - total (IFRS) 6.6 x 8 x

- bank 8.4 x 23 x

Land £m 426.5 547.6

Work in progress £m 183.8 157.3

Land creditors £m ** (76.5) (145.5)

Deferred payment – Linden & Chartdale £m (0.8) (43.9)

* Includes £19.7m net pension deficit (2007: £18m)

** Excludes JV commitments

Financial Overview


2008£m

2007£m

Operating cash flow 149.6 10.4

Interest, tax and dividends (37.8) (25.4)

Net proceeds from issue of shares 0.3 147.0

Acquisitions (net of cash acquired) (6.1) 40.1

Repayment of borrowings acquired - (261.0)

Proceeds from sale of fixed assets 0.3 19.6 *

Capital expenditure and investments (10.7) (4.7)

Other 1.4 (40.7)

Net cash (outflow)/inflow 97.0 (114.7)

Opening net cash/(debt) (98.7) 16.0

Closing net (debt)/cash (1.7) (98.7)

Cash Flow Summary

* Includes proceeds from sale and leasebacks

Financial Overview


Operating Review - Building



• Margin reflects upper quartile performance

• Strong performance from all business units

• FM business consolidated

• Market conditions becoming more challenging

• Secured 82% of current year’s workload

Key Highlights



• Major contracts proceeding well

• Geographic coverage increased

• Encouraging pipeline of Public Sector opportunities

• Profits conservatively reported

• Strong cash generation

Key Highlights


Forward Order Book: August 2008

Sectors £m

Health 114

Education 87

Prisons 121

Commercial 172

Interiors 55

FM 151

Other Public Sector 90

790


Excludes Affordable Housing


Operating Review - Infrastructure



• Margin reflects upper quartile performance

• Strong market conditions, despite economy

• Organic growth of over 38%

• Industry leading performance in Water

• Secured 80% of current year’s workload

Key Highlights



• Development and growth of Renewables capability

• Good progress on Whitelee Windfarm and Olympic contracts

• Secured 25% share of the £445m M74 Highways project

• Excellent customer satisfaction results

• Strong cash generation

Key Highlights



Forward Order Book: August 2008

Sectors £m

Water 396

Highways 268

Flood Alleviation 102

Rail 20

Waterways 15

Remediation 93

Communications 23

Renewable Energy 9

International 12

Ground Engineering 4

942


Operating Review - Investments


Operating Review - Investments

• Secondary markets remain strong

• Worcester Library –shortlist in the Autumn

• Maghull & Belmarsh prisons – bids to be submitted early October with G4S

• Directors’ valuation shows uplift of £11.1m

Key Highlights


Operating Review -

Affordable Housing and Regeneration


Key Highlights

Operating Review - Affordable Housing and Regeneration

• Award of £25m of Housing Corporation Grant

• Enhanced revenues achieved

• Intermediate market vehicle established

• 11% of speculative sales made to RSLs

• Excellent relationships with Housing Corporation and English Partnerships



Key Highlights

• Kendall Cross acquisition

• Major regeneration schemes in Grimsby and Plymouth progressing well

• Increased number of frameworks

• Market fundamentally strong but RSLs becoming risk adverse


Key Statistics: including share of joint ventures


12 months to June 2008

2008 2007 Inc/(Dec)%

Units Total 694 317 189%

- Affordable 533 155 244%

- Regeneration 161 162 (1)%

Av. Selling Price £000 Total 123 130 (5)%

-Affordable 112 110 2%

- Regeneration 157 148 6%

Revenue £m Total 230.4 128.4 79%

- Affordable 60.0 17.1 251%

- Regeneration 47.1 24.0 96%

- Contracting 123.3 87.3 41%

Profit from Operations £m 13.8 6.1 26%

Margin % 6.0% 4.8%

In hand position Aug 08 £m - Afford. & Regeneration 87 80 9%

- Contracting Order Book 149 126 18%

Land bank Aug 08 units 3,500 3,600 (3)%


Operating Review - Housebuilding


Market Conditions


• Extremely difficult market

• Visitor numbers reduced

• High cancellation rate

• Mortgage availability and consumer confidence key constraints

• Consortium sites and apartments worst affected

• Improved supply chain availability


Key Highlights


• Aggressive sales policy proving to be correct

• Cost base reduced by £12m per annum

• Substantial build savings achieved

• Reduced land bank

• Strong focus on cash management


Key Highlights


• Part exchange exposure under tight control

• Minimal exposure to consortium sites

• Linden integration complete

• Industry leading customer satisfaction

• Solid operational performance in extremely difficult market



Key Statistics pre exceptionals - including Joint Ventures

12 months to June 2008

2008 2007Increase/

(Decrease) %

Units 1,830 1,209 51

Average Selling Price £000 220 242 (9)

Revenue £m 486 304 60

Profit from operations £m 53.8 44.1 22

Margin % 11.1% 14.5%

ROCE * 14.3% 19.5%

In hand position August 08 £m 126 243 (48)

Land bank August 08 units 5,400 7,600 (29)

Strategic land August 08 acres 1,430 1,508 (5)

* Includes housebuilding and affordable housing and regeneration


Market Outlook


• No improvement expected in short term

• Encouraging sales levels achieved over summer

• Very prudent land procurement policy

• Continue to reduce exposure to apartments

• Strong relationship with Affordable Housing sector continues

• Fundamentals remain strong


Summary and Outlook


Summary and Outlook

• Market conditions for next 12 months

• Housing to remain extremely difficult

• Affordable Housing growth to pause

• Building sector to become more challenging

• Infrastructure to remain strong

• Aggressive housing sales policy to continue

• Hybrid model working well

• Group well placed in testing times

• Strong and focused management team


Preliminary Results Presentation

Year to 30th June 2008


Appendix 1

Office Locations

year end preliminary results – september 20081 preliminary results presentation, year to 30 th...

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