TIDMMGNS
RNS Number : 1291I
Morgan Sindall Group PLC
02 August 2023
2 August 2023
MORGAN SINDALL GROUP PLC
('Morgan Sindall' or 'Group')
The Construction & Regeneration Group
RESULTS FOR THE HALF YEAR (HY)ED 30 JUNE 2023
Strong first half, on track for record full year performance
HY 2023 HY 2022 Change
Revenue GBP1,935m GBP1,698m +14%
Operating profit - adjusted(1) GBP59.1m GBP56.9m +4%
Profit before tax - adjusted(1) GBP59.8m GBP54.6m +10%
Earnings per share - adjusted(1) 98.9p 95.8p +3%
Period end net cash GBP263m GBP274m -GBP11m
Interim dividend per share 36.0p 33.0p +9%
Operating profit - reported GBP57.3m GBP56.0m +2%
Profit before tax - reported GBP58.0m GBP53.7m +8%
Basic earnings per share
- reported 100.0p 94.3p +6%
------------------------------------ ----------- ----------- --------
(1) 'Adjusted' is defined as before intangible amortisation of
GBP2.2m and exceptional building safety credit of GBP0.4m
(HY 2022: before intangible amortisation of GBP0.9m)
Strong trading performance in first half
o Revenue up 14% to GBP1.9bn
o Adjusted profit before tax up 10% to GBP59.8m
Continued balance sheet strength
o Net cash of GBP263m (HY 2022: GBP274m)
o Average daily net cash of GBP268m (HY 2022: GBP264m)
High quality and growing secured order book
o Order book of GBP9.1bn, up 7% on year end (FY 2022:
GBP8.5bn)
Interim dividend up 9% to 36 .0p per share (HY 2022: 33.0p)
Divisional highlights
o Excellent performance from Fit Out; operating profit up 43% to
GBP30.4m (HY 2022: GBP21.2m). Medium-term target significantly
upgraded to reflect market opportunities and high quality of
business
o Construction delivering good revenue growth with margin in its
target range; revenue up 20% to GBP470m (HY 2022: GBP392m) at an
operating margin of 2.6%. Operating profit up 6% to GBP12.0m (HY
2022: GBP11.3m)
o Strong performance from Infrastructure; revenue up 15% to
GBP428m (HY 2022: GBP372m) at an operating margin of 3.7% (HY 2022:
3.4%). Operating profit up 24% to GBP15.9m (HY 2022: GBP12.8m)
o Cost pressures and operational challenges in Property Services
driving trading loss; operating loss(1) of GBP4.1m (HY 2022:
operating profit GBP2.5m). Medium-term target downgraded to reflect
current performance
o Partnership Housing demonstrating resilience in its business
model despite challenging market conditions; revenue up 31% to
GBP373m (HY 2022: GBP284m), however operating profit 27% lower at
GBP10.1m (HY 2022: GBP13.9m)
o Long-term regeneration schemes progressing as planned in Urban
Regeneration; operating profit of GBP6.0m (HY 2022: GBP7.3m)
Commenting on today's results, Chief Executive, John Morgan
said:
"We've had a record first half of the year, notably from our Fit
Out business which has delivered another outstanding performance in
the period, demonstrating the high quality of this business.
Although the wider economic backdrop remains challenging,
conditions have generally eased across many of our markets as the
year has progressed. Our strong balance sheet, with a substantial
net cash position, allows us to continue operating efficiently and
effectively and to focus on making the right decisions to drive for
long-term sustainable growth.
The positive momentum across the Group is driven by our
high-quality and substantial order book across a number of sectors
covering the built environment. We upgraded our expectations for
the full year in June, primarily based on an anticipation of
continued outperformance from Fit Out. Since then, there has been
no change to our overall expectations for the Group and we remain
confident of delivering another record performance."
Enquiries
Morgan Sindall Group Tel: 020 7307 9200
John Morgan
Steve Crummett
Brunswick Tel: 020 7404 5959
Jonathan Glass
Nina Coad
Presentation
-- There will be an analyst and investor presentation at 09.00am
at Numis Securities Limited, 45 Gresham Street, London EC2V 7BF on
3 August 2023. Coffee and registration will be from 08.30am
-- A copy of these results is available at: www.morgansindall.com
-- The presentation will be available via live webcast from 09.00am on 3 August 2023 at www.morgansindall.com.
Note to Editors
Morgan Sindall Group
Morgan Sindall Group plc is a leading UK Construction &
Regeneration group with annual revenue of GBP3.6bn, employing
around 7,600 employees and operating in the public, regulated and
private sectors. It reports through six 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 sustainable
regeneration and affordable housing needs.
Through its Construction and Infrastructure divisions, the Group
is also well positioned to meet the demand for ongoing sustainable
investment in the UK's social and physical infrastructure.
Construction is focused on key areas of education, healthcare and
commercial, while Infrastructure is focused on the highways, rail,
energy, nuclear and water markets.
The Fit Out division is the market leader in its field and
delivers a consistently strong operational performance. Fit Out,
together with both the Construction and Infrastructure divisions,
generates cashflow 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.
Group Structure
Under the two strategic lines of business of Construction and
Regeneration, the Group is organised into six reporting divisions
as follows:
Construction activities comprise the following operations:
-- Construction : Focused on the education, healthcare,
commercial, industrial, leisure and retail markets
-- Infrastructure : Focused on the highways, rail, energy,
nuclear and water markets. It also includes the BakerHicks 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
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 GBP2.2m (HY 2022: GBP0.9m) and an
exceptional building safety credit of GBP0.4m (HY 2022:
GBPnil).
Group operating review
Headline financial results
The Group delivered a strong performance in the first half,
driven mainly by the Fit Out division. Grou p revenue increased by
14% up to GBP1,935m (HY 2022: GBP1,698m), while adjusted operating
profit increased 4% to GBP59.1m (HY 2022: GBP56.9m), held back by
an operating loss of GBP4.1m in Property Services. Operating margin
was 3.1%, 30bps lower than the prior year period (HY 2022:
3.4%).
The Group benefited from higher interest rates on its cash
balances compared to the prior year period, with a net finance
income of GBP0.7m (HY 2022: expense of GBP2.3m) resulting in
adjusted profit before tax of GBP59.8m, up 10% (HY 2022: GBP54.6m).
The statutory profit before tax was GBP58.0m, an increase of 8% (HY
2022: GBP53.7m).
The adjusted tax charge for the period was GBP14.0m (statutory
tax charge of GBP11.7m), an effective rate of 23%.
The adjusted earnings per share increased 3% to 98.9p (HY 2022:
95.8p), with the statutory basic earnings per share of 100.0p, up
6% (HY 2022: 94.3p).
Market backdrop
The challenging general market conditions coming into 2023 have
continued to ease throughout the period, with inflation abating and
falling in certain areas; particularly in trade and labour costs
and certain materials. Although still a headwind for the Group, the
general trading environment has become more predictable and
manageable as the year has progressed. Raw material supplies have
become more consistent and any constraints in delivery are now only
sporadic and localised. During the period, however, the ongoing
stability of the supply chain has become more uncertain with
liquidity issues increasingly common, requiring additional
vigilance both pre-construction and during the delivery of
projects. The risk is mitigated to some extent by the diligence
taken before project commencement and the fact that no division is
overly reliant on any one supplier.
Most projects in Construction and Infrastructure currently
underway have appropriate inflationary protection contained within
the overall contract pricing and this is not now seen as a
significant risk. Where projects are being priced for future
delivery, the inflationary environment continues to place some
project budgets under pressure, which in turn has led to some
delays in decision-making and project commencement. However, the
impact of this has not been material and both still retain sizeable
and high-quality secured order books. In many cases, any client
budget constraints are being addressed by adjustments to project
scopes, thereby allowing projects to proceed.
The market for Fit Out's services has remained very strong.
There continue to be a number of positive structural changes in the
market with the main drivers being lease-related events, the
requirement for greater energy efficiency from offices, the move
towards more flexible and collaborative workspaces, the use of
office space as a tool for enhancing staff retention and brand
image, and office relocations to the regions with clients requiring
increasingly complex projects.
In Property Services, local authority and housing association
clients are increasingly focused on housing maintenance and on the
general state of repair of their housing stocks. In the delivery of
maintenance services, cost inflation and particularly labour
inflation have severely impacted the profitability of
contracts.
In Partnership Housing, the partnership model focusing on
long-term partnerships with the public sector has provided
resilience against a softer housing market and demand for
contracting has remained strong throughout the period. In line with
the rest of the UK housing industry, however, the division
experienced a significant slowdown in its sales rates of private
homes on its mixed-tenure sites, driven by the combination of
economic uncertainty and the cost-of-living crisis, together with
rising mortgage rates and the end of the Help to Buy scheme in
England in the period. Alongside this there is the wider context of
an increasingly challenging planning environment.
In Urban Regeneration, build cost inflation has continued to
provide challenges to the returns on some of its active
developments and on the viability of some of its schemes being
evaluated prior to commencement, although not material to the
overall portfolio of schemes and their future financial
performance.
Divisional headlines
The Group has amended the structure of its reporting segments in
the period and now reports through six divisions, with Construction
and Infrastructure now being reported as separate segments
(previously reported together as 'Construction &
Infrastructure') to more appropriately reflect the separate
management of these two businesses.
Construction and Infrastructure both delivered strong revenue
growth in the period, with Construction revenue up 20% to GBP470m
(HY 2022: GBP392m) and Infrastructure up 15% to GBP428m (HY 2022:
GBP372m). With both divisions continuing their disciplined focus on
operational delivery and contract selectivity, their respective
operating margins were well within their target ranges.
Fit Out had another excellent period of trading, with profit and
margin both increasing significantly. Operating profit was up 43%
to GBP30.4m (HY 2022: GBP21.2m) while its operating margin
increased up to 6.1% (HY 2022: 4.6%).
Property Services, however, had a difficult period with a number
of operational and market challenges leading to the division making
an operating loss in the period of GBP4.1m (HY 2022: operating
profit GBP2.5m).
Partnership Housing performed well, bearing in mind the
well-publicised challenges across the housing market. The
resilience of the partnership model was reinforced by the increased
revenue in the period, up 31% to GBP373m, driven by an increase in
contracting work. This allowed the division to cushion the full
extent of the market downturn, with operating profit down 27% to
GBP10.1m (HY 2022: GBP13.9m).
Urban Regeneration progressed as planned with its long-term
development portfolio. Although operating profit of GBP6.0m was
slightly down compared to prior year (HY 2022: GBP7.3m), this was
as a result of timing and phasing and scheme completions. ROCE for
the last 12 months was 17%, moving towards its target level of
20%.
Secured order book
The Group has a high-quality and growing secured order book. The
total secured order book for the Group at the period end was
GBP9,068m, up 6% on the same time last year (HY 2022: GBP8,519m)
and up 7% on the year-end position (FY 2022: GBP8,459m).
Maintaining contract selectivity and bidding discipline to
ensure there remains the appropriate risk balance in the order book
is of critical importance to the future success of the Group.
Balance sheet & cash
Operating cash for the period was an outflow of GBP31.2m (HY
2022: outflow of GBP40.4m), which in part was due to the continued
investment in Partnership Housing and Urban Regeneration in line
with their long-term strategies in regeneration, as well as also
reflecting the usual seasonal working capital movements. Operating
cash for the last twelve months was an inflow of GBP57.2m.
Net cash at the period end was GBP263m, a reduction of GBP11m on
the prior year (HY 2022: GBP274m). Of this total, GBP41m 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 GBP268m (including
GBP44m in JVs/PBAs) compared to GBP264m in the prior year period.
Looking ahead to the full year, based upon the current anticipated
cash movements over the second half, there is no change to the
expectation that the average daily net cash for the full year will
be at or around cGBP250m.
During the period, the Group extended the tenor of its existing
GBP165m revolving credit facility by a year, so that it is now
committed until late 2026. Provision has also been included for two
possible further one-year extensions, with the agreement of the
lending banks, which would extend it out to 2028. The facility
terms and pricing remain unchanged. In addition, the Group's GBP15m
loan facility has also been renewed, with the new facility expiring
in 2026.
Taken together, along with the ongoing net cash balances, this
provides the Group with a significant amount of total available
liquidity in line with the Group's Capital Allocation
Framework.
Building Safety
The Group signed the Developer Remediation Contract in March
2023 on behalf of all of its divisions. For the year ended 31
December 2022, the Group had recognised a provision for expected
costs of GBP48.9m in relation to its obligations thereunder.
Based on a reassessment of liabilities reflecting further
information during the period, the overall movement in this
building safety provision is a net gain of GBP0.4m and is shown
separately as an exceptional profit consistent with prior
treatment.
At the period end, the Group had not yet made any reimbursements
to the Building Safety Fund for amounts previously granted and
drawn on any of the developments for which the Group has taken
responsibility for. As notified by the Department of Levelling Up,
Housing and Communities (DLUHC), any repayments will only be
requested upon final completion of all the relevant works. On this
basis, any repayments are only likely to commence towards the end
of the year at the earliest.
Dividend
The interim dividend has been increased by 9% to 36.0p per share
(HY 2022: 33.0p). 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.
Outlook and medium-term divisional targets
The positive momentum across the Group is driven by its
high-quality and substantial order book across a number of sectors
covering the built environment.
Expectations for the full year were upgraded in June, primarily
based on an anticipation of continued outperformance from Fit Out.
Since then, there has been no change to the overall expectations
for the Group and the Board remains confident of delivering another
record performance.
Medium-term divisional targets
To provide a framework for future performance, each division
operates to a medium-term financial target or set of targets (the
'target' or 'targets') and are referred to in the Business
review.
The targets were originally set in February 2022. The
medium-term target for Fit Out was subsequently upgraded in
February 2023 and then upgraded again in August 2023. The
medium-term target for Property Services has been downgraded in
August 2023.
Division Target
Construction Operating margin of 2.5% - 3% pa
Revenue of GBP1bn
------------------- ----------------------------------------------
Infrastructure Operating margin of 3.5% - 4.0% pa
Revenue of GBP1bn
------------------- ----------------------------------------------
Fit Out Annual operating profit of GBP50m - GBP70m
(previously average annual operating profit
through the cycle of GBP45m-GBP50m)
------------------- ----------------------------------------------
Property Services Annual operating profit of GBP7.5m
(previously operating profit of GBP15m)
------------------- ----------------------------------------------
Partnership Operating margin of 8% / return on capital up
Housing towards 25%
------------------- ----------------------------------------------
Urban Regeneration 3-year rolling average return on capital up
towards 20%
----------------------------------------------
Divisional Review
The following Divisional Review is given on an adjusted basis,
unless otherwise stated. Refer to Note 14 of the consolidated
financial statements for appropriate reconciliations to the
comparable UK IAS measures.
Headline results by business segment (vs HY 2022)
Revenue Operating Operating
Profit Margin
GBPm Change GBPm Change % Change
------ ------- ------- ------- ------ --------
Construction 470 +20% 12.0 +6% 2.6% -30bps
Infrastructure 428 +15% 15.9 +24% 3.7% +30bps
Fit Out 498 +9% 30.4 +43% 6.1% +150bps
Property Services 97 +28% (4.1) -264% -4.2% -750bps
Partnership Housing 373 +31% 10.1 -27% 2.7% -220bps
Urban Regeneration 96 -24% 6.0 -18% n/a n/a
Group/Eliminations (27) (11.2)
------ ------- ------- ------- ------ --------
Total 1,935 +14% 59.1 +4% 3.1% -30bps
------ ------- ------- ------- ------ --------
Group secured order book(1) by division
The Group's secured order book(1) at 30 June 2023 was GBP9,068m,
up 6% compared to the prior year and 7% higher than at the year
end. The divisional split is shown below.
HY 2023 HY 2022 Change FY 2022 Change
GBPm GBPm vs HY GBPm vs FY
2022 2022
------- ------- ------ ------- ------
Construction 888 760 +17% 802 +11%
Infrastructure 1,628 1,775 -8% 1,799 -10%
Fit Out 1,217 869 +40% 841 +45%
Property Services 1,579 1,279 +23% 1,204 +31%
Partnership Housing 2,074 1,633 +27% 1,984 +5%
Urban Regeneration 1,699 2,235 -24% 1,847 -8%
Inter-divisional eliminations (17) (32) (18)
------- ------- ------ ------- ------
Group secured order
book(1) 9,068 8,519 +6% 8,459 +7%
------- ------- ------ ------- ------
(1) The 'Secured order book' is the sum of the 'committed order
book', the 'framework order book' and (for Partnership Housing and
Urban Regeneration) 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.
Construction
HY 2023 HY 2022 Change
GBPm GBPm
--------------------- ------- ------- -------
Revenue 470 392 +20%
Operating profit(1) 12.0 11.3 +6%
Operating margin(1) 2.6% 2.9% -30bps
--------------------- ------- ------- -------
Construction has had a strong period of revenue growth, with
revenue up 20% to GBP470m (HY 2022: GBP392m). Operating profit(1)
of GBP12.0m was up 6% on the prior year (HY 2022: GBP11.3m), with
the operating margin(1) of 2.6% well within its strategically
targeted range of 2.5%-3%.
As before, the focus for Construction has remained on improving
overall quality of earnings through contract selectivity and
operational delivery. The business remains broadly 85% public
sector focused, with projects primarily delivered through
frameworks and with education continuing to be the largest market
sector served at around 50%.
The division had a strong period of winning new work, with the
secured order book at the period end increasing to GBP888m, up 17%
from the prior year (HY 2022: GBP760m) and up 11% on the year-end
position (FY 2022: GBP802m).
Around 98% of the value of the order book is derived through
either negotiated, framework or two-stage bidding procurement
processes, in line with the preferred risk profile of work
undertaken.
There continues to be a significant amount of suitable work
available in the market, much of which is being generated through
the existing frameworks. In addition to the secured order book, the
division also had GBP1,018m of work at preferred bidder stage,
providing confidence of a sizeable ongoing workload.
Work won in the period included: the GBP41m retrofit and
repurposing of Pen-Y-Dre High School, a zero carbon initiative for
Merthyr Tydfil Council; the GBP75m Clive Booth student
accommodation village, a four block, new build redevelopment for
Oxford Brookes University; the GBP79m redevelopment of Woolwich
Leisure Centre to create a community arts, fitness and leisure hub
for the Royal Borough of Greenwich; and the GBP52m MIM Schools
contract consisting of three new build, zero carbon, primary
schools for the Welsh Government. In addition, Construction
resecured its positions on both the Pagabo National and SCF
Regional frameworks, as well as securing places on both the
Ministry of Justice framework and the Ministry of Defence's Defence
Estate Optimisation Project (DEOP), all of which provide the
Construction business with further growth opportunities.
Divisional outlook for Construction
The medium-term target for Construction is an operating margin
of between 2.5% and 3% per annum and revenue of GBP1bn. For the
full year, it is expected that the margin will be around the middle
of this range, with good progress made towards its revenue target,
while at the same time also maintaining its normal risk profile in
its workload and bidding discipline.
(1) Before exceptional Building Safety charge of GBP8.6m. See
Note 2 of the consolidated financial statements
Infrastructure (1)
HY 2023 HY 2022 Change
GBPm GBPm
------------------- ------- ------- -------
Revenue 428 372 +15%
Operating profit 15.9 12.8 +24%
Operating margin 3.7% 3.4% +30bps
------------------- ------- ------- -------
Infrastructure delivered a strong performance in the period.
With revenue increasing 15% to GBP428m (HY 2022: GBP372m),
operating profit increased 24% to GBP15.9m (HY 2022: GBP12.8m) with
the operating margin of 3.7% in the middle of its targeted range of
3.5%-4%.
Infrastructure's order book of GBP1,628m was down 8% compared to
the prior year (HY 2022: GBP1,775m) and down 10% from the year end
position (FY 2022: GBP1,799m). The order book remains long term in
nature, with 74% for 2024 and beyond and around 95% derived through
existing frameworks. P rocurement activity for the next regulatory
cycles has commenced, however due to the size and nature of
infrastructure frameworks and projects, bidding and procurement
processes are ordinarily lengthy, with the overall time to award
contracts increasing.
As before, the division remains focused on the key sectors of
highways, nuclear, energy, water, and rail. Within the period, the
increased activity was driven by good growth in rail and nuclear,
however highways was lower, impacted by budgetary pressures .
In highways, the division started work on the GBP66m A12 project
in Essex and continued to work on the A11 scheme in Norwich. These
schemes form part of National Highway's 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. The announcement by the UK Government
during the period to remove new smart motorways from its road
investment strategy has not impacted the division's future order
book and work continues on safety-critical works under the Smart
Motorways Alliance.
In nuclear, decommissioning works continued for Sellafield Ltd
on the Infrastructure Strategic Alliance and on the GBP1.6bn
Programme and Project Partners contract. In addition, work
continued on the 10-year Clyde Commercial Framework for the Defence
Infrastructure Organisation and on the D58 facility for BAE
Systems.
In energy, work continued on the Dinorwig and ZZA route projects
as part of the RIIO-2 electricity construction EPC (Engineer,
Procure and Construct) framework for National Grid. In addition,
delivery continued on several schemes as part of Scottish &
Southern Electricity Network's (SSEN) RIIO-2 framework involving
the construction, refurbishment and decommissioning of overhead
lines, underground cable systems and substations operating between
33kV to 400kV across SSEN's transmission network. In water, work
continued on various environmental improvement projects and
wastewater treatment upgrades as part of the long-term AMP7
framework with Welsh Water .
In rail, the division was awarded the GBP88m Beckton Depot
improvements project as part of the London Rail Infrastructure
Improvement Framework for Transport for London. In addition, work
continued on several schemes for Network Rail, including the
Parson's Tunnel rockfall shelter extension under the South West
Rail Resilience Programme and Bangor to Colwyn Bay, as part of the
CP6 Wales and Western framework.
In the BakerHicks design business(1) , design work completed on
the Biological Development Centre, a facility for Boehringer
Ingelheim in Biberach, Germany, which combined biological
analytics, process development and drug production for clinical
trials, and the new GBP42.5m Allander Leisure Centre for East
Dunbartonshire Council in Bearsden, East Dunbartonshire completed
and was opened to the public. In addition, the Ulster Hospital
Acute Services Block in Belfast on which design services were
provided, was presented with the RIBA Regional Award, the RSUA
Design Award and the RSUA Sustainability Award, whilst other
projects underway included work on an innovative feed additive
facility for East Dunbartonshire Council in Dalry, North Ayrshire
to reduce methane emissions from cattle.
Divisional outlook for Infrastructure
The medium-term target for Infrastructure is an operating margin
of between 3.5% and 4% per annum and revenue of GBP1bn. For the
full year, based upon the type of work and projects ending in the
second half, it is expected that the margin will be slightly above
the top end of this range, with good progress also made towards its
revenue target.
(1) D esign results are reported within Infrastructure
Fit Out
HY 2023 HY 2022 Change
GBPm GBPm
------------------ ------- ------- --------
Revenue 498 457 +9%
Operating profit 30.4 21.2 +43%
Operating margin 6.1% 4.6% +150bps
------------------ ------- ------- --------
Fit Out delivered an excellent result in the period, with
significant growth in operating profit and margin. With revenue
increasing by 9% to GBP498m (HY 2022: GBP457m), operating profit
was up 43% to GBP30.4m (HY 2022: GBP21.2m) with the operating
margin at a very strong 6.1%, up from 4.6% last year, driven by
contract mix and type of work.
The overall balance of the business between market sectors,
geography and type of work has remained broadly similar over a
number of years, reinforcing Fit Out's focused approach to its
markets and understanding of its own capabilities and skills. This
is complemented by its consistent operational delivery and overall
enhanced customer experience, which in turn supports the division's
strong brand reputation and market position.
The commercial office market remained the largest sector,
contributing 79% of revenue (HY 2022: 78%), with government/local
authority, higher education and retail banking accounting for the
majority of the remainder.
Geographically, the London region remained the division's
largest market, accounting for 59% of revenue (HY 2022: 62%). Other
regions accounted for 41% of revenue (HY 2022: 38%).
In terms of type of work delivered in the year, 84% related to
traditional fit out work (HY 2022: 86%), while 16% related to
'design and build' (HY 2022: 14%). The proportion of revenue
generated from the fit out of existing office space remained at 78%
(HY 2022: 78%), with the fit out of new office space at 22% (HY
2022: 22%). Of the fit out of existing office space, 82% related to
refurbishment 'in occupation' (HY 2022: 46%)
Underpinning the current and future performance is a
high-quality workload. At the period end, the secured order book
stood at GBP1,217m, an increase of 40% from the prior year position
(HY 2022: GBP869m) and 45% up on the year end position (FY 2022:
GBP841m). Of the increase in the order book since the year end, the
largest proportion was derived from the growth in value of an
existing project which is in its early stage of commencement.
Of the secured order book, GBP521m (43%) relates to the second
half of the year, which is 32% higher than the equivalent amount as
at 30 June 2022 of GBP394m. The remaining GBP696m of the current
order book (57%) is for 2024 and beyond, driven by a number of
larger (>GBP20m) contracts and this provides an increasing level
of long-term visibility of workload compared to previous periods.
The comparable number at the same time last year was GBP475m, 32%
lower.
In addition, there remains a significant pipeline of
opportunities being pursued. The division also had over GBP50m of
work in the pre-contract 'preferred bidder' stage at the period
end, as well as GBP553m of work currently being tendered or pending
a decision and GBP336m due to be tendered in the next 3 months.
Projects completed or continuing onsite during the period
include 360,000 sq ft for Marsh McLennan in London; 250,000 sq ft
for the relocation of a global financial organization to
Paddington; 150,000 sq ft HQ for GSK in London's Life Sciences hub,
known as the Knowledge Quarter; 110,000 sq ft for a professional
services firm in London; and 81,000 sq ft for ROKU Europe in
Manchester.
Projects won in the period include the 750,000 sq ft fit out for
a global financial services firm; 225,000 sq ft fit out for LandSec
at New Street Square in London; a 109,000 sq ft fit out for Aviva
at 80 Fenchurch Street; 82,000 sq ft fit out for a technology
company in London; a 41,000 sq ft fit out for a law firm on
Bishopsgate in London; 12,500 sq ft for a specialist insurer and
re-insurer on Bishopsgate in London; 16,000 sq ft fit out for Swiss
Life Asset Managers UK in Birmingham; a 10,000 sq ft fit out for
Rolls-Royce at Kings Place in London; and 10,750 sq ft for
telecommunications company CIENA in Shoreditch.
In higher education and the life science sector, projects won
during the period include four projects for Anglia Ruskin
University; 54,000 sq ft for London School of Economics and
Political Science, 16,000 sq ft for Loughborough University; two
projects for the University of Portsmouth to refurbish 14,000 sq ft
within the Medical Education Centre and Photography Suite.
Completed projects during the year include the 25,000 sq ft for
Coventry University that included a laboratory refurbishment; a
20,000 sq ft laboratory fit out of the Anatomy and Clinical Skills
department at the University of Warwick; and 19,000 sq ft fit out
of a laboratory and workspace at Queen Mary University's Francis
Bancroft building. Work continued on three projects for University
College London totalling GBP40m.
In commercial design and build, significant wins include 90,000
sq ft for BAE Systems at Victory Point in Camberley; 21,000 sq ft
for C&C Group at The Pavilions in Bristol; a 15,000 sq ft fit
out for TT Group in London; 11,000 sq ft for Butlins in Hemel
Hempstead; 10,000 sq ft for Kobalt Music Group in London; 9,000 sq
ft for Reflex Bracknell Limited (a subsidiary of CLS Holdings plc)
at the Reflex Building in Bracknell; and 9,000 sq ft for Chubb Fire
and Security in Staines.
Projects won under frameworks and corporate partnerships include
GBP10m of works for the Mayor's Office for Policing and Crime
(MOPAC); two projects through the Procure Partnerships Framework,
most significantly the relocation of the General Pharmaceutical
Council in London; five SCAPE procured projects totalling 91,000 sq
ft.; 19 projects won through Fit Out's partnership with NatWest
Group; and eleven projects totalling 64,000 sq ft for landlord
Great Portland Estates.
Divisional outlook for Fit Out
In order to more appropriately reflect the division's current
performance, its market position and its future prospects, Fit
Out's medium-term target has again been significantly upgraded as
of August 2023. The revised expectation is that over the medium
term, Fit Out will deliver annual operating profit within the range
of GBP50m - GBP70m (previously average annual operating profit
through the cycle of GBP45m - GBP50m).
For 2023, current trading patterns are anticipated to continue
through the second half and the division is expected to deliver a
result for the full year which is around the top end of the
upgraded medium-term target profit range.
Property Services
HY 2023 HY 2022 Change
GBPm GBPm
---------------------------- ------- ------- --------
Revenue 97 76 +28%
Operating (loss)/profit(1) (4.1) 2.5 -264%
Operating margin(1) -4.2% 3.3% -750bps
---------------------------- ------- ------- --------
Property Services has had a difficult first half, with the
division reporting an operating loss(1) in the period of GBP4.1m
(HY 2022: profit of GBP2.5m).
Revenue increased by 28%, up to GBP97m (HY 2022: GBP76m), with
the growth driven by new contracts mobilised during last year
becoming fully operational and by some more established client
contracts increasing their volumes to clear backlogs in repairs
arising from previous years and to improve the overall quality of
their estates.
However, the rapid increase in activity led to a number of
operational delivery issues and inefficiencies, with significant
additional costs also being required to support the start-up phases
of more recently mobilised contracts. Together with ongoing
inflationary pressures and contract pricing mechanisms, this
resulted in the division making an operating loss(1) in the period
of GBP4.1m (HY 2022: profit of GBP2.5m).
In addressing the current challenges, a number of key roles in
the senior management team have been changed and a remediation
programme is being implemented, focusing the division on improving
client service and operational delivery.
At the period end, the secured order book was GBP1,579m, up 23%
from the prior year (HY 2022: GBP1,279m) and up 31% from the full
year position (FY 2022: GBP1,204m). Of this total, over 80% is for
2025 and beyond. The order book growth was driven by the signing of
a 15-year contract with L&Q, the housing association, estimated
to be worth cGBP30m per year, to deliver a range of services
including estate and environmental improvements, planned mechanical
and engineering works and internal works for its residents.
Future growth in the order book during the second half and into
2024 is expected to mainly come through existing client contracts.
The timescales involved in bidding will mean that no material new
contracts will be progressed until the remediation programme has
been successfully implemented and the operational delivery
capability stabilised.
Divisional outlook for Property Services
In order to reflect the current trading performance and
short-term operational issues, the medium-term target for Property
Services has been reduced, with the revised target being to achieve
annual operating profit of GBP7.5m (previously annual operating
profit of GBP15m).
The remediation programme will continue to be implemented across
the second half of the year and will carry an associated cost with
it which will be charged through the normal trading results. When
taken together with the current trading patterns and operational
performance, a further loss is expected in the second half which is
slightly higher than that reported in the first half.
(1) before intangible amortisation of GBP2.2m (HY 2022:
GBP0.9m)
Partnership Housing
HY 2023 HY 2022 Change
GBPm GBPm
------------------------------ ------- ------- ----------
Revenue 373 284 +31%
Operating profit 10.1 13.9 -27%
Operating margin 2.7% 4.9% -220bps
------------------------------ ------- ------- ----------
Average capital employed(1) 221.9 179.0 +GBP42.9m
(last 12 months)
Capital employed(1)
- at period end 243.1 190.9 +GBP52.2m
ROCE(2) (last 12 months) 15% 20%
------------------------------ ------- ------- ----------
In Partnership Housing, the partnership model focusing on
long-term partnerships with the public sector provided resilience
against a softer housing market and demand for contracting remained
strong throughout the period.
Revenue was up 31% to GBP373m (HY 2022: GBP284m), driven by
Contracting (including planned maintenance and refurbishment) which
was up 49% to GBP214m (57% of divisional total) compared to the
prior year. Mixed-tenure revenue was 14% higher at GBP159m (43% of
divisional total).
In mixed-tenure, 805 units were completed across open market
sales and social housing (including through its joint ventures)
compared to 755 in the prior year period, however, the number of
open market sales within this dropped 20% to 340. The average sales
price was GBP241k compared to the prior year average of GBP261k, a
reduction of 8%.
Together, this resulted in operating profit of GBP10.1m, down
27% on the prior year (HY 2022: GBP13.9m) with the operating margin
reducing to 2.7% (HY 2022: 4.9%).
Despite the challenging short-term market conditions, the
longer-term development of the business and its partnerships with
local authorities and housing associations has continued as
planned. At the period end, the division had 69 active mixed-tenure
sites at various stages of construction and sales, up from 58 at
the year end and up from 49 at the prior year. There was an average
of 154 open market units per site at the period end.
Reflective of this significant amount of ongoing activity and
investment in future growth, the capital employed(1) at the period
end was GBP243.1m, an increase of GBP52.2m on the prior year (HY
2022: GBP190.9m) and GBP53.8m higher than at the year end (FY 2022:
GBP189.3m). With higher average capital employed(1) for the last
12-month period of GBP221.9m (HY 2022: GBP179.0m) and lower profit
in the period, the overall ROCE(2) for the last 12-month period
reduced to 15%. Average capital employed(1) for the full year is
expected to be cGBP240m.
The division had a positive period of winning work, with clients
increasingly looking to Partnership Housing to award work either
through frameworks or through direct negotiation. This was
reflected in the secured order book at the period end which was up
27% on the prior year at GBP2,074m (HY 2022: GBP1,633m) and up 5%
on the year-end position (FY 2022: GBP1,984m). Of this total, the
order book relating to mixed-tenure activities was up 30% on the
prior year position and broadly level with the year-end position at
GBP1,273m (HY 2022: GBP980m, FY 2022: GBP1,279m), while the
contracting secured order book increased to GBP801m, up 23% on the
prior year (HY 2022: GBP653m) and up 14% on the year end (FY 2022:
GBP705m).
In mixed-tenure, work secured included; a cGBP90m, 400 unit
development in partnership with Saffron Housing Trust at Harleston,
Norfolk; a 46 unit scheme in Skelemthorpe, Huddersfield; and 70
units at Gaultney Farm, Desborough.
Key contracting schemes awarded in the period included; a
cGBP38m, 143 apartment scheme in Stevenage for the Guinness
Partnership, a GBP50m, 159 unit scheme at Loxford Lane, Redbridge
for the London Borough of Redbridge; a GBP40m, 110 unit scheme for
the City of London Corporation in Sydenham Hill; and a GBP24m, 150
unit scheme in Coalville, Leicestershire for the EMH Group.
Divisional outlook for Partnership Housing
Partnership Housing's medium-term targets are to generate a
return on average capital employed up towards 25% and to deliver an
operating margin of 8%.
Looking ahead to the second half, an improved performance is
expected based on the secured contracting work in the order book
and the anticipated level of open market sales on the mixed-tenure
sites. However, both margin and return on average capital for the
full year are still expected to be significantly lower than last
year.
(1) Capital Employed is calculated as total assets (excluding
goodwill, intangibles and cash) less total liabilities (excluding
exceptional Building Safety provisions, corporation tax, deferred
tax, inter-company financing and overdrafts)
(2) Return On Average Capital Employed = (Adjusted operating
profit plus interest from JVs) divided by average capital
employed
Urban Regeneration
HY 2023 HY 2022 Change
GBPm GBPm
------------------------------ ------- ------- ----------
Revenue 96 126 -24%
Operating profit(1) 6.0 7.3 -18%
------------------------------ ------- ------- ----------
Average capital employed(2) 104.0 91.9 +GBP12.1m
(last 12 months)
Capital employed(2)
at period end 120.5 99.4 +GBP21.1m
ROCE(3) (last 12 months) 17% 12%
ROCE(3) (average last
3 years) 14% 12%
------------------------------ ------- ------- ----------
Urban Regeneration's long-term regeneration schemes progressed
to plan during the period, with the various phasing of schemes
resulting in an operating profit(1) of GBP6.0m (HY 2022: GBP7.3m).
The ROCE(3) for the last 12 months was 17%, up significantly on the
prior year, based on average capital employed(2) of GBP104.0m.
During the period good progress was made on Lewisham Gateway,
London, and New Victoria, Manchester, both developments subject to
forward funding deals signed in 2020 and due to reach practical
completion in the second half of the year. 58 homes were sold in
the period, including 31 sales at Novella, Salford, delivered by
The English Cities Fund (a joint venture with Legal & General
and Homes England) and 27 sales at Brixton Centric, a 75-home
development in partnership with Lambeth Council and Notting Hill
Genesis. Development continued at One City Park, a 56,000 sq ft
office building in Bradford; the final phase at Hale Wharf,
Tottenham, delivering a further 256 new homes, including 191
affordable homes for the London Borough of Haringey; and, Forge
Island, Rotherham, delivering a new town centre that will provide a
boutique cinema, Travelodge hotel and six independent
restaurants.
In The English Cities Fund, strong progress was made on a number
of developments, including the Eden building, a 115,000 sq ft
office building featuring Europe's largest living green wall due
for completion in the second half of the year; Four New Bailey,
Salford, where a 20-year pre-let is in place for 175,000 sq ft of
grade A office space; and, Manor Road, Canning Town, a 355 home
scheme in partnership with the London Borough of Newham and
Metropolitan Thames Valley Housing Association. In addition, the
fund was selected as preferred developer by Stockport Council for
its Stockport 8 scheme, a residential-led scheme located near to
Stockport railway station, with the development agreement to be
signed in the second half of the year.
At the period end, the division's regeneration order book
amounted to GBP1,699m, a reduction of 24% on the prior year period
(HY 2022: GBP2,235m) and 8% lower than the year end (FY 2022:
GBP1,847m). Activity levels remain good and there are a number of
sizeable schemes currently in the pipeline at preferred bidder
stage which are expected to be converted into contract in due
course.
Capital employed(2) at the period end was GBP120.5m, GBP21.1m
higher than the prior year (HY 2022: GBP99.4m), and GBP20.1m higher
than the year end (FY 2022: GBP100.4m). Based upon the projected
profile of scheme movements and completions due in the second half,
capital employed is expected to reduce over the rest of the year
and the average capital employed(2) for the full year is expected
to be cGBP95m.
Divisional outlook for Urban Regeneration
The medium-term target for Urban Regeneration is to increase its
rolling three-year average ROCE(3) up towards 20%. Based on the
expected scheme progress throughout the rest of the year, a higher
profit is expected in the second half, which will help drive
further improvement in the three-year average ROCE(3) towards its
target level.
(1) Before exceptional Building Safety credit of GBP9.0m. See
Note 2 of the consolidated financial statements
(2) Capital Employed is calculated as total assets (excluding
goodwill, intangibles and cash) less total liabilities (excluding
exceptional Building Safety provisions, 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
Group 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 growth 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 medium-term target is for an operating margin of
8% and for return on capital to be up towards 25% on an annual
basis. These investment returns 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 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.
Other Financial Information
1. Net finance expense. Ne t finance income was GBP0.7m, an
increase of GBP3.0m compared to HY 2022.
HY 2023 HY 2022 Change
GBPm GBPm GBPm
--------------------------------------- ------- ------- ------
Interest income on bank deposits 4.3 - 4.3
Amortisation of bank fees &
non-utilisation fees (1.0) (1.1) 0.1
Interest expense on lease liabilities (1.1) (1.0) (0.1)
Other (1.5) (0.2) (1.3)
Total net finance expense 0.7 (2.3) 3.0
--------------------------------------- ------- ------- ------
2. Tax. A tax charge of GBP11.7m is shown for the period (HY
2022: GBP10.7m). This equates to an effective tax rate of 20.2% on
profit before tax. The adjusted tax charge is GBP14.0m (HY 2022:
GBP10.9m).
HY 2023 HY 2022
GBPm GBPm
--------------------------------------------- ------- -------
Profit before tax 58.0 53.7
Less: share of underlying(1) net profit
in joint ventures (3.8) (3.1)
Profit before tax excluding joint ventures 54.2 50.6
Statutory tax rate 23.5% 19.0%
Current tax charge at statutory rate (12.7) (9.6)
Tax on underlying(1) joint venture profits
(2) (0.9) (0.6)
Tax on exceptional items 1.8 -
Residential Property Developer Tax (0.3) (0.4)
Other adjustments 0.4 (0.1)
Tax charge as reported (11.7) (10.7)
Tax on amortisation (0.5) (0.2)
Tax on exceptional items (1.8) -
Adjusted tax charge (14.0) (10.9)
--------------------------------------------- ------- -------
(1) Underlying net profit of joint ventures excludes the
exceptional Building Safety credit (GBP4.5m) related to
joint ventures
(2) 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.
Change
HY 2023 HY 2022 GBPm
GBPm GBPm
--------------------------- --------- -------
Inventories 397.4 333.9 +63.5
Trade & Other Receivables
(1) 666.7 574.4 +92.3
Trade & Other Payables(2) (1,063.8) (977.7) -86.1
Net working capital 0.3 (69.4) +69.7
--------------------------- --------- ------- -------
(1) Adjusted to exclude capitalised arrangement fees and accrued
interest receivable of GBP1.7m (HY 2022: GBP0.6m)
(2) Adjusted to exclude accrued interest payable of GBP0.6m (HY
2022: GBP0.5m)
4. Cash flow. O perating cash flow was an outflow of GBP31.2m
(HY 2022: outflow of GBP40.4m). Free cash flow was an outflow of
GBP37.3m (HY 2022: outflow of GBP55.7m).
HY 2023 HY 2022 Last 12
GBPm GBPm months
-------------------------------------- ------- -------- -------
Operating profit - adjusted 59.1 56.9 141.4
Depreciation 12.4 10.8 24.5
Share option expense 4.3 4.2 9.8
Movement in fair value of shared
equity loans - - (0.4)
Share of underlying net profit
of joint ventures(1) (3.8) (3.1) (15.0)
Other operating items (2) 4.0 (12.3) (1.3)
Change in working capital (3) (91.7) (84.7) (71.5)
Net capital expenditure (including
repayment of finance leases) (18.0) (12.2) (34.2)
Dividends and interest received
from joint ventures 2.5 - 3.9
Operating cash flow (31.2) (40.4) 57.2
Income taxes paid (9.0) (14.9) (14.4)
Net interest received/(paid)
- (non-joint venture) 2.9 (0.4) 3.3
Free cash flow (37.3) (55.7) 46.1
-------------------------------------- ------- -------- -------
(1 ') Underlying net profit of joint ventures' excludes the
exceptional Building Safety credit (GBP4.5m) related to joint
ventures
(2) 'Other operating items' includes shared equity redemptions
(GBP0.1m) and provision movements (GBP5.4m) less a gain on disposal
of joint ventures (GBP1.5m)
(3) The cash flow due to change in working capital excludes
non-cash movements relating to the unwinding of discounting on land
creditors (GBP1.5m) less other non-cash creditor movements
(GBP4.4m)
5. Net cash. Net cash at 30 June 2023 was GBP263.1m, with movements summarised as:
GBPm
------
Net cash as at 1 January
2023 354.6
Free cash flow (as above) (37.3)
Dividends (31.5)
Other(1) (22.7)
Net cash as at 30 June 2023 263.1
-------------------------------- ------
(1) 'Other' includes the purchase of shares in the Company by
the employee benefit trust (GBP2.2m) and net increase in loans to
JVs (GBP22.6m) less proceeds from the disposal of investments
(GBP1.5m) and proceeds from the exercise of share options
(GBP0.6m)
6. Capital employed by strategic activity. An analysis of the
capital employed in the Construction activities shows an increase
of GBP24.5m since the prior period, split as follows:
Capital employed(1,2) in HY 2023 HY 2022 Change
Construction GBPm GBPm GBPm
-------- --------
Construction (200.8) (177.8) -23.0
Infrastructure (72.2) (66.9) -5.3
Fit Out (54.3) (80.0) +25.7
Property Services 75.0 47.9 +27.1
(252.3) (276.8) +24.5
-------------------------- -------- -------- -------
An analysis of capital employed in the Regeneration activities
shows an increase of GBP73.3m since the prior period, split as
follows:
Capital employed(1,2) in HY 2023 HY 2022 Change
Regeneration GBPm GBPm GBPm
-------- --------
Partnership Housing 243.1 190.9 +52.2
Urban Regeneration 120.5 99.4 +21.1
363.6 290.3 +73.3
-------------------------- -------- -------- -------
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 Adjusted to exclude Building Safety provisions
7. Dividends. The Board of Directors has proposed an interim
dividend of 36.0p per share, an increase of 9% on the prior year
interim dividend (HY 2022: 33.0p). This will be paid on 26 October
2023 to shareholders on the register on 6 October 2022. The
ex-dividend date will be 5 October 2023.
8. 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 within the 2022 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).
Summary of principal risks as per 2022 Annual Report:
Economic change and uncertainty - There could be fewer or less
profitable opportunities in the Group's chosen markets including a
decline in construction and residential activity caused by
macroeconomic weakness. Allocating resources and capital to
declining markets or less attractive opportunities would reduce its
profitability and cash generation.
Exposure to UK housing market - The UK housing sector is
strongly influenced by government stimulus and consumer confidence.
Inflationary pressures and resulting interest rate direction could
challenge scheme viability, slowing down secured order book
conversion. If mortgage availability, affordability or consumer
confidence is reduced, this could impact on demand, make existing
schemes difficult to sell and future developments unviable,
reducing profitability and tying up capital.
Health and safety - If the Group fails to protect the health,
safety and wellbeing of its key stakeholders, individuals could be
hurt which could damage the Group's reputation as a responsible
employer and affect its ability to secure future work.
Climate change - Failure to protect the environment in which the
Group works 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. In isolated
circumstances supply chain failures have caused disruption and cost
at individual project level, but not material. Where this has
occurred, we have been able to step in, take on existing
commitments and/or alternative suppliers and mitigate any impacts.
Our supply chain is widely dispersed across both the SME market,
our geographies, businesses and regions and provides resilience by
limiting partner concentration which coupled with our close
relationships allows a degree of early warning and intervention
when required.
Inadequate funding - A lack of liquidity could impact the
Group's ability to continue to trade or restrict its 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.
Poor contract selection and/or bidding - Failure to fully
understand the risks on projects may lead the Group to accepting
work outside its core competencies or for which the Group has
insufficient resources, leading to poor delivery, a reduction in
gross margin and ultimately result in reputational damage and loss
of opportunities. In terms of inflation the Group's predominantly
public sector and largely negotiated orderbook continues to provide
resilience by allowing us to pass on costs or recover increases via
project terms.
Poor project delivery (including changes to contracts and
contract disputes) - Failure to meet client expectations could lead
to disputes and 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.
To comply with the Building Safety Act the Group needs to ensure
that its future buildings comply with the regulations and that
related issues in completed projects are identified, appropriate
provisions made, rectification and recovery strategies
implemented.
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 2023
Six months Six months
to to Year ended
30 June
2023 30 June 2022 31 Dec 2022
(unaudited) (unaudited) (audited)
Notes GBPm GBPm GBPm
---------------------------------- ----- ----------- ------------ -----------
Revenue 1,935.2 1,697.5 3,612.2
Cost of sales (1,723.8) (1,504.7) (3,241.3)
---------------------------------- ----- ----------- ------------ -----------
Gross profit 211.4 192.8 370.9
---------------------------------- ----- ----------- ------------ -----------
Analysed as:
Adjusted Gross Profit 215.5 192.8 410.0
Exceptional building safety
charge 3 (4.1) - (39.1)
---------------------------------- ----- ----------- ------------ -----------
Administrative expenses (163.9) (140.5) (287.6)
Share of net profit of joint
ventures 7 8.3 3.1 4.5
Other operating income 1.5 0.6 0.5
---------------------------------- ----- ----------- ------------ -----------
Operating profit 57.3 56.0 88.3
---------------------------------- ----- ----------- ------------ -----------
Analysed as:
Adjusted Operating profit 59.1 56.9 139.2
Exceptional building safety
credit/(charge) 3 0.4 - (48.9)
Amortisation of intangible assets (2.2) (0.9) (2.0)
---------------------------------- ----- ----------- ------------ -----------
Finance income 4.3 0.4 2.3
Finance costs (3.6) (2.7) (5.3)
---------------------------------- ----- ----------- ------------ -----------
Profit before tax 58.0 53.7 85.3
---------------------------------- ----- ----------- ------------ -----------
Analysed as:
Adjusted profit before tax 59.8 54.6 136.2
Exceptional building safety
credit/(charge) 3 0.4 - (48.9)
Amortisation of intangible assets (2.2) (0.9) (2.0)
---------------------------------- ----- ----------- ------------ -----------
Tax 4 (11.7) (10.7) (24.4)
---------------------------------- ----- ----------- ------------ -----------
Profit for the period 46.3 43.0 60.9
---------------------------------- ----- ----------- ------------ -----------
Attributable to:
Owners of the Company 46.3 43.0 60.9
---------------------------------- ----- ----------- ------------ -----------
Earnings per share
Basic 6 100.0p 94.3p 132.7p
Diluted 6 98.5p 91.9p 130.4p
---------------------------------- ----- ----------- ------------ -----------
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 2023
Six months Six months
to to Year ended
30 June
2023 30 June 2022 31 Dec 2022
(unaudited) (unaudited) (audited)
GBPm GBPm GBPm
-------------------------------------- ----------- ------------ -----------
Profit for the period 46.3 43.0 60.9
Items that may be reclassified
subsequently to profit or loss:
Foreign exchange (loss)/gain
on translation of overseas operation (0.1) 0.8 2.1
Fair value loss arising on hedging
instruments (0.1) - -
Other comprehensive (expense)/income (0.2) 0.8 2.1
--------------------------------------- ----------- ------------ -----------
Total comprehensive income 46.1 43.8 63.0
--------------------------------------- ----------- ------------ -----------
Attributable to:
Owners of the Company 46.1 43.8 63.0
--------------------------------------- ----------- ------------ -----------
Condensed consolidated statement of financial position
At 30 June 2023
30 June
2023 30 June 2022 31 Dec 2022
(unaudited) (unaudited) (audited)
Notes GBPm GBPm GBPm
------------------------------- ----- ----------- ------------ -----------
Assets
Goodwill and other intangible
assets 219.3 221.5 221.2
Property, plant and equipment 75.7 66.9 74.8
Investment property 0.8 0.8 0.8
Investments in joint ventures 7 108.4 91.8 84.0
Non-current assets 404.2 381.0 380.8
------------------------------- ----- ----------- ------------ -----------
Inventories 397.4 333.9 333.9
Contract assets 295.6 281.5 294.6
Trade and other receivables 8 372.8 293.6 353.0
Current tax assets - 8.9 -
Shared equity loan receivables 0.3 0.5 0.4
Cash and cash equivalents 11 326.9 352.3 431.7
Current assets 1,393.0 1,270.7 1,413.6
------------------------------- ----- ----------- ------------ -----------
Total assets 1,797.2 1,651.7 1,794.4
------------------------------- ----- ----------- ------------ -----------
Liabilities
Contract liabilities (78.5) (70.3) (74.2)
Trade and other payables 9 (949.4) (878.2) (963.2)
Current tax liabilities (8.4) - (5.6)
Lease liabilities (16.2) (14.2) (16.0)
Borrowings 11 (63.8) (78.4) (77.1)
Provisions 10 (62.9) (18.2) (55.1)
------------------------------- ----- ----------- ------------ -----------
Current liabilities (1,179.2) (1,059.3) (1,191.2)
------------------------------- ----- ----------- ------------ -----------
Net current assets 213.8 211.4 222.4
------------------------------- ----- ----------- ------------ -----------
Trade and other payables 9 (36.5) (29.7) (37.3)
Lease liabilities (37.6) (38.3) (40.9)
Borrowings 11 - (0.4) -
Retirement benefit obligation (0.2) (0.2) (0.2)
Deferred tax liabilities (6.7) (10.0) (6.8)
Provisions 10 (23.5) (26.4) (21.8)
------------------------------- ----- ----------- ------------ -----------
Non-current liabilities (104.5) (105.0) (107.0)
------------------------------- ----- ----------- ------------ -----------
Total liabilities (1,283.7) (1,164.3) (1,298.2)
------------------------------- ----- ----------- ------------ -----------
Net assets 513.5 487.4 496.2
------------------------------- ----- ----------- ------------ -----------
Equity
Share capital 2.4 2.4 2.4
Share premium account 55.9 53.4 55.9
Other reserves 0.9 (0.2) 1.1
Retained earnings 454.3 431.8 436.8
------------------------------- ----- ----------- ------------ -----------
Equity attributable to owners
of the Company 513.5 487.4 496.2
Total equity 513.5 487.4 496.2
------------------------------- ----- ----------- ------------ -----------
Condensed consolidated cash flow statement
For the six months ended 30 June 2023
Six months Six months
to to Year ended
30 June
2023 30 June 2022 31 Dec 2022
(unaudited) (unaudited) (audited)
Notes GBPm GBPm GBPm
------------------------------------ ----- ----------- ------------ -----------
Operating activities
Operating profit 57.3 56.0 88.3
Adjusted for:
Exceptional building safety
(credit)/charge 3 (0.4) - 48.9
Amortisation of intangible
assets 2.2 0.9 2.0
Underlying share of net profit
of equity accounted joint ventures 7 (3.8) (3.1) (14.3)
Depreciation 12.4 10.8 22.9
Share-based payments 4.3 4.2 9.7
Gain on disposal of investments (1.5) (0.6) -
Gain on disposal of property,
plant and equipment - (0.3) (0.5)
Movement in fair value of shared
equity loan receivables - - (0.4)
Impairment of investments - 0.3 0.9
Repayment of shared equity loan
receivables 0.1 1.0 1.5
Increase/(decrease) in provisions
(excluding exceptional building
safety items) 10 5.4 (12.7) (19.5)
Operating cash inflow before
movements in working capital 76.0 56.5 139.5
Increase in inventories (63.5) (45.7) (45.4)
Increase in contract assets (1.0) (48.9) (62.0)
(Increase)/decrease in receivables (19.4) 34.4 (24.4)
Increase/(decrease) in contract
liabilities 4.3 (8.2) (4.3)
(Decrease)/increase in payables (12.1) (16.3) 71.6
------------------------------------ ----- ----------- ------------ -----------
Movements in working capital (91.7) (84.7) (64.5)
------------------------------------ ----- ----------- ------------ -----------
Cash (outflow)/inflow from
operations (15.7) (28.2) 75.0
------------------------------------ ----- ----------- ------------ -----------
Income taxes paid (9.0) (14.9) (20.3)
------------------------------------ ----- ----------- ------------ -----------
Net cash (outflow)/inflow from
operating activities (24.7) (43.1) 54.7
------------------------------------ ----- ----------- ------------ -----------
Investing activities
Interest received 4.2 0.3 1.8
Dividend from joint ventures 2.5 - 1.4
Proceeds on disposal of property,
plant and equipment 0.3 0.3 0.6
Purchases of property, plant
and equipment (8.6) (3.9) (10.5)
Purchases of intangible fixed
assets (0.3) (0.5) (1.3)
Net (increase)/decrease in loans
to joint ventures 7 (22.6) 5.4 16.3
Proceeds from the disposal of
investments 1.5 0.6 -
------------------------------------ ----- ----------- ------------ -----------
Net cash (outflow)/inflow from
investing activities (23.0) 2.2 8.3
------------------------------------ ----- ----------- ------------ -----------
Financing activities
Interest paid (1.3) (0.7) (1.8)
Dividends paid 5 (31.5) (28.3) (43.5)
Repayments of lease liabilities (9.4) (8.1) (17.2)
Repayment of borrowings 11 - - (0.4)
Proceeds on issue of share capital - 7.7 10.2
Payments by the Trust to acquire
shares in the Company (2.2) (15.6) (15.7)
Proceeds on exercise of share
options 0.6 1.4 1.6
------------------------------------ ----- ----------- ------------ -----------
Net cash outflow from financing
activities (43.8) (43.6) (66.8)
------------------------------------ ----- ----------- ------------ -----------
Net decrease in cash and cash
equivalents (91.5) (84.5) (3.8)
Cash and cash equivalents at
the beginning of the period 354.6 358.4 358.4
------------------------------------ ----- ----------- ------------ -----------
Cash and cash equivalents at
the end of the period 11 263.1 273.9 354.6
------------------------------------ ----- ----------- ------------ -----------
Cash and cash equivalents presented in the consolidated cash
flow statement include bank overdrafts. See note 11 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 2023
Share Share premium Other Retained Total
capital account reserves earnings equity
GBPm GBPm GBPm GBPm GBPm
--------------------------------------- -------- ------------- --------- --------- -------
1 January 2023 2.4 55.9 1.1 436.8 496.2
Profit for the year - - - 46.3 46.3
Other comprehensive expense - - (0.2) - (0.2)
--------------------------------------- -------- ------------- --------- --------- -------
Total comprehensive (expense)/income - - (0.2) 46.3 46.1
Share-based payments - - - 4.3 4.3
Exercise of share options - - - 0.6 0.6
Purchase of shares in
the Company by the Trust - - - (2.2) (2.2)
Dividends paid - - - (31.5) (31.5)
--------------------------------------- -------- ------------- --------- --------- -------
30 June 2023 (unaudited) 2.4 55.9 0.9 454.3 513.5
--------------------------------------- -------- ------------- --------- --------- -------
Share Share premium Other Retained Total
capital account reserves earnings equity
GBPm GBPm GBPm GBPm GBPm
------------------------------- -------- ------------- --------- --------- -------
1 January 2022 2.3 45.8 (1.0) 427.1 474.2
Profit for the period - - - 43.0 43.0
Other comprehensive expense - - 0.8 - 0.8
------------------------------- -------- ------------- --------- --------- -------
Total comprehensive income - - 0.8 43.0 43.8
Share-based payments - - - 4.2 4.2
Issue of shares at a premium 0.1 7.6 - - 7.7
Exercise of share options - - - 1.4 1.4
Purchase of shares in
the Company by the Trust - - - (15.6) (15.6)
Dividends paid - - - (28.3) (28.3)
------------------------------- -------- ------------- --------- --------- -------
30 June 2022 (unaudited) 2.4 53.4 (0.2) 431.8 487.4
------------------------------- -------- ------------- --------- --------- -------
Share Share premium Other Retained Total
capital account reserves earnings equity
GBPm GBPm GBPm GBPm GBPm
------------------------------- -------- ------------- --------- --------- -------
1 January 2022 2.3 45.8 (1.0) 427.1 474.2
Profit for the year - - - 60.9 60.9
Other comprehensive income - - 2.1 - 2.1
------------------------------- -------- ------------- --------- --------- -------
Total comprehensive income - - 2.1 60.9 63.0
Share-based payments - - - 9.7 9.7
Tax relating to share-based
payments - - - (3.3) (3.3)
Issue of shares at a premium 0.1 10.1 - - 10.2
Exercise of share options - - - 1.6 1.6
Purchase of shares in
the Company by the Trust - - - (15.7) (15.7)
Dividends paid - - - (43.5) (43.5)
------------------------------- -------- ------------- --------- --------- -------
31 December 2022 (audited) 2.4 55.9 1.1 436.8 496.2
------------------------------- -------- ------------- --------- --------- -------
Other reserves
Other reserves include:
-- Capital redemption reserve of GBP0.6m (30 June 2022: GBP0.6m,
31 December 2022: GBP0.6m) which was created on the redemption of
preference shares in 2003.
-- Hedging reserve of (GBP0.9m) (30 June 2022: (GBP0.8m), 31
December 2022: (GBP0.8m)) 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 GBP1.2m (30 June 2022: nil, 31
December 2022: GBP1.3m) 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 to satisfy options under the Group's share incentive
schemes. The number of shares held by the Trust at 30 June 2023 was
947,924 (30 June 2022: 1,157,029, 31 December 2022: 1,135,131) with
a cost of GBP19.8m (30 June 2022: GBP26.6m, 31 December 2022:
GBP26.1m)
Notes to the consolidated financial statements
For the six months ended 30 June 2023
1 Basis of preparation
General information
The financial information for the year ended 31 December 2022
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
2023 and 2022 and for the six months ended 30 June 2023 and 2022
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 (UK IAS). The condensed consolidated financial statements
included in this half year report were prepared in accordance with
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 IAS,
this half year report does not itself contain sufficient
information to comply with UK IAS.
Going concern
As at 30 June 2023 , the Group had cash of GBP326.9m and total
loans and borrowings of GBP63.8m, including GBP63.8m of overdrafts
repayable on demand (together net cash of GBP263.1m). 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 going concern period, which the
directors have defined as the period from the date of approval of
the 30 June 2023 financial statements through to 3 August 2024.
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 going concern period to 3 August
2024. Accordingly, they continue to adopt the going concern basis
in preparing the condensed consolidated financial statements.
Tax
A tax charge of GBP11.7m is shown for the six month period (six
months to 30 June 2022: GBP10.7m, year ended 31 December 2022:
GBP24.4m). 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
2022.
Seasonality
The Group's activities are generally not subject to significant
seasonal variation.
2 Business segments
For management purposes, the Group is organised into six
operating divisions: Construction, Infrastructure, Fit Out,
Property Services, Partnership Housing and Urban Regeneration, and
this is the structure of segment information reviewed by the Chief
Operating Decision Maker (CODM). The CODM is determined to be the
Board of directors and reporting provided to the Board is in line
with these six divisions, which have been considered to be the
Group's operating segments.
During the six months ended 30 June 2023 the Group has
restructured internal management reporting to the CODM, including
monthly reports, budgets and forecasts, to present the Construction
and Infrastructure businesses separately. Under IFRS 8 this change
in reporting to the Board triggered the segments to be reported
separately as at 30 June 2023.
The six operating divisions' activities are as follows:
-- Construction: The Construction division within Morgan Sindall
Construction & Infrastructure Ltd focuses on the education,
healthcare, commercial, industrial, leisure and retail markets in
Construction.
-- Infrastructure: The Infrastructure division within Morgan
Sindall Construction & Infrastructure Ltd focuses on highways,
rail, energy, water and nuclear markets in Infrastructure.
Infrastructure also includes the BakerHicks design activities based
out of the UK and Switzerland.
-- Fit Out: Overbury plc specialises in fit out and
refurbishment in commercial, central and local government offices,
retail banking and further education. Morgan Lovell plc provides
office interior design and build services direct to occupiers.
-- Property Services: Morgan Sindall Property Services Limited
provides response and planned maintenance for social housing and
the wider public sector.
-- Partnership Housing: Lovell Partnerships Limited delivers
housing through mixed-tenure and contracting activities. Mixed
tenure includes building and developing homes for open market sale,
affordable rent, private renting or shared ownership in partnership
with local authorities and housing associations. Contracting
includes the design and build of new homes and planned maintenance
and refurbishment for clients who are mainly local authorities,
housing associations and the Defence Infrastructure
Organisation.
-- Urban Regeneration: Muse Developments Limited 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 represent 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,
information technology services, interest revenue and interest
expense.
The Group reports its segmental information as presented
below:
Six months to 30
June 2023
---------------------------- -------------- ----- -------- ----------- ------------ ---------- ------------ -------
Fit Property Partnership Urban Group
Construction Infrastructure Out Services Housing Regeneration Activities Eliminations Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
-------------- ------------ -------------- ----- -------- ----------- ------------ ---------- ------------ -------
External
revenue 457.0 422.5 498.0 96.5 365.2 96.0 - - 1,935.2
Inter-segment
revenue 13.0 5.1 0.4 - 7.6 - - (26.1) -
-------------- ------------ -------------- ----- -------- ----------- ------------ ---------- ------------ -------
Total revenue 470.0 427.6 498.4 96.5 372.8 96.0 - (26.1) 1,935.2
Adjusted
operating
profit/(loss)
(Note 14) 12.0 15.9 30.4 (4.1) 10.1 6.0 (11.2) - 59.1
-------------- ------------ -------------- ----- -------- ----------- ------------ ---------- ------------ -------
Amortisation
of intangible
assets - - - (2.2) - - - - (2.2)
Exceptional
operating
items (8.6) - - - - 9.0 - - 0.4
-------------- ------------ -------------- ----- -------- ----------- ------------ ---------- ------------ -------
Operating
profit/(loss) 3.4 15.9 30.4 (6.3) 10.1 15.0 (11.2) - 57.3
-------------- ------------ -------------- ----- -------- ----------- ------------ ---------- ------------ -------
Finance income 4.3
Finance
expense (3.6)
-------------- ------------ -------------- ----- -------- ----------- ------------ ---------- ------------ -------
Profit before
tax 58.0
-------------- ------------ -------------- ----- -------- ----------- ------------ ---------- ------------ -------
Six months to 30 June 2022 (restated)
----------------------------------------------------- -------- ----------- ------------ ---------- ------------ -------
Property Partnership Urban Group
Construction Infrastructure Fit Out Services Housing Regeneration Activities Eliminations Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
-------------- ------------ -------------- ------- -------- ----------- ------------ ---------- ------------ -------
External
revenue 383.6 371.2 457.0 75.9 283.7 126.1 - - 1,697.5
Inter-segment
revenue 8.6 0.9 - - - - - (9.5) -
-------------- ------------ -------------- ------- -------- ----------- ------------ ---------- ------------ -------
Total revenue 392.2 372.1 457.0 75.9 283.7 126.1 - (9.5) 1,697.5
Adjusted
operating
profit/(loss)
(Note 14) 11.3 12.8 21.2 2.5 13.9 7.3 (12.1) - 56.9
-------------- ------------ -------------- ------- -------- ----------- ------------ ---------- ------------ -------
Amortisation
of intangible
assets - - - (0.9) - - - - (0.9)
Operating
profit/(loss) 11.3 12.8 21.2 1.6 13.9 7.3 (12.1) - 56.0
-------------- ------------ -------------- ------- -------- ----------- ------------ ---------- ------------ -------
Finance income 0.4
Finance
expense (2.7)
-------------- ------------ -------------- ------- -------- ----------- ------------ ---------- ------------ -------
Profit before
tax 53.7
-------------- ------------ -------------- ------- -------- ----------- ------------ ---------- ------------ -------
Six months to 30 June
2022 (reported)
------------------------------ ------- -------- ----------- ------------ ---------- ------------ --------------
Construction Fit Out Property Partnership Urban Group Eliminations Total
& Services Housing Regeneration Activities
Infrastructure
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
-------------- -------------- ------- -------- ----------- ------------ ---------- ------------ --------------
External
revenue 754.8 457.0 75.9 283.7 126.1 - - 1,697.5
Inter-segment
revenue 9.5 - - - - - (9.5) -
-------------- -------------- ------- -------- ----------- ------------ ---------- ------------ --------------
Total revenue 764.3 457.0 75.9 283.7 126.1 - (9.5) 1,697.5
Adjusted
operating
profit/(loss)
(Note
14) 24.1 21.2 2.5 13.9 7.3 (12.1) - 56.9
-------------- -------------- ------- -------- ----------- ------------ ---------- ------------ --------------
Amortisation
of
intangible
assets - - (0.9) - - - - (0.9)
Operating
profit/(loss) 24.1 21.2 1.6 13.9 7.3 (12.1) - 56.0
-------------- -------------- ------- -------- ----------- ------------ ---------- ------------ --------------
Finance income 0.4
Finance
expense (2.7)
-------------- -------------- ------- -------- ----------- ------------ ---------- ------------ --------------
Profit before 53.7
tax
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-------------- -------------- ------- -------- ----------- ------------ ---------- ------------ --------------
Year ended 31 December 2022 (restated)
--------------------------------------------------------- ----------- ------------ ------------ ------------ ------------ -------
Fit Property Partnership Urban Group
Construction Infrastructure Out Services Housing Regeneration Activities Eliminations Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
-------------- -------------- -------------- --------- ----------- ------------ ------------ ------------ ------------ -------
External
revenue 786.8 758.6 967.5 163.5 691.8 244.0 - - 3,612.2
Inter-segment
revenue 21.0 2.2 - - 4.4 - - (27.6) -
-------------- -------------- -------------- --------- ----------- ------------ ------------ ------------ ------------ -------
Total revenue 807.8 760.8 967.5 163.5 696.2 244.0 - (27.6) 3,612.2
Adjusted
operating
profit/(loss)
(Note 14) 22.6 29.5 52.2 4.3 37.4 18.9 (25.7) - 139.2
-------------- -------------- -------------- --------- ----------- ------------ ------------ ------------ ------------ -------
Amortisation
of intangible
assets - - - (2.0) - - - - (2.0)
Exceptional
operating
items - - - - (5.5) (43.4) - - (48.9)
-------------- -------------- -------------- --------- ----------- ------------ ------------ ------------ ------------ -------
Operating
profit/(loss) 22.6 29.5 52.2 2.3 31.9 (24.5) (25.7) - 88.3
-------------- -------------- -------------- --------- ----------- ------------ ------------ ------------ ------------ -------
Finance income 2.3
Finance
expense (5.3)
-------------- -------------- -------------- --------- ----------- ------------ ------------ ------------ ------------ -------
Profit before
tax 85.3
-------------- -------------- -------------- --------- ----------- ------------ ------------ ------------ ------------ -------
Year ended 31 December 2022
(reported)
---------------------------------------------- --------- ----------- ------------ ------------ ------------ ------------
Construction
& Property Partnership Urban Group
Infrastructure Fit Out Services Housing Regeneration Activities Eliminations Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
-------------- -------------- -------------- --------- ----------- ------------ ------------ ------------ ------------
External
revenue 1,545.4 967.5 163.5 691.8 244.0 - - 3,612.2
Inter-segment
revenue 23.2 - - 4.4 - - (27.6) -
-------------- -------------- -------------- --------- ----------- ------------ ------------ ------------ ------------
Total revenue 1,568.6 967.5 163.5 696.2 244.0 - (27.6) 3,612.2
Adjusted
operating
profit/(loss)
(Note 14) 52.1 52.2 4.3 37.4 18.9 (25.7) - 139.2
-------------- -------------- -------------- --------- ----------- ------------ ------------ ------------ ------------
Amortisation
of intangible
assets - - (2.0) - - - - (2.0)
Exceptional
operating
items - - - (5.5) (43.4) - - (48.9)
-------------- -------------- -------------- --------- ----------- ------------ ------------ ------------ ------------
Operating
profit/(loss) 52.1 52.2 2.3 31.9 (24.5) (25.7) - 88.3
-------------- -------------- -------------- --------- ----------- ------------ ------------ ------------ ------------
Finance income 2.3
Finance
expense (5.3)
-------------- -------------- -------------- --------- ----------- ------------ ------------ ------------ ------------
Profit before
tax 85.3
-------------- -------------- -------------- --------- ----------- ------------ ------------ ------------ ------------
During the period ended 30 June 2023, the period ended 30 June
2022 and the year ended 31 December 2022, inter-segment sales were
charged at prevailing market prices and significantly all of the
Group's operations were carried out in the UK.
3 Exceptional building safety items
Six months Six months
to to Year ended
30 June 2023 30 June 2022 31 Dec 2022
Notes GBPm GBPm GBPm
-------------------------------------------- ----- ------------- ------------- ------------
Exceptional building safety provisions
recognised 10 4.1 - 39.1
Exceptional building safety (credit)/charge
within joint ventures 7 (4.5) - 9.8
-------------------------------------------- ----- ------------- ------------- ------------
Total exceptional building safety
(credit)/charge (0.4) - 48.9
-------------------------------------------- ----- ------------- ------------- ------------
The Group signed the Developer Remediation Contract in March
2023 on behalf of all of its divisions. For the year ended 31
December 2022, the Group had recognised a provision for expected
costs of GBP48.9m in relation to its obligations thereunder.
Based on a reassessment of liabilities based on further
information during the period, the overall movement in this
building safety provision is a net gain of GBP0.4m and is shown
separately as an exceptional profit consistent with prior
treatment.
At the period end, the Group had not yet made any reimbursements
to the Building Safety Fund for amounts previously granted and
drawn on any of the developments for which the Group has taken
responsibility for. As notified by the Department of Levelling Up,
Housing and Communities ("DLUHC"), any repayments will only be
requested upon final completion of all the relevant works. On this
basis, any repayments are only likely to commence towards the end
of the year at the earliest.
4 Tax
The UK statutory tax rate changed from 19% to 25% from 1 April
2023. Accordingly the statutory tax rate for the Group for 2023
(taking into account our 31 December year end) is 23.5% for 2023
and is expected to be 25% for 2024 and beyond.
The effective tax rate applied for the period was 20.2% (six
months to 30 June 2022: 19.9%, year ended 31 December 2022: 19.8%).
This reflects the anticipated full year effective rate before
adjusting items, as amended for the tax effect of adjusting items
incurred in the first half of the financial year. This is lower
than the statutory rate of 23.5% due to a GBP1.8m net tax credit on
exceptional items.
Deferred tax has been measured using the enacted rates that are
expected to apply to the period in which each asset or liability is
expected to unwind.
The adjusted effective tax rate for the period was 23.4% (six
months to 30 June 2022: 20.0%, year ended 31 December 2022: 19.8%)
with the difference between the reported and adjusted rates
reflecting adjustments to exclude the impact of the amortisation of
intangibles and movements within exceptional items.
5 Dividends
Amounts recognised as distributions to equity
holders in the period:
------------------------------------------------- ------------ -----------
Six months Six months
to to Year ended
30 June
2023 30 June 2022 31 Dec 2022
GBPm GBPm GBPm
------------------------------------- ---------- ------------ -----------
Final dividend for the year ended
31 December 2022 of 68.0p per share 31.5 - -
Final dividend for the year ended
31 December 2021 of 62.0p per share - 28.3 28.3
Interim dividend for the year ended
31 December 2022 of 33.0p per share - - 15.2
------------------------------------- ---------- ------------ -----------
31.5 28.3 43.5
------------------------------------- ---------- ------------ -----------
A proposed interim dividend of 36.0p per share for 2023 was
approved by the Board on 1 August 2023 and will be paid on 26(th)
October 2023 to shareholders on the register at 6 October 2023. The
ex-dividend date is 5 October 2023.
6 Earnings per share
Six months Six months
to to Year ended
30 June 30 June
2023 2022 31 Dec 2022
GBPm GBPm GBPm
--------------------------------------- ---------- ---------- -----------
Profit attributable to the owners
of the Company 46.3 43.0 60.9
Adjustments:
Exceptional operating items net
of tax (2.2) - 46.7
Amortisation of intangible assets
net of tax 1.7 0.7 1.6
Adjusted earnings 45.8 43.7 109.2
---------------------------------------- ---------- ---------- -----------
Basic weighted average ordinary shares
(m) 46.3 45.6 45.9
Dilutive effect of share options
and conditional shares not vested
(m) 0.7 1.2 0.8
---------------------------------------- ---------- ---------- -----------
Diluted weighted average ordinary
shares (m) 47.0 46.8 46.7
---------------------------------------- ---------- ---------- -----------
Basic earnings per share 100.0p 94.3p 132.7p
Diluted earnings per share 98.5p 91.9p 130.4p
Adjusted earnings per share 98.9p 95.8p 237.9p
Diluted adjusted earnings per share 97.4p 93.4p 233.8p
---------------------------------------- ---------- ---------- -----------
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 average share price
for the period was GBP17.35 (30 June 2022: GBP21.77, 31 December
2022: GBP19.12).
A total of 4,835,809 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 2023 (30
June 2022: 712,103, 31 December 2022: 681,571).
7 Investments in joint ventures
Investments in equity accounted joint ventures are as
follows:
Six months Six months Year ended
to 30 June to 30 June 31 Dec
2023 2022 2022
Notes GBPm GBPm GBPm
----------------------------------- ----- ----------- ----------- ----------
1 January 84.0 94.1 94.1
Equity accounted share of net
profits:
Underlying share of net profits 3.8 3.1 14.3
Exceptional building safety
credit/(charge) 3 4.5 - (9.8)
----------- ----------- ----------
8.3 3.1 4.5
Loans advanced to joint ventures 26.9 10.9 18.3
Loans repaid by joint ventures (4.3) (16.3) (34.6)
Non-cash impairment - - (0.9)
Dividends received (2.5) - (1.4)
Reclassification (from)/to funding
obligations payable 9 (4.0) - 4.0
----------------------------------- ----- ----------- ----------- ----------
End of period 108.4 91.8 84.0
----------------------------------- ----- ----------- ----------- ----------
During the six months ended 30 June 2023, an exceptional
building safety credit of GBP4.5m has been recognised in respect of
the Group's share of constructive and legal obligations to
remediate legacy building safety issues within joint ventures.
8 Trade and other receivables
30 June 2023 30 June 2022 31 Dec 2022
GBPm GBPm GBPm
-------------------------------- ------------ ------------ -----------
Amounts falling due within one
year
Trade receivables 253.4 180.7 243.6
Amounts owed by joint ventures 12.6 0.4 9.2
Prepayments 20.2 20.2 13.0
Insurance receivables 4.3 10.9 4.8
Other receivables 30.8 29.5 36.0
--------------------------------- ------------ ------------ -----------
321.3 241.7 306.6
-------------------------------- ------------ ------------ -----------
Amounts falling due after more
than one year
Trade receivables 51.5 51.9 46.4
--------------------------------- ------------ ------------ -----------
51.5 51.9 46.4
-------------------------------- ------------ ------------ -----------
Trade and other receivables 372.8 293.6 353.0
--------------------------------- ------------ ------------ -----------
The Group holds third party insurances that may mitigate the
contract and legal liabilities described in note 10 - Provisions.
Insurance receivables are recognised when reimbursement from
insurers is virtually certain.
9 Trade and other payables
30 June 2023 30 June 2022 31 Dec 2022
GBPm GBPm GBPm
------------------------------- ------------ ------------ -----------
Trade payables 207.1 191.3 165.4
Amounts owed to joint ventures 0.2 0.2 4.2
Other tax and social security 95.3 83.5 107.0
Accrued expenses 599.9 581.4 637.7
Deferred income 3.6 2.8 5.8
Land creditors 26.7 8.6 30.8
Other payables 16.6 10.4 12.3
-------------------------------- ------------ ------------ -----------
Current 949.4 878.2 963.2
-------------------------------- ------------ ------------ -----------
Land creditors 36.5 29.7 30.9
Other payables - - 6.4
-------------------------------- ------------ ------------ -----------
Non-current 36.5 29.7 37.3
-------------------------------- ------------ ------------ -----------
10 Provisions
Building Contract
Safety Self-insurance & legal Other Total
GBPm GBPm GBPm GBPm GBPm
--------------- -------- -------------- -------- ----- ------
1 January 2022 - 21.2 33.4 2.7 57.3
Utilised - (0.7) - - (0.7)
Additions - 3.1 8.9 0.6 12.6
Released - - (24.1) (0.5) (24.6)
--------------- -------- -------------- -------- ----- ------
30 June 2022 - 23.6 18.2 2.8 44.6
Utilised (0.8) (0.3) (6.5) (0.2) (7.8)
Additions 39.1 0.9 4.3 0.7 45.0
Released - (4.4) (0.3) (0.2) (4.9)
--------------- -------- -------------- -------- ----- ------
1 January 2023 38.3 19.8 15.7 3.1 76.9
Utilised (0.3) (0.8) (1.0) (0.1) (2.2)
Additions 8.6 3.1 6.9 0.5 19.1
Released (4.5) - (2.0) (0.9) (7.4)
--------------- -------- -------------- -------- ----- ------
30 June 2023 42.1 22.1 19.6 2.6 86.4
--------------- -------- -------------- -------- ----- ------
Current 42.1 - 19.6 1.2 62.9
Non-current - 22.1 - 1.4 23.5
--------------- -------- -------------- -------- ----- ------
30 June 2023 42.1 22.1 19.6 2.6 86.4
--------------- -------- -------------- -------- ----- ------
Building Safety provisions
During 2022 the Partnership Housing division signed the
Developers Pledge (the "Pledge") with the Department of Levelling
Up, Housing and Communities ("DLUHC") setting out the principles
under which life critical fire-safety issues on buildings that they
have developed of 11 meters and above are to be remediated. A
letter was also received from DLUHC requesting information to
assess whether it may be appropriate for Urban Regeneration to also
commit to the principles of the Pledge as part of its commitment to
support the remediation of historic cladding and fire safety
defects over and above its obligations under the new Building
Safety Act. The Group subsequently signed the Developer Remediation
Contract in March 2023 on behalf of all of its divisions.
Management review legal and constructive obligations with regard
to remedial work to rectify legacy building safety issues. Where
obligations exist, these have been evaluated for the likely cost to
address, including repayments of the Building Safety Fund. As a
result of this review process provisions are recognised, as
reported in the table above, excluding those recognised in joint
ventures.
Self-insurance provisions
Self-insurance provisions comprise the Group's self-insurance of
certain risks and include GBP13.1m (30 June 2022: GBP11.1m, 31
December 2022: GBP11.1m) held in the Group's captive insurance
company, Newman Insurance Company Limited (the 'Captive').
The Group makes provisions in respect of specific types of
claims incurred but not reported (IBNR). The valuation of IBNR
considers past claims experience and the risk profile of the Group.
These are reviewed periodically and are intended to provide a best
estimate of the most likely or expected outcome.
Contract and legal provisions
Contract and legal provisions include liabilities, loss
provisions, defect and warranty provisions on contracts that have
reached completion.
The Group also holds third party insurances that may mitigate
the liabilities. Third party insurance reimbursement is recognised
as a separate asset, but only when the reimbursement is virtually
certain. See note 8 for details of mitigating insurance assets
recognised at the period end.
Other provisions
Other provisions include property dilapidations and other
personnel related provisions.
The majority of the provisions are expected to be utilised
within 10 years.
11 Net cash
30 June
2023 30 June 2022 31 Dec 2022
GBPm GBPm GBPm
----------------------------------- ------- ------------ -----------
Cash and cash equivalents 326.9 352.3 431.7
Bank overdrafts presented as
borrowings due within one year (63.8) (78.4) (77.1)
------------------------------------ ------- ------------ -----------
Cash and cash equivalents reported
in the consolidated cash flow
statement 263.1 273.9 354.6
Borrowings due between two and
five years - (0.4) -
Net cash 263.1 273.5 354.6
------------------------------------ ------- ------------ -----------
Included within cash and cash equivalents is GBP36.8m which is
the Group's share of cash held within jointly controlled operations
(30 June 2022: GBP50.1m, 31 December 2022: GBP38.0m). There is
GBP4.2m included within cash and cash equivalents held for future
payments to designated suppliers (30 June 2022: GBP8.6m, 31
December 2022: GBP11.1m).
The Group has GBP180m of committed loan facilities maturing more
than one year from the balance sheet date, of which GBP15m mature
in June 2026 and GBP165m in October 2026. These facilities are
undrawn at 30 June 2023.
12 Contingent liabilities
Building Safety
At 30 June 2023, the Group held provisions totalling GBP47.4m,
including those related to joint ventures, in respect of
liabilities arising from commitments made under the Pledge. This
represents managements best estimate of the cost and timing of
remedial works required and repayments to the Building Safety
Fund.
The ongoing legislative and regulatory changes in respect of
legacy building safety issues create uncertainty around the extent
of remediation required for legacy buildings, the liability for
such remediation, recoveries from other parties and the time to be
considered. It is possible that as remediation work proceeds,
additional remedial works are required that may not have been
identified from the reviews and physical inspections undertaken to
date. The scope of buildings and remediation works to be considered
may also change as legislation and regulations continue to
evolve.
Uncertainties also exist in respect of the timing and extent of
expected recoveries from other third parties involved in
developments for which no assets have been recognised at 30 June
2023.
13 Subsequent events
There were no subsequent events that affected the financial
statements of the Group.
14 Adjusted Performance Measures
In addition to monitoring and reviewing the financial
performance of the operating segments and the Group on a statutory
basis, management also use adjusted performance measures which are
also disclosed in the Annual Report. These measures are not an
alternative or substitute to statutory IFRS measures but are seen
by management as useful in assessing the performance of the
business on a comparable basis. These financial measures are also
aligned to the measures used internally to assess business
performance in the Group's budgeting process and when determining
compensation. The Group also uses other non-statutory measures
which cannot be derived directly from the financial statements.
There are four alternative performance measures used by management
and disclosure in the Annual Report which are:
'Adjusted' In all cases the term 'adjusted' excludes the impact
of intangible amortisation and exceptional items. This is used to
improve the comparability of information between reporting periods
and aid the reader's understanding of the activities across the
Group's portfolio.
Below is a reconciliation between the reported Gross profit,
Operating profit and Profit before tax measures on a statutory
basis and the adjustment made to calculate Adjusted Gross profit,
Adjusted Operating profit and Adjusted Profit before tax.
Adjusted basic earnings per share and adjusted diluted earnings
per share is the statutory measure excluding the post-tax impact of
intangible amortisation and exceptional items, and the deferred tax
charge arising due to changes in UK corporation tax rates. See note
6 for a detailed reconciliation of the adjusted EPS measures.
Gross profit
------------------------------------- ----------- ----------- ----------
Six Months Six Months Year ended
to 30 June to 30 June 31 Dec
2023 2022 2022
GBPm GBPm GBPm
-------------------------------------
Reported 211.4 192.8 370.9
Add back: exceptional building
safety charge(1) 4.1 - 39.1
Adjusted 215.5 192.8 410.0
(1) The exceptional building safety charge includes a GBP4.1m
charge recognised in Cost of sales. See note 3.
Operating profit
------------------------------------- ----------- ----------- ----------
Six Months Six Months Year ended
to 30 June to 30 June 31 Dec
2023 2022 2022
GBPm GBPm GBPm
-------------------------------------
Reported 57.3 56.0 88.3
Add back: exceptional building
safety (credit)/charge(2) (0.4) - 48.9
Add back: amortisation of intangible
assets 2.2 0.9 2.0
Adjusted 59.1 56.9 139.2
(2) The exceptional building safety charge includes a GBP4.1m
charge recognised in Cost of sales and a GBP4.5m credit
recognised in Share of net profit of joint ventures. See
note 3.
Profit before tax
------------------------------------- ----------- ----------- ----------
Six Months Six Months Year ended
to 30 June to 30 June 31 Dec
2023 2022 2022
GBPm GBPm GBPm
-------------------------------------
Reported 58.0 53.7 85.3
Add back: exceptional building
safety (credit)/charge(2) (0.4) - 48.9
Add back: amortisation of intangible
assets 2.2 0.9 2.0
Adjusted 59.8 54.6 136.2
'Net cash' Net cash is defined as cash and cash equivalents less
borrowings and non-recourse project financing. Lease liabilities
are not deducted from net cash. A reconciliation of this number at
the reporting date can be found in note 11. In addition, management
monitor and review average daily net cash as good discipline in
managing capital. Average daily net cash is defined as the average
of the 365 end of day balances of the net cash over the course of a
reporting period.
'Operating cash flow' Management use an adjusted measure for
operating cash flow as it encompasses other cashflows that are key
to the ongoing operations of the Group such as repayments of lease
liabilities, investment in property, plant and equipment,
investment in intangible assets, and returns from equity accounted
joint ventures. Operating cash flow can be derived from the cash
inflow from operations reported in the consolidated cash flow
statement as shown below.
Operating cash flow conversion is operating cash flow divided by
adjusted operating profit as defined above.
Six months Six months
to to Year ended
30 June 30 June
2023 2022 31 Dec 2022
GBPm GBPm GBPm
Cash inflow from operations
- Reported (15.7) (28.2) 75.0
Dividends from joint ventures 2.5 - 1.4
Proceeds on disposal of property,
plant and equipment 0.3 0.3 0.6
Purchases of property, plant
and equipment (8.6) (3.9) (10.5)
Purchases of intangible fixed
assets (0.3) (0.5) (1.3)
Repayments of lease liabilities (9.4) (8.1) (17.2)
Operating cash flow (31.2) (40.4) 48.0
'Return on capital employed' Management use return on capital
employed (ROCE) in assessing the performance and efficient use of
capital within the Regeneration activities. ROCE is calculated as
adjusted operating profit plus interest received from joint
ventures divided by average capital employed. Average capital
employed is the 12-month average of total assets (excluding
goodwill, other intangible assets and cash) less total liabilities
(excluding corporation tax, deferred tax, intercompany financing
and overdrafts).
The directors confirm that to the best of their knowledge:
-- the unaudited condensed consolidated financial statements,
which have been prepared in accordance with UK adopted IAS 34
'Interim Financial Reporting', 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)
By order of the Board
John Morgan Steve Crummett
Chief Executive Finance Director
2 August 2023
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