REG - Morgan Sindall Grp - RESULTS FOR THE HALF YEAR (HY) ENDED 30 JUNE 2024
08/08/2024 07:00
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RNS Number : 6362Z Morgan Sindall Group PLC 08 August 2024
8 August 2024
MORGAN SINDALL GROUP PLC
('Morgan Sindall' or 'Group')
The Partnerships, Fit Out and Construction Services Group
RESULTS FOR THE HALF YEAR (HY) ENDED 30 JUNE 2024
Record first half performance, full year now expected to be slightly ahead of
our previous expectations
( ) HY 2024 HY 2023 Change
( )Revenue £2,214m £1,935m +14%
( )Operating profit - adjusted(1) £65.5m £59.1m +11%
( )Profit before tax - adjusted(1) £70.1m £59.8m +17%
( )Earnings per share - adjusted(1) 112.5p 98.9p +14%
( )Period end net cash £351m £263m +£88m
Interim dividend per share 41.5p 36.0p +15%
( ) ( ) ( ) ( )
Operating profit - reported £65.5m £57.3m +14%
Profit before tax - reported £70.1m £58.0m +21%
Basic earnings per share - reported 113.1p 100.0p +13%
( )
(1 )'Adjusted' is defined as before intangible amortisation of £0.3m and
exceptional building safety credit of £0.3m. (HY 2023: before intangible
amortisation of £2.2m and exceptional building safety credit of £0.4m)
Strong first half performance reinforcing the significant strategic and
operational progress being made across the Group
o Revenue up 14% to £2.2bn
o Adjusted profit before tax up 17% to £70.1m
Continued balance sheet strength
o Net cash of £351m (HY 2023: £263m)
o Average daily net cash of £372m (HY 2023: £268m)
High quality total future workload
o Order book of £8.7bn (FY 2023: £8.9bn)
Interim dividend up 15% to 41.5p per share (HY 2023: 36.0p)
Divisional highlights
o Fit Out delivering significant growth compared to the prior year on the
back of increased revenues; operating profit up 36% to £41.3m (HY 2023:
£30.4m) with an operating margin of 6.6% (HY 2023: 6.1%).
o Construction delivering good revenue growth with margin within its
medium-term target range; revenue up 10% to £519m (HY 2023: £470m) at an
operating margin of 2.7%. Operating profit up 18% to £14.1m (HY 2023:
£12.0m).
o Strong performance from Infrastructure; revenue up 24% to £530m (HY 2023:
£428m) at an operating margin of 3.7% (HY 2023: 3.7%). Operating profit up
24% to £19.7m (HY 2023: £15.9m).
o The remediation programme continues to progress really well in Property
Services, our smallest division. Early release from a small number of
contracts led to first half operating losses of £11.0m (HY 2023: operating
loss £4.1m). With the operating losses strongly weighted to the first half,
the remediation plan is on track to be completed by the end of 2024 to leave
the business positioned to return to profit in 2025.
o Partnership Housing has benefited from a modest improvement in the housing
market since the start of the year, reflected through an increase in the level
of open market sales activity in Mixed‐tenure, while Contracting has
continued to show good growth. Revenues up 2% to £381m (HY 2023: £373m)
while operating profits are 16% higher at £11.7m (HY 2023: £10.1m). The
average capital employed for the full year is estimated at c£330m, as the
business continues to invest in its partnerships for future growth.
o Mobilising existing long-term schemes to site for Mixed Use Partnerships
has been slower in the first half of 2024 compared to prior years, resulting
in a modest operating profit of £0.5m (HY 2023: £6.0m). Despite this hiatus
we are in three preferred bidder positions in our newly formed Midlands
region.
Commenting on today's results, Chief Executive, John Morgan said:
"We've delivered another record set of results in the first half, once again
reflecting the high quality of our operations, with revenue, adjusted profit
before tax and the interim dividend all showing strong mid to high
double-digit growth in the period.
The challenging market conditions that we experienced in 2023 are easing, as
we continue to make significant strategic and operational progress across the
Group and remain well positioned to support the Government's affordable home
and social infrastructure plans. Our balance sheet, supported by a substantial
average daily cash position, has enabled us to focus on making the right
decisions to drive for long-term sustainable growth while also supporting the
returns to shareholders in the period.
Following our strong trading performance in the first half, combined with the
high-quality secured order book and visibility for the rest of the year, we
now expect to deliver a result for the full year which is slightly ahead of
our previous expectations."
Enquiries
Morgan Sindall Group Tel: 020 7307 9200
John Morgan
Kelly Gangotra
Brunswick Tel: 020 7404 5959
Jonathan Glass
Nina Coad
Presentation
· There will be an analyst and investor presentation at 09.00am at Deutsche
Numis, 45 Gresham Street, London EC2V 7BF on 8 August 2024. Coffee and
registration will be from 08.30am
· A copy of these results is available at: www.morgansindall.com
(http://www.morgansindall.com)
· The presentation will be available via live webcast from 09.00am on 8
August 2024 at www.morgansindall.com.
Note to Editors
Morgan Sindall Group
Morgan Sindall Group plc, the Partnerships, Fit Out and Construction Services
Group, reported annual revenues of £4.1bn in full year 2023, employing around
7,700 employees and operating in the public, regulated and private sectors. It
reports through six divisions of Partnership Housing, Mixed Use Partnerships,
Fit Out, Construction, Infrastructure and Property Services.
Group Strategy
Reflecting the continued progression of the Group, and our strategy aligned to
structural growth drivers, with balanced end markets, Morgan Sindall has
evolved from the Construction and Regeneration Group to the Partnerships, Fit
Out and Construction Services Group it is today.
Morgan Sindall's recognised expertise in Partnerships is displayed through its
market positions in affordable housing (through its Partnership Housing
division) and in mixed use regeneration development (through the Mixed Use
Partnerships division). Both businesses within this segment reflect a deep
understanding of the built environment, developed over many years and their
ability to provide solutions for complex regeneration projects through various
partnerships. As a result, its capabilities are aligned with sectors which
support the UK's current and future regeneration and affordable housing needs.
Fit Out is the market leader in its field and delivers a consistently strong
operational performance and together with the Construction Services, it
generates cash resources to support the Group's investment in affordable
housing and mixed use regeneration.
Through Construction Services the Group is also well positioned to meet the
demand for ongoing investment in the UK's physical infrastructure, while its
geographically diverse construction activities are focused on key areas of
education, healthcare and commercial. 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 three strategic lines of business of Partnerships, Fit Out and
Construction Services, the Group is organised into six reporting divisions as
follows:
Partnerships 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
refurbishment.
· Mixed Use Partnerships: Focused on transforming the urban landscape
through partnership working and the development of multi-phase sites and mixed
use regeneration.
Fit Out
· Focused on the fit out of office space with opportunities in
commercial, central and local government offices and further education.
Construction Services 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 engineering design activities.
· Property Services: Focused on response and planned maintenance
activities provided to the social housing and the wider public sector.
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 £0.3m (HY 2023: £2.2m) and an exceptional building safety
credit of £0.3m for HY 2024 (HY 2023: £0.4m credit).
Group Operating Review
Summary Group financial results
The Group delivered a strong performance in the first half, with a significant
contribution from the Fit Out division. Group revenue increased by 14% up to
£2,214m (HY 2023: £1,935m), while adjusted operating profit increased by 11%
to £65.5m (HY 2023: £59.1m), which included the operating loss of £11.0m in
Property Services (HY 2023 £4.1m loss). Operating margin was 3.0%, 10bps
lower than the prior year period (HY 2023: 3.1%).
The Group benefited from higher interest rates on its cash balances compared
to the prior year period, with a net finance income of £4.6m (HY 2023:
£0.7m) resulting in adjusted profit before tax of £70.1m, up 17% (HY 2023:
£59.8m). The statutory profit before tax was £70.1m, an increase of 21% (HY
2023: £58.0m).
The adjusted tax charge for the period was £17.8m (statutory tax charge of
£17.5m), an effective rate of 25.4%.
The adjusted earnings per share increased 14% to 112.5p (HY 2023: 98.9p), with
the statutory basic earnings per share of 113.1p, up 13% (HY 2023: 100.0p).
General market conditions
The challenging market conditions that we experienced in 2023 have continued
to ease throughout the period with little increase in prices since the end of
2023. While there remains some cost inflation in the system, mostly related to
energy costs and wage inflation, overall, the general trading environment
remains more manageable and predictable.
The ongoing stability of the supply chain remains uncertain with liquidity
issues increasingly common, requiring additional vigilance during both the
pre-construction and delivery phases 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.
In Construction and Infrastructure, where projects are currently underway,
most include appropriate inflationary protection within the overall contract
pricing, and this is not seen as a significant risk. Where projects are being
priced for future delivery, inflation and funding constraints in some areas
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 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 continued to be very strong, with a
number of positive structural changes in the market. 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.
Housing activity in the UK has remained subdued given the still relatively
high mortgage rates, but there are some modest signs of improvement expected
later this year. In Partnership Housing, the partnership model focusing on
long-term partnerships with the public sector, has provided some level of
resilience and cushion against the impact of the slowdown. While the demand
for contracting has remained strong, the sales rates of private homes on its
mixed-tenure sites has begun to show modest recovery since the end of 2023,
with the first half of this year showing a gradual improvement on HY 2023
levels. It is positive that the Government has set out its ambitions for
affordable home targets, which we believe will bring about some positive
momentum in the near to medium term. In the current period, the challenging
planning environment continues to prevail, noting however the recent proposed
planning reforms by Government.
In Mixed Use Partnerships, build cost inflation continued to provide delay and
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. Similar to Partnership Housing, this division is
currently exposed to a challenging planning environment.
Divisional headlines
Construction and Infrastructure both delivered strong revenue growth in the
period, with Construction revenue up 10% to £519m (HY 2023: £470m) and
Infrastructure up 24% to £530m (HY 2023: £428m). With both divisions
continuing their disciplined focus on operational delivery and contract
selectivity, their respective operating margins for the period were well
within their target ranges.
Fit Out enjoyed another excellent period of trading, with revenues up 26% to
£630m (HY 2023: £498m) supporting the significant growth to both operating
profit and margin. Operating profit was up 36% to £41.3m (HY 2023: £30.4m)
while its operating margin increased up to 6.6% (HY 2023: 6.1%).
As Property Services advanced with its remediation plan in the period, exit
costs were incurred as the division negotiated its release from a small number
of contracts and operationally restructured some of its existing contracts.
The outcome of which has resulted in the division making an operating loss in
the period of £11.0m (HY 2023: operating loss £4.1m).
Against the backdrop of a market downturn last year, the housing market
started to make a gradual but modest recovery in the period, Partnership
Housing revenues climbed up slightly by 2% to £381m (HY 2023: £373m), as
growth in contracting work continued to provide a shield effect against the
slowly recovering housing market. Operating profit was up 16% to £11.7m (HY
2023: £10.1m).
Mixed Use Partnerships, which holds a long-term development portfolio, was
substantially impacted in the period by the duration of time that has lapsed
between scheme completions in the prior year and a lower level of completions
in the first half of this year. As a result, operating profit fell from £6.0m
in HY 2023 to just £0.5m in HY 2024. ROCE for the last 12 months was 10% (HY
2023: 17%).
Secured order book
The Group has a high-quality secured order book of £8,663m at the end of the
period, which has contracted against both the year-end position (FY 2023:
£8,920m) and the prior period (HY 2023: £9,068m), largely due to an
adjustment to remove the revenues of the unexpired term of the contracts which
Property Services had negotiated an early release from.
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
Net cash at the period end was £351m, an increase of £88m on the prior year
(HY 2023: £263m). Of this total, £50m 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 £372m (including £43m in
JVs/PBAs) compared to £268m in the prior year period. Looking ahead to the
full year, based upon the current anticipated cash movements over the second
half, we expect that the average daily net cash for the full year is likely to
be in excess of £350m.
Operating cash for the period was an outflow of £36.1m (HY 2023: outflow of
£31.2m), which in part was due to the continued investment in both
Partnership Housing and Mixed Use Partnerships 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 £184.1m.
Dividend
The interim dividend has been increased by 15% to 41.5p per share (HY 2023:
36.0p). 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.
Capital Allocation Framework and Medium-Term Targets
The Capital Allocation Framework remains unchanged since December 2023 and can
be found in the Group's Annual Report and Accounts for the period ending
31(st) December 2023.
To provide a framework for future performance, each division operates to a
medium-term financial target or set of targets (the 'target' or 'targets'),
these remain unchanged since August 2023 and can be found in each of the
Divisional review section of this report.
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 2023)
Revenue Operating Profit Operating Margin
£m Change £m Change % Change
Construction 519 +10% 14.1 +18% 2.7% +10bps
Infrastructure 530 +24% 19.7 +24% 3.7% -
Fit Out 630 +26% 41.3 +36% 6.6% +50bps
Property Services 103 +6% (11.0) -168% -10.7% -650bps
Partnership Housing 381 +2% 11.7 +16% 3.1% +40bps
Mixed Use Partnerships 59 -38% 0.5 -92% n/a n/a
Group/Eliminations (8) n/a (10.8) n/a n/a n/a
Total 2,214 +14% 65.5 +11% 3.0% -10bps
Group secured order book(1) by division
The Group's secured order book(1) at 30 June 2024 was £8,663m, down 4% and 3%
when compared to the prior year and the year-end respectively. The
divisional split is shown below.
HY 2024 HY 2023 Change FY 2023 Change
£m £m vs HY 2023 £m vs FY 2023
Construction 856 888 -4% 796 +8%
Infrastructure 1,682 1,628 +3% 1,689 -
Fit Out 1,210 1,217 -1% 1,098 +10%
Property Services 1,006 1,579 -36% 1,478 -32%
Partnership Housing 2,081 2,074 - 2,034 +2%
Mixed Use Partnerships 1,830 1,699 +8% 1,825 -
Inter-divisional eliminations (2) (17) -
Group secured order book(1) 8,663 9,068 -4% 8,920 -3%
(1) The 'Secured order book' is the sum of the 'committed order book', the
'framework order book' and (for Partnership Housing and Mixed Use
Partnerships) 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 2024 HY 2023 Change
£m £m
Revenue 519 470 +10%
Operating profit(1) 14.1 12.0 +18%
Operating margin(1) 2.7% 2.6% +10bps
Construction experienced a good period of revenue growth, up 10% to £519m (HY
2023: £470m). Operating profit(1) of £14.1m was up 18% on the prior year (HY
2023: £12.0m), with the operating margin(1) of 2.7% well placed in the middle
of its strategically targeted range of 2.5%-3%. The strong profit
performance was driven by improving the overall quality of earnings through
contract selectivity and operational delivery together with prudent risk
management within its order book.
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 at £856m, down slightly by 4% from the prior year (HY
2023: £888m) and up 8% on the year-end position (FY 2023: £796m). 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 £1,181m of work at
preferred bidder stage, providing confidence of a sizeable ongoing workload.
Key work won in the period included: the £51m new build secondary school in
Dumfries, Scotland; the £43m new build high rise residential block in Salford
for English Cities Fund; the £34m secondary academy in Newcastle-upon-Tyne
for the Department for Education and the £32m redevelopment and upgrade of a
Household Waste Recycling Centre (HWRC) and Waste Transfer Station (WTS) in
Aldridge, West Midlands for the Walsall Metropolitan Council.
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 £1bn. For the full year, the division is on
track to meet both its revenue and margin targets, while at the same time also
maintaining its normal risk profile in its workload and bidding discipline.
(1 ) Before exceptional Building Safety charge of £nil (HY 2023: £8.6m).
See Note 2 of the consolidated financial statements
Infrastructure
HY 2024 HY 2023 Change
£m £m
Revenue 530 428 +24%
Operating profit 19.7 15.9 +24%
Operating margin 3.7% 3.7% -
Infrastructure delivered another strong performance in the period. Revenues
increased by 24% to £530m (HY 2023: £428m) with an equally strong flow
through to operating profit, also up 24%, to £19.7m (HY 2023: £15.9m), with
the operating margin of 3.7% in the middle of its targeted range of 3.5%-4%.
Infrastructure's order book of £1,682m was 3% up compared to the prior period
(HY 2023: £1,628m) and broadly flat with the year-end position (FY 2023:
£1,689m). The order book continues to remain long term in nature, with 73%
for 2025 and beyond and around 95% derived through existing frameworks.
The division continues to remain focused on the key sectors of highways,
nuclear, energy, water, and rail with visible opportunities in defence.
In highways, work started on the £83m M27 project in Hampshire and works
continued on the A12 in Essex, both part of National Highway's Concrete Roads
Programme - Reconstruction Works Framework, a four-year programme to repair or
replace the concrete surface of motorways and major A roads in England. In
addition, works continued on safety-critical upgrades to the M40-M42
interchange for National Highways, this is part of the original Smart
Motorways Alliance. Through Early Contractor Involvement (ECI), we continue to
work with Oxfordshire County Council on their project to replace Kennington
Railway Bridge on the A423 Southern Bypass.
In nuclear, decommissioning works continued for Sellafield on the
Infrastructure Strategic Alliance and on the £1.6bn Programme and Project
Partners contract. In addition, work progressed on the 10-year Clyde
Commercial Framework for the Defence Infrastructure Organisation and on the
D58 facility for BAE Systems.
In energy, the division secured a position with National Grid on The Great
Grid Partnership, the first phase being the delivery of an initial nine
Accelerated Strategic Transmission Investment (ASTI) projects. The ASTI
projects form a key part of The Great Grid Upgrade which is building the
significant new electricity network infrastructure required to reduce the UK's
reliance on fossil fuels by connecting 50GW of offshore wind by 2030.
Elsewhere, work continued at Dinorwig in Wales, and commenced at ZA, in
Hertfordshire as part of the RIIO-2 electricity construction EPC (Engineer,
Procure and Construct) framework for National Grid. Under this framework the
division also secured several schemes to maintain the existing onshore
electricity transmission network in England and Wales. Work also continued in
Shetland for Scottish and Southern Electricity Networks (SSEN), which includes
an 11-kilometre 132Kv twin circuit underground cable project and construction
of Gremista substation.
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 addition, civil engineering works continued on the west
section of the Thames Tideway 'super sewer' project to help prevent pollution
in the Thames.
In rail, the division secured a position on the CP7 Eastern Framework for
Network Rail, a £3.5bn framework through the Control Period 7 investment
phase to 2029, this builds on our position secured on the CP7 Wales and
Western Framework in 2023, a £2bn programme. In the period, work commenced on
the Colindale Station Remodelling for Transport for London, a project to
upgrade Colindale station with a new ticket hall and step-free access. Works
continue on the project to extend Beckton Depot and a project to upgrade
Surrey Quays station, both for Transport for London, as part of its London
Rail Infrastructure Improvement Framework. Elsewhere, work continued on
several schemes for Network Rail, including the Bangor to Colwyn Bay line, as
part of the CP6 Wales and Western framework, the lift scheme at Liverpool
Central Station as part of the Mersey Rail framework, and the Northumberland
Line extension project.
In the BakerHicks design business, design work completed on Paisley Central
Learning and Cultural Hub, Renfrewshire Council's new £7m home for library
services. While in the highways sector, the innovative Tyn-y-bryn Active
Travel Bridge design was commended in the Chartered Institution of Highways
& Transportation's Infrastructure Award, providing residents with
essential pedestrian access to the local town and services; notably the
bridge's reinforced plastic structure considerably reduced its carbon
footprint. Work also continued 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 £1bn.
For the full year, based upon the timing of projects and the projected type of
work, the division expects to make strong progress towards its revenue target,
with its margin expected to be towards the middle of this range. This is
underpinned by their continued focus on long‐term client relationships,
disciplined contract selectivity, risk management and project delivery.
Fit Out
HY 2024 HY 2023 Change
£m £m
Revenue 630 498 +26%
Operating profit 41.3 30.4 +36%
Operating margin 6.6% 6.1% +50bps
Fit Out delivered an excellent result in the period, enjoying significant
growth for both revenues and operating profit. With revenue increasing by 26%
to £630m (HY 2023: £498m), operating profit was up 36% to £41.3m (HY 2023:
£30.4m) resulting in an expansion in the operating margin at a very strong
6.6% (HY 2023: 6.1%), due to contract type, mix and operational leverage.
The division's focus on consistent operational delivery and enhanced customer
experience has once again driven performance, complemented by a high-quality
workload and disciplined and focused bidding, which in turn supports the
division's strong brand reputation and market position.
The overall balance of the business has been reasonably consistent over recent
years, with any movements in geography, type of work and sectors served not
indicative of any longer-term trends; the London region remains the division's
largest market, accounting for 72% of revenue (HY 2023: 59%) while other
regions accounted for 28% of revenue (HY 2023: 41%), reinforcing Fit Out's
focused but agile approach to its markets and understanding of its own
capabilities and skills.
There was no significant change to the market sectors served. The commercial
office market remained the largest, contributing 87% of revenue (HY 2023:
79%), with government/local authority, higher education and retail banking
accounting for the majority of the remainder.
In terms of type of work delivered in the year, 85% related to traditional fit
out work (HY 2023: 84%), while 15% related to 'design and build' (HY 2023:
16%). The proportion of revenue generated from the fit out of existing office
space remained relatively constant at 79% (HY 2023: 78%), with the fit out of
new office space at 21% (HY 2023: 22%). Of the fit out of existing office
space, 43% of the work was refurbishment 'in occupation' compared to 57% where
work was performed in non-occupied space.
The market for Fit Out remains strong, with a number of different factors
driving demand; lease events and significant project requirements in the
London commercial office market; upcoming public and private sector schemes
outside of London; carbon-driven planning restrictions for new buildings and
energy efficiency of existing office space; and the continuation of
re-purposing of office space to accommodate new ways of working.
Underpinning the current and future performance is a high-quality workload,
with the secured order book strong at £1,210m at the end of the period, in
line with the prior year position (HY 2023: £1,217m) and 10% up on the year
end position (FY 2023: £1,098m).
Of the secured order book, £577m (48%) relates to the second half of the
year, which is 11% higher than the equivalent amount as at 30 June 2023 of
£521m. The remaining £634m of the current order book (52%) is for 2025 and
beyond; continuing to provide an increasing level of long-term visibility of
workload compared to previous periods (HY 2023: £696m).
In addition, there remains a significant pipeline of visible opportunities
being pursued. The division also had over £150m of work in the pre-contract
'preferred bidder' stage at the period end, as well as in excess of £800m of
work currently being tendered or pending a decision and over £1bn at tender
stage. The average value of enquiries received remains around £3-£4m.
Commercial fit out projects won in London during the period included 380,000
sq ft for PwC at More London; 277,000 sq ft for Latham & Watkins on
Leadenhall Street; 276,000 sq ft for Unilever in Kingston-upon-Thames; 158,000
sq ft for Travers Smith; 101,000 sq ft fit out for Investec on Gresham Street;
56,000 sq ft for Standard Chartered Bank; 37,000 sq ft fit out for OMERS &
Oxford Properties; 26,000 sq ft for Motability Operations at 22 Bishopsgate;
24,000 sq ft for Johnson Matthey at Gresham Street; and 8,500 sq ft for
AstraZeneca at Pancras Square.
Regional project wins in the period included 152,500 sq ft for Lloyds Banking
Group in Birmingham; 32,000 sq ft for an EV design and manufacturing company
in Bicester; 27,000 sq ft for Evelyn Partners in Bristol; and 18,500 sq ft for
a global telecommunications firm in Newbury.
Commercial fit out projects on site or completed in London during the period
included 750,000 sq ft for a global financial services firm in Canary Wharf;
110,000 sq ft for a professional services firm in London; 109,000 sq ft for
Aviva at 80 Fenchurch Street; 114,000 sq ft for law firm Reed Smith near
Spitalfields; two projects totalling 99,500 sq ft for Deloitte at New Street
Square; 51,500 sq ft for Berkeley Estate Asset Management in Mayfair; 40,000
sq ft for British Land on Bishopsgate; 17,000 sq ft for Boston Consulting
Group on Charlotte Street; and an 11,000 sq ft fit out for Burges Salmon at
New Street Square.
Regional projects on site or completed during the period include: 160,000 sq
ft for Lloyds Banking Group in Leeds; 144,000 sq ft for Wirral Borough
Council; 50,000 sq ft for Dojo in Bristol; 44,000 sq ft for Samsung in
Cambridge; 27,000 sq ft for Arup in Bristol; and 20,000 sq ft for Sky in
Leeds.
In the higher education and science and research sectors, projects won
included 40,500 sq ft for Birmingham City University, 29,000 sq ft library
refurbishment at University of Wolverhampton and two projects totalling 25,000
sq ft at Anglia Ruskin University.
Projects on site or completed during the period included a 150,000 sq ft HQ
for GSK in London's Life Sciences Hub, known as the Knowledge Quarter; 100,000
sq ft at Durham University School of Business; five projects totalling 45,000
sq ft for Queen Mary University; 27,500 sq ft for Aston University; 26,000 sq
ft fit out at Birmingham City University; and 12,500 sq ft to fit out Keele
University's Clinical Skills department.
Design and build fit out projects won in the period included 117,000 sq ft for
Wood Group at Green Park in Reading; 50,000 sq ft for Mapletree at Green Park
in Reading; 50,000 sq ft for Accrue Capital in Maidenhead; 38,000 sq ft for
Aurora Energy Research in Oxford and 18,000 sq ft for Sage UK in Winnerish
Triangle, Reading.
Design and build projects completed during the period included 30,000 sq ft of
fully-fitted labs and office space for Stanhope at MediaWorks in White City
Place; 21,000 sq ft for Kajima Properties (Europe); 13,500 sq ft for Smiths
Group plc; 8,600 sq ft for Centiva and 8,000 sq ft for AEW UK Investment
Management.
Projects won under frameworks and corporate partnerships included £10.6m of
works for the Mayor's Office for Policing and Crime (MOPAC), with a future
order book of £18.2m; and two projects for Scape to the value of £3m.
Divisional outlook for Fit Out
The medium-term target for Fit Out is to deliver an average annual operating
profit of £50m-£70m.
For 2024, current trading patterns are anticipated to continue through the
second half, supported by a secured order book. Operating profit is likely to
well exceed the top end of the medium-term target range for this year due to
exceptional revenues.
Property Services
HY 2024 HY 2023 Change
£m £m
Revenue 103 97 6%
Operating loss(1) (11.0) (4.1) -168%
Operating margin(1) -10.7% -4.2% -650bps
( )
The remediation programme for Property Services continued to progress well in
the first half and remains on track to be completed by the end of 2024. Under
the leadership of the new management team, the division successfully
negotiated early releases from a small number of underperforming contracts by
way of mutual agreement resulting in exit costs recorded in the first half.
Elsewhere, the division progressed with its operational restructuring efforts
across the existing contract portfolio.
The impact of these events has resulted in an operating loss(1) in the period
of £11.0m (HY 2023: loss of £4.1m).
Revenue increased by 6%, up to £103m (HY 2023: £97m), with the growth driven
by increased volumes of planned repair works as clients look to improve the
condition of their residential assets.
At the period end, the secured order book was £1,006m, down 36% from the
prior year (HY 2023: £1,579m) and 32% from the full year position (FY 2023:
£1,478m), as revenues were removed for the unexpired term for those contracts
for which the division had negotiated an early release from. Of the orderbook
remaining, over 89% is for 2025 and beyond. Future growth in the order book
during the second half and 2025 is expected to come through existing client
contracts.
The division's primary objective is to successfully implement the remediation
plan by the end of 2024 and to stabilise its operational delivery capability
over 2025.
Divisional outlook for Property Services
The medium-term target for Property Services is to deliver £7.5m operating
profit per annum.
A further loss is expected in the second half which is likely to be half of
the level in the first half. The remediation programme is expected to leave
the business positioned to return to profit in 2025 and beyond.
( )
( ) (1 )before intangible amortisation of £0.3m (HY 2023: £2.2m)
Partnership Housing
HY 2024 HY 2023 Change
£m £m
Revenue 381 373 +2%
Operating profit 11.7 10.1 +16%
Operating margin 3.1% 2.7% +40bps
Average capital employed(1) 289.3 221.9 +£67.4m
( ) (last 12 months)
Capital employed(1) - at period end 332.6 243.1 +£89.5m
ROCE(2) (last 12 months) 11% 15%
In Partnership Housing, the partnership model focusing on long-term
partnerships with the public sector provided resilience against a softer
housing market.
During the first half of the year, while we have seen a modest improvement in
the housing market, the demand for contracting remained strong, shielding the
impact of a gradual recovery of open market sales within the mixed-tenure
activities. The division continued to optimise construction of the contracted
affordable homes on mixed-tenure sites to maintain activity.
Reflective of the above, revenue was up 2% to £381m (HY 2023: £373m), driven
by Contracting (including planned maintenance and refurbishment) which was up
21% to £258m (68% of divisional total) compared to the prior year.
Mixed-tenure revenue declined by 23% to £123m (32% of divisional total)
compared to the prior year.
Notwithstanding the composition of the divisions revenue and its growth
profile, both contracting and mixed-tenure activities enjoyed stronger margins
in the period, led by contract type and mix of schemes delivered, resulting in
operating profits increasing by 16% to £11.7m (HY 2023: £10.1m) with an
operating margin of 3.1% (HY 2023: 2.7%).
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 with planned momentum. Reflective of this
ongoing activity and investment in future growth, the capital employed(1) at
the period end was £332.6m, an increase of £89.5m on the prior year (HY
2023: £243.1m) and £98.2m higher than at the year-end (FY 2023: £234.4m).
As we continue to invest, the higher average capital employed(1) for the last
12-month period of £289.3m (HY 2023: £221.9m), resulted in a reduction in
the ROCE(2) for the last 12-month period to 11% (HY 2023: 15%).
Mixed Tenure
The division continues to make good progress with its strategy of increasing
the number and size of mixed-tenure sites. At the period end, the division had
63 active mixed-tenure sites at various stages of construction and sales, up
from 61 at the year-end but down from 69 at the prior year. There was an
average of 166 open market units per site at the period end.
784 units were completed across open market sales and social housing
(including through its joint ventures) compared to 805 in the prior year
period, noting that the number of open market sales within this increased by
7% to 364. The average sales price was £222k compared to the prior year
average of £241k, a reduction of 8%.
Of the total divisional order book, the amount relating to mixed-tenure
activities was £1,250m, broadly in line with the prior period and slightly
ahead of the year end (HY 2023: £1,273m, FY 2023: £1,167m). In addition, the
amount of mixed-tenure business in preferred bidder status, or already under
development agreement but where land has not been drawn down, was £929m at
the end of the period.
Work secured in the period included; a 350 unit development in partnership
with the Aster Group, Williton; a 115 unit scheme in Haverford West in
partnership with the Pobl Group; 727 units as we moved into Phases 2 and 3 on
South Thamesmead Phases in joint venture with Peabody and 82 units in Primrose
Hill with Birmingham City Council.
Elsewhere, Progress continues on other mixed-tenure schemes, in partnerships
with Riverside, Clarion Housing, Trafford Housing Trust, Together Housing
Group, Repton Property Developments (owned by Norfolk County Council), the
Borough Council of Kings Lynn & West Norfolk, Flagship Group, Pobl Group,
West Sussex, Suffolk and Homes England.
Contracting
Partnership Housing continued to experience good levels of demand with clients
awarding work either through frameworks or direct negotiation.
The total number of equivalent units built increased by 19% to 1,584, up from
1,328 in the prior period. Of the total divisional order book, the contracting
secured order book was slightly higher at £831m (HY 2023: £801m), of which
£527m is for 2025 and beyond.
Key contracting schemes awarded in the period included; a £14m, 70 units in
Castle Gresley for East Midlands Homes; a £11m, 38 units at Saffron Lane for
Leicester City Council; a £10m, 45 units in Isleham for Havebury Housing
Partnership; a £10m, 56 units in Baginton for Platform Housing Group; a £9m,
55 units at Crick Road Phase 2 for Canleston Homes; and a number of retrofit
and refurbishment projects for local authorities and housing associations.
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%.
An improved performance is expected in the second half, based on the slightly
improving housing market and the secured contracting work in the order book.
For the full year, the operating margin is expected to improve slightly above
last year's levels, while the return on average capital is expected to be
lower than FY 2023 levels as we continue to invest.
The average capital employed(1) is expected to increase up towards c£330m,
reflecting the increased scale of the business and stage of developments.
(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
Mixed Use Partnerships
HY 2024 HY 2023 Change
£m £m
Revenue 59 96 -38%
Operating profit(1) 0.5 6.0 -92%
Average capital employed(2) 89.9 104.0 -£14.1m
( ) (last 12 months)
Capital employed(2) at period end 92.4 120.5 -£28.1m
ROCE(3) (last 12 months) 10% 17%
ROCE(3) (average last 3 years) 13% 14%
( )
Mixed Use Partnership's long-term projects were significantly impacted in the
first half notably by the length of time between projects completing in the
prior year and a lower level of completions in the first half of the year,
resulting in an operating profit(1) of £0.5m (HY 2023: £6.0m). The ROCE(3)
for the last 12 months was 10%, significantly down on the prior year, based on
average capital employed(2) of £89.9m.
Despite the modest profit contribution in the first half, key contributors to
performance were profit from a land sale in Hucknall, East Midlands; profit
and development fees generated from activity in Salford Central, Talbot
Gateway in Blackpool, Stroudley Walk, Lewisham Gateway and Forge Island in
Rotherham.
Good progress in the period was made on several long-term developments,
including 191 affordable homes for Haringey Council at Hale Wharf, Tottenham
Hale through the Waterside Places partnership with the Canal & River Trust
and a 215,000 sq ft office building at Talbot Gateway, Blackpool for the
Department for Work and Pensions. The final phase of Lewisham Gateway is
virtually complete, delivering 649 homes for rent, retail space, food and
beverage space, workspace and a multiplex cinema.
With the ECF partnership, strong progress was made on Manor Road, Canning Town
where Phase 1 is expected to complete later this year; 355-homes delivered in
partnership with the London Borough of Newham and Metropolitan Thames Valley
Housing.
The division's development portfolio included 10 projects on site at the end
of the period, totalling £877m gross development value, with a further 2
projects, with a gross development value of £41m expected to start on site in
the second half and 14 planned to start in 2025 with a gross development value
of £783m.
At the period end, the division's order book amounted to £1,830m, 8% up on
the prior year period (HY 2023: £1,699m) and slightly ahead of the year end
(FY 2023: £1,825m). Activity levels remain good and there are a number of
sizeable projects currently in the pipeline at preferred bidder stage which
are expected to be converted into contract in due course.
The Mixed Use Partnerships order book continues to maintain a diverse regional
and sector split:
· by value, 68% is in the North West, 31% in London and the South East
and 1% in Yorkshire and the North East: and
· by sector, 66% by value relates to residential, 18% to offices, with
the remainder broadly split between industrial, retail, public realm and
transport hubs.
Divisional outlook for Mixed Use Partnerships
The medium-term target for Mixed Use Partnerships is to generate a rolling
three-year average ROCE up towards 20%. The phasing of schemes expected in
2024 reflects a hiatus between projects having reached completion towards the
end of 2023 and the slower start-up of existing projects until later years.
While its full year performance is anticipated to be weighted towards the
second half, we expect profit (and the resulting ROCE) to be significantly
lower than in 2023, with the average capital employed for the year expected to
be c£90m.
(1 ) Before exceptional Building Safety Credit HY 2024: £0.3m (HY 2023:
Credit £9.0m). 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
Other Financial Information
1. Net finance income. Net finance income was £4.6m, an increase of £3.9m
compared to HY 2023.
HY 2024 HY 2023 Change
£m £m £m
Interest income on bank deposits 8.9 4.3 4.6
Amortisation of bank fees & non-utilisation fees (1.0) (1.0) -
Interest expense on lease liabilities (1.8) (1.1) (0.7)
Other (1.5) (1.5) -
Total net finance income 4.6 0.7 3.9
2. Tax. A reported tax charge of £17.5m is shown for the year (HY 2023:
£11.7m). This equates to an effective tax rate of 25.0% on profit before tax.
The adjusted tax charge is £17.8m (HY 2023: £14.0m).
HY 2024 HY 2023
£m £m
Profit before tax 70.1 58.0
Less: share of underlying(1) net loss/(profit) in joint ventures 0.1 (3.8)
Profit before tax excluding joint ventures 70.2 54.2
Statutory tax rate 25.0% 23.5%
Current tax charge at statutory rate (17.6) (12.7)
Tax on underlying(1) joint venture profits(2) - (0.9)
Tax on exceptional items 0.2 1.8
Residential Property Developer tax (0.1) (0.3)
Other adjustments - 0.4
Tax charge as reported (17.5) (11.7)
Tax on amortisation (0.1) (0.5)
Tax on exceptional items (0.2) (1.8)
Adjusted tax charge (17.8) (14.0)
( )
(1) Underlying net loss of joint ventures excludes the exceptional Building
Safety charge of £0.6m related to joint ventures (HY 2023: Credit of £4.5m)
(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.
HY 2024 HY 2023 Change
£m
£m £m
Inventories 417.3 397.4 +19.9
Trade & Other Receivables(1) 772.5 666.7 +105.8
Trade & Other Payables(2) (1,238.9) (1,063.8) -175.1
Net working capital (49.1) 0.3 -49.4
( )
(1) Adjusted to exclude capitalised arrangement fees and accrued interest
receivable of £1.8m (HY 2022: £1.7m) and exceptional Building Safety
receivables of £8.1m (HY 2023: £nil).
(2) Adjusted to exclude accrued interest payable of £0.4m (HY 2023: £0.6m).
4. Cash flow. Operating cash flow was an outflow of £36.1m (HY 2023: outflow
of £31.2m). Free cash flow was an outflow of £50.0m (HY 2023: outflow of
£37.3m).
HY 2024 HY 2023 Last 12
£m £m Months
Operating profit - adjusted 65.5 59.1 147.7
Depreciation 15.3 12.4 29.7
Share option expense 4.4 4.3 6.7
Share of underlying(1) net loss/(profit) of joint ventures 0.1 (3.8) (10.2)
Other operating items (2) 5.9 4.0 2.8
Change in working capital(3) (104.9) (91.7) 46.5
Net capital expenditure (including repayment of finance leases) (22.4) (18.0) (38.2)
Dividends and interest received from joint ventures - 2.5 (0.9)
Operating cash flow (36.1) (31.2) 184.1
Income taxes paid (22.3) (9.0) (38.5)
Net interest received/(paid) (non-joint venture) 8.4 2.9 13.1
Free cash flow (50.0) (37.3) 158.7
(1) 'Underlying net profit of joint ventures excludes the exceptional building
safety charge (£0.6m) related to joint ventures
(2) 'Other operating items' includes reduction on building safety receivable
(£8.4m) and increase in provisions (£0.3m) less by building safety provision
movements (£2.5m) and a gain on disposal of PPE (£0.3m).
(3) 'Change in working capital' excludes movement on building safety
receivable (£8.4m).
5. Net cash. Net cash at 30 June 2024 was £350.5m, as a result of a net
cash outflow of £110.2m from 1 January 2024, with movements summarised as:
£m
Net cash as at 1 January 2024 460.7
Free cash flow (as above) (50.0)
Dividends (36.5)
Other(1) (23.7)
Net cash as at 30 June 2024 350.5
(1) 'Other' includes the purchase of shares in the Company by the employee
benefit trust (£22.2m) and net loan advances paid from JVs (£15.2m) less
proceeds from the exercise of share options (£13.6m) and proceeds from the
issue of new shares (£0.1m).
6. Capital employed by strategic activity. An analysis of the capital
employed in Construction Services and Fit Out shows a decrease of £89.3m
since the prior period, split as follows:
Capital employed(1,2) in Construction Services and Fit Out HY 2024 HY 2023 Change
£m £m £m
Construction (228.4) (200.8) -27.6
Infrastructure (84.5) (72.2) -12.3
Fit Out (70.6) (54.3) -16.3
Property Services 41.9 75.0 -33.1
(341.6) (252.3) -89.3
An analysis of capital employed in the Partnership activities shows an
increase of £61.4m since the prior period, split as follows:
Capital employed(1,2) in Partnerships HY 2024 HY 2023 Change
£m £m £m
Partnership Housing 332.6 243.1 +89.5
Mixed Use Partnerships 92.4 120.5 -28.1
425.0 363.6 +61.4
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 receivables and provisions
7. Exceptional Building Safety credit. The total exceptional building safety
credit of £0.3m arose as a result of a better estimate of expected costs and
recoveries. This includes a charge of £0.6m that has been recognised in
respect of the Group's share of constructive and legal obligations to
remediate legacy building safety issues within JVs, and this has been
recognised within the Group's share of net profit of joint ventures. A net
credit of £0.9m has been recognised in cost of sales.
HY 2024 HY 2023
£m £m
Net releases/(additions) on building safety provisions 0.9 (4.1)
Exceptional building safety credit/(charge) within cost of sales 0.9 (4.1)
Exceptional building safety (charge)/credit within joint ventures (0.6) 4.5
Total exceptional building safety credit 0.3 0.4
8. Dividends. The Board of Directors has proposed an interim dividend of
41.5p per share, an increase of 15% on the prior year interim dividend (HY
2023: 36.0p). This will be paid on 24 October 2024 to shareholders on the
register on 4 October 2024. The ex-dividend date will be 3 October 2024.
9. 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 2023 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 2023 Annual Report:
Economic change and uncertainty - UK construction continues to benefit from
sustained government (and cross-party) investment commitments. This continues
to support the Group's market sectors which remain structurally secure
particularly in regeneration, construction and infrastructure (primary areas
in the UK targeted for growth). In addition, the Group's diversity of offering
and strong balance sheet protects the business from cyclical changes in
individual markets.
Exposure to UK housing market - The Group's long-term public sector
partnerships models, Government support (including cross-party) and UKs
Affordable Housing need complement its product position. Prior headwinds such
as inflation and mortgage availability have eased during the reporting period,
with cost of living set to follow, signalling signs of recovery in the market,
although interest rate trajectory is likely to impact timing. Planning
constraints continue to contribute to a slowdown in sales and in Partnerships,
cost inflation on some schemes is impacting their potential viability.
Poor contract selection and/or bidding - The quality of the Group's public and
regulated industry sectors should safeguard future performance, allowing the
Group to continue selecting the right projects and in sectors where it has
proven capability.
Macro-induced inflationary pressures have eased, with impacted projects now
largely completed and newer projects benefiting from improved customer budgets
which whilst more realistic in some instances do still result in
preconstruction periods taking longer.
Poor project delivery (including changes to contracts and contract disputes) -
The improved macro inflationary backdrop is allowing bids to include sensible
contingency allowances and contract terms with competition re-emerging in the
supply chain. In addition, the Group's longstanding supply chain relationships
and focus on customer experience continue to mitigate any significant issues
and disputes should they arise.
Health and safety - Failure to protect the health, safety and wellbeing of its
key stakeholders could damage the Group's reputation as a responsible employer
and affect its ability to secure future work.
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 -
There is a risk that our supply chain partners may be trading with strained
finances as a result of prior inflationary and borrowing pressures. Our teams
are acutely aware of this and have increased due diligence activities as well
as providing help and assistance where appropriate. In some limited
circumstances we have supported key partners with more favourable terms to
assist their cash flow while obtaining assurance on production progress and
forms of guarantee.
Condensed consolidated income statement
For the six months ended 30 June 2024
Six months to Six months to Year ended
30 June 2024 30 June 2023 31 Dec 2023
(unaudited) (unaudited) (audited)
Notes £m £m £m
Revenue 2,214.2 1,935.2 4,117.7
Cost of sales (1,978.0) (1,723.8) (3,672.9)
Gross profit 236.2 211.4 444.8
Analysed as:
Adjusted gross profit 235.3 215.5 446.7
Exceptional building safety items 3 0.9 (4.1) (1.9)
Administrative expenses (171.4) (163.9) (324.0)
Share of net (loss)/profit of joint ventures 7 (0.7) 8.3 18.2
Other operating income 1.4 1.5 1.6
Operating profit 65.5 57.3 140.6
Analysed as:
Adjusted operating profit 65.5 59.1 141.3
Exceptional building safety items 3 0.3 0.4 2.2
Amortisation of intangible assets (0.3) (2.2) (2.9)
Finance income 8.9 4.3 10.8
Finance costs (4.3) (3.6) (7.5)
Profit before tax 70.1 58.0 143.9
Analysed as:
Adjusted profit before tax 70.1 59.8 144.6
Exceptional building safety items 3 0.3 0.4 2.2
Amortisation of intangible assets (0.3) (2.2) (2.9)
Tax 4 (17.5) (11.7) (26.2)
Profit for the period 52.6 46.3 117.7
Attributable to:
Owners of the Company 52.6 46.3 117.7
Earnings per share
Basic 6 113.1p 100.0p 254.2p
Diluted 6 110.0p 98.5p 250.4p
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 2024
Six months to Six months to Year ended
30 June 2024 30 June 2023 31 Dec 2023
(unaudited) (unaudited) (audited)
£m £m £m
Profit for the period 52.6 46.3 117.7
Items that may be reclassified subsequently to profit or loss:
Foreign exchange (loss)/gain on translation of overseas operation - (0.1) 0.2
Fair value loss arising on hedging instruments - (0.1) -
Other comprehensive income/(expense) - (0.2) 0.2
Total comprehensive income 52.6 46.1 117.9
Attributable to:
Owners of the Company 52.6 46.1 117.9
Condensed consolidated statement of financial position
At 30 June 2024
30 June 2024 30 June 2023 31 Dec 2023
(unaudited) (unaudited) (audited)
Notes £m £m £m
Assets
Goodwill and other intangible assets 218.3 219.3 218.6
Property, plant and equipment 93.8 75.7 86.0
Investment property 0.8 0.8 0.8
Investments in joint ventures 7 121.1 108.4 106.6
Non-current assets 434.0 404.2 412.0
Inventories 417.3 397.4 344.7
Contract assets 332.1 295.6 270.6
Trade and other receivables 8 450.3 372.8 461.6
Current tax assets 2.9 - -
Shared equity loan receivables - 0.3 -
Cash and cash equivalents 11 391.9 326.9 541.3
Current assets 1,594.5 1,393.0 1,618.2
Total assets 2,028.5 1,797.2 2,030.2
Liabilities
Contract liabilities (97.8) (78.5) (95.8)
Trade and other payables 9 (1,116.6) (949.4) (1,087.0)
Current tax liabilities - (8.4) (1.9)
Lease liabilities (21.2) (16.2) (19.1)
Borrowings 11 (41.4) (63.8) (80.6)
Provisions 10 (70.4) (62.9) (76.7)
Current liabilities (1,347.4) (1,179.2) (1,361.1)
Net current assets 247.1 213.8 257.1
Trade and other payables 9 (24.9) (36.5) (28.2)
Lease liabilities (44.8) (37.6) (44.7)
Retirement benefit obligation - (0.2) -
Deferred tax liabilities (8.7) (6.7) (8.7)
Provisions 10 (22.6) (23.5) (19.4)
Non-current liabilities (101.0) (104.5) (101.0)
Total liabilities (1,448.4) (1,283.7) (1,462.1)
Net assets 580.1 513.5 568.1
Equity
Share capital 2.4 2.4 2.4
Share premium account 56.1 55.9 56.0
Other reserves 1.3 0.9 1.3
Retained earnings 520.3 454.3 508.4
Equity attributable to owners of the Company 580.1 513.5 568.1
Total equity 580.1 513.5 568.1
Condensed consolidated cash flow statement
For the six months ended 30 June 2024
Six months to Six months to Year ended
30 June 2024 30 June 2023 31 Dec 2023
(unaudited) (unaudited) (audited)
Notes £m £m £m
Operating activities
Operating profit 65.5 57.3 140.6
Adjusted for:
Exceptional building safety items 3 (2.8) (0.4) 13.7
Amortisation of intangible assets 0.3 2.2 2.9
Underlying share of net profit of equity accounted joint ventures 7 0.1 (3.8) (14.1)
Depreciation 15.3 12.4 26.8
Share-based payments 4.4 4.3 6.6
Gain on disposal of investments - (1.5) -
Gain on disposal of property, plant and equipment (0.3) - (0.1)
Additional pension contributions - - (0.2)
Repayment of shared equity loan receivables - 0.1 0.4
Increase/(decrease) in provisions (excluding exceptional building safety 10 0.3 5.4 1.4
items)
Operating cash inflow before movements in working capital 82.8 76.0 178.0
Increase in inventories (72.6) (63.5) (10.8)
(Increase)/decrease in contract assets (61.5) (1.0) 24.0
Decrease/(increase) in receivables 10.9 (19.4) (107.8)
Increase/(decrease) in contract liabilities 2.0 4.3 21.6
Increase/(decrease) in payables 24.7 (12.1) 116.2
Movements in working capital (96.5) (91.7) 43.2
Cash (outflow)/inflow from operations (13.7) (15.7) 221.2
Income taxes paid (22.3) (9.0) (25.2)
Net cash (outflow)/inflow from operating activities (36.0) (24.7) 196.0
Investing activities
Interest received 8.9 4.2 10.0
Dividend from joint ventures - 2.5 1.6
Proceeds on disposal of property, plant and equipment 0.3 0.3 2.0
Purchases of property, plant and equipment (10.9) (8.6) (14.3)
Purchases of intangible fixed assets - (0.3) (0.3)
Capital advances to joint ventures 7 (24.1) (26.9) (44.2)
Capital repayments from joint ventures 7 8.9 4.3 34.2
Proceeds from the disposal of investments - 1.5 -
Net cash outflow from investing activities (16.9) (23.0) (11.0)
Financing activities
Interest paid (0.5) (1.3) (2.4)
Dividends paid 5 (36.5) (31.5) (48.1)
Repayments of lease liabilities (11.8) (9.4) (21.2)
Proceeds on issue of share capital 0.1 - 0.1
Payments by the Trust to acquire shares in the Company (22.2) (2.2) (11.3)
Proceeds on exercise of share options 13.6 0.6 4.0
Net cash outflow from financing activities (57.3) (43.8) (78.9)
Net (decrease)/increase in cash and cash equivalents (110.2) (91.5) 106.1
Cash and cash equivalents at the beginning of the period 460.7 354.6 354.6
Cash and cash equivalents at the end of the period 11 350.5 263.1 460.7
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 2024
Share Share premium account Other Retained Total
capital reserves earnings equity
£m £m £m £m £m
1 January 2024 2.4 56.0 1.3 508.4 568.1
Profit for the year - - - 52.6 52.6
Other comprehensive expense - - - - -
Total comprehensive (expense)/income - - - 52.6 52.6
Share-based payments - - - 4.4 4.4
Issue of shares at a premium - 0.1 - - 0.1
Exercise of share options - - - 13.6 13.6
Purchase of shares in the Company by the Trust - - - (22.2) (22.2)
Dividends paid - - - (36.5) (36.5)
30 June 2024 (unaudited) 2.4 56.1 1.3 520.3 580.1
Share Share premium account Other Retained earnings Total
capital reserves equity
£m £m £m £m £m
1 January 2023 2.4 55.9 1.1 436.8 496.2
Profit for the period - - - 46.3 46.3
Other comprehensive expense - - (0.2) - (0.2)
Total comprehensive 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 account Other Retained earnings Total
capital reserves equity
£m £m £m £m £m
1 January 2023 2.4 55.9 1.1 436.8 496.2
Profit for the year - - - 117.7 117.7
Other comprehensive income - - 0.2 - 0.2
Total comprehensive income - - 0.2 117.7 117.9
Share-based payments - - - 6.6 6.6
Tax relating to share-based payments - - - 2.7 2.7
Issue of shares at a premium - 0.1 - - 0.1
Exercise of share options - - - 4.0 4.0
Purchase of shares in the Company by the Trust - - - (11.3) (11.3)
Dividends paid - - - (48.1) (48.1)
31 December 2023 (audited) 2.4 56.0 1.3 508.4 568.1
Other reserves
Other reserves include:
· Capital redemption reserve of £0.6m (30 June 2023: £0.6m, 31
December 2023: £0.6m) which was created on the redemption of preference
shares in 2003.
· Hedging reserve of (£0.8m) (30 June 2023: (£0.9m), 31 December
2023: (£0.8m)) 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 £1.5m (30 June 2023: £1.2m, 31 December
2023: £1.5m) 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 2024 was 965,018 (30 June 2023: 947,924, 31 December
2023: 1,124,215) with a cost of £23.8m (30 June 2023: £19.8m, 31 December
2023: £23.4m).
Notes to the consolidated financial statements
For the six months ended 30 June 2024
1 Basis of preparation
General information
The financial information for the year ended 31 December 2023 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 2024 and 2023 and for the six
months ended 30 June 2024 and 2023 are therefore unaudited.
Basis of preparation
The annual financial statements of Morgan Sindall Group plc are prepared in
accordance with the requirements of the Companies Act 2006 and UK-adopted
international accounting and reporting 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 2024, the Group had cash of £391.9m and total loans and total
overdrafts repayable on demand of £41.4m (together net cash of £350.5m).
Should further funding be required the Group has total committed banking
facilities of £180m 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 2024 financial statements through to 8 August
2025. 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 8 August 2025. Accordingly, they
continue to adopt the going concern basis in preparing the condensed
consolidated financial statements.
Tax
A tax charge of £17.5m is shown for the six month period (six months to 30
June 2023: £11.7m, year ended 31 December 2023: £26.2m). 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 2023.
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 Mixed Use Partnerships, 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.
The six operating divisions' activities are as follows:
· Construction: Morgan Sindall Construction focuses on education,
healthcare, commercial, industrial, leisure and retail markets.
· Infrastructure: Morgan Sindall Infrastructure focuses on highways,
rail, energy, water and nuclear markets. 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 is focused on
working in partnerships with local authorities and housing associations.
Activities include mixed-tenure developments, building and developing homes
for open market sales and for social/affordable rent, design and build house
contracting and planned maintenance and refurbishment.
· Mixed Use Partnerships: Muse Places Limited is focused on
transforming the urban landscape through partnership working and the
development of multi-phase sites and mixed-use regeneration.
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.
Six months to 30 June 2024
Construction Infrastructure Fit Out Property Services Partnership Housing Mixed Use Partnerships Group Activities Eliminations Total
£m £m £m £m £m £m £m £m £m
External revenue 517.9 523.8 629.8 103.1 380.5 59.1 - - 2,214.2
Inter-segment revenue 0.6 6.3 0.6 - - - - (7.5) -
Total revenue 518.5 530.1 630.4 103.1 380.5 59.1 - (7.5) 2,214.2
Adjusted operating profit/(loss) (Note 14) 14.1 19.7 41.3 (11.0) 11.7 0.5 (10.8) - 65.5
Amortisation of intangible assets - - - (0.3) - - - - (0.3)
Exceptional operating items - - - - - 0.3 - - 0.3
Operating profit/(loss) 14.1 19.7 41.3 (11.3) 11.7 0.8 (10.8) - 65.5
Finance income 8.9
Finance expense (4.3)
Profit before tax 70.1
Six months to 30 June 2023
Construction Infrastructure Fit Out Property Services Partnership Housing Mixed Use Partnerships Group Activities Eliminations Total
£m £m £m £m £m £m £m £m £m
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
Year ended 31 December 2023
Construction Infrastructure Fit Out Property Services Partnership Housing Mixed Use Partnerships Group Activities Eliminations Total
£m £m £m £m £m £m £m £m £m
External revenue 945.2 876.0 1,104.8 185.2 821.2 185.3 - - 4,117.7
Inter-segment revenue 21.4 10.7 0.4 - 16.3 - - (48.8) -
Total revenue 966.6 886.7 1,105.2 185.2 837.5 185.3 - (48.8) 4,117.7
Adjusted operating profit/(loss) (Note 14) 25.9 38.5 71.8 (16.8) 30.5 14.8 (23.4) - 141.3
Amortisation of intangible assets - - - (2.9) - - - - (2.9)
Exceptional operating items (11.5) - - - - 13.7 - - 2.2
Operating profit/(loss) 14.4 38.5 71.8 (19.7) 30.5 28.5 (23.4) - 140.6
Finance income 10.8
Finance expense (7.5)
Profit before tax 143.9
During the period ended 30 June 2024, the period ended 30 June 2023 and the
year ended 31 December 2023, 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 to 30 June 2024 Six months to 30 June 2023 Year ended
31 Dec 2023
Notes £m £m £m
Exceptional building safety provisions released/(recognised) 10 0.9 (4.1) (18.4)
Insurance and recoveries recognised in receivables - - 16.5
0.9 (4.1) (1.9)
Exceptional building safety (charge)/credit within joint ventures 7 (0.6) 4.5 4.1
Total exceptional building safety credit 0.3 0.4 2.2
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 Mixed Use Partnerships 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.
An exceptional charge of £48.9m was recognised in 2022 due to the materiality
and irregular nature of creating provisions arising because of the Pledge.
In the current period, the legal and constructive obligations related to the
Pledge (including reimbursement of grants provided by the Building Safety
Fund), the Building Safety Act and associated fire safety regulations have
been reassessed based on further information. The overall movement in the
building safety items is a net credit of £0.3m and is shown separately as an
exceptional item consistent with prior year treatment.
Included in the £0.3m exceptional building safety credit (30 June 2023:
£0.4m, 31 December 2023: £2.2m) is a £0.6m charge (30 June 2023: £4.5m
credit, 31 December 2023: £4.1m credit) that has been recognised in respect
of the Group's share of constructive and legal obligations to remediate legacy
building safety issues within joint ventures, and this has been recognised
within the Group's share of net profit of joint ventures. The remaining net
credit of £0.9m (30 June 2023: £4.1m charge, 31 December 2023: £1.9m
charge) has been recognised in cost of sales.
At the reporting date 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 DLUHC, any repayments will only be requested upon final completion of all
the relevant works.
4 Tax
The effective tax rate applied for the period was 25.0% (six months to 30 June
2023: 20.2%, year ended 31 December 2023: 18.2%). 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.
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 25.4% (six months to 30
June 2023: 23.4%, year ended 31 December 2023: 20.7%) 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 to Six months to Year ended
30 June 2024 30 June 2023 31 Dec 2023
£m £m £m
Final dividend for the year ended 31 December 2023 of 78.0p per share 36.5 - -
Final dividend for the year ended 31 December 2022 of 68.0p per share - 31.5 31.5
Interim dividend for the year ended 31 December 2023 of 36.0p per share - - 16.6
36.5 31.5 48.1
A proposed interim dividend of 41.5p per share for 2024 was approved by the
Board on 6 August 2024 and will be paid on 24 October 2024 to shareholders on
the register at 4 October 2024. The ex-dividend date is 3 October 2024.
6 Earnings per share
Six months to Six months to Year ended
30 June 2024 30 June 2023 31 Dec 2023
£m £m £m
Profit attributable to the owners of the Company 52.6 46.3 117.7
Adjustments:
Exceptional operating items (0.3) (2.2) (2.2)
Amortisation of intangible assets 0.3 2.2 2.9
Tax relating to the above items (0.3) (0.5) (3.7)
Adjusted earnings 52.3 45.8 114.7
Basic weighted average ordinary shares (m) 46.5 46.3 46.3
Dilutive effect of share options and conditional shares not vested (m) 1.3 0.7 0.7
Diluted weighted average ordinary shares (m) 47.8 47.0 47.0
Basic earnings per share 113.1p 100.0p 254.2p
Diluted earnings per share 110.0p 98.5p 250.4p
Adjusted earnings per share 112.5p 98.9p 247.7p
Diluted adjusted earnings per share 109.4p 97.4p 244.0p
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 £23.36 (30 June 2023:
£17.35, 31 December 2023: £18.57).
A total of 1,416,101 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 2024 (30 June 2023: 4,835,809, 31 December 2023:
2,535,887).
7 Investments in joint ventures
Six months to 30 June 2024 Six months to 30 June 2023 Year ended
31 Dec 2023
Notes £m £m £m
1 January 106.6 84.0 84.0
Equity accounted share of net profits:
Underlying share of net profits (0.1) 3.8 14.1
Exceptional building safety credit/(charge) 3 (0.6) 4.5 4.1
(0.7) 8.3 18.2
Capital advances to joint ventures 24.1 26.9 44.2
Loans repaid by joint ventures (8.9) (4.3) (34.2)
Dividends received - (2.5) (1.6)
Reclassification from funding obligations payable - (4.0) (4.0)
End of period 121.1 108.4 106.6
8 Trade and other receivables
30 June 2024 30 June 2023 31 Dec 2023
£m £m £m
Amounts falling due within one year
Trade receivables 308.7 253.4 320.9
Amounts owed by joint ventures 17.7 12.6 21.1
Prepayments 24.0 20.2 17.8
Insurance receivables 10.8 4.3 21.7
Other receivables 29.2 30.8 31.3
390.4 321.3 412.8
Amounts falling due after more than one year
Trade receivables 59.9 51.5 48.8
59.9 51.5 48.8
Trade and other receivables 450.3 372.8 461.6
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 2024 30 June 2023 31 Dec 2023
£m £m £m
Trade payables 228.9 207.1 202.2
Amounts owed to joint ventures 0.2 0.2 0.2
Other tax and social security 133.6 95.3 142.8
Accrued expenses 717.2 599.9 703.9
Deferred income 4.3 3.6 3.8
Land creditors 18.3 26.7 20.7
Other payables 14.1 16.6 13.4
Current 1,116.6 949.4 1,087.0
Land creditors 22.2 36.5 25.5
Other payables 2.7 - 2.7
Non-current 24.9 36.5 28.2
10 Provisions
Building Safety Self-insurance Contract & legal Other Total
£m £m £m £m £m
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
Utilised (0.6) (0.5) (4.2) (0.2) (5.5)
Additions 17.7 0.8 3.7 0.3 22.5
Reclassifications 0.3 - 3.7 - 4.0
Released (3.4) (3.2) (4.5) (0.2) (11.3)
1 January 2024 56.1 19.2 18.3 2.5 96.1
Utilised (2.5) (0.4) (3.5) - (6.4)
Additions 0.9 4.0 3.1 - 8.0
Released (1.8) (1.6) (0.2) (1.1) (4.7)
30 June 2024 52.7 21.2 17.7 1.4 93.0
Current 52.7 - 17.7 - 70.4
Non-current - 21.2 - 1.4 22.6
30 June 2024 52.7 21.2 17.7 1.4 93.0
Building Safety provisions
Management have reviewed legal and constructive obligations arising from the
Developers Pledge, the Building Safety Act and other associated fire
regulations. 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. See note 3 for further
detail.
The Group also holds third party insurances that may mitigate the liabilities.
Third party insurance reimbursement in respect of these provisions has been
recognised as a separate asset, but only when the reimbursement is virtually
certain. See notes 3 and 8 for details of mitigating insurance receivables
recognised at the period end. Note 12 includes details of contingent
liabilities related to building safety.
Self-insurance provisions
Self-insurance provisions comprise the Group's self-insurance of certain risks
and include £11.4m (30 June 2023: £13.1m, 31 December 2023: £10.0m) 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.
11 Net cash
30 June 2024 30 June 2023 31 Dec 2023
£m £m £m
Cash and cash equivalents 391.9 326.9 541.3
Bank overdrafts presented as borrowings due within one year (41.4) (63.8) (80.6)
Net cash 350.5 263.1 460.7
Included within cash and cash equivalents is £28.0m which is the Group's
share of cash held within jointly controlled operations (30 June 2023:
£36.8m, 31 December 2023: £26.1m). There is £21.9m included within cash and
cash equivalents held for future payments to designated suppliers (30 June
2023: £4.2m, 31 December 2023: £13.9m).
The Group has £180m of committed loan facilities maturing more than one year
from the balance sheet date, of which £15m mature in June 2026 and £165m in
October 2026. These facilities are undrawn at 30 June 2024.
Average daily net cash during the period to 30 June 2024 was £372m (30 June
2023: £268m, 31 December 2023: £282m). Average daily net cash is defined as
the average of the period's end of day balances of the net cash (as defined
above) over the course of the reporting period. Management use this as a key
metric in monitoring the performance of the business.
12 Contingent liabilities
Group banking facilities and surety bond facilities are supported by cross
guarantees given by the Company and participating companies in the Group.
There are contingent liabilities in respect of surety bond facilities,
guarantees and claims under contracting and other arrangements, including
joint arrangements and joint ventures entered into in the normal course of
business.
Contingent liabilities may also arise in respect of subcontractor and other
third party claims made against the Group, in the normal course of trading.
These claims can include those relating to cladding/legacy fire safety
matters, and defects. A provision for such claims is only recognised to the
extent that the Directors believe that the Group has a legal or constructive
obligation as a result of a past event and it is probable that an outflow of
economic benefit will be required to settle the obligation. However, such
claims are predominantly covered by the Group's insurance arrangements.
Recoveries under insurance arrangements are recognised as insurance
receivables when they are considered virtually certain.
Building Safety
At 30 June 2024, provisions in respect of liabilities arising from the
Developers Pledge, the Building Safety Act and other associated fire
regulations totalled £58.8m (30 June 2023: £47.4m, 31 December 2023:
£61.6m), including those related to joint ventures.
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.
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. See note 6 for a detailed reconciliation of the
adjusted earnings per share measures.
Gross profit
Six months to 30 June 2024 Six months to 30 June 2023 Year ended 31 Dec 2023
Note £m £m £m
Reported 236.2 211.4 444.8
Add back: exceptional building safety (credit)/charge 3 (0.9) 4.1 1.9
Adjusted 235.3 215.5 446.7
Operating profit
Six months to 30 June 2024 Six months to 30 June 2023 Year ended 31 Dec 2023
Note £m £m £m
Reported 65.5 57.3 140.6
Add back: exceptional building safety credit 3 (0.3) (0.4) (2.2)
Add back: amortisation of intangible assets 0.3 2.2 2.9
Adjusted 65.5 59.1 141.3
Profit before tax
Six months to 30 June 2024 Six months to 30 June 2023 Year ended 31 Dec 2023
Note £m £m £m
Reported 70.1 58.0 143.9
Add back: exceptional building safety credit 3 (0.3) (0.4) (2.2)
Add back: amortisation of intangible assets 0.3 2.2 2.9
Adjusted 70.1 59.8 144.6
'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 period's 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 cash flows 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 to Six months to Year ended
30 June 2024 30 June 2023 31 Dec 2023
£m £m £m
Cash (outflow)/inflow from operations - reported (13.7) (15.7) 221.2
Dividends from joint ventures - 2.5 1.6
Proceeds on disposal of property, plant and equipment 0.3 0.3 2.0
Purchases of property, plant and equipment (10.9) (8.6) (14.3)
Purchases of intangible fixed assets - (0.3) (0.3)
Repayments of lease liabilities (11.8) (9.4) (21.2)
Operating cash flow (36.1) (31.2) 189.0
'Return on capital employed' Management use return on capital employed
(ROCE) in assessing the performance and efficient use of capital within the
Partnership 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 Kelly Gangotra
Chief Executive Officer Chief Financial Officer
8 August 2024
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