TIDMMGNS
RNS Number : 1419V
Morgan Sindall Group PLC
05 August 2020
5 August 2020
MORGAN SINDALL GROUP PLC
('Morgan Sindall' or 'Group')
The Construction & Regeneration Group
RESULTS FOR THE HALF YEAR (HY)ED 30 JUNE 2020
This announcement contains information that qualified, or may
have qualified, as inside information for the purposes of Article
17 of the Market Abuse Regulations (EU) 596/2014 (MAR). The person
responsible for making this announcement is Steve Crummett, Finance
Director.
HY 2020 HY 2019 Change
Revenue GBP1,363m GBP1,421m -4%
Operating profit - adjusted(1) GBP18.1m GBP37.5m -52%
Profit before tax - adjusted(1) GBP15.7m GBP36.3m -57%
Earnings per share - adjusted(1) 27.4p 64.2p -57%
Period end net cash GBP146m GBP114m +GBP32m
Interim dividend per share - 21.0p n/a
Operating profit - reported GBP16.0m GBP36.7m -56%
Profit before tax - reported GBP13.6m GBP35.5m -62%
Basic earnings per share - reported 23.7p 62.9p -62%
----------------------------------------- ------------ ------------ ---------
(1) 'Adjusted' is defined as before intangible amortisation (GBP2.1m)
(HY 2019: GBP0.8m)
HY 2020 summary:
-- Results significantly impacted by COVID-19 pandemic
o Revenue down 4% to GBP1.4bn. Q1 revenue up 17%, Q2 revenue
down 23%
o Adjusted profit before tax down 57% to GBP15.7m
-- Balance sheet strengthened. Significant available liquidity
o Average daily net cash increased to GBP153m (HY 2019:
GBP123m).
o Period end net cash of GBP146m (HY 2019: GBP114m). In
addition, committed bank facilities of GBP180m
-- Improved visibility of the second half and full year outturn
o Guidance for the full year reinstated. FY 2020 profit before
tax expected to be in the range of GBP50m-GBP60m
o Intention to return all payments received under the
Coronavirus Job Retention Scheme during the second half
-- Well set for growth beyond 2020
o Aligned to demand for future investment, holding key market
positions in UK national and social infrastructure together with
affordable housing and regeneration
o High quality and growing order book, with secured workload up
5% to GBP8.0bn
-- No interim dividend declared at current time. The Board will
actively consider the resumption of dividend payments when there is
further clarity over the economic outlook and business interruption
risks
Commenting on today's results, Chief Executive, John Morgan
said:
"These results reflect the inevitable impact on our business of
the COVID-19 pandemic.
The business is having to continually adapt in this changing
environment and I am extremely thankful to all our employees for
their professionalism and dedication as we adjust to new ways of
working safely and productively.
Throughout this challenging period, the Group has demonstrated
its resilience, with an improved cash position strengthening our
balance sheet and providing significant available liquidity. This
in turn has enabled us to maintain our focus on making the right
decisions based upon the best long-term interests of the
business.
Our proven strategy remains the same, based on organic growth
and operational improvement. We have a balanced business geared
towards future demand for affordable housing, urban regeneration
and infrastructure and construction investment. Together with our
high-quality secured workload, we are confident of future growth
and success.
We now have greater clarity of the extent of the impact of
COVID-19 on the current year's performance and on the assumption of
no further significant business interruptions arising from any
widespread secondary lockdown, we expect profit before tax for 2020
to be in the range of GBP50m-GBP60m."
Enquiries
Morgan Sindall Group Tel: 020 7307 9200
John Morgan
Steve Crummett
Instinctif Partners Tel: 020 7457 2020
Matthew Smallwood Mobile: 07831 379
Rosie Driscoll 122
Mobile: 07891 564
641
Presentation
-- There will be an analyst and investor presentation followed
by a Q&A, held virtually via Microsoft Teams on Wednesday 5th
August at 09:00
-- A copy of these results is available at: www.morgansindall.com
-- The presentation will be available via playback on our website in the afternoon.
Note to Editors
Morgan Sindall Group
Morgan Sindall Group plc is a leading UK Construction &
Regeneration group with annual revenue of GBP3.1bn, employing
around 6,700 employees and operating in the public, regulated and
private sectors. It reports through six divisions of Construction
& Infrastructure, Fit Out, Property Services, Partnership
Housing, Urban Regeneration and Investments.
Group Strategy & Structure
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.
Under these two strategic lines of business, the Group is
organised into six divisions as follows:
Construction activities comprise the following operations:
-- Construction & Infrastructure : Focused on the education,
healthcare, defence, commercial, industrial, leisure and retail
markets in Construction; and on the highways, rail, aviation,
energy, water and nuclear markets in Infrastructure
-- 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
In addition, Investments is focused on providing the Group with
both construction and regeneration opportunities through various
long-term strategic partnerships to develop under-utilised public
land across multiple sites and generates development profits from
such partnerships.
Basis of Preparation
In addition to presenting the financial performance of the
business on a statutory basis, adjusted performance measures are
also disclosed. These measures are not an alternative or substitute
to statutory IFRS 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. The Group
also uses other non-statutory measures which cannot be derived
directly from the financial statements. In all cases the term
'adjusted' excludes the impact of intangible amortisation of
GBP2.1m (HY 2019: GBP0.8m).
Group Operating Review
Overview
The first half of the year has seen unprecedented challenges
arising from the COVID-19 pandemic ('C-19') and d uring this time,
the health and wellbeing of its people, partners and the public has
remained the Group's overriding priority. Operationally, activity
across the Group only continued where it was safe to do so, with
strict adherence to Government advice and that of the devolved
administrations and public health authorities across the UK.
The Group had a strong start to the year, building on the
significant positive momentum carried through from 2019. In the
first quarter, revenue was up 17% on the prior year.
With the onset of C-19 and the subsequent lockdown restrictions
imposed across the UK in late March, trading and activity across
all divisions were then significantly impacted. The Group's
decentralised approach allowed significant flexibility of response
and enabled each division to adopt its own specific approach to
suit their employees, clients and supply chain partners'
requirements in the evolving circumstances.
The extent of the operational and financial impact of C-19 on
each division is included in the Divisional Review below, however
Group revenue for the second quarter was down 23% on the prior
year. For April alone, revenue was 35% down on the prior year. As a
result, total Group revenue for the half year period decreased by
4% to GBP1,363m (HY 2019: GBP1,421m).
The gross margin impact of this lower revenue, together with
additional costs arising through site closures, lower productivity
on sites, and from implementing new safety processes and
procedures, have impacted profitability during this period. In
addition, construction delays on many of the development schemes in
the regeneration activities, together with lower revenue in the
mixed-tenure activity of Partnership Housing, have further reduced
profit in the period.
As a result, the adjusted operating profit was down 52% to
GBP18.1m (HY 2019: GBP37.5m), at an adjusted operating margin of
1.3%, down from 2.6% on the prior year. Consequently, the adjusted
profit before tax was GBP15.7m, down 57% (HY 2019: GBP36.3m) and
the adjusted earnings per share of 27.4p was also 57% lower (HY
2019: 64.2p)
Through the period, the Group placed a number of its employees
on furlough and accessed the Government's Coronavirus Job Retention
Scheme ('CJRS'). At the peak, c1,900 employees were furloughed
across the Group and as at 30 June, the Group had claimed GBP9.3m
under the CJRS, the benefit of which is reflected in the HY income
statement. As at the start of August, there remained c200 employees
on furlough, primarily within the Property Services and
Infrastructure divisions with this number expected to reduce
further through the month.
Other measures were taken across the Group to reduce
discretionary costs and improve cash flow. These included the
agreement of permissions to defer VAT, PAYE and other tax payments
(see Balance sheet & Cash section below) and the cancellation
of the 2019 final dividend. In addition, the Chair, Non-Executive
Directors, Executive Directors and Senior Management Team all
volunteered salary reductions of 20% for the 3 months to 30
June.
The Group's relationships with its supply chain partners are of
strategic importance and its actions and behaviours towards them
during these challenging times are viewed as key to the Group's
future success. Consequently, the prompt payment of its suppliers
has remained a major area of focus throughout the period and even
more so against the current backdrop of C-19.
It is, therefore, pleasing that for the formal Payment Practices
Reporting period of 1 January 2020 to 30 June 2020, Construction
& Infrastructure, the largest operating division by revenue,
improved its average time taken to pay invoices significantly;
reducing average time to 27 days (from 32 days), with 98% of
invoices paid within 60 days. Fit Out reported its average time
taken to pay invoices at 21 days, broadly unchanged from previous,
while Partnership Housing reported 36 days as its average time to
pay. Property Services, at an average of 32 days to pay invoices,
increased only slightly from the previous reporting period.
The future success of the Group is also determined by the
quality of the secured workload and the discipline across the Group
to maintain contract selectivity irrespective of economic
conditions. Looking ahead, preserving the appropriate risk balance
within the order book is critical to future success. Despite
certain delays to decision-making in progressing projects across
some clients, both public and private sector, the Group had a
successful period of winning new work, with the total secured
workload at the period end of GBP7,962m, up 5% from the year
end.
Balance sheet & Cash
The Group remains in a strong financial position. The average
daily net cash for the period was GBP153m (of which GBP60m was held
in jointly controlled operations or held for future payment to
designated suppliers (JVs/PBAs)), up from GBP123m in the prior year
period. For the second quarter (April-June), the average daily net
cash was GBP175m (including GBP60m in JVs/PBAs).
During the period, the Group took advantage of permissions to
defer VAT, PAYE and other tax payments which together increased the
average daily net cash position in the first half by cGBP22m.
Net cash as at 30 June was GBP146m (including GBP58m in
JVs/PBAs). At the period end, all PAYE liabilities and other tax
deferrals were fully up to date, with the exception of VAT payments
totalling GBP21m which have been deferred to March 2021.
The Group has committed bank facilities of GBP180m extending out
to 2022, which together with the net cash balance, provide a
significant amount of total available liquidity. In addition, and
as an additional precautionary measure, the Group was also
confirmed by the Bank of England as an eligible issuer for the
Covid Corporate Financing Facility (CCFF). No drawings have been
made on this facility and the Group does not anticipate the need to
utilise the CCFF scheme.
Looking ahead, the impact of the lower activity in the second
quarter due to C-19 is expected to be reflected in lower cash
balances across the second half, which together with the continued
planned investment in Partnership Housing, will reduce the average
daily position for the year. However, based upon current
anticipated cash flows and investment plans, the Group expects that
the average daily net cash for the full year will be well over
GBP100m.
As noted above, the Group received the benefit of GBP9.3m under
the CJRS during the period, which facilitated the safeguarding of
many jobs during the period of maximum impact of C-19. As the
Group's financial position has remained robust and resilient
throughout the period, it is now intended that all payments
received under the CJRS are returned during the second half and no
claims will be made in future for any bonus payments eligible under
the scheme. The repayment of such amounts will be charged through
Central costs.
Dividend
The Board considers the dividend to be a very important
component of shareholder returns. As previously noted, in light of
the economic uncertainty brought about by C-19, the Board announced
that it had decided to cancel the final dividend for 2019 which was
due for approval at the AGM in May 2020.
The Board has taken into consideration the interests of all
stakeholders and concluded that there remains sufficient market
uncertainty so as not to commit to an interim dividend at the
current time. The Group has a strong liquidity position and the
Board will actively consider the resumption of dividend payments
when there is further clarity over the economic outlook and
business interruption risks.
Outlook
The Group's strategy remains the same, based on organic growth
and operational improvement and a balanced business geared towards
future demand for affordable housing, urban regeneration and
infrastructure and construction investment. Together with the
high-quality secured workload, there is confidence of future growth
and success.
There is now greater clarity of the extent of the impact of C-19
on the current year's performance and on the assumption of no
further significant business interruptions arising from any
widespread secondary lockdown, profit before tax for 2020 is
expected to be in the range of GBP50m-GBP60m. This includes the
repayment of all amounts received under the CJRS, which will be
charged through Central costs in the second half.
Divisional Review
The following Divisional Review is given on an adjusted basis,
unless otherwise stated.
Headline results by business segment
Revenue Operating Profit/(Loss) Operating Margin
GBPm Change GBPm Change % Change
------ ------- ------------ ------------ -------- ---------
Construction & Infrastructure 789 +16% 11.5 -17% 1.5% -50bps
Fit Out 317 -22% 10.9 -34% 3.4% -60bps
Property Services 53 -4% (0.5) -131% -0.9% -380bps
Partnership Housing 165 -31% 3.0 -53% 1.8% -90bps
Urban Regeneration 35 -20% 2.1 -75% n/a n/a
Investments 12 n/a (3.2) n/a n/a n/a
Central/Eliminations (8) (5.7)
------ ------- ------------ ------------ -------- ---------
Total 1,363 -4% 18.1 -52% 1.3% -130bps
------ ------- ------------ ------------ -------- ---------
Group secured workload(1) by division
The Group's secured workload(1) at 30 June 2020 was GBP7,962m,
an increase of 5% from the previous year end. The divisional split
is shown below.
HY 2020 FY 2019 Change
GBPm GBPm
------------------------------- ------- ------- ------
Construction & Infrastructure 2,548 2,271 +12%
Fit Out 466 480 -3%
Property Services 867 904 -4%
------------------------------- ------- ------- ------
'Construction' secured order
book(2) 3,881 3,655 +6%
------------------------------- ------- ------- ------
Partnership Housing 1,234 1,093 +13%
Urban Regeneration 2,278 2,278 -
Investments 576 581 -1%
------------------------------- ------- ------- ------
'Regeneration' secured order
book(2) 4,088 3,952 +3%
------------------------------- ------- ------- ------
Inter-divisional eliminations (7) (14)
------------------------------- ------- ------- ------
Group secured workload(1) 7,962 7,593 +5%
------------------------------- ------- ------- ------
(1) The Group secured workload is the sum of the Construction
secured order book and the Regeneration secured order book, less
any inter-divisional eliminations
(2) The 'Secured order book' is the sum of the 'committed order
book', the 'framework order book' and (for the Regeneration
businesses only) 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 & Infrastructure
HY 2020 HY 2019 Change
GBPm GBPm
------------------------------ ------- ------- ------
Revenue 789 679 +16%
Operating profit 11.5 13.9 -17%
Operating margin 1.5% 2.0% -50bps
------------------------------ ------- ------- ------
During the period, revenue increased by 16% to GBP789m, however
operating profit reduced 17% to GBP11.5m. The operating margin was
down 50bps to 1.5%.
While Construction(1) was significantly impacted by C-19,
Infrastructure(1) (which includes Design) fared relatively well and
made significant positive progress with its volume and margin.
Of the divisional revenue split by type of activity,
Construction(1) increased 2% to GBP290m (37% of divisional
revenue), while Infrastructure(1) increased 26% to GBP499m (63% of
divisional revenue).
Construction's (1) operating margin reduced significantly, down
to 0.4% (HY 2019: 2.2%), with its operating profit down to GBP1.2m.
Infrastructure(1) delivered operating profit of GBP10.3m, an
increase of 37% which was driven mainly by revenue growth, but also
improved efficiency and work mix. Its operating margin of 2.1% was
up 20bps from the prior year.
Impact of C-19 on operations
(i) Construction
At the 'peak' impact of the lockdown measures, c31% of sites
were closed completely (c15% by value), with the remainder impacted
by significant productivity constraints.
Most impacted were the construction sites in Scotland, which
remained closed in accordance with the lockdown regulations imposed
by the Scottish Government. There were no other significant
geographical variations to site closures.
Productivity remained a challenge throughout the period. The
limited availability of certain building materials on site eased
from May onwards as manufacturers recommenced their own production.
The adoption of the necessary revised site safety operating
procedures created additional challenges according to the location
and size of the project site.
The operational impact on projects was broadly determined by the
stage of construction, with a relatively low impact on projects at
an earlier stage of construction (groundwork, piling, demolition
etc), while those most impacted were projects at the final stages
of construction.
The business is contractually entitled to 'time and costs' as a
result of the closures and delays to programmes for approximately
45% of its contracts. For the other 55%, the contractual
entitlement is for 'time' only, with any additional costs incurred
being the business's liability. Such costs would include the costs
of inefficiency through demobilising and remobilising sites,
reduced productivity and direct costs associated with additional
PPE (Personal Protection Equipment) and implementing social
distancing regulations on sites.
As at 30 June, 100% of sites were open and active, operating at
an estimated average 90% of productivity compared to pre-C-19
levels. This had improved to c95% of pre-C-19 productivity levels
by the end of July.
The maximum number of employees on furlough at any one time
during the period was 252 (23% of total). At the start of August,
10 employees remained on furlough.
(ii) Infrastructure
At the 'peak' impact of the lockdown measures, c61% of sites
were closed completely (59% by value), however in many cases, the
period of closure for a reassessment of safety procedures was
relatively short, allowing many sites to reopen and maintain
reasonable activity levels.
With c90% of the business's revenue being derived through public
sector frameworks or from regulated bodies, the publication of the
Government's ' Public Procurement Note (PPN) 02/20: Supplier relief
due to coronavirus' which provided guidance for public bodies on
the payment of their suppliers to ensure service continuity, was a
significantly positive development which supported the continuity
of operations across many of the division's sites.
In the Aviation sector, all ongoing projects at Heathrow were
immediately curtailed. With minimal future work now expected during
the second half of 2020 and 2021 (the final year of the framework)
resources are being re-deployed elsewhere where possible.
In Nuclear, there have been C-19 restrictions across the whole
Sellafield site, disrupting works on the Infrastructure Strategic
Alliance. However, after an initial pause, early works on the
20-year Sellafield Programme and Project Partners (PPP) framework
have progressed well.
Most of the business's contracts allow an entitlement to 'time
and costs' as a result of the closures and delays to
programmes.
As at 30 June, 93% of sites were open and active (c99% by
value), operating at an estimated average 80% of productivity
compared to pre-C-19 levels. This had improved to c90% of pre-C-19
productivity levels by the end of July.
The maximum number of employees on furlough at any one time
during the period was 428 (18% of total). Less than 100 employees
remained on furlough at the start of August.
Secured order book
The division performed well in terms of winning work and growing
its future workload. The secured order book at the period end was
GBP2,548m, up 12% compared to the year-end position.
(i) Construction
Construction's (1) order book increased by 8% to GBP554m (22% of
total division). Of the total, GBP322m (58%) is secured for the
second half of the year, GBP212m (38%) for 2021 and the remainder
(4%) for 2022 and beyond.
The risk balance and profile within the Construction order book
has been maintained, with 99% of the value derived through
negotiated, framework or two-stage bidding procurement processes,
and only 1% derived through competitive tenders. In addition,
Construction (1) had cGBP620m of work at preferred bidder stage at
the period end.
Work won in the period included a GBP46m residential development
for Urban Regeneration (through its joint venture) as part of the
wider New Bailey development in Manchester, two schools for the
City of Edinburgh totalling GBP24m, a GBP37m school for Urban and
Civic in Rugby and a GBP46m Engineering Block for Salford
University. In the period, Construction was also appointed onto Lot
1 (GBP10m-GBP30m) and Lot 2 (GBP30m+) of the GBP1.5bn YORbuild
framework as well as re-securing a place on the GBP0.5bn Scottish
Hub South West Framework.
(ii) Infrastructure
Infrastructure's (1) order book grew strongly, up 13% to
GBP1,994m (78% of total division). In excess of 90% of the order
book value is derived through existing frameworks and with 58% of
the order book for 2022 and beyond, this demonstrates the long-term
nature of the work streams and client relationships.
The focus remains on the key sectors of highways, rail, nuclear,
energy and water. As detailed above, the aviation business (FY
2019: revenue of cGBP65m) was significantly impacted in the period
and any future workload is likely to be minimal.
Work won in the period includes the appointment by Highways
England, through joint venture, as one of six partners in the
GBP4.5bn Smart Motorway Alliance, a newly created alliance to
transform the delivery of smart motorways and shape the digital
roads of the future. In Rail, work commenced on the first scheme as
part of Network Rail's CP6 framework in the Western Region, while
in Water, the division was awarded and has commenced work on AMP 7
schemes with Welsh Water.
2020 Outlook
Construction's performance is expected to improve throughout the
second half and its full year margin is expected to be no less than
1%.
Infrastructure is expected to continue working through its
high-quality workload and is well set to make progress towards its
targeted margin of 3% for the full year.
(1) Design results are reported within Infrastructure on the
basis that the design activities are better aligned to the overall
services provided by the Infrastructure activities. In HY 2019 and
prior years, Design results were reported within Construction and
comparative numbers for HY 2019 for Construction and Infrastructure
have been restated accordingly.
Fit Out
HY 2020 HY 2019 Change
GBPm GBPm
------------------ ------- ------- ------
Revenue 317 407 -22%
Operating profit 10.9 16.4 -34%
Operating margin 3.4% 4.0% -60bps
------------------ ------- ------- ------
Although Fit Out's revenue was down 22% to GBP317m, the
operating margin remained robust at 3.4%, with operating profit of
GBP10.9m demonstrating the overall resilience and high quality of
the business.
Geographically, the London region remained the division's
largest market, accounting for 80% of revenue, up from 69% in the
prior year. Other regions accounted for 20% of revenue (HY 2019:
31% of revenue).
The proportion of revenue generated from the fit out of existing
office space was 70% (HY 2019: 74%) with the remaining 30% relating
to new office fit out (HY 2019: 26%). Of the fit out of existing
office space, 69% related to refurbishment 'in occupation'.
88% of revenue related to traditional fit out work (HY 2019:
81%), while 12% related to 'design and build' (HY 2019: 19%).
By sector, the commercial office market remained the largest,
contributing 77% of revenue (HY 2019: 86%). Government, higher
education and retail banking accounted for the majority of the
remainder.
Impact of C-19 on operations
At the 'peak' impact of the lockdown measures, 53% of sites were
closed (40% by value).
In London, where many sites were initially closed at the
client's request, activity was restored relatively quickly,
benefiting from most sites being contained within vacated
buildings. In addition, the established and preferred relationships
built up with its supply chain over many years enabled prompt and
efficient remobilisation of teams at short notice and with
immediate responsiveness.
Most impacted were the projects based out of the Northern
business in Manchester, which covers clients geographically spread
up to Scotland. At the 'peak' impact, 92% of the Northern sites
were closed.
With much of the division's work being for clients whilst 'in
occupation', empty offices and more flexible working hours have
enabled the division to implement social distancing and revised
site safety operating procedures relatively easily and quickly. In
many situations, the business was able to accelerate its fit out
programmes.
The average size of project within Fit Out is cGBP2m, with an
average duration of c12 weeks. Most of the division's contracts
allow for 'time' only, with any additional costs incurred being the
division's liability. In many cases, the accelerated programmes
achieved through uninhibited access to buildings, has offset any
additional costs incurred.
As at 30 June, 100% of sites were open and active, operating at
an estimated average 75% of productivity compared to pre-C-19
levels. This had improved to in excess of 95% of pre-C-19
productivity levels by the end of July.
The maximum number of employees on furlough at any one time
during the period was 186 (22% of total). There were no employees
remaining on furlough at the start of August.
Secured order book
At the period end, the secured order book was GBP466m, a
reduction of 3% on the prior year end position and in line with the
position at the last half year. Of the secured order book, GBP318m
(68%) relates to the second half of the year. The equivalent amount
as at 30 June 2019 which related to the second half of 2019 was
only slightly higher at GBP331m and on this basis, the division has
broadly the same level of visibility of second half volumes as it
did at the same time last year.
Of the remainder, 30% of the order book (GBP139m) relates to
2021 with the balance for 2022. This compares favourably to GBP133m
of secured orders at the same time last year for 2020.
Projects won in the period include the fit out of 123,000 sq ft
of office space for the Boston Consulting Group (BCG) in London; a
45 week project for St Martins Property Investment Ltd at Hays
Galleria, London; multiple projects under a framework for The
Mayor's Office for Policing and Crime (MOPAC) in London; the design
and fit of c25,000 sq ft of office space for WaterAid in Canary
Wharf, London; and a 170,000 Category A fit out for Lexo Ltd in
Peterborough.
2020 outlook
The first half has demonstrated the quality and resilience of
Fit Out. Based on its current workload and order book visibility
(and assuming no further significant business interruption), Fit
Out is expected to deliver a profit up towards cGBP30m for the full
year.
Property Services
HY 2020 HY 2019 Change
GBPm GBPm
---------------------------- ------- ------- -------
Revenue 53 55 -4%
Operating (loss)/profit(1) (0.5) 1.6 -131%
Operating margin(1) -0.9% 2.9% -380bps
---------------------------- ------- ------- -------
Property Services made a loss in the period of GBP0.5m from
revenue of GBP53m, down 4% on the prior year.
At the start of the period in January and February, the division
was operating at a run rate of cGBP12m revenue per month.
Cumulatively at the end of February, revenue was 37% ahead of the
prior year. The operating structure and overheads were set
accordingly to deliver this level of volume on its contracts.
With the impact of C-19 reducing the services provided to mainly
'essential' repairs only, the significantly lower volume was
insufficient to cover the overheads in the division, resulting in
the small loss for the period.
Impact of C-19 on operations
In advance of the formal lockdown announcement, the division in
conjunction with its clients, had already started to reduce
response maintenance services and any planned and voids work, based
on the risk assessment of operatives entering tenant's
dwellings.
At the 'peak' impact of the lockdown measures, 21% of the
division's contracts had ceased all activity. Other contracts
remained active, although with much reduced volume levels.
As at 30 June, 94% of contracts were active, running at c70% of
normal volumes. It is expected that all contracts will have
remobilised and be back to near 100% of pre-C-19 volume levels by
October.
The maximum number of employees on furlough at any one time
during the period was 415 (57% of total). There remained less than
100 employees on furlough at the start of August and this number is
expected to reduce further as contracts remobilise.
Secured order book
During the period, the division has continued to focus on
delivering repairs and planned maintenance with a strong social
value offering, servicing public sector housing through integrated
contracts with housing associations and local authorities. At the
period end, the secured order book was GBP867m, down 4% from the
year end.
Subsequent to the period end, the division has been successful
in securing preferred bidder status on the following contracts with
a combined value of GBP171m. These will only be included in the
order book upon entering final contract:
(i) Two contracts for Hammersmith and Fulham Council - a housing
repairs contract and domestic and communal gas contract, both for
an initial 5 years with the potential to extend for a further 2
years and;
(ii) a contract with Home Group Housing Association to maintain
4,500 properties. The division will deliver responsive repairs,
void refurbishments, heating services and planned improvement works
such as kitchen and bathroom replacement and heating system
upgrades.
2020 outlook
Property Services is expected to continue to remobilise its
contracts across the second half and it is expected that the normal
'run-rate' of activity will be achieved by the fourth quarter. On
this basis, the division is expected to deliver a modest profit for
the full year.
(1) before intangible amortisation of GBP0.6m (HY 2019:
GBP0.8m)
Partnership Housing
HY 2020 HY 2019 Change
GBPm GBPm
------------------------------- ------- ------- ---------
Revenue 165 238 -31%
Operating profit 3.0 6.4 -53%
Operating margin 1.8% 2.7% -90bps
------------------------------- ------- ------- ---------
Average capital employed(1)
(last 12 months) 151.7 136.8 +GBP14.9m
Capital employed(1) at period
end 153.5 155.6 -GBP2.1m
ROCE(2) (last 12 months) 10% 10%
------------------------------- ------- ------- ---------
Partnership Housing revenue was down 31% on the prior year to
GBP165m. While the first quarter revenue was up 11% on prior year,
the second quarter fell significantly by 60%, reflecting the impact
of C-19.
Split by type of activity, Mixed-tenure revenue was down 15% to
GBP89m (54% of divisional revenue) while Contracting revenue
(including planned maintenance and refurbishment) was down 43% on
the prior year period to GBP76m (46% of divisional total).
In Mixed-tenure, 412 units were completed across open market
sales and social housing compared to 493 in the prior year period,
a reduction of 16%. The average sales price was GBP217k (HY 2019:
GBP214k).
Operating profit of GBP3.0m was 53% down on prior year, with the
operating margin down to 1.8%. Besides from the additional costs
and lower unit completions from C-19, the result also includes the
GBP2.0m non-cash impairment of the division's investment in a small
joint venture developer of supported independent living
accommodation. The impairment reduces the carrying value of the
investment to zero and was as a result of scheme delays and the
expiry of longstop dates on schemes, some of which can be
attributed to C-19.
Excluding the impairment, the underlying operating profit would
reflect a reduction of 22% on the prior year, however at an
improved margin of 3.0%, which represents an increase of 30bps on
the prior year (HY 2019: 2.7%).
The capital employed(1) at period end was GBP153.5m. This was an
increase of GBP21.2m on the year end position of GBP132.3m and a
reduction of GBP2.1m on the prior year period end. The average
capital employed(1) for the last 12-month period was GBP151.7m and
the ROCE(2) for the last 12-month period remained level at 10%.
Impact of C-19 on operations
At the 'peak' impact of the lockdown measures, 93% of sites were
closed (91% by value).
Upon the lockdown announcement, most construction sites started
to demobilise, both mixed-tenure and contracting sites. The
effective closure of the UK housebuilding industry and its
associated supply chain resulted in an inability to maintain
operations. Sales offices also closed in line with lockdown
regulations.
From early May, sites started to remobilise, with the limited
availability of certain building materials on site easing through
the month as manufacturers recommenced their own production.
Operations adopted the necessary revised site safety operating
procedures.
In Contracting, most contracts allow for 'time' only, with any
additional costs incurred on demobilising/remobilising/additional
safety procedures being the division's liability. In Mixed-Tenure,
in addition to lost profit from lower unit completions, additional
costs incurred will reduce the profit per unit.
Sales offices reopened in England in mid-May, with those in
Scotland/Wales reopening in June. As at 30 June, 100% of sites were
open and active again, operating at an estimated average 80% of
productivity compared to pre-C-19 levels. This had improved to c95%
of pre-C-19 productivity levels by the end of July.
The maximum number of employees on furlough at any one time
during the period was 586 (67% of total). There were no employees
remaining on furlough at the start of August.
Secured order book
The secured order book at the period end was GBP1,234m, an
increase of 13% on the year-end position and further demonstrated
the market opportunity available to the division.
Of this total, the Mixed-tenure activities increased by 24% to
GBP918m and in addition to this, the amount of mixed-tenure
business in preferred bidder status or already under development
agreement but where land has not been drawn down was in excess of
GBP600m. On the Contracting side, the order book reduced by 11% to
GBP316m.
Key project wins in the period include deals worth GBP140m with
Homes England to provide 532 new homes at two former Ministry of
Defence sites in Yorkshire and Wiltshire - 119 of these at Thorp
Arch near Wetherby, with 413 homes at Drummond Park in Luggershall,
Wiltshire. In addition, the two sites in South Wales at Coed Darcy
and Llanwern have a combined development value of GBP130m and will
deliver more than 660 units.
2020 outlook
The second half is expected to see higher levels of construction
activity across its sites and higher unit completions, with profit
for the full year expected to be up towards its prior year result.
In addition, increased investment in existing developments is
expected and based upon the current profile, the average capital
employed(1) for the full year is expected to be cGBP165m.
(1) Capital employed is calculated as total assets (excluding
goodwill, intangibles and cash) less total liabilities (excluding
corporation tax, deferred tax, inter-company financing and
overdrafts).
(2) Return On Average Capital Employed = Adjusted operating
profit divided by average capital employed.
Urban Regeneration
HY 2020 HY 2019 Change
GBPm GBPm
-------------------------------- ------- ------- ---------
Revenue 35 44 -20%
Operating profit 2.1 8.3 -75%
-------------------------------- ------- ------- ---------
Average capital employed(1)
(last 12 months) 109.7 105.3 +GBP4.4m
Capital employed(1) at period
end 117.3 97.5 +GBP19.8m
ROCE(2) (last 12 months) 12% 19%
ROCE(2) (average last 3 years) 14% 14%
-------------------------------- ------- ------- ---------
Urban Regeneration delivered an operating profit of GBP2.1m (HY
2019: GBP8.3m), resulting in the average return on capital(2) over
the last three years remaining level at 14%.
Capital employed(1) at the period end was GBP117.3m, which
represented an increase of GBP9.6m from the year end position of
GBP107.7m and an increase of GBP19.8m over the prior year period
end.
The main contributors to performance were the Group's share of
joint venture profit and development fees generated from the
Salford Central regeneration scheme, being developed by The English
Cities Fund (a joint venture with Legal & General and Homes
England), where six new developments are currently under
construction; profit from the pre-let and forward sale of three
separate warehouse and distribution buildings at Logic Leeds and a
land sale at Eurocentral in Scotland.
In addition, development management fees were generated from
Lewisham Gateway, Warrington's Time Square development and the
second phase of the Stockport Exchange development. Profits were
also earned from the sale of new homes in Brentford, Tottenham
Hale, Stockton-on-Tees and Plymouth.
Impact of C-19 on operations
The impact of COVID-19 was felt across all stages of the
development process.
Construction activity on most of the active development schemes
either ceased for a period or activity was significantly reduced.
At the 'peak' impact of the lockdown measures, 33% of sites were
closed completely.
As a consequence, development management fees received from such
schemes (which accrue in line with construction activity) were
lower. In addition, where forecast profit from schemes included the
sale of residential units either already completed or off-plan, the
delayed construction progress and closure of sales offices in the
period impacted profit.
In progressing the pipeline of new development schemes, delays
were experienced in decision-making, with potential forward funders
and contractors for schemes re-evaluating their positions amid
concerns over future costs, viability and returns.
As at 30 June, 100% of construction sites in Urban
Regeneration's development schemes were open and active again.
Secured order book
The secured order book at the period end was GBP2,278m, level
with the year-end position.
Due to the nature of the regeneration business, the order book
is long term and has a diverse geographic and sector split:
-- c70% by value is for 2022 and beyond, with projects stretching out to 2030;
-- by sector, 54% by value relates to residential, 30% to
offices, with the remainder split between retail, leisure, and
industrial;
-- by geography, 49% is in the South East and London, 34% in the
North West, 14% in Yorkshire and the North East, and 3% in the rest
of the UK.
In terms of progress with its existing schemes, the division
agreed two forward funding deals subsequent to the period end.
Firstly, a GBP252m forward funding deal was signed to deliver
the second and final phase of its Lewisham Gateway scheme. Once
complete, the scheme will provide 649 homes for rent, c.25,000 sq
ft of retail space, c.15,000 sq ft of food and beverage space, a
gym, 10,000 sq ft of offices and Lewisham's first major multiplex
cinema which has been pre-let. Completion is anticipated in 2023;
and secondly, a forward funding deal was agreed to commence with
the first phase of the GBP185m 'New Victoria' scheme in Manchester
city centre, in partnership with Network Rail with support from
Manchester City Council and Homes England. Adjacent to Manchester
Victoria train station, the first phase of the scheme is for
450,000 sq ft of residential development, with completion expected
in 2023.
In addition and not yet included in the secured order book, the
division was appointed, through its English Cities Fund joint
venture with Legal & General and Homes England, as the
development partner for the GBP2.5bn Salford Crescent masterplan,
with the joint venture now leading on the creation of a new
240-acre district in Salford over the next 10 to 15 years.
2020 Outlook
Further progress with the division's regeneration order book is
expected in the second half, however the full year result will
remain significantly below the prior year.
Based upon the current profile and type of scheme activity
across the portfolio, the average capital employed(1) for the full
year is expected to be cGBP110m.
(1) Capital employed is calculated as total assets (excluding
goodwill, intangibles inter-company financing and cash) less total
liabilities (excluding corporation tax, deferred tax, and
overdrafts)
(2) Return On Average Capital Employed = (Adjusted operating
profit less interest on non-recourse debt) divided by (average
capital employed). Interest and fees on non-recourse debt in the
last 12 months was GBPnil (LTM HY 2019: GBP1.3m)
Investments
HY 2020 HY 2019 Change
GBPm GBPm
------------------- ------- ------- ------
Operating loss(1) (3.2) (0.9) n/a
------------------- ------- ------- ------
Investments made a loss of GBP3.2m in the period compared to a
loss of GBP0.9m in the prior year.
Impact of C-19 on operations
The two main areas of C-19 impact were delays to construction
activity on existing development schemes and delays to achieving
financial close on new schemes as investment decisions were
deferred.
At the 'peak' impact of the lockdown measures, 55% of
construction sites on its development schemes were closed
completely. As at 30 June, 100% were open and active again.
Secured order book
The secured order book is spread across the division's four
public sector joint venture property partnerships and the Later
Living business. At the period end, the secured order book was
GBP576m, a decrease of 1% on the year end position.
In the division's joint venture with Slough Borough Council, the
construction of two Marriott hotels and 64 apartments on the site
of the former library continued to advance, with the works on the
GBP55m scheme being delivered by Construction &
Infrastructure.
In The Bournemouth Development Company joint venture with BCP
Council, planning consent was secured for 44 apartments, with work
expected to start on site later in the year, and construction
continued on 46 high quality homes for market rent. Winter Gardens,
a mixed-use scheme with a Gross Development Value of GBP164m,
concluded its section 106 agreement and is progressing towards a
start on site at the end of the year.
In Chalkdene Developments, the division's joint venture with
Hertfordshire County Council, construction work continued on a
21-home development in Welwyn Garden City, which is being delivered
by Partnership Housing.
In the Later Living business, six projects were on site across
the UK which together will provide over 400 extra care apartments.
It also continued to progress projects in its pipeline, securing a
planning consent for a 64-apartment extra care scheme in Leeds, its
second in the city.
2020 Outlook
Based upon the current profile of scheme developments and the
impact of delays in the first half, Investments is expected to
broadly break-even in the second half.
(1) before intangible amortisation of GBP1.5m (HY 2019: nil)
(2) Capital employed is calculated as total assets (excluding
goodwill, intangibles and cash) less total liabilities (excluding
corporation tax, deferred tax, inter-company financing and
overdrafts).
Other Financial Information
1. Net finance expense. Net finance expense was GBP2.4m, a
GBP1.2m increase versus HY 2019 due primarily to interest payable
from drawing down on the committed bank facilities as a
precautionary measure in March, during the early stages of C-19. As
at 30 June, GBP60m was still drawn on the facilities.
HY 2020 HY 2019 Change
GBPm GBPm GBPm
--------------------------------------- ------- ------- ------
Interest payable on drawings
on bank facilities (1.1) - (1.1)
Amortisation of bank fees &
non-utilisation fees (0.5) (0.8) 0.3
Interest expense on lease liabilities (0.8) (0.8) -
Interest from JVs 0.2 0.5 (0.3)
Other (0.2) (0.1) (0.1)
Total net finance expense (2.4) (1.2) (1.2)
--------------------------------------- ------- ------- ------
2. Tax. A tax charge of GBP2.9m is shown for the period (HY 2019: GBP7.2m).
HY 2020 HY 2019
GBPm GBPm
------------------------------------------------- ------- -------
Profit before tax 13.6 35.5
Less: share of net losses/(profits)
in joint ventures where taxed(1) 0.3 (0.2)
Profit before tax excluding joint ventures 13.9 35.3
Statutory tax rate 19.0% 19.0%
Current tax charge at statutory rate (2.6) (6.7)
Other adjustments (0.3) (0.5)
Tax charge (2.9) (7.2)
------------------------------------------------- ------- -------
(1) Most of the Group's joint ventures are partnerships
where profits are taxed within the Group rather than
the joint venture. Profits already taxed in the joint
venture are eliminated for these purposes
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 and is stated on a constant
currency basis.
Change
HY 2020 HY 2019 GBPm
GBPm GBPm
--------------------------- ------- -------
Inventories 352.9 355.6 -2.7
Trade & Other Receivables
(1) 410.9 514.8 -103.9
Trade & Other Payables(2) (813.6) (907.5) +93.9
Net working capital (49.8) (37.1) -12.7
--------------------------- ------- ------- -------
(1) Adjusted to exclude capitalised arrangement fees of GBP0.4m
(HY 2019: GBP0.8m) and accrued interest receivable of GBP0.1m (HY
2019: GBPnil)
(2) Adjusted to exclude accrued interest payable of GBP0.4m (HY
2019: GBP0.1m)
4. Cash flow. The operating cash flow for the 12 months to 30
June 2020 was an inflow of GBP94.7m and a free cash inflow of
GBP73.4m. For the half year period to 30 June 2020, there was an
operating cash outflow of GBP15.3m.
HY 2020 HY 2019 Last 12
GBPm GBPm months
-------------------------------------- ------- -------- -------
Operating profit - adjusted 18.1 37.5 73.7
Depreciation 11.3 10.2 22.4
Share option expense 0.1 3.2 2.8
Movement in fair value of shared
equity loans - - 0.4
Share of net loss/(profit)
of joint ventures 0.3 (2.1) (4.1)
Other operating items (1) 6.6 4.4 11.6
Change in working capital (2) (42.1) (116.6) 12.6
Net capital expenditure (including
repayment of finance leases) (9.8) (11.6) (28.3)
Dividends and interest received
from joint ventures 0.2 0.4 3.6
Operating cash flow (15.3) (74.6) 94.7
Income taxes paid (13.2) (5.4) (20.6)
Net interest paid (non-joint
venture) (1.1) (1.0) (0.7)
Free cash flow (29.6) (81.0) 73.4
-------------------------------------- ------- -------- -------
(1) 'Other operating items' includes impairment of investments
(GBP2.7m), provision movements (GBP1.7m), shared equity redemptions
(GBP1.5m), disposal of investment properties (GBP1.3m) less gain on
disposals of property, plant & equipment (GBP0.6m)
(2) The cash flow due to change in working capital for the 12
month period excludes GBP0.7m of non-cash movement relating to the
unwind of discounting on land creditors less GBP0.6m exchange
differences)
5. Net cash. Net cash at period end was GBP146.1m.
GBPm
------
Net cash as at 1 January
2020 192.7
Free cash flow (as above) (29.6)
Dividends -
Other(1) (17.0)
Net cash as at 30 June 2020 146.1
-------------------------------- ------
(1) 'Other' includes net loan payments to JVs (GBP11.7m),
purchase of shares in the Company by the employee benefit trust
(GBP9.4m) less proceeds from the issue of new shares (GBP3.7m) and
proceeds from the exercise of share options (GBP0.4m).
6. Capital employed by strategic activity. An analysis of the
capital employed in the Construction activities shows a decrease of
GBP2.5m since the prior period, split as follows:
Capital employed(1) in Construction HY 2020 HY 2019 Change
GBPm GBPm GBPm
-------- --------
Construction & Infrastructure (204.8) (205.1) +0.3
Fit Out (19.7) (23.4) +3.7
Property Services 9.4 15.9 -6.5
------------------------------------- -------- -------- -------
(215.1) (212.6) -2.5
------------------------------------- -------- -------- -------
An analysis of capital employed in the Regeneration activities
shows an increase of GBP17.7m since the prior period, split as
follows:
Capital employed(1) in Regeneration HY 2020 HY 2019 Change
GBPm GBPm GBPm
-------- --------
Partnership Housing 153.5 155.6 -2.1
Urban Regeneration 117.3 97.5 +19.8
270.8 253.1 +17.7
-------- --------
(1) Total assets (excluding goodwill, intangibles, inter-company
financing and cash) less total liabilities (excluding corporation
tax, deferred tax, inter-company financing and overdrafts)
In addition, capital employed in Investments was GBP27.8m (HY
2019: GBP33.8m).
7. Dividends. The Board has taken into consideration the
interests of all stakeholders and concluded that there remains
sufficient market uncertainty so as not to commit to an interim
dividend at the current time.
8. Principal risks. The Group has a clear and established risk
management framework in place designed and operated to identify,
control and mitigate any threat to the Group achieving its goals.
The risks, including details of the mitigations taken to manage
them, have been assessed by the Board, particularly the impact of
C-19 on current and future business activity.
The impact of C-19 and actions taken in response by the Group
and its divisions are detailed in the Group Operating Review,
Outlook and Divisional Review sections of this statement, including
those taken to preserve cash and return to safe operation.
Details of the Group's principal risks are set out on pages 23
to 32 of its 2019 annual report. The current assessment is that
these are all still applicable for the remainder of 2020, with C-19
having heightened the overall outlook and the following in
particular:
Changes in the economy - that could impact the markets in which
the Group operates, although these markets are believed to be
sustainable and structurally secure over the medium to longer term.
Should the macro position dictate, the Group's decentralised
approach allows it the flexibility to reshape and respond
quickly.
UK housing market - current sales in the Group's Regeneration
divisions point to sustainable short-term demand. The Group's
market position, its schemes with public sector partners and access
to gap funding all support its model (even if average selling
prices should fall). This is underpinned by a UK-wide demand for an
affordable product and political pressure to deliver.
Information technology - t he Group has invested significantly
in IT, allowing its teams to work remotely and remain protected
against a backdrop of significant UK cyber activity. It expects
this activity to increase and remains focused on ensuring that
appropriate protection and recovery strategies are in place.
Brexit - C-19 dominates the macroeconomic position although
specific issues such as the availability of certain materials will
be monitored during Q3/Q4 for signs of stress.
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 2020
Six months Six months
to to Year ended
30 June 2020 30 June 2019 31 Dec 2019
(unaudited) (unaudited) (audited)
Notes GBPm GBPm GBPm
------------------------------------- ----- ------------ ------------ -----------
Revenue 2 1,363.1 1,421.4 3,071.3
Cost of sales (1,225.3) (1,267.4) (2,739.9)
------------------------------------- ----- ------------ ------------ -----------
Gross profit 137.8 154.0 331.4
Administrative expenses (119.4) (122.4) (249.2)
Share of net (loss)/profit of
joint ventures (0.3) 2.1 6.5
Other gains and losses - 3.8 4.4
------------------------------------- ----- ------------ ------------ -----------
Operating profit before amortisation
of intangible assets 18.1 37.5 93.1
------------------------------------- ----- ------------ ------------ -----------
Amortisation of intangible assets (2.1) (0.8) (1.8)
------------------------------------- ----- ------------ ------------ -----------
Operating profit 16.0 36.7 91.3
Finance income 0.6 0.9 1.7
Finance costs (3.0) (2.1) (4.4)
------------------------------------- ----- ------------ ------------ -----------
Profit before tax 13.6 35.5 88.6
Tax (2.9) (7.2) (17.4)
------------------------------------- ----- ------------ ------------ -----------
Profit for the period 10.7 28.3 71.2
------------------------------------- ----- ------------ ------------ -----------
Attributable to:
Owners of the Company 10.7 28.3 71.2
------------------------------------- ----- ------------ ------------ -----------
Earnings per share
Basic 5 23.7p 62.9p 157.9p
Diluted 5 23.0p 60.3p 153.1p
------------------------------------- ----- ------------ ------------ -----------
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 2020
Six months Six months
to to Year ended
30 June
2020 30 June 2019 31 Dec 2019
(unaudited) (unaudited) (audited)
GBPm GBPm GBPm
----------------------------------------- ----------- ------------ -----------
Profit for the period 10.7 28.3 71.2
Items that may be reclassified
subsequently to profit or loss:
Foreign exchange movement on translation
of overseas operation 0.2 (0.1) (0.2)
Gains arising during the period on
net investment hedge 0.5 - -
0.7 (0.1) (0.2)
----------------------------------------- ----------- ------------ -----------
Other comprehensive income/(expense) 0.7 (0.1) (0.2)
------------------------------------------ ----------- ------------ -----------
Total comprehensive income 11.4 28.2 71.0
------------------------------------------ ----------- ------------ -----------
Attributable to:
Owners of the Company 11.4 28.2 71.0
------------------------------------------ ----------- ------------ -----------
Condensed consolidated balance sheet
At 30 June 2020
30 June 2020 30 June 2019 31 Dec 2019
(unaudited) (unaudited) (audited)
Notes GBPm GBPm GBPm
------------------------------- ----- ------------ ------------ -----------
Assets
Goodwill and other intangible
assets 222.1 216.8 223.6
Property, plant and equipment 72.9 71.7 79.5
Investment property 3.8 5.5 5.1
Investments in joint ventures 94.1 78.1 84.3
Other investments 0.2 1.3 1.3
Shared equity loan receivables 6 6.9 11.0 8.4
Non-current assets 400.0 384.4 402.2
------------------------------- ----- ------------ ------------ -----------
Inventories 352.9 355.6 338.1
Contract assets 199.6 264.7 186.8
Trade and other receivables 7 211.8 250.9 275.7
Current tax assets 0.7 - -
Cash and cash equivalents 8 206.1 115.5 192.7
Current assets 971.1 986.7 993.3
------------------------------- ----- ------------ ------------ -----------
Total assets 1,371.1 1,371.1 1,395.5
------------------------------- ----- ------------ ------------ -----------
Liabilities
Contract liabilities (50.6) (87.2) (56.2)
Trade and other payables 9 (759.6) (804.8) (832.4)
Current tax liabilities - (7.4) (9.6)
Lease liabilities (12.3) (11.6) (12.8)
Borrowings 8 (60.0) (1.6) -
Provisions (7.5) - (7.1)
------------------------------- ----- ------------ ------------ -----------
Current liabilities (890.0) (912.6) (918.1)
------------------------------- ----- ------------ ------------ -----------
Net current assets 81.1 74.1 75.2
------------------------------- ----- ------------ ------------ -----------
Trade and other payables (3.8) (15.6) (3.8)
Lease liabilities (43.1) (44.1) (46.9)
Deferred tax liabilities (8.1) (12.2) (8.1)
Provisions (23.1) (26.2) (21.8)
------------------------------- ----- ------------ ------------ -----------
Non-current liabilities (78.1) (98.1) (80.6)
------------------------------- ----- ------------ ------------ -----------
Total liabilities (968.1) (1,010.7) (998.7)
------------------------------- ----- ------------ ------------ -----------
Net assets 403.0 360.4 396.8
------------------------------- ----- ------------ ------------ -----------
Equity
Share capital 2.3 2.3 2.3
Share premium account 42.2 38.4 38.5
Other reserves (0.1) (0.7) (0.8)
Retained earnings 358.6 320.4 356.8
------------------------------- ----- ------------ ------------ -----------
Equity attributable to owners
of the Company 403.0 360.4 396.8
Total equity 403.0 360.4 396.8
------------------------------- ----- ------------ ------------ -----------
Condensed consolidated cash flow statement
For the six months ended 30 June 2020
Six months Six months
to to Year ended
30 June
2020 30 June 2019 31 Dec 2019
(unaudited) (unaudited) (audited)
Notes GBPm GBPm GBPm
---------------------------------------- ----- ----------- ------------ -----------
Operating activities
Operating profit 16.0 36.7 91.3
Adjusted for:
Amortisation of intangible
assets 2.1 0.8 1.8
Share of net loss/(profit)
of equity accounted joint ventures 0.3 (2.1) (6.5)
Depreciation 11.3 10.2 21.3
Share option expense 0.1 3.2 5.9
Gain on disposal of interest
in joint ventures - (3.8) (4.4)
Gain on disposal of property,
plant and equipment (0.6) (0.1) (0.2)
Revaluation of investment properties - - 0.4
Movement in fair value of shared
equity loan receivables 6 - - 0.4
Adjustment for impairment of
investments 2.7 - -
Disposals of investment properties 1.3 0.2 -
Repayment of shared equity loan
receivables 6 1.5 2.0 4.2
Increase in provisions 1.7 2.3 5.0
Proceeds on disposal of service
contracts in joint ventures - 3.8 4.4
Operating cash inflow before
movements in working capital 36.4 53.2 123.6
Increase in inventories (14.8) (21.4) (3.9)
(Increase)/decrease in contract
assets (12.8) (72.7) 5.2
Decrease/(increase) in receivables 63.6 (18.0) (42.9)
Decrease in contract liabilities (5.6) (11.1) (42.1)
(Decrease)/increase in payables (72.5) 6.6 21.8
---------------------------------------- ----- ----------- ------------ -----------
Movements in working capital (42.1) (116.6) (61.9)
---------------------------------------- ----- ----------- ------------ -----------
Cash (outflow)/inflow from operations (5.7) (63.4) 61.7
---------------------------------------- ----- ----------- ------------ -----------
Income taxes paid (13.2) (5.4) (12.8)
---------------------------------------- ----- ----------- ------------ -----------
Net cash (outflow)/inflow from
operating activities (18.9) (68.8) 48.9
---------------------------------------- ----- ----------- ------------ -----------
Investing activities
Interest received 0.6 0.8 1.6
Dividend from joint ventures - - 2.9
Proceeds on disposal of property,
plant and equipment 0.6 0.4 0.3
Purchases of property, plant
and equipment (2.6) (3.3) (12.6)
Purchases of intangible fixed
assets (0.6) (1.2) (2.7)
Net (increase)/decrease in loans
to joint ventures (11.7) 5.5 (3.3)
Payment for the acquisition of subsidiaries,
joint ventures and other businesses - - (1.6)
Net cash (outflow)/inflow from
investing activities (13.7) 2.2 (15.4)
---------------------------------------- ----- ----------- ------------ -----------
Financing activities
Interest paid (1.5) (1.4) (1.3)
Dividends paid 4 - (15.3) (24.8)
Repayments of lease liabilities (7.2) (7.5) (15.1)
Proceeds from borrowings 8 180.0 - -
Repayment of borrowings 8 (120.0) (8.6) (10.2)
Proceeds on issue of share capital 3.7 0.1 0.2
Payments by the Trust to acquire
shares in the Company (9.4) (3.6) (9.1)
Proceeds on exercise of share
options 0.4 1.2 2.3
---------------------------------------- ----- ----------- ------------ -----------
Net cash inflow/(outflow) from
financing activities 46.0 (35.1) (58.0)
---------------------------------------- ----- ----------- ------------ -----------
Net increase/(decrease) in cash
and cash equivalents 13.4 (101.7) (24.5)
Cash and cash equivalents at
the beginning of the period 192.7 217.2 217.2
---------------------------------------- ----- ----------- ------------ -----------
Cash and cash equivalents at
the end of the period 8 206.1 115.5 192.7
---------------------------------------- ----- ----------- ------------ -----------
Condensed consolidated statement of changes in equity
For the six months ended 30 June 2020
Share Share premium Other Retained Total
capital account reserves earnings equity
GBPm GBPm GBPm GBPm GBPm
------------------------------- -------- ------------- --------- --------- -------
1 January 2020 2.3 38.5 (0.8) 356.8 396.8
Profit for the year - - - 10.7 10.7
Other comprehensive income - - 0.7 - 0.7
------------------------------- -------- ------------- --------- --------- -------
Total comprehensive income - - 0.7 10.7 11.4
Share option expense - - - 0.1 0.1
Issue of shares at a premium - 3.7 - - 3.7
Exercise of share options - - - 0.4 0.4
Purchase of shares in
the Company by the Trust - - - (9.4) (9.4)
30 June 2020 (unaudited) 2.3 42.2 (0.1) 358.6 403.0
------------------------------- -------- ------------- --------- --------- -------
Share Share premium Other Retained Total
capital account reserves earnings equity
GBPm GBPm GBPm GBPm GBPm
------------------------------- -------- ------------- --------- --------- -------
1 January 2019 2.3 38.3 (0.6) 306.6 346.6
Profit for the year - - - 28.3 28.3
Other comprehensive expense - - (0.1) - (0.1)
------------------------------- -------- ------------- --------- --------- -------
Total comprehensive income - - (0.1) 28.3 28.2
Share option expense - - - 3.2 3.2
Issue of shares at a premium - 0.1 - - 0.1
Exercise of share options - - - 1.2 1.2
Purchase of shares in
the Company by the Trust - - - (3.6) (3.6)
Dividends paid - - - (15.3) (15.3)
------------------------------- -------- ------------- --------- --------- -------
30 June 2019 (unaudited) 2.3 38.4 (0.7) 320.4 360.4
------------------------------- -------- ------------- --------- --------- -------
Share Share premium Other Retained Total
capital account reserves earnings equity
GBPm GBPm GBPm GBPm GBPm
------------------------------- -------- ------------- --------- --------- -------
1 January 2019 2.3 38.3 (0.6) 306.6 346.6
Profit for the year - - - 71.2 71.2
Other comprehensive expense - - (0.2) - (0.2)
------------------------------- -------- ------------- --------- --------- -------
Total comprehensive income - - (0.2) 71.2 71.0
Share option expense - - - 5.9 5.9
Tax relating to share
option expense - - - 4.7 4.7
Issue of shares at a premium - 0.2 - - 0.2
Exercise of share options - - - 2.3 2.3
Purchase of shares in
the Company by the Trust - - - (9.1) (9.1)
Dividends paid - - - (24.8) (24.8)
------------------------------- -------- ------------- --------- --------- -------
31 December 2019 (audited) 2.3 38.5 (0.8) 356.8 396.8
------------------------------- -------- ------------- --------- --------- -------
Other reserves
Other reserves include:
-- Capital redemption reserve of GBP0.6m (30 June 2019: GBP0.6m,
31 December 2019: GBP0.6m) which was created on the redemption of
preference shares in 2003.
-- Hedging reserve of (GBP0.3m) (30 June 2019: (GBP0.8m), 31
December 2019: (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 (GBP0.4m) (30 June 2019: (GBP0.5m), 31
December 2019: (GBP0.6m)) 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 2020 was
349,359 (30 June 2019: 298,932, 31 December 2019: 351,961) with a
cost of GBP2.8m (30 June 2019: GBP1.5m, 31 December 2019:
GBP2.2m).
Notes to the consolidated financial statements
For the six months ended 30 June 2020
1 Basis of preparation
General information
The financial information for the year ended 31 December 2019
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
2020 and 2019 and for the six months ended 30 June 2020 and 2019
are therefore unaudited.
Basis of preparation
The annual financial statements of Morgan Sindall Group plc are
prepared in accordance with IFRSs as adopted by the European Union.
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 International Financial
Reporting Standards ('IFRS'), this half year report does not itself
contain sufficient information to comply with IFRS.
Going concern
As at 30 June 2020 , the Group had net cash of GBP146.1m and
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 foreseeable
future. 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 foreseeable future.
Accordingly, they continue to adopt the going concern basis in
preparing the condensed consolidated financial statements.
Tax
A tax charge of GBP2.9m is shown for the six month period (six
months to 30 June 2019: GBP7.2m, year ended 31 December 2019:
GBP17.4m). 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
2019.
Seasonality
The Group's activities are generally not subject to significant
seasonal variation.
2 Revenue
An analysis of the Group's revenue which depicts the nature,
timing and uncertainty of the different revenue streams is as
follows:
Six months Six months Year ended
to to
30 June 2020 30 June 2019 31 Dec 2019
GBPm GBPm GBPm
-------------------------------- ------------ ------------ -----------
Construction 290.1 284.2 618.9
Infrastructure and design 499.4 395.5 867.5
-------------------------------- ------------ ------------ -----------
Construction and Infrastructure 789.5 679.7 1,486.4
Traditional fit out 277.8 330.5 680.7
Design and build 38.9 76.1 158.0
-------------------------------- ------------ ------------ -----------
Fit Out 316.7 406.6 838.7
Property Services 52.8 54.7 115.3
Contracting 75.8 131.9 243.7
Mixed tenure 89.2 105.6 269.2
-------------------------------- ------------ ------------ -----------
Partnership Housing 165.0 237.5 512.9
Urban Regeneration 34.5 44.2 118.8
Investments 12.2 2.4 8.0
Eliminations (7.6) (3.7) (8.8)
-------------------------------- ------------ ------------ -----------
Total revenue 1,363.1 1,421.4 3,071.3
-------------------------------- ------------ ------------ -----------
3 Business segments
For management purposes, the Group is organised into six
operating divisions: Construction & Infrastructure, Fit Out,
Property Services, Partnership Housing, Urban Regeneration and
Investments. The divisions' activities are as follows:
-- Construction & Infrastructure: provides infrastructure
services in the highways, rail, aviation, energy, water and nuclear
markets, including tunnel design; and construction services in
education, healthcare, defence, commercial, industrial, leisure and
retail. BakerHicks offers a multidisciplinary design and
engineering consultancy.
-- Fit Out: Overbury specialises in fit out and refurbishment in
commercial, central and local government offices, further education
and retail banking. Morgan Lovell provides design and build
services for the office sector.
-- Property Services: provides planned asset management and
responsive maintenance to social housing and the wider public
sector.
-- Partnership Housing: works in partnerships with local
authorities and housing associations. Activities include
mixed-tenure developments, building and developing homes for open
market sale and affordable rent, design and build contracting and
planned maintenance and refurbishment.
-- Urban Regeneration: 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.
-- Investments: works to provide the Group with construction and
regeneration opportunities through various strategic partnerships
to develop under-utilised property assets .
Group Activities represents 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,
and information technology services. The divisions are the basis on
which the Group reports its segmental information as presented
below:
Six months
to 30 June
2020
-------------- -------------- ----- -------- ----------- ------------ ----------- ---------- ------------ -------
Construction
& Fit Property Partnership Urban Group
Infrastructure Out Services Housing Regeneration Investments Activities Eliminations Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
-------------- -------------- ----- -------- ----------- ------------ ----------- ---------- ------------ -------
External
revenue 781.9 316.7 52.8 165.0 34.5 12.2 - - 1,363.1
Inter-segment
revenue 7.6 - - - - - - (7.6) -
-------------- -------------- ----- -------- ----------- ------------ ----------- ---------- ------------ -------
Total revenue 789.5 316.7 52.8 165.0 34.5 12.2 - (7.6) 1,363.1
Operating
profit/(loss)
before
amortisation
of intangible
assets 11.5 10.9 (0.5) 3.0 2.1 (3.2) (5.7) - 18.1
-------------- -------------- ----- -------- ----------- ------------ ----------- ---------- ------------ -------
Amortisation
of intangible
assets - - (0.6) - - (1.5) - - (2.1)
Operating
profit/(loss) 11.5 10.9 (1.1) 3.0 2.1 (4.7) (5.7) - 16.0
-------------- -------------- ----- -------- ----------- ------------ ----------- ---------- ------------ -------
Six months to 30
June 2019
------------------------------ ----- -------- ----------- ------------ ----------- ---------- ------------ -------
Construction
& Fit Property Partnership Urban Group
Infrastructure Out Services Housing Regeneration Investments Activities Eliminations Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
-------------- -------------- ----- -------- ----------- ------------ ----------- ---------- ------------ -------
External
revenue 677.2 405.4 54.7 237.5 44.2 2.4 - - 1,421.4
Inter-segment
revenue 2.5 1.2 - - - - - (3.7) -
-------------- -------------- ----- -------- ----------- ------------ ----------- ---------- ------------ -------
Total revenue 679.7 406.6 54.7 237.5 44.2 2.4 - (3.7) 1,421.4
Operating
profit/(loss)
before
amortisation
of intangible
assets 13.9 16.4 1.6 6.4 8.3 (0.9) (8.2) - 37.5
-------------- -------------- ----- -------- ----------- ------------ ----------- ---------- ------------ -------
Amortisation
of intangible
assets - - (0.8) - - - - - (0.8)
Operating
profit/(loss) 13.9 16.4 0.8 6.4 8.3 (0.9) (8.2) - 36.7
-------------- -------------- ----- -------- ----------- ------------ ----------- ---------- ------------ -------
Year ended 31 December
2019
------------------------------ ----- -------- ----------- ------------ ----------- ---------- ------------ -------
Construction
& Fit Property Partnership Urban Group
Infrastructure Out Services Housing Regeneration Investments Activities Eliminations Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
-------------- -------------- ----- -------- ----------- ------------ ----------- ---------- ------------ -------
External
revenue 1,480.3 837.1 115.3 511.8 118.8 8.0 - - 3,071.3
Inter-segment
revenue 6.1 1.6 - 1.1 - - - (8.8) -
-------------- -------------- ----- -------- ----------- ------------ ----------- ---------- ------------ -------
Total revenue 1,486.4 838.7 115.3 512.9 118.8 8.0 - (8.8) 3,071.3
Operating
profit/(loss)
before
amortisation
of intangible
assets 32.3 36.9 4.3 18.3 19.4 (2.4) (15.7) - 93.1
-------------- -------------- ----- -------- ----------- ------------ ----------- ---------- ------------ -------
Amortisation
of intangible
assets - - (1.2) - - (0.6) - - (1.8)
Operating
profit/(loss) 32.3 36.9 3.1 18.3 19.4 (3.0) (15.7) - 91.3
-------------- -------------- ----- -------- ----------- ------------ ----------- ---------- ------------ -------
During the period ended 30 June 2020, the period ended 30 June
2019 and the year ended 31 December 2019, inter-segment sales were
charged at prevailing market prices and significantly all the
Group's operations were carried out in the UK.
4 Dividends
Amounts recognised as distributions to equity
holders in the period:
--------------------------------------------------- ------------ -----------
Six months Six months
to to Year ended
30 June 2020 30 June 2019 31 Dec 2019
GBPm GBPm GBPm
------------------------------------- ------------ ------------ -----------
Final dividend for the year ended
31 December 2018 of 34.0p per share - 15.3 15.3
Interim dividend for the year ended
31 December 2019 of 21.0p per share - - 9.5
------------------------------------- ------------ ------------ -----------
- 15.3 24.8
------------------------------------- ------------ ------------ -----------
Subsequent to the approval of the 2019 Annual Report, the Board
determined that it was no longer prudent to propose the 2019 final
dividend at the Group's AGM.
No interim dividend for 2020 is currently proposed by the
Board.
5 Earnings per share
Six months Six months
to to Year ended
30 June 2020 30 June 2019 31 Dec 2019
GBPm GBPm GBPm
----------------------------------- ------------ ------------ -----------
Profit attributable to the owners
of the Company 10.7 28.3 71.2
Adjustments:
Amortisation of intangible
assets net of tax 1.7 0.6 1.5
Adjusted earnings 12.4 28.9 72.7
------------------------------------ ------------ ------------ -----------
Basic weighted average ordinary
shares (m) 45.2 45.0 45.1
Dilutive effect of share options
and conditional shares not vested
(m) 1.3 1.9 1.4
------------------------------------ ------------ ------------ -----------
Diluted weighted average ordinary
shares (m) 46.5 46.9 46.5
------------------------------------ ------------ ------------ -----------
Basic earnings per share 23.7p 62.9p 157.9p
Diluted earnings per share 23.0p 60.3p 153.1p
Adjusted earnings per share 27.4p 64.2p 161.2p
Diluted adjusted earnings per
share 26.7p 61.6p 156.3p
------------------------------------ ------------ ------------ -----------
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 weighted average
share price for the period was GBP14.61 (30 June 2019: GBP12.31, 31
December 2019: GBP12.51).
A total of 783,723 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 2020 (30
June 2019: 3,305,885, 31 December 2019: 3,189,945).
6 Shared equity loan receivables
30 June 2020 30 June 2019 31 Dec 2019
GBPm GBPm GBPm
------------------------------------ ------------ ------------ -----------
1 January 8.4 13.0 13.0
Net change in fair value recognised
in the income statement - - (0.4)
Repayments by borrowers (1.5) (2.0) (4.2)
------------------------------------- ------------ ------------ -----------
End of period 6.9 11.0 8.4
------------------------------------- ------------ ------------ -----------
Basis of valuation and assumptions made
There is no directly observable fair value for individual loans
arising from the sale of properties under the scheme, and therefore
the Group has developed a model for determining the fair value of
the portfolio of loans based on national property prices, expected
property price increases, expected loan defaults and a discount
factor which reflects the interest rate expected on an instrument
of similar risk and duration in the market. Details of the key
assumptions made in this valuation are as follows:
30 June 2020 30 June 2019 31 Dec 2019
----------------------------------------- ------------ ------------ -----------
Assumption
Period over which shared equity loan receivables
are discounted:
First Buy and Home Buy schemes 20 years 20 years 20 years
Other schemes 9 years 9 years 9 years
Nominal discount rate 5.3% 5.3% 5.3%
Weighted average nominal annual property
price increase 2.4% 2.5% 2.5%
Forecast default rate 13.0% 11.3% 11.5%
Number of loans under the shared
equity scheme outstanding at the
period end 236 338 276
------------------------------------------ ------------ ------------ -----------
Sensitivity analysis
At 30 June 2020, if the nominal discount rate had been 100bps
higher at 6.3% and all other variables were held constant, the fair
value of the shared equity loan receivables would decrease by less
than GBP0.1m with a corresponding reduction in both the result for
the period and equity (excluding the effects of tax).
At 30 June 2020, if the period over which the shared equity loan
receivables (excluding those relating to the First Buy and Home Buy
schemes) are discounted had been 10 years and all other variables
were held constant, the fair value of the shared equity loan
receivables would decrease by less than GBP0.1m with a
corresponding reduction in both the result for the period and
equity (excluding the effects of tax).
At 30 June 2020, if the forecast default rate had been 100bps
higher at 14.0% and all other variables were held constant, the
fair value of the shared equity loan receivables would have
decrease by GBP0.1m with a corresponding reduction in both the
result for the period and equity (excluding the effects of
tax).
7 Trade and other receivables
30 June 2020 30 June 2019 31 Dec 2019
GBPm GBPm GBPm
------------------------------- ------------ ------------ -----------
Trade receivables 174.4 220.5 244.7
Amounts owed by joint ventures 4.2 1.5 4.9
Prepayments 21.4 19.0 14.1
Other receivables 11.8 9.9 12.0
-------------------------------- ------------ ------------ -----------
211.8 250.9 275.7
------------------------------- ------------ ------------ -----------
8 Net cash
30 June 2020 30 June 2019 31 Dec 2019
GBPm GBPm GBPm
---------------------------- ------------ ------------ -----------
Cash and cash equivalents 206.1 115.5 192.7
Borrowings due in less than
one year (60.0) (1.6) -
Net cash 146.1 113.9 192.7
----------------------------- ------------ ------------ -----------
Included within cash and cash equivalents is GBP58.2m which is
the Group's share of cash held within jointly controlled operations
(30 June 2019: GBP42.6m, 31 December 2019: GBP54.2m), including
GBP4.1m held for future payment to designated suppliers (30 June
2019: GBP6.1m, 31 December 2019: GBP10.2m).
9 Trade and other payables
30 June
30 June 2020 2019 31 Dec 2019
GBPm GBPm GBPm
------------------------------- ------------ ------- -----------
Trade payables 171.1 210.7 184.0
Amounts owed to joint ventures 0.2 0.4 0.1
Other tax and social security 42.7 15.4 37.1
Accrued expenses 527.5 561.7 597.8
Deferred income - 0.8 1.6
Other payables 18.1 15.8 11.8
-------------------------------- ------------ ------- -----------
759.6 804.8 832.4
------------------------------- ------------ ------- -----------
10 Retirement benefit asset
The Morgan Sindall Retirement Benefits Plan ('the Retirement
Plan') was established on 31 May 1995 and currently operates on
defined contribution principles for employees of the Group. The
Retirement Plan also includes a defined benefit section comprising
liabilities and transfers of funds representing the accrued benefit
rights of active and deferred members and pensioners of pension
plans of companies which are now part of the Group. These include
salary related benefits for members in respect of benefits accrued
before 31 May 1995 (and benefits transferred in from The Snape
Group Limited Retirement Benefits Scheme accrued up to 1 August
1997). No further defined benefit membership rights can accrue
after those dates. The scheme duration is an indicator of the
weighted-average time until benefit payments are expected to be
made. For the scheme as a whole, the duration is around 15
years.
On 23 May 2018 the Trustees of the Retirement Plan completed a
buy-in transaction with Aviva to insure the benefits of the Defined
Benefit members. The buy-in policy is an asset of the Plan that
provides payments that are an exact match to the pension payments
made to the Defined Benefit members covered by the policy.
11 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.
12 Subsequent events
The Group received the benefit of GBP9.3m under the CJRS during
the period, which facilitated the safeguarding of many jobs during
the period of maximum impact of COVID-19. As the Group's financial
position has remained robust and resilient throughout the period,
it is now intended that all payments received under the CJRS are
returned during the second half and no claims will be made in
future for any bonus payments eligible under the scheme.
Responsibility statement
The directors confirm that to the best of their knowledge:
(a) the unaudited condensed consolidated financial statements,
which have been prepared in accordance with IAS 34 'Interim
Financial Reporting' as adopted by the European Union, 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;
(b) 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
(c) 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
5 August 2020
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR FLFSATEISIII
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