Preliminary Results Presentation, Year to 30th June 2007
Greg Fitzgerald - Chief Executive
Frank Nelson - Finance Director
Stephen Teagle - Affordable Housing Director
1
Preliminary Results Presentation – September 2007
Disclaimer
This presentation is being made only to and is directed at (a) persons who have professional
experience in matters relating to investments falling within Article 19(1) of the Financial
Services and Markets Act 2000 (Financial Promotion) Order 2005 (the “Order”) or (b) any
other persons to who it may otherwise lawfully be communicated, falling within Article 49(2) of
the Order (all such persons being referred to as “relevant persons”).
Any person who is not a relevant person should not act or rely on this presentation or any of
its comments.
The financial information set out in this document does not constitute the Company’s statutory
accounts. Statutory accounts for 2006, which received an auditors’ report that was unqualified
and did not contain any statement concerning accounting records or failure to obtain
necessary information and explanations, have been filed with the Registrar of Companies.
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Preliminary Results Presentation – September 2007
Agenda
• Key Highlights
• Financial Review
• Operating Review
Regeneration Photo
• Initiatives for the Future
• Summary and Outlook
The Village, St Austell, Cornwall
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Preliminary Results Presentation – September 2007
Key Highlights
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Preliminary Results Presentation – September 2007
Key Highlights
• Profits substantially ahead of last year
• Gearing significantly below forecast
• Forward order book in construction maintained
• Strong in-hand sales position
• Land bank increased, resulting from success in regeneration
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Preliminary Results Presentation – September 2007
Key Highlights
• Significant expansion of Affordable Housing and Regeneration activity
• Morrison and Chartdale acquisitions performing ahead of expectations
• Acquisition of Linden
• Pension legacy addressed
• Momentum in all divisions facilitating further growth
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Preliminary Results Presentation – September 2007
Key Highlights
New Structure
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Preliminary Results Presentation – September 2007
Financial Overview
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Preliminary Results Presentation – September 2007
Financial Overview
Highlights
• Group revenue £1.4bn, up 65%
• Profit before tax
• Pre exceptional £53m, up 63%
• Post exceptional £60.2m, up 75%
• Earnings per share
• Pre exceptional 12.5p, up 29%
• Post exceptional 14.3p, up 32%
• Dividend 3p, up 20%
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Preliminary Results Presentation – September 2007
Financial Overview
Highlights
• Net debt £99m – strong construction performance
• Profit from operations (excluding Linden) up by 43%
• Return on average shareholders’ funds of 28%
• Pre exceptional tax charge reduced to 27.9% (post exceptional 27.6%)
• 5 year banking facility of £450m
• Progressing significant joint venture with HBOS
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Preliminary Results Presentation – September 2007
Financial Overview
Income Statement
2007
2006
£m
£m
1,409.7
854.1
Profit from operations*
62.8
38.3
JV interest and tax
(0.3)
(0.3)
Profit before finance costs, amortisation and exceptionals
62.5
38.0
Intangibles amortisation
(1.4)
(0.5)
Profit before exceptionals and finance costs
61.1
37.5
Net finance costs
(8.1)
(5.0)
Profit before exceptionals
53.0
32.5
- property rationalisation
3.9
3.9
- pensions, actuarial gain
5.2
-
(1.9)
(1.9)
60.2
34.5
Revenue
Exceptional items - £7.2m
- restructuring costs
Profit before tax
* Profit from operations is stated before finance costs, exceptional items, amortisation and share of joint ventures’ interest and tax
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Preliminary Results Presentation – September 2007
Financial Overview
Segmental Analysis to 30th June 2007 – Primary Operating Profit
Revenue (including JVs)
£m
2007
2006
Profit/(Loss)
£m
2007
2006
Building
667.0
12.3
Infrastructure
410.7
9.8
Construction
1077.7
628.8
22.1
13.2
3.5
0.9
(1.1)
(1.6)
345.9
223.8
48.9
32.1
1.1
0.6
(7.1)
(5.4)
1,428.2
854.1
62.8*
38.3*
Intangibles amortisation
(1.4)
(0.5)
Less JV interest and tax
(0.3)
(0.3)
Net interest payable
(8.1)
(5.0)
Profit before exceptionals
53.0
32.5
Exceptional items
7.2
2.0
Profit before tax
60.2
34.5
PPP Investments
Housebuilding
Group
* Profit from operations
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Preliminary Results Presentation – September 2007
Financial Overview
Segmental Analysis to 30th June 2007 – Profit Before Tax
Revenue (including JVs)
£m
2007
2006
Profit/(Loss)
£m
2007
2006
Building
667.0
15.7
Infrastructure
410.7
10.5
Construction
1,077.7
628.8
26.2
14.5
3.5
0.9
(1.4)
(1.7)
345.9
223.8
26.4
20.7
1.1
0.6
3.5
(0.2)
1,428.2
854.1
54.7*
33.3*
Intangibles amortisation
(1.4)
(0.5)
Less JV interest and tax
(0.3)
(0.3)
Profit before exceptionals
53.0
32.5
Exceptional items
7.2
2.0
Profit before tax
60.2
34.5
PPP Investments
Housebuilding
Group
* Management estimate of interest allocation
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Preliminary Results Presentation – September 2007
Financial Overview
Segmental Analysis to 30th June 2007 – Operating Profit including Affordable Housing and Regeneration
Revenue (including JVs)
£m
2007
2007
2006
Building
580.1
11.0
Infrastructure
410.7
9.8
Construction
990.8
584.1
20.8
11.8
3.5
0.9
(1.1)
(1.6)
Affordable Housing & Regeneration
128.4
67.6
6.1
3.8
Housebuilding
304.4
200.9
44.1
29.7
1.1
0.6
(7.1)
(5.4)
1,428.2
854.1
62.8*
38.3*
Intangibles amortisation
(1.4)
(0.5)
Less JV interest and tax
(0.3)
(0.3)
Net interest payable
(8.1)
(5.0)
Profit before exceptionals
53.0
32.5
Exceptional items
7.2
2.0
Profit before tax
60.2
34.5
PPP Investments
Group
14
2006
Profit/(Loss)
£m
*Profit from operations
Preliminary Results Presentation – September 2007
Financial Overview
Segmental Analysis to 30th June 2007 - PBT including Affordable Housing and Regeneration
Revenue (including JVs)
£m
2007
2006
Profit/(Loss)
£m
2007
2006
Building
580.1
14.0
Infrastructure
410.7
10.5
Construction
990.8
584.1
24.5
12.9
3.5
0.9
(1.4)
(1.7)
Affordable Housing & Regeneration
128.4
67.6
4.3
2.8
Housebuilding
304.4
200.9
23.8
19.5
1.1
0.6
3.5
(0.2)
1,428.2
854.1
54.7*
33.3*
Intangibles amortisation
(1.4)
(0.5)
Less JV interest and tax
(0.3)
(0.3)
Profit before exceptionals
53.0
32.5
Exceptional items
7.2
2.0
Profit before tax
60.2
34.5
PPP Investments
Group
*Management estimate of interest allocation
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Preliminary Results Presentation – September 2007
Financial Overview
Share of the Cake – Net Profits
2007
2006
Building (27%)
Construction (37%)
Infrastructure (20%)
Affordable &
Regeneration (8%)
Affordable &
Regeneration (8%)
Housebuilding (55%)
Housebuilding (45%)
Excludes Group and PPP Investments
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Preliminary Results Presentation – September 2007
Financial Overview
Finance Costs
2007
2006
£m
£m
- Net interest payable
1.6
1.9
- On unwinding of discount on creditors
5.1
2.4
- Net return on asset of pension fund
0.7
0.7
- Other
0.7
-
8.1
5.0
Finance Costs
Finance Costs
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Preliminary Results Presentation – September 2007
Financial Overview
Balance Sheet Highlights
2007
2006
Shareholders’ funds £m
306.6*
120.1*
Net (debt)/cash £m
(98.7)
16.0
32%
N/A
8x
8x
23 x
17 x
Gearing
Interest cover - total (IFRS)
- bank
Land £m
547.6
208.5
Work in progress £m
157.3
74.1
Land creditors £m
(145.5)
(56.6)
Deferred payment – Linden & Chartdale £m
(43.9)
(36.5)
* Includes £18m net pension deficit (2006: £33m)
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Preliminary Results Presentation – September 2007
Financial Overview
Cash Flow Summary
2007
£m
2006
£m
10.4
18.2
Interest, tax and dividends
(25.4)
(19.8)
Net proceeds from issue of shares
147.0
48.8
Acquisitions (net of cash acquired)
40.1
(24.8)
Repayment of borrowings acquired
(261.0)
-
Proceeds from sale of fixed assets *
19.6
11.1
Capital expenditure and investments
(4.7)
(3.3)
Other
(40.7)
(1.8)
Net cash (outflow)/inflow
(114.7)
28.4
Opening net cash/(debt)
16.0
(12.4)
Closing net (debt)/cash
(98.7)
16.0
Operating cash flow
* Includes proceeds from sale and leasebacks
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Preliminary Results Presentation – September 2007
Financial Overview
Linden Acquisition
• Accounting in line with estimates at acquisition date
Pre-Acquisition*
£m
Fair Value
£m
-
11.1
6.4
9.8
Developments
272.6
321.6
Other Assets
26.6
26.6
Net Debt
(159.8)
(159.8)
Liabilities
(105.7)
(139.7)
Deferred Tax
(0.9)
(11.0)
Net Assets Acquired
39.2
58.6
Linden Fair Value
Intangibles
Fixed Assets
Goodwill
52.2
110.8
Transaction Costs
Consideration
(2.3)
108.5*
*Deferred consideration of £13m
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Preliminary Results Presentation – September 2007
Operating Review - Building
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Preliminary Results Presentation – September 2007
Operating Review - Building
Key Highlights
• All business units exceeded budget
• 84% of work secured for current year
• Further penetration of commercial
market
• New FM business set up
SABMiller, Woking
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Preliminary Results Presentation – September 2007
Operating Review - Building
Key Highlights
• Northern operation now fully
established
• Progress on Highland and
Northampton schools on track
• Recruitment of quality staff is
challenging
• Market conditions remain strong
Royal Northern College of Music, Manchester
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Preliminary Results Presentation – September 2007
Operating Review - Building
Forward Order Book
Forward Order Book
£m
Sectors
Total
Health
128.1
Education
180.7
Prisons
150.2
Commercial
305.2
Interiors
12.8
Other
124.5
901.5
Excludes Affordable Housing
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Preliminary Results Presentation – September 2007
Operating Review - Infrastructure
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Preliminary Results Presentation – September 2007
Operating Review - Infrastructure
Key Highlights
• Delivering upper quartile
returns
• 85% of work secured for
current year
• Creation of transport business
from highways and rail
activities
• Expanding geographical
coverage through integration
Handsacre Rail Project, Trent Valley
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Preliminary Results Presentation – September 2007
Operating Review - Infrastructure
Key Highlights
• Development of
microrenewables capability
• New Framework wins including
Environment Agency
• Good progress on Whitelee and
Olympic contracts
• Excellent customer satisfaction
results
• Buoyant market conditions
Biosolids Treatment Works, Kings Lynn
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Preliminary Results Presentation – September 2007
Operating Review - Infrastructure
Forward Order Book
Forward Order Book
£m
Sectors
Total
Water
568.9
Highways
217.0
Flood Alleviation
107.3
Rail
40.0
Waterways
20.3
Remediation
97.0
Communications
10.7
Renewable Energy
38.5
International
21.3
Ground Engineering
1.9
1,122.9
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Preliminary Results Presentation – September 2007
Operating Review - Investments
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Preliminary Results Presentation – September 2007
Operating Review - Investments
Key Highlights
• Integration complete, optimising
complementary skills
• Achieved financial close on SE
Essex LIFT
• Preferred bidder on St Andrews
Community Hospital
• Shortlisted on Birmingham Schools
BSF
• Good pipeline of future projects
• New equity model in place
• Updated Directors’ Valuation
Gaelic Primary School, Inverness
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Preliminary Results Presentation – September 2007
Operating Review -
Affordable Housing and Regeneration
Stephen Teagle – Affordable Housing Director
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Preliminary Results Presentation – September 2007
Operating Review - Affordable Housing and Regeneration
The Market
• Increased public investment to improve
supply
• Major releases of public sector land
• Broadening market engagement by
Government
• Regeneration funding driving R&D in
housing
• Estate regeneration displacing decent
homes investment
• Hybrid GT model attractive to market
Green Paper – Gun Wharf, Plymouth
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Preliminary Results Presentation – September 2007
Operating Review - Affordable Housing and Regeneration
Key Highlights - Regeneration
• Established dedicated team
• Expertise and capability aligned with
market
• Secured 6 regeneration sites from EP
(1,883 plots)
• Shortlisted on 2 further EP sites
(530 plots)
New Photo
• Further joint ventures (980 plots) with
RSLs on estate regeneration
• First JV with National Grid
• Mixed use schemes being delivered
across Group
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Yarborough Estate, Grimsby
Preliminary Results Presentation – September 2007
Operating Review - Affordable Housing and Regeneration
Key Highlights – Affordable
• Frameworks with 25 RSLs
• Pre-qualified for National Grant
Programme 08-11
• Significant enhanced revenues
achieved
• Early involvement in S106 negotiations
• Average selling price 06/07 £133k
• National Award winner
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Preliminary Results Presentation – September 2007
Operating Review - Affordable Housing and Regeneration
Key Statistics - including Joint Ventures
12 months to June 2007
2007
2006
Increase %
Units
960
580
66%
Revenue £m
128
68
90%
Profit from operations £m
6.1
3.8
61%
4.8%
5.6%
-
187
134
40%
3,600
976
269%
Margin %
In hand position August 07 £m
Land bank August 07 units
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Preliminary Results Presentation – September 2007
Operating Review - Affordable Housing and Regeneration
Summary and Outlook
• Significant regeneration opportunities
• Further business focus to deliver growth
• Capitalise on operational synergies
• Access Government funding direct
New Photo
• Emphasis on enhancing affordable
margins
• Buoyant market with strong growth
prospects
Union Road, London
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Preliminary Results Presentation – September 2007
Operating Review - Housebuilding
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Preliminary Results Presentation – September 2007
Operating Review - Housebuilding
Key Highlights
• Record Year
• Secured first housing development
in Scotland
• National House Builder of the Year
• Acquisition of Linden Homes
• Consolidated position as Top Ten
Housebuilder
• All business units re-branded
• Industry leading customer
satisfaction
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Preliminary Results Presentation – September 2007
Operating Review - Housebuilding
Key Statistics - including Joint Ventures
12 months to June 2007
2007
2006
Increase %
1,211
854
42%
Average Selling Price £000
239
232
3%
Income per sq. ft £
228
224
2%
Revenue £m
304
201
51%
Profit from operations £m
44.1
29.7
48%
Margin %
14.5%
14.8%
-
ROCE *
19.5%
20.8%
-
243
97
151%
Land bank August 07 units
7,600
3,139
142%
Strategic land August 07 acres
1,508
625
141%
Units
In hand position August 07 £m
* Includes private housing, S106 and regeneration (excluding contracting)
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Preliminary Results Presentation – September 2007
Operating Review - Housebuilding
Linden Acquisition
• Integration ahead of schedule
• Re-organisation costs in line with
expectation
• Synergy savings and best practice
ahead of forecast
• Linden London Developments
established
• Merged business exceeding
expectations
• Linden management fully
integrated into enlarged business
Fusion, Woking, Surrey
40
Preliminary Results Presentation – September 2007
Operating Review - Housebuilding
Market Outlook
• Challenging market with
encouraging sales during summer
• Incentive levels within budgeted
allowances
• Part exchange remains under
control
• Little exposure to consortium sites
• Planning process continues to be
difficult
• Increased land bank gives greater
visibility
41
Watercolour, Redhill, Surrey
Preliminary Results Presentation – September 2007
Initiatives for the Future
42
Preliminary Results Presentation – September 2007
Initiatives for the Future
•
Initiatives
• Harness Group purchasing power
• Speculative housing in Scotland
• Development of microrenewable
expertise
• Mixed tenure development in
Partnerships
• Expand Facilities Management capability
• Strategic equity participation in PFI
schemes
•
Improved Incentive Scheme
Tesco, Welwyn Garden City
43
Preliminary Results Presentation – September 2007
Summary and Outlook
44
Preliminary Results Presentation – September 2007
Summary and Outlook
• Top 10 contractor and housebuilder
• All divisions performing well within challenging or strong market
conditions
• Major focus on Affordable and Regeneration Housing
• Successful integration of major acquisitions
• Increased land bank providing greater flexibility and visibility
• Management team further strengthened
• Significant investment for the future
• Strong cash generation
• Confidence in 2007/08
45
Preliminary Results Presentation – September 2007
Preliminary Results Presentation
Year to 30th June 2007
46
Preliminary Results Presentation – September 2007
Appendix 1
Office Locations
47
Preliminary Results Presentation – September 2007
Appendix 2
Affordable Housing and Regeneration
The combined Affordable Housing and Regeneration profit centre will comprise all turnover and profit from three sources:
CONTRACTING
•100% of affordable housing contracting
Currently undertaken primarily by GT Partnerships, but also Midas and Stamford.
ENABLING
•100% of affordable housing Section 106 units
This includes all planning obligations arising from spec schemes where affordable housing comprises < 50%. This is
irrespective of the contractual arrangements, or whether schemes are delivered via RSLs or the private sector.
REGENERATION
•Mixed tenure regeneration
 When publicly commissioned, these developments are generally characterised by a level of affordable provision in
excess of local planning policy; may require public gap funding to proceed; and are often on brownfield sites, surplus
public land, or within more fragile housing markets. Mixed tenure regeneration schemes incorporate profits arising
from all elements; spec and affordable and any additional mixed use. It includes
- all schemes where affordable housing represents 50% or more of a development
- all RSL or public joint venture schemes
- all publicly commissioned schemes e.g., EP sites
For the purpose of these definitions, First Time Buyer Initiative and other publicly commissioned housing is defined as
Affordable. The use of the term Regeneration is intended to illustrate those schemes which, whilst incorporating speculative
sales risk, provide a different business risk profile.
Profit arising from land sales which meets these policy definitions will also be incorporated, based on unit numbers within the
segment.
48
Preliminary Results Presentation – September 2007
Appendix 3
Housebuilding - Operational Structure
Chris Coates
South East
Ian Ralston
Thames V
49
Paul Cooper
South East
Ian Baker
Mids, S & SW
Tom Nicholson
Chiltern
Bill Cawse
South West
Mike Dempsey
Midlands
Brendan Blythe
North
Pat Feighery
Southern
Toby Ballard
Western
Preliminary Results Presentation – September 2007