Interim Results Presentation, Half Year to 31 December 2008 Greg Fitzgerald - Chief Executive Frank Nelson - Finance Director 1 Interim Results Presentation – February 2009
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 2008, 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. 2 Interim Results Presentation – February 2009
Agenda • Highlights • Financial Review • Operating Review • Key Strengths and Outlook Bermondsey Square, London 3 Interim Results Presentation – February 2009
Highlights 4 Interim Results Presentation – February 2009
Highlights • Operational strengths from hybrid model • Record profits and strong cash generation from construction • Net cash at period end • In compliance with bank covenants • Significant cost reductions achieved • Construction market more competitive • Construction order book 90% public and regulated 5 Interim Results Presentation – February 2009
Highlights • Difficult housing market • £ 48 m housing write down • Reduced land bank and number of stock properties • Geographic coverage maintained in Housebuilding • Excellent relationship with Homes and Communities Agency • New divisional management in place 6 Interim Results Presentation – February 2009
Highlights Group Structure 7 Interim Results Presentation – February 2009
Financial Review 8 Interim Results Presentation – February 2009
Financial Review Highlights • Group revenue £ 774 m, down 14% • Profit before tax • Pre-exceptional £ 11. 2 m profit, down 67% • Post-exceptional £ 37. 5 m loss • Earnings per share • Pre-exceptional 2. 2 p, down 66% • Post-exceptional (7. 0)p • Net cash £ 2 m (Dec 2007: £ 46 m net debt) • Interim dividend 0. 45 p per share 9 Interim Results Presentation – February 2009
Financial Review Financing • Total bank facility £ 432 m • £ 300 m until 2012 • £ 132 m amortising to £ 90 m in 2012 • Significant headroom over projected requirements • Projections within banking covenants • Substantial contract bonding facilities • Rigorous working capital management 10 Interim Results Presentation – February 2009
Financial Review Income Statement 2008 2007 £m £m Revenue 773. 8 897. 9 Profit from operations* 23. 5 47. 2 JV interest and tax (5. 3) (3. 7) Profit before finance costs, amortisation and exceptionals 18. 2 43. 5 Intangibles amortisation (1. 0) Profit before exceptionals and finance costs 17. 2 42. 5 Net finance costs (6. 0) (8. 7) Profit before exceptionals 11. 2 33. 8 Exceptional items (48. 7) - (Loss)/profit before tax (37. 5) 33. 8 * Profit from operations is stated before finance costs, exceptional items, amortisation and share of joint ventures’ interest and tax 11 Interim Results Presentation – February 2009
Financial Review Exceptional loss • £ 48. 7 m exceptional loss taking account of: • Sites (including JVs) with negative margins • Further deflationary price assumptions • Abortive costs relating to conditional contracts • Reorganisation costs • Land write down equivalent to 14% of land bank 12 Interim Results Presentation – February 2009
Financial Review Segmental Analysis: Profit from Operations Revenue (including JVs) £m Profit/(Loss) £m 2008 2007 Building 274. 6 339. 2 6. 7 6. 5 Infrastructure 265. 4 250. 1 7. 8 6. 2 Construction 540. 0 589. 3 14. 5 12. 7 PPP Investments 4. 9 2. 4 1. 9 0. 4 Affordable Housing & Regeneration 99. 5 94. 5 6. 7 5. 7 Housebuilding 141. 7 230. 0 3. 5 32. 6 0. 9 0. 2 (3. 1) (4. 2) 787. 0 916. 4 23. 5* 47. 2* Intangibles amortisation (1. 0) Less JV interest and tax (5. 3) (3. 7) Net interest payable (6. 0) (8. 7) Profit before exceptionals 11. 2 33. 8 Exceptional items (48. 7) - (Loss)/profit before tax (37. 5) 33. 8 Group *Profit from Operations 13 Interim Results Presentation – February 2009
Financial Review Segmental Analysis: Profit Before Tax Revenue (including JVs) £m Profit/(Loss) £m 2008 2007 Building 274. 6 339. 2 9. 1 9. 2 Infrastructure 265. 4 250. 1 8. 8 6. 8 Construction 540. 0 589. 3 17. 9 16. 0 PPP Investments 4. 9 2. 4 1. 6 0. 1 Affordable Housing & Regeneration 99. 5 94. 5 3. 0 3. 5 Housebuilding 141. 7 230. 0 (8. 3) 16. 7 0. 9 0. 2 3. 3 2. 2 787. 0 916. 4 17. 5* 38. 5* Intangibles amortisation (1. 0) Less JV interest and tax (5. 3) (3. 7) Profit before exceptionals 11. 2 33. 8 Exceptional items (48. 7) - (Loss)/profit before tax (37. 5) 33. 8 Group *PBT is stated before intangibles amortisation and JV interest and tax 14 Interim Results Presentation – February 2009
Financial Review Finance Costs Half year to 31 Dec 2008 Year to 30 June 2008 £m £m £m Net interest payable 0. 9 4. 0 6. 3 On unwinding of discount on creditors 0. 9 3. 1 4. 7 Net return on asset of pension fund 0. 5 (0. 4) (0. 9) Fair value losses on financial activities – interest rate swaps 3. 7 2. 0 0. 7 6. 0 15 Half year to 31 Dec 2007 8. 7 10. 8 Interim Results Presentation – February 2009
Financial Review Balance Sheet Highlights Half year to 31 Dec 2008 Half year to 31 Dec 2007 Year to 30 June 2008 302. 8 * 317. 1* 325. 3* Net cash/(debt) £m 1. 8 (45. 7) (1. 7) Gearing n/a 14% 0. 5% Interest cover - total (inc IFRS and swap) 3 x 5 x 6. 6 x 19 x 10 x 8. 4 x Shareholders’ funds £m - bank Land pre June 08 £m 292. 4 Land post June 08 £m 50. 2** Total Land 342. 6 498. 2 426. 5 Work in progress £m 146. 0 180. 6 183. 8 Land creditors £m (33. 2) (122. 4) (76. 5) Net Developments 455. 4 556. 4 533. 8 - (42. 9) (0. 8) Deferred payment – Linden Homes & Chartdale £m * Includes £ 6 m net pension deficit (Dec 2007: £ 19 m, June 2008: £ 20 m) **Includes land agreed & acquired, replanned, renegotiated 16 Interim Results Presentation – February 2009
Financial Review Cash Flow Summary 2008 2007 £m £m Operating cash flow 12. 5 86. 0 Interest, tax and dividends (5. 0) (20. 9) Net proceeds from issue of shares - 0. 1 Acquisitions (net of cash acquired) - (6. 0) (6. 5) (3. 7) Other 2. 5 (2. 5) Net cash inflow 3. 5 53. 0 (1. 7) (98. 7) 1. 8 (45. 7) Capital expenditure and investments Opening net debt Closing net cash/(debt) 17 Interim Results Presentation – February 2009
Financial Review Land Payments Profile Actual ytd Dec 2008 £m Payments made to date Estimated H 2 2008/9 £m 36. 7 Total 2008/9 £m Estimated 2009/10 £m 36. 7 Expected payments in respect of existing contracts 14. 9 16. 4 Forecast payments in respect of uncommitted land 1. 4 55. 1 16. 3 53. 0 71. 5 Total 18 36. 7 Interim Results Presentation – February 2009
Financial Review Balance Sheet/Debt Profile by Sector – Illustrative Only Tangible Net Assets £m Affordable Housing Investments Housebuilding and Group (NAV after deduction of debt) (60) 200 P/E 40 (40) P/E - (10) Directors’ Valuation 200 (210) Discount to NAV 180* Construction Cash/(Debt) £m Accepted Valuation Methodology (60)** £m * Total net assets per B/S 303 Less intangibles (123) Net tangible assets 180 ** Assume average net debt £ 60 m 19 Interim Results Presentation – February 2009
Financial Review Cost Savings • Strong focus on business efficiency and cost savings • Housebuilding £ 19 m • 4 day week • 43% head count reduction • Office and overhead savings • Construction £ 2. 6 m • Overhead savings • Group £ 3. 4 m • IT and communication costs • Corporate and central costs • Vehicle fleet expenses • National Insurances savings • Total targeted annualised savings £ 25 m to meet current market conditions 20 Interim Results Presentation – February 2009
Operating Review - Building 21 Interim Results Presentation – February 2009
Operating Review - Building Highlights • Strong trading performance • Excellent cash generation • Successful completion of Highland & Northampton Schools PFIs • Key projects progressing well • Market conditions more competitive • Easing in supply chain Museum of Liverpool 22 Interim Results Presentation – February 2009
Operating Review - Building Highlights • Selected for Scottish Health framework • Appointed on £ 103 m St Pancras contract • 45% of workload secured for next year • 80% of order book within public and regulated sectors Wimbledon 23 Interim Results Presentation – February 2009
Operating Review - Building Forward Order Book: February 2009 Sectors £m Health 123 Education 129 Prisons 155 Commercial 112 Interiors 17 FM 146 Other Public Sector 89 771 NB - Excludes £ 200 m at preferred bidder stage - Excludes affordable housing contracting 24 Interim Results Presentation – February 2009
Operating Review - Infrastructure 25 Interim Results Presentation – February 2009
Operating Review - Infrastructure Highlights • Strong trading performance • Excellent cash generation • Renewables prospects good • Industry leading performance in Water • AMP 5 procurement process underway Spen Valley Waste Water Treatment Works, Yorkshire 26 Interim Results Presentation – February 2009
Operating Review - Infrastructure Highlights • Whitelee Windfarm and A 595 successfully completed • Good progress at Olympic Park and on M 74 • 52% of workload secured for next year • Over 95% of order book within public and regulated sectors A 595 Parton to Lillyhall, West Cumbria 27 Interim Results Presentation – February 2009
Operating Review - Infrastructure Forward Order Book: February 2009 Sectors £m Water 315* Highways 234 Flood Alleviation 98 Rail 5 Waterways 7 Remediation 53 Communications 23 Renewable Energy 34 International 10 Ground Engineering 1 780 * Excludes AMP 5 renewals 28 Interim Results Presentation – February 2009
Operating Review - Investments 29 Interim Results Presentation – February 2009
Operating Review - Investments Highlights • Investments in projects performing well • Bid decisions expected shortly • • Worcester Library & History Centre • • Belmarsh and Maghull prisons Moray Schools, Scotland Good pipeline of future projects in longer term Milburn Academy, Inverness 30 Interim Results Presentation – February 2009
Operating Review Affordable Housing and Regeneration 31 Interim Results Presentation – February 2009
Operating Review - Affordable Housing and Regeneration Highlights • Excellent relationships with Homes and Communities Agency (HCA) • £ 28 m of National Affordable Housing Programme grant • £ 10 m (419 plots) Home. Buy Direct awarded • Secured first HCA site disposal Homes and Communities Agency 32 Interim Results Presentation – February 2009
Operating Review - Affordable Housing and Regeneration Highlights • Speculative sales to Registered Social Landlords (RSLs) continuing • Re-planning schemes for current market • Contracting market subdued • Good position to gain accelerated and gap funding from HCA TR 1, Truro, Cornwall 33 Interim Results Presentation – February 2009
Operating Review - Affordable Housing and Regeneration Key Statistics: excluding spec sales to RSLs, including share of joint ventures 6 months to December 2008 2007 Increase/ (decrease) % Total 292 284 3% - Affordable 216 248 (13)% - Regeneration 76 36 111% Total 125 118 6% -Affordable 115 113 2% - Regeneration 153 183 (16)% Total 99. 5 94. 5 5% - Affordable 24. 7 27. 0 (9)% - Regeneration 11. 7 18. 0 (35)% - Contracting 63. 1 49. 5 28% 6. 7 5. 7 17% Margin % 6. 7% 6. 0% - In hand position Feb 09 £m - Afford. & Regeneration 101. 0 135. 1 (26)% - Contracting Order Book 156. 6 153. 1 2% 2, 788 4, 100 (32)% Units Av. Selling Price £ 000 Revenue £m Profit/loss from Operations before exceptionals £m Land bank February 09 units 34 Interim Results Presentation – February 2009
Operating Review - Housebuilding 35 Interim Results Presentation – February 2009
Operating Review - Housebuilding Market Conditions • Difficult market conditions • Consumer confidence and mortgage availability key constraints • No new build premium • House price deflation from peak to trough of circa 25% • Sub-contract cost reductions from peak to trough circa 12% • Significant reduction in land prices • Cancellation rates stabilised Banstead Wood, Surrey 36 Interim Results Presentation – February 2009
Operating Review - Housebuilding Highlights • Aggressive sales policy maintained • 43% reduction in head count • Successful implementation of 4 day working week • Geographical coverage maintained • Land spend and work in progress strictly controlled. Whittington’s Meadow, Nassington, Northants 37 Interim Results Presentation – February 2009
Operating Review - Housebuilding Highlights • Renegotiations of major land acquisitions and existing planning approvals ongoing • Industry leading customer satisfaction maintained • Part exchange and stock levels at historically low levels Market Quarter, Chippenham, Wiltshire 38 Interim Results Presentation – February 2009
Operating Review - Housebuilding Key Statistics: including share of joint ventures 6 months to December 2008 2007 Increase/ (Decrease) % Units 671 890 (25)% Average Selling Price £ 000 201 231 (13)% Income per sq. ft £ 219 259 (15)% 141. 7 230. 0 (38)% 3. 5 32. 6 (89)% 2. 5% 14. 2% - ROCE % * 4% 18% - In hand position February 09 £m 205 415 (51)% Land bank February 09 units 4, 840 7, 000 (31)% Strategic land February 09 acres 1, 313 1, 512 (13)% Revenue £m Profit from operations £m Margin % *Includes private housing, S 106 and regeneration (excluding contracting) 39 Interim Results Presentation – February 2009
Operating Review - Housebuilding Market Outlook • Continue to reduce exposure to the apartment market • Strong cash management being maintained • Prudent land procurement policy to continue • Well positioned to take advantage of opportunities • Evidence of investors returning to the market • Encouraging start to 2009 Watercolour, Redhill, Surrey 40 Interim Results Presentation – February 2009
Key Strengths and Outlook 41 Interim Results Presentation – February 2009
Key Strengths and Outlook • £ 432 m banking facility negotiated in early 2007 - runs to 2012 • Continue to work within bank covenants • Low levels of debt with ability to gear up • Interim dividend declared • Construction • 90% in public and regulated sector • Industry leader in water • Upper quartile cash generation 42 Interim Results Presentation – February 2009
Key Strengths and Outlook • Housebuilding • Maintained geographic coverage with southern bias • Low levels of stock • Leader in affordable housing • Greater revenues from lower land bank than key competitors • Well placed to take advantage of opportunities • Experienced management team 43 Interim Results Presentation – February 2009
Interim Results Presentation, Half Year to 31 December 2008 Greg Fitzgerald - Chief Executive Frank Nelson - Finance Director 44 Interim Results Presentation – February 2009
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