Results for the Half Year Ended 30 June 2015

4 August 2015

MORGAN SINDALL GROUP PLC

('Morgan Sindall' or 'Group')

 

The Construction & Regeneration Group

 

RESULTS FOR THE HALF YEAR (HY) ENDED 30 JUNE 2015

 

	HY 2015	HY 2014	% change
Revenue	£1,152m	£998m	+15%
Profit before tax - adjusted1	£13.3m	£14.2m	-6%
Earnings per share - adjusted1	24.5p	28.6p	-14%
Period end net cash/(debt)	(£8m)	£34m
Average net debt	(£35m)	(£6m)
Interim dividend per share	12.0p	12.0p	-
(Loss)/profit before tax - reported	(£27.2m)	£13.0m	-309%
Basic (loss)/earnings per share - reported	(49.4p)	26.5p	-286%
1 'Adjusted' is defined as before intangible amortisation (£1.1m) and exceptional operating items (£39.4m) (HY 2014: before intangible amortisation (£1.2m))

Group highlights:

 

·      Group revenue up 15%, adjusted operating profit up 2%. Full year expectations remain unchanged

·      Strong performance from Fit Out, with operating profit up 89% to £10.4m (HY 2014: £5.5m) and good growth expected to continue through the second half

·      Construction & Infrastructure adjusted operating profit down to £0.3m (HY 2014: £5.9m), impacted by continued challenges from older construction contracts in London and the South. Completion taking longer than previously expected 

·      Urban Regeneration operating profit up to £5.0m (HY 2014: £3.5m) as a consequence of the ongoing and focused, long-term investment in the development portfolio

·      Improved performance from response maintenance in Affordable Housing, with loss reduced to £0.8m (HY 2014: loss £1.7m) and further progress expected in the second half towards its target break-even position by 2016

·      Further to the trading update on 7^th May, an exceptional charge of £39.4m taken as a write-down against amounts recoverable on two old construction contracts. The charge is non-cash in nature and commercial settlement 'in principle' reached on one of the contracts

·      Average net debt of £35m reflecting the expected increase in investment in Urban Regeneration and the regeneration activities of Affordable Housing 

·      Interim dividend held at 12.0p per share (HY 2014: 12.0p) 

 

 

Commenting on today's results, Chief Executive, John Morgan said:

 

 

"We've seen a strong performance from Fit Out in the first half and Urban Regeneration continues to deliver good growth as a result of our focused and long-term investment in the development portfolio. Construction & Infrastructure continues to be impacted by the poor performance of its older and lower margin construction contracts in London and the South and, whilst these are working through to completion, this is happening at a slower rate than previously anticipated which will hold back the divisional performance in the second half of the year.  However, it is expected that Fit Out will produce a further strong performance in the second half, with Urban Regeneration and Affordable Housing both making good progress.

 

Consequently, the Group remains on track to deliver results for the full year in line with the Board's expectations and the outlook for 2016 and beyond remains unchanged."

 

 

 

Morgan Sindall Group John Morgan Steve Crummett   Brunswick Jonathan Glass Alison Kay

Tel: 020 7307 9200       Tel: 020 7404 5959

 

Presentation

·      There will be an analyst and investor presentation today at 09.00 at Numis Securities Limited, The London Stock Exchange Building, 10 Paternoster Square, London EC4M 7LT. Coffee and registration will be from 08.45

·      A copy of these results is available at www.morgansindall.com

·      A recording of today's presentation of these results to investors and analysts will be available at www.morgansindall.com

 

Note to Editors

Morgan Sindall Group

Morgan Sindall Group plc is a leading UK Construction & Regeneration group with a turnover of £2.2bn, employing around 5,700 employees and operating in the public, regulated and private sectors.  It reports through five divisions of Construction & Infrastructure, Fit Out, Affordable Housing, Urban Regeneration and Investments.

 

 

 

Morgan Sindall Group's strategy is focused on two distinct but complementary business activities: Construction and Regeneration.

 

Construction activities comprise the following operations:

 

·      Construction & Infrastructure: Focused on the commercial, defence, education, energy, healthcare, industrial, leisure, retail, transport and water markets

·      Fit Out: Focused mainly on the fit out of office space with opportunities in commercial, central and local government offices, further education and retail banking

·      Construction and Services work within Affordable Housing:  Focused on new build house contracting and planned and response maintenance

 

Regeneration activities comprise the following operations:

 

·      Regeneration mixed-tenure developments within Affordable Housing: Focused on building and developing homes for open market sale and for social/affordable rent

·      Urban Regeneration:  Focused on transforming the urban landscape through partnership working and the development of multi-phase sites and mixed-use regeneration

·      Investments: Focused on strategic partnerships to develop under-utilised property assets and provide the Group with construction and regeneration opportunities

 

 

The term 'adjusted' excludes the impact of intangible amortisation of £1.1m and exceptional operating items of £39.4m (HY 2014: intangible amortisation of £1.2m)

 

 

Revenue for the period was up 15% on the prior year at £1,152m, driven by strong revenue growth in Fit Out (up 53%) and supported by growth in Construction & Infrastructure (up 10%) and Affordable Housing (up 5%).

 

The Group's total committed order book^* as at 30 June 2015 was £2.6bn, a decrease of 3% since the previous year end. Whilst Affordable Housing grew its order book by 9% up to £732m, Fit Out was down as expected from its high year end position of £241m, to £201m. The Construction & Infrastructure order book was down 8% to £1,414m reflecting greater selectivity in tendering and the transition towards more two-stage tendering work, where the extended procurement process takes longer to convert into a signed contract and therefore meet the strict criteria for inclusion as a committed order.  The regeneration & development pipeline^** remained broadly level with the year end position at £3.2bn.

 

Adjusted operating profit of £15.5m was 2% up on the prior year, with adjusted operating margin of 1.3% (HY 2014: 1.5%).

 

There were strong profit performances from Fit Out, with an increase in operating profit of 89% to £10.4m and an operating margin of 3.5%, and Urban Regeneration which delivered an operating profit of £5.0m compared to £3.5m in the prior year.  Affordable Housing performed in line with expectations delivering a profit of £3.0m (HY 2014: £2.7m) and included an improved performance from its response maintenance activities which reduced its losses to £0.8m, from a £1.7m loss in the prior year. 

 

Construction & Infrastructure was again impacted by lower returns from its construction activities in London and the South, as lower margin construction contracts procured during the more difficult pricing environment of 2012-2013 continue being worked through to delivery and completion. Completion of these construction contracts has been more difficult and at a slower rate than previously anticipated, with construction programmes now extending into the second half. As a result, Construction & Infrastructure delivered a significantly lower operating profit in the period of £0.3m (HY 2014: £5.9m).

 

Net finance expense increased to £2.2m (HY 2014: £1.0m) due mainly to higher net interest on a higher level of average net debt and an increase in the amortisation of bank fees and non-utilisation charges. This resulted in an adjusted profit before tax of £13.3m (HY 2014: £14.2m).

 

It was announced in May that the Group result would include an exceptional operating item of approximately £35m relating to the impairment of trade and other receivables on two construction contracts, both of which were transferred as part of the acquisition of the design and project services division of Amec in 2007. Since then, commercial resolution 'in principle' has been achieved on one of those contracts and based upon this and the Board's best current assessment of the likely outcome on the other contract, an exceptional item of £39.4m has been charged in the period which is non-cash in nature.

After charging this exceptional operating item, the statutory loss before tax was £27.2m, compared to a statutory profit before tax in the prior year period of £13.0m. As a result, there is a tax credit for the period of £5.5m, which is broadly in line with the UK statutory rate.

 

Adjusted earnings per share of 24.5p and fully diluted adjusted earnings per share of 24.2p were both down 14% on the prior year.

 

There was an operating cash outflow of £53.3m in the period, which resulted in a free cash outflow of £56.1m (HY 2014: outflow of £39.8m).  The main driver of this was the expected outflow of working capital of £62.7m, which included an increase in inventories of £54.2m in the regeneration activities of Affordable Housing and in Urban Regeneration.

 

Consequently, the average daily net debt for the period increased to £35m (HY 2014: £6m), of which £18m (HY 2014: £14m) was non-recourse debt. This increase was as expected and in line with the strategy of investing in the regeneration activities of Urban Regeneration and Affordable Housing. The Group had net debt of £8m as at 30 June 2015 (HY 2014: net cash £34m), which included £19m of non-recourse debt (HY 2014: £18m).

 

Further continued investment is expected in the second half and at a rate slightly higher than previously anticipated as schemes accelerate ahead of previous plans. It is now expected that the average daily net debt for the full year will be in the range of £50m-£60m.

 

The interim dividend of 12.0p per share has been held level with the prior year (HY 2014: 12.0p).

 

 

There has been a strong performance from Fit Out in the first half and Urban Regeneration continues to deliver good growth as a result of the focused and long-term investment in the development portfolio. Construction & Infrastructure continues to be impacted by the poor performance of its older and lower margin construction contracts in London and the South and, whilst these are working through to completion, this is happening at a slower rate than previously anticipated which will hold back the divisional performance in the second half of the year.  However, it is expected that Fit Out will produce a further strong performance in the second half, with Urban Regeneration and Affordable Housing both making good progress.

 

Consequently, the Group remains on track to deliver results for the full year in line with the Board's expectations and the outlook for 2016 and beyond remains unchanged.

 

 

 

The following Business Review is given on an adjusted basis, unless otherwise stated.

 

Order book and regeneration & development pipeline

 

The Group's committed order book^* at 30 June 2015 was £2,572m, a decrease of 3% from the previous year end.  The divisional split is shown below.

 

Order book	HY 2015	FY 2014	% change
	£m	£m
Construction & Infrastructure	1,414	1,537	-8%
Fit Out	201	241	-17%
Affordable Housing - construction & services	732	673	+9%
Urban Regeneration	212	197	+8%
Investments	17	19	-11%
Inter-divisional elims	(4)	(9)
Group committed order book	2,572	2,658	-3%

 

^* "Committed order book" comprises the secured order book and framework order book.  The secured 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.

 

In addition, the Group's regeneration & development pipeline^** was £3,209m, a decrease of 1% on the previous year end.

 

Regeneration & development pipeline	HY 2015 £m	FY 2014 £m	% change
Affordable Housing - mixed-tenure	761	770	-1%
Urban Regeneration	2,245	2,215	+1%
Investments	203	242	-16%
Group regeneration & development pipeline	3,209	3,227	-1%

 

^** "Regeneration & development pipeline" represents the Group's share of the gross development value of secured schemes including the development value of open market housing schemes. 

 

 

Construction & Infrastructure
	HY 2015	HY 2014	% change
	£m	£m
Revenue	623	567	+10%
Operating profit - adjusted	0.3	5.9	-95%
Operating margin - adjusted	-	1.0%	-100bps

 

The Construction & Infrastructure result for the period was down significantly on the prior year and was again adversely impacted by the poor performance of the London and South construction activities.

Divisional revenue of £623m was up 10% on the prior year (HY 2014: £567m). Split by type of activity, Construction accounted for 56% of divisional revenue at £348m, which was up 20% compared to the prior year, whilst Infrastructure was 44% of divisional revenue at £275m, down 1% on the prior year.

Within Construction, Scotland and the North have both performed well compared to prior year with the current higher quality work starting to deliver margin improvements, whilst the East region has maintained its already strong margin performance and is experiencing similar increases in overall activity.  The South West region has also seen an upturn in activity, albeit from a relatively low base, however London and the South East have continued to significantly underperform.  

London and the South East construction revenue in the period was £48m, down 7% on prior year. At the full year results in February, it was announced that delivery pressures during the second half of 2014 had resulted in an escalation of costs and increased forecast costs to complete which had adversely impacted profitability and margin. These related mainly to a small number of construction contracts which were due to complete within the first half of 2015 and which had experienced programme slippage and increases in costs. In addition, generally lower returns were expected for at least the first half as the lower margin construction contracts procured during the more difficult pricing environment of 2012-2013 were being worked through to delivery and completion.

 

Since then, although completion has been successfully achieved on many of these contracts and particularly on some of the larger, more difficult and complex projects, some final accounts still require settlement and progress on others has been slower than expected, with further delays now extending into the second half.  As a result, the continued low margin returns from these contracts as they work through will more than off-set the benefit of improved margins being produced elsewhere in the construction activities, thereby impacting the overall divisional performance. 

 

As a result of the ongoing poor performance, activities in the London and the South East region have been reduced, with new business activity being limited to mainly frameworks or bidding opportunities involving either Investments or Urban Regeneration.  The combined order book for London and the South East at 30 June was £58m, down 22% from the year end position and the regional overhead has been reduced accordingly to match this level of activity to improve performance and provide a competitive and sustainable platform for the business going forward.

 

Due to the timing and localised nature of the issues in London and the South East, together with the improving performance in the other regional construction activities, confidence remains that 2016 and beyond will see a gradual reversion back to more normalised construction margins.

 

In Infrastructure, activity levels on the division's existing Utility Services frameworks in Water and Energy have increased and at Sellafield, the provision of a range of new build and decommissioning services through its joint venture Infrastructure Strategic Alliance contract continues to progress. In other activities, further progress has been made in pursuing opportunities in Transport (Highways, Aviation and Rail) and Tunnelling; in Transport, the division was appointed by Heathrow Airport to work on the £16m improvement project on phase one of the Sierra Taxiway, which runs just off the Southern Runway and connects the cargo areas at Heathrow and the runway to Terminal 4; in Highways, the division commenced work in joint venture on the £290m A6 Manchester Airport Relief Road to provide c10km of dual carriageway; and in Tunnelling, the division was awarded preferred bidder status, in joint venture, on the £300m-£500m West section of the Thames Tideway Tunnel.

 

The committed order book for the division at the period end was £1,414m, down 8% since the start of the year.  The movement reflects the greater selectivity in tendering and the transition towards more two-stage tendering work, where the extended procurement process takes longer to convert into a signed contract and therefore meet the strict criteria for inclusion as a committed order. As at 30 June, 86% by value of the order book is derived through negotiated/framework/two-stage bidding procurement processes.

It was announced in May that the results would include an exceptional operating item of approximately £35m relating to the impairment of trade and other receivables on two construction contracts, both of which were transferred as part of the acquisition of the design and project services division of Amec in 2007. Both contracts have the Secretary of State for Defence as the overall employing party. One contract relates to the design and construction of a floating jetty, the other to the design and construction of living accommodation and infrastructure, both around the Faslane Naval Base in West Scotland.

Since May, commercial resolution 'in principle' has been achieved on one of those contracts, being the design and construction of living accommodation and infrastructure.  Based upon this and the Board's best current assessment of the likely outcome on the other contract, an exceptional item of £39.4m has been charged in the period which is non-cash in nature.

Fit Out
	HY 2015	HY 2014	% change
	£m	£m
Revenue	299	195	+53%
Operating profit - adjusted	10.4	5.5	+89%
Operating margin - adjusted	3.5%	2.8%	+70bps

 

Fit Out delivered a very strong performance in the period, with revenue of £299m (HY 2014: £195m) up 53%, with operating margin increasing to 3.5%, resulting in operating profit of £10.4m (HY 2014: £5.5m), up 89%. 

 

The fit out market has experienced significant activity during the period and there remain attractive tendering opportunities going into the second half, although bidding remains competitive. The margin increase of 70bps, up to 3.5% in the period, has been driven primarily by improved operational efficiency in project delivery, however supported also by a general improvement in negotiated terms on some projects.

 

The London region remains the most significant, accounting for 73% of revenue (HY 2014: 75%), with other regions at 27% (HY 2014: 25%). Split by type of work, 81% of revenue was traditional fit out work (HY 2014: 79%), compared to 19% 'design and build' (HY 2014: 21%), whilst 76% of revenue related to fitting out of existing space (34% refurbishment 'in occupation'), compared to 24% which was new office fit out.

 

There have been no material changes to end market sectors served, with commercial offices (82% of revenue) remaining the most important market. Higher education at 8% of revenue is the second largest, with retail banking, government and local authority work and work for charitable organisations being the others. Examples of projects delivered in the period are the Cat A and Cat B fit out for Microsoft in Paddington, London and the 20 week fit out of players' facilities and media areas for The All England Lawn Tennis Club in Wimbledon, London, ahead of The Championships 2015.

 

The committed order book as at 30 June was £201m, 17% down from the high year end position. Due to the relatively short term nature of the order book, this decrease is not indicative of any underlying trends and looking ahead to the second half, the overall level of secured revenue together with the operational delivery capability provides confidence of a continued strong performance.

 

 

 

Affordable Housing
	HY 2015	HY 2014	% change
	£m	£m
Revenue	202	193	+5%
Operating profit - adjusted	3.0	2.7	+11%
Operating margin - adjusted	1.5%	1.4%	+10bps

 

Total divisional revenue of £202m was up 5% (HY 2014: £193m), whilst operating profit of £3.0m was up 11% on the prior year (HY 2014: £2.7m).

 

Affordable Housing's activities are divided into two main categories:  Regeneration (22% of revenue) which refers to the division's mixed-tenure regeneration housing schemes; and Construction & Services (78% of revenue) which includes new build housing contracting and planned and response maintenance services.  Together, the division delivers a full range of housing solutions for its partners and customers.

 

On the Regeneration side, revenue was down 8% to £44.0m (HY 2014: £47.8m) with an operating profit of £3.3m. 76% of this revenue related to 195 (HY 2014: 233) open market sales completions at an average sales price of £171k, whilst 24% of revenue related to approximately 100 units through the social housing contracting element of the mixed-tenure schemes.  The lower level of open market sales compared to the prior year was expected and is a result of the current phases of the mixed-tenure developments. The second half of the year is expected to see a significant increase in unit sales, as construction completions accelerate through the third quarter to deliver sales completions in the fourth quarter.

 

Capital employed in the Regeneration activities at the period end was £150m, up from £123m at the year end, with £23m of this increase being the investment in development schemes for future open market sales in the second half of 2015 but also into 2016 and beyond. The regeneration and development pipeline at the period end was £761m (FY 2014: £770m).

 

In Construction & Services, the increase in new-build housing contracting revenue of £77.1m (HY 2014: £57.0m) compared to prior year was driven by a full period of activity at MOD Stafford, a £51m contract for 346 new homes for Army families returning to the UK.  Tender margins remain highly competitive in contracting, whilst planned maintenance revenue of £49.8m (HY 2014: £55.1m) remains broadly steady and an important offering to local authorities and housing associations.

 

Although response maintenance revenue was down 6% to £31.5m (HY 2014: £33.5m), the operating losses have reduced significantly to a loss of £0.8m (HY 2014: loss £1.7m).  Improvements have been based primarily on operational efficiency, contract management and overhead management, supported by the investment made in a new business system which is now live in the market.  The key focus for the second half of the year is on winning new business at appropriate margins to build the critical mass and the business remains on track to deliver its plan to achieve a minimum of break-even by 2016.

 

The committed order book for Construction & Services at the period end was £732m (FY 2014: £673m), an increase of 9%.  Of this, response maintenance accounted for £366m (FY 2014: £355m). Notable wins include a £20m home improvement planned maintenance programme for Chevin Housing Association in Yorkshire and a £24m new-build contract for 221 new council homes for North Lanarkshire Council.

 

 

Urban Regeneration
	HY 2015	HY 2014	% change
	£m	£m
Average capital employed1 (last 12 months)	58.3	51.0
Capital employed1 at period end	83.5	39.0
Revenue	26	42	-38%
Operating profit - adjusted	5.0	3.5	+43%

 

Urban Regeneration has delivered a further strong performance in the period, with operating profit up to £5.0m (HY 2014: £3.5m), reflecting the benefit derived from the ongoing investment programme in the development portfolio.

 

Capital employed¹ at the period end was £83.5m, up from £49.4m at the year end.  This is calculated after deducting non-recourse debt of £18.5m and deferred consideration on the purchase of interests in the ISIS Waterside Regeneration Joint Venture (ISIS) of £13.8m.  Average capital employed¹ for the trailing twelve month period ('LTM') was £58.3m, with the overall LTM Return On Average Capital Employed² of 16%.

 

Major contributors in the period include completions in the first phase of the ISIS residential scheme Brentford Lock West (a joint venture with the Canal and River Trust), further residential sales from the Vimto Gardens development (part of English Cities Fund's (ECf) Salford Central regeneration scheme - a joint venture with Legal and General and the Homes and Communities Agency) and the sale of remaining units in phase two of ECf's Rathbone Market scheme in Canning Town.

 

The regeneration and development pipeline as at the period end was £2,245m, up 1% from the year end and from this pipeline, the division is expected to continue delivering strong profits as schemes develop and as further working capital is invested through the second half of 2015 and 2016

 

¹ Capital employed is calculated as total assets (excluding goodwill, intangibles and cash) less total liabilities (excluding corporation tax, deferred tax and inter-company financing). At the period end, non-recourse debt was £18.5m (HY 2014: 18.3m) and deferred consideration was £13.8m (HY 2014: £18.0m).  LTM average non-recourse debt was £18.2m (HY 2014: £10.9m) and LTM average deferred consideration was £13.6m (HY 2014: £18.0m).

 

² Return On Average Capital Employed = (Adjusted operating profit less interest on non-recourse debt less unwind of discount on deferred consideration) divided by (average capital employed). LTM interest on non-recourse debt was £1.5m (HY 2014: LTM £0.5m) and the unwind of discount on deferred consideration was LTM £0.5m (HY 2014: LTM £0.5m).

Investments
	HY 2015	HY 2014	% change
	£m	£m
Average capital employed1 (last 12 months)	19.0	18.9
Capital employed1 at period end	15.4	14.8
Operating profit - adjusted	0.4	1.3	-69%

 

The strategic rationale for Investments is to unlock prime long-term construction and regeneration opportunities for other divisions and create value from investments for the Group. For 2015, approximately £150m of construction work is targeted to be secured for Group divisions, primarily for Construction & Infrastructure but also opportunities for Affordable Housing.   

 

During the period, Investments made a small profit of £0.4m generated principally from its interests in joint ventures and Local Asset Backed Vehicle (LABV) schemes. This included achieving legal completion on c60 residential units in the Bournemouth Town Centre LABV and reaching financial close on a number of sites in the division's HB Villages 'supported living' joint venture.  The second half is expected to show an operating loss due to the phasing of schemes, with the overall result for the year expected to be an operating loss of between £1m-£2m.   

 

Capital employed at the period end was £15.4m, slightly up on the prior year position, however down from £20.2m at the year end. The reduction in the period was primarily due to achieving practical completion on the Towcester mixed-use Regeneration and Civic Accommodation project. LTM average capital employed  was £19.0m.

 

¹ Capital employed = total assets (excluding goodwill, intangibles, corporation tax credit and cash) less total liabilities.

 

Note:  Capital is invested in a number of schemes including £5.6m in HB Villages (a joint venture focused on care and supported living), £4.4m in regeneration projects (including £2.2m in LABVs), £3.0m in PFI-type investments and £2.2m in the Wellspring Partnership, which is delivering public sector healthcare and education projects in Scotland.

 

Directors' valuation of investments can only be made in circumstances where future cash flows are near certain.  The Investments division holds a number of interests in developments, arrangements and schemes which are included in "capital employed".  Where directors' valuation is appropriate, current valuation is £3.0m relating to 2 investments with carrying value of £3.0m.

 

 

Net finance expense.  Net finance expense was £2.2m, a £1.2m increase versus HY 2014 which is broken down as follows:

 

	HY 2015	HY 2014	% change
	£m	£m
Net interest charge on net debt	(1.2)	(0.7)	-71%
Amortisation of bank fees & non-utilisation fees	(1.0)	(0.6)	-67%
Interest from JVs	0.4	0.3	+33%
Other	(0.4)	-	-
Total net finance expense	(2.2)	(1.0)	-120%

 

Tax.  A tax credit of £5.5m is shown for the six month period (HY 2014: charge of £1.8m).

 

	HY 2015	HY 2014
	£m	£m
(Loss)/profit before tax	(27.2)	13.0
Less: share of net profit in taxed joint ventures#	(0.5)	(0.5)
Less: gains on disposal of joint ventures	-	(1.7)
(Loss)/profit subject to tax	(27.7)	10.8
Statutory tax rate	20.25%	21.5%
Current tax credit/(charge) at statutory rate	5.6	(2.3)
Other adjustments	(0.1)	0.5
Tax credit/(charge)	5.5	(1.8)
# certain of the Group's joint ventures are reported net of tax. Other joint ventures are partnerships where profits are taxed within the Group rather than the joint venture

 

 

Net working capital.  'Net Working Capital' is defined as 'Inventories plus Trade & Other Receivables, less Trade & Other Payables, adjusted to exclude deferred consideration payable, accrued interest and capitalised arrangement fees.

 

	HY 2015	HY 2014
	£m	£m
Inventories	256.4	182.6
Trade & Other Receivables	455.0	422.3
Trade & Other Payables	(703.9)	(630.9)
Net working capital - adjusted	7.5	(26.0)
Exceptional operating items	(39.4)	-
Net working capital - reported	(31.9)	(26.0)

 

Cash flow.  Operating cash flow was an outflow of £53.3m, with a free cash outflow of £56.1m.

 

	HY 2015	HY 2014
	£m	£m
Operating profit - adjusted	15.5	15.2
Depreciation	2.6	2.3
Share option expense	0.8	0.8
Movement in fair value of shared equity loans	(0.6)	(0.6)
Gains on disposal of joint ventures	-	(1.7)
Share of net profit of joint ventures	(5.1)	(2.5)
Gain on disposal of PPE	-	(0.2)
Other operating items*	(0.6)	(5.8)
Change in working capital	(62.7)	(41.2)
Net capital expenditure (including repayment of finance leases)	(4.1)	(4.3)
Dividends and interest received from joint ventures	0.9	0.9
Operating cash flow	(53.3)	(37.1)
Income taxes paid	(1.3)	(1.8)
Net interest paid (non-joint venture)	(1.5)	(0.9)
Free cash flow	(56.1)	(39.8)

*Other operating items in 2014 includes property dilapidation provisions released to the income statement within the Construction

& Infrastructure division

 

Net debt.  Net debt at the end of the period was £7.6m, as a result of a net cash outflow of £63.3m from 1 January 2015.

 

	£m
Net cash as at 1 January 2015	55.7
Free cash flow	(56.1)
Dividends	(6.6)
Other	(0.6)
Net debt as at 30 June 2015	(7.6)

Capital employed by strategic activity.

 

An analysis of the negative capital employed in the Construction activities shows a decrease of £27.1m since the year end, split as follows:

 

Capital employed1 in Construction	HY 2015 £m	FY 2014 £m	Change £m
Construction & Infrastructure	(132.9)	(102.7)	-30.22
Fit Out	(39.6)	(41.6)	+2.0
Affordable Housing - Construction & Services	(30.6)	(31.7)	+1.1
	(203.1)	(176.0)	-27.1

 

 

An analysis of capital employed in the Regeneration activities shows an increase of £56.5m since the year end, split as follows:

 

Capital employed in Regeneration	HY 2015 £m	FY 2014 £m	Change £m
Affordable Housing - mixed tenure1	149.9	122.7	+27.2
Urban Regeneration3	83.5	49.4	+34.1
Investments1	15.4	20.2	-4.8
	248.8	192.3	+56.5

 

1  Definition as per the Investments section in the Business Review

2  includes the impact of the exceptional operating item of £39.4m

3  Definition as per the Urban Regeneration section in the Business Review

 

Dividends.  The Board of Directors has approved an interim dividend of 12.0p per share (HY 2014: 12.0p), level with the prior year.

 

Principal risks and uncertainties.

The Group has a clear and established risk framework in place for managing its risks.  The framework is designed and operated to identify, control and mitigate any threat to the Group achieving its goals.  The framework and the risks including details of the mitigations taken to manage them are set out more fully in the risk review in the Group's 2014 annual report and have not changed since then.  A summary of the principal risks and uncertainties that the directors consider may have a material impact on the Group's performance are:

 

·      Markets: The markets in which the Group operates are affected to varying degrees by general macro-economic conditions.  The Group is therefore focused on capitalising on the improving economic conditions and shaping the business to take account of future growth indicators.  However, there is a risk that business opportunities within the Group's strategy may be delayed.

·      People: The Group's performance and business conduct affects employees, subcontractors and the public and, in turn, can affect its reputation and commercial performance.  The Group prides itself on its industry-leading practices and works in some high profile and technically challenging environments.  As markets emerge from recession employee turnover has increased.  If the Group does not succeed in attracting and retaining the right talent for its future needs it will not be able to develop the business as anticipated.

·      Winning in our markets: The Group undertakes several hundred contracts each year and it is important that contractual terms reflect risks arising from the nature and complexity of the works and the duration of the contracts and that these risks are effectively managed.

·      Maximise efficiency: If employees are not properly engaged with the culture of the business, clients are less likely to receive exceptional levels of service.

·      Disciplined use of capital: Without sufficient liquidity, the Group's ability to meet its liabilities as they fall due would be compromised, which could ultimately lead to its failure to continue as a going concern.  In a rising market there is an increased risk that the Group's counterparties overtrade which could affect their liquidity.

·      Pursue innovation: The Group is committed to offering customers innovative and cost-effective solutions.  If it fails to encourage an innovative approach across the Group it will lose its competitive edge and suffer reputational damage.  This is coupled with the risk that the Group's systems will not provide appropriate security levels or resilience needed to ensure reliable levels of business continuity.

 

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 2015

 

		Six months to			Six months to	Year ended
		30 June 2015 (unaudited)			30 June 2014	31 Dec 2014
		Before	Exceptional		(unaudited)	(audited)
		exceptional items	operating items	Total	Total	Total
	Notes	£m	£m	£m	£m	£m
Revenue		1,152.0	-	1,152.0	998.5	2,219.8
Cost of sales		(1,056.1)	(39.4)	(1,095.5)	(914.9)	(2,038.8)
Gross profit		95.9	(39.4)	56.5	83.6	181.0
Administrative expenses		(85.5)	-	(85.5)	(72.6)	(160.3)
Share of net profit of joint ventures		5.1	-	5.1	2.5	6.3
Other gains and losses		-	-	-	1.7	1.9
Operating (loss)/profit before intangible amortisation		15.5	(39.4)	(23.9)	15.2	28.9
Intangible amortisation		(1.1)	-	(1.1)	(1.2)	(2.4)
Operating (loss)/profit		14.4	(39.4)	(25.0)	14.0	26.5
Finance income		0.5	-	0.5	0.8	1.0
Finance costs		(2.7)	-	(2.7)	(1.8)	(4.7)
(Loss)/profit before tax		12.2	(39.4)	(27.2)	13.0	22.8
Tax	1	(2.5)	8.0	5.5	(1.8)	(4.8)
(Loss)/profit for the period		9.7	(31.4)	(21.7)	11.2	18.0
Attributable to:
Owners of the Company		9.8	(31.4)	(21.6)	11.3	18.1
Non-controlling interests		(0.1)	-	(0.1)	(0.1)	(0.1)
(Loss)/profit for the period		9.7	(31.4)	(21.7)	11.2	18.0
(Loss)/earnings per share
Basic	5			(49.4p)	26.5p	42.3p
Diluted	5			(48.9p)	26.0p	41.6p

 

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 2015

 

	Six months to	Six months to	Year ended
	30 June 2015	30 June 2014	31 Dec 2014
	(unaudited)	(unaudited)	(audited)
	£m	£m	£m
(Loss)/profit for the period	(21.7)	11.2	18.0
Items that will not be reclassified subsequently to profit or loss:
Actuarial gain arising on defined benefit obligation	0.1	-	0.1
Income tax relating to items not reclassified	-	-	(0.2)
Items that may be reclassified subsequently to profit or loss:
Movement on cash flow hedges in equity accounted joint ventures	-	(0.1)	(0.2)
Foreign exchange movement on translation of overseas operation	0.1	(0.1)	(0.2)
	0.1	(0.2)	(0.4)
Other comprehensive income/(expense)	0.2	(0.2)	(0.5)
Total comprehensive (expense)/income	(21.5)	11.0	17.5
Attributable to:
Owners of the Company	(21.4)	11.1	17.6
Non-controlling interests	(0.1)	(0.1)	(0.1)
Total comprehensive (expense)/income	(21.5)	11.0	17.5

Condensed consolidated balance sheet

At 30 June 2015

 

		30 June 2015	30 June 2014	31 Dec 2014
		(unaudited)	(unaudited)	(audited)
	Notes	£m	£m	£m
Assets
Goodwill and other intangible assets		217.7	219.3	218.1
Property, plant and equipment		19.8	19.8	19.2
Investment property		9.5	9.8	9.5
Investments in joint ventures		61.5	47.2	55.0
Other investments		-	0.4	0.3
Shared equity loan receivables	6	20.6	20.1	20.4
Retirement benefit asset		1.2	0.3	0.8
Non-current assets		330.3	316.9	323.3
Inventories		256.4	182.6	202.2
Trade and other receivables	7	416.8	422.4	442.4
Cash and cash equivalents	8	84.9	72.4	87.6
Current assets		758.1	677.4	732.2
Total assets		1,088.4	994.3	1,055.5
Liabilities
Trade and other payables	9	(696.0)	(628.2)	(690.1)
Current tax liabilities		(3.9)	(5.6)	(5.2)
Finance lease liabilities		(1.7)	(1.5)	(1.6)
Borrowings	8	(18.5)	-	-
Provisions		(0.7)	(1.5)	(1.2)
Current liabilities		(720.8)	(636.8)	(698.1)
Trade and other payables		(22.3)	(20.8)	(22.0)
Finance lease liabilities		(2.2)	(3.2)	(2.5)
Borrowings	8	(74.0)	(38.3)	(31.9)
Deferred tax liabilities		(11.0)	(15.7)	(16.5)
Provisions		(16.4)	(17.0)	(16.6)
Non-current liabilities		(125.9)	(95.0)	(89.5)
Total liabilities		(846.7)	(731.8)	(787.6)
Net assets		241.7	262.5	267.9
Equity
Share capital		2.2	2.2	2.2
Share premium account		31.9	27.0	30.9
Other reserves		(0.7)	(0.6)	(0.8)
Retained earnings		209.0	234.5	236.2
Equity attributable to owners of the Company		242.4	263.1	268.5
Non-controlling interests		(0.7)	(0.6)	(0.6)
Total equity		241.7	262.5	267.9

Condensed consolidated cash flow statement

For the six months ended 30 June 2015

 

		Six months to	Six months to	Year ended
		30 June 2015	30 June 2014	31 Dec 2014
		(unaudited)	(unaudited)	(audited)
	Notes	£m	£m	£m
Operating activities
Operating (loss)/profit		(25.0)	14.0	26.5
Adjusted for:
Amortisation of intangible assets		1.1	1.2	2.4
Share of net profit of equity accounted joint ventures		(5.1)	(2.5)	(6.3)
Depreciation		2.6	2.3	4.8
Share option expense		0.8	0.8	0.7
Profit on disposal of interests in joint ventures		-	(1.7)	(1.9)
Gain on disposal of property, plant and equipment		-	(0.2)	(0.2)
Movement in fair value of shared equity loan receivables		(0.6)	(0.6)	(1.8)
Non-cash impairment of investments		-	-	1.0
Non-cash exceptional operating items		39.4	-	-
Additional pension contributions		(0.3)	(0.3)	(0.7)
Disposals of investment properties		-	0.2	0.5
Disposal of shared equity loan receivables		0.4	0.2	1.1
Decrease in provisions		(0.7)	(5.9)	(6.6)
Operating cash flows before movements in working capital		12.6	7.5	19.5
Increase in inventories		(54.2)	(21.6)	(41.2)
Increase in receivables		(14.1)	(37.3)	(55.7)
Increase in payables		5.6	17.7	85.1
Movements in working capital		(62.7)	(41.2)	(11.8)
Cash (outflow)/inflow from operations		(50.1)	(33.7)	7.7
Income taxes paid		(1.3)	(1.8)	(4.4)
Net cash (outflow)/inflow from operating activities		(51.4)	(35.5)	3.3

 

Investing activities
Interest received		0.5	0.8	0.9
Dividend from joint ventures		0.5	0.6	0.8
Proceeds on disposal of property, plant and equipment		-	0.3	0.4
Purchases of property, plant and equipment		(3.5)	(3.8)	(5.7)
Net payments to acquire or increase interests in joint ventures		(2.0)	-	(6.0)
Proceeds on disposal of interests in joint ventures		-	4.6	5.9
Proceeds on disposal of other investments		-	5.9	0.3
Net cash (outflow)/inflow from investing activities		(4.5)	8.4	(3.4)
Financing activities
Interest paid		(1.6)	(1.4)	(4.9)
Dividends paid	4	(6.6)	(6.4)	(11.5)
Repayments of obligations under finance leases		(0.6)	(0.8)	(1.5)
Proceeds from long-term borrowings	8	60.6	15.2	8.8
Proceeds on issue of share capital		1.0	0.1	4.0
Proceeds on exercise  of share options		0.4	-	-
Net cash inflow/(outflow) from financing activities		53.2	6.7	(5.1)
Net decrease in cash and cash equivalents		(2.7)	(20.4)	(5.2)
Cash and cash equivalents at the beginning of the period		87.6	92.8	92.8
Cash and cash equivalents at the end of the period	8	84.9	72.4	87.6

Condensed consolidated statement of changes in equity

For the six months ended 30 June 2015

 

	Share capital	Share premium account	Other reserves	Retained earnings	Total	Non-controlling interests	Total equity
	£m	£m	£m	£m	£m	£m	£m
1 January 2015	2.2	30.9	(0.8)	236.2	268.5	(0.6)	267.9
Total comprehensive expense	-	-	0.1	(21.5)	(21.4)	(0.1)	(21.5)
Share option expense	-	-	-	0.8	0.8	-	0.8
Issue of shares at a premium	-	1.0	-	-	1.0	-	1.0
Exercise of share options	-	-	-	0.1	0.1	-	0.1
Dividends paid	-	-	-	(6.6)	(6.6)	-	(6.6)
30 June 2015 (unaudited)	2.2	31.9	(0.7)	209.0	242.4	(0.7)	241.7

 

	Share capital	Share premium account	Other reserves	Retained earnings	Total	Non-controlling interests	Total equity
	£m	£m	£m	£m	£m	£m	£m
1 January 2014	2.2	26.9	(0.4)	228.8	257.5	(0.5)	257.0
Total comprehensive income	-	-	(0.2)	11.3	11.1	(0.1)	11.0
Share option expense	-	-	-	0.8	0.8	-	0.8
Issue of shares at a premium	-	0.1	-	-	0.1	-	0.1
Dividends paid	-	-	-	(6.4)	(6.4)	-	(6.4)
30 June 2014 (unaudited)	2.2	27.0	(0.6)	234.5	263.1	(0.6)	262.5

 

	Share capital	Share premium account	Other reserves	Retained earnings	Total	Non-controlling interests	Total equity
	£m	£m	£m	£m	£m	£m	£m
1 January 2014	2.2	26.9	(0.4)	228.8	257.5	(0.5)	257.0
Total comprehensive income	-	-	(0.4)	18.0	17.6	(0.1)	17.5
Share option expense	-	-	-	0.7	0.7	-	0.7
Tax relating to share option	-	-	-	0.2	0.2	-	0.2
Issue of shares at a premium	-	4.0	-	-	4.0	-	4.0
Dividends paid	-	-	-	(11.5)	(11.5)	-	(11.5)
31 December 2014 (audited)	2.2	30.9	(0.8)	236.2	268.5	(0.6)	267.9

 

Other reserves

Other reserves include:

 

·      Capital redemption reserve of £0.6m (30 June 2014: £0.6m, 31 December 2014: £0.6m) which was created on the redemption of preference shares in 2003.

·      Hedging reserve of (£0.8m) (30 June 2014: (£0.7m), 31 December 2014: (£0.8m)) arising under cash flow hedge accounting.  Movements on the effective portion of hedges are recognised through the hedging reserve, whilst any ineffectiveness is taken to the income statement.  Cumulative movements recognised through the hedging reserve are recycled through the income statement on disposal of the associated joint ventures.

·      Translation reserve of (£0.5m) (30 June 2014: (£0.5m), 31 December 2014: (£0.6m)) arising on the translation of overseas operations into the Group's functional currency.

 

Retained earnings

Retained earnings include shares that are held as 'treasury shares' and represent the cost to Morgan Sindall Group plc of shares purchased in the market and held by the Morgan Sindall Employee Benefit Trust (the 'Trust') to satisfy options under the Group's share incentive schemes.  The number of shares held by the Trust at 30 June 2015 was 487,668 (30 June 2014: 545,767, 31 December 2014: 545,767) with a cost of £3.7m (30 June 2014: £4.1m, 31 December 2014: £4.1m).

 

Notes to the condensed consolidated financial statements

For the six months ended 30 June 2015

1 Basis of preparation

 

General information

The financial information set out in this half year report does not constitute the Company's statutory accounts for the year ended 31 December 2014 as defined in 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 section 498(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 2015 and 2014 and for the six months ended 30 June 2015 and 2014 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

The directors are satisfied that the Group has sufficient resources to continue in operation for the foreseeable future, a period of not less than 12 months from the date of this report.  Accordingly, they continue to adopt the going concern basis in preparing the condensed consolidated financial statements.

            

Changes in accounting policies

In the current year, the Group has adopted Annual Improvements 2011 - 2013 Cycle which has not had a material impact on the Group's results.  Otherwise, the same accounting policies, presentation and methods of computation are followed in the condensed consolidated financial statements as applied in the Group's latest annual audited financial statements.

 

Tax

A tax credit of £5.5m is shown for the six month period (six months to 30 June 2014: charge of £1.8m, year ended 31 December 2014: charge of £4.8m).  This tax credit is recognised based upon the best estimate of the average income tax rate on profit/(loss) before tax expected for the full financial year.

 

Seasonality

The Group's activities are generally not subject to significant seasonal variation.

 

2 Business segments

 

For management purposes, the Group is organised into five operating divisions: Construction & Infrastructure, Fit Out, Affordable Housing, Urban Regeneration and Investments.  The divisions' activities are as follows:

 

·    Construction & Infrastructure: offers national design, construction and infrastructure services to private and public sector clients.  The division works on projects, and in frameworks and strategic alliances of all sizes across a broad range of markets including commercial, defence, education, energy, healthcare, industrial, leisure, retail, transport and water.

·    Fit Out: specialises in fit out and refurbishment projects in the commercial, central and local government office, further education and retail banking markets.  Overbury operates as a national fit out company through multiple procurement routes and Morgan Lovell offers a turnkey design and build service in office interior design, fit out and refurbishment.

·    Affordable Housing: specialises in the design and build, planned and response maintenance of homes and the regeneration of communities across the UK.  The division operates a full mixed-tenure model creating homes for rent, shared ownership and open market sale.

·    Urban Regeneration: works with landowners and public sector partners to unlock value from under-developed assets to bring about sustainable regeneration and urban renewal through the delivery of mixed-use and residential-led projects.  Typically creates commercial, retail, residential, leisure and public realm facilities.

·    Investments: realises the potential for under-utilised property assets and promotes economic growth, primarily through strategic partnerships with the public sector, by providing flexible structuring and funding solutions and development expertise.  The division covers a wide range of markets including asset backed, education, health and social care, residential, student accommodation, leisure and infrastructure.

 

Group Activities represents costs and income arising from corporate activities which cannot be meaningfully allocated to the operating segments.  These include costs such as treasury management, corporate tax coordination, insurance management and company secretarial services.  The divisions are the basis on which the Group reports its segmental information as presented below:

 

 

Six months to 30 June 2015
	Construction & Infrastructure	Fit Out	Affordable Housing	Urban Regeneration	Investments	Group Activities	Eliminations	Total
	£m	£m	£m	£m	£m	£m	£m	£m
External revenue	621.4	293.4	202.4	25.8	9.0	-	-	1,152.0
Inter-segment revenue	1.8	5.2	-	-	-	-	(7.0)	-
Total revenue	623.2	298.6	202.4	25.8	9.0	-	(7.0)	1,152.0
Operating profit/(loss) before amortisation of intangible assets and exceptional operating items	0.3	10.4	3.0	5.0	0.4	(3.6)	-	15.5
Amortisation of intangible assets	-	-	(0.3)	(0.8)	-	-	-	(1.1)
Exceptional operating items	(39.4)	-	-	-	-	-	-	(39.4)
Operating (loss)/profit	(39.1)	10.4	2.7	4.2	0.4	(3.6)	-	(25.0)

 

Six months to 30 June 2014
	Construction & Infrastructure	Fit Out		Affordable Housing		Urban Regeneration		Investments		Group Activities		Eliminations		Total
	£m	£m		£m		£m		£m		£m		£m		£m
External revenue	562.5	193.7		191.7		41.8		8.8		-		-		998.5
Inter-segment revenue	4.5	1.7		1.7		-		-		-		(7.9)		-
Total revenue	567.0	195.4		193.4		41.8		8.8		-		(7.9)		998.5
Operating profit/(loss) before amortisation of intangible assets and exceptional operating items	5.9	5.5		2.7		3.5		1.3		(3.7)		-		15.2
Amortisation of intangible assets	-	-		(0.3)		(0.9)		-		-		-		(1.2)
Exceptional operating items	-	-		-		-		-		-		-		-
Operating profit/(loss)	5.9	5.5		2.4		2.6		1.3		(3.7)		-		14.0
Year ended 31 December 2014
	Construction & Infrastructure		Fit Out		Affordable Housing		Urban Regeneration		Investments		Group Activities		Eliminations		Total
	£m		£m		£m		£m		£m		£m		£m		£m
External revenue	1,159.0		503.6		419.6		112.7		24.9		-		-		2,219.8
Inter-segment revenue	12.7		3.3		3.0		-		-		-		(19.0)		-
Total revenue	1,171.7		506.9		422.6		112.7		24.9		-		(19.0)		2,219.8
Operating profit/(loss) before amortisation of intangible assets and exceptional operating items	3.5		15.0		6.0		10.0		0.9		(6.5)		-		28.9
Amortisation of intangible assets	-		-		(0.6)		(1.8)		-		-		-		(2.4)
Operating profit/(loss)	3.5		15.0		5.4		8.2		0.9		(6.5)		-		26.5

 

During the six months to 30 June 2015, six months to 30 June 2014 and the year ended 31 December 2014, inter-segment sales were charged at prevailing market prices and significantly all of the Group's operations were carried out in the UK.

 

3 Exceptional operating items

 

	Six months to	Six months to	Year ended
	30 June 2015	30 June 2014	31 Dec 2014
	£m	£m	£m
Impairment of trade and other receivables	39.4	-	-

 

The exceptional operating item of £39.4m relates to the impairment of trade and other receivables on two construction contracts, both of which were transferred as part of the acquisition of the design and project services division of Amec plc in 2007.  Both contracts have the Secretary of State for Defence as the overall employing party. One contract relates to the design and construction of a floating jetty, the other to the design and construction of living accommodation and infrastructure, both around the Faslane Naval Base in West Scotland.

 

Commercial resolution 'in principle' has been achieved on the contract for the design and construction of living accommodation and infrastructure during the period.  Based upon this and the Board's best current assessment of the likely outcome on the other contract, an exceptional item has been charged, which is non-cash in nature. 

 

 

4 Dividends

 

Amounts recognised as distributions to equity holders in the period:
	Six months to	Six months to	Year ended
	30 June 2015	30 June 2014	31 Dec 2014
	£m	£m	£m
Final dividend for the year ended 31 December 2014 of 15.0p per share	6.6	-	-
Interim dividend for the year ended 31 December 2014 of 12.0p per share	-	-	5.1
Final dividend for the year ended 31 December 2013 of 15.0p per share	-	6.4	6.4
	6.6	6.4	11.5
Proposed dividends:
	Six months to	Six months to	Year ended
	30 June 2015	30 June 2014	31 Dec 2014
	£m	£m	£m
Interim dividend for the year ending 31 December 2015 of 12.0p per share	5.3
Final dividend for the year ended 31 December 2014 of 15.0p per share	-	-	6.6
Interim dividend for the year ending 31 December 2014 of 12.0p per share	-	5.1	-

 

The proposed interim dividend of 12.0p per share was approved by the Board on 4 August 2015 and will be paid on 23 October 2015 to shareholders on the register at 2 October 2015.  The ex-dividend date will be 1 October 2015.

 

5 (Loss)/earnings per share

 

		Six months to	Six months to	Year end
		30 June 2015	30 June 2014	31 Dec 2014
		£m	£m	£m
(Loss)/earnings attributable to the owners of the Company		(21.6)	11.3	18.1
Adjustments:
Exceptional operating items net of tax		31.4	-	-
Intangible amortisation net of tax		0.9	0.9	1.9
Adjusted Earnings		10.7	12.2	20.0
Basic weighted average ordinary shares (m)		43.7	42.7	42.8
Dilutive effect of share options and conditional shares not vested (m)		0.5	0.8	0.7
Diluted weighted average ordinary shares (m)		44.2	43.5	43.5

 

Basic (loss)/earnings per share		(49.4p)	26.5p	42.3p
Diluted (loss)/earnings per share		(48.9p)	26.0p	41.6p
Adjusted earnings per share		24.5p	28.6p	46.7p
Diluted adjusted earnings per share		24.2p	28.0p	46.0p

 

The average market value of the Company's shares for the purpose of calculating the dilutive effect of share options and long-term incentive plan shares was based on quoted market prices for the period that the options were outstanding.  The average share price for the period was £7.56 (30 June 2014: £7.89, 31 December 2014: £7.70).

 

A total of 917,350 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 2015 (30 June 2014: 276,056, 31 December 2014: 268,056).

6 Shared equity loan receivables

 

		30 June 2015	30 June 2014	31 Dec 2014
		£m	£m	£m
1 January		20.4	19.7	19.7
Net change in fair value recognised in the income statement		0.6	0.6	1.8
Repayments		(0.4)	(0.2)	(1.1)
End of period		20.6	20.1	20.4

 

Basis of valuation and assumptions made

There is no directly observable fair value for individual loans arising from the sale of specific 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 2015	30 June 2014	31 Dec 2014
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	8 years	9 years
Nominal discount rate		6.7%	7.0%	6.7%
Weighted average nominal annual property price increase		3.2%	2.2%	3.2%
Forecast default rate		2.0%	2.0%	2.0%
Number of properties sold under the shared equity scheme for which a loan was outstanding at the year end		705	743	709
Weighted average shared equity loan contribution (being the Group's weighted average loan as a proportion of the selling price of a property)		24%	24%	24%

 

Sensitivity analysis

At 30 June 2015, if the nominal discount rate had been 100bps higher at 7.7% and all other variables were held constant, the fair value of the shared equity loan receivables would decrease by £0.7m with a corresponding reduction in both the result for the period and equity (excluding the effects of tax).

 

At 30 June 2015, 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 £0.8m 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 2015	30 June 2014	31 Dec 2014
		£m	£m	£m
Amounts due from construction contract customers		246.9	256.8	241.5
Trade receivables		147.0	141.1	176.7
Amounts owed by joint ventures		0.6	7.6	3.3
Prepayments		13.0	9.0	11.9
Other receivables		9.3	7.9	9.0
		416.8	422.4	442.4

8 Net (debt)/cash

 

		30 June 2015	30 June 2014	31 Dec 2014
		£m	£m	£m
Cash and cash equivalents		84.9	72.4	87.6
Non-recourse project financing due in less than one year		(18.5)	-	-
Borrowings due after one year		(74.0)	(20.0)	(15.0)
Non-recourse project financing due after one year		-	(18.3)	(16.9)
Net (debt)/cash		(7.6)	34.1	55.7

 

Borrowings of £74.0m were drawn down under the Group's committed bank loan facilities.  Additional project finance borrowings of £18.5m (30 June 2014: £18.3m, 31 December 2014: £16.9m) were drawn from separate facilities to fund specific projects.  These project finance borrowings are without recourse to the remainder of the Group's assets.

 

9  Trade and other payables

 

		30 June 2015	30 June 2014	31 Dec 2014
		£m	£m	£m
Trade payables		209.7	187.6	167.7
Amounts due to construction contract customers		43.3	49.1	48.9
Amounts owed to joint ventures		0.2	0.2	0.2
Other tax and social security		17.7	12.5	17.0
Accrued expenses		396.9	348.2	429.2
Deferred income		8.9	7.4	8.6
Other payables		19.3	23.2	18.5
		696.0	628.2	690.1

 

Current and non-current other payables include nil and £13.8m respectively (30 June 2014: £4.7m and £13.3m, 31 December 2014 nil and £13.6m) related to the discounted deferred consideration due on the acquisition of an additional interest in ISIS Waterside Regeneration Partnership.

 

10 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.

 

11 Subsequent events

 

There were no subsequent events that affected the financial statements of the Group.