TIDMMGNS
RNS Number : 2707Q
Morgan Sindall Group PLC
25 February 2021
25 February 2021
MORGAN SINDALL GROUP PLC
('Morgan Sindall' or 'Group')
The Construction & Regeneration Group
This announcement contains information that qualified, or may
have qualified, as inside information for the purposes of Article
17 of the Market Abuse Regulations (EU) 596/2014 (MAR). The person
responsible for making this announcement is Steve Crummett, Finance
Director.
RESULTS FOR THE FULL YEAR (FY)ED 31 DECEMBER 2020
FY 2020 FY 2019 Change
Revenue GBP3,034m GBP3,071m -1%
Operating profit - adjusted(1) GBP68.5m GBP93.1m -26%
Profit before tax - adjusted(1) GBP63.9m GBP90.4m -29%
Earnings per share - adjusted(1) 108.6p 161.2p -33%
Year end net cash(2) GBP333m GBP193m +GBP140m
Total dividend per share 61.0p 21.0p +190%
Operating profit - reported GBP65.4m GBP91.3m -28%
Profit before tax - reported GBP60.8m GBP88.6m -31%
Basic earnings per share - reported 99.8p 157.9p -37%
---------------------------------------- ----------- ----------- ----------
(1) 'Adjusted' is defined as before intangible amortisation of
GBP3.1m and (in the case of earnings per share) deferred tax charge
of GBP1.5m
(FY 2019: before intangible amortisation of GBP1.8m)
(2) Note 10
FY 2020 summary:
-- Results demonstrate resilience of the Group against backdrop of COVID-19 pandemic
o Revenue of GBP3.0bn, down 1%
o Adjusted profit before tax down 29% to GBP63.9m
-- Very strong cash performance. Balance sheet further strengthened
o Net cash of GBP333m (FY 2019: GBP193m)
o Average daily net cash increased significantly to GBP181m (FY
2019: GBP109m)
-- No continuing support from Government schemes; all furlough
amounts repaid and previously deferred taxes fully up to date
-- Well set for strong growth in 2021
o High quality and growing order book, with secured workload up
9% to GBP8.3bn
o Well positioned to benefit from attractive UK investment
trends given key market positions in UK national and social
infrastructure together with affordable housing and
regeneration
o Positive momentum across the Group with result expected to be
materially ahead of previous expectations and slightly ahead of
that delivered in 2019
-- Reinstating medium-term targets
-- Final dividend of 40p per share resulting in total dividend
for the year of 61p per share (FY 2019: 21.0p) following
reinstatement of dividend in November
-- Divisional highlights
o Strong performance in Construction & Infrastructure driven
by Infrastructure; operating profit up 11% to GBP35.7m (FY 2019:
GBP32.3m), with operating margin maintained at 2.2%
o Resilient performance in Fit Out with result reflecting the
high quality of its business; improved operating margin to 4.6% (FY
2019: 4.4%) and operating profit of GBP32.1m (FY 2019:
GBP36.9m)
o Property Services' volumes return to more normalised levels in
the second half; full year operating profit of GBP1.0m (FY 2019:
GBP4.3m)
o Continued strategic and operational progress made in
Partnership Housing positioning it for future growth; margin
improved slightly to 3.7% (FY 2019: 3.6%), with operating profit of
GBP16.1m (FY 2019: GBP18.3m)
o Steady progress across Urban Regeneration's long-term
regeneration schemes, although operating profit lower at GBP9.2m
(FY 2019: GBP19.4m)
Commenting on today's results, Chief Executive, John Morgan
said:
"Whilst the year has been dominated by the COVID-19 pandemic,
these results reflect the resilience across the Group and the
benefits of actions taken in recent years to maintain contract
selectivity, further improve payments to our supply chain and
maintain a strong cash position at all times.
Throughout the year, the business has had to adapt quickly and
decisively to the continually changing external environment. I
would like to sincerely thank all our employees for their
commitment and dedication throughout. I am extremely proud of the
way our people have stepped up in these adverse circumstances.
Despite the differing challenges each division faced, the Group
has continued to make strategic and operational progress. Again, we
have an improved cash position and have further strengthened our
balance sheet, allowing us to make the right decisions and actions
for the long-term benefit of the business. Our strategy remains the
same, based on organic growth and operational improvement in
markets geared towards future demand for affordable housing, urban
regeneration and infrastructure and construction investment. We
welcome the Government's continued support for our activities and
the recognition of the industry as a key driver for economic
stability and recovery.
The size and quality of our growing secured workload at well
over GBP8bn leaves us well-positioned for the future and we are on
track to deliver a result which is materially ahead of our previous
expectations and slightly ahead of that delivered in 2019."
Enquiries
Morgan Sindall Group Tel: 020 7307 9200
John Morgan
Steve Crummett
Instinctif Partners Tel: 020 7457 2020
Matthew Smallwood
Rosie Driscoll
Presentation
-- There will be an analyst and investor presentation followed
by a Q&A, held virtually on Thursday 25th February at
09:00
-- A copy of these results is available at: www.morgansindall.com
-- The presentation will be available via playback on our
website in the afternoon.
Note to Editors
Morgan Sindall Group
Morgan Sindall Group plc is a leading UK Construction &
Regeneration group with annual revenue of GBP3.0bn, employing
around 6,600 employees and operating in the public, regulated and
private sectors. It reports through six divisions of Construction
& Infrastructure, Fit Out, Property Services, Partnership
Housing, Urban Regeneration and Investments.
Group Strategy
The Group's strategy is focused on its well-established core
strengths of Construction and Regeneration in the UK. The Group has
a balanced business which is geared toward the increasing demand
for affordable housing, urban regeneration and infrastructure and
construction investment.
Morgan Sindall's recognised expertise and market positions in
affordable housing (through its Partnership Housing division) and
in mixed-use regeneration development (through its Urban
Regeneration division) reflect its deep understanding of the built
environment developed over many years and its ability to provide
solutions for complex regeneration projects. As a result, its
capabilities are aligned with sectors of the UK economy which are
expected to see increasing opportunities in the medium to long term
and which support the UK's current and future regeneration and
affordable housing needs.
Through its Construction & Infrastructure division, the
Group is also well positioned to meet the demand for ongoing
investment in the UK's infrastructure, while its geographically
diverse construction activities are focused on key areas of
education, healthcare and commercial.
The Fit Out business is the market leader in its field and
delivers a consistently strong operational performance. Fit Out,
together with the Construction & Infrastructure division,
generates cash resources to support the Group's investment in
affordable housing and mixed-use regeneration. The Group also has
an operation in Property Services which is focused on response and
planned maintenance activities provided to the social housing and
the wider public sector.
Group Structure
Under the two strategic lines of business of Construction and
Regeneration, the Group is organised into five reporting divisions
as follows:
Construction activities comprise the following operations:
-- Construction & Infrastructure : Focused on the education,
healthcare, commercial, defence, industrial, leisure
and retail markets in Construction; and on the highways,
rail, aviation, energy, water and nuclear markets in
Infrastructure. Also includes the Baker Hicks design
activities based out of the UK and Switzerland
-- Fit Out : Focused on the fit out of office space with
opportunities in commercial, central and local government
offices and further education
-- Property Services : Focused on response and planned
maintenance activities provided to the social housing
and the wider public sector
Regeneration activities comprise the following operations:
-- Partnership Housing : Focused on working in partnerships
with local authorities and housing associations. Activities
include mixed-tenure developments, building and developing
homes for open market sale and for social/affordable
rent, 'design & build' house contracting and planned
maintenance & refurbishment
-- Urban Regeneration : Focused on transforming the urban
landscape through partnership working and the development
of multi-phase sites and mixed-use regeneration
The results for the full year ended 31 December 2020 also
include Investments as a separate reporting segment.
As from 1 January 2021, the activities of the Investments
division were reorganised with it no longer operating as a separate
division from that date. The operational management of the joint
venture property partnerships and Later Living business formerly
reported within Investments were transferred to Partnership Housing
and Urban Regeneration.
The results for future periods commencing 1 January 2021 will
reflect this divisional reorganisation in the segmental reporting
(see Section 8 of Other Financial Information).
Environment & Social Summary
The Group is committed to delivering economic, social and
environmental value to its stakeholders. Its approach is embodied
in its responsible business strategy, which is built around its
Five Total Commitments: to health, safety and wellbeing, employee
development, the environment, its supply chain and local
communities. These Commitments have been in place since 2008 and
are aligned to its purpose, the needs of its stakeholders and its
obligations towards society. Its Commitments support the UN
Sustainable Development Goals and each Commitment has clear targets
and KPIs set to monitor progress which are supported by its
divisions.
The Group is a leader in its sector in addressing climate change
and has been independently recognised as such. In 2020, the Group
was awarded an A score for the first time for its leadership on
climate change from CDP, the international non-profit organisation
focused on driving environmental disclosure to manage environmental
impacts. The Group is one of just 270 companies globally to receive
the grade and this is the fifth year its leadership in this area
has been acknowledged by CDP. In 2021, CDP also named it a Supplier
Engagement Leader for its work to drive action on climate change
along its supply chain.
The Group has set science-based targets for reducing carbon
emissions and is one of the first construction companies globally
to have its science-based emission targets officially accredited.
These targets are based on the 2015 International Treaty on Climate
Change, known as the Paris Agreement, which seeks to limit global
warming to well below 2 degrees Celsius, preferably 1.5 degrees
Celsius, compared to pre-industrial levels. The targets are
currently being revised to re-align to the lower range of the
agreement, and the specific accepted norm of no more than 1.5
degrees Celsius.
The Group is committed to minimising its impact on the
environment, both now and in the longer term and has a goal of
achieving 'net zero' by 2030. 'Net Zero' in this context is defined
as the sum of the Group's Scope 1 1 , Scope 2 2 and operational
Scope 3 3 emissions (as measured by The Carbon Reduce Scheme
(formerly CEMARS(4) )), less the impact of specific, identified and
measurable carbon removal actions (approved offsetting measures) in
the UK.
Other highlights and performance measures from the year in this
area include:
-- 22% reduction in Scope 11 and 22 carbon emissions compared to 2016 baseline emissions
-- Carbon intensity reduced to 7.5 (from 8.9 in 2019)
-- Introduction of internal carbon levy from 2021 onwards
-- 65% of electricity purchased from renewable sources
-- 96% of waste diverted from landfill
The Group's activities affect its employees, supply chain and
the communities where it works. It is critical to the Group's
success that its employees, suppliers and subcontractors all have
the tools they need to deliver for its clients and partners; this
includes a safe working environment, the right skills and an
in-depth understanding of the Group's values. The Group was a
founder member of, and continues to support, the Supply Chain
Sustainability School (SCSS) which provides free training in topics
such as waste management, energy management, biodiversity, modern
slavery, fairness, inclusion and respect, mental health and
wellbeing and community liaison.
The scale of its major construction and regeneration schemes
means the Group can remain working within some communities for many
years, enabling it to contribute to these communities by offering
employment opportunities and procuring where possible from local
suppliers.
Some highlights and performance measures in this area
include:
-- 540 people sponsored to complete national vocational
qualifications and professional qualifications
-- 28% reduction in lost time incidents(5) against 2018 baseline of 156
-- Employee voluntary turnover rate of 7.8%
-- 98% of invoices paid within 60 days in Construction &
Infrastructure for the second half of the year
The Group considers diversity in its broadest sense, including
age, gender, ethnicity, culture, socio-economic background,
disability and sexuality. It values and encourages diversity of
thought, perspective and experience and recognises that the new
ideas and innovations that a diverse and inclusive team of people
brings are critical to its future.
While some progress has been made and the representation of
people from a BAME background has increased from 13.6% to 15%,
female representation has remained at 24%. The Group's 2020 median
gender pay gap is 29.10%(6) (2019: 31.2%). This remains high and
reflects a higher number of senior male employees in the Group.
Women make up 10% (2019: 9%) of the upper pay quartile compared to
40% (2019: 37%) in the lower quartile.
See the responsibility section of the 2020 annual report which
will be published on 25 March 2020 for further information.
(1) Direct emissions from owned or controlled sources
(2) Indirect emissions generated from purchased energy
(3) All indirect emissions not included in Scope 2 that occur in
limited categories of our value chain as measured by The Carbon
Reduce Scheme (formerly) CEMARS
Note: Vehicle carbon emissions are included in the calculation
of Scope 1 emissions but are reported separately as they are a
significant source of the Group's emissions.
(4) The Carbon Reduce Scheme (formerly the Carbon & Energy
Management And Reduction Scheme (CEMARS))
(5) Incidents resulting in absence from work for a minimum of
one working day, excluding the day the incident occurred.
(6) This figure has been calculated using the methodology set
out in the Gender Pay Gap Regulations, however it is based on our
November payroll data rather than our April payroll data, which is
the payroll period we are required to report on under the
Regulations. Based on the Group's payroll data as at April 2020,
the 2020 median gender pay was 33.56%, however the April data was
impacted by the number of people across the Group who had agreed to
reduce their salaries for three months to 30 June 2020 and the
number of people on furlough. The November payroll data was not
distorted by Covid-related measures and therefore paints a more
accurate picture.
Basis of Preparation
In addition to presenting the financial performance of the
business on a statutory basis, adjusted performance measures are
also disclosed. Refer to the Other Financial Information section
which sets out the basis for the calculations. These measures are
not an alternative or substitute to statutory IFRS measures but are
seen as more useful in assessing the performance of the business on
a comparable basis and are used by management to monitor the
performance of the Group.
In all cases the term 'adjusted' excludes the impact of
intangible amortisation of GBP3.1m (FY 2019: GBP1.8m) and (in the
case of earnings per share) a deferred tax charge of GBP1.5m (FY
2019: nil).
Group Operating Review
Overview
The year has seen unprecedented challenges arising from the
COVID-19 pandemic ('C-19') and the health and wellbeing of its
people, partners and the public has remained the Group's overriding
priority throughout. At all times, activity across the Group only
continued where it was safe to do so, with strict adherence to
Government advice and that of the devolved administrations and
public health authorities across the UK.
The Group had a strong start to the year, building on the
significant positive momentum carried through from 2019, with first
quarter revenue up 17% on the prior year. However, with the onset
of C-19 and the subsequent lockdown restrictions imposed across the
UK in late March, trading across all divisions was significantly
impacted. Revenue in the second quarter of the year was down 23% on
the prior year as a result.
With the gradual lifting of the initial lockdown restrictions in
the first half and then through the subsequent tier system and
further national lockdown restrictions in the second half, there
was no further material impact on the Group's operations. Revenue
in the second half of the year recovered well and was 1% up on the
prior year, resulting in revenue for the year of GBP3,034m, a
reduction of 1% (FY 2019: GBP3,071m).
The impact of additional costs incurred from site closures,
lower productivity on sites, and from implementing new safety
processes and procedures, impacted profitability in the year. In
addition, construction delays on many of the development schemes in
the regeneration activities, further reduced profit in the
year.
As a result, the adjusted operating profit for the year was down
26% to GBP68.5m (FY 2019: GBP93.1m), with adjusted operating profit
down 52% in the first half and down only 9% in the second half. The
full year adjusted operating margin was 2.3%, down from 3.0% in the
prior year. The operating margin improved in the second half of the
year, up from 1.3% in the first half (H1 2019: 2.6%) to 3.0% in the
second half (H2 2019: 3.4%), approaching margin levels achieved
pre-C-19.
Consequently, the adjusted profit before tax was GBP63.9m, down
29% (FY 2019: GBP90.4m). The statutory profit before tax was
GBP60.8m (FY 2019: GBP88.6m).
The tax charge for the year was GBP15.4m (FY 2019: GBP17.4m), an
effective tax rate of 25.3% on profit before tax. This was higher
than the UK statutory rate due to the non-deductible repayment of
furlough receipts (see below) and the effect on the deferred tax
balances of the Government decision in the year to cancel the
previously planned future reduction in UK corporation tax
rates.
The adjusted earnings per share of 108.6p was 33% lower than the
prior year (FY 2019: 161.2p) and the statutory basic earnings per
share was 99.8p, 37% lower than the prior year (FY 2019:
157.9p).
The Group's relationships with its supply chain partners are of
strategic importance and its actions and behaviours towards them
during these challenging times are viewed as key to the Group's
future success. Consequently, the prompt payment of its suppliers
has remained a major area of focus throughout the year and even
more so against the current backdrop of C-19.
For the formal Payment Practices Reporting period of 1 July 2020
to 31 December 2020, Construction & Infrastructure, the largest
operating division by revenue, maintained its average time taken to
pay invoices at 27 days and this reflected a reduction of 5 days
compared to the corresponding period in the prior year. 98% of its
invoices were paid within 60 days. Fit Out reported its average
time taken to pay invoices at 21 days, with 97% of invoices paid
within 60 days, while Partnership Housing reported 35 days as its
average time to pay and 95% of its invoices paid within 60 days.
Property Services reported an average of 36 days to pay invoices, a
deterioration from previous reporting periods, however this was
impacted by process changes as a result of C-19 and is expected to
reverse in due course as conditions normalise.
The future success of the Group is also determined by the
quality of the secured workload and the discipline across the Group
to maintain contract selectivity irrespective of economic
conditions. Looking ahead, preserving the appropriate risk balance
within the order book is critical to future success. Despite
certain delays to decision-making in progressing projects across
some clients, both public and private sector, the Group had a
successful period of winning new work, with the total secured
workload at the year end of GBP8,290m, up 9% from the previous
year.
Specific actions in response to C-19
Operationally, the Group's decentralised approach allowed
significant flexibility of response and enabled each division to
adopt its own specific approach to suit their employees, clients
and supply chain partners' requirements in the changing
circumstances throughout the year.
In the first half of the year, the Group placed a number of its
employees on furlough and accessed the Government's Coronavirus Job
Retention Scheme ('CJRS') which facilitated the safeguarding of
many jobs during the period of maximum impact of C-19. At the peak,
c1,900 employees were furloughed across the Group. As the Group's
financial position remained robust and resilient throughout the
year, the total amount of cash received under the scheme of GBP9.5m
was repaid in the second half of the year. The repayment was
structured such that GBP7.7m was repaid directly and was charged
through Central costs, with the remaining GBP1.8m paid as
additional corporation tax as the repayment through Central costs
was not tax deductible.
Other measures taken in the second quarter to improve cash flow
included the agreement of permissions to defer VAT, PAYE and other
tax payments (see Balance sheet & Cash section below) and the
cancellation of the 2019 final dividend. In addition, the Chair,
Non-Executive Directors, Executive Directors and Senior Management
Team all volunteered salary reductions of 20% for the 3 months to
30 June.
Balance sheet & Cash
The Group maintained a strong financial position throughout the
year.
Net cash at the year end increased significantly to GBP333m, an
increase of GBP140m on the prior year end. Of this total, GBP58m
was held in jointly controlled operations or held for future
payment to designated suppliers (JVs/PBAs).
The average daily net cash for the period was GBP181m (including
GBP61m in JVs/PBAs), up from GBP109m in the prior year period. For
the second half of the year, the average daily net cash was GBP208m
(including GBP61m in JVs/PBAs).
During the period, the Group took advantage of permissions to
defer VAT, PAYE and other tax payments which together increased the
average daily net cash position in the year by cGBP20m.
At the year end, all these deferred amounts had been paid and
were fully up to date.
During October, the Group secured a new GBP150m committed
revolving credit facility, replacing the previous GBP150m facility
which was due to expire in early 2022. The new facility initially
extends until late 2023 and includes two further one-year extension
options, with the agreement of the lending banks. This facility is
in addition to the existing GBP30m loan facility, which together
provide the Group with a total of GBP180m of committed facilities
as before. Together with the ongoing net cash balances, this
provides the Group with a significant amount of total available
liquidity.
In addition, and as precautionary measure at the start of the
pandemic, the Group was also confirmed by the Bank of England as an
eligible issuer for the Covid Corporate Financing Facility (CCFF).
However, no drawings were made on this facility.
Looking ahead, based upon the current anticipated cash flows and
investment plans in the regeneration activities, the Group expects
that the average daily net cash for 2021 will be in excess of
GBP100m.
Dividend
In light of the economic uncertainty brought about by C-19, the
Board announced in March that it had decided to cancel the final
dividend for 2019. In November, based upon the performance of the
business, the outlook for the year at that time and the strong cash
position, the Board declared an interim dividend of 21.0p per
share, which was paid in December.
A final dividend of 40.0p per share is now proposed, resulting
in a total dividend for the year of 61.0p per share (FY 2019:
21.0p). This reflects the result for the year, the strong balance
sheet and the Board's confidence in the future prospects of the
Group.
Outlook
The size and quality of the Group's growing secured workload at
well over GBP8bn leaves it well-positioned for the future and is on
track to deliver a result which is materially ahead of its previous
expectations and slightly ahead of that delivered in 2019.
To provide a framework for future performance, each division
operates to a medium-term financial target (the 'target' or
'targets'). These targets are current as from the start of
2021.
All the targets remain the same as were previously announced in
February 2020 with the exception of Infrastructure, where its
target operating margin has been increased to 3.5% (previous target
of 3.0%).
The targets relate to either operating margin, return on capital
employed and/or profit and are referenced in the Business
review.
Medium-term target
Construction Operating margin of between 2.5% and 3%
per annum
Infrastructure Operating margin of 3.5%
Fit Out Operating profit at or around cGBP35m
per annum
Property Services Operating profit of at least GBP10m
Partnership Housing Operating margin of 6% / return on capital
in excess of 20%
Urban Regeneration 3-year rolling average return on capital
up towards 20%
-------------------------------------------
Business Review
The following Business Review is given on an adjusted basis,
unless otherwise stated. Refer to Note 3 of the consolidated
financial statements for appropriate reconciliations to the
comparable IFRS measures.
Headline results by business segment
Revenue Operating Profit/(Loss) Operating Margin
GBPm Change GBPm Change % Change
------ ------- ------------ ------------ ------- ----------
Construction & Infrastructure 1,637 +10% 35.7 +11% 2.2% -
Fit Out 700 -17% 32.1 -13% 4.6% +20bps
Property Services 112 -3% 1.0 -77% 0.9% -280bps
Partnership Housing 441 -14% 16.1 -12% 3.7% +10bps
Urban Regeneration 123 +3% 9.2 -53% n/a n/a
Investments 34 n/a (6.9) n/a n/a n/a
Central/Eliminations (13) (18.7)
------ ------- ------------ ------------ ------- ----------
Total 3,034 -1% 68.5 -26% 2.3% -70bps
------ ------- ------------ ------------ ------- ----------
Group secured workload(1) by division
The Group's secured workload(1) at 31 December 2020 was
GBP8,290m, an increase of 9% from the previous year end. The
divisional split is shown below.
FY 2020 FY 2019 Change
GBPm GBPm
------------------------------- ------- ------- ------
Construction & Infrastructure 2,537 2,271 +12%
Fit Out 410 480 -15%
Property Services 970 904 +7%
------------------------------- ------- ------- ------
'Construction' secured order
book(2) 3,917 3,655 +7%
------------------------------- ------- ------- ------
Partnership Housing 1,267 1,093 +16%
Urban Regeneration 2,434 2,278 +7%
Investments 673 581 +16%
------------------------------- ------- ------- ------
'Regeneration' secured order
book(2) 4,374 3,952 +11%
------------------------------- ------- ------- ------
Inter-divisional eliminations (1) (14)
------------------------------- ------- ------- ------
Group secured workload(1) 8,290 7,593 +9%
------------------------------- ------- ------- ------
(1) The Group secured workload is the sum of the Construction
secured order book and the Regeneration secured order book, less
any inter-divisional eliminations
(2) The 'Secured order book' is the sum of the 'committed order
book', the 'framework order book' and (for the Regeneration
businesses only) the Group's share of the gross development value
of secured schemes (including the development value of open market
housing schemes) .
The 'committed order book' represents the Group's share of
future revenue that will be derived from signed contracts or
letters of intent. The 'framework order book' represents the
Group's expected share of revenue from the frameworks on which the
Group has been appointed. This excludes prospects where
confirmation has been received as preferred bidder only, with no
formal contract or letter of intent in place.
Construction & Infrastructure
FY 2020 FY 2019 Change
GBPm GBPm
------------------------------ ------- ------- ------
Revenue 1,637 1,486 +10%
Operating profit 35.7 32.3 +11%
Operating margin 2.2% 2.2% -
------------------------------ ------- ------- ------
Construction & Infrastructure delivered a strong result in
the year despite C-19, with revenue up 10% to GBP1,637m and
operating profit up 11% to GBP35.7m. The operating margin of 2.2%
was level with the prior year.
The result was driven by strong revenue and profit growth in
Infrastructure (including Design)(1) , while Construction 's profit
and margin were significantly lower, impacted by additional costs
incurred associated with C-19.
For both Construction and Infrastructure, operational disruption
related to C-19 was mainly restricted to the first half, with most
sites fully open and active throughout the second half.
Of the divisional revenue split by type of activity,
Construction accounted for 41% of divisional revenue at GBP670m,
with 59% (GBP967m) being Infrastructure.
The division also performed well in terms of winning work and
growing its future workload. The secured order book at the year end
was GBP2,537m, up 12% compared to the prior year.
(i) Construction
Construction's revenue increased 8% to GBP670m, with second half
revenue growth of 13% compared to 2% in the first half as sites
reopened and productivity levels were restored following the
initial lockdown restrictions imposed in March.
At the 'peak' impact of the lockdown measures in the second
quarter of the year, c31% of sites were closed completely (c15% by
value), with the remainder impacted by significant productivity
constraints. The operational impact on projects was broadly
determined by the stage of construction, with a relatively low
impact on projects at an earlier stage of construction (groundwork,
piling, demolition etc), while those most impacted were projects at
the final stages of construction.
For approximately 50% of the division's projects, there was no
contractual entitlement to recover costs associated with C-19, and
this was in addition to the additional costs incurred as a result
of delays to commencing new work. Consequently, the operating
margin reduced significantly, down to 1.2% (FY 2019: 2.8%), with
operating profit down to GBP8.2m (FY 2019: GBP17.1m). As activity
increased, the second half margin improved to 1.8%, compared to
0.4% in the first half.
Construction's order book at the year end was broadly level with
the prior year at GBP512m (FY 2019: GBP514m), with GBP432m (84% by
value) secured for 2021. c100% of the order book value is derived
through either negotiated, framework or two-stage bidding
procurement processes, in line with the preferred risk profile of
work undertaken. In addition to this, Construction also had
cGBP730m of work at preferred bidder stage at the year end, up 8%
compared to the same time last year (FY 2019: GBP675m in preferred
bidder).
In education, Construction's largest sector, project wins
included: a GBP50m Science, Engineering and Environmental building
for the University of Salford; a GBP37m school for Urban&Civic
in Rugby; two schools for the City of Edinburgh totalling GBP24m;
and the GBP14.6m expansion and refurbishment of Cromwell Community
College in Chatteris, Cambridgeshire. Work started on all these
projects during the year, with the new build works at Cromwell
Community College handed over in January 2021. In addition, the
division secured a contract via the Pagabo framework to build St
Marks school in Southampton and a contract via the Department for
Education framework to refurbish and upgrade a 1930s building to
house Hujjat Primary School in Harrow.
Construction also achieved preferred bidder on a number of
projects: the GBP29m Glebe Farm school in Wavendon, Milton Keynes,
via the Pagabo framework for major construction works; the GBP15m
expansion and renovation of the University of Oxford's Grade
II-listed Radcliffe Science Library to house the new Reuben
College, via the University's capital works partner framework; and
the University of Salford's GBP13m project to build a Robotics
Innovation Centre, where work is due to start in early 2021. In
addition, Construction was selected as preferred bidder and awarded
a pre-construction services agreement for phase 1 of the GBP36m
Alconbury Education Hub project, in Alconbury Weald,
Cambridgeshire, which will include a secondary school, sixth form
and special needs school.
During the year, work progressed on the GBP27m Cefn Saeson
Comprehensive School in Neath, Wales and the GBP15.1m educational
campus in Renton, West Dumbartonshire, consisting of Renton Primary
School, a language and communication unit, and the Riverside Early
Learning and Childcare Centre. Completions included the GBP10.2m
Vandyke Upper School and the GBP6.5m Gilbert Ingelfield Academy in
Leighton Buzzard, Bedfordshire; and the Vita Student Nottingham
project, a GBP24m student accommodation scheme in the city centre.
In addition, the division handed over the GBP5.3m Highfields
Spencer Academy in Derby in September 2020, two weeks early;
offsite construction methods had been used to significantly reduce
the construction programme.
In healthcare, the GBP3.3m extension and refurbishment of South
Molton Medical Care Centre in Devon was completed in August; and
work began on a new clinical and education facility for the Evelina
London Children's Hospital, awarded through the Southern
Construction Framework.
In other sectors, the division secured a GBP46m residential
development for Urban Regeneration, through its joint venture, as
part of the New Bailey development in Manchester. Completions
included The Spine, the 70,000 sq ft headquarters in Liverpool of
the Royal College of Physicians, a GBP6.3m leisure centre in Market
Rasen, Lincolnshire, and two residential projects for Brighton
& Hove City Council: Buckley Close in Hangleton, delivered
under the New Homes for Neighbourhood scheme, and an GBP8m
apartment building in Moulsecoomb, completed five weeks ahead of
programme.
Framework appointments included: reappointment to Pagabo's
GBP10bn, six-year major construction works framework on all lots
and regions throughout the UK; Lot 1 (GBP10m-GBP30m) and Lot 2
(GBP30m plus) of the GBP1.5bn YORbuild major works contractors
framework for projects in the Yorkshire and Humber region; two lots
on the University of Birmingham's capital estates framework for
projects valued GBP2.5m-GBP10m and GBP10m plus respectively; and
all three lots of the University of Glasgow's new GBP250m capital
estates framework, for projects valued over GBP3m, GBP250,000-GBP3m
and below GBP250,000. The division re-secured its place on the
GBP0.5bn hub South West Scotland framework.
(ii) Infrastructure(1)
Infrastructure's revenue increased 12% to GBP967m, with 26%
growth in the first half and revenue 1% lower in the second half,
driven primarily by the mix of work across the year.
At the 'peak' impact of the lockdown measures in the second
quarter of the year, c61% of sites were closed completely (59% by
value), however in many cases, the period of closure for a
reassessment of safety procedures was relatively short, allowing
many sites to reopen and maintain reasonable activity levels.
Most of the business's contracts allowed for full entitlement to
'time and costs' as a result of the closures and delays to
programmes.
Operating profit increased 81% to GBP27.5m with an operating
margin of 2.8%, up a significant 100bps from the prior year and
driven by the higher revenue, the type of work and improved
operational delivery on site. The first half margin was 2.1%, while
this increased to 3.7% in the second half, benefitting from work
mix, efficiencies and final account settlements on a number of
projects.
Infrastructure's order book grew strongly, up 15% to GBP2,025m
(80% of the total by value). In excess of 90% of the value of the
order book is derived through frameworks, consistent with the
strategic focus on long-term workstreams from its clients.
The focus for the division remained on its key sectors of
highways, rail, nuclear, energy and water. In aviation, ongoing
projects at Heathrow were curtailed due to C-19 and workload in
this sector in 2021, the final year of the framework, is likely to
be minimal.
In highways, the division was appointed through joint venture by
Highways England as one of six partners on the GBP4.5bn Smart
Motorway Alliance, set up to improve motorway journeys through
increased capacity and safety improvements. Mobilisation work has
begun, with the project due to start on site in the early part of
2021. Infrastructure was also appointed by Transport for West
Midlands to deliver the main construction works for the Sprint
corridor on the A45 between Bordesley Circus and Brays Road in
Yardley, Birmingham. Completions included the M62 scheme and the M5
Oldbury viaduct, the largest concrete project, by value, carried
out to date in the UK.
In rail, work progressed on two enhancement schemes for Network
Rail: the Werrington Grade Separation project and the remodelling
of London King's Cross station, both due to complete in 2021. In
addition, the division is working with Network Rail to develop
enhancement schemes as part of the CP6 framework for the Western
region. Following some disruption owing to travel restrictions
relating to C-19, work resumed on the Barking Riverside Extension
in joint venture for Transport for London, with the scheme due to
complete in 2022.
In nuclear, progress was made with the first four projects of
Sellafield's 20-year Programme and Project Partners framework, and
the Infrastructure Strategic Alliance framework achieved a
significant milestone with the commissioning of a major project.
Work also continued on the multi-million pound D58/59 submarine
building facility in Cumbria for BAE Systems.
In energy, Infrastructure completed two overhead line and
cabling projects in 2020 for Scottish and Southern Electricity
Networks and secured, under framework, a further cGBP50m of cabling
and overhead line work. In addition, cable installation began
during the year on National Grid's cGBP80m Dorset Visual Impact
Provision (VIP) project, with jointing works commencing in January
2021.
In water, work started on schemes under the AMP7 framework with
Welsh Water; and progress was made on the west section of the
Thames Tideway Tunnel 'super sewer', with the joint venture's
tunnel boring machine completing the 7km journey from Fulham to
Acton.
In Design, work continued on Public Health England's new
headquarters in Harlow, Essex ahead of its relocation from Porton
Down in Wiltshire. On other major projects, the design of the
Medicines Manufacturing Innovation Centre in Glasgow was completed;
and work continued on the reconfiguration of the Fort Halstead site
in Kent for QinetiQ and GW Pharmaceutical's new facility in
Kent.
Divisional outlook
The strategy for Construction & Infrastructure remains
focused on contract selectivity and risk management, operational
delivery and developing long term relationships with its
clients.
The medium-term target for Construction remains to deliver a
consistent operating margin within the range of 2.5%-3.0%.
Infrastructure's medium-term target is to achieve an operating
margin of 3.5%, reflecting an increase on its previous target from
3.0%. P rogress towards these targets is expected in 2021.
(1) Design results are reported within Infrastructure
Fit Out
FY 2020 FY 2019 Change
GBPm GBPm
------------------ ------- ------- ------
Revenue 700 839 -17%
Operating profit 32.1 36.9 -13%
Operating margin 4.6% 4.4% +20bps
------------------ ------- ------- ------
Fit Out's performance in the year demonstrated the overall
resilience and high quality of the business, improving its
operating margin by 20bps to 4.6% despite a reduction in revenue of
17% to GBP700m. Operating profit was 13% lower at GBP32.1m.
At the 'peak' impact of the C-19 lockdown measures in the second
quarter of the year, 53% of sites were closed (40% by value).
However, activity was restored relatively quickly, benefiting from
many sites being contained within vacated buildings. In addition,
the established and preferred relationships built up with its
supply chain over many years enabled prompt and efficient
remobilisation of teams at short notice and with immediate
responsiveness.
With all Fit Out sites fully active and productive throughout
the second half, revenue improved and was down 11% on the prior
year compared to a reduction of 22% in the first half.
As with previous years, there was a second half weighting to the
operating margin (H1 2020: 3.4%, H2 2020: 5.5%) and was driven by
strong project delivery as volumes normalised and by the successful
completion of a number of contracts falling towards the end of the
year.
By sector, although the commercial office market remained the
largest served by Fit Out, contributing 66% of revenue (FY 2019:
85%), the proportion was significantly lower than in previous
years. Work in the public sector and for local authorities
increased to 25% of total revenue (FY 2019: 6%), providing
resilience through the year, with higher education and retail
banking making up the remainder.
Geographically, the London region was the division's largest
market, accounting for 69% of revenue, with no significant change
from the prior year (FY 2019: 70%). Other regions accounted for 31%
of revenue.
There was a slight shift in type of work towards traditional fit
out work at 86% of revenue (FY 2019: 81%), with 'design and build'
reducing to 14% of the total (FY 2019: 19%).
The proportion of revenue generated from the fit out of existing
office space remained broadly level with the prior year at 72% (FY
2019: 73%) with the remaining 28% relating to new office fit out
(FY 2019: 27%).
At the year end, the secured order book was GBP410m, a reduction
of 15% on the prior year end and a reduction of 12% from the
position at the half year. Of the year-end total of GBP410m,
GBP387m (94%) relates to 2021 and this level of orders for the next
12 months is 8% lower than it was at the same time last year.
However, in addition to these secured orders, the division had
cGBP450m of potential work 'pending decision' at the year end, as
well as in excess of GBP350m of tender opportunities identified for
the first quarter of 2021. The average value of enquiries received
through the year was around GBP3m.
Projects won and started on site in the year included: a 123,000
sq ft of office space for the Boston Consulting Group in London; a
170,000 sq ft Category A fit out for Lexo Ltd in Peterborough; and
the fit out of BT's new 284,000 sq ft office at Three Snowhill,
Birmingham which represents the city's largest letting ever in a
single building. BT's first phase was started and completed in the
year, with phase two on track to be handed over in the second
quarter of 2021.
Projects won and delivered included: multiple projects under The
Mayor's Office for Policing and Crime (MOPAC) framework totalling
GBP41m (a further GBP54m of MOPAC projects have been secured for
2021); the design and fit out of 25,000 sq ft of office space for
WaterAid in Canary Wharf; and 14,000 sq ft of office space at
London Wall for software company, R3.
Other notable projects that remained on track in 2020 were a
Category A completion of the 274,000 sq ft HMRC Government Hub at
the landmark India Building in Liverpool; and the 75,000 sq ft
headquarters of the Royal College of Physicians at the Paddington
Village development in Liverpool, where Fit Out has been working in
collaboration with Construction & Infrastructure.
In higher education, Fit Out won a GBP5m project to fit out and
refurbish a health and social care training centre at the
University of Wolverhampton. Projects completed in the sector in
2020 included a teaching, hospitality and administrative space for
the University of Chicago Booth School of Business at St
Bartholomew's Square, London and teaching and lecture facilities at
King's College London's Macadam Building.
Divisional outlook
The medium-term target for Fit Out remains to deliver a profit
at or around GBP35m per annum. For 2021, based upon the current
market conditions, the year-end order book and the level of
identified prospects, Fit Out is expected to meet this target.
Property Services
FY 2020 FY 2019 Change
GBPm GBPm
--------------------- ------- ------- -------
Revenue 112 115 -3%
Operating profit(1) 1.0 4.3 -77%
Operating margin(1) 0.9% 3.7% -280bps
--------------------- ------- ------- -------
Property Services was significantly impacted by C-19, with
operating profit down to GBP1.0m (FY 2019: GBP4.3m) from revenue of
GBP112m, down 3%. The operating margin was down to 0.9% (FY 2019:
3.7%).
After a strong start to the year in January and February, the
services provided by the division were restricted to mainly
'essential' repairs and external planned works during the first
national lockdown in March. The resulting lower volume was
insufficient to cover the overheads in the division and the
division reported a loss of GBP0.5m in the first half. The maximum
number of employees on furlough at any one time during the second
quarter was 415 (57% of total).
Activity improved throughout the second half and a more
normalised level of operations had been restored by the fourth
quarter of the year. The second half operating profit of GBP1.5m
more than offset the first half loss, resulting in an operating
profit for the year of GBP1.0m.
The division has continued to focus on delivering repairs and
planned maintenance with a strong social value offering, servicing
public sector housing through integrated contracts with housing
associations and local authorities. Notwithstanding the operational
disruption, the division has continued to enhance its IT platform
to provide data insight and improve customer experience.
At the year end, the secured order book was up 7% to GBP970m.
Bidding remains selective, targeting long term contracts of 10-15
years, with a current pipeline of opportunities of GBP1.6bn already
bid for and pending a decision, or identified for bidding in the
next 12 months.
During the year, the division entered into three new contracts
with a combined order book value of GBP171m. Two contracts are for
Hammersmith and Fulham Council for housing repairs and domestic and
communal gas; each is for an initial five years with the potential
to extend for a further two years. The third contract is with Home
Group housing association to maintain 4,500 properties for an
initial seven years with a potential to extend for a further seven
years thereafter; it includes responsive repairs, void
refurbishments, heating services and planned improvement works such
as kitchen and bathroom replacement and heating system
upgrades.
Divisional outlook
Although all response maintenance contracts are currently
operational, it is expected that planned maintenance activity will
be lower in the first half of 2021.
With the current order book and the division's operating model,
the medium-term target for Property Services remains to generate a
minimum GBP10m operating profit per annum. This target will be
delivered through both revenue growth and continued margin
improvement and progress will be made towards this in 2021.
(1) before intangible amortisation of GBP1.2m (FY 2019:
GBP1.2m)
Partnership Housing
FY 2020 FY 2019 Change
GBPm GBPm
-------------------------------- ------- ------- ---------
Revenue 441 513 -14%
Operating profit 16.1 18.3 -12%
Operating margin 3.7% 3.6% +10bps
-------------------------------- ------- ------- ---------
Average capital employed(1)
(last 12 months) 150.9 151.6 -GBP0.7m
Capital employed(1) at year
end 122.2 132.3 -GBP10.1m
ROCE(2) (last 12 months) 11% 12%
ROCE(2) (average last 3 years) 11% 12%
-------------------------------- ------- ------- ---------
Partnership Housing revenue for the year was 14% lower than the
prior year at GBP441m. Split by type of activity, Mixed-tenure
revenue was up 3% to GBP278m (63% of divisional revenue) while
Contracting revenue (including planned maintenance and
refurbishment) was down 33% in the year to GBP163m (37% of
divisional total).
At the 'peak' impact of the C-19 lockdown measures in the second
quarter of the year, 93% of sites were closed (91% by value). The
effective closure of the UK housebuilding industry and its
associated supply chain at that time resulted in an inability to
maintain operations. However from early May, sites started to
remobilise, with the limited availability of certain building
materials on site easing through the month as manufacturers
recommenced their own production. Following this and through the
second half, the division experienced higher levels of construction
activity, driven by mixed-tenure, and higher levels of demand for
its open market product across all its sites.
Operating profit of GBP16.1m was 12% down on prior year, with
the operating margin up slightly to 3.7% supported by the higher
mixed-tenure revenue. The second half operating margin was 4.7%
compared to the prior year second half margin of 4.3% demonstrating
the progress made in the division.
Besides from the additional construction costs incurred as a
result of the C-19 lockdown, the operating result also includes the
GBP2.0m non-cash impairment of the division's investment in a small
joint venture developer of supported independent living
accommodation, which reduces the carrying value of the investment
to zero.
The secured order book at the year end was GBP1,267m, an
increase of 16% on the prior year and further demonstrated the
positive strategic progress made and the market opportunity
available to the division.
Of this total, the order book relating to the Mixed-tenure
activities increased 11% to GBP821m (FY 2019: GBP740m). In
addition, the amount of mixed-tenure business in preferred bidder
status or already under development agreement but where land has
not been drawn down was in excess of GBP650m at the year end. The
Contracting secured order book increased 26% to GBP446m (FY 2019:
GBP353m), of which GBP151m is for 2021.
The average capital employed(1) for the last 12-month period was
GBP150.9m, a reduction of GBP0.7m on the prior year. This was lower
than anticipated at the start of the year and was driven by the
choice in a number of situations to forward fund certain
developments to de-risk the portfolio in the wake of C-19 and was
not indicative of a slowing in the strategic investment
programme.
The capital employed(1) at year end was GBP122.2m, a reduction
of GBP10.1m from the prior year end and was driven by the higher
level of sales towards the end of the year. As a result of the
lower profit in the year, the overall ROCE(2) reduced to 11%.
Based upon the current schedule and type of mixed-tenure
development currently anticipated, together with the timing of the
forecast contracting activities, average capital employed(1) is
expected to increase up to cGBP180m in 2021 (which includes cGBP10m
capital from Investments' Later Living and property development
JV's with local authorities - see Investments section below and
Section 8 Other Financial Information).
Mixed-tenure
In mixed tenure, 1,216 units were completed across open market
sales and social housing, slightly higher than in the prior year
(FY 2019: 1,144 units). The average sales price of GBP229k compared
to the prior year average of GBP238k.
The division currently has a total of 39 mixed-tenure sites at
various stages of construction and sales, with an average of 101
open market units per site. Average site duration is 45 months,
providing long-term visibility of activity.
Key project wins for Partnership Housing included deals worth
GBP140m with Homes England to provide 532 new homes at two former
Ministry of Defence sites: 119 at Thorp Arch near Wetherby,
Yorkshire where construction is underway, and 413 homes at Drummond
Park in Luggershall, Wiltshire, due to start on site in mid-2021.
In addition, the division exchanged on two sites in South Wales at
Coed Darcy and Llanwern which have a combined development value of
GBP130m and will deliver more than 660 units; and was selected by
Newark and Sherwood District Council for a GBP50m regeneration
project to build c310 homes on the Yorke Drive estate in Newark,
through the division's Compendium Living joint venture with The
Riverside Group.
Project starts in the year included an GBP80m scheme in joint
venture with Flagship Group to build 335 new homes at Williams Park
in Wymondham; and a GBP45m project to provide 252 new homes in
Walsall, via the Anthem Lovell joint venture with Walsall Housing
Group. Work progressed on the division's ongoing regeneration
scheme at Trinity Walk, Woolwich, with enabling works for further
phases also commencing in the year.
Lovell Together, the division's newly formed joint venture with
Together Housing Group, secured planning approval to build 127 new
homes in Pendleton, Salford, of which 17 will be affordable; the
GBP25m scheme will be the first phase of a project to deliver 1,000
homes in the area.
Contracting
In Contracting , the total number of equivalent units built was
978, down from 1,489 in the prior year.
The division was selected by Telford and Wrekin Council as
preferred contractor on a GBP53m contract to deliver 335 new homes
at a brownfield site in Donnington Wood, Telford. This includes 70
homes for Nuplace, the council's wholly-owned housing company, and
will be the division's 11th scheme with Nuplace in the last five
years. In addition, the division won an GBP8m contract with
LiveWest housing association to build 60 new affordable homes in
Exeter; and a GBP9m contract for planned maintenance work with
social landlord Midland Heart to refurbish 6,000 bathrooms and
kitchens over a five-year period. The division's GBP251m project
for the Defence Infrastructure Organisation at Salisbury Plain
substantially completed in August ahead of schedule, enabling army
personnel to move into their new homes early.
Divisional outlook
The market opportunity for Partnership Housing remains strong
and its medium-term targets remain as previous; firstly, to
generate a return on average capital employed(2) of over 20% and
secondly, to deliver an operating margin of 6%.
Looking ahead to 2021, it is expected that continued operational
improvements and the benefit of higher revenue will drive margin
and profit growth, supported by the high quality secured order
book.
(1) Capital employed is calculated as total assets (excluding
goodwill, intangibles and cash) less total liabilities (excluding
corporation tax, deferred tax, inter-company financing and
overdrafts).
(2) Return On Average Capital Employed = Adjusted operating
profit divided by average capital employed.
Urban Regeneration
FY 2020 FY 2019 Change
GBPm GBPm
-------------------------------- ------- ------- ---------
Revenue 123 119 +3%
Operating profit 9.2 19.4 -53%
-------------------------------- ------- ------- ---------
Average capital employed(1)
(last 12 months) 109.7 101.8 +GBP7.9m
Capital employed(1) at year
end 85.1 107.7 -GBP22.6m
ROCE(2) (last 12 months) 8% 19%
ROCE(2) (average last 3 years) 14% 15%
-------------------------------- ------- ------- ---------
Urban Regeneration delivered an operating profit of GBP9.2m in
the year, a reduction of 53% on the prior year (FY 2019: GBP19.4m).
The lower profit impacted the ROCE, which was down to 8% based on
the average capital employed in the year of GBP109.7m. The average
ROCE over the last three years was 14%.
The impact of C-19 was felt across all stages of the development
process. During the first national lockdown in March, construction
activity on most of the active development schemes either ceased
for a period or activity was significantly reduced, resulting in
lower development management fees and delayed residential sales
scheduled for later in the year. Delays were also experienced in
progressing schemes, with decision-making by partners remaining
cautious over future costs, viability and returns.
Capital employed(1) at the year end was GBP22.6m lower at
GBP85.1m, driven by the timing of completions towards the year end
and the choice of funding options for existing schemes. Based upon
the current profile and type of scheme activity across the
portfolio, the average capital employed(1) for 2021 is expected to
increase to cGBP120m (which includes cGBP20m capital from
Investments' property development JV's with local authorities - see
Investments section below and Section 8 Other Financial
Information).
The main contributors to performance were profit and development
fees generated from the Salford Central regeneration scheme, being
delivered by the English Cities Fund joint venture with Legal &
General and Homes England; profit from the pre-let and forward sale
of three warehouse and distribution buildings totalling over
400,000 sq ft at Logic Leeds; and two separate land sales at
Eurocentral in Lanarkshire, Scotland.
In addition, development management fees were generated from
Time Square in Warrington and a second office building at Stockport
Exchange. Profits were also earned from the sale of new homes at
Wapping Wharf, Bristol; Griffon Fields, Hucknall; Brentford Lock
West; Hale Wharf, Tottenham Hale; Northshore, Stockton-on-Tees and
Millbay, Plymouth. Other significant completions included the new
196,000 sq ft distribution centre at Harrier Park in Hucknall and
26,100 sq ft of commercial and research and development space at
Cheadle Royal.
Two significant forward funding deals were agreed in the year,
which are both on site and generating regular profits. The first
was a GBP252m deal signed with Get Living plc to deliver the second
and final phase of Lewisham Gateway. Due to complete in 2023, the
scheme will provide 649 homes for rent, 10,000 sq ft of offices,
c25,000 sq ft of retail space, c15,000 sq ft of food and beverage
space, a gym, and Lewisham's first major multiplex cinema which has
been pre-let. The second was a GBP130m deal agreed with Pension
Insurance Corporation to deliver the first phase of the 'New
Victoria' scheme in Manchester city centre, in partnership with
Network Rail with support from Manchester City Council and Homes
England. The first phase consists of 520 homes for rent and is
expected to complete in 2023. In addition, regular profits are
being received from active developments in Basingstoke and
Blackpool.
The English Cities Fund made progress in the year on existing
schemes. At Salford Central, five new developments are currently
under construction at Atelier, Valette Square, Novella, Three New
Bailey and a 175,000 sq ft pre-let office to BT at Four New Bailey.
The Fund has also completed the latest phase of 137 quayside homes
at Quadrant Wharf, Millbay and secured two deals with occupiers at
Merchant Gate, Wakefield.
Urban Regeneration's Waterside Places joint venture with the
Canal & River Trust made significant progress on a number of
schemes in the year. At Islington Wharf, Manchester, planning
consent was achieved on the fourth and final phase of 106 homes
over two blocks, which is due to start on site in the first half of
2021; the first phase of development at Hale Wharf, Tottenham Hale
is due to complete in Summer 2021, with 108 of 249 homes forward
funded by Grainger plc; and the third and final phase of Brentford
Lock West, to deliver 425 mixed-use homes, is scheduled to start on
site in 2021. Waterside Places has also submitted planning for its
residential-led development at Stoke Wharf in joint venture with
Slough Urban Renewal, to deliver over 300 new homes along a
revitalised canal side.
Urban Regeneration submitted a series of planning applications
during the year, including 1.4m sq ft of mixed-use development in
Birkenhead town centre, through the division's Wirral Growth
Company joint venture with Wirral Borough Council; and Stroudley
Walk, London which will bring forward 274 homes (50% affordable) in
partnership with Poplar HARCA (Housing and Regeneration Community
Association). Planning consent was received for new developments at
South Shields; Logic Leeds; Rotherham in South Yorkshire; and Manor
Road in Canning Town, where 804 homes (50% affordable) will be
delivered.
Urban Regeneration's development portfolio continues to be both
active and diverse, with 14 projects on site at the year end across
10 developments, totalling GBP950m gross development value, and a
further 11 projects expected to start on site in 2021.
At the year end, the division's regeneration order book amounted
to GBP2.4bn, an increase of 7% on the prior year end, and within
this there is a diverse geographic and sector split:
-- by value, 45% is in the North West, 41% in London and the
South East, 12% in Yorkshire and the North East and 2% in the rest
of the UK; and
-- by sector, 52% by value relates to residential, 31% to
offices, and the remainder is broadly split between retail,
leisure, and industrial.
The order book includes cGBP230m relating to the division's
share of JV gross development value and development management fees
from the appointment in the year through the English Cities Fund as
development partner for the Salford Crescent masterplan to create a
new 240-acre urban district in Salford over the next 10 to 15
years; the programme will deliver up to 3,000 homes, commercial,
innovation and education space, sustainable transport facilities
and large areas of green space.
Divisional outlook
The medium-term target for Urban Regeneration is to increase its
rolling three-year average ROCE(2) up towards 20%. The lower profit
result for 2020 reduced the three-year average to 14%, however the
medium-term outlook for the division has not changed, but only
modest progress towards its target ROCE(2) is expected in 2021.
(1) Capital employed is calculated as total assets (excluding
goodwill, intangibles and cash) less total liabilities (excluding
corporation tax, deferred tax, inter-company financing and
overdrafts)
(2) Return On Average Capital Employed = (Adjusted operating)
divided by (average capital employed)
Investments
FY 2020 FY 2019 Change
GBPm GBPm
------------------- ------- ------- ------
Operating loss(1) (6.9) (2.4) n/a
------------------- ------- ------- ------
Investments reported a loss of GBP6.9m in the year, with many of
the division's existing schemes experiencing delays to construction
activity as a result of C-19 and delays to achieving financial
close on new schemes as investment decisions were deferred. While
on-site construction activity recovered to normal levels relatively
quickly, clients continued to be cautious and defer investment
decisions throughout the year.
The division has four property development joint ventures with
local authorities and a Later Living development business, focusing
on the extra-care sector.
In the joint venture with Slough Borough Council, work continued
in the year on the GBP55m scheme to build two Marriott hotels and
64 apartments on the site of the city's former library, being
delivered by Construction & Infrastructure. The hotels were
completed and handed over in early 2021. Other highlights were the
submission of planning applications for the development of 212 new
homes in Montem Lane and a mixed-use development including 312 new
homes at Stoke Wharf.
In The Bournemouth Development Company joint venture with BCP
Council, work started on site on a development of 44 homes in
Durley Road and construction continued on 46 homes for market rent
in St Stephens Road. Winter Gardens, a mixed-use scheme with a
gross development value of GBP164m, concluded its section 106
planning agreement and is progressing towards a start on site, now
anticipated to be during 2021.
In The Brentwood Development Partnership, the division's joint
venture with Brentwood Borough Council, work is ongoing to prepare
planning applications for the joint venture's first four
schemes.
In Chalkdene Developments, the joint venture with Hertfordshire
County Council, two developments are on site which together will
deliver over 100 new homes. Both projects are being delivered by
Partnership Housing.
In the Later Living business, six projects were on site across
the UK which together will provide over 400 extra care apartments.
Three schemes were completed and handed over, bringing high
quality, purpose-built new homes to those local communities. Good
progress was made on new projects, with planning consents secured
for a 64-apartment extra care scheme in Leeds, a 60-apartment extra
care scheme in Gosport, Hampshire and a 50-apartment extra care
scheme in New Milton, Hampshire.
The division also disposed of its interests in the Priority
Schools Building Programme North West Batch joint venture (joint
venture with Equitix and the Department for Education) in the year,
delivering a profit of GBP2.7m.
Capital Employed(2) in the division at the year end was GBP21.9m
(FY 2019: GBP30.9m).
In order to address the increasing overlap between the market
propositions of the regeneration businesses and the duplication of
capabilities and resources, t he operational management of the
joint venture property partnerships and Later Living business was
transferred to Partnership Housing and Urban Regeneration at the
end of the year. Reorganisation costs of cGBP1m were incurred,
mainly relating to redundancies and were included in the division's
results. From 1(st) January 2021, Investments will no longer
operate as a separate reporting segment (see section 8 of Other
Financial Information).
(1) before intangible amortisation of GBP1.9m (FY
2019:GBP0.6m)
(2) Capital employed is calculated as total assets (excluding
goodwill, intangibles and cash) less total liabilities (excluding
corporation tax, deferred tax, inter-company financing and
overdrafts).
Other Financial Information
1. Net finance expense. The net finance expense was GBP4 .6 m, a
GBP1.9m increase versus FY 2019. Included in this is GBP1.3m of
interest payable as a result of drawing down on the committed bank
facilities as a precautionary measure in March, during the early
stages of C-19.
The net finance expense is broken down as follows:
2020 2019 Change
GBPm GBPm GBPm
--------------------------------------- ----- ----- ------
Interest payable on drawings
on bank facilities (1.3) (0.1) (1.2)
Amortisation of bank fees &
non-utilisation fees (1.7) (1.6) (0.1)
Interest expense on lease liabilities (1.7) (1.7) -
Interest from JVs 0.6 1.0 (0.4)
Other (0.5) (0.3) (0.2)
Total net finance expense (4.6) (2.7) (1.9)
--------------------------------------- ----- ----- ------
2. Tax. A tax charge of GBP15.4m is shown for the year (FY 2019:
GBP17.4m). This equates to an effective tax rate of 25.3% on profit
before tax. The adjusted tax charge is GBP14.5m (FY 2019:
GBP17.7m)
2020 2019
GBPm GBPm
----------------------------------------------------- ------- -------
Profit before tax 60.8 88.6
Less: share of net profit in joint ventures (2.3) (6.5)
Profit before tax excluding joint ventures 58.5 82.1
Statutory tax rate 19.00% 19.00%
Current tax charge at statutory rate (11.1) (15.6)
Tax on joint venture profits (1) (0.6) (1.3)
Prior year adjustments (0.2) 0.5
Effect of change in tax rate used to
calculate deferred tax (1.5) -
Other adjustments (including CJRS furlough
repayment(2) ) (2.0) (1.0)
Tax charge as reported (15.4) (17.4)
----------------------------------------------------- ------- -------
Tax on amortisation (0.6) (0.3)
Effect of change in tax rate used to
calculate deferred tax 1.5 -
Adjusted tax charge (14.5) (17.7)
----------------------------------------------------- ------- -------
(1) Most of the Group's joint ventures are partnerships
where profits are taxed within the Group rather than the
joint venture
(2) During 2020 the Group claimed GBP9.5m from HMRC under
the UK Government's CJRS furlough scheme, upon which corporation
tax of GBP1.8m was paid. Later in 2020 the Group voluntarily
repaid the CJRS furlough claims. The repayment was structured
such that GBP7.7m was repaid directly (being 81% of the
total received), recognised in central Group costs, with
the remaining GBP1.8m repaid (as above) to HMRC in additional
corporation tax, as the repayment through central Group
costs is not tax deductible.
3. Net working capital. ' Net Working Capital' is defined as
'Inventories plus Trade & Other Receivables (including Contract
Assets), less Trade & Other Payables (including Contract
Liabilities)' adjusted as below and is stated on a constant
currency basis.
Change
2020 2019 GBPm
GBPm GBPm
--------------------------- ------- -------
Inventories 294.2 338.1 (43.9)
Trade & Other Receivables
(1) 405.1 461.7 (56.6)
Trade & Other Payables(2) (894.9) (891.7) (3.2)
Net working capital (195.6) (91.9) (103.7)
--------------------------- ------- ------- --------
(1) Adjusted to exclude capitalised arrangement fees of GBP1.3m
(2019: GBP0.6m) and accrued interest receivable of GBPnil (2019:
GBP0.2m)
(2) Adjusted to exclude accrued interest of GBP0.4m (2019:
GBP0.3m) and deferred consideration payable of GBPnil (2019:
GBP0.4m)
4. Cash flow. Operating cash flow was an inflow of GBP178.7m (FY
2019: inflow of GBP35.4m). Free cash flow was an inflow of
GBP155.6m (FY 2019: inflow of GBP22.0m).
2020 2019
GBPm GBPm
---------------------------------------------------- ------ ------
Operating profit - adjusted 68.5 93.1
Depreciation 22.0 21.3
Share option (credit)/expense (0.1) 5.9
Movement in fair value of shared equity loans 0.5 0.4
Share of net profit of joint ventures (2.3) (6.5)
Other operating items (1) 6.4 9.4
Change in working capital(2) 102.6 (61.9)
Net capital expenditure (including repayment
of finance leases) (19.5) (30.1)
Dividends and interest received from joint
ventures 0.6 3.8
Operating cash flow 178.7 35.4
Income taxes paid (19.9) (12.8)
Net interest paid (non-joint venture) (3.2) (0.6)
Free cash flow 155.6 22.0
---------------------------------------------------- ------ ------
(1) 'Other operating items' includes provision movements
(GBP2.0m), shared equity redemptions (GBP2.4m), revaluation of
investment properties (GBP0.6m), disposal of investment properties
(GBP1.8m), adjustment for impairment of investments (GBP3.3m), less
gain on disposal of interests in joint ventures (GBP2.7m) and gain
on disposal of property, plant & equipment (GBP1.0m)
(2) The cash flow due to change in working capital excludes a
total GBP1.1m of non-cash movements relating to the unwinding of
discounting on land creditors (GBP0.7m) and other non-cash creditor
movements (GBP0.4m)
5. Net cash. Net cash at the end of the year was GBP332.8m as a
result of a net cash inflow of GBP140.1m from 1 January 2020.
GBPm
-----
Net cash as at 1 January
2020 192.7
Free cash flow (as above) 155.6
Dividends (9.6)
Other(1) (5.9)
Net cash as at 31 December
2020 332.8
-------------------------------- -----
(1) 'Other' includes net loans advanced to JVs (GBP12.9m), the
purchase of shares in the Company by the employee benefit trust
(GBP9.6m) and a payment to acquire an additional interest in a JV
(GBP0.1m); less proceeds on the disposal of interests in joint
ventures (GBP8.3m), proceeds from the sale of other investments
(GBP0.5m), proceeds from the issue of new shares (GBP7.0m) and
proceeds from the exercise of share options (GBP0.9m)
6. Capital employed by strategic activity. An analysis of the
negative capital employed in the Construction activities shows an
increase of GBP70.1m since the previous year, split as follows:
Capital employed(1) in Construction 2020 2019 Change
GBPm GBPm GBPm
-------- --------
Construction & Infrastructure (262.9) (220.0) (42.9)
Fit Out (63.7) (35.7) (28.0)
Property Services 14.4 13.6 0.8
------------------------------------- -------- -------- -------
(312.2) (242.1) (70.1)
------------------------------------- -------- -------- -------
An analysis of capital employed in the Regeneration activities
shows a reduction of GBP32.7m since the previous year, split as
follows:
Capital employed in Regeneration 2020 2019 Change
GBPm GBPm GBPm
------ ------
Partnership Housing(2) 122.2 132.3 (10.1)
Urban Regeneration(2) 85.1 107.7 (22.6)
207.3 240.0 (32.7)
------ ------
1 Total assets (excluding goodwill, intangibles, inter-company
financing and cash) less total liabilities (excluding corporation
tax, deferred tax, inter-company financing and overdrafts)
2 Definition as per the Partnership Housing and Urban
Regeneration sections in the Business Review
7. Dividends. The Board of Directors has proposed a final
dividend of 40.0p per share (FY 2019: nil). This will be paid on 19
May 2021 to shareholders on the register at 30 April 2021. The
ex-dividend date will be 29 April 2021.
8. Reporting segments. From 1 January 2021, the responsibility
of the operations of the current Investments division was divided
and allocated between Partnership Housing, Urban Regeneration and
Group Activities. The operational and financial performance of the
old Investments schemes will be reported within the division
responsible for the scheme as follows:
-- Bournemouth, Brentwood and Slough - Urban Regeneration
-- All other projects - Partnership Housing
-- Non-project related overheads - Group Activities
As such, there will no longer be an Investments reporting
segment and the Group will report five operating segments plus the
Group activities.
The preliminary (unaudited) reallocation of the 2020 Investments
segment is presented below. It is anticipated that these will be
the allocations presented for comparative purposes in 2021
reporting.
Partnership Group
Investments Housing Urban Regeneration Activities
Revenue 34.2 32.5 1.7 -
------------ ------------ ------------------- ------------
Operating Loss before amortisation
of intangible assets (6.9) (0.1) (0.4) (6.4)
------------ ------------ ------------------- ------------
Amortisation of Intangible Assets (1.9) (1.9) - -
------------ ------------ ------------------- ------------
Operating Loss (8.8) (2.0) (0.4) (6.4)
------------ ------------ ------------------- ------------
Capital employed at 31 December
2020 (GBPm) 21.9 8.4 15.7 (2.2)
------------ ------------ ------------------- ------------
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.
Consolidated income statement
For the year ended 31 December 2020
2020 2019
Notes GBPm GBPm
-------------------------------------- ----- --------- ---------
Revenue 3,034.0 3,071.3
Cost of sales (2,718.2) (2,739.9)
-------------------------------------- ----- --------- ---------
Gross profit 315.8 331.4
Administrative expenses (252.3) (249.2)
Share of net profit of joint ventures 2.3 6.5
Other gains and losses 2.7 4.4
-------------------------------------- ----- --------- ---------
Operating profit before amortisation
of intangible assets 68.5 93.1
-------------------------------------- ----- --------- ---------
Amortisation of intangible assets (3.1) (1.8)
-------------------------------------- ----- --------- ---------
Operating profit 65.4 91.3
Finance income 0.9 1.7
Finance expense (5.5) (4.4)
-------------------------------------- ----- --------- ---------
Profit before tax 60.8 88.6
Tax 4 (15.4) (17.4)
-------------------------------------- ----- --------- ---------
Profit for the year 45.4 71.2
-------------------------------------- ----- --------- ---------
Attributable to:
Owners of the Company 45.4 71.2
-------------------------------------- ----- --------- ---------
Earnings per share
Basic 6 99.8p 157.9p
Diluted 6 98.1p 153.1p
-------------------------------------- ----- --------- ---------
There were no discontinued operations in either the current or
comparative periods.
Consolidated statement of comprehensive income
For the year ended 31 December 2020
2020 2019
GBPm GBPm
------------------------------------------------ ----- -----
Profit for the year 45.4 71.2
Items that may be reclassified subsequently
to profit or loss:
Foreign exchange movement on translation of
overseas operations (0.2) (0.2)
Gains arising during the year on net investment
hedges 0.2 -
- (0.2)
------------------------------------------------ ----- -----
Other comprehensive income/(expense) - (0.2)
------------------------------------------------ ----- -----
Total comprehensive income 45.4 71.0
------------------------------------------------ ----- -----
Attributable to:
Owners of the Company 45.4 71.0
------------------------------------------------ ----- -----
Consolidated balance sheet
At 31 December 2020
1 January
2020 2019 2019
Notes GBPm GBPm GBPm
------------------------------- ----- --------- --------- ---------
Assets
Goodwill and other intangible
assets 222.1 223.6 216.4
Property, plant and equipment 65.8 79.5 62.6
Investment property 2.7 5.1 5.7
Investments in joint ventures 91.4 84.3 81.5
Other investments - 1.3 1.3
Shared equity loan receivables 7 5.5 8.4 13.0
Non-current assets 387.5 402.2 380.5
Inventories 294.2 338.1 334.2
Contract assets 171.8 186.8 192.0
Trade and other receivables 8 234.6 275.7 233.2
Cash and cash equivalents
(1) 10 400.5 251.2 268.3
Current assets 1,101.1 1,051.8 1,027.7
------------------------------- ----- --------- --------- ---------
Total assets 1,488.6 1,454.0 1,408.2
------------------------------- ----- --------- --------- ---------
Liabilities
Contract liabilities (55.6) (56.2) (98.3)
Trade and other payables 9 (838.0) (832.4) (797.8)
Current tax liabilities (1.0) (9.6) (5.8)
Lease liabilities (12.1) (12.8) (11.2)
Borrowings (1) 10 (67.3) (58.5) (61.3)
Provisions (4.9) (7.1) -
------------------------------- ----- --------- --------- ---------
Current liabilities (978.9) (976.6) (974.4)
------------------------------- ----- --------- --------- ---------
Net current assets 122.2 75.2 53.3
Trade and other payables (1.7) (3.8) (15.6)
Lease liabilities (38.9) (46.9) (35.7)
Borrowings 10 (0.4) - -
Retirement benefit obligation (0.2) - -
Deferred tax liabilities (12.5) (8.1) (12.0)
Provisions (26.0) (21.8) (23.9)
------------------------------- ----- --------- --------- ---------
Non-current liabilities (79.7) (80.6) (87.2)
------------------------------- ----- --------- --------- ---------
Total liabilities (1,058.6) (1,057.2) (1,061.6)
------------------------------- ----- --------- --------- ---------
Net assets 430.0 396.8 346.6
------------------------------- ----- --------- --------- ---------
Equity
Share capital 2.3 2.3 2.3
Share premium account 45.5 38.5 38.3
Other reserves (0.8) (0.8) (0.6)
Retained earnings 383.0 356.8 306.6
------------------------------- ----- --------- --------- ---------
Equity attributable to
owners of the Company 430.0 396.8 346.6
Total equity 430.0 396.8 346.6
------------------------------- ----- --------- --------- ---------
(1) The prior year balances for cash and cash equivalents
and bank overdrafts have been re-presented in accordance
with IAS 32 (see the Basis of Preparation for details). There
is no impact on the net assets of the Group or Net Cash and
cash equivalents.
Consolidated cash flow statement
For the year ended 31 December 2020
2020 2019
Notes GBPm GBPm
-------------------------------------------- ----- ------- ------
Operating activities
Operating profit 65.4 91.3
Adjusted for:
Amortisation of intangible assets 3.1 1.8
Share of net profit of equity accounted
joint ventures (2.3) (6.5)
Depreciation 22.0 21.3
Share option expense (0.1) 5.9
Gain on disposal of interests in joint
ventures (2.7) (4.4)
Gain on disposal of property, plant
and equipment (1.0) (0.2)
Revaluation of investment properties 0.6 0.4
Movement in fair value of shared equity
loan receivables 7 0.5 0.4
Impairment of investments 3.3 -
Proceeds on disposals of investment
properties 1.8 -
Repayment of shared equity loan receivables 7 2.4 4.2
Increase in provisions 2.0 5.0
Proceeds on disposal of service contracts
in joint ventures - 4.4
Operating cash inflow before movements
in working capital 95.0 123.6
Decrease/(increase) in inventories 43.9 (3.9)
Decrease in contract assets 15.0 5.2
Decrease/(increase) in receivables 41.6 (42.9)
Decrease in contract liabilities (0.6) (42.1)
Increase in payables 2.7 21.8
-------------------------------------------- ----- ------- ------
Movements in working capital 102.6 (61.9)
-------------------------------------------- ----- ------- ------
Cash inflow from operations 197.6 61.7
-------------------------------------------- ----- ------- ------
Income taxes paid (19.9) (12.8)
-------------------------------------------- ----- ------- ------
Net cash inflow from operating activities 177.7 48.9
-------------------------------------------- ----- ------- ------
Investing activities
Interest received 1.2 1.6
Dividend from joint ventures - 2.9
Proceeds on disposal of property, plant
and equipment 1.4 0.3
Purchases of property, plant and equipment (4.2) (12.6)
Purchases of intangible fixed assets (1.6) (2.7)
Net increase in loans to joint ventures (12.9) (3.3)
Proceeds on disposal of interests in joint
ventures 8.3 -
Proceeds from the disposal of other
investments 0.5 -
Acquisition of subsidiaries, joint ventures
and other businesses (0.1) (1.6)
--------------------------------------------------- ------- ------
Net cash outflow from investing activities (7.4) (15.4)
-------------------------------------------- ----- ------- ------
Financing activities
Interest paid (3.8) (1.3)
Dividends paid 5 (9.6) (24.8)
Repayments of lease liabilities (15.1) (15.1)
Proceeds from borrowings 10 180.4 -
Repayment of borrowings 10 (180.0) (10.2)
Proceeds on issue of share capital 7.0 0.2
Payments by the Trust to acquire shares
in the Company (9.6) (9.1)
Proceeds on exercise of share options 0.9 2.3
-------------------------------------------- ----- ------- ------
Net cash outflow from financing activities (29.8) (58.0)
-------------------------------------------- ----- ------- ------
Net increase/(decrease) in cash and
cash equivalents 140.5 (24.5)
Cash and cash equivalents at the beginning
of the year 192.7 217.2
-------------------------------------------- ----- ------- ------
Cash and cash equivalents at the end
of the year 10 333.2 192.7
-------------------------------------------- ----- ------- ------
Cash and cash equivalents presented in the Consolidated cash
flow statement include bank overdrafts. See note 10 for a
reconciliation to Cash and cash equivalents presented in
the Consolidated statement of financial position.
Consolidated statement of changes in equity
For the year ended 31 December 2020
Share premium Other Retained
Share capital account reserves earnings Total equity
GBPm GBPm GBPm GBPm GBPm
------------------------------- ------------- ------------- --------- --------- ------------
1 January 2019 2.3 38.3 (0.6) 306.6 346.6
Profit for the year - - - 71.2 71.2
Other comprehensive
expense - - (0.2) - (0.2)
------------------------------- ------------- ------------- --------- --------- ------------
Total comprehensive
income - - (0.2) 71.2 71.0
Share option expense - - - 5.9 5.9
Tax relating to share
options - - - 4.7 4.7
Issue of shares at a
premium - 0.2 - - 0.2
Purchase of shares in
the Company by the Trust - - - (9.1) (9.1)
Exercise of share options - - - 2.3 2.3
Dividends paid - - - (24.8) (24.8)
------------------------------- ------------- ------------- --------- --------- ------------
1 January 2020 2.3 38.5 (0.8) 356.8 396.8
Profit for the year - - - 45.4 45.4
Total comprehensive income - - - 45.4 45.4
Share option credit - - - (0.1) (0.1)
Tax relating to share
options - - - (0.8) (0.8)
Issue of shares at a premium - 7.0 - - 7.0
Purchase of shares in
the Company by the Trust - - - (9.6) (9.6)
Exercise of share options - - - 0.9 0.9
Dividends paid - - - (9.6) (9.6)
------------------------------- ------------- ------------- --------- --------- ------------
31 December 2020 2.3 45.5 (0.8) 383.0 430.0
------------------------------- ------------- ------------- --------- --------- ------------
Other reserves
Other reserves include:
-- Capital redemption reserve of GBP0.6m (2019: GBP0.6m) which
was created on the redemption of preference shares in 2003.
-- Hedging reserve of (GBP0.6m) (2019: (GBP0.8m)) arising under
hedge accounting. Movements on the effective portion of hedges are
recognised through the hedging reserve, whilst any ineffectiveness
is taken to the income statement.
-- Translation reserve of (GBP0.8m) (2019: (GBP0.6m)) arising on
the translation of overseas operations into the Group's functional
currency.
Retained earnings
Retained earnings include shares in Morgan Sindall Group plc
purchased in the market and held by the Morgan Sindall Employee
Benefit Trust (the 'Trust') to satisfy options under the Group's
share incentive schemes. The number of shares held by the Trust at
31 December 2020 was 278,383 (2019: 351,961) with a cost of GBP5.3m
(2019: GBP2.2m).
Notes to the consolidated financial statements
For the year ended 31 December 2020
1 Basis of preparation
General information
The financial information set out above does not constitute the
Company's statutory accounts for the year ended 31 December 2020 or
2019 but is derived from those accounts. A copy of the statutory
accounts for 2019 was delivered to the Registrar of Companies and
those for 2020 will be delivered following the Company's annual
general meeting. The auditor reported on those accounts: their
report was unqualified, did not draw attention to any matters by
way of emphasis without qualifying their report and did not contain
a statement under s498(2) or (3) of the Companies Act 2006.
This preliminary announcement has been prepared solely to assist
shareholders in assessing the strategies of the Board and in
gauging their potential to succeed. It should not be relied on by
any other party or for other purposes. Forward looking statements
have been made by the directors in good faith based on the
information available to them up to the time of their approval of
this preliminary announcement. Such statements should be treated
with caution due to the inherent uncertainties, including both
economic and business factors, underlying any such forward looking
information. Actual future results may differ materially from those
expressed in or implied by these statements.
While the financial information included in this preliminary
announcement was prepared in accordance with the recognition and
measurement criteria of International Financial Reporting Standards
('IFRS'), this announcement does not itself contain sufficient
information to comply with IFRS.
The consolidated financial statements will be available in March
2021. A copy will be delivered to the Registrar of Companies
following the Company's annual general meeting.
Further information on the Group, including the slide
presentation document which will be presented at the Group's
results meeting on 25 February 2021, can be found on the Group's
corporate website: www.morgansindall.com.
Basis of preparation
The Group's activities and the key risks facing its future
development, performance and position are set out in this
preliminary announcement and in its annual report and accounts for
the year ended 31 December 2020.
Going concern
In determining the appropriate basis of preparation of the
Financial Statements, the Directors are required to consider
whether the Group and Company can continue in operational existence
for the foreseeable future.
As at 31 December 2020, the Group the Group held cash of
GBP400.5m and total loans and borrowings of GBP67.7m, including of
GBP67.3m of overdrafts repayable on demand (together net cash of
GBP333m). Should further funding be required, the Group has
significant committed financial resources available including
unutilised bank facilities of GBP180m, of which GBP30m matures in
March 2022 and GBP150m matures in October 2023. The Group's secured
order book at 31 December 2020 is GBP8.3bn (2019: GBP7.6bn), of
which GBP2.3bn relates to the 12 months ended 31 December 2021.
The Group has continued to operate safely during the COVID-19
pandemic under the Site Operating Procedures ('SOP') agreed by the
Construction Leadership Council and following the advice from UK
Government, the devolved administrations and public health
authorities. The Group has operated profitably with positive
operating cash flows for the year ended 31 December 2020 whilst
under these restrictions and, whilst there continues to be
uncertainty over the remaining period of restrictions due to the
pandemic, the Group expects the business to remain resilient whilst
it continues to operate under these guidelines for the foreseeable
future until the end of the pandemic.
The directors have reviewed the Group's forecasts and
projections for 2021, including sensitivity analysis to assess the
Group's resilience to more adverse outcomes, which has been carried
out to model the potential financial impact on the Group of any
further impacts of the pandemic or other plausible losses of
revenue or operating profit which could arise from the one of the
principal risks to the business, including a reasonable worst case
scenario in which the Group's principal risks manifest in aggregate
to a severe but plausible level involving the aggregation of the
impacts of a number of these risks. The modelling showed that the
Group would remain profitable over the next 12 months and there is
considerable headroom in lending facilities and covenants which
underpins the going concern assumption on which these financial
statements have been prepared. As part of their analysis the Board
also considered further mitigating actions at their discretion to
improve the position identified by the reasonable worst case
scenario. In all scenarios, including the reasonable worst case,
the Group is able to comply with its financial covenants, operate
within its current facilities, and meet its liabilities as they
fall due.
Accordingly, the Directors consider there to be no material
uncertainties that may cast significant doubt on the Group's
ability to continue to operate as a going concern. They have formed
a judgement that there is a reasonable expectation that the Group
and Company have adequate resources to continue in operational
existence for the foreseeable future, being at least 12 months from
the date of signing of these Financial Statements. For this reason,
they continue to adopt the going concern basis in the preparation
of these Financial Statements
Changes in accounting policies
There have been no significant changes to accounting policies,
presentation or methods of preparation since the financial
statements for the year ended 31 December 2019 other than the item
noted below.
IAS 32 'Financial Instruments: Presentation'
The Group's bank overdrafts and certain cash balances are
subject to cash pooling arrangements where both the Group and the
bank have rights to offset credit balances within the cash pool
against overdrafts within the cash pool. In accordance with IAS 32:
'Financial Instruments: Presentation', cash balances are presented
gross within cash and cash equivalents and bank overdrafts are
presented gross within current loans and other borrowings. Within
the period, it was determined that the Group's cash and overdrafts
within cash pooling arrangements did not meet the requirements for
offsetting in accordance with IAS 32: 'Financial Instruments:
Presentation' and should not have been presented net in cash and
cash equivalents in the balance sheet in prior periods. For
presentational purposes, the balances have been re-presented as at
31 December 2019 and 1 January 2019. The impact of this change is
to increase both cash and cash equivalents and bank overdrafts
within current loans and other borrowings as at 31 December 2019 by
GBP58.5m and as at 1 January 2019 by GBP51.1m in the Group's
Balance Sheet. This has had no impact on net assets or net cash and
cash equivalents.
2 Revenue
An analysis of the Group's revenue which depicts the nature,
timing and uncertainty of the different revenue streams is as
follows:
2020 2019
GBPm GBPm
-------------------------------- ------- -------
Construction 670.3 618.9
Infrastructure and design 966.5 867.5
-------------------------------- ------- -------
Construction and Infrastructure 1,636.8 1,486.4
Traditional fit out 600.6 680.7
Design and build 99.5 158.0
-------------------------------- ------- -------
Fit Out 700.1 838.7
Property Services 111.7 115.3
Contracting 163.4 243.7
Mixed tenure 278.0 269.2
-------------------------------- ------- -------
Partnership Housing 441.4 512.9
Urban Regeneration 122.8 118.8
Investments 34.2 8.0
Inter-segment revenue (13.0) (8.8)
-------------------------------- ------- -------
Total revenue 3,034.0 3,071.3
-------------------------------- ------- -------
3 Business segments
For management purposes, the Group is organised into six
operating divisions: Construction & Infrastructure, Fit Out,
Property Services, Partnership Housing, Urban Regeneration and
Investments. The divisions' activities are as follows:
-- Construction & Infrastructure: Morgan Sindall
Construction & Infrastructure Ltd provides infrastructure
services in the highways, rail, aviation, energy, water and nuclear
markets, including tunnel design; and construction services in
education, healthcare, defence, commercial, industrial, leisure and
retail. BakerHicks Limited offers a multidisciplinary design and
engineering consultancy.
-- Fit Out: Overbury plc specialises in fit out and
refurbishment in commercial, central and local government offices,
retail banking and further education. Morgan Lovell plc provides
office interior design and build services direct to occupiers.
-- Property Services: Morgan Sindall Property Services Limited
provides response and planned maintenance for social housing and
the wider public sector.
-- Partnership Housing: Lovell Partnerships Limited delivers
housing through mixed-tenure and contracting activities. Mixed
tenure includes building and developing homes for open market sale,
affordable rent, private renting or shared ownership in partnership
with local authorities and housing associations. Contracting
includes the design and build of new homes and planned maintenance
and refurbishment for clients who are mainly local authorities,
housing associations and the Defence Infrastructure
Organisation.
-- Urban Regeneration: Muse Developments Limited works with
landowners and public sector partners to transform the urban
landscape through the development of multi-phase sites and
mixed-use regeneration, including residential, commercial, retail
and leisure.
-- Investments: Morgan Sindall Investments Limited provides the
Group with construction and regeneration opportunities through
long-term strategic partnerships to develop under-utilised public
land across multiple sites and generates development profits from
such partnerships. As from 1 January 2021, the activities of the
Investments division were reorganised with it no longer operating
as a separate division from that date. The operational management
of the joint venture property partnerships and Later Living
business formerly reported within Investments were transferred to
Partnership Housing and Urban Regeneration.
Group Activities represents costs and income arising from
corporate activities which cannot be meaningfully allocated to the
operating segments. These include the costs of the Group Board,
treasury management, corporate tax coordination, Group finance and
internal audit, insurance management, company secretarial services,
interest revenue and interest expense.
Adjusted Performance Measures
The divisions are the basis on which the Group reports its
segmental information as presented. In addition to monitoring and
reviewing the financial performance of the operating segments and
the Group on a statutory basis, management also use adjusted
performance measures which are also disclosed in the Annual Report.
These measures are not an alternative or substitute to statutory
IFRS measures but are seen by management as useful in assessing the
performance of the business on a comparable basis. These financial
measures are also aligned to the measures used internally to assess
business performance in the Group's budgeting process and when
determining compensation. The Group also uses other non-statutory
measures which cannot be derived directly from the financial
statements. There are four alternative performance measures used by
management and disclosure in the Annual Report which are:
'Adjusted' In all cases the term 'adjusted' excludes the impact
of intangible amortisation of GBP3.1m (2019: GBP1.8m). This is used
to improve the comparability of information between reporting
periods to aid the use of the Annual Report in understanding the
activities across the Group's portfolio. The below segmental
analysis reconciles the statutory operating profit measure to the
'adjusted' measure and is used in reviewing the segmental
performance. Adjusted profit before tax is used only in monitoring
the Group's performance which is the statutory measure excluding
the impact of intangible amortisation of GBP3.1m (2019: GBP1.8m).
Adjusted basic earnings per share and adjusted diluted earnings per
share is the statutory measure excluding the post-tax impact of
intangible amortisation of GBP2.5m (2019: GBP1.5m) and the deferred
tax charge arising due to changes in UK corporation tax rates of
GBP1.5m (2019: GBPnil). See note 6 for a detailed reconciliation of
the adjusted EPS measures.
'Net cash' Net cash is defined as cash and cash equivalents less
borrowings and non-recourse project financing. Lease liabilities
are not deducted from net cash. A reconciliation of this number at
the reporting date can be found in note 10. In addition, management
monitor and review average daily net cash as good discipline in
managing capital. Average daily net cash is defined as the average
of the 365 end of day balances of the net cash over the course of a
reporting period.
'Operating cashflow' Management use an adjusted measure for
operating cashflow as it encompasses other cashflows that are key
to the ongoing operations of the Group such as repayments of lease
liabilities, investment in property, plant and equipment,
investment in intangible assets, and returns from equity accounted
joint ventures. The figures can be derived from the consolidated
cash flow statement being: Cash inflow from operations (GBP197.6m)
plus dividend from joint ventures (GBPnil), interest received from
joint ventures (GBP0.6m, reported within GBP1.2m Interest received)
and proceeds from the disposal of property, plant and equipment
(GBP1.4m), less repayments of lease liabilities (GBP15.1m),
purchase of property, plant and equipment (GBP4.2m), and purchase
of intangible assets (GBP1.6m). Operating cash flow conversion is
operating cashflow as defined above divided by adjusted operating
profit as defined above.
'Return on capital employed' Management use return on capital
employed (ROCE) in assessing the performance and efficient use of
capital within the Regeneration activities. ROCE is calculated as
adjusted operating profit plus interest received from joint
ventures divided by average capital employed. Average capital
employed is the 12 month average of total assets (excluding
goodwill, intangibles and cash) less total liabilities (excluding
corporation tax, deferred tax, intercompany financing and
overdrafts).
The Group reports its segmental information as presented
below:
2020
-------------- -------------- ----- -------- ----------- ------------ ----------- ---------- ------------ ---------
Construction
& Fit Property Partnership Urban Group
Infrastructure Out Services Housing Regeneration Investments Activities Eliminations Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
-------------- -------------- ----- -------- ----------- ------------ ----------- ---------- ------------ ---------
External
revenue 1,623.8 700.1 111.7 441.4 122.8 34.2 - - 3,034.0
Inter-segment
revenue 13.0 - - - - - - (13.0) -
-------------- -------------- ----- -------- ----------- ------------ ----------- ---------- ------------ ---------
Total revenue 1,636.8 700.1 111.7 441.4 122.8 34.2 - (13.0) 3,034.0
Operating
profit/(loss)
before
amortisation
of intangible
assets 35.7 32.1 1.0 16.1 9.2 (6.9) (18.7) - 68.5
-------------- -------------- ----- -------- ----------- ------------ ----------- ---------- ------------ ---------
Amortisation
of intangible
assets - - (1.2) - - (1.9) - - (3.1)
Operating
profit/(loss) 35.7 32.1 (0.2) 16.1 9.2 (8.8) (18.7) - 65.4
-------------- -------------- ----- -------- ----------- ------------ ----------- ---------- ------------ ---------
2019
-------------- -------------- ----- -------- ----------- ------------ ----------- ---------- ------------ -------
Construction
& Fit Property Partnership Urban Group
Infrastructure Out Services Housing Regeneration Investments Activities Eliminations Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
-------------- -------------- ----- -------- ----------- ------------ ----------- ---------- ------------ -------
External
revenue 1,480.3 837.1 115.3 511.8 118.8 8.0 - - 3,071.3
Inter-segment
revenue 6.1 1.6 - 1.1 - - - (8.8) -
-------------- -------------- ----- -------- ----------- ------------ ----------- ---------- ------------ -------
Total revenue 1,486.4 838.7 115.3 512.9 118.8 8.0 - (8.8) 3,071.3
Operating
profit/(loss)
before
amortisation
of intangible
assets 32.3 36.9 4.3 18.3 19.4 (2.4) (15.7) - 93.1
-------------- -------------- ----- -------- ----------- ------------ ----------- ---------- ------------ -------
Amortisation
of intangible
assets - - (1.2) - - (0.6) - - (1.8)
Operating
profit/(loss) 32.3 36.9 3.1 18.3 19.4 (3.0) (15.7) - 91.3
-------------- -------------- ----- -------- ----------- ------------ ----------- ---------- ------------ -------
During the year ended 31 December 2020 and the year ended 31
December 2019, inter-segment sales were charged at prevailing
market prices and significantly all of the Group's operations were
carried out in the UK.
4 Tax
2020 2019
GBPm GBPm
-------------------------------------- ----- -----
Current tax:
Current year 10.9 17.0
Adjustment in respect of prior years 0.9 (0.4)
--------------------------------------- ----- -----
11.8 16.6
-------------------------------------- ----- -----
Deferred tax:
Current year 2.8 0.9
Revaluation of deferred tax balances
due to changes in statutory tax rate 1.5 -
Adjustment in respect of prior years (0.7) (0.1)
--------------------------------------- ----- -----
3.6 0.8
-------------------------------------- ----- -----
Tax expense for the year 15.4 17.4
--------------------------------------- ----- -----
Corporation tax is calculated at 19.00% (2019: 19.00%) of the
estimated assessable profit for the year.
The table below reconciles the tax charge for the year to tax at
the UK statutory rate:
2020 2019
GBPm GBPm
------------------------------------------- ------ ------
Profit before tax 60.8 88.6
Less: post tax share of profits from
joint ventures (2.3) (6.5)
-------------------------------------------- ------ ------
58.5 82.1
UK corporation tax rate 19.00% 19.00%
Income tax expense at UK corporation
tax rate 11.1 15.6
Tax effect of:
Gain on disposal of joint ventures
not giving rise to a tax liability (0.5) -
Non-taxable income and expenses (including
CJRS furlough repayment) (1) 2.7 0.7
Tax liability upon joint venture profits
(2) 0.6 1.3
Adjustments in respect of prior years 0.2 (0.5)
Expected forthcoming change in tax
rates upon deferred tax balance 1.5 -
Other (0.2) 0.3
-------------------------------------------- ------ ------
Tax expense for the year 15.4 17.4
-------------------------------------------- ------ ------
(1) During 2020 the Group claimed GBP9.5m from HMRC under the UK
Government's CJRS furlough scheme, upon which corporation tax of
GBP1.8m was paid. Later in 2020 the Group voluntarily repaid the
CJRS furlough claims. The repayment was structured such that
GBP7.7m was repaid directly (being 81% of the total received),
recognised in central Group costs, with the remaining GBP1.8m
repaid to HMRC in additional corporation tax, as the repayment
through central Group costs is not tax deductible.
(2) Certain of the Group's joint ventures are partnerships for
which profits are taxed within the Group rather than within the
joint venture.
5 Dividends
Amounts recognised as distributions to equity
holders in the year:
------------------------------------------------ ---- ----
2020 2019
GBPm GBPm
------------------------------------------------ ---- ----
Final dividend for the year ended 31 December
2018 of 34.0p per share - 15.3
Interim dividend for the year ended 31 December
2020 of 21.0p per share 9.6 -
Interim dividend for the year ended 31 December
2019 of 21.0p per share - 9.5
------------------------------------------------ ---- ----
9.6 24.8
------------------------------------------------ ---- ----
The proposed final dividend for the year ended 31 December 2020
of 40.0p per share is subject to approval by shareholders at the
AGM and has not been included as a liability in these financial
statements. The final dividend will be payable on 19 May 2020 to
shareholders on the register on 30 April 2020. The ex-dividend date
is 29 April 2020.
6 Earnings per share
2020 2019
GBPm GBPm
------------------------------------------------- ------ ------
Profit attributable to the owners of the
Company 45.4 71.2
Adjustments:
Amortisation of intangible assets net
of tax 2.5 1.5
Deferred tax charge arising due to change
in UK corporation tax rates 1.5 -
-------------------------------------------------- ------ ------
Adjusted earnings 49.4 72.7
-------------------------------------------------- ------ ------
Basic weighted average ordinary shares
(m) 45.5 45.1
Dilutive effect of share options and conditional
shares not vested (m) 0.8 1.4
-------------------------------------------------- ------ ------
Diluted weighted average ordinary shares
(m) 46.3 46.5
-------------------------------------------------- ------ ------
Basic earnings per share 99.8p 157.9p
Diluted earnings per share 98.1p 153.1p
Adjusted earnings per share 108.6p 161.2p
Diluted adjusted earnings per share 106.7p 156.3p
-------------------------------------------------- ------ ------
The average market value of the Company's shares for the purpose
of calculating the dilutive effect of share options and long-term
incentive plan shares was based on quoted market prices for the
year. The weighted average share price for the year was GBP13.60
(2019: GBP12.51).
A total of 1,724,145 share options that could potentially dilute
earnings per share in the future were excluded from the above
calculations because they were anti-dilutive at 31 December 2020
(2019: 3,189,945).
7 Shared equity loan receivables
2020 2019
GBPm GBPm
------------------------------------ ----- -----
1 January 8.4 13.0
Net change in fair value recognised
in the income statement (0.5) (0.4)
Repayments by borrowers (2.4) (4.2)
------------------------------------- ----- -----
31 December 5.5 8.4
------------------------------------- ----- -----
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.
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:
2020 2019
------------------------------------------------- -------- --------
Assumption
Period over which shared equity loan receivables
are discounted:
First Buy and Home Buy schemes 20 years 20 years
Other schemes 9 years 9 years
Nominal discount rate 5.3% 5.3%
Weighted average nominal annual property
price increase 3.0% 2.5%
Forecast default rate 27.0% 11.5%
Number of loans under the shared equity
scheme outstanding at the year end 211 276
-------------------------------------------------- -------- --------
Sensitivity analysis
At 31 December 2020, if the nominal discount rate had been
100bps higher at 6.3% and all other variables were held constant,
the fair value of the shared equity loan receivables would be
unchanged.
At 31 December 2020, if the period over which the shared equity
loan receivables (excluding those relating to the First Buy and
Home Buy schemes) are discounted had been 10 years and all other
variables were held constant, the fair value of the shared equity
loan receivables would decrease by GBP0.1m with a corresponding
reduction in both the result for the period and equity (excluding
the effects of tax).
At 31 December 2020, if the forecast default rate had been
100bps higher at 28.0% and all other variables were held constant,
the fair value of the shared equity loan receivables would decrease
by GBP0.1m with a corresponding reduction in both the result for
the period and equity (excluding the effects of tax).
8 Trade and other receivables
2020 2019
GBPm GBPm
------------------------------- ----- -----
Trade receivables 202.9 244.7
Amounts owed by joint ventures 0.9 4.9
Prepayments 11.3 14.1
Other receivables 19.5 12.0
-------------------------------- ----- -----
234.6 275.7
------------------------------- ----- -----
9 Trade and other payables
2020 2019
GBPm GBPm
------------------------------- ----- -----
Trade payables 189.2 184.0
Amounts owed to joint ventures 0.2 0.1
Other tax and social security 40.5 37.1
Accrued expenses 577.9 597.8
Deferred income 17.7 1.6
Other payables 12.5 11.8
-------------------------------- ----- -----
838.0 832.4
------------------------------- ----- -----
10 Net cash
2020 2019
re-presented
GBPm GBPm
------------------------------------------ ------ ------------
Cash and cash equivalents 400.5 251.2
Bank overdrafts presented as borrowings
due within one year (67.3) (58.5)
------------------------------------------- ------ ------------
Cash and cash equivalents reported
in the Consolidated cash flow statement 333.2 192.7
Borrowings due between two and five
years (0.4) -
------------------------------------------- ------ ------------
Net cash 332.8 192.7
------------------------------------------- ------ ------------
The prior year balances for cash and cash equivalents have
been re-presented in accordance with IAS 32 (see the Basis
of Preparation for details). There is no impact on the net
assets of the Group or net cash and cash equivalents.
The Group has GBP180m of committed loan facilities maturing more
than one year from the balance sheet date, of which GBP30m matures
in March 2022 and GBP150m in October 2023. These facilities are
undrawn at 31 December 2020. The Group has a further facility of
GBP0.4m that was drawn down in full during 2020 and matures in July
2025.
11 Related party transactions
Transactions between the Company and its subsidiaries, which are
related parties, have been eliminated on consolidation and are not
disclosed in this note. During the year, Group companies entered
into transactions to provide construction and property development
services with related parties, all of which were joint ventures,
not members of the Group, amounting to GBP50.7m (2019:
GBP43.9m).
Remuneration of key management personnel
The Group considers key management personnel to be the members
of the group management team, and sets out below in aggregate,
remuneration for each of the categories specified in IAS 24
'Related Party Disclosures'.
2020 2019
GBPm GBPm
------------------------------ ----- ----
Short-term employee benefits 7.3 9.5
Post-employment benefits 0.1 0.1
Termination benefits 0.2 0.3
Share option (credit)/expense (0.4) 3.1
------------------------------- ----- ----
7.2 13.0
------------------------------ ----- ----
Directors' transactions
There have been no related party transactions with any director
in the year or in the subsequent period to 25 February 2021.
Directors' material interests in contracts with the Company
No director held any material interest in any contract with the
Company or any Group company in the year or in the subsequent
period to 25 February 2021.
12 Contingent liabilities
Group banking facilities and surety bond facilities are
supported by cross guarantees given by the Company and
participating companies in the Group. There are contingent
liabilities in respect of surety bond facilities, guarantees and
claims under contracting and other arrangements, including joint
arrangements and joint ventures entered into in the normal course
of business.
13 Subsequent events
There were no subsequent events that affected the financial
statements of the Group.
The responsibility statement below has been prepared in
connection with the Company's annual report and accounts for the
year ended 31 December 2020. Certain parts thereof are not included
within this announcement.
We confirm to the best of our knowledge:
1. The financial statements, prepared in accordance with the
relevant financial reporting framework, give a true and fair view
of the assets, liabilities, financial position and profit or loss
of the Company and the undertakings included in the consolidation
taken as a whole;
2. The strategic report includes a fair review of the
development and performance of the business and the position of the
Company and the undertakings in the consolidation taken as a whole,
together with a description of the principal risks and
uncertainties they face; and
3. The annual report and financial statements, taken as a whole,
are fair, balanced and understandable and provide the information
necessary for shareholders to assess the Company's performance,
business model and strategy.
This responsibility statement was approved by the Board on 25
February 2021 and is signed on its behalf by:
John Morgan Steve Crummett
Chief Executive Finance Director
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