Interim Results
Morgan Sindall PLC
09 August 2004
Morgan Sindall Plc
('Morgan Sindall' or 'the Group')
Interim results for the six months to 30 June 2004
Morgan Sindall plc, the construction brands group, today announces record
interim results for the six months to 30 June 2004.
2004 2003
£m £m % increase
Group turnover 604 559 +8%
Profit before tax and goodwill amortisation 13.2 10.4 +27%
Profit before tax 11.6 8.9 +31%
Earnings per share before goodwill amortisation 21.92p 18.13p +21%
Earnings per share 18.20p 14.44p +26%
Total dividend per share 5.25p 4.75p +11%
Group highlights
• Excellent results driven by strong performances in Affordable Housing
and Fit Out
• Highly cash generative in the period with £39 million of cash at 30
June
• Well positioned to take advantage of further growth in its specialised
sectors
Divisional highlights
Fit Out
• Profit increased by 17% with a margin of 4.6% due to improving market
conditions and greater market share
• Seeing a return to fitting out of new office space leading to the
order book strengthening to £106 million, double that of a year ago
Construction
• Improving margins driven by a selective approach
• NHS LIFT projects are core to the division's future with four
successful schemes either closed or at preferred bidder stage
• Order book of £218 million
Infrastructure Services
• Turnover maintained and profit at £2.9 million
• Key projects progressing well - performance weighted to second half
• Order book of £436 million
Affordable Housing
• Strong growth with turnover up 50%
• Profits of £5.7 million - more than doubled
• Order book of £789 million
• Outlook very positive with market growth driven by increasing
expenditure from the government and housing associations
John Morgan, Chairman, said:
'These record results represent excellent progress for the Group and in
particular reflect strong performances from Affordable Housing and Fit Out.
'Looking forward we are well placed to take advantage of new opportunities in
both the public and private sectors. We have a strong forward order book and are
confident of achieving our expectations for the full year.'
9 August 2004
Enquiries:
Morgan Sindall plc Tel: 020 7307 9200
John Morgan, Chairman
Paul Smith, Chief Executive
College Hill Tel: 020 7457 2020
Kate Pope
Matthew Smallwood
Chairman and Chief Executive's Statement
We are pleased to announce record interim results with Group turnover for the
six months ended 30 June 2004 of £604m and profit before tax and goodwill
amortisation of £13.2m (2003: £559m and £10.4m respectively). Earnings per
share for the period increased by 26% to 18.20p (2003: 14.44p).
The growth in turnover and profit is largely attributable to the expansion of
Affordable Housing and to a strong performance at Fit Out as the commercial
office fit out market recovers. With satisfactory performances at
Infrastructure Services and Construction the Group is well positioned to achieve
its financial aspirations for 2004.
The Group was highly cash generative in the period. Cash balances at 30 June
2004 were £39m with £24m of cash being generated since December 2003 reflecting
improvements in working capital across the Group. In particular Fit Out has
generated cash as it has expanded while Affordable Housing has seen an increased
level of mixed tenure house sales in the first six months of 2004 compared with
the previous year.
In light of the encouraging trading in the first half of the year and the
Board's confidence in the future it has been decided that an increased interim
dividend of 5.25p (2003: 4.75p) be paid to shareholders.
DIVISIONAL REVIEWS
Fit Out
Fit Out achieved turnover for the period of £121m (2003: £101m) demonstrating
improving market conditions and growth in its market share. Operating profit
was £5.6m (2003: £4.8m) giving a margin of 4.6% (2003: 4.7%) which the Board
believes is consistent with the sustainable, long-term margin for this division.
In May Morgan Lovell opened a new office in Birmingham in line with Fit Out's
strategy to expand its operations outside the southeast of England. During the
first half we began to see a return to the fitting out of new office space as
well as orders for contracts extending into 2005. As a result the order book
has lengthened and strengthened to £106m from £77m at December 2003 and £49m a
year ago. Overall the outlook for Fit Out is positive with demand increasing
across a number of sectors including information technology, recruitment and
financial services.
Construction
During the first half Construction's margins improved resulting in a profit of
£0.6m (2003: £0.2m) as we continued our specific focus on the education,
healthcare and light industrial sectors, and on the securing of longer term
framework arrangements. Turnover for the six months reduced to £130m (2003:
£153m) due to this market focus. In particular in the healthcare sector, NHS
LIFT projects are a core part of the future and we have been successful in
financially closing two schemes at Barnsley and Camden & Islington for £100m.
Overall we have closed or are preferred bidder on 4 of the 42 schemes released
to date, which is in line with our original target. The forward order book
increased to £218m from £170m at December 2003. With the increases in capital
spending for health and education announced in the Chancellor's spending review
in July the outlook for Construction is also encouraging.
Infrastructure Services
Infrastructure Services had a satisfactory first half with turnover of £177m
(2003: £177m) and profit of £2.9m (2003: £3.4m). This year, due to the
programme timing of a number of large projects, profits will again be weighted
towards the second half. Key infrastructure projects, namely Heathrow Terminal
5, Newport Southern Distributor Road, Channel Tunnel Rail Link 310 and the A92
Dundee to Arbroath road improvements, all continue to progress well. In May the
division expanded its rail expertise with the recruitment of AWG's rail team,
which builds on the experience gained on the Channel Tunnel Rail Link projects
and puts us in a stronger position to pursue the increasing opportunities for
renewal work in the rail sector. The forward order book stands at £436m. The
division is currently engaged in bidding for a number of opportunities including
some large framework contracts under the Asset Management Programme 4 (AMP4),
the fourth tranche of the water sector's five year investment cycle.
Affordable Housing
Affordable Housing produced a record profit of £5.7m (2003: £2.7m), more than
double that of the same period last year and giving a margin of 3.2% (2003:
2.3%). Turnover increased by 50% to £177m (2003: £118m). Both margin and
turnover growth is in part attributable to a greater number of mixed tenure
house sales in the first half of the year, with a total of 436 sales versus 230
in the corresponding period of 2003. In addition sales and as a result profits
are expected to be more evenly balanced between the first and second halves of
2004 compared to 2003. Lovell's forward order book at June 2004 has increased
to £789m from £688m at December 2003. Following the recent announcements by the
Chancellor and Deputy Prime Minister of further funds being made available for
affordable housing, we believe the outlook for Lovell is very positive since, as
national market leader, it is well placed to help clients deliver their Decent
Homes and Sustainable Communities programmes.
OUTLOOK
With an order book of £1.55bn and with our balance of activities across the four
divisions, the Group is well positioned to take advantage of new opportunities
in both the public and private sectors particularly as the Government increases
its investment in the affordable housing, health, education, road and rail
sectors, and as the commercial office sector recovers.
Overall, we are confident of fulfilling our expectations for this year and are
pleased with the prospects for 2005 and beyond.
John Morgan Paul Smith
Chairman Chief Executive
9 August 2004
Group Profit and Loss Account
for the six months to 30 June 2004 (unaudited)
Unaudited Unaudited Audited
Six months to Six months to Year to
June 2004 June 2003 December 2003
£'000s £'000s £'000s
Turnover
Continuing operations 605,438 560,055 1,139,456
Less share of joint venture turnover (993) (934) (1,919)
Group turnover (note 1) 604,445 559,121 1,137,537
Cost of sales (549,461) (510,911) (1,030,719)
Gross profit 54,984 48,210 106,818
Administrative expenses (43,626) (39,448) (85,276)
Other operating income 17 376 428
Operating profit from continuing operations (note 1) 11,375 9,138 21,970
Share of profits and losses of joint ventures 110 138 132
Net interest receivable/(payable) 160 (401) (1,182)
Profit on ordinary activities before taxation 11,645 8,875 20,920
Tax charge on ordinary activities (note 2) (4,067) (2,929) (6,006)
Profit on ordinary activities after taxation 7,578 5,946 14,914
Dividends on equity and non-equity shares (note 6) (2,188) (2,006) (6,830)
Retained profit for the period 5,390 3,940 8,084
Earnings per ordinary share (note 3) 18.20p 14.44p 36.04p
Diluted earnings per ordinary share 17.46p 14.26p 35.45p
Group Balance Sheet
at 30 June 2004 (unaudited)
Unaudited Audited
Unaudited June 2003 December 2003
June 2004 (restated) (restated)
£'000s £'000s £'000s
Fixed Assets
Intangible assets 51,451 52,890 53,002
Tangible assets 13,413 13,087 13,375
Share of joint ventures gross assets 70,176 37,750 59,509
Share of joint ventures gross liabilities (64,876) (33,483) (53,711)
Investment in joint ventures 5,300 4,267 5,798
Other investments 103 103 103
70,267 70,347 72,278
Current Assets
Stocks 65,020 68,587 65,411
Debtors 198,776 212,112 195,546
Cash at bank and in hand 39,044 - 14,613
302,840 280,699 275,570
Creditors: amounts falling due within one year (287,242) (277,167) (267,401)
Net current assets 15,598 3,532 8,169
Total assets less current liabilities 85,865 73,879 80,447
Creditors: amounts falling due after more than one
year (1,394) (741) (1,569)
Net assets 84,471 73,138 78,878
Capital and reserves
Called up share capital 2,105 2,709 2,100
Share premium account 25,590 25,464 25,392
Capital redemption reserve 623 - 623
Investment in own shares (1,094) (1,234) (1,094)
Revaluation reserve 5,507 3,994 5,507
Profit and loss account 51,740 42,205 46,350
Total shareholders' funds 84,471 73,138 78,878
Shareholders' funds are attributable to:
Equity shareholders' funds 84,471 72,515 78,878
Non-equity shareholders' funds - 623 -
84,471 73,138 78,878
The Group Balance Sheets at 31 December 2003 and 30 June 2003 have been restated
following implementation of accounting abstracts UITF 37 (Purchases and Sales of
Own Shares) and UITF 38 (Accounting for ESOP Trusts), which requires the Group's
investment in own shares to be deducted from shareholders' funds.
Group Cash Flow Statement
for the six months to 30 June 2004 (unaudited)
Unaudited Unaudited Audited
Six months to Six months to Year to
June 2004 June 2003 December 2003
£'000s £'000s £'000s
Net cash inflow/(outflow) from operating activities
(note 4) 32,018 (11,066) 22,832
Dividend received from joint venture 336 355 355
Returns on investments and servicing of finance
Interest received 1,246 1,287 2,021
Interest paid (1,036) (1,668) (3,127)
Dividends paid to preference shareholders - (45) (62)
Interest paid on finance leases (50) (33) (80)
160 (459) (1,248)
Taxation
Corporation tax paid (1,577) (2,384) (6,946)
Capital expenditure and financial investment
Payments to acquire fixed assets (1,831) (1,544) (3,034)
Receipts from sale of fixed assets 188 1,411 9,205
(1,643) (133) 6,171
Acquisitions and disposals
Purchase of subsidiary undertakings - (6,801) (6,801)
Equity dividends paid (4,889) (4,479) (6,357)
Net cash inflow/(outflow) before financing 24,405 (24,967) 8,006
Financing
Issue of share capital, net of expenses 203 152 717
Redemption of preference shares - - (623)
(Capital element of finance leases)/new finance
leases (177) 183 (336)
Net cash inflow/(outflow) from financing activities 26 335 (242)
Net cash inflow/(outflow) (note 5) 24,431 (24,632) 7,764
Management of liquid resources (3,399) 4,900 421
Increase/(decrease) in cash 27,830 (29,532) 7,343
24,431 (24,632) 7,764
Statement of Movements in Shareholders' Funds
for the six months to 30 June 2004 (unaudited)
Unaudited Audited
Unaudited Six months to Year to
Six months to June 2003 December 2003
June 2004 (restated) (restated)
£'000s £'000s £'000s
Opening shareholders' funds (as previously stated) 79,972 70,280 70,280
Own shares reclassified (1,094) (1,234) (1,234)
Opening shareholders' funds (as restated) 78,878 69,046 69,046
Retained profit for the period 5,390 3,940 8,084
Options exercised 203 152 717
LTIP shares vested - - 140
Redeemed preference shares - - (623)
Share of joint venture revaluation surplus - - 1,514
Closing shareholders' funds 84,471 73,138 78,878
The Statements of Movement in Shareholders' Funds at 31 December 2003 and 30
June 2003 have been restated following implementation of accounting abstracts
UITF 37 (Purchases and Sales of Own Shares) and UITF 38 (Accounting for ESOP
Trusts), which requires the Group's investment in own shares to be deducted from
shareholders' funds.
Notes (unaudited)
1. Analysis of turnover and operating profit
Unaudited six months to Unaudited six months to
June 2004 June 2003
Profits/ Profits/
Turnover (losses) Turnover (losses)
£'000s £'000s £'000s £'000s
Fit Out 120,923 5,583 101,146 4,783
Construction 129,688 597 152,632 179
Infrastructure Services 176,506 2,910 177,352 3,437
Affordable Housing 177,328 5,674 117,991 2,672
Group activities - (3,389) 10,000 (1,933)
604,445 11,375 559,121 9,138
2. Taxation
Taxation on current period profits is charged at 32% being the
estimated effective rate of taxation for the year.
3. Earnings per ordinary share
The calculation of the earnings per ordinary share is based on the
weighted average number of 41,643,000 ordinary shares in issue during the period
and on the profit for the period attributable to ordinary shareholders of
£7,578,000.
In calculating the diluted earnings per share, the weighted average
number of ordinary shares is adjusted for the dilutive effect of share options
by 1,569,000 and by a further 202,000 for contingent awards under the Long Term
Incentive Plan giving an adjusted number of ordinary shares of 43,414,000.
4. Reconciliation of operating profit to net cash inflow/(outflow) from
operating activities
Unaudited Unaudited Audited
Six months to Six months to Year to
June 2004 June 2003 December 2003
£'000s £'000s £'000s
Operating profit 11,375 9,138 21,970
Depreciation of tangible fixed assets 1,642 1,923 4,292
Amortisation of goodwill 1,551 1,505 3,191
Profit on sale of fixed assets (37) (624) (1,056)
Decrease/(increase) in stocks and work in
progress 391 (11,881) (15,767)
Increase in debtors (3,247) (35,615) (18,367)
Increase in creditors 20,343 24,488 28,569
Net cash inflow/(outflow) from operating
activities 32,018 (11,066) 22,832
5. Reconciliation of net cash flow to movement in net funds
Unaudited Unaudited Audited
Six months to Six months to Year to
June 2004 June 2003 December 2003
£'000s £'000s £'000s
Increase/(decrease) in cash 24,431 (24,632) 7,764
Cash flow from decrease/(increase) in finance
leases 177 (182) 336
Change in net funds resulting from cash flows 24,608 (24,814) 8,100
Loan notes redeemed - 6,801 6,801
Non cash movement - - (1,474)
Change in net funds 24,608 (18,013) 13,427
Net funds/(debt) at start of period 12,313 (1,114) (1,114)
Net funds/(debt) at end of period 36,921 (19,127) 12,313
6. Interim dividend
The interim dividend of 5.25p per share (2003: 4.75p) will be paid on
10 September 2004 to shareholders on the register at 20 August 2004. The
ex-dividend date will be 18 August 2004.
7. The results for the half years ended 30 June 2004 and 2003 and the
balance sheets as at those dates have not been audited and do not constitute
statutory accounts. The figures for the year ended 31 December 2003 are an
abridged version of the Group's statutory accounts for that year which received
an unqualified audit report and which have been filed with the Registrar of
Companies.
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