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Galliford Try : Download our full year results presentation

09/16/2020 | 07:05am

Full year results

Strong foundations

Year ended 30 June 2020 16 September 2020

Bill

Agenda

Hocking

Full year to 30 June 2020

Highlights

Chief Executive

Our business model and strategy

Financial review

Summary and outlook

Q&As

2

Our vision

A people-orientated, progressive business, driven by our values to deliver for our

stakeholders and the communities we work in

3

FINANCIAL HIGHLIGHTS FY20

  • Well-capitalisedand debt-free.
  • Revenue £1,090m.
  • Average month end cash of £141m.
  • Focus on cost management and commercial discipline.

Highlights

Strong foundations

OPERATIONAL HIGHLIGHTS FY20

  • Successful transition following disposal of housebuilding divisions.
  • Rapid and effective response to Covid-19; all sites are open and productivity is close to normal.
  • Experienced and effective management.
  • Benefiting from our investment in people, digital and innovation.

CONFIDENCE IN THE FUTURE

  • High-qualityorder book of £3.2bn and 90% FY21 revenue secured.
  • Excellent client relationships and framework positions.
  • Increased Government investment in construction.
  • Strong platform for sustainable profitable growth.
  • Reinstating financial guidance.

4

Operating sustainably

  • Balance our financial performance with obligations to our stakeholders.
  • Assess and address Environmental, Social and Governance (ESG) across six areas.
  • Underpinned by our Social Value and Sustainability strategy, owned by the Executive Board.
  • Excellent FTSE4Good performance:
    3.3 vs sector average of 1.5/5.
  • Crucial to winning work.

FUNDAMENTALS

Health & Safety

Environment

  • Climate Change Our People Clients

Supply Chain

Communities

ISO 44001

Collaborative

business

relationship

management

5

Our business model

National strength, local delivery

Leading brands in England and Scotland

Focus on public and regulated sectors.

Solid capability targeting contracts with appropriate risk profile.

BUILDING

INFRASTRUCTURE

FY20 revenue1: £720m

FY20 revenue1: £357m

30 June 2020: £2.2bn order book

30 June 2020: £1.0bn order book

Established Investments & FM businesses complement core capability and provide opportunity.

  • Lower risk annuity type income.
  • Generation of work opportunities for wider Group.

1 Pre-exceptional.

  • Great opportunity for controlled growth in a margin enhancing market.
  • Growing capability in co-development.

6

Our market

Building

  • Construction fundamental to UK economy.
    • Growing population.
    • Ageing infrastructure.
    • Climate change.
    • Technical/digital
      revolution.
  • Clients primarily public sector and blue-chip commercial organisations.
  • Complemented by ability in Investments, co- development and FM.

Planned Government investment

EDUCATION

£14bn for primary and secondary education

DEFENCE

£4.6bn to optimise military sites

HEALTH

£7bn in capital budget

Total £2.2bn

Order book1

£531m Education

£504m

Defence

and custodial

£263m Health

£395m FM

£264m Commercial

£195m Other

1 As at 30 June 2020.

7

Our market

Infrastructure

  • Clients primarily public and regulated sectors.
  • Excellent framework position.
  • Further framework opportunities.

Planned Government investment

HIGHWAYS

£28.8bn in the National

Roads Fund

ENVIRONMENT

£15bn for new and improved water and wastewater services, flooding and droughts

Total £1.0bn

Order book1

£598m Highways

£384m Environment

£28m

Other civil

engineering

1 As at 30 June 2020.

8

Our market

  1. Investments and FM
  1. INVESTMENTS
  • Portfolio of £40.7m.
    • Valued using 9% discount rate.
  • Generates annuity interest income.
  • Generates bidding opportunities across Group.
  • Increasing focus on co-development projects.

FACILITIES MANAGEMENT

  • Delivers annuity income for Group.
  • £395m order book.
  • Primarily building management.
  • Operational capability supports Building business.

9

Our strategy

Three strategic priorities to create long-term value

S1S2S3

Retain

Improve

Deliver

Existing platform for

Operations to drive margin

Strong, predictable cash flows

sustainable growth.

progression.

and margin improvement.

10

Strategic priority 1

Retain

Solid business fundamentals to provide platform for sustainable growth

High-quality teams who uphold

Circa 3,000 employees.

our values.

Regional structure providing

Retained structure, complemented

national coverage with local

by agile working.

relationships.

Excellent position on frameworks.

90% of work in frameworks.

72 net promoter score.

Focus on public and regulated

81% of work in public and regulated

sectors.

sectors.

Operate sustainably for long-term

FTSE4Good inclusion since 2013.

value.

11

Strategic priority 2

Improve

Operations to drive margin progression

Health and safety.

AFR: 0.07 (improved from 0.10 in

FY19).

Risk management in project

Robust commercial control and

selection and operations.

rigorous risk management.

Top Graduate and Apprentice

Attract, develop and retain a

Employer; engagement via

diverse workforce.

Employee Forum; Leaders in

Diversity.

Continuing to invest in

Project Efficiency Task Force,

Business Forum driving digital

modernising systems.

agenda.

Advantage through Alignment;

Supply chain alignment.

restoration to Prompt Payment

Code.

12

Strategic priority 3

Deliver

Strong and predictable cash flow and margin improvement

OBJECTIVE

MEDIUM-TERM KPI

Disciplined contract selection

£1,200m - £1,500m.

and measured revenue growth.

Focus on bottom line margin

>2% operating margin after central

growth.

costs.

Control of operating cost base.

<£10m central costs.

Medium-term operating cash

Average month end cash.

generation.

Cash generative.

Increasing shareholder returns.

Reinstate dividends.

13

Order book

90% revenue secured for

2021.

Order book1 by client type

100%

£2.9bn

£3.2bn

Public

£462m

£583m

Regulated

£141m

75%

£411m

Private

<£20m average contract

size in Building.

50%

£2,267m

25%

0%

£2,168m

FY19

FY20

1 As at 30 June 2020.

14

Andrew Financial

Duxbury review

Finance Director

15

Financial performance

  • Transitional year for new business.
  • Core business was performing well ahead of the Covid-19 outbreak; benefits of our strict risk management.
  • Revenue reduction principally due to Covid-19.
  • Operating loss includes Covid-19 productivity impact.
  • Pre-exceptionalEPS (47.7)p.

Continuing operations

Pre-exceptional

FY20

FY19

Revenue

£1,090m

£1,403m

(Loss) from operations1

£(62.4)m

£(16.9)m

(Loss) before tax

£(59.7)m

£(17.2)m

(Loss)/profit after tax

£(52.9)m

£(11.8)m

EPS

(47.7)p

(10.7)p

1 Loss from operations stated before net finance income, amortisation and joint ventures' interest and tax.

16

Segmental analysis

  • Building.
    • Significant Covid-19 impact, especially in Scotland.
    • Revenue lower in London and commercial sectors.
    • Margin impacted by Covid-19 and final account settlements.
  • Infrastructure.
    • Revenue reduced in line with strategic review.
    • Loss reflects Covid-19 and settlements in year.
  • Combined divisional margin (5.0)%.
    • Underlying margin on current work provides strong platform.
  • PPP Investments benefited from £6.9m profit on disposals in FY19.
  • £8.2m costs for central functions.

£m

FY20

FY19

Var

Revenue1

1,089.6

1,402.9

(22)%

Building

719.9

858.3

(16)%

Infrastructure

357.1

527.0

(32)%

PPP Investments & Central

12.6

17.6

n/a

£m

FY20

FY19

(Loss)/profit from operations1

(62.4)

(16.9)

Building

(51.9)

(9.5)

Infrastructure

(1.8)

(5.5)

PPP Investments

(0.5)

4.5

Central

(8.2)

(6.4)

Operating margin

FY20

FY19

Building

(7.2)%

(1.1)%

Infrastructure

(0.5)%

(1.0)%

Combined

(5.0)%

(1.0)%

1 Pre-exceptional, continuing operations (and excluding net finance income, amortisation and share of joint ventures' interest and tax).

17

Financial review

Balance sheet

  • Debt-freegroup.
    • Net cash 30 June 2020: £197.2m.
    • No balance sheet debt.
    • No pension liability.
  • Daily positive cash balance 365 days per year.
    • Average month end cash January 2020 to June 2020 of £141m.
  • Strong surety facilities and significant headroom.
  • PFI portfolio currently valued at £40.7m (at 9% discount rate).
  • IFRS 16 assets at 30 June 2020: £22.8m.

30 June

30 June

Balance sheet £m

20201

20192

Intangible assets & goodwill

85.0

86.6

PPP & other investments

40.7

41.2

Other non-current assets1

32.1

15.6

Working capital

Working capital

(211.3)

(241.8)

IFRS 16

(22.3)

-

Total

(233.6)

(241.8)

Net cash/(debt)

197.2

(56.6)

  1. Includes impact of right of use assets on transition to IFRS 16.
  2. Indicative, excluding disposal group but before receipt of disposal proceeds.

18

Payment practices

  • Performance since July 2019 substantially improved compared to prior year.
  • Membership of Prompt Payment Code restored in December 2019.
    • Key to attract and retain our supply chain.
  • Prompt Payment statistics improved again in the six months to June 2020.
  • Electronic invoice submission introduced as part of our drive to pay suppliers promptly and efficiently.

19

Financial guidance1

Strategy

Disciplined revenue growth and contract selection.

Growing operating margin starting in FY21.

Control of central costs.

Annuity income from PPP portfolio.

Average month-end cash.

Increasing shareholder returns.

FY21

Revenue

£1.1bn - £1.3bn

Operating margin2

Pre central costs

1.4%

- 1.6%

Post central costs

0.4%

- 0.7%

Central costs

Circa £10m

Interest income

£1m

- £3m

Average cash

£125m

- £145m

Dividend to resume on return to profitability

  1. Assumes current operating levels continue, with no additional Covid-19 restrictions.
  2. Stated before net finance income, amortisation and joint ventures' interest and tax.

20

Bill

Summary

Hocking

& outlook

Chief Executive

21

Summary & outlook

Confident for the future

  • Well-capitalisedand debt-free; no balance sheet debt or pension liability.
  • Encouraging post Covid-19 recovery.
  • Clear strategic plan for long-term value creation supported by:
    • Strong demand and continued Government support in chosen sectors.
    • Excellent client relationships; participation on all significant public sector frameworks and high-quality pipeline.
    • Focus on cost and risk management to deliver margin improvement.
    • Underpinned by ESG commitments.
  • Restoring financial guidance.
  • Plan to resume dividends as we return to profitability.

22

Questions & answers

23

Appendices

1.

OUR BUSINESS

1.1

Management team

1.2

Operating sustainably

1.3

Geography

2.

ORDER BOOK

2.1

Commercial control

2.2

Forward order book

2.3

Key framework positions

3.

COVID-19 RESPONSE AND RECOVERY

4.

FINANCIAL ANALYSIS

4.1

FY20 financial performance

4.2

Net finance income

4.3

Exceptional items

4.4

PPP Investments valuation

4.5

Discontinued operations

24

Appendices

1.1 Management team

  1. HIGHLY-EXPERIENCEDEXECUTIVE BOARD
  • More than 150 years' construction sector experience.
  • Supported by a strong plc Board.

25

Appendices

1.2 Operating sustainably

  • FTSE4Good membership; 3.3/5 (FY19: 3.2); above sector average of 1.5.
  • 30% decrease in carbon emissions from calendar years 2018 to 2019.
  • Award-winningChallenging Beliefs, Affecting Behaviour and Be Well programmes.
  • 'Top Graduate Employer' (18th out of 100) and 'Top Apprentice Employer' (27th out of 100).
  • 'BIM Constructor of the Year' in 2019.
  • Average Considerate Constructors Scheme score of 41.1 (FY19: 40.47) - exceeds industry average of 37.1.
  • Gold status from Supply Chain Sustainability School.

26

Appendices

1.3 Geography

National strength, local delivery

BUILDING

  • National coverage through nine regions.
  • Sector-specificsupport.

INFRASTRUCTURE

  • National coverage across Highways and Environment.

KEY

Morrison Construction Highland

1

Morrison Construction North East

2

Morrison Construction Central

3

Building North East & Yorkshire

4

Building North West

5

Building West Midlands & South West

6

Building East Midlands

7

Building London & South East

8

Commercial

Building Southern (public sector)

9

27

Appendices

2.1 Commercial control and rigorous risk management

  • Focus on margin improvement over top-line growth.
  • Disciplined approach to project selection.
    • Comprehensive commercial training.
    • Ceased fixed-priceall-risk major contracts.
    • Margin thresholds employed.
    • Peer review of bids and contract reporting overseen by Internal Audit team.
    • All bids over £25m require Executive Board approval.
  • Introduced refreshed bidding 'heat map'.
  • Continued focus on alignment with supply chain.
  • Shortened management reporting lines.
  • Commitment to sustainable, long-term value creation.

High quality, low risk, focused

order book

Increasingly predictable and

sustainable margin

28

Appendices

2.2 Forward order book

  • 90% revenue secured for
    2021.
  • <£20m average contract size in Building.

Forward order book distribution - Building (excluding FM)

100

80

of contracts

60

Number

40

20

0

<£10m

>£10m

>£20m

>£30m

>£40m

>£50m

>£60m

>£70m

Size of contract

29

Appendices

2.3 Key framework positions

  • Department for Education's school building framework (six lots).
  • LHC Schools and Community Buildings Framework.
  • Crown Commercial Service (CCS) Capital Works Framework.
  • Ministry of Justice Strategic Alliance Framework (multiple lots).
  • Defence Infrastructure Organisation Capital Works Frameworks.
  • ProCure22 Department of Health and Social Care framework.
  • hub North Scotland, hub South East Scotland, hub South West Scotland and hub West Scotland.
  • London Construction Programme.
  • Manchester City Council Highways and Infrastructure Framework.
  • NEUPC Universities Framework.
  • Scottish Procurement Alliance.
  • Southern Construction Framework.
  • North West Construction Hub.
  • YORbuild/YORcivil.
  • University of Strathclyde.
  • Procure Partnerships.
  • Highways England Delivery Integration Partnership.
  • Manchester Airports Group Capital Delivery Framework.
  • Gatwick Airport's Capital Delivery Framework.
  • AMP7 - Yorkshire Water, Southern Water and Thames Water.
  • Scottish Water.
  • North East Procurement Organisation.
  • Smart Motorways Programme.
  • Midlands Highways Alliance.
  • Network Rail Control Period 5.

30

Appendices

3.0 Covid-19 response - quick, decisive and comprehensive action

PRIORITY 1 - health, safety and wellbeing of colleagues, subcontractors and clients.

  • Risk assessed all of our workplaces.
  • Anticipated/deployed enhanced safety protocols ahead of official introduction; strictly followed Construction Leadership Council's guidance.
  • Fast mobilisation due to previous investment in agile working.

PRIORITY 2 - site productivity.

  • Daily Executive calls, twice weekly Senior Leadership calls, regular staff updates.
  • Close communication with clients and supply chain.
  • Liaison with industry bodies.

PRIORITY 3 - reduce costs and preserve cash.

  • Utilised Job Retention Scheme; applied temporary salary cuts for most senior staff.
  • Maintained constant discipline and close scrutiny of non- essential spend.

31

Appendices

3.0 Covid-19 recovery - emerging strongly

PRODUCTIVITY

  • Return to near normal productivity in England and Scotland.
  • Office based staff continue to work remotely.
  • Project Efficiency Task Force for digital and technical innovation.

PIPELINE

  • Government investment in Build, Build, Build.
  • Encouraging wins throughout the period. Planned revenue secured >90% for FY21.
  • Some delayed decision-making from clients.

SUPPLY CHAIN

  • All major trades back on site.
  • Supported through Advantage through Alignment programme.
  • No bottlenecks encountered so far.

32

Appendices

4.1 FY20 financial performance

Revenue

(Loss)/profit after tax

Pre-exceptional, continuing1

£1,090m

£(52.9)m

Exceptional items

£32.0m

£20.3m

Discontinued operations2

n/a

£353.0m

Statutory

£1,122m

£320.4m

  1. Refer to slide 17.
  2. Refer to slide 37.

33

Appendices

4.2 Net finance income1

£m

FY20

FY19

Interest receivable from joint ventures and PPP

5.4

3.4

Investments

Interest receivable on bank deposits

0.3

0.2

Other2

(0.9)

(1.6)

TOTAL

4.8

2.0

  1. Continuing operations.
  2. Includes interest resulting from the adoption of IFRS 16 (in FY20).

34

Appendices

4.3 Exceptional items1

AWPR

Queensferry

£(m)

charge/(income)

Crossing charge

Other2

TOTAL

FY17

75.0

12.9

1.0

88.9

FY183

125.0

-

-

125.0

FY19

32.3

6.7

11.8

50.8

FY20

(28.0)

-

2.9

(25.1)

TOTAL

204.3

19.6

15.7

239.6

  1. Total Group.
  2. Aborted Bovis merger professional fees (FY17), Construction restructuring costs/GMP pension costs/buyout costs (FY19),

restructuring costs (FY20).

2 Includes £80.0m prior year adjustment identified during FY20.

35

Appendices

4.4 PPP Investments valuation

Valuation £m

PPP Investments valuation

50

45

£40.7m

40

35

30

7%

8%

9%

10%

Discount rate %

36

Appendices

4.5 Discontinued operations

  • FY20 up to date of disposal (3 January 2020).
  • Profit on disposal £328.2m.
  • Profit from discontinued activities £24.8m.

Discontinued operations

£m

FY20

FY19

Adjusted revenue1

£703.8m

£1,443.6m

Profit from operations2,3

£68.8m

£195.3m

Profit after tax

£24.8m

£136.1m

  1. Including share of joint ventures' revenue and excludes part-exchange revenue.
  2. Excluding finance costs, amortisation and share of joint ventures' interests and tax.
  3. For Linden Homes and Partnerships & Regeneration.

37

Disclaimer

This document contains statements that are, or may be deemed to be, "forward-looking statements" which are prospective in nature. These forward-looking statements may be identified by the use of forward-looking terminology, or the negative thereof such as "plans", "expects" or "does not expect", "is expected", "continues", "assumes", "is subject to", "budget", "scheduled", "estimates", "aims", "forecasts", "risks", "intends", "positioned", "predicts", "anticipates" or "does not anticipate", or "believes", or variations of such words or comparable terminology and phrases or statements that certain actions, events or results "may", "could", "should", "shall", "would", "might" or "will" be taken, occur or be achieved. Such statements are qualified in their entirety by the inherent risks and uncertainties surrounding future expectations. Forward-looking statements are not based on historical facts, but rather on current predictions, expectations, beliefs, opinions, plans, objectives, goals, intentions and projections about future events, results of operations, prospects, financial condition and discussions of strategy.

By their nature, forward-looking statements involve known and unknown risks and uncertainties, many of which are beyond the control of the Company. Forward-looking statements are not guarantees of future performance and may and often do differ materially from actual results. Neither the Company nor any member of its group or any of their respective directors, officers or advisers, provides any representation, assurance or

guarantee that the occurrence of the events expressed or implied in any forward-looking statements in this document will actually occur. You are cautioned not to place undue reliance on these forward-looking statements which only speak as of the date of this document. Other than in accordance with its legal or regulatory obligations, the Company is not under any obligation and the Company expressly disclaims any intention, obligation or undertaking to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. This document shall not, under any circumstances, create any implication that there has been no change in the business or affairs of the Company or any member of its group since the date of this document or that the information contained herein is correct as at any time subsequent to its date.

No statement in this document is intended as a profit forecast or a profit estimate and no statement in this document should be interpreted to mean that earnings per share of the Company for the current or future financial years would necessarily match or exceed the historical published earnings per share of the Company.

This document does not constitute or form part of any offer or invitation to sell or issue, or any solicitation of any offer to purchase or subscribe for any securities. The making of this presentation does not constitute any advice or recommendation regarding any securities.

38

Disclaimer

Galliford Try plc published this content on 15 September 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 16 September 2020 11:04:05 UTC

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