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
- Investments and FM
- 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. |
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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) | |
- Includes impact of right of use assets on transition to IFRS 16.
- 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 | |||
- Assumes current operating levels continue, with no additional Covid-19 restrictions.
- 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
- 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 |
- Refer to slide 17.
- 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 |
- Continuing operations.
- 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 |
- Total Group.
- 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 |
- Including share of joint ventures' revenue and excludes part-exchange revenue.
- Excluding finance costs, amortisation and share of joint ventures' interests and tax.
- 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.
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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