Interim Results Presentation, Half Year to 31 December 2007 Greg Fitzgerald - Chief Executive

Interim Results Presentation – February 20081

Interim Results Presentation, Half Year to 31 December 2007

Greg Fitzgerald - Chief Executive

Frank Nelson - Finance Director


This presentation is being made only to and is directed at (a) persons who have professional experience in matters relating to investments falling within Article 19(1) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the “Order”) or (b) any other persons to who it may otherwise lawfully be communicated, falling within Article 49(2) of the Order (all such persons being referred to as “relevant persons”).

Any person who is not a relevant person should not act or rely on this presentation or any of its comments.

The financial information set out in this document does not constitute the Company’s statutory accounts. Statutory accounts for 2007, which received an auditors’ report that was unqualified and did not contain any statement concerning accounting records or failure to obtain necessary information and explanations, have been filed with the Registrar of Companies.

Disclaimer


Agenda

• Key Highlights

• Financial Overview

• Operating Review

• Summary and Outlook

Marks and Spencer, Cheshunt


Key Highlights


Key Highlights

• Strong financial results

• Significant increase in Earnings Per Share

• Forward Order Book in construction maintained

• Affordable Housing and Regeneration growing strongly

• Acquisition of Kendall Cross

• Low gearing supported by construction cash flows

• Successful integration of Linden Homes


Financial Overview


Financial Overview

• Group revenue £898m, 48% increase

• Profit before tax £33.8m

63% increase on 2006 pre-exceptional, 56% on 2006 post-exceptional

• Earnings Per Share 6.4p

21% increase on 2006 pre-exceptional, 14% on 2006 post-exceptional

• Dividend 0.9p, 12.5% increase

Highlights


Highlights

Financial Overview

• Net debt £46m representing gearing of 14%

• Return on average shareholders’ funds of 22%

• Tax charge of 29%

• 5 year Bank facility to 2012

• Joint Venture with Bank of Scotland in place


Income Statement: 6 months to 31 December 2007

Financial Overview

2007 2006

£m £m

Revenue 897.9 606.8

Profit from operations* 47.2 23.6

JV interest and tax (3.7) (0.2)

Profit before finance costs, amortisation and exceptionals

43.5 23.4

Intangibles amortisation (1.0) (0.3)

Profit before exceptionals and finance costs 42.5 23.1

Net finance costs (8.7) (2.4)

Profit before exceptionals 33.8 20.7

Exceptional items – property rationalisation - 0.9

Profit before tax 33.8 21.6

* Profit from operations is stated before finance costs, exceptional items, amortisation and share of joint ventures’ interest and tax


Segmental Analysis: Operating Profit - 6 months to 31 December 2007

Revenue (including JVs) £m

Profit/(Loss)£m

2007 2006 2007 2006

Building 339.2 266.7 6.5 4.8

Infrastructure 250.1 171.4 6.2 4.1

Construction 589.3 438.1 12.7 8.9

PPP Investments 2.4 0.2 0.4 (1.6)

Affordable Housing & Regeneration 94.5 54.9 5.7 2.6

Housebuilding 230.0 116.4 32.6 16.9

Group 0.2 3.3 (4.2) (3.2)

916.4 612.9 47.2* 23.6*


Less JV interest and tax (3.7) (0.2)

Net interest payable (8.7) (2.4)


Exceptional items - 0.9


Financial Overview

*Profit from Operations


Segmental Analysis: Profit Before Tax - 6 months to 31 December 2007

Revenue (including JVs)£m

Profit/(Loss)£m

2007 2006 2007 2006

Building 339.2 266.7 9.2 6.0

Infrastructure 250.1 171.4 6.8 4.4

Construction 589.3 438.1 16.0 10.4

PPP Investments 2.4 0.2 0.1 (1.7)

Affordable Housing & Regeneration 94.5 54.9 3.5 1.8

Housebuilding 230.0 116.4 16.7 10.3

Group 0.2 3.3 2.2 0.4

916.4 612.9 38.5* 21.2*


Less JV interest and tax (3.7) (0.2)


Exceptional items - 0.9


Financial Overview

*Management estimate of interest allocation


Financial Overview

Share of the Cake: Net Profits for 6 months to 31 December *

20062007

* Excludes Group and PPP Investments

Building (27%)

Infrastructure (20%)

Affordable andregeneration (8%)

Housebuilding (46%)

Building (25%)

Infrastructure (19%)

Affordable andregeneration (10%)

Housebuilding (46%)


Finance Costs: 6 months to 31 December 2007

Financial Overview

2007 2006

£m £m

Finance Costs

- Net interest payable/(receivable) 4.0 (0.3)

- On unwinding of discount on creditors

3.1 2.4

- Net return on asset of pension fund (0.4) 0.3

- Other 2.0 -

Finance Costs 8.7 2.4


Balance Sheet Highlights: As at 31 December 2007

Financial Overview

2007 2006

Shareholders’ funds £m 317.1* 128.7*

Net (debt)/cash £m (45.7) 26.6

Gearing 14% n/a

Interest cover - total (inc IFRS) 5 x 10 x

- bank 10 x n/a

Land £m 498.2 255.1

Work in progress £m 180.6 70.1

Land creditors £m (122.4) (70.9)

Net Developments 556.4 254.3

Deferred payment – Linden Homes & Chartdale £m (42.9) (30.7)

* Includes £19m net pension deficit (2006: £35m)


2007£m

2006£m

Operating cash flow 86.0 25.6

Interest, tax and dividends (20.9) (8.9)

Net proceeds from issue of shares 0.1 0.4

Acquisition of subsidiaries (6.0) (1.9)

Capital expenditure and investments (3.7) (3.3)

Other (2.5) (1.3)

Net cash inflow 53.0 10.6

Opening net (debt)/ cash (98.7) 16.0

Closing net (debt)/cash (45.7) 26.6

Cash Flow Summary: 6 months to 31 December 2007

Financial Overview


Operating Review - Building



• Good market conditions although commercial slowing

• Strong performance from all business units

• Secured 60% of next year’s workload

• Increased market presence in the North

• FM business encouraging start

Key Highlights

Westminster Academy, London



• Major contracts proceeding well

• Longer lead time to commencement

• Strong cash generation

• Good pipeline of opportunities

Key Highlights

Centre Court, Wimbledon


Forward Order Book: February 2008

£m

Sectors * Total

Health 133.5

Education 139.4

Prisons 139.4

Commercial 258.5

Interiors 13.8

FM 143.0

Other 64.0

891.6


* Excludes Affordable Housing


Operating Review - Infrastructure



• Strong market conditions

• Growth of over 25% in current year

• Delivering upper quartile returns

• Secured 58% of next year’s workload

• Industry leading performance in Water

Key Highlights

Whitelee Windfarm, Scotland



• Further Flood Alleviation workload through Environment Agency framework

• Development and growth of Renewables capability

• Good progress on Whitelee and Olympic contracts

• Excellent customer satisfaction results

Key Highlights

Olympic Park



Forward Order Book: February 2008

£m

Sectors Total

Water 481.3

Highways 199.8

Flood Alleviation 107.1

Rail 18.4

Waterways 11.7

Remediation 100.6

Communications 41.7

Renewable Energy 23.9

International 18.2

Ground Engineering 1.5

1,004.2


Operating Review - Investments


Operating Review - Investments

• Achieved financial close on £32m St Andrews Community Hospital

• Directors’ valuation continues to show significant uplift

• £50m Worcester Library bid submitted

• £1.2bn Birmingham BSF bid submitted

• Good pipeline of future projects in England

Key Highlights

Community Hospital & Health Centre, St Andrews


Operating Review -

Affordable Housing and Regeneration


Key Highlights

Operating Review - Affordable Housing and Regeneration

Housing Corporation NAHP Prospectus

• Awaiting confirmation of HC Grant 08-11

• Increase in number of frameworks

• Expansion into North East through acquisition of Kendall Cross

• Hybrid model attractive in the market place

• Greater market coverage post Linden Homes



Key Highlights

Graylingwell, Chichester

• Well positioned for future releases of public sector land

• Secured largest site in EP Hospital disposal Programme

• Estate regeneration schemes in Grimsby and Plymouth contracted

• National regeneration award winner

• Enhanced revenues achieved


Key Statistics: including share of joint ventures


6 months to December 2007

2007 2006 Increase %

Units Total 284 105 170%

- Affordable 248 64 288%

- Regeneration 36 41 (12)%

Av. Selling Price £000 Total 118 143 (17)%

-Affordable 109 118 (8)%

- Regeneration 183 182 1%

Revenue £m Total 94.5 54.9 72%

- Affordable 27.0 7.6 255%

- Regeneration 18.0 7.4 143%

- Contracting 49.5 39.9 24%

Profit from Operations £m 5.7 2.6 119%

Margin % 6.0% 4.7% -

In hand position Feb 08 £m - Afford. & Regeneration 135.1 48.2 180%

- Contracting Order Book 153.1 116.7 31%

Land bank February 08 units 4,100 1,300 215%


Operating Review - Housebuilding


• Record results

• Bank of Scotland Joint Venture

• Low levels of stock property

• Development portfolio helping to mitigate difficult market conditions

• Industry leading customer satisfaction

• National Housebuilder of the Year second year running

Key Highlights


Tides Reach, Wadebridge



Key Statistics: including share of joint ventures

6 months to December 2007

2007 2006 Increase %

Units 890 488 82%

Average Selling Price £000 231 238 (3)%

Income per sq. ft £ 259 226 15%

Revenue £m 230.0 116.4 98%

Profit from operations £m 32.6 16.9 93%

Margin % 14.2% 14.5% -

ROCE % * 18% 22% -

In hand position February 08 £m 415 203 104%

Land bank February 08 units 7,000 3,800 84%

Strategic land February 08 acres 1,512 707 114%

*Includes private housing, S106 and regeneration (excluding contracting)


Linden Homes Integration

• Forecast synergy savings exceeded

• Delivering procurement savings from enlarged housebuilding division

• Linden London acquired first site

• Low levels of staff turnover

• Best practice rolled out


Watercolour, Redhill Surrey

Watercolour, Redhill Surrey


Market Outlook


• Market not expected to recover in short term

• South East market more robust and less price sensitive

• Part exchange – important tool in current market

• Business units targeting reduction in supply chain prices

• Land market starting to soften

• Market fundamentals in medium term remain sound

Fairfield Park, near Letchworth

Fairfield Park, near Letchworth


Summary and Outlook


Summary and Outlook

• Strong half year performance

• Hybrid model working well

• Good market conditions in Building, Infrastructure and

Affordable Housing

• Difficult housing market

• Strong team focussed on challenges ahead


Interim Results Presentation, Half Year to 31 December 2007

Greg Fitzgerald - Chief Executive

Frank Nelson - Finance Director

Documents

Interim Results Presentation, Half Year to 31 December 2007 Greg Fitzgerald - Chief Executive