Morgan Sindall Group Regulatory News (MGNS)

7 Aug 2006 07:00

Morgan Sindall PLC07 August 2006 Morgan Sindall plc ("Morgan Sindall" or "the Group") Interim results for the six months to 30 June 2006 Morgan Sindall plc, the construction group, today announces interim results forthe six months to 30 June 2006. Six months to Six months to 30 June 2006 30 June 2005 % increase £m £m Revenue 674 615 +9%Operating profit 21.0 17.4 +21%Profit before tax 21.3 18.2 +17%Earnings per share 35.42p 29.72p +19%Interim dividend per share 8.00p 7.00p +14% Key points • Record interim results driven by performance of Fit Out and Affordable Housing• Further margin improvement in Construction• Infrastructure Services secures £600m of orders• Group order book stands at record high of £3.4bn Divisional highlights Fit Out • Strong growth with profit up 29% to £10.2m (2005: £7.9m) and record margin of 5.6% achieved• Performance driven by financial and professional services sectors in London and telecoms and technology sectors in the M4 corridor• Order book increased to £165m Construction • Continued focus on health, education, light industrial and commercial property sectors• Profit up to £1.6m (2005: £1.3m) on revenue of £162m (2005: £164m)• Order book maintained Infrastructure Services • Profit of £2.7m (2005: £2.8m) on revenue of £143m (2005: £118m)• Non-track rail business acquired in March contributes £0.3m profit on revenue of £9m• £600m of new orders secured with the benefits to be seen in 2007• Division reorganised with associated one off costs of £0.75m Affordable Housing • Record profit of £10.2m (2005: £7.7m) on revenue of £186m (2005: £180m)• Margin improvement driven by success in mixed tenure developments• Order book of £1.4bn John Morgan, Executive Chairman, said: "The Group's order book stands at a record £3.4bn and all the market sectors inwhich we operate are attractive at present. This offers exciting opportunitiesand provides a positive outlook for the Group" 7 August 2006 Enquiries: Morgan Sindall plc Tel: 020 7307 9200 John Morgan, Executive ChairmanPaul Smith, Chief ExecutiveDavid Mulligan, Finance Director College Hill Tel: 020 7457 2020Alex WaltersMatthew Smallwood MORGAN SINDALL PLC Interim results for the six months to 30 June 2006 Chairman and Chief Executive's Statement We are pleased to announce another set of record results for the six months to30 June 2006. Profit before tax rose by 17% to £21.3m (2005: £18.2m) fromrevenue of £674m (2005: £615m). Earnings per share grew by 19% to 35.42p (2005:29.72p). Accordingly the interim dividend has been increased by 14% to 8.00p(2005: 7.00p). The performance of the business was driven primarily by Fit Out and AffordableHousing. The commercial property market continued to strengthen which enabledthe Fit Out division to further grow its revenue and profit, while theAffordable Housing division increased both its profit and profit margin over thesame period last year. The Construction division delivered revenue in line withthe prior year with a modest improvement in margin. Infrastructure Services'margin has been impacted by a divisional reorganisation. However, the divisionhas secured £600m of new projects during the first half which bodes well for thefuture. Cash at 30 June 2006 was £20m (2005: £35m) reflecting the acquisition in Marchof Gleeson MCL and the anticipated further investment in work in progress atAffordable Housing. DIVISIONAL REVIEWS Fit Out Fit Out grew significantly during the first half of 2006 with profit increasingby 29% to £10.2m (2005: £7.9m) on revenue of £182m (2005: £152m). The office fitout market continued to expand in the period primarily driven by the financialand professional services sectors in London as well as the telecoms andtechnology sectors in the M4 corridor. The margin reached a record level of5.6% (2005: 5.2%). The order book currently stands at £165m, which haslengthened to over 5 months. This reflects the current strength of the fit outmarket which is anticipated to continue into 2007. Construction Construction continues to focus on the core sectors of health, education, lightindustrial and commercial property with revenue broadly in line with the prioryear at £162m (2005: £164m) but with profit rising to £1.6m (2005: £1.3m). Thedivision made further progress in increasing the balance of its work coming fromframework and key client relationships and from its chosen sectors. The orderbook is £487m which is comparable with the positions at the end of June andDecember 2005. Overall we anticipate modest growth of the division as itcontinues to be highly selective in the work it targets. Infrastructure Services Infrastructure Services delivered a profit of £2.7m (2005: £2.8m) on revenue of£143m (2005: £118m). The result includes three months' performance of the railbusiness which was acquired in March for £23m. This business has performed wellsince being acquired, delivering £0.3m profit on £9m revenue. The business isfocused on non-track rail work and is already working closely with thedivision's tunnelling business. The division was highly successful in securing£600m of new orders in the first half of the year. Following the appointment ofa new managing director, the division has undergone a reorganisation to ensurethat it can effectively deliver this increased workload. The one off costs ofthis reorganisation, all incurred in the first half, were £0.75m. The forward order book currently stands at a record £1.3bn (2005: £911m),supporting our view that the performance of this division will improve in themedium term. Affordable Housing Affordable Housing increased its profit by 32% to £10.2m (2005: £7.7m) onrevenue of £186m (2005: £180m). The improvement in margin was driven by furtherfocusing on mixed tenure opportunities which lend themselves to Lovell's breadthof expertise in open market, new build and refurbishment of affordable houses.The division's revenue will be weighted towards the second half of this year.The forward order book currently stands at £1.4bn, demonstrating the division'sexcellent long term prospects. OUTLOOK The Group's overall forward order book now stands at a record £3.4bn. Ourmarket leading businesses in Fit Out and Affordable Housing are continuing toperform strongly in markets that are expected to remain healthy in the mediumterm. Construction will benefit from public spend in health and education whileInfrastructure Services' market is expected to strengthen in 2007. In short,all the market sectors in which we operate are attractive at present. Thisoffers exciting opportunities and provides a positive outlook for the Group. John Morgan Paul SmithExecutive Chairman Chief Executive 7 August 2006 MORGAN SINDALL PLC Interim results for the six months to 30 June 2006 Consolidated Income Statement for the six months to 30 June 2006 Unaudited Unaudited Audited Six months to Six months to Year to 30 June 2006 30 June 2005 31 December 2005 £'000s £'000s £'000s RevenueContinuing operations 664,887 615,154 1,296,708Acquisitions 8,619 - - Revenue (note 2) 673,506 615,154 1,296,708 Cost of sales (595,371) (546,284) (1,154,118)Gross profit 78,135 68,870 142,590 Administrative expenses (57,011) (51,588) (103,109)Share of results of joint ventures (118) 122 425 Operating profitContinuing operations 20,739 17,404 39,906Acquisitions 267 - - Operating profit (note 2) 21,006 17,404 39,906 Investment revenues 1,317 1,744 3,661Finance costs (1,048) (943) (1,867) Profit before tax 21,275 18,205 41,700 Tax (note 3) (6,382) (5,795) (12,125) Profit for the period attributable to equityholders of the parent company 14,893 12,410 29,575 Earnings per shareFrom continuing operationsBasic (note 5) 35.42p 29.72p 70.74p Diluted (note 5) 34.23p 28.95p 68.83p There are no discontinued activities in either the current or preceding year. MORGAN SINDALL PLC Interim results for the six months to 30 June 2006 Consolidated Balance Sheet at 30 June 2006 Unaudited Unaudited Audited 30 June 2006 30 June 2005 31 December 2005 £'000s £'000s £'000s Non current assets Goodwill 72,204 56,666 56,729Property, plant and equipment 16,009 15,710 16,403Interest in joint ventures 4,060 8,770 10,881Investments 103 103 103Deferred tax 3,211 1,448 2,485 95,587 82,697 86,601 Current assets Inventories 101,525 89,573 87,571Trade and other receivables 290,877 242,953 235,056Cash and cash equivalents 20,460 34,902 72,018 412,862 367,428 394,645Total assets 508,449 450,125 481,246 Current liabilitiesTrade and other payables (371,211) (336,955) (352,156)Current tax liabilities (6,084) (5,601) (6,295)Obligations under finance leases (754) (947) (766) (378,049) (343,503) (359,217) Net current assets 34,813 23,925 35,428 Non current liabilitiesRetirement benefit obligation (2,977) (2,010) (3,351)Obligations under finance leases (1,682) (1,814) (2,059) (4,659) (3,824) (5,410) Total liabilities (382,708) (347,327) (364,627)Net assets 125,741 102,798 116,619 Equity Share capital 2,118 2,111 2,116Share premium account 26,132 25,828 26,014Capital redemption reserve 623 623 623Own shares (1,775) (1,775) (1,775)Equity reserve 2,166 112 1,052Hedging reserve (1,901) (1,814) (2,238)Retained earnings 98,378 77,713 90,827 Total equity 125,741 102,798 116,619 MORGAN SINDALL PLC Interim results for the six months to 30 June 2006 Consolidated Cash Flow Statement for the six months to 30 June 2006 Unaudited Unaudited Audited Six months to Six months to Year to 30 June 2006 30 June 2005 31 December 2005 £'000s £'000s £'000s Net cash from operating activities (31,861) (27,781) 14,477(note 6) Investing activitiesInterest received 1,229 1,754 3,686Dividends received from joint ventures 7,225 - 336Proceeds on disposal of property, plant and 202 75 1,433equipmentPurchases of property, plant and equipment (1,866) (2,224) (4,680)Payments to acquire interest in joint ventures (185) (3,619) (6,190)Acquisition of subsidiary (note 8) (18,223) - -Net cash used in investing activities (11,618) (4,014) (5,415) Financing activitiesPayments to acquire own shares - (782) (782)Dividends paid (7,549) (5,530) (8,459)Repayments of obligations under finance leases (530) (471) (1,354)Repayment of loan notes (120) (120) (240)Proceeds on issue of share capital 120 153 344 Net cash used in financing activities (8,079) (6,750) (10,491) Net decrease in cash and cash equivalents (51,558) (38,545) (1,429) Cash and cash equivalents at beginning of year 72,018 73,447 73,447 Cash and cash equivalents at end of periodBank balances and cash 20,460 34,902 72,018 MORGAN SINDALL PLC Interim results for the six months to 30 June 2006 Consolidated Statement of Recognised Income and Expense for the six months to 30 June 2006 Unaudited Unaudited Audited Six months to Six months to Year to 30 June 2006 30 June 2005 31 December 2005 £'000s £'000s £'000s Actuarial gains/(losses) on defined benefit pension 319 215 (1,284)schemesTax on items taken directly to equity (112) (65) 312Changes in fair value of cash flow hedging 337 (1,814) (2,238)derivativesNet income recognised directly in equity 544 (1,664) (3,210) Profit for the period from continuing 14,893 12,410 29,575 operationsTotal recognised income and expense for the period 15,437 10,746 26,365attributable to equity shareholders Consolidated Statement of Changes in Equity for the six months to 30 June 2006 Unaudited Unaudited Audited Six months to Six months to Year to 30 June 2006 30 June 2005 31 December 2005 £'000s £'000s £'000s Balance at start of period 116,619 98,159 98,159 Profit for period 14,893 12,410 29,575Recognition of share based payments 411 73 589Income tax on share based payments 703 - 424Interim dividend declared and paid - - (2,929)Prior year final dividend paid (7,549) (5,551) (5,551)Actuarial gains/(losses) on defined benefit pensionscheme 319 215 (1,284)Income taxes on pension scheme (112) (65) 312Own shares purchased - (782) (782)Options exercised 120 153 344Changes in fair value of cash flow hedging 337 (1,814) (2,238)derivatives Balance at end of period 125,741 102,798 116,619 MORGAN SINDALL PLC Interim results for the six months to 30 June 2006 Notes to the Interim Report 1. Principal accounting policies Basis of accounting The financial statements have been prepared in accordance withInternational Financial Reporting Standards ('IFRS') adopted for use in theEuropean Union and therefore comply with Article 4 of the EU IAS Regulation. At the date of authorisation of these financial statements IFRS 7 andIFRIC 7 to 10, which have not been applied in these financial statements, werein issue but not yet effective. The directors anticipate that the adoption ofthese standards and interpretations in future years will have no material impacton the financial statements of the Group. The same accounting policies and methods of computation are followed inthe interim financial statements as in the 31 December 2005 report and accountswith the exception that IFRS 6 and IFRIC 4 to 6 have been adopted whereapplicable to the Group. 2. Analysis of revenue and profit from business segments Unaudited Unaudited Six months to Six months to 30 June 2006 30 June 2005 Operating Operating profit/(loss) profit/(loss) Revenue Revenue £'000s £'000s £'000s £'000s Fit Out 182,159 10,210 152,495 7,886Construction 161,677 1,550 164,098 1,274Infrastructure Services 143,127 2,692 118,171 2,753Affordable Housing 186,467 10,189 180,390 7,723Group activities 76 (3,517) - (2,354) 673,506 21,124 615,154 17,282Share of results of joint ventures (118) 122Operating profit 21,006 17,404Investment income 1,317 1,744Finance costs (1,048) (943)Profit before tax 21,275 18,205Tax (6,382) (5,795)Profit for the period attributable toequity holders of the parent company 14,893 12,410 3. Tax Unaudited Six months to 30 June 2006 2005 £'000s £'000sCurrent tax:UK corporation tax 6,517 5,795 6,517 5,795Deferred tax:Current year (135) - 6,382 5,795 Corporation tax for the interim period is charged at 30% (2005: 32%), being theestimated effective corporation tax rate for the full financial year. 4. Dividends Unaudited Six months to 30 June 2006 2005 £'000s £'000s Final dividend for the year ended 31 December 2005 7,549 5,551of 18.00p (2004: 13.25p) per share Interim dividend for the period to 30 June 2006 3,389 2,920of 8.00p (2005: 7.00p) per share The interim dividend was approved by the Board on 7 August 2006 and has not beenincluded as a liability at 30 June 2006. The interim dividend of 8.00p (2005: 7.00p) per share will be paid on 29September 2006 to shareholders on the register at 1 September 2006. Theex-dividend date will be 31 August 2006. 5. Earnings per share There are no discontinued operations in either the current or prior year. The calculation of the basic and diluted earnings per share is based on thefollowing data: Unaudited Six months to 30 June 2006 2005Earnings £'000s £'000s Earnings for the purposes of basic and dilutive earnings per share being 14,893 12,410net profit attributable to equity holders of the parent company Unaudited Six months to 30 June 2006 2005Number of shares '000s '000s Weighted average number of ordinary shares for the purposes of basic 42,042 41,756earnings per share Effect of dilutive potential ordinary shares:Share options 1,145 920LTIP shares 265 190Executive Remuneration Plan 57 - Weighted average number of ordinary shares for the purposes of diluted 43,509 42,866earnings per share 6. Reconciliation of operating profit to net cash from operatingactivities Unaudited Audited Six months to 30 June Year to 2006 2005 31 December 2005 £'000s £'000s £'000s Operating profit 21,006 17,404 39,906 Adjusted for:Share of results of joint ventures 118 (122) (425)Depreciation of property, plant and equipment 2,296 1,982 4,505Expense in respect of share options 411 73 589Defined benefit pension payment (120) - (240)Defined benefit pension charge 65 - 82(Gain)/loss on disposal of property, plant and (4) 30 (919)equipmentOperating cash flows before movements in working 23,772 19,367 43,498capitalIncrease in inventories (13,954) (28,756) (26,754)Increase in receivables (45,704) (39,870) (31,969)Increase in payables 11,446 28,142 43,118Cash (absorbed by)/generated from operations (24,440) (21,117) 27,893Income taxes paid (6,533) (5,766) (11,658)Interest paid (888) (898) (1,758)Net cash from operating activities (31,861) (27,781) 14,477 There were no additions to plant, property and equipment during the period thatwere financed by new finance leases. Cash and cash equivalents (which are presented as a single class of assets onthe face of the balance sheet) comprise cash at bank and other short term highlyliquid investments with a maturity of three months or less. 7. Retirement benefit schemes The Group operates a plan on defined contribution principles which includes somedefined benefit liabilities, full details of which are disclosed in the Group'sannual report and accounts. For the purposes of understanding these interimfinancial statements details of the valuation of the scheme are given below. Unaudited Audited Six months to 30 June Year to 2006 2005 31 December 2005 £'000s £'000s £'000s Fair value of the scheme assets 4,391 4,083 4,430Present value of defined benefit obligations (7,368) (6,093) (7,781) Deficit in the scheme (2,977) (2,010) (3,351) Related deferred taxation at 30% 893 604 1,004 Net pension liability (2,084) (1,406) (2,347) 8. Acquisition of business Primary Medical Property Limited On 1 February 2006 the Group purchased the remaining 52.5% shareholding inPrimary Medical Property Limited from certain private individuals for £11.1m.Subsequently, the Group agreed to dispose of 50% of its interest by way ofentering into a 50-50 owned joint venture agreement with a fund managed byBarclays Private Equity. Gleeson MCL Limited On 24 March 2006 the Group acquired the entire issued share capital of GleesonMCL Limited. Consideration of £22.8m was satisfied by cash and there were costsof approximately £0.2m which have been capitalised. Tangible net assets acquiredwere £7.5m including cash of £4.6m and in addition provisional fair valueadjustments have been made recognising assets totalling £0.1m. The resultantvalue of goodwill capitalised of £15.5m is provisional and will be subject toany subsequent adjustments required to fair value of the net assets acquired. 9. The results for the half years ended 30 June 2006 and 2005 and thebalance sheets at those dates have not been audited and do not constitutestatutory accounts. The financial information for the year ended 31 December2005 does not constitute statutory accounts as defined in section 240 of theCompanies Act 1985. A copy of the statutory accounts for that year has beendelivered to the Registrar of Companies. The auditors' report on those accountswas not qualified and did not contain statements under section 237(2) or (3) ofthe Companies Act 1985. This information is provided by RNS The company news service from the London Stock Exchange