Half year results for the six months ended 31 December 2016

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Quote
The Group delivered another strong performance in the first half. Our reorganised management teams have settled well and are making positive strides towards their respective operating and financial targets.

We continue to see robust demand and pricing in residential markets, for both Linden Homes and Partnerships and Regeneration, driving good rates of sale, and the land market remains benign in all regions. Linden Homes continues to achieve margin improvement, including much improved overhead efficiency. Partnerships achieved a higher proportion of mixed tenure development revenue, resulting also in first-half margin growth. Construction is making steady progress in resolving legacy contracts, and the contribution from newer work is encouraging, demonstrating that the underlying business is strong. Quote

Peter Truscott / Chief Executive

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Group revenue for the half year to 31 December 2016 was up 4% at £1,235 million (H1 2016: £1,182 million). Revenue (including share of joint ventures) was up 3% to £1,308 million (H1 2016: £1,265 million).

The Group achieved a profit from operations (stated before finance costs, amortisation, exceptional items, tax and share of joint ventures’ interest and tax) of £74.7 million, up 13% against the same period last year. Profit before tax was up 19% at £63.0 million (H1 2016: £52.9 million). Earnings per share for the period was 61.9 pence (H1 2016: 52.2 pence).

The taxation expense of £12.0 million reflects an estimated effective rate of 19.0% (H1 2016: 19.0%) for the full financial year to 30 June 2017. We anticipate our effective tax rate will continue to be just below the headline rate of corporation tax for the foreseeable future.

We have extended our banking facility for a further two years (to February 2022), on the same terms, and with operating requirements improved to match our growth plans; we are delighted with the continuing support of our syndicate banks.

We also announce this morning the completion of a debt private placement of £100 million 10 year Sterling notes, at a fixed rate of 4.03%. The notes were issued in a bilateral deal with Pricoa in London, and we are pleased to open a new relationship with another strong lender, thereby diversifying our sources of funding and enhancing our flexibility and resilience.

The Group maintained its strong focus on cash management throughout the period. Net debt at 31 December 2016 was £113.8 million (H1 2016: £95.7 million), which represents gearing of 19.0%. Average debt over the six months to 31 December 2016 was in line with expectations at £231 million compared to £194 million in the equivalent period last year and £204 million in the full year to June 2016. We continue to benefit from deferred payments for land acquisition with land creditors reducing to £193.3 million (H1 2016 restated: £240.7 million). As previously announced, the Group revised its policy for recognising land acquisition in FY 2016 to bring the Group’s approach in line with the peer group and therefore the prior year comparative has been restated accordingly.

Construction’s cash balance of £110.8 million (H1 2016: £154.7 million) was lower than normal. This reflected the deferral of several contracts in the Building division (following the referendum), which will unwind as these projects get underway; also delayed receipts from some legacy projects, which caused the Group to finance a higher than planned level of working capital by circa £40 million, and which will continue for several months pending resolution. Cash in the underlying business remains strong, at £160 million, representing 11% of annualised turnover.