Half-year results Six months ended 30 th June The Trusted Partner. Adrian Ringrose, Chief Executive Tim Jones, Group Finance Director

Transcription

1 Half-year results Six months ended 30 th June 2010 The Trusted Partner Adrian Ringrose, Chief Executive Tim Jones, Group Finance Director 10 August 2010

2 Overview H1 2010: trading in line with expectations 2010: confident of strong second-half performance Strong international platform to sustain long-term growth at attractive margins Continuation of progressive dividend policy 2 The Trusted Partner

3 Tim Jones

4 Income statement million H H % change Revenue % Operating profit % Interest (1.8) (3.7) Headline profit % PFI disposal Amortisation (2.7) (2.7) Profit before tax % Headline EPS 17.5p 23.1p -24.2% 4 The Trusted Partner

5 Analysis of operating profit million H Operating Margin H Operating Margin Support Services % % Project Services UK % % Project Services Int l 12.6* 10.3% 11.0* 8.6% Equipment Services % % Joint Ventures - PFI Group Services (10.1) (8.0) Profit from operations * After interest and tax 5 The Trusted Partner

6 Group interest charge million H H Group net interest paid (1.6) (1.6) PFI sub-debt interest received IAS 19 net finance charge (1.2) (4.5) Net interest (1.8) (3.7) 6 The Trusted Partner

7 PFI portfolio cash flows and valuation (excluding projects at preferred bidder) PFI portfolio valuation PFI portfolio - total life cash flows million % 5% 6% 7% 8% 9% 10% 11% 12% Discount rate million (5) (10) (15) Year Return of cash Investments Total equity investment in portfolio of 54.3m ( 25.8m paid) 7 The Trusted Partner

8 Net debt movement 20m Jun Dec Jun Dec Jun Dec Jun 0m Ju n D e c Ju n D e c Ju n D e c Ju n ( 20m) ( 40m) ( 60m) ( 80m) ( 100m) ( 120m) Net debt Average ( 140m) Strong cash generation 8 The Trusted Partner

9 Cash flow million H H Group JVs and Assocs TOTAL TOTAL Operating profit Depreciation Other and non-cash (5.3) - (5.3) (0.4) Less: associates and JVs - (14.6) (14.6) (13.5) Dividends from associates Working capital movement (18.8) - (18.8) 4.1 Operating cash flow Pension deficit payments (13.5) - (13.5) (6.8) Cash generated by operations (7.3) Tax paid (1.5) - (1.5) (6.5) Net capital expenditure (7.9) Other (0.4) - (0.4) (1.3) Free cash flow (6.0) Dividends (16.2) - (16.2) (16.1) Acquisition and investments (6.3) - (6.3) 11.9 Movement in net debt (28.5) 13.4 (15.8) 24.1 Operating cash conversion % 32% 92% 60% 118% 9 The Trusted Partner

10 Movement in IAS 19 deficit (net of tax) 90.0m 80.0m 70.0m 60.0m 50.0m 40.0m 30.0m 68.6m 20.0m 10.0m m H The Trusted Partner 2009 Current period cost Cash contributions Change in liabilities Return on assets Tax impact of movements

11 Summary Performance in line with expectations Support Services Public sector contract restructuring progressing to plan Private sector remains challenging Project Services Excellent UK performance benefiting from final account settlements Continued strong performance in the Middle East Equipment Services Returned to balanced hire/ sale mix Significant hire projects in comparator period Robust balance sheet Pensions deficit reducing despite some short-term volatility Net debt of 53.1m representing gearing of c.20% following strong cash generation Re-financing completed extending facilities to Oct 2013 Interim dividend increased 1.8% to 5.6p 11 The Trusted Partner

12 Adrian Ringrose

13 Strategic progress in H Develop & maintain long-term, value-added client relationships: Existing relationships extended: Thames Water, Leeds City Council, Shell, Siemens, United Utilities Winner of Best Facilities Management Provider in PPF Awards 2010 Capture emerging opportunities for integrated solutions: Broadening our footprint with HSBC Expand international growth with fuller service offering: Support Services: Middle East contract wins Equipment Services: gaining traction in Saudi Arabia Project Services: entering Indian construction market Project Services: entered Omani services market with OTI acquisition 13 The Trusted Partner

14 HSBC development in 2010 Broadening our services and footprint with a key client Qatar FM Integrated FM Contract Commenced 1 st Dec 2009 Consulting Nationwide Security Construction 14 The Trusted Partner

15 Support Services (H revenues 538.2m, OP 8.9m) Making businesses work more efficiently, combining: - Facilities Management: integrated outsourcing contracts - Specialist Services: single-service solutions H1 performance affected by: Public sector contract transition Weak private sector Restructuring charges Well advanced in taking contracts to planned levels of profitability Confident of improvement in performance: Margin recovery Attractive UK public sector outsourcing market Leveraging our infrastructure Middle East growth opportunities Metropolitan Police Service Initial target: sustainable margins comparable to peer group 15 The Trusted Partner

16 Support Services Public sector contracts turnaround progress Headcount/man-hour reductions c. 350 heads 61% Components of turnaround plan: Agency staff reductions c. 200 heads 23% Operational efficiencies 12% Sub-contractors re-tender 4% Targeted savings 100% Annualised impact in 2011 c. 10m Profile of cumulative targeted savings & progress to date: m Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Target savings Actual/projected savings 16 The Trusted Partner

17 Support Services Strong near-term visibility: c. 0.5bn of work for H c. 0.7bn of work for , Future workload 2.2bn 600 Attractive long-term growth prospects for UK public sector outsourcing market m Infrastructure in place for growth 0 H Revenue by sector Custodial & Health police 10% 5% Middle East opportunities Commerce 26% Defence 32% Infrastructure 6% Government 16% Industry 4% 17 The Trusted Partner

18 Project Services (H revenues 380.8m, OP 23.5m) Leading construction business, creating a broad range of buildings & infrastructure in the UK & Middle East Relationship-based revenue visibility Sector expertise International expansion Margin resilience Sohar Aluminium facility 18 The Trusted Partner

19 Project Services Middle East (H OP 12.6m) Strong performance from Qatar & Oman countering a subdued Dubai Workload rising from year end levels Entered Omani services market UK (H OP 10.9m) Excellent performance Stable workload vs. year-end level Good near-term visibility: c. 0.3bn of work for H c. 0.4bn of work for 2011 Targeting new sectors Continued focus on cost base Future workload by country (Middle East) UAE 30% Oman 14% Custodial & police 13% Health 24% Qatar 56% Revenue by sector (UK) Education 24% Defence 8% Commerce 5% Infrastructure 18% Industry 4% Government 4% 19 The Trusted Partner

20 Equipment Services (H revenues 68.4m, OP 7.7m) One of the world s leading suppliers of falsework and formwork solutions Value-added engineering services Geographic development in world infrastructure markets Return to historical hire/sale mix Asset utilisation Utility tunnels, Lusail City, Qatar 20 The Trusted Partner

21 Equipment Services Middle East: return to balanced hire/sale mix after exceptional 2009 Hire/Sale Mix H Saudi Arabia: gaining traction Sale 51% Hire 49% Australia: another strong result Far East: improved contribution Hire/Sale Mix 2009 Europe: remains challenging Sale 35% Excellent cash conversion of >100% Hire 65% 21 The Trusted Partner

22 Strong platform for long-term growth Significant international exposure to growth markets Margin improvement in Support Services Substantial future workload 22 The Trusted Partner

23 Significant international exposure to growth markets 100% 90% Share of Group profits from developed vs. developing economies 80% 70% Developed economies 60% 50% 40% 30% 20% Developing economies 10% 0% Profits from Developing Economies Developed over the past decade 23 The Trusted Partner

24 Significant international exposure to growth markets GDP CAGR * % of H1 profits Trading since Qatar 13.9% 23% 1996 Oman 8.6% 11% 1981 UAE 8.4% 8% 1981 Saudi Arabia 9.7% Start-up 2009 Australia 6.0% 10% 1953 India 10.0% * Source: IMF World Economic Database Set to be sustained 24 The Trusted Partner

25 Margin improvement in Support Services 5.0% 4.5% 4.0% 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% Interserve Support Services 2009 margin Interserve Support Services average margin Initial target margin 25 The Trusted Partner

26 Substantial future workload Group future workload of 5.7bn, including our share of Middle East associates (c. 80% forward orders, c. 20% pipeline) Movement in future workload since year end 8.0bn 7.0bn 6.0bn 5.0bn 4.0bn Pipeline Pipeline Pipeline: Bilateral negotiations, final terms being agreed 3.0bn 2.0bn Forward orders Forward orders Forward orders: Secured contracts in place 1.0bn - Opening future workload Work won Work delivered Contracts reassessed Closing future workload 26 The Trusted Partner

27 Strong near-term workload visibility bn bn Work done Forward orders Pipeline bn ,000 1,500 2,000 m NB: Above exclude our share of Middle East associates future workload, which is split 0.12bn 2010, 0.11bn The Trusted Partner

28 Group Outlook Confident of strong second-half performance Support Services: near-term margin improvement, medium-term growth Project Services: 2010 to remain strong, international markets to mitigate more challenging UK environment in medium-term Equipment Services: tough market conditions, Saudi gaining traction Group: sustain long-term growth at attractive margins 28 The Trusted Partner

29 Summary H1 2010: trading in line with expectations 2010: confident in strong second-half performance Strong international platform to sustain long-term growth at attractive margins Continuation of progressive dividend policy 29 The Trusted Partner

30 Questions

31 Appendix

32 Future workload m H Support Services UK Project Services Share of ME associates 32 The Trusted Partner

33 Investor relations contact: Matt Jones, Head of Investor Relations: