Steve Crummett's Review of 2020 Financial Performance & Carbon Strategy, Study notes of Construction

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Full Year Results

to 31 st^ December 2020

25 th^ February 2021

Agenda

 Financial & Operational Review | Steve Crummett

 Medium-term Targets & Outlook | John Morgan

 Reducing our Carbon Emissions | Steve Crummett

Summary Income Statement

Adjusted* basis £m FY 2020 FY 2019 % change

Revenue 3,034 3,071 -1%

Operating profit 68.5 93.1 -26%

Operating margin 2.3% 3.0% -70bps

Net Interest (4.6) (2.7) -£1.9m

Profit before Tax 63.9 90.4 -29%

Tax (14.5) (17.7) +£3.2m

Profit after Tax 49.4 72.7 -32%

Earnings per Share (p) 108.6p 161.2p -33%

Dividend per Share (p) 61.0p 21.0p n/a

* (^) before intangible amortisation of £3.1m and deferred tax charge of £1.5m (FY 2019: intangible amortisation of £1.8m)

Revenue (by quarter)

-25%

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

Q1 Q2 H1 Q3 Q4 H2 FY

+17%

-23%

-4%

0%

+2% (^) +1%

-1%

 Revenue tracks the impact of C-

restrictions through the year

 Strong momentum in the second half with

all sites open and operating

 Minimal impact on operations of tier

restrictions and lockdowns 2 & 3

 H2 operating margin of 3.0% approaching

pre C-19 levels (FY 2019: 3.4%)^ Revenue growth vs prior year

Summary by division

Revenue

Operating (^) Operating Profit/(Loss) 1 Margin 1 £m change^ £m change^ % change Construction & Infrastructure 1,637 +10%^ 35.7 +11%^ 2.2% -

Fit Out 700 -17%^ 32.1 -13%^ 4.6% +20bps

Property Services 112 -3%^ 1.0 -77%^ 0.9% -280bps

Partnership Housing 441 -14%^ 16.1 -12%^ 3.7% +10bps

Urban Regeneration 123 +3%^ 9.2 -53%^ n/a

Investments 34 n/a^ (6.9) n/a^ n/a

Elims/Central (13) (18.7)

Total 3,034 -1%^ 68.5 -26%^ 2.3% -70bps

(^1) before intangible amortisation of £3.1m (FY 2019: intangible amortisation of £1.8m)

Cash flow

 Very strong operating cash flow

 Total working capital inflow of £102.6m

 Lower working capital in Regeneration activities due to year end completions and chosen funding solutions

 No impact on long term strategic investment programme

 Working capital inflow driven by lower receivables

(^12) Adjusted‘Non-cash adjustments’ includes depreciation £22.0m, movement in shared equity loans receivable £0.5m and revaluation of investment properties £0.6m; less share of equity accounted joint venture profits £2.3m and share option credit £0.1m (^3) Includes repayment of lease liabilities £15.1m, purchase of property, plant & equipment £4.2m and purchase of intangible fixed assets £1.6m; less proceeds on disposal of property, plant & equipment £1.4m (^4) Includes provision movements £2.0m, adjustments for the impairment of investments £3.3m, shared equity redemptions £2.4m, proceeds on disposal of investment properties £1.8m, interest from joint ventures £0.6m; less gain on disposal of interests in joint ventures £2.7m and gain on disposal of property, plant & equipment £1.0m

68.

178.

155.

Operating Profit (1)

Non-cash adjustments(2) Working regenerationcapital in activities

-19.

Net capex and financeleases (3) Other workingcapital Other (4) (^) Operating cash flow

-3.

Net Interest(non JV)

-19.

Tax (^) Free cash flow

£m

£102.6m Working capital inflow

Payment practices

 Continued improvement in average time to pay invoices in Construction & Infrastructure  reduced to 27 days in last 12 months. 98% of invoices paid within 60 days

 Fit Out – invoices paid on average in 21 days  been around this level for a number of years

 Average time to pay in Property Services impacted by C-19 processing issues and expected to reverse

 Partnership Housing – 95% of invoices now paid within 60 days

Note: movements are shown compared to the prior year comparative reporting period of the 6 months to 31 December 2020. Green indicates improvement, red indicates deterioration

6m to 31st^ December 2020 (^) Average time to pay invoices

Invoices not paid within agreed terms

Invoices paid within 60 days

27 days 9% 98%

5 days 3% 1%

21 days 7% 97%

1 day 2% -

36 days 12% 94%

7 days 1% 3%

35 days 17% 95%

1 day 3% 2%

Construction & Infrastructure

Fit Out

Property Services

Partnership Housing

Balance Sheet

£m (^) FY 2020

FY

Intangibles 222.1 223. PP&E 65.8 79. Investments (including JVs) 94.1 90. Shared equity loan receivables 5.5 8. Net working capital (195.6) (91.9) Current and deferred tax (13.5) (17.7) Net cash 332.8 192. Lease liabilities (51.0) (59.7) Other 1 (30.2)^ (28.8) Net assets - reported 430.0 396.

(^1) ‘Other’ includes provisions £30.9m, retirement benefit obligation £0.2m, accrued interest £0.4m, less capitalised fees £1.3m

Divisional Performances

Construction & Infrastructure

+8% Revenue up to £670m

41% of divisional total

 Very strong year for Infrastructure

 Profit up 81% to £27.5m

 Construction impacted by C-

 Profit down 52% to £8.2m

 All sites fully operational through the second half

 High quality order book

 Focus on risk management and operational delivery

£m FY 2020 Change Revenue 1,637 +10% Operating profit 35.7 +11% Operating margin (%) 2.2% - Secured order book 2,537 +12%

+12% Revenue up to £967m

59% of divisional total

2.8% Operating margin

up from 1.8% in FY 2019

1.2% Operating margin

down from 2.8% in FY 2019

Level Order Book at £512m (+£730m in PB)

c100% 2-stage/frameworks

+15% Order Book at £2,025m

90% through frameworks

Construction Infrastructure

Property Services

Hammersmith & Fulham Home Group

£171m New contracts secured

 Significant operational disruption during the first lockdown in March onwards

 Lower volumes insufficient to cover overheads. Operating structure geared for higher expected activity

 Normalised run-rate in Q4. Lower planned maintenance activity expected in the short term

£m FY 2020 Change Revenue 112 -3% Operating profit* 1.0 -77% Operating margin (%) 0.9% -280bps Secured order book 970 +7%

£1.6bn Bids awaiting decision or identified for bid in 2021

£1.6m further investment in systems development to enhance client offering

>55% of order book for 2025 & beyond

Long-term visibility

* (^) before intangible amortisation of £1.2m (FY 2019: £1.2m)

Partnership Housing

+3% Mixed-tenure revenue

to £278m (63% of total)

 Growth in mixed-tenure. Contracting activity significantly lower

 High quality order book up 16%; mixed-tenure up 11%, contracting up 26%

 Capital employed reflects funding options to de-risk schemes  no impact of C-19 on the long-term strategic investment programme

 Average capital employed for 2021 expected to increase up to c£180m

£m FY 2020 Change Revenue 441 -14% Operating profit 16.1 -12% Operating margin (%) 3.7% +10bps Secured order book 1,267 +16% Average capital employed 150.9 -0. ROCE – last 12 months 11%

-33% Contracting revenue

to £163m (37% of total)

1,216 mixed-tenure units completed

FY 2019: 1,144 units

£229k ASP in mixed-tenure

FY 2019: £238k per unit

4.7% H2 margin

H2 2019: 4.3% margin

Investments

4 JV partnerships with local authorities

 Operational responsibility for activities transferred to Partnership Housing/Urban Regeneration

 Addresses increasing overlap between the market proposition of Investments and Partnership Housing/Urban Regeneration

 Duplication of resources and capabilities

 c£1m of redundancy costs & other reorganisation costs incurred

 No longer a separate operating unit/reporting segment from 1 January 2021

£m FY 2020 Change Operating loss* (6.9) n/a

Later Living Development of extra- care facilities

* (^) before intangible amortisation of £1.9m (FY 2019: £0.6m)

Investments – 2020 loss of £6.9m; capital employed £21.9m

 New structure effective from 1 January 2021

 Restatement of 2020 comparatives to reflect new structure

• Redundancy costs
• Bidding costs
• Property costs
• General overhead

Partnership Housing

• Later Living development
• JV with Herts CC
• Sundry other

2020 loss £0.1m

Capital employed £8.4m

Urban Regeneration

• JV with Slough BC
• JV with Bournemouth Council
• JV with Brentwood

2020 loss £0.4m

Capital employed £15.7m

Central costs

2020 loss £6.4m

Capital employed (£2.2m)

Revised segmental reporting