Financial review

The Group delivered increased profits and strong cash generation in 2016.

  2016 2015
Revenue  £2,562m £2,385m
Operating profit – adjusted*  £48.8m £38.8m
Profit before tax – adjusted*  £45.3m £34.3m
Earnings per share – adjusted*  84.7p 63.0p
Year end net cash balance  £208.7m £57.9m
Average net debt  £25.0m (£53.4m)
Total dividend per share  35.0p 29.0p
Operating profit/(loss) – reported  £47.4m (£10.3m)
Profit/(loss) before tax – reported  £43.9m (£14.8m)
Basic earnings per share – reported  83.8p (22.6p)

*Adjusted is defined as before intangible amortisation of £1.4m, and (in the case of earnings per share) deferred tax credit due to changes in the statutory tax rate of £0.7m (2015: exceptional operating items of £46.9m, intangible amortisation of £2.2m and (in the case of earnings per share) deferred tax credit due to changes in the statutory tax rate of £1.7m).

Net working capital1

Net working capital has improved by £125.2m to (£203.6m) as shown below:

  2016 2015 Change
Inventories £213.9m £246.7m (£32.8m)
Trade and other receivables £329.6m £352.2m (£22.6m)
Trade and other payables (£747.1m) (£677.3m) (£69.8m)
Net working capital (£203.6m) (£78.4m) (£125.2m)

1 Net working capital is defined as ‘inventories plus trade and other receivables less trade and other payables, adjusted to exclude deferred consideration payable, capitalised arrangement fees, interest accruals and derivative financial assets and liabilities’.


Revenue for the year was up 7% at £2,562m (2015: £2,385m), with adjusted operating profit up 26% to £48.8m (2015: £38.8m). This resulted in an adjusted operating margin of 1.9%, an improvement of 30bps compared to the prior year and an improvement of 60bps on the 2014 result. The net finance expense reduced to £3.5m (2015: £4.5m) due to a lower net interest charge on borrowings and, after deducting this, the adjusted profit before tax was £45.3m, up 32% (2015: £34.3m).

The reported profit before tax was £43.9m compared to a reported loss before tax in 2015 of £14.8m. The prior year loss included exceptional operating items of £46.9m. 

Details on performance by our divisions are shown in our 2016 annual report.


The tax charge for the year is £7.1m, which broadly equates to the UK statutory rate after adjusting for the impact of tax on joint ventures and for the deferred tax effect of future reductions in the UK statutory rate. Almost all of the Group’s operations and profits are in the UK, and we maintain an open and constructive working relationship with HMRC. 

Earnings per share

The adjusted earnings per share was 34% up to 84.7p (2015: 63.0p), with the fully diluted adjusted earnings per share of 82.3p up 32% (2015: 62.2p).

Net cash

The Group’s cash performance has been strong with operating cash inflow of £179.9m in the year and free cash inflow of £173.7m (2015: free cash outflow of £0.9m). This included an improvement in working capital of £125.2m. At the year end, the Group had net cash of £208.7m (2015: £57.9m), an improvement of £150.8m.

The average daily net cash for the year was £25m, a significant improvement of £78.4m on the prior year, and was due to overall better working capital management, settling a number of long-standing final accounts and the phasing of scheme completions and commencements in Lovell Partnerships and Muse Developments. Based on current plans and phasing for investment in the regeneration activities and the forecasts for cash generation of the construction activities, we expect an overall average daily net cash position for 2017.

Financing facilities

The Group has £175m of committed loan facilities maturing as follows: £15m in May 2018 and £160m in September 2018. The banking facilities are subject to financial covenants, all of which have been met throughout the year.  In the normal course of our business, we arrange for financial institutions to provide client guarantees (bonds) as security against the financial instability of the contractor prejudicing completion of the works. We pay a fee and provide a counter-indemnity to the financial institutions for issuing the bonds. As at 31 December 2016, contract bonds in issue under uncommitted facilities covered £227.7m (2015: £221.6m) of our contract commitments.

Further information on the Group’s use of financial instruments is explained in our 2016 annual report.