The financial performance in the year to 30 April 2016 has been very strong, with the results showing significant revenue growth, excellent cash generation, and margins maintained at a healthy level.
- £409.5m turnover (+8%)
- £378.2m net revenue (+7.9%)
- £39m operating profit (+6%)
Basis of preparation
The financial results are extracted from financial statements prepared under International Financial Reporting Standards. Prudent accounting policies continued to be applied on a basis consistent with prior years.
Revenue and profit
Our primary measure of revenue, net revenue, was £378.2m (2015: £350.5m), representing 7.9 percent growth over the prior year. Our turnover (which includes subcontract revenue) was £409.5m (2015: £379.9m). The growth in revenue was strong in real estate (15 percent) and infrastructure (16 percent), giving combined growth of 15.4 percent.
This was offset by a decline in natural resources (20.4 percent), reflecting the extremely challenging market conditions in that market sector. Net revenue in the UK achieved growth of 14 percent over the prior year, and revenue from outside the UK increased by 2.9 percent. Revenue growth was, again, particularly strong in the Middle East (24 percent). Non-UK revenue represented 52.5 percent of consolidated revenue. EBITA of £39.1m compares with £36.9m for the prior year, and EBITA margin was 10.3 percent (2015: 10.5 percent).
The taxation charge for the financial year was £9.1m (2015: £9.4m), representing an effective rate of 23.6 percent (2015: 25.7 percent).
The effective rate reflects the global nature of our business and the impact of varying tax rates across different jurisdictions. The reduction in the effective rate over 2015 reflects the decreasing UK corporation tax rates and different tax rates across the jurisdictions in which our businesses operate.
Cash flow and working capital
Cash generation has once again been maintained at a strong level through the financial year, reflecting the level of attention placed on working capital management by the business. This resulted in free cashflow of £30.0m (2015: £18.3m), and cash generation – defined as operating cashflow as a percentage of EBITDA – of 104 percent (2015: 77 percent). Trade debtors, while still at low levels, have increased during the year, with growth a contributory factor. Debtor days at the year-end were 58 (2015: 60), and our average debtor days across the 12 accounting periods were 60 (2015: 60).
Working capital management continues to be a key discipline across our business. As our geographic reach has extended, significant attention continues to be placed on establishing appropriate working capital management behaviour in all territories, and this has been key to maintaining our strong cashflow performance.
Cash, net of overdrafts and bank loans, was £26.2m at 30 April 2016 (2015: £29.9m). Net funds, including £11.5m of mostly non-interest bearing long-dated loans from shareholders, were £13.4m at the year-end date (2015: £13.0m).
Bank facilities were renewed in November 2015. This provided Turner & Townsend with five-year committed facilities of £80m to finance future operational cash requirements and selective acquisitions in line with our strategic aims. The facilities remain undrawn.
Turner & Townsend operates a number of pension schemes across the global business. Additionally, the business maintains one closed defined benefit scheme arising from the UK business. This scheme was closed to new members in 1992 and to future accrual in 2006. At 30 April 2016 the IAS19 deficit had reduced to £5.4m (2015: £6.7m), primarily due to movements in the liability discount rate.
The treasury risks faced by Turner & Townsend include interest rate risk, foreign exchange risk, credit risk and liquidity risk. Instruments such as interest rate swaps have not been entered into to mitigate risk as these risks are considered to be low. A two percent increase to the cost of external finance would not have a material impact to profit before tax. Contracts are mostly undertaken in the currency of local subsidiaries, and therefore foreign currency revenue streams are matched by the currency of the relevant cost base.