Morgan Sindall Group Plc · LSE:MGNS
Morgan Sindall — H1 2016 Earnings Presentation
34 slides from Morgan Sindall's earnings presentation, Aug 2, 2016
Slide 1: Half year results to 30 June 2016
Half year results to 30 June 2016 Morgan Sindall Group plc 2 August 2016
Slide 2: Agenda
Agenda • Introduction John Morgan • HY 2016 Financial and Operational Review Steve Crummett • Outlook and Prospects – 2017 & beyond John Morgan 2
Slide 3: Introduction
Introduction • Strong profit growth driven by focused strategic and operational development progress across all divisions • Balance sheet in good shape improved cash performance, with lower average debt through the period • Group is well-positioned for H2 2016 despite uncertainties from EU R
Slide 4: HY 2016 Financial and Operational Review
HY 2016 Financial and Operational Review Steve Crummett 4
Slide 5: Group structure
Group structure • Two strategic lines of business - Construction and Regeneration • Six reporting segments Investments shown to reflect the ‘facilitator’ nature of division Construction Regeneration Construction Property Partnership Urban & Fit Out Services Housing Regeneration Infrastructure Inve
Slide 6: Summary income statement
Summary income statement1 £m HY 2016 HY 2015 % change Revenue 1,148 1,152 - Operating profit1 18.2 15.5 +17% Operating margin1 1.6% 1.3% +30bps Profit before tax1 16.1 13.3 +21% Earnings per share1 29.8p 24.5p +22% Interim dividend per share 13.0p 12.0p +8% 1 Before intangible amortisation of £0.7m
Slide 7: Divisional performance
Divisional performance1 £m Revenue Operating Operating Profit1 Margin1 HY 2016 % HY 2016 % HY 2016 bps Construction & Infrastructure 612 -2% 3.2 +967% 0.5% +50bps Fit Out 294 -1% 11.5 +11% 3.9% +40bps Property Services 27 -16% 0.1 n/a 0.4% n/a Partnership Housing 183 +7% 4.6 +21% 2.5% +30bps Urban R
Slide 8: Operating cash flow
Operating cash flow £m • Improvement in HY operating cash 18.2 (0.9) outflow of £15.7m compared to (2.3) (34.6) outflow of £53.3m in HY 2015 (15.7) (17.8) 0 3.9 (2.0) (0.1) Operating Non-cash Net capex & Working Other 3 Operating Net interest Tax Free cash Profit 1 adjmts 2 finance leases Capital
Slide 9: Net cash/debt movements
Net cash/debt movements £m • Period end net cash of £36m (vs HY 57.9 (17.8) 2015: net debt of £8m) (7.5) 5.7 • Average daily net debt of £24m (1.9) 36.4 includes £16m non-recourse better than previous guidance vs HY 2015 average debt of £35m • Bank facilities of £175m 0 Opening Free cash Divid
Slide 10: Capital employed in Regeneration
Capital employed in Regeneration £m Partnership Urban • Lower investment in period Regeneration Housing Regeneration than anticipated due to timing of developments Total net land & regeneration WIP 233 130 103 Unsold completed units (excl JVs) 5 4 1 • Further investment still expected in H2 Amounts
Slide 11: Summary balance sheet
Summary balance sheet £m HY 2016 HY 2015 FY 2015 Intangibles 216.8 217.7 217.3 PP&E 19.8 19.8 20.8 Investments (incl JVs) 56.1 71.0 59.1 Shared equity loan receivables 19.6 20.6 20.3 Net working capital (44.2) (31.9) (78.8) Current and deferred tax (18.2) (14.9) (15.4) Pension scheme 1.7 1.2 1.4 Net
Slide 12: Construction & Infrastructure
Construction & Infrastructure £m HY 2016 HY 2015 % Revenue 612 623 -2% Operating profit1 3.2 0.3 +967% Margin % 0.5% -% +50bps • Significant improvement in operating profit and margin older Construction contracts completed in 2015 no longer diluting margin steady performance from Infrastructure
Slide 13: Fit Out
Fit Out £m HY 2016 HY 2015 % Revenue 294 299 -1% Operating profit1 11.5 10.4 +11% Margin % 3.9% 3.5% +40bps • Another strong performance operating profit increased by 11% margin up 40bps to 3.9% • Order book at £373m, an increase of 9% compared to previous year end £221m for the remainder of 2
Slide 14: Property Services
Property Services £m HY 2016 HY 2015 % Revenue 27 32 -16% Operating profit/(loss)1 0.1 (0.8) n/a Margin % 0.4% -2.5% +290bps • Profit achieved ahead of plan. Profit of £0.1m vs loss of £0.8m HY 2015 focus on operational efficiencies and overhead management • Successful period for work winning or
Slide 15: Partnership Housing
Partnership Housing £m HY 2016 HY 2015 % Revenue 183 171 +7% Operating profit1 4.6 3.8 +21% Margin % 2.5% 2.2% +30bps • Revenue and profit growth driven by mixed-tenure revenue up 75% to £77m 423 units sold (private and social) at average sales price of £181k • ‘Design & build’ contracting reven
Slide 16: Urban Regeneration
Urban Regeneration £m HY 2016 HY 2015 % Capital employed1 at period end 75.2 83.5 -10% LTM average capital employed1 84.1 58.3 +44% Operating profit2 4.6 5.0 -8% • Operating profit of £4.6m driven by timing of completions. Completions weighted towards H2 • Development milestones planning consents
Slide 17: Investments
Investments £m HY 2016 HY 2015 % Operating profit1 (0.8) 0.4 n/a • Rationale for the division is to secure work for other divisions in the Group loss due to phasing of schemes and bidding activity c£65m of construction and regeneration work for rest of Group secured during the period • FY result
Slide 18: Order book and regeneration & development pipeline
Order book and regeneration & development pipeline Order Regeneration book • Group committed order book up 11% to pipeline £3,148m £3.1bn £3,159m £3,199m £2,826m good growth in Property Services, Partnership Housing & Fit Out • Group regeneration & development pipeline up 1% at £3.2bn longer ter
Slide 19: Summary & Outlook FY 2016
Summary & Outlook FY 2016 • Group is in good shape • EU Referendum result has created some uncertainties in markets…. • ..but confidence in H2 is strong further recovery in performance expected in Construction & Infrastructure visibility of secured orders in Fit Out to maintain strong margin per
Slide 20: Outlook and prospects - 2017 and beyond
Outlook and prospects - 2017 and beyond John Morgan 20
Slide 21: Outlook and prospects – 2017 and beyond
Outlook and prospects – 2017 and beyond • Morgan Sindall Group – the last three years de-risking the balance sheet focused on existing activities strengthening our management teams increasing our investment in Regeneration • Building a strong position going forward 21
Slide 22: Outlook and prospects – 2017 and beyond
Outlook and prospects – 2017 and beyond • Progress across all divisions Fit Out Established market leader making good margins Construction Moving from loss-making to base profits – recovery potential Infrastructure Consolidating position; drive to increase margins and turnover Property Servi
Slide 23: Outlook and prospects – Fit Out
Outlook and prospects – Fit Out • Fit Out market different to the commercial office market • 85% work for tenants • 20% government work • 34% turnover whilst tenants in occupation • Order book end July 2016 (£461m), end of June 2016 (£373m) 32 jobs won in July, totalling £150.4m • Post EU Referend
Slide 24: Following year's order book as at July – Fit Out
Following year’s order book as at 31 July – Fit Out 250 225 200 150 £m 100 71 68 60 50 39 45 14 Jul-10 Jul-11 Jul-12 Jul-13 Jul-14 Jul-15 Jul-16 for FY 2011 for FY 2012 for FY 2013 for FY 2014 for FY 2015 for FY 2016 for FY 2017
Slide 25: Outlook and prospects – Construction & Infrastructure
Outlook and prospects – Construction & Infrastructure Construction Infrastructure • Legacy issues worked through • Strong potential for growth • Recovery potential – driving • Focus on improved margins improved margins • Strong current pipeline of • High quality order book opportunities • Significan
Slide 26: Outlook and prospects – Property Services
Outlook and prospects – Property Services • Long-term contracts • Ahead of recovery plan • Expect year on year improvement 26
Slide 27: Outlook and prospects – Partnership Housing
Outlook and prospects – Partnership Housing • Undersupply of housing in the UK presents long-term opportunity • Sales – momentum and pricing have not changed post EU Referendum result • Increased order book • Limited London exposure • More selective about partnership opportunities • EU Referendum re
Slide 28: Outlook and prospects – Urban Regeneration
Outlook and prospects – Urban Regeneration • Strong long-term pipeline • Wide geographic base • Lower risk model Residential split between forward sold and speculative Non-residential forward sold • Post EU Referendum result No sign of any change in markets to date Medium-term impact unclear
Slide 29: Outlook and prospects - summary
Outlook and prospects - summary • We are in a strong position Strong and capable management team Strengthened balance sheet and cash discipline Good quality order book • Too early to assess the full implications of EU Referendum result No impact on house sales so far Record visibility goin
Slide 30: Questions
MORGAN ee 8 GROUP Questions Thank you
Slide 31: Appendices
MORGAN eS =| SINDALL GROUP Appendices
Slide 32: Net finance expense
Net finance expense £m HY 2016 HY 2015 Net interest charge on net debt (1.1) (1.2) Amortisation of fees & non-utilisation fees (1.0) (1.0) Interest from JVs 0.4 0.4 Other (0.4) (0.4) Total (2.1) (2.2) 32
Slide 33: Tax
Tax £m HY 2016 HY 2015 Profit/(loss) before tax 15.4 (27.2) Less: share of net profit in taxed JVs 1 (0.7) (0.5) Profit subject to tax 14.7 (27.7) Statutory tax rate 20.0% 20.25% Current tax (charge)/credit at statutory rate (2.9) 5.6 Other adjustments - (0.1) Tax (charge)/credit (2.9) 5.5 1 Certain
Slide 34: Adjusted earnings per share
Adjusted earnings per share £m HY 2016 HY 2015 Profit after tax and minority interest 12.5 (21.6) Adjusted for: Exceptional operating items (net of tax) - 31.4 Amortisation of intangibles (net of tax) 0.6 0.9 Adjusted earnings 13.1 10.7 Average number of shares 43.9m 43.7m Adjusted earnings per shar