Morgan Sindall Group Plc · LSE:MGNS
Morgan Sindall — FY2015 Earnings Presentation
47 slides from Morgan Sindall's earnings presentation, Feb 23, 2016
Slide 1: Full year results to 31 December 2015
Full year results to 31 December 2015 Morgan Sindall Group plc 23 February 2016
Slide 2: Agenda
Agenda • Introduction John Morgan • FY 2015 Financial and Operational Review Steve Crummett • Partnership Housing John Morgan • Group summary and outlook John Morgan 2
Slide 3: Introduction
Introduction • Strong end to 2015 FY results reflect good strategic and operational progress Fit Out performing well. Improved second half performance from Construction & Infrastructure ‘Regeneration’ remains a key strategic growth driver through Affordable Housing and Urban Regeneration Ord
Slide 4: FY 2015 Financial and Operational Review
FY 2015 Financial and Operational Review Steve Crummett 4
Slide 5: Group summary
Group summary • Group has two strategic lines of business: ‘Construction’ and ‘Regeneration’ • Currently five reporting segments Affordable Housing segment straddles both strategic lines of business and comprises two distinct operations Partnership Housing and Property Services reflects strate
Slide 6: Summary income statement
Summary income statement1 £m FY 2015 FY 2014 % change Revenue 2,385 2,220 +7% Operating profit1 38.8 28.9 +34% Operating margin1 1.6% 1.3% +30bps Profit before tax1 34.3 25.2 +36% Earnings per share1 63.0p 46.7p +35% Total dividend per share 29.0p 27.0p +7% 1 Before intangible amortisation of £2.2m,
Slide 7: Divisional performance
Divisional performance1 £m Revenue Operating Operating Profit1 Margin1 FY 2015 % FY 2015 % FY 2015 Construction & Infrastructure 1,232 +5% 3.8 +9% 0.3% - Fit Out 607 +20% 24.0 +60% 4.0% +100bps Affordable Housing 426 +1% 8.6 +43% 2.0% +60bps Urban Regeneration 110 -3% 12.9 +29% 11.7% n/a Investments
Slide 8: Exceptional operating item
Exceptional operating item • Exceptional charge of £39.4m taken at the HY relates to impairment of receivable on two construction contracts with MOD as client, both transferred as part of the acquisition from Amec in 2007 • Since then... commercial settlement achieved on one of these contracts w
Slide 9: Operating cash flow
Operating cash flow £m 92% cash conversion prior to strategic investment in regeneration activities 38.8 (3.5) (8.9) 2.0 35.8 (30.7) 7.4 5.1 0 Operating Non-cash Net capex & Working Other 4 Operating Growth Operating 2 finance leases 3,6 Investment in 1 adjmts Capital cash flow - cash flow - Profit
Slide 10: Net cash/debt movements
Net cash/debt movements £m 5.1 (4.3) 1.3 57.9 • Year end net cash of £57.9m 13.6 55.7 (1.7) (11.8) • Average net debt of £53m includes non-recourse debt of £18m slightly better than previous guidance • Ongoing bank facilities of 0 £175m Opening Operating Net Tax Dividends Repayment Other Closing
Slide 11: Capital employed in Regeneration
Capital employed in Regeneration £m Affordable Total Housing Urban Regeneratio Partnership Regeneration Investments n Housing Total net land & regeneration WIP 220 118 101 1 Unsold completed units (excl JVs) 10 8 2 - Amounts invested in joint ventures 50 6 30 14 Shared equity loans and investment pr
Slide 12: Construction & Infrastructure
Construction & Infrastructure £m FY 2015 FY 2014 % Revenue 1,232 1,172 +5% Operating profit1 3.8 3.5 +9% Margin % 0.3% 0.3% - • Construction (55% of total revenue) up 7%; Infrastructure (45% of total revenue) up 3% • Overall result for FY impacted by construction activities in London & South most
Slide 13: Fit Out
Fit Out £m FY 2015 2014 % Revenue 607 507 +20% Operating profit1 24.0 15.0 +60% Margin % 4.0% 3.0% +100bps • Very strong performance, with record revenue of £607m, up 20% • Margin up to 4.0%. Profit up 60% to £24.0m focus on quality and operational delivery bidding remains competitive but genera
Slide 14: Fit Out order book
Fit Out Order book • Order book of £341m, up 41% £m £341m £257m relates to 2016, up 9% (12 month forward) encouragingly, £84m secured for 2017 £241m • In good position for 2016 £257m size and quality of order book £236m focus on margin and operational delivery 12 month forward order book Ord
Slide 15: Affordable Housing
Affordable Housing £m FY 2015 FY 2014 % Revenue 426 423 +1% Operating profit1 8.6 6.0 +43% Margin % 2.0% 1.4% +60bps ‘Affordable Housing’ as reported comprises ‘Partnership Housing’ and ‘Property Services’ Partnership Housing Property Services mixed-tenure ‘design & build’ contracting response maint
Slide 16: Affordable Housing – Partnership Housing
Affordable Housing – Partnership Housing Partnership Housing • Strategic focus on mixed-tenure regeneration housing revenue up 29% to £148m 913 units sold (private and social) at average sales price of £162k site openings planned for 2016 to drive future growth • ‘Design & build’ contracting r
Slide 17: Affordable Housing – Property Services
Affordable Housing – Property Services Property Services • Significant reduction in prior year losses to £1.0m • Strong progress made on improving operational and contract management • Overheads now right-sized for the business • Challenge remains winning work at acceptable margins to drive critical
Slide 18: Urban Regeneration
Urban Regeneration £m 2015 2014 % Capital employed1 at year end 76.6 49.4 n/a LTM average capital employed1 76.2 49.9 n/a Revenue 110 113 -3% Operating profit2 12.9 10.0 +29% • Strong performance with profit up to £12.9m LTM ROCE3 of 15% profit driven by significant increase in residential sales
Slide 19: Urban Regeneration
Urban Regeneration • Order book up 11% to £218m (56% for 2016) Good regional and sectoral spread • Regeneration and development pipeline of £2.2bn • High levels of activity expected to continue into 2016 increase in capital employed of c£20-30m expected in 2016 as schemes develop and new ones star
Slide 20: Investments
Investments £m 2015 2014 % Capital employed1 at period end 16.6 20.2 -18% Average capital employed 17.8 17.3 +3% Operating profit2 (1.5) 0.9 n/a • Operating loss of £1.5m as expected due to phasing of schemes and bidding activity to secure work for other Group companies over £160m of constructio
Slide 21: Order book and regeneration & development pipeline
Order book and regeneration & development pipeline £m £2,826m Order book • Group committed order book up 6% to £2,658m £2.8bn £0.5bn from frameworks 49% 49% in 2016 26% 25% FY 14 FY 15 2016 2017 2018 + £m Regeneration • Group regeneration & development £3,227m £3,159m pipeline pipeline down 2% t
Slide 22: Partnership Housing
Partnership Housing John Morgan
Slide 23: Group overview
Group overview Construction Regeneration Affordable Housing Construction Urban Property Partnership Investments & Fit Out Regeneration Services Housing Infrastructure (Mixed-Use) ‘Partnership Housing’ is a key strategic growth area for the Group major part of Group’s regeneration strategy signif
Slide 24: What is 'Partnership Housing' to the Morgan Sindall Group?
What is ‘Partnership Housing’ to the Morgan Sindall Group ? • Focused on working in partnerships with Local Authorities and Housing Associations • Three streams of activity mixed-tenure developments which include building and developing homes for open market sale, shared ownership Full service hou
Slide 25: Lovell by region
Lovell by region North West & North Wales Scotland Turnover 2015: £49m Turnover 2015: £35m No. mixed-tenure sites: 7 No. mixed-tenure sites: 1 No. D&B sites: 6 No. D&B sites: 9 No. refurbishment sites: 4 No. refurbishment sites: 2 No. employees: 128 No. employees: 85 Eastern Turnover 2015: £42m No.
Slide 26: Government policy: opportunities for Lovell
Government policy: opportunities for Lovell • How policy affects Housing Associations 1% p.a. rent cuts over four years Right to Buy likely loss of Section 106 to increase housing stock partners will need to find new ways of operating • Policy relating to open market sales Help to Buy - ex
Slide 27: Strong visibility: mixed-tenure
Strong visibility: mixed-tenure • Mixed-tenure sites from 21 in 2014 to circa 39 in 2017 Mixed-tenure outlets at year end • Circa 8,500 mixed-tenure units for sale in 45 our control 39 • Opening 15 new mixed-tenure sites in 35 2016 and expect to complete 10 sites 30 • Confidence in 2016 and 2017+ 25
Slide 28: Strong visibility: mixed-tenure developments
Strong visibility: mixed-tenure developments 2015 2016 2017 2018 2019 2020+ 52 current mixed-tenure schemes Average open market units per scheme: 94 Average site duration: 38 months On site/Sales 28
Slide 29: Regional case studies
Regional case studies Miles Platting, Manchester Compendium Living Towcester, Northamptonshire King’s Lynn, Norfolk The Mill at Canton, Cardiff Woolwich, London 29
Slide 30: Miles Platting, Manchester
Miles Platting, Manchester Partners: Manchester City Council, Adactus Housing Association, Dexia 30
Slide 31: Miles Platting, Manchester
Miles Platting, Manchester • Private Finance Initiative scheme with phased drawdown of sites for the open market housing • Commenced 2007 - ongoing • JV with Morgan Sindall Investments (PFI investment since sold) • Planned maintenance of 1,500 homes for rent, the development of up to 900 for sale an
Slide 32: Woolwich, London
Woolwich, London Partners: Royal Borough of Greenwich, asra Housing Group Morris Walk (south) – one of three estates being redeveloped 32
Slide 33: Woolwich, London
Woolwich, London • Demolition of existing three estates and redevelopment into 1,500 high-quality, mixed-tenure homes (1,000 open market) over 12-15 years • On site with demolition – construction starts in February 2016, sales start May 2017 • £350m GDV • Seven phases subject to commercial viability
Slide 34: The Mill at Canton, Cardiff
The Mill at Canton, Cardiff Partners: Tirion Group, Cadwyn Housing Association, Ely Bridge Development Corporation • 53-acre former paper mill • One of Wales’ largest regeneration schemes delivering 800 units over six years • 356 open market, 369 Private Rented Sector (PRS), 75 social rent • £100m G
Slide 35: Towcester, Northamptonshire
Towcester, Northamptonshire Partners: South Northamptonshire Council, Grand Union Housing • Morgan Sindall Investments-led regeneration involving both Lovell and our Construction business • Part of the wider £45m Towcester Masterplan, Lovell is delivering 87 homes over three years • Morgan Sindall C
Slide 36: Compendium Living
Compendium Living Partner: The Riverside Group (Housing Association) • Mixed-tenure 50/50 JV with The Riverside Group, formed 2005 • Lovell contracts design & build to the JV • Focus on large scale regeneration projects • Schemes in Liverpool, Derby, Stoke-on-Trent and Hull • GDV of £244m, circa 190
Slide 37: King's Lynn, Norfolk
King’s Lynn, Norfolk Partner: Borough Council of King’s Lynn and West Norfolk • 392 mixed-tenure homes over five years on four sites • £50m GDV • Deal structure development fee design & build contract sales fee profit share • 90% of workforce from the local community 37
Slide 38: Barriers to entry
Barriers to entry • Reputation and track record Lovell has been building Partnership homes since 1972 strong relationships with Housing Associations and Local Authorities • Very long time lines • Softer non-build elements of regeneration community engagement skills local training and apprent
Slide 39: Partnership Housing: summary
Partnership Housing: summary • Further investment of circa £15m during 2016 • Strong growth expected • Government measures generally positive for Partnership Housing • Robust long-term relationships • Significant barriers to entry • Strong visibility of earnings • Structure in place to deliver plann
Slide 40: Group summary and outlook
Group summary and outlook John Morgan 40
Slide 41: Group summary and outlook
Group summary and outlook • Continuation of positive momentum coming into 2016 focus on operational delivery in Fit Out to maintain strong margin performance Affordable Housing is a key growth driver through its position in Partnership Housing further steady recovery in performance expected th
Slide 42: Questions
A voRcaN SINDALL GROUP Questions Thank you
Slide 43: Appendices
A voRcaN SINDALL GROUP Appendices
Slide 44: Net finance expense
Net finance expense £m FY 2015 FY 2014 Net interest charge on net debt (2.9) (1.6) Amortisation of fees & non-utilisation fees (2.0) (1.9) Interest from JVs 0.9 0.8 Other (0.5) (1.0) Total (4.5) (3.7) 44
Slide 45: Tax
Tax £m FY 2015 FY 2014 (Loss)/profit before tax (14.8) 22.8 Less: share of net profit in taxed JVs 1 (9.6) (6.3) Profit subject to tax (24.4) 16.5 Statutory tax rate 20.25% 21.5% Current tax credit/(charge) at statutory rate 4.9 (3.5) Tax liability upon joint venture profits 1 (1.7) (1.1) Effect of
Slide 46: Adjusted earnings per share
Adjusted earnings per share £m FY 2015 FY 2014 Profit after tax and minority interest (9.9) 18.1 Adjusted for: Exceptional operating items (net of tax) 37.4 - Amortisation of intangibles (net of tax) 1.8 1.9 Deferred tax credit (1.7) - Adjusted earnings 27.6 20.0 Average number of shares 43.8m 42.8m
Slide 47: Summary balance sheet
Summary balance sheet £m FY 2015 FY 2014 Intangibles 217.3 218.1 PP&E 20.8 19.2 Investments (incl JVs) 59.1 64.8 Shared equity loan receivables 20.3 20.4 Net working capital (78.8) (55.2) Current and deferred tax (15.4) (21.7) Pension scheme 1.4 0.8 Net (debt)/cash 57.9 55.7 Other1 (33.6) (34.2) Net