Morgan Sindall Group plc · LSE:MGNS
Morgan Sindall — FY2020 Earnings Presentation
54 slides from Morgan Sindall's earnings presentation, Feb 25, 2021
Slide 1: Full Year Results
Full Year Results to 31st December 2020 25th February 2021
Slide 2: Agenda
Agenda Financial & Operational Review | Steve Crummett Medium-term Targets & Outlook | John Morgan Reducing our Carbon Emissions | Steve Crummett FY Results 2020 2
Slide 3: Financial & Operational Review
Financial & Operational Review Steve Crummett
Slide 4: Summary Income Statement
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
Slide 5: Revenue growth vs prior year
Revenue (by quarter) 20% +17% Revenue tracks the impact of C-19 15% restrictions through the year 10% Revenue growth vs prior year Strong momentum in the second half with 5% all sites open and operating +2% +1% 0% 0% Minimal impact on operations of tier Q1 Q2 H1 Q3 Q4 H2 FY restrictions and lo
Slide 6: Main areas of impact of C-19
Main areas of impact of C-19 Direct costs of closure and re-mobilisation Lower levels of operating efficiency and productivity Prolongation of contract periods Volume reduction in services provided to ‘essential’ only (Property Services) Slower work winning conversion Delayed decision ma
Slide 7: Summary by division
Summary by division Operating Operating Revenue Profit/(Loss)1 Margin1 £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 Urba
Slide 8: Cash flow
Cash flow 6.4 178.7 -3.2 -19.9 69.7 155.6 Very strong operating cash flow £m Total working capital inflow of £102.6m 32.9 20.7 Lower working capital in Regeneration -19.5 activities due to year end completions 68.5 and chosen funding solutions £102.6m No impact on long term strategic Working
Slide 9: Daily net cash balance
Daily net cash balance 181m 400 MAX: £354m Average daily net cash 350 (2019: £109m) £ 300 250 Average includes the benefit of deferrals 200 of VAT/PAYE etc impacting average by 150 c£20m. All now fully up to date 100 Year end net cash £333m (FY 2019: £193m) £m 50 MIN: £86m - Renewed bank facil
Slide 10: Payment practices
Payment practices 6m to 31st December 2020 Average time Invoices not Invoices paid to pay paid within within 60 Continued improvement in average time to pay invoices agreed terms days invoices in Construction & Infrastructure reduced to 27 days in last 12 months. 98% of 27 days 9% 98% Constructi
Slide 11: Balance Sheet
Balance Sheet £m FY FY 2020 2019 Intangibles 222.1 223.6 PP&E 65.8 79.5 Investments (including JVs) 94.1 90.7 Shared equity loan receivables 5.5 8.4 Net working capital (195.6) (91.9) Current and deferred tax (13.5) (17.7) Net cash 332.8 192.7 Lease liabilities (51.0) (59.7) Other1 (30.2) (28.8) Net
Slide 12: Secured Workload
Secured Workload £8.3bn Group Secured Workload +9% on FY 2019 £ 3.9bn Construction +7% on FY 2019 £ 4.4bn Regeneration +11% on FY 2019 includes Construction & Infrastructure, Fit Out, includes Partnership Housing, Urban Property Services Regeneration, Investments no compromise on quality of wo
Slide 13: Divisional Performances
Divisional Performances
Slide 14: Construction & Infrastructure
Construction & Infrastructure Construction Infrastructure £m FY 2020 Change +8% +12% Revenue 1,637 +10% Revenue up to £670m Revenue up to £967m Operating profit 35.7 +11% 41% of divisional total 59% of divisional total Operating margin (%) 2.2% - Secured order book 2,537 +12% 1.2% 2.8% Operating mar
Slide 15: Fit Out
Fit Out £m FY 2020 Change +20bps increase 25% of revenue Revenue 700 -17% margin up to 4.6% Public sector/local authority Operating profit 32.1 -13% FY 2019 margin: 4.4% FY 2019: 6% Operating margin (%) 4.6% +20bps Secured order book 410 -15% £387m c£450m Secured orders for 2021 Bids pending decisio
Slide 16: Property Services
Property Services £m FY 2020 Change £171m £1.6bn Revenue 112 -3% New contracts secured Bids awaiting decision or identified for bid in Operating profit* 1.0 -77% Hammersmith & Fulham 2021 Home Group Operating margin (%) 0.9% -280bps Secured order book 970 +7% >55% of order book £1.6m for 2025 & beyo
Slide 17: Partnership Housing
Partnership Housing £m FY 2020 Change +3% -33% Revenue 441 -14% Mixed-tenure revenue Contracting revenue Operating profit 16.1 -12% to £278m (63% of total) to £163m (37% of total) Operating margin (%) 3.7% +10bps Secured order book 1,267 +16% 1,216 mixed-tenure £229k units completed ASP in mixed-ten
Slide 18: Urban Regeneration
Urban Regeneration £m FY 2020 Change c£120m £950m GDV Revenue 123 +3% average capital Projects on site forecast for 2021 Operating profit 9.2 -53% 14 projects, across 10 developments Secured order book 2,434 +7% Average capital employed 109.7 +7.9 +7% Order book Diverse portfolio up to £2.4bn 52% re
Slide 19: Investments
Investments £m FY 2020 Change 4 Later Living Operating loss* (6.9) n/a JV partnerships with Development of extra- local authorities care facilities Operational responsibility for activities transferred to Partnership Housing/Urban Regeneration Addresses increasing overlap between the market prop
Slide 20: Revised segmental reporting
Revised segmental reporting New structure effective from 1 January 2021 Restatement of 2020 comparatives to reflect new structure Investments – 2020 loss of £6.9m; capital employed £21.9m Partnership Housing Urban Regeneration Central costs • Later Living development • JV with Slough BC • Redund
Slide 21: Financial summary
Financial summary Resilient performance against C-19 backdrop. No material impact of restrictions in H2 All businesses operational. Positive momentum coming into 2021 Strengthened balance sheet. Substantial net cash balance throughout the year All government monies repaid and up to date Av
Slide 22: Medium-term Targets & Outlook
Medium-term Targets & Outlook John Morgan
Slide 23: Group Strategy
Group Strategy Our chosen markets remain the same Long-term workstreams Organic growth Making our business better for all stakeholders Persistent execution of strategy gives us high quality earnings Quality of earnings demonstrated by 5 consecutive years of no exceptions FY Results 2020
Slide 24: Construction
Construction Medium-term target: Consistently make 2.5% to 3% margin Margin more important than turnover Route map Managing risk to ensure quality of earnings Increasing presence in some geographical areas Balance sheet important to more clients Market conditions Increasing barriers to ent
Slide 25: Infrastructure
Infrastructure Medium-term target: 3.5% margin Long-term relationships and workstreams Route map Continuous concentration on operational efficiency JVs only when clear competitive advantage With the exception of aviation the market is strong Market conditions Clients increasingly value str
Slide 26: Fit Out
Fit Out Medium-term target: Profit to be at or around £35m pa Maintain market share in commercial office market Route map Increase market share in work for the government More work from frameworks Market remains buoyant Market conditions Several large pre-let buildings finishing constructi
Slide 27: Property Services
Property Services Medium-term target: Profit of at least £10m pa Revenue and margin growth Route map Market ready for a disrupter Large available market Strong current bidding activity. Key is maintaining selectivity Market conditions Social value increasingly important Expect market to
Slide 28: Partnership Housing
Partnership Housing Medium-term target: 6% operating margin / ROCE > 20% Increase turnover Route map More geographical coverage Increase number of mixed tenure schemes High level of bidding activity Market conditions Larger schemes coming to the market Open market values and volumes curr
Slide 29: Urban Regeneration
Urban Regeneration Medium-term target: 3-year rolling average ROCE up towards 20% Increase activity off the same cost base Route map More efficient use of capital Increase geographical coverage Regeneration high on government agenda Market conditions Most commercial markets currently weak
Slide 30: Medium-Term Targets & Outlook Summary
Medium-Term Targets & Outlook Summary Previous Target 2020 Target as at 2021 Outlook (pre-C-19) actual February 2021 Consistent margin Consistent margin Construction 2.5%-3% Margin of 1.2% 2.5%-3% • Expect progress towards target margin Infrastructure Margin of 3% Margin of 2.9% Margin of 3.5% • Exp
Slide 31: Reducing our Carbon Emissions
Reducing our Carbon Emissions Steve Crummett
Slide 32: Our Responsible Business strategy
Our Responsible Business strategy Framework for a common strategy focused on all stakeholders. In place since 2008 Report on progress through set of established KPIs Support the UN Sustainable Development Goals FY Results 2020 32
Slide 33: Climate change – Our carbon credentials
Climate change – Our carbon credentials Independently audited by The Carbon Reduce Scheme (formerly CEMARS1) since 2010 CDP1 leadership score of ‘A’ awarded in 2020 Targets approved by the Science-Based Targets Initiative1 one of the first construction companies globally to gain accreditatio
Slide 34: Reducing carbon emissions – what we're already doing
Reducing carbon emissions – what we’re already doing Green Apple award for ecology and biodiversity works Infrastructure constructed new 840m stretch of river at Werrington Achieved a biodiversity net gain by improving wildlife habitats Additional flood capacity and biodiversity features Pro
Slide 35: Reducing our carbon emissions
Reducing our carbon emissions What is included ? Scope 11 All measured, reported Scope 21 and verified. Externally Operational Scope 31 audited tCO2e Science-Based Targets are calculated to eliminate all emissions to atmosphere by 2050 If we do nothing more - assumes minimal action beyond current
Slide 36: Following the science-based pathway to zero emissions
Following the science-based pathway to zero emissions Starting point 35,000 ‘Bottom Up’ 1.5 degrees target pathway out to 2030 30,000 Reproduced and validated the target 1.5 degrees pathway ‘Bottom Up’ 25,000 out to 2030 20,000 tCO2e Internal tool to flex the impact on 15,000 carbon emissions of
Slide 37: Following the science-based pathway to zero emissions
Following the science-based pathway to zero emissions Specific identified actions to achieve Pathway by source Reduce site and equipment consumption 30,000.00 Applies to: Gas Oil, Natural Gas, Burning Oil/Kerosene/Paraffin 25,000.00 Commercial fleet and cars – electric vehicles and 20,000.00 a
Slide 38: What does 'net zero' mean?
What does ‘net zero’ mean ? Starting point At any one time, ‘net zero’ or ‘net gain’ 35,000 could be claimed by investing £ in offsetting ‘Bottom Up’ 1.5 degrees target pathway out to 2030 activities 30,000 …but this doesn’t achieve the goal of eliminating all emissions 25,000 tCO2e Offsets no
Slide 39: Carbon emissions – our commitment
Carbon emissions – our commitment Morgan Sindall’s carbon commitment Continue with transparent and externally Invest in such UK carbon reduction initiatives which verifiable science-based targets and fulfil the have a long term, generational impact actions required to ‘follow the pathway’ to zer
Slide 40: Carbon emissions – the journey beyond
Carbon emissions – the journey beyond We need to address all of our Scope 3 emissions i.e. from supply chain and end-users of buildings To help our supply chain measure, report and reduce their emissions, we: launched a portal in 2020 for reporting emissions developed the Carbon Calculator t
Slide 41: Summary
Summary
Slide 42: Summary
Summary No change to strategy Expect to increase market share in most of the areas we operate in Reintroduced medium-term targets Strong balance sheet allows us to make the right long-term decisions Clear and transparent path to reducing our carbon emissions Expect profit in 2021 to be s
Slide 43: Questions?
Questions?
Slide 44: Thank You
Thank You
Slide 45: Morgan Sindall Group Full Year Results 2020
Morgan Sindall Group Full Year Results 2020 Email: IR@morgansindall.com Phone: 020 7307 9200 Website: www.morgansindall.com
Slide 46: Appendices
Appendices
Slide 47: Net finance expense
Net finance expense £m FY 2020 FY 2019 Interest payable on drawings on bank facilities (1.3) (0.1) Amortisation of fees & non-utilisation fees (1.7) (1.6) Interest expense on lease liabilities (IFRS 16) (1.7) (1.7) Interest from JVs 0.6 1.0 Other (0.5) (0.3) Total (4.6) (2.7) Higher interest charg
Slide 48: Adjusted earnings per share
Adjusted earnings per share £m FY 2020 FY 2019 Profit after tax 45.4 71.2 Adjusted for: Amortisation of intangibles (net of tax) 2.5 1.5 Impact of change in tax rate on deferred 1.5 - tax balances Adjusted earnings 49.4 72.7 Average number of shares 45.5m 45.1m Adjusted earnings per share 108.6p 161
Slide 49: Tax
Tax £m FY 2020 FY 2019 Profit before tax 60.8 88.6 Less: share of net JV profit (2.3) (6.5) Profit subject to tax 58.5 82.1 Statutory tax rate 19.0% 19.0% Current tax charge at statutory rate (11.1) (15.6) Tax on joint venture profits1 (0.6) (1.3) Change in tax rate on deferred tax balances (1.5) -
Slide 50: Net Cash Movement
Net Cash Movement 155.6 -9.6 -5.9 332.8 Year end net cash of £333m £m 192.7 Opening Free cash Dividends Other1 Closing net cash flow net cash 1‘Other’ includes net loans advanced to JVs (£12.9m), the purchase of shares in the Company by the employee benefit trust (£9.6m) and a payment to acquire a
Slide 51: Capital employed in Regeneration
Capital employed in Regeneration £m Partnership Urban Regeneration Housing Regeneration Total net land & regeneration WIP 259 190 69 Unsold completed units (excl. joint ventures) 14 13 1 Amounts invested in joint ventures 62 21 41 Shared equity loans and investment properties 8 8 - Other working cap
Slide 52: Carbon emissions – Background and terminology
Carbon emissions – Background and terminology 1. CDP is a global non-profit organization that drives companies and governments to reduce their greenhouse gas emissions, safeguard water resources and protect forests. Voted number one climate research provider by investors and working with institution
Slide 53: Carbon emissions - Background
Carbon emissions - Background Offsets Offsets are a mechanism whereby companies can effectively buy “credits” to reduce the balance of its carbon emissions. An offset is generally an investment in a recognised emissions reduction activity or process that reduces or removes carbon dioxide, and other
Slide 54: Morgan Sindall Group
MORGAN SINDALL GROUP