Morgan Sindall Group plc · LSE:MGNS
Morgan Sindall — FY2018 Earnings Presentation
46 slides from Morgan Sindall's earnings presentation, Feb 21, 2019
Slide 1: Full Year Results
Full Year Results To 31 December 2018 21 February 2019
Slide 2: Agenda
Agenda Introduction | John Morgan FY 2018 Financial & Operational Review | Steve Crummett Looking Forward | John Morgan
Slide 3: Introduction
Introduction Strong performance in 2018 Focus on construction and regeneration activities Simple strategy based on ‘self-help’ and operational improvement Strength of balance sheet gives flexibility to invest and make long-term decisions Brexit – limited impact expected. Already factored into foreca
Slide 4: FY 2018 Financial & Operational Review
FY 2018 Financial & Operational Review Steve Crummett
Slide 5: Financial Highlights
Financial Highlights £ 3.0bn + 23% £ 99m + 18% Revenue up Profit before tax1 Average daily Total dividend 6% to £3.0bn up 23% to £81.6m net cash of £99m up 18% to 53.0p per share £207m closing net cash 1 Adjusted 5
Slide 6: Summary Income Statement
Summary Income Statement £m FY 2018 FY 2017 % change Revenue 2,972 2,793 +6% Operating profit1 85.5 68.6 +25% Operating margin1 2.9% 2.5% +40bps Profit before tax1 81.6 66.1 +23% Earnings per share1 151.8p 121.1p +25% Total dividend per share 53.0p 45.0p +18% 1 Before intangible amortisation of £1.0
Slide 7: Divisional Performance
Divisional Performance Operating £m Revenue Operating Margin1 Profit/(Loss)1 FY 2018 % FY 2018 % FY 2018 bps Construction & Infrastructure 1,343 -4% 27.0 +32% 2.0% +50bps Fit Out 831 +13% 43.8 +12% 5.3% - Property Services 100 +52% 2.0 +254% 2.0% +400bps Partnership Housing 519 +9% 12.2 -13% 2.4% -6
Slide 8: Cash Flow
Cash Flow £ 66.4m Operating cash flow 19.1 (23.9) £m 85.5 (23.2) 78% Cash Conversion 8.9 66.4 (2.9) (13.9) 49.6 › Working capital increase includes net investment in regeneration activity of > £20m › No material change to pattern of receivables or payables › Free cash flow per share of £1.11 Operati
Slide 9: Working Capital
Working Capital (£153m) Total Group net working capital at FY 2018 INCLUDES (£248m) Construction & Infrastructure -18% of divisional revenue £ 175m Trade Payables at FY 2018 › Increase of £13m (8%) since FY 2017 24 days Trade Payable Days1 at FY 2018 › Increase of 1 day from FY 2017 (23 days) 16 day
Slide 10: Payment Practices & Sundry Items
Payment Practices & Sundry Items Payment practices reporting Other balance sheet items Construction activities 6m to 31/12/18 Average time to pay invoices Invoices not paid within agreed £ 98m Contract Liabilities at FY 2018 terms Construction & Infrastructure 44 days 19% › vs contract assets of £19
Slide 11: Net Cash Movement
Net Cash Movement £m 49.6 (21.5) £ 207m Year end net cash (14.5) 207.0 193.4 Opening Free cash Closing net Dividends Other 1 net cash flow cash 1‘Other’ includes net loans advanced to JVs (£3.0m), deferred consideration paid in relation to the acquisition of a joint venture and other investment (£2.
Slide 12: Daily Net Cash Profile
Daily Net Cash Profile Average daily net cash (2017: £118m) 99m £ £250m 2018 MAX: £210m £200m Bank facilities of £180m through to 2022 £150m £100m Significant headroom against £50m committed facilities throughout the year £0m- (£50m) Group is committed to 2018 MIN: £25m maintaining annual average da
Slide 13: Balance Sheet
Balance Sheet £m FY FY Strong balance sheet 2018 2017 Net cash and significant undrawn Intangibles 216.4 215.8 committed facilities. Tangible net assets of c£130m PP&E 62.6 14.4 Investments (including JVs) 88.5 83.9 Shared equity loan receivables 13.0 15.6 Pension risk eliminated Net working capital
Slide 14: Order Book and Pipeline
Order Book and Pipeline £ 3.6bn Order book £ 3.1bn Regeneration & development pipeline › Down 7% from FY 2017, down 1% from HY › Down 4% from FY 2018, down 8% from HY 2018 2018 › Only includes secured schemes (no preferred › Aggregate of various divisional movements bidder or ‘prospectives’) › Consi
Slide 15: Divisional Performances
Divisional Performances
Slide 16: Construction & Infrastructure
Construction & Infrastructure Revenue split (by activity) 50% Construction 50% Infrastructure £m FY 2018 FY 2017 Change Revenue 1,343 1,395 -4% Revenue growth (vs FY 2017) Operating profit 27.0 20.4 +32% Margin % 2.0% 1.5% +50bps - 17% Construction (at £669m) + 15% Infrastructure (at £674m) Clear st
Slide 17: Construction & Infrastructure Order Book
Construction & Infrastructure £1,855m £1,922m Divisional order book of £1.9bn £437m Up 4% from the year end, up 9% from half year £478m Infrastructure up 8%, Construction down 9% (vs FY Order book 2017). Construction ‘preferred bidder’ c£800m £1,377m £1,485m Continued focus on quality Infrastructure
Slide 18: Fit Out
Fit Out Revenue split £m FY 2018 FY 2017 Change 73% London Revenue 831 735 +13% 27% Other Regions Operating profit 43.8 39.1 +12% Margin % 5.3% 5.3% - 86% Traditional Fit Out 14% ‘Design & Build’ Very strong performance; record revenue and profit 62% Existing Office Space Margin of 5.3%, level with
Slide 19: Fit Out Order Book
Fit Out Order Book of £470m at year end £500m › Down 6% on FY 2017, down 11% from HY 2018 £470m › Level with Q3 2018 › £439m is secured for 2019 Order Book Order Book in line with order book at FY 2016 £468m £439m › FY 2016 order book was £466m (vs £470m FY 2018) › £410m was for 12m ahead (vs £439m
Slide 20: Property Services
Property Services Order book £ 723m £m FY 2018 FY 2017 Change Down 14% from FY 2017 Revenue 100 66 +52% Three contracts awarded post year Operating profit1 2.0 (1.3) +254% end worth £313m (not included in year end order book) Margin % 2.0% -2.0% +400bps 52% revenue growth driven primarily through ex
Slide 21: Partnership Housing
Partnership Housing Revenue split (by activity) £m FY 2018 FY 2017 Change 43% Mixed-tenure Revenue 519 474 +9% 57% Contracting Operating profit1 12.2 14.1 -13% Revenue growth (vs FY 2017) Margin % 2.4% 3.0% -60bps + 21% Mixed-tenure Profit down 13%, impacted by Contracting activities +2% Contracting
Slide 22: Partnership Housing Order Book and Capital Employed
Partnership Housing Order Book £ 327m £m FY 2018 FY 2017 Change Average capital employed1 Down 37% from FY 2017 115.0 99.7 +£15.3m Reflects lower bidding activity (last 12 months) Capital employed1 at period end 106.6 88.0 +£18.6m Capital employed increased as planned Regeneration Pipeline £ 708 m ›
Slide 23: Urban Regeneration
Urban Regeneration £89m Capital employed at year end £m FY 2018 FY 2017 Change includes £8.6m of non-recourse debt Revenue 185 175 +6% Operating profit1 Average capital employed 2 19.6 108.8 10.0 88.5 +96% +£20.3m £ 109m (last 12 months) Average capital employed LTM 2 Capital employed at period end
Slide 24: Urban Regeneration Pipeline
Urban Regeneration Pipeline › Regeneration & development pipeline down 5% to £2.0bn Retail › Preferred bidder on c£400m Scotland 1% GDV Yorks & 2% NE 16% SE & › London 46% Offices Broad geographic and 29% sector split Good progress Other 2% towards 20% ROCE North West 34% Leisure target expected in
Slide 25: Investments
Investments £m FY 2018 FY 2017 Change £ 437m Operating profit (2.4) 0.5 n/a Regeneration pipeline Average capital employed1 (last 12 months) 40.1 30.7 +£9.4m up 37% from FY 2017 Capital employed1 at period end 37.2 38.6 -£1.4m driven by Herts CC JV Loss in period due to delays in scheme completions
Slide 26: 2018 Summary and Outlook
2018 Summary and Outlook Strong performance in 2018 Further progress expected in 2019 Continued balance sheet strength Average daily net cash for 2019 expected to be at least £70m Total dividend up 18%
Slide 27: Looking Forward
Looking Forward John Morgan
Slide 28: What's important ....
What’s important …. › Strong balance sheets really matter in this market › Attraction and retention of talented people › Quality of our partners and supply chain relationships is fundamental › Delivering social value is increasingly becoming a competitive advantage 28
Slide 29: Construction New opportunities
Construction New opportunities › 75% public sector turnover – largely frameworks › Frameworks now alert to strength of the balance sheet and payment terms › Increased opportunities from new frameworks to penetrate Health & Defence › Work provided by Investments division provides long-term quality wo
Slide 30: Infrastructure Long-term order book
Infrastructure Long-term order book › Specialist sectors serving long-term repeat customers and frameworks › Highest visibility of our Construction operations › Quantified social value of projects is increasingly influencing decision makers › Seeing increased collaboration to drive innovation and in
Slide 31: Fit Out
Fit Out No.1 CLEAR MARKET › Operating in the Group’s least fragmented market LEADER › Now receiving 28% of work from frameworks - up from 17% in 2017 › London office fit out expected to remain strong › Focus on operational excellence and perfect delivery at unmatched scale and pace › Our most mature
Slide 32: Property Services
Property Services 1bn ORDER BOOK1 › Size of market remains predictable › Broad demand for increased investment in existing stock post Grenfell › Operational excellence and experience delivering social value programs is winning work, beyond price › Well-positioned to meet trend towards long-term inte
Slide 33: Partnership Housing Recovery & growth prospects
Partnership Housing Recovery & growth prospects › Returns will significantly benefit from new management delivering at merely sector norm levels › Affordable housing supply deficit driving demand › Target market is high on the agenda of all political parties › Increased Housing Association interest
Slide 34: Urban Regeneration Long-term visibility
Long- Urban Regeneration term visibility › Long-term visibility of schemes spread regionally across the UK › Five-year plan assumes no income from partnership agreements not signed today › Well-positioned for regional growth in the North and Midlands › Robust partnership residual land value model pr
Slide 35: Investments Long-term multi-site property
Investments Long-term multi-site property JVs › Important for all other group companies › Investing in winning more partnerships › Expect business to be more significant in the medium term › New MD from Urban Regeneration 35
Slide 36: Summary....
Summary…. › Plenty of growth in existing businesses › Organic growth strategy › Keeping up positive momentum › Annual average daily net cash for foreseeable future 36
Slide 37: Questions?
Questions ? MORGAN SINDALL GROUP
Slide 38: Appendices
Appendices
Slide 39: Net Finance Expense
Net Finance Expense £m FY 2018 FY 2017 Interest payable on project finance & other debt (2.0) (0.9) Amortisation of fees & non-utilisation fees (2.0) (2.6) Interest expense on lease liabilities (IFRS 16) (1.4) (0.1) Interest from JVs 1.4 1.3 Other 0.1 (0.2) Total (3.9) (2.5) 39
Slide 40: Tax
Tax £m FY 2018 FY 2017 Profit before tax 80.6 64.9 Less: share of net JV profit1 (5.2) (4.1) Profit subject to tax 75.4 60.8 Statutory tax rate 19.00% 19.25% Current tax charge at statutory rate (14.3) (11.7) Other adjustments 0.5 (0.8) Tax charge (13.8) (12.5) 1 Certain of the Group’s joint venture
Slide 41: Adjusted Earnings per Share
Adjusted Earnings per Share £m FY 2018 FY 2017 Profit after tax and minority interest 66.8 52.4 Adjusted for: Amortisation of intangibles (net of tax) 0.9 1.0 Adjusted earnings 67.7 53.4 Average number of shares 44.6m 44.1m Adjusted earnings per share 151.8p 121.1p 41
Slide 42: Capital Employed in Regeneration
Capital Employed in Regeneration £m Regeneration Partnership Housing Urban Regeneration Total net land & regeneration WIP 267 214 53 Unsold completed units (excl. joint ventures) 26 7 19 Amounts invested in joint ventures 49 6 43 Shared equity loans and investment properties 19 19 - Other working ca
Slide 43: Urban Regeneration Pipeline
Urban Regeneration Pipeline Expected flow of turnover and profit from top projects (by GDV of schemes) £ GDV Project 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028+ (100%) £550m ECF Salford £330m ECF Canning Town £260m Lewisham £200m Waterside Places Hale Wharf
Slide 44: IFRS 15
IFRS 15 Areas of difference for Group: Recognition of uncertain revenue: ‘probable’ vs ‘highly probable’ (Construction, Infrastructure, Partnership Housing) › Formalised tests to meet higher threshold Recognition of revenue for forward-sold, pre-let developments (Urban Regeneration) › Move from ‘ris
Slide 45: IFRS 15 Adjustment to Opening Reserves in 2018
IFRS 15 Adjustment to Opening Reserves in 2018 Adjustment at £m 1 Jan 2018 Recognition of uncertain revenue (£9m) Recognition of revenue for forward-sold, pre-let developments £1m Costs of fulfilment (£4m) Tax effect of the above £2m (Decrease) in opening equity (£10m) 45
Slide 46: IFRS 16
IFRS 16 ‘IFRS 16 Leases’ adopted a year early to align with implementation of IFRS 15 Requires all leases to be recognised on the balance sheet as a right of use asset with a corresponding lease liability › Mainly relates to property leases Balance sheet impact on 1 January is an increase in assets