Morgan Sindall Group plc · LSE:MGNS
Morgan Sindall — H1 2020 Earnings Presentation
45 slides from Morgan Sindall's earnings presentation, Aug 5, 2020
Slide 1: Half Year Results
Half Year Results To 30 June 2020 5 August 2020
Slide 2: Agenda
Agenda Introduction – John Morgan Financial & Operational Review – Steve Crummett Outlook – John Morgan 2
Slide 3: Introduction
Introduction • Period dominated by COVID-19 pandemic • Thank you to all our people and partners for professionalism and dedication throughout the period • Adapting to new ways of working, with health and wellbeing of all being overriding priority • Group has demonstrated its resilience and high qual
Slide 4: Financial & Operational Review
Financial & Operational Review Steve Crummett
Slide 5: Summary income statement
Summary income statement £m HY 2020 % change Revenue Jan/Feb +26% Q1 +17% Revenue 1,363 -4% April - 35% Q2 - 23% Operating profit1 18.1 -52% Operating margin1 1.3% -130bp Impact of C-19 taken in Profit before tax1 15.7 -57% operating results Earnings per share1 27.4p -57% No exceptional charges Inte
Slide 6: Main areas of impact of C-19
Main areas of impact of C-19 • Direct costs related to lockdown period. Closure and re-mobilisation • Lower levels of operating efficiency and productivity from phased return and social distancing measures • Prolongation of contract periods due to lock-down • Delayed sales completions during lock-do
Slide 7: Summary by division
Summary by division Operating £m Revenue Operating Margin1 Profit/(Loss)1 HY 2020 % HY 2020 % HY 2020 bps Construction & Infrastructure 789 +16% 11.5 -17% 1.5% -50bps Fit Out 317 -22% 10.9 -34% 3.4% -60bps Property Services 53 -4% (0.5) -131% -0.9% -380bps Partnership Housing 165 -31% 3.0 -53% 1.8%
Slide 8: Balance Sheet & Cash
Balance Sheet & Cash MORGAN SINDALL GROUP
Slide 9: Cash Flow – Half Year
Cash Flow – Half Year 11.7 (9.8) (42.1) £ 15.3m Operating cash outflow (24.3) 18.1 › Working capital movement of £42m 192.7 (17.8) Increase in Inventories 15 6.8 (14.3) Decrease in Receivables (51) Decrease in Payables 78 (0.0) (17.0) 146.1 Total 42 › Final dividend cancelled (c£17m) FY 2019 Operati
Slide 10: Daily Net Cash Balance
Daily Net Cash Balance Average daily net cash (HY 2019: £123m) £ 153m 250 HY 2020 MAX: £215m £m 200 Includes the benefit of deferrals of PAYE, VAT, etc impacting average in 150 period by c£22m 100 Only deferral into H2 and beyond 50 HY 2020 MIN: is c£21m of VAT payments for £86m March 2021 £0 - 1 Ja
Slide 11: Paying the supply chain through C-19
Paying the supply chain through C-19 Average time Invoices not Invoices paid Prompt payment to supply 6m to 30 June 2020 to pay paid within within 60 invoices agreed terms days chain is of strategic importance to the Group Construction & 27 days 12% 98% Infrastructure • Material improvement in 5 day
Slide 12: Balance Sheet
Balance Sheet £m HY HY 2020 2019 • Strong balance sheet Intangibles 222.1 216.8 Net cash and significant undrawn PP&E 72.9 71.7 committed facilities Investments (including JVs) 98.1 84.9 Shared equity loan receivables 6.9 11.0 • Tangible net assets of £181m Net working capital1 (49.8) (37.1) Current
Slide 13: Divisional performances
Divisional performances MORGAN SINDALL GROUP
Slide 14: Construction & Infrastructure - C-19 operational impact
Construction & Infrastructure - C-19 operational impact At ‘peak’ of C-19 At 30 June 2020 31 July 2020 % of sites open % of sites open % of sites open % of sites % productivity of sites % productivity of sites by number by value by number open by value compared to pre-COVID compared to pre-COVID Con
Slide 15: Construction & Infrastructure
Revenue split (by activity) Construction & Infrastructure 37% Construction £m HY 2020 Change 63% Infrastructure Revenue 789 +16% Operating profit 11.5 -17% Revenue growth (vs HY 2019) 2 Margin % 1.5% -50bps + % Construction (at £290m) Contrasting performances +26% Infrastructure (at £499m) › Infrast
Slide 16: Fit Out - C-19 operational impact
Fit Out - C-19 operational impact At ‘peak’ of C-19 At 30 June 2020 31 July 2020 % of sites open % of sites open % of sites open % of sites % productivity of sites % productivity of sites by number by value by number open by value compared to pre-COVID compared to pre-COVID Construction 69% 85% 100%
Slide 17: Fit Out
Fit Out Revenue split £m HY 2020 Change 80% London Revenue 317 -22% 20% Other Regions Operating profit 10.9 -34% Margin % 3.4% -60bps 88% Traditional Fit Out Resilient performance reflects the high quality of business 12% ‘Design & Build’ Margin robust at 3.4% › Market leading position › Strong proj
Slide 18: Property Services - C-19 operational impact
Property Services - C-19 operational impact At ‘peak’ of C-19 At 30 June 2020 31 July 2020 % of sites open % of sites open % of sites open % of sites % productivity of sites % productivity of sites by number by value by number open by value compared to pre-COVID compared to pre-COVID Construction 69
Slide 19: Property Services
Property Services £m HY 2020 Change Strong revenue ‘run rate’ at the start of the Revenue 53 -4% year Operating profit1 (0.5) -131% › YTD volumes 37% higher at the end of February (vs YTD February 2019) Margin % -0.9% -380bps › Geared up accordingly for this level of volume in year C-19 reduced the
Slide 20: Partnership Housing - C-19 operational impact
Partnership Housing - C-19 operational impact At ‘peak’ of C-19 At 30 June 2020 31 July 2020 % of sites open % of sites open % of sites open % of sites % productivity of sites % productivity of sites by number by value by number open by value compared to pre-COVID compared to pre-COVID Construction
Slide 21: Partnership Housing
Revenue growth (vs HY 2019) Partnership Housing - 15% Mixed-tenure (at £89m) £m HY 2020 Change - 43% Contracting (at £76m) Revenue 165 -31% Operating profit Margin % 3.0 1.8% -53% -90bps £ 154m Capital employed1 at period end 152m Second quarter revenue down 60% on prior year › vs Q1 revenue 11% ahe
Slide 22: Urban Regeneration - C-19 operational impact
Urban Regeneration - C-19 operational impact At ‘peak’ of C-19 At 30 June 2020 31 July 2020 % of sites open % of sites open % of sites open % of sites % productivity of sites % productivity of sites by number by value by number open by value compared to pre-COVID compared to pre-COVID Construction 6
Slide 23: Urban Regeneration
Urban Regeneration £ 117m Capital employed1 at period end £m HY 2020 Change 110m Revenue 35 -20% 2.1 -75% £ Operating profit Average capital1 employed LTM Delayed construction on development sites. Lower development fees 12% But positive progress with current portfolio, albeit slower than expected R
Slide 24: Investments - C-19 operational impact
Investments - C-19 operational impact At ‘peak’ of C-19 At 30 June 2020 31 July 2020 % of sites open % of sites open % of sites open % of sites % productivity of sites % productivity of sites by number by value by number open by value compared to pre-COVID compared to pre-COVID Construction 69% 85%
Slide 25: Investments
Investments £m HY 2020 HY 2019 Change Operating loss1 (3.2) (0.9) n/a General delays to construction activity on existing schemes and delays in achieving financial close on new schemes as investment decisions deferred Working with other Group companies on several schemes in partnership with local au
Slide 26: C-19 operational impact – by division
C-19 operational impact – by division At ‘peak’ of C-19 At 30 June 2020 31 July 2020 % of sites open % of sites open % of sites open % of sites % productivity of sites % productivity of sites by number by value by number open by value compared to pre-COVID compared to pre-COVID Construction 69% 85%
Slide 27: Furlough
Furlough • Group accessed the CJRS. At ‘peak’ of C-19, c1,900 employees placed on furlough across the Group • As at start of August, c200 still on furlough. Mainly in Property Services and Infrastructure • Results reflect benefit of £9.3m of furlough in HY • Financial position has remained strong an
Slide 28: HY Summary
HY Summary Strong Q1, revenue up 17%. Thereafter, significantly impacted by C-19 Most sites across the Group now operational again Strengthened balance sheet. Substantial net cash balance throughout period Average daily net cash for FY 2020 expected to be well in excess of £100m Intention to repay a
Slide 29: Outlook
Outlook John Morgan MORGAN SINDALL GROUP
Slide 30: Group Strategy
Group Strategy Organic growth Long-term workstreams No change expected to business segments Making our businesses better for all stakeholders Average daily net cash for foreseeable future 30
Slide 31: Secured Workload
Secured Workload +5% on FY 2019 £ 8.0bn Total securedworkload £ 3.9bn Construction +6% on FY 2019 4.1bn Regeneration £ +3% on FY 2019 › Includes Construction & Infrastructure, Fit Out, › Includes Partnership Housing, Urban Regeneration, Property Services Investments › No compromise on quality of wor
Slide 32: Construction
Construction Market • Delays in converting projects into contract conditions • Concerns over local authority funding • Order book of £554m, up 8% from year end • c80% public sector focused Order book • Long term in nature, with 42% for 2021 and beyond • Continued focus on quality. 99% derived from n
Slide 33: Infrastructure
Infrastructure • Market generally strong with the exception of aviation Market • Lots of activity in roads, rail, energy conditions • Current activity limited at Sellafield • Order book of £1,994m, up 13% from year end Order book • > 90% derived from frameworks • Long term visibility of work. 58% of
Slide 34: Fit Out
Fit Out • Market remains robust Market • Strong level of enquiries at present conditions • Several large pre-lets completing in the next couple of years • Average size of job c£2m • Order book of £466m, 3% lower than FY 2019 but level with HY 2019 Order book • £318m of which is for H2 2020 › Similar
Slide 35: Property Services
Property Services • Many opportunities to bid for. Key is maintaining selectivity Market • Clients increasingly demanding more sophisticated solutions resulting in conditions greater barriers to entry • Expect market to get less fragmented • Order book of £867m. > £700m for 2022 and beyond Order boo
Slide 36: Partnership Housing
Partnership Housing • Strong government support for affordable housing • High level of appetite from Housing Associations and Local Market Authorities for partnership approach conditions • Size of individual partnership opportunities generally increasing • Open market sales currently strong. Pricing
Slide 37: Urban Regeneration
Urban Regeneration • Government policies geared towards Regeneration Market • Decision-making generally slow and cautious by landowners and investors conditions • Viability and returns from existing schemes under pressure. But two recent forward-funded deals provide confidence • Regeneration is a lo
Slide 38: Summary
Summary Size and quality of order book gives us confidence for 2021 onwards Strong balance sheet allows us to make the right long-term decisions A weaker economy will have some impact on our business Expect to increase market share in the areas we operate in Reinstating guidance for 2020 • Profit be
Slide 39: Questions?
Questions? MORGAN SINDALL GROUP
Slide 40: Appendices
Appendices MORGAN SINDALL GROUP
Slide 41: Net Finance Expense
Net Finance Expense £m HY 2020 HY 2019 Interest payable on drawings on bank facilities (1.1) - Higher interest Amortisation of fees & non-utilisation fees (0.5) (0.8) charge due to precautionary Interest expense on lease liabilities (IFRS 16) (0.8) (0.8) initial drawing Interest from JVs 0.2 0.5 on
Slide 42: Tax
Tax £m HY 2020 HY 2019 Profit before tax 13.6 35.5 Less: share of net JV losses/(profits) 1 0.3 (0.2) Profit subject to tax 13.9 35.3 Statutory tax rate 19.0% 19.0% Current tax charge at statutory rate (2.6) (6.7) Other adjustments (0.3) (0.5) Tax charge (2.9) (7.2) 1 Most of the Group's joint ventu
Slide 43: Adjusted Earnings per Share
Adjusted Earnings per Share £m HY 2020 HY 2019 Profit after tax and minority interest 10.7 28.3 Adjusted for: Amortisation of intangibles (net of tax) 1.7 0.6 Adjusted earnings 12.4 28.9 Average number of shares 45.2m 45.0m Adjusted earnings per share 27.4p 64.2p 43
Slide 44: Cash Flow – Last twelve months
Cash Flow – Last twelve months 21.5 (28.3) 12.6 (21.3) £ 94.7m Operating cash outflow 128% 15.2 16.5 Cash 73.7 (9.5) Conversion (3.9) (31.7) 146.1 113.9 HY 2019 Operating Non-cash Net capital Working Other Other Tax and net Dividends Other4 HY 2020 profit1 adjustments2 expenditure capital in working
Slide 45: Capital Employed in Regeneration
Capital Employed in Regeneration £m Regeneration Partnership Housing Urban Regeneration Total net land & regeneration WIP 306 233 73 Unsold completed units (excl. joint ventures) 22 19 3 Amounts invested in joint ventures 67 19 48 Shared equity loans and investment properties 11 11 - Other working c