Morgan Sindall Group plc · LSE:MGNS
Morgan Sindall — H1 2017 Earnings Presentation
46 slides from Morgan Sindall's earnings presentation, Aug 8, 2017
Slide 1: Half year results to 30 June 2017
Half year results to 30 June 2017 Morgan Sindall Group plc 8 August 2017
Slide 2: Agenda
Agenda • Introduction John Morgan • HY 2017 Financial and Operational Review Steve Crummett • Fit Out John Morgan 2
Slide 3: Summary
Summary 1 Strong revenue, profit and cash performance in H1 2 Clear strategy based on self-help and organic growth 3 Aligned to growth markets of affordable housing and mixed-use regeneration 4 Strength of balance sheet provides flexibility to invest in the business 4 5 Positive momentum across Grou
Slide 4: HY 2017 Financial and Operational Review
HY 2017 Financial and Operational Review Steve Crummett 4
Slide 5: Highlights
Highlights • Strong profit growth in H1. PBT up 47% • Daily average net cash of £132m • High quality and growing order book; up 5% since year end to £3.8bn • Trading statement released on 19 July confirmed confidence in the FY • 23% increase in interim dividend 5
Slide 6: Summary income statement
Summary income statement £m HY 2017 HY 2016 % change Revenue 1,307 1,148 +14% Operating profit1 24.9 18.2 +37% Operating margin1 1.9% 1.6% +30bps Profit before tax1 23.7 16.1 +47% Earnings per share1 43.6p 29.8p +46% Interim dividend per share 16.0p 13.0p +23% 1 Before intangible amortisation of £0.
Slide 7: Divisional performance
Divisional performance £m Revenue Operating Operating Profit1 Margin1 HY 2017 % HY 2017 % HY 2017 bps Construction & Infrastructure 694 +13% 7.6 +138% 1.1% +60bps Fit Out 339 +15% 14.6 +27% 4.3% +40bps Property Services 31 +15% 0.3 +200% 1.0% +60bps Partnership Housing 200 +9% 5.5 +20% 2.8% +30bps U
Slide 8: Cash flow – six months to June 2017
Cash flow – six months to June 2017 24.9 2.2 (1.7) (116.8) • Cash flow reflects the usual working £m (86.5) (96.3) capital movements from year end 0 includes investment in regeneration schemes of £57m from low year end position no change to pattern of receivables 4.9 or payables (3.5) (6.3) fu
Slide 9: Cash flow – last 12 months
Cash flow – last 12 months 9.2 109.1 (4.4) (9.5) • Last 12 month period more 95.2 representative 43.0 £m • Operating cash inflow of £109m 5.2 (3.8) 55.5 • Cash-backed profits with working capital improvement of £43m 0 Operating Non-cash Net capex & Working Other 3 Operating Net interest Tax Free cas
Slide 10: Net cash movements – 6m to June 2017
Net cash movements – 6m to June 2017 208.7 (96.3) • Period end net cash of £97m • Average daily net cash of £132m £m vs HY 2016 average debt of £24m (9.7) (5.6) • FY expected to show average daily net cash in 97.1 excess of £75m • New bank facilities of £180m in place until 2022 previous facilit
Slide 11: Summary balance sheet
Summary balance sheet £m HY 2017 HY 2016 • Net cash and significant Intangibles 216.4 216.8 undrawn committed facilities PP&E 15.5 19.8 • No pension issues Investments (incl JVs) 70.1 56.1 Shared equity loan receivables 16.9 19.6 Net working capital (86.8) (43.8) Current and deferred tax (17.5) (18.
Slide 12: Order book
Order book £3,801m • Group committed order book up 5% to £3.8bn projects only included in order book £3,637m when signed contract or letter of intent does not include preferred bidder or 39% ‘prospectives’ 32% 29% increase driven by Fit Out and Infrastructure 68% for 2018 and beyond FY 16 HY
Slide 13: Regeneration & development pipeline
Regeneration & development pipeline £3,283m • Group regeneration & development £3,210m pipeline up 2% at £3.3bn relevant to Regeneration businesses 78% only includes secured schemes (no preferred bidder or ‘prospectives’) our share of Gross Development Value of schemes as an example, include
Slide 14: Divisional Performances
MORGAN eS =| SINDALL GROUP Divisional Performances
Slide 15: Construction & Infrastructure
Construction & Infrastructure £m HY 2017 HY 2016 change Revenue 694 612 +13% Operating profit1 7.6 3.2 +138% Margin % 1.1% 0.5% +60bps • Revenue mix between Construction and Infrastructure activities broadly unchanged Construction 59% of revenue, Infrastructure 41% Good revenue growth from both
Slide 16: Order Book – Construction & Infrastructure
Construction & Infrastructure £2,029m • Divisional order book up 8% to £2,029m £1,886m Order Book £529m • Growth driven by Infrastructure: significant £590m contract wins with order book up 16% to £1,500m c50% for 2019 and beyond £1,500m Infrastructure • Construction order book down 10% Constructi
Slide 17: Fit Out
Fit Out £m HY 2017 HY 2016 change Revenue 339 294 +15% Operating profit1 14.6 11.5 +27% Margin % 4.3% 3.9% +40bps • Another excellent performance revenue up 15%, operating profit up 27%, margin up to 4.3% • No significant changes to geographic or sector mix or type of work • Record order book at £
Slide 18: Property Services
Property Services £m HY 2017 HY 2016 change Revenue 31 27 +15% Operating profit1 0.3 0.1 +200% Margin % 1.0% 0.4% +60bps • New business beginning to drive performance • Margin diluted in H1 as new contracts slower to commence • Activity expected to increase in H2 • Order book up 3% to £705m 1 Adjust
Slide 19: Partnership Housing
Partnership Housing £m HY 2017 HY 2016 change Revenue 200 183 +9% Operating profit1 5.5 4.6 +20% Margin % 2.8% 2.5% +30bps Capital employed2 at period end 102.4 119.2 -14% LTM average capital employed2 94.6 126.4 -25% • Revenue growth driven by Contracting activities, up 34% to £142m • Completions i
Slide 20: Urban Regeneration
Urban Regeneration £m HY 2017 HY 2016 change Revenue 71 40 +78% Operating profit1 2.0 4.6 -57% Capital employed2 at period end 88.7 75.2 +18% LTM average capital employed2 79.4 84.1 -6% • Lower profit as expected due to timing of scheme completions completions weighted towards H2 • Capital employe
Slide 21: Investments
Investments £m HY 2017 HY 2016 change Operating profit/(loss)1 0.6 (0.8) n/a • Primarily secures work for other divisions in the Group £63m of construction and regeneration work sourced by Investments delivered across the Group further £61m secured for future delivery work delivered mainly thr
Slide 22: Summary & Outlook for remainder of 2017
Summary & Outlook for remainder of 2017 • Strong performance in H1 • Further progress expected in H2 current operational performance and order book visibility in Fit Out further margin improvement in Construction & Infrastructure second half weighting to scheme completions in Partnership Housi
Slide 23: Fit Out
MORGAN SINDALL GROUP Fit Out John Morgan
Slide 24: Fit Out today
Fit Out today HY 2017 HY 2016 FY 2016 £101m £105m Revenue £339m £294m £634m Cumulative Operating operating profit cash generated Operating profit £14.6m £11.5m £27.5m 2011 - 2016 2011 - 2016 Margin 4.3% 3.9% 4.3% Design & Build Outside London 19% fitted out in 35% London the last five years 65% £568
Slide 25: Work by sector
Work by sector Energy FY 2016 Higher FMCG 1% Education 3% • Commercial Office sector accounted for IT and 6% technology 86% of revenue in FY 2016 (83% in HY Legal 4% Financial 2017) 5% Services Other 40% 40% in Financial Services 1% Chems, pharmaceutical • Higher Education is an important sector a
Slide 26: This is what we do: Schroders, One London Wall
This is what we do Schroders, One London Wall, London Computer Generated Images of proposed scheme 45 weeks : 315,000 sq ft : 01/03/2017 - 12/01/2018 26
Slide 27: This is what we do: Bristol City Council
This is what we do Bristol City Council, Bristol BEFORE AFTER 43 weeks : £16.2m : 150,000 sq ft : 06/07/2015 – 27/05/2016 27
Slide 28: This is what we do: BBC
This is what we do BBC 114 projects : £121m : 2007 - present 28
Slide 29: This is what we do: King's College London
This is what we do King’s College London, West Wing 27 weeks : £2m : 9,063 sq ft : 07/12/2015 – 10/06/2016 29
Slide 30: This is what we do: Columbia Threadneedle
This is what we do Columbia Threadneedle BEFORE AFTER AFTER 130 projects : £160m : 2008 - present 30
Slide 31: What we do
What we do • Morgan Lovell formed 1977 Design & • Overbury acquired in 1985 Build 19% • Routes to market Overbury – work through clients’ professional teams Mixed tenure Contracting Morgan Lovell – works directly with end users 47% 53% • FY 2016, 82% of revenue was from fit out of Traditional fi
Slide 32: How we do it
How we do it Design and Build Traditional Client Client Project Manager Architect M&E Manager Cost Consultant IT Consultant Supply Chain Supply Chain Accountable for design, specifications and build Responsible for delivery of construction 32
Slide 33: Who we do it with
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Slide 34: Order book strengthened and lengthened
Order book strengthened… … and lengthened £568m HY Order Book and FY EBIT £568m Order Book Tail £325m £373m £162m £230m £223m £61m £201m £132m £13m £136m £7m FY EBIT HY Order Book • Order book cover increased despite significant increase in revenue • Order book cover increased from 3.6 months to 8.6
Slide 35: Fit Out: Looking ahead
MORGAN eS =| SINDALL GROUP Fit Out Looking ahead
Slide 36: Market drivers
Market drivers • London new build office completions and lease break activity • Increased investment by universities into facilities to attract students • Central government moving jobs to the regions (£1bn GPU Framework) • Occupiers moving back office operations to regions, particularly financial a
Slide 37: Future success factors
Future success factors • Nurturing frameworks to secure access to healthy pipeline of public sector work • Further penetration in the Higher Education market £2.5bn capital expenditure planned of which 56% is refurbishment (current work from Fit Out c£100m) • Maximising benefits of our strong regi
Slide 38: London activity and commercial offices
London activity and commercial offices • Lease breaks - 40.4m sq ft of London office space is subject to a lease event between 2017 - 2023 representing 22% of all occupied floorspace in London, 1 with more than 2,000 individual buildings impacted a 9% increase over the previous time period 2011
Slide 39: Growth in the medium term
Growth in the medium term • Medium-term target of £25m – £30m profit per annum • 2017 – expected to be well in excess • Growth in regions • London market still strong 39
Slide 40: Summary & Outlook for remainder of 2017
Summary & Outlook for remainder of 2017 • Strong performance in H1 • Further progress expected in H2 current operational performance and order book visibility in Fit Out further margin improvement in Construction & Infrastructure second half weighting to scheme completions in Partnership Housi
Slide 41: Questions
MORGAN eS =| SINDALL GROUP Questions Thank you
Slide 42: Appendices
MORGAN eS =| SINDALL GROUP Appendices
Slide 43: Net finance expense
Net finance expense £m HY 2017 HY 2016 Net interest charge on net debt (0.2) (1.1) Amortisation of fees & non-utilisation fees (1.4) (1.0) Interest from JVs 0.6 0.4 Other (0.2) (0.4) Total (1.2) (2.1) 43
Slide 44: Tax
Tax £m HY 2017 HY 2016 Profit before tax 23.1 15.4 Less: share of net JV profit1 - (0.7) Profit subject to tax 23.1 14.7 Statutory tax rate 19.25% 20.0% Current tax charge at statutory rate (4.4) (2.9) Other adjustments - - Tax charge (4.4) (2.9) 1 Certain of the Group’s joint ventures are reported
Slide 45: Adjusted earnings per share
Adjusted earnings per share £m HY 2017 HY 2016 Profit after tax and minority interest 18.7 12.5 Adjusted for: Amortisation of intangibles (net of tax) 0.5 0.6 Adjusted earnings 19.2 13.1 Average number of shares 44.0m 43.9m Adjusted earnings per share 43.6p 29.8p 45
Slide 46: Capital Employed in Regeneration
Capital Employed in Regeneration £m Partnership Urban Regeneration Housing Regeneration Total net land & regeneration WIP 252 155 97 Unsold completed units (excl JVs) 4 2 2 Amounts invested in joint ventures 43 3 40 Shared equity loans and investment properties 23 23 - Other working capital -109 -82