Morgan Sindall Group Plc · LSE:MGNS
Morgan Sindall — FY2011 Earnings Presentation
36 slides from Morgan Sindall's earnings presentation, Feb 21, 2012
Slide 1: 2011 Preliminary Results
Morgan Sindall Group plc Constructing and Regenerating 2011 Preliminary Results @morgansindall 21 February 2012 morgansindall.com
Slide 2: John Morgan, Executive Chairman
John Morgan Executive Chairman
Slide 3: 2011 performance
2011 performance • Results across the Group in line with expectations – Revenue of £2,227m (2010: £2,102m), normalised profit of £45.3m (2010: £51.3m) – EPS of 82.5p (2010: 92.9p), total dividend unchanged of 42.0p (2010: 42.0p); cover of 2.0x • Group margin at 2% • Financially strong and investing
Slide 4: Business environment
Business environment • Environment remains challenging; medium-term outlook more promising • Construction and Infrastructure – Continued competitive environment – Public sector shrinking and growth opportunities in infrastructure sectors of power distribution, road, rail and airports – Commercial re
Slide 5: Strategic objectives & delivery
Strategic objectives & delivery • Further develop construction • Growth in revenues in 2011; growing market position market shares – Focus on complex projects • 70% public exposure in 2009 to 50% – Reduce public sector exposure – Grow infrastructure exposure in 2011; expect to reduce by further 5% i
Slide 6: Growing regeneration
Growing regeneration What is regeneration? • Working in long-term partnerships with our clients to use their land and property assets to achieve large-scale social and economic renewal • Usually a complex scheme delivered in joint venture, typically using publicly- owned land currently in sub-optima
Slide 7: Growing regeneration: what drives regeneration
Growing regeneration What drives regeneration? • General – £17bn of land and assets suitable for development held by public sector – Government land and disposal strategy; land is key to promoting economic growth, housing delivery and community action – Mixed-use developments allow cross-subsidy of
Slide 8: Urban Regeneration and Investments pipeline
Urban Regeneration and Investments pipeline £m 500 450 400 350 300 250 200 150 100 50 0 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021+ Urban Regeneration £1.6bn Investments £0.2bn Preferred bidder £0.6bn • £2.4bn (2010: £1.4bn) regeneration pipeline incl. preferred bidder • 33% offices, 30% ligh
Slide 9: Forward order book
Forward order book £m 1600 1400 • £3.4bn forward order book 1200 • 67% covered for next 12 months 1000 • 26% of order book in frameworks 800 600 400 200 0 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021+ Construction and Infrastructure Fit Out Affordable Housing 9
Slide 10: David Mulligan, Finance Director
David Mulligan Finance Director
Slide 11: Results in line with expectations
Results in line with expectations £m 2011 2010 Change Revenue 2,227 2,102 +6% Adjusted operating profit 46.1 52.4 -12% Adjusted profit before tax 45.3 51.3 -12% Non-recurring items (1.4) (5.1) Amortisation (3.9) (5.5) Profit before tax 40.0 40.7 -2% Adjusted earnings per share 82.5p 92.9p -11% Total
Slide 12: Segmental analysis
Segmental analysis £m December 2011 December 2010 Revenue Profit Margin Revenue Profit Margin Construction and Infrastructure 1,268 21.1 1.7% 1,250 26.9 2.2% Fit Out 438 12.4 2.8% 415 14.8 3.6% Affordable Housing 462 18.5 4.0% 387 16.1 4.2% Urban Regeneration 57 3.9 6.8% 46 2.0 4.3% Investments 2 (3
Slide 13: Tax
Tax £m Year ended Year ended December 2011 December 2010 Current tax UK tax 10.0 11.7 Prior period adjustment (25.1) (1.4) Current tax expense (15.1) 10.3 Deferred tax Current year (1.0) 0.1 Prior period adjustment 23.3 0.5 Deferred tax expense 22.3 0.6 Income tax expense 7.2 10.9 • Successfully set
Slide 14: Balance sheet
Balance sheet £m December 2011 December 2010 YOY Movement Intangible FA 226.6 230.9 -4.3 Tangible FA 21.6 27.8 -6.2 Investments (incl. joint ventures) 61.3 49.8 +11.5 Shared equity loan receivables 17.6 13.9 +3.7 Inventories 146.0 141.1 +4.9 Other working capital (316.6) (361.1) +44.5 Current and de
Slide 15: Cashflow
Cashflow £m Year to Year to December 2011 December 2010 Profit from operations 40.8 41.8 Non-cash and other adjustments 7.8 3.7 Working capital movement (51.6) 53.7 Net investment in PPE (0.8) (1.7) Income tax (6.8) (6.4) Dividends (17.8) (17.8) Interest (0.6) (0.3) Payment for acquisitions/JVs (6.7
Slide 16: Paul Smith, Chief Executive
MORGAN SINDALL Paul Smith Chief Executive
Slide 17: Market overview
Market overview 2011 Market sectors Trend est. £bn Construction and Infrastructure 13.4 Infrastructure Private Industrial & Commercial 26.7 Public Non-Residential 12.9 Urban Regeneration Private Housing 13.7 Public Housing (incl. R&M) 10.4 Affordable Housing Private Housing R&M 10.4 Public Non-Resid
Slide 18: Construction and Infrastructure
Construction and Infrastructure
Slide 19: Construction and Infrastructure Market & Trading Highlights
Construction and Infrastructure Market & Trading Highlights Revenue Adjusted Operating Profit 2011 2010 Change 2011 2010 Change £1,268m £1,250m +1% £21.1m £26.9m -22% • Construction revenue £747m (2010: £737m) and Infrastructure revenue £521m (2010: £513m) • Margin as expected at 1.7% (2010: 2.2%) d
Slide 20: Construction and Infrastructure Outlook
Construction and Infrastructure Outlook • Market will remain highly competitive for foreseeable future • Minimise margin pressure by – Further improvements in Perfect Delivery quality programme – Tight control on costs – Continued contract selectivity • Target further growth in infrastructure sector
Slide 21: Fit Out
MORGAN SINDALL Fit Out SLoverbury Morgan Lovell Inspiring office transformation
Slide 22: Fit Out Market & Trading Highlights
Fit Out Market & Trading Highlights Revenue Operating Profit 2011 2010 Change 2011 2010 Change £438m £415m +6% £12.4m £14.8m -16% • Grown market share in tightening market • Fiercely competitive market with margin tighter at 2.8% (2010: 3.6%) • Success with international banks investing into London
Slide 23: Fit Out Outlook
Fit Out Outlook • Recovery likely to be slower than previously expected • Higher proportion of refurbishment work • Continue to broaden sector spread • London office market constrained in near-term • Over 1m sq ft of new London office space due onto market in 2013 and 2014 albeit level of take-up un
Slide 24: Affordable Housing
MORGAN SINDALL Affordable Housing LOVELL
Slide 25: Affordable Housing Market & Trading Highlights
Affordable Housing Market & Trading Highlights Revenue Adjusted Operating Profit 2011 2010 Change 2011 2010 Change £462m £387m +19% £18.5m £16.1m +15% • Growth in revenue and profit from full year impact of Connaught acquisition • Margin at 4.0% (2010: 4.2%) • Sold 332 open market units (2010: 338)
Slide 26: Affordable Housing Market Sectors
Affordable Housing Market Sectors 2009 2010 2011 102 130 171 162 185 204 68 47 47 25 82 Revenue £374m £387m £462m Planned Maintenance Response Maintenance Open Market New Building Social Housing 26
Slide 27: Affordable Housing Outlook
Affordable Housing Outlook • Alternative funding models emerging with HRA reform; bond finance, institutional funding and affordable rent rather than grant • More land-swap projects to overcome lack of grant funding; increasing use of cross-subsidy • Invest in and grow mixed-tenure regeneration • Gr
Slide 28: Urban Regeneration
MORGAN Urban Regeneration
Slide 29: Urban Regeneration Market & Trading Highlights
Urban Regeneration Market & Trading Highlights Revenue Adjusted Operating Profit 2011 2010 Change 2011 2010 Change £57m £46m +24% £3.9m £2.0m +95% • Activity increasing with profit almost doubling • On site with £100m of construction work • North Shore development at Stockton; commenced first phase
Slide 30: Urban Regeneration Outlook
Urban Regeneration Outlook • Increasing importance of regeneration; land release rather than grants will drive economic revival • Quality of portfolio of 30 development agreements remains excellent • Invest in working capital to drive medium-term growth • Expect further growth in 2012 and beyond • T
Slide 31: Investments
MORGAN SINDALL Investments MORGANSASIN DALL INVESTMENTS
Slide 32: Investments Market & Trading Highlights
Investments Market & Trading Highlights £m 2011 2010 Invested to date 19.1 14.6 Directors’ portfolio valuation at discount rates (7-9%) 49.3 40.5 Committed but not invested 10.4 12.0 Current carrying value 23.2 17.7 • Operating cost £5.5m (2010: cost of £4.1m) and income from JVs £1.6m (2010: £0.8m)
Slide 33: Investments Outlook
Investments Outlook • Awaiting new PFI model • Develop new financing models • Funding allocated for schools • Further land-swap regeneration opportunities; capitalise on joined-up skills of the Group given size and complexity • Begin to realise maturing investments; recent sale of DESPI for £3.8m 33
Slide 34: Key takeaways
Key takeaways • Market challenges remain and will continue to impact the year ahead • Group positioned to maximise opportunities in growth sectors • Continue to respond to market opportunities – Closely monitor cost base – Broaden and deepen our capabilities – Integrated approach to complex projects
Slide 35: Notes
Notes MORGAN SINDALL
Slide 36: Morgan Sindall Group plc contact details
Morgan Sindall Group plc, Kent House, 14-17 Market Place, London W1W 8AJ Tel: 020 7307 9200 enquiries@morgansindall.com @morgansindall 36 morgansindall.com