Morgan Sindall Group plc · LSE:MGNS
Morgan Sindall — FY2021 Earnings Presentation
46 slides from Morgan Sindall's earnings presentation, Feb 24, 2022
Slide 1: Full Year Results to 31st December 2021
Full Year Results to 31st December 2021 24th February 2022
Slide 2: Agenda
Agenda Introduction | John Morgan Financial & Operational Review | Steve Crummett ESG Update | Steve Crummett Medium-term Targets & Outlook | John Morgan FY Results 2021 2
Slide 3: Introduction
Introduction Record performance. Significantly higher than previous record in 2019 No change to our strategy which continues to deliver Several years hard work making our business better for all stakeholders Medium-term targets upgraded to provide the framework for the next stage of growth
Slide 4: Financial & Operational Review
Financial & Operational Review Steve Crummett
Slide 5: Summary Income Statement
Summary Income Statement Change vs Change vs Adjusted* basis £m FY 2021 FY 2020 FY 2019 FY 2020 FY 2019 Revenue 3,213 3,034 +6% 3,071 +5% Operating profit 131.3 68.5 +92% 93.1 +41% Operating margin 4.1% 2.3% +180bps 3.0% +110bps Net Interest (3.6) (4.6) +£1.0m (2.7) -£0.9m Profit before Tax 127.7 63
Slide 6: Summary by division
Summary by division Operating Operating Revenue Profit/(Loss)1 Margin1 £m vs FY 20 vs FY 19 £m vs FY 20 vs FY 19 % vs FY 20 vs FY 19 Construction & Infrastructure 1,520 -7% +2% 58.1 +63% +80% 3.8% +160bps +160bps Fit Out 795 +14% -5% 44.2 +38% +20% 5.6% +100bps +120bps Property Services 134 +20% +17
Slide 7: Cash flow
Cash flow 29.1 -21.8 131.3 -52.7 Operating cash inflow (FY 2020: inflow £178.7m) £ 117.6m 31.7 117.6 -1.7 -28.3 £m Working capital outflow of £52.7m 87.6 Includes £10.7m reclassification out of payables and into ‘Other’ (provisions) Includes recognition of £22.7m of insurance receivable, offse
Slide 8: Daily net cash balance
Daily net cash balance MAX: £365m MIN: £227m Average daily net cash (FY 2020: £181m) £ 291m Average includes c£39m impact of reverse charge VAT Year end net cash £358m (FY 2020: £333m) includes benefit of £66m from £m 1 Jan 31 Dec reverse charge VAT. Paid end January FY 2022 average daily ne
Slide 9: Payment practices
Payment practices 6m to 31st December 2021 Average time Invoices not Invoices paid Continued progress on most fronts to pay paid within within 60 invoices agreed terms days All divisions now paying over 95% of invoices 25 days 7% 98% within 60 days Construction & Infrastructure 2 days 2% - Imp
Slide 10: Balance Sheet
Balance Sheet £m FY FY 2021 20202 Intangibles 221.9 222.1 PP&E 66.6 65.8 Investments (including JVs) 94.9 94.1 Shared equity loan receivables 1.5 5.5 Net working capital (153.6) (205.5) Current and deferred tax (5.3) (13.5) Net cash 358.0 332.8 Lease liabilities (52.8) (51.0) Other1 (57.0) (30.2) Ne
Slide 11: Secured Workload
Secured Workload 8.6bn £ Group Secured Workload +4% on FY 2020 £ 4.5bn Construction +16% on FY 2020 £ 4.1bn Regeneration -7% on FY 2020 includes Construction & Infrastructure, Fit Out and includes Partnership Housing and Urban Regeneration Property Services no compromise on quality of work sec
Slide 12: Dividend track record
Dividend track record 100 92.0 90 Total 80 Dividend (p per share) 70 61.0 60 53.0 50 45.0 40 35.0 29.0 30 21.0 20 10 0 2015 2016 2017 2018 2019 2020 2021 FY Results 2021 12
Slide 13: Divisional Performances
Divisional Performances
Slide 14: Inflation
Inflation Inflation through most of the year wages, materials, general costs. Plus some material supply issues Managed mainly at a divisional and local site level focused sourcing through preferred supply chain no significant disruption to operations Financial impact mitigated protecti
Slide 15: Construction & Infrastructure
Construction & Infrastructure Construction Infrastructure £m FY 2021 vs FY 20 vs FY 19 +4% -15% Revenue 1,520 -7% +2% Revenue up to £694m Revenue down to £826m Operating profit 58.1 +63% +80% 46% of divisional total 54% of divisional total Operating margin (%) 3.8% +160bps +160bps Secured order book
Slide 16: Fit Out
Fit Out £m FY 2021 vs FY 20 vs FY 19 +100bps increase 76% of revenue Revenue 795 +14% -5% margin up to 5.6% Commercial office Operating profit 44.2 +38% +20% + 120bps from FY 2019 FY 2020: 66% Operating margin (%) 5.6% +100bps +120bps Secured order book 897 +119% £897m 42% of revenue Record order bo
Slide 17: Property Services
Property Services £m FY 2021 vs FY 20 vs FY 19 +20% revenue >85% of order book Revenue 134 +20% +17% vs FY 2020 for 2023 & beyond Operating profit* 4.1 +310% -5% +17% vs FY 2019 Long term visibility Operating margin (%) 3.1% +220bps -60bps Secured order book 945 -3% Response maintenance volumes no
Slide 18: Partnership Housing
Partnership Housing £m FY 2021 vs FY 201 vs FY 191 +16% +27% Revenue 572 +21% +10% Mixed-tenure revenue Contracting revenue Operating profit 33.2 +108% +53% to £323m (56% of total) to £249m (44% of total) Operating margin (%) 5.8% +240bps +160bps Secured order book 1,498 +4% 1,653 mixed-tenure £1,49
Slide 19: Urban Regeneration
Urban Regeneration £m FY 2021 vs FY 201 vs FY 191 £2.6bn Order book Diverse portfolio Revenue 203 +64% +69% down 12% from FY 2020 52% residential, 33% commercial 15% industrial/leisure/retail Operating profit 12.1 +38% -39% 52% SE & London, 38% NW, 8% c85% for 2023 & beyond York & NE, 2% rest Secure
Slide 20: Summary
Summary Record results for the Group All divisions on good form High quality and growing secured order book Strong balance sheet average daily net cash for 2022 expected to be broadly similar to 2021 Total dividend of 92p per share, up 51% FY Results 2021 20
Slide 21: ESG Update
ESG Update Steve Crummett
Slide 22: A reminder of our ESG framework
A reminder of our ESG framework Framework for a common strategy focused on all stakeholders. In place since 2008 Report on progress through set of established KPIs. See Annual Report Supports the UN Sustainable Development Goals Awarded ‘AAA’ MSCI ESG rating (AA for previous 4 years) FY Resu
Slide 23: Environmental
Environmental CDP score of ‘A’ for leadership on climate change awarded in 2021 for second year. One of 206 companies worldwide ‘Supplier Engagement Leader’ award for second year running by CDP for work to drive action on climate change through the supply chain Route-map to achieve 2030 ‘net z
Slide 24: Social
Social ‘Social Value’ is increasingly a work winner and playing a prominent role in bids Social Value Bank Further improvement on payment practices to supply chain • aligned to HM Treasury’s Green Book • calculates economic, environmental Disappointing increase in number of RIDDOR1 incidents i
Slide 25: Medium-term Targets & Outlook
Medium-term Targets & Outlook John Morgan
Slide 26: Group Strategy
Group Strategy Our chosen markets remain the same Organic growth Long-term workstreams Empowered teams through a highly decentralised structure Persistent execution of strategy gives us high quality earnings FY Results 2021 26
Slide 27: Capital Allocation
Capital Allocation Committed to maintaining a strong balance sheet and to holding significant cash balances at all times Capital allocation framework comprises: maintaining balance sheet to enhance our competitive advantage ensuring downside protection maximising investment to drive growth
Slide 28: Cladding & Building Safety
Cladding & Building Safety Fully agree cost of remediation should not be borne by leaseholders Review ongoing and possible a small number of cases will be identified Committed to meeting our liabilities as and when identified Any such costs not expected to be material and will likely span a
Slide 29: Construction
Construction Medium-term target: Revenue of £1bn Operating margin between 2.5% and 3% pa Margin target more important than turnover Route map Managing risk to ensure quality of earnings Increasing presence in some geographical areas Market Balance sheet more important to clients conditions
Slide 30: Infrastructure
Infrastructure Medium-term target: Revenue of £1bn Operating margin between 3.5% and 4% pa JVs only when clear competitive advantage Route map Concentrating on operational efficiencies Continue to build long-term relationships and workstreams Market Fairly strong market for infrastructure co
Slide 31: Fit Out
Fit Out Medium-term target: Operating profit of £40m-£45m pa (average through the cycle) Maintain market share of commercial office market Route map More repeat work from large occupiers of space Increasing average job size We expect a strong market for the next 2-3 years Market conditions
Slide 32: Property Services
Property Services Medium-term target: Operating profit of £15m Higher turnover with similar levels of overhead Route map Targeting long term contracts. 10 years + Increasing use of technology as competitive advantage Large available market Market conditions Barriers to entry increasing. Ma
Slide 33: Partnership Housing
Partnership Housing Medium-term target: Operating margin of 8% Return on capital up towards 25% More and larger schemes Route map Increased geographical coverage More mixed-tenure schemes Market Current open market prices and values strong conditions Large partnership schemes coming to mar
Slide 34: Urban Regeneration
Urban Regeneration Medium-term target: 3-year rolling average ROCE up towards 20% Larger schemes Route map More efficient use of capital Increase geographical coverage Demand side strong Market conditions Construction inflation challenging viability of schemes Large number of long-term o
Slide 35: Medium-Term Targets & Outlook Summary
Medium-Term Targets & Outlook Summary Previous Target 2021 ‘New’ target as at 2022 Outlook February 2021 actual February 2022 Revenue of £1bn, • Expect margin to be in the target range Construction Margin of 2.5%-3% 3.2% margin operating margin of and progress towards turnover target 2.5%-3% pa Reve
Slide 36: Summary
Summary
Slide 37: Summary
Summary Group is in really good shape No change to organic growth strategy Upgraded medium-term targets provide framework for next stage of growth Strong balance sheet allows us to make the right long-term decisions Expect result in 2022 to be slightly ahead of previous expectations FY Res
Slide 38: Appendices
Appendices
Slide 39: Net finance expense
Net finance expense £m FY 2021 FY 2020 Interest payable on drawings on bank facilities - (1.3)* Amortisation of fees & non-utilisation fees (2.5) (1.7) Interest expense on lease liabilities (IFRS 16) (1.5) (1.7) Interest from JVs 0.6 0.6 Other (0.2) (0.5) Total (3.6) (4.6) * Higher interest charge i
Slide 40: Adjusted earnings per share
Adjusted earnings per share £m FY 2021 FY 2020 Profit after tax 97.9 45.4 Adjusted for: Amortisation of intangibles (net of tax) 1.2 2.5 Impact of change in tax rate on deferred 5.1 1.5 tax balances Adjusted earnings 104.2 49.4 Average number of shares 46.1m 45.5m Adjusted earnings per share 226.0p
Slide 41: Tax
Tax £m FY 2021 FY 2020 Profit before tax 126.2 60.8 Less: share of net JV profit (5.4) (2.3) Profit subject to tax 120.8 58.5 Statutory tax rate 19.0% 19.0% Current tax charge at statutory rate (23.0) (11.1) Tax on joint venture profits1 (0.7) (0.6) Change in tax rate on deferred tax balances (5.1)
Slide 42: Net cash movement
Net cash movement 87.6 -32.3 -30.1 358.0 332.8 £m Full year net cash of £358.0m Opening Free cash Dividends Other Closing net cash flow net cash ‘Other’ includes the purchase of shares in the Company by the employee benefit trust (£33.6m) less net loan receipts from interests in joint ventures (£1
Slide 43: Balance sheet – adjustment of historic error
Balance sheet – adjustment of historic error On 27 July 2007, the Group acquired Amec Developments Limited and certain assets and businesses carried on by Amec Investments Limited and the assets, liabilities and contracts relating to the Design and Project Services division of Amec plc, save for c
Slide 44: Capital employed in Regeneration
Capital employed in Regeneration £m Partnership Urban Regeneration Housing Regeneration Total net land & regeneration WIP 220.1 169.4 50.7 Unsold completed units (excl. joint ventures) 25.4 25.1 0.3 Amounts invested in joint ventures 94.2 50.8 43.4 Shared equity loans and investment properties 2.3 2
Slide 45: Comparatives by division
Comparatives by division Operating Operating Revenue Profit/(Loss)1 Margin1 £m 2020 2019 £m 2020 2019 % 2020 2019 Construction & Infrastructure 1,520 1,637 1,486 58.1 35.7 32.3 3.8% 2.2% 2.2% Fit Out 795 700 839 44.2 32.1 36.9 5.6% 4.6% 4.4% Property Services 134 112 115 4.1 1.0 4.3 3.1% 0.9% 3.7% P
Slide 46: Morgan Sindall Group
MORGAN SINDALL GROUP