Morgan Sindall Group plc · LSE:MGNS
Morgan Sindall — FY2014 Earnings Presentation
47 slides from Morgan Sindall's earnings presentation, Feb 19, 2015
Slide 1: Full year results to 31 December 2014
Full year results to 31 December 2014 Morgan Sindall Group plc 19 February 2015
Slide 2: Agenda
Agenda • Introduction John Morgan • 2014 Financial and Operational Review Steve Crummett • Regeneration – Update and Strategy John Morgan • Summary John Morgan 2
Slide 3: Introduction
Introduction • Overall disappointing result for the Group in 2014 impacted by small number of construction contracts in Construction & Infrastructure • …But strong performances from Fit Out and Urban Regeneration • Quality of the order book improved • Balance sheet remains strong • Good strategic
Slide 4: 2014 Financial and Operational Review
2014 Financial and Operational Review Steve Crummett 4
Slide 5: Summary income statement
Summary income statement1 £m FY 2014 FY 2013 % change Revenue 2,220 2,095 +6% Operating profit1 28.9 33.6 -14% Operating margin1 1.3% 1.6% -30bps Profit before tax1 25.2 31.3 -19% Earnings per share1 46.7p 60.9p -23% Dividend per share 27.0p 27.0p - 1 Before intangible amortisation (£2.4m) (FY 2013:
Slide 6: Segmental analysis
Segmental analysis1 £m Revenue Operating Operating Profit1 Margin1 FY14 % FY14 % FY14 Construction & Infrastructure 1,172 -5% 3.5 -72% 0.3% -70bps Fit Out 507 +19% 15.0 +38% 3.0% +40bps Affordable Housing 423 +11% 6.0 -30% 1.4% -90bps Urban Regeneration 113 +83% 10.0 +900% 8.9% n/a Investments 25 n/
Slide 7: Operating cash flow
Operating cash flow £m 28.9 (3.7) (6.8) (11.8) (4.2) 2.4 (4.7) (6.7) 0 (4.4) Operating Non-cash Net capex Working Other 3 Operating Net Tax Free cash 2 Profit 1 adjmts & finance Capital cash flow interest flow leases (non JV) 1 Before intangible amortisation (£2.4m) 2 Adjustments include depreciatio
Slide 8: Net cash movements
Net cash movements £m 69.7 (6.7) • Average net debt of £9m (11.5) 6.2 (2.0) • Main bank facilities renewed and 55.7 increased during July 2014 £140m ‘club’ facility, expiring in September 2018 additionally retain £30m of facilities maturing in 2016 0 excludes non-recourse facilities in Opening
Slide 9: Working capital & capital employed
Working capital & capital employed Total Working Fixed Assets & Capital As at 31 December 2014 1 2 Capital Other employed £m £m £m Construction & Infrastructure -117 14 -103 Fit Out -43 1 -42 Affordable Housing 57 36 93 Urban Regeneration 43 6 49 Investments 8 12 20 Group/Elims -3 -11 -14 Total -55
Slide 10: Construction & Infrastructure
Construction & Infrastructure £m FY 2014 FY 2013 % Revenue 1,172 1,234 -5% Operating profit1 3.5 12.7 -72% Margin % 0.3% 1.0% -70bps • Operating margin reduced to 0.3% • Impacted by poor performance in certain of the Construction activities (55% of revenue) small number of projects in London and t
Slide 11: Construction & Infrastructure order book
Construction & Infrastructure • General market improving through the year. Good level of work now being won at required margins Order book • Order book up 3% to £1,537m £m £1,537m • Proportion of orders gained through competitive single £1,499m stage procurement vs ‘other procurement types’ more fav
Slide 12: Fit Out
Fit Out £m FY 2014 FY 2013 % Revenue 507 427 +19% Operating profit1 15.0 10.9 +38% Margin % 3.0% 2.6% +40bps £m Order book • Strong performance, particularly in H2 £241m • Margin growth supported by improved operational delivery focus on customer and supply chain relationships • Commercial office
Slide 13: Affordable Housing
Affordable Housing £m FY 2014 FY 2013 % Revenue 423 381 +11% Operating profit1 6.0 8.6 -30% Margin % 1.4% 2.3% -90bps • Activities split into : Regeneration (mixed-tenure) and Construction & Services (contracting, planned maintenance, response maintenance) delivers a full range of housing solution
Slide 14: Affordable Housing – Response Maintenance
Affordable Housing – Response Maintenance £m FY 2014 FY 2013 Revenue 61.0 67.5 Operating loss (3.5) (1.2) • Losses through a combination of operational delivery inefficiencies, insufficient volume and ageing business systems • Significant addressable market in response maintenance plus opportunity t
Slide 15: Affordable Housing order book and pipeline
Affordable Housing • Construction & Services order book up 16% Order book £m Construction & Services of which 53% is Response Maintenance £673m • Regeneration & development pipeline up 8% to £770m £581m investment in mixed-tenure to increase by c£20m-£25m in 2015, to develop the regeneration pip
Slide 16: Urban Regeneration
Urban Regeneration £m FY 2014 FY 2013 % Capital employed1 at year end 49.4 51.4 n/a Average capital employed1 49.9 53.5 n/a Revenue 113 62 +83% Operating profit 10.0 1.0 +900% • Strong performance, with significant increase in profit, up to £10.0m ROCE2 of 17% driven by completion of schemes in
Slide 17: Investments
Investments £m FY 2014 FY 2013 % Capital employed1 at year end 20.2 18.7 n/a Average capital employed 17.3 22.7 n/a Operating profit 0.9 6.1 -85% • Profit of £0.9m includes £1.9m from sale of investments compared to profit of £9.9m last year carrying value of remaining ‘PFI-type’ investments is
Slide 18: Order book and regeneration & development pipeline
Order book and regeneration & development pipeline £m £2,658m • Group committed order book up 11% £2,403m Split by year to £2.7bn £0.6bn from frameworks 58% 20% 22% FY 13 FY 14 2015 2016 2017 + £m £3,227m • Group regeneration & development £3,036m pipeline up 6% to £3.2bn Split by year 82% 69% r
Slide 19: Financial & operational summary
Financial & operational summary • 2014 was a difficult year for the Group impacted by small number of construction contracts in Construction & Infrastructure • Strong performance from Fit Out continued momentum going into 2015, with record order book • Urban Regeneration result supports the Grou
Slide 20: Regeneration – update and strategy
Newcastle Quayside - then and now Regeneration – update and strategy John Morgan
Slide 21: Group strategy
Group strategy Construction Regeneration Construction Affordable Affordable Urban & Fit Out Housing Housing Regeneration Investments Construction & Infrastructure Mixed-tenure Services • ‘Stick to our knitting’ • Margin improvement - Construction • ROCE improvement - Regeneration • Remain UK-focused
Slide 22: What is regeneration?
What is regeneration? “There is a pressing need to make Europe’s cities more competitive, resilient and sustainable and this challenge is at the heart of the urban regeneration process. However, the successful reuse of brownfield land and the reinvention of redundant or forgotten parts of a city, is
Slide 23: What does regeneration mean to Morgan Sindall Group?
But what does regeneration mean to Morgan Sindall Group? • Secure development agreements • A number of phases, over a long time frame • Usually several sources of funds • Working capital invested phase-by-phase and recycled • Social aspects of regeneration just as important as physical 23
Slide 24: What does regeneration mean to Lovell?
What does regeneration mean to Lovell? • Mixed-tenure homes • Houses for sale – new build for public sector; refurbishment of social rented • Community engagement skills • Long-term development agreements • Long-established culture of working in partnership with the public sector • Joint ventures 24
Slide 25: What does regeneration mean to Muse?
What does regeneration mean to Muse? • Creation of new sustainable mixed-use communities • Long time frames • High level of expertise needed to deliver schemes • Strategic joint ventures (English Cities fund, ISIS Waterside Regeneration) • Portfolio of 35 mixed-use projects, over 25m sq ft 25
Slide 26: What does regeneration mean to Investments?
What does regeneration mean to Investments? • Only work on schemes that involve other Group companies • Multiple sites or series of products HB Villages LABVs PF2 schools preferred bidder Land swaps Health 26
Slide 27: Why are we doing it?
Why are we doing it? • Large, growing market • Long-term income stream • Fits with the Group’s culture, skill set and track record • High barriers to entry 27
Slide 28: Barriers to entry
Barriers to entry • Reputation and track record • Very long time lines • Softer non-build elements of regeneration • Understand and react to the needs of the public sector 28
Slide 29: Total investment in regeneration across the Group
Total investment in regeneration across the Group £m Affordable Total Urban Housing Mixed- Investments Regeneration Regeneration Tenure Current land & regeneration WIP 198 122 75 1 Land creditors -21 -21 Total net land & regeneration WIP 177 101 75 1 Unsold completed units (excl JVs) 5 3 2 - Amounts
Slide 30: Operating profit
Operating profit Construction Regeneration Construction Affordable Affordable Urban & Fit Out Housing Construction & Housing Regeneration Investments Infrastructure Mixed-tenure Services Operating profit (£m) Operating profit (£m) 3.5 15.0 (4.7) 10.7 10.0 0.9 Central costs Total £13.8m £6.5m Total £
Slide 31: Lewisham Gateway: A Muse scheme
Lewisham Gateway A Muse scheme 31
Slide 32: Lewisham Gateway: overview
Lewisham Gateway: overview • 701 private residential units • 48,700 sq ft ground floor retail • 17,000 sq ft leisure use • 220 car parking spaces • A major new urban park • New town centre highway network 32
Slide 33: Lewisham Gateway: aerial view of the site
Lewisham Gateway: aerial view of the site 33
Slide 34: Lewisham Gateway: webcam view
Lewisham Gateway: webcam view on 17 Feb 2015 34
Slide 35: Lewisham Gateway: CGI of completed scheme
Lewisham Gateway: CGI of completed scheme 35
Slide 36: Lewisham Gateway: project timeline
Lewisham Gateway: project timeline 2004 Site marketed by public sector 2006 Development Agreement signed with public sector consortium comprising GLA, London Borough of Lewisham, TfL and LBSL; outline planning application submitted 2009 Outline planning permission granted and Compulsory Purchase Ord
Slide 37: Lewisham Gateway: returns
Lewisham Gateway: returns • Profit base case of £29.5m • Full priority return capable of accruing to the scheme is in excess of £42m • Main profit contributing years are 2016 and 2018-2020 • Phase 1 Equity Internal Rate of Return 24.5% base case that has potential to rise to approaching 30% on upsid
Slide 38: Regeneration: future investments and expected returns
Regeneration: future investments and expected returns • Our share of the regeneration pipeline is £3.2bn • Expect investment of £50m-£65m in regeneration in 2015 • Further £35m in 2016 • High teens ROCE targeted medium-term 38
Slide 39: National Property Company of the Year 2014
National Property Company of the Year 2014 Winner: Runners up: British Land The Crown Estate Land Securities Group “Showing the big boys how it’s done…..dogged and delivery focused.” Estates Gazette 39
Slide 40: Group Summary
MORGAN SINDALL GROUP Group Summary John Morgan
Slide 41: Group summary
Group summary • Construction & Infrastructure Disappointing results in 2014 Better quality order book, though need to work through the poorer quality jobs • Fit Out Good progress and strong start to the year • Affordable Housing Investing and building for growth in 2016 onwards • Urban Regen
Slide 42: Questions?
MORGAN SINDALL GROUP Questions?
Slide 43: Appendices
MORGAN SINDALL GROUP Appendices
Slide 44: Net finance expense
Net finance expense £m FY 2014 FY 2013 Net interest charge on debt (1.6) (1.3) Amortisation of fees & non-utilisation fees (1.9) (1.2) Interest from JVs 0.8 1.0 Other (1.0) (0.8) Total (3.7) (2.3) 44
Slide 45: Tax
Tax £m FY 2014 FY 2013 Profit before tax 22.8 13.9 Less: share of net profit of JVs (6.3) (0.9) Profit before tax excluding JVs 16.5 13.0 Statutory tax rate 21.5% 23.25% Current tax charge at statutory rate (3.5) (3.0) Tax on JV profits1 (1.1) - Profit on sale of JVs not subject to tax 0.4 2.3 Excep
Slide 46: Summary balance sheet
Summary balance sheet £m FY 2014 FY 2013 Intangibles 218.1 220.5 PP&E 19.2 18.3 Investments (incl JVs) 64.8 64.4 Shared equity loan receivables 20.4 19.7 Net working capital (55.2) (67.0) Current and deferred tax (21.7) (21.3) Pension scheme 0.8 - Net cash 55.7 69.7 Other 1 (34.2) (47.3) Net assets
Slide 47: Disclaimer
Disclaimer Certain statements included or incorporated by reference in this presentation are forward-looking statements in respect of Morgan Sindall Group plc’s operations, performance, prospects and/or financial condition. These forward-looking statements speak only as at the date of this presentat