Morgan Sindall Group Plc · LSE:MGNS
Morgan Sindall — FY2016 Earnings Presentation
36 slides from Morgan Sindall's earnings presentation, Feb 23, 2017
Slide 1: Full year results to 31 December 2016
Full year results to 31 December 2016 Morgan Sindall Group plc 23 February 2017
Slide 2: Agenda
Agenda • Introduction John Morgan • FY 2016 Financial and Operational Review Steve Crummett • Strategy and Medium-Term Outlook John Morgan 2
Slide 3: Morgan Sindall Group
Morgan Sindall Group 1 Strong performance in 2016 2 Clear strategy for growth 3 Aligned to growth markets 4 Strong financial position 3
Slide 4: FY 2016 Financial and Operational Review
FY 2016 Financial and Operational Review Steve Crummett 4
Slide 5: Highlights
Highlights • Strong profit growth in FY 2016. PBT up 32% • Daily average net cash for the year of £25m • High quality order book, up 29% to £3.6bn • Total dividend up 21% • Optimistic for 2017 5
Slide 6: Summary income statement
Summary income statement1 £m FY 2016 FY 2015 % change Revenue 2,562 2,385 +7% Operating profit1 48.8 38.8 +26% Operating margin1 1.9% 1.6% +30bps Profit before tax1 45.3 34.3 +32% Earnings per share1 84.7p 63.0p +34% Total dividend per share 35.0p 29.0p +21% 1 Before intangible amortisation of £1.4m
Slide 7: Divisional performance
Divisional performance1 £m Revenue Operating Operating Profit1 Margin1 FY 2016 % FY 2016 % FY 2016 bps Construction & Infrastructure 1,321 +7% 8.9 +134% 0.7% +40bps Fit Out 634 +4% 27.5 +15% 4.3% +30bps Property Services 55 -8% 0.7 +170% 1.3% +300bps Partnership Housing 433 +18% 13.4 +40% 3.1% +50bp
Slide 8: Cash flow
Cash flow 179.9 (2.9) 125.2 8.2 (3.3) 173.7 • Very strong cash performance £m • Driven by working capital inflow of £125m overdues reduced by c£40m in the year. Final accounts settled, legacy positions 2.1 (4.4) cleared 48.8 significant completions on regeneration schemes in Q4. Capital employed
Slide 9: Net cash movements
Net cash movements 173.7 (13.2) • Year end net cash of £209m (9.7) 208.7 £m • Average daily net cash of £25m includes £15m non-recourse debt vs FY 2015 average debt of £53m bank facilities of £175m. Main £140m facility expires in September 2018 57.9 • 2017 will see further capital invested in
Slide 10: Summary balance sheet
Summary balance sheet £m FY 2016 FY 2015 • Pension surplus of £2.6m Intangibles 217.0 217.3 PP&E 16.6 20.8 small DB scheme, gross liabilities of £11m Investments (incl JVs) 63.5 59.1 Shared equity loan receivables 18.4 20.3 < 100 members Net working capital (203.6) (78.4) assets match liabilit
Slide 11: Order book and regeneration & development pipeline
Order book and regeneration & development pipeline £3,637m • Strong year of winning work across the Group • Group committed order book up 29% to £3.6bn £2,826m up 16% from HY position increase driven by Construction & Infrastructure, Fit Out, Property Services & Partnership Housing 51% • Group r
Slide 12: Divisional Performances
MORGAN eS =| SINDALL GROUP Divisional Performances
Slide 13: Construction & Infrastructure
Construction & Infrastructure £m FY 2016 FY 2015 change Revenue 1,321 1,232 +7% Operating profit1 8.9 3.8 +134% Margin % 0.7% 0.3% +40bps • Construction 60% of revenue, Infrastructure 40% of revenue Construction up 16%, Infrastructure down 3% • Good progress made in returning divisional operating
Slide 14: Order Book: Construction & Infrastructure
Construction & Infrastructure £1,886m • Significant amount of visible opportunities across Order Book £1,595m Construction and Infrastructure £590m • Divisional order book up 18% to £1,886m £746m Growth driven by Infrastructure: significant contract wins with order book up 53% to £1,296m £1,296m
Slide 15: Fit Out
Fit Out £m FY 2016 FY 2015 change Revenue 634 607 +4% Operating profit1 27.5 24.0 +15% Margin % 4.3% 4.0% +30bps • Excellent performance. All key metrics showing progress record revenue of £634m, up 4% operating profit up 15% to £27.5m margin up 30bps to 4.3% focus on operational delivery •
Slide 16: Order Book: Fit Out
Fit Out • Order book at record level of £466m Order Book £466m increase of 37% compared to previous year end £410m up 25% from HY position £341m £410m for 2017; much greater visibility of year ahead than start of 2016 £257m Expect another strong performance in 2017 12 month forward order book
Slide 17: Property Services
Property Services £m FY 2016 FY 2015 change Revenue 55 60 -8% Operating profit/(loss)1 0.7 (1.0) +170% Margin % 1.3% -1.7% +300bps • First full year profit achieved as planned reversal of prior year losses improved contract and overhead management stable base from which to grow • New work secu
Slide 18: Partnership Housing
Partnership Housing FY 2016 FY 2015 change Revenue 433 366 +18% Operating profit1 13.4 9.6 +40% Margin % 3.1% 2.6% +50bps Capital employed2 at year end 63.9 113.0 n/a LTM average capital employed2 110.8 117.4 n/a • Revenue and margin increase driven by mixed-tenure regeneration activities Mixed-te
Slide 19: Order Book: Partnership Housing
Partnership Housing £445m • Order book up 30% to £445m £342m Development pipeline down 2% to £764m Order Book • no concerns as significant opportunities progressing increased dialogue with Local Authorities and Housing Associations • Average Capital Employed to increase in 2017 investment in m
Slide 20: Urban Regeneration
Urban Regeneration £m FY 2016 FY 2015 change Capital employed1 at year end 68.9 76.6 n/a LTM average capital employed1 80.0 76.2 n/a Revenue 156 110 +42% Operating profit2 13.4 12.9 +4% • Average capital employed increased slightly to £80m lower than expected due to earlier completions, revised ph
Slide 21: Urban Regeneration development pipeline
Urban Regeneration Development pipeline by region Development pipeline by sector • Regeneration & development pipeline up 2% to £2.2bn Scotland Other 3% 3% broad geographic and sector Yorks/NE 16% split South East Offices & London 32% 38% Residential • Significant activity currently ‘on 46% North
Slide 22: Investments
Investments £m FY 2016 FY 2015 change Operating loss1 (2.0) (1.5) -33% • Investments secures work for other divisions in the Group c£130m of construction and regeneration work sourced by Investments delivered across the Group further £50m for future delivery work delivered mainly through strat
Slide 23: Summary & Outlook for 2017
Summary & Outlook for 2017 • Strong set of results for FY 2016 • Positive momentum across the Group • Upgrade to previous expectations for 2017 market opportunities in Partnership Housing margin improvement in Construction & Infrastructure order book in Fit Out • Total dividend up 21% 23
Slide 24: Strategy and Medium-term Outlook
Strategy and Medium-term Outlook John Morgan 24
Slide 25: Strategic positioning
Strategic positioning Construction Regeneration Construction Property Partnership Urban & Fit Out Infrastructure Services Housing Regeneration Investments • Significant proportion of business geared to growth areas of the economy • Construction delivering improved performance • Fit Out: outstanding
Slide 26: Well-positioned for the future
Well-positioned for the future • Transformed business • Took tough decisions for the long term • Invested extra £100m in Regeneration • Increased size and quality of order book • Appointed highly motivated senior team • Positive momentum across the Group 26
Slide 27: Key political/demographic trends supporting long-term growth
Key political/demographic trends supporting long-term growth Macro Theme Consequence Morgan Sindall Group alignment Housing shortage* Requirement for mixed-tenure (social Partnership Housing rent, private) affordable homes across the Urban Regeneration UK Infrastructure capacity† Increased investmen
Slide 28: Construction Activities: Growth in the medium term
Growth in the medium term Construction Activities Medium-term FY 2016 target Margin in Construction 0% 2% Margin in Infrastructure 1.6% 2.5% Maintain profits at Fit Out £27.5m £25m-£30m pa Operational leverage in Property Services 1.3% margin >3% margin 28
Slide 29: Regeneration Activities: Growth in the medium term
Growth in the medium term Regeneration Activities Medium-term FY 2016 target ROCE in Partnership Housing 12% >20% ROCE in Urban Regeneration 15% Towards 20% 29
Slide 30: Morgan Sindall Group: the investment case
Morgan Sindall Group: the investment case 1 Clear strategy for growth • Cash-generating Construction activities support long-term strategic investment in Regeneration 2 Aligned to growth markets • Strong growth positions in Infrastructure, Partnership Housing and Urban Regeneration 3 Strong financia
Slide 31: Questions
MORGAN ee 8 GROUP Questions Thank you
Slide 32: Appendices
MORGAN eS =| SINDALL GROUP Appendices
Slide 33: Capital employed in Regeneration at year end
Capital employed in Regeneration at year end £m Partnership Urban Regeneration Housing Regeneration Total net land & regeneration WIP 196 113 83 Unsold completed units (excl JVs) 4 2 2 Amounts invested in joint ventures 35 - 35 Shared equity loans and investment properties 25 25 - Other working capi
Slide 34: Net finance expense
Net finance expense £m FY 2016 FY 2015 Net interest charge on net debt (1.8) (2.9) Amortisation of fees & non-utilisation fees (2.1) (2.0) Interest from JVs 1.1 0.9 Other (0.7) (0.5) Total (3.5) (4.5) 34
Slide 35: Tax
Tax £m FY 2016 FY 2015 Profit/(loss) before tax 43.9 (14.8) Less: share of net JV profit1 (7.4) (9.6) Profit subject to tax 36.5 (24.4) Statutory tax rate 20.0% 20.25% Current tax (charge)/credit at statutory rate (7.3) 4.9 Tax of joint venture profits1 (1.2) (1.7) Effect of tax rate change on defer
Slide 36: Adjusted earnings per share
Adjusted earnings per share £m FY 2016 FY 2015 Profit after tax and minority interest 36.8 (9.9) Adjusted for: Exceptional operating items (net of tax) - 37.4 Amortisation of intangibles (net of tax) 1.1 1.8 Deferred tax credit 1 (0.7) (1.7) Adjusted earnings 37.2 27.6 Average number of shares 43.9m