Morgan Sindall Group Plc · LSE:MGNS
Morgan Sindall — H1 2014 Earnings Presentation
29 slides from Morgan Sindall's earnings presentation, Aug 4, 2014
Slide 1: Half year results to 30 June 2014
Half year results to 30 June 2014 Morgan Sindall Group plc Constructing & Regenerating 4 August 2014
Slide 2: 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
Slide 3: Highlights
Highlights • First half results in line with expectations PBTA1 of £14.2m • Order book improved Committed order book up 14% from year end, with regeneration & development pipeline up 5% Higher quality through more favourable procurement routes • Shift in balance of profits, with significant co
Slide 4: Financial Review
Financial Review Steve Crummett Finance Director 4
Slide 5: Headline income statement
Headline income statement1 £m HY 2014 HY 2013 % change Revenue 998 1,019 -2% Gross profit1 83.6 82.6 +1% Gross margin1 8.4% 8.1% +30bps Operating profit1 15.2 16.2 -6% Operating margin1 1.5% 1.6% -10bps Net interest (1.0) (0.8) Profit before tax1 14.2 15.4 -8% Tax (2.1) (2.1) Effective adjusted tax
Slide 6: Segmental analysis
Segmental analysis1 £m Revenue Operating Operating Profit1 Margin HY14 % HY14 % HY14 change change change Construction & 567 -4% 5.9 -8% 1.0% -10bps Infrastructure Fit Out 195 -8% 5.5 +10% 2.8% +50bps Affordable Housing 193 +4% 2.7 - 1.4% -10bps Urban Regeneration 42 +24% 3.5 +775% 8.3% n/a Investme
Slide 7: Operating profit – key movements
Operating profit1 – key movements 1.6 16.2 (4.2) 2.7 0.1 15.2 2.1 (1.7) £m 7 1 Before intangible amortisation (£1.2m) (HY 2013: intangible amortisation (£1.4m) and exceptional operating items (£13.0m))
Slide 8: Cash flow
Cash flow (41.2) • Expected c£20m inventory increase 1.6 in Urban Regeneration and 15.2 (7.8) Affordable Housing since FY13 (41.2) • Payable 0.6 and receivable days in line £m with prior year (37.1) (39.8) 0 (4.3) 1.0 (1.8) (0.9) 8 1 Before intangible amortisation (£1.2m) 2 ‘Other’ includes JV divid
Slide 9: Net cash and debt reconciliation
Net cash and debt reconciliation • Period end net cash £34m 69.7 (39.8) • Average daily net debt of £6m Includes £14m of non- Net cash £m recourse 4.5third party debt 4.7 34.1 in Urban Regeneration (6.4) 5.9 • Expected increase in average debt through H2 and 2015 Investment in Urban Regeneration
Slide 10: Bank facilities
Bank facilities • Main bank facilities 1.6 renewed and increased during July 2014 • New £140m facility agreed, expiring in September 2018 Single “club” facility Four banks, including two new lending banks 4.5 • Additionally still retain £30m of facilities maturing in 2016 and £20m facility matur
Slide 11: Summary balance sheet
Summary balance sheet £m HY 2014 FY 2013 HY 2013 Intangibles 219.3 220.5 221.8 PP&E 19.8 18.3 19.2 Investments (incl JVs) 57.4 64.4 64.4 Shared equity loan receivables 20.1 19.7 19.2 Net working capital (26.0) (67.0) (45.8) Current and deferred tax (21.3) (21.3) (22.1) Pension scheme 0.3 - (1.4) Net
Slide 12: Working capital and capital employed
Working capital and capital employed Construction Regeneration • Cash generative • Long term investment • Measured by margin and working • Measured by return on capital capital/revenue ratios (ROCE) Working Capital As at 30 June 2014 Capital1 As at 30 June 2014 Employed2 £m £m Construction & Afforda
Slide 13: Order book
Order book Order book at 30 June 2014 • Committed order book of £2.7bn, up 14% from FY 2013 £1.0bn Fit Out up 57%, Affordable Housing up 1,000 322 £0.85bn £0.85bn 27% Generally higher quality – more negotiated, framework and two-stage £m work 322 322 • £1.0bn covered for H2 2014 500 Construction
Slide 14: Regeneration and development pipeline
Regeneration and development pipeline Regeneration & development pipeline at 30 June 2014 • Regeneration & development pipeline1 of £3.2bn, up 5% from FY 2013 £2.8bn Includes development value of open 322 market housing schemes in Affordable Housing Longer term in nature £m £2.2bn • Increase dri
Slide 15: Urban Regeneration order book, pipeline and preferred bidder
Urban Regeneration Order book, regeneration pipeline and preferred bidder Remaining GDV £m* 2014 2015 2016 2017 2018 2019 Aberdeen Office 90 Basingstoke Office and retail 190 Blackpool Office and leisure 60 Chester CBQ Office and residential 130 Lewisham Gateway Residential 210 Leeds - Sovereign Str
Slide 16: Operational Review
Operational Review John Morgan Chief Executive 16
Slide 17: Group strategy
Group strategy • Continue to focus on the two distinct but complementary business activities of ‘Construction’ and ‘Regeneration’ Construction Regeneration Construction Affordable Affordable Housing Urban & Fit Out Housing Investments Construction & Regeneration Infrastructure Mixed-tenure Services
Slide 18: Construction & Infrastructure
Construction & Infrastructure £m HY 2014 HY 2013 Change % Revenue 567 593 -4% Operating profit1 5.9 6.4 -8% Margin % 1.0% 1.1% -10bps • Overall trading conditions remain difficult Dual challenge of inflation and competitively tendered work from previous years Particularly relevant to constructio
Slide 19: Construction & Infrastructure
Construction & Infrastructure Manchester Rail Operating Centre • £19.7m contract for Network Rail’s regional operation centre • Completed and handed over in May 2014 • Rail capability - Manchester Victoria Railway Station – new roof as part of overall investment in station Outlook • Strong order boo
Slide 20: Fit Out
Fit Out £m HY 2014 HY 2013 Change % Revenue 195 2131 -8% Operating profit 5.5 5.0 +10% Margin % 2.8% 2.3% +50bps • Strong performance through the period as market recovers Margin improvement driven by operating efficiency Tender margins remain competitive • London office market 75% of revenue
Slide 21: Fit Out
Fit Out Canadian High Commission, London • £30m refurbishment of an iconic Grade II listed building situated on Trafalgar Square • Creating the new permanent home of the Canadian High Commission in the UK • Consolidation of two buildings; connecting Canada House with the adjacent building at 2- 4 Co
Slide 22: Affordable Housing
Affordable Housing £m HY 2014 HY 2013 Change % Revenue 193 1862 +4% Operating profit1 2.7 2.7 - Margin % 1.4% 1.5% -10bps • Regeneration mixed-tenure (25% of revenue) c75% from open-market sales & c25% from social housing contracting 233 house completions, up 4% - supply constrained Regenerati
Slide 23: Affordable Housing – Response Maintenance
Affordable Housing – Response Maintenance £m HY 2014 HY 2013 Revenue 33.5 34.3 Operating loss (1.7) (1.5) • Underperformance from a combination of operational delivery inefficiencies, insufficient volume and ageing business systems Full year loss expected to be c£3m-£3.5m • Significant addressable
Slide 24: Affordable Housing
Affordable Housing The Tynings and Old Common, Michinhampton • A £9.3m contract for Stroud District Council for completion at the end of 2015 • Mixed tenure – 31 new council homes and 35 open market sale properties over two sites • Selected by Stroud District Council via the HCA Delivery Partner Pan
Slide 25: Urban Regeneration
Urban Regeneration £m HY 2014 HY 2013 Change % Average capital employed 71 54 +31% Revenue 42 34 +24% Operating profit1 3.5 0.4 +775% • Significant increase in profit in H1 Driven by completion of scheme phases in Blackpool, Brentford, Stockport Progress towards target ROCE of 15% Regeneration &
Slide 26: Urban Regeneration
Urban Regeneration Stockport Exchange: £145m mixed-use ‘gateway’ scheme • Phase 1 completed Feb 2014: 1,000 space MSCP adjacent to the station • Planning secured for Phase 2 May 2014: 115 bed hotel plus 43,000 sq ft BREEAM Excellent office building with ground floor retail space Salford Central: £56
Slide 27: Investments
Investments £m HY 2014 HY 2013 Average capital employed 19 23 Operating profit 1.3 4.6 • Profit includes £1.7m from sale of investments No material disposals expected in H2 Carrying value of remaining ‘PFI-type’ investments is £4.1m Other capital employed includes interests in other schemes, L
Slide 28: HY 2014 Summary and Outlook
HY 2014 Summary and Outlook • Significant contribution from Urban Regeneration, in line with Group strategy HY 2014 • General construction margins still under severe pressure • No easing of pressure on construction margins expected in H2. Likely to remain difficult • Continued positive momentum in F
Slide 29: Questions
Questions MORGAN SINDALL GROUP