Morgan Sindall Group plc · LSE:MGNS
Morgan Sindall — H1 2024 Earnings Presentation
37 slides from Morgan Sindall's earnings presentation, Aug 8, 2024
Slide 1: Half Year 2024 Results Presentation
Half Year 2024 Results Presentation to 30th June 2024 8th August 2024
Slide 2: Agenda
Agenda • Group highlights – John Morgan • CFO first impressions – Kelly Gangotra • Financial & operational review – Kelly Gangotra • Markets & outlook – John Morgan • Q&A HY2024 Page 2
Slide 3: Group Highlights
Group Highlights • Record H1 performance £2.2bn +14% Group revenue • Inflation now more manageable • Balance sheet strength and significant daily cash £70.1m +17% Adjusted profit before tax • Full year performance expected to be slightly ahead of our previous expectations 41.5p +15% Interim Dividend
Slide 4: The Partnerships, Fit Out and Construction Services Group
The Partnerships, Fit Out and Construction Services Group HY2024 Page 4
Slide 5: CFO Reflections and priorities
CFO Reflections and priorities Reflections Short-term priorities Medium-term priorities ❖ Strong culture, core values and right ❖ Maintain the status quo on risk ❖ Capital allocation to optimise behaviours management Partnerships growth ❖ Clear long-term strategy & vision ❖ Property Services turnaro
Slide 6: Financial & operational review
Financial & operational review Kelly Gangotra
Slide 7: Summary of Group results
Summary of Group results Adjusted1 basis £m HY 24 HY 23 Change Revenue 2,214 1,935 +14% Operating profit 65.5 59.1 +11% Operating margin 3.0% 3.1% -10bps Net interest 4.6 0.7 +£3.9m Profit before tax 70.1 59.8 +17% Tax (17.8) (14.0) -£3.8m Profit after tax 52.3 45.8 +14% Earnings per share 112.5p 98
Slide 8: Summary by division
Summary by division Operating Operating Revenue Profit/(Loss)1 Margin1 £m change £m change % change Construction 519 +10% 14.1 +18% 2.7% +10bps Infrastructure 530 +24% 19.7 +24% 3.7% - Fit Out 630 +26% 41.3 +36% 6.6% +50bps Property Services 103 +6% (11.0) -168% -10.7% -650bps Partnership Housing 38
Slide 9: Operating cash flow
Operating cash flow £19.8m £65.5m • Operating cash outflow of £36.1m • Net working capital outflow of £104.9m (£22.4m) (£7.6m) ❖ Includes working capital investment in Partnerships activities of (£36.1m) £97.3m £5.9m (£97.3m) Operating Operating profit1 A B C D E Cashflow A = Non-cash adjustments. I
Slide 10: Daily net cash balance
Daily net cash balance MAX: £489m 550 • Average daily net cash of £372m 500 (HY 2023: £268m) 450 400 • Period end net cash of £351m 350 300 250 (HY 2023: £263m) 200 150 100 MIN: £295m • FY 2024 average daily net cash 50 expected to be in excess of c£350m - £m 1 Jan 30 Jun 31 Dec (50) (100) (150) (20
Slide 11: Secured order book
Secured order book £8.7bn £m vs HY 2023 vs FY 2023 Group secured order book Construction 856 -4% +8% Includes only: Infrastructure 1,682 +3% - • projects with signed Fit Out 1,210 -1% +10% contract or letter of intent Property Services 1,006 -36% -32% in place Partnership Housing 2,081 - +2% • expec
Slide 12: Divisional performance
Divisional performance
Slide 13: Construction
Construction £m HY 24 Change By revenue Revenue 519 +10% 15% Operating profit1 14.1 +18% Operating margin1 2.7% +10bps 85% Secured order book 856 -4% Public Sector Private Sector • Market remains active ❖ £0.9bn secured order book plus £1.2bn at preferred bidder stage provides visible pipeline of c£
Slide 14: Infrastructure
Infrastructure £m HY 24 Change By revenue Revenue 530 +24% 14% Operating profit 19.7 +24% Operating margin 3.7% - 86% Secured order book 1,682 +3% Infrastructure Services Design • Project type and phasing of workload driving revenue and margin growth • Good growth in rail, energy and nuclear • Long-
Slide 15: Fit Out
Fit Out £m HY 24 Change Revenue 630.0 +26% Commercial offices Operating profit 41.3 +36% 87% of revenue Operating margin 6.6% +50bps Secured order book 1,210 -1% London Region 72% of revenue • Another record result and an excellent performance, driven through project delivery and focus on customer e
Slide 16: Property Services
Property Services £m HY 24 Change Revenue 103 +6% Long-term order book Operating profit1 (11.0) -168% 89% by value for 2025+ Operating margin1 -10.7% -650bps Secured order book 1,006 -36% • Remediation programme progressing really well, on track to implement fully by end of 2024 ❖ New management tea
Slide 17: Partnership Housing
Partnership Housing £m HY 24 Change Revenue 381 +2% 784 mixed-tenure units Operating profit 11.7 +16% completed1 (HY 2023: 805) Inc. 364 open market sales, 7% higher (HY 2023: 340) Operating margin 3.1% +40bps Secured order book 2,081 - £222k ASP of mixed-tenure Average capital employed1– last 12 mo
Slide 18: Mixed Use Partnerships
Mixed Use Partnerships £m HY 24 Change Revenue 59 -38% £92m capital employed at period end (£13m higher than Operating profit1 0.5 -92% year-end) Secured order book 1,830 +8% Average capital employed2 – last 12 months 89.9 -£14.1m c£90m average capital employed for FY 2024 ROCE2 – last 12 months 10%
Slide 19: Summary
Summary • Record H1 performance • PBT1 up 17% • Strong and good quality order book • Continued balance sheet strength • Interim dividend up 15% 1 Adjusted = before intangible amortisation of £0.3m and exceptional building safety credit of £0.3m HY2024 Page 19
Slide 20: Markets & Outlook
Markets & Outlook John Morgan
Slide 21: General market themes
General market themes • Market conditions overall are continuing to improve • Public and regulated sectors remain very active • Inflation manageable though still some cost inflation in the system • Supply chain volatility remains a live risk HY2024 Page 21
Slide 22: Market Conditions & Outlook
Market Conditions & Outlook Market Conditions Medium Term Market Outlook Good visibility of work through established frameworks mainly with the Construction public sector Education, our largest market, is particularly strong Strong pipeline of new projects especially in defence, energy and nuclear I
Slide 23: Medium-term targets
Medium-term targets Medium-term target Operating margin of 2.5%-3% pa, revenue of £1bn Construction Operating margin of 3.5%-4% pa, revenue of £1bn Infrastructure Annual operating profit within the range £50m - £70m Fit Out Annual operating profit of £7.5m Property Services Operating margin of 8%, R
Slide 24: 2024 Divisional outlook
2024 Divisional outlook Divisional 2024 outlook Expect to meet both revenue and margin targets. Construction Expect margin to be mid-range and strong progress towards £1bn revenue Infrastructure Operating profit is likely to well exceed the top end of the medium-term target range for Fit Out this ye
Slide 25: Summary
Summary • Group in good shape • Expect further continuation of strong organic growth • Financial stability of supply chain remains a challenge • Importance of strong balance sheet and significant net cash balance at all times • Expect full year performance for 2024 to be slightly ahead of our previo
Slide 26: Questions
MORGAN SINDALL GROUP
Slide 27: Appendices
MORGAN SINDALL GROUP
Slide 28: Net Finance Income
Net Finance Income £m HY 24 HY 23 Interest income on bank deposits 8.9 4.3 Amortisation of fees & non-utilisation fees (1.0) (1.0) Interest expense on lease liabilities (IFRS 16) (1.8) (1.1) Other (1.5) (1.5) Total 4.6 0.7 HY2024 Page 28
Slide 29: Tax
Tax £m HY 24 HY 23 Profit before tax 70.1 58.0 Less: share of underlying1 net loss / (profit) in JVs 0.1 (3.8) Profit subject to tax 70.2 54.2 Statutory tax rate 25.0% 23.50% Current tax charge at statutory rate (17.6) (12.7) Tax on underlying1 joint venture profits2 - (0.9) Tax on exceptional items
Slide 30: Adjusted earnings per share
Adjusted earnings per share £m HY 24 HY 23 Profit after tax 52.6 46.3 Adjusted for: Exceptional operating items (0.3) (2.2) Amortisation of intangibles assets 0.3 2.2 Tax relating to the above items (0.3) (0.5) Adjusted earnings 52.3 45.8 Basic weighted average number of shares 46.5m 46.3m Adjusted
Slide 31: Payment practices
Payment practices 6 months to 30th June 2024 Invoices not Average time to Invoices paid paid with pay invoices within 60 days agreed terms Construction & Infrastructure1 25 days 4% 98% - - - Fit Out 20 days 6% 97% - 1% 1% Property Services 35 days 2% 99% 9 days 1% 2% Partnership Housing 32 days 13%
Slide 32: Net cash movement
Net cash movement £460.7m (£50.0m) • Period end net cash of £350.5m (£36.5m) (£23.7m) £350.5m Operating cash flow (Slide 9) (£36.1m) Tax (£22.3m) Interest (non-JV) £8.4m Free cash flow (A) (£50.0m) Opening A B C Closing net net cash cash A = Free cash flow. See table B = Dividends C = Other. Include
Slide 33: Summary balance sheet
Summary balance sheet £m 30 Jun 24 31 Dec 23 Intangibles 218.3 218.6 PP&E 93.8 86.0 Investments (including JVs)1 121.9 107.4 Net working capital2 (41.0) (136.0) Current and deferred tax (5.8) (10.6) Net cash 350.5 460.7 Lease liabilities (66.0) (63.8) Provisions1 (93.0) (96.1) Other3 1.4 1.9 Net ass
Slide 34: Provisions
Provisions Building £m Total Other Safety Provisions as at 31 December 2023 96.1 56.1 40.0 Additions 8.0 0.9 7.1 Utilised (6.4) (2.5) (3.9) Released (4.7) (1.8) (2.9) Provisions as at 30 June 2024 93.0 52.7 40.3 HY2024 Page 34
Slide 35: Capital Employed - Partnerships
Capital Employed - Partnerships £m Total Partnership Mixed Use Partnerships Housing Partnerships Total net land & Partnership WIP 340.8 287.2 53.6 Unsold completed units (excl. joint ventures) 35.1 35.1 - Amounts invested in joint ventures1 121.1 83.6 37.5 Shared equity loans and investment properti
Slide 36: Capital Allocation Policy
Capital Allocation Policy Overarching principle to hold significant net cash balances at all times Cash generation and maintain strong • Enhance competitive advantage and win future work balance sheet • Ensure downside protection. Maintain a buffer Maximise investment in current • Partnership Housin
Slide 37: Morgan Sindall Group
MORGAN SINDALL GROUP