Morgan Sindall Group plc · LSE:MGNS
Morgan Sindall — H1 2019 Earnings Presentation
50 slides from Morgan Sindall's earnings presentation, Aug 7, 2019
Slide 1: Half Year Results
Half Year Results To 30 June 2019 7 August 2019
Slide 2: Agenda
Agenda Introduction | John Morgan HY 2019 Financial & Operational Review | Steve Crummett Infrastructure | John Morgan
Slide 3: Introduction
Introduction Strong first half performance Cash remains strong and balance sheet is increasingly a key differentiator Optimistic about the opportunities ahead Backdrop of negative news flow around the industry Full year guidance upgraded. Slightly ahead of previous expectations 3
Slide 4: HY 2019 Financial & Operational Review
HY 2019 Financial & Operational Review Steve Crummett
Slide 5: Financial Highlights
Financial Highlights £ 1.4bn + 20% £ 123m + 11% Revenue level vs Profit before tax1 Average daily Interim dividend HY 2018 up 20% to £36.3m net cash of £123m up 11% to 21p per share Eps1 up 15% £114m closing net cash 1 Adjusted 5
Slide 6: Summary Income Statement
Summary Income Statement £m HY 2019 HY 2018 % change Revenue 1,421 1,423 -% Operating profit1 37.5 31.9 +18% Operating margin1 2.6% 2.2% +40bps Profit before tax1 36.3 30.2 +20% Earnings per share1 64.2p 55.6p +15% Interim dividend per share 21.0p 19.0p +11% 1 Adjusted - Before intangible amortisati
Slide 7: Summary by division
Summary by division Operating £m Revenue Operating Margin1 Profit/(Loss)1 HY 2019 % HY 2019 % HY 2019 bps Construction & Infrastructure 679 +3% 13.9 +23% 2.0% +30bps Fit Out 407 -4% 16.4 -13% 4.0% -40bps Property Services 55 +12% 1.6 +220% 2.9% +190bps Partnership Housing 238 +3% 6.4 +39% 2.7% +70bp
Slide 8: Cash Flow – half year
Cash Flow – half year 11.3 (11.6) £m (53.7) (53.1) › Reflects usual working capital 37.5 movements from year end (74.6) (81.0) › Working capital movement includes 0 investment in Regeneration (62.9) (63.2) activities of £54m 4.8 (1.0) (5.4) › Other working capital outflow driven by higher contract a
Slide 9: Payment practices
Payment practices Payment practices reporting for Construction activities Invoices not paid Average time to › Significant improvement in average time to pay 6m to 30/06/19 within agreed pay invoices terms invoices in Construction & Infrastructure Construction & Infrastructure 36 days 19% Reduced to
Slide 10: Net Cash
Net Cash 207.0 (81.0) £123m Half year average daily net cash £m (15.3) 3.2 £114m Period end net cash 113.9 > £90m Estimated average daily net cash for FY 2019 £180m Committed bank facilities Opening Free cash Dividends Other 1 Closing net expiring in 2022 net cash flow cash 1‘Other’ includes net loa
Slide 11: Balance Sheet
Balance Sheet £m HY HY 2019 2018 Strong balance sheet Intangibles 216.8 215.5 Net cash and significant undrawn PP&E 71.7 57.3 committed facilities Investments (including JVs) 84.9 94.7 No pension concerns Shared equity loan receivables 11.0 14.7 Tangible net assets of £144m Net working capital1 (37.
Slide 12: Order Book and Pipeline
Order Book and Pipeline £ 7.5bn Total future workload £ 4.2bn Order book £ 3.3bn Regeneration & development pipeline › Up 19% from FY 2018, up 17% from HY 2018 › Up 6% from FY 2018, down 3% from HY 2018 › Aggregate of various divisional movements › Only includes secured schemes (no preferred bidder
Slide 13: Divisional performances
Divisional performances MORGAN SINDALL GROUP
Slide 14: Construction & Infrastructure
Revenue split (by activity) Construction & Infrastructure 47% Construction £m HY 2019 HY 2018 Change 53% Infrastructure Revenue 679 662 +3% Revenue growth (vs HY 2018) Operating profit 13.9 11.3 +23% Margin % 2.0% 1.7% +30bps -7% Construction (at £317m) +13% Infrastructure (at £362m) Clear and consi
Slide 15: Order book – Construction & Infrastructure
Construction & Infrastructure £2,377m Strong period of work winning. Divisional order book of £577m £2.4bn £1,922m £437m Up 24% from the year end, up 35% from half year › Infrastructure up 21%, Construction up 32% (vs FY 2018) Order book › Construction growth driven by conversion of preferred bidder
Slide 16: Fit Out
Fit Out Revenue split £m HY 2019 HY 2018 Change 69% London Revenue 407 426 -4% 31% Other Regions Operating profit 16.4 18.8 -13% Margin % 4.0% 4.4% -40bps 81% Traditional Fit Out Performed as expected 19% ‘Design & Build’ › General tightening of overall market conditions › No underlying change to ba
Slide 17: Order Book – Fit Out
Fit Out Order book of £464m at period end £528m £464m › Down 12% on HY 2018 › Down 1% compared to year end position of £470m £331m £320m Order Book Secured and visible workload indicates good H2 volumes £468m £439m › £331m is secured for H2 2019 › £11m ahead of equivalent position last year £208m Ne
Slide 18: Property Services
Property Services Order book £ 962m £m HY 2019 HY 2018 Change Up 33% from FY 2018 Revenue 55 49 +12% Up 24% from HY 2018 1 Operating profit 1.6 0.5 +220% Margin % 2.9% 1.0% +190bps Revenue growth driven through existing contracts and new contract wins. Plenty of work to go for 2.9% margin from impro
Slide 19: Partnership Housing
Partnership Housing Revenue split (by activity) £m HY 2019 HY 2018 Change 45% Mixed-tenure Revenue 238 231 +3% 55% Contracting Operating profit 6.4 4.6 +39% Margin % 2.7% 2.0% +70bps Revenue growth (vs HY 2018) Better performance, but still early days + 22% Mixed-tenure - 8% Contracting › Evidence o
Slide 20: Partnership Housing workload and capital employed
Partnership Housing Total workload £1.1bn £m HY 2019 HY 2018 Change Order Book £ 352m Average capital employed1 Up 8% from FY 2018 136.8 103.5 +£33.3m (last 12 months) Capital employed1 at period end 155.6 118.2 +£37.4m Regeneration Pipeline £ 751 m Up 6% from FY 2018 Capital employed increased as p
Slide 21: Urban Regeneration
Urban Regeneration 97.5m £ Capital employed at period end £m HY 2019 HY 2018 Change Revenue Operating profit 44 8.3 62 6.1 -29% +36% £ 105.3m Average capital employed LTM Average capital employed1 105.3 102.1 +£3.2m (last 12 months) Capital employed1 at period end 19% 97.5 114.0 -£16.5m ROCE2 Strong
Slide 22: Investments
Investments £m Operating loss HY 2019 (0.9) HY 2018 (1.1) Change n/a £ 419m Regeneration pipeline 1 Average capital employed (last 12 months) 37.8 36.3 +£1.5m Capital employed1 at period end 33.8 41.8 -£8.0m Generally good progress across various JVs and developing new opportunities for high quality
Slide 23: HY 2019 Summary and FY Outlook
HY 2019 Summary and FY Outlook Strong performance in HY 2019. Upgraded FY 2019 expectations Continued balance sheet strength Average daily net cash for FY 2019 expected to be in excess of £90m Interim dividend up 11%
Slide 24: Infrastructure
Infrastructure John Morgan MORGAN SINDALL GROUP
Slide 25: Introduction
Introduction Good progress made. Long way to go. Further progress expected Growing turnover and margin Medium-term operating margin target upgraded to 3% (from 2.5%) High visibility of earnings 25
Slide 26: Revenue, Profit & Margin
Revenue, Profit & Margin 2.0% 13.7 O P E R AT I N G P R O F I T £ m 674 1.7% 1.7% 588 10.1 2.1% 550 533 9.2 7.7 REVENUE £m 362 0.7% 3.9 2015 2016 2017 2018 2019 HY 2015 2016 2017 2018 2019 HY 26
Slide 27: Growing order book
Growing order book £2,000 £1,800 High hurdle rate for work to be £1,600 included in the order book £1,400 £1,200 125% growth in the order book £1,000 £m over last 3.5 years £800 £600 Circa 90%+ of order book in £400 frameworks £200 £0 Long-term order book. Revenue 2015 2016 2017 2018 2019 HY expecte
Slide 28: Strategy
Strategy More long-term frameworks Reduced reliance on joint ventures Working for key customers with long-term workstreams Fewer high profile jobs Major projects only for key customers with appropriate risk/return Social value and innovation 28
Slide 29: Sectors we work in
Sectors we work in FY18 Revenue Spilt by Sector Other, 2% Aviation, 9% Water, 21% Aviation Nuclear Highways, 18% Energy Rail Highways Water Energy, 9% Rail, 22% Nuclear, 19% 29
Slide 30: Aviation
Heathrow — BrITIsHAIRWAYSs Aviation MORGAN SINDALL GROUP
Slide 31: Aviation
Aviation REVENUE Well placed at Heathrow to £33m HY 2019 potentially benefit from expansion £63m FY 2018 Relationship with Heathrow – over 25 years ORDER BOOK £201m HY 2019 31
Slide 32: Energy
MORGAN SINDALL GROUP
Slide 33: Energy
Energy REVENUE High voltage transmission market £34m HY 2019 (both overhead line and underground £60m FY 2018 cable) Underweight in terms of market share with National Grid ORDER BOOK £139m HY 2019 Potential for growth with Scottish and Southern Electricity Networks A growth area 33
Slide 34: Highways
Highways TRANSPORT FOR LONDON 5 highways england mM ORGAN SINDALL GROUP
Slide 35: Highways
Highways REVENUE Underweight in terms of market £62m HY 2019 share with Highways England £124m FY 2018 Potential for growth with Local Authority frameworks ORDER BOOK £207m HY 2019 Expect to grow presence in this sector 35
Slide 36: Nuclear
6 Defence Infrastructure Organisation Nuclear
Slide 37: Nuclear
Nuclear REVENUE Sellafield PPP 20 year partnership + £66m HY 2019 Sellafield ISA (2022) £126m FY 2018 £1.6bn estimated for the Sellafield PPP. In the order book at £370m ORDER BOOK £803m HY 2019 Potential for growth with Defence Infrastructure Organisation framework 37
Slide 38: Rail
eo TRANSPORT NetworkRail FOR LONDON Rail
Slide 39: Rail
Rail REVENUE Underweight in terms of market £85m HY 2019 share with Network Rail £151m FY 2018 Expect growth from TfL and London Underground ORDER BOOK £300m HY 2019 A key target growth sector 39
Slide 40: Water
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Slide 41: Water
Water REVENUE Relationship with Welsh Water of £72m HY 2019 20 years since award of AMP3, £140m FY 2018 awaiting further 5 year extension to AMP7 Not seen as a growth sector for us ORDER BOOK £147m HY 2019 In JV on Western Section of Thames Tideway 41
Slide 42: Infrastructure Summary
Infrastructure Summary Order book has grown and expect turnover to follow › 89% visibility of work for 2020. 79% Order book 10% preferred bidder › 60% visibility of work for 2021. 48% Order book 12% preferred bidder Expect medium-term operating profit margin of 3% Avoiding high profile jobs Brexit -
Slide 43: Summary
Summary Strong first half performance and positive outlook Plenty of growth in existing businesses Simple strategy based on ‘self-help’ and organic growth Maintaining positive momentum against negative industry news flow Keeping our discipline 43
Slide 44: Appendices
Appendices MORGAN SINDALL GROUP
Slide 45: Net Finance Expense
Net Finance Expense £m HY 2019 HY 2018 Interest payable on project finance & other debt - (0.9) Amortisation of fees & non-utilisation fees (0.8) (1.1) Interest expense on lease liabilities (IFRS 16) (0.8) (0.6) Interest from JVs 0.5 1.0 Other (0.1) (0.1) Total (1.2) (1.7) 45
Slide 46: Tax
Tax £m HY 2019 HY 2018 Profit before tax 35.5 29.9 Less: share of net JV profit 1 (0.2) (0.3) Profit subject to tax 35.3 29.6 Statutory tax rate 19.0% 19.0% Current tax charge at statutory rate (6.7) (5.6) Other adjustments (0.5) 0.2 Tax charge (7.2) (5.4) 1 Most of the Group's joint ventures are pa
Slide 47: Adjusted Earnings per Share
Adjusted Earnings per Share £m HY 2019 HY 2018 Profit after tax and minority interest 28.3 24.5 Adjusted for: Amortisation of intangibles (net of tax) 0.6 0.2 Adjusted earnings 28.9 24.7 Average number of shares 45.0m 44.4m Adjusted earnings per share 64.2p 55.6p 47
Slide 48: Cash Flow – last twelve months
Cash Flow – last twelve months £ 49.7m Operating cash flow 55% £m 20.1 (26.6) Cash Conversion 91.1 (45.0) 10.1 49.7 (2.6) (12.7) 34.4 Operating Non-cash Net capex & Working Operating Net interest Free cash 1 Other 3 Tax Profit adjmts 2 finance leases Capital cash flow (non JV) flow 1 Before intangib
Slide 49: Capital Employed in Regeneration
Capital Employed in Regeneration £m Regeneration Partnership Housing Urban Regeneration Total net land & regeneration WIP 295 238 57 Unsold completed units (excl. joint ventures) 20 15 5 Amounts invested in joint ventures 46 7 39 Shared equity loans and investment properties 16 16 - Other working ca
Slide 50: Urban Regeneration Pipeline
Urban Regeneration Pipeline Scotland 0% Other › Total workload of c£2.2bn, Yorks & Retail 3% 1% up 6% from FY 2018 NE 16% SE & London Offices 31% 44% › Of which, regeneration & development pipeline of £2,112m, up 8% North West 37% Leisure 8% Residential 50% South West Industrial 7% 3% 50