Morgan Sindall Group plc · LSE:MGNS
Morgan Sindall — H1 2023 Earnings Presentation
49 slides from Morgan Sindall's earnings presentation, Aug 3, 2023
Slide 1: Half year results
Half year results 3rd August 2023 to 30th June 2023
Slide 2: Agenda
Agenda • Introduction / John Morgan • Financial & operational review / Steve Crummett • Fit Out / Chris Booth • Markets & outlook / John Morgan HY Results 2023 2
Slide 3: Introduction
Introduction • Record H1 performance • Market conditions generally improving throughout the period • Balance sheet strength and significant daily cash • Upgraded expectations for FY 23 in June. Since then, no change Remain confident of another record performance HY Results 2023 3
Slide 4: Financial & operational review
Financial & operational review Steve Crummett
Slide 5: Summary of Group results
Summary of Group results Adjusted1 basis £m HY 23 HY 22 Change Revenue 1,935 1,698 +14% Operating profit 59.1 56.9 +4% Operating margin 3.1% 3.4% -30bps Net interest 0.7 (2.3) +£3.0m Profit before tax 59.8 54.6 +10% Tax (14.0) (10.9) -£3.1m Profit after tax 45.8 43.7 +5% Earnings per share (p) 98.9p
Slide 6: Summary by division
Summary by division Operating Operating Revenue Profit/(Loss)1 Margin1 £m change £m change % change Construction 470 +20% 12.0 +6% 2.6% -30bps Infrastructure 428 +15% 15.9 +24% 3.7% +30bps Fit Out 498 +9% 30.4 +43% 6.1% +150bps Property Services 97 +28% (4.1) -264% -4.2% -750bps Partnership Housing
Slide 7: Operating cash flow
Operating cash flow 12.9 -18.0 £91.7m net working 59.1 capital outflow • Operating cash outflow of £31.2m • Net working capital outflow of £91.7m • Includes working capital investment in -52.5 Regeneration activities of £52.5m -39.2 -31.2 • See appendices for ‘Payment Practices’ D reporting 6.5 Oper
Slide 8: Daily net cash balance
Daily net cash balance 400 MAX: £371m • Average daily net cash £ 268m 350 (HY 2022: £264m) 300 263m 250 200 • Period end net cash £ £m 150 (HY 2022: £274m) MIN: £195m 100 50 D - 1 Jan 30 Jun 31 Dec • FY 2023 average daily net cash (50) expected to be c£250m (100) (150) (200) (250) 2022 2023 Total Co
Slide 9: Secured order book
Secured order book £9.1bn £m vs HY 2022 vs FY 2022 Group secured order book Construction 888 +17% +11% Includes only: Infrastructure 1,628 -8% -10% Fit Out 1,217 +40% +45% • projects with signed contract or letter of intent Property Services 1,579 +23% +31% in place Partnership Housing 2,074 +27% +5
Slide 10: Divisional performances
Divisional performances
Slide 11: Construction
Construction by revenue £m HY 23 Change 15% Revenue 470 +20% Private sector 85% Operating profit1 12.0 +6% Public Operating margin1 2.6% -30bps sector Secured order book 888 +17% Education remains largest • Lots of activity in the market market at c50% Revenue up 20%, order book up 17%, preferred
Slide 12: Infrastructure
Infrastructure by revenue £m HY 23 Change Design Revenue 428 +15% 13% 87% Operating profit 15.9 +24% Infrastructure Operating margin 3.7% +30bps services Secured order book 1,628 -8% • Type and phasing of workload driving strong revenue and margin growth • Good growth in rail and nuclear. Highways w
Slide 13: Fit Out
Fit Out £m HY 23 Change Commercial offices Revenue 498 +9% 79% of revenue Operating profit 30.4 +43% Operating margin 6.1% +150bps London region Secured order book 1,217 +40% 59% of revenue • Excellent performance and another record result 60% of revenue ‘Traditional’ fit out work • Strong margin dr
Slide 14: Property Services
Property Services £m HY 23 Change Long-term order book Revenue 97 +28% 1 83% by value for 2025+ Operating profit (4.1) -264% Operating margin1 -4.2% -750bps Secured order book 1,579 +23% • Poor performance in difficult trading environment • Revenue growth driven by higher run-rate from newer contrac
Slide 15: Partnership Housing
Partnership Housing £m HY 23 Change Contracting revenue up 49% (at £214m) Revenue 373 +31% Mixed-tenure revenue up 14% (at £159m) Operating profit 10.1 -27% Operating margin 2.7% -220bps 805 mixed-tenure units completed (incl JVs) (HY 2022: 755) Secured order book 2,074 +27% Includes 340 open market
Slide 16: Urban Regeneration
Urban Regeneration £m HY 23 Change £120.5m capital employed at Revenue 96 -24% period end (£20.1m higher than 1 year end) Operating profit 6.0 -18% Secured order book 1,699 -24% c£95m average capital Average capital employed2 - last 12 months 104.0 +£12.1m employed for FY as projects complete in H2
Slide 17: Summary
Summary • Strong H1 performance • PBT1 up 10% • Driven by Fit Out. Other divisions performing well. Property Services needs fixing • Continued balance sheet strength • High-quality and growing order book • Interim dividend up 9% 1 Adjusted = before intangible amortisation of £2.2m and exceptional bu
Slide 18: Fit Out
MORGAN SINDALL GROUP
Slide 19: What we do
What we do We fit out and refurbish private and public sector offices and teaching spaces Established 1977 FY 2022 revenue £968m Design & Build (FY 2022) Traditional Fit Out 13% Design and Build • Work through clients’ 87% • Work directly with end users professional teams (Architects, Traditional Pr
Slide 20: Operational structure
Operational structure Chris Booth Paul Brazier Bobby Ewing Managing Director Commercial Director Finance Director Length of Service: Length of Service: Length of Service: 28 Years 31 Years 9 Years (10 Years as MD) (10 Years as CD) (2 Years as FD) Glasgow NORTHERN Leeds MAJOR Manchester CORE PROJECTS
Slide 21: Who do we work for
Who do we work for Other 6% • Commercial Office sector accounted for 73% of revenue in FY Media & Leisure 2022 (79% in HY 2023) 6% 13% Financial Services Telecoms & 22% • Financial Services, Real Estate and Professional Services technology markets represent Design & Build nearly half our clients 9%
Slide 22: Financial track record
Financial track record Strong track record through a full economic cycle Cash backed profits Consistent revenue growth and strengthening margin Consistent operating cashflow conversion over 10 years £1,000m £80m £400m £750m £60m £300m £52m £44m £44m £39m £37m £500m £32m £40m £200m £28m £24m £15m £25
Slide 23: Our Market
Our Market What do clients/consultants want from a fit out contractor? Increasing competitive advantage • Experts with technical competence and capability with environmental requirements, technical expertise and large scale project delivery • Certainty of delivery and quality. Delivers right first t
Slide 24: Our proposition
Our proposition What we offer How we do it 🗸🗸 Track record of consistent delivery and Disciplined in work selection. Stick to the core competencies technical capability and risk profile 🗸🗸 Known teams/individuals in the market with Focus on quality delivery and customer service seeking…
Slide 25: Case studies
MORGAN SINDALL GROUP
Slide 26: Case study – EBRD
Case study – EBRD Client European Bank for Reconstruction and Development Location Canary Wharf, London Size 370,000 sq ft The EBRD’s mission to ‘invest in changing lives’ and build a greener and more inclusive future for all, inspired Overbury to embed this message into the very core of the project
Slide 27: Case study – University of Portsmouth
Case study – University of Portsmouth Client University of Portsmouth Location Portsmouth, Hampshire Size 15,000 sq ft We set out to create a space that enables students and creators to explore next-generation extended reality technology in an industry-leading institution. We helped construct a seri
Slide 28: Case study – Great Portland Estates
Case study – Great Portland Estates Client Great Portland Estates Location Whitechapel, London Size 7,000 sq ft GPE's goal with Hickman was to ensure its workspaces, communal areas and amenities were all designed for creativity and authentic collaboration. As a gathering place for multiple tenants,
Slide 29: Fit Out: Looking ahead
Fit Out Looking ahead
Slide 30: Market drivers
Market drivers • Significant project requirements and lease events in London. • Energy performance criteria targets for 2027 has driven a refurbishment programme. 8% of London office space will be unlettable from March 2023 (F-G EPC Rating)1 51% of London office space anticipated to be unlettabl
Slide 31: Order Book and Pipeline
Order Book and Pipeline Order Book Split - By Year • Record Order Book of £1.2bn at HY23, up 40% 600 £521m H2 orders, 32% higher than last year 400 £696m orders for 2024 and beyond 13% • Greater visibility with orders into 2025 and beyond 200 Design & Build 0 • Strong demand in London but suppor
Slide 32: Growth opportunities
Growth opportunities • The highest volume of London refurbishment schemes starting since records began in 20051 with 37 new schemes covering 3.2 million sq. ft • Market is impacted by the Minimum Energy Efficiency Standard regulations (MEES) to achieve EPC B rating by 2030 13% • Developers are also
Slide 33: Medium-term target & 2023 outlook
Medium-term target & 2023 outlook • Medium-term target upgraded again based on current performance, market position and future prospects 13% • Revised expectation is to deliver annual operating profit in the range of £50m - £70m Design & Build • For 2023, current trading patterns are anticipated to
Slide 34: Markets & outlook
Markets & outlook John Morgan
Slide 35: General market themes
General market themes • Markets generally much less volatile • Public and regulated sectors are still very active • Inflation manageable and reducing • Minimal issues on availability of materials and labour • Heightened risk of financial failure in supply chain HY Results 2023 35
Slide 36: Market conditions by division
Market conditions by division Generally positive. Driven by public sector frameworks Heightened risk of supply chain failure Construction Balance sheet of increasing importance to clients/supply chain creating barriers for the right projects Continued need for Infrastructure investment in UK Infrast
Slide 37: Outlook and medium-term targets
Outlook and medium-term targets Medium-term target: operating margin of 2.5%-3% pa, revenue of £1bn Construction 2023: Expect margin around middle of range and good progress towards £1bn revenue Medium-term target: operating margin of 3.5%-4% pa, revenue of £1bn Infrastructure 2023: Expect margin sl
Slide 38: Summary
Summary • Markets are manageable • Continue to keep a strong balance sheet and significant net cash balance at all times • Focus on long-term workstreams and long-term client relationships • Increased medium-term target for Fit Out • Reduced medium-term target for Property Services • Upgraded expect
Slide 39: Questions
MORGAN SINDALL GROUP
Slide 40: Half year results
Half year results 3rd August 2023 to 30th June 2023
Slide 41: Appendices
MORGAN SINDALL GROUP
Slide 42: Net finance expense
Net finance expense £m HY 23 HY 22 Interest income on bank deposits 4.3 - Amortisation of fees & non-utilisation fees (1.0) (1.1) Interest expense on lease liabilities (IFRS 16) (1.1) (1.0) Other (1.5) (0.2) Total 0.7 (2.3) HY Results 2023 42
Slide 43: Tax
Tax £m HY 23 HY 22 Profit before tax 58.0 53.7 Less: share of underlying1 net profit in JVs (3.8) (3.1) Profit subject to tax 54.2 50.6 Statutory tax rate 23.50% 19.0% Current tax charge at statutory rate (12.7) (9.6) Tax on underlying1 joint venture profits2 (0.9) (0.6) Tax on exceptional items 1.8
Slide 44: Adjusted earnings per share
Adjusted earnings per share £m HY 23 HY 22 Profit after tax 46.3 43.0 Adjusted for: Exceptional operating items (net of tax) (2.2) - Amortisation of intangibles (net of tax) 1.7 0.7 Adjusted earnings 45.8 43.7 Basic average number of shares 46.3m 45.6m Adjusted earnings per share 98.9p 95.8p HY Resu
Slide 45: Payment practices
Payment practices 6m to 30th June 2023 Invoices not Average time Invoices paid to pay invoices paid within within 60 days • Note that Construction and agreed terms Infrastructure report their payment practices data under 24 days 4% 99% Construction & Infrastructure the same legal entity - - - 24 day
Slide 46: Net cash movement
Net cash movement 354.6 263.1m -37.3 -31.5 • Period end net cash of £ -22.7 263.1 Operating cash flow (Slide 7) (£31.2m) Tax (£9.0m) Interest (non-JV) 2.9 D Free cash flow (A) (£37.3m) Opening A B C Closing net cash net cash A = Free cash flow. See table B = Dividends C = Other. Includes net increas
Slide 47: Summary balance sheet
Summary balance sheet £m 30 Jun 23 31 Dec 22 Intangibles 219.3 221.2 PP&E 75.7 74.8 Investments (including JVs)1 109.2 84.8 Net working capital 0.3 (89.9) Current and deferred tax (15.1) (12.4) Net cash 263.1 354.6 Lease liabilities (53.8) (56.9) Provisions1 (86.4) (76.9) Other2 1.2 (3.1) Net assets
Slide 48: Provisions
Provisions £m Provisions as at 31 December 2022 76.9 Additions: Exceptional Building safety (non-JV element) 8.6 Other 10.5 Less: Utilised in period (2.2) Includes release of Released (7.4) £4.5m of non-JV Building Safety Provisions as at 30 June 2023 86.4 provision HY Results 2023 48
Slide 49: Capital employed in Regeneration
Capital employed1 in Regeneration £m Total Partnership Urban Regeneration Housing Regeneration Total net land & regeneration WIP 303.9 225.1 78.8 Unsold completed units (excl. joint ventures) 29.0 19.3 9.7 Amounts invested in joint ventures1 113.7 65.0 48.7 Shared equity loans and investment propert