Morgan Sindall Group plc · LSE:MGNS
Morgan Sindall — FY2019 Earnings Presentation
46 slides from Morgan Sindall's earnings presentation, Feb 20, 2020
Slide 1: Full Year Results
Full Year Results To 31 December 2019 20 February 2020
Slide 2: Agenda
Agenda Introduction | John Morgan FY 2019 Financial & Operational Review | Steve Crummett Strategy: Medium-Term Targets and 2020 Outlook | John Morgan
Slide 3: Introduction
Introduction Strong set of results Strategic focus on Construction and Regeneration Cash and balance sheet allow investment in the business for the long-term Positive momentum across the Group 3
Slide 4: FY 2019 Financial & Operational Review
FY 2019 Financial & Operational Review Steve Crummett
Slide 5: Financial Highlights
Financial Highlights £ 3.1bn + 11% £ 109m + 11% Revenue Profit before tax1 Average daily Total dividend up 3% to £3.1bn up 11% to £90.4m net cash up 11% to 59p per of £109m, up £10m share Eps1 up 6% £193m closing net cash 1 Adjusted 5
Slide 6: Summary Income Statement
Summary Income Statement £m FY 2019 FY 2018 % change Revenue 3,071 2,972 +3% Operating profit1 93.1 85.5 +9% Operating margin1 3.0% 2.9% +10bps Profit before tax1 90.4 81.6 +11% Earnings per share1 161.2p 151.8p +6% Total dividend per share 59.0p 53.0p +11% 1 Adjusted - Before intangible amortisatio
Slide 7: Summary by division
Summary by division Operating £m Revenue Operating Margin1 Profit/(Loss)1 FY 2019 % FY 2019 % FY 2019 bps Construction & Infrastructure 1,486 +11% 32.3 +20% 2.2% +20bps Fit Out 839 +1% 36.9 -16% 4.4% -90bps Property Services 115 +15% 4.3 +115% 3.7% +170bps Partnership Housing 513 -1% 18.3 +50% 3.6%
Slide 8: Cash Flow
Cash Flow › Working capital increase includes net investment in Regeneration activities of c£33m › Total working capital movement includes (61.9) a reduction of £42m in Contract 21.5 (30.1) £m Liabilities 93.1 (32.6) › No other material changes to working capital metrics (29.3) 12.8 35.4 (0.6) (12.8
Slide 9: Payment Practices
Payment Practices Payment practices reporting for Construction activities Invoices not Average Invoices 6m to 31st December 2019 time to pay paid within paid within › Continued improvement in average time to pay agreed invoices terms 60 days invoices in Construction & Infrastructure Construction & 3
Slide 10: Daily Net Cash Profile
Daily Net Cash Profile Average daily net cash (2018: £99m) £109m £250 2019 MAX: £207m £200 Bank facilities of £180m through to £150 2022 £100 Significant headroom against £m £50 committed facilities. Facilities 2019 MIN: £63m undrawn £0£0 (£50) Group is committed to maintaining average daily net cas
Slide 11: Net Cash Movement
Net Cash Movement 22.0 (24.8) £m £193m Year 207.0 (11.5) end 192.7 net cash Opening Free cash 1 Closing Dividends Other net cash flow net cash 1‘Other’ includes net loans advanced to JVs (£3.3m), payment to acquire an additional interest in a JV (£1.6m), and purchase of shares in the Company by the
Slide 12: Balance Sheet
Balance Sheet £m FY FY 2019 2018 Strong balance sheet Intangibles 223.6 216.4 Net cash and significant undrawn PP&E 79.5 62.6 committed facilities Investments (including JVs) 90.7 88.5 No pension liability Shared equity loan receivables 8.4 13.0 Tangible net assets of £173m Net working capital (91.9
Slide 13: Secured Workload
Secured Workload +14% £ 7.6bn Total secured workload on FY 2018 £ 3.7bn Construction +17% on FY 2018 £ 3.9bn Regeneration +11% on FY 2018 › Includes Construction & Infrastructure, Fit Out, › Includes Partnership Housing, Urban Regeneration, Property Services Investments › Growth from all divisions.
Slide 14: Divisional performances
Divisional performances MORGAN SINDALL GROUP
Slide 15: Construction & Infrastructure
Revenue split (by activity) Construction & Infrastructure 42% Construction £m FY 2019 FY 2018 Change 58% Infrastructure Revenue 1,486 1,343 +11% Revenue growth (vs FY 2018) Operating profit 32.3 27.0 +20% Margin % 2.2% 2.0% +20bps 4 + % Construction (at £619m) +16% Infrastructure (at £867m) Performa
Slide 16: Construction & Infrastructure Order book
Construction & Infrastructure £2,271m Order book 18% Strong period of work winning. Divisional order book of £2.3bn £514m + £1,922m on FY 2018 Up 18% from the year end £405m › Construction up 27%, Infrastructure up 16% (vs FY 2018) Continued focus on quality Order book › 98% of Construction order bo
Slide 17: Fit Out
Fit Out Revenue split £m FY 2019 FY 2018 Change 70% London Revenue 839 831 +1% 30% Other Regions Operating profit 36.9 43.8 -16% Margin % 4.4% 5.3% -90bps 81% Traditional Fit Out 19% ’Design & Build’ Demand remains strong with revenue up to £839m Margin robust at 4.4% despite general tightening of o
Slide 18: Fit Out Order Book
Fit Out Order book £480m + 2% Order book of £480m at year end £470m on FY 2018 › Up 2% on FY 2018, up 3% from HY19 Order Book £468m Secured workload indicates good H1 2020 volumes £439m £419m › £419m is secured for FY 2020, but 5% lower than at the same £439m point last year Next 12 months › no sign
Slide 19: Property Services
Property Services Order book £ 904m Up 25% from FY 2018 £m FY 2019 FY 2018 Change Revenue 115 100 +15% plus £1.5bn pipeline of Operating profit1 4.3 2.0 +115% tendering opportunities Margin %1 3.7% 2.0% +170bps Revenue growth driven by increasing scope of existing contracts and three new contract wi
Slide 20: Partnership Housing
Partnership Housing Revenue split (by activity) 52% Mixed-tenure £m FY 2019 FY 2018 Change Revenue 513 519 -1% 48% Contracting Operating profit 18.3 12.2 +50% Margin % 3.6% 2.4% +120bps Revenue growth (vs FY 2018) +21% Mixed-tenure Positive progress for Partnership Housing › Management team appointe
Slide 21: Partnership Housing
Partnership Housing Order Book £ 1.1bn Up 6% from FY 2018 £m FY 2019 FY 2018 Change Average capital employed1 151.6 115.0 +£36.6m (last 12 months) Capital employed1 at year end 132.3 106.6 +£25.7m Capital employed increased as planned › Year end capital employed up by £25.7m from FY 2018 › Last 12 m
Slide 22: Urban Regeneration
Urban Regeneration £ 108m Capital employed at year end 102m £m FY 2019 FY 2018 Change Revenue 119 185 -36% £ Average capital employed LTM Operating profit 19.4 19.6 -1% Average capital employed1 101.8 108.8 -£7.0m 19% (last 12 months) Capital employed1 at period end 107.7 89.4 £18.3m LTM ROCE2 Deliv
Slide 23: Investments
581m Investments £ Order Book £m FY 2019 FY 2018 Change Operating loss1 (2.4) (2.4) n/a Generally good progress across various JVs and developing new opportunities for high quality construction & regeneration work for the rest of the Group Loss for the year reflects the relative immaturity of some o
Slide 24: Being a responsible business (ESG)
Being a responsible business (ESG)
Slide 25: Being a responsible business (ESG)
Being a responsible business (ESG) Framework for a common strategy focused on all A- score stakeholders Report on progress through set of established KPIs 3.4 / 5 score We support the UN Sustainable Development Goals 25
Slide 26: Some key measures
Some key measures Total Commitment KPIs 2019 actual 2025 target Horizon ambition Protecting people • Reduction in lost time incidents (LTI) from 2018 17% 20% Zero incidents Developing people • Average training days per employee per year 4.1 5.0 6.0 • Percentage of employees leaving voluntarily 11.7%
Slide 27: Improving the environment
Improving the environment Key issues KPI – Carbon emissions • Carbon data independently audited since 2010 • 1 of 4 UK construction companies with an A- CDP ‘leadership’ ranking Climate • Targets approved by the Science Based Targets Initiative1 change • 13% reduction in Carbon emissions in 2019 (Sc
Slide 28: Enhancing communities
Enhancing communities Social Value Bank Key issues Social enterprises • All Together Cumbria and Basworx • Providing training and job opportunities for local people in Cumbria and Basildon Community respectively • Launched in 2019 engagement Considerate Constructors Scheme • Currently used on 60 pro
Slide 29: Summary of results
Summary of results Strong performance in 2019 Continued balance sheet strength Average daily net cash for 2020 expected to be in excess of £60m Final dividend up 11%
Slide 30: Strategy: Medium-Term Targets & 2020 Outlook
Strategy: Medium-Term Targets & 2020 Outlook John Morgan
Slide 31: Group Strategy
Group Strategy Planning and investing for the long term Organic growth and self help Looking for long-term workstreams No change expected to business segments Making our businesses better for all stakeholders Average daily net cash for foreseeable future Medium-term divisional financial targets 31
Slide 32: Construction
Construction • Maintain disciplined approach to work winning • Understand our capabilities - only take on projects we know we Strategy can deliver well • Focus on Frameworks and 2 stage tenders • Investments to provide long-term workstreams Medium-term target • Consistent 2.5% - 3% operating margin
Slide 33: Infrastructure
Infrastructure • Maintain the sector focus on rail, roads, airports, nuclear and energy Strategy • Long-term workstreams through frameworks • Win multiple smaller jobs for the same client • Only JVs if very compelling reason Medium-term target • 3% operating margin • 2019 operating margin of 1.8% 20
Slide 34: Fit Out
Fit Out • Fitting out offices and higher education • Maintain market share Strategy • Keep reinventing service delivery • Expansion outside London Medium-term target • Operating profit of c£35m per annum • 2019 profit of £36.9m 2020 outlook • Order book of £480m coming into year. £419m for 2020 • Ex
Slide 35: Property Services
Property Services • Disciplined selection of contracts. Only bid where we can add real added value through geographical or service efficiencies Strategy • Keep competitive advantage in IT • Focus on social value offering Medium-term target • Operating profit in excess of £10m • 2019 operating profit
Slide 36: Partnership Housing
Partnership Housing • National coverage through regional presence Strategy • Leverage work from trusted brand – Lovell • Significant opportunities to invest Group capital Medium-term • ROCE >20% target • Operating margin of 6% • 2019 ROCE of 12% and operating margin of 3.6% 2020 outlook • Expect pro
Slide 37: Urban Regeneration
Urban Regeneration • Mixed-use developments in partnership with landowners Strategy • Long-term workstreams Medium-term target • Rolling 3-year average ROCE towards 20% • 2019 3-year average ROCE of 15% 2020 outlook • Expect improvement on 3-year ROCE towards target • But lower profit on lower capit
Slide 38: Investments
Investments • Maximise opportunities for other Group companies Strategy • Win larger and longer workstreams with partners that the divisions cannot win on their own Medium-term • Secure 3 further Local Authority partnerships target • Continue to provide high quality construction and regeneration wor
Slide 39: Summary of Medium-term Targets
Summary of Medium-term Targets Construction 2.5% - 3% operating margin p.a. Infrastructure 3% operating margin Fit Out c£35m operating profit p.a. Property Services Operating profit of £10m Partnership Housing 20% +ROCE / 6% operating margin Urban Regeneration 3 year average ROCE towards 20% Investm
Slide 40: Conclusion
Conclusion Continuing to build on positive momentum Order book gives confidence going forward Continuing organic growth and self-help strategy Balance sheet gives competitive advantage Strong position to deliver
Slide 41: Appendices
Appendices MORGAN SINDALL GROUP
Slide 42: Net Finance Expense
Net Finance Expense £m FY 2019 FY 2018 Interest payable on project finance & other debt (0.1) (2.0) Amortisation of fees & non-utilisation fees (1.6) (2.0) Interest expense on lease liabilities (IFRS 16) (1.7) (1.4) Interest from JVs 1.0 1.4 Other (0.3) 0.1 Total (2.7) (3.9) 42
Slide 43: Tax
Tax £m FY 2019 FY 2018 Profit before tax 88.6 80.6 Less: share of net JV profit 1 (6.5) (5.2) Profit subject to tax 82.1 75.4 Statutory tax rate 19.0% 19.0% Current tax charge at statutory rate (15.6) (14.3) Tax on joint venture profits1 (1.3) (0.7) Prior year adjustments 0.5 1.6 Other adjustments (
Slide 44: Adjusted Earnings per Share
Adjusted Earnings per Share £m FY 2019 FY 2018 Profit after tax and minority interest 71.2 66.8 Adjusted for: Amortisation of intangibles (net of tax) 1.5 0.9 Adjusted earnings 72.7 67.7 Average number of shares 45.1m 44.6m Adjusted earnings per share 161.2p 151.8p 44
Slide 45: Capital Employed in Regeneration
Capital Employed in Regeneration £m Regeneration Partnership Housing Urban Regeneration Total net land & regeneration WIP 270 204 66 Unsold completed units (excl. joint ventures) 36 32 4 Amounts invested in joint ventures 57 15 42 Shared equity loans and investment properties 14 14 - Other working c
Slide 46: Urban Regeneration Pipeline
› Total Regeneration Urban Regeneration Pipeline workload of c£2.3bn, up 9% from FY 2018 › Broad geographic and Scotland Other 1% sector split Yorks & NE 1% 13% Offices 30% Residential North 54% Retail SE & 3% West London 33% Leisure 49% 7% Industrial South West 5% 4% 46