Half year results to 30 June 2013 Morgan Sindall Group plc - - PowerPoint PPT Presentation

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Half year results to 30 June 2013 Morgan Sindall Group plc - - PowerPoint PPT Presentation

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Half year results to 30 June 2013 Morgan Sindall Group plc Constructing & Regenerating 5 August 2013 Disclaimer Certain statements included or incorporated by reference in this presentation are forward-looking statements in respect of

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SLIDE 1

Half year results to 30 June 2013

Morgan Sindall Group plc Constructing & Regenerating

5 August 2013

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SLIDE 2

Disclaimer

2

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 presentation. These

statements concern, or may affect, future matters and include matters that are not facts. Such statements are based on current expectations and beliefs concerning future events and, by their nature, are subject to a number of known and unknown risks and uncertainties that could cause actual events, results or

  • utcomes to differ materially from any expected future results or performance expressed or implied by the

forward-looking statements. Such statements are also based on numerous assumptions regarding Morgan Sindall Group plc’s present and future strategy and the environment in which it operates, which may not be

  • accurate. You are cautioned not to place undue reliance on these forward-looking statements. The

information and opinions expressed in this presentation are subject to change without notice and neither the Company nor any other person assumes any responsibility or obligation to update publicly or review any of the forward-looking statements contained within this presentation, regardless of whether those statements are affected as a result of new information, future events or otherwise.

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SLIDE 3

HY 2013 - Overview

3

  • Revenue up 2% and order book up 1% in difficult market conditions
  • Margins under pressure in all divisions
  • Good cash management with average debt levels showing improvement
  • n 2012. Net cash of £40m at period end
  • Exceptional charge of £13.0m taken as provision against recoverability
  • n a small number of older contracts. No cash outflow
  • Prudent commercial assessment does not compromise contractual

entitlement

  • Interim dividend of 12p per share, level with last year
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SLIDE 4

Steve Crummett Finance Director

4

Financial Review

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SLIDE 5

Headline adjusted1 income statement

5

£m HY 2013 HY 2012 % change Revenue 1,019 1,000 +2% Gross profit1

Gross margin1

82.6

8.1%

92.7

9.3%

  • 11%
  • 120bps

Operating profit 1

Operating margin1

16.2

1.6%

20.8

2.1%

  • 22%
  • 50bps

Net Interest (0.8) (0.5)

  • 60%

Profit before tax 1 15.4 20.3

  • 24%

Tax1

Effective tax rate

(2.1)

14%

(4.0)

20%

+48% Profit after tax 1 13.3 16.3

  • 18%

Adjusted earnings per share 1 31.5p 38.4p

  • 18%

1 Before intangible amortisation (£1.4m) and exceptional operating items (£13.0m)

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SLIDE 6

Segmental analysis1

6

£m Revenue Operating Profit1 Operating Margin2 HY13

change

HY13

change

HY13

change

Construction & Infrastructure 593

+2%

6.4

  • 25%

1.1%

  • 40bps

Fit Out 203

+6%

5.0

  • 9%

2.5%

  • 40bps

Affordable Housing 185

  • 8%

2.7

  • 64%

1.5%

  • 220bps

Urban Regeneration 34

+48%

0.4

  • 73%

1.2%

  • 530bps

Investments 4

  • 4.6

+254%

102%

n/a

Central

  • (2.9)
  • 17%
  • Total

1,019

+2%

16.2

  • 22%

1.6%

  • 50bps

1 Before intangible amortisation (£1.4m) and exceptional operating items (£13.0m) 2 Operating margin, before intangible amortisation (£1.4m) and exceptional operating items (£13.0m)

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SLIDE 7

20.8 4.1 (3.3) 2 (11.6) 1.8 4.7 (0.3) 16.2

1.6

£m

Operating profit1 – key movements

1 Before intangible amortisation (£1.4m) and exceptional operating items (£13.0m) 2Community Solutions Management Services Ltd and Community Solutions Partnership Services Ltd became subsidiaries from 20 July 2012. Excluding the impact of these acquisitions

would decrease the reduction in share of JV profits by (£0.2m), increase the gross margin impact by £2.4m and increase the operating cost management by £2.5m

7

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SLIDE 8

Exceptional operating items

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  • £13.0m provision taken in period, shown as ‘exceptional’
  • Relates to small number of older construction contracts
  • Based upon revised assessment of recoverability reflecting
  • Commercial assessment of alternative resolutions
  • Takes into account cost, time and risk of legal remedy
  • Does not compromise contractual entitlement
  • No cash outflow as a result
  • Statutory profit before tax of £1.0m (HY 2012: £18.8m) and basic eps
  • f 5.4p (HY 2012: 35.8p)
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SLIDE 9

£m

0.6 1.6

Cash flow

16.2 (3.3) (2.2) (21.1) (1.0) (0.9) (19.2) (30.9) 1.0

1 Before intangible amortisation (£1.4m) and exceptional operating items (£13.0m) 2 Excludes exceptional operating items (£13.0m)

  • Operating cash flow of

(£19m), a significant improvement on prior year outflow of (£98m)

9

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SLIDE 10

Net cash and debt reconciliation

4.5 1.6

Net cash £m 50.4 (21.1) (6.4) 39.7 16.8

Average daily net debt of £32m

  • Period end net cash £40m.
  • Average daily net debt of £32m,

an improvement on last year from £36m

  • Includes disposal of investments
  • Miles Platting PFI £8.2m (plus

£0.2m deferred)

  • Access for Wigan £6.6m
  • £125m committed bank facilities
  • £110m expires in Sept 2015
  • £15m expires in May 2016

1 Includes proceeds from disposal of Access for Wigan and Miles Platting, repayment of loans by ISIS of £5.1m, net of additional loans

into Hull Esteem £2.3m and HB Community Solutions £0.8m .

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SLIDE 11

Balance Sheet

11

£m HY 2013 FY 2012 HY 2012 Intangible FA 221.8 223.2 225.1 Tangible FA 19.2 20.1 20.5 Investments (incl JVs) 64.4 73.9 70.8 Shared equity loan receivables 19.2 19.2 18.0 Net working capital 2 (28.0) (55.2) (23.6) Current and deferred tax 2 (25.1) (24.2) (26.8) Pension scheme (1.4) (1.5) (1.0) Net cash 39.7 50.4 (12.0) Other 1 (52.5) (56.6) (32.1) Net assets 2 257.3 249.3 238.9 Exceptional operating items (10.0)

  • Net assets – reported

247.3 249.3 238.9

1 ‘Other’ includes provisions and finance lease liabilities 2 Excludes impact of exceptional operating items of £13.0m (£10.0m post tax). Reported working capital is (£41.0m)

  • Reduction in Investments

driven by disposals

  • Net working capital2 reduced

to (£28.0m) from (£23.6m) at HY 2012

  • Improvement driven by

reduction in inventories

  • Receivables/payables

broadly level

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SLIDE 12

Order book

12

  • Group secured order book of £3,079m, up 1%

from FY 2012

  • 94% covered for FY 2013 (Construction &

Infrastructure fully covered)

  • Ongoing industry challenge to convert orders

and volumes into acceptable returns

  • Risk management of Terms & Conditions

critical £m

322 322 322

C&I Fit Out Affordable Housing Urban Regeneration

Note: excludes Regeneration pipeline

500 1,000 2013 2014 2015 2016 2017 2018 2019 2020 2021 +

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SLIDE 13

John Morgan Chief Executive

13

Strategic and Operational Review

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SLIDE 14

Strategic priorities and operational focus

14

  • Strategic focus on:
  • Complex construction and development schemes requiring an

integrated ‘Group’ approach

  • Maximising returns from existing schemes - regeneration

developments and construction frameworks

  • Pooling resources and capabilities from across the Group -

leveraging size of Group more effectively

  • Operational and management focus on:
  • Cash management
  • Bid and contract selection
  • Margin improvement
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SLIDE 15

Strategic developments

15

Woolwich, Royal Borough of Greenwich Sellafield Infrastructure Strategic Alliance

  • £269m mixed-tenure regeneration

scheme for Affordable Housing

  • Transforming three local authority

estates into 1,500 homes in partnership with LB Greenwich

  • Significant JV for C&I in important

strategic market – up to £1.1bn to the JV

  • Mobilisation completed and projects

commencing in H2

National Grid – National Operating Centre

  • JV between Fit Out and C&I
  • Construction of two storey structure and

internal fit out

  • Demonstrates the Group’s full service
  • ffering to key strategic customer
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SLIDE 16

Strategic developments

16

Civic and Cultural Quarter, Doncaster Leyton Mount, Bournemouth (LABV)

  • Partnership between Investments and

local council built on trusted relationships

  • LABV provides construction work for C&I
  • ver number of phases
  • Regeneration of Doncaster town centre

led by Urban Regeneration. GDV £110m

  • Phase 2 to deliver new homes in

conjunction with Affordable Housing

  • Urban Regeneration-led Leeds city centre
  • ffice development
  • Pre-let and fully forward funded
  • Construction by C&I

Sovereign Square, Leeds

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SLIDE 17

Construction & Infrastructure

17

£m HY 2013 HY 2012 Change % Revenue 593 583 +2% Operating profit1 6.4 8.5

  • 25%

Margin % 1.1% 1.5%

  • 40bps
  • Market remains highly competitive
  • Order book of £1,558m, up 3% from FY 2012
  • Construction revenue (56% of division)
  • Regional variations - London/South East positive, North

challenging

  • Infrastructure revenue (44% of division)
  • Driven by tunnelling
  • Sellafield ISA mobilisation

1 Adjusted, before intangible amortisation and exceptional operating items

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SLIDE 18

Construction & Infrastructure

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Commercial 10% Education 26% Electricity 8% Energy 2% Health 3% Transport 26% Water 14% Other 11%

  • 30% of revenue under

framework agreements

  • Maximise returns from existing

frameworks

  • Professional Services growth
  • f 14%, albeit from low base
  • Major market focus:
  • Transport

 Key target growth sectors in Rail, Road, Aviation

  • Strong presence in Water
  • Selective bidding to turn
  • rder book into profit

Revenue by market - HY 2013

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SLIDE 19

Fit Out

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  • No change in market conditions
  • Competitive tendering impacting margins
  • Order book of £136m, down 20% since year end. Timing, not a trend
  • Maintaining strong market position and market share
  • Current activity weighting towards refurbishment in occupation
  • Strategic focus on higher margin design-led fit out projects
  • Includes workplace consultancy and international alliances
  • Well positioned to benefit from any market upturn

£m HY 2013 HY 2012 Change % Revenue 203 191 +6% Operating profit1 5.0 5.5

  • 9%

Margin % 2.5% 2.9%

  • 40bps

1 Adjusted, before intangible amortisation and exceptional operating items

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SLIDE 20

Affordable Housing

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  • Difficult period with specific challenges within portfolio of activities
  • Order-book2 of £1,294m, down 1% from FY 2012
  • Significant strategic business wins
  • July 2013 of £269m redevelopment programme in Woolwich

for Royal Borough of Greenwich

 1,500 mixed-tenure homes  Expected to commence May 2014 for a 13 year period

  • Lymington Fields, Dagenham (£63m). Expected to commence late H2

2013

£m HY 2013 HY 2012 Change % Revenue 185 202

  • 8%

Operating profit1 2.7 7.5

  • 64%

Margin % 1.5% 3.7%

  • 220bps

1 Adjusted, before intangible amortisation and exceptional operating items 2 As at 30 June (ie excludes Woolwich)

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SLIDE 21

Affordable Housing

21 Planned Maintenance 34% New Build Housing Contracting 24% Mixed Tenure 24% Response Maintenance 18%

Revenue by type 1

Planned Maintenance 28% New Build Housing Contracting 17% Mixed Tenure 47% Response Maintenance 8%

% of gross margin by type 1

1 HY 2013

  • Strategic focus on complex regeneration

mixed-tenure schemes

  • Key segment for revenue growth and

margin enhancement

  • House completions up 36% on H1 2012 and

ASP of £172k, up 11% on FY 2012 average

  • New Build Housing Contracting revenue and

margins down. Highly competitive

  • Planned Maintenance down due to end of

Decent Homes programme

  • Response Maintenance requires critical
  • mass. Legacy contracts worked out. Focus
  • n winning profitable new volumes
  • Only modest improvement expected in H2

2013

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SLIDE 22

Urban Regeneration

22

£m HY 2013 HY 2012 Change % Capital employed 64 58 +10% Revenue 34 23 +48% Operating profit1 0.4 1.5

  • 73%
  • Positive market backdrop of Government focus on residential development

and emerging private rental sector investment market

  • Increased activity “on-site” driving revenue increase
  • Visibility of future returns. Projects commence only on viability of schemes

through pre-lets, forward funding and improved residential market conditions

  • Profit reduced due to timing of profit recognition on mix of schemes
  • Capital employed of £64m
  • Well-positioned to secure new regeneration initiatives. Strong track record

and market position

  • Investment in existing schemes will increase over next 18 months. Target 15%

ROCE over the cycle

1 Adjusted, before intangible amortisation and exceptional operating items

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SLIDE 23

Regeneration development profile

23

Remaining 2013 2014 2015 2016 2017 2018 GDV £m*

Basingstoke Office and retail 190 Blackpool Sainsbury's/office/leisure 170 Chester CBQ Office 130 Lewisham Gateway Residential 190 Leeds - Sovereign Street Offices - pre-let to KPMG 20 Logic Leeds Distribution 100 Manchester Victoria Office / residential 160 Stockton Residential / office 130 Reading - Chatham Square Residential 40 Stockport Grand Central Car park and offices 140 Swindon Office and residential 290 Other projects (10) Various 160 Joint ventures (3) Various 70 Strategic partnerships Various 220 Preferred bidder Various 300

2,310

*Muse share of GDV for projects carried out in joint venture

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SLIDE 24

Investments

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£m HY 2013 HY 2012 Invested to date 11.0 24.8 Directors’ portfolio valuation

(discount rate 7-9%)

24.0 56.0 Current carrying value 13.1 31.7

  • Development pipeline of c£300m
  • Slough and Bournemouth LABVs delivering inter-group
  • pportunities
  • Pipeline of opportunities following similar partnership models
  • Recycling capital by successful realisation of interests
  • Miles Platting PFI (£8.4m, profit £4.4m)
  • Access for Wigan (£6.6m, profit £1.5m)
  • Maximise opportunities for Group from existing frameworks and

schemes

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SLIDE 25

HY 2013 Summary and Outlook

25

HY 2013 Strategic focus Outlook

  • Difficult market conditions. Margins

impacted by competitive pressures

  • Cash improvement and greater cash

discipline

  • Interim dividend held level with prior year
  • Focus on maximising returns from existing

frameworks and development schemes

  • Opportunities to differentiate – integrated

‘Group’ approach

  • No significant improvement in market conditions

in H2 2013

  • Focus on cash management, bid selection and

margin improvement

  • Well-positioned for growth when markets turn
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SLIDE 26

Questions

26

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SLIDE 27

Appendices

27

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SLIDE 28

£m

0.6 1.6

Cash flow – HY 2012

20.8 (2.2) (2.0) (104.6) (1.2) (5.3) (98.1) (116.0) (1.3)

1 Before intangible amortisation and non-underlying items

28