Morgan Sindall Group plc Half Year Results 2010 Page left - PowerPoint PPT Presentation

Morgan Sindall Group plc Half Year Results 2010

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H1 2010 Overview  Good performance in challenging market conditions underpinned by broad spread of activities  Public sector spending cuts in the Emergency Budget largely as anticipated but specific details will not be known until CSR in Autumn  Pick up in commercial activity in London fit out  Strategic developments: – Construction and infrastructure capabilities merged into single division to deliver a more integrated service to clients – Expansion of response maintenance capabilities within Affordable Housing with acquisition of Powerminster  Continued focus on operational excellence and right-sizing of business with further £16m of annualised cost savings achieved  Financial strength of the Group improved through cash generation 3

H1 2010 Financial Highlights  Adjusted profit before tax 1 at £23.1m (2009: £23.9m) on revenue of £0.98bn (2009: £1.14bn)  Profit before tax at £18.4m (2009: £20.5m)  Adjusted earnings per share 1 of 42.0p (2009: 42.6p)  Interim dividend held at 12.0p (2009: 12.0p)  Net cash at 30 June 2010 of £138m (2009: £89m); £100m undrawn committed bank facilities in place through to mid-2012  Average cash for the period to 30 June 2010 of £61m (2009: £21m); continuing to improve into second half  Order book at £3.7bn (2009: £3.6bn), increased by £0.5bn since start of year 1 Before amortisation of intangible assets (£2.8m) and non-recurring costs (£1.9m) 4

Financial Summary £m Six months to Six months to June 2010 June 2009 Revenue 982 1,141 Adjusted PBT 23.1 23.9 Non-recurring costs (1.9) - Amortisation (2.8) (3.4) Profit before tax 18.4 20.5 Effective tax rate 29% 29% Tax charge (5.3) (5.9) Profit after tax 13.1 14.6 Net assets 209.3 195.8 Adjusted EPS 1 42.0p 42.6p Dividend per share 12.0p 12.0p 1 Before amortisation of intangible assets (6.6p) and non-recurring costs (4.5p) 5

Segmental Analysis £m Six months to June 2010 Six months to June 2009 Revenue Profit Margin Revenue Profit Margin Construction & Infrastructure 612 12.2 2.0% 797 15.0 1.9% Fit Out 179 6.9 3.9% 160 7.4 4.6% Affordable Housing 173 6.9 4.0% 178 7.1 4.0% Urban Regeneration 15 0.8 - 5 (1.1) - Investments 3 (0.4) - 1 (2.0) - TOTAL REVENUE 982 1,141 Group activities (3.7) (2.8) Interest 0.4 0.3 Non-recurring costs (1.9) - PBTA 21.2 2.1% 23.9 2.1% 6

Balance Sheet £m June 2010 June 2009 YTD Movement Intangibles 203.3 204.4 +2.3 Tangible FA 30.1 30.9 -1.2 Investments (incl. Joint ventures) 47.7 54.1 -4.4 Shared equity loan receivables 11.4 4.4 +2.4 Inventories 147.3 166.4 +6.1 Other working capital (339.3) (330.6) -23.0 Current and deferred tax (26.3) (19.7) -2.8 Pension scheme (3.0) (2.8) +0.2 Cash 138.1 88.7 +20.4 Net assets 209.3 195.8 -  Over last year open market inventories managed down at Affordable Housing  Continued use of shared equity to drive open market house sales  Current tax creditor at £30.1m (2009: £22.4m); £22.0m relating to provisional FV cost claim  Tight control of working capital maintained  Strong cash balances  Immaterial pension liability 7

Cashflow £m Six months to Six months to June 2010 June 2009 Operating profit 18.0 20.2 Non-cash adjustments 4.9 10.8 Working capital movement 25.2 (53.1) Income tax (3.4) 8.0 Dividends (12.7) (12.7) Interest 0.9 0.7 Payment for acquisitions (7.4) (1.1) Other cashflows (5.1) (4.4) Net cashflow 20.4 (31.6) Cash at beginning of period 117.7 120.3 Cash at end of period 138.1 88.7  Average cash £61m (2009: £21m)  Strong cash generation in the period driven by reduction in working capital  Acquisition of Powerminster (£4.8m) and three JV interests (£2.6m)  Five year operating profit to cash conversation of 118% 8

Market Overview 2009 est. Market sectors £bn Construction & Infrastructure 7.8 Infrastructure Private Industrial & Commercial 19.4 Public Non-Residential 13.3 Urban Regeneration Private Housing 10.7 Public Housing (incl R&M) 11.3 Affordable Housing Private Housing R&M 14.0 Public Non-Residential R&M 7.5 Private Non-Residential R&M 13.1 Fit Out (£2bn potential market) Total Construction Market 97.1 Investment led opportunities Source: Experian, values at 2005 prices 9

Market Challenging market expected to continue into 2011 and beyond  Managing ongoing decline in public sector demand, await outcome of autumn’s Comprehensive Spending Review  Major project opportunities in infrastructure  Commercial demand recovering in London fit out  Housing market softened in 2Q 2010 and mortgage availability remains tight  New build social housing, refurbishment and response maintenance sectors holding up reasonably well  Competitive environment tougher, with clients more price sensitive and seeking more onerous terms and conditions 10 10

Strategic Developments Remain focused on maximising potential from our market-leading positions in our chosen sectors  Acquisition of Powerminster adds to response maintenance and facilities management expertise  Construction & Infrastructure combination cements ability to deliver larger, more complex schemes; deliver integrated service to clients who procure both civil engineering and building work  Investment led opportunities remain important  JVs for delivery of larger and more complex infrastructure projects 11 11

Operations Continue to drive efficiencies across the Group  Overhead savings in first half of 2010 of £16m on top of £38m annualised savings realised in 2008-09  Further £5m targeted in second half relating to merger of divisions  Continued careful working capital management leading to improved cash position  Further leveraging of scale to achieve supply chain improvements  Perfect Delivery quality programme now implemented in all divisions; underpins margin performance 12 12

Construction & Infrastructure 13 13

Construction & Infrastructure – Merger  Client service driven  Greater ability to deliver larger and more complex projects  New brand launched, also giving Group greater profile  Extensive capability; design, construction, tunnelling, infrastructure, utility services, piling and plant  5,000 employees across 32 locations  £6m annualised cost savings targeted (£1m realised in first half 2010)  £6m non-recurring cost; £1.7m in first half 2010, £4m in total 2010 and £2m in 2011  Expected one-off net cost impact in 2010 of £2.5m 14 14

Construction & Infrastructure – Market & Trading Highlights Underlying Operating Profit 1 Revenue 2010 2009 % 2010 2009 % Construction 345 378 6.3 5.7 Infrastructure 267 419 5.9 9.3 Total £612m £797m -23% £12.2m £15.0m -19%  Blended margin improved to 2.0% (2009: 1.9%)  Construction margin further improved to 1.8% (2009: 1.5%)  Infrastructure underlying margin maintained at 2.2% (2009: 2.2%)  Cuts to BSF programme largely as anticipated  Infrastructure impacted by delays to major projects and transition to next regulatory period in utility services sector  Converted £900m of preferred bidder opportunities 1 Before non-recurring costs relating to the merger of £1.7m 15 15

Construction & Infrastructure – Projects Client : Network Rail Infrastructure Artist’s impression Project : Replacement of existing roof structure and glazing Contract value : £27 million Location : Paddington Station, London Client : Gatwick Airport Limited Project : Increase departures and arrivals capacity Contract value : £45 million Other key projects: Hull BSF (£200m), Yorkshire Water AMP5 Framework (£60m), Tayside Mental Health (£95m), Lowestoft Sixth Form College (£19m), E.On (£500m over 10 years) 16 16

Construction & Infrastructure – Outlook  Market continues to be tough; details in CSR report awaited in autumn  Growth opportunities in infrastructure markets  Sector focus on transport, water, energy, pharmachem, health, education, defence and retail  Continued focus on operational improvement through Perfect Delivery, cost control and working capital management  Order book of £2.1bn (2009: £2.1bn); an increase of 31% since the start of the year 17 17

Fit Out Markets: Commercial property Commercial property Retail banking, education and hotels Procurement: Traditional Design & build (‘D&B’) Traditional and D&B 18

Fit Out – Market & Trading Highlights Revenue Operating Profit 2010 2009 % 2010 2009 % £179m £160m +12% £6.9m £7.4m -7%  Increase in market demand from 2009, particularly in London  Greater demand for larger projects  Fit Out net recruiter in first half  Increased demand from financial and professional services; public sector <10% of revenue  Market share maintained with focus on profitable work rather than chasing revenue  Margin at 3.9% (2009: 4.6%)  Strong performance given the challenging market 19 19