Half year results to 30 June Morgan Sindall Group plc 2 August 2016

Transcription

1 Half year results to 30 June 2016 Morgan Sindall Group plc 2 August 2016

2 Agenda Introduction John Morgan HY 2016 Financial and Operational Review Steve Crummett Outlook and Prospects 2017 & beyond John Morgan 2

3 Introduction Strong profit growth driven by focused strategic and operational development progress across all divisions Balance sheet in good shape improved cash performance, with lower average debt through the period Group is well-positioned for H despite uncertainties from EU Referendum result order book and pipeline visibility give confidence in strong H2 Interim dividend increased by 8% FY 2016 slightly ahead of expectations 3

4 HY 2016 Financial and Operational Review Steve Crummett 4

5 Group structure Two strategic lines of business - Construction and Regeneration Six reporting segments Investments shown to reflect the facilitator nature of division Construction Regeneration Construction & Infrastructure Fit Out Property Services Partnership Housing Urban Regeneration Investments 5

6 Summary income statement 1 m HY 2016 HY 2015 % change Revenue 1,148 1,152 - Operating profit 1 Operating margin % % +17% +30bps Profit before tax % Earnings per share p 24.5p +22% Interim dividend per share 13.0p 12.0p +8% 1 Before intangible amortisation of 0.7m (HY 2015: intangible amortisation of 1.1m and an exceptional operating charge of 39.4m) 6

7 Divisional performance 1 m Revenue Operating Profit 1 Operating Margin 1 HY 2016 % HY 2016 % HY 2016 bps Construction & Infrastructure 612-2% % 0.5% +50bps Fit Out 294-1% % 3.9% +40bps Property Services 27-16% 0.1 n/a 0.4% n/a Partnership Housing % % 2.5% +30bps Urban Regeneration % 4.6-8% 11.5% n/a Investments 9 n/a (0.8) n/a -9.0% n/a Central/Elims (17) (5.0) n/a Total 1, % 1.6% +30bps 1 Before intangible amortisation of 0.7m (HY 2015: intangible amortisation of 1.1m and exceptional operating charge of 39.4m) 7

8 Operating cash flow m Improvement in HY operating cash 18.2 (0.9) (2.3) (34.6) outflow of 15.7m compared to outflow of 53.3m in HY 2015 (15.7) (17.8) (2.0) (0.1) Operating Profit 1 Non-cash adjmts 2 Net capex & finance leases Working Capital Other 3 Operating cash flow Net interest (non JV) Tax Free cash flow 1 Before intangible amortisation of 0.7m 2 Non-cash adjustments include depreciation, share option charge, shared equity valuation movements and share of JV profits 3 Other includes JV dividends and interest income, provision movements, shared equity redemptions, investment property disposals, additional pension contributions and gains on disposals 8

9 Net cash/debt movements m 57.9 (17.8) Period end net cash of 36m (vs HY 2015: net debt of 8m) (7.5) 5.7 (1.9) 36.4 Average daily net debt of 24m includes 16m non-recourse better than previous guidance vs HY 2015 average debt of 35m 0 Opening net cash Free cash flow Dividends Repayment of loans by JVs Other Closing net cash Bank facilities of 175m main 140m facility expiring in September 2018 FY average net debt expected to be no greater than 45m FY net finance expense expected to be in the region of 4.5m 9

10 Capital employed in Regeneration m Regeneration Partnership Housing Urban Regeneration Total net land & regeneration WIP Unsold completed units (excl JVs) Amounts invested in joint ventures Shared equity loans and investment properties Other working capital Lower investment in period than anticipated due to timing of developments Further investment still expected in H2 Urban Regeneration increase towards 100m Non-recourse debt Deferred consideration Total capital employed at 30 June As at 31 December

11 Summary balance sheet m HY 2016 HY 2015 FY 2015 Intangibles PP&E Investments (incl JVs) Shared equity loan receivables Net working capital (44.2) (31.9) (78.8) Current and deferred tax (18.2) (14.9) (15.4) Pension scheme Net cash/(debt) 36.4 (7.6) 57.9 Other 1 (34.3) (34.2) (33.6) Net assets - reported Other includes provisions, finance lease liabilities, deferred consideration and accrued/prepaid interest 11

12 Construction & Infrastructure 1 Adjusted m HY 2016 HY 2015 % Revenue % Operating profit % Margin % 0.5% -% +50bps Significant improvement in operating profit and margin older Construction contracts completed in 2015 no longer diluting margin steady performance from Infrastructure Continuing to bid selectively, maintaining the quality of the order book divisional order book down 3% higher quality, with 90% of Construction order book by value derived through negotiated/framework/2-stage bidding processes Commercial settlement reached on second of two old ex-amec legacy construction contracts Further gradual improvement in performance expected through H2 12

13 Fit Out m HY 2016 HY 2015 % Revenue % Operating profit % Margin % 3.9% 3.5% +40bps Another strong performance operating profit increased by 11% margin up 40bps to 3.9% Order book at 373m, an increase of 9% compared to previous year end 221m for the remainder of 2016 Secured order book gives confidence for continued strong performance in H2 1 Adjusted 13

14 Property Services m HY 2016 HY 2015 % Revenue % Operating profit/(loss) (0.8) n/a Margin % 0.4% -2.5% +290bps Profit achieved ahead of plan. Profit of 0.1m vs loss of 0.8m HY 2015 focus on operational efficiencies and overhead management Successful period for work winning order book up 91% to 690m boosted by award of contract to maintain and repair Basildon Council s housing stock and corporate buildings ( 300m 10yr + 5yr contract) Gaining the critical mass to improve margins mobilisation of new wins in H2 will drive profit and margin growth 1 Adjusted 14

15 Partnership Housing m HY 2016 HY 2015 % Revenue % Operating profit % Margin % 2.5% 2.2% +30bps 1 Adjusted Revenue and profit growth driven by mixed-tenure revenue up 75% to 77m 423 units sold (private and social) at average sales price of 181k Design & build contracting revenue down 8%; planned maintenance revenue down 29% contracting shortfall should reverse in H2, but planned maintenance likely to remain at lower level 32% increase in order book since year end to 452m. Regeneration & development pipeline up 3% to 803m Growth expected to accelerate in H2 due to construction completions and sales no material impact to date from Referendum on sales pace and prices 15

16 Urban Regeneration m HY 2016 HY 2015 % Capital employed 1 at period end % LTM average capital employed % Operating profit % Operating profit of 4.6m driven by timing of completions. Completions weighted towards H2 Development milestones planning consents achieved on 160m GDV further 500m of planning consents lodged 400m of construction work underway on active sites Average capital employed in period up to 84m LTM ROCE 3 of 13%, but expected to improve through H2 year end capital employed expected to increase towards c 100m 1 Capital employed is calculated as total assets (excluding goodwill, intangibles and cash/overdraft) less total liabilities (excluding corporation tax, deferred tax and inter-company financing). At period end, non-recourse debt was 18.7m (HY 2015: 18.5m) and deferred consideration was 14.2m (HY 2015: 13.8m). LTM non-recourse debt was 18.2m (HY 2015: 18.2m) and LTM deferred consideration was 14.0m (HY 2015: 13.6m). 2 Adjusted 3 Return on LTM average capital employed = (Adjusted LTM operating profit less interest on non-recourse debt less unwind of discount on deferred consideration) divided by (LTM average capital employed). 16

17 Investments m HY 2016 HY 2015 % Operating profit 1 (0.8) 0.4 n/a Rationale for the division is to secure work for other divisions in the Group loss due to phasing of schemes and bidding activity c 65m of construction and regeneration work for rest of Group secured during the period FY result expected in range of break-even to small loss of c 0.5m 1 Adjusted 17

18 Order book and regeneration & development pipeline Order book 2,826m 3,148m Group committed order book up 11% to 3.1bn good growth in Property Services, Partnership Housing & Fit Out Regeneration pipeline 3,159m 3,199m Group regeneration & development pipeline up 1% at 3.2bn longer term with 82% for 2018 and beyond FY 15 HY 16 FY 15 HY 16 18

19 Summary & Outlook FY 2016 Group is in good shape EU Referendum result has created some uncertainties in markets...but confidence in H2 is strong further recovery in performance expected in Construction & Infrastructure visibility of secured orders in Fit Out to maintain strong margin performance H2 benefit from new work won in Property Services land and developments secured in Partnership Housing to deliver accelerated growth in H2 Urban Regeneration s phasing of development completions have H2 weighting Interim dividend increased by 8% Expectations for FY 2016 slightly ahead of previous forecasts 19

20 Outlook and prospects and beyond John Morgan 20

21 Outlook and prospects 2017 and beyond Morgan Sindall Group the last three years de-risking the balance sheet focused on existing activities strengthening our management teams increasing our investment in Regeneration Building a strong position going forward 21

22 Outlook and prospects 2017 and beyond Progress across all divisions Fit Out Construction Infrastructure Property Services Urban Regeneration Partnership Housing Investments Established market leader making good margins Moving from loss-making to base profits recovery potential Consolidating position; drive to increase margins and turnover Stabilised and now in a growth phase Stable pipeline and high visibility of quality earnings In growth phase having received investment Supporting Group in securing work across divisions 22

23 Outlook and prospects Fit Out Fit Out market different to the commercial office market 85% work for tenants 20% government work 34% turnover whilst tenants in occupation Order book end July 2016 ( 461m), end of June 2016 ( 373m) 32 jobs won in July, totalling 150.4m Post EU Referendum result No cancelled orders Record order book for next year at this stage Excellent visibility for

24 Following year s order book as at 31 July Fit Out m Jul-10 for FY 2011 Jul-11 for FY 2012 Jul-12 for FY 2013 Jul-13 for FY 2014 Jul-14 for FY 2015 Jul-15 for FY 2016 Jul-16 for FY 2017

25 Outlook and prospects Construction & Infrastructure Construction Legacy issues worked through Recovery potential driving improved margins High quality order book Significant proportion of public sector work (70% order book) Management team strengthened Infrastructure Strong potential for growth Focus on improved margins Strong current pipeline of opportunities Post EU Referendum result potential increased infrastructure spend 25

26 Outlook and prospects Property Services Long-term contracts Ahead of recovery plan Expect year on year improvement 26

27 Outlook and prospects Partnership Housing Undersupply of housing in the UK presents long-term opportunity Sales momentum and pricing have not changed post EU Referendum result Increased order book Limited London exposure More selective about partnership opportunities EU Referendum result impact Medium term too early to say Long-term undersupply of housing will continue and house building remains priority for government 27

28 Outlook and prospects Urban Regeneration Strong long-term pipeline Wide geographic base Lower risk model Residential split between forward sold and speculative Non-residential forward sold Post EU Referendum result No sign of any change in markets to date Medium-term impact unclear Government s focus on regeneration may increase 28

29 Outlook and prospects - summary We are in a strong position Strong and capable management team Strengthened balance sheet and cash discipline Good quality order book Too early to assess the full implications of EU Referendum result No impact on house sales so far Record visibility going forward in Fit Out Group positioned well for longer term need for regeneration, partnership housing and infrastructure 29

30 Questions Thank you 30

31 Appendices 31

32 Net finance expense m HY 2016 HY 2015 Net interest charge on net debt (1.1) (1.2) Amortisation of fees & non-utilisation fees (1.0) (1.0) Interest from JVs Other (0.4) (0.4) Total (2.1) (2.2) 32

33 Tax m HY 2016 HY 2015 Profit/(loss) before tax 15.4 (27.2) Less: share of net profit in taxed JVs 1 (0.7) (0.5) Profit subject to tax 14.7 (27.7) Statutory tax rate 20.0% 20.25% Current tax (charge)/credit at statutory rate (2.9) 5.6 Other adjustments - (0.1) Tax (charge)/credit (2.9) Certain of the Group s joint ventures are reported net of tax. Other joint ventures are partnerships where profits are taxed within the Group rather than the joint venture 33

34 Adjusted earnings per share m HY 2016 HY 2015 Profit after tax and minority interest 12.5 (21.6) Adjusted for: Exceptional operating items (net of tax) Amortisation of intangibles (net of tax) Adjusted earnings Average number of shares 43.9m 43.7m Adjusted earnings per share 29.8p 24.5p 34