Results for the year ended 31 December 2014

Transcription

1 Results for the year ended 31 December 2014 Investor presentation

2 Mears at a glance 2 Social Housing We repair and maintain over 700,000 of the 5 million Social Homes in the UK. Our clients are increasingly looking for partners who can operate strategically as well as operationally across a range of housing services. Mears has extended its core reactive and planned maintenance offering to include Housing Management to support clients in delivering more integrated solutions, aligned to their strategic challenges. We provide rapid response and planned maintenance services to Local Authorities and other Registered Social Landlords. Revenue Employee numbers Office locations 715m c.5, Our breadth of services: Repairs Planned and cyclical maintenance Grounds maintenance Estate management Fuel poverty initiatives Capital projects Five year record 838.7m m Care We provide personal care to over 20,000 elderly and disabled people in their own home, on a daily basis. We have a comprehensive range of domiciliary care and complex care services enhanced by the ability to deliver a range of housing adaptations and assistive technology such as telecare. The range of services enable us to deliver broad solutions to the independent living challenges faced by many elderly people, as well as younger people with physical or mental disabilities. We provide high quality and flexible care for older and disabled people who want to continue living in their own homes. Revenue Employee numbers Office locations 124m c.7, Our breadth of services: Independent living service Complex care Live-in care Aids and adaptations Assistive technology (telecare) Extra care 10.00p 32.20p * Before acquired intangible amortisation and exceptional costs. ** Before acquired intangible amortisation and exceptional costs with an adjustment to reflect a full tax charge. *** Excludes M&E discontinued activities

3 Agenda 3 Highlights Financial review Social Housing market developments Care market developments Order book and pipeline Strategy and outlook

4 Financial highlights 4 Revenue of 838.7m (2013: 865.6m); underlying performance is flat before anticipated reduction in ex-morrison revenues Continued Social Housing margin accretion to 4.8% (2013: 4.5%); primarily from improvements in ex-morrison business Excellent EBITDA cash conversion of 96% (2013: 103%) New contract wins in excess of 300m: Social Housing awards of 170m with a conversion rate of 35% (2013: 420m and 32%) Care awards of 130m with a conversion rate of 73% (2013: 96m and 69%) Strong balance sheet with closing core net debt of 75.0m following the acquisition of Omega (2013: 70.0m), and net cash at 31 December of 3.8m (2013: net debt 0.4m) Progressive dividend policy; total dividend increasing by 14%, tracking earnings growth Change Revenue 838.7m 865.6m* -3% Profit for the year before tax** 42.0m 39.3m* +7% Normalised diluted EPS 32.20p 28.06p +15% Dividend per share 10.00p 8.80p +14% * Continuing activities ** Before exceptional costs and amortisation of acquisition intangibles

5 Operational and strategic highlights 5 Strategy focused on two growth sectors Outlook for both sectors is positive Continue to deliver solid growth in our core Social Housing offering; providing 'more of the same Emphasis on Housing Management to tackle underlying challenges in Social Housing, where demand exceeds supply Continued emergence of new commissioning models in Care Mears is positioned increasingly strongly, over and above differentiated service delivery; we are responding to evolving customer needs to drive organic growth Omega is performing well Torbay is a milestone contract Strong CQC compliance of 93.5% (6 provider peer group averages 80.8% ranging from 66.7% to 88.9%) Order book 3.3 billion; 92% visibility of consensus forecast revenues for 2015 and 82% for 2016 Focus on continuous improvement in an enlarged Social Housing business is reaping rewards in terms of margin improvement

6 Income statement 6 Year to December 2014 ( m) 2013 ( m)** Revenue % Operating profit % Share of results of Joint Ventures Net finance expense (1.3) (1.8) Normalised profit before tax* % Exceptional costs - (6.7) Acquired intangible amortisation (12.3) (10.9) Profit before tax % Average diluted number of shares 102.6m 100.2m Normalised diluted earnings per share* - all activities 32.20p 28.06p +15% - continuing activities 32.20p 30.08p +7% Total dividend per share 10.00p 8.80p +14% * Stated before amortisation of acquisition intangibles and exceptional costs. The normalised diluted EPS measure is further adjusted to reflect a full tax charge ** Continuing activities

7 Segmental Analysis 7 Social Housing Care Total Change Change Change Revenue % % % Operating profit* % level % Operating margin 4.8% 4.5% +30 bps 7.8% 7.8% level 5.3% 5.0% +30 bps * pre-amortisation and before share based payments, exceptional costs and long term incentive plan Social Housing Underlying Social Housing revenues flat before the anticipated reduction in Morrison revenues Continued margin accretion Acceleration of Housing Management will augment growth in revenue and margins Care Operating margin maintained despite significant investment in carer remuneration Strong progress in higher acuity Nurseplus activities

8 Revenue - key movements to Morrison - anticipated reduction Care acquisitions Care volume loss ( 35m) Omega acquisition 8m ( 7m) 2013 Actual revenue 866m* Housing - material contract loss ( 13m) Housing gains 16m 4m 2014 Actual revenue 839m *Revenues from continuing activities

9 Profit - key movements to Indicative Morrison margin enhancement Omega acquisition 0.3m Reduction in incentives 1.0m Reduced net finance costs 0.6m Other ( 0.9m) Care acquisitions 0.8m Care investment ( 0.8m) 1.7m 2014 PBT* 42.0m 2013 PBT 39.3m* *before exceptional costs and before the amortisation of acquired intangibles Making People

10 Cash performance 10 m Non-cash adjustments 7.9 Working capital (3.4) Tax (2.3) Capex (5.3) Interest (3.7) PBT pre acquisition intangible amortisation 42.0 Operating cash inflow 46.4 Free cash flow 35.1 Strong EBITDA to cash conversion of 96% (2013: 103%)

11 Net cash (debt) movement 11 m Free cash flow Acquisitions Year end net cash of 3.8m Average net debt, pre Omega, 59.0m. Closing core debt 75.0m Bank facility (22.2) Unsecured 120m RCF Expires July 2018 Margin bps 35.1 Dividends (9.3) Share issues Closing net cash Opening net debt (0.4)

12 Balance Sheet 12 At December Goodwill and acquisition intangibles Intangible assets (non acquisition) Investment in Joint Venture Inventories Property, plant and equipment Working capital - trade receivables trade payables (187.1) (197.0) Net cash / (debt) 3.8 (0.4) Deferred consideration (21.0) (1.8) Cash flow hedge (1.4) (1.2) Pensions (net of deferred tax) Tax and deferred tax (1.5) 3.0 Net assets Increase in intangibles due to Omega acquisition Deferred consideration assumes earn-out cap paid on Omega Continued strong working capital management

13 Social Housing market developments 13 Mears recognised widely as differentiated market leader with best service delivery Strong long term growth drivers Demand for Social Housing Consolidation of customers Reform of funding (HRA and rent) and budget surpluses providing additional potential revenue Contract evolution in Housing Associations Reforms have led to a quiet period in new contracts; long term opportunities remain Natural cycle of contracts Changes to housing finance arrangements working through Changes to audit process working through Management remain focused on improving our relative strategic positioning Delivering 'more of the same' with differentiated service model Capitalise on competitor weakness; expecting to benefit from a flight to quality Acceleration of Housing Management offering Further focus on margin improvement from ex-morrison contracts

14 Housing Management market developments 14 Change Drivers Housing Management Market Mears' Strategy Welfare Reform Estate Management Repairs management Procurement Call taking Tenant Liaison Business systems Preferred partner with existing customers Financial Incentives Housing Waiting List Private Rental Demands House Building ds Applications Allocations Emergencyaccommodation Voids and Lettings Outsourced 4bn Insourced Asset Management Portfolio strategy Purchasing Selling Valuation Long Income Management term leasing Rent Collection Grants& subsidies Recharges Accounts Superior service delivery ethos Strong capability synergy Wide array of potential acquisitions Strong secular drivers of demand Significant market opportunity Differentiated positioning

15 Care - creating a sustainable market 15 Strategic Partnering Reducing number of providers Inter-changeable Suppliers Inhibitors to growth: Supply of carers Demographics Terms and conditions Systems / processes Traditional frameworks Preferred provider contracts 400 Nurseplus (Higher Acuity) Wiltshire Torbay Change Drivers: Demographics (Service Users) NHS / Social Care intergration More complex services being delivered outside hospitals Political drive Higher customer expectations Task based standard service New commissioning models Outcome based differentiated solutions

16 Good visibility of future growth revenue visibility of 92% of consensus forecasts revenue visibility of 82% of consensus forecasts 2014 Actual revenue 839m H run-rate ( 19m) Full year effect of Omega 15m Omega organic growth 11m Care contract mobilisations 7m Social Housing contract mobilisations 5m 2015 sales gap 23m 2015 Consensus forecast revenue 881m No material contracts up for renewal in next 12 months Growth opportunities to close sales gap Traditional pipeline Increasing scope of works with existing customers Broader service provision generating wider opportunity Fuel Poverty Extension of Nurseplus model

17 Driving organic growth - Social Housing 17 Contract opportunities tendered m 3,000 Market share % 10 We continue to be selective in bidding Win rate improved to 35% 2,000 2, Absolute number of contract opportunities temporarily delayed Long term opportunities remain 1, ,490 68% 1,295 1,200 1,120 1,080 69% 57% 68% 67% 69% % 31% 43% 31% 32% 33% 65% 35% ,000 Milton Keynes 2015F 1,600 Manchester Birmingham Sedgefield 2016F 1,600 Gateshead 2017F Demand for social dwellings exceeds supply Welfare reforms have had a positive impact on funding KEY Tendered - unsuccessful Tendered - contracts awarded Market share

18 Driving organic growth - Care 18 Contract opportunities tendered m 200 Market share % 6 We continue to be selective in bidding Win rate improved to 73% % % % 27% Average contract length of 3 years Development of our Higher Acuity offering increases growth opportunity Positive development in the structure of new contract opportunities % 60% 70% 57% 69% 73% 1 KEY Tendered - unsuccessful Tendered - contracts awarded F 2016F 2017F 0 Market share

19 Strategy and outlook 19 Social Housing further strengthening in our market leading position Encouraging evidence of greater revenue streams from changes in housing finance Extending further scale and scope of Housing Management through organic growth and acquisition Deliver 'more of the same' through differentiated service model Driving operational and financial improvements in enhanced and larger Social Housing business Care market vindication of strategy Encouraging evidence of new commissioning models following the success of Wiltshire and Torbay; similar opportunities have reached tendering stage Enhancing and broadening our Care offering, primarily through leveraging further the Nurseplus model across a wider client base and targeted acquisitions Innovating our offering in anticipation of better funded and managed markets Current trading in line with Board expectations