Full year results to

31 December 2014

Morgan Sindall Group plc

19 February 2015

2

Agenda

• Introduction John Morgan

• 2014 Financial and Operational Review Steve Crummett

• Regeneration – Update and Strategy John Morgan

• Summary John Morgan

3

Introduction

• Overall disappointing result for the Group in 2014

impacted by small number of construction contracts in Construction &Infrastructure

• …But strong performances from Fit Out and Urban Regeneration

• Quality of the order book improved

• Balance sheet remains strong

• Good strategic progress made in Regeneration

well positioned for continued growth in profits and returns fromRegeneration activities

investment required in 2015 and 2016 to support current developmentprogrammes

• Total dividend of 27p per share - level with last year

4

2014 Financial and Operational Review

Steve Crummett

5

Summary income statement1

£m FY 2014 FY 2013 % change

Revenue 2,220 2,095 +6%

Operating profit1

Operating margin1

28.91.3%

33.61.6%

-14%-30bps

Profit before tax1 25.2 31.3 -19%

Earnings per share1 46.7p 60.9p -23%

Dividend per share 27.0p 27.0p -

1 Before intangible amortisation (£2.4m) (FY 2013: intangible amortisation £2.7m, exceptional operating items £14.7m and deferred tax credit £2.5m)

6

Segmental analysis1

£m Revenue Operating Profit1

Operating Margin1

FY14 % FY14 % FY14

Construction & Infrastructure 1,172 -5% 3.5 -72% 0.3% -70bps

Fit Out 507 +19% 15.0 +38% 3.0% +40bps

Affordable Housing 423 +11% 6.0 -30% 1.4% -90bps

Urban Regeneration 113 +83% 10.0 +900% 8.9% n/a

Investments 25 n/a 0.9 n/a 3.6% n/a

Central/Elims (20) (6.5)

Total 2,220 +6% 28.9 -14% 1.3% -30bps

1 Before intangible amortisation (£2.4m) (FY 2013: intangible amortisation (£2.7m) and exceptional operating items (£14.7m))

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£m

Operating

Profit 1Non-cash

adjmts 2

Net capex

& finance

leases

Working

CapitalOther 3 Operating

cash flow

Net

interest

(non JV)

Tax Free cash

flow

0

Operating cash flow

28.9 (3.7)

(6.8)

(11.8)

(4.2)

2.4 (4.7)

(4.4)

(6.7)

1 Before intangible amortisation (£2.4m)2 Adjustments include depreciation, share option charge, shared equity valuation movements, elimination of JV profits, investment impairment and net non-cash provision movements3 ‘Other’ includes JV dividends and interest income, JV gains on disposal, cash provisions utilised, sale of investment properties, shared equity redemptions and additional pension contributions

8

£m

Opening

net cash

Free cash

flow

Dividends Disposals

of JVs and

investmts

Other Closing

net cash

0

Net cash movements

• Average net debt of £9m

• Main bank facilities renewed and increased during July 2014

£140m ‘club’ facility, expiring in September 2018

additionally retain £30m of facilities maturing in 2016

excludes non-recourse facilities in Urban Regeneration (£17m year end)

69.7 (6.7)

(11.5)6.2 (2.0) 55.7

• Facilities provide the headroom for future investments in Urban Regeneration and Affordable Housing (mixed-tenure)

investment increased in Q4 2014 and will increase significantly in 2015

average net debt in 2015 anticipated to be in range c£40-£50m

9

Working capital & capital employed

1 Defined as: Inventories plus trade and other receivables, less trade and other payables (excl deferred consideration, accrued interest and capitalised arrangement fees)2 Defined as: Total assets (excl goodwill, intangible assets and cash) less total liabilities (excl corporation and deferred tax)

• Investment of £41.2m in inventory mainly in Affordable Housing and Urban Regeneration

• Over half debtor/creditor movement due to strong Fit Out Q4

excluding this, no material change to trade receivable/payable days

As at 31 December 2014Total Working

Capital 1

Fixed Assets &

Other

Capital

employed 2

£m £m £m

Construction & Infrastructure -117 14 -103

Fit Out -43 1 -42

Affordable Housing 57 36 93

Urban Regeneration 43 6 49

Investments 8 12 20

Group/Elims -3 -11 -14

Total -55 58 3

Movement in Year Inventory Debtors CreditorsTotal Working

Capital

£m £m £m £m

Total 41.2 55.7 -85.1 11.8

10

Construction & Infrastructure

£m FY 2014 FY 2013 %

Revenue 1,172 1,234 -5%

Operating profit1 3.5 12.7 -72%

Margin % 0.3% 1.0% -70bps

1 Adjusted (FY 2013: before exceptional operating items)

• Operating margin reduced to 0.3%

• Impacted by poor performance in certain of the Construction activities (55% of revenue)

small number of projects in London and the South

escalation in costs and forecast costs to complete in H2

all due to complete within H1 2015

management changes made to enhance skills and reinforce disciplines in bid selection and procurement

• Infrastructure (45% of revenue) performed well, with progress made on key transport frameworks and tunnelling projects

• Lower returns and challenges expected to persist through at least H1 2015 as older construction contracts work through to completion

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£m

£1,537m

£1,499m

FY 13 FY 14

Work secured through competitive fixed

price procurement

Work secured through frameworks, two

stage tenders, negotiated and PFI-type

work

85%

62%

38%

15%

Construction & Infrastructure

Order book

• General market improving through the year. Good level of work now being won at required margins

• Order book up 3% to £1,537m

• Proportion of orders gained through competitive single stage procurement vs ‘other procurement types’ more favourable

only 15% of order book by value is now from competitive single stage procurement compared to 38% last year

in London, only 5% of order book (£7m) gained through competitive single stage process

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Fit Out

£m FY 2014 FY 2013 %

Revenue 507 427 +19%

Operating profit1 15.0 10.9 +38%

Margin % 3.0% 2.6% +40bps

1 Adjusted

• Strong performance, particularly in H2

• Margin growth supported by improved operational delivery

focus on customer and supply chain relationships

• Commercial office market remains core (74% revenue), as does London (67% of revenue)

all markets and regions have shown growth

• Order book up 70% to £241m, a record high

• Continued growth anticipated through 2015, with primary focus on margin and profit growth through operational delivery

£m

£241m

£142m

FY 13 FY 14

Order book

13

Affordable Housing

£m FY 2014 FY 2013 %

Revenue 423 381 +11%

Operating profit1 6.0 8.6 -30%

Margin % 1.4% 2.3% -90bps

1 Adjusted

• Activities split into : Regeneration (mixed-tenure) and Construction & Services (contracting, planned maintenance, response maintenance)

delivers a full range of housing solutions

constructed nearly 2,000 housing units across all its activities

• Regeneration mixed-tenure (27% of revenue)

475 open market house completions, down 10% - supply constrained

additionally approx 300 units constructed under contract directly to housing association

• Construction & Services (73% of revenue)

contracting revenue up 51% (c1,150 units), but margins squeezed

planned maintenance – steady flow of work as investment made in housing stock

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Affordable Housing – Response Maintenance

1 Adjusted

£m FY 2014 FY 2013

Revenue 61.0 67.5

Operating loss (3.5) (1.2)

• Losses through a combination of operational delivery inefficiencies, insufficient volume and ageing business systems

• Significant addressable market in response maintenance plus opportunity to widen service offering

eg property and other FM services across Group divisions

business re-branded as Morgan Sindall Property Services

• New management team recruited externally and now in place for 6 months

• Investment of c£2m in business systems over 18 months, with initial ‘go live’ due in April

• Challenge is winning work at acceptable margins to drive critical mass

• Loss £1m-£2m expected in 2015; minimum of break-even by 2016

15

Affordable Housing

£m

£673m

£581m

FY 13 FY 14

Order book Construction & Services

£355m Response

Maintenance

• Construction & Services order book up 16%

of which 53% is Response Maintenance

• Regeneration & development pipeline up 8% to£770m

investment in mixed-tenure to increase byc£20m-£25m in 2015, to develop theregeneration pipeline and deliver profitsfrom 2016 onwards

• At divisional level, margin and profit growthexpected in 2015, but constrained by number ofcompleted units available for sale

16

Urban Regeneration

£m FY 2014 FY 2013 %

Capital employed1 at year end 49.4 51.4 n/a

Average capital employed1 49.9 53.5 n/a

Revenue 113 62 +83%

Operating profit 10.0 1.0 +900%

• Strong performance, with significant increase in profit, up to £10.0m

ROCE2 of 17%

driven by completion of schemes in Stockport, Leeds, Manchester

good performance through its JVs in Salford, Canning Town and Brentford

• Schemes prioritising residential sales to meet demand

347 unit sales compared to 158 last year; over 750 unit sales forecast for 2015

• Regeneration & development pipeline up 13% to £2.2bn

• Capital employed at year end of £49m. After deducting £17m of non-recourse debt

increase of c£30m-£40m expected over 2015 as schemes develop

1 Capital employed is calculated as total assets (excluding goodwill, intangibles and cash) less total liabilities (excluding corporation tax, deferred tax and inter-company financing). At year end, non-recourse debt was £17m (FY 2013: 8.1m) and deferred consideration was £13.6m (FY 2013: £17.8m). Average non-recourse debt was £16.2m (FY 2013: £3.9m) and average deferred consideration was £15.7m (FY 2013: £18.3m).2 Return on average capital employed = (Adjusted operating profit less interest on non-recourse debt less unwind of discount on deferred consideration) divided by (average capital employed). Interest on non-recourse debt

was £1.2m (FY 2013: £0.2m) and the unwind of discount on deferred consideration was £0.5m (FY 2013: £0.6m).

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Investments

£m FY 2014 FY 2013 %

Capital employed1 at year end 20.2 18.7 n/a

Average capital employed 17.3 22.7 n/a

Operating profit 0.9 6.1 -85%

• Profit of £0.9m includes £1.9m from sale of investments

compared to profit of £9.9m last year

carrying value of remaining ‘PFI-type’ investments is only £3.0m; no more sales likely in short/medium term

other capital employed includes interests in other schemes, LABVs etc

small operating loss expected in 2015

• Recurring revenue and profit from management service agreements through its Community Solutions business

• Focus is to maximise construction opportunities for Group from existing frameworks and new schemes

preferred bidder for PF2 North West, Priority School Building Programme

1 Capital employed = total assets (excluding goodwill, intangibles, corporation tax credit and cash) less total liabilities.

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Order book and regeneration & development pipeline

£m

£2,658m

£2,403m

Split by year

FY 13 FY 14 2015 2016 2017 +

58%

20% 22%

• Group committed order book up 11% to £2.7bn

£0.6bn from frameworks

£m

£3,227m

£3,036m

Split by year

FY 13 FY 14 2015 2016 2017 +

7% 11%

82%

• Group regeneration & development pipeline up 6% to £3.2bn

69% relates to Urban Regeneration, 24% to Affordable Housing, 7% Investments

longer-term with 82% for 2017 and beyond

19

Financial & operational summary

• 2014 was a difficult year for the Group

impacted by small number of construction contracts in Construction & Infrastructure

• Strong performance from Fit Out

continued momentum going into 2015, with record order book

• Urban Regeneration result supports the Group’s long-term regeneration strategy

further investment into Regeneration activities of Affordable Housing and Urban Regeneration

• Looking ahead to 2015

tough H1 2015 at least expected in Construction & Infrastructure

continued positive momentum in Fit Out, Affordable Housing and Urban Regeneration

• Quality of the order book improved

• Balance sheet remains strong

Regeneration –

update and strategy

John Morgan

Newcastle Quayside- then and now

21

Group strategy

• ‘Stick to our knitting’

• Margin improvement - Construction

• ROCE improvement - Regeneration

• Remain UK-focused

Construction Regeneration

Construction &

InfrastructureFit Out

Affordable Housing

Construction & Services

Urban Regeneration

Affordable Housing

Mixed-tenure

Investments

22

What is regeneration?

“There is a pressing need to make Europe’s cities more competitive, resilient and sustainable and this challenge is at the heart of the urban regeneration process. However, the successful reuse of brownfield land and the reinvention of redundant or forgotten parts of a city, is a highly complex process and requires insight and cooperation from a diverse range of disciplines.”

(Urban Land Institute)

“A process that reverses physical, economic and social decline in an area where market forces will not do this without government intervention.”

(UK Government, 2007)

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But what does regeneration mean to Morgan Sindall Group?

• Secure development agreements

• A number of phases, over a long time frame

• Usually several sources of funds

• Working capital invested phase-by-phase and recycled

• Social aspects of regeneration just as important as physical

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What does regeneration mean to Lovell?

• Mixed-tenure homes

• Houses for sale – new build for public sector; refurbishment of social rented

• Community engagement skills

• Long-term development agreements

• Long-established culture of working in partnership with the public sector

• Joint ventures

25

What does regeneration mean to Muse?

• Creation of new sustainable mixed-use communities

• Long time frames

• High level of expertise needed to deliver schemes

• Strategic joint ventures (English Cities fund, ISIS Waterside Regeneration)

• Portfolio of 35 mixed-use projects, over 25m sq ft

26

What does regeneration mean to Investments?

• Only work on schemes that involve other Group companies

• Multiple sites or series of products

HB Villages

LABVs

PF2 schools preferred bidder

Land swaps

Health

27

Why are we doing it?

• Large, growing market

• Long-term income stream

• Fits with the Group’s culture, skill set and track record

• High barriers to entry

28

Barriers to entry

• Reputation and track record

• Very long time lines

• Softer non-build elements of regeneration

• Understand and react to the needs of the public sector

29

Total investment in regeneration across the Group

£mTotal

Regeneration

Affordable

Housing Mixed-

Tenure

Urban

RegenerationInvestments

Current land & regeneration WIP 198 122 75 1

Land creditors -21 -21

Total net land & regeneration WIP 177 101 75 1

Unsold completed units (excl JVs) 5 3 2 -

Amounts invested in joint ventures

ISIS Waterside Regeneration 24 - 24 -

English Cities Fund 7 - 7 -

Compendium 4 4 - -

LABVs (Bournemouth & Slough) 4 - - 4

Other 16 - 8 8

55 4 39 12

Shared equity loans and investment properties 30 30 - -

Other working capital -44 -15 -36 7

Non-recourse debt -17 - -17 -

Deferred consideration -14 - -14 -

Total net capital employed in Regeneration 192 123 49 20

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Operating profit

Construction Regeneration

Construction &

InfrastructureFit Out

Affordable Housing

Construction & Services

Urban Regeneration

Affordable Housing

Mixed-tenureInvestments

Operating profit (£m)

3.5 15.0 (4.7)

Operating profit (£m)

10.7 10.0 0.9

Total £13.8m Total £21.6mCentral costs

£6.5m

Operating profit£28.9m

31

Lewisham Gateway

A Muse scheme

32

Lewisham Gateway: overview

• 701 private residential units

• 48,700 sq ft ground floor retail

• 17,000 sq ft leisure use

• 220 car parking spaces

• A major new urban park

• New town centre highway network

33

Lewisham Gateway: aerial view of the site

34

Lewisham Gateway: webcam view on 17 Feb 2015

35

Lewisham Gateway: CGI of completed scheme

36

Lewisham Gateway: project timeline

2004 Site marketed by public sector

2006 Development Agreement signed with public sector consortium comprising GLA, London Borough of Lewisham, TfL and LBSL; outline planning application submitted

2009 Outline planning permission granted and Compulsory Purchase Order confirmed

2011 Grant funding withdrawn, Development Agreement extended

2012 HCA funding of £19.9m secured

2013 HCA Funding Agreement completed; new bus layover created for £1m HCA funding

2014 Site start achieved in May

2020 Expect to complete

37

Lewisham Gateway: returns

• Profit base case of £29.5m

• Full priority return capable of accruing to the scheme is in excess of £42m

• Main profit contributing years are 2016 and 2018-2020

• Phase 1 Equity Internal Rate of Return 24.5% base case that has potential to rise to approaching 30% on upside scenario

• Feasibility done on £445 per sq ft, selling open market at £530 per sq ft

38

Regeneration: future investments and expected returns

• Our share of the regeneration pipeline is £3.2bn

• Expect investment of £50m-£65m in regeneration in 2015

• Further £35m in 2016

• High teens ROCE targeted medium-term

39

National Property Company of the Year 2014

Winner:

Runners up:

British LandThe Crown EstateLand Securities Group

“Showing the big boys how it’s done…..dogged and delivery focused.”Estates Gazette

40

Group Summary

John Morgan

Group summary

• Construction & Infrastructure

Disappointing results in 2014

Better quality order book, though need to work through the poorer quality jobs

• Fit Out

Good progress and strong start to the year

• Affordable Housing

Investing and building for growth in 2016 onwards

• Urban Regeneration

Good progress throughout the year; continuing to build out and invest in new schemes

• Group strategy

No change; need to make more out of what we have got

41

42

Questions?

43

Appendices

44

Net finance expense

£m FY 2014 FY 2013

Net interest charge on debt (1.6) (1.3)

Amortisation of fees & non-utilisation fees (1.9) (1.2)

Interest from JVs 0.8 1.0

Other (1.0) (0.8)

Total (3.7) (2.3)

45

Tax

£m FY 2014 FY 2013

Profit before tax 22.8 13.9

Less: share of net profit of JVs (6.3) (0.9)

Profit before tax excluding JVs 16.5 13.0

Statutory tax rate 21.5% 23.25%

Current tax charge at statutory rate (3.5) (3.0)

Tax on JV profits1 (1.1) -

Profit on sale of JVs not subject to tax 0.4 2.3

Exceptional deferred tax credit - 2.5

Other adjustments (0.6) (0.7)

Tax credit / (charge) (4.8) 1.1

1 Certain of the Group’s joint ventures are partnerships where profits are taxed within the Group rather then the joint venture

46

Summary balance sheet

£m FY 2014 FY 2013

Intangibles 218.1 220.5

PP&E 19.2 18.3

Investments (incl JVs) 64.8 64.4

Shared equity loan receivables 20.4 19.7

Net working capital (55.2) (67.0)

Current and deferred tax (21.7) (21.3)

Pension scheme 0.8 -

Net cash 55.7 69.7

Other 1 (34.2) (47.3)

Net assets - reported 267.9 257.0

1 ‘Other’ includes provisions, finance lease liabilities, deferred consideration and assets held for sale

47

Disclaimer

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 outcomes 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.