Kier Group Plc · LSE:KIE
Kier — H1 2023 Earnings Presentation
37 slides from Kier's earnings presentation, Mar 9, 2023
Slide 1: Kier Group plc Results for the six months ended 31 December 2022
Kier Group plc Results for the six months ended 31 December 2022 9 March 2023
Slide 2: Disclaimer
No representation or warranty, express or implied, is made or given by or on behalf of Kier Group plc (the “Company” and, together with its subsidiaries and subsidiary undertakings, the “Group”) or any of its directors or any other person as to the accuracy, completeness or fairness of the informati
Slide 3: Results Summary
Results Summary Andrew Davies, CEO
Slide 4: Strong financial performance despite ongoing inflationary pressures
▪ Strong financial performance despite ongoing inflationary pressures o Growth in Infrastructure Services and Construction o Adjusted operating profit increased 6% to £57m (HY22: £54m) o Margin improvement by 20 basis points to 3.7%; higher than medium-term target of c. 3.5% o Reported profit from o
Slide 5: HY23 Results
HY23 Results Simon Kesterton, CFO
Slide 6: Ahead of medium-term plan margin target of 3.5%
Ahead of medium-term plan margin target of 3.5% ▪ Higher volumes in Infrastructure Services and Construction offset £’m HY23 % HY22 % Δ FY22 % by reduced Property transactions Revenue 1,537 1,536 (0.0%) 3,257 Adjusted Operating Profit 57.2 3.7 54.2 3.5 5.5% 120.5 3.7 ▪ Strong adjusted operating prof
Slide 7: Higher activity in Infrastructure Services and Construction offset by reduced Property transactions
Higher activity in Infrastructure Services and Construction offset by reduced Property transactions ▪ Revenue in line with HY22 -% ▪ Infrastructure – ramp up of capital works on HS2 ▪ Construction – strong order book converting to revenue ▪ Continued bidding discipline and risk management ▪ Property
Slide 8: Adjusted Operating Profit
Adjusted Operating Profit Adjusted profit increase underpinned by business mix and cost management ▪ Adjusted operating profit of £57m, 3.7% margin ▪ Increase against prior year: ▪ Volume / price / mix ▪ Management actions ▪ Decrease against prior year: ▪ Property transactions ▪ Cost Inflation HY23
Slide 9: Cash adjusting items largely relate to previous periods
Cash adjusting items largely relate to previous periods £’m HY23 HY22 FY22 ▪ Restructuring costs materially reduced Business divestment related expenditure - (0.3) - Restructuring and related charges 3.6 11.8 40.0 ▪ Other includes £4m fire cladding costs Amortisation 9.8 9.9 19.7 ▪ Cash cost include
Slide 10: Seasonal working capital unwind and KEPS fully paid
Seasonal working capital unwind and KEPS fully paid £’m HY23 HY22 FY22 ▪ Free cash outflow reflecting seasonal working Adjusted EBITDA 90.9 76.8 165.4 capital unwind Working capital (78.7) (133.2) 3.7 Net capex (Including IFRS16 leases) (27.1) (19.6) (46.5) ▪ KEPS reduced by £50m JV dividends less p
Slide 11: Net Debt impacted by seasonal first half working capital unwind
Net Debt impacted by seasonal first half working capital unwind (1) HY23 Results Presentation, 9 March 2023 11 Note: (1) Other includes net JV investments and FX movements
Slide 12: Facilities maturing in January 2025
Facilities maturing in January 2025 ▪ Average month-end net debt of £243m 600 Maturities ▪ Committed debt facilities of £601m 500 ▪ £54m of RCF and USPP Notes repaid in December 2022 400 using operating cash flow £m 300 ▪ Facilities maturing in H2 FY23 200 ▪ RCF £20m 100 ▪ Schuldschein Notes £8m 0 ▪
Slide 13: Significantly increased order book underpinned by long-term framework positions
Significantly increased order book underpinned by long-term framework positions ▪ Order book at £10.1bn (HY22: £8.0bn) Secured revenue ▪ 96% of FY23 revenue secured 4,000 ▪ De-risked contracts: 3,500 ▪ c.60% of order book is under target cost or cost reimbursable contracts ▪ Construction - regional
Slide 14: Capital allocation priorities aligned with strategic objectives
Capital allocation priorities aligned with strategic objectives ▪ Sources and uses of cash Sources of Cash Uses of Cash ▪ Free cash flow generation over medium-term ▪ Capex - investment to support business Cumulative Free Cash Flow £’m ▪ Property - disciplined investment in Property business ▪ Delev
Slide 15: Operational Review
Operational Review Andrew Davies, CEO
Slide 16: Infrastructure Services: revenue growth of 5%
Revenue growth of 5%. Significant order book increase of 29% to £5.8bn £’m HY23 HY22 Δ Commercial & Operational Update Revenue 816 777 5.0% ▪ Significant order book increase of 29% to £5.8bn Adjusted Operating Profit 33.8 32.9 2.7% ▪ Utilities: reappointed to the £55m per annum, 3 year Operating mar
Slide 17: Construction: adjusted operating profit growth
Adjusted operating profit growth driven by revenue increase and previously re-aligned overheads £’m HY23 HY22 Δ Commercial & Operational Update Revenue 709 681 4.1% ▪ Significant awards: Adjusted Operating Profit 32.8 26.3 24.7% ▪ Two Kier joint ventures appointed to all six lots Operating margin 4.
Slide 18: Property: fewer transactions in current market conditions
Fewer property transactions in current market conditions £’m HY23 HY22 Δ Commercial & Operational Update Revenue 11 76 (85.5%) ▪ Andover development in Partnership with Test Adjusted Operating Profit 4.7 10.4 (54.8%) Valley Borough Council was fully let Operating margin 43% 14% 2,900 bps ▪ Solum Reg
Slide 19: Sustainability
Sustainability Andrew Davies, CEO
Slide 20: Building for a Sustainable World
Building for a Sustainable World Reminder of key focus areas: Environment – pollution prevention, sustainable 1 procurement, net zero carbon, zero avoidable waste and biosphere protection Social – building for tomorrow, diversity and inclusion, our social value and purpose, 2 employee wellbeing and
Slide 21: Carbon emissions reduction through use of battery storage units
Carbon emissions reduction through use of battery storage units Battery Storage Units ▪ Introduced use of battery storage units on certain Kier operational sites ▪ Reduces usage of fossil fuel powered temporary generators ▪ Potential to save significant site carbon emissions compared to generators ▪
Slide 22: Committed to investing in training programmes and addressing skills shortage
Committed to investing in training programmes and addressing industry skills shortage Apprenticeships and Interns ▪ Apprenticeships – over 500 participants ▪ Formal training programmes – 7.5% of workforce ▪ Black interns scheme – committed to 10 internships for talented young black students ▪ Focuse
Slide 23: Outlook and summary
1 Continued outperformance of medium-term margin target. 2 Focused on winning profitable work. Significantly increased order book of £10.1bn Current trading in line with expectations despite continued inflationary pressures with FY23 3 outlook unchanged Focused on delivery of a sustainable net cash
Slide 24: Q&A
Slide 25: Appendix
Appendix
Slide 26: Creating value for the medium-term
Creating value for the medium-term Value accretive Attractive market Strong order book Experienced earnings-led business positions focused on underpinned by long- management team. model. Aligned to UK UK infrastructure and term contracts and Proven track record of Government’s construction markets f
Slide 27: Simple and focused operating units
Simple and focused operating units: Infrastructure Services, Construction and Property Infrastructure Services Construction Property 1 3 4 5 Property Infrastructure Highways Utilities Construction Urban Regeneration Projects and Property Development Delivery of high value Designs, constructs Repairs
Slide 28: Rationalised and recapitalised. Focused on growth
Rationalised and recapitalised. Focused on growth May 2021 April 2019 March 2020 Refinancing package agreed New CEO, New senior Andrew Davies management Sale of team in place housebuilding Strategic Review business, Kier Living June 2019 June 2020 June 2021 Cost savings of Portfolio c. £100m rationa
Slide 29: Strategic priorities for FY22 onwards
Strategic priorities for FY22 onwards PURPOSE PURPOSE To Tosustainably deliver infrastructure sustainably deliver infrastructure which which is is vital to the UK UK VISION VISION Tobe To bethe UK’s theUK’s leading leading infrastructure infrastructure services services and and construction construc
Slide 30: Medium-term targets provide visibility over Group direction
Medium-term targets provide visibility over Group direction 3 4 ▪ Annual revenue c. £4.0 bn - £4.5 bn ▪ Adjusted operating margin c.3.5% Infrastructure Highways Utilities Construction Property ▪ Cashflow conversion of operating profit c.90% Projects ▪ Balance sheet: sustainable net cash position wit
Slide 31: Positive market environment underpinning UK Government spending commitments
Positive market environment underpinning UK Government spending commitments Population Economic Congested “Levelling up” Climate growth growth transport agenda change ▪ Population expansion ▪ UK economic ▪ Congested roads, ▪ Increased spending ▪ Energy supply with people living growth expected to ra
Slide 32: UK National Infrastructure Strategy – commitment to spend £600bn over next 5 years
UK National Infrastructure Strategy – commitment to spend £600bn over next 5 years Infrastructure Highways Utilities Rail and infrastructure Net Zero infrastructure ▪ Road investment Strategy 2: ▪ Water England/Wales AMP7 ▪ £45- £52bn forecast cost ranges ▪ UK leading net-zero pledge £27bn investmen
Slide 33: UK Government spending focused on schools, hospitals, prisons and defence
UK Government spending focused on schools, hospitals, prisons and defence Construction Property Education Health Justice Defence Urban Regeneration ▪ 500 DfE school replacement ▪ £1.5bn additional ▪ 20,000 new prison ▪ £4.3bn Defence Estate ▪ “Levelling up” agenda – project over 10 years funding for
Slide 34: Maintaining and growing central and local framework positions
Maintaining and growing central and local framework positions ▪ Awarded places on long-term frameworks and contracts worth up to £137bn, total OJEU values ▪ Driving long-term revenue streams, barriers to entry and strengthened customer relationships, underpinning strong order book Infrastructure Ser
Slide 35: Net pension scheme asset of £91m
Net pension scheme asset of £91m £’m HY23 HY22 Δ ▪ As at 31 December 2022, Group’s pension scheme asset was £91m Group Pension Schemes Market value of assets 1,301.9 2,018.2 (716.3) ▪ Pension scheme asset impacted by market Present value of liabilities (1,210.8) (1,884.3) 673.5 asset values and infl
Slide 36: Revenue split by sector and segment
Total 16% 16% 7% 10% 3% 1% 9% 7% 25% 5% 3% Infrastructure Services 31% 30% 12% 19% 6% 2% Construction 20% 15% 53% 12% Property 22% 76% 2% Highways Rail Power Water Telecoms Other Education Health Government Private Alternatives Mixed Use Office Industrial HY23 Results Presentation, 9 March 2023 36
Slide 37: Infrastructure Services and Construction revenue split
Infrastructure Services Total 31% 30% 12% 19% 6% 2% Highways 100% Infrastructure 2% 68% 10% 15% 5% Utilities 1% 31% 46% 22% Highways Rail Power Water Telecoms Other Construction Total 20% 15% 53% 12% Regional Build 23% 18% 45% 14% Kier Places 5% 4% 86% 5% International 100% Education Health Governme