Kier Group Plc · LSE:KIE

Kier — FY2016 Earnings Presentation

54 slides from Kier's earnings presentation, Sep 22, 2016

1. Slide 1: Preliminary results for the year ended 30 June 2016

   Kier Group Preliminary results for the year ended 30 June 2016 22 September 2016 Kier Group plc – Full Year results for the year ended 30 June 2016 1

2. Slide 2: Disclaimer

   Disclaimer No representation or warranty, expressed 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

3. Slide 3: Haydn Mursell, Chief Executive

   Haydn Mursell Chief Executive Kier Group plc – Full Year results for the year ended 30 June 2016 3

4. Slide 4: Agenda

   Agenda  Overview  Highlights  Market position  Financials  Divisional update  Vision 2020  Group outlook Kier Group plc – Full Year results for the year ended 30 June 2016 4

5. Slide 5: Strong underlying performance

   Strong underlying performance Results in line with expectations  Significantly improved net debt position  Excellent cash conversion  Strong working capital management  Net debt £99m: EBITDA <1, a year early  Diversified financing secured  Strengthened balance sheet  Pension deficit reduced 

6. Slide 6: Market leading positions

   Market leading positions With strong long-term fundamentals  Strategic focus aligned to the UK’s spending priorities Leading UK infrastructure Leading regional Top 3 housing  Robust long-term fundamentals player builder maintenance provider  Relatively unaffected to date (Kier + MG + Mouchel) wit

7. Slide 7: Focus and stability

   Focus and stability  Mouchel integration completed  Portfolio simplification well progressed  Investment in and upgrade of systems  Efficiency of operating structure  Risk management discipline International Mouchel Environmental (Caribbean) Consulting Strategic fit Sustainable margin / pipelin

8. Slide 8: Financial update

   Financial update Bev Dew, Finance Director Kier Group plc – Full Year results for the year ended 30 June 2016 8

9. Slide 9: Financial highlights

   Financial highlights  Good set of results  Revenue1 £4.2bn up 26%  Operating profit2 £150m up 44% − Margin recovery +50bps  Improved net debt £99m − After investment of £31m and working capital inflow of £55m  Earnings per share2 106.7p up 11%  Proposed full year dividend per share up 17% to 6

10. Slide 10: Revenue and Underlying Operating Profit

    Revenue and Underlying Operating Profit Services represent 50% of profits June 2016 June 2015 Revenue1 £4,211m +26% Revenue1,2 £3,351m 4%9% 4%8% Property Property Residential 37% Residential 39% Construction Construction Services Services 48% 51% June 2016 June 2015 Underlying operating profit3 £175

11. Slide 11: Income statement

    Income statement Strong EPS and dividend growth Year ended 30 June Change 2016 2015 1 % Underlying operating profit : £m £m Group 158.4 106.9 +48 Corporate costs (25.6) (25.9) -1 Joint ventures (JVs) results post tax 14.2 7.9 +80 Profit on disposal of joint ventures 2.6 14.8 -82 Total underlying ope

12. Slide 12: Underlying Operating Profit

    Underlying Operating Profit Year ended 30 June Change 2016 20151 % £m £m Performance by division Property 21.4 22.7 -6 Residential 20.3 11.2 +81 Construction 47.4 38.4 +23 Services 86.1 57.3 +50 Corporate (25.6) (25.9) -1 Total underlying operating profit2 149.6 103.7 +44 Net finance costs (24.7) (1

13. Slide 13: Property - Performance

    Property - Performance Year ended 30 June 2016 2015 Change £m £m % Revenue1 176 126 +40 Underlying operating profit2 21.4 22.7 -6 Average capital3 (94) (83) +13 Return on average capital (ROCE) 23% 27% -4 Underlying operating profit Return on average capital (ROCE)3 £m £m H1 H2 28.4% 30.0% 26.2% 27.

14. Slide 14: Residential - Performance

    Residential - Performance Year ended 30 June 2016 2015 Change £m £m % Revenue Mixed tenure 187 115 +63 Private (Kier owned land) 166 142 +17 Total 353 257 +37 Underlying operating profit1 Mixed tenure 6.0 4.8 +25 Private (Kier owned land) 14.3 6.4 +123 Total 20.3 11.2 +81 Average capital2 Mixed tenu

15. Slide 15: Construction - Performance

    Construction - Performance Year ended 30 June 2016 20153 Change £m £m % Revenue1 2,025 1,732 +17 Underlying operating profit2 47.4 38.4 +23 Underlying operating margin2 2.3% 2.2% Order book (secure and probable) £3.4bn £3.5bn -3 Revenue1 Underlying operating profit and margins2 £m £m 2,200 50.0 2,00

16. Slide 16: Services - Performance

    Services - Performance Year ended 30 June 2016 20153 Change £m £m % Revenue1 1,656 1,236 +34 Underlying operating profit2 86.1 57.3 +50 Underlying operating margin2 5.2% 4.6% Order book (secure and probable) £5.3bn £5.8bn -9 Revenue1 Underlying operating profit and margins2 £m £m 1,800 90 1,600 80 1

17. Slide 17: Order book

    - Order book Year ended 30 June 2016 20151 £bn £bn Construction 3.4 3.5 Services AMP 0.4 0.6 Services Highways England 1.2 1.5 Services other 3.7 3.7 Services Total 5.3 5.8 Total 8.7 9.3 £bn 12.0 10.0 1.9 (2.0) 1.2 (1.7) 8.0 6.0 9.3 8.7 4.0 2.0 0.0 - Opening Construction Construction Services awards

18. Slide 18: Services - Order book

    Services - Order book £bn Extensions Secured & probable 1.6 Contract extensions 1.4 could add £2.7bn to the order book 1.2 1.0 0.8 0.6 0.4 0.2 - 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029+ Kier Group plc – Full Year results for the year ended 30 June 2016 18

19. Slide 19: Mouchel integration update

    Mouchel integration update  Operational and financial performance on track  Integration now complete  Increased synergy costs delivering increased efficiencies  £4m synergy benefit in FY16  £15m synergy benefit in FY17  Total exceptional spend of £50m  Acquisition remains >15% ROCE Kier Group

20. Slide 20: Portfolio simplification costs

    Portfolio simplification costs  £35m commodity price £8m impact in environmental services  £23m provision for closure of Caribbean operations £66m £35m  Other costs totalling £8m £23m  FY16 cash outflow of £30m incurred  FY17 cash outflow of £25m forecast Environmental Caribbean Other Kier Grou

21. Slide 21: Balance sheet summary

    Balance sheet summary Year ended 30 June Change 2016 20151 £m £m £m Intangible assets 795 790 +5 Property, plant and equipment 99 121 -22 Investment in JVs 130 79 +51 Residential land and work in progress 315 345 -30 Net assets held for resale 4 26 -22 Other working capital (475) (373) -102 Net debt

22. Slide 22: Group net debt

    1 Group net debt Cash performance  Operating cash conversion of 121% (£m)  Sustainable working capital performance 150 55 100 181 50 (83) (30) (50) (31) (100) (50) (99) (150) (141) (200) June 2015 Operating cash Working capital Exceptionals Pension FX Net investment Dividend June 2016 net debt flo

23. Slide 23: Sustainable improvement in working capital

    Sustainable improvement in working capital  Material improvement in working capital due to process and systems focus FY16 FY15 Movement Debtor days 16 18 WIP days 50 55 Creditor days 32 33 Kier Group plc – Full Year results for the year ended 30 June 2016 23

24. Slide 24: Pensions

    Pensions Strong performance with asset gain of £218m At 30 June At 30 June Change 2016 2015 £m £m £m Kier Group Pension Scheme: Market value of assets 1,066 919 +147 Present value of liabilities (1,089) (994) -95 Deficit in the scheme (23) (75) +52 Deferred tax 4 15 -11 Net pension liability on Kier

25. Slide 25: Financial summary

    Financial summary  Group revenue1 of £4.2bn up 26%  Operating profit2 of £150m up 44%  Earnings per share2 up 11% to 106.7p  Strong operating cash conversion of 121%  Significantly improved net debt position  Order book of £8.7bn with potential extensions of £2.7bn  Full year dividend of 64.5

26. Slide 26: Operational update

    Operational update Haydn Mursell, Chief Executive Kier Group plc – Full Year results for the year ended 30 June 2016 26

27. Slide 27: Property

    Property 58 Victoria Embankment, London Walsall Waterfront, Birmingham Motel One, Highbridge Catterick. Yorkshire Kier Group plc – Full Year results for the year ended 30 June 2016 27

28. Slide 28: Property

    Property Regional, diversified portfolio  Good performance despite pre-Brexit uncertainty – National coverage and broad sector profile  Short term post-Brexit turbulence – Some investor caution and greater focus on prime locations – Pricing pressure presents some buying opportunities – Longer hold

29. Slide 29: Property - Outlook

    Property - Outlook  Up to £175m in FY17 (to c£200m average by 2020) Increasing  Group’s free cash flow available investment  Minimum 15% ROCE Funding  Continued support from co-investors & funders available  Gearing where appropriate  National coverage & multi-sector Market  Modest scheme GDV

30. Slide 30: Residential

    Residential Kier Group plc – Full Year results for the year ended 30 June 2016 30

31. Slide 31: Residential

    Residential Increased focus on mixed tenure Underlying operating profit Return on average capital (ROCE) £m Private Mixed tenure Private Mixed tenure Total 25.0 20.0% 18.0% 20.0 16.0% 14.0% 15.0 12.0% 10.0% 10.0 8.0% 6.0% 5.0 4.0% 2.0% 0.0 0.0% 2014 2015 2016 2014 2015 2016 Kier Group plc – Full Yea

32. Slide 32: Residential - Update

    Residential - Update Mixed Tenure  c1,400 completions  Returns improving as business matures nationally  Capital available from ‘recycled’ land bank  RPs adjusting to reduced rent environment ‒ Financing structures are key - New Communities Partnership Private (Kier land)  c750 completions  Se

33. Slide 33: Residential - Outlook

    Residential - Outlook Mixed Tenure Private (Kier land)  Shortage of affordable housing  Demand for housing exceeds ‒ Local Authorities and supply UK market Government to address  Good mortgage availability environment  Reduced income (rent reduction) ‒ Interest rate reduction requires financing

34. Slide 34: Construction

    Construction Hinkley Point C Nshmi, Dubai Norfolk Schools Project Capella, Cambridge Kier Group plc – Full Year results for the year ended 30 June 2016 34

35. Slide 35: Construction

    Construction Long-term frameworks provide visibility UK Building Revenue Future trend  Strong organic growth and market share June June Short Medium Sector  Market leader with national coverage 2016 2015 term term  Framework focus maintained Education 29% 27%  50:50 private : public sector  Low

36. Slide 36: Construction - Update

    Construction - Update International Revenue Future trend  Middle East focus ‒ Dubai, Abu Dhabi June June Short Medium Sector 2016 2015 term term ‒ Expo 2020  Low oil price challenging ‒ UK Export Finance differentiates International 13% 12% V2020 progress - Construction FY 14 2016 guide FY 16 actu

37. Slide 37: Construction - Outlook

    Construction - Outlook Strong  Secured £2bn of work, record level financial  Order book at £3.4bn position  >90% secured for 2017 on increasing revenues  UK Building - higher quality new work with less competition and lower risk Improving profile markets  Infrastructure - sizeable medium term o

38. Slide 38: Services

    Services Housing Maintenance Kier Workplace Services Highways Utilities Kier Group plc – Full Year results for the year ended 30 June 2016 38

39. Slide 39: Services

    Services Revenue analysis 30 June 2016 8% 14% 45% £1,656m 18% Property Infrastructure Services Services 15% Highways Utilities Housing Maintenance Kier Workplace Services Environmental Services / Other Kier Group plc – Full Year results for the year ended 30 June 2016 39

40. Slide 40: Infrastructure Services - Update

    Infrastructure Services - Update Highways Revenue Future trend  Mouchel integrated and performing well June June Short Medium Sector ‒ Combined all highways maintenance activities 2016 2015 term term  Leading UK Highways maintenance provider Highways 45% 27%  RIS funding ‘ring-fenced’ Utilities a

41. Slide 41: Property Services - Update

    Property Services - Update Housing Maintenance Revenue Future trend  Top 3 UK player June June Short Medium  Challenging market following rent Sector 2016 2015 term term reductions - some client consolidation  Client interest in Housing ‒ Asset maintenance approach maintenance - 12% 17% ‒ Improve

42. Slide 42: Services - Outlook

    Services - Outlook Strong  Secured >£1bn of new work financial  Order book £5.3bn, potential extensions of £2.7bn position  >90% secured for 2017  Leading UK Highways maintenance  Top 3 UK Housing Maintenance  Provision of essential everyday services Broad  Resilient, unaffected by Brexit, au

43. Slide 43: Vision 2020 Update & Group Outlook

    Vision 2020 Update & Group Outlook Kier Group plc – Full Year results for the year ended 30 June 2016 43

44. Slide 44: Reporting structure and business units

    Reporting structure and business units Property Residential Construction Services Development and Structured Finance Invest Private, Mixed Tenure and Affordable Housing Building, Infrastructure, Build International Highways, Housing Maintenance, Facilities Maintain Management, Utilities, Environment

45. Slide 45: Focus on core businesses

    Focus on core businesses Building Infrastructure Residential Developments and Developments and Structured Finance Structured Finance Kier Living Invest Capital & Investment Construction - Options - Regional Building Infrastructure Kier Living Build Property Facilities Housing Highways Management Mai

46. Slide 46: Market leading positions

    Market leading positions Leading UK Leading Top 3 infrastructure regional housing player builder maintenance (Kier + MG + provider with Mouchel) new build capabilities £1.5bn £1.5bn >£600m Represents >80% of Group turnover Kier Group plc – Full Year results for the year ended 30 June 2016 46

47. Slide 47: On track with Vision 2020

    On track with Vision 2020  Continued progress with Vision 2020 goals  Growth trajectory  Progressive dividend FY14 FY16 Journey to date FY20 target Discipline / Risk management T/O £4.2bn T/O >£5bn Profit growth 10% YoY T/O £3bn PBT £125m PBT >£200m Order book visibility significantly PBT £88m Ne

48. Slide 48: Proven track record

    Proven track record  Good FY16 results  Profit in line; net debt significantly ahead  Strong balance sheet  Order book of £8.7bn with long-term visibility & well secured for 2017  Track record speaks for itself Track record of growth Progressive dividend 4,500 160.0 70.0 4,000 140.0 65.0 3,500

49. Slide 49: Strong Group outlook

    Strong Group outlook  Leading market positions in growing sectors  >80% of Group revenue  Portfolio of businesses provides resilience  No material effect to date following Brexit  Good FY16 performance  Consolidation and evolution  Portfolio simplification  On track with Vision 2020 goals 

50. Slide 50: Questions & Answers

    Questions & Answers Kier Group plc – Full Year results for the year ended 30 June 2016 50

51. Slide 51: Appendices

    Appendices Kier Group plc – Full Year results for the year ended 30 June 2016 51

52. Slide 52: Financing Facilities

    Financing Facilities 2016 2015 Maturity Facility type £m £m 2019,2021, US Private Placement 183 183 2022,2024 Schuldschein Loan Notes 81 - 2019, 2021, 2023 Revolving credit facility 380 380 2020 Funding for lending scheme loan 30 30 2017 Overdraft 45 45 Asset finance 46 103 Total 765 741 Kier Group

53. Slide 53: Property

    Property PFI / PPP and Investments portfolio (as at 30 June 2016) Kier equity/loan stock Project Status Capital value £m Equity % £m Local authority Woking housing In construction 31 2.0 50.0 Glasgow (direct let) In operation 25 3.3 50.0 Student accommodation Newcastle (direct let) In construction 3

54. Slide 54: Kier Group plc – Full Year results for the year ended 30 June 2016

    Kier Group plc – Full Year results for the year ended 30 June 2016 54

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