Costain Group PLC · LSE:COST
Costain — FY2014 Earnings Presentation
28 slides from Costain's earnings presentation, Mar 3, 2015
Slide 1: Costain Group PLC Results for year ended 31 December 2014
Costain Group PLC Results for year ended 31 December 2014 3 March 2015
Slide 2: Another successful year for Costain
Another successful year for Costain • Good trading performance • Enhanced balance sheet with a strong net cash position • Unique customer focussed strategy generating record order book • Positive outlook and confidence in the future 2 Costain Group PLC - Results for year ended 31 December 2014
Slide 3: Financial Review
Financial Review Tony Bickerstaff, Finance Director
Slide 4: Another good trading performance
Another good trading performance • Revenue1 of £1,122.5m (2013: £960.0m) • Underlying 2 operating profit up 5% to £28.7m (2013: £27.4m) • Adjusted 3 profit before tax of £28.5m (2013: £31.0m) • Adjusted3,4 basic earnings per share of 27.8p (2013: 41.0p5) • Successful capital raise of £70.3m (net of
Slide 5: Costain has a unique market position
Costain has a unique market position • Focus on blue chip customers through long- Revenue – 30% Support services related revenue for 2014 term strategic relationships December 2010 December 2014 • Qualitative as well as quantitative selection 15% process 30% • Ability to deliver a broad range of int
Slide 6: Increasing profitability
Increasing profitability 32 Group underlying operating profit (£m) 2 Group adjusted profit from operations (£m) 40 40 35.0 29.4 30.8 31.4 30 30 9.1 4.0 23.6 7.7 † 11.2 20 24.1 24.5 27.4 28.7 20 23.6 23.1 25.9 27.4 17.4 10 10 18.2 0 0 2010 2011 2012 2013 2014 2010 2011 2012 2013 2014 2 PFI & Investme
Slide 7: Segmental income statement
Segmental income statement 2014 2013 Underlying Underlying Revenue 1 Operating Profit Revenue 1 Operating Profit £m £m Margin £m £m Margin Infrastructure 785.2 38.3 4.9% 560.6 31.4 5.6% Natural Resources 335.0 (3.5) (1.0)% 397.6 3.1 0.8% Central Costs (6.1) - (7.1) Underlying Operating Profit2 1,120
Slide 8: Consolidated income statement
Consolidated income statement 2014 2013 Before other Other Before other Other items items Total items items Total £m £m £m £m £m £m Revenue 1,122.5 - 1,122.5 960.0 - 960.0 Underlying operating profit 28.7 - 28.7 27.4 - 27.4 Exceptional transaction costs - - - - (3.7) (3.7) Amortisation of acquired i
Slide 9: Transitioned to lower risk target cost based contracts
Transitioned to lower risk target cost based contracts Cash balance December 2010 Advance payment £m Significantly cash Fixed price, lump sum contracts positive 50% • Suitable for well defined low complexity projects, £2.4bn 50% 50% e.g. PFI schools, offices % Target • Higher risk, can lead to confr
Slide 10: Strong cash position
Strong cash position Net cash movements due to: 2014 2013 • Changing profile of business £m £m – Increased level of support services Net cash at beginning of period 57.7 105.7 activities Cash used by operating activities* 40.6 (35.5) – c. 90% of customers now use target Cash used by investing activi
Slide 11: Enhanced balance sheet
Enhanced balance sheet 31 December 2014 31 December 2013 £m £m Assets Non current assets (excluding pension deficit deferred tax) 101.2 97.0 Trade and other receivables 198.4 192.2 Cash 148.5 84.3 Current assets 346.9 276.5 Total assets 448.1 373.5 Current liabilities (299.3) (296.1) Total assets le
Slide 12: Legacy pension obligation
Legacy pension obligation • In the year, agreed full actuarial valuation as at 31 March 2013 and updated recovery plan • Contributions at £7m per annum plus a top-up for total contributions to match annual dividend payments • Increase in accounting net deficit due to reduction in discount rate used
Slide 13: Implementing new dividend policy
Implementing new dividend policy • As set out at the time of the capital raise, progressive dividend policy, targeting ongoing dividend cover of c. 2 x underlying earnings • Final dividend recommended of 6.25 pence per share on the enlarged share capital base of the Group (2013: 7.75 pence per share
Slide 14: Unique strategy and accelerating growth
Unique strategy and accelerating growth Andrew W yllie, Chief Executive
Slide 15: 'Engineering Tomorrow': Unique strategy delivering results
‘Engineering Tomorrow’: Unique strategy delivering results Infrastructure Securing a future energy supply… …maintaining a safe and reliable water supply Natural Resources …upgrading the transport infrastructure 15 Costain Group PLC - Results for year ended 31 December 2014
Slide 16: Record order book and increased visibility
Record order book and increased visibility • Forward order book up 17% to £3.5bn 2015 (Dec ‘14) (December 2013: £3.0bn), in excess of 90% 2014 (Dec ‘13) from repeat orders • Over £1.5bn of new contracts and extensions 2016 (Dec ‘14) secured in 2014 2015 (Dec ‘13) • Over £1.0bn of work already secure
Slide 17: Order book of £3.5 billion underpinning growth
Order book of £3.5 billion underpinning growth Order book by value remaining Customers require long-term strategic relationships 8% > £100m • Larger, longer term contracts – average contract duration over 4 years 11% £50-100m • Incorporating broad range of integrated services 11% £15-50m 70% <£50m •
Slide 18: Delivering a broad range of integrated services
Delivering a broad range of integrated services Smart motorw ays Adv ising clients on asset enhancement Managing Mobicloud to improv e site efficiency Cutting the cost of carbon capture London Bridge Station Adv ising on HS2 Perenco Dimlington Centrica Barrow 18 Costain Group PLC - Results for year
Slide 19: Strategy in action: £5 billion collaborative delivery framework
Strategy in action: Delivery of £5 billion collaborative delivery framework • Largest ever framework for the improvement of England’s motorways and major A roads • Costain awarded one of five places on Lot 3b for major projects between £100m and £400m • Total value of Lot 3b is £3bn within the £5bn
Slide 20: Strategy in action: £4.5 billion rail electrification programme
Strategy in action: Delivery of £4.5 billion rail electrification programme ABC Joint Venture • Long term successful relationship with Network Rail • ABC joint venture formed to deliver the integrated service requirements of the customer Alstom • ABC to deliver c. 3,000 km of electrification over 5-
Slide 21: Strategy in action: £2.2 billion AMP programme
Strategy in action: Delivery of £2.2 billion AMP 6 programme • Thames Water Alliance, eight20 • A fully integrated, collaborative alliance with Thames Water • Using innovation and technology to deliver efficiency challenge set by regulator • Award represents largest ever UK water contract • Delivery
Slide 22: Technology-led innovation delivering value
Technology-led innovation delivering value • Engineering, technology and innovation are in the Costain DNA • Ability to develop and offer innovative solutions is a fundamental differentiator • Moved 400 people into our new engineering centre in Manchester ESDAL – Electronic Delivery Service Carbon C
Slide 23: Accelerating growth through strong market positions
Accelerating growth through strong market positions Revenue split by sector (£m) Rail Highways 2014 Power Water Nuclear Process 2013 Oil and Gas 0 200 400 600 800 1000 1200 Other And, looking forward… • Over £1bn of revenue already secured for 2015 • Preferred bidder increased to over £500m (2013: o
Slide 24: Good opportunities across targeted sectors
Good opportunities across targeted sectors • Total spend in target sectors of circa £80bn per annum • Addressable market of circa £20bn in 2015, driven by regulation, legislation and addressing essential national needs Securing a future • Level of tender activity remains very high energy supply… • T
Slide 25: Summary and outlook
Summary and outlook • Another strong performance • Unique strategy • Good market position • Enhanced balance sheet • Record forward order book • Look forward to reporting on further progress 25 Costain Group PLC - Results for year ended 31 December 2014
Slide 26: Appendix
MEETING NATIONAL NEEDS APPENDIX Py i ee ee m oe CPPERM LTR ae ates a t :
Slide 27: Costain financial overview
Costain financial overview Key historic financial information (£m) Revenue (£m) 1200 Year end December, £m FY10 FY11 FY12* FY13 FY14 Revenue 1,022.5 986.3 934.5 960.0 1,122.5 1000 EBITA 17.4 24.1 21.7** 27.4 28.7 EBITA margin 1.7% 2.4% 2.3% 2.9% 2.6% 800 Adjusted profit from operations 29.4 23.6 30.
Slide 28: Other items and tax
Other items and tax Other Items • Amortisation of acquired intangible assets – £3.0m (2013: £1.8m) – Amortised from date of acquisition (ClerkMaxwell - April 2011, Promanex - August 2011 & EPC - August 2013, Serco JV – January 2014) • Employment related and other deferred consideration – £2.2m (2013