Kier Group Plc · LSE:KIE
Kier — H1 2020 Earnings Presentation
44 slides from Kier's earnings presentation, Mar 5, 2020
Slide 1: Kier Group Results for the six months ended December 2019
Kier Group Results for the six months ended 31 December 2019 5 March 2020 Kier Group plc – Half year results for the period ended 31 December 2019 1
Slide 2: Andrew Davies, Chief Executive
Andrew Davies Chief Executive Kier Group plc – Half year results for the period ended 31 December 2019 2
Slide 3: Agenda
Agenda Overview Andrew Davies, Chief Executive Financial review Simon Kesterton, Chief Financial Officer Strategic progress and outlook Andrew Davies, Chief Executive Kier Group plc – Half year results for the period ended 31 December 2019 3
Slide 4: Overview
Overview Challenging market conditions - revenue down 9% Decisive management actions resulting in operating profit growing 3.4% on a LFL basis to £47m * Net debt in line with expectations at £242m Kier Living: new management team in place and sale is progressing Order book of £8bn * Before IFRS16 be
Slide 5: Strategic Review: Building firm foundations
Strategic Review: Building firm foundations Focus & Governance Operational change ➢ New Chairman and Chief Financial Officer ➢ Contract exits in Environmental Services and Facilities Management ➢ Strengthened Executive: ▪ On track to have substantially exited both ▪ New Construction and Highways Gro
Slide 6: Refreshed executive team
Refreshed executive team Chief Executive Hugh Raven Helen Redfern Liam Cummins Simon Kesterton General Counsel & Group HR Director Group Managing Director Company Secretary Chief Financial Officer Construction John Edwards Safety, Health, Environment Stuart Togwell Jamie McKechnie & Assurance Direct
Slide 7: Financial update
Financial update Simon Kesterton, Chief Financial Officer Kier Group plc – Half year results for the period ended 31 December 2019 7
Slide 8: Financial summary – continuing operations
Financial summary – continuing operations H1 2019 / 20 H1 2018 / 19 FY 2018 / 19 £m % £m % Δ £m % Revenue 1,866 2,053 (9.1)% 4,121 Operating profit 46.7 2.5 41.9 2.0 11.5% 85.7 2.1 Interest charge (16.0) (11.7) (36.8)% (24.3) Profit before tax 30.7 1.6 30.2 1.5 1.7% 61.4 1.5 Exceptional items (59.3)
Slide 9: Continuing operations revenue bridge (£m)
Continuing operations revenue bridge (£m) 2,053 (64) 1,866 (87) (18) (18) Revenue Construction Infrastructure Strategic exits Property Revenue H1 2019 Services H1 2020 Kier Group plc – Half year results for the period ended 31 December 2019 9
Slide 10: Continuing operations profit bridge (£m)
Continuing operations profit bridge (£m) 33.5 46.7 3.4 41.9 (23.0) (7.9) (1.2) Operating IFRS16 Volume Property Inflation Management Operating profit H1 2019 / price actions profit H1 2020 / mix Kier Group plc – Half year results for the period ended 31 December 2019 10
Slide 11: Exceptional items – continuing operations
Exceptional items – continuing operations £million H1 2019 / 20 H1 2018 / 19 FY 2018 / 19 Previous acquisition costs 3.1 (0.1) 29.3 Business divestment related expenditure 7.4 26.9 120.4 Cost saving programmes 48.8 - 56.1 Exceptional contract losses - 28.7 49.9 Amortisation 11.8 12.8 24.8 Other - 6.
Slide 12: Cost saving programmes; one-off costs to realise future savings
Cost saving programmes; one-off costs to realise future savings £million H1 2019 / 20 H1 2018 / 19 FY 2018 / 19 Redundancy costs 16.8 - 38.4 Professional advisor fees 17.2 - 9.7 Lease impairments (June 2019: onerous lease) 10.1 - 4.4 Costs in preparation for outsourcing arrangements 3.8 - 3.6 Other
Slide 13: Underlying cash generation – continuing businesses
Underlying cash generation – continuing businesses £million H1 2019 / 20 H1 2018 / 19 FY 2018 / 19 ▪ Continued reduction in supplier payment Adjusted EBITDA 54.8 61.1 115.1 terms from 57 days to 38 IFRS 161 (4.3) - - ▪ Working capital also reflects a further Working capital (75.7) (182.6) (126.7) £1
Slide 14: Net debt (£m)
Net debt (£m) 55 (167) (10) 14 (76) (36) (8) (14) (242) Net debt EBITDA Working capital* Interest & tax Exceptional items Sales proceeds Discontinued items Other Net debt Jun 2019 Dec 2019 * Includes £13m KEPS reduction Kier Group plc – Half year results for the period ended 31 December 2019 14
Slide 15: Financial position
Financial position KPIs Dec 2019 Renewal date main facilities £m Net debt (£m) 242 800 700 Average month end net debt (£m) 395 600 Interest cover covenant >4.0x 500 400 Net debt to EBITDA covenant <3.0x 300 200 100 0 2020 2021 2022 2023 2024 RCF USPP Schuldschein Calendar year Kier Group plc – Half
Slide 16: Kier Living update
Kier Living update H1 2019 / 20 H1 2018 / 19 £m % £m % ▪ A new experienced management team Revenue 54.4 81.5 focused on delivery Adjusted operating profit* 8.4 15.4 11.5 14.1 ▪ Sales process continues to progress Interest charge (1.0) (1.7) ▪ Classified as discontinued Adjusted profit before tax 7.4
Slide 17: Other
Other Property, Environmental Services, Facilities Management Increase / ▪ Ongoing release of capital from property H1 2019 / 20 H1 2018 / 19 (decrease) ▪ Delays in some completions impacting revenue Revenue (£m) 233.3 273.3 (15)% ▪ Capital at £168m down £16m from June 2019 Operating profit (£m) # 4
Slide 18: Order book
- Order book £bn 30 Jun 2019 31 Dec 2019 (Decrease) % Infrastructure services 4.3 4.3 - Construction 2.6 2.6 - Other 1.0 1.0 - Total 7.9 7.9 - £bn Construction Infrastructure Services 0.8 (0.8) Other 0.8 (0.8) HS2 0.1 (0.1) 1.0 1.0 6.9 6.9 June 2019 Awards Revenue recognised December 2019 order book
Slide 19: Operational review
Operational review Andrew Davies, Chief Executive Kier Group plc – Half year results for the period ended 31 December 2019 19
Slide 20: Operational review - Construction
Operational review - Construction Increase / H1 2019 / 20 H1 2018 / 19 (decrease) Customers Revenue (£m) 844.0 909.3 (7)% ➢ Key frameworks awarded in the period included the £30bn Crown Commercial Services Framework Operating profit (£m)# 28.8 36.4 (21)% Operating margin 3.4% 4.0% (60)bps ➢ Appointe
Slide 21: Operational review – Infrastructure Services
Operational review – Infrastructure Services Increase / H1 2019 / 20 H1 2018 / 19 (decrease) Revenue (£m) 783.2 870.7 (10)% Customers ➢ Contract extensions secured with Northamptonshire Operating profit (£m)# 27.6 40.3 (32)% and 15 month contract for Birmingham Council Operating margin 3.5% 4.6% (11
Slide 22: HS2
HS2 HS2 ➢ In joint venture with Eiffage ➢ Delivering early works since 2018 ➢ Civil engineering works across an 80km section between the Chilterns to outskirts of Birmingham ▪ 15 viaducts ▪ 6.5km of green tunnels ▪ 22km of road diversions ▪ 75 overbridges ▪ 30 million cubic metres of excavation. Kie
Slide 23: Strategic progress
Strategic progress Andrew Davies, Chief Executive Kier Group plc – Half year results for the period ended 31 December 2019 23
Slide 24: Strategic actions
Strategic actions Simplify Improve Reduce the Group cash flow net debt Kier Group plc – Half year results for the period ended 31 December 2019 24
Slide 25: Operating structure
Operating structure Construction Infrastructure Services Regional Building Highways Utilities Infrastructure All based on long term frameworks Kier Group plc – Half year results for the period ended 31 December 2019 25
Slide 26: Cost reduction programme
Cost reduction programme Headcount reduction FY20: Focus on sustainable value ~1,250 ➢ Reduce centre overhead ▪ 1,222 people left to date ~1,100 ▪ 420 people left in period ▪ Further 50 people to have left by FY2021 ~650 ➢ Enablers: ▪ Devolving central functions to the streamlined businesses as appr
Slide 27: Strategic framework
Strategic framework Kier Group plc – Half year results for the period ended 31 December 2019 27
Slide 28: Strategic framework
Strategic framework Kier Group plc – Half year results for the period ended 31 December 2019 28
Slide 29: Strategic framework
Strategic framework Kier Group plc – Half year results for the period ended 31 December 2019 29
Slide 30: Strategic framework
Strategic framework Kier Group plc – Half year results for the period ended 31 December 2019 30
Slide 31: Strategic framework
Strategic framework Kier Group plc – Half year results for the period ended 31 December 2019 31
Slide 32: Strategic framework
Strategic framework Kier Group plc – Half year results for the period ended 31 December 2019 32
Slide 33: Strategic framework
Strategic framework Kier Group plc – Half year results for the period ended 31 December 2019 33
Slide 34: Strategic framework
Strategic framework Operating framework Kier Group plc – Half year results for the period ended 31 December 2019 34
Slide 35: Summary and outlook
Summary and outlook Living sale progressing Resetting Group culture through new Board and Executive appointments Significant reductions in the Group’s cost base delivered HS2 early works and contract mobilisation commenced; anticipate starting construction later in 2020 The second half has started p
Slide 36: Kier Group plc – Half year results for the period ended 31 December 2019
Kier Group plc – Half year results for the period ended 31 December 2019 36
Slide 37: Appendix
Appendix Kier Group plc – Half year results for the period ended 31 December 2019 37
Slide 38: Disclaimer
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 th
Slide 39: Reconciliation to new corporate structure
Reconciliation to new corporate structure Revenue and Operating profit Revenue Operating Operating £m profit margin % Construction 909 36 4.0 Infrastructure Services 871 40 4.6 Other 273 0 0.0 Corporate - (34) - Group 2,053 42 2.0 Infrastructure Services 871 40 4.6 Building 915 31 3.4 House & Develo
Slide 40: Technical Guidance FY20
Technical Guidance FY20 Item Guidance Finance costs Proportional with average net debt Tax rate c.19% Pension contribution Subject to March 2019 triennial valuation Capex c.£10m-£20m Regional Building Demographic drivers Infrastructure Government investment Utilities growth AMP7; government regulati
Slide 41: IFRS 16
IFRS 16 ▪ IFRS 16 ‘Leases’ adopted in FY20, Opening reserve adjustments £m replacing IAS 17. Right-of-use assets recognised 173.0 ▪ Operating leases previously not recognised as liabilities have been brought New lease liabilities recognised (187.9) onto the balance sheet along with the Assets held u
Slide 42: Pensions
Pensions Pension schemes remain in overall surplus £m 31 December 2019 30 June 2019 Change Group Pension Schemes Market value of assets 1,780 1,789 (9) Present value of liabilities (1,777) (1,770) (7) Net pension asset in the schemes 3 19 (16) Deferred tax (1) (3) 2 Net pension asset after deferred
Slide 43: Construction sector distribution
Construction sector distribution 100% 100% Education Education Health 91% Health 90% Government Government 80% Private Private 70% 59% 60% 50% 46% 40% 36% 32% 30% 28% 23% 20% 20% 17% 14% 13% 12% 9% 10% 0% Division total Regional Building Major Projects Building International Housing Maintenance Kier
Slide 44: Infrastructure Services sector distribution
Infrastructure Services sector distribution Highways Highways Rail Rail Power 100% Power 100% Water Water Telco Telco 90% Other Other 80% 70% 60% 56% 50% 48% 45% 40% 38% 30% 30% 20% 15% 14% 16% 13% 10% 8% 5% 6% 2% 3% 0% 0% 1% 0% Division total Highways Utilities Infrastructure Kier Group plc – Half