Kier Group Plc · LSE:KIE

Kier — Investor Presentation (2016)

48 slides from Kier's investor presentation, 2016

1. Slide 1: Kier Residential Investor Seminar

   Document title Subtitle for the presentation Kier Residential Investor Seminar

2. Slide 2: Today’s schedule

   Today’s schedule Corporate Trading update and residential Haydn Mursell update overview Operations Mixed tenure market John Anderson 10:30 Client Thames Valley Housing Association Geeta Nanda Operations Kier mixed tenure case studies Chris King Q&A 12:00- Lunch 1:00 2

3. Slide 3: 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

4. Slide 4: Speakers

   Speakers Haydn John Geeta Chris Mursell Anderson Nanda King Chief Executive Chief Managing Executive Director Executive Director Kier Living Thames Kier Living Valley Central Housing 4

5. Slide 5: Strong group outlook

   Strong group outlook Trading in line with expectations  Solid order books  100% visibility for Construction and Services for 2017  Portfolio simplification progressing  Disposal of Mouchel Consulting to WSP Global Inc completed  Caribbean closure to conclude by March 2017  Average net debt exp

6. Slide 6: Market-leading positions

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

7. Slide 7: Top three market position

   Top three market position Leading UK Leading Top 3 infrastructure regional housing player builder maintenance provider with new build capabilities £1.5bn >£1.5bn £600m Residential Services Mixed Tenure Housing Maintenance Private Housebuilding 7

8. Slide 8: Residential – ahead of target

   Residential – ahead of target Mixed tenure V2020 progress  Returns improving as business expands nationally  Capital available from ‘recycled’ land bank FY 14  Financing structures key - New Communities £240m average capital Partnership 2% ROCE Private (Kier land)  Sales rates and prices in line

9. Slide 9: Residential – improving returns

   Residential – improving returns Mixed tenure Private Underlying operating profit (£m) Underlying operating profit (£m) 20 20 15 15 10 10 5 5 0 0 FY14 FY15 FY16 FY14 FY15 FY16 Return on average capital (ROCE) Return on average capital (ROCE) 20% 20% 15% 15% 10% 10% 5% 5% 0% 0% FY14 FY15 FY16 FY14 FY1

10. Slide 10: Residential – positive outlook

    Residential – positive outlook Mixed tenure Private (Kier land)  Shortage of affordable  Demand for housing exceeds UK market housing supply environment  Financing structures are  Good mortgage availability key  National coverage  Regional focus, not London Market  Broad capabilities & SE pos

11. Slide 11: Confident in Vision 2020 targets

    Confident in Vision 2020 targets 2014 2016 2020 Mixed tenure 450 1,400 2,500-3,000 Units Private 600 750 700-800 1,050 2,150 c3,500 Mixed tenure 20 40 80-100 Average capital Private 210 190 150-170 employed £m 230 230 250 Mixed tenure 15% 20%+ Return on average capital employed Private 7% 10%-15% (R

12. Slide 12: Kier’s mixed tenure model

    Kier’s mixed tenure model Mixed tenure  Open market sales Blended  Affordable housing business  Contracting  Operating margin 10% Financial  ROCE >20% targets  Double current volumes by 2020  Significant HCA, Local Market authority and Housing position Association relationships  4% market sh

13. Slide 13: Kier Residential

    Kier Residential John Anderson - Executive Director 13

14. Slide 14: Unique position

    Unique position Kier is able to meet the growing national need  The UK housing market is structurally undersupplied  Government stimulus is influencing the Residential market  Kier is well positioned: Kier Living Invest  End-to-end capability Kier Living Build  Overcome barriers to entry  Stro

15. Slide 15: Housing shortage needs addressing urgently

    Housing shortage needs addressing urgently 450,000 Targets 200,000 220,000 240,000 300,000 400,000 Targets Government Projected annual Barker Review Savills annual target household growth target (2005) Projections 350,000 300,000 250,000 200,000 150,000 100,000 50,000 0 1949 1951 1953 1955 1957 1959

16. Slide 16: Shift in mixed tenure

    Shift in mixed tenure  Affordable housing providers Tenure of completed homes 2015/16 disrupted by policy changes  Cross-subsidise affordable Private rent, 5% provision with private sales Social rent, 17%  Public sector bodies partnering Market sale, 16% with private sector providers  Greater ca

17. Slide 17: Supply & demand stimulus

    Government stimulus • Government target: 1 million new homes by 2020 • National Planning Policy Framework. Simplified planning • Help to Buy equity loan scheme. 100k homes sold • Autumn Statement: Supply & • £4.7bn already committed to shared ownership and affordable housing program 2016 - 2021 dema

18. Slide 18: Integrated breadth of services

    Integrated breadth of services Structured House building for House building for House building for Housing Finance private sale shared ownership affordable rent maintenance INVEST BUILD MAINTAIN Private House Builders Housing Associations (HAs) Partnership House Builders Local Authorities (LAs) KIER

19. Slide 19: Returns across all tenures

    Returns across all tenures Open Market Mixed Contracting Sale Tenure 15-20% 8-10% 2-4% Operating Margins Intensive Modest Minimal Capital 15% >20% >50% ROCE 19

20. Slide 20: Fragmented mixed tenure market

    Fragmented mixed tenure market Mixed tenure Private Housing maintenance 20

21. Slide 21: Kier has overcome the barriers to entry

    Kier has overcome the barriers to entry  Regulatory constraints  Public land procured through limited frameworks  Regulatory demands of public sector land development  Continuous HCA engagement  HCA performance monitoring  Planning process challenging  Strong relationships from Kier services

22. Slide 22: Joint Ventures unlocking the market

    Joint Ventures unlocking the market Funding led model New Communities Partnership • £1bn housing fund targeting asset rich but cash poor Local Authorities • Mixed tenure focus • 5,000 plots under review since launch Land led model Joint Ventures • Targeting cash rich but land poor Housing Associatio

23. Slide 23: Extensive reach and relationships

    Extensive reach and relationships  Three year pipeline >£600m  In excess of three years supply  Visibility beyond 2020  Relationship with 140 of 400 Local Authorities 23

24. Slide 24: Industry acknowledgement

    Industry acknowledgement 24

25. Slide 25: Kier is well positioned

    Kier is well positioned UK has a long- Industry has delivered standing housing crisis Brexit has had minimal growth but housing – Government is impact on demand – remains structurally committed to increase monitoring closely undersupplied housebuilding Strong fundamentals; High barriers to entry; Ki

26. Slide 26: Thames Valley Housing Association

    Thames Valley Housing Association Geeta Nanda – Chief Executive 26

27. Slide 27: TVHA tenure

    TVHA tenure Fa KIER Wa ™ General Rented & Other Housing @ Shared Ownership ™ Key Worker Loans m@ Key Worker NHS m Leaseholder ™ Student Accommodation ™ Market & Intermediate Rent m™ Fizzy

28. Slide 28: Where TVHA operate

    Where TVHA operate Yu BEDFORDSHIRE THAMES VALLEY HOUSING DEVELOPMENTS UNDER CONSTRUCTION AND IN THE PIPELINE HERTFORDSHIRE ESSEX ‘N ction OXFORDSHIRE Pipeline LONDON WILTSHIRE EAKIER ; HAMPSHIRE WEST SUSSEX 28

29. Slide 29: How housing tenure has changed

    How housing tenure has changed 29

30. Slide 30: Affordable housing supply profile

    Affordable housing supply profile Market Shared Ownership Social Rent Affordable Rent 30

31. Slide 31: Housing need is huge

    Housing need is huge  3.3m 20-34 year olds living at home with parents.  In 10 years, owner occupation amongst 25-35 year olds has fallen from 59% to 36%.  1.4m on social housing waiting list.  We need homes of all tenures. 31

32. Slide 32: What’s happening out there? The Strugglers

    What’s happening out there? The Strugglers 32

33. Slide 33: Government landscape

    Government landscape  Rent cuts – 1% a year for 4 years  Regulatory changes:  Freedom to dispose of assets  Merger without consent  Regulatory standards focus on:  Governance  Viability  Autumn Statement has given us more money for affordable housing  Want more homes and cost efficiency 33

34. Slide 34: Housing Association response – more market sales

    Housing Association response – more market sales Sales Revenue as a % of all turnover 34

35. Slide 35: TVHA delivery & partnerships

    TVHA delivery & partnerships – 1,500 per annum 500 224 45 8 800 200 35

36. Slide 36: Kier joint venture

    Kier joint venture OUT Investment Learning  Social  Setting up returns and IN  224 social rent operating a JV TVHA Kier Group Plc Jointly owned SPV  >75% family  Project homes finance –  Financial Leveraging  Management  Construction returns long-term capability capability  147 market value

37. Slide 37: Case Studies

    Case Studies Chris King – Managing Director, Kier Living Central 37

38. Slide 38: Case studies: Silver Court, Brownhills, West Midlands

    Case studies: Silver Court, Brownhills, West Midlands  Strong long-term relationships with Walsall MBD and Walsall Housing Group  The 6th in a programme of schemes  3.5 ha site, brief to build 101 apartments in 2 blocks and 6 elderly care bungalows  Masterplan to maximise private sales to delive

39. Slide 39: Case studies: Silver Court, Brownhills, West Midlands

    Case studies: Silver Court, Brownhills, West Midlands  Kier produced a masterplan for 157 new homes  107 for Walsall Housing Group  50 for open market sale  Surplus market sale proceeds cross subsidise the affordable housing  Monthly valuations for the balance of affordable housing cost  Blend

40. Slide 40: Case studies: Balaam Wood, Birmingham

    Case studies: Balaam Wood, Birmingham  Partnership with Birmingham City Council  Cleared sink estate in a socially-challenged environment  Birmingham City Council required a masterplan to maximise affordable housing delivery with no capital outlay  Utilised our core skills  Finding imaginative

41. Slide 41: Case studies: Balaam Wood, Birmingham

    Case studies: Balaam Wood, Birmingham  Kier master-planned 400 new homes  128 affordable homes to Birmingham City Council  272 for open market sale by Kier  Affordable housing completely cross subsidised by private sale  Scheme delivery over 6 years, 2 years early  ROCE in excess of 20%  Blen

42. Slide 42: Kier Residential

    Kier Residential John Anderson - Executive Director 42

43. Slide 43: Kier is uniquely well placed…

    Kier is uniquely well placed… …to provide an unrivalled breadth of service  The UK residential estate is in chronic under-supply  Mixed tenure housing development has not kept pace with demand  Housing waiting lists will take more than 40 years to clear at current build rates  Kier can provide a

44. Slide 44: Q&A

    Q&A 44

45. Slide 45: Appendix

    Appendix FaKIER

46. Slide 46: 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 tenure

47. Slide 47: Mixed tenure performance

    Mixed tenure performance Mixed tenure Completions mix Profitability 50 1,200 45 1,000 40 35 800 30 600 25 20 400 15 10 200 5 0 0 FY14 FY15 FY16 FY14 FY15 FY16 Affordable Capital Employed £m Open market sales Return on average capital (ROCE) % 47

48. Slide 48: Private residential performance

    Private residential performance Completions Kier landbank Profitability 600 16% 14% 500 12% 400 10% 300 8% 6% 200 4% 100 2% 0 0% FY14 FY15 FY16 FY14 FY15 FY16 Completions legacy land Gross margin % Completions new land Overhead % 48

Kier Group — Investor Presentation (2016) on 6ix