Costain Group PLC · LSE:COST
Costain — H1 2011 Earnings Presentation
28 slides from Costain's earnings presentation, Aug 25, 2011
Slide 1: Interim results for the half year ended 30 June 2011
Interim results for the half year ended 30 June 2011 Transforming Costain Presentation to analysts 25 August 2011
Slide 2: David Allvey, Chairman
David Allvey, Chairman 1
Slide 3: Welcome to Costain
Welcome to Costain » Strategy delivering strong performance » Dividend increased » Clear ambition to double profit over the medium term 2 Interim results for the six months ended 30 June 2011
Slide 4: Tony Bickerstaff, Finance Director
Tony Bickerstaff, Finance Director 3
Slide 5: Strategy transforming Costain
Strategy transforming Costain » Now established Tier One engineering solutions provider » Delivering the largest waste PFI project in Europe and the largest nuclear decommissioning project in the UK…and is the leading service provider to the UK Highways Agency » Increased tendering activity for £bil
Slide 6: Financial highlights
Financial highlights » Revenue* of £468.5m (H1 2010: £533.4m) following previous strategic decision to withdraw from lower margin activities » Profit from operations up 6% to £9.3m (H1 2010: £8.8m) » Profit before tax up 23% to £10.1m (H1 2010: £8.2m) » Basic earnings per share up 19% to 11.9p (H1 2
Slide 7: Revenue profile changing
Revenue profile changing Revenue £m 1,200 1,000 800 553 490 H2 529 600 H1 400 467 508 533 469 200 0 2008 2009 2010 2011 Environment* Infrastructure Energy & Process 300 300 100 88.6 246.7 223.8 219.4 250 250 80 62.4 200 159.8 200 60 £m 150 £m 150 £m 40 100 100 50 50 20 0 0 0 H1 2010 H1 2011 H1 2010
Slide 8: Growth in profit from operations
Growth in profit from operations Profit from Operations £m 35 30 25 H2 20 20.6* H1 15 12.5 10.8 10 5 8.5 8.3 8.8 9.3 0 2008 2009 2010 2011 *including profit arising from PFI transfer to pension scheme Environment Infrastructure Energy & Process 10 10 10 8.0 6.7 5.7 £m 5 £m 5 £m 5 3.1 1.2 1.7 0 0 0 H
Slide 9: Segmental income statement
Segmental income statement Half year ended 30 June Full H1 H1 Year 2011 2010 2010 £m Margin £m Margin £m Margin Environment 6.7 4.2% 1.2 0.5% 17.2* 3.5% Infrastructure 5.7 2.6% 8.0 3.6% 12.2 3.1% Energy & Process 1.7 1.9% 3.1 5.0% 8.2 6.0% Land Development (0.7) (0.5) (1.8) Central costs (4.1) (3.0)
Slide 10: Net finance income/(expense)
Net finance income/(expense) H1 H1 2011 2010 FY 2010 £m £m £m Net Bank Deposit/Loan interest (0.1) 0.4 0.1 IAS19 Pension Scheme interest: Expected return on scheme assets 16.3 14.8 29.7 Interest cost on present value of obligations (15.4) (15.8) (31.3) IAS19 Pension Scheme net interest 0.9 (1.0) (1.
Slide 11: Enhanced cash position
Enhanced cash position Half year ended 30 June H1 2011 H2 2010 FY 2010 £m £m £m Cash and cash equivalents at beginning of period 144.3 120.5 120.5 Cash generated by operating activities 22.6 18.7 30.7 Cash used by investing activities (14.0) (1.9) (1.6) Dividends (3.8) (3.4) (5.4) Effects of foreign
Slide 12: Increased banking & bonding facilities
Increased banking & bonding facilities » Facilities increased by £90m to £435m » c. 40% currently utilised for bonding » Net cash of £149.2m » Supportive and flexible financing in place to support strategy of continuing organic and acquisitive growth 11 Interim results for the six months ended 30 Ju
Slide 13: Balance sheet
Balance sheet Half year ended 30 June 30 June 2011 30 June 2010 31 December 2010 £m £m £m Non current assets (excluding pension deficit deferred tax) 82.0 73.2 76.3 Trade and other receivables 175.7 196.6 163.3 Cash 151.2 134.7 146.0 Current assets 326.9 331.3 309.3 Total assets 408.9 404.5 385.6 Cu
Slide 14: Pension deficit further reduced
Pension deficit further reduced » Net Deficit reduced to £26.5m (June 2010: £56.3m) due to increased asset returns and company contributions partially offset by an increased inflation assumption » Ongoing actions to manage the obligations » Scheme closed to future accrual from 30 September 2009 » Al
Slide 15: PFI equity portfolio – estimated valuation
PFI equity portfolio – estimated valuation Invested Committed Estimated Status Capital Capital Valuation Bridgend Sold Valuation of Current Portfolio Kings Sold 40.00 Sirhowy Sold Kent Schools Sold Ealing Schools Sold 35.00 Shropshire Sold Kent Elderly Sold Estimated Valuation (£m) Kingston 30.00 3
Slide 16: Increased dividend
Increased dividend » Interim dividend increased by 8% to 3.25p (H1 2010: 3.00p) » Payment on 28 October 2011 to shareholders on the register as at 23 September 2011 » Option to take shares in lieu 10 8 Final 6 5.5p 6.25p 5.0p Interim 4 2 5.0p 2.5p 2.75p 3.0p 3.25p 0 2007 2008 2009 2010 2011 15 Inter
Slide 17: Andrew Wyllie, Chief Executive
Andrew Wyllie, Chief Executive 16
Slide 18: Costain is a business being transformed
Costain is a business being transformed » Focussed strategy: targeting £billions of infrastructure investment & meeting customers’ needs » Repositioned as a Tier One engineering solutions provider: aligned with blue chip customers » Breadth and scale of business enhanced: consultancy, construction a
Slide 19: Business only targeting major customers
Business only targeting major customers » A business entirely focussed on meeting the needs of major blue chip customers » The major customers are: » Working with fewer Tier One suppliers » Placing longer-term, larger contracts… » …incorporating a wider range of complex services » Customers continue
Slide 20: Focussing on areas of priority spend
Focussing on areas of priority spend Energy £110bn over commitment 20 years Reducing £10bn congestion up to 2015 Waste £10 - £20bn over solutions 10 years Vital role for £37bn of railways Govt expenditure £22bn 2010 - Water challenges 2015 19
Slide 21: 'Choosing Costain'
Broadening our capabilities to meet our customers’ needs Changing Revenue Profile* 2006 2010 2014 Consulting Construction Care Infrastructure ‘Being Number One’ 2006 Highways, Rail, Airports 2008 Environment Water and Waste 2010 ‘Choosing Costain’ 2012 Energy and Process Nuclear, Power, and Hydrocar
Slide 22: Broadening capability by acquisition
Broadening capability by acquisition » ClerkMaxwell: acquired April 2011 » Front end engineering and operations support services provider in the upstream oil and gas sector » Based in Aberdeen, workforce of 50 sector specialists » Blue chip customers e.g. Chevron, BG, TAQA, GDF Suez, Talisman Energy
Slide 23: Broadening capability by acquisition
Broadening capability by acquisition » Promanex: acquired August 2011 » Industrial support services business providing facilities management, installation, repair and maintenance and general asset management » Operates in high growth areas of national need: power, petrochemical, nuclear » Blue chip
Slide 24: Our enhanced blue chip customer base: 80% repeat business
Our enhanced blue chip customer base: 80% repeat business 23 Interim results for the six months ended 30 June 2011
Slide 25: Innovation is an imperative
Innovation is an imperative » Costain applies technical innovation to engineer solutions which add value, reduce costs and achieve operational efficiencies for our customers Some examples from H1: » Appointed by the Energy Technologies Institute to develop the next generation in carbon capture techn
Slide 26: Higher quality order book
Higher quality order book » Major contract awards during period include: 30 June 2011: £2.3 billion » Centrica: Easington oil refinery upgrade » Welsh Government Head of the Valleys Highway » Network Rail Reading Station Energy & Process 6% » Northumbrian Water AMP5 framework » Magnox radioactive wa
Slide 27: Summary and Outlook
Summary and Outlook » Strategy delivering performance » robust set of results, enhanced cash balance, strong order book » dividend increased » Business being transformed » breadth and scale of operations » established as a Tier One engineering solutions provider » Clear ambition » expect to report f
Slide 28: Interim results for the half year ended 30 June 2011
Interim results for the half year ended 30 June 2011 Transforming Costain Presentation to Analysts 25 August 2011