Kier Group Plc · LSE:KIE

Kier — FY2015 Earnings Presentation

55 slides from Kier's earnings presentation, Sep 17, 2015

1. Slide 1: Preliminary results for the year ended 30 June 2015

   Kier Group Preliminary results for the year ended 30 June 2015 17th September 2015 Kier Group plc – Full Year results for the year ended 30 June 2015 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 2015 3

4. Slide 4: Agenda

   Agenda  Highlights  Financials  Operational update  Vision 2020 progress  Group outlook Kier Group plc – Full Year results for the year ended 30 June 2015 4

5. Slide 5: Highlights

   Highlights  Strong performance  Good contribution from all divisions  Increased scale and quality of earnings − Mouchel acquisition completed 8 June  Vision 2020 goals on track  Simplification of the Group  Macro environment positive  Funding available  Housing demand  Investment in infrast

6. Slide 6: Financial update

   Financial update Bev Dew, Finance Director Kier Group plc – Full Year results for the year ended 30 June 2015 6

7. Slide 7: Financial Highlights

   Financial Highlights  Strong set of results  Revenue1 £3.4bn up 14%  Operating profit2 £104m up 19% − Resilient operating margins  Improved net debt £141m − After investment of £82m and working capital inflow of £58m  Earnings per share 96p up 10%3  Proposed final dividend of 36.0p  Full year

8. Slide 8: Revenue and Underlying Operating Profit

   Revenue and Underlying Operating Profit June 2015 June 2014 Revenue1 £3,351m +14% Revenue1,2 £2,938m Property – 4% Property – 3% Residential – 8% Residential – 8% 126257 102233 Construction – 51% Construction – 51% 1,247 Services – 37% 1,104 Services – 38% 1,721 1,498 June 2015 June 2014 Underlying

9. Slide 9: Income Statement

   Income Statement Year ended 30 June Change 2015 2014 % £m £m Total underlying operating profit1 103.7 87.3 +19 Net finance costs (17.8) (13.6) +31 Underlying profit before tax1 85.9 73.7 +17 Underlying earnings per share (pence) 96.0 87.5 +10 Interim dividend per share (pence) 19.22 18.02 +7 Final d

10. Slide 10: Underlying Operating Profit

    Underlying Operating Profit Year ended 30 June Change 2015 20142 % £m £m Performance by division Property 22.7 16.0 +42 Residential 11.2 7.7 +45 Construction 37.7 30.2 +25 Services3 58.0 53.3 +9 Corporate (25.9) (19.9) +30 Total underlying operating profit1 103.7 87.3 +19 Net finance costs (17.8) (1

11. Slide 11: Non-underlying Items

    Non-underlying Items Year ended 30 June 2015 2014 Profit Cash impact impact £m £m £m Continuing operations Costs relating to acquisition of Mouchel Group (13.5) (8.4) - Costs relating to the preparation for & restructuring following the acquisition of the (8.4) (6.0) - Mouchel Group Costs associated

12. Slide 12: Order Book

    Order Book Year ended 30 June Change 2015 2014 £bn £bn % Construction 3.3 2.5 +32 Services 6.0 3.7 +62 Total 9.3 6.2 +50 £bn 14.0 12.0 (1.8) 10.0 2.6 0.8 (1.2) 8.0 2.7 6.0 9.3 4.0 6.2 2.0 0.0 - Opening Mouchel Construction Construction Services awards Services revenue Closing Construction and acquis

13. Slide 13: Balance Sheet Summary

    Balance Sheet Summary Year ended 30 June Change 2015 2014 £m £m £m Intangible assets 777 324 +453 Property, plant and equipment 121 192 -71 Investment in JVs 79 41 +38 Residential land and work in progress 345 334 +11 Net assets held for resale 26 10 +16 Other working capital (367) (246) -121 Cash 2

14. Slide 14: Group Net Debt

    Group Net Debt £m • Cash conversion >100% 250 200 334 (263) 150 100 50 58 (82) 0 June 110 (50) 2014 (94) June net (62) 2015 debt1 net (100) debt1 (123)m (19) (141)m (150) (200) Rights Acquisitions Net debt Operating Working Net Pension, Exceptionals issue acquired cash flows capital investment inter

15. Slide 15: Pensions

    Pensions At 30 June At 30 June Change 2015 2014 £m £m £m Kier Group Pension Scheme: Market value of assets 919 837 +82 Present value of liabilities (994) (900) -95 Deficit in the scheme (75) (63) -12 Deferred tax 15 13 +2 Net pension liability on Kier Group Pension Scheme (60) (50) -10 Mouchel Pensi

16. Slide 16: Synergies Update

    Synergies Update  May Gurney synergies on track  Mouchel Pre-tax run rate cost  All actions completed to deliver £4m synergies by category of synergies in 2016 £10m in FY 2017  On track to deliver £10m of synergies £10.0m in 2017 £9.0m  One-off exceptional integration costs £8.0m £4.4m Corporat

17. Slide 17: Financial Summary

    Financial Summary  Operating profit to £104m up 19%  Borrowings below consensus  Enhanced ROCE in Property  Strong working capital performance across all divisions  Banking facilities renegotiated and extended  Increased shareholder investment, dividend of £47m up 20%  Simplifying the Group 

18. Slide 18: Operational update

    Operational update Haydn Mursell, Chief Executive Kier Group plc – Full Year results for the year ended 30 June 2015 18

19. Slide 19: Property

    Property Kier Group plc – Full Year results for the year ended 30 June 2015 19

20. Slide 20: Property - Performance

    Property - Performance Year ended 30 June 2015 2014 Change £m £m3 % Revenue1 Development 79 86 -8 Structured finance 47 16 +194 Total 126 102 +24 Underlying operating profit2 Developments 23.0 11.2 +105 Structured finance (0.3) 4.8 -106 Total 22.7 16.0 +42 Average capital4 Developments (84) (70) +20

21. Slide 21: Property - Developments

    Property - Developments  27% return on capital in 2015  Maintained £1bn+ pipeline  Funding readily available  JV structures optimise ROC Foley Street, London  Logistics City launch  >£100m revenue to rest of the Group  Expertise critical to integrated Logistics City, Thurrock opportunities 

22. Slide 22: Property - Structured Finance

    Property - Structured Finance  Maintained portfolio  Eight schemes, £36m value  Continue to recycle mature assets  Sale of Oldham library Oldham Library  Student accommodation  Glasgow  Newcastle  Infrastructure  Silvertown tunnel Student accommodation, Glasgow Ayr Academy Kier Group plc –

23. Slide 23: Property - Outlook

    Property - Outlook  Strong UK market  Regions attractive  National coverage  Broad sector profile  Resilience  Good support by co-investors  Focused on ROC  Capital investment increasing  15% minimum return  Integrated opportunities to drive value creation Kier Group plc – Full Year result

24. Slide 24: Residential

    Residential Kier Group plc – Full Year results for the year ended 30 June 2015 24

25. Slide 25: Residential - Performance

    Residential - Performance 2015 20142 Change £m £m % Revenue Private (Kier land) 142 128 +11 Mixed tenure 115 105 +10 Total 257 233 +10 Underlying operating profit1 Private (Kier land) 6.4 3.9 +64 Mixed tenure 4.8 3.8 +26 Total 11.2 7.7 +45 Average capital3 Private (Kier land) (220) (213) +3 Mixed te

26. Slide 26: Residential - Mixed Tenure

    Residential - Mixed Tenure  Significant increase in activity  1,424 completions  Housing market strong  National coverage Manor Kingsway, Derby  Southdale acquisition  Improving financials  Return on capital now >10%  Capital increased to >£40m  >70% secured for 2016 Balaam Wood, Birmingham

27. Slide 27: Residential - Private (on Kier land)

    Residential - Private (on Kier land)  Completions in line with strategy  17% increase  c.60% on old land, minimal ROCE  Land bank mix improving Westhill, Kettering  75% old land: 25% new land  20% ROC on new land, once fully trading  Land bank units 3,485  Reducing as cash is recycled to Mix

28. Slide 28: Residential - Outlook

    Residential - Outlook  UK supply/demand imbalance  Continue to recycle land bank capital  Grow the Mixed Tenure business  Budget changes manageable  Potential housing provider consolidation  Integrated opportunities  Derivation of value from underutilised land/assets  Provision of new build

29. Slide 29: Construction

    Construction Kier Group plc – Full Year results for the year ended 30 June 2015 29

30. Slide 30: Construction - Performance

    Construction - Performance Year ended 30 June 2015 20143 Change £m £m % Revenue1 1,721 1,498 +15 2 Underlying operating profit 37.7 30.2 +25 2 Underlying operating margin 2.2% 2.0% Order book (secure and probable) 3.3bn 2.5bn +32 £m £m 1,800 40.0 38.0 2.4% 1,700 2.4% 36.0 1,600 2.2% 34.0 2.1% 1,500

31. Slide 31: Construction - Sectors

    Construction - Sectors Revenue Sector June 2014 June 2015 Future trend Education 24% 27% Commercial, residential and mixed use 22% 21% International 14% 12% Power, industrial, utilities and waste 12% 11% Health 8% 10% Transportation 10% 8% Defence 1% 4% Other (inc blue light/leisure/retail) 9% 7% Ki

32. Slide 32: Construction - UK Building

    Construction - UK Building  Strong organic growth  National coverage  Framework focus maintained  SCAPE £1.5bn The Ram Quarter, Wandsworth  Southern Construction £4bn  P21+ − Hampshire hospital  Biotech presence  University of Cambridge Scape  Wellcome Trust Sanger Institute  Lower risk pr

33. Slide 33: Construction - UK Infrastructure

    Construction - UK Infrastructure  Increased capability  Significant pipeline over medium term  Good revenue visibility  Transport Crossrail  Crossrail  HS2  Mersey Gateway  Smart Motorways  Power Mersey Gateway  New Nuclear – Hinkley  Gas and other  Utilities  Thames Water - Deephams De

34. Slide 34: Construction - International

    Construction - International  Order book strength  New work secured >£375m  Prestigious residential development, Dubai £100m+ Dubai residential development  Middle East focus  Dubai  Saudi Arabia  UK Export Finance  Hong Kong Saadiyat Rotana Resort  MTR rail programme delays  Strong market

35. Slide 35: Construction - Outlook

    Construction - Outlook  Strong position  Order book £3.3bn  95% secured for 2016  Recovering market  Higher quality new work  Lower risk profile  UK Infrastructure horizon  Government focus and investment  Significant potential over the medium term  Middle East activity  UKEF differentiat

36. Slide 36: Services

    Services Kier Group plc – Full Year results for the year ended 30 June 2015 36

37. Slide 37: Services - Performance

    Services - Performance Year ended 30 June 2015 2014 Change £m £m % Revenue1 1,247 1,104 +13 Underlying operating profit2 58.0 53.3 +9 Underlying operating margin2 4.7% 4.8% Order book (secure and probable) 6.0bn 3.7bn +62 £m £m 1,400 70 1,200 60 4.8% 4.5% 4.5% 4.4% 4.7% 1,000 50 800 40 600 30 1,492

38. Slide 38: Services - Sectors

    Services - Sectors Revenue Sector June 2014 June 2015 Future trend Highways 25% 27% Utilities and other regulated 22% 22% Housing maintenance - public 21% 17% Housing maintenance - private 5% 10% Facilities Management (FM) 12% 10% Other (includes KBS, Mouchel Consulting and 12% 11% Environmental) Fl

39. Slide 39: Services - Overview

    Services - Overview 2014 Revenue Breakdown 2015 Revenue Breakdown (3 weeks Mouchel) Revenue £1,104m Utilities Revenue £1,247m Utilities Highways Highways 1% Housing Housing FM 15% FM 13% 22% 22% Other Other Consulting 10% 12% 25% 27% 27% 26% 2015 Revenue Breakdown (Mouchel annual proforma basis) Rev

40. Slide 40: Services – Utilities and Highways Maintenance

    Services – Utilities and Highways Maintenance  >£700m AMP6 wins  May Gurney relationships  Thames Water  Anglian Water Thames Water  Contract mobilisations completed  £200m 4-year Northamptonshire County Council contract  Surrey, Lincolnshire and East Anglian Water Sussex extensions >£100m 

41. Slide 41: Services - Housing Maintenance and FM

    Services - Housing Maintenance and FM  Increased HA & RP coverage  £140m Genesis contract mobilised  Sheffield and Richmondshire awards >£50m Genesis  Potential consolidation  Likely larger, more complex outsourcing contracts  Broad FM offering  Royal Opera House £22m award Royal Opera House

42. Slide 42: Services - Mouchel

    Services - Mouchel  Integration progressing well  Customers and senior management retained  Combined Highways business Strategic Highways (formerly EM Highways)  Early sight of revenue synergies  UK sector leader in Highways Maintenance and Management  Accelerated infrastructure growth KBS (fo

43. Slide 43: Services - Outlook

    Services - Outlook  Strong position  Continued public sector  Long term order book of £6.0bn fiscal pressure  Potential extensions of £3.3bn  More complex outsourcing  90% secured for 2016 contracts  Expanded Infrastructure capabilities  Transport and Utilities £bn 1.8 Secured & probable Ext

44. Slide 44: Vision 2020 update

    Vision 2020 update Kier Group plc – Full Year results for the year ended 30 June 2015 44

45. Slide 45: Vision 2020 - organic growth

    Vision 2020 - organic growth Business Strategy Progress to date Property • Organic growth - cash flow • Excellent ROCE with external co-investors from Group and external • Capital invested increasing to £130m finance options during 2016 Residential • Stability (c700 units pa) • YoY unit sales growth

46. Slide 46: Vision 2020 - accelerated growth

    Vision 2020 - accelerated growth Business Strategy Progress to date Residential Mixed Tenure • Geographical coverage • Significant YoY units sales growth • Move beyond LA focus to • Double digit ROCE RPs • Southdale acquisition (Northern capability) Housing • Integrated opportunities Maintenance Con

47. Slide 47: Vision 2020 - divestments

    Vision 2020 - divestments  Disciplined approach to strategic and financial criteria  Aligns with our five year strategy for growth − Top 3 player in a sector/market  15% return on capital  Quality of margin and cash generation  Resolution of loss-making contracts Business Strategy Progress to d

48. Slide 48: Strategic Progress - financial targets

    Strategic Progress - financial targets  Key metrics 2014 to 2015 Target 2015 Annual average operating >10 19 – Ahead of target profit growth (%) Property – ROCE (%) >15 27 – Ahead of target Residential – ROCE (%) >15 Improving Construction – EBITA (%) >2.5 2.2 – Increasing Services – EBITA (%) >5 4

49. Slide 49: Group Outlook

    Group Outlook  Good results  Order book of £9.3bn  Well secured for 2016  Strong balance sheet  Mouchel acquisition  Infrastructure revenues >£1.5bn  Combined Highways business  Improving trading environment  Breadth of capabilities  Competitive market position  On track with our Vision 2

50. Slide 50: Q&A

    Q&A Kier Group plc – Full Year results for the year ended 30 June 2015 50

51. Slide 51: Appendices

    Appendices Kier Group plc – Full Year results for the year ended 30 June 2015 51

52. Slide 52: Dividend analysis

    Dividend analysis  Rights issue increased shares in issue by c.40m shares to 95.2m shares in issue at the year end. Only 3 week’s earnings from Mouchel (completed 8 June) were included in the Group’s earnings in the period  Rights issue bonus factor assumes 12 months revised capital structure rath

53. Slide 53: Financing Facilities

    Financing Facilities 2015 2014 Maturity Facility type £m £m 2019,2021, US Private Placement 183 63 2022,2024 Syndicated term loans - 50 2016 Revolving credit facility 380 190 2020 Funding for lending scheme loan 30 30 2017 Overdraft 45 45 Asset finance 103 121 Total 741 499 Kier Group plc – Full Yea

54. Slide 54: Property: PFI / PPP and Investments portfolio

    Property: PFI / PPP and Investments portfolio Kier Capital value Project Status equity/loan Equity % £m stock £m Local authority Woking housing In construction 31 2.0 50 Salford University In construction 64 2.1 25 Student accommodation Glasgow (direct let) In construction 16 3.0 50 East Ayrshire Sc

55. Slide 55: Kier Group plc – Full Year results for the year ended 30 June 2015

    Kier Group plc – Full Year results for the year ended 30 June 2015 55

Kier Group — FY2015 Earnings Presentation on 6ix