Costain Group Plc · LSE:COST
Costain — FY2009 Earnings Presentation
39 slides from Costain's earnings presentation, Mar 10, 2010
Slide 1: Results for the year ended 31 December 2009 Strategy update
Results for the year ended 31 December 2009 Strategy update Analyst presentation 10 March 2010 ‘Choosing Costain’
Slide 2: Tony Bickerstaff, Finance Director
Tony Bickerstaff, Finance Director 1
Slide 3: Another strong operational performance
Another strong operational performance • Revenue up 7% at £1,061.1m (2008: £996.0m)*, exceeding £1.0 billion for the first time in 16 years • Profit from operations up 14% at £20.8m (2008: £18.3m) • Profit before tax of £18.1m (2008: £23.1m) – As anticipated, impacted by low interest rates and IAS19
Slide 4: Revenue analysis (£m)
Revenue analysis (£m) Infrastructure Environment increased 75% increased 2% Group increased overall 7% 1200 1,061 996 1000 877 H2 800 553 529 447 H1 600 400 Energy and Process Community 508 increased 21% reduced 41% 200 430 467 0 2007 2008 2009 ‘Choosing Costain’ 3
Slide 5: Segmental income statement
Segmental income statement 2009 2008 £m margin £m margin Environment 11.7 2.7% 11.6 2.8% Infrastructure 16.9 4.6% 14.4 6.9% Community (8.4) (5.2) Energy & Process 9.3 9.2% 5.5 6.6% Land Development (2.6) (2.3) Central Costs (6.1) (5.7) Profit from operations 20.8 18.3 Net finance (expense) / income
Slide 6: Net finance (expense) / income
Net finance (expense) / income 2009 2008 £m £m Net Bank Deposit Interest 0.7 4.9 Interest on Loans to JVs 1.4 0.9 IAS19 Pension Scheme Interest: Expected return on scheme assets 23.4 28.3 Interest Cost on present value of obligations (28.2) (29.3) IAS19 Pension scheme net interest (4.8) (1.0) Net fi
Slide 7: Tax
Tax • 2009 tax rate at 19.3% of PBT (2008: 21.2%) • Includes benefit from non taxable gains • Normalised rate expected to be 25%-27% on non JV profit ‘Choosing Costain’ 6
Slide 8: Cash flow reconciliation
Cash flow reconciliation 2009 2008 £m £m Cash and cash equivalents at beginning of period 146.9 133.4 Cash flow (used by)/from operating activities (16.5) 22.6 Cash flow (used by)/from investing and financing activities (4.2) (5.4) Dividends/financing (5.0) (4.1) Effect of foreign exchange rate chan
Slide 9: Balance sheet
Balance sheet At 31 December 2009 2008 £m £m Assets Non Current Assets 74.6 63.0 (excluding pension deficit deferred tax) Trade and other receivables 204.3 181.9 Cash 120.8 147.3 Current Assets 325.1 329.2 Total Assets 399.7 392.2 Current Liabilities (320.5) (312.1) Total Assets less Current Liabili
Slide 10: Pension
Pension • Net Deficit increased to £75.4m (2008 £36.1m) due to increased inflation rate and reduced discount rate partially offset by increased equity values • Ongoing actions to manage obligations – Scheme closed to future accrual from 30th September 2009 : all current employees now only have defin
Slide 11: PFI portfolio valuation – December 2009
PFI portfolio valuation –December 2009 Invested Committed Estimated Status Capital Capital Valuation Valuation of Current Portfolio Bridgend Sold 55.0 Kings Sold Sirhowy Sold 50.0 Estimated valuation (£m) Kent Schools Sold Ealing Schools Sold Shropshire Sold 45.0 Kent Elderly Sold Kingston Operation
Slide 12: Land Development
Land Development • Long-term strategic land and marina assets Land Development – 50:50 joint venture with Santander Bank – Costain equity share £26.6m book value • No significant land sales in the year – Cost base reduced – No market improvement expected in 2010 • Development of 600-berth marina wel
Slide 13: Banking / Bonding facilities
Banking / Bonding facilities • Facilities recently increased by 20% to £345.0 million • Extended to September 2013 • Improved covenant structure • Circa 40% utilisation sufficient to support next phase of growth ‘Choosing Costain’ 12
Slide 14: Dividend
Dividend • Final dividend recommendation of 0.55p per share – Option to take shares in lieu • Based on shareholding as at 23 April 2010 • Payout for year will total 0.825p, up 10% ‘Choosing Costain’ 13
Slide 15: Share consolidation
Share consolidation • One ordinary share in the Company with a nominal value of 50 pence each for every ten ordinary shares with a nominal value of 5 pence held on 6 May 2010 • Aims to reduce volatility in the Company’s share price • Further details will be set out in the Company’s notice of annual
Slide 16: Andrew Wyllie, Chief Executive
Andrew Wyllie, Chief Executive 15
Slide 17: Results for the year ended December 2008 Analyst presentation
‘ ’ Results for the year ended 31 December 2008 Analyst presentation 11 March 2009 ‘Choosing Costain’ 16
Slide 18: Vital strategic investment decisions already being made for the future of UK infrastructure
Vital strategic investment decisions already being made for the future of the UK’s infrastructure ‘Choosing Costain’ 17
Slide 19: Circa 50 GW of new power generation capacity required by 2025
Circa 50 GW of new power generation capacity required by 2025 to ‘stop the lights going out’ ‘Choosing Costain’ 18
Slide 20: Strategic gas storage supply needs to increase by over 300%
Strategic gas storage supply needs to increase by over 300% just to bring UK in line with France & Germany ‘Choosing Costain’ 19
Slide 21: Urgent solutions needed for 100 mtpa of waste
Urgent solutions needed for the 100 mtpa of waste following introduction of landfill legislation ‘Choosing Costain’ 20
Slide 22: Economic growth dependent on efficient transport infrastructure
Economic growth dependent on efficient transport infrastructure: £65 billion investment required over the next decade 21
Slide 23: We have the skills and capabilities to help meet these strategic needs
We have the skills and capabilities to help meet these strategic needs ‘Choosing Costain’ 22
Slide 24: Consulting: established capability to deliver engineering solutions
Consulting: established capability to deliver engineering solutions Over 300 specialists working on nuclear decommissioning programme 23
Slide 25: Construction: world class expertise to deliver major complex projects
Construction: world class expertise to deliver major complex projects St Pancras rail terminal for High Speed 1 completed on time and budget 24
Slide 26: Care: a proven ability to maintain the nation's infrastructure
Care: a proven ability to maintain the nation’s infrastructure Maintaining 1 in 3 motorway miles for the Highways Agency in the UK 25
Slide 27: We are implementing the next stage of our strategy
We are implementing the next stage of our strategy – ‘Choosing Costain’ – for future profitable growth ‘Choosing Costain’ 26
Slide 28: 'Choosing Costain': A strategy for further profitable growth
‘Choosing Costain’: A strategy for further profitable growth • ‘Being Number One’ strategy, implemented since 2006, established Costain as one of UK’s leading engineering and construction companies • ‘Choosing Costain’ is the Group’s next stage of development, in line with changes to industry over t
Slide 29: Focus on organisations with committed spending plans
Focus on organisations with committed spending plans ‘Choosing Costain’ 28
Slide 30: Focus on organisations with committed spending plans
Focus on organisations with committed spending plans ‘Choosing Costain’ 29
Slide 31: Strategy to meet key market trends
Strategy to meet key market trends Changing Revenue Profile* Consulting Construction Care 2006 2010 2014 ‘Being Number One’ 2006 Infrastructure Highways, Rail, Airports 2008 Environment 2010 ‘Choosing Costain’ Water and Waste 2012 Energy and Process Nuclear, Power, and Hydrocarbons & Chemical 2014 1
Slide 32: Record year-end order book
Record year-end order book • Order book up 30% to £2.6 billion £2.6 billion • Major contract awards in year include: – Severn Trent, Greater Manchester Waste, Energy & 5-Year MAC Highways Agency contract Process Community 7% • Repeat business at 84% 6% • 13% maintenance related • In addition, prefer
Slide 33: Order book progression and breakdown
Order book progression and breakdown Private 8% Public 21% 3 2.5 2 £bn 1.5 Public Maintenance 13% 1 Private Regulated 0.5 48% 0 Public Regulated 10% December December December 2007 2008 2009 Order Book as at 31 Dec 2009 C. 70% of order book regulated or maintenance related ‘Choosing Costain’ 32
Slide 34: A longer-term visibility of earnings
A longer-term visibility of earnings 2009 2010 Order Book @ 31 Dec 2008: 2011+ £2.0bn Preferred Bidder 2010 2011 Order Book @ 2012+ 31 Dec 2009: £2.6bn Preferred Bidder 0 200 400 600 800 1000 1200 £m • Securing contracts on increasingly longer-term basis: 65% of order book for work 2011+ • Secured £
Slide 35: Environment
Environment Market Opportunity Costain’s Position Environment Order Book: Water £1.3 billion • £22.0 billion AMP5 programme, 2010 - 2015 • Leading player successfully completing AMP4 contracts • Regulatory pressure to • Southern Water, United improve performance and Utilities and Welsh Water standar
Slide 36: Infrastructure
Infrastructure Market Opportunity Costain’s Position Infrastructure Order Book: Highways • £6.5 billion investment in strategic schemes by • Top position in UK Highways and working on numerous major £1 billion Highways Agency through to capital projects 2014 • Managing one in three motorway (includi
Slide 37: Energy & Process
Energy & Process Market Opportunity Costain’s Position Energy & Process Order Book: Nuclear • NDA budget c. £2.8 • Delivering innovative £0.18 billion engineering billion during 2010/11 modularised process • Government solutions commitment to new • Operating at five nuclear Energy & nuclear programm
Slide 38: Summary
Summary • Strong operational performance in 2009 • Good start to 2010 • Challenging market conditions set to continue • Record year-end Order Book provides long-term visibility • ‘Choosing Costain’ strategy to expand and drive business forward • Cash balance and banking & bonding facilities provide
Slide 39: Slide 39