Costain Group Plc · LSE:COST
Costain — H1 2015 Earnings Presentation
28 slides from Costain's earnings presentation, Aug 20, 2015
Slide 1: Results for the six months ended 30 June 2015
Costain Group PLC ENGINEERING TOMORROW…TOD AY Results for the six months ended 30 June 2015 20 August 2015
Slide 2: A strong first half performance
A strong first half performance • Another strong trading performance • Unique customer focussed strategy generating record order book • Leveraging opportunity to accelerate growth both organically and by acquisition • Positive outlook for FY2015 and confidence in the future 2 Costain Group PLC - Res
Slide 3: Financial Review
ENGINEERING TOMORROW…TOD AY Financial Review Tony Bickerstaff, Finance Director
Slide 4: Another strong trading performance
Another strong trading performance • Unique strategy and market position delivered another strong performance • 17% increase in revenue 1 to £621.1m • 17% increase in underlying2 operating profit to £13.1m • Adjusted2 profit before tax increased to £11.4m • Adjusted2 basic earnings per share increas
Slide 5: Costain has a unique market position
Costain has a unique market position • Unique focus on blue chip customers • Target customers require innovation and agility to drive better value for money Order Book – 90% Target cost based contracts • Ability to deliver the necessary broad range of December 2010 June 2015 integrated services • Ov
Slide 6: 17% growth in revenue
17% growth in revenue Revenue split by sector (£m) Rail Highways 2015 Power Water Nuclear Process 2014 Oil and Gas 0 100 200 300 400 500 600 700 Other • Growth reflects targeting of Group resources to most attractive opportunities – Significant growth in Rail and Highways through long-term framework
Slide 7: Track record of increasing earnings
Track record of increasing earnings Group underlying operating profit* £m 35 30 25 H2 17.5 20 16.7 14.1 H1 15 14.9 10 13.1 10.4 10.7 11.2 5 9.2 0 2011 2012 2013 2014 2015 * Bef ore other items, amortisation of acquired intangible assets and employ ment related and other def erred consideration 7 Cos
Slide 8: Segmental income statement
Segmental income statement 6 Months to 30 June 2015 6 Months to 30 June 2014 Full Year 2014 Underlying Underlying Underlying Operating Operating Operating Revenue 1 Profit2 Revenue 1 Profit2 Revenue1 Profit2 £m £m Margin £m £m Margin £m £m Margin Infrastructure 475.2 23.6 5.0% 358.7 16.9 4.7% 785.2
Slide 9: Uniquely, over 90% target cost based contracts
Uniquely, over 90% target cost based contracts Cash balance December 2010 Advance payment £m Significantly cash Fixed price, lump sum contracts positive • Suitable for well defined low complexity projects, £2.4bn 50% 50% e.g. PFI schools, offices % Target • Higher risk, can lead to confrontation cos
Slide 10: Strong cash position
Strong cash position Movements in Cash £200m As expected change in working £180m capital due to: £14.7m £(17.3)m £160m £(5.9)m £140m £(5.9)m £(5.2)m - Continued increase in target cost £(2.1)m £120m contracts - Reversal from positive year-end £100m timing £80m £148.5m £60m £126.8m 2015 H2 items: £40
Slide 11: Strong balance sheet and increased banking facilities
Strong balance sheet and increased banking facilities 30 June 2015 30 June 2014 31 December 2014 £m £m £m Assets Non current assets 97.1 98.3 101.2 (excluding pension deficit deferred tax) 230.5 214.0 198.4 Trade and other receivables 126.8 134.9 148.5 Cash 357.3 348.9 346.9 Current assets 454.4 447
Slide 12: 15% increase in dividend
15% increase in dividend • Progressive dividend policy, targeting ongoing dividend cover of c. 2 x underlying earnings • Interim dividend of 3.75 pence per share (2014: 3.25 pence per share) • Increase of 15% in the interim dividend • Dividend will be paid on 23 October 2015 to shareholders on the r
Slide 13: Unique strategy and accelerating growth
ENGINEERING TOMORROW…TOD AY Unique strategy and accelerating growth Andrew W yllie CBE, Chief Executive
Slide 14: Strategic goals being achieved
Strategic goals being achieved • Accelerating growth, both organically and by acquisition • Strong trading performance generated by unique customer focused strategy • Developing skills and capabilities • Investing in innovation and technology • Acquisition of Rhead Group, further enhancing integrate
Slide 15: Unique strategy delivering results
Unique strategy delivering results Infrastructure Securing a future energy supply… …maintaining a safe and reliable water supply Natural Resources …upgrading the transport infrastructure 15 Costain Group PLC - Results for the six months ended 30 June 2015
Slide 16: Record order book and increased visibility
Record order book and increased visibility • Forward order book up 17% to £3.7bn 2015 (June ‘15) (June 2014: £3.2bn) 2014 (June ‘14) • Over £1.2bn of work secured for 2015 (June 2014: over £950m for 2014) 2016 (June ‘15) • Over £950m of work secured for 2016 2015 (June ‘14) (June 2014: over £800m fo
Slide 17: £3.7 billion order book underpinning growth
£3.7 billion order book underpinning growth Customers require long-term strategic relationships • Larger, longer term contracts – average contract duration over 4 years • Incorporating broad range of integrated services • Need to demonstrate scale and capability • Driving sector consolidation • Over
Slide 18: Developing a team of talented and award winning people
Developing a team of talented and award winning people Graduate Innovation and ‘Business Ideas’ Forum, July 2015 • 44% growth in total headcount to over 5,000 in the last 2 years • 1,000+ people in consulting, advisory and design roles • 450+ engineers and designers in new engineering centre in Manc
Slide 19: Constantly driving new technology and innovation across the business
Constantly driving new technology and innovation across the business Plasma Waste Vitrification Dimlington Terminal Upgrade Design for manufacture and assembly Augmented Reality CO2 capture for enhanced oil recovery Innovative collaboration partnership 19 Costain Group PLC - Results for the six mont
Slide 20: Acquisition of Rhead Group
Acquisition of Rhead Group • Acquisition of professional services consultancy for £36m • Rhead Group, with over 550 people, has an established reputation for providing a range of solutions across the lifecycle of infrastructure, construction and asset management programmes • Blue chip customer base
Slide 21: Good opportunities across targeted sectors
Good opportunities across targeted sectors • Total spend in target sectors of circa £80bn per annum • Addressable market remains at circa £20bn, driven by regulation, legislation and addressing essential national needs Securing a future • Government supporting investment through National Infrastruct
Slide 22: Summary and outlook
Summary and outlook • Unique strategy and market position delivered another strong performance • 17% increase in revenue and operating profit • 15% increase in dividend • £3.7bn record forward order book • Acquisition of professional services consultancy Rhead Group • On course to deliver a result f
Slide 23: Appendix
ENGINEERING TOMORROW…TOD AY APPENDIX
Slide 24: Re-organisation of Alcaidesa joint venture
Re-organisation of Alcaidesa joint venture • Reorganised land development JV with Santander in Spain • Assets split equally between the parties by mutual consent • From July, Costain has 100% ownership of leisure-based assets with significantly reduced exposure to land development • Costain’s assets
Slide 25: Delivering a broad range of integrated services
Delivering a broad range of integrated services Smart motorw ays Adv ising clients on asset enhancement Managing Mobicloud to improv e site efficiency Cutting the cost of carbon capture London Bridge Station Adv ising on HS2 Perenco Dimlington Centrica Barrow 25 Costain Group PLC - Results for the s
Slide 26: Cash position
Cash position June June Full Year 2015 2014 2014 £m £m £m Net Cash at beginning of period 148.5 82.7 82.7 Cash flow (used by)/from operating activities* (8.8) 19.3 40.6 Cash flow used by investing activities (7.0) (8.9) (12.7) Dividends / financing (5.9) 40.7 37.9 Net cash at end of period 126.8 133
Slide 27: Other items and tax
Other items and tax Other Items • Amortisation of acquired intangible assets – £1.2m (H1 2014: £1.6m; FY 2014: £3.0m) − Amortised from date of acquisition (ClerkMaxwell - April 2011, Promanex - August 2011, EPC - August 2013, Serco JV – January 2014) • Employment related and other deferred considera
Slide 28: Legacy pension obligation
Legacy pension obligation • Contributions at £7m per annum plus a top-up for total contributions to match annual dividend payments • Total contributions in H1 2015 of £ 5.9m with further contributions of £3.7m planned for H2 2015 • £29.6m in accounting net deficit. Decrease is a result of company co