Costain Group PLC · LSE:COST
Costain — Merger or Acquisition (March 2013)
31 slides from Costain's merger presentation, Mar 27, 2013
Slide 1: Creating a new UK force in the provision of integrated services
Creating a new UK force in the provision of integrated services Recommended all-share merger of Costain Group PLC and May Gurney Integrated Services plc 27 March 2013
Slide 2: Key messages
Key messages > Combination of Costain and May Gurney, creating a new UK force in the provision of integrated services > Broader range and greater scale of capabilities to meet customers’ changing demands > Greater financial strength and scale, underpinned by significant earnings visibility in a comb
Slide 3: Creating a new UK force in the provision of integrated services
Creating a new UK force in the provision of integrated services > Combining the skills, capabilities and experience of c. 11,000 people > Broader range and greater scale of capabilities to meet customers’ changing demands > Delivering innovative and cost-effective solutions to address essential nati
Slide 4: High quality, long-term customers
High quality, long-term customers Costain May Gurney 3
Slide 5: Combined Group business model
Combined Group business model RESOURCE ALLOCATION BUSINESS DEVELOPMENT PERFORMANCE MANAGEMENT Track record Skills and Range of innovative of reliable, Values and experience Financial strength services safe service brand reputation of team delivery Advisory & Programme Operations & Design Delivery Ma
Slide 6: Strategic rationale
Strategic rationale Enhanced range of capabilities to address customers’ changing demands Hydrocarbons & chemicals Nuclear process Costain Costain > Professional/Consulting services > Decommissioning infrastructure > Upstream front end consulting services > Managing nuclear waste > Mid stream front
Slide 7: Strategic rationale
Strategic rationale Enhanced range of capabilities to address customers’ changing demands Highways Rail Costain Costain > Traffic communications > Major multi-disciplinary projects > Asset management > Major transportation hubs > Programme management > Professional/Consulting services May Gurney May
Slide 8: Strategic rationale
Strategic rationale Enhanced range of capabilities to address customers’ changing demands Local government services Fleet and passenger services May Gurney May Gurney > Highway asset management > Transportation services services > Waste collection and recycling > Waste collection services vehicles >
Slide 9: Combined order book of c. £3.9bn
Combined order book of c. £3.9bn 2013 2014 2015 + £m 0 200 400 600 800 1,000 1,200 1,400 1,600 1,800 2,000 NB: Based on Costain’s order book of £2.4 billion as at 31 December 2012 and May Gurney’s order book of £1.5 billion as at 30 September 2012 8
Slide 10: Transaction terms
Transaction terms > Post the merger, current Costain shareholders would own 53% and May Gurney shareholders would own 47% of Costain May Gurney PLC > May Gurney shareholders will receive 0.8275 new Costain May Gurney PLC shares plus a second interim dividend of 5.6 pence per May Gurney share in lieu
Slide 11: Management of Costain May Gurney PLC
Management of Costain May Gurney PLC > Costain’s executive team, Andrew Wyllie (CEO) and Tony Bickerstaff (Group FD), would manage Costain May Gurney PLC > All existing Costain and May Gurney NEDs would join the board, with David Allvey as Chairman and Baroness Margaret Ford as Deputy Chairman > The
Slide 12: Integration plan
Integration plan > Maintain customer focused approach > Branding – Listed entity to be called Costain May Gurney PLC – Use of Costain and May Gurney brands as required by customers > Operating model – Common overhead services delivered centrally – Roll out of Costain Oracle platform across the May G
Slide 13: Delivery of cost synergies
Delivery of cost synergies Annual pre-tax cost synergies Central of £10m within 18 months > c.£2.5m in y/e Dec 2013 > c.£7.5m in y/e Dec 2014 Overheads c.90% Shared > c.£10m in y/e Dec 2015 Divisional One-off exceptional costs of c.£14m, plus one-off capex costs of c.£6m relating to Procurement c.10
Slide 14: Combined Group capital structure
Combined Group capital structure > Pro forma market capitalisation of £378m1 > Costain net cash of £105.7m as at 31 Dec 2012; May Gurney net debt of £77.0m (£74m finance leases) as at 30 Sept 2012 > Transaction and integration costs of c.£40m > Pro-forma modest net debt position, including finance l
Slide 15: Regulatory timetable
Regulatory timetable > Rule 2.7 announcement 26 March 2013 > Publication of Prospectus / Class 1 Circular (Costain) 26 March 2013 > Publication of Scheme Document (May Gurney) Mid April 2013 > May Gurney Court and shareholder meetings Early May 2013 > Costain shareholder meeting Early May 2013 > Com
Slide 16: Creating a new UK force in the provision of integrated services
Creating a new UK force in the provision of integrated services > Combined revenues of c.£1.6bn¹, broadly 50/50% Indicative revenue split by sectors support services and project delivery Hydrocarbons > Combined EBITDA of c.£80m¹, plus cost synergies Nuclear Process Water of £10m Waste Highways > For
Slide 17: Key messages
Key messages > Combination of Costain and May Gurney, creating a new UK force in the provision of integrated services > Broader range and greater scale of capabilities to meet customers’ changing demands > Greater financial strength and scale, underpinned by significant earnings visibility in a comb
Slide 18: Appendices
/ MAY GURNEY COSTAIN
Slide 19: May Gurney overview
May Gurney overview Key facts > A leading support services business > Over 95% of revenues from delivering long-term essential services to the public and regulated sectors > May Gurney has two divisions: – Public Sector Services (Highways, Environmental, Fleet & Passenger Services) – Regulated Secto
Slide 20: May Gurney overview: markets
May Gurney overview May Gurney’s markets Strategy to address resilient market segments Public Sector Services Regulated Sector Services c.60% of Group revenues c.40% of Group revenues > Highway Services > Utility Services − Highway maintenance: £2.8 billion p.a. − Water: average expenditure of £4.4
Slide 21: May Gurney Overview: Public Sector Services division
May Gurney Overview Public Sector Services division Public Sector Services1 2012 revenue £392m (59% of Group) Highway Services Environmental Services Fleet & Passenger Services 2012 revenue £255m (38% of Group) 2012 revenue £103m (15% of Group) 2012 revenue £34m (5% of Group) > Services include: > S
Slide 22: May Gurney Overview: Regulated Sector Services division
May Gurney Overview Regulated Sector Services division Regulated Sector Services Revenue £277m (41% of Group) Utility Services Rail Services Waterway Services Revenue £180m (27% of Group) Revenue £64m (10% of Group) Revenue £33m (5% of Group) > Services include > Services include > Services include:
Slide 23: May Gurney Overview: Historic trading
May Gurney Overview Historic trading Key historic financial information Capex £m Year end March, £m FY10 FY11 FY12 1H121 40.0 Revenue 483.1 571.4 695.3 338.9 EBITA 22.1 25.1 30.1 12.6 30.0 EBITA margin 4.6% 4.4% 4.3% 3.7% 20.0 Reported PBT 18.4 18.8 19.3 5.4 Cash generated from operations 30.7 28.6
Slide 24: Costain Overview
Costain Overview Key facts > One of the UK’s leading, Tier One, engineering solutions providers > The ‘Choosing Costain’ strategy provides valuable solutions for Government agencies and blue-chip customers > Costain provides consultancy, construction and operational maintenance for: – Infrastructure
Slide 25: Costain's business divisions
Costain’s business divisions Natural Resources Infrastructure Water Highways A leading provider of Capital Framework and Maintenance Framework Programmes under Delivering major programmes for the Highways Agency, maintenance under the current the current AMP 5 arrangements MAC contracts and Early Co
Slide 26: 'Choosing Costain'
Costain’s strategy Developing Tier 1 capabilities to meet Costain’s customers’ needs As a leading Tier One Engineering solutions provider to blue chip customers in chosen markets, Costain continues to strengthen its position by increasing its focus on customers’ needs and providing a broader range o
Slide 27: Costain's market focus
Costain’s market focus As a leading Tier 1 Engineering solutions provider to blue chip customers in chosen markets, Costain continues to strengthen their position by increasing the focus on customers’ needs and providing a broader range of services in markets underpinned by national needs, essential
Slide 28: Costain overview: Historic trading
Costain overview Historic trading 1 Key historic financial information Dividend per share (pence) Year end December, £m FY09 FY10 FY11 FY12 12 10.75p Revenue 993.4 924.5 868.5 934.5 10.00p EBITA 22.9 18.3 24.1 25.1 10 9.25p 8.25p EBITA margin 2.3% 2.0% 2.8% 2.7% 7.50p 8 Reported PBT 18.1 27.9 23.9 2
Slide 29: Disclaimer
Disclaimer This presentation and the information contained within it is provided on the following terms and subject to the following conditions: This document is for information purposes only. It is not intended to and does not constitute or form part of any offer to sell or subscribe for or any inv
Slide 30: Disclaimer
Disclaimer This presentation and the information contained within it is provided on the following terms and subject to the following conditions: This document contains certain forward-looking statements with respect to the financial condition, results of operations and business of May Gurney and Cos
Slide 31: Creating a new UK force in the provision of integrated services
Creating a new UK force in the provision of integrated services Recommended all-share merger of Costain Group PLC and May Gurney Integrated Services plc 27 March 2013