Kier Group Plc · LSE:KIE

Kier — H1 FY2015 Earnings Presentation

48 slides from Kier's earnings presentation, Feb 25, 2015

1. Slide 1: Kier Group Interim results for the six months to December 2014

   Kier Group Interim results for the six months to 31 December 2014 25 February 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 3

4. Slide 4: Agenda

   Agenda  Introduction and highlights  Financials  Operational update  Group outlook 4

5. Slide 5: Introduction

   Introduction  Broad global recovery  Positive momentum but uncertainty exists  Our markets improving  UK confidence  Building, Housing, and Property  Cross party support  Infrastructure  Austerity to continue  Outsourcing  Integrated services 5

6. Slide 6: Highlights

   Highlights  Good results in line with expectations  Operating profit £44m  Net debt £156m, ahead of forecast  Strong performances from Property and Construction  Residential and Services second half weighted, as expected  Well positioned for 2015  Property development pipeline of more than £1

7. Slide 7: Financial update

   Financial update Bev Dew, Finance Director 7

8. Slide 8: Overview: revenue and operating profit

   Overview: revenue and operating profit December 2014 December 2013 Revenue £1,583m Up 11% Property Revenue £1,432m Property Residential Residential 3% 4% 6% Construction 5% Construction Services Services 36% 39% 55% 52% Operating profit* £56.5m Up 7% Property Operating profit* £52.8m Property Reside

9. Slide 9: Income statement

   Income statement Six months ended 31 December Change 2014 2013 % £m £m Operating profit* Group 42.3 41.9 +1 Joint ventures (JVs) 0.6 0.4 +50 Profit on disposal of PFI 1.3 2.1 -38 investments Total operating profit 44.2 44.4 - Net finance costs (8.3) (7.6) +9 Profit before tax 35.9 36.8 -2 Underlying

10. Slide 10: Operating profit

    Operating profit Six months ended 31 December Change 2014 2013 % Performance by division £m £m Property 14.0 10.6 +32 Residential 0.8 0.5 +60 Construction 18.0 17.3 +4 Operating margin 2.1% 2.3% Services 23.7 24.4 -3 Operating margin 4.2% 4.3% Corporate (12.3) (8.4) +46 Total operating profit* 44.2

11. Slide 11: Exceptional items

    Exceptional items Six months ended 31 December 2014 2013 £m £m Costs in relation to the acquisition of May Gurney Transaction - (7.5) Integrated Services plc Integration - (14.5) Restructuring and business disposal costs (1.1) - Costs associated with cessation of the (1.0) - Kier Group final salary

12. Slide 12: Order book

    Order book At 31 December At 30 June At 31 December Change 2013 2014 2014 % £bn £bn £bn Construction 2.6 2.5 +4 2.5 Services 3.9 3.7 +5 3.6 Total 6.5 6.2 +5 6.1 8.0 7.0 (0.6)  90% 1.0 (0.9) 0.8 forward 6.0 sold in Residential 5.0 division £bn 4.0 6.2 6.5 3.0 2.0 1.0 0.0 June 2014 Construction award

13. Slide 13: Balance sheet summary

    Balance sheet summary At 31 At 30 At 31 December June Change December 2014 2014 £m 2013 £m £m £m Intangible assets 325 324 +1 324 Property, plant and equipment 184 192 -8 192 Investment in JVs 67 41 +26 32 Residential land and work in progress 343 334 +9 260 Other working capital (240) (236) -4 (130

14. Slide 14: Group net debt

    Group net debt 0 Operating cash flow Net capital and Working capital Tax, interest, Exceptionals (inc PFI disposals) investment movement dividends, pensions (20) (40) (60) (80) (55) £m 63 (100) June 2014 net debt* 5 (120) (123m) (44) December (140) 2014 net debt* (2) (156m) (160) (180) * Excludes fi

15. Slide 15: Pensions

    Pensions At 31 At 30 At 31 December June Change December 2014 2014 £m 2013 £m £m £m Kier Group Pension Scheme: Market value of assets 913 837 +76 815 Present value of liabilities (993) (900) -93 (872) Deficit in the scheme (80) (63) -17 (57) Deferred tax 16 13 +3 12 Net pension liability (64) (50) -

16. Slide 16: Financial summary

    Financial summary  Revenues up 11% to almost £1.6bn  Underlying operating profit in line with consensus at £44m  Net borrowings materially lower than consensus at £156m  Interim dividend increased by 7% to 24p  USPP closed in November 2014 providing an additional £120m of liquidity  Order book

17. Slide 17: Operational update

    Operational update Haydn Mursell, Chief Executive 17

18. Slide 18: Property

    Property 18

19. Slide 19: Property - Performance

    Property - Performance Six months ended 31 December 2014 2013 Change Year to June £m £m % 2014*** £m Revenue Developments 44 40 +11 86 Structured finance and PFI 5 15 -68 16 Total 49 55 -10 102 Operating profit* Developments 12.4 7.4 +68 11.2 Structured finance and PFI 1.6 3.2 -50 4.8 Total 14.0 10.

20. Slide 20: Property - Developments

    Property - Developments  Strong and improving contribution  >15% return on capital achieved on eight key completed schemes  Operating profit of £14m  Maintain predominately non-speculative approach 58 Victoria Embankment, London  Pipeline of >£1bn including  60,000 sq ft office in Hammersmith

21. Slide 21: Property - Structured finance & PFI

    Property - Structured finance & PFI  Continue to recycle assets as they become available for sale  Sale of Oldham Library project generating £2.4m  Maintained eight PFI projects valued at £38m in portfolio (7.5% discount rate valuation)  Student accommodation opportunities Oldham Library  Amber

22. Slide 22: Property - Outlook

    Property - Outlook  Strong occupier demand and an active investor market  Maintain risk-managed approach  Re-invest the Group’s free cash flow as it becomes available  Continue to target a minimum 15% return on capital  Replenished development and structured finance pipeline of >£1bn  Continue

23. Slide 23: Residential

    Residential 23

24. Slide 24: Residential - Performance

    Residential - Performance Six months ended 31 December 2014 2013 Change Year to June £m £m % 2014*** £m Revenue Private (Kier owned land) 52 49 +6 111 Mixed tenure 38 23 +65 71 Total 90 72 +25 182 Operating profit* Private (Kier owned land) 1.4 1.0 +40 1.8 Mixed tenure (0.6) (0.5) +20 3.2 Total 0.8

25. Slide 25: Residential - Mixed tenure

    Residential - Mixed tenure  On track to deliver 1,500 completions in FY15  Completed 436 units to 31 December  Second half weighted due to AHP timing  Good flow of opportunities from HCA, LAs and HAs  Success on two local four-year authority frameworks; Balaamwood, Birmingham the Westworks fram

26. Slide 26: Residential - Private (Kier owned land)

    Residential - Private (Kier owned land)  On track to deliver c700 private homes on our land  Completed 274 homes to 31 December New pic  Trading at 0.7 unit sales per week  New trading sites and marketing complexes are due to open before the end of the Millbrook Meadows financial year  Strong f

27. Slide 27: Residential - Outlook

    Residential - Outlook  Focus on mixed tenure growth  Respond to UK supply/demand imbalance  Recycle our private land bank capital  Capital retained at £250m over the medium term  Focused on return on capital of 15% by 2020  Increased number of opportunities from HCA, LAs and HAs  Easing of su

28. Slide 28: Construction

    Construction 28

29. Slide 29: Construction - Performance

    Construction - Performance Six months ended 31 Year ended June December 2014 2014 2013 Change £m £m £m % Revenue 874 742 +18 1,597 Operating profit* 18.0 17.3 +4 33.6 Operating margin* 2.1% 2.3% 2.1% Order book (secure and probable) 2.6bn 2.5bn +4 2.5bn 1,800 45 2.7% FY 2.6% 2.5% FY 40 H1 1,600 2.3%

30. Slide 30: Construction - Sectors

    Construction - Sectors Revenue Year to Expectation Sector June 2014 June 2015 Future trend Education 24% 26% k Health 8% 11% k Transportation 12% 10% n Commercial, residential and mixed use 22% 19% k Power, industrial, utilities and waste (incl. nuclear) 14% 12% k International 10% 11% k Defence 1%

31. Slide 31: Construction - UK Building

    Construction - UK Building  Strong performance with increased market share in education and health sectors  Framework focus  Place on all six lots of EFA framework  Preferred bidder for five batches under the National Constructor Framework, £173m Whitefriars Community School  Preferred bidder f

32. Slide 32: Construction - UK Infrastructure

    Construction - UK Infrastructure  Expanding business model  Underpinned by Government support and investment plans  Transport  Awarded a place on the Highways Agency's £1.15bn five-year collaborative delivery framework for schemes valued between £25m and £100m Mersey Gateway  Network Rail Weste

33. Slide 33: Construction - International

    Construction - International  Strong performance  Secured £150m new work  Middle East market buoyant  UK Export Finance funding  Awards include  Hotel and spa in Dubai and a data centre for a Saadiyat Rotana Hotel & Resort, Abu Dhabi leading UAE bank  Preferred bidder for a £100m mixed-use de

34. Slide 34: Construction - Outlook

    Construction - Outlook  Strong performance  Order book of secured or probable work increased to £2.6bn, represents 100% of the forecast revenue for FY15  UK market growth of 5% per annum  Unrivalled regional coverage  Success on frameworks  Continued strong risk management  Government focus o

35. Slide 35: Services

    Services 35

36. Slide 36: Services - Performance

    Services - Performance Six months ended 31 Year ended June December 2014 2014 2013 Change £m £m £m % Revenue 569 563 +1 1,104 Operating profit* 23.7 24.4 -3 53.3 Operating margin* 4.2% 4.3% 4.8% Order book (secure and probable) 3.9bn 3.6bn +8 3.7bn 1,200 60 FY FY 4.8% H1 1,000 4.7% 4.5% H1 50 4.5% 4

37. Slide 37: May Gurney operational update

    May Gurney operational update  Integration complete  New contract wins from broader capability offering:  Thames Water  £1bn infrastructure alliance  Anglian Water  £200m of total contract wins  Northamptonshire Strategic Partnership  £200m Highways maintenance extended  Strategic partnersh

38. Slide 38: Services - Sectors

    Services - Sectors Revenue Year to Expectation Sector Future trend June 2014 June 2015 Highways 25% 21% k Housing maintenance - public 21% 23% n Housing maintenance - private 5% 9% k Utilities and other regulated 22% 25% k Environmental 12% 10% n Facilities Management (FM) 12% 11% k Fleet & Passenge

39. Slide 39: Services - Utilities and Highways Maintenance

    Services - Utilities and Highways Maintenance Utilities  AMP6 success totalling more than £700m  Thames Water 15-year £1bn alliance commencing April 2015  £200m 3-5 year contracts with Anglian Water  Five-year £100m network maintenance services programmes with Bristol Water Thames Water  Six-ye

40. Slide 40: Services - Housing Maintenance & FM

    Services - Housing Maintenance & FM Housing  Successful mobilisation of four-year £140m repairs and maintenance contract with Genesis Housing Association covering 33,000 private properties  Sheffield City Council £30m five-year contract to provide roofing maintenance works Housing maintenance - Ha

41. Slide 41: Services - Outlook

    Services - Outlook  May Gurney capabilities contributing to bid success  Increased Government investment in utilities and highways  Fiscal pressures provide outsourcing opportunities  Greater volume, albeit margins likely to tighten  All of targeted revenue secured and probable for 2015  Exten

42. Slide 42: Group Outlook

    Group Outlook  Good set of results with net debt better than forecast  Economy recovering but fragility and uncertainty still exist  Encouraging level of new opportunities  Solid Property and Residential pipelines  Improving Construction and Services order books  Robust capital structure  Wel

43. Slide 43: Appendices

    [KIER Appendices

44. Slide 44: Residential - Key financials breakdown

    Residential - Key financials breakdown Dec 2014 Dec 2013 June 2014 Revenue Private New Land 10 - 4 Old Land 42 49 107 Mixed Tenure 38 23 71 Total 90 72 182 Operating profit Private New Land 0.9 - 0.3 Old Land 0.5 1.0 1.5 Mixed Tenure (0.6) (0.5) 3.2 Total 0.8 0.5 5.0 Average capital* Private New Lan

45. Slide 45: Financing facilities

    Financing facilities Dec 2014 June 2014 Maturity Facility type £m £m 2019, 2021, US Private Placements 183 63 2022, 2024 Syndicated term loan 50 50 2016 Revolving credit facility 190 190 2018 Funding for Lending Scheme loan 30 30 2017 Overdraft 45 45 Asset finance 109 121 Total 607 499 45

46. Slide 46: Property PFI portfolio

    Property PFI portfolio Capital value Kier equity/loan stock Equity Project Status £m £m % Local authority Woking housing In construction 31 2.0 50.0 Student Salford University In construction 64 2.1 25.0 accommodation East Ayrshire Schools Preferred Bidder 34 1.0 24.0 Education North Ayrshire School

47. Slide 47: Current services bid pipeline

    Current services bid pipeline 47

48. Slide 48: 48

    48

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