Kier Group Plc · LSE:KIE
Kier — Merger or Acquisition (April 2015)
30 slides from Kier's merger presentation, Apr 28, 2015
Slide 1: Proposed acquisition of Mouchel
Kier Group Proposed acquisition of Mouchel 28 April 2015 1
Slide 2: Disclaimer
Disclaimer NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN OR INTO OR FROM THE UNITED STATES, AUSTRALIA, CANADA, SOUTH AFRICA, JAPAN OR ANY OTHER JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OF SUCH JURISDICTION. This doc
Slide 3: Key messages
Key messages Proposed acquisition of Mouchel Positions Kier as the sector leader in the growing UK highways management and maintenance market Acquisition consistent with Kier’s Vision 2020 strategy Cash consideration of £265m for the equity with the Acquisition funded through a fully underwritten ri
Slide 4: Overview and Strategic Rationale
Overview and Strategic Rationale Haydn Mursell – CEO 4
Slide 5: Overview of Mouchel
Overview of Mouchel FY14 Revenue1: £616.6m Y/E Sept FY14 £20.2m £130.2m Revenue1 £616.6m MBS Underlying operating profit2 £27.7m IIS JVs Mouchel Group £466.2m FY14 Revenue: geography 12% Integrated Infrastructure Services (IIS) 3% Mouchel Business Services Australia (MBS) Core business: Services to
Slide 6: Mouchel: a successful turnaround post-2012 restructuring
Mouchel: a successful turnaround post-2012 restructuring Increased contribution forecast from higher-margin IIS division Strong control over corporate overheads Materially improved margins Exited or renegotiated loss-making contracts and / or took provisions for onerous contracts Bid and contract st
Slide 7: Compelling strategic rationale
Compelling strategic rationale Creates a sector leader in the growing UK highways management and maintenance market Combines Mouchel’s leading position in strategic roads with Kier’s strengths in the local authority roads market Provides access to Highways England as a strategic partner to complemen
Slide 8: The enlarged group
The enlarged group Kier Mouchel Combined Property & Residential Property & £260m Residential 9% £260m Integrated Mouchel Business 7% Construction Construction Infrastructure £1,590m Services Services Services £1,590m 54% £146m Revenue £1,104m £471m 45% 24% 76% 37% Services £1,721m 48% Revenue FY14 R
Slide 9: Enlarged order book £9.3bn, contracted beyond 2020
Enlarged order book £9.3bn, contracted beyond 2020 Kier (£6.5bn) Mouchel (£2.8bn) Combined (£9.3bn) Services Construction MBS £6.6bn Services £2.7bn £0.3bn 71% £3.8bn 29% 58% 9% Construction Order book £2.7bn 42% IIS £2.5bn 91% Combined order book 1 4,000 3,500 3,000 2,500 £m 2,000 1,500 1,000 500 0
Slide 10: Mouchel in detail
Mouchel in detail Haydn Mursell – CEO 10
Slide 11: Creating a leadership position in UK Highways
Creating a leadership position in UK Highways Total annual spend on UK highways is c.£13bn1, of which c.£7bn is maintenance The Strategic road network accounts for c.2% of total network but accounts for c.23% of roads expenditure With Mouchel, Kier becomes No. 1 player in the combined strategic and
Slide 12: A market which is growing, especially in strategic roads
A market which is growing, especially in strategic roads With Mouchel, Kier enters the strategic highways maintenance market and unlocks significant access to capex investment, thanks to Mouchel’s relationships and existing design capabilities A new Roads Investment Strategy (RIS) provides 5 year fu
Slide 13: The enlarged UK highways business would have a national footprint
The enlarged UK highways business would have a national footprint Kier and Mouchel’s highways businesses are geographically complementary Working for: − Highways England (strategic roads) − Transport for London & London Boroughs (London roads and street lights) − County and unitary authorities (Loca
Slide 14: Mouchel Infrastructure Services (MIS): complete set of highways capabilities
Mouchel Infrastructure Services (MIS): providing a complete set of highways capabilities from the combined business Integrated capability: design, build, maintain and operate Strong technology led solutions Operates the Highways England National Traffic Information Services in a JV with Thales Imple
Slide 15: Complementary activities in the Middle East
Complementary activities in the Middle East A £19m (FY14) revenue business employing 300 people Provides: Infrastructure Solutions (planning, design and construction supervision services) Transport Solutions (asset management and maintenance supervision services) Kier’s Middle East business plan has
Slide 16: A market leader in Australian highways
A market leader in Australian highways Australia has an improving roads maintenance market; DM business is growing and profitable A JV established in 2008 with Downer, an Australian infrastructure business Focused on integrated highway management and maintenance DM has seven contracts and is the mar
Slide 17: Mouchel Business Services (MBS) will enhance Kier's service offering
Mouchel Business Services (MBS) will enhance Kier’s service offering to the local authority market Overview MBS offers a range of Business Process Outsourcing (BPO) and property management services to the local authority market, as well ICT Pensions Revenues and Asset Management as the police, healt
Slide 18: Financials and transaction structure
Financials and transaction structure Bev Dew – CFO 18
Slide 19: EM Highway Services has driven revenue growth and margin enhancement in 2014
EM Highway Services has driven revenue growth and margin enhancement in 2014 Period to 30 September (£m) 2014 2013 20121 Integrated Infrastructure Services 470.9 387.9 372.6 Mouchel Business Services 145.7 167.4 248.0 less share of Joint ventures (20.2) (60.6) (161.6) Group revenue 596.4 494.7 459.0
Slide 20: Growth in EM Highway Services has continued in 2015
Growth in EM Highway Services has continued in 2015 Revenues for the three months ended 31 December 2014 have increased by approximately 38% compared to the same period in the previous year. Similar growth has been experienced since the period end and margins have been maintained at historic levels
Slide 21: Kier's current trading and order book
Kier’s current trading and order book On course to meet Board’s expectations Residential and Services divisions remain on track to deliver a second-half weighted performance in line with management expectations Property – good performance, maintaining 15% hurdle rate, capital investment rising in li
Slide 22: Synergies and integration plan
Synergies and integration plan Expect recurring pre-tax cost synergies Pre-tax run rate cost synergies by category FY 2016: £4m £10m in FY 2017 FY 2017: £10m £10.0m Comprehensive integration plan £9.0m Building on experience of completed May Gurney integration £4.4m Corporate £8.0m Overheads (inc. B
Slide 23: Transaction and funding highlights
Transaction and funding highlights Sources £m Uses £m Capital structure of enlarged group retains capital discipline Rights Issue 340 Purchase Price 265 Kier net debt of £156m (excluding £77m finance leases) and IAS 19 pension deficit of £65m as at 31 December 2014 Repayment of Bank Mouchel net debt
Slide 24: Summary
Summary Haydn Mursell – CEO 24
Slide 25: In summary
In summary Significantly increases Kier’s presence in the growing UK highways maintenance market creating a sector leader Combines Mouchel’s leading position in strategic roads with Kier’s strengths in the local authority roads market Enlarged Group is better placed to benefit from the £17bn planned
Slide 26: Q&A
Q&A 26
Slide 27: Appendix
Appendix 27
Slide 28: Pro forma Balance Sheet
Pro forma Balance Sheet As at 31 December 2014 (£m) Kier(1) Mouchel Group(2) Rights Issue and Acquisition Unaudited pro Refinancing(3) Accounting(4) forma total Non-current assets Property, Plant and Equipment 184.3 10.0 - - 194.3 Other non-current assets 418.3 106.7 - 308.1 833.1 Total non-current
Slide 29: Expected timetable and rights issue
Expected timetable and rights issue Key expected dates Rights issue 28 April: Announcement of acquisition and Gross proceeds of £340m Rights Issue Rights issue to be fully underwritten by 15 May: General Meeting, acquisition J.P. Morgan Cazenove and Numis conditional on shareholder approval Securiti
Slide 30: Mouchel has a blue chip contract portfolio
Mouchel has a blue chip contract portfolio Client Contract Expiry Area 11 (MAC)2 2016 Area 3 (ASC)3 2018/21 Area 9 (ASC) 2019/22 Area 131 (MAC) 2016 LoHAC 2021 Various consultancy contracts Outsourced shared services (JV) 2022 Outsourced estates & shared services 2020/25 Property & FM JV with Vinci