Kier Group Plc · LSE:KIE

Kier — FY2014 Earnings Presentation

52 slides from Kier's earnings presentation, Sep 18, 2014

1. Slide 1: Preliminary results for the year ended 30 June 2014

   Kier Group Preliminary results for the year ended 30 June 2014 18 September 2014 Kier Group plc – Full Year results for the year ended 30 June 2014 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 Kier Group plc – Full Year results for the year ended 30 June 2014 3

4. Slide 4: Agenda

   Agenda  Highlights of the period  Financials  Operational update  Group outlook Kier Group plc – Full Year results for the year ended 30 June 2014 4

5. Slide 5: Highlights

   Highlights  Strong set of results in-line with expectations  Group revenues £3.0bn, up 51%  Group underlying operating profit* of £88m, up 59%  Robust divisional operating margins  Resilient cash performance with net debt of £123m  Earnings per share* up 2% to 107.7p  After issue of 14.7m sha

6. Slide 6: Next stage

   Next stage To achieve Vision 2020 we are focused on six strategic priorities:  Operate a safe and sustainable business - always;  Achieve top quartile performance and efficiency;  Accelerate growth to be a top three player in our chosen markets;  Provide sector leading customer experience,  Att

7. Slide 7: Financial update

   Financial update Dave Benson, Acting Finance Director Kier Group plc – Full Year results for the year ended 30 June 2014 7

8. Slide 8: Overview: revenue and operating profit

   Overview: revenue and operating profit June 2014 June 2013 Revenue £2,985m +51% Revenue £1,983m 10% 12% Property Property 37% 22% Construction Construction Services Services 53% 66% Operating profit £107.9m* +54% Operating profit £70.2m* 19% Property 29% Property 27% Construction Construction 49% Se

9. Slide 9: Income statement

   Income statement Year ended 30 June Change 2014* 2013* £m £m % Operating profit: Group 80.3 44.8 +79 Joint ventures (JVs) 1.6 0.9 +78 Profit on disposal of PFI investments 6.1 9.8 -38 Total operating profit 88.0 55.5 +59 Net finance cost (14.9) (7.9) Profit before tax 73.1 47.6 +54 Underlying earnin

10. Slide 10: Operating profit

    Operating profit Year ended 30 June Change Performance by division 2014* 2013* £m £m % Property 21.0 20.5 +2 Construction 33.6 30.4 +11 Services 53.3 19.3 +176 Corporate (19.9) (14.7) -35 Total operating profit 88.0 55.5 +59 Net finance cost (14.9) (7.9) Profit before tax 73.1 47.6 +54 *Excluding on

11. Slide 11: Exceptional items

    Exceptional items Year ended 30 June 2014 2013 £m £m Costs relating to the acquisition of May Gurney (8.1) (1.8) Business restructuring and transformation relating to the acquisition of May Gurney (29.6) - Construction workers’ compensation scheme and related costs (4.5) - Business restructuring - (

12. Slide 12: Order book

    Order book At 30 June At 30 June Change 2014 2013 % £bn £bn Construction 2.5 2.3 +12 Services 3.7 2.0 +85 Total 6.2 4.3 +47 9.0 8.0 7.0 1.8 (1.6) 1.1 (1.1) 6.0 5.0 1.7 £bn 4.0 3.0 6.2 2.0 4.3 1.0 0.0 Opening Construction MG acquisition Construction awards Construction revenue Services awards Service

13. Slide 13: Balance sheet summary

    Balance sheet summary At 30 June At 30 June Change 2014 2013 £m £m £m Intangible assets 324 30 +294 Property, plant and equipment 192 109 +83 Investment in JVs 41 30 +11 Residential land and work in progress 334 324 +10 Other working capital (320) (364) +44 Cash 112 152 -40 Borrowings (235) (92) -14

14. Slide 14: Group net debt

    Group net debt 225  £40m capex, in line with 200 depreciation -37 175  £30m investment in mixed 150 - 39 tenure housing 125 +140 100 -26  £16m investment in property £m 75 development and PFI 50 -104  £14m private housing land 25 +60 - (25) -48 (50) -1 -123 (75) -37 (100) -31 (125) (150) 2013 ne

15. Slide 15: Pensions

    Pensions At 30 June At 30 June Change 2014 2013 £m £m £m Kier Group Pension Scheme: Market value of assets 837 784 +53 Present value of liabilities (900) (832) -68 Deficit in the scheme (63) (48) -15 Deferred tax 13 11 +2 Net pension liability (50) (37) -13 Net effect of Sheffield Pension Scheme - (

16. Slide 16: May Gurney update

    May Gurney update  Cost savings  £5m cost savings delivered in FY14 as anticipated  On track to deliver £15m in FY15 with 15% ROCE achieved in FY16  Integration costs of £29m in FY14 broadly in line with expectations  Fair value exercise completed  Provision1 of £73m recorded  Slight increase

17. Slide 17: Financial summary

    Financial summary  In line with expectations  May Gurney delivering as anticipated  Order book improving; secured positions ahead of prior year  Strong financial position  Progressive dividend up 6% Kier Group plc – Full Year results for the year ended 30 June 2014 17

18. Slide 18: Operational update

    Operational update Haydn Mursell, Chief Executive Kier Group plc – Full Year results for the year ended 30 June 2014 18

19. Slide 19: Property

    Property Kier Group plc – Full Year results for the year ended 30 June 2014 19

20. Slide 20: Property - Performance

    Property - Performance Year ended 30 June 2014 2013 Change £m £m % Revenue Development 86 94 -9% Structured finance and PFI 16 4 +275% Homes 182 140 +30% Total 284 238 +19% Operating profit* Developments 11.2 9.4 +19% Structured finance and PFI 4.8 6.8 -29% Homes 5.0 4.3 +16% Total 21.0 20.5 +2% Ave

21. Slide 21: Property - Performance

    Property - Performance 25 300 250 20 200 15 150 10 100 5 50 0 0 2010 2011 2012 2013 2014 2010 2011 2012 2013 2014 Revenue (£m) Operating profit (£m)* * Excluding one-off costs related to restructuring, acquisitions and business closures and amortisation of contract right costs held as intangibles on

22. Slide 22: Property - Developments

    Property - Developments  Strong contribution of £11m on the back of increased capital investment of £70m  15% return on capital achieved CostCo on eight completed development schemes  Three forward funded deals completed  Maintain predominantly 58, Victoria Embankment, London non-speculative app

23. Slide 23: Property - Structured finance & PFI

    Property - Structured finance & PFI  Continue with recycling of assets as they become available for sale  Sold two mature PFI investments generating £16m Woking Housing Development  Eight PFI projects in the portfolio  Portfolio value maintained at £34m (7.5% discount rate valuation)  New oppor

24. Slide 24: Residential

    Residential  Homes  Completed 601 units  0.7 unit sales per week per trading site  Land purchases of £14m, land bank reduced Manor Kingsway, Derby to 3,672 units (June 2013: 4,005)  >40% of FY15 forecast secured  Partnership housing  Increased activity in affordable and mixed tenure housing 

25. Slide 25: Property Outlook

    Property Outlook  Developments  Group’s free cash flow re-invested: capital investment will increase towards £200m by 2020  Maintenance of existing risk-managed approach; targeting a minimum of 15% return  Improved lending and occupier requirements  Structured Finance & PFI  Potential new sect

26. Slide 26: Construction

    Construction Kier Group plc – Full Year results for the year ended 30 June 2014 26

27. Slide 27: Construction - Performance

    Construction - Performance Year ended 30 June 2014 2013 Change £m £m % Revenue 1,597 1,307 +22 Operating profit* 33.6 30.4 +11 Operating margin* 2.1% 2.3% Order book (secure and probable) 2.5bn 2.3bn +12 Cash 274 319 1700 45 3.0% 1600 40 2.5% 1500 2.0% 1,492 1400 1,585 1,417 35 1300 1.5% 30 1200 1.0

28. Slide 28: Construction revenue by sector

    Construction Revenue Sector June 2013 June 2014 Future trend Education 31% 24% Living / Residential 11% 12% Health 10% 8% Transportation 10% 12% Commercial and mixed use 9% 10% Power, industrial, utilities and waste (inc nuclear) 9% 14% International 7% 10% Defence 2% 1% Other (inc blue light/hotel/

29. Slide 29: Construction - UK Building

    Construction - UK Building  Education  Strong contribution, framework focused  EFA framework position  Defence  Sector penetration RAF Lyneham  £121m award of RAF Lyneham contract  Place on MOD National Capital Works frameworks  Health  Preferred bidder on fifteen P21+ frameworks  Commerci

30. Slide 30: Construction - Infrastructure

    Construction - Infrastructure  Enhanced capability providing access to larger market  Revenue c£400m  Transport  Financial close of £450m Mersey Gateway  Focus of Government investment Chelsea Bridge  Place on major rail frameworks  Network Rail Western & Wales, national level crossing and ty

31. Slide 31: Construction - International

    Construction - International  Revenue >£150m with strong pipeline c£250m  Growth potential in Middle East  £43m Park Hyatt Hotel, St Kitts St Kitts  £47m Dubai Parks infrastructure project  £26m Dubai University  Post year end awards of c£120m Dubai University in Abu Dhabi  A prestigious hote

32. Slide 32: Construction - Outlook

    Construction - Outlook  Order book of £2.5bn with more than 90% secured for FY15  Ahead of prior year on increasing volumes  UK market growth of 5% per annum  Unrivalled regional coverage  Continued strong risk management  Increased sector penetration  Government focus on infrastructure  Int

33. Slide 33: Services

    Services Kier Group plc – Full Year results for the year ended 30 June 2014 33

34. Slide 34: Services - Performance

    Services - Performance Year ended 30 June 2014 2013 Change £m £m % Revenue 1,104 437 +153 Operating profit* 53.3 19.3 +176 Operating margin* 4.8% 4.4% Order book (secure and probable) 3.7bn 2.0bn +85 Cash 13 30 1200 60 4.9% 50 4.8% 1000 4.7% 800 40 4.6% 30 1,492 1,585 1,417 600 4.5% 400 20 4.4% 200

35. Slide 35: Services sector breakdown

    Services sector breakdown Revenue Sector June 2014 Future trend Highways 25% Housing maintenance - public 21% Housing maintenance - private 5% Utilities and other regulated 22% Environmental 12% Facilities Management (FM) 12% Fleet & Passenger Services (FPS) 3% Kier Group plc – Full Year results for

36. Slide 36: Services - Housing Maintenance & FM

    Services - Housing Maintenance & FM Housing  Three-year £110m housing maintenance contract with Sheffield City Council  Ten-year £50m contract with Grainger  Four-year £140m contract with Genesis HA Housing maintenance - Harlow  Further housing maintenance awards with Metropolitan and Four Housi

37. Slide 37: Services - Utilities and Highways Maintenance

    Services - Utilities and Highways Maintenance Utilities  AMP6 success  Three five-year Anglian water contracts totalling £250m  Five-year £24m contract with Bournemouth Water  Preferred bidder for two-year £7m pa contract with Anglian Water Severn Trent  Seven-year £107m contract with Western P

38. Slide 38: Services - May Gurney

    Services - May Gurney  Successful integration  Substantially complete  Cost savings on track  £20m by 2016 Surrey highways  Customers retained  Additional and larger contracts secured  Integrated offering  AMP success >£130m pa awarded Western Power Distribution  Greater Western Power Distr

39. Slide 39: Services order book longevity

    Services order book longevity 1,000,000  More than 90% of targeted revenue 900,000 secured and probable 800,000 for 2015 700,000 600,000 500,000 400,000 300,000 200,000 100,000 - Secured Orderbook Extensions Kier Group plc – Full Year results for the year ended 30 June 2014 39

40. Slide 40: Services - Outlook

    Services - Outlook  Post year end contract awards  Five-year £25m pa Canal & River Trust NECC contract  Five-year £20m pa contract with Bristol Water  Government investment in utilities and highways  Fiscal pressure likely to remain for our public sector clients  Outsourcing opportunities  Fo

41. Slide 41: Group outlook

    Group outlook  Robust operating performance  May Gurney integrated and providing increased opportunities  Cost synergies on track  Well positioned with strong order books  Investment in strong platform ongoing  Economic recovery fragile but hardening positively  Volumes and quality improving

42. Slide 42: Q&A

    Q&A Kier Group plc – Full Year results for the year ended 30 June 2014 42

43. Slide 43: Appendices

    Appendices Kier Group plc – Full Year results for the year ended 30 June 2014 43

44. Slide 44: Our new reporting segments from 1 July 2014

    Our new reporting segments from 1 July 2014 FY2014 FY2014 Revenue Revenue Property £0.1bn £0.3bn Property Residential £0.2bn Construction £1.6bn Construction £1.6bn Services Services £1.1bn £1.1bn Kier Group plc – Full Year results for the year ended 30 June 2014 44

45. Slide 45: Net cash/debt by division

    Net cash/debt by division Kier Group plc – Full Year results for the year ended 30 June 2014 45

46. Slide 46: Financing facilities

    Financing facilities 2014 2013 Facility type £m £m US Private Placement 63 63 Term loans 80 30 Revolving credit facility 190 120 Overdraft 45 20 Total 378 233 Kier Group plc – Full Year results for the year ended 30 June 2014 46

47. Slide 47: Property: PFI portfolio

    Property: PFI portfolio Kier equity/loan stock Project Status Capital value £m Equity % £m Oldham Library Operational 14 1.0 50.0 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

48. Slide 48: Current services bid pipeline

    Current services bid pipeline Potential Gross Customer Sector Annual Value (£m) Duration (years) Start date (£m) Severn Trent Water Utilities 45 5 225 2014 South West Water- DG3 Utilities 28 5 (max) 140 2015 Thames Water Infrastructure Alliance Utilities 30 2+3+5+5 450 2015 Birmingham City Council H

49. Slide 49: The integrated offering: North Tyneside

    The integrated offering: North Tyneside 2013: Kier builds first 2010 – 14: Kier: LA-owned housing for • Completes library 25 years refurbishment • Builds Wallsend Park 2014: Discussions re • Builds primary school building 300 homes 2013: Kier awarded 2009: Kier awarded 10 + £100m Swan Hunter 5 year

50. Slide 50: The integrated offering: Northamptonshire CC

    The integrated offering: Northamptonshire CC 2012: Local transport 2008: MGWSP JV 2014: St Johns Hall interchange awarded 8 year contract Student Residence Construction of the new to manage and maintain 458 bedroom development £7m bus interchange in county highways which was completed in Northampton

51. Slide 51: The integrated offering: Rail

    The integrated offering: Rail 2008: Solum Joint Crossrail: 2014: Increasing market Venture – Tendered mixed BAM Ferrovial Kier JV presence culminating in use JV with Network Rail delivering £1.2bn works recent award on Western to optimise regeneration & Wales framework of rail land Kings Cross/Argen

52. Slide 52: Kier Group plc – Full Year results for the year ended 30 June 2014

    Kier Group plc – Full Year results for the year ended 30 June 2014 52

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