Kier Group Plc · LSE:KIE

Kier — H1 FY2019 Earnings Presentation

50 slides from Kier's earnings presentation, Mar 20, 2019

  1. Slide 1: Interim results for the six months ended 31 December 2018

    Kier Group Interim results for the six months ended 31 December 2018 20 March 2019 Kier Group plc – Interim results for the six months ended 31 December 2018 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: Philip Cox, Executive Chairman

    Philip Cox Executive Chairman Kier Group plc – Interim results for the six months ended 31 December 2018 3

  4. Slide 4: Agenda

    Agenda  Overview - Philip Cox, Executive Chairman  Financial review - Bev Dew, Group Finance Director  Operational review - Claudio Veritiero, Chief Operating Officer  Summary and outlook - Philip Cox Kier Group plc – Interim results for the six months ended 31 December 2018 4

  5. Slide 5: Highlights

    Highlights  Solid operational performance  Increased Government focus on balance sheet strength and payment terms  £2.1bn new contract wins in period  £1bn contract awards since 1 December 2018  Order book of c.£10bn  Rights issue raised £250m net proceeds in December 2018  Group balance shee

  6. Slide 6: Future Proofing Kier (FPK)

    Future Proofing Kier (FPK) Programme progressing  A streamlining and efficiency programme  Focused on:  Cost reduction  Process improvement  Improved efficiency  Continued progress on disposal of non-core businesses Kier Group plc – Interim results for the six months ended 31 December 2018 6

  7. Slide 7: Financial review

    Financial review Bev Dew, Group Finance Director Kier Group plc – Interim results for the six months ended 31 December 2018 7

  8. Slide 8: Financial summary

    Financial summary  Revenue1 £2.2bn up 2%  Operating profit2 £51.8m after net FPK costs of £10m  Non-underlying charges of £59.9m  Period end net debt £180.5m (H1 FY18: £238.5m)  Average month end net debt of £430m (H1 FY18: £350m)  Stable order book of c.£10bn (H1 FY18: £9.8bn)  Dividend3 of

  9. Slide 9: New reporting structure

    New reporting structure Realigned to our three market positions 2019 revenue 2019 revenue Infrastructure HY19 Actual Services HY19 Actual 4% margin Services 45% 39% 4% margin Infrastructure Facilities management Buildings 3% 3% margin Construction 43% margin 42% Housing maintenance and environmental

  10. Slide 10: Revenue and operating profit

    Revenue and operating profit Revenue1 Operating profit2 HY18 HY19 HY18 HY19 19% 21% 24% 31% 37% 39% 48% 43% £2.1bn £2.2bn £82.7m £86.0m 42% 21% 36% 39% Infrastructure Services Buildings Developments & Housing 1Group and share of joint ventures for continuing operations 2Arising on continuing operati

  11. Slide 11: Income statement

    Income statement Six months to 31 December 2018 20173 Change £m £m % Revenue1 2,201.5 2,149.9 +2 Operating profit2 Infrastructure Services 37.2 39.3 -5 Buildings 30.8 17.7 +74 Developments & Housing 18.0 25.7 -30 Corporate (34.2) (22.1) +55 Underlying operating profit 51.8 60.6 -15 Underlying operat

  12. Slide 12: Order book

    - Order book At 31 Dec 2018 At 30 June 20181 Change £bn £bn % Infrastructure Services 6.0 5.5 +9 Buildings 3.6 3.8 -5 Developments & Housing 0.4 0.5 -20 Total 10.0 9.8 +2 14 Infrastructure Services £bn 12 Buildings 1.3 (0.8) (0.9) Developments & Housing 10 0.7 0.1 (0.2) 8 6 9.8 10.0 4 2 0 June 2018

  13. Slide 13: Group net debt

    Group net debt Cash flow summary HY19 - (50) 85 (100) (97) Trade payables (150) 255 (200) (181) (186) (97) Payments in advance of cost (250) (300) Residential WIP (26) (350) (220) 12 (21) (400) (37) (23) (450) (46) (500) June 2018 Operating Working capital Capex Discretionary Net disposal Pension, D

  14. Slide 14: Contracting working capital

    Contracting working capital Working capital flows Working capital days WIP Trade receivables Accruals Trade payables WC as a % revenue Working capital as % of revenue 100 80 8% 60 40 3% 20 - -20 -2% -40 -60 -7% -80 -100 -12% HY15 FY15 HY16 FY16 HY17 FY17 HY18 FY18 HY19 Kier Group plc – Interim resul

  15. Slide 15: Contracting working capital

    Contracting working capital Working capital flows Working capital as % revenue June 2018 -3% WIP Trade receivables Accruals Trade payables WC as a % revenue Working capital as % revenue December 2018 +2% Working capital Working capital as days % of revenue 80 12% Receivable days June 2018 56 60 9% R

  16. Slide 16: Net debt improvement plan

    Net debt improvement plan FY18 spot net debt (£186m) Rights issue FPK Reduced dividend FCF post dividend FPK savings proceeds disposals for FY19 Improved spot and average net debt Kier Group plc – Interim results for the six months ended 31 December 2018 16

  17. Slide 17: FPK

    FPK  Non-core disposals Benefits FY19  Target disposal proceeds of £30m-£50m  £28m secured to date Corporate Infrastructure  Disposal of Kier Highways Services Australia for Services £24.5m 31% 30%  Streamlining and efficiency savings  Cost to date total £14m: as expected H1 FY19 weighted 13%

  18. Slide 18: Non-underlying

    Non-underlying 2019 P&L Cash £m £m Early exit of loss-making waste collection contract (26.0) 0.0 Broadmoor Hospital redevelopment project (25.0) 0.0 Non-core disposals1,2 (0.8) 28.0 Guaranteed Minimum Pension equalisation (6.1) 0.0 McNicholas integration and remeasurement of contingent consideratio

  19. Slide 19: New accounting standards

    New accounting standards IFRS 9 and IFRS 15  IFRS 15 ‘Revenue from Contracts with Opening reserve adjustments £m Customers’ adopted in FY19 Revenue recognition 14.2  Timing impact only – no effect on Third party recoveries on an IAS 37 basis 24.6 profitability of individual contracts Disaggregatio

  20. Slide 20: Financial summary

    Financial summary  A solid operational performance  Stable order book  Net debt reduction remains a strategic priority  Working capital movements are a key driver  FPK disposals and efficiency savings on track  Target of net cash at 30 June 2019  Dividend 4.9p reflects the move to 5x dividend

  21. Slide 21: Operational review

    Operational review Claudio Veritiero, Chief Operating Officer Kier Group plc – Interim results for the six months ended 31 December 2018 21

  22. Slide 22: Infrastructure Services

    Infrastructure Services Add in HS2 pic HS2 Kier Group plc – Interim results for the six months ended 31 December 2018 22

  23. Slide 23: Infrastructure Services

    Infrastructure Services Steady performance Six months ended 31 December 2018 2017 Change £m £m % Revenue 867.7 801.5 +8 Underlying operating profit1 37.2 39.3 -5 Underlying operating margin1 4.3% 4.9% 31 Dec 2018 30 June 2018 Order book (secure and probable) £6.0bn £5.5bn Revenue split H1 2019 Secto

  24. Slide 24: Infrastructure Services

    Infrastructure Services Highways – No 1 provider  Four Smart Motorway schemes on M6, M23, M20  RIS1 (2015-2020) £17bn, RIS2 (2020-2025) c. £25bn  £8bn Routes to Market capital scheme framework  Local authority highways opportunities Strategic Highways – Area 8 M1 junctions 11-12, Bedfordshire Ut

  25. Slide 25: Infrastructure Services

    Infrastructure Services Major projects  HS2 – cost plan assessment  Crossrail – major completion milestone  Continuing work at Hinkley Point C  Mersey Gateway – landscaping and clearing Infrastructure Services outlook Crossrail Farringdon  National Infrastructure Strategy commitment  Highways

  26. Slide 26: Buildings

    Buildings Add in Lakenheath picture Lakenheath Kier Group plc – Interim results for the six months ended 31 December 2018 26

  27. Slide 27: Buildings

    Buildings Robust performance Six months ended 31 December 2018 2017 Change £m £m % Revenue 914.7 832.1 +10 Underlying operating profit1 30.8 17.7 +74 Underlying operating margin1 3.4% 2.1% 31 Dec 2018 30 June 2018 Order book (secure and probable) £3.6bn £3.8bn - Sector Mix FM, 10%  Average project

  28. Slide 28: Buildings

    Buildings No 1 regional builder in the UK  £0.7bn of new contracts secured  Strong market positions in education and health sectors  75% of contract awards on frameworks  North West Construction Hub Northstowe Education Campus, Cambridgeshire  Recent award on £5.2bn Southern Construction Framew

  29. Slide 29: Buildings

    Buildings Major projects  Current/completed projects in the period  Broadmoor Hospital phase 1 – close to handover  Abcam, Cambridge  University of Cambridge laboratory  Key new awards  £125m Argent development at King’s Cross University of Cambridge laboratory  Preferred bidder for major off

  30. Slide 30: Buildings

    Buildings Buildings outlook  Good start to H2  Crown Commercial Services construction framework  Financial qualification  Payment terms (30 day terms; 95% within 60 days) Wexham Park Hospital, Frimley NHS Trust, Berkshire  Secured place on £5.2bn Southern Construction framework  Order book str

  31. Slide 31: Developments & Housing

    Developments & Housing Add in Watford Riverwell picture Watford Riverwell Kier Group plc – Interim results for the six months ended 31 December 2018 31

  32. Slide 32: Developments & Housing

    Developments & Housing Second half weighting Six months ended 31 December 2018 2017 Change £m £m % Revenue1 419.1 516.3 -19 Underlying operating profit2 18.0 25.7 -30 Underlying operating margin2 4.3% 5.0% Property – ROCE Living – ROCE Revenue 35% 16% 30% 15% 30% 14% 23% 27% 12% HM/other Property 25

  33. Slide 33: Developments & Housing

    Developments & Housing Property  Focused principally on non-speculative development  Portfolio spread across a range of sectors and regions  Nine transactions in H1 (2017: 5) Evolution 50, Andover, Hampshire  Strongly forward sold for completion in H2  Consolidating presence in the West Midland

  34. Slide 34: Developments & Housing

    Developments & Housing Residential (Kier Living)  842 units completed (H1 FY18: 965 units)  Mix of private and affordable housing  0.8 units per sales outlet per week (H1 FY18: 0.7)  Homes England joint venture performing well  New front-end customer relations software The Hawthorns, Royston, H

  35. Slide 35: Developments & Housing

    Developments & Housing Housing Maintenance  Budgetary pressures on housing associations and local authorities  In-sourcing of contracts ongoing: Stoke, Harlow and in H2 North Tyneside contract  Fire safety protection contracts Bolonachi House, Bermondsey Environmental Services  In negotiation to

  36. Slide 36: Developments & Housing

    Developments & Housing Developments & Housing outlook  Property  Strongly forward sold  £180m regeneration scheme for Liverpool City Council  Mixed occupier and investor sentiment Watford Riverwell  Residential  Performing well  Land bank – 4,739 (H1 FY18: 3,897) Meadow Bank, Baldwin’s Gate,

  37. Slide 37: Operational KPIs

    Operational KPIs Increasing importance in new contract awards Accident incident rate (AIR) – Dec 2018 450 450 412 HSE Benchmark 398 397 400 400 350 350 319 358 300 300 250 250 211 200 200 150 150 130 79 100 100 50 50 0 0 2014 2015 2016 2017 2018 Safety & Environment Customer experience Employees  I

  38. Slide 38: Summary and outlook

    Summary and outlook  Regional buildings and property developments good start to H2  Volume pressures in highways, utilities and housing maintenance  Strengthened balance sheet  Continued focus on Group simplification, improving cash flow generation and net debt reduction  Forecast a net cash po

  39. Slide 39: Appendices

    Appendices Kier Group plc – Interim results for the six months ended 31 December 2018 39

  40. Slide 40: Operational Management Structure

    Operational Management Structure Claudio Veritiero Chief Operating Officer Infrastructure Services Buildings Developments & Housing Barry Dave Wright Mark Pengelly Peter Young Sean Fenner David Mawson John Anderson Leigh Thomas McNicholas Executive Director Executive Director Executive Director Mana

  41. Slide 41: Reporting structure

    Reporting structure Four divisions realigned to three markets Order book Revenue Operating profit Operating margin ROCE £bn £m £m % % Property 106.2 11.6 14 Residential 150.5 9.1 9 Construction 4.8 951.8 26.7 2.8 Services 5.2 993.0 38.6 3.9 Corporate (34.2) Group 10.0 2,201.5 51.8 2.4 Infrastructure

  42. Slide 42: Contracting cash balance

    Contracting cash balance Infrastructure Services Buildings £m £m 350 FY18 400 FY18 300 350 300 250 FY19 FY19 250 200 200 150 150 100 100 50 50 - - Jun Sep Dec Mar Jun Jun Sep Dec Mar Jun Kier Group plc – Interim results for the six months ended 31 December 2018 42

  43. Slide 43: Net debt bridge reconciliation

    Net debt bridge reconciliation Pension, Total Operating Working Discretionary Net disposal interest, tax & Rights movement cash flows capital Capex investment proceeds other Dividends issue £m £m £m £m £m £m £m £m £m Operating cash inflows before movements in working capital 60 60 Deficit contributi

  44. Slide 44: Pensions

    Pensions  Pension deficit of £13.7m driven by asset performance  Triennial valuation to commence March 2019 At 31 Dec 2018 At 30 June 2018 Change At 31 Dec 2017 £m £m £m £m Group Pension Schemes: Market value of assets 1,652.0 1,681.0 (29.0) 1,749.0 Present value of liabilities (1,668.5) (1,673.0)

  45. Slide 45: Guidance

    Guidance FY19 Operating profit Infrastructure Services Margin c.4.5% Buildings Margin c.3% Developments and Housing ROCE c.20% Central costs c.£50m incl. FPK costs Finance costs Moving in line with average net debt Tax rate c.19% Average net debt FY c.£320m Pension contribution £25m Capex (incl. fin

  46. Slide 46: Joint ventures

    Joint ventures Capital efficient model  Joint ventures provide capital efficient sources of Joint venture financials £m funding Investment on balance sheet 238 ‒ 29 JV assets in Property Kier committed investment 6 ‒ 9 trading assets in Residential  Loan to value 38% Partners investment 108 ‒ Base

  47. Slide 47: Supply chain finance illustrated

    Supply chain finance illustrated Draw down Normal Kier Invoice possible payment pays date bank pays terms bank supplier Day 0 21 60 75 90 Supply chain benefit at <2% interest cost Potential working capital effect £150 – 170m average utilisation* * Included in trade payables Kier Group plc – Interim

  48. Slide 48: Financing facilities

    Financing facilities 30 June 2018 Dec 2018 Facility type Maturity £m £m RCF 2022 670 670 US Private Placement1 2019-2024 183 183 Schuldschein Loan Notes1 2019-2023 81 81 Overdraft Facilities On demand 53 28 Other Finance 2019 onwards 26 23 Total 1,013 985 1 Stated net of effect of derivatives. Kier

  49. Slide 49: Kier Highways - current contracts

    Kier Highways - current contracts Strategic Road Contracts TYNE AND WEAR Local Authority Road Contracts CLEVELAND Area 14 Area 13 HUMBERSIDE WEST YORKSHIRE Area 12 GREATER SOUTH MANCHESTER YORKSHIRE MERSEYSIDE Area 10 Area 7 Enfield Barnet Harrow Harringey WE ST Redbridge MIDLA NDS Havering Area 9 A

  50. Slide 50: Kier Group plc – Interim results for the six months ended 31 December 2018

    Kier Group plc – Interim results for the six months ended 31 December 2018 50

Kier Group — H1 FY2019 Earnings Presentation on 6ix