Kier Group Plc · LSE:KIE
Kier — FY2023 Earnings Presentation
40 slides from Kier's earnings presentation, Sep 14, 2023
Slide 1: Kier Group plc Results for the year ended 30 June 2023
Kier Group plc Results for the year ended 30 June 2023 14 September 2023
Slide 2: Disclaimer
Disclaimer No representation or warranty, express 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 th
Slide 3: Results Summary
Results Summary Andrew Davies, CEO
Slide 4: FY23 Highlights
FY23 Highlights Strong financial performance despite ongoing inflationary pressures Revenue growth of 5% driven by strong operational performance Adjusted operating profit increased 9% to £132m (FY22: £121m) Adjusted operating margin at 3.9%, ahead of the medium-term target of c. 3.5% Free
Slide 5: Medium-Term Value Creation Plan Update
Medium-Term Value Creation Plan Update On track to achieve medium-term value creation plan targets Medium-term value creation plan expectations FY23 Delivered Revenue Revenue c.£4.0bn - £4.5 bn £3.4bn On track Adjusted EBIT margin Adjusted operating margin c.3.5% 3.9% Cashflow conversion Cashflow
Slide 6: FY23 Results
FY23 Results Simon Kesterton, CFO
Slide 7: Financial Highlights
Financial Highlights Significant free cash flow generation of £132m Higher volumes in Infrastructure £’m FY23 % FY22 % Δ Services and Construction more Revenue 3,405.4 3,256.5 4.6% than offset by expected reduced Property transactions Adjusted Operating Profit 131.5 3.9 120.5 3.7 9.1% Net finance
Slide 8: Revenue Performance
Revenue Performance Higher volumes in Infrastructure Services and Construction more than offset by Property 4.6% Revenue increase of 4.6% in FY23 Infrastructure – ramp up of capital works on HS2 Construction – strong order book converting to revenue Continued bidding discipline and risk mana
Slide 9: Adjusted Operating Profit
Adjusted Operating Profit Margin increase underpinned by business mix and cost management Adjusted operating profit of £132m, 3.9% margin Increase against prior year: Volume / price / mix Management actions Decrease against prior year: Property activity Cost Inflation FY23 Results Pres
Slide 10: Adjusting Items
Adjusting Items Restructuring costs materially reduced £’m FY23 FY22 Restructuring costs materially reduced and no further charges expected Restructuring and related charges 13.0 40.0 Amortisation 19.2 19.7 Amortisation - £19m of non-cash accounting charges Other 17.8 15.7 Total adjusting items
Slide 11: Free Cash Flow
Free Cash Flow Strong free cash flow generation with positive working capital inflow and reduction in KEPS £’m FY23 FY22 Adjusted operating cash flow conversion of Adjusted EBITDA 196.0 165.4 130% Working capital 80.3 3.7 Net capex (Including IFRS16 leases) (51.4) (46.5) Working capital inflow o
Slide 12: Net Cash Movement
Net Cash Movement Significant free cash flow generation of £132m and year-end net cash position of £64m FY23 Results Presentation, 14 September 2023 12
Slide 13: Average Month-End Net Debt
Average Month-End Net Debt Near-term pathway to sustainable average month-end net cash position £582m FY23 – expected increase due to the repayment of debt and debt-like items such as KEPs and HMRC Covid-19 deferred taxes Average month-end net debt of £(232)m FY24 – expected improvement with f
Slide 14: High Quality Order Book
High Quality Order Book Order book of £10.1bn underpinned by long-term framework positions Order book at £10.1bn (FY22: £9.8bn) Secured revenue 85% of FY24 revenue secured 5,000 De-risked contracts: 4,500 c.60% of order book is under target cost or cost reimbursable 4,000 contracts 3,500 C
Slide 15: Capital Allocation
Capital Allocation Capital allocation priorities aligned with strategic objectives Sources and uses of cash Sources of Cash Uses of Cash Free cash flow generation over medium-term Capex - investment to support business Free Cash Flow £’m Property - disciplined investment in Property business
Slide 16: Pension
Pension Net pension scheme asset of £105m £’m FY23 FY22 Δ As at 30 June 2023, Group’s pension scheme asset was £105m Group Pension Schemes Market value of assets 1,247.7 1,557.0 (309.3) Triennial valuation for funding the defined Present value of liabilities (1,143.2) (1,362.3) 219.1 benefit sch
Slide 17: Dividend
Dividend Intention to recommence dividend given progress against medium-term value creation plan Intention to commence dividends Near-term pathway to operating with an average month end net cash position Significant improvement in balance sheet net cash Over time, progress to deliver a divid
Slide 18: Operational Update
Operational Update Andrew Davies, CEO
Slide 19: Infrastructure Services
Infrastructure Services Adjusted operating profit growth of 14% to £80m Commercial & Operational Update £’m FY23 FY22 Δ Order book increase of 4% to £5.8bn Revenue 1,712 1,667 2.7% Transportation: appointed by National Highways to Adjusted Operating Profit 79.8 70.0 14.0% carry out maintenance o
Slide 20: Rail Assets Acquisition
Rail Assets Acquisition Bolt-on acquisition of rail assets completed post year end Completed post year end, 4 September 2023 Acquired substantially all the rail assets of Buckingham Group and the HS2 contract supplying Kier’s HS2 joint venture, EKFB Cash consideration of up to £9.6m Value ac
Slide 21: Construction
Construction Adjusted operating profit growth driven by higher volumes and impact of prior year restructuring £’m FY23 FY22 Δ Commercial & Operational Update Revenue 1,653 1,441 14.7% Significant awards: Adjusted Operating Profit 69.5 60.8 14.3% Appointed to the £5.1bn Strategic Alliance Operati
Slide 22: Property
Property Fewer property transactions in current market conditions £’m FY23 FY22 Δ Commercial & Operational Update Revenue 38 144 (73.9%) Commenced redevelopment work at 19 Cornwall Adjusted Operating Profit 12.8 17.6 (27.3%) Street Birmingham to transform it into an office operating at net zero ca
Slide 23: Sustainability
Sustainability Andrew Davies, CEO
Slide 24: New Sustainability Framework
New Sustainability Framework Building for a Sustainable World Key focus areas: Our People – we will build a workforce with the 1 necessary skills and capabilities whilst ensuring fair and equal treatment for our entire workforce Our Places – we aim to leave a positive legacy in the communities we wo
Slide 25: Environmental
Environmental Progress made on carbon, waste and water reduction in FY23 Carbon Waste Water (1) Carbon – reduction in scope 1 & 2 Waste – 33% year over year Biosphere protection carbon 19% in 2023 reduction in the volume of non- hazardous construction waste from Water – 8% year over year r
Slide 26: Social
Social Progress made on social commitments in FY23 Safety Apprenticeships SME Spend Supply Payment Days Safety – 12-month AIR Apprenticeships – 646 Small and Medium Supplier payments 88 a decrease of 23% on apprentices participants, Enterprise (“SME”) days – payment days of FY22 6% of workfo
Slide 27: Summary and Outlook
Summary and Outlook 1 Outperformed medium-term margin target 2 Order book of £10.1bn providing multi-year revenue visibility 3 FY24 started well and trading in line with expectations. Current year outlook unchanged Near-term pathway to sustainable average month-end net cash position; commencement of
Slide 28: Q&A
Q&A
Slide 29: Appendix
Appendix
Slide 30: Key Investment Proposition
Key Investment Proposition Creating value for the medium-term Value accretive Attractive market Strong order book Experienced earnings-led business positions focused on underpinned by long- management team. model. Aligned to UK UK infrastructure and term contracts and Proven track record of Governme
Slide 31: Our businesses
Our businesses Re-aligned Infrastructure Services segment. Well placed to support clients in key markets Infrastructure Services * Property 1 3 4Construction 5 Property Urban Infrastructure Highways Construction Regeneration and Projects Transportation Natural Resources, Property Nuclear and Develop
Slide 32: Transformation Journey
Transformation Journey Rationalised and recapitalised. Focused delivery of medium-term value creation plan April 2019 March 2020 May 2021 June 2022 September 2023 New CEO, New senior Refinancing Order book Intention to Andrew Davies management package agreed growth and commence team in place deliver
Slide 33: Kier's Strategic Framework
Kier’s Strategic Framework Strategic priorities PURPOSE To sustainably deliver infrastructure which is vital to the UK VISION To be the UK’s leading infrastructure services and construction company GROUP STRATEGY Focus on government, regulated Operate in business to Contracting or blue-chip client b
Slide 34: Medium-Term Value Creation Plan
Medium-Term Value Creation Plan Medium-term targets provide visibility over Group direction 3 4 Annual revenue c. £4.0 bn - £4.5 bn Adjusted operating margin c.3.5% Transportation Natural Construction Property Cashflow conversion of operating profit c.90% Resources, Nuclear and Networks Bala
Slide 35: Market Drivers
Market Drivers Positive market environment underpinning UK Government spending commitments Population Economic Congested Addressing Climate growth growth transport geographic change imbalance Population expansion UK economic Congested roads, Increased spending Energy supply with people liv
Slide 36: UK Government Spending Commitments
UK Government Spending Commitments UK National Infrastructure Strategy – commitment to spend £600bn over next 5 years Infrastructure Services Natural Resources, Transportation Net Zero infrastructure Nuclear & Networks Road investment Strategy 2: £27bn Water England/Wales AMP7 £51bn by UK lead
Slide 37: UK Government Spending Commitments continued
UK Government Spending Commitments continued UK Government spending focused on schools, hospitals, prisons and defence Construction Property Education Healthcare Custodial Defence Urban Regeneration 500 DfE school replacement £3.7bn committed until 20,000 new prison £4.3bn Defence Estate G
Slide 38: Frameworks – Route to Market
Frameworks – Route to Market Maintaining and growing central and local framework positions Awarded places on long-term frameworks and contracts worth up to £137bn (total OJEU values) Driving long-term revenue streams, barriers to entry and strengthened customer relationships, underpinning strong
Slide 39: Group Revenue Analysis
Group Revenue Analysis Total 16% 15% 6% 10% 3% 12% 9% 22% 7% Infrastructure Services 31% 30% 12% 20% 6% 1% 3% Construction 24% 18% 45% 13% Property 42% 50% 2% 6% Highways Rail Power Water Telecoms Other Education Health Government Private Alternatives Mixed Use Office Industrial FY23 Results Present
Slide 40: Segmental Revenue Analysis
Segmental Revenue Analysis Infrastructure Services Total 31% 30% 12% 20% 6% 1% Highways 100% Infrastructure 3% 67% 9% 20% 1% Utilities 1% 30% 46% 23% Highways Rail Power Water Telecoms Other Construction Total 24% 18% 45% 13% Regional Build 28% 21% 36% 15% Kier Places 6% 3% 82% 9% International 100%