Costain Group PLC · LSE:COST
Costain — H1 2023 Earnings Presentation
35 slides from Costain's earnings presentation, 2023
Slide 1: Results presentation
Results presentation For the six months ended 30 June 2023 Improving people’s lives. 1
Slide 2: Operating Review
Operating Review Alex Vaughan Chief Executive Officer Improving people’s lives. 2
Slide 3: Highlights
Highlights Strong financial performance Strong first half operating performance • Revenue flat at £664.4m • Adjusted operating profit(1) of £15.0m up 7.1% • Strong adjusted free cashflow(2) of £26.5m • Period end net cash of £132.1m • Business resilience due to diverse revenue and profit streams Str
Slide 4: Transportation
Transportation Adjusted Revenue1 Adjusted operating margin2 2.5% (H1 22: 3.2%) £487m Rephasing and rescoping of contracts in Road and HS2 (H1 22: £495m) Road Adjusted Revenue1 Current Road schemes on A1, M1, M6 and A30. Managed exit of A66 and -1.5% mobilised for A303. Area 14 maintenance Adjusted o
Slide 5: Natural Resources
Natural Resources Adjusted Revenue1 Adjusted Operating margin2 4.2% (H1 22: 1.5%) £177m Continued improved operational performance (H1 22: £171m) Water Adjusted Revenue1 Delivering broad range of services to major water companies; secured first +3.9% AMP8 contract Energy Adjusted operating profit2 M
Slide 6: Financial Review
Financial Review Helen Willis Chief Financial Officer Improving people’s lives. 6
Slide 7: Headline financial results
Headline financial results H1 23 H1 22 Change Financial Summary £m £m % • Adjusted revenue flat on (1) prior year Adjusted revenue 664.4 665.2 0% Reported revenue 664.4 665.2 0% • Adjusted operating profit up 7% to £15.0m Adjusted operating profit(2) 15.0 14.0 7% • Adjusted operating margin (2) Adju
Slide 8: Revenue walk
Revenue walk Growth in Natural Resources offsets project rephasing and rescoping in Transportation Transport Natural Resources £487.1m -1.5% £177.3m +3.9% Group £664.4m -0.1% 1. Adjusted Revenue is an adjusted metric and excludes the impact of contract adjustments totalling £nil (H1 22: £nil). See s
Slide 9: Operating profit walk
Operating profit walk Growth in Natural Resources and impact of project rephasing and rescoping in Transportation Group £15.0m +7% H1 23 Other adjustments £7.4m 1. Adjusted operating profit is an adjusted metric and excludes the impact of contract adjustments and other items totalling £7.4m (H1 22:
Slide 10: Strength of secured workload
Strength of secured workload Well positioned to deliver further progress this year Order & Preferred Bidder Books Secured Revenue Holistic view is increasingly relevant - our business mix is shifting £1.2bn towards the preferred bidder book as we secure long-term (5-to- 10-year) framework positions
Slide 11: Risk management
Risk management Strengthened contract governance to underpin margin progression Work winning Contract duration Contract Independent Enhanced legal Operational Financial Senior management selection review process excellence model oversight review Margin milestones: adjusted operating margin run-rate
Slide 12: Balance sheet
Balance sheet H1 23 FY 22 (as restated) Consolidated statem ent of financial position £m £m Assets • Net assets position maintained at Retirement benefit asset 58.7 60.2 £210.3m Other non-current assets 97.6 106.6 • Strong net cash £132.1m Total non-current assets 156.3 166.8 Current assets • Retire
Slide 13: H1 23 Cash walk
H1 23 Cash walk Increased H1 23 net cash position reflecting strong Free Cash Flow and working capital management • Strong free cash flow of £26.5m, reflecting continued working capital management, which benefitted from further positive cash collection timings during the half. Free Cash Flow(2) £26.
Slide 14: Cash and banking facilities
Cash and banking facilities Net Cash £m H1 23 FY 22 Cash 77.6 67.3 • Average month end net cash £127.9m, Cash held at joint ventures 54.5 56.5 higher than FY 22 of £99.2m Loans 0.0 0.0 132.1 123.8 • No drawdown of RCF Average month end net cash 127.9 99.2 • Significant headroom on bonding facilities
Slide 15: Pension
Pension • Triennial valuation of the Costain defined benefit pension scheme as at 31 March 2022 concluded in June 2023 • Deficit contributions of £3.3m (+CPI) agreed • Scheme funding position at 31 March 2022 deficit of £25.1m(1) (a funding level of around 97%) • Future contributions and “dividend p
Slide 16: Dividend
Dividend • Resumption of interim dividend payment under consideration by Board, with 1/3 interim, 2/3 final payment ratio • Within pension scheme “dividend parity” arrangements • Potential dividends may increase above “dividend parity” depending on cash flow and pension scheme funding level 16
Slide 17: Further progress in H2 23
Further progress in H2 23 • Mindful of macro-economic uncertainties • Making improvements to operational performance, a strong cash position and clear strategic priorities • Positive cash collections end of FY 22 and H1 23, likely to unwind H2 23 • Broad customer focus – secured 90% of revenue for H
Slide 18: Strategy & Outlook
Strategy & Outlook Alex Vaughan Chief Executive Officer Improving people’s lives. 18 1
Slide 19: Resilient investment in critical national needs
Resilient investment in critical national needs Megatrends Balancing and enabling Climate Change and Resource, Environmental and Need for Transformation and economic growth and Social Net Zero imperative Economic resilience Affordability Change UK Government sets out ten-year plan for investment of
Slide 20: Strong infrastructure investment
Strong infrastructure investment Most customers procure against five-year investment plans Committed Investment 2023 2024 2025 2026 2027 2028 2029 2030 investment period National Highways £27bn 2020-2025 RIS2 RIS3 Phase 1 (London – West Midlands) High Speed Rail c£50bn 2018-2040 Phase 2a (West Midla
Slide 21: Supporting our customers across their full ecosystems
Supporting our customers across their full ecosystems Digital services Consulting Complex programme delivery Results Presentation: Half year 30 June 2023 21
Slide 22: Solutions through complex programme delivery
Solutions through complex programme delivery • A leading capital delivery partner for complex infrastructure • Design, build and maintain expertise • Serving blue-chip customers Thames Tideway RDP & Smart Motorway Alliance HS2 Water Frameworks Gatwick Station Anglian SPA Results Presentation: Half y
Slide 23: Through consultancy
Through consultancy Delivery Partner • Leveraging our core expertise in programme delivery • A leading Delivery Partner overseeing AWE Cadent Devonport A303 Heathrow our customers’ major infrastructure programmes Solution Design/Project Controls • A growing design and Project Controls/P3M expert • A
Slide 24: Through digital solutions
Through digital solutions • Our value is the combination of our customer relationships, intimate infrastructure insight, technology expertise and know-how, and strategic digital partnerships. • Discontinuing development and manufacturing activities of operational technology • Our focus is on improvi
Slide 25: Delivering our ESG ambitions
Delivering our ESG ambitions Activating our purpose Planet People Performance Safeguard our Create a positive lasting legacy for our Deliver strong sustainable financial and planet's future people and communities ethical performance for our stakeholders • Innovative construction planning and • Durin
Slide 26: Further progress expected in H2 23
Further progress expected in H2 23 • On track to meet margin milestones and Board forecasts for FY 23 • Dividend resumption under review by Board with announcement expected shortly • New contracts won at margins and risk profile we aspire to • Quality forward workload with high level of bidding • Mi
Slide 27: Q&A
Q&A Improving people’s lives. 27 2
Slide 28: Appendices
Appendices Improving people’s lives. 28 2
Slide 29: Cash flow
Cash flow Consolidated cash flow statem ent H1 23 H1 22 £m £m Cash from operations before changes in w orking capital and provisions 20.9 17.2 Changes in w orking capital 4.9 9.8 Movement in provisions and employee benefits (8.9) (46.1) Interest and tax, net received / (paid) 0.9 (1.1) Net cash from
Slide 30: Free Cash Flow
Free Cash Flow Adjusted free cash flow H1 23 H1 22 £m £m Cash from operations 16.9 (19.1) Add back cash flow on adjusting items 4.0 48.4 Add back pension deficit contributions 5.7 5.2 Less taxation 0.0 0.0 Adjusted cash from operating activities 26.6 34.5 Capital expenditure (0.1) (0.1) Adjusted fre
Slide 31: Adjusted to Reported Reconciliation
Adjusted to Reported Reconciliation £m H1 23 H1 22 Reported Contract Other Adjusted Reported Contract Other Adjusted Adjustm ents Adjustm ents Adjustm ents Adjustm ents Group Revenue 664.4 0.0 0.0 664.4 665.2 0.0 0.0 665.2 Cost of sales (618.0) 0.0 0.0 (618.0) (627.4) 0.0 (0.5) (627.9) Gross Profit
Slide 32: Adjusting items
Adjusting items £m H1 23 H1 22 Contract Other Contract Other Adjustm ents Adjustm ents Adjustm ents Adjustm ents Transformation and restructuring costs 0.0 2.1 0.0 2.6 Impairment of development intangible asset 0.0 5.3 0.0 0.0 Profit on sale of non-core asset 0.0 0.0 0.0 (0.5) Total operating profit
Slide 33: FY 22 IFRS 16 impact
FY 22 IFRS 16 impact Incom e statem ent im pact £m Operating costs 7.1 Depreciation (6.3) Finance costs (0.7) Net im pact on incom e statem ent 0.1 Fixed Assets im pact £m Fixed assets opening position (restated) 30.7 Additions 4.1 Disposals (0.2) Depreciation (6.3) Fixed assets closing adjustm ent
Slide 34: Key to investment programmes
Key to investment programmes National Highways • RIS – Road Investment Strategy • S1 & S2 – Stage 1 and Stage 2 • 2A - Phase 2A High Speed Rail • DDP – Design & Delivery Partner • M&E – Tunnel & lineside mechanical & electrical • Power – HV power system Integrated Rail Plan • IRP – Integrated Rail P
Slide 35: Cautionary forward-looking statements
Cautionary forward-looking statements This presentation contains certain statements that are forward-looking statements based on current expectations and reasonable assumptions. Various known and unknown risks, uncertainties and other factors may cause actual results to differ from any future result