Slide 1: Welcome to the Kier Group preliminary results
Welcome to the Kier Group preliminary results Paul Sheffield Chief executive Haydn Mursell Group finance director
Slide 2: Highlights
Highlights Strong performance Operating profit up 23% to £71.1m Continued underlying strong cash generation: £129m average cash Dividend up 10% to 64p Order book up to £4.3bn What drove our results Increased underlying revenue in all divisions Risk management and cost base reduction Fr
Slide 3: How we see the next 12 months
How we see the next 12 months Construction 95% of 2012 revenue and 46% of 2013 revenue secure and probable, which is ahead of last year Environment increasingly competitive; margin still firmly above 2% Services Stable order book at £2bn and 4.5% sustainable margin Growth anticipated from 20
Slide 4: Financials
EIKIER Financials
Slide 5: Revenue 2010/11 vs 2009/10
Revenue 2010/11 Revenue 2009/10 £2,179m £2,099m +4% Construction Services Property Homes 7% 7% 4% £153m 3% £158m £97m £53m 22% 23% £484m £471m 67% 67% £1,445m £1,417m 5
Slide 6: Income statement
Income statement Year to 30 June Change 2011 2010 £m £m % Operating Profit Group 63.1 53.6 JVs 2.1 (0.1) Profit on disposal of PFI investments 5.9 4.2 Underlying operating profit 71.1 57.7 +23% Homes land transactions - 7.1 Total operating profit 71.1 64.8 +10% Share of joint ventures Finance cost (
Slide 7: Operating profit
Operating profit Year to 30 June Change Performance by division 2011 2010 £m £m % Construction 39.3 36.2 +9% Services 21.7 21.4 +1% Property Underlying 5.2 0.3 Profit on disposal of PFI investments 5.9 4.2 Homes Underlying 4.2 2.8 +50% Land transaction - 7.1 Corporate (5.2) (7.2) +28% Operating prof
Slide 8: Exceptional items
Exceptional items Year to 30 June 2011 2010 £m £m Reduction in the provisions following OFT appeal results 15.6 (18.0) Credit arising from changes to Kier Group pension scheme 25.7 - Local authority pension scheme - 16.0 Homes land and work in progress write-down (33.5) - Acquisition costs (0.8) - T
Slide 9: Earnings per share and dividend
Earnings per share and dividend Year to 30 June Change 2011 2010 % Weighted average number of shares (m) 37.2 36.7 Underlying earnings per share * 148.4p 131.6p +13% Excluding 2010 Homes land transaction * 148.4p 117.7p +26% Basic earnings per share 166.1p 108.2p +53% Dividend per share 64.0p 58.0p
Slide 10: Balance sheet summary
Balance sheet summary At 30 June Change 2011 2010 £m £m £m Intangible assets 27 28 -1 Property, plant and equipment 96 85 +11 Investment in joint ventures 9 24 -15 Inventories 431 407 +24 Other working capital (520) (487) -33 Cash 195 205 -10 Long-term borrowings (30) (30) - Provisions (51) (61) +10
Slide 11: Net cash
Net cash Net Group Cash 165 175 Construction 423 418 Services 28 32 Average net cash £129m -34 Property (June 2010: £95m) -20 -259 Homes -248 -300 -200 -100 0 100 200 300 400 500 £m June 2011 June 2010 11
Slide 12: Inventories
Inventories At 30 June Change 2011 2010 £m £m £m Residential land 159 214 -55 Residential work in progress 133 126 +7 Commercial land and work in progress 87 19 +68 Other work in progress 52 48 +4 Inventories 431 407 +24 12
Slide 13: Pensions
Pensions At 30 June Change 2011 2010 £m £m £m Kier Group Pension Scheme Market value of assets 680 611 +69 Present value of liabilities (711) (690) -21 Deficit in the scheme (31) (79) +48 Deferred tax 8 22 -14 Net pension liability (23) (57) +34 Net effect of Sheffield Pension Scheme 1 (6) +7 Net pe
Slide 14: Summary
Summary Strong growth Up 23% in underlying* operating profit to £71.1m (2010: £57.7m**) Up 26% in underlying* EPS to 148.4p (2010: 117.7p**) Record average net cash of £129m (2010: £95m) New committed facilities of £90m through to 2014 Dividend increased by 10% to 64.0p Improved order
Slide 15: Construction
Construction 15
Slide 16: Construction
Construction Year to June 2011 2010 Change £m £m % Revenue 1,445 1,417 +2 Operating profit 39.3 36.2 +9 Operating margin 2.7% 2.6% - Order book (secure and probable) 2,245 2,044 +10 Cash 423 418 +1 Revenue £m Operating profit £m Operating margin % 2.6% 2.6% 2.7% 2.3% 1.6% 1,585 1,492 1,445 1,417 39.
Slide 17: Construction: awards by sector
Construction % Awards by sector 12 months to June 2011 Year to 33% Education 3% Hotels & leisure June 2011 13% Transport 3% Industrial 13% Overseas 2% Custodial 10% Commercial 1% Mixed use 9% Residential 0% Defence 6% Health 3% Other 4% Retail Year to June 2010 Public 56% Public 74% 17
Slide 18: Construction: sector awards and likely impact
Construction Sector 2010 Previous 2011 Likely impact awards prediction awards 2012 & 2013 £1.4bn £1.5bn Education 41% 33% Transportation (rail + airports) 3% 13% Overseas 1% 13% Commercial 4% 10% Residential/accommodation 2% 9% Health 7% 6% Retail 4% 4% Industrial 3% 3%
Slide 19: Construction: Power and waste
Construction Power and waste £14bn civil works accessible to Kier over 5-10 years Kier market position Leader in CCGT power stations: civil works on 14 major stations 25 years nuclear experience Skills in power transferable to waste Preferred bidder on £150m Langage CCGT power station 19
Slide 20: Construction: Commercial
Construction Commercial London and South East growing Secured c.£150m Probable awards in excess of £100m Mix of new build, interiors and refurbishment Tottenham Court House 20
Slide 21: Construction: Overseas
Construction Overseas Hong Kong Caribbean £4bn pa infrastructure Jamaica: £50m secured plan over the next 5 years and probable Several years pipeline Trinidad: oil and gas £320m in JV secured market Admiralty MTR station Middle East Saudi Arabia: best potential; extending operation
Slide 22: Construction: Other opportunities
Construction Other opportunities Scape framework: £750m preferred bidder P21+: £140m awarded; £3bn over the next 4 years Academies II: £700m Confident of good quality order book and margin maintained firmly above 2% 22
Slide 23: Services
Services 23
Slide 24: Services
Services Year to June 2011 2010 Change £m £m % Revenue 484 471 +3 Operating profit * 21.7 21.4 +1 Operating margin * 4.5% 4.5% - Order book 2,030 2,128 -5 Cash 28 32 -13 * Before amortisation of intangible assets Revenues £m Operating profit £m Operating margin % 4.5% 4.5% 4.1% 4.1% 3.9% 21.7 484 21
Slide 25: Services
Services Revenue £484m Year to June £133m 2011 2010 Change 27% £m £m % £351m Maintenance 351 343 +2 73% FM and Environmental 133 128 +4 Maintenance FM and Environmental 25
Slide 26: Services: Maintenance
Services £351m Maintenance Public sector social housing market size: c£3bn 12% (265,000 homes) of Local Authorities’ homes Tendering or in competitive dialogue for 19 contracts valued at £1.3bn PV capability (Beco), 10,000 homes under contract valued at £30m 26
Slide 27: Services: Facilities Management and Environmental
Services £133m Facilities Management and Environmental Market size: £35bn Underweight position Organic and acquisition-based growth will improve margin and increase market share More than 10,000 buildings maintained/managed 27
Slide 28: Services: order book and contracts
Services 500 a 400 fl 300 — a 200 100 0 2012 2013 Fal KIER . — = 2014 2015 2016 2017 2018 2019 2020 2021 @ Order book © Potential contract extensions m™ Preferred bidder 28
Slide 29: Property and Homes
i Property and Homes KIER 29
Slide 30: Homes
Homes Year to June 2011 2010 Change £m £m % Revenue 153 158 -3 Operating profit underlying 4.2 2.8 +50 land transaction - 7.1 Net operating assets 311 329 -5 Land bank (units) 4,800 5,700 -16 Unit sales Affordable homes and mixed tenure Private homes on Kier-owned land 2011 2010 998 units 1,060 unit
Slide 31: Homes
Homes Mixed tenure Private Key area of focus £20m (350 plots) land £12.5m Affordable sales completed on Homes Programme’s deferred cash terms grant Progressing sales of the Secure and probable land bank pipeline c.1,700 Maintain a 500/600-unit affordable homes business within managea
Slide 32: Property
Property Year to June 2011 2010 Change £m £m % Revenue 97 53 +83 Operating profit underlying 5.2 0.3 - profit on disposal of PFI 5.9 4.2 - Net operating assets (incl. c.£10m PFI) 54 33 +64 £75m average capital base excl. PFI Seeking 15% return on our capital Largely pre-let with strong partner
Slide 33: Property: development pipeline
Property Development pipeline of £700m over 5 years Property portfolio (ex LBG), 10 schemes Solum Regeneration, 14 schemes Sydenham redevelopment 17 other schemes at an advanced stage Solum Regeneration, Epsom 33
Slide 34: Property: PFI projects
Property 10 PFI projects 3 projects sold in 2010/11 for £14m; discount rate of c.7% Directors’ portfolio valuation at 7.5%: £38m Committed equity investment: £21m Shortlisted for 5 projects: value £250m Radclyffe School 34
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Slide 36: Outlook
Outlook Diverse capability has enabled rapid adaptation to market changes 95% Construction order book for 2012 Poised to benefit from growth in outsourced opportunities Resources available to pursue growth in Services with potential margin enhancement Capital available to deliver our prope