Slide 1: Welcome to Kier Group's interim results
Welcome to Kier Group’s interim results Paul Sheffield Haydn Mursell Chief Executive Group Finance Director
Slide 2: Highlights
Highlights Resilient performance Underlying profit before tax increased to £34m Strong net cash position: £131m Dividend increased to 21.5p Order book maintained at more than £4bn What sustained our results Stable Group revenue Continued focus on cash management Risk management and ongoing cost cont
Slide 3: Key achievements
Key achievements Construction Services Property Awards Awards UK building £440m New work £125m Pipeline GDV £700m Crossrail (JV) £210m Renewals & Preferred extensions £35m bidder £200m Hinkley (JV) £100m+ Disposals Plymouth £50m PFI assets £8m Overseas £45m Savile Row £32m Housing land £18m £670m £1
Slide 4: The next 12 months
The next 12 months Construction 100% of FY12 revenue and 68% of FY13 revenue secure and probable, similar to last year Work balance changing: • UK infra and overseas growing • Frameworks reducing • Open market more competitive Operating margin on target for FY12, tightening for FY13 Services Stable
Slide 5: Overview: revenue & profit
Overview: revenue & profit Six months to 31 December 2011 Revenue £1,046m -4% Revenue £1,097m Construction £720m Construction £728m Services £218m Services £243m Property £108m Property £126m 10% 11% 21% 22% 67% 69% Operating profit* £37.6m +10% Operating profit* £34.1m Construction £17.8m Construct
Slide 6: Overview: revenue & profit - notes
Overview: revenue & profit - notes * Excludes Corporate Robust Construction revenue of £720m • Frameworks and negotiated opportunities • Long-term client relationships • Intelligent, value-engineered solutions Reduced Services revenue of £218m • Subdued level of public sector activity, particularly
Slide 7: Income statement
Income statement Six months to 31 December Change 2011 2010 £m £m % Operating profit: Group 28.4 30.8 - Joint ventures (JVs) 0.5 1.4 - Profit on disposal of PFI investments 6.7 - - Total operating profit 35.6 32.2 +11 Share of JVs: Finance cost (0.1) (0.7) - Tax (0.1) (0.1) - Profit from operations
Slide 8: Income statement - notes
Income statement - notes Net finance cost now includes the interest unwind on the deferred consideration following the Lloyds property portfolio acquisition in April 2011 Effective tax rate of 20% compares favourably with December 2010 (24%) No exceptional items 8
Slide 9: Operating profit
Operating profit Six months to 31 December Change Performance by division 2011 2010 £m £m % Construction 17.8 19.8 -10 Services 9.8 10.9 -10 Property: Property & PFI (including profit on disposal of PFI investments) 8.4 1.7 +194 Homes 1.6 1.7 Corporate (2.0) (1.9) +5 Operating profit* 35.6 32.2 +11
Slide 10: Operating profit - notes
Operating profit - notes Construction: robust operating margin of 2.5% Services: operating margin maintained at 4.5% Property: • Ongoing development at Uxbridge • Progressing and on track at Savile Row • PFI disposals at c.7% post-tax discount rate, following our strategy of regular disposal • Impro
Slide 11: Earnings per share and dividend
Earnings per share and dividend Six months to 31 December Change 2011 2010 % Weighted average number of shares (m) 37.7 37.0 - Underlying earnings per share* 70.3p 63.5p +11 Basic earnings per share 67.1p 60.3p +11 Dividend per share 21.5p 20.0p +8 * Before amortisation of intangible assets 11
Slide 12: Earnings per share and dividend - notes
Earnings per share and dividend - notes Growth of 11% in underlying EPS to 70.4p (2010: 63.5p) EPS benefitted from the effective tax rate of 20% Interim dividend increased by 8% to 21.5p (December 2010: 20.0p) Aiming to maintain 1/3 : 2/3 annualised split 12
Slide 13: Balance sheet summary
Balance sheet summary At 31 At 30 Change At 31 December June December 2011 2011 2010 £m £m £m £m Intangible assets 25 27 -2 29 Property, plant and equipment 103 96 +7 88 Investment in JVs 6 9 -3 28 Inventories 409 431 -22 420 Other working capital (466) (520) +54 (470) Cash 161 195 -34 174 Long-term
Slide 14: Net cash
Net cash December 2011 June 2011 131 Net Group cash 165 414 Construction 423 16 Services 28 Average net cash £110m -40 (June 2011: £129m) Property -34 -251 Homes -259 -400 -200 0 200 400 600 14
Slide 15: Net cash - notes
Net cash - notes Capital and investment spend of £33m since June 2011 includes: • £3m Mining and other Construction • £10m Plant and vehicles, Environmental Services • £11m Net Property developments (incl. Solum) Property • £4m PFI sub-debt injection and other Property • £5m Private units on Afforda
Slide 16: Inventories
Inventories At 31 At 30 Change At 31 December June December 2011 2011 2010 £m £m £m £m Residential land 148 159 -11 208 Residential work in progress 127 133 -6 139 Commercial land and work in progress 91 87 +4 19 Other work in progress 43 52 -9 54 Inventories 409 431 -22 420 16
Slide 17: Inventories - notes
Inventories - notes £22m reduction comprises: Housing unit sales Land & WIP sales WIP for private units on Affordable sites Movements on other WIP balances Residential land comprises 4,412 plots, all with planning permission 17
Slide 18: Pensions
Pensions At 31 At 30 Change At 31 December June December 2011 2011 2010 £m £m £m £m Kier Group Pension Scheme: Market value of assets 717 680 +37 667 Present value of liabilities (750) (711) -39 (732) Deficit in the scheme (33) (31) -2 (65) Deferred tax 8 8 - 17 Net pension liability (25) (23) -2 (4
Slide 19: Pensions - notes
Pensions - notes The decrease in the discount rate increased the liabilities, mitigated by a reduction in inflation and the greater than expected return on the assets From a sensitivity point of view, for every 0.1% movement in discount rates our liabilities move by about £11m. 19
Slide 20: Summary
Summary Resilient results Operating profit* up 11% to £35.6m Average month-end net cash of £110m Dividend increased to 21.5p Strong order books for Construction and Services at >£4bn Significant and sustainable increase in the Property division’s profit contribution Prudent accounting practices unde
Slide 21: Construction
Construction BIM model - Services distribution for a whole building 21
Slide 22: Construction
Construction 6 months to December Year to June 2011 2010 Change 2011 £m £m % £m Revenue 720 728 -1 1,445 Operating profit 17.8 19.8 -10 39.3 Operating margin 2.5% 2.7% - 2.7% Order book (secure and probable) 2,192 2,096 +5 2,245 Cash 414 434 -5 423 Revenue - £m Operating profit, £m Operating margin,
Slide 23: Construction - notes
Construction - notes Performance as anticipated £670m new awards in H1, of which 60% via frameworks and similar arrangements Outlook • 68% of FY13 revenue secure and probable • UK building market declining and increasingly competitive • Infrastructure and overseas markets growing The autumn statemen
Slide 24: Construction
Construction Sector Year to June 2011 6 months to Dec 2011 % awards Expectations % awards Current (£1.5bn) 2012 & 2013 (£0.7bn) expectations Education 33% 32% Power & waste 0% 18% Transportation 13% 11% Commercial 10% 10% Health 6% 7% Care home, high-rise affordable housing, student accommodation 9%
Slide 25: Construction - notes
Construction - notes Construction - notes Scape framework (up to £1bn over 4 years), in partnership with the Services division: £100m of opportunities identified Kier one of only three contractors appointed to the Welsh Regional NHS frameworks (£65m p.a.) Power and waste awards in H1 12: £100m+ (Kie
Slide 26: Construction – UK infrastructure
Construction – UK infrastructure New nuclear - Hinkley, £100m+ in JV Energy from waste Plymouth, £50m Transport - Farringdon station, £210m in JV Tunnel boring machine (TBM) Preferred bidder on a further £110m power & waste projects 26
Slide 27: Construction – UK infrastructure - notes
Construction –Construction – UK Infrastructure UK infrastructure - notes - notes Awards Crossrail: c.£800m of work now secured in JV Water: £17m for Thames Water at Oxford secured Bids Gas: Abernedd and Carrington bids during 2012 (£100m estimated work); national gas power station programme in appen
Slide 28: Construction – UK building
Construction – UK building £440m awarded in H1 Education: £150m of new academies awarded King’s Cross regeneration: preferred bidder on £100m Health: preferred bidder on £100m of P21+ Open market increasingly competitive Arthouse – Kings Cross regeneration 28
Slide 29: Construction – UK building - notes
Construction – UK building - notes Construction – UK Infrastructure - notes P21+: won £205m out of £935 awarded since inception Framework for Academies : 9 schemes entered into contract (£150m) in the 6 months to Dec 11 and 4 more to close (£50m) South Lanarkshire Schools framework awarded (1 of 3):
Slide 30: Construction - Overseas
Construction - Overseas Hong Kong Prospects £330m on site Targeting £150/200m revenue 5 year pipeline of new activity by June 2014 Caribbean Hydroelectric power station project, £20m Digicel HQs in Haiti and Jamaica, £24m New office in Trinidad to target oil and gas ME Saudi economic and social infr
Slide 31: Construction – Overseas - notes
Construction Construction – Overseas – Overseas - notes - notes Middle East £130bn National Investment Plan in Saudi Currently bidding for bauxite mining and rail work in Saudi Hong Kong New MTR projects are currently targeted for 2012/13 start Infrastructure plan, £4bn p.a. for the next 5 years: MT
Slide 32: Services
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Slide 33: Services
Services 6 months to December Year to June 2011 2010 Change 2011 £m £m % £m Revenue 218 243 -10 484 Operating profit 9.8 10.9 -10 21.7 Operating margin 4.5% 4.5% - 4.5% Order book (secure and probable) 1,973 1,982 0 2,030 Cash 16 32 -50 28 Revenues, £m Operating profit, £m Operating margin, % 4.5% 4
Slide 34: Services – Maintenance - notes
Services – Maintenance -Services notes - notes Operating profit and margin are before the amortisation of intangible assets Order book stable at £2bn 95% of FY12 revenue and good forward workload visibility £12m cash reduction since June 11 comprises: • £10m of capital and investment spend • Redunda
Slide 35: Services - Maintenance
Services - Maintenance H1 12 revenue £140m 64% 400 Revenue down 22%, Potential contract extensions 350 Order book reflecting public sector 300 budget pressures 250 200 No significant contracts £m 150 to rebid before 2014 100 £700m of potential 50 contract extensions if all 0 exercised 2013 2014 2015
Slide 36: Services - Maintenance - notes
Services Services – Maintenance - Maintenance - notes - notes Maintenance: planned and reactive housing maintenance for local authorities and registered providers. Reduction in revenue largely driven by more than 40% cuts in local authorities’ capital works Strong bid pipeline (see in appendix) Pres
Slide 37: Services - FM and Environmental
Services - FM and Environmental £78m H1 12 revenue 36% Revenue up 22% More than £100m of awards Private sector growth targeted Organic and acquisition- based growth being pursued 37
Slide 38: Services - FM and Environmental - notes
Services – FM Services – FM and Environmental and Environmental - notes - notes FM & Environmental: hard and soft FM, M&E, street cleaning, ground maintenance, waste collection and recycling. Strong bid pipeline (see in appendix). Environmental new contracts and extensions (value p.a.): East Northan
Slide 39: Property
Property 39
Slide 40: Property
Property 6 months to December Year to June 2011 2010 Change 2011 £m £m % £m Revenue Property and PFI 31 66 -53 97 Homes 77 60 +28 153 Operating profit Property and PFI (incl. £6.7m disposal profit) 8.4 1.7 11.1 Homes +194 1.6 1.7 4.2 Net operating assets Property and PFI 60 43 +40 54 Homes (land ban
Slide 41: Property - notes
Property - notes Property - notes Land bank reduced from 5,400 to 4,400 units over the last 12 months. 41
Slide 42: Property - Development
Property - Development £700m (GDV) development pipeline over 6 years 40 schemes in retail, hotels, residential and light industrial Non-speculative strategy Increase cash investment to c.£80m by June 13 Targeted return on capital of 15% Twickenham station redevelopment 42
Slide 43: Property - Development - notes
Property--notes Property – Development Development - notes Market still buoyant for good quality schemes in London area and key strategic locations further afield We continue to manage risk by securing an exit route before committing Solum • 2 schemes on site; completion in 2013, £55m • Planning ach
Slide 44: Property
Property Housing £18m land bank sales agreed in H1, £38m to date Stable private homes sales £200m of affordable contracts awarded in H1 Western Writhlington School 3 major regeneration schemes, £190m PFI 2 disposals at 7% post-tax discount rate Shortlisted for 4 projects valued at £200m Portfolio va
Slide 45: Property - Housing - notes
Property – Housing -Property notes - Housing - notes Housing - Regeneration schemes Tavy Bridge, London, £40m, start on site in March Awarded the Manor & Kingsway site in Derby, £100m; 700 new homes, residential-led mixed-use development Awarded the next development phase at Egg Hill in Birmingham,
Slide 46: Conclusion
Conclusion Good first half performance Full year on track Macro environment remains challenging Growth in public sector outsourcing expected in 2014 Maturing property business Strong cash and balance sheet, great people 46
Slide 47: Appendices
Appendices Featherstone Prison 47
Slide 48: Group net cash bridge
Group net cash bridge 220 200 +38 -33 180 -15 £m 160 -5 -7 140 -12 165 120 131 100 June 2011 net operating cash capital and tighter payment redundancy costs pension deficit tax, interest and Dec 2011 net cash cash inflow (incl PFI investment related environment contributions dividends disposals) 48
Slide 49: Construction - Awards
Construction - Awards Sector Year to June 2011 6 months to Dec 2011 % awards Expectations % awards Current (£1.5bn) 2012 & 2013 (£0.7bn) expectations Education 33% 32% Power & waste 0% 18% Transportation 13% 11% Commercial 10% 10% Health 6% 7% Care home, high-rise affordable 9% 5% housing, student a
Slide 50: Construction - CCGT programme
Construction - CCGT programme Station Power Owner Anticipated MW start on site Abernedd 450 S&SE 2012 Carrington 860 ESBI 2013 Damhead ‘2’ 800 Iberdrola/Scottish Power 2013 Kings Lynn 800 Centrica 2013 Willington 2400 RWE 2013 Corringham 900 Intergen 2013 Don Valley (was Hatfield) 900 2Co Power 2014
Slide 51: Services - Maintenance current contracts
Services - Maintenance current contracts Contract Description Annual Duration Expiry excl. revenue (years) extensions Wakefield MBC Housing improvements works £11m 1 year March 13 Harlow DC Housing, grounds & street services £20m 7 + 3* January 14 Sheffield City Council Repairs & maintenance and Dec
Slide 52: Services - Division's current bid pipeline (extract)
Services - Division’s current bid pipeline (extract) Duration Potential Council Annual value £m Start Date (years) Gross £m Oxfordshire County Council 52 10 + 10* 1,000 April 12 Accord Housing Association 5 10 50 April 12 East Sussex County Council 5 9 45 April 12 Golding Homes 5 10 + 5 75 April 12
Slide 53: Property - PFI portfolio
Property - PFI portfolio Sector Project Status Capital value Kier equity/loan Equity £m stock £m % Health Ipswich Hospital Operational 27 1.3 50.0 Local Bournemouth Library Operational 14 0.7 50.0 authority Oldham Library Operational 14 1.0 50.0 Education Kent BSF PFI 1 Operational 69 7.8 78.4 Blue