Kier Group Plc · LSE:KIE
Kier — H1 FY2024 Earnings Presentation
40 slides from Kier's earnings presentation, Mar 7, 2024
Slide 1: Results for the six months ended 31 December 2023
Kier Group plc Results for the six months ended 31 December 2023 7 March 2024
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: HY24 Highlights
HY24 Highlights Revenue growth and improved profitability driving material deleveraging Revenue growth of 23% driven by Infrastructure Services and Construction Adjusted operating profit increased 13% to £64.7m (HY23: £57.2m) Adjusted operating margin at 3.4%, in-line with the medium-term ta
Slide 5: HY24 Results
HY24 Results Simon Kesterton, CFO
Slide 6: Financial Highlights
Financial Highlights Strong increase in revenue growth of 22.5% Significant volume growth across the group £’m HY24 % HY23 % Δ FY23 % Revenue 1,883 1,537 22.5% 3,405 Strong adjusted operating profit of £64.7m (3.4% margin) Adjusted Operating Profit 64.7 3.4 57.2 3.7 13.1% 131.5 3.9 Net finance c
Slide 7: Revenue Performance
Revenue Performance Significant growth in Infrastructure Services and Construction 22.5% Revenue increase of 22.5% in HY24: Infrastructure – benefiting from HS2 volumes and Buckingham rail acquisition Construction – strong order book converting to revenue Continued bidding discipline and ris
Slide 8: Adjusted Operating Profit
Adjusted Operating Profit Operating profit increase driven by volume growth and management actions Adjusted operating profit of £65m, 3.4% margin Increase against prior year: Volume / price / mix Management actions Decrease against prior year: Cost Inflation HY24 Results Presentation, 7
Slide 9: Adjusting Items
Adjusting Items Restructuring activities complete £’m HY24 HY23 FY23 Amortisation - £11m of non-cash Amortisation 11.1 9.8 19.2 accounting charges increased due to Buckingham rail acquisition Fire and cladding compliance costs 7.2 4.0 12.6 Legacy legal claims 1.1 1.5 1.5 Fire compliance costs of
Slide 10: Free Cash Flow
Free Cash Flow Positive cash conversion despite the usual seasonable working capital outflow £’m HY24 HY23 FY23 Adjusted EBITDA 92.2 90.9 196.0 Positive adjusted operating cash flow conversion of 19% despite usual seasonal Working capital (46.4) (78.7) 80.3 working capital outflow Net capex (Inclu
Slide 11: Net Cash Movement
Net Cash Movement Net cash position of £17m achieved in H1 HY24 Results Presentation, 7 March 2024 11
Slide 12: FY24 Average Month-End Net Debt
FY24 Average Month-End Net Debt Near-term pathway to sustainable average month-end net cash position £582m FY21 to FY23 significant reduction in average month- end net debt HY24 average month-end net debt materially reduced Average debt YoY £m to £136.5m £286m £232m FY24 – expected improvement
Slide 13: Financing and Liquidity
Financing and Liquidity New long-term debt facilities: RCF to March 2027 and Senior Notes maturing February 2029 Committed debt facilities at 31 December 2023 of £548m 300 Maturities Recapitalisation of the Group completed in February 250 New debt structure in place: 200 £m £250m Senior Loan
Slide 14: High Quality Order Book
High Quality Order Book Order book of £10.7bn underpinned by long-term framework positions Order book at £10.7bn (HY23: £10.1bn) 97% of FY24 revenue secured Secured revenue De-risked contracts: 6,000 5,500 c.60% of order book is under target cost or cost reimbursable 5,000 contracts 4,500
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 Cumulative Free Cash Flow £’m Deleverage - further deleveraging in order
Slide 16: Dividend
Dividend Material deleveraging allows the declaration of a 1.67p dividend Significant improvement in balance sheet net cash Continued growth in the order book and future business prospects Declared dividend represents a dividend cover of 4x as we progressively move to the medium-term target
Slide 17: Operational Update
Operational Update Andrew Davies, CEO
Slide 18: Infrastructure Services
Infrastructure Services Adjusted operating profit growth of 30% to £44m Commercial & Operational Update £’m HY24 HY23 Δ Revenue 944 816 16% Order book increase of 16% to £6.7bn Adjusted Operating Profit 44.0 33.8 30% Natural Resources, Nuclear & Networks: appointed a place on the £3bn SCAPE Util
Slide 19: Rail Assets Acquisition
Rail Assets Acquisition Bolt-on acquisition of rail assets completed in the period 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 £9.4m Value accretiv
Slide 20: Construction
Construction Substantial revenue growth driven by strong orderbook Commercial & Operational Update £’m HY24 HY23 Δ Revenue 915 709 29% Significant awards: Adjusted Operating Profit 33.2 32.8 1% Five education projects c.£182m Operating margin 3.6% 4.6% (100) bps Four healthcare projects c.£81m
Slide 21: Property
Property Fewer property transactions given difficult market conditions Commercial & Operational Update £’m HY24 HY23 Δ Revenue 22 11 105% Property market showing tentative signs of recovery and the Group is seeing attractive Adjusted Operating Profit 4.6 4.7 (2%) investment opportunities Operating
Slide 22: Sustainability
Sustainability Andrew Davies, CEO
Slide 23: 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 24: Environmental
Environmental Operating as a responsible business Key milestones achieved in the Group’s ESG strategy Science Based Targets Initiative has verified Kier's net zero carbon targets across scope 1, 2 and 3 by 2045 Achieved PAS 2080 certification across Infrastructure Services and Construction. This
Slide 25: Social
Social Committed to delivering social value Apprenticeships and Interns Apprenticeships – over 720 participants Formal training programmes – c.9% of workforce Placed 23 prison leavers and eight Released on Temporary Licence (“ROTL”) candidates in employment at Kier or with our supply chain par
Slide 26: Summary and Outlook
Summary and Outlook 1 Order book of £10.7bn providing multi-year revenue visibility 2 Group delivered strong volume and profit growth and material deleveraging 3 Second half of the financial year has started well; trading in-line with expectations Confident in sustaining the strong cash generation o
Slide 27: Q&A
Q&A
Slide 28: Appendix
Appendix
Slide 29: 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 30: 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 Infrastructure Highways Urban Projects Transportation Natural Resources, Regeneration and Nuclear and Construction Property Network
Slide 31: Transformation Journey
Transformation Journey Rationalised and recapitalised. Focused delivery of medium-term value creation plan April 2019 March 2020 May 2021 2022 to 2023 March 2024 New CEO, New senior Refinancing Order book growth and Re-entry to Andrew Davies management package agreed delivery against medium- dividen
Slide 32: 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 33: 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 34: 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 35: UK Government Spending Commitments
UK Government Spending Commitments UK National Infrastructure Strategy – commitment to spend £770bn over next 10 years Infrastructure Services Natural Resources, Transportation Net Zero infrastructure Nuclear & Networks Road investment Strategy 2: £27bn England / Wales AMP7 £51bn investment prog
Slide 36: UK Government Spending Commitments continued
UK Government Spending Commitments continued Kier’s core competencies aligned with UK National Infrastructure Strategy Construction Property Education Healthcare Custodial Defence HM & FM1 Urban Regeneration 500 DfE school £3.7bn committed until 20,000 new prison £4.3bn Defence Estate £1.5
Slide 37: 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 £138bn (total advertised values) Driving long-term revenue streams, barriers to entry and strengthened customer relationships, underpinning
Slide 38: Pension
Pension Net pension scheme asset of £96m £’m Dec 23 Jun 23 Δ As at 31 December 2023, Group’s pension Group Pension Schemes scheme asset was £96m, £8m lower than 30 at Market value of assets 1,302.7 1,247.7 55.0 June 2023 Present value of liabilities (1,206.3) (1,143.2) (63.1) Funding for six of
Slide 39: HY24 Group Revenue Analysis
HY24 Group Revenue Analysis Total 14% 19% 4% 11% 2% 1% 11% 8% 21% 8% Infrastructure 28% 37% 9% 21% 4% 3% Services 3% Construction 23% 17% 44% 16% Property 13% 40% 2% 45% Highways Rail Power Water Telecoms Other Education Health Government Private Alternatives Mixed Use Office Industrial HY24 Results
Slide 40: HY24 Segmental Revenue Analysis
HY24 Segmental Revenue Analysis Infrastructure Services Total 28% 37% 9% 21% 4% 3% Transportation 42% 57% 1% Natural Resources, 25% 59% 10% 6% Nuclear and Networks Highways Rail Power Water Telecoms Other Construction Total 23% 17% 44% 16% Regional Build 27% 20% 35% 19% Kier Places 7% 3% 86% 4% Educ