Kier Group Plc · LSE:KIE
Kier — Investor Day (June 2017)
56 slides from Kier's investor day presentation, Jun 29, 2017
Slide 1: Kier Group plc Property Capital Markets Day
Kier Group plc Property Capital Markets Day 29 June 2017 1
Slide 2: Disclaimer
Disclaimer No representation or warranty, expressed 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
Slide 3: Haydn Mursell, Chief Executive
Haydn Mursell Chief Executive 3
Slide 4: Today's schedule
Today's schedule Activity Presenter Group update Haydn Mursell, CEO Nigel Turner, Executive Director, Assets and Investment Development, Property, Business Services Property Leigh Thomas, Managing Director, Property 11:00 Presentation Manny Lewis, Managing Director, Guest speaker Watford Borough Cou
Slide 5: Kier presenters & guest speaker
Kier presenters & guest speaker Haydn Mursell Nigel Turner Leigh Thomas Manny Lewis Pip Prongué Chief Executive Executive Managing Managing Managing Director Director Director Director Development, Property Watford Property, Property, Borough South Business Services Council 5
Slide 6: Trading update
Trading update Full-year underlying profit in line with expectations Core operations trading in line with expectations Net debt anticipated to be c£150m, at the lower-end of market forecasts Experiencing good organic growth and improved margins Portfolio simplification Two-year simplificat
Slide 7: Market-leading positions
Market-leading positions Strong long-term fundamentals Property & Investment Leading UK Leading Housing infrastructure player regional builder (new build and maintenance) £1.5bn+ £1.8bn+ £600m+ Represents 90% of Group turnover Invest, Build and Maintain all asset classes 7
Slide 8: The Property Division
The Property Division The integrated benefit FY14 FY17 FY20 Strengthens relationships with local authorities Average capital £70m c£120m £200m > £100m cross-divisional revenue p.a. generated for the group ROCE >15% >20% >15% Recipient of free cash flow Discretionary investment ON TRACK V
Slide 9: Nigel Turner, Executive Director
Nigel Turner Executive Director Development, Property, Business Services 9
Slide 10: Property division overview
Property division overview £m Occupier-led UK developer 250 50 Focused in areas of strong demand / low 45 supply 200 40 10 year visibility on pipeline 35 150 30 Over 50 live schemes 25 Development activity in all sectors: 100 20 logistics, regional city offices, retail and leisure, 15 mixe
Slide 11: Capital recycling
Capital recycling Capital reinvested Capital created Capital employed Construction Property Cash from Construction £20m - £40m Creating and Services capital increase Capital customer Capital invested into invested distribution each year on value Property and average Residential development Services
Slide 12: The Kier offer
The Kier offer Building Infrastructure Residential Mixed Tenure and Property and Investment Property and Investment Kier Living Invest Regional Building Infrastructure Kier Living Build Workplace Services Highways, Utilities Housing Maintenance Maintain £320m of cross-sell revenue over last 3 years
Slide 13: Breadth of capability
Breadth of capability Logistics Offices Hotels Balance sheet An enabler to is a key wider Group differentiator involvement Student Mixed-use Retail & Leisure Accommodation Capability to invest, build and maintain is unique 13
Slide 14: Strong market position
Strong market position Top 3 developer in UK commercial occupier market Regional capability High Target minimum 15% ROCE National coverage St Modwen Kier Operating profit 3 year average ROCE in excess of 20% MUSE Henry Boot £1.4bn net GDV pipeline (Morgan Sindall) Bruntwood Chancerygate Bouy
Slide 15: Supply opportunities
Supply opportunities Availability 80 Supply remains Local networks 60 Office below long term identify market Industrial trend levels opportunities 40 Retail Net balance % 20 0 -20 -40 -60 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 Source RICS - Q1 2017: UK Commercial Property Market Survey 15
Slide 16: Attractive investment class
Attractive investment class Selected Rates Property-Gilt Spread IPD Equivalent Yield 10 Year Gilt Base Rate Suggests 9% Property yields property yields vs 10 year Gilt 8% will remain spread remains 7% attractive in the significant medium term 6% 5% 4% 3% 2% 1% 0% Dec Dec Dec Dec Dec Dec Dec Dec Dec
Slide 17: Supply and demand drive investment returns
Supply and demand drive investment returns Dry Powder Index Total UK Weight of Closed-End PE real estate dry powder in European funds UK average prime yield investment money / value $70 7.5 volume up of Sterling 9% yoy to driving $60 Real Estate dry powder (US$ bn) 6.5 Average prime yield (%) £13bn
Slide 18: Corporate Responsibility focus
Corporate Responsibility focus People and Environment 1 Marketplace Governance communities Customer satisfaction BITC Index AIR 141 30 by 30 93% 91% Employee All Environment Group’s wider offer engagement Code of Conduct Incidence Rate 30% 60% Retention Supply Chain Innovation Leadership Group a t 8
Slide 19: An enabler for Kier Group offering
An enabler for Kier Group offering Invest Build Maintain Property Construction Services Strong market fundamentals Further capital investment Minimum 15% ROCE A visible pipeline 19
Slide 20: Leigh Thomas, Managing Director, Property
Leigh Thomas Managing Director, Property 20
Slide 21: The Kier Property team
The Kier Property team Leigh Thomas Managing Director Lee Howard Kevin Dixon Tom Gilman Pip Prongué Finance Director Managing Managing Managing Director, Director, North Director, South Joint Ventures 21
Slide 22: Top regional developer
Top 3 regional developer Market Top 3 in our selected markets position National coverage – local operator Consistent Strong consistent returns – 3 year average ROCE in excess of 20% financial delivery A predominantly non-speculative developer Group wide Key driver of Group wide offer offer
Slide 23: National coverage, local operator
National coverage, local operator 19 Mixed-use Property Current presence projects 10 Retail & leisure 8 Office 54 current Driving strong 14 Industrial and logistics developments local knowledge nationally 3 Student accommodation Newcastle Leeds Manchester Nottingham Solihull Tempsford London Andover
Slide 24: Last mile logistics, Hotels, Office
Last mile logistics Hotels Office Multi-let light industrial Student accommodation Mixed-use Retail & leisure 24
Slide 25: Repeat business
Repeat business Industrial / logistics Retail / leisure JVs Office 25
Slide 26: A flexible investment strategy
A flexible investment strategy Average capital employed - Student Accommodation £120m in 2017 10% Mixed-use Sector agnostic 31% Occupier-led Retail and Leisure 15% Regionally focused Industrial 17% Offices 27% Third quarter 2017 26
Slide 27: Kier Property value creation model
Kier Property value creation model Stages can occur in any order Pre-let allows early sale Acquire site Efficient use of Kier capital Obtain Purchaser funds construction Sell investment planning Risk permission £200m of Kier capital can management & value deliver £1.4bn GDV pipeline creati
Slide 28: Predominantly non-speculative approach
Predominantly non-speculative approach 58% of capital investment on Non-speculative Pre-let / land either under offer, pre-let Under offer 85% 37% or with income WAULT* on income is over 3 years with 10%+ income returns Land held as trading stock – Short term no requirement to value on a incom
Slide 29: Secure ten year pipeline
Secure ten year pipeline Net Pipeline £1.4bn GDV 60+ sites / phases of development Open market Over 20% benefits from short-term sites acquired – income – improved ROCE £710m GDV 25+ sites / phases of development £700m GDV on land with deferred cash terms - improved ROCE Long-term public sec
Slide 30: Guaranteed minimum margin
Guaranteed minimum margin Traditional model Kier model Development Agreements MARGIN Upside LAND MARGIN base ordinarily reflect priority case Downside MARGIN distribution of receipts LAND MARGIN Development costs Agreed overhead and profit to Kier DEVELOPMENT COSTS Land value DEVELOPMENT COSTS Overa
Slide 31: Capital employed
Capital employed 95% of Vision 2020 target controlled Controlled Current bid To be acquired Net pipeline £1.4bn GDV 250 Vision 2020 10 years controlled supply 200 95% secure against Capital employed £m 5% Vision 2020 investment 150 £180m of additional GDV being in tender 100 95% of pipeline
Slide 32: Pipeline visibility
Pipeline visibility £1.4bn GDV 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 Chester £ Wakefield £ Walsall £ £ Winsford £ £ Over 85+ sites Normanton £ NORTH Sutton Coldfield £ Thornton Cleveleys £ £ Durham £ £ Hull £ 40 locations UK wide Manchester Derby Leeds £ £ £ £ £ £ £ £ £ £
Slide 33: Conclusion
Conclusion Top 3 regional developer Well managed, Controlled, ten Robust risk controlled year diverse operational investment pipeline profit & ROCE strategy Key contributor to Group profits 33
Slide 34: Manny Lewis, Watford Borough Council
Manny Lewis Managing Director Watford Borough Council 34
Slide 35: Local Government context
Local Government context Current political climate and impact on Watford Central Government – v – Local Government Attitude towards private sector partnerships Commercial councils encouraging growth Public & private sectors working together 35
Slide 36: What is Watford LABV?
What is Watford LABV? 1. Kier / Watford Borough Council A 65 acre brownfield site in West Watford with a GDV of £450m 2. 12 phases of mixed-use development delivering Key Infrastructure Over 750 residential units 300,000 sq ft of commercial development 73,000 sq ft retail 3. Key Stakeholde
Slide 37: Riverwell – the Vision
Riverwell – the Vision To deliver a flexible, sustainable and market facing masterplan providing; Transformation of a brownfield site High quality homes, creating a new integrated community Employment opportunities and regeneration within West Watford Enhanced hospital patient, staff and vis
Slide 38: Watford Riverwell Master Plan
Watford Riverwell The Vision of the Watford Health Campus Master Plan 38
Slide 39: Why a Public/Private Partnership? Public sector
Why a Public/Private Partnership? Public Sector Drivers Brownfield redundant land Land value & revenue generating developments Commercial realism Inputs required: Private sector cash Private sector resources & expertise Private sector expertise and finance Realisation of land value,
Slide 40: Why a Public/Private Partnership? Private sector
Why a Public/Private Partnership? Private Sector Drivers Access to 20 years of projects/development opportunities Long term pipeline visibility – helping to develop a balanced portfolio Land as equity not paid for upfront preserve IRRs Further development and services opportunities beyond th
Slide 41: Watford Riverwell Vision
Watford Riverwell The Vision of the Watford Health Campus Vision 41
Slide 42: Added value
Added value Local Employment: 16,335 person days of local employment utilised in the delivery of the highway infrastructure project alone £31k of support: Princes Trust ‘Get into Construction’ programme - 8 young people (NEET*) Dragons Apprentice scheme (schools) YMCA support (staff volunteeri
Slide 43: Inclusive Communities
Inclusive Communities Homes that attract a wide range Sustainable transport and High quality open space of ages and build diversity connectivity attractive to all Creation of Community Trusts to maintain and develop communities 43
Slide 44: Health and Wellbeing
Health and Wellbeing Open spaces within the Streets for people community for all to enjoy Ecological benefits 44
Slide 45: Public/Private Working Together
Public/Private Working Together What are the basic ingredients? Communication and mutual trust Alignment of objectives Director/Executive/Mayoral buy-in to the partnership Decision making processes and timescales Realistic resource allocation Realistic programme expectations Joint Stak
Slide 46: Public/Private Working Together: Unintended benefits
Public/Private Working Together Unintended benefits Improved commercial nous Improved commercial confidence Property investment board JV Housing company established Trading company established Improved programme management 46
Slide 47: Watford Riverwell
Us ue WATFORD’ RIVERWELL _ L a
Slide 48: Pip Prongué, Managing Director Property, South
Pip Prongué Managing Director Property, South 48
Slide 49: Leeds, Sovereign Square
Leeds, 3 Sovereign Square Capital employed £4m ● Kier Construction value £18m ● >20% ROCE Urban regeneration ● JV formed ● Pre-let office 49
Slide 50: Glasgow, Student Accommodation
Glasgow, Student Accommodation 264 beds ● 100% Development ● Built by Kier JVoccupancy ● 100% by 2nd ● Capital employed year occupancy £6m by 2nd year Kier Construction value £10m ● Development JV 50
Slide 51: Thurrock, Logistics City & Trade City
Thurrock, Logistics City & Trade City Proprietary brand ● Capital employed £8m ● JV formed 250,000 ft2 developed ● 50% pre-let by sale ● ROCE >20% 51
Slide 52: Reading Gateway
Reading Gateway Land led ● JV formed ● Pre-lets secured Capital employed £16m ● Kier Construction value £26m ● ROCE > 15% 52
Slide 53: Reading Gateway value creation
Reading Gateway value creation Preferred Structure Planning Land Sale Mixed-use Lettings Car Trade City Bidder Showrooms £10m £0m £-10m £-20m £-30m Jul-14 Oct-14 Apr-16 Jun-16 Sep-16 Dec-16 Jun-17 FQ3 17 FQ4 18 Preferred Bidder Debt Equity Value Forecast value 53
Slide 54: Reading Gateway plans
Reading Gateway plans SOLD TO BEWLEY HOMES 54
Slide 55: Kier Property enhances Group value
Kier Property enhances Group value Enabler of the Low risk Consistent Group wide offer approach returns > 20% Kier Property on track to meet Vision 2020 targets 55
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