Costain Group PLC · LSE:COST
Costain — H1 2020 Earnings Presentation
33 slides from Costain's earnings presentation, Sep 14, 2020
Slide 1: Half year results
Half year results Six months ended 30 June 2020 14 September 2020 1
Slide 2: Alex Vaughan, Chief Executive Officer
Alex Vaughan Chief Executive Officer 2
Slide 3: Overview
Overview • All contracts now operational following impact of COVID-19 with necessary safety measures in place • Adjusted operating profit of £5.7 million • Results impacted by charges due to A465 contract (£45.4 million) and Peterborough & Huntingdon contract (£49.3 million) • Changes made to leader
Slide 4: A465 and P&H contract update
A465 and P&H contract update A465 Peterborough and Huntingdon ➢ Contract terminated by mutual ➢ Previous adjudication award in agreement in June 20 Costain’s favour ➢ One-off charge of £49.3m to ➢ Arbitration decision reversed income statement in H1 to the position and resulted in level for cash rec
Slide 5: Decisive actions taken to address issues
Decisive actions taken to address issues Enhanced contract risk Client/Contract selection Leadership management ➢ No longer pursuing Energy ➢ Changes to leadership ➢ Implementation of Group-wide ‘Operating EPC contracts including appointment of new Excellence model’ on all contracts - transportation
Slide 6: COVID-19: Business resilience
COVID-19: Business resilience Our Doing the right thing by our Delivering critical services priorities people, our clients, society and throughout lockdown protecting our business Operational Initial operational impact recovered, operating at 90% impact productivity with resilient working practices
Slide 7: Tony Bickerstaff, Chief Financial Officer
§ § Tony Bickerstaff Chief Financial Officer 7
Slide 8: Revenue
Revenue Total H1 2020 adjusted revenue1 down 8.4% at £548.7m (H1 2019: £599.2m) Revenue1 by sector 350 COVID-19 impact reducing month on month: 297 301 296 300 April May June -15% Reduction in c 90% 253 2020 revenue1 250 productivity compared to the same level from -12% 200 month in 2019 July 2020 -
Slide 9: COVID-19 impact and actions taken
COVID-19 impact and actions taken Impact: disruptions to productivity Actions taken Restrictions to Utilised Almost all 360 PAYE and VAT personnel on Delays to the Government Paused furloughed deferred (PAYE site due to award and start CJRS*, activities on employees paid July 2020, social of new suc
Slide 10: Segmental income statement
Segmental income statement H1 2020 H1 2019 FY 2019 Adjusted Adjusted Adjusted Adjusted operating Adjusted operating Adjusted operating revenue1 profit2 Margin revenue1 profit2 Margin revenue1 profit2 Margin £m £m £m £m £m £m Transportation 353.2 5.1 1.4% 380.2 14.6 3.8% 742.9 29.7 4.0% Natural Resou
Slide 11: Reconciliation to statutory reported figures
Reconciliation to statutory reported figures Adjusted3 P&H A465 Other items Statutory reported Other items £m £m £m £m £m £m Impairment of Alcaidesa (0.6) marina (on sale) Revenue, including share of joint ventures and 548.7 - - - 548.7 associates Impairment of legacy 0.4 - - - 0.4 (0.6) Less: share
Slide 12: H1 2020 cash bridge
H1 2020 cash bridge Average month end net cash1 £56.3m (H1 2019: £63.7m) Year end net cash1 expected: £m c £70-80m H2 2020 movements include: • timing unwind • PAYE payment • P&H & A465 cash out Average supplier payment in Note: Cash in joint operations: 38 days Opening = £84m Closing = £85m Invoice
Slide 13: Strengthened balance sheet
Strengthened balance sheet 31 December Target balance Position at 30 June 2020 30 June 2019 2019 sheet measures June 2020 £m £m £m Net assets Assets > £200m £180m Non current assets Current asset ratio 128.8 136.5 112.3 1.31 (excluding pension net surplus) > 1.3 Trade and other receivables 234.8 312
Slide 14: Strong order book
Strong order book Order book revenue by year Order book of £4.2bn at 30 June 2020 2020 2019 plus over £1bn from Smart Motorway Alliance and other frameworks 2021 2020 (£4.2bn order book at 30 June 2019) 2022 2021 Over £2bn of contracts and framework positions confirmed and secured in H1 2023 2020 20
Slide 15: Alex Vaughan, Chief Executive Officer
Alex Vaughan Chief Executive Officer 15
Slide 16: Meeting our clients' changing needs
Meeting our clients’ changing needs Digital technology solutions Consultancy and advisory Transportation Highways | Rail | Aviation Complex programme delivery 2019 2020 Evolving 2021our service 2022 mix 2023 2024 Focusing on complex Increasing the Increasing Natural Resources programme delivery, pro
Slide 17: Our core markets
Our core markets £600 billion UK Government TRANSPORTATION • Highways England RIS2 and Network Rail CP6 investment programmes continuing commitment to infrastructure • HS2 progressing the procurement of the next elements of the programme investment over 5 • Accelerative measures being developed as p
Slide 18: Complex programme delivery
Complex programme delivery Focused on strategic long term investment programmes Our strong secured foundation (H1 wins): • Anglian Water Strategic Pipeline Alliance • Highways England Smart Motorway Alliance Digital technology solutions • HS2 Main Works contract • Highways England A30 upgrade • Tham
Slide 19: Consultancy and advisory
Consultancy and advisory A ‘disruptive’ partner adding value with implementation bias Our growing position (H1 wins): Delivery partner • Cadent CMO • AWE Delivery Design services partner • Pale Blue Dot CCS • Sellafield DDP • Network Rail design services framework Design services Advisory commission
Slide 20: Digital services
Digital services Optimising performance by integrating leading digital solutions Step changing performance (H1 wins): Digitally led • Thermal imaging cameras at London Heathrow Digital • DfT Intelligent Infrastructure Control Centre delivery • Level crossing enhanced safety solution • Highways Engla
Slide 21: Creating a stronger mix of business
Creating a stronger mix of business Smart Motorway Digital railway safety Strategic Pipeline Programme Management SPaTS2 Framework Alliance solution Alliance Consultancy Client: Highways England Client: Highways England Client: Network Rail Client: Anglian Water Client: Cadent Framework value: £4.5b
Slide 22: 2020 strategic progress
2020 strategic progress Progress Leading Edge strategy and • Over £2 billion of contracts and framework accelerate deployment of higher positions secured incorporating our margin services consultancy and digital capabilities • Focus on long term investment programmes Enhance contract risk management
Slide 23: Our path to delivering the strategy
Our path to delivering the strategy Strategic milestone Run rate by December 2021 FY2024 Margin progression across both Increase margins 6-7% divisional margins divisions c. 3.5% - 4% New (Q3 2019 to date) secured Consistent profitability in complex All contracts delivering divisional contracts deli
Slide 24: Summary and outlook
Summary and outlook • All contracts now operational following impact of COVID-19 • Addressing the A465 and Peterborough & Huntingdon contracts. Actions taken to mitigate other contract risks • Strengthened balance sheet • Over £2 billion of contracts and framework positions secured in H1 • Good mome
Slide 25: Q&A
Q&A 25
Slide 26: Appendices
i COSTAIN Appendices
Slide 27: Ensuring a sustainable future
Ensuring a sustainable future Our H1 achievements: • Climate change action plan launched • Reduction of 39% in carbon impact from Create a travel greener future • Exceeded targets for spend with SMEs, voluntary, community and social enterprises • Supported our communities with PPE, food bank donatio
Slide 28: Net cash position
Net cash position H1 2020 H1 2019 FY 2019 £m £m Net cash1 at beginning of period 64.9 118.8 118.8 Cash from operations (81.6) 20.0 26.0 Changes in working capital 74.7 (66.0) (33.2) (excluding pension deficit contributions) Cash flow from operating activities (6.9) (46.0) (7.2) Pension deficit contr
Slide 29: Other items and tax
Other items and tax Other Items • Impairment from loss on sale of the Group’s remaining non-core assets in Spain of £0.6m (completed in August 2020) • Profit on sale of the Group’s non-core legacy assets in Zimbabwe of £1.0m • Impairment of the Group’s non-core minority equity in a hotel company of
Slide 30: Legacy pension obligation
Legacy pension obligation Legacy defined benefit pension scheme (closed fully to future accrual in 2009) • As at 30 June 2020, the Group’s pension scheme surplus in accordance with IAS 19, was £14.9 million (30 June 2019: £4.5 million). The position of the scheme has improved in the year due to the
Slide 31: IFRS 16 impact
IFRS 16 impact Balance sheet impact £m Income statement impact £m Fixed assets opening adjustment 29.7 Decrease in operating costs 7.0 Additions in H1 2020 12.1 Increase in depreciation (6.5) Disposals in H1 2020 (3.1) Increase in finance costs (0.3) Depreciation (6.5) Net impact on income statement
Slide 32: Notes
Notes Page 8 – Revenue 1. Including share of joint ventures and associates and excluding P&H and A465 contract adjustments. Page 10 – Segmental income statement 1. Including share of joint ventures and associates and excluding P&H and A465 contract adjustments 2. Before Peterborough & Huntingdon and
Slide 33: Cautionary forward-looking statements
Cautionary forward-looking statements This presentation contains forward-looking statements based on current expectations and assumptions. Various known and unknown risks, uncertainties and other factors may cause actual results to differ from any future results or developments expressed or implied