Costain Group Plc · LSE:COST
Costain — H1 2024 Earnings Presentation
35 slides from Costain's earnings presentation, September 2024
Slide 1: Results presentation
Results presentation For the six months ended 30 June 2024 Improving people’s lives. 1
Slide 2: Operating Review
Operating Review Alex Vaughan Chief Executive Officer Improving people’s lives. 2
Slide 3: Highlights
Highlights Continuing strong performance and confident outlook Strong first half operating performance • Revenue of £639.3m • Adjusted operating profit(1) of £16.3m up 8.7% • Reported operating profit of £13.9m up 82.9% • Period end net cash of £166.0m (H1 23: £132.1m) Clear strategy capitalising on
Slide 4: Transportation
Transportation Broadening customer mix Revenue Improved operating performance Increases in both adjusted operating profit £444m and margin. (H1 23: £487m) Road Adjusted operating profit1 Next phase of National Highways M60 scheme secured. Good visibility of forward £13.8m opportunities and growing p
Slide 5: Natural Resources
Natural Resources Strong regulated and private sector growth markets Revenue Operating profit increase £195m Continued improvement in operational performance and growing margins. (H1 23: £177m) Water Operating profit1 Secured significant wins in larger AMP8 investment cycle, with both new and existi
Slide 6: Financial Review
Financial Review Helen Willis Chief Financial Officer Improving people’s lives. 6
Slide 7: Headline financial results
Headline financial results On track to meet our adjusted operating margin targets H1 24 H1 23 Change • Adjusted Group revenue of Financial Summary £m £m % £639.3m, (3.8)% on H1 23. Revenue 639.3 664.4 (3.8)% • Adjusted Group operating profit up 8.7% to £16.3m Adjusted operating profit(1) 16.3 15.0 8
Slide 8: Revenue walk
Revenue walk Growth in Natural Resources partially offset by expected reduction in Transportation Revenue H1 24 vs H123 • Overall group revenue (3.8)% reduced by 3.8% • Natural Resources revenue (8.8)% +10.0% up 10.0% reflecting growth across Water, and Defence and Transportation Natural Nuclear Res
Slide 9: Operating profit walk
Operating profit walk Operating profit up 8.7% from increased volumes and operating margin improvement • Transportation operating margin up Operating Profit H1 24 vs H123 60bps to 3.1% (H1 23: 2.5%) due to +82.9% improved operating performance margins in newer contracts. • Natural Resources operatin
Slide 10: Adjusting items
Adjusting items Expect Transformation costs of around £5.0m in FY 24 £m H1 24 H1 23 Other Adjustm ents Transformation and restructuring costs 2.4 2.1 Impairment of development intangible asset 0.0 5.3 Total operating profit adjustments 2.4 7.4 • £2.4m of costs in respect of Transformation programme
Slide 11: Finance income/(expense)
Finance income/(expense) Net finance income benefitting from strong cash position Finance Incom e / (Expense) H1 24 H1 23 • £3.5m of interest income from bank deposits, higher than H1 23 of £m £m £1.6m on increased cash placed on deposit at higher rates Interest income from bank deposits 3.5 1.6 Int
Slide 12: Balance sheet
Balance sheet Net assets position strengthened H1 24 FY 23 Consolidated statem ent of financial position • Strong net cash position of £m £m £166.0m Assets Retirement benefit asset 55.1 53.5 Other non-current assets 89.8 90.6 • Retirement benefit asset Total non-current assets 144.9 144.1 increased
Slide 13: H1 24 cash walk
H1 24 cash walk Continued strong adjusted free cash flow • Adjusted free cash flow of £14.2m. • Strong closing net cash position of +£14.2m £166.0m. Adjusted free cash flow(2) • We expect our FY 24 year-end net cash position to be broadly similar to that at the end of H1 24. • During H1 24 we paid m
Slide 14: Cash and banking facilities
Cash and banking facilities Continued growth in cash during period Net Cash £m H1 24 FY 23 Cash 96.2 105.2 • No drawdown of RCF. Cash held at joint ventures 69.8 59.2 Loans 0.0 0.0 • Average month-end net cash balance during the 166.0 164.4 period was £173.9m, higher than FY 23 of Average month end
Slide 15: Strength of forward work position
Strength of forward work position Well positioned to deliver further progress in H2 24 Forward Work Position • Forward work position of £4.3bn an increase of 5.0 £4.3bn £400m on year end. 4.5 £4.0bn £3.9bn 4.0 3.5 • More than 3x FY 23 annual revenue. 1.5 3.0 1.8 2.5 2.5 • Post period wins of at leas
Slide 16: Predictable delivery
Predictable delivery Effective risk management underpins margin growth Work winning Contract duration Contract Independent Enhanced legal Senior Operational Financial Deep dive selection review process management standards oversight risk review review Underpins margin targets and quality of forward
Slide 17: Dividend and buyback
Dividend and buyback • Investing for growth through Transformation creating a more resilient business. Moving into systems investment with increased capex. • Dividend payments maintained. Interim dividend payment of 0.4p with 1/3 interim, 2/3 final payment ratio. • Actuarial valuation of the Costain
Slide 18: Further progress in H2
Further progress in H2 24 • Strong increase in high-quality forward work position securing revenue • Ongoing improvements to operational performance, a strong cash position and clear strategic priorities • Continuing positive net free cash flow generation • Increasing returns to shareholders • Mindf
Slide 19: Strategy & Outlook
Strategy & Outlook Alex Vaughan Chief Executive Officer Improving people’s lives. 19 1
Slide 20: Essential infrastructure meeting critical national needs
Essential infrastructure meeting critical national needs Defence and Transportation Nuclear Energy Addressing climate change, Driving economic growth targeting net zero and climate adaption Water Energy Safeguarding the environment Ensuring national security and securing future water supply Broadeni
Slide 21: Infrastructure investment cycles
Infrastructure investment cycles Strategic outcome-based five-year investment plans Committed Investment 2024 2025 2026 2027 2028 2029 2030 investment period National Highways £27bn 2020-2025 RIS2 RIS3 High Speed Rail £45-54bn 2018-2030 Phase 1 (London-West Midlands) Integrated Rail Plan £54bn 2022-
Slide 22: Secured leading positions in the Water sector
Secured leading positions in the Water sector More than doubling our market positioning Leading water expertise • Wastewater to gas • Water quality assurance • Water treatment Valued long-term relationships Broad service proposition • Advisory • Design • Asset optimisation • Capital delivery • Maint
Slide 23: Supporting our customers across their full ecosystems
Supporting our customers across their full ecosystems Rethinking the approach to infrastructure. Enhancing and maintaining existing assets Developing strategic solutions designed to to ensure safe, efficient and cost-effective optimise value and reduce risk. operations. Extending asset life or repur
Slide 24: Improving people's lives
Improving people’s lives Increasing relevance in today’s world People 0.09 Lost time injury rate (LTIR) for H1 24 All staff wellbeing impact day to ensure Times top 50 Employers for Gender Our Empower programme driving reductions Increased leave for maternity, paternity, everyone can be at their bes
Slide 25: Construction solutions through major capital delivery
Construction solutions through major capital delivery • A leading capital delivery partner for complex infrastructure grounded in experience of more than 155 years • Collaborate across our customer and supply chain to create a solution that reduces risk, enhances reputation and leaves a positive imp
Slide 26: Through consultancy
Through consultancy Delivery Partner • Leveraging our core expertise in programme delivery • A leading Delivery Partner overseeing our customers’ major AWE Cadent Devonport Heathrow infrastructure programmes Engineering & Design Services • A growing design and Project Controls/P3M expert • An energy
Slide 27: Strong H1 with further progress expected in H2 24
Strong H1 with further progress expected in H2 24 • Continued strong operational and financial performance • Strong cash and balance sheet • On course to meet margin targets of 3.5% and 4.5% during FY 24 and FY 25 respectively • High quality forward work position of £4.3bn, contracts won across all
Slide 28: Q&A
Q&A Improving people’s lives. 28 2
Slide 29: Cash flow
Cash flow Consolidated cash flow statem ent H1 24 H1 23 £m £m Cash from operations before changes in w orking capital and provisions 21.4 20.9 Changes in w orking capital (3.4) 4.9 Movement in provisions and employee benefits (2.8) (8.9) Interest and tax paid (0.9) 0.9 Net cash from operating activi
Slide 30: Adjusted to Reported Reconciliation
Adjusted to Reported Reconciliation £m H1 24 H1 23 Reported Contract Other Adjusted Reported Contract Other Adjusted Adjustm ents Adjustm ents Adjustm ents Adjustm ents Group Revenue 639.3 0.0 0.0 639.3 664.4 0.0 0.0 664.4 Cost of sales (594.7) 0.0 0.0 (594.7) (618.0) 0.0 0.0 (618.0) Gross Profit 44
Slide 31: Adjusted free Cash Flow
Adjusted free Cash Flow Adjusted free cash flow H1 24 H1 23 £m £m Cash from operations 15.2 16.9 Add back cash flow on adjusting items 3.3 4.0 Add back pension deficit contributions 1.7 5.7 Less taxation (1.9) 0.0 Adjusted cash from operating activities 18.3 26.6 Capital expenditure (4.1) (0.1) Adju
Slide 32: FY 23 IFRS 16 impact
FY 23 IFRS 16 impact Income statement impact £m Decrease in operating costs 7.0 Loss on disposal of assets (0.5) Increase in depreciation (5.6) Increase in finance costs (1.0) Net impact on income statement (0.1) Fixed Assets impact £m Fixed assets opening position 26.4 Additions 8.1 Disposals (4.2)
Slide 33: Cautionary forward-looking statements
Cautionary forward-looking statements This presentation contains certain statements that are forward-looking statements based on current expectations and reasonable assumptions. Various known and unknown risks, uncertainties and other factors may cause actual results to differ from any future result
Slide 34: Appendices
Appendices Improving people’s lives. 34 3
Slide 35: Key to investment programmes
Key to investment programmes National Highways • RIS – Road Investment Strategy • S1 & S2 – Stage 1 and Stage 2 • 2A - Phase 2A High Speed Rail • DDP – Design & Delivery Partner • M&E – Tunnel & lineside mechanical & electrical • Power – HV power system Integrated Rail Plan • IRP – Integrated Rail P