Kier Group Plc · LSE:KIE
Kier — H1 FY2021 Earnings Presentation
41 slides from Kier's earnings presentation, Apr 21, 2021
Slide 1: Kier Group Results for the 6 months ended 31 December 2020
Kier Group Results for the 6 months ended 31 December 2020 21 April 2021
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: Significant financial and strategic progress
Significant financial and strategic progress Materially improved results despite COVID-19 impact • Return to profitability – margin improvement to 2.9% • Free cash flow – improved performance as profits translating to cash • Order book – increased, de-risked and higher quality Significant progress o
Slide 5: H1 Results
H1 Results Simon Kesterton, CFO
Slide 6: Income Statement – Continuing Operations
Income Statement – Continuing Operations Material improvement in profitability through delivery of strategic priorities £’m HY21 % HY20 % Δ FY20 % Revenue 1,624 1,866 (13.0)% 3,476 • Revenue reduction reflects 1 Adjusted Operating Profit 47.6 2.9 46.7 2.5 1.9% 41.4 1.2 completion of Smart Motorways
Slide 7: Revenue Performance – Continuing Operations
Revenue Performance – Continuing Operations Revenue impacted by challenging market conditions and exiting of low margin business (13.0)% • Revenue decline of 13% in HY21 • Construction – simplification of the Group • Infrastructure – Highways reflects successful completion of two Smart Motorway proj
Slide 8: Adjusted Operating Profit – Continuing Operations
Adjusted Operating Profit – Continuing Operations Margin increase underpinned by cost savings and contract exits • Adjusted operating profit of £47.6m in HY21 or 2.9% margin • Increase against prior year: • Volume / price / mix impacted by volume declines • Property reflects capital allocation • Ann
Slide 9: Adjusting Items – Continuing Operations
Adjusting Items – Continuing Operations Adjusting items significantly reduced as cost saving programme nears completion £’m HY21 HY20 FY20 Previous acquisition costs - 3.1 5.0 • Largely non-cash amortisation related to Business divestment related expenditure (0.8) 7.4 33.6 acquired intangibles for p
Slide 10: Cost Saving Programmes
Cost Saving Programmes One-off costs incurred to access £115m of annualised cost savings run rate FY21 run £’m HY21 HY20 FY20 £m rate Redundancy costs 1.4 16.8 29.5 Wages & Salary 97 Professional advisor fees 0.5 18.1 34.2 Outsourcing 7 Restructure within Construction 3.5 - 61.5 Footprint 11 Lease i
Slide 11: Free Cash Flow – Continuing Operations
Free Cash Flow – Continuing Operations Implementation of strategic imperatives driving significant cash flow improvements £’m HY21 HY20 FY20 • Significant increase in operating cash flow Adjusted EBITDA (a),(d) 71.7 73.0 161.1 conversion to 110% Working capital (a) 1.1 (84.8) (43.7) Net capex (Inclu
Slide 12: Net Debt Movement
Net Debt Movement Free cash generation offset by the payment of one-off items 12
Slide 13: Financing and Liquidity
Financing and Liquidity Significant liquidity headroom under borrowing facilities Maturities 800 Dec 2020 700 Net debt (£m) 353 £m 600 500 Average month end net debt (£m) 436 400 300 Covenants 200 • Passed testing at September 2020 and December 2020 100 0 Facility extensions 2021 2022 2023 2024 2025
Slide 14: Strategic and Operational Update
Strategic and Operational Update Andrew Davies, CEO
Slide 15: Decisive management actions
Decisive management actions Legacy issues addressed and operational turnaround largely complete Legacy Issues Turnaround Process April 2019 Business Culture Management Change September 2019 January 2020 February 2020 Early 2020 2020 Simon Kesterton Matthew Lester Office footprint New Living New seni
Slide 16: Construction
Construction Reorganised profitable business is well placed to benefit from UK Government opportunities £’m HY21 HY20 Δ Commercial & Operational Update Revenue 902.6 989.5 (8.8)% • Awarded places on frameworks worth up to £11.5bn Adjusted Operating Profit 33.6 31.7 6.0% • Lots 3 & 4 of the NHS Share
Slide 17: Infrastructure Services
Infrastructure Services A quality portfolio of businesses well placed to benefit from UK Government opportunities £’m HY21 HY20 Δ Commercial & Operational Update Revenue 672.6 783.2 (14.1)% • Awarded a contract with Transport for London (TfL) Adjusted Operating Profit 27.3 27.6 (1.1)% worth £200m Op
Slide 18: Property
Property Appropriate capital allocation £’m HY21 HY20 Δ Revenue 46.1 87.9 (47.6)% Adjusted Operating Profit 2.6 3.4 (23.5)% Operating margin 5.6% 3.9% 170 bps Capital employed £139m £145m (4.1%) Financial Performance • Revenue reflects capital constraints • Adjusted Operating Profit margin reflects
Slide 19: Strong order book
Strong order book Strong order book underpinned by contract wins and extensions • Order book has remained resilient as the Group continues to win high quality work in its key markets Secured revenue • 62% of FY22 revenue secured 4000 • De-risked contracts: 3500 • 51% of order book is under target co
Slide 20: ESG Building for a Sustainable World
ESG Building for a Sustainable World Andrew Davies, CEO
Slide 21: Sustainability progress
Sustainability progress Environmental Social Governance • 2015 – Named in the FTSE 350 Climate • 2012 – Founding partner of Supply • Operating Assurance Statements Disclosure Leadership index scoring in Chain Sustainability School the top 10% • Annual BSI audits on ISO14001, 45001 • 38% reduction in
Slide 22: Building for a sustainable world
Building for a sustainable world Kier’s Sustainability framework commitments Environmental Social Governance • Net Zero Carbon emissions across scopes • Development and launch of a new • Sustainability Leadership forums, 1, 2 & 3 by 2045 employee health and well-being strategy ensuring Board oversig
Slide 23: Investment Case
Investment Case Andrew Davies, CEO Simon Kesterton, CFO
Slide 24: Attractive market positions in growing markets
Attractive market positions in growing markets Infrastructure Services Construction Highways Utilities Infrastructure Regional Building • Market leading position (#1 strategic • Top 3 contractor in water and energy • Delivers complex high value schemes for • # 1 UK national builder highways and top
Slide 25: Infrastructure UK Government spending commitments
Infrastructure UK Government spending commitments National Infrastructure Strategy- commitment to spend £600bn over next 5 years* Infrastructure Highways Utilities Rail and infrastructure Net Zero infrastructure Road investment Strategy 2: £27bn Water England/Wales AMP7 £50bn £37-53bn forecast
Slide 26: Construction UK Government spending commitments
Construction UK Government spending commitments Construction Education Health Justice Defence Commercial 10 year School Re- £1.5bn additional 18,000 new prison places £8bn 10-year capital Increase in refurbishment building Programme funding for hospital required expenditure programme for a
Slide 27: Financial performance issues resolved
Financial performance issues resolved Business now capable of 90% free cashflow conversion Historic issue Future Kier Working Capital outflows No material working capital Unwinding bad payment practices, outflow overreliance on KEPS & poor portfolio management Net Capex Includes £97m Oracle ERP syst
Slide 28: Drivers of medium term targets
Drivers of medium term targets Route to revenues of £4 - 4.5bn and 3.5% operating profit margin Revenue Growth £bn Operating profit margin growth % Chart Title 160.0 4.0% £4-4.5bn 140.0 3.5% 120.0 3.0% 100.0 2.5% 80.0 2.0% 60.0 1.5% 40.0 1.0% 20.0 0.5% 0.0 0.0% -20.0 -0.5% -40.0 -1.0% FY2020 (pre- M
Slide 29: Summary medium term targets
Summary medium term targets £4 – 4.5bn revenues 3.5% operating margin 90% cashflow conversion* Equity raise of £190m to £240m enables: Consistent & profitable growth Sustainable net cash position with capacity to invest Sustainable dividend policy: around 3x through the cycle * Defined as operating
Slide 30: Summary & Outlook
Summary & Outlook Andrew Davies, CEO
Slide 31: Summary
Summary Significant financial and strategic progress Materially improved results despite COVID-19 impact • Return to profitability – margin improvement to 2.9% • Free cash flow – improved performance as profits translating to cash • Order book – increased, de-risked and higher quality Significant pr
Slide 32: Outlook
Outlook Sustainably delivering infrastructure which is vital to the UK 1 Well placed to benefit from UK Government spending 2 Positive trends continuing into H2 3 Confident of further progress this year in line with our expectations 4 Medium term value creation plan 32
Slide 33: Appendix
[KIER Appendix Fi KIER
Slide 34: New management team
New management team Andrew Davies Chief Executive Officer Simon Kesterton Helen Redfern Stuart Togwell Liam Cummins Mark Pengelly Barry McNicholas Joe Incutti Chief Financial Officer Group HR Director Group Commercial Group Managing Group Managing Group Managing Group Managing Director Director Dire
Slide 35: Group Strategic Framework
Group Strategic Framework Refreshed Purpose, Vision and Strategy underpin the implementation of Performance Excellence culture and values Purpose: To sustainably deliver infrastructure which is vital to the UK Vision: Be the UK leading construction and infrastructure services company Strategy: Focus
Slide 36: Strength of frameworks
Strength of frameworks Maintaining and growing central and local framework positions • Awarded places on long-term frameworks and contracts worth up to £107bn (total OJEU values) • Driving long-term revenue streams, barriers to entry and strengthened customer relationships underpinning strong order
Slide 37: Strong customer relationships
Strong customer relationships Strong customer relationships with UK Government and regulated bodies Central Government Clients • “Strategic supplier” to UK Government and regulated bodies • Commercial and engineering relationships developed over many years Wider Public Sector Clients • Regional pres
Slide 38: Group Revenue Analysis
Group Revenue Analysis Total Group 22% 5% 5% 8% 2% 16% 6% 22% 11% Total 3% 53% 11% 13% 18% 4% 1% Infrastructure Services 29% 11% 40% 20% Construction 30% 11% 40% 19% Property Highways Rail Power Water Telecoms Other Education Health Government Private Alternatives Mixed Use Office Industrial 38
Slide 39: Segmental Revenue Analysis
Segmental Revenue Analysis Infrastructure Services Total 53% 11% 13% 18% 4% 1% Highways 100% Infrastructure 11% 48% 12% 24% 5% Utilities 6% 36% 45% 13% Highways Rail Power Water Telecoms Other Construction Total 29% 11% 40% 20% Regional Build 39% 13% 29% 19% Kier Places 5% 4% 79% 12% Strategic Proje
Slide 40: Pension
Pension Revised schedule of pension payments agreed £’m 31 Dec 2020 31 Dec 2019 Δ Group Pension Schemes • As at 31 December 2020, Group’s pension schemes’ deficit was £1.4m (HY19: surplus £2.9m) Market value of assets 1,976.0 1,780.1 195.9 Present value of liabilities (1,977.4) (1,777.2) (200.2) • R
Slide 41: Strategic Actions
Strategic Actions Successful disposal of Kier Living announced on 16 April 2021 • Identified as non-core as limited operational synergies • Significant capital requirements to grow business • Agreed sale to Terra Firma announced on 16 April • Subject to shareholder approval • Completion expected by