Costain Group Plc · LSE:COST
Costain — FY2010 Earnings Presentation
37 slides from Costain's earnings presentation, Mar 9, 2011
Slide 1: Results for the year ended 31 December 2010
Results for the year ended 31 December 2010 Meeting national needs Analyst presentation 9 March 2011
Slide 2: David Allvey, Chairman
David Allvey, Chairman
Slide 3: 2010: a milestone year
2010: a milestone year » Another excellent performance in 2010 » 12% increase in dividend » Significant progress in establishing Costain as one of the UK‟s top solutions providers » Deploying „firepower‟ to expedite strategy 2 Results for the year ended 31 December 2010
Slide 4: Acquisition strategy
Acquisition strategy » Expediting delivery of strategy by acquisitions, from bolt-on to transformational » Progressing a number of opportunities » Costain is in an offer period regarding Mouchel Group plc » Following completion of extensive initial due diligence, revised proposal reflecting our asse
Slide 5: Tony Bickerstaff, Finance Director
Tony Bickerstaff, Finance Director
Slide 6: Financial highlights
Financial highlights » Profit from operations* up 41% to £29.4m (2009: £20.8m) » Profit before tax* up 54% to £27.9m (2009: £18.1m) » Successfully completed PFI transfer into Costain Pension Scheme » High quality order book at £2.4bn (2009: £2.6bn) » C. £800m of new work secured for 2011 » Strong ne
Slide 7: Revenue & profit
Revenue & profit £m Revenue £m Profit from Operations 35 1,200 29 1,061 1,023 30 996 1,000 877 25 21 H2 800 553 490 H2 20 17 18 H1 529 20 600 447 H1 15 13 9 10 400 10 200 430 467 508 533 5 8 8 8 9 0 0 2007 2008 2009 2010 2007 2008 2009 2010 6 Results for the year ended 31 December 2010
Slide 8: Revenue by division
Revenue by division Infrastructure Environment * Energy & Process increased 8% decreased 18% increased 35% £m 500 £m 800 £m 150 400 600 137 300 395 594 100 365 101 400 490 200 50 100 200 0 0 0 2009 2010 2009 2010 2009 2010 (*Reflecting integration of Community division into Environment division) 7 R
Slide 9: Segmental income statement
Segmental income statement Year ended 31 December 2010 2009 £m £m Margin £m £m Margin Environment 17.2 3.5% 3.3 0.6% Including PFI Sales/transfers 11.2 2.0 Infrastructure 12.2 3.1% 16.9 4.6% Energy & Process 8.2 6.0% 9.3 9.2% Land Development (1.8) (2.6) Central costs (6.4) (6.1) Profit from operati
Slide 10: Net finance expense
Net finance expense 2010 2009 £m £m Net Bank Deposit/Loan interest 0.1 2.1 IAS19 Pension Scheme interest: Expected return on scheme assets 29.7 23.4 Interest cost on present value of obligations (31.3) (28.2) IAS19 Pension Scheme net interest (1.6) (4.8) Net finance expense (1.5) (2.7) 9 Results for
Slide 11: Tax
Tax » 2010 tax rate at 17.2% of PBT (2009: 19.3%) » Includes benefit of PFI Transfer as a non-taxable gain » Normalised rate expected to be 25%-27% on non JV profit 10 Results for the year ended 31 December 2010
Slide 12: Cash flow reconciliation
Cash flow reconciliation Year ended 31 December 2010 2009 £m £m Cash and cash equivalents at beginning of period 120.5 146.9 Cash flow from / (used by) operating activities 30.7 (16.5) Cash flow used by investing activities (1.6) (4.2) Dividends / financing (5.4) (5.0) Effects of foreign exchange ra
Slide 13: Balance sheet
Balance sheet Year ended 31 December 2010 2009 £m £m Non current assets (excluding pension deficit deferred tax) 76.3 74.6 Trade and other receivables 163.3 204.3 Cash 146.0 120.8 Current assets 309.3 325.1 Total assets 385.6 399.7 Current liabilities (311.4) (320.5) Total assets less current liabil
Slide 14: Pension
Pension » Net Deficit reduced to £28.9m (2009: £75.4m) » Increased asset returns and company contributions » Partially offset by increased longevity assumption and reduced discount rate » Ongoing actions to manage the obligations » Scheme closed to future accrual from 30th September 2009 » All curre
Slide 15: PFI transfer into Costain Pension Scheme
PFI transfer into Costain Pension Scheme » Costain actively trades its PFI portfolio investments to invest in future opportunities » In 2010, six PFI investments transferred into Costain Pension Scheme » Agreed valuation of £22.0 million, representing an effective discount rate below 7% » Accounting
Slide 16: Estimated Valuation (£m)
PFI equity portfolio Invested Committed Estimated Status Capital Capital Valuation Valuation of Current Portfolio Bridgend Sold 30.0 Kings Sold Sirhowy Sold Kent Schools Sold Ealing Schools Sold Shropshire Sold Estimated Valuation (£m) 25.0 Kent Elderly Sold Kingston 3 Shires - Lincolnshire Transfer
Slide 17: Banking & bonding facilities
Banking & bonding facilities » Facilities increased by 20% to £345.0 million in early 2010 » Extended to September 2013 » Circa 40% utilised for bonding » Cash of £146.0 million* » Only debt is £1.7 million overdraft » Strong position to support next phase of growth * Including £33.8 million share o
Slide 18: High quality order book
High quality order book » Major contract awards during year include: » Highways Agency managed motorway 31 December 2010: framework £2.4 billion » Highways Agency Maintenance Area 14 » Welsh Water AMP5 » 10-Year nuclear framework for Magnox South » Two Crossrail projects » Bond Street station upgrad
Slide 19: Over 70% of order book regulated or maintenance related
Over 70% of order book regulated or maintenance related Order Book as at 31 December 2010 18 Results for the year ended 31 December 2010
Slide 20: Maintained long-term visibility of earnings
Maintained long-term visibility of earnings 2010 Order Book @ 31 December 2009: 2011 £2.6bn 2012+ Preferred Bidder Order Book @ 2011 31 December 2010: £2.4bn 2012 2013+ Preferred Bidder 0 200 400 600 800 1000 1200 £m Secured circa £800 million of 2011 revenue at 31 December 2010 (December 2009: c. £
Slide 21: Increased dividend
Increased dividend » Recommended final dividend of 6.25p (2009: 5.5p*) taking full pay-out for year (if approved) to 9.25p (2009: 8.25p*), an increase of 12% » Payment on 20th May 2011 to shareholders on the register as at 15th April 2011 » Option to take shares in lieu * Restated following 1 for 10
Slide 22: Andrew Wyllie, Chief Executive
Andrew Wyllie, Chief Executive
Slide 23: Meeting national needs - priorities
Meeting national needs - priorities Energy commitment Reducing congestion Waste solutions Vital role for railways Water challenges
Slide 24: Key market dynamics & trends
Key market dynamics & trends » National need driving £ billions of essential infrastructure investment » Economic conditions expected to remain uncertain » Customers continue to drive for major cost savings » Major customers are: » Working with fewer tier-1 suppliers » Placing longer-term, larger co
Slide 25: Choosing Costain
Strategy to meet key market trends Changing Revenue Profile* 2006 2010 2014 Consulting Construction Care ‘Being Number One’ 2006 Infrastructure Highways, Rail, Airports 2008 Environment 2010 Water and Waste ‘Choosing Costain’ 2012 Energy and Process Nuclear, Power, and Hydrocarbons & Chemical 2014 1
Slide 26: The reality facing our customers today
The reality facing our customers today Rising expectations Limited funding Operating costs reduction Innovation is the solution 25 Results for the year ended 31 December 2010
Slide 27: Customers looking for innovative solutions
Customers looking for innovative solutions 26 Results for the year ended 31 December 2010
Slide 28: Customers looking for innovative solutions
Customers looking for innovative solutions 27 Results for the year ended 31 December 2010
Slide 29: Delivering innovative solutions
Delivering innovative solutions » Costain is delivering valuable solutions through innovation… » …through the application of technology…and at pace » Delivering solutions which… » Generate savings, and… » …add value » Performance resulting in 80% repeat order business…and attracting new customers A
Slide 30: Delivery being transformed at Sellafield
Delivery being transformed at Sellafield The national challenge » 200,000 tonnes of legacy waste Utilisation of module technology » £1.5bn pa maintenance Costain ability » Leading player: 400 process engineers » Integrated team The innovation » Offshore delivery » Whole-life condition management Cus
Slide 31: Risk reduced for Southern Water
Risk reduced for Southern Water The national challenge » 9,600m litres/day, 24/7 Capex comes off » Increasing regulation the risk register » Energy cost & carbon Costain ability » Market leader » Seeing through the eyes of the customer The innovation » First single framework » Asset value optimisati
Slide 32: Making Europe's largest waste project a reality
Making Europe’s largest waste project a reality The national challenge » 100m tonnes/yr in UK Finance for Europe’s » End to landfill biggest waste deal » Keeping ahead of regulatory timetable Costain ability » Innovation management » Finance The innovation » State of the art technologies » 1st PFI d
Slide 33: 40% saving on M1 scheme
40% saving on M1 scheme The national challenge » Journey time reliability Innovation in motion » Greater volume » 15% cost reduction Costain ability » Market leader » Asset management » Relentless project focus The innovation » Technology deployment » Dynamic road space utilisation Customer benefit
Slide 34: A glimpse of the future
A glimpse of the future 33 Results for the year ended 31 December 2010
Slide 35: Recognition: Extraordinary renaissance
Recognition “Extraordinary renaissance” “…the reputation of Costain has been rebuilt to the point that last summer it was named by the industry as “Contractor of the Decade”...in making the award New Civil Engineer magazine was elevating Costain above the likes of Balfour Beatty, Carillion, the McAl
Slide 36: Summary
Summary » 2010: a milestone year » Another excellent performance in 2010: 12% increase in dividend » Uncertain economic conditions expected to continue » National needs driving £ billions of essential infrastructure investment » Implementing clear strategy for development of the Group » 2011 progres
Slide 37: Results for the year ended 31 December 2010
Results for the year ended 31 December 2010 Analyst presentation 9 March 2011