Kier Group Plc · LSE:KIE

Kier — Non-Deal Roadshow (April 2018)

45 slides from Kier's roadshow presentation, April 2018

  1. Slide 1: Kier Group

    Kier Group Bev Dew CFO Louise Turner-Smith IR April 2018 Kier Group plc – North America roadshow April 2018 1

  2. 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

  3. Slide 3: Overview

    Kier Group Overview Kier Group plc – North America roadshow April 2018 3

  4. Slide 4: Market-leading positions

    Market-leading positions Strong long-term fundamentals Infrastructure Services Buildings Developments & Housing c.£2bn c.£2bn c.£1bn Revenue Revenue Revenue Invest, build and maintain all asset classes Repeat clients and clients working with 2+ businesses > 50% of revenue Kier Group plc – North Amer

  5. Slide 5: Strategy focused on market-leading positions

    Strategy focused on market-leading positions Infrastructure Services Buildings Developments & Housing c.£2bn c.£2bn c.£1bn Revenue Revenue Revenue Major projects Private commercial & other Housing - Maintenance Property Development General Civils & other Build Utilities & Power Gen Housing - New Bui

  6. Slide 6: Progression towards Services

    Progression towards Services 1 Operating profit Property Residential Construction Services 10% 11% 15% 21% 25% 9% 11% 41% 11% 1% 47% 50% £51m £57m 1% 56% £70m £74m 54% £82m 25% 31% 28% 33% 20% HY14 HY15 HY16 HY17 HY18 1 Arising on continuing operations, stated before non-underlying items, excluding

  7. Slide 7: Vision 2020

    Our strategic priorities Vision 2020 Operate a Grow to be Top quartile safe a top 3 performance Cash positive and player and ROCE > 15% sustainable in chosen efficiency business markets Attract Sector Embrace and leading technology retain customer and talent experience innovation Kier Group plc – No

  8. Slide 8: Approach

    Approach Contracting risk management approach <£10m >70% Average Frameworks Lower risk contract models project size  Careful selection on ‘where to’ operate  Committee for capital investment appraisals  Sectors  Post contract and reporting processes  Geographies  Contract types / Procurement r

  9. Slide 9: Approach: Infrastructure Services and Buildings

    Approach Infrastructure Services and Buildings INFRASTRUCTURE SERVICES BUILDINGS Two stage Cost bidding and Lower value reimbursable/ Target cost frameworks works plus <£7-8m average; <£2m average JV to manage <12 month duration Schedule of rates JV to manage resource Long-standing client resource r

  10. Slide 10: Corporate responsibility

    Corporate responsibility Accident incidence rate (AIR) – December 2017 450 HSE Benchmark 400 350 300 250 200 150 100 97 50 0 Jun 14 Dec 14 Jun 15 Dec 15 Jun 16 Dec 16 Jun 17 Dec 17 Safety Environment  Industry-leading AIR <100  30x30 energy strategy launched and in progress  Workforce health and

  11. Slide 11: Future growth

    Future growth Growth opportunity How  Leading market positions Infrastructure Services   UK under investment – fibre rollout, CP6, HS2+, Smart Motorways  Capital works 8% pa growth; maintenance contracts extended to 2022  Leading market positions Buildings   Growing population – schools, heal

  12. Slide 12: Financial highlights

    Financial highlights Interim results for the six months ended 31 December 2017 Kier Group plc – North America roadshow April 2018 12

  13. Slide 13: Financial highlights

    Financial highlights  Good performance in line with management expectations  Operating profit1 of £60.0m up 5%  Earnings per share1 of 41.0p up 3%  Net debt of £239m in line with expectations  Order book of c.£9.5bn with potential extensions of c.£2.5bn  Interim dividend of 23p up 2% 1 Arising

  14. Slide 14: On track with Vision 2020 targets

    On track with Vision 2020 targets Key metrics 2020 target December 2017 Annual average operating profit growth >10% On target Property – ROCE >15% Ahead Residential – ROCE to 15% Improving and on track Construction – EBITA to 2.5% On track Services – EBITA to 5.0% On track Net debt: EBITDA 1:1 Achie

  15. Slide 15: Income statement

    Income statement EPS and dividend growth 3 Six months to 31 Dec 2017 Six months to 31 Dec 2016 Change £m £m % Revenue1 2,154 2,001 +8 Operating profit 2 Property 12.2 7.7 +58 Residential 8.7 8.1 +7 Construction 16.7 20.8 -20 Services 44.4 37.2 +19 Corporate (22.0) (16.5) +33 Underlying operating pro

  16. Slide 16: Property performance

    Property performance Stable capital generating continued long-term strong returns Financials ROCE & average capital employed £m ROCE Revenue1 120 29% 100 27% 25% £138m +200% 80 23% 60 Operating profit1 40 21% 19% 20 17% 0 15% £12.2m +58% 2014 2015 2016 2017 HY18 Operational highlights Equity investe

  17. Slide 17: Residential performance

    Residential performance Stable capital with ROCE increasing Financials Average capital employed £m Revenue1 300 250 £166m -2% 200 Total Operating profit1 150 Private 100 50 Mixed tenure £8.7m +7% 0 2014 2015 2016 2017 2018 Operational highlights ROCE  3 year land bank, equity invested c.£300m: 12%

  18. Slide 18: Construction performance

    Construction performance Robust order book Financials Underlying operating profit and margins £m H1 FY Revenue1 50 40 2.0% 2.0% £949m -7% 30 2.2% 2.0% Operating profit1 20 2.1% 2.2% 2.0% 1.9% 1.8% 10 £16.7m -20% 0 2014 2015 2016 2017 2018 Operational highlights Contract size distribution Number  Or

  19. Slide 19: Services performance

    Services performance Increasing revenue with stable high quality margins Financials Underlying operating profit and margins £m Revenue1 100 H1 FY 80 5.2% 5.2% 4.8% £901m +17% 4.6% 60 Operating profit2 40 4.3% 4.2% 4.7% 4.8% 4.9% 20 £44.4m +19% 0 2014 2015 2016 2017 2018 Operational highlights Sector

  20. Slide 20: Construction and Services order book

    - Construction and Services order book At 31 Dec 2017 At 30 June 2017 Change At 31 Dec 2016 £bn £bn % £bn Construction 4.7 4.2 +12 3.3 Services 4.8 4.7 +2 5.6 Total 9.5 8.9 +7 8.9 £bn 11 1.1 ( 0.9 ) 0.7 ( 0.9 ) 10 0.6 9 8 7 9.5 8.9 6 5 4 June 2017 Acquisition of McNicholas Construction awards Constr

  21. Slide 21: Group net debt

    Group net debt Strong operating cash conversion1 of 125% £m (0)- (50) (100) (58) (110) 84 (24) (150) (38) (3) (22) (200) (24) (250) (44) (239) June 2017 net Operating cash Working capital McNicholas Capex Discretionary Non-underlying Pension, interest, Dividends December 2017 debt 2 flows movement a

  22. Slide 22: Contracting cash balance

    Contracting cash balance Improving net cash Construction Services £m £m 300 200 FY17 250 150 FY18 200 100 FY17 FY18 150 50 100 - 50 -50 - -100 June Oct Dec March June June Oct Dec March June  Average net cash in Construction and Services has increased. Kier Group plc – North America roadshow April

  23. Slide 23: Capital structure summary

    Capital structure summary  The Group continues to have strong operational cash conversion  H1 average net debt £350m  Cash conversion >100% for 5 years  Assets (at cost) £500m  Investment in Property and Residential sufficient to  On track: net debt <1x EBITDA achieve Vision 2020 targets  Cap

  24. Slide 24: Pensions

    Pensions Strong performance with asset gain of £90m  Pension deficit reduced to £19m driven by asset gain  Triennial valuation concluded  Annual deficit reduction payments reduced to £21m until 2020 At 31 Dec 2017 At 30 June 2017 Change At 31 Dec 2016 £m £m £m £m Group Pension Schemes: Market val

  25. Slide 25: Guidance

    Guidance FY18 FY19-20 Operating profit Property ROCE > 15% ROCE >15% Residential ROCE improving 15% Construction Margin c. 2% 2.5% Services Margin c. 5% 5% Central costs £35-40m incl. McNicholas integration costs and parallel running costs Reducing to 2020 Finance costs Growing in line with average

  26. Slide 26: Financial summary

    Financial summary  Good performance in line with management expectations  Earnings per share1 of 41.0p up 3%  Net debt position in line with expectations  Stable investment in Property and Residential divisions  Order book of c.£9.5bn with potential extensions of c.£2.5bn  Pension deficit redu

  27. Slide 27: Operational highlights

    Operational highlights A market and client-led strategy Kier Group plc – North America roadshow April 2018 27

  28. Slide 28: Robust business model

    Robust business model Infrastructure Developments & Buildings Services Housing c£2bn c£2bn c£1bn Revenue Revenue Revenue Major  Three market verticals projects Private commercial & other Housing - Maintenance Property Development General Civils & other Build Housing - New Build Central Government E

  29. Slide 29: Infrastructure Services

    Infrastructure Services Markets Position1 Approach and performance  Highways 1 Kier £1.7bn  Long-term order book  Rail  Beyond 2020 2 Costain £1.6bn  Energy (Power generation & distribution)  Lower risk contracts  Water 3 Balfour Beatty £1.5bn  Maintenance focus  Telecoms 4 Amey £1.2bn  Es

  30. Slide 30: Infrastructure Services: Markets and Highways

    Infrastructure Services Markets Highways  Market size: £26bn  Market leader in the UK  Kier 7% share  Repairs and maintenance stable  Maintenance  Areas 3 and 9 extensions in negotiation  Stable  Capital works increasing  Capital works  Smart Motorways - 100% share of schemes  8% pa growt

  31. Slide 31: Infrastructure Services: Utilities and Others

    Infrastructure Services Utilities Others  Top 3 player in the UK  Energy  Build and maintain utility networks  Hinkley  McNicholas performing well  Rail  Strengthened positions in Telco and Energy  HS2, Crossrail  Strong near-term pipeline  CP6 c.£36bn (CP5 £30bn) on renewals, total market

  32. Slide 32: Buildings

    Buildings Markets Approach and performance  Building  70% framework awards  Education  Long-standing and repeat clients  Health  Similar across Building and FM  Commercial  National coverage  Facilities Management (FM)  Modest value contracts  c.30% from Building clients  Average project

  33. Slide 33: Buildings: Markets and Position

    Buildings Markets Position1 Building  Value of market £62bn 1 Kier £1.9bn  Focus on frameworks  Kier 3% share  Leading Education and Health provider 2 Balfour Beatty £1.5bn  Disciplined approach  ESFA framework & P22 framework  Contract selection 3 Galliford Try £1.0bn  Fewer than 5 projects

  34. Slide 34: Developments & Housing

    Developments & Housing Markets Property developments  Property developments  Housing  Top 3 trader developer  Mixed-use  New build  Quick turnover of schemes  Offices  Maintenance  Student accommodation  Capital efficient joint ventures  Retail and leisure  Non-speculative approach  Ind

  35. Slide 35: Developments & Housing: Housing

    Developments & Housing Housing – new build Housing Data1  Achieved Vision 2020 capital levels Government target Nov 17  On track for 15% ROCE by 2020 300,000  Severe affordable housing shortage in UK 250,000 200,000  Average private house price c.£240k 150,000  Help to Buy accounts for 50% of s

  36. Slide 36: Summary and outlook

    Summary and outlook On course for Vision 2020 targets  Good first half performance  Leading market positions in long-term growth markets focused on UK priorities  Proven track record of financial and operational delivery  Disciplined bid and risk management  Strengthening order books/pipelines

  37. Slide 37: Appendices

    Appendices Kier Group plc – North America roadshow April 2018 37

  38. Slide 38: Supply chain finance illustrated

    Supply chain finance illustrated Draw down Normal Kier Invoice possible payment pays date bank pays terms bank supplier Day 0 21 60 75 90 Supply chain benefit at <2% interest cost Potential working capital effect £150 – 170m average utilisation* * Included in trade payables Kier Group plc – North Am

  39. Slide 39: Contracting – working capital flows

    Contracting – working capital flows Improving working capital Working capital flows WIP Debtors Accruals Creditors WC as a % revenue Working capital days Working capital as % of revenue 100 12% 10% 80 8% 60 6% 40 4% 20 2% 0 0% -2% -20 -4% -40 -6% -60 -8% -80 -10% FY14 HY15 FY15 HY16 FY16 HY17 FY17 H

  40. Slide 40: Joint venture financials - Capital efficient developments

    Joint venture financials - Capital efficient developments OWNED - £50m GDV1 JOINT VENTURE - £50m GDV1 £30m SPV non-recourse debt £40m Kier equity £10m equity £9m Kier / £1m JV partner £3m finance costs £10m Kier operating profit £7m operating profit £6.3m Kier / £0.7m JV partner Kier Cash flow Year

  41. Slide 41: Free cashflow

    Free cashflow 6 months to 31 Dec 2017 6 months to 31 Dec 2016 £m £m Underlying operating profit 60.0 57.3 Depreciation & amortisation 14.5 13.3 Underlying EBITDA 74.5 70.6 JV dividends less share of profits 29.2 (5.0) Working capital movement (56.3) (15.4) Capex (37.8) (30.4) Net interest (10.2) (9.

  42. Slide 42: Kier Strategic Highways - current contracts

    Kier Strategic Highways - current contracts Local authority planned and reactive maintenance contracts Area Duration  Surrey Area 3 2018 – in negotiation for 3 year extension  Suffolk Area 6 2019  Lincolnshire Area 7 (design services) 2021  Northamptonshire Area 8 2019  Torbay Area 9 2019 – in

  43. Slide 43: Our risk management gateway process

    Our risk management gateway process Controls and intervention points EXTERNAL PRE-QUAL STAGE 1 STAGE 2 DELIVERY Screened and risk based Emphasis on lower risk Mandatory focus Continual focus on project bidding process contracts on cash flow “End Life” performance STOP GO STOP GO STOP GO Project Pipe

  44. Slide 44: Strong UK regional presence

    Strong UK regional presence Kier Group plc – North America roadshow April 2018 44

  45. Slide 45: Kier Group plc – North America roadshow April 2018

    Kier Group plc – North America roadshow April 2018 45

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