Costain Group Plc · LSE:COST
Costain — FY2016 Earnings Presentation
33 slides from Costain's earnings presentation, March 2017
Slide 1: Engineering Tomorrow | Costain Group PLC
Engineering Tomorrow | Costain Group PLC Results for the year ended 31 December 2016
Slide 2: Unique strategy driving results
Unique strategy driving results Another strong performance with significant growth in both revenue and profit Major customers committed to spending £ billions on essential infrastructures Accelerating growth both organically and by targeted acquisition Our world is changing rapidly and funda
Slide 3: Financial Review
Financial Review Tony Bickerstaff Finance Director 3
Slide 4: Another strong performance
Another strong performance Revenue, including share of joint ventures and associates, increased to £1.7bn (2015: £1.3bn) Underlying1 operating profit up 24% to £41.1m (2015: £33.2m) Underlying1 profit before tax of £37.5m (2015: £29.9m) Underlying1 basic earnings per share of 31.5p (2015: 25
Slide 5: 'One Costain' philosophy
‘One Costain’ philosophy Focus on blue chip customers through Longer term, lower risk, more collaborative long-term strategic relationships Ability to adapt to customers’ rapidly Delivering required broad range changing needs, driving significant of integrated services levels of repeat order
Slide 6: Revenue growth reflects 'One Costain' philosophy
Revenue growth reflects ‘One Costain’ philosophy Revenue split by market (£m) Rail Highways 2016 Power Water Nuclear 2015 Oil and Gas 0 200 400 600 800 1000 1200 1400 1600 1800 Other ‘One Costain’ philosophy ensures resource focused on most attractive opportunities Significant continued growth in
Slide 7: Increasing profitability
Increasing profitability Group underlying operating profit (£m)1 Group underlying profit from operations (£m)1 50 50 40 40 9.1 4.0 41.3 30 41.1 9.1* 30 4.0* 33.1 33.2 7.7* 20 28.7 27.4 27.4 24.5 20 25.9 23.1 10 10 0 2012 2013 2014 2015 2016 0 2012 2013 2014 2015 2016 * PFI & investments sales and in
Slide 8: Segmental income statement reflects targeted resource allocation
Segmental income statement reflects targeted resource allocation 2016 2016 2015 2015 Underlying2 Underlying2 Revenue1 Operating Profit Revenue1 Operating Profit £m £m Margin £m £m Margin Infrastructure 1.276.1 56.6 4.4% 996.1 50.9 5.1% Natural Resources 377.3 (8.6)3 (2.3%) 317.6 (11.1) (3.5)% Alcaid
Slide 9: Greater Manchester Waste contract update
Greater Manchester Waste contract update Contract awarded in 2007 as part of GMWDA PFI scheme All 46 facilities are operational and processing waste Final Acceptance of all facilities targeted in 2017 Further works when access is available in accordance with the operational running of the pl
Slide 10: Two key elements driving cash flow
Two key elements driving cash flow 1. Net cash timing due to: MONTH END MONTH END MONTH END Thirty day payment cycle 30 DAY PAYMENT 30 DAY PAYMENT CYCLE CYCLE Year end balance benefited from positive working capital due to timing of receipts including several early receipts Average month end b
Slide 11: Strong net cash position at year end
Strong net cash position at year end 2016 2015 Year end timing impact on working capital £m £m positive benefit in 2016: c.£60m Net cash at beginning of period 108.2 148.5 reversal of timing benefit from 2015: c.£25m Cash from operations 49.6 38.2 net benefit in 2016: £35m Changes in working
Slide 12: Robust balance sheet and increased banking facilities
Robust balance sheet and increased banking facilities 31 December 2016 31 December 2015 £m £m Assets Non current assets (excluding pension deficit deferred tax) 119.3 103.7 Trade and other receivables 302.7 274.7 Cash and cash equivalents 210.2 146.7 Current assets 512.9 421.4 Total assets 632.2 525
Slide 13: Managing legacy pension obligation
Managing legacy pension obligation Increase in accounting deficit primarily due to the reduction in corporate bond yields used as the discount 31 Dec 31 Dec 2016 2015 rate for liabilities £m £m Agreed full actuarial valuation at 31 March 2016 and Fair value of scheme assets 754.0 650.7 updated r
Slide 14: 15% increase in recommended full year dividend
15% increase in recommended full year dividend Progressive dividend policy, targeting ongoing Would represent a 15% increase in the total dividend cover of around 2 x underlying earnings dividend for the year to 12.7 pence per share (2015: 11.0 pence per share) Recommended final dividend of 8.
Slide 15: Strategic Review
Strategic Review Andrew Wyllie CBE Chief Executive Costain Group PLC - Results for year ended 31 December 2016 15
Slide 16: Our purpose
Our purpose: To improve people’s lives by enhancing the UK’s energy, water and transportation infrastructures Costain Group Costain PLCGroup - Results PLCfor - Results year ended for year 31 December ended 31 December 2016 2016 16
Slide 17: Our unique strategy: 'Engineering Tomorrow'
Our unique strategy: ‘Engineering Tomorrow’ NATIONAL BLUE CHIP NEEDS CUSTOMERS Capacity Energy Service Security Water Efficiency Transportation MEETING NATIONAL NEEDS THROUGH PEOPLE AND TECHNOLOGY Costain Group Costain PLCGroup - Results PLCfor - Results year ended for year 31 December ended 31 Dece
Slide 18: Targeting areas of urgent national need
Targeting areas of urgent national need NATIONAL NEEDS Circa £20 billion annual addressable market of committed spend Capacity Increasing Government and cross-party support Energy Spend underpinned by legislation and regulation Service Performance bars being raised by regulators including Of
Slide 19: Regulators demanding more of our customers
Regulators demanding more of our customers No extra money – need to improve efficiency Increase capacity of existing networks + Improve consumer service + Ensure security of supply BUT “The network is “The level of service “The UK energy sector “Through our regulation, struggling to cope in customer
Slide 20: Customer requirements are changing radically
Customer requirements are changing radically BLUE CHIP CUSTOMERS This is driving: Fundamental change in Revolution in the use of supply chain relationship technology Moving from transactional to Every contract will have a long-term strategic significant technology relationships component Placi
Slide 21: Our world is changing rapidly and fundamentally
Our world is changing rapidly and fundamentally Every contract will have a significant technology component Customers’ radically changing requirements This is driving convergence of the supply chain to meet customer requirements Integrated service delivery Therefore we have: New partners New c
Slide 22: Why customers choose Costain
Why customers choose Costain Our ability to meet all these requirements Unique gives us competitive advantage, for customer example: focus Reputation, Skills and values and responsibility experience 90% repeat business of team 750 chartered professionals Acquisition of SSL Order book compris
Slide 23: Continuing to develop the best team
Continuing to develop the best team Investing in tomorrow’s talent Highways Magazine Excellence Award: Best Use of New Technology in the Over 950 new starters in 2016 Highways Industry 200 graduates in award-winning development programme 120 apprentices across a range of disciplines IOSH Prese
Slide 24: Delivering integrated technology solutions
Delivering integrated technology solutions We are working on major national Examples of where we are deploying programmes, including: technology: Advanced vehicle technology: A leading provider of Smart Motorways automatic recognition technology for Highways England for the management of vehicles. A
Slide 25: Acquisitions to enhance further our integrated service offering
Acquisitions to enhance further our integrated service offering Provider of innovative highways technology based solutions with potential application across the Group Acquired July 2016 for £17m Fully integrated, rebranded and performing well 550-strong professional services consultancy Ac
Slide 26: Enhanced range of services across a broadening contract portfolio
Enhanced range of services being delivered across a broadening contract portfolio London Highways England Sellafield Network Rail Crossrail EDF Welsh Government BAE Systems Underground Digital asset Decommissioning West Cost Paddington Station Hinkley C Project consultancy M4 Corridor Earned vaue Bo
Slide 27: 'Engineering Tomorrow' strategy continuing to generate a record order book
‘Engineering Tomorrow’ strategy continuing to generate a record order book Order book maintained at record 2017 (Dec ‘16) £3.9bn level 2016 (Dec ‘15) Over £1.2bn of revenues already secured for 2017 2018 (Dec ‘16) Over £2.7bn of revenues secured 2017 (Dec ‘15) for 2018 and beyond 2019+ (Dec ‘1
Slide 28: Summary
Summary Another strong performance as a consequence of our ‘Engineering Tomorrow’ strategy Customers committed to spending £ billions on essential infrastructures Our world is changing rapidly and we are well-positioned Good visibility giving confidence for the future Costain is improving pe
Slide 29: Engineering Tomorrow | Costain Group PLC
Engineering Tomorrow | Costain Group PLC Results for the year ended 31 December 2016
Slide 30: Appendix
Appendix
Slide 31: Costain financial review
Costain financial review Key historic financial information (£m) Revenue, including share of JVs & associates (£m) Year end December, £m FY12* FY13 FY14 FY15 FY16 1800 Revenue including share of joint 1600 ventures and associates 934.5 960.0 1,122.5 1,316.5 1,658.0 1400 Underlying operating profit 2
Slide 32: Other items and tax
Other items and tax Other Items Tax Amortisation of acquired intangible 2016 tax rate at 14.6% on adjusted assets – £4.6m (2015: £3.2m) profit before tax (2015: 14.6%) Includes benefits of R&D tax relief Employment related and other deferred consideration and positive timing differences – £1.6m
Slide 33: Alcaidesa
Alcaidesa From July 2015, terminated land development JV with Santander in Spain Assets split equally between the parties by mutual consent Costain has 100% ownership of leisure-based assets with significantly reduced exposure to land development Costain’s assets are now: Two golf courses and asso