Kier Group plc Property Capital Markets Day 29 June 2017 1 - PowerPoint PPT Presentation

Kier Group plc Property Capital Markets Day 29 June 2017 1

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 the information contained in this presentation and no responsibility or liability is accepted for any such information. This presentation does not constitute an offer of securities by the Company and no investment decision or transaction in the securities of the Company should be made on the basis of the information contained in this presentation. Not all of the information in this presentation has been audited. Further, this presentation includes or implies statements or information that are, or may deemed to be, "forward-looking statements". These forward-looking statements may use forward- looking terminology, including the terms "believes", "estimates", "anticipates", "expects", "intends", "may", "will" or "should". By their nature, forward-looking statements involve risks and uncertainties and recipients are cautioned that any such forward- looking statements are not guarantees of future performance. The Company's or the Group’s actual results and performance may differ materially from the impression created by the forward-looking statements or any other information in this presentation. The Company undertakes no obligation to update or revise any information contained in this presentation, except as may be required by applicable law or regulation. Nothing in this presentation is intended to be, or intended to be construed as, a profit forecast or a guide as to the performance, financial or otherwise, of the Company or the Group whether in the current or any future financial year. This presentation and its contents are confidential and should not be distributed, published or reproduced (in whole or in part) or disclosed by recipients to any other person. 2

Haydn Mursell Chief Executive 3

Today's schedule Activity Presenter Group update Haydn Mursell, CEO Nigel Turner, Executive Director, Assets and Investment Development, Property, Business Services Property Leigh Thomas, Managing Director, Property 11:00 Presentation Manny Lewis, Managing Director, Guest speaker Watford Borough Council Property case studies Pip Prongué, Managing Director, Property - South Site visit housekeeping Pip Prongué and site team 12:45 Lunch 14:00 Site visit Reading Gateway mixed-use development Kier Property and Construction teams 15:30 Return to Reading train station / Madejski stadium 4

Kier presenters & guest speaker Haydn Mursell Nigel Turner Leigh Thomas Manny Lewis Pip Prongué Chief Executive Executive Managing Managing Managing Director Director Director Director Development, Property Watford Property, Property, Borough South Business Services Council 5

Trading update Full-year underlying profit in line with expectations  Core operations trading in line with expectations  Net debt anticipated to be c£150m, at the lower-end of market forecasts  Experiencing good organic growth and improved margins  Portfolio simplification  Two-year simplification programme nearing conclusion  Funds generated for reinvestment  Improving order books and pipelines  Order books approximately £9bn  85% secured in Construction & Services for 2018  Strong foundation to deliver growth in 2018 6

Market-leading positions Strong long-term fundamentals Property & Investment Leading UK Leading Housing infrastructure player regional builder (new build and maintenance) £1.5bn+ £1.8bn+ £600m+ Represents 90% of Group turnover Invest, Build and Maintain all asset classes 7

The Property Division  The integrated benefit FY14 FY17 FY20  Strengthens relationships with local authorities Average capital £70m c£120m £200m  > £100m cross-divisional revenue p.a. generated for the group ROCE >15% >20% >15%  Recipient of free cash flow  Discretionary investment ON TRACK  Value generation  In excess of 15%  Risk managed  Predominantly non-speculative approach 8

Nigel Turner Executive Director Development, Property, Business Services 9

Property division overview £m  Occupier-led UK developer 250 50  Focused in areas of strong demand / low 45 supply 200 40  10 year visibility on pipeline 35 150 30  Over 50 live schemes 25  Development activity in all sectors: 100 20 logistics, regional city offices, retail and leisure, 15 mixed-use and student accommodation 50 10  Target £200m capital employed by 2020 5  Average scheme value c£50m 0 0 2013 2014 2015 2016 2017 2018 2019 2020 Average capital employed (LHS) Operating profit excl. PFI disposals (RHS) 10

Capital recycling Capital reinvested Capital created Capital employed Construction Cash from Property Construction £20m - £40m and Services Creating capital increase Capital Capital invested into customer each year on invested distribution value Property and average Residential development Services Residential Capital employed Capital created Capital reinvested 11

The Kier offer Building Infrastructure Residential Mixed Tenure and Invest Property and Investment Property and Investment Kier Living Build Regional Building Infrastructure Kier Living Maintain Highways, Utilities Workplace Services Housing Maintenance £320m of cross-sell revenue over last 3 years 12

Breadth of capability Logistics Offices Hotels Balance sheet An enabler to is a key wider Group differentiator involvement Student Mixed-use Retail & Leisure Accommodation Capability to invest, build and maintain is unique 13

Strong market position Top 3 developer in UK commercial occupier market  Regional capability High Target minimum 15% ROCE  National coverage Kier St Modwen Operating profit  3 year average ROCE in excess of 20% MUSE Henry Boot  £1.4bn net GDV pipeline (Morgan Sindall) Bruntwood Chancerygate Bouyges Vinci Developments Developments Salmon Sir Robert McAlpine Barwood Low Low ROCE High 14 Development operating profit and ROCE only. Three year average.

Supply opportunities Availability 80 Supply remains Local networks 60 Office below long term identify market Industrial trend levels opportunities Retail 40 Net balance % 20 0 -20 -40 -60 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 15 Source RICS - Q1 2017: UK Commercial Property Market Survey

Attractive investment class Selected Rates Property-Gilt Spread IPD Equivalent Yield 10 Year Gilt Base Rate Suggests 9% Property yields property yields vs 10 year Gilt 8% will remain spread remains 7% attractive in the significant medium term 6% 5% 4% 3% 2% 1% 0% Dec Dec Dec Dec Dec Dec Dec Dec Dec Dec Dec Dec Dec Dec Dec Dec Dec Dec Dec Dec 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 16 Source: Colliers International, IPD, Haver Analytics and Oxford Economics

Supply and demand drive investment returns Dry Powder Index Total UK Weight of Closed-End PE real estate dry powder in European funds UK average prime yield investment money / value $70 7.5 volume up of Sterling driving 9% yoy to $60 Real Estate dry powder (US$ bn) Average prime yield (%) 6.5 average price £13bn $50 yields Source: JLL 2017 5.5 $40 $30 4.5 $20 3.5 $10 $0 2.5 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 17 Source: Savills, Prequin Real Estate

Corporate Responsibility focus People and Environment 1 Marketplace Governance communities Customer satisfaction BITC Index AIR 141 30 by 30 93% 91% Employee Group’s wider offer All Environment engagement Code of Conduct Incidence Rate 30% 60% Retention Supply Chain Innovation Leadership Group at 87% Sustainability School We operate in accordance with Group governance principals 18 Source: Kier Group plc management information and Business in the Community – May 2017

An enabler for Kier Group offering Invest Build Maintain Property Construction Services Strong market fundamentals Further capital investment Minimum 15% ROCE A visible pipeline 19

Leigh Thomas Managing Director, Property 20

The Kier Property team Leigh Thomas Managing Director Lee Howard Kevin Dixon Tom Gilman Pip Prongué Finance Director Managing Managing Managing Director, Director, North Director, South Joint Ventures 21

Top 3 regional developer  Top 3 in our selected markets Market  National coverage – local operator position  Strong consistent returns – 3 year average ROCE in excess of 20% Consistent financial  A predominantly non-speculative developer delivery  Key driver of Group wide offer Group wide  £320m over 3 years cross sold revenue to Group offer  Client satisfaction score of 90%+ Partnerships  Collaboration and partnership central to delivery - Private and Public sectors 22