Smart thinking, improving lives Results for the half-year ended 30 June 2018 FINAL
2 Welcome Smart thinking, improving lives Results for the half-year ended 30 June 2018
3 Summary and outlook Another good performance Increased profjt and enhanced margin Ongoing evolution Continuing differentiation into the UK’s leading smart infrastructure solutions company Confident outlook On course to deliver full year results in line with the Board’s expectations. Results for the half-year ended 30 June 2018
4 Financial review Tony Bickerstaff Chief Financial Offjcer Smart thinking, improving lives Results for the half-year ended 30 June 2018
5 Continued good performance in H1 2018 Underlying 1 – Underlying 1 – Revenue – including share of Order book operating profit up 8% to profit before tax up 17% to joint ventures and associates of £22.8m £772.9m £21.4m £3.7bn (HY2017: £21.2m) (HY2017: £18.3m) (HY2017: £874.5m) (HY2017: £3.7bn) 1 basic Underlying Interim Preferred bidder Net cash position 2 earnings per share of dividend up 8% to position of circa 16.6p £77 .7m 5.15p £400m (HY2017: 14.4p) (HY2017: £87.5m) (HY2017: 4.75p) (HY2017: over £400m) Notes: 1. Before other items; amortisation of acquired intangible assets and employment related deferred consideration Results for the half-year ended 30 June 2018 2. Net cash balance is cash and cash equivalents less interest bearing loans and borrowings
6 Our strategy is delivering results • Changing nature of our services and contracts • One Costain philosophy • Focused and disciplined approach • Higher quality order book • Margin progression. Results for the half-year ended 30 June 2018
7 Track record of increasing profitability Group underlying 1 operating profit (£m) and margin 2 (%) £m 3.5% FY margin 3.0% 50 H1 margin 2.5% 40 27.5 2.0% 30 25.3 1.5% 20.1 17.5 20 1.0% 22.8 21.2 10 H2 0.5% 15.8 13.1 11.2 H1 0 0.0% 2014 2015 2016 2017 2018 Note: 1 Before other items; amortisation of acquired intangible assets and employment related deferred consideration 2 Margin is calculated by dividing the Group underlying operating profjt by Group revenue including JVs & associates Results for the half-year ended 30 June 2018
8 Revenue profile reflects changing nature of Costain’s business Revenue split by market (£m) Rail H1 2018 Highways Power H1 2017 Water Nuclear 0 200 400 600 800 Oil and Gas • The reduction in revenue results from a lower level of large capital Other project activity in the fjrst half of 2018, particularly in the rail sector • As at 30 June 2018, the Group had secured over £1.4bn of revenue for 2018 (30 June 2017: over £1.5bn secured for 2017 ) • The order book at 30 June 2018 includes over £0.85bn of revenue secured for 2019 (30 June 2017: over £0.9bn secured for 2018). Results for the half-year ended 30 June 2018
9 Segmental income statement HY 2018 HY 2017 FY 2017 Underlying 2 Underlying 2 Underlying 2 Operating Operating Operating Revenue 1 Profit Revenue 1 Profit Revenue 1 Profit £m £m Margin £m £m Margin £m £m Margin Infrastructure 587.0 21.5 3.7% 694.1 24.8 3.6% 1,379.7 52.2 3.8% Natural Resources 183.1 4.7 2.6% 177.7 0.2 0.1% 343.9 4.8 1.4% Alcaidesa 2.8 0.0 2.7 (0.5) 5.3 (1.4) Central costs (3.4) (3.3) (6.9) Underlying operating profjt 2 772.9 22.8 2.9% 874.5 21.2 2.4% 1,728.9 48.7 2.8% Other JVs 0.1 0.1 0.3 Net interest expense (1.5) (3.0) (5.6) Underlying profjt before tax 2 21.4 18.3 43.4 Reported profit before tax 19.5 15.7 38.9 Underlying basic earnings per share 2 16.6p 14.4p 34.8p Reported basic earnings per share 15.1p 12.2p 31.1p Notes: 1. Including share of joint ventures and associates 2. Before other items; amortisation of acquired intangible assets and employment related deferred consideration Results for the half-year ended 30 June 2018
10 Net cash position • H1 working capital outfmow refmects HY 2018 HY 2017 FY 2017 £m £m £m – reversal of £80m year-end Net cash at beginning of period 177.7 140.2 140.2 positive timing as expected Cash from operations 25.2 23.7 54.4 – timing of receipts Changes in working capital (103.2) (57.8) 17.9 – changing profjle of revenue (excluding pension contributions) Pension contributions (9.9) (7.3) (12.5) • Average month-end cash balance Acquisition consideration – (0.9) (2.4) £90.8m (H1 2017: £97.3m) Dividends (8.7) (7.0) (11.9) Share capital, interest, tax, • Average month-end balance for (3.4) (3.4) (8.0) and investing activities full year expected to be c£80m. 77.7 87.5 177.7 Net cash reconciliation: Cash and cash equivalents at end of period 158.1 167.8 248.7 Less: bank borrowings (80.4) (80.3) (71.0) Reported net cash 77.7 87.5 177.7 Results for the half-year ended 30 June 2018
11 Strong balance sheet 30 June 2018 30 June 2017 31 December 2017 Banking facilities of £m £m £m £m £m £m £191m Assets Non current assets 116.9 113.0 118.7 utilised – £80m (excluding pension related deferred tax) Trade and other receivables 346.3 347.5 289.2 Bonding facilities of Cash and cash equivalents 158.1 167.8 248.7 £320m Current assets 504.4 515.3 537.9 utilised – £99m Total assets 621.3 628.3 656.6 Maturity date of 30 June 2022 Current liabilities (389.8) (437.2) (421.3) Total assets less current liabilities 231.5 191.1 235.3 Non current liabilities (excluding net pension liability) (64.0) (31.2) (61.9) Pension asset/(liability) net of deferred tax 13.9 (35.2) (19.4) Total equity 181.4 124.7 154.0 Results for the half-year ended 30 June 2018
12 Growing returns to shareholders Total value of dividend pay-out (£m) 16 • Robust fjnancial management 14 • Effjcient allocation of capital regularly reviewed 12 • Further increase in interim dividend of 8% 10 9.8 • Policy targeting dividend cover of around 2.5 times, 8.8 8 consistent with recent levels 7.4 6 6.3 • Dividend growing in line with earnings. 4 X.X 5.4 5.0 2 4.4 3.9 3.2 0 2014 2015 2016 2017 2018 Final Interim Results for the half-year ended 30 June 2018
13 13 Evolving into the UK’s leading smart infrastructure solutions company Smart thinking, improving lives Andrew Wyllie CBE Chief Executive Results for the half-year ended 30 June 2018
14 H1 developments impacting our markets Environment secretary orders U K G o v e r n m e n t t o e s a t s t g y e a t s t r o e r water industry to raise the bar o Z t a d R o f u n d c o n n e c t e d a n d o s t a r w c e n o f % 5 0 t a s l e a t to reduce leakage a u 0 t o n 3 o m 2 0 o u s b y v e n h i c l i o e s s m i w e o a l t r u l b e s i m u l a t i o n a n d m o d e l l i n g Transport secretary invites NIC report states tech like artificial Rail regulator calls for local authorities and private intelligence and machine learning could help cut delays and sector companies to invest additional £1bn on disruptions across the UK’s in the rail network infrastructures upgrades E D I p e r f o r m £600m budget commitment a n c e n o w B i g i n v e s t o r c r s i t c e r h a i a m i p n i o N n e t w o r k R a i l to lower carbon electricity t h e b a b t t i d l e a f s s o e r m s s m o r e e n t s generation w o m e n o n b o a r d s Gender pay Business and energy secretary Government agrees landmark announces new £200 million gaps published deal to establish UK as world nuclear sector deal to secure the UK’s diverse energy mix, meaning leader in future mobility cheaper energy bills Results for the half-year ended 30 June 2018
15 Our markets are changing, and fast Ensure security Improve Increase Performance Critical requirement of supply customer service capacity effjciency Government and Tightening of legislation and raising the performance bar to improve the country’s infrastructure and people’s lives regulator action Utilisation Legislation Value-for-money Budget Critical challenges of existing and regulation criteria prioritisation networks circa £20bn per annum addressable market in Decarbonisation Reduced leakage Smart motorways energy, water and Energy mix Improved customer service Digital railway transportation Intelligent asset optimisation Smart mobility = Clients are consolidating their supply chains and demanding technology enabled smart infrastructre solutions Results for the half-year ended 30 June 2018
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