Presentation - Kier Group

KIER GROUP PLCINTERIM RESULTS PRESENTATION24 February 2010KIERTHE INTEGRATEDCONSTRUCTION ANDPROPERTY SERVICESGROUPKier Group plc interim results for the six months ended 31 December 2009 1

INTERIM HIGHLIGHTS• Underlying pre-tax profits* up to 20.8% at £31.9m (2008: £26.4m)• Underlying EPS* up 20.5% at 61.6p (2008: 51.1p)• Construction margins at 2.5% (2008: 2.4%); Support Services marginsat 4.4% (2008: 4.0%)• Interim dividend increased by 2.8% to 18.5p (2008: 18.0p)• £130.7m of net cash at 31 December 2009 (2008: £82.2m)• Order books for Construction and Support Services at £4.55bn(2008: £3.67bn)• Construction order books secure all of targeted revenue for 2010 and73% of the target for 2011• Healthy H1 performance in Partnership Homes and Developmentsbenefiting from land transactions* Underlying pre-tax profits and EPS are stated before the amortisation of intangibleassets and exceptional items.Kier Group plc interim results for the six months ended 31 December 2009 2

HEADLINE REVENUE NUMBERSSIX MONTHS TO 31 DECEMBER2009REVENUE£mConstructionSupport ServicesPartnership HomesDevelopments(£678.3m)(£229.7m)(£74.6m)(£27.2m)2008REVENUE£mConstructionSupport ServicesPartnership HomesDevelopments(£794.2m)(£224.4m)(£67.5m)(£22.6m)6% 2%7% 3% 72%23%20%67%REVENUE 2009(£1,009.8m)REVENUE 2008(£1,108.7m)Kier Group plc interim results for the six months ended 31 December 2009 3

HEADLINE NUMBERSUNDERLYING PRE-TAX PROFITSIX MONTHS TO 31 DECEMBERYEAR TO 30 JUNE2009 2008 Change 2009£m £m % £mOperating profit: Group 31.6 25.6 +23.4 50.1Operating profit: joint ventures 0.0 0.6 - 1.0Group and share of joint ventures 31.6 26.2 +20.6 51.1Share of joint ventures:finance cost (0.6) (1.1) +45.5 (0.7)tax 0.0 (0.2) - (0.3)Profit from operations 31.0 24.9 +24.5 50.1Net finance (cost)/income (0.5) 0.4 - 0.5Profit before tax and exceptional items 30.5 25.3 +20.6 50.6Exceptional items (13.8) 4.8 - (27.3)Profit before tax after exceptional items 16.7 30.1 -44.5 23.3Taxation (including joint venture tax onexceptional items) (8.9) (8.3) - (6.4)Minority interest (0.4) (0.5) - (0.8)Profit after tax attributableto equity holders 7.4 21.3 - 16.1Kier Group plc interim results for the six months ended 31 December 2009 4

HEADLINE NUMBERSEXCEPTIONAL ITEMSSIX MONTHS TO 31 DECEMBERYEAR TO 30 JUNE2009 2008 2009£m £m £mProfit from sale of PFI investments 4.2 - -Provision for fine imposed by OFT (18.0) - -Credit from change in salary related pension benefits - 24.3 24.3Partnership Homes reorganisation/restructuring costs - (0.8) (1.8)Partnership Homes land write-downs - (12.2) (42.5)Developments write-downs - (6.5) (7.3)Total exceptional items (13.8) 4.8 (27.3)Tax on exceptional items:Group (0.4) (2.8) 6.1joint ventures - 1.5 1.5Exceptional items net of tax (14.2) 3.5 (19.7)Kier Group plc interim results for the six months ended 31 December 2009 5

HEADLINE OPERATING NUMBERS PROFITPERFORMANCE BY DIVISIONSIX MONTHS TO 31 DECEMBERYEAR TO 30 JUNE2009 2008 Change 2009£m £m % £mConstruction 16.9 19.0 -11.1 39.1Support Services 8.8 7.8 +12.8 15.7Partnership Homes 6.8 0.4 - 1.1Developments 2.4 0.6 +300.0 (1.9)Corporate costs (3.3) (1.6) -106.3 (2.9)Profit from operations* 31.6 26.2 +20.6 51.1Finance income 1.6 3.2 -50.0 5.3Finance cost (2.1) (2.8) +25.0 (4.8)Joint venture finance cost (0.6) (1.1) - (0.7)Joint venture tax 0.0 (0.2) - (0.3)Pre-tax profit 30.5 25.3 +20.6 50.6* Before exceptional items and after charging amortisation of intangible assets.Kier Group plc interim results for the six months ended 31 December 2009 6

HEADLINE NUMBERSEARNINGS PER SHARE AND DIVIDENDSIX MONTHS TO 31 DECEMBERYEAR TO 30 JUNE2009 2008 Change 2009%Dividend per share 18.5p 18.0p +2.8 55.0pWeighted average number of shares 36.7m 36.4m - 36.5mAdjusted profit before tax excluding exceptionalitems and amortisation of intangibles £31.9m £26.4m +20.8 £52.8mAdjusted earnings per share excludingexceptional items and amortisationof intangibles 61.6p 51.1p +20.5 102.5pBasic earnings per share 20.2p 58.5p -65.5 44.1pKier Group plc interim results for the six months ended 31 December 2009 7

HEADLINE BALANCE SHEET NUMBERSSUMMARYAT 31 DECEMBERAT 30 JUNE2009 2008 Change 2009£m £m £m £mIntangible assets 22 12 +10 11Property, plant and equipment 82 93 -11 87Investment in joint ventures 29 26 +3 30Inventories 422 515 -93 424Other working capital (462) (509) +47 (438)Cash 161 112 +49 123Long-term borrowings (30) (30) - (30)Provisions (62) (33) -29 (38)Pensions (net of deferred tax) (82) 4 -86 (83)Tax and deferred tax (4) (4) - 3Net assets 76 186 -110 89Kier Group plc interim results for the six months ended 31 December 2009 8

HEADLINE NUMBERSINVENTORIESAT 31 DECEMBERAT 30 JUNE2009 2008 Change 2009£m £m £m £mResidential land 222 264 -42 230Residential work in progress 128 165 -37 135Commercial land and work in progress 20 35 -15 21Other work in progress 52 51 +1 38Inventories 422 515 -93 424Land commitments 17 51 -34 27Kier Group plc interim results for the six months ended 31 December 2009 9

HEADLINE NUMBERSPENSIONSAT 31 DECEMBERAT 30 JUNEKier Group Pension Scheme:2009 2009 Change£m £m £mMarket value of assets 591.8 498.4 93.4Present value of liabilities (679.4) (594.5) (84.9)Deficit in the scheme (87.6) (96.1) 8.5Deferred tax asset 24.5 26.9 (2.4)Net pension liability (63.1) (69.2) 6.1Net effect of Sheffield scheme (18.4) (13.4) (5.0)Net pension liability (81.5) (82.6) 1.1Special cash contributions of £72.5m since 2005.Additional cash contribution of £13.2m in the six months to 31 December 2009 settled by way of landasset transfer.Kier Group plc interim results for the six months ended 31 December 2009 10

HEADLINE CASH FLOWNUMBERSSUMMARY FOR THE SIX MONTHS TO 31 DECEMBER 2009£m £mBalance at 1 July 2009 92.5Operating profit (before exceptionals) 31.6Depreciation and amortisation 10.1Share-based payments 0.8‘Special’ pension contributions (17.9)Restructuring costs (0.8)Decrease in working capital 23.4Net cash inflow from operating activities 47.2Interest received 1.5Taxation received 2.2Net capital expenditure (3.4)Acquisitions (2.6)Disposals 7.3Dividends and distributions to minority interests (14.0)Balance at 31 December 2009 130.7Kier Group plc interim results for the six months ended 31 December 2009 11

HEADLINE NUMBERSCASHAT 31 DECEMBERAT 30 JUNE2009 2009 Movement£m £m £mConstruction 398 400 -2Support Services 42 37 +5Partnership Homes (251) (265) +14Developments* (21) (71) +50Centre (37) (8) -29Net cash 131 93 +38* Developments: inflow of £50m includes sale of UK Supreme Court development, equity PFI sales anddevelopment sales.Kier Group plc interim results for the six months ended 31 December 2009 12

CONSTRUCTIONSIX MONTHS TO 31 DECEMBERYEAR TO 30 JUNE2009 2008 Change 2009£m £m % £mRevenue 678.3 794.2 -14.6 1,492.2Operating profit 16.9 19.0 -11.1 39.1Operating margin 2.5% 2.4% - 2.6%Order book (secure and probable) 2,232 1,841 +21.3 2,245Cash 397.8 410.0 -3.0 399.7REVENUE £m OPERATING PROFIT £mOPERATING MARGIN %Kier Group plc interim results for the six months ended 31 December 2009 13

CONSTRUCTIONKEY MARKETS AND AWARDS% AWARDS BY SECTORSIX MONTHS TO 31 DECEMBER2009 2008% %Public sector 75 67Private sector 25 33100 100Negotiated and two-stage bids 74 65Competitive tender 26 35100 100Kier Group plc interim results for the six months ended 31 December 2009 14

CONSTRUCTIONKIER – FRAMEWORKS – 52 IN TOTAL• National:• Public sector:• Academies ContractorsFramework (1 and 2)• Building Schools for theFuture• Primary Schools CapitalInvestment Programme• Ministry of Justice• ProCure 21• Private sector:• BAA plc CommodityBuild• Network Rail• United Utilities• Sainsbury• Morrison• British Land• ArgentKier Group plc interim results for the six months ended 31 December 2009 15

CONSTRUCTIONKIER REGIONAL LOCAL AUTHORITY FRAMEWORKSKier Group plc interim results for the six months ended 31 December 2009 16

CONSTRUCTIONKEY SECTORS• Education:• Academies Contractors Framework 1:• £310m awarded and signed• £450m at preferred bidder stage including a BSF project at£195m for Telford & Wrekin• Academies Contractors Framework 2:• 15 contractors across the UK• Two areas –Kier on both• £4bn framework - £1.1bn already allocated• Building Schools for the Future:• Kent - £200m in next wave• Cambridge - £200m frameworkKier Group plc interim results for the six months ended 31 December 2009 17

CONSTRUCTIONKEY SECTORS• Health:• ProCure 21: £70m awarded year to date• P21+:• £650m per annum for six years• One of 11 bidders – six to be selected• Custodial:• Ministry of Justice: £180m Featherstone Prison• Retail:• Sainsbury/Morrison/Tesco:• Preferred bidder on £24m Sainsbury store in Newport• Two further £10m Sainsbury stores at Trowbridge and HelstonKier Group plc interim results for the six months ended 31 December 2009 18

CONSTRUCTIONKEY SECTORS• Power:• Gas/coal fired/nuclear:• Track record of delivery in all areas• £100m contract at West Burton for EDF• Consortium established and bidding to EDF on nuclearpower programme• Infrastructure:• Crossrail:• Water:• Demolition and enabling works• Tunnelling• Civil engineering work• United Utilities - £72m wastewater project awardedKier Group plc interim results for the six months ended 31 December 2009 19

CONSTRUCTION PROSPECTSKIER THE CONTRACTOR OF CHOICETideway School, Newhaven Atrium, Kier Longley• Order books stable at £2.2bn(2008: £1.9bn)• 2010 revenue secure, 2011revenue 73% secure• Cash strong and marginsrobust• Protection againstuncertainties surroundingpublic sector expenditure:• Frameworks• Negotiated and partnered work• Long-term relationships• Continued focus on costrealignmentKier Group plc interim results for the six months ended 31 December 2009 20

CONSTRUCTIONKIER WINNING THEMES• Wide geographic spread• Integration into local communities, client base andsupply chain• Strong central co-ordination of national clients• Track record of performance delivery• Financial strength of Kier Group• Ability to manage smaller contracts• Strong safety record – higher on clients’ agendas• Kier culture creates repeat business• 74% of awards sourced through frameworks orpartnered/negotiated workKier Group plc interim results for the six months ended 31 December 2009 21

SUPPORT SERVICESSIX MONTHS TO 31 DECEMBERYEAR TO 30 JUNE2009 2008 Change 2009£m £m % £mRevenue 229.7 224.4 +2.4 437.9Operating profit* 10.1 8.9 +13.5 17.9Operating margin 4.4% 4.0% - 4.1%Order book (secure) 2,312 1,830 +26.3 2,292Cash 42.1 19.7 +113.7 36.7* Before amortisation of intangible assetsREVENUE £mOPERATING PROFIT £mOPERATING MARGIN %Kier Group plc interim results for the six months ended 31 December 2009 22

SUPPORT SERVICESACTIVITIESBuilding Maintenance (£167m)Facilities Services (£59m)Plant (£15m)Street Services (£10m)23%6% 4%• Building Maintenance:• Local authority housingmaintenance ‘Decent Homes’ andhousing association repairs andmaintenance• Facilities Services:• Building management,maintenance and M&E design,installation and maintenance• Street Services:• Waste collection and recyclingstreet scene and groundsmaintenance67%• Plant:• Plant hire to both internal andexternal clientsNOTE: revenue analysis includes intra-grouprevenue £21mKier Group plc interim results for the six months ended 31 December 2009 23

SUPPORT SERVICESBUILDING MAINTENANCE SECURED FORWARD REVENUE – AS AT 31 DECEMBER 2009Kier Group plc interim results for the six months ended 31 December 2009 24

SUPPORT SERVICESPROSPECTS• Good opportunities foroutsourcing• Top five buildingmaintenance servicesprovider• 240,000 homes across thecountry• New bids include:• Southwark• Rotherham• North Lanarkshire• Renewal of IslingtonFacilities services, Kier Support ServicesKier Group plc interim results for the six months ended 31 December 2009 25

PARTNERSHIP HOMESSIX MONTHS TO 31 DECEMBERYEAR TO 30 JUNE2009 2008 Change 2009%Revenue £74.6m £67.5m +10.5 £150.8mUnit sales 488 511 -4.5 1,141Average selling price £135,900 £132,100 +2.9 £132,200Operating profit* £6.8m £0.4m - £1.1mOperating margin** 9.1% 0.6% - 0.7%Cash investment £251.1m £280.8m -10.6 £264.9mNet operating assets £325.8m £382.0m -14.7 £339.6mLand bank 5,880 6,500 - 6,150* Before exceptional charges.** 2009: includes profits from land disposals.Kier Group plc interim results for the six months ended 31 December 2009 26

PARTNERSHIP HOMESUNIT SALES – SIX MONTHS TO 31 DECEMBER 2009Private salesSocial (owned land)Social (contracted)2009• Adding value:• Land transactions includingand strategic landcontribution to Kier GroupPension Scheme at a profit• HomeBuy Direct Equityworking well2008• Listed as a partner for theHomes and CommunitiesAgency to develop out localauthority land• PFI opportunities includingWoking PFI on which we areshortlisted• Land bank of 5,880 plotsKier Group plc interim results for the six months ended 31 December 2009 27

PARTNERSHIP HOMESOUTLOOK• Mortgage terms andavailability are beginningto ease• Reservation levels areimproving• Lower stock availabilityunderpins pricing levels• Future: growth from currentrevenue levels, mid to highsingle digit margins, lowercash investmentRichmond Lock, Kier Partnership Homes• Valuable land bank with gooddevelopment and disposalopportunitiesKier Group plc interim results for the six months ended 31 December 2009 28

DEVELOPMENTSSIX MONTHS TO 31 DECEMBERYEAR TO 30 JUNE2009 2008 Change 2009£m £m % £mRevenue 27.2 22.6 +20.4 64.7Operating profit/(loss) 2.4 0.6 +300.0 (1.9)Cash investment 20.5 49.8 - 70.6Net operating assets 41.7 59.3 -29.7 82.0Includes: Kier Property, Kier Project Investment, Kier Asset Partnership Services.Kier Group plc interim results for the six months ended 31 December 2009 29

KIER PROPERTYHIGHLIGHTS• Sale of UK Supreme Court tothe Prudential for over£30m – 5.0% post-tax yield• Solum joint venture to startEpsom Station this financialyear• Transfer of land assets atgreater than book value toKier Group Pension Scheme• Sale of development atUxbridge for a yield of 5.5%UK Supreme Court, Kier PropertyKier Group plc interim results for the six months ended 31 December 2009 30

KIER PROJECT INVESTMENTHIGHLIGHTS• Sale two PFI investments for£7.3m generating £4.2m ofprofit (discount 8%)• Financial close on PoliceInvestigation Centres isimminent - £60m constructioncontract for Kier• Shortlisted on:• Woking Social Housing• Gloucester Fire Station• Gloucester PoliceOldham Library, Kier Project InvestmentKier Group plc interim results for the six months ended 31 December 2009 31

KIER PROJECT INVESTMENTHIGHLIGHTS• Kent BSF acquisition:• PFI: investment of £6.7m nowplus a further £8.0m infuture phases• Construction: £200m ofadditional schools work• FM contract: £80m over25 years• Total PFI portfolio - £26mcommitted investment:• Valued at 8% gives £44.2m• 12 projectsLakenham Middle School, Kier Project Investment• Invested £16.2m to dateKier Group plc interim results for the six months ended 31 December 2009 32

CURRENT TRADING AND PROSPECTS• 100% of targeted construction revenue for 2010and 73% of revenue for 2011 secure and probable• Framework and repeat business underpin ourawards• Support Services - good visibility and manyoutsourcing opportunities• Partnership Homes - market starting to improve• Developments – market returning• Cash positive, healthy order books, profitablebusiness, no net debtKier Group plc interim results for the six months ended 31 December 2009 33