Capital Markets Update 27 th February 2013 30 April 2013 Who you - - PowerPoint PPT Presentation

Full-year results Twelve months ended 31st December 2012

Adrian Ringrose, Chief Executive Tim Haywood, Group Finance Director 27th February 2013

Capital Markets Update

30 April 2013

Who you will be meeting

Phil Clark

Business Development Director

George Franks

Managing Director – Interserve International

Adrian Ringrose

Chief Executive

Tim Haywood

Group Finance Director

Lord Adonis Ian Hayes

Operations Director

T

• day’s itinerary
• 2010-2015 development

.Adrian Ringrose

• SustainAbilities

Tim Haywood

• The healthcare market

Phil Clark

• UK outsourcing and infrastructure

Lord Adonis

• Support Services and Construction International

George Franks

• Equipment Services

Ian Hayes

• Lunch (approximately 1pm)

2010 Medium-term growth rate 2012 Medium-term growth rate 2010 Sustainable medium-term margin trends 2012 Sustainable medium-term margin trends Actual Outlook Actual Outlook Support Services UK 4% 4% 2.5%

• c. 5%

4.0%

• c. 5%

Support Services International

• 4%-8%
• 12.8%
• c. 13%

Construction UK 0%

• 2%

3.0%

• c. 2%

2.0% 1.5 - 2% Construction International 14% 11% 10.7%

• c. 7%

6.5%

• c. 6%

Equipment Services 10%-14% 11% 10.3% c.15% 9.6% c.15%

Outlook: 2010 versus 2012

Support Services UK: Development since 2010

Strategic developments:

• Client/account growth
• Organic expansion into criminal justice

rehabilitation

• Inorganic expansion into welfare and

health

• Support function reengineering

2010 2011 2012 Revenue(£bn) 1.0 1.0 1.1 Contribution to operating profit (£m) 25.1 36.4 44.3 Operating margin 2.4% 3.6% 4.0% Future workload (£bn) 3.9 4.2 5.2

Revenue/contract development 2013-2015 outlook

• Demand growth
• Margin Progression
• Further diversification

Support Services International: Development since 2010

Strategic developments:

• Organic diversification into FM in UAE,

Qatar and Oman

• Inorganic expansion of training business

(OTI)

• Organic diversification of oil and gas

services

• Inorganic geographic expansion in oil and

gas (TOCO)

2010 2011 2012 Revenue (£m) 23.7 25.9 31.3 Contribution to operating profit (£m) 3.4 3.6 3.7 Operating margin 14.8% 15.1% 12.8% Future Workload (£m) 17.0 63.1 51.0

Revenue/contract development 2013 – 2015 Outlook

• Organic and inorganic expansion

in oil/gas

• Growth in FM services

Revenue/contract development

Construction UK: Development since 2010

Strategic developments:

• Continued focus on regional businesses and

national frameworks

• Cost base focus
• Product and services development

(BIM/Passivhaus/PodSolve)

• Sector diversification (EfW/selective

development)

2010 2011 2012 Revenue(£bn) 0.8 0.7 0.7 Contribution to operating profit(£m) 24.5 18.0 14.6 Operating margin 3.2% 2.5% 2.0% Future Workload (£bn) 0.9 0.9 0.9

2013-2015 Outlook

• Stable in the near-term
• Demand-led recovery from 2014

Revenue/contract development

Construction International: Development since 2010

Strategic developments:

• Cost base focus
• Strengthened leadership
• Organic and inorganic expansion of

interiors

• Selective contract up-scaling via JV
• Product development (Bionest)

2010 2011 2012 Revenue (£bn) 0.2 0.2 0.2 Contribution to operating profit (£m) 22.8 16.6 14.3 Operating margin 10.3% 8.4% 6.5% Future workload (£bn) 0.2 0.2 0.2

2013-2015 Outlook

• Near-term remains mixed but

early signs of improvement

• Stronger growth in the medium-

term across the Middle East

Equipment Services: Development since 2010

Strategic developments:

• Global fleet management – Capex restraint

and increased transfers

• Flexible operating model
• Back-office off-shoring to high skill/low

cost geographies

• Geographical expansion
• Product Development

2010 2011 2012 Revenue (£m) 139.9 154.3 167.5 Contribution to operating profit (£m) 14.4 13.6 16.0 Operating margin 10.3% 8.8% 9.6%

Cruise ship terminal, Hong Kong

2013-2015 outlook

• Development through flexible

global presence

• Individual markets mixed but

continued growth in the portfolio

Financial position

• Strong cash conversion (117%, 3 year rolling

average)

• Disposed of the majority of our PFI portfolio for

£179.5m realising significant latent value

• Materially reduced actuarial pension deficit from

£224m to £95m

• Substantial available committed debt capacity

(£246m)

Group-wide developments

• Developing the Interserve brand
• Driving greater sustainability
• Account management
• Talent management
• Learning and development
• Health and Safety

Summary

We are delivering our aspiration by:

• Client & account development
• Good execution of contracts
• Accessing further growth markets
• Strong balance sheet
• Selective, accretive acquisitions (welfare,
• il/gas, healthcare at home services)
• Dividend progression

Tim Haywood –

 Sustainable performance commercial value  Understanding and managing risk - technical, reputational  Stewardship, resource scarcity , supply chain complexity , human capital management  Improved reporting, better articulation of business strategy and impacts of material factors

Strategic approach, fully integrated into the business Key differentiator in the way we do business going forward Ambitious commitment, take a leadership position Launched 21st March

 A clear vision: to redefine the future for people and places  Do the right thing, manage risks, realise opportunities  Measure our impact on society and the environment  Embed positive behaviour, achieve culture change  Collaborative approach, sharing ideas, making suggestions and breaking down of silos within the business

What does

mean?

Natural resources, drinking water, breathable air, energy, raw materials Social connections, benefits, roles, networks, employment, trust, belonging, wellbeing, health Skills, knowhow, experience, apprenticeships, graduate training schemes, employees, education Financial management, growth, profit, reporting

Measure our impact beyond traditional financial metrics:

4 Capitals

5 Outcomes > 15 Goals > 48 Targets

Phil Clark – Healthcare market

AGENDA

Introduction

• The Healthcare Market
• Interserve Strategy
• Non-Clinical Services – Leicester

Project

• Clinical Services – Advantage

Healthcare

The Healthcare Market

Legislation

Market Growth in healthcare

Regulation Compliance

Enhanced Competition and Market Growth c.5-10% p.a

Health & Social Care Act 2012

• CCG’s
• CSG’s
• Enhanced

Clinical Powers

Monitor

• Any Qualified

Provider

• NHS Provider

Licences

• NHS

Foundation Trusts

CQC

• Inspect and

regulate

• National

Standards

• Chief

Inspectors

£50bn

Market Segmentation- our areas of focus

Non Clinical Clinical

Secondary Community Primary

£15bn £15bn £5bn

FM Market

£25bn

• Established growing FM Market in non-clinical services
• Growing community market in clinical services

Available Market to Interserve 2010 - 2015

Non-Clinical

£4.5bn

Clinical

£14bn £5bn £15bn

2013

£5.5bn £17bn

2015 2010

Market Share and Competitor Dynamics

In-house

£2.3bn

• utsourced

Clinical Community Services Non-Clinical Services

c.£2bn

short term

• utsourced

c.£2bn

in-house

c.£1b

long term

• utsourced

£15bn £5bn

• Clinical Community market growing opportunity for outsourcing
• Non-clinical market developing larger integrated packages

Interserve Strategy

Interserve Strategy

Service Capability Relationship Synergies Health Market Understanding Infrastructure

Non Clinical Services £5bn Community Services £15bn

£20bn

Non-Clinical Services – Leicester Project

Primary & Community Secondary Community The Client

CCG ACUTE MENTAL AND COMMUNITY

Leicester Health Collaborative

The Opportunity The Solution

FM Outsourcing

• Hard Services
• Cleaning
• Catering
• Security
• Front of House

Property

• Estates

Management

• Acquisitions
• Disposals
• Lease

management

Transformation

• Community Care
• Strategy
• Logistics
• Construction
• Consultation

Leicester Pathfinder Project

Estate Reduction

500,000m2 380,500m2

Usage and Occupancy

60% clinical care 36% for direct clinical care

Standards Costs

+ 10%

Our Commitment to Leicester

• 20%

Benchmark standards

2013 2020 2013 2020 2013 2020 2013 2020

• 20%

+ 10%

Property Non Clinical Transformation Interserve Saving Total Spend

Leicester – Value Proposition

20% of Total Budget 20% of Property

• Man. Spend

£1bn £250m £130m

Aligned Commercials Clinical Understanding Guaranteed Savings Local Company Integrated Service Capability Track records

• f delivery

Complement not Compete

Key features to our approach

Partner Approach

Leicester Growth Opportunities

Other local NHS customers Regional Government customers New NHS Frameworks across the UK

NHS Property Services Nottingham NHS Trust Leicester City Council Leicester County Council Southampton Leeds

Clinical Services -

Clinical Market

Community £15bn Secondary Primary

Major Competitors

• BUPA Home Health - £195m
• A24 Group - £56m
• Allied Healthcare Group - £166m
• Serco - £60m

Market Potential...

£- £0.5 £1.0 £1.5 £2.0 £2.5 Paediatrics Immunology Dementia Renal Haematology

Billions

Currently Outsourced In-House

Paediatric Sector – Market potential

Advantage current capability

• Over 30% revenue through paediatric cases
• Prime provider in London and South East

Barriers To Entry

• Recruitment
• Highly regulated, high profile and sensitive

market

Market Fragmentation

• 90% undertaken by NHS
• Over 200 registered private suppliers
• No major player

Growth Sector

• 35% savings achievable
• Larger , longer packages
• higher margins

Advantage – Customers and Services

9% 18% 73%

Revenue By Funding Type

Health Insurance Private Client NHS Complex Palliative Personal

Revenue By Service Type

55% 10% 35%

T

• p 50 Packages by type of Care

2 4 6 8 10 12 14 16 Eldery Frail Dementia Dysphasia Autism Epilepsy Cerebal Palsy Tracheoctomy Sclerosis Dystrophy Cancer Neurological Acquired Brian Injury Spinal Cord

Complex Care Learning and Disability Personal Care

Advantage – SWOT

Specialism Current Capability Competitor Strength Growth Potential Ease of Entry Rank Paediatrics PPPP O PPPP PPP 1 Immunology PPPP O PPPP PP 2 Dementia PPPP OOO PPP PPPP 3 Renal PPP OO PPPP PPPP 4 Haematology PPP OO PPP PPP 5 Orthopaedics PP O PPP PPPP 6 Oncology PPP O PPP PP 7 Mental Health PPP OOO PPP PPP 8 Domiciliary Care PPPP OOO PP PP 9

Geographical reach

Head office Branches

Leicester – Market opportunity for Advantage

£75m £35m £60m £5m £75m Paediatric Care Immunology Geriatric Renal Haematology

Integrated Care Objectives

• Above average infant

mortality rates

• Below average life

expectancy

• More community care
• Decreasing acute stay

times Leicester Annual Community Budget

Summary

• Healthcare outsourcing is a growing market

(5-10%) and has significant potential for more

• Community and estate management are

fastest developing

• Advantage Healthcare well positioned to

take advantage of the Community market

• Leicester is a unique arrangement

applicable to other estates in the UK

Questions

Lord Adonis – UK Outsourcing and Infrastructure

Questions

Coffee Break

Construction and Support Services International: George Franks

Geographical Reach

Macro Economic Issues in the Middle East

• Oil and Gas price
• Population growth (2-6% v’s UK 0.5%)
• Rapid urbanisation
• Arab Spring: Has resulted in an opening of the purse

strings.

• Spend on housing, infrastructure, education & social

care.

• Positioned well as economic might shifts towards the

east

Net profit by activity

2010 Actual Construction Support Services Construction Support Services 2012 Actual Construction Support Services 2015

Net profit by geography

Oman Qatar 2010 Actual 2012 Actual Oman UAE Qatar 2015 Oman UAE Qatar K SA

Middle East: West comparison

• More traditional procurement routes, but developing
• Power centralised and autocratic. Benign dictatorships.
• Company ownership and investment rules
• Low tax
• Labour drawn from most advantageous sources on cost, skill

and availability. Attraction cost rather than equal pay. Visa control.

• State sponsored private enterprise
• Cheap fuel, electricity and water costs
• Stratified
• Execution of vision unburdened by red tape

Middle East businesses

Construction International

• 1981 Khansaheb Civil Engineering

LLC (UAE)

• 1981 Douglas OHI LLC (Oman)
• 1995 Khansaheb Hussain LLC (UAE)
• 1996 Gulf Contracting Co. WLL

(Qatar)

• 2009 DOHI equity increased to 49%

Support Services International

• 2000 How United Services

WLL (Qatar)

• 2007 Madina Group WLL

(Qatar)

• 2010 Occupational Training

Institute LLC (Oman)

• 2010 Khansaheb Group LLC

(UAE)

• 2013 TOCO LLC (Oman)

Construction International

• Market still tight in all 3 countries of operation
• Strategy to hold our nerve, avoid diving in and taking low

margin/high risk work, maintain capabilities and wait for the upturn.

• UAE looks set to recover first
• Qatar will recover soon but too many new entrants to the market are

depressing prices.

• Oman remains competitive.
• We have taken time over the last three years to
• Strengthen and re-organise our businesses
• Improve efficiency
• Replace overtime with productivity schemes
• Open up new procurement routes and develop our internal

supply chain

• Grow our specialist divisions and target growth opportunities

Strategy Outcomes

Buildings (Jumeirah Beach Residences) Civils (Al Furjan) Support Services Specialist Divisions (Ritz Carlton Hotel)

Strategy Outcomes

Construction (Sohar Court) Construction (Al Sukri) Civils (Sur IPP) Specialist (HSBC Fit-Out)

Strategy Outcomes

Construction (Barzan) Spacemaker (Barzan) Bionest Specialist Div. (Commercial Law Court)

Support Services International: 2012

• Two principal areas of operation, engineering and

facilities services

• Expanded our reach – acquisition of TOCO
• Grown our offering – Shutdowns and increased customer

base

• Senior team seconded in to International from Interserve

UK to grow the facilities services business as a strategic priority.

• Ability to support with resource and infrastructure from

existing businesses

• Looking for suitable acquisitions/ investments in UAE,

Oman and KSA

Engineering - Oil Demand?

Support Services International: 2015

Substantial investment: T

• tal awarded value of oil and gas

projects between 2010-2012 was $75bn. T

• tal expected project award value 2013-2015 is $241bn.

Middle East oil and gas fields

Oil and Gas market value chain

Seismic / Reservoir Drilling Decommis- sioning Oil Companies Main Contractors System Integrators Product Suppliers Service Companies R & D, Services, Institutions Legend: Field Development Operations

Supply Chain Value Chain

Reservois Seismic Models and Equipment Drilling Systems and Equipment Subsea Project Management and Engineering Fabrication and Package Suppliers E, I & T Mechanical Equipment Operations Maintenance and Modifications Logistics and Trasportation Well Services

Environmental Protection, Emission and Carbon Management Decommis- sioning

R & D, Consulting, Training, Legal, Finance, and Institution

The Oman Construction Company (TOCO) acquisition

Acquired for $40m: Interserve majority ownership, local partner with minority interest. Services: Onshore, engineering, procurement and Construction (EPC), Shutdowns and maintenance. (e.g. Rig movement, fabrication, pipeline maintenance) Customers: Oil companies in Oman e.g. OXY , Shell and Oman LNG Competitors: Galafar , STS, Arabian Engineering, Margins in-line with medium margin trends £25bn to be invested in Oman in the oil and gas markets in coming 3 years

65

TOCO Operations in Oman

Birba

New Oilfield Construction Services Contract

On 02nd April 2013 The Oman Construction

• Co. LLC (TOCO) was awarded an Oilfield

Construction Services Contract to provide Oilfield Construction Services in the North of Oman by one of the major Oil and Gas Companies based in Oman The Scope Of Work includes:

• Pipelines / Flow lines / Plant Piping

Fabrication & Installation including NDT , Pigging, Cleaning & Hydrostatic T esting and wellhead Hook-ups and Well-pad Piping

• Installation of Equipment (Rotary and

Static)

• Hot T

apping

• Supply & Installation of Insulation
• Painting & Coating
• Civil Works & Steel Structural Works
• Operation & Maintenance Works

Support Services International

Facilities Services market:

• Hard and soft services currently delivered through Khansaheb Group

and How United Services. T/O Circa £13m p.a.

• We are demonstrating margin of 10%, and above, deliverable at site.
• Currently sectors include; residential, education, hospitality

, industrial, retail, health, defence and commercial.

• Focus on growth through, organic means, supporting new start ups

and acquisition.

• Development support is being provided from Group centre and bid

support from Support Services in the UK for strategic bids.

• Aim to register majority owned businesses in Oman and KSA in 2013
• Sustainability becoming more important

Future Operations

LOCATIONS WORK STREAMS T F M Managing Agent Hard FM (PPM + Call Centre Design + Consultancy + Professio- nal Inspections Estate Infrastruc- ture Whole Life Mgmt. Marine Services Catering Airport Systems Reception,

• Admin. And

Facility Care Educational Support Services Medical Support Services Discretio- nary Building & Civil Engineering Operations

Rest of the World KSA UAE Oman Qatar Europe UK

Support Services Service Delivery Portfolio - Current/Future

Current Operations

Experience and track record

Next Steps – Development of the international business in the ME

Sector UK UAE Oman Qatar KSA Construction

√ √ √ √

Support Services Engineering

√ √ √

Facilities

√ √ √ √

Establish 2013 Front line

√

Investments

√

Key √ = Established businesses Acquisitive = T est viability and market appetite

Summary

• Recovery in construction is coming, maintain and

position to take advantage. Construction will continue to be a major part of our business.

• Expansion of support services (engineering and facilities)

a strategic priority to become a significant player in ME by 2015. Thus developing a more balanced portfolio.

• Look into new markets where we believe opportunities

exist at acceptable risk and we can bring value.

• Test market appetite for investment offerings and

frontline services

Equipment Services: Ian Hayes

Building Strong Core businesses Expand Internationally Capturing related expansion

• pportunities

H1 2012 Highlights

Disposal of PFI Assets Frontline public services (Justice, Welfare, Health) Energy-from-waste (Westbury/Glasgow/ Peterborough) [Omani industrial sector] Equipment Services: Panama, Chile, Colombia and export growth Middle East interiors businesses Expansion into Omani oil and gas services

Future Workload Growth Revenue and profit growth Strong Cash Conversion

Strategy Outcomes

Interserve Equipment Services RMD Kwikform

Vision and Strategy

We aspire to be the Best Formwork and Shoring Company in the World T

• manage a de-centralised portfolio of companies with a

Divisional overlay that binds them together to:

• Operate accident free
• Live our values
• Be market driven
• Seek to be in the top 3 of each of our operating

markets Financial targets - profit growth, ROCE, double digit margins

Building Strong Core businesses Expand Internationally Capturing related expansion

• pportunities

H1 2012 Highlights

Disposal of PFI Assets Frontline public services (Justice, Welfare, Health) Energy-from-waste (Westbury/Glasgow/ Peterborough) [Omani industrial sector] Equipment Services: Panama, Chile, Colombia and export growth Middle East interiors businesses Expansion into Omani oil and gas services

Future Workload Growth Revenue and profit growth Strong Cash Conversion

Strategy Outcomes

Note - Insert photo of Shroud / roof over Hotel in Abu Dhabi so i can talk to how we add value as part of next slide

Drivers of the Business

RMDk Value add Utilisation Margin Markets / competitors

Where we were in 2010

EBIT £14.4m Utilisation 33.5% Margin 10.3% European recession – Costs / Equipment action End of large projects in UAE and before Arab spring Market contraction South Africa Growth expected Asia USA acquisition Australia mining / LNG

Where are we at end 2012?

Revenue +19.7% EBIT £16.1m (+11.8%) Utilisation 44.3% (+32%) Transferred £41m of equipment in 2012 Saudi Arabia growth Reduced costs Europe Reorganised South Africa H2 2012 USA price growth New Territories, branches and Product Development

Building Strong Core businesses Expand Internationally Capturing related expansion

• pportunities

H1 2012 Highlights

Disposal of PFI Assets Frontline public services (Justice, Welfare, Health) Energy-from-waste (Westbury/Glasgow/ Peterborough) [Omani industrial sector] Equipment Services: Panama, Chile, Colombia and export growth Middle East interiors businesses Expansion into Omani oil and gas services

Future Workload Growth Revenue and profit growth Strong Cash Conversion

Strategy Outcomes

Insert Photo of ME / Saudi project

Building Strong Core businesses Expand Internationally Capturing related expansion

• pportunities

H1 2012 Highlights

Disposal of PFI Assets Frontline public services (Justice, Welfare, Health) Energy-from-waste (Westbury/Glasgow/ Peterborough) [Omani industrial sector] Equipment Services: Panama, Chile, Colombia and export growth Middle East interiors businesses Expansion into Omani oil and gas services

Future Workload Growth Revenue and profit growth Strong Cash Conversion

Strategy Outcomes

Building Strong Core businesses Expand Internationally Capturing related expansion

• pportunities

H1 2012 Highlights

Disposal of PFI Assets Frontline public services (Justice, Welfare, Health) Energy-from-waste (Westbury/Glasgow/ Peterborough) [Omani industrial sector] Equipment Services: Panama, Chile, Colombia and export growth Middle East interiors businesses Expansion into Omani oil and gas services

Future Workload Growth Revenue and profit growth Strong Cash Conversion

Strategy Outcomes

Insert Photo – Australia project

Building Strong Core businesses Expand Internationally Capturing related expansion

• pportunities

H1 2012 Highlights

Disposal of PFI Assets Frontline public services (Justice, Welfare, Health) Energy-from-waste (Westbury/Glasgow/ Peterborough) [Omani industrial sector] Equipment Services: Panama, Chile, Colombia and export growth Middle East interiors businesses Expansion into Omani oil and gas services

Future Workload Growth Revenue and profit growth Strong Cash Conversion

Strategy Outcomes

Outlook to end 2015?

Margin range c.15% Utilisation range c.50% Growth in ME , Qatar and Saudi Arabia Australasia – Far East growth offsets some reduction in Australia Modest recovery Europe USA pricing level growth Infrastructure sector potential – fleet investment New start Colombia, Iraq, Export and other opportunities

Summary

Building on client relationships and investing in new

• pportunities

Optimising deployment of hire fleet equipment Improved Utilisation to c50% Pricing strength Medium term margin trend of 15%

Questions

Investor relations contact:

Matt Hickman, Investor Relations Manager 0118 960 2280 matt.hickman@interserve.com