Keller Group Plc · LSE:KLR
Keller — FY2003 Earnings Presentation
33 slides from Keller's earnings presentation, March 2004
Slide 1: Preliminary Results Year ended 31 December 2003
Preliminary Results Year ended 31 December 2003 March 2004
Slide 2: Introduction
Introduction Disappointing result for the year Poor performance from Makers Good result from specialist ground engineering Suncoast affected by raw material cost increases Business fundamentals still strong Management succession completed 1
Slide 3: Financial Highlights
Financial Highlights Turnover up 11% at £568m (2002: £511m) Good first year contributions from McKinney and Keller-Terra Profit before tax* down 6% to £28.7m (2002: £30.4m) Earnings per share* reduced to 24.1p (2002: 32.7p) Total dividend increased by 5% to 10.4p (2002: 9.9p) Strong cash performance
Slide 4: Profit and Loss Account
Profit and Loss Account £m 2003 2002 % change Turnover 567.5 511.0 +11% Operating profit* 32.8 34.3 -4% Interest (4.1) (3.9) Profit before tax* 28.7 30.4 -6% Exceptional items (3.1) - Amortisation (10.8) (3.1) 14.8 27.3 Taxation (10.7) (10.7) Profit after tax 4.1 16.6 Minority interests (1.8) (0.2)
Slide 5: Group Balance Sheet
Group Balance Sheet £m 2003 2002 Goodwill/intangibles 57.0 66.7 Tangible assets 82.2 79.8 139.2 146.5 Stocks 16.9 15.1 Debtors 137.9 143.9 Creditors (113.0) (113.4) Working capital 41.8 45.6 Provisions/long-term creditors (8.7) (8.7) Capital employed 172.3 183.4 Tax/dividends (11.9) (11.2) Deferred
Slide 6: Group Cash Flow Statement
Group Cash Flow Statement £m 2003 2002 Cash from operating activities 40.0 43.2 Capex – net (13.4) (12.7) Tax (12.8) (9.0) Interest (5.0) (4.4) Dividends (6.5) (5.6) Acquisitions 0.4 (32.0) Net cash flow 2.7 (20.5) Share issues 0.1 13.6 Net debt acquired - (1.7) Exchange differences 4.5 3.8 Opening
Slide 7: Operating Cash Flow
Operating Cash Flow 50 40 30 £m 20 10 0 1995 1996 1997 1998 1999 2000 2001 2002 2003 -10 EBITDA Working capital Other Group operating cash flow 15% compound growth in operating cash flow 1995-2003 Nine year operating cash flow represents 94% of EBITDA 6
Slide 8: Geographical Analysis
Geographical Analysis 2003 turnover 2002 turnover Australia Australia Continental 5% 5% Europe and Continental Overseas Europe and 27% Overseas USA 29% USA 47% 48% UK UK 21% 18% USA up 22% in dollars Europe/Overseas up 11% in euros 7
Slide 9: Operating profit and margin
Operating profit and margin (before exceptionals and amortisation of intangibles) 2003 2002 Operating Operating £m profit Margin profit Margin UK 0.5 0.5% 4.3 4.1% USA 19.3 7.1% 22.3 9.2% Europe/Overseas 13.8 8.4% 8.1 5.9% Australia 2.0 7.2% 1.8 6.9% 35.6 6.3% 36.5 7.1% Central costs (2.8) (2.2) 32.
Slide 10: 2004 Guidance
2004 Guidance US $ translation impact: 5c change in average rate = £0.5m 2004 budget at £1 = $1.70 Euro translation impact: 5c change in average rate = £0.4m 2004 budget at £1 = €1.45 Typically 35%-40% of profit in H1 Improved UK result should lower effective tax rate Working capital outflow in H1 G
Slide 11: North America
North America Results % % £m 2003 2002 Change Change £ $ Sales 270.4 242.6 + 11% +22% Operating profit 19.3 22.3 -13% -6% 2003 Sales Operating margin 7.1% 9.2% $ Exchange Rate 1.64 1.50 14% 35% 16% First year McKinney sales of $61m 35% Hayward Baker Suncoast Case McKinney 10
Slide 12: North America Trading Highlights
North America Trading Highlights Encouraging first year result for McKinney Particularly good second half Integration proceeding to plan Another good result for Case Case Atlantic performed well Several multi million dollar contracts Hayward Baker volumes less than expected Western region subdued Ov
Slide 13: North America: Suncoast
North America Suncoast Turnover up by 20% Reliance on Texas continues to reduce Turnover up by 50% in California/Arizona Raw material cost increased by circa 30% Introduction of tariffs on imports in July 2003 Chinese demand Management action taken Further increases in selling prices announced Sales
Slide 14: Suncoast – Average Cost of Raw Strand
Suncoast – Average Cost of Raw Strand 0.155 0.150 0.145 0.140 $ per foot of Strand 0.135 0.130 0.125 0.120 0.115 0.110 Jan Feb M ar Apr M ay Jun Jul Aug Sep Oct Nov Dec - 2003 - Stable costs prior to 2003 $8.5m raw material cost increase in 2003 13
Slide 15: Continental Europe & Overseas
Continental Europe & Overseas Results % % £m 2003 2002 Change Change £ € Sales 165.2 135.6 + 22% +11% Operating profit 13.8 8.0 + 73% +54% Operating margin 8.4% 5.9% 2003 Sales € Exchange Rate 1.45 1.59 11% 28% 12% Wide geographical coverage 19% 30% Central Eur S West Eur S East Eur 14 Overseas New
Slide 16: Continental Europe & Overseas Trading Highlights
Continental Europe & Overseas Trading Highlights Flat results from Central Europe Continuing decline of German construction market Results for Keller-Terra exceeded expectations Improved volumes in Italy Malaysia good but Singapore work delayed until 2004 Strong result from LCM in Sweden 15
Slide 17: United Kingdom
United Kingdom Results % £m 2003 2002 Change Sales 104.0 106.7 - 3% Operating profit 0.5 4.3 - 88% Operating margin 0.5% 4.0% 2003 Sales 2003 operating profit before exceptional items 40% 60% 16 KGE Makers
Slide 18: United Kingdom: Makers
United Kingdom Makers What went wrong Lack of focus Poor contracting margins in infrastructure business Lower than anticipated volumes in Social Housing Actions taken to restore profitability Management change in December 2003 Exited poorly performing sectors Overhead and cost base reduced by £1m St
Slide 19: United Kingdom: KGE
United Kingdom KGE Withdrawal from heavy piling mid year Restructuring now complete Improved result in the second half Retained ability to offer integrated solutions 18
Slide 20: Australia
Australia Results % % £m 2003 2002 Change Change £ AU$ Sales 27.9 26.1 + 7% -3% Operating profit 2.0 1.8 + 11% +1% Operating margin 7.2% 6.9% $ Exchange Rate 2.52 2.77 Australian construction market buoyant Several large contracts in year Opening of new geotechnical subsidiary 19
Slide 21: Business Model
Business Model Technological leadership, specialised equipment and people Autonomous and well incentivised business units Regionalisation offers clients a local presence Contract mix spreads risk and enhances margins Acquisitions sourced and integrated on a local basis 20
Slide 22: Strategy
Strategy To continue to enhance our international leadership in specialist ground engineering By Organic growth Existing territories New territories New technologies Acquisitions In United States Fragmented market Europe (inc UK) South East Asia 21
Slide 23: U.S. – Market Dynamics
U.S. – Market Dynamics US Construction Market Current construction market $930 billion¹ 22% Residential 55% Growth rates 01/03 +24% Non Residential 45% 55% 23% Growth rates 01/03 – 3% Residential Private Non R Public Residential sector driving US construction market Estimated geotechnical/foundation
Slide 24: U.S – Fragmented Market
U.S – Fragmented Market Market leader in geotechnical/foundation market Keller has 10% market share Keller is 2.5 x bigger than nearest competitor Higher market share in specialist products Market leader in post tensioning market Keller has 25% share of current market Suncoast is 7-8 x bigger than n
Slide 25: Europe – Market Dynamics
Europe – Market Dynamics Current construction market €1,050 billion¹ Civil engineering sector circa 20% of the market Construction growth rates expected 1-2% in Europe 6-9 % in Eastern Europe 3% + in civil engineering Positioning within Western Europe Established in mature markets in Germany/France/
Slide 26: Asia – Current Status
Asia – Current Status Large and growing construction market in Asia But much of this is in China and Japan Undertaking review of main markets Strong current presence in Malaysia/Singapore Also in Hong Kong/Taiwan/Philippines/Indonesia New subsidiary in India Opportunities to expand in line with stra
Slide 27: Current Trading & Prospects
Current Trading & Prospects Slow start to year, expect more traditional H1/H2 split Encouraging prospects in Continental Europe & Overseas Little change in our major markets in the US Continuing effects of currency translation Current focus to consolidate and strengthen existing business to return M
Slide 28: Appendix
KELLER % Appendix
Slide 29: New Management Structure
New Management Structure Justin Atkinson Chief Executive James Hind Finance Director Bob Rubright Wolfgang Sondermann MD - North America MD - Europe & Overseas US US UK Europe Middle East Far East Hayward Baker Suncoast Keller Keller Keller Keller Case Wannenwetsch McKinney LCM Peter Davis Makers Au
Slide 30: Ground Engineering Worldwide
Ground Engineering Worldwide Activities Applications Speciality grouting Control of building settlement Groundwater control Cavity filling Ground improvement Seismic risk protection Foundation support Caisson & piling in specific Foundation support local/niche markets Earth retention Post-tension co
Slide 31: Ten Year Track Record
Ten Year Track Record Turnover 1994 - 2003 600 567.5 27.9 511.0 500 26.1 10 4 . 0 422.2 10 6 . 7 18 . 3 400 10 0 . 1 314.9 313.0 £m 300 266.9 20.8 14 . 2 270.4 244.6 12 . 3 82.3 9 1. 0 242.6 239.0 225.0 4 1. 7 65.1 67.7 18 8 . 8 200 202.0 35.8 33.3 69.1 87.2 10 7 . 4 110 . 1 58.7 85.1 98.5 100 16 5
Slide 32: Ten Year Track Record – Operating Profit
Ten Year Track Record Operating Profit 1994 - 2003 40 34.3 1. 8 32.8* 35 2 .0 0 .5 4 .3 30 25.4 0 .5 25 19.4 3 .4 19 . 3 17.0 0 .7 17.7* 20 3 .0 2 2 .3 £m 14.3 0 .9 3 .4 4 .3 15 11.5 12.8 17 . 4 10.2 4 .3 1. 9 3 .4 12 . 0 10 1. 2 9 .7 9 .9 3 .8 5.0 6 .1 7.7 13 . 8 5 8 .1 5.6 5.4 5.5 5.1 5.9 3 .9 3 .
Slide 33: Results History
Results History Operating Margin Dividend per share 7.0% 12 10 6.0% 8 GBp 6 5.0% 4 2 4.0% 0 1994 1995 1996 1997 1998 1999 2000* 2001 2002 2003* 1994 1995 1996 1997 1998 1999 2000* 2001 2002 2003* *pre exceptionals Industry leading margins Dividend per share more than doubled since flotation 32