Keller Group Plc · LSE:KLR
Keller — FY2017 Earnings Presentation
52 slides from Keller's earnings presentation, Feb 26, 2018
Slide 1: Keller Group plc Full year results 2017
Texas Rangers Baseball Stadium (Dallas Cowboys Stadium in background) Dallas Keller Group plc Full year results 2017 26 February 2018
Slide 2: Agenda
Agenda • Summary • Financial results • Business update • Outlook • Questions and answers 2 2
Slide 3: 2017 – A positive year
2017 – A positive year • Record revenue and strong profit growth • North America: Solid result, better second half • EMEA: Very strong profit growth and excellent execution • APAC: Loss reduced, with progress masked by two significant contract losses • Order book up 5% excluding Caspian project • Go
Slide 4: Results summary
Results summary Revenue Operating profit Operating margin £2,071m £108.7m 5.2% +16% (+10% cc) +14% (+10% cc) -0.2% 2016: £1,780m 2016: 95.3m 2016: 5.4% ROCE Earnings per share Dividend 15.1% 102.2p 34.2p -0.2% +35% (+30% cc) +20% YOY 2016: 15.3% 2016: 75.9p 2016: 28.5p *cc = Constant currency 4 4
Slide 5: Financial results
Brenner Base Tunnel, Austria Jet grouting, micropiles and innovative water driven hammer drilling on the new Brenner railway line running from Munich to Verona Financial results
Slide 6: Group income statement
Group income statement* Double digit revenue and profit growth £m 2017 2016 % Change Revenue 2,070.6 1,780.0 +16% EBITDA 177.2 158.6 +12% Operating profit 108.7 95.3 +14% Net finance cost (10.0) (10.2) Profit before tax 98.7 85.1 +16% Tax (24.7) (29.8) - Profit after tax 74.0 55.3 +34% EBITDA % 8.6%
Slide 7: Group income statement (continued)
Group income statement* (continued) Dividend up 20% £m 2017 2016 % Change Profit after tax* 74.0 55.3 +34% Non-underlying items Amortisation of acquired intangibles (9.0) (9.7) Exceptional restructuring charge - (14.3) Exceptional Avonmouth credit 21.0 14.3 Other (0.1) (1.5) 11.9 (11.2) Tax on non-u
Slide 8: Divisional results
Divisional results* £m 2017 2016 Revenue OP Margin Revenue OP Margin North America 968.7 78.7 8.1% 952.9 86.9 9.1% EMEA 737.2 53.3 7.2% 552.6 30.2 5.5% APAC 364.7 (16.5) -4.5% 274.5 (18.0) -6.6% 2,070.6 115.5 5.6% 1,780.0 99.1 5.6% Central items - (6.8) - (3.8) 2,070.6 108.7 5.2% 1,780.0 95.3 5.4% C
Slide 9: North America Summary
Columbia Manhattanville, US Hayward Baker Moretrench joint venture to deliver excavation ‘and North America foundations for university campus Summary • Overall US market remains solid, but with regional and sectoral variations − Residential strong but infrastructure spend down • Dollar revenue and p
Slide 10: EMEA Summary
Port Said, Egypt Design and EMEA installation of vertical drains across an area Summary of 8 million m2 as part of industrial redevelopment • Strong growth in revenue and especially profit • Two large projects, virtually complete, contributed c£100m of revenue and £30m of profit • European businesse
Slide 11: Asia-Pacific Summary
Rail upgrade project, Melbourne Delivering projects worth A$25 million as part of programme to Asia-Pacific replace 50 level crossings in Melbourne Summary • Good revenue growth • Underlying progress masked by two projects which lost £14m combined, mainly in H2 • Losses significantly reduced in Kell
Slide 12: Delivering against our 2020 £50m benefits target
Delivering against our 2020 £50m benefits target • Targeting £50m of annualised gross benefits by 2020 − Half to be incremental profit; half invested to enhance competitive positioning • One third of this target achieved in 2017 − Largely from procurement − Operational improvements will be slower bu
Slide 13: Group balance sheet
Group balance sheet Remains robust £m 2017 2016 Goodwill/intangibles 170.9 188.0 Property, plant & equipment 399.2 405.6 Other non-current assets 27.4 30.2 597.5 623.8 Inventories 72.6 59.4 Receivables 589.2 528.5 Payables (480.5) (435.4) Working capital 181.3 152.5 Capital employed 778.8 776.3 Non-
Slide 14: Group cash flow statement
Group cash flow statement Reduction in net debt £m 2017 2016 Cash from operations before non-underlying items 136.1 135.7 Cash inflows from non-underlying items 10.6 4.9 Cash from operations 146.7 140.6 Capex – net (74.5) (73.0) Interest (12.2) (11.6) Tax (26.0) (25.3) Acquisitions (6.5) (14.6) Non-
Slide 15: 2018 planning guidance
2018 planning guidance Currency • 2018 assumption is £1 = US$1.40 − Restating 2017 at $1.40 (from $1.29) reduces operating profit by £9m and EPS by 9p Tax • US tax reforms expected to reduce group tax rate to 27-29% Capex • Expected to be around £80m, between 1.1x and 1.2x depreciation 15 15
Slide 16: Business update
Koolan island, Australia New seawall, 437m long, 1.2m wide and 45m deep, to enable Mount Gibson iron ore mine to reopen Business update
Slide 17: Vision and strategy
Vision and strategy Vision To be the world leader in geotechnical solutions Growing our product range and entering new markets, organically and by acquisition Building strong, customer-focused businesses Strategy Leveraging the scale and expertise of the group Enhancing our engineering and operation
Slide 18: Strategic progress: Growing product range and markets
Strategic progress Growing product range and markets Order book split Healthy • Order book continues positive order book multi-year trend APAC • Broad based, with good 26% North geographical spread America 46% EMEA 28% Investment • Actively bidding in India and in Marine Africa Order book (£m consta
Slide 19: Successfully executed 6,300 projects in 2017
Successfully executed 6,300 projects in 2017, driving 10% organic growth • Typical project range £25k to £10m • Average project value £300,000 Folloline, Norway Innes, Iceland Spirit, Australia Cattle Creek, Australia Polavaram Dam, India Innes, Iceland Hotel Titlis Palace, Switzerland Monad Terrace
Slide 20: Organic growth example: A$7 million barge investment
Organic growth example A$7 million investment in 400-tonne-capacity barge • Increasing demand for new/upgraded port facilities for mining market • The largest self-elevating modular platform (SEMP) in Australia • Enables us to complete jobs that require larger cranes and foundation equipment • Alrea
Slide 21: Potential acquisition of Moretrench
Potential acquisition of Moretrench • Renowned US geotechnical contractor • Operating mostly along the east coast of the US • 500 employees • Will bring good ground freezing, dewatering and industrial client expertise to Keller • US$170m revenue and EBITDA of US$14m in 2016 • Has partnered with Kell
Slide 22: Strategic progress: Customer-focused business units
Strategic progress Customer-focused business units Consolidated • Strengthened Hayward Baker on position in West Coast, US key markets • Canada – urban focus and returned to profitability • Invested in local branch network: Charlotte, Hamburg and Hannover Strategic • Strategic planning embedded in a
Slide 23: Strategic progress: Leveraging scale and expertise
Strategic progress Leveraging scale and expertise • Vertical drains from Europe to Continue to large scale ground improvement transfer project in Egypt technology • Jet grouting from Europe and US to India • Rigid inclusions from France to South Africa Procurement • Divisional teams at strength gain
Slide 24: Strategic progress: Enhancing Engineering and Operations
Strategic progress Enhancing Engineering and Operations ‘Design and • Optimisation software for our design build’ for 50% solutions of work • Alternative design for Marassi Al Bahrain project delivered 40% cost savings Global product • New generation of vibro equipment teams actively • Spread of D-w
Slide 25: Strategic progress: Investing in people
Strategic progress Investing in people Safety • Think Safe programme has performance reduced accidents by 80%, AFR is now at an all time low • Divisional President APAC Leadership • New business unit and strength functional leaders • High performance culture Investment programme in leadership • Glob
Slide 26: APAC project performance
APAC project performance Two significant loss makers in Australia • Commercial development in Sydney • Marine project in New South Wales Drivers • Tough contractual environment • Ground condition issues • Challenging technical designs Actions taken • Risk management tightening • Leadership strengthe
Slide 27: A lasting memorial
A lasting memorial South Africa • On 4 July 2017 a truck collided with two buses carrying Franki Africa employees to the Nkomati Mine project • 18 people died and 15 were injured • Tragic day for everyone in Keller • Franki Africa Memorial Fund to provide educational bursaries to children of the dec
Slide 28: Outlook
> KELLER Outlook
Slide 29: Outlook
Outlook • Most of our markets remain robust • Group order book of more than £1 billion and healthy bidding activity gives us confidence Mostaganem, Algeria • Well positioned to take A major power plant project for 2018 advantage of industry trends • APAC to return to profit in 2018 • Further underly
Slide 30: Financial performance since listing in 1994
Financial performance since listing in 1994 Revenue (£m) Operating profit (£m) 2,400 140 2,000 120 1,600 CAGR = 11% 100 CAGR = 11% 80 1,200 60 800 40 400 20 0 0 Dividend per share (pence) Share price (pence) 40 1,400 35 1,200 30 1,000 25 CAGR = 9% 800 CAGR = 10% 20 600 15 10 400 5 200 0 0 TSR of 12%
Slide 31: Cautionary statements
Cautionary statements This document contains certain ‘forward looking statements’ with Nothing in this document should be regarded as a respect to Keller’s financial condition, results of operations and profits forecast. business and certain of Keller’s plans and objectives with respect to This docu
Slide 32: Keller overview
Yonge Eglinton, Canada Technically-complex supporting works on the Eglinton Crosstown line’s busiest interchange while line stays open Keller overview
Slide 33: Keller today
Keller today Every day millions of people around the world live, work and play on ground prepared by Keller Three divisions Our purpose Our vision Our values 21 business units To help create To be the world’s •Integrity infrastructure that improves leading geotechnical •Collaboration £ the world’s c
Slide 34: Keller investment case
Keller investment case We operate in the large and growing global construction and infrastructure market The specialist geotechnical contracting sub-sector has higher margins and favourable market trends We are the number 1 business worldwide given our size, profitability and capabilities (wide prod
Slide 35: Geotechnical market size and share
Geotechnical market size and share Market size Share of addressable market Global geotechnical contracting market bn $52B Geotechnical contracting markets where Keller operates today $27bn Keller today $2.7bn Keller Trevi (contracting) Non-addressable market Soletanche / General contractor- mainly C
Slide 36: Geographical market approach
Geographical market approach 36 36
Slide 37: US markets Outlook
US markets Outlook Private residential: • Continued expansion in single family homes expected, especially in southern states (Florida, Texas), +9% for 2018 construction starts [Dodge] • Multi-family home market expected to contract further in 2018, -8% for 2018 construction starts [Dodge] Private no
Slide 38: Market demand trends play to our strengths
Market demand trends play to our strengths Urbanisation and more large-scale 1 development projects 200,000 people are added daily to urban areas Increasing land shortage, driving a need Most inner city sites 2 to use more brownfield and marginal land are 2nd or 3rd generation Infrastructure renewal
Slide 39: Factors to consider in geotechnical engineering
Factors to consider in geotechnical engineering Site conditions Requirements Loading conditions Constraints • Sand, silt, clay, • Performance • Spread, low intensity • Neighbouring rock, organic (allowable • Slender, high buildings settlements) • Loose, soft, stiff, intensity, sensitive • Noise, vib
Slide 40: Full product range
Full product range • Allows us to make the right choice for the given soil and structure type • Right combination of products leads to optimal solutions • Special equipment available for our products 40 40
Slide 41: Value engineering
Value engineering • Employ around 1,500 geotechnical engineers worldwide; over 200 focused purely on design • 50% of our projects are ‘design and build’ where value engineering can reduce cost by up to 40% and save time Maiden Lane, New York • 57-storey tower, lower Manhattan • Congested site where
Slide 42: The equipment advantage
The equipment advantage Large fleet and design and manufacture capability Keller total fleet • Total equipment fleet is 1,300 rigs − The largest equipment fleet in the world with net book value of £350m Keller manufactured fleet • We manufacture specialist equipment in Germany • Available only to Ke
Slide 43: Operational excellence
Operational excellence Safety, quality, productivity • Strong reputation for operational excellence • Strong safety record − Accident Frequency Ratio < 0.3 (industry average c0.8) − Numerous safety awards • High level of training for frontline crews • Strong network of global resources we can rely o
Slide 44: Support for United Nations Sustainability Development Goals
Support for United Nations Sustainability Development Goals • Health and safety: AFR <0.3 (vs. industry average c0.8) • Climate change: Carbon Disclosure Project rating A- • Sustainable solutions: Low carbon products eg stone columns and sand compaction, and offer to offset embedded carbon • Quality
Slide 45: Vision and strategy
Vision and strategy Vision To be the world leader in geotechnical solutions Growing our product range and entering new markets, organically and by acquisition Building strong, customer-focused businesses Strategy Leveraging the scale and expertise of the group Enhancing our engineering and operation
Slide 46: Financial performance since listing in 1994
Financial performance since listing in 1994 Revenue (£m) Operating profit (£m) 2,400 140 2,000 120 1,600 CAGR = 11% 100 CAGR = 11% 80 1,200 60 800 40 400 20 0 0 Dividend per share (pence) Share price (pence) 40 1,400 35 1,200 30 1,000 25 CAGR = 9% 800 CAGR = 10% 20 600 15 10 400 5 200 0 0 TSR of 12%
Slide 47: Through the cycle financial targets
Through the cycle financial targets • Revenue − Organic growth ahead of market • Last five years: Keller 5.2%; relevant construction markets 0.8% − Double digit CAGR including acquisitions • Continuation of long term trend • Profitability − ROCE in excess of 20% − £50m of gross benefits from improve
Slide 48: Capital allocation priorities
Capital allocation priorities 1. Profitable organic growth opportunities 2. Bolt-on acquisitions meeting Keller’s investment criteria 3. Ordinary dividends • At a level allowing dividend growth through the cycle 4. Return capital to shareholders • Only where the balance sheet allows • Unlikely to be
Slide 49: Targeted £50m gross benefits
Targeted £50m gross benefits • Targeting £50m of annualised gross Indicative realisation of £50m of gross benefits benefits by 2020 50 − Half to be incremental profit; half invested to enhance competitive 40 positioning 30 • Benefits expected to accumulate over time 20 − Many are slow burn − Upfront
Slide 50: Cost and efficiency: Where will they come from?
Cost and efficiency Where will they come from? 50 50
Slide 51: Keller fact sheet
Keller fact sheet • Established 1860, now number 1 geotechnical • About 50% of our contracts are design and build, 50% are contractor globally build only • Revenue by division (FY17): 47% North America, 35% • Contracts over £5m revenue make up under 1% of the EMEA, 18% APAC (only c3% of business in
Slide 52: Investor Relations contact
Investor Relations contact Victoria Huxster Head of Investor Relations +44 20 7616 7575 [email protected] Victoria Huxster joined Keller in August 2017 and brings 15 years’ of stock market experience – she started her career in Equity Sales at Cazenove and subsequently joined Liberum Cap