Keller Group Plc · LSE:KLR
Keller — H1 2014 Earnings Presentation
44 slides from Keller's earnings presentation, August 2014
Slide 1: Keller Group plc Interim Results
Keller Group plc Interim Results Half year ended June 2014
Slide 2: Cautionary Statements
Cautionary Statements This document contains certain 'forward looking statements' with respect to Keller’s financial condition, results of operations and business and certain of Keller’s plans and objectives with respect to these items. Forward looking statements are sometimes, but not always, ident
Slide 3: Agenda
Agenda • Highlights Justin Atkinson, Chief Executive • Financial results James Hind, Finance Director • Divisional review Justin Atkinson, Chief Executive • Outlook Justin Atkinson, Chief Executive •Q & A 2
Slide 4: Justin Atkinson, Chief Executive
Justin Atkinson Chief Executive 3
Slide 5: Highlights
Highlights* • Revenue up 22% to £788.2m (2013: £644.6m) • Constant currency revenue excluding acquisitions also up 22% • Operating margin slightly ahead at 4.5% (2013: 4.4%) • Earnings per share of 29.5p (2013: 28.1p), up 5% • Cash generated from operations of £31.9m (2013: £30.2m), representing 101
Slide 6: James Hind, Finance Director
James Hind Finance Director 5
Slide 7: Group Income Statement
Group Income Statement* £m H1 2014 H1 2013 % change FY2013 Revenue up 33% on a constant currency Revenue 788.2 644.6 +22% 1,438.2 basis - up 22% excluding acquisitions EBITDA 59.8 51.4 +16% 124.2 Operating profit 35.5 28.6 +24% 77.8 Average exchange rates: Net finance costs (3.0) (1.8) (3.7) - US$1.
Slide 8: Group Income Statement (continued)
Group Income Statement (continued) Exceptional items: £m H1 2014 H1 2013 % change FY 2013 - £30m contract dispute - £3.9m amortisation of Profit after tax* 21.8 18.5 +18% 50.3 acquired intangible assets Exceptional items (27.6) (9.4) (22.1) - £(6.9)m contingent consideration Tax on exceptional items
Slide 9: Exceptional charge – contract dispute
Exceptional charge – contract dispute • £30 million exceptional charge in respect of a dispute arising on a project that Keller’s UK subsidiary, Keller Limited, completed in 2008 • The claims intimated against Keller Limited, which are currently the subject of litigation, are denied and being vigoro
Slide 10: Operating Profit and Margin
Operating Profit and Margin* H1 2014 H1 2013 Constant currency Op Op revenue up 33% £m Revenue Profit Margin Revenue Profit Margin - N America: 30% - EMEA: 20% North America 373.0 20.7 5.5% 308.0 16.5 5.4% - Asia: 43% - Australia: 62% EMEA¹ 214.4 2.7 1.3% 185.5 1.8 1.0% Q1 impacted by Asia 56.6 3.6
Slide 11: Group Balance Sheet
Group Balance Sheet £m June 2014 June 2013 Dec 2013 Comparisons Goodwill/intangibles 178.1 100.2 187.9 impacted by Property, plant & equipment 281.7 251.9 281.9 acquisitions and 15.2 16.6 14.9 exchange rates Other non-current assets 475.0 368.7 484.7 Inventories 62.1 65.6 62.0 H1 working Receivables
Slide 12: Group Cash Flow Statement
Group Cash Flow Statement £m H1 2014 H1 2013 FY 2013 Cash from operations Cash generated from operations 31.9 30.2 132.0 includes usual seasonal working capital outflows Capex – net (27.8) (19.0) (42.6) Interest (3.4) (1.9) (5.0) Last 12 months’ cash from operations Tax (11.6) (14.7) (21.5) represen
Slide 13: Group Contract Awards
Group Contract Awards Monthly contract awards Strong contract awards £m (rolling 3 month average at constant currency*) order intake during H1 180 2014 Crossrail; Victoria Seattle 160 Station; LNG MOF 140 Wheatstone; Vale; Gdansk 120 100 Like-for-like order book up 9% 80 Sengkang - some work in Cana
Slide 14: 2014 Guidance
2014 Guidance • Usual seasonal H2 bias – not as pronounced as in 2013 • Full year expected to be in line with expectations – despite adverse £8m impact from foreign exchange • Expected effective tax rate of 33% • Capex to be around £60m 13
Slide 15: Justin Atkinson, Chief Executive
Justin Atkinson Chief Executive 14
Slide 16: Group Revenue by End Market
Group Revenue by End Market H1 2014 H1 2013 Keller operates across all Total revenue £788m Total revenue £645m sectors of the construction market 17% 20% 38% 38% Infrastructure/Public 18% 13% Buildings consistently the largest sector - reflects construction 27% 29% spending generally Infrastructure/
Slide 17: North America Revenue by End Market
North America Revenue by End Market H1 2014 H1 2013 Infrastructure/Public Total revenue $623m Total revenue $474m Buildings less dominant - down from 50% in 2010 23% 29% 37% 39% Power/Industrial still robust 17% 9% 23% 23% Revenue from Office/Commercial more Infrastructure/Public Buildings Infrastru
Slide 18: US Non-residential Construction Market
US Non-residential Construction Market $bn US Construction Put-in-Place YTD total non-residential 400 expenditure up 7% 350 300 Private non-residential 250 construction expenditure up 12% 200 - driven by power and commercial sector 150 100 50 Public expenditure on construction broadly flat 0 Infrast
Slide 19: US - Foundations
US - Foundations Revenue and profit up despite adverse weather conditions in Q1 and H1 2013 benefitting from profitable large contracts Coast to coast national coverage and on- going refocusing work enables advantage to be taken of improved market conditions US piling companies had a steady first ha
Slide 20: US Case Studies
US Case Studies Hayward Baker contracted to provide large specialty grouting project Constructing a grid of 5,700 soilcrete columns at depths of up to 85 feet Columns will provide seismic stability and foundation support for a new sea wall Working around the existing timber piles Specialty jet grout
Slide 21: US Suncoast
US Suncoast US Housing Starts (000s) Improving housing starts driven by multi- 1200 family units 1000 - represent one-third of housing starts 800 Houston high-rise market buoyant 600 Suncoast revenue up 20% YTD 400 200 Continued margin improvement 0 Challenge to recruit sufficient people to suppleme
Slide 22: Canada
Canada Investment in Canadian resources markets declined very materially in recent months Revenue from projects in the Alberta oil sands and other resource markets replaced in part by lower margin commercial work Keller Canada profits are below those expected at the time of acquisition Near shore pi
Slide 23: EMEA Revenue by End Market
EMEA¹ Revenue by End Market H1 2014 H1 2013 Infrastructure/Public Total revenue €262m Total revenue €219m Buildings reducing as some large projects complete 17% 40% 22% 21% Infrastructure/Public Buildings Power/Industrial/Manufacturing Office/Commercial Residential ¹EMEA = Europe, Middle East & Afri
Slide 24: EMEA Regional Split
EMEA¹ Regional Split H1 2014 H1 2013 Revenue from UK, Total revenue €262m Total revenue €219m Germany and Poland still c.50% 12% 16% 17% 19% 2% 7% Africa included for the first 2% time 16% 4% 8% 7% 17% 10% People and equipment 11% 16% redeployed to more active 13% 12% 11% markets UK Germany UK Germa
Slide 25: EMEA Highlights
EMEA Highlights Mature markets stable but challenging - on-going programme of cost controls and business improvements made important contribution Good results from Germany and Poland Southern European markets remain disappointing Good start from Franki Africa - market in South Africa picked up - tra
Slide 26: EMEA Case Studies
EMEA Case Studies Complete excavation pit Diaphragm walls Berlin State Opera House, Germany Nowy Swiat Financial Centre, Warsaw, Poland 25
Slide 27: Asia Regional Split
Asia Regional Split H1 2014 Revenue by Country H1 2013 Revenue by Country Singapore busy but Total revenue S$119m Total revenue S$85m increased competition 6% 11% Malaysian market remains buoyant 26% 57% India now busy Other reflects projects in Singapore Malaysia Hong Kong, Indonesia and India Othe
Slide 28: Asia Highlights
Asia Highlights Malaysia performing well - won first major contract in Johor Agreed acquisition of Ansah in Malaysia gives greater access to large foundation solution packages in both Malaysia and Singapore Sengkang hospital in Singapore completed ahead of schedule Bored piling Melawati Mall, Selang
Slide 29: Australia Revenue by End Market
Australia Revenue by End Market H1 2014 H1 2013 Revenue by segment Total revenue A$262m Total revenue A$162m significantly impacted by major natural resource 6% 9% related projects 14% 26% 6% 32% Some signs of recovery in 54% 53% the commercial and infrastructure sectors Infrastructure/Public Buildi
Slide 30: Australia Highlights
Australia Highlights H1 performance encouraging - Wheatstone a key contributor Wheatstone project progressing well with over 19,000 piles installed – due to substantially complete in September Order book (exc. Wheatstone) well up on last year - average margins reduced Better prospects for infrastruc
Slide 31: Australia Case Studies
Australia Case Studies Darydney Near shore piling for wharf extension Various categories of piling Overseas Passenger Terminal, Sydney Darling Harbour Live, Sydney 30
Slide 32: Strategy
Strategy • Our Objective – to extend our global leadership in specialist ground engineering through: – organic growth, particularly in developing markets – targeted acquisitions • Our Execution – expansion into new higher growth geographic regions – development of new technologies and techniques – t
Slide 33: Outlook
Outlook • Global markets remain mixed – North America: continued gradual improvement in the US; Canada subdued – Europe: no material changes in current challenging market conditions – signs of recovery in certain Australian construction markets – good opportunities in Africa and Asia • Contract awar
Slide 34: Q&A
Q&A
Slide 35: Appendix
Appendix
Slide 36: Introduction
Introduction • The world’s largest independent ground engineering contractor – ground engineering is a small, niche sub-sector of construction – growing faster than construction, reflecting: − more pressure to build on brownfield and marginal land − more ambitious development and infrastructure proj
Slide 37: Ground Engineering Worldwide
Ground Engineering Worldwide Activities Piling Ground Specialty Anchors, Post-tension improvement grouting nails, concrete minipiles % of 2013 45% 20% 12% 15% 8% revenue Applications Foundation Foundation Control of Excavation Slab-on-grade support support building support foundations Earth retentio
Slide 38: History of Keller
History of Keller 1958 1960’s 1974 1984 1990 1994 2001 2002 2006 2007 2009 2010 2013 NOW Acquired Acquired Est. 1958 Acquired Management Acquired Geo-Foundations Resource Ground test Johann Keller buyout from Suncoast (Canada) Piling services in Germany GKN plc (US) (Singapore) marking Acquired inte
Slide 39: Dividend History
Dividend History Dividend per share (pence) Dividend increased or 30 maintained 25 every year since 1994 20 flotation 15 Dividend policy of sustainable 10 growth 5 0 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 38
Slide 40: Ten Year Track Record
Ten Year Track Record £m Revenue 2004 – 2013 1600 (Continuing Operations) 1,438.2 1400 1,317.5 1,196.6 1,154.3 1200 1,068.9 1,037.9 1000 955.1 857.7 800 685.2 600 526.2 400 200 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 North America EMEA Asia Australia 39
Slide 41: Ten Year Track Record
Ten Year Track Record £m Operating Profit 2004 – 2013* 140 119.4 120 107.4 100 89.3 77.3 77.8 80 55.3 60 48.3 43.3 40 33.4 28.9 20 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 -20 Head Office Costs North America EMEA Asia Australia * * from continuing operations and before exceptional items 4
Slide 42: Operating Margin Trend
Operating Margin Trend Operating margin* Operating margin 12% recovering from 10% Through-the-cycle historic low margin target 8% Peak and 6% trough margins unlikely to 4% repeat 2% 0% 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 * from continui
Slide 43: Cash Flow History
Cash Flow History £m 160 10-year cash conversion rate of 98% 140 120 10-year aggregate 100 EBITDA of £970.5m 80 60 10-year aggregate cash 40 from operations of £949.7m 20 0 EBITDA Cash from operations 42
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