Keller Group Plc · LSE:KLR
Keller — Investor Presentation (June 2004)
45 slides from Keller's investor presentation, June 2004
Slide 1: Presentation to Analysts
Presentation to Analysts June 2004
Slide 2: Agenda
Agenda Introduction Justin Atkinson, Chief Executive Current trading James Hind, Finance Director Efficiencies and new technologies Wolfgang Sondermann, Managing Director, Continental Europe & Overseas Smart acquisitions and controlled organic growth Bob Rubright, Managing Director, North America Su
Slide 3: Strategy
Strategy To continue to enhance our international leadership in specialist ground engineering by Organic growth existing territories new territories new technologies by Acquisitions in United States fragmented market Europe (incl. UK) South East Asia
Slide 4: Current Trading
Current Trading half year anticipated to be in line with expectations US performance underpinned by strong Suncoast recovery price of strand continues to rise Hayward Baker picked up in Q2 Europe and Overseas performed well in mixed market conditions Portuguese restructuring costs Makers impacted by
Slide 5: Guidance
Guidance US $ translation impact: 5¢ change in average rate = £0.5m H1:H2 profit split in 2004 consistent with earlier years typically 35% - 40% in H1 usual cash outflow in H1 exacerbated by Suncoast working capital requirement gross capex will be less than in 2003 improved UK result should lower ef
Slide 6: Keller's Growth Formula: Efficiencies and New Technologies
Keller’s Growth Formula Efficiencies and New Technologies Wolfgang Sondermann Managing Director Continental Europe and Overseas June 2004
Slide 7: Ground Engineering Worldwide
Ground Engineering Worldwide Continental Europe The Americas United Kingdom and Overseas Australia Keller Foundations Keller Ltd., Keller Holding GmbH, Keller Australia Pty Inc., USA UK Germany Ltd Australia
Slide 8: Continental Europe & Overseas: Ten year track record
Continental Europe & Overseas Ten year track record 300.0 25.0 250.0 20.0 200.0 15.0 €m Profit €m Sales 150.0 10.0 100.0 5.0 50.0 0.0 0.0 1994 1995 1996 1997 1998 1999 2000* 2001 2002 2003 *Before exceptional costs Sales Profit German sales decline 24% (€21m) 1995-2003 Keller-Terra first full year,
Slide 9: Continental Europe & Overseas: Share of business units' sales
Continental Europe & Overseas Share of business units΄ sales 60.00 50.00 40.00 Share % 30.00 20.00 10.00 0.00 1998 1999 2000 2001 2002 2003 Year Central Europe South West Europe South East Europe Overseas Division Dev Bus
Slide 10: Efficiencies: Cost Leadership
Efficiencies What makes the difference in competitive markets? Cost Leadership Keller Core Competence in Cost Leadership close to clients with local offices; high technical reputation and competence strong decentralised technical competence to find best technology at lowest costs handling of small t
Slide 11: Efficiencies: What Keller has done to improve competitiveness
Efficiencies What has Keller done to improve competitiveness in the past? reduction of labour costs through automation substitution of traditional products by transfer of cheaper products to new markets increase of productivity by redesign of equipment and re-engineering of production processes focu
Slide 12: Efficiencies: An example in the German construction market
Efficiencies An example in the German construction market 1. Market environment construction sector depressed since 1995 (30%+ decline) decrease in public spending in the last 4 to 5 years without increase in alternatives like PPP/BOT projects investors search only for low cost solutions 2. Challeng
Slide 13: Efficiencies: German construction market advantages and results
Efficiencies An example in the German construction market 3. Keller advantages in this environment experienced staff to design, estimate and deliver technical alternatives ground improvement methods require special experience and technical design capabilities ground improvement methods are normally
Slide 14: New Technologies: Product Leadership
New Technologies What is the target with developing/improving technologies? Product Leadership Challenges improvement in productivity reduction of mobilisation/demobilisation costs reduction of wear and tear costs reduction of maintenance time and cost reduction of repair time improvement of design,
Slide 15: New stronger and faster vibrator
New Technologies New stronger and faster vibrator S 700 for vibro compaction works improvement of penetration by 50% compared to S 340 improvement of productivity by 75% compared to S 340 improvement of maintenance , increase in productivity reduced costs in wear and tear, cheaper materials improvem
Slide 16: New vibrocat and bottom feed vibrator
New Technologies New vibrocat and bottom feed vibrator for vibro replacement works improvement of productivity by more than 50% improvement of mob/demob time by more than 100% improvement of transportation → whole equipment as one piece without assembling/dismantling of parts improvement of producti
Slide 17: New Lime-C-shuttle and mixing tools
New Technologies New Lime-C-shuttle and mixing tools improved effectiveness of dry mixing with improved mixing process (quality assurance) reduction in material consumption by improved feeding mechanism reduction in mobilisation and preparation time with labour saving appliance
Slide 18: New mixing plants for concrete-vibro columns
New Technologies New mixing plants for concrete-vibro columns independence from external concrete/material supply just-in-time mixing of material, reduction of over consumption, wastage reduction of material costs, independence from transport problems
Slide 19: New products/processes introduced to new markets
New Technologies New products/processes introduced to new markets in the past Lime Column Method (dry mixing)→ Continental Europe, SEA Compaction grouting → Continental Europe, North Africa Controlled Modular Columns → North Africa Super jet grouting → Continental Europe, America Wet mixing/ jet gro
Slide 20: How do we introduce new technologies?
New Technologies How do we introduce new technologies? Group Technolgy Committee improves transfer of information between business areas (knowledge engineering) regular product line meetings to transfer technical design requirements, advantages against substitution products international J.V. agreem
Slide 21: How do we transfer technologies?
New Technologies How do we transfer technologies? Initial step Internal information transfer of technical knowledge (design) technical limitations, quality assurance estimation of costs, productivity, equipment requirements marketing options, advantages, disadvantages against existing products in th
Slide 22: Benefits of Technology Transfers
New Technologies Benefits of Technology Transfers more alternatives to find best solution for the client´s benefit to protect cost leadership in recessive markets short cut for introduction of new technologies into new markets effective utilisation of R&D resources to cover more opportunities protec
Slide 23: Keller's Growth Formula: Smart Acquisitions and Controlled Organic Growth
Keller’s Growth Formula Smart Acquisitions and Controlled Organic Growth Bob Rubright Managing Director Keller North America June 2004
Slide 24: No. 1 US Ground Engineering Specialist
No. 1 US Ground Engineering Specialist Suncoast Case Hayward Baker McKinney
Slide 25: Keller North America 2003
Keller North America 2003 a $450m business in 2003 operating profit of $31.6M…7.1% on turnover a synergistic mix of 13 acquisitions and controlled organic growth
Slide 26: Keller North America 2003
Keller North America 2003 [= _«$2M In The Beginning Hayward Baker 18M Hayward Baker Woodbine 4M. | Total $157M Jaques Co. 2M Atlanta (NCC) 9M Denver Grouting 5M TCDI 8M FSI 8M Case Foundation Company 30M Smith Drilling/Case Atlantic 6M [== SUNCOAST Post-Tension Total $152M Suncoast PT 134M McKinney
Slide 27: Keller North America: 1982 – 2003
Keller North America: 1982 – 2003 Keller has done an outstanding job of acquiring and growing businesses, especially in the US How have we done it?
Slide 28: Keller's Formula for Growth
Keller’s Formula for Growth #1 Pick a future winner #2 Pay attention to culture #3 Structure for growth #4 Empowerment, with strong controls
Slide 29: #1 – Pick a Future Winner
#1 – Pick a Future Winner Hayward Baker: A key Keller acquisition, has been the foundation for 8 ‘bolt-ons’ and significant organic growth
Slide 30: #1 – Pick a Future Winner
#1 – Pick a Future Winner a sound business premise Hayward Baker proved to be the ‘delivery vehicle’ for other Keller technology in the US people who are passionate about the business … but don't own it! a core of energetic employees, truly excited about their company and its prospects weaknesses in
Slide 31: #1 – Pick a Future Winner: The Rest of the Story
#1 – Pick a Future Winner The Rest of the Story… Hayward Baker has proved to be one of the best of Keller’s acquisitions by growing almost tenfold through bolt-ons and organic growth premium margins and prestigious contracts have made Hayward Baker the envy of the industry geographic presence extend
Slide 32: #2 – Pay Attention to Culture
#2 – Pay Attention to Culture always respect the culture of the business being acquired the leading cause of failure in acquisitions which fail to live up to expectations is the improper handling of ‘cultural’ issues Keller works hard to understand cultural issues before committing to the deal we th
Slide 33: #2 – Pay Attention to Culture: McKinney
#2 – Pay Attention to Culture McKinney: An example of cultural differences
Slide 34: #2 – Pay Attention to Culture: McKinney Drilling
#2 – Pay Attention to Culture McKinney Drilling Co. acquired at the end of 2002 2003 sales of $64M ‘family’ owned since 1938 a drilled shaft business very different from Case, Keller’s other US drilled shaft business after extensive visits and discussions, Keller decided to run the business on a sta
Slide 35: #2 – Pay Attention to Culture: The Rest of the Story
#2 – Pay Attention to Culture The Rest of the Story… acquisition disturbance impacted early results followed by a clear improvement second year on-budget and a positive, succession driven reorganisation plan in effect
Slide 36: #3 – Structure for Growth
#3 – Structure for Growth Growth from synergies cross fertilisation of products and customers benefits of increased financial strength and expertise shared technical and R&D support cost efficiencies Organic growth developing new markets opening of new offices
Slide 37: #3 – Structure for Growth: TCDI
#3 – Structure for Growth TCDI – Synergy from a bolt-on acquisition
Slide 38: TCDI – Synergy from a bolt-on acquisition
#3 – Structure for Growth TCDI — Synergy from a ‘bolt-on’ acquisition. acquired in August, 2000: 2003 sales of $12M General Manager was a minority owner (15%) who wanted to be part of Hayward Baker added other Keller technologies and financial strength to the strong local presence of the acquisition
Slide 39: #3 – Structure for Growth: Suncoast PT
#3 –Structure for Growth Suncoast PT – A bright future through organic growth
Slide 40: Suncoast PT – A bright future through organic growth
#3 –Structure for Growth Suncoast PT— A bright future through organic growth acquired in September 2001 2003 sales of $153M organic growth opportunities: demographics/geographic expansion building code changes technology transfer Suncoast is expanding its locations and professional staff to capitali
Slide 41: #4 – Empowerment, with Strong Controls
#4 – Empowerment, with Strong Controls Keller’s highly decentralized structure allows decisions to be taken locally and improves responsiveness good people usually make good decisions when empowered to do so the quality of our people is one of the keys to our competitive edge Keller has been able to
Slide 42: #4 – Case Foundation Company
#4 – Empowerment, with Strong Controls Case Foundation Company — Living up to its potential from within
Slide 43: Case Foundation Company – Living up to its potential from within
#4 – Empowerment,with Strong Controls Case Foundation Company— Living up to its potential from within acquired in 1994 2003 sales of $71M before acquisition, Case management was distracted by failed diversification attempts Keller’s long term view, strong controls and incentives for key managers re-
Slide 44: Keller's Growth Formula
Keller’s Growth Formula smart acquisitions and controlled organic growth pick a future winner pay attention to culture structure for growth empowerment, with strong controls
Slide 45: Summing up
Summing up growth enabled by effective business model solid organic growth record new markets and new offices strong track record of acquisition success continued focus on technical innovation transfer around Group’s network cost leader in mature markets good long term record of growth in EPS and DP