Keller Group Plc · LSE:KLR
Keller — FY2019 Earnings Presentation
53 slides from Keller's earnings presentation, Mar 3, 2020
Slide 1: Keller Group plc Full year results 2019
Keller Group plc Full year results 2019 3 March 2020 keller.com
Slide 2: Cautionary statements
Cautionary statements This document contains certain ‘forward looking statements’ with For a more detailed description of these risks, uncertainties and respect to Keller’s financial condition, results of operations and other factors, please see the Risk Management approach and business and certain
Slide 3: Agenda
Keller’s new VC-05 Vibrocat Agenda Summary Financial results Business update Strategic development Outlook and summary Questions and answers
Slide 4: Summary
Summary Underlying Underlying operating operating Underlying Revenue profit* margin* EPS* Order book Dividend £2,301m £101.8m 4.4% 83.5p £1bn 40.0p Up 3% Up 5% No change Up 6% No change Up 11% (Up 2% CC) (Up 2% CC) (Up 2% CC) • Results are in line with expectations following a strong second half as
Slide 5: Financial results
Financial results = — “= } KELLER
Slide 6: Summary income statement
Summary income statement 2019 2018 Underlying Effect of Underlying Non- Total Underlying Non- Total £m IAS 17 IFRS 16 IFRS 16 IAS 17 IAS 17 basis IFRS 161 basis underlying basis basis underlying basis Revenue 2,300.5 - 2,300.5 - 2,300.5 2,224.5 - 2,224.5 Operating costs (2,199.4) 2.0 (2,197.4) (28.7
Slide 7: Summary income statement - Underlying
Summary income statement - Underlying Revenue £m 2019 Organic +7 Moretrench +32 Underlying Effect of Underlying Non- Total £m IAS 17 IFRS 16 IFRS 16 Constant currency +39 basis IFRS 161 basis underlying basis FX +37 Total +76 Revenue 2,300.5 - 2,300.5 - 2,300.5 Operating costs (2,199.4) 2.0 (2,197.4
Slide 8: Underlying operating profit bridge 2018 to 2019
Underlying operating profit bridge 2018 to 2019 £m 115.0 North America EMEA APAC Central items Down £4.5m Down £12.4m Up £21.4m Down £2.6m 110.0 6.0 (13.1) 105.0 24.0 (2.6) (2.6) 2.0 103.8 3.2 100.0 101.8 3.3 95.0 96.6 (0.6) (9.1) 90.0 85.0 (4.4) 1.1 80.0 2018 2019 2019 (IAS 17 (IAS 17 (IFRS 16 basi
Slide 9: Summary income statement – IFRS 16 impact
Summary income statement – IFRS 16 impact 2019 IFRS 16 Operating costs £m Depreciation charge on Underlying Effect of Underlying Non- Total £m IAS 17 IFRS 16 IFRS 16 right-of-use assets (25.6) basis IFRS 161 basis underlying basis Operating lease charge 28.0 Revenue 2,300.5 - 2,300.5 - 2,300.5 Other
Slide 10: Summary income statement – Non-underlying
Summary income statement – Non-underlying Non-underlying operating costs £m Waterway restructuring charge (9.2) 2019 ASEAN restructuring provision release 4.3 Other (2.3) Underlying Effect of Underlying Non- Total £m IAS 17 IFRS 16 IFRS 16 Net restructuring charge (7.2) basis IFRS 161 basis underlyi
Slide 11: IAS 17 Cash flow
IAS 17 Cash flow 2019 Depreciation/Capex £m 2018 IAS 17 basis Net capex/Depreciation 75% Underlying operating profit 101.8 96.6 Gross capex/Depreciation 91% Depreciation and amortisation 69.0 70.9 Underlying EBITDA 170.8 167.5 Working capital £m Non-cash items 13.4 3.6 Volume (39.0) Dividends from j
Slide 12: IFRS 16 Balance sheet
IFRS 16 Balance sheet Intangibles Opening £m 153.4 Additions 0.7 Impairment goodwill (20.2) Amortisation acquired (4.3) Amortisation other (0.6) £m 31 December 2019 31 December 2018 FX (4.3) Closing 124.7 Intangibles 124.7 153.4 Tangible fixed assets £m Managed assets Opening 422.0 Tangible fixed as
Slide 13: IAS 17 Net debt profile (£m)
IAS 17 Net debt profile (£m) 2018 2019 365 379 365 368 367 371 351 343 359 358 353 355 343 332 343 334 341 320 312 318 268 286 258 213 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec • Term debt and committed facilities comprise US$125m of US private placements maturing 2021 to 2024 and £375m multi-
Slide 14: Financial modelling considerations
Financial modelling considerations 2019 experience 2020 consideration Trading/profit NA Suncoast margin Recovery of 2018 tariffs Normalised - pending no new tariffs Large projects EMEA reduction Cape Lambert in APAC APAC recovery Return to profit in H2 Profitable in H1 and H2 Portfolio action ASEAN
Slide 15: Phasing H1 vs H2 – Historical patterns
Phasing H1 vs H2 – Historical patterns Revenue split H1 vs H2 Operating profit split H1 vs H2 56% 55% 90% 54% 78% 53% 53% 53% 80% 68% 72% 54% 52% 52% 52% 52% 63% 61% 64% 63% 60% 63% 52% 51% 70% 53% 60% 49% 50% 45% 47% 50% 48% 55% 49% 40% 51% 46% 48% 48% 48% 48% 47% 47% 47% 30% 44% 46% 37% 39% 36% 37
Slide 16: Business update
Business update / E a a = } KELLER
Slide 17: Safety performance
Safety performance • Fewer incidents and no fatalities • 17 major injuries – an area of focus for 2020 • Continued to embed our working platform safety standard helping Accident Frequency Rate (AFR) reduce rig overturns from eight to three Per 100,000 hours • Launched new incident management standar
Slide 18: Insite
Insite A new app to improve safety and make administration easier and quicker on site Piloting and aiming for 100% use in North America by July 2020 18
Slide 19: Environmental, social and governance
Environmental, social and governance • We use the UN Sustainable Development Goals (SDGs) as a framework to guide our activities • In 2019, we started working with the University of Surrey Centre of Environment and Sustainability to apply sustainability best practice across all of our business funct
Slide 20: Healthy order book in excess of £1bn
Healthy order book in excess of £1bn Geographic mix Order book (£m) (Full order book) 1200 North America1 1100 £591m +14% 1000 900 EMEA large projects ASEAN reset EMEA1 800 £287m +11% 700 APAC1 600 £164m +21% 500 400 2012 2013 2014 2015 2016 2017 2018 2019 1Prepared on a constant currency basis 20
Slide 21: North America Operating review
North America Operating review Signature Bridge Miami, United States £m 20191 2018 Constant £m £m currency Revenue 1,333.9 1,161.4 11% Underlying operating profit 77.3 78.6 -6% Underlying operating margin 5.8% 6.8% n/a Order book2 590.9 541.6 +14% 1Prepared on an IAS 17 basis 2Comparative order book
Slide 22: North America reorganisation
North America reorganisation Reorganisation and rebranding of our foundation businesses in North America is progressing well Benefits • Easier for customers to work with us with one company in each local market offering all products and services • More standardised and efficient organisation Financi
Slide 23: EMEA Operating review
EMEA Port Said Phase 2 Egypt Operating review £m 20191 2018 Constant £m £m currency Revenue 679.6 668.2 2% Underlying operating profit 28.1 39.7 -31% Underlying operating margin 4.1% 5.9% n/a Order book2 287.2 273.2 11% 1Prepared on an IAS 17 basis 2Comparative order book stated at constant currency
Slide 24: Early works involvement
HS2 Early works involvement Section C2/3 S1 and S2 • Secured Instrumentation and monitoring package worth c£8m over five years C1 • Early works contracts worth £10m in joint venture with VSL • Negotiating main works currently Section C1 C2/C3 • Carrying out tests and trials worth £5m • Hope to negot
Slide 25: Asia-Pacific Operating review
Asia-Pacific Kununurra Operating review Western Australia £m 20191 2018 Constant £m £m currency Revenue 287.0 394.9 -27% Underlying operating profit 2.8 (18.0) n/a Underlying operating margin 1.0% -4.6% n/a Order book2 164.4 143.2 21% 1Prepared on an IAS 17 basis 2Comparative order book stated at co
Slide 26: Cape Lambert
Cape • Construction of 18 new dolphin structures with heaviest lift of 125t, and 2.4km long approach jetty Lambert • Started December 2019 and due for completion Australia mid 2021 AUD$125m (c£70m) • Completed on ‘live’ iron ore loadout facility contract • Investment of AUD$12m in new plant includin
Slide 27: Strategic development
Strategic development
Slide 28: Vision to actions
Vision to actions Vision Our ambition Strategy How we’ll achieve it Objectives Contributory actions, their Actions deliverables and how we’ll measure success 28
Slide 29: Our vision
Vision Strategy Objectives Actions Our vision To be the leading provider of specialist geotechnical solutions 29
Slide 30: Our strategy
Vision Strategy Objectives Actions To be the preferred international geotechnical specialist contractor focused on sustainable markets and attractive projects, generating Our sustained value for our stakeholders strategy Local businesses will leverage the group’s expertise and scale to deliver engin
Slide 31: Our objectives
Vision Strategy We select sustainable • A leading share in our markets (geography, Objectives chosen markets, profitable Balanced sector and products) in Actions through the cycle portfolio which to set up base • Customer focus businesses, and attractive • Sustained revenue stream projects • Retaine
Slide 32: Actions
Vision Strategy • Dispose of our Brazilian business Objectives Balanced • Exit Chile and Peru Actions portfolio • Complete strategic review of Franki Africa Engineered • Accelerate innovation agenda solutions • Improve equipment utilisation Actions • Improve project execution Operational excellence
Slide 33: Outlook and summary
Outlook and summary } KELLER
Slide 34: COVID-19: potential considerations
COVID-19: potential considerations Direct impact • Revenue: Very diverse revenue stream in terms of geography, sector, customer, products etc and nothing in China • Raw materials: Mainly locally sourced, generally commodity in nature • Direct workforce: Dispersed, fit, flexible workforce • Equipment
Slide 35: Outlook
Outlook Backdrop • Good start to the year • Market fundamentals remain healthy • Quality order book in excess of £1bn • Indirect effects of COVID-19 Drivers • Margin improvement in North America • Key contract wins in EMEA • Sound execution in APAC Leads to expectations for full year • Revenue broad
Slide 36: Summary
Summary 2019 – Significant year of decisive progress – Delivered on expectations – Revised strategy 2020 – Cautiously optimistic – Progressive implementation of the strategy – Another year of continued progress Transitioning to become a more efficient, higher quality business 36
Slide 37: Questions and answers
Questions and answers } KELLER
Slide 38: Summary
Summary 2019 • Significant year of decisive progress • Delivered on expectations • Revised strategy 2020 • Cautiously optimistic • Progressive implementation of the strategy • Another year of continued progress Transitioning to become a more efficient, higher quality business 38
Slide 39: Keller overview
Keller overview = — “= } KELLER
Slide 40: Keller today
Keller today Every day millions of people around the world live, work and play on ground prepared by Keller 3 divisions Our purpose Our vision Our values 23 business units To help create To be the world Integrity infrastructure leader in that improves geotechnical Collaboration 190 the world’s solut
Slide 41: Keller investment case
Keller investment case We operate in the large The specialist geotechnical and growing global contracting sub-sector has construction and higher margins and infrastructure market favourable market trends We are the number one geotechnical specialist contractor worldwide 1 given our geographic presen
Slide 42: Geotechnical market size
Geotechnical market size Global geotechnical contracting market $55bn Geotechnical contracting markets where Keller operates today $25bn Keller today $3bn Non-addressable market mainly China, Korea, Japan and Russia Sources: IHS Markit 2019, National statistics organisations. Keller accounts. Amount
Slide 43: Specialist versus generalist business model
Specialist versus generalist business model Project lifespan Keller General contractor Ground engineering General construction • Early stage • Longer, larger projects • Lower cyclicality • National focus • Specialist design capability • Higher cyclicality • A mix of contracts • Integration of multip
Slide 44: Market demand trends play to our strengths
Market demand trends play to our strengths More than half the world’s population lives Urbanisation and more large- 01 scale development projects in cities, and 65m people will be added to the urban population every year Increasing land shortage, 02 driving a need to use more brownfield and marginal
Slide 45: Factors to consider in geotechnical engineering
Factors to consider in geotechnical engineering Site conditions Requirements Loading Constraints • Performance conditions • Neighbouring • Sand, silt, clay, rock, organic (allowable • Spread, low buildings settlements) intensity • Loose, soft, stiff, • Noise, vibration hard, porous • Schedule • Slen
Slide 46: Full product range
Full product range Right combination of products leads to optimal solutions for the soil conditions and structure type 46
Slide 47: Value engineering
Value engineering Employ around 50% of our projects are 1,500 geotechnical ‘design and build’ where engineers worldwide; value engineering can over 200 focused purely reduce cost by up to on design 40% and save time Maiden Lane, New York 57-storey tower, lower Manhattan Drilled shafts Congested site
Slide 48: 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 Keller manufactured fleet • We manufacture specialist equipment in Germany • Available only to Keller • 20% of our projects ar
Slide 49: The people advantage
The people advantage Enabling high performance by investing in our people Project Manager Academy • 150 project managers trained globally − Significant improvement in gross margin already being evidenced Field Supervisor Academy • 120 supervisors have attended − Improving both performance and retent
Slide 50: Medium term financial targets
Medium term financial targets Revenue Profitability • Maintain diversity of geographies, • ROCE in excess of 20% sectors and products − Last five years: 13-20.5% Dividend Gearing • Maintaining progressive growth • Headline net debt between through the cycle 1.0x and 1.5x EBITDA 50
Slide 51: Financial performance since listing in 1994
Financial performance since listing in 1994 Revenue (£m) Underlying operating profit (£m) 2,800 140 2,400 120 2,000 100 1,600 CAGR = 10% 80 CAGR = 10% 1,200 60 800 40 400 20 0 0 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2019 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 20
Slide 52: Keller fact sheet
Keller fact sheet • Established 1860, now number one geotechnical • Contracts over £5m revenue make up around 2% of the specialist contractor globally number of contracts, but account for c24% of total • Revenue by division: 58% North America, 30% EMEA, revenue 12% APAC (only <3% of business in UK)
Slide 53: Investor Relations contacts
Investor Relations contacts Caroline Crampton Victoria Huxster Head of Investor Relations Head of Investor Relations +44 20 7616 7575 +44 20 7616 7575 [email protected] [email protected] 53