Keller Group Plc · LSE:KLR
Keller — H1 2016 Earnings Presentation
45 slides from Keller's earnings presentation, Aug 1, 2016
Slide 1: Keller Group Half Year Results
Keller Group Half Year Results 1 August 2016 Valdez, Alaska
Slide 2: Cautionary statements
Cautionary statements This document contains certain ‘forward looking which affect the Group; and changes in interest and statements’ with respect to Keller’s financial condition, exchange rates. results of operations and business and certain All written or verbal forward looking statements, made in
Slide 3: Agenda
Agenda • Highlights • H1 Financial results • Market environment • Progress update • Outlook • Questions and answers 3
Slide 4: Highlights
Highlights • Continued strong evolution in North America and EMEA • Difficult first half in Asia Pacific • Medium term objectives of the Group progressing well • Order book growth +10% year-on-year; increase broadly balanced • Outlook for full year 2016 at lower end of expectations 4
Slide 5: Financial results
Financial results
Slide 6: Projects contributing to half-year growth
Projects contributing to half-year growth Caspian Houston Region Loop Refinery Oil tanks San Changi Francisco Airport Light rail 6
Slide 7: Group income statement
Group income statement* £m H1 2016 H1 2015 % Change Revenue 849.7 755.8 +12% EBITDA 66.5 62.8 +6% Operating profit 35.6 37.7 -6% Net finance cost (5.4) (3.1) Profit before tax 30.2 34.6 -13% Tax (10.2) (12.1) Profit after tax 20.0 22.5 -11% EBITDA % 7.8% 8.3% -0.5bps Operating profit % 4.2% 5.0% -0.
Slide 8: Group income statement (continued)
Group income statement (continued) £m H1 2016 H1 2015 % Change Profit after tax* 20.0 22.5 -11% Exceptional items (5.2) (3.0) Tax on exceptional items 1.2 0.7 Non-controlling interests (0.3) (0.2) Attributable to shareholders 15.7 20.0 Earnings per share* 27.4p 31.1p -12% Dividend per share 9.25p 8.
Slide 9: Operating profit and margin
Operating profit and margin* £m H1 2016 H1 2015 Revenue Op Margin Revenue Op Margin profit profit North America 464.8 33.6 7.2% 415.8 28.4 6.8% EMEA 261.7 13.6 5.2% 210.3 7.0 3.3% APAC 123.2 (9.6) -7.8% 129.7 4.8 3.7% 849.7 37.6 4.4% 755.8 40.2 5.3% Central costs - (2.0) - (2.5) 849.7 35.6 4.2% 755.
Slide 10: North America
East Branch Dam, US North America Summary • Another excellent result in US, helped by a steadily growing market • Good H1 at Hayward Baker, Case and HJ • Bencor acquisition performing well • Outstanding performance from Suncoast - Benefitting from continuing increase in single family home starts • C
Slide 11: EMEA
Sienna Towers, Warsaw EMEA Summary • EMEA result improved substantially - Revenue up over 20%, profit doubled • Largest European businesses all had a good first half - Germany, UK, Poland and Austria • Major Caspian project going well - Now received notices to proceed for US$80m • Markets outside Eu
Slide 12: Asia-Pacific
Stingray Creek, Australia Asia-Pacific Summary • Markets generally very challenging • Results also impacted by project delays and non-recurrence of Wheatstone • APAC merger proceeding to plan - Capability in Asia upgraded - Costs reduced in Australia - Increased collaboration • Australia - Like-for-
Slide 13: Group balance sheet
Group balance sheet £m H1 2016 H1 2015 Goodwill/intangibles 181.5 172.0 Property, plant & equipment 383.7 286.0 Other non-current assets 32.0 21.3 597.2 479.3 Inventories 56.3 50.8 Receivables 534.6 445.2 Payables (423.9) (371.7) Working capital 167.0 124.3 Capital employed 764.2 603.6 Non-current a
Slide 14: Group cash flow statement
Group cash flow statement £m H1 2016 H1 2015 Cash from operations before exceptional items 41.9 18.6 Cash flows from exceptional items (2.1) (25.0) Cash from operations 39.8 (6.4) Capex – net (30.8) (31.0) Interest (5.1) (3.1) Tax (11.0) (17.0) Acquisitions (74.2) (2.7) Dividends (13.7) (12.6) Net c
Slide 15: Cash generation and dividend payments
Cash generation and dividend payments Cash from operations* Dividend per share 180 30 160 25 140 120 20 100 15 80 10 60 40 5 20 0 0 EBITDA Cash from operations 10-year cash conversion Dividend increased or rate of 100% maintained every year since 1994 flotation 10-year EBITDA of £1,212m 10-year cash
Slide 16: Impact of BREXIT
Impact of BREXIT • UK operations likely to be impacted in Q4 - Less than 4% of Group revenues • Main impact is weakening of sterling as most earnings and debt are in foreign currencies - Primarily US dollar • 5% movement in full year average exchange rate amounts to: - £5m change in full year profit
Slide 17: Market environment
Market environment 4 4 4
Slide 18: Market trends play to our strengths
Market trends play to our strengths Urbanisation and more large- 200k people added 1 scale development projects daily to urban areas Increasing land shortage, London redevelopment 2 driving a need to use more - Gateway, Docklands brownfield and marginal land Infrastructure renewal and 1 in 3 German
Slide 19: North American markets
North American markets New Construction growth trajectory US: continued growth but 10 Growth (y-o-y,%) a slight reduction in 5 momentum in the short- 0 term: -5 -10 • Keller tender activity up -15 (up more than 10%) United States Canada and conditions still strong 30 25 • Dodge and IHS Growth (y-o-y
Slide 20: EMEA markets
EMEA markets New Construction growth trajectory Good growth, but some 8 uncertainty remains: 6 • European markets are performing well Growth (y-o-y,%) 4 • Markets outside 2 Europe are more variable but provide 0 good growth -2 opportunities • Some Brexit and -4 Austria France Germany Poland United p
Slide 21: Asia Pacific markets
Asia Pacific markets Challenging circumstances New Construction growth trajectory remain but we are optimistic 14 for the medium / long term: 12 • Australia rebalancing after resources boom 10 Growth (y-o-y,%) • Indian market shows 8 good demand as 6 investment plans are realised and the economy 4 g
Slide 22: Progress update
Progress update
Slide 23: Keller vision and strategy
Keller 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 op
Slide 24: Order book growth +10%
Order book growth +10% Some recent wins • Bulk liquids berth, Mayfield 7, Australia - £20m • Barangaroo, Sydney - £14m • South Hartford Tunnel, US - £12m • Bahrain Airport modernisation - £11m • Follobanen high speed railway, Norway - £10m • Kochi India Oil Project - £6m Tender activity for major pr
Slide 25: Acquisition history
Acquisition history • More than 20 acquisitions since 2000 • Cash returns more than £100m in excess of WACC* • Average ROCE of acquisitions around 24%, with only five below 20% * Including Keller Canada, excluding Canada cash return is more than £200m in excess of WACC Major acquisitions only 25
Slide 26: 2016 acquisitions
2016 acquisitions March Acquisition of Tecnogeo Group, a leading geotechnical company in Brazil Paid £12m (plus possible earn out) April Acquisition of Smithbridge’s Australian marine and bridge assets £2m asset purchase Further potential in second half 26
Slide 27: Strong customer-focused business units
Strong customer-focused business units Progress “…other competitors do not have the same • Global Business knowledge base related to execution, design and Development quality control as Keller…” and Marketing Project Superintendent, Industrial Client, NA team established • Multi-BU tendering activit
Slide 28: Leveraging group scale
Leveraging group scale Procurement • More than 30 new regional supplier pricing programmes • Global equipment deals improved • £4m savings negotiated to date Information technology • Integrating our IT approaches globally • Global supplier agreements 28
Slide 29: Engineering and operational capability
Engineering and operational capability • Global product teams: – Product transfers – Next generation jet grouting and vibro – Innovation in design methods • Data acquisition and monitoring • Equipment and yard efficiencies 29
Slide 30: Investing in our people
Investing in our people • Project Manager Academy: designed to upskill and standardise capabilities throughout Keller • Heath, safety and environment focus: continued investment in workplace safety (5S pilots) and sustainability • Communications investments creating stronger connections between team
Slide 31: Investing in our people
» HELLER Investing in our people 31
Slide 32: Outlook
Outlook
Slide 33: Outlook
Outlook • Our US and main European markets are healthy • Market conditions elsewhere remain mixed • Group order book up 10%, increase spread across all divisions • North America and EMEA are expected to have a strong year • APAC will return to profitability in the second half • Full year Group resul
Slide 34: Questions and answers
Questions and answers
Slide 35: Appendices
Appendices 4 4 4
Slide 36: Introduction to Keller
Introduction to Keller The world’s largest geotechnical contractor • Ground engineering is a niche sub-sector of construction • Growing faster than construction, reflecting: • More pressure to build on brownfield and marginal land • More ambitious development and infrastructure projects Unrivalled g
Slide 37: Ground engineering worldwide
Ground engineering worldwide Piling Ground Specialty Anchors, Post-tension Instrumentation improvement grouting nails, concrete and monitoring minipiles 50% 20% 10% 10% 9% 1% Foundation Foundation Control of Excavation Slab-on-grade Data capture of support support building support foundations struct
Slide 38: Group country split
Group country split 2015 Revenue by country 2014 Revenue by country Total revenue £1,562m Total revenue £1,600m 13% 14% 42% 49% 5% 7% 10% 16% 38
Slide 39: Ten year track record
Ten year track record Revenue 2006 - 2015 (Continuing operations) £m 1800 1,599.7 1,562.4 1600 1,438.2 1400 1,317.5 1,196.6 1,154.3 1200 1,068.9 1,037.9 955.1 1000 857.7 800 600 400 200 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 North America EMEA APAC 39
Slide 40: Ten year track record
Ten year track record Operating Profit 2006 - 2015 (From continuing operations and before exceptional items) £m 140 119.4 120 107.4 103.4 92.0 100 89.3 77.3 77.8 80 60 48.3 43.3 40 28.9 20 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 -20 Head Office Costs North America EMEA APAC 40
Slide 41: Operating margin trend
Operating margin trend Operating margin* 12% 10% Through-the-cycle margin target 8% 6% 4% 2% 0% 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 Operating margin Peak and trough margins recovering from unlikely to repeat historic low * Before exceptional items 41
Slide 42: Dividend history
Dividend history Dividend per share (pence) 30 25 20 15 10 5 0 1994199519961997199819992000200120022003200420052006200720082009201020112012201320142015 Dividend increased or Dividend policy of maintained every year sustainable growth since 1994 flotation 42
Slide 43: 2015 Operating margin and ROCE progression
2015 Operating margin* and ROCE** progression Operating margin ROCE 8% 25% 7% 20% 6% 5% 15% 4% 3% 10% 2% 5% 1% 0% 0% 2011 2012 2013 2014 2015 2011 2012 2013 2014 2015 ROCE and operating Above the 6.5% through- 2015 ROCE of 20.5% margin recovering from the-cycle operating margin (2014: 18.3%) compare
Slide 44: Group financing position
Group financing position £495m of committed facilities, mainly: – £250m bank facility expiring September 2019 – US$40m private placement, repayable August 2018 – US$50m private placement, repayable October 2021 – US$75m private placement, repayable December 2024 Comfortably within all financial cove
Slide 45: US non-residential construction market
US non-residential construction market US Construction put-in-place ($bn) 400 350 300 250 200 150 100 50 - Power/Industrial Office/Commercial Infrastructure/Public Buildings US non-residential market Infrastructure/Public Buildings up 4% up 7% in 2016 Office/Commercial up 17% – Private up 9% Power/I