Keller Group Plc · LSE:KLR
Keller — FY2016 Earnings Presentation
55 slides from Keller's earnings presentation, Feb 27, 2017
Slide 1: Keller Group plc Full year results 2016
Keller Group plc Full year results 2016 27 February 2017 Caspian region North East Europe Business Unit
Slide 2: Agenda
Agenda • Summary and business update • Financial results • Strategic progress • Outlook • Questions and answers 2
Slide 3: Summary and business update
Entergy power project, Louisiana, US Hayward Baker Wick Drains Division Summary and business update
Slide 4: 2016: Mixed performance
2016: Mixed performance • Trading in North America and EMEA remained strong with some areas of excellent performance • Asia-Pacific had a very poor year but we have taken the right steps to recover • Order book at all time high, 20% above last year, with some major recent contract wins • Progressing
Slide 5: Results summary
Results summary Revenue Operating margin Earnings per share £1,780m 5.4% 75.9p 14% 2015: £1,562m 2015: 6.6% 12% 2015: 86.4p ROCE Order book Dividend 15.3% 20% YOY 28.5p 2015: 20.5% 2015: 27.1p 5
Slide 6: Markets in 2016
Markets in 2016 Europe, Middle East North America Asia-Pacific and Africa • Steady growth in US • Steady growth in • South East Asia difficult, Northern and Western especially Singapore, • Total construction spend Europe heavy foundation up 4% on 2015 • Southern Europe steady demand and ground impro
Slide 7: Action taken in difficult markets
Action taken in difficult markets • Appropriate response in each market • Base capabilities maintained so well positioned for market recovery 7
Slide 8: A closer look at Asia-Pacific actions
A closer look at Asia-Pacific actions 8
Slide 9: Financial results
Ritz Carlton residences, Miami HJ Foundation Financial results
Slide 10: Group income statement*
Group income statement* £m 2016 2015 % Change Revenue 1,780.0 1,562.4 +14% EBITDA 158.6 155.5 +2% Operating profit 95.3 103.4 -8% Net finance cost (10.2) (7.7) Profit before tax 85.1 95.7 -11% Tax (29.8) (33.0) Profit after tax 55.3 62.7 -12% EBITDA % 8.9% 10.0% -1.1bps Operating profit % 5.4% 6.6%
Slide 11: Group income statement* (continued)
Group income statement* (continued) £m 2016 2015 % Change Profit after tax* 55.3 62.7 -12% Non-underlying items Amortisation of acquired intangibles (9.7) (7.3) Exceptional restructuring charge (14.3) - Exceptional Avonmouth credit 14.3 - Goodwill impairment - (31.2) Other (1.5) (0.9) (11.2) (39.4)
Slide 12: Operating profit and margin*
Operating profit and margin* £m 2016 2015 Revenue Op Margin Revenue Op Margin profit profit North America 952.9 86.9 9.1% 851.2 76.4 9.0% EMEA 552.6 30.2 5.5% 441.5 21.3 4.8% APAC 274.5 (18.0) -6.6% 269.7 11.7 4.3% 1,780.0 99.1 5.6% 1,562.4 109.4 7.0% Central costs - (3.8) - (6.0) 1,780.0 95.3 5.4%
Slide 13: 2016 Operating margin and ROCE progression
2016 Operating margin* and ROCE** progression Operating margin ROCE 8% 25% 7% 20% Group target 6% 5% 15.3% 15% 4% 3% 10% WACC 2% 5% 1% 0% 0% 2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 2016 pre-tax ROCE of 15.3% (2015: 20.5%) compares to a pre-tax WACC of around 10% * Before non-underlying ite
Slide 14: North America Summary
Post-tension system Tempe Town Lake , Arizona Suncoast North America Summary • Another strong year in North America • Outstanding performance from Suncoast − Benefitted from strong residential market in its region and lower steel prices − New automated cut-lines will improve efficiency • Hayward Bak
Slide 15: EMEA Summary
St Kanzian Keller Austria EMEA Summary • Strong growth in revenue and profit • Operating margin improved from 4.8% to 5.5% - highest since 2009 • Driven by main European businesses and project in Caspian region − Best result in Europe for many years • Other markets remain difficult − Middle East rel
Slide 16: Asia-Pacific Summary
Mayfield Wharf, Newcastle, Australia Waterway Constructions Asia-Pacific Summary • Division recorded an £18m loss − Split broadly equally between Asia and Australia • Very difficult conditions in Australia and Singapore − Some pricing down 20% year-on-year • Australian geotechnical businesses fully
Slide 17: Group balance sheet
Group balance sheet £m 2016 2015 Goodwill/intangibles 188.0 160.1 Property, plant & equipment 405.6 331.8 Other non-current assets 30.2 22.9 623.8 514.8 Inventories 59.4 47.3 Receivables 528.5 423.2 Payables (435.4) (348.8) Working capital 152.5 121.7 776.3 636.5 Non-current assets held for sale 54.
Slide 18: UK warehousing facility update
UK warehousing facility update • Property purchased in May 2016 for £62m − On balance sheet as ‘held for sale’ at £54m • Gross annual rental of £4.25m • Insurance recoveries progressing − £7.5m received in 2016, £5.9m in 2017 − Further discussions ongoing • £14.3m exceptional credit in 2016 18
Slide 19: Group cash flow statement
Group cash flow statement £m 2016 2015 Cash from operations before non-underlying items 135.7 142.3 Cash flows from non-underlying items 4.9 (27.5) Cash from operations 140.6 114.8 Capex – net (73.0) (69.9) Interest (11.6) (6.1) Tax (25.3) (44.3) Acquisitions (76.6) (52.5) Dividends (20.5) (19.1) Ne
Slide 20: Cash generation and dividend payments
Cash generation and dividend payments Cash from operations* Dividend per share £m Pence 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 rate of 98% Dividend increased or maintained 10-year EBITDA of £1,212m every year since 1994 flotation 10-y
Slide 21: Strategic progress
> KELLER Strategic progress
Slide 22: Positive industry trends
Positive industry trends Urbanisation and more large- scale development projects Increasing land shortage, driving a need to use more brownfield and marginal land Infrastructure renewal and expansion eg road, rail, power Increasing demand from customers for complete solutions rather than just produc
Slide 23: 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 24: Progressing well against strategy: What has been changing?
Progressing well against strategy What has been changing? • Company is more connected and collaborative • Strategic alignment is much improved • Our capabilities are expanding − Larger projects − Knowledge sharing − Intra-company benchmarking − Product technology • Uncovering much more opportunity 2
Slide 25: Progressing well against strategy: Examples
Progressing well against strategy Examples • Technology transfer: eg Secured first ever diaphragm wall contracts in India and Malaysia • A stronger, more unified Keller brand: Emphasising all our companies are connected and ensuring worldwide brand recognition • Increased business unit collaboration
Slide 26: Targeting improvements
Targeting improvements Gross benefit (£m) • £50m gross benefit by 2020 • Benefit expected to be split evenly between P&L and enhanced competitive positioning • Targeting consistent 20%+ pre- tax Return on Capital Employed 26
Slide 27: Outlook
Keller’s in-house equipment manufacturing Renchen, Germany Outlook
Slide 28: Order book at all time high
Order book at all time high +20% above last year • Some major recent contract wins including the Caspian region extension, Zayed City in Abu Dhabi’s Capital District, the East Port Said Development Complex and Clairwood Logistics Park. • Total order book now more than £1 billion for first time in Ke
Slide 29: We expect US to remain a strong market
We expect US to remain a strong market US Construction spend as % GDP US Housing Starts (000s) Source: IHS global insight and World Bank Source: US Census Bureau Housing Starts Market still below long-term average, US housing starts continue to increase, forecast to continue to grow steadily up 6% i
Slide 30: US infrastructure opportunities
US infrastructure opportunities • Keller US revenue from infrastructure £276m in 2016 • Current work includes bridges, combined sewer outflow (Case) and East Branch Dam (Bencor) • Keller well placed to support infrastructure spending acceleration • Recent Oroville dam issues illustrate national chal
Slide 31: Outlook
Outlook • Long term drivers of market growth remain robust − We are well placed to take advantage of any acceleration in public infrastructure spending − We remain an active consolidator in a fragmented market • Our strategy remains clear and consistent and we’re making good progress − Significant o
Slide 32: Questions & Answers
> 3 KELLER Questions {S Answers
Slide 33: 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 34: Appendices
’ KELLER Appendices
Slide 35: What we do
What we do • Keller is renowned for providing technically advanced and cost effective ground engineering solutions to the construction industry • We offer a wide portfolio of products, unrivalled by our competitors and manufacture our own equipment where there’s a competitive advantage in doing so G
Slide 36: Number one globally with strong local presence
Number one globally with strong local presence • Operations in more Top three in terms than 40 countries of market share in across five 11 countries: continents • United States • 21 business units • Canada • Germany • Strong local • Poland relationships that • Austria keep us responsive • Slovakia a
Slide 37: An excellent reputation and a long and rich history
An excellent reputation and a long and rich history • More than 20 acquisitions since 2000 37 Only larger and most recent acquisitions shown
Slide 38: Ten year track record: Revenue
Ten year track record Revenue 2007 - 2016 (Continuing operations) £m 2,000 1,780 1,800 1,600 1,562 1,600 1,438 1,400 1,318 1,197 1,154 1,200 1,038 1,069 955 1,000 800 600 400 200 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 North America EMEA APAC 38
Slide 39: Ten year track record: Operating profit
Ten year track record Operating profit 2007 - 2016 (From continuing operations and before non-underlying items) £m 140 119 120 107 103 92 100 95 77 78 80 60 43 48 29 40 20 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 -20 Head Office Costs North America EMEA APAC -40 39
Slide 40: Historical performance Operating margin
Historical performance Operating margin Operating margin % 12% 10% 8% 6% 4% 2% 0% 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 40
Slide 41: Keller is well placed versus the competition
Keller is well placed versus the competition As industry consolidates, we are well-placed to gain market share Keller Independent local / regional (country / regional specific, smaller players) Captive local / regional (General contractor-owned) Independent global / equipment manufacturers (Bauer, T
Slide 42: Strong local relationships keep us responsive and competitive locally
Strong local relationships keep us responsive and competitive locally • 21 business units “Other competitors do not have the same knowledge base • Typical revenues of £40m to £100m related to execution, design and quality control as Keller” Project Superintendent, Industrial Client, NA “Having used
Slide 43: Resilience through diversity
Resilience through diversity Revenue – by market 2016 Revenue – by product 2016 43
Slide 44: Well positioned to access global growth opportunities
Well positioned to access global growth opportunities • Keller has a roughly a 10% share of • Clear market leader in North America, the markets where we operate today Australia and Sub-Saharan Africa • Prime positions in most established European markets • Strong profile in many developing markets 4
Slide 45: Group country split
Group country split 2016 Revenue by country 2015 Revenue by country Total revenue £1,780m Total revenue £1,562m 12% 11% 49% 50% 5% 9% 10% 45
Slide 46: Geographical market approach
Geographical market approach 46
Slide 47: Two routes to high margin
Two routes to high margin HJ Foundation North East Europe (Poland) • Mainly ‘construct only’ • ‘Design and construct’ • Few products • Multiple products • Strong market presence • Strong design capability • Highly efficient • Good market share 47
Slide 48: Continued progress on safety
Continued progress on safety • Continued progress on safety • Benchmarking shows our performance but two fatalities is around 50% better than UK • ‘Think Safe’ programme has construction and specialist helped reduce accidents in our construction sectors business by approximately 45% Comparative AFR
Slide 49: A clear organisational model
A clear organisational model Global Function Line product teams Functional Business strategy Product strategy strategy Profit and Loss Best Best practice practice Project execution Minimum Customer Minimum standards management standards People management 49
Slide 50: A stronger, more unified Keller brand
A stronger, more unified Keller brand 50
Slide 51: Management framework includes standard dashboards and internal benchmarking
Management framework includes standard dashboards and internal benchmarking Top tier Middle tier Bottom tier 51
Slide 52: Notable contract awards: East Port Said Development Complex, Egypt
Notable contract awards East Port Said Development Complex, Egypt 52
Slide 53: Notable contract awards: Clairwood Logistics Park, Durban
Notable contract awards Clairwood Logistics Park, Durban, South Africa 53
Slide 54: Notable contract awards: Zayed city infrastructure works
Notable contract awards Zayed city infrastructure works, Abu Dhabi 54
Slide 55: 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. Deploying funds for the benefit of shareholders • Only where the balance sheet allows