Keller Group Plc · LSE:KLR
Keller — H1 2017 Earnings Presentation
42 slides from Keller's earnings presentation, Jul 31, 2017
Slide 1: Keller Group plc Half year results 2017
Areal am Tacheles, Berlin Central Europe Keller Group plc Half year results 2017 31 July 2017
Slide 2: Road traffic accident South Africa
Road traffic accident South Africa • 4 July 2017 • Truck collided with two buses carrying Franki Africa employees to the Nkomati Mine project • 18 people died and 15 were injured • Tragic day for everyone in Franki Africa and across the Keller Group • Our deepest sympathies go out to the families, f
Slide 3: Agenda
Agenda • Summary • Financial results • Business update • Outlook • Questions and answers 3
Slide 4: Summary
Summary • Good progress overall • Record first half revenue and strong profit growth: - Strong growth in EMEA - Improved performance in APAC - Lower revenue and profit in North America • Exceptional profit of £21m mainly from Avonmouth sale and insurance proceeds • Record order book of £1.1 billion
Slide 5: Results summary
Results summary Revenue Operating margin Earnings per share £991m 4.4% 35.0p 17% 28% H1 2016: £849.7m H1 2016: 4.2% H1 2016: 27.4p Operating profit Order book Dividend £44.0m £1.1bn 9.7p 24% 20% YOY H1 2016: £35.6m H1 2016: 9.25p 5
Slide 6: Financial results
St Kanzian South East Europe Financial results
Slide 7: Group income statement
Group income statement* £m H1 2017 H1 2016 % Change Revenue 991.1 849.7 +17% EBITDA 78.1 66.5 +17% Operating profit 44.0 35.6 +24% Net finance cost (4.7) (5.4) +13% Profit before tax 39.3 30.2 +30% Tax (13.4) (10.2) -31% Profit after tax 25.9 20.0 +30% EBITDA % 7.9% 7.8% +10 bps Operating profit % 4
Slide 8: Group income statement (continued)
Group income statement* (continued) £m H1 2017 H1 2016 % Change Profit after tax* 25.9 20.0 +30% Non-underlying items Amortisation of acquired intangibles (4.5) (5.0) Exceptional Avonmouth credit 21.0 1.1 Other (0.6) (1.3) 15.9 (5.2) Tax on non-underlying items (0.1) 1.2 Non-controlling interests (0
Slide 9: Operating profit and margin
Operating profit and margin* £m H1 2017 H1 2016 Revenue OP Margin Revenue OP Margin North America 474.5 28.6 6.0% 464.8 33.6 7.2% EMEA 346.4 20.0 5.8% 261.7 13.6 5.2% APAC 170.2 (3.8) -2.2% 123.2 (9.6) -7.8% 991.1 44.8 4.5% 849.7 37.6 4.4% Central costs - (0.8) - (2.0) 991.1 44.0 4.4% 849.7 35.6 4.2
Slide 10: North America Summary
South Harford CSO Tunnel and Shaft, US Case Foundation North America Summary • Overall US market remains solid, but with regional and sectoral variations − Residential strong, infrastructure spend down, commercial mixed • Keller revenue and profit down − Contract margins remain healthy • Hayward Bak
Slide 11: EMEA Summary
Hotel Annapurna, Les Gets Keller France EMEA Summary • Strong growth in both revenue and profit • Largest European businesses all had a good first half − Germany, UK, Poland, Austria • Significant growth in Middle East • Africa and Brazil remain challenging • Order book up more than 30% • Excellent
Slide 12: Asia-Pacific Summary
Cattle Creek Keller Australia Asia-Pacific Summary • Actions taken over 18 months have reduced cost base significantly and positioned us well for market recovery • H1 loss much reduced, but pricing remains difficult in Australia and Singapore • Strong revenue growth in Australia − Not yet seen impro
Slide 13: Group balance sheet
Group balance sheet £m H1 2017 H1 2016 Goodwill/intangibles 178.5 181.5 Property, plant & equipment 398.7 383.7 Other non-current assets 29.8 32.0 607.0 597.2 Inventories 69.5 56.3 Receivables 598.9 534.6 Payables (436.8) (423.9) Working capital 231.6 167.0 Capital employed 838.6 764.2 Non-current a
Slide 14: UK warehousing facility update
UK warehousing facility update • Sold freehold warehousing facility at Avonmouth for £62m − £8m profit on sale • Further £12m of insurance proceeds received • Net loss reduced to £18.7m − Net cash cost £14.3m £m Original 2014 provision 54.0 2016 and 2017 credits: Property value (14.0) Insurance proc
Slide 15: Group cash flow statement
Group cash flow statement £m H1 2017 H1 2016 Cash from operations before non-underlying items (3.7) 41.9 Cash inflows from non-underlying items 8.3 (2.1) Cash from operations 4.6 39.8 Capex – net (31.5) (30.8) Interest (5.9) (5.1) Tax (8.7) (11.0) Acquisitions (3.0) (74.2) Disposals 62.0 - Dividends
Slide 16: Business update
} KELLER Business update
Slide 17: Strategic progress
Strategic progress • Strategy framework rolled out to all business units • Functional and global product teams active and implementing improvements • Organic growth levers beginning to show results • Acquisition pipeline showing promise • On track to achieve £50m gross benefits by 2020 More at Capit
Slide 18: Portfolio management
Portfolio management Restructuring • Canada – further cost reductions and administration moved to Toronto • ASEAN – further cost reductions and a more integrated regional business • Strengthened Hayward Baker on West Coast, US • New branches in Germany and US Acquisitions • GEO-Instruments, North Am
Slide 19: Order book at all time high
Order book at all time high +20% above last year • Total order book now more than Order book (£m constant currency) £1.1 billion 1200 • Broad based 1100 – Geographical spread 1000 CAGR = 14% – No new ultra-large projects 900 Order book split 800 700 600 500 400 2013 2014 2015 2016 2017 19
Slide 20: Notable new contract wins
Notable new contract wins Columbia-Manhattanville Racibórz Dolny flood New York, Micropiles/Anchors reservoir Poland, Vibro White River Bridge Replacement Brenner Base Tunnel Arkansas, Bored The Alps, Jet grouting, piles Polavaram dam and Koolan Island irrigation project Australia, D-wall India, Jet
Slide 21: Outlook
Outlook • Our US and main European markets are robust • Market conditions elsewhere remain mixed • Constant currency order book up 20% • North America and EMEA expected to have a good second half • 2017 full year results in line with expectations 21
Slide 22: Financial performance since listing in 1994
Financial performance since listing in 1994 CAGR = 11% CAGR = 11% CAGR = 8% CAGR = 9% 22
Slide 23: Capital Markets Day
Capital Markets Day • Monday 18 September 2017 • 2pm followed by drinks • Westminster, Central London • Will include presentations by divisional presidents and Group Director, Engineering and Operations 23
Slide 24: Questions and answers
4 > 3 KELLER Questions and answers
Slide 25: 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 26: Appendices
> KELLER Appendices
Slide 27: Keller at a glance
Keller at a glance Every day, people around the world live, work and play on ground prepared by Keller, the world's largest geotechnical solutions specialist established 20 1860 _—10,000 eats employees since 2000 Tobe the world To help create leader in geotechnical infrastructure that improves solut
Slide 28: Well positioned to access global growth opportunities
Well positioned to access global growth opportunities • Keller has roughly a 10% share of the • Clear market leader in North America, markets where we operate today Australia and Sub-Saharan Africa • Prime positions in most established European markets • Strong profile in many developing markets 28
Slide 29: Positive industry trends
Positive industry trends Urbanisation and more large- - Le Grand Paris 1 scale development projects - Kuala Lumpur metro Increasing land shortage, - Changi Airport, Singapore 2 driving a need to use more - Barangaroo, Sydney brownfield and marginal land Infrastructure renewal and - East Branch Dam,
Slide 30: Well placed versus the competition
Well placed versus the competition As industry consolidates, we are well-placed to gain market share Keller Soletanche/Bachy/Menard Bauer (contracting) Trevi (contracting) General contractor-owned Country / regional specific, smaller players Approximate market share (Where we operate today) 30
Slide 31: Resilience through diversity
Resilience through diversity Revenue – by market 2016 Revenue – by product 2016 31
Slide 32: Group country split
Group country split 2016 Revenue by country Total revenue £1,780m 12% 49% 5% 9% 32
Slide 33: 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 34: Geographical market approach
Geographical market approach 34
Slide 35: 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 35
Slide 36: How we manage the group
How we manage the group Group Three North Europe, Asia Pacific Common management approach Divisions America Middle East, Africa Performance High Strategic and Latin management performance framework America leadership and culture 21 Approvals and Specific Functional and Business delegated initiatives
Slide 37: Performance management
Performance management Top tier Middle tier Bottom tier 37
Slide 38: Safety performance
Safety performance • Accident Frequency Rate at all time low • Since introduction in 2013, our Think Safe programme has helped to reduce accidents in our business by around 77% • Out of more than 3,000 contractors worldwide, Austral Construction won Rio Tinto’s Chief Executive’s Safety Award for Bes
Slide 39: A stronger, more unified Keller brand
A stronger, more unified Keller brand 39
Slide 40: 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 % 9 8.5 8 7.5 7 6.5 6 5.5 5 Market still below long-term average, US housing starts continue to increase, forecast to conti
Slide 41: US infrastructure opportunities
US infrastructure opportunities • Keller US revenue from infrastructure around £300m in 2016 • Current work includes bridges, combined sewer outflow (Case) and East Branch Dam (Bencor) • Keller well placed to support infrastructure spending acceleration • Oroville dam issues illustrate national chal
Slide 42: 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