Keller Group Plc · LSE:KLR
Keller — H1 2018 Earnings Presentation
37 slides from Keller's earnings presentation, Jul 30, 2018
Slide 1: Keller Group plc Half year results 2018
River Landing Miami, USA Keller Group plc Half year results 2018 30 July 2018
Slide 2: Agenda
Agenda Barcelona Airport Spain • Summary • Financial results • Business update • Outlook • Questions and answers 2
Slide 3: Summary
Capital District Zayed City, Abu Dhabi Summary • Record first half revenue and strong profit growth: - Strong revenue and profit growth in North America - Good underlying performance in EMEA - APAC losses much reduced - profitable Q2 • Healthy order book of £1.0bn • Progressing well against strategi
Slide 4: Results summary
Results summary* Revenue Operating profit Operating margin £1,075m £49.1m 4.6% 8% (15% cc) 12% (22% cc) 0.2% H1 2017: £991m H1 2017: £44.0m H1 2017: 4.4% Earnings per share Order book Dividend 41.0p £1.0bn 12.0p 17% (29% cc) 24% H1 2017: 35.0p 3% YOY H1 2017: 9.7p 4 cc = constant currency * Before n
Slide 5: Group income statement
Group income statement* £m H1 2018 H1 2017 % Change Revenue 1,075.1 991.1 +8% EBITDA 83.5 78.1 +7% Operating profit 49.1 44.0 +12% Net finance cost (6.9) (4.7) -47% Profit before tax 42.2 39.3 +7% Tax (11.8) (13.4) +12% Profit after tax 30.4 25.9 +17% EBITDA % 7.8% 7.9% -10bps Operating profit % 4.6
Slide 6: Group income statement (continued)
Group income statement (continued) £m H1 2018 H1 2017 % Change Profit after tax* 30.4 25.9 +17% Non-underlying items Amortisation of acquired intangibles (5.8) (4.5) Exceptional Avonmouth credit - 21.0 Other (0.5) (0.6) (6.3) 15.9 Tax on non-underlying items 1.2 (0.1) Non-controlling interests (0.9)
Slide 7: Divisional summary
Divisional summary* £m H1 2018 H1 2017 Revenue OP Margin Revenue OP Margin North America 534.3 31.7 5.9% 474.5 28.6 6.0% EMEA 324.7 19.7 6.1% 346.4 20.0 5.8% APAC 216.1 (0.4) -0.2% 170.2 (3.8) -2.2% 1,075.1 51.0 4.7% 991.1 44.8 4.5% Central costs - (1.9) - (0.8) 1,075.1 49.1 4.6% 991.1 44.0 4.4% Con
Slide 8: Group balance sheet
Group balance sheet £m H1 2018 H1 2017 Goodwill/intangibles 187.6 178.5 Property, plant & equipment 429.4 398.7 Other non-current assets 23.9 29.8 640.9 607.0 Inventories 76.9 69.5 Receivables 694.9 598.9 Payables (485.1) (436.8) Working capital 286.7 231.6 Capital employed 927.6 838.6 Other liabili
Slide 9: Group cash flow statement
Group cash flow statement £m H1 2018 H1 2017 Cash from operations before non-underlying items 7.4 (3.7) Cash flows from non-underlying items (0.5) 8.3 Cash from operations 6.9 4.6 Capex – net (38.9) (31.5) Interest (6.7) (5.9) Tax (9.2) (8.7) Acquisitions* (71.4) (3.0) Disposals 3.3 62.0 Dividends (
Slide 10: North America Summary
Wolf Point East Chicago, US North America Summary • Overall market remains solid • Strong revenue and profit growth − Despite poor winter − Contract margins remain healthy • All US foundation businesses had a good first half − Case recovered from difficult 2017 − HJ Foundation performed well in Miam
Slide 11: Moretrench acquisition
Moretrench acquisition • Acquired Moretrench on 29 March 2018 • Renowned US geotechnical Year ended 31 Dec 2017 contractor operating mostly along Revenue US$168m east coast Operating profit US$11m* • Cash consideration of US$90m EBITDA US$16m* • 500 employees * excluding US$2.8m of charges relating
Slide 12: EMEA Summary
Nador West Med Morocco EMEA Summary • Revenue slightly down reflecting completion of major projects • Flat operating profit includes £6m benefit from resolution of open commercial items on major projects • Good performance from Continental Europe, despite harsh winter • Quiet H1 for UK − Targeting s
Slide 13: APAC Summary
Osborne Naval Shipbuilding Precinct Australia APAC Summary • Very strong revenue growth − Both Asia and Australia • Broadly break even result – profitable Q2 • Excellent performance by Austral and India • ASEAN and Keller Australia improving • Waterway challenged by low volumes and project performan
Slide 14: Notable projects
Notable projects Data Centre, Tennessee 1 Three Keller companies in partnership 4 Estates at Aqualina, US 2 World record 183 feet deep CFA 1 3 2 Mostaganem, Algeria 5 3 260,000m of stone columns and 47,500m of bored piles Årstafältet, Sweden 4 Contract with new acquisition, Sivenmark 6 Polavaram Dam
Slide 15: Melbourne's Metro Tunnel Project
Melbourne’s Metro Tunnel Project • New twin 9-km tunnels and five new underground stations • 50:50 joint venture (KIJV) with Intrafor, part of Bouygues Construction • A$200m (£113m) contract • To construct the substructure retention walls and foundation piling for five stations • Most work complete
Slide 16: Organisational changes
Organisational changes Group • Chris Girling, Non-executive Director and Chairman of Audit Committee, to retire after 2019 AGM • Paula Bell joins as a Non-executive Director in September - will become Audit Committee Chairman in January 2019 • Baroness Kate Rock joins as Non-executive Director in Se
Slide 17: Outlook
Hamburg Warburgstraße Germany Outlook • Most of our markets remain robust • Well positioned to take advantage of global industry trends • North America well set for H2 • As expected, EMEA’s H2 revenue and profit will be down in 2018 • APAC expected to report a full year profit • Business improvement
Slide 18: Financial performance since listing in 1994
Financial performance since listing in 1994 2,400 Revenue (£m) 140 Operating profit (£m) 2,000 120 1,600 100 1,200 80 CAGR = 11% CAGR = 11% 60 800 40 400 20 0 0 40 Dividend per share (pence) 1,400 Share price (pence) 35 1,200 30 1,000 25 CAGR = 9% CAGR = 10% 800 20 600 15 10 400 5 200 0 0 TSR of 12%
Slide 19: 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 20: Keller overview
Hard Rock Hotel and Casino Florida, US Keller overview
Slide 21: Keller today
Keller today Every day millions of people around the world live, work and play on ground prepared by Keller Three divisions Our purpose Our vision Our values 22 business units To help create To be the world’s •Integrity infrastructure that improves leading geotechnical •Collaboration £ the world’s c
Slide 22: Keller investment case
Keller investment case We operate in the large and growing global construction and infrastructure market The specialist geotechnical contracting sub-sector has higher margins and favourable market trends We are the number 1 business worldwide given our size, profitability and capabilities (wide prod
Slide 23: Geotechnical market size and share
Geotechnical market size and share Market size Share of addressable market Global geotechnical contracting market bn $52B Geotechnical contracting markets where Keller operates today $27bn Keller today $2.7bn Keller Trevi (contracting) Non-addressable market Soletanche / General contractor- mainly C
Slide 24: Market demand trends play to our strengths
Market demand trends play to our strengths Urbanisation and more large-scale 1 development projects 200,000 people are added daily to urban areas Increasing land shortage, driving a need Most inner city sites 2 to use more brownfield and marginal land are 2nd or 3rd generation Infrastructure renewal
Slide 25: Factors to consider in geotechnical engineering
Factors to consider in geotechnical engineering Site conditions Requirements Loading conditions Constraints • Sand, silt, clay, • Performance • Spread, low intensity • Neighbouring rock, organic (allowable buildings • Slender, high • Loose, soft, stiff, settlements) intensity, sensitive • Noise, vib
Slide 26: Full product range
Full product range • Allows us to make the right choice for the given soil and structure type • Right combination of products leads to optimal solutions 26
Slide 27: Value engineering
Value engineering • Employ around 1,500 geotechnical engineers worldwide; over 200 focused purely on design • 50% of our projects are ‘design and build’ where value engineering can reduce cost by up to 40% and save time Maiden Lane, New York • 57-storey tower, lower Manhattan • Congested site where
Slide 28: 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 with net book value of £350m Keller manufactured fleet • We manufacture specialist equipment in Germany • Available only to Ke
Slide 29: Sustainability at Keller
Sustainability at Keller • Health and safety: AFR <0.25 (vs. industry average c0.8) • Climate change: Carbon Disclosure Project rating A- • Sustainable solutions: Low carbon products eg stone columns and sand compaction, and offer to offset embedded carbon • Quality education: Safety, technical and
Slide 30: 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 31: Financial performance since listing in 1994
Financial performance since listing in 1994 2,400 Revenue (£m) 140 Operating profit (£m) 2,000 120 1,600 100 1,200 80 CAGR = 11% CAGR = 11% 60 800 40 400 20 0 0 40 Dividend per share (pence) 1,400 Share price (pence) 35 1,200 30 1,000 25 CAGR = 9% CAGR = 10% 800 20 600 15 10 400 5 200 0 0 TSR of 12%
Slide 32: Through the cycle financial targets
Through the cycle financial targets • Revenue − Organic growth ahead of market Last five years: Keller 4.9%; relevant construction markets 1.3% − Double digit CAGR including acquisitions Continuation of long term trend • Profitability − ROCE in excess of 20% − £50m of gross benefits from improve
Slide 33: 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. Return capital to shareholders • Only where the balance sheet allows • Unlikely to be
Slide 34: Targeted £50m gross benefits
Targeted £50m gross benefits • Targeting £50m of annualised gross Indicative realisation of £50m of gross benefits benefits by 2020 50 − Half to be incremental profit; half invested to enhance competitive 40 positioning 30 • Benefits expected to accumulate over time 20 − Many are slow burn − Upfront
Slide 35: Cost and efficiency: Where will they come from?
Cost and efficiency Where will they come from? 35
Slide 36: Keller fact sheet
Keller fact sheet • Established 1860, now number 1 geotechnical • About 50% of our contracts are design and build, 50% are contractor globally build only • Revenue by division (FY17): 47% North America, 35% • Contracts over £5m revenue make up under 1% of the EMEA, 18% APAC (only c3% of business in
Slide 37: Investor Relations contact
Investor Relations contact Victoria Huxster Head of Investor Relations +44 20 7616 7575 victoria.huxster@keller.co.uk Victoria Huxster joined Keller in August 2017 and brings 15 years’ of stock market experience – she started her career in Equity Sales at Cazenove and subsequently joined Liberum Cap