Keller Group Plc · LSE:KLR
Keller — FY2015 Earnings Presentation
58 slides from Keller's earnings presentation, Feb 29, 2016
Slide 1: Keller Group Plc Full Year Results 2015
Keller Group Plc Full Year Results 2015 29 February 2016
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 • Financial results • Strategy • Outlook • Questions and answers 3
Slide 4: Highlights
Highlights 4
Slide 5: Highlights
Highlights* Revenue of Order book £1,562.4m Up 15% YOY (2014: £1,599.7m) Operating margin raised to ROCE 6.6% 20.5% (2014: 5.8%) (2014: 18.3%) Earnings per share Total dividend increased to 86.4p 27.1p (2014: 75.3p), up 15% (2014: 25.2p) 2016 outlook in line with expectations * Before exceptional it
Slide 6: Financial results
Financial results 6
Slide 7: Group Income Statement
Group Income Statement* £m 2015 2014 % Change Revenue 1,562.4 1,599.7 -2% EBITDA 155.5 141.9 +10% Operating profit 103.4 92.0 +12% Net finance cost (7.7) (6.9) Profit before tax 95.7 85.1 +12% Tax (33.0) (29.7) Profit after tax 62.7 55.4 +13% EBITDA % 10.0% 8.9% +1.1bps Operating profit % 6.6% 5.8%
Slide 8: Group Income Statement (continued)
Group Income Statement (continued) £m 2015 2014 % Change Profit after tax* 62.7 55.4 +13% Exceptional items (39.4) (56.9) Tax on exceptional items 3.0 0.3 Non-controlling interests (0.8) (1.8) Attributable to shareholders 25.5 (3.0) Earnings per share* 86.4p 75.3p +15% Dividend per share 27.1p 25.2p
Slide 9: Operating Profit and Margin
Operating Profit and Margin* £m 2015 2014 Revenue Op Margin Revenue Op Margin Profit Profit North America 851.2 76.4 9.0% 775.6 59.9 7.7% EMEA 441.5 21.3 4.8% 451.5 12.9 2.9% Asia 108.2 4.5 4.2% 111.3 8.3 7.5% Australia 161.5 7.2 4.5% 261.3 15.7 6.0% 1,562.4 109.4 7.0% 1,599.7 96.8 6.1% Central cost
Slide 10: Operating margin and ROCE progression
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 2015 ROCE of 20.5% Capital employed is net margin recovering from (2014: 18.3%) compares assets, plus net debt and histor
Slide 11: North America Highlights
North America Highlights • Excellent results in US, helped by a steadily improving market – Strong performances from all businesses • Bencor bedding in well – Main work now started on US$135m East Branch Dam project • Canada continues to be challenging – Restructuring has reduced overhead costs by C
Slide 12: EMEA Highlights
EMEA Highlights • Improved performance from largest European businesses – Germany, UK, Poland and Austria • Southern European markets still difficult • Major Caspian region project going well – Received notices to proceed for US$64m • Middle East steady • Another good year from Franki Africa • Marke
Slide 13: Asia Highlights
Asia Highlights • Reduction in profits due to disappointing H1 – H2 in line with 2014 • Malaysia and Singapore impacted by market downturn – Commercial construction down; also oil and gas projects – Won nearly US$50m of work on RAPID petrochemical complex, half for 2016 • Won first major project in
Slide 14: Australia Highlights
Australia Highlights • Good performance from near-shore marine businesses – Austral integration on plan • Foundation contracting businesses struggled in very difficult market conditions – Result boosted by good final settlement on Wheatstone • Three piling companies merged into one – Together with e
Slide 15: Group Balance Sheet
Group Balance Sheet £m 2015 2014 Goodwill/intangibles 160.1 183.5 Property, plant & equipment 331.8 295.6 Other non-current assets 22.9 19.9 514.8 499.0 Inventories 47.3 48.6 Receivables 423.2 408.7 Payables (373.4) (353.2) Working capital 97.1 104.1 Capital employed 611.9 603.1 Other liabilities/pr
Slide 16: Group Cash Flow Statement
Group Cash Flow Statement £m 2015 2014 Cash from operations before exceptional items 142.3 165.4 Cash flows from exceptional items (27.5) - Cash from operations 114.8 165.4 Capex – net (69.9) (61.0) Interest (6.1) (9.6) Tax (44.3) (28.4) Acquisitions (52.5) (5.0) Dividends (19.1) (18.0) Net cash flo
Slide 17: 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 60 10 40 5 20 0 0 2006 2008 2010 2012 2014 EBITDA Cash from operations 10-year cash conversion Dividend increased or rate of 99% maintained every year since 1994 flotation 10-year EBITDA
Slide 18: 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
Slide 19: Strategy
Strategy 19
Slide 20: The ground engineering industry
The ground engineering industry • $50 billion global market • Wide variety of projects • Diverse customer base • Fragmented competition 20
Slide 21: Industry trends play to our strengths
Industry trends play to our strengths Urbanisation and more large-scale 1 development projects Increasing land shortage, driving a need to use 2 more brownfield and marginal land 3 Infrastructure renewal and expansion e.g. road, rail, power Increasing demand from customers for complete 4 solutions r
Slide 22: A strong position but plenty of room to grow
A strong position but plenty of room to grow Keller has a 5% global market share and a 10% share of the markets where we operate today Sources: IHS Global Insight 2014, national statistics organisations, Keller accounts 22
Slide 23: 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 24: Keller's balanced geographic and customer portfolio
Keller’s balanced geographic and customer portfolio Geographic Customer segment revenues revenues 17% North America 23% Infrastructure/ EMEA 37% Public Buildings 28% 55% Asia Pacific Power/Industrial 18% Office/Commercial Residential 22% • Good access to all markets • No overweight exposure to one c
Slide 25: Keller vision
Keller vision Our goal is to be the world leader in geotechnical solutions 25
Slide 26: Keller Strategy – five levers
Keller Strategy – five levers 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 operational capabilities Investing in our people 26
Slide 27: A recent win highlights our organic growth potential
A recent win highlights our organic growth potential Yonge-Eglinton station, Toronto Only a combined Keller offer could have secured this complex C$43m project 27 27
Slide 28: Acquisitions: we aim to continue the momentum from 2015
Acquisitions: we aim to continue the momentum from 2015 • £40m to £60m revenue per • £37m revenue in 2014 annum • Near-shore marine work, • Expanded our product offering consolidating our market to include diaphragm wall position in Australia technology, used in major infrastructure projects • Stren
Slide 29: Geographical market approach
Geographical market approach Rebase and Selectively Grow Non-active recover grow • US • Australia • India • China • Northern • Canada • Latin • Japan Europe • Southern America • Korea • Middle East Europe • Africa • Russia • Malaysia • Indonesia • Singapore 29
Slide 30: Keller Strategy – five levers
Keller Strategy – five levers 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 operational capabilities Investing in our people 30
Slide 31: Strong, customer-focused businesses
Strong, customer-focused businesses • Business units with distinct market approaches • Profit and Loss units with full operational capabilities • Typical revenue is £40m to £100m • Management framework via Group and Divisions Europe, Middle East North America Asia Pacific and Africa Bencor Central E
Slide 32: Management framework includes standard dashboards and internal benchmarking
Management framework includes standard dashboards and internal benchmarking Top tier Middle tier Bottom tier 32
Slide 33: 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 33
Slide 34: Keller Strategy – five levers
Keller Strategy – five levers 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 operational capabilities Investing in our people 34
Slide 35: Opportunity creation
Opportunity creation Wheatstone Caspian region • Global presence allows us to follow the customer • Expansion of our major project capability • Creation of stronger linkages between business units that serve common customers 35
Slide 36: Leveraging 'economies of scale' and 'economies of skill'
Leveraging ‘economies of scale’ and ‘economies of skill’ ‘Economies of skill’ • Specialist skills e.g. legal and contracting • IT systems • Strategic insight ‘Economies of scale’ • Shared back office processing • Procurement 36
Slide 37: Keller Strategy – five levers
Keller Strategy – five levers 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 operational capabilities Investing in our people 37
Slide 38: Enhancing our engineering and operational capabilities
Enhancing our engineering and operational capabilities Core strengths • Designing optimised solutions – around 45% of revenue • Leading product portfolio and ongoing evolution • Ongoing learning from project execution Expanding capabilities • KGS Renchen and equipment investment • Lean and quality t
Slide 39: Global product teams
Global product teams Deep mixing Rigid Auger cast Vibro dry, wet, Driven piles inclusion pile mass Lead region EMEA NA EMEA APAC NA Diaphragm Micro piles / Bored piles Grouting Jet grouting wall anchors Lead region NA NA EMEA NA EMEA • The teams are responsible for continuously improving all aspects
Slide 40: Differentiation through equipment
Differentiation through equipment • Keller manufactures sophisticated, specialist equipment for our use only • Automated operation, data acquisition and diagnostics • Innovation for higher quality, productivity and safety 40
Slide 41: Keller Strategy – five levers
Keller Strategy – five levers 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 operational capabilities Investing in our people 41
Slide 42: A stronger leadership team
A stronger leadership team Executive team Alain Michaelis Chief Executive Mark Kliner John Rubright Wolfgang James Hind Thorsten Holl Sondermann Finance Director President of President of EMEA President of APAC North America Engineering and Operations Director Venu Raju Joseph Hubback Serge Zimmerli
Slide 43: A clear organisational model
A clear organisational model Global Function Line product teams Functional strategy P&L responsibility Product quality Policies and Business strategy procedures Best Winning contracts practices Training and skills R&D Planning Minimum Product standards design Executing 43
Slide 44: Investing in our people
Investing in our people 1.5 Accidents per 100,000 hrs • Creation of a safe and 1 healthy work 0.5 environment 0 2012 2013 2014 2015 • Training and skills Accident Frequency Rate • Building a more ‘connected’ Keller 44
Slide 45: Keller vision and strategy
Keller vision and strategy Vision Our goal is 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 engine
Slide 46: Outlook
Outlook 46
Slide 47: Outlook
Outlook • Markets – US outlook remains positive – No major changes elsewhere • Tender activity remains healthy • Order book up around 15% • 2016 due to be another year of progress 47
Slide 48: Questions?
Questions? 48
Slide 49: Appendix
Keller Group plc Appendix 49
Slide 50: Introduction to Keller
Introduction to Keller The world’s largest independent ground engineering 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 pro
Slide 51: 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 52: 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% 52
Slide 53: Ten year track record: Revenue
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 Asia Australia 53
Slide 54: Ten year track record: Operating Profit
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 Asia Australia 54
Slide 55: 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 55
Slide 56: Dividend history
Dividend history Dividend per share (pence) 30 25 20 15 10 5 0 1994199519961997199819992000200120022003200420052006200720082009201020112012201320142015 Final dividend of 27.1p Dividend increased or Dividend policy of – Up 7.5% maintained every year sustainable growth since 1994 flotation 56
Slide 57: Group financing position
Group financing position £391m 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$75m private placement, repayable December 2024 Comfortably within all financial cove
Slide 58: US non-residential construction market
US non-residential construction market US Construction Put-in-Place ($bn) 400 350 300 250 200 150 100 50 - Infrastructure/Public Buildings Office/Commercial Power/Industrial Total US non-residential Infrastructure/Public Buildings up 6% market up 9% in 2015 Office/Commercial up 17% (up 7% in 2014) P