Keller Group plc Full year results 2018 4 March 2019 keller.com
Cautionary statements This document contains certain ‘forward looking statements’ with For a more detailed description of these risks, uncertainties and respect to Keller’s financial condition, results of operations and other factors, please see the Risk Management approach and business and certain of Keller’s plans and objectives with respect Principal Risks section of the Strategic Report. to these items. All written or verbal forward looking statements, made in this Forward looking statements are sometimes, but not always, document or made subsequently, which are attributable to Keller or identified by their use of a date in the future or such words as any other member of the group or persons acting on their behalf ‘anticipates’, ‘aims’, ‘due’, ‘could’, ‘may’, ‘should’, ‘expects’, are expressly qualified in their entirety by the factors referred to ‘believes’, ‘intends’, ‘plans’, ‘potential’, ‘reasonably possible’, above. Keller does not intend to update these forward looking ‘targets’, ‘goal’ or ‘estimates’. By their very nature forward -looking statements. statements are inherently unpredictable, speculative and involve Nothing in this document should be regarded as a risk and uncertainty because they relate to events and depend on profits forecast. circumstances that will occur in the future. This document is not an offer to sell, exchange or transfer any There are a number of factors that could cause actual results and securities of Keller Group plc or any of its subsidiaries and is not developments to differ materially from those expressed or implied soliciting an offer to purchase, exchange or transfer such securities by these forward-looking statements. These factors include, but in any jurisdiction. Securities may not be offered, sold or are not limited to, changes in the economies and markets in which transferred in the United States absent registration or an applicable the group operates; changes in the regulatory and competition exemption from the registration requirements of the US Securities frameworks in which the group operates; the impact of legal or Act of 1933 (as amended). other proceedings against or which affect the group; and changes in interest and exchange rates. 2
Aircraft service centre, Rzesow Poland Agenda Summary Financial results Business update Outlook Questions and answers
Summary Underlying Underlying operating operating Underlying profit margin Revenue EPS Order book Dividend £96.6 m 4.3% £2,225 m 79.1p £1.0bn 35.9p Up 7% Down 11% Down 0.9% Down 22% No change Up 5% (Down 8%cc) (Down 20%cc) (Up 11%cc) • Disappointing performance with strong H1 and weak H2. Losses in ASEAN and Waterway, large projects completion in EMEA and mixed performance in North America • Underlying operating profit at £96.6m , an 11% decrease on prior year • Net debt of £286.2m better than consensus, with leverage reduced to 1.7x and good cash generation • Decisive actions to restore and improve performance with significant restructuring in more challenged business units • Healthy order book of £1.0bn • Confidence in prospects - total dividend of 35.9p , a growth of 5% • Expect to show good profit recovery in 2019 4
2018 issues and remediation actions Area Issue Remediation actions • Tough markets and poor • New business unit leadership ASEAN project performance – Waterway • Comprehensive restructuring – significant loss 350 job losses • Exit of product lines (heavy foundations and bridge work) • ASEAN now focused on ground improvement • Waterway reset • Controls enhanced • Very difficult markets – • Significant cost reductions Brazil small loss and restructuring (350 job Franki Africa losses) 5
2018 issues and remediation actions (continued) Area Issue Remediation actions • Steel cost increases and Suncoast • Pricing increases passed margin compression through and margin substantially restored • £7m reduction in YoY profit • Successful completion • Strong improvement in Large project pipeline of two large EMEA EMEA core business projects • Active engagement globally • £29m YoY reduction in on prospects in 2020+ profit 6
Financial results
Summary income statement 2018 (Audited) 2017 (Audited) Non- Non- £m Underlying Total Underlying Total underlying underlying Revenue 2,224.5 - 2,224.5 2,070.6 - 2,070.6 Operating costs (2,129.5) (64.2) (2,193.7) (1,961.9) (1.6) (1,963.5) Amortisation of acquired - (7.9) (7.9) - (9.0) (9.0) intangibles Other operating income - 23.2 23.2 - 0.5 0.5 Share of post-tax profits from 1.6 - 1.6 - - - JVs Operating profit 96.6 (71.6) 25.0 108.7 12.6 121.3 Operating profit margin (%) 4.3% - 1.1% 5.2% - 5.9% Net finance costs (16.1) (0.5) (16.6) (10.0) (0.7) (10.7) Profit before tax 80.5 (72.1) 8.4 98.7 11.9 110.6 Taxation (22.5) 0.3 (22.2) (24.7) 1.6 (23.1) Profit/(loss) for the period 58.0 (71.8) (13.8) 74.0 13.5 87.5 Diluted earnings per share (p) 101.8p - 120.5p 79.1p - (20.6)p Full year dividend per share (p) 35.9 34.2 8
Summary income statement Revenue Total growth 7% FX -4% Constant currency 11% 2018 (Audited) Moretrench 5% Organic 6% Non- £m Underlying Total underlying Operating profit Revenue 2,224.5 - 2,224.5 Total -11% Operating costs (2,129.5) (64.2) (2,193.7) FX -3% Amortisation of acquired Constant currency -8% - (7.9) (7.9) intangibles Moretrench 9% Organic -17% Other operating income - 0.5 0.5 Share of post-tax profits from JVs 1.6 - 1.6 Net financing costs Operating profit 96.6 (71.6) 25.0 US NQ plan 3.1 Other net 3.0 Operating profit margin (%) 4.3% - 1.1% Total increase 6.1 Net finance costs (16.1) (0.5) (16.6) Majority of other increase attributable to Moretrench acquisition Profit before tax 80.5 (72.1) 8.4 Taxation (22.5) 0.3 (22.2) Taxation Effective tax rate 28% Profit/(loss) for the period 58.0 (71.8) (13.8) Prior year included benefit of one-off £9.7m from US tax reforms Diluted earnings per share (p) 79.1p - (20.6)p Dividend Full year dividend per share (p) 35.9 Board recommendation 35.9p Growth of 5% Earnings cover 2.2x 9
Underlying operating profit bridge £m EMEA APAC North America Central items Down £12.3m Down £1.7m Up £2.3m Up £3.1m £12.2 £(15.1) £108.7 £(7.1) £9.2 £3.1 £(3.5) £14 £(18.7) £96.6 £(5.6) £8.6 £3.1 £(29.1) £16.8 2017 2018 US NQ FX Moretrench Suncoast US data Other NA EMEA large Other Project ASEAN/ India/ Other APAC Central 2018 delta centres project mix / plan projects EMEA losses in Waterway Australia project mix / items 2017 to 2018 performance 2017 delta project mix / Australia losses growth performance 2018 2018 (Non- 2017 to performance 2017 2018 2018 2018 recurring) 2018 2018 10
Summary income statement Non underlying operating costs 2018 (Audited) Goodwill 30.1 Asset impairments 22.8 £m Underlying Non-underlying Total Total non cash 52.9 Redundancies, reorganisation 8.5 Revenue 2,224.5 - 2,224.5 Total restructuring 61.4 Other – non-restructuring Operating costs (2,129.5) (64.2) (2,193.7) 2.8 Total 64.2 Amortisation of acquired intangibles - (7.9) (7.9) Other operating income - 0.5 0.5 Amortisation of acquired intangibles Share of post-tax profits from JVs 1.6 - 1.6 Moretrench (nine months) 1.7 All other 6.2 Operating profit 96.6 (71.6) 25.0 Total 7.9 Operating profit margin (%) 4.3% - 1.1% Other operating income Net finance costs (16.1) (0.5) (16.6) Deferred acquisition consideration 0.5 Profit before tax 80.5 (72.1) 8.4 Taxation (22.5) 0.3 (22.2) Statutory loss Profit/(loss) for the period 58.0 (71.8) (13.8) Underlying profit 58.0 Non-underlying items (71.8) Diluted earnings per share (p) 79.1p - (20.6)p Statutory loss (13.8) Full year dividend per share (p) 35.9 11
Cash flow £m 2018 2017 Depreciation/Capex Underlying operating profit 96.6 108.7 Capex/Depreciation 109% Depreciation and amortisation 70.9 68.5 Fleet renewal programme complete Underlying EBITDA 167.5 177.2 Non-cash items 3.6 5.7 Working capital Dividends from joint ventures 0.9 - Volume (Q4 volume +3.6%) (6.6) (Increase)/decrease in working capital 1.5 (40.9) Performance 8.1 Outflows from provisions and retirement benefit (10.1) (5.9) 1.5 liabilities Net capital expenditure (77.1) (74.5) Sale of other non-current assets 3.5 - Cash tax Operating cash flow 89.8 61.6 Reduced from £26m to £16.7m due to reduction in US tax rate and completion of Adjusted operating cash flow to adjusted operating 93% 57% Caspian project profit Net interest paid (15.1) (12.2) Cash tax paid (16.7) (26.0) Free cash flow Free cash flow 58.0 23.4 Strong free cash flow Dividends paid to shareholders (26.3) (21.2) Dividend 2.2x cash cover Acquisitions (77.5) (6.5) Non-underlying items (5.2) 72.6 Acquisitions Foreign exchange movements (5.7) 7.8 Moretrench completed in March 2018 Movement in net debt (56.7) 76.1 Gross consideration $90m Opening net debt (229.5) (305.6) 2018 EBITDA (nine months) $16m Closing net debt (286.2) (229.5) Leverage ratio 1.7x 1.3x 12
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