Keller Group plc Half year results 2019 29 July 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 profits forecast. risk and uncertainty because they relate to events and depend on This document is not an offer to sell, exchange or transfer any circumstances that will occur in the future. securities of Keller Group plc or any of its subsidiaries and is not There are a number of factors that could cause actual results and soliciting an offer to purchase, exchange or transfer such securities developments to differ materially from those expressed or implied in any jurisdiction. Securities may not be offered, sold or by these forward-looking statements. These factors include, but transferred in the United States absent registration or an applicable are not limited to, changes in the economies and markets in which exemption from the registration requirements of the US Securities the group operates; changes in the regulatory and competition Act of 1933 (as amended). frameworks in which the group operates; the impact of legal or other proceedings against or which affect the group; and changes in interest and exchange rates. 2
Agenda Summary Financial results Business update Outlook Questions and answers
Summary Underlying Underlying operating operating Underlying profit margin EPS Revenue Order book Dividend £37.5 m 3.4% £1,092m 28.5p £1bn 12.6p Down 24% Down 1.2% Up 2% Down 30% No change Up 5% (Down 2% CC) (Down 29% CC) (Down 36% CC) • First half results in line with expectations driven by an increased momentum in the second quarter offsetting a weak start to the year • Year-on-year profit decrease primarily driven by completion of two large EMEA projects in 2018 • Net debt decreased year-on-year by £33.5m to £333.5m - represents 2.1x net debt/EBITDA (on a covenant and IAS 17 basis) • Restructuring programme started in 2018 has progressed well • Reorganisation of North American business, effective January 2020, expected to drive material revenue growth in the medium term • Full year expectations unchanged with stronger second half anticipated CC = Constant currency 4
Summary of management actions Area Issue / opportunity Actions ASEAN • Tough markets and poor • New business unit leadership project performance – • Comprehensive restructuring significant loss in 2018 • Exit of product lines (heavy foundations) • A focus on ground improvement • Returned to profit in H1 • Difficult market Waterway • Waterway restructuring extended conditions and poor and business will cease operations project performance from October 2019 • No material improvement in quality of contract awards 5
Area Issue / opportunity Actions Brazil • Still tough markets • Capacity reduction in 2018 Franki Africa • Further cost actions potentially required in H2 2019 Suncoast • Steel cost increases and • Pricing increases now passed margin compression in through and margin restored 2018 Large project • Successful completion • Steady underlying improvement pipeline of two large EMEA in EMEA core business projects in 2018 • Active engagement globally on prospects in 2020+ North • Potential to combine • Reorganising foundation American capabilities, strengthen businesses to operate as one foundation market position and Keller in each local market, businesses provide platform for offering all products and further growth services, effective January 2020 6
Financial results
Summary income statement H1 2019 2 H1 2018 Underlying Effect of Underlying Non- Total Underlying Non- Total £m (IAS 17 basis) IFRS 16 1 (IFRS 16 basis) underlying (IFRS 16 basis) (IAS 17 basis) underlying (IAS 17 basis) Revenue 1,091.7 - 1,091.7 - 1,091.7 1,075.1 - 1,075.1 Operating costs (1,054.3) 0.8 (1,053.5) (7.4) (1,060.9) (1,026.0) (0.5) (1,026.5) Amortisation of acquired - - - (1.7) (1.7) - (5.8) (5.8) intangibles Other operating income - - - 3.3 3.3 - - - Share of post-tax profits from 0.1 - 0.1 - 0.1 - - - JVs Operating profit 37.5 0.8 38.3 (5.8) 32.5 49.1 (6.3) 42.8 Operating profit margin (%) 3.4% - 3.5% - 3.0% 4.6% - 4.0% Net finance costs (8.6) (2.2) (10.8) - (10.8) (6.9) - (6.9) Profit/(loss) before tax 28.9 (1.4) 27.5 (5.8) 21.7 42.2 (6.3) 35.9 Taxation (8.1) 0.4 (7.7) (10.2) (17.9) (11.8) 1.2 (10.6) Profit/(loss) for the period 20.8 (1.0) 19.8 (16.0) 3.8 30.4 (5.1) 25.3 Diluted earnings per share (p) 28.5 27.1 4.8 40.7 33.7 Interim dividend per share (p) 12.6 12.0 1 The group adopted IFRS 16 on 1 January 2019 using the modified retrospective method of adoption. Under this method, the standard is applied retrospectively with the cumulative effect of initially applying the standard recognised at the date of adoption. As such, comparative information has not been restated. 2 For the first time, the half year results have been subject to review by the group’s external auditors 8
Summary income statement - Underlying Revenue Organic -5% H1 2019 2 Moretrench +3% Constant currency -2% Underlying Effect of Non- Underlying Total £m FX +4% (IAS 17 basis) IFRS 16 1 (IFRS 16 basis) underlying (IFRS 16 basis) Total +2% Revenue 1,091.7 - 1,091.7 - 1,091.7 Operating costs (1,054.3) 0.8 (1,053.5) (7.4) (1,060.9) Operating profit Organic -36% Amortisation of acquired - - - (1.7) (1.7) intangibles Moretrench +7% Constant currency -29% Other operating income - - - 3.3 3.3 FX +5% Share of post-tax profits from Total -24% 0.1 - 0.1 - 0.1 JVs Net financing costs Operating profit 37.5 0.8 38.3 (5.8) 32.5 Increase of £1.7m due to increases in the average level of borrowings, margin and Operating profit margin (%) 3.4% - 3.5% - 3.0% base rates, compounded by FX headwinds. Net finance costs (8.6) (2.2) (10.8) - (10.8) Profit/(loss) before tax 28.9 (1.4) 27.5 (5.8) 21.7 Taxation Taxation (8.1) 0.4 (7.7) (10.2) (17.9) Effective tax rate for 2019 & 2018 28% Profit/(loss) for the period 20.8 (1.0) 19.8 (16.0) 3.8 Dividend Diluted earnings per share(p) 28.5 27.1 4.8 Board recommendation 12.6p Full year dividend per share(p) 12.6 Growth of 5% Earnings cover 2.3x 1 The group adopted IFRS 16 on 1 January 2019 using the modified retrospective method of adoption. Under this method, the standard is applied retrospectively with the cumulative effect of initially applying the standard recognised at the date of adoption. As such, comparative information has not been restated. 2 For the first time, the half year results have been subject to review by the group’s external auditors 9
Underlying operating profit bridge H1 2018 to H1 2019 65.0 North America EMEA APAC Central items Down £10.4m Down £2.2m Down £1.0m Down £1.5m 60.0 (2.3) 4.0 (6.4) 3.2 55.0 3.5 (11.3) 50.0 49.1 45.0 3.7 (5.9) 0.9 (1.0) 40.0 0.8 38.3 37.5 35.0 30.0 H1 H1 H1 2018 2019 2019 (IAS 17 (IAS 17 (IFRS 16 basis) basis) basis) 10
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