TIDMKLR
RNS Number : 1510G
Keller Group PLC
02 March 2015
For immediate release Monday, 2 March 2015
Keller Group plc
Results for the year ended 31 December 2014
Keller Group plc ("Keller" or "the Group"), the international
ground engineering specialist, is pleased to announce its results
for the year ended 31 December 2014.
Results summary:
-------------------------------- ------------ ------------ --------- ----------
2014 2013 % change Constant
currency
% change
-------------------------------- ------------ ------------ --------- ----------
Revenue GBP1,599.7m GBP1,438.2m +11% +20%
-------------------------------- ------------ ------------ --------- ----------
EBITDA* GBP141.9m GBP124.2m +14% +24%
-------------------------------- ------------ ------------ --------- ----------
Operating profit* GBP92.0m GBP77.8m +18% +30%
-------------------------------- ------------ ------------ --------- ----------
Profit before tax* GBP85.1m GBP74.1m +15% +24%
-------------------------------- ------------ ------------ --------- ----------
Earnings per share* 75.3p 73.0p +3% +11%
-------------------------------- ------------ ------------ --------- ----------
Cash generated from operations GBP165.4m GBP132.0m +25% +36%
-------------------------------- ------------ ------------ --------- ----------
Total dividend per share 25.2p 24.0p +5% n/a
-------------------------------- ------------ ------------ --------- ----------
* stated before exceptional itemsof GBP56.9m (2013: GBP22.1m)
before tax
Highlights include:
-- Record revenue of GBP1,599.7m (2013: GBP1,438.2m), up 11%
-- Operating profit* increased by 18% to GBP92.0m, despite an
adverse currency impact of GBP9.3m
-- Operating margin* raised to 5.8% (2013: 5.4%)
-- Profit before tax* increased to GBP85.1m (2013: GBP74.1m)
-- Earnings per share* of 75.3p (2013: 73.0p)
-- Cash from operations of GBP165.4m, representing 117% of EBITDA* (2013: 106%)
-- Total dividend per share of 25.2p (2013: 24.0p), an increase of 5%
Justin Atkinson, Keller Chief Executive said:
"The 2014 results demonstrate the continued strength of the
Group's business model. Our breadth of geographies and capabilities
puts us in a good position to pursue future growth which, coupled
with strong risk management and ongoing self-help measures,
positions us well for the future.
Whilst conditions in our main markets remain mixed, the gradual
upturn in the US, our largest market, the continuing improvements
in our operating performance and our strong order book mean that
the Group is set for another year of good progress in 2015."
For further information, please contact:
Keller Group plc www.keller.co.uk
Justin Atkinson, Chief Executive 020 7616 7575
James Hind, Finance Director
Finsbury
Gordon Simpson, Rowley Hudson 020 7251 3801
A presentation for analysts will be held at 9.30am at The London
Stock Exchange,
10 Paternoster Square, London EC4M 7LS
A live audio webcast will be available from 9.30am and, on
demand, from 2.00pm at
http://www.keller.co.uk/keller/investor/result-centre/latest-results/
Print resolution images are available for the media to download
from www.vismedia.co.uk
Notes to Editors:
Keller is the world's largest independent ground engineering
specialist, providing technically advanced and cost-effective
foundation solutions to the construction industry. With annual
revenue of GBP1.6bn, Keller has approximately 9,000 staff
world-wide.
Keller is the clear market leader in North America, Australia
and Southern Africa; it has prime positions in most established
European markets; and a strong profile in many developing
markets.
Cautionary Statements:
This document contains certain 'forward looking statements' with
respect to Keller's financial condition, results of operations and
business and certain of Keller's plans and objectives with respect
to these items.
Forward looking statements are sometimes, but not always,
identified by their use of a date in the future or such words as
'anticipates', 'aims', 'due', 'could', 'may', 'should', 'expects',
'believes', 'intends', 'plans', 'potential', 'reasonably possible',
'targets', 'goal' or 'estimates'. By their very nature
forward-looking statements are inherently unpredictable,
speculative and involve risk and uncertainty because they relate to
events and depend on circumstances that will occur in the
future.
There are a number of factors that could cause actual results
and developments to differ materially from those expressed or
implied by these forward-looking statements. These factors include,
but are not limited to, changes in the economies and markets in
which the Group operates; changes in the regulatory and competition
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.
All written or verbal forward looking statements, made in this
document or made subsequently, which are attributable to Keller or
any other member of the Group or persons acting on their behalf are
expressly qualified in their entirety by the factors referred to
above. Keller does not intend to update these forward looking
statements.
Nothing in this document should be regarded as a profits
forecast.
This document is not an offer to sell, exchange or transfer any
securities of Keller Group plc or any of its subsidiaries and is
not soliciting an offer to purchase, exchange or transfer such
securities in any jurisdiction. Securities may not be offered, sold
or transferred in the United States absent registration or an
applicable exemption from the registration requirements of the US
Securities Act of 1933 (as amended).
Chairman's statement
Results(1)
I am pleased to report a strong set of results for 2014. Group
revenue rose by 11% to GBP1,599.7m (2013: GBP1,438.2m). While this
increase benefitted from acquisitions made in the second half of
2013, this benefit was broadly offset by the adverse impact of the
strengthening of sterling on the translation of the Group's
overseas revenues. Despite an adverse currency impact of GBP9.3m,
operating profit increased to GBP92.0m, 18% up on the GBP77.8m in
the previous year and profit before tax increased to GBP85.1m
(2013: GBP74.1m). Earnings per share were 75.3p (2013: 73.0p).
We delivered another increase in the Group operating margin from
5.4% in 2013 to 5.8%, marking further progress in raising the
margin towards our through-the-cycle target of 6.5%. The margin
uplift reflects improving conditions in some of our markets, most
notably the US, a continuing drive for improvements in all aspects
of the business and a good performance on several major
projects.
Cash generated from operations was GBP165.4m, representing 117%
of EBITDA (2013: 106%). 2014 was the third year in a row that cash
generated from operations has exceeded EBITDA, reflecting the
Group's relentless focus on improving working capital ratios across
the business and ensuring profits turn into cash.
Year-end net debt was GBP102.2m (2013: GBP143.7m), representing
0.7x EBITDA. Net capital expenditure was GBP61.0m, up on last
year's GBP42.6m and amounting to 1.2x depreciation. This return to
a more normal level of capital expenditure reflects higher revenues
generally and the Group's ongoing investment in higher growth
markets.
During 2014, the Group refinanced its syndicated revolving
credit facilities and raised new debt in the US private placement
market. A GBP250m revolving credit facility expiring in September
2019 was agreed in July, replacing both the GBP170m facility
expiring in April 2015 and the US$150m facility expiring in July
2017. In the fourth quarter, the Group raised US$125m of new US
private placement funds repayable in 2021 and 2024, US$70m of which
was used to repay maturing borrowings.
The financial position of the Group remains very strong. There
is comfortable headroom in the Group's main financing facilities
and we continue to operate well within all of our financial
covenants.
Exceptional items
The 2014 result includes an exceptional charge relating to the
settlement of a dispute on a completed contract of GBP54.0m and a
number of much smaller non-trading exceptional items relating to
acquisitions, which are required to be expensed under IFRS.
The contract dispute relates to a project that the Group's UK
subsidiary, Keller Limited, completed in 2008. The dispute was
subject to litigation proceedings involving a number of parties,
but these were settled in February 2015. The final cost to Keller
is subject to a number of remedial and other actions to be
undertaken as part of the settlement agreement. The exceptional
charge represents management's best estimate of the net cost to
Keller before taking account of future recoveries under applicable
insurances, as these cannot be recognised under IFRS.
After taking account of these exceptional items, the Group's
post-tax result for the year was a loss of GBP1.2m (2013: profit of
GBP30.1m).
Dividends
As a result of these improved underlying results, the Board's
confidence in the business going forward and its commitment to a
progressive dividend policy, the Board has decided to recommend a
final dividend of 16.8p per share (2013: 16.0p per share), to be
paid on 8 June 2015 to shareholders on the register at 13 March
2015. Together with the interim dividend paid of 8.4p, this brings
the total dividend per share for the year to 25.2p (2013: 24.0p),
an increase of 5%. Dividend cover, before exceptional items, for
the full year was 3.0x (2013: 3.0x).
Strategy
The Group's strategy remains to extend further our global
leadership in specialist ground engineering through both organic
growth and targeted acquisitions. We aim to deliver this through
expanding in higher growth markets, developing and transferring
technologies, offering design/build and alternative solutions and
through a programme of business improvement initiatives.
Board
In June 2014, we announced the appointment of Nancy Tuor Moore
as an independent Non-executive Director to the Board and Chairman
of our Health, Safety and Environment Committee. Nancy's extensive
international business experience, together with her proven record
in winning and safely delivering both global and local contracts,
will enable her to make a significant contribution to the Keller
Board.
In September 2014, Justin Atkinson announced his intention to
retire as the Company's CEO by the end of 2015 and we have
commenced a search process to identify his successor. That search
is in progress and we will notify shareholders as soon as we reach
a conclusion. Meanwhile, Justin continues to deliver the Group's
strategy with the full support of the Board and his Executive
management team.
Employees
Over 9,000 employees have contributed to the strong performance
of the Group during 2014. On behalf of the directors, I would like
to thank them for their hard work and efforts. As a Board, we will
continue to provide leadership and oversight in respect of the
Keller culture, creating an environment in which our employees can
thrive.
Outlook
After a relatively quiet period in the summer of 2014, the
Group's contract awards have picked up in recent months. As a
result, the order book at the end of January is 8% higher than at
the same time last year. This increase is spread across all the
Group's divisions except Australia, where the Wheatstone contract,
the largest in Keller's history, is now largely complete.
The 2014 results demonstrate the continued strength of the
Group's business model. Our breadth of geographies and capabilities
puts us in a good position to pursue future growth which, coupled
with strong risk management and ongoing self-help measures,
positions us well for the future.
Whilst conditions in our main markets remain mixed, the gradual
upturn in the US, our largest market, continuing improvements in
our operating performance and our strong order book mean that the
Group is set for another year of good progress in 2015.
Operating review
In 2014, the management team delivered strongly against the
Group's strategy. A combination of improving conditions in the US,
our business improvement initiatives and our risk management
programme delivered further growth in revenue and operating profit.
Revenue of GBP1.6 billion was an all-time high for the Group and we
increased the operating margin to 5.8%, marking good progress
towards achieving our through-the-cycle target of 6.5%.
Update on business improvement initiatives
Safety
Safety remains paramount in our business and the Group's "Think
Safe" programme continues to drive improvements and raise
awareness. Whilst we are pleased to report that the Group's AFR
reduced from 0.61 to 0.39 during 2014, one of our employees died in
a work-related accident whilst on a jobsite in Ghana in mid-June.
Such a tragic event reminds us of why we must be relentless in our
efforts to eliminate work-related accidents and increases our
resolve to redouble our efforts on all aspects of the Group's
safety programme. To that end, the Group's "Think Safe" programme
is being updated and relaunched later in 2015.
Large contracts
The more ambitious development projects and infrastructure plans
that have started to appear on the world markets in the past few
years are an indication of the impact of population growth and
related urbanisation. Recognising this market trend, for the last
three years we have been targeting larger contracts, which in our
specialist market start at just GBP5m, to supplement the small to
medium sized contracts which we perform as a matter of routine.
In 2014, we significantly increased the number of orders of
larger contracts and during the year 25% of revenue was from such
contracts. We expect to make further progress in this area.
Risk management
Three years ago we increased our focus on risk management
including the creation of the post of Group Technology & Best
Practice Director. Since that time local risk systems and
procedures have been refreshed, a Risk Management Framework has
been introduced, our Bid Appraisal System has been updated and KPIs
for poorly performing contracts have been introduced. As a result
of these actions, the trend in improved contract performance has
continued. Although the exceptional contract dispute in the UK
predated this recent period, lessons have been learned from this
project and have been disseminated throughout the Group.
Equipment
We have been working hard over recent years to improve the
utilisation of our equipment by transferring equipment to where it
is most needed, scrapping our older or obsolete machinery and by
investing in newer equipment. This has meant that capital
expenditure has increased in 2014 to be above depreciation, a level
we expect to continue for the foreseeable future throughout
business cycles. We have a small plant facility in Southern Germany
where we manufacture a limited amount of proprietary equipment
which cannot be bought on the open market and which we believe
gives us a significant competitive advantage. We have committed to
further investment in this facility in 2015.
Technology
Keller is the global leader in many technologies and has the
broadest range of products in the industry. Much of the Group's
growth over the years has come from transferring technologies from
one geography to another. Developing and transferring technologies
therefore continues to be a major focus for us and is important for
securing future growth.
We identify opportunities for technology transfer, promote
centres of excellence, organise training and workshops in new
technologies and then facilitate and co-ordinate research and
development. Examples of successful technology transfers in the
year include introducing geotechnical products to our relatively
new business in Africa and introducing driven piling into our Asian
businesses.
Conditions in our major markets
In the US, expenditure in private non-residential construction
increased significantly for the second year, with good growth in
most segments. In the residential market, housing starts were up 9%
year on year although this was primarily driven by multi-family
homes as growth in single family starts paused in the second half
of the year. Perhaps most encouragingly, 2014 saw a return to
growth in public expenditure on construction, with year on year
spend up 2% after four years of decline.
In Canada, construction activity in the Western Canadian
resources markets remains subdued but demand in the commercial and
infrastructure segments is holding up well.
Conditions in most of our European markets remain challenging,
particularly in Southern Europe. Looking at Keller's most important
markets, there are some reasonable prospects in both Poland and
Austria, despite the overall markets being relatively quiet; demand
for our services in Germany remains flat; and the UK is the one
market which has returned to steady, albeit slow, growth.
There are good opportunities in the Middle East but the market
remains very competitive. Since we acquired Franki Africa in
November 2013, the construction market in South Africa has picked
up. Whilst there are some exciting opportunities elsewhere in the
continent, a number of them are in the oil and gas arena and their
timing is therefore uncertain.
Construction expenditure in the Group's Asian markets remains
generally robust. There are a number of significant infrastructure
projects in Singapore and the Malaysian construction market is
buoyant. In India, we are continuing to see signs of increasing
confidence after a couple of relatively slow years.
In Australia, construction expenditure across virtually all
segments, including the resources sector, has been subdued for some
time and there are no significant signs of this changing in the
short term. The exception has been in LNG, where Keller has won and
performed successfully a number of large projects, including the
Wheatstone project, although the foundation works for the LNG
plants under construction in Australia are now effectively
complete. Whilst there are some significant infrastructure projects
on the horizon, these are unlikely to come to fruition in 2015.
Operations
North America
Results summary*:
------------------- ---------- ----------
2014 2013
------------------- ---------- ----------
Revenue GBP775.6m GBP699.4m
------------------- ---------- ----------
Operating profit GBP59.9m GBP51.6m
------------------- ---------- ----------
Operating margin 7.7% 7.4%
------------------- ---------- ----------
* before exceptional items
In North America our total revenue increased by 11% as market
conditions continued to improve in our largest market. Adjusting
for acquisitions and translation differences, like-for-like revenue
was up 11%. The full year operating profit of GBP59.9m (2013:
GBP51.6m) reflects further improved profitability in our US
foundation contracting businesses and a solid contribution from our
Canadian businesses.
US
Our US business had a strong second half, building on the good
progress made in the first half as construction activity continues
to gradually improve across the country.
Our largest North American business, Hayward Baker, finished the
year strongly. Its business model of performing a wide range of
small to medium sized contracts across a broad range of products
and geographies benefitted from better conditions across the
market. In addition to this base business workload, there has been
an increasing number of larger contracts performed in recent years,
in line with the Group's strategy. The largest contract undertaken
in the year, where scope changes have taken the total value to
US$56m (GBP36m), was the I-635 highway expansion project in Dallas
where Hayward Baker is installing earth retention systems for new
high-occupancy managed lanes.
Good progress has been made on the Elliott Bay seawall project
in Seattle, a project valued at US$41m (GBP25m), where the business
is performing jet grouting to depths of 85 feet to provide seismic
stability and foundation support for the repair and maintenance of
a 0.7 mile section of the 100 year old seawall. Hayward Baker also
worked successfully with HJ, our piling business based in Miami, to
deliver projects at Oceana Bal Harbour and One Ocean with
augercast, wet soil mixing, sheet piling and tie back anchor
technology. This is an excellent example of combining the local
presence of one company with the products and solutions of another
to give a competitive advantage in the market place.
Our other piling companies, Case and McKinney, performed well in
the year. McKinney had a good broad based result across the
southern and eastern states and Case, which undertakes larger
contracts, worked on projects such as the foundations for a mixed
use high rise building on the Chicago River and the installation of
catenary poles on an AMTRAK high speed rail line in the
north-east.
Suncoast continued to experience improving profitability despite
the slight softening of the single family home market in the
summer. Suncoast's high-rise business performed particularly well
on the back of more commercial developments and a significant
increase in multi-family home starts, as an increasing number of
people choose to live in such accommodation.
Canada
In order to consolidate operations and speed up the transfer of
technology into the Canadian marketplace, in the second half of the
year we successfully merged our Toronto-based geotechnical
business, Geo-Foundations, into the larger Keller Canada. This
move, which led to some cost savings in the Toronto area, has
resulted in a more focussed business in eastern Canada. After a
disappointing first half, the Canadian results improved in the
second half with full year revenue of approximately C$190m and an
operating margin of around 5%.
Europe, Middle East & Africa (EMEA)
Results summary*:
------------------- ---------- ----------
2014 2013
------------------- ---------- ----------
Revenue GBP451.5m GBP399.2m
------------------- ---------- ----------
Operating profit GBP12.9m GBP6.8m
------------------- ---------- ----------
Operating margin 2.9% 1.7%
------------------- ---------- ----------
* before exceptional items
Revenue in EMEA as a whole increased by 13% in 2014, largely due
to the acquisition of Franki Africa in November 2013. Like-for-like
revenue was 5% up on 2013. Operating profit nearly doubled and the
margin increased by 1.2% to 2.9%, reflecting the benefit of
management self-help measures.
Europe
Despite the continued challenging markets in Europe, our
businesses improved their performance through a focus on cost
control, risk management and careful contract selection.
Our Polish business had a particularly good year, much improved
on the prior period as the infrastructure market offered some good
opportunities despite a competitive backdrop. Germany also reported
an excellent result as it continues to adapt to the difficult
climate in which it operates.
The UK successfully completed its large projects at Crossrail
and Victoria Station.
After a very difficult winter-affected first half, the Austrian
business picked up in the second half and finished the year ahead
of 2013. Work performed during the year included a technically
complex project at the Semmering railway tunnel in the south of the
country. On 23 February 2015, Keller Austria announced another
large infrastructure rail contract, a major EUR31.2m (GBP23.1m)
project on the Koralm railway line between Graz and Klagenfurt.
The results were not as good in Southern Europe with the French
market weak and business remaining very challenging on the Iberian
Peninsula. Our Iberian business returned a small loss on revenues
20% lower than the previous year.
The European business has continued to move people and equipment
around the region to those areas where there is more work and to
support our major projects initiative. A good example of this was
in reallocating resources from Eastern Europe to the Caspian region
following the award of the major project in that area last
December.
Middle East and Africa
Competition in the Middle East remains tough but the Group
increased both its revenue and profit from the region. This
performance was aided by a good result in Saudi Arabia and a number
of contract wins in Qatar where, from a standing start, we are
building a reputation for reliability and quality.
Franki Africa performed in line with expectations in its first
year as a Keller subsidiary. The integration has been successfully
completed and a number of technology workshops have been held to
introduce Keller's grouting and ground improvement technologies
into the region. We have already successfully performed some jet
grouting jobs in South Africa. Elsewhere, the Group has undertaken
significant contracts in a number of other African countries, most
notably Ghana and Algeria.
Latin America
We have carefully expanded our sales network to cover the key
markets in Latin America: Rio de Janeiro and Sao Paulo in Brazil,
Chile, Peru, Panama and Mexico. Our business in Brazil is now well
established and, elsewhere, we have carried out a number of small
projects involving small diameter techniques, piling and ground
improvement works.
Asia
Results summary:
------------------ ---------- ---------
2014 2013
------------------ ---------- ---------
Revenue GBP111.3m GBP96.2m
------------------ ---------- ---------
Operating profit GBP8.3m GBP9.0m
------------------ ---------- ---------
Operating margin 7.5% 9.4%
------------------ ---------- ---------
Revenue grew by 16% in Asia and by more than 20% on a constant
currency basis, helped by investment in people and equipment and
the transfer of technologies. The reduction in the operating margin
in 2014 reflects the impact of one major project that was bid and
successfully delivered in the year at a lower than average
margin.
ASEAN region
Keller's Malaysian business had another excellent year operating
in a strong construction market. During the year, we further
expanded our piling business in Malaysia and established a presence
in Johor, a province just over the border from Singapore which is
currently benefitting from substantial industrial and commercial
investment. As previously announced, in August we acquired a small
Malaysian driven piling business, Ansah, broadening our product
offering in the region. Keller Malaysia now offers a full range of
foundation services and civil works.
In Singapore, Resource Piling completed the major Sengkang
hospital project ahead of schedule, on budget and safely. The
project included a number of different technologies such as piling,
diaphragm wall construction and micro-tunnelling. In January 2015,
we were awarded a major contract at Changhi airport comprising
vibrocompaction of the ground as part of the land preparation works
for a major expansion of the airport. The contract is for a total
amount of S$56m (GBP28m).
India
Keller India had a much improved performance in 2014 and
prospects for 2015 look encouraging. We completed a number of large
design and build LNG-related projects to schedule and safely during
the year using both bored piling and ground improvement
technologies.
Australia
Results summary:
------------------ ---------- ----------
2014 2013
------------------ ---------- ----------
Revenue GBP261.3m GBP243.4m
------------------ ---------- ----------
Operating profit GBP15.7m GBP15.6m
------------------ ---------- ----------
Operating margin 6.0% 6.4%
------------------ ---------- ----------
Australian dollar revenue increased by 21% and operating profit
by 14%. However, when translated into sterling at the relevant
exchange rates revenue was up only 7% and operating profit was
flat. The operating margin declined somewhat as the 2013 result
benefitted from an excellent result on the conclusion of a major
project.
Waterway Construction had a successful 2014 working on contracts
such as the Brisbane City Council wharf upgrade programme and the
Overseas Passenger Terminal in Sydney Harbour. The other Australian
businesses, however, found the year more challenging, mainly due to
the subdued state of the market.
The piling for the onshore LNG processing plant at Wheatstone,
the Group's largest ever project, is almost complete with 24,000
piles safely delivered and for which we have received the Chevron
Project Director's Award for outstanding performance and the
Bechtel Model Safety and Behaviour Award. With the challenging
market conditions and the completion of Wheatstone representing the
last of the foundations work on LNG projects under construction in
Australia, the year ahead for Keller Australia will be difficult.
Management has already begun to implement a number of self-help
initiatives to streamline the business and to obtain cost savings
and efficiencies in their management of equipment.
Frankipile received an award for Sustainable Achievement and
Leadership from Exxon Mobil in relation to their work on a major
LNG project in Papua New Guinea.
Financial review
Results
Trading results(1)
Group revenue for the year was up 11% on 2013. Stripping out the
adverse effects of foreign exchange movements and adjusting for
acquisitions, 2014 revenue was 12% up on 2013, with increases in
all divisions.
EBITDA was GBP141.9m, compared to GBP124.2m in 2013, and
operating profit was GBP92.0m, an increase of 18% on the GBP77.8m
in 2013. The Group operating margin increased from 5.4% to 5.8%.
This is due to a combination of the continuing benefits of our
business improvement initiatives and improving market conditions in
some countries, most notably the US from where Keller derives over
40% of its revenue.
In North America as a whole, which represented 49% of Group
revenue, operating profit increased from GBP51.6m in 2013 to
GBP59.9m in 2014. This was largely attributable to the further
improved profitability of the Group's US foundation contracting
businesses, which are benefitting from the gradual improvement in
the US private non-residential construction sector. There was also
a solid contribution from our Canadian businesses, despite more
challenging market conditions.
In EMEA, conditions in our key markets remain mixed and in those
regions where there have been signs of improvement, recovery
continues to be somewhat fragile. Despite this, both revenue and
operating profit for EMEA were higher than in 2013, helped by the
November 2013 acquisition of Franki Africa. The operating margin
has also benefitted from our ongoing business improvement
initiatives.
Revenue increased in Asia by 16%, with the operating margin
decreasing from 9.4% in 2013 to 7.5%. In constant currency terms,
however, the Asian operating profit was unchanged year on year. The
reduction in margin was mainly due to one large contract which was
bid and successfully delivered at a lower than average margin.
In Australia, the sterling-denominated results have been
affected by the further weakening of the Australian dollar.
Australian dollar revenue and operating profit increased by 21% and
14% respectively, compared to 7% and 1% when translated into
sterling at the average exchange rate. This underlying improvement
is mainly due to a strong performance on the Wheatstone contract,
the largest project the Group has ever performed.
The Group's trading results are discussed more fully in the
Chairman's statement and the Operating review.
Net finance costs
Net finance costs before exceptional items increased from
GBP3.7m in 2013 to GBP6.9m in 2014. This increase is mainly due to
higher average net debt in 2014 as a result of investing nearly
GBP200m in acquisitions in the second half of 2013.
Tax
The Group's effective tax rate before exceptional items was 35%,
up from 32% in 2013. The increase mainly reflects the different
geographic mix of profits, with a higher proportion of the Group's
2014 profit before tax being earned in the US, a country with a
high corporate tax rate. The increase in the effective tax rate is
also due to the impact of some prior year items.
Earnings and dividends
Earnings per share (EPS) before exceptional items increased to
75.3p (2013: 73.0p), an increase of 3%.
This is significantly below the 15% increase in the Group's
profit before tax because of a combination of the higher effective
tax rate in 2014, a GBP1.0m increase to GBP1.8m in the profit
attributable to minorities and a 5% increase in the average number
of shares in issue.
The Board has recommended a final dividend of 16.8p per share,
which brings the total dividend to be paid out of 2014 profits to
25.2p, a 5% increase on 2013. The 2014 dividend is covered 3.0
times by earnings before exceptional items.
Exceptional items
The 2014 result includes an exceptional charge relating to the
settlement of a dispute on a completed contract of GBP54.0m and a
number of much smaller non-trading exceptional items relating to
acquisitions, which are required to be expensed under IFRS.
The contract dispute relates to a project that the Group's UK
subsidiary, Keller Limited, completed in 2008. The dispute was
subject to litigation proceedings involving a number of parties,
but these were settled in February 2015. The final cost to Keller
is subject to a number of remedial and other actions to be
undertaken as part of the settlement agreement. The exceptional
charge represents management's best estimate of the net cost to
Keller before taking account of future recoveries under applicable
insurances, as these cannot be recognised under IFRS.
The non-trading exceptional items relating to acquisitions
totalled GBP2.9m before tax, mainly comprising GBP6.6m of
amortisation of acquired intangible assets and GBP0.5m of costs
relating to acquisitions, partly offset by a GBP4.7m credit in
respect of previously provided contingent consideration which the
Group no longer expects to pay, mainly relating to the acquisition
of Keller Canada.
Cash flow and financing
The Group has always placed a high priority on cash generation
and the active management of working capital. We are therefore
pleased to report that in 2014 cash generated from operations was
GBP165.4m, representing 117% (2013: 106%) of EBITDA before
exceptional items. This continues the Group's excellent record of
converting profits into cash. Year-end working capital was
GBP104.1m, which is well below the level at the end of 2013.
Capital expenditure totalled GBP61.0m, up on last year's
GBP42.6m.
At 31 December 2014, net debt amounted to GBP102.2m (2013:
GBP143.7m). Based on net assets of GBP346.3m, year-end gearing was
30%, compared to 39% at the beginning of the year.
The Group refinanced most of its debt and financing facilities
during 2014, extending maturities, further diversifying the sources
of finance and improving a number of key terms. A new five year
GBP250m revolving credit facility was agreed in July, replacing a
GBP170m facility expiring in April 2015 and a US$150m facility
expiring in July 2017. Later in the year, the Group raised US$125m
through a private placement with US institutions, the proceeds of
which were used in part to repay US$70m of private placement
borrowings which matured in October 2014. The Group's term debt and
committed facilities now mainly comprise US$165m of US private
placements maturing between 2018 and 2024 and the GBP250m
multi-currency syndicated revolving credit facility expiring in
September 2019.
At the year end, the Group had undrawn committed and uncommitted
borrowing facilities totalling GBP197.4m.
The most significant covenants in respect of our main borrowing
facilities relate to the ratio of net debt to EBITDA, EBITDA
interest cover and the Group's net worth. The Group is operating
well within its covenant limits.
Capital structure
The Group's capital structure is kept under constant review,
taking account of the need for and availability and cost of various
sources of finance.
Pensions
The Group has defined benefit pension arrangements in the UK,
Germany and Austria. The Group closed its UK defined benefit scheme
for future benefit accrual with effect from 31 March 2006 and
existing active members transferred to a new defined contribution
arrangement.
The last actuarial valuation of the UK scheme was as at 5 April
2014, when the market value of the scheme's assets was GBP35.8m and
the scheme was 77% funded on an ongoing basis. Following the
valuation, the level of contributions increased marginally to
GBP1.6m a year, a level which will be reviewed following the next
triennial actuarial valuation.
The 2014 year-end IAS 19 valuation of the UK scheme showed
assets of GBP38.2m, liabilities of GBP49.8m and a pre-tax deficit
of GBP11.6m.
In Germany and Austria, the defined benefit arrangements only
apply to certain employees who joined the Group prior to 1991. The
IAS19 valuation of the defined benefit obligation totalled GBP13.8m
at 31 December 2014. There are no segregated funds to cover these
defined benefit obligations and the respective liabilities are
included on the Group balance sheet.
All other pension arrangements in the Group are of a defined
contribution nature.
Management of financial risks
Currency risk
The Group faces currency risk principally on its net assets,
most of which are in currencies other than sterling. The Group aims
to reduce the impact that retranslation of these assets might have
on the balance sheet by matching the currency of its borrowings,
where possible, with the currency of its other net assets. The
majority of the Group's borrowings are held in US dollars, Canadian
dollars, Euros and South African rand, in order to provide a hedge
against these currency net assets.
The Group manages its currency flows to minimise currency
transaction exchange risk. Forward contracts and other derivative
financial instruments are used to hedge significant individual
transactions. The majority of such currency flows within the Group
relate to repatriation of profits, intra-Group loan repayments and
any foreign currency cash flows associated with acquisitions. The
Group's foreign exchange cover is executed primarily in the UK.
The Group does not trade in financial instruments, nor does it
engage in speculative derivative transactions.
Interest rate risk
Interest rate risk is managed by mixing fixed and floating rate
borrowings depending upon the purpose and term of the financing. As
at 31 December 2014, 85% of the Group's third-party borrowings bore
interest at floating rates.
Credit risk
The Group's principal financial assets are trade and other
receivables, bank and cash balances and a limited number of
investments and derivatives held to hedge certain of the Group's
liabilities. These represent the Group's maximum exposure to credit
risk in relation to financial assets.
The Group has stringent procedures to manage counterparty risk
and the assessment of customer credit risk is embedded in the
contract tendering processes. Customer credit risk is mitigated by
the Group's relatively small average contract size, its diversity,
both geographically and in terms of end markets, and by taking out
credit insurance in many of the countries in which the Group
operates. No individual customer represented more than 5% of
revenue in 2014.
The counterparty risk on bank and cash balances is managed by
limiting the aggregate amount of exposure to any one institution by
reference to their credit rating and by regular reviews of these
ratings.
Consolidated income statement
For the year ended 31 December 2014
2014 2014 2013 2013
Before Exceptional Before Exceptional
exceptional items exceptional items
items (Note 2014 items (Note 2013
Note GBPm 5) GBPm GBPm 5) GBPm
GBPm GBPm
-------------------- ------- ------------ ------------ ---------- ------------ ------------ ----------
Revenue 3 1,599.7 - 1,599.7 1,438.2 - 1,438.2
Operating costs (1,507.7) (56.7) (1,564.4) (1,360.4) (21.7) (1,382.1)
-------------------- ------- ------------ ------------ ---------- ------------ ------------ ----------
Operating profit 3 92.0 (56.7) 35.3 77.8 (21.7) 56.1
Finance income 1.5 - 1.5 3.1 - 3.1
Finance costs (8.4) (0.2) (8.6) (6.8) (0.4) (7.2)
-------------------- ------- ------------ ------------ ---------- ------------ ------------ ----------
Profit before
taxation 85.1 (56.9) 28.2 74.1 (22.1) 52.0
Taxation (29.7) 0.3 (29.4) (23.8) 1.9 (21.9)
-------------------- ----------
Profit/(loss) for
the
period 55.4 (56.6) (1.2) 50.3 (20.2) 30.1
-------------------- ------- ------------ ------------ ---------- ------------ ------------ ----------
Attributable to:
Equity holders of
the
parent 53.6 (56.6) (3.0) 49.5 (20.2) 29.3
Non-controlling
interests 1.8 - 1.8 0.8 - 0.8
-------------------- ------- ------------ ------------ ---------- ------------ ------------ ----------
55.4 (56.6) (1.2) 50.3 (20.2) 30.1
-------------------- ------- ------------ ------------ ---------- ------------ ------------ ----------
Earnings/(loss) per
share
Basic 7 75.3p (4.2)p 73.0p 43.2p
Diluted 7 74.2p (4.2)p 71.9p 42.6p
Consolidated statement of comprehensive income
For the year ended 31 December 2014
2014 2013
GBPm GBPm
--------------------------------------------- ------ -------
(Loss)/profit for the period (1.2) 30.1
---------------------------------------------- ------ -------
Other comprehensive income
Items that may be reclassified subsequently
to profit or loss:
Exchange differences on translation
of foreign operations (3.8) (23.9)
Net investment hedge gains/(losses) 2.0 (3.0)
Cash flow hedge (losses)/gains taken
to equity (6.1) 1.8
Cash flow hedge transfers to income
statement 6.1 (1.8)
Items that will not be reclassified
subsequently to profit or loss:
Remeasurements of defined benefit pension
schemes (4.1) (5.7)
Tax on remeasurements of defined benefit
pension schemes 0.2 1.1
---------------------------------------------- ------ -------
Other comprehensive income for the period,
net of tax (5.7) (31.5)
---------------------------------------------- ------ -------
Total comprehensive income for the period (6.9) (1.4)
---------------------------------------------- ------ -------
Attributable to:
Equity holders of the parent (8.6) (1.9)
Non-controlling interests 1.7 0.5
---------------------------------------------- ------ -------
(6.9) (1.4)
--------------------------------------------- ------ -------
Consolidated balance sheet
As at 31 December 2014
2014 2013
Note GBPm GBPm
------------------------------------------ --------- -------- --------
Assets
Non-current assets
Intangible assets 183.5 187.9
Property, plant and equipment 295.6 281.9
Deferred tax assets 10.0 7.9
Other assets 19.9 14.9
------------------------------------------ --------- -------- --------
509.0 492.6
------------------------------------------ --------- -------- --------
Current assets
Inventories 48.6 62.0
Trade and other receivables 408.7 414.5
Current tax assets 4.0 5.4
Cash and cash equivalents 85.6 53.3
------------------------------------------ --------- -------- --------
546.9 535.2
------------------------------------------ --------- -------- --------
Total assets 3 1,055.9 1,027.8
------------------------------------------ --------- -------- --------
Liabilities
Current liabilities
Loans and borrowings (2.7) (48.7)
Current tax liabilities (13.9) (8.8)
Trade and other payables (353.2) (352.4)
Provisions (50.0) (11.3)
------------------------------------------ --------- -------- --------
(419.8) (421.2)
------------------------------------------ --------- -------- --------
Non-current liabilities
Loans and borrowings (185.1) (148.3)
Retirement benefit liabilities (25.4) (23.1)
Deferred tax liabilities (19.7) (21.9)
Provisions (23.3) (4.8)
Other liabilities (36.3) (35.9)
------------------------------------------ --------- -------- --------
(289.8) (234.0)
------------------------------------------ --------- -------- --------
Total liabilities 3 (709.6) (655.2)
------------------------------------------ --------- -------- --------
Net assets 3 346.3 372.6
------------------------------------------ --------- -------- --------
Equity
Share capital 8 7.3 7.3
Share premium account 38.1 38.1
Capital redemption reserve 8 7.6 7.6
Translation reserve 8.3 10.0
Other reserve 8 56.9 56.9
Retained earnings 224.5 247.9
------------------------------------------ --------- -------- --------
Equity attributable to equity holders of
the parent 342.7 367.8
Non-controlling interests 3.6 4.8
------------------------------------------ --------- -------- --------
Total equity 346.3 372.6
------------------------------------------ --------- -------- --------
Consolidated statement of changes in equity
For the year ended 31 December 2014
Share Share Capital Translation Other Hedging Retained Attributable Non-controlling Total
capital premium redemption reserve reserve reserve earnings to equity interests equity
account reserve holders
of the
parent
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
----------------- -------- -------- ----------- ------------ -------- -------- --------- ------------- ---------------- -------
At 1 January
2013 6.6 38.1 7.6 36.6 - - 236.7 325.6 10.1 335.7
Profit for the
period - - - - - - 29.3 29.3 0.8 30.1
----------------- -------- -------- ----------- ------------ -------- -------- --------- ------------- ---------------- -------
Other
comprehensive
income
Exchange
differences
on translation
of foreign
operations - - - (23.6) - - - (23.6) (0.3) (23.9)
Net investment
hedge
losses - - - (3.0) - - - (3.0) - (3.0)
Cash flow hedge
gains
taken to equity - - - - - 1.8 - 1.8 - 1.8
Cash flow hedge
transfers
to income
statement - - - - - (1.8) - (1.8) - (1.8)
Remeasurements
of defined
benefit pension
schemes - - - - - - (5.7) (5.7) - (5.7)
Tax on
remeasurements
of defined
benefit
pension schemes - - - - - - 1.1 1.1 - 1.1
----------------- -------- -------- ----------- ------------ -------- -------- --------- ------------- ---------------- -------
Other
comprehensive
income for the
period,
net of tax - - - (26.6) - - (4.6) (31.2) (0.3) (31.5)
----------------- -------- -------- ----------- ------------ -------- -------- --------- ------------- ---------------- -------
Total
comprehensive
income for the
period - - - (26.6) - - 24.7 (1.9) 0.5 (1.4)
Dividends - - - - - - (15.4) (15.4) (0.2) (15.6)
Share-based
payments - - - - - - 1.9 1.9 - 1.9
Share capital
issued 0.7 - - - 56.9 - - 57.6 - 57.6
Acquisition of
non-controlling
interest - - - - - - - - (5.6) (5.6)
----------------- -------- -------- ----------- ------------ -------- -------- --------- ------------- ---------------- -------
At 31 December
2013
and 1 January
2014 7.3 38.1 7.6 10.0 56.9 - 247.9 367.8 4.8 372.6
(Loss)/profit
for the
period - - - - - - (3.0) (3.0) 1.8 (1.2)
----------------- -------- -------- ----------- ------------ -------- -------- --------- ------------- ---------------- -------
Other
comprehensive
income
Exchange
differences
on translation
of foreign
operations - - - (3.7) - - - (3.7) (0.1) (3.8)
Net investment
hedge
gains - - - 2.0 - - - 2.0 - 2.0
Cash flow hedge
losses
taken to equity - - - - - (6.1) - (6.1) - (6.1)
Cash flow hedge
transfers
to income
statement - - - - - 6.1 - 6.1 - 6.1
Remeasurements
of defined
benefit pension
schemes - - - - - - (4.1) (4.1) - (4.1)
Tax on
remeasurements
of defined
benefit
pension schemes - - - - - - 0.2 0.2 - 0.2
----------------- -------- -------- ----------- ------------ -------- -------- --------- ------------- ---------------- -------
Other
comprehensive
income for the
period,
net of tax - - - (1.7) - - (3.9) (5.6) (0.1) (5.7)
----------------- -------- -------- ----------- ------------ -------- -------- --------- ------------- ---------------- -------
Total
comprehensive
income for the
period - - - (1.7) - - (6.9) (8.6) 1.7 (6.9)
Dividends - - - - - - (17.4) (17.4) (0.6) (18.0)
Share-based
payments - - - - - - 1.9 1.9 - 1.9
Acquisition of
non-controlling
interest - - - - - - (1.0) (1.0) (2.3) (3.3)
At 31 December
2014 7.3 38.1 7.6 8.3 56.9 - 224.5 342.7 3.6 346.3
----------------- -------- -------- ----------- ------------ -------- -------- --------- ------------- ---------------- -------
Consolidated cash flow statement
For the year ended 31 December 2014
2014 2013
GBPm GBPm
------------------------------------------------------ -------- --------
Cash flows from operating activities
Operating profit before exceptional items 92.0 77.8
Depreciation of property, plant and equipment 48.0 45.0
Amortisation of intangible assets 1.9 1.4
Profit on sale of property, plant and equipment (0.3) (0.3)
Other non-cash movements 8.9 7.1
Foreign exchange losses 0.1 -
------------------------------------------------------ -------- --------
Operating cash flows before movements in working
capital 150.6 131.0
Decrease/(increase) in inventories 13.9 (22.5)
Decrease/(increase) in trade and other receivables 11.2 (37.4)
(Decrease)/increase in trade and other payables (0.1) 65.5
Change in provisions, retirement benefit and
other non-current liabilities (10.2) (4.6)
-------------------------------------------------------- -------- --------
Cash generated from operations 165.4 132.0
Interest paid (10.1) (5.4)
Income tax paid (28.4) (21.5)
-------------------------------------------------------- -------- --------
Net cash inflow from operating activities 126.9 105.1
-------------------------------------------------------- -------- --------
Cash flows from investing activities
Interest received 0.5 0.4
Proceeds from sale of property, plant and equipment 3.5 3.6
Acquisition of subsidiaries, net of cash acquired (5.0) (200.4)
Acquisition of property, plant and equipment (63.6) (44.8)
Acquisition of intangible assets (0.9) (1.4)
Net cash outflow from investing activities (65.5) (242.6)
-------------------------------------------------------- -------- --------
Cash flows from financing activities
Proceeds from the issue of share capital - 57.6
New borrowings 95.3 118.5
Repayment of borrowings (103.6) (24.2)
Payment of finance lease liabilities (1.2) (0.7)
Dividends paid (18.0) (15.6)
-------------------------------------------------------- -------- --------
Net cash (outflow)/inflow from financing activities (27.5) 135.6
-------------------------------------------------------- -------- --------
Net increase/(decrease) in cash and cash equivalents 33.9 (1.9)
Cash and cash equivalents at beginning of period 50.7 54.8
Effect of exchange rate fluctuations 1.0 (2.2)
-------------------------------------------------------- -------- --------
Cash and cash equivalents at end of period 85.6 50.7
-------------------------------------------------------- -------- --------
1. Basis of preparation
The Group's 2014 results have been prepared in accordance with
International Financial Reporting Standards ('IFRS') as adopted by
the EU.
The same accounting policies and presentation are followed in
the financial statements that were applied in the preparation of
the Company's published consolidated financial statements for the
year ended 31 December 2013, except for the adoption of:
-- IFRS 10, 'Consolidated financial statements'
-- IFRS 11, 'Joint arrangements'
-- IFRS 12, 'Disclosure of interests in other entities'
-- Amendments to IAS 27, 'Separate financial statements'
-- Amendments to IAS 28, 'Investments in associates and joint
ventures'
-- Amendments to IAS 32, 'Financial instruments:
Presentation'
-- Amendments to IAS 36, 'Impairment of assets'
-- Amendments to IAS 39, 'Financial instruments: Recognition and
measurement'
There is no significant impact on the Group financial statements
as a result of adopting these new and amended standards. There are
no standards, amendments or interpretations that are in issue but
not yet effective that are expected to have a significant impact on
the Group financial statements.
The financial information set out above does not constitute the
Company's statutory accounts for the years ended 31 December 2014
or 2013 but is derived from the 2014 accounts. Statutory accounts
for 2013 have been delivered to the Registrar of Companies. Those
for 2014, prepared under IFRS as adopted by the EU, will be
delivered to the Registrar of Companies and made available on the
Company's website at www.keller.co.uk in March 2015. The auditors
have reported on those accounts; their reports were (i)
unqualified, (ii) did not include references to any matters to
which the auditors drew attention by way of emphasis without
qualifying their reports and (iii) did not contain statements under
section 498(2) or (3) of the Companies Act 2006.
2. Foreign currencies
The exchange rates used in respect of principal currencies
are:
Average for Period end
period
------------------- -------------- -------------
2014 2013 2014 2013
------------------- ------ ------ ------ -----
US dollar 1.65 1.56 1.55 1.65
Canadian dollar 1.82 1.61 1.81 1.76
Euro 1.24 1.18 1.28 1.20
Singapore dollar 2.09 1.96 2.05 2.09
Australian dollar 1.83 1.62 1.90 1.86
------------------- ------ ------ ------ -----
3. Segmental analysis
The Group is managed as four geographical divisions and has only
one major product or service: specialist ground engineering
services. This is reflected in the Group's management structure and
in the segment information reviewed by the Chief Operating Decision
Maker.
2014 2014 2013 2013
Operating Operating
Revenue profit Revenue profit
GBPm GBPm GBPm GBPm
-------------------------------- --------- ----------- --------- -----------
North America 775.6 59.9 699.4 51.6
EMEA(1) 451.5 12.9 399.2 6.8
Asia 111.3 8.3 96.2 9.0
Australia 261.3 15.7 243.4 15.6
-------------------------------- --------- ----------- --------- -----------
1,599.7 96.8 1,438.2 83.0
Central items and eliminations - (4.8) - (5.2)
-------------------------------- --------- ----------- --------- -----------
Before exceptional items 1,599.7 92.0 1,438.2 77.8
Exceptional items (Note 5) - (56.7) - (21.7)
-------------------------------- --------- ----------- --------- -----------
1,599.7 35.3 1,438.2 56.1
-------------------------------- --------- ----------- --------- -----------
2014 2014 2014 2014
2014 2014
Tangible
Segment Segment Capital Capital Depreciation and intangible
assets liabilities employed additions and amortisation assets
GBPm GBPm GBPm GBPm GBPm GBPm
----------------------------- --------- ------------- ---------- ----------- ------------------ ----------------
North America 499.4 (159.9) 339.5 23.3 17.2 251.6
EMEA(1) 283.3 (215.2) 68.1 23.1 18.9 127.4
Asia 84.7 (29.4) 55.3 10.8 5.5 47.4
Australia 85.1 (44.2) 40.9 7.3 8.2 52.6
----------------------------- --------- ------------- ---------- ----------- ------------------ ----------------
952.5 (448.7) 503.8 64.5 49.8 479.0
Central items and
eliminations
(2) 103.4 (260.9) (157.5) - 0.1 0.1
----------------------------- --------- ------------- ---------- ----------- ------------------ ----------------
1,055.9 (709.6) 346.3 64.5 49.9 479.1
----------------------------- --------- ------------- ---------- ----------- ------------------ ----------------
2013 2013 2013 2013
2013 2013
Tangible
Segment Segment Capital Capital Depreciation and intangible
assets liabilities employed additions and amortisation assets
GBPm GBPm GBPm GBPm GBPm GBPm
----------------------------- --------- ------------- ---------- ----------- ------------------ ----------------
North America 487.0 (155.4) 331.6 19.9 15.5 245.5
EMEA(1) 278.6 (141.6) 137.0 12.5 16.9 131.1
Asia 76.7 (25.0) 51.7 4.2 4.8 36.7
Australia 116.5 (63.5) 53.0 9.6 9.0 56.3
----------------------------- --------- ------------- ---------- ----------- ------------------ ----------------
958.8 (385.5) 573.3 46.2 46.2 469.6
Central items and
eliminations
(2) 69.0 (269.7) (200.7) - 0.2 0.2
----------------------------- --------- ------------- ---------- ----------- ------------------ ----------------
1,027.8 (655.2) 372.6 46.2 46.4 469.8
----------------------------- --------- ------------- ---------- ----------- ------------------ ----------------
(1 Europe, Middle East and Africa.)
(2 Central items includes net debt and tax balances.)
Revenue and non-current non-financial assets are analysed by
country below:
Non-current
non-financial
Revenue assets(3)
------------------ -----------------
2014 2013 2014 2013
GBPm GBPm GBPm GBPm
-------------------------------------- -------- -------- -------- -------
United States 666.5 604.0 155.9 137.6
Australia 261.3 243.4 52.6 56.3
Canada 108.2 94.9 122.2 122.0
United Kingdom (country of domicile) 67.5 70.1 19.2 20.4
Other 496.2 425.8 145.0 148.4
-------------------------------------- -------- -------- -------- -------
1,599.7 1,438.2 494.9 484.7
-------------------------------------- -------- -------- -------- -------
(3 Non-current non-financial assets comprise intangible assets,
property, plant and equipment and other non-current non-financial
assets.)
4. Acquisitions
2014 acquisitions
On 14 August 2014, the Group acquired the trade and selected
assets of Ansah Sdn Bhd, a business based in Kuantan, Malaysia, for
an initial cash consideration of GBP3.5m (RM19.0m). GBP1.4m
(RM7.6m) of the purchase price relates to property, plant and
equipment, with the remaining purchase price allocated to goodwill.
Contingent consideration of up to GBP1.5m (RM8.0m) is payable based
on total earnings before interest and tax in the three-year period
following acquisition. The full amount of contingent consideration
is currently provided for.
On 15 May 2014, the Group acquired the remaining 45% minority
shareholding of Keller Engenharia Geotecnica Ltda in Brazil for a
cash consideration of GBP2.8m (R$10.7m) at a premium of GBP1.0m
(R$4.1m) to net book value, which has been taken directly to
reserves.
2013 acquisitions
Keller Canada Franki Africa Geo-Foundations Total
Carrying Fair Fair Carrying Fair Fair Carrying Fair Fair Carrying Fair Fair
amount value value amount value value amount value value amount value value
adjust-ment adjust-ment adjust-ment adjust-ment
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
--------------- --------- -------------- -------- --------- ------------ ------- --------- ------------ ------- --------- ------------ -------
Net assets
acquired
Intangible
assets - 31.5 31.5 2.2 3.2 5.4 - 0.4 0.4 2.2 35.1 37.3
Property,
plant
and equipment 32.9 1.3 34.2 19.0 - 19.0 1.9 1.3 3.2 53.8 2.6 56.4
Cash and cash
equivalents - - - 4.2 - 4.2 0.2 - 0.2 4.4 - 4.4
Receivables 19.7 (0.4) 19.3 14.3 - 14.3 4.0 - 4.0 38.0 (0.4) 37.6
Other assets 9.6 - 9.6 4.6 - 4.6 0.4 - 0.4 14.6 - 14.6
Loans and
borrowings (3.8) - (3.8) (2.4) - (2.4) (0.5) - (0.5) (6.7) - (6.7)
Deferred tax - (2.0) (2.0) (0.7) (0.8) (1.5) (0.4) (0.4) (0.8) (1.1) (3.2) (4.3)
Other
liabilities (4.2) - (4.2) (13.0) (0.9) (13.9) (0.9) - (0.9) (18.1) (0.9) (19.0)
--------------- --------- -------------- -------- --------- ------------ ------- --------- ------------ ------- --------- ------------ -------
54.2 30.4 84.6 28.2 1.5 29.7 4.7 1.3 6.0 87.1 33.2 120.3
Goodwill 74.8 2.9 - 77.7
--------------- --------- -------------- -------- --------- ------------ ------- --------- ------------ ------- --------- ------------ -------
Total
consideration 159.4 32.6 6.0 198.0
--------------- --------- -------------- -------- --------- ------------ ------- --------- ------------ ------- --------- ------------ -------
Satisfied by
Initial cash
consideration 151.2 31.8 6.0 189.0
Contingent
consideration 8.2 0.8 - 9.0
--------------- --------- -------------- -------- --------- ------------ ------- --------- ------------ ------- --------- ------------ -------
159.4 32.6 6.0 198.0
--------------- --------- -------------- -------- --------- ------------ ------- --------- ------------ ------- --------- ------------ -------
On 1 January 2013, the Group acquired 100% of the share capital
of Geo-Foundations Contractors, Inc. ('Geo-Foundations'), a
business based in Toronto, Canada. The fair value of the intangible
assets acquired represents the fair value of customer contracts at
the date of acquisition. A further amount of up to GBP4.4m (C$8m)
is payable based on total earnings before interest, tax,
depreciation and amortisation in the five year period following
acquisition. As the payment is contingent on continued employment
of the vendors until the entitlement date, this arrangement is
treated as remuneration for post-acquisition services and amounts
expected to be paid are accrued over the five-year period.
On 12 July 2013, the Group acquired selected assets and
businesses that comprised the piling division of North American
Energy Partners, Inc. (collectively 'Keller Canada'), a business
based in Edmonton, Canada. The fair value of the intangible assets
acquired represents the fair value of customer relationships,
customer contracts at the date of acquisition, patents and trade
names. Goodwill arising on acquisition is attributable to the
knowledge and expertise of the assembled workforce, the expectation
of future contracts and customer relationships and the opportunity
to expand the use of more advanced Group technologies into a growth
market. Contingent consideration of up to GBP51.1m (C$92.5m) is
payable based on total earnings before interest, tax, depreciation
and amortisation in the three-year period following
acquisition.
On 21 November 2013, the Group acquired selected assets and
businesses that comprised the geotechnical division of Esorfranki
Limited (collectively 'Franki Africa'), a business based in
Johannesburg, South Africa. The fair value of the intangible assets
acquired represents the fair value of customer contracts at the
date of acquisition and trade names. Goodwill arising on
acquisition is attributable to the knowledge and expertise of the
assembled workforce, operating synergies that arise from the
Group's strengthened market position and the opportunity for the
Group to accelerate its expansion in Africa using an established
business. Contingent consideration of up to GBP8.3m (R150m) is
payable based on total earnings before interest, tax, depreciation
and amortisation in the three-year period following
acquisition.
On 3 April 2013, the Group acquired the remaining 49% minority
shareholding of Keller Terra S.L. in Spain for a cash consideration
of GBP5.6m (EUR6.7m), which was equal to the net book value of the
assets and liabilities at the acquisition date.
5. Exceptional items
Exceptional items are items which are exceptional by their size
or are non-trading in nature, including those relating to
acquisitions. Exceptional items comprise the following:
2014 2013
GBPm GBPm
--------------------------------------------- --- --- ------ ------
Contract dispute 54.0 -
Amortisation of acquired intangible assets 6.6 6.7
Acquisition costs 0.5 5.9
Contingent consideration and payments (4.7) 6.0
Goodwill impairments - 3.1
Other 0.3 -
------------------------------------------------------- ------ ------
Exceptional items in operating costs 56.7 21.7
Exceptional finance costs 0.2 0.4
------------------------------------------------------- ------ ------
56.9 22.1
----------------------------------------------------- ------ ------
The contract dispute relates to a project that the Group's UK
subsidiary, Keller Limited, completed in 2008. The dispute was
subject to litigation proceedings involving a number of parties,
but these were settled in February 2015. The final cost to Keller
is subject to a number of remedial and other actions to be
undertaken as part of the settlement agreement and the value of the
property following these remedial actions. The exceptional charge
represents management's best estimate of the net cost to Keller
before taking account of future recoveries under applicable
insurances, as these cannot be recognised under IFRS. The majority
of these costs expect to be incurred within the next two years.
Amortisation of acquired intangible assets and acquisition costs
relate to the acquisitions set out in note 4.
The contingent consideration and payments credit in 2014 mainly
relates to the release of previously provided contingent
consideration for the acquisition of Keller Canada which the Group
no longer expects to pay. In the prior year, the contingent
consideration and payments charge primarily related to GBP4.8m
(A$7.8m) of previously unprovided contingent consideration paid in
respect of the acquisition of Waterway Constructions Group Pty Ltd
due to its better than expected performance in the period since
acquisition.
Goodwill impairments in 2013 mainly relate to Keller Specialni
Zakladani, spol. s.r.o. (Czech Republic).
Exceptional finance costs relate to the unwind of the discounted
contingent consideration to present value for the acquisitions set
out in note 4.
6. Dividends payable to equity holders of the parent
Ordinary dividends on equity shares:
2014 2013
GBPm GBPm
--------------------------------------------------------------- ----- -----
Amounts recognised as distributions to equity holders in
the period:
Final dividend for the year ended 31 December 2013 of 16.0p
(2012: 15.2p) per share 11.4 9.8
Interim dividend for the year ended 31 December 2014 of
8.4p (2013: 8.0p) per share 6.0 5.6
17.4 15.4
--------------------------------------------------------------- ----- -----
The Board has recommended a final dividend for the year ended 31
December 2014 of GBP12.0m, representing 16.8p (2013: 16.0p) per
share. The proposed dividend is subject to approval by shareholders
at the AGM on 14 May 2015 and has not been included as a liability
in these financial statements.
7. Earnings per share
Basic and diluted earnings/(loss) per share are calculated as
follows:
2014 2014 2014 2014 2013 2013 2013 2013
Basic Diluted Basic Diluted
before before before before
exceptional exceptional exceptional exceptional
items items Basic Diluted items items Basic Diluted
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------ ------------ ---------------- -------- -------- -------------- -------------- -------- --------
Earnings/(loss)
(after
tax and
non-controlling
interests),
being
net
profits/(losses)
attributable to
equity
holders of the
parent 53.6 53.6 (3.0) (3.0) 49.5 49.5 29.3 29.3
No. No. of No. of No. No. of No. of No. No.
of shares shares of shares shares of of
shares Million Million shares Million Million shares shares
Million Million Million Million
------------------ ------------ ----------- ------------- -------- -------------- -------------- -------- --------
Weighted average
of ordinary
shares
in issue during
the
year 71.2 71.2 71.2 71.2 67.8 67.8 67.8 67.8
------------------ ------------ ---------------- -------- -------- -------------- -------------- -------- --------
Add: weighted
average
of shares under
option
during the year - 1.0 - 1.0 - 1.1 - 1.1
Adjusted weighted
average of
ordinary
shares in issue 71.2 72.2 71.2 72.2 67.8 68.9 67.8 68.9
------------------ ------------ ---------------- -------- -------- -------------- -------------- -------- --------
Pence Pence Pence Pence Pence Pence Pence Pence
------------------ ------------ ---------------- -------- -------- -------------- -------------- -------- --------
Earnings/(loss)
per
share 75.3 74.2 (4.2) (4.2) 73.0 71.9 43.2 42.6
------------------ ------------ ---------------- -------- -------- -------------- -------------- -------- --------
8. Share capital and reserves
2014 2013
GBPm GBPm
------------------------------------------------------------- ------ ------
Allotted, called up and fully paid
Equity share capital:
73,099,735 ordinary shares of 10p each (2013: 73,099,735) 7.3 7.3
------------------------------------------------------------- ------ ------
The Company has one class of ordinary shares, which carries no
rights to fixed income. There are no restrictions on the transfer
of these shares.
On 14 June 2013, the Group issued 6,600,000 new ordinary shares
of 10p each for a total non-cash consideration (shares in a company
which received the placing proceeds) of GBP57.6m net of GBP1.2m of
issue costs. Merger relief has been applied under section 612 of
the Companies Act 2006, with the premium on the shares issued
allocated initially to a merger reserve and then to an other
reserve on redemption of the shares in the company that received
the placing proceeds.
The capital redemption reserve is a non-distributable reserve
created when the Company's shares were redeemed or purchased other
than from the proceeds of a fresh issue of shares.
The total number of shares held in Treasury was 1.8m (2013:
2.2m).
9. Related party transactions
Transactions between the parent, its subsidiaries and joint
operations, which are related parties, have been eliminated on
consolidation.
The remuneration of the Directors, who are the key management
personnel and related parties of the Group, is set out below:
2014 2013
Key management personnel compensation comprised: GBPm GBPm
-------------------------------------------------- ----- -----
Short-term employee benefits 2.0 3.4
Post-employment benefits 0.1 0.1
Share-based payments 0.9 1.0
-------------------------------------------------- ----- -----
3.0 4.5
-------------------------------------------------- ----- -----
(1) results stated before exceptional items of GBP56.9m (2013:
GBP22.1m) before tax. These relate to a provision for the
settlement of a contract dispute and non-trading costs relating to
acquisitions.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR QDLFLELFZBBV
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