13 April 2021
Keller Group plc
Annual Report and Accounts for the
year ended 31 December 2020 and
Notice of 2021 Annual General Meeting
Keller Group plc (“Keller”, the “Company”) announces that its
Annual General Meeting (“AGM”) will be held at 9.00am on Wednesday 19 May
2021 at the offices of DLA Piper UK LLP, 160 Aldersgate
Street, London EC1A 4HT.
In connection with this, the following documents have been
posted or otherwise made available to shareholders:
· Annual Report and Accounts for
the year ended 31 December 2020
("Annual Report 2020")
· Notice of AGM
· Proxy Form (in the case of
shareholders on the register of members)
Copies of these documents have been submitted, where
appropriate, to the National Storage Mechanism and will shortly be
available for inspection at
https://data.fca.org.uk/#/nsm/nationalstoragemechanism.
The Annual Report 2020 and the Notice of AGM are now available
to view on the Company's website at www.keller.com.
Keller is closely monitoring developments relating to COVID-19
and how this may affect the arrangements for the AGM. Shareholders
should therefore continue to refer to the Company's website and
announcements for any updates in relation to the AGM, including
venue.
In addition, should shareholders wish to ask any questions of
the Board relating to the business of the AGM, they are encouraged
to email their questions in advance to secretariat@keller.com or
send them by post to the Company's registered office for the
attention of the Group Company Secretary and Legal Advisor.
In accordance with the DTR 6.3.5, this announcement contains
information in the attached Appendix about the principal risks and
uncertainties, the Directors’ responsibility statement and note 28
to the accounts on related party transactions. This information has
been extracted in full unedited text from the Annual Report 2020.
This material should be read in conjunction with and is not a
substitute for reading the full Annual Report 2020. References to
page numbers and notes in the Appendix refer to those in the Annual
Report 2020. A condensed set of financial statements was
appended to the Keller's preliminary results announcement issued on
9 March 2021.
For further information, please contact:
Keller Group plc |
www.keller.com |
Kerry Porritt, Group Company
Secretary and Legal Advisor
020 7616 7575
Silvana Glibota-Vigo, Group Head
of Secretariat
Notes to editors:
Keller is the world's largest geotechnical specialist contractor
providing a wide portfolio of advanced foundation and ground
improvement techniques used across the entire construction sector.
With around 9,000 staff and operations across five continents,
Keller tackles an unrivalled 6,000 projects every year, generating
annual revenue of more than £2bn.
LEI number:
549300QO4MBL43UHSN10
Classification: 1.1 (Annual
financial and audit reports)
Appendix
Unedited extract
from Annual Report 2020
Principal risks and uncertainties
The table on the following pages lists the principal risks and
uncertainties as determined by the Board that may affect the
Group and highlights the mitigating actions that are being taken.
The content of the table, however, is not intended to be an
exhaustive list of all the risks and uncertainties that may
arise.
The COVID-19 pandemic is having and will continue to have an
impact across the entire organisation. We have incorporated
commentary into affected principal risks, which we will continue to
manage centrally as well as regionally.
Key: Strategy lever Key: Risk
movement
1 Balanced portfolio
Increased risk Reduced
risk
2 Engineered solutions
3 Operational excellence
4 Expertise and scale
Constant risk Link to
viability
Financial
risk |
Risk |
Potential impact |
Demonstrable
mitigation |
Risk movement (since
2019) |
Inability
to finance our business
Insufficient levels of funding, whether from operating cash flow or
external financing facilities, that are necessary to support the
business.
Link to strategic lever: 3, 4 |
A lack of
available funds restricts investment in growth opportunities,
whether through acquisition or innovation.
In an extreme circumstance, the lack of available funds could lead
to a failure of the Group to continue as a going concern. |
Mixture of
long-term committed debt with varying maturity dates which comprise
a £375m revolving credit facility with a maturity extended to
November 2025 and a US private placement debt of $125m ($50m note
maturing in 2021 and $75m note maturing in 2024).
Active and open communication with the revolving credit facility
banking group ensures that it understands the Group’s financial
performance and is supportive of funding requirements.
Strong free cash flow profile with the ability to turn off capital
expenditure and reduce dividends.
Embedded procedures to monitor the effective management of cash and
debt, including weekly cash reports and regular cash flow
forecasting to ensure compliance with borrowing limits and lender
covenants.
Culture focused on actively managing our working capital; the
annual bonus plan is linked to executive remuneration through an
operating cash flow metric. Please see the Directors’ remuneration
report for further information on metrics.
Monitoring of and response to external factors that may affect
funding availability; as a result of the strong cash management,
even taking account of the impact of COVID-19, the Board announced
in November 2020 reduced leverage guidance from 1.0x-1.5x to
0.5x-1.5x. |
Constant risk
Link to viability |
Market
risk |
Risk |
Potential impact |
Demonstrable
mitigation |
Risk movement (since
2019) |
A rapid
downturn in our markets
Inability to maintain a sustainable level of financial performance
throughout the construction industry market cycle, which grows more
than many other industries during periods of economic expansion and
falls more harder than many other industries when the economy
contracts.
Link to strategic lever: 1, 2 |
Reduction
in the demand for our products and services may lead to a
significant deterioration in financial performance, including cash
flow generation.
In an extreme circumstance, reduced cash flow generation could lead
to a failure of the Group to continue as a going concern. |
The
diverse markets in which the Group operates, both in terms of
geography and market segment, provide protection to individual
geographic or segment slowdowns.
Since March 2020, COVID-19 has caused a decrease in economic
activity in several of the markets in which we operate. Whilst the
Group has shown good resilience to this change, it is likely that
COVID-19 will continue to depress the economies in affected markets
over the next 12 months. This may cause a reduction in
activity in the construction sector which adversely affects the
Group’s order book.
Having strong local businesses with in-depth knowledge of the local
markets enables early detection and response to market trends.
Leveraging the global scale of the Group, talent and resources can
be redeployed to other parts of the company during individual
market slowdowns.
The diverse customer base, with no single customer accounting for
more than 3% of group revenue, reduces the potential impact of
individual customer failure caused by an economic downturn. |
Constant
risk
Link to viability
While we expect a slight shrinking of the construction market in
2021 and an adverse impact on our order book, we will mitigate
through our exposure across a number of sectors of the construction
market and are well placed to take advantage of opportunities,
especially in infrastructure. We will continue to monitor this risk
closely, paying close attention to any impact on the size of our
order book and take appropriate mitigating actions. |
Strategic
risk |
Risk |
Potential impact |
Demonstrable
mitigation |
Risk movement (since
2019) |
Failure to
procure new contracts on satisfactory terms
Increasing competition, changing customer requirements or a loss of
technological advantage results in a failure to continue to win and
retain contracts on satisfactory terms and conditions in our
existing and new target markets.
Link to strategic lever: 1, 2, 3, 4 |
Failure to
negotiate satisfactory and appropriate contractual terms may result
in delays and disputes during project delivery, negatively
impacting our relationships with our customers and the Group’s
reputation for delivering quality products and solutions.
Inability to enter into commercially viable contracts may have a
negative effect on the profitability of our projects and prevent
the Group from achieving its targets. |
A focus on
understanding customers’ requirements and competitors’
capabilities.
Structured bid review processes in operation throughout the Group
with well-defined selection criteria that are designed to ensure we
take on contracts only where we understand and can manage the risks
involved.
The Project Lifecycle Management (PLM) Standard has introduced more
rigour into how risks are considered during the opportunity,
contract approval and project execution phases.
Sales training, which includes a focus on contractual and
commercial terms. |
Increased
risk
In addition to a potential adverse impact on our order book as a
result of a downturn in our markets due to COVID-19, it is possible
that there is increased competition for a reduced number of
contracts within those markets. This may increase pressure on bid
pricing and potentially erode contract margins. We will continue to
monitor any increased pressure on contract margins and take
appropriate mitigating actions. |
Strategic
risk |
Risk |
Potential impact |
Demonstrable
mitigation |
Risk movement (since
2019) |
Losing our
market share
Inability to achieve sustainable growth, whether through
acquisition, new products, new geographies or industry-specific
solutions, may jeopardise our position as the preferred
international geotechnical specialist contractor.
Link to strategic lever: 1, 2 |
Delivering sustainable
growth is a key component of our strategy. Failure to deliver on
our key strategic objective may result in the loss of confidence
and trust of our key stakeholders including investors, financial
institutions and customers. |
A clear
business strategy with defined short, medium and long-term
objectives, which is monitored at local, divisional and group
level.
Continued analysis of existing and target markets to ensure
opportunities that they offer are understood.
An opportunities pipeline covering all sectors of the construction
market.
A wide-ranging local branch network which facilitates customer
relationships and helps secure repeat work.
Continually seeking to differentiate our offering through service
quality, value for money and innovation.
North American businesses reorganisation delivering
on cross-selling opportunities. However, due to COVID-19 there
is an economic squeeze globally, increasing pressure on
volume/market share.
Minimising the risk of acquisitions, including getting to know a
target company in advance, often working in joint venture, to
understand the operational and cultural differences and potential
synergies. As well as undertaking these through due diligence and
structured and carefully managed integration plans. |
Constant
risk
Link to viability |
Ethical
misconduct and non-compliance with regulations
Keller operates in many different jurisdictions and is subject to
various rules, regulations and other legal requirements including
those related to anti-bribery and anti-corruption. There is a risk
that the Group fails to maintain the required level of
compliance.
Link to strategic lever: 3, 4 |
Non-compliance with relevant laws and regulations could lead to
substantial damage to Keller’s reputation and/or large financial
penalties.
Losing the trust of our customers, suppliers and other stakeholders
would have an adverse effect on our ability to deliver against our
strategy and business objectives. |
A Code of
Business Conduct that sets out minimum expectations for all
colleagues in respect of ethics, integrity and regulatory
requirements and is backed by a training programme to ensure that
it is fully embedded across the Group.
A clear and confidential externally run ‘whistleblowing’ facility
encouraging employees to report any suspected misconduct.
An Ethics and Compliance Officer at every business unit who
supports the ethics and compliance culture and ensures best
practice developed by the Group is communicated and embedded into
local business practices.
Regular workshops across the Group to ensure compliance risks are
identified and addressed. |
Constant
risk
Link to viability
Strengthened communication of Keller’s tone at the top and a
renewed focus on risk management and internal control have
maintained the exposure of this risk. |
Strategic
risk |
Risk |
Potential impact |
Demonstrable
mitigation |
Risk movement (since
2019) |
Inability
to maintain our technological product advantage
Keller has a history of innovation that has given us a
technological advantage which is recognised by our clients and
competitors. Inability to maintain this advantage through the
continued technological advancements in our equipment, products and
solutions may impact our position in the market.
Link to strategic lever: 1, 2 |
Without a structured
innovation approach, including sufficient investment, Keller may
lose its completive advantage. |
The Keller
Innovation Board works closely with business units, divisions and
global product teams to ensure a structured approach to innovation
is in place across the Group.
Keller’s continued investment in both external and internal
equipment manufacture.
Keller Data AcQuisition (KDAQ), a group-wide innovation project,
will bring information together and make it accessible in one
simple and concise platform. It will include all technical
information from Keller and third-party sources at each stage of
delivery, including data analysis and visualisations where
possible, and it will also be BIM-compatible. |
Constant
risk |
Changing
environmental factors
Changes in environmental legislation and relevant standards that
impact our product and service offerings and an increasingly active
public response to environmental concerns in the sectors in which
we operate.
Link to strategic lever: 3 |
Inability
to achieve Keller’s commitment to deliver solutions in an
environmentally conscious manner may have a negative impact on our
reputation, affect employee morale and lead to loss of confidence
from our customers, suppliers and investors.
Product offerings become obsolete because they are no longer
compliant with environmental standards. We may be required to
remediate at our own cost to attain compliance. |
Collaboration with the University of Surrey’s Centre for
Environment and Sustainability to apply sustainability best
practice to all business functions.
A Sustainability Steering Group is responsible for integrating
sustainability targets and measures into the group business plan to
successfully drive changes important to the company.
Scope 1 and 2 carbon emissions verified by accredited external
third party (Carbon Intelligence).
Carbon Calculator tool used to identify/improve carbon
efficiency.
Project team created to develop processes to meet Task Force on
Climate-related Financial Disclosures (TCFD) requirements.
Further details can be found in the ESG and sustainability section
on pages 40 to 53. |
Constant
risk
While the focus around environmental legislation is increasing, we
believe this will present opportunities to us that we are well
placed to exploit. Our increasing activity to improve
sustainability over and above our peers will ensure we are ready to
take opportunities as they arise. |
Operational
risk |
Risk |
Potential impact |
Demonstrable
mitigation |
Risk movement (since
2019) |
Service or
solutions failure
In designing a product or a solution for customers many factors
need to be considered including client requirements, site and
loading conditions and local constraints (eg neighbouring
buildings, other underground structures). Inadequate design of a
customer product and/or solution may lead to an inability to
achieve the required standard.
Misinterpretation of client requirements or miscommunication of
requirements by the client may lead to a poorly designed solution
and consequently failure.
Link to strategic lever: 2, 4 |
Failure to
meet quality standards could damage our reputation, result in
regulatory action and legal liability, and impact financial
performance.
The liability limitation period of our products is generally 12
years; consequently, a poorly designed product/solution could have
an impact on our long-term profitability. |
Continuing
to enhance our technological and operational capabilities through
investment in our product teams, project managers and our
engineering capabilities.
Employing geotechnical engineers that are focused purely on
design.
Disaster Recovery/Business Continuity Plans in place across the
Group.
The global product teams set standards, provide guidance and
disseminate best practice across the organisation for our eight key
products.
We seek to agree liability limits in our contracts with
customers.
Insurance solutions are in place to limit financial exposure of a
potential customer claim. |
Constant
risk
Link to viability |
Operational
risk |
Risk |
Potential impact |
Demonstrable
mitigation |
Risk movement (since
2019) |
Ineffective execution of our projects
Failure to manage our projects to ensure that they are delivered on
time and to budget due to unforeseen ground and site conditions,
weather-related delays, unavailability of key materials, workforce
shortages or equipment breakdowns.
Link to strategic lever: 3, 4 |
Inability
to successfully deliver projects in line with the agreed customer
requirements may result in cost overruns, contractual disputes and
reputational damage.
Ineffective project delivery may also expose the Group to long-term
obligations including legal action and additional costs to remedy
solution failure. |
Ensuring
we understand all of our risks through the bid appraisal process
and applying rigorous policies and processes to manage and monitor
contract performance.
Ensuring we have high-quality people delivering projects. Keller’s
Project Management Academy and Field Leadership Academy are
designed to create project managers with a consistent skill set
across the entire organisation. The academies cover a broad range
of topics including contract management, planning, risk assessment,
change management, decision-making and finance.
KDAQ system enabling comparison of performance across sites using
similar products, identification of areas of best practice and
quickly raising awareness of where improvement is needed.
Safety Standards for operations (eg platform, cage handling),
Equipment Standards and fleet renewal.
The PLM Standard drives a consistent approach to project delivery
with robust controls at every project phase.
A formal, structured approach to LEAN and 5S across the
organisation is being embedded, which is improving processes and
strengthening Keller’s working culture. |
Constant
risk
Link to viability |
Operational
risk |
Risk |
Potential impact |
Demonstrable
mitigation |
Risk movement (since
2019) |
Causing a
serious injury or fatality to an employee or a member of the
public
Failure to maintain high standards of health and safety, and an
increase in serious injuries or fatalities leading to an
erosion of trust of employees and potential clients.
Link to strategic lever: 3 |
Inability
to maintain a positive health and safety culture may lead to damage
to morale, an increase in employee turnover rates and a decrease in
productivity.
Deterioration in health and safety performance may lead to loss of
customer, supplier and partner confidence and damage to our
reputation in an area that we regard as a top priority. |
Board-led
commitment to drive health and safety programmes and performance
with a vision of zero harm.
An emphasis on safety leadership to ensure both HSEQ professionals
and operational leaders drive implementation and sustainment of our
safety standards through ongoing site presence, using safety tours,
safety audits, safety action groups and mandatory employee
training.
Ongoing improvement of existing HSEQ systems to identify and
control known and emerging HSEQ risks, which conform to internal
standards.
Incident Management Standard and incident management software
driving a robust and consistent management process across the
organisation that ensures the cause of the incident is
identified and actions are put in place
to prevent recurrence. |
Constant
risk
Link to viability |
Not having
the right skills to deliver
Inability to attract and develop excellent people to create a
high-quality, vibrant, diverse and flexible workforce.
Link to strategic lever: 2, 3, 4 |
Failure to maintain
satisfactory performance in respect of our current projects and
failure to deliver our strategy and business targets for
growth. |
Continuing
to invest in our people and organisation in line with the four
pillars of the Keller People agenda as noted below.
Ensuring that the ‘Right Organisation’ is in place with people
having clear accountabilities; each organisational unit is properly
configured with a matrix of line management, functional support and
product expertise.
As industry leader, that Keller is made up of ‘Great People’ that
are well trained, motivated and have opportunities to develop to
their full potential. Project managers and field employees receive
comprehensive training programmes which cover a broad range of
topics including contract management, planning, risk assessment,
change management, decision?making and finance.
A strong focus on the ‘Exceptional Performance’ of employees
in delivering commercial outcomes safely for Keller based upon
project successes for our customers. Business leaders are
incentivised to deliver their annual financial and safety
commitments to the Group.
The ‘Keller Way’ provides guidance to the company’s employees and
leaders to comply with local laws
and work within Keller’s values and Code of
Business Conduct. |
Constant
risk |
Operational
risk |
Risk |
Potential impact |
Demonstrable
mitigation |
Risk movement (since
2019) |
Risk of
potential disruption in the business operations, reputational
damage and/or loss or corruption of data through external or
internal technical threats and malicious action
Information security and cyber threats are a concern
across industries worldwide. The introduction of digital solutions
such as InSite and KDAQ increases the Group’s reliance on IT
and its inherent cyber risk exposure.
Link to strategic lever: 3, 4 |
Cyber security breach
could result in leakage of proprietary information, operational
disruptions, and loss of employee and customer data. |
Building a
cyber security and information assurance team and services.
Building a zero trust layered technology capability.
Creation of an Information Security Management System framework,
referencing industry standards to ensure appropriate governance,
control and risk management and then onward management for
compliance, maturity and development of service.
Introduction of technical capabilities and services to further
enable prevention, detection, prediction and response services.
Multi-factor authentication for all users prevents unauthorised
access to Keller’s networks and applications.
Advanced threat protection on all IT equipment delivers
comprehensive, ongoing and real-time protection against viruses,
malware and spyware.
Data protection framework to ensure compliance with the General
Data Protection Regulation (GDPR) and other standards of data
protection. |
Constant
risk
The threat landscape continues to evolve each year and so we
continue to adapt our monitoring, detection, prevention and
education processes to maintain a balanced risk perspective.
We assess cyber risks and determine appropriate actions for our
business. Existing capabilities continue to be deployed and
enhanced if needed.
As an example, having seen in 2020 the rise in the number of
ransomware attacks and the increased number of reported attacks
that target backup as well as production environments across all
industries, we shall implement in 2021 a backup solution for key
services that is immutable and cannot be encrypted. |
Responsibility statement of the
Directors in respect of the Annual Report and the financial
statements
We confirm that to the best of our knowledge:
- the financial statements, prepared in accordance with the
applicable set of accounting standards, give a true and fair view
of the assets, liabilities, financial position and profit or loss
of the company and the undertakings included in the consolidation
as a whole; and
- the Strategic report and the Directors’ report, including
content contained by reference, includes a fair review of the
development and performance of the business and the position and
performance of the company and the undertakings included in the
consolidation taken as a whole, together with a description of the
principal risks and uncertainties that they face.
The Board confirms that the Annual Report and the financial
statements, taken as a whole, are fair, balanced and understandable
and provide the information necessary for shareholders to assess
the Group’s position and performance, business model and
strategy.
28 Related party transactions
Transactions between the parent, its subsidiaries and joint
operations, which are related parties, have been eliminated on
consolidation. Other related party transactions are disclosed
below:
Compensation of key management
personnel
The remuneration of the Board and Executive Committee, who are
the key management personnel, comprised:
|
2020
£m |
2019
£m |
Short-term employee
benefits |
8.3 |
5.4 |
Post-employment
benefits |
0.4 |
0.4 |
Termination
payments |
0.4 |
0.2 |
|
9.1 |
6.0 |
Other related party transactions
As at the year end there was a net balance of £0.1m owed by
(2019: £0.2m owed to) the joint venture. These amounts are
unsecured, have no fixed date of repayment and are
repayable on demand.