Annual Report 2014
Global
precision
Our reputation is built on engineering
excellence and a commitment to continual
innovation. Wherever Keller operates and
whatever the circumstances, we have the
ability to gather together the right people,
skills, processes, equipment and thinking
to deliver any project brilliantly.
By precisely blending these elements at
the right time, we achieve local results
that set the global standard.
Highlights
Revenue from continuing operations (£m)
2014
2013
2012
2011
2010
Operating profit (£m)*
2014
2013
2012
2011
2010
Earnings per share (pence)*
2014
2013
2012
2011
2010
Group revenue up
year on year by
11%
Group operating
margin* up to
5.8%
Earnings per share*
increased to
75.3p
per share
* Before exceptional items.
1,599.7
1,438.2
1,317.5
1,154.3
1,068.9
92.0
77.8
48.3
28.9
43.3
75.3
73.0
45.9
24.8
44.0
Operating profit* up to
£92.0m
Cash generated from
operations up to
£165.4m
Total dividend
increased to
25.2p
per share
Contents
Overview
1
2
4
Highlights
About Keller
Chairman’s statement
Chief Executive Officer’s review
Strategy in action
Strategic report
Strategy
6
8 Our markets
10 Our business model
12 Our strategy
2013
14
22 Principal risks and uncertainties
2014
24 Resources and relationships
27 Technology and best practice
table width = 57+15.8
mm
Performance
28 Executive Committee
height = 5.5mm per row
30 Operational results
diamond is inset
North America
30
EMEA
31
0.92mm from right
Asia
32
and bottom
Australia
33
34
Financial review
Governance
36 Corporate governance statement
36
38
42
Chairman’s statement
Board of Directors
Health, Safety & Environment
Committee report
Nomination Committee report
Audit Committee report
44
46
48 Directors’ Remuneration report
61 Directors’ report
63
64
Statement of Directors’ responsibilities
Independent Auditor’s report
Financial statements
66
66
Consolidated income statement
Consolidated statement of
comprehensive income
Consolidated balance sheet
Consolidated statement of
changes in equity
Consolidated cash flow statement
Notes to the consolidated
financial statements
Company balance sheet
Notes to the Company financial
statements
67
68
69
70
92
93
Other information
Financial record
98
99 Principal offices
100 Secretary and advisers
Cautionary statement
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’, ‘will’, ‘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.
1
PerformanceGovernanceFinancial statementsStrategyOverviewKeller Group plc | Annual Report & Accounts 2014
About Keller
Global
We operate in over 40 countries: we are
the clear market leader in North America,
Australia and South Africa; we have prime
positions in most established European
markets; and we have a strong profile
in many developing markets.
North America
We are the market leader in North America, where we have had a
market presence for over 30 years. Today, we operate from locations
spanning the US and Canada. Hayward Baker offers extensive ground
engineering solutions across North America. In the US, Case, McKinney
and HJ are heavy foundation specialists and Suncoast provides post-
tension cable systems. In Canada, Geo-Foundations specialises in
micro-piling, ground anchors, and specialty grouting services and
Keller Canada offers a broad range of piling solutions.
EMEA
Our EMEA division has operations across Europe, the Middle East and
Africa, together with a developing business in Latin America. We operate
as Keller in most of these regions, other than Sub-Saharan Africa, where
we operate under the Franki brand.
Revenue (£m)
£775.6m +10.9%
Revenue by country
1. US
2. Canada
86%
14%
1
Operating profit* (£m)
£59.9m +16.1%
* Before exceptional items.
2
Revenue (£m)
£451.5m +13.1%
pie = 31.575mm
Operating profit* (£m)
£12.9m +89.7%
* Before exceptional items.
Revenue by country
1. Western Europe
2. Eastern Europe
3. Africa
4. Middle East
5. Other
55%
16%
16%
8%
5%
pie = 31.575mm
3
2
54
1
Asia
2
In recent years we have built up our presence in Asia, where we
started life as a ground improvement specialist, but now offer a wide
1. US
range of foundation services. We are well established in Singapore,
2. Canada
India and Malaysia, with developing businesses in other parts of the
ASEAN Region. In Asia we generally operate as Keller, although the
Resource Piling name has been retained alongside the Keller brand
in Singapore.
1
1. Western Europe
Australia
2. Eastern Europe
Frankipile, Vibro-Pile and Piling Contractors offer a range of piling
3. Africa
services. Keller Ground Engineering (‘KGE’) offers specialist ground
4. Middle East
improvement and geotechnical solutions. Waterway Constructions
5. Other
(‘Waterway’) specialises in foundations for, and the maintenance of,
wharves, jetties and other marine structures.
Although they specialise in different techniques, on very large or complex
projects, the companies may join forces, under the Keller Australia brand.
Revenue (£m)
£261.3m +7.4%
pie = 31.575mm
Operating profit* (£m)
£15.7m +0.6%
* Before exceptional items.
1
Revenue by country
1. Frankipile
2. Piling Contractors
3. Waterway
4. Vibro-Pile
5. KGE
27%
27%
18%
16%
12%
pie = 31.575mm
4
3
5
2
1
1. Frankipile
2. Piling Contractors
3. Waterway
4. Vibro-Pile
5. KGE
Revenue (£m)
Revenue by country
£111.3m +15.7%
Operating profit* (£m)
£8.3m -7.8%
* Before exceptional items.
1. Singapore
2. Malaysia
3. India
4. Other
44%
32%
15%
9%
2
4
3
Where we operate
From our centres of excellence in more than 40 countries
around the world, we deliver exact combinations of industry-leading
expertise to the most challenging projects and locations.
1. Singapore
2. Malaysia
3. India
4. Other
The Group has operations in over 40 countries, including:
Algeria
Angola
Australia
Austria
Bahrain
Brazil
Canada
Czech Republic
Egypt
Finland
France
Germany
Ghana
Greece
Hong Kong
India
Indonesia
Italy
Malaysia
Mauritius
Morocco
Mozambique
Netherlands
Oman
Poland
Portugal
Qatar
Saudi Arabia
Singapore
Slovakia
South Africa
Spain
Swaziland
Sweden
Switzerland
UAE
Ukraine
United Kingdom
USA
Vietnam
2
Keller Group plc | Annual Report & Accounts 2014
Overview Precision
We are the world’s largest independent
ground engineering specialist, renowned
for providing technically advanced and
cost-effective foundation solutions.
Our services are used across the
construction sector in infrastructure,
industrial, commercial residential
and environmental projects.
Piling and earth retention
Piling involves the installation of structural elements to transfer foundation
loads through weak soils to stronger underlying ground. Keller offers a
wide range of piling and earth retention systems including diaphragm walls
and marine piles. Piles may be pre-formed and driven into the ground or
cast in situ.
Ground improvement
Ground improvement techniques are used to prepare the ground for
new construction projects and to reduce the risk of liquefaction in areas
of seismic activity.
Anchors, nails and minipiles
Anchors, nails and minipiles can provide temporary or permanent
solutions for a wide range of stability or support problems and are often
used to underpin or stabilise buildings, slopes and embankments.
Keller was the first to develop methods and equipment for the successful
deep compaction of soil in the 1930s and has continued to develop the
equipment and widen its application. Common soil stabilisation techniques
include a combination of vibro-compaction with stone, concrete or lime
columns as well as soil mixing and injection systems.
Specialty grouting
Specialty grouting strengthens target areas in the ground and controls
ground water flow through rocks and soils by reducing their permeability.
It is applicable both to new construction projects and to repair and
maintenance work. Other applications include excavation support,
settlement control and geo-environmental services to protect adjacent
ground from contamination.
Post-tension concrete
Post-tension cable systems are used to reinforce concrete foundations
and structural spans, enhancing their load-bearing capacity by applying
a compressive force to the concrete, once set. Suncoast’s post-tension
systems are used in foundation slabs for single family homes and, in the
commercial high-rise sector, in concrete structural spans and beams.
Instrumentation and monitoring
Keller specialises in providing instrumentation and monitoring solutions
for a wide range of applications. We provide and install a wide range of
instruments and then provide reliable and repeatable data presenting it
to our clients in the most effective and user friendly way.
Approximate split of services
1. Piling and earth retention
2. Ground improvement
3. Anchors, nails and minipiles
4. Specialty grouting
5. Post-tension concrete
6. Instrumentation and monitoring
50%
20%
10%
10%
9%
1%
pie = 34.75mm
circle = 26.414mm
58%
5 6
4
3
2
1
Keller Group plc | Annual Report & Accounts 2014
3
1. Piling and earth retention
2. Ground improvement
3. Anchors, nails and minipiles
4. Specialty grouting
5. Post-tension concrete
6. Instrumentation and monitoring
5 6
4
3
2
Approximate split of services
1. Piling and earth retention
2. Ground improvement
3. Anchors, nails and minipiles
4. Specialty grouting
5. Post-tension concrete
6. Instrumentation and monitoring
3
2
50%
20%
10%
10%
9%
1%
1
5 6
4
1
pie = 34.75mm
circle = 26.414mm
58%
PerformanceGovernanceFinancial statementsStrategyOverview Overview
Chairman’s statement
Results1
I am pleased to report a strong set of results for
2014. Group revenue rose by 11% to £1,599.7m
(2013: £1,438.2m). While this increase benefited
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 £9.3m
operating profit increased to £92.0m, was 18%
up on the £77.8m in the previous year and profit
before tax increased to £85.1m (2013: £74.1m).
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 £165.4m,
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 £102.2m (2013: £143.7m),
representing 0.7x EBITDA. Net capital expenditure
was £61.0m, up on last year’s £42.6m 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 £250m revolving credit facility expiring in
September 2019 was agreed in July, replacing
both the £170m 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 £54.0m 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 £1.2m (2013: profit of £30.1m).
Roy A Franklin
Chairman
I am pleased to
report a strong
set of results
for 2014.
4
Keller Group plc | Annual Report & Accounts 2014 To find out more please
visit our website: www.keller.co.uk
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.
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.
£1,599.7m
Revenue from continuing
operations
1 Results stated before exceptional items of
£56.9m (2013: £22.1m) before tax. These
relate to a provision for the settlement of a
contract dispute and non-trading costs
relating to acquisitions.
5
PerformanceGovernanceFinancial statementsStrategyOverviewKeller Group plc | Annual Report & Accounts 2014 Chief Executive Officer’s review
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 £1.6bn 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 £5m, 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.
Justin Atkinson
Chief Executive Officer
The management
team delivered
strongly against
our strategy.
6
StrategyKeller Group plc | Annual Report & Accounts 2014
Keller Group plc snapshot
Our vision
What we want to be
To be the best at being global and the best at being local.
Our mission
What we set out to achieve
To provide technically advanced and cost-effective foundation solutions in order to deliver long term value to
our shareholders.
Our services
What we do
P.2–3
Piling and
earth retention
Ground
improvement
Anchors, nails
and minipiles
Specialty
grouting
Post-tension
concrete
Instrumentation
and monitoring
Our markets
Where we operate
P.8–9
North America
We are the market leader in North America where
we have had a market presence for over 30 years.
EMEA
Our EMEA division has operations across Europe,
the Middle East and Africa, and a developing business
in Latin America.
Our business model is founded on a number of key
pillars and is the key enabler of our strategy:
Our strategy is to extend our global leadership in
specialist ground engineering through both organic
growth, particularly in developing markets, and
targeted acquisitions.
There are five main elements to our strategy:
Business model
How the business delivers
value
P.10–11
Our strategy
How we will achieve our
mission
P.12–13
KPIs
How we monitor our success
P.23
We measure our strategy against a focused set of five
key performance indicators:
Asia
In recent years we have built up our presence in Asia.
Australia
We operate under five business units throughout
Australia. Although they specialise in different
techniques, on very large or complex projects, they
may join forces, under the Keller Australia brand.
Expertise
Safety
Technology
People
Expansion
– into new, higher growth regions
New technologies and methods
– developed or acquired
Transfer of technologies
– and methods within our current regions
Design and build
– capability and offering alternative solutions
Continuous improvement
– to maintain our competitive edge
A Revenue growth compared with market growth
B Operating margins
C Return on net operating assets
D Accident Frequency Rate
E Staff turnover rate
Risks
How we manage our markets
and operating environment
P.22–23
The principal risks and uncertainties facing the
Group business model, strategy and resources.
We have five key risks across our business:
Market cycles
Tendering and management of contracts
Expansion
Safety
People
Resources and
relationships
What we need to achieve
our mission
P.24–25
There are four main areas where our business impacts
on society and where we have responsibilities which
extend beyond our financial performance:
Safety
Environment
Workplace and People
Communities
Keller Group plc | Annual Report & Accounts 2014
7
OverviewPerformanceGovernanceFinancial statementsStrategy Our markets
Trends, insights and opportunities
50%
the growth of our US business over three years
in comparison to 24% US market growth1
1 Market growth for the total US construction market,
from data published by the US Census Bureau of the
Department of Commerce on 2 February 2015.
National
Competition
In Europe, competition is often owned by general
contractors. In the US and Australia, these
services are usually outsourced. Independent
national competitors tend to be privately owned.
Types of project
As local markets, together with foundations for
larger structures and more complex solutions for
challenging ground conditions.
Keller’s advantage in this segment
We have a wide network of subsidiary companies
and branch offices employing local people with
knowledge of:
For more information
www.keller.co.uk/aboutkeller/businesses.aspx
– national building codes
– local language and business culture
– local ground conditions
The best of being local
– our wide network of regional offices allows
Keller to be responsive and competitive in
local markets
– this, in turn, means that our revenue is spread
over some 7,000 contracts with an average value
of around £250,000
– market decisions are made ‘close to the ground’
by highly experienced managers with real
accountability
– we can respond to the changing dynamics of our
business in a timely and informed way
The best of being global
– we can join forces across company and
country borders to tackle big opportunities
and challenging jobs
– we share technologies and equipment
– we exchange best practice and information
across the Group
– we have common operating rules, including our
safety programme and Code of Conduct, which
means that customers see a consistent Keller
approach, wherever in the world we operate
– our brand recognition is unrivalled by local/
– an entrepreneurial culture allows us to compete
regional players
in an industry dominated by entrepreneurs
– our financial strength is unrivalled by most
competitors
Local
Competition
Local competition is highly fragmented
comprising many small businesses, often
family-owned, with limited equipment capacity
and few (or single) product lines.
Types of project
Standard foundations for small to medium
structures, where ground conditions are
relatively straightforward.
Keller’s advantage in this segment
Our structure enables us to compete with
local players for small-to-medium-sized
contracts.
For a precise understanding of how we
see the markets in which we operate:
www.keller.co.uk
8
StrategyKeller Group plc | Annual Report & Accounts 2014 Market insights
The unique nature of Keller’s business
and global operations means that there
are few, if any, directly comparable companies,
particularly given the current macro-economic
and stock market conditions. The most
relevant comparable companies for Keller
can be analysed in three distinct groups:
the foundation companies, building and
construction companies, and construction/
services businesses.
39%
the growth of our Australian business over
three years in comparison to 2% Australian
market growth1
1 Market growth for the total Australian construction
market, from data published by the Australian Bureau
of Statistics in September 2014.
For more information:
www.keller.co.uk/investor/shareinfo/
shareprice.aspx
For more information:
www.keller.co.uk/aboutkeller/businesses.aspx
International
Competition
Only very few competitors can claim to
have a truly global capability, strong financial
credentials and the ability to offer a full
product range.
Types of project
Large-scale projects, requiring capacity
or expertise which may not be available
in-country. Often direct foreign investment,
where funders or clients prefer to contract
with international partners.
Keller’s advantage in this segment
As the largest independent operator with
a global presence, we can:
– follow known customers into new
geographic markets
– pool our global resources and expertise
– meet the stringent quality, safety and ethical
standards of our blue-chip customers
Market drivers
Throughout the world, we expect the growth
in specialist ground engineering to exceed the
growth in general construction, driven over the
medium-to-long term by such trends as shown
in the graphic to the right.
In our developing markets, additional drivers,
such as population growth, urbanisation, rapid
industrialisation and increased overseas trade,
are expected to sustain high levels of investment
across the whole construction sector over the
medium-to-long term and we continue to
strengthen our position in these regions.
1 Increasing land shortage, driving a need to use more brownfield and marginal land.
2 Climate change, triggering more river and dam flood protection projects.
3 The prevalence of very large-scale development projects.
4 The need for investment in energy capacity.
5 The renewal of outdated road and rail infrastructure.
9
OverviewPerformanceGovernanceFinancial statementsStrategyKeller Group plc | Annual Report & Accounts 2014
Our business model
We are the world’s largest independent ground
engineering specialist, providing technically
advanced and cost-effective foundation solutions.
Our services are used across the construction
sector in infrastructure, industrial, commercial,
residential and environmental projects. They
include piling and earth retention: specialty
grouting; anchors, nails and minipiles; ground
improvement; post-tension concrete; and
instrumentation and monitoring.
We are part of a supply chain that begins with the
materials with which we work on-site to deliver
tailored solutions for our numerous clients.
We have unrivalled coverage in North America,
Europe, Australia, and South Africa and a growing
presence in Asia, the Middle East and Latin America.
We have direct control over the development
of our own technology and the human and
intellectual property to make it operable. Our
business model is underpinned by robust bidding
processes, tight cost control, strong corporate
governance and meticulous risk management.
We are at our best when:
– a trusted brand is important – permitting us
to provide a premium service at a fair price
– our superior capabilities give us a
competitive edge
– time-critical delivery of quality is key
– complex projects require precise sequences
of skills to be delivered
– the environment provides particular or
new challenges.
With an annual turnover of £1.6bn, we have
around 9,000 staff world-wide with offices in
more than 40 countries.
Expertise
We offer solutions that are both tailored and
value-engineered. Our strong engineering
capability enables us to offer the most cost-effective,
complete packaged solutions which are tailored
to meet the specific needs of our customers,
helping them to keep down their costs.
Although we have many repeat customers,
we have a diverse customer base and we
are totally independent of all general
contractor organisations.
Customer partnership is a key element in Keller’s
value creation. We are focused on achieving
technical and financial project optimisation by
working closely with architects, engineers,
construction managers and contractors from
project inception to conclusion.
We offer the full range of ground engineering
products and technologies under one brand
allowing us to introduce new technologies to
new markets where we see an opportunity.
Safety
The Group’s standards on Safety are embraced
within the ‘Think Safe’ framework. The
framework sets out minimum requirements for:
– leadership
– having an effective HSE management system
in place
– developing and implementing annual HSE
improvement plans
– ensuring all staff are competent through
effective training and recruitment
– providing the channels through which staff
and sub-contractors can communicate any
HSE concerns
– monitoring how the HSE systems are
effectively mitigating the identified risks; and
– putting in place an annual audit and review
programme to check those systems are being
complied with and that they remain valid.
Each business unit also has qualified and
competent support resources in place to provide
guidance on compliance with and implementation
of the Group standards.
The Board has established a HSE Committee
that provides independent review and direction
on performance where necessary to the Board.
Operational delivery is managed through an
Executive Committee which reports directly
to the Chief Executive and, through him, to
the Board.
Technology
Centres of excellence provide support for
the continuous development of methods and
equipment and the transfer of technology
between Keller companies worldwide.
We have capabilities which give us a clear
competitive advantage:
– bigger and more sophisticated foundation
systems, often requiring specialist equipment;
– foundations for safety- and quality-critical
environments; and
– bespoke solutions with a high design content.
KGS is our specialist facility in Germany providing
the following services for the Group:
– equipment rental and utilisation
– manufacturing, repair, service and maintenance
– R&D
– improvement of existing machinery.
The Director of Technology and Best Practice has
established a steering group to identify specific
technology requirements/skill sets required in the
Group and workshops are held during the year
that bring together the best of our technical
experts to work on these and produce best
practice for the rest of the Group.
Keller has the
broadest range
of products in the
industry.
10
StrategyKeller Group plc | Annual Report & Accounts 2014 People
We are a decentralised organisation with
a devolved management structure, which
enables the Group to be managed in an
effective way. Within a clear control
framework, local managers have autonomy
in running their businesses, whilst working
together to share best practice and expertise
around the Group, seek synergies and cost
savings, improve performance and achieve
economies of scale wherever possible.
There are many regular forums for working
together across the Group, from the
high-level Executive, Technical and
Equipment Committees to various
functional working groups.
We believe that this structure allows us to
combine the ‘best of being global’ with the
‘best of being local’, striking the optimal
balance between encouraging local initiative
and entrepreneurial spirit and working
together, where to do so benefits the
Group as a whole.
Our culture helps us to attract and retain
the best people, allowing us to accumulate
a wealth of knowledge and experience.
Clients
Clients can be global – whereby we can bring
together resource and technology from our
four divisions to bid for and carry out contracts
under the Keller brand.
Clients can be localised – whereby we can use
one of our local brands and people who they
trust, as well as Keller technology, to bid and
carry out contracts.
Very often we will joint venture with a main
contractor on a bid – having local brands
enables us to joint venture with more than
one bidding contractor for the same contract
where we can offer different products and
solutions but whichever brand wins the
work we will draw on Keller resource and
technology to ensure the work is carried
out in the most effective way.
We value highly the customers in our
day-to-day business and we constantly strive
to meet their needs through the consistent
execution of many small-to-medium-sized
contracts. One or more of our businesses
can provide our customers with world-class
solutions, individually or combined, locally
or nationally.
Our large network of regional offices and our
strong local relationships ensure that we can
understand our clients and respond to their
needs. And the combined strength and
capabilities of our Group allow us to
respond rapidly when needs change.
Keller Group plc | Annual Report & Accounts 2014
11
OverviewPerformanceGovernanceFinancial statementsStrategy Our strategy
Our strategy is to extend our global leadership
in specialist ground engineering through both
organic growth, particularly in developing
markets, and targeted acquisitions.
In 2014, we continued to make progress in
delivering against our strategy. There are five
elements to our strategy:
Description
Expansion
– into new, higher-growth regions
Our long term growth track record is
built on a combination of organic growth
and acquisitions.
New technologies and methods
– developed or acquired
We continued to fund research into future
technologies, including:
– selection of best drilling methods and tools;
– new materials for use in geotechnical
solutions; and
– electronic data acquisition and workflow
control.
Our equipment facility, which designs and
manufactures our specialist plant, continued
its programme of enabling new, more
efficient methods through the adaptation
and optimisation of our plant.
Transfer of technologies
– and methods within our
current regions
Through acquisition we create new routes
to market for the Group’s geotechnical
solutions. We also continue our programme
of Group-wide engineering seminars to share
knowledge within Keller of some of our
newer or less widely used technologies.
Design and build
– capability and offering
alternative solutions
For piling solutions, which account for
around 50% of Keller’s revenue, Keller often
has only limited design input, being required
to install piles to the customer’s or engineer’s
specifications. Of Keller’s ground improvement
and grouting solutions, a sizeable proportion
is ‘design and construct’.
Continuous improvement
– to maintain our competitive edge
Risk management including:
– participation in large and complex projects
– equipment management
– safety management.
12
StrategyKeller Group plc | Annual Report & Accounts 2014 Progress
Market
KPIs (definitions can be found on page 23)
Successful integration of Franki Africa.
Sales offices established in Rio de Janeiro, São
Paulo, Santiago de Chile, Lima, Panama and
Mexico City.
Ansah joined the Keller Asia Division broadening
its product offerings (Driven Piling).
Whilst the US dominates near term investor
thinking and we can see further growth in that
region, longer term focus will shift to higher
growth emerging markets:
C Return on net operating assets
– Asia
– Africa
– Middle East
– Latin America
Cyntech Anchors, part of Keller Canada, had a
very successful year aided by sales in the US.
Internal design and manufacturing of a telescopic
bottom feed tube for vibro stone columns in air
height restriction areas.
Internal design and manufacturing of an
extendable vibrator tube for works in air
height restrictive areas.
Our range of technologies and products coupled
with the ability to bring them together in one
project, makes us unique in our markets.
C Return on net operating assets
D Accident Frequency Rate
E Staff turnover rate
In EMEA improved software for specific
geotechnical design launched in all business units.
We have started the transfer of our technologies
to Franki Africa.
Our global clients have an expectation that we
can provide the best technology, regardless of
geography.
We expect that an increasing market acceptance
of new techniques over time will offer significant
long-term organic growth potential.
C Return on net operating assets
E Staff turnover rate
Construction markets globally remain challenging.
A Revenue growth compared
By differentiating our offer both globally and
locally we can remain competitive.
with market growth
We continue to offer an extended product range
leading to further design and build opportunities.
Around 50% of our 2014 revenue was from
design and build work, bringing together key
technologies and Keller companies to execute
our strategy.
Examples are:
– Boufarik Power Plant, Algeria
– Berlin State Opera House, Germany (page 16).
A further improvement in our operating margin.
Another record year in the number of large and
complex projects won:
In EMEA our self help initiatives have
demonstrably improved margins and profitability
absent of an upturn in the wider economy.
B Operating margins
D Accident Frequency Rate
– Elliott Bay Seawall, Seattle
– Caspian region
– Changi Airport, Singapore and;
– Koralm railway line in Austria.
Keller’s high standards of quality (compliance
policy, health and safety) helped positioning as
a partner of key customers.
Larger contracts – limit competition, give greater
pricing power and improve visibility.
E Staff turnover rate
13
OverviewPerformanceGovernanceFinancial statementsStrategyKeller Group plc | Annual Report & Accounts 2014 Strategy
Strategy in action
Services used
Specialty grouting
The 100 year old seawall, built on top of wood
piling, was built to provide level access to
Seattle’s piers and supports the Alaskan Way
Viaduct and Alaskan Way itself.
Keller Company
Hayward Baker Seattle
www.hayward-baker.com
Technologies used
Jet grouting
Size of contract
$41m (£25m)
Customer
City of Seattle
Number of people on site
80
Background
Hayward Baker is currently performing jet
grouting to depths of up to 85 feet to provide
seismic stability and foundation support for the
repair and replacement of a 3,681 foot (0.7-mile)
section of the 100-year-old Elliott Bay Seawall.
Many of the existing timber piles supporting the
existing seawall and adjacent roadway did not
sufficiently penetrate underlying liquefiable soils
and have significantly deteriorated over time,
making the structure increasingly susceptible to
storm, tidal, and earthquake damage. Jet
grouting is a construction method that is
minimally disruptive to the critical, below
ground utility infrastructure within an urban
setting. Jet grouting does not require the
removal of the existing timber piles, further
reducing disruption of the infrastructure and
surrounding downtown environment.
Relocation of resources
The team comprised of Hayward Baker and
field staff from the Seattle, Santa Paula, and
Baltimore offices, providing the company’s jet
grouting experts and a wide array of resources.
HSE good practice
Two of Hayward Baker’s employees, both
operating engineers, have been selected by
their peers to serve as non-management
representatives on the job-site HSE Committee.
They vigorously participate and contribute useful
and thoughtful observations and suggestions.
They are also keen on following up on the
feedback on behalf of their peers to verify that
each suggestion receives timely attention. This is
truly valued by the long time superintendent,
whose leadership style empowers his
subordinates and fosters the safety culture we
highly value. The team trust him and are unafraid
to ask questions and make suggestions knowing
that he has everyone’s best interests at heart.
In addition, one of Hayward Baker’s long standing
drillers ensures that the drill helpers (labourers)
are always safe and well situated when he is on
the drill controls. He plans his work in such a way
as to put their safety and well-being first. This
includes keeping housekeeping first and foremost
in his thoughts. He communicates his intentions
very clearly to all those around him at all times.
He is also very eager to participate in safety
discussions and is not afraid to speak up as and
when needed. As an experienced driller, with
many inexperienced hands around him, he sets
an excellent example for others to follow, and
acts as a leader as far as safety is concerned.
Another colleague at Hayward Baker manages
the spoils operations coordinating large
numbers of spoils trucks/trailers. In the
congested site, this is a critical task. She has
taken ownership of her work area and the safety
of all concerned. She not only recognises
potential hazards (and reports them) but also
works diligently to correct them immediately.
She does not hesitate to discuss these issues
with her managers should she not be able to
address the concerns with her own resources
immediately. Most importantly, once a safety
correction has been made, she ensures that
it is upheld and maintained.
14
Keller Group plc | Annual Report & Accounts 2014
USA 14/07/2014, 11:24
Elliott Bay Seawall,
Seattle, Washington
Keller Group plc | Annual Report & Accounts 2014
15
OverviewPerformanceGovernanceFinancial statementsStrategy Berlin State
Opera House
Germany 07/04/2014, 16:14
Strategy in action
continued
16
Keller Group plc | Annual Report & Accounts 2014
Strategy Berlin State
Opera House
Germany 07/04/2014, 16:14
Services used
Piling and
earth retention
Anchors, nails
and minipiles
Specialty
grouting
Post-tension
concrete
Instrumentation
and monitoring
Founded in 1743, the original building was
commissioned by King Frederick II of Prussia
shortly after his accession to the throne. It was
the first free-standing opera house in Germany.
Size of contract
€17m (£13.7m)
(joint venture with Bauer Spezialtiefbau GmbH)
Location
Deutsche Staatsoper Berlin
Hinter der Katholischen Kirche 2
10117 Berlin, Germany
Customer
Senatsverwaltung für Stadtentwicklung Berlin
Number of technologies in use
– 1,400m² diaphragm walls
– 5,500 metres bored piling (D 880/1,200)
– 400m² Berlin type pit lining
– 3,300m² jet grouting slabs (medium-rise level)
– 5,700 metres anchors
– 10,000 metres pin piles
– 35m³ injection (acryl)
– steel bracing
– dewatering
– 40,000m³ excavation works
– measurement technique
– 3,300m² subbase.
Short description of background
and work
The Berlin State Opera is housed in a building
originally constructed as the Royal Opera in
1743, the first free-standing opera house in
Germany. It is now undergoing renovation
work at a cost of around €300m.
In 2011, Keller Grundbau extended its product
range to include complete excavation pits and
the successful completion of this contract, being
undertaken in joint venture, will provide an
excellent reference for similar future projects.
The excavation is to a depth of 12 to 14 metres.
Keller Group plc | Annual Report & Accounts 2014
17
OverviewPerformanceGovernanceFinancial statementsStrategy Strategy in action
continued
18
Singapore 19/11/2014, 10:36
Sengkang General
Hospital
StrategyKeller Group plc | Annual Report & Accounts 2014 Services used
Piling and
earth retention
Slated for completion in 2018, this future
1,400-bed integrated hospital development
will deliver all major healthcare disciplines
to five million people.
Size of contract
Approximately SGD 56m (£28m)
Location
Sengkang, Singapore
Customer
Ministry of Health, Government of Singapore
Scope of work
– 1,034 foundation bored piles: diameter
0.8 to 2.2 metres.
Deepest piles were 81 metres.
– 1,437 secant bored piles:
18 to 34 metres depth
– Diaphragm wall (subcontracted to
Bachy Soletanche)
– Civil works
– Capping beams
– Hospital mock-up building
Short description of background
and work
Contract is the largest single contract executed
by Resource Piling, and one of the largest in
Keller Asia.
Project characterised by large number of
rigs mobilised to site, with piling works finishing
comfortably ahead of contract schedule
(four months).
Keller Group plc | Annual Report & Accounts 2014
19
OverviewPerformanceGovernanceFinancial statementsStrategy Strategy
Strategy in action
continued
Services used
Piling and
earth retention
At midday the temperature reaches 46ºC,
baking the ground to the hardness of granite.
Keller Australia in association with its piling
member companies has overcome key
challenges and is largely complete under its
contract with Bechtel on the Chevron-operated
Wheatstone Project, located at Ashburton
North, 12 kilometres west of Onslow in
Western Australia.
Keller Australia’s contract to procure, install
and test around 20,000 piles is valued at over
AUD $200m (£105m) and the scope presented
a range of complex challenges such as logistics
with Ashburton North located around
1,400 kilometres north of Perth on the
Pilbara coast.
Overcoming the logistics challenges were a focus
for the Keller tender team and as early as 2010,
while the Wheatstone Project was in FEED
(Front End Engineering and Design), the Keller
team was working through a myriad of challenges
that included meeting complex construction
methodologies, innovative safety solutions,
and quality and environmental requirements
to secure a turnkey package.
Keller Australia’s piling mobilisation began in
May 2013 with the main piling works
commencing in June.
On the Wheatstone Project Keller Australia
is also conducting certification and maintenance
of piling platforms, storage, transport and
distribution of piles, pile set out, pre-drilling, pile
dynamic and static tests, trimming and splicing
of piles, and removal and disposal of soil heave.
Driven piles are typically 18.0 metres in length
and are split into three types, namely 355.6mm,
457.0mm and 610.0mm diameter.
The piles are received on-site where Keller’s
team of around 85 personnel work a 4 weeks
on and 1 week off roster. The team includes 23
site project staff in roles such as Project and
Construction Management, Environmental
Safety and Health, Site Supervision, Engineering,
Planning, QA and Technical, Testing, Survey,
Procurement, Logistics, Financial and
Administration.
The site team also has three dedicated Health,
Safety and Environment employees who work
tirelessly to maintain the Keller team’s focus on
safety and the environment. To date the Keller
team has achieved in excess of a quarter of a
million project hours without lost time injury
while undertaking over 1,000 Pre-Start
Meetings, writing over 450 Job Hazard Analysis
work sheets, compiling in excess of 40 Safe
Work Method Statements and undertaking 430
Site ES&H Audits and Inspections. To date the
Keller site team have been awarded ‘Safety
Subcontractor of the Year 2013’, the ‘Chevron
Project Director’s Award’ and the ‘Bechtel
Model Safety and Behavior Award’ as well as
receiving the ‘Subcontractor of the Month
Award’ on numerous occasions.
The project’s People-Based Safety (PBS)
Observational and Feedback Process has
ensured that the project team remains focused
and is underpinned with the Keller Think Safe,
Work Safe, Home Safe mantra.
Another priority is innovation. One of the key
innovations is a paperless system to digitally
record the progress of the works. The pile
installation crews on site use an electronic tablet
to scan pile bar codes and record pile installation
information such as pile type, position,
verticality, driven length and final set. Data is
then automatically matched with the information
provided by the rig iPiler system and any PDA or
static test results, pile pre-drilling and/or welding
data. Finally this data is automatically uploaded
into our Project Cloud where it is checked and
approved in real time by Chevron’s engineering,
procurement, construction and commissioning
contractor, Bechtel.
Keller Australia is focused on risk reduction and
the project team developed a comprehensive risk
management plan with project execution risks
identified and where possible controls implemented
to mitigate or eliminate exposure. Specifically,
prior to mobilisation Keller Australia identified
logistical challenges involved in maintaining
distribution of over 100 piles to the rigs each and
every day. The effective management of both the
off-site and on-site storage yards and subsequent
success of the sideloaders mitigated this risk.
20
Keller Group plc | Annual Report & Accounts 2014
Australia 25/07/2014, 13:07
Wheatstone,
Western Australia
Keller Group plc | Annual Report & Accounts 2014
21
OverviewPerformanceGovernanceFinancial statementsStrategy Principal risks and uncertainties
Our risks
Risks can materialise and impact on both
the achievement of business strategy and the
successful running of our business. A key element
in achieving our strategy and maintaining services
to customers is the management of these risks.
Our risk management strategy is therefore to
support the successful running of the business by
identifying and managing risks to an acceptable
level and delivering assurances on this.
How we identify risk
Our risk identification processes seek to
identify risks from both a top down strategic
perspective and a bottom up local operating
company perspective.
The Board
The Board has overall responsibility for risk
management, the setting of risk appetite and the
implementation of the risk management policy.
The Board reviews and challenges the Group
Risk Report.
The Audit Committee
The Audit Committee ensures adequate
assurance is obtained over the risks that
are identified in the Group Risk Report.
The Audit Committee is also responsible for
the independent review and challenge of
the adequacy and effectiveness of the
risk management approach.
Executive Committee
The Executive Committee is responsible for the
identification, reporting and ongoing management
of risks and for the stewardship of the risk
Risk
Description
Market cycles
The Group’s broad base helps
to mitigate against the risk of
downturn in our markets
Whilst our business will always be subject to
economic cycles, market risk is reduced by the
diversity of our markets, both in terms of
geography and market segment.
It is also partially offset by opportunities for
consolidation in our highly fragmented
markets.
Typically, even where we are the clear leader,
we still have a relatively small share of the
market. Our ability to exploit these
opportunities through bolt-on acquisitions is
reflected in our track record of growing sales,
and doing so profitably, across market cycles.
Tendering and
management
of contracts
Project risk is managed
throughout the life of a
project from the tendering
stage to completion
It is in the nature of our business that we
continually assess and manage technical, and
other operational, risks.
Expansion
Our long-term growth
track record is built on a
combination of organic growth
and acquisitions
We recognise the risks associated with
acquisitions and expanding into new regions
and aim to manage these to acceptable levels.
These include various country risks, including
the challenges of operating within different
business and safety cultures.
When considering an acquisition, we try to get
to know a target company, often working in
joint venture, to understand the operational
and cultural differences and potential synergies.
Safety
The construction industry
poses significant safety challenges,
but we do
not view injuries as
being inevitable
Keller is made up of businesses of varying sizes
operating around the world, often in
challenging environments.
It is essential that, as we continue to grow and
move into new regions, we can be sure that
our approach to safety is equally rigorous, no
matter whereabouts in the world, or on which
projects, we are working.
People
The accumulation of
knowledge and experience
is essential to helping
our customers to find
the best solutions
The risk of losing, or not being able to attract,
good people is key.
We pride ourselves in having some of the best
professional and skilled people in the industry,
who are motivated by our culture and the
opportunities for career growth.
22
StrategyKeller Group plc | Annual Report & Accounts 2014 management approach. The Executive
Committee identifies and assesses the key
strategic risks to the Group on an annual basis.
The outputs of the assessment are sent to the
divisional MDs for inclusion in their local risk
assessment exercises. In addition, the Group Risk
Report is reviewed and agreed by the Executive
Committee prior to submission to the Board.
Divisional MDs
Divisional MDs are responsible for the
identification, reporting and ongoing
management of risks in their respective
countries. They facilitate local risk assessment
exercises to review the key strategic risks and to
identify top local risks within their country. The
outputs of these assessment exercises are sent to
regional management and the Finance Director
and Company Secretary for review and challenge.
Regional management
Regional management are responsible for the
reporting, challenge and ongoing management
of risks in their respective regions. Regional
management, with support from their divisional
MD, review and challenge the risk information
from the countries and agree the regional
response to the key strategic risks and the
top regional risks.
How we manage risk
Our risk management process has been built to
identify, evaluate, analyse and mitigate significant
risks to the achievement of our strategy.
Our risk appetite
We use risk appetite to ensure the appropriate
focus is placed on the correct risks.
Controls and mitigation
Strategy of geographic diversification:
– operations in over 40 countries
– broad customer base
– services used across all industry segments:
infrastructure, industrial, commercial, residential
and environmental.
– Risk Management Framework defines
– project staff selected on the basis of their skills
Minimum Standards
– risk-based tender approval process, with
clear delegations of authority
– independent review of tenders
– training for staff in the typical risk issues
they may face when tendering for jobs,
negotiating contracts and executing work
– legal review of unusual or onerous
contract terms.
and experience
– establishment of ‘centres of excellence’
– periodic reviews of poorly performing contracts
to establish lessons learned with the results
communicated to all relevant staff.
– moving into new geographic markets often
involves following customers with whom we
have previously worked
– we deploy trusted and experienced personnel to
establish and grow our business in new regions
– robust operating rules, including our Think Safe
framework and Code of Conduct, apply
wherever in the world we are working.
– cross-border support and sharing of expertise
support the transfer of technologies
– acquisition targets are usually well known
to Keller
– we have thorough due diligence processes,
mostly undertaken by our own management
– individual integration plans reflect the unique
character of each acquisition.
KPIs
A Revenue growth compared with
market growth
Definition and method of calculation
Year-on-year sales growth (including
acquisitions) in local currency compared
with growth in the total regional
construction market.
B Operating margin
Definition and method of calculation
Operating profit before exceptional items
expressed as a percentage of revenue.
C Return on net operating assets
Definition and method of calculation
Operating profit before exceptional items
expressed as a percentage of average net
operating assets (including goodwill acquired
through acquisitions).
‘Net operating assets’ excludes net debt, tax
balances, deferred consideration and net
defined benefit pension liabilities.
– Think Safe initiative rolled out across Group in
– Group HSE Director continues to drive
2010 – a refresh of policies and guidance due to
take place in 2015
– Group HSE Committee monitors safety
programmes, sets targets for improvements
and ensures lessons learned across the Group
where appropriate.
improvement in safety standards and attitudes
supported by regional HSE representatives in
the divisions
– all divisions complete thorough self assessments
annually of their safety performance and culture,
which are used as a basis for developing safety
improvement plans.
D Accident Frequency Rate
Definition and method of calculation
Accident frequency per 100,000 hours.
Lost time injuries are calculated as any incident
over one day.
We aim to be a responsible employer for whom
our employees are proud to work.
We aim to treat our employees with fairness,
dignity and respect.
E Staff turnover rate
We provide excellent training and development
opportunities; experience on challenging and
high-profile projects; opportunities for
international career growth; and good
engagement and two-way communications.
Definition and method of calculation
Managerial, professional and technical staff
leaving in the period, other than through
redundancy or normal retirement, expressed
as a percentage of employees in this category.
23
OverviewPerformanceGovernanceFinancial statementsStrategyKeller Group plc | Annual Report & Accounts 2014 Resources and relationships
There are four main areas where our
business impacts on society and where we
have responsibilities which extend beyond
our financial performance.
Safety
We want every person who works for us, or
with us, to go home safely at the end of each day.
Environment
We want to reduce the impact of our operations
on the environment and help to meet our
customers’ environmental needs.
Workplace and people
We want to be known as a responsible
employer which people are proud to join.
Communities
We want to continue to take a leadership role
within our industry and to value, and be valued
by, the communities in which we work.
The Board’s role is to provide effective leadership,
establish overall policy for the Group and monitor
the performance of the operating companies in
relation to: health and safety; the environment;
responsible employment; business ethics; and our
interfaces with our communities. The Chief
Executive is ultimately accountable for the Group
operating in a way that is socially responsible.
Our line managers are charged with: delivering
performance safely and with integrity; supporting
Group policy; and providing leadership within
their companies. All employees are responsible
for following Group policy with the support,
direction and commitment of line management.
Our Code of Business Conduct, introduced in
2012, sets out the Group’s policies and practices
relating to:
– safety
– environment
– competition
– price-sensitive information
– equal opportunities
– harassment
– bribery, corruption and fraud
– gifts and hospitality
– whistle-blowing.
Our performance
With the support of our employees around the
Group, we have worked hard to create a safe
working environment across all of our businesses
and we enter 2015 determined to achieve our
goal of zero injuries.
In last year’s report, we undertook to report
back on progress against our 2014 Group-wide
objectives. These covered a number of high-risk
areas within the business, and each had a
completion date up to and including 2018.
Reduction in incidents associated with heavy
plant and equipment: we focused on the
prevention of large equipment overturning,
using the outcome of a review to develop better
guidance on prevention. This was carried out by
the HSE safety team, together with our technical
engineers. They looked at working platforms,
operator competency and common
circumstances where failures could occur.
2014: 8 recorded incidents (2013: 16)
Reduction in injuries to hands and feet: we
introduced a ‘Carry Glove’ policy across the
Group, supported with an awareness campaign
that included local road shows and events. In a
small number of instances, modifications were
made to existing equipment to prevent
access to moving parts.
2014: 112 recorded incidents (2013: 158)
Safety
While the Board and senior management remain
focused on achieving our goal of zero injuries
through continuous improvement in our health
and safety performance, we deeply regret that
an employee lost his life at work on a jobsite in
Ghana in June 2014. This was the Group’s first
fatality since 2011. Following the incident, the
Group Chief Executive and the Group’s Health
and Safety Director visited the site to ensure
appropriate measures were implemented to
prevent a recurrence and lessons learned
across the Group.
Occupational health and wellbeing: we reviewed
the divisional offerings and adopted a Group
policy setting minimum standards.
Implementation of OHSAS 18001 or an
equivalent standard: each division has put
in place a strategy and time frame to gain
certification by 2018. The Group’s Head Office
retained the certification it first gained in 2013.
Reduction of our Accident Frequency Rate
(AFR): we achieved a reduction in our AFR.
2014: 0.39 (2013: 0.61)
12 month rolling Accident Frequency Rate (AFR) per 100,000 hours worked
1.2
1.0
0.8
0.6
0.4
0.2
0.0
Dec
2013
Jan
2014
Feb
2014
Mar
2014
Apr
2014
May
2014
Jun
2014
Jul
2014
Aug
2014
Sep
2014
Oct
2014
Nov
2014
Dec
2014
Asia EMEA North America Australia Group
Australia
North America
EMEA
Asia
Group
6Recorded incidents
associated with heavy plant
and equipment in 2014
(2013: 12 incidents)
24
StrategyKeller Group plc | Annual Report & Accounts 2014 Environment
Greenhouse gas reporting
Here we report the quantity of greenhouse
gas (GHG) emissions for the year ended
31 December 2014. We have adopted the
International Greenhouse Gas Protocol
Corporate Accounting and Reporting Standard.
In doing so, we have fulfilled our requirements
under the UK’s Greenhouse Gas Emissions
(Directors’ Reports) Regulations 2013.
Reporting boundaries
To the best of our knowledge, we have included
all material emission sources which fall within the
boundaries of our consolidated accounts.
All direct (Scope 1) and indirect (Scope 2)
emissions are reported in absolute tonnes
equivalent CO2. GHG included are carbon dioxide,
methane and nitrous oxide emissions from the
combustion of fuels mentioned below, and carbon
dioxide emissions from the consumption of
purchased electricity:
– Scope 1 – Direct GHG emissions: combustion
of diesel, petrol, gas, oil and LPG.
– Scope 2 – Indirect GHG emissions: purchased
electricity consumed.
Data gaps and exclusions
Since adopting the International Greenhouse Gas
Protocol Corporate Accounting and Reporting
Standard in 2013, we have worked on improving
the coverage and accuracy of the reporting. This
is an ongoing exercise and this year the number
of data gaps has significantly reduced.
Last year we first reported our GHG for the 56
reporting units that made up the Group at that
time, about 93% of which were able to provide
some data on their primary emission sources. This
year the Group has expanded to 63 reporting
units with 98% now reporting some data, an
improvement on the prior year. We have
accounted for these new units in our calculation
of the 2014 footprint, including the acquisitions
at the end of 2013 and during 2014. Units also
report more complete data sets than last year
(more fuels reported, better coverage of the
whole year).
Results
Summary Scope 1 and 2 GHG emissions for the
Keller Group are shown below for 2013 and 2014.
2013
135,179
2014
170,031
Global GHG emissions data in tonnes of CO2e
Emissions from:
Scope 1 – Combustion of
fuel & operation of facilities
Scope 2 – Electricity, heat,
steam and cooling purchased
for own use
Total
Intensity measurement:
Absolute tonnes equivalent
CO2e per £m of revenue*
* These intensity measurement figures include the turnover
of entities that do not report any consumption data. When
excluding these entities from the total turnover, the figures
are 103tCO2e/£m in 2013 and 112tCO2e/£m in 2014. It is
not possible to quantify the difference made by the more
accurate and complete reporting in 2014, but this would
also serve to narrow the gap between the 2013 and 2014
carbon intensity.
9,531
179,562
112
6,225
141,404
98
The increase is due to a number of factors
including more complete reporting and the
new units included in the total for 2014. Entities
acquired at the end of 2013 and in 2014 account
for 6% of the 2014 footprint.
Third-party assurance statement
Keller Group plc appointed Anthesis Consulting
Group to provide independent assurance on
the 2014 Scope 1 and Scope 2 GHG accounts
presented above. Their summary opinion
is provided below (full opinion and
recommendations are available on request):
“ Based on our review, we are not aware of any
material modifications that should be made to
Keller Group plc’s assertion that their Scope 1
and 2 group inventory is in conformance with the
requirements of the Greenhouse Gas Emissions
(Directors’ Reports) Regulations 2013, following
the methodology of the Greenhouse Gas Protocol
Corporate Accounting and Reporting Standard.”
Anthesis Consulting Group, February 2015
Sustainability
In 2014, we adopted a Group Sustainability Policy.
It is our aim to become a leader in sustainability
within our sector by 2020 and we have identified
six priorities that we will take forward as a
business to achieve this:
– promote sustainable business growth
– keep our people healthy and safe
– support the low carbon economy
– limit our environmental impact
– be a responsible and inclusive employer
– engage positively with communities.
HSE Committee
In June 2014, we reported the appointment
of Nancy Tuor Moore to the Board as an
independent Non-executive Director and as
Chairman of the HSE Committee. Nancy has
served on the board of directors of CH2M
Hill, Inc., a global leader in consulting design,
design-build and project management, latterly
as Group President and Corporate Sponsor for
Sustainability. Prior to that, she held a number
of senior executive roles within CH2M Hill,
both in the US and internationally, most notably
leading the Rocky Flats Closure Project in
Golden, Colorado, the world’s largest nuclear
environmental clean-up programme, and
delivering the Masdar City Project development,
the desert community that aims to be carbon
neutral and zero waste, in Abu Dhabi. As part of
her induction, Nancy has been working with our
Group HSE Director and his team to understand
more fully the HSE culture within the Group and
we look forward to reporting to you next year
on areas in which we have been able to make
further progress with her input.
Our Code of Business Conduct can be
found on our website:
www.keller.co.uk/how-we-do-it/code-of-business-
conduct
50%Reduction in injuries
to hands and feet
0.39Accident Frequency Rate (AFR)
(2013: 0.61)
(per 100,000 hours worked)
25
OverviewPerformanceGovernanceFinancial statementsStrategyKeller Group plc | Annual Report & Accounts 2014 Workplace and people
Keller employs around 9,000 people worldwide,
most of whom are working in front-line roles
meeting with, and delivering for, our customers.
We are only as good as our employees, which is
why we want to be known as a responsible
employer which people are proud to join.
As a Group, we believe in treating all employees
with dignity and respect and do not tolerate any
form of harassment, discrimination or bullying.
We are committed to creating a working
environment in which every employee is
employed and promoted solely on the basis of his
or her merit and personal contribution. We aim
to provide fair employment opportunity to all
whilst not offending, or being insensitive to, the
traditions and cultures of countries in which we
operate. This is not only about ‘being fair’, it also
makes sound business sense.
We are committed to providing training and
development opportunities which enable
employees to perform at their best and increase
their contribution to the Group.
In addition to safety, technical and competency-
based training, management training programmes
operate at a Group and at a divisional level.
One of the ways in which we measure how well
we are doing as an employer is to measure our
staff turnover, and this key performance indicator
for each division is shown in the Operating
review.
Diversity
We believe that equal opportunity means hiring
and retaining the best people, developing all
employees to their potential and using their
talents and resources to the full. Diversity of
people, skills and abilities is a strength which will
help us to achieve our best.
At the end of the financial year, the breakdown
of male/female employees was as follows:
Main Board directors
(inc. Non-executive Directors)
Directors/senior managers
Managers
All employees
Male
Female
6
153
1,091
7,884
2
12
94
795
Communities
Geotechnical community
Our companies take a leadership role within their
industry by providing employees, customers,
suppliers and potential employees with technical
papers, seminars, field trips and site visits. Staff
from companies throughout the Group maintain
close contact with partner universities in order to
share best practice and provide examples of their
leading-edge engineering.
Many of our senior managers play key roles in the
geotechnical construction industry’s professional
associations and activities around the world,
getting involved in writing building codes,
specifications, guidelines, and industry-wide
safety initiatives.
Wider community
In terms of engagement with the wider
community in which we work, we are generally
working for a main contractor, who is the party
responsible for consulting with any community
affected by the project. Our work comes at the
outset of a project and we are typically on and
off the project very quickly; and our job sites are
often in remote locations, where we have no
interface with members of the public. There are
occasions when we are working in built-up areas
or in proximity to the public, such as the London
Crossrail and Victoria Station Upgrade projects,
and on any such projects in particular we strive to
reduce our noise and dust levels and to conduct
our work in a considerate manner.
Typically, where we have some community
engagement, it is by supporting our employees
when they get involved with community groups
and local charities.
Ultimately, we want to be a sustainable business
which earns the respect of all of our stakeholders
by taking seriously our wider responsibilities.
Looking ahead, we aim to bring greater definition
to our sustainability agenda, as we continue to
invest in our people, technology, systems and
processes to enhance both our business
performance and our reputation as a good
corporate citizen.
Resources and relationships
continued
9,000
Keller employees worldwide
26
StrategyKeller Group plc | Annual Report & Accounts 2014 Technology and best practice
Research
Keller in Australia is working in partnership
with Monash University to develop geothermic
piles incorporating heat exchangers for the
intermittent storage of energy in soils for heating
and cooling of buildings. This technology will
minimise the carbon footprint of built structures,
while also providing substantial long-term
cost savings.
Existing technologies
Keller has technologies which reduce the use of
concrete without compromising on the strength
and capability of the solution. These include hollow
centred piles and the patented Gem-Tech process.
Gem-Tech produces a lightweight, air-entrained
material using a variety of additives as a catalyst.
Costs savings of around 20% are achieved using
this sustainable material.
Hayward Baker (USA) is partnering with three
US universities to design methods for using
ground improvement in liquefaction remediation.
Keller in the United Kingdom is working in
partnership with Novacem on a carbon negative
cement solution for the ground engineering
industry. This Green solution can see energy savings
of between 60-80% over traditional methods.
Case study: UXO detection
Occasionally, where required by a customer,
Keller may be responsible for surveying the site
for unexploded ordnance (‘UXO’) or unexploded
bombs, before executing its own work.
Keller has experience in preparing control
documents to protect the health and safety of site
personnel and ensure quality assurance during
construction. Keller’s approach to sustainability can
reduce the overall environmental impact of projects
by establishing and operating on-site laboratories
to test material quality, slurry density, viscosity &
filtration, and backfill properties as part of the
quality assurance program.
Keller can provide clients with calculations of the
embodied carbon associated with our solutions. This
calculation accounts for carbon emissions associated
with materials, material delivery, personnel transport,
equipment transport, product manufacture, waste
and spoil and associated haulage.
To limit the risk of explosive ordnance, Keller in
Germany has developed an information leaflet
together with the Construction Industry
Association and other experts.
Case study: Vibro Stone Columns
with Concrete plug
Project Name: Spice Ball Leisure Centre
Region: United Kingdom
Project Description: The Spice Ball Leisure
Centre was built near the Cherwell River in a
1 in 100 year flood area. The focus was to raise
the ground floors above predicted flood levels.
The site was underlain by unknown landfill and
on-site groundwater testing showed contamination.
The Environment Agency required a solution
which would prevent groundwater run-off from
contaminating the underlying alluvium during
construction of the Centre.
Solution applied: Keller used a re-enforced soil
wall in combination with vibro ground treatment.
Environmental Stone Columns were inserted with
a lean mix concrete plug in the soft wet clay at the
base of the columns. The vibrator remained in the
ground during the procedure and columns were
completed using a conventional bottom-feed
approach. The Environment Agency was satisfied
that this approach prevented the risk of
contamination of alluvium from any flash storm
run-off during construction.
For the first time this leaflet (edition of 9,000)
contains a summary of all applicable norms and
regulations and make them manageable for all
users. The associated internet platform has
already been visited 32,000 times
(www.kampfmittelportal.de).
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The R&D function of KGS undertook
a number of reviews and issued best
practice during 2014.
The reviews were around operational issues
raised by the businesses and our HSE function.
Issue
Overturning equipment
Review
– monitoring of working platforms surcharging
to understand load transfer issues using steel
rebar as reinforcement
– research on rig pressure on working
platforms in different working conditions
and position
Result
Detailed guidance and standards issued to
Group, reduction in number of rigs overturning
in 2014
Issue
Increasing number of clients’ sites are in built
up areas or locations with low overheads
e.g. airports making the use of drill rigs difficult
Review
– review of drill rigs and safety features
Result
Design and manufacture of low head room
drills including remote control compliant with
latest safety standards
£15mIn 2014, Keller invested
£15m in research, technology
and equipment through KGS
27
OverviewPerformanceGovernanceFinancial statementsStrategyKeller Group plc | Annual Report & Accounts 2014
Executive Committee
Another year of progress across our divisions
1 Justin Atkinson
Chief Executive. Age 54
Justin became CEO of Keller in 2004 after joining
the Group in 1990. A Chartered Accountant by
training, he has held the roles of Group Finance
Director (1999–2003) and Chief Operating
Officer (2004). In September of 2014, Justin
announced his intention to retire from Keller
by the end of 2015, when he will be 55.
3 Wolfgang Sondermann
Director, Global Technology & Best Practice.
Age 64
A geotechnical engineer by training, Wolfgang
joined the Group in 1986 and was appointed to the
Board in 2003. He was appointed Director, Global
Technology & Best Practice in January 2012.
In 2014, Wolfgang was appointed as Chairman
of the Board of the German Geotechnical Society
(DGGT), a technical and scientific society dedicated
to the science and application of soil and rock as
a foundation and construction material.
4 Eduard Falk
Managing Director, EMEA. Age 54
Eduard is a Geotechnical Engineer by training
and joined the Group in 1987. He has held various
senior management roles and was appointed
Managing Director, Europe, Middle East and
Africa (EMEA) and to the Group Executive
Committee in 2012.
5 Venu Raju
Managing Director, Keller Asia. Age 53
A Geotechnical Engineer by training, Venu joined
the Group in 1994. Following appointments as
Managing Director, Keller Singapore & Malaysia
in 1999 and as Business Unit Manager, Keller Far
East in 2009, he was appointed as Managing
Director, Asia and to the Group Executive
Committee in 2012.
6 Mark Kliner
Chief Executive, Keller Australia. Age 51
Mark joined the Group in 2006 and was
appointed as Managing Director of Piling
Contractors in 2007 and as CEO of Keller
Australia in 2010. Mark was appointed to the
Group Executive Committee in 2012 and is a
Civil and Structural Engineer by qualification.
2 James Hind
Finance Director. Age 50
James was appointed Finance Director in 2003
after joining the Group from D S Smith plc,
where he was Group Financial Controller. James
spent two years in the New York office of
Coopers & Lybrand advising on mergers and
acquisitions further to qualifying as an accountant.
1
2
28
3
4
5
6
PerformanceKeller Group plc | Annual Report & Accounts 2014 7 John Rubright,
Managing Director, Keller North America.
Age 51
John joined the Group in 1986. He was appointed
as Senior Vice-President, Southern Region, of
Hayward Baker in 2005, President of Hayward
Baker in 2011 and as Managing Director, Keller
North America in 2013. John was appointed to
the Group Executive Committee in 2012. He is
a Civil Engineer by qualification.
8 Jim De Waele
Business Unit Manager, Europe. Age 47
A Civil Engineer by qualification, Jim joined the
Group in 2008 as Managing Director, Keller UK
from Stent Foundations, where he had been
Managing Director. He was appointed to the
Group Executive Committee in 2012 and as
Business Unit Manager, Europe in 2013.
9 Michael Sinclair-Williams
Group HSE Director. Age 53
Michael holds a PhD in Risk/Quality Management
and has a varied background in senior safety and
operational roles. He joined Keller in 2012 as
Group Health, Safety & Environment Director
and was appointed to the Group Executive
Committee in 2013.
10 Kerry Porritt
Group Company Secretary. Age 44
Kerry was appointed Group Company Secretary
in 2013. She is a Fellow of the Institute of
Chartered Secretaries and Administrators and
has over 20 years’ experience of complex and
global FTSE100 companies.
7
8
9
10
29
OverviewGovernanceFinancial statementsStrategyPerformanceKeller Group plc | Annual Report & Accounts 2014 Operational results
North America
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 £59.9m
(2013: £51.6m) reflects further improved
profitability in our US foundation contracting
businesses and a solid contribution from our
Canadian businesses.
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%.
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.
table width = 40.5
Our largest North American business, Hayward
height = 11mm
Baker, finished the year strongly. Its business
model of performing a wide range of small to
medium sized contracts across a broad range of
diamond is inset
products and geographies benefited from better
conditions across the market. In addition to this
0.68mm from right
base business workload, there has been an
increasing number of larger contracts performed
and bottom
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 (£36m), 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 (£25m), 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 marketplace.
Results summary and KPIs
Revenue (£m)
£775.6m
2014
2013
Operating profit (£m*)
£59.9m
2014
2013
Operating margin (%*)
7.7%
2014
2013
* Before exceptional items
Our US growth compared with the
growth of our US markets1 (%)
2014
Over 1 year
Our growth
Market growth1
Over 3 years
Our growth
Market growth1
1 Market growth for the total US construction market,
from data published by the US Census Bureau of the
Department of Commerce on 2 February 2015.
Return on net operating assets (%)
2014
2013
Accident Frequency Rate (%)
2014
2013
Staff turnover
Foundation contracting businesses
2014
2013
Suncoast
2014
2013
30
775.6
699.4
59.9
51.6
7.7
7.4
17
6
50
24
17
19
0.20
0.27
13
12
15
14
PerformanceKeller Group plc | Annual Report & Accounts 2014 Europe, Middle East & Africa (EMEA)
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.
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.
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 €31.2m
(£23.1m) 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.
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 São 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.
table width = 40.5
height = 11mm
diamond is inset
0.68mm from right
and bottom
Results summary and KPIs
Revenue (£m)
£451.5m
2014
2013
Operating profit (£m*)
£12.9m
2014
2013
Operating margin (%*)
2.9%
2014
2013
* Before exceptional items
Our growth compared with the
growth of our markets1 (%)
2014
Over 1 year
Our growth
Market growth1
Over 3 years
Our growth
Market growth1
451.5
399.2
12.9
6.8
2.9
1.7
5
3
-4
-2
1 Market growth in the construction markets in Austria,
France, Germany, Poland, Spain and the UK, (which
together account for around 60% of revenue from EMEA)
from estimates of real annual growth plus estimated
change in construction prices published by Euroconstruct
in November 2014.
Return on net operating assets (%)
2014
2013
Accident Frequency Rate (%)
2014
2013
Staff turnover (%)
2014
2013
8
5
0.42
0.88
14
11
31
OverviewGovernanceFinancial statementsStrategyPerformanceKeller Group plc | Annual Report & Accounts 2014 Operational results
continued
Asia
Results summary and KPIs
Revenue (£m)
£111.3m
2014
2013
Operating profit (£m*)
£8.3m
2014
2013
Operating margin (%*)
7.5%
2014
2013
* Before exceptional items.
111.3
96.2
8.3
9.0
7.5
9.4
Our growth compared with the
growth of our markets (%)
There is insufficient reliable published data on the growth in
our principal markets in Asia to enable us to report this KPI
for our Asian division.
Return on net operating assets (%)
2014
2013
Accident Frequency Rate (%)
2014
2013
Staff turnover (%)
2014
2013
15
17
0.64
0.78
11
14
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 benefiting from
table width = 40.5
substantial industrial and commercial investment.
height = 11mm
As previously announced, in August we acquired
a small Malaysian driven piling business, Ansah,
broadening our product offering in the region.
diamond is inset
Keller Malaysia now offers a full range of
foundation services and civil works.
0.68mm from right
In Singapore, Resource Piling completed the
and bottom
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 (£28m).
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.
32
PerformanceKeller Group plc | Annual Report & Accounts 2014 Australia
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 benefited 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.
table width = 40.5
height = 11mm
diamond is inset
0.68mm from right
and bottom
Results summary and KPIs
Revenue (£m)
£261.3m
2014
2013
Operating profit (£m*)
£15.7m
2014
2013
Operating margin (%*)
6.0%
2014
2013
* Before exceptional items.
Our growth compared with the
growth of our markets1 (%)
2014
Over 1 year
Our growth
Market growth1
Over 3 years
Our growth
Market growth1
1 Market growth for the total Australian construction
market, from data published by the Australian Bureau
of Statistics in September 2014.
Return on net operating assets (%)
2014
2013
Accident Frequency Rate (%)
2014
2013
Staff turnover (%)
2014
2013
261.3
243.4
15.7
15.6
6.0
6.4
21
-4
39
2
30
23
0.35
0.87
19
9
33
OverviewGovernanceFinancial statementsStrategyPerformanceKeller Group plc | Annual Report & Accounts 2014 Financial review
James Hind
Finance Director
£92.0m
Operating profit1
Results
Trading results1
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 £141.9m, compared to £124.2m
in 2013, and operating profit was £92.0m, an
increase of 18% on the £77.8m 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 £51.6m in 2013 to £59.9m 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 on page 4 and
the CEO’s strategic review on page 6.
Net finance costs
Net finance costs before exceptional items
increased from £3.7m in 2013 to £6.9m in 2014.
This increase is mainly due to higher average net
debt in 2014 as a result of investing nearly £200m
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 £1.0m increase to £1.8m 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 £54.0m 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 £2.9m before tax, mainly
comprising £6.6m of amortisation of acquired
intangible assets and £0.5m of costs relating to
acquisitions, partly offset by a £4.7m credit in
respect of previously provided contingent
consideration which the Group no longer
expects to pay, mainly relating to the
acquisition of Keller Canada.
34
1 Results stated before exceptional items comprising
a contract dispute provision and non-trading costs
relating to acquisitions.
PerformanceKeller Group plc | Annual Report & Accounts 2014 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.
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 £165.4m, 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 £104.1m, which is well below
the level at the end of 2013. Capital expenditure
totalled £61.0m, up on last year’s £42.6m.
At 31 December 2014, net debt amounted to
£102.2m (2013: £143.7m). Based on net assets of
£346.3m, 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 £250m
revolving credit facility was agreed in July, replacing a
£170m 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 £250m
multi-currency syndicated revolving credit facility
expiring in September 2019.
At the year end, the Group had undrawn
committed and uncommitted borrowing facilities
totalling £197.4m.
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 £35.8m and the scheme was 77% funded
on an ongoing basis. Following the valuation, the level
of contributions increased marginally to £1.6m 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 £38.2m, liabilities of
£49.8m and a pre-tax deficit of £11.6m.
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
£13.8m 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.
Operating margin from continuing
operations (%*)
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
* Before exceptional items.
Dividend per share pence
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
5.8
5.4
3.7
2.5
4.1
7.4
10.0
11.2
10.4
8.1
25.2
24.0
22.8
22.8
22.8
21.75
20.7
18.0
15.6
12.0
Test
Net debt: EBITDA
EBITDA interest cover
Net worth
Covenant
limit
Current
position*
< 3x
> 4x
> 200m
1.0x
20.1x
£342.7m
* Calculated in accordance with the covenant, with certain
adjustments to net debt and net interest and EBITDA
annualised for acquisitions.
Investment (£m)
2014
2013
2012
2011
2010
Capital expenditure Acquisitions
Cash flow history* – profits = cash
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
Total
68.6
245.2
33.7
37.9
51.6
141.9
124.2
91.9
71.4
85.0
113.2
144.3
125.8
104.9
65.0
EBITDA Group operating cash flow
Our strategic report, from page 6 to 27, has
been reviewed and approved by the Board
of Directors on 2 March 2015.
By order of the Board
Kerry Porritt
Company Secretary
2 March 2015
35
OverviewGovernanceFinancial statementsStrategyPerformanceKeller Group plc | Annual Report & Accounts 2014 Corporate governance statement
Chairman’s introduction
The Board has established arrangements to evaluate whether the
information in the annual report is fair, balanced and understandable.
Further detail of these arrangements can be found on page 46. As a result
of this, the Board considers the Annual Report and Accounts, taken as a
whole, is fair, balanced and understandable, and provides the information
necessary for shareholders to assess the Company’s performance, business
model and strategy.
The Annual Report is sent to all shareholders. We maintain a corporate
website, containing a wide range of information of interest to investors,
including presentations to institutional investors and analysts. It was recently
refreshed and relaunched, assisting our audiences with a simpler, cleaner
format and a mobile responsive capability. The website is updated with all
formal communications to the investment community immediately following
their release through a regulatory news service, in compliance with Keller’s
obligations under the Listing Rules and Disclosure and Transparency Rules.
The Board uses the Annual General Meeting to communicate with private
and institutional shareholders and welcomes their participation.
Throughout the year, the Chief Executive and Finance Director regularly
meet with, and make presentations to, institutional investors in the UK,
Continental Europe and the US. These include meetings following the
announcement of the annual and interim results with the Company’s largest
institutional shareholders on an individual basis. The Finance Director and
Financial Controller customarily meet with our debt investors throughout
the year and during 2014, held a series of additional meetings with our debt
investors as part of the re-financing exercise described in more detail on
page 35. All major shareholders have the opportunity on request to meet
the Chairman, the Senior Independent Director or, on appointment, any
new Non-executive Directors. On a regular basis, the Board is apprised of
the views of the investment community through the circulation of brokers’
research notes and feedback from analysts and investors, supplemented by
occasional investor perception surveys.
The remainder of this report contains the narrative reporting variously
required by the Code, the Listing Rules and the Disclosure and Transparency
Rules. I hope that you find this an informative and helpful discussion of an
important topic.
Roy A Franklin
Chairman
Dear shareholder
In this part of the Annual Report, we set out the measures that we have
taken to ensure that the Group continues to apply high standards of
corporate governance.
At Keller, the Board of Directors is accountable for ensuring that the highest
standards of governance facilitate the success of the Company and sustain
this over time.
The Board believes that Keller’s effectiveness should be supported by a
strong governance framework. The Group takes pride in its good reputation
globally and our Business Conduct Programme continues to promote
honesty, fairness and integrity in relations between employees and their
work colleagues, customers, suppliers, competitors and the communities
in which they work.
In June of 2014 we welcomed Nancy Tuor Moore to the Board and as
Chairman of the HSE Committee. Nancy has been spending time in the
business and with our HSE leadership team to gain an understanding of the
Keller culture and to help shape the direction of our efforts in this area in
the future. Her report on HSE is set out on page 42.
Yours faithfully
In September 2014, Justin announced his intention to retire as CEO of Keller
by 31 December 2015. Justin has been with the business for 25 years, leading
the business for 11 years. The timing of his departure allows us time to find
and appoint his successor with a smooth transition. Further information on
how we are approaching the search for his successor can be found in the
Nominations Committee report.
Roy A Franklin
Chairman
2 March 2015
Following the 2013 external Board evaluation and in line with corporate
governance best practice, during the year an internal Board evaluation was
undertaken. The feedback from the evaluation confirmed that the Board
and each of its Committees continue to operate effectively and that each
Director continues to make an effective contribution and retains a strong
commitment to their role. The resulting development themes that arose
from the evaluation are discussed on page 43. I have also set out how we
have progressed against the areas we identified for improvement as part
of the 2013 review.
36
GovernanceKeller Group plc | Annual Report & Accounts 2014 Compliance with the UK Corporate Governance Code
Throughout the financial year ended 31 December 2014, we have complied
with the provisions set out in the UK Corporate Governance Code 2012
(the ‘Code’). The Code is publicly available at the website of the Financial
Reporting Council (www.frc.org.uk). This Corporate Governance section of
the Annual Report and Accounts describes how we have applied the main
principles of the Code.
A. Leadership
A.1 The role of the Board
The Board met formally eight times during the year. The Group is controlled
through its Board of Directors. The Board has formally adopted a schedule
of matters reserved to it for decision.
A.2 Division of Responsibilities
The roles of the Chairman and Chief Executive are defined and there is a
clear division of responsibilities. Roy Franklin, the Chairman, is responsible
for the leadership and effectiveness of the Board. Justin Atkinson, the Chief
Executive, is the Director ultimately responsible for the running of the
Group’s business.
B.6 Evaluation
During 2014, the Company Secretary assisted the Chairman in a review
of the performance of the Board, its Committees and Directors.
B.7 Re-election
All Directors were subject to shareholder election or re-election at the
2014 AGM, as will be the case at the AGM in May 2015.
C. Accountability
C.1 Financial and Business Reporting
The Strategic Report on pages 6 to 35 provides information about the
performance of the Group, the business model, strategy, principal risks
and uncertainties relating to the Group’s future prospects.
C.2 Risk Management and Internal Controls
The Board confirms that there is an ongoing process for identifying,
evaluating and managing significant risks faced by the Group. Principal risks,
including controls and mitigating actions are set out on pages 22 and 23
of the Strategic Report.
A.3 The Chairman
The Chairman sets the Board’s agenda, ensures that adequate time is given
for discussion of all agenda items, facilitates effective Board processes, and
ensures that Directors are properly briefed in order to take a full and
constructive part in the Board and Board Committee discussion. Also,
the Chairman ensures effective communication with shareholders.
C.3 Audit Committee and Auditors
The Board has delegated a number of responsibilities to the Audit
Committee, which is responsible for overseeing the Group’s financial
reporting processes, internal audit and work undertaken by the external
auditors. The chairman of the Audit Committee provides regular updates
to the Board.
D. Remuneration
D.1 The Level and Components of Remuneration
The Remuneration Committee sets levels of remuneration appropriately so
as to attract, retain and motivate the Board, but also structures remuneration
so as to link it to both corporate and individual performance, thereby
aligning management’s interest with those of shareholders.
D.2 Procedure
Details of the work of the Remuneration Committee can be found in the
Remuneration Report on pages 48 to 60.
E. Relations with shareholders
E.1 Dialogue with Shareholders
The Board is committed to ongoing engagement with shareholders and
has an established cycle of communication based on the Group’s financial
reporting calendar. This includes preliminary results in March, publication
of the Annual Report in March, half year results in August and Interim
Management Statements in May and November. The Board is keen to
understand the views of shareholders and ensures open dialogue
throughout the year.
E.2 Constructive Use of the AGM
The Board uses the AGM to communicate with private and institutional
shareholders and welcomes their participation. The Notice of the AGM,
detailing all proposed resolutions, is sent to shareholders at least 20
working days before the meeting.
A.4 Non-executive Directors
The Non-executive Directors constructively challenge and help to develop
proposals on strategy and bring strong independent judgement, knowledge
and experience to the Board’s deliberations. Periodically, the Chairman
meets with the Non-executive Directors without the Executive Directors
present. Apart from the formal Board meetings, there is regular informal
contact between the Directors.
B. Effectiveness
B.1 The composition of the Board
The Nomination Committee keeps under review the balance of skills on the
Board and the knowledge, experience, length of service and performance of
the Directors.
B.2 Appointments to the Board
The appointment of new Directors to the Board is led by the Nomination
Committee. Further details of the activities of the Nomination Committee
can be found on page 44.
B.3 Commitment
On appointment, Directors are notified of the time commitment expected
from them. External directorships, which may impact existing time
commitments, must be agreed with the Chairman.
B.4 Development
On appointment, the Directors are provided with induction training and
information about the Group, the role of the Board and the matters
reserved for its decision, the terms of reference and membership of Board
Committees and the latest financial information. This is supplemented by
meetings with the Company’s legal and other professional advisers, where
appropriate, visits to key locations and meetings with certain senior
executives to develop the Directors’ understanding of the business. Also,
the Directors are continually apprised of best practice, regulatory and
legislative developments.
B.5 Information and Support
The Chairman, in conjunction with the Company Secretary, ensures that all
Board members receive timely and accurate information. The Company
Secretary ensures that there are effective information flows to the Board
and its Committees and between senior management and Non-executive
Directors.
37
OverviewFinancial statementsStrategyPerformanceGovernanceKeller Group plc | Annual Report & Accounts 2014 Governance
Corporate governance statement
continued
Board of Directors
1 Justin Atkinson
Chief Executive. Age 54
Justin became CEO of Keller in 2004 after joining the Group in 1990. A
Chartered Accountant by training, he has held the roles of Group Finance
Director (1999–2003) and Chief Operating Officer (2004). In September
of 2014, Justin announced his intention to retire from Keller by the end of
2015, when he will be 55.
2 James Hind
Finance Director. Age 50
James was appointed Finance Director in 2003 after joining the Group from
D S Smith plc, where he was Group Financial Controller. James spent two
years in the New York office of Coopers & Lybrand advising on mergers
and acquisitions further to qualifying as an accountant.
3 Wolfgang Sondermann
Director, Global Technology & Best Practice. Age 64
A geotechnical engineer by training, Wolfgang joined the Group in 1986
and was appointed to the Board in 2003. He was appointed Director, Global
Technology & Best Practice in January 2012.
In 2014, Wolfgang was appointed as Chairman of the Board of the
German Geotechnical Society (DGGT), a technical and scientific society
dedicated to the science and application of soil and rock as a foundation
and construction material.
4 Roy Franklin
Non-executive Chairman. Age 61
Roy was appointed to the Board in 2007 and became Chairman of the
Board and the Nomination Committee in 2009. He was formerly Chief
Executive of Paladin Resources plc and Group Managing Director of Clyde
Petroleum plc, following various senior management posts at BP. Roy’s
background in the international oil and gas sector brings with it an
understanding of what it takes to operate within challenging markets.
Roy is a Non-executive Director of the Australian-listed company
Santos Ltd. He is also an Advisory Board Member of Kerogen Capital, a
Non-executive Director of privately held Cuadrilla Resources Holdings
Limited and is a member of the Supervisory Board of OMV AG.
5 Ruth Cairnie
Independent Non-executive Director. Age 61
Appointed to the Board in 2010, Ruth is a member of the Nomination
and Health, Safety & Environment Committees and is Chairman of the
Remuneration Committee. A physicist by background, Ruth’s strategic and
commercial experience were gained within Shell, where she held a number
of senior international roles, most recently as Executive Vice President
Strategy and Planning, before her retirement in 2014.
Ruth is a Non-executive Director of Associated British Foods plc and
Rolls-Royce Holdings plc.
3
5
7
1
38
Keller Group plc | Annual Report & Accounts 2014
6 Chris Girling
Independent Non-executive Director. Age 61
Chris was appointed to the Board and the Audit, Remuneration and
Nomination Committees in 2011 and is Chairman of the Audit Committee.
A chartered accountant by training, Chris was formerly Group Finance
Director of Carillion plc and he brings to Keller his background in a range
of sectors, as well as recent and relevant financial experience.
He is a Non-executive Director of Workspace Group PLC and South East
Water Limited and the independent Chairman Trustee for Slaughter and
May’s pension fund.
7 Nancy Tuor Moore
Independent Non-executive Director. Age 66
Nancy was appointed to the Board and as a member of the Audit,
Nomination and Health, Safety & Environment Committees on 26 June 2014
and is Chairman of the Health, Safety & Environment Committee. Nancy’s
extensive international business experience, together with a proven record
in winning and safely delivering both global and local contracts, was gained at
CH2M Hill, Inc., where she held the Board position of Group President and
Corporate Sponsor for Sustainability before retiring in 2013.
Nancy is a Non-executive Director on the Board of Global Food Exchange
and a member of the Board of Governors for Colorado State University.
8 Paul Withers
Senior Independent Director. Age 58
Appointed to the Board and as a member of the Audit, Nomination,
Remuneration and Health, Safety & Environment Committees on
17 December 2012, Paul is also the Senior Independent Director. He
qualified as a chartered mechanical engineer and was Group Managing
Director at BPB plc, the international building materials business, where
he spent his executive career.
He is a Non-executive Director of Devro plc and Premier Farnell plc.
9 Kerry Porritt
Group Company Secretary. Age 44
Kerry was appointed Group Company Secretary in 2013. She is a Fellow
of the Institute of Chartered Secretaries and Administrators and has over
20 years’ experience of complex and global FTSE100 companies.
4
2
8
6
9
Keller Group plc | Annual Report & Accounts 2014
39
OverviewFinancial statementsStrategyPerformanceGovernance Corporate governance statement
continued
Leadership
The role of the Board and its Committees
Board
Strategy development, growing shareholder value, oversight and corporate governance
– provide entrepreneurial
leadership of the Group
driving it forward for the
benefit, and having regard
to, the views of its
shareholders and other
stakeholders
– govern the Group within a
framework of prudent
and effective controls
which enable risk to be
assessed and managed to
an appropriate level
– approve the Group’s
strategic objectives
– ensure that sufficient
resources are available to
enable it to meet those
objectives
– it delegates authority
to manage the business
to the Chief Executive
Officer and also delegates
other matters to
Board committees
and management
as appropriate.
The Board has formally
adopted a schedule of
matters reserved to it
for its decision.
Audit Committee
Oversee the Group’s
financial reporting, risk
management and internal
control procedures and
the work of its internal
and external auditors
(page 46)
HSE Committee
Oversee the Board’s
responsibilities in relation
to health, safety and
environmental matters,
arising out of the
activities of the Company
and its subsidiaries
(page 42)
Nomination
Committee
Review the composition
of the Board and plan for
its progressive
refreshing with regard
to balance and structure
as well as succession
planning (page 44)
Remuneration
Committee
Determine the
framework, policy
and levels of
remuneration and
make recommendations
to the Board on the
remuneration of the
CEO, executive directors
and senior executives
(page 48)
Executive
Committee
Assists the CEO to
develop and implement
strategy, operational
plans, budgets, policies
and procedures, monitor
operating and financial
performance, assess and
control risks, prioritise
and allocate resource,
monitor competitive
forces in each area
of operation.
The terms of reference for each of the Board’s key committees, which are reviewed on an annual basis, can be found on our website.
Key roles
Chairman
Responsibilities
Responsible for leading the Board, its effectiveness and governance.
The Chairman is responsible for the following matters pertaining to the leadership of the Board:
– ensuring appropriate Board composition;
– ensuring effective Board processes;
– setting the Board’s agenda;
– ensuring that Directors are properly briefed in order to take a full and constructive part in Board and Board Committee discussions;
– ensuring effective communication with shareholders; and
– ensuring constructive relations between Executive and Non-executive Directors.
Chief Executive Officer Responsible for the formulation of strategy and the business of the Board.
The Chief Executive is responsible for the following matters:
– formulating strategy proposals for the Board;
– formulating annual and medium-term plans charting how this strategy will be delivered;
– apprising the Board of all matters which materially affect the Group and its performance, including any significantly
underperforming business activities; and
– leadership of executive management to enable the Group’s businesses to deliver the requirements of shareholders: ensuring
adequate, well-motivated and incentivised management resources; ensuring succession planning; and ensuring appropriate
business processes.
The roles of the Chairman and the CEO are quite distinct from each other and are clearly defined in written terms of reference for
each role.
Senior Independent
Director
Discusses any concerns with shareholders that cannot be resolved through the normal channels of communication.
The role of Senior Independent Director provides a point of contact for those shareholders who wish to raise issues with the
Board, other than through the Chairman. The Board has agreed that the Senior Independent Director will act as Chairman of the
Board in the event that the Chairman is unable to do so for any reason.
Company Secretary
Ensures good information flows to the Board and its committees and between senior management and Non-executive Directors.
All Directors have access to the advice and services of the Company Secretary. The Company Secretary is responsible for
ensuring that the Board operates in accordance with the governance framework it has adopted and that there are effective
information flows to the Board and its Committees and between senior management and the Non-executive Directors.
The appointment and resignation of the Company Secretary is a matter for consideration by the Board as a whole.
40
GovernanceKeller Group plc | Annual Report & Accounts 2014 Throughout their period of office, Non-executive Directors are continually
updated on the Group’s business, its markets, social responsibility matters
and other changes affecting the Group and the industry in which it operates,
including changes to the legal and governance environment and the
obligations on themselves as Directors.
In April 2014, the Directors spent two days in Calgary meeting the
senior management team of Keller Canada during which time they
received updates on the business and its local markets from the team
and from local industry experts. In December 2014, the Company Secretary
facilitated a boardroom discussion on forthcoming regulatory and legislative
developments between the Board and its corporate lawyers, DLA Piper
UK LLP.
Directors’ conflicts of interests
Under the Companies Act 2006, a Director must avoid a situation where
they have, or could have, a direct or indirect interest that conflicts, or
possibly may conflict, with Keller’s interests. The Act allows Directors
of public companies to authorise conflicts and potential conflicts, where
appropriate, where the articles of association contain a provision to this
effect. The Articles of Association give the Directors authority to approve
such situations and to include other provisions to allow conflicts of interest
to be dealt with. To address this issue, at the commencement of each
Board meeting, the Board considers its register of interests and gives,
when appropriate, any necessary approvals.
There are safeguards which will apply when Directors decide whether
to authorise a conflict or potential conflict. First, only Directors who have
no interest in the matter being considered will be able to take the relevant
decision, and secondly, in taking the decision, the Directors must act in a
way that they consider, in good faith, will be most likely to promote Keller’s
success. The Directors are able to impose limits or conditions when giving
authorisation if they think this is appropriate. These procedures on conflict
have been followed throughout the year and the Board considers the
approach to operate effectively.
Board and Committee meetings and attendance
Director
Justin Atkinson1
Ruth Cairnie
Roy Franklin
Chris Girling2
James Hind
Wolfgang
Sondermann
Nancy Tuor
Moore3
Paul Withers
Board
8/8
7/8
8/8
7/8
8/8
Audit
Committee
–
–
–
4/4
–
HSE
Committee
–
3/4
–
1/1
–
Nomination
Committee
3/3
3/4
4/4
3/4
–
Remuneration
Committee
–
3/3
–
3/3
–
7/8
5/5
8/8
–
2/2
4/4
–
2/2
4/4
–
2/2
4/4
–
–
3/3
1 Justin Atkinson did not attend a Nomination Committee meeting relating
to CEO succession.
2 Chris Girling attended as an alternate member of the HSE Committee in
Ruth Cairnie’s absence.
3 Nancy Tuor Moore was appointed to the Board on 26 June 2014.
Board diversity
Keller continues to be supportive of the need for diversity on its Board
to provide the necessary range of background, experience, values and
perspectives to optimise the decision-making process. Gender is seen
as one important aspect of diversity to which the Chairman and the
Nomination Committee must pay due regard when deciding upon
the most appropriate composition of the Board.
The Board has established a range of backgrounds, capabilities and
experiences that are critical for the overall Board composition and this
forms the key objective and basis for the search and assessment of
candidates for future positions. Within this context, in the ongoing process
of refreshing the Board, the Company continues to encourage and welcome
interest from women, as from other candidates who will add to the Board’s
diversity. Against this overriding objective, the Company does not currently
propose to set targets for the percentage of women or other aspects of
diversity on its Board in future years.
The Board, as at the date of this Annual Report and Accounts, comprises 25%
women – two women: six men (14% at 4 March 2013 – one woman: six men).
Within the Keller Group, our overall senior management population
comprises 7% women and women employees account for 9% of the
organisation as a whole.
Professional development
On appointment, Directors are provided with induction training and
information about the Group, the role of the Board and the matters
reserved for its decision, the terms of reference and membership of the
Board Committees and the latest financial information about the Group.
This is supplemented by meetings with the Company’s legal and other
professional advisers, and, where appropriate, visits to key locations and
meetings with certain senior executives to develop the Directors’
understanding of the business.
Nancy Tuor Moore was appointed to the Board and as Chairman of the
HSE Committee in June 2014. Nancy’s induction programme has included
specific training on the regulatory and governance requirements of a UK
PLC, site visits to a number of contracts in the UK and USA, and attendance
at the HSE Safety Conference in the USA.
41
OverviewFinancial statementsStrategyPerformanceGovernanceKeller Group plc | Annual Report & Accounts 2014 Corporate governance statement
continued
Health, Safety & Environment Committee report
Dear shareholder
It is my pleasure to present the HSE Committee Report for the year
ended 31 December 2014.
Key objective
The Committee assists the Board in fulfilling its oversight responsibilities
in relation to health, safety and environmental matters arising out of
the activities of the Company and its subsidiaries. The Committee is
responsible for monitoring and reviewing the Group’s Health and Safety
Framework and Environmental Policy in line with applicable laws and
regulations. It also evaluates and oversees the quality and integrity of the
Company’s reporting to external stakeholders concerning health, safety
and environmental matters.
Terms of reference of the Committee
The Committee’s terms of reference, which were reviewed during the
year, are available on the Group’s website (www.keller.co.uk) and on
request from the Company Secretary.
Committee meetings
The Chief Executive and the Group Health, Safety & Environment
Director attend all meetings of the Committee. Members of the
Executive Committee have an open invitation to attend meetings
where they are encouraged to contribute and present.
The Committee is required to meet at least twice per year.
During this financial year the Committee met four times.
Activities of the Committee
The main activities of the Committee since the last report were
as follows:
– reviewing the Group’s safety performance in 2014 against its plan
– approving the Group’s 2015 health, safety and environment plan
– receiving safety performance reports and updates on progress
against the 2014 health, safety and environment plan
– recommending to the Board new policies on Sustainability and
Occupational Health; and
– receiving updates on regulatory and legal developments.
It was particularly hard to receive the news of an employee fatality in
Ghana in June 2014 and underpinned the importance of encouraging
and supporting the Think Safe framework in all of our operations
across the world.
I have focused my time at Keller to date on meeting the global HSE
safety team, to understand their priorities and the safety culture
within the Company. Next year, I shall report on our progress.
Further detail on the Company’s HSE performance in 2014 can
be found in our Strategic Report on page 24.
Nancy Tuor Moore
Chairman of the Health, Safety & Environment Committee
2 March 2015
Nancy Tuor Moore
Chairman of the Health, Safety & Environment Committee
HSE Committee Membership:
– Nancy Tuor Moore (Chairman from 26 June 2014)
– Ruth Cairnie
– Paul Withers (Interim Chairman until 26 June 2014)
42
GovernanceKeller Group plc | Annual Report & Accounts 2014 Effectiveness
Directors and Directors’ independence
The Board currently comprises the Chairman, four other Non-executive
Directors and three Executive Directors. The names of the Directors at
the date of this report, together with their biographical details, are set out
on page 38. All of these Directors served throughout the year with the
exception of Nancy Tuor Moore who was appointed on 26 June 2014.
The Non-executive Directors constructively challenge and help to develop
proposals on strategy and bring strong independent judgment, knowledge
and experience to the Board’s deliberations. Periodically, the Chairman
meets with the Non-executive Directors without the Executive Directors
present. Apart from formal contact at Board meetings, there is regular
informal contact between the Directors.
Ruth Cairnie, Chris Girling, Nancy Tuor Moore and Paul Withers are all
considered to be independent Non-executive Directors. Roy Franklin was
independent at the time of his appointment as Chairman on 1 August 2009.
His other professional commitments are as detailed on page 38.
All Directors are subject to election by shareholders at the first Annual
General Meeting (‘AGM’) following their appointment and to annual
re-election thereafter, in accordance with the Code.
Board evaluation
The Board has continued to make good progress in relation to the findings
of its external evaluation, concluded in 2013, particularly with regard to the
areas of health and safety, where Nancy Tuor Moore now chairs the HSE
Committee, and executive succession planning, for which there is now a
Group development programme in operation.
In 2014, we undertook an internally facilitated review of the performance
of the Board, its Committees and individual Directors. This process was
managed by the Company Secretary, under the Chairman’s direction. The
Senior Independent Director directed a review of the Chairman, in parallel.
The review covered: the Board dynamics and the quality of Board discussion;
the organisation and working of the Board Committees; the composition
of the Board, including the skill sets of Directors, their knowledge of the
business and the balance between Executive and Non-executive Directors;
and the Board’s interaction and relationship with the Executive Committee.
The evaluation was conducted by way of an online questionnaire, with
content developed by the Company Secretary, and the Chairman and Senior
Independent Director followed up with each respondent individually. The
results of the review were discussed at the Board’s meeting in December
2014 and a number of areas identified for further action, including Chairman
and Non-executive Director succession planning and increased interaction
between the Board and Executive Committee.
Following this process, the Chairman has confirmed that the Directors
standing for election at this year’s AGM continue to perform effectively
and to demonstrate commitment to their roles.
Information and support
The Board and each Committee are satisfied that they receive sufficient,
reliable and timely information in advance of meetings and are provided
with all necessary resources and expertise to enable them to fulfil their
responsibilities and undertake their duties in an effective manner.
For each Board and Committee meeting, Directors are provided with a
tailored Board pack at least one week prior to the meeting. To improve
the delivery and security of Board papers, the Company continues to
use an electronic system allowing the Board to easily access information,
irrespective of geographic location. Directors regularly receive additional
information from the Company between Board meetings, including a
monthly Group performance update. Where a Director was unable to
attend a meeting, they were provided with all the papers and information
relating to that meeting and were able to discuss issues arising directly
with the Chairman and Chief Executive.
Board focus areas in 2014
Strategy
– reviewed and approved the Group’s strategic plans and annual budget
– evaluated and approved:
– a contract bid and award in the Caspian region
– the acquisition of Ansah, a piling business in Malaysia
– considered and evaluated further adjacencies to the Group structure.
Risk
– considered the principal risks and uncertainties which could impact
the Group
– reviewed the risk management framework with particular regard to
contract and tendering risk.
Finance
– considered and approved the refinancing of the Group’s syndicated
credit facilities and US private placements
– considered and agreed the 2014 interim and final dividends.
Operational performance
– received and considered operational performance presentations
from the MDs of the US, Asia and EMEA regions.
HSE
– considered health and safety performance throughout the Group
– appointed a new Chairman to the Health, Safety and Environment
Committee.
2014 Board meetings –
time spent
5
4
1. Strategy
2. Risk
3. Finance
4. Operational performance
5. HSE
3
2
1
pie = 34.75mm
circle = 26.414mm
58%
43
OverviewFinancial statementsStrategyPerformanceGovernanceKeller Group plc | Annual Report & Accounts 2014 Dear shareholder
This report provides details of the role of the Nomination Committee
and the work it carried out during 2014.
Key objective
The Committee keeps under review the balance of skills on the Board
and the knowledge, experience, length of service and performance of
the Directors.
Terms of reference of the Committee
The Committee’s terms of reference, which were reviewed during the
year, are available on the Group’s website (www.keller.co.uk) and on
request from the Company Secretary.
Committee meetings
No one other than a member of the Committee is entitled to be
present at its meetings. Justin Atkinson did not attend a meeting of
the Committee where CEO succession was discussed.
The Committee is required to meet at least twice per year.
During this financial year the Committee met four times.
Activities of the Committee
The main activities of the Committee since the last report were
as follows:
– the appointment of Nancy Tuor Moore as a new Non-executive
Director in June 2014
– CEO succession planning, including the creation of a role profile and the
appointment of Egon Zehnder as external search consultants to assist
with the search in September 2014
– oversight of the development and implementation of an executive
development programme for the Group.
The search for a new CEO is progressing positively and we will report
on the outcome in due course.
Keller and the Committee continue to encourage and welcome interest
from women, as from other candidates who will add to the Board’s
diversity. The Board’s overriding objective is to continue to provide
effective leadership and, therefore, the Committee continues to
recommend for appointment only the most appropriate candidates
to the Board in line with the criteria set out on page 41. There are,
therefore, no formal targets set for female representation at Board level.
In accordance with the requirements of the UK Corporate Governance
Code, all members of the Board will seek re-election at the Annual
General Meeting in May 2014, with the exception of Nancy Tuor Moore
who will seek her first election.
In December 2014, the Committee formally reviewed the performance,
contribution and commitment of each of the Directors retiring at this
year’s Annual General Meeting and seeking reappointment, and
supported and recommended their reappointment to the Board. The
Committee has confirmed that each Director continues to perform well
both on an individual and collective basis, making a valuable contribution
to the Board’s deliberations and demonstrating commitment to Keller’s
long-term interests.
Roy A Franklin
Chairman of the Nomination Committee
2 March 2015
Corporate governance statement
continued
Nomination Committee report
Roy A Franklin
Chairman of the Nomination Committee
Nomination Committee Membership:
– Roy Franklin (Chairman)
– Justin Atkinson
– Ruth Cairnie
– Chris Girling
– Nancy Tuor Moore
– Paul Withers
44
GovernanceKeller Group plc | Annual Report & Accounts 2014 Accountability
Internal control
The Board is ultimately responsible for the Group’s system of internal
control and for reviewing its effectiveness. However, such a system is
designed to manage, rather than eliminate, the risk of failure to achieve
business objectives, and can provide only reasonable, not absolute,
assurance against material misstatement or loss.
The Board confirms that there is an ongoing process for identifying,
evaluating and managing the significant risks faced by the Group, which has
been in place for the year under review and up to the date of approval of
the Annual Report and Accounts. This process is regularly reviewed by
the Board and accords with the guidance.
The principal elements of the internal control framework are as follows:
(a) Risk identification and evaluation
Managers are responsible for the identification and evaluation of significant
risks applicable to their areas of business, together with the design and
operation of suitable internal controls. These risks may be associated with a
variety of internal or external sources including market cycles, acquisitions,
people, technical risks such as engineering and project tendering and
management, health and safety risks, control breakdowns, disruptions in
information systems, natural catastrophe and regulatory requirements.
The identified risks, and the controls in place to manage them, are subject
to continual reassessment.
On an annual basis, the significant risks across all principal business units and
divisions are collated and discussed in detail with each management team.
The outcome of these discussions is collated in the Group risk report, which
summarises and prioritises the significant risks facing the Group. These risks
are discussed, challenged and reviewed by the Board each year.
The Chief Executive reports to the Board on significant changes in the
business and the external environment that affect significant risks. The
Finance Director provides the Board with monthly financial information
which includes key performance and risk indicators. More information on
our principal risks can be found on pages 22 and 23. Keller’s KPIs are set
out on page 23.
(b) Authorisation procedures
Documented authorisation procedures provide for an auditable trail of
accountability. These procedures are relevant across Group operations and
provide for successive assurances to be given at increasingly higher levels of
management and, finally, to the Board.
(c) Management of project risk
Project risk is managed throughout the life of a contract from the bidding
stage to completion.
Detailed risk analyses covering technical, operational and financial issues are
performed as part of the bidding process. Authority limits applicable to the
approval of bids relate both to the specific risks associated with the contract
and to the total value being bid by Keller, or any joint venture to which Keller
is a party. Any bids involving an unusually high degree of technical or
commercial risk, for example those using a new technology or in a territory
where we have not previously worked, must be approved at a senior level
within the operating company.
On average, our contracts have a duration of around six weeks but larger
contracts may extend over several months. The performance of contracts
is monitored and reported by most business units on a weekly basis. In
addition, thorough reviews are carried out by senior managers on any
poorly performing jobs and full cost-to-complete assessments are routinely
carried out on extended duration contracts.
Further detail on the management of project risk is provided in the section
headed ‘Principal risks and KPIs’ on pages 22 and 23.
(d) Health and safety
Regular reporting, monitoring and reviews of health and safety matters
are made to the HSE Committee and the Board.
(e) Budgeting and forecasting
There is a comprehensive budgeting system with an annual budget approved
by the Board. This budget includes monthly profit and loss accounts, balance
sheets and cash flows. In addition, forecasts are prepared for the two
subsequent years. Forecasts for the full year are regularly updated during
the year.
(f) Financial reporting
Detailed monthly management accounts are prepared which compare profit
and loss accounts, balance sheets, cash flows and other information with
budget and prior year, and significant variances are investigated.
(g) Cash control
Each business reports its cash position weekly. Regular cash forecasts are
prepared to monitor the Group’s short- and medium-term cash positions
and to control immediate borrowing requirements.
(h) Investments and capital expenditure
All significant investment decisions, including capital expenditure, are
referred to the appropriate divisional or Group authority level.
(i) Internal audit
The Group has a structured programme of independent, outsourced audit
reviews, covering tendering, operational processes and internal financial
controls. The intention is to conduct an internal audit of all material business
units at least once every four years. This programme has been carried out
by PricewaterhouseCoopers since 2010. The programme is approved and
monitored by the Audit Committee, which reviews the findings of each
such exercise.
(j) Electronic Internal Control Questionnaire (‘EICQ’)
Each year, every principal business unit is required to complete an electronic
questionnaire responding to whether key internal financial and non-financial
controls are in place. The results of these questionnaires are summarised in
a ‘heat map’, which is presented to and discussed by the Audit Committee.
The responses to the questionnaires are also reviewed by
PricewaterhouseCoopers during each internal audit.
(k) Annual compliance statement
Once a year, managers are asked to confirm the adequacy of the systems of
internal controls for which they are responsible; and their compliance with
Group policies, local laws and regulations; and to report any significant
control weaknesses or ‘breakdowns’ identified in the past year.
(l) Business conduct
The Group’s business conduct handbook sets out the Group’s policies
and processes with regards to conducting business in all business units
worldwide. All business units are required to self-certify that they are
compliant with the Group’s business conduct handbook and compliance
with the handbook is considered as part of the independent reviews.
(m) Whistle-blowing procedures
Employees are encouraged to raise genuine concerns about malpractice
at the earliest possible stage and a confidential whistle-blowing hotline and
e-mail address is available. Any issues raised are thoroughly investigated
and reported back to the Audit Committee.
The management of financial risks is described in the Financial review and
the management of the principal risks and uncertainties facing the Group
is described in the Operating review.
45
OverviewFinancial statementsStrategyPerformanceGovernanceKeller Group plc | Annual Report & Accounts 2014 Corporate governance statement
continued
Audit Committee report
Chris Girling
Chairman of the Audit Committee
Audit Committee Membership:
– Chris Girling (Chairman)
– Nancy Tuor Moore (appointed 26 June 2014)
– Paul Withers
46
Dear shareholder
This report provides details of the role of the Audit Committee and the
work it carried out during the year.
The Chairman, Chief Executive, Finance Director, Group Financial
Controller and the Company’s external auditors (the ‘Auditors’)
normally attend, by invitation, all meetings of the Committee.
PricewaterhouseCoopers, in their role as internal auditors, attend
at least two meetings of the Committee each year.
Key objective
To assist the Board in discharging its responsibility for ensuring that the
Group’s financial systems provide accurate and up-to-date information on
its financial position and that the Group’s published financial statements
represent a true and fair reflection of this position. It also reviews
annually the Group’s systems of internal control and the processes
for monitoring and evaluating the risks facing the Group.
Terms of reference of the Committee
The Committee’s terms of reference, which were reviewed during the
year, are available on the Group’s website (www.keller.co.uk) and on
request from the Company Secretary.
Committee meetings
The Committee is required to meet at least twice per year. During this
financial year the Committee met four times, all with the Company’s
Auditors in attendance, and on two of these occasions, the Committee
met privately with the Auditors without management being present.
Activities of the Committee
During the year, the Audit Committee discharged its responsibilities by:
– reviewing an annual report on the Group’s system of internal control
and its effectiveness and receiving regular updates on key risk areas of
financial control
– reviewing and approving the Auditors’ engagement letter and audit fee
– reviewing the Auditors’ reports and the Group’s draft financial
statements and recommending them for approval to the Board
– reviewing the scope and results of the audit, its cost-effectiveness and
the independence and objectivity of the Auditors
– undertaking an assessment of the effectiveness of the internal audit
process
– approving a rolling four-year programme of internal audit reviews of
aspects of the Group’s operations and financial controls and receiving
reports on all reviews carried out during the year
– receiving briefings on various technical issues, such as accounting
standards and their practical consequences for Keller
– reviewing the Group’s whistle-blowing policy and monitoring the
procedures in place for employees to be able to raise matters of possible
impropriety
– reviewing the Committee’s effectiveness and its terms of reference
– reviewing the Group’s policy on employment of the Auditors for
non-audit services
– reviewing the need for an internal audit function
– reviewing the Group’s policy on the employment of former employees
of the Auditors.
The Audit Committee also reviewed the Company’s processes to ensure
that it was able to offer advice to the Board over whether the 2014
Annual Report and Accounts can be considered fair, balanced and
understandable. The following processes were established in 2013 and
were used again in 2014 to provide assurance: the co-ordination and
review of the Annual Report and Accounts was performed within an
exacting time-frame which ran alongside the formal audit process
undertaken by the Auditors; guidance was issued to contributors at an
operational level; an internal verification process dealing with the factual
content of the reports took place; and a comprehensive review was
undertaken by the senior management team and external advisers
that aimed to ensure consistency and overall balance.
GovernanceKeller Group plc | Annual Report & Accounts 2014 Significant issues considered by the Committee in relation to the financial
statements focused on the Group’s approach to key estimates and
judgments in connection with:
– accounting for construction contracts. The main factors considered
when making those estimates and judgments include the percentage of
work completed at the balance sheet date on longer-term contracts, the
costs of the work required to complete the contract and the outcome
of claims and variations raised against customers and claims raised against
the Group by customers or third parties. The Committee has reviewed
a report prepared by management on the key estimates and judgments
relating to construction contracts having a material impact on the Group’s
result for the year, including the estimates and judgments relating to the
significant contract dispute presented within exceptional items
– the carrying value of goodwill. The Group tests annually whether
goodwill has suffered any impairment in accordance with the accounting
policy set out in Note 2 to the financial statements. The Group
estimates the recoverable amount based on value in use calculations.
These calculations require the use of assumptions, the most important
being the forecast revenues, operating margins and the discount rate
applied. The key assumptions used for the value in use calculations are
set out in Note 13 to the financial statements. The Committee has
reviewed the key assumptions used for all impairment tests of material
goodwill balances. In particular, this review has focused on Keller Limited
in the UK and Keller Canada where there is the most uncertainty
surrounding the projections used in the value in use calculation.
The Committee also examined the disclosure of items which are
described as exceptional in the consolidated income statement
and discussed the appropriateness of such disclosure with the
Company’s Auditors.
These matters and any audit differences are considered in the
Committee meetings that review the full-year and interim results.
At these meetings, the Committee discusses with the Auditors whether
they consider management’s assumptions behind these estimates
and judgments to be conservative or aggressive. In addition, during
such meetings, the Committee meets with the Auditors without
management being present.
There are a number of checks and controls in place for safeguarding the
objectivity and independence of the Auditors. There are open lines of
communication and reporting between the Auditors and the Committee
and when presenting their ‘independence letter’ KPMG discuss with the
Committee their internal process for ensuring independence.
A detailed assessment of the amounts and relationship of audit and
non-audit fees and services is carried out each year and the Audit
Committee has developed and implemented a policy regulating the
placing of non-audit services to the Auditors, which should prevent any
impairment of independence. Any work awarded to the Auditors, other
than audit or tax compliance, with a value in excess of £100,000 requires
the specific approval of the Committee.
Over the last five years, the ratio of non-audit related fees paid to the
Auditor averaged 49% of the total audit fee. The ratio of non-audit
related fees paid to the Auditor in 2014 is 41% of the total audit fee.
Also, as part of its annual review of Auditors’ independence, the
Committee reviews the level and nature of entertainment between
the Auditors and management.
A resolution to re-appoint KPMG LLP will be put to shareholders at
the Annual General Meeting to be held in May 2015.
Internal audit
PricewaterhouseCoopers continues to provide a structured programme
of independent, outsourced reviews of all material business units at
least once every four years. During 2014, the Audit Committee received
and considered reports from PricewaterhouseCoopers which detailed
the progress against the agreed work programme for 2014. This
programme covered reviews of business units in six countries, which
together represented approximately 13% of the Group’s turnover
for the year. In September, the Committee formally reviewed the
effectiveness of these arrangements, concluding that the internal
audit arrangements were appropriate and effective.
Chris Girling
Chairman of the Audit Committee
External audit
The Committee places great importance on ensuring there are high
standards of quality and effectiveness in the external audit process.
2 March 2015
KPMG were re-appointed as the Company’s Auditor in 2014, further
to a retendering of the external audit process.
The Committee has undertaken an assessment of the effectiveness
of the external audit process of the 2013 financial statements. This
assessment focused on: the calibre of the audit firm (including reputation,
presence in the industry, size, resources and geographic spread); its
quality control processes; the quality of the team assigned to the audit;
the audit scope, fee and audit communications; and the governance
and independence of the audit firm. This process was supported by
the completion of a questionnaire by each material Keller business
and the divisional finance teams following the conclusion of the audit.
The questionnaire covered areas such as the quality of audit team, their
understanding of the business, and the management of and approach
to the audit. Where appropriate, actions were agreed against the
points raised and will be monitored for progress.
47
OverviewFinancial statementsStrategyPerformanceGovernanceKeller Group plc | Annual Report & Accounts 2014 Directors’ Remuneration report
Annual statement
Dear shareholder,
It is my pleasure to present the Directors’ Remuneration Report for
the year ended 31 December 2014.
Remuneration overview
In 2014, the Remuneration Committee’s membership, remit and role
were unchanged compared to 2013 and we continued to apply our
remuneration policy, as approved by shareholders at the Annual
General Meeting in May 2014.
Remuneration policy
We operate a remuneration structure comprising base salary and benefits,
a bonus plan and a long-term incentive plan, which provides a clear link
between pay and strategic priorities. We believe that the policy as a whole
is well aligned to the current business strategy and the outcomes reflect
business performance.
Activities of the Committee
The Committee’s main regular activities during 2014 were as follows:
– we reviewed the performance of the Group for the year, and
the performance of the Executive Directors to determine bonus
outcomes for 2014
– we approved share awards for 2014
– we set base salaries and established the Executive Directors’
bonus arrangements for 2015
– we reviewed the Directors’ remuneration report
– we considered remuneration market trends and corporate
governance developments.
In addition, during the year the Committee:
– took advice on and agreed the remuneration arrangements for Justin
Atkinson, who will retire as CEO no later than 31 December 2015
– reviewed the remuneration principles applicable to an incoming CEO
– considered the revised UK Corporate Governance Code; the Committee
concluded that the clawback arrangements currently applicable to the
Company’s bonus plan and long-term incentive plan, which include both
clawback and malus, are appropriate and meet
with the requirements.
Remuneration for 2014
The Group’s results for 2014 demonstrated continued good progress
in delivery of the strategy with profit before tax* increasing by 15%
and earnings per share* by 3%.
Performance Share Awards granted in 2012 are measured using EPS and
TSR targets: with EPS determined before exceptional items according to
the scheme rules. These targets were met in full and 100% of the Awards
vested in March 2015.
A strong performance by the Group for the year would have resulted in
bonuses ranging from 78% to 82% for the Executive Directors under the
Company’s annual bonus plan.
However, the PBT and EPS elements of the financial targets in the annual
bonus plan are set after exceptional items and performance was thus
impacted by the exceptional charge detailed in Note 7 to the accounts. This
led to the payment potential of the EPS and PBT elements being reduced to
zero and, under the rules of the plan, to restrict the payment potential
against personal strategic objectives to 15% for Justin Atkinson, James Hind
and Wolfgang Sondermann. The adverse impact on bonuses has also been
cascaded down to the Executive Committee.
Details of the remuneration decisions for 2014 are set out in the Directors’
annual remuneration report on pages 54 to 60.
Ruth Cairnie
Chairman of the Remuneration Committee
Remuneration Committee Membership:
– Ruth Cairnie (Chairman)
– Chris Girling
– Paul Withers
Key objective
To determine the framework, broad policy and levels of remuneration
for the Group’s Chief Executive Officer (CEO), the Group’s Finance
Director and Technology and Best Practice Director and other
executives as deemed appropriate. The framework includes, but is
not limited to, establishing stretching performance-related elements
of reward and is intended to promote the long-term success of
the Company.
Terms of reference of the Committee
The Committee’s terms of reference, which were reviewed during the
year, are available on the Group’s website (www.keller.co.uk) and on
request from the Company Secretary.
Committee meetings
Committee meetings are attended by the members. In addition, the
Chairman and the CEO may attend meetings as required. The CEO is
not present when his own performance or remuneration is discussed,
and no Director is involved in deciding their own remuneration.
The Committee is required to meet at least twice per year.
During this financial year the Committee met three times.
Key responsibilities
– making recommendations to the Board, within the agreed terms
of reference, on Keller’s framework of executive remuneration.
– determining the contract terms, remuneration and other benefits
for each of the Executive Directors, including performance share
awards, performance-related bonus schemes, pension rights and
compensation payments.
– monitoring remuneration for senior executives below Board level.
– approval of share awards.
Remuneration overview
– our remuneration policy supports the following principles:
– to provide a clear link between performance and reward and ensure
that the Executive Directors’ interests are closely aligned with those
of our shareholders.
– to help us to attract, retain and motivate high-calibre executives to
manage the business and deliver against our strategy, ensuring the
long-term success of the company
48
GovernanceKeller Group plc | Annual Report & Accounts 2014 Remuneration for 2015
The base salaries of James Hind and Wolfgang Sondermann were
increased by 3%, to £340,337 and £355,402 respectively, with effect
from 1 January 2015, in line with general pay increases of 3% awarded
across the Group.
As reported by the Chairman in his Corporate Governance report,
an external search is underway for a successor to the CEO at Keller.
Justin Atkinson will continue to be employed by the Company until
31 December 2015.
Justin will continue to receive his normal base salary and benefits during
his employment but his bonus for 2015 will be pro-rated to the date he
steps down as CEO and he will not be eligible for a share award in 2015.
The financial arrangements relating to Justin’s retirement will be
consistent with the remuneration policy and will be disclosed once
his employment ceases.
The Committee has set Justin’s base salary at £477,400 with effect
from 1 January 2015, an increase of 2% reflecting general inflation.
During 2015, Wolfgang Sondermann will reach retirement age and he
will, therefore, not receive a share award. The Committee considered
the impact of the 2015 retirements of Justin and Wolfgang and, given
the exceptional circumstances, decided it was appropriate to use its
discretion under the remuneration policy to award James Hind shares
in the amount of 200% of salary.
Remuneration disclosure
This report complies with the requirements of the Large and
Medium-sized Companies and Groups Regulations 2008 as amended in
2013, the provisions of the UK Corporate Governance Code 2014 and
the UK Listing Authority’s Listing Rules and the Disclosure and
Transparency Rules.
The report is in two sections:
– a summary of the Directors’ remuneration policy report (pages
50 to 53). This section contains details of the remuneration policy
approved at the 2014 AGM and is for information only; and
– the Directors’ annual remuneration report. This section sets out the
details of how our remuneration policy was implemented for the year
ended 31 December 2014 and how we intend for it to apply for the
year ending 31 December 2015 and it is the subject of an advisory
shareholder vote at the AGM in May 2015.
I will be available at the AGM to answer your questions.
Ruth Cairnie
Chairman of the Remuneration Committee
2 March 2015
* Before exceptional items
49
OverviewFinancial statementsStrategyPerformanceGovernanceKeller Group plc | Annual Report & Accounts 2014 Directors’ Remuneration report
continued
Remuneration policy report
Summary of Directors’ remuneration policy report
The remuneration policy was approved at the AGM in May 2014. Provided for information only are the details of the policy that were referenced in
Committee activities over the past reporting year which includes the Remuneration policy table, the recruitment remuneration arrangements, Executive
Director service contracts and terms and conditions for Non-executive Directors. The full policy report, as approved by shareholders, can be found in last
year’s remuneration report, a copy of which can be found at www.keller.co.uk/who-we-are/corporate-governance/remuneration-report.
Remuneration policy table
Element
Base salary
Fixed cash compensation, dependent
upon experience and responsibilities.
Purpose and link
to strategy
Sufficiently competitive to
ensure adequate retention.
Sufficient for incentives to
be fully variable.
Operation
Reviewed annually,
effective 1 January.
Periodically benchmarked.
Pay and conditions
throughout the Group
taken into account when
determining any increase.
Annual bonus
Short-term cash incentive up to
100% of salary based on achievement
of annual financial and personal
strategic objectives.
Medium-term incentive: any bonus
in excess of 100% of salary (up to a
maximum of 150% of salary) is deferred
for three years and payout linked to
ongoing share price performance.
Drives and rewards
annual performance.
Part deferral, together
with link to share price
(see Operation column)
focuses participants on
medium-term performance
and supports alignment
with shareholders.
Performance measures
and weightings are set at
the start of the year to
reflect business priorities.
Targets are reviewed
annually and relate to
financial and non-financial
targets in line with the
business plan.
The mix of financial
and personal strategic
objectives, together with
Group performance,
ensures an appropriate
broad focus on different
elements of Company
performance.
At the end of the year, the
Remuneration Committee
determines the extent to
which targets have been
achieved.
Any bonus above 100% of
salary is deferred (satisfied
in cash, adjusted in line with
share price movements and
dividends paid over the
three-year deferral period,
commencing on the last
day of the year to which
the bonus relates).
Bonuses are subject to
clawback in situations of
material misstatement,
error or gross misconduct.
Opportunity
No maximum, but
positioned broadly
at the median.
Increases are not expected
to exceed average
increases for the wider
workforce, unless a change
in scope or complexity of
role applies.
For maximum
performance
– 150% of salary
For threshold performance
– 0% of salary
Bonus up to 100% of
salary for very strong
performance.
Payouts between 0%
and 100% of salary are
determined broadly on
a straight-line basis such
that the payout for
performance in line with
budget (‘target’) is likely
to be in the range of
35%-55% of maximum.
Any bonus in excess of
100% of salary only payable
for genuinely exceptional
performance.
Performance metrics
None
At least 70% based on
financial performance.
Measures may include
(but are not limited to):
– Profit before tax (‘PBT’)
– Earnings per share (‘EPS’)
– Average net debt target
– Personal strategic
objectives.
Targets will be adjusted
to take account of major
acquisitions.
Payment potential for
personal strategic
objectives is capped at
50% of the potential payout
if PBT or EPS targets are
not triggered.
Bonuses may be reduced
by up to 10% if pre-defined
‘lead’ safety targets are
not delivered.
In addition, the Committee
has discretion to reduce
bonuses (down to zero, if
appropriate) in exceptional
circumstances to take into
account factors adversely
affecting the Company’s
reputation.
50
GovernanceKeller Group plc | Annual Report & Accounts 2014 Element
Performance Share Plan (‘PSP’)
Variable long-term remuneration
paid in shares.
Focuses on long-term financial
performance as well as stock market
out-performance, through targets based
on EPS growth and relative total
shareholder return (‘TSR’).
Purpose and link
to strategy
Retention through delivery
of potentially significant
deferred remuneration.
A considerable part of
potential remuneration
is linked to long-term
Group performance.
Retention of vested shares
(linked to shareholding
guidelines) enables
meaningful shareholdings to
be built up, aligning interests
of senior managers and
shareholders.
Operation
Award released after
three years.
Performance measured
over three financial years.
Any dividends paid may
accrue over the vesting
period and would be
paid only on those
shares that vest.
Awards are subject to
clawback in situations of
material misstatement,
error or gross misconduct.
Opportunity
Normal award of 100%
of base annual salary
each year.
Up to 200% of salary
where the Committee
determines that
exceptional circumstances
exist (e.g. on recruitment).
25% of an award vests
for threshold performance,
rising on a straight-line
basis to full vesting.
Performance metrics
Vesting of PSP awards
is subject to continued
employment and
performance against two
equally-weighted measures,
which are currently as
follows:
– EPS growth measured
on a point to point basis
over the three-year
performance period;
– TSR relative to a
relevant peer group
over the three-year
performance period.
The Committee will review
the targets prior to each
grant to ensure that they
continue to be well aligned
with the delivery of
Company strategy.
Pension
Salary supplement, defined benefit
plan and defined contribution plan.
Other benefits
Company car or car allowance;
private health care; life assurance;
and long-term disability insurance.
Provides for employee
welfare and retirement
needs.
Defined benefit (‘DB’) plan
in the UK closed to future
benefit accrual in 2006.
Replaced with lower-risk
defined contribution
(‘DC’) plans.
Access to company car to
facilitate effective travel.
Insurance benefits to
support the individual and
their family to minimise
disruption to day-to-day
business e.g. from illness.
Executives can elect
to receive either a DC
contribution or a salary
supplement of equivalent
cost to the Company.
No formal maximum, but
no plans to exceed current
percentages of basic salary.
None
None
Benefits currently include,
but are not limited to
a car and payment of its
operating expenses, or
car allowance; private
health care; life assurance;
and long-term disability
insurance.
Benefits provided through
third-party providers.
It is not anticipated that the
cost of benefits provided
will materially exceed the
level in recent years.
The Committee retains
the discretion to approve
a higher cost in exceptional
circumstances (e.g.
relocation).
Notes to the policy table
Performance measure selection and approach to target setting
The measures used under the annual bonus plan are selected annually to reflect the Group’s plans for the year and reflect both financial and non-financial
priorities. Performance targets are set annually to be stretching but achievable, with regard to the particular strategic priorities and economic environment
in a given year.
The Committee believes that EPS and TSR continue to be appropriate measures of long-term performance for Keller. EPS provides a link to long-term
financial performance and is highly visible internally, while TSR provides strong alignment with shareholder interests. EPS targets will be reviewed and
confirmed prior to each grant, taking account of analyst estimates, historical performance and EPS performance ranges used at other FTSE250 companies.
The TSR target for full vesting has been determined on the basis of an historical analysis of the median to upper quartile spread and is in line with typical
market practice for a company of Keller’s size. The Committee retains discretion to adjust this target for future awards should circumstances change.
If an event occurs which causes the Committee to consider that an outstanding PSP Award or bonus would not achieve its original purpose without
alteration, the Committee has discretion to amend the targets, provided the new conditions are materially no less challenging than when originally imposed.
Such discretion could be used to adjust appropriately for the impact of material acquisitions or disposals, or for exceptional and unforeseen events outside
the control of the management team. The application of any such discretion would have regard to the Committee’s practice of ensuring the stability of
measures and targets throughout the business cycle.
Shareholding guidelines
To reflect the importance the Committee places on aligning their interests with shareholders, Executive Directors are required to hold shares with a value
equivalent to 100% of salary. Executive Directors are required to retain 50% net of tax of shares acquired on vesting of share Awards until the required
holding is attained.
Awards under previous remuneration policies
Any awards or remuneration-related commitments made to Directors under previous remuneration policies will continue to be honoured.
51
OverviewFinancial statementsStrategyPerformanceGovernanceKeller Group plc | Annual Report & Accounts 2014 Directors’ Remuneration report
continued
Performance metrics
None
Details of the policy on fees paid to Non-executive Directors are set out in the table below:
Function
Chairman and Non-executive
Director fees.
To attract and retain NEDs of
the highest calibre with broad
commercial and other experience
relevant to the Company.
Non-executive Directors
do not participate in any
incentive scheme.
Operation
Fee levels are reviewed annually,
with any adjustments effective
1 January.
The determination of fees,
including that of the Chairman,
has been delegated by the Board
to the Executive Directors, who
are guided by independent
surveys of fees paid to NEDS
of similar companies.
The Chairman is paid a single,
consolidated fee.
The Non-executive Directors are
paid a basic fee, plus additional
fees for the chairing of a Board
Committee and to the Senior
Independent Director, which
reflects the time commitment
and responsibilities of their roles.
Opportunity
No maximum, but positioned
broadly at median.
It is not expected that increases
will exceed those for the wider
workforce or market NED fee
inflation rates. However, in the
event that there is a material
change in the complexity,
responsibility or time commitment
required to fulfil a non-executive
role, the Board has overall
discretion to make an appropriate
adjustment to fee levels.
Aggregate fees are subject to
the limit in the Company’s articles
of £500,000.
Fees for the year commencing
1 January 2015 are set out in the
Annual Report on Remuneration.
Recruitment remuneration arrangements
In the case of appointing a new Executive Director from outside the Company, the Remuneration Committee will seek to align the remuneration package
with our remuneration policy, which may include elements outlined in the policy table above.
In determining appropriate remuneration, the Remuneration Committee will take into consideration all relevant factors to ensure that arrangements are in
the best interests of both Keller and its shareholders and will seek not to pay more than is necessary for this purpose. The Committee may make an award
in respect of a new appointment to ‘buy out’ incentive arrangements forfeited on leaving a previous employer on a like-for-like basis, which may be awarded
in addition to the remuneration structure outlined in the table above. In doing so, the Committee will consider relevant factors including any performance
conditions attached to these awards and the likelihood of those conditions being met. The Committee may also rely on exemption 9.4.2 of the Listing Rules
to facilitate such a buy out if required.
Internal promotions to the Board
In cases of appointing a new Executive Director by way of internal promotion, the Remuneration Committee will apply the policy consistently as for
external appointees detailed above. Where an individual has contractual commitments made prior to their promotion to Executive Director level, the
Company will continue to honour these arrangements. Incentive opportunities for below Board level employees are typically no higher than Executive
Directors, but measures may vary.
Non-executive Director recruitment
In recruiting a new Non-executive Director, the Remuneration Committee will utilise the policy as set out in the table above.
All Non-executive Directors have specific terms of engagement, the dates of which are set out below.
Unexpired term of contract table
Director
L R Cairnie
R A Franklin
C F Girling
N Tuor Moore
P N Withers
Date of engagement letter
8 April 2010 (renewed on 30 May 2013)
17 July 2007 (and 28 July 2009 as Chairman, renewed on 19 June 2012)
11 February 2011 (renewed on 14 January 2014)
26 June 2014
17 December 2012
Unexpired term (months as at 2 March 2015)
15 months
4 months
24 months
27 months
10 months
The Non-executive Directors are not eligible to participate in any incentive plans or pension arrangements.
52
GovernanceKeller Group plc | Annual Report & Accounts 2014 Event
Annual bonus
Resignation
‘Good leaver’1, Death,
Change of Control
Performance Share Plan
Resignation
Death
Service contracts and exit payment policy
In accordance with general market practice, it is the Company’s policy that Executive Directors should have contracts with an indefinite term providing for a
maximum of one year’s notice.
Service contracts between the Company (or other companies in the Group*) and individuals who served as Executive Directors at any time during the year
are summarised below. All are rolling contracts. Executive Director service contracts are available to view at the Company’s registered office.
Director
J R Atkinson
J W G Hind
W Sondermann*
Date of service contract
6 March 2003
Notice period
12 months
16 May 2003
12 February 1998 (modified
by memoranda of employment
dated 5 March 2004 and
20 December 2011)
* Wolfgang Sondermann’s service contract is with Keller Holding GmbH.
Termination payment
Maximum of basic annual salary
plus the fair value of benefits for
the unexpired portion of the
notice period, subject to mitigation
See below for treatment of
incentives on termination in
varying circumstances
When considering exit payments, the Committee reviews all potential incentive outcomes to ensure they are fair to both shareholders and participants.
The table below summarises how the Awards under the annual bonus and PSP arrangements are typically treated in specific circumstances, with the final
treatment remaining subject to the Committee’s discretion:
Timing of vesting
Calculation of vesting / payment
Awards lapse
On termination
Not applicable
A pro-rata bonus may become payable for the period up to the termination date.
Performance targets will continue to apply
Awards lapse
As soon as practicable
‘Good leaver’1
Normal vesting date
Change of control
Within one month of the
relevant event
Not applicable
The Committee determines whether and to what extent outstanding awards vest based
on the extent to which performance conditions have been achieved at the relevant date
The Committee determines whether and to what extent outstanding awards vest based
on the extent to which performance conditions have been achieved over the full performance
period, and the proportion of the performance period worked
The Committee determines whether and to what extent outstanding awards vest based
on the extent to which performance conditions have been achieved at the relevant date,
and the proportion of the performance period worked
1 ‘Good leaver’ is defined as a participant ceasing to be employed by the Group by reason of injury or disability, ill health, redundancy, retirement with the agreement of the employer, or any
other reason that the Committee determines in its absolute discretion.
If employment is terminated by the Company, the departing Executive Director may have a legal entitlement (under statute or otherwise) to additional
amounts, which would need to be met. In addition, the Committee retains discretion to settle any other amounts reasonably due to the Executive Director,
for example to meet the legal fees incurred by the Executive Director in connection with the termination of employment, where the Company wishes to
enter into a settlement agreement and the individual must seek independent legal advice.
In certain circumstances, the Committee may approve new contractual arrangements with departing Executive Directors including (but not limited to)
settlement, confidentiality, restrictive covenants and/or consultancy arrangements. These will be used sparingly and only entered into where the Committee
believes that it is in the best interests of the Company and its shareholders to do so.
Terms and conditions for Non-executive Directors
The appointment of Non-executive Directors is for a fixed term of three years, during which period the appointment may be terminated by either party on
three months’ notice. There are no provisions on payment for early termination in letters of appointment.
The letters of appointment of Non-executive Directors and service contracts of executives are available for inspection at the Company’s registered office
during normal hours and will be available at the Annual General Meeting.
53
OverviewFinancial statementsStrategyPerformanceGovernanceKeller Group plc | Annual Report & Accounts 2014 Directors’ Remuneration report
continued
Annual remuneration report
The following section provides details of how Keller’s remuneration policy was implemented during the financial year ended 31 December 2014.
Single total figure of remuneration for Executive Directors (audited information)
The table below sets out a single figure for the total remuneration received by each Director for the financial years ended 31 December 2013 and 2014:
J R Atkinson
J W G Hind
W Sondermann5
2014
£
468
16
140
156
850
1,630
2013
£
446
16
134
564
710
1,870
2014
£
330
13
60
109
612
1,124
2013
£
321
13
58
417
511
1,320
2014
£
345
13
57
102
688
1,205
2013
£
353
13
59
397
576
1,398
Salary
Taxable benefits1
Pension benefit2
Single-year variable3
Multiple-year variable4
Total
1 Taxable benefits consist primarily of a car and payment of its operating expenses or car allowance (£15,000, £12,000 and £6,109 for Justin Atkinson, James Hind and Wolfgang Sondermann
respectively), private health care; life assurance; and long-term disability insurance.
2 See table below for a breakdown of pension benefits.
3 See Annual Bonus in respect of 2014 performance on page 55 for further details.
4 PSP Awards reflect those vesting based on performance to 31 December 2014. The market price on the date of vesting is currently unknown; the value is estimated using the average market
value over the last quarter of 2014 of 830p. See 2012 PSP vesting on page 56 for further details.
5 Wolfgang Sondermann’s salary is paid locally in euro. The 2013 and 2014 totals are calculated in GBP using the average currency conversion rate applicable to those years.
Total pension entitlements (audited information)
The changes during the year in the accrued pension entitlements of Justin Atkinson under the Keller Group Pension Scheme and of Wolfgang Sondermann
under the defined benefit (DB) pension arrangements operated by Keller Grundbau GmbH are shown in the table below. The amount shown as accrued
pension at the end of the year is that which would be paid annually on retirement, based on service to the end of the year.
Executive Director
J R Atkinson1
J W G Hind
W Sondermann2
1 The normal retirement age for Justin Atkinson is 60.
2 The normal retirement age for Wolfgang Sondermann is 65.
Accrued
pension
31 December
2014
£000
109
n/a
5
Accrued
pension
31 December
2013
£000
106
–
5
Increase in
accrued benefit
(net of inflation
and Directors’
contributions)
£000
–
–
–
Value of DB
scheme
benefits
£000
–
–
2
Pension
allowance/DC
contribution
£000
140
60
57
Total pension
included in
single figure
table
£000
140
60
57
Single total figure of remuneration for Non-executive Directors (audited information)
The table below sets out a single figure for the total remuneration received by each Non-executive Director for the year ended 31 December 2014 and the
prior year:
L R Cairnie
R A Franklin
C F Girling
N Tuor Moore1
P N Withers
1 Nancy Tuor Moore was appointed to the Board on 26 June 2014.
Total fees
2014
£
52,300
159,700
52,300
26,753
52,300
2013
£
51,000
155,000
51,000
–
51,000
54
GovernanceKeller Group plc | Annual Report & Accounts 2014 Incentive outcomes for the year ended 31 December 2014
Annual bonus in respect of 2014 performance
Under the 2014 annual bonus plan, the Executive Directors delivered strongly on both financial targets and their own personal targets, of which Justin
Atkinson had six and James Hind and Wolfgang Sondermann each had five. Notably, on the personal objectives, Justin put in place an executive development
programme for the Group, to support talent development and succession planning; James reviewed and refinanced the Group’s main debt facilities, at
improved rates; and Wolfgang continued to lead improvements in the Group’s bid appraisal process, to reduce the risk from underperforming contracts.
However, PBT and EPS elements of the financial targets in the annual bonus plan are set after exceptional items and performance was thus impacted by the
exceptional charge detailed in Note 7 of the Annual Accounts. This led to the payment potential of the PBT and EPS elements being reduced to zero and,
under the rules of the plan, reduced the payment potential against personal strategic objectives from 30% to 15% for Justin, James and Wolfgang. Leading
safety targets were met by each of the Executive Directors; however, the Committee exercised its discretion to reduce the pay-outs under that target in
recognition of a fatality in the business during the year. The overall outcome is an annual bonus pay-out for Executive Directors of between 30 and 33% for
2014. Without the exceptional charge, annual bonus pay-outs would have been in the range of 78 and 82%.
The Committee did not exercise any discretion in relation to the financial performance targets. The financial targets, together with the actual performance
achieved against each target, are set out in the table below.
Director
J R Atkinson
Weighting (% salary)
Threshold
Target
Maximum
Actual1
Awarded2
J W G Hind
Weighting (% salary)
Threshold
Target
Maximum
Actual1
Awarded2
W Sondermann
Weighting (% salary)
Threshold
Target
Maximum
Actual1
Awarded2
1 At 2014 budget exchange rate before exceptional items.
2 EPS and PBT impacted by the exceptional charge detailed in Note 7.
2014 performance targets and outcomes
Group EPS
Group PBT
Group average
net debt
50%
80p
90p
100p
80.3p
0%
50%
80p
90p
100p
80.3p
0%
50%
80p
90p
100p
80.3p
0%
50%
£85m
£95m
£105m
£90.6m
0%
50%
£85m
£95m
£105m
£90.6m
0%
50%
£85m
£95m
£105m
£90.6m
0%
20%
£185m
£170m
£155m
£154.7m
20%
20%
£185m
£170m
£155m
£154.7m
20%
20%
£185m
£170m
£155m
£154.7m
20%
Personal
strategic
objectives
30%
Total
150%
13.4%
33.4%
30%
150%
13.0%
33.0%
30%
150%
9.6%
29.6%
55
OverviewFinancial statementsStrategyPerformanceGovernanceKeller Group plc | Annual Report & Accounts 2014 Directors’ Remuneration report
continued
2012 PSP vesting
Based on EPS and TSR performance over the three years ended 31 December 2014, the Performance Share Plan Awards made in 2012 will vest in full in
March 2015, once again demonstrating strong progress in the delivery of the Group’s strategy. Further details, including vesting schedules and performance
against each of the metrics, are provided in the table below:
Measure
Earnings per share (EPS)
Weighting
50%
TSR relative to the constituents of the
FTSE All-Share Index
50%
Targets
0% vesting below RPI+4% p.a.
30% vesting for RPI+4% p.a.
100% vesting for RPI+9% p.a. or more;
Straight-line vesting between these points
0% vesting below median
30% vesting for median
(50th centile) performance
100% vesting for upper quintile
(80th centile) performance;
Straight-line vesting between these points
Outcome
Vest %
RPI+194.9% p.a. 100%
95.7th centile
100%
Total PSP vesting
100%
The value of these Awards to the individual Executive Directors, as shown in the single figure of total remuneration, is therefore as follows:
Executive Director
J R Atkinson
J W G Hind
W Sondermann
Interests held
102,340
73,641
82,907
Vesting %
100%
Interests
vesting
102,340
73,641
82,907
Date vested
March 2015
Market price
830p
Value (£000)
£850
£612
£688
The market price on the date of vesting is currently unknown; the value is estimated using the average market value over the last quarter of 2014.
Scheme interests awarded in 2014 (audited information)
Performance Share Plan (‘PSP’)
The three-year performance period over which performance will be measured began on 1 January 2014 and will end on 31 December 2016. Awards will
vest on 7 March 2017, subject to meeting performance conditions.
Executive Director
J R Atkinson
J W G Hind
W Sondermann
Date of grant
7 March 2014
Shares over
which awards
granted
39,977
28,232
30,453
Market price at
date of award
1171p
Face
value
£468,131
£330,597
£356,605
Vesting of the PSP Awards is dependent on the development of EPS and TSR relative to the FTSE250 Index (excluding investment trusts) with equal waiting
over a three-year performance period. There is no retest provision. Details of the vesting schedules are provided below:
EPS vesting schedule (50% of award)
Relative TSR vesting schedule (50% of award)
% award vesting
100%
% award vesting
100%
5%
15%
0%
10%
Keller three-year EPS CAGR (p.a.)
Keller three-year TSR % outperformance vs. FTSE250xIT (p.a.)
25%
0%
25%
0%
56
GovernanceKeller Group plc | Annual Report & Accounts 2014 Payments to past Directors
No payments were made to past Directors during the year.
Exit payments made in the year
The Company paid no exit payments during the year.
Directors’ interests (audited information)
A table setting out the beneficial interests of the Directors and their families in the share capital of the Company as at 31 December 2014 is set out below.
None of the Directors has a beneficial interest in the shares of any other Group company. Since 31 December 2014, there have been no changes in the
Directors’ interests in shares.
Executive Director
J R Atkinson
J W G Hind
W Sondermann
L R Cairnie
R A Franklin
C F Girling
P N Withers
N T Moore
Ordinary
Shares at
31 December
2014
238,586
93,258
130,000
6,000
6,000
3,000
20,000
–
Ordinary
Shares at
31 December
2013
202,693
67,434
90,000
6,000
6,000
3,000
10,000
–
Executive Directors’ shareholding requirements (audited information)
The table below shows the shareholding of each Executive Director against their respective shareholding requirement as at 31 December 2014:
J R Atkinson
J W G Hind
W Sondermann
Shares held
Options held
Owned
outright or
vested
238,586
93,258
130,000
Vested but
subject to
holding period
0
0
0
Unvested and
subject to
performance
conditions
197,118
141,299
152,631
Vested but not
exercised
0
0
0
Shareholding
requirement %
salary/fee
100%
100%
100%
*Current
shareholding %
salary/fee
450%
248%
332%
Requirement
met?
yes
yes
yes
* Reflects closing price on 31 December 2014 of 880p.
Directors’ interests in options under long-term incentives (audited information)
Details of Directors’ PSP Awards are set out in the table below.
Awards
held at
1 January
2014
67,936
102,340
54,801
–
48,879
73,641
39,426
–
55,041
82,907
39,271
–
Awards
granted
during
the year
–
–
–
39,977
–
–
–
28,232
–
–
–
30,453
Awards
exercised
during
the year
67,936
–
–
–
48,879
–
–
–
55,041
–
–
–
Awards
lapsed
during
the year
Awards
held at
31 December
2014
Exercise
price
(per exercise)
Date from
which
exercisable
–
–
–
–
–
–
–
–
–
–
–
–
–
102,340
54,801
39,977
–
73,641
39,426
28,232
–
82,907
39,271
30,453
100.0p
100.0p
100.0p
100.0p
100.0p
100.0p
100.0p
100.0p
100.0p
100.0p
100.0p
100.0p
03/03/14
01/03/15
20/06/16
07/03/17
03/03/14
01/03/15
20/06/16
07/03/17
03/03/14
01/03/15
20/06/16
07/03/17
Expiry date
02/09/14
31/08/15
19/12/16
06/09/17
02/09/14
31/08/15
19/12/16
06/09/17
02/09/14
31/08/15
19/12/16
06/09/17
J R Atkinson
3 March 2011
1 March 2012
20 June 2013
7 March 2014
J W G Hind
3 March 2011
1 March 2012
20 June 2013
7 March 2014
W Sondermann
3 March 2011
1 March 2012
20 June 2013
7 March 2014
The performance conditions for Awards made in 2011, 2012 and 2013 are detailed on page 51. The performance conditions for the 2014 Award are detailed
on page 56.
57
OverviewFinancial statementsStrategyPerformanceGovernanceKeller Group plc | Annual Report & Accounts 2014 Directors’ Remuneration report
continued
Performance graph and table
The graph below shows the Company’s performance, measured by TSR, compared with the performance of the FTSE250 Index (excluding investment
trusts) and the FTSE All-Share Index. These indices have been selected for consistency with the comparator groups used to measure TSR performance
for outstanding as well as 2015 PSP awards.
The graph looks at the value, by the end of 2014, of £100 invested in Keller on 31 December 2008 compared with the value of £100 invested in each index.
The table below details the Chief Executive’s ‘single figure’ remuneration over the same period.
Historical TSR performance
Growth in the value of hypothetical £100 holding over the six years to 31 December 2014 is set out below against the FTSE All-Share Index and the
FTSE250 Index.
Historical TSR performance Growth in the value of a hypothetical £100 holding over the six years to 31 December 2014 (£)
350
300
250
200
150
100
50
0
Dec-08
Dec-09
Dec-10
Dec-11
Dec-12
Dec-13
Dec-14
Keller
FTSE250 (excluding investment trusts)
FTSE All Share
Chief Executive single figure of remuneration (£000)
Annual bonus as a % of maximum opportunity
PSP vesting as a % of maximum opportunity
1 The CEO waived any entitlement to a bonus in 2010 and 2011.
2009
£891
42%
31%
20101
£550
0%
0%
20111
£562
0%
0%
2012
£951
57%
0%
2013
£1,870
84%
100%
2014
£1,630
22%
100%
Percentage change in Chief Executive remuneration
The table following shows the percentage change in Chief Executive remuneration from the prior year compared to the average percentage change in
remuneration for our UK senior management population, who have been selected for this comparison due to the UK employment location and the
structure of total remuneration – most of our management team are able to earn an annual bonus as well as receiving a base salary.
The Chief Executive’s remuneration includes base salary, taxable benefits and annual bonus. The pay for all other employees is calculated using the increase
in the earnings of full-time employees. The analysis excludes part-time employees and is based on a consistent set of employees, i.e. the same individuals
appear in the 2013 and 2014 populations.
Chief Executive
% change
2013-14
5
0
(72)
(38)
All other
employees
% change
2013-14
3
0
(60)
(19)
Base salary
Taxable benefits
Annual bonus
Total
58
GovernanceKeller Group plc | Annual Report & Accounts 2014 Relative importance of spend on pay
The table below shows shareholder distributions (i.e. dividends) and total employee pay expenditure for the financial years ended 31 December 2013 and
31 December 2014, along with the percentage changes.
Distribution to shareholders
Employee remuneration
* Reflects a full year of the three acquisitions made in 2013.
2014
£m
18.0
404.5*
2013
£m
15.4
363.4
%
change
5
11.3
The Directors are proposing a final dividend in respect of the financial year ended 31 December 2014 of 16.8p per ordinary share. Employee remuneration
excludes social security costs.
Implementation of the remuneration policy for 2015
Base salaries in 2015
In line with the remuneration policy, the Committee reviewed pay and conditions elsewhere in the Group. The salaries of James Hind and
Wolfgang Sondermann were increased by 3% commensurate with general pay increases of 3% across the Group. The Committee considered the
Chief Executive’s pending retirement balanced with his commitment to continue to lead the Company until a successor is appointed and,
accordingly, increased Justin Atkinson’s base salary by 2%, reflecting general inflation.
Executive Director
J R Atkinson
J W G Hind
W Sondermann*
Salary
for 2015
£477,400
£340,337
£355,402
Salary
for 2014
£468,000
£330,500
£345,120
Increase
from 2014
2%
3%
3%
* Wolfgang Sondermann’s salary is paid locally in euro. The 2013 and 2014 totals are calculated in GBP using the average currency conversion rate applicable to those years.
Pension
Justin is a member of the Keller Group Pension Scheme (the ‘Scheme’). The Scheme provides a pension based upon a percentage of final salary and pensions
for dependents on death in service or following retirement. The table on page 54 shows Justin’s accrued Scheme benefits. The Scheme closed to future
benefit accrual with effect from 31 March 2006, since when he has received a salary supplement in lieu of a Company contribution to an alternative pension
arrangement equivalent to 30% of salary.
The salary supplement is not taken into account in determining bonuses or any other form of remuneration.
Wolfgang is a member of the DB pension arrangements established by Keller Grundbau GmbH. His accrued benefits under these arrangements are
included in the table on page 54.
Wolfgang is also a member of a DC scheme, as is James. For 2015, they will continue to receive contributions and/or a salary supplement totalling 17% and
18% of salary respectively.
Annual bonus for 2015
The financial targets for the 2015 annual bonus are based on the same performance metrics as in 2014. The actual targets for 2015 are considered to be
commercially sensitive and accordingly they are not disclosed in this report, but will be disclosed retrospectively in the 2015 remuneration report.
Director
J R Atkinson*
J W G Hind
W Sondermann
* 2015 annual bonus will be pro-rated to the date that Justin steps down as CEO.
2015 annual bonus weightings (% of salary)
Group EPS
50%
50%
50%
Group PBT
50%
50%
50%
Group average
net debt
20%
20%
20%
Personal
strategic
objectives
30%
30%
30%
Total
150%
150%
150%
For bonuses paid in respect of 2015, the Committee continues to have discretion to reduce bonuses in exceptional circumstances (down to zero, if
appropriate) to take into account factors adversely impacting the Company’s reputation. This discretion is in addition to the safety underpin whereby
bonuses may be reduced by up to 10% if pre-defined ‘lead’ safety targets are not delivered.
Performance Share Plan (PSP) for 2015
The performance conditions for PSP Awards made in 2015 will be unchanged compared to the 2014 Awards; the vesting schedules are as shown in the
charts on page 56.
Justin Atkinson will not receive a PSP award for 2015.
During 2015, Wolfgang Sondermann will reach retirement age and he will, therefore, not receive a share award. The Committee considered the impact
of the 2015 retirements of Justin and Wolfgang and, given the exceptional circumstances, decided it was appropriate to use its discretion under the
remuneration policy to award James Hind shares in the amount of 200% of salary.
59
OverviewFinancial statementsStrategyPerformanceGovernanceKeller Group plc | Annual Report & Accounts 2014 Directors’ Remuneration report
continued
Chairman and Non-executive Director fees
With effect from 1 January 2015, fees payable to the Chairman of the Board and the basic fee payable to each Non-executive Director were increased by
2%. The Chairman’s fee is £162,900 per annum and the basic fee payable to each Non-executive Director is £45,700 per annum. An additional payment of
£7,500 is made to those Non-executive Directors who additionally act as Chairman of a Committee and the Senior Independent Director. The additional
fee remains unchanged from 2014.
Retirement of the CEO
Justin will be paid his base salary and contractual benefits until his termination date of 31 December 2015. He will be eligible to receive a bonus for the
period he remains as CEO, up to the earlier of the date he stands down as CEO on appointment of a successor or 31 December 2015. As already set out,
he will not receive a PSP Award for 2015. In addition, Justin’s 2013 and 2014 Awards will vest based on the extent to which performance conditions have
been achieved over the full performance period, and the proportion of the performance period worked.
In line with the remuneration policy, the Committee retains discretion to settle any amounts reasonably due to Justin where the Committee believes that
it is in the best interest of the Company and its shareholders to do so.
The financial arrangements relating to Justin’s retirement, which will adhere to the rules of all relevant incentive schemes and be within the Remuneration
Policy, will be reported when Justin steps down.
Consideration by the Directors of matters relating to Directors’ remuneration
The following Directors were members of the Remuneration Committee when matters relating to the Directors’ remuneration for the year were
being considered:
– L R Cairnie
– C F Girling
– P N Withers
During the year, the Committee received assistance from Jackie Holman (Group HR Director) and Kerry Porritt (Group Company Secretary) on
salary increases and bonus awards, and policy and governance matters respectively. In determining the Executive Directors’ remuneration for 2014,
the Committee has consulted Roy Franklin, the Chairman, and Justin Atkinson, the Chief Executive, about its proposals, except (in the case of Justin)
in relation to his own remuneration. No Director is involved in determining their own remuneration.
No member of the Committee has any personal financial interest (other than as a shareholder), conflict of interest arising from cross-directorships or
day-to-day involvement in running the business. Given their diverse backgrounds, the Board believes that the members of the Committee are able to offer
an informed and balanced view on executive remuneration issues.
External Advisers
During the year, the Committee continued to receive advice from Kepler Associates (‘Kepler’), an independent firm of remuneration consultants appointed
by the Committee after consultation with the Board. In 2014, Kepler provided independent advice on remuneration policy and the external remuneration
environment; benchmarking data; and provided remuneration advice in the context of CEO succession planning.
Kepler reports directly to the Chairman of the Remuneration Committee and does not advise the Company on any other issues. Kepler’s total fees for the
provision of remuneration services in 2014 were £48,562 on the basis of time spent. Kepler is a founding member and signatory of the Code of Conduct for
Remuneration Consultants, details of which can be found at www.remunerationconsultantsgroup.com.
The Company’s corporate lawyers, DLA Piper LLP, are providing legal advice on CEO succession matters. Fees in 2014 relating to this matter amounted
to £33,000.
The Committee is satisfied that the advice they have received has been objective and independent.
Statement of shareholder voting
The following table sets out the results of the vote on the Remuneration report and the Remuneration policy respectively at the 2014 AGM:
Remuneration report
Remuneration policy
Votes for
Votes against
Number
49,135,596
47,818,830
%
99.52%
97.87%
Number
236,887
1,042,595
%
0.48%
2.13%
Votes cast
49,372,483
48,861,425
Votes withheld
64,513
575,571
Ruth Cairnie
Chairman of the Remuneration Committee
2 March 2015
60
GovernanceKeller Group plc | Annual Report & Accounts 2014 Directors’ report
The Directors present their report together with the audited
consolidated financial statements for the year ended 31 December 2014.
This report is required to be produced by law. The Disclosure and
Transparency Rules and Listing Rules also require us to make certain
disclosures.
The Corporate Governance statement, including the Audit Committee
report, form part of this Directors’ report and is incorporated by
reference. Disclosures elsewhere in the Annual Report and Accounts are
cross-referenced where appropriate. Taken together, the Strategic Report
on pages 6 to 35 and this Directors’ Report fulfil the requirement of
Disclosure and Transparency Rule 4.1.5R to provide a Management Report.
Results and dividends
The results for the year, showing a profit before taxation* of £85.1m
(2013: £74.1m), are set out on pages 66 to 97. The Directors recommend a
final dividend of 16.8p per share to be paid on 8 June 2015, to members on
the register at the close of business on 13 March 2015. An interim dividend
of 8.4p per share was paid on 5 September 2014. The total dividend for the
year of 25.2p (2013: 24.0p) will amount to £18.0m (2013: £15.4m).
Going concern
The Directors consider that the Group has adequate financial resources
to continue operating for the foreseeable future and that it is therefore
appropriate to adopt the going concern basis in preparing the
financial statements.
The Directors have satisfied themselves that the Group is in a sound
financial position and that it has access to sufficient borrowing facilities and
can reasonably expect sufficient facilities to be available to meet the Group’s
foreseeable cash requirements. Further information is provided in Note 24
to the accounts and the Financial review.
Financial instruments
Full details can be found in Note 24 to the financial statements and in the
Financial review.
Post balance sheet events
The 2014 result includes an exceptional charge relating to the settlement of
a dispute on a completed contract of £54.0m 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.
Change of control
The Group’s main banking facilities contain provisions that, upon 15 days’
notice being given to the Group, lenders may exercise their discretion to
require immediate repayment of the loans on a change of control and
cancel all commitments under the agreement.
Certain other commercial agreements, entered into in the normal course
of business, include change of control provisions. There are no agreements
providing for compensation for the Directors or employees on a change
of control.
Transactions with related parties
Apart from transactions between the Company, its subsidiaries and joint
operations, which are related parties, there have been no related party
transactions during the year.
Directors and their interests
The names of all persons who, at any time during the year, were Directors
of the Company can be found on page 38. The interests of the Directors
holding office at the end of the year in the issued ordinary share capital of
the Company and any interests in its performance share plan are given in
the Directors’ Remuneration report on pages 48 and 60.
No Director had a material interest in any significant contract, other than a
service contract or a contract for services, with the Company or any of its
operating companies during the year.
The Company’s Articles of Association indemnify the Directors out of the
assets of the Company in the event that they suffer any loss or liability in
the execution of their duties as Directors, subject to the provisions of the
Companies Act 2006. The Company maintains insurance for Directors
and Officers in respect of liabilities which could arise on the discharge of
their duties.
Powers of the Directors
The business of the Company is managed by the Board who may exercise
all the powers of the Company subject to the provisions of the Company’s
articles of association, the Companies Act 2006 and any ordinary resolution
of the Company. Specific treatment of directors’ powers regarding allotment
and repurchase of shares is provided under separate headings below.
Amendment of the Company’s Articles of Association
Any amendments to the Company’s Articles of Association may be made
in accordance with the provisions of the Companies Act 2006 by way
of special resolution.
Appointment and replacement of Directors
Directors shall be no less than two and no more than 12 in number. Subject
to applicable law, a Director may be appointed by an ordinary resolution
of shareholders in general meeting following nomination by the Board or
a member (or members) entitled to vote at such a meeting, or following
retirement by rotation if the Director chooses to seek re-election at a
general meeting. In addition, the Directors may appoint a Director to fill a
vacancy or as an additional Director, provided that the individual retires at
the next Annual General Meeting (‘AGM’). A Director may be removed by
the Company as provided for by applicable law, in certain circumstances set
out in the Company’s articles of association (for example bankruptcy, or
resignation), or by a special resolution of the Company. All Directors stand
for re-election on an annual basis, in line with the recommendations of
the Code.
Employees
The Group employed approximately 9,000 people at the end of the year.
Employment Policy
The Group gives full and fair consideration to applications for employment
made by disabled persons, having regard for their respective aptitudes and
abilities. The policy includes, where practicable, the continued employment
of those who become disabled during their employment and the provision
of training and career development and promotion, where appropriate.
Information on the Group’s approach to employee involvement, equal
opportunities and health, safety and the environment can be found in
the Resources and relationships report on pages 24 to 26.
Political donations
No political donations were made during the year. Keller has an established
policy of not making donations to any political party, representative or
candidate in any part of the world.
Greenhouse gas emissions
Information relating to the greenhouse gas emissions of the Company
is set out on page 25 and is incorporated by reference into this report.
Research and development
The Group continues to have in-house design, development and
manufacturing facilities, where staff work closely with site engineers to
develop new and more effective methods of solving problems of ground
conditions and behaviour. Most of the specialised ground improvement
equipment used in the business is designed and built in-house and, where
applicable, the development costs are included in the cost of the equipment.
Further information on our latest activities can be found on page 27 of the
Strategic Report.
* Before exceptional items
61
OverviewFinancial statementsStrategyPerformanceGovernanceKeller Group plc | Annual Report & Accounts 2014 Directors’ report
continued
Share capital
Details of the share capital, together with details of the movements in the
Company’s issued share capital during the year, are shown in Note 25: Share
capital and reserves. The Company has one class of ordinary shares which is
listed on the London Stock Exchange (‘Ordinary Shares’). Ordinary Shares
carry no right to a fixed income; and each Ordinary Share carries
the right to one vote at general meetings of the Company.
There are no specific restrictions on the size of a shareholding, nor on the
transfer of shares, which are both governed by the Articles of Association
and the prevailing law. The Directors are not aware of any agreements
between shareholders that may result in restrictions on voting rights and
the transfer of securities. No person has any special rights of control over
the Company’s share capital and all issued shares are fully paid.
Details of employee share schemes are set out in Note 29: Share-based
payments. Shares held by the Keller Group plc Employee Benefit Trust
are not voted.
Repurchase of shares
The Company obtained shareholder authority at the last AGM (22 May
2014) to buy back up to 7,309,974 Ordinary Shares. The authority remains
outstanding until the conclusion of the 2015 AGM or 22 August 2015,
whichever is the earlier. The minimum price which must be paid for each
Ordinary Share is its nominal value and the maximum price is the higher
of an amount equal to not more than 5% above the average of the middle
market quotations for an Ordinary Share as derived from the London Stock
Exchange Daily Official List for the five business days immediately before
the purchase is made and an amount equal to the higher of the price of
the last independent trade of an Ordinary Share and the highest current
independent bid for an Ordinary Share on the trading venue where
the purchase is carried out.
The Directors have not used, and have no current plans to use,
this authority.
Allotment of shares and pre-emption disapplication
Shareholder authority was also given at the last AGM for the Directors
to allot new shares up to a nominal amount of £2,364,573, equivalent to
approximately one-third of the Company’s issued share capital (excluding
treasury shares) as at 3 March 2014 and to disapply pre-emption rights up
to an aggregate nominal amount of £354,686, representing approximately
5% of the Company’s issued share capital as at 3 March 2014.
The Directors have not used, and have no current plans to use,
these authorities.
Substantial shareholdings
At 2 March 2015, the Company had been notified in accordance with
chapter 5 of the Disclosure and Transparency Rules of the Financial Conduct
Authority of the following voting rights of shareholders in the Company:
Auditors
The Board has decided that KPMG LLP will be proposed as the Group’s
auditors for the year ending 31 December 2015 and a resolution to appoint
KPMG LLP will be put to shareholders at the 2015 AGM.
Annual General Meeting
The 2015 AGM of the Company will take place at the offices of Investec,
2 Gresham Street, London, EC2V 7QP at 11.00am on Thursday,
14 May 2015. The full wording of the resolutions to be tabled at the
meeting is set out in the Notice of AGM.
Disclaimer
The purpose of this Annual Report and Accounts is to provide information
to the members of the Company, as a body, and no other persons.
The Company, its Directors and employees, agents or advisers do not
accept or assume responsibility to any other person to whom this document
is shown or into whose hands it may come and any such responsibility or
liability is expressly disclaimed.
The Annual Report and Accounts contain certain forward-looking
statements with respect to the operations, performance and financial
condition of the Group. By their nature, these statements involve
uncertainty since future events and circumstances can cause results and
developments to differ materially from those anticipated. The forward-
looking statements reflect knowledge and information available at the date
of preparation of this Annual Report and Accounts and the Company
undertakes no obligation to update these forward-looking statements.
Nothing in this Annual Report and Accounts should be construed as a
profit forecast.
Information included in the Directors’ Report
Certain information that fulfils the requirements of the Corporate
Governance Statement can be found in the Directors’ Report in the sections
headed ‘Substantial shareholdings’, ‘Repurchase of shares’, ‘Amendment of
the Company’s articles of association’, ‘Appointment and replacement of
Directors’ and ‘Powers of the Directors’ and is incorporated into this
corporate governance section by reference.
Other information
The Directors who held office at the date of approval of this Directors’
report confirm that, in accordance with the provisions of section 418 of the
Companies Act 2006, so far as they are each aware, there is no relevant audit
information of which the Company’s Auditors are unaware; and each Director
has taken all the steps that he or she ought to have taken as a Director to
make him or herself aware of any relevant audit information and to establish
that the Company’s Auditors are aware of that information.
In addition, the Directors as at the date of this report consider the Annual
Report and Accounts, taken as a whole, is fair, balanced and understandable
and provides the information necessary for shareholders to assess the
Company’s performance, business model and strategy.
Ordinary Shares
Franklin Templeton Institutional, LLC
Standard Life Investments (Holdings) Limited
Old Mutual Plc
Baillie Gifford & Co
Schroders plc
Norges Bank
Royal London Asset Management Limited
Number of
Company’s
total
7,026,927
6,568,407
4,242,670
3,251,556
3,148,747
2,973,272
2,147,626
Percentage
of the
voting
rights
9.91%
9.22%
5.96%
4.56%
4.90%
4.17%
3.01%
Kerry Porritt
Company Secretary
2 March 2015
Registered Office:
Capital House
25 Chapel Street
London NW1 5DH
Registered in England No. 2442580
62
GovernanceKeller Group plc | Annual Report & Accounts 2014 Statement of Directors’ responsibilities
Statement of Directors’ responsibilities in respect of the
Annual Report and the financial statements
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 Directors’ report, including content contained by reference, includes a
fair review of the development and performance of the business and the
position 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 Accounts, taken as a whole,
is fair, balanced and understandable and provides the information necessary
for shareholders to assess the performance, strategy and business model of
the Company.
Signed on behalf of the Board
Justin Atkinson
Chief Executive
James Hind
Finance Director
2 March 2015
The Directors are responsible for preparing the Annual Report and the
Group and Company financial statements in accordance with applicable
law and regulations.
Company law requires the Directors to prepare Group and Company
financial statements for each financial year. Under that law they are required
to prepare the Group financial statements in accordance with International
Financial Reporting Standards (IFRSs) as adopted by the European Union
(EU) and applicable law and they have elected to prepare the Company
financial statements in accordance with UK Accounting Standards.
Under company law the Directors must not approve the financial
statements unless they are satisfied that they give a true and fair view of the
state of affairs of the Group and Company and of their profit or loss for that
period. In preparing each of the Group and Company financial statements,
the Directors are required to:
– select suitable accounting policies and then apply them consistently;
– make judgments and estimates that are reasonable and prudent;
– for the Group financial statements, state whether they have been prepared
in accordance with IFRSs, as adopted by the EU;
– for the Company financial statements, state whether the applicable UK
Accounting Standards have been followed, subject to any material
departures disclosed and explained in the Company financial statements;
and
– prepare the financial statements on the going concern basis unless it
is inappropriate to presume that the Group and Company will continue
in business.
The Directors are responsible for keeping adequate accounting records that
are sufficient to show and explain the Company’s transactions and disclose
with reasonable accuracy at any time the financial position of the Company
and enable them to ensure that its financial statements comply with the
Companies Act 2006. They have general responsibility for taking such steps
as are reasonably open to them to safeguard the assets of the Group and to
prevent and detect fraud and other irregularities.
Under applicable law and regulations, the Directors are also responsible for
preparing a Strategic report, Directors’ report, Directors’ Remuneration
report and Corporate Governance Statement that complies with that law
and those regulations.
The Directors are responsible for the maintenance and integrity of the
corporate and financial information included on the Company’s website.
Legislation in the UK governing the preparation and dissemination of
financial statements may differ from legislation in other jurisdictions.
63
OverviewFinancial statementsStrategyPerformanceGovernanceKeller Group plc | Annual Report & Accounts 2014 Goodwill
Refer to page 46 (Audit Committee Report), page 73 (accounting policy)
and pages 80 to 81 (financial statements disclosures).
– The risk: There is a risk of impairment of the Group’s significant goodwill
balances due to prolonged downturn or structural change in the relevant
construction market. In particular there is increased risk on the balance
of £12.1m related to Keller Limited in the UK where large infrastructure
projects have come to an end, and there is less certainty as to the source
of future revenue and profit, and on the £64.9m relating to Keller Canada
where the oil sands business is currently experiencing a downturn in
investment. The Group estimates recoverable amount based on value in
use which includes significant estimation and judgement in the selection
of key inputs, specifically revenue, margin and discount rates.
– Our response: Our audit procedures included detailed testing of the
Group’s impairment assessment for each significant goodwill balance at year
end, including in particular Keller Limited in the UK and Keller Canada. For
the key inputs referred to above we critically assessed the reasonableness
of the Group’s assumptions by reference to past performance, external data
and forecasts for economic factors, and current order book. Our valuation
specialists assisted in evaluating the assumptions and methodologies
underlying the discount rates adopted by the Group. We considered the
sensitivity of key inputs to reasonably possible changes in assumptions. We
also assessed whether the Group’s disclosures about the sensitivity of the
outcome of the impairment assessment to changes in key assumptions
reflected the risks inherent in the valuation of goodwill.
3. Our application of materiality and an overview of the scope of
our audit
The materiality for the financial statements as a whole was set at £3.9m
determined with reference to a benchmark of Group profit before taxation,
normalized to exclude this year’s exceptional items as disclosed on the face of
the income statement. Materiality represents 4.6% of Group profit before
tax and exceptional items as disclosed on the face of the income statement.
We report to the Audit Committee any corrected or uncorrected identified
misstatements exceeding £0.2m, in addition to other identified misstatements
that warranted reporting on qualitative grounds.
Audits for Group reporting purposes were performed by component
auditors at the key reporting components, including North America, EMEA,
Asia and Australia. The components within the scope of our work
accounted for the following percentages of the Group’s results:
– Group revenue – 90%
– Group profit and loss – 94%
– Group profit and loss before exceptional items and taxation – 93%
– Group total assets – 84%
The Group audit team instructed component auditors as to the significant
areas to be covered, including the relevant risks detailed above and the
information to be reported back. The Group audit team approved the
component materialities, which ranged from £0.2m to £3.25m, having
regard to the mix of size and risk profile of the Group across the
components. Aside from the audit of the parent company that was
performed by the Group audit team, the work on all of the components
was performed by the component auditors, and none by the Group
audit team.
Governance
Independent Auditor’s report
To the Members of Keller Group plc only
Opinions and conclusions arising from our audit
1. Our opinion on financial statements is unmodified
We have audited the financial statements of Keller Group plc for the
year ended 31 December 2014 which comprise the Consolidated Income
Statement, the Consolidated Statement of Comprehensive Income, the
Consolidated and Company Balance Sheets, the Consolidated Statement
of Changes in Equity, the Consolidated Cash Flow Statement and related
notes. In our opinion:
– the financial statements give a true and fair view of the state of the Group’s
and of the parent company’s affairs as at 31 December 2014 and of the
Group’s loss for the year then ended;
– the Group financial statements have been properly prepared in accordance
with International Financial Reporting Standards as adopted by the
European Union;
– the parent company financial statements have been properly prepared in
accordance with UK Accounting Standards; and
– the financial statements have been prepared in accordance with the
requirements of the Companies Act 2006 and, as regards the Group
financial statements, Article 4 of the IAS Regulation.
2. Our assessment of risks of material misstatement
In arriving at our audit opinion above on the financial statements the risks
of material misstatement that had the greatest effect on our audit were
as follows:
Accounting for construction contracts
Refer to page 46 (Audit Committee Report), page 73 (accounting policy)
and pages 77 and 83 (financial statement disclosures).
– The risk: Revenue on construction contracts is recognised in proportion
to the stage of completion of the contract. The stage of completion is
calculated by comparing the costs incurred up to the balance sheet date
with the total forecast costs at completion of the contract. Contract
accounting is considered to be an ongoing significant audit risk to the Group
as it requires a high degree of estimation and judgement of matters such as:
the percentage of work completed at the balance sheet date on longer term
contracts; the costs of the work required to complete the contract; and the
outcome of claims and variations raised against customers and claims raised
against the Group by customers or third parties, including one significant
historic claim that was settled post year end and is disclosed as an
exceptional item in the accounts. Error in any of these judgements could
result in a material variance in the amount of profit or loss recognised to
date and therefore also in the current period.
– Our response: Our audit procedures included testing controls over
contract related expenditure and assessing a selection of contracts with the
greatest impact on the Group’s financial results, including those considered
to be high risk due to such factors as known issues on the contract or the
nature of work being undertaken. For a selection of contracts in progress at
the balance sheet date, we challenged the Group’s assumptions on costs to
complete the contract through agreeing cost estimates to sub-contracts and
assessing the Group’s historical experience of costs on similar contracts. For
contracts completed by the year end, we confirmed subsequent settlement
of revenue recognised. In respect of claims and variations raised against
customers and those claims raised against the Group by customers or third
parties, on a selection of contracts we: challenged the progress on the claims
with the Group and corroborated explanations provided; considered prior
experience on settlement of claims and variations; inspected correspondence
with the counterparty and with the Group’s legal advisers or insurers, to
identify the extent of written agreement of settlement; and confirmed
recoveries to after year-end settlement where applicable. In respect of
the significant historic claim that was settled post year end we have: held
discussions with the Group’s directors and challenged their judgements
on the expected settlement costs, corroborating to the settlement
agreement or other appropriate evidence, inspected correspondence
with the Group’s advisers; and considered the adequacy of disclosure
of the matter, including of the related uncertainties.
64
Keller Group plc | Annual Report & Accounts 2014 Scope and responsibilities
As explained more fully in the Directors’ Responsibilities Statement set
out on page 63, the Directors are responsible for the preparation of the
financial statements and for being satisfied that they give a true and fair
view. A description of the scope of an audit of accounts is provided on the
Financial Reporting Council’s website at www.frc.org.uk/auditscopeukprivate.
This report is made solely to the Company’s members as a body and is subject
to important explanations and disclaimers regarding our responsibilities,
published on our website at www.kpmg.com/uk/auditscopeukco2014a,
which are incorporated into this report as if set out in full and should be
read to provide an understanding of the purpose of this report, the work
we have undertaken and the basis of our opinions.
William Meredith (Senior Statutory Auditor)
for and on behalf of KPMG LLP, Statutory Auditor
Chartered Accountants
15 Canada Square
London, E14 5GL
2 March 2015
The Group audit team visited the four divisional component locations
in North America, EMEA, Asia and Australia. Telephone conference
meetings were also held with these component auditors and one country
component, the United Kingdom. At these visits and meetings, the findings
reported to the Group audit team were discussed in more detail, and any
further work required by the Group audit team was then performed by
the component auditor.
4. Our opinion on other matters prescribed by the Companies Act
2006 is unmodified
In our opinion:
– the part of the Directors’ Remuneration report to be audited has been
properly prepared in accordance with the Companies Act 2006; and
– the information given in the Strategic report and Directors’ report for the
financial year for which the financial statements are prepared is consistent
with the financial statements.
5. We have nothing to report in respect of the matters on which
we are required to report by exception
Under ISAs (UK and Ireland) we are required to report to you if, based
on the knowledge we acquired during our audit, we have identified other
information in the annual report that contains a material inconsistency with
either that knowledge or the financial statements, a material misstatement
of fact, or that is otherwise misleading.
In particular, we are required to report to you if:
– we have identified material inconsistencies between the knowledge we
acquired during our audit and the directors’ statement that they consider
that the annual report and financial statements taken as a whole is fair,
balanced and understandable and provides the information necessary for
shareholders to assess the Group’s performance, business model and
strategy; or
– the part of the Corporate Governance Report dealing with the Audit
Committee on pages 46 and 47 does not appropriately address matters
communicated by us to the Audit Committee.
Under the Companies Act 2006 we are required to report to you if, in
our opinion:
– adequate accounting records have not been kept by the parent company,
or returns adequate for our audit have not been received from branches
not visited by us; or
– the parent company financial statements and the part of the Directors’
Remuneration Report to be audited are not in agreement with the
accounting records and returns; or
– certain disclosures of Directors’ remuneration specified by law are not
made; or
– we have not received all the information and explanations we require for
our audit.
Under the Listing Rules we are required to review:
– the Directors’ statement, set out on page 61, in relation to going concern;
and
– the part of the Corporate Governance Statement on pages 36 to 63 relating
to the company’s compliance with the ten provisions of the 2012 UK
Corporate Governance Code specified for our review.
We have nothing to report in respect of the above responsibilities.
65
OverviewFinancial statementsStrategyPerformanceGovernanceKeller Group plc | Annual Report & Accounts 2014 Consolidated income statement
For the year ended 31 December 2014
Revenue
Operating costs
Operating profit
Finance income
Finance costs
Profit before taxation
Taxation
Profit/(loss) for the period
Attributable to:
Equity holders of the parent
Non-controlling interests
Earnings/(loss) per share
Basic
Diluted
2014
Before
exceptional
items
£m
1,599.7
(1,507.7)
92.0
1.5
(8.4)
85.1
(29.7)
55.4
2014
Exceptional
items
(Note 7)
£m
–
(56.7)
(56.7)
–
(0.2)
(56.9)
0.3
(56.6)
(56.6)
–
(56.6)
53.6
1.8
55.4
75.3p
74.2p
Note
3
5
3
8
9
10
12
12
2013
Before
exceptional
items
£m
1,438.2
(1,360.4)
77.8
3.1
(6.8)
74.1
(23.8)
50.3
49.5
0.8
50.3
73.0p
71.9p
2014
£m
1,599.7
(1,564.4)
35.3
1.5
(8.6)
28.2
(29.4)
(1.2)
(3.0)
1.8
(1.2)
(4.2)p
(4.2)p
2013
Exceptional
items
(Note 7)
£m
–
(21.7)
(21.7)
–
(0.4)
(22.1)
1.9
(20.2)
(20.2)
–
(20.2)
2013
£m
1,438.2
(1,382.1)
56.1
3.1
(7.2)
52.0
(21.9)
30.1
29.3
0.8
30.1
43.2p
42.6p
Consolidated statement of comprehensive income
For the year ended 31 December 2014
(Loss)/profit for the period
Other comprehensive income
Items that may be reclassified subsequently to profit or loss:
Exchange differences on translation of foreign operations
Net investment hedge gains/(losses)
Cash flow hedge (losses)/gains taken to equity
Cash flow hedge transfers to income statement
Items that will not be reclassified subsequently to profit or loss:
Remeasurements of defined benefit pension schemes
Tax on remeasurements of defined benefit pension schemes
Other comprehensive income for the period, net of tax
Total comprehensive income for the period
Attributable to:
Equity holders of the parent
Non-controlling interests
66
Note
24
24
24
30
10
2014
£m
(1.2)
(3.8)
2.0
(6.1)
6.1
(4.1)
0.2
(5.7)
(6.9)
(8.6)
1.7
(6.9)
2013
£m
30.1
(23.9)
(3.0)
1.8
(1.8)
(5.7)
1.1
(31.5)
(1.4)
(1.9)
0.5
(1.4)
Financial statementsKeller Group plc | Annual Report & Accounts 2014 Consolidated balance sheet
As at 31 December 2014
Note
2014
£m
2013
£m
Assets
Non-current assets
Intangible assets
Property, plant and equipment
Deferred tax assets
Other assets
Current assets
Inventories
Trade and other receivables
Current tax assets
Cash and cash equivalents
Total assets
Liabilities
Current liabilities
Loans and borrowings
Current tax liabilities
Trade and other payables
Provisions
Non-current liabilities
Loans and borrowings
Retirement benefit liabilities
Deferred tax liabilities
Provisions
Other liabilities
Total liabilities
Net assets
Equity
Share capital
Share premium account
Capital redemption reserve
Translation reserve
Other reserve
Retained earnings
Equity attributable to equity holders of the parent
Non-controlling interests
Total equity
These financial statements were approved by the Board of Directors and authorised for issue on 2 March 2015.
They were signed on its behalf by:
Justin Atkinson
Chief Executive
James Hind
Finance Director
13
14
10
15
17
18
20
3
24
21
22
24
30
10
22
23
3
3
25
25
25
183.5
295.6
10.0
19.9
509.0
48.6
408.7
4.0
85.6
546.9
1,055.9
(2.7)
(13.9)
(353.2)
(50.0)
(419.8)
(185.1)
(25.4)
(19.7)
(23.3)
(36.3)
(289.8)
(709.6)
346.3
7.3
38.1
7.6
8.3
56.9
224.5
342.7
3.6
346.3
187.9
281.9
7.9
14.9
492.6
62.0
414.5
5.4
53.3
535.2
1,027.8
(48.7)
(8.8)
(352.4)
(11.3)
(421.2)
(148.3)
(23.1)
(21.9)
(4.8)
(35.9)
(234.0)
(655.2)
372.6
7.3
38.1
7.6
10.0
56.9
247.9
367.8
4.8
372.6
67
OverviewStrategyPerformanceGovernanceFinancial statementsKeller Group plc | Annual Report & Accounts 2014 Consolidated statement of changes in equity
For the year ended 31 December 2014
At 1 January 2013
Profit for the period
Other comprehensive income
Exchange differences on translation
of foreign operations
Net investment hedge losses
Cash flow hedge gains taken to equity
Cash flow hedge transfers to
income statement
Remeasurements of defined benefit
pension schemes
Tax on remeasurements of defined
benefit pension schemes
Other comprehensive income
for the period, net of tax
Total comprehensive income
for the period
Dividends
Share-based payments
Share capital issued
Acquisition of non-controlling interest
At 31 December 2013 and 1 January 2014
(Loss)/profit for the period
Other comprehensive income
Exchange differences on translation
of foreign operations
Net investment hedge gains
Cash flow hedge losses taken to equity
Cash flow hedge transfers to
income statement
Remeasurements of defined benefit
pension schemes
Tax on remeasurements of defined
benefit pension schemes
Other comprehensive income
for the period, net of tax
Total comprehensive income
for the period
Dividends
Share-based payments
Acquisition of non-controlling interest
At 31 December 2014
Share
capital
£m
6.6
–
Share
premium
account
£m
38.1
–
Capital
redemption
reserve
£m
7.6
–
Translation
reserve
£m
36.6
–
Other
reserve
£m
–
–
Hedging
reserve
£m
–
–
Retained
earnings
£m
236.7
29.3
Attributable
to equity
holders of
the parent
£m
325.6
29.3
Non-
controlling
interests
£m
10.1
0.8
Total
equity
£m
335.7
30.1
–
–
–
–
–
–
–
–
–
–
0.7
–
7.3
–
–
–
–
–
–
–
–
–
–
–
–
7.3
–
–
–
–
–
–
–
–
–
–
–
–
38.1
–
–
–
–
–
–
–
–
–
–
–
–
38.1
–
–
–
–
–
–
–
–
–
–
–
–
7.6
–
–
–
–
–
–
–
–
–
–
–
–
7.6
(23.6)
(3.0)
–
–
–
–
(26.6)
(26.6)
–
–
–
–
10.0
–
(3.7)
2.0
–
–
–
–
(1.7)
(1.7)
–
–
–
8.3
–
–
–
–
–
–
–
–
–
–
56.9
–
56.9
–
–
–
–
–
–
–
–
–
–
–
–
56.9
–
–
1.8
(1.8)
–
–
–
–
–
–
–
–
–
–
–
–
(6.1)
6.1
–
–
–
–
–
–
–
–
–
–
–
–
(5.7)
1.1
(23.6)
(3.0)
1.8
(1.8)
(5.7)
1.1
(0.3)
–
–
(23.9)
(3.0)
1.8
–
–
–
(1.8)
(5.7)
1.1
(4.6)
(31.2)
(0.3)
(31.5)
24.7
(15.4)
1.9
–
–
247.9
(3.0)
–
–
–
–
(4.1)
0.2
(3.9)
(6.9)
(17.4)
1.9
(1.0)
224.5
(1.9)
(15.4)
1.9
57.6
–
367.8
(3.0)
(3.7)
2.0
(6.1)
6.1
(4.1)
0.2
0.5
(0.2)
–
–
(5.6)
4.8
1.8
(0.1)
–
–
–
–
–
(1.4)
(15.6)
1.9
57.6
(5.6)
372.6
(1.2)
(3.8)
2.0
(6.1)
6.1
(4.1)
0.2
(5.6)
(0.1)
(5.7)
(8.6)
(17.4)
1.9
(1.0)
342.7
1.7
(0.6)
–
(2.3)
3.6
(6.9)
(18.0)
1.9
(3.3)
346.3
68
Financial statementsKeller Group plc | Annual Report & Accounts 2014 Consolidated cash flow statement
For the year ended 31 December 2014
Cash flows from operating activities
Operating profit before exceptional items
Depreciation of property, plant and equipment
Amortisation of intangible assets
Profit on sale of property, plant and equipment
Other non-cash movements
Foreign exchange losses
Operating cash flows before movements in working capital
Decrease/(increase) in inventories
Decrease/(increase) in trade and other receivables
(Decrease)/increase in trade and other payables
Change in provisions, retirement benefit and other non-current liabilities
Cash generated from operations
Interest paid
Income tax paid
Net cash inflow from operating activities
Cash flows from investing activities
Interest received
Proceeds from sale of property, plant and equipment
Acquisition of subsidiaries, net of cash acquired
Acquisition of property, plant and equipment
Acquisition of intangible assets
Net cash outflow from investing activities
Cash flows from financing activities
Proceeds from the issue of share capital
New borrowings
Repayment of borrowings
Payment of finance lease liabilities
Dividends paid
Net cash (outflow)/inflow from financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Effect of exchange rate fluctuations
Cash and cash equivalents at end of period
Note
20
2014
£m
92.0
48.0
1.9
(0.3)
8.9
0.1
150.6
13.9
11.2
(0.1)
(10.2)
165.4
(10.1)
(28.4)
126.9
0.5
3.5
(5.0)
(63.6)
(0.9)
(65.5)
–
95.3
(103.6)
(1.2)
(18.0)
(27.5)
33.9
50.7
1.0
85.6
2013
£m
77.8
45.0
1.4
(0.3)
7.1
–
131.0
(22.5)
(37.4)
65.5
(4.6)
132.0
(5.4)
(21.5)
105.1
0.4
3.6
(200.4)
(44.8)
(1.4)
(242.6)
57.6
118.5
(24.2)
(0.7)
(15.6)
135.6
(1.9)
54.8
(2.2)
50.7
69
OverviewStrategyPerformanceGovernanceFinancial statementsKeller Group plc | Annual Report & Accounts 2014 Notes to the consolidated financial statements
1 General information
Keller Group plc (‘the parent’ or ‘the Company’) is a company incorporated
in the United Kingdom. The consolidated financial statements are presented
in pounds sterling (rounded to the nearest hundred thousand), the
functional currency of the parent. Foreign operations are included in
accordance with the policies set out in Note 2.
2 Principal accounting policies
Statement of compliance
The consolidated financial statements have been prepared and approved by
the Directors in accordance with International Financial Reporting Standards
(IFRS), as adopted by the EU.
The Company has elected to prepare its parent company financial
statements in accordance with UK GAAP; these are presented on
pages 92 to 97.
Basis of preparation
The financial statements are prepared on the historical cost basis except
that derivative financial instruments are stated at their fair value. The
carrying value of hedged items are re-measured to fair value in respect of
the hedged risk. Except as noted below, these accounting policies have been
applied consistently to all periods presented in these consolidated financial
statements and have been applied consistently by subsidiaries.
Revenue recognition
Revenue represents the fair value of work done on construction contracts
performed during the year on behalf of customers or the value of goods
or services delivered to customers. In accordance with IAS 11, contract
revenue and expenses are recognised in proportion to the stage of
completion of the contract as soon as the outcome of a construction
contract can be estimated reliably.
The fair value of work done is calculated using the expected final contract
value, based on contracted values adjusted for the impact of any known
variations, and the stage of completion, calculated as costs to date as a
proportion of total expected contract costs.
In the nature of the Group’s business, the results for the year include
adjustments to the outcome of construction contracts, including joint
operations, completed in prior years arising from claims from customers
or third parties and claims on customers or third parties for variations to
the original contract.
Provision against claims from customers or third parties is made in the
year in which the Group becomes aware that a claim may arise. Income
from claims on customers or third parties is not recognised until the
outcome can be reliably measured and it is probable that the Group
will receive the economic benefits.
The consolidated financial statements are prepared on a going concern
basis as set out in the Directors’ report on page 61.
Where it is probable that a loss will arise on a contract, full provision for
this loss is made when the Group becomes aware that a loss may arise.
Changes in accounting policies and disclosures
There is no significant financial impact on the Group financial statements
of the following new standards, amendments and interpretations that are
in issue and mandatory for the financial year ending 31 December 2014:
– 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 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.
Basis of consolidation
The consolidated financial statements consolidate the accounts of the
parent and its subsidiary undertakings (collectively ‘the Group’) made up to
31 December each year. Subsidiaries are entities controlled by the Company.
Control exists when the Company has power over an entity, exposure to
variable returns from its involvement with an entity and the ability to use its
power over the entity to affect its returns. Where subsidiary undertakings
were acquired or sold during the year, the accounts include the results for
the part of the year for which they were subsidiary undertakings using the
acquisition method of accounting. Intra-Group balances, and any unrealised
income and expenses arising from intra-Group transactions, are eliminated
in preparing the consolidated financial statements.
Joint operations
From time to time the Group undertakes contracts jointly with other
parties. These fall under the category of joint operations as defined by
IFRS 11. In accordance with IFRS 11, the Group accounts for its own share
of assets, liabilities, revenues and expenses measured according to the
terms of the agreements covering the joint operations.
Revenue in respect of goods and services is recognised as the goods and
services are delivered.
Leases
Leases are classified as finance leases whenever the terms of the lease
transfer substantially all the risks and rewards of ownership to the lessee.
All other leases are classified as operating leases.
Property, plant and equipment acquired under finance leases are capitalised
in the balance sheet at the lower of fair value or present value of minimum
lease payments and depreciated in accordance with the Group’s accounting
policy. The capital element of the leasing commitment is included as
obligations under finance leases. The rentals payable are apportioned
between interest, which is charged to the income statement, and capital,
which reduces the outstanding obligation.
Amounts payable under operating leases are charged to contract work in
progress or operating costs on a straight-line basis over the lease term.
Foreign currencies
Balance sheet items in foreign currencies are translated into sterling at
closing rates of exchange at the balance sheet date. Income statements and
cash flows of overseas subsidiary undertakings are translated into sterling at
average rates of exchange for the year.
Exchange differences arising from the retranslation of opening net assets and
income statements at closing and average rates of exchange respectively are
dealt with in other comprehensive income, along with changes in fair values
of associated net investment hedges. All other exchange differences are
charged to the income statement.
70
Financial statementsKeller Group plc | Annual Report & Accounts 2014 2 Principal accounting policies continued
The exchange rates used in respect of principal currencies are:
US dollar: average for period
US dollar: period end
Canadian dollar: average for period
Canadian dollar: period end
Euro: average for period
Euro: period end
Singapore dollar: average for period
Singapore dollar: period end
Australian dollar: average for period
Australian dollar: period end
2014
1.65
1.55
1.82
1.81
1.24
1.28
2.09
2.05
1.83
1.90
Deferred tax is calculated at the tax rates that are expected to apply in
the period when the liability is settled or the asset is realised. Deferred tax
is charged or credited to the income statement, except when it relates to
items charged or credited directly to equity or to other comprehensive
income, in which case the related deferred tax is also dealt with in equity
or in other comprehensive income.
Property, plant and equipment
Items of property, plant and equipment are stated at cost less accumulated
depreciation and impairment.
Depreciation
Depreciation is not provided on freehold land.
Depreciation is provided to write off the cost less the estimated residual
value of property, plant and equipment by reference to their estimated
useful lives using the straight-line method.
2013
1.56
1.65
1.61
1.76
1.18
1.20
1.96
2.09
1.62
1.86
The rates of depreciation used are:
Buildings
Long-life plant and equipment
Short-life plant and equipment
Motor vehicles
Computers
2%
8%
12%
25%
33%
The cost of leased properties is depreciated by equal instalments over the
period of the lease or 50 years, whichever is the shorter.
Business combinations
The Group accounts for business combinations in accordance with
IFRS 3, ‘Business Combinations (2008)’ using the acquisition method as
at the acquisition date, which is the date on which control is transferred
to the Group.
For acquisitions on or after 1 January 2010, costs related to the acquisition
are expensed as incurred. Any contingent consideration payable is recognised
at fair value at the acquisition date with subsequent changes to the fair value
being recognised in profit or loss, unless the change was as a result of new
information about facts or circumstances existing at the acquisition date
being obtained during the measurement period, in which case the change is
recognised in the balance sheet as an adjustment to goodwill. For acquisitions
before 1 January 2010, transaction costs were capitalised as part of the cost
of the acquisition. Any contingent consideration payable was recognised at
fair value at the acquisition date with subsequent changes to the fair value
being recognised in the balance sheet as an adjustment to goodwill.
Interest income and expense
All interest income and expense is recognised in the income statement
in the period in which it is incurred using the effective interest method.
Employee benefit costs
The Group operates a number of defined benefit pension arrangements,
and also makes payments into defined contribution schemes for employees.
The liability in respect of defined benefit schemes is the present value of
the defined benefit obligations at the balance sheet date, calculated using
the projected unit credit method, less the fair value of the schemes’ assets.
As allowed by IAS 19, the Group recognises the current service cost and
interest on scheme net liabilities in the income statement, and
remeasurements of defined benefit plans in other comprehensive
income in full in the period in which they occur.
Payments to defined contribution schemes are accounted for on an
accruals basis.
Taxation
The tax expense represents the sum of the tax currently payable and the
deferred tax charge.
Provision is made for current tax on taxable profits for the year. Taxable
profit differs from profit before taxation as reported in the income
statement because it excludes items of income or expense that are taxable
or deductible in other years and it further excludes items that are never
taxable or deductible. The Group’s liability for current tax is calculated using
tax rates that have been enacted or substantively enacted by the balance
sheet date.
Deferred tax is recognised on differences between the carrying amounts
of assets and liabilities in the financial statements and the corresponding tax
bases used in the computation of taxable profit, and is accounted for using
the balance sheet liability method.
Full provision is made for deferred tax on temporary differences in line
with IAS 12, ‘Income Taxes’. Deferred tax assets are recognised when it is
considered likely that they will be utilised against future taxable profits.
71
OverviewStrategyPerformanceGovernanceFinancial statementsKeller Group plc | Annual Report & Accounts 2014 Notes to the consolidated financial statements
continued
2 Principal accounting policies continued
Goodwill and other intangible assets
Goodwill
Goodwill arising on consolidation, representing the difference between the
fair value of the purchase consideration and the fair value of the identifiable
net assets of the subsidiary undertaking at the date of acquisition, is
capitalised as an intangible asset.
The fair value of identifiable net assets in excess of the fair value of purchase
consideration is credited to the income statement in the year of acquisition.
Derivative financial instruments are accounted for in accordance with
IAS 39 and recognised initially at fair value.
The Group uses currency and interest rate swaps to manage financial risk.
Interest charges and financial liabilities are stated after taking account of
these swaps.
The Group uses these swaps and other hedges to mitigate exposures to
both foreign currency and interest rates.
Hedges are accounted for as follows:
Subsequent to initial recognition, goodwill is measured at cost less
accumulated impairment losses. Goodwill is reviewed for impairment
annually and whenever there is an indication that the goodwill may be
impaired in accordance with IAS 36, with any impairment losses being
recognised immediately in the income statement. Goodwill arising prior
to 1 January 1998 was taken directly to equity in the year in which it
arose. Such goodwill has not been reinstated on the balance sheet.
Other intangible assets
Intangible assets, other than goodwill, include purchased licences,
software, patents, customer contracts, non-compete undertakings,
customer relationships, trademarks and trade names. Intangible assets
are capitalised at cost and amortised on a straight-line basis over their
useful economic lives from the date that they are available for use and
are stated at cost less accumulated amortisation and impairment losses.
Useful economic lives do not exceed seven years.
Intangible assets acquired in a business combination are accounted for
initially at fair value.
Impairment of assets excluding goodwill
At each balance sheet date the Group reviews the carrying amounts of its
assets to determine whether there is any indication that those assets have
suffered an impairment loss. If any such indication exists, the recoverable
amount of the asset is estimated in order to determine the extent of the
impairment loss, if any.
Capital work in progress
Capital work in progress represents expenditure on property, plant and
equipment in the course of construction. Transfers are made to other
property, plant and equipment categories when the assets are available
for use.
Inventories
Inventories are measured at the lower of cost and estimated net realisable
value with due allowance being made for obsolete or slow-moving items.
Cost comprises direct materials and, where applicable, direct labour costs
and those overheads that have been incurred in bringing the inventories to
their present location and condition.
Financial instruments
Financial assets and financial liabilities are recognised on the Group’s
balance sheet when the Group becomes party to the contractual provisions
of the instrument.
Cash flow hedges: The effective part of any gain or loss on the hedging
instrument is recognised directly in the hedging reserve. Any ineffective
portion of the hedge is recognised immediately in the income statement.
The associated cumulative gain or loss is removed from equity and
recognised in the income statement in the same period or periods
during which the hedged forecast transaction affects profit or loss.
Fair value hedges: Changes in the fair value of the derivative are recognised
immediately in the income statement. The carrying value of the hedged item
is adjusted by the change in fair value that is attributable to the risk being
hedged and any gains or losses on remeasurement are recognised
immediately in the income statement.
Net investment hedges: The effective portion of the change in fair value
of the hedging instrument is recognised directly in the translation reserve.
Any ineffectiveness is recognised immediately in the income statement.
Trade receivables
Trade receivables do not carry any interest, are initially recognised at
fair value and are carried at amortised cost as reduced by appropriate
allowances for estimated irrecoverable amounts.
Trade payables
Trade payables are not interest bearing, are initially recognised at fair value
and are carried at amortised cost.
Borrowings
Borrowings are recognised initially at fair value less attributable issue costs.
Subject to initial recognition, borrowings are stated at amortised cost.
Provisions
A provision is recognised in the balance sheet when the Group has a present
legal or constructive obligation as a result of a past event and where it is
probable that an outflow will be required to settle the obligation.
Financial guarantees
Where Group companies enter into financial guarantee contracts to
guarantee the indebtedness or obligations of other companies within the
Group, these are considered to be insurance arrangements, and accounted
for as such. In this respect, the guarantee contract is treated as a contingent
liability until such time as it becomes probable that the guarantor will be
required to make a payment under the guarantee.
72
Financial statementsKeller Group plc | Annual Report & Accounts 2014 The estimates and underlying assumptions are reviewed on an ongoing basis.
Revisions to accounting estimates are recognised in the period in which the
estimate is revised if the revision affects only that and prior periods, or in the
period of the revision and future periods if the revision affects both current
and future periods.
The key estimates and judgments in drawing up the Group’s consolidated
financial statements are in connection with accounting for construction
contracts and the carrying value of goodwill.
Construction contracts: The Group’s approach to key estimates and
judgments relating to construction contracts is set out in the revenue
recognition policy above. The main factors considered when making those
estimates and judgments include the percentage of work completed at the
balance sheet date on longer-term contracts, the costs of the work required
to complete the contract and the outcome of claims and variations raised
against customers and claims raised against the Group by customers or
third parties.
Carrying value of goodwill: The Group tests annually whether goodwill
has suffered any impairment in accordance with the accounting policy set out
above. The Group estimates the recoverable amount based on value in use
calculations. These calculations require the use of assumptions, the most
important being the forecast revenues, operating margins and the discount
rates applied.
2 Principal accounting policies continued
Share-based payment
Charges for employee services received in exchange for share-based
payment have been made in accordance with IFRS 2.
Options granted under the Group’s employee share schemes are equity
settled. The fair value of such options has been calculated using a stochastic
model, based upon publicly available market data, and is charged to the
income statement over the performance period with a corresponding
increase in equity.
At the end of each reporting period, the Group revises its estimate of
the number of options that are expected to vest based on the service and
non-market vesting conditions. It recognises the impact of the revision to
original estimates, if any, in the income statement, with a corresponding
adjustment to equity.
Segmental reporting
IFRS 8 requires operating segments to be identified on the basis of internal
reports about components of the Group that are regularly reviewed by the
Chief Operating Decision Maker to allocate resources to the segments and
to assess their performance. The Group determines the Chief Operating
Decision Maker to be the Board of Directors.
An operating segment is a component of the Group that engages in business
activities from which it may earn revenues and incur expenses, including
revenues and expenses that relate to transactions with any of the Group’s
other components. Segmental results are presented as operating profit
before exceptional items. Segment assets are defined as property, plant and
equipment, intangible assets, inventories and trade and other receivables.
Segment liabilities are defined as trade and other payables, retirement
benefit liabilities, provisions and other liabilities. The accounting policies of
the operating segments are the same as the Group’s accounting policies.
Dividends
Interim dividends are recorded in the Group’s consolidated financial
statements when paid. Final dividends are recorded in the Group’s
consolidated financial statements in the period in which they receive
shareholder approval.
Exceptional items
Exceptional items are disclosed separately in the financial statements where
it is necessary to do so to provide further understanding of the financial
performance of the Group. They are items which are exceptional by their
size or are non-trading in nature, including those relating to acquisitions.
Accounting estimates and judgments
The preparation of the consolidated financial statements in conformity with
IFRS requires management to make judgments, estimates and assumptions
that affect the application of policies and reported amounts of assets and
liabilities, income and expenses. The estimates and associated assumptions
are based on historical experience and various other factors that are
believed to be reasonable under the circumstances, the results of which
form the basis of making the judgments about carrying values of assets and
liabilities that are not readily apparent from other sources. Actual results
may differ from these estimates.
73
OverviewStrategyPerformanceGovernanceFinancial statementsKeller Group plc | Annual Report & Accounts 2014 Notes to the consolidated financial statements
continued
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.
North America
EMEA1
Asia
Australia
Central items and eliminations
Before exceptional items
Exceptional items (Note 7)
North America
EMEA1
Asia
Australia
Central items and eliminations2
North America
EMEA1
Asia
Australia
Central items and eliminations2
1 Europe, Middle East and Africa.
2 Central items include net debt and tax balances.
2014
Segment
assets
£m
499.4
283.3
84.7
85.1
952.5
103.4
1,055.9
2013
Segment
assets
£m
487.0
278.6
76.7
116.5
958.8
69.0
1,027.8
2014
Segment
liabilities
£m
(159.9)
(215.2)
(29.4)
(44.2)
(448.7)
(260.9)
(709.6)
2013
Segment
liabilities
£m
(155.4)
(141.6)
(25.0)
(63.5)
(385.5)
(269.7)
(655.2)
Revenue and non-current non-financial assets are analysed by country below:
United States
Australia
Canada
United Kingdom (country of domicile)
Other
2014
Revenue
£m
775.6
451.5
111.3
261.3
1,599.7
–
1,599.7
–
1,599.7
2014
Capital
employed
£m
339.5
68.1
55.3
40.9
503.8
(157.5)
346.3
2013
Capital
employed
£m
331.6
137.0
51.7
53.0
573.3
(200.7)
372.6
2014
Operating
profit
£m
59.9
12.9
8.3
15.7
96.8
(4.8)
92.0
(56.7)
35.3
2014
Capital
additions
£m
23.3
23.1
10.8
7.3
64.5
–
64.5
2013
Capital
additions
£m
19.9
12.5
4.2
9.6
46.2
–
46.2
2013
Revenue
£m
699.4
399.2
96.2
243.4
1,438.2
–
1,438.2
–
1,438.2
2014
Depreciation
and
amortisation
£m
17.2
18.9
5.5
8.2
49.8
0.1
49.9
2013
Depreciation
and
amortisation
£m
15.5
16.9
4.8
9.0
46.2
0.2
46.4
2013
Operating
profit
£m
51.6
6.8
9.0
15.6
83.0
(5.2)
77.8
(21.7)
56.1
2014
Tangible and
intangible
assets
£m
251.6
127.4
47.4
52.6
479.0
0.1
479.1
2013
Tangible and
intangible
assets
£m
245.5
131.1
36.7
56.3
469.6
0.2
469.8
Revenue
Non-current
non-financial assets3
2014
£m
666.5
261.3
108.2
67.5
496.2
1,599.7
2013
£m
604.0
243.4
94.9
70.1
425.8
1,438.2
2014
£m
155.9
52.6
122.2
19.2
145.0
494.9
2013
£m
137.6
56.3
122.0
20.4
148.4
484.7
3 Non-current non-financial assets comprise intangible assets, property, plant and equipment and other non-current non-financial assets.
74
Financial statementsKeller Group plc | Annual Report & Accounts 2014 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 £3.5m (RM19.0m). £1.4m (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 £1.5m (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
£2.8m (R$10.7m) at a premium of £1.0m (R$4.1m) to net book value, which has been taken directly to reserves.
2013 acquisitions
Net assets acquired
Intangible assets
Property, plant
and equipment
Cash and cash equivalents
Receivables
Other assets
Loans and borrowings
Deferred tax
Other liabilities
Goodwill
Total consideration
Satisfied by
Initial cash consideration
Contingent consideration
Keller Canada
Fair
value
adjustment
£m
Carrying
amount
£m
Fair
value
£m
Carrying
amount
£m
Franki Africa
Fair
value
adjustment
£m
Geo-Foundations
Fair
value
£m
Carrying
amount
£m
Fair
value
adjustment
£m
Fair
value
£m
Carrying
amount
£m
Total
Fair
value
adjustment
£m
Fair
value
£m
–
31.5
31.5
2.2
3.2
5.4
–
0.4
0.4
2.2
35.1
37.3
32.9
–
19.7
9.6
(3.8)
–
(4.2)
54.2
1.3
–
(0.4)
–
–
(2.0)
–
30.4
34.2
–
19.3
9.6
(3.8)
(2.0)
(4.2)
84.6
74.8
159.4
151.2
8.2
159.4
19.0
4.2
14.3
4.6
(2.4)
(0.7)
(13.0)
28.2
–
–
–
–
–
(0.8)
(0.9)
1.5
19.0
4.2
14.3
4.6
(2.4)
(1.5)
(13.9)
29.7
2.9
32.6
31.8
0.8
32.6
1.9
0.2
4.0
0.4
(0.5)
(0.4)
(0.9)
4.7
1.3
–
–
–
–
(0.4)
–
1.3
3.2
0.2
4.0
0.4
(0.5)
(0.8)
(0.9)
6.0
–
6.0
6.0
–
6.0
53.8
4.4
38.0
14.6
(6.7)
(1.1)
(18.1)
87.1
2.6
–
(0.4)
–
–
(3.2)
(0.9)
33.2
56.4
4.4
37.6
14.6
(6.7)
(4.3)
(19.0)
120.3
77.7
198.0
189.0
9.0
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 £4.4m (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 £51.1m (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 £8.3m (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 £5.6m (€6.7m),
which was equal to the net book value of the assets and liabilities at the acquisition date.
75
OverviewStrategyPerformanceGovernanceFinancial statementsKeller Group plc | Annual Report & Accounts 2014 Notes to the consolidated financial statements
continued
5 Operating costs
Raw materials and consumables
Staff costs
Other operating charges
Amortisation of intangibles
Operating lease and short-term rental expense:
Land and buildings
Plant, machinery and vehicles
Depreciation:
Owned property, plant and equipment
Property, plant and equipment held under finance leases
Operating costs before exceptional items
Exceptional items (Note 7)
Other operating charges include:
Redundancy and other reorganisation costs
Fees payable to the Company’s auditor for the audit of the Company’s Annual Accounts
Fees payable to the Company’s auditor for other services:
The audit of the Company’s subsidiaries, pursuant to legislation
Tax compliance services
Tax advisory services
Other assurance services
6 Employees
The aggregate staff costs of the Group were:
Wages and salaries
Social security costs
Other pension costs
Share-based payments
These costs include Directors’ remuneration. Directors’ remuneration comprised:
Short-term employee benefits
Post-employment benefits
Share-based payments
The average number of persons, including Directors, employed by the Group during the year was:
North America
EMEA
Asia
Australia
76
Note
6
2014
£m
481.5
404.5
511.4
1.9
9.5
50.9
47.6
0.4
1,507.7
56.7
1,564.4
4.4
0.1
1.0
0.2
0.2
0.1
2014
£m
350.4
41.9
10.3
1.9
404.5
2014
£m
2.0
0.1
0.9
3.0
2014
Number
3,316
3,900
1,233
674
9,123
2013
£m
420.8
363.4
480.2
1.4
7.3
42.3
44.8
0.2
1,360.4
21.7
1,382.1
2.3
0.1
1.2
0.4
–
0.7
2013
£m
318.3
34.4
8.8
1.9
363.4
2013
£m
3.4
0.1
1.0
4.5
2013
Number
3,410
2,664
838
930
7,842
Financial statementsKeller Group plc | Annual Report & Accounts 2014
7 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:
Contract dispute
Amortisation of acquired intangible assets
Acquisition costs
Contingent consideration and payments
Goodwill impairments
Other
Exceptional items in operating costs
Exceptional finance costs
2014
£m
54.0
6.6
0.5
(4.7)
–
0.3
56.7
0.2
56.9
2013
£m
–
6.7
5.9
6.0
3.1
–
21.7
0.4
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
£4.8m (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.
8 Finance income
Bank and other interest receivable
Other finance income
9 Finance costs
Interest payable on bank loans and overdrafts
Interest payable on other loans
Interest payable on finance leases
Net pension interest cost
Other finance costs
Finance costs before exceptional items
Exceptional finance costs (Note 7)
2014
£m
0.6
0.9
1.5
2014
£m
3.7
1.9
0.4
0.7
1.7
8.4
0.2
8.6
2013
£m
0.6
2.5
3.1
2013
£m
2.5
2.2
0.1
0.7
1.3
6.8
0.4
7.2
77
OverviewStrategyPerformanceGovernanceFinancial statementsKeller Group plc | Annual Report & Accounts 2014 Notes to the consolidated financial statements
continued
10 Taxation
Current tax expense
Current year
Prior years
Total current tax
Deferred tax expense
Current year
Prior years
Total deferred tax
2014
£m
35.1
(0.8)
34.3
(6.5)
1.6
(4.9)
29.4
2013
£m
21.9
(1.1)
20.8
1.0
0.1
1.1
21.9
UK corporation tax is calculated at 21.5% (2013: 23.25%) of the estimated assessable profit for the year. Taxation for other jurisdictions is calculated at the
rates prevailing in the respective jurisdictions.
The effective tax rate can be reconciled to the UK corporation tax rate of 21.5% as follows:
UK corporation tax rate of 21.5% (2013: 23.25%)
Tax charged overseas at rates other than 21.5% (2013: 23.25%)
Tax losses
Non-deductible expenses
Adjustment to tax charge in respect of previous periods
Effective tax rate before exceptional items
Impact of exceptional items (Note 7)
Effective tax rate
2014
%
21.5
11.0
1.0
0.5
0.9
34.9
69.4
104.3
2013
%
23.3
7.8
1.3
1.1
(1.4)
32.1
10.0
42.1
The following are the major deferred tax liabilities and assets recognised by the Group and movements thereon during the current and prior reporting periods:
At 1 January 2013
Charge/(credit) to the income statement
Credit to other comprehensive income
Acquired with subsidiaries
Exchange differences
Reclassification
At 31 December 2013 and 1 January 2014
(Credit)/charge to the income statement
Credit to other comprehensive income
Exchange differences
At 31 December 2014
Unused
tax
losses
£m
(4.8)
0.9
–
–
(0.2)
–
(4.1)
(3.2)
–
0.1
(7.2)
Accelerated
capital
allowances
£m
31.3
0.1
–
0.4
(1.3)
1.2
31.7
1.1
–
0.9
33.7
Retirement
benefit
obligations
£m
(1.7)
0.2
(1.1)
–
0.3
(0.3)
(2.6)
(0.4)
(0.2)
0.1
(3.1)
Other
employee
related
liabilities
£m
(9.6)
(1.2)
–
–
0.8
(0.3)
(10.3)
0.6
–
(0.5)
(10.2)
Bad
debts
£m
(3.5)
0.4
–
0.1
0.1
(1.7)
(4.6)
(2.1)
–
(0.2)
(6.9)
The following is the analysis of the deferred tax balances:
Deferred tax liabilities
Deferred tax assets
Other
temporary
differences
£m
(2.5)
0.7
–
3.8
0.8
1.1
3.9
(0.9)
–
0.4
3.4
2014
£m
19.7
(10.0)
9.7
Total
£m
9.2
1.1
(1.1)
4.3
0.5
–
14.0
(4.9)
(0.2)
0.8
9.7
2013
£m
21.9
(7.9)
14.0
At the balance sheet date, the Group had unused tax losses of £25.2m (2013: £24.6m) available for offset against future profits, on which no deferred tax
asset has been recognised. Of these losses, £19.4m (2013: £19.4m) may be carried forward indefinitely.
At the balance sheet date the aggregate of temporary differences associated with investments in subsidiaries, branches and joint ventures for which no
deferred tax liability has been recognised is £71.6m (2013: £51.5m). The unprovided deferred tax liability in respect of these timing differences is £3.2m
(2013: £1.6m).
78
Financial statementsKeller Group plc | Annual Report & Accounts 2014 11 Dividends payable to equity holders of the parent
Ordinary dividends on equity shares:
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
Interim dividend for the year ended 31 December 2014 of 8.4p (2013: 8.0p) per share
2014
£m
11.4
6.0
17.4
2013
£m
9.8
5.6
15.4
The Board has recommended a final dividend for the year ended 31 December 2014 of £12.0m, 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.
12 Earnings per share
Basic and diluted earnings/(loss) per share are calculated as follows:
2014
Basic
before
exceptional
items
£m
2014
Diluted
before
exceptional
items
£m
2014
Basic
£m
2014
Diluted
£m
2013
Basic
before
exceptional
items
£m
2013
Diluted
before
exceptional
items
£m
2013
Basic
£m
2013
Diluted
£m
Earnings/(loss) (after tax and non-controlling
interests), being net profits/(losses) attributable
to equity holders of the parent
Weighted average of ordinary shares in issue
during the year
Add: weighted average of shares under option
during the year
Adjusted weighted average of ordinary shares
in issue
Earnings/(loss) per share
53.6
53.6
(3.0)
(3.0)
49.5
49.5
29.3
29.3
Number
of shares
Million
Number
of shares
Million
Number
of shares
Million
Number
of shares
Million
Number
of shares
Million
Number
of shares
Million
Number
of shares
Million
Number
of shares
Million
71.2
–
71.2
2014
Pence
75.3
71.2
1.0
72.2
2014
Pence
74.2
71.2
–
71.2
71.2
1.0
72.2
2014
Pence
(4.2)
2014
Pence
(4.2)
67.8
–
67.8
2013
Pence
73.0
67.8
1.1
68.9
2013
Pence
71.9
67.8
–
67.8
2013
Pence
43.2
67.8
1.1
68.9
2013
Pence
42.6
79
OverviewStrategyPerformanceGovernanceFinancial statementsKeller Group plc | Annual Report & Accounts 2014 Notes to the consolidated financial statements
continued
13 Intangible assets
Cost
At 1 January 2013
Additions
Exchange differences
At 31 December 2013 and 1 January 2014
Additions
Exchange differences
At 31 December 2014
Accumulated amortisation and impairment
At 1 January 2013
Impairment charge for the year
Amortisation charge for the year
Exchange differences
At 31 December 2013 and 1 January 2014
Amortisation charge for the year
Exchange differences
At 31 December 2014
Carrying amount
At 31 December 2014
At 31 December 2013 and 1 January 2014
At 1 January 2013
Goodwill
£m
Other intangible assets
Arising on
acquisition
£m
Other
£m
114.2
77.4
(11.3)
180.3
3.2
0.9
184.4
21.0
3.1
–
(0.3)
23.8
–
0.1
23.9
160.5
156.5
93.2
–
37.3
(3.6)
33.7
–
(1.0)
32.7
–
–
6.7
(0.5)
6.2
6.6
(0.2)
12.6
20.1
27.5
–
16.0
1.4
(0.8)
16.6
0.9
0.2
17.7
12.0
–
1.4
(0.7)
12.7
1.9
0.2
14.8
2.9
3.9
4.0
Total
£m
130.2
116.1
(15.7)
230.6
4.1
0.1
234.8
33.0
3.1
8.1
(1.5)
42.7
8.5
0.1
51.3
183.5
187.9
97.2
Goodwill impairments in 2013 mainly relate to Keller Specialni Zakladani, spol. s.r.o. (Czech Republic).
Other intangible assets arising on acquisition represent customer relationships, customer contracts at the date of acquisition, patents and trade names.
In 2014, for impairment testing purposes goodwill has been allocated to 16 separate cash-generating units (‘CGUs’). Of these, the carrying amount of
goodwill allocated to four individual CGUs (Keller Canada, Suncoast, HJ Foundations and Keller Limited) is significant in comparison to the total carrying
amount of goodwill and comprises 76% of the total. The carrying amounts allocated to three further CGUs, taken together, comprise a further 15% of
the total. The relevant CGUs and the carrying amount of the goodwill allocated to each are as set out below, together with the pre-tax discount rate
and medium-term growth rate used in their value in use calculations:
Cash-generating unit
Keller Canada
Suncoast
HJ Foundations
Keller Limited
Hayward Baker
Resource Piling
Waterway
Other
Geographical segment
North America
North America
North America
EMEA
North America
Asia
Australia
Various
2014
Pre-tax
discount rate
%
11.3
13.4
16.0
12.4
16.7
11.9
15.7
2014
Forecast
growth rate
%
2.0
3.0
3.0
2.0
3.0
2.0
1.0
2014
Carrying
value
£m
64.9
27.7
17.9
12.1
9.0
7.9
7.4
13.6
160.5
2013
Carrying
value
£m
66.8
26.1
16.8
12.1
8.4
7.7
7.5
11.1
156.5
2013
Pre-tax
discount rate
%
11.5
13.0
16.9
13.0
16.3
11.8
16.2
2013
Forecast
growth rate
%
2.0
3.0
3.0
2.0
3.0
2.0
1.0
The recoverable amount of the goodwill allocated to each CGU has been determined based on a value in use calculation. The calculations all use cash flow
projections based on financial budgets and forecasts approved by management covering a five-year period.
The Group’s businesses operate in cyclical markets, some of which are expected to continue to face uncertain conditions over the next couple of years.
The most important factors in the value in use calculations, however, are the forecast revenues and operating margins during the forecast period and
the discount rates applied to future cash flows. The key assumptions underlying the cash flow forecasts are therefore the revenue and operating margins
assumed throughout the forecast period. The discount rates used in the value in use calculations are based on the weighted average cost of capital of
companies comparable to the relevant CGUs, adjusted as necessary to reflect the risk associated with the asset being tested.
Management considers all the forecast revenues, margins and profits to be reasonably achievable given recent performance and the historic trading results
of the relevant CGUs. Cash flows beyond 2019 have been extrapolated using a steady growth rate of between 1% and 3% (shown in the table above),
which does not exceed the long-term average growth rates for the markets in which the relevant CGUs operate.
80
Financial statementsKeller Group plc | Annual Report & Accounts 2014 13 Intangible assets continued
Management believes that, with the exception of Keller Limited (UK) and Keller Canada (Canada), any reasonably possible change in the key assumptions on
which the recoverable amounts of the CGUs identified above are based would not cause any of their carrying amounts to exceed their recoverable amounts.
Keller Limited (UK)
Although revenues are forecast to reduce in 2015 as two significant contracts were substantially completed during 2014, the assumptions underlying the
forecasts in subsequent years are for a gradual recovery to more normal, mid-cycle, market conditions by 2019. Clearly, in the event that this assumption
proves over optimistic and the UK construction market experiences a prolonged depression, such that demand for our products is materially below
long-term historic levels, this would adversely impact the forecast cash flows and may lead to an impairment of goodwill. Based on the value in use
calculation, the recoverable amount of Keller Limited exceeds the carrying amount by £11.5m. In order for the recoverable amount to equal the carrying
amount, forecast revenue growth in each year, at the assumed operating margins, would have to decrease by 6.3%, which would result in a negative 2.6%
compound annual growth rate over the period from 2015 to 2019. Alternatively, assumed operating margins in each year would have to decrease by 1.5%.
Keller Canada (Canada)
The 2014 results of Keller Canada are below those expected at the time of acquisition, primarily due to worsening market conditions. The assumptions
underlying the forecasts in subsequent years are for a recovery in the Canadian market in the medium term. Clearly, in the event that this assumption proves
over optimistic and the Canadian market experiences a prolonged depression such that demand for our products is materially below long-term historic
levels, this would adversely impact the forecast cash flows and may lead to an impairment of goodwill. Based on the value in use calculation, the recoverable
amount of Keller Canada exceeds the carrying amount by C$71.2m (£39.3m). In order for the recoverable amount to equal the carrying amount, forecast
revenue growth in each year, at the assumed operating margins, would have to decrease by 5.1%, which would result in a 3.2% compound annual growth
rate over the period from 2015 to 2019. Alternatively, assumed operating margins in each year would have to decrease by 2.5%.
14 Property, plant and equipment
Cost
At 1 January 2013
Additions
Disposals
Acquired with subsidiaries
Exchange differences
At 31 December 2013 and 1 January 2014
Additions
Disposals
Acquired with subsidiaries
Reclassification
Exchange differences
At 31 December 2014
Accumulated depreciation
At 1 January 2013
Charge for the year
Disposals
Exchange differences
At 31 December 2013 and 1 January 2014
Charge for the year
Disposals
Exchange differences
At 31 December 2014
Carrying amount
At 31 December 2014
At 31 December 2013 and 1 January 2014
At 1 January 2013
Land and
buildings
£m
Plant, machinery
and vehicles
£m
Capital work
in progress
£m
39.6
3.2
(1.1)
1.2
(0.5)
42.4
2.9
–
–
2.0
(0.7)
46.6
8.7
0.9
(0.1)
–
9.5
1.7
–
(0.1)
11.1
35.5
32.9
30.9
491.3
41.6
(10.0)
53.6
(27.9)
548.6
59.2
(11.8)
1.4
(2.0)
0.5
595.9
274.0
44.1
(7.7)
(10.5)
299.9
46.3
(8.6)
–
337.6
258.3
248.7
217.3
0.3
–
–
–
–
0.3
1.5
–
–
–
–
1.8
–
–
–
–
–
–
–
–
–
1.8
0.3
0.3
The net book value of plant, machinery and vehicles includes £3.9m (2013: £5.2m) in respect of assets held under finance leases.
The Group had contractual commitments for the acquisition of property, plant and equipment of £0.9m (2013: £3.1m) at the balance sheet date.
These amounts were not included in the balance sheet at the year end.
Total
£m
531.2
44.8
(11.1)
54.8
(28.4)
591.3
63.6
(11.8)
1.4
–
(0.2)
644.3
282.7
45.0
(7.8)
(10.5)
309.4
48.0
(8.6)
(0.1)
348.7
295.6
281.9
248.5
81
OverviewStrategyPerformanceGovernanceFinancial statementsKeller Group plc | Annual Report & Accounts 2014 Notes to the consolidated financial statements
continued
15 Other non-current assets
Fair value of derivative financial instruments
Other assets
2014
£m
3.5
16.4
19.9
2013
£m
–
14.9
14.9
16 Investments
The Company’s principal operating subsidiary undertakings at 31 December 2014 were as follows:
Subsidiary undertaking
Keller Limited
Hayward Baker Inc
Case Foundation Company
McKinney Drilling Company LLC
Suncoast Post-Tension Ltd
HJ Foundation Company
Keller Foundations Ltd
Cyntech Construction Ltd
Geo-Foundations Contractors, Inc.
Keller Grundbau GmbH
Keller Fondations Spéciales SAS
Keller Grundbau Ges.mbH
Keller Cimentaciones S.L.U. (previously Keller-Terra S.L.)
Country of incorporation
UK
USA
USA
USA
USA
USA
Canada
Canada
Canada
Germany
France
Austria Waterway Constructions Group Pty Ltd
Subsidiary undertaking
Keller Polska Sp. z o.o.
Keller Engenharia Geotécnica Ltda
Keller Ground Engineering India Private Ltd
Keller (Malaysia) Sdn. Bhd
Keller Foundations (South East Asia) Pte Ltd
Resource Piling Pte Ltd
Keller Turki Company Ltd
Franki Geotechnical (Pty) Ltd
Frankipile Australia Pty Ltd
Vibro-Pile (Aust.) Pty Ltd
Piling Contractors Pty Ltd
Spain
Keller Ground Engineering Pty Ltd
Country of incorporation
Poland
Brazil
India
Malaysia
Singapore
Singapore
Saudi Arabia
South Africa
Australia
Australia
Australia
Australia
Australia
Each of the above subsidiary undertakings is directly or indirectly wholly owned by the Company apart from Keller Turki Company Ltd, which is 65%
owned by Keller Grundbau GmbH. Keller Limited is held directly by the Company. All other shareholdings are held by intermediate subsidiary undertakings.
All companies are engaged in the principal activities of the Group, as defined in the Directors’ report.
The Company has taken advantage of the exemption in s410 of the Companies Act 2006 to disclose a list comprising solely the principal operating
subsidiaries. A full list of subsidiaries is sent to Companies House with each annual return.
17 Inventories
Raw materials and consumables
Work in progress
Finished goods
18 Trade and other receivables
Trade receivables
Construction work in progress
Other receivables
Prepayments
Fair value of derivative financial instruments
Trade receivables are shown net of an allowance for doubtful debts.
The movement in the provision for bad and doubtful debt is as follows:
At 1 January
Acquired with subsidiaries
Used during the period
Additional provisions
Unused amounts reversed
Exchange differences
At 31 December
82
2014
£m
33.8
0.5
14.3
48.6
2014
£m
319.8
59.6
19.3
10.0
–
408.7
2014
£m
29.0
–
(2.1)
12.3
(3.1)
0.4
36.5
2013
£m
45.7
2.1
14.2
62.0
2013
£m
336.9
56.6
11.2
8.4
1.4
414.5
2013
£m
32.8
0.8
(4.0)
13.3
(13.5)
(0.4)
29.0
Financial statementsKeller Group plc | Annual Report & Accounts 2014 18 Trade and other receivables continued
The ageing of trade receivables that were past due but not impaired was as follows:
Overdue by less than 30 days
Overdue by between 31 and 90 days
Overdue by more than 90 days
19 Construction contracts
Construction contracts in progress at balance sheet date:
Aggregate amount of costs incurred and recognised profits (less recognised losses) to date
Retentions withheld by customers
Advances received
Construction contract revenue recognised in the year in accordance with IAS 11 totalled £1,433.2m (2013: £1,319.3m).
20 Cash and cash equivalents
Bank balances
Short-term deposits
Cash and cash equivalents in the balance sheet
Bank overdrafts
Cash and cash equivalents in the cash flow statement
21 Trade and other payables
Trade payables
Other taxes and social security payable
Other payables
Accruals
Fair value of derivative financial instruments
Other payables includes contract accruals and advance billings.
22 Provisions
At 1 January 2014
Charge for the year
Used during the period
Unused amounts reversed
Exchange differences
At 31 December 2014
To be settled within one year
To be settled after one year
At 31 December 2014
2014
£m
61.5
34.4
24.3
120.2
2014
£m
887.5
28.0
4.9
2014
£m
79.7
5.9
85.6
–
85.6
2014
£m
171.4
8.8
142.0
30.8
0.2
353.2
2013
£m
65.9
36.5
25.9
128.3
2013
£m
637.0
23.9
1.9
2013
£m
50.5
2.8
53.3
(2.6)
50.7
2013
£m
169.5
7.6
139.7
33.6
2.0
352.4
Total
£m
16.1
64.8
(8.2)
(0.1)
0.7
73.3
50.0
23.3
73.3
Employee
provisions
£m
10.3
4.7
(3.9)
(0.1)
0.6
11.6
6.4
5.2
11.6
Restructuring
provisions
£m
1.1
1.0
(0.2)
–
(0.1)
1.8
1.7
0.1
1.8
Other
provisions
£m
4.7
59.1
(4.1)
–
0.2
59.9
41.9
18.0
59.9
Employee provisions comprise obligations to employees other than retirement benefit obligations. Other provisions are in respect of legal and other
disputes in various Group companies, including the provision for the contract dispute outlined in Note 7. The majority of provisions are expected to be
utilised within one year.
23 Other non-current liabilities
Fair value of derivative financial instruments
Other liabilities
Other liabilities include contingent consideration of £2.8m (2013: £8.5m).
2014
£m
19.4
16.9
36.3
2013
£m
14.9
21.0
35.9
83
OverviewStrategyPerformanceGovernanceFinancial statementsKeller Group plc | Annual Report & Accounts 2014 Notes to the consolidated financial statements
continued
24 Financial instruments
Exposure to credit, interest rate and currency risks arise in the normal
course of the Group’s business. Derivative financial instruments are used
to hedge exposure to fluctuations in foreign exchange and interest rates.
The Group does not trade in financial instruments nor does it engage
in speculative derivative transactions.
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 net assets might have on the consolidated balance
sheet, by matching the currency of its borrowings, where possible, with the
currency of its 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.
At 31 December 2014, the fair value of foreign exchange forward contracts
outstanding was £0.2m (2013: £nil).
Interest rate risk
Interest rate risk is managed by mixing fixed and floating rate borrowings
depending upon the purpose and term of the financing.
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 review of these ratings. The ageing of trade
receivables that were past due but not impaired is shown in Note 18.
Liquidity risk and capital management
The Group’s capital structure is kept under constant review, taking account
of the need for, availability and cost of various sources of finance. The capital
structure of the Group consists of net debt, as shown on page 85, and equity
attributable to equity holders of the parent as shown in the consolidated balance
sheet. The Group maintains a balance between certainty of funding and a
flexible, cost effective financing structure with all main borrowings being from
committed facilities. The Group’s policy continues to be to ensure that its capital
structure is appropriate to support this balance and the Group’s operations.
In order to maintain or adjust the capital structure, the Group may adjust the
amount of dividends paid to shareholders, return capital to shareholders, issue
new shares or sell assets to reduce debt. The Group’s debt and committed
facilities mainly comprise a US$40m private placement repayable in 2018, a
US$50m private placement repayable in 2021, a US$75m private placement
repayable in 2024 and a £250m syndicated revolving credit facility expiring in
2019. These facilities are subject to certain covenants linked to the Group’s
financing structure, specifically regarding the ratios of debt and interest to
profit. The Group has complied with these covenants throughout the period.
At the year end, the Group also had other committed and uncommitted
borrowing facilities totalling £40.7m (2013: £68.5m) to support local requirements.
84
Private placements
In August 2012, US$40m was raised through a private placement with US
institutions. The proceeds of the issue of US$40m 5.0% notes due 2018 were
used to repay existing debt. In October and December 2014, a further US$50m
and US$75m respectively were raised through a private placement with US
institutions. The proceeds of the issue of US$50m 3.81% Series A notes due 2021
and US$75m 4.17% Series B notes due 2024 were used to refinance the 2004
US$70m 5.48% private placement notes which matured in October 2014 and
other existing debt.
The US private placement loans are accounted for on an amortised cost basis,
adjusted for the impact of hedge accounting (as described below), and retranslated
at the spot exchange rate at each period end. The carrying value of the private
placement liabilities at 31 December 2014 was £108.8m (2013: £68.5m).
Hedging
The 2004 US$70m fixed rate private placement liabilities were swapped
into floating rates, US$45m by means of US dollar interest rate swaps and
US$25m through a dollar euro cross-currency and interest rate swap
(together, ‘the 2004 swaps’). The 2004 swaps matured at the same time
as the private placement liability in October 2014 and therefore the fair
value of the 2004 swaps at 31 December 2014 was £nil (2013: a net asset
of £0.3m).
In June 2006, US$185m of floating rate intra-Group debt was swapped
into sterling floating rates by means of dollar sterling cross-currency interest
rate swaps (‘the 2006 swaps’). The 2006 swaps have the same maturity as
the intra-Group debt and have been designated as cash flow hedges of the
Company’s exposure to the variability of cash flows on the intra-Group
debt resulting from changes in foreign exchange rates.
The fair value of the 2006 swaps at 31 December 2014 represented a
liability of £18.5m (2013: £11.3m) included in other non-current liabilities.
The effective portion of changes in the fair value of the 2006 swaps, a loss
of £7.2m (2013: £2.1m gain), has been taken to the hedging reserve and fully
recycled through the income statement during the year.
The 2012 US$40m fixed rate private placement liabilities were swapped
into sterling by means of dollar sterling cross-currency fixed interest rate
swaps. Also, on the same date, £25.5m of sterling was swapped into euros
by means of sterling euro cross-currency fixed interest rate swaps. These
interest rate swaps (‘the 2012 swaps’) have the same maturity as the private
placement liability. The dollar sterling swaps have been designated as cash
flow hedges of the Company’s exposure to the variability of cash flows on
the private placement resulting from changes in foreign exchange rates and
the sterling euro swaps have been designated as net investment hedges of
the Group’s euro-denominated net assets.
The fair value of the 2012 swaps at 31 December 2014 represented an
asset of £0.5m (2013: £nil) included in other non-current assets and a liability
of £0.9m (2013: £3.6m) included in other non-current liabilities. The effective
portion of the changes in the fair value of the dollar sterling swaps, a gain of
£1.1m (2013: £0.3m loss), has been taken to the hedging reserve and fully
recycled through the income statement during the year. The effective
portion of the changes in the fair value of the sterling euro swaps, a gain of
£2.0m (2013: £1.6m loss), has been taken to the translation reserve through
other comprehensive income along with the foreign exchange gains and
losses arising on retranslation of the euro-denominated assets they hedge.
The 2014 US$50m and US$75m fixed rate private placement liabilities
were swapped into floating rate by means of US dollar interest rate swaps
(‘the 2014 swaps’). The 2014 swaps have the same maturity as the private
placement liabilities and have been designated as fair value hedges of the
Group’s exposure to changes in the fair value of the US private placement
loans and related interest cash flows due to changes in US dollar
interest rates.
The fair value of the 2014 swaps at 31 December 2014 represented an
asset of £3.0m which is included in other non-current assets. The effective
portion of the changes in the fair value of the 2014 swaps, a gain of £3.0m,
has been taken to the income statement along with equal and opposite
movement in fair value of the corresponding hedged items.
All hedges are tested for effectiveness every six months using the cumulative
dollar offset method. All hedging relationships remained effective during the
year. The ineffective portion of the movement in the fair value of the
hedging instruments was £nil (2013: £nil).
Financial statementsKeller Group plc | Annual Report & Accounts 2014 24 Financial instruments continued
Effective interest rates and maturity analysis
In respect of interest-earning financial assets and interest-bearing financial liabilities, the following table indicates their effective interest rates at the balance
sheet date and the periods in which they mature.
2014
Effective
interest rate
%
1.8
2.6
7.3
1.6
2.8
Bank loans*
Other loans*
Obligations under finance leases*
Total loans and borrowings
Bank balances*
Short-term deposits*
Net debt
Derivative financial instruments
2013
Effective
interest rate
%
2.0
2.9
2.9
7.5
1.6
3.7
Bank overdrafts
Bank loans*
Other loans*
Obligations under finance leases*
Total loans and borrowings
Bank balances
Short-term deposits*
Net debt
Derivative financial instruments
* These include assets/liabilities bearing interest at a fixed rate.
2014
Due within
1–2 years
£m
(0.5)
–
(1.9)
(2.4)
–
–
(2.4)
(18.6)
2013
Due within
1–2 years
£m
–
(37.0)
–
(0.8)
(37.8)
–
–
(37.8)
–
2014
Due within
2–5 years
£m
(72.2)
(25.8)
(0.7)
(98.7)
–
–
(98.7)
(0.4)
2013
Due within
2–5 years
£m
–
(82.8)
(24.2)
(1.5)
(108.5)
–
–
(108.5)
(14.9)
2014
Due after
more than
5 years
£m
(1.0)
(83.0)
–
(84.0)
–
–
(84.0)
3.1
2013
Due after
more than
5 years
£m
–
(0.5)
–
(1.5)
(2.0)
–
–
(2.0)
–
2014
Total
non-current
£m
(73.7)
(108.8)
(2.6)
(185.1)
–
–
(185.1)
(15.9)
2013
Total
non-current
£m
–
(120.3)
(24.2)
(3.8)
(148.3)
–
–
(148.3)
(14.9)
Loans and borrowings consist of the following:
US$75m private placement (due December 2024)
US$50m private placement (due October 2021)
£250m syndicated revolving credit facility (expiring September 2019)
US$70m private placement (repaid October 2014)
US$40m private placement (due August 2018)
£170m syndicated revolving credit facility (expired July 2014)
US$150m syndicated revolving credit facility (amended and restated July 2014)
Bank overdrafts
Obligations under finance leases
Other loans and borrowings
Total loans and borrowings
2014
Due within
1 year
£m
(1.2)
–
(1.5)
(2.7)
79.7
5.9
82.9
(0.2)
2013
Due within
1 year
£m
(2.6)
(0.2)
(44.3)
(1.6)
(48.7)
50.5
2.8
4.6
(0.6)
2014
£m
50.3
32.7
71.9
–
25.8
–
–
–
4.1
3.0
187.8
2014
Total
£m
(74.9)
(108.8)
(4.1)
(187.8)
79.7
5.9
(102.2)
(16.1)
2013
Total
£m
(2.6)
(120.5)
(68.5)
(5.4)
(197.0)
50.5
2.8
(143.7)
(15.5)
2013
£m
–
–
–
44.3
24.2
36.4
82.4
2.6
5.4
1.7
197.0
During 2014, the US$150m facility was amended and restated to become the £250m facility.
In addition, there were non-interest-bearing financial liabilities comprising trade and other payables of £322.2m (2013: £316.8m) which were payable within one
year. Contingent consideration in respect of acquisitions taking place on or after 1 January 2010 which were payable between two and five years is £2.8m (2013: £8.5m).
The Group had unutilised committed banking facilities of £173.1m at 31 December 2014 (2013: £122.6m). This mainly comprised the unutilised portion
of the Group’s £250m facility which expires on 4 September 2019. In addition, the Group had unutilised uncommitted borrowing facilities totalling £24.3m
at 31 December 2014 (2013: £42.7m). All of these borrowing facilities are unsecured. Future obligations under finance leases totalled £4.6m (2013: £6.0m),
including interest of £0.5m (2013: £0.6m).
Fair values
The fair values of the Group’s financial assets and liabilities are not materially different from their carrying values. The following summarises the major
methods and assumptions used in estimating the fair values of financial instruments:
Derivatives
The fair value of interest rate and cross-currency swaps is calculated based on expected future principal and interest cash flows discounted using market
rates prevailing at the balance sheet date. In 2014 and in 2013, the valuation methods of all of the Group’s derivative financial instruments carried at fair value
are categorised as Level 2. Level 2 is defined as inputs, other than quoted prices (unadjusted) in active markets for identical assets or liabilities, that are
observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
85
OverviewStrategyPerformanceGovernanceFinancial statementsKeller Group plc | Annual Report & Accounts 2014
Notes to the consolidated financial statements
continued
24 Financial instruments continued
Interest-bearing loans and borrowings
Fair value is calculated based on expected future principal and interest cash flows discounted using market rates prevailing at the balance sheet date.
Contingent consideration
Fair value is calculated based on the amounts expected to be paid, determined by reference to forecasts of future performance of the acquired businesses
discounted using market rates prevailing at the balance sheet date and the probability of contingent events and targets being achieved.
In 2014 and in 2013, the valuation methods of all of the Group’s contingent consideration carried at fair value are categorised as Level 3. Level 3 inputs are
unobservable inputs for the asset or liability.
The significant unobservable inputs used in the fair value measurement of the Group’s contingent consideration are forecast revenue growth rates
(2014: 1%–10%), forecast EBITDA margins (2014: 9%–14%) and pre-tax discount rates (2014: 17%–22%).
The following table shows a reconciliation from the opening to closing balances for Level 3 fair values:
At 1 January 2014
Provision released (Note 7)
Additional amounts provided
Assumed within business combinations (Note 4)
Unwind of contingent consideration (Note 7)
Exchange differences1
At 31 December 2014
1 Included in other comprehensive income.
Contingent
consideration
£m
8.5
(7.5)
0.9
0.9
0.2
(0.2)
2.8
The fair value measurement of the contingent consideration could be affected if the forecast revenue growth rates or forecast EBITDA margins
are different to those stated above. A higher forecast revenue growth rate or higher EBITDA margin may increase the value of the contingent
consideration payable.
Trade and other payables and receivables and construction work in progress
For payables and receivables with a remaining life of one year or less, the carrying amount is deemed to reflect the fair value. All other payables and
receivables are discounted using market rates prevailing at the balance sheet date.
Interest rate and currency profile
The profile of the Group’s financial assets and financial liabilities after taking account of swaps was as follows:
Weighted average fixed debt interest rate
Weighted average fixed debt period (years)
Fixed rate financial liabilities
Floating rate financial liabilities
Financial assets
Net debt
Weighted average fixed debt interest rate
Weighted average fixed debt period (years)
2014
Sterling
–
–
2014
£m
–
–
1.4
1.4
2013
Sterling
–
–
2014
USD
–
–
2014
£m
–
(83.0)
15.3
(67.7)
2013
USD
–
–
2014
Euro
4.4%
3.8
2014
£m
(27.6)
(19.3)
17.2
(29.7)
2013
Euro
5.0%
4.6
2014
CAD
–
–
2014
£m
–
(40.9)
2.5
(38.4)
2013
CAD
6.9%
2.4
2014
Other1
8.4%
1.8
2014
£m
(0.5)
(16.5)
49.2
32.2
2013
Other1
–
–
2014
Total
n/a
n/a
2014
£m
(28.1)
(159.7)
85.6
(102.2)
2013
Total
n/a
n/a
Fixed rate financial liabilities
Floating rate financial liabilities
Financial assets
Net debt
1 Included within other floating rate financial liabilities are AUD revolver loans of £nil (2013: £3.6m), ZAR revolver loans of £13.3m (2013: £9.3m) and SGD revolver loans of £2.0m (2013: £nil).
2013
£m
–
(2.6)
1.0
(1.6)
2013
£m
–
(31.2)
5.6
(25.6)
2013
£m
(25.4)
(21.2)
9.0
(37.6)
2013
£m
(2.9)
(98.3)
2.6
(98.6)
2013
£m
–
(15.4)
35.1
19.7
2013
£m
(28.3)
(168.7)
53.3
(143.7)
Included within other financial assets are AUD cash balances of £12.0m (2013: £9.5m), ZAR cash balances of £2.8m (2013: £6.6m) and SGD cash balances of £2.8m (2013: £6.2m).
86
Financial statementsKeller Group plc | Annual Report & Accounts 2014 24 Financial instruments continued
Sensitivity analysis
At 31 December 2014, it is estimated that a general increase of one percentage point in interest rates would decrease the Group’s profit before taxation
by approximately £0.8m (2013: £1.2m). The impact of interest rate swaps has been included in this calculation.
It is estimated that a general increase of ten percentage points in the value of sterling against other principal foreign currencies would have decreased the
Group’s profit before taxation and exceptional items by approximately £8.2m for the year ended 31 December 2014 (2013: £7.1m). This sensitivity relates
to the impact of retranslation of foreign earnings only. The impact on the Group’s earnings of currency transaction exchange risk is not significant.
25 Share capital and reserves
Allotted, called up and fully paid
Equity share capital:
73,099,735 ordinary shares of 10p each (2013: 73,099,735)
2014
£m
2013
£m
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 £57.6m net of £1.2m 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).
26 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 in Note 6.
27 Commitments
(a) Capital commitments
Capital expenditure contracted for at the end of the reporting period but not yet incurred was £0.9m (2013: £3.1m) and relates to property, plant and
equipment purchases.
(b) Operating lease commitments
At the balance sheet date, the Group’s total commitments for future minimum lease payments under non-cancellable operating leases were as follows:
Payable within one year
Payable between one and five years inclusive
Payable in over five years
2014
Land and
buildings
£m
10.0
18.4
10.6
39.0
2014
Plant,
machinery
and vehicles
£m
6.3
5.1
–
11.4
2014
Total
£m
16.3
23.5
10.6
50.4
2013
Land and
buildings
£m
8.8
17.6
5.0
31.4
2013
Plant,
machinery
and vehicles
£m
6.6
5.8
–
12.4
2013
Total
£m
15.4
23.4
5.0
43.8
28 Contingent liabilities
Claims against the Group arise in the normal course of trading. Some of these claims involve or may involve litigation and, in a few instances, the total
amounts claimed against the Group may be significant in relation to the size of the related contract. However, the amounts agreed, if any, are generally less
than the total amount claimed, in many cases significantly so, and are normally covered by the Group’s insurance arrangements. The Directors’ best
estimate, based on their knowledge as at the date of these accounts, of the likely amounts payable by the Group on account of such claims has been accrued
in these accounts.
The Group has entered into bonds in the normal course of business relating to contract tenders, advance payments, contract performance, the release of
retentions and the Group’s insurance arrangements.
The Company and certain of its subsidiary undertakings have entered into a number of guarantees in the ordinary course of business, the effects of which
are to guarantee or cross-guarantee certain bank borrowings and other liabilities of other Group companies.
At 31 December 2014, the Group had standby letters of credit outstanding totalling £13.0m (2013: £17.5m).
87
OverviewStrategyPerformanceGovernanceFinancial statementsKeller Group plc | Annual Report & Accounts 2014 Notes to the consolidated financial statements
continued
28 Contingent liabilities continued
The following subsidiaries have taken the exemption from having their financial statements audited on the basis that Keller Group plc has provided a guarantee
of these subsidiaries’ liabilities in respect of their financial year ended 31 December 2014 under sections 479A to 479C of the Companies Act 2006:
Company
Keller Holdings Limited
Keller Resources Limited
Keller Finance Australia Limited
Keller Finance Limited
Keller Financing
Registered number
02499601
04592974
06768174
02922459
04592933
29 Share-based payments
The Group has two share option plans, the 2001 Plans and the Performance Share Plan.
Details of the terms and conditions of the Performance Share Plan are set out in the Directors’ Remuneration report on pages 48 to 60.
Under the 2001 Plans, the option price is the average of the share price for the three days preceding the date of grant. Under the Performance Share Plan,
all awards have an exercise price of £1 per exercise. Options outstanding are as follows:
Outstanding at 1 January 2013
Granted during 2013
Lapsed during 2013
Outstanding at 31 December 2013 and 1 January 2014
Granted during 2014
Lapsed during 2014
Exercised during 2014
Outstanding at 31 December 2014
Exercisable at 1 January 2013
Exercisable at 31 December 2013 and 1 January 2014
Exercisable at 31 December 2014
2001 Plans
Weighted
average
exercise
price
251.0p
–
251.0p
–
–
–
–
–
251.0p
–
–
Performance
Share Plan
Options
1,234,087
306,182
(355,185)
1,185,084
206,069
(54,307)
(340,105)
996,741
3,750
3,750
–
2001 Plans
Options
6,000
–
(6,000)
–
–
–
–
–
6,000
–
–
Exercises occurred throughout the year. The average share price during the year was 964.3p.
Under IFRS 2, the fair value of services received in return for share options granted is measured by reference to the fair value of share options granted.
The estimate of the fair value of share options granted is measured based on a stochastic model. The contractual life of the option is used as an input into
this model, with expectations of early exercise being incorporated into the model.
The inputs into the stochastic model are as follows:
Weighted average share price
Weighted average exercise price
Expected volatility
Expected life
Risk free rate
Expected dividend yield
2014
1,171.0p
0.0p
37.0%
3 years
0.95%
2.20%
2013
944.0p
0.0p
39.0%
3 years
0.62%
2.40%
Expected volatility was determined by calculating the historical volatility of the Group’s share price over the previous three years, adjusted for any expected
changes to future volatility due to publicly available information.
The Group recognised total expenses (included in operating costs) of £1.9m (2013: £1.9m) related to equity-settled, share-based payment transactions.
The weighted average fair value of options granted in the year was 734.3p (2013: 795.4p).
88
Financial statementsKeller Group plc | Annual Report & Accounts 2014 30 Retirement benefit liabilities
The Group operates pension schemes in the UK and overseas.
In the UK, the Group operates the Keller Group Pension Scheme (‘the Scheme’), a defined benefit scheme, which has been closed to new members
since 1999 and was closed to all future benefit accrual with effect from 31 March 2006. Under the Scheme, employees are normally entitled to retirement
benefits on attainment of a retirement age of 65. The Scheme is subject to UK pensions legislation which, inter alia, provides for the regulation of work-based
pension schemes by the Pensions Regulator. The Trustees are aware of and adhere to the Codes of Practice issued by the Pensions Regulator. The Scheme
Trustees currently comprise one member-nominated Trustee and one employer-nominated Trustee. The employer-nominated Trustee is also the Chair of the
Trustees. The Scheme exposes the Group to actuarial risks, such as longevity risk, interest rate risk and market (investment) risk, which are managed through
the investment strategy to acceptable levels. The Scheme can invest in a wide range of asset classes including equities, bonds, cash, property, alternatives
(including private equity, commodities, hedge funds, infrastructure, currency, high yield debt and derivatives) and annuity policies. Any investment in
derivative instruments is only made to contribute to a reduction in the overall level of risk in the portfolio or for the purposes of efficient portfolio
management. With effect from the most recent actuarial valuation date (5 April 2014), the Group has agreed to pay annual contributions of £1.6m.
The Group has two UK defined contribution retirement benefit schemes. There were no contributions outstanding in respect of these schemes at
31 December 2014 (2013: £nil). The total UK defined contribution pension charge for the year was £1.2m (2013: £1.0m).
The Group also has defined benefit retirement obligations in Germany and Austria. Under these schemes, employees are entitled to retirement benefits
on attainment of a retirement age of 65, provided they have 15 years of employment with the Group. The amount of benefit payable depends on the
grade of employee and the number of years of service, up to a maximum of 40 years. Benefits under these schemes only apply to employees who joined
the Group prior to 1991. These defined benefit retirement obligations are funded on the Group’s balance sheet and obligations are met as and when
required by the Group.
The Group operates a defined contribution scheme for employees in North America, where the Group is required to match employee contributions up
to a certain level in accordance with the scheme rules. The total North America pension charge for the year was £3.0m (2013: £2.5m).
In Australia, there is a defined contribution scheme where the Group is required to ensure that a prescribed level of superannuation support of an
employee’s notional base earnings is made. This prescribed level of support is currently 9.5% (2013: 9.25%). The total Australian pension charge for the
year was £3.9m (2013: £4.1m).
Details of the Group’s defined benefit schemes are as follows:
Present value of the scheme liabilities
Present value of assets
Deficit in the scheme
The Keller
Group Pension
Scheme (UK)
Year ended
31 December
2014
£m
(49.8)
38.2
(11.6)
The Keller
Group Pension
Scheme (UK)
Year ended
31 December
2013
£m
(44.7)
35.0
(9.7)
German and
Austrian
Schemes
Year ended
31 December
2014
£m
(13.8)
–
(13.8)
The value of the scheme liabilities has been determined by the actuary using the following assumptions:
Discount rate
Interest on assets
Rate of increase in pensions in payment
Rate of increase in pensions in deferment
Rate of inflation
31 December
2014
%
3.6
3.6
3.3
2.1
3.1
31 December
2013
%
4.5
4.5
3.5
2.7
3.5
31 December
2014
%
1.9
n/a
2.0
2.0
2.0
German and
Austrian
Schemes
Year ended
31 December
2013
£m
(13.4)
–
(13.4)
31 December
2013
%
2.7
n/a
2.0
2.0
2.0
The mortality rate assumptions are based on published statistics. The average remaining life expectancy, in years, of a pensioner retiring at the age of 65 at
the balance sheet date is:
Male currently aged 65
Female currently aged 65
The Keller
Group Pension
Scheme (UK)
Year ended
31 December
2014
21.6
23.5
The Keller
Group Pension
Scheme (UK)
Year ended
31 December
2013
21.7
23.9
German and
Austrian
Schemes
Year ended
31 December
2014
18.9
22.9
German and
Austrian
Schemes
Year ended
31 December
2013
18.8
22.8
89
OverviewStrategyPerformanceGovernanceFinancial statementsKeller Group plc | Annual Report & Accounts 2014 Notes to the consolidated financial statements
continued
30 Retirement benefit liabilities continued
The assets of the schemes were as follows:
Equities
Gilts
Bonds
Changes in scheme liabilities
Opening balance
Current service cost
Interest cost
Benefits paid
Exchange differences
Experience loss on defined benefit obligation
Changes to demographic assumptions
Changes to financial assumptions
Closing balance
Changes in scheme assets
Opening balance
Interest on assets
Employer contributions
Benefits paid
Return on plan assets less interest
Closing balance
Actual return on scheme assets
Statement of comprehensive income (SOCI)
Return on plan assets less interest
Experience loss on defined benefit obligation
Changes to demographic assumptions
Changes to financial assumptions
Remeasurements of defined benefit plans
Cumulative remeasurements of defined benefit plans
Expense recognised in the income statement
Current service cost
Operating costs
Net pension interest cost
Expense recognised in the income statement
Movements in the balance sheet liability
Net liability at start of year
Expense recognised in the income statement
Employer contributions
Benefits paid
Exchange differences
Remeasurements of defined benefit plans
Net liability at end of year
90
The Keller
Group Pension
Scheme (UK)
Value as at
31 December
2014
£m
23.0
7.6
7.6
38.2
The Keller
Group Pension
Scheme (UK)
Year ended
31 December
2014
£m
The Keller
Group Pension
Scheme (UK)
Value as at
31 December
2013
£m
22.8
6.0
6.2
35.0
The Keller
Group Pension
Scheme (UK)
Year ended
31 December
2013
£m
German and
Austrian
Schemes
Value as at
31 December
2014
£m
n/a
n/a
n/a
n/a
German and
Austrian
Schemes
Year ended
31 December
2014
£m
German and
Austrian
Schemes
Value as at
31 December
2013
£m
n/a
n/a
n/a
n/a
German and
Austrian
Schemes
Year ended
31 December
2013
£m
(44.7)
(0.2)
(2.0)
1.5
–
(0.5)
(0.1)
(3.8)
(49.8)
35.0
1.6
1.5
(1.5)
1.6
38.2
3.2
1.6
(0.5)
(0.1)
(3.8)
(2.8)
(20.2)
0.2
0.2
0.4
0.6
9.7
0.6
(1.5)
–
–
2.8
11.6
(41.1)
(0.1)
(1.8)
1.8
–
–
–
(3.5)
(44.7)
34.4
1.5
1.5
(1.8)
(0.6)
35.0
0.9
(0.6)
–
–
(3.5)
(4.1)
(17.4)
0.1
0.1
0.3
0.4
6.7
0.4
(1.5)
–
–
4.1
9.7
(13.4)
(0.3)
(0.3)
0.7
0.8
(0.1)
–
(1.2)
(13.8)
–
–
–
–
–
–
–
–
(0.1)
–
(1.2)
(1.3)
(5.5)
0.3
0.3
0.3
0.6
13.4
0.6
–
(0.7)
(0.8)
1.3
13.8
(11.5)
(0.2)
(0.4)
0.6
(0.3)
–
–
(1.6)
(13.4)
–
–
–
–
–
–
–
–
–
–
(1.6)
(1.6)
(4.2)
0.2
0.2
0.4
0.6
11.5
0.6
–
(0.6)
0.3
1.6
13.4
Financial statementsKeller Group plc | Annual Report & Accounts 2014 30 Retirement benefit liabilities continued
A reduction in the discount rate of 0.1% would increase the deficit in the schemes by £1.0m (2013: £0.9m), whilst a reduction in the inflation assumption
of 0.1% would decrease the deficit by £0.6m (2013: £0.8m).
The weighted average duration of the defined benefit obligation is approximately 17 years for the UK scheme and 12 years for the German and
Austrian schemes.
The history of experience adjustments on scheme assets and liabilities for all the Group’s defined benefit pension schemes are as follows:
Present value of defined benefit obligations
Fair value of scheme assets
Deficit in the schemes
Experience adjustments on scheme liabilities
Experience adjustments on scheme assets
2014
£m
(63.6)
38.2
(25.4)
(5.7)
1.6
2013
£m
(58.1)
35.0
(23.1)
(5.1)
(0.6)
2012
£m
(52.6)
34.4
(18.2)
(3.5)
0.7
2011
£m
(49.9)
32.2
(17.7)
1.0
0.1
2010
£m
(50.7)
30.6
(20.1)
(2.6)
1.3
91
OverviewStrategyPerformanceGovernanceFinancial statementsKeller Group plc | Annual Report & Accounts 2014 Company balance sheet
As at 31 December 2014
Fixed assets
Intangible assets
Tangible fixed assets
Investments
Current assets
Debtors*
Cash and bank balances
Creditors: amounts falling due within one year
Provisions
Net current assets*
Total assets less current liabilities
Creditors: amounts falling due after more than one year
Net assets excluding pension liabilities
Pension liabilities
Net assets
Capital and reserves
Called up share capital
Share premium account
Capital redemption reserve
Other reserve
Profit and loss account
Shareholders’ funds
* Debtors and net current assets include debtors recoverable after more than one year of £451.0m (2013: £307.1m).
These financial statements were approved by the Board of Directors and authorised for issue on 2 March 2015.
They were signed on its behalf by:
Note
4
5
6
7
8
9
10
16
11
13
13
13
13
12
2014
£m
–
0.1
94.1
94.2
452.6
2.2
(4.8)
(20.0)
430.0
524.2
(186.2)
338.0
(1.8)
336.2
7.3
38.1
7.6
56.9
226.3
336.2
2013
£m
0.1
0.1
127.8
128.0
347.7
–
(53.7)
–
294.0
422.0
(85.1)
336.9
(1.6)
335.3
7.3
38.1
7.6
56.9
225.4
335.3
J R Atkinson
Chief Executive
J W G Hind
Finance Director
92
Financial statementsKeller Group plc | Annual Report & Accounts 2014 Notes to the Company financial statements
1 Significant accounting policies
These financial statements have been prepared under the historical
cost convention in accordance with applicable accounting standards
of UK Generally Accepted Accounting Practice.
The Company has taken the exemption granted under SI 2008/489 not
to disclose non-audit fees paid to its auditors.
The following accounting policies have been applied consistently.
The principal accounting policies adopted under UK GAAP are the same
as the Group’s accounting policies under International Financial Reporting
Standards, except for those listed below:
Basis of accounting
No profit and loss account is presented for the Company as permitted
by Section 408 of the Companies Act 2006.
Pension liabilities
The Company operates a defined benefit pension scheme, and also makes
payments into defined contribution schemes for employees.
The liability in respect of the defined benefit scheme is the present value
of the defined benefit obligations at the balance sheet date, calculated using
the projected unit credit method, less the fair value of the scheme’s assets.
The Company has applied the requirements of FRS 17 recognising the
current service cost and interest on scheme liabilities in the profit and
loss account, and actuarial gains and losses in reserves.
Payments to defined contribution schemes are accounted for on an
accruals basis.
Investments
Investments in subsidiaries are stated at cost less, where appropriate,
provisions for impairment.
Deferred taxation
Except where otherwise required by FRS 19, full provision without
discounting is made for all timing differences which have arisen but not
reversed at the balance sheet date.
Tangible fixed assets
Tangible fixed assets principally consist of leasehold improvements
which are depreciated over the term of the lease.
Accounting developments
FRS 100, 101 and 102 were recently issued by the Financial Reporting
Council. FRS 101 (‘IFRS with reduced disclosures’) outlines the reduced
disclosure framework available for use by qualifying entities choosing to
report under IFRS. The Company will apply FRS 101 (‘IFRS with reduced
disclosures’) for accounting periods beginning on or after 1 January 2015.
2 Employees
The Company has no employees other than the Directors. Directors’
remuneration and details of their share-based payments are disclosed
in Note 6 to the consolidated financial statements.
3 Dividends paid
Ordinary dividends paid on equity shares are disclosed in Note 11 to
the consolidated financial statements.
93
OverviewStrategyPerformanceGovernanceFinancial statementsKeller Group plc | Annual Report & Accounts 2014 Notes to the Company financial statements
continued
4 Intangible assets
Cost
At 1 January 2014
At 31 December 2014
Accumulated amortisation
At 1 January 2014
Charge for the year
At 31 December 2014
Carrying amount
At 1 January 2014
At 31 December 2014
5 Tangible fixed assets
Cost
At 1 January 2014
At 31 December 2014
Accumulated depreciation
At 1 January 2014
Charge for the year
At 31 December 2014
Carrying amount
At 1 January 2014
At 31 December 2014
6 Investments
Shares at cost less amounts provided for
At 1 January
Additions
Disposals
Amounts provided during the year
At 31 December
Development
costs
£m
0.3
0.3
0.2
0.1
0.3
0.1
–
Leasehold
improvements
£m
0.4
0.4
0.3
–
0.3
0.1
0.1
2014
£m
127.8
–
(0.2)
(33.5)
94.1
The amounts provided during the current year largely relate to the Group’s UK subsidiary, Keller Limited, following the contract dispute on a project
completed in 2008. Further details are set out in Note 7 to the consolidated financial statements.
The Company’s principal investments are disclosed in Note 16 to the consolidated financial statements.
7 Debtors
Amounts owed by subsidiary undertakings
Other debtors
Included in the above are amounts falling due after more than one year in respect of:
Amounts owed by subsidiary undertakings
Other debtors
2014
£m
448.6
4.0
452.6
447.5
3.5
451.0
94
Total
£m
0.3
0.3
0.2
0.1
0.3
0.1
–
Total
£m
0.4
0.4
0.3
–
0.3
0.1
0.1
2013
£m
127.3
1.2
–
(0.7)
127.8
2013
£m
345.9
1.8
347.7
307.1
–
307.1
Financial statementsKeller Group plc | Annual Report & Accounts 2014
8 Creditors: amounts falling due within one year
Bank overdraft
Other loans
Amounts owed to subsidiary undertakings
Other creditors
Accruals
9 Provisions
At 1 January 2014
Charge for the year
At 31 December 2014
2014
£m
–
–
0.2
3.7
0.9
4.8
Other
provisions
£m
–
20.0
20.0
2013
£m
0.5
44.3
1.2
6.7
1.0
53.7
Total
£m
–
20.0
20.0
Other provisions relate to the Company’s commitments under the settlement of a contract dispute on a project completed in 2008 and are expected to be
utilised within one year. Further details are set out in Note 7 to the consolidated financial statements.
10 Creditors: amounts falling due after more than one year
Bank loans
Other loans
Other creditors
Amounts owed to subsidiary undertakings
Bank and other loans are repayable as follows:
Between two and five years
After five years
2014
£m
31.3
107.6
21.9
25.4
186.2
55.9
83.0
138.9
2013
£m
20.5
24.2
14.9
25.5
85.1
44.7
–
44.7
The Company had unutilised committed banking facilities of £163.4m at 31 December 2014 (2013: £113.4m). This comprised the unutilised portion of the
Company’s £250m revolving credit facility which expires in September 2019.
11 Share capital
Details of the Company’s share capital are given in Note 25 to the consolidated financial statements.
12 Reconciliation of movements in shareholders’ funds
Profit for the financial year
Net actuarial losses
Dividends
Issue of new shares
Share-based payments
Net movements in shareholders’ funds
Shareholders’ funds at 1 January
Shareholders’ funds at 31 December
2014
£m
16.8
(0.4)
(17.4)
–
1.9
0.9
335.3
336.2
2013
£m
21.9
(0.6)
(15.4)
57.6
1.9
65.4
269.9
335.3
95
OverviewStrategyPerformanceGovernanceFinancial statementsKeller Group plc | Annual Report & Accounts 2014 Notes to the Company financial statements
continued
13 Reserves
At 1 January 2014
Profit for the financial year
Net actuarial losses
Dividends
Issue of new shares
Share-based payments
At 31 December 2014
Share
premium
account
£m
38.1
–
–
–
–
–
38.1
Capital
redemption
reserve
£m
7.6
–
–
–
–
–
7.6
Other
reserve
£m
56.9
–
–
–
–
–
56.9
Profit and
loss
account
£m
225.4
16.8
(0.4)
(17.4)
–
1.9
226.3
Total
£m
328.0
16.8
(0.4)
(17.4)
–
1.9
328.9
Details of the other reserve are included in Note 25 to the consolidated financial statements.
Of the profit and loss account reserve, an amount of £100.8m attributable to profits arising on an intra-Group reorganisation is not distributable.
14 Share-based payments
Details of the Company’s share option plans are given in Note 29 to the consolidated financial statements.
15 Contingent liabilities
The Company and certain of its subsidiary undertakings have entered into a number of guarantees in the ordinary course of business, the effects of which
are to guarantee or cross-guarantee certain bank borrowings and other liabilities of other Group companies. At 31 December 2014, the Company’s liability
in respect of the guarantees against bank borrowings amounted to £50.5m (2013: £108.4m). Standby letters of credit outstanding totalled £13.0m (2013:
£17.5m). No amounts were paid or liabilities incurred relating to these guarantees during 2014 (2013: £nil).
In addition, as set out in Note 28 to the consolidated financial statements, the Company has provided a guarantee of certain subsidiaries’ liabilities to take
the exemption from having their financial statements audited under sections 479A to 479C of the Companies Act 2006.
16 Pension liabilities
In the UK, the Company participates in the Keller Group Pension Scheme, a defined benefit scheme, details of which are given in Note 30 to the
consolidated financial statements. The Company’s share of the present value of the assets of the scheme at the date of the last actuarial valuation
on 5 April 2014 was £5.6m and the actuarial valuation showed a funding level of 77%.
Details of the actuarial methods and assumptions, as well as steps taken to address the deficit in the scheme, are given in Note 30 to the consolidated
financial statements.
2014
£m
(7.8)
6.0
(1.8)
2014
£m
3.6
1.2
1.2
6.0
2013
£m
(7.3)
5.7
(1.6)
2013
£m
3.7
1.0
1.0
5.7
There were no contributions outstanding in respect of the defined contribution schemes at 31 December 2014 (2013: £nil).
Details of the Company’s share of the Keller Group Pension Scheme are as follows:
Present value of the scheme liabilities
Present value of assets
Deficit in the scheme
The assets of the scheme were as follows:
Equities
Gilts
Bonds
96
Financial statementsKeller Group plc | Annual Report & Accounts 2014 16 Pension liabilities continued
Changes in scheme liabilities
Opening balance
Interest cost
Benefits paid
Actuarial losses
Closing balance
Changes in scheme assets
Opening balance
Expected return on scheme assets
Employer contributions
Benefits paid
Actuarial losses
Closing balance
Actual return on scheme assets
Statement of total recognised gains and losses (STRGL)
Actuarial losses from assets
Actuarial losses from liabilities
Net actuarial losses
Cumulative actuarial losses
Expense recognised in the profit and loss account
Interest cost
Expected return on scheme assets
Expense recognised in the profit and loss account
Movements in the balance sheet liability
Net liability at start of year
Employer contributions
Actuarial losses recognised in STRGL
Net liability at end of year
2014
£m
(7.3)
(0.3)
0.2
(0.4)
(7.8)
5.7
0.3
0.2
(0.2)
–
6.0
0.3
–
(0.4)
(0.4)
(2.6)
0.3
(0.3)
–
1.6
(0.2)
0.4
1.8
The expected return on the average value of the assets over the year was calculated using the long-term average rate of return expected over the
remaining term of the scheme’s liabilities. The contributions expected to be paid during 2014 are £0.2m.
The history of experience adjustments on scheme assets and liabilities is as follows:
Present value of defined benefit obligations
Fair value of scheme assets
Deficit in the scheme
Experience adjustments on scheme liabilities
Experience adjustments on scheme assets
2014
£m
(7.8)
6.0
(1.8)
(0.4)
–
2013
£m
(7.3)
5.7
(1.6)
(0.2)
(0.4)
2012
£m
(7.1)
5.9
(1.2)
(0.5)
0.1
2011
£m
(6.6)
5.6
(1.0)
(0.4)
0.4
2013
£m
(7.1)
(0.3)
0.3
(0.2)
(7.3)
5.9
0.3
0.2
(0.3)
(0.4)
5.7
(0.1)
(0.4)
(0.2)
(0.6)
(2.2)
0.3
(0.3)
–
1.2
(0.2)
0.6
1.6
2010
£m
(6.1)
4.9
(1.2)
(0.2)
0.2
97
OverviewStrategyPerformanceGovernanceFinancial statementsKeller Group plc | Annual Report & Accounts 2014 Other information
Financial record
Consolidated income statement
Continuing operations
Revenue
EBITDA1
Operating profit1
Net finance costs1
Profit before taxation1
Taxation1
Profit for the period before exceptional items
Exceptional items2
Profit/(loss) for the period
Consolidated balance sheet
Working capital
Property, plant and equipment
Intangible and other non-current assets
Net debt
Other net assets/liabilities
Net assets
Key performance indicators
Basic earnings per share from continuing
operations (pence)1
Dividend per share (pence)
Operating margin1
Return on net operating assets1,3
Net debt: EBITDA1
2005
£m
2006
£m
2007
£m
2008
£m
2009
£m
2010
£m
2011
£m
2012
£m
2013
£m
2014
£m
685.2
65.0
55.3
(4.6)
50.7
(20.4)
30.3
–
30.3
46.5
90.4
55.7
(40.9)
(34.5)
117.2
857.7
104.9
89.3
(5.6)
83.7
(30.7)
53.0
3.8
56.8
54.8
114.6
66.3
(38.6)
(38.0)
159.1
955.1
125.8
107.4
(4.2)
103.2
(35.9)
67.3
–
67.3
55.7
155.8
94.5
(54.5)
(40.0)
211.5
1,196.6
144.3
119.4
(6.2)
113.2
(35.9)
77.3
–
77.3
1,037.9
113.2
77.3
(2.6)
74.7
(22.6)
52.1
–
52.1
1,068.9
85.0
43.3
(3.7)
39.6
(11.0)
28.6
(17.1)
11.5
1,154.3
71.4
28.9
(7.0)
21.9
(5.5)
16.4
–
16.4
1,317.5
91.9
48.3
(4.8)
43.5
(13.5)
30.0
–
30.0
1,438.2 1,599.7
141.9
92.0
(6.9)
85.1
(29.7)
55.4
(56.6)
(1.2)
124.2
77.8
(3.7)
74.1
(23.8)
50.3
(20.2)
30.1
92.2
254.7
124.3
(84.6)
(84.0)
302.6
85.0
264.4
131.8
(78.8)
(79.1)
323.3
106.7
275.0
122.9
(94.0)
(79.8)
330.8
119.8
266.1
116.4
(102.5)
(73.0)
326.8
97.6
248.5
112.1
(51.2)
(71.3)
335.7
124.1
281.9
202.8
(143.7)
(92.5)
372.6
104.1
295.6
203.4
(102.2)
(154.6)
346.3
43.8
12.0
8.1%
42%
0.6x
79.0
15.6
10.4%
58%
0.4x
97.6
18.0
11.2%
56%
0.4x
111.1
20.7
10.0%
43%
0.6x
78.8
21.8
7.4%
24%
0.7x
44.0
22.8
4.1%
12%
1.1x
24.8
22.8
2.5%
7%
1.4x
45.9
22.8
3.7%
12%
0.6x
73.0
24.0
5.4%
16%
1.2x
75.3
25.2
5.8%
17%
0.7x
1 Before exceptional items.
2 Exceptional items consist of a contract dispute provision, non-recurring tax credits, goodwill impairment charges and other non-trading items relating to acquisitions which are required to be
expensed under IFRS.
3 Calculated as operating profit expressed as a percentage of average working capital and property, plant and equipment.
98
Keller Group plc | Annual Report & Accounts 2014 Overview
Strategy
Performance
Governance
Financial statements
Principal offices
North America
Europe
Asia
Case Foundation Company
1325 West Lake Street
Roselle
Illinois 60172
Telephone +1 630 529 2911
www.casefoundation.com
Geo-Foundations Contractors Inc
302 Main Street North
Acton
Ontario
Canada
L7J 1W9
Telephone +1 888 846 7858
www.geo-foundations.com
Hayward Baker Inc
7550 Teague Road
Suite 300
Hanover
Maryland 21076
Telephone +1 410 551 8200
www.haywardbaker.com
HJ Foundation Inc
8275 NW 80th Street
Miami
Florida 33166
Telephone +1 305 592 8181
www.hjfoundation.com
Keller Canada
Zone 3, Acheson Industrial Area
2-53016 – HWY.60
Acheson
Alberta
T7X 5A7
Telephone +1 780 960 6700
www.kellercanada.com
McKinney Drilling Company
7550 Teague Road
Suite 300
Hanover
Maryland 21076
Telephone +1 410 874 1235
www.mckinneydrilling.com
Suncoast Post-Tension Ltd
509 N. Sam Houston Parkway East
Suite 400
Houston
Texas 77060
Telephone +1 281 668 1840
www.suncoast-pt.com
South America
Keller Engenharia Geotécnica Ltda
Rua Victor Civitá
66 – Ed. 04. Salas 225–227
Rio Office Park – Barra da Tijuca
Cep:22775-044 Rio de Janeiro – RJ – Brasil
Telephone +55 21 3535 9911
www.kellerbrasil.com.br
Keller Cimentaciones S.L.U.
c/Miguel Yuste, No. 45 bis
28037 Madrid
Spain
Telephone +34 91 423 7561
www.keller-cimentaciones.com
Keller Fondations Spéciales
2 rue Denis Papin
CS 69224 Duttlenheim
67129 Molsheim Cedex
France
Telephone +33 3 88599200
www.keller-france.com
Keller Grundbau GmbH
Kaiserleistrasse 8
63067 Offenbach
Germany
Telephone +49 69 80510
www.kellergrundbau.de
Keller Grundbau Ges.mbH
Mariahilfer Strasse 127a
1150 Wien
Austria
Telephone +43 1 8923526
www.kellergrundbau.at
Keller Limited
Oxford Road
Ryton-on-Dunsmore
Coventry CV8 3EG
United Kingdom
Telephone +44 2 476 511 266
www.keller-uk.com
Keller Polska Sp. z o.o.
ul. Poznánska 172
05-850
Ozarów Mazowiecki
Warsaw
Poland
Telephone +48 22 733 8270
www.keller.com.pl
Middle East
Keller Grundbau GmbH
UAE Region
Office No. 408
Al Mansour Building
Damascus Street, Al Qusais
Dubai
UAE
Telephone +971 4 2575 188
www.kellergrundbau.ae
Keller Turki Co. Ltd
P.O. Box 718
Dammam 31421
Saudi Arabia
Telephone +966 3833 3997
www.kellergrundbau.ae
Africa
Franki Geotechnical (Pty) Ltd
674 Main Pretoria Road
Wynberg
Sandton
South Africa 2090
Telephone: +27 11 531 2700
www.franki.co.za
Keller Foundations (SE Asia) Pte Ltd
18 Boon Lay Way
#04–104 Tradehub 21
Singapore 609966
Telephone +65 6316 8500
www.kellerasia.com
Keller Ground Engineering India Pvt. Ltd.
7th Floor, Eastern Wing
Centennial Square 6A
Dr. Ambedkar Road
Kodambakkam
Chennai-600024
India
Tel. +91 44 2480 7500
www.kellerindia.com
Keller (Malaysia) Sdn. Bhd.
B5-10 Block B, Plaza Dwitasik
Bandar Sri Permaisuri
56000 Kuala Lumpur
Malaysia
Telephone +603 9173 3198
www.kellerasia.com
Resource Piling Pte Ltd
1 Upper Aljunied Link
#07-06 Block A
Joo Seng Warehouse
Singapore 367901
Telephone +65 6382 3400
www.resource-piling.com.sg
Australia
Frankipile Australia Pty Ltd
Level 1
4 Burbank Place
Baulkham Hills
New South Wales 2153
Telephone +61 2 8866 1100
www.franki.com.au
Keller Ground Engineering
Pty Ltd
Level 1
4 Burbank Place
Baulkham Hills
New South Wales 2153
Telephone +61 2 8866 1155
www.kellerge.com.au
Piling Contractors Pty Ltd
5 Jacque Court
Lawnton
Queensland 4501
Telephone +61 7 3285 5900
www.pilingcontractors.com.au
Vibro-Pile (Aust.) Pty Ltd
Building 4, Level 2
540 Springvale Road
Glen Waverley
Victoria 3150
Telephone +61 3 9590 2600
www.vibropile.com.au
Waterway Constructions Pty Ltd
Level 1, 104 Victoria Road
Rozelle
New South Wales 2039
Telephone +61 2 9555 2211
www.waterway.com.au
99
Keller Group plc | Annual Report & Accounts 2014 Other information
Secretary and advisers
Company secretary
K A A Porritt FCIS
Registered office
Capital House
25 Chapel Street
London NW1 5DH
Registered number
2442580
Joint brokers
Jefferies Hoare Govett
Vintners Place
68 Upper Thames Street
London EC4V 3BJ
Investec Investment Banking
2 Gresham Street
London EC2V 7QP
Auditors
KPMG LLP
Chartered Accountants
15 Canada Square
London E14 5GL
Principal bankers
Lloyds Bank plc
25 Gresham Street
London EC2V 7HN
Legal advisers
DLA Piper UK LLP
3 Noble Street
London EC2V 7EE
Financial public relations advisers
Finsbury
Tenter House
45 Moorfields
London EC2 9AE
Registrars
Equiniti Limited
Aspect House
Spencer Road
Lancing
West Sussex BN99 6DA
100
Keller Group plc | Annual Report & Accounts 2014 Designed and produced by Gather
www.gather.london
The paper used in this Report is derived
from sustainable sources
Keller Group plc
Capital House
25 Chapel Street
London
NW1 5DH
+44 (0)20 7616 7575
info@keller.co.uk
keller.co.uk