Keller Group Plc - Annual Financial Report
Annual Report and Accounts for the year ended
In connection with this, the following documents have been posted or otherwise made available to shareholders:
·
Annual Report and Accounts for the year ended
· Notice of AGM 2024
· Proxy Form (for shareholders on the register of members)
· Form of Direction (for employee shareholders)
· Notice of Availability
In compliance with Listing Rule 9.6.1R,
copies of these documents have been submitted, where appropriate, to the National Storage Mechanism via the
We have also submitted the Annual Report 2023 in the electronic reporting format required by Disclosure Guidance and Transparency Rule (“DGTR”) 4.1.14R; and the Annual Report 2023 and the Notice of AGM 2024 are now available to view on the Investors section of the Company's website at
Investor centre |
The Board is keen to ensure that shareholders are able to exercise their right to participate in the meeting. Details on how to submit a proxy vote electronically, by post, online through CREST or Proxymity are set out in the Notice of AGM 2024.
Should shareholders wish to ask any questions of the Board relating to the business of the AGM 2024, they are encouraged to email their questions in advance to
secretariat@keller.com
or send them by post to the Company's registered office for the attention of the
In accordance with DGTR 6.3.5R, this announcement contains information in the Appendix about the principal risks and uncertainties, the Directors’ responsibility statement and note 29 to the accounts on related party transactions. This information has been extracted in full unedited text from the Annual Report 2023. This material should be read in conjunction with and is not a substitute for reading the full Annual Report 2023. References to page numbers and notes in the Appendix refer to those in the Annual Report 2023.
A condensed set of financial statements was appended to the Keller's preliminary results announcement issued on
For further information, please contact:
Keller Group plc www.keller.com
Notes to editors:
Keller is the world's largest geotechnical specialist contractor providing a wide portfolio of advanced foundation and ground improvement techniques used across the entire construction sector. With around 9,500 staff and operations across five continents, Keller tackles an unrivalled 5,500 projects every year, generating annual revenue of c.£3bn.
LEI number: 549300QO4MBL43UHSN10
DGTR 6 Annex 1 Classification: 1.1 (Annual financial and audit reports)
Appendix
Principal risks and uncertainties
We list on the following pages the principal risks and uncertainties as determined by the Board that may affect the Group and highlights the mitigating actions that are being taken. The content of the table, however, is not intended to be an exhaustive list of all the risks and uncertainties that may arise.
Link to strategy
1 Balanced portfolio 2 Engineered solutions
3 Operational excellence 4 Expertise and scale
Risk movement since 2022 and link to viability
Increased risk Constant risk Reduced risk
Timeframe
Short term Medium term Long term
Financial risk
1 Inability to finance our business
Description and impact Causes Mitigation and Movement since internal controls 2022 -- Centralised Treasury function that is responsible for managing key financial risks, including liquidity and credit capacity. -- Mixture of long-term committed debt with varying maturity dates which comprise a £375m revolving credit facility with a maturity extended to November 2025 and a new US private placement Failure to debt of sufficiently and$300m , with effectively manage the$120m financial strength of maturing in the Group could lead 2030 and it to:$180m maturing in -- Fail to meet 2033. There Reduced risk required tests is$75m of US that allow it private New$300m US to continue to placement private use the going maturing in placement concern basis 2024. secured, along in preparing -- Failure to -- The Group with strong its financial accurately maintains operational statements. forecast significant performance -- Fail to meet material undrawn throughout 2023, financial exposures facilities demonstrate covenant and/or within a clear ability to tests, manage the high-quality manage both potentially financial RCF bank existing and leading to a resources syndicate, future risks. default event. of the which -- Have a lack of Group. underpin the Negotiations to available liquidity refinance the funds, requirements existing restricting of the Group. revolving credit investment in -- Strong free facility will growth cash flow commence in Q1 opportunities, profile – 2024. whether flexibility through on capital acquisition or expenditure innovation. and ability -- Be unable to to reduce meet dividend dividends. payment -- Embedded requirements. procedures to monitor the effective management of cash and debt, including weekly cash reports and regular cash flow forecasting to ensure compliance with borrowing limits and lender covenants. -- Culture focused on actively managing our working capital and monitoring external factors that may affect funding availability.
Link to strategy 3 / 4
Link to viability Yes
Timeframe Medium / Long term
Market risk
2 A rapid downturn in our markets
Description and Causes Mitigation and Movement since 2022 impact internal controls -- The diverse markets in which the Group operates, both in terms of geography and market segment, provide protection to individual geographic or segment slowdowns. Inability to -- Leveraging maintain a the global sustainable level scale of of financial the Group, performance talent and throughout the -- Customers resources construction postponing can be industry market or reducing redeployed Constant risk cycle, which grows investment to other more than many in ongoing parts of The Group continues other industries and new the company to maintain a very during periods of projects. during strong order book economic expansion -- Impact of individual across all and falls more increasing market divisions at near harder than many inflation, slowdowns. record levels. other industries especially -- Having However, due to when the economy in steel, strong increasing contracts. Any cement and local inflation, higher significant, energy. businesses interest rates and, sustained reduction -- Political with geopolitical in the level of instability in-depth uncertainty, we are customer activity leading to knowledge seeing some early could adversely disruption of the signs of customers affect the Group’s in supply local delaying project strategy, reducing chains markets starts and revenue and impacting enables investment. profitability in both early the short and availability detection medium term, and and price. and negatively impact response to the longer-term market viability of the trends. Group. -- The diverse customer base, with no single customer accounting for more than 4% of Group revenue, reduces the potential impact of individual customer failure caused by an economic downturn.
Link to strategy 1 / 2
Link to viability Yes
Timeframe Medium / Long term
Strategic risks
3 Failure to procure new contracts while maintaining appropriate margins
Description and Causes Mitigation and Movement since impact internal controls 2022 Constant risk -- A focus on We continue to understanding maintain a customer strong order requirements book with and improving competitor margins during capabilities. 2023. We are -- Structured also seeing bid review increased processes in competition on Failure to negotiate operation contracts satisfactory and throughout within our appropriate the Group markets with contractual terms may with increased result in: well-defined pressure on selection bid pricing -- Delays and criteria that from our disputes -- Increased are designed customers that during competition to ensure we along with project especially in take on inflationary delivery, tight or contracts pressures negatively contracting only where we could impacting our markets. understand potentially relationships -- Failure to and can erode contract with our fully manage the margins. customers and understand risks Significant the Group’s and/or involved. increase in reputation ability to -- The Project the cost of for meet customer Lifecycle insurance delivering requirements. Management along with quality -- Inadequate (PLM) increased products and resources in Standard has self-insured solutions. place introduced and deductible -- Adverse (physical more rigour limits will impact on the assets and into how require a Group’s people). risks are renewed strategy -- Failure to considered communication leading to understand during the across Keller reduced and engage opportunity, with a focus revenue and with customer contract on minimising profitability on balanced approval and our exposure and approach to project to unnecessary negatively allocation or execution risk and impacting the sharing of phases. contractually Group’s risk in the -- Sales limiting our ability to contract. training – liability fund its focus on wherever strategic contractual possible. objectives. and -- Increased commercial Work to cost of terms. refresh and insurance and -- Continuous refocus the deductible. monitoring of PLM Standard market trends focusing on and their project potential performance impact. management, -- Continuous hence renaming monitoring of it PPM order book (Project wins and Performance losses. Management), is almost complete.
Link to strategy 1 / 2 / 3 / 4
Link to viability No
Timeframe Short / Medium / Long term
4 Losing our market share
Description and impact Causes Mitigation and Movement internal controls since 2022 -- A clear business strategy with defined short, medium and long-term objectives, which is monitored at local, divisional and Group level. -- Continued analysis of existing and target markets Inability to achieve to ensure sustainable growth, opportunities Constant whether through that they risk acquisition, new offer are products, new understood. We geographies or -- An continued industry-specific opportunities to see very solutions, may: pipeline strong covering all improvement -- Jeopardise our sectors of the across the position as construction US in 2023, the preferred -- Increased market. where we international competitor -- A wide-ranging are geotechnical activity local branch providing a specialist especially in network which wider range contractor. tight or facilitates of our -- Lead to contracting customer products inefficiencies markets. relationships across more and increased -- Failure to and helps locations operating adjust to secure repeat following costs, which changing work. the in turn could customer -- Continually successful impact our demands or seeking to execution ability to fully differentiate of the One deliver understand and our offering Keller balanced meet their through project in profitable requirements. service 2021. This growth, which -- Inability to quality, value focus is is a key identify for money and also component of changes in innovation. showing our strategy. market demands, -- North American success in -- Failure to including businesses the other deliver on our changes to reorganisation divisions key strategic promote delivering on as they objective may sustainability. cross-selling diversify result in the opportunities. their loss of -- Minimising the available confidence and risk of product trust of our acquisitions, range to key including maintain stakeholders getting to and grow including know a target our market investors, company in share. financial advance, often institutions working in and customers. joint venture, to understand the operational and cultural differences and potential synergies, as well as undertaking these through due diligence and structured and carefully managed integration plans.
Link to strategy 1 / 2
Link to viability Yes
Timeframe Short / Medium / Long term
5 Ethical misconduct and non-compliance with regulations
Description and Causes Mitigation and Movement impact internal controls since 2022 -- A Code of Business Conduct that sets out minimum expectations for all colleagues in respect of ethics, integrity and regulatory requirements, Keller operates in that is many different updated jurisdictions and is annually and subject to various is backed by a Constant rules, regulations training risk and other legal programme to requirements ensure that it Following on including those is fully from the related to Failure to comply with embedded financial anti-bribery and the Code of Business across the reporting anti-corruption. Conduct or related Group. fraud in the Failure to comply policies and procedures -- Ethics and Austral with the Code of could stem from: Compliance business Business Conduct or Officers in discovered other regulations -- Failure to every business in late could leave the establish unit who 2022, a Group exposed to: robust support the specific corporate ethics and controls -- Instances of culture. compliance response bribery and -- Failure to culture and plan was corruption. adopt a ensure best developed -- Fraud and compliance risk practice and executed deception. approach. developed by in 2023. -- Human rights -- Failure to the Group is This plan abuses, such embed the communicated covered the as modern Group’s values and embedded specific slavery, and behaviours into local control child labour across the business failings in abuses and entire practices. Austral and human organisation, -- Regular a wider trafficking. including any workshops review -- Unfair joint ventures. across the across competition -- Failure to have Group to Keller. All practices. a robust ensure elements of -- Unethical training and compliance the plan are treatment monitoring risks are either within our programme in identified and completed or supply place. addressed. progressing chain. -- Deliberate -- Ethics and well and These failures could non-compliance. compliance owned by a result in legal updates to the senior investigations, Audit and Risk leader in leading to fines and Committee the penalties, semi-annually. business. reputational damage -- An independent and business losses. third-party whistleblowing helpline that is actively promoted. Complaints are independently investigated by the Compliance and Internal Audit teams and appropriate action taken where necessary.
Link to strategy 3 / 4
Link to viability Yes
Timeframe Short term
6
Inability to maintain our technological product advantage
Description and Causes Mitigation and Movement since impact internal controls 2022 -- Innovation initiatives developed at both Group and divisional level to ensure a structured Keller has a approach to history of innovation is innovation that in place has given us a across the technological Group. advantage which is -- Innovation in recognised by our low carbon clients and materials competitors. (cement, Failure to concrete, maintain this cement-free advantage through binders), by the continued carrying out technological field trials advancements in and our equipment, collaborating products and with cement solutions may: suppliers and -- Failure to other -- Impact our maintain companies position investment in innovating in in the innovation this space. market. and -- Digitisation -- Result in digitisation. initiatives us not -- Increased focusing on being competitor strategy of Constant risk selected investment in facilitating for key innovative equipment and complex, solutions. operational high-value -- Failure to data capture. projects continue to -- We take a that invest in our leadership support people. role in the the Group geotechnical strategy. industry, -- Make it with many of more our team difficult playing key to attract roles in and retain professional the best associations talent. and industry -- Result in activities the loss around the of world. reputation -- Global for product teams delivering set the best standards, engineered provide solutions. guidance and disseminate best practice across the Group. -- Continued investment in both external and internal equipment manufacture.
Link to strategy 1 / 2
Link to viability No
Timeframe Medium / Long term
7 Climate change
Description and impact Causes Mitigation and internal Movement since controls 2022 Climate change is a Sustainability Steering global threat and Committee that is failure to manage and responsible for mitigate it could lead integrating to: sustainability targets Constant risk and measures into the -- An inability to Group business plan to We are achieve successfully drive starting to Keller’s changes important to the win project commitment to company. opportunities deliver related to solutions in an -- Collaboration climate environmentally with the impact. This conscious University of is tempered by manner, which Surrey’s Centre the may in turn for Environment introduction have a negative -- Failure to and of more impact on our update Sustainability legislation reputation, product to apply relating to affect employee offerings sustainability climate morale and lead in line best practice to impact, eg to a loss of with both all business proposed new confidence from legislation functions. restriction our customers, and -- Scope 1 and 2 for federal suppliers and customer carbon emissions construction investors. demand. verified by projects in -- Product accredited the US. offerings external third becoming party (Carbon We continue to obsolete Intelligence). focus on because they -- Carbon delivering are no longer calculator tool against our compliant with used to sustainability environmental identify/improve targets and standards. carbon meeting TCFD -- Remediation of efficiency. reporting non-compliant -- Project team requirements. work at our own created to expense to develop and maintain embed processes compliance. to meet TCFD requirements.
Link to strategy 1 / 2 / 3 / 4
Link to viability Yes
Timeframe Short / Medium / Long term
Operational risks
8 Service or solutions failure
Mitigation and internal Movement Description and impact Causes controls since 2022 In designing a product or a solution for -- Continuing to customers many factors enhance our need to be considered technological and including client operational requirements, site and capabilities loading conditions and through local constraints (eg investment in our neighbouring buildings, product teams, other underground project managers structures). Inadequate and our design of a customer engineering product and/or solution capabilities. may lead to: -- Employing geotechnical -- An inability to engineers that achieve the are focused required purely on design. standard. -- Misinterpretation -- Disaster -- Failure to meet of client Recovery/Business quality requirements or Continuity Plans standards, miscommunication in place and Constant damaging our of requirements reviewed across risk reputation, by the client may the Group. giving rise to lead to a poorly -- The global regulatory designed solution product teams set action and legal and consequently standards, liability, and failure. provide guidance ultimately and disseminate impacting best practice financial across the performance. organisation for -- A negative our eight key impact on products. long-term -- We seek to agree profitability liability limits from poorly in our contracts designed with customers. product/solution -- Insurance as they are solutions are in generally place to limit covered by a financial liability exposure of a limitation potential period of 12 customer claim. years.
Link to strategy 2 / 4
Link to viability Yes
Timeframe Short / Medium / Long term
9 Ineffective execution of our projects
Description and Causes Mitigation and internal Movement impact controls since 2022 -- Ensuring we understand all of our risks through the bid appraisal process and applying rigorous policies and processes to manage and monitor contract performance. -- Ensuring we have high-quality people delivering projects. Keller’s Project Management Academy and Field Constant Leadership risk Academy are designed to The number create project of projects managers with a not executed consistent to skill set expectation -- Failure to across the in 2022 was Inability to manage our entire above the successfully deliver projects to organisation. long-term projects in line ensure that The academies average, with the agreed they are cover a broad adversely customer delivered on range of topics impacted by requirements may time and to including persistently result in: budget due to contract high unforeseen management, inflation -- Cost ground and site planning, risk across North overruns, conditions, assessment, America and contractual weather-related change Europe. disputes and delays, management, reputational unavailability decision-making This trend damage. of key and finance. has improved -- Ineffective materials, -- Safety throughout project workforce Standards for 2023 along delivery may shortages or operations (eg with the also expose equipment platform, cage work under the Group to breakdowns. handling), way to long-term -- Lack of Equipment update the obligations comprehensive Standards and PLM Standard including understanding fleet renewal. focusing on legal action of contract -- The PLM project and obligations. Standard aims performance additional -- Inadequate to drive a management. costs to resources consistent This will remedy (people, approach to put in place solution physical assets project better failure. and materials). delivery with controls to robust controls ensure at every continued project phase. effective This is execution of currently being projects updated and across will be renamed Keller. PPM (project performance management). Alongside the updated standard will be an app to support the efficient and effective execution of projects. -- A formal, structured approach to Lean and 5S is being rolled out across the organisation, which is improving processes and strengthening Keller’s working culture.
Link to strategy 3 / 4
Link to viability Yes
Timeframe Short term
10 Supply chain – partners fail to meet the Group’s operational expectation and contractual obligations (including capacity, competency, quality, financial stability, safety, environmental, social and ethical)
Description and Causes Mitigation and Movement since impact internal controls 2022 Constant risk Supply chain -- The Group has issues, developed especially long-term availability of partnerships certain with key materials suppliers, (steel, cement working and energy) closely with continue to them to show signs of -- Failure to understand easing. Pricing Failure to manage embed the their is still suppliers Group’s operations, adversely effectively could expectation but is not impacted by the lead to: within the over-reliant persistently procurement on any single high inflation, -- Delays to process. one, with an but this too is executing -- Inadequate extensive beginning to projects assessment network of show signs of waiting for of supply approved abating. materials chain suppliers in and ongoing partner place across While pressure business capabilities the remains as a disruption. during organisation result of the -- Additional bidding to support its geopolitical costs to phase. strategic uncertainty, it find -- Lack of ambitions. is being better alternative supplier -- A Supply Chain managed as suppliers. resilience Code of demand cools -- Becoming due to Business slightly as involved in rising costs Conduct that interest rate legal of energy as sets out increases take disputes and a result of minimum effect on some potentially geopolitical expectations investment fines and uncertainty. for all decisions. penalties. -- Lack of suppliers in -- Damaging our supply respect of In 2023 we reputation availability ethics, carried out an and due to integrity and independent potentially increased regulatory legal being barred demand from requirements, assessment of from bidding and too that is our human on future little updated rights and contracts. supply. annually. modern slavery -- Human rights -- Inflation -- Working group standards and abuses, such driving up established, processes. as modern prices. reporting to Consequently, slavery, -- Logistical the Group we have child labour impact Company introduced a abuses and causing Secretary and Human Rights human delays due Legal Advisor, Policy, updated trafficking. to lack of to drive our Supply HGV drivers. minimum Chain Code of standards, Business both Conduct and contractually supplier and contractual behaviourally, clauses and put across key in place more labour rigorous due suppliers. diligence processes across our supply chain.
Link to strategy 3 / 4
Link to viability Yes
Timeframe Short / Medium / Long term
11 Causing a serious injury or fatality to an employee or a member of the public
Description and Causes Mitigation and Movement impact internal controls since 2022 -- Board-led commitment to drive health and safety programmes and performance with a vision of zero harm. -- An emphasis on safety leadership to ensure both HSEQ professionals and operational Failure to maintain leaders drive high standards of implementation health and safety, and and an increase in sustainment of serious injuries or our safety fatalities leading -- Inadequate risk standards to: identification, through assessment and ongoing site -- An erosion of management. presence, trust of -- Lack of clear using safety employees and leadership tours, safety potential driving the audits, safety clients. safety culture. action groups -- Damage to -- Lack of and mandatory staff morale, employee employee an increase competency. training. Constant in employee -- Poorly designed -- Ongoing risk turnover processes that improvement of rates and a do not existing HSEQ decrease in eliminate or systems to productivity. mitigate risk. identify and -- Threat of -- Lack of focus control known potential on the and emerging criminal wellbeing and HSEQ risks, prosecutions, mental health which conform fines, of employees to internal disbarring and JV standards. from future partners. -- Incident contract Management bidding and Standard and reputational incident damage. management software driving a robust and consistent management process across the organisation that ensures the cause of the incident is identified and actions are put in place to prevent recurrence.
Link to strategy 3
Link to viability Yes
Timeframe Short term
12 Not having the right skills to deliver
Description and Causes Mitigation and internal Movement impact controls since 2022 -- Continuing to invest in our people and organisation in line with the four pillars of the Keller People agenda as noted below. -- Ensuring that the ‘Right Organisation’ is in place with people having clear accountabilities; each -- Inability to organisational recruit unit is properly and retain configured with a strong matrix of line performers. management, -- Lack of a functional diverse support and Constant risk workforce. product -- Failure to expertise. We are still Failure to attract maintain and -- As an industry witnessing and develop promote the leader, that inflationary excellent people to Keller Keller is made up pressure on create a culture. of ‘Great People’ pay across high-quality, -- Overheating that are well many vibrant, diverse of market trained, locations and flexible causing motivated and where Keller workforce could: significant have operates and increase in opportunities to thus the -- Harm the demand or develop to their pressure on Group’s competition full potential. competition ability to for people. Project managers for skilled win or -- Lack of and field personnel is execute visibility employees receive still an specific of long-term comprehensive issue in some high-value, pipeline for training parts of the complex career programmes which Group. projects. progression cover a broad However, job -- Fail to resulting in range of topics markets are meet existing including just strategic employees contract beginning to objectives leaving the management, show signs of to grow the business. planning, risk a slowdown, business -- Post assessment, which should and lose COVID-19 change ease this key recovery management, issue. Focus stakeholder driving decision-making remains on confidence increase in and finance. retaining within the attrition or -- A strong focus on staff with market. people the ‘Exceptional the right leaving Performance’ of skills to sector. employees in deliver. -- Pressure delivering from wage commercial inflation outcomes safely and for Keller based increased upon project offers from successes for our competition. customers. Business leaders are incentivised to deliver their annual financial and safety commitments to the Group. -- The ‘Keller Way’ provides guidance to the company’s employees and leaders to comply with local laws and work within Keller’s values and Code of Business Conduct
Link to strategy 2 / 3 / 4
Link to viability No
Timeframe Short / Medium / Long term
13 Cyber security
Description and Causes Mitigation and internal Movement impact controls since 2022 -- Creation of an Information Security Management System framework, referencing industry standards to ensure appropriate governance, control and risk management -- Failure to and then onward Risk of potential maintain management for disruption appropriate compliance, in the business threat maturity and operations, prevention, development of reputational damage identification service. and/or loss or and resolution -- Introduction of corruption of data mechanisms technical could lead to: either capabilities technically or and services to -- Loss of through further enable intellectual processes. prevention, property and -- Poor internal detection, competitive governance. prediction and advantage. -- Failure to response -- Loss of embed services. personal preventative -- Multi-factor data. culture. authentication -- Operational -- Lack of or for all users impact inadequate prevents restricting training and unauthorised Constant the ability awareness access to risk to carry out leading to Keller’s business mistakes and networks and critical errors. applications activities. -- Inconsistent and further -- Potential approach to controls limit fines and data security, access to only penalties. especially Keller-approved -- Reputational with JV devices. damage partners and -- Advanced threat leading to external third protection on loss of parties. all IT market and -- Cyber attacks. equipment customer -- Failure to delivers confidence. obtain or comprehensive, -- Failure to maintain ongoing and meet client external real-time security security protection requirements certifications against to win or that are viruses, maintain required by malware and contracts. clients. spyware. -- Data protection framework to ensure compliance with the General Data Protection Regulation (GDPR) and other standards of data protection. -- Proactive threat hunting throughout the environment.
Link to strategy 3 / 4
Link to viability No
Timeframe Short term
Responsibility statement of the Directors in respect of the Annual Report and the financial statements
We confirm that to the best of our knowledge:
-- the financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the company and the undertakings included in the consolidation as a whole; and -- the Strategic report and the Directors’ report, including content contained by reference, includes a fair review of the development and performance of the business and the position and performance of the company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face.
The Board confirms that the Annual Report and the financial statements, taken as a whole, are fair, balanced and understandable and provide the information necessary for shareholders to assess the Group’s position and performance, business model and strategy.
29 Related party transactions
Transactions between the parent, its subsidiaries and joint operations, which are related parties, have been eliminated on consolidation. Other related party transactions are disclosed below:
Compensation of key management personnel
The remuneration of the
2023 2022 £m £m Short-term employee benefits 8.2 4.5 Post-employment benefits 0.3 0.3 Termination payments – 0.4 8.5 5.2
Other related party transactions
As at