12 April 2022
Keller Group plc
Annual Report and Accounts for the
year ended 31 December 2021 and
Notice of 2022 Annual General Meeting
Keller Group plc (“Keller”, the “Company”) announces that its
Annual General Meeting will be held at 9.30am on Wednesday 18 May
2022 (“AGM 2022”) at the offices of DLA Piper UK LLP, 160
Aldersgate Street, London EC1A
4HT.
In connection with this, the following documents have been
posted or otherwise made available to shareholders:
· Annual Report and Accounts for
the year ended 31 December 2021
("Annual Report 2021")
· Notice of AGM 2022
· Proxy Form (in the case of
shareholders on the register of members)
In compliance with Listing Rule 9.6.1R, copies of these
documents have been submitted, where appropriate, to the National
Storage Mechanism via the FCA's Electronic Submission System and
will shortly be available for inspection at
https://data.fca.org.uk/#/nsm/nationalstoragemechanism
We have also submitted the Annual Report 2021 in the electronic
reporting format required by Disclosure Guidance and Transparency
Rule (“DGTR”) 4.1.14R; and the Annual Report 2021 and the Notice of
AGM 2022 are now available to view on the Company's website at
www.keller.com.
Shareholders should be aware that arrangements for the AGM 2022
may change at short notice. We will give notice of any changes to
our arrangements, including venue, as early as possible before the
date of the meeting via our website or via a regulatory information
service.
Should shareholders wish to ask any questions of the Board
relating to the business of the AGM 2022, they are encouraged to
email their questions in advance to secretariat@keller.com or send
them by post to the Company's registered office for the attention
of the Group Company Secretary and Legal Advisor.
In accordance with DGTR 6.3.5R, this announcement contains
information in the Appendix about the principal risks and
uncertainties, the Directors’ responsibility statement and note 28
to the accounts on related party transactions. This information has
been extracted in full unedited text from the Annual Report 2021.
This material should be read in conjunction with and is not a
substitute for reading the full Annual Report 2021. References to
page numbers and notes in the Appendix refer to those in the Annual
Report 2021. A condensed set of financial statements was
appended to the Keller's preliminary results announcement issued on
8 March 2022.
For further information, please contact:
Keller Group plc |
www.keller.com |
Kerry Porritt, Group Company
Secretary and Legal Advisor
020 7616 7575
Silvana Glibota-Vigo, Group Head
of Secretariat
Notes to editors:
Keller is the world's largest geotechnical specialist contractor
providing a wide portfolio of advanced foundation and ground
improvement techniques used across the entire construction sector.
With around 10,000 staff and operations across five continents,
Keller tackles an unrivalled 6,000 projects every year, generating
annual revenue of more than £2bn.
LEI number:
549300QO4MBL43UHSN10
DGTR 6 Annex 1 Classification:
1.1 (Annual financial and audit reports)
Appendix
Principal risks and uncertainties
The table on the following pages lists the principal risks and
uncertainties as determined by the Board that may affect the Group
and highlights the mitigating actions that are being taken. The
content of the table, however, is not intended to be an exhaustive
list of all the risks and uncertainties that may arise.
The COVID-19 pandemic is having and will continue to have an
impact across the entire organisation. We have incorporated
commentary into affected principal risks and we will continue to
manage mitigation centrally as well as regionally. We have also
taken account of the impact of climate-related risks and
opportunities on our principal risks and uncertainties.
Key: Strategic lever |
|
1 |
Balanced portfolio |
3 |
Operational excellence |
|
|
|
|
2 |
Engineered solutions |
4 |
Expertise and scale |
|
|
|
|
Financial risk
Risk |
Potential impact |
Demonstrable mitigation |
Risk movement (since
2020) |
Inability to finance
our business
Insufficient levels of funding, whether from operating cash flow or
external financing facilities, that are necessary to support the
business.
Link to strategic lever:
3
4 |
A lack of available
funds restricts investment in growth opportunities, whether through
acquisition or innovation.
In an extreme circumstance, the lack of available funds could lead
to a failure of the Group to continue as a going concern. |
Mixture of long -term
committed debt with varying maturity dates which comprise a £375m
revolving credit facility with a maturity extended to November 2025
and a US private placement debt of $75m maturing in 2024. The $50m
note maturing in 2021 was redeemed from existing facilities.
Active and open communication with the revolving credit facility
banking group ensures that it understands the Group’s financial
performance and is supportive of funding requirements.
Strong free cash flow profile with the ability to turn off capital
expenditure and reduce dividends.
Embedded procedures to monitor the effective management of cash and
debt, including weekly cash reports and regular cash flow
forecasting to ensure compliance with borrowing limits and lender
covenants.
Culture focused on actively managing our working capital; the
annual bonus plan is linked to executive remuneration through an
operating cash flow metric. Please see the Directors’ remuneration
report for further information on metrics.
Monitoring of and response to external factors that may affect
funding availability; as a result of the continued strong cash
management, even taking account of the ongoing impact of COVID-19,
the Board announced in November 2021 that it expected leverage to
be at the bottom end of the 0.5x–1.5x guided range at 31 December
2021. |
Constant
risk Link to viability
Looking forward, as new facilities are either required or renewed,
we will look at ESG-linked funding, alongside traditional funding
alternatives. |
Market risk
Risk |
Potential impact |
Demonstrable mitigation |
Risk movement (since
2020) |
A rapid downturn in
our markets
Inability to maintain a sustainable level of financial performance
throughout the construction industry market cycle, which grows more
than many other industries during periods of economic expansion and
falls more harder than many other industries when the economy
contracts.
Link to strategic lever:
1
2 |
Reduction in the demand
for our products and services may lead to a significant
deterioration in financial performance, including cash flow
generation.
In an extreme circumstance, reduced cash flow generation could lead
to a failure of the Group to continue as a going concern. |
The diverse markets in
which the Group operates, both in terms of geography and market
segment, provide protection to individual geographic or segment
slowdowns.
COVID-19 has continued to cause disruption in economic activity in
several of the markets in which we operate. Whilst the Group has
shown good resilience to this change in 2021, it is likely that
COVID-19 will continue to depress the economies in affected markets
over the next 12 months. This may cause a reduction in activity in
the construction sector which adversely affects the Group’s order
book.
Having strong local businesses with in-depth knowledge of the local
markets enables early detection and response to market trends.
Leveraging the global scale of the Group, talent and resources can
be redeployed to other parts of the company during individual
market slowdowns.
The diverse customer base, with no single customer accounting for
more than 3% of Group revenue, reduces the potential impact of
individual customer failure caused by an economic downturn. |
Constant
risk Link to viability
As expected, we saw a slight shrinking of the construction market
in 2021, with recovery moving at different speeds in each
geography. North America was the most advanced in recovery, with
Europe in line with expectations and AMEA remaining the most
challenging. We will continue to mitigate through our market
position across a number of sectors of the construction market and
are well placed to take advantage of opportunities, especially in
infrastructure. We will continue to monitor this risk closely,
paying close attention to any impact on the size of our order book,
which has recovered to a record level, and take appropriate
mitigating actions. |
Strategic risks
Risk |
Potential impact |
Demonstrable mitigation |
Risk movement (since
2020) |
Failure to procure
new contracts on satisfactory terms
Increasing competition, changing customer requirements or a loss of
technological advantage results in a failure to continue to win and
retain contracts on satisfactory terms and conditions in our
existing and new target markets.
Link to strategic lever:
1
2
3
4 |
Failure to negotiate
satisfactory and appropriate contractual terms may result in delays
and disputes during project delivery, negatively impacting our
relationships with our customers and the Group’s reputation for
delivering quality products and solutions.
Inability to enter into commercially viable contracts may have a
negative effect on the profitability of our projects and prevent
the Group from achieving its targets. |
A focus on
understanding customers’ requirements and competitors’
capabilities.
Structured bid review processes in operation throughout the Group
with well-defined selection criteria that are designed to ensure we
take on contracts only where we understand and can manage the risks
involved.
The Project Lifecycle Management (PLM) Standard has introduced more
rigour into how risks are considered during the opportunity,
contract approval and project execution phases.
Sales training, which includes a focus on contractual and
commercial terms. |
Increased risk
Our business depends on purchasing materials efficiently and in a
timely manner, linked to project execution. COVID-19 continues to
disrupt supply chains, putting pressure both on the continuity of
supply and also on pricing.
Fluctuations in these costs cannot always be passed on in full to
the customer, especially with increased competition for a reduced
number of contracts, which puts pressure on bid pricing. Our focus
on maintaining our supply chain and managing material price risk
for our critical materials is actively managed through our business
unit procurement teams. |
Losing our market
share
Inability to achieve sustainable growth, whether through
acquisition, new products, new geographies or industry-specific
solutions, may jeopardise our position as the preferred
international geotechnical specialist contractor.
Link to strategic lever:
1
2 |
Delivering sustainable growth is a
key component of our strategy. Failure to deliver on our key
strategic objective may result in the loss of confidence and trust
of our key stakeholders including investors, financial institutions
and customers. |
A clear business
strategy with defined short, medium and long-term objectives, which
is monitored at local, divisional and Group level.
Continued analysis of existing and target markets to ensure
opportunities that they offer are understood.
An opportunities pipeline covering all sectors of the construction
market.
A wide-ranging local branch network which facilitates customer
relationships and helps secure repeat work.
Continually seeking to differentiate our offering through service
quality, value for money and innovation.
North American businesses reorganisation delivering on
cross-selling opportunities. However, due to COVID-19 there is an
ongoing economic squeeze globally, increasing pressure on
volume/market share.
Minimising the risk of acquisitions, including getting to know a
target company in advance, often working in a joint venture, to
understand the operational and cultural differences and potential
synergies, as well as undertaking these through due diligence and
structured and carefully managed integration plans. |
Constant
risk Link to viability
While we are seeing improvement across the US, selling a whole
range of services not previously offered in regions before One
Keller was implemented, due to COVID-19 there is an economic
squeeze globally, increasing pressure on volume/market share. This
is being somewhat offset by focused, targeted M&A activity.
The focus on sustainability continues to increase from both
government and private clients and we are well placed to take
advantage of opportunities supported by our wide product
offering. |
Ethical misconduct
and non-compliance with regulations
Keller operates in many different jurisdictions and is subject to
various rules, regulations and other legal requirements including
those related to anti-bribery and anti-corruption. There is a risk
that the
Group fails to maintain the required level of compliance.
Link to strategic lever:
3
4 |
Non-compliance with
relevant laws and regulations could lead to substantial damage to
Keller’s reputation and/or large financial penalties.
Losing the trust of our customers, suppliers and other stakeholders
would have an adverse effect on our ability to deliver against our
strategy and business objectives. |
A Code of Business
Conduct that sets out minimum expectations for all colleagues in
respect of ethics, integrity and regulatory requirements and is
backed by a training programme to ensure that it is fully embedded
across the Group.
A clear and confidential externally run ‘whistleblowing’ facility
encouraging employees to report any suspected misconduct.
An Ethics and Compliance Officer at every business unit who
supports the ethics and compliance culture and ensures best
practice developed by the Group is communicated and embedded into
local business practices.
Regular workshops across the Group to ensure compliance risks are
identified and addressed. |
Constant
risk Link to viability
Strengthened communication of Keller’s tone at the top and a
renewed focus on risk management and internal control have
maintained the exposure of this risk. Refresher training on code of
conduct taking place across the Group. |
Inability to
maintain our technological product advantage
Keller has a history of innovation that has given us a
technological advantage which is recognised by our clients and
competitors. Inability to maintain this advantage through the
continued technological advancements in our equipment, products and
solutions may impact our position in the market.
Link to strategic lever:
1
2 |
Without a structured innovation
approach, including sufficient investment, Keller may lose its
competitive advantage. |
Innovation initiatives
developed at both Group and divisional level to ensure a structured
approach to innovation is in place across the Group.
Keller’s continued investment in both external and internal
equipment manufacture.
Global product teams set standards, provide guidance and
disseminate best practice across the Group.
Digitisation initiatives focusing on strategy of facilitating
equipment and operational data capture, bringing information
together and making it accessible on a single platform. It will
include all technical information from Keller and third-party
sources at each stage of delivery, including data analysis and
visualisations where possible, and it will also be
BIM-compatible. |
Constant risk |
Changing
environmental factors
Changes in environmental legislation and relevant standards that
impact our product and service offerings and an increasingly active
public response to environmental concerns in the sectors in which
we operate.
Link to strategic lever:
3 |
Inability to achieve
Keller’s commitment to deliver solutions in an environmentally
conscious manner may have a negative impact on our reputation,
affect employee morale and lead to loss of confidence from our
customers, suppliers and investors.
Product offerings become obsolete because they are no longer
compliant with environmental standards. We may be required to
remediate at our own cost to maintain compliance. |
Collaboration with the
University of Surrey’s Centre for Environment and Sustainability to
apply sustainability best practice to all business functions.
The Sustainability Steering Committee is responsible for
integrating sustainability targets and measures into the Group
business plan to successfully drive changes important to the
company.
Scope 1 and 2 carbon emissions verified by accredited external
third party (Carbon Intelligence).
Carbon calculator tool used to identify/improve carbon
efficiency.
Project team created to develop processes to meet Task Force on
Climate-related Financial Disclosures (TCFD) requirements.
Further details can be found in the ESG and sustainability section
on pages 42 to 67. |
Increased risk
While the focus around environmental legislation is increasing, we
believe this will also present opportunities to us that we are well
placed to exploit. Our increasing activity to improve
sustainability will put us in a good position to compete with our
peers as opportunities arise.
We have now put in place targets for Scopes 1, 2 and 3. For Scope
3, the target covers transportation of materials, business travel
and waste disposal.
We have also developed a process to capture climate-related risks
and opportunities in line with TCFD reporting requirements and now
have a climate-related risk and opportunity register. |
Climate-related risks and
opportunities
Climate change is a global threat and, as such, will continue to
have many impacts across our business over the short (1 year),
medium (2–5 years) and long term (6–30 years). Nonetheless, we
believe there are also many opportunities as we, and the rest of
the world, look to decarbonise. We fully support the aims of the
TCFD and are using this framework to record and communicate the
impacts of climate change on our business. We also use this to
improve our disclosure of climate-related financial information.
Please see our TCFD dashboard on page 52 for further information.
An update on significant climate-related risks and opportunities is
provided below:
Physical-Acute |
Transition |
Policy and Legal |
Market |
Flooding, drought,
heavy precipitation and other extreme weather events, which are
expected to increase over the medium and long term, can affect our
ability to conduct geotechnical projects. Forest fires have
impacted our Australian and Western North America business,
directly delaying projects in this area, which could lead to lost
revenue. Flooding in Europe also delayed projects in that region.
These events may also cause harm to our employees as well as damage
to our buildings, yards and equipment.
Our management and project teams take a view on the risk factors
that might adversely impact their ability to successfully deliver
any given project. These are formalised within the Group-wide PLM
Standard.
Keller continues to offer new and sustainable techniques for
working in our markets. See pages 47, 49 and 51 for more details.
Where these markets are exposed to acute or chronic climate
extremes, our design skills, global reach and product range enable
us to deliver some of the most complex projects in the industry. We
believe these factors set us apart from our competitors and
therefore also present an opportunity.
We will look at these impacts, alongside chronic physical impacts,
in more detail with scenario analysis modelling later in 2022. |
Current and emerging
legislation could impact our financial performance over the medium
term. As governments introduce carbon taxes and other legislation,
operating costs and the costs of raw materials may increase.
Keller is committed to reducing the carbon intensity of our work,
which will aid mitigation of the impact of any laws or regulations.
For more details on what Keller is doing, please refer to page
47. |
There is a risk that
our customer base contracts and switches to our competitors over
the medium or long term as a result of not responding to client
demand for lower-carbon solutions. This could prove more costly for
projects related to the climate transition, such as flood defence
projects. More carbon-intensive projects, such as those using jet
grouting, may see a decrease in client demand.
Keller has therefore developed a number of more sustainable
construction solutions which will help mitigate these market risks.
For example, Keller’s vibro stone column solution can be used
instead of the traditional continuous-flight auger piling; this
technique can reduce the embodied carbon dioxide produced by up to
90%. Most of this saving is achieved by replacing the use of
concrete and reinforced steel, which have high embodied carbon,
with lower embodied carbon stone aggregate.
To highlight the benefits of these lower embodied carbon
techniques, we use the European standardised EFFC-DFI carbon
calculator to demonstrate the carbon savings from alternative
solutions. |
Operational risks
Risk |
Potential impact |
Demonstrable mitigation |
Risk movement (since
2020) |
Service or solutions
failure
In designing a product or a solution for customers, many factors
need to be considered including client requirements, site and
loading conditions and local constraints (eg neighbouring
buildings, other underground structures). Inadequate design of a
customer product and/or solution may lead to an inability to
achieve the required standard.
Misinterpretation of client requirements or miscommunication of
requirements by the client may lead to a poorly designed solution
and consequently failure.
Link to strategic lever:
2
4 |
Failure to meet quality
standards could damage our reputation, result in regulatory action
and legal liability, and impact financial performance.
The liability limitation period of our products is generally 12
years; consequently, a poorly designed product/solution could have
an impact on our long-term profitability. |
Continuing to enhance
our technological and operational capabilities through investment
in our product teams, project managers and our engineering
capabilities.
Employing geotechnical engineers that are focused purely on
design.
Disaster Recovery/Business Continuity Plans in place and reviewed
across the Group.
The global product teams set standards, provide guidance and
disseminate best practice across the organisation for our eight key
products.
We seek to agree liability limits in our contracts with
customers.
Insurance solutions are in place to limit financial exposure of a
potential customer claim. |
Constant
risk Link to viability |
Ineffective
execution of our projects
Failure to manage our projects to ensure that they are delivered on
time and to budget due to unforeseen ground and site conditions,
weather-related delays, unavailability of key materials, workforce
shortages or equipment breakdowns.
Link to strategic lever:
3
4 |
Inability to
successfully deliver projects in line with the agreed customer
requirements may result in cost overruns, contractual disputes and
reputational damage.
Ineffective project delivery may also expose the Group to long-term
obligations including legal action and additional costs to remedy
solution failure. |
Ensuring we understand
all of our risks through the bid appraisal process and applying
rigorous policies and processes to manage and monitor contract
performance.
Ensuring we have high-quality people delivering projects. Keller’s
Project Management Academy and Field Leadership Academy are
designed to create project managers with a consistent skill set
across the entire organisation. The academies cover a broad range
of topics including contract management, planning, risk assessment,
change management, decision-making and finance.
Keller Data Acquisition (KDAQ) system enabling comparison of
performance across sites using similar products, identification of
areas of best practice and quickly raising awareness of where
improvement is needed.
Safety Standards for operations (eg platform, cage handling),
Equipment Standards and fleet renewal.
The PLM Standard aims to drive a consistent approach to project
delivery with robust controls at every project phase.
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. |
Constant
risk Link to viability
|
Causing a serious
injury or fatality to an employee or a member of the public
Failure to maintain high standards of health and safety, and an
increase in serious injuries or fatalities leading to an erosion of
trust of employees and potential clients.
Link to strategic lever:
3 |
Inability to maintain a
positive health and safety culture may lead to damage to morale, an
increase in employee turnover rates and a decrease in
productivity.
Deterioration in health and safety performance may lead to loss of
customer, supplier and partner confidence and damage to our
reputation in an area that we regard as a top priority. |
Board-led commitment to
drive health and safety programmes and performance with a vision of
zero harm.
An emphasis on safety leadership to ensure both HSEQ professionals
and operational leaders drive implementation and sustainment of our
safety standards through ongoing site presence, using safety tours,
safety audits, safety action groups and mandatory employee
training.
Ongoing improvement of existing HSEQ systems to identify and
control known and emerging HSEQ risks, which conform to internal
standards.
Incident Management Standard and incident management software
driving a robust and consistent management process across the
organisation that ensures the cause of the incident is identified
and actions are put in place to prevent recurrence. |
Constant
risk Link to viability
|
Not having the right
skills to deliver
Inability to attract and develop excellent people to create a
high-quality, vibrant, diverse and flexible workforce.
Link to strategic lever:
2
3 4 |
Failure to maintain satisfactory
performance in respect of our current projects and failure to
deliver our strategy and business targets for growth. |
Continuing to invest in
our people and organisation in line with the four pillars of the
Keller People agenda as noted below.
Ensuring that the ‘Right Organisation’ is in place with people
having clear accountabilities; each organisational unit is properly
configured with a matrix of line management, functional support and
product expertise.
As an industry leader, that Keller is made up of ‘Great People’
that are well trained, motivated and have opportunities to develop
to their full potential. Project managers and field employees
receive comprehensive training programmes which cover a broad range
of topics including contract management, planning, risk assessment,
change management, decision?making and finance.
A strong focus on the ‘Exceptional Performance’ of employees in
delivering commercial outcomes safely for Keller based upon project
successes for our customers. Business leaders are incentivised to
deliver their annual financial and safety commitments to the
Group.
The ‘Keller Way’ provides guidance to the company’s employees and
leaders to comply with local laws and work within Keller’s values
and Code of Business Conduct. |
Increased risk
We are seeing increased competition for skilled personnel as well
as inflationary pressure on pay across many locations where Keller
operates. This is leading to increased risk around recruiting and
retaining staff with the right skills to deliver. |
Risk of potential
disruption in the business operations, reputational damage and/or
loss or corruption of data through external or internal technical
threats and malicious action
Information security and cyber threats are a concern across
industries worldwide. The introduction of digital solutions such as
InSite and KDAQ increases the Group’s reliance on IT and its
inherent cyber risk exposure.
Link to strategic lever:
3
4 |
Cyber security breach could result
in leakage of proprietary information, operational disruptions, and
loss of employee and customer data. |
Building a cyber
security and information assurance team and services.
Building a zero trust layered technology capability.
Creation of an Information Security Management System framework,
referencing industry standards to ensure appropriate governance,
control and risk management and then onward management for
compliance, maturity and development of service.
Introduction of technical capabilities and services to further
enable prevention, detection, prediction and response services.
Multi-factor authentication for all users prevents unauthorised
access to Keller’s networks and applications.
Advanced threat protection on all IT equipment delivers
comprehensive, ongoing and real-time protection against viruses,
malware and spyware.
Data protection framework to ensure compliance with the General
Data Protection Regulation (GDPR) and other standards of data
protection. |
Constant
risk
The threat landscape continues to evolve each year and so we
continue to adapt our monitoring, detection, prevention and
education processes to maintain a balanced risk perspective.
We assess cyber risks and determine appropriate actions for our
business. Existing capabilities continue to be deployed and
enhanced if needed.
As an example, having seen over the last two years the rise in the
number of ransomware attacks and the increased number of reported
attacks that target backup as well as production environments
across all industries, we have implemented a backup solution for
key services that is immutable and cannot be encrypted. |
Responsibility statement of the
Directors in respect of the Annual Report and the financial
statements
We confirm that to the best of our knowledge:
- the financial statements, prepared
in accordance with the applicable set of accounting standards, give
a true and fair view of the assets, liabilities, financial position
and profit or loss of the company and the undertakings included in
the consolidation as a whole; and
- the Strategic report and the
Directors’ report, including content contained by reference,
includes a fair review of the development and performance of the
business and the position and performance of the company and the
undertakings included in the consolidation taken as a whole,
together with a description of the principal risks and
uncertainties that they face.
The Board confirms that the Annual Report and the financial
statements, taken as a whole, are fair, balanced and understandable
and provide the information necessary for shareholders to assess
the Group’s position and performance, business model and
strategy.
Related party transactions
Transactions between the parent, its subsidiaries and joint
operations, which are related parties, have been eliminated on
consolidation. Other related party transactions are disclosed
below:
Compensation of key management
personnel
The remuneration of the Board and Executive Committee, who are
the key management personnel, comprised:
|
2021
£m |
2020
£m |
Short-term employee benefits |
8.2 |
8.3 |
Post-employment benefits |
0.3 |
0.4 |
Termination payments |
0.4 |
0.4 |
|
8.9 |
9.1 |
Other related party transactions
As at the year end there was a net balance of £0.1m owed by
(2020: £0.1m owed by) the joint venture. These amounts are
unsecured, have no fixed date of repayment and are repayable on
demand.