Annual Financial Report

Keller Group plc
12 April 2013
 
Keller Group plc ("the Company") - Annual Financial Report
 
In accordance with the Listing Rules, copies of the following documents have
been submitted to the National Storage Mechanism:
 
 * Annual Report and Accounts for the year ended 31 December 2012  (the 'Annual Report 2012')
 * The notice of annual general meeting 2013
 * Form of proxy for the annual general meeting
 
These documents will shortly be available for inspection at the National
Storage Mechanism at www.hemscott.com/nsm.do.
 
The Annual Report 2012 is also available on the Company's website at 
www.keller.co.uk. Hard copies of all the documents have been sent to shareholders.
 
The annual general meeting will be held at 11.00am on Thursday 23 May 2013 at 
the offices of Investec, 2 Gresham Street, London, EC2V 7QP.

In accordance with DTR 6.3.5, this announcement contains information in the
attached Appendix of the principal risk factors, the directors' responsibility
statement and a note to the accounts on related party transactions.   This
information has been extracted in full unedited text from the Annual Report
2012.  References to page numbers and notes in the Appendix refer to those in
the Annual Report 2012.  A condensed set of financial statements was appended
to Keller Group plc's preliminary results announcement issued on 4 March 2013.

For further information please contact:

 
Jackie Holman
Company Secretary

 


 

                                   Appendix                                    

                   Unedited extract from Annual Report 2012                    

 
Principal risks

 

Risk              Description                 KPIs           Controls           
                                                                                
Market cycles     Whilst our business will    Revenue growth •  Strategy of     
                  always be subject to                       geographic         
The Group's broad economic cycles, market     compared with  diversification:   
base helps to     risk is reduced by the                                        
mitigate against  diversity of our markets,   market growth  - operations in    
the risk of       both in terms of geography                 over 30 countries  
downturn in       and market segment.  It is  Definition and                    
                  also partially offset by                   - growing presence 
our markets       opportunities for           method of      in Australia and   
                  consolidation in our highly calculation    developing markets.
                                                                                
                  fragmented markets.         Year-on-year   •  Broad customer  
                  Typically, even where we    sales          base.              
                  are the clear leader, we                                      
                  still have a relatively     growth in      •  Services used   
                  small share of the market.  local currency across all industry
                  Our ability to exploit                     segments:          
                  these opportunities through compared with  infrastructure,    
                  bolt-on acquisitions is     growth in      industrial,        
                  reflected in our track                     commercial,        
                  record of growing sales,    the total      residential and    
                  and doing so profitably,    regional       environmental.     
                  across market cycles.                                         
                                              construction                      
                                              market.                           
                                                                                
                                              As our work                       
                                              occurs at the                     
                                                                                
                                              start of the                      
                                              construction                      
                                                                                
                                              cycle, our                        
                                              revenue is a                      
                                                                                
                                              leading                           
                                              indicator for                     
                                              the                               
                                                                                
                                              construction                      
                                              market,                           
                                                                                
                                              whereas market                    
                                                                                
                                              comparators                       
                                              are based on                      
                                                                                
                                              the lagging                       
                                              indicator                         
                                                                                
                                              'construction                     
                                              put in                            
                                                                                
                                              place'.                           
                                                                                
Tendering and     It is in the nature of our  Operating      •  Risk Management 
                  business that we            margin         Framework defines  
management        continually assess and                     Minimum Standards  
                  manage technical, and other                in the control of  
of projects       operational, risks.                        project risk.      
                                              Definition and                    
Project risk is   Some of the controls we     method of      •  Risk-based      
managed           have in place, particularly                tender             
                  at the crucial stage of     Calculation.      approval        
throughout the    tendering of contracts, are Operating      process, with      
life of a         set out in the table                          clear           
                  opposite. Given the Group's profit         delegations of     
project from the  relatively small average    expressed as a    authority.      
tendering         contract value (less than £                                   
                  200,000), it would be       percentage of  •  Independent     
stage to          unusual for any one         revenue.       review of tenders. 
completion        contract to                                                   
                                                             •  Training for    
                  materially affect the                      staff in the       
                  results of the Group. In                   typical risk issues
                  fact, our largest contract                 they may face when 
                  in 2012 accounted for less                 tendering for jobs,
                  than 3% of total revenue.                  negotiating        
                  Our ability to manage                      contracts and      
                  technical risks will                       executing work.    
                  generally be reflected                                        
                                                             •  Legal review of 
                  in our profitability.                      unusual or onerous 
                                                             contract terms.    
                                                                                
                                                             •  Project staff   
                                                             selected on the    
                                                             basis of their     
                                                             skills, experience 
                                                             of a particular    
                                                             type of project and
                                                             their workload.    
                                                                                
                                                             •  Establishment of
                                                             'centres of        
                                                             excellence'.       
                                                                                
                                                             •  Formal handover 
                                                             meetings at each   
                                                             step of the        
                                                             contract in        
                                                             progress.          
                                                                                
                                                             •  Weekly cost     
                                                             reports produced   
                                                             for all projects   
                                                             and reviewed by    
                                                             next level         
                                                             management.        
                                                                                
                                                             •  Periodic reviews
                                                             of poorly          
                                                             performing         
                                                             contracts to       
                                                             establish lessons  
                                                             learned with the   
                                                             results            
                                                             communicated to all
                                                             relevant staff.    
                                                                                
                                                                                
                                                                                
Acquisitions      We recognise the risks      Return on net  •  Target companies
                  associated with             operating      are usually well   
Our long-term     acquisitions and our                       known to Keller;   
growth            approach to buying          Assets         and the operational
                  businesses aims to manage                  and cultural       
track record is   these to acceptable levels.                differences and    
built on a                                                   potential synergies
combination of    First, we try to get to     Definition and are well           
organic growth    know a target company,      method of      understood.        
and acquisitions  often working in joint                                        
                  venture, to understand the  calculation    •  Robust due      
                  operational and cultural                   diligence process, 
                  differences and potential   Operating      mostly undertaken  
                                              profit before  by own management. 
                  synergies. This is followed                                   
                  by a robust due diligence   impairment of  •  Clear           
                  process, most of which is   intangibles    integration plan,  
                  undertaken by our own                      reflecting the     
                  managers, and we then       expressed as a unique character of
                  develop a clear integration percentage     the target company.
                                                                                
                  plan which takes account of of average net                    
                  the unique character of the operating                         
                  target company.                                               
                                              assets                            
                                              (including                        
                                              goodwill                          
                                                                                
                                              acquired                          
                                              through                           
                                                                                
                                              acquisitions).                    
                                              Net                               
                                                                                
                                              operating                         
                                              assets                            
                                              excludes                          
                                                                                
                                              net debt, tax                     
                                              balances,                         
                                                                                
                                              deferred                          
                                              consideration                     
                                                                                
                                              and net                           
                                              defined                           
                                              benefit                           
                                                                                
                                              pension                           
                                              liabilities.                      
                                                                                
Safety            Keller is made up of        Accident       •  Keller Safety   
                  businesses                  Frequency      Framework 'Think   
The construction                                             Safe',             
industry in which of varying sizes operating  Rate ('AFR')   incorporating our  
we operate poses  around the world, often in                 Safety Goal,       
significant       challenging environments.                  Principles, Policy 
safety                                                       and Minimum        
challenges, but   It is essential that, as we Definition and Standards.         
we do not accept  continue to grow and move   method of                         
the inevitability into new regions, we can be                •  All business    
of injury         sure that our approach to   calculation    units undertake an 
                  safety is equally rigorous,                annual safety      
                  no matter                   Accident       assessment.        
                                              frequency per                     
                  whereabouts in the world,                  •  From these,     
                  or on which projects, we    100,000 man    safety improvement 
                  are working.                hours.         plans are developed
                                                             and implemented.   
                                                                                
                                                             •  Regular         
                                                             directors' and     
                                                             managers' safety   
                                                             tours reinforce the
                                                             importance of      
                                                             safety.            
                                                                                
                                                                                
                                                                                
People            The risk of losing, or not  Staff turnover •  Excellent       
                  being able to attract, good rate           training and       
The accumulation  people is key.  We pride                   development        
of                ourselves in having some of                opportunities.     
                  the best professional and                                     
knowledge and     skilled people              Definition and •  Opportunities   
experience is                                 method of      for career growth. 
essential to      in the industry, who are                                      
helping our       motivated by our culture    calculation    •  Good engagement 
customers to find and the opportunities for                  and two-way        
the best          career growth.              The number of  communications.    
solutions                                                                       
                                              managerial,    •  Employees       
                                              professional   treated with       
                                                             dignity and        
                                              and technical  respect.           
                                              staff leaving                     
                                                                                
                                              in the period,                    
                                              other than                        
                                                                                
                                              through                           
                                              redundancy or                     
                                                                                
                                              normal                            
                                              retirement,                       
                                                                                
                                              expressed as a                    
                                              percentage                        
                                                                                
                                              of employees                      
                                              in this                           
                                                                                
                                              category.                         
                                                                                


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.

24 Related party transactions

Transactions between the parent, jointly controlled operations and its
subsidiaries, which are related parties, have been eliminated on consolidation
and are not disclosed in this note.

During the year the Group undertook various contracts with a total value of £
3.9m (2011: £2.3m) for GTCEISU Construcción, S.A., a connected person of Mr
López Jiménez, who retired as a Director of the Company during the year. An
amount of £5.6m (2011: £1.8m) is included in trade and other receivables in
respect of amounts outstanding as at 31 December 2012.

During the year the Group made purchases from GTCEISU Construcción, S.A. with a
total value of £2.0m (2011: £3.5m). An amount of £1.0m (2011: £1.0m) is
included in trade and other payables in respect of amounts outstanding as at 31
December 2012.

Related party transactions were made on an arms-length basis. All amounts
outstanding from related parties are unsecured and will be settled in cash. No
guarantees have been given or received. No provisions have been made for
doubtful debts in respect of the amounts owed by related parties.

The remuneration of the Directors, who are the key management personnel and
related parties of the Group is set out below in aggregate for each of the
relevant categories specified in IAS 24 Related Party Disclosures.

Key management personnel compensation comprised:

                             2012 2011
                               £m   £m
                                      
Short-term employee benefits  3.4  2.1
                                      
Post-employment benefits      0.3  0.2
                                      
                              3.7  2.3
                                      

 

END