Keller Group Plc - Annual Financial Report

[A blue text on a white background Description automatically generated] 9 April 2024 Keller Group plc Annual Report and Accounts for the year ended 31 December 2023 and Notice of 2024 Annual General Meeting Keller Group plc ("Keller", the "Company") announces that its Annual General Meeting will be held at 10.00am on Wednesday 15 May 2024 ("AGM 2024") 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 2023 ("Annual Report 2023") · 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 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 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 | Keller Group plc (https://investors.keller.com/). 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 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 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 5 March 2024. For further information, please contact: Keller Group plc www.keller.com Silvana Glibota-Vigo, Group Head of Secretariat020 7616 7575 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 portfolio2 Engineered solutions 3 Operational excellence4 Expertise and scale Risk movement since 2022 and link to viability Increased riskConstant riskReduced risk Timeframe Short termMedium termLong term Financial risk 1Inability to finance our business Description Causes Mitigation Movement since 2022 and impact and internal controls Failure to Reduced risk sufficiently · · and Failure to Centralised New $300m US private placement effectively accurately Treasury secured, along with strong manage the forecast function that operational performance throughout financial material is 2023, demonstrate clear ability to strength of exposures responsible manage both existing and future the Group and/or for managing risks. could lead it manage the key financial to: financial risks, Negotiations to refinance the resources including existing revolving credit facility · Fail to of the liquidity and will commence in Q1 2024. meet required Group. credit tests that capacity. allow it to · Mixture continue to of long-term use the going committed concern basis debt with in preparing varying its financial maturity statements. dates which · Fail to comprise a meet financial £375m covenant revolving tests, credit potentially facility with leading to a a maturity default event. extended to · Have a November 2025 lack of and a new US available private funds, placement restricting debt of investment in $300m, with growth $120m opportunities, maturing in whether 2030 and through $180m acquisition or maturing in innovation. 2033. There · Be unable is $75m of US to meet private dividend placement payment maturing in requirements. 2024. · The Group maintains significant undrawn facilities within a high -quality RCF bank syndicate, which underpin the liquidity requirements of the Group. · Strong free cash flow profile - flexibility on capital expenditure and ability to 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 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 Causes Mitigation Movement since 2022 and impact and internal controls Inability to Constant risk maintain a · · The sustainable Customers diverse The Group continues to maintain a level of postponing markets in very strong order book across all financial or reducing which the divisions at near record levels. performance investment Group However, due to increasing inflation, throughout in ongoing operates, higher interest rates and, the and new both in geopolitical uncertainty, we are construction projects. terms of seeing some early signs of customers industry · Impact geography delaying project starts and market cycle, of and market investment. which grows increasing segment, more than inflation, provide many other especially protection industries in steel, to during cement and individual periods of energy. geographic economic · or segment expansion and Political slowdowns. falls more instability · harder than leading to Leveraging many other disruption the global industries in supply scale of when the chains the Group, economy impacting talent and contracts. both resources Any availability can be significant, and price. redeployed sustained · to other reduction in parts of the level of the customer company activity during could individual adversely market affect the slowdowns. Group's · Having strategy, strong reducing local revenue and businesses profitability with in in the short -depth and medium knowledge term, and of the negatively local impact the markets longer-term enables viability of early the Group. detection and response to market trends. · 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 TimeframeMedium / Long term Strategic risks 3 Failure to procure new contracts while maintaining appropriate margins Description Causes Mitigation Movement since 2022 and impact and internal controls Failure to Constant risk negotiate · Increased · A focus satisfactory competition on We continue to maintain a strong and especially in understanding order book with improving margins appropriate tight or customer during 2023. We are also seeing contractual contracting requirements increased competition on terms may markets. and contracts within our markets with result in: · Failure competitor increased pressure on bid pricing to fully capabilities. from our customers that along · Delays understand · with inflationary pressures could and disputes and/or Structured potentially erode contract during ability to bid review margins. Significant increase in project meet customer processes in the cost of insurance along with delivery, requirements. operation increased self-insured and negatively · throughout deductible limits will require a impacting our Inadequate the Group renewed communication across relationships resources in with well Keller with a focus on minimising with our place -defined our exposure to unnecessary risk customers and (physical selection and contractually limiting our the Group's assets and criteria that liability wherever possible. reputation people). are designed for · Failure to ensure we Work to refresh and refocus the delivering to understand take on PLM Standard focusing on project quality and engage contracts performance management, hence products and with customer only where we renaming it PPM (Project solutions. on balanced understand Performance Management), is · Adverse approach to and can almost complete. impact on the allocation or manage the Group's sharing of risks strategy risk in the involved. leading to contract. · The reduced Project revenue and Lifecycle profitability Management and (PLM) negatively Standard has impacting the introduced Group's more rigour ability to into how fund its risks are strategic considered objectives. during the · Increased opportunity, cost of contract insurance and approval and deductible. project execution phases. · Sales training - focus on contractual and commercial terms. · Continuous monitoring of market trends and their potential impact. · Continuous monitoring of order book wins and losses. Link to strategy  1 / 2 / 3 / 4 Link to viability No TimeframeShort / Medium / Long term 4 Losing our market share Description Causes Mitigation and Movement since 2022 and impact internal controls Inability to Constant risk achieve · Increased · A clear sustainable competitor business We continued to see very growth, activity strategy with strong improvement across the whether especially in defined short, US in 2023, where we are through tight or medium and providing a wider range of acquisition, contracting long-term our products across more new products, markets. objectives, locations following the new · Failure to which is successful execution of the geographies or adjust to monitored at One Keller project in 2021. industry changing local, This focus is also showing -specific customer divisional and success in the other solutions, demands or Group level. divisions as they diversify may: fully · Continued their available product range understand and analysis of to maintain and grow our · Jeopardise meet their existing and market share. our position requirements. target markets as the · Inability to ensure preferred to identify opportunities international changes in that they geotechnical market demands, offer are specialist including understood. contractor. changes to · An · Lead to promote opportunities inefficiencies sustainability. pipeline and increased · covering all operating sectors of the costs, which construction in turn could market. impact our · A wide ability to -ranging local deliver branch network balanced which profitable facilitates growth, which customer is a key relationships component of and helps our strategy. secure repeat · Failure to work. deliver on our · key strategic Continually objective may seeking to result in the differentiate loss of our offering confidence and through trust of our service key quality, value stakeholders for money and including innovation. investors, · North financial American institutions businesses and customers. reorganisation delivering on cross-selling opportunities. · Minimising the risk of acquisitions, including getting to know a target company in advance, often working in joint venture, to understand the operational and cultural differences and potential synergies, as well as undertaking these through due diligence and structured and carefully managed integration plans. Link to strategy  1 / 2 Link to viability Yes TimeframeShort / Medium / Long term 5  Ethical misconduct and non-compliance with regulations Description and Causes Mitigation and Movement since 2022 impact internal controls Keller operates Failure to Constant risk in many comply with · A Code of different the Code of Business Following on from the jurisdictions Business Conduct that financial reporting fraud in and is subject Conduct or sets out the Austral business to various related minimum discovered in late 2022, a rules, policies and expectations specific controls response regulations and procedures for all plan was developed and other legal could stem colleagues in executed in 2023. This plan requirements from: respect of covered the specific control including those ethics, failings in Austral and a related to anti · Failure integrity and wider review across Keller. -bribery and to establish regulatory All elements of the plan are anti robust requirements, either completed or -corruption. corporate that is progressing well and owned by Failure to culture. updated a senior leader in the comply with the · Failure annually and business. Code of to adopt a is backed by a Business compliance training Conduct or risk programme to other approach. ensure that it regulations · Failure is fully could leave the to embed the embedded Group exposed Group's across the to: values and Group. behaviours · Ethics and · Instances across the Compliance of bribery and entire Officers in corruption. organisation, every business · Fraud and including any unit who deception. joint support the · Human ventures. ethics and rights abuses, · Failure compliance such as modern to have a culture and slavery, child robust ensure best labour abuses training and practice and human monitoring developed by trafficking. programme in the Group is · Unfair place. communicated competition · and embedded practices. Deliberate into local · Unethical non business treatment -compliance. practices. within our · Regular supply chain. workshops across the These failures Group to could result in ensure legal compliance investigations, risks are leading to identified and fines and addressed. penalties, · Ethics and reputational compliance damage and updates to the business Audit and Risk losses. Committee semi -annually. · An independent 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 TimeframeShort term 6  Inability to maintain our technological product advantage Description Causes Mitigation Movement and impact and internal since controls 2022 Keller has a Constant history of · Failure to maintain · risk innovation investment in innovation and Innovation that has digitisation. initiatives given us a · Increased competitor developed at technological investment in innovative both Group advantage solutions. and which is · Failure to continue to invest divisional recognised by in our people. level to our clients · ensure a and structured competitors. approach to Failure to innovation is maintain this in place advantage across the through the Group. continued · technological Innovation in advancements low carbon in our materials equipment, (cement, products and concrete, solutions cement-free may: binders), by carrying out · Impact field trials our position and in the collaborating market. with cement · Result in suppliers and us not being other selected for companies key complex, innovating in high-value thisspace. projects that · support the Digitisation Group initiatives strategy. focusing on · Make it strategy of more facilitating difficult to equipment and attract and operational retain the data capture. best talent. · We take a · Result in leadership the loss of role in the reputation geotechnical for industry, delivering with many of the best our team engineered playing key solutions. roles in professional associations and industry activities around the world. · Global product teams set standards, provide 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 TimeframeMedium / Long term 7  Climate change Description and Causes Mitigation and Movement since impact internal 2022 controls Climate change Sustainability Constant risk is a global · Failure to update Steering threat and product offerings in Committee that We are failure to line with both is responsible starting to manage and legislation and for win project mitigate it customer integrating opportunities could lead to: demand. sustainability related to targets and climate · An measures into impact. This inability to the Group is tempered by achieve business plan the Keller's to introduction commitment to successfully of more deliver drive changes legislation solutions in an important to relating to environmentally the company. climate conscious impact, eg manner, which · proposed new may in turn Collaboration restriction have a negative with the for federal impact on our University of construction reputation, Surrey's projects in affect employee Centre for the US. morale and lead Environment to a loss of and We continue to confidence from Sustainability focus on our customers, to apply delivering suppliers and sustainability against our investors. best practice sustainability · Product to all targets and offerings business meeting TCFD becoming functions. reporting obsolete · Scope 1 requirements. because they and 2 carbon are no longer emissions compliant with verified by environmental accredited standards. external third · Remediation party (Carbon of non Intelligence). -compliant work · Carbon at our own calculator expense to tool used to maintain identify/improv compliance. e carbon efficiency. · Project team created to develop and embed processes to meet TCFD requirements. Link to strategy  1 / 2 / 3 / 4 Link to viability Yes TimeframeShort / Medium / Long term Operational risks 8  Service or solutions failure Description Causes Mitigation and internal Movement since 2022 and impact controls In designing Constant risk a product or · · Continuing to a solution Misinterpretation enhance our for customers of client technological and many factors requirements or operational need to be miscommunication capabilities through considered of requirements investment in our including by the client may product teams, project client lead to a poorly managers and our requirements, designed solution engineering site and and consequently capabilities. loading failure. · Employing conditions geotechnical engineers and local that are focused purely constraints on design. (eg · Disaster neighbouring Recovery/Business buildings, Continuity Plans in other place and reviewed underground across the Group. structures). · The global product Inadequate teams set standards, design of a provide guidance and customer disseminate best product practice across the and/or organisation for our solution may eight key products. lead to: · We seek to agree liability limits in our · An contracts with inability to customers. achieve the · Insurance solutions required are in place to limit standard. financial exposure of a · Failure potential customer to meet claim. quality standards, damaging our reputation, giving rise to regulatory action and legal liability, and ultimately impacting financial performance. · A negative impact on long-term profitability from poorly designed product/soluti on as they are generally covered by a liability limitation period of 12 years. Link to strategy  2 / 4 Link to viability Yes TimeframeShort / Medium / Long term 9 Ineffective execution of our projects Description Causes Mitigation Movement since 2022 and impact and internal controls Inability to Constant risk successfully · Failure to · Ensuring deliver manage our we understand The number of projects not projects in projects to all of our executed to expectation in 2022 line with ensure that risks through was above the long-term average, the agreed they are the bid adversely impacted by customer delivered on appraisal persistently high inflation requirements time and to process and across North America and Europe. may result budget due to applying in: unforeseen rigorous This trend has improved ground and policies and throughout 2023 along with the · Cost site processes to work under way to update the PLM overruns, conditions, manage and Standard focusing on project contractual weather monitor performance management. This will disputes and -related contract put in place better controls to reputational delays, performance. ensure continued effective damage. unavailability · Ensuring execution of projects across · of key we have high Keller. Ineffective materials, -quality project workforce people delivery may shortages or delivering also expose equipment projects. the Group to breakdowns. Keller's long-term · Lack of Project obligations comprehensive Management including understanding Academy and legal action of contract Field and obligations. Leadership additional · Inadequate Academy are costs to resources designed to remedy (people, create solution physical project failure. assets and managers with materials). 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. · 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. This is currently being updated and will be renamed 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 TimeframeShort 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 impact Causes Mitigation and Movement internal since 2022 controls Failure to manage Constant risk suppliers effectively · Failure · The Group could to embed the has developed Supply chain lead to: Group's long-term issues, expectation partnerships especially · Delays to within the with key availability executing projects procurement suppliers, of certain waiting for process. working materials materials and ongoing · closely with (steel, business disruption. Inadequate them to cement and · Additional costs assessment understand energy) to find alternative of supply their continue to suppliers. chain operations, show signs of · Becoming involved partner but is not easing. in legal disputes and capabilities over-reliant Pricing is potentially fines and during on any single still penalties. bidding one, with an adversely · Damaging our phase. extensive impacted by reputation and · Lack of network of the potentially supplier approved persistently being barred from resilience suppliers in high bidding on future due to place across inflation, contracts. rising costs the but this too · Human rights of energy as organisation is beginning abuses, such as modern a result of to support its to show signs slavery, child labour geopolitical strategic of abating. abuses and human uncertainty. ambitions. trafficking. · Lack of · A Supply While supply Chain Code of pressure availability Business remains as a due to Conduct that result of the increased sets out geopolitical demand from minimum uncertainty, and too expectations it is being little for all better supply. suppliers in managed as · respect of demand cools Inflation ethics, slightly as driving up integrity and interest rate prices. regulatory increases · requirements, take effect Logistical that is on some impact updated investment causing annually. decisions. delays due · Working to lack of group In 2023 we HGV drivers. established, carried out reporting to an the Group independent Company legal Secretary and assessment of Legal Advisor, our human to drive rights and minimum modern standards, slavery both standards and contractually processes. and Consequently, behaviourally, we have across key introduced a labour Human Rights suppliers. Policy, updated our Supply Chain Code of Business Conduct and supplier contractual clauses and put in place more rigorous due diligence processes across our supply chain. Link to strategy  3 / 4 Link to viability Yes TimeframeShort / Medium / Long term 11  Causing a serious injury or fatality to an employee or a member of the public Description Causes Mitigation and Movement and impact internal since controls 2022 Failure to Constant maintain high · Inadequate risk · Board-led risk standards of identification, commitment to health and assessment and drive health safety, and management. and safety an increase · Lack of clear programmes and in serious leadership driving performance injuries or the with a vision fatalities safety culture. of zero harm. leading to: · Lack of employee · An competency. emphasis on · An · Poorly designed safety erosion of processes that do leadership to trust of not ensure both employees and eliminate or HSEQ potential mitigate risk. professionals clients. · Lack of focus on and · Damage to the wellbeing and operational staff morale, mental health of leaders drive an increase employees and JV implementation in employee partners. and turnover sustainment of rates and a our safety decrease in standards productivity. through · Threat of ongoing site potential presence, criminal using safety prosecutions, tours, safety fines, audits, safety disbarring action groups from future and mandatory contract employee bidding and training. reputational · Ongoing damage. 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. Link to strategy  3 Link to viability Yes TimeframeShort term 12 Not having the right skills to deliver Description Causes Mitigation and Movement since 2022 and impact internal controls Failure to Constant risk attract and · · Continuing to develop Inability to invest in our We are still witnessing excellent recruit people and inflationary pressure on pay people to and retain organisation in across many locations where create a strong line with the Keller operates and thus the high performers. four pillars of pressure on competition for -quality, · Lack of the Keller People skilled personnel is still an vibrant, a diverse agenda as noted issue in some parts of the diverse and workforce. below. Group. However, job markets are flexible · Failure · Ensuring that just beginning to show signs of workforce to maintain the `Right a slowdown, which should ease could: and promote Organisation' is this issue. Focus remains on the Keller in place with retaining staff with the right · Harm culture. people having skills to deliver. the Group's · clear ability to Overheating accountabilities; win or of market each execute causing organisational specific significant unit is properly high-value, increase in configured with a complex demand or matrix of line projects. competition management, · Fail to for people. functional meet · Lack of support and strategic visibility product objectives of long-term expertise. to grow the pipeline for · As an business career industry leader, and lose progression that Keller is key resulting in made up of `Great stakeholder existing People' that are confidence employees well trained, within the leaving the motivated and market. business. have · Post opportunities to COVID-19 develop to their recovery full potential. driving Project managers increase in and field attrition or employees receive people comprehensive leaving training sector. programmes which · Pressure cover a broad from wage range of topics inflation including and contract increased management, offers from planning, risk competition. 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 Link to strategy  2 / 3 / 4 Link to viability No TimeframeShort / Medium / Long term 13  Cyber security Description and impact Causes Mitigation and Movement internal since controls 2022 Risk of potential Constant disruption · Failure to · Creation risk in the business maintain of an operations, reputational appropriate Information damage threat Security and/or loss or prevention, Management corruption of data could identification System lead to: and resolution framework, mechanisms referencing · Loss of intellectual either industry property and technically or standards to competitive advantage. through ensure · Loss of personal processes. appropriate data. · Poor governance, · Operational impact internal control and restricting the ability governance. risk to carry out business · Failure to management and critical activities. embed then onward · Potential fines and preventative management for penalties. culture. compliance, · Reputational damage · Lack of or maturity and leading to loss of inadequate development of market and customer training and service. confidence. awareness · · Failure to meet leading to Introduction client security mistakes and of technical requirements errors. capabilities to win or maintain · and services contracts. Inconsistent to further approach to enable data security, prevention, especially detection, with JV prediction and partners and response external third services. parties. · Multi · Cyber -factor attacks. authentication · Failure to for all users obtain or prevents maintain unauthorised external access to security Keller's certifications networks and that are applications required by and further clients. controls limit access to only Keller -approved devices. · 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. · Proactive threat hunting throughout the environment. Link to strategy  3 / 4 Link to viability No TimeframeShort 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 Board and Executive Committee, who are the key management personnel, comprised: 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 31 December 2023, there was a net balance of £0.1m (2022: £0.1m) owed by the joint venture. These amounts are unsecured, have no fixed date of repayment and are repayable on demand. 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