the Group, the board is again recommending an increased final dividend.
Board
During the year, we completed our
management succession planning.
Following the appointment in
March 2003 of Justin Atkinson (43)
as chief operating officer, we were
pleased to welcome James Hind to
succeed Justin as finance director
in July. James (39) joined the Group
from D S Smith plc, the international
packaging manufacturer and office
products wholesaler, where he had
been group financial controller
since 1997.
The board was further strengthened
during the year by the appointments
of Bob Rubright (52) in March and
Dr Wolfgang Sondermann (53) in
November, who between them have
careers spanning 38 years with the
Keller Group. Rob Ewen stood down
in November, following the decision
to change the Group’s strategic
focus and its management and
reporting structure.
With the new executive team secured,
Tom Dobson, who joined the Group
in 1966 and has been chief executive
for the past six years, will retire from
his position and from the board at the
end of March 2004. We are indebted
to Tom for his enormous contribution
to the Group and we will continue
to benefit from his wisdom and
experience, as he will remain an
adviser to the Group for a further
three years. Justin Atkinson will
succeed Tom as chief executive.
Mr Pedro Lopez Jimenez joined the
board as a non-executive director
in January 2003 and in October we
welcomed Dr Kevin Bond back to
the board as a non-executive director,
following his two-year assignment
at the Home Office.
People
May 2004 will mark the tenth
anniversary of Keller’s listing on
the London Stock Exchange. Since
our flotation, we have delivered to
shareholders compound annual
growth in adjusted earnings per share
of 10%. At the heart of this track record
is a team of quality people with huge
expertise and an in-depth knowledge
of our industry, many of whom have
served with us throughout this period.
On behalf of the board, I would like to
thank all our employees for their hard
work and to reiterate our commitment
to rewarding their achievements and
loyalty with excellent training and
development opportunities in an
environment where they can fulfil
their potential.
Strategy
Our current focus is to consolidate
and strengthen our existing businesses,
returning Makers to profitability and
improving Suncoast’s margins during
the course of 2004. Looking ahead,
we continue to see significant
growth opportunities within our
core competence of specialist ground
engineering in the United States,
Europe and South East Asia. We
are therefore confident of restoring
our successful track record of growing
the business through a combination
of organic growth, both in existing
and new markets, and targeted bolt-on
acquisitions.
Outlook
The current year has started somewhat
slowly, which is likely to mean that profit
will be more second-half weighted than
in 2003, consistent with earlier years.
However, order intake in the first two
months of 2004 was good, especially
in Continental Europe & Overseas,
where prospects are encouraging. In
North America, we foresee little change
in our major markets, but a continuing
weakness in the US dollar will affect the
result in sterling terms. We anticipate
another good year in Australia and, in
the UK, we expect Makers to return to
profitability during the course of 2004,
the benefit of which will come through
in the second half. Our current order
book remains good, representing over
four months’ sales, giving us a sound
platform from which to go forward.
Dr Michael West
Chairman
11 March 2004
The results for the 2003 financial year mark a disappointing pause in the Group’s long-term track record of growth. In general, our specialist ground engineering businesses performed ahead of the previous year and in line with our expectations at the start of the year, but the Group result was held back by reduced margins in our US post-tensioning business, Suncoast, and by a poor result from Makers in the UK.
Sales at £567.5m were up 11% (2002: £511.0m), with profit before tax, exceptional items and amortisation of intangibles down 6% to £28.7m (2002: £30.4m). The results include an underlying loss of £0.9m at Makers (which compares to a £2.8m operating profit in the previous year) and the adverse net impact of exchange rate fluctuations of £0.9m. Earnings per share before exceptional items and amortisation of intangibles reduced to 24.1p (2002: 32.7p).
Exceptional costs of £3.1m were incurred in connection with the restructuring of our UK businesses. Makers’ weak performance also resulted in an exceptional goodwill
impairment charge of £7.4m. Profit before tax after exceptional items and amortisation of intangibles totalled £14.8m (2002: £27.3m).
We announced in December 2003, following a strategic review, that the Group would focus on its core specialist ground engineering activities worldwide and that its management and reporting would be structured along geographic, rather than product, lines. We believe that these actions will strengthen the Group in 2004.
Cash flow and net debt
Net cash inflow from operating activities was £40.0m, representing 98% of the Group’s EBITDA. This compares to £43.2m and 100% in 2002. This strong cash performance, including a particularly good inflow in the last quarter, resulted in net debt at the end of the year of £60.7m (2002: £68.0m). Interest cover remains comfortable at over ten times EBITDA.
Dividends
In recognition of the strong fundamentals of our core business and our confidence in the future performance of the Group, the board is recommending an increased final dividend of 6.95p per share (2002: 6.6p), bringing the total dividend for the year to 10.4p (2002: 9.9p), an increase of 5%. This will be paid on 28 June 2004 to shareholders on the register at 28 May 2004. This increase is in line with our policy of reinvesting our strong cash flow in the continued growth of the Group, whilst at the same time maintaining a healthy dividend cover and seeking to reward shareholders with above inflation increases.
Hayward Baker uses 8-foot diameter soil mix columns to support 310-foot diameter oil storage tanks in marshlands in southern Louisiana.
Keller Grundbau treats settlement using its “Soilfrac” compensation grouting system during tunnelling below the main train station at Antwerp, Belgium.