Interim Results
Keller Group PLC
22 August 2003
22 August 2003
Keller Group plc
Interim Results for the
Six Months Ended 30 June 2003
Keller Group plc ('Keller' or 'the Group'), the global
construction services group, reports further progress in the
first half of 2003; highlights include:
> Turnover increased by 11% to £278.7 million (2002:
£250.5m)
> Profit before tax* up 7% to £12.8 million (2002: £12.0m),
after adverse £0.6 million currency impact
> EBITDA interest cover of 11 times
> Interim dividend raised 4.5% to 3.45p (2002: 3.3p)
> Strong performance from Foundation Services
> Encouraging first contributions from 2002 acquisitions,
Keller-Terra and McKinney
> Action taken to restore margins in the UK
> Board succession plans completed
* before exceptionals and amortisation of intangibles
Tom Dobson, Keller Chief Executive said:
'While the first half was characterised by a strong
performance from the Continental Europe and Overseas
business and a steadily improving performance from the US
foundations business, trading in the UK was disappointing.
We have implemented a number of actions to improve
performance in our two UK businesses.
'Overall our strong business fundamentals and an order book
representing 4 months' sales give us confidence that we
shall report a further year of growth.'
Enquiries:
Keller Group plc www.keller.co.uk
Tom Dobson, Chief Executive 020 8341 6424
Justin Atkinson, Chief Operating Officer
James Hind, Finance Director
Weber Shandwick Square Mile 020 7067 0700
Reg Hoare/Josh Royston
A briefing for analysts will be held at 9.15 for 9.30 am on
Friday, 22 August 2003 at the offices of Weber Shandwick
Square Mile, Fox Court, 14 Gray's Inn Road, London, WC1X 8WS
Print resolution images are available for the media to
download from www.vismedia.co.uk
Financial Overview
I am pleased to report further progress in the first half of
2003, with Group sales up 11% at £278.7m (2002: £250.5m) and
profit before tax, exceptionals and amortisation of
intangibles up 7% at £12.8m (2002: £12.0m). Adjusted earnings
per share were down at 11.6p (2002: 12.8p), mainly reflecting
the issue of 5.2m shares in December 2002 in connection with
the financing of McKinney and of our 51% share in Keller-
Terra.
While the first half was characterised by a strong performance
from the Continental Europe and Overseas business and a
steadily improving performance from the US foundations
business, trading in the UK was disappointing. As announced
in our trading statement on 27 June 2003, we have implemented
a number of actions to improve performance in our two UK
businesses, Makers and KGE, as a result of which exceptional
restructuring costs of £0.7m were charged in the first half.
Total restructuring costs in the year are expected to be
around £2m.
Operating cash flow was £9.9m, down on last year's
exceptionally strong £18.3m. Working capital increased in
the period, mainly reflecting high activity levels in the
second quarter, particularly at Suncoast, and growth in
southern Europe where working capital levels are generally
higher. The Group's EBITDA net interest cover remained
comfortable at 11 times on a pro-forma, rolling 12-month basis
(2002: 10 times).
The average foreign currency exchange rate of the US Dollar
against Sterling was 11% weaker than in the first half of
2002, whilst the Euro against Sterling was 9% stronger.
Cumulatively, this had an adverse effect on operating profit
before exceptionals and amortisation of intangibles of £0.6m.
Dividend
The directors have declared an interim dividend of 3.45p per
share (2002: 3.3p), representing an increase of 4.5%. This
will be paid on 31 October 2003 to shareholders on the
register at 3 October 2003. This increase is in line with
our policy of maintaining a healthy dividend cover and seeking
to reward shareholders with above inflation increases, whilst
at the same time reinvesting our cash flow into the continued
growth of the Group.
Operational Overview
Foundation Services
Foundation Services produced another good set of results in
challenging conditions. Sales of £198.8m (2002: £173.8m) and
operating profit before exceptionals and amortisation of
intangibles of £13.2m (2002: £10.8m), were respectively some
14% and 23% ahead of the previous year. Operating margins
improved from 6.2% to 6.6%.
North America
The public infrastructure sector of the US construction market
remained resilient, although we saw continued weakness in the
commercial sector. Despite this, Case, which predominantly
serves the commercial sector, gave another strong first half
performance, having entered the year with a healthy order
backlog. In particular, Case Atlantic made an excellent
contribution, helped by a good result from the large Cooper
River Bridge project in Charleston, South Carolina. McKinney
experienced a slow start to the year, with several projects
delayed due to exceptionally wet weather along the eastern
seaboard; however, some improvement in the second quarter
produced a satisfactory half year result. Both order books
are well filled through the third quarter of this year and we
are confident of their ability to continue to win business.
After a much improved second quarter, Hayward Baker returned a
first half result close to last year's strong first half.
Its most significant contract during the period was a soil
mixing project for oil storage tanks in Louisiana, which
generated some $6m of sales. Current activity levels,
together with a good order book, indicate that the business is
well placed for the second half.
Continental Europe & Overseas
Despite challenging market conditions in several of our
markets, our Continental Europe & Overseas business had a good
first half. Germany, Switzerland, France and Portugal all
saw reductions in construction volume whilst elsewhere in
Europe, most notably in Spain, Italy, Austria, Sweden and
Poland, high levels of public infrastructure spending
continued to support demand. Against this market background,
sales and margin held up well, with good results from our
Austrian operation and from our developing business in Poland.
In particular, the performance of LCM, our 50% owned
subsidiary in Sweden, was excellent and Keller-Terra, our 51%-
owned Spanish venture acquired in December last year, made a
very good first-half contribution, resulting in a
significantly improved margin for the Continental Europe &
Overseas business overall.
Our Overseas businesses experienced a number of project delays
in Singapore and in the Middle East, although recent
indications suggest that trading in these regions is now
returning to more normal levels. The results were also helped
by an impressive contribution from Malaysia, where Keller is
undertaking vibro replacement work on several large public
infrastructure projects.
UK
Market conditions in the UK foundations sector were stable,
with the housing sector remaining strong and the commercial
and infrastructure sectors generally flat. Volumes within
our UK foundations business were up on the same period last
year and the geotechnical and ground improvement businesses
performed solidly. However, the overall result was diluted
by weak margins from the piling business, where competition
from the specialist subsidiaries of general contractors
continues to result in overcapacity in the market.
In our June trading statement we said that we would be taking
steps to address poor performance in the UK foundations
business and subsequently we have withdrawn from the under-
performing heavy piling activities. This leaves the business
focused on its higher value-added products which, together
with a streamlining of processes and reduction in headcount,
are expected to improve margins going forward.
Australia
Following a sluggish start to the year, activity improved in
the second quarter to produce a half-year result in line with
expectations. Our Franki business performed well although,
as anticipated, Vibropile, which we acquired in August 2002,
did not repeat its exceptional contribution in the second half
of last year.
Specialist Services
The results for Specialist Services did not meet expectations,
with sales of £79.9m (2002: £76.7m) and an operating profit
before exceptionals and amortisation of intangibles of £3.1m
(2002: £4.2m). This shortfall was largely attributable to a
weak performance from Makers.
North America
The residential sector of the North American construction
market remained strong, particularly in the Southern States
served by Suncoast's slab-on-grade business. Although the
commercial sector generally was weak, Suncoast's high-rise
activity improved following an expansion into new regions and
a resultant increase in market share. However, the
exceptionally wet weather at the start of the year restricted
activity levels and impacted on Suncoast's first quarter
performance. The second quarter saw a progressive recovery in
volume but increases in the cost of Suncoast's main raw
material, resulting from the introduction of new tariffs on
imports of steel strand, put pressure on margins in June. As
a result, Suncoast is introducing a programme of price
increases which are expected to restore gross margins in the
fourth quarter. This, together with a healthy high-rise
order book, is likely to produce a full year result broadly in
line with last year.
UK
Makers' first half was impacted by poor productivity in the
highways division of its infrastructure business; the
cancellation of a new-build car park contract; and
disappointing spend under its London-based partnering
agreements for social housing refurbishment. Our June trading
statement indicated that a restructuring programme was
underway, which has led to an exit from the reactive
maintenance business through the disposal of our 50% share of
the London-based reactive maintenance joint venture and
closure of Makers' own reactive maintenance business based in
the West Midlands. Our social housing business is now focussed
on planned capital maintenance projects, predominantly in the
London area, but with scope to expand to other regions. Our
car parks business, both new build and refurbishment, has been
amalgamated into our infrastructure business. These actions,
together with a reduction in headcount, are expected to
improve margins going forward. A further update on Makers'
strategy will be provided at the time of the preliminary
results in March 2004.
Board Changes
In March we announced our Board succession planning. These
management changes were completed with the appointment of
James Hind, who joined the Board on 15 July 2003 as Finance
Director. James takes over from Justin Atkinson, who in
March was appointed Chief Operating Officer. The Board now
has a balance of new blood and management continuity together
with the blend of talents required to lead the next stage of
the Group's development.
With the new team secured, Tom Dobson, who joined the Group in
1966 and has been Chief Executive for the past six years,
plans to retire from his position and from the Board in Spring
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. It is planned that Justin Atkinson will
succeed Tom as Chief Executive.
Outlook
As we go into the second half, we anticipate little change in
our major markets for the remainder of the year. Overall our
strong business fundamentals and an order book representing
four months' sales, gives us confidence that we will report a
further year of growth.
Dr J.M.West
Chairman
22 August 2003
Consolidated profit and loss account
for the half year ended 30 June 2003
Half year to Half year to Year to
Note 30 June 30 June 31 December
2003 2002 2002
£'000 £'000 £'000
----------------------------------------------------------------------------------------------------------------------
Turnover from continuing operations 3 278,730 250,494 510,971
Operating costs (266,489) (238,235) (479,727)
======================================================================================================================
Operating profit
before exceptional items and amortisation of intangibles 3 14,904 13,826 34,344
Exceptional items (748) - -
Amortisation of intangibles (1,915) (1,567) (3,100)
Operating profit from continuing operations 12,241 12,259 31,244
Net interest payable (2,071) (1,822) (3,914)
----------------------------------------------------------------------------------------------------------------------
Profit on ordinary activities before taxation
before exceptional items and amortisation of intangibles 12,833 12,004 30,430
Exceptional items (748) - -
Amortisation of intangibles (1,915) (1,567) (3,100)
Profit on ordinary activities before taxation 10,170 10,437 27,330
Tax on profit on ordinary activities (4,292) (4,118) (10,684)
Tax on exceptional items 224 - -
Taxation 4 (4,068) (4,118) (10,684)
----------------------------------------------------------------------------------------------------------------------
Profit on ordinary activities after taxation 6,102 6,319 16,646
Equity minority interests (1,004) (256) (233)
----------------------------------------------------------------------------------------------------------------------
Profit for the period 5,098 6,063 16,413
Dividends proposed 5 (2,245) (1,970) (6,284)
----------------------------------------------------------------------------------------------------------------------
Retained profit for the period 2,853 4,093 10,129
======================================================================================================================
Earnings per share 6 7.9p 10.2p 27.5p
Adjusted earnings per share* 11.6p 12.8p 32.7p
Diluted earnings per share 6 7.9p 10.1p 27.3p
Dividend per share 5 3.45p 3.3p 9.9p
----------------------------------------------------------------------------------------------------------------------
*Adjusted earnings per share is calculated before exceptional
items and amortisation of intangibles
Consolidated statement of total recognised gains and losses
for the half year ended 30 June 2003
Half year to Half year to Year to
30 June 30 June 31 December
2003 2002 2002
£'000 £'000 £'000
----------------------------------------------------------------------------------------------------------------------
Profit for the period 5,098 6,063 16,413
Currency translation differences on overseas investments 1,083 311 (107)
----------------------------------------------------------------------------------------------------------------------
Total recognised gains and losses 6,181 6,374 16,306
======================================================================================================================
Consolidated balance sheet
as at 30 June 2003
As at As at As at
30 June 30 June 31 December
2003 2002 2002
£'000 £'000 £'000
----------------------------------------------------------------------------------------------------------------------
Fixed assets
Positive goodwill 66,398 58,467 68,529
Negative goodwill (142) (53) (2,239)
----------------------------------------------------------------------------------------------------------------------
66,256 58,414 66,290
Other intangible assets 287 337 374
----------------------------------------------------------------------------------------------------------------------
Intangible assets 66,543 58,751 66,664
Tangible assets 83,633 61,626 79,815
Investments - 1,379 -
----------------------------------------------------------------------------------------------------------------------
150,176 121,756 146,479
----------------------------------------------------------------------------------------------------------------------
Current assets
Stocks 17,434 12,141 15,147
Debtors 152,705 124,814 143,897
Cash at bank and in hand 12,340 7,875 16,206
----------------------------------------------------------------------------------------------------------------------
182,479 144,830 175,250
Creditors: amounts falling due within one year (154,184) (129,838) (141,404)
----------------------------------------------------------------------------------------------------------------------
Net current assets 28,295 14,992 33,846
----------------------------------------------------------------------------------------------------------------------
Total assets less current liabilities 178,471 136,748 180,325
Creditors: amounts falling due after more than one year (63,235) (51,878) (72,341)
Provisions for liabilities and charges (10,392) (6,814) (7,840)
----------------------------------------------------------------------------------------------------------------------
Net assets 104,844 78,056 100,144
======================================================================================================================
Capital and reserves
Called up share capital 6,507 5,974 6,498
Share premium account 35,374 22,266 35,293
Capital redemption reserve 7,629 7,629 7,629
Profit and loss account 50,430 40,876 46,494
----------------------------------------------------------------------------------------------------------------------
Equity shareholders' funds 99,940 76,745 95,914
Equity minority interests 4,904 1,311 4,230
----------------------------------------------------------------------------------------------------------------------
104,844 78,056 100,144
======================================================================================================================
Consolidated cash flow statement
for the half year ended 30 June 2003
Half year to Half year to Year to
30 June 30 June 31 December
2003 2002 2002
£'000 £'000 £'000
----------------------------------------------------------------------------------------------------------------------
Net cash inflow from operating activities 9,936 18,331 43,171
Returns on investment and servicing of finance (2,378) (2,171) (4,358)
Taxation (5,772) (5,817) (8,975)
Capital expenditure (7,489) (6,319) (12,700)
Acquisitions and disposals 207 (591) (32,042)
Equity dividends paid (4,404) (3,611) (5,609)
----------------------------------------------------------------------------------------------------------------------
Net cash (outflow) before use of liquid resources and financing (9,900) (178) (20,513)
Management of liquid resources 369 633 (61)
Financing (4,980) (6,641) 31,254
----------------------------------------------------------------------------------------------------------------------
(Decrease)/increase in cash in the period (14,511) (6,186) 10,680
----------------------------------------------------------------------------------------------------------------------
Exchange differences on cash balances 570 - 75
(Decrease)/increase in short term bank deposits (258) (691) 235
Decrease/(increase) in bank loans 3,676 6,043 (16,553)
Decrease in loan notes 1,451 2,776 1,595
Decrease/(increase) in finance leases 244 (169) (825)
----------------------------------------------------------------------------------------------------------------------
(Increase)/decrease in net debt (8,828) 1,773 (4,793)
Opening net debt (67,995) (63,202) (63,202)
----------------------------------------------------------------------------------------------------------------------
Closing net debt (76,823) (61,429) (67,995)
======================================================================================================================
Analysis of closing net debt
Cash in hand 10,257 6,460 13,865
Bank overdrafts (12,565) (11,768) (2,232)
----------------------------------------------------------------------------------------------------------------------
Net (overdraft)/cash (2,308) (5,308) 11,633
Short term bank deposits 2,083 1,415 2,341
Bank loans (69,871) (50,951) (73,547)
Loan notes (3,852) (4,122) (5,303)
Finance leases (2,875) (2,463) (3,119)
----------------------------------------------------------------------------------------------------------------------
Closing net debt (76,823) (61,429) (67,995)
======================================================================================================================
Notes to the interim report:
1. Basis of preparation
This interim report, which is unaudited, was approved by the board of
directors on 21 August 2003 and has been prepared following the
accounting policies set out in the Group's 2002 Annual Report and
Accounts. The figures for the year to 31 December 2002 have been
extracted from the 2002 Annual Report and Accounts which received an
unqualified auditors' report and which has been filed with the
Registrar of Companies.
2. Exchange rates
The exchange rates used in respect of principal currencies are
----------------------------------------------------------------------------------------------------------------------
Half year to Half year to Year to
30 June 30 June 31 December
2003 2002 2002
----------------------------------------------------------------------------------------------------------------------
Euro: average for period 1.46 1.61 1.59
period end 1.44 1.55 1.53
US Dollar: average for period 1.61 1.45 1.50
period end 1.65 1.53 1.60
Australian Dollar: average for period 2.62 2.70 2.77
period end 2.47 2.72 2.84
----------------------------------------------------------------------------------------------------------------------
3. Segmental analysis
Turnover and operating profit may be analysed as follows:
Half year to Half year to Year to
30 June 30 June 31 December
2003 2002 2002
£'000 £'000 £'000
----------------------------------------------------------------------------------------------------------------------
Turnover from continuing operations
Class of business
Foundations 198,848 173,839 361,441
Specialist services 79,882 76,655 149,530
----------------------------------------------------------------------------------------------------------------------
278,730 250,494 510,971
----------------------------------------------------------------------------------------------------------------------
Geographical origin
United Kingdom 57,142 50,228 106,738
The Americas 130,571 127,505 242,567
Continental Europe and Overseas 78,783 64,014 135,599
Australia 12,234 8,747 26,067
----------------------------------------------------------------------------------------------------------------------
278,730 250,494 510,971
======================================================================================================================
Operating profit from continuing operations before
exceptional items and amortisation of intangibles
Class of business
Foundations 13,237 10,767 27,678
Specialist services 3,053 4,233 8,829
----------------------------------------------------------------------------------------------------------------------
16,290 15,000 36,507
----------------------------------------------------------------------------------------------------------------------
Geographical origin
United Kingdom 930 1,771 4,323
The Americas 9,104 9,867 22,338
Continental Europe and Overseas 5,447 3,179 8,042
Australia 809 183 1,804
----------------------------------------------------------------------------------------------------------------------
16,290 15,000 36,507
Unallocated central costs (1,386) (1,174) (2,163)
----------------------------------------------------------------------------------------------------------------------
14,904 13,826 34,344
======================================================================================================================
3.Segmental analysis continued
Half Half
year to year to Year to
Amortisation Exceptional 30 June 30 June 31 December
of intangibles items 2002 2002 2002
£'000 £'000 £'000 £'000 £'000
Exceptional items and amortisation of
intangibles
Class of business
Foundations 439 330 769 169 292
Specialist services 1,476 418 1,894 1,398 2,808
----------------------------------------------------------------------------------------------------------------------
1,915 748 2,663 1,567 3,100
----------------------------------------------------------------------------------------------------------------------
Geographical origin
United Kingdom 252 748 1,000 144 376
The Americas 1,343 - 1,343 1,443 2,802
Continental Europe and Overseas 334 - 334 32 122
Australia (14) - (14) (52) (200)
----------------------------------------------------------------------------------------------------------------------
1,915 748 2,663 1,567 3,100
=======================================================================================================================
Exceptional items comprise reorganisation costs in respect of the UK
businesses. There were no exceptional items in the prior year.
4. Taxation
Taxation based on the profit on ordinary activities is:
----------------------------------------------------------------------------------------------------------------------
Half Half
year to year to Year to
30 June 30 June 31 December
2003 2002 2002
£'000 £'000 £'000
----------------------------------------------------------------------------------------------------------------------
UK corporation tax at 30% (2002:30%) (861) 87 342
Overseas tax 5,017 3,923 9,555
Deferred tax (104) 85 1,817
Under/(over) provisions in respect of prior periods 16 23 (1,030)
----------------------------------------------------------------------------------------------------------------------
4,068 4,118 10,684
======================================================================================================================
5. Dividends proposed and paid
----------------------------------------------------------------------------------------------------------------------
Ordinary dividends on equity shares 2,245 1,970 6,284
----------------------------------------------------------------------------------------------------------------------
The interim ordinary dividend of 3.45p per share (2002:3.3p) will be paid on 31 October 2003 to shareholders on
the register at 3 October 2003.
6. Earnings per share
Earnings per share is calculated as follows:
----------------------------------------------------------------------------------------------------------------------
2003 2002
Basic Diluted Basic Diluted
----------------------------------------------------------------------------------------------------------------------
Profit after tax and minority interests (earnings) £5,098,000 £5,098,000 £6,063,000 £6,063,000
----------------------------------------------------------------------------------------------------------------------
Earnings before exceptional items and
amortisation of intangibles £7,537,000 £7,537,000 £7,630,000 £7,630,000
----------------------------------------------------------------------------------------------------------------------
No of shares No of shares
----------------------------------------------------------------------------------------------------------------------
Weighted average of ordinary shares in issue 64,807,347 64,807,347 59,456,908 59,456,908
Weighted average of ordinary shares under option - 1,079,359 - 734,550
Weighted average of own shares held - 195,044 - 242,596
Number of shares assumed issued (at fair value) - (1,160,877) - (544,322)
----------------------------------------------------------------------------------------------------------------------
Adjusted weighted average of ordinary shares in issue 64,807,347 64,920,873 59,456,908 59,889,732
----------------------------------------------------------------------------------------------------------------------
Earnings per share 7.9p 7.9p 10.2p 10.1p
----------------------------------------------------------------------------------------------------------------------
Adjusted earnings per share* 11.6p 11.6p 12.8p 12.7p
======================================================================================================================
*Adjusted earnings per share is calculated before exceptional items and amortisation of intangibles.
7. Reconciliation of movements in shareholders' funds
As at As at As at
30 June 30 June 31 December
2003 2002 2002
£'000 £'000 £'000
----------------------------------------------------------------------------------------------------------------------
Profit for the period 5,098 6,063 16,413
Dividends (2,245) (1,970) (6,284)
Exchange differences 1,083 311 (107)
Issue of new shares* 90 70 13,621
----------------------------------------------------------------------------------------------------------------------
Net addition to shareholders' funds 4,026 4,474 23,643
Shareholders' funds at start of period 95,914 72,271 72,271
----------------------------------------------------------------------------------------------------------------------
Shareholders' funds at end of period 99,940 76,745 95,914
======================================================================================================================
* Shares include share premium
This information is provided by RNS
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