Interim Results - Replacement
Keller Group PLC
22 August 2002
22 August 2002
Keller Group plc
Interim results - replacement
The issuer has made the following amendment to the Interim Results announcement
released on 22 August at 07:00 under RNS No. 2681A.
Within the detailed consolidated profit and loss account the figure for earnings
per share before amortisation of goodwill for the half year to 30 June 2002
should read 12.8p, and not 12.9p as previously stated.
All other details remain unchanged.
The full corrected version is shown below.
22 August 2002
Keller Group plc
Interim Results for the
Six Months Ended 30 June 2002
Keller Group plc ('Keller' or 'the Group'), the global construction services
group, reports an excellent set of results for the first half of 2002, further
underlining the Group's strong business fundamentals and its ability to generate
sustainable growth.
• Turnover increased by 32% to £250.5 million
• Profit before tax* up 41% to £12.0 million
• Earnings per share* increased 38% to 12.8p
• Strong operating cash flow and interest cover
• Operating margins increased to 5.5%
• Interim dividend raised 5% to 3.3p (2001: 3.15p)
* before goodwill amortisation
Tom Dobson, Keller Chief Executive said:
'These results continue to reflect the Group's inherent strength and highlight
our ability to create and exploit growth opportunities.
'The order book at the end of July, on a like-for-like basis, was some 13% ahead
of the previous year's exceptional level, demonstrating good organic growth.
Tender levels remain strong. In light of our current trading and the
opportunities facing the Group, we are confident that the results for the full
year will be good.'
Enquiries:
Tom Dobson Chief Executive, Keller 020 7950 2800
Justin Atkinson Finance Director, Keller 020 7950 2800
Reg Hoare Weber Shandwick Square Mile 020 7950 2800
Laurence Read Weber Shandwick Square Mile 020 7950 2800
A briefing for analysts will be held at 9.15 for 9.30 am on 22 August 2002 at
the offices of Weber Shandwick Square Mile, Aldermary House, 15 Queen Street,
London, EC4N 1TX.
Financial Overview
I am pleased to report another excellent set of results for the first half of
2002, with operating margins up from 4.7% in 2001 to 5.5%. Group sales were up
32% at £250.5m (2001: £189.2m), with profit before tax and goodwill amortisation
up 41% at £12.0m (2001: £8.5m). Earnings per share before goodwill amortisation
increased to 12.8p (2001: 9.3p), representing growth of 38%.
Operating cash flow at £18.3m (2001: £7.8m) was well in excess of operating
profit and reflects good management of working capital. The Group's EBITDA net
interest cover remained comfortable at almost 10 times on a pro forma, rolling
12-month basis.
Dividend
In light of this strong performance, the directors have declared an interim
dividend of 3.3p per share (2001: 3.15p), representing an increase of 5%. This
will be paid on 31 October 2002 to shareholders on the register at 4 October
2002. This increase is in line with our policy of reinvesting our strong cash
flow into 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.
Management Changes
Managing the next chapter of our growth, which we shall drive both organically
and through acquisition, will require dedicated leadership. In recognition of
this, Bob Rubright, who has been President of our North American foundations
operations since 1995, will now head all of our highly successful international
Foundation Services businesses. In addition, we have recruited Rob Ewen to lead
the next stage of development of our Specialist Services businesses, which now
account for 30% of our turnover and which continue to gain momentum. Refocusing
the Group around these two distinct profit streams, led by extremely capable
individuals, will enhance our ability to focus on strengthening our global
leadership in Foundation Services while expanding our range of Specialist
Services.
Foundation Services
The results of Foundation Services were excellent, with sales of £173.8m, (2001:
£162.2m) and operating profit before amortisation of goodwill of £10.6m (2001:
£9.1m), respectively some 7% and 16% ahead of the previous year.
North America
The markets served by our North American foundations businesses have remained
robust. Case Foundation, our large diameter caisson business based in Chicago,
had a particularly strong first half with good performances from all divisions.
Noteworthy jobs completed in the period included the foundations for a new
convention centre at Grand Rapids, Michigan and caisson work for the Gallery
Place development in Washington DC. In the south, Case Atlantic continued work
on the Cooper River Bridge in Charleston, South Carolina. This good performance
in Case contributed to an improvement in margins in our North American
foundations businesses from 7.4% to 8.1%.
In common with prior periods, Hayward Baker's sales were characterised by a
large volume of small to medium sized jobs across the United States. However,
sales also included work on a $23m jet grouting project at Wickiup Dam in
Oregon, which is due to complete late this year, some six months ahead of
schedule. The contribution of those businesses acquired by Hayward Baker over
the past two years was particularly encouraging and demonstrates the success of
its business model.
Continental Europe & Overseas
Our Continental Europe & Overseas business had a very good first half with sales
some 23% ahead of the previous year, while margins improved slightly to 5%.
Despite the continuing slow down in the German construction industry, our
operation in Germany further improved its share of the market with sales growing
by 7% and margins holding steady. This good result was underpinned by strong
performance in our niche markets of soilfrac, vibro systems and compaction
grouting. For example, the latter system was chosen for a remedial contract at
the site of a new major retail store in Dortmund, where uneven settlements of
the floor slab necessitated ground treatment. Last year's strong performance in
France continued through the first half of 2002, including a major foundation
contract in the Rhone-Alp region for a new bottled water storage facility.
Towards the end of the period, our Austrian business improved, while production
in the Czech Republic and Slovakia remained steady. In line with its strategy
of taking Keller technologies to new territories, the business acquired a 51%
stake in Geotechnik, a regional ground treatment specialist contractor in
Croatia, enabling Keller to increase its penetration in the Balkans.
Our Overseas business saw good growth, with the Far East operations benefiting
from several large vibro contracts for land reclamation projects, including two
sand compaction contracts in Singapore with a combined value of €27.8m, both of
which are progressing well. We also saw some improvement in market conditions
in the Middle East with good performances from our operations in Dubai and Saudi
Arabia. In May, Keller's first stone column project in India got underway
involving ground improvement work to reduce the risk of soil liquefaction in
earthquake prone Gujarat.
UK
Market conditions in the UK foundations sector remained stable, with the housing
sector continuing to be strong and the commercial and infrastructure sectors
running at similar levels to last year. While volumes were some 6% down on the
same period last year, margins improved from 1.9% to 3.1%, reflecting our
strategy of concentrating on our higher margin products. Major contracts
undertaken during the period included a ground improvement project for a new
power station at Spalding in Lincolnshire and vibro stone columns for a new
school in Dalkeith. In May, we were awarded a £7.2m large diameter piling
contract for a section of the Channel Tunnel Rail Link, a project which will
gain momentum during the second half of 2002. In the housing sector we have
provided package schemes to some of the UK's leading house builders, where we
have combined systems such as piling, vibro and earth retention to offer
economic solutions to difficult foundation problems. We welcome the news of
increased government spending on health, education, housing and infrastructure,
which should inject some additional impetus into the construction market.
Australia
Following a sluggish start to the year, activity improved through the period.
The largest contract carried out in the first six months was the Victoria Towers
project in Melbourne, where Franki drove pre-cast, concrete piles to support the
structure. Work was also completed on the Eureka project in Melbourne, where
we worked in joint venture with Vibropile to complete this difficult bored pile
contract. Whilst small, our Indonesian subsidiary performed very well during
the period, undertaking a variety of small jobs to support mainly commercial
developments.
Since the end of the half year, we have bought out the local management's 15%
minority interest in our Australian subsidiary, Keller Australia, for AU$0.9m
(£0.3m). This gives Keller the full benefit of future value creation. In
addition, we have acquired the assets of Vibro-pile (Aust) Pty Limited ('
Vibropile'), the Melbourne-based foundation drilling contractor, for a cash
consideration of AU$5.3m (£1.9m). This acquisition will consolidate our
position as foundations market leader in Australia and its products will
complement the excellent range of services already offered by our Australian
business. Vibropile has been a much respected competitor with whom we have
enjoyed good co-operation over a number of years and we are delighted that their
drilling skills and expertise will now be available within Keller.
Specialist Services
Specialist Services returned a good set of results, with sales of £76.7m and an
operating profit before amortisation of goodwill of £4.4m. A full first half
contribution from Suncoast is included in the results for the first time.
Suncoast
The integration of Suncoast, which we acquired on 1 October 2001, is progressing
well. As planned, we strengthened the management team and installed new
processes and procedures to ensure that the business infrastructure has the
capacity and strength to support its future growth.
The business adapted well to these changes and we are encouraged by Suncoast's
performance in the first half. Sales in the slab on grade market remained
strong, buoyed by the residential market, which held up well during the first
half. This is particularly true of the Southern States from which Suncoast
derives the vast majority of its sales. Progress was also achieved in entering
new markets such as Arizona and California, with the Northern California market,
in particular, presenting opportunities for growth. As expected, there was some
weakness in high rise activity during the period. This is being addressed by an
additional sales drive in Atlanta, Denver and Chicago, where we are using
existing Group resources to nurture new opportunities. Margins achieved were in
line with our expectations at the time of the acquisition and, with new control
systems, we see opportunities for improvement in the future.
Makers
After a year of consolidation for Makers in 2001, in which we strengthened the
core business systems to create a firm platform for growth, the first half of
2002 started to show the fruits of that investment, with a 13% increase in
turnover and an improvement in margins.
The strong performance was reflected across all Makers' business units, but was
particularly marked in the social housing sector. The growing tendency for
local authorities to embrace partnering agreements plays to Makers' strengths,
having an established culture of teamwork and customer focus. The success of
the current partnering arrangements with the City of Westminster and others, for
social housing refurbishment, is expected to spawn significant growth
opportunities as increasing numbers of local authorities adopt partnering
practices. The move into reactive maintenance, through the Makers Haywards
joint venture which was announced in February and began operations in June of
this year, has got off to a good start.
We continue to foster our relationship with BAA for the repair of car parks and
to see other partnership opportunities in this market. During the first half of
this year we completed our first new build car park project at Amersham, where
our experience in repair and maintenance was utilised to build an efficient car
park design.
Since the period end, we have acquired Accrete Limited, a specialist concrete
repair business providing a national service to the UK water industry, for an
initial cash consideration of £3.0m and deferred consideration of up to £0.9m.
The acquisition will enhance the position of the Makers utilities division as a
major partnering contractor in the water sector.
Strategy
We now have a management structure that is aligned with our strategic objective:
to further develop our global leadership in our core foundations business and
expand the range of specialist products and services we offer to the built
environment. To meet this objective, we shall continue to pursue organic
growth in our Foundation Services businesses while taking advantage of
acquisition opportunities when they arise and where they offer earnings
enhancement and growth. In the Specialist Services sector we shall continue to
invest in the growth of Makers and Suncoast and, at the same time, continue to
seek acquisition opportunities to broaden our offering of technical services and
products.
Outlook
The order book at the end of July, on a like-for-like basis, was some 13% ahead
of the previous year's exceptional level, demonstrating good organic growth.
Tender levels remain strong. In light of our current trading and the
opportunities facing the Group, we are confident that the results for the full
year will be good.
Dr J.M.West
Chairman
22 August 2002
Consolidated profit and loss account
for the half year ended 30 June 2002
Half year to Half year to Year to
30 June 30 June 31 December
2002 2001 2001
Note £'000 £'000 £'000
------------ ------------ ------------
Turnover from continuing operations 3 250,494 189,204 422,248
Operating costs (238,235) (180,525) (398,070)
------------ ------------ ------------
Operating profit before amortisation of goodwill 13,826 8,977 25,429
Amortisation of goodwill (1,567) (298) (1,251)
------------ ------------ ------------
Operating profit from continuing operations 3 12,259 8,679 24,178
Net interest payable (1,822) (464) (1,785)
------------ ------------ ------------
Profit on ordinary activities before taxation 10,437 8,215 22,393
Taxation 4 (4,118) (3,168) (8,684)
------------ ------------ ------------
Profit on ordinary activities after taxation 6,319 5,047 13,709
Equity minority interests (256) (92) (342)
------------ ------------ ------------
Profit for the period 6,063 4,955 13,367
Dividends proposed and paid 5 (1,970) (1,790) (5,401)
------------ ------------ ------------
Retained profit for the period 4,093 3,165 7,966
------------ ------------ ------------
Earnings per share 6 10.2p 8.8p 23.6p
Earnings per share before amortisation of goodwill 12.8p 9.3p 25.8p
Diluted earnings per share 6 10.1p 8.7p 23.4p
Diluted earnings per share before amortisation of
goodwill 12.7p 9.2p 25.6p
Dividend per share 5 3.3p 3.15p 9.2p
------------ ------------ ------------
Consolidated statement of total recognised gains and losses
for the half year ended 30 June 2002
Year to
Half year to Half year to 31 December
30 June 2002 30 June 2001 2001
£'000 £'000 £'000
------------ ------------ ------------
Profit for the period 6,063 4,955 13,367
Currency translation differences on overseas investments 311 1,010 (555)
------------ ------------ ------------
Total recognised gains and losses 6,374 5,965 12,812
------------ ------------ ------------
Consolidated balance sheet
as at 30 June 2002
As at As at As at
30 June 30 June 31 December
2002 2001 2001
£'000 £'000 £'000
------------ ------------ ------------
Fixed assets
Positive goodwill 58,467 12,160 60,752
Negative goodwill (53) (157) (105)
------------ ------------ ------------
58,414 12,003 60,647
Other intangible assets 337 417 372
------------ ------------ ------------
Intangible assets 58,751 12,420 61,019
Tangible assets 61,626 52,625 59,277
Investments 1,379 - -
------------ ------------ ------------
121,756 65,045 120,296
------------ ------------ ------------
Current assets
Stocks 12,141 6,541 12,466
Debtors 124,814 105,900 120,318
Cash at bank and in hand 7,875 8,720 12,209
------------ ------------ ------------
144,830 121,161 144,993
Creditors: amounts falling due within one year (129,838) (103,530) (129,143)
------------ ------------ ------------
Net current assets 14,992 17,631 15,850
------------ ------------ ------------
Total assets less current liabilities 136,748 82,676 136,146
Creditors: amounts falling due after more than one year (51,878) (14,718) (56,825)
Provisions for liabilities and charges (6,814) (6,081) (6,046)
------------ ------------ ------------
Net assets 78,056 61,877 73,275
------------ ------------ ------------
Capital and reserves
Called up share capital 5,974 5,683 5,968
Share premium account 22,266 14,558 22,202
Capital redemption reserve 7,629 7,629 7,629
Profit and loss account 40,876 33,236 36,472
------------ ------------ ------------
Equity shareholders' funds 7 76,745 61,106 72,271
Equity minority interests 1,311 771 1,004
------------ ------------ ------------
78,056 61,877 73,275
------------ ------------ ------------
Consolidated cash flow statement
for the half year ended 30 June 2002
Half year to Half year to Year to
30 June 30 June 31 December
2002 2001 2001
£'000 £'000 £'000
------------ ------------ ------------
Net cash inflow from operating activities 18,331 7,788 32,187
Returns on investment and servicing of finance (2,171) (536) (3,301)
Taxation (5,817) (3,392) (8,237)
Capital expenditure (6,319) (4,914) (10,234)
Acquisitions and disposals (591) (548) (67,330)
Equity dividends paid (3,611) (3,210) (5,000)
------------ ------------ ------------
Net cash outflow before use of liquid resources and financing (178) (4,812) (61,915)
Management of liquid resources 633 2,176 947
Financing (6,641) (2,230) 52,181
------------ ------------ ------------
Decrease in cash in the period (6,186) (4,866) (8,787)
------------ ------------ ------------
Exchange differences on cash balances - 10 (30)
Decrease in short term deposits (691) (2,182) (947)
Decrease/(increase) in bank loans 6,043 1,670 (43,427)
Decrease in loan notes 2,776 57 170
(Increase)/decrease in finance leases (169) 82 (570)
------------ ------------ ------------
Decrease/(increase) in net debt 1,773 (5,229) (53,591)
Opening net debt (63,202) (9,611) (9,611)
------------ ------------ ------------
Closing net debt (61,429) (14,840) (63,202)
------------ ------------ ------------
Analysis of closing net debt
Cash in hand 6,460 7,798 10,103
Bank overdrafts (11,768) (2,991) (9,225)
------------ ------------ ------------
Net (overdraft)/cash (5,308) 4,807 878
Short term bank deposits 1,415 922 2,106
Bank loans (50,951) (11,936) (56,994)
Loan notes (4,122) (7,011) (6,898)
Finance leases (2,463) (1,622) (2,294)
------------ ------------ ------------
Closing net debt (61,429) (14,840) (63,202)
------------ ------------ ------------
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 2002 and has been prepared
following the accounting policies set out in the Group's 2001 Annual Report and Accounts. The figures for the year to
31 December 2001 have been extracted from the 2001 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
2002 2001 2001
------------ ------------ ------------
Euro: average for period 1.61 1.60 1.61
period end 1.55 1.66 1.64
US Dollar: average for period 1.45 1.44 1.44
period end 1.53 1.41 1.45
Australian Dollar: average for period 2.70 2.76 2.79
period end 2.72 2.77 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
2002 2001 2001
£'000 £'000 £'000
------------ ------------ ------------
Turnover from continuing operations
Class of business
Foundations 173,839 162,174 347,826
Specialist services 76,655 27,030 74,422
------------ ------------ ------------
250,494 189,204 422,248
------------ ------------ ------------
Geographical origin
United Kingdom 50,228 48,128 100,130
The Americas 127,505 81,187 188,761
Continental Europe and overseas 64,014 52,159 115,008
Australia 8,747 7,730 18,349
------------ ------------ ------------
250,494 189,204 422,248
------------ ------------ ------------
Operating profit from continuing operations
Class of business
Foundations 10,412 8,897 23,216
Specialist services 3,021 681 2,762
------------ ------------ ------------
13,433 9,578 25,978
------------ ------------ ------------
Geographical origin
United Kingdom 1,627 1,074 3,167
The Americas 8,424 5,848 16,344
Continental Europe and overseas 3,147 2,426 5,820
Australia 235 230 647
------------ ------------ ------------
13,433 9,578 25,978
Unallocated central costs (1,174) (899) (1,800)
------------ ------------ ------------
12,259 8,679 24,178
------------ ------------ ------------
4. Taxation
Taxation based on the profit on ordinary activities is:
Half year to Half year to Year to
30 June 30 June 31 December
2002 2001 2001
£'000 £'000 £'000
------------ ------------ ------------
UK corporation tax at 30% (2001:30%) 87 227 411
Overseas tax 3,923 4,570 9,286
Deferred tax 85 (1,685) (1,049)
Under provisions in respect of prior periods 23 56 36
------------ ------------ ------------
4,118 3,168 8,684
------------ ------------ ------------
5. Dividends proposed and paid
------------ ------------ ------------
Ordinary dividends on equity shares 1,970 1,790 4,829
------------ ------------ ------------
The interim ordinary dividend of 3.3p per share (2001: 3.15p) will be paid on 31 October 2002 to shareholders
on the register at 4 October 2002.
6. Earnings per share
Earnings per share is calculated as follows:
2002 2001
Basic Diluted Basic Diluted
---------- ---------- ---------- ----------
Profit after tax and minority interests (earnings) £6,063,000 £6,063,000 £4,955,000 £4,955,000
------------- ------------- ------------- -------------
Earnings before amortisation of goodwill £7,630,000 £7,630,000 £5,253,000 £5,253,000
------------- ------------- ------------- -------------
No of shares No of shares
----------------------- ----------------------
Weighted average of ordinary shares in issue 59,456,908 59,456,908 56,499,561 56,499,561
Weighted average of ordinary shares under option - 734,550 - 282,630
Weighted average of own shares held - 242,596 - 318,000
Number of shares assumed issued (at fair value) - (544,322) - (210,857)
------------- ------------- ------------- -------------
Adjusted weighted average of ordinary shares in issue 59,456,908 59,889,732 56,499,561 56,889,334
------------- ------------- ------------- -------------
Earnings per share 10.2p 10.1p 8.8p 8.7p
------------- ------------- ------------- -------------
Earnings per share before amortisation of goodwill 12.8p 12.7p 9.3p 9.2p
------------- ------------- ------------- -------------
7. Reconciliation of movement in shareholders' funds
As at As at As at
30 June 30 June 31 December
2002 2001 2001
£'000 £'000 £'000
------------ ------------ ------------
Profit for the period 6,063 4,955 13,367
Dividends (1,970) (1,790) (5,401)
Exchange differences 311 1,010 (555)
Issue of new shares* 70 15 7,944
------------ ------------ ------------
Net addition to shareholders' funds 4,474 4,190 15,355
Shareholders' funds at start of period
------------ ------------ ------------
As previously reported 72,271 57,997 57,997
Prior year adjustment (see note 8) - (1,081) (1,081)
------------ ------------ ------------
As restated 72,271 56,916 56,916
------------ ------------ ------------
Shareholders' funds at end of period 76,745 61,106 72,271
* Shares include share premium ------------ ------------ ------------
8. Prior year adjustment - deferred tax
The Group implemented FRS 19 - Deferred Tax during 2001. The change required
provision for taxation in respect of all timing differences. This represented a
change in accounting policy and therefore resulted in a prior year adjustment.
The charge to reserves brought forward at 31 December 2000 amounted to
£1,081,000.
9. Post balance sheet events
Since the balance sheet date the Group has bought out the 15% minority interest
in its Australian subsidiary, Keller Australia, for £0.3m. Keller Australia
has purchased the assets of Vibro-pile (Aust) Pty Ltd for a cash consideration
of £1.9m. Makers UK Ltd has purchased Accrete Limited for an initial cash
consideration of £3m and deferred consideration of up to £0.9m.
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