Keller Group plc (“Keller” or “the Group”), the international ground engineering specialist, issues this Interim Management Statement covering the period from 1 July to 17 November 2010.
Overview
Keller’s developing markets still present excellent growth opportunities. However, conditions in the Group’s mature markets continue to be difficult and the overall picture remains challenging.
In the four months to the end of October, like-for-like revenue was in line with the same period last year. This shows an improvement on the first six months, for which like-for-like revenue was down by 14% compared with the previous first half, in part reflecting the severe weather impact on many of the Group’s businesses. However, as anticipated at the time of the half-year results, intense competition in the Group’s mature markets has meant that margins have remained under pressure.
Management is implementing further cost reduction measures in its more difficult markets, which will result in a total of £3m of redundancy and other reorganisation costs in 2010, most of which will be incurred in the final quarter. After taking account of these charges, the Board expects the 2010 full-year results to be around the bottom end of the current range of market expectations.
Divisional Review
US
Conditions in the general US construction market overall remain challenging, although the rate of year-on-year decline in spending has slowed.
In the Group’s US foundation contracting businesses, contract awards since the half year and the order book at the end of October were both ahead of the same time last year. However, this has not yet fed through into higher activity levels and, as anticipated at the time of our half-year results, margins have remained under significant pressure. Trading within Suncoast continues to be challenging, with its residential and commercial high-rise markets still in the doldrums, and management has responded with further headcount reductions in the second half.
Continental Europe, Middle East & Asia (CEMEA)
Within Continental Europe, the Group’s Polish business has performed well in a market which remains strong and the business in Germany has continued to hold up. Elsewhere in Continental Europe, conditions in our other major markets remain difficult, necessitating further cost reduction measures, most notably in France and Spain.
With good demand for our products, we continue to grow profitably in India and our other Asian markets and the Middle East remains stable.
Australia
The Group’s Australian business is still performing strongly, largely on the back of infrastructure and resources-related projects. Looking ahead, this business should benefit from a number of major projects which are in the pipeline, albeit that some will not be awarded before late 2011.
The integration of Waterway, the near-shore marine foundation contractor acquired by the Group in June 2010, is progressing well and already several opportunities have been identified where synergies exist with one or more of the Group’s other Australian companies.
UK
The Group’s business in the UK has continued to be beset by very weak market conditions. Actions taken in the first half to reduce overheads and operating costs will not be sufficient to offset the impact on its full-year results of a reduction in volume in the second half.
Financial Position
The Group’s financial position remains strong, with net debt at the end of October standing at approximately £109m (30 June 2010: £121m). The Group continues to have sufficient available financing to meet all of its strategic and operational goals and the planned refinancing of the Group’s central banking facilities is expected to be completed by the end of the year.
Outlook
After charging £3m of redundancy and other reorganisation costs, most of which will be incurred in the final quarter, the Board expects the 2010 full-year results to be around the bottom end of the current range of market expectations.
The improvement in contract awards in the first half of the year has been maintained and, as at the end of October, the order book was 7% ahead of the same time last year on a constant currency basis, compared with 1% at the end of June. However, as previously stated, underlying margins are not expected to begin to improve until such time as there is confidence in a sustained recovery in volumes.
Keller will issue a routine pre-close statement in respect of the year ending 31 December 2010 on 17 December 2010.
This document contains forward-looking statements which have been made in good faith based on the information available at the time of its approval. It is believed that the expectations reflected in these statements are reasonable, but they may be affected by a number of risks and uncertainties that are inherent in any forward-looking statement which could cause actual results to differ materially from those currently anticipated.
Note to Editors
Keller is the world’s largest independent ground engineering specialist, providing technically advanced and cost-effective foundation solutions to the construction industry. With 2009 revenue of £1,038m, Keller is a member of the FTSE-250. It has around 6,000 staff world-wide, with offices in over 30 countries on five continents.
Keller is the market leader in the US and Australia; it has prime positions in most established European markets; and a strong profile in many developing markets.