TIDMKLR
RNS Number : 0747W
Keller Group PLC
30 July 2018
For immediate release 30 July 2018
Keller Group plc
Results for the six months ended 30 June 2018
Keller Group plc ("Keller" or "the group"), the world's largest
geotechnical contractor, announces its results for the six months
ended 30 June 2018.
Constant currency
H1 2018 H1 2017 % change
GBPm GBPm % change
---------- ---------- -----------
Revenue 1,075.1 991.1 +8% +15%
Underlying EBITDA(1) 83.5 78.1 +7% +15%
Underlying operating profit(1) 49.1 44.0 +12% +22%
Underlying profit before tax(1) 42.2 39.3 +7% +18%
Underlying earnings per share(1) 41.0p 35.0p +17% +29%
Interim dividend per share 12.0p 9.7p +24% +24%
Statutory operating profit 42.8 60.4 (29)% (25)%
Statutory profit before tax 35.9 55.2 (35)% (31)%
Statutory earnings per share 33.9p 57.0p (41)% (37)%
---------------------------------- ---------- ---------- ----------- ------------------
(1) Before pre-tax non-underlying costs of GBP6.3m (H1 2017:
credit of GBP15.9m). The H1 2017 statutory profit included a
GBP21.0m credit from an exceptional contract dispute. Details of
the non-underlying items are set out in note 6 of the consolidated
financial information.
H1 2018 summary:
-- Record first half revenue of GBP1,075m driven by constant currency growth of 15%
-- Strong underlying constant currency operating profit growth of 22%
-- Divisional performance
-- North America: strong growth in both revenue and profit,
despite poor weather in the first quarter
-- EMEA: solid performance with profits maintained despite less
revenue from large projects and a harsh winter
-- APAC: losses substantially reduced; profitable second quarter and an encouraging order book
-- Tendering activity remains positive and the order book
remains healthy - up 1% excluding the Caspian project, giving
confidence for the full year
-- Net debt increased to GBP367m, representing 1.9x annualised
EBITDA, due to the Moretrench acquisition, strong organic growth
and normal seasonal working capital outflows - currently expected
to be around 1.5x at year end
-- Underlying earnings per share increased 17% to 41.0p
-- Interim dividend per share of 12.0p, up 24%, following the
upward rebasing of the 2017 full year dividend
Alain Michaelis, Chief Executive, said:
"We remain encouraged by the group's progress. Despite a harsh
northern hemisphere winter, we are reporting a strong financial
performance for the first half of the year. Broadly healthy
markets, consistent operational delivery and business improvement
projects have all contributed to this performance. We remain well
positioned to benefit from the global trends of urbanisation and
infrastructure growth and we continue to advance our strategic
objectives. We are confident of making further progress in the
second half."
Basis of preparation
The group's results as reported under International Financial
Reporting Standards (IFRS) and presented in the financial
statements (the "statutory results") are significantly impacted by
movements in exchange rates relative to sterling, as well as by
exceptional items and non-trading amounts relating to
acquisitions.
As a result, adjusted performance measures have been used
throughout this report to describe the group's underlying
performance. The Board and Executive Committee use these adjusted
measures to assess the performance of the business because they
consider them more representative of the underlying ongoing trading
result and allow more meaningful comparison to prior year. Where
not presented on the face of the consolidated income statement,
balance sheet or cash flow statement, the adjusted measures are
defined and reconciled to the amounts reported under IFRS in the
adjusted performance measures section at the end of this
statement.
The constant currency basis ("constant currency") adjusts the
comparative to exclude the impact of movements in exchange rates
relative to sterling on the translation of the results of overseas
operations. Retranslating at 2018 average exchange rates decreases
the first half 2017 revenue and underlying operating profit by
GBP56.4m and GBP3.6m respectively.
The term 'underlying' excludes the impact of exceptional items,
amortisation of acquired intangible assets and other non-trading
amounts relating to acquisitions (collectively 'non-underlying
items'), net of any associated tax. Pre-tax non-underlying items of
GBP6.3m mainly comprise GBP5.8m of amortisation of acquired
intangible assets.
Group overview
Financial results
Group revenue for the period was GBP1,075.1m, up 8% on the first
half of 2017. On a constant currency basis and excluding
acquisitions revenue was up 13%, primarily as a result of strong
organic growth in North America and APAC. Constant currency revenue
in EMEA was down 4% year on year due to the completion of the two
large projects early in 2018.
Underlying operating profit was GBP49.1m, an increase of 12% on
the GBP44.0m generated in the first half of 2017. On a constant
currency basis underlying operating profit was up 22%, despite the
first quarter's trading being impacted by poor weather conditions
in both North America and Europe. This increase in profitability
reflects an improved underlying performance in North America and a
much improved result in APAC. The group underlying operating margin
increased from 4.4% to 4.6%, mainly reflecting the better
performance in APAC.
After taking account of GBP5.8m of amortisation of acquired
intangible assets and a GBP0.5m charge relating to other
non-underlying items, the statutory operating profit was GBP42.8m
(H1 2017: GBP60.4m). The decrease in statutory operating profit is
mainly due to a credit of GBP21.0m in the first half of 2017
relating to an exceptional contract dispute.
On an underlying basis, after net finance costs of GBP6.9m (H1
2017: GBP4.7m), the profit before tax was GBP42.2m, up 7% compared
to the first half of 2017. Tax has been provided on the underlying
profits at the expected 2018 full year rate of 28%, above the full
year 2017 rate of 25% as the latter benefitted from a large credit
for the revaluation of US deferred tax liabilities following the
recent US tax reforms.
Underlying earnings per share for the period were 41.0p (H1
2017: 35.0p), an increase of 17%. On a constant currency basis,
underlying earnings per share were up 29%.
The statutory profit before tax was down to GBP35.9m (H1 2017:
GBP55.2m). After the statutory tax charge of GBP10.6m (H1 2017:
GBP13.5m), statutory profit after tax was GBP25.3m (H1 2017:
GBP41.7m) and statutory earnings per share were 33.9p, compared
with 57.0p in 2017.
Cash generated from operations before non-underlying items was
GBP7.4m (H1 2017: GBP3.7m outflow). Net debt at the end of June was
GBP367.0m (30 June 2017: GBP297.3m), representing 1.9x annualised
underlying EBITDA. The financial position of the group remains
strong with undrawn committed borrowing facilities totalling
GBP110m. The group continues to operate well within all of its
financial covenants and, given the seasonally much stronger cash
flow in the second half of the year, the net debt to EBITDA ratio
is currently expected to be around 1.5x at the year end.
The group continues to invest in growing and upgrading its
equipment capability, with net capital expenditure of GBP38.9m in
the first half of 2018, representing 1.2x depreciation.
We continue to see tangible benefits coming from the group's
business improvement initiatives. We remain confident that these
initiatives will produce the targeted GBP50m of gross benefits by
2020, of which we continue to expect about half will be reflected
in improved profitability.
Interim dividend
At the time of the group's 2017 preliminary results, we
announced that the Board had decided to rebase the dividend, in
part due to ongoing benefits expected from the US tax reforms
announced in December. We therefore announced an increase of 20% in
the total 2017 dividend to 34.2p.
The Board has therefore decided to recommend an interim dividend
for 2018 of 12.0p (H1 2017: 9.7p). This is consistent with the
group's usual approach of paying an interim dividend representing
about a third of the total year's expected dividend payments, and
it is currently expected that the full year dividend will therefore
represent a 5% increase on the full year 2017. The dividend will be
paid on 3 September 2018 to shareholders on the register as at the
close of business on 10 August 2018. As previously stated, the
group intends to maintain a progressive dividend policy in the
future.
Outlook
Customer orders have been healthy in the first half of the year
and the group order book remains over GBP1bn. There are increases
in North America and APAC, largely offset by a decrease in
EMEA.
The majority of our markets remain robust; bidding activity is
at a healthy level and Keller is well positioned to address the
continuing global market trends of urbanisation and infrastructure
growth. There is good momentum in most of our business units and we
continue to expect APAC to record a full year profit in 2018.
EMEA's underlying business performance remains healthy, and our
North America business has returned to growth. As a result, the
Board expects further progress during the second half, and remains
confident that the group's full year results will be in line with
its expectations.
Board changes
As announced on 18 July 2018, James Hind, currently the group's
Finance Director, is appointed President of Keller's North America
division, remaining an Executive Director, and Michael Speakman
joins Keller as Chief Financial Officer and an Executive Director,
both effective from 20 August 2018.
Keller has today separately announced that Chris Girling,
independent Non-executive Director and Chairman of the Audit
Committee, has decided to retire from the Board at the conclusion
of the Company's Annual General Meeting to be held in May 2019,
having served on the Board for 8 years. Chris will step down as
Chairman of the Audit Committee with effect from 1 January
2019.
Paula Bell will join the Board as an independent Non-executive
Director with effect from 1 September 2018, and succeed Chris
Girling as Audit Committee Chairman on 1 January 2019. Baroness
Kate Rock also joins the Board on 1 September 2018 as an
independent Non-executive Director.
Divisional results - underlying
North America
H1 2018 H1 2017 Constant
currency
GBPm GBPm
---------------------- -------- --------
Revenue 534.3 474.5 +23%
Underlying operating
profit 31.7 28.6 +21%
Underlying operating
margin 5.9% 6.0%
---------------------- -------- -------- ----------
In North America, which accounts for around half the group's
revenue, we saw strong constant currency growth in both revenue and
underlying profit over what was a relatively weak first half of
2017. About one quarter of this growth was attributable to
Moretrench, a business acquired at the end of March 2018. The
underlying operating margin was only slightly down at 5.9%, despite
the poor weather in the first two months of the year and a
reduction in Suncoast's margin as a result of rising steel
prices.
The US construction market as a whole remains solid. Total
construction spend in the US in the first five months of 2018 was
up 4% vs the same period in 2017, driven by residential
construction which grew by 6%. Elsewhere, public expenditure on
construction was up 4% year-on-year whilst private non-residential
spend was up 2%.
After difficult conditions due to prolonged periods of poor
weather early in the year, the US business performance improved
significantly in the second quarter. For the first half as a whole,
all the business units have recorded good revenue growth.
Hayward Baker, our largest and most diverse business, continues
to successfully leverage its engineering expertise to deliver a
wide variety of projects across the whole of the US, using multiple
techniques. Elsewhere, Case is recovering well from a disappointing
2017 with a much improved performance. Our other US piling
businesses McKinney, which operates in the south and east of the
country, and HJ, based in Miami, also performed well in the first
half.
Early signs from Moretrench, the business we acquired in March
for $90m, are positive. The integration with the rest of the
business is going to plan and the targeted cost reductions will be
achieved. Moretrench has a strong order book and its niche
products, ground freezing and dewatering, are being embraced by the
other Keller businesses where appropriate.
Suncoast, the group's post-tension business which mainly serves
the residential construction market, showed good revenue growth in
the period, benefitting from a continued increase in housing starts
in its markets. However, the business continues to face some
significant raw material price increases which it has to date been
unable to recover from customers in full. As a result, its profit
in the first half is significantly down year-on-year.
Our business in Canada continues with its steady recovery. Its
large Toronto subway job is progressing well and is now over 50%
complete, and the business has a healthy order book going into the
second half. We also invested in the first half in developing new
product capabilities for the growing Vancouver market.
We continue to focus on leveraging scale and expertise within
the North American division and there is an ever increasing level
of collaboration between the North American business units. This is
evidenced both outwardly by the number of multi-product projects
bid and executed jointly by two or more business units, as well as
through an increase in business units working together in
functional arenas such as procurement, marketing and health and
safety. The division's largest new project in the first half
involved three business units working collaboratively together on
the foundations for a new data centre, performing several different
piling techniques as well as some significant grouting work. We
look to further develop these opportunities following the
organisational changes that we announced on 18 July - appointing
James Hind to lead the division and Eric Drooff as Chief Operating
Officer, North America.
Europe, Middle East & Africa (EMEA)
H1 2018 H1 2017 Constant
currency
GBPm GBPm
---------------------- -------- --------
Revenue 324.7 346.4 (4)%
Underlying operating
profit 19.7 20.0 +5%
Underlying operating
margin 6.1% 5.8%
---------------------- -------- -------- ----------
In EMEA, reported revenue declined by 6%, largely as a result of
the completion of our Caspian project early in the year. On a
constant currency basis, revenue for the division as a whole was
down 4%. However, beneath the total divisional picture there was
constant currency growth of 11% in Europe, which accounts for
around 70% of the division's 2018 revenue, offset by a reduction in
revenues elsewhere, most notably the Caspian region, and in the
Middle East following the completion of large projects.
The division's underlying operating profit was flat
year-on-year, whilst the underlying operating margin increased from
5.8% to 6.1%. The first half profit benefitted from the successful
resolution of open commercial items at the completion of the two
large projects which together totalled about GBP6m. Looking
forward, as a result of the completion of these projects the
division's revenue and profit in the second half of the year will,
as expected, be significantly below that achieved in the second
half of 2017.
Our core businesses in continental Europe continue to perform
well, reflecting strong project execution and favourable
construction markets. We recently completed the acquisition of
Sivenmark, a small sheet piling business in Sweden. This, together
with a small acquisition in Finland in 2017 and some good contract
wins, means that the group is building a more meaningful presence
in Scandinavia. We recently secured a GBP15m project in Stockholm
on which Keller's pre-existing Swedish business will work alongside
Sivenmark.
The UK, which represents 3% of overall group revenue, is having
a quiet year in a more difficult market. However the major
infrastructure projects forthcoming in the UK, most notably HS2,
mean that the market for geotechnical work should increase
noticeably in 2019 and 2020. We continue to target significant work
on HS2, although any such work is not expected to commence until
well into 2019.
The Middle East had a relatively quiet first half following the
completion of large projects in Abu Dhabi and Egypt. However, we
are close to securing some significant projects in the region,
which should result in a busier second half. The GBP28m Mostaganem
project in Algeria, where we are installing stone columns to
mitigate liquefaction and bored piles for a new power plant, is
progressing well.
Our businesses in Africa and Brazil are both challenged by very
difficult economic and political backdrops. We continue to take
actions to adjust our cost base in these regions.
Asia-Pacific (APAC)
H1 2018 H1 2017 Constant
currency
GBPm GBPm
----------------------------- -------- --------
Revenue 216.1 170.2 +34%
Underlying operating loss (0.4) (3.8) n/a
Underlying operating margin (0.2)% (2.2)%
------------------------------ -------- -------- ----------
In APAC, constant currency revenue was up 34% with significant
increases in both Asia and Australia. Following two years of
material losses, the division was broadly break even in the first
half, recording a loss of GBP0.4m, demonstrating the positive
effects of the significant restructuring and rebuilding actions we
have undertaken in the region. The division was profitable in the
second quarter and we are confident that APAC will be profitable
for the year as a whole, and that its performance will continue to
improve.
In general, our markets in APAC continue to show signs of
recovery, in particular in the Australian mining and infrastructure
sectors. The surprise election result in Malaysia however means
that the major infrastructure projects planned in the country have
been put on hold.
Australia
The group's geotechnical business in Australia had an improved
first half, with revenue significantly up on 2017. Pricing in some
sectors remains challenging, but investment in infrastructure in
Australia is now robust, and the order book for this business is
encouraging. We were pleased to announce in May that our 50:50
joint venture with Intrafor had been awarded a GBP113m contract for
work on the Metro Tunnel Project in Melbourne. The contract is to
construct the sub-structure retention walls and foundation piling
for five new underground stations. Keller and Intrafor provided a
significant amount of early technical advice to optimise design and
buildability. Work is already underway. The majority of the project
will finish in mid-2019, although some work will continue through
to 2020.
Our near shore marine businesses have had a mixed start to the
year. Waterway has struggled with low volumes, but Austral, which
does most of its work for the resources industry, grew its revenue
and profits substantially and has a strong order book going into
the second half.
Asia
Our business in Singapore and Malaysia continues to improve in
what remains a challenging market. We have recently introduced new
management and continue to build capability in the region. Whilst
consistently realising good contract margins remains a challenge,
it is encouraging that the business made a small profit in the
second quarter.
Keller India has again shown strong revenue and profit growth.
Demonstrating strong collaboration between business units, we won
our first near shore marine contract in Kattupalli, with expertise
drawn from colleagues in Australia.
Other financial items
Non-underlying items
Non-underlying items before taxation totalled GBP6.3m before tax
in the first half of 2018. These comprise GBP5.8m of amortisation
of acquired intangible assets and GBP0.5m of other items relating
to acquisitions.
Interest
Underlying net finance costs were GBP6.9m (2017: GBP4.7m), due
to both a higher level of average net debt and higher rates.
Statutory net finance costs increased from GBP5.2m in the first
half of 2017 to GBP6.9m in the first half of 2018.
Tax
The group's underlying effective tax rate for the period was
28.0%, a significant reduction on the 2017 first half effective
rate of 34.0%. This is mainly attributable to the benefit from the
US tax reforms announced in December 2017.
A non-underlying tax credit of GBP1.2m has been recognised,
representing the net tax impact of the 2018 non-underlying
items.
Cash flow and financing
Cash generated from operations before non-underlying items was
GBP7.4m (H1 2017: GBP3.7m outflow). After taking account of net
capital expenditure of GBP38.9m in the first half (H1 2017:
GBP31.5m) and interest and tax payments, there was a free cash
outflow of GBP44.1m (H1 2017: outflow of GBP49.8m). On a constant
currency basis and excluding acquisitions, working capital
increased by GBP73.1m (H1 2017: an increase of GBP84.4m),
reflecting the strong organic growth as well as the usual seasonal
movement.
Net underlying capital expenditure in the period totalled
GBP38.9m (H1 2017: GBP31.5m), compared to depreciation and
amortisation of GBP34.4m. The group continues to invest in
transferring technologies into new geographies and to expand and
upgrade the equipment fleet.
At 30 June 2018, net debt amounted to GBP367.0m (30 June 2017:
GBP297.3m, 31 December 2017: GBP229.5m). The increase in net debt
is explained as follows:
GBPm
Net debt at 1 January 2018 (229.5)
--------
Free cash outflow (44.1)
--------
Dividends (17.6)
--------
Foreign exchange movements (3.9)
--------
Non-underlying items (0.5)
--------
Acquisitions (71.4)
--------
Net debt at 30 June 2018 (367.0)
--------
Net debt represents 1.9x underlying annualised EBITDA on a
headline basis or 2.1x calculated on a covenant basis, well within
the covenant limit of 3.0x. Given the seasonally much stronger cash
flow in the second half of the year, the headline net debt to
EBITDA ratio is expected to be around 1.5x at the year end.
Principal risks and uncertainties
The principal risks and uncertainties faced by Keller in the
remaining six months of the year remain largely unchanged from
those reported in the 2017 annual report and can be found, together
with the mitigating actions in place, in pages 39 to 41 of the
report. In summary, these are:
Market risk: A rapid downturn in our markets
Strategic risk:
- Failure to procure new contracts
- Losing our market share
- Non-compliance with our Code of Business Conduct
Financial risk: Inability to finance our business
Operational risk:
- Product and/or solution failure
- Ineffective management of our contracts
- Causing a serious injury or fatality to an employee or member of the public
- Not having the right skills to deliver
Consolidated income statement
For the half year ended 30 June 2018
Half year to 30 June Half year to 30 Year to 31 December
2018 June 2017 2017
---------------------------------------------- ---------------------------------------------- ----------------------------------------------
Non-underlying Non-underlying Non-underlying
Before items Before items Before items
non-underlying (Note non-underlying (Note non-underlying (Note
Note items 6) Statutory items 6) Statutory items 6) Statutory
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
-------------- ------ ---------------- --------------- ----------- ---------------- --------------- ----------- ---------------- --------------- -----------
Revenue 3 1,075.1 - 1,075.1 991.1 - 991.1 2,070.6 - 2,070.6
Operating
costs (1,026.0) (0.5) (1,026.5) (947.1) (0.1) (947.2) (1,961.9) (1.6) (1,963.5)
Amortisation
of acquired
intangible
assets - (5.8) (5.8) - (4.5) (4.5) - (9.0) (9.0)
Other
operating
income - - - - 21.0 21.0 - 23.2 23.2
-------------- ------ ---------------- --------------- ----------- ---------------- --------------- ----------- ---------------- --------------- -----------
Operating
profit 3 49.1 (6.3) 42.8 44.0 16.4 60.4 108.7 12.6 121.3
Finance
income 0.7 - 0.7 1.8 - 1.8 3.8 - 3.8
Finance costs (7.6) - (7.6) (6.5) (0.5) (7.0) (13.8) (0.7) (14.5)
-------------- ------ ---------------- --------------- ----------- ---------------- --------------- ----------- ---------------- --------------- -----------
Profit before
taxation 42.2 (6.3) 35.9 39.3 15.9 55.2 98.7 11.9 110.6
Taxation 7 (11.8) 1.2 (10.6) (13.4) (0.1) (13.5) (24.7) 1.6 (23.1)
-------------- -----------
Profit for the
period 30.4 (5.1) 25.3 25.9 15.8 41.7 74.0 13.5 87.5
---------------------- ---------------- --------------- ----------- ---------------- --------------- ----------- ---------------- --------------- -----------
Attributable
to:
Equity holders
of the parent 29.5 (5.1) 24.4 25.2 15.8 41.0 73.6 13.5 87.1
Non-controlling
interests 0.9 - 0.9 0.7 - 0.7 0.4 - 0.4
---------------------- ---------------- --------------- ----------- ---------------- --------------- ----------- ---------------- --------------- -----------
30.4 (5.1) 25.3 25.9 15.8 41.7 74.0 13.5 87.5
-------------- ------ ---------------- --------------- ----------- ---------------- --------------- ----------- ---------------- --------------- -----------
Earnings per share
Basic (pence) 9 41.0 33.9 35.0 57.0 102.2 121.0
Diluted
(pence) 9 40.7 33.7 34.4 56.0 101.8 120.5
Consolidated statement of comprehensive income
For the half year ended 30 June 2018
Half Half Year to
year year 31 December
to 30 to 30 2017
June June
2018 2017
GBPm GBPm GBPm
------------------------------------------------------------ ------- ------- -------------
Profit for the period 25.3 41.7 87.5
------------------------------------------------------------- ------- ------- -------------
Other comprehensive income
Items that may be reclassified subsequently to profit
or loss:
Exchange differences on translation
of foreign operations (3.4) (14.0) (27.0)
Net investment hedge gains/(losses) 0.2 (0.6) (0.7)
Cash flow hedge gains/(losses) taken
to equity 1.3 (1.8) (3.3)
Cash flow hedge transfers to income
statement (1.0) 1.8 3.4
Items that will not be reclassified subsequently to profit
or loss:
Remeasurements of defined benefit pension
schemes 3.9 2.0 1.4
Tax on remeasurements of defined benefit
pension schemes (0.5) (0.2) (0.3)
Other comprehensive income for the period, net of tax 0.5 (12.8) (26.5)
------------------------------------------------------------- ------- ------- -------------
Total comprehensive income for the period 25.8 28.9 61.0
------------------------------------------------------------- ------- ------- -------------
Attributable to:
Equity holders of the parent 25.0 28.3 61.0
Non-controlling interests 0.8 0.6 -
------------------------------------------------------------- ------- ------- -------------
25.8 28.9 61.0
------------------------------------------------------------ ------- ------- -------------
Consolidated balance sheet
As at 30 June 2018
As at As at As at
30 June 30 June 31 December
2018 2017 2017
Note GBPm GBPm GBPm
------------------------------------------ ------ ---------- --------- -------------
Assets
Non-current assets
Intangible assets 187.6 178.5 170.9
Property, plant and equipment 429.4 398.7 399.2
Deferred tax assets 36.4 22.9 39.3
Other assets 23.9 29.8 27.4
------------------------------------------- ------ ---------- --------- -------------
677.3 629.9 636.8
------------------------------------------ ------ ---------- --------- -------------
Current assets
Inventories 76.9 69.5 72.6
Trade and other receivables 694.9 598.9 589.2
Current tax assets 15.8 19.6 18.7
Cash and cash equivalents 10 49.3 61.9 67.7
------------------------------------------- ------ ---------- --------- -------------
836.9 749.9 748.2
------------------------------------------ ------ ---------- --------- -------------
Total assets 1,514.2 1,379.8 1,385.0
------------------------------------------- ------ ---------- --------- -------------
Liabilities
Current liabilities
Loans and borrowings (51.4) (19.1) (48.3)
Current tax liabilities (15.5) (23.1) (19.1)
Trade and other payables (485.1) (436.8) (480.5)
Provisions (9.5) (7.7) (10.3)
------------------------------------------- ------ ---------- --------- -------------
(561.5) (486.7) (558.2)
------------------------------------------ ------ ---------- --------- -------------
Non-current liabilities
Loans and borrowings (364.9) (340.1) (248.9)
Retirement benefit liabilities (24.7) (29.7) (29.2)
Deferred tax liabilities (46.3) (32.8) (45.5)
Provisions (13.6) (15.3) (13.0)
Other liabilities (19.8) (29.1) (18.0)
------------------------------------------- ------ ---------- --------- -------------
(469.3) (447.0) (354.6)
------------------------------------------ ------ ---------- --------- -------------
Total liabilities (1,030.8) (933.7) (912.8)
------------------------------------------- ------ ---------- --------- -------------
Net assets 483.4 446.1 472.2
------------------------------------------- ------ ---------- --------- -------------
Equity
Share capital 11 7.3 7.3 7.3
Share premium account 38.1 38.1 38.1
Capital redemption reserve 7.6 7.6 7.6
Translation reserve 29.4 45.3 32.5
Other reserve 56.9 56.9 56.9
Hedging reserve 0.3 (0.1) -
Retained earnings 339.2 286.2 326.0
------------------------------------------- ------ ---------- --------- -------------
Equity attributable to equity holders of
the parent 478.8 441.3 468.4
Non-controlling interests 4.6 4.8 3.8
------------------------------------------- ------ ---------- --------- -------------
Total equity 483.4 446.1 472.2
------------------------------------------- ------ ---------- --------- -------------
Condensed consolidated statement of changes in equity
For the half year ended 30 June 2018
Share Capital Non-controlling
Share premium redemption Translation Other Hedging Retained interests Total
capital account reserve reserve reserve Reserve earnings equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
--------------- --------- -------- ----------- ------------- --------- --------- ---------- ---------------- --------
At 30 June
2017 7.3 38.1 7.6 45.3 56.9 (0.1) 286.2 4.8 446.1
--------------- --------- -------- ----------- ------------- --------- --------- ---------- ---------------- --------
At 31 December
2017 7.3 38.1 7.6 32.5 56.9 - 326.0 3.8 472.2
Adjustment on
initial
application
of IFRS 15 - - - - - - 2.3 - 2.3
Total
comprehensive
income for
the
period - - - (3.1) - 0.3 27.8 0.8 25.8
Dividends - - - - - - (17.6) - (17.6)
Share-based
payments - - - - - - 0.7 - 0.7
At 30 June
2018 7.3 38.1 7.6 29.4 56.9 0.3 339.2 4.6 483.4
--------------- --------- -------- ----------- ------------- --------- --------- ---------- ---------------- --------
Consolidated cash flow statement
For the half year ended 30 June 2018
Half Half Year
year year to
to 30 to 30 31 December
June June 2017
2018 2017
Note GBPm GBPm GBPm
------------------------------------------------------ ----- ------- ------- -------------
Cash flows from operating activities
Operating profit before non-underlying items 49.1 44.0 108.7
Depreciation of property, plant and equipment 33.8 33.5 67.3
Amortisation of intangible assets 0.6 0.6 1.2
Profit on sale of property, plant and equipment (0.5) (0.6) (4.0)
Other non-cash movements 2.1 3.7 9.5
Foreign exchange (gains)/losses (0.3) 0.4 0.2
------------------------------------------------------- ----- ------- ------- -------------
Operating cash flows before movements in working
capital 84.8 81.6 182.9
Increase in inventories (6.6) (11.2) (15.7)
Increase in trade and other receivables (61.7) (81.8) (79.1)
(Decrease)/increase in trade and other payables (4.8) 8.6 53.9
Change in provisions, retirement benefit and
other non-current liabilities (4.3) (0.9) (5.9)
------------------------------------------------------- ----- ------- ------- -------------
Cash generated from operations before non-underlying
items 7.4 (3.7) 136.1
Cash inflows from non-underlying items - 9.8 12.7
Cash outflows from non-underlying items (0.5) (1.5) (2.1)
Cash generated from operations 6.9 4.6 146.7
Interest paid (7.0) (6.1) (12.9)
Income tax paid (9.2) (8.7) (26.0)
------------------------------------------------------- ----- ------- ------- -------------
Net cash (outflow)/inflow from operating activities (9.3) (10.2) 107.8
------------------------------------------------------- ----- ------- ------- -------------
Cash flows from investing activities
Interest received 0.3 0.2 0.7
Proceeds from sale of property, plant and
equipment 3.1 2.5 10.5
Proceeds from sale of other non-current assets 3.3 - -
Acquisition of subsidiaries, net of cash acquired (62.3) (3.0) (6.5)
Acquisition of property, plant and equipment (41.6) (33.6) (84.2)
Disposal of non-current assets held for sale - 62.0 62.0
Acquisition of intangible assets (0.4) (0.4) (0.8)
Net cash (outflow)/inflow from investing activities (97.6) 27.7 (18.3)
------------------------------------------------------- ----- ------- ------- -------------
Cash flows from financing activities
New borrowings 129.9 12.8 41.6
Repayment of borrowings (22.6) (52.4) (135.7)
Cash flows from derivative instruments (1.4) - 0.2
Payment of finance lease liabilities (0.5) (0.6) (1.5)
Dividends paid (17.6) (13.8) (21.2)
------------------------------------------------------- ----- ------- ------- -------------
Net cash inflow/(outflow) from financing activities 87.8 (54.0) (116.6)
------------------------------------------------------- ----- ------- ------- -------------
Net decrease in cash and cash equivalents (19.1) (36.5) (27.1)
Cash and cash equivalents at beginning of
period 51.3 84.0 84.0
Effect of exchange rate fluctuations (1.1) (1.5) (5.6)
------------------------------------------------------- ----- ------- ------- -------------
Cash and cash equivalents at end of period 10 31.1 46.0 51.3
------------------------------------------------------- ----- ------- ------- -------------
1. Basis of preparation
The condensed financial statements included in this interim
financial report have been prepared in accordance with IAS 34,
'Interim Financial Reporting', as adopted by the European Union.
They do not include all of the information required for full annual
financial statements, and should be read in conjunction with the
consolidated financial statements of the group as at and for the
year ended 31 December 2017.
Except as described in note 14, the same accounting policies and
presentation are followed in the financial statements that were
applied in the preparation of the Company's published consolidated
financial statements for the year ended 31 December 2017.
The group is also considering the impact on the group financial
statements of adopting other standards, amendments or
interpretations in issue but not yet effective, the most
significant of which is IFRS 16, 'Leases'.
IFRS 16 is effective for annual periods beginning on or after 1
January 2019. The standard introduces a single, on-balance sheet
lease accounting model for lessees. A lessee recognises a
right-of-use asset representing its right to use the underlying
asset and a lease liability representing its obligation to make
lease payments. There are recognition exemptions for short-term
leases and leases of low-value items. The group has substantially
completed an initial impact assessment of adopting IFRS 16. The
actual impact of applying IFRS 16 on the financial statements at 1
January 2019 will depend on future economic conditions, including
the group and subsidiaries' borrowing rates at 1 January 2019, the
composition of the lease portfolio at that date, the group's latest
assessment of whether it will exercise any lease purchase,
termination or extension options and the extent to which the group
chooses to use practical expedients and recognition exemptions. The
most significant impact identified is that the group will recognise
new assets and liabilities for its operating leases. These
principally relate to properties, machinery and vehicles. In
addition, the profile of the expense incurred in the income
statement for these operating leases will change because IFRS 16
replaces the straight-line operating lease expense with a
depreciation charge for the right-to-use assets and interest
expense on lease liabilities. No significant impact is expected for
the group's finance leases. A more detailed update on the adoption
of IFRS 16 will be provided in the 2018 Annual Report and
Accounts.
The figures for the year ended 31 December 2017 are not
statutory accounts but have been extracted from the group's
statutory accounts for that financial year. The auditor's report on
those accounts was not qualified and did not contain statements
under section 498(2) or (3) of the Companies Act 2006. A copy of
the statutory accounts for that year has been delivered to the
Registrar of Companies and has been made available on the Company's
website at www.keller.com.
The financial information in this interim financial report for
the half years ended 30 June 2018 and 30 June 2017 has neither been
reviewed, nor audited.
The key risks and uncertainties facing the group, as explained
in the group's annual report for the year ended 31 December 2017,
continue to be: market risk, strategic risk, financial risk and
operational risk.
Going concern
The directors have satisfied themselves that the group is in a
sound financial position, that it has access to sufficient
borrowing facilities and can reasonably expect sufficient
facilities to be available to meet the group's foreseeable cash
requirements. As a consequence, the directors continue to adopt the
going concern basis in preparing the condensed financial
statements.
2. Foreign currencies
The exchange rates used in respect of principal currencies
are:
Average for period Period end
------------------------------------- -----------------------------------
Half year Half year Year to As at As at As at
to to 31 December 30 June 30 June 31 December
30 June 30 June 2017 2018 2017 2017
2018 2017
------------------- ---------- ---------- ------------- --------- --------- -------------
US dollar 1.38 1.26 1.29 1.32 1.30 1.35
Canadian dollar 1.76 1.68 1.67 1.73 1.69 1.69
Euro 1.14 1.16 1.14 1.13 1.14 1.13
Singapore dollar 1.82 1.77 1.78 1.80 1.79 1.80
Australian dollar 1.78 1.67 1.68 1.78 1.69 1.73
------------------- ---------- ---------- ------------- --------- --------- -------------
3. Segmental analysis
In accordance with IFRS 8, the group has determined its
operating segments based upon the information reported to the Chief
Operating Decision Maker. The group comprises three geographical
divisions which have only one major product or service: specialist
ground engineering services. North America, EMEA and APAC continue
to be managed as separate geographical divisions. This is reflected
in the group's management structure and in the segment information
reviewed by the Chief Operating Decision Maker. There have been no
material changes to the assets and liabilities of these segments
since the year end. Revenue and operating profit of the three
reportable segments is given below:
Revenue Operating profit
------------------------------------- -------------------------------------
Half year Half year Year to Half year Half year Year to
to to 31 December to to 31 December
30 June 30 June 2017 30 June 30 June 2017
2018 2017 GBPm 2018 2017 GBPm
GBPm GBPm GBPm GBPm
----------------------- ---------- ---------- ------------- ---------- ---------- -------------
North America 534.3 474.5 968.7 31.7 28.6 78.7
EMEA(1) 324.7 346.4 737.2 19.7 20.0 53.3
APAC(2) 216.1 170.2 364.7 (0.4) (3.8) (16.5)
1,075.1 991.1 2,070.6 51.0 44.8 115.5
Central items and
eliminations - - - (1.9) (0.8) (6.8)
----------------------- ---------- ---------- ------------- ---------- ---------- -------------
Before non-underlying
items 1,075.1 991.1 2,070.6 49.1 44.0 108.7
Non-underlying items
(note 6) - - - (6.3) 16.4 12.6
----------------------- ---------- ---------- ------------- ---------- ---------- -------------
1,075.1 991.1 2,070.6 42.8 60.4 121.3
----------------------- ---------- ---------- ------------- ---------- ---------- -------------
(1) Europe, Middle East and Africa.
(2) Asia-Pacific.
4. Revenue
The group's revenue is derived from contracts with customers.
The nature and effect of initially applying IFRS 15 on the group's
interim financial statements is disclosed in note 14.
In the following table, revenue is disaggregated by primary
geographical market, being the group's operating segments (see note
3) and timing of revenue recognition:
For the half year to 30 June 2018:
Revenue recognised Revenue recognised Total
on performance on performance revenue
obligations obligations
satisfied satisfied
over time at a point
in time
------------------- ------------------- ---------
North America 474.6 59.7 534.3
EMEA 324.7 - 324.7
APAC 216.1 - 216.1
--------------- ------------------- ------------------- ---------
1,015.4 59.7 1,075.1
--------------- ------------------- ------------------- ---------
5. Acquisitions
2018 acquisitions
Moretrench
------------------------------------
Carrying Fair value Fair value
amount adjustment
GBPm GBPm GBPm
------------------------------- --------- ------------ -----------
Net assets acquired
Intangible assets - 10.1 10.1
Property, plant and equipment 21.4 2.8 24.2
Cash and cash equivalents 8.5 - 8.5
Receivables 30.1 - 30.1
Other assets 10.4 - 10.4
Loans and borrowings (8.8) - (8.8)
Deferred tax 0.1 - 0.1
Other liabilities (20.9) - (20.9)
------------------------------- --------- ------------ -----------
40.8 12.9 53.7
Goodwill 11.5
------------------------------- --------- ------------ -----------
Total consideration 65.2
------------------------------- --------- ------------ -----------
Satisfied by
Initial cash consideration 65.2
Contingent consideration -
------------------------------- --------- ------------ -----------
65.2
------------------------------- --------- ------------ -----------
On 29 March 2018, the group acquired 100% of the issued share
capital of Moretrench America Corporation, a geotechnical
contracting company operating predominantly along the east coast of
the US for cash consideration of GBP65.2m ($90m). The fair value of
the intangible assets acquired represents the fair value of
customer contracts at the date of acquisition, customer
relationships and the trade name. Goodwill arising on acquisition
is attributable to the knowledge and expertise of the assembled
workforce, the expectation of future contracts and customer
relationships and the operating synergies that arise from the
group's strengthened market position. The amount of goodwill that
is expected to be deductible for tax purposes totals GBP21.6m.
On 13 June 2018, the group acquired 100% of the issued share
capital of Sivenmark Maskintjanst AB, a sheet piling specialist
based in Sweden for cash consideration of GBP2.1m (SEK 24.6m). The
purchase price is a premium of GBP0.8m (SEK 9.4m) to the fair value
of the net assets acquired. This goodwill is attributable to the
knowledge and expertise of the assembled workforce, the expectation
of future contracts and customer relationships and the operating
synergies that arise from the group's strengthened market
position.
For both acquisitions the fair value of the total trade
receivables is not materially different from the gross contractual
amounts receivable and is expected to be recovered in full. In the
period to 30 June 2018, the acquisitions contributed GBP19.5m to
revenue and a net profit of GBP1.3m. Had the acquisitions taken
place on 1 January 2018, total group revenue would have been
GBP1,106.0m and total net profit before non-underlying items would
have been GBP31.3m.
Any adjustments made in respect of acquisitions in the period to
30 June 2018 are provisional and will be finalised within 12 months
of the acquisition date.
2017 acquisitions
On 6 March 2017, the group acquired the assets and liabilities
of Geo Instruments, an instrumentation and monitoring company based
in North America, for cash consideration of GBP2.8m ($3.6m). The
purchase price is a premium of GBP0.5m ($0.7m) to the fair value of
the net assets acquired. This goodwill is attributable to the
knowledge and expertise of the assembled workforce, the expectation
of future contracts and customer relationships and the operating
synergies that arise from the group's strengthened market
position.
6. Non-underlying items
Non-underlying items are disclosed separately in the financial
statements where it is necessary to do so to provide further
understanding of the financial performance of the group. They are
items which are exceptional by their size or are non-trading in
nature, including those relating to acquisitions. Non-underlying
items comprise the following:
Half year Half year
to 30 to Year to
June 30 June 31 December
2018 2017 2017
GBPm GBPm GBPm
---------------------------------------------- ---------- ---------- -------------
Amortisation of acquired intangible assets (5.8) (4.5) (9.0)
Contingent consideration: additional amounts
provided - (0.1) (1.6)
Acquisition costs (0.5) - -
Non-underlying items in operating costs (0.5) (0.1) (1.6)
Exceptional contract dispute - 21.0 21.0
Contingent consideration: provision released - - 2.2
----------------------------------------------- ---------- ---------- -------------
Non-underlying items in other operating
income - 21.0 23.2
Total non-underlying items in operating
profit (6.3) 16.4 12.6
Non-underlying finance costs - (0.5) (0.7)
----------------------------------------------- ---------- ---------- -------------
Total non-underlying items before taxation (6.3) 15.9 11.9
----------------------------------------------- ---------- ---------- -------------
Amortisation of acquired intangible assets primarily relate to
Moretrench, Keller Canada, Austral, Bencor and Franki Africa.
For the year ended 31 December 2017, additional contingent
consideration provided relates to the Geo-Foundations and Ellington
Cross acquisitions.
The GBP21.0m exceptional profit in 2017 represents the gain on
disposal of a freehold property acquired in 2016 following the
resolution of a contract dispute, rental income less operating
costs to the date of disposal of the property and insurance
recoveries in the period.
Contingent consideration released in 2017 relates to adjustments
to estimated amounts payable for the Austral and Ansah
acquisitions.
7. Taxation
Taxation, representing management's best estimate of the average
annual effective income tax rate expected for the full year, based
on the underlying profit before tax, is 28.0% (half year ended 30
June 2017: 34.0%; year ended 31 December 2017: 25.0%). In December
2017 the US Government approved a package of tax reform which
included a reduction in the federal rate of corporation tax from
35% to 21%, effective from 1 January 2018. This has resulted in a
significant reduction in the in the group's tax costs due to the
relatively large size of its US business.
8. Dividends payable to equity holders of the parent
Ordinary dividends on equity shares:
Half Half
year year
to 30 to Year to
June 30 June 31 December
2018 2017 2017
GBPm GBPm GBPm
Amounts recognised as distributions to equity
holders in the period:
Interim dividend for the year ended 31 December
2017 of 9.7p (2016: 9.25p) per share - - 7.0
Final dividend for the year ended 31 December
2017 of 24.5p (2016: 19.25p) per share 17.6 13.8 13.8
17.6 13.8 20.8
------------------------------------------------- ------- --------- -------------
In addition to the above, an interim ordinary dividend of 12.0p
per share (2017: 9.7p) will be paid on 3 September 2018 to
shareholders on the register at 10 August 2018. This proposed
dividend has not been included as a liability in these financial
statements and will be accounted for in the period in which it is
paid.
9. Earnings per share
Earnings attributable Earnings attributable
to equity holders of the to equity holders of the
parent before non-underlying parent
items
------------------------------ ---------------------------------- --------------------------------
30 June 30 June 31 December 30 June 30 June 31 December
2018 2017 2017 2018 2017 2017
------------------------------ --------- --------- ------------ -------- -------- ------------
Basic and diluted earnings
(GBPm) 29.5 25.2 73.6 24.4 41.0 87.1
------------------------------ --------- --------- ------------ -------- -------- ------------
Weighted average number
of shares (million)
Basic number of ordinary
shares outstanding 72.0 71.9 72.0 72.0 71.9 72.0
Effect of dilutive potential
ordinary shares:
Share options and awards 0.4 1.3 0.3 0.4 1.3 0.3
------------------------------ --------- --------- ------------ -------- -------- ------------
Diluted number of ordinary
shares outstanding 72.4 73.2 72.3 72.4 73.2 72.3
------------------------------ --------- --------- ------------ -------- -------- ------------
Earnings per share
------------------------------ --------- --------- ------------ -------- -------- ------------
Basic earnings per share
(pence) 41.0 35.0 102.2 33.9 57.0 121.0
------------------------------ --------- --------- ------------ -------- -------- ------------
Diluted earnings per
share (pence) 40.7 34.4 101.8 33.7 56.0 120.5
------------------------------ --------- --------- ------------ -------- -------- ------------
10. Analysis of closing net debt
As at As at As at
30 June 30 June 31 December
2018 2017 2017
GBPm GBPm GBPm
------------------------------------------ --------- --------- -------------
Bank balances 46.9 60.0 66.5
Short-term deposits 2.4 1.9 1.2
------------------------------------------- --------- --------- -------------
Cash and cash equivalents in the balance
sheet 49.3 61.9 67.7
Bank overdrafts (18.2) (15.9) (16.4)
------------------------------------------- --------- --------- -------------
Cash and cash equivalents in the cash
flow statement 31.1 46.0 51.3
Bank and other loans (395.6) (341.0) (279.5)
Finance leases (2.5) (2.3) (1.3)
------------------------------------------- --------- --------- -------------
Closing net debt (367.0) (297.3) (229.5)
------------------------------------------- --------- --------- -------------
11. Share capital and reserves
As at As at As at
30 June 30 June 31 December
2018 2017 2017
GBPm GBPm GBPm
Allotted, called up and fully paid
Equity share capital:
73,099,735 ordinary shares of 10p each
(30 June 2017: 73,099,735; 31 December
2017: 73,099,735) 7.3 7.3 7.3
------------------------------------------- --------- --------- -------------
The Company has one class of ordinary shares, which carries no
rights to fixed income. There are no restrictions on the transfer
of these shares. The total number of shares held in Treasury was
1.0m (30 June 2017: 1.1m; 31 December 2017: 1.1m).
12. Related party transactions
Transactions between the parent, its subsidiaries and joint
operations, which are related parties, have been eliminated on
consolidation.
13. Post balance sheet events
There were no material post balance sheet events between the
balance sheet date and the date of this report.
14. Changes in accounting policies
The group has adopted IFRS 15 'Revenue from Contracts with
Customers' and IFRS 9 'Financial Instruments' from 1 January 2018.
The impact of adopting these standards is set out below. A number
of other standards, amendments and interpretations became effective
from 1 January 2018 but they do not have an impact on the group's
financial statements or accounting policies.
IFRS 15 'Revenue from Contracts with Customers'
IFRS 15 establishes a comprehensive framework for determining
whether, how much and when revenue is recognised. It replaced IAS
18 'Revenue', IAS 11 'Construction Contracts' and related
interpretations. The standard has been adopted retrospectively with
the cumulative effect of initially applying the standard recognised
as an adjustment to retained earnings at 1 January 2018.
Accordingly, the information presented for 2017 has not been
restated. The effect of initially applying this standard is a
GBP2.3m credit to equity. This is due to the earlier recognition of
revenue at our Suncoast business on contracts that involve
installation or post-delivery services. Previously all revenue was
deferred on these contracts until the contract had been completed,
however under IFRS 15, these contracts qualify for over time
recognition. The following table summarises the impact of adopting
IFRS 15 on the balance sheet at 1 January 2018:
As at 1 January 2018
-------------------------------------
As Reported Impact As reported
under of under
IAS 18 IFRS 15 IFRS 15
& IAS GBPm
11 GBPm
GBPm
--------------------------------------- ------------ --------- ------------
Inventories 72.6 (2.3) 70.3
Current assets 748.2 (2.3) 745.9
---------------------------------------- ------------ --------- ------------
Total assets 1,385.0 (2.3) 1,382.7
---------------------------------------- ------------ --------- ------------
Trade and other payables (480.5) 4.6 (475.9)
---------------------------------------- ------------ --------- ------------
Current liabilities (558.2) 4.6 (553.6)
---------------------------------------- ------------ --------- ------------
Total liabilities (912.8) 4.6 (908.2)
---------------------------------------- ------------ --------- ------------
Net assets 472.2 2.3 474.5
---------------------------------------- ------------ --------- ------------
Retained earnings 326.0 2.3 328.3
---------------------------------------- ------------ --------- ------------
Equity attributable to equity holders
of the parent 468.4 2.3 470.7
---------------------------------------- ------------ --------- ------------
Total equity 472.2 2.3 474.5
---------------------------------------- ------------ --------- ------------
Other than set out above, there is no financial impact on the
interim financial statements as a result of adopting IFRS 15.
The accounting policy for revenue recognition at 31 December
2017 is replaced with the following with effect from 1 January
2018. There are no changes to the key estimates and judgements set
out in the 2017 Annual Report and Accounts with regard to
accounting for construction contracts:
Revenue recognition
Revenue consists of contracts with customers. For each contract,
revenue is the amount that is expected to be received from the
customer. Where consideration is variable, this is estimated based
on the most likely amount. Revenue from contract modifications (for
example change orders, variations or claims) is recognised only to
the extent that it is highly probable that there will not be a
significant reversal.
Revenue from construction contracts: The majority of the group's
revenue is derived from construction contracts. Typically, the
group's construction contracts consist of one performance
obligation, however for certain contracts (for example where
contracts involve separate phases or products that are not highly
interrelated) multiple performance obligations exist. Where
multiple performance obligations exist, total revenue is allocated
to performance obligations based on the relative standalone selling
prices of each performance obligation.
Revenue attributed to each performance obligation is recognised
over time based on the percentage of completion. The percentage of
completion is calculated as the costs incurred to date as a
percentage of the total costs expected to satisfy the performance
obligation. Estimates of revenues, costs or extent of progress
toward completion are revised if circumstances change. Any
resulting increases or decreases in estimated revenues or costs are
reflected in the percentage of completion calculation in the period
in which the circumstances that give rise to the revision become
known.
Where it is probable that a loss will arise on the total
contract, full provision for this loss is made when the group
becomes aware that a loss may arise.
Incremental bid/tender costs and fulfilment costs are not
material to the overall contract and are expensed as incurred.
Any revenues recognised in excess of billings are recognised as
contract assets within trade and other receivables. Any payments
received in excess of revenue recognised are recognised as contract
liabilities within trade and other payables.
Revenue from the sale of goods and services: The group's revenue
recognised from the sale of goods and services primarily relates to
the Suncoast business. These contracts all have a single
performance obligation, or a series of distinct performance
obligations that are substantially the same. There are typically
two types of contract:
a. Delivery of goods: revenue for these contracts is recognised
at a point in time, on delivery of the goods to the customer.
b. Delivery of goods with installation and/or post-delivery
services: revenue for these contracts is recognised over time by
reference to the percentage of completion. The percentage of
completion is calculated as the costs incurred to date as a
percentage of the total costs expected to satisfy the contract,
however this results in most of the revenue being recognised on
delivery of the materials as this forms the majority of the cost to
Keller.
IFRS 9 'Financial Instruments'
IFRS 9 sets out requirements for recognising and measuring
financial assets, financial liabilities and some contracts to buy
or sell non-financial items. This standard replaces IAS 39
'Financial Instruments: Recognition and Measurement'.
The classification and measurement of financial liabilities and
derivative instruments remains unchanged from IAS 39. Under IFRS 9,
a financial asset is now classified on initial recognition as
measured at: amortised cost; fair value through other comprehensive
income (FVOCI) - debt investment; FVOCI - equity investment; or
fair value through profit or loss (FVTPL). Applying this
classification to the group's financial assets does not result in
changes to the accounting: trade receivables and cash and cash
equivalents continue to be recognised at amortised cost and certain
other non-current financial assets continue to be recognised at
FVTPL.
With regard to impairment of financial assets, IFRS 9 replaces
the 'incurred loss' model in IAS 39 with an 'expected credit loss'
(ECL) model. The group's bad debts typically arise due to invoices
being unpaid for commercial reasons rather than credit default and
therefore the group's expected initial credit loss on initial
recognition was not material and there has been no change in the
overall bad debt provision at 1 January 2018.
As a result of adopting IFRS 9, the accounting policy for trade
receivables at 31 December 2017 is replaced with the following with
effect from 1 January 2018:
Trade receivables
Trade receivables are initially recognised at their transaction
price, unless there is a significant financing component, and are
carried subsequently at amortised cost. Loss allowances for
expected credit losses are deducted on initial recognition from the
gross carrying amount of trade receivables and recognised in full
when there is a significant increase in credit risk.
Responsibility Statement
The interim financial report is the responsibility of the
directors who confirm that to the best of their knowledge:
(a) the condensed set of financial statements has been prepared
in accordance with IAS 34 Interim Financial Reporting as adopted by
the EU;
(b) the interim management report includes a fair review of the information required by:
-- DTR 4.2.7R of the Disclosure Guidance and Transparency Rules,
being an indication of important events that have occurred during
the first six months of the financial year and their impact on the
condensed set of financial statements; and a description of the
principal risks and uncertainties for the remaining six months of
the year; and
-- DTR 4.2.8R of the Disclosure Guidance and Transparency Rules,
being related party transactions that have taken place in the first
six months of the current financial year and that have materially
affected the financial position or performance of the entity during
that period; and any changes in the related party transactions
described in the last annual report that could do so.
The directors of Keller Group plc are listed in the 2017 Annual
Report and Accounts.
Approved by the Board of Keller Group plc and signed on its
behalf by:
Alain Michaelis
Chief Executive
James Hind
Finance Director
30 July 2018
Adjusted performance measures
The group's results as reported under International Financial
Reporting Standards (IFRS) and presented in the financial
statements (the "statutory results") are significantly impacted by
movements in exchange rates relative to sterling, as well as by
exceptional items and non-trading amounts relating to
acquisitions.
As a result, adjusted performance measures have been used
throughout this report to describe the group's underlying
performance. The Board and Executive Committee use these adjusted
measures to assess the performance of the business because they
consider them more representative of the underlying ongoing trading
result and allow more meaningful comparison to prior year.
Underlying measures
The term "underlying" excludes the impact of items which are
exceptional by their size or are non-trading in nature, including
amortisation of acquired intangible assets and other non-trading
amounts relating to acquisitions (collectively "non-underlying
items"), net of any associated tax. Underlying measures allow
management and investors to compare performance without the
potentially distorting effects of one-off items or non-trading
items. Non-underlying items are disclosed separately in the
financial statements where it is necessary to do so to provide
further understanding of the financial performance of the
group.
Constant currency measures
The constant currency basis ("constant currency") adjusts the
comparative to exclude the impact of movements in exchange rates
relative to sterling. This is achieved by retranslating the 2017
results of overseas operations into sterling at the 2018 average
exchange rates.
A reconciliation between the underlying results and the reported
statutory results is shown on the face of the consolidated income
statement, with non-underlying items detailed in note 6. A
reconciliation between the 2017 underlying result and the 2017
constant currency result is shown below and compared to the
underlying 2018 performance:
Revenue by segment
Impact
of exchange Constant Constant
Statutory Statutory movements currency Statutory currency
2018 2017 2017 2017 change change
GBPm GBPm GBPm GBPm % %
--------------- ---------- ---------- ------------- ---------- ---------- ----------
North America 534.3 474.5 (39.8) 434.7 +13% +23%
EMEA 324.7 346.4 (8.1) 338.3 -6% -4%
APAC 216.1 170.2 (8.5) 161.7 +27% +34%
--------------- ---------- ---------- ------------- ---------- ---------- ----------
1,075.1 991.1 (56.4) 934.7 +8% +15%
--------------- ---------- ---------- ------------- ---------- ---------- ----------
Underlying operating profit by segment
Impact
of exchange Constant Constant
Underlying Underlying movements currency Underlying currency
2018 2017 2017 2017 change change
GBPm GBPm GBPm GBPm % %
------------------- ----------- ----------- ------------- ---------- ----------- ----------
North America 31.7 28.6 (2.4) 26.2 +11% +21%
EMEA 19.7 20.0 (1.2) 18.8 -2% +5%
APAC (0.4) (3.8) - (3.8) n/a n/a
Central items
and eliminations (1.9) (0.8) - (0.8) n/a n/a
------------------- ----------- ----------- ------------- ---------- ----------- ----------
49.1 44.0 (3.6) 40.4 +12% +22%
------------------- ----------- ----------- ------------- ---------- ----------- ----------
Underlying operating margin
Underlying operating margin is underlying operating profit as a
percentage of revenue.
Other adjusted measures
Where not presented and reconciled on the face of the
consolidated income statement, consolidated balance sheet or
consolidated cash flow statement, the adjusted measures are
reconciled to the IFRS statutory numbers below:
EBITDA
30 June 30 June 31 December
2018 2017 2017
GBPm GBPm GBPm
----------------------------------------- -------- -------- ------------
Operating profit before non-underlying
items 49.1 44.0 108.7
Depreciation of property, plant and
equipment 33.8 33.5 67.3
Amortisation of intangible assets 0.6 0.6 1.2
----------------------------------------- -------- -------- ------------
Underlying EBITDA 83.5 78.1 177.2
Non-underlying items in operating costs (0.5) (0.1) (1.6)
Non-underlying items in other operating
income - 21.0 23.2
----------------------------------------- -------- -------- ------------
EBITDA 83.0 99.0 198.8
----------------------------------------- -------- -------- ------------
Net finance costs
30 June 30 June 31 December
2018 2017 2017
GBPm GBPm GBPm
------------------------------------- -------- -------- ------------
Finance income (0.7) (1.8) (3.8)
Finance costs before non-underlying
items 7.6 6.5 13.8
------------------------------------- -------- -------- ------------
Underlying net finance costs 6.9 4.7 10.0
Non-underlying finance costs - 0.5 0.7
------------------------------------- -------- -------- ------------
Net finance costs 6.9 5.2 10.7
------------------------------------- -------- -------- ------------
Net capital expenditure
30 June 30 June 31 December
2018 2017 2017
GBPm GBPm GBPm
---------------------------------------------- -------- -------- ------------
Acquisition of property, plant and equipment 41.6 33.6 84.2
Acquisition of intangible assets 0.4 0.4 0.8
Proceeds from sale of property, plant
and equipment (3.1) (2.5) (10.5)
---------------------------------------------- -------- -------- ------------
Net capital expenditure 38.9 31.5 74.5
---------------------------------------------- -------- -------- ------------
Net debt
30 June 30 June 31 December
2018 2017 2017
GBPm GBPm GBPm
---------------------------------- -------- -------- ------------
Current loans and borrowings 51.4 19.1 48.3
Non-current loans and borrowings 364.9 340.1 248.9
Cash and cash equivalents (49.3) (61.9) (67.7)
---------------------------------- -------- -------- ------------
Net debt 367.0 297.3 229.5
---------------------------------- -------- -------- ------------
Order book
The group's disclosure of its order book is aimed to provide
insight into its backlog of work and future performance. The
group's order book is not a measure of past performance and
therefore cannot be derived from its financial statements. The
group's order book comprises the unexecuted elements of orders on
contracts that have been awarded. Where a contract is subject to
variations, only secured variations are included in the reported
order book.
For further information, please contact:
Keller Group plc www.keller.com
James Hind, Finance Director
Victoria Huxster, Head of Investor
Relations 020 7616 7575
Finsbury
Gordon Simpson
James Kavanagh 020 7251 3801
A presentation for analysts will be held at 10.00am at
One Moorgate Place - Chartered Accountants Hall,
1 Moorgate Place, London EC2R 6EA
A live webcast will be available from 10.00am and, on demand,
from 2.00pm at
https://www.investis-live.com/keller/5b2cd5d64b7b0d10007b75d4/omaa
Notes to editors:
Keller is the world's largest geotechnical contractor, providing
technically advanced geotechnical solutions to the construction
industry. With annual revenue of more than GBP2.0bn, Keller has
approximately 11,000 staff world-wide.
Keller is the clear market leader in the US, Canada, Australia
and South Africa; it has prime positions in most established
European markets and a strong profile in many developing
markets.
Cautionary statements:
This document contains certain 'forward looking statements' with
respect to Keller's financial condition, results of operations and
business and certain of Keller's plans and objectives with respect
to these items.
Forward looking statements are sometimes, but not always,
identified by their use of a date in the future or such words as
'anticipates', 'aims', 'due', 'could', 'may', 'should', 'expects',
'believes', 'intends', 'plans', 'potential', 'reasonably possible',
'targets', 'goal' or 'estimates'. By their very nature
forward-looking statements are inherently unpredictable,
speculative and involve risk and uncertainty because they relate to
events and depend on circumstances that will occur in the
future.
There are a number of factors that could cause actual results
and developments to differ materially from those expressed or
implied by these forward-looking statements. These factors include,
but are not limited to, changes in the economies and markets in
which the group operates; changes in the regulatory and competition
frameworks in which the group operates; the impact of legal or
other proceedings against or which affect the group; and changes in
interest and exchange rates.
All written or verbal forward looking statements, made in this
document or made subsequently, which are attributable to Keller or
any other member of the group or persons acting on their behalf are
expressly qualified in their entirety by the factors referred to
above. Keller does not intend to update these forward looking
statements.
Nothing in this document should be regarded as a profits
forecast.
This document is not an offer to sell, exchange or transfer any
securities of Keller Group plc or any of its subsidiaries and is
not soliciting an offer to purchase, exchange or transfer such
securities in any jurisdiction. Securities may not be offered, sold
or transferred in the United States absent registration or an
applicable exemption from the registration requirements of the US
Securities Act of 1933 (as amended).
LEI number: 549300QO4MBL43UHSN10
Classification: 1.2 (Half yearly financial reports)
The person responsible for making this announcement is Kerry
Porritt, Group Company Secretary
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR UBONRWOABUAR
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