TIDMKLR
RNS Number : 1148I
Keller Group PLC
22 November 2018
For immediate release 22 November 2018
Keller Group plc ("Keller" or "the Group")
Trading Update, APAC Strategic Review and Completion of
Refinancing
Trading update
Group trading in the second half of the year has continued in
line with the Board's full year expectations.
In North America, our geotechnical businesses (Hayward Baker,
Case, McKinney, HJ, Bencor and Keller Canada) continue to trade in
line with expectations and have avoided any material impact from
Hurricanes Florence and Michael. The integration of the Moretrench
acquisition is progressing very well. We are currently negotiating
an adjustment due to scope increase on a large long-term Bencor
contract. Whilst we are confident of the position we have taken,
there is some uncertainty as to the exact timing and quantum of the
final settlement. The unusually poor weather in Texas in October
has adversely affected Suncoast, our post-tension business,
compounding the previously announced impact of steel price
increases.
In EMEA, our businesses have performed in line with
expectations, demonstrating year on year profitable growth,
excluding the reducing beneficial effect from the significant
projects in the Middle East and the Caspian. Within this overall
performance, growth in our core European, Middle Eastern and North
African markets has continued to be offset by challenging market
conditions in Brazil and South Africa, reflecting the geo-political
environment in those countries. As part of our continued focus on
the shape of our global capacity we are taking proactive measures
to scale back our operations in these difficult markets, primarily
though capacity reduction, whilst maintaining bidding
discipline.
In APAC, we have undertaken a strategic review to address the
losses in our ASEAN and Waterway businesses and are taking
immediate actions, as described below. Austral retains an excellent
market position with leading Australian natural resources companies
and is having a record year, whilst Keller Australia has recovered
well from its challenging contracts in 2017 with improved contract
bidding and execution. India continues its profitable growth. All
of these three businesses are trading in line with expectations and
demonstrating good progress on the prior year.
The group-wide outlook for 2019 is somewhat mixed. Our main
markets remain healthy and our order book remains sound, but as
previously indicated the contribution from major projects will be
lower than this year.
Results of APAC strategic review
On 11 October the Group announced that as a consequence of
deteriorating ASEAN market conditions, and the reassessment of
project performance in ASEAN and Waterway, it expected that the
APAC division would make a pre-tax loss of between GBP12m-GBP15m in
2018, in contrast with the previous expectation of a small profit.
As a consequence, the Group announced it would be conducting a
strategic review of its activities in ASEAN and Waterway, which
account for the APAC losses in the year.
In ASEAN, we have conducted a thorough review of our product and
business portfolio in the context of the current political and
competitive landscape. As a result, we are downsizing the business
to focus on those product lines offering the greatest opportunity
to leverage our market-leading technologies. The Group will
therefore undertake a managed exit of its Heavy Foundations
activities (bored piling, driven piling and diaphragm walls) in
Singapore and Malaysia, which have become highly commoditised and
continue to see heavy competitive and pricing pressure. These
operations have a combined annual revenue of approximately GBP60m
and represent substantially all of the expected 2018 loss in ASEAN.
Going forward, we will focus on higher margin Ground Improvement
activities (vibro, grouting and deep soil mixing) in the ASEAN
region, where we hold a technological competitive advantage.
In Waterway, we will improve performance by exiting the highly
congested bridge superstructure market and refocusing on higher
margin projects. Although the two business units will retain their
independent brands and operations, we are sharing key leadership
roles and functional support between Austral and Waterway, reducing
overhead and improving business processes. Legacy lower margin
contracts in Waterway are expected to be substantially worked
through by the end of H1 2019.
The Group expects that these measures, along with leadership
changes and actions already implemented, will have the combined
effect of returning the APAC region to profit in H2 2019.
Group-wide restructuring programme
The actions described in ASEAN, Waterway, Brazil and South
Africa are part of a group-wide programme of portfolio and capacity
actions. The Group currently expects to take an exceptional
restructuring charge of approximately GBP57m in its Full Year 2018
results. Around GBP30m will relate to goodwill and around GBP20m
will relate to fixed asset and other impairments. Restructuring
cash costs in 2018 will be around GBP7m offset by income from asset
disposals in 2019 of around GBP5m, with a net cash cost therefore
of around GBP2m. We estimate these measures will result in a
reduction of around 700 employees.
Completion of scheduled refinancing
The Group also announces today that it has successfully
negotiated improved terms in the scheduled refinancing of its
existing debt facilities which were due to mature in September
2019, by entering into a new syndicated revolving credit facility
totalling GBP375m. The new facility, syndicated to a broader club
of eight banks, has a maturity of five years to November 2023,
incorporates two additional one year extension options and a
GBP200m accordion at the discretion of the banks, and has been
agreed on improved terms and rates in comparison to the existing
facility.
Alain Michaelis, Chief Executive, said:
"We are taking tough but necessary actions to reduce our cost
base and exposure to unprofitable market segments, and we are also
sharpening our control regime. We continue to focus on improving
operational performance and remain well positioned to address the
long term market trends in our industry."
Keller will announce its Full Year 2018 results on 4 March
2019.
For further information, please contact:
Keller Group plc 020 7616 7575
Alain Michaelis, Chief Executive Officer
Michael Speakman, Chief Financial Officer
Victoria Huxster, Head of Investor Relations
Finsbury 020 7251 3801
Gordon Simpson
Notes to Editors:
Keller is the world's largest geotechnical contractor, providing
technically advanced geotechnical solutions to the construction
industry. With annual revenue of around 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.
For more information, please go to:
http://www.keller.com/investors.aspx and
http://www.keller.com/investors/investment-case.aspx.
LEI: 549300QO4MBL43UHSN10
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disclosed in accordance with the Company's obligations under
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END
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