Keller cuts costs, exits Brazilian market

(Sharecast News) - Specialist geotechnical contractor Keller Group updated the market on trading in its first quarter on Thursday, reiterating that trading in January and February was "marginally above" its expectations.
The London-listed firm said that, as it anticipated, it saw a "swift deterioration" in activity during the second half of March, due to national and regional restrictions on travel and work.

Notwithstanding that, it said the March result was still less impacted than expected, and the performance for the quarter as a whole was better than the board's expectations, and materially better than the prior year.

The company said the Covid-19 coronavirus situation had continued to evolve and, while the position across its geographic markets remained broadly as it described on 25 March, the short-term trading outlook remained uncertain.

"Accordingly, we have put in place a broad range of measures to reduce costs and manage our liquidity through this period," the directors said.

"Measures include operating cost reductions, cancellation of discretionary projects, reduced capital expenditure, and an even greater focus on working capital management.

"We continue to seek to maximise the group's resilience and to minimise the potential financial and other risks arising from the current crisis."

Keller said it was availing itself of relevant governmental support schemes across all of its markets, such as furlough and tax deferrals, where appropriate.

Additionally, the board and senior management had taken a voluntary 20% reduction in fees and salary during the second quarter.

The firm said trading in April remained mixed, with the Asia-Pacific and Europe, Middle East and Africa geographies currently impacted more than North America, which varied "significantly" by state.

"Once current national and regional restrictions on travel and work are lifted, we would expect to return to work on the majority of those contracts currently being affected and our order book in the near term remains largely unaffected."

In terms of financing and liquidity, as it said in its full-year results on 3 March, as at 31 December, its net debt was ?213m on a bank covenant IAS 17 basis, equating to a net debt-to-EBITDA ratio of 1.2x, compared to its covenant limit of 3.0x.

The company said it had "substantial" borrowing facilities available to it, saying that as at the end of March, the group had undrawn committed and uncommitted borrowing facilities totalling ?238m, comprising ?167m of the unutilised portion of its ?375m revolving credit facility, ?29m of other undrawn committed borrowing facilities, and undrawn uncommitted borrowing facilities of ?42m, as well as cash and cash equivalents of ?87m.

At the end of March, its net debt was ?251m on a bank covenant IAS 17 basis, equating to a net debt-to-EBITDA ratio of 1.3x, with the board saying the firm's liquidity position remained under constant review.

"It remains too early to provide earnings guidance in relation to the remainder of the current financial year.

"We will continue to monitor external events, manage the situation closely and update the market as appropriate."

Keller also announced the sale of its Brazilian entity Tecnogeo on Wednesday, and its successful exit from the Brazilian market, as part of its previously-announced phased withdrawal from South America.

The sale was for a total cash consideration of BRL15m (?2.3m), with unconditional payments totalling BRL10m (?1.5m) in 2020 and a final payment of BRL5m (?0.8m) deferred until 2021.

It said the sale would result in a small non-underlying loss on disposal for the group.

"Whilst Keller benefits from a strong financial position, in light of the market uncertainty arising from Covid-19, the board will keep the appropriateness of paying the final dividend under review until the rescheduled annual general meeting, with a final decision dependant on the prevailing circumstances at the time," the board said.

"As the group's proposed final dividend for 2019 of 27.4p per share, which was due to be paid on 26 June 2020, requires approval at the annual general meeting, the postponement of the meeting means the approval of this final dividend to shareholders will also be postponed accordingly."

At 1506 BST, shares in Keller Group were up 7.68% at 603p.