Keller Regulatory News (KLR)

20 Aug 2007 07:01

Keller Group PLC20 August 2007 Monday, 20 August 2007 Keller Group plc Interim Results for the six months ended 30 June 2007 Keller Group plc ("Keller" or "the Group"), the international ground engineeringspecialist, is pleased to announce its interim results for the six months ended30 June 2007. Highlights include: • Revenue of £465.2m up 3% (9% on a constant currency basis) • Record first-half operating margin of 9.0% (2006: 7.9%) • Profit before tax of £40.1m up 20% (28% on a constant currency basis) • Basic earnings per share up 23% to 37.2p (2006: 30.3p) • Recent major contract wins contribute to a record order book • Interim dividend per share increased to 6.0p (2006: 4.2p) • Withdrawal from the loss-making, non-core Makers business Justin Atkinson, Keller Chief Executive said: "The momentum of the past two years has continued through this first half, withstrong overall trading, further margin enhancement and an impressivecontribution from all our recent acquisitions. "The prevalence of very large scale development projects around the world,requiring complex foundation solutions, is playing to our strengths.Increasingly, combined Group resources are co-operating on large projects,demonstrating the benefits of scale and the synergies between our businesses. "In these favourable conditions, and with an all-time high order book, the Boardnow expects that the full-year results of the Group's continuing operationswill significantly exceed last year's outstanding results." For further information, please contact: Keller Group plc www.keller.co.ukJustin Atkinson, Chief Executive 020 7616 7575James Hind, Finance Director SmithfieldReg Hoare/Will Henderson 020 7360 4900 A presentation for analysts will be held at 9.15 for 9.30am at the offices of Smithfield Consultants, 10 Aldersgate Street, London, EC1A 4HJ Print resolution images are available for the media to download from www.vismedia.co.uk Chairman's Statement Financial Overview I am pleased to report an excellent set of results for the six months ended 30June 2007. The momentum of the past two years has continued through this firsthalf, with strong overall trading, further margin enhancement and an impressivecontribution from all our recent acquisitions. Group revenue for the period was up 3% at £465.2m (2006: £450.0m). Operatingprofit was up 18% at £42.1m (2006: £35.7m) and the first-half operating marginrose to its highest-ever level of 9.0% (2006: 7.9%). On a constant currencybasis, revenue increased by 9% and operating profit was up 27%. This strongGroup profit performance is stated after a £5.3m operating loss in Makers in theperiod. Profit before tax increased by 20% to £40.1m (2006: £33.4m) and earnings pershare were up 23% at 37.2p (2006: 30.3p). Cash generated from operations increased to £40.2m, compared to last year's£28.8m, underlining the quality of our earnings. The period-end net debt was£53.8m, which compares to £47.6m at the end of June 2006. This year-on-yearincrease is stated after expenditure of £29.5m on acquisitions and capitalexpenditure of £37.5m over the last twelve months. At more than twicedepreciation, this level of capital expenditure is much higher than historiclevels in order to support the expanding workload and to invest for futuregrowth. Dividend The Board has declared an interim dividend of 6.0p per share (2006: 4.2p). Thisrepresents one third of the expected total dividend for the year of 18.0p pershare which is a 15% increase on the total 2006 dividend of 15.6p. This increaseis in line with the new dividend policy announced at the time of our 2006preliminary results. The interim dividend will be paid on 1 November 2007 toshareholders on the register at 5 October 2007. Operational Overview US Our US operations as a whole had a very good first half. The commercial andpublic infrastructure markets remain extremely robust although, as anticipated,there was a further contraction in the residential market, which still shows nosigns of abating. Total US revenue was 6% ahead of last year on a constantcurrency basis. Translated into sterling, revenue was 3% behind the previousyear at £232.7m (2006: £241.1m), reflecting the significant weakening of the USdollar. Despite the currency impact, operating profit of £29.4m (2006: £27.8m)was up 6%, reflecting a further increase in the previously strong margin of theUS foundation businesses. Suncoast As expected, given the severe decline in the residential sector, Suncoast'sfirst-half trading was not as strong as last year. However, management took fulladvantage of buoyant demand for Suncoast's high-rise products, whilst continuingto deliver operational improvements, thus in part limiting the impact of theresidential downturn. We expect pressure on prices to cause some erosion ofhigh-rise margins in the second half. Hayward Baker Good contributions from all of its regions combined to give another excellentresult from Hayward Baker. One of the many noteworthy contracts completed by Hayward Baker in the first sixmonths relates to the Combined Sewer Overflow Abatement Program in Providence,Rhode Island, involving the construction of seven underground storage facilitiesand three deep rock tunnel segments. The contract was bid by Donaldson, abusiness acquired by Hayward Baker in October 2005, and was undertaken using itsown and other Hayward Baker resources. The work included driven piling, designand installation of excavation support and extensive jet grouting to support thetunnelling operations. This is one of several jobs in the first half requiringboth Donaldson's and pre-existing Hayward Baker resources, illustrating thesynergies from this acquisition. Case Case is on track to have another record year, with an extremely strongperformance on many of the contracts undertaken in the first half. Since the period end, Case has started work on a very large project to build thefoundations for The Chicago Spire. The Spire, a 150-storey, 610-metre highresidential tower, to be built overlooking the shores of Lake Michigan, isexpected to be the tallest building in the US. It is envisaged that Case willinstall 34 steel-reinforced concrete caissons, 36 metres in length, drilled intobedrock, whilst Hayward Baker will construct a 32-metre diameter sheet-piledwall to create a dry work environment and to serve as the foundation for thecore of the building. McKinney McKinney reported a very good first half in spite of weather-related delays onseveral of their contracts. The trend in recent years for McKinney to take onmore large jobs, often in joint venture with other Group companies, continuedover the first six months of this year, with the award of two power plantprojects in joint venture with Case. Work on the first of these, the Fort Martinpower plant in West Virginia, was around 25% complete at the end of June and isprogressing well, whilst work on the Hatfield Ferry plant in Pennsylvania isexpected to start in October and should be substantially complete by the end ofthe year. Anderson Anderson, the Group's October 2006 acquisition, has made a smooth transition toKeller ownership, with a migration to the Group's principal accounting andreporting systems now complete. Anderson, whose contribution to the first halfexceeded our most optimistic expectations at the time of acquisition, expects2007 to be the busiest year in its history. Continental Europe & Overseas Continental Europe & Overseas reported another set of much improved results,with particularly significant contributions from Spain and the Middle East andan improvement in margins across most of its markets. Revenue of £136.2m (2006:£125.8m) was 8% ahead of the previous year, whilst operating profit of £13.7mnearly doubled (2006: £7.0m). Our operations in Spain had another busy six months and, as expected, marginsrecovered following the measures taken last year to strengthen our resources andkey business processes. Two contracts in particular made good contributions:emergency works in the Canary Islands to stabilise storm-damaged embankmentswhich were in danger of collapsing onto an adjacent housing estate; andextensive works at the southern Port of Huelva, including the largest area ofcompaction grouting works undertaken in Spain, as part of the port redevelopmentproject. Our businesses in Eastern Europe continue to thrive, particularly in Polandwhere we have been progressively moving into the heavy foundations sector,resulting in an almost 80% increase in revenue in this first half compared withthe same period last year. We continue to extend our reach in the region and inrecent months have established a presence in Serbia and Romania. After a slow start, we had a better second quarter in Germany, where we expectthe increased pace to continue through the second half of the year. The performance of the Overseas business was characterised by a strong firsthalf in the Middle East. We expect to be extremely busy here for the remainderof the year with current work in Bahrain and Dubai, a major contract for the AlRaha Beach development in Abu Dhabi and three contracts with a total value ofc.US$80m (£40m) for the new Saudi Kayan petrochemical complex in Saudi Arabia. Asignificant portion of our current order book in the Middle East is for heavyfoundations, an area of the market in which we have historically beenunder-represented. We are now seeing the benefit of a greater strategic focusand increased investment in heavy foundations capacity in this region. UK Keller Ground Engineering had a good first half, with a strong contribution fromPhi, the retaining wall specialist acquired in April 2006. The Group's latest UKacquisition, Systems Geotechnique, also performed very well in its first fewmonths under Keller ownership. Acquired in April 2007 for an initial cost of£9.1m including debt, this drilling and grouting specialist is being steadilyassimilated into the Group and synergies with other parts of our UK foundationbusiness are starting to be developed. The Board's stated intention has been to return Makers to sustainableprofitability. However, its performance over recent years has been veryinconsistent, culminating in a reported operating loss of £5.3m in this firsthalf (first half 2006: loss of £0.5m; full year 2006: loss of £0.2m), mainly asa result of issues on two large contracts and a significant decline in volumes.Accordingly, following a strategic review, the Board has taken the decision towithdraw from this non-core business, to enable greater focus on the Group'sstrongly performing specialist ground engineering businesses. After taking independent expert advice, the Board has concluded that a sale ofMakers as a single business in its current form is unlikely to be achieved andtherefore its various divisions will be sold or discontinued as appropriate. Weanticipate that this process will be largely complete within the next six monthsand that it will result in a one-off charge, expected to be less than £10m, inthe second half. Australia In Australia, where we continued to trade extremely well in the first half, ourleading market position is helping our business to take full advantage of goodopportunities, particularly in the infrastructure sector. The award of a circa A$72m (£30m) contract for piling and ground improvementworks in Queensland is expected to underpin the revenue for this business in thesecond half. The Gateway Upgrade, located near Brisbane's International Airport,is the largest road and bridge infrastructure project in Queensland's history.The ground engineering works for the project are to be carried out by a jointventure led by Piling Contractors, which was acquired by Keller in August 2006.The joint venture also comprises our three other Australian companies:Frankipile, Vibro-pile and Keller Ground Engineering. Test piles were completedearlier this year and the main works are due to complete by autumn 2008. Outlook The prevalence of very large scale development projects around the world,requiring complex foundation solutions, is playing to our strengths. Increasingly, combined Group resources are co-operating on large projects,demonstrating the benefits of scale and the synergies between our businesses. We enter the second half with an all-time high order book and with strongtrading in most parts of the Group. In these favourable conditions, the Boardnow expects that the full-year results of the Group's continuing operations willsignificantly exceed last year's outstanding results. Dr J. M. West Chairman 20 August 2007 Consolidated income statement for the half year ended 30 June 2007 -------------------------------- ----- -------- -------- -------- Half year to Half year to Year to 31 30 June 2007 30 June 2006 December 2006 Note £m £m £m -------------------------------- ----- -------- -------- -------- Revenue 3 465.2 450.0 920.2Operating costs (423.1) (414.3) (831.1)-------------------------------- ----- -------- -------- --------Operating profit 3 42.1 35.7 89.1Finance income 1.5 0.9 2.3Finance costs (3.5) (3.2) (7.7)-------------------------------- ----- -------- -------- --------Profit before taxation 40.1 33.4 83.7-------------------------------- ----- -------- -------- --------Taxation before one-offtax credit (14.5) (13.1) (30.7)One-off tax credit - - 3.8-------------------------------- ----- -------- -------- --------Total taxation 4 (14.5) (13.1) (26.9)-------------------------------- ----- -------- -------- --------Profit for the period 25.6 20.3 56.8-------------------------------- ----- -------- -------- -------- Attributable to:Equity holders of the parent 24.5 19.9 55.7Minority interests 1.1 0.4 1.1-------------------------------- ----- -------- -------- -------- 25.6 20.3 56.8 -------------------------------- ----- -------- -------- -------- Basic earnings per share 5 37.2p 30.3p 84.8pEarnings per share beforeone-off tax credit 5 37.2p 30.3p 79.0pDiluted earnings per share 5 36.7p 30.0p 83.7pDiluted earnings pershare before one-off tax credit 5 36.7p 30.0p 78.0p-------------------------------- ----- -------- -------- -------- Consolidated statement of recognised income and expense for the half year ended 30 June 2007 -------------------------------- -------- -------- -------- Half year to 30 Half year to 30 Year to 31 June 2007 June 2006 December 2006 £m £m £m -------------------------------- -------- -------- -------- Foreign exchange translationdifferences (0.1) (6.0) (8.0)Actuarial losses on definedbenefit pension schemes 1.8 0.7 (0.1)Tax on items taken directlyto equity (0.5) (0.2) 0.1-------------------------------- -------- -------- --------Net income/(expense) recogniseddirectly in equity 1.2 (5.5) (8.0)Profit for the period 25.6 20.3 56.8-------------------------------- -------- -------- --------Total recognised income andexpense for the period 26.8 14.8 48.8-------------------------------- -------- -------- -------- Attributable to:Equity holders of the parent 25.7 14.4 47.9Minority interests 1.1 0.4 0.9-------------------------------- -------- -------- -------- 26.8 14.8 48.8 -------------------------------- -------- -------- -------- Consolidated balance sheet As at 30 June 2007 -------------------------------- ----- -------- -------- -------- As at As at As at 31 December 2006 30 June 30 June 2007 2006 Note £m £m £m -------------------------------- ----- -------- -------- --------Assets Non-current assetsIntangible assets 63.9 58.9 57.5Property, plant and equipment 130.8 93.5 114.6Deferred tax assets 8.3 7.7 7.9Other assets 12.4 - 8.8-------------------------------- ----- -------- -------- -------- 215.4 160.1 188.8-------------------------------- ----- -------- -------- --------Current assetsInventories 27.4 25.7 25.5Trade and other receivables 260.5 236.0 221.7Cash and cash equivalents 17.9 24.5 25.2-------------------------------- ----- -------- -------- -------- 305.8 286.2 272.4-------------------------------- ----- -------- -------- --------Total assets 521.2 446.3 461.2-------------------------------- ----- -------- -------- -------- Liabilities Current liabilitiesLoans and borrowings (7.1) (10.2) (6.8)Current tax liabilities (10.6) (10.1) (9.4)Trade and other payables (222.2) (204.3) (192.4)-------------------------------- ----- -------- -------- -------- (239.9) (224.6) (208.6)-------------------------------- ----- -------- -------- --------Non-current liabilitiesLoans and borrowings (64.6) (61.9) (57.0)Employee benefits (18.2) (15.5) (18.8)Deferred tax liabilities (6.1) (4.9) (6.2)Other liabilities (13.6) (12.8) (11.5)-------------------------------- ----- -------- -------- -------- (102.5) (95.1) (93.5)-------------------------------- ----- -------- -------- --------Total liabilities (342.4) (319.7) (302.1)-------------------------------- ----- -------- -------- --------Net Assets 178.8 126.6 159.1-------------------------------- ----- -------- -------- --------Equity Share capital 6.6 6.6 6.6Share premium account 37.4 36.8 37.1Capital redemption reserve 7.6 7.6 7.6Translation reserve (4.5) (2.7) (4.5)Retained earnings 124.3 72.6 105.6-------------------------------- ----- -------- -------- --------Equity attributable to equityholders of the parent 7 171.4 120.9 152.4Minority interests 7.4 5.7 6.7-------------------------------- ----- -------- -------- --------Total equity 178.8 126.6 159.1-------------------------------- ----- -------- -------- -------- Consolidated cash flow statement for the half year ended 30 June 2007 -------------------------------- -------- -------- -------- Half year to 30 Half year to 30 Year to 31 June 2007 June 2006 December 2006 £m £m £m -------------------------------- -------- -------- --------Cash flows from operating activitiesOperating profit 42.1 35.7 89.1Depreciation of property, plant andequipment 7.9 6.5 13.4Amortisation of intangible assets 0.1 - 2.4Gain on sale of property,plant and equipment (0.2) (0.3) (0.6)Other non-cash movements 0.5 0.1 0.2Foreign exchange gains (0.8) - (0.2)-------------------------------- -------- -------- --------Operating cash flows beforechanges in working capital andprovisions 49.6 42.0 104.3Movement in long-term liabilitiesand employee benefits (3.1) (4.1) (1.7)Increase in inventories (2.2) (1.9) (3.0)Increase in trade and otherreceivables (33.8) (46.0) (30.6)Increase in trade andother payables 29.7 38.8 29.3-------------------------------- -------- -------- --------Cash generated from operations 40.2 28.8 98.3Interest paid (2.5) (2.5) (6.2)Income tax paid (14.0) (15.9) (30.7)-------------------------------- -------- -------- --------Net cash inflow fromoperating activities 23.7 10.4 61.4-------------------------------- -------- -------- -------- Cash flows from investing activitiesInterest received 0.7 0.3 1.1Proceeds from sale of property,plant and equipment 1.0 1.0 2.0Acquisition of subsidiaries,net of cash acquired (9.0) (5.9) (26.4)Acquisition of property,plant and equipment (22.8) (12.9) (29.4)Acquisition of othernon-current assets (1.7) - (2.6)-------------------------------- -------- -------- --------Net cash outflow frominvesting activities (31.8) (17.5) (55.3)-------------------------------- -------- -------- -------- Cash flows from financing activitiesProceeds from the issue of share capital 0.4 0.5 0.8New borrowings 8.1 9.5 3.0Payment of finance lease liabilities (0.2) (0.1) (2.1)Dividends paid (8.0) (6.2) (9.0)-------------------------------- -------- -------- --------Net cash inflow/(outflow) fromfinancing activities 0.3 3.7 (7.3)-------------------------------- -------- -------- -------- Net decrease in cash andcash equivalents (7.8) (3.4) (1.2)Cash and cash equivalents atbeginning of period 20.3 23.3 23.3Effect of exchange rate fluctuations 0.1 (0.9) (1.8)-------------------------------- -------- -------- --------Cash and cash equivalents atend of period 12.6 19.0 20.3-------------------------------- -------- -------- -------- -------------------------------- -------- -------- -------- As at As at As at 31 December 2006 30 June 30 June 2007 2006 £m £m £m -------------------------------- -------- -------- --------Analysis of closing net debtCash in hand 17.7 24.5 25.1Short term deposits 0.2 - 0.1Bank overdrafts (5.3) (5.5) (4.9)-------------------------------- -------- -------- --------Net cash 12.6 19.0 20.3Bank and other loans (62.7) (61.3) (56.1)Loan notes due within one year - (2.8) -Finance leases (3.7) (2.5) (2.8)-------------------------------- -------- -------- --------Closing net debt (53.8) (47.6) (38.6)-------------------------------- -------- -------- -------- 1. Basis of preparation This interim financial information has been prepared applying the accountingpolicies and presentation that were applied in the preparation of the Company'spublished consolidated financial statements for the year ended 31 December 2006. The figures for the year to 31 December 2006 have been extracted from theGroup's statutory accounts for that financial year which received an unqualifiedauditors' report and did not contain statements under section 237(2) or (3) ofthe Companies Act 1985. 2. Foreign currencies The exchange rates used in respect of principal currencies are: ---------------- -------------------- -------- -------- -------- Half year to Half year to Year to 31 30 June 30 June December 2007 2006 2006 ---------------- -------------------- -------- -------- --------US dollar: average for period 1.97 1.79 1.84 period end 2.00 1.82 1.96Euro: average for period 1.48 1.46 1.47 period end 1.49 1.45 1.49Australiandollar: average for period 2.44 2.41 2.45 period end 2.36 2.49 2.49 ---------------- -------------------- -------- -------- -------- 3. Segmental analysis Revenue and operating profit may be analysed as follows: Revenue Operating profit Half year Half year Year to Half year Half year Year to to 30 to 30 31 to 30 to 30 31 June June December June June December ---------------- -------- -------- -------- -------- -------- -------- 2007 2006 2006 2007 2006 2006 £m £m £m £m £m £m ---------------- -------- -------- -------- -------- -------- --------United Kingdom 56.7 60.0 123.2 (3.6) 0.9 3.2North America 232.7 241.1 476.9 29.4 27.8 64.1ContinentalEurope &Overseas 136.2 125.8 255.0 13.7 7.0 17.9Australia 39.6 23.1 65.1 4.6 2.2 7.0---------------- -------- -------- -------- -------- -------- -------- 465.2 450.0 920.2 44.1 37.9 92.2Central itemsandeliminations - - - (2.0) (2.2) (3.1)---------------- -------- -------- -------- -------- -------- -------- 465.2 450.0 920.2 42.1 35.7 89.1---------------- -------- -------- -------- -------- -------- -------- 4. Taxation Taxation based on the profit before tax is: ---------------------------------- -------- -------- -------- Half year to Half year to Year to 31 30 June 2007 30 June 2006 December 2006 £m £m £m ---------------------------------- -------- -------- --------UK corporation tax at 30% (2006: 30%) (0.7) - (3.8)Overseas tax 15.2 13.1 30.7---------------------------------- -------- -------- -------- 14.5 13.1 26.9---------------------------------- -------- -------- -------- 5. Earnings per share Basic and diluted earnings per share are calculated as follows: ---------------------------- -------- -------- -------- -------- Half year Half year Half year Half year to to to to 30 June 30 June 30 June 30 June 2007 2007 2006 2006 Basic Diluted Basic Diluted £m £m £m £m ---------------------------- -------- -------- -------- --------Earnings (after tax and minorityinterests) being net profitsattributableto equity holders of the parent 24.5 24.5 19.9 19.9---------------------------- -------- -------- -------- -------- No. of No. of No. of No. of shares shares shares shares millions millions millions millions---------------------------- -------- -------- -------- --------Weighted average of ordinaryshares in issue during the year 65.8 65.8 65.5 65.5---------------------------- -------- -------- -------- --------Adjusted weighted averageordinary shares in issue 65.8 66.8 65.5 66.3---------------------------- -------- -------- -------- -------- Pence Pence Pence Pence -------- -------- -------- --------Earnings per share 37.2p 36.7p 30.3p 30.0p---------------------------- -------- -------- -------- -------- 6. Dividends payable to equity holders of the parent Ordinary dividends on equity shares: ----------------------------------- -------- -------- -------- Half year to Half year to Year to 31 30 June 2007 30 June 2006 December 2006 £m £m £m ----------------------------------- -------- -------- --------Amounts recognised as distributionsto equity holders in the period:Final dividend for the yearended 31 December 2006 of 11.4p(2005: 8.2p) per share 7.5 5.3 5.3Interim dividend for the year ended31 December 2006 of 4.2p per share - - 2.8----------------------------------- -------- -------- -------- 7.5 5.3 8.1----------------------------------- -------- -------- -------- In addition to the above, an interim ordinary dividend of 6.0p per share (2006:4.2p) will be paid on 1 November 2007 to shareholders on the register at 5October 2007. This proposed dividend has not been included as a liability inthese interim statements and will be accounted for in the period in which it ispaid. 7. Reconciliation of movements in equity attributable to equity holdersof the parent ---------------------------------- --------- -------- -------- Half year to Half year to Year to 31 30 June 2007 30 June 2006 December 2006 £m £m £m ---------------------------------- --------- -------- --------Equity at start of period 152.4 111.1 111.1Total recognised income andexpense 25.7 14.4 47.9Dividends to shareholders (7.5) (5.3) (8.1)Shares issued* 0.4 0.5 0.7Share based payments 0.4 0.2 0.8---------------------------------- --------- -------- --------Equity at end of period 171.4 120.9 152.4---------------------------------- --------- -------- -------- * Includes share premium. This information is provided by RNS The company news service from the London Stock Exchange