Keller Regulatory News (KLR)

2 August 2022

Keller Group plc Interim Results for the half year ended 26 June 2022

Keller Group plc ('Keller' or the 'Group'), the world's largest geotechnical specialist contractor, announces its results for the half year ended 26 June 2022.

 Record profit in H1, confidence in H2 outlook maintained and dividend increased

1 Underlying operating profit and underlying diluted earnings per share are non-statutory measures which provide readers of this Announcement with a balanced and comparable view of the Group's performance by excluding the impact of non-underlying items, as disclosed in note 7 of the interim condensed consolidated financial statements.

2 Net debt is presented on a lender covenant basis excluding the impact of IFRS 16 as disclosed within the adjusted performance measures in the interim condensed consolidated financial statements.

Highlights

· Record first half performance despite the current macroeconomic challenges

· Revenue of £1,337.4m, up 31% on a constant currency basis, reflecting growth in all three divisions as trading activity recovered following the impacts of COVID-19

· Record first half underlying operating profit of £49.6m, up 19% on a constant currency basis, driven by growth and the active management of inflationary pressures and materials and labour availability

· Group operating margin of 3.7% reflects the passing on of materials cost inflation with little or no mark-up and some operational challenges in the North America Foundations business

· Net debt (on a bank covenant IAS 17 basis) of £194.0m, equating to a net debt/EBITDA leverage ratio of 1.1x (H1 2021: 0.7x), well within our target range of 0.5x - 1.5x

· Mobilising in preparation for work on major new contract to undertake work on the prestigious NEOM project in Saudi Arabia where we are well positioned, with the potential to generate contract revenues in the hundreds of millions of pounds in future years

· A number of recent contract awards and prospects in the energy and infrastructure sectors, including increased LNG activity where Keller has both a well-established presence and an excellent reputation

· ESG: On climate action, we are making good progress towards our net zero targets with specific actions taken at business unit level in collaboration with industry partners

· The overall accident frequency rate increased slightly to 0.09 from 0.08 injuries per 100,000 hours worked, driven by a small number of lost time injuries in Europe. North America and AMEA continued to show improvement, with zero injuries reported in AMEA

· Continued successful strategy execution, with a bolt-on acquisition in North America and restructuring of specific business units in Europe and AMEA

· Interim dividend increased by 5% to 13.2p, continuing the dividend policy of long-term progression, and building on the Group's uninterrupted record of maintaining or increasing the dividend since flotation in 1994. The Board is also reviewing a further increase to the final dividend

Outlook

· Record order book of £1.6bn at the end of June, up 31% on the prior period, and up 22% on a constant currency basis, underpinning future performance

· The Board's expectations for the Group's full-year performance remain unchanged, with our usual increase in trading momentum and moderate second half weighting

Michael Speakman, Chief Executive Officer, said:

"Our record first half profit and the Group's record and growing £1.6bn order book provides us with confidence for the second half and for delivering on our expectations for the full year. Our involvement in the prestigious NEOM project, together with a number of recent infrastructure and LNG contract wins, demonstrates the strength and inherent resilience of the Group across the macroeconomic cycle. We remain very confident in the Group's strategy and long-term prospects, which is reflected in the Board's decision to recommence the progressive dividend policy with a 5% increase in the interim dividend for the first half of 2022."

For further information, please contact:

A webcast for investors and analysts will be held at 09.00am BST on 2 August 2022

and will also be available later the same day on demand

https://www.investis-live.com/keller/62d1570959bc74140084098a/ebppos

Notes to editors:

Keller is the world's largest geotechnical specialist contractor providing a wide portfolio of advanced foundation and ground improvement techniques used across the entire construction sector. With around 10,000 staff and operations across five continents, Keller tackles an unrivalled 6,000 projects every year, generating annual revenue of more than £2bn.

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. For a more detailed description of these risks, uncertainties and other factors, please see the Principal risks and uncertainties section of the Strategic report in the Annual Report and Accounts. 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).

Adjusted performance measures

In addition to statutory measures, a number of adjusted performance measures (APMs) are included in this Interim Announcement to assist investors in gaining a clearer understanding and balanced view of the Group's underlying results and in comparing performance. These measures are consistent with how business performance is measured internally.

The APMs used include underlying operating profit, underlying earnings before interest, tax, depreciation and amortisation, underlying net finance costs and underlying earnings per share, each of which are the equivalent statutory measure adjusted to eliminate the amortisation of acquired intangibles and other significant one-off items not linked to the underlying performance of the business. Net debt (bank covenant IAS 17 basis) is provided as a key measure for measuring bank covenant compliance and is calculated as the equivalent statutory measure adjusted to exclude the additional lease liabilities relating to the adoption of IFRS 16. Further underlying constant exchange rate measures are given which eliminate the impact of currency movements by comparing the current measure against the comparative restated at this year's actual average exchange rates. Where APMs are given, these are compared to the equivalent measures in the prior year.

APMs are reconciled to the statutory equivalent, where applicable, in the adjusted performance measures section in this Announcement.

GROUP OVERVIEW

Financial performance

The Group delivered a strong recovery in the first half, with significantly improved performance in terms of both revenue and profit growth, delivering a record first half profit, despite the challenging macroeconomic environment. As previously highlighted, across the Group we have successfully passed on a significant portion of cost increases in the form of higher prices, preserving the absolute level of profitability. The operating margin, down 30 basis points, has inevitably been affected by project delays due to some materials shortages, the residual unrecovered inflation and the mathematical margin dilution effect of the increased material costs passed through to clients.

The Group reported revenue of £1,337.4m, up 31% on the prior period on a constant currency basis and up 20% excluding the impact of the RECON acquisition. As anticipated, the return of market demand drove trading activity across all our markets as the impacts of COVID-19 subsided.

We delivered a record first half underlying operating profit of £49.6m, an increase of 19% on a constant currency basis. The recovery in market demand and the inclusion of RECON in North America more than offset some operational challenges in the North America Foundations business. These challenges in North America also caused a softening of the Group's underlying operating margin, along with the inflation-driven price increases passed onto clients with little or no mark-up, and the operational challenges associated with material and labour availability.

Increased trading activity across the Group was reflected in the working capital profile, with net debt at the period end of £194.0m, up 71%, equating to a net debt/EBITDA leverage ratio of 1.1x (H1 2021: 0.7x). Our target leverage ratio for the year end is c1.0x, well within our target range of 0.5x - 1.5x.

Operating performance

Active management and market demand helped drive growth in our revenue and operating profit, offsetting the macroeconomic challenges including the impacts of raw material and labour availability post COVID-19, the significant increase in inflation and the war in Ukraine.

In North America, our foundations business experienced a high level of activity in delivering on a backlog of projects. Profitability was challenged due to material and labour availability that impacted productivity, together with project execution issues that resulted in some contract losses in the half. Suncoast, the Group's post-tension business, continued to trade well as demand in the residential single family home market offset the impact of steel prices in the high-rise sector. Moretrench Industrial, our business that operates in the highly regulated environmental remediation market, continued to make good progress in the period. RECON, the geotechnical and industrial services company we acquired in July 2021, has integrated well and is performing strongly and ahead of our expectations. The business is managed under the Moretrench Industrial team as we establish and build our new environmental, geotechnical and industrial services business that will leverage our position in this large and growing sector.

In Europe, revenue and profit increased, reflecting heightened activity across all business units as our markets recovered following the impact of COVID-19. The division has demonstrated operational and financial resilience following the disruption triggered by the war in Ukraine, in particular in managing the impact of price escalation and shortages of raw materials across the region.

Our AMEA (Asia-Pacific, Middle East and Africa) Division delivered a strong turnaround in the period, as well as reporting a zero accident frequency rate. We are encouraged by the turnaround of the business over the last three years and, while we will continue to refine areas of the portfolio, the division is well placed for consistent future growth. The performance in the period was primarily driven by management action that took advantage of the recovery in trading in Australia and Middle East and Africa (MEA) following the pandemic.

Strategy

The Group continues to successfully implement its strategy to be the preferred international geotechnical specialist contractor focused on sustainable markets and attractive projects, generating long-term value for our stakeholders. During 2020 and 2021 we made considerable progress rationalising and restructuring the Group's geographic and service activities to create a more focused, higher quality portfolio of businesses. In 2022 we have maintained that trajectory and successfully exited two of our more peripheral geographies in our Europe Division as we continued to refine its focus. In addition, we are looking at our South West Europe and Middle East and Africa business units, both of which still retain a legacy of geographically dispersed locations which will benefit from further rationalisation and reorganisation.

A core pillar of our strategy is to further in-fill our chosen local markets, both organically and through bolt-on acquisitions, to accelerate our growth. In May, we completed the bolt-on acquisition of GKM Consultants Inc, a small geo-structural measurements and monitoring business based in Quebec, Canada. GKM will integrate into our Specialty Services business in our North America Division and will help accelerate our growth in this specialist segment.

One of our strategic priorities starting in 2022 is the successful implementation of an enterprise resource planning (ERP) system. This initiative will embed operational excellence in project execution across the whole Group, together with the associated financial benefits. It will also help address the emerging requirement for UK SOX. The initiative will be implemented over five years and we will leverage our risk management processes to help control the challenges associated with implementing the programme of work.

Safety

Construction is an inherently dangerous industry and safety remains our top priority. We saw an increase in the accident frequency rate of 13% year on year, to 0.09 injuries per 100,000 hours worked. This increase is primarily due to six lost time injuries in Europe in June. None of these injuries were classified as critical but any increase demonstrates that we cannot be complacent and must maintain our focus on the pursuit of zero harm. North America and AMEA continued to show improvement, with AMEA recording zero accidents in the period.

ESG

In 2021 the Executive team set ambitious and achievable targets to achieve net zero by 2050. We will be net zero across all three emission scopes by 2050; net zero on Scope 2 by 2030, net zero on Scope 1 by 2040 and net zero by 2050 on Keller originated Scope 3 (as opposed to client originated Scope 3). We have begun implementing the short, medium and long-term actions required to achieve these goals.

Keller is actively working to embed sustainability within the Group and this year there are three key elements to our sustainability strategy to support this. First, setting long-term and interim carbon reduction targets establishes clear and measurable goals on environmental sustainability. Second, energy audits and carbon calculator training provide our employees with insight on the source of Keller's emissions, and tangible ways in which to reduce our impact. Third, by tying our leaders' bonuses to carbon-cutting initiatives, Keller is signalling its commitment to making our environmental sustainability a top priority for the company. To keep this strategy at the forefront of our employees' minds, Keller is including carbon reduction discussions in our quarterly webinars to our extended leadership teams, mandating carbon reduction reporting from each business unit in their quarterly updates and requiring carbon calculator training for all our engineers.

During the pandemic, the Board approved funding of £300,000 to UNICEF, where teams were able to work around the clock to distribute billions of doses of the COVID-19 vaccines, to protect frontline workers, teachers and families everywhere, as a result of our contribution. The Board recognises the continued global challenges faced by our communities and is therefore announcing a new three-year partnership with UNICEF, commencing with a funding contribution of £250,000 in 2022 towards its Core Resources for Children. UNICEF's Core Resources for Children provides help wherever the need is greatest. Whether it is needed for programmes working to tackle the devastating effect of the climate crisis on children's lives, or programmes to help support children caught in conflict zones, our partnership will help UNICEF to continue to provide life-saving support to those families in need.

Interim dividend

The Board recognises the importance of capital returns to our shareholders and Keller has consistently and materially grown its dividend in the 28 years since listing. This unbroken record of dividends clearly demonstrates the Group's ability to continue to prosper through economic downturns, including both the global financial crisis and the pandemic. In the recent AGM trading statement, the Board stated that it would be reviewing the progression of the dividend. Accordingly, the Board has announced a 5% increase in the interim dividend to 13.2p (2021: 12.6p), payable on 9 September 2022 to shareholders on the register as at 19 August 2022. The Board will also be reviewing a further increase to the final dividend in respect of the current year as part of the Group's return to a progressive dividend policy.

Outlook

After a relatively slow start to the year, trading momentum improved as the first half progressed, despite the challenging economic conditions. Whilst macroeconomic uncertainty continues to increase, the combination of the Group's geographic footprint, sector diversity, its record £1.6bn order book and an FX tailwind, gives the Board confidence that the Group is on track to deliver its expectations for the full year. The recently announced NEOM project in Saudi Arabia further underpins this confidence and has the potential to be a material contributor to the Group's performance in the medium term.

Operating review

North America

1 Comparative order book stated at constant currency.

In North America, revenue was up 39% and up 22% excluding the impact of the RECON acquisition (both on a constant currency basis). Revenue growth was largely driven by price increases at Suncoast and improved trading across all sectors post COVID-19. Operating profit decreased by 27% on a constant currency basis to £30.1m, largely driven by the foundations business, which experienced cost inflation and shortages of materials and labour, some contract losses, and a c£7m claim resolution which benefited the prior period. This was partly offset by the inclusion of RECON and a strong performance at Suncoast in the residential market. The accident frequency rate, our key metric for measuring safety performance, improved from 0.06 to 0.04.

In the foundations business, whilst revenue increased in almost all business units, reflecting the increased activity levels post COVID-19, our performance was affected by widespread material and labour inflation and shortages. The business was able to pass on these inflationary increases on a timely basis; however, material and labour availability did reduce productivity and profitability. Furthermore, there were project execution issues that resulted in some contract losses.

Suncoast, the Group's post-tension business, performed strongly, with increased demand continuing in the residential sector and new high-rise contracts adjusted to reflect the market increases in steel prices that had a significant adverse impact in the prior period.

Moretrench Industrial, which operates in the highly regulated industrial and power segments, performed in line with our expectations and reported high levels of activity. RECON, the geotechnical and industrial services company we acquired in July 2021, has integrated well and performed strongly and ahead of our expectations. The business is managed under the Moretrench Industrial team as we establish and build our new environmental, geotechnical and industrial services business that will leverage our position in this large and growing sector. The contract to develop an energy facility in the Gulf Coast region of the USA, worth approximately £120m, is progressing well. We continue to explore further opportunities related to LNG in the region.

In the period we continued to make strategic progress through the bolt-on acquisition of GKM Consultants Inc, a small geo-structural measurements and monitoring business based in Quebec, Canada. GKM has integrated into our Specialty Services business in our North America Division and will help accelerate our growth in this specialist segment.

The order book for North America at the period end strengthened to £927.2m, up 26% on a constant currency basis, reflecting the improved momentum across all the North American business units.

Europe

1 Comparative order book stated at constant currency.

In Europe, revenue increased by 26% and underlying operating profit increased by 144% to £13.9m on a constant currency basis. Improved activity levels and underlying operating profit growth were reported across all five business units, reflecting a recovery in our markets post the impact of COVID-19 and the ability of the business to respond to the disruption triggered by the war in Ukraine. The accident frequency rate increased to 0.28 from 0.17 as a result of 10 lost time injuries. The injuries were classified as non-critical and all have been subject to a thorough root cause analysis.

Whilst the first half performance was robust, the period was operationally challenging. There was a significant escalation in supplier costs and energy prices, and delays in the delivery of materials to site resulted in some downtime. Material price inflation stabilised to some extent and increases were largely passed onto our customers.

South-East Europe and Nordics delivered revenue and operating profit growth, with the largest gains in Austria, Italy, Slovakia and the Czech Republic. Activity levels in Norway were affected by a de-scoping of a substantial part of the remaining works on the Sandbukta-Moss-Sastad (SMS2) rail project. The order book was bolstered by the award of the c£35m Tangenvika bridge project, also in Norway, where work will start in 2023.

The UK business reported revenue and profit growth through the core foundations business and continued good delivery on the High Speed 2 (HS2) rail contract.

Our business in Central Europe increased revenue and profit, driven by a number of large projects. Additionally, it has secured some important project wins in the period that position it well for the second half of the year.

The North-East Europe business continued to be profitable despite being the most affected by the war in Ukraine, both from a financial and humanitarian perspective. The leadership team and our employees responded quickly to provide direct support to our workers from Ukraine and their families and to assist with the associated migration crisis in Poland.

South-West Europe has shown some recovery in the period, having been heavily impacted by COVID-19 in the prior year. The integration of our Iberian and French Speaking Countries operations is now substantially complete following the merger announced mid-2021.

Having announced the exit from smaller, non-core geographies during the first half, we continue to actively monitor our European portfolio as well as ensuring our position in certain growth sectors, such as oil and gas and the energy sector more broadly.

The Europe order book at the end of the period was £390.5m, up 5% on a constant currency basis.

Asia-Pacific, Middle East and Africa (AMEA)

1 Comparative order book stated at constant currency.

In AMEA, revenues increased by 7% on a constant currency basis, driven by improved trading activity in Middle East and Africa (MEA), Australia and India. Underlying operating profit increased to £10.5m, primarily driven by the general recovery in trading. There were no reported accidents in the period, with the accident frequency rate falling from 0.03 to zero.

Austral continued to deliver a strong performance in terms of both revenue and profit. Following the successful completion of the large Cape Lambert upgrade project in the Pilbara region (c£75m), the business has successfully secured a number of follow-on resource related projects across the country.

Keller Australia significantly increased its trading activity in delivering on the order book backlog resulting from COVID-19. However, persistent heavy rains and flooding on the East Coast in the second quarter temporarily impacted profitability. Tendering levels were high and we anticipate this will continue in the second half of the year.

The ASEAN business has experienced some continued market softness, with the region continuing to feel the impacts of COVID-19. We expect an improved trading environment in the second half.

Our India business performed strongly, growing in revenue and profit, having recovered following the impacts of COVID-19. The business has experienced high tendering levels and has a number of large industrial infrastructure projects in the pipeline.

The MEA business delivered strong growth in revenue and profit, with an improved trading environment post COVID-19 that is expected to gain further momentum in the second half of the year. In Mozambique, the LNG project remains suspended through 2022.

As announced on 27 June 2022, Keller has made a strong commitment to the transformational NEOM development in Saudi Arabia. As recently announced by HRH Mohammad Bin Salam, the scale of the project affords significant opportunity to companies of Keller's skills and global reach. Keller has commenced mobilisation of key resources and equipment to service this exciting opportunity with further works orders expected to be awarded later in the year. We have a longstanding presence in Saudi Arabia and we are delighted to have been invited to participate in NEOM, a world-class construction project. Following the signing of the Framework Agreement, Keller is very well positioned to participate in the future geotechnical work, with the potential to generate contract revenues in the hundreds of millions of pounds in future years.

The AMEA order book at the end of the period was £247.4m, up 44%, on a constant currency basis and excluding the benefit of NEOM.

Chief Financial Officer's review

This report comments on the key financial aspects of the Group's interim results for the half year period ended 26 June 2022.

1 Details of non-underlying items are set out in note 7 to the interim condensed consolidated financial statements. Reconciliations to statutory numbers are set out in the adjusted performance measures section on page 37.

Geographic segmentation

2 Details of non-underlying items are set out in note 7 of the interim condensed consolidated financial statements.

Revenue

Revenue of £1,337.4m (H1 2021: £984.1m) was 36% up on 2021 due to growth in all three divisions with some benefit from foreign exchange tailwinds. On a constant currency basis, revenue increased by 31% and on an organic constant currency basis, excluding the impact of RECON revenue increased by 20%.

North America reported a revenue increase of 39% (at constant currency), positively impacted by the RECON acquisition in H2 2021, price increases at Suncoast and increased volumes in the US Foundations business. Constant currency revenue growth excluding RECON was 22%. In Europe, revenue increased by 26% (at constant currency) as business activity levels increased compared to the prior year which was still heavily impacted by COVID restrictions. Revenue in AMEA increased by 7% on a constant currency basis, as increased activity levels in Australia, India and the Middle East more than offset softer volumes in Indonesia and Malaysia.

We have a diversified spread of revenues across geographies, product lines, market segments and end customers. Customers are generally market specific and the largest customer represented less than 5% (H1 2021: 3%) of the Group's revenue for the half year. The top 10 customers represent 18% of the Group's revenue for the half year (H1 2021: 17%).

Underlying operating profit

The underlying operating profit of £49.6m was 26% ahead of prior year (H1 2021: £39.5m) and on a constant currency basis was 19% up on prior year.

North America underlying constant currency operating profit decreased by 27% as profitability was challenged due to the increased cost of materials and labour as well as availability constraints that impacted productivity and some project execution issues. In addition, the prior half year period included the £7m benefit from the resolution of a significant historic claim. Europe constant currency operating profit increased 144%, reflecting the bounce back post-COVID restrictions and the ability of the business to respond to the disruption triggered by the war in Ukraine, and managing the impact of price escalation and shortages of raw materials across the region. AMEA constant currency operating profit increased significantly in H1 2022, largely as a result of the recovery in trading in Middle East and Africa (MEA) and Australia following the impacts of the pandemic. The first half last year was negatively impacted by the Mozambique LNG project losses.

Share of post-tax results from joint ventures

The Group recognised an underlying post-tax profit of £0.9m in the period (H1 2021: £0.3m) from its share of the post-tax results from joint ventures. The share of the post-tax amortisation charge of £0.7m (H1 2021: £nil) arising from the acquisition of NordPile by our joint venture KFS Oy in 2021 is included as a non-underlying item.

Statutory operating profit

Statutory operating profit, comprising underlying operating profit of £49.6m (H1 2021: £39.5m) and non-underlying items comprising net costs of £11.9m (H1 2021: £6.0m), increased by 13% to £37.7m (H1 2021: £33.5m).

Net finance costs

Net finance costs increased by 16% to £5.0m (H1 2021: £4.3m), as a result of a higher average net debt during the half year. Average net borrowings, excluding IFRS 16 lease liabilities, increased by 76% in the period from £123.4m during the half year to 27 June 2021 to £217.8m during the half year to 26 June 2022, as a result of increased working capital requirements.

Taxation

The Group's underlying effective tax rate decreased to 25% (H1 2021: 27%). The overall rate is determined by a range of factors, but the reduction is mainly as a result of the change in profit mix across the various tax jurisdictions in which we operate. The actual underlying tax charge for the half year has been reduced by £0.4m as a result of a reduction of a provision held for historic taxes.

Cash tax paid in the period of £2.4m was a decrease of £9.5m over prior year (H1 2021: £11.9m). The difference is mainly due to the timing and phasing of tax payments which do not necessarily relate to the period in which the profits are earned. Further details on tax are set out in note 8 of the interim condensed consolidated financial statements.

The Group is monitoring developments in the OECD's Pillar 2 proposals to agree minimum effective tax rates across jurisdictions participating in the OECD programme. Although the Group's activities are mainly in territories which will be unaffected by the Pillar 2 proposals, it is possible that additional tax will be charged in the future in countries where corporate tax rates are increased. Any changes are not expected to be introduced before 2024.

Under draft proposals introduced to the US Congress in 2021, the Group would potentially be subject to adverse changes in respect of measures intended to limit the tax deductibility of intra-group financing costs. The proposed measures were unable to secure passage through Congress in 2021 and the Group is awaiting developments to see if the measures, and whether they are in original or revised form, are reintroduced in 2022. At present there is insufficient evidence to assess the probable financial impact on the Group's future tax position.

Non-underlying items

Details of non-underlying items are included in note 7 to the interim condensed consolidated financial statements.

Amortisation of acquired intangibles

The £5.8m (H1 2021: £0.4m) charge for amortisation of acquired intangible assets relates primarily to the RECON, Moretrench and Voges acquisitions in the current half year and to the Moretrench acquisition in the prior half year.

Non-underlying operating costs

Non-underlying operating costs were £6.1m (H1 2021: £6.3m).

The Group has recognised costs of £3.5m relating to a historical contract dispute. Exceptional restructuring costs of £1.2m (H1 2021: £3.1m) have been incurred during the period related to the scheduled exit from the Ivory Coast business. The prior year costs primarily related to rationalisation activities within the Europe Division and KGS, the in-house equipment manufacturer.

The Group has commenced a strategic project to implement a new cloud computing enterprise resource planning (ERP) system across the Group. Due to the size, nature and incidence of these costs, they are presented as a non-underlying item, as they are not reflective of underlying performance of the Group. As this is a complex implementation, project costs are expected to be incurred over the next five years . The cost recognised in the first half is £1.2m.

An impairment charge of £0.4m was recognised in respect of trade receivables in Ukraine that are not expected to be recovered due to the ongoing conflict.

A net credit of £0.2m (H1 2021: £1.3m cost) arising from a change in the fair value of contingent considerations related to prior year acquisitions has been recognised in non-underlying operating costs, in line with the Group's policy to show acquisition-related costs separately from the underlying performance of the business.

The prior half year period included the loss on classification of disposal group for the Cyntech Anchors business of £1.9m.

Non-underlying other operating income

Non-underlying other operating income of £0.7m (H1 2021: £0.7m) is contingent consideration receivable in relation to the Wannenwetsch disposal, completed in 2020.

Non-underlying taxation

A non-underlying tax credit of £2.4m (H1 2021: £0.6m) relates to the tax benefit on non-underlying charges which are expected to be deductible.

Earnings per share

Underlying diluted earnings per share increased by 31% to 46.5p (H1 2021: 35.6p) in line with the increased operating profit combined with a reduced effective tax rate in the period. Statutory diluted earnings per share was 33.5p (H1 2021: 28.2p).

Dividend

The Group's dividend policy is to increase the dividend sustainably whilst allowing the Group to be able to grow, or as a minimum, maintain, the level of dividend through market cycles. The dividend policy is therefore impacted by the performance of the Group, which is subject to the Group's principal risks and uncertainties as well as the level of headroom on the Group's borrowing facilities, future cash commitments and investment plans.

Reflecting the financial strength of the Group and the longer-term confidence in the performance of the business the Board has decided to increase the interim dividend by 5% and has recommended a dividend of 13.2p per share (H1 2021: 12.6p per share).

Free cash flow

The Group's free cash outflow of £46.8m (H1 2021: inflow of £26.9m) has been impacted by the volume growth in the business and the related increase in working capital requirements. The basis of deriving free cash flow is set out below:

Working capital

The working capital performance reflects the increased activity in H1, as the revenue volumes grow post-pandemic resulting in an increased working capital position. The net increase of £93.2m (H1 2021: £3.9m decrease) includes the impact of supply chain requirements for earlier payments in order to ensure delivery of materials to site. There was a decrease in provisions and retirement benefits of £9.7m (H1 2021: £7.1m), reflecting utilisations and legal settlements in the period.

Capital expenditure

The Group manages capital expenditure tightly whilst investing in the upgrade and replacement of equipment where appropriate. Net capital expenditure of £23.4m (H1 2021: £26.4m) included proceeds from the sale of equipment of £3.3m (H1 2021: £5.5m). The asset replacement ratio, which is calculated by dividing gross capital expenditure, excluding sales proceeds on disposal of items of property, plant and equipment and those assets capitalised under IFRS 16, by the depreciation charge on owned property, plant and equipment, was 76% (H1 2021: 101%).

Acquisitions and disposals

On 2 May 2022, the Group acquired GKM Consultants Inc. for an initial cash consideration of £3.6m and £1.3m of contingent consideration to be paid based on future profitability of the acquired entity. The business is an instrumentation and monitoring provider based in Quebec, Canada and is included in the North America Division.

The acquisition cash flow of £15.6m includes the GKM outflow of £3.4m, net of £0.2m of acquired cash and £12.2m of contingent and deferred consideration relating to past acquisitions.

There were no material acquisitions or disposals in the period ended 27 June 2021.

Financing facilities and net debt

The Group's term debt and committed facilities principally comprise US private placements of US$75m (£61.0m) which mature in December 2024 and a £375m multi-currency syndicated revolving credit facility which matures in November 2025. At 26 June 2022, the Group had undrawn committed and uncommitted borrowing facilities totalling £215.7m comprising £144.3m of the unutilised portion of the revolving credit facility, £18.4m of other undrawn committed borrowing facilities and undrawn uncommitted borrowing facilities of £53.0m, as well as cash and cash equivalents of £85.8m.

The most significant covenants in respect of the main borrowing facilities relate to the ratio of net debt to underlying EBITDA, underlying EBITDA interest cover and the Group's net worth. The covenants are required to be tested at the half year and the year end. The Group operates comfortably within all of its covenant limits. Net debt to underlying EBITDA leverage, calculated excluding the impact of IFRS 16, was 1.1x (H1 2021: 0.7x), well within the limit of 3.0x and within the leverage target of between 0.5x - 1.5x. Calculated on a statutory basis, including the impact of IFRS 16, net debt to EBITDA leverage was 1.4x at 26 June 2022 (H1 2021: 0.9x). Underlying EBITDA, excluding the impact of IFRS 16, to net finance charges for the period to 26 June 2022 was 27.5x (H1 2021: 30.5x), well above the limit of 4.0x.

On an IFRS 16 basis, gearing at 26 June 2022 was 56% (H1 2021: 44%).

The average month-end net debt during the period ended 26 June 2022, excluding IFRS 16 lease liabilities, was £217.8m (H1 2021: £123.4m) and the minimum headroom during this period on the Group's main banking facility was £75.6m (H1 2021: £250.2m), in addition to a cash balance at that time of £89.4m (H1 2021: £116.8m). The Group had no material discounting or factoring in place during the period. Given the relatively low value and short-term nature of the majority of the Group's projects, the level of advance payments is typically not significant.

At 26 June 2022 the Group had drawn upon uncommitted overdraft facilities of £0.5m (H1 2021: £4.5m) and had drawn £165.2m of bank guarantee facilities (H1 2021: £163.1m).

Retirement benefit liabilities

The primary defined benefit scheme is in the UK. The Group also has defined benefit retirement obligations in Germany and Austria and a number of end of service schemes in the Middle East that follow the same principles as a defined benefit scheme. The Group's net defined benefit liabilities as at 26 June 2022 were £22.5m (H1 2021: £23.0m). The reduction in the half year period was driven by an actuarial gain of £2.2m on the German and Austrian schemes, reflecting a higher discount rate driven by the increase in interest rates during the first half of 2022. The net defined liability for the Keller Group Pension Scheme in the UK as at 26 June 2022 is £5.4m (H1 2021: £2.7m), being the minimum funding requirement, calculated using the agreed contributions.

Prior year balance sheet restatement

As a result of the restatement at 31 December 2021 of insurance reimbursement receivables and the provision for insurance and legal claims, the comparative consolidated balance sheet as at 27 June 2021 has been restated. Consequently, the Group has increased current provisions by £0.6m, increased non-current provisions by £31.0m and increased trade and other receivables by £0.6m and non-current other assets by £31.0m. As a result of the restatement in respect of the non-current element of trade receivables arising from customer retentions, the comparative consolidated balance sheet at 27 June 2021 has been restated to increase non-current other assets by £20.4m and decrease trade and other receivables by £20.4m. Further details on this are set out in note 2 of the interim condensed consolidated financial statements.

The comparative consolidated balance sheet as at 31 December 2021 has been restated to reflect the prior year measurement period adjustment as a result of finalising the provisional fair value of assets and liabilities acquired with RECON Services Inc.

Currencies

The Group is exposed to both translational and, to a lesser extent, transactional foreign currency gains and losses through movements in foreign exchange rates as a result of its global operations. The Group's primary currency exposures are US dollar, Canadian dollar, euro, Singapore dollar and Australian dollar.

As the Group reports in sterling and conducts the majority of its business in other currencies, movements in exchange rates can result in significant currency translation gains or losses. This has an effect on the primary statements and associated balance sheet metrics, such as net debt and working capital.

A large proportion of the Group's revenues are matched with corresponding operating costs in the same currency. The impacts of transactional foreign exchange gains or losses are consequently mitigated and are recognised in the period in which they arise.

The following exchange rates applied during the current and prior half year period:

Principal risks

The Group operates globally across many geotechnical market sectors and in varied geographic markets. The Group's performance and prospects may be affected by risks and uncertainties in relation to the industry and the environments in which it undertakes its operations around the world. The Group is alert to the challenges of managing risk and has systems and procedures in place across the Group to identify, assess and mitigate major business risks.

The principal risks and uncertainties are as follows:

· financial risks

o  the inability to finance our business;

· market risk

o  a rapid downturn in our markets;

· strategic risk

o  the failure to procure new contracts, losing market share;

o  ethical misconduct and non-compliance with regulations;

o  inability to maintain our technological product advantage;

o  climate change;

· operational risk

o  service or solution failure;

o  the ineffective execution of our projects;

o  supply chain partners fail to meet the Group's operational expectation and contractual obligations (including capacity, competency, quality, financial stability, safety, environmental, social and ethical);

o  causing a serious injury or fatality to an employee or member of the public;

o  not having the right skills to deliver and the risk of potential disruption in the business operations;

o  cyber risk.

The Group's principal risks and uncertainties have not materially changed in the first half of 2022. For a more detailed description of these risks, uncertainties and other factors, please see the principal risks and uncertainties section of the Strategic report in the Annual Report and Accounts.

The important developments in managing our principal risks during 2022 are as follows:

· continued focus on embedding risk management processes across all parts of the organisation;

· regularly reviewing our principal risks and the mitigating activities we are taking to ensure they accurately reflect the risks we are facing and how we are responding to those risks;

· continuing to review risk trends, including the consideration of risks across the medium and long-term via horizon scanning and reviewing emerging legislation to ascertain how they may impact Keller;

· continuing to embed the requirements of the Task Force on Climate-related Financial Disclosures (TCFD) into business-as-usual activities, including risk reporting;

· maintaining focus on managing the continued impact of COVID-19 even as its impact on the business has declined.

The key areas of focus for the remainder of 2022 are as follows:

· finalising and developing appropriate scenario analyses needed to comply with TCFD requirements. These scenarios will also lead to continued improvement in understanding of the longer-term strategic impact and in turn support a more timely and robust decision-making process;

· we will be closely monitoring the following items through the regular review of risks across the business and any impact they may have on our principal risks for 2022 year-end reporting:

o  Supply chain issues, including both scarcity of certain materials (steel, cement and energy) and the pricing impact of this, which has come under renewed pressure as a result of the geopolitical uncertainty following Russia's invasion of Ukraine. This will be closely monitored in the coming months as the volume of gas supplies from Russia become even more significant as Europe moves into autumn and winter.

o  Recruitment and retention which is being exacerbated by the inflationary pressure in many of our markets.

o  Inflation and interest rates, which if they continue to rise may negatively impact customer confidence in many of the markets in which we operate as they delay investment decisions on new projects, while they evaluate the trajectory of both.

o  The continuing impact from COVID-19 in specific markets continues to diminish across the majority of the markets in which we operate, but we are observing different responses driven by new waves of infection set against vaccination levels in the population. These include the introduction of mandates on vaccination and/or testing regimes, plus the reintroduction of partial lockdowns.

Statement of Directors' responsibilities

The interim financial report is the responsibility of, and has been approved by, the Directors. The Directors are responsible for preparing the interim financial report in accordance with the Disclosure Guidance and Transparency Rules (DTR) of the United Kingdom's Financial Conduct Authority (FCA).

The DTR require that the accounting policies and presentation applied to the half yearly figures must be consistent with those applied in the latest published annual accounts, except where the accounting policies and presentation are to be changed in the subsequent annual accounts, in which case the new accounting policies and presentation should be followed, and the changes and the reasons for the changes should be disclosed in the interim report, unless the FCA agrees otherwise.

The Directors confirm that to the best of their knowledge the condensed set of financial statements, which have been prepared in accordance with UK adopted International Accounting Standard 34, 'Interim Financial Reporting' give a true and fair view of the assets, liabilities, financial position and profit and loss of the Group, as required by DTR 4.2 and in particular include a fair review of:

• the important events that have occurred during the first half of the financial year and their impact on the interim condensed consolidated set of financial statements as required by DTR 4.2.7R;

• the principal risks and uncertainties for the remaining half of the year as required by DTR 4.2.7R; and

• related party transactions that have taken place in the first half of the current financial year and changes in the related party transactions described in the previous annual report that have materially affected the financial position or performance of the Group during the first half of the current financial year as required by DTR 4.2.8R.

The Directors of Keller Group plc are listed in the 2021 Annual Report and Accounts.

Approved by the Board of Keller Group plc and signed on its behalf by:

Michael Speakman

Chief Executive Officer

David Burke

Chief Financial Officer

1 August 2022

INDEPENDENT REVIEW REPORT TO KELLER GROUP PLC

Conclusion

We have been engaged by the company to review the condensed set of financial statements in the Interim Results of Keller Group plc for the half-year period ended 26 June 2022, which comprises the consolidated income statement, consolidated statement of comprehensive income, consolidated balance sheet, consolidated statements of changes in equity, consolidated cash flow statement, and the related explanatory notes. We have read the other information contained in the Interim Results and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the interim period ended 26 June 2022 is not prepared, in all material respects, in accordance with UK adopted International Accounting Standard 34 and the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority.

Basis for conclusion

We conducted our review in accordance with International Standard on Review Engagements 2410 (UK) 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Financial Reporting Council. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

As disclosed in note 2, the annual financial statements of the Group are prepared in accordance with UK adopted international accounting standards. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with UK adopted International Accounting Standard 34, 'Interim Financial Reporting'.

Conclusions relating to going concern

Based on our review procedures, which are less extensive than those performed in an audit, as described in the basis for conclusion section of this report, nothing has come to our attention to suggest that management have inappropriately adopted the going concern basis of accounting or that management have identified material uncertainties relating to going concern that are not appropriately disclosed.

This conclusion is based on the review procedures performed in accordance with this ISRE, however future events or conditions may cause the entity to cease to continue as a going concern.

Responsibilities of the Directors

The Directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority.

In preparing the half-yearly financial report, the Directors are responsible for assessing the company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either intend to liquidate the company or to cease operations, or have no realistic alternative but to do so.

Auditor's responsibilities for the review of the financial information

In reviewing the half-yearly report, we are responsible for expressing to the company a conclusion on the condensed set of financial statements in the half-yearly financial report. Our conclusion, including our conclusions relating to going concern, are based on procedures that are less extensive than audit procedures, as described in the basis for conclusion paragraph of this report.

Use of our report

This report is made solely to the company in accordance with guidance contained in International Standard on Review Engagements 2410 (UK) 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Financial Reporting Council. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company, for our work, for this report, or for the conclusions we have formed.

Ernst & Young LLP

Reading

1 August 2022

Interim condensed consolidated income statement (unaudited)

For the half year period ended 26 June 2022

Interim condensed consolidated statement of comprehensive income (unaudited)

For the half year period ended 26 June 2022

Interim condensed consolidated balance sheet (unaudited)

As at 26 June 2022

1 The 27 June 2021 consolidated balance sheet has been restated for items disclosed in the 2021 Annual Report and Accounts, as outlined in note 2 to the interim financial statements.

2 The 31 December 2021 consolidated balance sheet has been restated in respect of prior period measurement adjustments, as outlined in notes 2 and 6 to the interim financial statements.

Interim condensed consolidated statement of changes in equity (unaudited)

For the half year period ended 26 June 2022

1 Retained earnings as at 31 December 2021 have been restated in respect of prior period measurement adjustments, as outlined in notes 2 and 6 to the interim financial statements.

Interim condensed consolidated cash flow statement (unaudited)

For the half year period ended 26 June 2022

1. Corporate information

The interim condensed consolidated financial statements of Keller Group plc and its subsidiaries (collectively, the 'Group') for the half year period ended 26 June 2022 were authorised for issue in accordance with a resolution of the Directors on 1 August 2022.

Keller Group plc (the 'company') is a limited company, incorporated and domiciled in the United Kingdom, whose shares are publicly traded on the London Stock Exchange. The registered office is located at 2 Kingdom Street, London W2 6BD. The Group is principally engaged in the provision of specialist geotechnical engineering services.

2. Basis of preparation

The condensed financial statements included in this interim financial report have been prepared in accordance with UK adopted International Accounting Standard 34, 'Interim Financial Reporting'. 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 2021. The interim report does not constitute statutory accounts. The financial information for the year ended 31 December 2021 does not constitute the Group's statutory financial statements for that period as defined in section 435 of the Companies Act 2006 but is instead an extract from those financial statements. The Group's financial statements for the year ended 31 December 2021 have been delivered to the Registrar of Companies. The Auditor's Report on those financial statements contained an unqualified opinion, did not draw attention to any matters by way of emphasis and did not contain any statement under section 498 of the Companies Act 2006. The annual financial statements for year ended 31 December 2022 will be prepared in accordance with UK adopted international accounting standards.

The accounting policies adopted in the preparation of the interim condensed consolidated financial statements are consistent with those followed in the preparation of the Group's annual consolidated financial statements for the year ended 31 December 2021, except in respect of the adoption of new standards effective as of 1 January 2022. The following applicable amendments apply for the first time in 2022:

· Amendments to IAS 37 'Onerous Contracts - Costs of Fulfilling a Contract'.

· Amendments to IAS 16 'Property, Plant and Equipment: Proceeds before Intended Use'.

· IFRS 9 Financial Instruments 'Fees in the '10 per cent' test for derecognition of financial liabilities'.

These amendments have a limited impact on the consolidated financial statements of the Group.

The Group has not early adopted any standard, interpretation or amendment that has been issued but is not yet effective.

Amendments to IAS 37 'Onerous Contracts - Costs of Fulfilling a Contract'

An onerous contract is a contract under which the unavoidable costs (ie, the costs that the Group cannot avoid because it has the contract) of meeting the obligations under the contract exceed the economic benefits expected to be received under it. The amendments specify that when assessing whether a contract is onerous or loss-making, an entity needs to include costs that relate directly to a contract to provide goods or services including both incremental costs (eg, the costs of direct labour and materials) and an allocation of costs directly related to contract activities (eg, depreciation of equipment used to fulfil the contract as well as costs of contract management and supervision). General and administrative costs do not relate directly to a contract and are excluded unless they are explicitly chargeable to the counterparty under the contract. This amendment does not have an impact on the interim condensed consolidated financial statements of the Group as an allocation of costs directly related to contract activities was previously included in the unavoidable costs used in the costs to complete assessment for onerous contracts and the Group does not include an allocation of general overheads.

Amendments to IAS 16 'Property, Plant and Equipment: Proceeds before Intended Use'

The amendments prohibit entities from deducting from the cost of an item of property, plant and equipment, any proceeds of the sale of items produced while bringing that asset to the location and condition necessary for it to be capable of operating in the manner intended by management. Instead, an entity recognises the proceeds from selling such items, and the costs of producing those items, in profit or loss. These amendments had no impact on the interim condensed consolidated financial statements of the Group as there were no sales of such items produced by property, plant and equipment made available for use on or after the beginning of the earliest period presented.

IFRS 9 Financial Instruments 'Fees in the '10 per cent' test for derecognition of financial liabilities'

The amendment clarifies the fees that an entity includes when assessing whether the terms of a new or modified financial liability are substantially different from the terms of the original financial liability. These fees include only those paid or received between the borrower and the lender, including fees paid or received by either the borrower or lender on the other's behalf. This amendment had no impact on the interim condensed consolidated financial statements of the Group as there were no modifications of the Group's financial instruments during the period.

Going concern

As part of the interim going concern review, management ran a series of downside scenarios on the latest forecast profit and cash flow projections to assess covenant headroom against available funding facilities for the period to 31 December 2023, a period of at least 12 months from when the interim financial statements are authorised for issue and aligning with the interval in which the Group's banking covenants are tested. This process involved constructing scenarios to reflect the Group's current assessment of its principal risks, including those that would threaten its business model, future performance, solvency or liquidity. The principal risks and uncertainties modelled by management align with those disclosed in the 2021 Annual Report and Accounts and there have been no changes since in management's risk assessment. The following severe but plausible downside assumptions were modelled:

· Rapid downturn in the Group's markets resulting in up to a 10% decline in revenues.

· Ineffective execution of projects reducing profits by 1% of revenue.

· A combination of other principal risks and trading risks materialising together reducing profits by up to £33.5m over the period to 31 December 2023. These risks include costs of ethical misconduct and regulatory non-compliance, occurrence of an accident causing serious injury to an employee or member of the public, the cost of a product or solution failure and an unrecorded tax liability.

· Deterioration of working capital performance by 5% of six months' sales.

The financial and cash effects of these scenarios were modelled individually and in combination. The focus was on the ability to secure or retain future work and potential downward pressure on margins. Management applied sensitivities against projected revenue, margin and working capital metrics reflecting a series of plausible downside scenarios. Against the most negative scenario, mitigating actions were overlaid. These include a range of cost-cutting measures and overhead savings designed to preserve cash flows. The most extreme downside scenario modelled included an aggregation of all risks considered. This showed a decrease in the 18-month rolling operating profit to 31 December 2023 of 62.2% compared to the base case and an increase in net debt of 41.9% against the Group's latest forecast and cash flow projections for the review period up to 31 December 2023. Even in these circumstances, the adjusted projections do not show a breach of covenants in respect of available funding facilities or any liquidity shortfall. Consideration was given to scenarios where covenants would be breached and the circumstances giving rise to these scenarios were considered extreme and remote. This process allowed the Board to conclude that the Group will continue to operate on a going concern basis for the period through to the end of December 2023, a period of at least 12 months from when the interim consolidated financial statements are authorised for issue. Accordingly, the interim consolidated financial statements are prepared on a going concern basis.

At 26 June 2022, the Group had undrawn committed and uncommitted borrowing facilities totalling £215.7m, comprising £144.3m of the unutilised portion of the revolving credit facility, £18.4m of other undrawn committed borrowing facilities and undrawn uncommitted borrowing facilities of £53.0m, as well as cash of £85.8m. At 26 June 2022, the Group's net debt to underlying EBITDA ratio (calculated on an IAS 17 covenant basis, as documented in the adjusted performance measures section) was 1.1x, well within the covenant limit of 3.0x.

Prior year restatement as at 27 June 2021

The below restatements were made to the comparative consolidated balance sheet for the year ending 31 December 2020, published in the 2021 Annual Report and Accounts. For the 2022 interim report, the comparative consolidated balance sheet as at 27 June 2021 has been restated.

Insured liabilities restatement

In October 2021, the Group received a letter from the Financial Reporting Council (FRC) as part of its regular review and assessment of the quality of corporate reporting in the UK, following the Group's inclusion in the 'Thematic review on Provisions, Contingent Liabilities and Contingent Assets'. The letter included a request for further information on the Group's Annual Report and Accounts for the year ended 31 December 2020. The review conducted by the FRC was based solely on the Group's published Annual Report and Accounts and does not provide any assurance that the Annual Report and Accounts are correct in all material respects.

Following finalisation of the correspondence with the FRC, the Directors have concluded that the insurance reimbursement receivables relating to claims made against the Group should be separately presented gross on the consolidated balance sheet, rather than netted off against the insurance and legal provision.

Retentions restatement

Separately from the above, the element of trade receivables relating to customer retentions expected to be received in more than one year was previously disclosed separately in the revenue note to the year-end accounts, but classified incorrectly within the trade and other receivables balance sheet line. The Group has amended this disclosure and separately categorised this receivable within other non-current assets as detailed below.

As a result of these items, the consolidated balance sheet as at 27 June 2021 has been restated as follows:

Consolidated balance sheet

The restatement did not result in any change to reported profit, earnings per share, net assets or cash flows reported in the half year period to 27 June 2021.

Prior year measurement period adjustment as at 31 December 2021

Under IFRS 3 'Business Combinations' there is a measurement period of no longer than 12 months in which to finalise the valuation of the acquired assets and liabilities. During the measurement period, the acquirer shall retrospectively adjust the provisional amounts recognised at the acquisition date to reflect new information obtained about facts and circumstances that existed as of the acquisition date and, if known, would have affected the measurement of the amounts recognised as of that date. During the measurement period, the acquirer shall also recognise additional assets or liabilities if new information is obtained about facts and circumstances that existed as of the acquisition date and, if known, would have resulted in the recognition of those assets and liabilities as of that date.

In the year to 31 December 2021, the Group acquired RECON Services Inc. Adjustments to the provisional fair values were made during the measurement period, as set out in note 6. The impact of the measurement period adjustments has been applied retrospectively, meaning that the results and financial position for the year to 31 December 2021 have been restated as follows:

Consolidated balance sheet

Significant accounting judgements, estimates and assumptions

During the half year period to 26 June 2022, there have not been any changes in the significant accounting judgements, estimates and assumptions disclosed in the 2021 Annual Report and Accounts.

3. Foreign currencies

The exchange rates used in respect of principal currencies are:

4. 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 of three geographical divisions which have only one major product or service: specialist geotechnical services. North America, Europe, and Asia-Pacific, Middle East and Africa 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.

The increase in trade receivables, inventories and trade payables as at 26 June 2022 is driven by increased revenues in the half year period. Trade receivables include invoiced amounts for retentions. Retentions anticipated to be receivable in more than one year are included in other non-current assets.

1 Central items include net debt and tax balances, which are managed at Group.

2 Depreciation and amortisation excludes amortisation of acquired intangible assets.

3 Tangible and intangible assets comprise goodwill, intangible assets and property, plant and equipment.

4 The 27 June 2021 consolidated balance sheet has been restated for items disclosed in the 2021 Annual Report and Accounts, as outlined in note 2 to the interim financial statements.

5 The 31 December 2021 consolidated balance sheet has been restated in respect of prior period measurement adjustments, as outlined in notes 2 and 6 to interim the financial statements.

5. Revenue

The Group's revenue is derived from contracts with customers. In the following table, revenue is disaggregated by primary geographical market, being the Group's operating segments (see note 4) and timing of revenue recognition: