REG - Keller Group PLC - Interim Results for the half year ended 30 June 23
01/08/2023 07:00
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RNS Number : 8195H Keller Group PLC 01 August 2023
1 August 2023
Keller Group plc
Interim Results for the half year ended 30 June 2023
Keller Group plc ('Keller' or the 'Group'), the world's largest geotechnical
specialist contractor, announces its results for the half year ended 30 June
2023.
Record H1 performance; positive H2 outlook; dividend increased
H1 2023 H1 2022(1) Constant currency
£m £m % change
% change
Revenue 1,466.3 1,333.4 +10% +6%
Underlying operating profit(2) 67.0 42.3 +58% +50%
Underlying operating profit margin(2) 4.6% 3.2% +140bps n/a
Underlying diluted earnings per share(2) 56.0p 37.9p +48%
Free cashflow before interest and tax 40.8 (41.6)
Net debt (bank covenant IAS 17 basis)(3) 244.6 194.0 +26%
Dividend per share 13.9p 13.2p +5%
Statutory operating profit 56.6 30.4 +86%
Statutory profit before tax 43.1 25.4 +70%
Net cash inflow/(outflow) from operating activities 35.3 (12.7)
Statutory diluted earnings per share 45.0p 24.9p +81%
Statutory net debt (IFRS 16 basis) 331.6 277.7 +19%
(1) Restated for prior period accounting error arising from the financial
reporting fraud at Austral as detailed in note 3 to the interim condensed
consolidated financial statements.
(2) 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 8 to the interim
condensed consolidated financial statements.
(3) 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 in revenue and underlying profit
· Revenue of £1,466.3m, up 6% (at constant currency),
demonstrating the benefit of our diverse and resilient revenue streams
· Record first half underlying operating profit of £67.0m, up 50%
(at constant currency), with an increased underlying operating profit margin
of 4.6% (H1 2022: 3.2%). Performance driven by improved performance at North
America Foundations and a strong margin performance at Suncoast, offset by
losses associated with the closeout of legacy projects at Austral and a more
competitive pricing environment due to market conditions in Europe
· Underlying diluted EPS of 56.0p, up 48%, with growth in earnings
moderated by higher finance costs
· Statutory diluted EPS of 45.0p, up 81%
· Strong recovery in free cash flow before interest and tax of
£40.8m, benefitting from the increased underlying profits and the improved
working capital performance
· Net debt of £244.6m, up 26%, impacted by the timing of US tax
payments. Net debt/EBITDA leverage ratio of 1.2x (H1 2022(1): 1.2x)
· Strong order book of £1.5bn which underpins performance in the
second half of the year
· Overall accident frequency rate decreased to 0.09 from 0.10
injuries per 100,000 hours worked
· Interim dividend increased by 5% to 13.9p (H1 2022: 13.2p),
reflecting strong performance and confidence in both the second half and our
longer-term prospects
Michael Speakman, Chief Executive Officer, said:
"Keller delivered a record performance in the first half, largely driven by
management actions to drive performance in our North American Foundations
business and strong profitability at Suncoast, together with a number of large
projects. Accordingly, performance will be more evenly weighted between the
first and second half of the year. The continued momentum in the business,
together with our strong order book underpins the Board's confidence in the
full year expectations which remain unchanged. The underlying strength of the
Group's performance provides confidence in our longer-term prospects and is
reflected in the Board's decision to increase the interim dividend by 5% for
the first half, continuing our 29-year track record of maintained or improved
dividend payments."
For further information, please contact:
Keller Group plc www.keller.com (http://www.keller.com)
Michael Speakman, Chief Executive Officer 020 7616 7575
David Burke, Chief Financial Officer
Caroline Crampton, Group Head of Investor Relations
FTI Consulting
Nick Hasell 020 3727 1340
Matthew O'Keeffe
A webcast and presentation for investors and analysts will be held at 09.00am
BST on 1 August 2023, at Investec Bank plc, 30 Gresham Street, London EC2V 7QP
RSVP: connie.gibson@fticonsulting.com (mailto:connie.gibson@fticonsulting.com)
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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 nearly £3bn.
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 items which are exceptional by their size and/or are
non-trading in nature, including amortisation of acquired intangibles,
goodwill impairment, restructuring costs and other non-trading amounts,
including those relating to acquisitions and disposals. 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. Free cash flow before interest and tax is provided as a metric to
reflect operating cash flow including capital expenditure, it is reconciled in
the net debt flow table in the Chief Financial Officer's review. 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. The Chief
Financial Officer's review includes the main drivers of changes in underlying
operating profit for the period, which reconciles to the constant currency
change in underlying operating profit by division, which is set out in the
adjusted performance measures section in this Announcement. 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 an exceptionally strong first half with a record
performance in revenue and even more notably in underlying operating profit.
Reported revenue of £1,466.3m was up 6% on the prior period on a constant
currency basis, driven by a strong performance in North America Foundations, a
robust performance in Keller Australia and the NEOM project in Saudi Arabia,
offset by lower revenues at Suncoast and at RECON.
First half underlying operating profit of £67.0m was 50% higher on a constant
currency basis, primarily driven by North America Foundations as a result of
an increased focus on both project execution and commercial discipline, the
benefit of larger and more profitable contracts in the automotive sector, and
temporary higher margins at Suncoast as the lower steel strand price gradually
took effect. Our profit performance also benefitted from the first NEOM
contract, partly offset by pricing pressure in some European markets and the
close out of loss-making legacy projects at Austral.
The Group's profitable growth was underpinned by sustainable, improved cash
generation from operations as supply chain issues abated, with a resulting
improved working capital performance.
Net debt at the period end of £244.6m was up 26% due to higher tax and
interest payments, equating to a net debt/EBITDA leverage ratio of 1.2x (H1
2022(1): 1.2x). We continue to expect a lower leverage ratio for the 2023 year
end and to be well within our target range of 0.5x - 1.5x.
Operating performance
The Group's continued progress in delivering on its strategy to be the
preferred international geotechnical specialist contractor generating
long-term value for our stakeholders is evident in the strength of its
financial results in the period. Management actions and overall resilient
market demand resulted in record revenue and operating profit.
In North America, despite a small decline in volume, sustained improvement in
underlying contract performance, improved project execution and a heightened
focus on commercial discipline as well as the benefit of larger and more
profitable contracts in the automotive sector in our foundations business,
together with a strong performance at Suncoast, saw the division's underlying
operating profit more than double. Supply chain issues that impacted
productivity across the region in the prior period have abated. Suncoast, the
Group's post-tension business, continued to perform well despite a fall in
demand in the residential market. The volume decline was more than offset by
temporary higher margins as the lower steel strand price gradually takes
effect. These growth drivers were partly offset by reduced volumes in our
Specialty Services business and some legacy contract issues. Moretrench
Industrial, our business that operates in the highly regulated environmental
remediation market, continued to make progress in the period, while RECON, our
geo-environmental and industrial services company, saw a decline in volume
following the substantial completion of a large project for an LNG plant in
the US Gulf Coast region.
In Europe, despite an increase in revenue, profitability was impacted by a
more competitive pricing environment, a change in contract mix, a challenging
performance in North-East Europe due to the effects of the war in Ukraine, and
by softer demand in the residential and commercial sectors across the region.
We anticipate an improvement in the second half as we execute more profitable
projects in the pipeline.
In AMEA (Asia-Pacific, Middle East and Africa), Keller Australia and the
Middle East region delivered a strong performance, driven by the
infrastructure sector in Eastern Australia and the completion of the first
works order at NEOM. As previously indicated, the phasing of the NEOM project
remains subject to variation. We remain in discussions with the client,
however there has been an evolution of the design which in turn has delayed
further work orders. Our current expectation is we should be awarded a second
works order later in the second half. Good performance in the division was
partly offset by the significant project losses at Austral, following the
close out of the legacy near-shore marine projects and by contract issues
elsewhere in the Middle East. Austral is expected to return to profit in the
second half.
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. Our local businesses leverage the Group's scale and expertise to
deliver engineered solutions and operational excellence, driving market share
leadership in our selected segments.
Over the last three years, we have made significant progress rationalising,
restructuring and refining the Group's geographic and service offering to
create a more focused and higher quality portfolio of businesses. We continue
to evaluate our portfolio and potential further incremental rationalisation.
More recently, we have been focusing our efforts on our operational execution
across all our businesses, as evidenced by recent results, and we expect to
make further progress as we implement the enterprise resource planning (ERP)
system, Project Performance Management (PPM) and several other initiatives.
Now we have established a strong base for our business, we are looking to grow
market share within our existing geographic footprint, through both organic
investment and targeted M&A, and gain the benefits of operational leverage
within our markets.
Safety
Our continued focus on safety has seen our key indicator for injury - the
accident frequency rate - reduce to 0.09 from 0.10, representing 13 lost time
injuries per 100,000 hours worked, in the first half of the year.
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.
On Scope 1 this year, we have developed our first electric rig, the KB0-E.
This is currently undergoing testing before it becomes the next step we take
to decarbonise our site operations. On Scope 2, we remain on track for our net
zero commitment, with further reductions in the first half of the year. Energy
efficiency audits and an increased use of solar panels in our maintenance
yards all have long-term carbon and cost savings for our business units. On
Scope 3 operations, we are developing our company car schemes to encourage the
use of lower emission, hybrid and electric vehicles in our business units. On
Scope 3 materials, we continue to train our engineers and estimators on the
sector standard carbon calculator. This is designed to strengthen our ability
to upsell low carbon solutions to our clients where appropriate.
Interim dividend
Keller has an unbroken record of dividend payments and has consistently and
materially grown its dividend in the 29 years since listing, clearly
demonstrating the Group's ability to continue to prosper through economic
downturns, including both the global financial crisis and the pandemic. In
keeping with the Group's progressive dividend policy and the strong first half
performance and outlook, the Board has announced a 5% increase in the interim
dividend to 13.9p (2022: 13.2p) payable on 8 September 2023 to shareholders on
the register as at 18 August 2023.
Outlook
Keller delivered a record performance in the first half, largely driven by
management actions to drive performance in our North American Foundations
business and strong profitability at Suncoast, together with a number of large
projects. Accordingly, performance will be more evenly weighted between the
first and second half of the year. The continued momentum in the business,
together with our strong order book underpins the Board's confidence in the
full year expectations which remain unchanged. The underlying strength of the
Group's performance provides confidence in our longer-term prospects and is
reflected in the Board's decision to increase the interim dividend by 5% for
the first half, continuing our 29-year track record of maintained or improved
dividend payments
Operating review
North America
H1 2023 H1 2022 Constant currency
£m £m
Revenue 875.8 865.7 -3.9%
Underlying operating profit 65.4 30.1 +105.4%
Underlying operating margin 7.5% 3.5% +400bps
Order book(1) 979.1 902.9 +8.4%
(1) Comparative order book stated at constant currency.
In North America, revenue was down 3.9%, on a constant currency basis, with a
reduction in trading volume at Suncoast and at RECON. Underlying operating
profit doubled on a constant currency basis to £65.4m, driven by an improved
performance in the foundations business as well as strong margin performance
at Suncoast. The accident frequency rate, our key metric for measuring safety
performance, was stable at 0.07 as a result of four lost time injuries.
In the foundations business, revenue increased by 10% reflecting higher
activity levels generally. Operating profit grew strongly, benefitting from
the sustained improvement in underlying contract performance, improved project
execution and a heightened focus on commercial discipline as well as the
benefit from larger and more profitable contracts in the automotive sector.
Supply chain issues that impacted productivity across the region in the prior
period abated. These benefits were partly offset by lower volumes at our
Speciality Services business unit, which we expect to reverse in the second
half, together with some close out issues on legacy contracts.
Suncoast, the Group's post-tension business, continued to perform well despite
a fall in demand in the residential market. The volume decline was more than
offset by temporary higher margins as the lower price for steel strand
gradually took effect.
Moretrench Industrial, our business that operates in the highly regulated
environmental remediation market, continued to make progress in the period,
while RECON, our geo-environmental and industrial services company, saw a
decline in volume following the substantial completion of a large project for
an LNG plant in the US Gulf Coast region. We are in advanced discussions on
another LNG project that we anticipate will commence later in the second half,
and we continue to target further LNG opportunities in the region.
The order book for North America at the period end strengthened to £979.1m,
up 8.4% on a constant currency basis.
Europe
H1 2023 H1 2022 Constant currency
£m £m
Revenue 332.2 297.6 +8.4%
Underlying operating profit 4.1 13.9 -71.4%
Underlying operating margin 1.2% 4.7% -350bps
Order book(1) 306.0 389.4 -21.4%
(1) Comparative order book stated at constant currency.
In Europe, revenue increased by 8.4% while underlying operating profit
decreased by 71.4% to £4.1m on a constant currency basis. Whilst cost
inflation has stabilised and supply chain issues have eased, profitability was
impacted by a more competitive pricing environment, a challenging performance
in North-East Europe due to the effects of the war in Ukraine, and by softer
demand in the residential and commercial sectors across the region. Margin has
also been further hampered by the mix of the work completed and the phasing of
major projects. The accident frequency rate reduced to 0.14 from 0.27,
representing seven lost time injuries.
Overall, despite challenging construction markets in parts of Europe,
particularly in the residential and commercial sectors, revenues have held up
well and we have successfully secured some large and profitable infrastructure
projects that will benefit performance in the second half and for which we
expect an improved operating margin.
In the South-East Europe and Nordics business, whilst early works have been
completed on the Tangenvika bridge project in Norway and at the Södertälje
lock project in Sweden, we anticipate increased volumes in the second half of
2023. In the UK, good progress continues to be made on the High Speed 2 (HS2)
rail contract, with lower levels of revenue against the prior period
reflecting the phasing of work on the project. Increased volumes have been
achieved in the core UK foundations business albeit margins have been
adversely affected by the mix of work performed. Our business in Central
Europe has seen increased volumes in the first half and despite some pricing
pressure has secured some important project wins that position it well for the
second half of the year. The North-East Europe trading environment has been
challenging, particularly in Poland, with the war in Ukraine causing a market
slowdown and lower demand. South-West Europe saw good growth in revenues, but
profits were flat with tighter pricing and margin erosion.
We continue to actively monitor our European portfolio whilst seeking to
maintain and extend 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 £306.0m, down 21.4% on a
constant currency basis, reflecting the challenging market conditions
affecting confidence across Europe. The successful award of some larger
project tenders due in the coming months is expected to improve the order
book.
Asia-Pacific, Middle East and Africa (AMEA)
H1 2023 H1 2022(1) Constant
currency
£m £m
Revenue 258.3 170.1 +53.8%
Underlying operating profit 3.7 3.2 +10.5%
Underlying operating margin 1.4% 1.9%
Order book(2) 206.2 229.8 -10.3%
(1) Restated for prior period accounting error arising from the financial
reporting fraud at Austral.
(2) Comparative order book stated at constant currency.
In AMEA, revenues increased by 53.8% on a constant currency basis, driven by
strong trading in Keller Australia and completion of the first tranche of
works at NEOM in Saudi Arabia. Underlying operating profit increased to
£3.7m, driven by the NEOM project and trading in Keller Australia, offset
particularly by losses at Austral and contract issues elsewhere in the Middle
East. The accident frequency rate was 0.04, reporting two lost time injuries
compared to zero in the prior period.
Keller Australia significantly increased its trading activity and
profitability, particularly in the infrastructure sector. Tendering levels
were high and we anticipate this will continue in the second half of the year.
Our India business performed well in revenue terms driven by several large
projects but with some margin erosion from legacy contracts. The business
overall continues to experience high tendering levels and has a number of
large industrial infrastructure projects in the pipeline. In the Middle East
region, we completed the first works order at NEOM in the first quarter. As
previously indicated, the phasing of the NEOM project remains subject to
variation. We remain in discussions with the client, however there has been an
evolution of the design which in turn has delayed further work orders. Our
current expectation is we should be awarded a second works order later in the
second half. Elsewhere in the Middle East, performance was mixed with some
contract issues that will be remediated in the second half. We continually
review our portfolio and have taken the strategic decision to exit Egypt. The
ASEAN business continued to experience market softness, while we expect an
improved trading environment in the second half. In Austral, some significant
losses were incurred in closing out legacy projects. The new management team
has addressed the remaining issues in the near-shore marine business and we
expect the business to be profitable in the second half.
The AMEA order book at the end of the period was £206.2m, down 10.3% on a
constant currency basis.
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 30 June 2023.
H1 2023 H1 2022(1)
£m £m
Revenue 1,466.3 1,333.4
Underlying operating profit(2) 67.0 42.3
Underlying operating profit %(2) 4.6% 3.2%
Non-underlying items (10.4) (11.9)
Statutory operating profit 56.6 30.4
(1) Restated for prior period accounting error arising from the financial
reporting fraud at Austral as detailed in note 3 to the interim financial
statements.
( )
(2) Details of non-underlying items are set out in note 8 to the interim
condensed consolidated financial statements. Reconciliations to statutory
numbers are set out in note 5 to the interim condensed consolidated financial
statements.
Geographic segmentation
Revenue Underlying operating profit(3) Underlying operating profit margin(3)
£m £m %
H1 2023 H1 2022(1) H1 2023 H1 2022(1) H1 2023 H1 2022(1)
Division
North America 875.8 865.7 65.4 30.1 7.5% 3.5%
Europe 332.2 297.6 4.1 13.9 1.2% 4.7%
AMEA 258.3 170.1 3.7 3.2 1.4% 1.9%
Central - (6.2) (4.9) - -
Group 1,466.3 1,333.4 67.0 42.3 4.6% 3.2%
(3) Details of non-underlying items are set out in note 8 of the interim
condensed consolidated financial statements.
Prior year restatement
As disclosed in the 2022 year-end financial statement, the impact of the
previously reported Austral financial reporting fraud was material. The
interim financial statements for the comparative six months to 26 June 2022
have been restated to show the corrected amounts.
Revenue
Revenue of £1,466.3m (H1 2022(1): £1,333.4m) was 10.0% up on 2022. On a
constant currency basis, revenue increased by 5.8%, reflecting volume growth
in Europe and AMEA, offset by a reduction in North America.
North America reported a revenue decrease of 3.9% (at constant currency),
positively impacted by the higher activity levels in foundations which was
offset by a reduction in trading volume at Suncoast and RECON. In Europe,
revenue increased by 8.4% (at constant currency), although business activity
levels were mixed across the geographies. Revenue in AMEA increased by 53.8%
on a constant currency basis, driven by strong trading in Keller Australia and
completion of the first tranche of works at NEOM in Saudi Arabia.
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 4% (H1 2022(1): 5%) 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 2022(1): 18%).
Underlying operating profit
The underlying operating profit of £67.0m was 58.3% ahead of prior year (H1
2022(1): £42.3m) and on a constant currency basis was 49.8% up on prior year.
North America underlying constant currency operating profit increased by over
100% as the improved margin was driven by a strong performance in the
foundations business as well as higher profitability at Suncoast. Europe
constant currency operating profit decreased by 71.4%, impacted by a change in
contract mix, a challenging performance in North-East Europe due to the
regional tensions, and by softer demand in the residential and commercial
sectors across the region. AMEA constant currency operating profit increased
by 10.5% through the contribution of strong performance at Keller Australia
and the NEOM project, offset by losses at Austral.
The table below illustrates the key drivers of the movements, H1 2022 to H1
2023, in the divisional segmental operating profit which are summarised above:
£m
H1 2022 underlying operating profit 42.3
Constant currency FX movement 2.4
H1 2022 underlying operating profit at constant currency 44.7
North America Foundations volume 6.8
North America Foundations margin 18.5
Suncoast 10.4
North America other movements (2.1)
North America division movement 33.6
Europe volume 4.0
Europe margin (14.3)
Europe division movement (10.3)
Keller Australia 6.7
Middle East region including NEOM 7.2
Austral (11.0)
AMEA other movements (2.6)
AMEA division movement 0.3
Central items (1.3)
H1 2023 underlying operating profit 67.0
Share of post-tax results from joint ventures
The Group recognised an underlying post-tax profit of £0.2m in the period (H1
2022: £0.9m) from its share of the post-tax results from joint ventures. The
share of the post-tax amortisation charge of £0.4m (H1 2022: £0.7m) 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 £67.0m
(H1 2022(1): £42.3m) and non-underlying items comprising net costs of £10.4m
(H1 2022: £11.9m), increased by 86% to £56.6m (H1 2022(1): £30.4m).
Net finance costs
Net finance costs increased by 170% to £13.5m (H1 2022: £5.0m), as a result
of higher interest rates and a higher average net debt during the half year.
Average net borrowings, excluding IFRS 16 lease liabilities, increased by 12%
in the period from £217.8m during the half year to 26 June 2022 to £244.7m
during the half year to 30 June 2023, partially driven by increased US tax
payments.
Taxation
The Group's underlying effective tax rate decreased to 22% (H1 2022(1): 26%).
The reduction from the 2022 restated rate of 26% is largely due to recognition
of the operating loss in Austral for which no associated tax relief is
available in Australia. Australia is already in an overall loss position and
no deferred tax asset is booked for these losses.
Cash tax paid in the period of £38.6m was an increase of £36.2m over prior
year (H1 2022: £2.4m). The difference is mainly attributable to the timing in
paying the US tax charge for 2022. The Group was awaiting a possible law
change on the timing of deductions for research and development expenditure
which has not materialised. As such, the Group has paid both the full year
2022 US tax charge and the provisional payments for H1 2023 during the first
half of this year, totalling £36.7m. Given the US law change, the Group is
expecting to continue to pay higher cash tax compared to prior years. Further
details on tax are set out in note 9 to the interim condensed consolidated
financial statements.
The UK government enacted new legislation introducing a global minimum tax of
15% in line with the OECD's Pillar Two rules. The rules will apply to Keller
from 1 January 2024 and it is expected that the Pillar Two rules will not have
a material impact on the Group's overall tax charge.
Non-underlying items
Details of non-underlying items are included in note 8 to the interim
condensed consolidated financial statements.
Non-underlying operating costs
Non-underlying operating costs were £7.2m (H1 2022: £6.1m).
Exceptional restructuring costs of £3.2m (H1 2022: £1.2m) have been incurred
during the period, related to senior leadership changes in North America and
the planned exit from Egypt. The prior year costs primarily related to the
scheduled exit from the Ivory Coast business.
The Group has continued to make progress with the 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 four to five years.
The cost recognised in the first half is £4.0m (H1 2022: £1.2m).
In the prior period, a £3.5m exceptional charge was recognised related to a
provision made for additional costs from a historical contract dispute. In
addition, the prior period included an impairment charge of £0.4m which was
recognised in respect of trade receivables in Ukraine that are not expected to
be recovered due to the ongoing conflict and a credit of £0.2m arising from
the change in the fair value of contingent consideration.
Amortisation of acquired intangibles
The £3.8m (H1 2022: £5.8m) charge for amortisation of acquired intangible
assets relates to the RECON, Nordwest Fundamentering, GKM Consultants and
Moretrench acquisitions.
Non-underlying other operating income
Non-underlying other operating income of £1.0m (H1 2022: £0.7m) comprises
the gain on disposal of assets held for sale. Impairment charges for these
assets had previously been charged to non-underlying items in prior periods
and therefore the corresponding profit on disposal is also recognised as a
non-underlying item. The income in the prior period was the final contingent
consideration receivable of £0.7m in relation to the Wannenwetsch disposal,
completed in 2020.
Non-underlying taxation
A non-underlying tax credit of £2.3m (H1 2022: £2.4m) 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 47.8% to 56.0p (H1 2022(1):
37.9p) in line with the increased operating profit combined with a reduced
effective tax rate in the period. Statutory diluted earnings per share was
45.0p (H1 2022(1): 24.9p).
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 13.9p per share (H1
2022: 13.2p per share).
Net debt flow
The Group's free cash outflow of £9.1m (H1 2022: outflow of £46.8m) compares
favourably to the prior period. Free cash flow has been impacted by the timing
of US tax payments as well as volume growth in the business and the related
increase in working capital requirements. The basis of deriving free cash flow
is set out below:
H1 2023 H1 2022(1)
£m £m
Underlying operating profit 67.0 42.3
Depreciation and amortisation 54.1 48.5
Underlying EBITDA 121.1 90.8
Non-cash items (0.6) (1.1)
Increase in working capital (33.1) (85.9)
Increase in provisions, retirement benefit liabilities and other non-current 7.4 (9.7)
liabilities
Net capital expenditure (34.4) (23.4)
Additions to right-of-use assets (19.6) (12.3)
Free cash flow before interest and tax 40.8 (41.6)
Free cash flow before interest and tax to underlying operating profit 61% (98%)
Net interest paid (11.3) (2.8)
Cash tax paid (38.6) (2.4)
Free cash flow (9.1) (46.8)
Dividends paid to shareholders (17.6) -
Purchase of own shares (3.4) (1.2)
Acquisitions - (15.6)
Non-underlying items (9.4) (1.7)
Right-of-use assets/lease liability modifications (4.9) (4.4)
Foreign exchange movements 11.7 (14.7)
Movement in net debt (32.7) (84.4)
Opening net debt (298.9) (193.3)
Closing net debt (331.6) (277.7)
(1) Restated for prior period accounting error arising from the financial
reporting fraud at Austral as detailed in note 3 to the interim financial
statements.
Working capital
Working capital in the period compares favourably to the prior year, where
inventory levels and issues associated with the supply chain resulted in a
significant outflow. The working capital performance in H1 2023 reflects the
increased activity, given the 6% constant currency increase in revenue. The
net increase of £33.1m (H1 2022: £85.9m) arises despite a favourable working
capital movement in North America as a result of decreased inventory at
Suncoast and the abatement of the supply chain pressures on payment terms that
we saw in the first half last year. Elsewhere, the working capital was
adversely impacted by a change in the invoicing process at NEOM and the unwind
of advance payments received last year. There was an increase in provisions
and retirement benefits of £7.4m (H1 2022: £9.7m decrease), reflecting
movements on provisions for contract and disputes.
Capital expenditure
The Group manages capital expenditure tightly whilst investing in the upgrade
and replacement of equipment where appropriate. Net capital expenditure of
£34.4m (H1 2022: £23.4m) included proceeds from the sale of equipment of
£8.1m (H1 2022: £3.3m). 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
108% (H1 2022: 76%).
Acquisitions and disposals
There were no acquisitions or disposals in the period ended 30 June 2023.
Non-underlying cash flows
Non-underlying cash outflow of £9.4m includes the cash impact of
non-underlying items reflected in the income statement in the current and
prior periods. The outflow in the period includes £3.1m cash outflow for ERP
costs, £1.4m outflow for current period restructuring costs, £1.9m outflow
for restructuring costs provided for in a prior period and the £3.0m
settlement of the historic contract provision provided for in the prior half
year period.
Financing facilities and net debt
The Group's total net debt of £331.6m (H1 2022: £277.7m) comprises loans and
borrowings of £344.5m (H1 2022: £279.4m), lease liabilities of £87.5m (H1
2022: £84.1m) net of cash and cash equivalents of £100.4m (H1 2022:
£85.8m).
The Group's term debt and committed facilities principally comprise US private
placements of US$75m which mature in December 2024, a £375m multi-currency
syndicated revolving credit facility which matures in November 2025 and a
US$115m bilateral term loan facility, expiring in November 2024. On 21 June
2023, the Group signed a note purchase and guarantee agreement regarding the
proposed private placement of US$300m of loan notes, to be split between seven
and ten-year maturities. Subject to the fulfilment of certain conditions
precedent, proceeds to be received in August 2023 will be used to refinance
existing debt of the Group and for general corporate purposes.
At 30 June 2023, the Group had undrawn committed and uncommitted borrowing
facilities totalling £237.0m, comprising £174.6m of the unutilised portion
of the revolving credit facility, £11.8m of other undrawn committed borrowing
facilities and undrawn uncommitted borrowing facilities of £50.6m, as well as
cash and cash equivalents of £100.4m.
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 1.2x (H1 2022(1): 1.2x), 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 30 June 2023 (H1 2022: 1.4x). Underlying
EBITDA, excluding the impact of IFRS 16, to net finance charges for the period
to 30 June 2023 was 11.2x (H1 2022(1): 25.6x). This is lower than in prior
periods, due to the impact of higher interest rates on the net finance costs,
but still well above the limit of 4.0x.
On an IFRS 16 basis, gearing at 30 June 2023 was 68% (H1 2022(1): 59%).
The average month-end net debt during the period ended 30 June 2023, excluding
IFRS 16 lease liabilities, was £244.7m (H1 2022: £217.8m) and the minimum
headroom during this period on the Group's main banking facilities was
£147.2m (H1 2022: £275.6m), in addition to a cash balance at that time of
£151.2m (H1 2022: £89.4m). 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 30 June 2023 the Group had drawn upon uncommitted overdraft facilities of
£5.6m (H1 2022: £0.5m) and had drawn £185.4m of bank guarantee facilities
(H1 2022: £165.2m).
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 30
June 2023 were £18.2m (H1 2022: £22.5m). The reduction in the half year
period was driven by an actuarial gain during H2 2022 and cash payments into
the schemes. The net defined liability for the Keller Group Pension Scheme in
the UK as at 30 June 2023 is £2.6m (H1 2022: £5.4m), being the minimum
funding requirement, calculated using the agreed contributions.
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:
H1 2023 H1 2022
Closing Average Closing Average
USD 1.26 1.23 1.23 1.30
CAD 1.67 1.66 1.58 1.65
EUR 1.16 1.14 1.16 1.19
SGD 1.72 1.65 1.70 1.77
AUD 1.90 1.83 1.77 1.81
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 2023. 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 2022 Annual Report and
Accounts.
The important developments in managing our principal risks during 2023 are as
follows:
· Continued focus on embedding risk management processes across all
parts of the organisation, supported by the roll out of a new Governance, Risk
Management and Compliance (GRC) tool;
· 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 development of appropriate scenarios and supporting
metrics; and
· Maintaining focus on managing the continued impact of high
inflation and rising interest rates.
The key areas of focus for the remainder of 2023 are as follows:
· Finalising and developing further appropriate scenario analyses
and identifying relevant metrics to support them, 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 2023 year-end reporting:
o Supply chain issues, including both scarcity of certain materials (steel,
cement and energy) and the pricing impact of this, continue to show signs of
easing. While pressure remains as a result of the geopolitical uncertainty
following Russia's invasion of Ukraine, it is being better managed as supply
chains fully recover from the COVID-19 impact and demand cools slightly across
North America and Europe as interest rate increases take effect.
o Energy security did not materialise as a major issue last winter due to
both the actions taken and the mild weather. However, with the level of gas
supplies from Russia still being restricted, focus will increase again on
planning and preparation in Europe as it moves into autumn and winter.
o Recruitment and retention are still being impacted by the inflationary
pressure in many of our markets, but with the exception of site personnel, is
easing slightly. Increased focus on retaining and training staff.
o Persistently high inflation, while beginning to fall, alongside
still-rising interest rates is having a negative effect in many of the markets
in which we operate. We are seeing some customers now beginning to delay
investment decisions on new projects, while they evaluate the trajectory of
both.
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 2022 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
31 July 2023
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 30 June 2023 which comprises the condensed consolidated income
statement, condensed consolidated statement of comprehensive income, condensed
consolidated balance sheet, condensed consolidated statements of changes in
equity, condensed 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 30 June 2023 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" (ISRE) 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 of 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
31 July 2023
Interim condensed consolidated income statement (unaudited)
For the half year period ended 30 June 2023
30 June 2023 26 June 2022 ( Restated)(1)
Note Underlying Non-underlying items Statutory Underlying Non-underlying items
£m (note 8) £m £m (note 8)
£m £m Statutory
£m
Revenue 5,6 1,466.3 - 1,466.3 1,333.4 - 1,333.4
Operating costs 13 (1,399.5) (7.2) (1,406.7) (1,292.0) (6.1) (1,298.1)
Amortisation of acquired intangible assets - (3.8) (3.8) - (5.8) (5.8)
Other operating income - 1.0 1.0 - 0.7 0.7
Share of post-tax results of joint ventures 0.2 (0.4) (0.2) 0.9 (0.7) 0.2
Operating profit/(loss) 5 67.0 (10.4) 56.6 42.3 (11.9) 30.4
Finance income 0.6 - 0.6 0.3 - 0.3
Finance costs (14.1) - (14.1) (5.3) - (5.3)
Profit/(loss) before taxation 53.5 (10.4) 43.1 37.3 (11.9) 25.4
Taxation 9 (11.8) 2.3 (9.5) (9.7) 2.4 (7.3)
Profit/(loss) for the period 41.7 (8.1) 33.6 27.6 (9.5) 18.1
Attributable to:
Equity holders of the parent 41.3 (8.1) 33.2 27.8 (9.5) 18.3
Non-controlling interests 0.4 - 0.4 (0.2) - (0.2)
41.7 (8.1) 33.6 27.6 (9.5) 18.1
Earnings per share
Basic 11 56.7p 45.6p 38.3p 25.2p
Diluted 11 56.0p 45.0p 37.9p 24.9p
(1) The 26 June 2022 condensed consolidated income statement has been restated in
respect of the correction of prior period errors arising from the fraud at
Austral, as outlined in note 3 to the interim financial statements.
Interim condensed consolidated statement of comprehensive income (unaudited)
For the half year period ended 30 June 2023
30 June 2023 26 June 2022
(Restated)(1)
£m £m
Profit for the period 33.6 18.1
Other comprehensive income
Items that may be reclassified subsequently to profit or loss:
Exchange movements on translation of foreign operations (26.2) 40.9
Exchange movements on translation of non-controlling interests (0.2) 0.2
Items that will not be reclassified subsequently to profit or loss:
Remeasurements of defined benefit pension schemes - 2.2
Tax on remeasurements of defined benefit pension schemes - (0.4)
Other comprehensive income/(loss) for the period, net of tax (26.4) 42.9
Total comprehensive income for the period 7.2 61.0
Attributable to:
Equity holders of the parent 7.0 61.0
Non-controlling interests 0.2 -
7.2 61.0
(1) The 26 June 2022 condensed consolidated statement of comprehensive income has
been restated in respect of the correction of prior period errors arising from
the fraud at Austral, as outlined in note 3 to the interim financial
statements.
Interim condensed consolidated balance sheet (unaudited)
As at 30 June 2023
As at As at As at
30 June 26 June 31 December
2023 2022 2022
(Restated)(1) (Restated)(2)
Note £m £m £m
Assets
Non-current assets
Goodwill and intangible assets 128.8 149.1 137.9
Property, plant and equipment 12 473.5 468.1 486.5
Investments in joint ventures 4.1 4.4 4.4
Deferred tax assets 26.2 9.9 15.1
Other assets 72.3 111.4 60.8
704.9 742.9 704.7
Current assets
Inventories 92.8 107.3 124.4
Trade and other receivables 13 760.5 729.5 764.6
Current tax assets 9 4.3 9.5 5.0
Cash and cash equivalents 14 100.4 85.8 101.1
Assets held for sale 15 1.6 1.0 2.8
959.6 933.1 997.9
Total assets 1,664.5 1,676.0 1,702.6
Liabilities
Current liabilities
Loans and borrowings (30.7) (29.0) (34.2)
Current tax liabilities 9 (34.6) (23.5) (53.2)
Trade and other payables (550.9) (610.6) (585.6)
Provisions (49.6) (59.9) (52.7)
(665.8) (723.0) (725.7)
Non-current liabilities
Loans and borrowings (401.3) (334.5) (365.8)
Retirement benefit liabilities 16 (18.2) (22.5) (20.8)
Deferred tax liabilities (4.7) (31.5) (5.3)
Provisions (72.6) (76.5) (66.9)
Other liabilities (16.8) (15.3) (21.3)
(513.6) (480.3) (480.1)
Total liabilities (1,179.4) (1,203.3) (1,205.8)
Net assets 485.1 472.7 496.8
Equity
Share capital 18 7.3 7.3 7.3
Share premium account 38.1 38.1 38.1
Capital redemption reserve 18 7.6 7.6 7.6
Translation reserve 31.7 53.0 57.9
Other reserve 18 56.9 56.9 56.9
Retained earnings 341.0 307.0 326.7
Equity attributable to equity holders of the parent 482.6 469.9 494.5
Non-controlling interests 2.5 2.8 2.3
Total equity 485.1 472.7 496.8
( )
(1) The 26 June 2022 condensed consolidated balance sheet has
been restated in respect of the correction of prior period errors arising from
the fraud at Austral as outlined in note 3 to the interim financial
statements.
(2) The 31 December 2022 condensed consolidated balance sheet has been
restated in respect of prior period business combination measurement
adjustments, as outlined in notes 3 and 7 to the interim financial statements.
Interim condensed consolidated statement of changes in equity (unaudited)
For the half year period ended 30 June 2023
Share premium account Capital redemption reserve Non-controlling interests
Share capital Translation reserve Other Retained earnings Total
reserve equity
£m £m £m £m £m £m £m £m
At 31 December 2022(2) 7.3 38.1 7.6 57.9 56.9 326.7 2.3 496.8
Total comprehensive income for the period - (26.2) 33.2 0.2 7.2
- - -
Dividends - - - - - (17.6) - (17.6)
Purchase of own shares for ESOP trust - - - - - (3.4) - (3.4)
Share-based payments - - - - - 2.1 - 2.1
At 30 June 2023 7.3 38.1 7.6 31.7 56.9 341.0 2.5 485.1
Share premium account Capital redemption reserve Non-controlling interests
Share Translation reserve Other Retained earnings Total
capital reserve equity
£m £m £m £m £m £m £m £m
At 31 December 2021 (Restated)(1) 7.3 38.1 7.6 12.1 56.9 303.2 2.8 428.0
Total comprehensive income for the period - 40.9 20.1 - 61.0
- - -
Dividends - - - - - (16.8) - (16.8)
Purchase of own shares for ESOP trust - - - - - (1.2) - (1.2)
Share-based payments - - - - - 1.7 - 1.7
At 26 June 2022 7.3 38.1 7.6 53.0 56.9 307.0 2.8 472.7
(1) Retained earnings as at 31 December 2021 have been restated
in respect of the correction of prior period errors arising from the fraud at
Austral as outlined in note 3 to the interim financial statements.
(2) Retained earnings as at 31 December 2022 have been restated in
respect of prior period measurement adjustments, as outlined in notes 3 and 7
to the interim financial statements.
Interim condensed consolidated cash flow statement (unaudited)
For the half year period ended 30 June 2023
30 June 2023 26 June 2022
(Restated)(1)
Note £m £m
Cash flows from operating activities
Profit before taxation 43.1 25.4
Non-underlying items 10.4 11.9
Finance income (0.6) (0.3)
Finance costs 14.1 5.3
Underlying operating profit 5 67.0 42.3
Depreciation/impairment of property, plant and equipment 53.9 48.2
Amortisation of intangible assets 0.2 0.3
Share of underlying post-tax results of joint ventures (0.2) (0.9)
Profit on sale of property, plant and equipment 12 (2.5) (2.5)
Other non-cash movements (including charge for share-based payments) 2.1 2.3
Operating cash flows before movements in working capital and other underlying 120.5 89.7
items
(Increase)/decrease in inventories 27.4 (28.3)
Increase in trade and other receivables (38.7) (117.7)
Increase/(decrease) in trade and other payables (21.8) 60.1
Increase/(decrease) in provisions, retirement benefit and other non-current 7.4 (9.7)
liabilities
Cash generated from operations before non-underlying items 94.8 (5.9)
Cash outflows from non-underlying items: contract dispute (3.0) -
Cash outflows from non-underlying items: ERP costs (3.1) (0.2)
Cash outflows from non-underlying items: restructuring costs (3.3) (1.5)
Cash generated from operations 85.4 (7.6)
Interest paid (9.1) (0.9)
Interest element of lease rental payments (2.4) (1.8)
Income tax paid (38.6) (2.4)
Net cash inflow/(outflow) from operating activities 35.3 (12.7)
Cash flows from investing activities
Interest received 0.6 0.3
Proceeds from sale of property, plant and equipment 8.1 3.3
Acquisition of businesses, net of cash acquired 7 - (15.6)
Acquisition of property, plant and equipment 12 (42.5) (26.6)
Acquisition of other intangible assets - (0.1)
Net cash outflow from investing activities (33.8) (38.7)
Cash flows from financing activities
Increase in borrowings 100.1 68.2
Cash flows from derivative instruments - 0.2
Repayment of borrowings (61.2) (1.7)
Payment of lease liabilities (14.1) (15.4)
Purchase of own shares for ESOP trust (3.4) (1.2)
Dividends paid 10 (17.6) -
Net cash inflow from financing activities 3.8 50.1
Net increase/(decrease) in cash and cash equivalents 5.3 (1.3)
Cash and cash equivalents at beginning of period 94.2 81.8
Effect of exchange rate movements (4.7) 4.8
Cash and cash equivalents at end of period 14 94.8 85.3
(1) The 26 June 2022 condensed consolidated cash flow statement has been restated
in respect of the correction of prior period errors arising from the fraud at
Austral, as outlined in note 3 to the interim financial statements.
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 30 June 2023 were authorised for issue in accordance with a resolution
of the Directors on 31 July 2023.
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 2022. The interim report does not
constitute statutory accounts. The financial information for the year ended 31
December 2022 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 2022 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 the year ended 31
December 2023 will be prepared in accordance with UK adopted international
accounting standards.
The Group has not early adopted any new standard, interpretation or amendment
that has been issued but is not yet effective. Several amendments apply for
the first time in 2023, but do not have an impact on the interim condensed
consolidated financial statements of the Group.
Finance (No 2) Bill 2023, that includes Pillar Two legislation, was
substantively enacted on 20 June 2023 for IFRS purposes. The Group has applied
the exemption from recognising and disclosing information about deferred tax
assets and liabilities related to Pillar Two income taxes as required by the
amendments to IAS 12 International Tax Reform-Pillar Two Model Rules which was
issued in May 2023.
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 2024. This is a period of at least 12 months from when the
interim financial statements are authorised for issue and align with the
period 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 within the
2022 Annual Report and Accounts.
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.
· Failure to procure new contracts while maintaining appropriate
margins reducing profits by 0.5% of revenue.
· 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 £97.7m over the period to
31 December 2024. These risks include changing environmental factors, 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 the impact of a previously 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.
Even in the most extreme downside scenario modelled, including an aggregation
of all risks considered, which showed a decrease in operating profit of 58.1%.
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
2024, a period of at least 12 months from when the interim financial
statements are authorised for issue. Accordingly, the interim financial
statements are prepared on a going concern basis. At 30 June 2023, the Group
had undrawn committed and uncommitted borrowing facilities totalling £237.0m,
comprising £174.6m of the unutilised portion of the revolving credit
facility, £11.8m of other undrawn committed borrowing facilities and undrawn
uncommitted borrowing facilities of £50.6m, as well as cash and cash
equivalents of £100.4m. At 30 June 2023, the Group's net debt to underlying
EBITDA ratio (calculated on an IAS 17 covenant basis) was 1.2x, well within
the limit of 3.0x.
Significant accounting judgements, estimates and assumptions
During the half year period to 30 June 2023, there have not been any changes
in the significant accounting judgements, estimates and assumptions disclosed
in the 2022 Annual Report and Accounts. Consistent with the disclosure in the
2022 Annual Report and Accounts, our assessment over the carrying value of
goodwill in Keller Limited continues to be sensitive to the future successful
execution of business plans designed to address the reduction in revenue,
margins and profits from HS2 contracts, schedule to be completed over the next
three years.
3. Prior period restatements
The below restatements were made to the comparative consolidated income
statement, consolidated statement of comprehensive income, consolidated
balance sheet, consolidated statement of changes in equity and consolidated
cash flow statement for 26 June 2022 and 31 December 2022.
Prior period financial reporting fraud
As disclosed in the 2022 Annual Report and Accounts, following an internal
management operational review at the Austral business in Australia, the Group
identified a historical overstatement of revenue and profit relating to the
half year period ended 26 June 2022 and the past three years to 31 December
2021 due to a financial reporting fraud.
For the 2023 interim report, the comparatives as at 26 June 2022 have been
restated.
Prior period business combination measurement adjustment
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 2022, the Group acquired Nordwest Fundamentering
AS. Adjustments to the provisional fair values were made during the
measurement period, as set out in note 7. The impact of the measurement period
adjustments has been applied retrospectively, meaning that the results and
financial position for the year to 31 December 2022 have been restated.
The following tables summarise the impacts on the Group's financial
statements.
Restatement of condensed consolidated income statement for the period ended 26
June 2022 (statutory results)
26 June 2022 Impact 26 June 2022
Statutory of prior Statutory
(as presented) period error (Restated)
£m £m £m
Revenue 1,337.4 (4.0) 1,333.4
Operating costs (1,294.8) (3.3) (1,298.1)
Amortisation of acquired intangible assets (5.8) - (5.8)
Other operating income 0.7 - 0.7
Share of post-tax results of joint ventures 0.2 - 0.2
Operating profit 37.7 (7.3) 30.4
Finance income 0.3 - 0.3
Finance costs (5.3) - (5.3)
Profit before taxation 32.7 (7.3) 25.4
Taxation (8.3) 1.0 (7.3)
Profit for the period 24.4 (6.3) 18.1
Attributable to:
Equity holders of the parent 24.6 (6.3) 18.3
Non-controlling interests (0.2) - (0.2)
24.4 (6.3) 18.1
Earnings per share
Basic 33.9p (8.7p) 25.2p
Diluted 33.5p (8.6p) 24.9p
Restatement of condensed consolidated income statement for the period ended 26
June 2022 (underlying results)
26 June 2022 Impact 26 June 2022
Underlying of prior Underlying
(as presented) period error (Restated)
£m £m £m
Revenue 1,337.4 (4.0) 1,333.4
Operating costs (1,288.7) (3.3) (1,292.0)
Amortisation of acquired intangible assets - - -
Other operating income - - -
Share of post-tax results of joint ventures 0.9 - 0.9
Operating profit 49.6 (7.3) 42.3
Finance income 0.3 - 0.3
Finance costs (5.3) - (5.3)
Profit before taxation 44.6 (7.3) 37.3
Taxation (10.7) 1.0 (9.7)
Profit for the period 33.9 (6.3) 27.6
Attributable to:
Equity holders of the parent 34.1 (6.3) 27.8
Non-controlling interests (0.2) - (0.2)
33.9 (6.3) 27.6
Earnings per share
Basic 47.0p (8.7p) 38.3p
Diluted 46.5p (8.6p) 37.9p
Restatement of condensed consolidated statement of comprehensive income for
the period ended 26 June 2022
26 June Impact 26 June
2022 of prior 2022
(as presented) period error (Restated)
£m £m £m
Profit for the period 24.4 (6.3) 18.1
Other comprehensive income
Items that may be reclassified subsequently to profit or loss:
Exchange movements on translation of foreign operations 41.8 (0.9) 40.9
Exchange movements on translation of non-controlling interests 0.2 - 0.2
Items that will not be reclassified subsequently to profit or loss:
Remeasurements of defined benefit pension schemes 2.2 - 2.2
Tax on remeasurements of defined benefit pension schemes (0.4) - (0.4)
Other comprehensive income for the period, net of tax 43.8 (0.9) 42.9
Total comprehensive income for the period 68.2 (7.2) 61.0
Attributable to:
Equity holders of the parent 68.2 (7.2) 61.0
Non-controlling interests - - -
68.2 (7.2) 61.0
Restatement of condensed consolidated balance sheet at 26 June 2022
At 26 June Impact At 26 June
2022 of prior 2022
(as presented) period error (Restated)
£m £m £m
Assets
Non-current assets
Goodwill and intangible assets 149.1 - 149.1
Property, plant and equipment 468.1 - 468.1
Investments in joint ventures 4.4 - 4.4
Deferred tax assets 14.3 (4.4) 9.9
Other assets 111.4 - 111.4
747.3 (4.4) 742.9
Current assets
Inventories 107.3 - 107.3
Trade and other receivables 742.6 (13.1) 729.5
Current tax assets 9.5 - 9.5
Cash and cash equivalents 85.8 - 85.8
Assets held for sale 1.0 - 1.0
946.2 (13.1) 933.1
Total assets 1,693.5 (17.5) 1,676.0
Liabilities
Current liabilities
Loans and borrowings (29.0) - (29.0)
Current tax liabilities (24.5) 1.0 (23.5)
Trade and other payables (605.0) (5.6) (610.6)
Provisions (59.9) - (59.9)
(718.4) (4.6) (723.0)
Non-current liabilities
Loans and borrowings (334.5) - (334.5)
Retirement benefit liabilities (22.5) - (22.5)
Deferred tax liabilities (31.5) - (31.5)
Provisions (76.5) - (76.5)
Other liabilities (15.3) - (15.3)
(480.3) - (480.3)
Total liabilities (1,198.7) (4.6) (1,203.3)
Net assets 494.8 (22.1) 472.7
Equity
Share capital 7.3 - 7.3
Share premium account 38.1 - 38.1
Capital redemption reserve 7.6 - 7.6
Translation reserve 53.4 (0.4) 53.0
Other reserve 56.9 - 56.9
Retained earnings 328.7 (21.7) 307.0
Equity attributable to equity holders of the parent 492.0 (22.1) 469.9
Non-controlling interests 2.8 - 2.8
Total equity 494.8 (22.1) 472.7
Restatement of consolidated balance sheet at 31 December 2022
At 31 December Impact At 31 December
2022 of measurement 2022
(as presented) period adjustments (Restated)
£m £m £m
Assets
Non-current assets
Goodwill and intangible assets 137.2 0.7 137.9
Property, plant and equipment 486.5 - 486.5
Investments in joint ventures 4.4 - 4.4
Deferred tax assets 15.1 - 15.1
Other assets 60.8 - 60.8
704.0 0.7 704.7
Current assets
Inventories 124.4 - 124.4
Trade and other receivables 764.6 - 764.6
Current tax assets 5.0 - 5.0
Cash and cash equivalents 101.1 - 101.1
Assets held for sale 2.8 - 2.8
997.9 - 997.9
Total assets 1,701.9 0.7 1,702.6
Liabilities
Current liabilities
Loans and borrowings (34.2) - (34.2)
Current tax liabilities (52.5) (0.7) (53.2)
Trade and other payables (585.6) - (585.6)
Provisions (52.7) - (52.7)
(725.0) (0.7) (725.7)
Non-current liabilities
Loans and borrowings (365.8) - (365.8)
Retirement benefit liabilities (20.8) - (20.8)
Deferred tax liabilities (5.3) - (5.3)
Provisions (66.9) - (66.9)
Other liabilities (21.3) - (21.3)
(480.1) - (480.1)
Total liabilities (1,205.1) (0.7) (1,205.8)
Net assets 496.8 - 496.8
Equity
Share capital 7.3 - 7.3
Share premium account 38.1 - 38.1
Capital redemption reserve 7.6 - 7.6
Translation reserve 57.9 - 57.9
Other reserve 56.9 - 56.9
Retained earnings 326.7 - 326.7
Equity attributable to equity holders of the parent 494.5 - 494.5
Non-controlling interests 2.3 - 2.3
Total equity 496.8 - 496.8
Restatement of condensed consolidated cash flow statement for the period ended
26 June 2022
26 June Impact 26 June
2022 of prior 2022
(as presented) period error (Restated)
£m £m £m
Cash flows from operating activities
Profit before taxation 32.7 (7.3) 25.4
Non-underlying items 11.9 - 11.9
Finance income (0.3) - (0.3)
Finance costs 5.3 - 5.3
Underlying operating profit 49.6 (7.3) 42.3
Depreciation of property, plant and equipment 48.2 - 48.2
Amortisation of intangible assets 0.3 - 0.3
Share of underlying post-tax results of joint ventures (0.9) - (0.9)
Profit on sale of property, plant and equipment (2.5) - (2.5)
Other non-cash movements 2.3 - 2.3
Operating cash flows before movements in working capital and other underlying 97.0 (7.3) 89.7
items
Increase in inventories (28.3) - (28.3)
Increase in trade and other receivables (121.9) 4.2 (117.7)
Increase in trade and other payables 57.0 3.1 60.1
Decrease in provisions, retirement benefit and other non-current liabilities (9.7) - (9.7)
Cash generated from operations before non-underlying items (5.9) - (5.9)
Cash outflows from non-underlying items (1.7) - (1.7)
Cash generated from operations (7.6) - (7.6)
Interest paid (0.9) - (0.9)
Interest element of lease rental payments (1.8) - (1.8)
Income tax paid (2.4) - (2.4)
Net cash outflow from operating activities (12.7) - (12.7)
Net cash outflow from investing activities (38.7) - (38.7)
Net cash inflow from financing activities 50.1 - 50.1
Net decrease in cash and cash equivalents (1.3) - (1.3)
Cash and cash equivalents at beginning of period 81.8 - 81.8
Effect of exchange rate movements 4.8 - 4.8
Cash and cash equivalents at end of period 85.3 - 85.3
4. Foreign currencies
The exchange rates used in respect of principal currencies are:
Average for period Period end
Half year period to Half year Year to As at As at As at
30 June period to 31 December 30 June 26 June 31 December
2023 26 June 2022 2023 2022 2022
2022
US dollar 1.23 1.30 1.24 1.26 1.23 1.21
Canadian dollar 1.66 1.65 1.61 1.67 1.58 1.63
Euro 1.14 1.19 1.17 1.16 1.16 1.12
Singapore dollar 1.65 1.77 1.70 1.72 1.70 1.62
Australian dollar 1.83 1.81 1.78 1.90 1.77 1.76
5. 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.
Half year period to 30 June 2023 Half year period to 26 June 2022 (Restated)
Revenue Operating profit Revenue Operating profit
£m £m £m £m
North America 875.8 65.4 865.7 30.1
Europe 332.2 4.1 297.6 13.9
Asia-Pacific, Middle East and Africa 258.3 3.7 170.1 3.2
1,466.3 73.2 1,333.4 47.2
Central items and eliminations - (6.2) - (4.9)
Before non-underlying items 1,466.3 67.0 1,333.4 42.3
Non-underlying items (note 8) - (10.4) - (11.9)
1,466.3 56.6 1,333.4 30.4
As at 30 June 2023
Segment Segment Capital Capital Depreciation Tangible and
assets liabilities employed additions and intangible
£m £m £m £m amortisation(2) assets(3)
£m £m
North America 942.8 (320.9) 621.9 15.5 27.7 340.3
Europe 313.2 (187.3) 125.9 8.6 14.9 154.5
Asia-Pacific, Middle East and Africa 270.5 (138.7) 131.8 18.4 10.8 106.2
1,526.5 (646.9) 879.6 42.5 53.4 601.0
Central items and eliminations(1) 138.0 (532.5) (394.5) - 0.7 1.3
1,664.5 (1,179.4) 485.1 42.5 54.1 602.3
Trade receivables include invoiced amounts for retentions. Retentions
anticipated to be receivable in more than one year are included in other
non-current assets.
As at 26 June 2022 (Restated)(4)
Segment Segment Capital Capital Depreciation Tangible and
assets liabilities employed additions and intangible
£m £m £m £m amortisation(2) assets(3)
£m £m
North America 1,011.3 (410.9) 600.4 12.3 26.2 360.8
Europe 289.7 (191.0) 98.7 7.6 13.4 144.7
Asia-Pacific, Middle East and Africa 239.8 (123.0) 116.8 6.7 9.2 109.3
1,540.8 (724.9) 815.9 26.6 48.8 614.8
Central items and eliminations(1) 135.2 (478.4) (343.2) - (0.3) 2.4
1,676.0 (1,203.3) 472.7 26.6 48.5 617.2
As at 31 December 2022 (Restated)(5)
Segment Segment Capital Capital Depreciation Tangible and
assets liabilities employed additions and intangible
£m £m £m £m amortisation(2) assets(3)
£m £m
North America 1,016.3 (349.1) 667.2 33.8 54.6 352.5
Europe 338.9 (208.7) 130.2 23.2 27.8 159.6
Asia-Pacific, Middle East and Africa 251.1 (163.4) 87.7 24.7 13.7 109.6
1,606.3 (721.2) 885.1 81.7 96.1 621.7
Central items and eliminations(1) 96.3 (484.6) (388.3) - 0.9 2.7
1,702.6 (1,205.8) 496.8 81.7 97.0 624.4
1 ( ) Central items include net debt and tax balances, which are
managed by the 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 26 June 2022 condensed consolidated balance sheet has been
restated in respect of the correction of prior period errors arising from the
fraud at Austral as outlined in note 3 to the interim financial statements.
5 The 31 December 2022 condensed consolidated balance sheet has been
restated in respect of prior period measurement adjustments, as outlined in
note 3 to the interim financial statements.
( )
6. 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 5) and timing of revenue recognition:
Half year period to 30 June 2023 Half year period to 26 June 2022 (Restated)
Revenue recognised on performance obligations satisfied over time Revenue recognised on performance obligations satisfied at a point in time Total Revenue recognised on performance obligations satisfied over time Revenue recognised on performance obligations satisfied at a point in time Total
£m £m revenue £m £m revenue
£m £m
North America 662.8 213.0 875.8 625.4 240.3 865.7
Europe 332.2 - 332.2 297.6 - 297.6
Asia-Pacific, Middle East and Africa 258.3 - 258.3 170.1 - 170.1
1,253.3 213.0 1,466.3 1,093.1 240.3 1,333.4
7. Acquisitions
Current period
There were no material acquisitions during the half year period to 30 June
2023.
Prior period measurements adjustments
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
retrospectively adjusts the provisional amounts recognised at the acquisition
date to reflect any 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.
On 15 November 2022, the Group acquired Nordwest Fundamentering AS. The
valuation of the acquired assets and liabilities is now final and the
adjustments to the provisional fair values that were made during the
measurement period are set out in the table below:
Provisional Adjustments Revised
fair value during provisional
recognised on measurement fair value
acquisition period recognised on
acquisition
£m £m £m
Assets
Intangible assets - 0.9 0.9
Property, plant and equipment 0.3 - 0.3
Property, plant and equipment - right of use asset 2.1 - 2.1
Trade and other receivables 1.5 - 1.5
Cash and cash equivalents 1.1 - 1.1
5.0 0.9 5.9
Liabilities
Trade and other payables (1.5) - (1.5)
Current tax liabilities - (0.7) (0.7)
Loans and borrowings, including lease liabilities (2.2) - (2.2)
Deferred tax liabilities (0.3) - (0.3)
(4.0) (0.7) (4.7)
Total identifiable net assets 1.0 0.2 1.2
Goodwill 5.3 (0.2) 5.1
Total consideration 6.3 - 6.3
Satisfied by:
Initial cash consideration 5.5 - 5.5
Initial valuation of contingent consideration 0.5 - 0.5
Purchase price adjustment 0.3 - 0.3
6.3 - 6.3
The impact of these adjustments has been applied retrospectively, meaning that
the results and financial position for the year to 31 December 2022 have been
restated, as detailed in note 3.
Disposals
There were no material disposals during the half year period to 30 June 2023
(H1 2022: none).
8. Non-underlying items
Non-underlying items include items which are exceptional by their size and/or
are non-trading in nature, including amortisation of acquired intangibles,
restructuring costs and other non-trading amounts, including those relating to
acquisitions and disposals. Tax arising on these items, including movement in
deferred tax assets arising from non-underlying provisions, is also classified
as a non-underlying item. These are detailed below:
Half year period to Half year period to
30 June 26 June
2023 2022
£m £m
Exceptional historic contract dispute - (3.5)
Exceptional restructuring costs (3.2) (1.2)
ERP implementation costs (4.0) (1.2)
Impairment costs - (0.4)
Contingent consideration payable: additional amounts provided - (0.1)
Change in fair value of contingent consideration - 0.3
Non-underlying items in operating costs (7.2) (6.1)
(3.8) (5.8)
Amortisation of acquired intangible assets
Gain on disposal of assets held for sale 1.0 -
Contingent consideration received - 0.7
Non-underlying items in other operating income 1.0 0.7
Amortisation of joint venture acquired intangibles (0.4) (0.7)
Total non-underlying items in operating profit and before taxation (10.4) (11.9)
Taxation 2.3 2.4
Total non-underlying items after taxation (8.1) (9.5)
Non-underlying items in operating costs
Exceptional restructuring costs
Exceptional restructuring costs comprise £1.7m in the North American division
and £1.5m in the Asia-Pacific, Middle East and Africa (AMEA) division. In
North America the costs reflect the reorganisation of the US Foundations
business and senior leadership changes. In AMEA the costs relate to the
closure of the Egypt business. In the prior period, restructuring costs of
£1.2m in the Europe division related to the scheduled exit of the Ivory Coast
business. Costs include asset impairments and redundancy costs.
ERP implementation costs
The Group is continuing the strategic project to implement a new cloud
computing enterprise resource planning (ERP) system across the Group. Due to
the size, nature and incidence of the relevant costs expected to be incurred,
the costs are presented as a non-underlying item, as they are not reflective
of the underlying performance of the Group. Non-underlying ERP costs of £4.0m
(H1 2022: £1.2m) include only costs relating directly to the implementation
including external consultancy costs and the cost of the dedicated
implementation team. Non-underlying costs does not include operational
post-deployment costs such as licence costs for businesses that have
transitioned.
Exceptional historic contract dispute
In the prior period to 26 June 2022, the £3.5m exceptional charge related to
a provision made for additional costs relating to a historical contract
dispute. The liability has been settled in the current year and the related
cash flow included in non-underlying cash flows in the cash flow statement.
Impairment costs
In the prior period to 26 June 2022, an impairment charge of £0.4m by the
North-East Europe Business Unit was in respect of trade receivables in Ukraine
that are not expected to be recovered due to the ongoing conflict.
Contingent consideration
In the prior period to 26 June 2022, additional contingent consideration
payable of £0.1m related to the acquisition of the Geo Instruments US
business in 2017. During the prior period there was an adjustment of £0.3m to
the fair value of the RECON contingent consideration on finalisation of the
amount payable.
Amortisation of acquired intangible assets
Amortisation of acquired intangible assets of £3.8m relates to the
amortisation charge on assets acquired in the RECON, Moretrench, GKM and NWF
acquisitions. The amortisation for the period ended 26 June 2022 of £5.8m
relates to the RECON, Moretrench and Voges acquisitions.
Non-underlying items in other operating income
Gain on disposal of assets held for sale
Gain on disposal of assets held for sale of £1.0m relates primarily to the
sale of assets owned by the now closed Waterway business in Australia as
mentioned in note 15. Impairment charges for these assets had previously been
charged to non-underlying items in prior periods and therefore the
corresponding profit on disposal of the assets is also recognised as a
non-underlying item.
Contingent consideration received
In the period to 26 June 2022, the second and final instalment of the
contingent consideration of £0.7m was received in relation to the
Wannenwetsch disposal in September 2020, in accordance with the terms of the
sale and purchase agreement.
Amortisation of joint venture acquired intangibles
Amortisation of joint venture intangibles relates to NordPile, an acquisition
by the Group's joint venture interest KFS Finland Oy on 8 September 2021.
Non-underlying taxation
The credit relates to the tax benefit of amounts which are expected to be
deductible for tax purposes.
9. Taxation
The effective tax rate on the Group's underlying profit of 22% (H1 2022
Restated: 26%) is calculated using management's best estimate of the average
annual effective income tax rate expected for the full year. The average is
calculated using the weighted average profit at jurisdictional rates which
differ from the tax rate in the UK of 23.5%. The reduction from the H1 2022
restated rate of 26% is largely due to the fact that the 2022 restated rate
takes into account the Austral loss for which no associated tax relief is
available in Australia. Australia is already in an overall loss position and
no deferred tax asset is booked for these losses.
The tax credit on non-underlying items has been calculated by assessing the
tax impact of each component of the charge to the income statement in the
interim accounts and applying the jurisdictional tax rate that applies to that
item.
The increase in deferred tax assets from 31 December 2022 to 30 June 2023 is
as a result of the timing of the deductibility of R&D expenditure for US
tax purposes. R&D expenditure is capitalised for tax purposes and
amortised over five years.
The Group is subject to taxation in over 40 countries worldwide and the risk
of changes in tax legislation and interpretation from tax authorities in the
jurisdictions in which it operates. The assessment of uncertain positions is
subjective and subject to management's best judgement of the probability of
the outcome in reaching agreement with the relevant tax authorities. Where tax
positions are uncertain, provision is made where necessary based on
interpretation of legislation, management experience and appropriate
professional advice. Management do not expect the outcome of these estimates
to be materially different from the position taken.
The UK government enacted new legislation introducing a global minimum tax of
15% in line with the OECD's Pillar Two rules. The rules will apply to the
Group from 1 January 2024 and it is expected that the Pillar Two rules will
not have a material impact on its overall tax charge. The Group has applied
the exemption in the Amendments to IAS 12 issued in May 2023 and has neither
recognised nor disclosed information about deferred tax assets or liabilities
relating to Pillar Two income taxes.
10. Dividends
Ordinary dividends on equity shares:
Half year period to Half year period to Year to
30 June 26 June 31 December 2022
2023 2022 £m
£m £m
Amounts recognised as distributions to equity holders in the period:
Interim dividend for the year ended 31 December 2022 of 13.2p (2021: 12.6p) - -
per share
9.6
Final dividend for the year ended 31 December 2022 of 24.5p (2021: 23.3p) per 17.6 - 16.8
share
17.6 - 26.4
The 2022 final dividend of £17.6m was paid on 23 June 2023. The 2021 final
dividend of £16.8m was paid on 1 July 2022.
In addition to the above, an interim ordinary dividend of 13.9p per share (H1
2022: 13.2p) will be paid on 8 September 2023 to shareholders on the register
at 18 August 2023. This proposed dividend has not been included as a liability
in these financial statements and will be accounted for in the period in which
it is paid.
11. Earnings per share
Basic earnings per share is calculated by dividing the profit for the year
attributable to ordinary equity holders of the parent by the weighted average
number of ordinary shares outstanding during the year.
When the Group makes a profit, diluted earnings per share equals the profit
attributable to equity holders of the parent divided by the weighted average
diluted number of shares. When the Group makes a loss, diluted earnings per
share equals the loss attributable to the equity holders of the parent divided
by the basic average number of shares. This ensures that earnings per share on
losses is shown in full and not diluted by unexercised share awards.
Basic and diluted earnings per share are calculated as follows:
Underlying earnings attributable to the equity holders Statutory earnings attributable to equity holders of the parent
of the parent
Half year Half year Half year Half year
period to period to period to period to
30 June 26 June 30 June 26 June
2023 2022 2023 2022
(Restated) (Restated)
Profit available for equity holders (£m) 41.3 27.8 33.2 18.3
Weighted average number of shares (m)(1)
Basic number of ordinary shares outstanding 72.8 72.6 72.8 72.6
Effect of dilution from:
Share options and awards 0.9 0.8 0.9 0.8
Diluted number of ordinary shares 73.7 73.4 73.7 73.4
Earnings per share
Basic earnings per share (p) 56.7 38.3 45.6 25.2
Diluted earnings per share (p) 56.0 37.9 45.0 24.9
( )
1 The weighted average number of shares takes into
account the weighted average effect of changes in treasury shares during the
year. The weighted average number of shares excludes those held in the
Employee Share Ownership Plan Trust and those held in treasury, which for the
purpose of this calculation are treated as cancelled.
12. Property, plant and equipment
Property, plant and equipment comprises owned and leased assets.
As at As at As at
30 June 26 June 31 December 2022
2023 2022 £m
£m £m
Property, plant and equipment - owned 390.7 392.2 409.5
Right-of-use assets - leased 82.8 75.9 77.0
473.5 468.1 486.5
During the period to 30 June 2023, the Group acquired owned property, plant
and equipment with a cost of £42.5m (H1 2022: £26.6m, FY 2022: £81.6m).
Right-of-use asset additions during the period were £19.6m (H1 2022: £12.4m,
FY 2022: £23.4m).
Owned assets with a net book value of £4.3m were disposed of during the half
year period to 30 June 2023 (H1 2022: £0.8m, FY 2022: £4.7m), resulting in a
net gain on disposal of £2.5m (H1 2022: £2.5m gain, FY 2022: £3.3m gain).
13. Trade and other receivables
Trade receivables and contract assets on the balance sheet are shown net of
expected credit loss provisions. During the period to 30 June 2023, the net
expected credit loss included in the operating costs is £14.8m (H1 2022:
£11.6m).
14. Analysis of closing net debt
As at As at As at
30 June 26 June 31 December
2023 2022 2022
£m £m £m
Bank balances 98.7 81.5 97.0
Short-term deposits 1.7 4.3 4.1
Cash and cash equivalents in the balance sheet 100.4 85.8 101.1
Bank overdrafts (5.6) (0.5) (6.9)
Cash and cash equivalents in the cash flow statement 94.8 85.3 94.2
Bank and other loans (338.9) (278.9) (312.1)
Lease liabilities (87.5) (84.1) (81.0)
Closing net debt (331.6) (277.7) (298.9)
Cash and cash equivalents include £6.9m (26 June 2022: £9.4m, 31 December
2022: £8.5m) of the Group's share of cash and cash equivalents held by joint
operations, and £1.1m (26 June 2022: £1.1m, 31 December 2022: £1.4m) of
restricted cash which is subject to local country restrictions.
15. Assets held for sale
As at As at As at
30 June 26 June 31 December 2022
2023 2022 £m
£m £m
Assets held for sale 1.6 1.0 2.8
Liabilities directly associated with assets held for sale - - -
During the period to 30 June 2023, £0.8m of the North American assets and
£1.2m of the Waterway assets were disposed of for a total cash consideration
of £3.0m resulting in a gain from the disposal of assets of £1.0m.
At 30 June 2023, assets held for sale comprises of an electric crane in
Australia costing £1.4m which was added during the period and remaining
£0.2m of assets in North America and South Africa.
16. Retirement benefit liabilities
The Group operates pension schemes in the UK and overseas. 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.
For further information on the Group's pension schemes, refer to note 33 of
the Group's financial statements for the year ended 31 December 2022.
The Group's net defined benefit liabilities as at 30 June 2023 were £18.2m
(31 December 2022: £20.8m).The reduction in the half year period was driven
primarily by the £1.7m contributions from the employer. The net charge to the
income statement was £0.6m and no significant actuarial change was recognised
in the comprehensive income during the period to 30 June 2023.
The net defined liability for the Keller Group Pension Scheme in the UK as at
30 June 2023 is £2.6m (31 December 2022: £4.1m), being the minimum funding
requirement, calculated using the agreed contributions.
17. Financial assets and financial liabilities
Set out below is an overview of financial assets and liabilities held by the
Group:
As at As at As at
30 June 26 June 31 December
2023 2022 2022
(Restated)
£m £m £m
Financial assets measured at fair value through profit or loss
Non-qualifying deferred compensation plan 20.0 18.8 19.4
Contingent consideration receivable - 0.7 -
Financial assets measured at amortised cost
Trade receivables 575.0 531.3 615.5
Contract assets 138.8 150.0 105.3
Cash and cash equivalents 100.4 85.8 101.1
Financial liabilities at fair value through profit or loss
Contingent consideration payable (0.9) (1.2) (0.9)
Financial liabilities measured at amortised cost
Deferred consideration payable (0.9) (0.8) (1.0)
Trade payables (181.6) (290.8) (229.4)
Contract liabilities (93.3) (58.5) (85.6)
Bank and other loans (344.5) (279.4) (319.0)
Lease liabilities (87.5) (84.1) (81.0)
Fair values
The fair values of the Group's financial assets and liabilities are not
materially different from their carrying values. The following summarises the
major methods and assumptions used in estimating the fair values of financial
instruments; being derivatives, interest-bearing loans and borrowings,
contingent and deferred consideration and payables, receivables and contract
assets, cash and cash equivalents.
Contingent and deferred consideration
Fair value is calculated based on the amounts expected to be paid, determined
by reference to forecasts of future performance of the acquired businesses
discounted using appropriate discount rates prevailing at the balance sheet
date and the probability of contingent events and targets being achieved. The
valuation methods of the Group's contingent consideration carried at fair
value are categorised as Level 3. Level 3 assets are financial assets and
liabilities that are considered to be the most illiquid. Their values have
been estimated using available management information including subjective
assumptions. There are no individually significant unobservable inputs used in
the fair value measurement of the Group's contingent consideration as at 30
June 2023.
The following table shows a reconciliation from the opening to closing
balances for net contingent and deferred consideration:
As at As at As at
30 June 26 June 31 December
2023 2022 2022
£m £m £m
Opening balance at 1 January 1.9 12.7 12.7
Acquisition of businesses - 1.3 1.7
Additional amounts provided - 0.1 0.1
Amount receivable - (0.7) -
Released during the period - (0.3) -
Paid during the period - (12.2) (12.3)
Fair value in the income statement during the period - - (0.7)
Exchange movements (0.1) 0.4 0.4
Closing balance 1.8 1.3 1.9
On 1 May 2022, the Group acquired 100% of the issued share capital of GKM
Consultants Inc., an instrumentation and monitoring provider in Quebec,
Canada, for an initial cash consideration of £3.3m (CAD$5.3m). In addition,
contingent consideration is payable dependent on the cumulative EBITDA in the
three-year period post-acquisition. The fair value of the contingent
consideration is £0.9m (CAD$1.4m) as at 30 June 2023 (31 December 2022:
£0.9m or CAD$1.4m).
On 15 November 2022, the Group acquired 100% of the issued share capital of
Nordwest Fundamentering AS, a small specialist geotechnical contractor
provider in Norway, for an initial cash consideration of £5.5m (NOK65m). In
addition, deferred consideration of £0.4m (NOK6m) is payable (31 December
2022: £0.5m or NOK6m).
On 1 November 2021, the Group acquired the trade and assets of Voges Drilling,
a geotechnical foundation company based in Texas, US. Deferred consideration
of £0.5m (US$0.6m) is payable (31 December 2022: £0.5m or US$0.6m).
Payables, receivables and contract assets
For payables, receivables and contract assets with an expected maturity of one
year or less, the carrying amount is deemed to reflect the fair value.
Non-qualifying deferred compensation plan
The value of both the employee investments and those held in trust by the
company are measured using Level 1 inputs per IFRS 13 ('quoted prices in
active markets for identical assets or liabilities that the entity can access
at the measurement date') based on published market prices at the end of the
period. Adjustments to the fair value are recorded within net finance costs in
the consolidated income statement. Refer to note 18 of the Group's financial
statements for the year ended 31 December 2022 for further information on the
non-qualifying deferred compensation plan.
18. Share capital and reserves
As at As at As at
30 June 26 June 31 December
2023 2022 2022
£m £m £m
Allotted, called up and fully paid equity share capital 7.3 7.3 7.3
73,099,735 ordinary shares of 10p each
(26 June 2022 and 31 December 2022: 73,099,735)
The company has one class of ordinary shares, which carries no rights to fixed
income. There are no restrictions on the transfer of these shares.
The capital redemption reserve of £7.6m is a non-distributable reserve
created when the company's shares were redeemed or purchased other than from
the proceeds of a fresh issue of shares.
The other reserve of £56.9m is a non-distributable reserve created when
merger relief was applied to an issue of shares under section 612 of the
Companies Act 2006 to part-fund the acquisition of Keller Canada. The reserve
becomes distributable should Keller Canada be disposed of.
At 30 June 2023, the total number of shares held in treasury was 323,133 (26
June 2022: 328,954 and 31 December 2022: 328,954).
During the period to 30 June 2023, 500,000 ordinary shares were purchased by
the Keller Group Employee Benefit Trust (H1 2022: 135,050, FY 2022: 135,050),
to be used to satisfy future obligations of the company under the Keller Group
plc Long Term Incentive Plan. The cost of the market purchases was £3.4m (FY
2022: £1.2m).
19. Related party transactions
Transactions between the parent, its subsidiaries and joint operations, which
are related parties, have been eliminated on consolidation.
Other related party transactions
As at 30 June 2023, a net balance of £0.1m was owed by (26 June 2022: £0.1m
owed by and 31 December 2022: £0.1m owed by) the joint venture. This amount
is unsecured, has no fixed date of repayment and is repayable on demand.
20. Post balance sheet events
There were no material post balance sheet events between the balance sheet
date and the date of this report.
Adjusted performance measures
The Group's results as reported under International Financial Reporting
Standards (IFRS) and presented in the interim condensed consolidated financial
statements (the 'statutory results') are significantly impacted by movements
in exchange rates relative to sterling, as well as by exceptional items and
non-trading amounts including those relating to acquisitions and disposals.
Adjusted performance measures have been used throughout this report to
describe the Group's underlying performance. The Board and Executive Committee
use these adjusted measures to assess the performance of the business as they
consider them more representative of the underlying ongoing trading result and
allow more meaningful comparison to prior periods.
Underlying measures
The term 'underlying' excludes the impact of items which are exceptional by
their size and/or are non-trading in nature, including amortisation of
acquired intangible assets and other non-trading amounts relating to
acquisitions and disposals (collectively 'non-underlying items'), net of any
associated tax. Underlying measures allow management and investors to compare
performance without the potentially distorting effects of one-off items or
non-trading items. Non-underlying items are disclosed separately in the
interim financial statements where it is necessary to do so to provide further
understanding of the financial performance of the Group.
Constant currency measures
The constant currency basis ('constant currency') adjusts the comparative to
exclude the impact of movements in exchange rates relative to sterling. This
is achieved by retranslating the 2022 results of overseas operations into
sterling at the 2023 average exchange rates.
A reconciliation between the underlying results and the reported statutory
results is shown on the face of the condensed consolidated income statement,
with non-underlying items detailed in note 8. A reconciliation between the
2022 underlying result to the 2022 constant currency result is shown below and
compared to the underlying 2023 performance:
Revenue by segment
Statutory Statutory Impact of exchange movements Constant Statutory Constant
2023 2022 (Restated) 2022 currency change currency
2022 change
£m £m £m £m % %
North America 875.8 865.7 46.0 911.7 +1% -4%
Europe 332.2 297.6 8.9 306.5 +12% +8%
Asia-Pacific, Middle East and Africa 258.3 170.1 (2.2) 167.9 +52% +54%
Group 1,466.3 1,333.4 52.7 1,386.1 +10% +6%
Underlying operating profit by segment
Underlying Underlying Impact of exchange movements Constant Underlying Constant
2023 2022 (Restated) 2022 currency change currency
2022 change
£m £m £m £m % %
North America 65.4 30.1 1.7 31.8 +117% +105%
Europe 4.1 13.9 0.5 14.4 -71% -71%
Asia-Pacific, Middle East and Africa 3.7 3.2 0.2 3.4 +16% +10%
Central items (6.2) (4.9) - (4.9) +27% +27%
Group 67.0 42.3 2.4 44.7 +58% +50%
Underlying operating margin
Underlying operating margin is underlying operating profit as a percentage of
revenue.
Other adjusted measures
Where not presented and reconciled on the face of the interim condensed
consolidated income statement, balance sheet or cash flow statement, the
adjusted measures are reconciled to the IFRS statutory numbers below:
EBITDA (statutory)
30 June 26 June
2023 2022 (Restated)
£m £m
Underlying operating profit 67.0 42.3
Depreciation and impairment of owned property, plant and equipment 39.3 34.8
Depreciation and impairment of right-of-use assets 14.6 13.4
Amortisation of intangible assets 0.2 0.3
Underlying EBITDA 121.1 90.8
Non-underlying items in operating costs (7.2) (6.1)
Non-underlying items in other operating income 1.0 0.7
EBITDA 114.9 85.4
EBITDA (IAS 17 covenant basis)
30 June 26 June
2023 2022 (Restated)
£m £m
Underlying operating profit 67.0 42.3
Depreciation and impairment of owned property, plant and equipment 39.3 34.8
Depreciation and impairment of right-of-use assets 14.6 13.4
Legacy IAS 17 operating lease charges (16.7) (15.2)
Amortisation of intangible assets 0.2 0.3
Underlying EBITDA 104.4 75.6
Non-underlying items in operating costs (7.2) (6.1)
Non-underlying items in other operating income 1.0 0.7
EBITDA 98.2 70.2
( )
Net finance costs
30 June
2023 26 June
2022
£m £m
Finance income (0.6) (0.3)
Finance costs 14.1 5.3
Net finance costs (statutory) 13.5 5.0
Finance charge on lease liabilities(1) (2.5) (1.2)
Lender covenant adjustments - -
Net finance costs (IAS 17 covenant basis) 11.0 3.8
1( ) Excluding legacy IAS 17 finance leases.
Net capital expenditure
30 June 26 June 31 December
2023 2022 2022
£m £m £m
Acquisition of property, plant and equipment 42.5 26.6 81.6
Acquisition of intangible assets - 0.1 0.1
Proceeds from sale of property, plant and equipment (8.1) (3.3) (8.2)
Net capital expenditure(1) 34.4 23.4 73.5
( )
1 ( ) Net capital expenditure excludes right-of-use assets.
Net debt
30 June 26 June 31 December
2023 2022 2022
£m £m £m
Current loans and borrowings 30.7 29.0 34.2
Non-current loans and borrowings 401.3 334.5 365.8
Cash and cash equivalents (100.4) (85.8) (101.1)
Net debt (statutory) 331.6 277.7 298.9
Lease liabilities(1) (87.0) (83.7) (80.1)
Net debt (IAS 17 covenant basis) 244.6 194.0 218.8
1 ( ) Excluding legacy IAS 17 finance leases.
Leverage ratio
The leverage ratio is calculated as net debt to underlying EBITDA.
Statutory 31 December
30 June 26 June 2022
2023 2022 (Restated) £m
£m £m
Net debt 331.6 277.7 298.9
Underlying EBITDA (last twelve months) 235.9 192.7 205.6
Leverage ratio (x) 1.4 1.4 1.5
IAS 17 covenant basis 26 June 31 December
30 June 2022 (Restated) 2022
2023 £m £m
£m
Net debt 244.6 194.0 218.8
Underlying EBITDA (last twelve months) 206.5 158.7 177.7
Leverage ratio (x) 1.2 1.2 1.2
Order book
The Group's disclosure of its order book is aimed to provide insight into its
backlog of work and future performance. The Group's order book is not a
measure of past performance and therefore cannot be derived from its financial
statements. The Group's order book comprises the unexecuted elements of orders
on contracts that have been awarded. Where a contract is subject to
variations, only secured variations are included in the reported order book.
IFRS 16 gearing
31 December
30 June 26 June 2022
2023 2022 (Restated) £m
£m £m
Net debt (statutory) 331.6 277.7 298.9
Net assets 485.1 472.7 496.8
Gearing 68% 59% 60%
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