REG - Keller Group PLC - Interim Results for the half year ended 30 June 24
06/08/2024 07:00
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RNS Number : 2651Z Keller Group PLC 06 August 2024
6 August 2024
Keller Group plc
Interim Results for the half year ended 30 June 2024
Keller Group plc ('Keller' or the 'Group'), the world's largest geotechnical
specialist contractor, announces its results for the half year ended 30 June
2024.
Outstanding H1 performance; expectations for FY 2024 materially increased
H1 2024 H1 2023 Constant currency
£m £m % change
% change
Revenue 1,489.8 1,466.3 +2% 5%
Underlying operating profit(1) 113.2 67.0 +69% 76%
Underlying operating profit margin(1) 7.6% 4.6% +300bps n/a
Underlying diluted earnings per share(1) 103.3p 56.0p +85%
Free cashflow before interest and tax 134.1 40.8 +229%
Net debt (bank covenant IAS 17 basis)(2) 100.7 244.6 -59%
Dividend per share 16.6p 13.9p +19%
Statutory operating profit 105.9 56.6 +87%
Statutory profit before tax 95.3 43.1 +121%
Net cash inflow from operating activities 118.9 35.3 +237%
Statutory diluted earnings per share 94.7p 45.0p +110%
Statutory net debt (IFRS 16 basis) 199.0 331.6 -40%
(1) Underlying operating profit and underlying diluted earnings per share are
non-statutory measures which provide readers of this Announcement with a
balanced and comparable view of the Group's performance by excluding the
impact of non-underlying items, as disclosed in note 7 to the interim
condensed consolidated financial statements.
(2) Net debt is presented on a lender covenant basis excluding the impact of
IFRS 16 as disclosed within the adjusted performance measures in the interim
condensed consolidated financial statements.
( )
Highlights
· Outstanding first half performance sets new records across the
Group as we continued to sustain and build on the material step-up in
operational and financial performance delivered in 2023
o Revenue of £1,489.8m, up 5% at constant currency
o Underlying operating profit of £113.2m, up 76% at constant currency
o Underlying operating profit margin increased by 300bps to 7.6% (H1 2023:
4.6%)
o Underlying diluted EPS of 103.3p, up 85%
o Underlying ROCE at 28.4% (H1 2023: 16.6%), the highest for 15 years
o Net debt(2) of £100.7m, down £46m since December 2023, driven by strong
profitability and cash generation, with net debt/EBITDA leverage ratio(2) of
0.3x (H1 2023: 1.2x; FY 2023: 0.6x)
o Statutory operating profit up 87% to £105.9m
o Statutory diluted EPS of 94.7p, up 110%
· Board's expectations for full year 2024 materially increased,
underpinned by our record order book of £1.6bn
· Our Accident Frequency Rate remained unchanged at 0.09 with nine
lost time events
· The interim dividend has been rebased to 16.6p (H1 2023: 13.9p),
following the 20% increase in the 2023 full year dividend; anticipating a 2024
full year dividend increase of 5%
Michael Speakman, Chief Executive Officer, said: "Keller achieved outstanding
results in the first half of the year, setting new records across the Group,
as we continued to sustain and build on the material step-up in operational
and financial performance delivered in 2023. We maintained our focus on
sustainable markets and attractive projects and the results reflect both the
strength of the Group's presence in the buoyant North American market and our
continuous groupwide emphasis on improving project execution and delivery.
The current macroeconomic environment presents opportunities, particularly in
North America, albeit there are challenges in some of our other markets. The
strength of the Group's performance, together with the quality of our record
£1.6bn order book, provides us with increased confidence in the outlook for
the rest of this year. As a consequence, the Board now anticipates that the
Group's performance for the full year will be materially ahead of current
market expectations(1). This performance will have a modest weighting towards
the first half given beneficial tailwinds in the period."
(1) Analyst consensus underlying operating profit for FY 2024: £178m; range:
£176m - £179m.
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 08.30am
BST on 6 August 2024, at:
Storey Club
100 Liverpool Street
London EC2M 2AU
RSVP: connie.gibson@fticonsulting.com (mailto:connie.gibson@fticonsulting.com)
The webcast replay will be available later the same day on demand
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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 9,500 staff and operations
across five continents, Keller tackles an unrivalled 5,500 projects every
year, generating annual revenue of c.£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 one-off items not linked to the underlying performance of
the business. Net debt (bank covenant IAS 17 basis) is provided as a key
measure for measuring bank covenant compliance and is calculated as the
equivalent statutory measure adjusted to exclude the additional lease
liabilities relating to the adoption of IFRS 16. 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. 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 excelled in the first half of the year driven by an exceptional
performance in North America, and evidencing the sustainability of the
material operational and financial improvements we delivered last year. The
record underlying operating profit, operating margin and free cash flow
performance represent material improvements on the prior period.
Overall reported revenue increased to £1,489.8m (H1 2023: £1,466.3m), up 5%
on a constant currency basis, largely driven by revenue growth in North
America Foundations and Central Europe, partly offset by lower revenues at
Suncoast and the NEOM project in Saudi Arabia compared with the prior period.
Underlying operating profit of £113.2m was 76% higher on a constant currency
basis, primarily driven by a strong performance and favourable market
conditions in North America Foundations, together with the turnaround in
profitability at Austral in Australia, moderated by lower trading volume and a
challenging project in the Middle East region. The underlying operating margin
increased significantly to 7.6% (H1 2023: 4.6%), the highest in 15 years,
reflecting the benefit of the continued operational improvements across many
areas of the business and a buoyant market in North America. As a result of
our strong profitability and cash generation, our net debt (IAS 17 lender
covenant basis) reduced by £143.9m, from £244.6m in June 2023 to £100.7m,
and £46m lower than December 2023. This equated to a net debt/EBITDA ratio of
0.3x (H1 2023: 1.2x; FY 2023: 0.6x), below our target leverage range of 0.5x -
1.5x.
The Group's term debt and committed facilities include a multi-currency
syndicated revolving credit facility (expiring June 2029) which was refinanced
in the period, increasing the facility from £375m to £400m, with no change
in the related covenants. The revolving credit facility was undrawn at the
period end.
Operating performance
The Group's performance in the first half of the year continued to build on
the significant material improvement in operational and financial performance
delivered in 2023.
In the North America Division, despite only a marginal increase in revenue,
underlying operating profit increased by 68% on a constant currency basis and
the underlying margin was 12.0% (H1 2023: 7.5%). This was principally driven
by a continued improvement in underlying contract performance, execution and
commercial discipline in the foundations business, as well as a stronger than
expected profit performance at Suncoast. In addition, buoyant market
conditions created a positive pricing environment for the foundations business
and the whole North America region benefitted from unusually fair weather in
the period. Moretrench Industrial, our business that operates in the highly
regulated environmental remediation market, continued to make good progress in
the period, with growth in revenue and profit. Performance was partly offset
by RECON, our geoenvironmental and industrial services company, where volumes
and profit were lower than the prior period which had benefitted from a large
LNG project in the US Gulf Coast. Suncoast, the Group's post-tension business,
performed well and ahead of our expectations. Whilst, as expected, Suncoast's
revenue was adversely impacted by a decreased level of activity, profitability
was maintained due to the greater than anticipated benefit of pricing actions
taken.
The Europe and Middle East Division (EME) performance was disappointing
overall, albeit our European business improved compared with the prior period.
Whilst overall revenue increased by 6.0% on a constant currency basis to
£418.9m, underlying operating profit declined to £3.0m, down 74.4% on a
constant currency basis. Revenue growth was primarily driven by a large
infrastructure project in Central Europe and by several large infrastructure
projects in the Nordics, partly offset by the lower volumes in the Middle East
region (including the NEOM project) against a strong prior year comparator and
lower volumes in the UK. The reduction in underlying profit in the period
reflected the non-recurrence of work on The Line project at NEOM in the first
half of 2023, compounded by losses incurred in the early stages of the Trojena
project at NEOM in the period. This was partially offset by the profit benefit
of the increased volume and operating profit delivered elsewhere in the Middle
East and Africa region.
In the Asia-Pacific Division (APAC) an impressive revenue performance in India
and, to a lesser extent, ASEAN contributed to growth of 3.4% on a constant
currency basis to £187.1m in the division. The strong return to profit of
£11.1m, compared to an underlying loss of £(4.2)m in the prior period, was
driven by the very strong turnaround at Austral, which achieved its margin
target. Performance more than offset the anticipated lower volumes and
corresponding profits from Keller Australia following a record performance in
the prior period.
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.
In the first half we completed the exit of our South African business. This
further builds on the progress we have made in recent years to significantly
rationalise, restructure and refine 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.
To build on the strong foundations we have established for our business, we
are looking to grow market share within our existing geographic footprint,
through both organic investment and targeted M&A, to gain the benefits of
operational leverage within our key markets.
Safety
We maintained our unrelenting focus on safety through a number of initiatives.
In the first half of 2024 our Accident Frequency Rate remained unchanged at
0.09 per 100,000 hours, with nine lost time events, and our Total Recordable
Incident Rate improved to 0.58, with 39 recordable injury events, a reduction
of two on the prior period.
Sustainability and ESG
In April, we ran the first Group-wide sustainability week, engaging over 1,000
employees in environmental and social sustainability webinars, competitions,
surveys and videos.
We remain focused on the wellbeing and safety of every employee across the
organisation. We continue to build on the introduction of our Inclusive Site
Culture Standard with the roll-out of our global employee programme,
'Engineering Respect for a Safer Tomorrow', promoting positive behaviours to
enhance team performance and addressing harmful behaviours that create unsafe
working environments.
We are progressing well against our carbon reduction 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 Operational Scope 3 (covering business travel, material transport and waste
disposal). The short, medium and long-term actions required to achieve these
goals are in progress and we are on track to meet this year's Scope 2 carbon
reduction target.
As part of our continued focus on mutually beneficial partnerships, we have
contributed £250,000 in 2024 towards UNICEF's Core Resources for Results.
Keller's unrestricted funding enables UNICEF to support children wherever and
whenever the need is greatest. Keller is delighted to have contributed
£750,000 to UNICEF UK over the duration of our three-year partnership.
Board development and succession
Keller continued its long-term planning agenda which will continue to evolve
to reflect the Group's strategy and the Board's composition of skills and
experience.
As previously announced, Eva Lindqvist retired from the Board at the AGM in
May 2024, having served seven years as an independent Non-executive Director
and five years as Chair of the Remuneration Committee. Annette Kelleher joined
the Board as a Non-executive Director in December 2023 and became Chair of the
Remuneration Committee in May 2024.
On 18 July 2024, it was announced that Stephen King will join the Board as an
independent Non-executive Director on 1 September 2024. Stephen will be a
member of the Audit and Risk, Nomination and Governance, Remuneration, and
Sustainability Committees. It was also announced that Peter Hill CBE has given
notice of his intention to retire as Chairman and step down as a director of
the Company during the first half of 2025, after what will have been
approximately nine years on the Board. A formal external search process is
underway led by Kate Rock, Keller's Senior Independent Director.
People
We have recently strengthened our Executive Committee with several new
leadership roles that will assist us in driving forward our strategy. Kerry
Porritt has been appointed as Keller's first Chief Sustainability Officer, in
addition to her responsibilities as Group Company Secretary, where she will
drive Keller's sustainability agenda and ensure it continues to gain traction
across the Group. Marisa Schleter is promoted to the new role of Chief
Communications Officer to foster effective communication across the Group.
Brent Byford has been promoted to the new role of Chief Construction Officer.
Interim dividend
In 2023 the Board rebased the full year dividend to 45.2p, a 20% increase on
2022 in recognition of the step-change in profitability in 2023, and increased
the 2023 final dividend by 28%. The Board currently expects to return to a
more normal progressive 5% dividend growth in 2024 and reverting to the normal
balance of the full year dividend being payable 35% as an interim dividend and
65% as the final dividend. The Board is therefore declaring an interim
dividend of 16.6p (2023: 13.9p). Keller has a notable 30-year history of a
maintained or growing dividend with a CAGR of just under 9% since flotation in
1994 and is one of only a very few FTSE listed companies to have consistently
paid a dividend over such a period. The interim dividend is payable on 13
September 2024 to shareholders on the register as at 16 August 2024.
Outlook
Keller achieved outstanding results in the first half of the year, setting new
records across the Group, as we continued to sustain and build on the material
step-up in operational and financial performance delivered in 2023. We
maintained our focus on sustainable markets and attractive projects and the
results reflect both the strength of the Group's presence in the buoyant North
American market and our continuous groupwide emphasis on improving project
execution and delivery.
The current macroeconomic environment presents opportunities, particularly in
North America, albeit there are challenges in some of our other markets. The
strength of the Group's performance, together with the quality of our record
£1.6bn order book, provides us with increased confidence in the outlook for
the rest of this year.
As a consequence, the Board now anticipates that the Group's performance for
the full year will be materially ahead of current market expectations. This
performance will have a modest weighting towards the first half given
beneficial tailwinds in the period.
Operating review
North America
H1 2024 H1 2023 Constant currency
£m £m
Revenue 883.8 875.8 4.2%
Underlying operating profit 105.8 65.4 67.7%
Underlying operating margin 12.0% 7.5% +460bps
Order book 1,131.0 979.1 15.8%
In North America, revenue was up 4.2% on a constant currency basis, driven by
an increase in revenue in the foundations business and Moretrench Industrial,
partly offset by a reduction in trading volume at Suncoast. Underlying
operating profit increased significantly to £105.8m, up 67.7% on a constant
currency basis, driven by an improved volume and margin performance in the
foundations business, particularly across the eastern and southern USA.
Performance was assisted by a generally buoyant market and benign weather
conditions. The Accident Frequency Rate, our key metric for measuring safety
performance, improved to 0.08 (H1 2023: 0.09) as a result of three lost time
injuries.
In the foundations business, increased revenue reflected buoyant market demand
and an attractive pricing environment, particularly in the south east and
north east regions. The significant increase in operating profit was driven by
the sustained improvement in underlying contract performance, improved project
execution and focus on commercial discipline.
Suncoast, the Group's post-tension business, performed well and ahead of our
expectations. Whilst, as expected, Suncoast's revenue reflected a decreased
level of activity, profitability was maintained at prior period levels due to
the benefit of successful pricing actions by local management. We expect this
benefit to unwind in the second half of the year.
Moretrench Industrial, our business that operates in the highly regulated
environmental remediation market, continued to make good progress in the
period, with growth in revenue and profit. At RECON, our geoenvironmental and
industrial services company, volumes and profit were lower due to the delay in
the permitting of new LNG projects. We continue to target further LNG
opportunities in the region.
The order book for North America at the period end strengthened to £1,131.0m,
up 15.8% on a constant currency basis.
Europe and Middle East (EME)(1)
H1 2024 H1 2023 Constant currency
£m £m
Revenue 418.9 401.3 +6.0%
Underlying operating profit 3.0 12.0 -74.4%
Underlying operating margin 0.7% 3.0% -230bps
Order book 367.3 332.9 10.7%
In EME, revenue increased by 6.0% to £418.9m, on a constant currency basis,
driven by large infrastructure projects in Central Europe and the Nordics,
partly offset by lower volumes in the Middle East region (including the NEOM
project) and lower volumes in the UK. Underlying operating profit decreased by
74.4% to £3.0m on a constant currency basis. Whilst the European business
showed good improvement over the period, underlying operating profit
performance was more than offset by the weaker trading performance in the
Middle East business, which was down year-on-year. The Accident Frequency Rate
reduced to 0.10 from 0.11, representing three lost time injuries.
In the European business units, a good turnaround in performance in the period
saw an increase in underlying operating profit by £5.3m in constant currency.
Despite the continuation of some challenging construction markets in parts of
Europe, particularly in the residential and commercial sectors, performance
benefitted from several infrastructure projects including a large tunnel
project in Central Europe which is now complete. Despite some residual
challenges, there was an improvement in the delivery of the two previously
underperforming multi-year infrastructure contracts in the Nordics. One
project was profitable in the period with the other delivering reduced losses,
with unusually adverse weather conditions playing a part in the
underperformance and delaying the implementation of the turnaround plans. We
expect further improvement in these projects in the second half of the year.
In the UK, as expected, trading was softer versus the prior period reflecting
the near completion of High Speed 2 and the resulting increased
competitiveness in the UK market.
In the Middle East and Africa, both year-on-year revenue and profit were
negatively impacted by the prior year comparative benefitting from work on The
Line at NEOM. The Trojena project at NEOM commenced at the start of the year
and has encountered ground condition difficulties resulting in a loss reported
in the period. We are in discussions with the client to remedy the contractual
position. The rest of the Middle East region performed well. Overall, the
Middle East and Africa region (including NEOM) declined in underlying
operating profit by £14.0m in constant currency.
We completed the exit of our business in South Africa at the end of the first
half, which recorded a modest profit in the period prior to sale.
We continue to actively monitor our European portfolio whilst seeking to
maintain and extend our position organically in our core markets.
The EME order book at the end of the period was £367.3m, up 10.7% on a
constant currency basis.
(1)EME performance included the South Africa business up until it was sold at
the end of the first half of 2024.
Asia-Pacific (APAC)
H1 2024 H1 2023 Constant
currency
£m £m
Revenue 187.1 189.2 3.4%
Underlying operating profit 11.1 (4.2) n/a
Underlying operating margin 5.9% (2.2)% +820bps
Order book 142.5 179.2 -20.2%
In APAC, revenues increased 3.4% on a constant currency basis, driven by an
impressive performance in India and, to a lesser extent, ASEAN and Austral in
Australia, partly offset by lower volumes at Keller Australia following the
record performance in the prior period. Underlying operating profit increased
to £11.1m driven by the substantial turnaround at Austral from a significant
loss in the first half of 2023. This was partly offset by the anticipated
lower volumes and corresponding operating profits from Keller Australia as
major infrastructure projects were completed. The Accident Frequency Rate was
0.08 (H1 2023: 0.05) following three reported lost time injuries.
Keller Australia performed well and ahead of our expectations, albeit with
revenues and profits down against the very strong performance in the prior
period. The successful turnaround of Austral continued and the business has
now been stabilised and achieved its margin target. The new management team
are taking a selective and cautious approach to the market, particularly in
the near-shore marine sector. Our India business delivered a record
performance in terms of both revenue and operating profit through successful
execution of projects across the industrial, manufacturing, commercial and
petrochemical sectors and we continue to see good prospects for that business.
In ASEAN, market conditions started to show signs of recovery and performance
improved compared with 2023.
The APAC order book at the end of the period was £142.5m, down 20.2%,
reflecting softer volumes in Austral.
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 2024.
H1 2024 H1 2023
£m £m
Revenue 1,489.8 1,466.3
Underlying operating profit(1) 113.2 67.0
Underlying operating profit %(1) 7.6% 4.6%
Non-underlying items (7.3) (10.4)
Statutory operating profit 105.9 56.6
( )
(1) Details of non-underlying items are set out in note 7 to the interim
condensed consolidated financial statements. Reconciliations to statutory
numbers are set out in note 4 to the interim condensed consolidated financial
statements.
Geographic segmentation
Revenue Underlying operating profit(2) Underlying operating profit margin(2)
£m £m %
H1 2024 H1 2023 H1 2024 H1 2023 H1 2024 H1 2023
Division
North America 883.8 875.8 105.8 65.4 12.0% 7.5%
EME(3) 418.9 401.3 3.0 12.0 0.7% 3.0%
APAC(3) 187.1 189.2 11.1 (4.2) 5.9% (2.2)%
Central - - (6.7) (6.2) - -
Group 1,489.8 1,466.3 113.2 67.0 7.6% 4.6%
( )
(2) Details of non-underlying items are set out in note 7 to the interim
condensed consolidated financial statements.
(3) From 1 January 2024 the Middle East and Africa (MEA) business was
transferred to the Europe Division, creating the Europe and Middle East
Division (EME), and the Asia-Pacific, Middle East and Africa Division became
the Asia-Pacific Division (APAC). The 2023 comparative segmental information
has been updated to reflect this change as it is consistent with the
information reviewed by the Chief Operating Decision Maker.
Revenue
Revenue of £1,489.8m (H1 2023: £1,466.3m) was 1.6% up on 2023. On a constant
currency basis, revenue increased by 4.6%, reflecting volume growth in North
America Foundations and Central Europe, offset by lower revenues at Suncoast
and the NEOM project in Saudi Arabia compared with the prior period.
North America reported a revenue increase of 4.2% (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 and
Middle East, revenue increased by 6.0% (at constant currency), driven by large
infrastructure projects in Central Europe and the Nordics, partly offset by
lower volumes in the Middle East and the UK. Revenue in APAC increased by 3.4%
on a constant currency basis, driven by strong trading in India.
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 4% (H1 2023: 4%) of the Group's revenue for
the half year. The top 10 customers represent 20% of the Group's revenue for
the half year (H1 2023: 18%).
Underlying operating profit
The underlying operating profit of £113.2m was 69.0% ahead of prior year (H1
2023: £67.0m) and on a constant currency basis was 75.5% up on prior year.
North America underlying constant currency operating profit increased by 67.7%
as the improved margin was driven by a strong performance in the foundations
business. Europe and Middle East constant currency operating profit decreased
by 74.4%, largely driven by the non-recurrence of the NEOM project in the
prior period which more than offset the profit benefit of the increased volume
in the division. APAC operating profit increased to £11.1m driven by the
turnaround at Austral.
Share of post-tax results from joint ventures
The Group recognised an underlying post-tax loss of £0.5m in the period (H1
2023: £0.2m profit) from its share of the post-tax results from joint
ventures. In the prior period, the share of the post-tax amortisation charge
of £0.4m arising from the acquisition of NordPile by our joint venture KFS Oy
in 2021 was included as a non-underlying item.
Statutory operating profit
Statutory operating profit, comprising underlying operating profit of £113.2m
(H1 2023: £67.0m) and non-underlying items comprising net costs of £7.3m (H1
2023: £10.4m), increased by 87.1% to £105.9m (H1 2023: £56.6m).
Net finance costs
Net finance costs decreased by 21.5% to £10.6m (H1 2023: £13.5m), as a
result of lower average net debt during the period. Average net borrowings,
excluding IFRS 16 lease liabilities, decreased by 54% in the period from
£244.7m during the half year to 30 June 2023 to £112.4m during the half year
to 30 June 2024, driven by strong operating cash flow.
Taxation
The Group's underlying effective tax rate increased to 26% (H1 2023: 22%). The
increase is as a result of the change in the profit profile of the Group,
particularly the higher profits in the US.
Cash tax paid in the period of £34.4m was a decrease of £4.2m over prior
year (H1 2023: £38.6m). The reduction is due to the fact that the tax
payments in 2023 included a catch up payment for 2022 tax.
The UK government enacted new legislation introducing a global minimum tax of
15% in line with the OECD's Pillar Two rules. The rules applied to Keller from
1 January 2024. The Group has performed an assessment and no additional tax is
expected for most jurisdictions in which we operate. Those where the effective
rate is below 15% are not expected to give rise to a material additional tax
charge.
Non-underlying items
Details of non-underlying items are included in note 7 to the interim
condensed consolidated financial statements.
Non-underlying operating costs
Non-underlying operating costs were £6.6m (H1 2023: £7.2m).
The Group has continued to make progress with the strategic project to
implement a new cloud-based 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 £2.5m (H1 2023: £4.0m).
Exceptional restructuring costs of £3.3m (H1 2023: £3.2m) have been
incurred. This comprises £3.5m in respect of a new Group-wide finance
transformation project, which will move certain finance activities into
internal shared service centres. The non-underlying costs for the period
include headcount restructuring and one-off set-up costs; it does not include
the running costs for the shared service centres. Also included in this
caption is a £0.2m credit from a reduction in a restructuring provision
recognised in a prior period.
In the prior period, restructuring costs of £3.2m reflected the cost of
senior leadership changes in North America and the closure of the Egypt
business.
The Group realised a £0.8m loss on the disposal of the South African
business, which completed on 28 June 2024. There is an earnout arrangement on
the sale, with a potential maximum further £1.3m sale proceeds dependent on
the profitability of the business post-disposal. No receivable for the earnout
has been recognised at the half year.
Amortisation of acquired intangibles
The £1.5m (H1 2023: £3.8m) 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 £0.8m arises from a change in fair
value of the contingent consideration related to the GKM Consultants
acquisition.
The prior year income of £1.0m was 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.
Non-underlying taxation
A non-underlying tax credit of £1.0m (H1 2023: £2.3m) 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 85% to 103.3p (H1 2023:
56.0p) due to the increased operating profit and lower net finance costs.
Statutory diluted earnings per share was 94.7p (H1 2023: 45.0p).
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.
The interim dividend has been rebased to 16.6p (H1 2023: 13.9p) commensurate
with an anticipated full year dividend increase of 5%, following the 20%
increase in 2023.
Net debt flow
The Group's free cash inflow of £88.6m (H1 2023: outflow of £9.1m) compares
favourably to the prior period. Free cash flow has been driven by strong
operating cash flow with interest and tax cash flows broadly in line with the
prior period. The basis of deriving free cash flow is set out below:
H1 2024 H1 2023
£m £m
Underlying operating profit 113.2 67.0
Depreciation and amortisation 54.0 54.1
Underlying EBITDA 167.2 121.1
Non-cash items (3.3) (0.6)
Increase in working capital (2.5) (33.1)
Increase in provisions, retirement benefit liabilities and other non-current 10.0 7.4
liabilities
Net capital expenditure (23.1) (34.4)
Additions to right-of-use assets (14.2) (19.6)
Free cash flow before interest and tax 134.1 40.8
Free cash flow before interest and tax to underlying operating profit 118% 61%
Net interest paid (11.1) (11.3)
Cash tax paid (34.4) (38.6)
Free cash flow 88.6 (9.1)
Dividends paid to shareholders (22.6) (17.7)
Purchase of own shares (6.5) (3.4)
Acquisitions (0.7) -
Business disposals (4.9) -
Non-underlying items (5.0) (9.4)
Right-of-use assets/lease liability modifications (7.4) (4.9)
Foreign exchange movements (3.2) 11.8
Movement in net debt 38.3 (32.7)
Opening net debt (237.3) (298.9)
Closing net debt (199.0) (331.6)
Working capital
Net working capital increased by £2.5m (H1 2023: £33.1m), reflecting
relatively flat inventory levels and offsetting increases in both trade and
other receivables and payables.
An increase in provisions and retirement benefit liabilities improved the
working capital by £10.0m (H1 2023: £7.4m). This reflects an increase in
provisions, as the amounts provided for contract and legal disputes exceeded
the amounts settled. This also excludes the cash outflow on restructuring
provisions and other items included in non-underlying costs which are
presented within non-underlying items in the free cash flow calculation.
Capital expenditure
The Group manages capital expenditure tightly whilst investing in the upgrade
and replacement of equipment where appropriate. Net capital expenditure of
£23.1m (H1 2023: £34.4m) included proceeds from the sale of equipment of
£14.5m (H1 2023: £8.1m). 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 96%
(H1 2023: 108%).
Acquisitions and disposals
Acquisition cash flow of £0.7m in the period relates to an earn-out payment
related to the acquisition of the 35% of our Saudi Arabia subsidiary completed
in 2023.
The business disposal cash outflow of £4.9m relates to the disposal of the
cash held by the South African subsidiary on the disposal date of 28 June
2024. The sale proceeds of £2.3m were received in the first week of July and
are therefore not reflected in the cash flow statement for the half year
period.
Non-underlying cash flows
Non-underlying cash outflow of £5.0m (H1 2023: £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 £2.4m cash
outflow (H1 2023: £3.1m) for ERP costs and £2.6m outflow (H1 2023: £3.3m)
for restructuring costs, including the finance transformation project. The
prior period also included the £3.0m settlement of a historic contract
provision.
Financing facilities and net debt
The Group's total net debt of £199.0m (H1 2023: £331.6m) comprises loans and
borrowings of £296.8m (H1 2023: £344.5m), lease liabilities of £98.7m (H1
2023: £87.5m) net of cash and cash equivalents of £196.5m (H1 2023:
£100.4m).
The Group's term debt and committed facilities include US private placements
of US$75m, US$120m and US$180m which mature in December 2024, August 2030 and
August 2033 respectively. In addition, the Group's multi-currency syndicated
revolving credit facility was refinanced in the period, increasing the
facility from £375m to £400m, with no change in the related covenants. The
revolving credit facility was undrawn at the period end.
At 30 June 2024, the Group had undrawn committed and uncommitted borrowing
facilities totalling £449.2m, comprising £400m of the unutilised revolving
credit facility, £2.1m of other undrawn committed borrowing facilities and
undrawn uncommitted borrowing facilities of £47.1m, as well as cash and cash
equivalents of £196.5m.
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 0.3x (H1 2023: 1.2x), well
within the limit of 3.0x and below 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 0.6x at 30 June 2024 (H1 2023: 1.4x). Underlying EBITDA,
excluding the impact of IFRS 16, to net finance charges for the period to 30
June 2024 was 17.0x (H1 2023: 11.2x).
On an IFRS 16 basis, gearing at 30 June 2024 was 36% (H1 2023: 68%).
The average month-end net debt during the period ended 30 June 2024, excluding
IFRS 16 lease liabilities, was £112.4m (H1 2023: £244.7m) and the Group's
revolving credit facility has been undrawn during the period. 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 2024 the Group had drawn upon uncommitted overdraft facilities of
£2.3m (H1 2023: £5.6m) and had drawn £203.0m of bank guarantee facilities
(H1 2023: £185.4m).
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 2024 were £16.0m (H1 2023: £18.2m). The reduction in the half year
period was driven by cash payments into the schemes. The net defined liability
for the Keller Group Pension Scheme in the UK as at 30 June 2024 is £0.2m (H1
2023: £2.6m), being the minimum funding requirement, calculated using the
remaining 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 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 2024 H1 2023
Closing Average Closing Average
USD 1.26 1.27 1.26 1.23
CAD 1.73 1.72 1.67 1.66
EUR 1.18 1.17 1.16 1.14
AUD 1.90 1.92 1.90 1.83
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
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 2023 Annual Report and Accounts.
Overall, our risk environment has improved slightly during the first half of
2024, and we have only seen some minor changes to the previously disclosed
principal risks and mitigations. Key points to note are:
· New seven-year £400m revolving credit facility secured (initial
five years with two one-year extensions), along with continued strong
operational performance throughout the first half of 2024 are improving the
outlook on our ability to finance the business. Supply chains have on the
whole returned to normal, including a reduction in the risk of both scarcity
of certain materials (steel, cement and energy) and the pricing impact.
· Recruitment issues are beginning to ease across many of our
business units, although there are still some hotspots around specific roles.
The inflationary pressure on pay is also starting to show signs of abating as
the inflation rates return to normal levels in most of our markets. Our focus
on retaining and training key talent across our business units remains.
· Inflation is falling back to near normal levels, with interest
rates looking like they have peaked and now expected to start falling in the
second half of 2024 in many of the markets in which we operate.
The important developments in managing our principal risks during 2024 are as
follows:
· Continued focus on embedding risk management processes across all
parts of the organisation to enable better and more responsive decision
making, supported by the new Governance, Risk Management and Compliance (GRC)
tool.
· Regularly reviewing our principal risks and the mitigating
actions 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.
The key areas of focus for the remainder of 2024 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
timelier and more robust decision-making process.
· Continued roll-out of tailored business unit training on the new
GRC tool.
· We will continue to monitor the following items through the
regular review of risks across the business and any impact they may have on
our principal risks for 2024 year-end reporting:
o Supply chain issues, specifically transportation, where the conflict in
Gaza and the drought impacting the Panama Canal has been putting some pressure
on shipping rates for steel.
o Recruitment and retention issues have eased slightly, but focus will
remain where hotspots exist around specific roles. Increased focus on
retaining and training staff will remain a priority.
o Inflation rates remaining steady, and the potential start of interest
rates beginning to fall, will be closely tracked in the markets in which we
operate. We will also monitor whether this leads to customers beginning to
restart projects that were put on hold.
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 2023 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
5 August 2024
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 2024 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 2024 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 for Conclusion section of this report,
nothing has come to our attention to suggest that management have
inappropriately adopted the going concern basis of accounting or that
management have identified material uncertainties relating to going concern
that are not appropriately disclosed.
This conclusion is based on the review procedures performed in accordance with
this ISRE, however future events or conditions may cause the entity to cease
to continue as a going concern.
Responsibilities of the directors
The directors are responsible for preparing the half-yearly financial report
in accordance with the Disclosure Guidance and Transparency Rules of the
United Kingdom's Financial Conduct Authority.
In preparing the half-yearly financial report, the directors are responsible
for assessing the company's ability to continue as a going concern,
disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either intend to
liquidate the company or to cease operations, or have no realistic alternative
but to do so.
Auditor's Responsibilities for the review of the financial information
In reviewing the half-yearly report, we are responsible for expressing to the
Company a conclusion on the condensed set of financial statements in the
half-yearly financial report. Our conclusion, including our Conclusions
Relating to Going Concern, are based on procedures that are less extensive
than audit procedures, as described in the Basis for Conclusion paragraph of
this report.
Use of our report
This report is made solely to the company in accordance with guidance
contained in International Standard on Review Engagements 2410 (UK) "Review of
Interim Financial Information Performed by the Independent Auditor of the
Entity" issued by the Financial Reporting Council. To the fullest extent
permitted by law, we do not accept or assume responsibility to anyone other
than the company, for our work, for this report, or for the conclusions we
have formed.
Ernst & Young LLP
London
5 August 2024
Interim condensed consolidated income statement (unaudited)
For the half year ended 30 June 2024
30 June 2024 ( )
30 June 2023(1)
Note Underlying Non-underlying items Statutory Underlying Non-underlying items
£m (note 7) £m £m (note 7)
£m £m Statutory
£m
Revenue 4,5 1,489.8 - 1,489.8 1,466.3 - 1,466.3
Operating costs (1,373.3) (6.6) (1,379.9) (1,384.9) (7.0) (1,391.9)
Net impairment loss on trade receivables and contract assets (2.8) - (2.8) (14.6) (0.2) (14.8)
Amortisation of acquired intangible assets - (1.5) (1.5) - (3.8) (3.8)
Other operating income - 0.8 0.8 - 1.0 1.0
Share of post-tax results of joint ventures (0.5) - (0.5) 0.2 (0.4) (0.2)
Operating profit/(loss) 4 113.2 (7.3) 105.9 67.0 (10.4) 56.6
Finance income 3.2 - 3.2 0.6 - 0.6
Finance costs (13.8) - (13.8) (14.1) - (14.1)
Profit/(loss) before taxation 102.6 (7.3) 95.3 53.5 (10.4) 43.1
Taxation 8 (26.7) 1.0 (25.7) (11.8) 2.3 (9.5)
Profit/(loss) for the period 75.9 (6.3) 69.6 41.7 (8.1) 33.6
Attributable to:
Equity holders of the parent 75.8 (6.3) 69.5 41.3 (8.1) 33.2
Non-controlling interests 0.1 - 0.1 0.4 - 0.4
75.9 (6.3) 69.6 41.7 (8.1) 33.6
Earnings per share
Basic 10 104.8p 96.1p 56.7p 45.6p
Diluted 10 103.3p 94.7p 56.0p 45.0p
(1) The prior period columns have been reclassified to show net impairment
loss on trade receivables and contract assets separate from operating costs,
where they were reported in previous periods. The inclusion of this
information is in line with the presentation of the Group's consolidated
financial statements for the year ended 31 December 2023.
Interim condensed consolidated statement of comprehensive income (unaudited)
For the half year ended 30 June 2024
30 June 2024 30 June 2023
£m £m
Profit for the period 69.6 33.6
Other comprehensive income
Items that may be reclassified subsequently to profit or loss:
Exchange movements on translation of foreign operations (5.0) (26.4)
Transfer of translation reserve on disposal of subsidiaries (0.6) -
Cash flow hedge transfers to income statement (0.1) -
Other comprehensive income/(loss) for the period, net of tax (5.7) (26.4)
Total comprehensive income for the period 63.9 7.2
Attributable to:
Equity holders of the parent 63.8 7.0
Non-controlling interests 0.1 0.2
63.9 7.2
Interim condensed consolidated balance sheet (unaudited)
As at 30 June 2024
As at As at As at
30 June 30 June 31 December
2024 2023 2023
Note £m £m £m
Assets
Non-current assets
Goodwill and intangible assets 113.3 128.8 114.6
Property, plant and equipment 11 461.7 473.5 480.2
Investments in joint ventures 3.9 4.1 4.5
Deferred tax assets 45.5 26.2 36.8
Other assets 76.8 72.3 66.8
701.2 704.9 702.9
Current assets
Inventories 91.5 92.8 93.3
Trade and other receivables 796.6 760.5 721.8
Current tax assets 8 6.3 4.3 6.3
Cash and cash equivalents 12 196.5 100.4 151.4
Assets held for sale 13 13.0 1.6 1.6
1,103.9 959.6 974.4
Total assets 1,805.1 1,664.5 1,677.3
Liabilities
Current liabilities
Loans and borrowings (88.6) (30.7) (86.8)
Current tax liabilities 8 (36.2) (34.6) (35.5)
Trade and other payables (615.7) (550.9) (553.6)
Provisions (68.9) (49.6) (59.1)
(809.4) (665.8) (735.0)
Non-current liabilities
Loans and borrowings (306.9) (401.3) (301.9)
Retirement benefit liabilities 14 (16.0) (18.2) (17.7)
Deferred tax liabilities (7.9) (4.7) (7.8)
Provisions (86.4) (72.6) (73.7)
Other liabilities (23.4) (16.8) (23.2)
(440.6) (513.6) (424.3)
Total liabilities (1,250.0) (1,179.4) (1,159.3)
Net assets 555.1 485.1 518.0
Equity
Share capital 16 7.3 7.3 7.3
Share premium account 38.1 38.1 38.1
Capital redemption reserve 16 7.6 7.6 7.6
Translation reserve 24.2 31.7 29.8
Other reserve 16 56.9 56.9 56.9
Hedging reserve 1.6 - 1.7
Retained earnings 416.6 341.0 373.9
Equity attributable to equity holders of the parent 552.3 482.6 515.3
Non-controlling interests 2.8 2.5 2.7
Total equity 555.1 485.1 518.0
( )
Interim condensed consolidated statement of changes in equity (unaudited)
For the half year ended 30 June 2024
Share premium account Capital redemption reserve Non-controlling interests
Share capital Translation reserve Other Hedging Retained earnings Total
reserve reserve equity
£m £m £m £m £m £m £m £m £m
At 31 December 2023 7.3 38.1 7.6 29.8 56.9 1.7 373.9 2.7 518.0
Total comprehensive income for the period - - - (5.6) - (0.1) 69.5 0.1 63.9
Dividends - - - - - - (22.6) - (22.6)
Purchase of own shares for ESOP trust - - - - - - (6.5) - (6.5)
Share-based payments - - - - - - 2.3 - 2.3
At 30 June 2024 7.3 38.1 7.6 24.2 56.9 1.6 416.6 2.8 555.1
Share premium account Capital redemption reserve Non-controlling interests
Share capital Translation reserve Other Hedging reserve Retained earnings Total
reserve equity
£m £m £m £m £m £m £m £m £m
At 31 December 2022 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 - - - - - - (17.7) - (17.7)
Purchase of own shares for ESOP trust - - - - - - (3.4) - (3.4)
Share-based payments - - - - - - 2.2 - 2.2
At 30 June 2023 7.3 38.1 7.6 31.7 56.9 - 341.0 2.5 485.1
Interim condensed consolidated cash flow statement (unaudited)
For the half year ended 30 June 2024
30 June 2024 30 June 2023
Note £m £m
Cash flows from operating activities
Profit before taxation 95.3 43.1
Non-underlying items 7.3 10.4
Finance income (3.2) (0.6)
Finance costs 13.8 14.1
Underlying operating profit 4 113.2 67.0
Depreciation/impairment of property, plant and equipment 53.9 53.9
Amortisation of intangible assets 0.1 0.2
Share of underlying post-tax results of joint ventures 0.5 (0.2)
Profit on sale of property, plant and equipment 11 (6.3) (2.5)
Other non-cash movements (including charge for share-based payments) 2.5 2.1
Operating cash flows before movements in working capital and other underlying 163.9 120.5
items
Decrease in inventories 1.0 27.4
Increase in trade and other receivables (75.9) (38.7)
Increase/(decrease) in trade and other payables 72.4 (21.8)
Increase in provisions, retirement benefit and other non-current liabilities 10.0 7.4
Cash generated from operations before non-underlying items 171.4 94.8
Cash outflows from non-underlying items: contract dispute (0.1) (3.0)
Cash outflows from non-underlying items: ERP costs (2.4) (3.1)
Cash outflows from non-underlying items: restructuring costs (2.5) (3.3)
Cash generated from operations 166.4 85.4
Interest paid (10.2) (9.1)
Interest element of lease rental payments (2.9) (2.4)
Income tax paid (34.4) (38.6)
Net cash inflow from operating activities 118.9 35.3
Cash flows from investing activities
Interest received 2.7 0.6
Proceeds from sale of property, plant and equipment 14.5 8.1
Acquisition of businesses, net of cash acquired (0.7) -
Disposal of businesses 6 (4.9) -
Acquisition of property, plant and equipment 11 (37.6) (42.5)
Net cash outflow from investing activities (26.0) (33.8)
Cash flows from financing activities
Debt issuance costs (3.2) (0.4)
Increase in borrowings - 100.5
Repayment of borrowings (0.1) (61.2)
Payment of lease liabilities (14.1) (14.1)
Purchase of own shares for ESOP trust (6.5) (3.4)
Dividends paid 9 (22.6) (17.7)
Net cash inflow from financing activities (46.5) 3.7
Net increase/(decrease) in cash and cash equivalents 46.4 5.2
Cash and cash equivalents at beginning of period 149.0 94.2
Effect of exchange rate movements (1.2) (4.6)
Cash and cash equivalents at end of period 12 194.2 94.8
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 2024 were authorised for issue in accordance with a resolution
of the Directors on 5 August 2024.
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 2023. The interim report does not
constitute statutory accounts. The financial information for the year ended 31
December 2023 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 2023 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 2024 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 2024, 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 2025. 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
2023 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 £39.7m over the period to
31 December 2025. 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 53.3%,
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
2025, 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 2024, the Group
had undrawn committed and uncommitted borrowing facilities totalling £449.2m,
comprising £400m of the unutilised portion of the revolving credit facility,
£2.1m of other undrawn committed borrowing facilities and undrawn uncommitted
borrowing facilities of £47.1m, as well as cash and cash equivalents of
£196.5m. At 30 June 2024, the Group's net debt to underlying EBITDA ratio
(calculated on an IAS 17 covenant basis) was 0.3x, well within the limit of
3.0x.
Significant accounting judgements, estimates and assumptions
During the half year to 30 June 2024, there have not been any changes in the
significant accounting judgements, estimates and assumptions disclosed in the
2023 Annual Report and Accounts. Consistent with the disclosure in the 2023
Annual Report and Accounts, our assessment over the carrying value of goodwill
in Keller Canada continues to be sensitive to the future successful execution
of business plans designed to improve operating performance by improving
project delivery and revenue growth over the next three years.
3. Foreign currencies
The exchange rates used in respect of principal currencies are:
Average for period Period end
Half year to Half year to Year to As at As at As at
30 June 30 June 31 December 30 June 30 June 31 December
2024 2023 2023 2024 2023 2023
US dollar 1.27 1.23 1.24 1.26 1.26 1.27
Canadian dollar 1.72 1.66 1.68 1.73 1.67 1.69
Euro 1.17 1.14 1.15 1.18 1.16 1.15
Singapore dollar 1.70 1.65 1.67 1.71 1.72 1.68
Australian dollar 1.92 1.83 1.87 1.90 1.90 1.87
4. Segmental analysis
In accordance with IFRS 8, the Group has determined its operating segments
based upon the information reported to the Chief Operating Decision Maker. The
Group comprises of three geographical divisions which have only one major
product or service: specialist geotechnical services. North America, Europe
and Middle East, and Asia-Pacific 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 to 30 June 2024 Half year to 30 June 2023(1)
Revenue Operating profit Revenue Operating profit
£m £m £m £m
North America 883.8 105.8 875.8 65.4
Europe and Middle East 418.9 3.0 401.3 12.0
Asia-Pacific 187.1 11.1 189.2 (4.2)
1,489.8 119.9 1,466.3 73.2
Central items and eliminations - (6.7) - (6.2)
Before non-underlying items 1,489.8 113.2 1,466.3 67.0
Non-underlying items (note 7) - (7.3) - (10.4)
1,489.8 105.9 1,466.3 56.6
As at 30 June 2024
Segment Segment Capital Capital Depreciation Tangible and
assets liabilities employed additions and intangible
£m £m £m £m amortisation(3) assets(4)
£m £m
North America 965.2 (344.4) 620.8 23.9 27.4 348.7
Europe and Middle East 393.0 (290.1) 102.9 9.6 19.0 153.7
Asia-Pacific 169.3 (104.6) 64.7 4.1 7.0 67.8
1,527.5 (739.1) 788.4 37.6 53.4 570.2
Central items and eliminations(2) 277.6 (510.9) (233.3) - 0.6 4.8
1,805.1 (1,250.0) 555.1 37.6 54.0 575.0
As at 30 June 2023(1)
Segment Segment Capital Capital Depreciation Tangible and
assets liabilities employed additions and intangible
£m £m £m £m amortisation(3) assets(4)
£m £m
North America 942.8 (320.9) 621.9 15.5 27.7 340.3
Europe and Middle East 394.7 (223.1) 171.6 16.0 18.7 181.9
Asia-Pacific 189.0 (102.9) 86.1 11.0 7.0 78.8
1,526.5 (646.9) 879.6 42.5 53.4 601.0
Central items and eliminations(2) 138.0 (532.5) (394.5) - 0.7 1.3
1,664.5 (1,179.4) 485.1 42.5 54.1 602.3
As at 31 December 2023(1)
Segment Segment Capital Capital Depreciation Tangible and
assets liabilities employed additions and intangible
£m £m £m £m amortisation(3) assets(4)
£m £m
North America 929.9 (302.9) 627.0 42.1 56.5 347.3
Europe and Middle East 390.6 (271.3) 119.3 36.2 40.5 169.2
Asia-Pacific 162.3 (91.0) 71.3 16.2 14.1 77.5
1,482.8 (665.2) 817.6 94.5 111.1 594.0
Central items and eliminations(2) 194.5 (494.1) (299.6) - 1.1 0.8
1,677.3 (1,159.3) 518.0 94.5 112.2 594.8
1 From 1 January 2024 the Middle East and Africa (MEA) business was
transferred to the Europe Division, creating the Europe and Middle East
Division, and the remaining Asia-Pacific, Middle East and Africa Division
became the Asia-Pacific Division. The 2023 comparative segmental information
has been updated to reflect this change as it is consistent with the
information reviewed by the Chief Operating Decision Maker.
2 ( ) Central items include net debt and tax balances, which are
managed by the Group.
3 ( ) Depreciation and amortisation excludes amortisation of acquired
intangible assets.
4 ( ) Tangible and intangible assets comprise goodwill, intangible
assets and property, plant and equipment.
( )
5. Revenue
The Group's revenue is derived from contracts with customers. In the following
table, revenue is disaggregated by primary geographical market, being the
Group's operating segments (see note 4) and timing of revenue recognition:
Half year to 30 June 2024 Half year to 30 June 2023(1)
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 707.5 176.3 883.8 662.8 213.0 875.8
Europe and Middle East 418.9 - 418.9 401.3 - 401.3
Asia-Pacific 187.1 - 187.1 189.2 - 189.2
1,313.5 176.3 1,489.8 1,253.3 213.0 1,466.3
1 From 1 January 2024 the Middle East and Africa (MEA) business was
transferred to the Europe Division, creating the Europe and Middle East
Division, and the remaining Asia-Pacific, Middle East and Africa Division
became the Asia-Pacific Division. The 2023 comparative segmental information
has been updated to reflect this change.
6. Acquisitions and disposals
Current period
There were no acquisitions during the half year ended 30 June 2024.
Disposals
On 28 June 2024, the Group disposed of its South African operation, being 100%
of the issued share capital of Keller Geotechnics SA (Pty) Ltd, for a cash
consideration received of £2.3m (ZAR55m). A non-underlying loss on disposal
of £0.8m (ZAR19.9m) was recognised. The business disposal cash outflow of
£4.9m relates to the disposal of the cash held by the South African
subsidiary on the disposal date of 28 June 2024. The sale proceeds of £2.3m
were received in the first week of July and are therefore not reflected in the
cash flow statement for the half year period.
7. 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.
As underlying results include the benefits of restructuring programmes and
acquisitions but exclude significant costs (such as major restructuring costs
and the amortisation of acquired intangible assets) they should not be
regarded as a complete picture of the Group's financial performance, which is
presented in its total statutory results. The exclusion of non-underlying
items may result in underlying earnings being materially higher or lower than
total statutory earnings. In particular, when significant impairments and
restructuring charges are excluded, underlying earnings will be higher than
total statutory earnings.
Half year to Half year to
30 June 30 June
2024 2023
£m £m
ERP implementation costs (2.5) (4.0)
Exceptional restructuring costs (3.3) (3.2)
Loss on disposal of business (0.8) -
Non-underlying items in operating costs (6.6) (7.2)
(1.5) (3.8)
Amortisation of acquired intangible assets
Change in fair value of contingent consideration 0.8 -
Gain on disposal of assets held for sale - 1.0
Non-underlying items in other operating income 0.8 1.0
Amortisation of joint venture acquired intangibles - (0.4)
Total non-underlying items in operating profit and before taxation (7.3) (10.4)
Taxation 1.0 2.3
Total non-underlying items after taxation (6.3) (8.1)
Non-underlying items in operating 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. As this is a complex
implementation, project costs are expected to be incurred over a total period
of five years. Non-underlying ERP costs of £2.5m (H1 2023: £4.0m) 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 restructuring costs
Exceptional restructuring costs comprises £3.5m in respect of the Group's
finance transformation project, which will move certain finance activities
into internal shared service centres. This is a Group-wide strategic project.
The costs for the period mainly comprise headcount restructuring and one-off
set-up costs for the shared service centres. Non-underlying costs does not
include operational post-implementation running costs for the shared service
centres. Exceptional restructuring costs also includes a £0.2m credit from a
reduction in a restructuring provision recognised as a non-underlying cost in
a prior period.
In 2023, exceptional restructuring costs comprised £1.7m in the North America
Division and £1.5m in the Europe and Middle East (EME) Division. In North
America the costs reflected the reorganisation of the US Foundations business
and senior leadership changes. In AMEA the costs related to the closure of the
Egypt business. Costs included asset impairments and redundancy costs.
The Group exercises judgement in assessing whether restructuring items should
be classified as non-underlying. This assessment covers the nature of the
item, cause of the occurrence and scale of impact of that item on the reported
performance. Typically, management will categorise restructuring costs
incurred to exit a specific geography as non-underlying. In addition,
restructuring programmes which are incremental to normal operations undertaken
to add value to the business are included in non-underlying items.
Loss on disposal of business
As explained in note 6, the Group disposed of its South African operation in
the period, recognising a loss on disposal of £0.8m.
Amortisation of acquired intangible assets
Amortisation of acquired intangible assets of £1.5m relates to the
amortisation charge on assets acquired in the RECON, Moretrench, GKM and NWF
acquisitions. The amortisation for the half year ended 30 June 2023 of £3.8m
related to the RECON, Moretrench, GKM and NWF acquisitions.
Non-underlying items in other operating income
Change in fair value of contingent consideration
Non-underlying other operating income of £0.8m arises from a change in fair
value of the contingent consideration related to the GKM Consultants
acquisition.
Gain on disposal of assets held for sale
In 2023, the gain on disposal of assets held for sale of £1.0m related
primarily to the sale of assets owned by the now closed Waterway business in
Australia. 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.
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.
8. Taxation
The effective tax rate on the Group's underlying profit of 26% (30 June 2023:
22%) 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 25%. The increase from the H1 2023 rate
is as a result of the change in the profit profile of the Group, particularly
the higher profits in the US.
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 2023 to 30 June 2024 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 the Finance (No 2) Act 2023 on 11 July 2023, which
includes the Pillar Two legislation introducing a multi-national top-up tax
and a domestic minimum top-up tax in line with the minimum 15% rate in the
OECD's Pillar Two rules. The rules apply to the Group for the current
financial year that commenced on 1 January 2024, and as Keller Group plc
qualifies as the ultimate parent entity (UPE) of all the entities consolidated
within its consolidated financial statements, it will be required to calculate
the jurisdictional effective tax rates for the constituent entities within the
Group in accordance with the multi-national top-up tax rules. As the UPE,
Keller Group plc will be required to pay a top-up tax in the UK on any excess
profits, as defined, of its subsidiaries that are taxed at an effective rate
of less than 15%. The UK legislation has also adopted the OECD's transitional
Pillar Two safe harbour rules which, if applicable, will deem the top-up tax
for a jurisdiction to be nil based on available Country-by-Country Reporting
data.
The Group has performed an assessment of the potential exposure to
multi-national top-up tax, and specifically the application of the
transitional safe harbour rules based on the forecasted financial data for FY
2024 and taking into account actual performance. Based on the assessment, the
transitional safe harbour rules apply for most of the jurisdictions in which
the Group operates. There are however a limited number of jurisdictions where
the transitional safe harbour relief may not apply, and the effective tax rate
is below the 15% threshold. The Group does not expect a material exposure to
multi-national top-up taxes for these jurisdictions.
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.
9. Dividends
Ordinary dividends on equity shares:
Half year to Half year to Year to
30 June 30 June 31 December 2023
2024 2023 £m
£m £m
Amounts recognised as distributions to equity holders in the period:
Interim dividend for the year ended 31 December 2023 of 13.9p per share - -
10.0
Final dividend for the year ended 31 December 2023 of 31.3p per share 22.6 - -
Final dividend for the year ended 31 December 2022 of 24.5p per share - 17.7 17.7
22.6 17.7 27.7
The 2023 final dividend of £22.6m was paid on 25 June 2024. The 2022 final
dividend of £17.7m was paid on 23 June 2023.
In addition to the above, an interim ordinary dividend of 16.6p per share (30
June 2023: 13.9p) will be paid on 13 September 2024 to shareholders on the
register at 16 August 2024. 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.
10. 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 to Half year to Half year to Half year to
30 June 30 June 30 June 30 June
2024 2023 2024 2023
Profit available for equity holders (£m) 75.8 41.3 69.5 33.2
Weighted average number of shares (m)(1)
Basic number of ordinary shares outstanding 72.3 72.8 72.3 72.8
Effect of dilution from:
Share options and awards 1.1 0.9 1.1 0.9
Diluted number of ordinary shares 73.4 73.7 73.4 73.7
Earnings per share
Basic earnings per share (p) 104.8 56.7 96.1 45.6
Diluted earnings per share (p) 103.3 56.0 94.7 45.0
( )
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.
11. Property, plant and equipment
Property, plant and equipment comprises owned and leased assets.
As at As at As at
30 June 30 June 31 December 2023
2024 2023 £m
£m £m
Property, plant and equipment - owned 370.0 390.7 394.9
Right-of-use assets - leased 91.7 82.8 85.3
461.7 473.5 480.2
During the period to 30 June 2024, the Group acquired owned property, plant
and equipment with a cost of £37.6m (30 June 2023: £42.5m; 31 December 2023:
£94.3m). Right-of-use asset additions during the period were £14.1m (30 June
2023: £19.6m; 31 December 2023: £33.9m).
Owned assets with a net book value of £8.2m were disposed of during the half
year to 30 June 2024 (30 June 2023: £4.3m; 31 December 2023: £13.0m),
resulting in a net gain on disposal of £6.3m (30 June 2023: £2.5m; 31
December 2023: £4.4m).
12. Analysis of closing net debt
As at As at As at
30 June 30 June 31 December
2024 2023 2023
£m £m £m
Bank balances 112.9 98.7 105.2
Short-term deposits 83.6 1.7 46.2
Cash and cash equivalents in the balance sheet 196.5 100.4 151.4
Bank overdrafts (2.3) (5.6) (2.4)
Cash and cash equivalents in the cash flow statement 194.2 94.8 149.0
Bank and other loans (294.5) (338.9) (294.7)
Lease liabilities (98.7) (87.5) (91.6)
Closing net debt (199.0) (331.6) (237.3)
Cash and cash equivalents include £6.8m (30 June 2023: £6.9m, 31 December
2023: £4.4m) of the Group's share of cash and cash equivalents held by joint
operations, and £nil (30 June 2023: £1.1m; 31 December 2023: £1.1m) of
restricted cash which is subject to local country restrictions.
13. Assets held for sale
As at As at As at
30 June 30 June 31 December 2023
2024 2023 £m
£m £m
Assets held for sale 13.0 1.6 1.6
At 30 June 2024, assets held for sale comprised of the Dandenong Yard in
Australia costing £1.5m, various cranes and equipment in Australia costing
£5.0m and various cranes and equipment in Saudi Arabia costing £6.5m.
14. Retirement benefit liabilities
The Group operates pension schemes in the UK and overseas, including a defined
benefit scheme 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 2023.
The Group's net defined benefit liabilities as at 30 June 2024 were £16.0m
(30 June 2023: £18.2m; 31 December 2023: £17.7m). The reduction in the half
year was driven primarily by the £1.5m contributions from the employer. The
net charge to the income statement was £0.1m (30 June 2023: £0.6m) and no
significant actuarial change was recognised in the comprehensive income during
the period to 30 June 2024 (30 June 2023: £nil).
The net defined liability for the Keller Group Pension Scheme in the UK as at
30 June 2024 was £0.2m (30 June 2023: £2.6m; 31 December 2023: £1.5m),
being the minimum funding requirement, calculated using the agreed
contributions.
A potentially landmark judgment was handed down in the High Court case of
Virgin Media vs NTL Trustees in June 2023. The judge in this case ruled that,
where benefit changes were made without a valid 'section 37' certificate from
the scheme actuary, those changes could be considered void. The Keller Group
Pension Scheme was contracted out of the additional state pension between 1997
and 2016 and made scheme amendments during this period. The scheme trustees
have not yet investigated the scheme's historic documentation to confirm
whether they hold the relevant section 37 certificates. Until this review has
been completed, we are unable to determine the impact of this judgment.
15. 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 30 June 31 December
2024 2023 2023
£m £m £m
Financial assets measured at fair value through profit or loss
Non-qualifying deferred compensation plan 22.0 20.0 20.5
Financial assets measured at amortised cost
Trade receivables 593.3 575.0 583.1
Contract assets 135.2 138.8 90.9
Cash and cash equivalents 196.5 100.4 151.4
Financial liabilities at fair value through profit or loss
Contingent consideration payable (8.5) (0.9) (10.0)
Forward contracts (0.3) - (0.3)
Financial liabilities measured at amortised cost
Deferred consideration payable (0.6) (0.9) (0.7)
Trade payables (199.7) (181.6) (155.5)
Contract liabilities (119.6) (93.3) (90.9)
Bank and other loans (296.8) (344.5) (297.1)
Lease liabilities (98.7) (87.5) (91.6)
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 2024.
On 29 August 2023, the Group acquired the 35% interest in the voting shares of
Keller Turki Company Limited. A contingent consideration is payable annually
until 2027, dependent on the qualifying revenue generated by the business for
each of those years. During the period to 30 June 2024, £0.7m contingent
consideration was paid.
The contingent consideration relating to the acquisition of GKM Consultants
Inc. of £0.8m was released during the period.
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 2023 for further information on the
non-qualifying deferred compensation plan.
16. Share capital and reserves
As at As at As at
30 June 30 June 2023 31 December 2023
2024 £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
(30 June 2023 and 31 December 2023: 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 2024, the total number of shares held in treasury was 123,153 (30
June 2023: 323,133; 31 December 2023: 323,133).
During the period to 30 June 2024, 422,863 ordinary shares were purchased by
the Keller Group Employee Benefit Trust (30 June 2023: 500,000), to be used to
satisfy future obligations of the company under the Keller Group plc Long Term
Incentive Plan, and 250,736 shares were utilised to satisfy the obligation in
the period (30 June 2023: 515,119). This brings the total number of ordinary
shares held by the Keller Group Employee Benefit Trust to 709,298 (30 June
2023: 537,171). The cost of the market purchases in the period was £6.5m (30
June 2023: £3.4m).
17. Related party transactions
Transactions between the parent, its subsidiaries and joint operations, which
are related parties, have been eliminated on consolidation.
There are no other material related party transactions.
18. 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 2023 results of overseas operations into
sterling at the 2024 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 7. A reconciliation between the
2023 underlying result to the 2023 constant currency result is shown below and
compared to the underlying 2024 performance:
Revenue by segment
Statutory Statutory Impact of exchange movements Constant Statutory Constant
2024 2023(1) 2023 currency change currency
2023 change
£m £m £m £m % %
North America 883.8 875.8 (27.9) 847.9 +1% +4%
Europe and Middle East 418.9 401.3 (6.2) 395.1 +4% +6%
Asia-Pacific 187.1 189.2 (8.3) 180.9 -1% +3%
Group 1,489.8 1,466.3 (42.4) 1,423.9 +2% +5%
Underlying operating profit by segment
Underlying Underlying Impact of exchange movements Constant Underlying Constant
2024 2023(1) 2023 currency change currency
2023 change
£m £m £m £m % %
North America 105.8 65.4 (2.3) 63.1 +62% +68%
Europe and Middle East 3.0 12.0 (0.3) 11.7 -75% -74%
Asia-Pacific 11.1 (4.2) 0.1 (4.1) n/a n/a
Central items (6.7) (6.2) - (6.2) +8% +8%
Group 113.2 67.0 (2.5) 64.5 +69% +76%
1 From 1 January 2024 the Middle East and Africa (MEA) business was
transferred to the Europe Division, creating the Europe and Middle East
Division, and the remaining Asia-Pacific, Middle East and Africa Division
became the Asia-Pacific Division. The 2023 comparative segmental information
has been updated to reflect this change as it is consistent with the
information reviewed by the Chief Operating Decision Maker.
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 30 June
2024 2023
£m £m
Underlying operating profit 113.2 67.0
Depreciation and impairment of owned property, plant and equipment 39.0 39.3
Depreciation and impairment of right-of-use assets 14.9 14.6
Amortisation of intangible assets 0.1 0.2
Underlying EBITDA 167.2 121.1
Non-underlying items in operating costs (6.6) (7.2)
Non-underlying items in other operating income 0.8 1.0
EBITDA 161.4 114.9
EBITDA (IAS 17 covenant basis)
30 June 30 June
2024 2023
£m £m
Underlying operating profit 113.2 67.0
Depreciation and impairment of owned property, plant and equipment 39.0 39.3
Depreciation and impairment of right-of-use assets 14.9 14.6
Legacy IAS 17 operating lease charges (17.2) (16.7)
Amortisation of intangible assets 0.1 0.2
Underlying EBITDA 150.0 104.4
Non-underlying items in operating costs (6.6) (7.2)
Non-underlying items in other operating income 0.8 1.0
EBITDA 144.2 98.2
( )
Net finance costs
30 June
2024 30 June
2023
£m £m
Finance income (3.2) (0.6)
Finance costs 13.8 14.1
Net finance costs (statutory) 10.6 13.5
Finance charge on lease liabilities(1) (2.9) (2.5)
Lender covenant adjustments 0.1 -
Net finance costs (IAS 17 covenant basis) 7.8 11.0
1( ) Excluding legacy IAS 17 finance leases.
Net capital expenditure
30 June 30 June 31 December
2024 2023 2023
£m £m £m
Acquisition of property, plant and equipment 37.6 42.5 94.3
Acquisition of intangible assets - - 0.2
Proceeds from sale of property, plant and equipment (14.5) (8.1) (20.9)
Net capital expenditure(1) 23.1 34.4 73.6
( )
1 ( ) Net capital expenditure excludes right-of-use assets.
Net debt
30 June 30 June 31 December
2024 2023 2023
£m £m £m
Current loans and borrowings 88.6 30.7 86.8
Non-current loans and borrowings 306.9 401.3 301.9
Cash and cash equivalents (196.5) (100.4) (151.4)
Net debt (statutory) 199.0 331.6 237.3
Lease liabilities(1) (98.3) (87.0) (91.1)
Net debt (IAS 17 covenant basis) 100.7 244.6 146.2
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 30 June 2023
2024 2023 £m
£m £m
Net debt 199.0 331.6 237.3
Underlying EBITDA (last 12 months) 339.2 235.9 293.1
Leverage ratio (x) 0.6 1.4 0.8
IAS 17 covenant basis 31 December
30 June 30 June 2023
2024 2023 £m
£m £m
Net debt 100.7 244.6 146.2
Underlying EBITDA (last 12 months) 304.9 206.5 259.3
Leverage ratio (x) 0.3 1.2 0.6
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 30 June 2023
2024 2023 £m
£m £m
Net debt (statutory) 199.0 331.6 237.3
Net assets 555.1 485.1 518.0
Gearing 36% 68% 46%
Free cash flow
The calculation of free cash flow is set out in the Chief Financial Officer's
section of the Strategic report and is reconciled to movements in the
consolidated cash flow statement and other movements in net debt as set out
below.
31 December
30 June 30 June 2023
2024 2023 £m
£m £m
Net cash inflow from operating activities 118.9 35.3 197.0
Net cash outflow from investing activities (26.0) (33.8) (70.7)
Exclude: 0.1 3.0 3.7
Cash inflows from non-underlying items - contract dispute
Cash inflows from non-underlying items - ERP costs 2.4 3.1 7.5
Cash inflows from non-underlying items - restructuring costs 2.5 3.3 1.2
Acquisition of subsidiaries, net of cash acquired 0.7 - 0.2
Disposal of subsidiaries 4.9 - (1.3)
Include: (14.2) (19.6) (33.9)
Increase in net debt from new leases
Increase in net debt from amortisation of deferred finance costs (0.7) (0.4) (0.5)
Free cash flow 88.6 (9.1) 103.2
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