KELLER GROUP PLC

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Keller : Update on Trading, Strategic Progress and Declaration of Interim Dividend

11/19/2020 | 02:13am
Update on Trading, Strategic Progress and Declaration of Interim Dividend

Posted: 19 Nov 20

Keller Group plc ('Keller' or 'the Group'), the world's largest geotechnical specialist contractor, today issues an update on the Group's trading for the period ended 31 October 2020, its strategic progress and the declaration of an interim dividend.

Keller Group plc ('Keller' or 'the Group'), the world's largest geotechnical specialist contractor, today issues an update on the Group's trading for the period ended 31 October 2020, its strategic progress and the declaration of an interim dividend.

Highlights

  • We expect to outperform current market expectations for 2020, with full year performance at similar levels to 2019 despite the disruptive impact of COVID-19
  • Financing and liquidity remain strong with net debt to EBITDA leverage further reduced to 0.8x
  • Execution of our strategy continues with the creation of a new, more focused, Europe division
  • The Board declares an interim dividend of 12.6p, the same level as 2019
  • Our expectations for 2021 remain unchanged

Health and Safety

As always, the health and safety of our employees is at the forefront of everything we do and as a result of our constant focus we have experienced a continued improvement in this area. In respect of the ongoing challenges posed by COVID-19, the guidance and support we are providing to our employees continues to follow World Health Organisation guidelines, supplemented by local authority guidance in the regions in which we operate, as well as our own Company specific protocols. This approach has enabled us to continue to execute work, wherever the local regulatory regime allows, in a safe and productive manner.

Trading Update

The Group expects to outperform current market expectations for 2020 as a result of better than expected trading in the second half to date, specifically in North America, with full year performance now anticipated to be at similar levels to 2019. Whilst the Group's Q2 performance was adversely impacted by a period of restricted access to sites as a result of COVID-19, this has not been repeated in the second half. The impact of the pandemic is now more notably evident in logistical challenges and a softening level of order intake, albeit the order book remains robust.

In North America, operational efficiency has been better than anticipated in the second half, despite the disruptive logistical impact of COVID-19. We have continued to benefit from the re-organisation of the North American foundations business from incremental revenue from new products in new markets, cost savings and more efficient use of resources. As anticipated, Suncoast, the Group's post-tension business which mainly serves the residential construction market, is being negatively impacted by recent additional tariffs on imported steel strand, Suncoast's main raw material, which will reduce margins in its high-rise business in the near to medium term. The order book overall provides good revenue coverage through to the end of the year. However, as previously indicated, we continue to see a softening in order intake as well as deferrals of projects already in the order book, which will impact 2021.

EMEA trading was mixed with the impact of extended holiday shutdowns in Q3 exaggerated by COVID-19, partly offset by the benefits of new project awards. Our businesses in Continental Europe are largely operational, although our businesses in the Middle East, Africa and Latin America continue to be impacted by COVID-19 restrictions. The EMEA order book remains firm for the remainder of 2020 and we remain suitably cautious looking ahead to 2021 with order intake slowing.

In APAC, trading remains healthy and the division is returning to near normal levels, with activity improving in Singapore and Australia. The Cape Lambert project in the Pilbara, Australia, continues to make progress. The APAC order book remains solid to the end of the year. Tendering activity and enquiries remain strong and project cancellations have been minimal, although we have seen the award and commencement dates of some projects deferred into 2021.

Financing and Liquidity

As reported at our interim results on 4 August 2020, at 28 June 2020, our net debt (on a bank covenant IAS 17 basis) was £155m, equating to net debt to EBITDA leverage ratio of 0.9x compared to our covenant limit of 3.0x. On the same bank covenant IAS 17 basis net debt at 31 October 2020 was £142m and leverage was 0.8x. We have revised our medium term target net debt to EBITDA ratio range from 1.0x-1.5x to 0.5x-1.5x.

The Group has access to substantial borrowing facilities and retains a significant level of available liquidity. As at 31 October 2020, the Group had undrawn committed and uncommitted borrowing facilities totalling £648m, comprising £269m of the unutilised portion of the Group's £375m revolving credit facility, which has recently been extended by one year to November 2025, £17m of other undrawn committed borrowing facilities and undrawn uncommitted borrowing facilities of £362m, as well as cash and cash equivalents of £84m.

Undrawn uncommitted facilities include an investment grade £300m tranche under the Covid Corporate Financing Facility (CCFF), confirmed as available to us by the Bank of England in June 2020 and which become committed only at point of drawing. The Bank of England has announced that the CCFF scheme will close to the issue of new funds on 23 March 2021. We have not drawn and do not expect to draw on the CCFF.

Strategic Progress

We have continued to implement our revised strategy, focusing our resources on those markets and activities where customers value our skills and expertise, where we can achieve mutual benefits and deliver an appropriate level of financial return. Despite the impact of COVID-19 we have made good progress in the rationalisation of our geographic presence and exiting from certain non-core activities.

In line with our strategy, and as already announced, this year we have successfully exited from Brazil and have substantially completed the rationalisation of Franki Africa and its integration into our Middle East operations, forming a new Middle East and Africa business unit. More recently we have exited two further non-core EMEA businesses, Wannenwetsch, a specialist high-pressure water blasting business based in Germany and Colcrete Eurodrill, an equipment manufacturer, based in the UK. Exit from the Chile and Peru markets has been delayed by COVID-19 but will be completed in the first half of 2021 concluding our phased withdrawal from South America.

Our newly formed Middle East and Africa business will combine with APAC, with effect from 1 January 2021, to create an Asia-Pacific, Middle East and Africa (AMEA) division. This will bring together under one management team all of our businesses in developing geographies and which have similar market characteristics and customers, with a greater focus on large contracts, particularly in the resources sector. The EMEA division will become our Europe division, which like the North America division, will comprise of larger, more functionally self-sufficient business units that benefit from established market positions in sustainable markets.

As a result of the rationalisation and simplification of EMEA, the more focused Europe division will no longer need a divisional headquarters the size it is currently, and consequently we will establish a divisional headquarters using a similar model to that already successfully implemented in the APAC division. The rightsizing of the Europe divisional headquarters will give rise to a non-underlying restructuring charge in the current year and will reduce our operating costs in the future.

The new Europe division will be headed by Jim De Waele, as President Europe, and Mark Hooper, as Chief Financial Officer Europe, both appointments will be effective from 1 January 2021. Jim, a geotechnical engineer, has over 30 years of industry experience and was most recently our Group Strategy and Business Development Director having managed one of Keller's major European businesses for over a decade previously. Mark joined Keller in 2019 as Group Financial Controller and was Group Chief Financial Officer on an interim basis for twelve months to October 2020. The new management team will support the Group in its strategic endeavour to progressively develop our focused, high quality businesses in Europe.

Dividend

The Board fully recognises the importance of dividends to shareholders and, as announced in our trading update on 16 June 2020 and reiterated in the Company's Interim results on 4 August 2020, has continued to keep the payment of a 2020 interim dividend under review. The Board has decided that it would be both prudent and appropriate to declare an interim dividend of 12.6p per share, the same level as in 2019. The 2020 interim dividend will be paid on 18 December 2020 to shareholders on the register at close of business on 27 November 2020. The continuation of dividend payments during 2020 reflects the financial strength of the Group, its significant liquidity position, positive trading during the second half of the year and the longer-term confidence in the performance of the business.

Board Development

As announced on 3 September 2020, David Burke was appointed Chief Financial Officer as of 12 October 2020, joining the Board and Executive Committee. David joined Keller from J. Murphy & Sons Ltd, a leading international specialist engineering and construction company, where he had been Chief Financial Officer since 2016. He has a track record of driving business performance and change in the construction and services sectors across varied cultures and geographies including Europe, the Middle East, the Americas and Asia.

Outlook

As a result of higher than anticipated operational momentum in the second half, specifically in North America, we expect to outperform current market expectations for 2020, with the full year performance anticipated to be at similar levels to that of the prior year. As previously indicated, we continue to see a softening in order intake, albeit overall the order book remains robust. Given the late cycle nature of our business and uncertain global macroeconomic environment, our expectations for 2021 remain unchanged.

Keller Group plc will announce full year results for 2020 at 7am on 9 March 2021.

For further information, please contact:

Keller Group plc

www.keller.com
020 7616 7575

Michael Speakman, Chief Executive Officer
David Burke, Chief Financial Officer
Caroline Crampton, Group Head of Investor Relations

FTI Consulting
Nick Hasell / Matthew O'Keeffe

020 3727 1340

Notes to editors:
Keller is the world's largest geotechnical specialist contractor providing a wide portfolio of advanced foundation and ground improvement techniques used across the entire construction sector. With around 10,000 staff and operations across six continents, Keller tackles an unrivalled 7,000 projects every year, generating annual revenue of more than £2bn.

Cautionary statements:
This document contains certain 'forward looking statements' with respect to Keller's financial condition, results of operations and business and certain of Keller's plans and objectives with respect to these items. Forward looking statements are sometimes, but not always, identified by their use of a date in the future or such words as 'anticipates', 'aims', 'due', 'could', 'may', 'should', 'expects', 'believes', 'intends', 'plans', 'potential', 'reasonably possible', 'targets', 'goal' or 'estimates'. By their very nature forward-looking statements are inherently unpredictable, speculative and involve risk and uncertainty because they relate to events and depend on circumstances that will occur in the future. There are a number of factors that could cause actual results and developments to differ materially from those expressed or implied by these forward-looking statements. These factors include, but are not limited to, changes in the economies and markets in which the group operates; changes in the regulatory and competition frameworks in which the group operates; the impact of legal or other proceedings against or which affect the group; and changes in interest and exchange rates. For a more detailed description of these risks, uncertainties and other factors, please see the Risk Management approach and Principal Risks 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: 549300QO4MBL43UHSN10. Announcement classification: 2.2 Inside information. The person responsible for making this announcement is Kerry Porritt, Group Company Secretary and Legal Advisor

Disclaimer

Keller Group plc published this content on 19 November 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 19 November 2020 07:12:01 UTC

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