TIDMKLR
RNS Number : 8195H
Keller Group PLC
01 August 2023
1 August 2023
Keller Group plc
Interim Results for the half year ended 30 June 2023
Keller Group plc ('Keller' or the 'Group'), the world's largest
geotechnical specialist contractor, announces its results for the
half year ended 30 June 2023.
Record H1 performance; positive H2 outlook; dividend
increased
H1 2023 H1 2022(1) Constant currency
GBPm GBPm % change % change
-------- ----------- -----------
Revenue 1,466.3 1,333.4 +10% +6%
Underlying operating profit(2) 67.0 42.3 +58% +50%
Underlying operating profit margin(2) 4.6% 3.2% +140bps n/a
Underlying diluted earnings per share(2) 56.0p 37.9p +48%
Free cashflow before interest and tax 40.8 (41.6)
Net debt (bank covenant IAS 17 basis)(3) 244.6 194.0 +26%
Dividend per share 13.9p 13.2p +5%
Statutory operating profit 56.6 30.4 +86%
Statutory profit before tax 43.1 25.4 +70%
Net cash inflow/(outflow) from operating activities 35.3 (12.7)
Statutory diluted earnings per share 45.0p 24.9p +81%
Statutory net debt (IFRS 16 basis) 331.6 277.7 +19%
----------------------------------------------------- -------- ----------- ----------- ------------------
(1) Restated for prior period accounting error arising from the
financial reporting fraud at Austral as detailed in note 3 to the
interim condensed consolidated financial statements.
(2) Underlying operating profit and underlying diluted earnings
per share are non-statutory measures which provide readers of this
Announcement with a balanced and comparable view of the Group's
performance by excluding the impact of non-underlying items, as
disclosed in note 8 to the interim condensed consolidated financial
statements.
(3) Net debt is presented on a lender covenant basis excluding
the impact of IFRS 16 as disclosed within the adjusted performance
measures in the interim condensed consolidated financial
statements.
Highlights
-- Record first half performance in revenue and underlying profit
-- Revenue of GBP1,466.3m, up 6% (at constant currency),
demonstrating the benefit of our diverse and resilient revenue
streams
-- Record first half underlying operating profit of GBP67.0m, up
50% (at constant currency), with an increased underlying operating
profit margin of 4.6% (H1 2022: 3.2%). Performance driven by
improved performance at North America Foundations and a strong
margin performance at Suncoast, offset by losses associated with
the closeout of legacy projects at Austral and a more competitive
pricing environment due to market conditions in Europe
-- Underlying diluted EPS of 56.0p, up 48%, with growth in
earnings moderated by higher finance costs
-- Statutory diluted EPS of 45.0p, up 81%
-- Strong recovery in free cash flow before interest and tax of
GBP40.8m, benefitting from the increased underlying profits and the
improved working capital performance
-- Net debt of GBP244.6m, up 26%, impacted by the timing of US
tax payments. Net debt/EBITDA leverage ratio of 1.2x (H1 2022(1) :
1.2x)
-- Strong order book of GBP1.5bn which underpins performance in the second half of the year
-- Overall accident frequency rate decreased to 0.09 from 0.10
injuries per 100,000 hours worked
-- Interim dividend increased by 5% to 13.9p (H1 2022: 13.2p),
reflecting strong performance and confidence in both the second
half and our longer-term prospects
Michael Speakman, Chief Executive Officer, said:
"Keller delivered a record performance in the first half,
largely driven by management actions to drive performance in our
North American Foundations business and strong profitability at
Suncoast, together with a number of large projects. Accordingly,
performance will be more evenly weighted between the first and
second half of the year. The continued momentum in the business,
together with our strong order book underpins the Board's
confidence in the full year expectations which remain unchanged.
The underlying strength of the Group's performance provides
confidence in our longer-term prospects and is reflected in the
Board's decision to increase the interim dividend by 5% for the
first half, continuing our 29-year track record of maintained or
improved dividend payments."
For further information, please contact:
Keller Group plc www.keller.com
Michael Speakman, Chief Executive
Officer 020 7616 7575
David Burke, Chief Financial Officer
Caroline Crampton, Group Head of
Investor Relations
FTI Consulting
Nick Hasell 020 3727 1340
Matthew O'Keeffe
A webcast and presentation for investors and analysts will be
held at 09.00am BST on 1 August 2023 , at Investec Bank plc, 30
Gresham Street, London EC2V 7QP
RSVP: connie.gibson@fticonsulting.com
The webcast replay will be available later the same day on
demand
https://www.investis-live.com/keller/649ae6ac9b8a600d00174000/klrt
Conference call: Accessing the telephone replay:
Participants joining by telephone: A recording will be available until
UK (Local): 020 4587 0498 8 August 2023
UK (Toll-free): 0800 358 1035 UK: 020 3936 3001
UK (Toll-free): 0808 304 5227
Participant access code: 004656
Access code: 350651
Notes to editors:
Keller is the world's largest geotechnical specialist contractor
providing a wide portfolio of advanced foundation and ground
improvement techniques used across the entire construction sector.
With around 10,000 staff and operations across five continents,
Keller tackles an unrivalled 6,000 projects every year, generating
annual revenue of nearly GBP3bn.
Cautionary statements:
This document contains certain 'forward-looking statements' with
respect to Keller's financial condition, results of operations and
business and certain of Keller's plans and objectives with respect
to these items. Forward-looking statements are sometimes, but not
always, identified by their use of a date in the future or such
words as 'anticipates', 'aims', 'due', 'could', 'may', 'should',
'expects', 'believes', 'intends', 'plans', 'potential', 'reasonably
possible', 'targets', 'goal' or 'estimates'. By their very nature,
forward-looking statements are inherently unpredictable,
speculative and involve risk and uncertainty because they relate to
events and depend on circumstances that will occur in the future.
There are a number of factors that could cause actual results and
developments to differ materially from those expressed or implied
by these forward-looking statements. These factors include, but are
not limited to, changes in the economies and markets in which the
Group operates; changes in the regulatory and competition
frameworks in which the Group operates; the impact of legal or
other proceedings against or which affect the Group; and changes in
interest and exchange rates. For a more detailed description of
these risks, uncertainties and other factors, please see the
Principal risks and uncertainties section of the Strategic report
in the Annual Report and Accounts. All written or verbal
forward-looking statements, made in this document or made
subsequently, which are attributable to Keller or any other member
of the Group, or persons acting on their behalf, are expressly
qualified in their entirety by the factors referred to above.
Keller does not intend to update these forward-looking statements.
Nothing in this document should be regarded as a profits forecast.
This document is not an offer to sell, exchange or transfer any
securities of Keller Group plc or any of its subsidiaries and is
not soliciting an offer to purchase, exchange or transfer such
securities in any jurisdiction. Securities may not be offered, sold
or transferred in the United States absent registration or an
applicable exemption from the registration requirements of the US
Securities Act of 1933 (as amended).
LEI number: 549300QO4MBL43UHSN10. Classification: 1.2 (Half
yearly financial reports).
Adjusted performance measures
In addition to statutory measures, a number of adjusted
performance measures (APMs) are included in this Interim
Announcement to assist investors in gaining a clearer understanding
and balanced view of the Group's underlying results and in
comparing performance. These measures are consistent with how
business performance is measured internally.
The APMs used include underlying operating profit, underlying
earnings before interest, tax, depreciation and amortisation,
underlying net finance costs and underlying earnings per share,
each of which are the equivalent statutory measure adjusted to
eliminate the amortisation of acquired intangibles and other
significant items which are exceptional by their size and/or are
non-trading in nature, including amortisation of acquired
intangibles, goodwill impairment, restructuring costs and other
non-trading amounts, including those relating to acquisitions and
disposals. Net debt (bank covenant IAS 17 basis) is provided as a
key measure for measuring bank covenant compliance and is
calculated as the equivalent statutory measure adjusted to exclude
the additional lease liabilities relating to the adoption of IFRS
16. Free cash flow before interest and tax is provided as a metric
to reflect operating cash flow including capital expenditure, it is
reconciled in the net debt flow table in the Chief Financial
Officer's review . Further underlying constant exchange rate
measures are given which eliminate the impact of currency movements
by comparing the current measure against the comparative restated
at this year's actual average exchange rates. The Chief Financial
Officer's review includes the main drivers of changes in underlying
operating profit for the period, which reconciles to the constant
currency change in underlying operating profit by division, which
is set out in the adjusted performance measures section in this
Announcement. Where APMs are given, these are compared to the
equivalent measures in the prior year.
APMs are reconciled to the statutory equivalent, where
applicable, in the adjusted performance measures section in this
Announcement.
GROUP OVERVIEW
Financial performance
The Group delivered an exceptionally strong first half with a
record performance in revenue and even more notably in underlying
operating profit.
Reported revenue of GBP1,466.3m was up 6% on the prior period on
a constant currency basis, driven by a strong performance in North
America Foundations, a robust performance in Keller Australia and
the NEOM project in Saudi Arabia, offset by lower revenues at
Suncoast and at RECON.
First half underlying operating profit of GBP67.0m was 50%
higher on a constant currency basis, primarily driven by North
America Foundations as a result of an increased focus on both
project execution and commercial discipline, the benefit of larger
and more profitable contracts in the automotive sector, and
temporary higher margins at Suncoast as the lower steel strand
price gradually took effect. Our profit performance also benefitted
from the first NEOM contract, partly offset by pricing pressure in
some European markets and the close out of loss-making legacy
projects at Austral.
The Group's profitable growth was underpinned by sustainable,
improved cash generation from operations as supply chain issues
abated, with a resulting improved working capital performance.
Net debt at the period end of GBP244.6m was up 26% due to higher
tax and interest payments, equating to a net debt/EBITDA leverage
ratio of 1.2x (H1 2022(1) : 1.2x). We continue to expect a lower
leverage ratio for the 2023 year end and to be well within our
target range of 0.5x - 1.5x.
Operating performance
The Group's continued progress in delivering on its strategy to
be the preferred international geotechnical specialist contractor
generating long-term value for our stakeholders is evident in the
strength of its financial results in the period. Management actions
and overall resilient market demand resulted in record revenue and
operating profit.
In North America, despite a small decline in volume, sustained
improvement in underlying contract performance, improved project
execution and a heightened focus on commercial discipline as well
as the benefit of larger and more profitable contracts in the
automotive sector in our foundations business, together with a
strong performance at Suncoast, saw the division's underlying
operating profit more than double. Supply chain issues that
impacted productivity across the region in the prior period have
abated. Suncoast, the Group's post-tension business, continued to
perform well despite a fall in demand in the residential market.
The volume decline was more than offset by temporary higher margins
as the lower steel strand price gradually takes effect. These
growth drivers were partly offset by reduced volumes in our
Specialty Services business and some legacy contract issues.
Moretrench Industrial, our business that operates in the highly
regulated environmental remediation market, continued to make
progress in the period, while RECON, our geo-environmental and
industrial services company, saw a decline in volume following the
substantial completion of a large project for an LNG plant in the
US Gulf Coast region.
In Europe, despite an increase in revenue, profitability was
impacted by a more competitive pricing environment, a change in
contract mix, a challenging performance in North-East Europe due to
the effects of the war in Ukraine, and by softer demand in the
residential and commercial sectors across the region. We anticipate
an improvement in the second half as we execute more profitable
projects in the pipeline.
In AMEA (Asia-Pacific, Middle East and Africa), Keller Australia
and the Middle East region delivered a strong performance, driven
by the infrastructure sector in Eastern Australia and the
completion of the first works order at NEOM. As previously
indicated, the phasing of the NEOM project remains subject to
variation. We remain in discussions with the client, however there
has been an evolution of the design which in turn has delayed
further work orders. Our current expectation is we should be
awarded a second works order later in the second half. Good
performance in the division was partly offset by the significant
project losses at Austral, following the close out of the legacy
near-shore marine projects and by contract issues elsewhere in the
Middle East. Austral is expected to return to profit in the second
half.
Strategy
The Group continues to successfully implement its strategy to be
the preferred international geotechnical specialist contractor
focused on sustainable markets and attractive projects, generating
long-term value for our stakeholders. Our local businesses leverage
the Group's scale and expertise to deliver engineered solutions and
operational excellence, driving market share leadership in our
selected segments.
Over the last three years, we have made significant progress
rationalising, restructuring and refining the Group's geographic
and service offering to create a more focused and higher quality
portfolio of businesses. We continue to evaluate our portfolio and
potential further incremental rationalisation.
More recently, we have been focusing our efforts on our
operational execution across all our businesses, as evidenced by
recent results, and we expect to make further progress as we
implement the enterprise resource planning (ERP) system, Project
Performance Management (PPM) and several other initiatives. Now we
have established a strong base for our business, we are looking to
grow market share within our existing geographic footprint, through
both organic investment and targeted M&A, and gain the benefits
of operational leverage within our markets.
Safety
Our continued focus on safety has seen our key indicator for
injury - the accident frequency rate - reduce to 0.09 from 0.10,
representing 13 lost time injuries per 100,000 hours worked, in the
first half of the year.
ESG
In 2021 the executive team set ambitious and achievable targets
to achieve net zero by 2050. We will be net zero across all three
emission scopes by 2050; net zero on Scope 2 by 2030, net zero on
Scope 1 by 2040 and net zero by 2050 on Keller originated Scope 3
(as opposed to client originated Scope 3). We have begun
implementing the short, medium and long-term actions required to
achieve these goals.
On Scope 1 this year, we have developed our first electric rig,
the KB0-E. This is currently undergoing testing before it becomes
the next step we take to decarbonise our site operations. On Scope
2, we remain on track for our net zero commitment, with further
reductions in the first half of the year. Energy efficiency audits
and an increased use of solar panels in our maintenance yards all
have long-term carbon and cost savings for our business units. On
Scope 3 operations, we are developing our company car schemes to
encourage the use of lower emission, hybrid and electric vehicles
in our business units. On Scope 3 materials, we continue to train
our engineers and estimators on the sector standard carbon
calculator. This is designed to strengthen our ability to upsell
low carbon solutions to our clients where appropriate.
Interim dividend
Keller has an unbroken record of dividend payments and has
consistently and materially grown its dividend in the 29 years
since listing, clearly demonstrating the Group's ability to
continue to prosper through economic downturns, including both the
global financial crisis and the pandemic. In keeping with the
Group's progressive dividend policy and the strong first half
performance and outlook, the Board has announced a 5% increase in
the interim dividend to 13.9p (2022: 13.2p) payable on 8 September
2023 to shareholders on the register as at 18 August 2023.
Outlook
Keller delivered a record performance in the first half, largely
driven by management actions to drive performance in our North
American Foundations business and strong profitability at Suncoast,
together with a number of large projects. Accordingly, performance
will be more evenly weighted between the first and second half of
the year. The continued momentum in the business, together with our
strong order book underpins the Board's confidence in the full year
expectations which remain unchanged. The underlying strength of the
Group's performance provides confidence in our longer-term
prospects and is reflected in the Board's decision to increase the
interim dividend by 5% for the first half, continuing our 29-year
track record of maintained or improved dividend payments
Operating review
North America
H1 2023 H1 2022 Constant
currency
GBPm GBPm
---------------------- -------- --------
Revenue 875.8 865.7 -3.9%
Underlying operating
profit 65.4 30.1 +105.4%
Underlying operating
margin 7.5% 3.5% +400bps
Order book (1) 979.1 902.9 +8.4%
---------------------- -------- -------- ----------
(1) Comparative order book stated at constant currency.
In North America, revenue was down 3.9%, on a constant currency
basis, with a reduction in trading volume at Suncoast and at RECON.
Underlying operating profit doubled on a constant currency basis to
GBP65.4m, driven by an improved performance in the foundations
business as well as strong margin performance at Suncoast. The
accident frequency rate, our key metric for measuring safety
performance, was stable at 0.07 as a result of four lost time
injuries.
In the foundations business, revenue increased by 10% reflecting
higher activity levels generally. Operating profit grew strongly,
benefitting from the sustained improvement in underlying contract
performance, improved project execution and a heightened focus on
commercial discipline as well as the benefit from larger and more
profitable contracts in the automotive sector. Supply chain issues
that impacted productivity across the region in the prior period
abated. These benefits were partly offset by lower volumes at our
Speciality Services business unit, which we expect to reverse in
the second half, together with some close out issues on legacy
contracts.
Suncoast, the Group's post-tension business, continued to
perform well despite a fall in demand in the residential market.
The volume decline was more than offset by temporary higher margins
as the lower price for steel strand gradually took effect.
Moretrench Industrial, our business that operates in the highly
regulated environmental remediation market, continued to make
progress in the period, while RECON, our geo-environmental and
industrial services company, saw a decline in volume following the
substantial completion of a large project for an LNG plant in the
US Gulf Coast region. We are in advanced discussions on another LNG
project that we anticipate will commence later in the second half,
and we continue to target further LNG opportunities in the
region.
The order book for North America at the period end strengthened
to GBP979.1m, up 8.4% on a constant currency basis.
Europe
H1 2023 H1 2022 Constant
currency
GBPm GBPm
---------------------- -------- --------
Revenue 332.2 297.6 +8.4%
Underlying operating
profit 4.1 13.9 -71.4%
Underlying operating
margin 1.2% 4.7% -350bps
Order book(1) 306.0 389.4 -21.4%
---------------------- -------- -------- ----------
(1) Comparative order book stated at constant currency.
In Europe, revenue increased by 8.4% while underlying operating
profit decreased by 71.4% to GBP4.1m on a constant currency basis.
Whilst cost inflation has stabilised and supply chain issues have
eased, profitability was impacted by a more competitive pricing
environment, a challenging performance in North-East Europe due to
the effects of the war in Ukraine, and by softer demand in the
residential and commercial sectors across the region. Margin has
also been further hampered by the mix of the work completed and the
phasing of major projects. The accident frequency rate reduced to
0.14 from 0.27, representing seven lost time injuries.
Overall, despite challenging construction markets in parts of
Europe, particularly in the residential and commercial sectors,
revenues have held up well and we have successfully secured some
large and profitable infrastructure projects that will benefit
performance in the second half and for which we expect an improved
operating margin.
In the South-East Europe and Nordics business, whilst early
works have been completed on the Tangenvika bridge project in
Norway and at the Södertälje lock project in Sweden, we anticipate
increased volumes in the second half of 2023. In the UK, good
progress continues to be made on the High Speed 2 (HS2) rail
contract, with lower levels of revenue against the prior period
reflecting the phasing of work on the project. Increased volumes
have been achieved in the core UK foundations business albeit
margins have been adversely affected by the mix of work performed.
Our business in Central Europe has seen increased volumes in the
first half and despite some pricing pressure has secured some
important project wins that position it well for the second half of
the year. The North-East Europe trading environment has been
challenging, particularly in Poland, with the war in Ukraine
causing a market slowdown and lower demand. South-West Europe saw
good growth in revenues, but profits were flat with tighter pricing
and margin erosion.
We continue to actively monitor our European portfolio whilst
seeking to maintain and extend our position in certain growth
sectors, such as oil and gas and the energy sector more
broadly.
The Europe order book at the end of the period was GBP306.0m,
down 21.4% on a constant currency basis, reflecting the challenging
market conditions affecting confidence across Europe. The
successful award of some larger project tenders due in the coming
months is expected to improve the order book.
Asia-Pacific, Middle East and Africa (AMEA)
H1 2023 H1 2022(1) Constant
currency
GBPm GBPm
----------------------------- -------- -----------
Revenue 258.3 170.1 +53.8%
Underlying operating profit 3.7 3.2 +10.5%
Underlying operating margin 1.4% 1.9%
Order book (2) 206.2 229.8 -10.3%
----------------------------- -------- ----------- ----------
(1) Restated for prior period accounting error arising from the
financial reporting fraud at Austral.
(2) Comparative order book stated at constant currency.
In AMEA, revenues increased by 53.8% on a constant currency
basis, driven by strong trading in Keller Australia and completion
of the first tranche of works at NEOM in Saudi Arabia. Underlying
operating profit increased to GBP3.7m, driven by the NEOM project
and trading in Keller Australia, offset particularly by losses at
Austral and contract issues elsewhere in the Middle East. The
accident frequency rate was 0.04, reporting two lost time injuries
compared to zero in the prior period.
Keller Australia significantly increased its trading activity
and profitability, particularly in the infrastructure sector.
Tendering levels were high and we anticipate this will continue in
the second half of the year. Our India business performed well in
revenue terms driven by several large projects but with some margin
erosion from legacy contracts. The business overall continues to
experience high tendering levels and has a number of large
industrial infrastructure projects in the pipeline. In the Middle
East region, we completed the first works order at NEOM in the
first quarter. As previously indicated, the phasing of the NEOM
project remains subject to variation. We remain in discussions with
the client, however there has been an evolution of the design which
in turn has delayed further work orders. Our current expectation is
we should be awarded a second works order later in the second half.
Elsewhere in the Middle East, performance was mixed with some
contract issues that will be remediated in the second half. We
continually review our portfolio and have taken the strategic
decision to exit Egypt. The ASEAN business continued to experience
market softness, while we expect an improved trading environment in
the second half. In Austral, some significant losses were incurred
in closing out legacy projects. The new management team has
addressed the remaining issues in the near-shore marine business
and we expect the business to be profitable in the second half.
The AMEA order book at the end of the period was GBP206.2m, down
10.3% on a constant currency basis.
Chief Financial Officer's review
This report comments on the key financial aspects of the Group's
interim results for the half year period ended 30 June 2023.
H1 2023 H1 2022 (1)
GBPm GBPm
---------------------------------- ------- -----------
Revenue 1,466.3 1,333.4
Underlying operating profit(2) 67.0 42.3
Underlying operating profit %(2) 4.6% 3.2%
Non-underlying items (10.4) (11.9)
Statutory operating profit 56.6 30.4
----------------------------------- ------- -----------
(1) Restated for prior period accounting error arising from the
financial reporting fraud at Austral as detailed in note 3 to the
interim financial statements.
(2) Details of non-underlying items are set out in note 8 to the
interim condensed consolidated financial statements.
Reconciliations to statutory numbers are set out in note 5 to the
interim condensed consolidated financial statements.
Geographic segmentation
Revenue Underlying operating profit(3) Underlying operating profit margin(3)
GBPm GBPm %
H1 2023 H1 2022 (1) H1 2023 H1 2022 (1) H1 2023 H1 2022 (1)
-------------- ------- ----------- ------------- ------------------ ------------- -------------------------
Division
North America 875.8 865.7 65.4 30.1 7.5% 3.5%
Europe 332.2 297.6 4.1 13.9 1.2% 4.7%
AMEA 258.3 170.1 3.7 3.2 1.4% 1.9%
Central - (6.2) (4.9) - -
------------------ ------- ----------- ------------- ------------------ ------------- -------------------------
Group 1,466.3 1,333.4 67.0 42.3 4.6% 3.2%
------------------ ------- ----------- ------------- ------------------ ------------- -------------------------
(3) Details of non-underlying items are set out in note 8 of the
interim condensed consolidated financial statements.
Prior year restatement
As disclosed in the 2022 year-end financial statement, the
impact of the previously reported Austral financial reporting fraud
was material. The interim financial statements for the comparative
six months to 26 June 2022 have been restated to show the corrected
amounts.
Revenue
Revenue of GBP1,466.3m (H1 2022(1) : GBP1,333.4m) was 10.0% up
on 2022. On a constant currency basis, revenue increased by 5.8%,
reflecting volume growth in Europe and AMEA, offset by a reduction
in North America.
North America reported a revenue decrease of 3.9% (at constant
currency), positively impacted by the higher activity levels in
foundations which was offset by a reduction in trading volume at
Suncoast and RECON. In Europe, revenue increased by 8.4% (at
constant currency), although business activity levels were mixed
across the geographies. Revenue in AMEA increased by 53.8% on a
constant currency basis, driven by strong trading in Keller
Australia and completion of the first tranche of works at NEOM in
Saudi Arabia.
We have a diversified spread of revenues across geographies,
product lines, market segments and end customers. Customers are
generally market specific and the largest customer represented less
than 4% (H1 2022(1) : 5%) of the Group's revenue for the half year.
The top 10 customers represent 18% of the Group's revenue for the
half year (H1 2022(1) : 18%).
Underlying operating profit
The underlying operating profit of GBP67.0m was 58.3% ahead of
prior year (H1 2022(1) : GBP42.3m) and on a constant currency basis
was 49.8% up on prior year.
North America underlying constant currency operating profit
increased by over 100% as the improved margin was driven by a
strong performance in the foundations business as well as higher
profitability at Suncoast . Europe constant currency operating
profit decreased by 71.4%, impacted by a change in contract mix, a
challenging performance in North-East Europe due to the regional
tensions, and by softer demand in the residential and commercial
sectors across the region. AMEA constant currency operating profit
increased by 10.5% through the contribution of strong performance
at Keller Australia and the NEOM project, offset by losses at
Austral.
The table below illustrates the key drivers of the movements, H1
2022 to H1 2023, in the divisional segmental operating profit which
are summarised above:
GBPm
H1 2022 underlying operating profit 42.3
Constant currency FX movement 2.4
------
H1 2022 underlying operating profit at constant currency 44.7
North America Foundations volume 6.8
North America Foundations margin 18.5
Suncoast 10.4
North America other movements (2.1)
------
North America division movement 33.6
Europe volume 4.0
Europe margin (14.3)
------
Europe division movement (10.3)
Keller Australia 6.7
Middle East region including NEOM 7.2
Austral (11.0)
AMEA other movements (2.6)
------
AMEA division movement 0.3
Central items (1.3)
------
H1 2023 underlying operating profit 67.0
------
Share of post-tax results from joint ventures
The Group recognised an underlying post-tax profit of GBP0.2m in
the period (H1 2022: GBP0.9m) from its share of the post-tax
results from joint ventures. The share of the post-tax amortisation
charge of GBP0.4m (H1 2022: GBP0.7m) arising from the acquisition
of NordPile by our joint venture KFS Oy in 2021 is included as a
non-underlying item.
Statutory operating profit
Statutory operating profit, comprising underlying operating
profit of GBP67.0m (H1 2022(1) : GBP42.3m) and non-underlying items
comprising net costs of GBP10.4m (H1 2022: GBP11.9m), increased by
86% to GBP56.6m (H1 2022(1) : GBP30.4m).
Net finance costs
Net finance costs increased by 170% to GBP13.5m (H1 2022:
GBP5.0m), as a result of higher interest rates and a higher average
net debt during the half year. Average net borrowings, excluding
IFRS 16 lease liabilities, increased by 12% in the period from
GBP217.8m during the half year to 26 June 2022 to GBP244.7m during
the half year to 30 June 2023, partially driven by increased US tax
payments.
Taxation
The Group's underlying effective tax rate decreased to 22% (H1
2022(1) : 26%). The reduction from the 2022 restated rate of 26% is
largely due to recognition of the operating loss in Austral for
which no associated tax relief is available in Australia. Australia
is already in an overall loss position and no deferred tax asset is
booked for these losses.
Cash tax paid in the period of GBP38.6m was an increase of
GBP36.2m over prior year (H1 2022: GBP2.4m). The difference is
mainly attributable to the timing in paying the US tax charge for
2022. The Group was awaiting a possible law change on the timing of
deductions for research and development expenditure which has not
materialised. As such, the Group has paid both the full year 2022
US tax charge and the provisional payments for H1 2023 during the
first half of this year, totalling GBP36.7m. Given the US law
change, the Group is expecting to continue to pay higher cash tax
compared to prior years. Further details on tax are set out in note
9 to the interim condensed consolidated financial statements.
The UK government enacted new legislation introducing a global
minimum tax of 15% in line with the OECD's Pillar Two rules. The
rules will apply to Keller from 1 January 2024 and it is expected
that the Pillar Two rules will not have a material impact on the
Group's overall tax charge.
Non-underlying items
Details of non-underlying items are included in note 8 to the
interim condensed consolidated financial statements.
Non-underlying operating costs
Non-underlying operating costs were GBP7.2m (H1 2022:
GBP6.1m).
Exceptional restructuring costs of GBP3.2m (H1 2022: GBP1.2m)
have been incurred during the period, related to senior leadership
changes in North America and the planned exit from Egypt. The prior
year costs primarily related to the scheduled exit from the Ivory
Coast business.
The Group has continued to make progress with the strategic
project to implement a new cloud computing enterprise resource
planning (ERP) system across the Group. Due to the size, nature and
incidence of these costs, they are presented as a non-underlying
item, as they are not reflective of underlying performance of the
Group. As this is a complex implementation, project costs are
expected to be incurred over the next four to five years. The cost
recognised in the first half is GBP4.0m (H1 2022: GBP1.2m).
In the prior period, a GBP3.5m exceptional charge was recognised
related to a provision made for additional costs from a historical
contract dispute. In addition, the prior period included an
impairment charge of GBP0.4m which was recognised in respect of
trade receivables in Ukraine that are not expected to be recovered
due to the ongoing conflict and a credit of GBP0.2m arising from
the change in the fair value of contingent consideration.
Amortisation of acquired intangibles
The GBP3.8m (H1 2022: GBP5.8m) 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 GBP1.0m (H1 2022:
GBP0.7m) comprises the gain on disposal of assets held for sale.
Impairment charges for these assets had previously been charged to
non-underlying items in prior periods and therefore the
corresponding profit on disposal is also recognised as a
non-underlying item. The income in the prior period was the final
contingent consideration receivable of GBP0.7m in relation to the
Wannenwetsch disposal, completed in 2020.
Non-underlying taxation
A non-underlying tax credit of GBP2.3m (H1 2022: GBP2.4m)
relates to the tax benefit on non-underlying charges which are
expected to be deductible.
Earnings per share
Underlying diluted earnings per share increased by 47.8% to
56.0p (H1 2022(1) : 37.9p) in line with the increased operating
profit combined with a reduced effective tax rate in the period.
Statutory diluted earnings per share was 45.0p (H1 2022(1) :
24.9p).
Dividend
The Group's dividend policy is to increase the dividend
sustainably whilst allowing the Group to be able to grow or, as a
minimum, maintain the level of dividend through market cycles. The
dividend policy is therefore impacted by the performance of the
Group, which is subject to the Group's principal risks and
uncertainties as well as the level of headroom on the Group's
borrowing facilities, future cash commitments and investment
plans.
Reflecting the financial strength of the Group and the
longer-term confidence in the performance of the business, the
Board has decided to increase the interim dividend by 5% and has
recommended a dividend of 13.9p per share (H1 2022: 13.2p per
share) .
Net debt flow
The Group's free cash outflow of GBP9.1m (H1 2022: outflow of
GBP46.8m) compares favourably to the prior period. Free cash flow
has been impacted by the timing of US tax payments as well as
volume growth in the business and the related increase in working
capital requirements. The basis of deriving free cash flow is set
out below:
H1 2023 H1 2022(1)
GBPm GBPm
------------------------------------------------------------------------------------------ ------- ----------
Underlying operating profit 67.0 42.3
Depreciation and amortisation 54.1 48.5
------------------------------------------------------------------------------------------- ------- ----------
Underlying EBITDA 121.1 90.8
------------------------------------------------------------------------------------------- ------- ----------
Non-cash items (0.6) (1.1)
Increase in working capital (33.1) (85.9)
Increase in provisions, retirement benefit liabilities and other non-current liabilities 7.4 (9.7)
Net capital expenditure (34.4) (23.4)
Additions to right-of-use assets (19.6) (12.3)
Free cash flow before interest and tax 40.8 (41.6)
Free cash flow before interest and tax to underlying operating profit 61% (98%)
------------------------------------------------------------------------------------------- ------- ----------
Net interest paid (11.3) (2.8)
Cash tax paid (38.6) (2.4)
------------------------------------------------------------------------------------------- ------- ----------
Free cash flow (9.1) (46.8)
------------------------------------------------------------------------------------------- ------- ----------
Dividends paid to shareholders (17.6) -
Purchase of own shares (3.4) (1.2)
Acquisitions - (15.6)
Non-underlying items (9.4) (1.7)
Right-of-use assets/lease liability modifications (4.9) (4.4)
Foreign exchange movements 11.7 (14.7)
------------------------------------------------------------------------------------------- ------- ----------
Movement in net debt (32.7) (84.4)
------------------------------------------------------------------------------------------- ------- ----------
Opening net debt (298.9) (193.3)
------------------------------------------------------------------------------------------- ------- ----------
Closing net debt (331.6) (277.7)
------------------------------------------------------------------------------------------- ------- ----------
(1) Restated for prior period accounting error arising from the
financial reporting fraud at Austral as detailed in note 3 to the
interim financial statements.
Working capital
Working capital in the period compares favourably to the prior
year, where inventory levels and issues associated with the supply
chain resulted in a significant outflow. The working capital
performance in H1 2023 reflects the increased activity, given the
6% constant currency increase in revenue. The net increase of
GBP33.1m (H1 2022: GBP85.9m) arises despite a favourable working
capital movement in North America as a result of decreased
inventory at Suncoast and the abatement of the supply chain
pressures on payment terms that we saw in the first half last year.
Elsewhere, the working capital was adversely impacted by a change
in the invoicing process at NEOM and the unwind of advance payments
received last year. There was an increase in provisions and
retirement benefits of GBP7.4m (H1 2022: GBP9.7m decrease),
reflecting movements on provisions for contract and disputes.
Capital expenditure
The Group manages capital expenditure tightly whilst investing
in the upgrade and replacement of equipment where appropriate. Net
capital expenditure of GBP34.4m (H1 2022: GBP23.4m) included
proceeds from the sale of equipment of GBP8.1m (H1 2022: GBP3.3m).
The asset replacement ratio, which is calculated by dividing gross
capital expenditure, excluding sales proceeds on disposal of items
of property, plant and equipment and those assets capitalised under
IFRS 16, by the depreciation charge on owned property, plant and
equipment, was 108% (H1 2022: 76%).
Acquisitions and disposals
There were no acquisitions or disposals in the period ended 30
June 2023.
Non-underlying cash flows
Non-underlying cash outflow of GBP9.4m 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
GBP3.1m cash outflow for ERP costs, GBP1.4m outflow for current
period restructuring costs, GBP1.9m outflow for restructuring costs
provided for in a prior period and the GBP3.0m settlement of the
historic contract provision provided for in the prior half year
period.
Financing facilities and net debt
The Group's total net debt of GBP331.6m (H1 2022: GBP277.7m)
comprises loans and borrowings of GBP344.5m (H1 2022: GBP279.4m),
lease liabilities of GBP87.5m (H1 2022: GBP84.1m) net of cash and
cash equivalents of GBP100.4m (H1 2022: GBP85.8m).
The Group's term debt and committed facilities principally
comprise US private placements of US$75m which mature in December
2024, a GBP375m multi-currency syndicated revolving credit facility
which matures in November 2025 and a US$115m bilateral term loan
facility, expiring in November 2024. On 21 June 2023, the Group
signed a note purchase and guarantee agreement regarding the
proposed private placement of US$300m of loan notes, to be split
between seven and ten-year maturities. Subject to the fulfilment of
certain conditions precedent, proceeds to be received in August
2023 will be used to refinance existing debt of the Group and for
general corporate purposes.
At 30 June 2023, the Group had undrawn committed and uncommitted
borrowing facilities totalling GBP237.0m, comprising GBP174.6m of
the unutilised portion of the revolving credit facility, GBP11.8m
of other undrawn committed borrowing facilities and undrawn
uncommitted borrowing facilities of GBP50.6m, as well as cash and
cash equivalents of GBP100.4m.
The most significant covenants in respect of the main borrowing
facilities relate to the ratio of net debt to underlying EBITDA,
underlying EBITDA interest cover and the Group's net worth. The
covenants are required to be tested at the half year and the year
end. The Group operates comfortably within all of its covenant
limits. Net debt to underlying EBITDA leverage, calculated
excluding the impact of IFRS 16, was 1.2x (H1 2022(1) : 1.2x), well
within the limit of 3.0x and within the leverage target of between
0.5x - 1.5x. Calculated on a statutory basis, including the impact
of IFRS 16, net debt to EBITDA leverage was 1.4x at 30 June 2023
(H1 2022: 1.4x). Underlying EBITDA, excluding the impact of IFRS
16, to net finance charges for the period to 30 June 2023 was 11.2x
(H1 2022(1) : 25.6x). This is lower than in prior periods, due to
the impact of higher interest rates on the net finance costs, but
still well above the limit of 4.0x.
On an IFRS 16 basis, gearing at 30 June 2023 was 68% (H1 2022(1)
: 59%).
The average month-end net debt during the period ended 30 June
2023, excluding IFRS 16 lease liabilities, was GBP244.7m (H1 2022:
GBP217.8m) and the minimum headroom during this period on the
Group's main banking facilities was GBP147.2m (H1 2022: GBP275.6m),
in addition to a cash balance at that time of GBP151.2m (H1 2022:
GBP89.4m). The Group had no material discounting or factoring in
place during the period. Given the relatively low value and
short-term nature of the majority of the Group's projects, the
level of advance payments is typically not significant.
At 30 June 2023 the Group had drawn upon uncommitted overdraft
facilities of GBP5.6m (H1 2022: GBP0.5m) and had drawn GBP185.4m of
bank guarantee facilities (H1 2022: GBP165.2m).
Retirement benefit liabilities
The primary defined benefit scheme is in the UK. The Group also
has defined benefit retirement obligations in Germany and Austria
and a number of end of service schemes in the Middle East that
follow the same principles as a defined benefit scheme. The Group's
net defined benefit liabilities as at 30 June 2023 were GBP18.2m
(H1 2022: GBP22.5m). The reduction in the half year period was
driven by an actuarial gain during H2 2022 and cash payments into
the schemes. The net defined liability for the Keller Group Pension
Scheme in the UK as at 30 June 2023 is GBP2.6m (H1 2022: GBP5.4m),
being the minimum funding requirement, calculated using the agreed
contributions.
Currencies
The Group is exposed to both translational and, to a lesser
extent, transactional foreign currency gains and losses through
movements in foreign exchange rates as a result of its global
operations. The Group's primary currency exposures are US dollar,
Canadian dollar, euro, Singapore dollar and Australian dollar.
As the Group reports in sterling and conducts the majority of
its business in other currencies, movements in exchange rates can
result in significant currency translation gains or losses. This
has an effect on the primary statements and associated balance
sheet metrics, such as net debt and working capital.
A large proportion of the Group's revenues are matched with
corresponding operating costs in the same currency. The impacts of
transactional foreign exchange gains or losses are consequently
mitigated and are recognised in the period in which they arise.
The following exchange rates applied during the current and
prior half year period:
H1 2023 H1 2022
Closing Average Closing Average
------- ------- ------- -------
USD 1.26 1.23 1.23 1.30
CAD 1.67 1.66 1.58 1.65
EUR 1.16 1.14 1.16 1.19
SGD 1.72 1.65 1.70 1.77
AUD 1.90 1.83 1.77 1.81
------- ------- ------- -------
Principal risks
The Group operates globally across many geotechnical market
sectors and in varied geographic markets. The Group's performance
and prospects may be affected by risks and uncertainties in
relation to the industry and the environments in which it
undertakes its operations around the world. The Group is alert to
the challenges of managing risk and has systems and procedures in
place across the Group to identify, assess and mitigate major
business risks.
The principal risks and uncertainties are as follows:
-- Financial risks
o The inability to finance our business;
-- Market risk
o A rapid downturn in our markets;
-- Strategic risk
o The failure to procure new contracts, losing market share;
o Ethical misconduct and non-compliance with regulations;
o Inability to maintain our technological product advantage;
o Climate change;
-- Operational risk
o Service or solution failure;
o The ineffective execution of our projects;
o Supply chain partners fail to meet the Group's operational
expectation and contractual obligations (including capacity,
competency, quality, financial stability, safety, environmental,
social and ethical);
o Causing a serious injury or fatality to an employee or member
of the public;
o Not having the right skills to deliver and the risk of
potential disruption in the business operations;
o Cyber risk.
The Group's principal risks and uncertainties have not
materially changed in the first half of 2023. For a more detailed
description of these risks, uncertainties and other factors, please
see the Principal risks and uncertainties section of the Strategic
report in the 2022 Annual Report and Accounts.
The important developments in managing our principal risks
during 2023 are as follows:
-- Continued focus on embedding risk management processes across
all parts of the organisation, supported by the roll out of a new
Governance, Risk Management and Compliance (GRC) tool;
-- Regularly reviewing our principal risks and the mitigating
activities we are taking to ensure they accurately reflect the
risks we are facing and how we are responding to those risks;
-- Continuing to review risk trends, including the consideration
of risks across the medium and long term via horizon scanning and
reviewing emerging legislation to ascertain how they may impact
Keller;
-- Continuing to embed the requirements of the Task Force on
Climate-related Financial Disclosures (TCFD) into business-as-usual
activities, including development of appropriate scenarios and
supporting metrics; and
-- Maintaining focus on managing the continued impact of high
inflation and rising interest rates.
The key areas of focus for the remainder of 2023 are as
follows:
-- Finalising and developing further appropriate scenario
analyses and identifying relevant metrics to support them, needed
to comply with TCFD requirements. These scenarios will also lead to
continued improvement in understanding of the longer-term strategic
impact and in turn support a more timely and robust decision-making
process;
-- We will be closely monitoring the following items through the
regular review of risks across the business and any impact they may
have on our principal risks for 2023 year-end reporting:
o Supply chain issues, including both scarcity of certain
materials (steel, cement and energy) and the pricing impact of
this, continue to show signs of easing. While pressure remains as a
result of the geopolitical uncertainty following Russia's invasion
of Ukraine, it is being better managed as supply chains fully
recover from the COVID-19 impact and demand cools slightly across
North America and Europe as interest rate increases take
effect.
o Energy security did not materialise as a major issue last
winter due to both the actions taken and the mild weather. However,
with the level of gas supplies from Russia still being restricted,
focus will increase again on planning and preparation in Europe as
it moves into autumn and winter.
o Recruitment and retention are still being impacted by the
inflationary pressure in many of our markets, but with the
exception of site personnel, is easing slightly. Increased focus on
retaining and training staff.
o Persistently high inflation, while beginning to fall,
alongside still-rising interest rates is having a negative effect
in many of the markets in which we operate. We are seeing some
customers now beginning to delay investment decisions on new
projects, while they evaluate the trajectory of both.
Statement of Directors' responsibilities
The interim financial report is the responsibility of, and has
been approved by, the Directors. The Directors are responsible for
preparing the interim financial report in accordance with the
Disclosure Guidance and Transparency Rules (DTR) of the United
Kingdom's Financial Conduct Authority (FCA).
The DTR require that the accounting policies and presentation
applied to the half yearly figures must be consistent with those
applied in the latest published annual accounts, except where the
accounting policies and presentation are to be changed in the
subsequent annual accounts, in which case the new accounting
policies and presentation should be followed, and the changes and
the reasons for the changes should be disclosed in the interim
report, unless the FCA agrees otherwise.
The Directors confirm that to the best of their knowledge the
condensed set of financial statements, which have been prepared in
accordance with UK adopted International Accounting Standard 34,
'Interim Financial Reporting', give a true and fair view of the
assets, liabilities, financial position and profit and loss of the
Group, as required by DTR 4.2 and in particular include a fair
review of:
-- The important events that have occurred during the first half
of the financial year and their impact on the interim condensed
consolidated set of financial statements as required by DTR
4.2.7R;
-- The principal risks and uncertainties for the remaining half
of the year as required by DTR 4.2.7R; and
-- Related party transactions that have taken place in the first
half of the current financial year and changes in the related party
transactions described in the previous annual report that have
materially affected the financial position or performance of the
Group during the first half of the current financial year as
required by DTR 4.2.8R.
The Directors of Keller Group plc are listed in the 2022 Annual
Report and Accounts.
Approved by the Board of Keller Group plc and signed on its
behalf by:
Michael Speakman
Chief Executive Officer
David Burke
Chief Financial Officer
31 July 2023
INDEPENT REVIEW REPORT TO KELLER GROUP PLC
Conclusion
We have been engaged by the Company to review the condensed set
of financial statements in the Interim Results of Keller Group plc
for the half-year period ended 30 June 2023 which comprises the
condensed consolidated income statement, condensed consolidated
statement of comprehensive income, condensed consolidated balance
sheet, condensed consolidated statements of changes in equity,
condensed consolidated cash flow statement, and the related
explanatory notes. We have read the other information contained in
the Interim Results and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the condensed set of financial statements.
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the interim period ended 30
June 2023 is not prepared, in all material respects, in accordance
with UK adopted International Accounting Standard 34 and the
Disclosure Guidance and Transparency Rules of the United Kingdom's
Financial Conduct Authority.
Basis for Conclusion
We conducted our review in accordance with International
Standard on Review Engagements 2410 (UK) "Review of Interim
Financial Information Performed by the Independent Auditor of the
Entity" (ISRE) issued by the Financial Reporting Council. A review
of interim financial information consists of making enquiries,
primarily of persons responsible for financial and accounting
matters, and applying analytical and other review procedures. A
review is substantially less in scope than an audit conducted in
accordance with International Standards on Auditing (UK) and
consequently does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in
an audit. Accordingly, we do not express an audit opinion.
As disclosed in note 2, the annual financial statements of the
group are prepared in accordance with UK adopted international
accounting standards. The condensed set of financial statements
included in this half-yearly financial report has been prepared in
accordance with UK adopted International Accounting Standard 34,
"Interim Financial Reporting".
Conclusions Relating to Going Concern
Based on our review procedures, which are less extensive than
those performed in an audit as described in the Basis of Conclusion
section of this report, nothing has come to our attention to
suggest that management have inappropriately adopted the going
concern basis of accounting or that management have identified
material uncertainties relating to going concern that are not
appropriately disclosed.
This conclusion is based on the review procedures performed in
accordance with this ISRE, however future events or conditions may
cause the entity to cease to continue as a going concern.
Responsibilities of the directors
The directors are responsible for preparing the half-yearly
financial report in accordance with the Disclosure Guidance and
Transparency Rules of the United Kingdom's Financial Conduct
Authority.
In preparing the half-yearly financial report, the directors are
responsible for assessing the company's ability to continue as a
going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless the
directors either intend to liquidate the company or to cease
operations, or have no realistic alternative but to do so.
Auditor's Responsibilities for the review of the financial
information
In reviewing the half-yearly report, we are responsible for
expressing to the Company a conclusion on the condensed set of
financial statements in the half-yearly financial report. Our
conclusion, including our Conclusions Relating to Going Concern,
are based on procedures that are less extensive than audit
procedures, as described in the Basis for Conclusion paragraph of
this report.
Use of our report
This report is made solely to the company in accordance with
guidance contained in International Standard on Review Engagements
2410 (UK) "Review of Interim Financial Information Performed by the
Independent Auditor of the Entity" issued by the Financial
Reporting Council. To the fullest extent permitted by law, we do
not accept or assume responsibility to anyone other than the
company, for our work, for this report, or for the conclusions we
have formed.
Ernst & Young LLP
Reading
31 July 2023
Interim condensed consolidated income statement (unaudited)
For the half year period ended 30 June 2023
26 June Restated)
30 June 2023 2022 ( (1)
-------------------------- ---- ------------------------------------- ---------- -------------- -----------
Non-underlying Non-underlying
items items
Underlying (note 8) Statutory Underlying (note 8) Statutory
Note GBPm GBPm GBPm GBPm GBPm GBPm
-------------------------- ---- ---------- -------------- --------- ---------- -------------- -----------
Revenue 5,6 1,466.3 - 1,466.3 1,333.4 - 1,333.4
Operating costs 13 (1,399.5) (7.2) (1,406.7) (1,292.0) (6.1) (1,298.1)
Amortisation of acquired
intangible assets - (3.8) (3.8) - (5.8) (5.8)
Other operating income - 1.0 1.0 - 0.7 0.7
Share of post-tax results
of joint ventures 0.2 (0.4) (0.2) 0.9 (0.7) 0.2
-------------------------- ---- ---------- -------------- --------- ---------- -------------- -----------
Operating profit/(loss) 5 67.0 (10.4) 56.6 42.3 (11.9) 30.4
Finance income 0.6 - 0.6 0.3 - 0.3
Finance costs (14.1) - (14.1) (5.3) - (5.3)
-------------------------- ---- ---------- -------------- --------- ---------- -------------- -----------
Profit/(loss) before
taxation 53.5 (10.4) 43.1 37.3 (11.9) 25.4
Taxation 9 (11.8) 2.3 (9.5) (9.7) 2.4 (7.3)
-------------------------- ---- ---------- -------------- --------- ---------- -------------- -----------
Profit/(loss) for the
period 41.7 (8.1) 33.6 27.6 (9.5) 18.1
-------------------------- ---- ---------- -------------- --------- ---------- -------------- -----------
Attributable to:
Equity holders of the
parent 41.3 (8.1) 33.2 27.8 (9.5) 18.3
Non-controlling interests 0.4 - 0.4 (0.2) - (0.2)
-------------------------- ---- ---------- -------------- --------- ---------- -------------- -----------
41.7 (8.1) 33.6 27.6 (9.5) 18.1
-------------------------- ---- ---------- -------------- --------- ---------- -------------- -----------
Earnings per share
Basic 11 56.7p 45.6p 38.3p 25.2p
Diluted 11 56.0p 45.0p 37.9p 24.9p
-------------------------- ---- ---------- -------------- --------- ---------- -------------- -----------
The 26 June 2022 condensed consolidated income statement has been
(1) restated in respect of the correction of prior period errors arising
from the fraud at Austral, as outlined in note 3 to the interim financial
statements.
Interim condensed consolidated statement of comprehensive income
(unaudited)
For the half year period ended 30 June 2023
30 June
2023 26 June 2022
(Restated)(1)
GBPm GBPm
--------------------------------------------------------- -------- --------------
Profit for the period 33.6 18.1
--------------------------------------------------------- -------- --------------
Other comprehensive income
Items that may be reclassified subsequently to profit
or loss:
Exchange movements on translation of foreign operations (26.2) 40.9
Exchange movements on translation of non-controlling
interests (0.2) 0.2
Items that will not be reclassified subsequently to
profit or loss:
Remeasurements of defined benefit pension schemes - 2.2
Tax on remeasurements of defined benefit pension schemes - (0.4)
--------------------------------------------------------- -------- --------------
Other comprehensive income/(loss) for the period, net
of tax (26.4) 42.9
--------------------------------------------------------- -------- --------------
Total comprehensive income for the period 7.2 61.0
--------------------------------------------------------- -------- --------------
Attributable to:
Equity holders of the parent 7.0 61.0
Non-controlling interests 0.2 -
--------------------------------------------------------- -------- --------------
7.2 61.0
--------------------------------------------------------- -------- --------------
The 26 June 2022 condensed consolidated statement of comprehensive
(1) income has been restated in respect of the correction of prior period
errors arising from the fraud at Austral, as outlined in note 3 to
the interim financial statements.
Interim condensed consolidated balance sheet (unaudited)
As at 30 June 2023
As at As at
As
at 26 June 31 December
30
June 2022 2022
2023 (Restated)(1) (Restated)(2)
Note GBPm GBPm GBPm
--------------------------------------- ---- ---------- ---------- --------------- ---------------
Assets
Non-current assets
Goodwill and intangible assets 128.8 149.1 137.9
Property, plant and equipment 12 473.5 468.1 486.5
Investments in joint ventures 4.1 4.4 4.4
Deferred tax assets 26.2 9.9 15.1
Other assets 72.3 111.4 60.8
--------------------------------------------- ---------- ---------- --------------- ---------------
704.9 742.9 704.7
-------------------------------------------- ---------- ---------- --------------- ---------------
Current assets
Inventories 92.8 107.3 124.4
Trade and other receivables 13 760.5 729.5 764.6
Current tax assets 9 4.3 9.5 5.0
Cash and cash equivalents 14 100.4 85.8 101.1
--------------------------------------------- ---------- ---------- --------------- ---------------
Assets held for sale 15 1.6 1.0 2.8
--------------------------------------------- ---------- ---------- --------------- ---------------
959.6 933.1 997.9
-------------------------------------------- ---------- ---------- --------------- ---------------
Total assets 1,664.5 1,676.0 1,702.6
--------------------------------------------- ---------- ---------- --------------- ---------------
Liabilities
Current liabilities
Loans and borrowings (30.7) (29.0) (34.2)
Current tax liabilities 9 (34.6) (23.5) (53.2)
Trade and other payables (550.9) (610.6) (585.6)
Provisions (49.6) (59.9) (52.7)
--------------------------------------------- ---------- ---------- --------------- ---------------
(665.8) (723.0) (725.7)
-------------------------------------------- ---------- ---------- --------------- ---------------
Non-current liabilities
Loans and borrowings (401.3) (334.5) (365.8)
Retirement benefit liabilities 16 (18.2) (22.5) (20.8)
Deferred tax liabilities (4.7) (31.5) (5.3)
Provisions (72.6) (76.5) (66.9)
Other liabilities (16.8) (15.3) (21.3)
--------------------------------------------- ---------- ---------- --------------- ---------------
(513.6) (480.3) (480.1)
-------------------------------------------- ---------- ---------- --------------- ---------------
Total liabilities (1,179.4) (1,203.3) (1,205.8)
--------------------------------------------- ---------- ---------- --------------- ---------------
Net assets 485.1 472.7 496.8
--------------------------------------------- ---------- ---------- --------------- ---------------
Equity
Share capital 18 7.3 7.3 7.3
Share premium account 38.1 38.1 38.1
Capital redemption reserve 18 7.6 7.6 7.6
Translation reserve 31.7 53.0 57.9
Other reserve 18 56.9 56.9 56.9
Retained earnings 341.0 307.0 326.7
--------------------------------------------- ---------- ---------- --------------- ---------------
Equity attributable to equity holders
of the parent 482.6 469.9 494.5
Non-controlling interests 2.5 2.8 2.3
--------------------------------------------- ---------- ---------- --------------- ---------------
Total equity 485.1 472.7 496.8
--------------------------------------------- ---------- ---------- --------------- ---------------
(1) The 26 June 2022 condensed consolidated balance sheet has
been restated in respect of the correction of prior period errors
arising from the fraud at Austral as outlined in note 3 to the
interim financial statements.
(2) The 31 December 2022 condensed consolidated balance sheet
has been restated in respect of prior period business combination
measurement adjustments, as outlined in notes 3 and 7 to the
interim financial statements.
Interim condensed consolidated statement of changes in equity
(unaudited)
For the half year period ended 30 June 2023
Share Capital
Share premium redemption Translation Other Retained Non-controlling Total
capital account reserve reserve reserve earnings interests equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
--------------- --------- --------- ----------- ------------- ---------- ---------- ---------------- ---------
At 31 December
2022(2) 7.3 38.1 7.6 57.9 56.9 326.7 2.3 496.8
Total
comprehensive
income for
the
period - - - (26.2) - 33.2 0.2 7.2
Dividends - - - - - (17.6) - (17.6)
Purchase of
own
shares for
ESOP
trust - - - - - (3.4) - (3.4)
Share-based
payments - - - - - 2.1 - 2.1
At 30 June
2023 7.3 38.1 7.6 31.7 56.9 341.0 2.5 485.1
--------------- --------- --------- ----------- ------------- ---------- ---------- ---------------- ---------
Share Capital
Share premium redemption Translation Other Retained Non-controlling Total
capital account reserve reserve reserve earnings interests equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
--------------- --------- --------- ----------- ------------- ---------- ---------- ---------------- ---------
At 31 December
2021
(Restated)
(1) 7.3 38.1 7.6 12.1 56.9 303.2 2.8 428.0
--------------- --------- --------- ----------- ------------- ---------- ---------- ---------------- ---------
Total
comprehensive
income for
the
period - - - 40.9 - 20.1 - 61.0
Dividends - - - - - (16.8) - (16.8)
Purchase of
own
shares for
ESOP
trust - - - - - (1.2) - (1.2)
Share-based
payments - - - - - 1.7 - 1.7
At 26 June
2022 7.3 38.1 7.6 53.0 56.9 307.0 2.8 472.7
--------------- --------- --------- ----------- ------------- ---------- ---------- ---------------- ---------
(1) Retained earnings as at 31 December 2021 have been restated
in respect of the correction of prior period errors arising from
the fraud at Austral as outlined in note 3 to the interim financial
statements.
(2) Retained earnings as at 31 December 2022 have been restated
in respect of prior period measurement adjustments, as outlined in
notes 3 and 7 to the interim financial statements.
Interim condensed consolidated cash flow statement
(unaudited)
For the half year period ended 30 June 2023
30 June 26 June
2023 2022
(Restated)(1)
Note GBPm GBPm
------------------------------------------------------------ ---- ----- --------- ---------------
Cash flows from operating activities
Profit before taxation 43.1 25.4
Non-underlying items 10.4 11.9
Finance income (0.6) (0.3)
Finance costs 14.1 5.3
------------------------------------------------------------------ ----- --------- ---------------
Underlying operating profit 5 67.0 42.3
Depreciation/impairment of property, plant and equipment 53.9 48.2
Amortisation of intangible assets 0.2 0.3
Share of underlying post-tax results of joint ventures (0.2) (0.9)
Profit on sale of property, plant and equipment 12 (2.5) (2.5)
Other non-cash movements (including charge for share-based
payments) 2.1 2.3
Operating cash flows before movements in working
capital and other underlying items 120.5 89.7
(Increase)/decrease in inventories 27.4 (28.3)
Increase in trade and other receivables (38.7) (117.7)
Increase/(decrease) in trade and other payables (21.8) 60.1
Increase/(decrease) in provisions, retirement benefit
and other non-current liabilities 7.4 (9.7)
------------------------------------------------------------------ ----- --------- ---------------
Cash generated from operations before non-underlying
items 94.8 (5.9)
Cash outflows from non-underlying items: contract
dispute (3.0) -
Cash outflows from non-underlying items: ERP costs (3.1) (0.2)
Cash outflows from non-underlying items: restructuring
costs (3.3) (1.5)
Cash generated from operations 85.4 (7.6)
Interest paid (9.1) (0.9)
Interest element of lease rental payments (2.4) (1.8)
------------------------------------------------------------------ ----- --------- ---------------
Income tax paid (38.6) (2.4)
------------------------------------------------------------------ ----- --------- ---------------
Net cash inflow/(outflow) from operating activities 35.3 (12.7)
------------------------------------------------------------------ ----- --------- ---------------
Cash flows from investing activities
Interest received 0.6 0.3
Proceeds from sale of property, plant and equipment 8.1 3.3
Acquisition of businesses, net of cash acquired 7 - (15.6)
Acquisition of property, plant and equipment 12 (42.5) (26.6)
Acquisition of other intangible assets - (0.1)
Net cash outflow from investing activities (33.8) (38.7)
------------------------------------------------------------------ ----- --------- ---------------
Cash flows from financing activities
Increase in borrowings 100.1 68.2
Cash flows from derivative instruments - 0.2
Repayment of borrowings (61.2) (1.7)
Payment of lease liabilities (14.1) (15.4)
Purchase of own shares for ESOP trust (3.4) (1.2)
Dividends paid 10 (17.6) -
------------------------------------------------------------------ ----- --------- ---------------
Net cash inflow from financing activities 3.8 50.1
------------------------------------------------------------------ ----- --------- ---------------
Net increase/(decrease) in cash and cash equivalents 5.3 (1.3)
------------------------------------------------------------------ ----- --------- ---------------
Cash and cash equivalents at beginning of period 94.2 81.8
Effect of exchange rate movements (4.7) 4.8
------------------------------------------------------------------ ----- --------- ---------------
Cash and cash equivalents at end of period 14 94.8 85.3
------------------------------------------------------------------ ----- --------- ---------------
The 26 June 2022 condensed consolidated cash flow statement has been
(1) restated in respect of the correction of prior period errors arising
from the fraud at Austral, as outlined in note 3 to the interim financial
statements.
1. Corporate information
The interim condensed consolidated financial statements of
Keller Group plc and its subsidiaries (collectively, the 'Group')
for the half year period ended 30 June 2023 were authorised for
issue in accordance with a resolution of the Directors on 31 July
2023.
Keller Group plc (the 'company') is a limited company,
incorporated and domiciled in the United Kingdom, whose shares are
publicly traded on the London Stock Exchange. The registered office
is located at 2 Kingdom Street, London W2 6BD. The Group is
principally engaged in the provision of specialist geotechnical
engineering services.
2. Basis of preparation
The condensed financial statements included in this interim
financial report have been prepared in accordance with UK adopted
International Accounting Standard 34, 'Interim Financial
Reporting'. They do not include all of the information required for
full annual financial statements and should be read in conjunction
with the consolidated financial statements of the Group as at and
for the year ended 31 December 2022. The interim report does not
constitute statutory accounts. The financial information for the
year ended 31 December 2022 does not constitute the Group's
statutory financial statements for that period as defined in
section 435 of the Companies Act 2006 but is instead an extract
from those financial statements. The Group's financial statements
for the year ended 31 December 2022 have been delivered to the
Registrar of Companies. The Auditor's Report on those financial
statements contained an unqualified opinion, did not draw attention
to any matters by way of emphasis and did not contain any statement
under section 498 of the Companies Act 2006. The annual financial
statements for the year ended 31 December 2023 will be prepared in
accordance with UK adopted international accounting standards.
The Group has not early adopted any new standard, interpretation
or amendment that has been issued but is not yet effective. Several
amendments apply for the first time in 2023, but do not have an
impact on the interim condensed consolidated financial statements
of the Group.
Finance (No 2) Bill 2023, that includes Pillar Two legislation,
was substantively enacted on 20 June 2023 for IFRS purposes. The
Group has applied the exemption from recognising and disclosing
information about deferred tax assets and liabilities related to
Pillar Two income taxes as required by the amendments to IAS 12
International Tax Reform-Pillar Two Model Rules which was issued in
May 2023.
Going concern
As part of the interim going concern review, management ran a
series of downside scenarios on the latest forecast profit and cash
flow projections to assess covenant headroom against available
funding facilities for the period to 31 December 2024. This is a
period of at least 12 months from when the interim financial
statements are authorised for issue and align with the period in
which the Group's banking covenants are tested.
This process involved constructing scenarios to reflect the
Group's current assessment of its principal risks, including those
that would threaten its business model, future performance,
solvency or liquidity. The principal risks and uncertainties
modelled by management align with those disclosed within the 2022
Annual Report and Accounts.
The following severe but plausible downside assumptions were
modelled:
-- Rapid downturn in the Group's markets resulting in up to a 10% decline in revenues.
-- Failure to procure new contracts while maintaining
appropriate margins reducing profits by 0.5% of revenue.
-- Ineffective execution of projects reducing profits by 1% of revenue.
-- A combination of other principal risks and trading risks
materialising together reducing profits by up to GBP97.7m over the
period to 31 December 2024. These risks include changing
environmental factors, costs of ethical misconduct and regulatory
non-compliance, occurrence of an accident causing serious injury to
an employee or member of the public, the cost of a product or
solution failure and the impact of a previously unrecorded tax
liability.
-- Deterioration of working capital performance by 5% of six months' sales.
The financial and cash effects of these scenarios were modelled
individually and in combination. The focus was on the ability to
secure or retain future work and potential downward pressure on
margins. Management applied sensitivities against projected
revenue, margin and working capital metrics reflecting a series of
plausible downside scenarios. Against the most negative scenario,
mitigating actions were overlaid. These include a range of
cost-cutting measures and overhead savings designed to preserve
cash flows.
Even in the most extreme downside scenario modelled, including
an aggregation of all risks considered, which showed a decrease in
operating profit of 58.1%. The adjusted projections do not show a
breach of covenants in respect of available funding facilities or
any liquidity shortfall. Consideration was given to scenarios where
covenants would be breached and the circumstances giving rise to
these scenarios were considered extreme and remote.
This process allowed the Board to conclude that the Group will
continue to operate on a going concern basis for the period through
to the end of December 2024, a period of at least 12 months from
when the interim financial statements are authorised for issue.
Accordingly, the interim financial statements are prepared on a
going concern basis. At 30 June 2023, the Group had undrawn
committed and uncommitted borrowing facilities totalling GBP237.0m,
comprising GBP174.6m of the unutilised portion of the revolving
credit facility, GBP11.8m of other undrawn committed borrowing
facilities and undrawn uncommitted borrowing facilities of
GBP50.6m, as well as cash and cash equivalents of GBP100.4m. At 30
June 2023, the Group's net debt to underlying EBITDA ratio
(calculated on an IAS 17 covenant basis) was 1.2x, well within the
limit of 3.0x.
Significant accounting judgements, estimates and assumptions
During the half year period to 30 June 2023, there have not been
any changes in the significant accounting judgements, estimates and
assumptions disclosed in the 2022 Annual Report and Accounts.
Consistent with the disclosure in the 2022 Annual Report and
Accounts, our assessment over the carrying value of goodwill in
Keller Limited continues to be sensitive to the future successful
execution of business plans designed to address the reduction in
revenue, margins and profits from HS2 contracts, schedule to be
completed over the next three years.
3. Prior period restatements
The below restatements were made to the comparative consolidated
income statement, consolidated statement of comprehensive income,
consolidated balance sheet, consolidated statement of changes in
equity and consolidated cash flow statement for 26 June 2022 and 31
December 2022.
Prior period financial reporting fraud
As disclosed in the 2022 Annual Report and Accounts, following
an internal management operational review at the Austral business
in Australia, the Group identified a historical overstatement of
revenue and profit relating to the half year period ended 26 June
2022 and the past three years to 31 December 2021 due to a
financial reporting fraud.
For the 2023 interim report, the comparatives as at 26 June 2022
have been restated.
Prior period business combination measurement adjustment
Under IFRS 3 'Business Combinations' there is a measurement
period of no longer than 12 months in which to finalise the
valuation of the acquired assets and liabilities. During the
measurement period, the acquirer shall retrospectively adjust the
provisional amounts recognised at the acquisition date to reflect
new information obtained about facts and circumstances that existed
as of the acquisition date and, if known, would have affected the
measurement of the amounts recognised as of that date. During the
measurement period, the acquirer shall also recognise additional
assets or liabilities if new information is obtained about facts
and circumstances that existed as of the acquisition date and, if
known, would have resulted in the recognition of those assets and
liabilities as of that date.
In the year to 31 December 2022, the Group acquired Nordwest
Fundamentering AS. Adjustments to the provisional fair values were
made during the measurement period, as set out in note 7. The
impact of the measurement period adjustments has been applied
retrospectively, meaning that the results and financial position
for the year to 31 December 2022 have been restated.
The following tables summarise the impacts on the Group's
financial statements.
Restatement of condensed consolidated income statement for the
period ended 26 June 2022 (statutory results)
26 June 2022 Impact 26 June 2022
Statutory of prior Statutory
(as presented) period error (Restated)
--------------------------------------------
GBPm GBPm GBPm
-------------------------------------------- --------------- ------------- ------------
Revenue 1,337.4 (4.0) 1,333.4
Operating costs (1,294.8) (3.3) (1,298.1)
Amortisation of acquired intangible assets (5.8) - (5.8)
Other operating income 0.7 - 0.7
Share of post-tax results of joint ventures 0.2 - 0.2
--------------------------------------------- --------------- ------------- ------------
Operating profit 37.7 (7.3) 30.4
Finance income 0.3 - 0.3
Finance costs (5.3) - (5.3)
--------------------------------------------- --------------- ------------- ------------
Profit before taxation 32.7 (7.3) 25.4
Taxation (8.3) 1.0 (7.3)
--------------------------------------------- --------------- ------------- ------------
Profit for the period 24.4 (6.3) 18.1
--------------------------------------------- --------------- ------------- ------------
Attributable to:
Equity holders of the parent 24.6 (6.3) 18.3
Non-controlling interests (0.2) - (0.2)
--------------------------------------------- --------------- ------------- ------------
24.4 (6.3) 18.1
-------------------------------------------- --------------- ------------- ------------
Earnings per share
Basic 33.9p (8.7p) 25.2p
Diluted 33.5p (8.6p) 24.9p
--------------------------------------------- --------------- ------------- ------------
Restatement of condensed consolidated income statement for the
period ended 26 June 2022 (underlying results)
26 June 2022 Impact 26 June 2022
Underlying of prior Underlying
(as presented) period error (Restated )
--------------------------------------------
GBPm GBPm GBPm
-------------------------------------------- --------------- ------------- ------------
Revenue 1,337.4 (4.0) 1,333.4
Operating costs (1,288.7) (3.3) (1,292.0)
Amortisation of acquired intangible assets - - -
Other operating income - - -
Share of post-tax results of joint ventures 0.9 - 0.9
--------------------------------------------- --------------- ------------- ------------
Operating profit 49.6 (7.3) 42.3
Finance income 0.3 - 0.3
Finance costs (5.3) - (5.3)
--------------------------------------------- --------------- ------------- ------------
Profit before taxation 44.6 (7.3) 37.3
Taxation (10.7) 1.0 (9.7)
--------------------------------------------- --------------- ------------- ------------
Profit for the period 33.9 (6.3) 27.6
--------------------------------------------- --------------- ------------- ------------
Attributable to:
Equity holders of the parent 34.1 (6.3) 27.8
Non-controlling interests (0.2) - (0.2)
--------------------------------------------- --------------- ------------- ------------
33.9 (6.3) 27.6
-------------------------------------------- --------------- ------------- ------------
Earnings per share
Basic 47.0p (8.7p) 38.3p
Diluted 46.5p (8.6p) 37.9p
--------------------------------------------- --------------- ------------- ------------
Restatement of condensed consolidated statement of comprehensive
income for the period ended 26 June 2022
26 June Impact 26 June
2022 of prior 2022
(as presented) period error (Restated)
GBPm GBPm GBPm
-------------------------------------------------------------------- --------------- ------------- ------------
Profit for the period 24.4 (6.3) 18.1
-------------------------------------------------------------------- --------------- ------------- ------------
Other comprehensive income
Items that may be reclassified subsequently to profit or loss:
Exchange movements on translation of foreign operations 41.8 (0.9) 40.9
Exchange movements on translation of non-controlling interests 0.2 - 0.2
Items that will not be reclassified subsequently to profit or loss:
Remeasurements of defined benefit pension schemes 2.2 - 2.2
Tax on remeasurements of defined benefit pension schemes (0.4) - (0.4)
-------------------------------------------------------------------- --------------- ------------- ------------
Other comprehensive income for the period, net of tax 43.8 (0.9) 42.9
-------------------------------------------------------------------- --------------- ------------- ------------
Total comprehensive income for the period 68.2 (7.2) 61.0
-------------------------------------------------------------------- --------------- ------------- ------------
Attributable to:
Equity holders of the parent 68.2 (7.2) 61.0
Non-controlling interests - - -
-------------------------------------------------------------------- --------------- ------------- ------------
68.2 (7.2) 61.0
-------------------------------------------------------------------- --------------- ------------- ------------
Restatement of condensed consolidated balance sheet at 26 June
2022
At 26 June Impact At 26 June
2022 of prior 2022
(as presented) period error (Restated)
GBPm GBPm GBPm
---------------------------------------------------- --------------- ------------- ------------
Assets
Non-current assets
Goodwill and intangible assets 149.1 - 149.1
Property, plant and equipment 468.1 - 468.1
Investments in joint ventures 4.4 - 4.4
Deferred tax assets 14.3 (4.4) 9.9
Other assets 111.4 - 111.4
---------------------------------------------------- --------------- ------------- ------------
747.3 (4.4) 742.9
---------------------------------------------------- --------------- ------------- ------------
Current assets
Inventories 107.3 - 107.3
Trade and other receivables 742.6 (13.1) 729.5
Current tax assets 9.5 - 9.5
Cash and cash equivalents 85.8 - 85.8
---------------------------------------------------- --------------- ------------- ------------
Assets held for sale 1.0 - 1.0
---------------------------------------------------- --------------- ------------- ------------
946.2 (13.1) 933.1
---------------------------------------------------- --------------- ------------- ------------
Total assets 1,693.5 (17.5) 1,676.0
---------------------------------------------------- --------------- ------------- ------------
Liabilities
Current liabilities
Loans and borrowings (29.0) - (29.0)
Current tax liabilities (24.5) 1.0 (23.5)
Trade and other payables (605.0) (5.6) (610.6)
Provisions (59.9) - (59.9)
---------------------------------------------------- --------------- ------------- ------------
(718.4) (4.6) (723.0)
---------------------------------------------------- --------------- ------------- ------------
Non-current liabilities
Loans and borrowings (334.5) - (334.5)
Retirement benefit liabilities (22.5) - (22.5)
Deferred tax liabilities (31.5) - (31.5)
Provisions (76.5) - (76.5)
Other liabilities (15.3) - (15.3)
---------------------------------------------------- --------------- ------------- ------------
(480.3) - (480.3)
---------------------------------------------------- --------------- ------------- ------------
Total liabilities (1,198.7) (4.6) (1,203.3)
---------------------------------------------------- --------------- ------------- ------------
Net assets 494.8 (22.1) 472.7
---------------------------------------------------- --------------- ------------- ------------
Equity
Share capital 7.3 - 7.3
Share premium account 38.1 - 38.1
Capital redemption reserve 7.6 - 7.6
Translation reserve 53.4 (0.4) 53.0
Other reserve 56.9 - 56.9
Retained earnings 328.7 (21.7) 307.0
---------------------------------------------------- --------------- ------------- ------------
Equity attributable to equity holders of the parent 492.0 (22.1) 469.9
Non-controlling interests 2.8 - 2.8
---------------------------------------------------- --------------- ------------- ------------
Total equity 494.8 (22.1) 472.7
---------------------------------------------------- --------------- ------------- ------------
Restatement of consolidated balance sheet at 31 December
2022
At 31 December Impact At 31 December
2022 of measurement 2022
(as presented) period adjustments (Restated)
GBPm GBPm GBPm
---------------------------------------------------- --------------- ------------------- ---------------
Assets
Non-current assets
Goodwill and intangible assets 137.2 0.7 137.9
Property, plant and equipment 486.5 - 486.5
Investments in joint ventures 4.4 - 4.4
Deferred tax assets 15.1 - 15.1
Other assets 60.8 - 60.8
---------------------------------------------------- --------------- ------------------- ---------------
704.0 0.7 704.7
---------------------------------------------------- --------------- ------------------- ---------------
Current assets
Inventories 124.4 - 124.4
Trade and other receivables 764.6 - 764.6
Current tax assets 5.0 - 5.0
Cash and cash equivalents 101.1 - 101.1
---------------------------------------------------- --------------- ------------------- ---------------
Assets held for sale 2.8 - 2.8
---------------------------------------------------- --------------- ------------------- ---------------
997.9 - 997.9
---------------------------------------------------- --------------- ------------------- ---------------
Total assets 1,701.9 0.7 1,702.6
---------------------------------------------------- --------------- ------------------- ---------------
Liabilities
Current liabilities
Loans and borrowings (34.2) - (34.2)
Current tax liabilities (52.5) (0.7) (53.2)
Trade and other payables (585.6) - (585.6)
Provisions (52.7) - (52.7)
---------------------------------------------------- --------------- ------------------- ---------------
(725.0) (0.7) (725.7)
---------------------------------------------------- --------------- ------------------- ---------------
Non-current liabilities
Loans and borrowings (365.8) - (365.8)
Retirement benefit liabilities (20.8) - (20.8)
Deferred tax liabilities (5.3) - (5.3)
Provisions (66.9) - (66.9)
Other liabilities (21.3) - (21.3)
---------------------------------------------------- --------------- ------------------- ---------------
(480.1) - (480.1)
---------------------------------------------------- --------------- ------------------- ---------------
Total liabilities (1,205.1) (0.7) (1,205.8)
---------------------------------------------------- --------------- ------------------- ---------------
Net assets 496.8 - 496.8
---------------------------------------------------- --------------- ------------------- ---------------
Equity
Share capital 7.3 - 7.3
Share premium account 38.1 - 38.1
Capital redemption reserve 7.6 - 7.6
Translation reserve 57.9 - 57.9
Other reserve 56.9 - 56.9
Retained earnings 326.7 - 326.7
---------------------------------------------------- --------------- ------------------- ---------------
Equity attributable to equity holders of the parent 494.5 - 494.5
Non-controlling interests 2.3 - 2.3
---------------------------------------------------- --------------- ------------------- ---------------
Total equity 496.8 - 496.8
---------------------------------------------------- --------------- ------------------- ---------------
Restatement of condensed consolidated cash flow statement for
the period ended 26 June 2022
26 June Impact 26 June
2022 of prior 2022
(as presented) period error (Restated)
GBPm GBPm GBPm
--------------- -------------- ---------------
Cash flows from operating activities
Profit before taxation 32.7 (7.3) 25.4
Non-underlying items 11.9 - 11.9
Finance income (0.3) - (0.3)
Finance costs 5.3 - 5.3
-------------------------------------------------------------------- --------------- -------------- ---------------
Underlying operating profit 49.6 (7.3) 42.3
Depreciation of property, plant and equipment 48.2 - 48.2
Amortisation of intangible assets 0.3 - 0.3
Share of underlying post-tax results of joint ventures (0.9) - (0.9)
Profit on sale of property, plant and equipment (2.5) - (2.5)
Other non-cash movements 2.3 - 2.3
Operating cash flows before movements in working capital and other
underlying items 97.0 (7.3) 89.7
Increase in inventories (28.3) - (28.3)
Increase in trade and other receivables (121.9) 4.2 (117.7)
Increase in trade and other payables 57.0 3.1 60.1
Decrease in provisions, retirement benefit and other non-current
liabilities (9.7) - (9.7)
Cash generated from operations before non-underlying items (5.9) - (5.9)
Cash outflows from non-underlying items (1.7) - (1.7)
Cash generated from operations (7.6) - (7.6)
Interest paid (0.9) - (0.9)
Interest element of lease rental payments (1.8) - (1.8)
Income tax paid (2.4) - (2.4)
-------------------------------------------------------------------- --------------- -------------- ---------------
Net cash outflow from operating activities (12.7) - (12.7)
-------------------------------------------------------------------- --------------- -------------- ---------------
Net cash outflow from investing activities (38.7) - (38.7)
-------------------------------------------------------------------- --------------- -------------- ---------------
Net cash inflow from financing activities 50.1 - 50.1
-------------------------------------------------------------------- --------------- -------------- ---------------
Net decrease in cash and cash equivalents (1.3) - (1.3)
-------------------------------------------------------------------- --------------- -------------- ---------------
Cash and cash equivalents at beginning of period 81.8 - 81.8
Effect of exchange rate movements 4.8 - 4.8
-------------------------------------------------------------------- --------------- -------------- ---------------
Cash and cash equivalents at end of period 85.3 - 85.3
-------------------------------------------------------------------- --------------- -------------- ---------------
4. Foreign currencies
The exchange rates used in respect of principal currencies
are:
Average for period Period end
---------------------------------------- -----------------------------------
Half Half year Year to As at As at As at
year period period 31 December 30 June 26 June 31 December
to to 2022 2023 2022 2022
30 June 26 June
2023 2022
------------------- ------------- ---------- ------------- --------- --------- -------------
US dollar 1.23 1.30 1.24 1.26 1.23 1.21
Canadian dollar 1.66 1.65 1.61 1.67 1.58 1.63
Euro 1.14 1.19 1.17 1.16 1.16 1.12
Singapore dollar 1.65 1.77 1.70 1.72 1.70 1.62
Australian dollar 1.83 1.81 1.78 1.90 1.77 1.76
------------------- ------------- ---------- ------------- --------- --------- -------------
5. Segmental analysis
In accordance with IFRS 8, the Group has determined its
operating segments based upon the information reported to the Chief
Operating Decision Maker. The Group comprises of three geographical
divisions which have only one major product or service: specialist
geotechnical services. North America, Europe, and Asia-Pacific,
Middle East and Africa continue to be managed as separate
geographical divisions. This is reflected in the Group's management
structure and in the segment information reviewed by the Chief
Operating Decision Maker.
Half year period to Half year period to
30 June 2023 26 June 2022 (Restated)
-------------------------------- ---------------------- ---------------------------
Operating Operating
Revenue profit Revenue profit
GBPm GBPm GBPm GBPm
-------------------------------- --------- ----------- ------------ -------------
North America 875.8 65.4 865.7 30.1
Europe 332.2 4.1 297.6 13.9
Asia-Pacific, Middle East
and Africa 258.3 3.7 170.1 3.2
1,466.3 73.2 1,333.4 47.2
Central items and eliminations - (6.2) - (4.9)
-------------------------------- --------- ----------- ------------ -------------
Before non-underlying items 1,466.3 67.0 1,333.4 42.3
Non-underlying items (note
8) - (10.4) - (11.9)
-------------------------------- --------- ----------- ------------ -------------
1,466.3 56.6 1,333.4 30.4
-------------------------------- --------- ----------- ------------ -------------
As at 30 June 2023
---------------------------------- ---------------------------------------------------------------------------
Tangible
Depreciation and
Segment Segment Capital Capital and intangible
assets liabilities employed additions amortisation(2) assets(3)
GBPm GBPm GBPm GBPm GBPm GBPm
---------------------------------- ------- ------------ --------- ---------- ---------------- -----------
North America 942.8 (320.9) 621.9 15.5 27.7 340.3
Europe 313.2 (187.3) 125.9 8.6 14.9 154.5
Asia-Pacific, Middle East
and Africa 270.5 (138.7) 131.8 18.4 10.8 106.2
---------------------------------- ------- ------------ --------- ---------- ---------------- -----------
1,526.5 (646.9) 879.6 42.5 53.4 601.0
Central items and eliminations(1) 138.0 (532.5) (394.5) - 0.7 1.3
---------------------------------- ------- ------------ --------- ---------- ---------------- -----------
1,664.5 (1,179.4) 485.1 42.5 54.1 602.3
---------------------------------- ------- ------------ --------- ---------- ---------------- -----------
Trade receivables include invoiced amounts for retentions.
Retentions anticipated to be receivable in more than one year are
included in other non-current assets.
As at 26 June 2022 (Restated)(4)
---------------------------------- ---------------------------------------------------------------------------
Tangible
Depreciation and
Segment Segment Capital Capital and intangible
assets liabilities employed additions amortisation(2) assets(3)
GBPm GBPm GBPm GBPm GBPm GBPm
---------------------------------- ------- ------------ --------- ---------- ---------------- -----------
North America 1,011.3 (410.9) 600.4 12.3 26.2 360.8
Europe 289.7 (191.0) 98.7 7.6 13.4 144.7
Asia-Pacific, Middle East
and Africa 239.8 (123.0) 116.8 6.7 9.2 109.3
---------------------------------- ------- ------------ --------- ---------- ---------------- -----------
1,540.8 (724.9) 815.9 26.6 48.8 614.8
Central items and eliminations(1) 135.2 (478.4) (343.2) - (0.3) 2.4
---------------------------------- ------- ------------ --------- ---------- ---------------- -----------
1,676.0 (1,203.3) 472.7 26.6 48.5 617.2
---------------------------------- ------- ------------ --------- ---------- ---------------- -----------
As at 31 December 2022 (Restated) (5)
---------------------------------- ---------------------------------------------------------------------------
Tangible
Depreciation and
Segment Segment Capital Capital and intangible
assets liabilities employed additions amortisation(2) assets(3)
GBPm GBPm GBPm GBPm GBPm GBPm
---------------------------------- ------- ------------ --------- ---------- ---------------- -----------
North America 1,016.3 (349.1) 667.2 33.8 54.6 352.5
Europe 338.9 (208.7) 130.2 23.2 27.8 159.6
Asia-Pacific, Middle East
and Africa 251.1 (163.4) 87.7 24.7 13.7 109.6
---------------------------------- ------- ------------ --------- ---------- ---------------- -----------
1,606.3 (721.2) 885.1 81.7 96.1 621.7
Central items and eliminations(1) 96.3 (484.6) (388.3) - 0.9 2.7
---------------------------------- ------- ------------ --------- ---------- ---------------- -----------
1,702.6 (1,205.8) 496.8 81.7 97.0 624.4
---------------------------------- ------- ------------ --------- ---------- ---------------- -----------
1 Central items include net debt and tax balances, which are
managed by the Group.
2 Depreciation and amortisation excludes amortisation of
acquired intangible assets.
3 Tangible and intangible assets comprise goodwill, intangible
assets and property, plant and equipment.
4 The 26 June 2022 condensed consolidated balance sheet has been
restated in respect of the correction of prior period errors
arising from the fraud at Austral as outlined in note 3 to the
interim financial statements.
5 The 31 December 2022 condensed consolidated balance sheet has
been restated in respect of prior period measurement adjustments,
as outlined in note 3 to the interim financial statements.
6. Revenue
The Group's revenue is derived from contracts with customers. In
the following table, revenue is disaggregated by primary
geographical market, being the Group's operating segments (see note
5) and timing of revenue recognition:
Half year period to 30 Half year period to 26
June 2023 June 2022 (Restated)
------------------------- -------------------------------------------- ---------------------------------------------
Revenue Revenue
Revenue recognised Revenue recognised
recognised on performance recognised on performance
on performance obligations on performance obligations
obligations satisfied obligations satisfied
satisfied at a point Total satisfied at a point Total
over time in time revenue over time in time revenue
GBPm GBPm GBPm GBPm GBPm GBPm
------------------------- --------------- --------------- ---------- --------------- --------------- -----------
North America 662.8 213.0 875.8 625.4 240.3 865.7
Europe 332.2 - 332.2 297.6 - 297.6
Asia-Pacific, Middle
East and Africa 258.3 - 258.3 170.1 - 170.1
------------------------- --------------- --------------- ---------- --------------- --------------- -----------
1,253.3 213.0 1,466.3 1,093.1 240.3 1,333.4
------------------------- --------------- --------------- ---------- --------------- --------------- -----------
7. Acquisitions
Current period
There were no material acquisitions during the half year period
to 30 June 2023.
Prior period measurements adjustments
Under IFRS 3 'Business Combinations' there is a measurement
period of no longer than 12 months in which to finalise the
valuation of the acquired assets and liabilities. During the
measurement period, the acquirer retrospectively adjusts the
provisional amounts recognised at the acquisition date to reflect
any new information obtained about facts and circumstances that
existed as of the acquisition date and, if known, would have
affected the measurement of the amounts recognised as of that
date.
On 15 November 2022, the Group acquired Nordwest Fundamentering
AS. The valuation of the acquired assets and liabilities is now
final and the adjustments to the provisional fair values that were
made during the measurement period are set out in the table
below:
Revised
Provisional Adjustments provisional
fair value during fair value
recognised on measurement recognised on
acquisition period acquisition
GBPm GBPm GBPm
--------------------------------------------------- -------------- ------------ --------------
Assets
Intangible assets - 0.9 0.9
Property, plant and equipment 0.3 - 0.3
Property, plant and equipment - right of use asset 2.1 - 2.1
Trade and other receivables 1.5 - 1.5
Cash and cash equivalents 1.1 - 1.1
--------------------------------------------------- -------------- ------------ --------------
5.0 0.9 5.9
--------------------------------------------------- -------------- ------------ --------------
Liabilities
Trade and other payables (1.5) - (1.5)
Current tax liabilities - (0.7) (0.7)
Loans and borrowings, including lease liabilities (2.2) - (2.2)
Deferred tax liabilities (0.3) - (0.3)
(4.0) (0.7) (4.7)
--------------------------------------------------- -------------- ------------ --------------
Total identifiable net assets 1.0 0.2 1.2
--------------------------------------------------- -------------- ------------ --------------
Goodwill 5.3 (0.2) 5.1
--------------------------------------------------- -------------- ------------ --------------
Total consideration 6.3 - 6.3
--------------------------------------------------- -------------- ------------ --------------
Satisfied by:
Initial cash consideration 5.5 - 5.5
Initial valuation of contingent consideration 0.5 - 0.5
Purchase price adjustment 0.3 - 0.3
6.3 - 6.3
--------------------------------------------------- -------------- ------------ --------------
The impact of these adjustments has been applied
retrospectively, meaning that the results and financial position
for the year to 31 December 2022 have been restated, as detailed in
note 3.
Disposals
There were no material disposals during the half year period to
30 June 2023 (H1 2022: none).
8. Non-underlying items
Non-underlying items include items which are exceptional by
their size and/or are non-trading in nature, including amortisation
of acquired intangibles, restructuring costs and other non-trading
amounts, including those relating to acquisitions and disposals.
Tax arising on these items, including movement in deferred tax
assets arising from non-underlying provisions, is also classified
as a non-underlying item. These are detailed below:
Half Half
year year
period period
to to
30 June 26 June
2023 2022
GBPm GBPm
------------------------------------------------------ --------- ---------
Exceptional historic contract dispute - (3.5)
------------------------------------------------------- --------- ---------
Exceptional restructuring costs (3.2) (1.2)
------------------------------------------------------- --------- ---------
ERP implementation costs (4.0) (1.2)
------------------------------------------------------- --------- ---------
Impairment costs - (0.4)
------------------------------------------------------- --------- ---------
Contingent consideration payable: additional amounts
provided - (0.1)
------------------------------------------------------- --------- ---------
Change in fair value of contingent consideration - 0.3
------------------------------------------------------- --------- ---------
Non-underlying items in operating costs (7.2) (6.1)
------------------------------------------------------- --------- ---------
Amortisation of acquired intangible assets (3.8) (5.8)
------------------------------------------------------- --------- ---------
Gain on disposal of assets held for sale 1.0 -
Contingent consideration received - 0.7
------------------------------------------------------- --------- ---------
Non-underlying items in other operating income 1.0 0.7
------------------------------------------------------- --------- ---------
Amortisation of joint venture acquired intangibles (0.4) (0.7)
------------------------------------------------------- --------- ---------
Total non-underlying items in operating profit
and before taxation (10.4) (11.9)
------------------------------------------------------- --------- ---------
Taxation 2.3 2.4
------------------------------------------------------- --------- ---------
Total non-underlying items after taxation (8.1) (9.5)
------------------------------------------------------- --------- ---------
Non-underlying items in operating costs
Exceptional restructuring costs
Exceptional restructuring costs comprise GBP1.7m in the North
American division and GBP1.5m in the Asia-Pacific, Middle East and
Africa (AMEA) division. In North America the costs reflect the
reorganisation of the US Foundations business and senior leadership
changes. In AMEA the costs relate to the closure of the Egypt
business. In the prior period, restructuring costs of GBP1.2m in
the Europe division related to the scheduled exit of the Ivory
Coast business. Costs include asset impairments and redundancy
costs.
ERP implementation costs
The Group is continuing the strategic project to implement a new
cloud computing enterprise resource planning (ERP) system across
the Group. Due to the size, nature and incidence of the relevant
costs expected to be incurred, the costs are presented as a
non-underlying item, as they are not reflective of the underlying
performance of the Group. Non-underlying ERP costs of GBP4.0m (H1
2022: GBP1.2m) include only costs relating directly to the
implementation including external consultancy costs and the cost of
the dedicated implementation team. Non-underlying costs does not
include operational post-deployment costs such as licence costs for
businesses that have transitioned.
Exceptional historic contract dispute
In the prior period to 26 June 2022, the GBP3.5m exceptional
charge related to a provision made for additional costs relating to
a historical contract dispute. The liability has been settled in
the current year and the related cash flow included in
non-underlying cash flows in the cash flow statement.
Impairment costs
In the prior period to 26 June 2022, an impairment charge of
GBP0.4m by the North-East Europe Business Unit was in respect of
trade receivables in Ukraine that are not expected to be recovered
due to the ongoing conflict.
Contingent consideration
In the prior period to 26 June 2022, additional contingent
consideration payable of GBP0.1m related to the acquisition of the
Geo Instruments US business in 2017. During the prior period there
was an adjustment of GBP0.3m to the fair value of the RECON
contingent consideration on finalisation of the amount payable.
Amortisation of acquired intangible assets
Amortisation of acquired intangible assets of GBP3.8m relates to
the amortisation charge on assets acquired in the RECON,
Moretrench, GKM and NWF acquisitions. The amortisation for the
period ended 26 June 2022 of GBP5.8m relates to the RECON,
Moretrench and Voges acquisitions.
Non-underlying items in other operating income
Gain on disposal of assets held for sale
Gain on disposal of assets held for sale of GBP1.0m relates
primarily to the sale of assets owned by the now closed Waterway
business in Australia as mentioned in note 15. Impairment charges
for these assets had previously been charged to non-underlying
items in prior periods and therefore the corresponding profit on
disposal of the assets is also recognised as a non-underlying
item.
Contingent consideration received
In the period to 26 June 2022, the second and final instalment
of the contingent consideration of GBP0.7m was received in relation
to the Wannenwetsch disposal in September 2020, in accordance with
the terms of the sale and purchase agreement.
Amortisation of joint venture acquired intangibles
Amortisation of joint venture intangibles relates to NordPile,
an acquisition by the Group's joint venture interest KFS Finland Oy
on 8 September 2021.
Non-underlying taxation
The credit relates to the tax benefit of amounts which are
expected to be deductible for tax purposes.
9. Taxation
The effective tax rate on the Group's underlying profit of 22%
(H1 2022 Restated: 26%) is calculated using management's best
estimate of the average annual effective income tax rate expected
for the full year. The average is calculated using the weighted
average profit at jurisdictional rates which differ from the tax
rate in the UK of 23.5% . The reduction from the H1 2022 restated
rate of 26% is largely due to the fact that the 2022 restated rate
takes into account the Austral loss for which no associated tax
relief is available in Australia. Australia is already in an
overall loss position and no deferred tax asset is booked for these
losses.
The tax credit on non-underlying items has been calculated by
assessing the tax impact of each component of the charge to the
income statement in the interim accounts and applying the
jurisdictional tax rate that applies to that item .
The increase in deferred tax assets from 31 December 2022 to 30
June 2023 is as a result of the timing of the deductibility of
R&D expenditure for US tax purposes. R&D expenditure is
capitalised for tax purposes and amortised over five years.
The Group is subject to taxation in over 40 countries worldwide
and the risk of changes in tax l egislation and interpretation from
tax authorities in the jurisdictions in which it operates. The
assessment of uncertain positions is subjective and subject to
management's best judgement of the probability of the outcome in
reaching agreement with the relevant tax authorities. Where tax
positions are uncertain, provision is made where necessary based on
interpretation of legislation, management experience and
appropriate professional advice. Management do not expect the
outcome of these estimates to be materially different from the
position taken.
The UK government enacted new legislation introducing a global
minimum tax of 15% in line with the OECD's Pillar Two rules. The
rules will apply to the Group from 1 January 2024 and it is
expected that the Pillar Two rules will not have a material impact
on its overall tax charge. The Group has applied the exemption in
the Amendments to IAS 12 issued in May 2023 and has neither
recognised nor disclosed information about deferred tax assets or
liabilities relating to Pillar Two income taxes.
10. Dividends
Ordinary dividends on equity shares:
Half Half
year year
period period
to to Year to
30 June 26 June 31 December
2023 2022 2022
GBPm GBPm GBPm
------------------------------------------------- --------- --------- -------------
Amounts recognised as distributions to equity
holders in the period:
------------------------------------------------- --------- --------- -------------
Interim dividend for the year ended 31 December
2022 of 13.2p (2021: 12.6p) per share - - 9.6
Final dividend for the year ended 31 December
2022 of 24.5p (2021: 23.3p) per share 17.6 - 16.8
------------------------------------------------- --------- --------- -------------
17.6 - 26.4
------------------------------------------------- --------- --------- -------------
The 2022 final dividend of GBP17.6m was paid on 23 June 2023.
The 2021 final dividend of GBP16.8m was paid on 1 July 2022.
In addition to the above, an interim ordinary dividend of 13.9p
per share (H1 2022: 13.2p) will be paid on 8 September 2023 to
shareholders on the register at 18 August 2023. This proposed
dividend has not been included as a liability in these financial
statements and will be accounted for in the period in which it is
paid.
11. Earnings per share
Basic earnings per share is calculated by dividing the profit
for the year attributable to ordinary equity holders of the parent
by the weighted average number of ordinary shares outstanding
during the year.
When the Group makes a profit, diluted earnings per share equals
the profit attributable to equity holders of the parent divided by
the weighted average diluted number of shares. When the Group makes
a loss, diluted earnings per share equals the loss attributable to
the equity holders of the parent divided by the basic average
number of shares. This ensures that earnings per share on losses is
shown in full and not diluted by unexercised share awards.
Basic and diluted earnings per share are calculated as
follows:
Underlying earnings Statutory earnings
attributable to attributable to
the equity holders equity holders
of the parent of the parent
--------------------------------------------- ------------------------------- ----------------------------------
Half year Half year
period period
Half year to Half year to
period period
to 26 June to 26 June
30 June 2022 30 June 2022
2023 (Restated) 2023 (Restated)
--------------------------------------------- -------------- --------------- --------------- -----------------
Profit available for equity holders
(GBPm) 41.3 27.8 33.2 18.3
--------------------------------------------- -------------- --------------- --------------- -----------------
Weighted average number of shares
(m)(1)
Basic number of ordinary shares outstanding 72.8 72.6 72.8 72.6
Effect of dilution from:
Share options and awards 0.9 0.8 0.9 0.8
--------------------------------------------- -------------- --------------- --------------- -----------------
Diluted number of ordinary shares 73.7 73.4 73.7 73.4
--------------------------------------------- -------------- --------------- --------------- -----------------
Earnings per share
--------------------------------------------- -------------- --------------- --------------- -----------------
Basic earnings per share (p) 56.7 38.3 45.6 25.2
--------------------------------------------- -------------- --------------- --------------- -----------------
Diluted earnings per share (p) 56.0 37.9 45.0 24.9
--------------------------------------------- -------------- --------------- --------------- -----------------
1 The weighted average number of shares takes into account the
weighted average effect of changes in treasury shares during the
year. The weighted average number of shares excludes those held in
the Employee Share Ownership Plan Trust and those held in treasury,
which for the purpose of this calculation are treated as
cancelled.
12. Property, plant and equipment
Property, plant and equipment comprises owned and leased
assets.
As at As at As at
30 June 26 June 31 December
2023 2022 2022
GBPm GBPm GBPm
--------------------------------------- --------- --------- -------------
Property, plant and equipment - owned 390.7 392.2 409.5
Right-of-use assets - leased 82.8 75.9 77.0
--------------------------------------- --------- --------- -------------
473.5 468.1 486.5
--------------------------------------- --------- --------- -------------
During the period to 30 June 2023, the Group acquired owned
property, plant and equipment with a cost of GBP42.5m (H1 2022:
GBP26.6m, FY 2022: GBP81.6m). Right-of-use asset additions during
the period were GBP19.6m (H1 2022: GBP12.4m, FY 2022:
GBP23.4m).
Owned assets with a net book value of GBP4.3m were disposed of
during the half year period to 30 June 2023 (H1 2022: GBP0.8m, FY
2022: GBP4.7m), resulting in a net gain on disposal of GBP2.5m (H1
2022: GBP2.5m gain, FY 2022: GBP3.3m gain).
13. Trade and other receivables
Trade receivables and contract assets on the balance sheet are
shown net of expected credit loss provisions. During the period to
30 June 2023, the net expected credit loss included in the
operating costs is GBP14.8m (H1 2022: GBP11.6m).
14. Analysis of closing net debt
As at As at As at
30 June 26 June 31 December
2023 2022 2022
GBPm GBPm GBPm
-------------------------------------------- --------- --------- -------------
Bank balances 98.7 81.5 97.0
Short-term deposits 1.7 4.3 4.1
-------------------------------------------- --------- --------- -------------
Cash and cash equivalents in the balance
sheet 100.4 85.8 101.1
Bank overdrafts (5.6) (0.5) (6.9)
-------------------------------------------- --------- --------- -------------
Cash and cash equivalents in the cash flow
statement 94.8 85.3 94.2
Bank and other loans (338.9) (278.9) (312.1)
Lease liabilities (87.5) (84.1) (81.0)
-------------------------------------------- --------- --------- -------------
Closing net debt (331.6) (277.7) (298.9)
-------------------------------------------- --------- --------- -------------
Cash and cash equivalents include GBP6.9m (26 June 2022:
GBP9.4m, 31 December 2022: GBP8.5m) of the Group's share of cash
and cash equivalents held by joint operations, and GBP1.1m (26 June
2022: GBP1.1m, 31 December 2022: GBP1.4m) of restricted cash which
is subject to local country restrictions.
15. Assets held for sale
As at As at As at
30 June 26 June 31 December
2023 2022 2022
GBPm GBPm GBPm
--------------------------------------------- --------- --------- -------------
Assets held for sale 1.6 1.0 2.8
--------------------------------------------- --------- --------- -------------
Liabilities directly associated with assets - - -
held for sale
--------------------------------------------- --------- --------- -------------
During the period to 30 June 2023, GBP0.8m of the North American
assets and GBP1.2m of the Waterway assets were disposed of for a
total cash consideration of GBP3.0m resulting in a gain from the
disposal of assets of GBP1.0m.
At 30 June 2023, assets held for sale comprises of an electric
crane in Australia costing GBP1.4m which was added during the
period and remaining GBP0.2m of assets in North America and South
Africa.
16. Retirement benefit liabilities
The Group operates pension schemes in the UK and overseas. The
primary defined benefit scheme is in the UK. The Group also has
defined benefit retirement obligations in Germany and Austria and a
number of end of service schemes in the Middle East that follow the
same principles as a defined benefit scheme. For further
information on the Group's pension schemes, refer to note 33 of the
Group's financial statements for the year ended 31 December
2022.
The Group's net defined benefit liabilities as at 30 June 2023
were GBP18.2m (31 December 2022: GBP20.8m).The reduction in the
half year period was driven primarily by the GBP1.7m contributions
from the employer. The net charge to the income statement was
GBP0.6m and no significant actuarial change was recognised in the
comprehensive income during the period to 30 June 2023.
The net defined liability for the Keller Group Pension Scheme in
the UK as at 30 June 2023 is GBP2.6m (31 December 2022: GBP4.1m),
being the minimum funding requirement, calculated using the agreed
contributions.
17. Financial assets and financial liabilities
Set out below is an overview of financial assets and liabilities
held by the Group:
As at As at As at
30 June 26 June 31 December
2023 2022 2022
(Restated)
GBPm GBPm GBPm
Financial assets measured at fair value
through profit or loss
Non-qualifying deferred compensation plan 20.0 18.8 19.4
Contingent consideration receivable - 0.7 -
Financial assets measured at amortised
cost
Trade receivables 575.0 531.3 615.5
Contract assets 138.8 150.0 105.3
Cash and cash equivalents 100.4 85.8 101.1
Financial liabilities at fair value through
profit or loss
Contingent consideration payable (0.9) (1.2) (0.9)
Financial liabilities measured at amortised
cost
Deferred consideration payable (0.9) (0.8) (1.0)
Trade payables (181.6) (290.8) (229.4)
Contract liabilities (93.3) (58.5) (85.6)
Bank and other loans (344.5) (279.4) (319.0)
Lease liabilities (87.5) (84.1) (81.0)
--------------------------------------------- ---------- ------------ -------------
Fair values
The fair values of the Group's financial assets and liabilities
are not materially different from their carrying values. The
following summarises the major methods and assumptions used in
estimating the fair values of financial instruments; being
derivatives, interest-bearing loans and borrowings, contingent and
deferred consideration and payables, receivables and contract
assets, cash and cash equivalents.
Contingent and deferred consideration
Fair value is calculated based on the amounts expected to be
paid, determined by reference to forecasts of future performance of
the acquired businesses discounted using appropriate discount rates
prevailing at the balance sheet date and the probability of
contingent events and targets being achieved. The valuation methods
of the Group's contingent consideration carried at fair value are
categorised as Level 3. Level 3 assets are financial assets and
liabilities that are considered to be the most illiquid. Their
values have been estimated using available management information
including subjective assumptions. There are no individually
significant unobservable inputs used in the fair value measurement
of the Group's contingent consideration as at 30 June 2023.
The following table shows a reconciliation from the opening to
closing balances for net contingent and deferred consideration:
As at As at As at
30 June 26 June 31 December
2023 2022 2022
GBPm GBPm GBPm
----------------------------------------------------- -------- -------- ------------
Opening balance at 1 January 1.9 12.7 12.7
Acquisition of businesses - 1.3 1.7
Additional amounts provided - 0.1 0.1
Amount receivable - (0.7) -
Released during the period - (0.3) -
Paid during the period - (12.2) (12.3)
----------------------------------------------------- -------- -------- ------------
Fair value in the income statement during the period - - (0.7)
----------------------------------------------------- -------- -------- ------------
Exchange movements (0.1) 0.4 0.4
----------------------------------------------------- -------- -------- ------------
Closing balance 1.8 1.3 1.9
----------------------------------------------------- -------- -------- ------------
On 1 May 2022, the Group acquired 100% of the issued share
capital of GKM Consultants Inc., an instrumentation and monitoring
provider in Quebec, Canada, for an initial cash consideration of
GBP3.3m (CAD$5.3m). In addition, contingent consideration is
payable dependent on the cumulative EBITDA in the three-year period
post-acquisition. The fair value of the contingent consideration is
GBP0.9m (CAD$1.4m) as at 30 June 2023 (31 December 2022: GBP0.9m or
CAD$1.4m).
On 15 November 2022, the Group acquired 100% of the issued share
capital of Nordwest Fundamentering AS, a small specialist
geotechnical contractor provider in Norway, for an initial cash
consideration of GBP5.5m (NOK65m). In addition, deferred
consideration of GBP0.4m (NOK6m) is payable (31 December 2022:
GBP0.5m or NOK6m).
On 1 November 2021, the Group acquired the trade and assets of
Voges Drilling, a geotechnical foundation company based in Texas,
US. Deferred consideration of GBP0.5m (US$0.6m) is payable (31
December 2022: GBP0.5m or US$0.6m).
Payables, receivables and contract assets
For payables, receivables and contract assets with an expected
maturity of one year or less, the carrying amount is deemed to
reflect the fair value.
Non-qualifying deferred compensation plan
The value of both the employee investments and those held in
trust by the company are measured using Level 1 inputs per IFRS 13
('quoted prices in active markets for identical assets or
liabilities that the entity can access at the measurement date')
based on published market prices at the end of the period.
Adjustments to the fair value are recorded within net finance costs
in the consolidated income statement. Refer to note 18 of the
Group's financial statements for the year ended 31 December 2022
for further information on the non-qualifying deferred compensation
plan.
18. Share capital and reserves
As at As at As at
30 June 26 June 31 December
2023 2022 2022
GBPm GBPm GBPm
-------------------------------------------------- ---------------- ---------------- --------------------
Allotted, called up and fully paid equity
share capital
73,099,735 ordinary shares of 10p each
(26 June 2022 and 31 December 2022: 73,099,735) 7.3 7.3 7.3
--------------------------------------------------- ---------------- ---------------- --------------------
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 GBP7.6m 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 GBP56.9m is a non-distributable reserve
created when merger relief was applied to an issue of shares under
section 612 of the Companies Act 2006 to part-fund the acquisition
of Keller Canada. The reserve becomes distributable should Keller
Canada be disposed of.
At 30 June 2023, the total number of shares held in treasury was
323,133 (26 June 2022: 328,954 and 31 December 2022: 328,954).
During the period to 30 June 2023, 500,000 ordinary shares were
purchased by the Keller Group Employee Benefit Trust (H1 2022:
135,050, FY 2022: 135,050), to be used to satisfy future
obligations of the company under the Keller Group plc Long Term
Incentive Plan. The cost of the market purchases was GBP3.4m (FY
2022: GBP1.2m).
19. Related party transactions
Transactions between the parent, its subsidiaries and joint
operations, which are related parties, have been eliminated on
consolidation.
Other related party transactions
As at 30 June 2023, a net balance of GBP0.1m was owed by (26
June 2022: GBP0.1m owed by and 31 December 2022: GBP0.1m owed by)
the joint venture. This amount is unsecured, has no fixed date of
repayment and is repayable on demand.
20. Post balance sheet events
There were no material post balance sheet events between the
balance sheet date and the date of this report.
Adjusted performance measures
The Group's results as reported under International Financial
Reporting Standards (IFRS) and presented in the interim condensed
consolidated financial statements (the 'statutory results') are
significantly impacted by movements in exchange rates relative to
sterling, as well as by exceptional items and non-trading amounts
including those relating to acquisitions and disposals.
Adjusted performance measures have been used throughout this
report to describe the Group's underlying performance. The Board
and Executive Committee use these adjusted measures to assess the
performance of the business as they consider them more
representative of the underlying ongoing trading result and allow
more meaningful comparison to prior periods.
Underlying measures
The term 'underlying' excludes the impact of items which are
exceptional by their size and/or are non-trading in nature,
including amortisation of acquired intangible assets and other
non-trading amounts relating to acquisitions and disposals
(collectively 'non-underlying items'), net of any associated tax.
Underlying measures allow management and investors to compare
performance without the potentially distorting effects of one-off
items or non-trading items. Non-underlying items are disclosed
separately in the interim financial statements where it is
necessary to do so to provide further understanding of the
financial performance of the Group.
Constant currency measures
The constant currency basis ('constant currency') adjusts the
comparative to exclude the impact of movements in exchange rates
relative to sterling. This is achieved by retranslating the 2022
results of overseas operations into sterling at the 2023 average
exchange rates.
A reconciliation between the underlying results and the reported
statutory results is shown on the face of the condensed
consolidated income statement, with non-underlying items detailed
in note 8. A reconciliation between the 2022 underlying result to
the 2022 constant currency result is shown below and compared to
the underlying 2023 performance:
Revenue by segment
Impact of
exchange Constant Constant
Statutory Statutory movements currency Statutory currency
2023 2022 (Restated) 2022 2022 change change
GBPm GBPm GBPm GBPm % %
----------------------- ------------- ----------------- ----------- ---------- ---------- ----------
North America 875.8 865.7 46.0 911.7 +1% -4%
Europe 332.2 297.6 8.9 306.5 +12% +8%
Asia-Pacific, Middle
East and Africa 258.3 170.1 (2.2) 167.9 +52% +54%
--------------------------- --------- ----------------- ----------- ---------- ---------- ----------
Group 1,466.3 1,333.4 52.7 1,386.1 +10% +6%
----------------------- ------------- ----------------- ----------- ---------- ---------- ----------
Underlying operating profit by segment
Impact of
exchange Constant Constant
Underlying Underlying movements currency Underlying currency
2023 2022 (Restated) 2022 2022 change change
GBPm GBPm GBPm GBPm % %
------------------ ----------------- ----------------- ----------- ---------- ----------- ------------
North America 65.4 30.1 1.7 31.8 +117% +105%
Europe 4.1 13.9 0.5 14.4 -71% -71%
Asia-Pacific, Middle
East and Africa 3.7 3.2 0.2 3.4 +16% +10%
Central items (6.2) (4.9) - (4.9) +27% +27%
------------------------- ---------- ----------------- ----------- ---------- ----------- ------------
Group 67.0 42.3 2.4 44.7 +58% +50%
------------------------- ---------- ----------------- ----------- ---------- ----------- ------------
Underlying operating margin
Underlying operating margin is underlying operating profit as a
percentage of revenue.
Other adjusted measures
Where not presented and reconciled on the face of the interim
condensed consolidated income statement, balance sheet or cash flow
statement, the adjusted measures are reconciled to the IFRS
statutory numbers below:
EBITDA (statutory)
30 June 26 June
2023 2022 (Restated)
GBPm GBPm
------------------------------------------------ ---------- -------------------
Underlying operating profit 67.0 42.3
Depreciation and impairment of owned property,
plant and equipment 39.3 34.8
Depreciation and impairment of right-of-use
assets 14.6 13.4
Amortisation of intangible assets 0.2 0.3
------------------------------------------------ ---------- -------------------
Underlying EBITDA 121.1 90.8
Non-underlying items in operating costs (7.2) (6.1)
Non-underlying items in other operating income 1.0 0.7
------------------------------------------------ ---------- -------------------
EBITDA 114.9 85.4
------------------------------------------------ ---------- -----------------
EBITDA (IAS 17 covenant basis)
30 June 26 June
2023 2022 (Restated)
GBPm GBPm
------------------------------------------------ -------- -----------------
Underlying operating profit 67.0 42.3
Depreciation and impairment of owned property,
plant and equipment 39.3 34.8
Depreciation and impairment of right-of-use
assets 14.6 13.4
Legacy IAS 17 operating lease charges (16.7) (15.2)
Amortisation of intangible assets 0.2 0.3
------------------------------------------------ -------- -----------------
Underlying EBITDA 104.4 75.6
Non-underlying items in operating costs (7.2) (6.1)
Non-underlying items in other operating income 1.0 0.7
------------------------------------------------ -------- -----------------
EBITDA 98.2 70.2
------------------------------------------------ -------- -----------------
Net finance costs
30 June 26 June
2023 2022
GBPm GBPm
------------------------------------------- -------- ----------
Finance income (0.6) (0.3)
Finance costs 14.1 5.3
------------------------------------------- -------- ----------
Net finance costs (statutory) 13.5 5.0
------------------------------------------- -------- ----------
Finance charge on lease liabilities(1) (2.5) (1.2)
------------------------------------------- -------- ----------
Lender covenant adjustments - -
------------------------------------------- -------- ----------
Net finance costs (IAS 17 covenant basis) 11.0 3.8
------------------------------------------- -------- ----------
1 Excluding legacy IAS 17 finance leases.
Net capital expenditure
30 June 26 June 31 December
2023 2022 2022
GBPm GBPm GBPm
-------------------------------------- -------- -------- ------------
Acquisition of property, plant and
equipment 42.5 26.6 81.6
Acquisition of intangible assets - 0.1 0.1
Proceeds from sale of property, plant
and equipment (8.1) (3.3) (8.2)
Net capital expenditure(1) 34.4 23.4 73.5
1 Net capital expenditure excludes right-of-use assets.
Net debt
30 June 26 June 31 December
2023 2022 2022
GBPm GBPm GBPm
Current loans and borrowings 30.7 29.0 34.2
Non-current loans and borrowings 401.3 334.5 365.8
Cash and cash equivalents (100.4) (85.8) (101.1)
Net debt (statutory) 331.6 277.7 298.9
Lease liabilities(1) (87.0) (83.7) (80.1)
Net debt (IAS 17 covenant basis) 244.6 194.0 218.8
1 Excluding legacy IAS 17 finance leases.
Leverage ratio
The leverage ratio is calculated as net debt to underlying
EBITDA.
30 June 26 June 31 December
2023 2022 (Restated) 2022
Statutory GBPm GBPm GBPm
Net debt 331.6 277.7 298.9
Underlying EBITDA (last twelve months) 235.9 192.7 205.6
Leverage ratio (x) 1.4 1.4 1.5
30 June 26 June 31 December
2023 2022 (Restated) 2022
IAS 17 covenant basis GBPm GBPm GBPm
Net debt 244.6 194.0 218.8
Underlying EBITDA (last twelve months) 206.5 158.7 177.7
Leverage ratio (x) 1.2 1.2 1.2
Order book
The Group's disclosure of its order book is aimed to provide
insight into its backlog of work and future performance. The
Group's order book is not a measure of past performance and
therefore cannot be derived from its financial statements. The
Group's order book comprises the unexecuted elements of orders on
contracts that have been awarded. Where a contract is subject to
variations, only secured variations are included in the reported
order book.
IFRS 16 gearing
30 June 26 June 31 December
2023 2022 (Restated) 2022
GBPm GBPm GBPm
Net debt (statutory) 331.6 277.7 298.9
Net assets 485.1 472.7 496.8
Gearing 68% 59% 60%
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END
IR DBGDRSDXDGXB
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August 01, 2023 02:00 ET (06:00 GMT)
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