Keller Group plc ("Keller" or "the Group"), the international ground engineering specialist, issues this Interim Management Statement covering the period 1 July to 11 November 2009.
Overview
Most of the geographical markets in which we operate remain challenging. Whilst in most of our regions public infrastructure spending remains robust, privately-financed construction generally is still extremely weak.
As expected, both revenues and margins since the first half have continued to be below the comparable period in 2008. However, viewed in the context of the difficult market conditions, the results so far reflect a resilient performance.
Given our trading in the year to date, the Board's expectations for the full year remain unchanged and within the current range of market expectations.
Divisional Review
US
Non-residential construction in the US has been held back by further deterioration in the commercial sector, which shows no signs of improving, although public expenditure has remained reasonably strong. As yet, there has been no meaningful recovery in the depressed residential sector.
To date, the results from our broadly-based US operations have held up relatively well, given the substantial decline in commercial construction. However, as expected, securing sufficient workload in such lean markets is continuing to put margins under pressure.
Continental Europe, Middle East & Asia (CEMEA)
Our principal Continental European markets have all continued to be difficult, with the exception of Poland where our operations will report a good result this year. The Middle East region has shown few signs of re-awakening whereas, overall, our Asian markets have remained fairly busy.
The Group's acquisition of Resource Holdings Limited in Singapore, announced on 12 October 2009, completed as planned on 14 October for an initial debt-free consideration of £32.6m and the process of integration is underway. This acquisition significantly increases the size of the Group's operations in South East Asia and adds further momentum to our move into heavy foundations in these attractive growth markets.
Australia & UK
In Australia we are benefiting from ongoing strong investment in the public sector. A number of major infrastructure contracts which mobilised in the second and third quarters of the year are now well underway and are expected to make significant contributions to another good year.
The results of our UK business will reflect a continuation of the harsh market conditions seen in the first half, although the second half result will benefit from the significant restructuring undertaken earlier in the year.
Financial Position
The Group's financial position remains strong. After payment for the acquisition of Resource Holdings, net debt at the end of October stood at approximately £100m (30 June 2009: £95.3m), reflecting good cash generation in the period. The Group retains over £200m of committed facilities expiring between 2010 and 2014 to meet its strategic and operational goals.
Outlook
Given our trading in the year to date, the Board's expectations for the full year remain unchanged and within the current range of market expectations.
Order intake, which in the first half of the year was down 22% on a like-for-like basis compared with the preceding first half, has since remained reasonably steady. However, reduced levels of construction expenditure around the world have, as expected, resulted in tighter pricing which will generate lower margins until our markets recover.
Keller will issue a routine pre-close statement in respect of the year ending 31 December 2009 on 18 December 2009.