Keller Group plc (“Keller” or “the Group”), the international ground engineering specialist, issues this Interim Management Statement covering the period 1 July to 12 November 2008.
Overview
Trading in the period has remained very strong. We have continued to see good organic growth, particularly in Eastern Europe, Middle East and Australia, demonstrating the benefits of the Group’s geographic diversification.
In light of this strong current trading, the Board now expects to report record results for the year as a whole, around the top end of market expectations.
Divisional Review
US
Within the US construction market, we are encountering significant regional variances and are now starting to see a more general weakening across the commercial sector.
Overall, revenues from our broadly-based US operations have remained strong. However, as expected, we have recently seen a softening of the previously exceptional margins earned in our foundation contracting businesses.
Continental Europe, Middle East & Asia (CEMEA)
CEMEA continues to show excellent growth in both revenue and operating margin. In particular, the Middle East and Eastern Europe businesses are performing extremely well, meeting high levels of demand with an extended range of services.
Australia & UK
The very strong first-half performance from the Group’s Australian businesses has continued into the second half whilst in the UK performance has been steady, in spite of a very weak housing market.
Acquisitions
As announced separately today, the Group has recently completed the acquisitions of Craig Olden Inc (“Olden”) in the US and Boreta spol sr.o. (“Boreta”) in the Czech Republic, two profitable and successful businesses. Olden is the leading earth retention contractor in Texas, specialising in soil nailing services. Boreta is a well-established foundations specialist operating in the eastern part of the Czech Republic. The initial consideration for the two businesses, which have combined annualised revenues of around £30m, was approximately £14m.
Financial Position
The Group’s financial position remains strong, with more than £200m of committed facilities expiring between 2010 and 2014, which compares with net debt of £82m at the end of October.
Outlook
In light of the strong trading in the year to date, the Board now expects to report record results for the current year as a whole, around the top end of market expectations.
Although our order book remains at around the same level as this time last year, recent events in the world’s financial markets have created significant uncertainty for global construction markets, particularly for the commercial sector where conditions currently range from satisfactory to weak, depending on geography. However, the prospects for public infrastructure investment around the world remain good, whilst in our growing markets in the Middle East and Eastern Europe demand for our services continues to be strong. We expect 2009 to be characterised by challenging market conditions, particularly in the US where, of late, the outlook has clearly deteriorated. However, we believe the geographic diversity, proven business model and financial strength of the Group will provide resilience in these market conditions.
Keller will issue a trading update in respect of the year ending 31 December 2008 on 19 December 2008.