TIDMKLR
RNS Number : 5327U
Keller Group PLC
02 August 2022
2 August 2022
Keller Group plc Interim Results for the half year ended 26 June
2022
Keller Group plc ('Keller' or the 'Group'), the world's largest
geotechnical specialist contractor, announces its results for the
half year ended 26 June 2022.
Record profit in H1, confidence in H2 outlook maintained and
dividend increased
H1 2022 H1 2021 Constant currency
GBPm GBPm % change % change
-------- -------- -----------
Revenue 1,337.4 984.1 +36% +31%
Underlying operating profit(1) 49.6 39.5 +26% +19%
Underlying operating profit margin(1) 3.7% 4.0% -30bps n/a
Underlying diluted earnings per share(1) 46.5p 35.6p +31%
Net debt (bank covenant IAS 17 basis)(2) 194.0 113.4 +71%
Dividend per share 13.2p 12.6p +5%
Statutory operating profit 37.7 33.5
Statutory profit before tax 32.7 29.2
Statutory diluted earnings per share 33.5p 28.2p
Statutory net debt (IFRS 16 basis) 277.7 180.8
------------------------------------------ -------- -------- ----------- ------------------
(1) Underlying operating profit and underlying diluted earnings
per share are non-statutory measures which provide readers of this
Announcement with a balanced and comparable view of the Group's
performance by excluding the impact of non-underlying items, as
disclosed in note 7 of the interim condensed consolidated financial
statements.
(2) Net debt is presented on a lender covenant basis excluding
the impact of IFRS 16 as disclosed within the adjusted performance
measures in the interim condensed consolidated financial
statements.
Highlights
-- Record first half performance despite the current macroeconomic challenges
-- Revenue of GBP1,337.4m, up 31% on a constant currency basis,
reflecting growth in all three divisions as trading activity
recovered following the impacts of COVID-19
-- Record first half underlying operating profit of GBP49.6m, up
19% on a constant currency basis, driven by growth and the active
management of inflationary pressures and materials and labour
availability
-- Group operating margin of 3.7% reflects the passing on of
materials cost inflation with little or no mark-up and some
operational challenges in the North America Foundations
business
-- Net debt (on a bank covenant IAS 17 basis) of GBP194.0m,
equating to a net debt/EBITDA leverage ratio of 1.1x (H1 2021:
0.7x), well within our target range of 0.5x - 1.5x
-- Mobilising in preparation for work on major new contract to
undertake work on the prestigious NEOM project in Saudi Arabia
where we are well positioned, with the potential to generate
contract revenues in the hundreds of millions of pounds in future
years
-- A number of recent contract awards and prospects in the
energy and infrastructure sectors, including increased LNG activity
where Keller has both a well-established presence and an excellent
reputation
-- ESG: On climate action, we are making good progress towards
our net zero targets with specific actions taken at business unit
level in collaboration with industry partners
-- The overall accident frequency rate increased slightly to
0.09 from 0.08 injuries per 100,000 hours worked, driven by a small
number of lost time injuries in Europe. North America and AMEA
continued to show improvement, with zero injuries reported in
AMEA
-- Continued successful strategy execution, with a bolt-on
acquisition in North America and restructuring of specific business
units in Europe and AMEA
-- Interim dividend increased by 5% to 13.2p, continuing the
dividend policy of long-term progression, and building on the
Group's uninterrupted record of maintaining or increasing the
dividend since flotation in 1994. The Board is also reviewing a
further increase to the final dividend
Outlook
-- Record order book of GBP1.6bn at the end of June, up 31% on
the prior period, and up 22% on a constant currency basis,
underpinning future performance
-- The Board's expectations for the Group's full-year
performance remain unchanged, with our usual increase in trading
momentum and moderate second half weighting
Michael Speakman, Chief Executive Officer, said:
"Our record first half profit and the Group's record and growing
GBP1.6bn order book provides us with confidence for the second half
and for delivering on our expectations for the full year. Our
involvement in the prestigious NEOM project, together with a number
of recent infrastructure and LNG contract wins, demonstrates the
strength and inherent resilience of the Group across the
macroeconomic cycle. We remain very confident in the Group's
strategy and long-term prospects, which is reflected in the Board's
decision to recommence the progressive dividend policy with a 5%
increase in the interim dividend for the first half of 2022."
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 for investors and analysts will be held at 09.00am BST
on 2 August 2022
and will also be available later the same day on demand
https://www.investis-live.com/keller/62d1570959bc74140084098a/ebppos
Conference call: Accessing the telephone replay:
Participants joining by telephone: A recording will be available until
United Kingdom 0800 640 6441 9 August 2022
United Kingdom (Local) 020 3936 UK: 020 3936 3001
2999 USA: 1 845 709 8569
All other locations +44 20 3936 All other locations: +44 20 3936
2999 3001
Participant access code: 461478 Access code: 124678
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 more than GBP2bn.
Cautionary statements:
This document contains certain 'forward-looking statements' with
respect to Keller's financial condition, results of operations and
business and certain of Keller's plans and objectives with respect
to these items. Forward-looking statements are sometimes, but not
always, identified by their use of a date in the future or such
words as 'anticipates', 'aims', 'due', 'could', 'may', 'should',
'expects', 'believes', 'intends', 'plans', 'potential', 'reasonably
possible', 'targets', 'goal' or 'estimates'. By their very nature,
forward-looking statements are inherently unpredictable,
speculative and involve risk and uncertainty because they relate to
events and depend on circumstances that will occur in the future.
There are a number of factors that could cause actual results and
developments to differ materially from those expressed or implied
by these forward-looking statements. These factors include, but are
not limited to, changes in the economies and markets in which the
Group operates; changes in the regulatory and competition
frameworks in which the Group operates; the impact of legal or
other proceedings against or which affect the Group; and changes in
interest and exchange rates. For a more detailed description of
these risks, uncertainties and other factors, please see the
Principal risks and uncertainties section of the Strategic report
in the Annual Report and Accounts. All written or verbal
forward-looking statements, made in this document or made
subsequently, which are attributable to Keller or any other member
of the Group, or persons acting on their behalf, are expressly
qualified in their entirety by the factors referred to above.
Keller does not intend to update these forward-looking statements.
Nothing in this document should be regarded as a profits forecast.
This document is not an offer to sell, exchange or transfer any
securities of Keller Group plc or any of its subsidiaries and is
not soliciting an offer to purchase, exchange or transfer such
securities in any jurisdiction. Securities may not be offered, sold
or transferred in the United States absent registration or an
applicable exemption from the registration requirements of the US
Securities Act of 1933 (as amended).
LEI number: 549300QO4MBL43UHSN10. Classification: 1.2 (Half
yearly financial reports).
Adjusted performance measures
In addition to statutory measures, a number of adjusted
performance measures (APMs) are included in this Interim
Announcement to assist investors in gaining a clearer understanding
and balanced view of the Group's underlying results and in
comparing performance. These measures are consistent with how
business performance is measured internally.
The APMs used include underlying operating profit, underlying
earnings before interest, tax, depreciation and amortisation,
underlying net finance costs and underlying earnings per share,
each of which are the equivalent statutory measure adjusted to
eliminate the amortisation of acquired intangibles and other
significant one-off items not linked to the underlying performance
of the business. Net debt (bank covenant IAS 17 basis) is provided
as a key measure for measuring bank covenant compliance and is
calculated as the equivalent statutory measure adjusted to exclude
the additional lease liabilities relating to the adoption of IFRS
16. Further underlying constant exchange rate measures are given
which eliminate the impact of currency movements by comparing the
current measure against the comparative restated at this year's
actual average exchange rates. Where APMs are given, these are
compared to the equivalent measures in the prior year.
APMs are reconciled to the statutory equivalent, where
applicable, in the adjusted performance measures section in this
Announcement.
GROUP OVERVIEW
Financial performance
The Group delivered a strong recovery in the first half, with
significantly improved performance in terms of both revenue and
profit growth, delivering a record first half profit, despite the
challenging macroeconomic environment. As previously highlighted,
across the Group we have successfully passed on a significant
portion of cost increases in the form of higher prices, preserving
the absolute level of profitability. The operating margin, down 30
basis points, has inevitably been affected by project delays due to
some materials shortages, the residual unrecovered inflation and
the mathematical margin dilution effect of the increased material
costs passed through to clients.
The Group reported revenue of GBP1,337.4m, up 31% on the prior
period on a constant currency basis and up 20% excluding the impact
of the RECON acquisition. As anticipated, the return of market
demand drove trading activity across all our markets as the impacts
of COVID-19 subsided.
We delivered a record first half underlying operating profit of
GBP49.6m, an increase of 19% on a constant currency basis. The
recovery in market demand and the inclusion of RECON in North
America more than offset some operational challenges in the North
America Foundations business. These challenges in North America
also caused a softening of the Group's underlying operating margin,
along with the inflation-driven price increases passed onto clients
with little or no mark-up, and the operational challenges
associated with material and labour availability.
Increased trading activity across the Group was reflected in the
working capital profile, with net debt at the period end of
GBP194.0m, up 71%, equating to a net debt/EBITDA leverage ratio of
1.1x (H1 2021: 0.7x). Our target leverage ratio for the year end is
c1.0x, well within our target range of 0.5x - 1.5x.
Operating performance
Active management and market demand helped drive growth in our
revenue and operating profit, offsetting the macroeconomic
challenges including the impacts of raw material and labour
availability post COVID-19, the significant increase in inflation
and the war in Ukraine.
In North America, our foundations business experienced a high
level of activity in delivering on a backlog of projects.
Profitability was challenged due to material and labour
availability that impacted productivity, together with project
execution issues that resulted in some contract losses in the half.
Suncoast, the Group's post-tension business, continued to trade
well as demand in the residential single family home market offset
the impact of steel prices in the high-rise sector. Moretrench
Industrial, our business that operates in the highly regulated
environmental remediation market, continued to make good progress
in the period. RECON, the geotechnical and industrial services
company we acquired in July 2021, has integrated well and is
performing strongly and ahead of our expectations. The business is
managed under the Moretrench Industrial team as we establish and
build our new environmental, geotechnical and industrial services
business that will leverage our position in this large and growing
sector.
In Europe, revenue and profit increased, reflecting heightened
activity across all business units as our markets recovered
following the impact of COVID-19. The division has demonstrated
operational and financial resilience following the disruption
triggered by the war in Ukraine, in particular in managing the
impact of price escalation and shortages of raw materials across
the region.
Our AMEA (Asia-Pacific, Middle East and Africa) Division
delivered a strong turnaround in the period, as well as reporting a
zero accident frequency rate. We are encouraged by the turnaround
of the business over the last three years and, while we will
continue to refine areas of the portfolio, the division is well
placed for consistent future growth. The performance in the period
was primarily driven by management action that took advantage of
the recovery in trading in Australia and Middle East and Africa
(MEA) following the pandemic.
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. During 2020 and 2021 we made
considerable progress rationalising and restructuring the Group's
geographic and service activities to create a more focused, higher
quality portfolio of businesses. In 2022 we have maintained that
trajectory and successfully exited two of our more peripheral
geographies in our Europe Division as we continued to refine its
focus. In addition, we are looking at our South West Europe and
Middle East and Africa business units, both of which still retain a
legacy of geographically dispersed locations which will benefit
from further rationalisation and reorganisation.
A core pillar of our strategy is to further in-fill our chosen
local markets, both organically and through bolt-on acquisitions,
to accelerate our growth. In May, we completed the bolt-on
acquisition of GKM Consultants Inc, a small geo-structural
measurements and monitoring business based in Quebec, Canada. GKM
will integrate into our Specialty Services business in our North
America Division and will help accelerate our growth in this
specialist segment.
One of our strategic priorities starting in 2022 is the
successful implementation of an enterprise resource planning (ERP)
system. This initiative will embed operational excellence in
project execution across the whole Group, together with the
associated financial benefits. It will also help address the
emerging requirement for UK SOX. The initiative will be implemented
over five years and we will leverage our risk management processes
to help control the challenges associated with implementing the
programme of work.
Safety
Construction is an inherently dangerous industry and safety
remains our top priority. We saw an increase in the accident
frequency rate of 13% year on year, to 0.09 injuries per 100,000
hours worked. This increase is primarily due to six lost time
injuries in Europe in June. None of these injuries were classified
as critical but any increase demonstrates that we cannot be
complacent and must maintain our focus on the pursuit of zero harm.
North America and AMEA continued to show improvement, with AMEA
recording zero accidents in the period.
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.
Keller is actively working to embed sustainability within the
Group and this year there are three key elements to our
sustainability strategy to support this. First, setting long-term
and interim carbon reduction targets establishes clear and
measurable goals on environmental sustainability. Second, energy
audits and carbon calculator training provide our employees with
insight on the source of Keller's emissions, and tangible ways in
which to reduce our impact. Third, by tying our leaders' bonuses to
carbon-cutting initiatives, Keller is signalling its commitment to
making our environmental sustainability a top priority for the
company. To keep this strategy at the forefront of our employees'
minds, Keller is including carbon reduction discussions in our
quarterly webinars to our extended leadership teams, mandating
carbon reduction reporting from each business unit in their
quarterly updates and requiring carbon calculator training for all
our engineers.
During the pandemic, the Board approved funding of GBP300,000 to
UNICEF, where teams were able to work around the clock to
distribute billions of doses of the COVID-19 vaccines, to protect
frontline workers, teachers and families everywhere, as a result of
our contribution. The Board recognises the continued global
challenges faced by our communities and is therefore announcing a
new three-year partnership with UNICEF, commencing with a funding
contribution of GBP250,000 in 2022 towards its Core Resources for
Children. UNICEF's Core Resources for Children provides help
wherever the need is greatest. Whether it is needed for programmes
working to tackle the devastating effect of the climate crisis on
children's lives, or programmes to help support children caught in
conflict zones, our partnership will help UNICEF to continue to
provide life-saving support to those families in need.
Interim dividend
The Board recognises the importance of capital returns to our
shareholders and Keller has consistently and materially grown its
dividend in the 28 years since listing. This unbroken record of
dividends clearly demonstrates the Group's ability to continue to
prosper through economic downturns, including both the global
financial crisis and the pandemic. In the recent AGM trading
statement, the Board stated that it would be reviewing the
progression of the dividend. Accordingly, the Board has announced a
5% increase in the interim dividend to 13.2p (2021: 12.6p), payable
on 9 September 2022 to shareholders on the register as at 19 August
2022. The Board will also be reviewing a further increase to the
final dividend in respect of the current year as part of the
Group's return to a progressive dividend policy.
Outlook
After a relatively slow start to the year, trading momentum
improved as the first half progressed, despite the challenging
economic conditions. Whilst macroeconomic uncertainty continues to
increase, the combination of the Group's geographic footprint,
sector diversity, its record GBP1.6bn order book and an FX
tailwind, gives the Board confidence that the Group is on track to
deliver its expectations for the full year. The recently announced
NEOM project in Saudi Arabia further underpins this confidence and
has the potential to be a material contributor to the Group's
performance in the medium term.
Operating review
North America
H1 2022 H1 2021
Constant
GBPm GBPm currency
----------------------------- -------- --------
Revenue 865.7 581.7 +39%
Underlying operating profit 30.1 38.4 -27%
Underlying operating margin 3.5% 6.6% -310bps
Order book (1) 927.2 735.7 +26%
----------------------------- -------- -------- ----------
(1) Comparative order book stated at constant currency.
In North America, revenue was up 39% and up 22% excluding the
impact of the RECON acquisition (both on a constant currency
basis). Revenue growth was largely driven by price increases at
Suncoast and improved trading across all sectors post COVID-19.
Operating profit decreased by 27% on a constant currency basis to
GBP30.1m, largely driven by the foundations business, which
experienced cost inflation and shortages of materials and labour,
some contract losses, and a cGBP7m claim resolution which benefited
the prior period. This was partly offset by the inclusion of RECON
and a strong performance at Suncoast in the residential market. The
accident frequency rate, our key metric for measuring safety
performance, improved from 0.06 to 0.04.
In the foundations business, whilst revenue increased in almost
all business units, reflecting the increased activity levels post
COVID-19, our performance was affected by widespread material and
labour inflation and shortages. The business was able to pass on
these inflationary increases on a timely basis; however, material
and labour availability did reduce productivity and profitability.
Furthermore, there were project execution issues that resulted in
some contract losses.
Suncoast, the Group's post-tension business, performed strongly,
with increased demand continuing in the residential sector and new
high-rise contracts adjusted to reflect the market increases in
steel prices that had a significant adverse impact in the prior
period.
Moretrench Industrial, which operates in the highly regulated
industrial and power segments, performed in line with our
expectations and reported high levels of activity. RECON, the
geotechnical and industrial services company we acquired in July
2021, has integrated well and performed strongly and ahead of our
expectations. The business is managed under the Moretrench
Industrial team as we establish and build our new environmental,
geotechnical and industrial services business that will leverage
our position in this large and growing sector. The contract to
develop an energy facility in the Gulf Coast region of the USA,
worth approximately GBP120m, is progressing well. We continue to
explore further opportunities related to LNG in the region.
In the period we continued to make strategic progress through
the bolt-on acquisition of GKM Consultants Inc, a small
geo-structural measurements and monitoring business based in
Quebec, Canada. GKM has integrated into our Specialty Services
business in our North America Division and will help accelerate our
growth in this specialist segment.
The order book for North America at the period end strengthened
to GBP927.2m, up 26% on a constant currency basis, reflecting the
improved momentum across all the North American business units.
Europe
H1 2022 H1 2021
Constant
GBPm GBPm currency
----------------------------- -------- --------
Revenue 297.6 242.0 +26%
Underlying operating profit 13.9 5.7 +144%
Underlying operating margin 4.7% 2.4% +230bps
Order book(1) 390.5 373.2 +5%
----------------------------- -------- -------- ----------
(1) Comparative order book stated at constant currency.
In Europe, revenue increased by 26% and underlying operating
profit increased by 144% to GBP13.9m on a constant currency basis.
Improved activity levels and underlying operating profit growth
were reported across all five business units, reflecting a recovery
in our markets post the impact of COVID-19 and the ability of the
business to respond to the disruption triggered by the war in
Ukraine. The accident frequency rate increased to 0.28 from 0.17 as
a result of 10 lost time injuries. The injuries were classified as
non-critical and all have been subject to a thorough root cause
analysis.
Whilst the first half performance was robust, the period was
operationally challenging. There was a significant escalation in
supplier costs and energy prices, and delays in the delivery of
materials to site resulted in some downtime. Material price
inflation stabilised to some extent and increases were largely
passed onto our customers.
South-East Europe and Nordics delivered revenue and operating
profit growth, with the largest gains in Austria, Italy, Slovakia
and the Czech Republic. Activity levels in Norway were affected by
a de-scoping of a substantial part of the remaining works on the
Sandbukta-Moss-Sastad (SMS2) rail project. The order book was
bolstered by the award of the cGBP35m Tangenvika bridge project,
also in Norway, where work will start in 2023.
The UK business reported revenue and profit growth through the
core foundations business and continued good delivery on the High
Speed 2 (HS2) rail contract.
Our business in Central Europe increased revenue and profit,
driven by a number of large projects. Additionally, it has secured
some important project wins in the period that position it well for
the second half of the year.
The North-East Europe business continued to be profitable
despite being the most affected by the war in Ukraine, both from a
financial and humanitarian perspective. The leadership team and our
employees responded quickly to provide direct support to our
workers from Ukraine and their families and to assist with the
associated migration crisis in Poland.
South-West Europe has shown some recovery in the period, having
been heavily impacted by COVID-19 in the prior year. The
integration of our Iberian and French Speaking Countries operations
is now substantially complete following the merger announced
mid-2021.
Having announced the exit from smaller, non-core geographies
during the first half, we continue to actively monitor our European
portfolio as well as ensuring 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 GBP390.5m, up
5% on a constant currency basis.
Asia-Pacific, Middle East and Africa (AMEA)
H1 2022 H1 2021
Constant
GBPm GBPm currency
----------------------------- -------- --------
Revenue 174.1 160.4 +7%
Underlying operating profit 10.5 0.1 n/a
Underlying operating margin 6.0% 0.1% +590bps
Order book (1) 247.4 171.6 +44%
----------------------------- -------- -------- ----------
(1) Comparative order book stated at constant currency.
In AMEA, revenues increased by 7% on a constant currency basis,
driven by improved trading activity in Middle East and Africa
(MEA), Australia and India. Underlying operating profit increased
to GBP10.5m, primarily driven by the general recovery in trading.
There were no reported accidents in the period, with the accident
frequency rate falling from 0.03 to zero.
Austral continued to deliver a strong performance in terms of
both revenue and profit. Following the successful completion of the
large Cape Lambert upgrade project in the Pilbara region (cGBP75m),
the business has successfully secured a number of follow-on
resource related projects across the country.
Keller Australia significantly increased its trading activity in
delivering on the order book backlog resulting from COVID-19.
However, persistent heavy rains and flooding on the East Coast in
the second quarter temporarily impacted profitability. Tendering
levels were high and we anticipate this will continue in the second
half of the year.
The ASEAN business has experienced some continued market
softness, with the region continuing to feel the impacts of
COVID-19. We expect an improved trading environment in the second
half.
Our India business performed strongly, growing in revenue and
profit, having recovered following the impacts of COVID-19. The
business has experienced high tendering levels and has a number of
large industrial infrastructure projects in the pipeline.
The MEA business delivered strong growth in revenue and profit,
with an improved trading environment post COVID-19 that is expected
to gain further momentum in the second half of the year. In
Mozambique, the LNG project remains suspended through 2022.
As announced on 27 June 2022, Keller has made a strong
commitment to the transformational NEOM development in Saudi
Arabia. As recently announced by HRH Mohammad Bin Salam, the scale
of the project affords significant opportunity to companies of
Keller's skills and global reach. Keller has commenced mobilisation
of key resources and equipment to service this exciting opportunity
with further works orders expected to be awarded later in the year.
We have a longstanding presence in Saudi Arabia and we are
delighted to have been invited to participate in NEOM, a
world-class construction project. Following the signing of the
Framework Agreement, Keller is very well positioned to participate
in the future geotechnical work, with the potential to generate
contract revenues in the hundreds of millions of pounds in future
years.
The AMEA order book at the end of the period was GBP247.4m, up
44%, on a constant currency basis and excluding the benefit of
NEOM.
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 26 June 2022.
H1 2022 H1 2021
GBPm GBPm
---------------------------------- ------- -------
Revenue 1,337.4 984.1
Underlying operating profit(1) 49.6 39.5
Underlying operating profit %(1) 3.7% 4.0%
Non-underlying items (11.9) (6.0)
Statutory operating profit 37.7 33.5
----------------------------------- ------- -------
(1) Details of non-underlying items are set out in note 7 to the
interim condensed consolidated financial statements.
Reconciliations to statutory numbers are set out in the adjusted
performance measures section on page 37.
Geographic segmentation
Revenue Underlying operating profit(2) Underlying operating profit margin(2)
GBPm GBPm %
H1 2022 H1 2021 H1 2022 H1 2021 H1 2022 H1 2021
--------------- ------- ------- ---------------- --------------- ------------------- -------------------
Division
North America 865.7 581.7 30.1 38.4 3.5% 6.6%
Europe 297.6 242.0 13.9 5.7 4.7% 2.4%
AMEA 174.1 160.4 10.5 0.1 6.0% 0.1%
Central - - (4.9) (4.7) - -
------------------- ------- ------- ---------------- --------------- ------------------- -------------------
Group 1,337.4 984.1 49.6 39.5 3.7% 4.0%
------------------- ------- ------- ---------------- --------------- ------------------- -------------------
(2) Details of non-underlying items are set out in note 7 of the
interim condensed consolidated financial statements.
Revenue
Revenue of GBP1,337.4m (H1 2021: GBP984.1m) was 36% up on 2021
due to growth in all three divisions with some benefit from foreign
exchange tailwinds. On a constant currency basis, revenue increased
by 31% and on an organic constant currency basis, excluding the
impact of RECON revenue increased by 20%.
North America reported a revenue increase of 39% (at constant
currency), positively impacted by the RECON acquisition in H2 2021,
price increases at Suncoast and increased volumes in the US
Foundations business. Constant currency revenue growth excluding
RECON was 22%. In Europe, revenue increased by 26% (at constant
currency) as business activity levels increased compared to the
prior year which was still heavily impacted by COVID restrictions.
Revenue in AMEA increased by 7% on a constant currency basis, as
increased activity levels in Australia, India and the Middle East
more than offset softer volumes in Indonesia and Malaysia.
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 5% (H1 2021: 3%) 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 2021: 17%).
Underlying operating profit
The underlying operating profit of GBP49.6m was 26% ahead of
prior year (H1 2021: GBP39.5m) and on a constant currency basis was
19% up on prior year.
North America underlying constant currency operating profit
decreased by 27% as profitability was challenged due to the
increased cost of materials and labour as well as availability
constraints that impacted productivity and some project execution
issues. In addition, the prior half year period included the GBP7m
benefit from the resolution of a significant historic claim. Europe
constant currency operating profit increased 144%, reflecting the
bounce back post-COVID restrictions and the ability of the business
to respond to the disruption triggered by the war in Ukraine, and
managing the impact of price escalation and shortages of raw
materials across the region. AMEA constant currency operating
profit increased significantly in H1 2022, largely as a result of
the recovery in trading in Middle East and Africa (MEA) and
Australia following the impacts of the pandemic. The first half
last year was negatively impacted by the Mozambique LNG project
losses.
Share of post-tax results from joint ventures
The Group recognised an underlying post-tax profit of GBP0.9m in
the period (H1 2021: GBP0.3m) from its share of the post-tax
results from joint ventures. The share of the post-tax amortisation
charge of GBP0.7m (H1 2021: GBPnil) 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 GBP49.6m (H1 2021: GBP39.5m) and non-underlying items
comprising net costs of GBP11.9m (H1 2021: GBP6.0m), increased by
13% to GBP37.7m (H1 2021: GBP33.5m).
Net finance costs
Net finance costs increased by 16% to GBP5.0m (H1 2021:
GBP4.3m), as a result of a higher average net debt during the half
year. Average net borrowings, excluding IFRS 16 lease liabilities,
increased by 76% in the period from GBP123.4m during the half year
to 27 June 2021 to GBP217.8m during the half year to 26 June 2022,
as a result of increased working capital requirements.
Taxation
The Group's underlying effective tax rate decreased to 25% (H1
2021: 27%). The overall rate is determined by a range of factors,
but the reduction is mainly as a result of the change in profit mix
across the various tax jurisdictions in which we operate. The
actual underlying tax charge for the half year has been reduced by
GBP0.4m as a result of a reduction of a provision held for historic
taxes.
Cash tax paid in the period of GBP2.4m was a decrease of GBP9.5m
over prior year (H1 2021: GBP11.9m). The difference is mainly due
to the timing and phasing of tax payments which do not necessarily
relate to the period in which the profits are earned. Further
details on tax are set out in note 8 of the interim condensed
consolidated financial statements.
The Group is monitoring developments in the OECD's Pillar 2
proposals to agree minimum effective tax rates across jurisdictions
participating in the OECD programme. Although the Group's
activities are mainly in territories which will be unaffected by
the Pillar 2 proposals, it is possible that additional tax will be
charged in the future in countries where corporate tax rates are
increased. Any changes are not expected to be introduced before
2024.
Under draft proposals introduced to the US Congress in 2021, the
Group would potentially be subject to adverse changes in respect of
measures intended to limit the tax deductibility of intra-group
financing costs. The proposed measures were unable to secure
passage through Congress in 2021 and the Group is awaiting
developments to see if the measures, and whether they are in
original or revised form, are reintroduced in 2022. At present
there is insufficient evidence to assess the probable financial
impact on the Group's future tax position.
Non-underlying items
Details of non-underlying items are included in note 7 to the
interim condensed consolidated financial statements.
Amortisation of acquired intangibles
The GBP5.8m (H1 2021: GBP0.4m) charge for amortisation of
acquired intangible assets relates primarily to the RECON,
Moretrench and Voges acquisitions in the current half year and to
the Moretrench acquisition in the prior half year.
Non-underlying operating costs
Non-underlying operating costs were GBP6.1m (H1 2021:
GBP6.3m).
The Group has recognised costs of GBP3.5m relating to a
historical contract dispute. Exceptional restructuring costs of
GBP1.2m (H1 2021: GBP3.1m) have been incurred during the period
related to the scheduled exit from the Ivory Coast business. The
prior year costs primarily related to rationalisation activities
within the Europe Division and KGS, the in-house equipment
manufacturer.
The Group has commenced a 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 five years . The cost recognised in the first half is
GBP1.2m.
An impairment charge of GBP0.4m was recognised in respect of
trade receivables in Ukraine that are not expected to be recovered
due to the ongoing conflict.
A net credit of GBP0.2m (H1 2021: GBP1.3m cost) arising from a
change in the fair value of contingent considerations related to
prior year acquisitions has been recognised in non-underlying
operating costs, in line with the Group's policy to show
acquisition-related costs separately from the underlying
performance of the business.
The prior half year period included the loss on classification
of disposal group for the Cyntech Anchors business of GBP1.9m.
Non-underlying other operating income
Non-underlying other operating income of GBP0.7m (H1 2021:
GBP0.7m) is contingent consideration receivable in relation to the
Wannenwetsch disposal, completed in 2020.
Non-underlying taxation
A non-underlying tax credit of GBP2.4m (H1 2021: GBP0.6m)
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 31% to 46.5p
(H1 2021: 35.6p) in line with the increased operating profit
combined with a reduced effective tax rate in the period. Statutory
diluted earnings per share was 33.5p (H1 2021: 28.2p).
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 13.2p per share (H1 2021: 12.6p per
share) .
Free cash flow
The Group's free cash outflow of GBP46.8m (H1 2021: inflow of
GBP26.9m) has been impacted by the 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 2022 H1 2021
GBPm GBPm
-------------------------------------------------------------------------------- ------- -------
Underlying operating profit 49.6 39.5
Depreciation and amortisation 48.5 44.5
--------------------------------------------------------------------------------- ------- -------
Underlying EBITDA 98.1 84.0
--------------------------------------------------------------------------------- ------- -------
Non-cash items (1.1) (0.7)
(Increase)/decrease in working capital (93.2) 3.9
Outflows from provisions, retirement benefit liabilities and other non-current
liabilities (9.7) (7.1)
Net capital expenditure (23.4) (26.4)
Additions to right-of-use assets (12.3) (10.6)
Free cash flow before interest and tax (41.6) 43.1
Free cash flow before interest and tax to underlying operating profit (84%) 109%
--------------------------------------------------------------------------------- ------- -------
Net interest paid (2.8) (4.3)
Cash tax paid (2.4) (11.9)
--------------------------------------------------------------------------------- ------- -------
Free cash flow (46.8) 26.9
--------------------------------------------------------------------------------- ------- -------
Dividends paid to shareholders - (16.8)
Purchase of own shares (1.2) -
Acquisitions (15.6) -
Non-underlying items (1.7) (1.7)
Right-of-use assets/lease liability modifications (4.4) 0.8
Foreign exchange movements (14.7) 2.5
--------------------------------------------------------------------------------- ------- -------
Movement in net debt (84.4) 11.7
--------------------------------------------------------------------------------- ------- -------
Opening net debt (193.3) (192.5)
--------------------------------------------------------------------------------- ------- -------
Closing net debt (277.7) (180.8)
--------------------------------------------------------------------------------- ------- -------
Working capital
The working capital performance reflects the increased activity
in H1, as the revenue volumes grow post-pandemic resulting in an
increased working capital position. The net increase of GBP93.2m
(H1 2021: GBP3.9m decrease) includes the impact of supply chain
requirements for earlier payments in order to ensure delivery of
materials to site. There was a decrease in provisions and
retirement benefits of GBP9.7m (H1 2021: GBP7.1m), reflecting
utilisations and legal settlements in the period.
Capital expenditure
The Group manages capital expenditure tightly whilst investing
in the upgrade and replacement of equipment where appropriate. Net
capital expenditure of GBP23.4m (H1 2021: GBP26.4m) included
proceeds from the sale of equipment of GBP3.3m (H1 2021: GBP5.5m).
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 76% (H1 2021: 101%).
Acquisitions and disposals
On 2 May 2022, the Group acquired GKM Consultants Inc. for an
initial cash consideration of GBP3.6m and GBP1.3m of contingent
consideration to be paid based on future profitability of the
acquired entity. The business is an instrumentation and monitoring
provider based in Quebec, Canada and is included in the North
America Division.
The acquisition cash flow of GBP15.6m includes the GKM outflow
of GBP3.4m, net of GBP0.2m of acquired cash and GBP12.2m of
contingent and deferred consideration relating to past
acquisitions.
There were no material acquisitions or disposals in the period
ended 27 June 2021.
Financing facilities and net debt
The Group's term debt and committed facilities principally
comprise US private placements of US$75m (GBP61.0m) which mature in
December 2024 and a GBP375m multi-currency syndicated revolving
credit facility which matures in November 2025. At 26 June 2022,
the Group had undrawn committed and uncommitted borrowing
facilities totalling GBP215.7m comprising GBP144.3m of the
unutilised portion of the revolving credit facility, GBP18.4m of
other undrawn committed borrowing facilities and undrawn
uncommitted borrowing facilities of GBP53.0m, as well as cash and
cash equivalents of GBP85.8m.
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 1.1x (H1 2021: 0.7x), 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 26 June 2022
(H1 2021: 0.9x). Underlying EBITDA, excluding the impact of IFRS
16, to net finance charges for the period to 26 June 2022 was 27.5x
(H1 2021: 30.5x), well above the limit of 4.0x.
On an IFRS 16 basis, gearing at 26 June 2022 was 56% (H1 2021:
44%).
The average month-end net debt during the period ended 26 June
2022, excluding IFRS 16 lease liabilities, was GBP217.8m (H1 2021:
GBP123.4m) and the minimum headroom during this period on the
Group's main banking facility was GBP75.6m (H1 2021: GBP250.2m), in
addition to a cash balance at that time of GBP89.4m (H1 2021:
GBP116.8m). 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 26 June 2022 the Group had drawn upon uncommitted overdraft
facilities of GBP0.5m (H1 2021: GBP4.5m) and had drawn GBP165.2m of
bank guarantee facilities (H1 2021: GBP163.1m).
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 26 June 2022 were GBP22.5m
(H1 2021: GBP23.0m). The reduction in the half year period was
driven by an actuarial gain of GBP2.2m on the German and Austrian
schemes, reflecting a higher discount rate driven by the increase
in interest rates during the first half of 2022. The net defined
liability for the Keller Group Pension Scheme in the UK as at 26
June 2022 is GBP5.4m (H1 2021: GBP2.7m), being the minimum funding
requirement, calculated using the agreed contributions.
Prior year balance sheet restatement
As a result of the restatement at 31 December 2021 of insurance
reimbursement receivables and the provision for insurance and legal
claims, the comparative consolidated balance sheet as at 27 June
2021 has been restated. Consequently, the Group has increased
current provisions by GBP0.6m, increased non-current provisions by
GBP31.0m and increased trade and other receivables by GBP0.6m and
non-current other assets by GBP31.0m. As a result of the
restatement in respect of the non-current element of trade
receivables arising from customer retentions, the comparative
consolidated balance sheet at 27 June 2021 has been restated to
increase non-current other assets by GBP20.4m and decrease trade
and other receivables by GBP20.4m. Further details on this are set
out in note 2 of the interim condensed consolidated financial
statements.
The comparative consolidated balance sheet as at 31 December
2021 has been restated to reflect the prior year measurement period
adjustment as a result of finalising the provisional fair value of
assets and liabilities acquired with RECON Services Inc.
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 2022 H1 2021
Closing Average Closing Average
------- ------- ------- -------
USD 1.23 1.30 1.39 1.39
CAD 1.58 1.65 1.71 1.73
EUR 1.16 1.19 1.16 1.15
SGD 1.70 1.77 1.87 1.85
AUD 1.77 1.81 1.83 1.80
------- ------- ------- -------
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 2022. 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.
The important developments in managing our principal risks
during 2022 are as follows:
-- continued focus on embedding risk management processes across
all parts of the organisation;
-- 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 risk reporting;
-- maintaining focus on managing the continued impact of
COVID-19 even as its impact on the business has declined.
The key areas of focus for the remainder of 2022 are as
follows:
-- finalising and developing appropriate scenario analyses
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 2022 year-end reporting:
o Supply chain issues, including both scarcity of certain
materials (steel, cement and energy) and the pricing impact of
this, which has come under renewed pressure as a result of the
geopolitical uncertainty following Russia's invasion of Ukraine.
This will be closely monitored in the coming months as the volume
of gas supplies from Russia become even more significant as Europe
moves into autumn and winter.
o Recruitment and retention which is being exacerbated by the
inflationary pressure in many of our markets.
o Inflation and interest rates, which if they continue to rise
may negatively impact customer confidence in many of the markets in
which we operate as they delay investment decisions on new
projects, while they evaluate the trajectory of both.
o The continuing impact from COVID-19 in specific markets
continues to diminish across the majority of the markets in which
we operate, but we are observing different responses driven by new
waves of infection set against vaccination levels in the
population. These include the introduction of mandates on
vaccination and/or testing regimes, plus the reintroduction of
partial lockdowns.
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 2021 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
1 August 2022
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 26 June 2022, which comprises the
consolidated income statement, consolidated statement of
comprehensive income, consolidated balance sheet, consolidated
statements of changes in equity, 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 26
June 2022 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' issued by the Financial Reporting Council. A review of
interim financial information consists of making enquiries,
primarily of persons responsible for financial and accounting
matters, and applying analytical and other review procedures. A
review is substantially less in scope than an audit conducted in
accordance with International Standards on Auditing (UK) and
consequently does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in
an audit. Accordingly, we do not express an audit opinion.
As disclosed in note 2, the annual financial statements of the
Group are prepared in accordance with UK adopted international
accounting standards. The condensed set of financial statements
included in this half-yearly financial report has been prepared in
accordance with UK adopted International Accounting Standard 34,
'Interim Financial Reporting'.
Conclusions relating to going concern
Based on our review procedures, which are less extensive than
those performed in an audit, as described in the basis for
conclusion section of this report, nothing has come to our
attention to suggest that management have inappropriately adopted
the going concern basis of accounting or that management have
identified material uncertainties relating to going concern that
are not appropriately disclosed.
This conclusion is based on the review procedures performed in
accordance with this ISRE, however future events or conditions may
cause the entity to cease to continue as a going concern.
Responsibilities of the Directors
The Directors are responsible for preparing the half-yearly
financial report in accordance with the Disclosure Guidance and
Transparency Rules of the United Kingdom's Financial Conduct
Authority.
In preparing the half-yearly financial report, the Directors are
responsible for assessing the company's ability to continue as a
going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless the
Directors either intend to liquidate the company or to cease
operations, or have no realistic alternative but to do so.
Auditor's responsibilities for the review of the financial
information
In reviewing the half-yearly report, we are responsible for
expressing to the company a conclusion on the condensed set of
financial statements in the half-yearly financial report. Our
conclusion, including our conclusions relating to going concern,
are based on procedures that are less extensive than audit
procedures, as described in the basis for conclusion paragraph of
this report.
Use of our report
This report is made solely to the company in accordance with
guidance contained in International Standard on Review Engagements
2410 (UK) 'Review of Interim Financial Information Performed by the
Independent Auditor of the Entity' issued by the Financial
Reporting Council. To the fullest extent permitted by law, we do
not accept or assume responsibility to anyone other than the
company, for our work, for this report, or for the conclusions we
have formed.
Ernst & Young LLP
Reading
1 August 2022
Interim condensed consolidated income statement (unaudited)
For the half year period ended 26 June 2022
2022 2021
-------------------------- ---- ------------------------------------- ---------- -------------- ---------
Non-underlying Non-underlying
items items
Underlying (note 7) Statutory Underlying (note 7) Statutory
Note GBPm GBPm GBPm GBPm GBPm GBPm
-------------------------- ---- ---------- -------------- --------- ---------- -------------- ---------
Revenue 4,5 1,337.4 - 1,337.4 984.1 - 984.1
Operating costs (1,288.7) (6.1) (1,294.8) (944.9) (6.3) (951.2)
Amortisation of acquired
intangible assets - (5.8) (5.8) - (0.4) (0.4)
Other operating income - 0.7 0.7 - 0.7 0.7
Share of post-tax results
of joint ventures 0.9 (0.7) 0.2 0.3 - 0.3
-------------------------- ---- ---------- -------------- --------- ---------- -------------- ---------
Operating profit/(loss) 4 49.6 (11.9) 37.7 39.5 (6.0) 33.5
Finance income 0.3 - 0.3 0.1 - 0.1
Finance costs (5.3) - (5.3) (4.4) - (4.4)
-------------------------- ---- ---------- -------------- --------- ---------- -------------- ---------
Profit/(loss) before
taxation 44.6 (11.9) 32.7 35.2 (6.0) 29.2
Taxation 8 (10.7) 2.4 (8.3) (9.5) 0.6 (8.9)
-------------------------- ---- ---------- -------------- --------- ---------- -------------- ---------
Profit/(loss) for the
period 33.9 (9.5) 24.4 25.7 (5.4) 20.3
-------------------------- ---- ---------- -------------- --------- ---------- -------------- ---------
Attributable to:
Equity holders of the
parent 34.1 (9.5) 24.6 26.0 (5.4) 20.6
Non-controlling interests (0.2) - (0.2) (0.3) - (0.3)
-------------------------- ---- ---------- -------------- --------- ---------- -------------- ---------
33.9 (9.5) 24.4 25.7 (5.4) 20.3
-------------------------- ---- ---------- -------------- --------- ---------- -------------- ---------
Earnings per share
Basic 10 47.0p 33.9p 36.0p 28.5p
Diluted 10 46.5p 33.5p 35.6p 28.2p
-------------------------- ---- ---------- -------------- --------- ---------- -------------- ---------
Interim condensed consolidated statement of comprehensive income
(unaudited)
For the half year period ended 26 June 2022
2022 2021
GBPm GBPm
--------------------------------------------------------- ----- -----
Profit for the period 24.4 20.3
--------------------------------------------------------- ----- -----
Other comprehensive income
Items that may be reclassified subsequently to profit
or loss:
Exchange movements on translation of foreign operations 41.8 (8.7)
Exchange movements on translation of non-controlling
interests 0.2 -
Items that will not be reclassified subsequently to
profit or loss:
Remeasurements of defined benefit pension schemes 2.2 5.8
Tax on remeasurements of defined benefit pension schemes (0.4) (0.9)
--------------------------------------------------------- ----- -----
Other comprehensive income/(loss) for the period, net
of tax 43.8 (3.8)
--------------------------------------------------------- ----- -----
Total comprehensive income for the period 68.2 16.5
--------------------------------------------------------- ----- -----
Attributable to:
Equity holders of the parent 68.2 16.8
Non-controlling interests - (0.3)
--------------------------------------------------------- ----- -----
68.2 16.5
--------------------------------------------------------- ----- -----
Interim condensed consolidated balance sheet (unaudited)
As at 26 June 2022
As
at As at(1) As at(2)
26
June 27 June 31 December
2022 2021 2021
Note GBPm GBPm GBPm
--------------------------------------- ---- ----- ---------- --------- -------------
Assets
Non-current assets
Goodwill and intangible assets 149.1 116.9 141.4
Property, plant and equipment 11 468.1 417.7 443.4
Investments in joint ventures 4.4 4.6 4.0
Deferred tax assets 14.3 8.4 13.0
Other assets 111.4 77.0 88.5
--------------------------------------------- ----- ---------- --------- -------------
747.3 624.6 690.3
-------------------------------------------- ----- ---------- --------- -------------
Current assets
Inventories 107.3 74.5 72.1
Trade and other receivables 742.6 523.7 592.0
Current tax assets 9.5 8.2 8.9
Cash and cash equivalents 12 85.8 116.8 82.7
--------------------------------------------- ----- ---------- --------- -------------
Assets held for sale 13 1.0 23.6 3.4
--------------------------------------------- ----- ---------- --------- -------------
946.2 746.8 759.1
-------------------------------------------- ----- ---------- --------- -------------
Total assets 1,693.5 1,371.4 1,449.4
--------------------------------------------- ----- ---------- --------- -------------
Liabilities
Current liabilities
Loans and borrowings (29.0) (65.9) (29.8)
Current tax liabilities (24.5) (19.7) (17.9)
Trade and other payables (605.0) (450.7) (505.7)
Provisions (59.9) (45.3) (53.8)
--------------------------------------------- ----- ---------- --------- -------------
Liabilities directly associated with
assets held for sale 13 - (10.5) -
--------------------------------------------- ----- ---------- --------- -------------
(718.4) (592.1) (607.2)
-------------------------------------------- ----- ---------- --------- -------------
Non-current liabilities
Loans and borrowings (334.5) (231.7) (246.2)
Retirement benefit liabilities 14 (22.5) (23.0) (25.7)
Deferred tax liabilities (31.5) (20.4) (28.3)
Provisions (76.5) (72.4) (77.9)
Other liabilities (15.3) (20.3) (21.2)
--------------------------------------------- ----- ---------- --------- -------------
(480.3) (367.8) (399.3)
-------------------------------------------- ----- ---------- --------- -------------
Total liabilities (1,198.7) (959.9) (1,006.5)
--------------------------------------------- ----- ---------- --------- -------------
Net assets 494.8 411.5 442.9
--------------------------------------------- ----- ---------- --------- -------------
Equity
Share capital 16 7.3 7.3 7.3
Share premium account 38.1 38.1 38.1
Capital redemption reserve 16 7.6 7.6 7.6
Translation reserve 53.4 7.6 11.6
Other reserve 16 56.9 56.9 56.9
Retained earnings 328.7 290.6 318.6
--------------------------------------------- ----- ---------- --------- -------------
Equity attributable to equity holders
of the parent 492.0 408.1 440.1
Non-controlling interests 2.8 3.4 2.8
--------------------------------------------- ----- ---------- --------- -------------
Total equity 494.8 411.5 442.9
--------------------------------------------- ----- ---------- --------- -------------
1 The 27 June 2021 consolidated balance sheet has been restated
for items disclosed in the 2021 Annual Report and Accounts, as
outlined in note 2 to the interim financial statements.
2 The 31 December 2021 consolidated balance sheet has been
restated in respect of prior period measurement adjustments, as
outlined in notes 2 and 6 to the interim financial statements.
Interim condensed consolidated statement of changes in equity
(unaudited)
For the half year period ended 26 June 2022
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(1) 7.3 38.1 7.6 11.6 56.9 318.6 2.8 442.9
--------------- --------- --------- ----------- ------------- ---------- ---------- ---------------- ---------
Total
comprehensive
income for
the
period - - - 41.8 - 26.4 - 68.2
--------------- --------- --------- ----------- ------------- ---------- ---------- ---------------- ---------
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 53.4 56.9 328.7 2.8 494.8
--------------- --------- --------- ----------- ------------- ---------- ---------- ---------------- ---------
1 Retained earnings as at 31 December 2021 have been restated in
respect of prior period measurement adjustments, as outlined in
notes 2 and 6 to the interim financial statements.
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
2020 7.3 38.1 7.6 16.3 56.9 280.1 3.7 410.0
--------------- --------- --------- ----------- ------------- ---------- ---------- ---------------- ---------
Total
comprehensive
(loss)/income
for the
period - - - (8.7) - 25.5 (0.3) 16.5
--------------- --------- --------- ----------- ------------- ---------- ---------- ---------------- ---------
Dividends - - - - - (16.8) - (16.8)
Share-based
payments - - - - - 1.8 - 1.8
At 27 June
2021 7.3 38.1 7.6 7.6 56.9 290.6 3.4 411.5
--------------- --------- --------- ----------- ------------- ---------- ---------- ---------------- ---------
Interim condensed consolidated cash flow statement
(unaudited)
For the half year period ended 26 June 2022
2022 2021
Note GBPm GBPm
-------------------------------------------------------- ----- -------- -------
Cash flows from operating activities
Profit before taxation 32.7 29.2
Non-underlying items 11.9 6.0
Finance income (0.3) (0.1)
Finance costs 5.3 4.4
--------------------------------------------------------- ----- -------- -------
Underlying operating profit 4 49.6 39.5
Depreciation of property, plant and equipment 48.2 44.2
Amortisation of intangible assets 0.3 0.3
Share of underlying post-tax results of joint ventures (0.9) (0.3)
Profit on sale of property, plant and equipment 11 (2.5) (1.5)
Other non-cash movements 2.3 1.2
Foreign exchange gains - (0.1)
--------------------------------------------------------- ----- -------- -------
Operating cash flows before movements in working
capital and other underlying items 97.0 83.3
Increase in inventories (28.3) (20.3)
Increase in trade and other receivables (121.9) (59.5)
Increase in trade and other payables 57.0 83.7
Decrease in provisions, retirement benefit and other
non-current liabilities (9.7) (7.1)
--------------------------------------------------------- ----- -------- -------
Cash generated from operations before non-underlying
items (5.9) 80.1
Cash outflows from non-underlying items: ERP costs (0.2) -
Cash outflows from non-underlying items: restructuring
costs (1.5) (1.7)
Cash generated from operations (7.6) 78.4
Interest paid (0.9) (2.6)
Interest element of lease rental payments (1.8) (1.5)
--------------------------------------------------------- ----- -------- -------
Income tax paid (2.4) (11.9)
--------------------------------------------------------- ----- -------- -------
Net cash (outflow)/inflow from operating activities (12.7) 62.4
--------------------------------------------------------- ----- -------- -------
Cash flows from investing activities
Interest received 0.3 0.1
Proceeds from sale of property, plant and equipment 3.3 5.5
Acquisition of businesses, net of cash acquired 6 (15.6) -
Acquisition of property, plant and equipment 11 (26.6) (31.7)
Acquisition of other intangible assets (0.1) (0.2)
Net cash outflow from investing activities (38.7) (26.3)
--------------------------------------------------------- ----- -------- -------
Cash flows from financing activities
Increase in borrowings 68.2 52.6
Cash flows from derivative instruments 0.2 -
Repayment of borrowings (1.7) (7.4)
Payment of lease liabilities (15.4) (12.9)
Purchase of own shares for ESOP trust (1.2) -
Dividends paid 9 - (16.8)
--------------------------------------------------------- ----- -------- -------
Net cash inflow from financing activities 50.1 15.5
--------------------------------------------------------- ----- -------- -------
Net (decrease)/increase in cash and cash equivalents (1.3) 51.6
--------------------------------------------------------- ----- -------- -------
Cash and cash equivalents at beginning of period 81.8 61.6
Effect of exchange rate movements 4.8 (0.9)
--------------------------------------------------------- ----- -------- -------
Cash and cash equivalents at end of period 12 85.3 112.3
--------------------------------------------------------- ----- -------- -------
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 26 June 2022 were authorised for
issue in accordance with a resolution of the Directors on 1 August
2022.
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 2021. The interim report does not
constitute statutory accounts. The financial information for the
year ended 31 December 2021 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 2021 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 year ended 31 December 2022 will be prepared in
accordance with UK adopted international accounting standards.
The accounting policies adopted in the preparation of the
interim condensed consolidated financial statements are consistent
with those followed in the preparation of the Group's annual
consolidated financial statements for the year ended 31 December
2021, except in respect of the adoption of new standards effective
as of 1 January 2022. The following applicable amendments apply for
the first time in 2022:
-- Amendments to IAS 37 'Onerous Contracts - Costs of Fulfilling a Contract'.
-- Amendments to IAS 16 'Property, Plant and Equipment: Proceeds before Intended Use'.
-- IFRS 9 Financial Instruments 'Fees in the '10 per cent' test for derecognition of financial liabilities'.
These amendments have a limited impact on the consolidated
financial statements of the Group.
The Group has not early adopted any standard, interpretation or
amendment that has been issued but is not yet effective.
Amendments to IAS 37 'Onerous Contracts - Costs of Fulfilling a
Contract'
An onerous contract is a contract under which the unavoidable
costs (ie, the costs that the Group cannot avoid because it has the
contract) of meeting the obligations under the contract exceed the
economic benefits expected to be received under it. The amendments
specify that when assessing whether a contract is onerous or
loss-making, an entity needs to include costs that relate directly
to a contract to provide goods or services including both
incremental costs (eg, the costs of direct labour and materials)
and an allocation of costs directly related to contract activities
(eg, depreciation of equipment used to fulfil the contract as well
as costs of contract management and supervision). General and
administrative costs do not relate directly to a contract and are
excluded unless they are explicitly chargeable to the counterparty
under the contract. This amendment does not have an impact on the
interim condensed consolidated financial statements of the Group as
an allocation of costs directly related to contract activities was
previously included in the unavoidable costs used in the costs to
complete assessment for onerous contracts and the Group does not
include an allocation of general overheads.
Amendments to IAS 16 'Property, Plant and Equipment: Proceeds
before Intended Use'
The amendments prohibit entities from deducting from the cost of
an item of property, plant and equipment, any proceeds of the sale
of items produced while bringing that asset to the location and
condition necessary for it to be capable of operating in the manner
intended by management. Instead, an entity recognises the proceeds
from selling such items, and the costs of producing those items, in
profit or loss. These amendments had no impact on the interim
condensed consolidated financial statements of the Group as there
were no sales of such items produced by property, plant and
equipment made available for use on or after the beginning of the
earliest period presented.
IFRS 9 Financial Instruments 'Fees in the '10 per cent' test for
derecognition of financial liabilities'
The amendment clarifies the fees that an entity includes when
assessing whether the terms of a new or modified financial
liability are substantially different from the terms of the
original financial liability. These fees include only those paid or
received between the borrower and the lender, including fees paid
or received by either the borrower or lender on the other's behalf.
This amendment had no impact on the interim condensed consolidated
financial statements of the Group as there were no modifications of
the Group's financial instruments during the period.
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 2023, a period of
at least 12 months from when the interim financial statements are
authorised for issue and aligning with the interval 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 in the 2021 Annual Report and Accounts and there
have been no changes since in management's risk assessment. 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.
-- 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 GBP33.5m over the
period to 31 December 2023. These risks include 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 an 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. The most extreme downside scenario modelled included an
aggregation of all risks considered. This showed a decrease in the
18-month rolling operating profit to 31 December 2023 of 62.2%
compared to the base case and an increase in net debt of 41.9%
against the Group's latest forecast and cash flow projections for
the review period up to 31 December 2023. Even in these
circumstances, 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 2023, a period of at least 12 months from when the
interim consolidated financial statements are authorised for issue.
Accordingly, the interim consolidated financial statements are
prepared on a going concern basis.
At 26 June 2022, the Group had undrawn committed and uncommitted
borrowing facilities totalling GBP215.7m, comprising GBP144.3m of
the unutilised portion of the revolving credit facility, GBP18.4m
of other undrawn committed borrowing facilities and undrawn
uncommitted borrowing facilities of GBP53.0m, as well as cash of
GBP85.8m. At 26 June 2022, the Group's net debt to underlying
EBITDA ratio (calculated on an IAS 17 covenant basis, as documented
in the adjusted performance measures section) was 1.1x, well within
the covenant limit of 3.0x.
Prior year restatement as at 27 June 2021
The below restatements were made to the comparative consolidated
balance sheet for the year ending 31 December 2020, published in
the 2021 Annual Report and Accounts. For the 2022 interim report,
the comparative consolidated balance sheet as at 27 June 2021 has
been restated.
Insured liabilities restatement
In October 2021, the Group received a letter from the Financial
Reporting Council (FRC) as part of its regular review and
assessment of the quality of corporate reporting in the UK,
following the Group's inclusion in the 'Thematic review on
Provisions, Contingent Liabilities and Contingent Assets'. The
letter included a request for further information on the Group's
Annual Report and Accounts for the year ended 31 December 2020. The
review conducted by the FRC was based solely on the Group's
published Annual Report and Accounts and does not provide any
assurance that the Annual Report and Accounts are correct in all
material respects.
Following finalisation of the correspondence with the FRC, the
Directors have concluded that the insurance reimbursement
receivables relating to claims made against the Group should be
separately presented gross on the consolidated balance sheet,
rather than netted off against the insurance and legal
provision.
Retentions restatement
Separately from the above, the element of trade receivables
relating to customer retentions expected to be received in more
than one year was previously disclosed separately in the revenue
note to the year-end accounts, but classified incorrectly within
the trade and other receivables balance sheet line. The Group has
amended this disclosure and separately categorised this receivable
within other non-current assets as detailed below.
As a result of these items, the consolidated balance sheet as at
27 June 2021 has been restated as follows:
Consolidated balance sheet
27 June
27 June
2021 Retentions 2021
Insured
liabilities
(as reported) restatement restatement (restated)
GBPm GBPm GBPm GBPm
------------------------------------------- --------------- ------------- ------------- -------------
Non-current assets
Other assets 25.6 31.0 20.4 77.0
Current assets
Trade and other receivables 543.5 0.6 (20.4) 523.7
Current liabilities
Provisions (44.7) (0.6) - (45.3)
Of which: Insurance and legal provisions (9.6) (0.6) - (10.2)
Other provisions (35.1) - - (35.1)
Non-current liabilities
Provisions (41.4) (31.0) - (72.4)
Of which: Insurance and legal provisions (26.4) (31.0) - (57.4)
Other provisions (15.0) - - (15.0)
------------------------------------------- --------------- ------------- ------------- -------------
The restatement did not result in any change to reported profit,
earnings per share, net assets or cash flows reported in the half
year period to 27 June 2021.
Prior year measurement period adjustment as at 31 December
2021
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 2021, the Group acquired RECON
Services Inc. Adjustments to the provisional fair values were made
during the measurement period, as set out in note 6. The impact of
the measurement period adjustments has been applied
retrospectively, meaning that the results and financial position
for the year to 31 December 2021 have been restated as follows:
Consolidated balance sheet
31 December 31 December
2021 2021
Impact of
measurement
(as reported) period adjustments (restated)
GBPm GBPm GBPm
-------------------------------- --------------- -------------------- -------------
Non-current assets
Goodwill and intangible assets 141.5 (0.1) 141.4
Of which: Goodwill 121.3 1.1 122.4
Intangible assets 20.2 (1.2) 19.0
--------------- -------------------- -------------
Non-current liabilities
--------------- -------------------- -------------
Deferred tax liabilities (28.6) 0.3 (28.3)
--------------- -------------------- -------------
Retained earnings 318.4 0.2 318.6
-------------------------------- --------------- -------------------- -------------
Significant accounting judgements, estimates and assumptions
During the half year period to 26 June 2022, there have not been
any changes in the significant accounting judgements, estimates and
assumptions disclosed in the 2021 Annual Report and Accounts.
3. Foreign currencies
The exchange rates used in respect of principal currencies
are:
Average for period Period end
---------------------------------------- -----------------------------------
Half Half year
year period period
to to Year to As at As at As at
26 June 27 June 31 December 26 June 27 June 31 December
2022 2021 2021 2022 2021 2021
------------------- ------------- ---------- ------------- --------- --------- -------------
US dollar 1.30 1.39 1.38 1.23 1.39 1.35
Canadian dollar 1.65 1.73 1.72 1.58 1.71 1.71
Euro 1.19 1.15 1.16 1.16 1.16 1.19
Singapore dollar 1.77 1.85 1.85 1.70 1.87 1.82
Australian dollar 1.81 1.80 1.83 1.77 1.83 1.86
------------------- ------------- ---------- ------------- --------- --------- -------------
4. Segmental analysis
In accordance with IFRS 8, the Group has determined its
operating segments based upon the information reported to the Chief
Operating Decision Maker. The Group comprises of three geographical
divisions which have only one major product or service: specialist
geotechnical services. North America, Europe, and 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
26 June 2022 27 June 2021
-------------------------------- ---------------------- ----------------------
Operating Operating
Revenue profit Revenue profit
GBPm GBPm GBPm GBPm
-------------------------------- --------- ----------- --------- -----------
North America 865.7 30.1 581.7 38.4
Europe 297.6 13.9 242.0 5.7
Asia-Pacific, Middle East
and Africa 174.1 10.5 160.4 0.1
1,337.4 54.5 984.1 44.2
Central items and eliminations - (4.9) - (4.7)
-------------------------------- --------- ----------- --------- -----------
Before non-underlying items 1,337.4 49.6 984.1 39.5
Non-underlying items (note
7) - (11.9) - (6.0)
-------------------------------- --------- ----------- --------- -----------
1,337.4 37.7 984.1 33.5
-------------------------------- --------- ----------- --------- -----------
As at 26 June 2022
---------------------------------- --------------------------------------------------------------------------
Tangible
Depreciation(2) and(3)
Segment Segment Capital Capital and intangible
assets liabilities employed additions amortisation assets
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 257.3 (118.4) 138.9 6.8 9.2 109.3
---------------------------------- ------- ------------ --------- ---------- --------------- -----------
1,558.3 (720.3) 838.0 26.7 48.8 614.8
Central items and eliminations(1) 135.2 (478.4) (343.2) - (0.3) 2.4
---------------------------------- ------- ------------ --------- ---------- --------------- -----------
1,693.5 (1,198.7) 494.8 26.7 48.5 617.2
---------------------------------- ------- ------------ --------- ---------- --------------- -----------
The increase in trade receivables, inventories and trade
payables as at 26 June 2022 is driven by increased revenues in the
half year period. 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 27 June 2021(4)
---------------------------------- --------------------------------------------------------------------------
Tangible
Depreciation(2) and(3)
Segment Segment Capital Capital and intangible
assets liabilities employed additions amortisation assets
GBPm GBPm GBPm GBPm GBPm GBPm
---------------------------------- ------- ------------ --------- ---------- --------------- -----------
North America 729.4 (308.6) 420.8 13.3 22.3 290.7
Europe 261.2 (170.6) 90.6 8.9 12.8 143.2
Asia-Pacific, Middle East
and Africa 219.9 (102.5) 117.4 9.7 9.4 100.6
---------------------------------- ------- ------------ --------- ---------- --------------- -----------
1,210.5 (581.7) 628.8 31.9 44.5 534.5
Central items and eliminations(1) 160.9 (378.2) (217.3) - - 0.1
---------------------------------- ------- ------------ --------- ---------- --------------- -----------
1,371.4 (959.9) 411.5 31.9 44.5 534.6
---------------------------------- ------- ------------ --------- ---------- --------------- -----------
As at 31 December 2021 (5)
---------------------------------- --------------------------------------------------------------------------
Tangible
Depreciation(2) and(3)
Segment Segment Capital Capital and intangible
assets liabilities employed additions amortisation assets
GBPm GBPm GBPm GBPm GBPm GBPm
---------------------------------- ------- ------------ --------- ---------- --------------- -----------
North America 826.9 (349.9) 477.0 36.4 46.1 334.6
Europe 273.9 (184.7) 89.2 23.8 25.0 143.7
Asia-Pacific, Middle East
and Africa 218.0 (99.9) 118.1 24.2 19.5 103.5
---------------------------------- ------- ------------ --------- ---------- --------------- -----------
1,318.8 (634.5) 684.3 84.4 90.6 581.8
Central items and eliminations(1) 130.6 (372.0) (241.4) - 0.6 3.0
---------------------------------- ------- ------------ --------- ---------- --------------- -----------
1,449.4 (1,006.5) 442.9 84.4 91.2 584.8
---------------------------------- ------- ------------ --------- ---------- --------------- -----------
1 Central items include net debt and tax balances, which are
managed at 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 27 June 2021 consolidated balance sheet has been restated
for items disclosed in the 2021 Annual Report and Accounts, as
outlined in note 2 to the interim financial statements.
5 The 31 December 2021 consolidated balance sheet has been
restated in respect of prior period measurement adjustments, as
outlined in notes 2 and 6 to interim the financial statements.
5. Revenue
The Group's revenue is derived from contracts with customers. In
the following table, revenue is disaggregated by primary
geographical market, being the Group's operating segments (see note
4) and timing of revenue recognition:
Half year period to 26 Half year period to 27
June 2022 June 2021
---------------------- --------------------------------------------- ---------------------------------------------
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 625.4 240.3 865.7 439.2 142.5 581.7
Europe 297.6 - 297.6 242.0 - 242.0
Asia-Pacific, Middle
East and Africa 174.1 - 174.1 160.4 - 160.4
---------------------- ---------------- ---------------- --------- ---------------- ---------------- ---------
1,097.1 240.3 1,337.4 841.6 142.5 984.1
---------------------- ---------------- ---------------- --------- ---------------- ---------------- ---------
6. Acquisitions and disposals
Acquisitions
Current period
On 2 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
GBP3.6m (CAD$5.3m). In addition, contingent consideration is
payable dependent on the cumulative EBITDA in the three-year period
post acquisition. At 26 June 2022, the fair value of the contingent
consideration is GBP1.3m (CAD$2.0m). Goodwill and other intangibles
arising on acquisition is attributable to the knowledge and
expertise of the assembled workforce, the expectation of future
contracts and customer relationships and the operating synergies
that arise from the Group's strengthened market position. The
goodwill is not expected to be deductible for tax purposes.
Due to the timing of the acquisition, the review of the fair
value of net assets acquired is expected to be completed in the
second half of the year. The value of assets acquired is therefore
provisional and will be finalised within 12 months of the
acquisition date. The provisional value of net assets acquired was
GBP2.2m, resulting in a goodwill and other intangibles value of
GBP2.7m.
In the half year period to 26 June 2022, the acquisition
contributed GBP1.3m to revenue and an underlying profit before tax
of GBP0.3m. Had the acquisition taken place on 1 January 2022,
total Group revenue would have been GBP1,342.3m and underlying
profit before tax for the period would have been GBP43.3m.
Acquisition of businesses per the cash flow statement
Half year
period
to
26 June
2022
GBPm
------------------------------------------------------ ----------
GKM Consultants Inc. - initial cash consideration 3.6
------------------------------------------------------- ----------
GKM Consultants Inc. - cash acquired (0.2)
------------------------------------------------------- ----------
Contingent and deferred consideration paid (note 15) 12.2
------------------------------------------------------- ----------
15.6
------------------------------------------------------ ----------
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 13 July 2021, the Group acquired RECON Services Inc. 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(1) 18.9 (1.4) 17.5
Property, plant and equipment 4.7 - 4.7
Other non-current assets 0.1 - 0.1
Trade and other receivables 20.4 - 20.4
Current tax assets 1.4 - 1.4
---------------------------------------------- -------------- ------------ --------------
Cash and cash equivalents 0.9 - 0.9
---------------------------------------------- -------------- ------------ --------------
46.4 (1.4) 45.0
---------------------------------------------- -------------- ------------ --------------
Liabilities
Lease liabilities (1.4) - (1.4)
Trade and other payables (11.2) - (11.2)
Current tax liabilities (1.1) - (1.1)
Deferred tax liabilities(2) (5.1) 0.3 (4.8)
Provisions (1.4) - (1.4)
Other non-current assets (0.3) - (0.3)
(20.5) 0.3 (20.2)
---------------------------------------------- -------------- ------------ --------------
Total identifiable net assets 25.9 (1.1) 24.8
---------------------------------------------- -------------- ------------ --------------
Goodwill 3.7 1.1 4.8
---------------------------------------------- -------------- ------------ --------------
Total consideration 29.6 - 29.6
---------------------------------------------- -------------- ------------ --------------
Satisfied by:
Initial cash consideration 20.2 - 20.2
Initial valuation of contingent consideration 9.5 - 9.5
Purchase price adjustment (0.1) - (0.1)
29.6 - 29.6
---------------------------------------------- -------------- ------------ --------------
1 The adjustment to intangible assets relates to the revised
valuation of the tradename and customer relationships acquired.
2 The adjustment to deferred tax liabilities relates to the
updated value of intangible assets.
The impact of these adjustments has been applied
retrospectively, meaning that the results and financial position
for the year to 31 December 2021 have been restated, as detailed in
note 2. The adjustment to intangible assets at acquisition resulted
in a lower amortisation charge in the year to 31 December 2021 of
GBP0.2m, resulting in a net adjustment to the net book value of
intangible assets of GBP1.2m as at 31 December 2021.
Disposals
There were no material disposals during the half year period to
26 June 2022. During the current period contingent consideration
receivable of GBP0.7m was agreed in accordance with the terms of
the sale and purchase agreement of Wannenwetsch GmbH, which was
disposed of in 2020.
7. Non-underlying items
Non-underlying items include items which are exceptional by
their size and/or are non-trading in nature, including amortisation
of acquired intangibles, restructuring costs and other non-trading
amounts, including those relating to acquisitions and disposals.
Tax arising on these items, including movement in deferred tax
assets arising from non-underlying provisions, is also classified
as a non-underlying item. These are detailed below:
Half
Half year
year period period
to to
26 June 27 June
2022 2021
GBPm GBPm
------------------------------------------------------ ------------- ---------
Exceptional contract dispute (3.5) -
------------------------------------------------------ ------------- ---------
Exceptional restructuring costs (1.2) (3.1)
------------------------------------------------------- ------------- ---------
ERP implementation costs (1.2) -
------------------------------------------------------ ------------- ---------
Impairment costs (0.4) -
------------------------------------------------------ ------------- ---------
Contingent consideration payable: additional amounts
provided (0.1) (1.3)
------------------------------------------------------- ------------- ---------
Change in fair value of contingent consideration 0.3 -
------------------------------------------------------ ------------- ---------
Loss on classification of disposal group/disposal
of operations - (1.9)
------------------------------------------------------- ------------- ---------
Non-underlying items in operating costs (6.1) (6.3)
------------------------------------------------------- ------------- ---------
Amortisation of acquired intangible assets (5.8) (0.4)
------------------------------------------------------- ------------- ---------
Contingent consideration received 0.7 0.7
------------------------------------------------------- ------------- ---------
Non-underlying items in other operating income 0.7 0.7
------------------------------------------------------- ------------- ---------
Amortisation of joint venture acquired intangibles (0.7) -
------------------------------------------------------ ------------- ---------
Total non-underlying items in operating profit
and before taxation (11.9) (6.0)
------------------------------------------------------- ------------- ---------
Taxation 2.4 0.6
------------------------------------------------------- ------------- ---------
Total non-underlying items after taxation (9.5) (5.4)
------------------------------------------------------- ------------- ---------
Non-underlying items in operating costs
Half year period to 26 June 2022
The GBP3.5m exceptional charge relates to a provision made for
additional costs relating to a historical contract dispute.
Restructuring costs comprise GBP1.2m in the Europe Division
relating to the scheduled exit of the Ivory Coast business. Costs
include asset impairments and redundancy costs.
The Group has commenced a 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 underlying
performance of the Group. As this is a complex implementation,
project costs are expected to be incurred over the next five years.
Non-underlying ERP costs include only costs relating directly to
the implementation. Non-underlying costs does not include
operational post-deployment costs such as licence costs for
businesses that have transitioned.
An impairment charge of GBP0.4m by the North-East Europe
Business Unit is in respect of trade receivables in Ukraine that
are not expected to be recovered due to the ongoing conflict.
Additional contingent consideration of GBP0.1m relates to the
acquisition of the Geo Instruments US business in 2017.
During the period there was an adjustment to the fair value of
the RECON contingent consideration on finalisation of the amount
payable.
Half year period to 27 June 2021
Restructuring costs of GBP3.1m comprised GBP2.6m in Europe,
GBP0.9m of central items and a credit of GBP0.4m in North America.
In Europe, these costs arose as a continuation of the strategic
project to rationalise the Europe Division and comprised redundancy
costs, property costs, asset impairments and costs of market exit
which included project termination costs. Centrally, GBP0.9m of
restructuring costs were incurred in KGS, the in-house equipment
manufacturer, as part of a plan to streamline the organisation.
These costs comprised redundancy costs.
The Cyntech Anchors business in Canada was disposed of on 28
June 2021, resulting in GBP1.9m of non-underlying costs including
asset write-downs and additional impairments recorded on
classification of the business as held for sale, which reflected
anticipated proceeds under the planned sale.
Contingent consideration payable of GBP1.3m related to the
acquisition of the Geo Construction Group (Bencor) in 2015,
following finalisation of items referenced in the sale and purchase
agreement.
Amortisation of acquired intangible assets
Amortisation of acquired intangible assets relates to the RECON,
Moretrench and Voges acquisitions. The prior year charge relates to
Moretrench.
Non-underlying items in other operating income
During 2022, the second instalment of contingent consideration
was agreed in relation to the Wannenwetsch disposal in September
2020, in accordance with the terms of the sale and purchase
agreement. The first instalment was agreed in the half year period
to 27 June 2021 and paid in the second half of 2021.
During 2022, there was an adjustment to the fair value of the
RECON contingent consideration on finalisation of the amount
payable.
Amortisation of joint venture acquired intangibles
Amortisation of joint venture intangibles relates to NordPile,
an acquisition by the Group's joint venture interest KFS Finland Oy
on 8 September 2021.
Non-underlying taxation
The credit relates to the tax benefit of amounts which are
expected to be deductible for tax purposes.
8. Taxation
The Group's effective tax rate on underlying profit of 25.0%
(2021: 27.0%) 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
19% . The actual underlying tax charge for the half year has been
reduced by GBP0.4m as a result of a reduction of a provision held
for historic taxes. 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 Group is monitoring developments in the OECD's Pillar 2
proposals to agree minimum effective tax rates across jurisdictions
participating in the OECD programme. Although the Group's
activities are mainly in territories which will be unaffected by
the Pillar 2 proposals, it is possible that additional tax will be
charged in the future in countries where corporate tax rates are
increased. Any changes are not expected to be introduced before
2024.
Under draft proposals introduced to the US Congress in 2021, the
Group would potentially be subject to adverse changes in respect of
measures intended to limit the tax deductibility of intra-group
financing costs. The proposed measures were unable to secure
passage through Congress in 2021 and the Group is awaiting
developments to see if the measures, and whether they are in
original or revised form, are reintroduced in 2022. At present
there is insufficient evidence to assess the probable financial
impact on the Group's future tax position.
9. Dividends
Ordinary dividends on equity shares:
Half Half
year year
period period
to to Year to
26 June 27 June 31 December
2022 2021 2021
GBPm GBPm GBPm
-------------------------------------------------- ---------- --------- -------------
Amounts recognised as distributions to equity
holders in the period:
-------------------------------------------------- ---------- --------- -------------
Interim dividend for the year ended 31 December
2021 of 12.6p (2020: 12.6p) per share - - 9.1
Final dividend for the year ended 31 December
2021 of 23.3p per share (2020: 23.3p) per share - 16.8 16.8
-------------------------------------------------- ---------- --------- -------------
- 16.8 25.9
------------------------------------------------------------- --------- -------------
The 2021 final dividend of GBP16.8m was paid on 1 July 2022 and
is included as a liability in the interim consolidated balance
sheet within trade and other payables. The 2020 final dividend of
GBP16.8m was paid in the half year period to 27 June 2021.
In addition to the above, an interim ordinary dividend of 13.2p
per share (2021: 12.6p) will be paid on 9 September 2022 to
shareholders on the register at 19 August 2022. This proposed
dividend has not been included as a liability in these financial
statements and will be accounted for in the period in which it is
paid.
10. Earnings per share
Basic earnings per share is calculated by dividing the profit
for the year attributable to ordinary equity holders of the parent
by the weighted average number of ordinary shares outstanding
during the year.
When the Group makes a profit, diluted earnings per share equals
the profit attributable to equity holders of the parent divided by
the weighted average diluted number of shares. When the Group makes
a loss, diluted earnings per share equals the loss attributable to
the equity holders of the parent divided by the basic average
number of shares. This ensures that earnings per share on losses is
shown in full and not diluted by unexercised share awards.
Basic and diluted earnings per share are calculated as
follows:
Underlying earnings
attributable to Earnings attributable
the equity holders to equity holders
of the parent of the parent
--------------------------------------------- ---------------------- ------------------------
Half year Half year Half year Half year
period period period period
to to to to
26 June 27 June 26 June 27 June
2022 2021 2022 2021
--------------------------------------------- ---------- ---------- ----------- -----------
Basic and diluted earnings (GBPm) 34.1 26.0 24.6 20.6
--------------------------------------------- ---------- ---------- ----------- -----------
Weighted average number of shares
(m)(1)
Basic number of ordinary shares outstanding 72.6 72.3 72.6 72.3
Effect of dilution from:
Share options and awards 0.8 0.7 0.8 0.7
--------------------------------------------- ---------- ---------- ----------- -----------
Diluted number of ordinary shares 73.4 73.0 73.4 73.0
--------------------------------------------- ---------- ---------- ----------- -----------
Earnings per share
--------------------------------------------- ---------- ---------- ----------- -----------
Basic earnings per share (p) 47.0 36.0 33.9 28.5
--------------------------------------------- ---------- ---------- ----------- -----------
Diluted earnings per share (p) 46.5 35.6 33.5 28.2
--------------------------------------------- ---------- ---------- ----------- -----------
1 The weighted average number of shares takes into account the
weighted average effect of changes in treasury shares during the
year. The weighted average number of shares excludes those held in
the Employee Share Ownership Plan Trust and those held in treasury,
which for the purpose of this calculation are treated as
cancelled.
11. Property, plant and equipment
Property, plant and equipment comprises owned and leased
assets.
As at As at As at
26 June 27 June 31 December
2022 2021 2021
GBPm GBPm GBPm
--------------------------------------- --------- --------- -------------
Property, plant and equipment - owned 392.2 352.3 375.5
Right-of-use assets - leased 75.9 65.4 67.9
--------------------------------------- --------- --------- -------------
468.1 417.7 443.4
--------------------------------------- --------- --------- -------------
During the half year period to 26 June 2022, the Group acquired
owned property, plant and equipment with a cost of GBP26.6m (27
June 2021: GBP31.7m, 31 December 2021: GBP84.0m). Right-of-use
asset additions during the period were GBP12.4m (27 June 2021:
GBP10.6m, 31 December 2021: GBP23.4m). Owned assets with a net book
value of GBP0.8m were disposed of during the half year period to 26
June 2022 (27 June 2021: GBP4.0m, 31 December 2021: GBP8.0m),
resulting in a net gain on disposal of GBP2.5m (27 June 2021:
GBP1.5m gain, 31 December 2021: GBP1.8m gain).
12. Analysis of closing net debt
As at As at As at
26 June 27 June 31 December
2022 2021 2021
GBPm GBPm GBPm
-------------------------------------------- --------- --------- -------------
Bank balances 81.5 111.0 77.9
Short-term deposits 4.3 5.8 4.8
-------------------------------------------- --------- --------- -------------
Cash and cash equivalents in the balance
sheet 85.8 116.8 82.7
Bank overdrafts (0.5) (4.5) (0.9)
-------------------------------------------- --------- --------- -------------
Cash and cash equivalents in the cash flow
statement 85.3 112.3 81.8
Bank and other loans (278.9) (223.8) (199.7)
Lease liabilities (84.1) (69.3) (75.4)
-------------------------------------------- --------- --------- -------------
Closing net debt (277.7) (180.8) (193.3)
-------------------------------------------- --------- --------- -------------
Cash and cash equivalents include GBP9.4m (27 June 2021:
GBP4.4m, 31 December 2021: GBP2.7m) of the Group's share of cash
and cash equivalents held by joint operations, and GBP1.1m (27 June
2021: GBP1.7m, 31 December 2021: GBP1.7m) of restricted cash which
is subject to local country restrictions.
The increase in bank and other loans in the half year period to
26 June 2022 reflects further drawdowns on the Group's revolving
credit facility.
13. Assets held for sale
As at As at As at
26 June 27 June 31 December
2022 2021 2021
GBPm GBPm GBPm
--------------------------------------------- --------- --------- -------------
Assets held for sale 1.0 23.6 3.4
--------------------------------------------- --------- --------- -------------
Liabilities directly associated with assets
held for sale - (10.5) -
--------------------------------------------- --------- --------- -------------
Current period
At 26 June 2022, assets held for sale mainly comprise equipment
in the North America Division following a rationalisation exercise.
During the period, a number of assets held for sale in the AMEA
Division were reinstated for use and transferred to property, plant
and equipment.
Prior period
On 28 June 2021, subsequent to the half year period to 27 June
2021, the Group disposed of its Cyntech Anchors business in Canada.
In the half year period to 27 June 2021, the business' assets and
liabilities were classified as a disposal group held for sale and
written down to the expected value of the proceeds to be received.
Net assets held for sale were GBP5.6m, comprising assets classified
as held for sale of GBP16.1m and liabilities directly associated
with assets held for sale of GBP10.5m.
Other assets held for sale mainly comprised plant and machinery
in the AMEA Division, as a result of the wind-down of a business,
and equipment in the North America Division following a
rationalisation exercise.
14. 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 32 of the
Group's financial statements for the year ended 31 December
2021.
The Group's net defined benefit liabilities as at 26 June 2022
were GBP22.5m (27 June 2021: GBP23.0m, 31 December 2021:
GBP25.7m).The reduction in the half year period was driven by an
actuarial gain of GBP2.2m on the German and Austrian schemes,
reflecting a higher discount rate driven by the increase in
interest rates during the first half of 2022. The net defined
liability for the Keller Group Pension Scheme in the UK as at 26
June 2022 is GBP5.4m, being the minimum funding requirement,
calculated using the agreed contributions.
15. Financial assets and financial liabilities
Set out below is an overview of financial assets and liabilities
held by the Group:
As at As at As at
26 June 27 June 31 December
2022 2021 2021
GBPm GBPm GBPm
Financial assets measured at fair value
through profit or loss
Non-qualifying deferred compensation plan 18.8 19.5 20.6
Interest rate swaps - 4.4 2.6
Contingent consideration receivable 0.7 0.7 -
Financial assets measured at amortised
cost
Trade receivables 531.3 400.1 448.8
Contract assets 163.1 109.1 107.6
Cash and cash equivalents 85.8 116.8 82.7
Financial liabilities at fair value through
profit or loss
Contingent consideration payable (1.2) (4.3) (11.9)
Financial liabilities measured at amortised
cost
Deferred consideration payable (0.8) - (0.8)
Trade payables (290.8) (234.8) (268.8)
Contract liabilities (58.5) (61.2) (46.5)
Bank and other loans (279.4) (228.3) (200.6)
Lease liabilities (84.1) (69.3) (75.4)
--------------------------------------------- --------- --------- -------------
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.
Derivatives
The fair values of interest rate and cross-currency swaps are
calculated based on expected future principal and interest cash
flows, discounted using market rates prevailing at the balance
sheet date. The valuation methods of all the Group's derivative
financial instruments carried at fair value are categorised as
Level 2. Level 2 assets are financial assets and liabilities that
do not have regular market pricing, but whose fair value can be
determined based on other data values or market prices. During the
period, the interest rate swaps on the $75m private placement were
terminated.
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 26
June 2022.
The following table shows a reconciliation from the opening to
closing balances for net contingent and deferred consideration:
As at As at As at
26 June 27 June 31 December
2022 2021 2021
GBPm GBPm GBPm
----------------------------------- -------- -------- ------------
Opening balance at 1 January 12.7 3.0 3.0
Acquisition of businesses (note 6) 1.3 - 8.8
Additional amounts provided 0.1 1.3 1.3
Amount receivable (0.7) (0.7) -
Released during the period (0.3) - (0.1)
Paid during the period (12.2) - (0.4)
----------------------------------- -------- -------- ------------
Exchange movements 0.4 - 0.1
----------------------------------- -------- -------- ------------
Closing balance 1.3 3.6 12.7
----------------------------------- -------- -------- ------------
On 2 May 2022, the Group acquired GKM Consultants Inc.
Contingent consideration is payable dependent on the cumulative
EBITDA in the three year period post acquisition. At 26 June 2022,
the fair value of the contingent consideration is GBP1.3m
(CAD$2.0m).
Additional contingent consideration of GBP0.1m relates to the
acquisition of the Geo Instruments US business in 2017.
Contingent consideration receivable of GBP0.7m was recognised
during the period in relation to the Wannenwetsch disposal in
2020.
Amounts released during the period of GBP0.3m relate to a fair
value adjustment of the RECON contingent consideration on
finalisation of the amount payable.
Total contingent and deferred consideration of GBP12.2m was paid
during the period, comprising GBP8.6m in respect of the RECON
Services Inc. acquisition in 2021 and, GBP3.8m in respect of the
Geo Construction Group (Bencor) acquisition in 2015. These both
represent final agreements. Additionally, GBP0.2m was paid in
respect of the Geo Instruments acquisition and GBP0.1m deferred
consideration in respect of the Voges Drilling acquisition in
2021.
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 17 of the
Group's financial statements for the year ended 31 December 2021
for further information on the non-qualifying deferred compensation
plan.
16. Share capital and reserves
As at As at As at
26 June 27 June 31 December
2022 2021 2021
GBPm GBPm GBPm
-------------------------------------------------- --------- --------- -------------
Allotted, called up and fully paid equity
share capital
73,099,735 ordinary shares of 10p each
(27 June 2021 and 31 December 2021: 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 26 June 2022, the total number of shares held in treasury was
328,954 (27 June 2021: 784,364 and 31 December 2021: 777,917 ).
During the period to 26 June 2022, 135,050 ordinary shares were
purchased by the Keller Group Employee Benefit Trust (27 June 2021:
nil, 31 December 2021: 417,240), 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 GBP1.2m (31
December 2021: GBP3.7m).
17. 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 26 June 2022, a net balance of GBP0.1m was owed by (27
June 2021: GBPnil owed by and 31 December 2021: GBP0.1m owed by)
the joint venture. This amount is unsecured, has no fixed date of
repayment and is repayable on demand.
18. Post balance sheet events
There were no material post balance sheet events between the
balance sheet date and the date of this report.
Adjusted performance measures
The Group's results as reported under International Financial
Reporting Standards (IFRS) and presented in the interim condensed
consolidated financial statements (the 'statutory results') are
significantly impacted by movements in exchange rates relative to
sterling, as well as by exceptional items and non-trading amounts
including those relating to acquisitions and disposals.
Adjusted performance measures have been used throughout this
report to describe the Group's underlying performance. The Board
and Executive Committee use these adjusted measures to assess the
performance of the business as they consider them more
representative of the underlying ongoing trading result and allow
more meaningful comparison to prior periods.
Underlying measures
The term 'underlying' excludes the impact of items which are
exceptional by their size and/or are non-trading in nature,
including amortisation of acquired intangible assets and other
non-trading amounts relating to acquisitions and disposals
(collectively 'non-underlying items'), net of any associated tax.
Underlying measures allow management and investors to compare
performance without the potentially distorting effects of one-off
items or non-trading items. Non-underlying items are disclosed
separately in the interim financial statements where it is
necessary to do so to provide further understanding of the
financial performance of the Group.
Constant currency measures
The constant currency basis ('constant currency') adjusts the
comparative to exclude the impact of movements in exchange rates
relative to sterling. This is achieved by retranslating the 2021
results of overseas operations into sterling at the 2022 average
exchange rates.
A reconciliation between the underlying results and the reported
statutory results is shown on the face of the consolidated income
statement, with non-underlying items detailed in note 7. A
reconciliation between the 2021 underlying result to the 2021
constant currency result is shown below and compared to the
underlying 2022 performance:
Revenue by segment
Impact of
exchange Constant Constant
Statutory Statutory movements currency Statutory currency
2022 2021 2021 2021 change change
GBPm GBPm GBPm GBPm % %
------------------------- ---------- ---------- ----------- ---------- ---------- -----------
North America 865.7 581.7 38.9 620.6 +49% +39%
Europe 297.6 242.0 (6.6) 235.4 +23% +26%
Asia-Pacific, Middle
East and Africa 174.1 160.4 2.0 162.4 +9% +7%
------------------------- ---------- ---------- ----------- ---------- ---------- -----------
Group 1,337.4 984.1 34.3 1,018.4 +36% +31%
------------------------- ---------- ---------- ----------- ---------- ---------- -----------
Underlying operating profit by segment
Impact of
exchange Constant Constant
Underlying Underlying movements currency Underlying currency
2022 2021 2021 2021 change change
GBPm GBPm GBPm GBPm % %
---------------------- ----------- ----------- ----------- ---------- ----------- ------------
North America 30.1 38.4 2.8 41.2 -22% -27%
Europe 13.9 5.7 - 5.7 +144% +144%
Asia-Pacific, Middle
East and Africa 10.5 0.1 (0.7) (0.6) n/a n/a
Central items (4.9) (4.7) - (4.7) n/a n/a
---------------------- ----------- ----------- ----------- ---------- ----------- ------------
Group 49.6 39.5 2.1 41.6 +26% +19%
---------------------- ----------- ----------- ----------- ---------- ----------- ------------
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)
26 June 27 June
2022 2021
GBPm GBPm
------------------------------------------------ -------- ----------
Underlying operating profit 49.6 39.5
Depreciation and impairment of owned property,
plant and equipment 34.8 31.4
Depreciation and impairment of right-of-use
assets 13.4 12.8
Amortisation of intangible assets 0.3 0.3
------------------------------------------------ -------- --------
Underlying EBITDA 98.1 84.0
Non-underlying items in operating costs (6.1) (6.3)
Non-underlying items in other operating income 0.7 0.7
------------------------------------------------ -------- --------
EBITDA 92.7 78.4
------------------------------------------------ -------- --------
EBITDA (IAS 17 covenant basis)
26 June 27 June
2022 2021
GBPm GBPm
------------------------------------------------ -------- --------
Underlying operating profit 49.6 39.5
Depreciation and impairment of owned property,
plant and equipment 34.8 31.4
Depreciation and impairment of right-of-use
assets 13.4 12.8
Legacy IAS 17 operating lease charges (15.2) (13.9)
Amortisation of intangible assets 0.3 0.3
------------------------------------------------ -------- --------
Underlying EBITDA 82.9 70.1
Non-underlying items in operating costs (6.1) (6.3)
Non-underlying items in other operating income 0.7 0.7
------------------------------------------------ -------- --------
EBITDA 77.5 64.5
------------------------------------------------ -------- --------
Net finance costs
26 June 27 June
2022 2021
GBPm GBPm
------------------------------------------- -------- ----------
Finance income (0.3) (0.1)
Finance costs 5.3 4.4
------------------------------------------- -------- ----------
Net finance costs (statutory) 5.0 4.3
------------------------------------------- -------- ----------
Finance charge on lease liabilities(1) (1.2) (1.4)
------------------------------------------- -------- ----------
Lender covenant adjustments - (0.1)
------------------------------------------- -------- ----------
Net finance costs (IAS 17 covenant basis) 3.8 2.8
------------------------------------------- -------- ----------
1 Excluding legacy IAS 17 finance leases.
Net capital expenditure
26 June 27 June 31 December
2022 2021 2021
GBPm GBPm GBPm
--------------------------------------- -------- -------- ------------
Acquisition of property, plant and
equipment 26.6 31.7 84.0
Acquisition of intangible assets 0.1 0.2 0.4
Proceeds from sale of property, plant
and equipment (3.3) (5.5) (9.8)
--------------------------------------- -------- -------- ------------
Net capital expenditure(1) 23.4 26.4 74.6
--------------------------------------- -------- -------- ------------
1 Net capital expenditure excludes right-of-use assets.
Net debt
26 June 27 June 31 December
2022 2021 2021
GBPm GBPm GBPm
---------------------------------- -------- -------- ------------
Current loans and borrowings 29.0 65.9 29.8
Non-current loans and borrowings 334.5 231.7 246.2
Cash and cash equivalents (85.8) (116.8) (82.7)
---------------------------------- -------- -------- ------------
Net debt (statutory) 277.7 180.8 193.3
---------------------------------- -------- -------- ------------
Lease liabilities(1) (83.7) (67.4) (73.9)
---------------------------------- -------- -------- ------------
Net debt (IAS 17 covenant basis) 194.0 113.4 119.4
---------------------------------- -------- -------- ------------
1 Excluding legacy IAS 17 finance leases.
Leverage ratio
The leverage ratio is calculated as net debt to underlying
EBITDA.
Statutory
26 June 27 June 31 December
2022 2021 2021
GBPm GBPm GBPm
------------------- --------- --------- -------------
Net debt 277.7 180.8 193.3.8
Underlying EBITDA 204.3 194.1 190.2
------------------- --------- --------- -------------
Leverage ratio (x) 1.4 0.9 1.0
------------------- --------- --------- -------------
IAS 17 covenant basis
26 June 27 June 31 December
2022 2021 2021
GBPm GBPm GBPm
------------------- --------- --------- -------------
Net debt 194.0 113.4 119.4
Underlying EBITDA 170.3 164.8 157.5
------------------- --------- --------- -------------
Leverage ratio (x) 1.1 0.7 0.8
------------------- --------- --------- -------------
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.
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