Keller sets top construction profit figure of £113m

Keller, the global groundwork specialist, has pushed turnover through the £1bn barrier with a 25% surge in 2008 to £1.3bn.

Turnover in the previous year had come close to the £1bn glass ceiling at £960m.

Keller’s latest annual results, covering the 12 months to 31 December 2008 show a pre-tax profit of £113m, the highest of any UK-based construction group thus far in the latest round of the financial reporting season.

Keller’s 2007 figures show pre-tax profit of £103m.

Justin Atkinson, chief executive, said: “2008 was an excellent year. However, as we move into 2009, we are encountering tougher conditions in almost all our markets and we expect this to continue for some time.”

Cash generated from operations was £140m (figure in 2007: £120m) and cash conversion from continuing operations was 99% of profit.

After spending £65m on capital expenditure and a further £32m on acquisitions and share repurchases, net debt at the end of the year stood at £85m (2007: £55m).

“The increase in capital expenditure enabled us to make further progress in improving the efficiency of our equipment fleets and extending our heavy foundations operations in Eastern Europe and the Middle East,” said Atkinson.

Keller’s performance in 2008 sparkled so brightly that it was able to hand over £12m to its shareholders by way of a dividend.

Strong like-for-like organic growth of 12% in 2008 was achieved by the group’s dual approach:

• growing within the current geographic regions through the introduction of new technologies and methods
• expanding into new geographic regions.

The later saw Keller pushing for a firmer foothold in Brazil, Greece and Romania.
 
Atkinson said: “Global GDP growth is projected to fall to 0.5 percent in 2009, its lowest rate in 60 years, which may yet prove to be optimistic, with most of the countries in which we operate being in recession.

“At this early stage in the year, it is difficult to predict the severity of the impact which the global economic downturn will have on the group.

“To a large extent, it will depend on the success of the stimulus measures that have been taken by governments around the world to assist construction markets by both accelerating public infrastructure programmes and unclogging credit markets so that privately-financed projects can be resumed. 

“We are encountering tougher conditions in almost all our markets and we expect this to continue for some time.

“We have also experienced a shift towards more publicly-financed projects, with private funding becoming increasingly scarce and, in general, we are seeing lead times between contract tender and award being extended.”

At the end of the day, the message from Keller is that the volume of work will fall, inevitably putting pressure on margins.

On a constant currency basis, order intake in the last six months has been down by around 20% on the previous six months.

The impact of this on the Group order book, however, has been substantially mitigated by the weakening of sterling over this period. Accordingly, at the end of January, Keller’s order book was around 10% below its January 2008 level on a constant currency basis, but slightly ahead in sterling terms.

Keller’s global turnover contributions were:

• £530m – USA
• £440m – CEMEA (continental Europe, Middle East & Asia)
• £140m – Australia
• £85m – UK

In the UK, the foundations at the Olympic stadium were handed over in October 2008 “ahead of schedule and on budget, marking our contribution towards London meeting its 2012 deadline”

The subsidiary Phi has Olympic-related work with a contract to install retaining walls for roadways and other infrastructure for the Olympic Park.