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Keller expects 2018 to be a challenging year for the UK

Keller has said that 2017 was a solid year in the UK and expects growth in 2019 and 2020 but has concerns over the performance of the market this year.

The company made the statement when announcing its preliminary results for 2017 today, which shows a global revenue rise of 16% to a record £2.07bn. The business also saw EBITDA rise to £177M, up 12% on the previous year, which Keller has said was driven by strong organic growth.

According to the announcement, the company’s Europe Middle East and Africa (EMEA) region saw strong profit growth, which was up 70% to £53.3M through execution of large contracts. This growth offset a 14% decline in profits in the North America region to £78.7M and a £16.5M operating loss in the Asia Pacific and Australasia (APAC) region.

In the statement, Keller also said: “The UK had a solid year in 2017, working on a wide variety of commercial and infrastructure projects. We have seen a notable slowdown in orders in recent months and expect 2018 to be a challenging year. However, the major infrastructure projects coming up in the UK, most notably HS2, should mean that the market for geotechnical work picks up noticeably in 2019 and 2020.”

Keller chief executive Alain Michaelis said: “Overall Keller has had a positive year with good growth in group revenue and profits. The results were extremely strong in EMEA and solid in North America, but disappointing in APAC. Ongoing operational improvements, strengthened leadership and market recovery should lead to APAC returning to profitability in 2018. Our confidence in group fundamentals and the recent US tax changes have allowed us to significantly raise the dividend to shareholders.

“The order book of over £1bn gives us confidence as we start 2018. Most of our markets remain robust and bidding activity is at a healthy level. Overall, we expect 2018 to be another year of underlying progress.”

Keller said that it is now seeing “tangible results” from a number of the strategic initiatives launched in the last two years. It said that it is confident that a combination of these improvement initiatives, its technical leadership, wide product portfolio, broad branch network and operational strength will continue to drive the business forward.

The Australian impact

The operating loss reported in Keller’s APAC region is the result of failures on two major projects, each with expected revenues of AUS$40M (£22.4M).

During Keller’s analysts’ briefing following announcement of the preliminary full year results, the company outline the problems experienced on these contracts.

According to Michaelis, both were procured in 2014 to 2015 when the market in Australia was quite challenging but both experienced technical issues and problems with ground conditions. One was a Keller Australia scheme for heavy foundations in Sydney and the other was a marine project undertaken by its Waterway division to the north of Sydney.

“There were £14M of losses across both schemes,” he said. “There have been a number of learnings drawn from the projects, including a better understanding on productivity assumptions on challenging projects.

“They were procured when pricing in the market was more competitive and these schemes validate the work the business has been undertaking globally on risk management and project planning.”

 

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