Keller Group plc (LON:KLR), the world’s largest geotechnical specialist contractor, has issued a trading update for the period ended 30 September 2023.
Overall, positive trading momentum in the third quarter has been maintained following the Group’s exceptionally strong first half performance. Given our trading performance to date and the continued momentum in the business, we now expect full year underlying operating profit to be materially ahead of current market expectations.
In North America, more resilient pricing than expected in Suncoast and sustained operational improvements in the foundations business have resulted in a strong performance, with a more progressive recovery in the operating margin than expected. The pricing benefit at Suncoast is expected to moderate into 2024 with the margin returning to more normalised levels.
In Europe, the macro-economic environment remains a challenge for the business, resulting in weak demand in the residential and commercial sectors across the region. Profitability continues to be impacted by the competitive pricing environment and the impact of some challenging projects, whilst the effect of several large successful projects in the prior year, provides a tough comparator for the period. Accordingly, the anticipated profitability improvement in the second half will be less than expected and as a result we are taking appropriate corrective actions.
In Asia-Pacific, Middle East and Africa (AMEA), Keller Australia is performing strongly, particularly in the infrastructure sector, and Austral has returned to profit in the third quarter as expected. At NEOM, we remain in discussions with the client in respect of the award of future works orders, however, due to the evolution of the design, the piling work on The Line has been delayed and we are taking steps to redeploy resources in the short term.
Reflecting the very strong earnings performance, together with continued focus on working capital management, the Group’s cash generation for the year to date is considerably ahead of the prior year and better than our expectations. We therefore expect the year-end net debt/EBITDA leverage ratio to be below 1.0x, well within our target range of 0.5x – 1.5x (2022: 1.2x).
Commenting, Michael Speakman, CEO of Keller Group plc, said:
“The Keller team has built on an exceptionally strong first half to deliver a better than expected third-quarter performance, and consequently we now expect full year underlying profit to be materially ahead of current market expectations. This performance reflects continued momentum and operational improvements within the business and the outstanding contribution of colleagues across the Group, whom I would like to thank for their dedication and hard work”.
