2nd Mar 2015 12:42
LONDON (Alliance News) - Ground engineering company Keller Group PLC on Monday reported a fall in pretax profit in 2014 due to a charge taken on a contract dispute, but said its adjusted pretax profit and revenue both rose in spite of the strength of sterling, sending its shares higher.
FTSE 250-listed Keller said its pretax profit for the year fell to GBP28.2 million from GBP52 million in 2013, primarily due to a GBP56.9 million charge taken on a historical contract in the UK.
Excluding exceptional items, its pretax profit for the year rose to GBP85.1 million from GBP74.1 million, as revenue rose to GBP1.6 billion from GBP1.44 billion last year, boosted by acquisitions made in the second half of 2013 and by revenue increases across its regional businesses. The profit rise was capped by the strength of sterling on the company's translated overseas earnings. It said adjusted pretax profit would have been up 24% if exchange rates had remained constant over the year.
Keller said its contract wins picked up in the second half of 2014 and said its order book at the end of January is up 8% year-on-year. It expects the momentum to continue on the back of a gradual upturn in the US and its strong order book.
The company has recommended a final dividend of 16.8 pence per share, bringing its total dividend for the year to 25.2 pence, up 5% year-on-year.
"The 2014 results demonstrate the continued strength of the Group's business model. Our breadth of geographies and capabilities puts us in a good position to pursue future growth which, coupled with strong risk management and ongoing self-help measures, positions us well for the future," said Keller Chief Executive Justin Atkinson.
"Whilst conditions in our main markets remain mixed, the gradual upturn in the US, our largest market, the continuing improvements in our operating performance and our strong order book mean that the group is set for another year of good progress in 2015," Atkinson added.
Shares in Keller were up 3.3% to 1,046.00 pence on Monday, one of the best performers in the FTSE 250.
Keller's North America revenue rose 11%, amid a continued improvement in market conditions over the year. Revenue was up to GBP775.6 million, from GBP699.4 million in 2013, and the operating margin improved in the region to 7.7% from 7.4%.
Hayward Baker, Keller's main American subsidiary, finished the year strongly and the company said it has made good progress on the Elliott Bay seawall project in Seattle. It added its piling companies, Case and McKinney, both performed well in 2014.
Europe, Middle East and Africa revenue rose to GBP451.4 million in the year, from GBP399.2 million a year earlier, with operating margin improving to 2.9% against 1.7% in 2013.
Keller said European market conditions remained challenging in 2014, but said the improvement in its performance was down to cost control, risk management and selectivity on contracts. Its Polish business performed well amid a backdrop of a robust infrastructure market in the country, while its German business also performed well within a difficult environment.
However, its Iberian business posted a small loss for the year on the back of a 20% fall in revenue. Profit and revenue from the Middle East improved, boosted by a strong performance in Saudi Arabia and a number of contract wins in Qatar.
Asia revenue increased to GBP111.3 million, up from GBP96.2 million, with solid performances in Malaysia and Singapore and an improvement in its India business.
Its Australian business performed well on an underlying basis, but Keller said revenue only rose 7% to GBP261.3 million and operating profit was broadly flat at GBP15.7 million as the strength of sterling against the Australian dollar hit its results from the country. In constant currencies, revenue rose 21% and operating profit increased 14%, Keller said.
Investec reiterated its Buy rating and 1,420 price target on Keller on Monday, saying its 2014 results beat its estimates.
"Keller remains one of our preferred plays, given its high revenue exposure to the recovering US construction market, strong cash generation and a balance sheet which gives the group options going forwards," said Investec analyst Andrew Gibb.
Gibb continues to believe there is considerable upside to the current levels, which will be driven by an improving organic revenue growth profile alongside margin expansion, as the impact of operating leverage and larger contracts begin to flow through.
By Sam Unsted; [email protected]; @SamUAtAlliance
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