7th Mar 2005 07:01
Keller Group PLC07 March 2005 For immediate release Monday, 7 March 2005 Keller Group plc Preliminary results for the year ended 31 December 2004 Keller Group plc ("Keller" or "the Group"), the international ground engineeringspecialist, is pleased to announce its preliminary results for the year ended 31December 2004. Highlights include: • Turnover of £595.9m (2003: £567.5m) up 11% on a constant currency basis, representing strong organic growth across our international markets• Profit before tax* up 3% to £29.6m (2003: £28.7m), despite adverse currency fluctuations of £2.3m• Strong US performance on the back of restored Suncoast margins• Improved UK performance following Makers recovery• Earnings per share* increased to 25.1p (2003: 24.1p)• Total dividend per share increased by 5% to 10.9p (2003: 10.4p)• Record order book, boosted by recent large US contract wins * before amortisation of intangibles and 2003 exceptional items, together totalling £3.0m (2003: £13.9m) Justin Atkinson, Keller Chief Executive said: "I am pleased to report that in 2004 we met our immediate objectives ofconsolidating and strengthening our existing businesses, returning Makers toprofitability and improving Suncoast's margins. Now our focus is on continuingthe Group's long-term track record of growth through a combination of organicgrowth and targeted acquisitions." "Looking ahead, the good order intake in the final quarter of 2004 has continuedinto 2005. Our current order book represents over four months' sales, giving usa sound base from which to progress." For further information, please contact: Keller Group plc www.keller.co.ukJustin Atkinson, Chief ExecutiveJames Hind, Finance Director Smithfield 020 7360 4900Reg Hoare/Rupert Trefgarne A presentation for analysts will be held at 9.15 for 9.30am at The Theatre & Gallery, London Stock Exchange, 10 Paternoster Square, London, EC4M 7LS Print resolution images are available for the media to download from www.vismedia.co.uk Preliminary Announcement Chairman's Statement Results The results for the 2004 financial year show a strong recovery, reflecting oursuccess in implementing the strategy which I set out in my Chairman's Statementa year ago. I am pleased to report that Makers has put behind it the issueswhich held back performance in 2003, to report a small profit in 2004. Suncoasthas seen a significant increase in volumes which, together with selling priceincreases and operating cost efficiencies, have combined to restore margins.Elsewhere, our specialist ground engineering businesses have given anotherrobust performance overall. Group sales rose to £595.9m (2003: £567.5m). On a constant currency basis, salesincreased by 11%, representing strong organic growth across our internationalmarkets. Profit before tax, exceptional items and amortisation of intangibleswas up 3% to £29.6m (2003: £28.7m). This result includes a net adverse impactfrom exchange rate fluctuations of £2.3m, mainly reflecting the weaker dollar.Earnings per share before exceptional items and the amortisation of intangiblesincreased by 4% to 25.1p (2003: 24.1p). Cash flow and net debt Net cash inflow from operating activities was £33.6m (2003: £40.0m) and net debtat the end of the year was £60.0m (2003: £60.7m). Both reflect the higherworking capital needed to service increased turnover, particularly in ourSuncoast business. EBITDA interest cover remains strong at over 10 times. Financing During the year the Group's debt was refinanced to reduce the cost of borrowingand diversify our sources of funding, as well as to increase our committedfacilities to support the Group's continued growth plans. In October, $100m oflong-term debt was raised through a private placement with US institutions. Inaddition, in December, the Group negotiated a new £80m, five-year syndicatedrevolving credit facility. Dividends The Board is recommending an increased final dividend of 7.3p per share (2003:6.95p). This brings the total dividend for the year to 10.9p (2003: 10.4p), anincrease of 5%, which is covered 2.3 times by earnings per share beforeamortisation of intangibles. The final dividend will be paid on 28 June 2005 toshareholders on the register at 27 May 2005. This increase reflects ourcontinuing policy of reinvesting our cash flow in the growth of the Group,whilst maintaining a healthy dividend cover and seeking to reward shareholderswith above inflation increases. Board As previously announced, Tom Dobson retired as chief executive and as a directorat the end of March 2004. As planned, he was replaced by Justin Atkinson, whowas previously chief operating officer, and before that finance director. People The success of our business depends on the delivery of quality solutions for ourcustomers around the world. On behalf of the board, I would like to thank all ofour employees for the quality of work and high standards they have delivered dayin, day out in order that such success can be maintained. Their commitment tothe further achievements of Keller will continue to be matched by the board'scommitment to providing excellent job support, good reward and recognition andopportunities for career growth. Strategy In 2004 we met our immediate objectives of consolidating and strengthening ourexisting businesses, returning Makers to profitability and improving Suncoast'smargins. Now our focus is on continuing the Group's long-term track record ofgrowth within our core competence of specialist ground engineering. This will beachieved, as it has been successfully in the past, through a combination oforganic growth, both in existing and new markets, and targeted acquisitions. Outlook The good order intake in the final quarter of 2004, which was boosted by severallarge US contract wins, has continued into 2005. Our current order bookrepresents over four months' sales, giving us a sound base from which toprogress. With our businesses well positioned to take advantage of new opportunities asthey emerge, and no major changes anticipated in our markets, the Board isconfident that the Group will deliver further performance improvement and growthin 2005. Operating Review 2004 saw a return to good organic sales growth across the Group, demonstratingonce again the strong underlying fundamentals of our international businesses. Conditions in our major markets In North America, the very buoyant housing market held up well, whilst publicinfrastructure remained robust and commercial construction showed signs ofimprovement. In Europe, German construction output continued to fall,contrasting with our other principal markets, such as Spain, UK, and Poland,which remained strong and France, where market conditions firmed up. The MiddleEast saw increased levels of investment, but in the Far East there were fewermajor projects in our markets. Operations North America The North American operations overall had a record year, with particularlystrong performances from Suncoast and McKinney. Sales of £280.2m (2003: £270.4m)were 16% ahead on a constant currency basis. Operating profit beforeamortisation of intangibles of £21.0m (2003: £19.3m) was 22% ahead on a constantcurrency basis. Suncoast Suncoast increased its sales in the year by more than 30%, reflecting bothhigher volumes and increased selling prices. This, together with operating costefficiencies, resulted in restored margins. Combined sales from California and Arizona increased by more than 60%, markingfurther progress in the strategy of increasing the proportion of sales outsideSuncoast's original, core Texan market through targeted growth in WesternStates. Revenues from outside Texas now represent nearly 40% of total sales,compared to less than 30% in 2002, the first full year following Suncoast'sacquisition. The recent expansion of Suncoast's operations on the West Coast is expected tocontinue, assisted by the issue of new code standards by the Post-TensioningInstitute. These standards, which will gradually be introduced into buildingcodes around the country over the coming years, are expected to be an importantdevelopment in the advancement of post-tension slab on grade foundations. Overtime they are expected to raise the design standard for all slab-on-gradefoundations, making post-tensioning the preferred choice when compared toalternatives with which our products currently compete. Whilst Suncoast may face further volatility in the price of steel strand, thefundamentals of the business remain strong and good opportunities exist goingforward. Hayward Baker After a sluggish start, Hayward Baker recovered as the year progressed and hasentered 2005 with a strong order book. Changes to the operational management anda reduction in overheads in the western region paid dividends and this regionmade a strong contribution to the full-year result. This was helped by theMarina Del Ray project in Los Angeles, where Hayward Baker performed soil mixingand vibro-replacement for the construction of a new waterfront condominiumdevelopment. Amongst the 1,100 contracts completed during the year, HaywardBaker was responsible for installing retaining walls to provide excavationsupport for the Saluda Dam in South Carolina; the provision of compactiongrouting for a sink-hole remediation project in Mulberry, Florida; and theinstallation of rock bolts and soil nails to stabilise rocky ground for the safeconstruction of luxury villas on Peter Island in the British Virgin Islands. In the final quarter of 2004, Hayward Baker won two significant tunnel-relatedprojects in Los Angeles, where the company has a solid track record ofperformance on similar projects. The $10.2m (£5.4m) Lower North Outfall SewerRehabilitation contract is for specialty grouting services to stabilise the soilabove an existing sewer tunnel for the City of Los Angeles. Similar serviceswill be provided for twin underground tunnels under construction for the LosAngeles County Metropolitan Transportation Authority. This $9.4m (£5m) contractcommenced at the start of January and should be completed by the end of 2005. Hayward Baker was also awarded an $11.6m (£6.2m) contract for soil stabilisationby the Florida Department of Transportation. This project is Keller's firstapplication in the US of the dry soil mixing technology acquired by the Groupthrough the acquisition of LCM in Sweden. The technology will be used tostabilise extremely soft and wet soils next to the existing US Route 1 in SouthFlorida, so allowing the only road serving the Florida Keys to be widened fromtwo to four lanes. Case Case started the year well but the momentum slowed a little in the second half,partly due to the four hurricanes that struck Florida, where the majority ofCase Atlantic's work was performed in 2004. The contract for the expansion ofthe McCormick Place Convention Center in Chicago, where Case installed just over1,000 caissons in six months, was a major contributor. Other notable contractsin the year included the installation of drilled shafts for an officedevelopment at One South Dearborn in Chicago and the TVA Paradise Fossil Plantin Drakesboro, Kentucky, where caissons were socketed into bedrock for thefoundations of an addition to this coal-fired powerplant. Towards the end of the year, Case was awarded contracts for two landmarkprojects in New York and Chicago. The $12.6m (£6.7m) contract to install caissonfoundations for the new Goldman Sachs headquarters building in Lower Manhattanwill start during March 2005. In Chicago, Case is providing foundations andexcavation support for the new, 92-storey Trump International Hotel and Tower.This $17.2m (£9.1m) contract is underway and should be completed by autumn 2005. McKinney McKinney had a very successful second year under Keller ownership, with bothsales and operating margin up on the previous year. Although the vast majorityof contracts undertaken during the year had a value of less than £250,000,consistent with McKinney's market niche, its 2004 results were bolstered byseveral higher value contracts which all performed well, including work on theSeneca Niagara Falls Casino, which McKinney undertook in joint venture withCase. Continental Europe & Overseas Our Continental Europe & Overseas business produced a steady performance,despite challenging conditions in some of its markets. Sales of £175.0m (2003:£165.2m) were some 8% above the previous year on a constant currency basis.Operating profit before amortisation of intangibles was £11.9m (2003: £13.8m),12% below the previous year's strong result on a constant currency basis. Thislower profit principally reflects the continuing difficult market conditions inGermany. Keller-Terra had another good year, increasing its sales in all major productareas, with its ground improvement techniques, in particular, continuing to gainmarket share. An increase in production capacity, to keep pace with the growthin the business, enabled as many as 30 sites across Spain to be operational atone time. Over 300 contracts were completed during the year, across a wide rangeof market sectors: from the A-3 highway in Madrid, where Keller-Terra undertookrepairs to stabilise the embankment; to Zaragoza's Presa de Caspe Dam, wheremicro-cement grouting of the foundation was used to reduce water seepage. Our French business performed well in its home market and made good progress inexpanding its operations in North Africa. This resulted in the award of severalcontracts in Algeria, including the first phase of a ground improvement projectat Bejaia harbour and the installation of stone columns for a new railway linenear Oran. High levels of infrastructure investment are planned for the regionwhich, coupled with Keller's growing presence and reputation in Algeria, Moroccoand Tunisia, are expected to result in a growing contribution from these marketsin 2005. In addition, a new branch was established in the French West Indies,introducing ground improvement technologies into this region of high seismicrisk. Our operations in Austria and Italy had a good year, with advances made in theintroduction of Keller's specialty grouting techniques to the Italian market onmetro projects in Turin and Bologne. Further progress was made in EasternEurope, particularly Poland which had a strong year and where we expect acontinued high level of investment spend to offer good opportunities goingforward. LCM, our Swedish lime column subsidiary, in which we acquired theremaining 50% minority interest in January 2004, had a slow start to the year,recovering well in the second half. Against a further decline in both the public and private sectors of the Germanconstruction market, sales and profit in our German operation were down on lastyear, reducing Germany's contribution to total Group sales to 7%. Work on themajor underground rail link project in Cologne got underway satisfactorily andother noteworthy contracts undertaken included flood protection work on theRiver Rhine and ground improvement work for a road bypass in the Lausitz region.However, in order to remain profitable in this competitive market, a programmeof initiatives to reduce costs and improve efficiencies commenced in 2004 andwill be completed in the first quarter of 2005. As reported in our interimresults announcement, cost reductions in response to soft market conditions werealso instigated in our Portuguese operation, which saw an improvement inperformance in the second half of the year. The redundancy costs incurred inboth Portugal and Germany have been included in these results. Within the Overseas division, the Middle East had a good result reflecting botha strong contribution from Saudi Arabia, where we completed the foundations forseveral industrial plants, and a good performance from Dubai where our work onthe first prestigious Palm Island contract was completed on time in August.Within the Far East, although our results were below those of last year, ouroperations in Singapore performed well due to a large ground improvementcontract for land reclamation in the Pulau Ubin region and Malaysia continuedits strategy of introducing grouting products into the market. UK Sales in the year were up 4% on the previous year at £108.3m (2003: £103.9m),with operating profit before exceptional items and amortisation of intangiblesincreased to £1.7m (2003: £0.5m). Makers At Makers, following the management changes in December 2003, initial steps weretaken to stabilise the business, reduce its cost base and refocus on its areasof core competence - social housing refurbishment in the South East, togetherwith concrete repair work, principally in the car park and water markets. Thedisposal of Makers' specialist stone masonry business, A J Woods, in October2004 formed part of this overall strategy. In the second half, the managementteam was reorganised and further strengthened and, going into 2005, the businessis now in much better shape to take advantage of the opportunities it faces. Despite first-half losses in discontinued areas of the business which were beingrun off, Makers returned to profitability in the second half and reported asmall profit for the year as a whole, compared with a loss of £0.9m in 2003.Operating in an extremely buoyant market, the social housing division remainedprofitable throughout the year, working with a number of local authorities andhousing associations to meet the government's Decent Homes Standard. One of theflagship contracts completed in 2004 was the restoration of the 1934 Grade 1listed Isokon Building in Camden, London. Makers was awarded a Certificate ofExcellence from the Concrete Society for this project, which involved extensiveconcrete repairs as well as external and internal refurbishment. KGE Keller Ground Engineering (KGE) had a satisfactory year overall, on lower salesfollowing the withdrawal from heavy piling in 2003. The foundations supportdivision responded well to the organisational changes introduced that year. KGE's range of techniques enabled it to take on several design and constructprojects, where different solutions were packaged to address customer problemsin a technically efficient and cost-effective way. An example of this"value-engineering" approach was at Londonderry in Northern Ireland, where theoriginal plans for foundations for a new retail warehouse were changed from anexpensive and protracted pile-only scheme to a combination of vibro concretecolumns and vibro stone columns with a load transfer platform. The work wascompleted, including testing, in just six weeks, representing a saving in bothtime and direct cost of around 50% against the original piled scheme. KGE's specialist grouting and dry soil mixing systems were employed on a widerange of contracts during the year, including the installation of a cut-offcurtain for a new dam at Kingairloch in Scotland; rock grouting and shaftconsolidation for a rail tunnel at Strood; and stabilisation of Scarborough'sEast Pier. Australia Sales of £32.4m (2003: £27.9m) were some 16% above the previous year whilstoperating profit before amortisation of intangibles of £1.7m (2003: £2.0m) was15% below. The new ground engineering business, which commenced operations in January 2004to promote the full range of ground improvement and specialty groutingsolutions, started to establish itself and is expected to make a positivecontribution in 2005. International collaboration between our Australian businesses and Hayward Bakerin the US was the hallmark of the Martha Cove project in Victoria, in whichKeller introduced techniques not previously used in the Australian market toconstruct retaining walls for the excavation of an underpass. Maintaining our competitive edge The development of our products and processes to improve our productivity andcapability is continuous; it relies on excellent co-operation and communicationbetween employees across our businesses from sales teams to research anddevelopment staff, design engineers and site personnel. Examples of innovationsin 2004, which will help to maintain our competitive edge in the future,include: • further investment in advanced equipment, such as state-of-the-art rock excavation tooling which enabled Case to remove granite- and quartz-based rock on a drop shaft project at Fall River in Massachusetts; • the manufacture by McKinney's equipment division of its first hydraulic rigs; • the development of a remote controlled shuttle as a feeding device and carrier of materials for the production of dry soil mixed columns; • in France, the introduction of composite columns, comprising a lower part in concrete and a traditional bottom-feed stone column on top; this new product, will have applications for heavy buildings or organic soils, as an alternative to traditional piling; • a jetted Soilcrete contiguous piled retaining wall system, developed and introduced in Australia, as an economic alternative to diaphragm walls; • the development of a prototype minicat in the UK with combined capability for preboring and vibro stone columns; • the further development at our German workshops of our latest vibrator systems; and • improvements to our jet grouting equipment, designed to reduce mobilisation and maintenance costs. We are confident that these and other ongoing improvements in our equipment,techniques and systems of work mean that we will continue to find the bestsolutions to our customers' needs and maintain our competitive positions aroundthe world. Financial Review Trading results The Group's sales at £595.9m were 5% higher than in 2003. Movements in reportedsales and profits were adversely influenced by fluctuations in foreign currencyexchange rates. The average US dollar exchange rate against sterling wasUS$1.83, 12% weaker than in 2003, while the average euro exchange rate weakenedby 2%. Stripping out the effects of currency movements, the Group's 2004 saleswere 11% up on 2003. Operating profit before exceptional items and the amortisation of intangibleswas £33.7m, compared to £32.8m in 2003. The 2004 result is stated after a £2.3mnet adverse currency impact, primarily due to the weaker US dollar. On aconstant currency basis, operating profit was also up 11% year on year. The Group's trading performance is discussed in more detail in the Chairman'sStatement and the Operating Review. Interest The net interest charge changed little from £4.2m in 2003 to £4.1m in 2004.EBITDA interest cover remains comfortable at over 10 times. Tax The Group's effective tax rate, before exceptional items and amortisation ofintangibles, was 38%, down slightly from 39% in 2003. The effective ratereflects the fact that the vast majority of the Group's profits are earned inrelatively high tax jurisdictions, in particular the United States where theeffective combined federal and state tax rates are nearly 40%. The reduction inthe effective rate in 2004 is due to lower taxable losses in the UK (aftercentral costs and interest). Earnings and dividends Earnings per share before exceptional items and the amortisation of intangiblesincreased by 4% to 25.1p. Following the recommendation of an increased finaldividend of 7.3p per share, the total dividend for the year is 10.9p, anincrease of 5% on 2003. This is covered 2.3 times by adjusted earnings pershare. Cash flow and net debt Net cash inflow from operating activities was £33.6m, representing 75% of theGroup's EBITDA. This compares to £40.0m and 98% in 2003. Year-end workingcapital was higher than last year's level, reflecting the significantly highercost of Suncoast's raw materials and the strong organic growth across the Group. Capital expenditure decreased by 17% in the year, although the proceeds from thesale of fixed assets also fell. Net capital expenditure in the year was £11.8m,which represents 1.1 times depreciation. After paying tax, interest and dividends, year-end net debt decreased marginallyfrom £60.7m at 31 December 2003 to £60.0m at the end of 2004. Net debt at theyear-end represents 1.3 times EBITDA. Based on net assets of £101.4m, gearingwas 59%, down from 62% at the beginning of the year. Refinancing During the year the Group's debt was refinanced to reduce the cost of borrowingand diversify our sources of funding, as well as to increase our committedfacilities to support the Group's continued growth. In October, US$100m wasraised through a private placement with US institutions. The proceeds of theissue of $30m 5.05% notes due 2011 and $70m 5.48% notes due 2014 were used torefinance existing debt. In December, the Group negotiated a new £80m, five-yearsyndicated revolving credit facility at a reduced margin. The $100m fixed rate private placement liabilities were immediately swapped intofloating rates, $75m by means of US dollar interest rate swaps and $25m througha dollar:euro cross currency and interest rate swap. These, together with otherborrowings, are held as hedges against the Group's dollar and euro denominatednet assets. Pensions The Group offers defined benefit pension arrangements in the UK, Germany andAustria. The last actuarial valuation of the UK scheme, which has been closed tonew members since 1999, was as at 5 April 2002. At this date, the market valueof the scheme's assets was £14.6m and the valuation concluded that the schemewas 79% funded on an ongoing basis. In order to reduce the deficit, the Groupsubsequently increased both the employee and employer contribution rates. Thenext actuarial valuation is as at 5 April 2005. The transitional disclosures required by FRS 17, which will be set out in note29 of the accounts, show that, as at 31 December 2004, the pre-tax deficit inthe UK scheme was £8.2m on an FRS 17 basis, up from £6.0m at the end of 2003. In Germany and Austria, there are no segregated funds to cover defined benefitretirement obligations for the German and Austrian employees. Instead, therespective liabilities are included within provisions on the Group balancesheet. All other pension provisions in the Group are of a defined contributionnature. Accounting standards The Group's 2004 results have been prepared in accordance with applicable UKaccounting standards (UK GAAP). They have not been significantly impacted by anynew accounting standards. As noted in the 2003 Annual Report, the Group is required to produce financialstatements for accounting periods beginning on or after 1 January 2005 inaccordance with International Financial Reporting Standards ("IFRS"). The 2005accounts will also require the 2004 comparative numbers to be restated to complywith IFRS. Keller has undertaken a detailed review of the impact that IFRS will have on itsfinancial results and balance sheet. The Group can confirm that it expects themain areas of impact on its financial results to be: • non-amortisation of goodwill, to be replaced with annual impairment testing (IFRS 3); • pensions accounting (IAS 19); • the timing of accruals for dividends (IAS 10); • share based payments (IFRS 2); and • financial instruments (IAS 39). In order to assist an understanding of the likely impact of IFRS adoption, anestimate of the effect of these items on the Group's 2004 results and net assetsis summarised below. -------------------------------------------------------------------------------- Profit before tax Net assets £000 £000--------------------------------------------------------------------------------As reported under UK GAAP (post amortisation) 26,638 101,427Adjustments to comply with IFRS:Goodwill 2,877 (7,630)Pensions 136 (6,541)Dividends - 4,771Share based payments 97 ---------------------------------------------------------------------------------Restated to comply with IFRS 29,748 92,027-------------------------------------------------------------------------------- Goodwill amortisation will no longer be allowed and companies will instead berequired to assess at each reporting date whether there is an indication that anasset may be impaired. In addition, IAS 21 requires goodwill to be denominatedin local currencies and retranslated at each reporting date at closing exchangerates. The Group currently applies SSAP 24 to account for defined benefit pensionschemes and complies with the FRS 17 transitional arrangements. IAS 19 isbroadly consistent with FRS 17 except that that it provides the option not torecognise actuarial gains and losses below a threshold while spreading forwardthose above this threshold over the average remaining service life of theemployees in the scheme. If the spreading option is not adopted then the effectof adopting IAS 19 is broadly the same as FRS 17. The Group pension deficit, netof deferred tax, will be debited to equity at the date of transition. Under existing UK GAAP, dividends are included in the financial statements on anaccruals basis when proposed. Under IAS 10 dividends are not permitted to berecognised unless there is a commitment to pay them at the balance sheet date. In accordance with UITF 17, the intrinsic value of share awards granted underemployee share schemes is recognised as a cost in the profit and loss account,spread over the performance period. The provisions of IFRS 2 require recognitionof the fair value rather than the intrinsic value of options and performanceshares. IAS 39 requires derivative financial instruments to be included on the balancesheet at fair value. Significantly more onerous criteria will need to be metbefore companies are entitled to apply hedge accounting to their financialinstruments and offset changes in the fair value of hedging instruments withchanges in the fair value of the hedged items. This could potentially increasethe volatility of companies' results, however it is envisaged that the Group'shedge accounting practices will meet the criteria stipulated by IAS 39 and theintroduction of the standard is not expected to have a significant impact on theGroup's 2005 results. In addition to the above, there will be a number of changes to the format anddisclosures of the 2005 interim and full year financial statements resultingfrom the adoption of IFRS. The 2005 accounts will include a detailedreconciliation of its 2004 financial results and position as previously reportedunder UK GAAP, to its 2004 financial results and position adjusted to complywith IFRS. Consolidated Profit and Loss accountfor the year ended 31 December 2004 2004 2003------------------------------------------------------------------------------------------------------------------------ Before Exceptional exceptional items and Before Amortisation items and amortisation amortisation of amortisation of of intangibles of intangibles intangibles (note 1) Total intangibles (note 1) Total Note £000 £000 £000 £000 £000 £000------------------------------------------------------------------------------------------------------------------------Turnover 1 595,856 - 595,856 567,505 - 567,505Operating costs* (562,107) (2,964) (565,071) (534,667) (13,881) (548,548)------------------------------------------------------------------------------------------------------------------------Operating profit 1 33,749 (2,964) 30,785 32,838 (13,881) 18,957Net interest payable (4,147) - (4,147) (4,151) - (4,151)------------------------------------------------------------------------------------------------------------------------Profit on ordinary activities before taxation 29,602 (2,964) 26,638 28,687 (13,881) 14,806Taxation 2 (11,130) - (11,130) (11,211) 510 (10,701)------------------------------------------------------------------------------------------------------------------------Profit on ordinary activities after taxation 18,472 (2,964) 15,508 17,476 (13,371) 4,105Equity minority interests (2,131) - (2,131) (1,846) - (1,846)------------------------------------------------------------------------------------------------------------------------Profit for the financial year 16,341 (2,964) 13,377 15,630 (13,371) 2,259Dividends paid and proposed 3 (7,121) - (7,121) (6,768) - (6,768)------------------------------------------------------------------------------------------------------------------------Retained profit/(loss) for the financial year 9,220 (2,964) 6,256 8,862 (13,371) (4,509)------------------------------------------------------------------------------------------------------------------------ Basic earnings per share 4 20.5p 3.5pDiluted earnings per share 4 20.5p 3.5pAdjusted earnings per share** 4 25.1p 24.1pDividends per share 3 10.9p 10.4p------------------------------------------------------------------------------------------------------------------------ * Operating costs in 2003 include exceptional items of £10,444,000** Adjusted earnings per share is calculated before exceptional items and amortisation of intangibles The Group's 2004 results shown above are derived from continuing operations.There were no material acquisitions or discontinued operations in the year. The difference between the reported and historical cost profits for each of theyears reported above is not material. Consolidated Statement of Total Recognised Gains and Lossesfor the year ended 31 December 2004 ------------------------------------------------------------------------------- 2004 2003 £000 £000-------------------------------------------------------------------------------Profit for the financial year 13,377 2,259Currency translation differences on overseas investments (2,695) (136)-------------------------------------------------------------------------------Total recognised gains and losses relating to the year 10,682 2,123------------------------------------------------------------------------------- Consolidated Balance SheetAs at 31 December 2004 ------------------------------------------------------------------------------- 2004 2003 £000 £000-------------------------------------------------------------------------------Fixed assetsPositive goodwill 57,771 57,493Negative goodwill (92) (734)------------------------------------------------------------------------------- 57,679 56,759Other intangible assets 211 287-------------------------------------------------------------------------------Intangible assets 57,890 57,046Tangible assets 80,937 82,169------------------------------------------------------------------------------- 138,827 139,215-------------------------------------------------------------------------------Current assetsStocks 24,319 16,885Debtors 144,518 137,855Cash at bank and in hand 16,416 21,511------------------------------------------------------------------------------- 185,253 176,251Creditors: amounts falling due within one year (140,848) (147,047)-------------------------------------------------------------------------------Net current assets 44,405 29,204-------------------------------------------------------------------------------Total assets less current liabilities 183,232 168,419Creditors: amounts falling due after more than one year (68,161) (58,438)Provisions for liabilities and charges (13,644) (12,358)-------------------------------------------------------------------------------Net assets 101,427 97,623------------------------------------------------------------------------------- Capital and reservesCalled up share capital 6,536 6,507Share capital to be issued - 680Share premium account 36,027 35,374Capital redemption reserve 7,629 7,629Profit and loss account 45,624 41,849-------------------------------------------------------------------------------Equity shareholders' funds 95,816 92,039Equity minority interests 5,611 5,584------------------------------------------------------------------------------- 101,427 97,623------------------------------------------------------------------------------- Consolidated Cash Flow Statementfor the year ended 31 December 2004 ---------------------------------------------------------------------------------------------- 2004 2004 2003 2003 £000 £000 £000 £000----------------------------------------------------------------------------------------------Net cash inflow from operating activities 33,577 39,951Returns on investment and servicing of financeInterest received 339 259Interest paid (4,281) (4,300)Interest element of finance lease rental payments (87) (222)Payments to minority interests (2,473) (690)---------------------------------------------------------------------------------------------- (6,502) (4,953)TaxationUK corporation tax received/(paid) 461 (608)Overseas tax paid (7,800) (12,187)---------------------------------------------------------------------------------------------- (7,339) (12,795)Capital expenditurePurchase of intangible fixed assets (15) (48)Purchase of tangible fixed assets (13,887) (16,670)Sale of tangible fixed assets 2,063 3,300---------------------------------------------------------------------------------------------- (11,839) (13,418)Acquisitions and disposalsAcquisition of subsidiary undertakings (3,422) 421---------------------------------------------------------------------------------------------- (3,422) 421Equity dividends paid (6,872) (6,534)----------------------------------------------------------------------------------------------Net cash (outflow)/inflow before management of (2,397) 2,672liquid resources and financingManagement of liquid resourcesRepayments from short term bank deposits 1,002 885FinancingIssue of new shares 15 90New bank and other loans drawn 55,982 5,640Repayment of bank loans and loan notes (52,498) (11,552)Sale and leaseback transactions 229 377Capital element of finance lease rental payments (602) (1,547)----------------------------------------------------------------------------------------------Net cash inflow/(outflow) from financing 3,126 (6,992)----------------------------------------------------------------------------------------------Increase/(decrease) in cash in the year 1,731 (3,435)---------------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------------------- 2004 2003Reconciliation of net cash flow to movement in net debt £000 £000----------------------------------------------------------------------------------------------Increase/(decrease) in cash in the year 1,731 (3,435)Cash flow from debt and lease financing (3,111) 7,081Cash flow from short-term bank deposits (1,002) (885)----------------------------------------------------------------------------------------------Change in net debt resulting from cash flows (2,382) 2,761Exchange differences 3,087 4,570----------------------------------------------------------------------------------------------Movement in net debt in the year 705 7,331Net debt at 1 January (60,664) (67,995)----------------------------------------------------------------------------------------------Net debt at 31 December (59,959) (60,664)---------------------------------------------------------------------------------------------- 1. Segmental analysis Turnover and operating profit may be analysed as follows: 2004 2003------------------------------------------------------------------------------------------------------------ Operating Operating profit before profit before exceptionals exceptionals and Operating and Operating Turnover amortisation profit Turnover amortisation profit £000 £000 £000 £000 £000 £000------------------------------------------------------------------------------------------------------------United Kingdom 108,263 1,707 1,690 103,976 538 (10,317)The Americas 280,212 21,048 18,780 270,447 19,305 16,890Continental Europe and Overseas 175,024 11,920 11,198 165,204 13,812 13,180Australia 32,357 1,671 1,714 27,878 2,004 2,025------------------------------------------------------------------------------------------------------------ 595,856 36,346 33,382 567,505 35,659 21,778Less: Unallocated central costs - (2,597) (2,597) - (2,821) (2,821)------------------------------------------------------------------------------------------------------------ 595,856 33,749 30,785 567,505 32,838 18,957------------------------------------------------------------------------------------------------------------In the opinion of the directors the Group operates only one class of businessand turnover by destination is not materially different from turnover by origin. The exceptional items and amortisation of intangibles comprise: --------------------------------------------------------------------------------------------------- 2004 2003 £000 £000---------------------------------------------------------------------------------------------------Amortisation of intangibles: recurring 2,964 3,437 exceptional impairment provision - 7,372UK restructuring costs - 3,072--------------------------------------------------------------------------------------------------- 2,964 13,881--------------------------------------------------------------------------------------------------- As a result of the Group's Makers business incurring a loss in 2003, anexceptional impairment provision was charged in 2003 amounting to theunamortised capitalised goodwill associated with that business. The 2003exceptional restructuring costs related to both the Group's UK businesses,Makers and Keller Ground Engineering, and mainly comprised redundancy costs, thewrite-down of tangible fixed assets and office closure costs. Capital employed may be analysed as follows: --------------------------------------------------------------------------------------------------- 2004 2003 £000 £000---------------------------------------------------------------------------------------------------United Kingdom 6,802 7,141The Americas 116,121 114,851Continental Europe and Overseas 49,410 43,008Australia 7,554 7,323--------------------------------------------------------------------------------------------------- 179,887 172,323---------------------------------------------------------------------------------------------------Capital employed shown above excludes items of a financing nature andcorporation tax balances. Capital employed is reconciled to Group net assets asfollows: --------------------------------------------------------------------------------------------------- 2004 2003 £000 £000---------------------------------------------------------------------------------------------------Net assets 101,427 97,623Net debt 59,959 60,664Deferred purchase consideration 2,235 2,133Dividends payable 4,771 4,522Corporation tax payable 5,538 2,509Deferred tax provision 5,957 4,872---------------------------------------------------------------------------------------------------Capital employed 179,887 172,323--------------------------------------------------------------------------------------------------- 2. Taxation The taxation charge comprises: --------------------------------------------------------------------------------------------------- 2004 2003 £000 £000---------------------------------------------------------------------------------------------------Current tax:UK corporation tax on the profits of the period - -Overseas tax 10,480 8,990Adjustments in respect of previous periods (850) (423)---------------------------------------------------------------------------------------------------Total current tax 9,630 8,567---------------------------------------------------------------------------------------------------Deferred tax:Current year 721 1,901Prior year 779 233---------------------------------------------------------------------------------------------------Total deferred tax 1,500 2,134--------------------------------------------------------------------------------------------------- 11,130 10,701--------------------------------------------------------------------------------------------------- 3. Dividends --------------------------------------------------------------------------------------------------- 2004 2003 £000 £000---------------------------------------------------------------------------------------------------Interim paid 2,350 2,246Final proposed 4,771 4,522--------------------------------------------------------------------------------------------------- 7,121 6,768--------------------------------------------------------------------------------------------------- An interim ordinary dividend of 3.6p (2003: 3.45p) per share was paid on 1 November2004. The final proposed ordinary dividend of 7.3p (2003: 6.95p) per share will bepaid on 28 June 2005 to holders on the register at 27 May 2005. 4. Earnings per share Adjusted earnings per share of 25.1p (2003: 24.1p) is calculated based on profit after tax and minority interests before exceptional items and amortisation of intangibles of £16,341,000 (2003: £15,630,000) and the weighted average number of ordinary shares in issue during the year of 65,129,000 (2003: 64,918,500). Basic and diluted earnings per share are calculated as follows: 2004 2004 2003 2003 Basic Diluted Basic Diluted £000 £000 £000 £000-----------------------------------------------------------------------------------------------------------------Profit after tax and minority interests 13,377 13,377 2,259 2,259----------------------------------------------------------------------------------------------------------------- No. of No. of No. of No. of shares shares shares shares 000s 000s 000s 000s-----------------------------------------------------------------------------------------------------------------Weighted average of ordinary shares in issue during the year 65,129 65,129 64,919 64,919Add: Weighted average of shares under option during year - 1,678 - 1,550Add: Weighted average of own shares held - 83 - 118Less: no. of shares assumed issued at fair value during year - (1,509) - (1,484)-----------------------------------------------------------------------------------------------------------------Adjusted weighted average ordinary shares in issue 65,129 65,381 64,919 65,103----------------------------------------------------------------------------------------------------------------- Pence Pence Pence Pence-----------------------------------------------------------------------------------------------------------------Earnings per share 20.5 20.5 3.5 3.5----------------------------------------------------------------------------------------------------------------- 5. Reconciliation of operating profit to net cash inflow from operating activities --------------------------------------------------------------------------------------------------- 2004 2003 £000 £000---------------------------------------------------------------------------------------------------Operating profit 30,785 18,957Depreciation charge 10,992 10,897Amortisation of goodwill and intangibles 2,964 3,437Exceptional impairment provision - 7,372Profit on sale of fixed assets (727) (716)Other non-cash movements 214 -Movement in long-term provisions 206 328Increase in stocks (8,559) (2,040)(Increase)/decrease in debtors (10,846) 3,351Increase/(decrease) in creditors 8,548 (1,635)---------------------------------------------------------------------------------------------------Net cash inflow from operating activities 33,577 39,951--------------------------------------------------------------------------------------------------- 6. Foreign Currencies The exchange rates used in respect of principal currencies are:--------------------------------------------------------------------------------------------------- 2004 2003---------------------------------------------------------------------------------------------------US dollar: average for year 1.83 1.64US dollar: year end 1.93 1.78Australian dollar: average for year 2.49 2.52Australian dollar: year end 2.47 2.38Euro: average for year 1.47 1.45Euro: year end 1.41 1.42--------------------------------------------------------------------------------------------------- 7. Basis of preparation The financial information set out above does not constitute the Company's statutory accounts for the years ended 31 December 2004 or 2003 but is derived from those accounts. Statutory accounts for 2003 have been delivered to the Registrar of Companies and those for 2004 will be delivered following the Company's Annual General Meeting. The auditors have reported on those accounts. Their reports were unqualified and did not contain statements under section 237 (2) or (3) of the Companies Act 1985. Accounts will be posted to shareholders by 8 April 2005. The Annual General Meeting will be held on 23 June 2005. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Keller