TIDMKLR
RNS Number : 3241H
Keller Group PLC
03 August 2021
3 August 2021
Keller Group plc Interim Results for the half year ended 27 June
2021
Keller Group plc ('Keller' or 'the Group'), the world's largest
geotechnical specialist contractor, announces its results for the
half year ended 27 June 2021.
A better than expected performance in H1; strong momentum
building into H2
H1 2021 H1 2020 Constant currency
GBPm GBPm % change % change
-------------------------------------------------- -------- -----------
Revenue 984.1 1,039.1 -5% -
Underlying operating profit(1) 39.5 47.9 -18% -9%
Underlying operating profit margin(1) 4.0% 4.6% -60bps n/a
Underlying diluted earnings per share(1) 35.6p 39.5p -10% 1%
Net debt (bank covenant IAS 17 basis)(2) 113.4 155.1 -27% -24%
Dividend per share 12.6p 12.6p - -
Statutory operating profit 33.5 28.0 20% 31%
Statutory profit before tax 29.2 20.8 41% 57%
Statutory diluted earnings per share 28.2p 13.8p 104% 125%
Statutory net debt (IFRS 16 basis) 180.8 232.4 -22% -17%
------------------------------------------- ------ -------- ----------- ------------------
(1) Underlying operating profit and underlying diluted earnings
per share are non-statutory measures which provide readers of this
Announcement with a balanced and comparable view of the Group's
performance by excluding the impact of non-underlying items, as
disclosed in note 7 of the interim condensed consolidated financial
statements.
(2) Net debt is presented on a lender covenant basis excluding
the impact of IFRS 16 as disclosed within the adjusted performance
measures in the interim condensed consolidated financial
statements.
Highlights
-- A better than expected first half trading performance,
despite the anticipated market-driven compression in contract
margins as a result of COVID-19 and headwinds from foreign
exchange
-- Revenue of GBP984.1m was flat on a constant currency basis,
with a slow Q1 followed by improved momentum in Q2
-- Underlying operating profit decreased 9% to GBP39.5m, on a
constant currency basis, after adjusting for a foreign exchange
headwind of cGBP5m. The positive resolution of a historical claim
in North America was more than offset by the anticipated impact of
COVID-19, higher steel prices in the Suncoast business and
unrecognised revenue on suspended contracts in Africa,
predominantly a liquefied natural gas (LNG) contract in
Mozambique
-- Net debt (on a bank covenant IAS 17 basis) reduced by 27% to
GBP113.4m, equating to net debt/EBITDA leverage ratio of 0.7x (H1
2020: 0.9x) driven by continued strong cash performance
-- Further progress in operational safety evidenced by a 27%
improvement in our overall accident frequency rate
-- ESG: On climate action, one of the Group's 4 specific UN
Sustainable Development Goals, we have now set ambitious net zero
targets for all three of our emission scopes which will culminate
in carbon neutrality by 2050 at the latest
-- Execution of our strategy continued with the completion of
restructuring actions in Europe and the acquisition of RECON
Services, Inc in North America in July
-- Maintained dividend of 12.6p, continuing the Group's
uninterrupted record of maintaining or increasing the dividend
since flotation in 1994
Outlook
-- Our order book at the end of June up 11% to GBP1.2bn on the
prior period and on a constant currency basis. A record high,
reflecting the recovery of economic activity across our markets,
particularly in North America and Europe
-- The Group's performance for the full year is now anticipated
to be materially ahead of the Board's previous expectations, with a
modest second half bias
Michael Speakman, Chief Executive Officer, said:
"The first half of this year saw the greatest impact of the
COVID-19 pandemic on the business and now we have passed this
anticipated inflection point, as evidenced by our record order
book, our confidence for the remainder of the year has increased.
The Group has weathered the challenges of the last twelve months
well, and our materially improved expectation for the full year
provides a great foundation to build from as we embark on
delivering the next phase of our strategy."
For further information, please contact:
Keller Group plc www.keller.com
Michael Speakman, Chief Executive Officer 020 7616 7575
David Burke, Chief Financial Officer
Caroline Crampton, Group Head of Investor Relations
FTI Consulting
Nick Hasell 020 3727 1340
Matthew O'Keeffe
A webcast for investors and analysts will be held at 08.30am BST
on 3 August 2021
and will also be available later the same day on demand
https://www.investis-live.com/keller/60eecc362527a916004f0c6a/hyr21
Conference call: Accessing the telephone replay:
Participants joining by telephone: A recording will be available until
United Kingdom 0800 640 6441 10 August 2021
United Kingdom (Local) 020 3936 UK: 020 3936 3001
2999 All other locations: +44 20 3936
All other locations +44 20 3936 3001
2999 Access Code: 829417
Participant access code: 002293
Notes to editors:
Keller is the world's largest geotechnical specialist contractor
providing a wide portfolio of advanced foundation and ground
improvement techniques used across the entire construction sector.
With around 9,000 staff and operations across five continents,
Keller tackles an unrivalled 6,000 projects every year, generating
annual revenue of more than GBP2bn.
Cautionary statements:
This document contains certain 'forward-looking statements' with
respect to Keller's financial condition, results of operations and
business and certain of Keller's plans and objectives with respect
to these items. Forward-looking statements are sometimes, but not
always, identified by their use of a date in the future or such
words as 'anticipates', 'aims', 'due', 'could', 'may', 'should',
'expects', 'believes', 'intends', 'plans', 'potential', 'reasonably
possible', 'targets', 'goal' or 'estimates'. By their very nature,
forward-looking statements are inherently unpredictable,
speculative and involve risk and uncertainty because they relate to
events and depend on circumstances that will occur in the future.
There are a number of factors that could cause actual results and
developments to differ materially from those expressed or implied
by these forward-looking statements. These factors include, but are
not limited to, changes in the economies and markets in which the
Group operates; changes in the regulatory and competition
frameworks in which the Group operates; the impact of legal or
other proceedings against or which affect the Group; and changes in
interest and exchange rates. For a more detailed description of
these risks, uncertainties and other factors, please see the
Principal risks and uncertainties section of the Strategic report
in the Annual Report and Accounts. All written or verbal forward
looking-statements, made in this document or made subsequently,
which are attributable to Keller or any other member of the Group,
or persons acting on their behalf, are expressly qualified in their
entirety by the factors referred to above. Keller does not intend
to update these forward-looking statements. Nothing in this
document should be regarded as a profits forecast. This document is
not an offer to sell, exchange or transfer any securities of Keller
Group plc or any of its subsidiaries and is not soliciting an offer
to purchase, exchange or transfer such securities in any
jurisdiction. Securities may not be offered, sold or transferred in
the United States absent registration or an applicable exemption
from the registration requirements of the US Securities Act of 1933
(as amended).
LEI number: 549300QO4MBL43UHSN10
Classification: 1.2 (Half yearly financial reports)
Adjusted performance measures
In addition to statutory measures, a number of adjusted
performance measures (APMs) are included in this Interim
Announcement to assist investors in gaining a clearer understanding
and balanced view of the Group's underlying results and in
comparing performance. These measures are consistent with how
business performance is measured internally.
The APMs used include underlying operating profit, underlying
earnings before interest, tax, depreciation and amortisation,
underlying net finance costs and underlying earnings per share,
each of which are the equivalent statutory measure adjusted to
eliminate the amortisation of acquired intangibles and other
significant one-off items not linked to the underlying performance
of the business. Further underlying constant exchange rate measures
are given which eliminate the impact of currency movements by
comparing the current measure against the comparative restated at
this year's actual average exchange rates. Where APMs are given,
these are compared to the equivalent measures in the prior
year.
APMs are reconciled to the statutory equivalent, where
applicable, in the adjusted performance measures section in this
Announcement.
GROUP OVERVIEW
Financial performance
The Group performed well in the period, delivering a better than
expected result despite foreign exchange headwinds and the impact
of COVID-19 in terms of trading volume and margin compression.
The Group reported revenue of GBP984.1m, broadly flat on the
prior period on a constant currency basis. As anticipated, the low
level of activity at the end of 2020 continued into the early part
of the year and gradually recovered through the second quarter as
the success of the vaccination and lockdown programmes began to
feed through to increased business confidence and improved market
demand.
Underlying operating profit decreased to GBP39.5m, a reduction
of 9% on a constant currency basis and against a very strong
comparative performance last year. The positive resolution of a
historical claim in North America was more than offset by the
anticipated impact of COVID-19, higher steel prices in the Suncoast
business and unrecognised revenue on suspended contracts in Africa,
predominantly an LNG contract in Mozambique, which are subject to
commercial resolution with clients.
Another strong cash performance has driven a 27% reduction in
net debt (on a bank covenant IAS 17 basis) to GBP113.4m, equating
to a net debt/EBITDA leverage ratio of 0.7x (H1 2020: 0.9x).
Operating performance
The slowdown of the global construction market that we
highlighted previously led to lower trading volume at the end of
2020 and through the start of 2021. Whilst some countries continue
to be impacted by COVID-19, notably Australia, India, the Middle
East and parts of Europe, the success of vaccination and lockdown
containment programmes in many other countries, most notably North
America, has led to increased business confidence and improved
market demand generally. However, the combination of increased
activity and disrupted supply chains has caused some localised
material shortages in some of our markets, affecting spot pricing
and more importantly material availability.
In North America, our foundations business traded as expected,
negatively impacted in the first quarter by COVID-19 and adverse
weather whilst benefitting from the resolution of a historical
claim in relation to a large civic project completed in 2017.
Suncoast, the Group's post-tension business, was impacted by higher
steel prices which were partially mitigated by strong demand from
the residential single family home market. Moretrench Industrial,
our business that operates in the highly regulated environmental
remediation market, continued to make good progress in the
period.
In Europe, our business activity at the start of the year was
impacted by extreme winter weather and COVID-19 related project
delays in several geographies, in addition to lower volumes
following the exit from South America and the completion of a large
oil refinery project in Mexico in 2020. Trading volumes benefitted
from the High Speed 2 (HS2) rail project in the UK and the
Sandbukta-Moss-Sastad (SMS2) rail project in Norway as well as
other new projects across our European markets.
In AMEA (Asia-Pacific, Middle East and Africa), the ASEAN
business continued to feel the impact of COVID-19 with reduced
trading activity in the period, though we expect activity to pick
up in the second half. Australia experienced a difficult first
quarter due to unusually heavy rain on the East coast and cyclones
on the West coast. Notwithstanding this, at Austral, the Cape
Lambert project continued to progress well and we continued to
benefit from securing additional mining-related projects, most
recently work relating to Rio Tinto's Gudai-Darri iron-ore rail
project. In Africa, the business was impacted by unrecognised
revenue related to suspended projects, predominantly an LNG
contract in Mozambique following an escalation in terrorist attacks
in the local region. The suspended projects are subject to
commercial resolution with clients. Business activity across the
Middle East and South Africa is improving and whilst we expect this
to continue during the course of this year, we expect the operating
environment to remain challenging.
Strategy
In December 2019 we announced a revised strategy to be the
preferred international geotechnical specialist contractor focused
on sustainable markets and attractive projects, generating
long-term value for our stakeholders. Local businesses will
leverage the Group's scale and expertise to deliver engineered
solutions and operational excellence, driving market share
leadership in our selected segments.
We have continued to successfully execute this strategy in 2021.
In Europe, as well as rightsizing the divisional head office, we
have simplified the structure of the division by reducing the
number of business units from six to five, with the merger of
French Speaking Countries with Iberia and Latin America, to form a
new South West Europe business unit, effective 1 July 2021. The
latter action has already secured work through the combined
business unit that would not have been won previously, and has also
reduced costs.
In North America, in July we furthered our drive to gain market
share in our chosen markets with the acquisition of RECON Services,
Inc (RECON), a geotechnical and industrial services company
headquartered in Houston, Texas. Similar to Keller's existing
Florida-based Moretrench Industrial business, RECON is focused on
environmental remediation activities and the geographic proximity
of the two businesses will provide revenue synergies from cross-
selling opportunities, both between the two businesses and also the
Keller Foundations businesses, and some, primarily volume-based,
cost synergies. The additional revenue synergies provide the
opportunity to increase the Group's overall market share in the
important Gulf Coast area where Keller has historically been
relatively under-represented. The initial cash consideration was
US$23m (GBP17m), and there is an expected earn-out of US$15m
(GBP11m) relating to specific future contract wins.
Safety
As always, safety is a management priority and we have made
continued progress in this regard in respect of both operational
and COVID-19 safety during the global pandemic. This approach has
enabled us to work in a safe and productive manner on sites
wherever the local regulatory regime allows, using applicable
personal protective equipment and social distancing.
At the start of the year, a tragic fatality occurred following
an accident on a site in Austria in which we lost a long-serving
and valued employee, and whilst it has been determined Keller was
not at fault for the accident, as a result we have actively
advanced our safety programme.
Our key safety metric, the accident frequency rate, improved by
27% year-on-year with 0.08 injuries per 100,000 hours worked and
there was a 25% improvement in the total recordable incident rate.
However, we are not complacent in this regard, despite an
industry-leading performance, and we continue to prioritise the
health and safety of our employees with a number of safety
initiatives underway to leverage our experience and safety
knowledge across the Group. As our number of recordable incidents
decrease, it is ever more important to document proactive reports
to identify and address hazardous situations before they occur.
Year-on-year near miss reports are up and leadership site
interaction is strong, even with the site access challenges created
by COVID-19. Proactive reporting is the reporting of near miss
events, events that could have caused damage or harm, and hazardous
situations that if not addressed could lead to an incident.
ESG
To reflect the growing importance of Environmental, Social and
Governance matters and provide greater focus and oversight on these
issues, as announced on 30 July 2021, the Board has established two
new Board Committees; the Environment Committee and the Social and
Community Committee. In addition, the Audit and the Nomination
Committees have been renamed the Audit and Risk Committee and the
Nomination and Governance Committee respectively to better reflect
their remits. Further detail with regard to the membership and
terms of reference
for these Committees can be found at www.keller.com
The company has identified safety, good governance, gender
diversity and carbon reduction as the most important areas of
sustainability that the Group can focus on globally. These align
with UN Sustainable Development Goals 3, 5, 13 and 16. Furthermore,
in respect of carbon reduction, the Executive team has set
ambitious but achievable net zero targets by 2050. We will be net
zero across all three emission scopes by 2050; net zero on Scope 2
by 2030, net zero on Scope 1 by 2040 and net zero by 2050 on Keller
originated Scope 3 (as opposed to client originated Scope 3). We
have begun implementing the short, medium and long-term actions
required to achieve these goals.
The Group has actively encouraged and supported employees to
become vaccinated against COVID-19 wherever possible. In
recognition of the benefit of free vaccination that many of the
Group's employees and their families have received from their
national governments, the Board has approved a funding contribution
of GBP300,000 to UNICEF's COVID-19 Vaccines Appeal. This amount
approximately equates to the cost of vaccinating the Keller
workforce and their immediate families and will help UNICEF to
deliver 1.9 billion doses of vaccines this year for frontline
health workers, social workers, teachers and those at highest
risk.
Management succession
James Hind, Divisional President of Keller North America, has
informed the Board of his intention to retire at the end of 2021,
after 18 years' service. James has been a highly effective member
of the Executive team, from his appointment in 2003 as Finance
Director of Keller Group plc and an Executive Director on the Board
until 2020, through to his current appointment as Divisional
President of Keller North America, a post he has held since 2018.
Under his leadership and with the support of a strong Executive
team, Keller North America has undergone significant
transformation, with greatly enhanced organisational capability and
accelerated collaboration.
Eric Drooff, currently Chief Operating Officer, Keller North
America, will succeed James. Over the 29 years Eric has been with
Keller North America he has demonstrated his strong leadership
capabilities across the organisation and his dedication, passion
and depth of geotechnical experience make him the best person to
lead Keller North America.
Interim dividend
Keller has consistently increased or maintained its dividend
over the 27 years since first listing on the London Stock Exchange,
through successive market cycles. The Board has considered the
financial strength of the Group, its significant liquidity position
and its longer-term confidence in the performance of the business,
and has decided it would be appropriate to maintain the 2021
interim dividend consistent with that declared in respect of 2020
and has approved the payment of an interim dividend of 12.6p in
respect of the half year ended 27 June 2021, payable on 10
September 2021 to shareholders on the register as at 20 August
2021.
Outlook
Whilst, as anticipated, trading at the beginning of the year was
slow, our major markets have more recently improved, as evidenced
by our increased record order book, and this increased volume will
more than offset the headwind of translational foreign exchange.
Whilst residual COVID-19 related risk remains in some markets, we
expect a continuing increase in business confidence and trading
momentum as the year progresses, with the performance for the full
year now anticipated to be materially ahead of the Board's previous
expectations, with a modest second half bias.
The continued, diligent execution of our strategy to develop
market leadership in our chosen focused geographies has positioned
the Group well to exploit the post-pandemic recovery and to benefit
from the positive medium and long-term market trends of
urbanisation and infrastructure growth.
Operating review
North America
H1 2021 H1 2020
Constant
GBPm GBPm currency
---------------------- -------- --------
Revenue 581.7 636.5 -
Underlying operating
profit 38.4 38.6 +11%
Underlying operating
margin 6.6% 6.1% n/a
Order book (1) 653.8 605.2 +8%
---------------------- -------- -------- ----------
(1) Comparative order book stated at constant currency.
In North America, revenue was flat on a constant currency basis,
with the first quarter impacted by the COVID-19 related
construction market slowdown and extreme adverse weather,
particularly in Texas. Momentum across all markets improved in the
second quarter, bringing first-half volumes in line with last year.
Operating profit increased by 11% to GBP38.4m on a constant
currency basis, mainly driven by the benefit from the resolution of
a historical claim (cGBP7m) in relation to a large civic project
completed in 2017, with a resultant 50 basis points improvement in
operating margin. The accident frequency rate, our key metric for
measuring safety performance, fell from 0.08 to 0.07, a 13%
improvement.
In the foundations business, whilst revenue declined due to a
slow first quarter, the business overall traded in line with our
expectations for the first half and continued to benefit from our
restructuring actions in 2020. In Canada, our business continued to
grow, building on the new base established in Montreal and the
restructure of the Alberta region, in 2020.
At Suncoast, the Group's post-tension business, the market
increase in steel prices had a significant adverse impact on
margins in the period, although these are expected to recover
somewhat as new high-rise contracts are awarded. The margin impact
was partially mitigated by record customer demand in the single
family home sector and our ability to re-price in this segment in
the relatively short term. Demand in the high-rise sector was muted
due to the impact of COVID-19.
Moretrench Industrial, our business which operates in the highly
regulated industrial and power segments, performed strongly and
reported robust revenue and profit growth.
In July 2021, we announced the acquisition of RECON Services,
Inc (RECON) a geotechnical and industrial services company
headquartered in Houston, Texas, for an initial cash consideration
of US$23m (GBP17m), and an expected earn-out of US$15m (GBP11m)
relating to certain specific contract wins. RECON is a specialist
geotechnical environmental remediation and industrial services
contractor working principally for industrial clients, many in the
petrochemical sector, predominantly along the Gulf and East coasts
of the United States. Similar to Keller's existing Florida-based
Moretrench Industrial business, RECON is focused on environmental
remediation activities and the geographic proximity of the two
businesses will provide revenue synergies from cross-selling
opportunities, both between the two businesses and also the Keller
foundations businesses. The additional revenue synergies provide
the opportunity to increase the Group's overall market share in the
important Gulf Coast area where Keller has historically been
relatively under-represented, and where a significant pipeline of
new projects is projected by the petrochemical sector. Cost
synergies will also be achieved through this acquisition.
The order book for North America at the period end strengthened
to GBP653.8m, up 8% on a constant currency basis, reflecting the
improved momentum across all of the North American business
units.
Europe
H1 2020
H1 2021 (2)
Constant
GBPm GBPm currency
---------------------- -------- --------
Revenue 242.0 254.7 -4%
Underlying operating
profit 5.7 7.1 -14%
Underlying operating
margin 2.4% 2.8% n/a
Order book(1) 375.5 285.3 +32%
---------------------- -------- -------- ----------
(1) Comparative order book stated at constant currency.
(2) From 1 January 2021 Middle East and Africa business unit
transferred to APAC division, to create Asia-Pacific, Middle East
and Africa (AMEA) division. The remaining EMEA division became our
Europe division.
In Europe, revenue decreased by 4% on a constant currency basis
reflecting extreme winter weather during the first quarter,
COVID-19 related project delays and the exit of non-core businesses
in 2020. Underlying operating profit decreased by 14% to GBP5.7m,
reflecting the reduced level of activity and weather-related
inefficiencies and the mix of revenues and projects, in particular
completion of a large oil refinery project in Mexico(3) that was
ongoing in the prior period.
The accident frequency rate fell from 0.21 to 0.17, a 19%
improvement. At the start of the year, a tragic fatality occurred
following an accident on a site in Austria in which we lost a
long-serving and valued employee. A thorough investigation was
completed, and whilst it has been determined Keller was not at
fault for the accident, as a result we have actively advanced our
safety programme further.
South-East Europe and Nordics delivered revenue growth, with
Austria, our first European business to be materially impacted by
COVID-19 restrictions in early 2020, recovering well during the
period. Norway benefitted from the SMS2 project, despite delays to
the work schedule at the main project site.
The UK business, which was adversely impacted by the hesitant
investment climate during the early part of 2020 following the 2019
general election and uncertainty around Brexit, has seen revenue
levels recover well during the first half of 2021, including work
on the HS2 rail project.
Central Europe and North East Europe were both impacted by lower
volumes as a result of the harsh winter during the first quarter
and low levels of activity and delays related to COVID-19.
Our French Speaking Countries business merged with Iberia and
Latin America, to form a new South West Europe business unit(4) ,
simplifying the structure of the new Europe division by reducing
the number of business units from six to five, and lowering costs.
During the first half period, the business was affected by adverse
weather and delayed project starts as well as the withdrawal from
South America. In addition, the completion in early 2021 of work on
an oil refinery project in Mexico reduced revenue and profits
compared to the prior period.
The Europe order book at the end of the period was GBP375.5m, up
32% on a constant currency basis. As well as the previously
announced awards on HS2, the order book across our European
businesses was generally higher at the period end compared to the
2020 year end, with momentum building across most European markets
during the second quarter. As markets improved, supply chain
pressures have impacted the cost and, more so, the availability of
both raw materials, such as steel, concrete and cement, as well as
suitably qualified employees. Managing these supply chain and
employee challenges will be a focus area in the second half of
2021.
(3) Following the Europe restructure Mexico continued to be
managed from Iberia.
(4) Effective 1 July 2021.
Asia-Pacific, Middle East and Africa (AMEA)
H1 2021 H1 2020(2)
Constant
GBPm GBPm currency
----------------------------- -------- -----------
Revenue 160.4 147.9 +8%
Underlying operating profit 0.1 5.9 -98%
Underlying operating margin 0.1% 4.0% n/a
Order book (1) 162.8 187.2 -13%
----------------------------- -------- ----------- ----------
(1) Comparative order book stated at constant currency.
(2) From 1 January 2021, the Middle East and Africa business
unit transferred to APAC division, to create Asia-Pacific, Middle
East and Africa (AMEA) division. The remaining EMEA division became
our Europe division.
In AMEA, revenues increased by 8% on a constant currency basis,
driven by Austral in Australia and India, partly offset by a
decline in Middle East and Africa, the business unit that was
transferred to the former APAC division to form AMEA in January
2021. Operating profit declined to GBP0.1m, primarily as a result
of unrecognised revenue related to suspended projects in Africa,
predominantly an LNG project in Mozambique following an escalation
in terrorist attacks in the local region, and which are subject to
commercial resolution with clients. The accident frequency rate
declined from 0.06 to 0.03 in the period, a 50% improvement.
The ASEAN business continued to feel the impact of COVID-19 with
continued market softness and the postponement of contracts,
particularly in Malaysia and Indonesia. In Singapore, activity
levels improved and the trading outlook for the business unit as a
whole in the second half looks encouraging.
Austral's business delivered a strong performance in terms of
both revenue and profit as it continued to deliver on Rio Tinto's
Cape Lambert project in the Pilbara as well as other mining-related
projects in the region, including Rio Tinto's Gudai-Darri rail
project. The cGBP75m Cape Lambert project is due to complete by the
end of 2021.
Our Keller Australia business was impacted by COVID-19 related
project delays with interstate lockdowns in New South Wales and
Victoria which constrained the movement of people and their access
to work sites. At the start of the year the business was impacted
by unusually heavy rain on the East Coast and cyclones in the
Pilbara region on the West Coast.
Our India business performed strongly, growing in revenue and
profit despite the continued impact of the second wave of COVID-19.
Tendering levels improved with a number of large projects in the
pipeline, though some project award decisions continued to be
delayed due to the pandemic.
The Middle East and Africa business had a challenging trading
period following the suspension of the LNG project in Mozambique
and the COVID-19 related construction market slowdown across the
business unit.
The AMEA order book at the end of the period was GBP162.8m, down
13%, on a constant currency basis. This is largely driven by the
continued impact of COVID-19 across the Middle East, Africa, ASEAN
and India. We expect tendering and trading activity to ramp up in
the second half.
Chief Financial Officer's review
This report comments on the key financial aspects of the Group's
interim results for the half year period ended 27 June 2021.
H1 2021 H1 2020
GBPm GBPm
---------------------------------- ------- -------
Revenue 984.1 1,039.1
Underlying operating profit(1) 39.5 47.9
Underlying operating profit %(1) 4.0% 4.6%
Non-underlying items (6.0) (19.9)
Statutory operating profit 33.5 28.0
----------------------------------- ------- -------
(1) Details of non-underlying items are set out in note 7 to the
interim condensed consolidated financial statements.
Reconciliations to statutory numbers are set out in the adjusted
performance measures section on page 33.
Geographic segmentation
From 1 January 2021, the Middle East and Africa (MEA) business
was transferred to the Asia-Pacific division, creating the
Asia-Pacific, Middle East and Africa division (AMEA), and the
remaining EMEA division became the Europe division. The 2020
comparative segmental analysis has been updated to reflect this
change.
Revenue Underlying operating profit(2) Underlying operating profit margin(2)
GBPm GBPm %
H1 2021 H1 2020 H1 2021 H1 2020 H1 2021 H1 2020
--------------- --- ------- ------- --------------- --------------- ------------------- ------------------
Division
North America 581.7 636.5 38.4 38.6 6.6% 6.1%
Europe 242.0 254.7 5.7 7.1 2.4% 2.8%
AMEA 160.4 147.9 0.1 5.9 0.1% 4.0%
Central - - (4.7) (3.7) - -
-------------------- ------- ------- --------------- --------------- ------------------- ------------------
Group 984.1 1,039.1 39.5 47.9 4.0% 4.6%
-------------------- ------- ------- --------------- --------------- ------------------- ------------------
(2) Details of non-underlying items are set out in note 7 of the
interim condensed consolidated financial statements.
Revenue
Revenue of GBP984.1m (H1 2020: GBP1,039.1m) was 5.3% down on
2020 due to foreign exchange translation. On a constant currency
basis, revenue was broadly in line with the prior year. Slower
trading in the first quarter was offset by an increased momentum
across the majority of markets in the second quarter.
North America reported flat revenues (at constant currency),
negatively impacted by COVID-19 and extreme adverse weather
conditions in Q1, offset by higher trading volumes in the second
quarter. In Europe, revenue decreased by 3.6% (at constant
currency) with lower activity levels due to the exit from non-core
businesses, adverse weather in some geographies and the impact of
the 2020 completion of an oil refinery project in Mexico. These
were offset by the ramp- up of the HS2 rail project in the UK and
SMS2 rail project in Norway. Revenue in AMEA increased by 7.8% on a
constant currency basis, despite activity levels in the Middle East
being impacted by COVID-19 delays, adverse weather conditions in
Australia and the suspension of contracts in Africa, predominantly
an LNG project in Mozambique following an escalation in terrorist
attacks in the region. Notwithstanding this, revenue in the Austral
business showed significant growth as the Cape Lambert project
progressed well and positive revenue growth was achieved in India
in a market adversely impacted by COVID-19.
We have a diversified spread of revenues across geographies,
product lines, market segments and end customers. Customers are
generally market specific and the largest customer represented less
than 3% (H1 2020: 2%) of the Group's revenue for the half year. The
top 10 customers represent 17% of the Group's revenue for the half
year (H1 2020: 7%).
Underlying operating profit
The underlying operating profit of GBP39.5m was 17.5% behind
prior year (H1 2020: GBP47.9m) and on a constant currency basis was
8.6% down on prior year.
North America underlying constant currency operating profit
increased by 10.9% despite the negative impact of bad weather,
COVID-19 and increasing steel prices at Suncoast, benefitting from
the resolution of a historical claim in relation to a large civic
project completed in 2017. Europe constant currency operating
profit decreased by 14.3%, reflecting the exit from non-core
businesses, weaker volumes in Central Europe, North-East Europe and
Iberia and Latin America, and the completion of a large oil
refinery project in Mexico, partly offset by the ramp-up of HS2 and
SMS2. AMEA constant currency operating profit decreased by 98.1% in
H1 2021, largely as a result of the suspension of an LNG project in
Mozambique and the impact of delayed projects in Australia and the
Middle East. However, growth in operating profit was achieved in
the Austral and India business units.
Share of post-tax results from joint ventures
The Group recognised a post-tax profit of GBP0.3m in the period
(H1 2020: GBP0.2m) from its share of the post-tax results from
joint ventures. No dividends (H1 2020: GBP0.5m) were received from
joint ventures in the period.
Statutory operating profit
Statutory operating profit, comprising underlying operating
profit of GBP39.5m (H1 2020: GBP47.9m) and non-underlying items
comprising net costs of GBP6.0m (H1 2020: GBP19.9m net costs),
increased by 19.6% to GBP33.5m (H1 2020: GBP28.0m).
Net finance costs
Net finance costs decreased by 40.2% to GBP4.3m (H1 2020:
GBP7.2m), as a result of consistent tight working capital
management and reduced borrowing rates during the half year in
2021. The cash generative nature of the Group's businesses is
demonstrated by the 44.9% decrease over prior half year of the
average net borrowings, excluding IFRS 16 lease liabilities, which
reduced from GBP223.9m during the half year to 28 June 2020 to
GBP123.4m during the half year to 27 June 2021.
Taxation
The Group's underlying effective tax rate decreased to 27% (H1
2020: 29%). The overall rate is determined by a range of factors
but the reduction is mainly as a result of the change in profit mix
across the various tax jurisdictions in which we operate and a
reduction in provisions made against recognising deferred tax
assets compared to 2020.
Cash tax paid in the period of GBP11.9m was an increase of
GBP5.4m over prior year (H1 2020: GBP6.5m). The difference is
mainly due to the timing and phasing of tax payments which do not
necessarily relate to the period in which the profits are earned.
Further details on tax are set out in note 8 of the interim
condensed consolidated financial statements.
The UK Government has announced an increase in the UK
corporation tax rate to 25% from 19% with effect from 1 April 2023.
This change has an immaterial impact on the deferred tax asset
recognised in the UK.
In the event that proposed US tax increases are enacted before
31 December 2021, the impact of revaluing existing net deferred tax
liabilities would increase our overall tax rate for 2021.
Non-underlying items
Details of non-underlying items are included in note 7 to the
interim condensed consolidated financial statements.
Amortisation of acquired intangibles
The GBP0.4m (H1 2020: GBP2.5m) charge for amortisation of
acquired intangible assets relates primarily to the Moretrench
acquisition (H1 2020: Moretrench and Austral acquisitions).
Non-underlying operating costs
Non-underlying operating costs were GBP6.3m (H1 2020:
GBP18.1m).
Exceptional restructuring costs of GBP3.1m (H1 2020: GBP7.8m)
have been incurred during the period; GBP2.6m related to the
continuation of the strategic project to rationalise the Europe
division and GBP0.9m related to restructuring costs incurred to
streamline KGS, the in-house equipment manufacturer. These costs
were partly offset by a credit of GBP0.4m from an underspend of
prior year provisions for restructuring costs in North America.
The Cyntech Anchors business in Canada was disposed of on 28
June 2021, resulting in GBP1.9m of non-underlying costs including
asset write-downs and additional impairments recorded on
classification of the business as held for sale, which reflect
anticipated proceeds under the planned sale. In the previous period
a loss of GBP10.0m was recognised on disposal of the Group's Brazil
operation.
Also included is contingent consideration payable of GBP1.3m due
to the resolution of a historical claim in relation to a large
civic project completed in 2017.
Non-underlying other operating income
Non-underlying other operating income of GBP0.7m (H1 2020:
GBP0.7m) is contingent consideration receivable in relation to the
Wannenwetsch disposal, completed in 2020. The proceeds of GBP0.7m
received in the previous period were received on final settlement
of a contributory claim relating to an exceptional contract
dispute.
Non-underlying taxation
A non-underlying tax credit of GBP0.6m (H1 2020: GBP1.2m credit)
relates to the tax benefit on non-underlying charges which are
expected to be deductible.
Earnings per share
Underlying diluted earnings per share decreased by 9.9% to 35.6p
(H1 2020: 39.5p) in line with the lower operating profit partly
offset by a reduced interest charge and a reduced effective tax
rate in the period. Statutory diluted earnings per share was 28.2p
(H1 2020: 13.8p).
Dividend
The Group's dividend policy is to increase the dividend
sustainably whilst allowing the Group to be able to grow, or as a
minimum, maintain, the level of dividend through market cycles. The
dividend policy is therefore impacted by the performance of the
Group, which is subject to the Group's principal risks and
uncertainties as well as the level of headroom on the Group's
borrowing facilities, future cash commitments and investment
plans.
Reflecting the financial strength of the Group, its significant
liquidity position and the longer-term confidence in the
performance of the business the Board has decided to maintain the
2021 half-year dividend consistent with that declared in respect of
2020 and have recommended an interim dividend of 12.6p per share
(H1 2020: 12.6p per share) .
Acquisitions and disposals
There were no material acquisitions or disposals in the period
ended 27 June 2021.
Working capital
Overall, a good working capital performance resulted in total
net working capital decreasing by GBP3.9m in the half year (H1
2020: GBP7.9m decrease). This was offset by a decrease in
provisions and retirement benefits of GBP7.1m (H1 2020: GBP16.7m
increase), reflecting utilisations and legal settlements in the
period.
Prior-year balance sheet restatement
As a result of a reclassification at 31 December 2020 of
contract provisions from other payables to provisions and end of
service scheme liabilities from provisions to retirement benefit
liabilities within the classification of liabilities, the
comparative consolidated balance sheet as at 28 June 2020 has been
restated. Consequently, with regard to contract provisions, the
Group has increased current provisions by GBP27.7m, increased
non-current provisions by GBP9.4m and reduced trade and other
payables by GBP37.1m. With regard to end of service scheme
liabilities, the Group has reduced current provisions by GBP0.6m,
non-current provisions by GBP2.5m and increased retirement benefit
liabilities by GBP3.1m. Further details on this are set out in note
18 of the interim condensed consolidated financial statements.
Capital expenditure
The Group manages capital expenditure tightly whilst investing
in the upgrade and replacement of equipment where appropriate. Net
capital expenditure of GBP26.4m (H1 2020: GBP24.9m) included
proceeds from the sale of equipment of GBP5.5m (H1 2020: GBP2.9m).
The asset replacement ratio, which is calculated by dividing gross
capital expenditure, excluding sales proceeds on disposal of items
of property, plant and equipment and those assets capitalised under
IFRS 16, by the depreciation charge on owned property, plant and
equipment was 101% (H1 2020: 83%).
Free cash flow
The Group's free cash flow of GBP26.9m (H1 2020: GBP74.1m) is
more than sufficient to fund, in cash terms, the full value of the
payment of the interim dividend of GBP9.1m (H1 2020: GBP9.1m). The
basis of deriving free cash flow is set out below:
H1 2021 H1 2020(1)
GBPm GBPm
----------------------------------------------------------------------- ------- ----------
Underlying operating profit 39.5 47.9
Depreciation and amortisation 44.5 47.0
------------------------------------------------------------------------ ------- ----------
Underlying EBITDA 84.0 94.9
------------------------------------------------------------------------ ------- ----------
Non-cash items (0.7) 0.6
Dividends from joint ventures - 0.5
Decrease in working capital 3.9 7.9
(Outflows)/inflows from provisions and retirement benefit liabilities (7.1) 16.7
Net capital expenditure (26.4) (24.9)
Additions to right-of-use assets (10.6) (7.9)
Free cash flow before interest and tax 43.1 87.8
Free cash flow before interest and tax to underlying operating profit 109% 183%
------------------------------------------------------------------------ ------- ----------
Net interest paid (4.3) (7.2)
Cash tax paid (11.9) (6.5)
------------------------------------------------------------------------ ------- ----------
Free cash flow 26.9 74.1
------------------------------------------------------------------------ ------- ----------
Dividends paid to shareholders (16.8) -
Acquisitions - (0.1)
Non-underlying items (1.7) 2.7
Right-of-use assets/lease liability modifications 0.8 (0.6)
Foreign exchange movements 2.5 (18.7)
------------------------------------------------------------------------ ------- ----------
Movement in net debt 11.7 57.4
------------------------------------------------------------------------ ------- ----------
Opening net debt (192.5) (289.8)
------------------------------------------------------------------------ ------- ----------
Closing net debt (180.8) (232.4)
------------------------------------------------------------------------ ------- ----------
(1) Trade and other payables, provisions, retirement benefit and
other non-current liabilities presented here do not correspond to
the published 2020 interim condensed consolidated financial
statements. The comparative cash flow has been restated to
reclassify contract provisions from other payables to provisions,
as outlined in note 18 to the interim condensed consolidated
financial statements.
Financing facilities and net debt
The Group's term debt and committed facilities principally
comprise US private placements of US$125m (GBP94.2m) which mature
between October 2021 and December 2024 and a GBP375m multi-currency
syndicated revolving credit facility which matures in November
2025. At 27 June 2021, the Group had undrawn committed and
uncommitted borrowing facilities totalling GBP302.3m comprising
GBP250.2m of the unutilised portion of the revolving credit
facility, GBP16.3m of other undrawn committed borrowing facilities
and undrawn uncommitted borrowing facilities of GBP35.8m, as well
as cash of GBP116.8m.
The most significant covenants in respect of the main borrowing
facilities relate to the ratio of net debt to underlying EBITDA,
underlying EBITDA interest cover and the Group's net worth. The
covenants are required to be tested at the half year and the year
end. The Group operates comfortably within all of its covenant
limits. Net debt to underlying EBITDA leverage, calculated
excluding the impact of IFRS 16, was 0.7x (H1 2020: 0.9x), well
within the limit of 3.0x and at the lower end of the leverage
target of between 0.5x-1.5x. Calculated on a statutory basis,
including the impact of IFRS 16, net debt to EBITDA leverage was
0.9x at 27 June 2021 (H1 2020: 1.1x). Underlying EBITDA, excluding
the impact of IFRS 16, to net finance charges for the period to 27
June 2021 was 30.5x (H1 2020: 12.7x), well above the limit of
4.0x.
On an IFRS 16 basis, gearing at 27 June 2021 was 44% (H1 2020:
53%).
The average month-end net debt during the period ended 27 June
2021, excluding IFRS 16 lease liabilities, was GBP123.4m (H1 2020:
GBP223.9m) and the minimum headroom during this period on the
Group's main banking facility was GBP250.2m (H1 2020: GBP129.4m),
in addition to a cash balance at that time of GBP116.8m (H1 2020:
GBP80.8m). The Group had no material discounting or factoring in
place during the period. Given the relatively low value and
short-term nature of the majority of the Group's projects, the
level of advance payments are typically not significant.
At 27 June 2021 the Group had drawn upon uncommitted overdraft
facilities of GBP4.5m (H1 2020: GBP7.6m) and had drawn GBP163.1m of
bank guarantee facilities (H1 2020: GBP183.0m).
Retirement benefit liabilities
The primary defined benefit scheme is in the UK. The Group also
has defined benefit retirement obligations in Germany and Austria
and a number of end of service schemes in the Middle East that
follow the same principles as a defined benefit scheme. The Group's
net defined benefit liabilities as at 27 June 2021 were GBP23.0m
(H1 2020: GBP32.6m, FY 2020: GBP31.1m). The reduction in the half
year period was driven by an actuarial gain of GBP5.4m on the UK
defined benefit scheme (H1 2020: GBP2.0m loss) reflecting an
increase in the discount rate for scheme liabilities to 1.8% from
1.2% at 31 December 2020 and higher asset returns. During the
period there was an actuarial gain of GBP0.4m on other schemes.
Post balance sheet events
On 28 June 2021, subsequent to the half year period to 27 June
2021, the Group disposed of its Cyntech Anchors operation in
Canada, being 100% of the issued share capital of Keller Cyntech
U.S. and Cyntech Anchors Ltd. In the half year period to 27 June
2021, GBP1.9m of non-underlying costs were recorded on
classification of the business as held for sale.
On 13 July 2021, the Group acquired 100% of the issued share
capital of RECON Services Inc, a geotechnical and industrial
services company headquartered in Houston, Texas, USA, for an
initial cash consideration of GBP17m (US$23m) and an expected
earn-out of GBP11m (US$15m) relating to certain future contract
wins.
Principal risks
The Group operates globally across many geotechnical market
sectors and in varied geographic markets. The Group's performance
and prospects may be affected by risks and uncertainties in
relation to the industry and the environments in which it
undertakes its operations around the world. The Group is alert to
the challenges of managing risk and has systems and procedures in
place across the Group to identify, assess and mitigate major
business risks.
The principal risks and uncertainties are as follows:
-- financial risks
o the inability to finance our business;
-- market risk
o a rapid downturn in our markets;
-- strategic risk
o the failure to procure new contracts, losing market share;
o ethical misconduct and non-compliance with regulations;
o inability to maintain our technological product advantage;
o changing environmental factors;
-- operational risk
o service or solution failure;
o the ineffective execution of our projects;
o causing a serious injury or fatality to an employee or member
of the public;
o not having the right skills to deliver and the risk of
potential disruption in the business operations;
o reputational damage and/or loss or corruption of data through
external or internal technical threats and malicious action.
The Group's principal risks and uncertainties remain unchanged
from the year end. For a more detailed description of these risks,
uncertainties and other factors, please see the principal risks and
uncertainties section of the Strategic report in the Annual Report
and Accounts.
The important developments in managing our principal risks
during 2021 are as follows:
-- maintaining focus on managing the continued impact of COVID-19 on the business;
-- continued focus on embedding risk management processes across
all parts of the organisation;
-- regularly reviewing our principal risks and the mitigating
activities we are taking to ensure they accurately reflect the
risks we are facing and how we are responding to those risks;
-- continuing to review risk trends, including the consideration
of emerging risks via horizon scanning and reviewing emerging
legislation to ascertain how they may impact Keller;
-- reviewing the impact of complying with the recommendations of
the Task Force on Climate-related Financial Disclosures (TCFD),
including risk reporting.
The key areas of focus for the remainder of 2021 are as
follows:
-- finalising and deploying risk management process improvements
needed to comply with TCFD requirements, deploying where possible
or providing an explanation where not yet fully deployed. These
improvements will also lead to continued improvement of the wider
risk reporting and in turn support a more timely and robust
decision-making process;
-- we will be closely monitoring the following items through the
regular review of risks across the business and any impact they may
have on our principal risks for 2021 year-end reporting:
o the continuing impact from COVID-19 in specific markets;
o supply chain issues, including both scarcity of certain
materials and the pricing impact of this; and
o people issues, including the ability to hire post COVID-19 and
movement across borders to deliver projects.
Statement of Directors' responsibilities
The interim financial report is the responsibility of, and has
been approved by, the Directors. The Directors are responsible for
preparing the interim financial report in accordance with the
Disclosure Guidance and Transparency Rules ('DTR') of the United
Kingdom's Financial Conduct Authority ('FCA').
The DTR require that the accounting policies and presentation
applied to the half yearly figures must be consistent with those
applied in the latest published annual accounts, except where the
accounting policies and presentation are to be changed in the
subsequent annual accounts, in which case the new accounting
policies and presentation should be followed, and the changes and
the reasons for the changes should be disclosed in the Interim
report, unless the FCA agrees otherwise.
The Directors confirm that to the best of their knowledge the
condensed set of financial statements, which have been prepared in
accordance with UK adopted International Accounting Standard 34,
'Interim Financial Reporting' give a true and fair view of the
assets, liabilities, financial position and profit and loss of the
Group, as required by DTR 4.2 and in particular include a fair
review of:
-- the important events that have occurred during the first half
of the financial year and their impact on the interim condensed
consolidated set of financial statements as required by DTR
4.2.7R;
-- the principal risks and uncertainties for the remaining half
of the year as required by DTR 4.2.7R; and
-- related party transactions that have taken place in the first
half of the current financial year and changes in the related party
transactions described in the previous annual report that have
materially affected the financial position or performance of the
Group during the first half of the current financial year as
required by DTR 4.2.8R.
The Directors of Keller Group plc are listed in the 2020 Annual
Report and Accounts.
Approved by the Board of Keller Group plc and signed on its
behalf by:
Michael Speakman
Chief Executive Officer
David Burke
Chief Financial Officer
2 August 2021
INDEPENT REVIEW REPORT TO KELLER GROUP PLC
Conclusion
We have been engaged by the company to review the condensed set
of financial statements in the Interim Results of Keller Group plc
for the half-year period ended 27 June 2021 which comprises the
consolidated income statement, consolidated statement of
comprehensive income, consolidated balance sheet, consolidated
statement of changes in equity, consolidated cash flow statement,
and the related explanatory notes. We have read the other
information contained in the Interim Results and considered whether
it contains any apparent misstatements or material inconsistencies
with the information in the condensed set of financial
statements.
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the interim period ended 27
June 2021 is not prepared, in all material respects, in accordance
with UK adopted International Accounting Standard 34 and the
Disclosure Guidance and Transparency Rules of the United Kingdom's
Financial Conduct Authority.
Basis for Conclusion
We conducted our review in accordance with International
Standard on Review Engagements 2410 (UK and Ireland) 'Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity' issued by the Auditing Practices Board. A review of
interim financial information consists of making enquiries,
primarily of persons responsible for financial and accounting
matters, and applying analytical and other review procedures. A
review is substantially less in scope than an audit conducted in
accordance with International Standards on Auditing (UK) and
consequently does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in
an audit. Accordingly, we do not express an audit opinion.
As disclosed in note 2, the annual financial statements of the
Group will be prepared in accordance with UK adopted IFRSs. The
condensed set of financial statements included in this half-yearly
financial report has been prepared in accordance with UK adopted
International Accounting Standard 34, 'Interim Financial
Reporting'.
Responsibilities of the Directors
The Directors are responsible for preparing the half-yearly
financial report in accordance with the Disclosure Guidance and
Transparency Rules of the United Kingdom's Financial Conduct
Authority.
Auditor's responsibilities for the review of the financial
information
In reviewing the half-yearly report, we are responsible for
expressing to the company a conclusion on the condensed set of
financial statements in the half-yearly financial report. Our
conclusion, based on procedures that are less extensive than audit
procedures, as described in the 'basis for conclusion' paragraph of
this report.
Use of our report
This report is made solely to the company in accordance with
guidance contained in International Standard on Review Engagements
2410 (UK and Ireland) 'Review of Interim Financial Information
Performed by the Independent Auditor of the Entity' issued by the
Auditing Practices Board. To the fullest extent permitted by law,
we do not accept or assume responsibility to anyone other than the
company, for our work, for this report, or for the conclusions we
have formed.
Ernst & Young LLP
Reading
2 August 2021
Interim condensed consolidated income statement (unaudited)
For the half year period ended 27 June 2021
2021 2020
-------------------------- ---- ------------------------------------- ---------- -------------- -----------
Non-underlying Non-underlying
items items
Underlying (note 7) Statutory Underlying (note 7) Statutory
Note GBPm GBPm GBPm GBPm GBPm GBPm
-------------------------- ---- ---------- -------------- --------- ---------- -------------- -----------
Revenue 4,5 984.1 - 984.1 1,039.1 - 1,039.1
Operating costs (944.9) (6.3) (951.2) (991.4) (18.1) (1,009.5)
Amortisation of acquired
intangible assets - (0.4) (0.4) - (2.5) (2.5)
Other operating income - 0.7 0.7 - 0.7 0.7
Share of post-tax results
of joint ventures 0.3 - 0.3 0.2 - 0.2
-------------------------- ---- ---------- -------------- --------- ---------- -------------- -----------
Operating profit/(loss) 4 39.5 (6.0) 33.5 47.9 (19.9) 28.0
Finance income 0.1 - 0.1 0.4 - 0.4
Finance costs (4.4) - (4.4) (7.6) - (7.6)
-------------------------- ---- ---------- -------------- --------- ---------- -------------- -----------
Profit/(loss) before
taxation 35.2 (6.0) 29.2 40.7 (19.9) 20.8
Taxation 8 (9.5) 0.6 (8.9) (11.8) 1.2 (10.6)
-------------------------- ---- ---------- -------------- --------- ---------- -------------- -----------
Profit/(loss) for the
period 25.7 (5.4) 20.3 28.9 (18.7) 10.2
-------------------------- ---- ---------- -------------- --------- ---------- -------------- -----------
Attributable to:
Equity holders of the
parent 26.0 (5.4) 20.6 28.7 (18.7) 10.0
Non-controlling interests (0.3) - (0.3) 0.2 - 0.2
-------------------------- ---- ---------- -------------- --------- ---------- -------------- -----------
25.7 (5.4) 20.3 28.9 (18.7) 10.2
-------------------------- ---- ---------- -------------- --------- ---------- -------------- -----------
Earnings per share
Basic 10 36.0p 28.5p 39.8p 13.9p
Diluted 10 35.6p 28.2p 39.5p 13.8p
-------------------------- ---- ---------- -------------- --------- ---------- -------------- -----------
Interim condensed consolidated statement of comprehensive income
(unaudited)
For the half year period ended 27 June 2021
2021 2020
GBPm GBPm
----------------------------------------------------------- ----- -----
Profit for the period 20.3 10.2
----------------------------------------------------------- ----- -----
Other comprehensive income
Items that may be reclassified subsequently to profit
or loss:
Exchange movements on translation of foreign operations (8.7) 28.1
Transfer of translation reserve on disposal of subsidiary - 2.9
Items that will not be reclassified subsequently to profit
or loss:
Remeasurements of defined benefit pension schemes 5.8 (2.0)
Tax on remeasurements of defined benefit pension schemes (0.9) 0.4
----------------------------------------------------------- ----- -----
Other comprehensive (loss)/income for the period, net
of tax (3.8) 29.4
----------------------------------------------------------- ----- -----
Total comprehensive income for the period 16.5 39.6
----------------------------------------------------------- ----- -----
Attributable to:
Equity holders of the parent 16.8 39.4
Non-controlling interests (0.3) 0.2
----------------------------------------------------------- ----- -----
16.5 39.6
----------------------------------------------------------- ----- -----
Interim condensed consolidated balance sheet (unaudited)
As at 27 June 2021
As at As at(1)
27 June 28 June As at
31 December
2021 2020 2020
Note GBPm GBPm GBPm
--------------------------------------- ---- ----- --------- --------- -------------
Assets
Non-current assets
Goodwill and intangible assets 116.9 129.9 118.8
Property, plant and equipment 11 417.7 464.3 434.9
Investments in joint ventures 4.6 3.9 4.4
Deferred tax assets 8.4 15.0 10.3
Other assets 25.6 27.2 25.9
--------------------------------------------- ----- --------- --------- -------------
573.2 640.3 594.3
-------------------------------------------- ----- --------- --------- -------------
Current assets
Inventories 74.5 74.9 60.1
Trade and other receivables 543.5 573.3 503.9
Current tax assets 8.2 9.6 2.1
Cash and cash equivalents 12 116.8 129.0 66.3
--------------------------------------------- ----- --------- --------- -------------
Assets held for sale 13 23.6 - 8.7
--------------------------------------------- ----- --------- --------- -------------
766.6 786.8 641.1
-------------------------------------------- ----- --------- --------- -------------
Total assets 1,339.8 1,427.1 1,235.4
--------------------------------------------- ----- --------- --------- -------------
Liabilities
Current liabilities
Loans and borrowings (65.9) (41.1) (67.0)
Current tax liabilities (19.7) (31.7) (17.1)
Trade and other payables (450.7) (416.0) (381.7)
Provisions (44.7) (47.4) (46.2)
--------------------------------------------- ----- --------- --------- -------------
Liabilities directly associated with
assets held for sale 13 (10.5) - -
--------------------------------------------- ----- --------- --------- -------------
(591.5) (536.2) (512.0)
-------------------------------------------- ----- --------- --------- -------------
Non-current liabilities
Loans and borrowings (231.7) (320.3) (191.8)
Retirement benefit liabilities 14 (23.0) (32.6) (31.1)
Deferred tax liabilities (20.4) (28.9) (21.3)
Provisions (41.4) (48.3) (47.2)
Other liabilities (20.3) (22.8) (22.0)
--------------------------------------------- ----- --------- --------- -------------
(336.8) (452.9) (313.4)
-------------------------------------------- ----- --------- --------- -------------
Total liabilities (928.3) (989.1) (825.4)
--------------------------------------------- ----- --------- --------- -------------
Net assets 411.5 438.0 410.0
--------------------------------------------- ----- --------- --------- -------------
Equity
Share capital 16 7.3 7.3 7.3
Share premium account 38.1 38.1 38.1
Capital redemption reserve 7.6 7.6 7.6
Translation reserve 7.6 50.1 16.3
Other reserve 56.9 56.9 56.9
Retained earnings 290.6 272.5 280.1
--------------------------------------------- ----- --------- --------- -------------
Equity attributable to equity holders
of the parent 408.1 432.5 406.3
Non-controlling interests 3.4 5.5 3.7
--------------------------------------------- ----- --------- --------- -------------
Total equity 411.5 438.0 410.0
--------------------------------------------- ----- --------- --------- -------------
(1) Trade and other payables, provisions and retirement benefit
liabilities presented here do not correspond to the published 2020
interim condensed consolidated financial statements. The
comparative balance sheet has been restated to reclassify contract
provisions from other payables to provisions and end of service
schemes in the Middle East from provisions to retirement benefit
liabilities, as outlined in note 18 to the interim financial
statements.
Interim condensed consolidated statement of changes in equity
(unaudited)
For the half year period ended 27 June 2021
Share Capital
Share premium redemption Translation Other Retained Non-controlling Total
capital account reserve reserve reserve earnings interests equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
--------------- --------- --------- ----------- ------------- ---------- ---------- ---------------- ---------
At 31 December
2020 7.3 38.1 7.6 16.3 56.9 280.1 3.7 410.0
--------------- --------- --------- ----------- ------------- ---------- ---------- ---------------- ---------
Total
comprehensive
(loss)/income
for the
period - - - (8.7) - 25.5 (0.3) 16.5
--------------- --------- --------- ----------- ------------- ---------- ---------- ---------------- ---------
Dividends - - - - - (16.8) - (16.8)
Share-based
payments - - - - - 1.8 - 1.8
At 27 June
2021 7.3 38.1 7.6 7.6 56.9 290.6 3.4 411.5
--------------- --------- --------- ----------- ------------- ---------- ---------- ---------------- ---------
Share Capital
Share premium redemption Translation Other Retained Non-controlling Total
capital account reserve reserve reserve earnings interests equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
--------------- --------- --------- ----------- ------------- ---------- ---------- ---------------- ---------
At 31 December
2019 7.3 38.1 7.6 19.1 56.9 263.2 5.3 397.5
--------------- --------- --------- ----------- ------------- ---------- ---------- ---------------- ---------
Total
comprehensive
income for
the
period - - - 31.0 - 8.4 0.2 39.6
--------------- --------- --------- ----------- ------------- ---------- ---------- ---------------- ---------
Share-based
payments - - - - - 0.9 - 0.9
At 28 June
2020 7.3 38.1 7.6 50.1 56.9 272.5 5.5 438.0
--------------- --------- --------- ----------- ------------- ---------- ---------- ---------------- ---------
Interim condensed consolidated cash flow statement
(unaudited)
For the half year period ended 27 June 2021
2021 2020(1)
Note GBPm GBPm
---------------------------------------------------------- ----- ------- --------
Cash flows from operating activities
Profit before taxation 29.2 20.8
Non-underlying items 6.0 19.9
Finance income (0.1) (0.4)
Finance costs 4.4 7.6
----------------------------------------------------------- ----- ------- --------
Underlying operating profit 4 39.5 47.9
Depreciation of property, plant and equipment 44.2 46.8
Amortisation of intangible assets 0.3 0.2
Share of post-tax results of joint ventures (0.3) (0.2)
Profit on sale of property, plant and equipment 11 (1.5) (1.2)
Other non-cash movements 1.2 0.9
Foreign exchange (gains)/losses (0.1) 0.5
----------------------------------------------------------- ----- ------- --------
Operating cash flows before movements in working
capital and other underlying items 83.3 94.9
Increase in inventories (20.3) (2.5)
(Increase)/decrease in trade and other receivables (59.5) 82.1
Increase/(decrease) in trade and other payables 83.7 (71.7)
(Decrease)/increase in provisions, retirement benefit
and other non-current liabilities (7.1) 16.7
----------------------------------------------------------- ----- ------- --------
Cash generated from operations before non-underlying
items 80.1 119.5
Cash inflows from non-underlying items: contract
disputes - 0.7
Cash (outflows)/inflows from non-underlying items:
restructuring costs (1.7) 2.0
Cash generated from operations 78.4 122.2
Interest paid (2.6) (5.8)
Interest element of lease rental payments (1.5) (1.8)
----------------------------------------------------------- ----- ------- --------
Income tax paid (11.9) (6.5)
----------------------------------------------------------- ----- ------- --------
Net cash inflow from operating activities 62.4 108.1
----------------------------------------------------------- ----- ------- --------
Cash flows from investing activities
Interest received 0.1 0.4
Proceeds from sale of property, plant and equipment 5.5 2.9
Proceeds on disposal of subsidiary, net of cash disposed 6 - (0.1)
Acquisition of property, plant and equipment 11 (31.7) (27.8)
Acquisition of intangible assets (0.2) -
Dividends received from joint ventures - 0.5
Net cash outflow from investing activities (26.3) (24.1)
----------------------------------------------------------- ----- ------- --------
Cash flows from financing activities
Increase in borrowings 52.6 -
Repayment of borrowings (7.4) (40.3)
Payment of lease liabilities (12.9) (12.6)
Dividends paid 9 (16.8) -
----------------------------------------------------------- ----- ------- --------
Net cash inflow/(outflow) from financing activities 15.5 (52.9)
----------------------------------------------------------- ----- ------- --------
Net increase in cash and cash equivalents 51.6 31.1
----------------------------------------------------------- ----- ------- --------
Cash and cash equivalents at beginning of period 61.6 87.5
Effect of exchange rate movements (0.9) 2.8
----------------------------------------------------------- ----- ------- --------
Cash and cash equivalents at end of period 12 112.3 121.4
----------------------------------------------------------- ----- ------- --------
(1) Trade and other payables, provisions, retirement benefit and
other non-current liabilities presented here do not correspond to
the published 2020 interim condensed consolidated financial
statements. The comparative cash flow has been restated to
reclassify contract provisions from other payables to provisions,
as outlined in note 18 to the interim financial statements.
1. Corporate information
The interim condensed consolidated financial statements of
Keller Group plc and its subsidiaries (collectively, 'the Group')
for the half year period ended 27 June 2021 were authorised for
issue in accordance with a resolution of the Directors on 2 August
2021.
Keller Group plc ('the company') is a limited company,
incorporated and domiciled in the United Kingdom, whose shares are
publicly traded on the London Stock Exchange. The registered office
is located at 5(th) floor, 1 Sheldon Square, London W2 6TT. The
Group is principally engaged in the provision of specialist
geotechnical engineering services.
2. Basis of preparation
The condensed financial statements included in this interim
financial report have been prepared in accordance with UK adopted
International Accounting Standard 34, 'Interim Financial
Reporting'. They do not include all of the information required for
full annual financial statements and should be read in conjunction
with the consolidated financial statements of the Group as at and
for the year ended 31 December 2020. The interim report does not
constitute statutory accounts. The financial information for the
year ended 31 December 2020 does not constitute the Group's
statutory financial statements for that period as defined in
section 435 of the Companies Act 2006 but is instead an extract
from those financial statements. The Group's financial statements
for the year ended 31 December 2020 have been delivered to the
Registrar of Companies. The Auditor's Report on those financial
statements contained an unqualified opinion, did not draw attention
to any matters by way of emphasis and did not contain any statement
under section 498 of the Companies Act 2006. The annual financial
statements for year ended December 2021 will be prepared in
accordance with UK-adopted international accounting standards (UK
adopted IFRSs).
The accounting policies adopted in the preparation of the
interim condensed consolidated financial statements are consistent
with those followed in the preparation of the Group's annual
consolidated financial statements for the year ended 31 December
2020.
The Group has not early adopted any standard, interpretation or
amendment that has been issued but is not yet effective. There were
no new standards, or amendments to standards, which are mandatory
and relevant to the Group for the year ending 31 December 2021
which have a material effect on the interim consolidated financial
statements.
Going concern
As part of the interim going concern review, management ran a
series of downside scenarios on the latest forecast profit and cash
flow projections to assess covenant headroom against available
funding facilities for the period to 31 December 2022, a period of
at least 12 months from when the interim financial statements are
authorised for issue and aligning with the interval in which the
Group's banking covenants are tested . This process involved
constructing scenarios to reflect the Group's current assessment of
its principal risks, including those that would threaten its
business model, future performance, solvency or liquidity. The
principal risks and uncertainties modelled by management align with
those disclosed in the 2020 Annual Report and there have been no
changes since in management's risk assessment. The following severe
but plausible downside assumptions were modelled:
-- Rapid downturn in the Group's markets resulting in up to a 10% decline in revenues.
-- Ineffective execution of projects reducing profits by 1% of revenue.
-- A combination of other principal risks and trading risks
materialising together reducing profits by up to GBP22.0m over the
period to 31 December 2022. These risks include costs of ethical
misconduct and regulatory non-compliance, occurrence of an accident
causing serious injury to an employee or member of the public, the
cost of a product or solution failure and an unrecorded tax
liability.
-- Deterioration of working capital performance by 5% of six months' sales.
The financial and cash effects of these scenarios were modelled
individually and in combination. The focus was on the ability to
secure or retain future work and potential downward pressure on
margins. Management applied sensitivities against projected
revenue, margin and working capital metrics reflecting a series of
plausible downside scenarios. Against the most negative scenario,
mitigating actions were overlaid. These include a range of
cost-cutting measures and overhead savings designed to preserve
cash flows. Even in the most extreme downside scenario modelled,
including an aggregation of all risks considered, which showed a
reduction in the 12-month rolling operating profit to June 2022 of
approximately 58% compared with the actual 12-month rolling
operating profit to June 2021, the adjusted projections do not show
a breach of covenants in respect of available funding facilities or
any liquidity shortfall. Consideration was given to scenarios where
covenants would be breached and the circumstances giving rise to
these scenarios were considered extreme and remote. This process
allowed the Board to conclude that the Group will continue to
operate on a going concern basis through to 31 December 2022.
Accordingly, the interim consolidated financial statements are
prepared on a going concern basis.
At 27 June 2021, the Group had undrawn committed and uncommitted
borrowing facilities totalling GBP302.3m, comprising GBP250.2m of
the unutilised portion of the revolving credit facility, GBP16.3m
of other undrawn committed borrowing facilities and undrawn
uncommitted borrowing facilities of GBP35.8m, as well as cash of
GBP116.8m. At 27 June 2021 the Group's net debt to underlying
EBITDA ratio (calculated on an IAS 17 covenant basis, as documented
in the adjusted performance measures section) was 0.7x, well within
the covenant limit of 3.0x.
3. Foreign currencies
The exchange rates used in respect of principal currencies
are:
Average for period Period end
------------------------------------- -----------------------------------
Half year Half year
period period
to to Year to As at As at As at
27 June 28 June 31 December 27 June 28 June 31 December
2021 2020 2020 2021 2020 2020
------------------- ---------- ---------- ------------- --------- --------- -------------
US dollar 1.39 1.26 1.28 1.39 1.23 1.37
Canadian dollar 1.73 1.72 1.72 1.71 1.69 1.74
Euro 1.15 1.14 1.12 1.16 1.10 1.12
Singapore dollar 1.85 1.76 1.77 1.87 1.72 1.81
Australian dollar 1.80 1.92 1.86 1.83 1.80 1.78
------------------- ---------- ---------- ------------- --------- --------- -------------
4. Segmental analysis
In accordance with IFRS 8, the Group has determined its
operating segments based upon the information reported to the Chief
Operating Decision Maker. The Group comprises of three geographical
divisions which have only one major product or service: specialist
geotechnical services. North America, Europe, and Asia-Pacific,
Middle East and Africa continue to be managed as separate
geographical divisions. This is reflected in the Group's management
structure and in the segment information reviewed by the Chief
Operating Decision Maker.
Half year period to 27 Half year period to
June 2021 28 June 2020(1)
-------------------------------- ------------------------- ----------------------
Operating Operating
Revenue profit Revenue profit
GBPm GBPm GBPm GBPm
-------------------------------- ----------- ------------ --------- -----------
North America 581.7 38.4 636.5 38.6
Europe 242.0 5.7 254.7 7.1
Asia-Pacific, Middle East
and Africa 160.4 0.1 147.9 5.9
984.1 44.2 1,039.1 51.6
Central items and eliminations - (4.7) - (3.7)
-------------------------------- ----------- ------------ --------- -----------
Before non-underlying items 984.1 39.5 1,039.1 47.9
Non-underlying items (note
7) - (6.0) - (19.9)
-------------------------------- ----------- ------------ --------- -----------
984.1 33.5 1,039.1 28.0
-------------------------------- ----------- ------------ --------- -----------
As at 27 June 2021
---------------------------------- --------------------------------------------------------------------------
Tangible
Depreciation(3) and(4)
Segment Segment Capital Capital and intangible
assets liabilities employed additions amortisation assets
GBPm GBPm GBPm GBPm GBPm GBPm
---------------------------------- ------- ------------ --------- ---------- --------------- -----------
North America 709.8 (289.0) 420.8 13.3 22.3 290.7
Europe 250.1 (159.5) 90.6 8.9 12.8 143.2
Asia-Pacific, Middle East
and Africa 219.0 (101.6) 117.4 9.7 9.4 100.6
---------------------------------- ------- ------------ --------- ---------- --------------- -----------
1,178.9 (550.1) 628.8 31.9 44.5 534.5
Central items and eliminations(2) 160.9 (378.2) (217.3) - - 0.1
---------------------------------- ------- ------------ --------- ---------- --------------- -----------
1,339.8 (928.3) 411.5 31.9 44.5 534.6
---------------------------------- ------- ------------ --------- ---------- --------------- -----------
As at 28 June 2020(1)
---------------------------------- --------------------------------------------------------------------------
Tangible
Depreciation(3) and(4)
Segment Segment Capital Capital and intangible
assets liabilities employed additions amortisation assets
GBPm GBPm GBPm GBPm GBPm GBPm
---------------------------------- ------- ------------ --------- ---------- --------------- -----------
North America 753.7 (248.2) 505.5 8.5 24.2 332.0
Europe 306.7 (187.6) 119.1 10.9 13.0 163.7
Asia-Pacific, Middle East
and Africa 210.3 (97.9) 112.4 8.4 9.6 97.0
---------------------------------- ------- ------------ --------- ---------- --------------- -----------
1,270.7 (533.7) 737.0 27.8 46.8 592.7
Central items and eliminations(2) 156.4 (455.4) (299.0) - 0.2 1.5
---------------------------------- ------- ------------ --------- ---------- --------------- -----------
1,427.1 (989.1) 438.0 27.8 47.0 594.2
---------------------------------- ------- ------------ --------- ---------- --------------- -----------
As at 31 December 2020(1)
---------------------------------- --------------------------------------------------------------------------
Tangible
Depreciation(3) and(4)
Segment Segment Capital Capital and intangible
assets liabilities employed additions amortisation assets
GBPm GBPm GBPm GBPm GBPm GBPm
---------------------------------- ------- ------------ --------- ---------- --------------- -----------
North America 670.3 (208.3) 462.0 26.9 47.7 304.0
Europe 264.0 (186.3) 77.7 24.6 25.9 147.3
Asia-Pacific, Middle East
and Africa 223.6 (97.7) 125.9 21.5 20.7 101.8
---------------------------------- ------- ------------ --------- ---------- --------------- -----------
1,157.9 (492.3) 665.6 73.0 94.3 553.1
Central items and eliminations(2) 77.5 (333.1) (255.6) - 0.6 0.6
---------------------------------- ------- ------------ --------- ---------- --------------- -----------
1,235.4 (825.4) 410.0 73.0 94.9 553.7
---------------------------------- ------- ------------ --------- ---------- --------------- -----------
(1) From 1 January 2021 the Middle East and Africa (MEA)
business was transferred to the Asia-Pacific division, creating
Asia-Pacific, Middle East and Africa division, and the remaining
Europe, Middle East and Africa division became the Europe division.
The 2020 comparative segmental information has been updated to
reflect this
change as it is consistent with the information reviewed by the Chief Operating Decision Maker.
(2) Central items include net debt and tax balances, which are
managed at Group.
(3) Depreciation and amortisation excludes amortisation of
acquired intangible assets.
(4) Tangible and intangible assets comprise goodwill, intangible
assets and property, plant and equipment.
5. Revenue
The Group's revenue is derived from contracts with customers. In
the following table, revenue is disaggregated by primary
geographical market, being the Group's operating segments (see note
4) and timing of revenue recognition:
Half year period to 27 Half year period to 28
June 2021 June 2020
---------------------- --------------------------------------------- ---------------------------------------------
Revenue Revenue(1)
Revenue recognised Revenue recognised
recognised on performance recognised on performance
on performance obligations on performance obligations
obligations satisfied obligations satisfied
satisfied at a point Total satisfied at a point Total
over time in time revenue over time in time revenue
GBPm GBPm GBPm GBPm GBPm GBPm
---------------------- ---------------- ---------------- --------- ---------------- ---------------- ---------
North America 439.2 142.5 581.7 493.9 142.6 636.5
Europe 242.0 - 242.0 254.7 - 254.7
Asia-Pacific, Middle
East and Africa 160.4 - 160.4 147.9 - 147.9
---------------------- ---------------- ---------------- --------- ---------------- ---------------- ---------
841.6 142.5 984.1 896.5 142.6 1,039.1
---------------------- ---------------- ---------------- --------- ---------------- ---------------- ---------
(1) During the second half of 2020 it was identified that all
Suncoast revenue is recognised based on performance conditions
satisfied at a point in time and so amounts misclassified at 28
June 2020 (GBP68.4m) have been re-presented to reflect the
accounting treatment.
6. Disposals
No material disposals occurred during the half year period to 27
June 2021.
On 6 April 2020, the Group disposed of its Brazil operation,
being 100% of the issued share capital of Keller Tecnogeo Fundacoes
Ltda, for a cash consideration received of GBP0.5m (BRL3.0m).
Additional consideration of GBP0.9m (BRL6.5m) was received in
September 2020. The non-underlying loss on disposal for the period
ending 28 June 2020 was GBP10.0m. The loss at 31 December 2020 was
GBP9.2m, reflecting the additional proceeds and further disposal
costs of GBP0.1m.
On 11 September 2020, the Group disposed of Wannenwetsch GmbH, a
non-core business in Germany, for a cash consideration received of
GBP2.4m (EUR2.6m). At 31 December 2020, the non-underlying loss on
disposal reported was GBP0.9m. During the current period contingent
consideration of GBP0.7m was agreed in accordance with the
terms of the sale and purchase agreement, reducing the loss on sale to GBP0.2m.
7. Non-underlying items
Non-underlying items are disclosed separately in the financial
statements where it is necessary to do so to provide further
understanding of the financial performance of the Group. They are
items which are exceptional by their size and/or are non-trading in
nature, including amortisation of acquired intangibles and other
non-trading amounts, including those relating to acquisitions and
disposals. Non-underlying items comprise the following:
Half
Half year year
period period
to to
27 June 28 June
2021 2020
GBPm GBPm
------------------------------------------------------ ---------- ---------
Exceptional restructuring costs (3.1) (7.8)
------------------------------------------------------- ---------- ---------
Loss on classification of disposal Group/disposal
of operations (1.9) (10.0)
------------------------------------------------------- ---------- ---------
Contingent consideration payable: additional amounts
provided (1.3) (0.2)
------------------------------------------------------- ---------- ---------
Acquisition costs - (0.1)
------------------------------------------------------- ---------- ---------
Non-underlying items in operating costs (6.3) (18.1)
------------------------------------------------------- ---------- ---------
Amortisation of acquired intangible assets (0.4) (2.5)
------------------------------------------------------- ---------- ---------
Contingent consideration received 0.7 -
------------------------------------------------------ ---------- ---------
Exceptional contract dispute - 0.7
------------------------------------------------------- ---------- ---------
Non-underlying items in other operating income 0.7 0.7
------------------------------------------------------- ---------- ---------
Total non-underlying items in operating profit
and before taxation (6.0) (19.9)
------------------------------------------------------- ---------- ---------
Taxation 0.6 1.2
------------------------------------------------------- ---------- ---------
Total non-underlying items after taxation (5.4) (18.7)
------------------------------------------------------- ---------- ---------
Exceptional restructuring costs of GBP3.1m comprise GBP2.6m in
Europe, GBP0.9m of Central items and a credit of GBP0.4m in North
America. In Europe, these costs arose as a continuation of the
strategic project to rationalise the Europe division. The
restructuring costs during the period comprised redundancy costs,
property costs, asset impairments and costs of market exit which
include project termination costs.
Centrally, GBP0.9m of restructuring costs were incurred in KGS,
the in-house equipment manufacturer, as part of a plan to
streamline the organisation. These costs comprised redundancy
costs.
In 2020, restructuring costs of GBP7.8m comprised GBP4.6m in
North America, as a result of exiting the Prairies region in Canada
and a specific market rationalisation exercise in the US. GBP3.3m
was incurred as a result of the rationalisation of the Franki
Africa business and net GBP0.1m in Asia-Pacific (now Asia-Pacific,
Middle East and Africa) related to the cessation of the Waterway
operation, offset by a restructuring provision release in ASEAN in
relation to the activities started in the second half of 2018.
During the current period there was a restructuring provision
release of GBP0.4m in the US relating to the rationalisation
exercise.
The Cyntech Anchors business in Canada was disposed of on 28
June 2021, resulting in GBP1.9m of non-underlying costs including
asset write-downs and additional impairments recorded on
classification of the business as held for sale, which reflects
anticipated proceeds under the planned sale.
In the previous period a loss on disposal of GBP10.0m was
recognised on disposal of the Group's Brazil operation, see note 6
for further details.
Additional contingent consideration payable of GBP1.3m relates
to the acquisition of the Geo Construction Group (Bencor) in 2015,
following finalisation of items referenced in the sale and purchase
agreement. In the previous period the contingent consideration
payable related to the acquisition of the Geo Instruments US
business in 2017.
Amortisation of acquired intangible assets primarily relates to
the Moretrench acquisition. The prior period charge also includes
amounts related to the Austral acquisition.
During the period GBP0.7m additional contingent consideration on
performance of the business was agreed in relation to the
Wannenwetsch disposal, see note 6 for further details.
The proceeds of GBP0.7m received in the previous period were
received on final settlement of a contributory claim relating to an
exceptional contract dispute.
8. Taxation
The Group's effective tax rate on underlying profit of 27.0%
(2020: 29.0%) is calculated using management's best estimate of the
average annual effective income tax rate expected for the full
year. The average is calculated using the weighted average profit
at jurisdictional rates. The tax credit on non-underlying items has
been calculated by assessing the tax impact of each component of
the charge to the income statement in the interim accounts.
The UK Government has announced an increase in the UK
corporation tax rate to 25% from 19% with effect from 1 April 2023.
This change has an immaterial impact on the deferred tax asset held
in the UK.
The financing of Group companies includes some activities which
are subject to exemptions under the UK's Controlled Foreign Company
regime. On 2 April 2019, the European Commission announced that the
UK's exemption rules are only partially justified and the UK tax
authorities are required to recover tax which may constitute State
Aid. The Group is managing enquiries from the UK tax authorities in
relation to the matter and has made an application to the EU
General Court to overturn the ruling. No provision has been made
for any additional tax that might become payable as on the basis of
professional advice received the Group believes that the original
filing position will ultimately be agreed. The cumulative benefits
recognised from the Controlled Foreign Company finance exemption
are approximately GBP4.0m.
9. Dividends
Ordinary dividends on equity shares:
Half Half
year year
period period
to to Year to
27 June 28 June 31 December
2021 2020 2020
GBPm GBPm GBPm
-------------------------------------------------- --------- --------- -------------
Amounts recognised as distributions to equity
holders in the period:
-------------------------------------------------- --------- --------- -------------
Interim dividend for the year ended 31 December
2020 of 12.6p (2019: 12.6p) per share - - 9.1
Final dividend for the year ended 31 December
2020 of 23.3p per share (2019: 23.3p) per share 16.8 - 16.8
-------------------------------------------------- --------- --------- -------------
16.8 - 25.9
-------------------------------------------------- --------- --------- -------------
In addition to the above, an interim ordinary dividend of 12.6p
per share (2020: 12.6p) will be paid on 10 September 2021 to
shareholders on the register at 20 August 2021. This proposed
dividend has not been included as a liability in these financial
statements and will be accounted for in the period in which it is
paid.
10. Earnings per share
Basic earnings per share is calculated by dividing the profit
for the year attributable to ordinary equity holders of the parent
by the weighted average number of ordinary shares outstanding
during the year.
When the Group makes a profit, diluted earnings per share equals
the profit attributable to equity holders of the parent divided by
the weighted average diluted number of shares. When the Group makes
a loss, diluted earnings per share equals the loss attributable to
the equity holders of the parent divided by the basic average
number of shares. This ensures that earnings per share on losses is
shown in full and not diluted by unexercised share awards.
Basic and diluted earnings per share are calculated as
follows:
Underlying earnings
attributable to Earnings attributable
the equity holders to equity holders
of the parent of the parent
--------------------------------------------- ---------------------- ------------------------
Half year Half year Half year Half year
period period period period
to to to to
27 June 28 June 27 June 28 June
2021 2020 2021 2020
--------------------------------------------- ---------- ---------- ----------- -----------
Basic and diluted earnings (GBPm) 26.0 28.7 20.6 10.0
--------------------------------------------- ---------- ---------- ----------- -----------
Weighted average number of shares
(m)(1)
Basic number of ordinary shares outstanding 72.3 72.1 72.3 72.1
Effect of dilution from:
Share options and awards 0.7 0.6 0.7 0.6
--------------------------------------------- ---------- ---------- ----------- -----------
Diluted number of ordinary shares 73.0 72.7 73.0 72.7
--------------------------------------------- ---------- ---------- ----------- -----------
Earnings per share
--------------------------------------------- ---------- ---------- ----------- -----------
Basic earnings per share (p) 36.0 39.8 28.5 13.9
--------------------------------------------- ---------- ---------- ----------- -----------
Diluted earnings per share (p) 35.6 39.5 28.2 13.8
--------------------------------------------- ---------- ---------- ----------- -----------
(1) The weighted average number of shares takes into account the
weighted average effect of changes in treasury shares during the
year.
11. Property, plant and equipment
Property, plant and equipment comprises owned and leased
assets.
As at As at As at
27 June 28 June 31 December
2021 2020 2020
GBPm GBPm GBPm
--------------------------------------- --------- --------- -------------
Property, plant and equipment - owned 352.3 390.8 365.4
Right-of-use assets - leased 65.4 73.5 69.5
--------------------------------------- --------- --------- -------------
417.7 464.3 434.9
--------------------------------------- --------- --------- -------------
During the half year period to 27 June 2021 the Group acquired
property, plant and equipment with a cost of GBP31.7m (28 June
2020: GBP27.8m). Right-of-use asset additions during the period
were GBP10.6m (28 June 2020: GBP7.9m). Assets with a net book value
of GBP4.0m were disposed of during the half year period to 27 June
2021 (28 June 2020: GBP1.7m), resulting in a net gain on disposal
of GBP1.5m (28 June 2020: GBP1.2m).
12. Analysis of closing net debt
As at As at As at
27 June 28 June 31 December
2021 2020 2020
GBPm GBPm GBPm
-------------------------------------------- --------- --------- -------------
Bank balances 111.0 123.6 64.2
Short-term deposits 5.8 5.4 2.1
-------------------------------------------- --------- --------- -------------
Cash and cash equivalents in the balance
sheet 116.8 129.0 66.3
Bank overdrafts (4.5) (7.6) (4.7)
-------------------------------------------- --------- --------- -------------
Cash and cash equivalents in the cash flow
statement 112.3 121.4 61.6
Bank and other loans (223.8) (275.3) (180.3)
Lease liabilities (69.3) (78.5) (73.8)
-------------------------------------------- --------- --------- -------------
Closing net debt (180.8) (232.4) (192.5)
-------------------------------------------- --------- --------- -------------
13. Assets held for sale
As at As at As at
27 June 28 June 31 December
2021 2020 2020
GBPm GBPm GBPm
--------------------------------------------- --------- --------- -------------
Assets held for sale 23.6 - 8.7
Liabilities directly associated with assets
held for sale (10.5) - -
--------------------------------------------- --------- --------- -------------
13.1 - 8.7
--------------------------------------------- --------- --------- -------------
On 28 June 2021, subsequent to the half year period to 27 June
2021, the Group disposed of its Cyntech Anchors business in Canada.
In the half year period to 27 June 2021, the business' assets and
liabilities were classified as a disposal group held for sale and
written down to the expected value of the proceeds to be
received.
Also included within assets held for sale are GBP7.5m (31
December 2020: GBP8.7m) associated with the wind-down of the
Waterway business and as a result of the restructuring activities
in North America and Franki Africa. At 31 December 2020 assets held
for sale of GBP8.7m also included assets associated with the sale
of the Colcrete business which completed in January 2021.
The major classes of assets and liabilities comprising the
disposal group, and other assets held for sale, are as follows:
As at As at As at As at
27 June 27 June 27 June 31 December
2021 2021 2021 2020
GBPm GBPm GBPm GBPm
------------------------------------------ --------- ---------- --------- -------------
Disposal
group Other Other
held assets assets
for held for held for
sale sale Total sale
------------------------------------------ --------- ---------- --------- -------------
Plant, machinery and vehicles - 7.4 7.4 7.9
------------------------------------------ --------- ---------- --------- -------------
Inventories 3.4 0.1 3.5 0.3
------------------------------------------ --------- ---------- --------- -------------
Trade and other receivables 12.7 - 12.7 0.3
Total assets classified as held for sale 16.1 7.5 23.6 8.7
Trade payables (1.4) - (1.4) -
------------------------------------------ --------- ---------- --------- -------------
Other liabilities (9.1) - (9.1) -
------------------------------------------ --------- ---------- --------- -------------
Total liabilities directly associated
with assets held for sale (10.5) - (10.5) -
Net assets held for sale 5.6 7.5 13.1 8.7
------------------------------------------ --------- ---------- --------- -------------
14. Retirement benefit liabilities
The Group operates pension schemes in the UK and overseas. The
primary defined benefit scheme is in the UK. The Group also has
defined benefit retirement obligations in Germany and Austria and a
number of end of service schemes in the Middle East that follow the
same principles as a defined benefit scheme. For further
information on the Group's pension schemes, refer to note 32 of the
Group's financial statements for the year ended 31 December
2020.
The Group's net defined benefit liabilities as at 27 June 2021
were GBP23.0m (28 June 2020: GBP32.6m, 31 December 2020: GBP31.1m).
The reduction in the half year period was driven by an actuarial
gain of GBP5.4m on the UK defined benefit scheme (28 June 2020:
GBP2.0m loss) reflecting an increase in the discount rate (27 June
2021: 1.8%, 31 December 2020: 1.2%). The discount rate is derived
from the yield on a high quality corporate bond on a similar term
to the liabilities; the corporate bond yield has increased at 27
June 2021 compared to 31 December 2020. Higher asset returns also
contributed to the actuarial gain. During the period there was an
actuarial gain of GBP0.4m on other schemes.
15. Financial assets and financial liabilities
Set out below is an overview of financial assets and liabilities
held by the Group:
As at As at As at
27 June 28 June 31 December
2021 2020 2020
GBPm GBPm GBPm
Financial assets measured at fair value
through profit or loss
Non-qualifying deferred compensation plan 19.5 17.5 18.3
Interest rate swaps 4.4 7.8 6.2
Contingent consideration receivable 0.7 - -
Financial assets measured at amortised cost
Trade receivables 400.1 434.5 393.4
Contract assets 109.1 92.9 71.3
Cash and cash equivalents 116.8 129.0 66.3
Financial liabilities at fair value through
profit or loss
Forward exchange contracts - - (0.5)
Contingent consideration payable (3.6) (2.6) (3.0)
Financial liabilities measured at amortised
cost
Trade payables (234.8) (227.6) (169.3)
Contract liabilities (61.2) (49.5) (43.9)
Bank and other loans (228.3) (284.1) (185.0)
Lease liabilities (69.3) (78.5) (73.8)
--------------------------------------------- --------- --------- -------------
Fair values
The fair values of the Group's financial assets and liabilities
are not materially different from their carrying values. The
following summarises the major methods and assumptions used in
estimating the fair values of financial instruments, being
derivatives, interest-bearing loans and borrowings, contingent
consideration and payables, receivables and contract assets.
Derivatives
The fair value of interest rate and cross-currency swaps are
calculated based on expected future principal and interest cash
flows discounted using market rates prevailing at the balance sheet
date. The valuation methods of the Group's derivative financial
instruments carried at fair value are categorised as Level 2. Level
2 assets are financial assets and liabilities that do not have
regular market pricing, but whose fair value can be determined
based on other data values or market prices.
Interest-bearing loans and borrowings
Fair value is calculated based on expected future principal and
interest cash flows discounted using appropriate discount rates
prevailing at the balance sheet date.
Contingent consideration
Fair value is calculated based on the amounts expected to be
paid, determined by reference to forecasts of future performance of
the acquired businesses discounted using appropriate discount rates
prevailing at the balance sheet date and the probability of
contingent events and targets being achieved.
The valuation methods of the Group's contingent consideration
carried at fair value are categorised as Level 3. Level 3 assets
are financial assets and liabilities that are considered to be the
most illiquid. Their values have been estimated using available
management information including subjective assumptions. There has
been additional contingent consideration payable provided of
GBP1.3m during the half year period to 27 June 2021 relating to the
acquisition of Geo Construction Group (Bencor) in 2015. Contingent
consideration receivable of GBP0.7m was recognised during the
period in relation to the Wannenwetsch disposal in 2020.
Payables, receivables and contract assets
For payables and receivables, the carrying amount is deemed to
reflect the fair value.
16. Share capital and reserves
As at As at As at
27 June 28 June 31 December
2021 2020 2020
GBPm GBPm GBPm
-------------------------------------------------- --------- --------- -------------
Allotted, called up and fully paid equity
share capital
73,099,735 ordinary shares of 10p each
(28 June 2020 and 31 December 2020: 73,099,735) 7.3 7.3 7.3
--------------------------------------------------- --------- --------- -------------
The company has one class of ordinary shares, which carries no
rights to fixed income. There are no restrictions on the transfer
of these shares.
The capital redemption reserve is a non-distributable reserve
created when the company's shares were redeemed or purchased other
than from the proceeds of a fresh issue of shares.
The other reserve is a non-distributable reserve created when
merger relief was applied to an issue of shares under section 612
of the Companies Act 2006 to part fund the acquisition of Keller
Canada. The reserve becomes distributable should Keller Canada be
disposed of.
At 27 June 2021, the total number of shares held in treasury was
784,364 (28 June 2020: 1,001,590 and 31 December 2020: 889,733
).
17. Related party transactions
Transactions between the parent, its subsidiaries and joint
operations, which are related parties, have been eliminated on
consolidation.
18. Prior period restatement
In preparing the comparative consolidated balance sheet, the
Group restated amounts reported previously in the interim condensed
consolidated financial statements as a result of a reclassification
of liabilities. This restatement is consistent with the
like-for-like reclassification of comparative balances which were
disclosed in the December 2020 Annual Report. Consistent with the
restatement presented at the year end, there was no impact on the
prior period consolidated income statement, cash flow statement or
brought forward reserves.
Presented below is a reconciliation of the interim consolidated
balance sheet previously reported as at 28 June 2020 to the
restated 28 June 2020 balance sheet included for comparative
purposes in the interim condensed consolidated financial statements
for the period ended 27 June 2021:
28 June
2020 28 June 2020 28 June 2020
Presented Restatements Restated
Note GBPm GBPm GBPm
------------------------------- ------- ---------- ------------- -------------------
Trade and other payables a (453.1) 37.1 (416.0)
Provisions a,b (20.3) (27.1) (47.4)
Current liabilities (546.2) 10.0 (536.2)
Retirement benefit liabilities b (29.5) (3.1) (32.6)
Provisions a,b (41.4) (6.9) (48.3)
Non-current liabilities a,b (442.9) (10.0) (452.9)
Total liabilities (989.1) - (989.1)
---------------------------------------- ---------- ------------- -------------------
The 28 June 2020 interim condensed consolidated balance sheet
previously reported has been restated as follows:
a) The Group previously classified contract provisions within
trade and other payables. This classification has been revised and
these have been reclassified to provisions. As a result, trade and
other payables have decreased by GBP37.1m (30 June 2019: GBP28.3m),
current provisions have increased by GBP27.7m (30 June 2019:
GBP20.9m) and non-current provisions have increased by GBP9.4m (30
June 2019: GBP7.4m) to reflect the revised classification.
b) The Group previously classified end of service schemes in the
Middle East within employee provisions. Following a review it was
concluded these arrangements follow the same principles as a
defined benefit scheme and are accounted for in accordance with IAS
19 'Employee Benefits'. As a result, current provisions have
decreased by GBP0.6m, non-current provisions have decreased by
GBP2.5m and retirement benefit liabilities have increased by
GBP3.1m to reflect the revised classification. There was no
material impact on the opening balances of the comparative
period.
19. Post balance sheet events
On 28 June 2021, the Group disposed of its Cyntech Anchors
operation in Canada, being 100% of the issued share capital of
Keller Cyntech U.S. and Cyntech Anchors Ltd. In the half year
period to 27 June 2021 GBP1.9m of non-underlying costs were
recorded, representing impairment charges on classification of the
business as held for sale. See note 13 for further details.
On 13 July 2021, the Group acquired 100% of the issued share
capital of RECON Services Inc, a geotechnical and industrial
services company headquartered in Houston, Texas, USA, for an
initial cash consideration of GBP17m (US$23m) and an expected
earn-out of GBP11m (US$15m) relating to certain future contract
wins.
There were no other material post balance sheet events between
the balance sheet date and the date of this report.
Adjusted performance measures
The Group's results as reported under International Financial
Reporting Standards (IFRS) and presented in the interim condensed
consolidated financial statements (the 'statutory results') are
significantly impacted by movements in exchange rates relative to
sterling, as well as by exceptional items and non-trading amounts
including those relating to acquisitions and disposals.
Adjusted performance measures have been used throughout this
report to describe the Group's underlying performance. The Board
and Executive Committee use these adjusted measures to assess the
performance of the business as they consider them more
representative of the underlying ongoing trading result and allow
more meaningful comparison to prior periods.
Underlying measures
The term 'underlying' excludes the impact of items which are
exceptional by their size and/or are non-trading in nature,
including amortisation of acquired intangible assets and other
non-trading amounts relating to acquisitions and disposals
(collectively 'non-underlying items'), net of any associated tax.
Underlying measures allow management and investors to compare
performance without the potentially distorting effects of one-off
items or non-trading items. Non-underlying items are disclosed
separately in the interim financial statements where it is
necessary to do so to provide further understanding of the
financial performance of the Group.
Constant currency measures
The constant currency basis ('constant currency') adjusts the
comparative to exclude the impact of movements in exchange rates
relative to sterling. This is achieved by retranslating the 2020
results of overseas operations into sterling at the 2021 average
exchange rates.
A reconciliation between the underlying results and the reported
statutory results is shown on the face of the consolidated income
statement, with non-underlying items detailed in note 7. A
reconciliation between the 2020 underlying result to the 2020
constant currency result is shown below and compared to the
underlying 2021 performance:
Revenue by segment
Impact of
exchange Constant Constant
Statutory Statutory movements currency Statutory currency
2021 2020 2020 2020 change change
GBPm GBPm GBPm GBPm % %
----------------------- ---------- ---------- ----------- ---------- ---------- ----------
North America 581.7 636.5 (54.4) 582.1 -9% -
Europe 242.0 254.7 (3.7) 251.0 -5% -4%
Asia-Pacific, Middle
East and Africa 160.4 147.9 0.9 148.8 +8% +8%
----------------------- ---------- ---------- ----------- ---------- ---------- ----------
Group 984.1 1,039.1 (57.2) 981.9 -5% -
----------------------- ---------- ---------- ----------- ---------- ---------- ----------
Underlying operating profit by segment
Impact of
exchange Constant Constant
Underlying Underlying movements currency Underlying currency
2021 2020 2020 2020 change change
GBPm GBPm GBPm GBPm % %
------------------------------ ----------- ----------- ---------- ----------- ----------
North America 38.4 38.6 (3.9) 34.7 -1% +11%
Europe 5.7 7.1 (0.5) 6.6 -20% -14%
Asia-Pacific, Middle
East and Africa 0.1 5.9 (0.2) 5.7 -98% -98%
Central items (4.7) (3.7) (0.1) (3.8) n/a n/a
----------------------- ------ ----------- ----------- ---------- ----------- ----------
Group 39.5 47.9 (4.7) 43.2 -18% -9%
----------------------- ------ ----------- ----------- ---------- ----------- ----------
Underlying operating margin
Underlying operating margin is underlying operating profit as a
percentage of revenue.
Other adjusted measures
Where not presented and reconciled on the face of the interim
condensed consolidated income statement, balance sheet or cash flow
statement, the adjusted measures are reconciled to the IFRS
statutory numbers below:
EBITDA (statutory)
27 June 28 June
2021 2020
GBPm GBPm
----------------------------------------------------- -------- ----------
Operating profit before non-underlying items 39.5 47.9
Depreciation of owned property, plant and equipment 31.4 33.5
Depreciation of right-of-use assets 12.8 13.3
Amortisation of intangible assets 0.3 0.2
----------------------------------------------------- -------- --------
Underlying EBITDA 84.0 94.9
Non-underlying items in operating costs (6.3) (18.1)
Non-underlying items in other operating income 0.7 0.7
----------------------------------------------------- -------- --------
EBITDA 78.4 77.5
----------------------------------------------------- -------- --------
EBITDA (covenant basis)
27 June 28 June
2021 2020
GBPm GBPm
----------------------------------------------------- -------- ----------
Statutory operating profit before non-underlying
items 39.5 47.9
----------------------------------------------------- -------- --------
Impact of leases (1.2) (1.1)
Operating profit before non-underlying items 38.3 46.8
Depreciation of owned property, plant and equipment 31.4 33.5
Depreciation of right-of-use assets(1) 0.1 -
Amortisation of intangible assets 0.3 0.2
----------------------------------------------------- -------- --------
Underlying EBITDA 70.1 80.5
Non-underlying items in operating costs (6.3) (18.1)
Non-underlying items in other operating income 0.7 0.7
----------------------------------------------------- -------- --------
EBITDA 64.5 63.1
----------------------------------------------------- -------- --------
(1) Includes depreciation on legacy finance leases.
Net finance costs
27 June 28 June
2021 2020
GBPm GBPm
---------------------------------------- -------- ----------
Finance income (0.1) (0.4)
Finance costs 4.4 7.6
---------------------------------------- -------- ----------
Net finance costs (statutory) 4.3 7.2
---------------------------------------- -------- ----------
Finance charge on lease liabilities(1) (1.4) (1.8)
---------------------------------------- -------- ----------
Lender covenant adjustments (0.1) (0.6)
---------------------------------------- -------- ----------
Net finance costs (covenant basis) 2.8 4.8
---------------------------------------- -------- ----------
(1) Excluding legacy finance leases.
Net capital expenditure
27 June 28 June 31 December
2021 2020 2020
GBPm GBPm GBPm
--------------------------------------- -------- -------- ------------
Acquisition of property, plant and
equipment 31.7 27.8 72.5
Acquisition of intangible assets 0.2 - 0.5
Proceeds from sale of property, plant
and equipment (5.5) (2.9) (7.4)
--------------------------------------- -------- -------- ------------
Net capital expenditure(1) 26.4 24.9 65.6
--------------------------------------- -------- -------- ------------
(1) Includes depreciation on legacy finance leases.
Net debt
27 June 28 June 31 December
2021 2020 2020
GBPm GBPm GBPm
---------------------------------- -------- -------- ------------
Current loans and borrowings 65.9 41.1 67.0
Non-current loans and borrowings 231.7 320.3 191.8
Cash and cash equivalents (116.8) (129.0) (66.3)
---------------------------------- -------- -------- ------------
Net debt (statutory) 180.8 232.4 192.5
---------------------------------- -------- -------- ------------
Lease liabilities(1) (67.4) (77.3) (71.6)
---------------------------------- -------- -------- ------------
Net debt (covenant basis) 113.4 155.1 120.9
---------------------------------- -------- -------- ------------
(1) Excluding legacy finance leases.
Leverage ratio
The leverage ratio is calculated as net debt to underlying
EBITDA.
Statutory
27 June 28 June 31 December
2021 2020 2020
GBPm GBPm GBPm
------------------- ----------- ----------- -------------
Net debt 180.8 232.4 192.5.8
Underlying EBITDA 194.1 205.8 205.0
------------------- ----------- ----------- -------------
Leverage ratio (x) 0.9 1.1 0.9
------------------- ----------- ----------- -------------
Covenant basis
27 June 28 June 31 December
2021 2020 2020
GBPm GBPm GBPm
------------------- ----------- --------- -------------
Net debt 113.4 155.1 120.9.1
Underlying EBITDA 164.8 178.8 175.0
------------------- ----------- --------- -------------
Leverage ratio (x) 0.7 0.9 0.7
------------------- ----------- --------- -------------
Order book
The Group's disclosure of its order book is aimed to provide
insight into its backlog of work and future performance. The
Group's order book is not a measure of past performance and
therefore cannot be derived from its financial statements. The
Group's order book comprises the unexecuted elements of orders on
contracts that have been awarded. Where a contract is subject to
variations, only secured variations are included in the reported
order book.
Leases
IFRS 16 'Leases' became effective from 1 January 2019. The
financial impact of this standard compared to the accounting under
the previous leasing standard, IAS 17, is excluded when calculating
borrowing leverage under the principal lender covenants and is
summarised in the table below:
27 June 28 June 31 December
2021 2020 2020
------------------------------------ -------- -------- ------------
GBPm GBPm GBPm
------------------------------------ -------- -------- ------------
Lease charges removed 14.0 14.4 31.0
Depreciation and impairment of
right-of-use assets (12.8) (13.3) (28.7)
------------------------------------ -------- -------- ------------
Increase in operating profit 1.2 1.1 2.3
Finance charge (1.5) (1.8) (3.8)
------------------------------------ -------- -------- ------------
Reduction in profit before tax (0.3) (0.7) (1.5)
------------------------------------ -------- -------- ------------
Tax effect 0.1 0.2 0.4
------------------------------------ -------- -------- ------------
Reduction in profit for the period (0.2) (0.5) (1.1)
------------------------------------ -------- -------- ------------
Right-of-use assets at balance
sheet date 65.4 73.5 69.5
------------------------------------ -------- -------- ------------
Lease liabilities at balance
sheet date(1) (69.3) (78.5) (73.8)
------------------------------------ -------- -------- ------------
(1) Included in the lease liabilities are GBP1.9m of legacy
finance leases (28 June 2020: GBP1.2m, 31 December 2020: GBP2.2m).
These covenants are calculated on a frozen GAAP basis, hence these
amounts are not excluded when calculating the borrowing leverage
under the principal lender covenants.
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END
IR BIGDIBUGDGBD
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