Trading update and the dividend recommendation
For immediate release 16 June 2020
Keller Group plc
Trading update and the Board's dividend recommendation
Keller Group plc ("Keller" or "the group"), the world's largest geotechnical specialist contractor, today provides an update on trading for the year to date and the 2019 final dividend, ahead of its Annual General Meeting to be held on 30 June 2020.
Health and Safety
Our priority, as always, remains the health and safety of our employees and we have continued to make progress in this area. In respect of the additional operational challenges posed by COVID-19, the guidance and support we are providing to our employees continues to follow World Health Organisation guidelines, supplemented by local authority guidance in the regions in which we operate. 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.
Trading Update
As announced on 23 April 2020, overall trading for the first quarter was better than our expectations, and materially better than the prior year. This was despite a deterioration in activity during the second half of March as the impacts of COVID-19 were felt across the group.
Trading during the second quarter to date has been resilient, with the impact of COVID-19 being less significant on the group overall than first anticipated. The impact has varied across the group's geographic markets. In North America whilst some states have imposed tight restrictions, other states have not, and overall the vast majority of sites on which we are working have remained open. In EMEA, there has been a variation by country, with an earlier and more significant impact overall. In APAC, India and Singapore have experienced countrywide lock downs whereas Australia has largely remained operational throughout. Markets in APAC and EMEA are now emerging more decisively from the lock down restrictions than North America, which in contrast remains regionally variable.
The measures that we have put in place since the start of the COVID-19 pandemic have strengthened our resilience and minimised both the human and financial impact of the crisis. These measures include enhanced safety protocols, operating cost reductions, cancellation of discretionary projects, reduced capital expenditure and an even greater focus on working capital. We have selectively accessed relevant governmental support schemes across our major markets. In the UK, the level of support has not been material in the overall group context. To date we have not seen a deterioration in our receivables profile and have actively managed our investment in capital and revenue projects. As a result we have maintained our characteristically strong cashflow performance during the period.
The group order book remains steady at c.£1bn. Recent project wins include the award of a $90m two-year contract for the Hampton Roads Bridge Tunnel Expansion Project in Virginia, USA. During the second quarter we have experienced some increase in the level of contract deferrals and cancellations across the group, whilst in North America we have seen increased pricing pressure in some areas. We continue to closely monitor the level of tendering activity and both the pace and margin at which the order book is replenished.
Financing and Liquidity
As reported in our full year results announcement on 3 March 2020, at 31 December 2019 our net debt was £213m, on a bank covenant IAS 17 basis, equating to a net debt to EBITDA ratio of 1.2x compared to our covenant limit of 3.0x. We have successfully maintained the leverage ratio within our target range during the year to date. At the end of May net debt was £195m, on the same bank covenant IAS 17 basis, equating to a net debt to EBITDA ratio of 1.0x.
The group has substantial borrowing facilities available to it. As at the end of May 2020, the group had undrawn committed and uncommitted borrowing facilities totalling £293m, comprising £223m of the unutilised portion of the group's £375m revolving credit facility (which expires in November 2024 and has an option to extend by one further year), £18m of other undrawn committed borrowing facilities and undrawn uncommitted borrowing facilities of £52m, as well as cash and cash equivalents of £88m.
In addition to the strong operational cash performance, we are able to announce that as a company considered to be investment grade for the purposes of the Covid Corporate Financing Facility (CCFF), we have recently had confirmation of funding of up to £300m from the Bank of England, which becomes committed at point of drawing. We have not drawn on the CCFF and nor do we expect to. To be explicitly clear, the CCFF facility has only been secured to provide additional protection, in extremis, should there be an unexpected and significant deterioration in future market conditions and client payment behaviours resulting in a very material deterioration in cash flow performance.
Strategic Development
At the beginning of 2020 we announced that we intended to complete a strategic review of our Franki Africa business by the end of the first half of 2020. This review is now complete. The business has faced challenging market, economic and political conditions in a number of the countries in which it operates, and despite the significant cost reductions carried out in 2018 and 2019, the business in its current form is unable to deliver the required margins and returns. The business will therefore be rationalised, retaining a small number of profitable operations which will be integrated into our Middle East-based operations, which share similar market dynamics and conditions. There remain major contract opportunities in the region, particularly in the oil and gas sector where we were recently awarded a $23m LNG contract in Mozambique. Our ability to compete for and execute such contracts will not be diminished by this action.
Dividend
Following the trading update announced on 23 April 2020, the Board has kept under review whether to recommend the 2019 final dividend of 27.4 pence per share as announced in conjunction with the 2019 full year results on 3 March 2020.
The Board fully recognises the importance of dividends to shareholders and has now decided that it would be both prudent and appropriate to maintain the full year dividend at the prior year's level, representing a full year total 2019 dividend of 35.9p. This reflects the continued financial strength of the group, its significant liquidity position, trading during the first half of the year and the longer-term confidence in the performance of the business. This continues the group's track record of maintaining or increasing the dividend every year since its flotation in 1994. The Board has also decided that the consideration of the declaration and payment of a 2020 interim dividend will not be made at the time of the interim results announcement in August but will be reviewed later in the year.
Accordingly, Resolution 3 of the Notice of Meeting issued to shareholders on 3 March 2020, to declare a final 2019 dividend of 27.4p per Ordinary Share of 10p in the capital of the group is amended to a final dividend of 23.3p per Ordinary Share. If approved, this dividend would be paid on 21 August 2020 to shareholders on the register at the close of business on 31 July 2020.
Shareholders are reminded that the group's Annual General Meeting will be held at 9am on 30 June 2020 at the offices of DLA Piper UK LLP, 160 Aldersgate Street, London EC1A 4HT. As a result of the requirements of the UK with regard to social distancing, and in order to protect the health and safety of our shareholders and employees, it will not be possible to allow shareholders to attend the Annual General Meeting. Shareholders are strongly encouraged to exercise their vote on the matters of business at the AGM by submitting a proxy appointment and giving voting instructions.
Questions from shareholders can be sent by email to secretariat@keller.com, or by post to the group's head office at 5th Floor, 1 Sheldon Square, London W2 6TT for the attention of the Company Secretary. Answers will not be provided at the AGM, but as soon as possible thereafter.
Board Development
As announced at our 2019 full year results on 3 March 2020, Paul Withers, Senior Independent Director and recent Chairman of the Remuneration Committee, having served on the Board for over eight years, gave us notice in December 2019 of his intention to retire from the Board at the conclusion of the Company's 2020 Annual General Meeting. Paul stepped down as Senior Independent Director and Chairman of the Remuneration Committee with effect from 1 January 2020. Baroness Kate Rock, Non-executive Director and Chairman of the Workforce Engagement Committee, was appointed Senior Independent Director and Eva Lindqvist, Non-executive Director, was appointed as Chairman of the Remuneration Committee, both effective from 1 January 2020.
We also announced that concurrent with the retirement of Paul Withers, we had collectively agreed that it is the right time to move to a more conventional plc board structure, by reducing the number of executive directors. Accordingly James Hind and Venu Raju will not stand for re-election as Executive Directors at the Company's upcoming Annual General Meeting. James and Venu will remain as members of Keller's Executive Committee, retaining their current executive responsibilities as President of North America and Engineering and Operations Director, respectively, and will continue to be available to the Board.
Outlook
Whilst the performance for the year to date has been ahead of our expectations and the current order book remains steady at c.£1bn, we are cognisant of the potential impact of an economic slowdown on construction markets as well as the volume and quality of our order book as we look ahead to the important fourth quarter and beyond. It therefore remains too early to provide earnings guidance for the current financial year. We will continue to monitor external events, manage the situation closely and update the market as appropriate.
We remain confident in the medium term prospects for our key markets and that our strategy, to be the preferred international geotechnical specialist contractor focused on sustainable markets and attractive projects, will enable us to continue to generate shareholder value.
For further information, please contact:
Keller Group plc 020 7616 7575
Michael Speakman, Chief Executive Officer
Mark Hooper, Interim Chief Financial Officer
Victoria Huxster, Co-Head of Investor Relations
Caroline Crampton, Co-Head of Investor Relations
Finsbury 020 7251 3801
Gordon Simpson
James Kavanagh
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 10,000 staff and operations across six continents, Keller tackles an unrivalled 7,000 projects every year, generating annual revenue of more than £2bn.
For more information, please go to:
http://www.keller.com/investors.aspx and http://www.keller.com .
LEI: 549300QO4MBL43UHSN10
Classification: 2.2 Inside information (DTR Annex 1)
This announcement includes inside information as defined in Article 7 of the Market Abuse Regulation No. 596/2014 and is disclosed in accordance with the Company's obligations under Article 17 of those Regulations. On the publication of this announcement via a Regulatory Information Service ("RIS"), this information is considered to be in the public domain. The person responsible for making this announcement is Kerry Porritt, Group Company Secretary and Legal Adviso r.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
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