Keller (KLR) will be glad to see the back of 2018. The groundworks specialist saw underlying pre-tax profit fall 18 per cent in the year to £80.5m, as cost inflation in North America, large completions in Europe, project issues in Asia and an unfavourable strengthening of the British pound offset a strong contribution from Moretrench, a US-based competitor acquired last March for $90m (£68m).
Chief among the headaches was the market deterioration in the Asia-Pacific region, which sparked October’s profit warning. Although Keller expects the region to return to profitability in the second half of 2019, it will first need to complete underperforming contracts in Malaysia and the Australian bridge superstructure market, where high competition has hammered margins. A review of these businesses also resulted in an exceptional restructuring charge of £61.4m, which explains the sharp contraction in statutory profits.
The share price crash that greeted this episode should be seen in the context of the group’s leverage, although year-end net debt was a relative bright spot, arriving below consensus forecasts at £286m. A recent refinancing has also improved terms, but "a more conservative approach" toward the balance sheet will de-prioritise acquisitions and raise controls on capital expenditure and working capital – although there has been no change to the progressive dividend policy.
The consensus market forecast is for earnings of 93.8p a share this year, against an average adjusted forecast of 80.7p for 2018.
| KELLER (KLR) | ||||
| ORD PRICE: | 559p | MARKET VALUE: | £403m | |
| TOUCH: | 552-562p | 12-MONTH HIGH: | 1,134p | LOW: 463p |
| DIVIDEND YIELD: | 6.4% | PE RATIO: | na | |
| NET ASSET VALUE: | 618p* | NET DEBT: | 64% | |
| Year to 31 Dec | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2014 | 1.60 | 28.2 | -4.2 | 25.2 |
| 2015 | 1.56 | 56.3 | 35.5 | 27.1 |
| 2016 | 1.78 | 73.9 | 65.7 | 28.5 |
| 2017 | 2.07 | 111 | 121 | 34.2 |
| 2018 | 2.22 | 8.4 | -20.6 | 35.9 |
| % change | +7 | -92 | - | +5 |
| Ex-div: | 30 May | |||
| Payment: | 21 Jun | |||
| *Includes intangible assets of £153m, or 213p a share | ||||
