Keller set for record year as trading exceeds expectations

Specialist geotechnical contractor Keller Group said in an update on Monday that it anticipated full-year underlying operating profit to significantly exceed current market expectations.

The FTSE 250 company put the performance down to a number of factors across different regions, reporting that in North America, it had surpassed expectations due to resilient pricing in Suncoast and continuous operational improvements in the foundations business.

That had resulted in a more substantial recovery in the operating margin than initially projected, with the firm noting that the pricing benefit at Suncoast was expected to normalise in 2024.

Conversely, in Europe, the business faced challenges in a macroeconomic environment characterised by weak demand in residential and commercial sectors.

Competitive pricing and difficulties with certain projects had impacted profitability, and comparisons with the strong performance of last year's projects made it a tough period.

As a response, Keller said it was taking corrective measures to address the challenges.

In the Asia-Pacific, Middle East, and Africa (AMEA) region, Keller Australia delivered a robust performance, particularly in the infrastructure sector, while Austral returned to profit in the third quarter, as expected.

However, there had been delays in the piling work on The Line at NEOM due to evolving design requirements, prompting resource reallocation in the short term.

Discussions with the client for future works orders at NEOM were ongoing.

On the financial front, Keller reported impressive cash generation for the year to date, driven by strong earnings and diligent working capital management.

As a result, it expected its year-end net debt-to-EBITDA leverage ratio to fall below 1.0x - well within its target range of between 0.5x and 1.5x.

“The Keller team has built on an exceptionally strong first half to deliver a better than expected third-quarter performance, and consequently we now expect full year underlying profit to be materially ahead of current market expectations,” said chief executive officer Michael Speakman.

“This performance reflects continued momentum and operational improvements within the business and the outstanding contribution of colleagues across the group, whom I would like to thank for their dedication and hard work.”

Keller Group said it would announce its full year results for 2023 on 5 March next year.

Reporting by Josh White for Sharecast.com.