COMPANY NEWS Keller tumbles after difficult conditions report Nov 2011
Peter Kenyon, TunnelTalk
International ground improvement and stabilisation specialists Keller, has been forced to shut a third office and slash its profit forecasts for 2011. This comes after securing a £30 million compensation grouting contract on the multi-billion Crossrail project in London in August. In an interim statement on Tuesday (15 November), Chief Executive Justin Atkinson cut the company's pre-tax profit projection for 2011 for a second time, to between £21-23 million on a group turnover of £1.15 billion.

Financial analysts had been expecting the listed company to return pre-tax profits of £32.4 million for this year. The company's accounts show that profits have fallen steadily from a peak in 2008 of £113.2 million (Fig 1).
Keller shares on the London stock market crashed by as much as 66p (a fall of nearly 20%) to 281p on the announcement, but recovered to close Tuesday at 303p. Just six months ago the shares were trading at nearly 700p.
Atkinson blamed "extremely difficult conditions" in the UK, a weak infrastructure market in Australia and an insufficient number of privately financed projects in Continental Europe in the wake of government austerity measures.

Keller Chief Executive Justin Atkinson

Only in the USA, where Atkinson noted "signs that the market has stabilised", are 2011 profits expected to be ahead of those for the previous year.
Atkinson said: "Conditions across our mature markets remain difficult, with an increasingly uncertain macro-economic outlook threatening any significant recovery. Whilst our growth markets continue to offer good prospects in the medium term, the overall picture remains challenging.
"Trading in the US and Europe has been in line with the Board's expectations, but the results elsewhere have suffered from a combination of tougher market conditions in certain locations and delays in the start of a few large projects."
Of the US market Atkinson said: "Although conditions in the US construction market overall remain difficult, there are some signs that the market may have stabilised. The competitive environment however remains extremely challenging, with margins still at historically low levels."
On Continental Europe he said: "Within Continental Europe, trading in the last four months has been broadly in line with the Board's expectations, however, order intake has trended down somewhat and is now below the level of the same time last year."

Fig 1. Keller's accounts summary 2006-2010

Atkinson concluded: "The outlook for construction markets, particularly in Europe, remains uncertain. In this environment, we will continue to exercise caution in our management of costs and to focus on risk management, the most efficient use of our resources, and maximising cash generation."
Keller, which claims to be the world's largest independent ground engineering contractor, employs 6,000 staff and has permanent operations in around 40 countries.
In the last five years it has increasingly looked to developing markets in Asia and Australia to assure its future, and in 2010, 38% of revenue came from these markets, up from 13% in 2005.
Keller's £30m contract for Crossrail is for compensation grouting works at London Underground's Tottenham Court Road and Bond Street stations, and covers the installation of more than 50km of injection pipeline. The contract also includes structural monitoring, geotechnical instrumentation and surveying works.
The Crossrail contract, and another awarded in June to complete for £37 million of grouting works for the Victoria Underground Station upgrade, were said by Keller at the time of award to "significantly improve the prospects of the UK business, which has faced extremely challenging market conditions in recent years."
Just two months ago UK-based engineering consultancy Halcrow agreed to sell to US-based CH2M-Hill after coming under similar pressure in its core mature markets. Last week after reporting that pre-tax profits in 2010 had plummeted to £8.8 million on a falling turnover of £465 million, Halcrow announced the closure of four of its UK offices and the loss of 55 more jobs in addition to 1,000 shed since 2008.
Bad debts and downturn left Halcrow exposed - TunnelTalk, Sep 2010
Keller 2010 Annual Report pdf
Keller website

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