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Keller braces for UK slowdown in 2018

Keller is braced for a “challenging” year in its UK operations after revenue in the region declined during 2017.

UK revenue for the international engineering group fell 5.4 per cent to £61.2m for the year to 31 December 2017, with the region contributing approximately 3 per cent of total group revenue.

The company said its UK arm had experienced a “solid year” across its commercial and infrastructure projects despite the fall in revenue, but added that it expected the market to deteriorate.

Keller said: “We have seen a notable slowdown in orders in recent months and expect 2018 to be a challenging year.

“However, the major infrastructure projects coming up in the UK, most notably HS2, should mean that the market for geotechnical work picks up noticeably in 2019 and 2020.”

Last August Keller chief executive Alain Michealis told Construction News that the company hoped to acquire £50m of work when construction on HS2 begins in 2019.

Overall the group’s worldwide revenue for 2017 was up 16.3 per cent to £2.07bn, with profit before tax rising almost 50 per cent to £110m.

The company attributed much of this growth to the substantial completion of two large projects in Abu Dhabi before the end of 2017.

With these two projects winding down, Keller forecast a decline in overall revenue and profit in 2018, though the firm expects to remain ahead of its 2016 results.

Keller booked a £9.7m windfall in 2017 from president Donald Trump’s tax cuts in the US, where almost half of the company’s business is located.

US operations produced a profit before tax of £78.7m on revenue of £968.7m in 2017.

The company is currently trying to acquire US geotechnical contractor Moretrench to strengthen its presence on North America’s east coast and add new capabilities to its services.

It announced its takeover intentions in January and plans to fund the acquisition through new borrowing.

Keller’s net debt at the end of 2017 stood at £229.5m – a 24.9 per cent reduction on 12 months earlier.

The company continued to struggle in the Asia and Pacific market in 2017, where it made a £16.5m loss after tax, adding to 2016’s £18m loss.

These losses were mainly attributed to a pair of large contracts in Australia.

Keller said that it expects the Asian and Pacific division to return to profit in 2018 as the problem Australian projects are closed out .

Mr Michaelis said: “The order book of over £1bn gives us confidence as we start 2018. Most of our markets remain robust and bidding activity is at a healthy level.

“Overall, despite the completion of our excellent Caspian project, we expect 2018 to be another year of underlying progress.”

The 2017 results also included a £21m exceptional credit item linked to a warehouse in Avonmouth, which had been the source of long-running dispute.

VolkerFitzpatrick brought a lawsuit against Keller in 2013, accusing the firm of installing defective piles on the project, which was completed in 2008.

Keller then purchased the property in May 2016 as part of the settlement with a plan to carry out remedial works before selling it on.

This sale was completed in May 2017 and added £8m to the group’s profit for the year, in addition to an £11.7m insurance payout linked to the project.

The company previously announced a £54m provision against the job; it has now recovered £35.5m of this, but does not expect to recoup any more.

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