Post Close Trading Update

Keller Group plc ('Keller' or 'the Group'), the world's largest geotechnical specialist contractor, issues a post close trading update for the year ended 31 December 2023.

The positive trading momentum and strong operational performance seen in the first nine of months of the year continued in the fourth quarter, with a particularly strong end to the year. Accordingly, we now expect to report an underlying operating profit for the year significantly ahead of current market expectations1. The underlying operating profit margin for the year is expected to be significantly ahead of recent years.

In North America, management actions to improve performance in the foundations business in the second half of 2022 generated a material and sustainable improvement in operational performance, with a resultant uplift in operating margin. In addition, the division benefited from better than expected pricing resilience at Suncoast, which is now unwinding and the contribution from three large projects in the foundations business that were particularly well executed and delivered materially higher than normal levels of contract profitability. These two material, non-recurring benefits are considered one-off in nature and are not expected to repeat in 2024.

In Europe, the macro-economic environment remained a challenge in the second half, with weak demand and competitive pricing impacting profitability. In addition, some challenging projects in the Nordic region created a further drag on margins in the year. As a result of these combined issues, the division will deliver a full year performance below our original expectations and we are taking appropriate corrective actions to drive an improved performance in 2024.

In Asia-Pacific, Middle East and Africa (AMEA), Keller Australia is expected to report a record performance for the year, following very high levels of demand and improved operational execution. Austral returned to a sustainable profit in the second half, albeit insufficient to offset the loss experienced in the first half of the year. At NEOM, we continue to take a measured and disciplined approach to the opportunities provided by the project. Whilst we remain in constructive discussions with the client in respect of future work on The Line, we do not have a current works order and have redeployed resources in the short term. However, we have recently been awarded a work package worth c.USD$80m in respect of Trojena, the winter resort development at NEOM, for which we are currently preparing to mobilise to site with work expected to be completed by the end of 2024.

As a result of the significant increase in underlying operating profits in North America, the Group's underlying effective tax rate in 2023 is expected to be c.25%, versus our previous guidance of c.22%.

The strong earnings performance, together with the continued focus on working capital management, is expected to result in the Group's cash generation for the year being a considerable improvement on the prior year and ahead of our previous expectations. We expect the year-end net debt/EBITDA leverage ratio to be c.0.6x, at the lower end of our target range of 0.5x - 1.5x (2022: 1.2x).

Commenting, Michael Speakman, CEO of Keller, said:

"We are very encouraged by the Group's strong progress in 2023. The combination of management actions to improve operational performance in project execution, commercial agility in the face of a dynamic market, and the one-off benefits in North America will result in Keller delivering a record performance in 2023 that has significantly exceeded our original expectations. The fundamental strengths of the business, together with the continued positive outlook and our strong order book, give us confidence in further progress in 2024."

The Group will announce its full year results for 2023 on 5 March 2024.

1 Analyst consensus underlying operating profit for 2023: £150m.