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Keller Group reports solid growth in underlying first-half profits, but Numis trims its rating on valuation grounds

For the six months to June, the FTSE 250-listed firm saw its underlying pre-tax profit rise by 7% at reported rates and 18% at constant currency to £42.2mln, excluding exceptional items

Ground engineer
Keller's revenue for the period increased to £1.0bn, up 8% at reported rates and 15% at constant currency

Keller Group PLC (LON:KLR) saw its shares rise on Monday after the ground engineering contractor reported solid growth in underlying first-half profits, although Numis Securities was prompted to trim its rating on valuation grounds.

For the six months to June, the FTSE 250-listed firm saw its underlying pre-tax profit rise by 7% at reported rates and 18% at constant currency to £42.2mln, excluding exceptional items, with 2017's first-half having benefited £21mln due to a contract dispute.

READ: Barclays initiates coverage on Keller, Balfour Beatty and Kier Group

Keller's revenue for the period increased to £1.0bn, up 8% at reported rates and 15% at constant currency.

In North America, the group’s revenue rose 23% year-on-year to £432.4mln, with around a quarter of the growth coming from Moretrench, acquired in March.

In Europe, the Middle East, & Africa, revenue fell by 4% to £324.7mln, with the firm noting that the decline in revenue was due to the early finish of its Caspian project.

In the Asia-Pacific region, the group added, revenue increased by 34% to £216.1mln and, after two years of "material" losses, the division made a profit in the second quarter.

Order book remains strong

Keller said its order book remains over £1bn, with "the majority" of markets remaining strong and, overall, the company expects good progress going into the second half of 2018 and is confident of meeting 2018 expectations.

The firm also hiked its interim dividend by 24% year-on-year to 12p per share.

In a separate statement, Keller also announced the appointments of Paula Bell, currently Spirent Communications PLC’s (LON:SPT) chief financial officer, and of Kate Rock, a former UK Conservative party vice-chairman, both as non-executive directors from September.

In late morning trading, Keller shares were 1.1% higher at 1,092p, easing back from an earlier peak of 1,132p.

In a note to clients, the analysts at Numis noted that Keller’s first-half pre-tax profit was ahead of forecasts and they upgraded their forecasts for the group and raised their target price for the stock to 1,190p, up from 1,000p previously.

However, they added, with Keller’s share price up 34% since the start of 2017, including 16% growth in the year-to-date, they have moved their recommendation down to ‘hold’ from ‘add’ on valuation grounds.

Quick facts: Keller Group

Price: 529 GBX

LSE:KLR
Market: LSE
Market Cap: £381.25 m
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