Ground engineering specialist Keller has admitted 2018 will be a “challenging year” for its UK business as it revealed reduced margin in its 2017 financial results.
The FTSE 250 company posted a record £2bn turnover but saw underlying operating margin drop from 5.4% to 5.2%.
But chief executive Alain Michaelis told New Civil Engineer the group was targetting a long-term goal of 20% return on capital employed (ROCE).
“We don’t really talk about margin as a goal, we talk about ROCE. And our longer-term aspiration is to get to 20% ROCE,” he explained.
Michaelis also revealed that Keller had made savings of £5-7M in 2017 through operating efficiencies. He said these would also boost profitability in 2018, but warned that margins were “a product of project and market mix”, and therefore unpredictable.
He said reduced margins in 2017 were largely attributable to lower margins in North America.
Over the year ending 31 December 2017, Keller generated £2.07bn in revenue and saw pre-tax profits jump 50% to reach 111M.
This was largely down to positive market conditions and two large projects completing in its Europe, Middle East & Africa (EMEA) division: the Caspian project and Zayed City in Abu Dhabi.
However Keller expects to see a dip in UK activity before HS2 boosts the market from 2019.
Michaelis 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.”
Two problem projects in Australia suffered technical setbacks which led to an operating loss of 16.5% for the Asia and North Pacific (APAC) region.
Michaelis said internal changes, such as enhancing its engineering capabilities and building better contractual skills, had made the division stronger.