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Keller acts on shrinking margins

27 Feb 12 Ground engineering contractor Keller is planning to take further action to reduce overheads after seeing its profit margins nosedive in 2011.

For the year to 31 December 2011, Keller Group reported an 8% rise in group revenues for 2011 to £1,154.3m (2010: £1,068.9m) but with operating profits down a third to  £28.9m (2010: £43.3m).

The resulting operating margin was 2.5%, compared with 2010’s 4.1%.

Chairman Roy Franklin said: “These results reflect tough market conditions which remained very challenging throughout 2011, with the uncertain macro-economic outlook impeding any significant recovery in our mature construction markets - principally the US and Western Europe - and overcapacity maintaining pressure on margins.     

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“Against this backdrop, the group has continued to take steps to reduce its fixed cost base. Actions taken in 2011 will deliver a further £5m of savings in 2012, bringing the total fixed overhead reduction in North America and Western Europe since 2009 to over £20m, a reduction of around 20%. Going forward, we will continue to keep costs under close scrutiny.”

Keller’s UK business further reduced its costs in 2011 by closing one office and cutting the size of another. Despite these actions, the business still reported a loss, which was exacerbated by the impact of two legacy contracts, the company said. 

During the year the UK business was awarded contracts valued at £37m for the Victoria Station Upgrade project and £31m for the Crossrail project, which started towards the end of 2011. Another Crossrail contract was for the largest-ever restricted access piling project awarded in the UK, at Lord Hill's Bridge. With the first phase of the contract - installing vertical piles - now complete, the more challenging second phase, which involves installing minipiles at up to 38-degree angles, is progressing well, Keller said.

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