Keller uncovers financial reporting fraud in Australian business

Keller issued the profit warning after identifying “deliberate and sophisticated” financial reporting fraud at its Austral business unit in Australia.

Keller said Austral, a construction contractor in the Asia Pacific, Middle East and Africa division, had overstated the group’s operating profit by up to £16m over several years.

The fraud relates to the financial results of Austral from 2019 onwards, and was discovered after an operational review of the operations of the internal administration.

Two people were fired following the audit and an internal investigation is now underway to appoint an external consultant to conduct an independent investigation.

Keller estimated the impact of the fraud on its historical operating profit to be around £6m for the first half of 2022 and £8m to £10m for previous years.

It added that the fraud continued in the second half of 2022 and affected the board’s expectations for full-year 2022 results.

As a result, management expects the group to report full-year operating profit slightly below the lower end of the range of market expectations. Analysts had forecast a profit of between £109M and £114M.

“As this is a reporting issue, there is no impact on the group’s financial position at the end of the year,” the company added in a statement.

Last summer, the geotechnical specialist announced pre-tax profits of £32.7m for the first half of 2022 and an increased dividend of 5% to 13.2p per share.

Keller CEO Michael Speakman said: “We responded quickly and decisively to a serious issue within one of our business units and a full investigation is ongoing. Until this process is completed and its consequences are fully understood, it is inappropriate to comment further. The board and management team have taken and will continue to take whatever action we deem appropriate to ensure that high ethical and professional standards and robust and effective controls are maintained throughout our organization.

“The group continues to perform well overall with the momentum achieved in the first half of the year continuing in the second half. We are also benefiting from the actions we have taken to improve performance in the foundation’s North American operations. Our significant order book, together with the significant potential of the Neom project, underpins our confidence in the group’s prospects in both the short and medium term.”

Austral contributes about 3% to the group’s revenues. It is the only business that solely calculates revenue based on the percentage of completion in the department.

Keller will provide more details about the fraud in its full 2022 results due on March 7, 2023.

Leave a Reply

Your email address will not be published. Required fields are marked *