HS2 contractor Keller sacks two staff after £16m fraud

HS2 contractor Keller Group has fired two members of staff after uncovering what it called an “apparently deliberate and sophisticated” fraud that will cost it as much as £16m.

Shares in London-listed Keller tumbled after the company said it had uncovered what appeared to be a yearslong effort to inflate profit numbers at its Australian division.

The misstatements at Austral Construction, an Australian engineering contractor it acquired in 2015, mean profits there have been overstated by £16m since 2019.

Two employees have been dismissed in connection with the incident and the company is in the process of appointing an external investigator to look into the scandal.

Austral works in Australia’s mining industry, helping to prepare the ground for pits and reinforcing tunnels.

Keller said that profits in its Austral division had been overstated by £6m in the first half of 2022, and by up to £10m in the two years prior.

The company has not yet established the impact on its profits for the second half of 2022, but management expects profits for the year to be only slightly below target thanks to its strong performance in North America and Europe. Analysts at Investec cut £5m off their estimate for Keller’s profits in 2022 in response to the news, reducing its estimate to £106m.

Austral made up approximately 3pc of Keller’s £2.2bn revenues in 2021.

Michael Speakman, the chief executive of Keller said: “We have responded swiftly and decisively to a serious issue within one of our business units and a full investigation is underway.

“Until this process is complete and its consequences are fully understood, it would be inappropriate to comment further.”

Keller Group, a FTSE 250 company, is an engineering contractor specialising in large-scale infrastructure projects.

The company conducts early stage prep work for mining companies and civil engineering firms, laying foundations and reinforcing tunnels, dams and bridges.

The business has secured contracts worth over £250m for ground engineering work on sections of HS2 and was recently hired by the Kingdom of Saudi Arabia to conduct preliminary work on the country’s futuristic megacity Neom.

Shares in Keller dropped by 12pc on the news, wiping out over £70m in market capitalisation.