Kier shows ‘resilience’ despite dip in revenues

Kier Group results for the year ended 30 June 2022 show total revenue down 4% to £3,144m (2021: £3,261m). But thanks to several years of restructuring, pre-tax profit rose nearly threefold to £15.9m (2021: £5.6m).

After losing more than £500m before tax over the two years to June 2020, the 2022 results reflect Kier’s “significantly enhanced resilience”, according to chief executive Andrew Davies.

The Infrastructure Services segment, comprising Highways, Infrastructure and Utilities, increased revenue by 17% to £1,667m, primarily due to the ramp up of capital works on HS2, and operating profit by 16% to £48.1m.

Revenue from the Construction division fell 19% to £1,441m due to deferred orders, delayed project starts and completion of the HMP Five Wells prison project in Wellingborough. Operating profit for the division fell 46% to £21.8m.

Kier Property’s revenue rose 8% to £144m, and operating profit was up by more than £14m to £16.7m due to industrial sector divestments.

The net cash position at 30 June 2022 was £3m and remains unchanged from June 2021.

Having sold the house-building division, Kier Living, and held a rights issue last year, Kier’s average month-end net debt has reduced from £431.9m to £216.1m.

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One-of costs during the year included £22.2m on the restructuring of the Regional Southern Build business (on the back of £13.6m spent on it in the previous year) and £6.5m on redundancies. There is also a figure of £3.8m of aborted acquisition costs. Kier has not gone public on any attempted acquisitions over the past year but had been reported to be in talks with Tilbury Douglas. These reports were never confirmed or denied.

The order book on 30th June 2022 stood at £9.8bn, an increase of 27% from a year before. Approximately 85% of group revenue for the current financial year is already secured.

Chief executive Andrew Davies said: “Over the last two years Kier has undergone a transformation, rationalisation and recapitalisation and the group is delivering against its medium-term value creation plan.

“The performance over the last 12 months reflects our significantly enhanced resilience and strengthened financial position.”

He said that there had been “a strong operational performance despite increased cost inflation relating to materials, wages and other costs”.

He explained: “We were successful in mitigating these pressures through having 60% of our order book under target cost or cost reimbursable contracts, various procurement strategies, ability to mitigate risk through negotiations on fixed price contracts and an average order size of £13m in our Construction business resulting in a regular re-pricing of contracts.”

He concluded: “The group is well positioned to continue benefiting from UK government infrastructure spending commitments and we have a significantly increased order book of £9.8bn which gives us certainty against the market backdrop. The new financial year has started well and we are trading in line with our expectations, despite continued inflationary pressure and see no change in the current market outlook. We remain focused on the delivery of a sustainable net cash position and sustainable dividend policy, in-line with our medium-term value creation plan.”

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