Kier £175m record cash pot stokes bid rumours

Aaron Morby 13 years ago

Kier has built up record cash reserves over the year, stoking speculating that it is on the look out for an acquisition.

The integrated construction group today reported strong annual results with underlying pre-tax profits up 11% to £58m from turnover down 5% at £2bn.

The strong performance saw it lift its dividend payment to shareholders by 5%.

During the year the construction business generated £111m cash from operating activities taking net funds to a record £175.2m.

A city analysis told the Enquirer: “There are certainly a lot of things that Kier could spend it cash on. There is scope to build up partnership homes, or invest in the growing number of local authority development partnerships.

“Each of these options would make good sense, but there is also a feeling that Kier is eyeing opportunities to extend its capabilities in contracting.”

Kier expects the nuclear building programme will deliver significant amounts of civils work for the construction arm. Over the next decade the civils work for energy investment projects will reach £6bn.

The civil engineering arm built up a strong track record delivering gas-fired power station work packages, which would be a spring board into the nuclear power station civils programme.

This week, Kier secured its first contract worth £4.5m with Bam Nuttall for enabling works at Hinckley C. It is presently also bidding for the £1bn civils package at the site.

    Kier performance by division

  • Construction Profit £36.2m (39.1m); turnover £1.42bn (£1.49bn); margin 2.6%
  • Support services Profit £21.4m (£17.9m); turnover £470m (£438m); margin 4.5%
  • Partnership Homes Profit £9.9 (£1.1m); turnover £158m (£151m); margin 6.3%
  • Development Profit £0.3m (loss £1.9); turnover £53m (£65m)

Construction sales fell 5% to £1.42bn, with marginal growth in UK turnover offset by a decline in revenue from overseas operations, particularly those in Dubai and Romania.

In support services annual revenues are expected to exceed £500m by 2012.

Paul Sheffield, chief executive, said Kier was busy talking to local authorities about bundling up  services to drive greater efficiency.

He said: “Our bidding teams are busier then ever helping our local authority partners to address the budgetary pressures which they are facing by providing innovative funding and development solutions and assisting them in their desire to bundle several services into one contract.”

At North Tyneside Council Kier is in discussions to broaden our range of activities to include both development and waste management opportunities.

For Sheffield City Council it existing contract teams are working together to provide property management, funding, development, construction, housing maintenance, street cleansing and recycling.

Kier also said that it hope to benefit from the new era of house building, which would see firms benefit from public and private building capability.

Sheffield said: “Our integrated business model provides us with unique opportunities drawing on the strength of our relationships with public and private sector clients and this has proved to be very resilient during the global economic slowdown.

“We are also encouraged by the prospects we see in markets such as power, utilities, waste and mixed-use regeneration schemes and overseas, ” he added.

Over the year Kier managed to hold its performance in a deteriorating and competitive market.

Operating margins remained strong in construction division at 2.6% and grew to 4.5% from 4.1% at the support services business.

The Partnership Homes division turned round with operating margins up from 0.7 last year to 6.3%, benefiting from land disposals and transfers.

Kier completed 1,060 units (2009: 1,141), with a slight shift mix towards private development homes – 499 came from private development sales and 561 through affordable housing.

These unit sales, together with land sales boosted profits to nearly £10m.

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