Construction margins at Kier hit 2.7%

Aaron Morby 10 years ago

Kier’s construction division drove growth in group profit despite mounting industry competition for falling public sector work.

The firm has seen public sector workload fall from around three-quarters of its construction activity to around half over the year.

Despite the fall, Kier’s construction arm helped the group lift underlying pre-tax profits by 24% to £70m on turnover up 4% at £2.18bn in the year to June.

Construction margins improved in the tough market from 2.6% to 2.7%.

Paul Sheffield, Chief Executive said: “Kier has had another successful year in a tough economic environment; underlying revenue and profit before tax are well ahead of last year and cash generation has been very strong.”

He added: “We are encouraged by the prospects we see in markets such as power and waste, in mixed‑use regeneration and in the growth we see in public sector outsourcing.

“Kier continues to benefit from its long‑term client relationships and the numerous frameworks in which we are involved.

“Our network of local offices allows us to respond to the ever‑widening requirement of customers for local capability to deliver ‘bundled’ services.”

    Kier trading by division

    Construction: turnover £1,445 (£1,417m) profit £39.3 (£36.2), margin 2.7% (2.6%)

    Services: turnover £484m (£471m), £21.7m (£21.4m), margin 4.5% (4.5%)

    Property: turnover £97m (£53), profit £11.1m (£4.5m), margin

    Homes: turnover £153m (£158m) profit £4.2m (£2.8m)

Sheffield said he did not expect to see any improvement in the construction market until at least 2013.

He said the focus remained on securing quality work through frameworks and targeting the power, waste and nuclear markets and commercial building projects from our long‑term customers.

To date Kier is placed on 70 frameworks, including sole contractor to deliver up to £1.0bn of construction projects over four years on behalf of Scape, a local authority alliance. This should generate 2,500 projects.

Sheffield said that the power market alone was likely to provide Kier with over £13bn of opportunities over the next ten years.

Kier’s secured and probable order book rose to £2.3bn from £2.1bn last year.

The firm has bagged 95% of the division’s targeted revenue for 2012 and 46% of its targeted revenue for 2013.

Sheffield said the outlook at the rest of the group remained good.

“Our services division is beginning to see larger opportunities come to market as local authorities outsource different bundled services, and our property division is in a strong position to expand its portfolio and seek non‑speculative schemes in the medium term.”

On the housing side Kier is focused on reducing its land bank.

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