Construction margins improved to 2.7% (2010: 2.6%), while Services margins remained “resilient” at 4.5% (2010: 4.5%). The firm’s order books for Construction and Services increased to £4.3bn (2010: £4.2bn), and Kier said it has a strong pipeline of further opportunities in place.
The Construction order book (secured and probable) stood at £2.3bn (June 2010: £2.1bn) and represented 95% of the division’s targeted revenue for 2012 and 46% of its targeted revenue for 2013, which was slightly ahead of normal - Kier expects its operating margins to remain firmly above 2%. The order book in Services stood at £2.0bn (2010: £2.1bn) giving good forward visibility of workload. The firm said that coupled with a strong pipeline of further opportunities, this would translate into revenue growth for the division in the year to June 2013.
Commenting on the results, Kier Group chief executive, Paul Sheffield, 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, with average month-end cash balances at a high level.
“Our diverse skills and integrated business model have provided greater resilience during these challenging economic conditions. 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 Construction has new process and engineering capability
Kier’s Construction division, which encompasses all of the UK regional contracting, civil engineering and overseas businesses, now includes a newly formed Process & Engineering business which provides mechanical and electrical (M&E) design and delivery services to grow its in-house M&E capability.
The firm said the development of its own 4D building information modelling (BIM) processes, placed it at the forefront of the industry and ready to respond to the Government’s Construction Strategy that will require the use of this technology in the future.
Construction margins up
The firm said revenue in Construction was 2% above last year, at £1,445m (2010: £1,417m), with “modest growth” in UK revenues. Operating profit increased to £39.3m from £36.2m, at an improved 2.7% margin, ahead of last year’s 2.6%. The results described margin performance as underpinned by “excellent cash generation” with a year-end cash balance at a record £423m (2010: £418m).
Contract awards were higher than last year with 68% arising from the firms numerous frameworks and collaborative bidding arrangements. The awards have provided Kier with a secured order book amounting to £1,386m (2010: £1,320m), together with £859m of probable awards, comprising contracts on which Kier is either the preferred bidder or is in one-to-one negotiations (2010: £723m). In total, the firm is active on over 70 frameworks across the UK.
Growing revenues via private sector work
Kier said it was growing revenues via a move away from public sector work and into the private sector, particularly in areas of non-discretionary, economic infrastructure investment, such as:
- power, where the firm is a leading player in the provision of civil engineering works;
- waste, a growing market which includes recycling and power generation opportunities; and
- transport, both in the UK and overseas.
Other growth areas include:
- commercial, primarily in London and the south-east;
- mixed-use and urban regeneration; and
- overseas, where Kier is growing in its three principal territories: Hong Kong, the Middle East and the Caribbean.
Despite the strong results, Kier is expecting the next 12 months to be challenging. However, Paul Sheffield added:
“We remain confident that our positioning across a wide spectrum of service areas, coupled with our committed and professional staff, will enable us to deliver a good performance in the new financial year.”
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