In its latest interim Results for the six months to 31 December 2011 published yesterday, Kier Group, part of the KMI Plus joint venture in United Utilities AMP5 capital delivery framework, has reported a 10 per cent fall in its half-year revenues and a fall in construction margins – down to 2.5% compared with 2.7% for the same period in 2010.

However, underlying pre tax profits increased by 9% to £34.0m compared to £31.3m in 2010.

Kier order books for Construction and Services have been maintained at more than £4bn following £830m of awards in the period. Construction order books have targeted revenue for 2012 and 68% of the target for 2013 secured or probable.

Commenting on the results, Phil White, chairman said:

“I am pleased to report a good set of results for Kier for the six months ended 31 December 2011. The increase in underlying pre tax profits to £34.0m and the continued strong cash position demonstrate the strength of the Group’s performance and we expect this good performance to continue for the full year.

“As we look to the medium term, conditions continue to be difficult in the UK construction market and we are inevitably seeing greater pressure on our current operating margins.”

Paul Sheffield, chief executive said that the Group was continuing to perform in line with expectations, despite facing challenges in many of its markets, commenting:

“The next 18 months will remain challenging as external macroeconomic factors weigh heavily on the public sector and the confidence of the private sector to invest. We will, however, continue to focus on those markets where we see the most potential for future growth.”

In Construction, Kier achieved revenues of £720m (2010: £728m) at an operating margin of 2.5% delivering £17.8m of operating profit (2010: £19.8m). Paul Sheffield said the Group’s focus in construction continued to be the provision of intelligent, value-engineered solutions working in partnership with customers. A significant number of framework agreements and long-standing customer relationships underpin Kier contract awards and order books, which had remained robust at £2.2bn at 31 December 2011 (June 2011: £2.2bn).

All of the Construction Division’s targeted revenue for the current financial year and 68% of targeted revenue for 2012/13 is either secure or probable (2010: 65%), with its workload increasingly focused towards the private sector.

Kier’s Construction division encompasses its UK building, infrastructure and overseas businesses, together with power, waste, infrastructure and mining projects.

Paul Sheffield said the fall in in Construction revenue for the six months to 31 December 2011 down from £728m 2010 to £720m reflected “a robust performance in light of the ongoing challenging market conditions.”  He described the division’s  performance as underpinned by involvement on more than 70 frameworks, the flexibility of the Kier workforce in being able to move between a variety of sectors and a consistent track record of delivery.

Frameworks make up 60% of Construction Division’s contract wins in the period

Frameworks and similar arrangements accounted for approximately 60% of the Construction Division’s contract awards in the six-month period. However, Paul Sheffield added that the firm was now seeing a tightening in the market which would “inevitably put greater pressure on operating margins over the next 18 months.”

Looking ahead, he said that overall, the Construction division was well positioned in its key markets and that strong order books and the core of new work coming through frameworks in the UK provided a stable platform from which to target the areas where the firm saw the best opportunities for growth, both in the UK and overseas.