Growth in profits at Kier reflects government spending on infrastructure

A construction services and property giant has reported a strong financial performance for the year ended June 30 2023, that has resulted in pension schemes being in a significantly improved position and will see it return to providing dividends to shareholders.

Kier Group Plc announced pre-tax profits of £51.9m compared with £15.9m in the previous year and revealed it has an order book of £10.1bn.

This came despite inflationary pressures and a drop in revenue of 73.9% in its property business.

The group, which has undergone a "transformation, rationalisation and capitalisation" over the past two years, says it is well positioned to continue benefiting from UK government infrastructure spending commitments.

Andrew Davies, the group's chief executive, Andrew Davies, Chief Executive, said it had achieved "considerable operational and financial progress" over the last two years, reflected in the significantly improved financial performance in 2023. 

"It is testament to the hard work and commitment of our people who have enhanced our resilience and strengthened our financial position in line with the objectives set out in our medium-term value creation plan," he said. 

"Our order book remains strong at £10.1bn and provides us with good, multi-year revenue visibility. 

"The contracts within our order book reflect the bidding discipline and risk management now embedded in the business. 

"I am also particularly pleased to report, the Group significantly improved its year-end net cash position [£64.1m] and has confidence in sustaining this momentum going forward."

The firm's revenue of £3.4bn, which increased 4.6% compared to the previous year, reflects growth in both the infrastructure services and construction segments, which saw revenues of more than £1.7bn and more than £1.65bn respectively.

This was offset by the anticipated reduction in the property business, which saw revenues of £37.6m compared to £144.3m in the previous year, driven by market conditions such as rising inflation and interest rates.

Kier has more than 400 live projects at any given time and says regularly delivering existing contracts and pricing new contracts is mitigating against cost pressures.

Adjusted earnings per share rose to 19.2p compared to 16.8p the previous year and the firm announced it would now reinstate dividends to ensure shareholders "share the benefits of the group's growth".

Highlights for the group in 2023 included being appointed by National Highways to carry out an essential maintenance programme on eight viaducts at Lune Gorge, spanning the M6 and being reappointed to the £55m per year, three-year extension of the Network Service Alliance framework by South West Water and Bournemouth Water.

The firm was also appointed to the £5.1bn Strategic Alliance Contract Framework in relation to the Defence Estate Optimisation ("DEO") Portfolio by the Ministry of Defence and was re-appointed to the £4.5bn Southern Construction Framework.

Kier was also appointed by L&Q for its Major Works Investment Programme to deliver housing maintenance across its estate and started work on site at our Trade City scheme in Manchester.

At the beginning of the month, Kier agreed to acquire substantially all of the rail assets of Buckingham Group Contracting Limited and its HS2 contract, supplying Kier's HS2 joint venture EFKB for a total cash consideration of up to £9.6m

The firm said this provided a "cultural fit" as well as accelerating its broader rail strategy. The acquisition provided the firm with a number of new rail clients and brought 180 high quality new employees into the fold.

Kier is delivering a number of projects across the rail sector, including a £65m upgrade of Oxford Railway Station.

Throughout the last year, the firm also demonstrated its commitment to a number of 'Performance Excellence' workstreams, to continuously improve health and safety, employee wellbeing and workplace culture and is set to focus on 'Digital and Simplification' throughout 2024.

It has reinforced its commitment to its own and the governments environmental, social and governance goals.

Key appointments during the year for the firm included the propmotion of Louisa Finlay to chief people officer and the appointment of Stuart Togwell as group managing director, construction.

Optimistic about the year ahead, Davies said: "The new financial year has started well, and we are trading in line with our expectations. 

"The Group is well positioned to continue benefiting from UK Government infrastructure spending commitments and we are confident in sustaining the strong cash generation evidenced this year. 

"This, combined with our focus on operational delivery, gives the Group a clear line-of-sight to significantly de-lever."

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