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Kier profits rise

Kier saw a construction margin of 2.5 per cent and a rise in property profits, but incurred £5m of redundancy costs after a dip in local authority maintenance work.

The contractor said today that revenue fell 5 per cent to £2.07bn for the year ended 30 June 2012 (2011: £2,179m), as pre tax profit - excluding exceptional items - rose by 2 per cent from £68.9m to £70m.

However, after £3.6m of costs relating to the disposal of the majority of its plant business and investment in anaerobic digestion joint venture Biogen (UK), pre tax profits were down from £72.5m to £63m.

The contractor reported a construction margin of 2.5 per cent (2011: 2.7 per cent) and services margin of 4.5 per cent (2011: 4.5 per cent).

But the firm also saw redundancy costs of £7m for the year, including £5m in its maintenance division after a drop in local authority work.

Chief executive Paul Sheffield said: “Trading conditions will remain demanding in our core markets for some time. However, the business has proven to be resilient and we will maintain a focus on the market sectors which we believe have the greatest growth potential, continuing to invest and redeploy our resources to progress our strategy.”

Services revenue saw an 8 per cent dip on the back of public sector cuts, to £445m of revenue ((2011: £484m) and £20.1m operating profit (2011: £21.7m).

Cash balances dropped from £28m to £19m, which included redundancy and restructuring costs “to realign the cost base in light of the lower volumes of work in maintenance” and following investment of around £10m, primarily in its environmental business.

The maintenance business revenues decreased by 20 per cent to £280m (2011: £351m). The services order book amounted to £2.1bn (2011: £2bn).

Mr Sheffield said the firm expects further pressure on UK construction margins and cash performance over the next 12 to 18 months.

Construction revenue dipped by 4 per cent to £1.38bn (2011: £1.45bn), with £35.2m of operating profit compared with £39.3m in 2011. Public sector now represents 50 per cent of work, compared with 56 per cent last time.  It said commercial, power and waste sectors are providing the most significant opportunities.

The firm added that it has seen significant change in the balance of its work, with a greater proportion of more specialist major civil engineering and infrastructure opportunities. It has a £1.8bn pipeline spread across the power, regulated, water and waste sectors.

Kier also said it is also increasing activities outside the UK, in the Caribbean, Hong Kong and the Middle East.

The firm’s property division, including the housing businesses, saw a 44 per cent increase in its operating profit to £22m (2011: £15.3m) with revenue of £241m (2011: £250m) and a £1bn pipeline. Kier delivered nearly 300 homes, 80 per cent of which were affordable. It has a forward pipeline of work in excess of £250m, which equates to 1,900 affordable and private sale plots.

It said 95 per cent of the construction division’s targeted revenue and 91 per cent of the services revenue for 2013 is ‘secure and probable’, with an order book of £4.3bn (2011: £4.3bn).

The firm had net cash of £129m at year-end(2011: £165m) after investment of approximately £50m during the year. Its full full-year dividend is up 3% to 66p (2011: 64p).