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Extreme weather blamed for Kier profit drop

Kier’s pre-tax profits fell by £20m to £43m in the year to 30 June as its May Gurney takeover allowed for £500m in new bids in rail, highways and water.

In its preliminary results released today, Kier said construction revenue was 5 per cent lower than 2012 at £1,308m (2012: £1,384m), something it attributed to poor weather in the first quarter of 2013 which caused delays and pushed revenues into the 2014 financial year.

Underlying pre-tax profit was £63.4m (2012: £70m).

Its net cash was £60m (2012: £129m) after investment of around £77m during the year and average month-end net debt of £4m (2012: average month-end net cash of £95m).

UK building revenue has decreased to approximately £1bn, which Kier said was a result of its “focus on the quality of work” it pursues. This reduction had, it said, been partially mitigated by growth in UK infrastructure and overseas revenues.

Operating margin was at 2.3 per cent (2012: 2.5 per cent), while it increased the dividend by 3 per cent.

The acquisition of May Gurney had not caused it to lose any contracts, and it said had enabled the combined group to bid on new projects worth more than £500m in water, rail and highways.

The group incurred an exceptional restructuring charge of £12m, as set out in February, of which around £10m was in the first half of 2013.

Kier chief executive Paul Sheffield, said: “I am pleased to report that Kier Group plc has performed well and delivered profits in line with our expectations.

“The modest decline in revenue and profit reflects the tough trading conditions the industry has faced during the year, but I am delighted to see that the divisional trading results remain robust.

“Margins in Construction and Services were resilient and our Property division again made a strong contribution.”

Cash in construction reduced to £320m (2012: £361m) after a £14m investment in mining operations, a £6m cash effect of the restructuring programme and changing mix of activities with an increasing number of infrastructure projects typically of a target cost, reimbursable nature.

Around 60 per cent of its contract awards during the year were from frameworks and repeat business with clients.

Its secured and probable order book remains at £2.2bn, the same level as 2012.

At Argent’s King’s Cross development, Kier is preferred bidder on almost £90m of projects including a £65m residential-led mixed-use development, an £18m supermarket project and a £5m pavilion scheme in addition to the £110m of work currently under way on the development.

But just under half of its contracts (49 per cent) were still in the public sector.

Of the public sector awards, the Education sector continues to be the largest source of work, representing 28 per cent of awards (2012: 31 per cent) and it won more than £100m of contract awards through the contractors’ framework this year.

Kier has won more than £400m in ProCure21+ deals, of which more than £150m was in this financial year, with a further pipeline identified in excess of £300m

Chairman Phil White said: “The comprehensive review of our business that we started earlier in the year is substantially complete and our attention remains focused on the successful integration of May Gurney. 

“This comes at a time when the macroeconomic outlook is beginning to improve in all our markets, positioning the group for growth.”

Kier said its £1.5bn pipeline in the property division has grown significantly over the last three years and it will use its cash resources to continue to invest in non-speculative schemes that will generate a targeted 15 per cent return on capital.

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