Kier raises operating margin to 3.7%

The firm said a period of strong work winning had seen the forward order book swell 27% to £9.8bn, reflecting a large number of contract wins across all divisions.

Kier said much of this was buttressed from inflationary headwind with around 60% for target reimbursable or cost reimbursable contracts.

But statutory pre-tax profit continued to be impacted by restructuring costs which ran to £40m in the year to June 2022.

These included £22m in extra costs relating to five remaining projects at the firm’s southern construction business, which are due to complete this year.

A further £6.7m stemmed from redundancies under the present cost-saving programme and re-sizing the international business.

A further £7.5m and £4.2m was booked against professional adviser fees and property write-downs respectively.

Reported pre-tax profit improved to £16m from £5.6m previously with revenue marginally down at £3.26bn, dragged down an expected fall in revenue at the construction division.

But Kier said that adjusted operating profit had rebounded strongly reflecting the strength of the underlying business.

Over the year operating profit was up 20% to £120m with adjusted operating margin hitting 3.7% across the group.

The construction business average order size stands at £13m reducing exposure with regular re-pricing of contracts.

This strong orderbook amounting to 85% of the year ahead’s revenue target.

Andrew Davies, Chief Executive, said: “Over the last two years Kier has undergone a transformation, rationalisation and recapitalisation and the group is delivering against its medium-term value creation plan.

“The performance over the last 12 months reflects our significantly enhanced resilience and strengthened financial position.

“The Group is well positioned to continue benefiting from UK Government infrastructure spending commitments and we have a significantly increased order book of £9.8bn which gives us certainty against the market backdrop.

“The new financial year has started well and we are trading in line with our expectations, despite continued inflationary pressure and see no change in the current market outlook.

“We remain focused on the delivery of a sustainable net cash position and sustainable dividend policy, in-line with our medium-term value creation plan.”

Proceeds from the sale house building business Kier Living saw average month-end net debt for the year reduce to £216m from £432m a year before.

The speed in the reduction of debt was impacted by a £29m repayment of Kier’s supply chain finance facility and £21m repayment of its deferred HMRC obligations agreed during the pandemic.

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