Annual Financial Report

RNS Number : 6744B

Kier Group PLC

09 October 2020

 

9 October 2020

Kier Group plc

Publication of the 2020 Annual Report

The Company has today made available on its website at https://www.kier.co.uk/investors/annual-report-2020/ its annual report and accounts for the year ended 30 June 2020 (the "Annual Report"), The Annual Report will be submitted to the National Storage Mechanism shortly, where it will be available for inspection at https:// data.fca.org.uk/#/nsm/nationalstoragemechanism .

The Company announced its results for the year ended 30 June 2020 on 17 September 2020. Additional information has been extracted from the Annual Report and is included in the Appendix to this announcement for the purposes of compliance with the Disclosure Guidance and Transparency Rules.

For enquiries, please contact:

Phil Higgins

Deputy Company Secretary

[e-mail]

The Company's Legal Entity Identifier is 2138002RKCU2OM4Y7O48.

Cautionary statement

This announcement does not constitute an offer of securities by the Company.  Nothing in this announcement is intended to be, or intended to be construed as, a profit forecast or a guide as to the performance, financial or otherwise, of the Company or the group of companies of which the Company is the holding company whether in the current or any future financial year.  This announcement may include statements that are, or may be deemed to be, ''forward-looking statements''.  These forward-looking statements can be identified by the use of forward-looking terminology, including the terms ''believes'', ''estimates'', ''anticipates'', ''expects'', ''intends'', ''plans'', ''target'', ''aim'', ''may'', ''will'', ''would'', ''could'' or ''should'' or, in each case, their negative or other variations or comparable terminology.  By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future and may be beyond the Company's ability to control or predict.  Forward-looking statements are not guarantees of future performance.  Important factors that could cause these differences include, but are not limited to, general economic and business conditions, industry trends, competition, changes in government and other regulation, changes in political and economic stability and changes in business strategy or development plans and other risks.  Other than in accordance with its legal or regulatory obligations, the Company does not accept any obligation to update or revise publicly any forward-looking statement, whether as a result of new information, future events or otherwise.

APPENDIX

The information in this Appendix has been extracted as unedited full text from the Annual Report, subject to certain non-material amendments,

Principal risks and uncertainties  

The Board's assessment of the principal risks and uncertainties facing the Group and a summary of the key controls and mitigating actions are each summarised below. The Board considers these to be the most significant risks facing Kier. Not all risks facing the business are listed and the risks are not listed in any order of priority.

Principal risk	Description	Mitigating actions
Health and safety	Failure to maintain a safe and sustainable environment and prevent a major incident. The Group's operations are inherently complex and potentially hazardous and require the continuous management of safety, health and sustainability issues. COVID-19 impact: high. During COVID-19, the Group has worked closely with its people, clients and suppliers to ensure that its sites and offices are able to continue to operate safely and in accordance with Government guidelines.	§ Continued focus on the five basics of SHE risk management; § Implementing the Group's new sustainability framework, 'Building for a Sustainable World'; and § Setting a tone from the top, through activities such as senior management visible leadership tours.
Legislation and regulation	Failure to manage effectively changes in legislation and regulation. The sectors in which the Group operates are subject to increasing scrutiny from stakeholders, oversight from regulators and requirements introduced by new legislation or regulation. COVID-19 impact: no material effect.	§ Regular engagement with Government and Government agencies with respect to the Group's performance; § Monitoring of, and planning for, the impact of new legislation and regulations; and § Collaborative engagement with external stakeholders.
Funding	Failure to maintain adequate funding or liquidity. Reduced availability of financing options resulting in an inability to maintain adequate funding or financial liquidity and an inability to execute the Group's strategy effectively. COVID-19 impact: medium. The Group has worked with its clients and supply chain to maintain liquidity during COVID-19. The Group has agreed waivers and revised financial covenants with its lenders and worked with other stakeholders to ensure sufficient flexibility under its principal finance facilities remains available.	§ Effective cash forecasting and working capital management; § Following COVID-19, the Group has agreed waivers with its lenders in respect of the financial covenants for the test period ended 30 June 2020 and has agreed revised financial covenants which will apply for the going concern period; § Collaborative engagement with customers, HMRC, pension scheme trustees, banks, lenders and  sureties; and § Exit, substantial exit or restructuring of non-core businesses to reduce net debt.
Market sector performance	A general market or sector downturn may materially and adversely affect the Group's ability to secure work. The Group's performance is affected by macroeconomic factors which affect UK business in general and/or the markets in which the Group operates. COVID-19 impact: high . COVID-19 has resulted in high levels of macroeconomic sector uncertainty and volatility and has resulted in the UK entering a recession. This has, in turn, adversely affected the Group's financial performance.	§ Evaluate markets, including the impact of macroeconomic factors and the associated market risk of specific events (for example, Brexit); § Review the Group's pipeline of future work to identify market trends and plan accordingly; and § Maintain a broad sector focus to mitigate against the decline of a particular sector.
Contract  management	Failure to manage contracts effectively at each stage of a project's lifecycle. The Group has a number of large and complex contracts in progress at any one time. Failure to manage the risks associated with these contracts could materially and adversely affect the Group's financial performance. COVID-19 impact: medium. COVID-19 has resulted in certain projects being delayed or suspended and the Group incurring additional costs as a result.	§ Adhere to the Group's contract risk governance framework; § Identify early warnings of under-performing contracts; and § Timely and accurate reporting of contract performance.  ​
People	Failure to retain  key employees and  identify future leaders. The Group's employees are critical to its current performance. The Group needs to identify, retain and motivate people with the right skills, experience and behaviours and to identify tomorrow's leaders. COVID-19 impact: high. The Group has implemented a number of measures relating to its employees, including temporary pay reductions, furlough and requiring more agile working practices (including working from home).	§ Focus on skills development and retention plans for the talent pipeline; § Create an effective, inclusive work environment, through our Performance Excellence culture; and § Clear and effective communication with the workforce.
Supply chain	Failure to maintain effective working relationships with the supply chain; following COVID-19, supply chain insolvencies. The Group relies on its supply chain for the delivery of its projects. Maintaining close and effective working relationships with the supply chain is therefore a priority for the Group. Following COVID-19, the risk of insolvencies in the supply chain has increased. COVID-19 impact: medium. The Group has worked closely with its supply chain to ensure that projects can be delivered. There has been an increase in the number of insolvencies within the supply chain as a result of COVID-19	§ Develop long-term relationships with critical subcontractors; § Continue to seek to reduce supply chain payment terms; and § Review the supply chain to ensure alternative delivery mechanisms are available and appropriate contingencies are in place.
Strategy	The Group fails to deliver its strategy. The delivery of the Group's strategy is of fundamental importance to its future performance. COVID-19 impact: low. The Group believes that COVID-19 has affected its short-term performance, rather than the longer-term delivery of its strategy.	§ Delivery of our Performance Excellence culture; § Continued focus on cash management; and § Effective communication with stakeholders.
Brexit	The UK left the EU on 31 January 2020, with a transition period currently running to 31 December 2020. Currently, the UK's long-term relationship with the EU remains unclear.	The Group has identified potential risks relating to, for example, the supply chain, the workforce and the supply and cost of materials and has set up contingency plans in respect of these risks. The Group keeps these plans under review, in the light of political developments. In particular, the Group continues to work with its supply chain to develop plans to ensure continuity of potentially critical supplies and has developed plans with respect to those members of its workforce who are nationals of EU member states and wish to continue to work in the UK.
COVID-19	The COVID-19 pandemic has had, and may continue to have, a material and adverse effect on the Group's results of operations and a number of the Group's stakeholders, including its employees, clients and supply chain. The extent of the effect of COVID-19 on the Group and its stakeholders depends on a range of factors, including its effect on the wider economy in general, measures taken by Government in response to it, including the proposed increase in UK infrastructure investment, and the effects of any re-occurrence of the pandemic.	As the UK continues its exit from lockdown, Government restrictions and requirements are closely monitored so as to ensure continued compliance. Particular areas of focus include: Compliance with the Group's site operating procedures; Ensuring the continued supply of materials and availability of the supply chain, wherever possible; and Supporting the Group's workforce to continue to operate as effectively as possible in the circumstances.
Emerging Risks	The Group has identified the following as principal, emerging risks: The continued impact of COVID-19 on the Group's sites and operations; The UK's recession, following COVID-19; and The operational, financial and commercial effects of climate change disruption on the Group.

​ Related party transactions

Identity of related parties

The Group has a related party relationship with its, key management personnel, the pension schemes in which its employees participate and the joint ventures listed below.

Transactions with key management personnel

The Group's key management personnel are the Company's Executive and the Non-executive Directors. Transactions with these individuals are identified in the Directors' Remuneration Report on pages 101 to 121 of the Annual Report.

In addition to their salaries, the Group also provides non-cash benefits to the Directors and contributes to their pension arrangements as disclosed on page 113 of the Annual Report. Key management personnel also participate in the Group's share option programme (see note 28 of the consolidated financial statements).

Key management personnel compensation comprises:

	2020 £m	2019 £m
Emoluments as analysed in the Directors' Remuneration Report	2.2	5.2
Employer's national insurance contributions	0.3	0.6
Total short-term employment benefits	2.5	5.8
Share-based payment charge	1.8	0.7
	4.3	6.5

Transactions with pension schemes

Details of transactions between the Group and pension schemes in which its employees participate are detailed in note 9 of the consolidated financial statements.

Transactions with joint ventures

	2020 £m	2019 £m
Construction services and materials	237.1	278.2
Staff and associated costs	10.2	10.0
Management services	13.4	16.0
Interest on loans to joint ventures	0.8	0.6
Plant hire	1.4	1.3
	262.9	306.1

Equity loans due from joint ventures are analysed below:

	2020 £m	20191 £m
Kier Cross Keys Holdco 1 LLP	35.0	35.0
Kier Community Living Topco 1 LLP	32.1	32.1
Kier Trade City Holdco 1 LLP	17.6	12.7
Solum Regeneration (Twickenham) LLP	14.5	14.2
Kier (Newcastle) Investment Ltd	10.1	10.1
Kier (Southampton) Investment Limited	10.0	10.0
Kier Richmond Holdings Limited	9.9	9.9
Watford Health Campus Partnership LLP	9.7	7.0
Solum Regeneration (Bishops) LLP	7.2	5.0
Kier Cornwall Street Holdings 1 LLP	6.5	6.5
Kier Cornwall Street Holdings 2 LLP	6.5	6.5
Solum Regeneration (Guildford) LLP	6.2	3.4
50 Bothwell Street Holdco 1 LLP	5.6	5.2
Easingwold Holdco 1 LLP	4.7	2.9
Stokesley Holdco 1 LLP	4.2	2.7
Driffield Holdco 1 LLP	2.5	2.5
Winsford Holdings 1 LLP	2.4	1.2
Solum Regeneration (Kingswood) LLP	2.2	0.1
Solum Regeneration (Epsom) LP	1.4	5.3
Solum Regeneration (Redhill) LLP	1.4	1.2
Solum Regeneration (Maidstone) LLP	0.7	0.6
Solum Regeneration (Surbiton) LLP	0.3	0.1
Solum Regeneration Holding 1 LLP	0.2	0.2
Solum Regeneration Holding 2 LLP	0.2	0.2
Solum Regeneration (Walthamstow) LLP	0.1	2.0
Solum Regeneration (Haywards) LLP	0.1	0.4
KCK Peterborough Holdco 1 LLP	-	4.8
Strawberry Percy Holdings 1 LLP	-	1.6
Strawberry Percy Holdings 2 LLP	-	1.6
Tri-link 140 Holdings 1 LLP	-	1.4
Notaro Kier LLP	-	1.3
Black Rock Holdco 1 LLP	-	1.2
Kier Sovereign LLP	-	0.8
	191.3	189.7

1  The comparative figure for Kier Cross Keys Holdco 1 LLP has been restated by £3.9m from £38.9m to £35.0m to reflect the equity loan provided to the joint venture by Kier only.

2 

Trading balances due from joint ventures are analysed below:

	2020 £m	2019 £m
Kier Community Living LLP	12.7	4.2
Kier Cross Keys Dev LLP	0.8	6.0
Stokesley Devco LLP	0.6	3.3
Hackney Schools for the Future 2 Limited	0.6	-
Easingwold Devco LLP	0.4	0.5
Kier (Southampton) Investment Limited	0.3	-
Driffield Devco LLP	0.2	0.4
Black Rock Devco LLP	0.1	-
Dragon Lane LLP	0.1	-
Kier Trade City LLP	0.1	-
Tri-Link 140 LLP	-	3.8
Hackney Schools for the Future Limited	-	1.4
Winsford Devco LLP	-	0.8
Kier Richmond Limited	-	0.3
Team Van Oord Limited	-	0.1
KCK Peterborough Devco LLP	-	0.1
	15.9	20.9

Directors' responsibility statements

The Directors consider that the Annual Report, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Group and Company's position and performance, business model and strategy.

Each of the Directors, whose names and functions are listed in the Annual Report confirm that, to the best of their knowledge:

· the Company financial statements, which have been prepared in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards, comprising FRS 101 'Reduced Disclosure Framework', and applicable law), give a true and fair view of the assets, liabilities, financial position and loss of the Company;

· the Group financial statements, which have been prepared in accordance with IFRSs as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and loss of the Group;
 

· the Directors' Report in the Annual Report includes a fair review of the development and performance of the business and the position of the Group and Company, together with a description of the principal risks and uncertainties that it faces; and

· so far as the Directors are aware, there is no relevant audit information of which the Group and Company's auditors are unaware; and they have taken all the steps that they ought to have taken as a Director in order to make themselves aware of any relevant audit information and to establish that the Group and Company's auditors are aware of that information.

Ends.

 

END

 

 

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