Annual Financial Report

RNS Number : 2582P

Kier Group PLC

15 October 2021

 

15 October 2021

Kier Group plc

Publication of the 2021 Annual Report and Notice of Annual General Meeting

Kier Group plc (the "Company") announces that its annual general meeting will be held at the offices of Linklaters LLP, One Silk Street, London EC2Y 8HQ on Friday 19 November 2021 at 10.00 am.

The Company has today made available on its website www.kier.co.uk the annual report and accounts for the year ended 30 June 2021 (the "Annual Report"), the Notice of Annual General Meeting 2021 (the "AGM Notice") and the Notice of Availability. These documents, together with the Proxy Form, will be submitted to the National Storage Mechanism shortly, where they will be available for inspection at https://data.fca.org.uk/#/nsm/nationalstoragemechanism . A hard copy of the Annual Report and the AGM Notice have been posted to shareholders who have requested them on or around 14 October 2021.

For the purposes of complying with Disclosure Guidance and Transparency Rule ("DTR") 6.3.5R and the requirements it imposes on issuers as to how to make public annual financial reports, information has been extracted from the Annual Report in unedited full text and is included in the Appendix to this announcement. Page numbers and note references in the Appendix refer to page numbers in the Annual Report and the notes to the Company's consolidated financial statements for the year ended 30 June 2021 as included in the Annual Report. This information should be read in conjunction with the Company's 2021 full-year results announcement, released on 16 September 2021, which contained a condensed set of financial statements and can be found at https://www.kier.co.uk/investors/reports-results-presentations.

Together, these constitute the material required by DTR 6.3.5R to be communicated to the media in unedited full text through a Regulatory Information Service.

For enquiries, please contact:

Jaime Tham

Company Secretary

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

PRINCIPAL RISKS AND UNCERTAINTIES  

The Board's assessment of the principal risks and uncertainties facing the Group and a summary of the potential impact and mitigating actions are each summarised below. The risks are not listed in any order of priority.

Principal risk	Description	Impact/actions
1. Health and safety	Failure to maintain a safe working 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.	Potential impact · An increase in safety or environmental incidents on site · The failure to meet clients' expectations, adversely affecting the ability to bid for and win new work · Financial penalties arising from fines, legal action and project delays. Mitigating actions · Minimise the operational impact of relaxing restrictions in the workplace and community · Continued focus on the five basics of SHE risk management · Implementing the Group's new sustainability framework, 'Building for a Sustainable World' · Setting a tone from the top, through activities such as senior management visible leadership tours.
2. Legislation and regulation	Failure to comply with and manage effectively current legislation and regulation and any changes to them The sectors in which the Group operates are subject to increasing scrutiny from stakeholders, oversight from regulators and requirements including those introduced by new legislation or regulation.	Potential impact · Penalties for failing to adhere to legislation or regulation · Increased operating costs of compliance · The loss of business and resultant reputational damage. Mitigating actions · Appropriate policies that are regularly reviewed and relevant training to support policy implementation · 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 · Collaborative engagement with external stakeholders.
3. Funding	Failure to maintain adequate financial liquidity and/or comply with financial covenants Failure to maintain adequate financial liquidity and/or comply with financial covenants resulting in an inability to execute the Group's strategy effectively.	Potential impact · The loss of confidence by other stakeholders (for example, investors, clients, subcontractors and employees) · Conducting existing business becomes increasingly challenging · The loss of future business. Mitigating actions · During the period, the Group completed a capital raise, which together with the sale of Kier Living raised c.£350m of gross proceeds for the Group. In support of the capital raise the Group secured an extension of a significant proportion of its committed funding to 31 January 2025 providing the Group with financial and operational flexibility to continue to pursue its strategic objectives · Effective cash forecasting and working capital management in combination with continued monitoring and prudent financial planning to ensure covenant compliance is maintained · Continued collaborative engagement with customers, suppliers, HMRC, pension scheme trustees, banks, lenders and sureties.
4. Maintaining an order book within selected markets	A general market or sector downturn materially and adversely affects the Group's ability to secure work - UK Government spending, certainty and timing, including competitiveness of current market The Group strategy sets out specific sectors that it wishes to trade within. The pipeline of work could be adversely affected by a general or sector downturn or cause a delay to projects going to site. The Group manages the impact of an economic downturn by building a strong order book. It concentrates on sectors with long-term frameworks and customers who prefer repeat procurement.	Potential impact · A failure of one or more of the Group's businesses · Increased competition for new work · A decrease in stakeholder confidence in the Group. Mitigating actions · To continue to secure long-term frameworks within each of our business streams · Tailoring the Kier offer to meet customer needs · Maintaining an efficient cost base.
5. Contract management of changes	Failure to manage contracts effectively at each stage of a project's lifecycle. The business suffers a significant loss as a result of failing to follow the contract administration The Group has a large number of contracts in progress at any one time. Changes to contracts may lead to additional costs being incurred, delays and delayed receipt of cash.	Potential impact · A failure to manage project delivery and WIP and, ultimately, to meet the Group's financial targets · The Group incurring losses on individual contracts · The Group failing to win new work. Mitigating actions · To update the Kier standards for contract amendments · To cascade the Commercial Handbook into the business through webinars · To implement the new Commercial Standards across the Group.
6. People	Failure to attract and retain key employees 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.	Potential impact · An adverse effect on the delivery of the Group's purpose and strategy · A lack of operational leadership, potentially leading to poor project performance · An erosion of the Group's employer brand. Mitigating actions · Diversity and Inclusion roadmap · Wellbeing strategy · New leadership development offer in place · Create an effective, inclusive work environment, through our Performance Excellence culture.
7. Supply chain	Failure to maintain effective working relationships with the supply chain and, as a result of COVID-19 bottlenecks and recovery, supply chain insolvencies, capacity, pricing, inflation volatility The Group relies upon its partners for the delivery of its projects. Maintaining a close working relationship is a priority for the Group.	Potential impact · Unavailability of appropriate resources, impacting on project delivery and cost · Use of suppliers from outside the preferred supplier list increases cost and decreases quality · Poor relationships lead to lack of confidence in the Group and adverse publicity. Mitigating actions · To update the Kier subcontract to reflect the principles of the Construction Playbook · To place a Procurement Director directly into each business to deliver their supply chain management strategy · To continue to meet prompt payment reporting requirements.
8. Strategy	Failure to deliver the Group's strategy The Group fails to deliver its strategy in terms of medium-term strategic objectives - £4bn-4.5bn turnover, 3.5% margin, 90% cash conversion and a net cash balance.	Potential impact · An adverse impact on the Group's net debt and liquidity · Failure to secure positions on national and regional frameworks · Failure to meet stakeholders' expectations may lead to a decline in confidence in the Group. Mitigating actions · Delivery of the balance sheet strategy · Delivery of our Performance Excellence culture · Continued focus on cash management · Effective communication with stakeholders.
9. Cyber, IT Security and data protection 1	Kier is exposed to cyber, IT security or data protection breaches Failure to keep up to date with modern attack landscape as well as protecting from current conventional cyber risks could cause heavy reputational damage or financial fines.	Potential impact · Operational impact - e.g. delivery of projects, key systems outage, failure to win work, loss of confidential and/or other data · Financial impact - regulatory fines/prosecutions · Reputational/brand damage. Mitigating actions · Vulnerabilities are understood and mitigated · Certification to the Government's Cyber Essentials Plus Scheme and ISO 27001 · Privileged access to all core systems subject to multi-factor authentication; systems run security agents for additional monitoring · Advanced use of Microsoft Office 365, cloud and collaboration services.
10. Climate chan ge 1	Failure to identify and effectively manage climate change risks and opportunities The Group's operations are subject to physical and financial climate change risks, while climate resilience measures offer opportunities to innovate and expand/enhance capabilities.	Potential impact · Failure to meet client and investor expectations or regulatory requirements · Loss of opportunity to contribute to UK climate action policy and direction · Reputational damage · Failure to prepare/plan for physical and financial impacts of more extreme and frequent weather conditions affecting operations and supply chain. Mitigating actions · Implementing the Group's new sustainability framework, 'Building for a Sustainable World', particularly: o  Net Zero Carbon pathway and Science Based Targets o  Zero Avoidable Waste strategy o  Sustainable Procurement strategy · Sustainability Leadership Forum ('SLF'); chaired by our Chief Executive and supported by business stream SLFs that are led by a managing director or commercial director · Developing the climate risk and opportunities register and net zero management system to align with TCFD reporting and managing the financial risk of climate change · Embracing modern methods of construction and product innovation to deliver low-carbon solutions for climate resilience.

^{1 Risk introduced in 2021.}

Other risks

Brexit

The new UK-EU Trade and Cooperation Agreement ('TCA') removed the uncertainty of a no-deal Brexit. While this has reduced the Brexit risk, uncertainty remains around the full effect of Brexit, and the ongoing impact this will have on our trading relationships.

The Group continues to work with its supply chain to maintain plans to ensure continuity of potentially critical supplies and continues to monitor and refresh its contingency plans for potential risk areas such as the workforce. We continue to work with and update customers by providing up to date analysis on availability and mitigation strategies of any resources that are becoming under pressure.

COVID-19

The focus of the Group's management, and our colleagues, throughout the unprecedented COVID-19 pandemic was ensuring that, wherever it was safe to do so, the Group's activities remained safe and operational.

The pandemic highlighted the need to be agile and flexible in the way we operate and has brought about a fundamental shift in the way we work. As a result of the lessons learnt during this time, we have introduced the Kier way of working. In spite of the significant challenge of the pandemic, the Group has delivered well and has made significant progress on the 2019 operational and financial turnaround strategy.

Whilst the COVID-19 pandemic had a continued negative effect on the Group's results and operations, the impact has been effectively managed across our operations through contractual arrangements and extensive stakeholder engagement and communication.

The impact of the pandemic continues to be closely monitored by the Board and the Executive Committee with particular focus on maintenance of a safe working environment, supply chain, materials continuity and availability of critical workforce. We continue to be at the forefront of the sector approach to Site Operating Procedures and safe working practices.

We will respond to any ongoing Government restrictions and requirements and any further re-occurrence of the pandemic to ensure continued compliance. We are maintaining a watching brief of the extent and duration of lockdowns in Europe and will react accordingly.

Emerging risks

The Group has identified the following as principal, emerging risks:

· Global recession

· Ongoing COVID-19 bottlenecks and recovery impact

· Continued development of the climate change risk agenda

· Modern construction methods ('MCM') - embracing fast-paced changes in construction methods, linked to digital pace of change

· Short-term concerns regarding the volatility of key commodity prices.

RELATED PARTY TRANSACTIONS

Identity of related parties

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

Transactions with key management personnel

The Group's key management personnel are the Executive and Non-executive Directors as identified in the Directors' remuneration report on pages 98 to 117.

In addition to their salaries, the Group also provides non-cash benefits to Directors and contributes to their pension arrangements as disclosed on page 102. Key management personnel also participate in the Group's share option programme (see note 28).

Key management personnel compensation comprises:

	2021 £m	2020 £m
Emoluments as analysed in the Directors' remuneration report	2.9	2.2
Employer's national insurance contributions	0.4	0.3
Total short-term employment benefits	3.3	2.5
Share-based payment charge	0.6	1.8
	3.9	4.3

Transactions with pension schemes

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

Transactions with joint ventures

	2021 £m	2020 £m
Construction services and materials	163.8	237.1
Staff and associated costs	7.9	10.2
Management services	12.1	13.4
Interest on loans to joint ventures	1.2	0.8
Plant hire	1.4	1.4
	186.4	262.9

Equity loans due from joint ventures are analysed below:

	2021 £m	2020 £m
Solum Regeneration (Twickenham) LLP	16.2	14.5
Kier (Southampton) Investment Limited	12.2	10.0
Kier (Newcastle) Investment Ltd	11.1	10.1
Kier Trade City Holdco 1 LLP	10.1	17.6
Kier Richmond Holdings Limited	9.9	9.9
Solum Regeneration (Guildford) LLP	8.9	6.2
Watford Health Campus Partnership LLP	8.4	9.7
Solum Regeneration (Bishops) LLP	7.0	7.2
Kier Cornwall Street Holdings 1 LLP	6.5	6.5
Kier Cornwall Street Holdings 2 LLP	6.5	6.5
50 Bothwell Street Holdco 1 LLP	5.6	5.6
Kier Maidenhead Holdings 1 LLP	3.3	-
Winsford Holdings 1 LLP	2.4	2.4
Solum Regeneration (Kingswood) LLP	2.2	2.2
Solum Regeneration (Redhill) LLP	2.1	1.4
Solum Regeneration (Epsom) LP	1.5	1.4
Solum Regeneration (Maidstone) LLP	0.7	0.7
Solum Regeneration Holding 1 LLP	0.7	0.2
Solum Regeneration (Surbiton) LLP	0.4	0.3
Solum Regeneration Holding 2 LLP	0.2	0.2
Cross Keys Holdco 1 LLP1	-	35.0
Kier Community Living Topco 1 LLP1	-	32.1
Easingwold Holdco 1 LLP1	-	4.7
Stokesley Holdco 1 LLP1	-	4.2
Driffield Holdco 1 LLP1	-	2.5
Solum Regeneration (Haywards) LLP	-	0.1
Solum Regeneration (Walthamstow) LLP	-	0.1
	115.9	191.3

¹ Joint ventures disposed of as part of the sale of Kier Living during the year, see note 33.

Trading balances and other loans due from/(to) joint ventures are analysed below:

	2021 £m	2020 £m
Kier Cornwall Street LLP Winsford Devco LLP Kier (Southampton) Investment Limited Dragon Lane LLP Watford Health Campus Partnership LLP	0.8 0.8 0.4 0.3 0.3	- - 0.3 0.1 -
Hackney Schools for the Future 2 Limited Team Van Oord Limited Kier Richmond Limited Kier Maidenhead LLP Lysander Student Operations Limited Kier Trade City LLP Kier Community Living LLP1 Kier Cross Keys Dev LLP1 Stokesley Devco LLP1 Easingwold Devco LLP1 Driffield Devco LLP1	0.2 0.1 0.1 (0.6) (0.6) (1.1) - - - - -	0.6 - - - - 0.1 12.7 0.8 0.6 0.4 0.2
Black Rock Devco LLP1	-	0.1
	0.7	15.9

¹ Joint ventures disposed of as part of the sale of Kier Living during the year, see note 33.

DIRECTORS' RESPONSIBILITY STATEMENT

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

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

· the Group financial statements, which have been prepared in accordance with IFRSs as issued by the International Accounting Standards Board (IASB), give a true and fair view of the assets, liabilities, financial position and loss of the Group;

· the Company financial statements, which have been prepared in accordance with United Kingdom Accounting Standards, comprising FRS 101, give a true and fair view of the assets, liabilities, financial position and loss of the Company; and

· the Directors' 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.

In the case of each Director in office at the date the Directors' Report is approved:

· so far as the Director is aware, there is no relevant audit information of which the Group's 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's and Company's auditors are aware of that information.

 

END

 

 

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