Final Results

Kier Group PLC
13 September 2007




                                 KIER GROUP PLC

                PRELIMINARY RESULTS FOR THE YEAR TO 30 JUNE 2007


   •Pre-tax profits* up 30.5% to £79.6m (2006: £61.0m)
   •EPS before amortisation of intangible assets up 27.3% to 158.9p (2006:
    124.8p)
   •Full year dividend rebased by 92.3% to 50.0p (2006: 26.0p)
   •£114.8m of cash generated from operating activities
   •Construction and Support Services order books at record levels
   •Homes order book at 31 August 11% ahead of last year by value


*Pre-tax profits are stated before amortisation of intangible assets of £2.0m
(2006: £1.9m) and after deducting joint venture tax of £1.4m (2006: £1.4m)


Commenting on the results, John Dodds, Chief Executive said:

"The Group is in great shape. Our Construction order books are at record levels
and our Construction businesses are experiencing very strong markets allowing us
to be highly selective in the work we undertake. Our Support Services business
has reached new heights in terms of volume and profits and with the new awards
in 2007 and potential awards for 2008 we can expect increased growth in the
current financial year. In Homes the market continues to be sound and, having
established a new operating region during the year, we continue to look for
further opportunities to expand the business. Our Property division has a good
portfolio of developments in the pipeline and is seeking to grow further through
strategic acquisitions; and in PFI value will continue to be created from new
and existing investments.


"With its strong markets, a sound business infrastructure and talented
management teams I have enormous confidence in the future prospects for Kier."
Chairman's statement


I am delighted to report record results for Kier Group plc for the year to 30
June 2007. Revenue was up 15.8% to £2,127.9m (2006: £1,838.3m); profits before
tax (before minority interests) grew 31.3% to £77.6m (2006: £59.1m) and earnings
per share before the amortisation of intangible assets increased by 27.3% to
158.9p (2006: 124.8p).


The excellent trading result was complemented by outstanding cash performance,
one of our key measures particularly within the Construction division. Net cash
inflow from Group operating activities was £114.8m (2006: £96.6m) leading to
year-end net cash balances of £148.4m (2006: £111.2m).


We have experienced strong order intake which led to record year-end combined
order books for Construction and Support Services of £3.5bn (2006: £2.9bn). Our
Homes division has had a good year with the number of unit sales 16% ahead of
last year and order books at 31 August 5% ahead of the same time last year by
number of units and 11% ahead by value.


In proposing a dividend for this year we have taken into account the comparative
compound annual growth rates in dividends and earnings per share over the last
ten years and whilst dividends have increased at 15% per annum, earnings per
share have increased at 23% per annum, widening the dividend cover over the
period. It is, therefore, proposed that we adjust the dividend this year to a
total of 50.0p for the year (2006: 26.0p), an increase of 92.3% and covered 3.1
times by earnings per share. Following this rebasing the Board intends to
continue its progressive dividend policy. The final dividend of 40.4p will be
paid on 4 December 2007 to shareholders on the register on 28 September 2007 and
there will be a scrip dividend alternative.


Board changes

Peter Berry, non-executive director, retired from the Board on 30 June 2007 and
I should like to thank him for the significant contribution he has made to the
Group since joining the Board in 1997. He has advised and supported the Group
through a huge amount of growth and change over the last ten years and his
involvement and wise counsel will be very much missed by all of us.


I am pleased to welcome Chris Geoghegan to our Board as a non-executive director
from

1 July 2007. Chris joined the Board of BAE Systems in July 2002 as chief
operating officer with responsibility for European joint ventures and UK defence
electronics assets. His experience will contribute significantly to the further
growth of the Group.


Prospects

Our divisions are enjoying excellent market conditions, record order books and
healthy cash balances all of which gives me great confidence in the prospects
for the Group and for further profitable growth in 2008.



Chief Executive's review


Overview

Kier Group plc has once again delivered excellent results for the year to 30
June 2007 continuing the reliable, consistent performance that has become a
prominent feature of our business. This performance, a consequence of our
long-term approach to both risk management and business opportunities, is
reflected in the strong earnings per share record which has had a compound
annual growth rate of over 23% for the last ten years and a 28.3% increase this
year to 155.0p (2006: 120.8p).


Revenue, profits and cash generation for the year to 30 June 2007 are at record
levels. Our order books for the new financial year are very strong with ample
opportunity available reflecting probably the best Construction and Support
Services markets that we have ever experienced and a housing market that
continues to be sound. Our integrated contractor/developer approach to mixed-use
schemes continues to set us aside from others and provides excellent
opportunities in the affordable housing-led regeneration sector.


Financial performance

Revenue for the year at £2,127.9m (2006: £1,838.3m) was 15.8% ahead of last year
with strong growth from all of our divisions. Operating profit, after
amortisation of intangible assets and joint venture interest and tax, was 31.6%
ahead of last year at £77.9m (2006: £59.2m) and profit before tax increased by
31.3% to £77.6m (2006: £59.1m) before minority interests of £0.8m (2006: £nil).


Adjusted earnings per share, before the amortisation of intangible assets,
increased by 27.3% to 158.9p (2006: 124.8p).


The robust trading performance was supported by excellent cash generation in the
year with £114.8m generated from operating activities (2006: £96.6m) resulting
in a year-end net cash position of £148.4m (2006: £111.2m). Further special
pension contributions of £11.0m were made to the Kier Group Pension Scheme in
the year (2006: £31.5m). In addition we acquired the shares in Hugh Bourn
Developments (Wragby) Limited for £46.8m of which £24.0m was paid in the year.


The Construction division generated £62.5m of cash in the year (after tax and
dividends) reflecting a strong underlying trading performance and increased
volumes of revenue. The division ended the year with a record cash balance
(including intra-Group loans) of £361.2m (2006: £298.7m).


Group structure and strategic developments

Kier Group comprises five divisions; Construction, Support Services, Homes,
Property Development and Infrastructure Investment (investment under the Private
Finance Initiative 'PFI'). The Group's management structure and segmental
analysis for reporting purposes are based on the five divisions.


The Group has a well established business model that has underpinned its growth
and development over a number of years. Whilst our origins are in construction
activities, by undertaking strategic investments in housing, property
development, support services and PFI we have developed a business model
comprising complementary activities. They provide a balanced cash profile
enabling the funds generated by lower margin construction operations to be
invested in higher margin, asset-rich businesses such as housing, property
development and PFI, while operationally we are able to combine complementary
skills to offer fully integrated services to clients throughout the UK. In 2007
we have again seen many examples of mixed-use projects on which our businesses
have worked together to provide a total in-house solution for the delivery of
these developments. We are one of the few Groups able to do this and we intend
to continue to use our skills to generate further profit growth from these
opportunities.


As part of our strategy to grow our Homes division we acquired the shares in
Hugh Bourn Developments (Wragby) Limited in July 2006. This business has
provided the fifth operating area for our Homes division, extending our
operations north of Allison Homes' area of Lincolnshire and North
Cambridgeshire.



Business review, markets and outlook


Construction

The Construction segment comprises Kier Regional and Kier Construction. Kier
Regional encompasses our ten regional contracting businesses, our affordable
housing business and major building projects. Kier Construction comprises the
Group's infrastructure and overseas operations with civil engineering,
infrastructure, rail, mining and remediation capability.


Overall revenue increased by 15.9% to a record £1,411.2m for the year (2006:
£1,218.1m) with good growth in both Kier Regional and Kier Construction.
Operating profit increased by 21.7% to £21.9m (2006: £18.0m) and the operating
margin increased to 1.6% from 1.5% last year.


Cash generation, one of our key performance measures, has been extremely strong
again this year with cash balances at 30 June 2007 £62.5m higher than the
previous year end (after tax and dividends) and average balances for the year
£49m ahead. Contract awards were higher than last year providing a record order
book of £1,710m at 30 June 2007 (2006: £1,470m).


Kier Regional business review

The performance in the Kier Regional businesses was outstanding this year with
excellent progress made in the key performance measures of revenue, profit
margins and cash. Revenue, at £1,209.9m, was 10.7% ahead of 2006; margins have
again increased and the cash performance remains strong with average cash
balances, including intra-Group loans, around £42m higher than last year, ending
the year at a record £336m (2006: £278m).


Contract awards were ahead of last year with 55% arising from private sector
clients (2006: 57%) and 45% from the public sector (2006: 43%). Negotiated,
partnered and two-stage tenders represented around 64% of work secured (2006:
65%) reflecting the strength of our long-term relationships with clients, our
regional framework agreements and our commitment to long-term partnering. This,
coupled with the relatively low value of contracts undertaken within the
business, averaging £4.7m, (2006: £3.2m) continues to provide a lower-risk, and
more sustainable, order book.


Demand for commercial property has been strong in the year representing 23% of
our awards including a £66m office scheme in Snow Hill Birmingham by Kier Build,
our major projects business, and a £36m office block, The Pinnacle, in the
centre of Milton Keynes by a joint team comprising the Kier Regional businesses
of Marriott Construction and Kier Build. The retail market continues to be
buoyant in most regions, representing around 10% of awards secured during the
year. A number of contracts have been awarded for Morrison, John Lewis
Partnership & Waitrose, Sainsbury and Tesco including a 'Tesco Extra'
environmental concept store at Shrewsbury incorporating geothermal heating and
cooling, rainwater harvesting and a host of other sustainable features.


Public sector demand has also been strong, particularly in the education sector
which represented 22% of our awards for the year. New schools work has been
secured by a number of our businesses either conventionally or through
frameworks, most notably for the South East Centre of Excellence (SECE), and a
primary schools framework in which Kier was selected as one of three partner
contractors for South Lanarkshire Council. Colleges and universities also
provided a strong work stream nationwide. We were delighted to have been
selected as one of six preferred contractors on the 'Contractors' Framework for
Academies and other Educational Facilities' which is forecast to provide £1.7bn
of work, in total for the six contractors over the next four years. Our
framework agreement with the Home Office for custodial work on prisons is
affording us good opportunities providing 8% of awards in the year with a
significant level of further contracts in negotiation. The affordable housing
sector is also buoyant presenting good prospects through our framework
agreements with housing associations and local authorities. The division
completed 850 affordable housing units this year including the 161 unit Burford
Wharf scheme for Dominion Housing and was awarded around £98m of new contracts
in the year.


We have seen an increase in the number of opportunities for two or more of our
businesses to combine their skills, resources and geographical experience in
order to deliver appropriate services to customers. The recently awarded project
to deliver the new £35m UK Supreme Court for the Ministry of Justice in
Parliament Square, London is a prime example of this where the skills of Wallis,
our specialist refurbishment contractor, combined with Kier Property to secure
the project. Marriot Construction is working with Kier Property to deliver a new
UK headquarters for EDS in Milton Keynes and Kier South East has joined with
Bellwinch to develop 281 flats in Maidstone. In addition Kier Plant provides
tower cranes and site accommodation to a large number of our sites and Kier
Building Service Engineers, providing mechanical and electrical design services,
is often an integral part of our construction teams.


Kier Construction business review

Kier Construction saw a 61.0% increase in its revenue in the year to £201.3m
(2006: £125.3m) through a combination of growth in UK framework contracts,
traditional UK civil engineering contracts and overseas work. In UK civil
engineering, a good performance was achieved in our five-year rail
infrastructure framework for railway structures renewal in East Anglia for
Network Rail. In the water sector, the five year joint venture integrated
alliance under the Asset Management Programme 4 for United Utilities is
developing well.


At Milford Haven, where we are carrying out offshore works for the South Hook
LNG terminal, we are making excellent progress despite poor weather conditions
and remain on target to meet the client's planned date of commissioning by May
2008.

Our remediation capability, where brownfield sites are redeveloped for
commercial, residential or mixed use, continues to grow. In Peterborough work
has now completed on a former Anglian Water site for our Homes business and in
Uxbridge, Kier Construction has successfully remediated a British Gas site for
Kier Property ahead of development of a mixed-use scheme. Both of these projects
were completed on time and, more importantly, within budget giving us a firm
foundation of experience to pursue similar opportunities.


At our private open cast coal mine, Greenburn in East Ayrshire, we have now
extracted 2.0m tonnes of coal since production began in April 2004. We expect
production to continue into 2012 and have forward sold 38% of the remaining 2.0m
tonnes of anticipated coal at favourable prices.


Overseas good progress made in the Caribbean on Jamaica's Norman Manley
International Airport and on a large transportation centre in Kingston, Jamaica
was overshadowed by a challenging project in Antigua comprising a large
five-star hotel complex for Sandals. The hotel has now opened on a phased basis
and the projected financial outturn of the contract has been provided for in
full in the results for the year to 30 June 2007.


Construction markets and outlook

The UK construction market remains buoyant in both the public and private
sectors. In the public sector healthcare spending slowed during the year but is
again strengthening and the outlook for education and custodial projects is
positive. As the education and custodial sectors operate procurement framework
arrangements of which we are a part we are well placed to attract further work.
Affordable homes and the social housing sector remain strong and we welcome the
recent government Green paper on housing. This indicates provision of £8bn of
public money for the affordable housing programme between 2008 and 2011 and a
target of at least 70,000 new affordable homes each year by 2010/11 of which
45,000 would be for social rented accommodation. This represents a 50% increase
in the supply of new social homes in the three years. These planned increases
will provide good opportunities for our Construction businesses and in
particular Kier Partnership Homes which has recently achieved 'partner status'
with the Housing Corporation allowing us to bid directly for social housing
grant funding.


We have a good track record in civil engineering work for power stations and
recent awards at Immingham and Langage confirm our strong reputation in the
energy markets which, we believe, will continue to expand and include
opportunities in the waste to energy sectors.


Overseas, our relationships with clients and joint venture partners are
providing us with good opportunities, particularly in Romania, where we have
negotiated contracts for a shopping mall and residential apartments. In the
Middle East, we are building on our experience of phosphate mining in Jordan and
are in negotiation on a contract to mine phosphate in Saudi Arabia in joint
venture with a local partner.


The UK Construction markets are probably the best that we have ever experienced,
providing us with record order books at 30 June 2007 of £1,710m (2006: £1,470m)
supported by a significant pipeline of contracts in the final stages of
negotiation. With these strong, good quality order books, the scene is set to
deliver further growth in our construction division over the next few years.


Support Services

Support Services comprises four business streams: Kier Building Maintenance,
providing reactive and planned maintenance principally to local authority
clients, housing associations and Arms Length Management Organisations; Kier
Managed Services, providing facilities management services to public and private
sector clients; Kier Building Services Engineers; our specialist mechanical and
electrical design, installation and maintenance business; and Kier Plant which
hires plant to Kier Group companies and external clients.


Support Services business review

Revenue in the Support Services segment rose 12.2% to £315.5m (2006: £281.3m)
driven by a combination of organic growth and the inclusion of a number of new,
large building maintenance contracts awarded in the year. Operating profit,
before deducting the amortisation of intangibles of £2.0m and minority interests
of £0.8m (2006: £2.0m and £nil), increased by 40.2% to £12.2m (2006: £8.7m) at
an improved margin of 3.9% (2006: 3.1%) exceeding our original target set for
this year. The cash position within the division remains strong with £3.3m
generated in the year to give a closing balance of £15.8m (2006: £12.5m). Once
again we have seen significant growth in the order books which stand at £1,788m
at 30 June 2007 (2006: £1,396m), including Building Maintenance at £1,211m
(2006: £844m), Managed Services at £528m (2006: £537m) and Kier Building
Services Engineers at £49m (2006: £15m).


In Building Maintenance, the largest division with revenues of £228.3m (2006:
£172.5m), we have enjoyed unprecedented success over the last year. We now look
after 200,000 public sector homes throughout the country, having secured £525m
of new contracts in the year including Hull, Sefton (Liverpool), Harlow, Harrow,
Hackney and Brighton. Kier Sheffield LLP, our partnership with Sheffield City
Council, provided the largest volume of revenue for the year at £107.1m (2006:
£94.2m) and includes Sharrow Industries, a sheltered workshop run by Kier
Sheffield LLP which manufactures and supplies kitchens, windows and doors under
an exclusivity agreement with the five contractors under the Decent Homes
initiative. Sheffield City Council's share of profits from the LLP for the year
was £0.8m and has been disclosed as a minority interest in the income statement.
A good performance was achieved in Kier Islington on increased volumes of £46.6m
(2006: £37.6m) and we were proud to have been involved in Islington Council's UK
Housing Award for preventing homelessness through the Home Shelter Scheme.


During what has been predominantly a year of consolidation, Kier Managed
Services continued to secure a good mix of both public and private sector
contracts largely through renewals. There was significant activity in the PFI
arena, of which a good share of contracts emanated from Kier Project Investment
for whom Kier Managed Services manages a portfolio of healthcare projects,
libraries and schools.


The past year has seen a record £11.0m of investment by Kier Plant in new
equipment including tower cranes, generators, telehandlers and site
accommodation. This brings us to a fleet of 95 tower cranes and 3,400
accommodation units on hire to both Kier companies and external clients.


Support Services markets and outlook

Opportunities in the facilities management market continue to emerge for Kier
Managed Services in both the public and private sectors and our strategy of
being selective on what we pursue is reaping rewards.


In Building Maintenance both local authority expenditure, through housing
repairs and maintenance budgets, and central government expenditure, through the
Decent Homes initiative, continue to provide good potential for new work. A
number of new contracts were awarded to us in the year with combined annual
revenues of around £100m. These, like Sheffield, are likely to grow as our
partnerships flourish to embrace other areas of Kier expertise, including street
cleaning, street scene works and grounds maintenance. A strong pipeline of other
good opportunities continues to be explored and we are preferred bidder on
Hammersmith & Fulham (approximately £5m per annum) and Hackney (approximately
£4m per annum) and short-listed as one of two bidders on Stoke (approximately
£35m per annum).


We have a strong track record of delivery on the high value Building Maintenance
contracts which places us in a good position to secure further work.


Homes

Kier Residential, our housebuilding division, comprises five companies: Allison
Homes operating throughout Lincolnshire and North Cambridgeshire; Bellwinch
Homes with sites in the south and south-east; Kier Homes, operating across the
central belt of Scotland; Twigden Homes with activities in East Anglia and the
West Midlands; and the recently acquired Hugh Bourn Homes, operating as Kier
Homes Northern, in north Lincolnshire.


Homes business review

Kier Residential sold 1,767 homes in the year (2006: 1,522) representing a 16.1%
increase in unit sales over last year. Average selling prices were marginally
lower than last year at £179,300 (2006: £180,100) reflecting the inclusion of
162, slightly lower value, units from Kier Homes Northern which was acquired in
July 2006. Revenue of £316.8m was generated from housing sales (2006: £274.2m)
and land disposals generated a further £8.3m of revenue (2006: £3.7m) at a
nominal profit of £0.2m (2006: £0.1m). The proportion of social housing sales
remained constant at 16% (2006: 16%). Operating profit from housing sales
increased by 14.7% to £47.6m (2006: £41.5m) at a margin of 15.0% (2006: 15.1%).


On 31 July 2006 we acquired the shares in Hugh Bourn Developments (Wragby)
Limited for a total consideration of £46.8m representing the market value of
land, work in progress and fixed assets after taking into account liabilities
and adjustments. £24.0m was paid during the year and £12.9m on 2 July 2007 with
the balance due on 1 July 2008. Hugh Bourn (rebranded Kier Homes Northern) has
formed the foundation for a fifth trading division of Kier Residential.


As well as the corporate acquisition, Kier Residential had a busy year in 2007.
A number of new developments started including our first carbon neutral
development of 281 flats in Maidstone with Kier South East, the previous
occupier of the site, as contractor. At Sunbury, Kier Residential is developing
96 homes, 48 of which are for a housing association, on a site previously owned
by Kier Property. In Scotland a development of 489 units at Belvidere Village in
the East End of Glasgow was launched in November 2006 with the first completions
being taken in the year to June 2007. A number of large sites were purchased
during the year including 192 units at Costessey, Norfolk, 245 units at Redding
Park in the central belt of Scotland, 213 units at Little Paxton, Cambridgeshire
and 225 units at Turnford College, Hertfordshire. In addition detailed planning
consent was granted for 330 units at Stoke Mandeville, Buckinghamshire and the
first phase of 550 units at Fengate, Peterborough.


During the year £87.5m was spent on selective land purchases, including a
significant amount on deferred terms, and at 30 June 2007 the land bank
contained 6,465 units (2006: 5,863 units) which, at 3.7 years' worth of current
years sales, is marginally less than our target holding of four years' unit
sales. We are planning further investment in land in our current areas of
operation and continue to look for opportunities to expand the business.


In addition to land with planning consent we hold approximately 11,500 plots of
strategic land mostly under option which continue to provide a valuable route
for land acquisition as, historically, between 16% and 18% of our annual unit
sales have originated from this process.


Housing markets and outlook

The typically quiet selling period over the summer started earlier than in
previous years in our areas of operation but also ended earlier with
reservations in the last three weeks of August ahead of the same period last
year. The order book at 31 August, comprising reserved and exchanged units, is
11% ahead of last year by value and 5% ahead by number of units reflecting the
high level of social housing units included in last year's order book.


We will be trading from broadly the same number of outlets this year as last but
are anticipating a notable increase in the number of unit sales from three of
our businesses; Kier Homes Northern, our newest business, is gearing up its
operations in line with the rest of the division; Kier Homes in Scotland and
Bellwinch, our south-east business are both benefiting from a number of major
new developments this year which are currently trading very well. Around 40% of
our projected unit sales for the full year are already secure by way of
completions, exchanged contracts and reservations and, similar to the pattern of
sales in 2007, we expect the balance of units to be skewed to the second half of
the year.


The outlook for regeneration and brownfield opportunities is excellent and a
number of developments are expected to come forward including two in joint
venture with Kier Property: a major project in Ashford New Town and the Ordnance
Survey site in Southampton, together providing over 1,000 units. We also welcome
the recent Green paper on housing which should benefit our business over the
next few years.


Property

Our Property development activity covers commercial, offices, industrial, retail
and mixed-use sectors largely on a low-risk basis. It operates through Kier
Ventures, a wholly owned subsidiary, and Kier Developments, a 50% joint venture
with the Bank of Scotland.


Kier Property enjoyed another highly successful year, significantly enhancing
its portfolio through acquisitions as well as crystallising considerable value
on several existing properties. The portfolio now totals 29 properties
representing over 5m sq ft of development with a prospective end value of over
£930m.


The active management of its properties led to a 29.1% increase in revenue to
£61.3m in the year (2006: £47.5m), with operating profit up from £9.2m to £12.1m
representing a margin of 19.7% (2006: 19.4%).


A number of developments were sold during the year including two to Invista Real
Estate: the 80,000sq ft Mannington Retail Park development in Swindon; and the
216,000sq ft first phase of Reading Central, a commercial site in the centre of
Reading. We have retained a 50% equity stake in Mannington Retail Park and have
created an innovative joint venture with Invista Real Estate to bring forward
both of these major developments with Kier taking on the development management
role. At Mannington we will develop 45,000sq ft of new retail units and reclad
an existing terrace of four units. At Reading, a revised planning application
has been submitted and work is expected to begin on site by the end of 2007 with
discussions under way amongst a number of potential occupiers. Since the
financial year-end, Kier and Invista have added a third development to the joint
venture, purchasing the 23-acre Ponders End industrial estate in Enfield. This
will be converted into a 500,000sq ft regeneration project, comprising a mix of
uses including hotel, self-storage, car showroom, industrial and offices.


The year saw Kier Property, through our integrated developer/contractor approach
with other Group companies, selected as development partner for a number of
projects including the new United Kingdom Supreme Court, in Parliament Square,
London. The £35m project comprises a 70,000sq ft renovation of the Grade II*
listed Middlesex Guildhall by Wallis, our specialist refurbishment contractor,
which will be let to the Ministry of Justice on a 30-year lease on practical
completion in the spring of 2009. We also finalised our agreement to deliver a
new 150,000sq ft head office for Ordnance Survey at Adanac Park in Southampton.
Through our Construction, Support Services and Homes divisions, we will
redevelop Ordnance Survey's existing office in the area into a 24-acre site
embracing residential, commercial, office and industrial uses.


Regeneration is at the forefront of Kier Property's approach to development. As
well as the Southampton and Ponders End projects we made progress on a number of
key regeneration projects during the year:


• In October 2006, we were selected to deliver a major mixed-use
sustainable development of a 4.5-acre town centre site in Newcastle called GQ2.
The scheme will include a blend of residential, leisure, retail, hotel and
office uses.

• Kier Property is also set to deliver a £35m regeneration of a former
gas works in Uxbridge, following a comprehensive remediation of the site during
the year by Kier Construction.

• The redevelopment of the former Shippams food factory in Chichester
was also completed in the year, with New Look and Hennes taking occupation of
the 50,000sq ft of retail space.

• Work has now completed on a new 175,000sq ft replacement produce and
flower hall for the Western International Market, near Heathrow which will allow
us to bring forward a 300,000sq ft distribution scheme on the site of the old
market.


Kier Property's industrial division continued its success. This included
delivering 145,000sq ft of development in Weybridge, Surrey which was almost
entirely pre-let or pre-sold, under the Trade City brand. Trade City has now
developed almost 1m sq ft of bespoke industrial units for local and national
occupiers. At Warth Park in Northamptonshire work has started on a 250,000sq ft
warehouse which, on completion, will be sold to Tesco Pension Fund.


Property markets and outlook

Looking ahead, the relationship with Invista is likely to be further augmented
with the addition of a second 125,000sq ft phase of Reading Central. Several
sites within Kier Property's existing portfolio will be brought forward to
maximise value for the company including the recently acquired Breakspear House,
a former Royal Mail building in Hemel Hempstead. This will be redeveloped for
industrial, office and hotel uses complementing our nearby Trade City Hemel
site, which is nearing completion.


We are hopeful of achieving planning consent, in the near future, on a number of
large regeneration schemes in which we are involved including Poole and Ashford
New Town which will use the multi-disciplined services within Kier Group.


Occupational demand continues to be strong but we anticipate a correction in
pricing in the property investment market which we believe will lead to further
opportunities for strategic acquisitions of sites and businesses where we are
able to add value through the development process and asset management.


Infrastructure investment

Kier Project Investment (KPI) manages the Group's PFI interests. The core
strength of KPI is its ability to bring together the diverse range of skills and
resources within the Group and combine these with a financial package to deliver
high quality buildings and services to meet the needs of the public sector.
Having been involved with, and committed to, PFI projects since 1996, KPI is
able to demonstrate continuity of involvement from early design and concept
stage, through construction, to facilities management and whole-life
sustainability solutions.


Infrastructure investment business review

In July 2006 financial close was achieved on the new Kent Police Constabulary, a
ground-breaking project incorporating several aspects of sustainability in its
design including ground source heating. This brought our portfolio of PFI
projects to 13 and our committed equity investment in PFI to £22.8m, of which
£15.5m has been invested to date.


Good progress is being made on the projects under construction including The
Garrett Anderson Centre at Ipswich Hospital, a clinical services treatment
centre. The project is on schedule to be completed at the end of 2007, with the
£27m construction project being undertaken by a collaboration of two Kier
Regional businesses. Similarly, the six Norwich schools scheme for Norfolk
County Council has progressed well with the first phase of Taverham Secondary
School in Norwich, a conversion project comprising part new build and part
refurbishment, now handed over. The period also saw construction completed at
the Meadowhead and Westfield Schools in Sheffield.


Infrastructure Investment markets and outlook

Although our traditional markets of education and health have slowed, by
offering a one-stop package including investment, construction, facilities
management and ongoing building management services we are able to provide the
successful delivery of built environment requirements for communities throughout
the UK. This will now include new markets for us, such as fire stations, prisons
and waste projects, all areas in which our construction division has skills and
expertise.


Our portfolio of projects, held at cost in the balance sheet, will continue to
provide additional value through refinancing and possible disposal opportunities
in the future. The directors' valuation of the committed investment in our
portfolio at 30 June 2007 was approximately £49m based on discounting the cash
flow from investments in financially closed projects at 7%.


Health & Safety

Kier Group's management strategy of Safety, Health & Environmental issues
continues to be a significant area of focus for all members of our management
teams and employees.


The past year has seen a clear focus on people issues, raising awareness within
the workforce and supply chain of the areas that cause injury and ill health.
One of the biggest challenges to our industry is tackling the professional risk
takers by re-educating them to work safely. Part of Kier's programme, linked to
the 'Don't Walk By' message, involves addressing behavioural issues through a
process under development by our in-house occupational psychologist planned to
further enhance the safe working environment which we require on all of our
projects.


Kier Group is an active member of the Major Contractors Group (MCG) and
continues to support and deliver the MCG Health & Safety Strategy for both
safety issues and occupational health improvements. The positive proactive
vigilance and professionalism of our site teams has ensured that we maintain and
develop a positive safety culture. Our Accident Incident Rate (AIR) in 2007 was
640 per 100,000 staff and subcontractors measured against a HSE benchmark of
946.


In recognition of the overall efforts made by Kier staff, employees and supply
chain in maintaining safety vigilance we were awarded the Quality in
Construction Award for Safety Management for the second successive year and Kier
Group companies received 11 RoSPA Gold Medals, 9 RoSPA Gold, 1 RoSPA Silver and
16 British Safety Council Awards.


People

The talent, commitment and enthusiasm of our people provide the winning
combination behind the Group's unbroken record of growth. Whatever the scope of
project we undertake, its location or its complexity, it will involve Kier
people exercising individuality, flair and a commitment to achieving success.
The extent of awards won, commendations received and personal achievements
throughout the year demonstrate our strong commitment to high quality service
delivery. I am proud of our Group and what we can achieve and I would like to
take this opportunity to thank all of our people for their ongoing contribution
to our record-breaking achievements and for upholding our core values.


Objectives and prospects

The Group is in great shape. Our Construction order books are at record levels
and our Construction businesses are experiencing very strong markets allowing us
to be highly selective in the work we undertake. Our Support Services business
has reached new heights in terms of volume and profits and with the new awards
in 2007 and potential awards for 2008 we can expect increased growth in the
current financial year. In Homes the market continues to be sound and having
established a new operating region during the year we continue to look for
further opportunities to expand the business. Our Property division has a good
portfolio of developments in the pipeline and is seeking to grow further through
strategic acquisitions; and in PFI value will continue to be created from new
and existing investments.


With its strong markets, a sound business infrastructure and talented management
teams I have enormous confidence in the future prospects for Kier.


Financial review

Accounting policies

The Group's annual consolidated financial statements have been prepared in
accordance with International Financial Reporting Standards. There have been no
changes in accounting policies during the year.


Acquisitions

On 31 July 2006 we acquired the shares in Hugh Bourn Developments (Wragby)
Limited for a total adjusted consideration of £46.8m, after allowing for
liabilities and the discount for deferred payments. £24.0m was paid during the
year, £12.9m was paid on 2 July 2007 and the balance is due on 1 July 2008. The
consideration represented the market value of land, work in progress and other
assets and liabilities including 1,197 residential plots benefiting from a
combination of outline and detailed planning consent. The business changed its
name to Kier Homes Northern during the period and completed 162 housing sales.


Profit before tax

Profit before tax increased by 31.3% to £77.6m (2006: £59.1m). This is stated
after deducting joint venture tax of £1.4m (2006: £1.4m) and before minority
interests of £0.8m (2006: £nil). The share of minority interests relates to our
building maintenance outsourcing contracts at Sheffield which is carried out
through Kier Sheffield LLP in partnership with Sheffield City Council and
represents their share of profits for the year.


Taxation

The Group's effective tax rate, including joint venture tax on joint venture
profits, is in line with last year at 29.0% reflecting tax benefits relating to
contaminated land remediation and the effect of the corporation tax rate change
on deferred tax offset by permanent differences.



Interest and cash

The interest charge for the year comprises the following:

                                                                           Year to 30 June
                                                                            2007      2006
                                                                              £m        £m

Group interest receivable                                                    6.9       5.3

Interest payable                                                            (2.6)     (2.8)

Unwinding of discount                                                       (4.6)     (2.6)

Share of joint venture interest                                             (2.9)     (2.6)

                                                                            (3.2)     (2.7)


The Group interest receivable includes that arising from average treasury
balances of £65m for the year. The charge of £4.6m relating to unwinding of
discounts includes £3.9m relating to land creditor balances payable over a
number of years (2006: £2.0m).


Net cash at 30 June 2007 was £148.4m (2006: £111.2m) after deducting £30.2m
relating to loan notes. £114.8m was generated from operations during the year
after deducting £11.0m (2006: £31.5m) in respect of special pension
contributions made during the year.


Cash, net of debt, at 30 June 2007 includes £44.3m (2006: £37.6m) of cash which
is not generally available for Group purposes, including that held by joint
arrangements, overseas and by the Group's captive insurance company. The liquid
cash position is affected by seasonal, monthly and contract-specific cycles. In
order to accommodate these flows the Group maintains a range of bank facilities
of £120.0m comprising £12.5m of overdraft facilities and £107.5m of committed,
revolving credit facilities all on an unsecured basis. £15.0m of this expires in
January 2008 and £92.5m expires in January 2011.


Treasury policy and risk management

The Group has a centralised treasury function which manages funding, liquidity
and financial risks. The Group's policy is to use the cash generated by the
Construction business to invest in the asset based Homes and Property
businesses. This financial model is supplemented with bank facilities amounting
to £120m and long-term debt of £30m.


The Group's financial instruments comprise cash and liquid investments. The
Group, largely through its PFI and Property joint ventures, enters into
derivatives transactions (principally interest rate swaps) to manage interest
rate risks arising from the Group's operations and its sources of finance. We do
not enter into speculative transactions.


There are minor foreign currency risks arising from operations. The Group has a
small number of branches and subsidiaries operating overseas in different
currencies. Currency exposure to overseas assets is hedged through inter-company
balances and borrowings, such that assets denominated in foreign currencies are
matched, as far as possible, by liabilities. Where there may be further exposure
to foreign currency fluctuations, forward exchange contracts are entered into to
buy and sell foreign currency.


Balance sheet and total equity

The balance sheet at 30 June 2007 includes intangible assets of £8.4m of which
£7.7m relates to the outsourcing contract at Sheffield which is being amortised
over ten years, being the life of the contract, with £1.9m (2006: £1.9m) charged
to profits in the year; and £0.7m relates to Harlow, which was acquired during
the year, after charging £0.1m to profit.


Total equity has increased during the year to £183.0m (2006: £108.5m) as
follows:
                                                            £m

Total equity at 1 July 2006                              108.5
Profit for the year                                       56.3
Dividends paid                                            (9.8)
Issue of shares                                            7.0
Purchase of shares                                        (8.7)
Share-based payments                                       6.6
Cash flow hedge*                                           9.4
Net improvement in the pension deficit                    14.1
Translation differences                                   (0.4)
Total equity at 30 June 2007                             183.0

*This movement is driven by the increase in bond yields in the period 30 June
2006 to 30 June 2007.


Pensions

The Group participates in two principal schemes, the Kier Group Pension Scheme,
which includes a defined benefit section, and a defined benefit scheme on behalf
of its employees in Kier Sheffield LLP. The financial statements reflect the
pension scheme deficits and surpluses calculated in accordance with IAS 19. At
30 June 2007 the net deficit under the Kier Group Pension Scheme was £21.9m
(2006: £46.9m). The market value of the scheme's assets was £506.7m (2006:
£467.0m) and the net present value of the liabilities was £537.3m (2006:
£534.0m). The increase in liabilities represents an increase in the life
expectancy of members by one year offset by the effect of an improvement in bond
yields.


We have been addressing the issue of pensions over a period of several years and
in the last three years have contributed £54.5m in special contributions
including £11.0m during the year to 30 June 2007 (2006: £31.5m). The special
contributions have no effect on the income statement for the year, but are shown
as a reduction in cash and a reduction in the pension deficit.


Under the scheme relating to Kier Sheffield LLP there was a net surplus of £4.8m
at 30 June 2006. This is being carried at £4.9m this year, based on the present
value of the economic benefit available in the form of reductions in future
contributions to the plan and will be amortised over the remaining life of the
contract.


Pension charges of £11.7m (2006: £16.9m) have been made to the income statement
in accordance with IAS 19.





Consolidated income statement
for the year ended 30 June 2007
                                                                  2007      2006
                                                       Notes        £m        £m
Revenue
Group and share of joint ventures                         2    2,127.9   1,838.3
Less share of joint ventures                                     (62.5)    (55.1)
Group revenue                                                  2,065.4   1,783.2
Cost of sales                                                 (1,874.6) (1,623.7)
Gross profit                                                     190.8     159.5
Administrative expenses                                         (115.9)   (103.5)
Share of post tax profits from joint ventures                      3.0       3.2
Profit from operations                                    2       77.9      59.2
Finance income                                                     6.9       5.3
Finance cost                                                      (7.2)     (5.4)
Profit before tax                                         2       77.6      59.1
Income tax                                               3a      (21.3)    (16.2)
Profit for the year                                               56.3      42.9
Attributable to:
Equity holders of the parent                                      55.5      42.9
Minority interests                                                 0.8       -
                                                                  56.3      42.9
Earnings per share                                       5
- basic                                                          155.0p    120.8p
- diluted                                                        152.9p    118.8p
Underlying earnings per share (excluding the
amortisation of intangible assets)
- basic                                                          158.9p    124.8p
- diluted                                                        156.7p    122.7p



Consolidated statement of recognised income and expense
for the year ended 30 June 2007
                                                                   2007     2006
                                                        Notes        £m       £m
Foreign exchange translation differences                           (0.4)    (0.3)
Fair value movements in cash flow hedging instruments              13.1      4.1
Actuarial gains on defined benefit pension schemes                 22.5     30.0
Deferred tax on items recognised directly in equity      3b       (12.1)   (10.2)
Income and expense recognised directly in equity                   23.1     23.6
Profit for the year                                                56.3     42.9
Total recognised income and expense for the year                   79.4     66.5
Change in accounting policy
Effect of adoption of IAS 32 and IAS 39 on 1 July 2005                -     (7.5)
(with June 2005 not restated)
on cash flow hedge reserve
Deferred tax on above                                               -        2.2
                                                                   79.4     61.2
Attributable to:
Equity holders of the parent                                       78.6     61.2
Minority interests                                                  0.8      -
                                                                   79.4     61.2



Consolidated balance sheet
at 30 June 2007
                                                                   2007     2006
                                                        Notes        £m       £m
Non-current assets
Intangible assets                                                  13.6     14.8
Property, plant and equipment                                      83.4     78.5
Investment in joint ventures                                       40.7     20.8
Retirement benefit surplus                                          6.8      6.8
Deferred tax assets                                                 8.7     20.9
Other financial assets                                              0.2      0.6
Trade and other receivables                                        10.3     16.1
Non-current assets                                                163.7    158.5
Current assets
Inventories                                                       460.1    377.8
Other financial assets                                              0.3      0.6
Trade and other receivables                                       319.4    258.4
Cash and cash equivalents                                         178.6    141.3
Current assets                                                    958.4    778.1
Total assets                                                    1,122.1    936.6
Current liabilities
Trade and other payables                                         (791.8)  (670.5)
Tax liabilities                                                    (3.4)    (2.7)
Provisions                                                         (2.4)    (0.9)
Current liabilities                                              (797.6)  (674.1)
Non-current liabilities
Long-term borrowings                                              (30.2)   (30.1)
Trade and other payables                                          (50.0)   (36.8)
Retirement benefit obligations                                    (30.6)   (67.0)
Provisions                                                        (20.2)   (18.1)
Deferred tax liabilities                                          (10.5)    (2.0)
Non-current liabilities                                          (141.5)  (154.0)
Total liabilities                                                (939.1)  (828.1)
Net assets                                                 2      183.0    108.5
Equity
Share capital                                                       0.4      0.4
Share premium                                                      27.0     20.0
Capital redemption reserve                                          2.7      2.7
Retained earnings                                                 145.7     88.0
Cash flow hedge reserve                                             7.0     (2.4)
Translation reserve                                                (0.6)    (0.2)
Equity attributable to equity holders of the parent               182.2    108.5
Minority interests                                                  0.8      -
Total equity                                               6      183.0    108.5



Consolidated cash flow statement
for the year ended 30 June 2007
                                                                    2007    2006
                                                          Notes       £m      £m
Cash flows from operating activities
Profit before tax                                                   77.6    59.1
Adjustments Share of post tax profits from joint ventures           (3.0)   (3.2)
            Normal contributions to pension fund in excess          (2.9)   (0.2)
            of pension charge
            Share-based payments charge                              3.9     1.1
            Amortisation of intangible assets                        2.0     1.9
            Depreciation charges                                    15.0    13.5
            Profit on disposal of property, plant &                 (0.7)   (1.1)
            equipment
            Net finance cost                                         0.3     0.1
Operating cash flows before movements in working capital            92.2    71.2
Special contributions to pension fund                              (11.0)  (31.5)
Increase in inventories                                            (20.1)  (49.3)
Increase in receivables                                            (54.4)  (26.7)
Increase in payables                                               104.9   131.8
Increase in provisions                                               3.2     1.1
Cash inflow from operating activities                              114.8    96.6
Dividends received from joint ventures                               0.6     1.3
Interest received                                                    6.8     5.3
Income taxes paid                                                  (16.9)  (11.3)
Net cash generated from operating activities                       105.3    91.9
Cash flows from investing activities
Proceeds from sale of property, plant & equipment                    1.5     4.6
Proceeds from sale of investments                                    -       1.4
Purchases of property, plant & equipment                           (19.7)  (23.2)
Acquisition of subsidiaries, including net borrowings        7     (28.0)  (10.1)
acquired
Investment in joint ventures                                        (7.7)   (0.6)
Net cash used in investing activities                              (53.9)  (27.9)
Cash flows from financing activities
Proceeds from the issue of share capital                             3.1     -
Purchase of own shares                                              (8.7)   (2.0)
Interest paid                                                       (2.6)   (2.7)
Dividends paid                                                      (5.9)   (6.2)
Net cash used in financing activities                              (14.1)  (10.9)
Increase in cash and cash equivalents                               37.3    53.1
Opening cash and cash equivalents                                  141.3    88.2
Closing cash and cash equivalents                                  178.6   141.3
Reconciliation of net cash flow to movement in net funds
Increase in cash and cash equivalents                               37.3    53.1
Increase in long-term borrowings                                    (0.1)   -
Opening net funds                                                  111.2    58.1
Closing net funds                                                  148.4   111.2
Net funds consist of:
Cash and cash equivalents                                          178.6   141.3
Long-term borrowings                                               (30.2)  (30.1)
Net funds                                                          148.4   111.2


Notes to the consolidated financial statements

1. Accounting policies

There have been no changes to the accounting policies in these financial
statements. They have been prepared in accordance with International Financial
Reporting Standards as adopted by the EU.


2 Turnover, profit and segmental information

For management purposes the Group is organised into five operating divisions,
Construction, Support Services, Homes, Property and Infrastructure Investment.
These divisions are the basis on which the Group reports its primary segmental
information.

                                     Support                  Infrastructure
                       Construction Services   Homes Property     Investment Centre   Group
                                 £m       £m      £m       £m             £m     £m      £m
Year to 30 June 2007
Revenue
Group and share of          1,411.2    315.5   325.1     61.3           14.8     -  2,127.9
joint ventures
Less share of joint              -        -       -     (48.7)         (13.8)    -    (62.5)
ventures
Group revenue               1,411.2    315.5   325.1     12.6            1.0     -  2,065.4
Profit
Group operating profit         21.9     10.2    47.4      6.9           (1.1)  10.4)   74.9
Share of joint                   -        -      0.4      5.2            1.7     -      7.3
ventures' operating
profit
Group and share of             21.9     10.2    47.8     12.1            0.6  (10.4)   82.2
joint ventures
Share of joint                   -        -       -      (1.7)          (1.2)    -     (2.9)
ventures - finance
cost
- tax                            -        -     (0.1)    (1.1)          (0.2)    -     (1.4)
Profit from operations         21.9     10.2    47.7      9.3           (0.8)  10.4)   77.9
Finance income/(cost)          16.2      0.3   (14.9)    (1.7)           1.5   (1.7)   (0.3)
Profit before tax              38.1     10.5    32.8      7.6            0.7  (12.1)   77.6
Balance sheet
Investment in joint              -        -       -      26.0           14.7     -     40.7
ventures
Other assets                  325.2     95.0   418.8     35.9            0.6   27.3   902.8
Total liabilities            (603.0)   (96.4) (123.3)    (4.5)          (4.8) (76.9) (908.9)
Net operating assets/        (277.8)    (1.4)  295.5     57.4           10.5  (49.6)   34.6
(liabilities)
Cash, net of debt             361.2     15.8  (163.9)   (36.8)          (7.6) (20.3)  148.4
Net assets                     83.4     14.4   131.6     20.6            2.9  (69.9)  183.0


On 29 September 2006 Kier Residential Limited issued £50.0m of shares to Kier
Group plc as part of the refinancing of the Homes division. This has increased
the net assets of the Homes division with a corresponding reduction in the
Centre and no overall impact on the Group.

                                      Support                  Infrastructure
                        Construction Services   Homes Property     Investment  Centre   Group
                                  £m       £m      £m       £m             £m      £m      £m
Year to 30 June 2006
Revenue
Group and share of           1,218.1    281.3   277.9     47.5           13.5       - 1,838.3
joint ventures
Less share of joint             (2.6)       -       -    (40.0)         (12.5)      -   (55.1)
ventures
Group revenue                1,215.5    281.3   277.9      7.5            1.0       - 1,783.2
Profit
Group operating profit          17.2      6.8    41.6      4.2           (2.1)  (11.7)   56.0
Share of joint                   0.8        -       -      5.0            1.4       -     7.2
ventures' operating
profit
Group and share of              18.0      6.8    41.6      9.2           (0.7)  (11.7)   63.2
joint ventures
Share of joint ventures            -        -       -     (2.1)          (0.5)      -    (2.6)
- finance cost
- tax                           (0.1)       -       -     (0.8)          (0.5)      -    (1.4)
Profit from operations          17.9      6.8    41.6      6.3           (1.7)  (11.7)   59.2
Finance income/(cost)           13.7     (0.5)  (13.1)    (0.9)           1.2    (0.5)   (0.1)
Profit before tax               31.6      6.3    28.5      5.4           (0.5)  (12.2)   59.1
Balance sheet
Investment in joint                -        -       -     21.7           (0.9)      -    20.8
ventures
Other assets                   281.3     77.3   351.1     22.9            0.8    41.1   774.5
Total liabilities             (496.6)   (78.2) (112.3)    (5.2)          (3.2) (102.5) (798.0)
Net operating assets/         (215.3)    (0.9)  238.8     39.4           (3.3)  (61.4)   (2.7)
(liabilities)
Cash, net of debt              298.7     12.5  (165.8)   (23.8)          (3.8)   (6.6)  111.2
Net assets                      83.4     11.6    73.0     15.6           (7.1)  (68.0)  108.5


Net operating assets represent assets excluding cash, bank overdrafts, long-term
borrowings and interest-bearing inter-company loans.


3. Income tax

a) Recognised in the income statement
                                                                            2007   2006
                                                                              £m     £m
Current tax expense
UK corporation tax                                                          16.1    7.6
Overseas tax                                                                 1.5    0.8
Adjustments for prior years                                                 (0.5)  (3.9)
Total current tax                                                           17.1    4.5
Deferred tax expense
Origination and reversal of temporary differences                            4.1    7.2
Effect of change in tax rate                                                (1.0)    -
Adjustments for prior years                                                  1.1    4.5
Total deferred tax                                                           4.2   11.7
Total income tax expense in the income statement                            21.3   16.2
Reconciliation of effective tax rate
Profit before tax                                                           77.6   59.1
Add : tax on joint ventures                                                  1.4    1.4
Underlying profit before tax                                                79.0   60.5
Income tax at UK corporation tax rate of 30%                                23.7   18.2
Non-deductible expenses                                                      1.7    0.5
Tax reliefs on expenses not recognised in the income statement              (2.6)  (1.4)
Rate change effect on deferred tax                                          (1.0)    -
Profits attributable to minority interest not taxable                       (0.2)    -
Effect of tax rates in foreign jurisdictions                                 0.3     -
Under provision in respect of prior years                                    0.8    0.3
Total tax (including joint ventures)                                        22.7   17.6
Tax on joint ventures                                                       (1.4)  (1.4)
Group income tax expense                                                    21.3   16.2


b) Recognised in the statement of recognised income and expense
                                                                            2007   2006
                                                                              £m     £m
Deferred tax expense
Fair value movements on cash flow hedging instruments
Group                                                                       (0.2)    -
Joint ventures                                                               3.9    1.2
Actuarial gains on defined benefit pension schemes                           8.4    9.0
Total income tax expense in the statement of recognised income and          12.1   10.2
expense

Included within the above charge is £1.5m (2006: nil) arising from the effect of
the change in the rate of UK corporation tax from 30% to 28% in April 2008.


4. Dividends

Amounts recognised as distributions to equity holders in the year.

                                                                            2007    2006
                                                                              £m      £m
Final dividend for the year ended 30 June 2006 of 17.8 pence (2005:          6.3     5.4
 15.2 pence)
Interim dividend for the year ended 30 June 2007 of 9.6 pence (2006:         3.5     2.9
 8.2 pence)
                                                                             9.8     8.3


The proposed final dividend of 40.4 pence (2006: 17.8 pence) had not been
approved at the balance sheet date and so has not been included as a liability
in these financial statements. The dividend totalling £14.6m will be paid on
4 December 2007 to shareholders on the register at the close of business on
28 September 2007. A scrip dividend alternative will be offered.


5. Earnings per share

A reconciliation of profit and earnings per share, as reported in the income
statement, to underlying and adjusted profit and earnings per share is set out
below. The adjustments are made to illustrate the impact of the amortisation of
intangible assets.

                                                             2007            2006
                                                         Basic Diluted   Basic Diluted
                                                            £m      £m      £m      £m
Earnings (after tax and minority interests), being net    55.5    55.5    42.9    42.9
profits attributable to
equity holders of the parent
Add : amortisation of intangible assets                    2.0     2.0     1.9     1.9
Less : tax on amortisation of intangible assets           (0.6)   (0.6)   (0.5)   (0.5)
Adjusted earnings                                         56.9    56.9    44.3    44.3
                                                       million million million million
Weighted average number of shares                         35.8    35.8    35.5    35.5
Weighted average number of unexercised options -            -       -       -      0.3
dilutive effect
Weighted average impact of LTIP                             -      0.5      -      0.3
Weighted average number of shares used for earnings       35.8    36.3    35.5    36.1
per share
                                                         pence   pence   pence   pence
Earnings per share                                       155.0   152.9   120.8   118.8
Adjusted earnings per share (excluding the               158.9   156.7   124.8   122.7
amortisation of intangible assets)


6. Reconciliation of changes in shareholders' equity
                                                                            2007   2006
                                                                              £m     £m
Opening shareholders' equity                                               108.5   52.8
Adjustments on adoption of IAS 32 and IAS 39 on 1 July 2005 (net of           -    (5.3)
tax)
Restated opening shareholders' equity                                      108.5   47.5
Recognised income and expense for the year                                  79.4   66.5
Dividends paid                                                              (9.8)  (8.3)
Issue of own shares                                                          7.0    2.1
Purchase of own shares                                                      (8.7)  (2.0)
Share-based payments                                                         3.9    1.1
Deferred tax on share-based payments                                         2.7    1.6
Closing shareholders' equity                                               183.0  108.5


7. Summary of acquisitions
                                                                            2007  2006
                                                                              £m    £m
Construction and building services operations of:
Sheffield City Council                                                       1.4   1.6
Harlow Council                                                               1.0    -
Hugh Bourn Developments (Wragby) Limited:
Consideration paid                                                          24.0    -
Net borrowings on acquisition                                                1.6    -
Ashwood Homes: consideration paid                                             -    8.5
Total                                                                       28.0  10.1


8. Statutory accounts

The information set out above does not constitute statutory accounts for the
year ended 30 June 2007 or 2006 but is derived from those accounts.

Statutory accounts for 2006 have been delivered to the Registrar of Companies
and those for 2007 will be delivered following the Company's Annual General
Meeting. The auditors have reported on those accounts, their reports were
unqualified and did not contain statements under section 237 (2) or (3) of the
Companies Act 1985.





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