Interim Results
Kier Group PLC
15 March 2001
KIER GROUP plc
INTERIM RESULTS FOR THE SIX MONTHS TO 31 DECEMBER 2000
Highlights
* Record Interim results from Kier
* Operating profit up 47% to £6.9m, as margins
increase (1999: £4.7m)
* Turnover up 22% at £591.3m (1999: £484.7m)
* Earnings per share of 16.3p, up 18% (1999: 13.8p)
* Dividend per share of 3.9p, up 15% (1999: 3.4p)
* Strong internal growth in Construction and Homes
* Progress for the future in Support Services and
Infrastructure Investment
Commenting, Colin Busby, said: 'All areas of activity
have performed well in the first six months and I am
confident that this momentum will carry through into the
results for the full year.'
Enquiries to:
Kier Group plc
Colin Busby/Duncan Brand
Tel: 01767 640111
Bell Pottinger Financial Ltd
Caroline Sturdy
Tel: 020 7353 9203
CHAIRMAN'S INTERIM STATEMENT
Once again I can report that Kier Group has made a
powerful start to its financial year. Turnover for the
six months to 31 December 2000 in each of our traditional
business segments of Construction and Homes is a record,
as are operating profit, operating margin, pre-tax profit
and earnings per share. With strong current order books,
we are looking to an equally busy second half of the
year, so that we can continue the pattern of year-on-year
profit and earnings growth that we have established since
1992.
We have also made further important progress in the new
business areas we are building for the long term future,
Support Services and Infrastructure Investment.
RESULTS
Basic Earnings per share has increased by 18.1% to 16.3p
(1999: 13.8p), with pre-tax profits up 21.3% at £7.4m
(1999: £6.1m). Turnover at £591.3m (1999: £484.7m) shows
a 22.0% increase with total operating profit up 46.8% to
£6.9m (1999: £4.7m). Net interest receivable totalled
£0.5m (1999: £0.6m). On 16 May Kier will pay an interim
dividend of 3.9p (1999: 3.4p), an increase of 14.7%, with
the usual scrip dividend alternative. The balance sheet
is further strengthened with total net assets of £48.9m
(1999: £36.9m) including net cash and liquid funds of
£28.5m (1999: £39.2m).
BUSINESS STRATEGY
Our business model remains that of marrying the cash-
generative, high turnover/lower margin Construction &
Services segment of the Group to the cash-consumptive,
asset-using, high margin Homes & Property segment. We
have developed this model over the past decade and
believe it is well suited to current market conditions.
It delivers superior returns on shareholders' funds: for
the 12 months to 31 December we achieved a return of
44.4%. Its success depends on experienced and
professional management in the underlying businesses and
on central management taking a prudent overview to
control risk levels, and enabling investments to
capitalise on opportunities in either segment.
We see infrastructure investment through the PFI as one
such opportunity, and will continue to invest in a range
of projects bringing operational involvement in both
construction and support services. Opportunities are
also pursued to develop and expand our range of support
services.
CONSTRUCTION & SERVICES
Operating profit is up by 81.8% to £4.0m (1999: £2.2m) on
turnover 23.3% ahead; we have made further progress
towards our stated target of margins of at least 1.0%.
Construction
Kier Regional has provided the turnover growth in the
period. In the previous financial year, Regional's
turnover started to grow sharply during the second half.
This growth has continued into this financial year and
turnover at £362m is 38.5% up on 1999. All parts of the
UK contributed to this impressive increase, which
emphasises the value of our unique network of
construction offices, spanning Great Britain and
providing a full construction service to clients local
and national, ranging from small works up to projects of
£15m or so in value. The proportion of new work on a
negotiated or partnered basis is continuing to grow and
now exceeds 50%. About a third is in the Commercial
sector, with Retail and Education also prominent.
Turnover in Kier National, our major projects division,
showed little change on the previous period. However,
improving prospects for civil engineering in the UK,
together with a further round of major building project
awards, will put this division, too, on a growth tack in
the second half of the year. We have recently booked, or
are currently finalising, new orders on the northern
section of the Channel Tunnel Rail Link; at Devonport
Dockyard for further naval repair facilities; with TAG
McLaren for the development of their manufacturing and
development base at Woking, Surrey; with Arlington
Securities at their Hatfield Business Park and with
Castlemore Developments in Bournemouth. Together, these
awards, all of which are on a partnered or negotiated
basis, will add £390m to our order book.
International Construction has continued its progress
towards recovery. Our strategy is to further lower the
risk profile by building on relationship and lower risk
forms of contract. I am confident that this will deliver
a smaller but profitable international business, one
which will complement our major position in the UK
construction market.
Support Services
We are continuing the development of our Support Services
activities, which in the future will take a bigger share
in the Group's business mix. In November, Caxton
Islington Ltd, our 'Best Value' partnership company with
the London Borough of Islington, acquired the borough's
building services department with 500 employees; it has
made a most encouraging start to what is a ten-year
project of continuous improvement to service levels. We
have recently announced the formation of a new divisional
company, Caxton Integrated Services, to co-ordinate, lead
and develop this sector, where the 'Best Value'
procurement programme for local authorities and other
public sector bodies is creating a major new market. We
are not neglecting private sector outsourcing, where
Caxton Facilities Management continues to increase its
client base, with major new outsourcing contracts from
TXU Europe (the UK's second largest energy retailer) and
Hostmark of Slough. Support Services grew by 38%,
contributing £23.8m of turnover in the period.
HOMES & PROPERTY
The additional investment last year in Kier Residential's
land bank has led to a sharp volume increase, with 350
legal completions by 31 December 2000 (1999: 253). We
found the market solid during the period but becoming
more favourable to the smaller end of our product range,
especially in the South East. This, together with
planning policy changes, which call for higher density
development, has led to a change in the sales mix with
detached homes representing 52% of completions this year
as against 78% last year. Nevertheless, despite these
trends, and activity in Scotland increasing as a
proportion of sales, average selling prices were
maintained at £144,300 (1999: £143,800). Interim
operating margins improved from 9.7% last year to 11.3%.
The land bank has been maintained at the level of around
2,000 plots at both the beginning and end of the period,
as compared with 1,650 plots a year ago. Demand since
the year end has remained firm, and with interest rate
reductions now beginning, we are confident that a good
spring market will continue our forward momentum.
Kier Ventures, our commercial property vehicle,
progressed this year's two major schemes, which are
expected to contribute to profit in the second half.
These are both pre-let distribution facilities, to
Hotpoint near Northampton and to Sainsbury at Waltham
Abbey.
Homes & Property was thus able to achieve operating
profit of £5.8m (1999: £4.7m), an increase of 23.4%, on
turnover of £50.7m (1999: £46.1m), an increase of 10.0%.
INFRASTRUCTURE INVESTMENT
The new 416-bed district general hospital at Hairmyres,
East Kilbride, was recently completed by our construction
division and handed over to the PFI concession company
for occupation by the Lanarkshire Acute Hospitals NHS
Trust, who are bringing the facility into use as we make
this announcement. This has been achieved three months
ahead of the date agreed when this PFI deal was signed
three years ago. Kier holds 50% of the equity in this
concession, on which we will now see a regular return
accruing over the next 30 years. This is tangible
evidence that the PFI does deliver benefits, both in
improved public services and in returns to those who have
invested in it.
This is a timely message, as we are continuing to spend
significantly as an overhead cost on bidding for PFI and
PPP long term contracts.
Of our other current major projects, the construction
phase of both Neath/Port Talbot Hospital and Bournemouth
Library continued satisfactorily and we have made good
progress towards financial close on the West Berkshire
Mental Health project, which is expected in the second
half of the year. We are currently short-listed on two
further major hospital projects, two school projects and
one care homes project. Kier is a major force in this
market and will create a valuable portfolio of
investments over the next few years.
BOARD OF DIRECTORS
As previously announced, Graham Corbett retired from the
Board on 25 November last year. We were pleased to be
able, a few days ago, to appoint Simon Leathes as a non-
executive director to restore the appropriate balance to
our Board. Simon has extensive investment banking
experience as well as good knowledge of our sector and I
am sure will prove a valuable member of the Board.
PROSPECTS
With internally generated growth in both Construction and
Homes continuing, prospects for the full year are good.
With interest rates having peaked in this cycle at 6% and
inflation set to remain low, we expect an extended period
of stability in our UK markets, and that short-run
effects, such as this winter's weather or the distraction
of a General Election campaign, will have only limited
impact.
I therefore believe the economic outlook will remain
favourable to our markets into the next financial year.
Kier is positioned to continue its growth, as our younger
businesses in PFI and Support Services contribute more
and we continue to improve returns in Construction and in
Homes.
Colin Busby
Chairman
Consolidated Profit and Loss Account
Unaudited Unaudited
6 months to 6 months to Year to
31 December 31 December 30 June
2000 1999 2000
Notes £m £m £m
Total turnover 1 591.3 484.7 1,034.8
---------- ---------- ---------
Operating profit -
Group 6.3 4.2 15.2
Share of operating
profit -
joint ventures 0.6 0.5 0.4
---------- ---------- ---------
Total operating
profit - Group
and share of joint
ventures 1 6.9 4.7 15.6
Profit on disposal of
fixed asset
investment - 0.5 0.5
Income from
investments - 0.3 0.3
Net interest
receivable 0.5 0.6 1.3
---------- ---------- ----------
Profit on ordinary
activities
before taxation 1 7.4 6.1 17.7
Taxation 2 (2.0) (1.6) (4.6)
---------- ---------- ----------
Profit on ordinary
activities after
taxation 5.4 4.5 13.1
Ordinary dividend 3 (1.3) (1.1) (3.5)
---------- ---------- ----------
Retained profit
attributable to
ordinary
shareholders 4.1 3.4 9.6
---------- ---------- ----------
Earnings per share 4
Undiluted 16.3p 13.8p 39.8p
Diluted 16.1p 13.5p 39.3p
---------- ---------- ----------
Dividend per share 3.9p 3.4p 10.7p
---------- ---------- ----------
Consolidated Balance Sheet
Unaudited Unaudited
31 December 31 December 30 June
2000 1999 2000
£m £m £m
Fixed assets 47.5 48.0 46.8
---------- ---------- ----------
Current assets
Stock 152.0 122.0 149.5
Debtors 211.3 155.1 187.1
Short term
investments - 0.6 0.8
Cash at bank and in
hand 34.5 39.0 47.4
---------- ---------- ----------
397.8 316.7 384.8
---------- ---------- ----------
Current liabilities
Creditors - amounts
falling due
within one year (383.5) (316.0) (373.4)
---------- ---------- ----------
Net current assets 14.3 0.7 11.4
Total assets less
current liabilities 61.8 48.7 58.2
Creditors - amounts
falling due
after more than one
year (8.3) (5.9) (8.6)
Provisions for
liabilities and
charges (4.6) (5.9) (5.1)
---------- ---------- ----------
Net assets 48.9 36.9 44.5
---------- ---------- ----------
Capital and reserves
Called up share
capital 0.3 0.3 0.3
Share premium account 11.1 9.6 10.8
Other reserves 2.7 2.7 2.7
Profit and loss
account 34.8 24.3 30.7
---------- ---------- ----------
Shareholders' funds 48.9 36.9 44.5
---------- ---------- ----------
Consolidated Cash Flow Statement
Unaudited Unaudited
6 months 6 months Year to
to to 30 June
31 31 2000
December December £m
2000 1999
£m £m
Operating activities
Operating profit 5.8 4.2 15.2
Depreciation charges 3.5 3.8 7.8
(Increase) in working
capital (13.6) (8.3) (14.9)
---------- ---------- ----------
Net cash (outflow)/inflow
from operating
activities (4.3) (0.3) 8.1
Returns on investments and
servicing of
finance 0.9 0.7 0.5
Taxation (1.8) (0.2) (4.4)
Capital and investment
expenditure (4.1) (1.4) (3.6)
Financing (0.2) - 0.6
Equity dividends paid (2.4) (1.8) (3.0)
---------- ---------- ----------
Cash (outflow) before
management of
liquid resources and
financing (11.9) (3.0) (1.8)
Management of liquid
resources 11.4 (13.4) (16.4)
---------- ---------- ----------
(Decrease) in cash in the
period (0.5) (16.4) (18.2)
Increase/(decrease) in (11.4) 13.4 16.4
liquid resources
---------- ---------- ----------
(Decrease) in net funds (11.9) (3.0) (1.8)
Opening net funds 40.4 42.2 42.2
---------- ---------- ----------
Closing net funds 28.5 39.2 40.4
---------- ---------- ----------
Analysis of closing net
funds
Cash at bank and in hand 17.2 13.9 19.5
Bank overdrafts (6.0) (0.4) (7.8)
Short term bank deposits 17.3 25.1 27.9
Short term investments - 0.6 0.8
---------- ---------- ----------
Closing net funds 28.5 39.2 40.4
---------- ---------- ----------
Notes:
1. Segmental information
Unaudited Unaudited
6 months 6 months
to 31 to 31 Year to
December December 30 June
2000 1999 2000
£m £m £m
Turnover
Construction & Services 540.6 438.6 937.4
Homes & Property 50.7 46.1 97.4
---------- ---------- ----------
591.3 484.7 1,034.8
---------- ---------- ----------
United Kingdom 540.2 438.1 944.7
Rest of World 51.1 46.6 90.1
---------- ---------- ----------
591.3 484.7 1034.8
---------- ---------- ----------
Operating profit
Construction & Services 4.0 2.2 6.5
Homes & Property 5.8 4.7 13.2
Corporate Overhead/Finance (2.9) (2.2) (4.1)
---------- ---------- ----------
6.9 4.7 15.6
---------- ---------- ----------
United Kingdom 7.4 7.0 16.8
Rest of World (0.5) (2.3) (1.2)
---------- ---------- ----------
6.9 4.7 15.6
---------- ---------- ----------
Profit before tax
Construction & Services 8.0 5.6 13.5
Homes & Property 3.4 3.9 10.0
Corporate Overhead/Finance (4.0) (3.4) (5.8)
---------- ---------- ----------
7.4 6.1 17.7
---------- ---------- ----------
United Kingdom 8.0 8.7 19.4
Rest of World (0.6) (2.6) (1.7)
---------- ---------- ----------
7.4 6.1 17.7
---------- ---------- ----------
Net assets
Construction & Services 53.3 50.7 52.4
Homes & Property 26.9 22.5 25.0
Corporate Overhead/Finance (31.3) (36.3) (32.9)
---------- ---------- ----------
48.9 36.9 44.5
---------- ---------- ----------
United Kingdom 48.1 36.3 43.1
Rest of World 0.8 0.6 1.4
---------- ---------- ----------
48.9 36.9 44.5
---------- ---------- ----------
Notes continued
2. Taxation
The corporation tax rate of 27.0% (June 2000
26.0%, December 1999 26.2%) is based on the estimated
effective percentage tax rate for the full year, and
is calculated after taking into consideration tax
losses brought forward from previous years.
3. Dividends per ordinary share
The interim dividend of 3.9p (December 1999 3.4p) per
ordinary share will be paid on 16 May 2001 to
shareholders on the register at the close of business
on 31 March 2001. A scrip dividend alternative will be
offered.
4. Earnings per share
Earnings per share is calculated by dividing the
profit for the period after taxation by the following
weighted average number of shares.
31 December 31 30 June
2000 December 2000
million 1999 million
million
------------ --------- ---------
Basic 33.2 32.7 32.9
------------ --------- ---------
Diluted 33.6 33.3 33.3
------------ --------- ---------
The diluted earnings per share takes account of the
dilutive effect of options and is calculated in
accordance with FRS 14.
5. Reconciliation of movements in shareholders' funds
£m
Shareholders' funds at 30
June 2000 44.5
Issue of new ordinary
shares 0.3
Retained profit for period 4.1
----------
Shareholders' funds at 31
December 2000 48.9
6. Status
The Interim results do not constitute statutory
accounts within the meaning of section 240 of the
Companies Act 1985.
The abridged consolidated profit and loss account for
the year to 30 June 2000 and the abridged
consolidated balance sheet at 30 June 2000 have been
extracted from the latest published accounts of Kier
Group plc on which the report of the auditors was
unqualified and which have been delivered to the
Registrar of Companies.
Copies of this Interim statement will be sent to
shareholders and are available for inspection at the
Company's registered office.
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