Scottish arm helps Kier Group build profits

Kier Construction Scotland contributed to a strong order book. Picture: Kier Group
Kier Construction Scotland contributed to a strong order book. Picture: Kier Group
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Kier Group has upped underlying revenue and profit with help from a “strong” contribution by its Scottish arm and a record order book, although group net debt rose sharply.

The construction and services company, parent of Kier Construction Scotland, posted a 5 per cent increase in underlying revenue to £4.5 billion in its full-year results to 30 June.

The group reported a record construction and services order book of £10.2bn, with £2.7bn worth of construction contracts and some £1.9bn worth of services contracts awarded during the year.

Its underlying profit for the period rose 13 per cent to hit £113 million.

Kier cited a strong performance from the Scottish division and a number of major contract wins north of the Border, including a £750m contract to deliver building and civil engineering works in Clyde, as supporting the results.

Kier Construction Scotland employs more than 220 people across its offices in Glasgow, Aberdeen, Inverness and Newcastle.

The group’s net debt increased to £186m, up from £110m in the previous financial year. In June, it launched the cost-saving “Future Proofing Kier” (FPK) programme, which is tasked with accelerating the reduction of net debt, increasing the group’s efficiency and improving overall profitability.

Its FPK programme will also target proceeds of £30m to £50m from the disposal of Kier’s non-core businesses.

The group proposed a full-year dividend per share of 69p, a 2 per cent increase from the previous year.

Brian McQuade, managing director of Kier Construction Scotland, said: “In Scotland, Kier has secured a solid stream of new business wins. Notably, we have been appointed to the ten-year £750m Clyde Commercial Framework.

“This Kier Graham joint venture will deliver building and civil engineering works to the Clyde naval base at Faslane and Coulport.

“We have also strengthened our healthcare portfolio with a number of recent wins, including a £6m refurbishment programme at Royal Cornhill Hospital in Aberdeen and Dr Gray’s hospital in Elgin.”

McQuade cited its education portfolios as another key area for the business, after securing high value contracts such as building the £30m Alness Academy for the Highland Council.

Haydn Mursell, chief executive at Kier Group, said: “I am pleased to report a good set of results with all divisions performing well.

“We have launched the Future Proofing Kier programme which will streamline the business thereby enabling us to deliver a more efficient service to clients, respond to changes in our markets and capitalise on growth opportunities, whilst, importantly, also accelerating the reduction of the group’s net debt position.”

Anthony Codling, analyst at Jefferies, said the construction group’s exposure could weigh on investors.

However, he added: “There remain many moving parts and many strings to Kier’s bow and all are moving in the right direction… that construction did not move backwards is a good result in our view given the current challenges in the UK construction markets.”