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Kier interim profit chopped in half by £18m OFT bid-rigging fine

24 Feb 10 Kier’s pre-tax profit has fallen by 47% to £16.7m in its latest interim results, due to the £18m fine levied on the construction group by the Office of Fair Trading for bid-rigging.

Kier’s pre-tax profit has fallen by 47% to £16.7m in its latest interim results, due to the £18m fine levied on the construction group by the Office of Fair Trading for bid-rigging.

The provision Kier has made for the fine – which the firm has appealed against, but does not expect any verdict on until the end of the year – spoilt an otherwise healthy set of results.

Underlying profit before tax for the six months to 31 December 2009 was £30.5m (2008: £25.3m). The firm also banked £4.2m from the sale of two PFI investments.

Total revenue was down slightly at £1,009.8m (2008: £1,108.7m).

In Construction, Kier’s order book has grown to £2.2bn (2008: £1.9bn). The firm reported all of its targeted revenue for the current financial year and 73% of targeted revenue for the following financial year is already secure or 'probable'.

Construction margins are holding up at 2.5% for the six months (2008: 2.4%) and its cash position remains strong.

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In Support Services, order books have grown to £2.3bn (2008: £1.8bn), operating margins have grown to 4.4% (2008: 4.0%) and cash balances have increased.

Kier said conditions for its Partnership Homes and Developments businesses remain challenging but “the financial performance improvement in each of these businesses reflects a slight easing in the market”.

The cash performance was strong in the period reflecting the sale, by Kier Property, of the UK Supreme Court investment which generated over £30m. Net cash balances in the period averaged £71m (2008: £61m), ending the period at a net balance of £130.7m (2008: £82.2m).

However, net assets at 31 December 2009 were reduced to £75.5m (June 2009: £89.3m) reflecting a net deficit of £63.1m the Kier Group Pension Scheme (December 2008: surplus of £2.7m, June 2009: net deficit £69.2m). As a result, the group will make an additional special cash contribution to the scheme amounting to £13.2m.

Group chief executive John Dodds, who will shortly be replaced by Paul Sheffield, said: “Kier Group has continued to perform well and in line with expectations. The public sector deficit give rise to concerns over the future levels of public sector spending.

"Notwithstanding that, our order book has grown and Kier is on over 50 construction framework agreements, both public and private, which provide comfort that we will grow our market share whilst delivering value to our clients."

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