Kier Group makes £78m pre-tax profit

Kier Group has reported a mouth-watering pre-tax profit of £78m, well ahead of most of its construction rivals.

Annual results (12 months to 30 June) show that Kier has become a £2bn-a-year turnover player – workload having shot ahead to £2.1bn, well up on last year’s tally of £1.8bn.

Pre-tax profit in the previous year ran to £59m.

The group comprises five divisions: Construction, Support Services, Homes, Property Development and Infrastructure Investment (taking in PFI).

Kier bucked the trend when most contractors sold off their housebuilding operations and has been handsomely rewarded for its independence of mind.

John Dodds, chief executive, said that while Kier’s origins are in construction activities, by undertaking investments in four additional areas “we have developed a business model comprising complementary activities”.

He added: “They provide a balanced cash profile enabling the funds generated by lower margin construction activities to be invested in higher margin, asset-rich businesses.”

The construction division generated £63m of cash and ended the year with a record cash balance of £360m (comparable figure last year: £300m).

Profits from the five divisions were:

• Construction - £38m (from turnover £1.4bn)
• Homes - £33m (from turnover £330m)
• Support Services - £11m (turnover 320m)
• Property - £8m (from turnover of £60m)
• Infrastructure Investment - £1m (from turnover of £15m)

All figures are before allocation of group costs running to £12m.

As a result of winning the Kent Police PFI last year, Kier now has a portfolio of 13 projects. Its committed PFI equity investment stands at £23m of which £16m has already been spent.

The deficit in the Kier Group’s pension scheme has been cut back to £22m despite liabilities having moved higher, to £540m, as a result of an increase in the life expectancy of members by one year. The fund’s deficit stood at £47m a year earlier.

Dodds said that Kier has knuckled down to sorting out its pension scheme funding over a period of several years. In the last three years it has contributed £55m in special contributions. The latest contribution figure of £11m follows the chunky £32m sum that was paid over in the previous year.