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Kier revenue dips but profit rises

24 February 2012

Kier Group reports revenue has fallen for the half-year to 31 December 2011, but profit is up, as it battles uncertain economic conditions.

Total group revenue for its three divisions – construction, property and services – was down to £1.05 billion from £1.1 billion for the same period 2010.

But efficiency measures boosted underlying group pre-tax profit to £34 million, up from £31.3 million for the same period last year.

Construction revenue decreased slightly to £720 million (2010: £728m). “This reflects a robust performance in light of the ongoing challenging market conditions,” according to the statement.

The construction division’s operating profit of £17.8 million (2010: £19.8m) “highlights the competitive pressures faced by the construction sector”.

Property division revenue was £108 million (2010: £126m), generating operating profit of £10 million (2010: £3.4m). Kier said the increase was because of a £700 million property development pipeline, the ongoing strategy of selectively disposing of mature private finance investments from their portfolio and the activities of their homes businesses.
Revenue in services division, including maintenance and FM, decreased overall by 10 per cent to £218 million (2010: £243m) mostly because of a lower level of activity in maintenance contracts. This “reflecting more than 40 per cent reductions in the capital works areas of our established contracts, which is partly mitigated by contract renewals and extensions in the FM and environmental businesses”.

Operating profit for the services division decreased by 10 per cent to £9.8 million (2010: £10.9m), in line with revenue, maintaining the operating margin at 4.5 per cent (2010: 4.5%).

Maintenance, the largest part of the services division, saw revenue levels decline to
£140 million (2010: £179m) because of the reduction in spend by local authorities, particularly in the discretionary area of capital works in Kier’s established contracts.
But in FM and environmental business, revenue increased to £78 million (2010: £64m). “In FM our current customer relationships are strong, our current contracts are performing well and in line with our expectations and a number of contracts have been successfully renewed or extended, including Legal and General valued at £7 million per annum.”

Kier said it “can clearly see the opportunity for operational synergies that could be realised by enlarged scale across this business sector and see the private sector as more receptive to outsourcing to meet their budget pressures”.

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