Last updated 25th February 2023.
Kier Group plc
One of the leading UK contractors, Kier Group has struggled in recent years as heavy debts taken on to finance earlier acquisitions and weak cash generation have taken their toll. However after a series of asset sales and moves to exit non-core businesses under chief executive Andrew Davies, together with a £350 million capital-raising exercise, the group has been simplified and its cash generation, results and balance sheet have improved.
Today, the group’s strategy is focused on its core businesses in construction, highways, infrastructure and utilities. It aims to work for the UK government, regulated industries and blue-chip customers along with the b2b market and contracting, through long-term frameworks
In early 2023 the Beds-based group had an order book worth £10.1 billion, up from £8 billion a year earlier and with 90% of its current year workload secured and strong momentum from its bidding activity. Recent wins included the £1.3bn National Highways A66 Northern Trans-Pennine contract, where it is one of four contractors and a position on the Canal & River Trust’s new £500m civil engineering contract framework.
Kier’s medium-term plan is to create a group with revenues of £4-4.5 billion and margins of 3.5%. In early 2023, Andrew Davies said : “The group”s performance over the last six months is in line with our expectations and reflects a good start to the year.” He added that the group was well-positioned to continue benefiting from UK government infrastructure spending.
Financials
To access the financials for Kier Group Plc please visit Companies House and use company number: 02708030
Kier”s latest financial results for the year to end-June 2022 reflect the progress made during its turnaround. They show that the group reported an adjusted pre-tax profit of £94.1 million, up from £65.4 million previously, on a turnover of £3.26 billion, down 2%. Adjusted operating profit rose 20% to £120.5 million profit. Meanwhile, the balance sheet was healthier with net cash little-changed at £2.9 million and average month-end net debt stood at £216 million, down 50% on a year previously.
Infrastructure Services
Revenues at the division – which covers highways, infrastructure, utilities and rail – rose by 17% to £1.67 billion in the year to June 2022, producing an adjusted operating profit of £70 million, up from £65.3 million and a margin of 4.2%. The order book stood at £5.6 billion, up from £4.4 billion previously.
Kier’s infrastructure business delivers major and complex infrastructure and civil engineering projects, including the HS2 project in jv with Eiffage, Ferrovial and BAM Nuttall; the A13 dualling and the Luton DART rail system in jv with VolkerFitzpatrick. It is also working on a major programme of highway and utility works on High Speed 2 Phase 2a.
Kier is a lead supplier to Highways England and a rationalisation of suppliers on the Smart Motorways programme – where significant investment is planned – bodes well for the group. Italso has £200m eight-year maintenance and management contract for TfL.
During 2022, the group won major highways maintenance works and services contracts from North Northamptonshire and West Northamptonshire Council and it was appointed to the £1.6bn Pagabo Civils and infrastructure framework.
The group’s utilities business delivers construction and maintenance services to the water, energy, rail and telecoms sectors on long term contracts. Recent wins include a place on Northern Ireland Water”s £1.2bn Major Projects Framework in jv with BAM. Meanwhile, Andrew Bradshaw, group managing director, Infrastructure Services (Utilities), recently joint the group’s executive committee.
Kier”s utilities business is also working on contracts worth around £250m for Anglian Water, as part of AMP7 and it has a place on the five-year £50m Severn Trent Water civils framework.
In the nuclear sector, Kier was appointed in autumn 2020 to deliver a £59m major infrastructure project at Sellafield and the group has also won work on the Hinkley Point C framework.
Construction
Kier’s construction division covers regional building, strategic projects, Kier Places (including housing maintenance, facilities management and environmental services) and its international business.
The division saw revenues slip to £1.44 billion in the year to end-June 2022, from £1.77 billion previously although its order book strengthened to £4.2 billion, up 27%.
The business, which delivers schools, hospitals, defence facilities and local authority and private sector buildings across the UK, reported an adjusted operating profit of £60.8 million, up 7%. Meanwhile, the adjusted margin stood at 4.2%, up from 3.3%.
Business wins have been significant recently. In late 2022, the division was re-appointed to the North West Construction Hub High Value Construction Framework and to a £22m investment programme by the Isle of Wight NHS Trust to redevelop St Mary”s Hospital along with the three school projects for the Department for Education
The group’s Kier Places business was also made a preferred bidder on a £75m housing maintenance contract for 10 years with RHP Group across west London.
Meanwhile, in February 2023, Kier and its jv partners, McAvoy and Metek, won places on all six lots of Crown Commercial Services’ new £10bn Offsite Construction Solutions (OCS) framework, which will run for four years.
Other key recent contract wins include a health and wellbeing centre in Ringland, Newport, a net zero carbon school for Deyes High School in Sefton and a landmark high spec life sciences lab development, “Refinery”, at ARC West London in Hammersmith
Significant wins during 2022 included a £500m contract for new houseblock buildings across six prisons with Wates and a £400m contract for a new East Yorkshire prison, HMP Full Sutton. Kier also picked up a £32.5m refurbishment contract for Manchester Aquatics Centre and was chosen by Baring and LBS Properties to design and construct a £69m mixed-use building in London.
The group has a significant position on frameworks. Kier Places has a place on the £35bn Crown Commercial Service”s Facilities Management and Workplace Services Framework for four years. The group also has places on the Department for Education’s (DfE’s) £7bn 2021 Construction Framework, a four-year agreement covering all types of education buildings in England.
Elsewhere, the group’s property division has agreed an £80m equity joint venture with Housing Growth Partnership to develop urban brownfield sites across the UK over five years. The property business reported an operating profit of £17.6 million in the year to June 2022 on revenues of £144 million.
Overseas, the group’s UAE-based international business is focused on managing its cost and projects in line with market weakness.
Glenigan Data
Figures from Glenigan underline the scale of Kier”s workload. They show that Kier ranked as the largest UK contractor in the year to December 2022, securing a total of 185 significant contracts worth £2,836 million. They were divided between building work, worth £1,718 million and civils work worth £288 million. Glenigan data also shows that Kier was the largest contractor in the South West (with work worth £829 million) and the largest in Yorkshire (£444 million); the third largest contractor in the South East (with work worth £461 million), the fourth largest in the East Midlands (worth £144 million); the third largest in the East of England (work worth £227 million), the seventh largest in Scotland (£109 million) and the fifth largest in Wales (£90 million)
Conclusion: A strengthening order book and fresh momentum
Kier has faced turbulent times in recent years as its debts climbed in the face of pressures on volume and cash flow. Under new chief executive Andrew Davies, the group has undertaken some significant rationalisation as it withdraws from some large businesses including housebuilding. The group”s recent history provides a warning on the hazards of rapid expansion by acquisition. But the slimmed-down company will still be a major player in its chosen sectors; regional building, highways, utilities and infrastructure and should be well-placed to take advantage of promising markets, particularly high speed rail, nuclear, defence and biotech. Meanwhile, the group”s health business should benefit from more government spending.
Winning work with Kier
Kier has a section to help would-be suppliers at www.kier.co.uk under the supply chain button:
https://www.kier.co.uk/approach/supply-chain/
The group, which is based at Sandy in Beds, is keen to work with local companies and SMEs. Suppliers interested in working with the group are recommended to register on a Construction online portal which is linked to the supply chain section. The group”s latest aggregate average payment days was reduced to 33 days and 89% of payments were made to suppliers within 60 days was 89%.
Contacts:
David O”Keeffe, Procurement Director at Kier Group
Email David.okeeffe@kier.co.uk
Tel 01767 640111
Andy Johnson, Procurement Director (based in Sheffield)
Tel: 01767 640111
Email: andy.johnson@kier.co.uk
Danielle Fordham, Procurement Team Lead
Tel: 01767 640111