Kier Group earnings rise as chairman steps down
Property, residential, construction and services company Kier Group posted its results for the six months to 31 December on Thursday, with revenue falling 1% to £2bn on an underlying basis.
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The FTSE 250 firm said the results were in line with expectations, as profit from operations improved 4% to £56.5m, with the board saying there remained a “strong pipeline” of growth opportunities.
Profit before tax was 12% higher at £46.3m, and the board declared an interim dividend per share of 22.5p - up 5% on a year prior.
Its operating margin was 2.8%, improving from 2.7% in the six months to the end of 2015, and basic earnings per share were up 11% to 38.9p.
Net debt was £179m, widening 3% from £174m.
On a statutory basis, group revenue was up 1% to £2bn, profit from operations improved 149% to £47m, profit before tax was up 712% at £34.9m, and basic earnings per share were 405% higher at 39.9p.
“Today's results reflect the ongoing financial and operational discipline employed across the group and the strength of our flexible, integrated business model,” said chief executive Haydn Mursell.
“The group has a balanced portfolio of businesses and market leading positions in regional building, infrastructure and housing.
“Our continued focus on simplifying the portfolio and working with clients in a collaborative way is delivering further growth opportunities.”
Mursell said Kier’s clients recognised that approach as a “key differentiator” when working with the company.
He also claimed the group's breadth provided some resilience against economic uncertainty, and the board was continuing to “shape” Kier to focus on its core competencies.
“We are encouraged by the pipeline in the property and residential businesses and our healthy order books of approximately £9bn in the construction and services businesses.
“We remain on course to deliver our expectations for the full year and we are well positioned to achieve our Vision 2020 goals.”
East of England joint venture established with Cross Keys
At the same time, Kier announced that it established a joint venture with CKH Developments, a housing association and care services provider which principally operates in the east of England, on Wednesday.
The company said it would transfer part of its land bank and a number of its residential developments in the east of England, valued at up to £97m, into the joint venture with Cross Keys, contributing up to £4m of equity into the venture.
Kier will receive a cash payment of up to £64m for the assets and the joint venture will be funded by a non-recourse revolving credit facility from HSBC Bank.
There will be a 90:10 split of economic ownership and each party will have 50:50 voting rights.
Initial completion of the transaction was expected to take place by 31 March, with subsequent completions expected to take place prior to 30 June upon the transfer of further sites.
The JV was expected to be cash generative from completion of the transaction, Kier’s board said.
The transaction would release funds to Kier for reinvestment in other parts of its business in line with its 15% return on capital employed hurdle, and it expected the transaction to be earnings accretive in 2019.
Kier said itself and and Cross Keys had a long-standing relationship in the eastern region, operating in complementary sectors of the housing market.
It would provide its development, land-buying, construction and sales expertise to the venture, and Cross Keys would provide access to key strategic relationships for the benefit of the venture.
“The joint venture represents a strategic milestone for Kier Residential,” commented Haydn Mursell.
“This transaction enables us to accelerate our strategy to recycle the capital employed in the Kier private land bank to drive the future growth of the group and improve our overall ROCE.
“In addition, the joint venture plays a role in addressing the UK Government's housing strategy by creating a vehicle which can focus on delivering new homes in the east of England, a geography both parties know well.”
Phil White stepping down as chairman, Philip Cox to be appointed
Kier Group also announced that Phil White had advised the board of directors that he would retire as chairman and step down from the board with effect from the conclusion of the annual general meeting on 17 November.
He will be succeeded by Philip Cox CBE, who is currently chairman of Drax Group and Global Power Generation.
Kier confirmed Cox will retire as the chairman of GPG by 10 September.
He will join the board as a non-executive director and chairman designate on 1 July, and will assume the role of chairman immediately following the AGM.
He will be a member of the nomination and remuneration committees with effect from his appointment as a non-executive director.
Phil White was appointed to the board of Kier in July 2006 and has served as chairman since January 2008.
“I am delighted that Philip has agreed to accept the role of chairman designate, as his extensive track record demonstrates that he has the range of skills and experience for the role,” commented Phil White.
“I would like to welcome Philip to the board and I am looking forward to working with him over the coming months to ensure a smooth handover of duties.”
Philip Cox, commenting on his appointment, said he was honoured to be joining the board of Kier.
“There are clear opportunities for Kier in each of its market sectors and I am excited about the prospect of working with the management team to grow the business in line with its Vision 2020 strategy.”