Interim Results

Kier Group PLC 12 March 2002 12 March 2002 KIER GROUP plc INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2001 â€¢ Record interim results for Kier â€¢ Operating profit up 55% at Â£10.7m (2000: Â£6.9m) â€¢ Turnover up 17% at Â£693.9m (2000: Â£591.3m) â€¢ Earnings per share at 20.4p, up 25% (2000: 16.3p) â€¢ Dividend per share at 4.5p, up 15% (2000: 3.9p) â€¢ Successful integration of Allison Homes â€¢ Strong order books in Construction and Homes Commenting, Colin Busby, Chairman and Chief Executive, said: "Our businesses are soundly based and are performing well in markets that remain remarkably robust despite recent world events. "........ with our sound financial base, disciplined risk management and competitive strengths and, on the basis that market sentiment continues, we can look forward to further successful performance for the full year and beyond." Enquiries to: Kier Group plc Colin Busby/Deena Mattar Tel: 01767 640111 Bell Pottinger Financial Ltd Caroline Sturdy Tel: 020 7353 9203 CHAIRMAN'S INTERIM STATEMENT OVERVIEW I am pleased to report that Kier Group has delivered yet another strong set of results for the first half of its financial year. Turnover for the six months ended 31 December 2001 was at an all time high with all business segments contributing to this growth. Profits are still growing strongly with both operating and pre-tax profits at record levels providing further growth in earnings per share and enabling an increase in the interim dividend. Our Homes division has benefited from the acquisition of Allison Homes, in September, which has integrated well with our existing housebuilding businesses and has made a very pleasing contribution during its three and a half months with Kier. The markets in the UK for both Construction and Homes are showing considerable resilience despite recent world events. Our order books in both sectors remain strong and we are well placed to continue the growth in turnover, profits and earnings per share achieved since our flotation in 1996. We remain committed to growing our Infrastructure Investment and Support Services activities. We saw Infrastructure Investment providing our first returns last year and those returns will continue to grow as more projects come on stream. Much opportunity is available within the Support Services sector and we remain active in pursuing such opportunities. RESULTS Turnover at Â£693.9m (2000: Â£591.3m) shows a 17.4% increase with operating profit up 55.0% at Â£10.7m (2000: Â£6.9m) and pre-tax profit up 27.0% to Â£9.4m (2000: Â£7.4m). Basic earnings per share have, therefore, increased by 25.2% to 20.4p (2000: 16.3p). Net interest receivable (excluding interest payable by joint ventures) has been maintained at Â£0.5m (2000: Â£0.5m). In keeping with our policy of progressively increasing shareholders' returns the Board has declared an interim dividend of 4.5p (2000: interim dividend of 3.9p), an increase of 15.4%. This will be paid to shareholders on 16 May 2002 with the usual scrip alternative. The operating cash flow was exceptionally strong during the period and, despite an outflow of Â£24.9m in respect of the acquisition of Allison Homes and investments in associates, we ended the period with higher net cash balances than those at 30 June 2001, at Â£58.6m (2000: Â£28.5m and Â£58.1m at 30 June 2001). The Construction divisions have performed particularly well beating all previous cash records. The business model we have developed over the past decade of utilising the cash generated by the Construction & Services segment to invest in the cash consuming, higher margin Homes & Property and Infrastructure Investment segments continues to deliver enhanced returns on shareholders' funds. For the twelve months to 31 December 2001 we achieved a return of 42.4%. CONSTRUCTION & SERVICES Turnover has increased by 15.8% to Â£626.1m (2000: Â£540.6m) with operating profit up 42.5% to Â£5.7m (2000: Â£4.0m) and margins at 0.91% (2000: 0.74%). We started the period with very high order books and have maintained them at around Â£1.2bn compared with Â£1.0bn at December 2000. The proportion of new work on a negotiated or partnered basis continues to grow and is now almost 60% of total awards. Construction Kier Regional is the largest division within our Construction & Services segment with turnover in the period of Â£377.2m (2000: Â£362.0m) at an average contract size of Â£3.6m. From its network of 27 offices, located throughout the UK, it combines the advantages of operating in local market places with the organisational structure required to serve our national clients. This business remains the backbone of the Group providing low risk turnover, operating profit and, importantly, an excellent cash flow to finance the investment activities of the Group. The last six months has seen an increase in public sector work and a balanced spread of awards across the retail, education, commercial and industrial sectors. Our relationships with the major food retailers continue to develop with a number of projects awarded during the period for Tesco and J Sainsbury. Kier National, our major projects division, increased its activity significantly during the period, as anticipated, with turnover up 36.9% on last year to Â£211.9m. The UK major building sector in particular has seen a significant uplift in turnover and activity with no sign of a future downturn. New contract awards in the period included a Â£64m retail development for Castlemore Securities in Bournemouth and a Â£39m office development in the centre of Birmingham for Richardson Barberry. In civil engineering there has been a steady growth in turnover assisted by the recent awards of the Channel Tunnel Rail Link contracts, with prospects improving further following the award in February 2002 of a Â£250m framework agreement for United Utilities in which Kier has a one-third share. International construction has continued its progress towards recovery. Our strategy of reducing the risk profile by focusing on specific client relationships and lower risk contracts has continued and is now beginning to reap rewards. I am pleased to report that Kier International is now profitable having recorded a pre-tax profit of Â£0.5m (2000: loss of Â£0.6m). Support Services Support Services continues to gather momentum with turnover in the period of Â£37.0m being 55.5% up on 12 months ago due to the continuing growth of our Support Services businesses and the success of our partnership company with the London Borough of Islington. The "Best Value" procurement programme for local authorities and other public sector bodies, such as Islington, provides us with a very important, major new market. We are short listed on a number of such projects including Sheffield, Canterbury and Greenwich with many more opportunities coming on stream. We are also heavily involved in providing services to PFI consortia for projects including health, education and local services. The total committed value for these services is around Â£130m on contracts ranging in length from 25 to 32 years. HOMES & PROPERTY Homes & Property achieved operating profit of Â£7.4m (2000: Â£5.8m), an increase of 27.6% on turnover, up 25.8% at Â£63.8m (2000: Â£50.7m). Homes Kier Residential has increased its unit sales to 386 legal completions in the six months to December 2001 from 350 units in the same period last year. This, coupled with an increase in average selling price from Â£144,300 to Â£164,400 has led to a 25.7% increase in turnover to Â£63.5m (2000: Â£50.5m). Interim operating margins improved from 11.3% last year to 11.8%. In September we announced the acquisition of Allison Homes, based in Spalding, Lincolnshire. This business is performing extremely well and we are pleased with its successful integration into Kier Residential. The acquisition has boosted our land bank, which now stands at 3,038 plots (December 2000: 2,031 plots), and brought with it an exceptionally strong strategic land portfolio, which, together with existing strategic land, now stands at 11,400 plots. Underpinned by favourable interest rates, our order books are strong in all companies. At 28 February our unit completions were ahead of last year and the forward order book of reservations and exchanged contracts was at record levels at Â£47.4m (February 2001: Â£24.2m). We are confident that the Spring selling season will continue the momentum and will support our targets for the full year and beyond. Property In Whitehall Kier Ventures is proceeding with a 90,000sq ft office development which will be let to the Department of the Environment, Food and Rural Affairs on completion. Construction on this project is due to start later this year. At Waltham Point the 700,000 sq ft distribution centre, for J Sainsbury, is making good progress. January 2002 saw the completion and sale of an office development in Cheltenham for Marlborough Stirling which will contribute to profit in the second half of the year. We continue to seek to expand our property portfolio and are actively pursuing opportunities to grow the business. Partnership housing In October we purchased a 49% investment in Belan Limited which acquired the partnership housing and timber frame businesses of Beazer PLC. We believe there are good long-term prospects in these markets which will provide sensible returns in the future. INFRASTRUCTURE INVESTMENT In October 2001 we were pleased to announce the award of our first PFI schools project, Tendring Schools, in Essex, which augments our expanding portfolio of PFI projects in which we typically hold a 50% stake. In the healthcare sector one hospital, Hairmyres, is operational and two others are under construction, expected to complete later this year and early next year. In the local services sector we have a stake in the Bournemouth library project and we are preferred bidder on the Greenwich Care Homes scheme. These projects bring our total committed investment, in equity and loan stock, to Â£10.6m with an expected long-term average yield in excess of 15%. PFI remains an important and growing element of our business and one in which we continue to invest with overhead and net bidding costs of just under Â£1.0m included in the results for the six months to 31 December 2001 (2000: Â£0.3m). This has enabled us to maintain a strong pipeline of projects on which we are short-listed and from which we expect to further expand our portfolio. BOARD OF DIRECTORS Last year we said farewell to Duncan Brand, our Finance Director since the employee buy-out in 1992, who retired at the AGM in November. We were pleased to appoint Deena Mattar as Finance Director from that date. HEALTH AND SAFETY Achieving a high standard of health and safety is a fundamental requirement in our industry. Last year we signed the Health and Safety Charter sponsored by the Major Contractors' Group which sets tough targets for improvements but ones that we believe we have met and can continue to achieve. Kier is totally committed to improving safety standards at the highest level in the organisation. PROSPECTS Our businesses are soundly based and are performing well in markets that remain remarkably robust despite recent world events. Our order books in Construction are healthy with many opportunities available in most of our business sectors. In Homes visitor levels, sales reservations and completions are strong reflecting the continued demand for new houses in a low interest rate environment. We live in a world characterised by vigorous and accelerating change and uncertainty but, with our sound financial base, disciplined risk management and competitive strengths and, on the basis that market sentiment continues, we can look forward to further successful performance for the full year and beyond. COLIN BUSBY Chairman KIER GROUP plc CONSOLIDATED PROFIT AND LOSS ACCOUNT Unaudited Unaudited 6 months to 6 months to Year to 31 December 31 December 30 June 2001 2000 2001 Notes Â£m Â£m Â£m Total turnover 1 693.9 591.3 1,251.1 -------------- --------------- -------------- Operating profit - Group 9.1 6.3 19.9 Share of operating profit - joint 1.6 0.6 2.0 ventures and associates -------------- --------------- -------------- Total operating profit - Group and 1 10.7 6.9 21.9 share of joint ventures and associates Net interest receivable - Group 0.5 0.5 1.0 Net interest payable - joint ventures (1.8) - (1.0) and Associates -------------- --------------- -------------- Profit on ordinary activities before 1 9.4 7.4 21.9 taxation Taxation 2 (2.6) (2.0) (5.9) -------------- --------------- -------------- Profit on ordinary activities after 6.8 5.4 16.0 taxation Ordinary dividend 3 (1.5) (1.3) (4.1) -------------- --------------- -------------- Retained profit attributable to 5.3 4.1 11.9 ordinary shareholders -------------- --------------- -------------- Earnings per ordinary share 4 Undiluted 20.4p 16.3p 48.0p Diluted 20.0p 16.1p 47.1p -------------- --------------- -------------- Dividend per ordinary share 3 4.5p 3.9p 12.3p -------------- --------------- -------------- KIER GROUP plc CONSOLIDATED BALANCE SHEET Unaudited Unaudited 31 December 31 December 30 June 2001 2000 2001 Â£m Â£m Â£m Fixed assets Tangible assets 47.3 43.3 46.3 Investments in joint ventures Share of gross assets 96.0 72.9 87.3 Share of gross liabilities (87.5) (68.7) (78.9) ------------- ------------- ----------- 8.5 4.2 8.4 Investment in associates 2.3 - - Investment in own shares 1.5 1.1 1.1 ------------- ------------- ----------- Investments 12.3 5.3 9.5 ------------- ------------- ----------- 59.6 48.6 55.8 Current assets Stock 210.9 152.0 164.4 Debtors 202.3 210.2 212.0 Cash at bank and in hand 66.9 34.5 60.9 -------------- ------------- ----------- 480.1 396.7 437.3 -------------- ------------- ----------- Current liabilities Creditors - amounts falling due within one year (450.6) (383.5) (416.8) -------------- ------------- ----------- Net current assets 29.5 13.2 20.5 Total assets less current liabilities 89.1 61.8 76.3 Creditors - amounts falling due after more than one year (17.4) (8.3) (12.8) Provisions for liabilities and charges (7.9) (4.6) (5.7) ------------- ------------- ----------- Net assets 63.8 48.9 57.8 ------------- ------------- ----------- Capital and reserves Called up share capital 0.3 0.3 0.3 Share premium account 12.9 11.1 12.0 Other reserves 2.7 2.7 2.7 Profit and loss account 47.9 34.8 42.8 ------------- ------------- ----------- Shareholders' funds 63.8 48.9 57.8 ------------- ------------- ----------- KIER GROUP plc CONSOLIDATED CASH FLOW STATEMENT Unaudited Unaudited 6 months to 6 months to Year to 31 December 31 December 30 June 2001 2000 2001 Â£m Â£m Â£m Operating activities Operating profit 9.1 6.3 19.9 (Profit) on sale of fixed assets (0.1) - - Depreciation charges 3.6 3.5 7.6 Decrease/(increase) in working capital 21.2 (14.9) 11.0 ------------- ------------- ------------ Net cash inflow/(outflow) from operating activities 33.8 (5.1) 38.5 Returns on investments and servicing of finance 0.3 0.9 2.3 Taxation (1.5) (1.0) (5.0) Capital expenditure and financial investment (4.9) (3.2) (10.7) Acquisitions and investments in joint ventures and associates (24.9) (0.9) (4.4) Equity dividends paid (2.1) (2.4) (2.9) Financing (0.2) (0.2) (0.1) ------------- ------------- ------------ Cash inflow/(outflow) before management of liquid 0.5 (11.9) 17.7 resources and financing Management of liquid resources (28.7) 11.4 18.4 ------------- ------------- ------------ (Decrease)/increase in cash in the period (28.2) (0.5) 36.1 Increase/(decrease) in liquid resources 28.7 (11.4) (18.4) ------------- ------------- ------------ Increase/(decrease) in net funds 0.5 (11.9) 17.7 Opening net funds 58.1 40.4 40.4 ------------- ------------- ------------ Closing net funds 58.6 28.5 58.1 ------------- ------------ ------------ Analysis of closing net funds Cash at bank and in hand 27.9 17.2 50.6 Bank overdrafts (8.3) (6.0) (2.8) Short-term bank deposits 39.0 17.3 10.3 ------------- ------------- ------------ Closing net funds 58.6 28.5 58.1 ------------- ------------- ------------ Notes 1. Segmental information Unaudited Unaudited 6 months to 6 months to Year to 31 December 2001 31 December 2000 30 June 2001 Â£m Â£m Â£m Turnover Construction & Services 626.1 540.6 1,121.3 Homes & Property 63.8 50.7 126.1 Infrastructure Investment 4.0 - 3.7 ------------ ------------ ------------ 693.9 591.3 1,251.1 ------------ ------------ ------------ United Kingdom 655.9 540.2 1,149.4 Rest of World 38.0 51.1 101.7 ------------ ------------ ------------ 693.9 591.3 1,251.1 ------------ ------------ ------------ Operating profit Construction & Services 5.7 4.0 11.1 Homes & Property 7.4 5.8 16.2 Infrastructure Investment 1.8 - 0.9 Corporate Overhead/Finance (4.2) (2.9) (6.3) ------------ ------------ ------------ 10.7 6.9 21.9 ------------ ------------ ------------ United Kingdom 10.0 7.4 22.8 Rest of World 0.7 (0.5) (0.9) ------------ ------------ ------------ 10.7 6.9 21.9 ------------ ------------ ------------ Profit before tax Construction & Services 9.4 8.0 19.2 Homes & Property 5.1 3.4 11.2 Infrastructure Investment 0.4 - 0.2 Corporate Overhead/Finance (5.5) (4.0) (8.7) ------------ ------------ ------------ 9.4 7.4 21.9 ------------ ------------ ------------ United Kingdom 8.9 8.0 23.0 Rest of World 0.5 (0.6) (1.1) ------------ ------------ ------------ 9.4 7.4 21.9 ------------ ------------ ------------ Net assets Construction & Services 58.0 53.3 56.7 Homes & Property 36.3 26.9 30.8 Infrastructure Investment - - - Corporate Overhead/Finance (30.5) (31.3) (29.7) ------------ ------------ ------------ 63.8 48.9 57.8 ------------ ------------ ------------ United Kingdom 63.0 48.1 57.1 Rest of World 0.8 0.8 0.7 ------------ ------------ ------------ 63.8 48.9 57.8 ------------ ------------ ------------ 2. Taxation The corporation tax rate of 27.5% (June 2001: 27.0%, December 2000: 27.0%) is based on the estimated effective percentage tax rate for the full year, and is calculated after taking into consideration tax losses brought forward from previous years. The tax charge is calculated in accordance with FRS 19. 3. Dividends per ordinary share The interim dividend of 4.5p (December 2000: 3.9p) per ordinary share will be paid on 16 May 2002 to shareholders on the register at the close of business on 2 April 2002. A scrip dividend alternative will be offered. 4. Earnings per share Earnings per share is calculated by dividing the profit for the period after taxation by the following weighted average number of shares. 31 December 31 December 30 June 2001 2000 2001 million million million Basic 33.5 33.2 33.2 Diluted 34.2 33.6 33.8 The diluted earnings per share takes account of the dilutive effect of options and is calculated in accordance with FRS 14. 5. Reconciliation of movements in shareholders' funds Â£m Shareholders' funds at 30 June 2001 57.8 Issue of new ordinary shares 0.9 Retained profit for period 5.3 Currency (0.2) ----------- Shareholders' funds at 31 December 2001 63.8 ----------- 6. Status The interim results do not constitute statutory accounts within the meaning of section 240 of the Companies Act 1985. The abridged consolidated profit and loss account for the year to 30 June 2001 and the abridged consolidated balance sheet at 30 June 2001 have been extracted from the latest published accounts of Kier Group plc on which the report of the auditors was unqualified and which have been delivered to the Registrar of Companies. Copies of this interim statement will be sent to shareholders and are available for inspection at the Company's registered office. This information is provided by RNS The company news service from the London Stock Exchange

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