Interim Results
Kier Group PLC
19 March 2007
19 March 2007
KIER GROUP PLC
INTERIM RESULTS FOR THE SIX MONTHS TO 31 DECEMBER 2006
• Pre-tax profits up 27.5% to £36.2m (2005: £28.4m)
• EPS* up 26.3% to 75.8p (2005: 60.0p)
• Dividend increased by 17.1% to 9.6p (2005: 8.2p)
• Net funds of £114.4m at 31 December 2006 (2005: £87.6m)
• Construction and Support Services order books at strong levels
• Homes order book over 50% ahead of last year with over 80% of projected
full year unit sales secure
* adjusted for amortisation of intangibles
Commenting on the results, John Dodds, Chief Executive, said:
"Our businesses are continuing to flourish, benefiting from public sector
spending in Construction and Support Services, continued demand for housing in
Homes and a sustained appetite by investors for good quality properties at
excellent yields in our Property division.
"The prospects for Kier Group are excellent. There continues to be ample
opportunity in all of the markets in which we operate, our order books are full,
our balance sheet is strong and we have very capable management teams in place.
All of this leads me to anticipate further profitable growth."
For further information, please contact:
John Dodds, Chief Executive
Deena Mattar, Finance Director
Kier Group plc Tel: 01767 640 111
Caroline Sturdy
Madano Partnership Tel: 020 7593 4000
Chief Executive's Review
Overview
I am pleased to report that Kier Group plc has delivered another strong set of
results for the six months to 31 December 2006 in a busy period that has seen
record levels of revenue in each of our principal divisions: Construction,
Support Services and Homes.
Our businesses are continuing to flourish, benefiting from public sector
spending in Construction and Support Services, continued demand for housing in
Homes and a sustained appetite by investors for good quality properties at
excellent yields in our Property division. Our Construction order book at 28
February 2007 is robust at £1,196m; in Support Services the two recent major
building maintenance contract wins in Harlow and Sefton have contributed to a
record order book of £1,589m at 28 February 2007 and in Homes, activity in our
markets has been encouraging, resulting in our order books at 28 February 2007
being over 50% ahead of last year. In Property, opportunity remains plentiful
and we were pleased to achieve financial close on a large project for Ordnance
Survey earlier this month.
Financial results
Revenue for the six months to 31 December 2006 was at a record £1,020.5m (2005:
£922.6m) and 10.6% ahead of last year; operating profit after the amortisation
of intangible assets and joint venture interest and tax was 26.9% ahead at
£36.3m (2005: £28.6m) and pre-tax profit was 27.5% ahead at £36.2m (2005:
£28.4m) benefiting from growth across all divisions, particularly Property,
where the majority of property sales targeted for the financial year have been
achieved in the first half. Earnings per share, adjusted for the amortisation of
intangibles, increased by 26.3% to 75.8p (2005: 60.0p).
The results for the period are underpinned by strong cash balances, with £44.7m
generated from operating activities (2005: £43.4m). Net funds at 31 December
2006 were £114.4m, compared with £111.2m at 30 June 2006 and £87.6m at 31
December 2005. The Construction division maintained strong cash balances in the
period on average £47m ahead of last year and generated £23.7m in the six month
period.
The Board has declared an interim dividend of 9.6p (2005: 8.2p), an increase of
17.1% on last year continuing the growth record of 15% or more per annum
achieved since 1997. The dividend is 7.7 times covered by earnings per share and
will be paid to shareholders on 18 May 2007 with the usual scrip alternative.
Construction
The Construction segment comprises Kier Regional and Kier Construction. Kier
Regional encompasses our ten regional contracting businesses, affordable housing
and major projects. Kier Construction includes the Group's infrastructure and
overseas operations with civil engineering, rail, mining and remediation
capability.
Overall revenue increased by 11.8% to £675.2m (2005: £603.7m) with good growth
in both Kier Regional and Kier Construction. Operating profit increased by 15.9%
to £9.5m (2005: £8.2m), maintaining the operating margin at 1.4% (2005: 1.4%).
The order book at 28 February 2007 was £1,196m (2006: £1,057m) supported by a
strong pipeline of orders which are close to being confirmed, leading us to
expect overall volume growth for the year.
Kier Regional continues to see improvements in its key performance measures of
revenue, profit margins and cash. It started the new financial year with a high
level of orders on hand which converted to a record level of revenue in the six
months to 31 December 2006. Margins have continued to improve across the
business and the cash performance remains strong with average cash balances
around £40m higher than the same period last year, ending the period at a record
£262.4m (2005: £224.5m).
Orders have remained strong throughout the period at £581m (2005: £493m) with
49% arising from public sector clients (2005: 50%). Education continues to be an
important sector for us and we were delighted to have been selected as one of
six preferred contractors on the 'Contractors' Framework for Academies and other
educational facilities' which is forecast to provide £1.7bn of work, in total,
over the next four years. Our framework agreement with the Home Office for
custodial contracts is affording us good opportunities providing 14% of awards
in the period with a significant level of additional contracts in negotiation.
The affordable housing sector, to which we anticipate providing around 1,000
units this year, is also buoyant presenting good prospects through our framework
agreements with housing associations and local authorities.
Private sector demand has also been strong in the six months under review,
particularly in the commercial property sector, which has provided 25% of the
awards for the period, including a £66m office development in Snow Hill,
Birmingham, for our major projects business. 65% of our total awards (2005: 59%)
for the period were negotiated or awarded through two-stage tenders, reflecting
our continued focus on partnering and repeat business.
Kier Construction has had mixed fortunes in the period. In the UK good progress
is being made on the LNG terminal in Milford Haven for South Hook LNG, despite
poor weather during most of December and January, and land remediation projects
for the Homes and Property divisions have been completed on time and, more
importantly for such projects, within budgets. Our private opencast coal mine at
Greenburn, East Ayrshire, continues to make good progress with over 1.5m tonnes
of coal extracted since production began in April 2004. 68% of the remaining
1.8m tonnes from the original deposit has been forward sold at fixed prices and
we are delighted to report that our planning application for a further 0.8m
tonnes has now been approved, which will extend the life of the mine by a
further two years to 2011.
Overseas, good progress made in Jamaica on the Norman Manley International
Airport and on a large transportation centre has been overshadowed by
difficulties with a hotel project for Sandals in Antigua having an adverse
impact on profitability for that region.
Support Services
Support Services comprises four business streams: Kier Managed Services,
providing facilities management services to public and private sector clients;
Kier Building Maintenance, providing reactive and planned maintenance
principally to local authority clients, housing associations and Arms Length
Management Organisations; Kier Building Services Engineers, our specialist
mechanical and electrical design and installation and maintenance business; and
Kier Plant which hires plant to Kier Group companies and external clients.
Overall revenue increased by 2.6% to £142.7m (2005: £139.1m) with 22.5% growth
in Kier Building Maintenance offset by a planned reduction in Kier Managed
Services. Operating profit, before deducting the amortisation of intangibles of
£1.0m (2005: £1.0m), increased by 30.8% to £5.1m (2005: £3.9m) at an improved
margin of 3.5% (2005: 2.8%).
In Kier Managed Services our focus on improving the quality of contracts has
been effective. Volumes have declined over the period but profitability has
improved providing us with a sound base from which to grow the business.
Kier Building Maintenance has made excellent progress in the last six months.
Revenue is up from £80.8m to £99.0m and order books have grown significantly
benefiting from £232m of new orders from two major contract awards in the
period; Harlow and Sefton. At Harlow we commenced work on 1 February 2007 on a
£17m per annum seven-year contract, extendable by a further three years, in
partnership with Harlow District Council. We will provide environmental
services, including street cleaning, as well as managing all the repairs for the
Council's 10,000 property stock. At Sefton, Merseyside, we are about to commence
work on a four-year outsourcing contract for One-Vision Housing valued at £62m
which involves upgrading 5,600 council properties to the Government's Decent
Homes standard.
We have also recently been selected as preferred bidder on a five-year
outsourcing contract for Kingston-upon-Hull District Council valued at £83m
which will involve repairs and maintenance and Decent Homes work on 10,000
council properties.
Many more opportunities are available to us in this market including a ten-year
£30m per annum repair and maintenance contract for Stoke-on-Trent City Council
on which we are short-listed as one of two bidders. At Harrow we are
short-listed on a £17m per annum contract for five years and at Hackney we are
short-listed on a £13m per annum four-year contract.
Homes
Kier Residential, our housebuilding division, is structured through five
companies: Allison Homes, operating throughout Lincolnshire and North
Cambridgeshire; Bellwinch Homes, with sites in the south and south east; Kier
Homes, operating across the central belt of Scotland; Twigden Homes with
activities in East Anglia and the West Midlands; and the recently acquired Hugh
Bourn Homes operating in North Lincolnshire.
Kier Residential sold 819 homes in the six months to 31 December 2006, a 15.5%
increase over 2005's 709 homes but with a greater proportion of affordable homes
than ever before at 20.9% of total sales (2005: 11.0%). Revenue for the six
months at £151.8m was 12.6% ahead of last year's £134.8m including land sales of
£8.3m (2005: £3.0m) with the high proportion of affordable housing, together
with the inclusion of sales from Hugh Bourn Homes, reducing average selling
prices to £175,200 (2005: £185,900).
Operating profit increased marginally to £20.4m (2005: £19.8m) including £0.2m
relating to land sales (2005: £0.3m) giving a margin on housing sales of 14.1%
(2005: 14.8%), slightly lower than our 15.0% target with the high number of
affordable housing sales having an impact.
On 31 July 2006 we acquired the shares in Hugh Bourn Developments (Wragby)
Limited for a total consideration of £53.3m, representing the market value of
land, work in progress and other assets and liabilities. £20m was paid on
completion, with the balance due in instalments on 2 July 2007 and 1 July 2008.
Hugh Bourn Homes (rebranded Kier Homes Northern) has formed the foundation for a
fifth trading division of Kier Residential, expanding its reach to the north of
Allison Homes' operating area. It contributed 54 units to sales in the period
since acquisition.
The land bank at 31 December 2006 contained 7,004 plots with planning consent
(2005: 5,618) including 1,151 in Hugh Bourn Homes. A number of large sites on
which we are progressing detailed planning consent have recently been acquired
including 192 units at Costessey, Norfolk, 245 units at Redding Park in the
central belt of Scotland and 213 units at Little Paxton, Cambridgeshire. In
addition to the land with planning consent the land bank also contains a further
11,800 plots of strategic land, mostly under option.
There is continued demand for homes in the markets in which we operate. Weekly
reservation rates are in line with those required in order to achieve our full
year projection with recent interest rate increases having no discernable
effect. Our order books are over 50% ahead of last year (43% excluding Hugh
Bourn Homes) and completions to the end of February combined with our order book
for the current year secure over 80% of our projected unit sales for the year.
Looking forward to the full year we are expecting to see a similar pattern to
the distribution of unit sales as last year, with a bias towards the second half
of the year. The exceptional level of affordable housing units experienced in
the first half of the year is expected to reduce over the whole year to a level
similar to that achieved in the full year to 30 June 2006.
Property
Our Property development business activity covers commercial, offices,
industrial, retail and mixed-use sectors largely on a non-speculative basis. It
operates through Kier Ventures, a wholly owned subsidiary; and Kier
Developments, a 50% joint venture with the Bank of Scotland.
The Property division had an extremely busy six months to 31 December 2006 with
the majority of the development sales targeted for this financial year taking
place in this period. Revenue for the six months of £43.5m (2005: £38.3m) was
13.6% ahead of last year with operating profits 70.4% ahead at £9.2m (2005:
£5.4m), before joint venture interest and tax, representing a margin of 21.1%
(2005: 14.1%).
Within our wholly owned business we sold a retail park at Haverhill during the
period and made good progress on the development of offices pre-let to
Electronic Data Systems in Milton Keynes where Kier is also the contractor. In
our joint venture with the Bank of Scotland a number of developments were sold
including two to Invista Real Estate: Mannington Retail Park in Swindon; and
Reading Central, a commercial site in the centre of Reading. We have retained a
50% equity stake in Mannington Retail Park and will be involved in its future
development. We are also planning to enter into a joint venture development
agreement with Invista to redevelop the Reading Central site.
Earlier this month we reached financial close on a project to develop a new
corporate headquarters for Ordnance Survey in Southampton. This will include the
residential and commercial redevelopment of their existing site with
participation from our Construction, Support Services and Homes divisions. We
were also pleased to have been selected as preferred developer on a project to
deliver the UK's first Supreme Court in Parliament Square, London. Kier Property
and Kier Regional (Wallis) are working together to remodel a 70,000sq ft listed
building which, on completion of the development, will be leased to the
Department of Constitutional Affairs for 30 years.
Our ability to provide a 'total solution' to clients including land remediation,
mixed-use development (residential and commercial) and affordable housing
continues to provide a flow of interesting opportunity to this division.
Infrastructure Investment
Kier Project Investment (KPI) manages the Group's interests procured under the
Private Finance Initiative (PFI). The core strength of KPI is the ability to
bring together the diverse range of skills and resources within the Group and
combine these with a financial package that will deliver high quality buildings
and services to meet the public sector's needs.
In July 2006 we achieved financial close on a contract to provide a new
headquarters building in Gravesend for Kent Police bringing our total committed
equity in PFI projects to £22.8m on which we expect to achieve an average yield
of around 14%. Construction was also successfully completed on two secondary
schools in Sheffield to add to the two completed last year and Kier Managed
Services has now commenced facilities management operations. Good construction
progress is being made on a number of schools for Oldham Metropolitan Council
and Norfolk County Council and on the Garrett Anderson Health Centre at Ipswich,
all by Kier Regional.
With PFI health projects slowing down and schools largely being provided under
'Building Schools for the Future' we are exploring new markets including fire
stations, social housing and prisons, all areas in which our Construction
division has a great deal of experience.
Pensions
At 31 December 2006 the net pension deficit calculated as required by IAS19
'Employee Benefits' is £28.9m (December 2005: £93.0m, June 2006: £42.1m). The
improvement in the period is attributable to: special contributions amounting to
£31.5m in the six months to 30 June 2006 and £8.0m in the six months to 31
December 2006; and an increase in the market value of assets. We continue to
make special contributions of £0.5m per month into the Kier Group Pension
Scheme, over and above our normal contributions. We are determined that Kier's
pension deficit will continue to reduce.
Health & Safety
Kier Group's attention to behavioural issues affecting safety on sites has
increased the focus of both employees and members of the supply chain on
improving standards and an understanding of what is needed to ensure safe sites.
This initiative has resulted in an Accident Incidence Rate of 492 per 100,000
staff and subcontractors measured against a Health & Safety Executive (HSE)
target rate of 902 per 100,000. The HSE target for 2007 is set at 946.
People
Our successful track record is the tangible result of the skill,
professionalism, enthusiasm and commitment of our people. They have ensured that
we have achieved consistent growth in revenue, profits and cash flow and that we
continue to excel in all of our chosen markets. I wish to pay tribute to all
Kier employees for their enduring hard work and dedication which have
contributed to the continued success of the Group.
Prospects
The prospects for Kier Group are excellent. There continues to be ample
opportunity in all of the markets in which we operate, our order books are full,
our balance sheet is strong and we have very capable management teams in place.
All of this leads me to anticipate further profitable growth.
Consolidated income statement
Unaudited Unaudited
6 months to 6 months to Year to
31 December 31 December 30 June
2006 2005 2006
Notes £m £m £m
------------------------------------- ---- ------- ------- -------
Revenue - continuing operations
Group and share of joint ventures 2 1,020.5 922.6 1,838.3
Less share of joint ventures (40.7) (41.3) (55.1)
------------------------------------- ---- ------- ------- -------
Group revenue 979.8 881.3 1,783.2
Cost of sales (889.4) (804.0) (1,623.7)
------------------------------------- ---- ------- ------- -------
Gross profit 90.4 77.3 159.5
Administrative expenses (55.9) (50.0) (103.5)
Share of post tax profits from joint
ventures 1.8 1.3 3.2
------------------------------------- ---- ------- ------- -------
Profit from operations 2 36.3 28.6 59.2
Finance income 3.3 2.7 5.3
Finance cost (3.4) (2.9) (5.4)
------------------------------------- ---- ------- ------- -------
Profit before tax 2 36.2 28.4 59.1
Taxation 3 (9.9) (7.8) (16.2)
------------------------------------- ---- ------- ------- -------
Profit for the period 26.3 20.6 42.9
------------------------------------- ---- ------- ------- -------
Earnings per ordinary share
- basic 5 73.9p 58.0p 120.8p
- diluted 72.9p 57.5p 118.8p
------------------------------------- ---- ------- ------- -------
Adjusted earnings per ordinary share
(excluding the amortisation of
intangible assets)
- basic 5 75.8p 60.0p 124.8p
- diluted 74.8p 59.5p 122.7p
------------------------------------- ---- ------- ------- -------
Consolidated statement of recognised income and expense
Unaudited Unaudited
6 months to 6 months to Year to
31 December 31 December 30 June
2006 2005 2006
Notes £m £m £m
------------------------------------- ---- ------- ------- -------
Foreign exchange translation
differences - - (0.3)
Fair value movements in cash flow
hedging instruments - (0.5) 4.1
Actuarial gains and losses on defined
benefit pension schemes 10.2 (10.8) 30.0
Deferred tax on items recognised
directly in equity (3.1) 3.4 (10.2)
------------------------------------- ---- ------- ------- -------
Net expense recognised directly in
equity 7.1 (7.9) 23.6
Profit for the period 26.3 20.6 42.9
------------------------------------- ---- ------- ------- -------
Total recognised income and expense
for the period 33.4 12.7 66.5
Effect of change in accounting policy
Adoption of IAS 32 and IAS 39, net of
tax, on 1 July 2005 on cash flow
hedge reserve - (7.5) (7.5)
Deferred tax on above - 2.2 2.2
------------------------------------- ---- ------- ------- -------
33.4 7.4 61.2
------------------------------------- ---- ------- ------- -------
Consolidated balance sheet
Unaudited Unaudited
31 December 31 December 30 June
2006 2005 2006
Notes £m £m £m
------------------------------------- ---- ------- ------- -------
Non-current assets
Intangible assets 13.8 15.7 14.8
Property, plant and equipment 80.3 71.8 78.5
Investment in joint ventures 28.0 17.4 20.8
Retirement benefit surplus 6.8 4.6 6.8
Deferred tax assets 14.4 42.9 20.9
Other financial assets 0.2 0.7 0.6
Trade and other receivables 17.4 12.1 16.1
------------------------------------- ---- ------- ------- -------
Non-current assets 160.9 165.2 158.5
------------------------------------- ---- ------- ------- -------
Current assets
Inventories 443.3 369.1 377.8
Other financial assets 0.3 0.4 0.6
Trade and other receivables 258.7 254.9 258.4
Cash and cash equivalents 144.6 117.8 141.3
------------------------------------- ---- ------- ------- -------
Current assets 846.9 742.2 778.1
------------------------------------- ---- ------- ------- -------
Total assets 1,007.8 907.4 936.6
------------------------------------- ---- ------- ------- -------
Current liabilities
Bank overdrafts and loans - (0.1) -
Trade and other payables (700.1) (600.6) (670.5)
Tax liabilities (3.3) (11.4) (2.7)
Provisions (1.2) (1.0) (0.9)
------------------------------------- ---- ------- ------- -------
Current liabilities (704.6) (613.1) (674.1)
------------------------------------- ---- ------- ------- -------
Non-current liabilities
Interest-bearing loans and borrowings (30.2) (30.1) (30.1)
Other payables (51.3) (50.8) (36.8)
Retirement benefit obligations (48.1) (137.5) (67.0)
Provisions (21.4) (19.1) (18.1)
Deferred tax liabilities (12.7) (1.4) (2.0)
------------------------------------- ---- ------- ------- -------
Non-current liabilities (163.7) (238.9) (154.0)
------------------------------------- ---- ------- ------- -------
Total liabilities (868.3) (852.0) (828.1)
------------------------------------- ---- ------- ------- -------
Net assets 2 139.5 55.4 108.5
------------------------------------- ---- ------- ------- -------
Equity
Share capital 0.4 0.4 0.4
Share premium 22.7 19.6 20.0
Capital redemption reserve 2.7 2.7 2.7
Retained earnings 116.3 38.3 88.0
Cash flow hedge reserve (2.4) (5.6) (2.4)
Translation reserve (0.2) - (0.2)
------------------------------------- ---- ------- ------- -------
Total equity 6 139.5 55.4 108.5
------------------------------------- ---- ------- ------- -------
Consolidated cash flow statement
Unaudited Unaudited
6 months to 6 months to Year to
31 December 31 December 30 June
2006 2005 2006
£m £m £m
------------------------------------- ---- ------- ------- -------
Cash flows from operating activities
Profit before
tax 36.2 28.4 59.1
Adjustments Share of post tax profits from (1.8) (1.3) (3.2)
joint ventures
Normal contributions to pension (0.7) 0.2 (0.2)
fund in excess of pension
charge
Share-based payments charge 1.6 0.4 1.1
Amortisation of intangible 1.0 1.0 1.9
assets
Depreciation charges 7.3 6.1 13.5
Profit on disposal of property, (0.3) (1.2) (1.1)
plant & equipment
Net finance cost 0.1 0.2 0.1
--------------------------------------- ---- ------- ------- -------
Operating cash
flows before
movements in
working
capital 43.4 33.8 71.2
Special
contributions
to pension
fund (8.0) - (31.5)
Increase in
inventories (2.8) (40.5) (49.3)
Increase in
receivables (1.4) (18.7) (26.7)
Increase in
payables 10.1 66.3 131.8
Increase in
provisions 3.4 2.5 1.1
------------------------------------- ---- ------- ------- -------
Cash inflow
from operating
activities 44.7 43.4 96.6
Interest
received 3.1 2.5 5.3
Income taxes
paid (7.4) (6.5) (11.3)
------------------------------------- ---- ------- ------- -------
Net cash
generated from
operating
activities 40.4 39.4 90.6
------------------------------------- ---- ------- ------- -------
Cash flows from investing activities
Proceeds from
sale of
property,
plant &
equipment 0.9 4.2 4.6
Proceeds from
sale of
investments - - 1.4
Dividends
received from
joint ventures 0.5 1.0 1.3
Purchases of
property,
plant &
equipment (7.7) (8.0) (23.2)
Acquisition of
subsidiaries (20.0) - (10.1)
Investment in
joint ventures (5.4) (0.6) (0.6)
------------------------------------- ---- ------- ------- -------
Net cash used
in investing
activities (31.7) (3.4) (26.6)
------------------------------------- ---- ------- ------- -------
Cash flows from financing activities
Purchase of
own shares (0.4) (1.5) (2.0)
Interest paid (1.3) (1.3) (2.7)
Dividends paid (3.7) (3.7) (6.2)
------------------------------------- ---- ------- ------- -------
Net cash used
in financing
activities (5.4) (6.5) (10.9)
------------------------------------- ---- ------- ------- -------
Net increase
in cash and
cash
equivalents 3.3 29.5 53.1
Opening net
cash and cash
equivalents 141.3 88.2 88.2
------------------------------------- ---- ------- ------- -------
Closing net
cash and cash
equivalents 144.6 117.7 141.3
------------------------------------- ---- ------- ------- -------
Reconciliation of net cash flow to movement
in net funds
Net increase
in cash and
cash
equivalents 3.3 29.5 53.1
Increase in
long term
borrowings (0.1) - -
Opening net
funds 111.2 58.1 58.1
------------------------------------- ---- ------- ------- -------
Closing net
funds 114.4 87.6 111.2
------------------------------------- ---- ------- ------- -------
Net funds consist of:
Cash and cash
equivalents 144.6 117.8 141.3
Overdrafts - (0.1) -
------------------------------------- ---- ------- ------- -------
Net cash and
cash
equivalents 144.6 117.7 141.3
Long-term
borrowings (30.2) (30.1) (30.1)
------------------------------------- ---- ------- ------- -------
Net funds 114.4 87.6 111.2
------------------------------------- ---- ------- ------- -------
Notes to the financial statements
1. Basis of preparation
This interim financial information has been prepared applying the accounting
policies and presentation that were applied in the preparation of the Company's
published consolidated financial statements for the year ended 30 June 2006.
The interim financial information in this statement does not constitute
statutory accounts, as defined in section 240 of the Companies Act 1985. The
auditors' report on the statutory accounts for the year to 30 June 2006 was
unqualified and did not contain a statement under section 237 of the Companies
Act 1985. Statutory accounts for the year to 30 June 2006 have been delivered to
the Registrar of Companies. The interim financial statements were approved by
the Board of Directors on 16 March 2007. The preparation of the interim
financial statements requires management to make assumptions and estimates about
future events which are uncertain, the actual outcome of which may result in a
materially different outcome from that anticipated.
2 Segmental analysis
For management purposes the Group is organised into five operating divisions,
Construction, Support Services, Homes, Property and Infrastructure Investment.
These divisions are the basis on which the Group reports its primary segmental
information.
Support Infrastructure
Construction Services Homes Property Investment Centre Group
£m £m £m £m £m £m £m
---------------------- ------- ------ ------ ------ ------- ------ ------
Six months to 31
December 2006
Revenue
Group and
share of joint
ventures 675.2 142.7 151.8 43.5 7.3 - 1,020.5
Less share of
joint ventures - - - (34.1) (6.6) - (40.7)
----------------------- ------- ------ ------ ------ ------- ------ ------
Group revenue 675.2 142.7 151.8 9.4 0.7 - 979.8
----------------------- ------- ------ ------ ------ ------- ------ ------
Profit
Group
operating
profit 9.5 4.1 20.4 5.6 (0.3) (4.8) 34.5
Share of joint
ventures'
operating
profit - - - 3.6 0.8 - 4.4
----------------------- ------- ------ ------ ------ ------- ------ ------
Group and
share of joint
ventures 9.5 4.1 20.4 9.2 0.5 (4.8) 38.9
Share of joint
ventures -
finance cost - - - (1.2) (0.5) - (1.7)
- tax - - - (0.7) (0.2) - (0.9)
----------------------- ------- ------ ------ ------ ------- ------ ------
Profit from
operations 9.5 4.1 20.4 7.3 (0.2) (4.8) 36.3
Finance
income/(cost) 7.8 - (6.9) (0.7) 0.7 (1.0) (0.1)
----------------------- ------- ------ ------ ------ ------- ------ ------
Profit before
tax 17.3 4.1 13.5 6.6 0.5 (5.8) 36.2
----------------------- ------- ------ ------ ------ ------- ------ ------
Balance sheet
Total assets 275.2 76.7 425.3 48.6 4.0 33.4 863.2
Total
liabilities (516.2) (82.8) (138.6) (5.9) (4.6) (90.0) (838.1)
----------------------- ------- ------ ------ ------ ------- ------ ------
Net operating
assets/(liabil
ities) (241.0) (6.1) 286.7 42.7 (0.6) (56.6) 25.1
Cash, net of
debt 322.4 17.8 (163.0) (23.8) (5.7) (33.3) 114.4
----------------------- ------- ------ ------ ------ ------- ------ ------
Net assets 81.4 11.7 123.7 18.9 (6.3) (89.9) 139.5
----------------------- ------- ------ ------ ------ ------- ------ ------
Notes to the financial statements continued
2 Segmental analysis continued
Support Infrastructure
Construction Services Homes Property Investment Centre Group
£m £m £m £m £m £m £m
---------------------- ------- ------- ------- ------- ------- ------- -------
Six months to 31
December 2005
Revenue
Group and
share of joint
ventures 603.7 139.1 134.8 38.3 6.7 - 922.6
Less share of
joint ventures (2.7) - - (32.1) (6.5) - (41.3)
---------------------- ------- ------- ------- ------- ------- ------- -------
Group revenue 601.0 139.1 134.8 6.2 0.2 - 881.3
---------------------- ------- ------- ------- ------- ------- ------- -------
Profit
Group
operating
profit 8.0 2.9 19.8 2.9 (0.9) (5.4) 27.3
Share of joint
ventures'
operating
profit 0.2 - - 2.5 0.7 - 3.4
---------------------- ------- ------- ------- ------- ------- ------- -------
Group and
share of joint
ventures 8.2 2.9 19.8 5.4 (0.2) (5.4) 30.7
Share of joint
ventures -
finance cost - - - (1.0) (0.3) - (1.3)
- tax - - - (0.6) (0.2) - (0.8)
---------------------- ------- ------- ------- ------- ------- ------- -------
Profit from
operations 8.2 2.9 19.8 3.8 (0.7) (5.4) 28.6
Finance
income/(cost) 6.8 (0.5) (6.4) (0.3) 0.5 (0.3) (0.2)
---------------------- ------- ------- ------- ------- ------- ------- -------
Profit before
tax 15.0 2.4 13.4 3.5 (0.2) (5.7) 28.4
---------------------- ------- ------- ------- ------- ------- ------- -------
Balance sheet
Total assets 252.2 77.7 357.7 41.8 (3.1) 63.3 789.6
Total
liabilities (452.6) (76.5) (103.9) (8.1) (2.6) (178.1) (821.8)
---------------------- ------- ------- ------- ------- ------- ------- -------
Net operating
assets/(liabil
ities) (200.4) 1.2 253.8 33.7 (5.7) (114.8) (32.2)
Cash, net of
debt 278.3 8.6 (187.7) (19.0) (4.5) 11.9 87.6
---------------------- ------- ------- ------- ------- ------- ------- -------
Net assets 77.9 9.8 66.1 14.7 (10.2) (102.9) 55.4
---------------------- ------- ------- ------- ------- ------- ------- -------
Year to 30 June 2006
Revenue
Group and
share of joint
ventures 1,218.1 281.3 277.9 47.5 13.5 - 1,838.3
Less share of
joint ventures (2.6) - - (40.0) (12.5) - (55.1)
--------------------- ------- ------- ------- ------- ------- ------- -------
Group revenue 1,215.5 281.3 277.9 7.5 1.0 - 1,783.2
--------------------- ------- ------- ------- ------- ------- ------- -------
Profit
Group
operating
profit 17.2 6.8 41.6 4.2 (2.1) (11.7) 56.0
Share of joint
ventures'
operating
profit 0.8 - - 5.0 1.4 - 7.2
--------------------- ------- ------- ------- ------- ------- ------- -------
Group and
share of joint
ventures 18.0 6.8 41.6 9.2 (0.7) (11.7) 63.2
Share of joint
ventures -
finance cost - - - (2.1) (0.5) - (2.6)
- tax (0.1) - - (0.8) (0.5) - (1.4)
--------------------- ------- ------- ------- ------- ------- ------- -------
Profit from
operations 17.9 6.8 41.6 6.3 (1.7) (11.7) 59.2
Finance
income/(cost) 13.7 (0.5) (13.1) (0.9) 1.2 (0.5) (0.1)
--------------------- ------- ------- ------- ------- ------- ------- -------
Profit before
tax 31.6 6.3 28.5 5.4 (0.5) (12.2) 59.1
--------------------- ------- ------- ------- ------- ------- ------- -------
Balance sheet
Total assets 281.3 77.3 351.1 44.6 (0.1) 41.1 795.3
Total
liabilities (496.6) (78.2) (112.3) (5.2) (3.2) (102.5) (798.0)
--------------------- ------- ------- ------- ------- ------- ------- -------
Net operating
assets/(liabil
ities) (215.3) (0.9) 238.8 39.4 (3.3) (61.4) (2.7)
Cash, net of
debt 298.7 12.5 (165.8) (23.8) (3.8) (6.6) 111.2
--------------------- ------- ------- ------- ------- ------- ------- -------
Net assets 83.4 11.6 73.0 15.6 (7.1) (68.0) 108.5
--------------------- ------- ------- ------- ------- ------- ------- -------
Net operating assets represent net assets excluding cash, bank overdrafts, long
term borrowings and interest-bearing inter-company loans.
Notes to the financial statements continued
3 Taxation
The taxation charge for the six months ended 31 December 2006 has been
calculated at 29% (June 2006 29%, December 2005 29.5%) of underlying profit
before tax, being profits adjusted for the Group's share of tax in equity
accounted joint ventures. This represents the estimated effective rate of tax
for the year.
Unaudited Unaudited
31 December 31 December 30 June
2006 2005 2006
£m £m £m
---------------------------------------- ------- ------- -------
Profit before tax 36.2 28.4 59.1
Add: tax on joint ventures 0.9 0.8 1.4
---------------------------------------- ------- ------- -------
Underlying profit before tax 37.1 29.2 60.5
---------------------------------------- ------- ------- -------
Tax charge 9.9 7.8 16.2
Add: tax on joint ventures 0.9 0.8 1.4
---------------------------------------- ------- ------- -------
Underlying tax charge 10.8 8.6 17.6
---------------------------------------- ------- ------- -------
Rate 29% 29.5% 29%
---------------------------------------- ------- ------- -------
4 Dividends
Amounts recognised as distributions to equity holders in the period.
Unaudited Unaudited
31 December 31 December 30 June
2006 2005 2006
£m £m £m
---------------------------------------- ------- ------- -------
Final dividend for the year ended 30
June 2006 of 17.8 pence (2005: 15.2
pence) 6.3 5.4 5.4
Interim dividend for the year ended 30
June 2006 of 8.2 pence - - 2.9
---------------------------------------- ------- ------- -------
6.3 5.4 8.3
---------------------------------------- ------- ------- -------
The proposed interim dividend of 9.6 pence (2006: 8.2 pence) had not been
approved at the balance sheet date and so has not been included as a liability
in these financial statements. The dividend totalling £3.5m will be paid on 18
May 2007 to shareholders on the register at the close of business on 30 March
2007. A scrip dividend alternative will be offered.
5 Earnings per share
Unaudited Unaudited
31 December 31 December 30 June
2006 2005 2006
£m £m £m
---------------------------------------- ------- ------- -------
Profit after tax 26.3 20.6 42.9
Add: amortisation of intangible assets 1.0 1.0 1.9
Less: tax on the amortisation of
intangible assets (0.3) (0.3) (0.5)
---------------------------------------- ------- ------- -------
Adjusted profit after tax 27.0 21.3 44.3
---------------------------------------- ------- ------- -------
million million million
---------------------------------------- ------- ------- -------
Weighted average number of shares used for
EPS
- basic 35.6 35.5 35.5
- diluted 36.1 35.8 36.1
pence pence pence
---------------------------------------- ------- ------- -------
Earnings per share
- basic 73.9 58.0 120.8
- diluted 72.9 57.5 118.8
Adjusted earnings per share after excluding
the amortisation of intangible assets
- basic 75.8 60.0 124.8
- diluted 74.8 59.5 122.7
---------------------------------------- ------- ------- -------
Notes to the financial statements continued
6 Reconciliation of changes in total equity
Unaudited Unaudited
31 December 31 December 30 June
2006 2005 2006
£m £m £m
---------------------------------------- ------- ------- -------
Opening shareholders' equity 108.5 52.8 52.8
Adjustments on adoption of IAS 32 and
IAS 39 on 1 July 2005 (net of tax) - (5.3) (5.3)
---------------------------------------- ------- ------- -------
Restated opening shareholders' equity 108.5 47.5 47.5
Recognised income and expense for the
period 33.4 12.7 66.5
Dividends paid (6.3) (5.4) (8.3)
Issue of own shares 2.7 1.7 2.1
Purchase of own shares (0.4) (1.5) (2.0)
Share-based payments charge 1.6 0.4 1.1
Deferred tax on share-based payments - - 1.6
---------------------------------------- ------- ------- -------
Closing shareholders' equity 139.5 55.4 108.5
---------------------------------------- ------- ------- -------
Independent review report to Kier Group plc
Introduction
We have been instructed by the Company to review the financial information for
the six months ended 31 December 2006 which comprises the income statement, the
balance sheet, statement of recognised income and expense and cash flow
statement. We have read the other information contained in the interim report
and considered whether it contains any apparent misstatements or material
inconsistencies with the financial information.
This report is made solely to the Company in accordance with the terms of our
engagement to assist the Company in meeting the requirements of the Listing
Rules of the Financial Services Authority. Our review has been undertaken so
that we might state to the Company those matters we are required to state to it
in this report and for no other purpose. To the fullest extent permitted by law,
we do not accept or assume responsibility to anyone other than the Company for
our review work, for this report, or for the conclusions we have reached.
Directors' responsibilities
The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by, the directors. The directors
are responsible for preparing the interim report in accordance with the Listing
Rules of the Financial Services Authority which require that the accounting
policies and presentation applied to the interim figures should be consistent
with those applied in preparing the preceding annual accounts except where any
changes, and the reasons for them, are disclosed.
Review work performed
We conducted our review in accordance with guidance contained in Bulletin 1999/4
Review of interim financial information issued by the Auditing Practices Board
for use in the UK. A review consists principally of making enquiries of group
management and applying analytical procedures to the financial information and
underlying financial data and, based thereon, assessing whether the accounting
policies and presentation have been consistently applied unless otherwise
disclosed. A review excludes audit procedures such as tests of controls and
verification of assets, liabilities and transactions. It is substantially less
in scope than an audit performed in accordance with International Standards on
Auditing (UK and Ireland) and therefore provides a lower level of assurance than
an audit. Accordingly, we do not express an audit opinion on the financial
information.
Review conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 31 December 2006.
KPMG Audit Plc
Chartered Accountants
Registered Auditor
London
16 March 2007
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