Interim Results - 6 Months to 31 December 1999
Kier Group PLC
16 March 2000
Kier Group plc
Interim Results
For the six months to 31 December 1999
Highlights
* Kier's growth continues into eighth year
* Record interim pre-tax profits £6.1m, up 30% (1998: £4.7m)
* Operating margins improve, operating profit up 18% at
£4.7m (1998: £4.0m)
* Earnings per share up 31% to 13.8p (1998: 10.5p)
* UK markets stable and strong position carried into second
half
Chairman's Statement
Kier Group's interim results to 31 December 1999 confirm that
our profits are still growing strongly. Pre-tax profit at
£6.1m is 30% ahead of 1998's £4.7m and basic EPS at 13.8p is
31% ahead. Returns have improved in both Construction and
Homes & Property and these excellent results augur well for the
full year.
Across the business, total operating profit is up 18% to £4.7m,
achieved from turnover up just 4% to £484.7m. Profit of £0.5m
(1998: NIL) arose on disposal of our investment in property
development at Oxford. Adjusted EPS, excluding this investment
profit, was 12.5p, up 19% on 1998.
Net interest receivable and similar income is increased from
£0.7m to £0.9m, including this year £0.3m dividend income
(1998: NIL).
Kier's liquidity remains strong with £39.2m of net liquid funds
in the December balance sheet (1998: £27.4m).
An interim dividend of 3.4p will be paid on 17 May 2000 to
shareholders on the register at 31 March 2000. This represents
a 13% increase on 1998 (3.0p). There will again be a scrip
dividend alternative.
Construction
The gradual improvement in operating margins and the continuing
strong cash flow from our construction business is firm
evidence that our strategy to maintain the quality and improve
the returns from Construction is working.
Kier Regional, our network of 28 construction offices across
the UK, offering a construction service from the smallest
contract up to the £12m-£15m level, has again proved a solid
backbone to the business. Operations in the period were at a
similar volume to last year, but with orders at a record level,
we expect an exceptionally busy second half. Negotiated and
partnered work now accounts for 40% of turnover, while we also
continue to pursue traditionally tendered work to ensure we
remain fully competitive. Spread of risk remains a feature,
and the outlying offices such as Norwich, Durham, Carlisle and
Newport are now contributing to the growth. Kier National,
dealing with major projects, saw growth principally in Kier
Build, with contracts from major office developers a feature,
both in London and provincial centres. Kier Rail is also
progressing, and is to refurbish and upgrade the chain of
depots required to service the new West Coast Mainline trains.
The civil engineering market remains short of opportunities,
restricting growth in this field, although we remain
prominently involved in power generation projects .
The international contracting markets in which we operate
remain less buoyant than the UK. The new team installed last
year in Kier International is making headway in its task but
the return to profitability in this sector has still to be
achieved.
In the FM sector, our activities remain modest relative to
construction, but grew at 10% in the period. Their expansion
remains an objective, which we believe the introduction of the
'Best Value' programme to local authorities will facilitate.
We are currently short-listed on two major local authority
'externalisation' projects.
Overall, our construction and FM operations increased total
operating profit by 57% to £2.2m, a notable achievement. Total
turnover was £438.6m (1998: £416.7m).
Homes & Property
Both our residential and commercial property companies
contributed strongly to the interim result and are well placed
for satisfactory results over the year as a whole.
In Kier Residential, development of our three homes brands
continued (Bellwinch and Twigden in South East England and Kier
Homes in Scotland). All have experienced a generally firm
underlying market little affected by the several interest rate
rises so far announced. Prices have moved ahead in most
locations, and with land increasingly scarce (and expensive)
and the planning process increasingly problematic, our
emphasis continues to be on quality not quantity. We sold 253
homes in the period (1998: 307) at an average sales price of
£143,800 (1998: £121,900) achieving approximately the same
turnover as last year. A major project completed in the period
was the remediation and provision of access and services to
Waltham Park, the 30 acre residential site by the M25,
following which we have sold parts of this valuable site to
other developers so as to redeploy capital. This contributed
£7.4m to our turnover. At 31 December our consented land-bank
totalled 1,650 plots (1998: 1,543) with a further 230 under
contract, at an average plot cost of £33,600 (1998: £31,200).
Orders carried over into January are well ahead of last year,
as have been reservations so far in 2000, so we anticipate a
strong spring sales season, for which we are well prepared.
Our commercial property team has made progress on a number of
larger schemes and is now concluding an important pre-let on a
major distribution site near Northampton which we are
developing in joint venture. The period's result includes a
dividend of £0.3m from our participation in the Arlington
Business Park on Oxford's Eastern Bypass, representing our
interest in several successful development phases over recent
years. Our long term investment in this project was
repurchased by Arlington Securities plc during December on
terms showing a satisfactory investment gain of £0.5m. Our
close association with Arlington Securities will continue
through the partnering relationship of our Construction
division at Oxford and on other projects.
Homes & Property contributed operating profit of £4.7m (1998:
£4.4m) in addition to the dividend and investment profit
mentioned above. Turnover was £46.1m (1998: £49.3m).
Private Finance Initiative/Private Public Partnership
We continue to develop our portfolio of PFI and PPP projects
with both operational and equity participation. We are
watching with interest the increasing acceptance of partnering
principles across more areas of public sector procurement. We
know partnering works in the private sector and more and more
of our teams have experience of it. We have a lot to bring to
the table as local authorities and spending agencies consider
their strategies for procuring both new-build and maintenance
in the light of 'Best Value' and similar initiatives.
Progress on the construction phase at the major PFI hospital in
East Kilbride has been ahead of expectation and occupation is
now expected to begin in February 2001, over three months
early. Kier, besides constructing this, holds 50% of the
equity in this project. Our Welsh PFI hospital project has
recently achieved commercial close. Upon finalisation of the
finance package, this will generate a 27 year contract for our
FM division. We will hold 25% of the equity in this project.
We continue to progress a number of smaller 'preferred bidder'
positions and are well represented in the larger health
projects currently going through competitive selection
processes. Bidding costs remain high and account for the
increase in central charges in our interim results. We are
confident these will be rewarded with both operational and
investment returns over future years.
Prospects
Both the Construction and Homes & Property segments of our
business are carrying a strong position forward into the second
half of the year, having recorded solid advances in the first
half. Construction opportunities remain attractive in the
majority of our markets where our position is buttressed by our
teams' proven ability to adopt the best modern practices in the
construction process. We should continue to increase our share
of UK markets and to improve steadily our returns, in line with
the strategy outlined last year. Our Homes activities also
will continue to benefit from the well spread land-bank in
South East England and the growing maturity of the Scottish
operation.
While the rate of our growth is dependent on general economic
conditions, current national policies will, I believe, deliver
shallow economic cycles which will not disrupt the forward
progress of our markets. I therefore expect this year's
outturn to be satisfactory to shareholders, and I am optimistic
for the medium to longer term.
Colin Busby
Chairman
For further information, please contact:
Colin Busby/Duncan Brand
Kier Group plc
Tel: 01767 640111
Jerry Wood/Caroline Sturdy
Bell Pottinger Financial
Tel: 020 7353 9203
Consolidated Profit and Loss Account
Notes Unaudited Unaudited
6 months 6 months Year to
to to
31 31 30 June
December December
1999 1998 1999
£m £m £m
Total turnover 1 484.7 466.0 962.9
---------- ---------- ----------
Operating profit -
Group 4.2 3.4 10.9
Share of operating
profit - joint
ventures 0.5 0.6 1.7
---------- ---------- ----------
Total operating profit
- Group and share of
joint ventures 1 4.7 4.0 12.6
Profit on disposal of
fixed asset investment 2 0.5 - -
Income from investments 0.3 - -
Net interest receivable 0.6 0.7 1.2
---------- --------- ----------
Profit on ordinary
activities before
taxation 1 6.1 4.7 3.8
Taxation 3 (1.6) (1.3) (3.9)
---------- ---------- ----------
Profit on ordinary
activities after
taxation 4.5 3.4 9.9
Ordinary dividend 4 (1.1) (1.0) (3.0)
---------- ---------- ----------
Retained profit
attributable to
ordinary shareholders 3.4 2.4 6.9
---------- ---------- ----------
Earnings per share 5
Undiluted 13.8p 10.5p 30.6p
Undiluted before profit
on disposal of fixed
asset investment 12.5p 10.5p 30.6p
Diluted 13.5p 10.4p 30.2p
Dividend per share 3.4p 3.0p 9.3p
Consolidated Balance Sheet
Unaudited Unaudited
31 December 31 December 30 June
1999 1998 1999
£m £m £m
Fixed assets 48.0 47.6 49.4
---------- ---------- ----------
Current assets
Stock 122.0 100.9 115.7
Debtors 155.1 153.0 167.3
Short term investments 0.6 - 0.6
Cash at bank and in
hand 39.0 31.3 44.1
---------- ---------- ----------
316.7 285.2 327.7
---------- ---------- ----------
Current liabilities
Creditors - amounts
falling due within one
year (316.0) (293.3) (332.8)
---------- ---------- ----------
Net current
assets/(liabilities) 0.7 (8.1) (5.1)
Total assets less
current liabilities 48.7 39.5 44.3
Creditors - amounts
falling due after more
than one year (5.9) (8.5) (5.3)
Provisions for
liabilities and
charges (5.9) (2.1) (5.5)
---------- ---------- ----------
Net assets 36.9 28.9 33.5
---------- ---------- ----------
Capital and reserves
Called up share capital 0.3 0.3 0.3
Share premium account 9.6 9.2 9.4
Other reserves 2.7 2.7 2.7
Profit and loss account 24.3 16.7 21.1
---------- ---------- ----------
Shareholders' funds 36.9 28.9 33.5
---------- ---------- ----------
Consolidated Cash Flow Statement
Unaudited Unaudited
6 months to 6 months to Year to
31 December 31 December 30 June
1999 1998 1999
£m £m £m
Operating activities
Operating profit 4.2 3.4 10.9
Depreciation charges 3.8 3.1 6.7
(Increase)/decrease in
working capital (8.3) (11.0) 1.2
---------- ---------- ----------
Net cash
(outflow)/inflow from
operating activities (0.3) (4.5) 18.8
Returns on investments
and servicing of
finance 0.7 0.9 1.3
Taxation (0.2) (0.4) (3.5)
Capital and investment
expenditure (1.4) (6.8) (11.7)
Acquisitions - (10.0) (10.1)
Equity dividends paid (1.8) (1.1) (1.9)
---------- ---------- ----------
Cash (outflow) before
management of liquid
resources and
financing (3.0) (21.9) (7.1)
Management of liquid
resources (13.4) (1.1) 14.3
---------- ---------- ----------
(Decrease)/increase in
cash in the period (16.4) (23.0) 7.2
Increase/(decrease) in
liquid resources 13.4 1.1 (14.3)
---------- ---------- -----------
(Decrease) in net funds (3.0) (21.9) (7.1)
Opening net funds 42.2 49.3 49.3
---------- ---------- ----------
Closing net funds 39.2 27.4 42.2
---------- ---------- ----------
Analysis of closing net
funds
Cash at bank and in
hand 13.9 4.2 32.4
Bank overdrafts (0.4) (3.9) (2.5)
Short term bank
deposits 25.1 27.1 11.7
Short term investments 0.6 - 0.6
---------- ---------- ----------
Closing net funds 39.2 27.4 42.2
---------- ---------- ----------
Notes
1 Segmental information
Unaudited Unaudited
6 months to 6 months to Year to
31 December 31 December 30 June
1999 1998 1999
£m £m £m
Turnover
Construction 438.6 416.7 857.7
Homes & Property 46.1 49.3 105.2
---------- ---------- ----------
484.7 466.0 962.9
---------- ---------- ----------
United Kingdom 438.1 430.3 884.9
Rest of World 46.6 35.7 78.0
---------- ---------- ----------
484.7 466.0 962.9
---------- ---------- ----------
Operating profit
Construction 2.2 1.4 4.0
Homes & Property 4.7 4.4 12.0
Corporate
overhead/Finance (2.2) (1.8) (3.4)
---------- ---------- ----------
4.7 4.0 12.6
---------- ---------- ----------
United Kingdom 7.0 3.4 14.1
Rest of World (2.3) 0.6 (1.5)
---------- ---------- ----------
4.7 4.0 12.6
---------- ---------- ----------
Profit before tax
Construction 5.6 5.4 11.0
Homes & Property 3.9 2.7 9.0
Corporate
overhead/Finance (3.4) (3.4) (6.2)
---------- --------- ----------
6.1 4.7 13.8
---------- ---------- ----------
United Kingdom 8.7 4.5 15.9
Rest of World (2.6) 0.2 (2.1)
---------- ---------- ----------
6.1 4.7 13.8
---------- ---------- ----------
Net assets
Construction 50.7 49.5 50.2
Homes & Property 22.5 17.1 21.0
Corporate
overhead/Finance (36.3) (37.7) (37.7)
---------- ---------- ----------
36.9 28.9 33.5
---------- ---------- ----------
United Kingdom 36.3 24.5 30.9
Rest of World 0.6 4.4 2.6
---------- ---------- ----------
36.9 28.9 33.5
---------- ---------- ----------
2 Profit on disposal of fixed asset investment
During the period, the Group realised a profit on the
disposal of its 10% shareholding in Oxford Business Park
(South) Limited, a company engaged in commercial property
development, which had been held as a fixed asset
investment.
3 Taxation
The corporation tax rate of 26.2% (June 1999 28.3%,
December 1998 27.7%) 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.
4 Dividends per ordinary share
The interim dividend of 3.4p (December 1998 3.0p) per
ordinary share will be paid on 17 May 2000 to shareholders
on the register at the close of business on 31 March 2000.
A scrip dividend alternative will be offered.
5 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
1999 1998 1999
£m £m £m
Basic 32.7 32.3 32.4
Diluted 33.3 32.7 32.8
The diluted earnings per share takes account of the
dilutive effect of options and is calculated in accordance
with FRS 14.
6 Reconciliation of movements in shareholders' funds
£m
Shareholders' funds at 30 June 1999 33.5
Issue of new ordinary shares 0.2
Currency translation (0.2)
Retained profit for period 3.4
Shareholders' funds at 31 December 1999 36.9
7 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 1999 and the abridged consolidated balance
sheet at 30 June 1999 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.
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