REG - Kier Group PLC - FY24 Results
12/09/2024 07:00
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RNS Number : 8574D Kier Group PLC 12 September 2024
12 September 2024
Kier Group plc
FY24 Results
Year of significant growth; material debt reduction; new long-term growth plan
Kier Group plc ("Kier", the "Company" or the "Group"), a leading UK
infrastructure services, construction and property group, announces its
results for the year ended 30 June 2024 ("FY24" or the "year").
Financial Highlights - Continuing Operations
(£m unless otherwise stated) Year to Year to Change
30 June 2024 30 June 2023
Adjusted results
Revenue(1) 3,969.4 3,405.4 17%
Adjusted operating profit(2) 150.2 131.5 14%
Adjusted operating margin (%) 3.8 3.9 (10)bps
Adjusted profit before tax(3) 118.1 104.8 13%
Adjusted basic earnings per share (p) (note 9) 20.6 19.2 7%
Net cash(4) 167.2 64.1 161%
Average month-end net debt (116.1) (232.1) 50%
Free cash flow 185.9 132.3 41%
Order book (£bn) 10.8 10.1 7%
Statutory reported
Group revenue 3,905.1 3,380.7 16%
Operating profit 103.1 81.5 27%
Profit before tax 68.1 51.9 31%
Basic earnings per share (p) (note 9) 11.8 9.5 24%
Proposed full year dividend per share (p) (note 8) 5.15 - -
1 Revenue of the Group and its share of revenue from joint ventures
2Stated before adjusting items of £23.9m (FY23: £30.8m) and amortisation of
acquired intangible assets of £23.2m (FY23: £19.2m).
3 Stated before adjusting items of £26.8m (FY23: £33.7m) and amortisation of
acquired intangible assets of £23.2m (FY23: £19.2m).
4 Disclosed net of the effect of hedging instruments and excludes leases - see
note 13 to the preliminary financial statements.
FY24 Highlights
· Revenue growth and improved profitability driving material
deleveraging
o Revenue growth of 17% driven by strong operational delivery across
divisions
o Adjusted operating profit increased 14% to £150.2m (FY23: £131.5m)
o Adjusted operating margin at 3.8%, ahead of the medium-term target of
c.3.5%
o Adjusted basic EPS: 20.6p (FY23: 19.2p), up 7%
o Reported operating profit increased 27% to £103.1m (FY23: £81.5m)
o Free Cash Flow of £185.9m outperformed the prior year (FY23: £132.3m)
with an operating free cash flow conversion of 144.5%
o Net cash of £167.2m, more than double the prior year-end (FY23:
£64.1m)
o Average month-end net debt halved to £(116.1)m (FY23: £(232.1)m)
· High quality order book, increased 7% to £10.8bn (FY23: £10.1bn)
providing significant visibility over FY25 and beyond
· Acquisition of Buckingham Group's rail assets fully integrated into
the business and continues to perform ahead of the pre-acquisition plan
· Refinancing complete with RCF maturity profile to 2027 and Senior
Notes to 2029
· Proposed final dividend of 3.48p per share, together with an interim
dividend of 1.67p, giving a total of 5.15p for FY24
· New long-term sustainable growth plan announced following the
successful delivery of the FY21 medium-term value creation plan
· Current trading in-line with Board expectations
Andrew Davies, Chief Executive, said:
"The past three years have seen the Group achieve significant operational and
financial progress. The strong results for FY24 are testament to the hard work
and commitment of our people who have enhanced our resilience and strengthened
our financial position in-line with our medium-term value creation plan. Our
order book remains strong and growing at £10.8bn and provides us with good
multi-year revenue visibility. The contracts within our order book reflect the
bidding discipline and risk management now embedded in the business.
I am also pleased to report that the Group significantly reduced its average
month-end net debt position as well as improved its year-end net cash
position. I am confident we can sustain this momentum going forward.
The Group has started the financial year well and is trading in-line with the
Board's expectations. The Group is well positioned to continue benefiting from
UK Government infrastructure spending commitments and we are confident in
sustaining the strong cash generation evidenced especially over the last two
years allowing us to significantly deleverage, increase dividends to
shareholders and deliver the evolved long-term sustainable growth plan which
will benefit all stakeholders."
FY24 Results Presentation
Kier Group plc will host a presentation for analysts and investors at 9:00am
on 12 September 2024 at the offices of FTI Consulting, 200 Aldersgate Street,
London EC1A 4HD.
Analysts wishing to attend should contact FTI Consulting to register -
Connie.Gibson@fticonsulting.com
Analysts unable to attend in person will be able to join the webcast using the
details below:
Webcast: https://www.investis-live.com/kier/66cdecf94763e40c0030c838/jdnu
(https://www.investis-live.com/kier/66cdecf94763e40c0030c838/jdnu)
United Kingdom: +44 800 358 1035
United Kingdom (Local): +44 20 3936 2999
Conference password: 915475
An audio recording will be available on our website in due course.
Online Retail Investor Presentation
Andrew Davies, Chief Executive and Simon Kesterton, Chief Financial Officer
will be hosting a live online retail investor presentation at 10:30 am on 19
September 2024. To attend, please register via the following link:
Zoom Webinar Registration - Kier Group investor presentation
(https://us06web.zoom.us/webinar/register/WN_k40kL8_hSDy4NcaqSBvkPA) .
Further Information:
Kier Group plc
Investor Relations +44 (0) 7933 388 746
Kier Press office +44 (0) 1767 355 096
FTI Consulting +44 (0) 20 3727 1340
Richard Mountain
Cautionary Statement
This announcement does not constitute an offer of securities by the Company.
Nothing in this announcement is intended to be, or intended to be construed
as, a profit forecast or a guide as to the performance, financial or
otherwise, of the Company or the Group whether in the current or any future
financial year. This announcement may include statements that are, or may be
deemed to be, ''forward-looking statements''. These forward-looking statements
can be identified by the use of forward-looking terminology, including the
terms ''believes'', ''estimates'', ''anticipates'', ''expects'', ''intends'',
''plans'', ''target'', ''aim'', ''may'', ''will'', ''would'', ''could'' or
''should'' or, in each case, their negative or other variations or comparable
terminology. They may appear in a number of places throughout this
announcement and include statements regarding the intentions, beliefs or
current expectations of the directors, the Company or the Group concerning,
amongst other things, the operating results, financial condition, prospects,
growth, strategies and dividend policy of the Group or the industry in which
it operates. By their nature, forward-looking statements involve risks and
uncertainties because they relate to events and depend on circumstances that
may or may not occur in the future and may be beyond the Company's ability to
control or predict. Forward-looking statements are not guarantees of future
performance. The Group's actual operating results, financial condition,
dividend policy or the development of the industry in which it operates may
differ materially from the impression created by the forward-looking
statements contained in this announcement. In addition, even if the operating
results, financial condition and dividend policy of the Group, or the
development of the industry in which it operates, are consistent with the
forward-looking statements contained in this announcement, those results or
developments may not be indicative of results or developments in subsequent
periods. Important factors that could cause these differences include, but are
not limited to, general economic and business conditions, industry trends,
competition, changes in government and other regulation, changes in political
and economic stability and changes in business strategy or development plans
and other risks.
Other than in accordance with its legal or regulatory obligations, the Company
does not accept any obligation to update or revise publicly any
forward-looking statement, whether as a result of new information, future
events or otherwise.
Principal Risks and Uncertainties
You are advised to read the section headed ''Principal risks and
uncertainties'' in the Company's Annual Report and Accounts for the year ended
30 June 2023 for a discussion of the factors that could affect the Group's
future performance and the industry in which it operates.
About Kier
Kier is a leading UK infrastructure services, construction and property group.
We provide specialist design and build capabilities and the knowledge, skills
and intellectual capital of our people ensure we are able to project manage
and integrate all aspects of a project.
We take pride in bringing specialist knowledge, sector-leading experience and
fresh thinking to create workable solutions for our clients across the
country.
Together, we have the scale and breadth of skills of a major company, while
retaining a local focus and pride that comes from never being far from our
clients, through a network of offices spanning across England, Wales, Scotland
and Northern Ireland.
For further information and to subscribe to our news alerts, please visit:
www.kier.co.uk (http://www.kier.co.uk)
Follow us on X (formerly Twitter): @kiergroup
Connect with us on LinkedIn: Kier Group
Introduction
The Group delivered a strong set of results for the 12 months ended 30 June
2024 with significant growth in revenue and operating profitability. The
material deleveraging is the result of the Group's focus on operational
excellence and cash management. A clear demonstration of the commitment to our
medium-term value creation plan launched three years ago.
Accordingly, on 7 March 2024, we announced the resumption of dividend
distributions with an interim dividend payment with clear line-of-sight to a
sustainable average month-end net cash position, alongside an appropriate
longer term debt structure.
On 15 February 2024, we completed a successful £250m Senior Notes issue and
extended the existing £261m Revolving Credit Facility ('RCF'), thereby
securing a long-term debt structure for the Group. Given the considerable
progress Kier has made and the Board's ongoing confidence in the Group's
future prospects, a final dividend of 3.48p per share has been proposed -
giving a total dividend of 5.15p for FY24.
The success for future years is underpinned by the year-end order book growing
to £10.8bn in FY24, an increase of 7% against the prior year, resulting from
a large number of contract wins across Infrastructure Services and
Construction, providing multi-year revenue visibility. The new wins consist of
high quality and profitable work in our markets reflecting the bidding
discipline and risk management embedded in the business.
Benefiting from the order book strength and Kier's framework positioning,
c.90% of Group revenue for FY25 is already secured which provides the Board
with a high degree of confidence in our outlook.
New long-term sustainable growth plan
Since the medium-term value creation plan announced in June 2021, the Group
has made significant progress against these financial targets with operating
free cash flow conversion and profit margins met consistently over recent
reporting periods. During that time, the Group has significantly de-risked,
having deleveraged the business markedly, enabling the Group to commence
incremental returns to shareholders.
The direction of travel is expected to be maintained with the recently secured
long-term funding alongside our cash generative business model. We believe
this will comfortably support our organic growth including further increases
to Property investment and value accretive acquisitions. We are now in a
position where we have capital allocation options to drive shareholder value
over the long term.
Accordingly, the Group has evolved its targets.
Revenue: GDP + growth through the cycle
Adjusted operating profit margin: 3.5% +
Cash conversion of operating profit: c.90%
Balance sheet: Average month-end net cash with investment of surplus cash
Dividend: Sustainable dividend policy: c.3 x earnings cover through the cycle
Strategy
The Group's strategy continues to be focused on:
· UK Government, regulated industries and blue-chip customers;
· Operating in the business-to-business market; and
· Contracting through long-term frameworks.
Our core businesses are well-placed to benefit from UK Government and
regulated industry spending commitments to invest in UK infrastructure.
We believe UK infrastructure spending commitments are driven by structural
demand which have a positive influence on Kier's chosen markets. Population
growth, transportation pressures, aged infrastructure, energy security and
climate change are substantial and largely non-discretionary.
Given that public funding may be insufficient to maintain public assets,
customer behaviours are shifting further towards long-term partnerships. These
continue to favour Kier, given our scale, integrated design and project
management capability, track record of delivery and Environment, Social and
Governance ('ESG') credentials.
These positive structural demand trends and customer behaviours are expected
to expand our addressable market opportunities, particularly in water,
environment, energy and affordable housing as well as increased demand in our
Property business. In particular, the Group has been awarded a number of
framework places as part of the significant investment across the AMP8 water
cycle. Kier is well positioned with all the major water companies to support
them with their water infrastructure upgrade and maintenance work.
Customers and winning new work
The Group's core markets have remained favourable. We continue to be a
"strategic supplier" to the UK Government, with c.90% of our revenue generated
from public sector and regulated companies. Our contract awards reflect our
long-standing client relationships and regionally based UK operations.
Highlights in the year:
· Infrastructure Services:
o Birmingham - appointed on a two-year interim extension to deliver
maintenance and repair services across Birmingham's extensive road network
o United Utilities - five-year framework to deliver £100m per annum of
design, engineering, project management and construction services for water
and waste water infrastructure
o Southern Water - appointed to the £3.1bn seven-year Strategic Development
Partnership framework to increase capacity at water supply and waste water
treatment sites
o South West Water - appointed to the £2.8bn five-year Mechanical,
Electrical, Instrumentation, Control and Automation ('MEICA') framework. An
alliance to deliver their water infrastructure plan for 2025-2030
o Anglian Water - appointed on an extension for the next five years of the
Integrated Maintenance, Repair and Developer Services ('IMRDS') alliance to
provide vital repair services and infrastructure improvements across East
Anglia
· Construction:
o Defence - appointed by the Defence Infrastructure Organisation ('DIO') on
a six-year alliance to create 16,000 bed spaces for the Armed Forces in
single-living accommodation.
o Education - awarded four projects worth over £130m
o Healthcare - awarded three projects worth over £55m including Cheshire
Surgical Centre and Princess Royal University Hospital Endoscopy Unit
o Justice and Borders - awarded HMP Channings Wood and HMP Bullingdon design
and build houseblock projects, together worth over £300m
o Other - appointed by Essex County Council to Lot 3 of a four-year £400m
framework to provide design and construction services to public sector
projects
o Kier Places - appointed by Heathrow Airport to deliver its Quieter
Neighbour Support Scheme, a major programme of works over the next eight years
to reduce the impact of aircraft noise on homes, businesses and community
buildings around the airport
Financial summary
Kier's revenue of £4.0bn (FY23: £3.4bn) reflects growth across
Infrastructure Services and Construction. The Group's FY24 results reflect a
strong operational and financial performance.
Our order book has continued to grow and increased 7% year over year to
£10.8bn. Approximately 60% of our order book is under target cost or cost
reimbursable contracts. The remainder of the order book is on fixed priced
contracts where the risk is negotiated and managed with our customers and
supply chain partners.
With over 400 live projects at any given time, we are also regularly
delivering on existing contracts and pricing new contracts which mitigates
against cost pressures. In addition, we have an average order size of c.£20m
in our Construction business which given its modest size, limits our risk
exposure in the event a project does not go to plan.
The Group delivered adjusted operating profit of £150.2m which represents a
14% increase on the prior year (FY23: £131.5m) driven predominantly by
profitable growth in Infrastructure Services.
Group adjusted operating profit margin decreased by 10 basis points to 3.8%
(FY23: 3.9%) due to the timing and mix of projects. The margin remains above
the Group's medium-term plan target and is industry leading. Profit for the
year from continuing operations increased 25% to £51.3m (FY23: £41.0m) with
lower adjusting items, partially offset by an increase in interest costs and
taxation.
Adjusted earnings per share ('EPS') increased 7% to 20.6p (FY23: 19.2p) and
reported EPS increased 24% to 11.8p (FY23: 9.5p).
The Group generated £185.9m of free cash flow in FY24 (FY23: £132.3m), with
the increase attributable to the Group's revenue growth converted to increased
profit and excellent cash conversion. The incremental cash has allowed the
Group to invest further in the Property business, which is currently seeing a
number of exciting opportunities. In addition, the Group experienced a
seasonal working capital inflow of £68.4m, predominantly driven by
Construction.
The Group's net cash position at 30 June 2024 was £167.2m (FY23: £64.1m)
with supplier payment days remaining consistent with the prior year as the
strong volume growth translated to increased cash receipts.
Average month-end net debt for the year ended 30 June 2024 was £(116.1)m
(FY23: £(232.1)m). As noted above the increased activity seen across the
Group which started in Q4 FY23 has translated into cash generation and lower
net debt as well as allowing us to deploy cash to our Property business,
acquire certain assets of Buckingham Group and paying pension deficit
obligations.
In February 2024, we announced the completion of our £250m 5 year Senior
Notes. The proceeds were used to further reduce our USPP ('US Private
Placement') Notes by £37m and lower the RCF to £261m. These revised
long-term debt facilities completed the last stage of the Group's
recapitalisation and provides us with both flexibility and optionality whilst
we continue to deleverage.
Capital allocation
In addition to the long-term sustainable growth plan, the Group has clear
capital allocation priorities, which remain largely unchanged. The Group
maintains a disciplined approach to capital and continuously reviews capital
allocation priorities with the aim of maximising shareholder returns. The
Group's capital allocation is underpinned by its commitment to maintain a
strong balance sheet. The capital priorities are:
· Capex - investment to support its businesses
· Deleveraging - further deleveraging. Targeting an average month-end
net cash position with investment of any surplus cash
· Dividend - targeting a dividend cover of around 3 x earnings through
the cycle
· Property - disciplined non-speculative investment in the Property
segment. ROCE target of 15%
· Mergers and acquisitions - the Group will consider value accretive
acquisitions in core markets
Dividend
The importance of dividends to the Group's shareholders has always been
recognised by the Board and was an important facet of the medium-term value
creation plan launched during FY21. Our stated aim is to deliver a dividend,
covered c.3x by adjusted earnings over the cycle and in a payment ratio of
approximately one-third interim dividend and two thirds final dividend.
The Group has continued to deliver strong operating and financial performance
resulting in material deleveraging during the period. This significant
improvement, combined with the strength of the order book and future prospects
of the Group have resulted in the Board proposing a final dividend of 3.48p
per share. When combined with the interim dividend of 1.67p, the total
dividend of 5.15p in FY24 represents an earnings cover of 4x as we
progressively move to our target of 3x cover.
The final dividend will be paid on 29 November 2024 to shareholders on the
register at close of business on 25 October 2024. The shares will be marked
ex-dividend on 24 October 2024. Kier has a Dividend Reinvestment Plan
('DRIP'), which allows shareholders to reinvest their cash dividends in our
shares. The final election date for the DRIP is 8 November 2024.
Property
Kier's property business invests in and develops sites across the UK, largely
through joint ventures where it partners with local authorities, as well as
blue-chip and regulated businesses. The business typically delivers mixed-use
commercial and residential developments and specialises in urban regeneration,
last mile logistics, modern sustainable office developments and affordable
housing.
The Property division targets a return on capital employed of 15%. A component
of the cash generated by our Construction and Infrastructure Services segments
is invested in long-term property developments. It also recycles cash
generated from completed property transactions as a further source of capital.
With the new Government's focus on the delivery of affordable housing combined
with the cyclical recovery in the property market, the Group is currently
seeing many attractive investment opportunities in Property. Accordingly,
during FY24, the Board reviewed the capital employed in Property and increased
the range to between £160m and £225m (previously £140m to £170m).
Acquisition
On 4 September 2023, Kier agreed to acquire substantially all of the rail
assets of Buckingham Group Contracting Limited ("in Administration") and their
HS2 contract supplying Kier's HS2 joint venture, Eiffage Kier Ferrovial BAM
('EKFB'), for a total cash consideration of £9.4m.
The Group has previously stated it would consider value accretive acquisitions
in core markets where there is potential to accelerate the medium-term value
creation plan. This is an excellent example of an acquisition which provides a
cultural fit as well as accelerating Kier's broader rail strategy. The rail
assets consisted of design, build and project integration contracts for a
range of customers including Network Rail.
As part of the acquisition, Kier achieved positions on various frameworks and
projects including, the Control Period 6 ('CP6') North West & Central
framework for Network Rail, Transport for Greater Manchester ('TfGM')
framework, Transport for Wales ('TfW') framework, West Midlands Combined
Authority: Willenhall & Darlaston Project, East Midlands Railway: Etches
Park Project and Nexus' Whitley Bay Project.
The acquisition has been successfully integrated into the Group's
Transportation business and is performing ahead of our initial expectations.
Performance Excellence
Through our Performance Excellence programme, which was introduced in 2020,
Kier has embedded a strong operational and financial risk management framework
across the Group. It is essential to, and embedded into, Kier's contract
selection and delivery processes.
The Group's focus for FY24 was Digital and Simplification as we continuously
improve the operational performance of the business. The key tenets were as
follows:
· Site set-up - standardisation of site offices and enhancing site
connectivity
· Health, safety and wellbeing - simplifying health and safety,
data and sharing best practice
· Quality assurance - improving capability and digital tools
· Functions - simplifying processes and enhancing current systems
Supply chain partners
We continue to focus on maintaining and growing relationships with our key
stakeholders, including our supply chain. Many of our suppliers are long-term
partners of the Group and we value their contribution.
We were pleased to report that, in our latest Duty to Report on Payment
Practices and Reporting submission, covering the period from 1 January 2024 to
30 June 2024, the Group's aggregate average payment days was 34 days (H1: 33
days) and the percentage of payments made to suppliers within 60 days was 86%
(H1: 88%).
We are committed to further improvements in our payment practices and continue
to work with both customers and suppliers to achieve this. We are fully
committed to complying with the 30-day payment requirements for small and
medium sized firms.
Environmental, Social and Governance ('ESG')
Kier's purpose is to sustainably deliver infrastructure which is vital to the
UK. To achieve this, we are focused on growth that supports a just transition
towards a greener, fairer, resilient and inclusive economy. As a "strategic
supplier" to the UK Government, Environmental, Social, Governance ('ESG') is
fundamental to our ability to win work and secure positions on long-term
frameworks. UK Government contracts with a value of or above £5m per annum
require net zero carbon and social value commitments.
Building for a Sustainable World
Last year, we launched our refreshed sustainability framework, "Building for a
Sustainable World". It covers sustainability from both an environment and
social perspective and focuses on three pillars: Our People, Our Places and
Our Planet, alongside relevant metrics to report progress. Our actions
during FY24 have been on establishing strong foundations: developing and
embedding milestone plans to govern our actions and deliver against each
framework topic and pillar.
We believe that to be a responsible business and to play a leading role in our
industry, we must address both the impact of climate change and leave a
positive lasting legacy in the communities in which we operate.
Health, Safety and Wellbeing
The Group's 12-month rolling Accident Incident Rate ('AIR') in FY24 of 155
represents an increase of 76% compared to the prior year (FY23: 88).
The Group's 12-month rolling All Accident Incident Rate ('AAIR') in FY24 of
363 increased by 13.5% from the FY23 result of 320.
These FY24 figures are an increase on the high performing benchmark that we
achieved last year. We are disappointed with these trends given our high
standards, but we continue to outperform historic industry league tables.
Safety remains our licence to operate. During FY24, we rolled out our culture
programme, which complements safety-specific behavioural training across our
projects. These programmes have been designed to bring positive health, safety
and wellbeing approaches into our operations, and apply to all personnel,
including our supply chain. They sit alongside our existing policies and
procedures.
Environment
Net Zero Carbon Targets
In FY24, c.4% of Kier's carbon emissions came directly from our operations
(Scope 1 & 2) such as the fuel in our fleet and energy consumed in the
offices and depots that we operate. Scope 3 predominately relates to the
emissions from the materials we buy and the supply chain partners we rely on
to deliver our projects. Scope 3 makes up the remaining c.96% of the
emissions.
We have prepared a milestone plan to become net zero carbon for Scope 1 &
2 by 2039. We achieved a 9% year-on-year reduction in Scope 1 & 2 carbon
emissions in FY24. For value chain emissions (Scope 3), we are aiming for net
zero carbon by 2045. We are working with our supply chain to target our most
carbon intensive materials and activities. This is our third year of reporting
on our Scope 3 emissions as we continue to improve the process.
Accreditations
In FY24, we received external verification of our approach to delivering our
net zero ambitions:
o The Science Based Target initiative confirmed that our targets are aligned
to limiting global warming to 1.5(o)C and Net Zero.
o PAS 2080 accreditation shows that our processes are contributing to
reducing lifecycle carbon emissions from our customers' buildings and
infrastructure projects.
o The British Standards Institute ('BSI') provided ISO14064-1 standards
assurance of our FY23 and FY24 carbon footprint.
As well as reducing our own carbon footprint, Kier continues to work with its
clients to design out carbon from UK infrastructure projects, and with our
supply chain to reduce their carbon emissions.
In February 2024, Kier was provided the London Stock Exchange Green Economy
Mark demonstrating that 69% of our FY24 revenue was derived from green
products and services.
Social
Delivering a legacy of social value continues to be a key priority for our
customers and for Kier. This year we delivered £583m of added social value(5)
through our workforce, supply chain and positive impact in our local
communities.
5 We now measure our added social value, which excludes the economic value
gained from subcontracted spend if not with an SME or VCSE.
Emerging Talent
We continue to offer apprenticeships as a key means of upskilling employees
and bringing in diverse emerging talent to reduce the industry skills gap.
Kier is a people-based business and our performance depends upon our ability
to attract and retain a dedicated workforce. In FY24, we had over 660
apprentices participating in programmes, representing c.6.5% of our workforce
and we welcomed c.60 future graduates on work experience placements and c.100
graduates onto our graduate programme, c.36% of which comprised women.
We contribute to a variety of educational engagement activities, including
playing a leading role in Open Doors Week to introduce students and the
general public to the construction industry.
Making Ground programme
As part of our drive to recruit diverse talent, Kier operates a prison
engagement and employability programme, Making Ground. We have provided
employment training to over 35 candidates in custody, offered 41 prison
leavers employment and over 25 Released on Temporary Licence ('ROTL')
opportunities to people in custody within our business or with our supply
chain in FY24.
Kier also remains committed to offering employment opportunities to those who
have served in our armed forces and has offered employment to 67 veterans and
11 reservists during the year.
Governance
Governance is a core component of the Group's approach to operations.
Governance is delivered within Kier's Operating Framework. The laws, policies
and procedures underpinning the Operating Framework are regularly reviewed and
updates implemented as necessary. Within the Operating Framework is Kier's
Code of Conduct which sets the corporate compliance agenda.
Integral to this is our management of risk. We ensure that risk management is
adopted at every stage of the project lifecycle to ensure that the delivery of
the Group's order backlog remains profitable and cash generative in line with
our long-term sustainable growth plan.
Built by Brilliant People(TM)
Kier is Built by Brilliant People(TM). We have therefore invested in the
rewards and benefits that we offer to them and their families. We are a proud
Real Living Wage employer, and c.1,000 employees received a Real Living Wage
increase of, on average, 7.3% in January 2024. All our employees receive life
assurance and access to a range of wellbeing support including a virtual GP,
confidential advice and counselling services.
Focus has also been made on wellbeing including such initiatives as Your
Voice, a survey which enables employee engagement. This is an important
measure to ensure our approach to employees is successful. The current
surveys show a c.67% employee engagement score for FY24, an increase from the
previous year (FY23: c.65%).
Our approach to sustainability safeguards our business and builds a resilient
environment, community and profits over the long term.
Summary and outlook
The past three years have seen the Group achieve significant operational and
financial progress. The strong results for FY24 are testament to the hard work
and commitment of our people who have enhanced our resilience and strengthened
our financial position in-line with our medium-term value creation plan. Our
order book remains strong and growing at £10.8bn and provides us with good
multi-year revenue visibility. The contracts within our order book reflect the
bidding discipline and risk management now embedded in the business.
We are also pleased to report that the Group significantly reduced its average
month-end net debt position as well as improved its year-end net cash
position. We are confident we can sustain this momentum going forward.
The Group has started the financial year well and is trading in-line with the
Board's expectations. The Group is well positioned to continue benefiting from
UK Government infrastructure spending commitments and we are confident in
sustaining the strong cash generation evidenced especially over the last two
years allowing us to significantly deleverage, increase dividends to
shareholders and deliver the evolved long-term sustainable growth plan which
will benefit all stakeholders.
Operational Review
Infrastructure Services - 50% of FY24 Group revenue
Year ended Year ended
30 June 2024 30 June 2023 Change
Revenue (£m) 1,988.3 1,712.3 16%
Adjusted operating profit (£m)(6) 112.3 79.8 41%
Adjusted operating margin (%) 5.6 4.7 90bps
Reported operating profit (£m) 88.7 57.2 55%
Order book (£bn) 6.4 5.8 10%
6 Stated before adjusting items of £23.6m (FY23: £22.6m).
· Key contract wins include:
Transportation:
o Birmingham - appointed on a two-year interim extension to deliver
maintenance and repair services across Birmingham's extensive road network
Natural Resources, Nuclear & Networks:
o United Utilities - five-year framework to deliver £100m per annum of
design, engineering, project management and construction services for water
and waste water infrastructure
o Southern Water - appointed to the £3.1bn seven-year Strategic Development
Partnership framework to increase capacity at water supply and waste water
treatment sites
o South West Water - appointed to the £2.8bn five-year Mechanical,
Electrical, Instrumentation, Control and Automation ('MEICA') framework. An
alliance to deliver their water infrastructure plan for 2025-2030
o Anglian Water - appointed on an extension for the next five years of the
Integrated Maintenance, Repair and Developer Services ('IMRDS') alliance to
provide vital repair services and infrastructure improvements across East
Anglia
· 86% of revenue secured for FY25
Infrastructure Services segment comprised the Transportation and Natural
Resources, Nuclear & Networks businesses.
Infrastructure Services revenue increased 16% against the prior year primarily
due to the continued volume of work on HS2 and the impact of the Buckingham
acquisition. Excluding the impact of Buckingham, revenue increased 9% on a
like-for-like basis. Adjusted operating profit increased 41% to £112.3m due
to these higher volumes.
The Transportation business division undertakes design, build and maintenance
of assets to support the movement of people, goods and equipment. It
includes our road, rail and aviation businesses.
The business experienced a period of continued work winning, including new
contracts and contract extensions in road maintenance, rail projects, and the
design and build of three National Highways major capital projects. The
business has transitioned from a predominantly maintenance-focused to an
established roads maintenance and capital works contractor. Adjusting items
largely relate to acquisition activity including costs related to the
Buckingham acquisition and the amortisation of contract rights from this and
previous acquisitions.
During the year, the business benefited from a one-off £6m customer claim.
The Natural Resources, Nuclear & Networks division delivers long-term
contracts in maintenance and capital projects to the water, nuclear and energy
sectors; and protection of habitats and communities in our natural environment
and waterways. The business is well positioned to benefit from the
anticipated increased opportunities afforded by the new water spending cycle,
AMP8 programme as well as opportunities in the environment and energy sectors.
In FY24, we delivered volume and margin growth in these key growth sectors
which offset managed lower activity in telecoms.
Construction - 48% of FY24 Group revenue
Year ended Year ended
30 June 2024 30 June 2023 Change
Revenue (£m) 1,907.8 1,652.5 15%
Adjusted operating profit (£m) (7) 69.2 69.5 -%
Adjusted operating margin (%) 3.6 4.2 (60)bps
Reported operating profit (£m) 59.6 46.4 28%
Order book (£bn) 4.4 4.3 2%
7 Stated before adjusting items of £9.6m (FY23: £23.1m)
· Key contract wins include:
o Defence - appointed by the Defence Infrastructure Organisation ('DIO') on
a six-year alliance to create 16,000 bed spaces for the Armed Forces in
single-living accommodation.
o Education - awarded four projects worth over £130m
o Healthcare - awarded three projects worth over £55m including Cheshire
Surgical Centre and Princess Royal University Hospital Endoscopy Unit
o Justice and Borders - awarded HMP Channings Wood and HMP Bullingdon design
and build houseblock projects, together worth over £300m
o Other - appointed by Essex County Council to Lot 3 of a four-year £400m
framework to provide design and construction services to public sector
projects
o Kier Places - appointed by Heathrow Airport to deliver its Quieter
Neighbour Support Scheme, a major programme of works over the next eight years
to reduce the impact of aircraft noise on homes, businesses and community
buildings around the airport
· 97% of revenue secured for FY25
The Construction segment comprises Regional Building, Strategic Projects, and
Kier Places (comprises three streams: residential solutions (housing
maintenance and fire safety work), work place solutions (building facilities
management) and building solutions (construction works for customers with a
build value less than £10m)). Construction has national coverage delivering
schools, hospitals, prisons, defence estate optimisation as well as
commercial, residential and heritage buildings for local authorities, the
Ministry of Justice and other government departments, and the private sector.
Revenue increased 15% largely due to increased volume in our regional build
business.
Adjusted operating profit was in line with the prior period at £69.2m. In the
prior year, the business benefited from a larger weighting towards the higher
margin Kier Places business. In FY24, the mix was weighted towards the
regional build business.
In addition, the segment experienced increased overheads for site starts, as
anticipated.
As a regional contractor, we continue to be well placed to benefit from the UK
Government's focus on spending to improve under-invested assets such as
schools, hospitals and prisons where our Construction business has specialist
expertise.
Kier Places is a client-focused building, construction and property management
business which delivers end-to-end solutions for places where people live,
work and play. As part of Kier Construction, we focus our business on three
key areas: Building Solutions, Residential Solutions and Workplace Solutions,
with expertise and services extended to planned and reactive maintenance,
renovation, facilities management, capital building works, mechanical and
electrical maintenance, decarbonisation and retrofit, cladding remediation and
fire compliance.
Property - 2% of FY24 Group revenue
Year ended Year ended
30 June 2024 30 June 2023 Change
Revenue (£m) 71.0 37.6 89%
Adjusted operating profit (£m) (8) 6.2 12.8 (52)%
Adjusted operating margin (%) 8.7 34.0 (2,530)bps
Reported operating profit (£m) 1.9 14.3 (87)%
Capital employed (£m) 166 150 11%
ROCE (%) 3.9 9.4 (550)bps
8 Stated before adjusting items of £4.3m (FY23: £(1.5)m)
· Disposed of a 423 bed redeveloped student accommodation asset in
Southampton to Greystar
The Property business invests in and develops mixed-use commercial and
residential schemes across the UK, largely through joint ventures. For FY24,
Property generated revenue of £71m (FY23: £37.6m) despite wider market
conditions. The growth was predominately driven by the sale of our Southampton
Student scheme in March 2024 for £44m.
The Property business has seen a challenging environment with scheme
evaluations, developments and transactions being delayed due to market
conditions. Despite the conditions, Property generated £6.2m in adjusting
operating profit (FY23: £12.8m). These results include a fair value gain of
£5.1m related to investments in various sectors, including the students and
green investments.
The Group is focused on the disciplined expansion of the Property business
through select investments and strategic joint ventures.
As at 30 June 2024, the capital employed in the Property segment was £166m
excluding third party debt and fair value gains. Due to the Group's increased
operating cash flows, the benefit of building out projects such as 19 Cornwall
Street in Birmingham and market conditions, we have reviewed the capital
employed in our Property segment and increased the range to between £160m and
£225m (previously £140m to £170m).
In FY24, the Property business had a ROCE of 3.9%. The Group targets the
Property business to generate a ROCE of 15%. The Property business is
well-positioned to deliver this over time as it continues to support its
capital-constrained public sector clients with asset optimisation, as well as
leverage the structural trends in changing demographics, population growth and
climate change. The business has had limited investment over the past three
years. An increase in the value and consistency of capital investment is
expected to smooth out the returns profile of the Property segment over time.
Corporate
Year ended Year ended
30 June 2024 30 June 2023 Change
Adjusted operating loss (£m) (9) (37.5) (30.6) 23%
Reported operating loss (£m) (47.1) (36.4) 29%
9 Stated before adjusting items of £9.6m (FY23: £5.8m)
The Corporate segment comprises the costs of the Group's central functions
which have increased over the prior year due to inflation and investment in
people and systems to support the Group's volume growth.
Financial Review
Introduction
The Group has delivered a strong set of results for the year with further
improvement in the order book, which has been converted into strong revenue
growth in both Construction and Infrastructure Services. The Group's focus on
operational delivery and cash management has seen the Group continue to
deleverage materially with average month-end net debt improving significantly.
As a result of the clear line-of-sight to a sustainable net cash position
alongside an appropriate longer-term debt structure, on 7 March 2024 the Group
returned to the dividend list and declared an interim dividend payment. A
final dividend of 3.48p has been proposed.
In February 2024, the Group completed a refinancing of its principal debt
facilities and has secured significant committed funding to support its
evolved long-term sustainable growth plan.
The Group delivered strong growth of 16.6% giving total Group revenues of
£3,969.4m (FY23: £3,405.4m) and which helped deliver an adjusted operating
profit of £150.2m (FY23: £131.5m).
The continued strong operational performance led to a 26.5% increase in
operating profit to £103.1m (FY23: £81.5m) and an increase in profit before
tax to £68.1m (FY23: £51.9m).
Adjusting items were £50.0m (FY23: £52.9m). The current period charge
includes £23.2m of amortisation of intangible contract rights arising from
acquisitions, and £15.0m of fire and cladding compliance costs. As expected,
the Group's restructuring activities are now complete and no further
restructuring costs have been incurred in adjusting items in the year.
Net finance charges, excluding adjusting items, for the period were £32.1m
(FY23: £26.7m), with the benefit of lower average month-end net debt offset
by higher interest rates through the year following the completion of the
Group's refinancing in February 2024. Interest on the RCF facility remains at
SONIA plus c.2.5%, the Senior Notes are issued at a fixed interest of 9%
whilst the USPP notes incur fixed interest at c.5%.
Adjusted earnings per share increased 7.3% to 20.6p (FY23: 19.2p).
The Group generated a free cash inflow of £185.9m during the year (FY23:
£132.3m) driven by a strong volume growth across Infrastructure Services and
Construction and a focus on working capital management.
Free cash flow was used to fund the acquisition of the Buckingham Group's rail
assets, adjusting items, pension deficit obligations as well as an interim
dividend. Net cash at 30 June 2024 of £167.2m was significantly improved
compared to the prior year (FY23: £64.1m).
Average month-end net debt for the year ended 30 June 2024 was £(116.1)m
(FY23: £(232.1)m), reduced significantly from the prior year.
The Group continued to win new, high-quality and profitable work in its
markets on terms and rates which reflect the Group's bidding discipline and
risk management.
The order book has increased to £10.8bn (FY23: £10.1bn), a 6.9% increase
compared to the prior year end, with c.90% of revenue for FY25 is already
secured which provides certainty of further progress over next year; an
increase over the same time in the prior year.
Summary of financial performance
Adjusted(10)results Statutory reported results
30 Jun 30 Jun Change 30 Jun 30 Jun Change
2024 2023 % 2024 2023 %
Revenue (£m) - Total 3,969.4 3,405.4 16.6 3,969.4 3,405.4 16.6
Revenue (£m) - Excluding joint ventures 3,905.1 3,380.7 15.5 3,905.1 3,380.7 15.5
Operating profit (£m)( ) 150.2 131.5 14.2 103.1 81.5 26.5
Profit before tax (£m) 118.1 104.8 12.7 68.1 51.9 31.2
Earnings per share (p) 20.6 19.2 7.3 11.8 9.5 24.2
Total dividend per share (p) 5.15 - 100.0 5.15 - 100.0
Free cash flow (£m) 185.9 132.3 40.5
Net cash (£m) 167.2 64.1 160.8
Net debt (£m) - average month-end (116.1) (232.1) (50.0)
Order book (£bn) 10.8 10.1 6.9
10 Reference to 'Adjusted' excludes adjusting items, see note 3.
Revenue
The following table bridges the Group's revenue from the year ended 30 June
2023 to the year ended 30 June 2024.
£m
Revenue for the year ended 30 June 2023 3,405.4
Infrastructure Services - existing businesses 156.1
Infrastructure Services - Buckingham acquisition 119.9
Construction 255.3
Property and Corporate 32.7
Revenue for the year ended 30 June 2024 3,969.4
The Group grew revenue across all segments, with Construction reporting
revenue growth of 15.4% compared to the prior period and Infrastructure
Services reporting revenue growth of 16.1% for the same period.
On 4 September 2023, the Group acquired substantially all of the rail assets
of Buckingham Group Contracting Limited from administration. The acquisition
has been successfully integrated into the Group's Transportation business,
within Infrastructure Services.
The Group continues to focus on delivering high-quality and high-margin work.
Alternative performance measures ('APMs')
The Directors continue to consider that it is appropriate to present an income
statement that shows the Group's statutory results only. The Directors,
however, still believe it is appropriate to disclose those items which are
one-off, material or non-recurring in size or nature. The Group is disclosing
as supplementary information an 'adjusted profit' APM. The Directors consider
doing so clarifies the presentation of the financial statements and better
reflects the internal management reporting and is therefore consistent with
the requirements of IFRS 8.
Adjusted Operating Profit
£m
Adjusted operating profit for the year ended 30 June 2023 131.5
Volume / price / mix changes 21.0
Fewer Property transactions, net of valuation gains (6.6)
Cost inflation (8.3)
Management actions 12.6
Adjusted operating profit for the year ended 30 June 2024 150.2
A reconciliation of reported to adjusted operating profit is provided below:
Operating profit Profit before tax
30 Jun 30 Jun 30 Jun 30 Jun
2024 2023 2024 2023
£m
£m
£m £m
Reported profit from continuing operations 103.1 81.5 68.1 51.9
Amortisation of acquired intangible assets 23.2 19.2 23.2 19.2
Fire and cladding costs 15.0 12.6 15.0 12.6
Property-related items 7.2 (1.1) 7.2 (1.1)
Recycle of foreign exchange (5.9) - (5.9) -
Refinancing fees 4.5 - 4.5 -
Net financing costs - - 2.9 2.9
Insurance-related items - 5.3 - 5.3
Redundancy and other people-related costs - 4.8 - 4.8
Professional fees and other non-people initiatives - 4.9 - 4.9
Other 3.1 4.3 3.1 4.3
Adjusted profit from continuing operations 150.2 131.5 118.1 104.8
Additional information about these items is as follows:
· Amortisation of acquired intangible assets £23.2m (FY23: £19.2m):
Comprises the amortisation of acquired contract rights through the
acquisitions of MRBL Limited (Mouchel Group), May Gurney Integrated Services
PLC and McNicholas Construction Holdings Limited. The current year charge also
includes amortised contract rights in respect of the Buckingham Group rail
acquisition.
· Fire and cladding costs £15.0m (FY23: £12.6m):
Costs have been incurred in rectifying legacy issues where the Group has used
cladding solutions, in order to comply with the latest Government guidance.
The net charge of £15.0m includes a credit of £11.8m in respect of insurance
proceeds.
· Property-related items £7.2m (FY23: credit of £1.1m):
Property-related items consist of the loss on disposal of a property
previously treated as adjusting items, and costs incurred and fair value
adjustment in respect of corporate properties vacated in prior years as part
of the review of Group premises.
The prior year credit consisted of vacated corporate property costs offset by
a credit of £1.6m relating to the profit on the sale of mothballed land which
had previously been impaired through adjusting items.
· Recycle of foreign exchange £5.9m credit (FY23: £nil):
The retranslation of the overseas subsidiary balance sheets has been recycled
to the income statement following the down-sizing of the international
business and has been treated as an adjusting item.
· Refinancing fees £4.5m (FY23: £nil):
These costs consist of professional advisor fees that were incurred as part of
the refinancing exercise but that were not directly attributable to the issue
of the debt instruments and so could not be capitalised.
· Net financing costs £2.9m (FY23: £2.9m):
Net financing costs relate to IFRS 16 interest charges on leased investment
properties previously used as offices.
· Other adjusting items £3.1m (FY23: £4.3m):
Other costs consist of charges in respect of the down-sizing of the
International business and costs incurred on the acquisition of Buckingham
Group's rail division.
Discontinued operations
Following the sale of its residential property building business ('Kier
Living') in FY21, the Group retained responsibility for the cost of defect
rectification works relating to former Kier Living sites. At the time of the
sale, provisions were made for the expected rectification costs. These costs
were included in discontinued operations as they were directly associated with
the disposal of Living.
During FY24, the Group has reviewed the remaining liabilities for the defect
rectification works, based on the outstanding scope of works to be completed
and current market price. The cost has increased by £8.3m, net of tax credit
of £0.8m, the majority of which remains as a provision on the year end
balance sheet. The £8.3m has been recognised as an adjusting item within
discontinued operations.
Earnings per share
EPS before adjusting items amounted to 20.6p (FY23: 19.2p). EPS after
adjusting items amounted to 11.8p (FY23: 9.5p).
Finance income and charges
The Group's finance charges include interest on the Group's bank borrowings
and finance charges relating to IFRS 16 leases.
Net finance charges for the year were £32.1m (FY23: £26.7m) before adjusting
items of £2.9m (FY23: £2.9m).
Interest on borrowings amounted to £31.5m (FY23: £29.0m). The Group was able
to partially mitigate the risk of higher interest rates with fixed interest
rate swaps. At 30 June 2024, the Group had an interest rate swap of £50m due
to expire in June 2025.
Lease interest was £9.5m (FY23: £9.5m).
The Group had a net interest credit of £5.7m (FY23: £7.8m) in relation to
the defined benefit pension schemes which has arisen due to the combination of
the overall pension surplus and the discount rate (derived from corporate bond
yields), at the start of the financial year. We anticipate this will reduce to
c.£4m in FY25.
The Group continues to exclude lease liabilities from its definition of net
cash/(debt).
Dividend
The Board recognises the importance of a sustainable dividend policy to
shareholders. Given the strong operational and financial performance in FY23
and throughout HY24, together with continued confidence over further progress
in the short term, the Board reinstated a dividend at the announcement of its
half year results in March 2024.
Over time, the Board's target is to progress to deliver a dividend, covered
c.3x by adjusted earnings and in a payment ratio of approximately one-third
interim dividend and two thirds final dividend.
As a result, the Board has proposed a final dividend of 3.48p per share.
Balance sheet
Net assets
The Group had net assets of £520.1m at 30 June 2024 (FY23: £513.0m). The
primary driver for this is the retained profit for the year, offset by the
decrease in the pension scheme surplus during the period.
Goodwill
The Group held intangible assets of £638.2m (FY23: £645.0m) of which
goodwill represented £543.5m (FY23: £536.7m).
The Group completed its annual review of goodwill assuming a pre-tax discount
rate of 12.4% (FY23: 13.1%), and concluded that no impairment was required.
The Infrastructure Services group of cash generating units ('CGU') comprise
£523.1m of the total goodwill balance. Whilst no impairment is noted and
management believes the discounted cash flows applied is underpinned by the
order book and current pipeline prospects, this CGU is sensitive to changes in
key assumptions. The key assumptions in the value in use calculations are the
forecast revenues and operating margins, the discount rates applied to future
cash flows and the terminal growth rate assumptions applied.
Deferred tax asset
The Group has a deferred tax asset of £133.1m recognised at 30 June 2024
(FY23: £128.8m) primarily due to historical losses. The asset has increased
in the year predominantly due to the deferred tax debit in relation to the
movement in the pension scheme asset. In addition, tax losses of £20.4m have
been used against current year profits.
Based on the Group's forecasts, it is expected that the deferred tax asset
will be utilised over a period of approximately eight years.
An adjusted tax credit of £11.6m (FY23: £11.1m) has been included within
adjusting items.
Right-of-use assets and lease liabilities
At 30 June 2024, the Group had right-of-use assets of £95.0m (FY23: £105.4m)
and associated lease liabilities of £173.1m (FY23: £182.6m). The movements
reflect operational equipment requirements less associated depreciation and
lease repayments.
Investment properties
The Group has long-term leases on two office buildings which were formerly
utilised by the Group that have been vacated and are now leased out (or
intended to be leased out) to third parties under operating leases, as well as
two freehold properties no longer used by the business that are being held for
capital appreciation. These are all held as investment properties.
In addition, the Group's Property business invests and develops primarily
mixed-use commercial and residential schemes and sites across the UK. One of
these sites is held as an investment property, along with the Group's former
mine at Greenburn, Scotland, which has planning permission for a wind farm.
The Group recognised an overall fair value gain of £6.5m across these sites
which has been recognised in Other income.
Contract assets and liabilities
Contract assets represents the Group's right to consideration in exchange for
works which have already been performed. Similarly, a contract liability is
recognised when a customer pays consideration before work is performed. At 30
June 2024, total contract assets amounted to £358.1m (FY23: £401.9m).
Contract liabilities were £128.4m (FY23: £90.5m).
Retirement benefits obligation
Kier operates a number of defined benefit pension schemes. At 30 June 2024,
the reported surplus, which is the difference between the aggregate value of
the schemes' assets and the present value of their future liabilities, was
£80.5m (FY23: £104.5m), before accounting for deferred tax, with the
movement in the year primarily as a result of actuarial losses of £36.5m
(FY23: £107.8m).
The net movement is due to both lower than assumed asset returns and changes
in financial assumptions, with lower corporate bond yields leading to
increased pension scheme liabilities. The impact of these changes have been
partially offset by a change in demographic assumptions and deficit reduction
contributions, both of which have led to a decrease in the schemes'
liabilities.
In FY23 the Group agreed the triennial valuation for funding six of its seven
defined benefit pension schemes, with the seventh scheme being agreed during
this year. Given the Group's improved covenant and payments made under the
existing schedule of contributions, the schemes are in a significantly
improved position.
Accordingly, deficit payments will decrease from £9m in FY24 to £7m in FY25,
£5m in FY26, £4m in FY27 and £1m in FY28.
Once the pension schemes are in actuarial surplus, they will cover their own
administration expenses. In FY24, total expenses amounted to £2.3m (FY23:
£2.9m), of which £1.7m (FY23: £nil) were paid by the schemes.
Free cash flow and net cash
30 Jun 30 Jun
2024 2023
£m £m
Operating profit 103.1 81.5
Depreciation of owned assets 8.3 6.1
Depreciation of right-of-use assets 39.0 43.7
Amortisation of intangible assets 30.6 26.8
Amortisation of mobilisation costs 3.2 7.1
EBITDA 184.2 165.2
Adjusting items excluding adjusting amortisation and interest 23.9 30.8
Adjusted EBITDA 208.1 196.0
Working capital inflow 68.4 80.3
Net capital expenditure including finance lease capital payments (57.3) (51.4)
Joint venture dividends less profits 0.7 0.7
Repayment of KEPS - (49.8)
Other free cash flow items (2.8) (5.2)
Operating free cash flow 217.1 170.6
Net interest and tax (31.2) (38.3)
Free cash flow 185.9 132.3
2024 2023
£m £m
Net cash at 1 July 64.1 2.9
Free cash flow 185.9 132.3
Adjusting items (36.7) (27.0)
Pension deficit payments and fees (9.2) (12.8)
Net purchase of own shares (3.7) (11.9)
Net investment in joint ventures (18.2) (18.6)
Acquisition of Buckingham (9.4) -
Dividends paid (7.3) -
Other 1.7 (0.8)
Net cash at 30 June 167.2 64.1
The Group has delivered a strong free cash flow for the year, driven by the
underlying business performance and good working capital management.
The average month-end net debt position has reduced by half to £(116.1)m,
(FY23: £(232.1)m). Positive operating cash flow was used to pay adjusting
items, tax and interest, pension deficit obligations, interim dividend, the
acquisition of the Buckingham rail assets, purchase existing Kier shares on
behalf of employees and deploy cash to our Property business.
The purchase of existing shares relates to the Group's employee benefit trusts
which acquire Kier shares from the market for use in settling the Long Term
Incentive Plan ('LTIP') share schemes when they vest. The trusts purchased and
sold shares at a net cost of £3.7m (FY23: £11.9m).
Given the extent of Free Cash Flow ('FCF') generation, we have a line-of-sight
to further reduce average month-end net debt for FY25 and FY26.
Accounting policies
The Group's annual consolidated financial statements are prepared in
accordance with UK-adopted International Accounting Standards and with the
requirements of the Companies Act 2006. There have been no significant changes
to the Group's accounting policies during the year.
Treasury facilities
Bank finance
In February 2024 the Group completed a refinancing of its principal debt
facilities. This included the issuance of a 5 Year £250m Senior Notes,
maturing February 2029 and an extension of its RCF, with a committed facility
of £150m from January 2025 to March 2027.
The proceeds of the Senior Notes were used to reduce the USPP notes by £37m
and lower the RCF to £261m.
At 30 June 2024 the Group has committed debt facilities of £548.2m with a
further £18.0m of uncommitted overdrafts.
The facilities comprise £250.0m Senior Notes, £260.9m Revolving Credit
Facility ('RCF'), £37.3m US Private Placement ("USPP") Notes as well as
£18.0m of overdrafts.
The remainder of its USPP notes and reduction in the RCF of £111m in January
2025 will be met from operating free cash flow.
The Group has a fixed interest rate swap of £50m through to June 2025.
With £400m of facilities (£250m Senior Notes and £150m RCF), post January
2025, the Group has secured significant committed funding to support its
long-term sustainable growth plan.
Financial instruments
The Group's financial instruments mainly comprise cash and liquid investments.
The Group selectively enters into derivative transactions (interest rate and
currency swaps) to manage interest rate and currency risks arising from its
sources of finance. The US dollar denominated USPP notes were hedged with
fixed cross-currency swaps at inception to mitigate the foreign exchange risk.
There are minor foreign currency risks arising from the Group's operations
both in the UK and through its limited number of international activities.
Currency exposure to international assets is hedged through inter-company
balances, so that assets denominated in foreign currencies are matched, as far
as possible, by liabilities. Where exposures to currency fluctuations are
identified, forward exchange contracts are completed to buy and sell foreign
currency.
The Group does not enter into speculative transactions.
Going concern
The Directors are satisfied that the Group has adequate resources to meet its
obligations as they fall due for a period of at least 12 months from the date
of approving these financial statements and, for this reason, they continue to
adopt the going concern basis in preparing these financial statements.
Further information on this assessment is detailed in note 1 of the
consolidated financial statements on page 24.
Financial statements
Condensed consolidated income statement
For the year ended 30 June 2024
Note 2024 2023
£m
£m
Continuing operations
Group revenue including share of joint ventures(1) 2 3,969.4 3,405.4
Less share of joint ventures 2 (64.3) (24.7)
Group revenue 3,905.1 3,380.7
Cost of sales (3,570.1) (3,074.4)
Gross profit 335.0 306.3
Administrative expenses (240.0) (240.0)
Share of post-tax results of joint ventures 1.6 1.1
Other income 4 6.5 14.1
Operating profit 2 103.1 81.5
Finance income 5 9.2 9.4
Finance costs 5 (44.2) (39.0)
Profit before tax 2 68.1 51.9
Taxation 7 (16.8) (10.9)
Profit for the year from continuing operations 2 51.3 41.0
Discontinued operations
Loss for the year from discontinued operations (attributable to equity holders 2,3 (8.3) -
of the Company)
Profit for the year 2 43.0 41.0
Attributable to:
Owners of the Company 42.7 41.1
Non-controlling interests 0.3 (0.1)
43.0 41.0
Earnings/(losses) per share
Basic:
- Continuing operations 9 11.8p 9.5p
- Discontinued operations 9 (1.9)p -
Total 9.9p 9.5p
Diluted:
- Continuing operations 9 11.3p 9.3p
- Discontinued operations 9 (1.8)p -
Total 9.5p 9.3p
Supplementary information - continuing operations
Adjusted2 operating profit 3 150.2 131.5
Adjusted2 profit before tax 3 118.1 104.8
Adjusted2 basic earnings per share 9 20.6p 19.2p
(1 ) Group revenue including share of joint ventures is an
alternative performance measure.
(2 ) References to 'adjusted' excludes adjusting items, see note 3.
These are alternative performance measures.
Financial statements
Condensed consolidated statement of comprehensive income
For the year ended 30 June 2024
Note 2024 2023
£m
£m
Profit for the year 43.0 41.0
Other comprehensive (loss)/income
Items that may be reclassified subsequently to the income statement
Fair value movements on cash flow hedging instruments (2.6) 2.1
Fair value movements on cash flow hedging instruments recycled to the income 5 - 1.2
statement
Deferred tax on fair value movements on cash flow hedging instruments 0.9 (0.8)
Foreign exchange translation differences (0.1) 0.3
Foreign exchange movements recycled to the income statement (9.2) -
Items that will not be reclassified to the income statement
Re-measurement of retirement benefit assets and obligations 6 (36.5) (107.8)
Tax on re-measurement of retirement benefit assets and obligations 9.1 26.5
Other comprehensive loss for the year (38.4) (78.5)
Total comprehensive income/(loss) for the year 4.6 (37.5)
Attributable to:
Equity holders of the Company 4.3 (37.4)
Non-controlling interests 0.3 (0.1)
4.6 (37.5)
Total comprehensive income/(loss) for the year attributable to equity holders
of the Company arises from:
Continuing operations 12.6 (37.4)
Discontinued operations (8.3) -
4.3 (37.4)
Financial statements
Condensed consolidated balance sheet
As at 30 June 2024
Note 2024 2023(1,2)
£m
£m
Non-current assets
Intangible assets 11 638.2 645.0
Property, plant and equipment 27.7 29.8
Right-of-use assets 95.0 105.4
Investment properties 12 104.9 98.4
Investments in and loans to joint ventures 91.7 78.6
Deferred tax assets 7 133.1 128.8
Contract assets 53.6 43.7
Trade and other receivables 28.5 24.8
Retirement benefit assets 6 105.0 129.3
Other financial assets - 9.7
Non-current assets 1,277.7 1,293.5
Current assets
Inventories 74.0 72.9
Contract assets 304.5 358.2
Trade and other receivables 237.3 189.2
Corporation tax receivable - 13.4
Other financial assets 7.1 1.0
Cash and cash equivalents 13 1,563.1 1,389.5
Current assets 2,186.0 2,024.2
Total assets 3,463.7 3,317.7
Current liabilities
Bank overdrafts 13 (1,101.4) (1,012.6)
Borrowings 13 (58.8) -
Lease liabilities (42.2) (36.2)
Trade and other payables 14 (1,109.8) (1,075.0)
Contract liabilities (128.4) (90.5)
Provisions (55.3) (38.2)
Current liabilities (2,495.9) (2,252.5)
Non-current liabilities
Borrowings 13 (242.0) (319.1)
Lease liabilities (130.9) (146.4)
Trade and other payables 14 (28.4) (36.9)
Retirement benefit obligations 6 (24.5) (24.8)
Provisions (21.9) (25.0)
Non-current liabilities (447.7) (552.2)
Total liabilities (2,943.6) (2,804.7)
Net assets 2 520.1 513.0
Equity
Share capital 4.5 4.5
Share premium 3.2 684.3
Retained earnings/(accumulated losses) 162.1 (539.5)
Merger reserve 350.6 350.6
Other reserves (0.2) 13.5
Equity attributable to owners of the Company 520.2 513.4
Non-controlling interests (0.1) (0.4)
Total equity 520.1 513.0
(1) £1,012.6m has been re-presented in the comparative information from cash
and cash equivalents to bank overdrafts, as a result of a change in accounting
policy (see note 13).
(2) £6.3m has been re-presented in the comparative information from
capitalised mobilisation costs to trade and other receivables in non-current
assets. £2.7m capital redemption reserve, £1.6m cash flow hedge reserve and
£9.2m translation reserve have been re-presented in the comparative
information to other reserves within equity.
Financial statements
Condensed consolidated statement of changes in equity
As at 30 June 2024
Share capital(1) Share (Accumulated losses)/ Merger Other reserves(4) Equity attributable to owners of Non- Total
£m
premium(2)
reserve(3)
the Company
controlling
equity
£m retained earnings
£m £m
£m
interests
£m
£m
£m
At 1 July 2022 4.5 684.3 (494.9) 350.6 10.7 555.2 (0.6) 554.6
Profit/(loss) for the year - - 41.1 - - 41.1 (0.1) 41.0
Other comprehensive (loss)/income - - (81.3) - 2.8 (78.5) - (78.5)
Total comprehensive (loss)/income for the year - - (40.2) - 2.8 (37.4) (0.1) (37.5)
Issue of own shares - - - - - - 0.3 0.3
Changes in ownership of subsidiary - - (0.9) - - (0.9) - (0.9)
Share-based payments - - 8.4 - - 8.4 - 8.4
Purchase of own shares - - (11.9) - - (11.9) - (11.9)
At 30 June 2023 4.5 684.3 (539.5) 350.6 13.5 513.4 (0.4) 513.0
Profit for the year - - 42.7 - - 42.7 0.3 43.0
Other comprehensive loss - - (27.4) - (11.0) (38.4) - (38.4)
Total comprehensive income/(loss) for the year - - 15.3 - (11.0) 4.3 0.3 4.6
Dividends paid 8 - - (7.3) - - (7.3) - (7.3)
Issue of own shares - 3.3 - - - 3.3 - 3.3
Capital reduction - (684.4) 687.1 - (2.7) - - -
Share-based payments - - 9.3 - - 9.3 - 9.3
Deferred tax on share-based payments - - 0.9 - - 0.9 - 0.9
Purchase of own shares - - (3.7) - - (3.7) - (3.7)
At 30 June 2024 4.5 3.2 162.1 350.6 (0.2) 520.2 (0.1) 520.1
(1.) The share capital includes 452,133,752 of authorised, issued and fully
paid ordinary shares of 1p each (2023: 446,314,435). The holders of ordinary
shares are entitled to receive dividends as declared from time to time and are
entitled to one vote per share at meetings of the Company. During the year,
5,819,317 shares were issued under the Sharesave Scheme (2023: 72,753).
(2.) On 22 December 2023, the Company completed a capital reduction exercise,
resulting in £684.4m of share premium being cancelled and transferred to
retained earnings.
(3.) £134.8m of the merger reserve arose on the shares issued at a premium to
acquire May Gurney on 8 July 2013. In addition, a further £215.8m relates to
the issue of share capital on 18 June 2021.
(4.) Other reserves includes capital redemption reserve, cash flow hedge
reserve and translation reserve. On 22 December 2023, the Company completed a
capital reduction exercise, resulting in £2.7m of capital redemption being
cancelled and transferred to retained earnings.
Financial statements
Condensed consolidated statement of cash flows
For the year ended 30 June 2024
Note 2024 2023
£m
£m
Cash flows from operating activities
Profit/(loss) before tax - continuing operations 68.1 51.9
- discontinued operations 3 (9.1) -
Net finance cost 5 35.0 29.6
Share of post-tax trading results of joint ventures (1.6) (1.1)
Pension cost charge 1.8 0.1
Equity-settled share-based payments charge 9.3 8.4
Amortisation of intangible assets and mobilisation costs 33.8 33.9
Change in fair value of investment properties 12 (6.5) (11.4)
Research and development expenditure credit 7 (28.3) (22.8)
Depreciation of property, plant and equipment 8.3 6.1
Depreciation of right-of-use assets 39.0 43.7
Recycling of foreign exchange movements to the income statement (9.2) -
Profit on disposal of property, plant and equipment, right-of-use assets and (1.3) (1.8)
intangible assets
Operating cash inflows before movements in working capital and 139.3 136.6
deficit contributions to pension funds
Deficit contributions to pension funds 6 (8.6) (9.9)
Increase in inventories (1.1) (18.8)
(Increase)/decrease in receivables (20.3) 12.2
Decrease/(increase) in contract assets 43.8 (4.4)
Increase in payables 23.7 26.1
Increase in contract liabilities 37.9 23.2
Increase in provisions 8.1 15.2
Cash inflow from operating activities 222.8 180.2
Dividends received from joint ventures 6.7 1.8
Interest received 5 3.5 1.6
Income tax paid (2.9) (0.1)
Net cash inflow from operating activities 230.1 183.5
Cash flows from investing activities
Proceeds from sale of property, plant and equipment 1.8 2.6
Purchase of property, plant and equipment (7.1) (3.9)
Purchase of intangible assets 11 (9.5) (2.7)
Purchase of capitalised mobilisation costs (1.9) (1.8)
Acquisition of assets 10 (9.4) -
Investment in joint ventures (23.8) (35.7)
Acquisition of joint venture debt - (0.9)
Loan repayment and return of equity from joint ventures 5.6 17.1
Net cash used in investing activities (44.3) (25.3)
Cash flows from financing activities
Issue of shares 3.3 0.3
Purchase of own shares (3.7) (11.9)
Interest paid (32.7) (39.5)
Principal elements of lease payments (40.6) (45.6)
Drawdown of borrowings 247.5 56.8
Repayment of borrowings (267.4) (43.2)
Settlement of derivative financial instruments - 4.7
Changes in ownership interests of subsidiaries - (0.9)
Dividends paid 8 (7.3) -
Net cash used in financing activities (100.9) (79.3)
Increase in cash, cash equivalents and bank overdrafts 84.9 78.9
Effect of change in foreign exchange rates (0.1) 0.3
Opening cash, cash equivalents and bank overdrafts 376.9 297.7
Closing cash, cash equivalents and bank overdrafts 13 461.7 376.9
Financial statements
Notes to the condensed consolidated financial statements
For the year ended 30 June 2024
1 Significant accounting policies
Reporting entity
Kier Group plc (the Company) is a public limited company which is listed on
the London Stock Exchange and incorporated and domiciled in the UK. The
Company's registered number is 2708030. The address of its registered office
is 2(nd) Floor, Optimum House, Clippers Quay, Salford, M50 3XP.
The consolidated financial statements (financial statements) for the year
ended 30 June 2024 comprise the Company and its subsidiaries (together
referred to as the Group) and the Group's interest in jointly controlled
entities.
Basis of preparation
These results have been prepared in accordance with the UK Financial Conduct
Authority and in accordance with the UK-adopted International Accounting
Standards effective for accounting periods beginning on or after 1 July 2023
and with the requirements of the Companies Act 2006 as applicable to companies
reporting under those standards.
The financial information contained in this preliminary announcement does not
constitute the Company's statutory accounts as at and for the year ended 30
June 2024, but is derived from those statutory accounts. The Company's
statutory accounts as at and for the year ended 30 June 2024 were approved by
the Board on 11 September 2024 and received an unqualified audit report. These
will be delivered to the Registrar of Companies following the Company's Annual
General Meeting on 14 November 2024.
Going concern
In determining the appropriate basis of preparation of the financial
statements, the Directors are required to consider whether the Group can
continue in operational existence during the going concern period, which the
directors have determined to be until 31 December 2025.
In February 2024 the Group completed a refinancing of its principal debt
facilities, issuing a 5 Year £250m Senior Notes maturing February 2029; and
an extension of its RCF, with a committed facility of £150m to March 2027.
With £400m of facilities, post January 2025, the Group has lowered its
facilities and secured significant committed funding to support its long-term
sustainable growth plan. As at 30 June 2024, the Group had £548.2m of
unsecured committed facilities and £18.0m of uncommitted overdrafts.
The Directors have carried out an assessment of the Group's ability
to continue as a going concern for the period of at least 12 months from the
date of approval of the financial statements. This assessment has involved the
review of cash flow forecasts for the period to 31 December 2025 for each of
the Group's divisions. The Directors have also considered the strength of the
Group's order book which amounted to £10.8bn at 30 June 2024 and will provide
a pipeline of secured work over the going concern assessment period.
The Directors have considered a number of stressed but plausible downside
scenarios in assessing going concern:
· Potential reductions in trading volumes;
· Potential future challenges in respect of ongoing
projects;
· Delays in Property transactions and cost of
adoption of green legislation;
· Plausible changes in the interest rate
environment; and
· The availability of mitigating actions that could
be taken by management in such a scenario.
The Directors also considered the macroeconomic and political risks affecting
the UK economy. The Directors noted that the Group's forecasts are underpinned
by a significant proportion of revenue that is either secured or considered
probable, often as part of long-term framework agreements, and that the Group
operates primarily in sectors such as road, rail, water, energy, prisons,
health and education, which are considered likely to remain largely unaffected
by macroeconomic factors. Although inflationary pressures remain a risk, both
in the supply chain and the labour market, this is partly mitigated by c.60%
of contracts being target cost or cost plus.
The Directors have also considered the potential impact of climate change and
do not consider the Group's operations are at risk from physical
climate-related risks such as hurricanes and temperature changes in the
short-term. In the medium-term the Directors have concluded that any adverse
financial impacts from required changes to operations in line with ESG
requirements will be offset by opportunities which present the Group with
additional volumes and profits, such as construction of sustainable buildings,
climate impact and water management, as well as nuclear infrastructure. As
such, the longevity of the Group's business model means that climate change
has no material adverse impact on going concern.
Having reviewed the Group's cash flow forecasts, the Directors consider that
the Group is expected to continue to have available liquidity headroom under
its finance facilities and operate within its financial covenants over the
going concern period, including in a severe but plausible downside scenario.
As a result, the Directors are satisfied that the Group has adequate resources
to meet its obligations as they fall due for a period of at least 12 months
from the date of approving these financial statements and, for this reason,
they continue to adopt the going concern basis in preparing these financial
statements.
2 Segmental reporting
Year to 30 June 2024
Infrastructure Services Construction Property Corporate Group
£m
£m
£m
£m
£m
Revenue1
Group revenue including share of joint ventures 1,988.3 1,907.8 71.0 2.3 3,969.4
Less share of joint ventures - (2.4) (61.9) - (64.3)
Group revenue 1,988.3 1,905.4 9.1 2.3 3,905.1
Timing of revenue1
Products and services transferred at a point in time 5.9 0.6 57.8 - 64.3
Products and services transferred over time 1,982.4 1,907.2 13.2 2.3 3,905.1
Group revenue including share of joint ventures 1,988.3 1,907.8 71.0 2.3 3,969.4
Profit/(loss) for the year
Adjusted operating profit/(loss)2 112.3 69.2 6.2 (37.5) 150.2
Adjusting items2 (23.6) (9.6) (4.3) (9.6) (47.1)
Operating profit/(loss) 88.7 59.6 1.9 (47.1) 103.1
Net finance income/(costs)3 4.4 1.4 (3.7) (37.1) (35.0)
Profit/(loss) before tax 93.1 61.0 (1.8) (84.2) 68.1
Taxation (16.8)
Profit for the year from continuing operations 51.3
Loss for the year from discontinued operations (8.3)
Profit for the year 43.0
Balance sheet
Operating assets4 908.3 424.4 217.9 342.9 1,893.5
Operating liabilities4 (499.8) (814.2) (14.8) (212.6) (1,541.4)
Net operating assets/(liabilities)4 408.5 (389.8) 203.1 130.3 352.1
Cash, cash equivalents, bank overdrafts and borrowings 540.4 700.4 (171.3) (908.6) 160.9
Net financial assets - - - 7.1 7.1
Net assets/(liabilities) 948.9 310.6 31.8 (771.2) 520.1
Other information
Inter-segmental revenue 4.9 0.1 - 39.8 44.8
Capital expenditure on property, plant, equipment and intangible assets 2.4 4.4 - 9.8 16.6
Depreciation of property, plant and equipment (0.7) (0.4) (0.2) (7.0) (8.3)
Amortisation of computer software (1.1) (0.2) - (6.1) (7.4)
Year to 30 June 2023
Continuing operations Infrastructure Services Construction Property Corporate Group
£m
£m
£m
£m
£m
Revenue1
Group revenue including share of joint ventures 1,712.3 1,652.5 37.6 3.0 3,405.4
Less share of joint ventures - (2.4) (22.3) - (24.7)
Group revenue 1,712.3 1,650.1 15.3 3.0 3,380.7
Timing of revenue1
Products and services transferred at a point in time 3.9 0.8 21.5 - 26.2
Products and services transferred over time 1,708.4 1,651.7 16.1 3.0 3,379.2
Group revenue including share of joint ventures 1,712.3 1,652.5 37.6 3.0 3,405.4
Profit/(loss) for the year
Adjusted operating profit/(loss)2 79.8 69.5 12.8 (30.6) 131.5
Adjusting items2 (22.6) (23.1) 1.5 (5.8) (50.0)
Operating profit/(loss) 57.2 46.4 14.3 (36.4) 81.5
Net finance income/(costs)3 1.4 (4.3) (0.6) (26.1) (29.6)
Profit/(loss) before tax 58.6 42.1 13.7 (62.5) 51.9
Taxation (10.9)
Profit for the year 41.0
Balance sheet
Operating assets4 973.7 413.1 188.5 342.3 1,917.6
Operating liabilities4 (511.7) (732.7) (18.5) (210.2) (1,473.1)
Net operating assets/(liabilities)4 462.0 (319.6) 170.0 132.1 444.5
Cash, cash equivalents, bank overdrafts and borrowings 456.6 594.5 (134.1) (859.2) 57.8
Net financial assets - - - 10.7 10.7
Net assets/(liabilities) 918.6 274.9 35.9 (716.4) 513.0
Other information
Inter-segmental revenue 31.5 0.1 - 40.5 72.1
Capital expenditure on property, plant, equipment and intangible assets 0.7 0.1 - 5.8 6.6
Depreciation of property, plant and equipment (0.9) (0.4) (0.2) (4.6) (6.1)
Amortisation of computer software (1.4) (0.8) - (5.4) (7.6)
(1 ) Revenue is stated after the exclusion of inter-segmental
revenue. 100% of the Group's revenue is derived from UK-based customers. 15%
of the Group's revenue was received from High Speed Two (HS2) Limited (2023:
15%). Group revenue including joint ventures is an alternative performance
measure.
(2 ) See note 3 for adjusting items.
(3 ) Interest was (charged)/credited to the divisions at a
notional rate of 4.0% (2023: 4.0%).
(4 ) Net operating assets/(liabilities) represent assets
excluding cash, cash equivalents, bank overdrafts, borrowings, financial
assets and liabilities, and interest-bearing inter-company loans.
3 Adjusting items
(a) Reconciliation to adjusted profit
2024 2023
Continuing operations Adjusting Total Adjusting Total
£m
£m
Adjusted items Adjusted items
£m
£m
£m £m
Group revenue 3,905.1 - 3,905.1 3,380.7 - 3,380.7
Cost of sales (3,555.1) (15.0) (3,570.1) (3,055.5) (18.9) (3,074.4)
Gross profit 350.0 (15.0) 335.0 325.2 (18.9) 306.3
Administrative expenses (216.2) (23.8) (240.0) (208.0) (32.0) (240.0)
Share of post-tax results of joint ventures 6.0 (4.4) 1.6 1.1 - 1.1
Other income 10.4 (3.9) 6.5 13.2 0.9 14.1
Operating profit 150.2 (47.1) 103.1 131.5 (50.0) 81.5
Net finance charges (32.1) (2.9) (35.0) (26.7) (2.9) (29.6)
Profit before tax 118.1 (50.0) 68.1 104.8 (52.9) 51.9
Taxation (28.4) 11.6 (16.8) (22.0) 11.1 (10.9)
Profit for the year from continuing operations 89.7 (38.4) 51.3 82.8 (41.8) 41.0
Loss for the year from discontinued operations - (8.3) (8.3) - - -
Profit for the year 89.7 (46.7) 43.0 82.8 (41.8) 41.0
Adjusting items include:
· Cost of sales:
o Fire and cladding compliance costs of £15.0m - these consist of costs
incurred in rectifying legacy issues to comply with the latest Government
guidance. The net charge of £15.0m includes a credit of £11.8m in respect of
insurance proceeds.
· Administrative expenses:
o Amortisation of acquired intangible assets of £23.2m - comprises
amortised contract rights arising from prior year acquisitions, along with the
amortisation of contract rights relating to the Buckingham acquisition.
o Recycle of foreign exchange gain of £(5.9)m - the retranslation of the
overseas subsidiary balance sheets has been recycled to the income statement
following the down-sizing of the international business and has been treated
as an adjusting item.
o Refinancing fees of £4.5m - these costs consist of professional advisor
fees that were incurred as part of the refinancing exercise but that were not
directly attributable to the issue of the debt instruments and so could not be
capitalised.
o Property-related items of £(1.1)m - these costs primarily consist of
income and costs incurred in respect of corporate properties vacated in prior
years as part of the review of Group premises.
o Other adjusting items of £3.1m - other costs consist of charges in
respect of the down-sizing of the International business and costs incurred on
the acquisition of Buckingham Group's rail division.
· Share of post-tax results of joint ventures and other income:
o Property-related items of £8.3m - these costs primarily consist of the
loss on disposal of a property previously treated as adjusting items, and a
fair value adjustment of £2.3m in relation to the Group's former head office.
· Net finance charges:
o Net financing costs of £2.9m - these relate to IFRS 16 interest charges
on leased investment properties previously used as offices.
(b) Discontinued operations
Following the sale of its residential property building business ('Kier
Living') in FY21, the Group retained responsibility for the cost of defect
rectification works relating to former Kier Living sites. At the time of the
sale, provisions were made for the expected rectification costs. These costs
were included in discontinued operations as they were directly associated with
the disposal of Living.
During FY24, the Group has reviewed the remaining liabilities for the defect
rectification works, based on the outstanding scope of works to be completed
and current market price. The cost has increased by £8.3m, net of tax credit
of £0.8m, the majority of which remains as a provision on the year end
balance sheet. The £8.3m has been recognised as an adjusting item within
discontinued operations.
(c) Cash outflow from adjusting items
2024 2023
£m
£m
Adjusting items reported in the income statement
- Continuing operations 50.0 52.9
- Discontinued operations 8.3 -
Less: non-cash items incurred in the year (31.4) (39.0)
Add: payment of prior year accruals and provisions 9.8 13.1
Cash outflow from adjusting items 36.7 27.0
4 Other income
2024 2023
£m
£m
Insurance proceeds - 2.7
Fair value gain on investment properties 6.5 11.4
Other income 6.5 14.1
5 Finance income and costs
2024 2023
£m
£m
Finance income
Bank deposits 3.4 0.5
Interest receivable on loans to related parties 0.1 1.1
Net interest on net defined benefit obligation 5.7 7.8
9.2 9.4
Finance costs
Interest payable on loans and overdrafts (23.1) (29.0)
Interest payable on bonds (8.4) -
Interest payable on leases (9.5) (9.5)
Foreign exchange movements on foreign denominated borrowings (0.6) 2.5
Fair value movements on cash flow hedges recycled from other comprehensive - (1.2)
income
Other (2.6) (1.8)
(44.2) (39.0)
Net finance costs (35.0) (29.6)
6 Retirement benefit obligations
The principal assumptions used by the independent qualified actuaries are
shown below.
2024 2023
%
%
Discount rate 5.15 5.30
Inflation rate (Retail Price Index) 3.20 3.20
Inflation rate (Consumer Price Index)(1) 2.40 - 2.85 2.30 - 2.75
(1 ) CPI rates for 2023 have been based on individual
scheme expected durations.
The amounts recognised in the financial statements in respect of the Group's
defined benefit schemes are as follows:
2024 2023
Kier Acquired schemes Total Kier Acquired schemes Total
Group
£m
£m
Group
£m
£m
£m
£m
Opening net surplus/(deficit) 117.5 (13.0) 104.5 170.2 24.5 194.7
Credit/(charge) to income statement 4.8 (0.9) 3.9 6.6 1.1 7.7
Employer contributions - 8.6 8.6 0.4 9.5 9.9
Actuarial losses (25.4) (11.1) (36.5) (59.7) (48.1) (107.8)
Closing net surplus/(deficit) 96.9 (16.4) 80.5 117.5 (13.0) 104.5
Comprising:
Fair value of scheme assets 825.2 393.4 1,218.6 850.9 396.8 1,247.7
Net present value of the defined benefit obligation (728.3) (409.8) (1,138.1) (733.4) (409.8) (1,143.2)
Net surplus/(deficit) 96.9 (16.4) 80.5 117.5 (13.0) 104.5
Presentation of net surplus/(deficit) in the Consolidated balance sheet:
Retirement benefit assets 96.9 8.1 105.0 117.5 11.8 129.3
Retirement benefit obligations - (24.5) (24.5) - (24.8) (24.8)
Net surplus/(deficit) 96.9 (16.4) 80.5 117.5 (13.0) 104.5
7 Taxation
2024 2023
£m
£m
Profit before tax 68.1 51.9
Losses/(income) from joint venture companies 1.6 (3.6)
Adjusted profit before tax 69.7 48.3
Current tax (12.2) (7.3)
Deferred tax (4.6) (3.6)
Total tax charge in the income statement (16.8) (10.9)
Effective tax rate 24.1% 22.6%
The deferred tax asset of £133.1m (2023: £128.8m) includes £106.8m of tax
losses (2023: £106.2m) and £26.3m of other deferred tax assets and
liabilities (2023: £22.6m).
When considering the recoverability of net deferred tax assets, the taxable
profit forecasts are based on the same Board-approved information used to
support the going concern and goodwill impairment assessments.
The following evidence has been considered when assessing whether these
forecasts are achievable and realistic:
· The business traded in line with Board expectations in 2024;
· The Group has completed its restructuring activities and is focusing on the
achievement of the long-term sustainable growth plan; and
· The Group's core businesses are well-placed to benefit from the announced
and committed UK Government spending plans to invest in infrastructure and
decarbonisation.
When considering the length of time over which the losses are expected to be
utilised, the Group has taken into account that generally only 50% of profits
in each year can be offset by brought forward losses.
Based on these forecasts, the Group is expected to utilise its deferred tax
asset over a period of approximately 8 years.
The Research and Development Expenditure Credit ('RDEC') of £28.3m was
included in operating profit during the year (2023: £22.8m). Included in
other receivables at 30 June 2024 were RDEC receivables of £30.0m (2023:
£16.1m).
8 Dividends
2024 2023
£m pence per share £m pence per share
Current year interim 7.3 1.67 - -
Total dividend recognised in the year 7.3 1.67 - -
2024 2023
£m pence per share £m pence per share
Interim 7.3 1.67 - -
Final 15.1 3.48 - -
Total dividend relating to the year 22.4 5.15 - -
The proposed final dividend for the year ending 30 June 2024 of 3.48p pence
per share (2023: nil p) has not yet been paid and so has not been included as
a liability in these financial statements. The dividend totalling
approximately £15.1m will be paid on 29 November 2024 to shareholders on the
register on 25 October 2024.
9 Earnings per share
2024 2023
Continuing operations Basic Diluted Basic Diluted
£m
£m
£m
£m
Profit for the year 51.3 51.3 41.0 41.0
Less: non-controlling interest share (0.3) (0.3) 0.1 0.1
Profit after tax and minority interests 51.0 51.0 41.1 41.1
Adjusting items (excluding tax) 50.0 50.0 52.9 52.9
Tax impact of adjusting items (11.6) (11.6) (11.1) (11.1)
Adjusted profit after tax from continuing operations 89.4 89.4 82.9 82.9
Discontinued operations
Adjusting items from discontinued operations (net of tax) (8.3) (8.3) - -
Weighted average number of shares (no, m) 433.5 451.7 431.2 441.5
Basic earnings (p)
Attributable to the ordinary equity holders of the Company from continuing 11.8 11.3 9.5 9.3
operations
Attributable to the ordinary equity holders of the Company from discontinued (1.9) (1.8) - -
operations
Total basic earnings per share attributable to the ordinary equity holders of 9.9 9.5 9.5 9.3
the Company
Adjusted basic earnings (p)
Adjusted basic earnings per share attributable to the ordinary equity holders 20.6 19.8 19.2 18.8
of the Company
The weighted average number of shares is lower than the number of shares in
issue by 18.6m (2023: 15.1m) primarily due to shares that are held by the
Group's employee benefit trusts, which are excluded from the calculation, and
the weighting applied to the new shares issued in the year in respect of the
Sharesave scheme, which were predominantly in the fourth quarter of FY24.
Options granted to employees under the Sharesave and LTIP schemes are
considered to be potential ordinary shares. They have been included in the
determination of diluted earnings per share if the required performance
obligations would have been met based on the Group's performance up to the
reporting date, and to the extent to which they are dilutive. The options have
not been included in the determination of basic earnings per share.
10 Acquisition
On 4 September 2023, the Group acquired the rail assets of the Buckingham
Group, primarily consisting of 180 employees and a number of customer
contracts.
The purchase has been accounted for as a business combination in accordance
with IFRS 3. The fair value amounts recognised in respect of the identifiable
assets acquired and liabilities assumed are set out in the table below. These
values have been reconsidered since the half year as part of the hindsight
period review and are now final.
Fair value total
£m
Intangible assets 7.5
Trade and other receivables 2.6
Trade and other payables (1.6)
Provisions (5.9)
Total identifiable assets and liabilities 2.6
Goodwill 6.8
Consideration payable 9.4
Adjustments to the acquired balance sheet primarily relate to intangible
assets in relation to customer contracts along with the recognition of
necessary provisions.
The goodwill recognised includes certain intangible assets that cannot be
separately identified and measured due to their nature. This includes control
over the acquired business and the skills and experience of the assembled
workforce. Goodwill also represents the opportunity for Kier's Infrastructure
segment to grow its business within the rail market.
Consideration consisted of £9.4m cash.
The Buckingham acquisition contributed £119.9m to the Group revenue for the
period 5 September 2023 to 30 June 2024.
11 Intangible assets
Goodwill Intangible Computer Total
£m
contract rights
£m
£m software
£m
Cost
At 1 July 2022 538.8 252.2 132.6 923.6
Additions - - 2.7 2.7
Disposals - (16.5) (9.6) (26.1)
At 30 June 2023 538.8 235.7 125.7 900.2
Additions - - 9.5 9.5
Arising on acquisition 6.8 7.5 - 14.3
Disposals - - (0.1) (0.1)
At 30 June 2024 545.6 243.2 135.1 923.9
Accumulated amortisation and impairment
At 1 July 2022 (2.1) (168.2) (84.2) (254.5)
Charge for the year - (19.2) (7.6) (26.8)
Disposals - 16.5 9.6 26.1
At 30 June 2023 (2.1) (170.9) (82.2) (255.2)
Charge for the year - (23.2) (7.4) (30.6)
Disposals - - 0.1 0.1
At 30 June 2024 (2.1) (194.1) (89.5) (285.7)
Net book value
At 30 June 2024 543.5 49.1 45.6 638.2
At 30 June 2023 536.7 64.8 43.5 645.0
12 Investment properties
Owned assets Right-of-use assets Total
£m
£m
£m
At 1 July 2022 13.0 47.4 60.4
Transfers 2.7 - 2.7
Additions 22.8 1.1 23.9
Fair value gain/(loss) recognised in other income 14.4 (3.0) 11.4
At 30 June 2023 52.9 45.5 98.4
Fair value gain/(loss) recognised in other income 8.2 (1.7) 6.5
At 30 June 2024 61.1 43.8 104.9
13 Net cash
2024 2023
£m
£m
Cash and cash equivalents 1,563.1 1,389.5
Bank overdrafts (1,101.4) (1,012.6)
Net cash, cash equivalents and bank overdrafts 461.7 376.9
Borrowings due within one year (58.8) -
Borrowings due after one year (242.0) (319.1)
Impact of cross-currency hedging 6.3 6.3
Net cash 167.2 64.1
Average month-end net debt was £116.1m (2023: £232.1m). Net debt excludes
lease liabilities.
In May 2024, the Company received a letter from the Financial Reporting
Council ('FRC') following its review of the Group's FY23 Annual Report and
Accounts.
Following completion of a review, the Directors have concluded that separate
presentation of these overdrafts and cash balances within the Consolidated
Balance Sheet would be preferable, with cash held in subsidiary company bank
accounts shown separately from overdrawn amounts in the Group's Consolidated
Balance Sheet, with the prior year comparative balances re-presented
accordingly.
The restatement did not result in any change to reported profit, earnings per
share, net assets, net cash or cashflows reported in FY23.
Following provision of the information to the queries raised, the FRC
concluded its enquiries in September 2024.
14 Trade and other payables
2024 2023
£m
£m
Current:
Trade payables 328.4 310.0
Accruals 580.2 585.1
Sub-contract retentions 30.8 22.5
Other taxation and social security 152.1 138.4
Other payables and deferred income 18.3 19.0
1,109.8 1,075.0
Non-current:
Trade payables 3.9 5.1
Sub-contract retentions 24.5 31.8
28.4 36.9
15 Guarantees, contingent liabilities and contingent assets
The Company has given guarantees and entered into counter-indemnities in
respect of bonds relating to certain of the Group's own contracts. The Company
has also given guarantees in respect of certain contractual obligations of its
subsidiaries and joint ventures, which were entered into in the normal course
of business, as well as certain of the Group's other obligations (for example,
in respect of the Group's finance facilities and its pension schemes).
Financial guarantees over the obligations of the Company's subsidiaries and
joint ventures are initially measured at fair value, based on the premium
received from the joint venture or the differential in the interest rate of
the borrowing including and excluding the guarantee. Subsequent to initial
recognition, financial guarantee contracts are measured at the higher of the
initial fair value measurement (adjusted for any income amounts recognised)
and the amount determined in accordance with the expected credit loss model.
Performance guarantees are treated as a contingent liability until such time
as it becomes probable that payment will be required under its terms.
Provisions are made for the Directors' best estimate of known legal claims,
investigations and legal actions relating to the Group which are considered
more likely than not to result in an outflow of economic benefit. If the
Directors consider that a claim, investigation or action relating to the Group
is unlikely to succeed, no provision is made. If the Directors cannot make a
reliable estimate of a potential, material obligation, no provision is made
but details of the claim are disclosed.
Fire and cladding review
The Group has undertaken a review of all of its current and legacy constructed
buildings where it has used cladding solutions and continues to assess the
action required in line with the latest Government guidance, as it applies, to
multi-storey and multi-occupied residential buildings. The buildings,
including the cladding works, were signed off by approved inspectors as
compliant with the relevant Building Regulations at the time of completion.
In preparing the financial statements, currently available information has
been considered, including the current best estimate of the extent and future
costs of work required, based on the reviews and physical inspections
undertaken.
Where an obligation has been established and a reliable estimate of the costs
to rectify is available, a provision has been made. No provision has been made
where an obligation has not been established.
These estimates may be updated as further inspections are completed and as
work progresses which could give rise to the recognition of further
liabilities. Such liabilities, should they arise, are expected to be covered
materially by the Group's insurance arrangements thereby limiting the net
exposure. Any insurance recovery must be considered virtually certain before a
corresponding asset is recognised and so this could potentially lead to an
asymmetry in the recognition of assets and liabilities.
16 Related parties
The Group has related party relationships with its joint ventures, key
management personnel and pension schemes in which its employees participate.
There have been no significant changes in the nature of related party
transactions since the last annual financial statements for the year ended 30
June 2023.
Details of contributions made to the pension schemes by the Group are detailed
in note 6.
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