7
March 2024
Kier Group
plc
Results for the period ended
31 December 2023
Strong operational
performance; Material debt reduction; Dividend
resumed
Kier Group plc ("Kier", the
"Company" or the "Group"), a leading UK infrastructure services,
construction and property group, announces its results for the six
months ended 31 December 2023 ("HY24" or the "period").
|
Highlights
|
|
(£m unless otherwise stated)
|
Six months
to
31
December
20231
|
Six
months to
31
December
20221
|
Change
|
|
Adjusted
results
|
|
|
|
|
Revenue2
|
1,883
|
1,537
|
23%
|
|
Adjusted operating
profit3
|
64.7
|
57.2
|
13%
|
|
Adjusted operating
margin
|
3.4%
|
3.7%
|
(30)bps
|
|
Adjusted profit before
tax4
|
49.0
|
45.8
|
7%
|
|
Adjusted basic earnings per share
(note 9)
|
8.7p
|
8.5p
|
2%
|
|
Net cash /
(debt)5
|
17.0
|
(130.6)
|
113%
|
|
Average month-end net
debt
|
(136.5)
|
(242.7)
|
44%
|
|
Statutory
reported
|
|
|
|
|
Group revenue
|
1,862
|
1,526
|
22%
|
|
Profit from operations
|
44.1
|
38.3
|
15%
|
|
Profit before tax
|
27.0
|
25.4
|
6%
|
|
Basic earnings per share (note
9)
|
4.6p
|
4.7p
|
(2)%
|
|
Interim dividend per
share
|
1.67p
|
-
|
-
|
1 Continuing operations
2 Revenue
of the Group and its share of revenue from joint
ventures
3 Stated
before adjusting items of £9.5m (HY23: £9.1m) and amortisation of
acquired intangible assets of £11.1m (HY23: £9.8m).
4 Stated
before adjusting items of £10.9m (HY23: £10.6m) and amortisation of
acquired intangible assets of £11.1m (HY23: £9.8m).
5 Disclosed
net of the effect of hedging instruments and excludes leases - see
note 13 to the preliminary financial statements.
HY24 Highlights
·
Revenue growth and improved profitability driving
material deleveraging
o Revenue
growth of 23% driven by Infrastructure Services and
Construction
o Adjusted operating profit increased 13% to £64.7m (HY23:
£57.2m)
o Adjusted operating margin at 3.4%, in-line with the
medium-term target
o Adjusted basic EPS: 8.7p (HY23: 8.5p), up 2%
o Reported profit from operations increased 15% to £44.1m
(HY23: £38.3m)
o Free
Cash Flow of £(7.9)m materially improved over the prior period
(HY23 £(87.8)m) following a strong Q1 performance
o Net
cash at period-end of £17.0m, significantly higher than prior
period-end (HY23: net debt (£130.6m)
o Average
month-end net debt materially reduced by £106.2m to
£(136.5m)
·
Resumption of dividends, with an interim dividend
declared of 1.67p per share
·
High quality order book, increased 6% to £10.7bn
(FY23: £10.1bn) providing significant visibility
o 97% of
expected FY24 revenue secured
·
Acquisition of Buckingham Group's rail assets
fully integrated into the business and performing ahead of
expectations as at the time of the transaction
·
Successful refinancing post period-end providing
long-term debt facilities and a strengthened maturity
profile
·
Sustainability strategy on track to deliver ESG
targets
Andrew Davies, Chief Executive, said:
"The past two and a half years have seen the Group achieve
significant operational and financial progress and I am delighted
that today marks a return to paying dividends. The first half has
seen the Group deliver strong volume and profit growth, increased
orders and material deleveraging. This is testament to the
hard work and commitment of our people who have enhanced our
resilience and strengthened our financial position in line with the
objectives set out in our medium-term value creation plan. Our
order book remains strong at £10.7bn 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 particularly pleased to report that the
Group significantly improved upon its year-end net cash position
with significantly lower average month-end net debt and has
confidence in sustaining this momentum going
forward.
The second half of the financial year has started well, and
we are trading in-line with 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 achieved over the last 18 months, allowing us to
continue to significantly deleverage the Group. We remain committed
to delivering our medium-term value creation plan which will
benefit all stakeholders."
HY24 Results Presentation
Kier Group plc will host a
presentation for analysts and investors at 9:00am on 7 March 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/65c25190d0d52012009b361c/aerz
United Kingdom (Local): +44 20
3936 2999
United Kingdom (Toll-Free): +44
800 358 1035
Conference password:
010525
An audio recording will be
available on our website in due course.
|
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. Following
a review by the Board of these risks, the Climate Change principal
risk has been replaced with a Sustainability principal risk
'Failure to identify and effectively manage sustainability risks
and opportunities' which incorporates climate change and
environmental incidents and aligns with Kier's Building for a
Sustainable World strategy. Subject to this change the Board
believes that these principal risks and uncertainties will continue
to apply to the Group in the second half of the financial
year.
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
Follow us on X (formerly Twitter):
@kiergroup
Connect with us on LinkedIn: Kier
Group
Introduction
The Group has delivered a strong
set of results for the six months to 31 December 2023. The
material deleveraging is a clear demonstration of the Group's
commitment to our medium-term value creation plan launched two and
a half years ago.
At the last year end, we committed
to recommence dividend payments once we had clear line-of-sight of
operating with a sustainable average month-end net cash position,
alongside an appropriate longer term debt
structure.
Following the period end we
completed a Senior Notes issue and combined with an extended
Revolving Credit Facility ("RCF"), have secured a long-debt debt
structure for the Group. Given the considerable progress Kier has
made and the Board's confidence in the Group's prospects, an
interim dividend of 1.67p per share has been declared - returning
Kier to the dividend list.
The success for future years is
underpinned by the year-end order book growing to £10.7bn in HY24,
an increase of 6% against the prior year comparative, reflecting a
large number of contract wins across Infrastructure Services and
Construction as well as providing multi-year revenue visibility.
Long-term framework positions, as well as pipeline opportunities
and income from the Property division, are excluded from the order
book and represent an additional opportunity. Given the order book
strength and Kier's framework positioning, approximately 97% of
Group revenue for FY24 is already secured which provides us with a
high degree of confidence of further progress against a backdrop of
wider market uncertainty.
During the period, Kier won new,
high quality and profitable work in our markets reflecting the
bidding discipline and risk management embedded in the
business.
Medium-term value creation plan
The Group is focused on delivering
its medium-term targets over a three to five year
period:
|
Revenue:
|
£4.0bn - £4.5bn
|
|
Adjusted operating profit
margin:
|
c.3.5%
|
|
Cash conversion of operating
profit:
|
c.90%
|
|
Balance sheet:
|
Sustainable net cash position with
capacity to invest
|
|
Dividend:
|
Sustainable dividend policy: c.3 x
earnings cover through the cycle
|
The Group aims to achieve these
medium-term targets through:
·
volume growth and improved contract
profitability;
·
continued management discipline; and
·
deploying additional capital in the Property
business.
The Group continues to make good
progress against these targets with free cashflow conversion and
profit margins met consistently over the past reporting period.
Despite political and economic uncertainties, our core markets have
remained favourable. We are a "strategic supplier" to the UK
Government and c.93% of our contracts are with the public sector
and regulated companies.
Customers and winning new work
We remain focused on winning work
through our long-standing client relationships and regionally based
operations.
Highlights include:
·
Infrastructure
services: appointed a place on the
£3bn SCAPE Utilities Framework aimed at delivering utilities, civil
infrastructure and transportation services work
·
Construction: awarded
five education projects worth a total of
c.£182m, four healthcare projects worth c.£81m, and
awarded a new houseblock
for the Ministry of Justice at HMP Elmley worth over
£100m
·
Property: our Kier Property
and Housing Growth Partnership ("HGP") joint venture,
acquired a development site in Tunbridge Wells,
and Kier Property sold its Logistics City scheme in Whiteley,
Hampshire for £10.5m
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 the UK Government spending commitments
to invest in infrastructure and the significant investment plans
announced by regulated UK asset owners. We have secured places on
the long-term frameworks through which much of the increased spend
will be deployed.
This, combined with our regional
coverage, customer relationships and project management expertise,
will enable our strategic actions of disciplined growth, consistent
delivery and strong cash generation.
Financial summary
Kier's revenue in the period of
£1.9bn (HY23: £1.5bn) reflects strong growth across Infrastructure
Services and Construction. In particular, the strong momentum seen
towards the end of FY23 in Construction continued into HY24.
The Group's HY24 results reflect a
strong performance despite continuing cost inflation relating to
materials, wages and other costs. We remain successful in
mitigating these pressures through having c.60% of our order book
under target cost or cost reimbursable contracts as well as through
procurement strategies and negotiations on fixed price contracts.
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 £64.7m which represents a 13.1% increase on the
prior period (HY23: £57.2m). Both our Infrastructure Services and
Construction segments performed well in the period supplemented
with a contribution from Property. Group adjusted operating
profit margin fell by 30 basis points to 3.4% (HY23: 3.7%) due to
the growth in volumes of the lower margin Construction business.
Reported profit from operations increased 15.1% to £44.1m (HY23:
£38.3m).
Adjusted earnings per share
increased 2.4% to 8.7p (HY23: 8.5p) and
reported earnings per share reduced 2.1% to 4.6p (HY23: 4.7p) due
to increased amortisation and corporation tax offsetting profitable
volume growth.
The Group generated £(7.9)m of
free cash flow in HY24 (HY23: £(87.8)m), a significant improvement
over the prior year comparative. The Group's revenue growth in
Infrastructure Services and Construction converted to increased
profit and cash.
The Group's net cash position at
31 December 2023 was £17.0m (HY23: net debt £(130.6)m) despite
reducing supplier payment days by 1 day to 33 as the strong volume
growth translates into cash receipts.
Average month-end net debt for the
period ended 31 December 2023 was £(136.5)m (HY23: £(242.7)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 and paying pension deficit obligations.
During the period, the Group
repaid £1.4m of its US Private Placement ("USPP") Notes in line
with its repayment schedule and the Group's RCF reduced by £20.0m
in-line with the facility agreement.
In February 2024, we announced the
completion of our £250m 5 year Senior Notes. The proceeds of
which were used to further reduce our USPP Notes by £36m 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 going forward
whilst we continue to deleverage.
Capital allocation
In addition to the medium-term
value creation plan, the Group has clear capital allocation
priorities. 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 a sustainable net cash position in the medium-term and a
funding profile which is appropriate for the medium and long-term
needs of the Group
· Property - disciplined
non-speculative investment in the Property segment
· Dividend - the reinstatement of the
dividend is key to ensuring that shareholders share the benefits of
the Group's growth. In the medium-term, the Group is targeting a
dividend cover of around three times through the cycle
· Mergers and acquisitions - the Group
will consider value accretive acquisitions in core markets where
there is potential to accelerate the medium-term value creation
plan
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 declaring an interim
dividend of 1.67p per share. This represents a dividend cover of 4x
as we progressively move to the medium-term target. The interim
dividend will be paid on 31 May 2024 to shareholders on the
register at close of business on 19 April 2024. The shares will be
marked ex-dividend on 18 April 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 9 May 2024.
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 expectations compared to the time of the
transaction.
Performance Excellence
Through our Performance Excellence
culture, 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 is
Digital and Simplification as we continuously improve the
operational performance of the business. The key tenets are 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 July 2023 to 31 December
2023, the Group's aggregate average payment days improved to 33
days (H2 FY23: 34 days) and the percentage of payments made to
suppliers within 60 days was 88% (H2 FY23: 85%).
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. As a "strategic
supplier" to the UK Government, 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 require net zero
carbon and social value commitments.
Our evolved Building for a
Sustainable World framework continues to cover sustainability from
both an environment and social perspective with a focus on the
three key pillars of Our People, Our Places and Our Planet.
Our framework follows the guiding principles of the United Nations
Sustainable Development Goals ("SDGs").
·
Environmental
Under the Group's sustainability
framework, Kier has set out our pathway to become net zero carbon
across our business operations by 2039 (Scope 1 and 2) and value
chain (Scope 3) by 2045.
In February 2024, Kier was
provided the London Stock Exchange Green Economy Mark. In order to
obtain the Green Economy Mark, Kier was able to demonstrate that
over 50% of our revenue was derived from green products and
services in-line with the FTSE Russell Green Revenues
Classification System. Climate change has led to increased demand
in Kier's end markets.
The Group is also pleased that the
successful implementation of its Carbon Reduction Plan has been
recognised by the Science Based Targets Initiative ("SBTi")
including our target to achieve net zero carbon across scopes 1, 2
and 3 by 2045.
In addition, our Infrastructure
Services and Construction segments received certification to PAS
2080, the leading standard for carbon management solutions in
buildings and infrastructure development. This demonstrates Kier's
commitment to designing and managing out carbon from the lifecycle
of UK infrastructure projects that we deliver for our
customers.
The combined achievements
represent a key milestone in the Group's ESG strategy as Kier
continues in its aim to deliver sustainable infrastructure which is
vital to the UK whilst operating as a responsible business in
itself.
·
Social
Delivering a legacy of social
value continues to be a key priority for our customers and for
Kier. We continue to offer apprenticeships as a key means of
upskilling employees and bringing in diverse emerging talent to
reduce the industry skills gap.
At 31 December 2023, we had over
720 apprentices employed within Kier, which equates to 7% of our
workforce. In addition, c.9% of the workforce are on a formal
learning programme. These statistics represent an increase of
30% and 17% respectively compared with HY23.
As part of our drive to recruit
diverse talent, Kier has placed 23 prison leavers and eight
Released on Temporary Licence ("ROTL") candidates in employment
either within our business or with our supply chain partners in the
first half of the year. Kier also remains committed to
offering employment opportunities to those who have served in our
armed forces and has hired 24 veterans in the same period.
The Group's 12-month rolling
Accident Incident Rate ("AIR") at HY24 of 108 represents a 23%
increase on FY23. The 12-month rolling All Accident Incident Rate
("AAIR") at HY24 of 301 represents a 6% reduction compared to HY23.
Whilst we are disappointed with the AIR performance, we remain
focused on improving it. Accordingly, we are targeting a 10%
reduction in this metric and have implemented a series of
initiatives to address this including:
·
Culture Programme - continued roll out of the
programme and alignment of our Behavioural Safety Programmes;
and
·
Sharing Best Practice - the instigation of
regular forums for our project leads, where key safety learnings
and initiatives are discussed and shared
Despite the recent AIR
performance, we retain a strong overall safety record and maintain
highest standards in our industry. Safety remains our license to
operate and we continue to share and embed best practice across our
divisions.
·
Governance
Governance remains a core
component of the Group's approach to operations. The Group monitors
governance matters through our annual audits and operating risk
framework.
Summary and outlook
The past two and a half years have
seen the Group achieve significant operational and financial
progress and I am delighted that today marks a return to the
dividend list. The first half has seen the Group deliver strong
volume and profit growth, increased orders and material
deleveraging. This is testament to the hard work and commitment of
our people who have enhanced our resilience and strengthened our
financial position in line with the objectives set out in our
medium-term value creation plan. Our order book remains strong at
£10.7bn 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
particularly pleased to report that the Group significantly
improved upon its year-end net cash position with significantly
lower average month-end net debt and has confidence in sustaining
this momentum going forward.
The second half of the financial
year has started well, and we are trading in-line with
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 over
the last 18 months allowing us to significantly deleverage the
Group and deliver the medium-term value creation plan which will
benefit all stakeholders.
Operational Review
Infrastructure
Services
|
|
Six months to 31 December
2023
|
Six
months to 31 December 2022
|
Change
|
|
Revenue (£m)
|
944
|
816
|
16%
|
|
Adjusted operating profit
(£m)6
|
44.0
|
33.8
|
30%
|
|
Adjusted operating margin
(%)
|
4.7%
|
4.1%
|
60bps
|
|
Reported operating profit
(£m)
|
32.4
|
22.0
|
47%
|
|
Order book (£bn)
|
6.7
|
5.8
|
16%
|
6 Stated
before adjusting items of £(11.6)m (HY23: £(11.8)m).
·
Key contract wins include:
o
appointed a place on the £3bn SCAPE Utilities
Framework aimed at delivering utilities, civil infrastructure and
transportation services work
·
96% of orders secured for FY24
Infrastructure Services revenue
increased 16% against the prior period primarily due to the
continued ramp up of capital works on HS2. Adjusted operating
profit increased 30% to £44.0m due to higher HS2 volumes. Adjusting
items largely relate to acquisition related activity including
costs related to the Buckingham acquisition and the amortisation of
contract rights from this and previous acquisitions.
The Transportation business division
provides design, engineering, delivery and maintenance to support
the movement of people, goods and equipment by land, sea and
air. It includes our highways business and infrastructure
projects business relating to rail, ports and air including our
EKFB joint venture which is delivering 80km of HS2. The
business has benefited from the start of contracts won in previous
periods, the continued successful delivery of assets for HS2 and
the delivery of contracts acquired from Buckingham.
The Natural Resources, Nuclear &
Networks division includes our water, energy, nuclear and
networks projects. 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
energy and environment sectors. During the period, we
saw reduced activity and margins in telecoms due
to market conditions.
Construction
|
|
Six months to 31 December
2023
|
Six
months to 31 December 2022
|
Change
|
|
Revenue (£m)
|
915
|
709
|
29%
|
|
Adjusted operating profit
(£m)7
|
33.2
|
32.8
|
1%
|
|
Adjusted operating margin
(%)
|
3.6%
|
4.6%
|
(100)bps
|
|
Reported operating profit
(£m)
|
25.1
|
25.6
|
(2)%
|
|
Order book (£bn)
|
4.0
|
4.3
|
(7)%
|
7 Stated
before adjusting items of £(8.1)m (HY23: £(7.2)m)
· Key
contract wins include:
o Five education projects worth a total of c.£182m,
o Four healthcare projects worth c.£81m; and
o Awarded a new houseblock for the Ministry of Justice at HMP
Elmley worth over £100m
·
99% of orders secured for FY24
The Construction segment comprises
Regional Building, Strategic Projects and Kier Places (including
Housing Maintenance, Facilities Management and Environmental
Services). Construction has national coverage delivering schools,
hospitals, defence, custodial facilities and amenities centres for
local authorities, councils and the private sector.
Revenue increased 29% largely due
to increased volume in our regional build business.
Adjusted operating profit
increased 1% to £33.2m driven by increased revenue. The reduction
in margin was driven by mix and increased overheads for site
starts, as anticipated. Adjusting items include £7.2m relating to
fire and cladding compliance costs.
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 custodial services, where our Construction business
has specialist expertise.
Our Kier Places consists of
facilities management and housing maintenance services. The
facilities management business specialises in working in occupied
properties including residential and offices delivering
maintenance, repairs, fire safety and compliance services,
predominantly for the Ministry of Justice and central Government.
The housing maintenance business delivers repairs and maintenance
services for local authorities. We continue to grow our
capabilities and customers with a focus on decarbonising social
housing through retrofit and other interventions. These have
allowed the business to benefit from increased revenue volume and
profitability.
Property
|
|
Six months to 31 December
2023
|
Six
months to 31 December 2022
|
Change
|
|
Revenue (£m)
|
22.1
|
10.8
|
105%
|
|
Adjusted operating profit
(£m) 8
|
4.6
|
4.7
|
(2)%
|
|
Adjusted operating margin
(%)
|
20.8%
|
42.7%
|
2,190bps
|
|
Reported operating profit
(£m)
|
4.6
|
4.4
|
5%
|
|
Capital employed (£m)
|
163
|
148
|
10%
|
|
ROCE (%)
|
5.9%
|
7.0%
|
(110)bps
|
8 Stated
before adjusting items of £nil (HY23: £(0.3)m)
·
Our Kier Property and Housing
Growth Partnership ("HGP") joint venture, acquired a development
site in Tunbridge Wells
·
Sold its Logistics City scheme
in Whiteley, Hampshire for £10.5m
The Property business invests and
develops primarily mixed-use commercial and residential schemes
across the UK. The business is a well-established urban
regeneration and property developer and largely operates through
joint ventures and does not make speculative
investments.
Adjusted operating profit of £4.6m
during the period was driven by limited transaction activity as a
result of difficult market conditions. Property recognised a fair
value gain of £3.8m within other income related to two sites that
are held as investment properties.
As previously stated, the Group
has focused on the controlled expansion of the Property business
through select investments and strategic joint ventures using a
disciplined capital approach. We had previously limited the amount
of capital employed in our Property segment to £170m, excluding
third party debt and fair value gains.
However, the property market is
showing tentative signs of recovery and the Group is currently
seeing many attractive investment opportunities. As at 31 December
2023, the capital employed in the Property segment was £163m
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).
The Property division targets a
return on capital employed of 15%. Property transactions also
provide a source of capital for the future as the cash is
recycled.
Corporate
|
|
Six months to 31 December
2023
|
Six
months to 31 December 2022
|
Change
|
|
|
|
|
|
|
Adjusted operating loss
(£m) 9
|
(17.1)
|
(14.1)
|
(21)%
|
|
Reported operating loss
(£m)
|
(18.0)
|
(13.7)
|
(31)%
|
|
|
|
|
|
9 Stated
before adjusting items of £(0.9)m (HY23: £0.4m)
The Corporate segment comprises
the costs of the Group's central functions which have increased
over the prior period due to investment in people and culture to
support the Group's growth.
Financial Review
Introduction
The Group performed well through
the first half of the year with further improvement in the order
book, which has been converted into strong revenue and profit
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. In February 2024, the Group
completed a refinancing of its principal debt facilities and has
secured significant committed funding to support its medium-term
value creation plan. Given the strong operational and financial
performance, together with continued confidence over further
progress in the future, the Board is pleased to reinstate
dividends.
The Group delivered strong volume
growth of 23% giving total Group revenues of £1,882.9m (HY23:
£1,536.6m, FY23: £3,405.4m) and which helped deliver an adjusted
operating profit of £64.7m (HY23: £57.2m, FY23:
£131.5m).
The continued strong operational
performance led to a 15% increase in profit from operations to
£44.1m (HY23: £38.3m, FY23: £81.5m) and an increase in profit
before tax to £27.0m (HY23: £25.4m, FY23: £51.9m).
Adjusting items were £22.0m (HY23:
£20.4m, FY23: £52.9m). The current period charge includes £11.1m of
amortisation of intangible contract rights and £7.2m 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 period.
Net finance charges, excluding
adjusting items, for the period were £15.7m (HY23: £11.4m, FY23:
£26.7m), with the benefit of lower average month-end net debt
offset by higher interest rates through the period. Net finance
charges are expected to increase with the completion of the Group's
refinancing in February 2024. Interest on the RCF facility remains
at SONIA plus c.2.5%, whilst the USPP notes incur fixed interest at
c.5%.
Adjusted earnings per share
increased to 8.7p (HY23: 8.5p, FY23: 19.2p).
The Group experienced a free cash
outflow of £7.9m during the period, significantly improved from the
prior period (HY23: £87.8m outflow, FY23: £132.3m inflow) driven by
continued disciplined working capital management and assisted by
volume growth, particularly in Construction. Although there was an
expected H1 working capital outflow, this was significantly reduced
compared with the prior period. The prior period free cash
outflow included the repayment of the supply chain facility
("KEPS") of £49.8m.
Out of its free cashflow, the
Group paid for the Buckingham acquisition, adjusting items, and pension deficit obligations. Net cash at 31 December 2023 of £17.0m was significantly
improved compared to the prior period (HY23: £(130.6)m, FY23:
£64.1m).
Average month-end net debt for the
period ended 31 December 2023 was £(136.5)m (HY23: £(242.7)m, FY23
£(232.1)m), reduced significantly from the prior period and the
prior year end.
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
£10.7bn, a 6% increase since the year-end (HY23: £10.1bn, FY23:
£10.1bn). 97% of revenue for FY24 is already secured which provides
certainty for the full year.
Summary of financial
performance
|
|
Adjusted10 results
|
Statutory reported results
|
|
|
31 Dec
2023
|
31
Dec
2022
|
Change
%
|
31 Dec
2023
|
31
Dec
2022
|
Change
%
|
|
Revenue (£m) - Total
|
1,882.9
|
1,536.6
|
22.5
|
1,882.9
|
1,536.6
|
22.5
|
|
Revenue (£m) - Excluding
JV's
|
1,862.1
|
1,525.8
|
22.0
|
1,862.1
|
1,525.8
|
22.0
|
|
Profit from operations
(£m)
|
64.7
|
57.2
|
13.1
|
44.1
|
38.3
|
15.1
|
|
Profit before tax (£m)
|
49.0
|
45.8
|
7.0
|
27.0
|
25.4
|
6.3
|
|
Earnings per share (p)
|
8.7
|
8.5
|
2.4
|
4.6
|
4.7
|
(2.1)
|
|
Free cash flow (£m)
|
(7.9)
|
(87.8)
|
91.0
|
|
|
|
|
Net cash / (debt)
(£m)
|
17.0
|
(130.6)
|
113.0
|
|
|
|
|
Net debt (£m) -
average month-end
|
(136.5)
|
(242.7)
|
43.8
|
|
|
|
|
Order book (£bn)
|
10.7
|
10.1
|
5.9
|
|
|
|
10 Reference to 'Adjusted' excludes adjusting items, see note
3.
Revenue
The following table bridges the
Group's revenue from the period ended 31 December 2022 to the
period ended 31 December 2023.
|
|
£m
|
|
Revenue for the period ended 31 December
2022
|
1,536.6
|
|
Infrastructure Services
|
128.8
|
|
Construction
|
206.4
|
|
Property and Corporate
|
11.1
|
|
Revenue for the period ended 31 December
2023
|
1,882.9
|
The Group grew revenue across all
segments, with Construction reporting revenue growth of 29.1%
compared to the prior period and Infrastructure Services reporting
revenue growth of 15.8% 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 period ended 31 December
2022
|
57.2
|
|
Volume / price / mix
changes
|
6.1
|
|
Management actions
|
5.4
|
|
Cost inflation
|
(4.0)
|
|
Adjusted operating profit for the period ended 31 December
2023
|
64.7
|
A reconciliation of reported to
adjusted operating profit is provided below:
|
|
Operating profit
|
Profit
before tax
|
|
|
31 Dec
2023
£m
|
31
Dec
2022
£m
|
31 Dec
2023
£m
|
31
Dec
2022
£m
|
|
Reported profit
|
44.1
|
38.3
|
27.0
|
25.4
|
|
Amortisation of acquired
intangible assets
|
11.1
|
9.8
|
11.1
|
9.8
|
|
Fire and cladding compliance
costs
|
7.2
|
4.0
|
7.2
|
4.0
|
|
Legacy legal claims
|
1.1
|
1.5
|
1.1
|
1.5
|
|
Net financing costs
|
-
|
-
|
1.4
|
1.5
|
|
Redundancy and other
people-related costs
|
-
|
1.7
|
-
|
1.7
|
|
Professional fees and other
non-people initiatives
|
-
|
0.3
|
-
|
0.3
|
|
Other
|
1.2
|
1.6
|
1.2
|
1.6
|
|
Adjusted profit
|
64.7
|
57.2
|
49.0
|
45.8
|
Additional information about these
items is as follows:
·
Amortisation of acquired intangible
assets £11.1m (HY23: £9.8m):
Comprises the amortisation of
acquired contract rights primarily through the acquisitions of MRBL
Limited (Mouchel Group), May Gurney Integrated Services plc,
McNicholas Construction Holdings Limited and the Buckingham Group.
The increase compared to prior period is due to the acquisition of
the rail assets of the Buckingham Group during the
period.
·
Fire and cladding compliance
costs £7.2m (HY23: £4.0m):
The Group continues to review 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 updates to Government guidance, as it applies,
to multi-storey and multi-occupied residential
buildings.
The charge incurred in the period
is for those projects where the Group has confirmed liability and
has a reasonable estimate of the cost to rectify the issues
identified.
·
Legacy legal
claims £1.1m (HY23: £1.5m) and Other £1.2m (HY23:
£1.6m):
Legacy legal claims in the period
relate to the disposal of Kier Living in May 2021. Included within
other are legal fees and implementation costs in respect of the
Buckingham acquisition, along with costs associated with the
down-sizing of the International business. These were offset by
fair value movements and associated costs relating to vacated
leased properties.
Earnings per
share
Earnings per share ("EPS"), before
adjusting items, amounted to 8.7p (HY23: 8.5p, FY23: 19.2p). EPS,
after adjusting items, from continuing operations amounted to 4.6p
(HY23: 4.7p, 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 leases recorded under IFRS 16.
Net finance charges for the period
were £15.7m (HY23: £11.4m, FY23: £26.7m) before adjusting items of
£1.4m (HY23: £1.5m, FY23: £2.9m).
Interest on bank borrowings
amounted to £14.7m (HY23: £11.9m, FY23: £29.0m). Although
average month-end net debt has decreased, the impact of this on the
interest charge has been more than offset by the higher interest
rates throughout the period. The Group was able to partially
mitigate the risk of higher interest rates with a fixed interest
rate swap of £100m, which expired in September 2023, and an
additional 3 year fixed interest rate swap of £100m, taken out in
February 2023, which reduces to £75m in
its second year and £50m in its third year.
Lease interest was £4.8m (HY23:
£4.7m, FY23: £9.5m).
The Group had a net interest
credit of £2.8m (HY23: £3.8m, FY23: £7.8m) in relation to the defined benefit pension schemes which has
arisen due to the combination of the overall pension surplus and
relatively high discount rate (derived from corporate bond yields),
at the start of the financial year.
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 believes that now is the
appropriate time to reinstate dividends.
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
declared an interim dividend of 1.67p per share.
Balance
sheet
Net assets
The Group had net assets
of £517.1m at 31 December 2023 (HY23: £482.6m,
FY23: £513.0m).
Goodwill
The Group held intangible assets
of £645.5m (HY23: £655.3m, FY23: £645.0m) of which
goodwill represented £540.9m (HY23: £536.7m,
FY23: £536.7m). The increase in goodwill in the period is due
to the Buckingham acquisition. No impairment triggers were
identified in the period.
Deferred tax asset
The Group has a deferred tax asset
of £128.6m recognised at 31 December 2023 (HY23: £133.7m,
FY23: £128.8m) primarily due to historical losses.
Based on the Group's forecasts, it
is expected that the deferred tax asset will be utilised over a
period of approximately 10 years.
An adjusted tax credit
of £4.1m (HY23: £3.9m, FY23: £9.1m) has been included within
adjusting items, representing the tax impact of adjusting
items.
Right-of-use assets and lease liabilities
At 31 December 2023, the Group had
right-of-use assets of £94.8m (HY23: £122.0m,
FY23: £105.4m) and associated lease liabilities
of £173.9m (HY23: £197.9m,
FY23: £182.6m). The movements
at each balance sheet date, reflect operational equipment
requirements less associated depreciation and lease repayments.
Investment properties
As at 31 December 2023, the Group
had investment properties of £102.2m (HY23: £89.3m, FY23: £98.4m).
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. Two of these sites are
held as investment properties and during the period the Group
recognised an overall fair value gain of £3.8m across these sites
which has been recognised in Other income.
Contract assets & 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 31 December 2023, total contract assets amounted
to £323.1m (HY23: £336.5m, FY23: £401.9m).
Contract liabilities
were £119.2m (HY23: £73.3m,
FY23: £90.5m).
Retirement benefits obligation
Kier operates a number of defined
benefit pension schemes. At 31 December 2023, the reported surplus,
which is the difference between the aggregate value of the schemes'
assets and the present value of their future liabilities, was
£96.4m (HY23: £91.1m, FY23: £104.5m), before accounting for
deferred tax, with the movement in the period primarily as a result
of actuarial losses of £15.1m (HY23: £112.4m losses, FY23: £107.8m
losses). The net movement is due to changes in financial
assumptions, with lower corporate bond yields, increasing pension
schemes' liabilities, which has been partially offset by both
higher than assumed asset returns and a change in demographic
assumptions, which has 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. 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 £10m in FY23 to £9m in FY24, £8m 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 FY23, expenses amounted to £2.9m. The largest of the
six schemes is already in surplus.
Free cash flow and Net debt
|
|
31 Dec
2023
|
31
Dec
2022
|
|
|
£m
|
£m
|
|
Operating profit
|
44.1
|
38.3
|
|
Depreciation of owned
assets
|
3.5
|
2.7
|
|
Depreciation of right-of-use
assets
|
18.7
|
21.8
|
|
Amortisation
|
16.4
|
19.0
|
|
EBITDA
|
82.7
|
81.8
|
|
Adjusting items excluding
adjusting amortisation and interest
|
9.5
|
9.1
|
|
Adjusted EBITDA
|
92.2
|
90.9
|
|
Working capital outflow
|
(46.4)
|
(78.7)
|
|
Net capital expenditure including
finance lease capital payments
|
(26.3)
|
(27.1)
|
|
Joint Venture dividends less
profits
|
(5.9)
|
(2.2)
|
|
Repayment of KEPS
|
-
|
(49.8)
|
|
Other free cash flow
items
|
(1.2)
|
(2.9)
|
|
Operating free cash flow
|
12.4
|
(69.8)
|
|
Net interest and tax
|
(20.3)
|
(18.0)
|
|
Free cash flow
|
(7.9)
|
(87.8)
|
|
|
2023
|
2022
|
|
|
£m
|
£m
|
|
Net cash at 1 July
|
64.1
|
2.9
|
|
Free cash flow
|
(7.9)
|
(87.8)
|
|
Adjusting items
|
(16.1)
|
(22.7)
|
|
Pension deficit payments and
fees
|
(5.0)
|
(6.6)
|
|
Net purchase of own
shares
|
(3.7)
|
(11.9)
|
|
Acquisition of
Buckingham
|
(9.4)
|
-
|
|
Other
|
(5.0)
|
(4.5)
|
|
Net cash / (debt) at 31 December
|
17.0
|
(130.6)
|
As expected, the Group experienced
a free cash outflow during the period driven by a seasonal working
capital outflow, however, this was significantly reduced compared
to the prior period assisted by volume growth, particularly in
Construction. Working capital is seasonal in the business with
summer being a higher period of activity compared to winter months.
As a result of the improved free cash flow performance, the Group
delivered a net cash position at 31 December 2023 with the Group
anticipating this improvement to continue through into
H2.
The average month-end net debt
position is better than the comparative period at £(136.5)m,
(HY23: £(242.7)m, FY23: £(232.1)m). The business
generated operating profit and positive
working capital which was used to pay adjusting items, tax and
interest, pension deficit obligations, invest in our Property
business, purchase existing Kier shares on behalf of employees and
acquire the rail assets of the Buckingham Group.
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 (HY23: £11.9m, FY23:
£11.9m).
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 period.
Treasury
facilities
Bank finance
At 31 December 2023, the Group had
committed debt facilities of £548.2m with a
further £18.0m of uncommitted overdrafts as at 31
December 2023.
The facilities comprised £475.0m
RCF, £73.2m USPP Notes as well as £18.0m of
overdrafts.
The Group has a fixed interest
rate swap through to February 2026, initially contracted at £100m
but which in February 2024 reduced to £75m in its second year, and
will reduce further to £50m in its third year.
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 £36m and lower the RCF to
£261m. The remainder of its USPP notes and reduction in the RCF of
£111m in January 2025 will be met from operating free cash
flow.
With £400m of facilities, post
January 2025, the Group has secured significant committed funding
to support its medium-term value creation 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. One non-recourse, project specific, property
joint venture loan is hedged using an interest rate derivative to
fix the cost of borrowing.
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 and borrowings, 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 twelve 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 condensed consolidated
financial statements.
Statement of directors'
responsibilities
The Directors confirm that these
condensed interim financial statements have been prepared in
accordance with UK adopted International Accounting Standard 34,
'Interim Financial Reporting', and the Disclosure Guidance and
Transparency Rules sourcebook of the UK's Financial Conduct
Authority and that the interim management report includes a fair
review of the information required by DTR 4.2.7 and DTR 4.2.8,
namely:
· an indication of important events that have occurred during
the first six months and their impact on the consolidated financial
statements, and a description of the principal risks and
uncertainties for the remaining six months of the financial year;
and
· material related-party transactions in the first six months
and any material changes in the related-party transactions
described in the last annual report.
The directors of Kier Group plc
are as listed on pages 94 and 95 of the 2023 Annual Report and
Accounts, with the exception of the following change: Mohammed
Saddiq joined the Board as a Non-executive Director on 1 January
2024.
A list of the current directors is
also maintained on Kier Group plc's website at:
www.kier.co.uk.
Signed on 6 March 2024 on behalf
of the Board.
|
Andrew Davies
|
Simon Kesterton
|
|
Chief Executive
|
Chief Financial Officer
|
Independent review report to Kier
Group plc
Report on the condensed
consolidated interim financial statements
Our conclusion
We have reviewed Kier Group plc's
condensed consolidated interim financial statements (the "interim
financial statements") in the unaudited results for the half year
of Kier Group plc for the 6 month period ended
31 December 2023 (the "period").
Based on our review, nothing has
come to our attention that causes us to believe that the interim
financial statements are not prepared, in all material respects, in
accordance with UK adopted International Accounting Standard 34,
'Interim Financial Reporting' and the Disclosure Guidance and
Transparency Rules sourcebook of the United Kingdom's Financial
Conduct Authority.
The interim financial statements
comprise:
·
the Condensed consolidated balance sheet as at
31 December 2023;
·
the Condensed consolidated income statement and
Condensed consolidated statement of comprehensive income for the
period then ended;
·
the Condensed consolidated statement of cash
flows for the period then ended;
·
the Condensed consolidated statement of changes
in equity for the period then ended; and
·
the explanatory notes to the interim financial
statements.
The interim financial statements
included in the unaudited results for the half year of Kier Group
plc have been prepared in accordance with UK adopted International
Accounting Standard 34, 'Interim Financial Reporting' and the
Disclosure Guidance and Transparency Rules sourcebook of the United
Kingdom's Financial Conduct Authority.
Basis for conclusion
We conducted our review in
accordance with International Standard on Review Engagements (UK)
2410, 'Review of Interim Financial Information Performed by the
Independent Auditor of the Entity' issued by the Financial
Reporting Council for use in the United Kingdom ("ISRE (UK) 2410").
A review of interim financial information consists of making
enquiries, primarily of persons responsible for financial and
accounting matters, and applying analytical and other review
procedures.
A review is substantially less in
scope than an audit conducted in accordance with International
Standards on Auditing (UK) and, consequently, does not enable us to
obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly, we do
not express an audit opinion.
We have read the other information
contained in the unaudited results for the half year and considered
whether it contains any apparent misstatements or material
inconsistencies with the information in the interim financial
statements.
Conclusions relating to going
concern
Based on our review procedures,
which are less extensive than those performed in an audit as
described in the Basis for conclusion section of this report,
nothing has come to our attention to suggest that the directors
have inappropriately adopted the going concern basis of accounting
or that the directors have identified material uncertainties
relating to going concern that are not appropriately disclosed.
This conclusion is based on the review procedures performed in
accordance with ISRE (UK) 2410. However, future events or
conditions may cause the group to cease to continue as a going
concern.
Responsibilities for the interim
financial statements and the review
Our responsibilities and those of
the directors
The unaudited results for the half
year, including the interim financial statements, is the
responsibility of, and has been approved by the directors. The
directors are responsible for preparing the unaudited results for
the half year in accordance with the Disclosure Guidance and
Transparency Rules sourcebook of the United Kingdom's Financial
Conduct Authority. In preparing the unaudited results for the half
year, including the interim financial statements, the directors are
responsible for assessing the group's ability to continue as a
going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless the
directors either intend to liquidate the group or to cease
operations, or have no realistic alternative but to do
so.
Our responsibility is to express a
conclusion on the interim financial statements in the unaudited
results for the half year based on our review. Our conclusion,
including our Conclusions relating to going concern, is based on
procedures that are less extensive than audit procedures, as
described in the Basis for conclusion paragraph of this report.
This report, including the conclusion, has been prepared for and
only for the company for the purpose of complying with the
Disclosure Guidance and Transparency Rules sourcebook of the United
Kingdom's Financial Conduct Authority and for no other purpose. We
do not, in giving this conclusion, accept or assume responsibility
for any other purpose or to any other person to whom this report is
shown or into whose hands it may come save where expressly agreed
by our prior consent in writing.
PricewaterhouseCoopers
LLP
Chartered Accountants
London
6 March 2024
Financial
statements
Condensed consolidated
income statement
For the six months ended 31
December 2023
|
|
Note
|
Unaudited
six months to 31 December
2023
£m
|
Unaudited
six months to 31 December 2022
£m
|
Year to
30 June
2023
£m
|
|
Continuing operations
|
|
|
|
|
|
Revenue
|
|
|
|
|
|
Group and share of joint
ventures1
|
2
|
1,882.9
|
1,536.6
|
3,405.4
|
|
Less share of joint
ventures
|
2
|
(20.8)
|
(10.8)
|
(24.7)
|
|
Group revenue
|
|
1,862.1
|
1,525.8
|
3,380.7
|
|
Cost of sales
|
|
(1,715.1)
|
(1,395.2)
|
(3,074.4)
|
|
Gross profit
|
|
147.0
|
130.6
|
306.3
|
|
Administrative expenses
|
|
(112.6)
|
(101.5)
|
(240.0)
|
|
Share of post-tax profits of
joint ventures
|
|
5.9
|
3.2
|
1.1
|
|
Other income
|
4
|
3.8
|
6.0
|
14.1
|
|
Profit from operations
|
2
|
44.1
|
38.3
|
81.5
|
|
Finance income
|
5
|
4.0
|
0.6
|
9.4
|
|
Finance costs
|
5
|
(21.1)
|
(13.5)
|
(39.0)
|
|
Profit before tax
|
2
|
27.0
|
25.4
|
51.9
|
|
Taxation
|
7
|
(7.4)
|
(5.0)
|
(10.9)
|
|
Profit for the period
|
2
|
19.6
|
20.4
|
41.0
|
|
|
|
|
|
|
|
Attributable to:
|
|
|
|
|
|
Owners of the parent
|
|
19.6
|
20.5
|
41.1
|
|
Non-controlling
interests
|
|
-
|
(0.1)
|
(0.1)
|
|
|
|
19.6
|
20.4
|
41.0
|
|
|
|
|
|
|
|
Earnings per share from continuing
operations
|
|
|
|
|
|
- Basic
|
9
|
4.6p
|
4.7p
|
9.5p
|
|
- Diluted
|
9
|
4.4p
|
4.7p
|
9.3p
|
|
|
|
|
|
|
|
Supplementary information from
continuing operations
|
|
|
|
|
|
Adjusted2 operating profit
|
3
|
64.7
|
57.2
|
131.5
|
|
Adjusted2 profit before tax
|
3
|
49.0
|
45.8
|
104.8
|
|
Adjusted2 earnings per share
|
9
|
8.7p
|
8.5p
|
19.2p
|
|
Adjusted2 diluted earnings per
share
|
9
|
8.5p
|
8.5p
|
18.8p
|
1
Group revenue including joint ventures is an
alternative performance measure.
2
Reference to 'adjusted' excludes adjusting items,
see note 3. These are alternative performance measures.
Financial
statements
Condensed consolidated statement of
comprehensive income
For the six months ended 31
December 2023
|
|
Note
|
Unaudited
six months to 31 December
2023
£m
|
Unaudited
six months to 31 December 2022
£m
|
Year to
30 June
2023
£m
|
|
Profit for the period
|
|
19.6
|
20.4
|
41.0
|
|
Items that may be reclassified
subsequently to the income statement
|
|
|
|
|
|
Fair value movements on cash flow
hedging instruments
|
|
(3.1)
|
0.7
|
2.1
|
|
Fair value movements on cash flow
hedging instruments recycled to the income statement
|
5
|
0.1
|
(0.9)
|
1.2
|
|
Deferred tax on fair value
movements on cash flow hedging instruments
|
|
0.8
|
-
|
(0.8)
|
|
Foreign exchange translation
differences
|
|
-
|
1.2
|
0.3
|
|
Foreign exchange movements recycled
to the income statement
|
|
(2.8)
|
-
|
-
|
|
Total items that may be reclassified
subsequently to the income statement
|
|
(5.0)
|
1.0
|
2.8
|
|
Items that will not be reclassified
to the income statement
|
|
|
|
|
|
Re-measurement of retirement
benefit assets and obligations
|
6
|
(15.1)
|
(112.4)
|
(107.8)
|
|
Deferred tax on re-measurement of
retirement benefit assets and obligations
|
|
3.8
|
28.1
|
26.5
|
|
Total items that will not be
reclassified to the income statement
|
|
(11.3)
|
(84.3)
|
(81.3)
|
|
Other comprehensive loss for the
period
|
|
(16.3)
|
(83.3)
|
(78.5)
|
|
Total comprehensive income/(loss)
for the period
|
|
3.3
|
(62.9)
|
(37.5)
|
|
|
|
|
|
|
|
Attributable to:
|
|
|
|
|
|
Equity holders of the
parent
|
|
3.3
|
(62.8)
|
(37.4)
|
|
Non-controlling interests -
continuing operations
|
|
-
|
(0.1)
|
(0.1)
|
|
|
|
3.3
|
(62.9)
|
(37.5)
|
|
|
|
|
|
|
Financial
statements
Condensed consolidated statement of
changes in equity
For the six months ended 31
December 2023
|
|
Note
|
Share capital
£m
|
Share
premium
£m
|
Capital
redemption
reserve
£m
|
(Accumulated losses)/
retained earnings
£m
|
Cash flow
hedge
reserve
£m
|
Translation
reserve
£m
|
Merger
reserve
£m
|
Equity attributable to owners
of
the parent
£m
|
Non-
controlling
interests
£m
|
Total
equity
£m
|
|
1 July 2022
|
|
4.5
|
684.3
|
2.7
|
(494.9)
|
(0.9)
|
8.9
|
350.6
|
555.2
|
(0.6)
|
554.6
|
|
Profit/(loss) for the
period
|
|
-
|
-
|
-
|
20.5
|
-
|
-
|
-
|
20.5
|
(0.1)
|
20.4
|
|
Other comprehensive
income/(loss)
|
|
-
|
-
|
-
|
(84.3)
|
(0.2)
|
1.2
|
-
|
(83.3)
|
-
|
(83.3)
|
|
Total comprehensive income/(loss) for the
period
|
|
-
|
-
|
-
|
(63.8)
|
(0.2)
|
1.2
|
-
|
(62.8)
|
(0.1)
|
(62.9)
|
|
Transactions with non-controlling
interests
|
|
-
|
-
|
-
|
(0.9)
|
-
|
-
|
-
|
(0.9)
|
-
|
(0.9)
|
|
Issue of own shares
|
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
0.3
|
0.3
|
|
Share-based payments
|
16
|
-
|
-
|
-
|
3.4
|
-
|
-
|
-
|
3.4
|
-
|
3.4
|
|
Purchase of own shares
|
16
|
-
|
-
|
-
|
(11.9)
|
-
|
-
|
-
|
(11.9)
|
-
|
(11.9)
|
|
At 31 December 2022
|
|
4.5
|
684.3
|
2.7
|
(568.1)
|
(1.1)
|
10.1
|
350.6
|
483.0
|
(0.4)
|
482.6
|
|
Profit for the period
|
|
-
|
-
|
-
|
20.6
|
-
|
-
|
-
|
20.6
|
-
|
20.6
|
|
Other comprehensive
income/(loss)
|
|
-
|
-
|
-
|
3.0
|
2.7
|
(0.9)
|
-
|
4.8
|
-
|
4.8
|
|
Total comprehensive income/(loss) for the
period
|
|
-
|
-
|
-
|
23.6
|
2.7
|
(0.9)
|
-
|
25.4
|
-
|
25.4
|
|
Share-based payments
|
16
|
-
|
-
|
-
|
5.0
|
-
|
-
|
-
|
5.0
|
-
|
5.0
|
|
At 30 June 2023
|
|
4.5
|
684.3
|
2.7
|
(539.5)
|
1.6
|
9.2
|
350.6
|
513.4
|
(0.4)
|
513.0
|
|
Profit for the period
|
|
-
|
-
|
-
|
19.6
|
-
|
-
|
-
|
19.6
|
-
|
19.6
|
|
Other comprehensive
loss
|
|
-
|
-
|
-
|
(11.3)
|
(2.2)
|
(2.8)
|
-
|
(16.3)
|
-
|
(16.3)
|
|
Total comprehensive income/(loss) for the
period
|
|
-
|
-
|
-
|
8.3
|
(2.2)
|
(2.8)
|
-
|
3.3
|
-
|
3.3
|
|
Issue of own shares
|
|
-
|
0.1
|
-
|
-
|
-
|
-
|
-
|
0.1
|
-
|
0.1
|
|
Capital reduction
|
15
|
-
|
(684.4)
|
(2.7)
|
687.1
|
-
|
-
|
-
|
-
|
-
|
-
|
|
Share-based payments
|
16
|
-
|
-
|
-
|
4.4
|
-
|
-
|
-
|
4.4
|
-
|
4.4
|
|
Purchase of own shares
|
16
|
-
|
-
|
-
|
(3.7)
|
-
|
-
|
-
|
(3.7)
|
-
|
(3.7)
|
|
At 31 December 2023
|
|
4.5
|
-
|
-
|
156.6
|
(0.6)
|
6.4
|
350.6
|
517.5
|
(0.4)
|
517.1
|
The numbers in the table above are
shown net of tax as applicable.
Financial
statements
Condensed consolidated balance
sheet
As at 31 December
2023
|
|
Note
|
Unaudited
31 December 2023
£m
|
Unaudited
31 December 2022
£m
|
30 June
2023
£m
|
|
Non-current assets
|
|
|
|
|
|
Intangible assets
|
11
|
645.5
|
655.3
|
645.0
|
|
Property, plant and
equipment
|
|
29.6
|
32.2
|
29.8
|
|
Right-of-use assets
|
|
94.8
|
122.0
|
105.4
|
|
Investment properties
|
12
|
102.2
|
89.3
|
98.4
|
|
Investments in and loans to joint
ventures
|
|
89.4
|
66.7
|
78.6
|
|
Capitalised mobilisation
costs
|
|
5.0
|
7.7
|
6.3
|
|
Deferred tax assets
|
7
|
128.6
|
133.7
|
128.8
|
|
Contract assets
|
|
48.5
|
31.7
|
43.7
|
|
Trade and other
receivables
|
|
17.6
|
15.1
|
18.5
|
|
Retirement benefit
assets
|
6
|
125.0
|
116.8
|
129.3
|
|
Other financial assets
|
|
0.4
|
8.1
|
9.7
|
|
Non-current assets
|
|
1,286.6
|
1,278.6
|
1,293.5
|
|
Current assets
|
|
|
|
|
|
Inventories
|
|
74.2
|
77.2
|
72.9
|
|
Contract assets
|
|
274.6
|
304.8
|
358.2
|
|
Trade and other
receivables
|
|
216.1
|
206.5
|
189.2
|
|
Corporation tax
receivable
|
|
23.9
|
14.8
|
13.4
|
|
Other financial assets
|
|
6.2
|
2.7
|
1.0
|
|
Cash and cash
equivalents
|
13
|
327.3
|
316.7
|
376.9
|
|
Current assets
|
|
922.3
|
922.7
|
1,011.6
|
|
Total assets
|
|
2,208.9
|
2,201.3
|
2,305.1
|
|
Current liabilities
|
|
|
|
|
|
Borrowings
|
13
|
-
|
(7.9)
|
-
|
|
Lease liabilities
|
|
(35.3)
|
(39.7)
|
(36.2)
|
|
Trade and other payables
|
14
|
(972.5)
|
(886.4)
|
(1,075.0)
|
|
Contract liabilities
|
|
(119.2)
|
(73.3)
|
(90.5)
|
|
Provisions
|
|
(29.7)
|
(18.8)
|
(38.2)
|
|
Current liabilities
|
|
(1,156.7)
|
(1,026.1)
|
(1,239.9)
|
|
Non-current liabilities
|
|
|
|
|
|
Borrowings
|
13
|
(316.5)
|
(448.5)
|
(319.1)
|
|
Lease liabilities
|
|
(138.6)
|
(158.2)
|
(146.4)
|
|
Trade and other payables
|
14
|
(27.4)
|
(34.1)
|
(36.9)
|
|
Retirement benefit
obligations
|
6
|
(28.6)
|
(25.7)
|
(24.8)
|
|
Provisions
|
|
(24.0)
|
(26.1)
|
(25.0)
|
|
Non-current liabilities
|
|
(535.1)
|
(692.6)
|
(552.2)
|
|
Total liabilities
|
|
(1,691.8)
|
(1,718.7)
|
(1,792.1)
|
|
Net assets
|
2
|
517.1
|
482.6
|
513.0
|
|
Equity
|
|
|
|
|
|
Share capital
|
15
|
4.5
|
4.5
|
4.5
|
|
Share premium
|
15
|
-
|
684.3
|
684.3
|
|
Capital redemption
reserve
|
15
|
-
|
2.7
|
2.7
|
|
Retained earnings/(accumulated
losses)
|
|
156.6
|
(568.1)
|
(539.5)
|
|
Cash flow hedge reserve
|
15
|
(0.6)
|
(1.1)
|
1.6
|
|
Translation reserve
|
15
|
6.4
|
10.1
|
9.2
|
|
Merger reserve
|
|
350.6
|
350.6
|
350.6
|
|
Equity attributable to owners of the
parent
|
|
517.5
|
483.0
|
513.4
|
|
Non-controlling
interests
|
|
(0.4)
|
(0.4)
|
(0.4)
|
|
Total equity
|
|
517.1
|
482.6
|
513.0
|
Financial
statements
Condensed consolidated statement of
cash flows
For the six months ended 31
December 2023
|
|
Note
|
Unaudited
six months to 31 December
2023
£m
|
Unaudited
six months to 31 December 2022
£m
|
Year to
30 June
2023
£m
|
|
Cash flows from operating
activities
|
|
|
|
|
|
Profit before tax
|
|
27.0
|
25.4
|
51.9
|
|
Net finance cost
|
5
|
17.1
|
12.9
|
29.6
|
|
Share of post-tax trading results
of joint ventures
|
|
(5.9)
|
(3.2)
|
(1.1)
|
|
Difference between pension funding
contributions paid and the pension cost charge
|
|
0.4
|
-
|
0.1
|
|
Equity-settled share-based payments
charge
|
16
|
4.4
|
3.4
|
8.4
|
|
Amortisation of intangible assets
and mobilisation costs
|
|
16.4
|
19.0
|
33.9
|
|
Change in fair value of investment
properties
|
12
|
(3.8)
|
(6.0)
|
(11.4)
|
|
Research and development
expenditure credit
|
7
|
(11.9)
|
(9.5)
|
(22.8)
|
|
Depreciation of property, plant and
equipment
|
|
3.5
|
2.7
|
6.1
|
|
Depreciation of right-of-use
assets
|
|
18.7
|
21.8
|
43.7
|
|
Recycling of foreign exchange
movements to the Income Statement
|
|
(2.8)
|
-
|
-
|
|
Profit on disposal of property,
plant and equipment and intangible assets
|
|
(0.6)
|
(0.1)
|
(1.8)
|
|
Operating cash inflows before movements in working capital
and pension deficit contributions
|
|
62.5
|
66.4
|
136.6
|
|
Deficit contributions to pension
funds
|
6
|
(4.6)
|
(5.0)
|
(9.9)
|
|
Increase in inventories
|
|
(1.3)
|
(20.4)
|
(18.8)
|
|
(Increase)/decrease in
receivables
|
|
(22.1)
|
(1.7)
|
12.2
|
|
Decrease/(increase) in contract
assets
|
|
78.8
|
61.0
|
(4.4)
|
|
(Decrease)/increase in
payables
|
|
(110.4)
|
(177.0)
|
26.1
|
|
Increase in contract
liabilities
|
|
28.7
|
6.0
|
23.2
|
|
(Decrease)/increase in
provisions
|
|
(12.7)
|
(3.1)
|
15.2
|
|
Cash inflow/(outflow) from operating
activities
|
|
18.9
|
(73.8)
|
180.2
|
|
Dividends received from joint
ventures
|
|
-
|
0.7
|
1.8
|
|
Interest received
|
5
|
1.2
|
0.6
|
1.6
|
|
Income tax paid
|
|
(3.0)
|
-
|
(0.1)
|
|
Net cash inflow/(outflow) from operating
activities
|
|
17.1
|
(72.5)
|
183.5
|
|
Cash flows from investing
activities
|
|
|
|
|
|
Proceeds from sale of property,
plant and equipment
|
|
1.0
|
0.3
|
2.6
|
|
Purchase of property, plant and
equipment
|
|
(3.4)
|
(2.8)
|
(3.9)
|
|
Purchase of intangible
assets
|
11
|
(4.4)
|
(0.3)
|
(2.7)
|
|
Purchase of capitalised
mobilisation costs
|
|
(0.1)
|
(1.0)
|
(1.8)
|
|
Acquisition of joint venture
debt
|
|
-
|
(0.9)
|
(0.9)
|
|
Investment in joint
ventures
|
|
(13.0)
|
(15.6)
|
(35.7)
|
|
Loan repayment and return of equity
from joint ventures
|
|
8.1
|
12.1
|
17.1
|
|
Acquisition of business
|
10
|
(9.4)
|
-
|
-
|
|
Net cash used in investing activities
|
|
(21.2)
|
(8.2)
|
(25.3)
|
|
Cash flows from financing
activities
|
|
|
|
|
|
Issue of shares
|
|
0.1
|
-
|
-
|
|
Issue of shares to non-controlling
interest
|
|
-
|
0.3
|
0.3
|
|
Net purchase of own
shares
|
|
(3.7)
|
(11.9)
|
(11.9)
|
|
Interest paid
|
|
(19.6)
|
(18.0)
|
(39.5)
|
|
Principal elements of lease
payments
|
|
(19.4)
|
(22.5)
|
(45.6)
|
|
Drawdown of borrowings
|
|
-
|
180.2
|
56.8
|
|
Repayment of borrowings
|
|
(2.9)
|
(32.7)
|
(43.2)
|
|
Settlement of derivative financial
instruments
|
|
-
|
4.0
|
4.7
|
|
Transactions with non-controlling
interests
|
|
-
|
(0.9)
|
(0.9)
|
|
Net cash (used in)/generated from financing
activities
|
|
(45.5)
|
98.5
|
(79.3)
|
|
(Decrease)/increase in cash and cash
equivalents
|
|
(49.6)
|
17.8
|
78.9
|
|
Effect of change in foreign
exchange rates
|
|
-
|
1.2
|
0.3
|
|
Opening cash and cash
equivalents
|
|
376.9
|
297.7
|
297.7
|
|
Closing cash and cash equivalents
|
13
|
327.3
|
316.7
|
376.9
|
|
Supplementary information
|
|
|
|
|
|
Adjusted cash flow generated
from/(used in) operating activities
|
3(b)
|
35.0
|
(51.1)
|
207.2
|
|
|
|
|
|
|
Financial
statements
Notes to the condensed consolidated
financial statements
For the period ended 31
December 2023
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
2nd Floor, Optimum House, Clippers Quay, Salford, M50
3XP.
The interim condensed consolidated
financial statements (financial statements) for the period ended 31
December 2023 comprise the Company and its subsidiaries (together
referred to as the Group) and the Group's interest in jointly
controlled entities.
The accounting policies adopted are
consistent with those of the previous financial year
and corresponding interim reporting period.
Basis of preparation
The interim condensed consolidated
financial statements for the half year ended 31 December 2023 have
been prepared in accordance with the UK-adopted International
Accounting Standard 34, 'Interim Financial Reporting' and the
Disclosure Guidance and Transparency Rules sourcebook of the United
Kingdom's Financial Conduct Authority.
The unaudited financial information
contained in this announcement does not constitute the Company's
statutory accounts as at and for the six months ended 31 December
2023. Statutory financial statements for the year ended 30 June
2023 were approved by the Board of Directors on 13 September 2023
and delivered to the Registrar of Companies. The auditor's report
on these accounts was unqualified, did not contain an emphasis of
matter paragraph and did not contain a statement under section 498
of the Companies Act 2006.
A number of new or amended
standards became applicable for the current reporting period,
including IFRS 17 'Insurance Contracts'. The Group did not have to
change its accounting policies or make retrospective adjustments as
a result of adopting these standards.
Going concern
The Directors continue to adopt the
going concern basis in preparing the Group's interim financial
statements.
The Group performed well through
the half year ended 31 December 2023 and delivered strong volume
and adjusted operating profit growth, with the associated cash
generation leading to material deleveraging with an over £106m
reduction in average month end debt in the period. The Group
continues to win new, high quality and profitable business in its
markets on terms and at rates which reflect the bidding disciplines
and risk management practices introduced under the Group's
Performance Excellence programme and which provides good,
multi-year revenue visibility. At 31 December 2023, the order book
was £10.7bn (FY23: £10.1bn).
As at 31 December 2023, the Group
had £548.2m of unsecured committed facilities and £18.0m of
uncommitted overdrafts. In February 2024, the Group completed a
refinancing of its principal debt facilities. This included the
issuance of 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 medium-term value creation plan.
Financial covenant certificates for
December 2023 have been prepared with no breaches noted. The
Directors have reviewed the Group's cash flow forecasts for the
period to 30 June 2025, which are included in the Group's
three-year strategic plan, on the basis of certain key assumptions
and including a number of stressed but plausible downside
scenarios.
These scenarios included the
consideration of risks which may arise to the Group's available
liquidity and its ongoing compliance with financial covenants
within the Group's principal debt facilities as a result of or in
light of the following factors or circumstances:
· Potential reductions in trading volumes;
· Potential future challenges in respect of ongoing
projects;
· Reduced investment/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 Board also considered the
macroeconomic and political risks affecting the UK economy. The
Board 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 Board has also considered the
potential impact of climate change and does 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 Board has 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 interim financial statements and,
for this reason, they continue to adopt the going concern basis in
preparing these interim financial statements.
2 Segmental reporting
The Group operates three divisions:
Infrastructure Services, Construction and Property, which is the
basis on which the Group manages and reports its primary segmental
information. Corporate includes unrecovered overheads and the
charge for defined benefit pension schemes.
Segmental information is based on
the information, which is provided to the Chief Executive, together
with the Board, who is the Chief Operating Decision Maker. The
segments are strategic business units with separate management and
have different core customers and offer different
services.
The accounting policies of the
operating segments are consistent across the Group. The Group
evaluates segmental information on the basis of profit or loss from
operations before adjusting items (see note 3), interest and tax
expense. The segmental results reported to the Chief Executive
include items directly attributable to a segment as well as those
that can be allocated on a reasonable basis.
Unaudited
six months to 31 December 2023
|
Continuing operations
|
Infrastructure Services
£m
|
Construction
£m
|
Property
£m
|
Corporate
£m
|
Group
£m
|
|
Revenue1
|
|
|
|
|
|
|
Group and share of joint
ventures
|
944.4
|
915.4
|
22.1
|
1.0
|
1,882.9
|
|
Less share of joint
ventures
|
-
|
(1.4)
|
(19.4)
|
-
|
(20.8)
|
|
Group revenue
|
944.4
|
914.0
|
2.7
|
1.0
|
1,862.1
|
|
|
|
|
|
|
|
|
Profit for the period
|
|
|
|
|
|
|
Operating profit/(loss) before
adjusting items2
|
44.0
|
33.2
|
4.6
|
(17.1)
|
64.7
|
|
Adjusting items2
|
(11.6)
|
(8.1)
|
-
|
(0.9)
|
(20.6)
|
|
Profit/(loss) from
operations
|
32.4
|
25.1
|
4.6
|
(18.0)
|
44.1
|
|
Net finance
income/(costs)3
|
1.8
|
0.2
|
(1.0)
|
(18.1)
|
(17.1)
|
|
Profit/(loss) before tax
|
34.2
|
25.3
|
3.6
|
(36.1)
|
27.0
|
|
Taxation
|
|
|
|
|
(7.4)
|
|
Profit for the period
|
|
|
|
|
19.6
|
|
|
|
|
|
|
|
|
Balance sheet
|
|
|
|
|
|
|
Operating assets4
|
900.7
|
407.8
|
206.5
|
359.9
|
1,874.9
|
|
Operating
liabilities4
|
(419.2)
|
(712.6)
|
(14.5)
|
(228.9)
|
(1,375.2)
|
|
Net operating
assets/(liabilities)4
|
481.5
|
(304.8)
|
192.0
|
131.0
|
499.7
|
|
Cash, cash equivalents and
borrowings
|
280.8
|
463.1
|
(153.8)
|
(579.3)
|
10.8
|
|
Net financial assets
|
-
|
-
|
-
|
6.6
|
6.6
|
|
Net assets/(liabilities)
|
762.3
|
158.3
|
38.2
|
(441.7)
|
517.1
|
Unaudited
six months to 31 December 2022
|
Continuing operations
|
Infrastructure Services
£m
|
Construction
£m
|
Property
£m
|
Corporate
£m
|
Group
£m
|
|
Revenue1
|
|
|
|
|
|
|
Group and share of joint
ventures
|
815.6
|
709.0
|
10.8
|
1.2
|
1,536.6
|
|
Less share of joint
ventures
|
-
|
(1.4)
|
(9.4)
|
-
|
(10.8)
|
|
Group revenue
|
815.6
|
707.6
|
1.4
|
1.2
|
1,525.8
|
|
|
|
|
|
|
|
|
Profit for the period
|
|
|
|
|
|
|
Operating profit/(loss) before
adjusting items2
|
33.8
|
32.8
|
4.7
|
(14.1)
|
57.2
|
|
Adjusting items2
|
(11.8)
|
(7.2)
|
(0.3)
|
0.4
|
(18.9)
|
|
Profit/(loss) from
operations
|
22.0
|
25.6
|
4.4
|
(13.7)
|
38.3
|
|
Net finance
income/(costs)3
|
0.3
|
(2.4)
|
(0.2)
|
(10.6)
|
(12.9)
|
|
Profit/(loss) before tax
|
22.3
|
23.2
|
4.2
|
(24.3)
|
25.4
|
|
Taxation
|
|
|
|
|
(5.0)
|
|
Profit for the period
|
|
|
|
|
20.4
|
|
|
|
|
|
|
|
|
Balance sheet
|
|
|
|
|
|
|
Operating assets4
|
927.6
|
417.6
|
180.1
|
348.5
|
1,873.8
|
|
Operating
liabilities4
|
(417.4)
|
(594.2)
|
(14.1)
|
(236.6)
|
(1,262.3)
|
|
Net operating
assets/(liabilities)4
|
510.2
|
(176.6)
|
166.0
|
111.9
|
611.5
|
|
Cash, cash equivalents and
borrowings
|
267.8
|
342.5
|
(133.4)
|
(616.6)
|
(139.7)
|
|
Net financial assets
|
-
|
-
|
-
|
10.8
|
10.8
|
|
Net assets/(liabilities)
|
778.0
|
165.9
|
32.6
|
(493.9)
|
482.6
|
Year to 30 June 2023
|
Continuing operations
|
Infrastructure Services
£m
|
Construction
£m
|
Property
£m
|
Corporate
£m
|
Group
£m
|
|
Revenue1
|
|
|
|
|
|
|
Group and 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
|
|
|
|
|
|
|
|
|
Profit for the year
|
|
|
|
|
|
|
Operating profit/(loss) before
adjusting items2
|
79.8
|
69.5
|
12.8
|
(30.6)
|
131.5
|
|
Adjusting items2
|
(22.6)
|
(23.1)
|
1.5
|
(5.8)
|
(50.0)
|
|
Profit/(loss) from
operations
|
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 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
|
|
|
|
|
|
|
|
1 Revenue is stated after the exclusion of inter-segmental
revenue. 100% of the Group's revenue is derived from UK-based
customers (31 December 2022: 90%; 30 June 2023: 100%). 16% of the
Group's revenue was received from High Speed Two (HS2) Limited (31
December 2022: 16%; 30 June 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%.
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
These items are explained in
detail below:
|
|
Operating profit
|
Profit before tax
|
|
|
Unaudited
six months to
31 December 2023
£m
|
Unaudited six months to 31
December 2022
£m
|
Year to 30 June
2023
£m
|
Unaudited
six months to 31 December 2023
£m
|
Unaudited six months to 31 December
2022
£m
|
Year to 30 June
2023
£m
|
|
Reported profit from continuing
operations
|
44.1
|
38.3
|
81.5
|
27.0
|
25.4
|
51.9
|
|
Amortisation of acquired intangible
assets1
|
11.1
|
9.8
|
19.2
|
11.1
|
9.8
|
19.2
|
|
Fire and cladding compliance
costs2
|
7.2
|
4.0
|
12.6
|
7.2
|
4.0
|
12.6
|
|
Legacy legal
claims3
|
1.1
|
1.5
|
1.5
|
1.1
|
1.5
|
1.5
|
|
Net financing
costs4
|
-
|
-
|
-
|
1.4
|
1.5
|
2.9
|
|
Insurance-related items
|
-
|
-
|
5.3
|
-
|
-
|
5.3
|
|
Redundancy and other people related
costs
|
-
|
1.7
|
4.8
|
-
|
1.7
|
4.8
|
|
Professional adviser fees and other
costs incurred implementing non-people initiatives
|
-
|
0.3
|
4.9
|
-
|
0.3
|
4.9
|
|
Other5
|
1.2
|
1.6
|
1.7
|
1.2
|
1.6
|
1.7
|
|
Adjusted profit from continuing
operations
|
64.7
|
57.2
|
131.5
|
49.0
|
45.8
|
104.8
|
1 Comprises the amortised contract rights relating to previous
acquisitions of MRBL Limited (Mouchel Group), May Gurney Integrated
Services plc and McNicholas Construction Holdings Limited, along
with the amortisation of contract rights acquired as part of the
Group's acquisition of the Buckingham Group rail business in
HY24.
2 Fire and cladding compliance costs consist of costs incurred
in complying with the updated fire and cladding compliance
regulations on legacy projects.
3 Legacy legal claims related to the disposal of Kier Living in
May 2021. The prior period charge of £1.5m relates to a HSE fine
for historical safety issues.
4 Net financing costs relate to IFRS 16 interest charges on
leased investment properties previously used as offices.
5 Other costs consist of charges in respect of the re-sizing of
the International business and costs incurred on the acquisition of
Buckingham Group's rail division.
(a) Taxation
The tax impact of the above
adjusting items was a credit of £4.1m (six
months ended 31 December 2022: £3.9m; year
ended 30 June 2023: £9.1m). In addition, a credit of £2.0m was
recognised in the year ended 30 June 2023 relating to the change in
tax rate to 25%.
(b) Adjusted cash flow
|
|
Note
|
Unaudited
six months to 31
December
2023
£m
|
Unaudited
six months to 31 December 2022
£m
|
Year to 30 June
2023
£m
|
|
Reported cash inflow/(outflow)
from operating activities
|
|
18.9
|
(73.8)
|
180.2
|
|
Add: Cash outflow from operating
activities (adjusting items)
|
3(c)
|
16.1
|
22.7
|
27.0
|
|
Adjusted cash inflow/(outflow) from
operating activities
|
|
35.0
|
(51.1)
|
207.2
|
(c) Cash outflow from operating activities (adjusting
items)
|
|
|
Unaudited
six months to 31 December 2023
£m
|
Unaudited
six months to 31 December 2022
£m
|
Year to 30 June
2023
£m
|
|
Adjusting items reported in the
income statement
|
|
22.0
|
20.4
|
52.9
|
|
Less: non-cash items incurred in
the period
|
|
(14.8)
|
(12.9)
|
(39.0)
|
|
Add: payment of prior year
accruals and provisions
|
|
8.9
|
15.2
|
13.1
|
|
Cash outflow from operating
activities (adjusting items)
|
|
16.1
|
22.7
|
27.0
|
4 Other income
|
|
Unaudited
six months to 31 December 2023
£m
|
Unaudited
six months to 31 December 2022
£m
|
Year to 30 June
2023
£m
|
|
Recycling Plant insurance
proceeds
|
-
|
-
|
2.7
|
|
Fair value gain on investment
properties
|
3.8
|
6.0
|
11.4
|
|
Other income
|
3.8
|
6.0
|
14.1
|
5 Finance income and costs
|
|
Unaudited
six months to 31 December 2023
£m
|
Unaudited
six months to 31 December 2022
£m
|
Year to 30 June
2023
£m
|
|
Finance income
Bank deposits
|
1.2
|
0.1
|
0.5
|
|
Interest receivable on loans to
related parties
|
-
|
0.5
|
1.1
|
|
Net interest on net defined
benefit assets
|
2.8
|
-
|
7.8
|
|
|
4.0
|
0.6
|
9.4
|
|
Finance costs
|
|
|
|
|
Bank interest
|
(14.7)
|
(11.9)
|
(29.0)
|
|
Interest payable on
leases
|
(4.8)
|
(4.7)
|
(9.5)
|
|
Foreign exchange gains/(losses) on
foreign denominated borrowings
|
0.2
|
(1.2)
|
2.5
|
|
Fair value (losses)/gains on cash
flow hedges recycled from other comprehensive
income1
|
(0.1)
|
0.9
|
(1.2)
|
|
Net interest on net defined
benefit assets
|
-
|
3.8
|
-
|
|
Other
|
(1.7)
|
(0.4)
|
(1.8)
|
|
|
(21.1)
|
(13.5)
|
(39.0)
|
|
|
|
|
|
|
Net finance costs
|
(17.1)
|
(12.9)
|
(29.6)
|
1 Fair value (losses)/gains arise from movements in
cross-currency swaps which hedge the currency risk on foreign
denominated borrowings.
6 Retirement benefit assets and
obligations
The principal assumptions used by
the independent qualified actuaries are shown below.
|
|
Unaudited
31 December 2023
%
|
Unaudited
31 December 2022
%
|
30 June 2023
%
|
|
Discount rate
|
4.60
|
4.95
|
5.30
|
|
Inflation rate (Retail Price
Index)
|
3.05
|
3.10
|
3.20
|
|
Inflation rate (Consumer Price
Index)
|
2.20-2.65
|
2.60
|
2.30-2.75
|
The amounts recognised in the
financial statements in respect of the Group's defined benefit
schemes are as follows:
|
|
Unaudited
six months to
31 December
2023
|
Unaudited
six months to
31 December
2022
|
Year to
30 June
2023
|
|
|
Kier
Group plc
£m
|
Acquired schemes
£m
|
Total
£m
|
Kier
Group plc
£m
|
Acquired schemes
£m
|
Total
£m
|
Kier
Group plc
£m
|
Acquired schemes
£m
|
Total
£m
|
|
Opening net
surplus/(deficit)
|
117.5
|
(13.0)
|
104.5
|
170.2
|
24.5
|
194.7
|
170.2
|
24.5
|
194.7
|
|
Credit/(charge) to income
statement
|
2.8
|
(0.4)
|
2.4
|
3.3
|
0.5
|
3.8
|
6.6
|
1.1
|
7.7
|
|
Employer contributions
|
-
|
4.6
|
4.6
|
0.2
|
4.8
|
5.0
|
0.4
|
9.5
|
9.9
|
|
Actuarial losses
|
(4.2)
|
(10.9)
|
(15.1)
|
(64.4)
|
(48.0)
|
(112.4)
|
(59.7)
|
(48.1)
|
(107.8)
|
|
Closing net surplus/(deficit)
|
116.1
|
(19.7)
|
96.4
|
109.3
|
(18.2)
|
91.1
|
117.5
|
(13.0)
|
104.5
|
|
Comprising:
|
|
|
|
|
|
|
|
|
|
|
Fair value of scheme
assets
|
886.6
|
416.1
|
1,302.7
|
888.7
|
413.2
|
1,301.9
|
850.9
|
396.8
|
1,247.7
|
|
Net present value of the defined
benefit obligation
|
(770.5)
|
(435.8)
|
(1,206.3)
|
(779.4)
|
(431.4)
|
(1,210.8)
|
(733.4)
|
(409.8)
|
(1,143.2)
|
|
Net surplus/(deficit)
|
116.1
|
(19.7)
|
96.4
|
109.3
|
(18.2)
|
91.1
|
117.5
|
(13.0)
|
104.5
|
|
Presentation of net
surplus/(deficit) in the Consolidated balance sheet:
|
|
|
|
|
|
|
|
|
|
|
Retirement benefit assets
|
116.1
|
8.9
|
125.0
|
109.3
|
7.5
|
116.8
|
117.5
|
11.8
|
129.3
|
|
Retirement benefit
obligations
|
-
|
(28.6)
|
(28.6)
|
-
|
(25.7)
|
(25.7)
|
-
|
(24.8)
|
(24.8)
|
|
Net surplus/(deficit)
|
116.1
|
(19.7)
|
96.4
|
109.3
|
(18.2)
|
91.1
|
117.5
|
(13.0)
|
104.5
|
Pension scheme contingent
liabilities
In June 2023, in the case of Virgin
Media vs NTL Pension Trustees II Limited, the High Court judged
that amendments made to the Virgin Media scheme were invalid
because they were not accompanied by the correct actuarial
confirmation. If upheld, the High Court's decision could have wider
ranging implications, affecting other schemes that were
contracted-out on a salary-related basis, and made amendments
between April 1997 and April 2016. There is still further
uncertainty with a Court of Appeal hearing for the case set for 25
June 2024, as well as the potential for overriding government
legislation to be introduced. As a result, the Group and the
Trustees of the Group's pension schemes have not yet investigated
the potential implications for the Group's accounts in detail. The
Group considers the amount of any potential impact on the schemes'
defined benefit obligation cannot yet be measured with sufficient
reliability and therefore no allowance for this case has been made
in calculating the defined benefit obligations at the reporting
date.
7 Taxation
|
|
Unaudited
six months to 31 December
2023
£m
|
Unaudited
six months to 31 December 2022
£m
|
Year to 30 June
2023
£m
|
|
Profit before tax
|
27.0
|
25.4
|
51.9
|
|
Less: (Loss)/profit from joint
venture companies
|
0.9
|
(3.6)
|
(3.6)
|
|
Profit before tax excluding income
from joint ventures
|
27.9
|
21.8
|
48.3
|
|
Current tax
|
(3.8)
|
(2.0)
|
(7.3)
|
|
Deferred tax
|
(3.6)
|
(3.0)
|
(3.6)
|
|
Total tax charge in the income
statement
|
(7.4)
|
(5.0)
|
(10.9)
|
|
Effective tax rate
|
26.5%
|
22.9%
|
22.6%
|
As at 31 December 2023, the Group
had a deferred tax asset of £128.6m, which includes £107.3m in
relation to tax losses (31 December 2022: £104.6m; 30 June 2023:
£106.2m), and £21.3m of other temporary differences (31 December
2022: £29.1m; 30 June 2023: £22.6m).
At 31 December 2023, the Group had
unused tax losses of £175.4m (six months ended 31 December 2022:
£203.6m; year ended 30 June 2023; £187.7m). There were no other
temporary differences (six months ended 31 December 2022: £nil;
year ended 30 June 2023; £nil) on which deferred tax had not been
recognised.
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 so far in 2024;
·
The Group has substantially completed its
restructuring activities and is focusing on the achievement of the
medium-term value creation 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, decarbonisation and
spending.
When considering the length of
time over which the losses are expected to be utilised, the Group
has taken into account that only 50% of taxable profits in each
year can be offset by brought forward losses, after the annual £5m
deductions allowance.
Based on these forecasts, the
Group is expected to utilise its deferred tax asset over a period
of approximately 10 years.
Income tax expense is recognised
based on management's estimate of the weighted average effective
annual income tax rate expected for the full financial year. The
estimated average annual tax rate used for the year to 30 June 2024
is 26.5%, compared to 22.9% for the six months ended 31 December
2022. The estimated average annual tax rate was higher largely due
to the increase in UK corporation tax to 25% which was effective
from 1 April 2023.
The Research and Development
Expenditure Credit ("RDEC") of £11.9m was included in operating
profit during the period (31 December 2022: £9.5m; 30 June 2023:
£22.8m). Included in the corporation tax asset at 31 December 2023
were RDEC receivables of £23.9m (31 December 2022: £16.9m; 30 June
2023: £16.1m).
On 20 June 2023, Finance (No2) Act
2023 was substantively enacted in the UK, introducing a global
minimum effective tax rate of 15%. The legislation implements a
domestic top-up tax and a multinational top-up tax, effective for
accounting periods starting on or after 31 December 2023. The Group
applied the exception under the IAS12 amendment to recognising and
disclosing information about deferred tax assets and liabilities
related to top-up income taxes.
8 Dividends
The proposed interim dividend for
the year ending 30 June 2024 of 1.67p 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
£7m will be paid on 31 May 2024 to shareholders on the register at
the close of business on 19 April 2024.
9 Earnings per share
a)
Reconciliation of earnings used in calculating earnings per
share
Profit attributable to the
ordinary equity holders of the company used in calculating basic
earnings per share.
|
|
Note
|
Unaudited
six months to
31 December 2023
£m
|
Unaudited
six months to 31 December
2022
£m
|
Year to 30 June
2023
£m
|
|
Continuing operations
|
|
|
|
|
|
Profit for the period
|
|
19.6
|
20.4
|
41.0
|
|
Less: non-controlling interest
share
|
|
-
|
0.1
|
0.1
|
|
Profit (after tax and minority
interests), being net gains attributable to equity holders of the
parent (A)
|
|
19.6
|
20.5
|
41.1
|
|
Adjusting items (excluding
tax)
|
3
|
22.0
|
20.4
|
52.9
|
|
Tax impact of adjusting
items
|
3
|
(4.1)
|
(3.9)
|
(11.1)
|
|
Adjusted profit after tax
(B)
|
|
37.5
|
37.0
|
82.9
|
b)
Weighted average
number of shares used as the denominator
|
|
|
Unaudited
six months to 31 December 2023
million
|
Unaudited
six months to 31 December
2022
million
|
Year to 30 June
2023
million
|
|
Weighted average number of shares
used as the denominator in calculating basic earnings per share
(C)
|
|
429.8
|
433.0
|
431.2
|
|
Adjustments for calculation of
diluted earnings per share:
|
|
|
|
|
|
Impact of share options
|
|
11.5
|
4.2
|
10.3
|
|
Weighted average number of shares
used as the denominator in calculating diluted earnings per share
(D)
|
|
441.3
|
437.2
|
441.5
|
The weighted average number of
shares is lower than the number of shares in issue (per note 15)
primarily due to shares that are held by the Group's employee
benefit trusts (see note 16), which are excluded from the
calculation.
Options granted to employees under
the Sharesave, Conditional Share Awards Plan ("CSAP") and Long Term
Incentive Plan ("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. Details relating to the share option schemes
are set out in note 16.
c)
Basic earnings per share
|
|
|
Unaudited
six months to 31 December 2023
pence
|
Unaudited
six months to 31 December
2022
pence
|
Year to 30 June
2023
pence
|
|
From continuing operations
attributable to the ordinary equity holders of the company
(A/C)
|
|
4.6
|
4.7
|
9.5
|
|
Adjusted from continuing operations
attributable to the ordinary equity holders of the company
(B/C)
|
|
8.7
|
8.5
|
19.2
|
d)
Diluted earnings per share
|
|
|
Unaudited
six months to 31 December 2023
pence
|
Unaudited
six months to 31 December
2022
pence
|
Year to 30 June
2023
pence
|
|
From continuing operations
attributable to the ordinary equity holders of the company
(A/D)
|
|
4.4
|
4.7
|
9.3
|
|
Adjusted from continuing operations
attributable to the ordinary equity holders of the company
(B/D)
|
|
8.5
|
8.5
|
18.8
|
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
provisional fair value amounts recognised in respect of the
identifiable assets acquired and liabilities assumed are set out in
the table below:
|
|
Unaudited
Fair value total
|
|
|
£m
|
|
Intangible assets
|
7.5
|
|
Trade and other
receivables
|
0.9
|
|
Provisions
|
(3.2)
|
|
Total identifiable assets and
liabilities
|
5.2
|
|
Goodwill
|
4.2
|
|
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.
11 Intangible assets
|
|
Unaudited
Goodwill
£m
|
Unaudited
Intangible
contract rights
£m
|
Unaudited
Computer
software
£m
|
Unaudited
Total
£m
|
|
Cost
|
|
|
|
|
|
At 1 July 2022
|
538.8
|
252.2
|
132.6
|
923.6
|
|
Additions
|
-
|
-
|
0.3
|
0.3
|
|
At 31 December 2022
|
538.8
|
252.2
|
132.9
|
923.9
|
|
Additions
|
-
|
-
|
2.4
|
2.4
|
|
Disposals
|
-
|
(16.5)
|
(9.6)
|
(26.1)
|
|
At 30 June 2023
|
538.8
|
235.7
|
125.7
|
900.2
|
|
Additions
|
-
|
-
|
4.4
|
4.4
|
|
Arising on acquisition
|
4.2
|
7.5
|
-
|
11.7
|
|
Disposals
|
-
|
-
|
(0.6)
|
(0.6)
|
|
At 31 December 2023
|
543.0
|
243.2
|
129.5
|
915.7
|
|
|
|
|
|
|
|
Accumulated amortisation
|
|
|
|
|
|
At 1 July 2022
|
(2.1)
|
(168.2)
|
(84.2)
|
(254.5)
|
|
Charge for the period
|
-
|
(9.8)
|
(4.3)
|
(14.1)
|
|
At 31 December 2022
|
(2.1)
|
(178.0)
|
(88.5)
|
(268.6)
|
|
Charge for the period
|
-
|
(9.4)
|
(3.3)
|
(12.7)
|
|
Disposals
|
-
|
16.5
|
9.6
|
26.1
|
|
At 30 June 2023
|
(2.1)
|
(170.9)
|
(82.2)
|
(255.2)
|
|
Charge for the period
|
-
|
(11.1)
|
(3.9)
|
(15.0)
|
|
At 31 December 2023
|
(2.1)
|
(182.0)
|
(86.1)
|
(270.2)
|
|
|
|
|
|
|
|
Net book value
|
|
|
|
|
|
At 31 December 2023
|
540.9
|
61.2
|
43.4
|
645.5
|
|
At 30 June 2023
|
536.7
|
64.8
|
43.5
|
645.0
|
|
At 31 December 2022
|
536.7
|
74.2
|
44.4
|
655.3
|
12 Investment properties
|
|
Unaudited
Owned assets
£m
|
Unaudited
Right-of-use assets
£m
|
Unaudited
Total
£m
|
|
At 1 July 2022
|
13.0
|
47.4
|
60.4
|
|
Additions
|
22.9
|
-
|
22.9
|
|
Fair value gain
|
5.7
|
0.3
|
6.0
|
|
At 31 December 2022
|
41.6
|
47.7
|
89.3
|
|
Transfers
|
2.7
|
-
|
2.7
|
|
Additions
|
-
|
1.1
|
1.1
|
|
Fair value gain/(loss)
|
8.6
|
(3.3)
|
5.3
|
|
At 30 June 2023
|
52.9
|
45.5
|
98.4
|
|
Fair value gain
|
3.7
|
0.1
|
3.8
|
|
At 31 December 2023
|
56.6
|
45.6
|
102.2
|
13 Net cash/(debt)
|
|
Unaudited
31 December 2023
£m
|
Unaudited 31 December 2022
£m
|
Year to 30 June
2023
£m
|
|
Cash and cash equivalents - bank
balances and cash in hand
|
327.3
|
316.7
|
376.9
|
|
Borrowings due within one
year
|
-
|
(7.9)
|
-
|
|
Borrowings due after one
year
|
(316.5)
|
(448.5)
|
(319.1)
|
|
Impact of cross-currency
hedging
|
6.2
|
9.1
|
6.3
|
|
Net cash/(debt)
|
17.0
|
(130.6)
|
64.1
|
Average month-end net debt for the
six months ended 31 December 2023 was £136.5m (six months ended 31
December 2022: £242.7m; year ended 30 June 2023: £232.1m). Net debt
excludes lease liabilities.
14 Trade and other payables
|
|
Unaudited
31 December 2023
£m
|
Unaudited
31 December 2022
£m
|
30 June
2023
£m
|
|
Current:
|
|
|
|
|
Trade payables
|
303.1
|
274.5
|
310.0
|
|
Accruals
|
484.7
|
439.1
|
585.1
|
|
Sub-contract retentions
|
33.1
|
26.7
|
22.5
|
|
Other taxation and social
security
|
134.8
|
127.4
|
138.4
|
|
Other payables and deferred
income
|
16.8
|
18.7
|
19.0
|
|
|
972.5
|
886.4
|
1,075.0
|
|
Non-current:
|
|
|
|
|
Trade payables
|
3.9
|
9.4
|
5.1
|
|
Sub-contract retentions
|
23.5
|
24.7
|
31.8
|
|
|
27.4
|
34.1
|
36.9
|
15 Share capital and reserves
Share capital
The share capital of the Company
comprises:
|
|
Unaudited
31 December
2023
|
Unaudited
31 December
2022
|
30 June
2023
|
|
|
Number
|
£m
|
Number
|
£m
|
Number
|
£m
|
|
Authorised, issued and fully paid
ordinary shares of 1 pence each
|
446,416,044
|
4.5
|
446,305,548
|
4.5
|
446,314,435
|
4.5
|
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 six months to 31
December 2023, 101,609 shares were issued under the Sharesave
Scheme (six months to 31 December 2022: 63,866; year ended 30 June
2023: 72,753).
Share premium account
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.
Capital redemption 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.
Cash flow hedge reserve
This reserve comprises the
effective portion of the cumulative net change in the fair value of
the cash flow hedging instruments related to hedged transactions
that have not yet occurred, net of any related deferred
tax.
Translation reserve
This reserve comprises the
cumulative difference on exchange arising from the retranslation of
net investments in overseas subsidiary undertakings.
16 Share-based payments
The Group has an established
long-term incentive plan (LTIP) under which directors and senior
employees can receive awards of shares subject to the Group
achieving certain performance targets. Participants are entitled to
receive dividend equivalents on these awards. Awards made to
members of the Board are subject to a two-year holding period post
vesting. Further details of the LTIP schemes were disclosed in
the 2023 annual financial statements. 8,695,601 shares vested
under the LTIP schemes during the six months to 31 December 2023
(six months to 31 December 2022: 8,339,894; year ended 30
June 2023: 8,432,381). 9,088,937 new awards were granted under the
LTIP during the six months to 31 December 2023 (six months to 31
December 2022 and year ended 30 June 2023: 15,492,751).
The Group also has an established
Sharesave (SAYE) scheme. Options to acquire shares in the capital
of Kier Group plc are granted to eligible employees who enter into
a Sharesave contract, saving a regular sum each month.
Participation in the scheme is offered to all employees of the
Group who have been employed for a continuous period determined by
the Board. 6,841,037 options were granted under the Sharesave
scheme during the six months to 31 December 2023 (six months to 31
December 2022 and year ended 30 June 2023: 8,730,264). 101,609
Sharesave options were exercised during the six months to 31
December 2023 (six months to 31 December 2022: 63,866; year ended
30 June 2023: 72,753).
The following assumptions were used
in calculating the fair values of the grants made under the
share-based payment schemes during the six months to 31 December
2023:
|
|
LTIP
|
LTIP
subject to a holding
period
|
Sharesave
|
|
Grant date
|
17 November
2023
|
17 November
2023
|
31 October
2023
|
|
Shares granted
|
6,740,256
|
2,348,681
|
6,841,037
|
|
Share price at grant
|
107.8p
|
107.8p
|
100.8p
|
|
Exercise price
|
nil
|
nil
|
90.0p
|
|
Expected term
|
3 years
|
3 years
|
3.3 years
|
|
Holding period
|
n/a
|
2 years
|
n/a
|
|
Expected volatility
|
37.9%
|
32.9%
|
43.7%
|
|
Risk-free interest rate
|
4.23%
|
3.97%
|
4.50%
|
|
Dividend yield
|
n/a
|
n/a
|
0.0%
|
|
Value per option:
|
|
|
|
|
LTIP - Market condition
(25%)1,3
|
88.8p
|
83.0p
|
-
|
|
LTIP - Non-market conditions
(75%)2,3
|
107.8p
|
100.8p
|
-
|
|
Sharesave 2
|
-
|
-
|
40.7p
|
1 Based upon a stochastic model.
2 Based upon the Black-Scholes model.
3 LTIP awards provided to the Board directors are subject to a
2 year post vesting holding period. The Finnerty model has been
used to estimate a discount for the lack of marketability of these
shares during the holding period.
The value per option represents
the fair value of the option less any consideration payable. The
fair value of the proportion of the awards subject to performance
conditions that are market conditions under IFRS 2 'Share-based
Payments' (the total shareholder return 'TSR' element) incorporates
an assessment of the number of shares that will vest.
Performance conditions linked to
adjusted earnings per share, free cash flow and carbon reduction
are non-market conditions under IFRS 2. Therefore, the fair value
of these elements do not include an assessment of the number of
shares that will vest. Instead, the amount charged is based on the
fair values factored by a 'true-up' for the number of awards that
are expected to vest.
The expected volatility is based
on historical volatility over the period of time commensurate with
the expected award term immediately prior to the date of grant. The
risk-free rate of return is the yield on UK Government securities
over a term consistent with the expected term.
The share-based payment charge
recognised in the Group's income statement for the six months to 31
December 2023 was £4.4m (six months to 31 December 2022: £3.4m;
year ended 30 June 2023: £8.4m).
Shares held in trusts
The Group's employee benefit
trusts acquire shares in the Group from the market, that are
intended to be used in settling LTIP awards vesting in the future.
The shares held by the trusts are accounted for as a deduction from
equity within retained earnings.
Shares acquired by the trusts
during the six months to 31 December 2023 at a cost of £4.1m (six
months to 31 December 2022 and year ended 30 June 2023: £12.4m),
net of shares transferred to deferred bonus recipients for proceeds
of £0.4m (six months to 31 December 2022 and year ended 30 June
2023: £0.5m), are reflected in the statement of changes in equity
as a net purchase of own shares of £3.7m (six months to 31 December
2022 and year ended 30 June 2023: £11.9m).
At 31 December 2023, a total of
11,804,281 shares were held by the trusts (31 December 2022:
17,001,979 shares; 30 June 2023: 16,952,961 shares), with an
historic cost value of £9.0m (31 December 2022: £11.2m; year ended
30 June 2023: £11.2m).
17 Guarantees and contingent
liabilities
The Company has given guarantees
and entered into counter-indemnities in respect of Senior Notes
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 compliance
review
The Group monitors the position on
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 updates to 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.
18 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.
