Profit down 40% after restructuring costs as firm appoints former Balfour Beatty regional boss as finance director

Kier

The impact of the integration of May Gurney saw pre-tax profit at contractor Kier fall by more than 40% in the year to June 2014, it reported today.

The contractor announced pre-tax profit of £14.8m after exceptional items, on revenue of £2.99bn, up more than 50%.

Kier also said Beverly Dew was set to join as finance director from Balfour Beatty, where he has been FD of the regional construction business  since June 2013, after leaving Lend Lease where he had been since September 2008.

Kier said “underlying” pre-tax profit at the group rose by 54% to £73.1m, reflecting the £222m purchase of May Gurney in June last year.

However, the group reported £42.2m of exceptional costs, which it said were due to “restructuring, acquisitions and business closures”, as well as the amortisation of contract right costs and the unwind of “fair value adjustments made on acquisition”.

After this the profit of £14.8m represented a 43% fall from the £25.9m reported last year.

The construction business saw its operating profit increase 11% to £33.6m, with a slight reduction in its operating margin to 2.1% given the 22% rise in revenue to £1.6bn.

Kier chief executive Haydn Mursell said increased activity had seen some price inflation from increasing labour costs and commodity prices, but that these problems had been mitigated by the use of two stage bidding and its position on long-term framework contracts.

Mursell added that the recovering market meant Kier expected a “steady stream of opportunities particularly in the health, education and defence sectors” in the next year, but that it would nevertheless take 5-6 years for the construction division’s operating margin to repair to 2.5%.

Kier said the integration of May Gurney was “substantially complete” and on track to meet expected returns. Mursell said overall that it was a “good” set of results showing “significant progress on last year”.

He said: “Despite inflationary price and labour cost pressures in the market, our margins remained solid, particularly in our Services business.  Following the integration of May Gurney, which transformed the scale and diversity of the Group, the breadth of our capabilities has resulted in new as well as larger contract awards.”

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