Kier begins to draw line under recovery effort as contractor announces fresh set of growth targets

Kier produced its best set of results since Andrew Davies took over as chief executive five years ago with Davies saying the firm was now ready to move out of its recovery phase and target growth with a new set of objectives.

In his first set of results back in September 2019, Davies was forced to preside over a thumping £245m pre-tax loss in the year to June 2019 with the firm racking up nearly £350m in exceptional costs.

Under a restructuring, the firm axed hundreds of jobs, sold its housing business and began making inroads into cutting its average month-end net debt which at one point stood at £436m.

In its latest set of results the firm saw revenue rise 17% to hit £4bn while pre-tx profit was up a third in the year to June to £68m. Operating profit was up 27% to £103m.

Davies said it was now “in a position where we have capital allocation options to drive shareholder value over the long term” with the firm drawing up a new list of targets including operating margins of 3.5%, average month-end net cash, further revenue growth and possible bolt-on acquisitions.

Kier also announced it was paying a final dividend for the first time since 2018, having paid an interim dividend earlier this year for the first time since March 2019.

The final dividend will be 3.48p per share which, on top of the 1.67p per share it paid for the half year, means shareholders will have been handed 5.15pper share this year.

Davies said: “Paying a dividend is manifestly an endorsement of the confidence in our order book, revenue and out team.”

The firm’s net cash at the end of the year was £167m, compared to £64m last time, while its average month-end net debt halved to £116m from £232m. Davies admitted: “Pretty soon, we will be in a net cash position.”

Davies added Kier was beginning to draw a line under the past five years of getting the business on an even keel and said: “We are now pivoting from recovery to long-term sustainable growth and that requires money.”

The firm is set to plough more cash into its property business while Davies said its infrastructure arm might see more growth in the coming years because of burgeoning sectors such as water and nuclear.

Infrastructure accounts for half of the firm’s business with construction, which includes its prisons work in the South of England for the Ministry of Justice, accounting for 48% of revenue.

The dwindling number of prison spaces available has forced the government into releasing more than 1,000 offenders early to free up capacity,  putting pressure on builders to get the work done. Davies said: “We are working very hard to go as fast we can.”

Kier operates a prison engagement and employability programme called Making Ground and said it has provided employment training to over 35 candidates in custody and offered 41 prison leavers employment.

The firm said its order book grew 7% to £10.8bn with around 60% of its order book either target cost or cost reimbursable contracts.