Kier cuts public construction work to 50%

Paul Sheffield, chief executive of Kier, has said that he expects the company’s public sector workload to stabilise at about half of its construction activity, after falling to that level from about three quarters over the past year.

Sheffield was speaking after Kier last week reported a 24% rise in pre-tax profit to £69m for the year to June. Revenue increased by 4% to £2.18bn, from £2.1bn.

We have access to good markets and a lot of our work is with repeat customers

Paul Sheffield, Kier

“There has been a big shift from public to private sector but we expect it to stabilise at about 50/50 for at least the next couple of years,” Sheffield told Building.

“We expect revenue to hold up pretty well through 2012 and for margins to remain pretty strong. We have access to some really good markets and a lot of our work is with repeat customers.”

Sheffield said the news that Kier had secured the sole contractor role to deliver the local authority-controlled Scape National Minor Works framework, valued at up to £1bn over the next four years, was a bonus. The work covers an estimated 2,500 projects valued at less than £500,000 and more than 350 projects valued at between £500,000 and £2m. Kier was chosen from a shortlist that also included Keepmoat, Galliford Try, Interserve and Morgan Sindall.

“We were not sure about this until last night [last Wednesday] but it has given the business a boost,” he said.

Sheffield added that he expects Kier’s international work to be worth £150m in revenue in 2012/13.

“We went through a low point in 2010,” he said. “We dropped right down to £20m overseas revenue. But there are some good markets for us overseas […] and our focus is on Hong Kong, the Middle East and the Caribbean.”

In the year to June, Kier’s construction margin improved from 2.6% to 2.7% while its order book for construction and services increased from £4.2bn to £4.3bn.