Kier's profit up 9% as revenue falls

Contractor Kier has reported a 9% rise in pre-tax profit even though its revenue fell 5% in the second half of last year.

The firm saw a profit of £34m compared with £31m in the second half of 2010 and revenue of £1.046bn compared with £1.097bn in the same period the previous year.

In an interim results statement to the London stock exchange it said construction revenue had dropped slightly from £728m in the last six months of 2010 to £720m in 2011. Revenue from its service businesses in maintenance, facilities management and environmental services fell more sharply from £243m in 2010 to £218m in 2011 over the period.

The sharpest decline was in the group’s maintenance service division, which it said was feeling the pinch of public spending cuts, particularly in capital expenditure. It said the decline in services work was principally to blame for the drop in group revenue.

The firm’s property arm also saw revenue shrink from £126m in the second half of 2010 to £108m in the second half of 2011, though profit tripled from £3.4m to £10m over the period.

Paul Sheffield, Kier’s chief executive, said the results were in line with expectations. “The next 18 months will remain challenging as external macroeconomic factors weigh heavily on the public sector and the confidence of the private sector to invest. We will, however, continue to focus on those markets where we see the most potential for future growth,” he said.

Sheffield said the group saw construction opportunities in the transport, waste and power markets.

Phil White, chairman of Kier, added: “As we look to the medium term, conditions continue to be difficult in the UK construction market and we are inevitably seeing greater pressure on our current operating margins. In services, public sector outsourcing opportunities are taking longer to come to market and are often reduced in scale, which means the financial effect of any public sector outsourcing is not likely to be recognised until 2014.”