Kier ends first half in line with expectations

The London-listed firm put the performance down to a “strong” operational performance in the six months ended 31 December, despite inflationary pressure which it was confident it could continue to mitigate.

It said it continued to win “new, high quality and profitable” work in its markets on terms and at rates which reflected its bidding discipline and risk management.

The order book at the end of the first half was expected to be £10.1bn, making for an increase of 3% from the end of the 2022 financial year, and “significantly higher” than a year prior, when it totalled £8bn.

Kier said it secured revenue of more than 90% for the 2023 financial year, providing it with a “high degree” of visibility against a backdrop of ongoing wider market uncertainty.

Recent awards included its reappointment to the £55m per annum, three-year extension of the Network Service Alliance framework by South West Water and Bournemouth Water.

It was also reappointed to the North West Construction Hub High Value Construction Framework, and was appointed on a £22m investment programme by the Isle of Wight NHS Trust to redevelop St Mary's Hospital, as well as three school projects by the Department for Education.

Kier Places, meanwhile, was named as the preferred bidder on a £75m housing maintenance contract for 10 years with RHP Group across its housing portfolio in Richmond, Hounslow, Kingston and Hillingdon.

The company said it was continuing to make progress towards its medium-term plan of achieving a sustainable net cash position.

It said there had been a “significant” reduction in debt-like items from cash flow generation compared to the first half of the prior year.

Net debt as at 31 December was expected to be similar to the end of the 2021 calendar year, and was impacted by the seasonal working capital unwind in the business.

The board said that was typical for the first half, with a reversal expected in the second six months of the year.

Kier said it was continuing to generate positive operating cash flow in 2023, and expected to have a net cash position at the end of the financial year.

Its average month-end net debt position was expected to be around £50m higher than the prior period, in line with the board's expectations.

Positive operating cash flow was used to reduce the average month-end supply chain finance facility balance by more than £60m, pay adjusting items, pension deficit obligations and the remaining HMRC Covid-19 support of around £10m.

The group said it fully repaid its remaining £50m supply chain finance facility in July last year, followed by £54m of its revolving credit facility and USPP notes, which matured in December.

Looking at its ‘Medium Term Value Creation Plan’, Kier said it was confident in achieving its medium term targets of £4bn to £4.5bn of revenue, and adjusted operating profit margin of 3.5%, cash conversion of operating profit of 90%, a balance sheet showing a “sustainable” net cash position with capacity to invest, and a sustainable dividend policy of around 3x cover through the cycle.

“The group's performance over the last six months is in line with our expectations and reflects a good start to the year,” said chief executive officer Andrew Davies.

“We expect to generate positive operating cash flow for the full year and deliver a net cash position at the year end.

“The group is well positioned to continue benefiting from UK government infrastructure spending commitments and focused on the delivery of a sustainable net cash position and a sustainable dividend, in line with our medium term value creation plan.”

Kier said it would publish its results for the six months ended 31 December on 9 March.

At 1226 GMT, shares in Kier Group were up 2.87% at 68p.

Reporting by Josh White for Sharecast.com.