Kier ends year in line with expectations

The London-listed firm said its year-end order book remained robust, surpassing £10bn, indicating strong demand in its core markets.

It said it had secured new, high-quality, and profitable contracts, with notable recent awards including the £5.1bn Strategic Alliance Contract for the Defence Estate Optimisation (DEO) portfolio by the Ministry of Defence, and the re-appointment to the £4.5bn Southern Construction Framework.

Kier said its construction division experienced strong growth in the second half, contributing to the overall positive performance.

Additionally, the firm said it had already secured about 85% of revenue for the 2024 financial year, providing a good level of certainty amidst market uncertainty.

The triennial valuation for funding the company's defined benefit pension schemes had meanwhile been agreed, resulting in significantly decreased deficit payments.

Kier added that its improved covenant, coupled with previous contributions, had substantially improved the position of the pension schemes.

As a result, deficit payments would decrease from £10m in the 2023 financial year, to £1m by 2028.

In terms of financials, Kier Group said it expected to report a net cash position of around £60m at the year-end, surpassing initial expectations and demonstrating strong cash flow generation.

The company said its average month-end net debt position was also anticipated to be better than expected, at abut £230m.

Kier said it used its positive operating cash flow to repay outstanding debt, including supply chain finance facilities, Covid-19 support, and certain notes, leading to a significant reduction in debt.

Regarding its business structure, Kier said it had recently realigned its infrastructure services segment to better support its growth ambitions and align capabilities with client needs.

The two new business divisions are transportation, encompassing highways, rail, ports, and air infrastructure; and natural resources, nuclear and networks, including utilities, water, energy, and network-related projects.

It said the strategic realignment would position Kier to pursue its objectives, given the UK government's commitment to substantial public sector spending and investment plans by UK asset owners in regulated sectors.

“The group has delivered another year of strong operational and cash performance,” said chief executive officer Andrew Davies.

“We have now completed the second year of our medium-term value creation plan.

“This plan has embedded bidding discipline and risk management into the business and is allowing us to maximise value and convert the many high quality and profitable opportunities in our chosen markets, which remain favourable.”

Davies said the company had also strengthened its balance sheet and grown its order book despite the uncertainty in the wider economy.

“These factors give the Board confidence in the continued success of the group.”

At 0955 BST, shares in Kier Group were up 4.96% at 88.38p.

Reporting by Josh White for Sharecast.com.