25th Feb 2015 14:28
LONDON (Alliance News) - Kier Group PLC on Wednesday reported a surge in pretax profit in the first half of its financial year partly thanks to higher revenue in its construction business, and hiked its dividend as it said it expects an improvement in profit from its residential and property businesses in the second half.
The FTSE 250-listed property, construction, housebuilding and services company said its pretax profit for the six months to the end of December was GBP26.7 million, a huge rise on the GBP6.3 million reported last year when it had booked a GBP22.0 million exceptional charge for its acquisition of May Gurney.
Revenue in the half was up to GBP1.58 billion from GBP1.43 billion, boosted by a big rise in revenue in its construction business, with broadly flat results in its services, property and residential arms. Its operating profit excluding exceptional items was flat at GBP44.2 million.
Construction revenue rose to GBP874 million, up 18% year-on-year from the GBP742 million reported in its 2014 financial year, with operating profit slightly higher despite a slight weakening in margins. Its order book in the construction division now sits at GBP2.6 billion of secured or probable work, representing 100% of forecast revenue for the current financial year.
Kier said inflationary pressures continue to present challenges in the division but it is closely managing those issues. It said the division has continued to perform well in the second half, boosted by infrastructure project demand in the UK, a recovering UK market generally and a strong Middle East market.
Services revenue ticked up slightly in the half, up to GBP569 million from GBP563 million, but operating profit in the division fell slightly due to a weaker operating margin. The margin, which fell to 4.2% from 4.3%, was in line with expectations but was impacted by an intense period of contract mobilisation and expensed bidding costs associated with recent contract wins, particularly in the utilities segment.
Kier said it expects the performance in the division to hold up in the second half, boosted by an increased UK government focus on utilities and highways and the fiscal pressures being placed on local authorities and the wider public sector in the country.
In its smaller property business, Kier said revenue fell to GBP49 million from GBP55 million but generated an underlying operating profit of GBP14 million, up from GBP10.6 million. The unit has a development and structured finance pipeline of more than GBP1 billion, Kier said.
Revenue in its residential housebuilding arm increased to GBP90 million from GBP72 million, with its operating profit ticking up slightly to GBP0.8 million from GBP0.5 million. Kier said a significant proportion of affordable housing completions are due to take place in the second half of its financial year.
Kier hiked its dividend to 24 pence per share from 22.5 pence per share last year, a move it said reflects its confidence in its future.
The company also said it remains in talks with infrastructure and business services company Mouchel Group. The pair entered talks about a possible acquisition of Mouchel by Kier in December. Kier said there remains no certainty that a deal will be done.
"I am pleased to announce a good set of results, once again reflecting Kier's ability to deliver consistently whilst continuing to invest for medium-term growth. With improving economic conditions, and, notwithstanding pressures in the supply chain, our robust execution skills and delivery and disciplined approach to bidding and risk management continue to deliver good results," said Kier Chief Executive Haydn Mursell.
Shares in Kier were down 0.9% to 1,718.00 pence Wednesday.
By Sam Unsted; [email protected]; @SamUAtAlliance
Copyright 2015 Alliance News Limited. All Rights Reserved.
Related Shares:
Kier