Kier Group plc has reported a 51% increase in Group revenue and 54% increase in profit before tax, together with an ongoing expansion of its work in the utilities sector.

According to its latest financial results for the year ended 30 June 2014 published today, Group revenue rose to £3.0bn from £2.0bn in 2013, while underlying profit before tax increased to  £73.1m from £47.6m in 2013.

Construction division margin fell slightly to  2.1% compared to 2.3% in 2013 on increased revenue, while the Services division saw an improved margin of 4.8% (2013: 4.4%), reflecting £5m cost saving and winning larger value contracts following the May Gurney acquisition.

Operational highlights flagged up by Kier include;

• the integration of May Gurney substantially complete and on track to achieve ROCE of 15%pa;
• more than £1bn of new Services work and almost £2bn of new Construction work won;
• Construction and Services order books of £6.2bn (2013: £4.3bn) represent more than 90% (2013: 88%1) secured and probable for 2015.

The Group’s Construction division comprises the UK building, major projects, infrastructure and international operations.  Revenue was up 22% to £1.6bn (2013: £1.3bn) reflecting significant market and contract growth over the period, particularly within the infrastructure and international businesses. The order book of secured and probable work, at £2.5bn, represents more than 90% of the forecast revenue for the 2015 financial year, on increasing volumes.

Post year end new contracts secured by Kier in the water sector include:

•  the five-year £25m pa Canal & River Trust National Engineering & Construction Contract (NECC) for England and Wales
•  a five-year £20m pa contract with Bristol Water for network maintenance services, bringing awards under AMP6 bidding cycle to £190m pa
• preferred bidder for a two-year £7m pa contract with Severn Trent on the Asset Management Solutions (AMS) framework, with a possible five-year extension.

Since Haydn Mursell took up the role of chief executive at Kier Group on 1 July, Kier has reviewed and refreshed the Group’s strategy, Vision 2020, which will see the Group aim to deliver double-digit compound annual profit growth for the period to 2020 and to be a top three in its chosen markets.

The Group said that the Infrastructure business had performed strongly, with revenues of c£400m in the year and future UK Government investment in power, roads, rail and water anticipated. Kier’s penetration of the rail and water sectors has benefited from the integration of May Gurney, which has provided it with a larger, more sustainable workload for the infrastructure business and broader client exposure.

In the water sector Kier has begun working on the £180m Thames Water Deephams sewerage treatment works upgrade, in joint venture with Aecom and Murphy, with additional water projects in excess of £100m to deliver under the United Utility AMP 6 framework in joint venture with Murphy and Interserve.

Utilities also come under the umbrella of Kier’s Services division which saw revenues up 153% to £1.1bn (2013: £437m) benefiting from the increased breadth of capability and strengthening of client-partnerships following the May Gurney integration. Order book in the division (secure and probable) nearly doubled  - up 85% to £3.7bn from £2.0bn in 2013. Kier attributed an increase in operating margin to 4.8% to the increased range of services now available to clients and its ability to bid for a greater number and larger scale contracts.

The firm said the order book at 30 June 2014 of £3.7bn provides a good visibility of work, having secured over £1.1bn of new contracts during the year including the £1.7bn May Gurney order book. The order book does not include contract extensions, which, if included, would add a further £2.1bn to the order book.

May Gurney acquisition has significantly strengthened Kier’s penetration of the utilities

The May Gurney acquisition has significantly strengthened Kier’s penetration of the utilities and highways maintenance marketplaces, as well as giving the division an increased presence in environmental services. Kier’s penetration of the utilities sector is continuing to expand into water, energy and telecoms. Kier’s overall market share is currently below 1.5% in the addressable services market which is worth in excess of £80bn – the firm believes there is significant room for further penetration.

Commenting on its growth, Kier said that greater co-operation between its Construction and Services divisions had resulted in larger contract awards in the year, for example, Anglian Water, where the client has procured both maintenance services and capex construction capabilities from the Group.

Water sector contract awards, including awards under the AMP6 bidding cycle, have been high in the year totalling £374m, demonstrating the greater capability of the Group. Most recent AMP6 awards include three five-year Anglian Water contracts with a total value of £250m and a contract worth up to £24m with Bournemouth Water. In addition, a £20m pa network maintenance services programme has been secured with Bristol Water.

Through the Team Van Oord joint venture, £21m worth of projects have also been awarded by the Environment Agency for flood defence and flood remediation work.

In August this year the £25m pa Canal & River Trust National Engineering & Construction Contract (NECC) for England and Wales was secured and Kier was named preferred bidder on Severn Trent’s two-year £7m pa contract for provision of asset maintenance solutions with a possible five-year extension. The company said further opportunities exist in the upcoming AMP6 2015-20 investment cycle.

Commenting on the results, Kier Group plc chief executive, Haydn Mursell said:

“I am pleased to report a good set of results that show significant progress on last year and demonstrate the strength of the operational performance of the business and the benefits of the May Gurney acquisition.”

“Despite inflationary price and labour cost pressures in the market, our margins remained solid, particularly in our Services business. Following the integration of May Gurney, which transformed the scale and diversity of the Group, the breadth of our capabilities has resulted in new as well as larger contract awards.”

 We are now able to help our customers maximise the value of their assets as they invest, build, maintain and renew them. Our capabilities extend from negotiating finance and planning permissions to constructing major buildings and infrastructure, as well as providing facilities management and environmental services. This breadth of capabilities puts us in a good position to pursue future growth.”