Contractor hit with £22m of integration and acquisition costs, which brings down its half-year profit to £6.3m
Kier’s pre-tax profit has nearly halved after it was hit with £22m of one-off cost related to the acquisition of May Gurney, which it bought last July.
In a statement to the City, Kier reported a pre-tax profit of £6.3m in the six months to 31 December 2013, down from £12.5m over the same period of 2012.
The fall was largely due to “business integration and restructuring” and “acquisition” costs totalling £22m.
The firm also incurred finance costs and amortisation of assets bringing the total non-underlying items to £30.5m.
This compared with just £6.9m of non-underlying costs - mostly related to closure of Kier’s scaffolding business, restructuring and finance costs - incurred in the last six months of 2012.
Without these items included Kier reported an underlying pre-tax profit of £36.8m in the six months to 31 December 2013, up 90% from the £19.4m underlying pre-tax profit it reported for the same period of 2012.
Kier also moved into a position of net debt from at the end of 2013 from a position of net cash at the end of 2012.
On 31 December 2013 Kier’s net debt stood at £138m, compared with a net cash of £60m at the end of 2012.
The firm reported a 47% increase in revenue to £1.4bn in the second half of 2013, up from £976m in the second half of 2012.
It said like-for-like revenue grew 12% between the two periods.
Writing in the results, Kier’s chief executive Paul Sheffield said he was “pleased with the performance of May Gurney”, which Kier acquired last July.
He added: “The acquisition has consolidated the group’s position in support services, providing a range of complementary services to clients in the highways, transport and utilities sectors.
“The integration remains on course, with good customer retention, new contract extensions and revenue synergies. We are on track to deliver the anticipated £5m cost savings in this financial year.”
He said he was “encouraged” that the “upturn in construction workloads observed last year has been sustained” but warned there would be continued pressure on margins and cash generation.
Sheffield added: “As reported at the year end, we are seeing the early signs of economic recovery across the country. Our wider portfolio of offerings, strong cost management, a growing order book of over £6bn together with our strong capital structure, positions us well for the future.”
Kier’s construction division reported a 18% increase in revenue to £742m in the second half of 2013, up from £627m in the second half of 2012.
It also reported a 28% increase in underlying operating profit to £17.3m in the second half 2013, up from £13.5m in the same period of 2012.
It said the firm had picked-up a lot of work through frameworks and in the infrastructure sector.
The only division of Kier to experience a fall in revenue was Kier’s property division, which reported revenue of £127m in the last six months of 2013, down from £138m in the last six months of 2012.
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