Revenue at firm’s biggest division hit by impact of rising costs
Kier has said the impact of rising costs meant its construction business was hit by delays to project starts as clients took longer to sign off jobs, blunting turnover in the first half.
Revenue from its construction arm, its biggest division in the first half of 2020, was down a quarter in the six months to December 2021 to £681m.
Chief executive Andrew Davies said the impact of inflation meant some clients were taking a second look at jobs.
“Headwinds are causing reappraisals of business cases which is causing some delays on getting our jobs going, particularly in our construction business,” he said. “Clients need to go back and get approvals in the wake of increased costs.”
The slump in revenue meant operating profit at construction fell from £30.7m to £12.8m.
But there was better news at infrastructure with turnover in the first half up 15% to £777m and operating profit up 8% to £22.5m.
Davies said the government was still committed to its levelling-up agenda and the promised investment in upgrading infrastructure despite rising general inflation and the war in Ukraine.
“The whole country is facing inflationary pressure. From a business point of view, Ukraine is not going to make [inflation] any better, it will make it worse.”
Kier said it has just £2.7m left to pay of tax it was allowed to defer by the government in the wake of the covid-19 pandemic having paid back £53m during the period. Davies said the outstanding balance would be settled by its year end in June.
The firm said this and the impact of other items meant its average month-end net debt would have been lower than the £191m during the period – although this was significantly down from the £436m last time following its equity raise and the sale of its Kier Living housing arm last year.
Group revenue during the period was down 8% to £1.5bn but pre-tax profit was up 41% to £12.7m.
Davies added: “These are normal results. We are doing what we promised to do.” Operating profit was down 12% to £25m.