TIDMKIE
RNS Number : 0968W
Kier Group PLC
21 April 2021
21 April 2021
Kier Group plc
Results for the six months ended 31 December 2020
Significant financial and strategic progress achieved
Kier Group plc (the "Company" or the "Group"), a leading
infrastructure services and construction company, announces its
results for the six months ended 31 December 2020 (the
"period").
Materially improved results despite COVID-19 impact
-- Revenue - reflects focus on winning and executing contracts with appropriate risk / reward:
o Group revenue and share of joint ventures of GBP1.6bn (HY20: GBP1.9bn)
-- Operating profit - margin improvement to 2.9% and improved quality of earnings:
o Operating profit before adjusting items of GBP48m (HY20: GBP47m)
o Return to reported operating profit of GBP29m (HY20: loss GBP(24)m)
-- Free cash flow: GBP19m (HY20: GBP(30)m) - improved performance as profits translating to cash
-- Net debt at 31 December 2020 of GBP354m (FY20: GBP310m),
average month-end net debt stable at GBP436m (FY20: GBP436m)
o Includes a further reduction in supply-chain financing of
GBP16m, average payment days from 38 to 34 days and percentage of
payments made to suppliers within 60 days increasing from 84% to
91%
o Includes repayment of GBP29m of tax deferred due to COVID-19
Increased and higher quality order book
-- Increased order book of GBP8bn at 31 December 2020,
underpinning near term growth prospects and covering 62% per cent.
of year to 30 June 2022 forecast revenues
-- Expected to benefit from medium and long term committed UK
Government and regulated industry spending through established
frameworks and other opportunities
Significant progress on 2019 operational and financial
turnaround strategy
-- Simplification of the Group now substantially complete
-- Self-help actions identified now substantially delivered
-- Annualised run rate cost savings upgraded further to be at least GBP115m by 30 June 2021
-- Performance Excellence culture embedded throughout the Group
-- Launched sustainability framework in July 2020
Medium term financial targets
-- The Group expects actions taken to right size the group as
part of the turnaround strategy will result in continued improved
financial performance and expects that over the medium term the
Group will be capable of the following medium-term targets:
o Revenue: GBP4.0 - 4.5bn
o Adjusted operating profit margin: c. 3.5%
o Cash conversion of operating profit: c. 90%
o Balance sheet: Sustainable net cash position with capacity to
invest
o Dividend: Sustainable dividend policy with dividend cover
of
around three times earnings.
Comprehensive balance sheet recapitalisation programme
-- GBP300m to GBP350m gross capital expected to be received by the Group
o Divestment of Living for GBP110m announced - expected to be
completed before mid-June
o Proposed equity raise in the range of GBP190m to GBP240m,
expected in the coming weeks
-- Agreement with lenders to extend RCF to 2025, conditional on successful equity raise
-- Agreement with pension trustees on appropriate deficit reduction strategy
Andrew Davies, Chief Executive, said:
"I am pleased to report that the execution of the strategic
imperatives outlined in June 2019 has resulted in significant
improvements in both our financial results and free cash flow for
the re-shaped Group. With the announcement of the sale of Kier
Living on 16 April , we have achieved many of the milestones
required to improve cash generation and reduce net debt . The
process of simplifying the Group has been substantially completed
through the exit of non-core businesses and the adoption of an
appropriate cost base. These actions will have delivered annualised
cost savings of at least GBP115m by the end of FY21. We recognize
there is much more opportunity within the business and will
continue to drive continuous improvement through our Performance
Excellence culture.
With the Group focused on UK Government and regulated
industries, it is well-placed to benefit from the announced and
committed increased spend in these areas. We have secured places on
the Frameworks through which much of the increased spend is
expected to come and our nationwide coverage combined with project
management expertise gives us confidence in the outlook for Kier
over the next few years.
During the pandemic, the health and safety of our employees has
been a clear focus and I would like to thank all my colleagues who
have worked hard to get the Company to where it is today.
The proposed equity raise, which we plan to launch in the coming
weeks, subject to market conditions, together with the continued
support of our lending group, will further strengthen the Group's
balance sheet by reducing net debt and will facilitate investment
in the business to help drive sustainable, profitable organic
growth and the achievement of our medium term financial targets.
The second half of the year has started well seeing a continuation
of the positive trends of the first half and we are confident of
achieving further progress this year in line with our expectations.
"
Financial Highlights
6 months to
6 months to 31 December
Continuing Operations 31 December 2020 2019
Adjusted results
Revenue (GBPm) 1 1,624 1,866
Operating profit (GBPm) 2 47.6 46.7
Operating margin 2.9% 2.5%
Profit before tax (GBPm) 3 27.8 30.7
Basic earnings per share (note
9) 13.0p 15.0p
Net debt (GBPm) 4 353.5 242.5
Average month-end net debt (GBPm) 436.3 395.1
Reported
Group revenue (GBPm) 1,617 1,819
Profit / (loss) from operations
(GBPm) 28.8 (24.4)
Profit / (loss) before tax (GBPm) 9.0 (41.2)
Basic earnings / (losses) per
share (note 9) 4.8p (22.1)p
Dividend per share - -
Enquiries:
Kier Group plc
Andrew Collins, Head of Investor
Relations +44 (0) 7933 388 746
Kier Press office +44 (0) 1767 355 096
FTI Consulting:
Richard Mountain / Nick Hasell +44 (0) 20 3727 1340
There will be a webcast and a call for analysts and investors at
09:00 a.m. The details are:
Webcast
https://www.investis-live.com/kier/606c7849fb74790c0024b920/abbi
United Kingdom: 0800 640 6441
United Kingdom (Local): 020 3936 2999
All other locations: +44 20 3936 2999
Conference password: 331107
Cautionary Statement
This announcement does not constitute an offer of securities by
the Company. Nothing in this announcement is intended to be, or
intended to be construed as, a profit forecast or a guide as to the
performance, financial or otherwise, of the Company or the Group
whether in the current or any future financial year. This
announcement may include statements that are, or may be deemed to
be, "forward-looking statements". These forward-looking statements
can be identified by the use of forward-looking terminology,
including the terms "believes", "estimates", "anticipates",
"expects", "intends", "plans", "target", "aim", "may", "will",
"would", "could" or "should" or, in each case, their negative or
other variations or comparable terminology. These forward-looking
statements include all matters that are not historical facts. They
may appear in a number of places throughout this announcement and
include statements regarding the intentions, beliefs or current
expectations of the directors, the Company or the Group concerning,
amongst other things, the operating results, financial condition,
prospects, growth, strategies and dividend policy of the Group or
the industry in which it operates. By their nature, forward-looking
statements involve risks and uncertainties because they relate to
events and depend on circumstances that may or may not occur in the
future and may be beyond the Company's ability to control or
predict. Forward-looking statements are not guarantees of future
performance. The Group's actual operating results, financial
condition, dividend policy or the development of the industry in
which it operates may differ materially from the impression created
by the forward-looking statements contained in this announcement.
In addition, even if the operating results, financial condition and
dividend policy of the Group, or the development of the industry in
which it operates, are consistent with the forward-looking
statements contained in this announcement, those results or
developments may not be indicative of results or developments in
subsequent periods. Important factors that could cause these
differences include, but are not limited to, general economic and
business conditions, including resulting from the COVID-19 pandemic
and responses by governments to it, sector and market trends,
stakeholder perception of the Group and/or the sectors or markets
in which it operates, industry trends, competition, changes in
government and other regulation, changes in political and economic
stability and changes in business strategy or development plans and
other risks.
Other than in accordance with its legal or regulatory
obligations, the Company does not accept any obligation to update
or revise publicly any forward-looking statement, whether as a
result of new information, future events or otherwise.
1 Revenue of the Group and its share of joint ventures.
2 Stated before adjusting items of GBP18.8m (HY20: GBP71.1m) -
see note 3 to the interim financial statements.
3 Stated before adjusting items of GBP18.8m (HY20: GBP71.9m) -
see note 3 to the interim financial statements.
4 Disclosed net of the effect of hedging instruments and
excludes leases - see note 11 to the interim financial
statements.
Principal Risks and Uncertainties
You are advised to read the section headed "Principal risks and
uncertainties" in the Company's Annual Report and Accounts for the
year ended 30 June 2020 for a discussion of the factors that could
affect the Group's future performance and the industry in which it
operates. The Board believes that these principal risks and
uncertainties will continue to apply to the Group in the
second-half of the financial year.
The Group continues to monitor developments relating to the
COVID-19 pandemic and is taking steps to mitigate its effect on the
Group's operations, including ensuring that the Group operates in
line with Public Health England's advice.
About Kier
Kier's purpose is to sustainably deliver infrastructure which is
vital to the UK. As a leading provider of infrastructure services
and construction we are committed to delivering for communities and
leaving lasting legacies through our work.
The services we offer to our clients fit in to three core market
propositions; Infrastructure Services, Construction and Property
development.
At the core of our project delivery is technical excellence,
utilising the latest building methods, innovations and technology
to ensure we offer the best value for our clients.
For further information and to subscribe to our news alerts,
please visit: www.kier.co.uk/media/news-alerts
Connect with us on LinkedIn: Kier Group
Follow us on Twitter: @kiergroup
Results Summary
Revenues in the period fell 13% to GBP1,624m, primarily due to
the actions taken to simplify the Group in exiting low margin and
loss-making contracts and businesses, in addition to the COVID-19
restrictions in the UK which weighed on first quarter activity
levels. Challenging market conditions as well as continued COVID-19
restrictions affected some project starts. However our position as
one of the largest Government suppliers, offering an attractive
proposition and underpinned by a track record of successful project
delivery has resulted in the Group continuing to win new work
resulting in a strong order book which has increased to
GBP8.0bn.
The profits made in the period reflect the strategic focus on
core markets served by a simplified Group. Adjusted Group operating
profit increased 1.9% to GBP47.6m and operating margins increased
40bps to 2.9% due to the continued realisation of cost savings and
an increased focus on managing contract risk. A credit due to lower
holiday accruals of GBP8.0m during the period was mostly off-set by
in-efficiencies driven by COVID-19 restrictions. The majority of
the costs associated with the cost saving programme were incurred
in the previous financial year and this has resulted in Kier
achieving a statutory operating profit of GBP28.8m, significantly
above the previous period's GBP24.4m loss.
Group net debt at 31 December 2020 was GBP353.5m. The Group's
profitability has resulted in significant operating cash inflow.
This has allowed Kier to continue to reduce supplier payment days
from 38 to 34 which has also resulted in all Kier entities being
reinstated to the Prompt Payment Code. During the period the Group
has started to repay deferred PAYE and VAT commitments from FY20.
The Group has also paid the majority of the adjusting items accrued
for at 30 June 2020.
Comprehensive balance sheet recapitalisation programme
Since the strategic review was completed in June 2019, the Group
has made significant progress on the implementation of the
conclusions of the strategic review. This review had concluded that
several of our businesses were not operating in a way that was
compatible with the Group's cash flow capital objectives :
-- Residential: the successful divestment was announced on 16
April for gross proceeds of GBP110m;
-- Environmental Services: we have now substantially exited this business; and
-- Facilities Management: following the successful conclusion of
certain non-core contracts the business has been appropriately
rationalised and now forms part of our new Kier Places business
(formerly called Specialist Services).
In addition, we have ensured that the capital allocated to our
Property business remains at an appropriate level and is
effectively deployed. This business is now categorised as a Core
business due to the operational synergies it achieves with other
Group businesses.
As a result of the strategic and operational successes of the
last two years which aimed to recapitalise Kier's balance sheet
through strong operational cash flow, rationalising its asset
portfolio and a proposed equity raise, the potential for Kier to
create significant future shareholder value is clear:
-- the Group has a senior leadership team across the business
with the required expertise and track record to capitalise on
Kier's potential;
-- Kier is now focussed on nationwide markets in both
Infrastructure Services and Construction, which are defined by
significant and committed UK government and regulated industry
spend over the medium and long term;
-- our position as a clear leader in our core markets is
underpinned by long-term contracts, and framework agreements,
creating high visibility of revenues and contract profitability. As
at March 2021, the Group has been awarded places on long-term
frameworks worth up to GBP80bn, across a number of sectors
including, health, education, defence and justice and has an order
book of GBP8.0bn (including GBP1.7bn in Highways, GBP1.3bn in
Utilities, GBP1.5bn in Infrastructure and GBP2.2bn in Regional
Building), which in aggregate cover 62% of year to 30 June 2022
forecast revenues;
-- the Group's scale, leading delivery capability at both
national and regional levels, and operational delivery processes
and expertise, should enable Kier to take maximum advantage of its
leading market positions; and
-- Kier has successfully executed an ambitious self-help
programme and now has the appropriate cost base and embedded a
culture of "Performance Excellence" to ensure contracts are won and
executed on terms and values appropriate to their risk. The Group
expects to deliver at least GBP115m of annualised cost savings by
the end of financial year 2021 (as compared to FY18) and continues
to review its cost base to identify additional cost saving
measures.
In order to take full advantage of its leading positions in
attractive markets, and its strong operational performance, the
Board believes that it is imperative that Kier has a strong,
resilient and flexible balance sheet.
Having now substantially delivered on the many self-help actions
identified by management through the 2019 strategic review process,
the Kier Group Board has concluded that it is the right time to
complete the balance sheet recapitalisation programme through an
equity raise, which it intends to launch in the coming weeks,
subject to market conditions.
The proposed equity raise is expected to be in the range of
GBP190m to GBP240m and to be undertaken by way of a Firm Placing
and Placing and Open Offer.
Kier intends to use the net proceeds from the equity raise to
further strengthen the Group's balance sheet, building on the sale
of Kier Living, and to underpin Kier's medium-term value creation
plan to deliver:
-- organic annual revenues of approximately GBP4bn to GBP4.5bn;
-- a resilient and well-balanced portfolio, focused on:
o Infrastructure Services (approximately 55% of Group revenue),
comprising its Highways (20%), Infrastructure (15%), and Utilities
(20%) businesses; and
o Construction (approximately 40% of Group revenue), comprising
its Regional Building, Strategic Projects, International and Kier
Places businesses; plus
o An attractive UK Property business generating high return on capital employed in the business.
-- a sustainable Group operating margin of around 3.5%;
-- a well-invested asset base, consistently generating returns
which are in excess of Kier's cost of capital;
-- strong, consistent and sustainable operating cash flows, with
operating cash flow conversion of around 90% of operating profit;
and
-- a strong, resilient and flexible balance sheet, with a
sustainable net cash position within 2-3 years, and the capacity to
invest in the future growth of the business and support a
sustainable dividend policy with dividend cover of around three
times earnings.
The Group will provide a further update on the proposed equity
raise in due course.
Performance Excellence
In 2020, we launched Performance Excellence to provide
consistency in our approach to people, projects, processes, cash
management and future ways of working. Our Performance Excellence
culture, which is underpinned by our values; collaborative, trusted
and focused is supporting our focus on continuous improvement
across the Group and helping us to deliver on our Purpose - to
sustainably deliver infrastructure which is vital to the UK.
The period has seen the launch of two further important pillars
of Performance Excellence; Project Lifecycle Management and
Performance Centred Leadership. Projects are the lifeblood of the
Group and through Project Lifecycle Management we have a new
gateway system that is driving consistency in our project delivery.
Each project must follow the ten gateways which spans pre-contract
to aftercare. Performance Centred Leadership recognises that the
most important aspect to the successful delivery of projects is our
people and it provides a set of principles and processes that shape
what we do and why we do it, as well as driving a high-performance
culture leading to improved results for both employees and
customers.
Each business within the Group has now certified compliance with
Performance Excellence, providing assurance that the Group does,
and will continue to, share best practice and look for continuous
improvements across the Group and has applied the governance
required under its Code of Conduct and Operating Framework.
Customers and winning new work
We remain focused on winning work through our long-standing
client relationships and regionally based operations. Our rigorous
customer satisfaction programme shows that our scores have remained
stable; our consistently high level of customer satisfaction
remains unchanged from the year-end at 92% and our net promoter
score remains strong at +53 (FY20: 55). During the year:
-- our Construction business was awarded places on long-term
frameworks worth up to GBP11.5bn, across a number of sectors,
including health, education and justice;
-- our Highways business was successful winning contracts with
clients including Transport for London in joint venture with Tarmac
to maintain and improve highways in north London and further work
for Highways England in Areas 4 and 13; and
-- we have also won work in the regulated sector, including
being appointed as a partner in the Openreach Network Services
Agreement to build new broadband infrastructure and by CityFibre to
deliver full-fibre rollouts across five towns and cities in central
and south-west England.
The Group's order book at 31 December 2020 was GBP8.0bn (30 June
2020: GBP7.9bn), as we continue to win new work in our chosen
markets.
The Group has won a number of contracts since 1 January 2021,
including being awarded an 8-year contract worth c. GBP200m to
deliver the new Tunnels and Pumping Stations under a Maintenance
and Management Contract for Transport for London.
Supply chain
We have also focused on maintaining and growing relationships
with our key stakeholders, including our supply-chain, m any of
whom are long-term partners of Kier. We were pleased to confirm
that, in our latest Payment Practices and Reporting Regulations
submission covering the period from 1 July 2020 to 31 December
2020, the Group's aggregate average payment days reduced to 34 days
from 38 days and the percentage of payments made to suppliers
within 60 days increased from 84% to 91%, in each case compared to
the six months period to 30 June 2020. We are committed to further
improvements in our payment practices and continue to work with
both customers and suppliers to achieve this. The actions taken by
the Group have also resulted in all registered entities being
reinstated on to the Prompt Payment Code.
Safety, Health and Environment (SHE)
The safety, health and wellbeing of our employees and suppliers
remain of paramount importance and we continue to work in line with
Government Guidance in respect of COVID-19.
The Group's 12-month rolling Accident Incident Rate (AIR) as at
end December 2020 (68) and 12-month rolling Average Accident
Incident Rate (AAIR) as at end December 2020 (238), decreased by
c.46% and c.38%, respectively, as compared to the equivalent
figures at December 2019. In addition, we have commenced
measurement of a Severity Weighted Incidence Rate, a more rounded
metric which focuses on measuring the impact of high potential and
severe risks across the Group.
Sustainability
In July 2020, Kier launched a new sustainability framework,
Building for a Sustainable World, which reframed sustainability
away from being an environmental specialism to being a strategic
and business critical mindset, balancing the need for environmental
resilience, community resilience and profitability in day to day
decision making. Across environmental and social sustainability,
the framework focuses on ten critical areas for improvement and
builds on the company's historical successes.
Since 2014, Kier has reduced its carbon intensity footprint by
54%, and since 2015 it has reduced its construction waste footprint
by 35%.
Under the new sustainability framework, Kier has committed to
achieving Net Zero carbon across its own operations and supply
chain by 2045, eliminating single use plastics by 2030, and to
tackling inequality by providing support, opportunities and
training to local communities. In FY21, its businesses have
concentrated on achieving their framework reduction targets, which
they are well on the way towards, and also on developing our
pathway to Net Zero, with interim targets, annual carbon budgets
and limits on carbon off-setting. The pathway and budgets will be
published in Kier's FY21 annual report, along with the refined
social value targets for FY22.
Operational Review
Construction
6 months 6 months
to to
31 December 31 December
2020 2019 5
Revenue (GBPm) 903 990
Adjusted operating profit (GBPm)
6 33.6 31.7
Adjusted operating margin 3.7% 3.2%
Reported operating profit (GBPm) 30.7 8.1
Order book (GBPbn) 3.4 3.6
-- Awarded places on frameworks worth up to GBP11.5bn lasting typically four years
-- Awarded an GBP87m project by Somerset NHS Foundation Trust to
provide a new surgical centre for Musgrove Park Hospital and the
GBP64m Fitzalan High School for Cardiff City Council
-- 91% of orders secured for the second half of FY21
-- Margin improvement due to realisation of cost saving programme and higher margin contracts
The Construction segment comprises the Regional Building
business, the Strategic Projects business, the complementary Kier
Places business as well as the International business.
As part of the Group's continued focus on restructuring and
streamlining operations, and in line with the Group's strategy to
simplify the Group's portfolio, a review of Kier Places (Facilities
Management and Housing Maintenance) was conducted in the period to
31 December 2020. Following internal restructuring driven by the
potential synergy benefits available, Kier Places now reports into
the Construction Leadership Team.
The Regional Building business covers the UK, delivering
schools, hospitals, defence facilities and amenities centres for
local authorities, councils and the private sector.
Revenue decreased 9% due primarily to challenging market
conditions including the first quarter COVID-19 restrictions as
well as an increased focus on higher margin contracts. This focus
on margin and the realisation of the savings resulting from the
cost saving programme led to a 6% increase in adjusted operating
profit. The significant reduction in adjusting items resulted in
reported operating profit increasing 279% to GBP30.7m. We are well
placed to benefit from the GBP5bn "New Deal" opportunities
announced by Government which focus on areas such as health,
education and custodial services, where the Group has specialist
expertise.
Our Strategic Projects business continued to work on the RAF
Lakenheath project and on the GBP250m Five Wells prison at
Wellingborough, which utilises innovative modular building
techniques and integrates digital tools to drive efficiencies in
the design, construction and operation of the facility. The
business continued to focus on the defence, science, commercial,
and custodial sectors, which are expected also to benefit from
recent Government announcements.
Housing Maintenance specialises in working in occupied
properties, delivering maintenance, repairs, fire safety and
compliance services. Revenue and profit performance in the period
were both below last year. The business now operates under a new
simplified operating structure as Kier Places and this, combined
with significant changes to contract delivery, gives clear
visibility of future work. The business should benefit from recent
Government announcements such as the GBP2bn Green Homes Grant and
GBP1bn Building Safety Fund .
The Facilities Management business provides management and
maintenance solutions for its clients. Consistent with our
strategy, we have rationalised and exited the non-core elements of
this business resulting in higher profits in the period despite
reductions in revenue. The remaining core, operating as part of
Kier Places, seeks to identify synergistic opportunities with the
Construction business for the benefit of the Group with customers
such as the Ministry of Justice and the Department of
Education.
The Environmental Services business provides waste collection
and recycling services. Revenues were less than in the prior period
as we have now substantially exited the business, with only one
contract remaining, together with the Pure Recycling business.
The International business is now focused on managing its cost
base and projects in line with the weakness in its markets.
5 Prior year comparative information re-presented to show the
new reporting segments - see note 1 to the interim financial
statements.
6 Stated before adjusting items.
Infrastructure Services
6 months
to 6 months
31 December to 31 December
2020 2019(5)
Revenue (GBPm) 673 783
Adjusted operating profit (GBPm)(6) 27.3 27.6
Adjusted operating margin 4.1% 3.5%
Reported operating profit (GBPm) 20.8 23.8
Order book (GBPbn) 4.6 4.3
-- A joint venture was awarded the Lot 2 contract of the
Transport for London (TfL) Highways Maintenance and Project
Framework to maintain and improve highways and related assets
covering a 189km network in north London
-- Appointed to deliver a GBP59m major infrastructure project at Sellafield
-- Appointed as a partner in the Openreach Network Services
Agreement to carry out network delivery works and by CityFibre to
deliver full-fibre rollouts across five towns and cities in central
and south-west England
-- 84% of orders secured for the second half of FY21
The Infrastructure Services segment comprises the Highways,
Infrastructure and Utilities businesses.
Revenue for the segment was down 14% due largely to the
completion of several Highways capital projects and the end of a
local authority contract. The start and mobilisation of recent
Highways contracts result in a growing outlook for H2 and beyond
for this business.
The Highways business builds and maintains roads for Highways
England and a number of district and county councils. During the
period the business successfully mobilised the Area 4 maintenance
and response contract and continued to successfully deliver the M6
Smart Motorway project. Kier, in joint venture with WSP, has been
awarded a 12-month extension to its Northamptonshire Highways and
Transportation contract to March 2022 by Northamptonshire County
Council (NCC). The extension will help to support the smooth
transition of services as NCC moves to become two new unitary
authorities from 1 April 2021.
The Infrastructure business delivers major and complex
infrastructure and civil engineering projects, including the HS2
project in joint venture with Eiffage, Ferrovial and BAM Nuttall,
the A13 dualling project and the Luton DART rail system in joint
venture with VolkerFitzpatrick. Revenue was marginally lower than
the previous period following completion of projects partially
offset by HS2. Adjusted operating profit has increased due to the
settlement of previous years contracts and the receipt of Research
and Development Expenditure Credit (RDEC) credits.
The Utilities business delivers long-term contracts providing
construction and maintenance services to the water, energy, rail
and telecommunications sectors. The business has undergone changes
over the last year to refocus on margin enhancement leading to the
exit of several contracts and a decline in revenue. Performance
improvement on other contracts, as well as the commencement of
contracts won last year, have resulted in increased profitability.
The business pipeline for high-quality, long-term infrastructure
works remains strong.
Property
6 months
to 6 months
31 December to 31 December
2020 2019(5)
Revenue (GBPm) 46 88
Adjusted operating profit (GBPm)(6) 2.6 3.4
Adjusted operating margin 5.6% 3.9%
Reported operating profit (GBPm) 0.1 3.4
-- Handed-over building 3 at Arena Central in Birmingham to HMRC
and continues to develop the three further development plots,
totalling 550,000 sq ft
-- Reached practical completion at its Logistics City scheme in
Whiteley, Hampshire having delivered three-units totalling 58,664
sq ft
The Property business invests and develops schemes and sites
across the UK.
Revenue has reduced compared to the prior period as a result of
completion delays in certain asset disposals and continued rental
income challenges in the owned student housing assets, both of
which have been driven by the continuing COVID-19 environment.
Adjusted operating profit decreased principally driven by the
above noted volume impact, offset partly by the impact of an
alignment of the accounting treatment for forward
funding-arrangements, which increased operating profit but had no
impact on statutory earnings.
Corporate
6 months
to 6 months
31 December to 31 December
2020 2019(5)
Adjusted operating loss (GBPm)(6) (15.9) (16.0)
Reported operating loss (GBPm) (22.8) (59.7)
The Corporate segment comprises the costs of the Group's central
functions. In the prior period adjusting items relate to the costs
of implementing the Group's cost reduction programme with the
programmes substantially completing during FY20. This has led to a
large drop in adjusting items. The reported operating loss reduced
significantly by GBP37m.
Kier Living
The results for Kier Living for the period are classified as
discontinued. Kier Living's adjusted profit before tax for the year
was GBP4.9m (HY20: GBP5.0m), as the smaller reorganised business
recovered COVID-19 related losses.
On 16 April 2021, the Group announced that it had entered into
an agreement for the cash sale of Kier Living Limited. The
consideration payable is GBP110m, payable in cash on completion.
After adjusting for estimated transaction costs, the net cash
proceeds from the sale are expected to be approximately GBP100m,
which the Board intend to use to reduce the Group's net debt and to
make a contribution to its Pension Schemes, both of which will help
improve the financial position of the Group.
This transaction constitutes a Class 1 transaction for the Group
and is therefore, conditional upon the approval of Shareholders.
There are no other conditions to completion, which is expected to
occur before mid-June.
Summary and outlook
The results for the period reflect the realisation of the
strategic imperatives outlined nearly two years ago. Kier is now
profitable and generating underlying operating cash. These
improvements result from the actions taken by the new management
team in the last 24 months which include, the appointment of a new
Executive team, the launch of Performance Excellence, the removal
of management layers throughout the organisation, the exit of
various contracts and business streams, and the implementation of a
significant reduction in our cost base. The conclusion of the
divestment of Living after the period end allows the Group to
further strengthen the balance sheet and focus on our core
businesses.
The Directors believe that the proposed equity raise is required
to reduce average net debt and strengthen the balance sheet
enabling the Group to drive sustainable, profitable organic
growth.
The streamlined Group with its attractive customer proposition
and history of complex project delivery has continued to win work
throughout the period and remains well placed to benefit from any
increased investment in UK infrastructure. The second half of the
year has started well seeing a continuation of the positive trends
of the first half and we are confident of achieving further
progress this year in line with our expectations.
Financial Review
Introduction
As reported in the announcement of 19 January 2021, the Group
performed well in the first six months of the financial year and
delivered results above the Board's expectation. The Group saw a
significant reduction in adjusting items in the period and has
achieved a statutory profit for the period of GBP5.3m, which
reflects the decisive cost actions that the Group has taken over
the previous 24 months. The Group has also delivered a robust free
cash flow of GBP19m.
Compared to the second half of FY20, the effects of COVID-19
have lessened; both due to the investments made in the prior year
to adopt social distancing working, and also as our businesses and
supply chain have learnt to adapt to the new working environment.
The majority of the Group's sites remained open throughout the
period but there were some delays in anticipated growth.
The Group remains well placed to benefit from Government
announcements which highlight the UK's infrastructure being at the
centre of the Government's economic growth strategy, and the
orderbook remains strong, growing slightly from 30 June 2020 to
GBP8.0bn.
Summary of financial performance
Adjusted 7 results - Reported results - continuing
continuing operations operations
----------------------------------
Adjusted Adjusted Reported Reported
31 Dec 31 Dec 31 Dec 31 Dec
20 19 % change 20 19 % change
--------- --------- --------- ---------- ---------- ----------
Revenue (GBPm) - Total 1,624.2 1,866.0 (13.0) 1,624.2 1,866.0 (13.0)
Revenue (GBPm) - Excluding
JV's 1,617.1 1,819.2 (11.1) 1,617.1 1,819.2 (11.1)
Profit/(loss) from
operations (GBPm) 47.6 46.7 1.9 28.8 (24.4) 218.0
Profit/(loss) before
tax (GBPm) 27.8 30.7 (9.4) 9.0 (41.2) 121.8
Earnings/(loss) per
share (p) 13.0 15.0 (13.3) 4.8 (22.1) 121.7
Free cash flow 19.0 (30.0) 163.3
Net Debt (GBPm) -
at 31 Dec 353.5 242.5 45.8
Net Debt (GBPm) -
average month end 436.3 395.1 10.4
Orderbook (GBPbn) 8.0 7.9 1.3
Supply Chain Financing
(GBPm) 109.4 157.1 (30.3)
---------------------------- --------- --------- --------- ---------- ---------- ------------
Revenue from continuing operations
The following table represents a bridge in the Group's revenue
from the period ended 31 December 2019 to the period ended 31
December 2020.
GBPm
-------------------------------------------------- ------
Revenue for the half year ended 31 December 2019 1,866
Construction (87)
Infrastructure (110)
Property and Corporate (45)
Revenue for the half year ended 31 December 2020 1,624
-------------------------------------------------- ------
Revenue has decreased due to the Group focusing on improving
profitability by exiting low margin and loss-making contracts and
businesses, as well as challenging market conditions.
Despite this, the Group performed well in the first half of the
year and has delivered results above the Board's expectations. The
above table shows our revenue performance by operating segment and
reflects the market conditions experienced in the period along with
the UK's exit from the first national lockdown in Q1. The Group
continues to focus on delivering higher margin work and the
reduction in revenue also reflects this.
Adjusted Profit from continuing operations
GBPm
--------------------------------------------------- -------
Adjusted operating profit for the half year ended
31 December 2019 46.7
Volume/price/mix changes (15.8)
Reduction in property profitability (1.1)
Cost inflation (1.2)
Management actions 22.9
Holiday pay accrual reduction 4.2
COVID costs (7.2)
Other (0.9)
Adjusted operating profit for the half year ended
31 December 2020 47.6
--------------------------------------------------- -------
Operating profit has remained consistent with the prior year
despite the reduction in revenue as the Group's focus on
strengthening margins offsets the reduction in volume from delays
and market weakness in the current environment.
7 Reference to 'Adjusted' excludes adjusting items, see page 10.
December 2019 numbers have been restated to reflect the change in
policy to Adjusting items.
Assets held for sale and discontinued operations
Following the Group's 2019 strategic review, the Board concluded
that Kier Living is not compatible with the Group's working capital
objectives and on 16 April 2020 announced its sale. Accordingly,
the assets and liabilities of Kier Living continue to be classified
as held for sale, with assets of GBP234.8m and liabilities of
GBP124.8m at 31 December 2020. These assets have been written down
to their fair value less costs to sale and a non-cash fair value
uplift of GBP0.8m has been recorded in the year. In addition,
adjusting items totalling GBP6.5m net of tax have been incurred in
respect of historical costs within a Kier Living joint venture that
had built up in prior periods within work in progress and that are
now considered irrecoverable. A further GBP1.0m of additional cost
was incurred in respect of the exit from the Welsh region.
The results for Kier Living for the period are classified as
discontinued. Kier Living's adjusted profit after tax for the
period was GBP4.9m (HY20: GBP4.0m, FY20: GBP12.8m loss).
Earnings per share
Earnings per share (EPS), before adjusting items, from
continuing operations were earnings of 13.0p (HY20: 15.0p, FY20:
15.3p). EPS, after adjusting items, from continuing operations were
earnings of 4.8p (HY20: 22.1p losses, FY20: 106.2p losses).
Alternative performance measures
The Directors continue to consider that it is appropriate to
present an income statement that shows the Group's statutory
results only.
The Directors, however, still believe it is appropriate to
disclose those items which are one-off, material or non-recurring
in size or nature. The Group is disclosing as supplementary
information an 'adjusted profit' APM. The Directors consider doing
so clarifies the presentation of the financial statements and
better reflects the internal management reporting and is therefore
consistent with the requirements of IFRS 8.
A reconciliation of reported to adjusted operating profit is
provided below:
Operating profit
/ Profit / (loss)
(loss) before tax
---------------------- ---------------------
6 months
6 months 6 months to 31 6 months
to 31 to 31 Dec to 31
Dec 2020 Dec 2019 2020 Dec 2019
GBPm GBPm GBPm GBPm
------------------------------------- ---------- ---------- --------- ----------
Reported profit / (loss) from
continuing operations 28.8 (24.4) 9.0 (41.2)
Amortisation of acquired intangible
assets 11.3 11.8 11.3 11.8
Costs associated with previous
acquisitions - 3.1 - 3.1
Restructuring and related charges 6.0 48.8 6.0 48.8
Preparation for business divestment
or closure (0.8) 7.4 (0.8) 7.4
Other 2.3 - 2.3 0.8
------------------------------------- ---------- ---------- --------- ----------
Adjusted profit from continuing
operations 47.6 46.7 27.8 30.7
------------------------------------- ---------- ---------- --------- ----------
Additional information about these items is as follows:
-- Amortisation of acquired intangible assets GBP11.3m (HY20: GBP11.8m, FY20: GBP23.7m):
Comprises the amortisation of acquired contract rights primarily
relating to the acquisitions of May Gurney in 2013, Mouchel in 2015
and McNicholas in 2017. These charges have no future cash
impact.
-- Costs associated with previous acquisitions GBPnil (HY20: GBP3.1m, FY20: GBP5.0m):
In prior periods the Group recognised charges in respect of the
McNicholas acquisition and its subsequent integration. These
non-recurring costs have now been completed.
-- Restructuring and related charges GBP6.0m (HY20: GBP48.8m, FY20: GBP156.1m):
The Group has incurred restructuring costs in the period
totalling GBP6.0m. In the prior year, costs were incurred following
the decision to restructure the Regional Building Southern
business. During the period a further GBP3.5m was incurred relating
to this restructuring within the Regional Building Southern region.
In addition, GBP1.4m of employee exit costs were incurred across
the Group, GBP0.6m is due to lease impairments and the remaining
GBP0.5m was incurred on professional fees.
Of this total restructuring costs of GBP6.0m, GBP0.6m relates to
impairments of non-current assets, GBP3.5m is a net working capital
reduction and the remainder resulted in a cash outflow in the
period.
-- Costs relating to the preparation of businesses for sale
GBP0.8m credit (HY20: GBP7.4m charge, FY20: GBP33.6m charge):
An impairment of GBP1.6m has been recognised in respect of an
investment in a property joint venture. This is offset by a credit
of GBP3.0m as a result of transferring the assets and liabilities
of Pure Recycling Warwick Limited from Assets Held For Sale as it
currently does not meet the criteria. The remaining charge of
GBP0.6m relates to other business closure costs.
Of this total, GBP0.4m has resulted in a cash outflow in the
period, with a net GBP1.4m relating to non-cash movements in
non-current assets.
-- Other costs GBP2.3m (HY20: GBP0.8m, FY20: GBP23.8m)
Other costs include GBP1.8m in respect of fire compliance and
cladding claims and a further GBP0.5m following the most recent
High Court ruling that pension schemes equalise Guaranteed Minimum
Pension between male and female members. Of the GBP2.3m, GBP0.6m is
held in accruals, GBP0.5m is included within pension liabilities
and the remainder is cash.
In addition to the GBP18.8m of adjusted charges incurred from
continuing operations, GBP6.7m of charges, net of tax, have been
incurred in respect of discontinued operations. This includes a
fair value uplift of the net assets held for sale of the Living
division of GBP0.8m and a GBP7.5m charge relating to the exit from
the Welsh region and the write-off of historic costs within a Kier
Living joint venture that had built up in prior periods within work
in progress and are now considered irrecoverable.
Finance charges
Finance costs have increased to GBP21.7m (HY20: GBP17.1m, FY20:
GBP36.4m) due to an additional GBP5.5m of forward funding interest
within the Property division, which reflects an alignment of the
accounting treatment across all forward funded development
contracts. Finance costs also include GBP3.4m (HY20: GBP3.7m, FY20:
GBP7.2m) of costs relating to interest and finance charges for
lease liabilities.
Segmental Reporting
As part of the Group's continued focus on restructuring and
streamlining operations, and in line with the Group's strategy to
simplify the Group's portfolio, a review of the Group's Specialist
Services business (Facilities Management, Housing Maintenance,
Design and Business Services and Environmental Services) was
conducted in the period to 31 December 2020.
Following internal restructuring driven by the potential synergy
benefits available, the Group's Specialist Services business is now
reporting into the Construction Leadership Team.
As a result, the Group have considered this and have concluded
that the results of the Specialist Services division should be
reported within the Construction segment for external reporting
purposes.
Balance sheet
Net assets
The Group had net assets of GBP189.3m at 31 December 2020 (HY20:
GBP386.3m, FY20: GBP240.8m).
Goodwill
The Group held intangible assets of GBP705.7m (HY20: GBP741.5m,
FY20: GBP720.6m), of which goodwill represented GBP536.7m (HY20:
GBP536.7m, FY20: GBP536.7m). No impairment indicators were
identified in the period.
Deferred tax asset
Given the reported losses recorded over the last two financial
years, the Group has a deferred tax asset of GBP124.1m recognised
at 31 December 2020 (HY20: GBP58.7m, FY20: GBP111.0m). The asset
has increased in the period due to the movement in the defined
benefit pension liability. Based on the Group's forecasts, it is
considered probable that this will be utilised over a reasonable
timeframe.
Working capital
During the period there was a total GBP16.1m reduction in the
utilisation of the Kier Early Payment Scheme (KEPS). The Group is
actively reducing the KEPS scheme, paying the supply chain more
quickly and reducing the cyclicality of its working capital cycle
around reporting periods.
GBPm
------------------------------------------------- -------
Net debt as at 30 June 2020 (310)
Adjusted EBITDA 72
Working capital 1
Net capital expenditure including finance lease
capital payments (21)
Joint Venture dividends less profits 5
Other free cash flow items 1
Net interest and tax (10)
------------------------------------------------- -------
Free cash flow before COVID-19 48
Net COVID-19 tax repayment (29)
------------------------------------------------- -------
Free cash flow 19
Adjusting items (27)
Pension deficit payments (27)
Discontinued operations (6)
Other (3)
Net debt as at 31 December 2020 (354)
------------------------------------------------- -------
Government support
As of 31 December 2020, there was total tax deferred of GBP49.9m
(HY20: GBPnil, FY20: GBP78.8m). This comprises GBP23.2m of VAT
deferred in accordance with HMRC guidance. The balance of GBP26.7m
is subject to a Time To Pay agreement with HMRC with the amount due
to be repaid by the end of the 2021 financial year.
Contract assets & liabilities
Contract assets represents the Group's right to consideration in
exchange for works which has already been performed. Similarly, a
contract liability is recognised when a customer pays consideration
before work is performed. As at 31 December 2020, contract assets
totalled GBP279.2m (HY20: GBP381.2m, FY19: GBP278.5m). Contract
liabilities totalled GBP86.7m (HY20: GBP134.4m, FY20:
GBP108.7m).
Retirement benefits obligation
Kier operates a number of defined benefit pension schemes. At 31
December 2020, the reported deficit, which is the difference
between the aggregate value of the schemes' assets and the present
value of their future liabilities, was GBP1.4m (HY19: GBP2.9m
surplus, FY20: GBP38.8m surplus), before accounting for deferred
tax, with the movement in the period caused predominately by
changes in financial assumptions.
Right-of-use assets and lease liabilities
At 31 December 2020 the Group had a right-of-use asset of
GBP92.6m (HY20: GBP149.6m, FY20: GBP100.9m) and associated lease
liabilities of GBP161.6m (HY20: GBP176.1m, FY20: GBP172.9m).
Accounting policies
The Group's annual consolidated financial statements are
prepared in accordance with International Financial Reporting
Standards as adopted by the EU (IFRS). There have been no
significant changes to the Group's accounting policies during the
period.
Treasury facilities
Bank finance
The Group has committed debt facilities of GBP892m with a
further GBP18m of uncommitted overdrafts. Following the
half-year-end, extension of the Group's Rolling Credit Facility
(RCF) to 30 September 2022 has been granted. US private placement
notes mature between 2020 and 2024.
Supply chain finance
The Group offers its supply chain in the Construction business
the opportunity to participate in KEPS. The balance owed on this
facility is included in trade creditors. The balance at 31 December
2020 was GBP109.4m (HY20: GBP157.1m, FY20: GBP125.5m).
Financial instruments
The Group's financial instruments comprise cash and liquid
investments. The Group, largely through its PFI and Property joint
ventures, enters into derivative transactions (principally interest
rate swaps) to manage interest rate risks arising from its
operations and its sources of finance. The US dollar denominated
USPP notes have been hedged with fixed cross-currency swaps at
inception to mitigate the foreign exchange risk. The Group does not
enter into speculative transactions. There are minor foreign
currency risks arising from the Group's operations.
The Group has a limited number of international operations in
different currencies. Currency exposure to international assets is
hedged through inter-company balances and borrowings, so that
assets denominated in foreign currencies are matched, as far as
possible, by liabilities. Where there may be further exposure to
currency fluctuations, forward exchange contracts are completed to
buy and sell foreign currency
Going concern
The directors continue to adopt the going concern basis in
preparing the Group's interim financial statements.
As set out in previous financial reporting periods, the Group's
strategic plan is to focus on its core businesses; to simplify the
Group by selling or substantially exiting non-core activities,
including Kier Living; to restructure the Group by reducing
headcount by c.1,700 and deliver annual cost savings of at least
GBP105m from FY21; and to embed a culture of performance excellence
with a particular focus on cash generation to deliver a reduction
in average month-end net debt.
On 16 April 2021 the Group announced it had entered into an
agreement for the all-cash sale of Kier Living Limited. The
transaction is conditional on shareholder approval at the General
Meeting expected on 7 May 2021. The sale of Kier Living is a key
step in the Group's implementation of the strategic plan, and the
Board unanimously believe that the Transaction reflects the
underlying value of Kier Living. Once complete, the transaction
will facilitate a reduction in the Group's net debt; reduce the
volatility of the Group's working capital, remove the capital
requirement to support land acquisition and remove unconsolidated
debt in certain joint ventures. The disposal simplifies the Group
and will allow it to focus on its core businesses.
The Group has now substantially completed its restructuring and
head-count reduction activities and will have achieved annual cost
savings of at least GBP115m per annum by the end of FY21, over and
above the GBP55m outlined in the initial strategic review.
Management continue to review the cost base of the Group to ensure
it is appropriately and efficiently structured.
The Group performed well in the first half and has delivered
half-year results slightly above the Board's expectations. This
represents an improvement in profitability against the prior
comparative period with a material reduction in adjusting items
noted. Average net debt compared to the prior year has remained
stable compared to FY20. The Group's sites have operated under our
Site Operating Procedures since March 2020.
Kier continues to win new business in its markets on terms and
at rates which reflect the bidding discipline and risk management
introduced under the Group's Performance Excellence programme. As
at 31 December 2020, Kier had been awarded places on long-term
frameworks worth up to GBP11bn, across a number of sectors
including health, education and justice. In addition, several
existing frameworks were extended by 12 months. The orderbook as at
31 December 2020 was slightly ahead of the position at 30 June 2020
at GBP8bn.
At 31 December 2020, the Group had GBP892m of unsecured
committed facilities and GBP18m of uncommitted overdrafts and
GBP109m drawn against uncommitted supply chain financing
facilities.
Revised financial covenants have been extended to cover the 31
December 2020 going concern period of review and an extension of
the Group's RCF to September 2022 has been granted. Financial
covenant certificates for September 2020 and December 2020 have
been prepared with no breaches noted. Further covenant and facility
amendments will be made on the anticipated successful completion of
the disposal of Kier Living and any future equity raise.
The directors have reviewed the Group's cash flow forecasts to
30 June 2022, which are included in the Group's three-year
strategic plan, on the basis of certain key assumptions and
including a number of stressed but plausible downside
scenarios.
These scenarios include a consideration of the risks which may
arise to the Group's available liquidity and its ongoing compliance
with the revised financial covenants within the Group's principal
debt facilities as a result of or in light of the following factors
or circumstances:
-- The continued and ongoing impact of COVID-19;
-- Potential reductions in trading volumes;
-- Potential margin erosion;
-- Risks in respect of certain specific projects;
-- The completion of the sale of Kier Living; and
-- The availability of supply-chain finance.
The Board also considered the macroeconomic and political risks
affecting the UK economy, including Brexit. At present, and
following the UK's agreement with the EU, the Group is not seeing
any material adverse impacts post-exit. The Board noted that the
Group's forecasts are underpinned by a significant proportion of
revenue that is either secured or considered probable, often as
part of long-term framework agreements, and that the Group operates
primarily in sectors such as health, education and utilities, which
are considered likely to remain largely unaffected by
macro-economic factors. In addition, significant cost reduction
actions have already been taken to improve the Group's
profitability.
The Board also considered the Group's ability to manage its
working capital, in order to mitigate the potential impact on the
Group's liquidity over the forecast period, in particular at the
lowest point under the downside scenarios in Q1 of calendar year
2022, and in the event of downside risks and circumstances
described above taking place. This, together with the agreements
with the lenders mean that the Group is expected to continue to
have available liquidity headroom under its finance facilities and
operate within the revised financial covenants over the going
concern period.
As a result, the directors are satisfied that the Group has
adequate resources to meet its obligations as they fall due and,
for this reason, they continue to adopt the going concern basis in
preparing these interim financial statements.
Statement of directors' responsibilities
The directors confirm that these interim financial statements
have been prepared in accordance with International Accounting
Standard 34, 'Interim Financial Reporting', as adopted by the
European Union and that the interim management report includes a
fair review of the information required by DTR 4.2.7 and DTR 4.2.8,
namely:
-- an indication of important events that have occurred during
the first six months and their impact on the consolidated financial
statements, and a description of the principal risks and
uncertainties for the remaining six months of the financial year;
and
-- material related-party transactions in the first six months
and any material changes in the related-party transactions
described in the last annual report.
The Directors of Kier Group plc are listed on pages 84 and 85 of
the 2020 Annual Report and Accounts, except that
-- Kirsty Bashforth left the Board on 17 December 2020; and
-- Alison Atkinson joined the Board as a Non-executive Director on 15 December 2020.
A list of the current directors is maintained on Kier Group
plc's website at: www.kier.co.uk.
Signed on 20 April 2021 on behalf of the Board.
Andrew Davies Simon Kesterton
Chief Executive Chief Financial Officer
Independent review report to Kier Group plc
Report on the consolidated interim financial statements
Our conclusion
We have reviewed Kier Group plc's consolidated interim financial
statements (the "interim financial statements") in the Interim
Management Report and Financial Statements of Kier Group plc for
the 6 month period ended 31 December 2020 (the "period").
Based on our review, nothing has come to our attention that
causes us to believe that the interim financial statements are not
prepared, in all material respects, in accordance with
International Accounting Standard 34, 'Interim Financial
Reporting', as adopted by the European Union and the Disclosure
Guidance and Transparency Rules sourcebook of the United Kingdom's
Financial Conduct Authority.
What we have reviewed
The interim financial statements comprise:
-- the Consolidated balance sheet as at 31 December 2020;
-- the Consolidated income statement and Consolidated statement
of comprehensive income for the period then ended;
-- the Consolidated cash flow statement for the period then ended;
-- the Consolidated statement of changes in equity for the period then ended; and
-- the explanatory notes to the interim financial statements.
The interim financial statements included in the Interim
Management Report and Financial Statements of Kier Group plc have
been prepared in accordance with International Accounting Standard
34, 'Interim Financial Reporting', as adopted by the European Union
and the Disclosure Guidance and Transparency Rules sourcebook of
the United Kingdom's Financial Conduct Authority.
As disclosed in note 1 to the interim financial statements, the
financial reporting framework that has been applied in the
preparation of the full annual financial statements of the group is
applicable law and International Financial Reporting Standards
(IFRSs) as adopted by the European Union.
Responsibilities for the interim financial statements and the
review
Our responsibilities and those of the directors
The Interim Management Report and Financial Statements,
including the interim financial statements, is the responsibility
of, and has been approved by the directors. The directors are
responsible for preparing the Interim Management Report and
Financial Statements in accordance with the Disclosure Guidance and
Transparency Rules sourcebook of the United Kingdom's Financial
Conduct Authority.
Our responsibility is to express a conclusion on the interim
financial statements in the Interim Management Report and Financial
Statements based on our review. This report, including the
conclusion, has been prepared for and only for the company for the
purpose of complying with the Disclosure Guidance and Transparency
Rules sourcebook of the United Kingdom's Financial Conduct
Authority and for no other purpose. We do not, in giving this
conclusion, accept or assume responsibility for any other purpose
or to any other person to whom this report is shown or into whose
hands it may come save where expressly agreed by our prior consent
in writing.
What a review of interim financial statements involves
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, 'Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity' issued by the Auditing Practices Board for use in
the United Kingdom. A review of interim financial information
consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures.
A review is substantially less in scope than an audit conducted
in accordance with International Standards on Auditing (UK) and,
consequently, does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in
an audit. Accordingly, we do not express an audit opinion.
We have read the other information contained in the Interim
Management Report and Financial Statements and considered whether
it contains any apparent misstatements or material inconsistencies
with the information in the interim financial statements.
PricewaterhouseCoopers LLP
Chartered Accountants
London
20 April 2021
Consolidated income statement Kier Group plc
Interim Management
Report and Financial
Statements for
the six months
ended 31 December
2020
For the six months ended 31 December 2020
Unaudited Unaudited
6 months 6 months Year
to 31 to 31 to 30
December December June
2020 2019 2020
Total Total Total
Notes GBPm GBPm GBPm
-------------------------------------------------------- ----- --------- --------- ---------
Continuing operations
Revenue
Group and share of joint ventures 2 1,624.2 1,866.0 3,475.6
Less share of joint ventures 2 (7.1) (46.8) (53.1)
-------------------------------------------------------- ----- --------- --------- ---------
Group revenue 1,617.1 1,819.2 3,422.5
Cost of sales (1,459.4) (1,657.7) (3,220.4)
-------------------------------------------------------- ----- --------- --------- ---------
Gross profit 157.7 161.5 202.1
Ad ministrative expenses (124.3) (191.3) (391.7)
Share of post-tax results of joint ventures (4.6) 5.5 (6.6)
(Loss)/profit on disposal of joint ventures and
subsidiaries - (0.1) 0.6
-------------------------------------------------------- ----- --------- --------- ---------
Profit/(loss) from operations 2 28.8 (24.4) (195.6)
Finance income 1.9 0.3 6.7
Finance cost 5 (21.7) (17.1) (36.4)
-------------------------------------------------------- ----- --------- --------- ---------
Profit/(loss) before tax 2 9.0 (41.2) (225.3)
Taxation 7 (1.9) 5.4 53.4
-------------------------------------------------------- ----- --------- --------- ---------
Profit/(loss) for the period from continuing operations 7.1 (35.8) (171.9)
-------------------------------------------------------- ----- --------- --------- ---------
Discontinued operations
Loss for the period from discontinued operations
(attributable to equity holders of the parent) 10 (1.8) (55.5) (101.4)
-------------------------------------------------------- ----- --------- --------- ---------
Profit/(loss) for the period 5.3 (91.3) (273.3)
-------------------------------------------------------- ----- --------- --------- ---------
Attributable to:
Owners of the parent 5.9 (91.2) (273.3)
Non-controlling interests (0.6) (0.1) -
-------------------------------------------------------- ----- --------- --------- ---------
5.3 (91.3) (273.3)
-------------------------------------------------------- ----- --------- --------- ---------
Earnings per share
Basic earnings/(loss) per share
From continuing operations 9 4.8p (22.1)p (106.2)p
From discontinued operations 9 (1.1)p (34.3)p (62.7)p
-------------------------------------------------------- ----- --------- --------- ---------
Total 3.7p (56.4)p (168.9)p
-------------------------------------------------------- ----- --------- --------- ---------
Diluted earnings/(loss) per share
From continuing operations 9 4.8p (22.1)p (106.2)p
From discontinued operations 9 (1.1)p (34.3)p (62.7)p
-------------------------------------------------------- ----- --------- --------- ---------
Total 3.7p (56.4)p (168.9)p
-------------------------------------------------------- ----- --------- --------- ---------
Supplementary information(1)
Adjusted operating profit 3 47.6 46.7 41.4
Adjusted profit before tax 3 27.8 30.7 16.9
Adjusted earnings per share 9 13.0p 15.0p 15.3p
Adjusted diluted earnings per share 9 13.0p 15.0p 15.3p
-------------------------------------------------------- ----- --------- --------- ---------
(1) Reference to 'adjusted' excludes adjusting items, see note 1
and 3.
Consolidated statement of comprehensive income Kier Group plc
Interim Management
Report and Financial
Statements for
the six months
ended 31 December
2020
For the six months ended 31 December 2020
Unaudited Unaudited
6 months 6 months Year
to 31 to 31 to 30
December December June
2020 2019 2020
Notes GBPm GBPm GBPm
Profit/(loss) for the period 5.3 (91.3) (273.3)
-------------------------------------------------------- ----- --------- --------- -------
Items that may be reclassified subsequently to
the income statement
Share of joint venture fair value movements on
cash flow hedging instruments - - (0.3)
Fair value (loss)/gain on cash flow hedging instruments (13.6) (6.6) 5.7
Fair value movements on cash flow hedging instruments
recycled to the income statement 10.4 6.1 (2.3)
Deferred tax charge on fair value movements on
cash flow hedging instruments 0.6 0.1 (0.7)
Foreign exchange (loss)/gain on long-term funding
of foreign operations - (0.1) 1.0
Foreign exchange translation differences (2.9) (2.0) 0.1
Foreign exchange movements recycled to the income
statement 0.1 (0.2) 3.3
-------------------------------------------------------- ----- --------- --------- -------
Total items that may be reclassified subsequently
to the income statement (5.4) (2.7) 6.8
-------------------------------------------------------- ----- --------- --------- -------
Items that will not be reclassified to the income
statement
Re-measurement of defined benefit liabilities 6 (66.5) (29.0) (6.2)
Deferred tax credit on actuarial losses on defined
benefit liabilities 12.6 5.0 6.4
-------------------------------------------------------- ----- --------- --------- -------
Total items that will not be reclassified to the
income statement (53.9) (24.0) 0.2
-------------------------------------------------------- ----- --------- --------- -------
Other comprehensive (loss)/profit for the period (59.3) (26.7) 7.0
-------------------------------------------------------- ----- --------- --------- -------
Total comprehensive loss for the period (54.0) (118.0) (266.3)
-------------------------------------------------------- ----- --------- --------- -------
Attributable to:
Equity holders of the parent (53.4) (117.9) (266.3)
Non-controlling interests - continuing operations (0.6) (0.1) -
-------------------------------------------------------- ----- --------- --------- -------
(54.0) (118.0) (266.3)
-------------------------------------------------------- ----- --------- --------- -------
Total comprehensive loss attributable to equity
shareholders arises from:
Continuing operations (51.6) (62.4) (164.9)
Discontinued operations (1.8) (55.5) (101.4)
-------------------------------------------------------- ----- --------- --------- -------
(53.4) (117.9) (266.3)
-------------------------------------------------------- ----- --------- --------- -------
Consolidated statement of changes in equity Kier Group plc
Interim Management
Report and Financial
Statements for
the six months
ended 31 December
2020
For the six months ended 31 December 2020
Equity
Cash attributable
Capital flow to owners
Share Share redemption Accumulated hedge Translation Merger of Non-controlling Total
capital premium reserve losses reserve reserve reserve the parent interests equity
Notes GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
-------------- ------ ------- ------- ---------- ----------- ------- ----------- -------- ------------ --------------- -------
At 30 June
2019 1.6 684.3 2.7 (306.8) (1.2) 3.7 134.8 519.1 0.5 519.6
Impact of
adopting
IFRS 16 - - - (16.6) - - - (16.6) - (16.6)
-------------- ------ ------- ------- ---------- ----------- ------- ----------- -------- ------------ --------------- -------
At 1 July 2019 1.6 684.3 2.7 (323.4) (1.2) 3.7 134.8 502.5 0.5 503.0
Loss for the
period - - - (91.2) - - - (91.2) (0.1) (91.3)
Other
comprehensive
loss - - - (24.0) (0.4) (2.3) - (26.7) - (26.7)
Share-based
payments 13 - - - 2.2 - - - 2.2 - 2.2
Purchase of
own shares - - - (0.9) - - - (0.9) - (0.9)
-------------- ------ ------- ------- ---------- ----------- ------- ----------- -------- ------------ --------------- -------
At 31 December
2019 1.6 684.3 2.7 (437.3) (1.6) 1.4 134.8 385.9 0.4 386.3
-------------- ------ ------- ------- ---------- ----------- ------- ----------- -------- ------------ --------------- -------
(Loss)/profit
for the
period - - - (182.1) - - - (182.1) 0.1 (182.0)
Other
comprehensive
Income - - - 24.2 2.8 6.7 - 33.7 - 33.7
Dividends paid 7 - - - - - - - - (0.4) (0.4)
Share-based
payments 13 - - - 3.2 - - - 3.2 - 3.2
At 30 June
2020 1.6 684.3 2.7 (592.0) 1.2 8.1 134.8 240.7 0.1 240.8
-------------- ------ ------- ------- ---------- ----------- ------- ----------- -------- ------------ --------------- -------
Profit/(loss)
for the
period - - - 5.9 - - - 5.9 (0.6) 5.3
Other
comprehensive
Loss - - - (53.9) (2.6) (2.8) - (59.3) - (59.3)
Share-based
payments 13 - - - 2.8 - - - 2.8 - 2.8
Purchase of
own shares - - - (0.3) - - - (0.3) - (0.3)
-------------- ------ ------- ------- ---------- ----------- ------- ----------- -------- ------------ --------------- -------
At 31 December
2020 1.6 684.3 2.7 (637.5) (1.4) 5.3 134.8 189.8 (0.5) 189.3
-------------- ------ ------- ------- ---------- ----------- ------- ----------- -------- ------------ --------------- -------
The numbers in the table above are shown net of tax as
applicable.
Consolidated balance sheet Kier Group plc
Interim Management
Report and Financial
Statements for
the six months
ended 31 December
2020
A t 31 December 2020
Unaudited Unaudited
31 December 31 December 30 June
2020 2019 2020
Notes GBPm GBPm GBPm
------------------------------------------------- ----- ------------- ------------- ---------
Non-current assets
Intangible assets 14 705.7 741.5 720.6
Property, plant and equipment 45.4 53.3 42.3
Right-of-use assets 92.6 149.6 100.9
Investment properties 49.8 - 49.8
Investments in and loans to joint ventures 102.0 116.8 105.6
Capitalised mobilisation costs 2.0 2.2 1.9
Deferred tax assets 7 124.1 58.7 111.0
Contract assets 28.8 21.7 28.8
Trade and other receivables 30.7 34.3 32.9
Retirement benefit assets 6 67.1 55.2 99.5
Other financial assets 14.3 17.5 30.0
------------------------------------------------- ----- ------------- ------------- ---------
Non-current assets 1,262.5 1,250.8 1,323.3
------------------------------------------------- ----- ------------- ------------- ---------
Current assets
Inventories 54.3 54.7 60.0
Contract assets 250.4 359.5 249.7
Trade and other receivables 287.5 357.6 236.4
Corporation tax receivable 8.1 10.3 12.5
Other financial assets 2.3 - -
Cash and cash equivalents 11 328.6 390.8 413.9
------------------------------------------------- ----- ------------- ------------- ---------
Current assets 931.2 1,172.9 972.5
Assets held for sale as part of a disposal group 10 234.8 234.0 196.7
------------------------------------------------- ----- ------------- ------------- ---------
Total assets 2,428.5 2,657.7 2,492.5
------------------------------------------------- ----- ------------- ------------- ---------
Current liabilities
Borrowings 11 (99.6) (0.3) (61.6)
Lease liabilities (28.1) (26.5) (33.1)
Trade and other payables 12 (1,000.6) (1,052.7) (957.5)
Contract liabilities (86.7) (134.4) (108.7)
Provisions (13.7) (24.4) (20.8)
Current liabilities (1,228.7) (1,238.3) (1,181.7)
------------------------------------------------- ----- ------------- ------------- ---------
Liabilities held for sale as part of a disposal
group 10 (124.8) (106.0) (81.7)
------------------------------------------------- ----- ------------- ------------- ---------
Non-current liabilities
Borrowings 11 (599.4) (651.8) (689.8)
Lease liabilities (133.5) (149.6) (139.8)
Trade and other payables (40.4) (26.0) (46.5)
Retirement benefit obligations 6 (68.5) (52.3) (60.7)
Provisions (43.9) (47.4) (51.5)
Non-current liabilities (885.7) (927.1) (988.3)
------------------------------------------------- ----- ------------- ------------- ---------
Total liabilities (2,239.2) (2,271.4) (2,251.7)
------------------------------------------------- ----- ------------- ------------- ---------
Net assets 2 189.3 386.3 240.8
------------------------------------------------- ----- ------------- ------------- ---------
Equity
Share capital 1.6 1.6 1.6
Share premium 684.3 684.3 684.3
Capital redemption reserve 2.7 2.7 2.7
Accumulated losses (637.5) (437.3) (592.0)
Cash flow hedge reserve (1.4) (1.6) 1.2
Translation reserve 5.3 1.4 8.1
Merger reserve 134.8 134.8 134.8
------------------------------------------------- ----- ------------- ------------- ---------
Equity attributable to owners of the parent 189.8 385.9 240.7
Non-controlling interests (0.5) 0.4 0.1
------------------------------------------------- ----- ------------- ------------- ---------
Total equity 189.3 386.3 240.8
------------------------------------------------- ----- ------------- ------------- ---------
Consolidated cash flow statement Kier Group plc
Interim Management
Report and Financial
Statements for
the six months
ended 31 December
2020
For the six months ended 31 December 2020
Unaudited Unaudited
6 months 6 months Year
to 31 to 31 to
December December 30 June
2020 2019 2020
Notes GBPm GBPm GBPm
--------------------------------------------------------- ------- ----------- --------- --------
Cash flows from operating activities
Profit/(loss) before tax - continuing operations 9.0 (41.2) (225.3)
Loss before tax - discontinued operations (1.8) (54.5) (101.4)
Net finance cost 19.8 16.8 29.7
Share of post-tax trading results of joint ventures (2.3) (16.2) 0.2
Normal cash contributions to pension fund in excess
of pension charge 0.6 0.1 0.2
Equity settled share-based payments charge 2.8 2.2 5.4
Amortisation and impairment of intangible assets
and mobilisation costs 15.7 15.3 36.9
Impairment of assets held for sale and transfers
to/(from) assets held for sale (3.8) 59.5 57.0
Research and development expenditure credit (7.9) (3.0) (10.2)
Depreciation charges 4.4 4.7 7.6
Depreciation of right of use assets 16.2 27.7 46.0
(Profit)/loss on disposal of joint ventures and
subsidiaries - 0.1 (0.6)
Loss on disposal of property, plant and equipment
and intangible assets 0.7 4.0 4.9
--------------------------------------------------------- ------- ----------- --------- --------
Operating cash inflows/(outflows) before movements
in working capital and pension deficit contributions 53.4 15.5 (149.6)
Deficit contributions to pension fund (26.5) (12.2) (25.0)
(Increase)/decrease in inventories 5.7 25.7 44.2
(Increase)/decrease in receivables (48.6) (28.0) 108.1
(Increase)/decrease in contract assets (6.0) 107.7 212.2
(176.2)
Increase/(decrease) in payables 36.4 ) (278.6)
Increase/(decrease) in contract liabilities (22.0) 2.6 (20.5)
Increase/(decrease) in provisions (15.2) (8.1) (4.0)
--------------------------------------------------------- ------- ----------- --------- --------
Cash inflow/(outflow) from operating activities (22.8) (73.0) (113.2)
Dividends received from joint ventures 7.1 25.2 28.9
Interest received 1.9 0.3 6.7
Income tax received 10.9 4.9 5.9
Net cash inflow/(outflow) from operating activities (2.9) (42.6) (71.7)
--------------------------------------------------------- ------- ----------- --------- --------
Cash flows from investing activities
Proceeds from sale of property, plant and equipment - 0.5 1.6
Proceeds from sale of subsidiaries and joint ventures,
net of cash disposed - 14.1 14.1
Purchase of property, plant and equipment (0.8) (0.9) (3.8)
Purchase of intangible assets 14 (0.1) (2.3) (4.0)
Purchase of capitalised mobilisation costs (0.5) - (0.8)
Investment in or loans to joint ventures (5.5) (9.5) (14.2)
Classification (to)/from assets held for sale (0.1) - (0.1)
Net cash from/(used) in investing activities (7.0) 1.9 (7.2)
--------------------------------------------------------- ------- ----------- --------- --------
Cash flows from financing activities
Purchase of own shares (0.3) (0.9) (0.9)
Interest paid (15.2) (16.2) (34.9)
Principal elements of lease payments (19.1) (19.7) (40.4)
Drawdown of borrowings - 184.1 274.7
Repayment of borrowings (42.4) (30.0) (30.3)
Loan repayment from joint ventures 4.4 4.7 9.4
Settlement of derivative financial instruments - - (0.5)
Dividends paid to non-controlling interests - - (0.4)
--------------------------------------------------------- ------- ----------- --------- --------
Net cash from financing activities (72.6) 122.0 176.7
--------------------------------------------------------- ------- ----------- --------- --------
Increase/(decrease) in cash, cash equivalents and
overdraft (82.5) 81.3 97.8
Effect of change in foreign exchange rates (2.8) (2.2) 4.4
Opening cash, cash equivalents and overdraft 413.9 311.7 311.7
--------------------------------------------------------- ------- ----------- --------- --------
Closing cash, cash equivalents and overdraft 11 328.6 390.8 413.9
--------------------------------------------------------- ------- ----------- --------- --------
Supplementary information(1)
Adjusted cash flow from operating activities 34.3 (37.6) (19.7)
--------------------------------------------- --- ------ ------
(1) Reference to 'adjusted' excludes adjusting items, see note 1
and 3.
Notes to the financial statements Kier Group plc
Interim Management
Report and Financial
Statements for
the six months
ended 31 December
2020
1 Accounting policies
Reporting entity
Kier Group plc (the Company) is a public limited company which
is listed on the London Stock Exchange and incorporated and
domiciled in the UK. The address of its registered office is 81
Fountain Street, Manchester, M2 2EE.
The condensed interim consolidated financial statements (interim
financial statements) for the six months ended 31 December 2020
comprise the Company and its subsidiaries (together referred to as
the Group) and the Group's interest in jointly controlled
entities.
Basis of preparation
The financial statements have been prepared in accordance with
the Disclosure and Transparency Rules of the Financial Conduct
Authority, and the principles of International Financial Reporting
Standards (IFRS) as adopted by the European Union but do not comply
with the full disclosure requirements of these standards.
The unaudited financial information contained in this
announcement does not constitute the Company's statutory accounts
as at and for the six months ended 31 December 2020. Statutory
financial statements for the year ended 30 June 2020 were approved
by the Board of Directors on 25 September 2020 and delivered to the
Registrar of Companies. The auditor's report on these accounts was
unqualified, did not contain an emphasis of matter paragraph and
did not contain a statement under section 498 of the Companies Act
2006.
The directors continue to adopt the going concern basis in
preparing the Group's interim financial statements.
As set out in previous financial reporting periods, the Group's
strategic plan is to focus on its core businesses; to simplify the
Group by selling or substantially exiting non-core activities,
including Kier Living; to restructure the Group by reducing
headcount by c.1,700 and deliver annual cost savings of at least
GBP105m from FY21; and to embed a culture of performance excellence
with a particular focus on cash generation to deliver a reduction
in average month-end net debt.
On 16 April 2021 the Group announced it had entered into an
agreement for the all-cash sale of Kier Living Limited. The
transaction is conditional on shareholder approval at the General
Meeting expected 7 May 2021. The sale of Kier Living is a key step
in the Group's implementation of the strategic plan, and the Board
unanimously believe that the Transaction reflects the underlying
value of Kier Living. Once complete, the transaction will
facilitate a reduction in the Group's net debt; reduce the
volatility of the Group's working capital; remove the capital
requirement to support land acquisition and remove unconsolidated
debt in certain joint ventures. The disposal simplifies the Group
and will allow it to focus on its core businesses.
The Group has now substantially completed its restructuring and
head-count reduction activities and will have achieved annual cost
savings of at least GBP115m per annum by the end of FY21, over and
above the GBP55m outlined in the initial strategic review.
Management continue to review the cost base of the Group to ensure
it is appropriately and efficiently structured.
The Group performed well in the first half and has delivered
half-year results slightly above the Board's expectations. This
represents an improvement in profitability against the prior
comparative period with a material reduction in adjusting items
noted. Average net debt compared to the prior year has remained
stable compared to FY20. The Group's sites have operated under our
Site Operating Procedures since March 2020.
Kier continues to win new business in its markets on terms and
at rates which reflect the bidding discipline and risk management
introduced under the Group's Performance Excellence programme. As
at 31 December 2020, Kier had been awarded places on long-term
frameworks worth up to GBP11bn, across a number of sectors
including health, education and justice. In addition, several
existing frameworks were extended by 12 months. The orderbook as at
31 December 2020 was slightly ahead of the position at 30 June 2020
at GBP8bn.
At 31 December 2020, the Group had GBP892m of unsecured
committed facilities and GBP18m of uncommitted overdrafts and
GBP109m drawn against uncommitted supply chain financing
facilities.
Revised financial covenants have been extended to cover the 31
December 2020 going concern period of review and an extension of
the Group's Rolling Credit Facility (RCF) to Sep-22 has been
granted. Financial covenant certificates for Sep-20 and Dec-20 have
been prepared with no breaches noted. Further covenant and facility
amendments will be made on the anticipated successful completion of
the disposal of Kier Living and any future equity raise.
The directors have reviewed the Group's cash flow forecasts to
30 June 2022, which are included in the Group's three-year
strategic plan, on the basis of certain key assumptions and
including a number of stressed but plausible downside
scenarios.
These scenarios include a consideration of the risks which may
arise to the Group's available liquidity and its ongoing compliance
with the revised financial covenants within the Group's principal
debt facilities as a result of or in light of the following factors
or circumstances:
-- The continued and ongoing impact of COVID-19;
-- Potential reductions in trading volumes;
-- Potential margin erosion;
-- Risks in respect of certain specific projects;
-- The completion of the sale of Kier Living; and
-- The availability of supply-chain finance.
The Board also considered the macroeconomic and political risks
affecting the UK economy, including Brexit. At present, and
following the UK's agreement with the EU, the Group is not seeing
any material adverse impacts post-exit. The Board noted that the
Group's forecasts are underpinned by a significant proportion of
revenue that is either secured or considered probable, often as
part of long-term framework agreements, and that the Group operates
primarily in sectors such as health, education and utilities, which
are considered likely to remain largely unaffected by
macro-economic factors. In addition, significant cost reduction
actions have already been taken to improve the Group's
profitability.
The Board also considered the Group's ability to manage its
working capital, in order to mitigate the potential impact on the
Group's liquidity over the forecast period, in particular at the
lowest point under the downside scenarios in Q1 of calendar year
2022, in the event of downside risks and circumstances described
above taking place. This, together with the agreements with the
lenders, mean that the Group is expected to continue to have
available liquidity headroom under its finance facilities and
operate within the revised financial covenants over the going
concern period.
As a result, the directors are satisfied that the Group has
adequate resources to meet its obligations as they fall due and,
for this reason, they continue to adopt the going concern basis in
preparing these interim financial statements.
Significant accounting policies
The accounting policies applied by the Group in these interim
financial statements are consistent with those applied by the Group
in its financial statements as at, and for the year ended, 30 June
2020.
Adjusting items
IAS 1 permits an entity to present additional information for
specific items to enable users to better assess the entity's
financial performance.
During FY20, the Directors reviewed the previous accounting
presentation for disclosing certain items as exceptional on the
income statement. The Directors considered the requirements of
applicable accounting standards, along with additional guidance
around Alternative Performance Measures (APM) and concluded that
the Group would move away from using its previous disclosure on the
face of the Group's income statement. The Directors considered that
it would be more appropriate to present an income statement that
shows the Group's statutory results only.
The Directors however still believe it is appropriate to inform
users regarding various items and disclose those items which are
deemed one-off, material or non-recurring in size or nature and a
decision has been made to align to internal management reporting as
the Directors consider it makes the financial statements
presentation clearer to the users of the accounts. As such, the
Group is disclosing as supplementary information an 'Adjusted
Profit' APM which is reconciled to statutory profit in the Notes to
the Financial Statements and is consistent with IFRS 8 segmental
reporting.
Separate presentation of these items is intended to enhance
understanding of the financial performance of the Group in the
particular financial period under review and the extent to which
results are influenced by material unusual and/or non-recurring
items. The Directors review segmental results under an adjusted
items basis to analyse the performance of operating segments.
The Directors exercise judgement in determining the
classification of certain items as adjusting using quantitative and
qualitative factors. In assessing whether an item is an adjusting
item, the Directors give consideration, both individually and
collectively, as to an item's size, the specific circumstances
which have led to the item arising and if the item is likely to
recur, or whether the matter forms part of a group of similar
items.
Amortisation of acquired intangible assets and certain financing
costs are also included as adjusting items on the basis of being
ongoing non-cash items generated from acquisition related
activity.
A full reconciliation from statutory numbers to adjusted profit
measures has been presented in note 3. As a result of the Group's
change in its APM, a review of the prior interim period has been
conducted to align to the revised presentation. No restatement of
prior period numbers is required as the Directors believe all
material items in the prior period which were classified as an
exceptional item also meet the new definition of an adjusting item.
Similarly, no material prior period items have been highlighted
which meet the new adjusting items definition that did not meet the
previous exceptional items definition.
The Group presents revenue including from joint venture
arrangements as an alternative performance measure. The Directors
believe this is a useful measure as it provides visibility over the
scale of the Group's operations, particularly within its Property
business where a significant proportion of developments are set up
in joint ventures.
The Group also presents adjusted cash flow from operations, free
cash flow and net debt as alternative performance measures. The
Directors consider that these provide useful information about the
Group's liquidity and debt profile.
Segmental reporting
As part of the Group's continued focus on restructuring and
streamlining operations, and in line with the Group's strategy to
simplify the Group's portfolio, a review of the Facilities
Management, Housing Maintenance, Design and Business Services and
Environmental Services businesses was conducted in the period to 31
December 2020. Following internal restructuring driven by the
potential synergy benefits available, these businesses now report
into the Construction Leadership Team. As part of this process, the
information that is used to manage the Construction business, and
what is being reported to the Group's Chief Operating Decision
Maker, has been realigned to include these businesses.
The Directors have therefore concluded that the results of the
Facilities Management, Housing Maintenance, Design and Business
Services and Environmental Services businesses should be reported
within the Construction segment for external reporting purposes,
still named Construction. The Other segment now only consists of
the Property division and has been renamed Property. The prior year
segmental analysis has been restated to reflect these changes.
2 Segmental reporting
For the six months ended 31 December Infrastructure
2020 Services Construction Property Corporate Group
Continuing operations GBPm GBPm GBPm GBPm GBPm
------------------------------------------ -------------- ------------ -------- --------- ---------
Revenue(1)
Group and share of joint ventures 672.6 902.6 46.1 2.9 1,624.2
Less share of joint ventures - (0.8) (6.3) - (7.1)
------------------------------------------ -------------- ------------ -------- --------- ---------
Group revenue 672.6 901.8 39.8 2.9 1,617.1
------------------------------------------ -------------- ------------ -------- --------- ---------
Profit for the period
Operating profit/(loss) before adjusting
items 27.3 33.6 2.6 (15.9) 47.6
Adjusting items (6.5) (2.9) (2.5) (6.9) (18.8)
------------------------------------------ -------------- ------------ -------- --------- ---------
Profit/(loss) from operations 20.8 30.7 0.1 (22.8) 28.8
Net finance costs(2) (0.1) (1.8) (7.0) (10.9) (19.8)
Profit/(loss) before tax from continuing
operations 20.7 28.9 (6.9) (33.7) 9.0
========================================== ============== ============ ======== ========= =========
Taxation (1.9)
========================================== ============== ============ ======== ========= =========
Profit for the period from continuing
operations 7.1
------------------------------------------ -------------- ------------ -------- --------- ---------
Loss for the period from discontinued
operations (1.8)
------------------------------------------ -------------- ------------ -------- --------- ---------
Profit for the period 5.3
------------------------------------------ -------------- ------------ -------- --------- ---------
Balance sheet
Operating assets (3) 845.3 518.0 180.0 305.1 1,848.4
Operating liabilities (3) (361.1) (724.3) (27.3) (302.6) (1,415.3)
------------------------------------------ -------------- ------------ -------- --------- ---------
Net operating assets/(liabilities)(3) 484.2 (206.3) 152.7 2.5 433.1
Cash, cash equivalents and borrowings 299.7 355.1 (130.0) (895.2) (370.4)
Net financial assets - - - 16.6 16.6
------------------------------------------ -------------- ------------ -------- --------- ---------
Net assets/(liabilities) excluding net
assets held for sale 783.9 148.8 22.7 (876.1) 79.3
------------------------------------------ -------------- ------------ -------- --------- ---------
Net assets held for sale 110.0
------------------------------------------ -------------- ------------ -------- --------- ---------
Net assets 189.3
------------------------------------------ -------------- ------------ -------- --------- ---------
For the six months ended 31 December Infrastructure
2019 (4) Services Construction Property Corporate Group
Continuing operations GBPm GBPm GBPm GBPm GBPm
----------------------------------------------- -------------- ------------ -------- --------- ---------
Revenue(1)
Group and share of joint ventures 783.2 989.5 87.9 5.4 1,866.0
Less share of joint ventures - (6.1) (40.7) - (46.8)
----------------------------------------------- -------------- ------------ -------- --------- ---------
Group revenue 783.2 983.4 47.2 5.4 1,819.2
----------------------------------------------- -------------- ------------ -------- --------- ---------
Loss for the period
Operating profit/(loss) before adjusting
items 27.6 31.7 3.4 (16.0) 46.7
Adjusting items (3.8) (23.6) - (43.7) (71.1)
----------------------------------------------- -------------- ------------ -------- --------- ---------
Profit/(loss) from operations 23.8 8.1 3.4 (59.7) (24.4)
Net finance costs(2) (1.1) (0.8) (7.0) (7.9) (16.8)
Profit/(loss) before tax from continuing
operations 22.7 7.3 (3.6) (67.6) (41.2)
=============================================== ============== ============ ======== ========= =========
Taxation 5.4
=============================================== ============== ============ ======== ========= =========
Loss for the period from continuing operations (35.8)
----------------------------------------------- -------------- ------------ -------- --------- ---------
Loss for the period from discontinued
operations (55.5)
----------------------------------------------- -------------- ------------ -------- --------- ---------
Loss for the period (91.3)
----------------------------------------------- -------------- ------------ -------- --------- ---------
Balance sheet
Operating assets (3) 844.4 567.7 232.4 370.8 2,015.3
Operating liabilities (3) (383.1) (798.3) (58.4) (273.4) (1,513.2)
----------------------------------------------- -------------- ------------ -------- --------- ---------
Net operating assets/(liabilities)(3) 461.3 (230.6) 174.0 97.4 502.1
Cash, cash equivalents and borrowings 223.8 305.3 (121.4) (669.0) (261.3)
Net financial assets - - - 17.5 17.5
----------------------------------------------- -------------- ------------ -------- --------- ---------
Net assets/(liabilities) excluding net
assets held for sale 685.1 74.7 52.6 (554.1) 258.3
----------------------------------------------- -------------- ------------ -------- --------- ---------
Net assets held for sale 128.0
----------------------------------------------- -------------- ------------ -------- --------- ---------
Net assets 386.3
----------------------------------------------- -------------- ------------ -------- --------- ---------
Infrastructure
For the year ended 30 June 2020 (4) Services Construction Property Corporate Group
Continuing operations GBPm GBPm GBPm GBPm GBPm
----------------------------------------------- -------------- ------------ -------- --------- ---------
Revenue(1)
Group and share of joint ventures 1,506.2 1,838.0 120.3 11.1 3,475.6
Less share of joint ventures - - (53.1) - (53.1)
----------------------------------------------- -------------- ------------ -------- --------- ---------
Group revenue 1,506.2 1,838.0 67.2 11.1 3,422.5
----------------------------------------------- -------------- ------------ -------- --------- ---------
Loss for the year
Operating profit/(loss) before adjusting
items 31.3 46.7 (5.4) (31.2) 41.4
Adjusting items (21.9) (104.2) (10.2) (100.7) (237.0)
----------------------------------------------- -------------- ------------ -------- --------- ---------
Profit/(loss) from operations 9.4 (57.5) (15.6) (131.9) (195.6)
Net finance costs(2) (1.5) (6.7) (5.2) (16.3) (29.7)
Profit/(loss) before tax from continuing
operations 7.9 (64.2) (20.8) (148.2) (225.3)
=============================================== ============== ============ ======== ========= =========
Taxation 53.4
=============================================== ============== ============ ======== ========= =========
Loss for the year from continuing operations (171.9)
----------------------------------------------- -------------- ------------ -------- --------- ---------
Loss for the year from discontinued operations (101.4)
----------------------------------------------- -------------- ------------ -------- --------- ---------
Loss for the year (273.3)
----------------------------------------------- -------------- ------------ -------- --------- ---------
Balance sheet
Operating assets (3) 828.2 500.6 186.1 337.0 1,851.9
Operating liabilities (3) (385.2) (696.9) (24.4) (312.1) (1,418.6)
----------------------------------------------- -------------- ------------ -------- --------- ---------
Net operating assets/(liabilities)(3) 443.0 (196.3) 161.7 24.9 433.3
Cash, cash equivalents and borrowings 346.1 376.5 (134.4) (925.7) (337.5)
Net financial assets - - - 30.0 30.0
----------------------------------------------- -------------- ------------ -------- --------- ---------
Net assets/(liabilities) excluding net
assets held for sale 789.1 180.2 27.3 (870.8) 125.8
----------------------------------------------- -------------- ------------ -------- --------- ---------
Net assets held for sale 115.0
----------------------------------------------- -------------- ------------ -------- --------- ---------
Net assets 240.8
----------------------------------------------- -------------- ------------ -------- --------- ---------
(1) Revenue is stated after the exclusion of inter-segmental
revenue and before exceptional items. Over 90% of the Group's
revenue is derived from UK based customers.
(2) Interest was (charged)/credited to the divisions at a
notional rate of 4.0%.
(3) Net operating assets/(liabilities) excludes cash, cash
equivalents, bank overdrafts, borrowings, financial assets and
liabilities, assets and liabilities classified as held for sale and
interest-bearing inter-company loans.
(4) Prior year comparative information re-presented to show the
new reporting segments, see note 1.
3 Adjusting items
The Group's policy in respect of adjusting items is described in
note 1. These items are discussed in detail below:
Operating Profit/(loss)
profit/(loss) before tax
---------------------------------------- ---------------------------------- ----------------------------------
Unaudited Unaudited Unaudited Unaudited
6 months 6 months Year 6 months 6 months Year
to 31 to 31 to 30 to 31 to 31 to 30
December December June December December June
2020 2019 2020 2020 2019 2020
GBPm GBPm GBPm GBPm GBPm GBPm
---------------------------------------- ------------ ---------- -------- ------------ ---------- --------
Reported profit/(loss) from continuing
operations 28.8 (24.4) (195.6) 9.0 (41.2) (225.3)
Amortisation of acquired intangible
assets 11.3 11.8 23.7 11.3 11.8 23.7
Costs associated with previous
acquisitions - 3.1 5.0 - 3.1 5.0
Restructuring and related charges 6.0 48.8 156.1 6.0 48.8 156.1
Preparation for business divestment
or closure (0.8) 7.4 33.6 (0.8) 7.4 33.6
Other 2.3 - 18.6 2.3 0.8 23.8
---------------------------------------- ------------ ---------- -------- ------------ ---------- --------
Adjusted profit from continuing
operations 47.6 46.7 41.4 27.8 30.7 16.9
---------------------------------------- ------------ ---------- -------- ------------ ---------- --------
a) Amortisation of acquired intangible assets
Unaudited Unaudited
6 months 6 months Year
to 31 to 31 to 30
December December June
2020 2019 2020
GBPm GBPm GBPm
-------------------------------------------- ------------ ---------- -------
Amortisation of acquired intangible assets (11.3) (11.8) (23.7)
-------------------------------------------- ------------ ---------- -------
b) Costs associated with previous acquisitions
Unaudited Unaudited
6 months 6 months Year
to 31 to 31 to 30
December December June
2020 2019 2020
GBPm GBPm GBPm
------------------------------------------------------------- ------------- ---------- -------
Integration costs relating to the McNicholas acquisition(1) - (6.6) (8.5)
McNicholas acquired contract settlement(2) - 3.5 3.5
Total - (3.1) (5.0)
------------------------------------------------------------- ------------- ---------- -------
(1) Costs incurred to integrate the McNicholas acquisition into
the Utilities business including significant double-running of
people and lease costs. These are considered to be adjusting items
on the basis of their size, the fact that they relate to a major
acquisition and that these are non-recurring costs that came to an
end in FY20.
(2) Revenue received in settlement of a contract acquired with
McNicholas.
c) Restructuring and related charges
The Group has incurred significant restructuring charges
relating to costs of organisational change associated with the
Group's cost saving programmes and, latterly, the Group's Strategic
Review. These are discussed further in the Financial Review. These
are considered to be adjusting items on the basis of their size and
the fact that they relate to significant changes to the Group's
activities or workforce.
Unaudited Unaudited
6 months 6 months Year
to 31 to 31 to 30
December December June
2020 2019 2020
GBPm GBPm GBPm
------------------------------------------------------- ------------ ---------- --------
Restructure of Regional Southern Building business(1) (3.5) - (61.5)
Redundancy costs(2) (1.4) (16.8) (29.5)
Professional adviser fees and other costs incurred
implementing non-people initiatives(3) (0.5) (18.1) (34.2)
Lease impairments(4) (0.6) (10.1) (14.4)
Costs in preparation for outsourcing arrangements(5) - (3.8) (11.1)
Property impairment(6) - - (5.4)
Total (6.0) (48.8) (156.1)
------------------------------------------------------- ------------ ---------- --------
(1) During FY20, the Group undertook a strategic review of its
Regional Southern Building business which resulted in the
restructuring of management, closure of offices and closure of
certain sectors. This process also included charges relating to the
recoverability of assets following implementation of the new
strategy and the challenging COVID-impacted market conditions. The
majority of these costs was recognised in FY20 with an additional
amount of GBP3.5m being identified in HY21.
(2) Costs in respect of roles made redundant as a result of cost
saving programmes and from strategic decisions taken to reduce
headcount in a number of the Group's principal operating divisions
following the announcement of the strategic review.
(3) The Group incurred various costs in running the
restructuring activities during the year. These include
professional adviser fees, partly offset by releases of GBP1.6m
relating to prior year accruals no longer required.
(4) The Group incurred further impairment charges on a corporate
office lease of GBP0.6m during the period.
(5) The Group outsourced its Fleet and IT services in FY20,
incurring GBP8.3m of costs. This included one-off set up costs,
dual-running costs and redundancy payments.
(6) As part of its restructuring programme the Group closed its
head office in April 2020 which is now held within investment
properties. As a result, an impairment charge of GBP5.4m was
recognised in FY20.
d) Preparation for business divestment or closure
The Group has incurred various charges driven by the change in
strategic direction of the Group and the decision to exit certain
divisions deemed non-core to its ongoing operations. Most of these
charges are non-cash and are considered to be adjusting items on
the basis that they relate to a major restructuring of the Group
following the Strategic Review.
Unaudited Unaudited
6 months 6 months Year
to 31 to 31 to 30
December December June
2020 2019 2020
GBPm GBPm GBPm
---------------------------------------------------- ------------ ---------- -------
Business closure and sales costs(1) (2.2) (2.9) (32.0)
Impairment of ERP computer software(2) - (2.4) (4.7)
Reversal of impairment of ERP computer software(2) - - 3.1
Fair value reversal/(impairment) of Assets Held
for Sale - note 10 3.0 (2.1) -
Total 0.8 (7.4) (33.6)
---------------------------------------------------- ------------ ---------- -------
(1) Following the announcement of the Group's intention to exit
parts of the Group, a number of charges were recognised in FY20.
During HY21 some further costs were recognised and have been
treated as adjusting items as they relate to the same items as the
prior year costs. Of the GBP2.2m, GBP1.6m relates to the impairment
of an investment in a property joint venture in a geographic region
that is being exited and is an extension of the write down taken in
FY20.
(2) In FY20 a cost of GBP4.7m was written-off due to software
functionality which will no longer be utilised within the Group.
Certain elements of this previously impaired software will now be
utilised and therefore part of the previous impairment has been
reversed.
e) Other
Other adjusting items are analysed below:
Unaudited Unaudited
6 months 6 months Year
to 31 to 31 to 30
December December June
2020 2019 2020
GBPm GBPm GBPm
------------------------------------- ------------ ---------- -------
Net financing costs (1) - (0.8) (5.2)
Central charges and other items (2) - - (8.9)
Procurement charge (3) - - (2.1)
Legal compliance (4) (1.8) - (7.6)
GMP equalisation pension charge(5) (0.5) - -
Total before tax (2.3) (0.8) (23.8)
------------------------------------- ------------ ---------- -------
(1) Net financing costs in FY20 relate to discount unwinding of
acquired intangible assets and the recycling of foreign exchange
from the translation reserve in respect of the Caribbean
operations.
(2) Central charges and other items in FY20 include a number of
write offs that were recognised following a detailed review of
certain carrying values. These were not considered to be part of
the underlying performance of the business and so were highlighted
as adjusting items.
(3) The Group incurred a material charge in FY19 in relation to
certain aged receivables, driven by a management review of
contractual terms following the impact of the changing credit
market. This review was driven by the changing commercial
landscape, as a result of which, management has determined that the
assets should be written off. The charge is deemed an adjusting
item on the basis of its size. In FY20, additional costs not
identified in the prior year review were written off and a
consistent treatment has been adopted.
(4) In FY20 the Group incurred a number of costs in relation to
legal claims, including GBP4.2m of costs in complying with new fire
compliance regulations. During HY21 the Group incurred another
GBP1.8m of legacy issue costs in relation to these regulations.
(5) The Group incurred costs of GBP0.5m relating to a High Court
ruling that pension schemes must equalise Guaranteed Minimum
Pensions (GMP) between male and female members, specifically in
respect of the treatment of scheme transfers.
f) Discontinued operations
Adjusting items within discontinued operations are analysed
below:
Unaudited Unaudited
6 months 6 months Year
to 31 to 31 to 30
December December June
2020 2019 2020
GBPm GBPm GBPm
-------------------------------------------------- ------------ ---------- -------
Fair value adjustment of Kier Living 0.8 (59.5) (51.6)
Closure costs relating to non-core businesses(1) (1.0) - (29.0)
Out of period charges in relation to the Eastern
region(2) (6.5) - -
Rationalisation costs(3) - - (2.6)
Inventory write downs(4) - - (5.4)
Total after tax (6.7) (59.5) (88.6)
-------------------------------------------------- ------------ ---------- -------
(1) Costs incurred in respect of Living's decision to exit the
affordable housing market as well as the Welsh and Northern
regions. In HY21 some additional cost was incurred in respect of
the Welsh region.
(2) In preparing the Kier Living business for disposal, the
Group identified GBP6.5m of historic costs within a Kier Living
joint venture that had built up in prior periods within work in
progress and that are now considered irrecoverable. These have been
written off in arriving at the loss from discontinued operations in
the period.
(3) Rationalisation costs primarily consist of roles made
redundant as a result of cost saving programmes and from strategic
decisions taken to reduce headcount in a number of the Group's
principal operating divisions following the announcement of the
Strategic Review.
(4) During FY20, a number of sites were closed resulting in
costs being capitalised which are not recoverable through future
sales, and hence an impairment charge was taken against this
inventory.
g) Adjusted cash flow
Unaudited Unaudited
6 months 6 months Year
to 31 to 31 to 30
December December June
2020 2019 2020
GBPm GBPm GBPm
--------------------------------------------------- ------------ ---------- --------
Reported cash outflow from operating activities (22.8) (73.0) (113.2)
Cash outflow from operating activities (adjusting
items) 27.1 35.4 93.5
---------------------------------------------------
Adjusted cash inflow / (outflow) from operating
activities 4.3 (37.6) (19.7)
--------------------------------------------------- ------------ ---------- --------
4 COVID-19
The COVID-19 pandemic has had a significant impact on the Group,
both operationally and financially. Decisive management actions in
the prior year led to Kier implementing a number of self-help
measures which allowed the Group to continue to trade.
Although the pandemic has continued to impact the business in
the half year to 31 December 2020, the direct COVID-19 charge is
not material to the Group.
5 Finance costs
Unaudited Unaudited
6 months 6 months Year
to 31 to 31 to 30
December December June
2020 2019 2020
GBPm GBPm GBPm
---------------------------------------------------- ------------ ---------- -------
Bank interest (12.2) (11.7) (23.6)
Forward funding interest(1) (6.0) (0.5) (1.3)
Interest and finance charges for lease liabilities (3.4) (3.7) (7.2)
Recycling of translation reserve - - (3.3)
Discount unwind (0.5) (0.9) (1.7)
Pension credit/(interest) 0.4 (0.3) 0.7
---------------------------------------------------- ------------ ---------- -------
Total (21.7) (17.1) (36.4)
---------------------------------------------------- ------------ ---------- -------
(1) The Forward Funding Interest costs in the six months ended
31 December 2020 reflect an alignment of the accounting treatment
across all forward funding development contracts.
6 Retirement benefit obligations
The principal assumptions used by the independent qualified
actuaries are shown below.
Unaudited
at 31
December
Unaudited
at 31 At 30
December June
2020 2019 2020
% % %
--------------------------------------------- ----------- ---------- ------
Discount Rate 1.40 2.05 1.60
Inflation rate (Retail Price Index (RPI)) 2.85 3.00 2.85
Inflation rate (Consumer Price Index (CPI)) 2.15 1.90 1.95
--------------------------------------------- ----------- ---------- ------
The amounts recognised in the financial statements in respect of
the Group's defined benefit schemes are as follows:
Unaudited
6 months
Kier May Mouchel to 31
Group Gurney Pension McNicholas December
Pension Pension Schemes(1, Pension 2020
Scheme Scheme 2) Scheme Total
GBPm GBPm GBPm GBPm GBPm
-------------------------------------------- --------- -------- ----------- ---------- ---------
Opening surplus/(deficit) 89.8 (5.2) (38.1) (7.7) 38.8
Credit/(charge) to income statement 0.4 - (0.5) (0.1) (0.2)
Employer contributions 13.3 3.0 9.6 0.6 26.5
Actuarial losses (42.2) (3.7) (19.8) (0.8) (66.5)
--------------------------------------------- --------- -------- ----------- ---------- ---------
Closing surplus/(deficit) 61.3 (5.9) (48.8) (8.0) (1.4)
--------------------------------------------- --------- -------- ----------- ---------- ---------
Comprising:
Total market value of assets 1,323.4 86.4 537.4 28.8 1,976.0
Present value of liabilities (1,262.1) (92.3) (586.2) (36.8) (1,977.4)
--------------------------------------------- --------- -------- ----------- ---------- ---------
Net surplus/(deficit) 61.3 (5.9) (48.8) (8.0) (1.4)
--------------------------------------------- --------- -------- ----------- ---------- ---------
Related deferred tax (liability)/asset (11.6) 1.1 9.3 1.5 0.3
--------------------------------------------- --------- -------- ----------- ---------- ---------
Net pension asset/(liability) 49.7 (4.8) (39.5) (6.5) (1.1)
--------------------------------------------- --------- -------- ----------- ---------- ---------
Presentation of net surplus/(deficit) above
in the Consolidated balance sheet:
Retirement benefit assets 61.3 - 5.8 - 67.1
Retirement benefit obligations - (5.9) (54.6) (8.0) (68.5)
--------------------------------------------- --------- -------- ----------- ---------- ---------
Net surplus/(deficit) 61.3 (5.9) (48.8) (8.0) (1.4)
--------------------------------------------- --------- -------- ----------- ---------- ---------
The amounts recognised in the financial statements in respect of
the Group's defined benefit schemes are as follows:
Unaudited
6 months
Kier May Mouchel to 31
Group Gurney Pension McNicholas December
Pension Pension Schemes(1, Pension 2019
Scheme Scheme 2) Scheme Total
GBPm GBPm GBPm GBPm GBPm
-------------------------------------------- --------- -------- ----------- ---------- ---------
Opening surplus/(deficit) 39.4 1.4 (14.6) (6.7) 19.5
Credit/(charge) to income statement 0.5 - (0.2) (0.1) 0.2
Employer contributions 6.2 1.0 4.4 0.6 12.2
Actuarial losses (4.9) (1.3) (22.3) (0.5) (29.0)
--------------------------------------------- --------- -------- ----------- ---------- ---------
Closing surplus/(deficit) 41.2 1.1 (32.7) (6.7) 2.9
--------------------------------------------- --------- -------- ----------- ---------- ---------
Comprising:
Total market value of assets 1,191.2 79.0 483.6 26.3 1,780.1
Present value of liabilities (1,150.0) (77.9) (516.3) (33.0) (1,777.2)
--------------------------------------------- --------- -------- ----------- ---------- ---------
Net surplus/(deficit) 41.2 1.1 (32.7) (6.7) 2.9
--------------------------------------------- --------- -------- ----------- ---------- ---------
Related deferred tax (liability)/asset (7.0) (0.2) 5.6 1.1 (0.5)
--------------------------------------------- --------- -------- ----------- ---------- ---------
Net pension asset/(liability) 34.2 0.9 (27.1) (5.6) 2.4
--------------------------------------------- --------- -------- ----------- ---------- ---------
Presentation of net surplus/(deficit) above
in the Consolidated balance sheet:
Retirement benefit assets 41.2 1.1 12.9 - 55.2
Retirement benefit obligations - - (45.6) (6.7) (52.3)
--------------------------------------------- --------- -------- ----------- ---------- ---------
Net surplus/(deficit) 41.2 1.1 (32.7) (6.7) 2.9
--------------------------------------------- --------- -------- ----------- ---------- ---------
The amounts recognised in the financial statements in respect of
the Group's defined benefit schemes are as follows:
Year
Kier May Mouchel to 30
Group Gurney Pension McNicholas June
Pension Pension Schemes(1, Pension 2020
Scheme Scheme 2) Scheme Total
GBPm GBPm GBPm GBPm GBPm
-------------------------------------------- --------- -------- ----------- ---------- ---------
Opening surplus/(deficit) 39.4 1.4 (14.6) (6.7) 19.5
Credit/(charge) to income statement 1.0 - (0.4) (0.1) 0.5
Employer contributions 12.4 2.0 9.4 1.2 25.0
Actuarial (losses)/gains 37.0 (8.6) (32.5) (2.1) (6.2)
--------------------------------------------- --------- -------- ----------- ---------- ---------
Closing surplus/(deficit) 89.8 (5.2) (38.1) (7.7) 38.8
--------------------------------------------- --------- -------- ----------- ---------- ---------
Comprising:
Total market value of assets 1,300.5 83.5 526.4 27.5 1,937.9
Present value of liabilities (1,210.7) (88.7) (564.5) (35.2) (1,899.1)
--------------------------------------------- --------- -------- ----------- ---------- ---------
Net surplus/(deficit) 89.8 (5.2) (38.1) (7.7) 38.8
--------------------------------------------- --------- -------- ----------- ---------- ---------
Related deferred tax (liability)/asset (17.1) 1.0 7.2 1.5 (7.4)
--------------------------------------------- --------- -------- ----------- ---------- ---------
Net pension asset/(liability) 72.7 (4.2) (30.9) (6.2) 31.4
--------------------------------------------- --------- -------- ----------- ---------- ---------
Presentation of net surplus/(deficit) above
in the Consolidated balance sheet:
Retirement benefit assets 89.8 - 9.7 - 99.5
Retirement benefit obligations - (5.2) (47.8) (7.7) (60.7)
--------------------------------------------- --------- -------- ----------- ---------- ---------
Net surplus/(deficit) 89.8 (5.2) (38.1) (7.7) 38.8
--------------------------------------------- --------- -------- ----------- ---------- ---------
(1) This comprises of schemes in a net surplus and net deficit
position: GBP5.8m surplus and GBP54.6m deficit at 31 December 2020
(31 December 2019: GBP12.9m surplus and GBP45.6m deficit, 30 June
2020: GBP9.7m surplus and GBP47.8m deficit).
(2) The Mouchel figures comprise four individual schemes
(Mouchel Superannuation Fund, Mouchel Staff Pension Scheme, Mouchel
Business Services Limited Pension Scheme (Final Salary Section) and
EM Highways Prudential Platinum Scheme) which have been grouped
together because they were purchased as part of the Mouchel Group.
The composition of these schemes has not changed since the prior
year.
7 Taxation
Unaudited Unaudited
6 months 6 months Year
to 31 to 31 to 30
December December June
2020 2019 2020
Total Total Total
GBPm GBPm GBPm
--------------------------------------- ------- ---------- --------- -------
Profit/(loss) before tax 9.0 (41.2) (225.3)
Add: tax on joint ventures - - (1.4)
--------------------------------------- ------- ---------- --------- -------
Adjusted profit/(loss) before tax 9.0 (41.2) (226.7)
--------------------------------------- ------- ---------- --------- -------
Current tax (1.9) 1.8 (0.8)
Deferred tax - 3.6 54.2
Overseas tax - - -
Total income tax (expense)/credit
in the income statement (1.9) 5.4 53.4
Tax on joint ventures - - 1.4
Effective tax (charge)/credit (1.9) 5.4 54.8
--------------------------------------- ------- ---------- --------- -------
Effective tax rate 21.1% 13.1% 24.1%
--------------------------------------- ------- ---------- --------- -------
The Deferred Tax Asset includes GBP96.1m of tax losses (31
December 2019: GBP62.7m, 30 June 2020: GBP94.6m), and GBP28.0m of
other deferred tax assets and liabilities (31 December 2019:
GBP(4.0m), 30 June 2020: GBP16.4m). Management expects the Deferred
Tax Asset will be utilised over a reasonable timeframe.
RDEC of GBP7.9m was included in operating profit during the
period (six months ended 31 December 2019: GBP3.0m, 30 June 2020:
GBP10.2m). Included in the corporation tax asset at 31 December
2020 were RDEC receivables of GBP8.8m (31 December 2019: GBP8.8m,
year ended 30 June 2020: GBP13.6m)
8 Dividends
The Group's focus on cash generation and reducing net debt has
required a suspension in dividend payments. No interim or final
dividends have been declared during the period (six months ended 31
December 2019: GBPnil, year ended 30 June 2020: GBPnil).
9 Earnings per share
A reconciliation of profit and earnings per share, as reported
in the income statement, to profit and earnings per share before
adjusting items is set out below. The disclosure is made to
illustrate the impact of adjusting items .
Unaudited Unaudited Year to
6 months 6 months 30 June 2020
to to
31 December 31 December
2020 2019
Basic Diluted Basic Diluted Basic Diluted
GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------------------------- ------- ------- ------- ------- ------- -------
(Losses)/earnings
Continuing operations
Earnings/(losses) (after tax and non-controlling
interests), being net losses attributable
to equity holders of the parent 7.7 7.7 (35.7) (35.7) (171.9) (171.9)
Impact of adjusting items (1) net of
tax:
Amortisation of intangible assets -
net of tax credit of GBP2.1m (31 December
2019: GBP2.0m, 30 June 2020: GBP4.5m) 9.2 9.2 9.8 9.8 19.2 19.2
Acquisition discount unwind - net of
tax credit of GBPnil (31 December 2019:
GBP0.1m, 30 June 2020: GBP0.3m) - - 0.7 0.7 1.2 1.2
Other adjusting items (1) - net of tax
credit of GBP3.5m (31 December 2019:
GBP10.5m, 30 June 2020: GBP35.8m) 4.0 4.0 49.5 49.5 176.2 176.2
------------------------------------------------- ------- ------- ------- ------- ------- -------
Earnings from continuing operations
before adjusting items (1) 20.9 20.9 24.3 24.3 24.7 24.7
------------------------------------------------- ------- ------- ------- ------- ------- -------
Discontinued operations
(Losses)/earnings (after tax and non-controlling
interests), being net profits attributable
to equity holders of the parent 4.9 4.9 4.0 4.0 (12.8) (12.8)
Adjusting items from discontinued operations (6.7) (6.7) (59.5) (59.5) (88.6) (88.6)
------------------------------------------------- ------- ------- ------- ------- ------- -------
Loss from discontinued operations (1.8) (1.8) (55.5) (55.5) (101.4) (101.4)
------------------------------------------------- ------- ------- ------- ------- ------- -------
million million million million million million
------------------------------------------------- ------- ------- ------- ------- ------- -------
Weighted average number of shares used
for earnings per share 161.8 161.8 161.8 161.8 161.8 161.8
------------------------------------------------- ------- ------- ------- ------- ------- -------
Basic Diluted Basic Diluted Basic Diluted
------------------------------------------------- ------- ------- ------- ------- ------- -------
Earnings per share pence pence pence pence pence pence
------------------------------------------------- ------- ------- ------- ------- ------- -------
Continuing operations
Earnings/(losses) (after tax and non-controlling
interests), being net losses attributable
to equity holders of the parent 4.8 4.8 (22.1) (22.1) (106.2) (106.2)
Impact of adjusting items (1) net of
tax:
Amortisation of intangible assets -
net of tax credit 5.7 5.7 6.1 6.1 11.9 11.9
Acquisition discount unwind - net of
tax credit - - 0.4 0.4 0.7 0.7
Other adjusting items (1) - net of tax
credit 2.5 2.5 30.6 30.6 108.9 108.9
------------------------------------------------- ------- ------- ------- ------- ------- -------
Earnings from continuing operations
before adjusting items 13.0 13.0 15.0 15.0 15.3 15.3
------------------------------------------------- ------- ------- ------- ------- ------- -------
Discontinued operations
Earnings/(losses) (after tax and non-controlling
interests), being net profits attributable
to equity holders of the parent 3.0 3.0 2.5 2.5 (7.9) (7.9)
Adjusting items from discontinued operations (4.1) (4.1) (36.8) (36.8) (54.8) (54.8)
------------------------------------------------- ------- ------- ------- ------- ------- -------
Loss from discontinued operations (1.1) (1.1) (34.3) (34.3) (62.7) (62.7)
------------------------------------------------- ------- ------- ------- ------- ------- -------
Total earnings/(losses) per share
Statutory 3.7 3.7 (56.4) (56.4) (168.9) (168.9)
Before adjusting items (1) 16.0 16.0 17.5 17.5 7.4 7.4
------------------------------------------------- ------- ------- ------- ------- ------- -------
(1) See note 1 for reference to adjusting items.
10 Assets and liabilities held for sale and discontinued
operations
a) Assets held for sale
In June 2019, the Group announced results of its strategic
review and concluded that the Group needed to simplify its
structure, better allocate its capital resources and reduce net
debt. The Directors concluded that Kier Living is not compatible
with the Group's working capital objectives and that the division
should be sold. Accordingly, the assets and liabilities of Kier
Living are classified as held for sale, with assets of GBP234.8m
and liabilities of GBP124.8m at 31 December 2020. As disclosed in
Note 17, the Group entered into a disposal agreement after the
balance sheet date.
On 16 April 2021 the Group announced it had entered into an
agreement for the all-cash sale of Kier Living Limited. The
transaction is conditional on shareholder approval at the General
Meeting expected on 7 May 2021.
As at 31 December 2019 and 30 June 2020, the assets and
liabilities of Pure Recycling Warwick Limited were presented as
held for sale. As at 31 December 2020, Management do not believe
the classification criteria has been met and have therefore ceased
classifying the asset as held for sale, resulting in a GBP3.0m
credit to the Income Statement.
Unaudited Unaudited
at 31 at 31 At 30
December December June
Assets of disposal group classified as held for 2020 2019 2020
sale GBPm GBPm GBPm
------------------------------------------------ ----------- --------- -----
Investments in and loans to joint ventures 53.7 54.4 52.2
Inventories 145.2 137.6 114.7
Trade and other receivables 33.6 38.4 22.2
Other assets 2.3 3.6 7.6
------------------------------------------------ ----------- --------- -----
Total 234.8 234.0 196.7
------------------------------------------------ ----------- --------- -----
Unaudited Unaudited
at 31 at 31 At 30
December December June
Liabilities of disposal group classified as held 2020 2019 2020
for sale GBPm GBPm GBPm
------------------------------------------------- ----------- --------- ------
Trade and other payables (85.5) (96.7) (59.9)
Other liabilities (39.3) (9.3) (21.8)
------------------------------------------------- ----------- --------- ------
Total (124.8) (106.0) (81.7)
------------------------------------------------- ----------- --------- ------
b) Discontinued operations
Results for Kier Living for the period are classified as
discontinued.
Unaudited Unaudited
6 months 6 months Year
to 31 to 31 to 30
December December June
2020 2019 2020
Results of discontinued operations Note GBPm GBPm GBPm
------------------------------------------------- ---- ----------- --------- -------
Revenue 62.8 54.4 79.9
Share of post-tax results of joint ventures 6.9 10.6 10.0
Operating costs (62.4) (59.0) (95.3)
------------------------------------------------- ---- ----------- --------- -------
Operating profit/(loss) 7.3 6.0 (5.4)
Finance cost (2.4) (1.0) (7.3)
------------------------------------------------- ---- ----------- --------- -------
Profit/(loss) before tax and adjusting items 4.9 5.0 (12.7)
Tax - (1.0) (0.1)
------------------------------------------------- ---- ----------- --------- -------
Profit/(loss) for the period before adjusting
items 4.9 4.0 (12.8)
Adjusting items net of tax 3(f) (6.7) (59.5) (88.6)
------------------------------------------------- ---- ----------- --------- -------
Loss for the period from discontinued operations
after tax (1.8) (55.5) (101.4)
------------------------------------------------- ---- ----------- --------- -------
1 1 Cash, cash equivalents, overdraft and borrowings
Unaudited Unaudited At 30
at 31 at 31 June
December December 2020
2020 2019 Total
GBPm GBPm GBPm
--------------------------------------------------- ----------- --------- -------
Net debt consists of:
Cash and cash equivalents - bank balances and cash
in hand 328.6 390.8 413.9
Borrowings due within one year (99.6) (0.3) (61.6)
Borrowings due after one year (599.4) (651.8) (689.8)
Impact of cross-currency hedging 16.9 18.8 27.2
--------------------------------------------------- ----------- --------- -------
Net debt (353.5) (242.5) (310.3)
--------------------------------------------------- ----------- --------- -------
Average month-end net debt for the six months to 31 December
2020 was GBP436.3m (six months to 31 December 2019: GBP395.1m, year
to 30 June 2020: GBP435.6m). Net debt excludes lease
liabilities.
12 Trade and other payables
Unaudited Unaudited At 30
at 31 at 31 June
December December 2020
2020 2019 Total
GBPm GBPm GBPm
-------------------------------------- ----------- --------- ------
Trade payables(1) 351.1 35 1.2 255.8
Accruals 488.2 457.5 477.1
Sub-contract retentions 39.4 41.8 35.0
Other taxation and social security(2) 88.7 61.0 131.4
Other payables 33.2 141.2 58.2
-------------------------------------- ----------- --------- ------
1,000.6 1,052.7 957.5
-------------------------------------- ----------- --------- ------
(1) Included within the trade payables balance is GBP109.4m (31
December 2019: GBP157.1m, 30 June 2020: GBP125.5m) relating to
payments due to suppliers who are on bank-supported supply chain
finance arrangements.
(2) Included within other taxation and social security is tax
deferred of GBP49.9m (31 December 2019: GBPnil, 30 June 2020:
GBP78.8m). This is comprised of GBP23.2m of VAT deferred in
accordance with HMRC guidance and GBP26.7m subject to a Time To Pay
agreement with HMRC due to be repaid by the end of the 2021
financial year.
1 3 Share-based payments
The Group has an established long-term incentive plan (LTIP)
under which directors and senior employees can receive awards of
shares subject to the Group achieving certain performance targets.
Participants are entitled to receive dividend equivalents on these
awards. Further details of the LTIP schemes were disclosed in the
2020 annual financial statements. No shares have vested under the
LTIP schemes during the six months to 31 December 2020 (six months
to 31 December 2019 and year ended 30 June 2020: no share awards
vested). 17,856,246 new awards were granted under the LTIP during
the six months to 31 December 2020 (six months to 31 December 2019:
13,225,627; year ended 30 June 2020: 13,741,092).
In 2017, the Group established a Conditional Share Award Plan
(CSAP) under which senior employees receive awards of shares
subject only to service conditions, i.e. the requirement for
participants to remain in employment with the Group over the
vesting period. Participants are entitled to receive dividend
equivalents on these awards. No new awards were granted under the
CSAP during the six months to 31 December 2020 (six months to 31
December 2019 and year ended 30 June 2020: no awards granted).
515,093 shares vested under the CSAP during the six months to 31
December 2020 (six months to 31 December 2019 and year ended 30
June 2020: no share awards vested).
The Group also has an established Sharesave (SAYE) scheme.
Options to acquire shares in the capital of Kier Group plc are
granted to eligible employees who enter into a Sharesave contract,
saving a regular sum each month. Participation in the scheme is
offered to all employees of the Group who have been employed for a
continuous period determined by the Board. No options were granted
under the Sharesave scheme during the six months to 31 December
2020 (six months to 31 December 2019 and year ended 30 June 2020:
7,199,823 share options were granted). The annual grant of options
under the Sharesave scheme was deferred into the second half of the
year with 8,634,038 options being granted on 15 February 2021.
For grants made under the share-based payment schemes during the
six months to 31 December 2020 the assumptions used and calculated
fair values were as follows:
LTIP
subject
to a holding
LTIP period
18 December 18 December
Grant date 2020 2020
Shares granted 16,063,973 1,792,273
Share price at grant 80.95p 80.95p
Exercise price nil nil
Option life 3 years 3 years
Holding period n/a 2 years
Expected volatility 90.69% 92.35%
Risk-free interest rate 0.00% 0.00%
Value per option:
LTIP - TSR element (25%) (1,3) 58.44p 50.59p
LTIP - Adjusted operating profit (AOP) (50%)
and Net Debt:EBITDA (25%) elements (2,3) 80.95p 70.07p
(1) Based upon a stochastic model.
(2) Based upon the Black-Scholes model.
(3) LTIP awards provided to the Board directors are subject to a
2 year post vesting holding period. The Finnerty model has been
used to estimate a discount for the lack of marketability of these
shares during the holding period.
The fair value of the TSR element incorporates an assessment of
the number of shares that will be awarded, as the performance
conditions are market conditions under IFRS 2 'Share-based
payments'.
The performance conditions of the adjusted operating profit
'AOP' and Net Debt:EBITDA elements are non-market conditions under
IFRS 2. The fair value therefore does not include an assessment of
the number of shares that will be awarded. Instead the amount
charged for these elements is based on the fair value factored by a
'true up' for the number of awards that are expected to vest.
The share-based payment charge recognised in the Group's income
statement for the six months to 31 December 2020 was GBP2.8m (six
months to 31 December 2019: GBP2.2m, year to 30 June 2020:
GBP5.4m).
1 4 I ntangible assets
Intangible
contract Computer
Goodwill rights software Total
GBPm GBPm GBPm GBPm
-------------------------------------------- ----------- ------------- ----------- --------
Cost
At 1 July 2019 544.7 259.4 155.0 959.1
Additions - - 2.3 2.3
Transfers to property, plant and equipment - - (8.1) (8.1)
Transfers to assets held for sale - - (10.7) (10.7)
At 31 December 2019 544.7 259.4 138.5 942.6
-------------------------------------------- ----------- ------------- ----------- --------
Additions - - 1.7 1.7
Disposals - - (19.1) (19.1)
Transfers to property, plant and equipment - - (1.6) (1.6)
Transfers from assets held for sale (5.9) - 5.9 -
-------------------------------------------- ----------- ------------- ----------- --------
At 30 June 2020 538.8 259.4 125.4 923.6
-------------------------------------------- ----------- ------------- ----------- --------
-
Additions - - 0.1 0.1
Transfers to property, plant and equipment - - (0.7) (0.7)
Transfers from assets held for sale - - 1.0 1.0
At 31 December 2020 538.8 259.4 125.8 924.0
-------------------------------------------- ----------- ------------- ----------- --------
Accumulated amortisation and impairment
At 1 July 2019 (8.0) (111.0) (73.4) (192.4)
Charge for the period - (11.8) (3.5) (15.3)
Impairment - - (2.4) (2.4)
Transfers to assets held for sale - - 9.0 9.0
At 31 December 2019 (8.0) (122.8) (70.3) (201.1)
-------------------------------------------- ----------- ------------- ----------- --------
Charge for the period - (11.9) (7.5) (19.4)
Disposals - - 14.1 14.1
Impairment - - 2.4 2.4
Transfers to property, plant and equipment - - 1.0 1.0
Transfers to assets held for sale 5.9 - (5.9) -
At 30 June 2020 (2.1) (134.7) (66.2) (203.0)
-------------------------------------------- ----------- ------------- ----------- --------
Charge for the period - (11.3) (3.9) (15.2)
Transfers from assets held for sale - - (0.1) (0.1)
At 31 December 2020 (2.1) (146.0) (70.2) (218.3)
-------------------------------------------- ----------- ------------- ----------- --------
Net book value
At 31 December 2020 536.7 113.4 55.6 705.7
-------------------------------------------- ----------- ------------- ----------- --------
At 30 June 2020 536.7 124.7 59.2 720.6
-------------------------------------------- ----------- ------------- ----------- --------
At 31 December 2019 536.7 136.6 68.2 741.5
-------------------------------------------- ----------- ------------- ----------- --------
1 5 Related parties
The Group has related party relationships with its joint
ventures, key management personnel and pension schemes in which its
employees participate.
There have been no significant changes in the nature of related
party transactions since the last annual financial statements as
at, and for the year ended, 30 June 2020.
Details of contributions made to the pension schemes by the
Group are detailed in note 6.
1 6 Guarantees, contingent liabilities and contingent assets
The Company has given guarantees and entered into
counter-indemnities in respect of bonds relating to certain of the
Group's own contracts. The Company has also given guarantees in
respect of certain contractual obligations of its subsidiaries and
joint ventures, which were entered into in the normal course of
business, as well as certain of the Group's other obligations (for
example, in respect of the Group's finance facilities and its
pension schemes). Financial guarantees over the obligations of the
Company's subsidiaries and joint ventures are measured at fair
value. The fair value measurement is based on the premium received
from the joint venture or the differential in the interest rate of
the borrowing including and excluding the guarantee. Performance
guarantees are treated as a contingent liability until such time as
it becomes probable that payment will be required under its
terms.
Provisions are made for the Directors' best estimate of known
legal claims, investigations and legal actions relating to the
Group which are considered more likely than not to result in an
outflow of economic benefit. If the Directors consider that a
claim, investigation or action relating to the Group is unlikely to
succeed, no provision is made. If the Directors cannot make a
reliable estimate of a potential, material obligation, no provision
is made but details of the claim are disclosed.
1 7 Post balance sheet events
On 16 April 2021, the Group announced that it has entered into
an agreement for the all-cash sale of Kier Living Limited. This
disposal is for the entirety of the Group's 100% shareholding for
consideration of GBP110m. There will be additional payments made on
Completion to cover the Group providing working capital funding to
Kier Living Limited in the period from 1 July 2020 until
Completion.
As detailed in note 10, the assets and liabilities of Kier
Living have been classified as held for sale and have been impaired
to bring the disposal group in line with expected net proceeds of
GBP110m.
The Directors are confident that the Group will receive the
necessary regulatory and shareholder approvals for the disposal and
expect the sale to complete by mid June.
This transaction is a key step in the Group's implementation of
the conclusions of its 2019 strategic review, being to facilitate a
reduction in the Group's net debt; reduce the volatility of the
Group's working capital; remove the capital requirement to support
land acquisition and remove unconsolidated debt in certain joint
ventures. The disposal simplifies the Group and will allow it to
focus on its core businesses.
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END
IR SEEEFSEFSEEL
(END) Dow Jones Newswires
April 21, 2021 02:00 ET (06:00 GMT)
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