TIDMKIE
RNS Number : 3784M
Kier Group PLC
14 September 2023
14 September 2023
Kier Group plc
Strong financial performance and significantly improved cash
generation:
intention to return to the dividend list in FY24
Kier Group plc ("Kier", the "Company" or the "Group"), a leading
UK infrastructure services, construction and property group,
announces its results for the year ended 30 June 2023 ("FY23" or
the "year").
Highlights
Year to Year to
(GBPm unless otherwise stated) 30 June 2023(1) 30 June 2022(1) Change
---------------------------------- ---------------- ---------------- --------
Adjusted results
Revenue(2) 3,405.4 3,256.5 4.6%
Adjusted operating profit(3) 131.5 120.5 9.1%
Adjusted operating margin 3.9% 3.7% 20bps
Adjusted profit before tax(4) 104.8 94.1 11.4%
Adjusted basic earnings per share
(note 9) 19.2p 16.8p 14.3%
Net cash(5) 64.1 2.9 2,110.3%
Average month-end net debt (232.1) (216.1) (7.4)%
Statutory reported
Group revenue 3,380.7 3,143.9 7.5%
Profit from operations 81.5 45.1 80.7%
Profit before tax 51.9 15.9 226.4%
Basic earnings per share (note 9) 9.5p 2.9p 227.6%
(1) Continuing operations
2 Revenue of the Group and its share of revenue from joint
ventures
3 Stated before adjusting items of GBP30.8m (FY22: GBP55.7m) and
amortisation of acquired intangible assets of GBP19.2m (FY22:
GBP19.7m).
4 Stated before adjusting items of GBP33.7m (FY22: GBP58.5m) and
amortisation of acquired intangible assets of GBP19.2m (FY22:
GBP19.7m).
5 Disclosed net of the effect of hedging instruments and
excludes leases - see note 12 to the preliminary financial
statements.
FY23 Highlights
-- Strong financial performance despite ongoing inflationary pressures
o Revenue growth of 4.6% driven by strong operational
delivery
o Adjusted operating profit increased 9.1% to GBP131.5m (FY22:
GBP120.5m)
o Adjusted operating margin at 3.9%, ahead of the medium-term
target of c.3.5%
o Adjusted basic EPS: 19.2p (FY22: 16.8p), up 14.3%
o Reported profit from operations increased 80.7% to GBP81.5m
(FY22: GBP45.1m)
o Free Cash Flow of GBP132.3m, driven by an operating cash
conversion of 129.7% following a strong Q4 performance
o Net cash of GBP64.1m, significantly higher than prior year-end
(FY22: GBP2.9m) and achieved after fully repaying GBP49.8m KEPS
o Strong cash generation and repayment of debt-like items.
Average month-end net debt at GBP(232.1)m
-- Intention to resume dividend payments in FY24, commencing with an interim dividend
-- High quality order book, increased 3.1% to GBP10.1bn (FY22:
GBP9.8bn) providing significant visibility over FY24
-- Bolt-on acquisition of rail assets announced post year-end
-- Pension scheme triennial valuation agreed resulting in decreased deficit payments
-- Updated sustainability framework reinforces commitment to ESG targets
Andrew Davies, Chief Executive, said:
"The Group has achieved considerable operational and financial
progress over the last two years. This is reflected in the
significantly improved financial performance of the Group over the
last year. It is testament to the hard work and commitment of our
people who have enhanced our resilience and strengthened our
financial position in line with the objectives set out in our
medium-term value creation plan. Our order book remains strong at
GBP10.1bn and provides us with good, multi-year revenue visibility.
The contracts within our order book reflect the bidding discipline
and risk management now embedded in the business. I am also
particularly pleased to report, the Group significantly improved
its year-end net cash position and has confidence in sustaining
this momentum going forward.
The new financial year has started well, and we are trading in
line with our expectations. The Group is well positioned to
continue benefiting from UK Government infrastructure spending
commitments and we are confident in sustaining the strong cash
generation evidenced this year. This, combined with our focus on
operational delivery, gives the Group a clear line-of-sight to
significantly de-lever. As a result, the Group intends to resume
dividend payments during FY24, with the first dividend to be
declared alongside our interim results."
FY23 Results Presentation
Kier Group plc will host a presentation for analysts and
investors at 9:00am on 14 September 2023 at the offices of FTI
Consulting, 200 Aldersgate Street, London EC1A 4HD.
Analysts wishing to attend should contact FTI Consulting to
register - Connie.Gibson@fticonsulting.com
Analysts unable to attend in person will be able to join the
webcast using the details below:
Webcast:
https://www.investis-live.com/kier/64d201c1383e901300a364b6/tyej
United Kingdom: 0800 358 1035
United Kingdom (Local): 020 4587 0498
All other locations: 44 20 4587 0498
Conference password: 038464
An audio recording will be available on our website in due
course.
Online Retail Investor Presentation
Andrew Davies, Chief Executive Officer and Simon Kesterton,
Chief Financial Officer will be hosting a live online retail
investor presentation at 10:30am on Thursday 28 September 2023. To
attend, please register via the following link: Zoom Webinar
Registration - Kier Group investor presentation .
Further Information:
Kier Group plc
Investor Relations +44 (0) 7933 388 746
Kier Press office +44 (0) 1767 355 096
FTI Consulting +44 (0) 20 3727 1340
Richard Mountain
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. 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, 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.
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 2022 for a discussion of the factors that could
affect the Group's future performance and the industry in which it
operates.
About Kier
Kier is a leading UK infrastructure services, construction and
property group.
We provide specialist design and build capabilities and the
knowledge, skills and intellectual capital of our people ensure we
are able to project manage and integrate all aspects of a
project.
We take pride in bringing specialist knowledge, sector-leading
experience and fresh thinking to create workable solutions for our
clients across the country.
Together, we have the scale and breadth of skills of a major
company, while retaining a local focus and pride that comes from
never being far from our clients, through a network of offices
spanning across England, Wales, Scotland and Northern Ireland.
For further information and to subscribe to our news alerts,
please visit: www.kier.co.uk
Follow us on X (formerly Twitter): @kiergroup
Connect with us on LinkedIn: Kier Group
Introduction
Over the last two years, Kier has undergone a transformation,
rationalisation and recapitalisation. The Group announced and
committed to a medium-term value creation plan in FY21 and our
focus has been to deliver against the targets we set.
The medium-term plan focused on increasing revenue, increasing
margin and increasing operating cash generation thus enabling debt
reduction providing a stronger balance sheet with a commitment to
reintroducing dividends at the appropriate time. FY23 saw a
significant improvement in the net cash balance to GBP64.1m which
gives us a clear line-of-sight to an average net cash position and
gives the Board confidence in announcing its intention to return to
the dividend list in the current financial year.
The success for future years is underpinned by the year-end
order book growing to GBP10.1bn in FY23, an increase of 3.1%
against the prior year, reflecting a large number of contract wins
across all divisions and providing multi-year revenue visibility.
Long-term framework positions, as well as pipeline opportunities
and income from the Property division, are excluded from the order
book and represent an additional opportunity. Given the order book
strength and Kier's framework positioning, approximately 85% of
Group revenue for FY24 is already secured which provides us with a
high degree of confidence of further progress against a backdrop of
wider market uncertainty.
Kier won new, high quality and profitable work in our markets
reflecting the bidding discipline and risk management embedded in
the business.
Medium-term value creation plan
The Group is focused on delivering its medium-term targets over
a three to five year period:
Revenue: GBP4.0bn - GBP4.5bn
Adjusted operating profit c.3.5%
margin:
Cash conversion of operating c.90%
profit:
Balance sheet: Sustainable net cash position with capacity
to invest
Dividend: Sustainable dividend policy: c.3 x earnings
cover through the cycle
The Group aims to achieve these medium-term targets through:
-- volume growth and improved contract profitability;
-- continued management discipline; and
-- deploying additional capital in the Property business.
The Group continues to make good progress against these targets
with free cashflow conversion and profit margins met consistently
over the past reporting period. Despite political and economic
uncertainties, our core markets have remained favourable. We are a
"strategic supplier" to the UK Government and c.94% of our
contracts are with the public sector and regulated companies.
Customers and winning new work
We remain focused on winning work through our long-standing
client relationships and regionally based operations.
Highlights in the year:
-- Highways: appointed by National Highways to carry out an
essential maintenance programme on eight viaducts at Lune Gorge,
spanning the M6
-- Utilities: reappointed to the GBP55m per annum, three-year
extension of the Network Service Alliance framework by South West
Water and Bournemouth Water
-- Construction: appointed to the GBP5.1bn Strategic Alliance
Contract Framework in relation to the Defence Estate Optimisation
("DEO") Portfolio by the Ministry of Defence; re-appointed to the
GBP4.5bn Southern Construction Framework
o Kier Places - appointed by L&Q for its Major Works
Investment Programme to deliver housing maintenance across its
estate
-- Property: started work on site at our Trade City scheme in Manchester
Strategy
The simplification and strengthening of the Group's balance
sheet has resulted in Kier being well-placed to continue to pursue
its strategic objectives successfully within its chosen markets and
allow it to further enhance and capitalise on its position as a
strategic partner to its customers.
The Group's strategy continues to be focused on:
-- UK Government, regulated industries and blue-chip customers;
-- operating in the business-to-business market; and
-- contracting through long-term frameworks.
Our core businesses are well-placed to benefit from the UK
Government spending commitments to invest in infrastructure and the
significant investment plans announced by regulated UK asset
owners. We have secured places on the long-term frameworks through
which much of the increased spend will be deployed.
This, combined with our regional coverage, customer
relationships and project management expertise, will enable our
strategic actions of disciplined growth, consistent delivery and
strong cash generation.
Financial summary
Kier's revenue of GBP3.4bn (FY22: GBP3.3bn) reflects growth in
both the Infrastructure Services and Construction segments, offset
by the anticipated reduction in the Property business driven by
market conditions.
The Group's FY23 results demonstrate a strong performance
despite continuing cost inflation relating to materials, wages and
other costs. We remain successful in mitigating these pressures
through having c. 60% of our order book under target cost or cost
reimbursable contracts, procurement strategies and negotiations on
fixed price contracts. With over 400 live projects at any given
time, we are also regularly delivering existing contracts and
pricing new contracts which mitigates against cost pressures. In
addition, we have an average order size of c. GBP16m in our
Construction business which given its modest size, limits our risk
exposure in the event a project does not go to plan.
The Group delivered adjusted operating profit of GBP131.5m which
represents a 9.1% increase on the prior year (FY22: GBP120.5m).
Both our Infrastructure Services and Construction segments
performed well in the year, partially offset by the expected
reduction within the Property segment. Group adjusted operating
profit margin increased by 20 basis points to 3.9% (FY22: 3.7%).
Reported profit from operations increased 80.7% to GBP81.5m (FY22:
GBP45.1m) with a reduction in adjusting items.
Adjusted earnings per share increased 14.3% to 19.2p (FY22:
16.8p) and reported earnings per share increased 227.6% to 9.5p
(FY22: 2.9p) as revenue converted to profitability and adjusting
items reduced.
The Group generated GBP132.3m of free cash flow in FY23 (FY22:
GBP54.6m), a significant increase over the prior year. The Group's
revenue growth in Infrastructure Services and Construction
converted to increased profit and cash. In addition, the Group
experienced a seasonal working capital inflow of GBP80.3m,
predominantly driven by Construction.
The Group's net cash position at 30 June 2023 was GBP64.1m
(FY22: GBP2.9m) with supplier payment days remaining consistent
with the prior year.
Average month-end net debt for the year ended 30 June 2023 was
GBP(232.1)m (FY22: GBP(216.1)m). As outlined in our FY22 results,
the Group expected an increase in average month-end net debt due to
the anticipated repayment of debt-like items such as KEPS and lower
activity in our Construction business until the fourth quarter of
the year. The average month-end net debt balance of GBP(232.1)m was
better than expected due to mitigating actions taken through the
year. The Group used positive operating cash flow to repay the
average KEPS balance of GBP56.2m, to pay pension deficit
obligations and to repay the remaining HMRC COVID-19 support of
GBP6.1m.
The Group fully repaid its remaining GBP49.8m KEPS programme in
July 2022 followed by a repayment of all its Schuldschein Notes and
certain of the US Private Placement ('USPP') Notes totalling
GBP43.8m.
The Group's Revolving Credit Facility ('RCF') also reduced by
GBP40.0m, in line with the facility agreement.
Capital allocation
In addition to the medium-term value creation plan, the Group
has set out its capital allocation priorities. The Group maintains
a disciplined approach to capital and continuously reviews capital
allocation priorities with the aim of maximising shareholder
returns. The Group's capital allocation is underpinned by its
commitment to maintain a strong balance sheet. The capital
priorities are:
-- Capex - investment to support its businesses
-- Property - disciplined non-speculative investment in the Property segment
-- De-leveraging - further de-leveraging. Targeting a
sustainable net cash position in the medium-term and a funding
profile which is appropriate for the medium and long-term needs of
the Group
-- Dividend - reinstating the dividend is key to ensuring that
shareholders share the benefits of the Group's growth. In the
medium-term, the Group is targeting a dividend cover of around
three times through the cycle
-- Mergers and acquisitions - the Group will consider value
accretive acquisitions in core markets where there is potential to
accelerate the medium-term value creation plan.
Dividend
As part of the medium-term value creation plan, the Board
intended to reinstate dividends when a near-term pathway to
operating with an average net cash position was clear.
Given the Group's strong operational and financial performance
over the last year, the year-end net cash position and confidence
over further progress in the short term, the Board is able to
confirm its intention to commence dividend payments to
shareholders. Over time, we will progress to deliver a dividend,
covered 3x by earnings and in a payment ratio of one-third interim
dividend and two thirds final dividend. The first dividend is
expected to be announced alongside the interim results.
Acquisition
On 4 September 2023, after the year-end, Kier agreed to acquire
substantially all of the rail assets of Buckingham Group
Contracting Limited ("in Administration") and their HS2 contract
supplying Kier's HS2 joint venture, EKFB, for a total cash
consideration of up to GBP9.6m.
The Group has previously stated it would consider value
accretive acquisitions in core markets where there is potential to
accelerate the medium-term value creation plan. This is an
excellent example of an acquisition which provides a cultural fit
as well as accelerates Kier's broader rail strategy.
Kier is delivering a number of projects across the rail sector
including a GBP65m upgrade to Oxford Railway Station. The
acquisition provides Kier with new rail clients and increases our
capabilities across the UK. The acquisition also brings c.180
employees to the Group consisting of high-quality individuals with
expertise in the rail sector, further enhancing Kier's talent
pool.
The rail assets consisted of design, build and project
integration contracts for a range of customers including Network
Rail. In addition, the Group acquired a limited amount of working
capital in the form of trade debtors, work in progress and client
retentions. The transaction was implemented by way of a purchase
out of administration.
Kier observes a disciplined risk management process, a result of
which is that historical contractual liabilities recognised prior
to the completion date were not acquired. The acquisition also
provides operational stability and defensiveness to Kier's HS2
joint venture, EKFB.
Given its modest size, the Group does not believe this will
materially impact its forecasts for FY24, nor its year-end net cash
or average net debt position. For FY25, the Group expects
acquisition revenue of c.GBP50m-GBP75m.
Pension
During the year the Group agreed the triennial valuation for
funding its defined benefit pension schemes. Given the Group's
improved pension covenant and payments made under the existing
schedule of contributions, the schemes are now in a significantly
improved position, resulting in reducing deficit contributions to
be made over the coming years concluding in FY28.
Performance Excellence
Through our Performance Excellence culture, which was introduced
in 2020, Kier has embedded a strong operational and financial risk
management framework across the Group. It is essential to, and
embedded into, Kier's contract selection and delivery
processes.
Following the evolution of the Performance Excellence programme
during 2022, the focus in 2023 has been on the five workstreams of
Culture and Behaviours, Customers, Digital, Simplification and
Wellbeing. These workstreams ensure we continue to meet our
obligations to the environment and the communities we work within,
as well as our investors and client expectations.
The key tenets are as follows:
-- measure clients' and customers' experiences objectively,
using data to improve our external relationships
-- adopt a digital-first approach through a digitally enabled workforce increasing productivity
-- instil best practices in our workforce through behaviour,
cultural programmes, and wellbeing initiatives
-- simplify processes across the Group; and
-- win new business with attractive margins.
Performance Excellence is also fundamental to the Group's
overall approach to safety. We aim to continually improve the
Group's processes and performance by operating through this
framework.
The Group's focus for FY24 will be on Digital and
Simplification.
Supply chain partners
We continue to focus on maintaining and growing relationships
with our key stakeholders, including our supply chain. Many of our
suppliers are long-term partners of the Group and we value their
contribution.
We were pleased to report that, in our latest Duty to Report on
Payment Practices and Reporting submission, covering the period
from 1 January 2023 to 30 June 2023, the Group's aggregate average
payment days was maintained at 34 days (H1: 34 days) and the
percentage of payments made to suppliers within 60 days was 85%
(H1: 87%).
We are committed to further improvements in our payment
practices and continue to work with both customers and suppliers to
achieve this. We are fully committed to complying with the 30-day
payment requirements for small and medium sized firms.
Management change
The Group has continuously focused on the strength of its talent
and succession management. This was demonstrated in the year with
Louisa Finlay's promotion to Chief People Officer. Stuart Togwell
was appointed as Group Managing Director, Construction.
Environmental, Social and Governance ("ESG")
Kier's purpose is to sustainably deliver infrastructure which is
vital to the UK. As a "strategic supplier" to the UK Government,
ESG is fundamental to our ability to win work and secure positions
on long-term frameworks. UK Government contracts with a value of or
above GBP5m require net zero carbon and social value
commitments.
In 2023 we reinforced our commitment to Kier's and Government's
ESG targets through the launch of our refreshed sustainability
framework, "Building for a Sustainable World" which covers
sustainability from both an environment and social perspective. Our
framework has evolved to focus on the three key pillars of People,
Places and Planet with new metrics to monitor progress.
We believe that to be a responsible business and to play a
leading role in our industry, we must address both the impact of
climate change and leave a lasting legacy in the communities in
which we operate.
Environment
The Group has set out its pathway to become net zero carbon
across all business operations by 2039 (scope 1 and 2), value chain
(scope 3) by 2045 together with interim targets.
FY23 was another year of progress and we achieved an 18.7%
year-on-year reduction in carbon emissions from our business
operations (scope 1 and 2). We have worked with partners to refine
our scope 3 carbon measurement. This indicated a reduction of c.7%
in scope 3 emissions in the year. The Group re-based its scope 3
emissions as it further expanded the categories included in its
emissions reporting.
The net zero carbon milestone plan for scope 1 and 2 has been
updated as we evolve our Building for a Sustainable World
framework. As Kier is a Tier 1 supplier, the majority of its carbon
emissions relate to the use of fuel, either on our sites or travel
to our sites.
Accordingly, our pathway to being net zero by 2039 includes the
following key short- and medium-term actions: rolling out ultra-low
emission and electric vehicles across our fleet; ensuring our sites
and facilities use energy efficient technology; reviewing
opportunities to self-deliver electricity; enhanced data management
with the supply chain and increased usage of design to address
scope 3.
The plan is designed to help deliver our FY30 near-term targets
of:
-- a 66% absolute reduction in scope 1 and 2 emissions; and
-- a 42% absolute reduction in scope 3 emissions.
As well as reducing our own carbon footprint, Kier continues to
work with its clients to design out carbon from UK infrastructure
projects and with our supply chain to reduce their carbon
emissions.
Social
The Group's 12-month rolling Accident Incident Rate ('AIR') in
FY23 of 88 represents a decrease of 23% compared to FY22 and
indicates the focus given to it during the year and also our
approach to risk which is improving our safety management.
The Group's 12-month rolling All Accident Incident Rate ('AAIR')
in FY23 of 320 increased by 1%.
Following an investigation by the UK's national regulator for
workplace health and safety, the Health and Safety Executive
('HSE'), on 23 January 2023 the Group was fined GBP4.4m for safety
breaches in connection with two incidents in our Highways business
dating back to March 2018 and January 2019. The incidents relate to
work carried out on the M6 motorway. Since these incidents occurred
the Highways business has been very successful in transforming and
improving its safety record. Throughout the year to June 2023, Kier
had market leading safety performance as recognised by National
Highways.
Kier is a people-based business and our performance depends upon
our ability to attract and retain a dedicated workforce. During
FY23 we had:
-- 646 apprentices participating in programmes, representing c.6% of our workforce
-- graduate intake of 115 of which 43% comprised of women; and
-- developed and implemented a new health, safety and wellbeing
strategy as well as launched a new behavioural programme
We continue to deliver apprenticeships as a key means of
upskilling employees and bringing in diverse emerging talent to
reduce the industry skills gap. We contribute to a variety of
educational engagement activities, including playing a leading role
in Open Doors Week and Teacher Encounters, to introduce students
and teachers to the construction industry.
Governance
Governance is a core component of the Group's approach to
operations. Governance is delivered within Kier's Operating
Framework. The laws, policies and procedures underpinning the
Operating Framework are regularly reviewed and updates implemented
as necessary. Within the Operating Framework is Kier's Code of
Conduct which sets the corporate compliance agenda.
Integral to this is our management of risk. We ensure that risk
management is adopted at every stage of the project lifecycle to
ensure that the delivery of the Group's order backlog remains
profitable and cash generative in line with our medium-term value
creation plan.
Our people
I would like to thank our c.10,000 people for their dedication,
contribution and commitment throughout the last year and this is
reflected in the performance of the Group and the significantly
improved financial position.
People are at the heart of our Group and we ensure that we pay
them a competitive wage and offer support through the
cost-of-living crisis. Since April 2021 the Group has been an
accredited Real Living Wage employer. The cost-of-living crisis has
resulted in the Group accelerating the application of the Real
Living Wage from April to January, for c.850 people and we are
working to extend this to all those employed on a Kier site. Kier
employees received, on average, a 4% pay rise in FY23 and we intend
to offer a further pay rise of up to 5% in FY24.
We have also focused on many other areas of employee welfare and
support with other key initiatives such as:
-- Inflation support payment - we awarded c.800 employees with
an inflation support payment of GBP300 in November 2022. This
payment was in addition to the pay increases noted above and was
targeted to provide financial support to those who we believe are
most challenged with the high increases in food, energy and
household bills
-- Enhanced sick pay - we have also implemented enhanced sick
pay terms for our lowest paid employees, providing them with
increased financial peace of mind if they are absent from work due
to sickness
-- Financial support - financial support for employees is always
an important area and has been magnified by the cost-of-living
pressures. For our workforce that need additional financial support
we have introduced support and guidance in the form of Salary
Finance. Salary Finance provides education and a savings option
through HMRC's Help to Save scheme as well as responsible loans
-- Mortgage advice - we have arranged a bespoke service,
providing our employees with free professional mortgage and
financial advice.
We are continuing to review the rising cost of living on our
lowest paid employees and contingent workers. We will consider
taking further steps as appropriate.
Focus has also been made on wellbeing including such initiatives
as Employee Voice, a survey which enables employee engagement. We
are currently extending our culture and behavioural programme
across our people and by listening to them our surveys show a 65%
employee engagement score for FY23, an increase from the previous
year (FY22: 58%).
Summary and outlook
The Group has achieved considerable operational and financial
progress over the last two years. This is reflected in the
significantly improved financial performance of the Group over the
last year. It is testament to the hard work and commitment of our
people who have enhanced our resilience and strengthened our
financial position in line with the objectives set out in our
medium-term value creation plan. Our order book remains strong at
GBP10.1bn and provides us with good, multi-year revenue visibility.
The contracts within our order book reflect the bidding discipline
and risk management now embedded in the business. I am also
particularly pleased to report, the Group significantly improved
its year-end net cash position and has confidence in sustaining
this momentum going forward.
The new financial year has started well, and we are trading in
line with our expectations. The Group is well positioned to
continue benefiting from UK Government infrastructure spending
commitments and we are confident in sustaining the strong cash
generation evidenced this year. This, combined with our focus on
operational delivery, gives the Group a clear line-of-sight to
significantly de-lever. As a result, the Group intends to resume
dividend payments during FY24, with the first dividend to be
declared alongside our interim results.
Operational Review
Infrastructure Services
Year ended
30 June Year ended
2023 30 June 2022 Change
------------------------------------- ----------- -------------- -------
Revenue (GBPm) 1,712.3 1,666.6 2.7%
Adjusted operating profit (GBPm)(6) 79.8 70.0 14.0%
Adjusted operating margin (%) 4.7% 4.2% 50bps
Reported operating profit (GBPm) 57.2 48.1 18.9%
Order book (GBPbn) 5.8 5.6 3.6%
6 Stated before adjusting items of GBP22.6m (FY22:
GBP21.9m).
-- Key contract wins include:
o Highways: appointed by National Highways to carry out an
essential maintenance programme on eight viaducts at Lune Gorge,
spanning the M6
o Utilities: reappointed to the GBP55m per annum, three-year
extension of the Network Service Alliance framework by South West
Water and Bournemouth Water
-- 76% of orders secured for FY24
Infrastructure Services segment comprised the Highways,
Infrastructure and Utilities businesses.
Infrastructure Services revenue increased 2.7% against the prior
year primarily due to the continued ramp up of capital works on
HS2. Adjusted operating profit increased 14.0% to GBP79.8m due to
higher HS2 volumes. Adjusting items include GBP1.5m for the HSE
fine in relation to Highways.
The Highways business designs, builds and maintains roads for
National Highways, Transport for London and a number of city,
county and district councils. The business experienced a period of
strong wins, including new contracts and contract extensions in
maintenance projects, alongside the design and build of three
National Highways major capital projects as the business has
transitioned from one predominantly maintenance focused to both
maintenance and capital works.
The Infrastructure Projects business delivers major and complex
infrastructure and civil engineering projects, including HS2,
Devonport, Oxford Railway Station, Mogden Sewage and Treatment
Works and Hinkley Point C. Infrastructure experienced a ramp up in
HS2 volumes during the period.
The Utilities business provides construction and maintenance
services under long-term contracts, to the water, energy, and
telecoms sectors. The Utilities business had anticipated higher
volumes in the telecoms sector with the UK Government's commitment
to rolling out 5G connectivity to the UK. However, changes to
market conditions has resulted in reduced activity, which in turn
has had an adverse impact on the telecoms margin.
Re-alignment
From 1 July 2023 the announced re-alignment of the
Infrastructure Services segment took effect and the three business
units became two. This change ensures we are able to support our
growth ambitions and align our capabilities, skills and expertise
to the evolving needs of our clients.
-- Transportation: this business division provides design,
engineering, delivery and maintenance to support the movement of
people, goods and equipment by land, sea and air. It includes our
existing highways business and infrastructure projects relating to
rail, ports and air.
-- Natural Resources, Nuclear & Networks: this business
division includes our existing utilities business and
infrastructure projects related to water, energy, nuclear and
networks.
The re-alignment positions Kier in an even stronger standing to
pursue our strategic objectives within our chosen markets given the
UK Government's commitment to GBP600bn of public sector spending
and the significant investment plans by UK asset owners in the
regulated sector.
Construction
Year ended
30 June Year ended
2023 30 June 2022 Change
------------------------------------- ----------- -------------- -------
Revenue (GBPm) 1,652.5 1,440.8 14.7%
Adjusted operating profit (GBPm)(7) 69.5 60.8 14.3%
Adjusted operating margin (%) 4.2% 4.2% - bps
Reported operating profit (GBPm) 46.4 21.8 112.8%
Order book (GBPbn) 4.3 4.2 2.4%
7 Stated before adjusting items of GBP23.1m (FY22: GBP39.0m)
-- Key contract wins include:
o The GBP5.1bn Strategic Alliance Framework Contract in relation
to the Defence Estate Optimisation ("DEO") Portfolio by the
Ministry of Defence
o Re-appointment to the GBP4.5bn Southern Construction
Framework
o Kier Places appointed by L&Q for its Major Works
Investment Programme to deliver housing maintenance across its
estate
-- 95% of orders secured for FY24
-- Significant growth in volumes in the second half of the year
The Construction segment comprises Regional Building, Strategic
Projects, Kier Places (including Housing Maintenance, Facilities
Management and Environmental Services), as well as our
International business. Construction has national coverage
delivering schools, hospitals, defence, custodial facilities and
amenities centres for local authorities, councils and the private
sector.
Revenue increased 14.7% due largely to the start of works on the
new custodial facility, HMP Millsike in East Yorkshire, and growth
in Kier Places as we benefit from increased facilities and housing
management contracts.
Adjusted operating profit increased 14.3% to GBP69.5m driven by
increased volume and the impact of the prior year's restructuring.
Adjusting items include GBP12.6m relating to fire cladding costs,
GBP5.2m of restructuring and related charges and a net GBP5.3m in
relation to historical insurance claims. Adjusting items are
significantly lower than last year, resulting in reported operating
profit growing 112.8% to GBP46.4m.
As a regional contractor, we continue to be well placed to
benefit from the UK Government's focus on spending to improve
under-invested assets such as schools, hospitals and custodial
services, where our Construction business has specialist
expertise.
Our Kier Places business specialises in working in occupied
properties including residential, offices, and other facilities
delivering maintenance, repairs, fire safety and compliance
services.
It is focused on central Government for our facilities
management work and delivering housing maintenance services for
local authorities. The net zero agenda alongside changes to
building safety regulations continue to drive opportunities within
the housing maintenance business. These have allowed the business
to benefit from increased revenue volume and profitability
including those from long-term maintenance contracts.
The UAE-based International business is focused on managing its
cost base and projects in line with the continued weakness in its
markets.
Property
Year ended
30 June Year ended
2023 30 June 2022 Change
------------------------------------- ----------- -------------- ---------
Revenue (GBPm) 37.6 144.3 (73.9)%
Adjusted operating profit (GBPm)(8) 12.8 17.6 (27.3)%
Adjusted operating margin (%) 34.0% 12.2% 2,180bps
Reported operating profit (GBPm) 14.3 16.7 (14.4)%
Capital employed - new (GBPm) 150 122 23.0%
ROCE - new (%) 9.4% 13.7% (430)bps
Capital employed (GBPm) 175 122 43.4%
ROCE (%) 8.6% 13.7% (510)bps
(8) Stated before adjusting items of GBP(1.5)m (FY22:
GBP0.9m)
-- Commenced redevelopment work at 19 Cornwall Street Birmingham
to transform it into an office operating at net zero carbon
-- Entered a Joint Venture partnership with Countryside to
deliver a housing development in South Wokingham
-- Benefitted from planning consent for a wind farm to be
developed on the former Greenburn Mine site
The Property business invests and develops primarily mixed-use
commercial and residential schemes across the UK. The business is a
well-established urban regeneration and property developer and
largely operates through joint ventures and does not make
speculative investments.
Revenue of GBP37.6m and adjusted operating profit of GBP12.8m
during the year was driven by lower transaction activity as a
result of market conditions, in contrast to a higher level of
transactions in the prior year. Property recognised a fair value
gain of GBP13.2m within other income related to two transactions in
its investment property unit during the year.
The Group has focused on the controlled expansion of the
Property business through select investments and strategic joint
ventures using a disciplined capital approach.
In order to make the reported capital employed meaningful, we
plan on amending the definition so that it excludes fair value
gains and third party debt. We believe this better reflects the
Group's investment in the Property segment.
As at 30 June 2023, Kier's capital employed in the Property
segment was GBP175m, including third party debt and fair value
gains. Excluding these items, it would have been GBP150m. Due to
the Group's increased operating cash flows, the benefit of building
out projects such as 19 Cornwall Street in Birmingham and market
conditions we are reviewing the upper end of capital employed in
our Property segment, which is currently at GBP170m.
Corporate
Year ended
30 June Year ended
2023 30 June 2022 Change
----------------------------------- ----------- -------------- ---------
Adjusted operating loss (GBPm)(9) (30.6) (27.9) (9.7)%
Reported operating loss (GBPm) (36.4) (41.5) 12.3%
(9) Stated before adjusting items of GBP5.8m (FY22:
GBP13.6m)
The Corporate segment comprises the costs of the Group's central
functions which have increased over the prior year due to inflation
and investment in people to support the Group's growth.
Financial Review
Introduction
The Group performed well during the year and delivered an
adjusted operating profit of GBP131.5m (FY22: GBP120.5m). This
represents a 20 basis points operating margin increase over the
prior period to 3.9% (FY22: 3.7%) with the Group exceeding its
medium-term value creation plan margin target of c.3.5% ahead of
time.
The continued strong operational performance, together with
lower adjusting items, led to a significant increase in profit from
operations to GBP81.5m (FY22: GBP45.1m) and a 226.4% increase in
profit before tax to GBP51.9m (FY22: GBP15.9m).
Adjusting items reduced by 32.4% to GBP52.9m (FY22: GBP78.2m).
The current year charge includes GBP19.2m of amortisation of
intangible contract rights, GBP12.6m of fire and cladding costs,
GBP13.0m of restructuring and related charges and a net GBP5.3m in
relation to historical insurance claims . The Group believes its
restructuring activities are now substantially complete.
Adjusted earnings per share increased 14.3% to 19.2p (FY22:
16.8p).
The Group generated a free cash inflow of GBP132.3m during the
year (FY22: GBP54.6m) driven by a strong working capital
performance, in particular driven by growth in Q4 within the
Construction business.
Net cash at 30 June 2023 of GBP64.1m increased significantly
compared to the prior year (FY22: GBP2.9m), driven by the strong
free cash flow performance. The net cash increase was achieved
despite the Group repaying its supply chain facility ('KEPS'),
adjusting items, pension deficit obligations and purchasing
existing Kier shares for future employee share-based
remuneration.
Average month-end net debt for the year ended 30 June 2023 was
GBP(232.1)m (FY22: GBP(216.1)m). As outlined in our FY22 results,
the Group expected an increase in average month-end net debt due to
the anticipated repayment of debt-like items such as KEPS and lower
activity in our Construction business until the fourth quarter of
the year. The average month-end net debt balance of GBP(232.1)m was
better than expected due to mitigating actions taken through the
year. The Group used positive operating cash flow to repay the
average KEPS balance of GBP56.2m, to pay pension deficit
obligations and to repay the remaining HMRC COVID-19 support of
GBP6.1m.
The Group continued to win new, high-quality and profitable work
in its markets on terms and rates which reflect the Group's bidding
discipline and risk management.
The order book has increased to GBP10.1bn (FY22: GBP9.8bn), a
3.1% increase compared to the prior year end. c.85% of revenue for
FY24 is already secured which provides certainty of further
progress over next year.
Summary of financial performance
Adjusted(10) results Reported results
---------------------------
30 Jun 30 Jun change 30 Jun 30 Jun change
23 22 % 23 22 %
-------- -------- -------- -------- -------- -------
Revenue (GBPm) -
Total 3,405.4 3,256.5 4.6 3,405.4 3,256.5 4.6
Revenue (GBPm) -
Excluding JV's 3,380.7 3,143.9 7.5 3,380.7 3,143.9 7.5
Profit from operations
(GBPm) 131.5 120.5 9.1 81.5 45.1 80.7
Profit before tax
(GBPm) 104.8 94.1 11.4 51.9 15.9 226.4
Earnings per share
(p) 19.2 16.8 14.3 9.5 2.9 227.6
Free cash flow (GBPm) 132.3 54.6 142.3
Net cash (GBPm) 64.1 2.9 2,110.3
Net debt (GBPm) -
average month end (232.1) (216.1) (7.4)
Order book (GBPbn) 10.1 9.8 3.1
Supply Chain Financing
(GBPm) - (49.8) 100.0
------------------------ -------- -------- -------- -------- -------- -------
(10) Reference to 'Adjusted' excludes adjusting items, see note
5.
Revenue
The following table bridges the Group's revenue from the year
ended 30 June 2022 to the year ended 30 June 2023.
GBPm
---------------------------------------- -------
Revenue for the year ended 30 June 2022 3,256.5
Infrastructure Services 45.7
Construction 211.7
Property and Corporate (108.5)
---------------------------------------- -------
Revenue for the year ended 30 June 2023 3,405.4
---------------------------------------- -------
The Group grew revenue in both Infrastructure Services and
Construction, which more than offsets the lower revenue in
Property. In particular the growth within Infrastructure Services
was driven by the ramp up of HS2. Utilities had anticipated higher
volumes in the telecoms sector, however, changes to market
conditions has resulted in reduced activity. This has had an
adverse impact on the telecoms margin. Construction's improved
performance was driven by its Kier Places business as well as HMP
Millsike, in East Yorkshire.
Property transactions were down as expected due to a
deterioration in market conditions. The deterioration was
anticipated and therefore the Group accelerated the sale of certain
portfolio items in the second half of the prior year to take
advantage of the market conditions at the time.
The Group continues to focus on delivering high-quality and
high-margin work.
Alternative performance measures ('APMs')
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
nonrecurring 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.
Adjusted Operating Profit
GBPm
----------------------------------------------------- -----
Adjusted operating profit for the year ended 30 June
2022 120.5
Volume / price / mix changes 9.2
Fewer property transactions, net of valuation gains (4.8)
Cost inflation (7.2)
Management actions 13.8
Adjusted operating profit for the year ended 30 June
2023 131.5
----------------------------------------------------- -----
Adjusted operating profit improved compared to the prior year.
The main reasons for this were an improvement in volume, price and
mix changes as well as management actions to reduce costs. These
were offset by inflationary pressures and lower property
transactions compared to FY22.
A reconciliation of reported to adjusted operating profit is
provided below:
Operating profit Profit before tax
------------------- --------------------
30 Jun 30 Jun 30 Jun 30 Jun
23 22 23 22
GBPm GBPm GBPm GBPm
-------------------------------------- --------- -------- --------- ---------
Reported profit 81.5 45.1 51.9 15.9
Amortisation of acquired intangibles 19.2 19.7 19.2 19.7
Restructuring and related charges 13.0 40.0 13.0 40.0
Other 17.8 15.7 20.7 18.5
-------------------------------------- --------- -------- --------- ---------
Adjusted profit 131.5 120.5 104.8 94.1
-------------------------------------- --------- -------- --------- ---------
Additional information about these items is as follows:
-- Amortisation of acquired intangible assets GBP19.2m (FY22:
GBP19.7m):
Comprises the amortisation of acquired contract rights primarily
through the acquisitions of MRBL Limited (Mouchel Group), May
Gurney Integrated Services PLC and McNicholas Construction Holdings
Limited.
-- Restructuring and related charges GBP13.0m (FY22:
GBP40.0m):
Restructuring costs include GBP7.6m incurred on redundancy and
other people-related costs within the Group, including those
related to the re-sizing of the International business. A further
GBP4.9m was incurred on professional advisor fees and other
non-people related activities, including GBP1.6m of vacant property
costs. The Group's restructuring is now substantially complete and
there will be no further restructuring charges recognised in
adjusting items.
-- Other costs GBP20.7m (FY22: GBP18.5m)
Legal and compliance costs include GBP12.6m incurred on fire
compliance and cladding claims.
A further GBP5.3m was incurred on insurance-related matters.
This is made up of a provision of GBP8.0m against an
insurance-related receivable. This is offset by GBP2.7m of
insurance proceeds received following the fire at the Pure
Recycling plant in July 2021.
A further GBP1.5m was incurred as a result of the fine from HSE
in relation to historical safety issues. In addition, GBP2.9m of
finance costs relate to the IFRS 16 interest charge on leased
properties that were previously vacated.
Offsetting these costs was a GBP1.6m profit on the sale of
mothballed land which had previously been impaired through
adjusting items.
Earnings per share
Earnings per share ('EPS') before and after adjusting items have
both increased significantly compared to prior year. EPS before
adjusting items amounted to 19.2p (FY22: 16.8p). EPS after
adjusting items amounted to 9.5p (FY22: 2.9p). There was a
significant reduction in adjusting items in the year.
Finance income and charges
The Group's finance charges include interest on the Group's bank
borrowings and finance charges relating to IFRS 16 leases.
Net finance charges for the year were GBP26.7m (FY22: GBP26.4m)
before adjusting items of GBP2.9m (FY22: GBP2.8m).
Interest on bank borrowings amounted to GBP29.0m (FY22:
GBP18.9m) and have increased during the year due to the higher
average month-end net debt and increased interest rates. The Group
was able to partially mitigate the risk of higher interest rates
with a fixed interest rate swap of GBP100m, which resulted in a
fair value gain of GBP1.1m as at 30 June 2023, and which expires in
September 2023; and another three-year fixed interest rate swap of
GBP100m reducing to GBP75m in its second year and GBP50m in its
third year and which expires in February 2026.
Finance lease charges were GBP9.5m (FY22: GBP6.5m) driven by the
ramp up of HS2.
The Group had a net interest credit of GBP7.8m (FY22: GBP1.0m)
in relation to the defined benefit pension schemes which has arisen
due to the combination of the overall pension surplus and the
discount rate (derived from corporate bond yields), at the start of
the financial year. We anticipate this will reduce to c.GBP5.5m in
FY24.
The Group continues to exclude lease liabilities from its
definition of net cash/(debt).
Dividend
As part of the medium-term value creation plan, the Board
intended to reinstate dividends when a near-term pathway to
operating with an average net cash position was clear.
Given the Group's strong operational and financial performance
over the last year, the year-end net cash position and confidence
over further progress in the short term, the Board is able to
confirm its intention to commence dividend payments to
shareholders. Over time, we will progress to deliver a dividend,
covered 3x by earnings and in a payment ratio of one-third interim
dividend and two thirds final dividend. The first dividend is
expected to be announced alongside the interim results.
Balance sheet
Net assets
The Group had net assets of GBP513.0m at 30 June 2023 (FY22:
GBP554.6m). The primary driver for this is the decrease in the
pension scheme surplus during the period, offset by the retained
profit for the year.
Goodwill
The Group held intangible assets of GBP645.0m (FY22: GBP669.1m)
of which goodwill represented GBP536.7m (FY22: GBP536.7m).
The Group completed its annual review of goodwill assuming a
pre-tax discount rate of 13.1% (FY22: 11.1%), and concluded that no
impairment was required.
The Infrastructure Services group of Cash Generating Units
('CGU') comprise GBP516.3m of the total goodwill balance. Whilst no
impairment is noted and management believes the discounted cash
flows applied is underpinned by the order book and current pipeline
prospects, this CGU is sensitive to changes in key assumptions. The
key assumptions in the value in use calculations are the forecast
revenues and operating margins, the discount rates applied to
future cash flows and the terminal growth rate assumptions
applied.
Deferred tax asset
The Group has a deferred tax asset of GBP128.8m recognised at 30
June 2023 (FY22: GBP108.8m) primarily due to historical losses. The
asset has increased in the year predominantly due to the deferred
tax debit in relation to the movement in the pension scheme asset.
In addition, tax losses of GBP10.8m have been used against current
year profits.
Based on the Group's forecasts, it is expected that the deferred
tax asset will be utilised over a period of approximately ten
years.
An adjusted tax credit of GBP9.1m (FY22: GBP14.8m) has been
included within adjusting items, representing the tax impact of
adjusting items.
Right-of-use assets and lease liabilities
At 30 June 2023, the Group had right-of-use assets of GBP105.4m
(FY22: GBP80.6m) and associated lease liabilities of GBP182.6m
(FY22: GBP157.6m). The increase in the period is principally due to
the levels of hired plant and equipment required for major
Infrastructure projects, including HS2 and Hinkley Point C.
Investment properties
The Group has long term leases on two office buildings which
were formerly utilised by the Group that have been vacated and are
now leased out (or intended to be leased out) to third parties
under operating leases, as well as two freehold properties no
longer used by the business that are being held for capital
appreciation. These are all held as investment properties.
In addition, the Group's Property business invests and develops
primarily mixed-use commercial and residential schemes and sites
across the UK. One of these sites is held as an investment
property, along with the Group's former mine at Greenburn,
Scotland, which was granted planning permission for a wind farm
during the year.
The Group recognised an overall fair value gain of GBP11.4m
across these sites which has been recognised in Other income.
Contract assets & liabilities
Contract assets represents the Group's right to consideration in
exchange for works which have already been performed. Similarly, a
contract liability is recognised when a customer pays consideration
before work is performed. At 30 June 2023, total contract assets
amounted to GBP401.9m (FY22: GBP397.5m).
Contract liabilities were GBP90.5m (FY22: GBP67.3m).
Retirement benefits obligation
Kier operates a number of defined benefit pension schemes. At 30
June 2023, the reported surplus, which is the difference between
the aggregate value of the schemes' assets and the present value of
their future liabilities, was GBP104.5m (FY22: GBP194.7m), before
accounting for deferred tax, with the movement in the year
primarily as a result of actuarial losses of GBP107.8m (FY22:
GBP136.3m gains). A change in financial assumptions, resulting from
higher corporate bond yields, has reduced the pension schemes'
liabilities. This is partly offset by an experience loss of
GBP51.4m. However, there has also been a fall in the schemes' asset
values, largely due to the level of liability hedging in the asset
portfolio. High inflation rates have also impacted the pension
surplus through higher annual pension increases awarded.
During the year the Group agreed the triennial valuation for
funding six of its seven defined benefit pension schemes. Given the
Group's improved covenant and payments made under the existing
schedule of contributions, the schemes are in a significantly
improved position.
Accordingly, deficit payments will decrease from GBP10m in FY23
to GBP9m in FY24, GBP8m in FY25, GBP5m in FY26, GBP4m in FY27 and
GBP1m in FY28.
Once the pension schemes are in actuarial surplus, they will
cover their own administration expenses. In FY23, expenses amounted
to GBP2.9m (FY22: GBP4.2m). The largest of the six schemes is
already in surplus.
Free cash flow and Net debt
2023 2022
GBPm GBPm
-------------------------------------------------- ------- ------
Operating profit 81.5 45.1
Depreciation of owned assets 6.1 6.6
Depreciation of right-of-use assets 43.7 30.0
Amortisation 33.9 28.0
-------------------------------------------------- ------- ------
EBITDA 165.2 109.7
Adjusting items excluding adjusting amortisation
and interest 30.8 55.7
Adjusted EBITDA 196.0 165.4
Working capital inflow 80.3 3.7
Net capital expenditure including finance
lease capital payments (51.4) (46.5)
Joint Venture dividends less profits 0.7 5.9
Repayment of KEPS (49.8) (29.3)
Other free cash flow items (5.2) 9.0
-------------------------------------------------- ------- ------
Operating free cash flow 170.6 108.2
Net interest and tax (38.3) (32.8)
-------------------------------------------------- ------- ------
Free cash flow before COVID-19 132.3 75.4
Net COVID-19 tax repayment - (20.8)
-------------------------------------------------- ------- ------
Free cash flow 132.3 54.6
-------------------------------------------------- ------- ------
2023 2022
GBPm GBPm
------------------------------------------- ------- ------
Net cash at 30 June 2022 2.9 3.0
Free cash flow 132.3 54.6
Adjusting items (27.0) (41.2)
Pension deficit payments and fees (12.8) (15.0)
Fees paid in respect of prior year equity
raise - (6.1)
Purchase of own shares (11.9) (7.0)
Other (19.4) 14.6
Net cash at 30 June 2023 64.1 2.9
------------------------------------------- ------- ------
The Group has delivered a strong free cash flow for the year,
driven by the underlying business performance and good working
capital management. This performance was achieved despite the
repayment of GBP49.8m of KEPS in July 2022.
The average month-end net debt position is higher than the
comparative period at GBP(232.1)m, (FY22: GBP216.1m). Positive
operating cash flow was used to pay off the average KEPS balance,
pay adjusting items, tax and interest, pension deficit obligations,
purchase existing Kier shares on behalf of employees and the
remaining HMRC COVID-19 support.
The purchase of existing shares relates to the Group's employee
benefit trusts which acquire Kier shares from the market for use in
settling the Long-Term Incentive Plan ('LTIP') share schemes when
they vest. The trusts purchased and sold shares at a net cost of
GBP11.9m (FY22: GBP7.0m). This buyback reduced the dilution impact
of the LTIP issuance and the 2021 equity fund raising.
Given the extent of Free Cash Flow ('FCF') generation, we have a
line-of-sight to further significant net debt reduction for FY24
and FY25.
Accounting policies
The Group's annual consolidated financial statements are
prepared in accordance with UK-adopted International Accounting
Standards and with the requirements of the Companies Act 2006.
There have been no significant changes to the Group's accounting
policies during the year.
Treasury facilities
Bank finance
The Group has committed debt facilities of GBP569.4m with a
further GBP18.0m of uncommitted overdrafts.
The facilities comprise GBP495.0m Revolving Credit Facility
('RCF'), GBP74.4m US Private Placement ("USPP") Notes as well as
GBP18.0m of overdrafts.
During the year, the Group repaid GBP35.6m of USPP Notes and the
remaining GBP8.2m of Schuldschein Notes. It also reduced the RCF
facility by GBP40.0m. We expect to reduce a further GBP20.0m of the
RCF and repay GBP1.7m of USPP Notes in the calendar year 2023.
The Group's revolving credit facility is scheduled to expire on
31 January 2025. The Board is confident in the Group's ability to
refinance during FY24.
Supply chain finance
The Group's supply chain finance scheme ('KEPS') was fully paid
down in July 2022 (FY22: GBP49.8m).
Financial instruments
The Group's financial instruments mainly comprise cash and
liquid investments. The Group selectively enters into derivative
transactions (interest rate and currency swaps) to manage interest
rate and currency risks arising from its sources of finance. The US
dollar denominated USPP notes were hedged with fixed cross-currency
swaps at inception to mitigate the foreign exchange risk. One
non-recourse, project-specific, property joint venture loan is
hedged using an interest rate derivative to fix the cost of
borrowing.
There are minor foreign currency risks arising from the Group's
operations both in the UK and through its limited number of
international activities. 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 exposures to currency fluctuations
are identified, forward exchange contracts are completed to buy and
sell foreign currency.
The Group does not enter into speculative transactions.
Going concern
The Directors are satisfied that the Group has adequate
resources to meet its obligations as they fall due for a period of
at least twelve months from the date of approving these financial
statements and, for this reason, they continue to adopt the going
concern basis in preparing these financial statements.
Further information on this assessment is detailed in note 1 of
the consolidated financial statements on pages 23 and 24.
Financial statements
Condensed consolidated income statement
For the year ended 30 June 2023
2023 2022
Note GBPm GBPm
-------------------------------------------- ---- --------- ---------
Continuing operations
Revenue
Group and share of joint ventures(1) 2 3,405.4 3,256.5
Less share of joint ventures 2 (24.7) (112.6)
-------------------------------------------- ---- --------- ---------
Group revenue 3,380.7 3,143.9
Cost of sales (3,074.4) (2,879.9)
-------------------------------------------- ---- --------- ---------
Gross profit 306.3 264.0
Administrative expenses (240.0) (245.5)
Share of post-tax results of joint ventures 1.1 26.6
Other income 4 14.1 -
Profit from operations 2 81.5 45.1
Finance income 5 9.4 0.7
Finance costs 5 (39.0) (29.9)
-------------------------------------------- ---- --------- ---------
Profit before tax 2 51.9 15.9
Taxation 7 (10.9) (3.2)
-------------------------------------------- ---- --------- ---------
Profit for the year 2 41.0 12.7
-------------------------------------------- ---- --------- ---------
Attributable to:
Owners of the parent 41.1 12.7
Non-controlling interests (0.1) -
-------------------------------------------- ---- --------- ---------
41.0 12.7
-------------------------------------------- ---- --------- ---------
Earnings per share
* Basic 9 9.5p 2.9p
* Diluted 9 9.3p 2.8p
Supplementary information
Adjusted2 operating profit 3 131.5 120.5
Adjusted 2 profit before tax 3 104.8 94.1
Adjusted 2 basic earnings per share 9 19.2p 16.8p
Adjusted2 diluted earnings per share 9 18.8p 16.4p
-------------------------------------------- ---- --------- ---------
(1) Group revenue including joint ventures is an alternative
performance measure.
(2) Reference to 'adjusted' excludes adjusting items, see note
3. These are alternative performance measures.
Financial statements
Condensed consolidated statement of comprehensive income
For the year ended 30 June 2023
2023 2022
Note GBPm GBPm
------------------------------------------------------ ---- ------- ------
Profit for the year 41.0 12.7
------------------------------------------------------ ---- ------- ------
Items that may be reclassified subsequently to
the income statement
Fair value movements on cash flow hedging instruments 2.1 6.4
Fair value movements on cash flow hedging instruments
recycled to the income statement 5 1.2 (7.4)
Deferred tax on fair value movements on cash flow
hedging instruments (0.8) 0.2
Foreign exchange translation differences 0.3 3.9
Total items that may be reclassified subsequently
to the income statement 2.8 3.1
------------------------------------------------------ ---- ------- ------
Items that will not be reclassified to the income
statement
Re-measurement of retirement benefit assets and
obligations 6 (107.8) 136.3
Tax on re-measurement of retirement benefit assets
and obligations 26.5 (34.7)
------------------------------------------------------ ---- ------- ------
Total items that will not be reclassified to the
income statement (81.3) 101.6
------------------------------------------------------ ---- ------- ------
Other comprehensive (loss)/income for the year (78.5) 104.7
------------------------------------------------------ ---- ------- ------
Total comprehensive (loss)/income for the year (37.5) 117.4
------------------------------------------------------ ---- ------- ------
Attributable to:
Equity holders of the parent (37.4) 117.4
Non-controlling interests (0.1) -
------------------------------------------------------ ---- ------- ------
(37.5) 117.4
------------------------------------------------------ ---- ------- ------
Financial statements
Condensed consolidated statement of changes in equity
As at 30 June 2023
Equity
attributable
Cash to owners
Capital flow of Non-
Share Share redemption Accumulated hedge Translation Merger the controlling Total
capital premium reserve losses reserve reserve reserve parent interests equity
Note GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
-------------- ---- ------- ------- ---------- ----------- ------- ----------- ------- ------------ ----------- ------
At 1 July 2021 4.5 684.3 2.7 (610.8) (0.1) 5.0 350.6 436.2 (1.2) 435.0
Profit for
the year - - - 12.7 - - - 12.7 - 12.7
Other
comprehensive
income/(loss) - - - 101.6 (0.8) 3.9 - 104.7 - 104.7
-------------- ---- ------- ------- ---------- ----------- ------- ----------- ------- ------------ ----------- ------
Total
comprehensive
income/(loss)
for the year - - - 114.3 (0.8) 3.9 - 117.4 - 117.4
Issue of own
shares - - - - - - - - 0.6 0.6
Share-based
payments 15 - - - 8.6 - - - 8.6 - 8.6
Purchase of
own shares - - - (7.0) - - - (7.0) - (7.0)
-------------- ---- ------- ------- ---------- ----------- ------- ----------- ------- ------------ ----------- ------
At 30 June
2022 4.5 684.3 2.7 (494.9) (0.9) 8.9 350.6 555.2 (0.6) 554.6
Profit/(loss)
for the year - - - 41.1 - - - 41.1 (0.1) 41.0
Other
comprehensive
(loss)/income - - - (81.3) 2.5 0.3 - (78.5) - (78.5)
-------------- ---- ------- ------- ---------- ----------- ------- ----------- ------- ------------ ----------- ------
Total
comprehensive
(loss)/income
for the year - - - (40.2) 2.5 0.3 - (37.4) (0.1) (37.5)
Issue of own
shares - - - - - - - - 0.3 0.3
Changes in
ownership of
subsidiary - - - (0.9) - - - (0.9) - (0.9)
Share-based
payments 15 - - - 8.4 - - - 8.4 - 8.4
Purchase of
own shares - - - (11.9) - - - (11.9) - (11.9)
-------------- ---- ------- ------- ---------- ----------- ------- ----------- ------- ------------ ----------- ------
At 30 June
2023 4.5 684.3 2.7 (539.5) 1.6 9.2 350.6 513.4 (0.4) 513.0
-------------- ---- ------- ------- ---------- ----------- ------- ----------- ------- ------------ ----------- ------
The numbers in the table above are shown net of tax as
applicable.
Financial statements
Condensed consolidated balance sheet
As at 30 June 2023
2023 2022
Note GBPm GBPm
-------------------------------------------- ---- --------- ---------
Non-current assets
Intangible assets 10 645.0 669.1
Property, plant and equipment 29.8 32.7
Right-of-use assets 105.4 80.6
Investment properties 11 98.4 60.4
Investments in and loans to joint ventures 78.6 82.3
Capitalised mobilisation costs 6.3 11.6
Deferred tax assets 7 128.8 108.8
Contract assets 43.7 31.2
Trade and other receivables 18.5 17.0
Retirement benefit assets 6 129.3 199.2
Other financial assets 9.7 8.5
-------------------------------------------- ---- --------- ---------
Non-current assets 1,293.5 1,301.4
-------------------------------------------- ---- --------- ---------
Current assets
Inventories 72.9 56.8
Contract assets 358.2 366.3
Trade and other receivables 189.2 202.9
Corporation tax receivable 13.4 10.0
Other financial assets 1.0 3.7
Cash and cash equivalents 12 376.9 297.7
-------------------------------------------- ---- --------- ---------
Current assets 1,011.6 937.4
-------------------------------------------- ---- --------- ---------
Total assets 2,305.1 2,238.8
-------------------------------------------- ---- --------- ---------
Current liabilities
Borrowings 12 - (40.5)
Lease liabilities (36.2) (25.9)
Trade and other payables 13 (1,075.0) (1,065.7)
Contract liabilities (90.5) (67.3)
Provisions (38.2) (22.2)
-------------------------------------------- ---- --------- ---------
Current liabilities (1,239.9) (1,221.6)
-------------------------------------------- ---- --------- ---------
Non-current liabilities
Borrowings 12 (319.1) (266.5)
Lease liabilities (146.4) (131.7)
Trade and other payables 13 (36.9) (34.1)
Retirement benefit obligations 6 (24.8) (4.5)
Provisions (25.0) (25.8)
Non-current liabilities (552.2) (462.6)
-------------------------------------------- ---- --------- ---------
Total liabilities (1,792.1) (1,684.2)
-------------------------------------------- ---- --------- ---------
Net assets 2 513.0 554.6
-------------------------------------------- ---- --------- ---------
Equity
Share capital 14 4.5 4.5
Share premium 684.3 684.3
Capital redemption reserve 2.7 2.7
Accumulated losses (539.5) (494.9)
Cash flow hedge reserve 1.6 (0.9)
Translation reserve 9.2 8.9
Merger reserve 350.6 350.6
-------------------------------------------- ---- --------- ---------
Equity attributable to owners of the parent 513.4 555.2
Non-controlling interests (0.4) (0.6)
-------------------------------------------- ---- --------- ---------
Total equity 513.0 554.6
-------------------------------------------- ---- --------- ---------
Financial statements
Condensed consolidated statement of cash flows
For the year ended 30 June 2023
2023 2022
Note GBPm GBPm
----------------------------------------------------------- ---- ------ -------
Cash flows from operating activities
Profit before
tax 51.9 15.9
Net finance cost 5 29.6 29.2
Share of post-tax trading results of joint ventures (1.1) (26.6)
Pension cost charge/(credit) 0.1 (0.4)
Equity-settled share-based payments charge 15 8.4 8.6
Amortisation and impairment of intangible assets
and mobilisation costs 33.9 30.3
Change in fair value of investment properties 11 (11.4) (0.2)
Research and development expenditure credit 7 (22.8) (20.7)
Depreciation and impairment of property, plant and
equipment 6.1 10.7
Depreciation and impairment of right-of-use assets 43.7 35.2
(Profit)/loss on disposal of property, plant and
equipment and intangible assets (1.8) 0.8
----------------------------------------------------------- ---- ------ -------
Operating cash inflows before movements in working
capital and pension deficit contributions 136.6 82.8
Deficit contributions to pension funds 6 (9.9) (10.8)
Increase in inventories (18.8) (2.1)
Decrease in receivables 12.2 7.3
Increase in contract assets (4.4) (31.6)
Increase/(decrease) in payables 26.1 (12.4)
Increase in contract liabilities 23.2 7.4
Increase in provisions 15.2 0.2
----------------------------------------------------------- ---- ------ -------
Cash inflow from operating activities 180.2 40.8
Dividends received from joint ventures 1.8 32.5
Interest received 5 1.6 0.7
Income tax paid (0.1) -
Net cash inflow from operating activities 183.5 74.0
----------------------------------------------------------- ---- ------ -------
Cash flows from investing activities
Proceeds from sale of property, plant and equipment 2.6 4.2
Purchase of property, plant and equipment (3.9) (6.0)
Purchase of intangible assets 10 (2.7) (0.7)
Purchase of capitalised mobilisation costs (1.8) (10.2)
Acquisition of joint venture debt (0.9) -
Investment in joint ventures (35.7) (16.8)
Loan repayment and return of equity from joint ventures 17.1 27.5
Net cash used in investing activities (25.3) (2.0)
----------------------------------------------------------- ---- ------ -------
Cash flows from financing activities
Issue of shares net of associated transaction costs - (6.1)
Issue of shares to non-controlling interest 0.3 0.6
Purchase of own shares (11.9) (7.0)
Interest paid (39.5) (28.8)
Principal elements of lease payments (45.6) (33.8)
Drawdown of borrowings 56.8 -
Repayment of borrowings (43.2) (101.8)
Settlement of derivative financial instruments 4.7 7.5
Changes in ownership interests of subsidiaries (0.9) -
Net cash used in financing activities (79.3) (169.4)
----------------------------------------------------------- ---- ------ -------
Increase/(decrease) in cash, cash equivalents and
overdraft 78.9 (97.4)
Effect of change in foreign exchange rates 0.3 3.9
Opening cash, cash equivalents and overdraft 297.7 391.2
----------------------------------------------------------- ---- ------ -------
Closing cash, cash equivalents and overdraft 12 376.9 297.7
----------------------------------------------------------- ---- ------ -------
Supplementary information
Adjusted(1) cash inflow from operating activities 3(e) 207.2 82.0
----------------------------------------------------------- ---- ------ -------
(1) Reference to 'adjusted' excludes adjusting items, see note
3. This is an alternative performance measure.
Financial statements
Notes to the condensed consolidated financial statements
For the year ended 30 June 2023
1 Significant 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 Company's registered number is 2708030.
The address of its registered office is 2(nd) Floor, Optimum House,
Clippers Quay, Salford, M50 3XP.
The consolidated financial statements (financial statements) for
the year ended 30 June 2023 comprise the Company and its
subsidiaries (together referred to as the Group) and the Group's
interest in jointly controlled entities.
Basis of preparation
These results have been prepared in accordance with the UK
Financial Conduct Authority and in accordance with the UK-adopted
International Accounting Standards effective for accounting periods
beginning on or after 1 July 2022 and with the requirements of the
Companies Act 2006 as applicable to companies reporting under those
standards.
The financial information contained in this preliminary
announcement does not constitute the Company's statutory accounts
as at and for the year ended 30 June 202 3 , but is derived from
those statutory accounts. The Company's statutory accounts as at
and for the year ended 30 June 202 3 were approved by the Board on
13 September 2023 and received an unqualified audit report. These
will be delivered to the Registrar o f Companies following the
Company's Annual General Meeting on 16 November 202 3 .
Going concern
The Directors continue to adopt the going concern basis in
preparing the Group's financial statements.
The Group performed well through the year ended 30 June 2023 and
produced results in line with the Board's expectations.
The Group continues to win new, high quality and profitable
business in its markets on terms and at rates which reflect the new
bidding disciplines and risk management practices introduced under
the Group's Performance Excellence programme. At 30 June 23, the
order book was GBP10.1bn (2022: GBP9.8bn).
As at 30 June 2023, the Group had GBP569.4m of unsecured
committed facilities and GBP18.0m of uncommitted overdrafts. During
the year the Group repaid the final amount of GBP49.8m of
uncommitted supply chain financing facilities ('KEPS') and as at 30
June 2023 the Group had no outstanding invoices on these
facilities.
Financial covenant certificates for June 2023 have been prepared
with no breaches noted. The Directors have reviewed the Group's
cash flow forecasts for the period to 31 December 2024, 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 included the consideration of risks which may
arise to the Group's available liquidity and its ongoing compliance
with financial covenants within the Group's principal debt
facilities as a result of or in light of the following factors or
circumstances:
-- Potential reductions in trading volumes;
-- Potential future challenges in respect of ongoing projects;
-- Project inflation and subcontractor insolvency;
-- Reduced investment/delays in Property transactions and cost
of adoption of green legislation;
-- Plausible changes in the interest rate environment; and
-- The availability of mitigating actions that could be taken by
management in such a scenario.
During the year there has been a significant increase in bank
base rates which directly impacts the cost of the Revolving Credit
Facility ('RCF'). Rates have increased from 1.0% at June 2022 to
5.0% at June 2023. Inflation has remained higher than expected
which could potentially put further upward pressure on interest
rates. The increase in interest rates has, however, been partly
mitigated by entering into fixed rate swaps at advantageous
rates.
The RCF facility extends to 31 January 2025. Working with
lenders and its advisors, the Board is confident in the Group's
ability to access a number of available funding markets to achieve
an appropriate capital structure to support the Group's strategic
objectives; and would expect to complete a re-financing in the
current financial year.
The Board also considered the macroeconomic and political risks
affecting the UK economy, including the availability of labour and
inflationary pressures leading to increased supply chain costs. 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 infrastructure, health, education and utilities, which are
considered likely to remain largely unaffected by macroeconomic
factors. Although inflationary pressures remain a risk, both in the
supply chain and the labour market, this is partly mitigated by
c.60% of contracts being target cost or cost plus.
The Board has also considered the potential impact of climate
change and does not consider the Group's operations are at risk
from physical climate-related risks such as hurricanes and
temperature changes in the short term. In the medium term the Board
has concluded that any adverse financial impacts from required
changes to operations in line with ESG requirements will be offset
by opportunities which present the Group with additional volumes
and profits, such as replacement of non-sustainable buildings,
construction of new 'clean' power plants and 'green' building
conversions. As such, the longevity of the Group's business model
means that climate change has no material adverse impact on going
concern.
Having reviewed the Group's cash flow forecasts, the Directors
consider that the Group is expected to continue to have available
liquidity headroom under its finance facilities and operate within
its financial covenants over the going concern period, including in
a severe but plausible downside scenario.
As a result, the Directors are satisfied that the Group has
adequate resources to meet its obligations as they fall due for a
period of at least 12 months from the date of approving these
financial statements and, for this reason, they continue to adopt
the going concern basis in preparing these financial
statements.
2 Segmental reporting
Year to 30 June 2023
Infrastructure
Services Construction Property Corporate Group
Continuing operations GBPm GBPm GBPm GBPm GBPm
----------------------------------------- -------------- ------------ -------- --------- ---------
Revenue1
Group and share of joint ventures 1,712.3 1,652.5 37.6 3.0 3,405.4
Less share of joint ventures - (2.4) (22.3) - (24.7)
----------------------------------------- -------------- ------------ -------- --------- ---------
Group revenue 1,712.3 1,650.1 15.3 3.0 3,380.7
----------------------------------------- -------------- ------------ -------- --------- ---------
Timing of revenue1
Products and services transferred
at a point in time 3.9 0.8 21.5 - 26.2
Products and services transferred
over time 1,708.4 1,651.7 16.1 3.0 3,379.2
----------------------------------------- -------------- ------------ -------- --------- ---------
Group and share of joint ventures 1,712.3 1,652.5 37.6 3.0 3,405.4
----------------------------------------- -------------- ------------ -------- --------- ---------
Profit for the year
Operating profit/(loss) before adjusting
items2 79.8 69.5 12.8 (30.6) 131.5
Adjusting items2 (22.6) (23.1) 1.5 (5.8) (50.0)
----------------------------------------- -------------- ------------ -------- --------- ---------
Profit/(loss) from operations 57.2 46.4 14.3 (36.4) 81.5
Net finance income/(costs)3 1.4 (4.3) (0.6) (26.1) (29.6)
----------------------------------------- -------------- ------------ -------- --------- ---------
Profit/(loss) before tax 58.6 42.1 13.7 (62.5) 51.9
----------------------------------------- -------------- ------------ -------- --------- ---------
Taxation (10.9)
----------------------------------------- -------------- ------------ -------- --------- ---------
Profit for the year 41.0
----------------------------------------- -------------- ------------ -------- --------- ---------
Balance sheet
Operating assets4 973.7 413.1 188.5 342.3 1,917.6
Operating liabilities4 (511.7) (732.7) (18.5) (210.2) (1,473.1)
----------------------------------------- -------------- ------------ -------- --------- ---------
Net operating assets/(liabilities)4 462.0 (319.6) 170.0 132.1 444.5
Cash, cash equivalents and borrowings 456.6 594.5 (134.1) (859.2) 57.8
Net financial assets - - - 10.7 10.7
----------------------------------------- -------------- ------------ -------- --------- ---------
Net assets/(liabilities) 918.6 274.9 35.9 (716.4) 513.0
----------------------------------------- -------------- ------------ -------- --------- ---------
Other information
Inter-segmental revenue 31.5 0.1 - 40.5 72.1
Capital expenditure on property,
plant, equipment and intangible assets 0.7 0.1 - 5.8 6.6
Depreciation of property, plant and
equipment (0.9) (0.4) (0.2) (4.6) (6.1)
Amortisation of computer software (1.4) (0.8) - (5.4) (7.6)
----------------------------------------- -------------- ------------ -------- --------- ---------
Year to 30 June 2022
Infrastructure
Services Construction Property Corporate Group
Continuing operations GBPm GBPm GBPm GBPm GBPm
----------------------------------------- -------------- ------------ -------- --------- ---------
Revenue1
Group and share of joint ventures 1,666.6 1,440.8 144.3 4.8 3,256.5
Less share of joint ventures - (3.1) (109.5) - (112.6)
----------------------------------------- -------------- ------------ -------- --------- ---------
Group revenue 1,666.6 1,437.7 34.8 4.8 3,143.9
----------------------------------------- -------------- ------------ -------- --------- ---------
Timing of revenue1
Products and services transferred
at a point in time 5.3 1.5 90.7 - 97.5
Products and services transferred
over time 1,661.3 1,439.3 53.6 4.8 3,159.0
----------------------------------------- -------------- ------------ -------- --------- ---------
Group and share of joint ventures 1,666.6 1,440.8 144.3 4.8 3,256.5
----------------------------------------- -------------- ------------ -------- --------- ---------
Profit for the year
Operating profit/(loss) before adjusting
items2 70.0 60.8 17.6 (27.9) 120.5
Adjusting items2 (21.9) (39.0) (0.9) (13.6) (75.4)
----------------------------------------- -------------- ------------ -------- --------- ---------
Profit/(loss) from operations 48.1 21.8 16.7 (41.5) 45.1
Net finance income/(costs)3 2.1 (4.1) (1.6) (25.6) (29.2)
----------------------------------------- -------------- ------------ -------- --------- ---------
Profit/(loss) before tax 50.2 17.7 15.1 (67.1) 15.9
----------------------------------------- -------------- ------------ -------- --------- ---------
Taxation (3.2)
----------------------------------------- -------------- ------------ -------- --------- ---------
Profit for the year 12.7
----------------------------------------- -------------- ------------ -------- --------- ---------
Balance sheet
Operating assets4 925.5 442.6 144.0 416.8 1,928.9
Operating liabilities4 (466.0) (706.2) (25.9) (179.1) (1,377.2)
----------------------------------------- -------------- ------------ -------- --------- ---------
Net operating assets/(liabilities)4 459.5 (263.6) 118.1 237.7 551.7
Cash, cash equivalents and borrowings 440.2 504.0 (90.3) (863.2) (9.3)
Net financial assets - - - 12.2 12.2
----------------------------------------- -------------- ------------ -------- --------- ---------
Net assets/(liabilities) 899.7 240.4 27.8 (613.3) 554.6
----------------------------------------- -------------- ------------ -------- --------- ---------
Other information
Inter-segmental revenue 25.7 - - 43.6 69.3
Capital expenditure on property,
plant, equipment and intangible assets 2.6 0.4 - 3.7 6.7
Depreciation of property, plant and
equipment (0.9) (0.4) (0.2) (5.1) (6.6)
Amortisation of computer software (0.7) (1.2) - (4.1) (6.0)
----------------------------------------- -------------- ------------ -------- --------- ---------
(1) Revenue is stated after the exclusion of inter-segmental
revenue. 100% of the Group's revenue is derived from UK-based
customers. 15% of the Group's revenue was received from High Speed
Two (HS2) Limited (2022: 10%). Group revenue including joint
ventures is an alternative performance measure.
(2) See note 3 for adjusting items.
(3) Interest was (charged)/credited to the divisions at a
notional rate of 4.0%.
(4) Net operating assets/(liabilities) represent assets
excluding cash, cash equivalents, bank overdrafts, borrowings,
financial assets and liabilities, and interest-bearing
inter-company loans.
3 Adjusting items
These items are explained in detail below:
Profit before
Profit from operations tax
------------------------ ---------------
2023 2022 2023 2022
GBPm GBPm GBPm GBPm
------------------------------------------- ----------- ----------- ------- ------
Reported profit from operations 81.5 45.1 51.9 15.9
Amortisation of acquired intangible assets 19.2 19.7 19.2 19.7
Restructuring and related charges 13.0 40.0 13.0 40.0
Other(1) 17.8 15.7 20.7 18.5
------------------------------------------- ----------- ----------- ------- ------
Adjusted profit from operations 131.5 120.5 104.8 94.1
------------------------------------------- ----------- ----------- ------- ------
(1) Operating profit adjusting items exclude net financing costs
of GBP2.9m (2022: GBP2.8m), see note 3(c).
(a) Amortisation of acquired intangible assets
The Group has amortised contract rights, acquired primarily
through the acquisitions of MRBL Limited (Mouchel Group), May
Gurney Integrated Services PLC and McNicholas Construction Holdings
Limited.
2023 2022
Note GBPm GBPm
------------------------------------------- ---- ------ ------
Amortisation of acquired intangible assets 10 (19.2) (19.7)
------------------------------------------- ---- ------ ------
(b) 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 the Group's Strategic Review.
These are discussed further in the Financial Review and 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.
2023 2022
GBPm GBPm
--------------------------------------------------- ------ ------
Redundancy and other people-related costs1 (7.6) (6.5)
Professional adviser fees and other costs incurred
implementing non-people initiatives2 (4.9) (7.1)
Impairments and other costs relating to investment
properties3 (0.5) (4.2)
Restructure of Regional Southern Build business
4 - (22.2)
---------------------------------------------------- ------ ------
Total charge before tax (13.0) (40.0)
---------------------------------------------------- ------ ------
(1) Costs of GBP4.8m in respect of roles made redundant as a
result of the ongoing implementation of cost saving programmes and
from strategic decisions taken to reduce headcount in a number of
the Group's principal operating divisions. The current year charge
also includes GBP2.8m of costs incurred in the re-sizing of the
International operations. The Directors consider this to be an
adjusting item due to its nature and size.
(2) This includes GBP1.6m of vacant property costs along with a
further GBP4.8m of other non-people related initiatives undertaken
in the year. This is offset by a credit of GBP1.5m as a result of
the finalisation of aborted acquisition costs from the prior
year.
(3) Investment property costs include GBP1.5m in respect of its
investment properties vacated as part of the corporate review of
Group premises. This is offset by a credit of GBP1.0m due to a
revaluation of the land at the Pure recycling plant.
(4) In the prior year the Group completed its strategic
restructuring of its Regional Southern Build business.
(c) Other adjusting items
Other adjusting items are analysed below:
2023 2022
GBPm GBPm
---------------------------------------------- ------ ------
Net financing costs1 (2.9) (2.8)
Legal compliance2 (14.1) (8.8)
Insurance-related items(3) (5.3) (5.2)
Profit on sale of previously impaired land(4) 1.6 -
Software impairment5 - (2.2)
Pension credit6 - 0.5
----------------------------------------------- ------ ------
Total charge before tax (20.7) (18.5)
----------------------------------------------- ------ ------
(1) Net financing costs relate to IFRS 16 interest charges on
leased investment properties previously used as offices.
(2) The Group has provided for an additional; GBP12.6m of costs
in the year in complying with the updated fire compliance
regulations, resulting in a year-end provision of GBP15.5m. In
addition, following the Health and Safety Executive ('HSE')
decision in January 2023 to fine the Group for historical safety
issues, the Group provided for a further GBP1.5m to cover these
costs.
(3) A provision of GBP8.0m has been made for additional costs
associated with an insurance-related receivable. Offsetting this is
a credit of GBP2.7m in relation to insurance proceeds received in
respect of the fire at the Group's recycling plant in Warwickshire,
to offset the prior year impairment and associated costs.
(4) In June 2023 the Group sold some of its land that was
previously impaired through adjusting items. The profit of GBP1.6m
has been credited to adjusting items so as to be consistent with
the original accounting treatment.
(5) During the prior year, the Group impaired some software
related to one of its design businesses. This impairment was
treated as an adjusting item due to its nature.
(6) During the prior year, a Pension Increase Exchange ('PIE')
exercise was undertaken which generated a GBP0.5m credit to the
income statement.
(d) Taxation
Adjusting items in respect of taxation are analysed below:
2023 2022
GBPm GBPm
---------------------------------------------- ----- -----
Deferred tax credit as a result of the change
in tax rate1 2.0 5.1
Tax impact of adjusting items2 9.1 14.8
Other tax charges3 - (3.6)
----------------------------------------------- ----- -----
Total tax credit 11.1 16.3
----------------------------------------------- ----- -----
(1) Benefits arising from change in tax rate to 25%.
(2) The tax impact of the adjusting items charged to continuing
operations has also been included as an adjusting item.
(3) During the prior year, historical tax balances were
identified mainly as a result of historic acquisitions and were
written off.
(e) Adjusted cash flow
2023 2022
Note GBPm GBPm
------------------------------------------------------- ------ ----- -----
Reported cash inflow from operating activities 180.2 40.8
Add: Cash outflow from operating activities (adjusting
items) 3(f) 27.0 41.2
------------------------------------------------------- ------ ----- -----
Adjusted cash inflow from operating activities 207.2 82.0
------------------------------------------------------- ------ ----- -----
(f) Cash outflow from operating activities (adjusting items)
2023 2022
GBPm GBPm
--------------------------------------------------- ------ ------
Adjusting items reported in the income statement 52.9 78.2
Less: non-cash items incurred in the year (39.0) (38.4)
Add: payment of prior year accruals and provisions 13.1 1.4
Cash outflow from operating activities (adjusting
items) 27.0 41.2
---------------------------------------------------- ------ ------
4 Other income
2023 2022
GBPm GBPm
----------------------------------------- ----- -----
Recycling Plant insurance proceeds 2.7 -
Fair value gain on investment properties 11.4 -
----------------------------------------- ----- -----
Other income 14.1 -
----------------------------------------- ----- -----
5 Finance income and costs
2023 2022
GBPm GBPm
-------------------------------------------------------- ------ ------
Finance income
Bank deposits 0.5 -
Interest receivable on loans to related parties 1.1 0.7
Net interest on net defined benefit obligation 7.8 -
-------------------------------------------------------- ------ ------
9.4 0.7
-------------------------------------------------------- ------ ------
Finance costs
Bank interest (29.0) (18.9)
Interest payable on leases (9.5) (6.5)
Forward funding interest - (0.5)
Foreign exchange gains/(losses) on foreign denominated
borrowings 2.5 (9.9)
Fair value (losses)/ gains on cash flow hedges recycled
from other comprehensive income(1) (1.2) 7.4
Net interest on net defined benefit obligation - 1.0
Other (1.8) (2.5)
-------------------------------------------------------- ------ ------
(39.0) (29.9)
-------------------------------------------------------- ------ ------
Net finance costs (29.6) (29.2)
-------------------------------------------------------- ------ ------
(1) Fair value (losses)/gains arise from movements in
cross-currency swaps which hedge the currency risk on foreign
denominated borrowings.
6 Retirement benefit obligations
The principal assumptions used by the independent qualified
actuaries are shown below.
2023 2022
% %
----------------------------------------- --------- ----
Discount rate 5.30 3.90
Inflation rate (Retail Price Index) 3.20 3.15
Inflation rate (Consumer Price Index)(1) 2.30-2.75 2.65
----------------------------------------- --------- ----
(1) CPI rates for 2023 have been based on individual scheme
expected durations.
The amounts recognised in the financial statements in respect of
the Group's defined benefit schemes are as follows:
2023 2022
-------- -------- --------- ------- -------- ---------
Kier Acquired Kier Acquired
Group schemes Total Group schemes Total
GBPm GBPm GBPm GBPm GBPm GBPm
-------------------------------------- -------- -------- --------- ------- -------- ---------
Opening net surplus/(deficit) 170.2 24.5 194.7 78.6 (32.4) 46.2
Credit/(charge) to income
statement 6.6 1.1 7.7 1.5 (0.1) 1.4
Employer contributions 0.4 9.5 9.9 0.5 10.3 10.8
Actuarial (losses)/gains ( 59 .7) (48.1) (107.8) 89.6 46.7 136.3
-------------------------------------- -------- -------- --------- ------- -------- ---------
Closing net surplus/(deficit) 117.5 (13.0) 104.5 170.2 24.5 194.7
-------------------------------------- -------- -------- --------- ------- -------- ---------
Comprising:
Fair value of scheme assets 850.9 396.8 1,247.7 1,048.0 509.0 1,557.0
Net present value of the
defined benefit obligation (733.4) (409.8) (1,143.2) (877.8) (484.5) (1,362.3)
Net surplus/(deficit) 117.5 (13.0) 104.5 170.2 24.5 194.7
-------------------------------------- -------- -------- --------- ------- -------- ---------
Presentation of net surplus/(deficit)
in the Consolidated balance
sheet:
Retirement benefit assets 117.5 11.8 129.3 170.2 29.0 199.2
Retirement benefit obligations - (24.8) (24.8) - (4.5) (4.5)
-------------------------------------- -------- -------- --------- ------- -------- ---------
Net surplus/(deficit) 117.5 (13.0) 104.5 170.2 24.5 194.7
-------------------------------------- -------- -------- --------- ------- -------- ---------
7 Taxation
2023 2022
GBPm GBPm
------------------------------------------ ------ -----
Profit before tax 51.9 15.9
Less: Income from joint venture companies (3.6) (0.8)
------------------------------------------ ------ -----
Adjusted profit before tax 48.3 15.1
------------------------------------------ ------ -----
Current tax (7.3) (8.5)
Deferred tax (3.6) 5.3
Total tax charge in the income statement (10.9) (3.2)
Effective tax rate 22.6% 21.2%
------------------------------------------ ------ -----
The Deferred Tax Asset includes GBP106.2m of tax losses (2022:
GBP105.6m), and GBP22.6m of other deferred tax assets and
liabilities (2022: GBP3.2m).
When considering the recoverability of net deferred tax assets,
the taxable profit forecasts are based on the same Board-approved
information used to support the going concern and goodwill
impairment assessments.
The following evidence has been considered when assessing
whether these forecasts are achievable and realistic:
-- The business traded in line with Board expectations in 2023;
-- The Group has substantially completed its restructuring
activities and is focusing on the achievement of the medium-term
growth strategy; and
-- The Group's core businesses are well-placed to benefit from
the announced and committed UK Government spending plans to invest
in infrastructure, decarbonisation and spending.
When considering the length of time over which the losses are
expected to be utilised, the Group has taken into account that
generally only 50% of profits in each year can be offset by brought
forward losses.
Based on these forecasts, the Group is expected to utilise its
deferred tax asset over a period of approximately 10 years.
The Research and Development Expenditure Credit ('RDEC') of
GBP22.8m was included in operating profit during the year (2022:
GBP20.7m). Included in the corporation tax asset at 30 June 2023
were RDEC receivables of GBP16.1m (2022: GBP12.0m).
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 year (2022: GBPnil).
9 Earnings per share
a) Reconciliation of earnings used in calculating earnings per share
Profit attributable to the ordinary equity holders of the
company used in calculating basic earnings per share.
2023 2022
Note GBPm GBPm
------------------------------------------------- ---- ------ ------
Continuing operations
Profit for the year 41.0 12.7
Less: non-controlling interest share 0.1 -
------------------------------------------------- ---- ------ ------
Profit (after tax and minority interests), being
net gains attributable to equity holders of the
parent (A) 41.1 12.7
------------------------------------------------- ---- ------ ------
Adjusting items (excluding tax) 3 52.9 78.2
Tax impact of adjusting items 3 (11.1) (16.3)
Adjusted profit after tax (B) 82.9 74.6
------------------------------------------------- ---- ------ ------
b) Weighted average number of shares used as the denominator
2023 2022
million million
Weighted average number of shares used as the
denominator in calculating basic earnings per
share (C) 431.2 443.3
Adjustments for calculation of diluted earnings
per share
Impact of share options 10.3 11.8
-------------------------------------------------- -------- --------
Weighted average number of shares used as the
denominator in calculating diluted earnings per
share (D) 441.5 455.1
-------------------------------------------------- -------- --------
The weighted average number of shares is lower than the number
of shares in issue (per note 14) primarily due to shares that are
held by the Group's employee benefit trusts (see note 15), which
are excluded from the calculation.
Options granted to employees under the Sharesave, Conditional
Share Awards Plan ('CSAP') and Long Term Incentive Plan ('LTIP')
schemes are considered to be potential ordinary shares. They have
been included in the determination of diluted earnings per share if
the required performance obligations would have been met based on
the Group's performance up to the reporting date, and to the extent
to which they are dilutive. The options have not been included in
the determination of basic earnings per share. Details relating to
the share option schemes are set out in note 15.
c) Basic earnings per share
2023 2022
pence pence
-------------------------------------------------- ------ ------
Total basic earnings per share attributable to
the ordinary equity holders of the Company (A/C) 9.5 2.9
--------------------------------------------------- ------ ------
Adjusted basic earnings per share attributable
to the ordinary equity holders of the Company
(B/C) 19.2 16.8
--------------------------------------------------- ------ ------
d) Diluted earnings per share
2023 2022
pence pence
Total diluted earnings per share attributable
to the ordinary equity holders of the Company
(A/C) 9.3 2.8
----------------------------------------------------- ------ ------
Adjusted diluted earnings per share from continuing
operations attributable to the ordinary equity
holders of the Company (B/D) 18.8 16.4
----------------------------------------------------- ------ ------
10 Intangible assets
Intangible
contract Computer
Goodwill rights software1 Total
GBPm GBPm GBPm GBPm
---------------------------------------- -------- ---------- ---------- -------
Cost
At 1 July 2021 538.8 259.4 132.8 931.0
Additions - - 0.7 0.7
Disposals - (7.2) (0.9) (8.1)
At 30 June 2022 538.8 252.2 132.6 923.6
---------------------------------------- -------- ---------- ---------- -------
Additions - - 2.7 2.7
Disposals - (16.5) (9.6) (26.1)
---------------------------------------- -------- ---------- ---------- -------
At 30 June 2023 538.8 235.7 125.7 900.2
---------------------------------------- -------- ---------- ---------- -------
Accumulated amortisation and impairment
At 1 July 2021 (2.1) (155.7) (76.0) (233.8)
Charge for the year - (19.7) (6.0) (25.7)
Disposals - 7.2 - 7.2
Impairment - - (2.2) (2.2)
---------------------------------------- -------- ---------- ---------- -------
At 30 June 2022 (2.1) (168.2) (84.2) (254.5)
---------------------------------------- -------- ---------- ---------- -------
Charge for the year - (19.2) (7.6) (26.8)
Disposals - 16.5 9.6 26.1
At 30 June 2023 (2.1) (170.9) (82.2) (255.2)
---------------------------------------- -------- ---------- ---------- -------
Net book value
---------------------------------------- -------- ---------- ---------- -------
At 30 June 2023 536.7 64.8 43.5 645.0
---------------------------------------- -------- ---------- ---------- -------
At 30 June 2022 536.7 84.0 48.4 669.1
---------------------------------------- -------- ---------- ---------- -------
(1) Computer software mainly relates to the Group's ERP software
and is being amortised.
11 Investment properties
Owned Right-of-use
assets assets Total
GBPm GBPm GBPm
---------------------------------------------------- ------- ------------ -----
At 1 July 2021 8.3 41.3 49.6
Transfers 2.0 6.1 8.1
Additions - 2.5 2.5
Fair value gain/(loss) recognised in administrative
expenses 2.7 (2.5) 0.2
---------------------------------------------------- ------- ------------ -----
At 30 June 2022 13.0 47.4 60.4
---------------------------------------------------- ------- ------------ -----
Transfers 2.7 - 2.7
Additions 22.8 1.1 23.9
Fair value gain/(loss) recognised in other income 14.4 (3.0) 11.4
---------------------------------------------------- ------- ------------ -----
At 30 June 2023 52.9 45.5 98.4
---------------------------------------------------- ------- ------------ -----
12 Net cash
2023 2022
GBPm GBPm
------------------------------------------------------ ------- -------
Cash and cash equivalents - bank balances and cash in
hand 376.9 297.7
Borrowings due within one year - (40.5)
Borrowings due after one year (319.1) (266.5)
Impact of cross-currency hedging 6.3 12.2
------------------------------------------------------ ------- -------
Net cash 64.1 2.9
------------------------------------------------------ ------- -------
Average month-end net debt was GBP232.1m (2022: GBP216.1m). Net
debt excludes lease liabilities.
13 Trade and other payables
2023 2022
GBPm GBPm
------------------------------------ ------- -------
Current:
Trade payables1 310.0 354.2
Accruals 585.1 527.4
Sub-contract retentions 22.5 32.7
Other taxation and social security2 138.4 122.1
Other payables and deferred income 19.0 29.3
1,075.0 1,065.7
------------------------------------ ------- -------
Non-current:
Trade payables 5.1 11.0
Sub-contract retentions 31.8 23.1
------------------------------------ ------- -------
36.9 34.1
------------------------------------ ------- -------
(1) There are no payments due to suppliers who are on
bank-supported supply chain finance arrangements (2022:
GBP49.8m).
14 Share capital and reserves
Share capital
The share capital of the Company comprises:
2023 2022
----------------- -----------------
Number GBPm Number GBPm
---------------------------------- ----------- ---- ----------- ----
Authorised, issued and fully-paid
ordinary shares of 1 pence each 446,314,435 4.5 446,241,682 4.5
---------------------------------- ----------- ---- ----------- ----
The holders of ordinary shares are entitled to receive dividends
as declared from time to time and are entitled to one vote per
share at meetings of the Company.
During the year, 72,753 shares were issued under the Sharesave
Scheme (2022: 75,893).
Cash flow hedge reserve
This reserve comprises the effective portion of the cumulative
net change in the fair value of the cash flow hedging instruments
related to hedged transactions that have not yet occurred, net of
any related deferred tax.
Translation reserve
This reserve comprises the cumulative difference on exchange
arising from the retranslation of net investments in overseas
subsidiary undertakings. In accordance with the transitional
provisions of IFRS 1, this reserve was set to nil at 1 July
2004.
15 Share-based payments
The Group has an established 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 2022 annual financial
statements. 8,432,381 shares vested under the LTIP schemes during
the year (2022: no share awards vested). 15,492,751 new awards were
granted under the LTIP during the year (2022: 8,570,392). Awards
made to members of the Board are subject to a two-year holding
period post vesting.
The Group previously operated a CSAP, under which senior
employees received 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
were entitled to receive dividend equivalents on these awards. No
new awards were granted under the CSAP during the year (2022: no
awards granted) and no shares vested under the CSAP during the year
(2022: 650,951 shares vested plus a further 9,777 shares equivalent
to the dividends that would have been received during the vesting
period).
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. 8,730,264 options were
granted under the Sharesave scheme during the year (2022:
7,943,643). 72,753 Sharesave Scheme options were exercised during
the year (2022: 75,983).
The assumptions used in calculating the fair values of the
shares granted under the share-based payment schemes during the
year were as follows:
LTIP
subject
to a holding
LTIP period Sharesave
-------------------------------------------------- ---------- ------------- ----------
21 October 21 October 2 November
Grant date 2022 2022 2022
Shares granted 11,890,876 3,601,875 8,730,264
Share price at grant 60.0p 60.0p 58.2p
Exercise price nil nil 55.0p
Expected term 3 years 3 years 3.3 years
Holding period n/a 2 years n/a
Expected volatility 53.7% 44.5% 62.1%
Risk-free interest rate 3.83% 4.14% 3.13%
Dividend yield n/a n/a 0.0%
Value per option:
LTIP - TSR element (25%)(1,3) 41.2p 38.1p -
LTIP - EPS (50%) and free cash flow ('FCF') (25%)
elements (2,3) 60.0p 55.6p -
Sharesave (2) - - 27.6p
(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 total shareholder return ('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 earnings per share ('EPS') and
free cash flow ('FCF') 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 year was GBP8.4m (2022: GBP8.6m).
Shares held in trusts
The Group's employee benefit trusts acquire shares in the Group
from the market, that are intended to be used in settling LTIP
awards vesting in the future. The shares held by the trusts are
accounted for as a deduction from equity within retained
earnings.
Shares acquired by the trusts during the year at a cost of
GBP12.4m (2022: GBP7.5m), net of shares transferred to deferred
bonus recipients for proceeds of GBP0.5m (2022: GBP0.5m), are
reflected in the statement of changes in equity as a purchase of
own shares.
At 30 June 2023, a total of 16,952,961 shares were held by the
trusts (2022: 7,555,030 shares), with an historic cost value of
GBP11.2m (2022: GBP7.7m).
16 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 initially measured at
fair value, based on the premium received from the joint venture or
the differential in the interest rate of the borrowing including
and excluding the guarantee. Subsequent to initial recognition,
financial guarantee contracts are measured at the higher of the
initial fair value measurement (adjusted for any income amounts
recognised) and the amount determined in accordance with the
expected credit loss model. 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.
Fire and cladding review
The Group has undertaken a review of all of its current and
legacy constructed buildings where it has used cladding solutions
and continues to assess the action required in line with the latest
updates to Government guidance, as it applies, to multi-storey and
multi-occupied residential buildings. The buildings, including the
cladding works, were signed off by approved inspectors as compliant
with the relevant Building Regulations at the time of
completion.
In preparing the financial statements, currently available
information has been considered, including the current best
estimate of the extent and future costs of work required, based on
the reviews and physical inspections undertaken.
Where an obligation has been established and a reliable estimate
of the costs to rectify is available, a provision has been made. No
provision has been made where an obligation has not been
established.
These estimates may be updated as further inspections are
completed and as work progresses which could give rise to the
recognition of further liabilities. Such liabilities, should they
arise, are expected to be covered materially by the Group's
insurance arrangements thereby limiting the net exposure. Any
insurance recovery must be considered virtually certain before a
corresponding asset is recognised and so this could potentially
lead to an asymmetry in the recognition of assets and
liabilities
17 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 for
the year ended 30 June 2022.
Details of contributions made to the pension schemes by the
Group are detailed in note 6.
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