Order book steady at resilient Kier

Kier Group battled through tough trading conditions to deliver full-year results in line with expectations.

Underlying pre-tax profits of £70.0m in the year to June 30th were up 2% on the previous year's £68.9m and a shade ahead of market expectations of £69.7m.

The increase in adjusted profits was achieved despite the construction, services and property group's top line declining 5% to £2,069m from £2,179m the year before, reflecting the moribund state of much of the UK construction market and the group's policy of not seeking growth at the expense of quality work.

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The group's fussiness in what orders it accepts has not prevented it from building a strong pipeline in the Construction division.

In the Services division, revenue declined as a result of a not unexpected tail-off in activity in the Maintenance business.

Combined together, the Construction and Services division's order book stands at £4.3bn, unchanged from a year earlier; 95% of the Construction division's targeted revenue and 91% of the Services division's targeted revenue for 2013 is secure and probable, the group revealed.

There was a more substantial contribution this time round from the Property division, including the housing businesses, with a 44% increase in its operating profit to £22.0m (2011: £15.3m).

Kier Group had some success in holding the line in terms of margins, with the Services division's margins steady at 4.5% while the Construction arm's margin ticked lower to 2.5% from 2.7% the year before.

Underlying earnings per share (EPS) of 156.8p were up 6% from the previous year's 148.4p, as the group enjoyed a 6% reduction in its effective tax rate. Analysts following the company had pencilled in 147.91p for EPS.

Net cash at the end of June stood at £129m, down from £165m a year earlier, but this was after investment of around £50m during the year. The average month-end net cash balance during the year was £95m, versus £129m the year before.

"Our strong balance sheet, focused approach to cost control and track record of delivery across all our sectors gives us the confidence to invest in the long-term growth of the business and to continue to provide high quality, innovative solutions to our customers," said Paul Sheffield, Kier's Chief Executive, though he conceded that "trading conditions will remain demanding in our core markets for some time."

The full-year dividend is up 3% to 66p from 64p the year before, reflecting the board's confidence in the business. The broking community evidently have similar confidence, as they had predicted a full-year divi of 65.94p.

Kier's shares edged up 16p to 1,361p in the first hour of trading.

JH