Construction company Kier Group Plc (KIE.L) on Thursday annouced preliminary results for fiscal 2009, reporting a decline in profit, as revenues dropped sharply at its Construction and Partnership Homes divisions, reflecting tough economic conditions, and write-downs related to land increased. Looking ahead, the company said the year started well, but it expects the current economic climate would continue to pose challenges.
Profit attributable to equity holders of the parent for the fiscal year ended June 30, 2009 slipped to GBP 16.1 million from GBP 47.2 million reported in the prior year. Earnings per share were 44.0 pence, sharply lower than 129.7 pence a year earlier. Pre-tax profit declined to GBP 24.8 million from GBP 63.4 million a year earlier.
Profit attributable to equity holders of the parent, before exceptional items, was GBP 35.8 million, down from GBP 61.6 million a year ago. Earnings per share, before exceptional items, were 97.8 pence, compared to 169.2 pence in the previous year. Pre-tax profit, before exceptional items, was GBP 50.6 million, down from GBP 87.1 million last year.
The company noted that exceptional charges, associated with pension credit and other costs, totaled GBP 27.3 million in fiscal 2009, compared to charges of GBP 24.6 million in fiscal 2008. Land and work-in-progress write-downs increased to GBP 49.8 million from GBP 31.3 million in the previous year. In 2009, the company recorded a credit of GBP 24.3 million associated with changes in the salary related section of the Kier Group Pension Scheme. Reorganization costs in 2009 were GBP 1.8 million, compared to GBP 9.5 million last year.
Underlying pre-tax profit, which excludes amortisation of intangible assets and exceptional items, was GBP 52.8 million, compared to GBP 89.2 million a year earlier. Underlying earnings per share were 102.5 pence compared to 174.8 pence last year.
Revenue for the year fell to GBP 2.146 billion from GBP 2.374 billion in the previous year. Group revenue, which discounts share of joint ventures, for the latest year dropped to GBP 2.112 billion from GBP 2.332 billion generated last year.
Revenue from Construction segment, comprising Kier Regional and Kier Construction, declined to GBP 1.492 billion from GBP 1.585 billion, largely due to a decline in private sector projects. The company noted that 56% of its awards were for public sector projects, with education being the biggest source of work accounting for some GBP 600 million of total awards.
At Support Services, revenue for fiscal 2009 rose to GBP 437.9 million from GBP 393.7 million in the previous year. The division consists of four business streams - Kier Building Maintenance, Kier Facilities Services, Kier Street Services and Kier Plant. The company noted that the largest and fastest growing business stream is Building Maintenance, with revenue growing 14.0% to GBP 329.1 million in the year.
Partnership Homes generated GBP 150.8 million in revenues, compared to GBP 311.5 million last year, as unit sales declined from 2,090 in 2008 to 1,141 in 2009. Kier noted that conditions within the housing market were difficult throughout the year largely due to restricted mortgage availability and tighter mortgage criteria as well as weak buyer sentiment.
In this segment, 59% of the unit sales were social housing sales, and 41% were private unit sales, compared to 43% social housing sales and 57% private unit sales in 2008. Average selling prices fell from GBP 149,000 to GBP 132,200 through a combination of reduced selling prices and an increase in social housing sales, Kier said.
Developments division brought in GBP 64.7 million in revenues, less than GBP 84.5 million reported in the previous year, reflecting the low level of development sales within the Property business.
Further, Kier said the Construction and Support Services divisions had combined order books of GBP 4.5 billion, up from GBP 4.1 billion in 2008.
The company's board has proposed to maintain the total dividend for the year at 55.0 pence, flat with last year. The final dividend of 37 pence will be paid on November 27 to shareholders on the register on September 25.
Early this month, Kier said it purchased Telereal Trillium's investment in Kent's Building Schools for the Future or BSF Local Education Partnership. The company said today that it is active in the BSF market and its role on the Kent County Council BSF has started to deliver with GBP 108 million already awarded and a further GBP 300 million anticipated to come on-stream in due course.
Looking ahead, the company said the current economic climate would continue to pose challenges to its business over the next 12 months.
In Partnership Homes, Kier feels the difficult market conditions of the last 12 months are beginning to ease. In the Developments division, Kier sees liquidity remaining a key issue although there are some signs that banks are cautiously re-entering the market.
"The new financial year has started well. The current economic climate will, no doubt, present us with many challenges however our businesses are financially strong," the company said.
KIE.L is currently trading at 1,260.00 pence, up 15.00 pence or 1.20%, on 3,522 shares.
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