TIDMKIE
RNS Number : 9784L
Kier Group PLC
16 September 2021
16 September 2021
Kier Group plc
Results for the year ended 30 June 2021
Strong operational performance and materially improved
results
Kier Group plc (the "Company" or the "Group"), a leading
infrastructure services and construction company, announces its
results for the year ended 30 June 2021 ("FY21" or the "year").
Key Financial Highlights - Continuing Operations
Year to Year to
30 June 2021 30 June 2020
Adjusted results
Revenue (GBPm)(3) 3,329 3,476
Adjusted operating profit (GBPm)(1) 100.3 41.4
Adjusted operating margin 3.0% 1.2%
Adjusted profit before tax (GBPm)(2) 65.4 16.9
Adjusted basic earnings per share
(note 8) 25.0p 12.2p
Net cash / (debt) (GBPm)(4) 3.0 (310.3)
Average month-end net debt (GBPm) (432) (436)
Reported
Group revenue (GBPm) 3,261 3,423
Profit / (loss) from operations
(GBPm) 43.7 (195.6)
Profit / (loss) before tax (GBPm) 5.6 (225.3)
Basic earnings per share (note 8) 11.6p (85.3)p
(1) Stated before adjusting items of GBP35.6m (2020: GBP213.3m)
and amortisation of acquired intangible assets of GBP21.0m (2020:
GBP23.7m).
(2) Stated before adjusting items of GBP38.8m (2020: GBP218.5m)
and amortisation of acquired intangible assets of GBP21.0m (2020:
GBP23.7m).
(3) Revenue of the Group and its share of joint ventures.
(4) Disclosed net of the effect of hedging instruments and
excludes leases - see note 10 to the preliminary financial
statements.
Highlights
-- 2019 operational and financial strategic actions delivered
o Simplification of the Group complete, Group's cash generation
improved and balance sheet strengthened
-- Gross proceeds of c.GBP350m raised through successful capital
raise and sale of Kier Living
-- Extension of the Group's 2017 Revolving Credit Facility (RCF)
to January 2025
-- Performance Excellence culture established
-- Launched Sustainability Framework in July 2020, "Building for
a Sustainable World"
-- Strong operational performance and materially improved results
o Revenue of GBP3.3bn (FY20: GBP3.5bn): reduction due to exiting
non-core low margin and loss-making contracts, successful
completion of our motorway upgrade projects and COVID-19 pandemic,
partially offset by growth in our core businesses
o Adjusted operating profit of GBP100m (FY20: GBP41m): reported
profit GBP44m (FY20: loss GBP(196)m)
o Margin improvement to 3% and improved quality of earnings
o Adjusted basic EPS: 25.0p (FY20:12.2p): improvement driven by
profit generation
o Free cash flow of GBP93m (FY20: GBP(8)m): strong performance
as profits translating to cash
o Net cash / (debt) at 30 June 2021 of GBP3m (FY20: GBP(310)m),
average month-end net debt of GBP(432)m (FY20: GBP(436)m)
-- Includes reduction of GBP46m in supply-chain financing
-- Receipt of capital raise and Kier Living sale proceeds
arriving in the final months of the year. Limited impact on average
net debt
-- Recent contract awards
o Highways: appointed to deliver Transport for London's (TfL)
new c.GBP200m Maintenance and Management contract
o Infrastructure: appointed on the first stage of a GBP50m
Enabling Civil Works programme on Phase 2a of HS2
o Utilities: contract with Openreach to construct new broadband
infrastructure
o Construction: won a place on the Ministry of Justice's GBP1bn
New Prisons Programme; appointed to Lot 1 of the SCAPE next
generation framework in England & Wales and Lot 2 of newly
launched SCAPE Scotland
o Focused on winning and executing contracts with appropriate
risk / reward
-- High quality order book of GBP7.7bn
o Covering 83% of FY22 expected revenue
o New awards received in H2. Lower level than last year due to
procurement delays from the pandemic
o Underpinned by significant frameworks and other
opportunities
o Well positioned to continue benefiting from UK Government
infrastructure spending commitments
-- Focused on delivering medium term value creation plan
o Revenue: GBP4.0 - 4.5bn
o Adjusted operating profit margin: c.3.5%
o Cash conversion of operating profit: c.90%
o Balance sheet: Sustainable net cash position with capacity to
invest
o Dividend: Sustainable dividend policy: c.3 x cover through the
cycle
Andrew Davies, Chief Executive, said:
"The Group delivered a strong operational performance and
materially improved results in FY21. We have completed the
strategic actions set out in 2019 to simplify and focus the Group,
improve cash generation and strengthen our balance sheet. The
successful capital raise, the recent sale of Kier Living, and the
extension of the Group's RCF facility provides Kier with the
financial and operational flexibility to continue to pursue its
strategic objectives within its chosen markets and will allow it to
further enhance and capitalise on its position as a strategic
partner to its customers.
Current trading is in line with our expectations, and despite
inflationary pressures and the impact of increased national
insurance contributions, our outlook for the current year remains
unchanged. We are now focused on delivering our medium term value
creation plan by leveraging our attractive market positions,
delivering our high-quality order book and fostering our long-term
customer relationships and sector expertise. "
FY21 Results Presentation
Kier Group plc will host a presentation for analysts and
investors at 8:30am on 16 September 2021 at the offices of FTI
Consulting, 200 Aldersgate Street, London EC1A 4HD.
Analysts wishing to attend should contact FTI Consulting to
register - becky.west@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/61112ab3be9f22100006ce1d/fda
United Kingdom: 0800 640 6441
United Kingdom (Local): 020 3936 2999
All other locations: +44 20 3936 2999
Conference password: 332505
An audio recording will be available on our website in due
course.
Capital Markets Event
Kier Group plc will be hosting a Capital Markets Event in FY22.
Further details to be announced.
The in-person event will be hosted by Andrew Davies, CEO and
Simon Kesterton, CFO, and will include presentations from our Group
Managing Directors of our core business units:
-- Infrastructure Services - Highways, Utilities and Infrastructure
-- Construction
-- Property
Investor and analysts will also be able to join the Capital
Markets Event through a webcast. Details will be announced closer
to the time.
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 2021 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 and construction
group. The services we offer to our clients fit in to three core
market propositions: Infrastructure Services, Construction and
Property.
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 Twitter: @kiergroup
Connect with us on LinkedIn: Kier Group
Introduction
The Group delivered materially improved results in FY21
demonstrating the completion of our operational and financial
strategic actions announced in June 2019; to simplify and focus the
Group, improve the Group's cash generation and strengthen its
balance sheet.
In FY21, we reported revenue of GBP3.3bn, a slight decrease of
4% on the prior year reflecting our ongoing exit of some non-core
low margin and loss-making contracts, the successful completion of
our motorway upgrade projects and the ongoing impact of the
COVID-19 pandemic; partially offset by growth in our core
businesses.
We generated strong adjusted operating profit of GBP100m (FY20:
GBP41m). An increase in margin from 1.2% to 3.0% reflects our
improved quality of earnings.
Free cash flow amounted to GBP93m (FY20: GBP(8)m). We achieved a
high level of cash conversion as profits translated to cash and
working capital normalised, enabling the Group to support business
growth opportunities and deleveraging.
The Group's net cash position at 30 June 2021 of GBP3m (FY20:
GBP(310)m) demonstrates the continued focus on cash and improved
strength of the Group's balance sheet.
Average year-end net debt for FY21 was GBP432m and remained at a
similar level to the prior year (FY20: GBP436m) due to the Group's
receipt of the capital raise and Kier Living sale proceeds in the
final months of the year.
Strategy Update
The strong performance demonstrates that the simplification of
the Group has been completed through the exit of non-core
businesses and the adoption of an appropriate cost base. These
actions delivered a savings run rate of c.GBP115m in FY21. The
Performance Excellence culture has been embedded in the Group which
will drive continuous improvement.
The successful capital raise, together with the recent sale of
Kier Living, raised c.GBP350m of gross proceeds for the Group.
This, together with the extension of the Group's 2017 RCF Facility
to January 2025, provides Kier with the financial and operational
flexibility to continue to pursue its strategic objectives within
its chosen markets and will 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
announced and committed UK Government spending plans to invest in
infrastructure, decarbonisation and the post COVID-19 recovery. We
have secured places on long-term frameworks through which much of
the increased spend will be deployed.
This, combined with our nationwide coverage and project
management expertise, is expected to drive our strategic actions of
disciplined growth, consistent delivery and strong cash
generation.
Medium Term Value Creation Plan
The Group is now focused on delivering its medium term
targets:
o Revenue: GBP4.0 - 4.5bn
o Adjusted operating profit margin: c.3.5%
o Cash conversion of operating profit: c.90%
o Balance sheet: Sustainable net cash position with capacity to
invest
o Dividend: Sustainable dividend policy: c.3 x cover through the
cycle
The Group aims to achieve these medium term targets through:
-- volume growth and improved contract profitability;
-- continued management discipline;
-- deploying additional capital in the Property business; and
-- a recovery from COVID-19
Performance Excellence
Kier now operates with a strong operational and financial risk
management framework, which is fundamental to, and embedded into,
Kier's contract selection and delivery processes.
Kier's Performance Excellence culture introduced a consistent
approach in how Kier develops and manages people, as well as
processes, projects, costs and its way of working. The key tenets
are as follows:
-- deliver projects on time and to budget, thereby meeting
clients' and customers' expectations;
-- do not enter into contracts with unacceptable risk profiles;
-- introduce increased levels of resilience, and a consistency
of approach, across the Group; and
-- win new business with attractive margins.
Kier launched a new Operating Framework in January 2020, which
sets out the governance structure within which the Group now
operates, including a new framework for the assessment of contract
risk and new project reviews to ensure that the Group only enters
into contracts with an acceptable and appropriate risk and
financial reward profile.
Performance Excellence is also fundamental to Kier's approach to
safety, with the aim of continuing to improve the Group's overall
safety performance.
Supply Chain Partners
We have also focused 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 2021 to 30 June 2021, the Group's aggregate average
payment days was 34 days (H1: 33 days) and the percentage of
payments made to suppliers within 60 days was 89% (H1:91%). For the
year, our payments days have reduced from 38 to 34 days.
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 Changes
The Group has continued to strengthen its management team
through the year with three new appointments to the Executive
Committee:
-- Alpna Amar, Corporate Development Director responsible for
Strategy, Mergers & Acquisitions and Investor Relations
-- Leigh Thomas, Group Managing Director of our Property business
-- Sophie Timms, Corporate Affairs Director responsible for UK
Government relations and communications
The refreshed team provides additional strength and perspectives
as the Group moves into the next phase of its strategy.
Customers and winning new work
We remain focused on winning work through our long standing
client relationships and regionally based operations. The Group's
order book at 30 June 2021 was GBP7.7bn (FY20: GBP7.9bn). We
continue to win new high quality and profitable work.
During the year:
-- Highways was appointed to deliver a c.GBP200m maintenance and
management contract for TfL over eight years
-- Infrastructure was appointed on the first stage of a GBP50m
Enabling Civils Works programme on Phase 2a of HS2
-- Utilities won a contract with Openreach to construct new
broadband infrastructure in urban and rural areas in the west and
south of England as well as Scotland, building on our current
delivery of a similar contract in Wiltshire, Hampshire and
Berkshire
-- Construction won a place on the Ministry of Justice's GBP1bn
New Prisons Programme and was also appointed to Lot 1 of the SCAPE
next generation framework in England & Wales and Lot 2 of newly
launched SCAPE Scotland
Safety, Health and Environment (SHE)
The safety, health and wellbeing of all of our employees and
suppliers remains of paramount importance. We continue to work in
line with Government Guidance in respect of COVID-19.
With that, it is a matter of deep regret that an employee of one
of our subcontractors suffered a fatality at one of our sites in
our International business in UAE in August 2020. We worked with
our subcontractor and fully co-operated with the local authority in
their investigations to ensure all lessons learnt could be embedded
in the Group's operations. Our sympathy goes out to the bereaved
family.
The Group's 12-month rolling Accident Incident Rate ('AIR') of
105 and 12-month rolling All Accident Incident Rate ('AAIR') of 332
represents increases of c.21% and c.9% respectively compared to
FY20. Whilst we recognise this is disappointing, we retain a solid
safety record and maintain high safety standards in our industry.
Health and safety remains our license to operate and we continue to
embed best practice and make conditions as safe as possible for our
workforce. Looking at the long-term trend, the Group's AIR and AAIR
have both decreased by c.50% compared to five years ago.
ESG
In July 2020, the Group launched a new sustainability policy
"Building for a Sustainable World", which reframed sustainability
away from being an environmental specialism to being a strategic
and business critical mindset, balancing the need for environmental
resilience, community resilience and profitability in day-to-day
decision making.
The framework is governed through Sustainability Leadership
Forums established at Group level and for each core business.
-- Environmental
Under this framework, the Group has committed to achieving net
zero carbon across its own operations and supply chain by 2045.
This supports the UK Government's commitment to Net Zero by
2050.
Our environmental sustainability approach is based on five
pillars:
1. Pollution prevention: prevent pollution from all operations within our control
2. Sustainable procurement: take a life cycle approach to the
sourcing of materials, products and services
3. Net zero carbon: achieve net zero carbon across its business
operations by 2039 and supply chain by 2045
4. Zero avoidable waste: produce no avoidable waste by 2035 and
operations to be single use plastic free by 2030
5. Biosphere protection: maintain a healthy environment for future generations
In FY21, the Group's businesses have concentrated on achieving
their environmental framework reduction targets, which they have
made considerable progress on, as well as developing the Group's
pathway to Net Zero, with interim targets, annual carbon budgets
and limits on carbon offsetting.
The Group is launching carbon, water, waste and biodiversity
KPIs for FY22, and seeking to employ innovation, new technology and
best practices in pollution prevention.
We have won a number of "Green Apple" awards for biodiversity
and protected species enhancement. In partnership with Network
Rail, Kier won a "Sustainability & Environmental Excellence"
award at the 2020 Rail Business Awards, for its work in the
community. Kier was shortlisted for "Most Innovative Use of
Existing Tech" at the 2020 Water Industry Awards, as a result of
its collaboration with Huber and South West Water to reduce
chemical consumption and operating costs in the South West of the
UK.
-- Social
The Group's work and actions directly and positively impact the
communities it serves, and this in turn generates wider value for
society. Our social sustainability framework is based on the
following pillars:
1. Building for tomorrow: developing partnerships to drive forward sustainability
2. Diversity and inclusion: creating a diverse and inclusive business
3. Our social value and purpose: tackling inequality at work and in communities
4. Employee wellbeing and retention: recognising the importance
of safety, wellbeing and employee retention
5. Protecting human rights: addressing the way we operate and conduct our business
The Group has achieved progress on these objectives, including
its graduate intake comprising 25% women in FY21 and achieving 41%
of expenditure on a number of public sector frameworks with SMEs,
as well as training 900 mental health first aiders.
The Group introduced a new severity-based metric to focus on
wider health and safety performance in its operations. This follows
an established track record on social sustainability matters. For
example, the Group was the first construction company, as part of
the Department of Education's Care Leaver Covenant, to support 16
to 25 year olds who had spent time as "cared for" children.
Our Highways business and our HS2 joint venture are both
Disability Confident employers. Our Highways business has also been
a Disability Confident Leader since 2019, enabling people of all
abilities to come into the workplace.
The Group's social framework commitments include developing and
launching a new employee health and well-being strategy, as well as
a Group Equality, Diversity and Inclusion strategy. This is driven
by our recently appointed Group Head of Equality, Diversity and
Inclusion. These efforts are supported by a focus on social purpose
that aims to tackle inequality by giving individuals and
communities the tools and opportunities to create brighter futures.
For example, we had 649 apprentices participating on a Kier
apprenticeship programme during the financial year ended 30 June
2021 which included 220 graduate apprentices.
-- Governance
Governance will remain a core component of the Group's approach
to operations. The Group monitors governance matters through Annual
BSI audits on ISO14001, 45001 & 9001 compliance, Integrated
Operational Assurance Statement & processes and operating
assurance statements. The Group's internal policy centre supports
the Group's efforts in governance focus areas such as modern
slavery, anti-bribery and corruption, data protection and
whistleblowing matters.
Framework commitments on governance matters include continued
participation in sustainability leadership forums, ensuring Board
oversight and cross-functional input, as well as implementation of
project lifecycle management systems and processes, and continuous
improvement of the Operational Assurance Statement processes and
increased training requirements.
Our People
The Group's strong performance is attributable to the dedication
of our c.10,800 employees across the UK. I would like to thank them
for their commitment and contribution throughout the year.
Summary and Outlook
The Group delivered a strong operational performance and
materially improved results in FY21. We have completed the
strategic actions set out in 2019 to simplify and focus the Group,
improve cash generation and strengthen our balance sheet. The
successful capital raise, the recent sale of Kier Living, and the
extension of the Group's RCF facility provides Kier with the
financial and operational flexibility to continue to pursue its
strategic objectives within its chosen markets and will allow it to
further enhance and capitalise on its position as a strategic
partner to its customers.
Current trading is in line with our expectations and,
notwithstanding potential inflationary pressures and the impact of
increased national insurance contributions, our outlook for the
current year remains unchanged. We are now focused on delivering
our medium term value creation plan by leveraging our attractive
market positions, delivering our high-quality order book and
fostering our long-term customer relationships and sector
expertise.
Operational Review
Infrastructure Services
Year ended Year ended
30 June 2021 30 June 2020
Revenue (GBPm) 1,422 1,506
Adjusted operating profit (GBPm)
1 65.3 31.3
Adjusted operating margin 4.6% 2.1%
Reported operating profit (GBPm) 41.4 9.4
Order book (GBPbn) 4.4 4.6
1 Stated before adjusting items
-- Key contract wins include
o Infrastructure - appointed to deliver a major programme of
highway and utility works on HS2 Phase 2a
o Highways - c.GBP200m eight-year maintenance and management
contract for TfL
o Utilities - contract with Openreach to construct new broadband
infrastructure in urban and rural areas in the west and south of
England as well as Scotland
-- 87% of orders secured for FY22
The Infrastructure Services segment comprises the Highways,
Infrastructure and Utilities businesses.
Segmental revenue was 6% lower than last year primarily due to
the successful handover of the M20, M23 and M6 motorway upgrade
projects during the second half of FY21 which more than offset the
start of work for HS2. The focus on higher margin maintenance and
service based work together with reductions in COVID-19 related
costs, resulted in an increase in adjusted operating profit by 109%
to GBP65m.
The Infrastructure business delivers major and complex
infrastructure and civil engineering projects, including the HS2
project in joint venture with Eiffage, Ferrovial and BAM Nuttall,
the A13 dualling project and the Luton DART rail system in joint
venture with VolkerFitzpatrick. Revenue and adjusted operating
profit were above the comparative period, primarily due to ramp-up
of capital works on HS2, as well as the reduction in both COVID-19
related volume declines and the additional costs incurred during
the period of the pandemic.
The Highways business builds and maintains roads for National
Highways and a number of district and county councils. During the
year, three of our motorway upgrade projects, the M20, M23 and M6
were delivered on schedule and we continued to successfully deliver
a fourth. The business continued to win work at both national and
local levels. The business was appointed to deliver a c.GBP200m
maintenance and management contract for TfL Road Tunnels and
Pumping Stations (TAPS). The new contract commenced in April 2021
and will run for eight years.
The Utilities business delivers long-term contracts providing
construction and maintenance services to the water, energy, rail
and telecommunications sectors. Changes made to the business are
starting to deliver increased year over year revenue and
profitability. There is also a positive timing impact as successful
contract wins have been mobilised and are now in their delivery
phase, especially in the broadband rollout market. Utilities has
also benefited from an increase in volumes and reduced costs as it
recovers from COVID-19. Utilities has continued to win work
including a contract with Openreach to construct new broadband
infrastructure in urban and rural areas in the south & west of
England and in Scotland. This complements similar contracts in
other regions. The pipeline for attractive high-quality, long-term
infrastructure work remains strong.
Construction
Year ended Year ended
30 June 2021 30 June 2020
Revenue (GBPm) 1,769 1,835
Adjusted operating profit (GBPm)
1 56.7 43.6
Adjusted operating margin 3.2% 2.4%
Reported operating profit / (loss)
(GBPm) 40.7 (52.3)
Order book (GBPbn) 3.3 3.3
1 Stated before adjusting items
-- Awarded places on frameworks worth up to GBP11.5bn lasting typically four years
-- Appointed to the Ministry of Justice's (MoJ) GBP1bn New Prisons Programme
-- 80% of orders secured for FY22
-- Margin improvement due to realisation of cost saving programme and improved productivity
The Construction segment comprises the 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 decreased 4% due primarily to the impact of procurement
delays resulting from COVID-19 and the implementation of our
strategy to exit non-core businesses. Our focus on margin and the
realisation of the savings resulting from the cost saving
programme, as well as a significant reduction in costs related to
the pandemic, resulted in a 30% increase in adjusted operating
profit. Adjusting items include costs related to the restructuring
of our Southern regional business following our strategic
review.
The business continued to win contracts such as being awarded a
place on the new GBP1bn New Prisons Programme. We are well placed
to benefit from the GBP5bn "New Deal" opportunities announced by
the Government which focus on areas such as health, education and
custodial services, where the Group has specialist expertise.
Our Construction business has started to see a few deferrals in
project awards caused by procurement delays. In addition, whilst we
recognise the risk of cost inflation, we plan to mitigate this with
our customer and supply agreements.
Our Strategic Projects business continued to work on the GBP275m
new Five Wells prison at Wellingborough, which utilises innovative
modular building techniques allowing a more standardised approach
and integrates digital tools to drive efficiencies in the design,
construction and operation of the facility which is expected to be
handed over before the end of 2021.
The newly rebranded Kier Places business specialises in working
in occupied properties both residential and offices, delivering
maintenance, repairs, fire safety and compliance services. The exit
from several contracts, as well as the exit from the commercial
facilities management market, resulted in revenue declining
compared to the prior year. However, the changes to the business
model and its concentration on core markets resulted in the
business significantly improving its profitability. It continues to
win new work such as the contract to deliver an extensive range of
fire remedial works for Hammersmith and Fulham Council.
The UAE-based International business is now focused on managing
its cost base and projects in line with the continued weakness in
its markets.
Property
Year ended Year ended
30 June 2021 30 June 2020
Revenue (GBPm) 134 124
Adjusted operating profit / (loss)
(GBPm) 1 5.7 (3.2)
Adjusted operating margin 4.3% (2.6)%
Reported operating profit / (loss)
(GBPm) 2.3 (21.7)
1 Stated before adjusting items
-- The Solum Regeneration joint venture (between Kier Property
and Network Rail) sold the last two phases of its Twickenham
Gateway development scheme.
-- We secured a pre-let to Leonardo hotels on a 35-year lease
for a 284 bed hotel on our Pall Mall development in Liverpool.
The Property business invests and develops primarily mixed-use
commercial and residential schemes and sites across the UK.
Revenue increased 8% compared to the prior year as the easing of
COVID-19 related problems resulted in an increased number of assets
being sold during the second half of FY21.
Adjusted operating profit increased from GBP(3.2)m to GBP5.7m
due to increased completions, prior year comparatives reflecting
COVID-19 costs and GBP3.9m from the alignment of accounting
treatment for forward funding-arrangements which, although
increased adjusted operating profit, had no impact on statutory
profit. The business has had limited investment over the last two
years. The focus is to slowly expand the Property business through
select investments and a disciplined capital approach.
Corporate
Year ended Year ended
30 June 2021 30 June 2020
Adjusted operating loss (GBPm) 1 (27.4) (30.3)
Reported operating loss (GBPm) (40.7) (131.0)
1 Stated before adjusting items
The Corporate segment comprises the costs of the Group's central
functions. We continued to see year over year reductions in central
costs, including further savings in FY21 as the implementation of
the Group's cost reduction programme continues to deliver
benefits.
Kier Living
The results for Kier Living for the period are classified as
discontinued. Kier Living's adjusted operating profit for the
period of ownership was GBP5.3m (FY20: loss GBP(5.4)m), as the
smaller reorganised business recovered COVID-19 related losses.
On 16 April 2021, the Group announced that it had entered into
an agreement for the sale of Kier Living. The transaction was
approved by shareholders at a General Meeting held on 7 May 2021
and was completed on 28 May 2021. The sale resulted in a loss on
disposal of GBP12.1m.
Financial Review
Introduction
The Group performed well during the financial year FY21. Kier's
income statement, cash flow and balance sheet all materially
improved as the Group completed the strategic actions commenced two
years earlier.
The Group delivered adjusted operating profit of GBP100.3m
(FY20: GBP41.4m) with a margin of 3.0% (FY20: 1.2%).
A significant reduction in adjusting items in the period has
resulted in the Group's return to profitability with a statutory
profit before tax from continuing operations of GBP5.6m (FY20: loss
GBP225.3m), driven by decisive management actions taken over the
previous 24 months.
Adjusted earnings per share was 25.0p from continuing operations
(FY20: 12.2p restated). The prior year has been restated as a
result of the equity raise.
The Group delivered strong free cash flow of GBP93m (FY20: GBP8m
outflow) as increased operating profit converted to cash and
working capital normalised to levels seen prior to COVID-19.
The inefficiencies of COVID-19 reduced in the second half of
FY21; both due to the investments made in the prior year to adopt
socially distanced working, as well as our businesses and supply
chain having learnt to adapt to the new working environment. The
majority of the Group's sites remained open throughout the
year.
The Group remains well placed to benefit from the UK
Government's commitment to national infrastructure investment.
The orderbook was GBP7.7bn at 30 June 2021. The Group continued
to win new business in its markets on terms and rates which reflect
the bidding discipline and risk management introduced under the
Group's Performance Excellence programme.
The orderbook is underpinned by significant long-term framework
agreements including new awards in the second half of the year,
albeit at lower levels than seen last year due to procurement
delays resulting from COVID-19.
Sale of Living business
On 28 May 2021 the Group announced the sale of its Living
division. The disposal represented one of the final milestones in
management's strategic actions to simplify the Group and create a
strong, resilient and flexible balance sheet.
The sale generated cash proceeds of GBP110m with an additional
payment received for working capital movements of GBP10.8m, less
sale costs and liabilities created on disposal. The accounting loss
on the assets, which were disclosed as held for sale prior to
disposal, was GBP12.1m. This has been recognised within
discontinued operations. See note 16 of the financial statements
for further information.
The results for Kier Living for the period to 28 May 2021 are
classified as discontinued. Kier Living's adjusted loss after tax
for the period was GBP0.3m (FY20: GBP12.8m loss).
Equity raise and refinancing
On 18 June 2021 the Group issued 284,049,829 new shares at
GBP0.85 per share by way of a Firm Placing and a Placing and Open
Offer. Accordingly, the total issued share capital now comprises
446,165,699 shares.
The new shares generated gross cash proceeds of GBP241.4m before
deducting costs of GBP33.6m, of which GBP22.7m were deducted from
equity, GBP2.6m has been offset against debt with the remaining
GBP8.3m being general advisory fees which have been expensed to the
income statement and classified as an adjusting item. Fees of
GBP6.1m remain unpaid as at 30 June 2021.
On completion of the equity raise, the existing RCF debt
facilities were refinanced, extending the Revolving Credit Facility
of GBP475m and US Private Placement Notes of GBP71m to January
2025.
Summary of financial performance
Adjusted (1) results Reported results - continuing
- continuing operations operations
----------------------------------
30 Jun 30 Jun 30 Jun 30 Jun
21 20 change 21 20 change
--------- --------- ------- ----------- ---------- ---------
Revenue (GBPm) -
Total 3,328.5 3,475.6 (4.2)% 3,328.5 3,475.6 (4.2)%
Revenue (GBPm) -
Excluding JV's 3,261.0 3,422.5 (4.7)% 3,261.0 3,422.5 (4.7)%
Profit/(loss) from
operations (GBPm) 100.3 41.4 142.3% 43.7 (195.6) N/a
Profit/(loss) before
tax (GBPm) 65.4 16.9 287.0% 5.6 (225.3) N/a
Earnings/(loss) per
share (p) 25.0 12.2 104.9% 11.6 (85.3) N/a
Free cash flow (GBPm) 92.6 (8.3) 100.9
Net cash/(debt) (GBPm) 3.0 (310.3) 313.3
Net debt (GBPm) -
average month end (431.9) (435.6) 0.8%
Orderbook (GBPbn) 7.7 7.9 (0.2)
Supply Chain Financing
(GBPm) 79.1 125.5 (46.4)
------------------------ --------- --------- ------- ----------- ---------- ---------
1 Reference to 'Adjusted' excludes adjusting items, see note 3.
Revenue from continuing operations
The following table represents a bridge in the Group's revenue
from the year ended 30 June 2020 to the year ended 30 June
2021.
GBPm
----------------------------------------- --------
Revenue for the year ended 30 June 2020 3,475.6
Construction (65.6)
Infrastructure (84.6)
Property and Corporate 3.1
Revenue for the year ended 30 June 2021 3,328.5
----------------------------------------- --------
Revenue slightly decreased due to the completion of the Group's
simplification, focusing on improving profitability by exiting
non-core, low margin and loss-making facilities management and
environmental services contracts and businesses, the successful
completion of our motorway upgrade projects, as well as challenging
market conditions and the ongoing COVID-19 pandemic, partly offset
by growth in all of the Group's core businesses.
The above table shows our revenue performance by operating
segment and reflects the market conditions experienced in the
period along with the UK's exit from the first national lockdown
that took place in the first quarter of FY21. The Group continues
to focus on delivering high quality and high margin work and the
reduction in revenue also reflects this.
Alternative performance measures
The Directors continue to consider that it is appropriate to
present an income statement that shows the Group's statutory
results only.
The Directors, however, still believe it is appropriate to
disclose those items which are one-off, material or non-recurring
in size or nature. The Group is disclosing as supplementary
information an 'adjusted profit' APM. The Directors consider doing
so clarifies the presentation of the financial statements and
better reflects the internal management reporting and is therefore
consistent with the requirements of IFRS 8.
Adjusted Operating Profit from continuing operations
GBPm
------------------------------------------------- -------
Adjusted operating profit for the year ended 30
June 2020 41.4
Volume / price / mix changes 6.4
Cost inflation (2.2)
Management actions 34.3
Wages and salaries (14.9)
COVID direct costs incurred in FY20 35.3
Adjusted operating profit for the year ended 30
June 2021 100.3
------------------------------------------------- -------
Adjusted operating profit improved significantly compared to the
prior year despite the reduction in revenue. This is due to the
full impact of management actions, including cost savings of
GBP31.2m being translated into financial metrics. In addition, the
costs incurred in the prior year as a result of the COVID-19
pandemic have not recurred. These improvements are partly offset by
wages and salaries, which includes an increased bonus accrual, the
reversal of the temporary pay reduction in the prior year and
reduced holiday pay accrual.
A reconciliation of reported to adjusted operating profit is
provided below:
Operating profit Profit / (loss)
/ (loss) before tax
------------------ -----------------
2021 2020 2021 2020
GBPm GBPm GBPm GBPm
-------------------------------------------- ------- --------- ------- --------
Reported profit / (loss) from continuing
operations 43.7 (195.6) 5.6 (225.3)
Amortisation of acquired intangible assets 21.0 23.7 21.0 23.7
Costs associated with previous acquisitions - 5.0 - 5.0
Restructuring and related charges 31.6 156.1 31.6 156.1
Preparation for business divestment or
closure 0.5 33.6 0.5 33.6
Other 3.5 18.6 6.7 23.8
-------------------------------------------- ------- --------- ------- --------
Adjusted profit from continuing operations 100.3 41.4 65.4 16.9
-------------------------------------------- ------- --------- ------- --------
Additional information about these items is as follows:
-- Amortisation of acquired intangible assets GBP21.0m (FY20: GBP23.7m):
Comprises the amortisation of acquired contract rights primarily
relating to the acquisitions of May Gurney in 2013, Mouchel in 2015
and McNicholas in 2017.
-- Costs associated with previous acquisitions GBPnil (FY20: GBP5.0m):
In prior years the Group recognised charges in respect of the
McNicholas acquisition and its subsequent integration. These
non-recurring costs have now been substantially completed.
-- Restructuring and related charges GBP31.6m (FY20: GBP156.1m):
The Group incurred restructuring costs and related charges in
the year totalling GBP31.6m. The Group continued its strategic
restructuring of its Regional Southern Build business, which has
included the closure of offices, a down-sizing of personnel and the
withdrawal/early settlement of certain contract positions. As a
result of these ongoing restructuring activities, a net cost of
GBP13.6m was charged in the current year. This relates
predominantly to charges in respect of the recoverability of assets
and increased project costs due to settlements and delays, which
have been directly impacted by this restructuring programme.
This represents an extension of the prior year charges, which
similarly included costs relating to the restructuring of
management, closure of offices and closure of certain sectors, and
the impact that COVID-19 had on market conditions. In addition,
GBP11.9m was incurred on professional fees and non-people
initiatives, including GBP8.3m of advisors' fees in respect of the
equity raise. A further GBP5.4m of employee exit costs were
incurred across the Group and a GBP0.7m lease impairment charge was
also incurred.
-- Costs relating to the preparation of busines divestment or
closure GBP0.5m (FY20: GBP33.6m):
A total net loss on sale of two properties has been recognised
in the year of GBP2.2m. This is offset by a credit of GBP3.0m as a
result of transferring the assets and liabilities of Pure Recycling
Warwick Limited from Assets Held For Sale as it currently does not
meet the criteria. These assets had previously been impaired and
are now being carried at their book value.
-- Other costs GBP6.7m (FY20: GBP23.8m)
Other costs include a GBP2.4m IFRS 16 interest charge on a
leased property that was previously vacated and the write off of
GBP0.8m of unamortised debt refinancing fees relating to the
previous refinancing. The remaining charge includes GBP3.0m in
respect of fire compliance and cladding claims and GBP0.5m
following the most recent High Court ruling that pension schemes
equalise Guaranteed Minimum Pension between male and female
members.
In addition, adjusting items amounting to GBP24.3m were incurred
within discontinued operations. There was a GBP12.1m loss on
disposal of the Kier Living business, GBP6.5m relates to historical
costs within a Kier Living joint venture that had built up in prior
periods within work in progress and that were considered
irrecoverable prior to sale. In addition, GBP4.1m was incurred in
respect of mothballed land impairments and GBP1.1m of management
incentives were paid in relation to the sale. A further GBP1.0m of
additional cost was incurred in respect of the exit from the Welsh
region. These costs are offset by a tax credit of GBP0.5m.
Earnings per share
Earnings per share (EPS), before adjusting items, from
continuing operations were earnings of 25.0p (FY20: 12.2p
(restated)). EPS, after adjusting items, from continuing operations
were earnings of 11.6p (FY20: 85.3p losses (restated)). The prior
year restatement of EPS numbers are as a result of the equity
raise.
Finance charges
Finance costs have increased to GBP41.8m (FY20: GBP36.4m) due to
additional forward funding interest within the Property division.
Forward funding interest costs relate to advanced funding in
relation to certain projects. The forward funding interest costs of
GBP8.8m in the year to 30 June 2021 reflect an alignment of the
accounting treatment across all forward funding development
contracts. The charge of GBP8.8m includes GBP3.9m that represents a
cumulative catch up of interest costs that would have been
recognised in previous reporting periods if the Group had always
applied this accounting treatment to all applicable contracts. An
offsetting credit is included within revenue, with a corresponding
impact on the Group's operating profit. There is no impact on the
statutory profit for the year from continuing operations.
Underlying interest is broadly in line with prior year which
reflects the consistent year-on-year average net debt position.
Finance costs also include GBP6.7m (FY20: GBP7.2m) of costs
relating to interest and finance charges for lease liabilities.
Segmental Reporting
As part of the Group's continued focus on restructuring and
streamlining operations, and in line with the Group's strategy to
simplify the Group's portfolio, a review of the Group's Specialist
Services business (Facilities Management, Housing Maintenance,
Design and Business Services and Environmental Services) was
conducted during the year.
Following internal restructuring driven by the potential synergy
benefits available, the Group's remaining Specialist Services
business is now rebranded as Kier Places, reporting into the
Construction Leadership Team. As part of this process, the
information that is used to manage the Construction business, and
what is being reported to the Group's Chief Operating Decision
Maker, has been realigned to include these businesses.
As a result, the Group has considered this and concluded that
the results of the Specialist Services division, Kier Places,
should be reported within the Construction segment for external
reporting purposes.
Balance sheet
Net assets
The Group had net assets of GBP435.0m at 30 June 2021 (FY20:
GBP240.8m). The primary driver for this is the equity raise.
Goodwill
The Group held intangible assets of GBP697.2m (FY20: GBP720.6m)
of which goodwill represented GBP536.7m (FY20: GBP536.7m).
The Group completed its review of goodwill at 30 June 2021,
assuming a pre-tax discount rate derived from a weighted average
cost of capital of 9.1%, and concluded that no impairment was
required.
The Infrastructure Services CGU comprises GBP516.3m of the total
goodwill balance. Whilst no impairment is noted and management
believe the discounted cashflows applied is underpinned by the
orderbook 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. Further details of the sensitivities of
these assumptions will be disclosed in the Annual Report and
Accounts.
Deferred tax asset
Given the reported losses recorded over the last two financial
years, the Group has a deferred tax asset of GBP138.0m recognised
at 30 June 2021 (FY20: GBP111.0m). The asset has increased in the
period due to the change in future UK corporation tax rates and
movement in the defined benefit pension liability. Based on the
Group's forecasts, it is expected that this will be utilised over a
period of approximately 12 years. Further disclosures on the
considerations made when assessing this timeframe will be disclosed
in the Annual Report and Accounts.
Due to its magnitude and one-off nature, the GBP25.5m tax credit
relating to the tax rate change has been treated as an adjusting
item.
Free cash flow and Net debt
GBPm
-------------------------------------------------- -------
Operating profit from continuing operations 43.7
Depreciation of owned assets 6.4
Depreciation of right-of-use assets 33.7
Amortisation 30.9
-------------------------------------------------- -------
EBITDA 114.7
Adjusting items excluding adjusting amortisation
and interest 35.6
Adjusted EBITDA 150.3
Working capital inflow 63.5
Net capital expenditure including finance lease
capital payments (47.0)
Joint Venture dividends less profits 6.6
Other free cash flow items 7.0
Net interest and tax (26.8)
-------------------------------------------------- -------
Free cash flow before COVID-19 153.6
Net COVID-19 tax repayment (61.0)
-------------------------------------------------- -------
Free cash flow 92.6
-------------------------------------------------- -------
GBPm
Net debt at 30 June 2020 (310.3)
Free cash flow 92.6
Adjusting items (72.1)
Pension deficit payments (including GBP10m related
to Living disposal) (37.0)
Sales proceeds 120.8
Equity raise (net of fees) 224.8
Discontinued operations (11.4)
Other (4.4)
Net cash as at 30 June 2021 3.0
---------------------------------------------------- --------
The Group delivered strong free cash flow in the year,
underpinned by cash generation from operations, a working capital
inflow of GBP64m, which includes a GBP50m benefit from the
implementation of the Domestic Reverse Charge (DRC) VAT regulations
in the year, being partially offset by a GBP46m outflow as the
Group's use of its supply chain finance facility (KEPS) continued
to reduce (FY21: GBP79.1m, FY20: GBP125.5m). The Group paid GBP61m
of VAT and payroll taxes that were deferred from 2020 as a result
of COVID-19. Net cash proceeds from the sale of Living of GBP121m
and the equity raise of GBP225m have contributed to the Group
delivering a net cash position of GBP3m at the year end.
Government support
As of 30 June 2021, there was total tax deferred of GBP18.8m
(FY20: GBP79.8m) representing VAT deferred in accordance with HMRC
guidance.
Contract assets & liabilities
Contract assets represents the Group's right to consideration in
exchange for works which has already been performed. Similarly, a
contract liability is recognised when a customer pays consideration
before work is performed. At 30 June 2021, contract assets amounted
to GBP366.4m (FY20: GBP278.5m). Contract liabilities were GBP59.9m
(FY20: GBP108.7m).
Retirement benefits obligation
Kier operates a number of defined benefit pension schemes. At 30
June 2021, the reported surplus, which is the difference between
the aggregate value of the schemes' assets and the present value of
their future liabilities, was GBP46.2m (FY20: GBP38.8m), before
accounting for deferred tax, with the movement in the period as a
result of employer contributions of GBP37m, which includes GBP10m
of contributions as a result of the Living disposal. This is partly
offset by changes in financial assumptions.
Right-of-use assets and lease liabilities
At 30 June 2021 the Group had right-of-use assets of GBP96.5m
(FY20: GBP100.9m) and associated lease liabilities of GBP163.8m
(FY20: GBP172.9m).
Accounting policies
The Group's annual consolidated financial statements are
prepared in accordance with International Financial Reporting
Standards as adopted by the UK (IFRS). There have been no
significant changes to the Group's accounting policies during the
period.
Treasury facilities
Bank finance
The Group has committed debt facilities of GBP685.0m with a
further GBP18m of uncommitted overdrafts. Following the half year
results and the sale of Living and the equity raise, the Group
extended its GBP475m Revolving Credit Facility and GBP70.9m of US
Private Placement (USPP) notes to January 2025.
Over the year, management has reduced the Group's total debt
facilities by GBP189m.
Supply chain finance
The Group offers its supply chain in the Construction business
the opportunity to participate in KEPS. The balance owed on this
facility is included in trade creditors. The balance at 30 June
2021 was GBP79.1m (FY20: GBP125.5m) which was considerably reduced
from the prior year.
Financial instruments
The Group's financial instruments 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 have been 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 continue to adopt the going concern basis in
preparing the Group's financial statements.
The Group delivered improved results in FY21 demonstrating the
significant progress made on the operational and financial
turnaround strategy announced in June 2019; to simplify and focus
the Group, improve the Group's cash generation and strengthen its
balance sheet.
The sale of Kier Living and the new share issue enabled the
successful completion of the funding elements of the Group's
strategic plan. The transactions facilitated a reduction in the
Group's net debt, with a repayment of GBP189m of facilities prior
to 30 June 2021; they have provided the Group with more working
capital, and with less associated volatility; and they have removed
the capital requirement to support residential land acquisition and
presence of unconsolidated debt in certain joint ventures.
Along with the reduction in debt facilities in the year, the
Group has also agreed and signed an extension to its Revolving
Credit Facility (RCF) which was due to expire in July 2022. This
has been extended to January 2025, with covenant requirements reset
accordingly.
The Group performed well through the year ended 30 June 2021 and
produced results slightly above the Board's expectations. Average
net debt compared to the prior year has reduced slightly compared
to FY20, and is expected to materially reduce going forward
following the corporate actions noted above. The Group continues to
win new 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. The
orderbook as at 30 June 2021 was generally in line with the
position at 30 June 2020 at GBP7.7bn.
Following the revised debt facility agreements, at 30 June 2021,
the Group had GBP685.0m of unsecured committed facilities, GBP18.0m
of uncommitted overdrafts and GBP79.1m of uncommitted supply chain
financing facilities.
Financial covenant certificates for September 2020, December
2020, March 2021 and June 2021 have been prepared with no breaches
noted. The Directors have reviewed the Group's cash flow forecasts
for the period to 31 December 2022, which are included in the
Group's three-year strategic plan, on the basis of certain key
assumptions and including a number of stressed but plausible
downside scenarios.
These scenarios included the consideration of risks which may
arise to the Group's available liquidity and its ongoing compliance
with revised financial covenants within the Group's principal debt
facilities as a result of or in light of the following factors or
circumstances:
-- The continued and ongoing impact of COVID-19, in respect of
which a full shut-down of the construction sector akin to that of
March 2020 was not considered plausible in light of the experience
of government restrictions imposed during the first half of
2021;
-- Potential reductions in trading volumes;
-- Potential margin erosion;
-- Risks in respect of certain specific projects; and
-- The availability of supply-chain finance.
The Board also considered the macroeconomic and political risks
affecting the UK economy, including the availability of labour and
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 health, education and utilities, which
are considered likely to remain largely unaffected by macroeconomic
factors.
The Group is expected to continue to have available liquidity
headroom under its finance facilities and operate within the
revised financial covenants over the going concern period. The
available headroom in a downside scenario has significantly
increased compared to previous years. The Directors therefore
believe the risk associated with going concern has reduced
following the corporate actions taken in the financial year and in
light of the Group's execution of its strategic milestones, its
most recent trading performance and latest forecasts, and the
associated improved headroom over liquidity and covenant
limits.
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 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.
Viability statement
The UK Corporate Governance Code requires the Board to explain
how it has assessed the prospects of the Group, over what period it
has done so and why it considers that period to be appropriate.
Assessment period
Consistent with the practice of previous years, the Board has
assessed the prospects of the Group over a period of three years
from 30 June 2021, taking account of its current position and the
potential impact of the Group's principal risks and uncertainties
(the PRUs) which is set out in this Annual Report and certain other
risks referred to below. The Board has identified a three-year
period as being a period over which it believes it is able to
forecast the Group's performance with reasonable certainty,
principally because:
-- The Group's internal forecasting covers a three-year period;
-- The tender process and delivery programme for a number of the
Group's projects can, together, take a period of up to
approximately three years; and
-- The visibility of the Group's secured work and bidding
opportunities can reasonably be assessed over a three-year
period.
Assessment process
The work required to support the viability statement was
undertaken by management and has been substantially reviewed by
external advisers with respect to certain elements of the work
relevant to the recently completed corporate projects, being the
Group's disposal of Kier Living and the June 2021 equity raise. The
following is a summary of the key elements of the assessment
process:
-- The model used as the basis of the assessment included a
number of key assumptions (please see 'Key assumptions' below) and
was subject to stress-testing (please see 'Stress-testing'
below);
-- The process considered the Group's current performance and
future prospects, strategy, the PRUs and the mitigation of the
PRUs;
-- The process included a review of certain other risks relating
to the Group, including macroeconomic and political risks affecting
the UK economy (for example, Brexit), and risks relating to the
Group's trading, the Group's pensions, the availability of the
Group's finance facilities, systemic margin erosion, the execution
of the Group's strategy, the supply chain and certain project
specific risks; and
-- The process assessed the continuing impact of COVID-19,
including ongoing adverse effects and the likelihood of further
waves and further lockdowns.
The Director's note that the actions taken in the financial year
have strengthened the balance sheet and have extended the maturity
of the Group's Revolving Credit Facility to 2025; outside of the
assessment period.
Key assumptions
The key assumptions within the model used to support the
viability statement include:
-- No material changes to Group operations, including no material acquisitions or disposals
-- The Group maintains its position as one of the leading
providers of construction and infrastructure services to Government
and regulated entities;
-- The Group's supply chain finance facility is retained at similar levels;
-- The Group operates within its financial covenants under its
principal debt facilities during the review period;
-- The Group's facilities are repaid on their respective
maturity dates during the review period; and
-- The Group makes payments to the pension schemes in line with the deficit recovery plan.
Stress-testing
Management assessed the financial impact of a number of severe
but plausible downside scenarios (both individually and in
combination) by overlaying them against the three-year business
plan. These scenarios included:
-- An adverse impact on the Group's forecasts, including a lower
than forecast volume, an erosion of forecast margins and a
reduction in the win rate of any revenue which is to be
obtained;
-- A certain level of loss-making contracts having an impact on
the Group's reported profit and cash over the review period;
-- The removal of the Group's supply chain finance facility, which is uncommitted; and
-- The application of certain, additional macroeconomic factors which may impact the Group.
COVID-19
Significant judgement was required to assess the ongoing impact
of COVID-19 on the three-year plan. The key assumptions used in
this assessment were driven by the most recent experiences the
Group has incurred whereby government lockdowns have not included
the Construction industry and the primary markets in which the
Group operates. The impact on the 2021 results are less severe than
the impact incurred in 2020 as social distancing operating
procedures have been adopted by the Group since the initial
outbreak.
Viability statement
The Board therefore has a reasonable expectation that the Group
has adequate resources to continue to operate and to meet its
liabilities as they fall due across the three-year review
period.
Financial Statements
Consolidated income statement
For the year ended 30 June 2021
2021 2020(2)
Notes GBPm GBPm
------------------------------------------------------ ----- --------- ---------
Continuing operations
Revenue
Group and share of joint ventures 2 3,328.5 3,475.6
Less share of joint ventures 2 (67.5) (53.1)
------------------------------------------------------ ----- --------- ---------
Group revenue 3,261.0 3,422.5
Cost of sales (2,976.9) (3,220.4)
------------------------------------------------------ ----- --------- ---------
Gross profit 284.1 202.1
Administrative expenses (240.1) (391.7)
Share of post-tax results of joint ventures (0.3) (6.6)
Profit on disposal of joint ventures and subsidiaries - 0.6
------------------------------------------------------ ----- --------- ---------
Profit/(loss) from operations 43.7 (195.6)
Finance income 4 3.7 6.7
Finance costs 4 (41.8) (36.4)
------------------------------------------------------ ----- --------- ---------
Profit/(loss) before tax 2 5.6 (225.3)
Taxation 6 17.4 53.4
------------------------------------------------------ ----- --------- ---------
Profit/(loss) for the year from continuing operations 23.0 (171.9)
------------------------------------------------------ ----- --------- ---------
Discontinued operations
Loss for the year from discontinued operations
(attributable to equity holders of the parent) 11 (24.6) (101.4)
------------------------------------------------------ ----- --------- ---------
Loss for the year (1.6) (273.3)
------------------------------------------------------ ----- --------- ---------
Attributable to:
Owners of the parent (0.3) (273.3)
Non-controlling interests (1.3) -
------------------------------------------------------ ----- --------- ---------
(1.6) (273.3)
------------------------------------------------------ ----- --------- ---------
Earnings/(loss) per share from continuing operations
* Basic 8 11.6p (85.3)p
* Diluted 8 11.4p (85.3)p
Total earnings/(loss) per share
* Basic 8 (0.1)p (135.5)p
* Diluted 8 (0.1)p (135.5)p
------------------------------------------------------ ----- --------- ---------
Supplementary information from continuing operations
Adjusted1 operating profit 3 100.3 41.4
Adjusted1 profit before tax 3 65.4 16.9
Adjusted1 earnings per share 8 25.0p 12.2p
Adjusted1 diluted earnings per share 8 24.6p 12.2p
------------------------------------------------------ ----- --------- ---------
(1) Reference to 'adjusted' excludes adjusting items, see note
3.
(2) Earnings per share has been re-presented in the comparative
information as a result of the equity raise which completed on 18
June 2021, see note 17.
Financial Statements
Consolidated statement of comprehensive income
For the year ended 30 June 2021
2021 2020
Notes GBPm GBPm
-------------------------------------------------------- ----- ------ -------
Loss for the year (1.6) (273.3)
-------------------------------------------------------- ----- ------ -------
Items that may be reclassified subsequently to
the income statement
Share of joint venture fair value movements on
cash flow hedging instruments - (0.3)
Fair value (loss)/gain on cash flow hedging instruments (16.6) 5.7
Fair value movements on cash flow hedging instruments
recycled to the income statement 15.0 (2.3)
Deferred tax credit/(charge) on fair value movements
on cash flow hedging instruments 0.3 (0.7)
Foreign exchange gains on long-term funding of
foreign operations - 1.0
Foreign exchange translation differences (3.2) 0.1
Foreign exchange movements recycled to the income
statement 0.1 3.3
-------------------------------------------------------- ----- ------ -------
Total items that may be reclassified subsequently
to the income statement (4.4) 6.8
-------------------------------------------------------- ----- ------ -------
Items that will not be reclassified to the income
statement
Re-measurement of retirement benefit assets and
obligations 5 (29.8) (6.2)
Deferred tax on re-measurement of retirement benefit
assets and obligations 4.8 6.4
-------------------------------------------------------- ----- ------ -------
Total items that will not be reclassified to the
income statement (25.0) 0.2
-------------------------------------------------------- ----- ------ -------
Other comprehensive (loss)/income for the year (29.4) 7.0
-------------------------------------------------------- ----- ------ -------
Total comprehensive loss for the year (31.0) (266.3)
-------------------------------------------------------- ----- ------ -------
Attributable to:
Equity holders of the parent (29.7) (266.3)
Non-controlling interests - continuing operations (1.3) -
-------------------------------------------------------- ----- ------ -------
(31.0) (266.3)
-------------------------------------------------------- ----- ------ -------
Total comprehensive loss attributable to equity
shareholders arises from:
Continuing operations (5.1) (164.9)
Discontinued operations (24.6) (101.4)
-------------------------------------------------------- ----- ------ -------
(29.7) (266.3)
-------------------------------------------------------- ----- ------ -------
Financial Statements
Consolidated statement of changes in equity
As at 30 June 2021
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
Notes GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
-------------- ----- ------- ------- ---------- ----------- ------- ----------- ------- ------------ ----------- -------
At 30 June
2019 1.6 684.3 2.7 (306.8) (1.2) 3.7 134.8 519.1 0.5 519.6
Impact of
adopting
IFRS 16 - - - (16.6) - - - (16.6) - (16.6)
-------------- ----- ------- ------- ---------- ----------- ------- ----------- ------- ------------ ----------- -------
At 1 July 2019 1.6 684.3 2.7 (323.4) (1.2) 3.7 134.8 502.5 0.5 503.0
Loss for the
year - - - (273.3) - - - (273.3) - (273.3)
Other
comprehensive
income - - - 0.2 2.4 4.4 - 7.0 - 7.0
Dividends paid - - - - - - - - (0.4) (0.4)
Share-based
payments 13 - - - 5.4 - - - 5.4 - 5.4
Purchase of
own shares - - - (0.9) - - - (0.9) - (0.9)
-------------- ----- ------- ------- ---------- ----------- ------- ----------- ------- ------------ ----------- -------
At 30 June
2020 1.6 684.3 2.7 (592.0) 1.2 8.1 134.8 240.7 0.1 240.8
Loss for the
year - - - (0.3) - - - (0.3) (1.3) (1.6)
Other
comprehensive
losses - - - (25.0) (1.3) (3.1) - (29.4) - (29.4)
Issue of own
shares 17 2.9 - - - - - 215.8 218.7 - 218.7
Share-based
payments 13 - - - 7.0 - - - 7.0 - 7.0
Purchase of
own shares - - - (0.5) - - - (0.5) - (0.5)
-------------- ----- ------- ------- ---------- ----------- ------- ----------- ------- ------------ ----------- -------
At 30 June
2021 4.5 684.3 2.7 (610.8) (0.1) 5.0 350.6 436.2 (1.2) 435.0
-------------- ----- ------- ------- ---------- ----------- ------- ----------- ------- ------------ ----------- -------
The numbers in the table above are shown net of tax as
applicable.
Financial Statements
Consolidated balance sheet
For the year ended 30 June 2021
2021 2020
Notes GBPm GBPm
------------------------------------------------- ----- --------- ---------
Non-current assets
Intangible assets 9 697.2 720.6
Property, plant and equipment 43.3 42.3
Right-of-use assets 96.5 100.9
Investment properties 49.6 49.8
Investments in and loans to joint ventures 98.9 105.6
Capitalised mobilisation costs 3.8 1.9
Deferred tax assets 6 138.0 111.0
Contract assets 30.7 28.8
Trade and other receivables 24.1 32.9
Retirement benefit assets 5 87.2 99.5
Other financial assets 11.4 30.0
------------------------------------------------- ----- --------- ---------
Non-current assets 1,280.7 1,323.3
------------------------------------------------- ----- --------- ---------
Current assets
Inventories 54.7 60.0
Contract assets 335.7 249.7
Trade and other receivables 203.1 236.4
Corporation tax receivable 13.6 12.5
Other financial assets 2.0 -
Cash and cash equivalents 10 391.2 413.9
------------------------------------------------- ----- --------- ---------
Current assets 1,000.3 972.5
------------------------------------------------- ----- --------- ---------
Assets held for sale as part of a disposal group 11 - 196.7
------------------------------------------------- ----- --------- ---------
Total assets 2,281.0 2,492.5
------------------------------------------------- ----- --------- ---------
Current liabilities
Borrowings 10 (38.2) (61.6)
Lease liabilities (27.4) (33.1)
Trade and other payables 12 (1,093.1) (957.5)
Contract liabilities (59.9) (108.7)
Provisions (14.9) (20.8)
------------------------------------------------- ----- --------- ---------
Current liabilities (1,233.5) (1,181.7)
------------------------------------------------- ----- --------- ---------
Liabilities held for sale as part of a disposal
group 11 - (81.7)
------------------------------------------------- ----- --------- ---------
Non-current liabilities
Borrowings 10 (362.3) (689.8)
Lease liabilities (136.4) (139.8)
Trade and other payables 12 (39.9) (46.5)
Retirement benefit obligations 5 (41.0) (60.7)
Provisions (32.9) (51.5)
Non-current liabilities (612.5) (988.3)
------------------------------------------------- ----- --------- ---------
Total liabilities (1,846.0) (2,251.7)
------------------------------------------------- ----- --------- ---------
Net assets 2 435.0 240.8
------------------------------------------------- ----- --------- ---------
Equity
Share capital 17 4.5 1.6
Share premium 684.3 684.3
Capital redemption reserve 2.7 2.7
Accumulated losses (610.8) (592.0)
Cash flow hedge reserve (0.1) 1.2
Translation reserve 5.0 8.1
Merger reserve 17 350.6 134.8
------------------------------------------------- ----- --------- ---------
Equity attributable to owners of the parent 436.2 240.7
Non-controlling interests (1.2) 0.1
------------------------------------------------- ----- --------- ---------
Total equity 435.0 240.8
------------------------------------------------- ----- --------- ---------
Financial Statements
Consolidated cash flow statement
For the year ended 30 June 2021
2021 2020(1)
Notes GBPm GBPm
---------------------------------------------------------- ----- ------- -------
Cash flows from operating activities
Profit/(loss)
before tax * continuing operations 5.6 (225.3)
* discontinued operations (24.6) (101.4)
Net finance cost 4 38.1 29.7
Share of post-tax trading results of joint ventures 0.3 0.2
Normal cash contributions to pension fund in excess
of pension charge 0.7 0.2
Equity-settled share-based payments charge 13 7.0 5.4
Amortisation of intangible assets and mobilisation
costs 30.9 36.9
(Reversal of impairment)/impairment of assets
held for sale, intangible assets and investment
properties (5.1) 57.0
Research and development expenditure credit (13.3) (10.2)
Depreciation of property, plant and equipment 6.4 7.6
Depreciation and impairment of right-of-use assets 33.7 46.0
Loss/(profit) on disposal of joint ventures and
subsidiaries 16 12.1 (0.6)
(Profit)/loss on disposal of property, plant and
equipment and intangible assets (0.2) 4.9
---------------------------------------------------------- ----- ------- -------
Operating cash inflows/(outflows) before movements
in working capital and pension deficit contributions 91.6 (149.6)
Deficit contributions to pension funds 5 (37.0) (25.0)
Decrease in inventories 3.9 44.2
Decrease in receivables 43.0 108.1
(Increase)/decrease in contract assets (95.3) 212.2
Increase/(decrease) in payables 100.7 (278.6)
Decrease in contract liabilities (48.8) (20.5)
Decrease in provisions (31.3) (4.0)
---------------------------------------------------------- ----- ------- -------
Cash inflow/(outflow) from operating activities 26.8 (113.2)
Dividends received from joint ventures 6.3 28.9
Interest received 3.7 6.7
Income tax received 11.2 5.9
---------------------------------------------------------- ----- ------- -------
Net cash inflow/(outflow) from operating activities 48.0 (71.7)
---------------------------------------------------------- ----- ------- -------
Cash flows from investing activities
Proceeds from sale of property, plant and equipment 2.5 1.6
Proceeds from sale of subsidiaries and joint ventures,
net of cash disposed 120.8 14.1
Purchase of property, plant and equipment (3.3) (3.8)
Purchase of intangible assets (3.1) (4.0)
Purchase of capitalised mobilisation costs (3.5) (0.8)
Investment in joint ventures (9.2) (14.2)
Loan repayment and return of equity from joint
ventures(1) 9.3 9.4
Classification to assets held for resale - (0.1)
Net cash from investing activities 113.5 2.2
---------------------------------------------------------- ----- ------- -------
Cash flows from financing activities
Issue of shares net of associated transaction
costs 224.8 -
Purchase of own shares (0.5) (0.9)
Interest paid (28.4) (34.9)
Principal elements of lease payments (39.6) (40.4)
Drawdown of borrowings - 274.7
Repayment of borrowings (337.4) (30.3)
Settlement of derivative financial instruments - (0.5)
Dividends paid to non-controlling interests - (0.4)
---------------------------------------------------------- ----- ------- -------
Net cash (used in)/from financing activities (181.1) 167.3
---------------------------------------------------------- ----- ------- -------
(Decrease)/increase in cash, cash equivalents
and overdraft (19.6) 97.8
Effect of change in foreign exchange rates (3.1) 4.4
Opening cash, cash equivalents and overdraft 413.9 311.7
---------------------------------------------------------- ----- ------- -------
Closing cash, cash equivalents and overdraft 10 391.2 413.9
---------------------------------------------------------- ----- ------- -------
Supplementary information
Adjusted cash flow from operating activities 3 98.9 (19.7)
---------------------------------------------------------- ----- ------- -------
(1) GBP9.4m has been re-presented in the comparative information
from financing activities to investing activities for loan
repayment and return of equity from joint ventures.
Financial Statements
Notes to the consolidated financial statements
For the year ended 30 June 2021
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 preliminary consolidated financial statements (financial
statements) for the year ended 30 June 2021 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 preliminary results have been prepared in accordance with
the Disclosure Guidance and Transparency Rules of the UK Financial
Conduct Authority and in accordance with International Accounting
Standards, in conformity with the requirements of the Companies Act
2006, and International Financial Reporting Standards, adopted
pursuant to regulation (ED) 1606/2000 as it applies in the European
Union.
The financial information contained in this announcement does
not constitute the Company's statutory accounts as at and for the
year ended 30 June 2021, but is derived from those statutory
accounts . The Company's statutory accounts as at and for the year
ended 30 June 2021 will be delivered to the Registrar or Companies
following the Company's Annual General Meeting on 19 November
2021.
The Directors continue to adopt the going concern basis in
preparing the Group's financial statements.
The Group delivered improved results in FY21 demonstrating the
significant progress made on the operational and financial
turnaround strategy announced in June 2019; to simplify and focus
the Group, improve the Group's cash generation and strengthen its
balance sheet.
The sale of Kier Living and the new share issue enabled the
successful completion of the funding elements of the Group's
strategic plan. The transactions facilitated a reduction in the
Group's net debt, with a repayment of GBP189m of facilities prior
to 30 June 2021; they have provided the Group with more working
capital, and with less associated volatility; and they have removed
the capital requirement to support residential land acquisition and
presence of unconsolidated debt in certain joint ventures.
Along with the reduction in debt facilities in the year, the
Group has also agreed and signed an extension to its Revolving
Credit Facility (RCF) which was due to expire in July 2022. This
has been extended to January 2025, with covenant requirements reset
accordingly.
The Group performed well through the year ended 30 June 2021 and
produced results slightly above the Board's expectations. Average
net debt compared to the prior year has reduced slightly compared
to FY20, and is expected to materially reduce going forward
following the corporate actions noted above. The Group continues to
win new 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. The
orderbook as at 30 June 2021 was generally in line with the
position at 30 June 2020 at GBP7.7bn.
Following the revised debt facility agreements, at 30 June 2021,
the Group had GBP685.0m of unsecured committed facilities, GBP18.0m
of uncommitted overdrafts and GBP79.1m of uncommitted supply chain
financing facilities.
Financial covenant certificates for September 2020, December
2020, March 2021 and June 2021 have been prepared with no breaches
noted. The Directors have reviewed the Group's cash flow forecasts
for the period to 31 December 2022, which are included in the
Group's three-year strategic plan, on the basis of certain key
assumptions and including a number of stressed but plausible
downside scenarios.
These scenarios included the consideration of risks which may
arise to the Group's available liquidity and its ongoing compliance
with revised financial covenants within the Group's principal debt
facilities as a result of or in light of the following factors or
circumstances:
-- The continued and ongoing impact of COVID-19, in respect of
which a full shut-down of the construction sector akin to that of
March 2020 was not considered plausible in light of the experience
of government restrictions imposed during the first half of
2021;
-- Potential reductions in trading volumes;
-- Potential margin erosion;
-- Risks in respect of certain specific projects; and
-- The availability of supply-chain finance.
The Board also considered the macroeconomic and political risks
affecting the UK economy, including the availability of labour and
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 health, education and utilities, which
are considered likely to remain largely unaffected by macroeconomic
factors.
The Group is expected to continue to have available liquidity
headroom under its finance facilities and operate within the
revised financial covenants over the going concern period. The
available headroom in a downside scenario has significantly
increased compared to previous years. The Directors therefore
believe the risk associated with going concern has reduced
following the corporate actions taken in the financial year and in
light of the Group's execution of its strategic milestones, its
most recent trading performance and latest forecasts, and the
associated improved headroom over liquidity and covenant
limits.
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 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
.
Significant accounting policies
The accounting policies applied by the Group in these financial
statements are consistent with those applied by the Group in its
financial statements as at, and for the year ended, 30 June
2020.
Segmental reporting
As part of the Group's continued focus on restructuring and
streamlining operations, and in line with the Group's strategy to
simplify the Group's portfolio, a review of the Facilities
Management, Housing Maintenance, Design and Business Services and
Environmental Services businesses was conducted during the year to
30 June 2021. Following internal restructuring driven by the
potential synergy benefits available, these businesses now report
into the Construction Leadership Team. As part of this process, the
information that is used to manage the Construction business, and
what is being reported to the Group's Chief Operating Decision
Maker, has been realigned to include these businesses.
The Directors have therefore concluded that the results of the
Facilities Management, Housing Maintenance, Design and Business
Services and Environmental Services businesses should be reported
within the Construction segment for external reporting purposes,
still named Construction. The Other segment now only consists of
the Property division and has been renamed Property. The prior year
segmental analysis has been restated to reflect these changes.
2 Segmental reporting
Year to 30 June 2021
Infrastructure
Services Construction Property Corporate Group
Continuing operations GBPm GBPm GBPm GBPm GBPm
----------------------------------------- -------------- ------------ -------- --------- ---------
Revenue1
Group and share of joint ventures 1,421.6 1,769.1 133.6 4.2 3,328.5
Less share of joint ventures - (1.5) (66.0) - (67.5)
----------------------------------------- -------------- ------------ -------- --------- ---------
Group revenue 1,421.6 1,767.6 67.6 4.2 3,261.0
----------------------------------------- -------------- ------------ -------- --------- ---------
Timing of revenue1
Products and services transferred
at a point in time 5.2 9.2 59.0 - 73.4
Products and services transferred
over time 1,416.4 1,759.9 74.6 4.2 3,255.1
----------------------------------------- -------------- ------------ -------- --------- ---------
Group and share of joint ventures 1,421.6 1,769.1 133.6 4.2 3,328.5
----------------------------------------- -------------- ------------ -------- --------- ---------
Loss for the year
Operating profit/(loss) before adjusting
items5 65.3 56.7 5.7 (27.4) 100.3
Adjusting items5 (23.9) (16.0) (3.4) (13.3) (56.6)
----------------------------------------- -------------- ------------ -------- --------- ---------
Profit/(loss) from operations 41.4 40.7 2.3 (40.7) 43.7
Net finance costs2 - (3.9) (10.8) (23.4) (38.1)
----------------------------------------- -------------- ------------ -------- --------- ---------
Profit/(loss) before tax from continuing
operations 41.4 36.8 (8.5) (64.1) 5.6
----------------------------------------- -------------- ------------ -------- --------- ---------
Taxation 17.4
----------------------------------------- -------------- ------------ -------- --------- ---------
Profit for the year from continuing
operations 23.0
----------------------------------------- -------------- ------------ -------- --------- ---------
Loss for the year from discontinued
operations (24.6)
----------------------------------------- -------------- ------------ -------- --------- ---------
Loss for the year (1.6)
----------------------------------------- -------------- ------------ -------- --------- ---------
Balance sheet
Operating assets3 945.3 459.6 167.0 304.5 1,876.4
Operating liabilities3 (457.0) (749.0) (24.0) (215.5) (1,445.5)
----------------------------------------- -------------- ------------ -------- --------- ---------
Net operating assets/(liabilities)3 488.3 (289.4) 143.0 89.0 430.9
Cash, cash equivalents and borrowings 346.7 480.7 (126.4) (710.3) (9.3)
Net financial assets - - - 13.4 13.4
----------------------------------------- -------------- ------------ -------- --------- ---------
Net assets/(liabilities) 835.0 191.3 16.6 (607.9) 435.0
----------------------------------------- -------------- ------------ -------- --------- ---------
Other information
Inter-segmental revenue 20.1 0.3 - 46.7 67.1
Capital expenditure on property,
plant, equipment and intangible assets 1.7 0.5 - 4.2 6.4
Depreciation of property, plant and
equipment (1.2) (0.8) - (4.4) (6.4)
Amortisation of computer software (0.4) (1.3) - (6.6) (8.3)
----------------------------------------- -------------- ------------ -------- --------- ---------
Year to 30 June 2020(4)
Infrastructure
Services Construction Property Corporate Group
Continuing operations GBPm GBPm GBPm GBPm GBPm
----------------------------------------- -------------- ------------ -------- --------- ---------
Revenue1
Group and share of joint ventures 1,506.2 1,834.7 123.8 10.9 3,475.6
Less share of joint ventures - (7.4) (45.7) - (53.1)
----------------------------------------- -------------- ------------ -------- --------- ---------
Group revenue 1,506.2 1,827.3 78.1 10.9 3,422.5
----------------------------------------- -------------- ------------ -------- --------- ---------
Timing of revenue1
Products and services transferred
at a point in time 3.9 8.5 44.5 - 56.9
Products and services transferred
over time 1,502.3 1,826.2 79.3 10.9 3,418.7
----------------------------------------- -------------- ------------ -------- --------- ---------
Group and share of joint ventures 1,506.2 1,834.7 123.8 10.9 3,475.6
----------------------------------------- -------------- ------------ -------- --------- ---------
Loss for the year
Operating profit/(loss) before adjusting
items5 31.3 43.6 (3.2) (30.3) 41.4
Adjusting items5 (21.9) (95.9) (18.5) (100.7) (237.0)
----------------------------------------- -------------- ------------ -------- --------- ---------
Profit/(loss) from operations 9.4 (52.3) (21.7) (131.0) (195.6)
Net finance costs2 (1.5) (8.4) (3.8) (16.0) (29.7)
----------------------------------------- -------------- ------------ -------- --------- ---------
Profit/(loss) before tax from continuing
operations 7.9 (60.7) (25.5) (147.0) (225.3)
----------------------------------------- -------------- ------------ -------- --------- ---------
Taxation 53.4
----------------------------------------- -------------- ------------ -------- --------- ---------
Loss for the year from continuing
operations (171.9)
----------------------------------------- -------------- ------------ -------- --------- ---------
Loss for the year from discontinued
operations (101.4)
----------------------------------------- -------------- ------------ -------- --------- ---------
Loss for the year (273.3)
----------------------------------------- -------------- ------------ -------- --------- ---------
Balance sheet
Operating assets3 828.2 500.6 186.1 337.0 1,851.9
Operating liabilities3 (385.2) (696.9) (24.4) (312.1) (1,418.6)
----------------------------------------- -------------- ------------ -------- --------- ---------
Net operating assets/(liabilities)3 443.0 (196.3) 161.7 24.9 433.3
Cash, cash equivalents and borrowings 346.1 370.6 (145.5) (908.7) (337.5)
Net financial assets - - - 30.0 30.0
----------------------------------------- -------------- ------------ -------- --------- ---------
Net assets/(liabilities) excluding
net assets held for sale 789.1 174.3 16.2 (853.8) 125.8
----------------------------------------- -------------- ------------ -------- --------- ---------
Net assets held for sale 115.0
----------------------------------------- -------------- ------------ -------- --------- ---------
Net assets 240.8
----------------------------------------- -------------- ------------ -------- --------- ---------
Other information
Inter-segmental revenue 16.4 0.2 - 43.6 60.2
Capital expenditure on property,
plant, equipment and intangible assets 1.2 3.7 - 2.9 7.8
Depreciation of property, plant and
equipment (1.0) (0.8) - (5.8) (7.6)
Amortisation of computer software (0.3) - - (10.7) (11.0)
----------------------------------------- -------------- ------------ -------- --------- ---------
(1) Revenue is stated after the exclusion of inter-segmental
revenue. Over 90% of the Group's revenue is derived from UK-based
customers. 12% of the Group's revenue was received from National
Highways (2020: 17%).
(2) Interest was (charged)/credited to the divisions at a
notional rate of 4.0%.
(3) Net operating assets/(liabilities) represent assets
excluding cash, cash equivalents, bank overdrafts, borrowings,
financial assets and liabilities, assets and liabilities classified
as held for sale and interest-bearing inter-company loans.
(4) Prior year comparative information re-presented to show the
new reporting segments.
(5) See note 3 for adjusting items.
3 Adjusting items
These items are explained in detail below:
Profit/(loss)
Operating profit/(loss) before tax
------------------------- ---------------
2021 2020 2021 2020
GBPm GBPm GBPm GBPm
-------------------------------------------- ---------- ------------- ------ -------
Reported profit/(loss) from continuing
operations 43.7 (195.6) 5.6 (225.3)
Amortisation of acquired intangible assets 21.0 23.7 21.0 23.7
Costs associated with previous acquisitions - 5.0 - 5.0
Restructuring and related charges 31.6 156.1 31.6 156.1
Preparation for business divestment or
closure 0.5 33.6 0.5 33.6
Other 3.5 18.6 6.7 23.8
-------------------------------------------- ---------- ------------- ------ -------
Adjusted profit from continuing operations 100.3 41.4 65.4 16.9
-------------------------------------------- ---------- ------------- ------ -------
a) Amortisation of acquired intangible assets
2021 2020
Notes GBPm GBPm
------------------------------------------- ----- ------ ------
Amortisation of acquired intangible assets 9 (21.0) (23.7)
------------------------------------------- ----- ------ ------
b) Costs associated with previous acquisitions
2021 2020
GBPm GBPm
---------------------------------------------------------- ----- -----
Integration costs relating to the McNicholas acquisition1 - (8.5)
McNicholas acquired contract settlement2 - 3.5
----------------------------------------------------------- ----- -----
Total charge before tax - (5.0)
----------------------------------------------------------- ----- -----
(1) Costs incurred in the prior year to integrate the McNicholas
acquisition into the Utilities business including significant
double-running of people and lease costs. These were considered to
be adjusting items on the basis of their size, the fact that they
related to a major acquisition and that these were non-recurring
costs. These are no longer material for separate disclosure.
(2) Revenue received in settlement of a contract acquired with
McNicholas.
c) Restructuring and related charges
The Group has incurred significant restructuring charges
relating to costs of multi-year organisational change associated
with the Group's cost saving programmes and, the Group's Strategic
Review programme announced following the appointment of Andrew
Davies as CEO in 2019. These are treated as adjusting items on the
basis of their size and the fact that they relate to significant
changes to the Group's activities, property portfolio and
workforce.
2021 2020
GBPm GBPm
--------------------------------------------------- ------ -------
Restructure of Regional Southern Build business1 (13.6) (61.5)
Redundancy costs2 (5.4) (29.5)
Professional adviser fees and other costs incurred
implementing non-people initiatives3 (11.9) (34.2)
Impairments and other costs relating to leased
properties4 (0.7) (14.4)
Costs in preparation for outsourcing arrangements5 - (11.1)
Property impairment6 - (5.4)
---------------------------------------------------- ------ -------
Total charge before tax (31.6) (156.1)
---------------------------------------------------- ------ -------
(1) The Group has continued its strategic restructuring of its
Regional Southern Build business, which has included the closure of
offices, a down-sizing of personnel and the withdrawal/early
settlement of certain contract positions As a result of these
ongoing restructuring activities a net cost of GBP13.6m has been
charged in the current year. This relates predominantly to charges
in respect of the recoverability of assets and increased project
costs due to settlements and delays, which have been directly
impacted by this restructuring programme. This represents an
extension of the prior year charges, which similarly included costs
relating to the restructuring of management, closure of offices and
closure of certain sectors, and the impact that COVID-19 had on
market conditions.
(2) Costs 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 following the continued
implementation of the strategic review.
(3) The Group incurred various costs in respect of the
restructuring activities during the year. In particular, GBP8.3m of
adviser fees relating to the equity raise and debt refinancing were
expensed to the income statement on the basis that they were not
directly attributable to either transaction. In addition to the
fees charged to adjusting items, GBP22.7m has been charged to
equity and GBP2.6m offset against debt. The remaining adjusting
costs were incurred implementing non-people initiatives.
(4) The Group has incurred impairment and other charges on a
corporate office lease of GBP0.7m (2020: GBP16.8m), which is being
exited as part of the cost saving programme. These further charges
are as a result of the delayed subletting of the property. In the
prior year another corporate office lease that was previously
impaired was brought back into use by the Group, which resulted in
a net credit to adjusting items of GBP2.4m.
(5) In the prior year the Group outsourced its Fleet and IT
services, incurring GBP8.3m of costs. This included one-off set up
costs and dual-running costs.
(6) As part of its restructuring programme the Group closed its
head office in the prior year, which is now held as an investment
property. As a result, an impairment charge of GBP5.4m was
recognised.
d) Costs incurred in preparation for business divestment or
closure
The Group has incurred various charges driven by the change in
strategic direction of the Group and the decision to exit certain
divisions deemed non-core to its ongoing operations. Most of these
charges are non-cash and are treated as adjusting items on the
basis that they relate to a major restructuring of the Group
following the Strategic Review that took place in 2019.
2021 2020
GBPm GBPm
------------------------------------------------- ----- ------
Business closure and sales costs1 (3.5) (32.0)
Fair value reversal of assets held for sale 3.0 -
Impairment of ERP computer software2 - (4.7)
Reversal of impairment of ERP computer software2 - 3.1
Total charge before tax (0.5) (33.6)
-------------------------------------------------- ----- ------
(1) Following the announcement of the Group's intention to exit
parts of the Group, a number of charges have been recognised. These
primarily consist of the Group's share of net losses on disposal of
two sites within the Property division (GBP2.2m). The prior year
charge includes costs of GBP14.8m in Property, GBP1.6m in
Facilities Management and GBP2.1m in Kier Business Services in
relation to closure activities as well as adviser fees of
GBP7.8m.
(2) In the prior year a cost of GBP4.7m was written-off due to
software functionality which was no longer to be utilised within
the Group. Software previously impaired is instead being utilised
and so this element of impairment was reversed.
e) Other adjusting items
Other adjusting items are analysed below:
2021 2020
Notes GBPm GBPm
--------------------------------- ----- ----- ------
Net financing costs1 (3.2) (5.2)
Legal compliance2 (3.0) (7.6)
GMP Pension charge 9 (0.5) -
Central charges and other items3 - (8.9)
Procurement charge4 - (2.1)
Total charge before tax (6.7) (23.8)
--------------------------------- ----- ----- ------
(1) Net financing costs relate to IFRS 16 interest charges on
vacated properties (GBP2.4m) and the write off of unamortised debt
arrangement fees following the current year refinancing (GBP0.8m).
The prior year charge included the discount unwinding of acquired
intangible assets and the recycling of foreign exchange from the
translation reserve in respect of the Caribbean operations.
(2) The Group has incurred GBP3.0m (2020: GBP4.2m) of costs in
complying with new fire compliance regulations. The remaining
charge in the prior year related to incidents that occurred out of
period but were notified to the Group within the year and so were
treated as adjusting items.
(3) In the prior year central charges and other items included a
number of write offs that were recognised following a detailed
review of certain carrying values. These were not considered to be
part of the underlying performance of the business and so were
highlighted as adjusting items.
(4) The procurement charge in the prior year related to the
write off of certain aged receivables, driven by a management
review of contractual terms.
f) Taxation
Adjusting items in respect of taxation are analysed below:
2021 2020
GBPm GBPm
------------------------------------------------- ----- -----
Deferred tax credit as a result of the change in
tax rate(1) 25.5 -
Tax impact of adjusting items(2) 12.2 45.5
Other tax charges(3) (6.0) -
Total tax credit 31.7 45.5
-------------------------------------------------- ----- -----
(1) The change in tax rate from 19% to 25% has led to a
significant deferred tax credit in the income statement. This is a
one-off event that is out of the Group's control and so is
considered to be an adjusting item.
(2) The tax impact of the adjusting items charged to continuing
operations has also been included as an adjusting item.
(3) Other tax charges primarily consist of the write off of
losses in legal entities which have ceased to trade or are going to
be wound up and therefore can no longer be used within the
Group.
g) Discontinued operations
The Group disposed of Kier Living in May 2021. Adjusting items
within discontinued operations in relation to this disposal are
analysed below:
2021 2020
Notes GBPm GBPm
----------------------------------------------- ----- ------ ------
Loss on disposal of Kier Living 16 (12.1) -
Fair value adjustment of Kier Living - (51.6)
Closure costs relating to non-core businesses1 (1.0) (29.0)
Charges in relation to the Eastern Region2 (6.5) -
Other disposal related costs3 (5.2) -
Rationalisation costs - (2.6)
Inventory write-downs - (5.4)
Total charge before tax (24.8) (88.6)
----------------------------------------------- ----- ------ ------
Tax on adjusting items (discontinued) 0.5 -
----------------------------------------------- ----- ------ ------
Total charge after tax (24.3) (88.6)
----------------------------------------------- ----- ------ ------
(1) Costs incurred in respect of Living's decision to exit the
affordable housing market as well as the Welsh and Northern
regions. During the year some additional cost was recognised in
respect of the Welsh region in preparing the business for
disposal.
(2) In preparing the Kier Living business for disposal, the
Group identified GBP6.5m of historic costs within a Kier Living
joint venture that had built up in prior periods within work in
progress and that were considered irrecoverable. These were written
off in arriving at the loss from discontinued operations in the
year.
(3) Other disposal related costs include management incentives
and impairment charges as a result of the disposal of Kier
Living.
h) Adjusted cash flow
2021 2020
Notes GBPm GBPm
-------------------------------------------------- ------ ----- -------
Reported cash inflow/(outflow) from operating
activities 26.8 (113.2)
Cash outflow from operating activities (adjusting
items) 72.1 93.5
---------------------------------------------------------- ----- -------
Adjusted cash inflow/(outflow) from operating
activities 98.9 (19.7)
---------------------------------------------------------- ----- -------
4 Finance income and costs
2021 2020
GBPm GBPm
--------------------------------------------------------- ------ ------
Finance income
Interest receivable on bank deposits - 0.3
Interest receivable on loans to related parties1 3.7 6.4
3.7 6.7
--------------------------------------------------------- ------ ------
Finance costs
Bank interest (26.0) (23.6)
Forward funding interest2 (8.8) (1.3)
Interest payable on leases (6.7) (7.2)
Discount unwind3 (1.1) (1.7)
Net interest on net defined benefit obligation 0.9 0.7
Recycling of translation reserve (0.1) (3.3)
Foreign exchange gains/(losses) on foreign denominated
borrowings(4) 15.0 (2.3)
Fair value gains on cash flow hedges recycled from Other
Comprehensive Income (15.0) 2.3
--------------------------------------------------------- ------ ------
(41.8) (36.4)
--------------------------------------------------------- ------ ------
Net finance costs (38.1) (29.7)
--------------------------------------------------------- ------ ------
(1) Includes GBP2.3m (2020: GBP5.6m) receivable from
discontinued operations. The Group disposed of Kier Living in May
2021. No further amounts will be received.
(2) The forward funding interest costs of GBP8.8m in the year to
30 June 2021 reflect an alignment of the accounting treatment
across all forward funding development contracts. The charge of
GBP8.8m includes GBP3.9m that represents a cumulative catch up of
interest costs that would have been recognised in previous
reporting periods if the Group had always applied this accounting
treatment to all applicable contracts. An offsetting credit is
included within revenue, with a corresponding impact on the Group's
operating profit. There is no impact on the statutory profit for
the year from continuing operations.
(3) Unwind of discount in respect of acquired intangible
assets.
(4) Foreign exchange gains/(losses) arise from movements in
cross-currency swaps which hedge the currency risk on foreign
denominated borrowings.
5 Retirement benefit obligations
The principal assumptions used by the independent qualified
actuaries are shown below.
2021 2020
% %
-------------------------------------- -------- --------
Discount rate 1.90 1.60
Inflation rate (Retail Price Index) 3.15 2.85
Inflation rate (Consumer Price Index) 2.60 1.95
-------------------------------------- -------- --------
The amounts recognised in the financial statements in respect of
the Group's defined benefit schemes are as follows:
2021 2020
----------- --------- ----------- ------------ ----------- --------- --------- ------- ---------- ---------
Kier May Kier May
Group Gurney Mouchel McNicholas Total Group Gurney Mouchel McNicholas Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------ ----------- --------- ----------- ------------ ----------- --------- --------- ------- ---------- ---------
Opening net
surplus/(deficit) 89.8 (5.2) (38.1) (7.7) 38.8 39.4 1.4 (14.6) (6.7) 19.5
Credit/(charge)
to income
statement 1.1 - (0.8) (0.1) 0.2 1.0 - (0.4) (0.1) 0.5
Employer
contributions 13.9 4.9 17.0 1.2 37.0 12.4 2.0 9.4 1.2 25.0
Actuarial
gains/(losses) (26.2) (1.0) (2.6) - (29.8) 37.0 (8.6) (32.5) (2.1) (6.2)
------------------ ----------- --------- ----------- ------------ ----------- --------- --------- ------- ---------- ---------
Closing net
surplus/(deficit) 78.6 (1.3) (24.5) (6.6) 46.2 89.8 (5.2) (38.1) (7.7) 38.8
------------------ ----------- --------- ----------- ------------ ----------- --------- --------- ------- ---------- ---------
Comprising:
Total market
value of assets 1,273.2 85.1 525.3 26.3 1,909.9 1,300.5 83.5 526.4 27.5 1,937.9
Present value
of liabilities (1,194.6) (86.4) (549.8) (32.9) (1,863.7) (1,210.7) (88.7) (564.5) (32.5) (1,899.1)
Net
surplus/(deficit) 78.6 (1.3) (24.5) (6.6) 46.2 89.8 (5.2) (38.1) (7.7) 38.8
------------------ ----------- --------- ----------- ------------ ----------- --------- --------- ------- ---------- ---------
Presentation
of net surplus/
(deficit)
in the
Consolidated
balance sheet:
Retirement
benefit assets 78.6 - 8.6 - 87.2 89.8 - 9.7 - 99.5
Retirement
benefit
obligations - (1.3) (33.1) (6.6) (41.0) - (5.2) (47.8) (7.7) (60.7)
------------------ ----------- --------- ----------- ------------ ----------- --------- --------- ------- ---------- ---------
Net
surplus/(deficit) 78.6 (1.3) (24.5) (6.6) 46.2 89.8 (5.2) (38.1) (7.7) 38.8
------------------ ----------- --------- ----------- ------------ ----------- --------- --------- ------- ---------- ---------
6 Taxation
2021 2020
GBPm GBPm
------------------------------------------------ ------ -------
Profit/(loss) before tax 5.6 (225.3)
Add: tax on joint ventures included above (1.4) (1.4)
------------------------------------------------ ------ -------
Adjusted profit/(loss) before tax 4.2 (226.7)
------------------------------------------------ ------ -------
Current tax (5.2) (0.8)
Deferred tax 22.6 54.2
Total income tax credit in the income statement 17.4 53.4
Tax on joint ventures 1.4 1.4
------------------------------------------------ ------ -------
Effective tax credit from continuing operations 18.8 54.8
------------------------------------------------ ------ -------
Effective tax rate 447.6% 24.2%
------------------------------------------------ ------ -------
The Deferred Tax Asset includes GBP108.6m of tax losses (2020:
GBP94.6m), and GBP29.4m of other deferred tax assets and
liabilities (2020: GBP16.4m).
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:
Significant progress has been made in the year on the
operational and financial turnaround strategy announced in June
2019, with the business trading in line with forecasts in 2021;
The Group has substantially completed its restructuring
activities, with a significant reduction in adjusting items in the
year; 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 to support post
COVID-19 recovery.
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 12 years.
The Research and Development Expenditure Credit (RDEC) of
GBP13.3m was included in operating profit during the year (2020:
GBP10.2m). Included in the corporation tax asset at 30 June 2021
were RDEC receivables of GBP12.4m (2020: GBP13.6m).
7 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 (2020: GBPnil).
8 Earnings/(losses) per share
A reconciliation of loss and earnings per share, as reported in
the income statement, to profit and earnings per share before
adjusting items is set out below. The disclosure is made to
illustrate the impact of adjusting items.
2021 2020(3)
------- ------- ------- -------
Basic Diluted Basic Diluted
Earnings/(losses) GBPm GBPm GBPm GBPm
--------------------------------------------- ------- ------- ------- -------
Continuing operations
Profit/(loss) (after tax and minority
interests), being net losses attributable
to equity holders of the parent 24.3 24.3 (171.9) (171.9)
Impact of adjusting items net of tax1:
Amortisation of intangible assets - net
of tax credit of GBP4.0m (2020: GBP4.5m) 17.0 17.0 19.2 19.2
Acquisition discount unwind - net of tax
credit of GBPnil (2020: GBP0.3m)2 - - 1.2 1.2
Other adjusting items - net of tax credit
of GBP27.7m (2020: GBP40.7m credit) 11.1 11.1 176.2 176.2
--------------------------------------------- ------- ------- ------- -------
Earnings from continuing operations before
adjusting items 52.4 52.4 24.7 24.7
--------------------------------------------- ------- ------- ------- -------
Discontinued operations
Losses (after tax and non-controlling
interests), being net loss attributable
to equity holders of the parent (0.3) (0.3) (12.8) (12.8)
Adjusting items from discontinued operations (24.3) (24.3) (88.6) (88.6)
Loss from discontinued operations (24.6) (24.6) (101.4) (101.4)
--------------------------------------------- ------- ------- ------- -------
Million Million Million Million
--------------------------------------------- ------- ------- ------- -------
Weighted average number of shares used
for earnings per share 210.3 212.3 201.6 201.6
--------------------------------------------- ------- ------- ------- -------
2021 2020
---------------- ----------------
Basic Diluted Basic Diluted
Earnings/(losses) per share pence pence pence pence
--------------------------------------------- ------- ------- ------- -------
Continuing operations
Profit/(loss) (after tax and minority
interests), being net losses attributable
to equity holders of the parent 11.6 11.4 (85.3) (85.3)
Impact of adjusting items net of tax1:
Amortisation of intangible assets 8.1 8.0 9.5 9.5
Acquisition discount unwind2 - - 0.6 0.6
Other adjusting items 5.3 5.2 87.4 87.4
--------------------------------------------- ------- ------- ------- -------
Earnings from continuing operations before
adjusting items 25.0 24.6 12.2 12.2
--------------------------------------------- ------- ------- ------- -------
Discontinued operations
Losses (after tax and minority interests),
being net losses attributable to equity
holders of the parent (0.1) (0.1) (6.3) (6.3)
Adjusting items from discontinued operations (11.6) (11.4) (43.9) (43.9)
Loss from discontinued operations (11.7) (11.5) (50.2) (50.2)
--------------------------------------------- ------- ------- ------- -------
Total (losses)/earnings per share
Statutory (0.1) (0.1) (135.5) (135.5)
Before adjusting items1 24.9 24.5 5.9 5.9
--------------------------------------------- ------- ------- ------- -------
(1) See note 3 for reference to adjusting items.
(2) Unwind of discount in respect of deferred consideration.
(3) Earnings per share has been re-presented in the comparative
information as a result of the equity raise which completed on 18
June 2021, see note 17.
Options granted to employees under the Sharesave, CSAP and 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 13.
9 Intangible assets
Intangible
contract Computer
Goodwill rights software1 Total
GBPm GBPm GBPm GBPm
--------------------------------------------- -------- ---------- ---------- -------
Cost
At 1 July 2019 544.7 259.4 155.0 959.1
Additions - - 4.0 4.0
Disposals - - (20.1) (20.1)
Transfers to property, plant and equipment - - (8.7) (8.7)
Transfers to assets held for sale (5.9) - (4.8) (10.7)
At 30 June 2020 538.8 259.4 125.4 923.6
--------------------------------------------- -------- ---------- ---------- -------
Additions - - 3.1 3.1
Disposals - - (1.1) (1.1)
Transfers from property, plant and equipment - - 0.9 0.9
At 30 June 2021 538.8 259.4 128.3 926.5
--------------------------------------------- -------- ---------- ---------- -------
Accumulated amortisation and impairment
At 1 July 2019 (8.0) (111.0) (73.4) (192.4)
Charge for the year - (23.7) (11.0) (34.7)
Disposals - - 15.1 15.1
Transfers to assets held for sale 5.9 - 3.1 9.0
--------------------------------------------- -------- ---------- ---------- -------
At 30 June 2020 (2.1) (134.7) (66.2) (203.0)
--------------------------------------------- -------- ---------- ---------- -------
Charge for the year - (21.0) (8.3) (29.3)
Impairment reversal2 - - 2.4 2.4
Disposals - - 0.6 0.6
At 30 June 2021 (2.1) (155.7) (71.5) (229.3)
--------------------------------------------- -------- ---------- ---------- -------
Net book value
--------------------------------------------- -------- ---------- ---------- -------
At 30 June 2021 536.7 103.7 56.8 697.2
--------------------------------------------- -------- ---------- ---------- -------
At 30 June 2020 536.7 124.7 59.2 720.6
--------------------------------------------- -------- ---------- ---------- -------
(1) Computer software mainly relates to the Group's ERP
implementation which was completed in FY19 and is being
amortised.
(2) Impairment relating to a prior year disposal has been
reversed during the year.
10 Net cash/(debt)
2021 2020
GBPm GBPm
------------------------------------------------------ ------- -------
Cash and cash equivalents - bank balances and cash in
hand 391.2 413.9
Borrowings due within one year (38.2) (61.6)
Borrowings due after one year (362.3) (689.8)
Impact of cross-currency hedging 12.3 27.2
------------------------------------------------------ ------- -------
Net cash/(debt) 3.0 (310.3)
------------------------------------------------------ ------- -------
Average month-end net debt was GBP431.9m (2020: GBP435.6m). Net
debt excludes lease liabilities.
11 Assets held for sale and discontinued operations
(a) Assets held for sale
The Group's investment in its subsidiary Kier Living was
classified as held for sale at 30 June 2020. The disposal was
completed on 28 May 2021. See note 16 for further details.
The assets and liabilities of Pure Recycling Warwick Limited
were presented as held for sale at 30 June 2020. As at 30 June
2021, Management do not believe the classification criteria has
been met and have therefore ceased classifying the asset as held
for sale, resulting in a GBP3.0m credit to adjusting items on the
Income Statement.
2021 2020
GBPm GBPm
----------------------------------------------------- ----- ------
Assets of disposal group classified as held for sale
Investments in and loans to joint ventures - 52.2
Inventories - 114.7
Trade and other receivables - 22.2
Other assets - 7.6
----------------------------------------------------- ----- ------
Total - 196.7
Liabilities of disposal group classified as held for
sale
Trade and other payables - (59.9)
Other liabilities - (21.8)
----------------------------------------------------- ----- ------
Total - (81.7)
----------------------------------------------------- ----- ------
(b) Results of discontinued operations
Kier Living
Results for Kier Living for the period up to disposal are
classified as discontinued.
2021 2020
GBPm GBPm
--------------------------------------------- ------- -------
Results of discontinued operations
Revenue 98.3 79.9
Share of post-tax results of joint ventures 12.2 7.8
Operating costs (105.2) (93.1)
--------------------------------------------- ------- -------
Operating profit/(loss) 5.3 (5.4)
Finance costs1 (5.1) (7.3)
--------------------------------------------- ------- -------
Profit/(loss) before tax and adjusting items 0.2 (12.7)
Tax (0.5) (0.1)
--------------------------------------------- ------- -------
Loss for the year before adjusting items (0.3) (12.8)
Adjusting items net of tax (note 3)2 (24.3) (88.6)
Loss from discontinued operations after tax (24.6) (101.4)
--------------------------------------------- ------- -------
(1) Includes interest payable to the continuing Group of GBP2.3m
(2020: GBP5.6m).
(2) Includes GBPnil (2020: GBP1.4m) of share of post-tax results
of joint ventures.
12 Trade and other payables
2021 2020
GBPm GBPm
------------------------------------ ------- -----
Current:
Trade payables1 330.3 255.8
Sub-contract retentions 39.1 35.0
Other taxation and social security2 144.2 131.4
Other payables 47.3 57.5
Accruals 531.8 477.1
Deferred income 0.4 0.7
------------------------------------ ------- -----
1,093.1 957.5
------------------------------------ ------- -----
Non-current:
Trade payables 14.1 14.2
Sub-contract retentions 25.8 32.3
------------------------------------ ------- -----
39.9 46.5
------------------------------------ ------- -----
(1) Included within the trade payables balance is GBP79.1m
(2020: GBP125.5m) relating to payments due to suppliers who are on
bank-supported supply chain finance arrangements.
(2) As at 30 June 2021, there was total tax deferred under the
Government's COVID-19 support schemes of GBP18.8m (2020: GBP79.8m).
This comprises GBP18.8m payable by 28 January 2022 (2020: GBP25.1m)
of VAT deferred in accordance with HMRC guidance, and GBPnil (2020:
GBP54.7m) of a Time to Pay agreement with HMRC. VAT payable to HMRC
was GBP120.9m (2020: GBP69.5m), an increase from the prior year as
a result of implementing the new VAT regulations for the domestic
reverse charge.
13 Share-based payments
The Group has an established long-term incentive plan (LTIP)
under which directors and senior employees can receive awards of
shares subject to the Group achieving certain performance targets.
Participants are entitled to receive dividend equivalents on these
awards. Further details of the LTIP schemes were disclosed in the
2020 annual financial statements. No shares vested under the LTIP
schemes during the year (2020: no share awards vested). 17,856,246
new awards were granted under the LTIP during the year (2020:
13,741,092). Awards made to members of the Board are subject to a
two-year holding period post vesting.
In 2017, the Group established a Conditional Share Award Plan
(CSAP) under which senior employees receive awards of shares
subject only to service conditions, i.e. the requirement for
participants to remain in employment with the Group over the
vesting period. Participants are entitled to receive dividend
equivalents on these awards. No new awards were granted under the
CSAP during the year (2020: no awards granted). 515,093 shares
vested under the CSAP during the year (2020: no share awards
vested). In accordance with the rules of the scheme, a further
72,562 shares were provided to recipients of the vesting CSAP
shares, equivalent to the dividends that would have been received
during the vesting period (2020: no dividend equivalent
shares).
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. 8,634,038 options were
granted under the Sharesave scheme (2020: 7,199,823).
On 18 June 2021, the Group issued new share capital at a
discount to market value, by way of a firm placing, a placing and
open offer, and Director subscriptions. The number of options and
option prices for participants in the Group's share-based payments
schemes were adjusted for the effect of the open offer but not the
firm placing or Director subscriptions that existing shareholders
were unable to participate in.
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
--------------------------------------------- ----------- ------------- -----------
18 December 18 December 15 February
Grant date 2020 2020 2021
Shares granted 16,063,973 1,792,273 8,634,038
Share price at grant 81.0p 81.0p 66.3p
Exercise price at grant nil nil 66.0p
Exercise price adjusted for bonus element of
new share issue nil nil 56.5p
Option life 3 years 3 years 3 years
Holding period n/a 2 years n/a
Expected volatility 90.7% 92.4% 80.2%
Risk-free interest rate 0.0% 0.0% 0.0%
Dividend yield n/a n/a 0.0%
Value per option at grant:
LTIP - TSR element (25%)(1,3) 58.4p 50.6p -
LTIP - Adjusted operating profit (AOP) (50%)
and Net Debt:EBITDA (25%) elements (2,3) 81.0p 70.1p -
Sharesave (2) - - 35.8p
Value per option adjusted for bonus element
of new share issue:
LTIP - TSR element (25%)(1,3) 50.0p 43.3p -
LTIP - Adjusted operating profit (AOP) (50%)
and Net Debt:EBITDA (25%) elements (2,3) 69.2p 59.9p -
Sharesave (2) - - 30.6p
--------------------------------------------- ----------- ------------- -----------
(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 TSR element incorporates an assessment of
the number of shares that will be awarded, as the performance
conditions are market conditions under IFRS 2 'Share-based
payments'.
The performance conditions of the adjusted operating profit
'AOP' and Net Debt:EBITDA elements are non-market conditions under
IFRS 2. The fair value therefore does not include an assessment of
the number of shares that will be awarded. Instead the amount
charged for these elements is based on the fair value factored by a
'true up' for the number of awards that are expected to vest.
The share-based payment charge recognised in the Group's income
statement for the year was GBP7.0m (2020: GBP5.4m).
14 Guarantees, contingent liabilities and contingent assets
The Company has given guarantees and entered into
counter-indemnities in respect of bonds relating to certain of the
Group's own contracts. The Company has also given guarantees in
respect of certain contractual obligations of its subsidiaries and
joint ventures, which were entered into in the normal course of
business, as well as certain of the Group's other obligations (for
example, in respect of the Group's finance facilities and its
pension schemes). Financial guarantees over the obligations of the
Company's subsidiaries and joint ventures are measured at fair
value. The fair value measurement is based on the premium received
from the joint venture or the differential in the interest rate of
the borrowing including and excluding the guarantee. Performance
guarantees are treated as a contingent liability until such time as
it becomes probable that payment will be required under its
terms.
Provisions are made for the Directors' best estimate of known
legal claims, investigations and legal actions relating to the
Group which are considered more likely than not to result in an
outflow of economic benefit. If the Directors consider that a
claim, investigation or action relating to the Group is unlikely to
succeed, no provision is made. If the Directors cannot make a
reliable estimate of a potential, material obligation, no provision
is made but details of the claim are disclosed.
As at 30 June 2021, the Group had contingent assets of GBP4.5m
(2020: GBP12.4m) in relation to claims against third-parties for
the reimbursement of costs on construction contracts. Under IAS 37
these amounts may only be recognised when the economic benefit
arising from the claims is virtually certain. It is probable that
these amounts will be recognised in future periods when the
uncertainty over their recoverability has been removed.
As at 30 June 2021, the Group had no contingent liabilities
(2020: GBPnil).
15 Related parties
The Group has related party relationships with its joint
ventures, key management personnel and pension schemes in which its
employees participate.
The Group has disposed of a number of joint ventures during the
year through the disposal of Kier Living, see note 16 below. There
have been no other significant changes in the nature of related
party transactions since the last annual financial statements as
at, and for the year ended, 30 June 2021.
Details of contributions made to the pension schemes by the
Group are detailed in note 5.
16 Acquisitions and disposals
The Group completed the disposal of Kier Living during the year.
The disposal represents one of the final milestones in management's
strategy to simplify the Group and to create a strong, resilient
and flexible balance sheet.
2021
GBPm
------------------------------------- -------
Sale proceeds 110.0
Working capital adjustment1 10.8
------------------------------------- -------
Total consideration 120.8
Book value of net assets disposed of (116.7)
Sale costs (9.7)
Liabilities recognised on disposal2 (6.5)
------------------------------------- -------
Loss on disposal (12.1)
------------------------------------- -------
(1) The disposal was subject to a "locked box" mechanism. The
adjustment represents the movement in the Kier Living working
capital since the "locked box" date.
(2) As part of the disposal the Group retained some obligations
to fulfil existing contracts. The Group created liabilities on
disposal of Living which represent the costs of completing the
outstanding work. In addition, a piece of land owned by Kier
Limited was transferred to Kier Living on disposal, generating a
Stamp Duty Land Tax liability.
In FY20, the Group disposed of its interest in Kier Hammersmith
Holdco Limited, Strawberry Percy LLP and South West Hub with sales
proceeds totalling GBP14.1m and a profit of GBP0.6m.
17 Share capital and reserves
Share capital
The share capital of the Company comprises:
2021 2020
----------------- -----------------
Number GBPm Number GBPm
------------------------------------------- ----------- ---- ----------- ----
Authorised, issued and fully paid ordinary
shares of 1 pence each 446,165,699 4.5 162,115,870 1.6
------------------------------------------- ----------- ---- ----------- ----
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.
Firm Placing and Placing and Open Offer
On 18 June 2021 the Group issued new share capital by way
of:
a Firm Placing of 141,851,386 Firm Placing Shares;
a Placing and Open Offer of 141,851,386 Open Offer Shares;
and
Director Subscriptions of 347,057 Subscription Shares.
All of the above shares were issued at GBP0.85 per share. The
total new shares of 284,049,829 generated proceeds of GBP207.8m
after deducting costs of GBP33.6m, of which GBP22.7m were deducted
from equity. Of these costs, GBP6.1m remain unpaid as at 30 June
2021.
Kier Group plc was transferred 100 fixed rate redeemable
preference shares in its subsidiary company, Kite (Jersey) Limited,
which were subsequently redeemed for cash. Following the receipt of
the cash proceeds of the capital raise through this cashbox
structure, the Group obtained merger relief for the new shares
issued by Kier Group plc. The excess of the net proceeds received
over the nominal value of the new shares has been transferred to
the merger reserve.
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.
Merger reserve
The brought forward merger reserve of GBP134.8m arose on the
shares issued at a premium to acquire May Gurney on 8 July 2013.
The movement in the year of GBP215.8m relates to the issue of new
share capital as described above.
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END
FR SFASIMEFSELU
(END) Dow Jones Newswires
September 16, 2021 02:00 ET (06:00 GMT)
Grafico Azioni Kier (LSE:KIE)
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Grafico Azioni Kier (LSE:KIE)
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