TIDMKIE
RNS Number : 5041K
Kier Group PLC
22 September 2016
Kier Group plc, a leading property, residential, construction
and services group, announces its preliminary results for the year
ended 30 June 2016
Breadth of portfolio and order book of GBP8.7bn provide
visibility and resilience
Underlying
===================================================================
Year Year Change
ended ended %
30 30
June June
2016 2015
Revenue(1) GBP4.2bn GBP3.4bn +26
Profits from operations(2) GBP150m GBP104m +44
Operating margin(2) 3.6% 3.1% +50 bps
Profit before tax(2) GBP125m GBP86m +45
Earnings per share(2) 106.7p 96.0p +11
Proposed full year dividend GBP61m GBP47m +29
Proposed full year dividend
per share 64.5p 55.2p +17
Net debt GBP99m GBP141m -30
----------------------------- --------- --------- --------------
Statutory
===================================================================
Year Year Change
ended ended %
June June
2016 2015
Group revenue GBP4.1bn GBP3.3bn +26
Profit from operations GBP12m GBP61m -81
(Loss)/profit before tax GBP(15)m GBP39m
----------------------------- --------- --------- --------------
Financial information in this table relates to continuing
operations
1 Group and share of joint ventures
2 Stated before non-underlying items - see note 3
-- Results in line with expectations
o Revenue(1) of GBP4.2bn up 26%; like-for-like revenue up 8%
o Underlying profit(2) from operations of GBP150m, up 44%;
including a full year's contribution from Mouchel, an increased
share of post-tax results of joint ventures in the Property
division and margin recovery supported by cost efficiencies
o Underlying earnings per share(2) of 106.7p up 11%.
-- Integration of Mouchel completed and portfolio simplification well advanced
o Reported statutory profit from operations of GBP12m (2015:
GBP61m) including GBP116m non-underlying costs primarily relating
to the portfolio simplification including;
-- GBP50m relating to the Mouchel integration and
restructuring
-- GBP35m relating to the impact of commodity prices on two
waste collection contracts
-- GBP23m provision for winding down of the Caribbean
operations
o The Mouchel Consulting review - well progressed with the total
impact of the Mouchel Consulting review and portfolio
simplification expected to be cash positive in FY17.
-- Significantly improved net debt position
o Net debt at GBP99m (2015: GBP141m) after GBP31m investment in
the Property and Residential divisions and IT systems
o Strong operating cash conversion of 121%, and
o Net debt to EBITDA ratio of <1, a year ahead of Vision 2020
target.
-- Reduction in net pension scheme (post tax) deficit to GBP72m (2015: GBP123m)
-- Dividend
o Proposed full year dividend per share increased 17% to 64.5p
(2015: 55.2p); dividend increased to GBP61m (2015: GBP47m),
reflecting the Board's confidence in the Group.
-- Outlook
o Group performing well in growing market sectors with solid
long-term fundamentals
o Order book of GBP8.7bn providing long-term visibility
o 50% of Group profit from operations arising from Services
division
o Confident of achieving our strategic goal of double-digit
profit growth on average each year to 2020.
Commenting on the results, Haydn Mursell, chief executive,
said:
"I am pleased to report a good set of results reflecting the
evolution of the Group during the year following the completion of
the integration of Mouchel.
This year, we have successfully focused on our commercial and
capital disciplines and are pleased to report a significant
improvement in our net debt, further strengthening our balance
sheet and the delivery of a key Vision 2020 target: net debt:
EBITDA of less than 1x, a year ahead of our expectations.
The Group continues to perform well in growing market sectors
including infrastructure, housing and regional building, providing
a breadth of capabilities to our clients. For the first time, 50%
of Group profit now comes from our Services division where
essential day-to-day services are provided to clients and we have
long-term visibility of our future pipeline of work.
We remain focused on growing the business through improving
operational efficiencies and investing in new technology to support
our operations. We believe that our range of complementary
businesses underpins the resilience of our operating model and the
strength of our order book. Having completed the integration of
Mouchel, we are well progressed with the simplification of our
portfolio of businesses and are focused on capitalising on the
growth opportunities available to the Group. We remain confident of
achieving our goal of double-digit profit growth on average each
year to 2020."
-S -
There will be a presentation of the preliminary results to
analysts at 0900 hours British Summer Time on 22 September 2016 at
the offices of Numis, The London Stock Exchange Building, London,
EC4M 7LT and a live webcast :
http://www.investis-live.com/kier/57b1908b5f165d0900134102/gdsh
which will also be recorded and available later in the day on
Kier's website.
For further information, please contact:
Faeth Birch/Daniela Fleischmann, Finsbury +44 (0)20 7251 3801
Kier press office +44 (0)1767 355903
Louise Turner-Smith, Head of Investor Relations, Kier +44 (0)7976 790012
CHIEF EXECUTIVE'S OVERVIEW
I am pleased to announce a good set of results, reflecting a
year of consolidation and evolution. We have made good progress on
our five-year strategy, Vision 2020. These results reflect two key
features of the year; the robust underlying trading of the Group
and a drive to improve the efficiency and focus of our operations.
The actions taken, including the integration of Mouchel and the
portfolio simplification, will streamline and simplify the Group's
operations allowing us to invest in our core businesses in the
future.
Operational review
During the year we continued to expand in key market sectors and
put in place systems, processes and structures for future growth.
The increased efficiency of the Group was achieved through a
streamlining of our portfolio of businesses and a 4% reduction in
overall Group headcount which saw the amalgamation of a number of
management teams as well as the successful integration of
Mouchel.
During the year, the integration of Mouchel was a key area of
focus and this has now been completed. The Mouchel businesses are
performing well with the combined strategic highways and local
authority highways maintenance businesses delivering efficiencies,
ahead of expectations at the time of acquisition. In addition, the
integration of the Mouchel business services operations and Kier
facilities management (FM), creating Kier Workplace Services,
provides enhanced opportunities with local authority clients
through the provision of a broader FM offer. The acquired
businesses will deliver a return on capital in excess of our target
of 15% in FY17.
Market position
The markets in which we operate are supported by solid long-term
fundamentals. UK household population growth will require more
housing, schools, hospitals and public services and there is a need
for investment in the UK's infrastructure (roads, power, rail), all
of which are key drivers of UK GDP, productivity and the UK's
international competitiveness. A low interest environment should
encourage Government spending in these areas and austerity is set
to continue which will promote more efficient and innovative
solutions from service providers such as Kier.
Over 80% of the Group's turnover is now delivered from the
following market positions. We are:
-- one of the leading infrastructure players in the UK with revenue of GBP1.5bn;
-- a leading provider of affordable and social housing and
related maintenance services with a pipeline of >GBP600m;
and
-- the UK's leading regional builder with revenue of GBP1.5bn.
The business is resilient and ready to respond to an increase in
Government spending for both 'shovel ready' projects which tend to
lead to spend in maintenance activities and for the larger capital
works that will underpin the UK economy over the medium term.
Portfolio simplification
Following the integration of two sizeable acquisitions over the
last two years, on 4 July 2016 we announced a simplification of the
Group's portfolio. This is underway and will allow an increased
focus on those core businesses which will underpin the Group's
future growth. We announced an evaluation of strategic options for
Mouchel Consulting, including a possible sale, and this process has
commenced. In addition, in light of the challenging trading
conditions in the Caribbean, activities in the region are being
wound down and, despite the stable operations of our Environmental
Services business and Biogen, a provision has been taken reflecting
the decline in commodity prices. Exceptional charges primarily from
the above portfolio simplification of GBP66m have been reported in
FY16 while any exceptional gain on the sale of Mouchel Consulting
will be reported in FY17. In cash terms, the total effect of the
above items is expected to be cash positive in FY17.
The Kier offer
The Group continues to benefit from promoting its integrated
offer where two or more parts of the Group are providing services
to a client. Recent examples of cross-selling include Highways
England where the Group provides both capital works and maintenance
services, and Kent County Council where construction and property
services are provided. Our Construction and Property divisions
continue to work jointly on a number of projects, including office
developments such as Sovereign Square in Leeds, student
accommodation and hotel opportunities. The Group is investing
GBP25m in both front and back office systems to improve its
platform for delivery as well as its service provision to clients,
particularly within the highways, FM and housing maintenance
businesses.
EU Referendum vote
To date, there has been no material impact on our operations
following the EU Referendum vote. In the Property division, we are
predominantly a UK regional player and focus on non-speculative
development. In Residential, we are a 100% regional player focusing
on modest value private homes. Our mixed tenure business is
addressing the supply-demand imbalance in the UK affordable housing
market and we have a strong pipeline of more than GBP600m,
providing visibility of workload over the next four years. The
launch of the New Communities Partnership, in conjunction with
Cheyne Capital and The Housing Growth Partnership, a joint venture
between Lloyds Bank & the Homes and Communities Agency, has
already seen strong interest, providing further opportunities for
this business. Our regional building business operates on a number
of frameworks delivering multiple, modest value schemes in key
sectors such as education and health. In Infrastructure, projects
such as Crossrail and Mersey Gateway provide longer-term
visibility. The Services division, which accounts for 50% of the
Group's profit, provides essential, every-day, routine services to
our clients and communities. Many of the budgets for these services
are ring-fenced which provides further resilience to the Group.
We will continue to provide a network of local, regional and
national services and maintain our disciplined risk managed
approach to new work. Our current financial position is
strengthening as net debt improves, which combined with our
Construction and Services order book of GBP8.7bn, allows continued
investment in the future growth of the Group.
Our people
The safety of our people is of paramount importance and we have
made excellent progress in the year by reducing the Group accident
incidence rate by 34%. As the Group continues to evolve, I would
like to thank all of our teams for their contribution and support
during the year.
Board changes
During the year, Justin Atkinson and Adam Walker joined the
Board as non-executive directors and Richard Bailey stood down as
the senior independent director. Justin has subsequently been
appointed to the role of the senior independent director and Adam
as Chair of the Risk Management and Audit Committee. On 1 July
2016, Constance Baroudel joined the Board as a non-executive
director.
Amanda Mellor has decided not to stand for re-election at the
2016 Annual General Meeting (AGM) and will, therefore, be leaving
the Board with effect from the conclusion of the meeting. Amanda
has made a significant contribution to the Board and its
committees, latterly as the Chair of the Remuneration Committee,
since her appointment in 2011. We would like to thank Amanda for
her hard work during her time on the Board. Constance will assume
the role of the Chair of the Remuneration Committee with effect
from the conclusion of the AGM.
Outlook
The Group continues to perform well in growing market sectors
including infrastructure, housing and regional building, providing
a breadth of capabilities to our clients. For the first time, 50%
of Group profit now comes from our Services division where
essential day-to-day services are provided to clients and we have
long-term visibility of our future pipeline of work.
We remain focused on growing the business through improving
operational efficiencies and investing in new technology to support
our operations. We believe that our range of complementary
businesses underpins the resilience of our operating model and the
strength of our order book. Having completed the integration of
Mouchel, we are well progressed with the simplification of our
portfolio of businesses and are focused on capitalising on the
growth opportunities available to the Group. We remain confident of
achieving our goal of double-digit profit growth on average each
year to 2020.
Divisional Review
Property
The division provides property development and structured
finance.
Year ended Year ended Change
30 June 30 June %
2016 2015
GBPm GBPm
Revenue(1) 176 126 +40
----------- ----------- -------
Underlying operating
profit(2) 21.4 22.7 -6
----------- ----------- -------
Average capital(3) (94) (83) +13
----------- ----------- -------
Return on Average
Capital(3) Employed
(ROCE) 23% 27% -4
----------- ----------- -------
Year ended Year ended
30 June 30 June
2016 2015
GBPm GBPm
Statutory operating
profit 16.0 22.6
----------- -----------
(1) Group and share of joint ventures.
(2) Stated before non-underlying items - see notes 2 and 3.
(3) Equates to average net debt.
-- Consistent performance delivering strong returns
-- 23% ROCE on increasing average capital of GBP94m
-- Development pipeline of more than GBP1bn
Revenue was GBP176m (2015: GBP126m), up 40% generating an
underlying operating profit of GBP21.4m (2015: GBP22.7m) and
reflecting the usual second half timing of transactions and a
return to a more normalised level as it continued its successful
investment strategy. This result was achieved with average capital
invested of GBP94m with a peak at GBP129m in the developments
business, through continued support of co-investors and funders and
utilising the Group's cash flow. The division, with over 80% of its
activity taking place outside of London, achieved ROCE of 23%, well
ahead of our 15% target and continues to have a healthy development
pipeline of opportunities in excess of GBP1bn.
The Property division has a diversified national portfolio of
multi-sector, high-quality projects which continues to receive
investment support from co-investors and funders. It also continues
to offer its specialist skills as part of the Group's integrated
offer to public sector clients who are seeking to maximise the
return from their property assets. By way of example, the Penda
Property Strategic Partnership with Staffordshire County Council
and the Police and Crime Commissioner for Staffordshire, signed in
June 2015, has commenced the provision of a total facilities
management solution to over 30 occupied police properties,
including the county headquarters.
The development business concentrates predominantly on
non-speculative opportunities, where elements of the schemes are
pre-let and forward sold or developed in joint venture, thereby
reducing the associated risk and demands on the Group's
capital.
In the industrial sector, the Trade City Bracknell scheme was
sold in June 2016 and future opportunities in Oxford and Thurrock
progressed with strong pre-let interest. Our presence in the sector
has been expanded with the launch of the Logistics City brand with
units up to 150,000 sq ft with sites at Normanton, Thurrock,
Frimley, Basingstoke and Winsford.
In the office development sector, the 100,000 sq ft office in
Sovereign Square, Leeds, built by the Construction division, was
forward sold to Leeds City Council with completion due in October
this year. Speculative investment in the London market is very
limited with the development of the 60,000 sq ft office in
Hammersmith in joint venture with Investec ongoing. 58 Victoria
Embankment, the 46,500 sq ft office development in which Kier held
a 16% equity stake, was sold during the year.
In the retail and mixed use sector, the GBP30m retail and
leisure development at Catterick was sold in May 2016 for GBP30.5m,
the construction of a forward funded 68,000 sq ft leisure scheme in
Walsall was completed in December 2015 with strong pre-let interest
on phase 2, a 45,000 sq ft pre-let retail scheme in Wakefield was
forward sold with construction commencing in May 2016 and two
further opportunities have been secured in Kingswood in Hull and
Durham for retail schemes.
In the hotel sector, construction was completed in December 2015
on the forward-sold 222-bed hotel for Motel One in Highbridge.
Following the award of the masterplan in December 2013, the
GBP240m Watford Health Campus project continued the construction of
the infrastructure works with completion due in October 2016. The
scheme will deliver 375,000 sq ft of mixed use development to the
area, in addition to 680 new homes.
In August 2015, a 264-room student accommodation scheme in
Glasgow was completed ready for the 2015/16 academic year with
lettings ahead of forecast in the first year and the scheme 100%
let for the second year. Further opportunities for student
accommodation projects were secured in Newcastle and Southampton.
In September 2015 in the education sector, financial close was
reached to design, build, finance and maintain the GBP25m Ayr
Academy in South Ayrshire being delivered via Hub South West.
Solum Regeneration, our joint venture with Network Rail, has in
excess of GBP500m of mixed use schemes in its portfolio with
regeneration schemes underway including Guildford, Haywards Heath,
Redhill, Twickenham and Walthamstow.
The Group's investment portfolio holds eight schemes, two at
preferred bidder stage, three in construction and three in
operation. The committed equity investment stands at GBP29.5m
(2015: GBP22.1m) of which GBP14.7m (2015: GBP13.1m) has been
invested to date. The directors' valuation is GBP41m (2015:
GBP36m).
Property outlook
The market outside of London remains strong and the division
will maintain its strategy to focus on predominantly regional,
non-speculative and pre-let opportunities. While there has been
some investor and occupier caution following the EU Referendum
vote, this has not had a noticeable impact on the performance of
the division to date, which has a development pipeline in excess of
GBP1bn. The Group's strong cash flow this year allows for
additional investment into schemes during 2017 and the current
market may present some buying opportunities. These investments,
which will see a Group capital investment peak at GBP175m in the
year ahead, will follow our strict capital and return disciplines.
However, a select few with good rental yields may be held for
longer periods, prior to any development activity.
Residential
Kier Residential, branded Kier Living, includes mixed tenure
affordable housing and private house building.
Year ended Year ended Change
30 June 30 June %
2016 2015
GBPm GBPm
Revenue
Mixed tenure 187 115 +63
Private (Kier
owned land) 166 142 +17
----------- ----------- -------
Total 353 257 +37
----------- ----------- -------
Underlying operating
profit(1)
Mixed tenure 6.0 4.8 +25
Private (Kier
owned land) 14.3 6.4 +123
----------- ----------- -------
Total 20.3 11.2 +81
----------- ----------- -------
Average capital(2)
Mixed tenure (39) (43) -9
Private (Kier
owned land) (192) (220) -13
----------- ----------- -------
Total (231) (263) -12
----------- ----------- -------
Return on Average
Capital Employed
(ROCE) 9% 4% +5
----------- ----------- -------
Land bank -
speculative
(units) 3,279 3,413 -4
----------- ----------- -------
Year ended Year ended
30 June 30 June
2016 2015
GBPm GBPm
Statutory operating
profit 19.5 11.2
----------- -----------
1 Stated before non-underlying items - see notes 2 and 3.
2 Equates to average net debt.
-- Revenue up 37% to GBP353m
-- Healthy mixed tenure pipeline of >GBP600m, >70% secured for FY17
-- Launch of the New Communities Partnership (NCP) joint venture
-- Completions increased to 2,139 units including c750 units from private sale completions
The Residential division's activities are focused on both
private house sales and working with local authorities, registered
providers and other clients to build mixed tenure affordable
housing. This blended approach to house building provides
resilience to market fluctuations and all of the division's
activity is outside of London. The regional profile of the business
provides a stable environment for mixed tenure affordable house
building with demand continuing to exceed supply.
Revenues increased to GBP353m (2015: GBP257m) with the total
number of unit completions increasing to 2,139 units, generating an
increase in underlying operating margin to 5.8%. Underlying
operating profit of GBP20.3m (2015: GBP11.2m), up 81%, was achieved
as our focus increased on mixed tenure housing. The rebalancing of
the legacy Kier land bank continues. The cash performance of the
business was excellent.
Since the EU Referendum vote, sales and visitor levels have
remained consistent with historical seasonal trends and the sales
rate per active site pre and post the vote has remained consistent.
Notwithstanding, new investment in land is being tightly managed
and monitored to align to the pace of sales.
Mixed tenure
Turnover in the mixed tenure business of GBP187m was up 63% on
the previous year with a marginal reduction in average invested
capital to GBP39m. This reflected the low working capital
requirements of the mixed tenure model and the shift in the year to
a higher contracting output which is also reflected in the reduced
operating margin.
The mixed tenure business achieved approximately 1,400
completions (2015: 1,424) in the year and the business has a
pipeline of more than GBP600m and is more than 70% secured for
FY17.
In May, the NCP joint venture, in conjunction with Cheyne
Capital and The Housing Growth Partnership, a joint venture between
Lloyds Bank and the Homes and Communities Agency, was launched. The
NCP joint venture will invest GBP1bn and build up to 10,000 new
homes throughout the UK. Interest from local authorities in the NCP
has been high with over 35 sites currently being evaluated with 11
local authorities across the country.
Following the successful integration of the Southdale business,
the business now has coverage across the north of England and the
Midlands. During the year, the business secured places on all
available significant frameworks covering the north of England
including Torus, Innovation Chain North West, Thirteen Housing
Group, Cutting Edge, Scape, Yorbuild and Places for People.
The rent cuts announced in the Comprehensive Spending Review in
Autumn 2015 saw a number of clients delay affordable housing
development schemes as organisations reshaped their development
plans to adapt to new income forecasts. To align to this new
landscape, the division has refocused its capability to deliver
new, innovative mixed tenure joint ventures. The first of these,
Northern Ventures, in collaboration with Together Housing and
Thirteen Housing Group, aims to deliver 500 units per annum in
schemes across the north of England.
Private
The year saw an uplift in private sale completions on Kier owned
land with c750 completions (2015: 706). The land bank mix continues
to improve with approximately 50% of completions on land bought
before 2008 and the remainder on newer land. The business continues
to rationalise its land bank and reinvest in mixed tenure
opportunities to return capital to the Group. The land bank has
reduced to 3,279 speculative units (2015: 3,413) and sales were
completed at a rate of 0.6 units per trading site per week. Help to
Buy has underpinned new home sales and accounted for approximately
half of private sales. Average sales prices were at GBP230k and the
business is currently more than 50% forward sold for FY2017.
Residential outlook
The division continues to address the UK shortage of housing
with particular focus on mixed tenure housing. The stimulus for
housing provided by Government initiatives such as Help to Buy,
coupled with the availability of mortgages and the recent reduction
in interest rates, should see the business continue to grow and
improve its ROCE year-on-year. With a mixed tenure pipeline of more
than GBP600m, we have good revenue visibility in the business for
the next four years and, when combined with our experience of
housing maintenance, we are well positioned to assist our clients
to develop their portfolios for both private and affordable housing
purposes and to deliver the maintenance requirements thereafter. In
the mixed tenure business, the significant imbalance between supply
and demand for affordable housing in the UK requires a long-term
solution. We are working with local authorities, registered
providers and central government to address the issue through a
variety of financing options.
Construction
The Construction division comprises the UK regional building, UK
infrastructure and international businesses.
Year ended Year ended Change
30 June 30 June %
2016 2015(3)
GBPm GBPm
Revenue(1) 2,025 1,732 +17
----------- ----------- -------
Underlying operating
profit(2) 47.4 38.4 +23
----------- ----------- -------
Underlying operating
margin(2) 2.3% 2.2%
----------- -----------
30 June 30 June
2016 2015(3)
Order book (secure GBP 3.4bn GBP3.5bn
and probable)
---------- ---------
Year ended Year end
30 June 30 June
2016 2015(3)
GBPm GBPm
Statutory operating
profit 15.9 37.5
----------- ---------
Financial information in this table relates to continuing
operations.
1 Group and share of joint ventures.
2 Stated before non-underlying items - see notes 2 and 3.
3 Restated to reflect the reallocation of Mouchel Consulting
from the Services division to the Construction division.
-- Record revenue of GBP2bn
-- Increased underlying operating margin of 2.3%
-- Order book solid at GBP3.4bn
-- Contracts awarded post year end;
o one of six on the four-year GBP4bn Department of Health
ProCure22 framework
o one of five framework partners for works worth up to GBP750m
at Gatwick Airport over the next five years
o award of three lots on the five-year GBP500m University of
Cambridge framework and
o award of GBP48m ARM Peterhouse Technology Park Expansion
Project in Cambridge with works already commenced.
The Construction division experienced a record year of growth,
with revenue up 17% to GBP2,025m (2015: GBP1,732m). The division
benefited from the incorporation of Mouchel Consulting as well as
strong growth in the regional building business delivering a 10%
increase in like-for-like volumes. This resulted in an underlying
operating profit increase of 23% to GBP47.4m (2015: GBP38.4m).
Underlying operating margins increased to 2.3% (2015: 2.2%) and the
working capital position has improved. The current order book of
GBP3.4bn for secured and probable work, excluding framework wins,
includes more than 90% of forecast revenue for the 2017 financial
year, on increasing volumes.
UK regional building
During the year, the split of work across the business was
broadly 50/50 private and public sector, reflecting a balanced
portfolio and consistent with prior years. Buoyant sectors included
education, student accommodation, aviation, transport, defence and
bio-tech, the latter particularly within the Cambridge region.
Collaborative working on strategic frameworks continues to
underpin the day-to-day activity of the business. Frameworks
provide a steady stream of opportunities and long-term
relationships with clients with an addressable spend of over
GBP20bn over the next five years.
In September 2015, Kier won the four-year Scape Minor Works
framework for the second time, giving Kier businesses, including
our regional building, housing maintenance and facilities
management activities, the unique opportunity to deliver up to
GBP1.5bn of public sector projects throughout the UK, each valued
at up to GBP4m over a four-year period. At the end of the financial
year, nine months into the framework, Scape Minor Works awards
totalled GBP60m, with a pipeline of a further GBP160m of projects
in pre-construction. Through this framework, the Group is working
for a broad range of public sector clients.
Education awards continue to be secured under the Education
Funding Agency framework and in the year, we achieved selected
panel member status on a further five schemes worth GBP156m.
In August 2016, Kier was named as one of the six principal
supply chain partners on the four-year GBP4bn Department of Health
ProCure22 framework, the new framework replacing ProCure21+,
building further on the Group's leading position in the health
sector.
New framework successes during the year included the South-West
Wales Regional Contractors framework, valued at GBP850m which is
used by 27 local authorities and public bodies in Wales. Kier was
successful on all four Lots tendered, covering contracts from
GBP3.5m to over GBP15m. In addition, a position on the YORbuild2
Construction framework was awarded in February 2016, with a value
of GBP2bn. This framework can be accessed by local authorities,
public sector bodies and third sector organisations across the
Yorkshire and Humber region, Sheffield Local Enterprise Partnership
(LEP) area, North East England and Lincolnshire. After the year
end, Kier was selected as one of five framework partners appointed
to deliver construction works worth up to GBP750m at Gatwick
Airport on each of the Lots tendered covering low and medium
complexity building works and medium complexity civil works over
the next five years. In addition, Kier has been selected for the
GBP500m University of Cambridge framework and secured a place on
the GBP240m Essex Construction framework for projects over
GBP2m.
We have continued to build on our existing expertise in the
education, health, commercial and defence sectors and we have also
penetrated a number of new sectors covering aviation, logistics and
distribution, bio-tech and science.
The Construction division has continued to work with the
Property division on delivering developments including 58 Victoria
Embankment, London, Sovereign Street, Leeds, a student
accommodation development in Glasgow and Motel One in
Newcastle.
Infrastructure
The infrastructure business operates across a number of sectors
and across a broad range of project values from frameworks to
larger-scale projects, such as Crossrail. Key sectors for the
business are transportation, water and the nuclear and energy
sectors.
In the transportation sector, Crossrail, the Mersey Gateway
project and the Smart Motorways programme continue to make good
progress. Kier's presence in capital programmes in the UK highways
sector continues to grow, complementing Kier's highways maintenance
operations. Key successes in the period include the award of a new
GBP600m highways framework in the East of England, with Kier being
one of six contractors appointed to the major works Lot. In the
rail sector, CEK, a joint venture partnership with Carillion and
Eiffage established in June 2015, has pre-qualified for the maximum
four of seven HS2 phase 2 civil engineering packages, each worth
about GBP1bn. This further expands Kier's involvement in HS2, with
CEK already having tendered for all three enabling works packages,
each worth more than GBP200m.
In the nuclear sector, we are working at Aldermaston and Urenco
and continuing our long track record of working in Sellafield. We
welcome the UK Government approval on Hinkley Point C where we are
currently working and look forward to Kier deploying its proven
capabilities further in the energy and nuclear sectors.
Mouchel Consulting
Following the announcement of the portfolio simplification, an
evaluation of the strategic options for Mouchel Consulting, which
continues to trade well, is underway.
International
The international business has secured over GBP100m of new work
in the Middle East, mainly in Dubai. The low oil price is having an
impact on the pipeline of opportunities in the region, albeit our
ability to provide clients with access to export credit facilities
supported by UK Export Finance (UKEF) is proving to be a key
differentiator and has enabled high quality work to be secured. An
example of this is the GBP51m staff accommodation project awarded
by Nshmi, a local developer, after year end which is being funded
with the support of UKEF. An GBP11m infrastructure contract was
awarded by the same client at its Town Square development in the
emirate. Two further contracts were also secured for Meraas, an
existing key customer; a GBP15m infrastructure project at Al
Khawaneej in Dubai and the island-wide infrastructure works on
Bluewaters island, worth GBP28m. The region continues to provide
attractive opportunities for the Group in the build-up to Expo
2020. The two contracts in Hong Kong are nearing completion with
discussions ongoing with the client and, as part of the portfolio
simplification, operations in the Caribbean are winding down,
including the completion of a contract and the settlement of final
accounts.
Construction outlook
The Construction division continues to perform strongly having
secured more than GBP2bn of new contract awards in the last year
and delivering an increased margin. With an order book of GBP3.4bn,
more than 90% of forecast revenue for 2017 is secured. Margins and
cash generation are expected to improve further as we maintain our
prudent risk management process. The division's regional spread of
projects and standing on key frameworks ensures that it is well
positioned to take advantage of public and private sector
opportunities that arise across the UK. In the short term, the
regional building business will underpin the division's growth;
however, given the political momentum and recognition that the UK's
economic growth will be strengthened by improved transport systems,
power generation and utilities networks, the scale of the UK
infrastructure pipeline provides good visibility over the medium
term.
Services
The Services division comprises strategic and local authority
highways maintenance, utilities, housing maintenance and facilities
management and business processing, the latter recently being
renamed Kier Workplace Services, and environmental services.
Year Year ended Change
ended 30 June %
30 June 2015(3)
2016 GBPm
GBPm
Revenue(1) 1,656 1,236 +34
--------- ----------- -------
Underlying operating
profit(2) 86.1 57.3 +50
--------- ----------- -------
Underlying operating
margin(2) 5.2% 4.6%
--------- -----------
30 June 30 June
2016 2015(3)
Order book (secure and GBP5.3bn GBP5.8bn
probable)
-------- --------
Year Year end(3)
ended
30 June
2016
GBPm 30 June
2015
GBPm
Statutory operating
profit 5.6 38.6
--------- ------------
1 Group and share of joint ventures.
2 Stated before non-underlying items - see notes 2 and 3.
3 Restated to reflect the reallocation of Mouchel Consulting
from the Services division to the Construction division.
-- Significant revenue growth to GBP1.7bn
-- Strong and increased underlying operating margin performance
of 5.2%, including the benefit of Mouchel synergies
-- Expanded highways capability following the integration of Mouchel
-- Long-term order book of cGBP5.3bn with additional potential
extensions of more than GBP2.7bn; and
-- Post-year end award: award of three-year GBP50m National Grid
Infrastructure Protection Works framework security contract and
GBP40m Affinity Water trunk mains utility contract.
Services revenue(1) was up 34% to GBP1.7bn (2015: GBP1.2bn),
reflecting a robust organic performance by the business and a full
year's contribution from the Mouchel businesses. Underlying
operating profit(2) was GBP86.1m (2015(3) : GBP57.3m), up 50%.
Underlying operating margins improved to 5.2%, reflecting the
organic performance of the division and the newly acquired
businesses.
The integration of Mouchel has delivered the anticipated cost
savings of GBP4m in FY16. Furthermore, additional savings of GBP5m
are anticipated in FY17, increasing the forecast annual cost
synergies from the Mouchel acquisition to a total of GBP15m in
FY17. To achieve the higher level of savings, integration costs
have increased by GBP36m to GBP50m, with these additional costs
having been incurred during FY16. This has included a 4% reduction
in overall Group headcount with in excess of 850 roles being
removed, mainly through the amalgamation of business units and the
consolidation of managerial and support roles. The Mouchel
acquisition remains on track to deliver a return on capital in
excess of our target of 15% in FY17.
The order book at 30 June 2016 of GBP5.3bn (2015(3) : GBP5.8bn)
has reduced by GBP0.5bn, as expected, reflecting the unwinding of
the longer-term contracts typical of the utilities and highways
sectors which results in a reduction in the order book each year of
c.GBP600m. More than 90% of targeted revenue for 2017 is secured;
moreover, the order book does not include potential contract
extensions, which, if included, would add more than GBP2.7bn.
Infrastructure Services - Highways maintenance
Following the acquisition of Mouchel, the integration of the
highways management teams has been completed, creating one team
that oversees the combined highways maintenance activity for the
Group. The highways businesses performed well in the year. In
Strategic Highways, the five-year Road Investment Strategy funding
remains unchanged. The formal tender process for Highways England
Areas 1 and 13 and a number of other Areas, where Kier is not
currently the maintenance provider, is underway and these provide
further opportunity for the Group specifically where Highways
England has lifted the cap on the number of Areas that can be
awarded to one company from four to five. In March a GBP50m design
services contract was awarded by Highways England for Area 7
covering the East Midlands.
Demonstrating a leading commitment to collaborative working,
Kier Highways has pioneered an alliance approach with the British
Standards Institution for its supply chain partners. In May 2016,
the Area 3 team and its suppliers were the first to become
certified to BS 11000 Collaborative Business Relationships as part
of a new alliance approach. It is anticipated that this innovative
model will be adopted by other contractors. In the local
authorities market where the Group has five contracts plus its
operations in London, budget challenges continue for our clients
and we are working with clients on new approaches to service
provision. This has been well received by clients, including Surrey
County Council, which earlier this year extended the Group's
relationship with the provision of a four-year GBP160m extension to
the existing Surrey Highways contract. The current local authority
highways bidding pipeline has a value of over GBP2bn despite the
recent quieter bidding cycle.
In Australia, where we operate seven contracts as part of the
DownerMouchel joint venture, expenditure on infrastructure capital
spend continues. Bid opportunities have been developed in Western
Australia and New South Wales and opportunities in the New Zealand
market continue to be evaluated.
Infrastructure Services - Utilities
Following the completion of the AMP6 bidding process and the
successful mobilisation of the Thames Water and Anglian Water
contracts, work is focusing on the cultural transformation of the
alliances to deliver more efficiently. During the year, a GBP105m
five-year extension was awarded on the Scottish Water contract for
the provision of repair and maintenance services for the waste
water network across Scotland. In addition, two extensions for
existing contracts with South West Water and Bournemouth Water are
in advanced discussion. After the year end, two new contracts were
won; a three-year GBP50m National Grid Infrastructure Protection
Works framework security contract, in joint venture with Siemens,
and a GBP40m trunk mains utility contract for Affinity Water, a new
client win.
Property Services - Housing maintenance
The business continues to be impacted by the social rent
reduction announced in last year's Budget. This has impacted on our
clients' finances and their long-term planning and, consequently,
resulted in a reduced level of new awards.
Our strong partnership with Genesis continues and discussions
are ongoing about extending the scope of services to include
compliance works. With the anticipated merger of registered
providers and the increasing need for social housing, we are
starting to see new opportunities for the provision of end-to-end
services which our Residential and Services divisions can provide
with a combined new build and maintenance offering.
Changes of approach and greater efficiencies with our clients
are necessary to address reducing client budgets. In addition to
our breadth of services, we have developed and are implementing an
improved front-end IT system to better and more efficiently
interact with our clients' own systems and enable us to drive
operational efficiencies and flexibility.
Property Services - Kier Workplace Services
The new division, incorporating facilities management, property
management and business processing, was launched on 1 July 2016.
The business provides end-to-end workplace solutions for both
public and private sector clients, designed to address a growing
market seeking the full range of hard and soft facilities
management, asset management and wider business services.
During the year, facilities management contracts were awarded by
a number of organisations in the heritage and arts sector, in local
government and other areas of the public sector such as health and
blue light. Key contract awards totalling cGBP100m include a GBP32m
contract to deliver repairs and estate management to Southwark
Council, a mechanical and electrical services contract to the Royal
Shakespeare Company, an GBP12m contract to provide mechanical and
electrical services to the six Imperial War Museums (IWM) as well
as a GBP30m repeat award by Wiltshire County Council.
Other
The operational performance of the Environmental Services
business remains on track, albeit the decline in the commodity
prices has resulted, as announced on 4 July, in a provision of
GBP35m on losses incurred by the Environmental Services business
which will be taken in FY16, providing for all future cash outflows
on two environmental contracts of eight and ten years' remaining
duration. Additionally, in light of recyclate pricing, the carrying
value of our investment in Biogen, our renewable energy joint
venture in which the Group holds a 50% share, has been reviewed,
resulting in an impairment cost to Kier of GBP5m in FY16.
Services outlook
The Services division, which accounts for 50% of the Group's
profit, provides essential, day-to-day, routine services to clients
and communities. Many of these budgets are ring-fenced which
provides resilience to the Group. The integration of the Mouchel
business has been completed and the Services division is benefiting
from the complementary capabilities now within the Group, something
that our clients are increasingly interested in. The Services order
book of GBP5.3bn provides good long-term visibility of our workload
with potential extensions adding a further GBP2.7bn, and is more
than 90% secured for 2017.
FINANCIAL REVIEW
Results
The Group reports a robust underlying performance with record
turnover, underlying operating profit and underlying EPS. Group
revenue(1) for the year ended 30 June 2016 increased by 26% to
GBP4.2bn (2015: GBP3.4bn) and underlying operating profit(2)
increased by 44% to GBP150m (2015: GBP104m). These results include
a full twelve months contribution from the Mouchel acquisition,
with the Services division contributing 50% of underlying operating
profit for the first time. The underlying operating margins(2)
improved to 2.3% in the Construction division (2015: 2.2%) and 5.2%
in the Services division (2015: 4.6%) with the latter benefiting
from the acquisition of Mouchel. The Property division generated an
underlying operating profit(2) of GBP21.4m (2015: GBP22.7m)
reflecting a return to more normalised levels as it continued its
successful investment strategy. The Residential division performed
strongly, with underlying operating profit(2) up 81% to GBP20.3m
(2015: GBP11.2m), and an increase in margin reflecting the ongoing
improvement in the quality of the owned land bank and an increased
contribution from the mixed tenure business.
Net underlying finance costs of GBP24.7m (2015: GBP17.8m)
reflect the additional working capital requirements and banking
facilities associated with the Mouchel acquisition in June 2015. In
addition, a full year's interest charge has been incurred on the US
Private Placement debt facilities taken out in November 2014 whilst
interest charges on finance leases of GBP1.4m (2015: GBP2.6m)
reduced following the disposal of the Fleet and Passenger Services
business in July 2015. Financing charges associated with the
Group's pension schemes have increased to GBP5.6m (2015: GBP2.2m)
following the incorporation of the Mouchel Group's pension scheme
into the Group's balance sheet.
The tax charge(2) for the period of GBP22.5m (2015: GBP16.9m)
represents an effective corporation tax rate of 18.0% (2015:
19.7%), assisted by the increasing use of capital efficient joint
venture structures in the Property division.
Underlying earnings per share(2) of 106.7p represents an 11%
increase on the prior year (2015: 96.0p).
Dividend
In line with the Group's progressive dividend policy, the Board
is recommending a full year dividend for the year ended 30 June
2016 of 64.5p per share (2015: 55.2p), amounting to approximately
GBP61m (2015: GBP47m). An interim dividend of 21.5p per share
(2015: 19.2p) amounting to approximately GBP20m (2015: GBP13m), was
paid on 20 May 2016. Full year dividend cover is 1.7 times (2015:
1.7 times) underlying earnings per share. Subject to shareholder
approval, the final dividend will be paid on 2 December 2016 to
shareholders on the register at the close of business on 30
September 2016. A scrip dividend alternative will also be
available.
Non-underlying items
The Group has recognised a net pre-tax charge of GBP116m on
continuing operations in respect of the following non-underlying
items in the year. These are set out in note 3 and include:
-- Integration and restructuring charges following the
acquisition of Mouchel. In the 2016 financial year the Group has
restructured both the acquired Mouchel business and the legacy Kier
operations, primarily within the Services division. This has
included a 4% reduction in overall Group headcount with in excess
of 850 roles being removed, mainly through the amalgamation of
business units and the consolidation of managerial and support
roles. Total costs incurred were GBP50m including GBP35m of
severance costs.
-- Impact of commodity prices on waste collection contracts. The
Group operates two waste contracts with recyclate income clauses
and has recognised an impairment charge of GBP35.6m for the
remainder of the contract life. Recyclate income is highly
correlated to oil prices which have fallen 40% since the second
half of 2014. The Group has recognised provisions which assume
ongoing income equivalent average oil price of $60 per barrel for
the remainder of the contract life.
-- Closure of the Caribbean operations. Following a strategic
review of overseas operations in 2016, the Group's Caribbean
operations are winding down. A GBP23.1m provision has been taken in
respect of this closure and associated final account positions.
-- Other costs totalling GBP8m include GBP4.5m relating to the
final costs for the Construction Workers Compensation Scheme and a
non-cash impairment of GBP5m in respect of the Group's investment
in its Biogen joint venture which are partially outset by a small
gain relating to sale of Fleet & Passenger Services.
As a result of the non-underlying costs noted above and non-cash
charges associated with the amortisation of acquired intangible
contract rights and discount unwind of GBP23.9m (2015: GBP14.8m),
the Group reported a loss on a statutory basis of GBP15.4m (2015:
profit of GBP39.5m) before taxation.
The Group announced a strategic review of the Mouchel Consulting
business in July 2016. This review may encompass the sale of the
business. The business contributed operating profit of GBP8m in the
current financial year.
The cash outflow of the above items in FY17 is expected to be in
the range of GBP25m.
Cash performance
The Group's net debt as at 30 June 2016 was GBP99m (2015:
GBP141m) which was ahead of expectations particularly in light of
capital investment of GBP31m in the Property and Residential
divisions and on new front and back office systems including ERP.
Strong working capital management has driven a material and
sustainable improvement in cash flows during the year. This
performance equates to a net debt to EBITDA ratio of less than 1x,
achieved a year ahead of our Vision 2020 goal of a net debt to
EBITDA ratio of 1x by 30 June 2017.
The Group recently concluded the raising of GBP81m (EUR100m) of
additional finance via the Schuldschein market. The placement has
an average maturity of approximately five years and a blended
interest rate of approximately 3% including fees. This fundraising
further diversifies the Group's sources of funding and provides it
with long-term, fixed-rate debt, therefore reducing the Group's
exposure to increases in interest rates over the longer-term.
Pensions
The Group's balance sheet includes the combined deficits of the
Kier, May Gurney and Mouchel consolidated pension schemes. The
three pension schemes have reported a reduced aggregate net deficit
of GBP72m (2015: GBP123m) after accounting for the benefit of
deferred tax. A strong performance from the scheme pension asset
portfolios resulted in a gain of GBP218m driven by the pension
scheme's corporate and government bond investments more than
off-setting the increase in liabilities as a result of a reduction
in discount rates. All of the Group's pension schemes are closed to
future accrual.
1 Group and share of joint ventures
2 Stated before non-underlying items - see note 3
- E N D S-
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. 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 2016 for a further discussion
of the factors that could affect the Group's future performance and
the industry in which it operates. 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.
Consolidated income statement
For the year ended 30 June 2016
2016 2015
---------- --------------- --------- ---------- ----------- ---------
Non-
Non-underlying underlying
items items
Underlying (note Underlying (note
Items(1) 3) Total Items(1) 3) Total
Continuing operations Notes GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------ ----- ---------- --------------- --------- ---------- ----------- ---------
Revenue
------------------------------ ----- ---------- --------------- --------- ---------- ----------- ---------
Group and share of joint
ventures 2 4,210.6 - 4,210.6 3,351.2 - 3,351.2
------------------------------ ----- ---------- --------------- --------- ---------- ----------- ---------
Less share of joint
ventures 2 (98.3) - (98.3) (75.3) - (75.3)
------------------------------ ----- ---------- --------------- --------- ---------- ----------- ---------
Group revenue 4,112.3 - 4,112.3 3,275.9 - 3,275.9
------------------------------ ----- ---------- --------------- --------- ---------- ----------- ---------
Cost of sales (3,702.0) - (3,702.0) (2,993.0) - (2,993.0)
------------------------------ ----- ---------- --------------- --------- ---------- ----------- ---------
Gross profit 410.3 - 410.3 282.9 - 282.9
------------------------------ ----- ---------- --------------- --------- ---------- ----------- ---------
Administrative expenses (277.5) (137.9) (415.4) (201.9) (42.8) (244.7)
------------------------------ ----- ---------- --------------- --------- ---------- ----------- ---------
Share of post-tax results
of joint ventures 14.2 - 14.2 7.9 - 7.9
------------------------------ ----- ---------- --------------- --------- ---------- ----------- ---------
Profit on disposal of
joint ventures 2.6 - 2.6 14.8 - 14.8
------------------------------ ----- ---------- --------------- --------- ---------- ----------- ---------
Profit/(loss) from operations 2 149.6 (137.9) 11.7 103.7 (42.8) 60.9
------------------------------ ----- ---------- --------------- --------- ---------- ----------- ---------
Finance income 0.8 - 0.8 1.7 - 1.7
------------------------------ ----- ---------- --------------- --------- ---------- ----------- ---------
Finance costs (25.5) (2.4) (27.9) (19.5) (3.6) (23.1)
------------------------------ ----- ---------- --------------- --------- ---------- ----------- ---------
Profit/(loss) before
tax 2 124.9 (140.3) (15.4) 85.9 (46.4) 39.5
------------------------------ ----- ---------- --------------- --------- ---------- ----------- ---------
Taxation 4a (22.5) 26.1 3.6 (16.9) 6.9 (10.0)
------------------------------ ----- ---------- --------------- --------- ---------- ----------- ---------
Profit/(loss) for the
year from continuing
operations 102.4 (114.2) (11.8) 69.0 (39.5) 29.5
------------------------------ ----- ---------- --------------- --------- ---------- ----------- ---------
Discontinued operations
------------------------------ ----- ---------- --------------- --------- ---------- ----------- ---------
Loss for the year from
discontinued operations
(attributable to equity
holders of the parent
company) - (5.0) (5.0) (2.2) (21.8) (24.0)
------------------------------ ----- ---------- --------------- --------- ---------- ----------- ---------
Profit/(loss) for the
year 102.4 (119.2) (16.8) 66.8 (61.3) 5.5
------------------------------ ----- ---------- --------------- --------- ---------- ----------- ---------
Attributable to:
------------------------------ ----- ---------- --------------- --------- ---------- ----------- ---------
Owners of the parent 101.6 (119.2) (17.6) 65.7 (61.3) 4.4
------------------------------ ----- ---------- --------------- --------- ---------- ----------- ---------
Non-controlling interests 0.8 - 0.8 1.1 - 1.1
------------------------------ ----- ---------- --------------- --------- ---------- ----------- ---------
102.4 (119.2) (16.8) 66.8 (61.3) 5.5
------------------------------ ----- ---------- --------------- --------- ---------- ----------- ---------
Earnings per share
------------------------------ ----- ---------- --------------- --------- ---------- ----------- ---------
Basic earnings/(loss)
per share
------------------------------ ----- ---------- --------------- --------- ---------- ----------- ---------
From continuing operations 6 106.7p (119.9)p (13.2)p 96.0p (55.8)p 40.2p
------------------------------ ----- ---------- --------------- --------- ---------- ----------- ---------
From discontinued operations 6 - (5.3)p (5.3)p (3.1)p (30.8)p (33.9)p
------------------------------ ----- ---------- --------------- --------- ---------- ----------- ---------
Total 6 106.7p (125.2)p (18.5)p 92.9p (86.6)p 6.3p
------------------------------ ----- ---------- --------------- --------- ---------- ----------- ---------
Diluted earnings/(loss)
per share
------------------------------ ----- ---------- --------------- --------- ---------- ----------- ---------
From continuing operations 6 106.7p (119.9)p (13.2)p 95.6p (55.6)p 40.0p
------------------------------ ----- ---------- --------------- --------- ---------- ----------- ---------
From discontinued operations 6 - (5.3)p (5.3)p (3.1)p (30.8)p (33.9)p
------------------------------ ----- ---------- --------------- --------- ---------- ----------- ---------
Total 6 106.7p (125.2)p (18.5)p 92.5p (86.4)p 6.1p
------------------------------ ----- ---------- --------------- --------- ---------- ----------- ---------
(1) Stated before non-underlying items, see note 3.
Consolidated statement of comprehensive income
For the year ended 30 June 2016
2016 2015
Notes GBPm GBPm
-------------------------------------------------- ----- ------ ------
(Loss)/profit for the year (16.8) 5.5
-------------------------------------------------- ----- ------ ------
Items that may be reclassified subsequently
to the income statement
-------------------------------------------------- ----- ------ ------
Share of joint venture fair value movements
on cash flow hedging instruments (0.1) 0.7
-------------------------------------------------- ----- ------ ------
Deferred tax on share of joint venture
fair value movements on cash flow hedging
instruments 4c - (0.2)
-------------------------------------------------- ----- ------ ------
Fair value movements on cash flow hedging
instruments 18.5 0.2
-------------------------------------------------- ----- ------ ------
Fair value movements on cash flow hedging
instruments recycled to the Income Statement (17.7)
-------------------------------------------------- ----- ------ ------
Deferred tax on fair value movements on
cash flow hedging instruments (0.2) -
-------------------------------------------------- ----- ------ ------
Foreign exchange gains on long term funding
of foreign operations 9.6 0.9
-------------------------------------------------- ----- ------ ------
Foreign exchange translation differences (1.1) (0.2)
-------------------------------------------------- ----- ------ ------
Total items that may be reclassified subsequently
to the income statement 9.0 1.4
-------------------------------------------------- ----- ------ ------
Items that will not be reclassified to
the income statement
-------------------------------------------------- ----- ------ ------
Re-measurement of defined benefit liabilities 47.6 (34.0)
-------------------------------------------------- ----- ------ ------
Deferred tax on actuarial gains/losses
on defined benefit liabilities 4c (9.1) 6.8
-------------------------------------------------- ----- ------ ------
Total items that will not be reclassified
to the income statement 38.5 (27.2)
-------------------------------------------------- ----- ------ ------
Other comprehensive income/(loss) for the
year 47.5 (25.8)
-------------------------------------------------- ----- ------ ------
Total comprehensive income/(loss) for the
year 30.7 (20.3)
-------------------------------------------------- ----- ------ ------
Attributable to:
-------------------------------------------------- ----- ------ ------
Equity holders of parent 29.9 (21.4)
-------------------------------------------------- ----- ------ ------
Non-controlling interests - continuing
operations 0.8 1.1
-------------------------------------------------- ----- ------ ------
30.7 (20.3)
-------------------------------------------------- ----- ------ ------
Total comprehensive income/(loss) attributable
to equity shareholders arises from:
-------------------------------------------------- ----- ------ ------
Continuing operations 34.9 2.6
-------------------------------------------------- ----- ------ ------
Discontinued operations (5.0) (24.0)
-------------------------------------------------- ----- ------ ------
29.9 (21.4)
-------------------------------------------------- ----- ------ ------
Consolidated statement of changes in equity
For the year ended 30 June 2016
Attributable
to
Cash owners
Capital flow of
Share Share redemption Retained hedge Translation Merger the Non-controlling Total
capital premium reserve earnings reserve reserve reserve parent interests equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
-------------- ------- ------- ---------- -------- ------- ----------- -------- ------------ --------------- ------
At 1 July 2014 0.6 73.7 2.7 51.4 (2.9) (3.6) 184.8 306.7 3.0 309.7
-------------- ------- ------- ---------- -------- ------- ----------- -------- ------------ --------------- ------
Profit for
year - - - 4.4 - - - 4.4 1.1 5.5
-------------- ------- ------- ---------- -------- ------- ----------- -------- ------------ --------------- ------
Other
comprehensive
(loss)/income - - - (27.2) 0.7 0.7 - (25.8) - (25.8)
-------------- ------- ------- ---------- -------- ------- ----------- -------- ------------ --------------- ------
Dividends paid - - - (40.2) - - - (40.2) (2.3) (42.5)
-------------- ------- ------- ---------- -------- ------- ----------- -------- ------------ --------------- ------
Issue of own
shares 0.4 334.8 - - - - - 335.2 - 335.2
-------------- ------- ------- ---------- -------- ------- ----------- -------- ------------ --------------- ------
Share-based
payments - - - 3.4 - - - 3.4 - 3.4
-------------- ------- ------- ---------- -------- ------- ----------- -------- ------------ --------------- ------
Tax on
share-based
payments - - - (0.1) - - - (0.1) - (0.1)
-------------- ------- ------- ---------- -------- ------- ----------- -------- ------------ --------------- ------
Transfers - - - 50.0 - - (50.0) - - -
-------------- ------- ------- ---------- -------- ------- ----------- -------- ------------ --------------- ------
At 30 June
2015 1.0 408.5 2.7 41.7 (2.2) (2.9) 134.8 583.6 1.8 585.4
-------------- ------- ------- ---------- -------- ------- ----------- -------- ------------ --------------- ------
Loss for year - - - (17.6) - - - (17.6) 0.8 (16.8)
-------------- ------- ------- ---------- -------- ------- ----------- -------- ------------ --------------- ------
Other
comprehensive
income - - - 38.5 0.5 8.5 - 47.5 - 47.5
-------------- ------- ------- ---------- -------- ------- ----------- -------- ------------ --------------- ------
Dividends paid - - - (54.7) - - - (54.7) (0.4) (55.1)
-------------- ------- ------- ---------- -------- ------- ----------- -------- ------------ --------------- ------
Issue of own
shares - 9.5 - - - - - 9.5 - 9.5
-------------- ------- ------- ---------- -------- ------- ----------- -------- ------------ --------------- ------
Share-based
payments - - - 5.6 - - - 5.6 - 5.6
-------------- ------- ------- ---------- -------- ------- ----------- -------- ------------ --------------- ------
At 30 June
2016 1.0 418.0 2.7 13.5 (1.7) 5.6 134.8 573.9 2.2 576.1
-------------- ------- ------- ---------- -------- ------- ----------- -------- ------------ --------------- ------
Consolidated balance sheet
At 30 June 2016
2016 2015(1)
Notes GBPm GBPm
-------------------------------------------- ----- --------- ---------
Non-current assets
-------------------------------------------- ----- --------- ---------
Intangible assets 794.6 790.0
-------------------------------------------- ----- --------- ---------
Property, plant and equipment 99.3 120.9
-------------------------------------------- ----- --------- ---------
Investment in and loans to joint ventures 129.8 79.4
-------------------------------------------- ----- --------- ---------
Deferred tax assets 7.3 9.0
-------------------------------------------- ----- --------- ---------
Trade and other receivables 34.7 31.4
-------------------------------------------- ----- --------- ---------
Non-current assets 1,065.7 1,030.7
-------------------------------------------- ----- --------- ---------
Current assets
-------------------------------------------- ----- --------- ---------
Inventories 675.9 733.7
-------------------------------------------- ----- --------- ---------
Trade and other receivables 523.0 535.0
-------------------------------------------- ----- --------- ---------
Other financial assets 18.1 -
-------------------------------------------- ----- --------- ---------
Cash and cash equivalents 9 186.7 254.0
-------------------------------------------- ----- --------- ---------
Current assets 1,403.7 1,522.7
-------------------------------------------- ----- --------- ---------
Assets held for sale as part of a disposal
group 18.2 193.9
-------------------------------------------- ----- --------- ---------
Total assets 2,487.6 2,747.3
-------------------------------------------- ----- --------- ---------
Current liabilities
-------------------------------------------- ----- --------- ---------
Finance lease obligations (13.5) (14.9)
-------------------------------------------- ----- --------- ---------
Other financial liabilities (0.2) -
-------------------------------------------- ----- --------- ---------
Trade and other payables (1,379.5) (1,315.5)
-------------------------------------------- ----- --------- ---------
Corporation tax payable (6.0) (12.7)
-------------------------------------------- ----- --------- ---------
Provisions (22.8) (18.2)
-------------------------------------------- ----- --------- ---------
Current liabilities (1,422.0) (1,361.3)
-------------------------------------------- ----- --------- ---------
Liabilities held for sale as part of a
disposal group (13.7) (168.0)
-------------------------------------------- ----- --------- ---------
Non-current liabilities
-------------------------------------------- ----- --------- ---------
Borrowings 9 (303.2) (394.8)
-------------------------------------------- ----- --------- ---------
Finance lease obligations (12.8) (25.7)
-------------------------------------------- ----- --------- ---------
Other financial liabilities (1.1) (1.5)
-------------------------------------------- ----- --------- ---------
Trade and other payables (13.2) (11.4)
-------------------------------------------- ----- --------- ---------
Retirement benefit obligations 7 (87.8) (153.6)
-------------------------------------------- ----- --------- ---------
Provisions (57.7) (45.6)
-------------------------------------------- ----- --------- ---------
Non-current liabilities (475.8) (632.6)
-------------------------------------------- ----- --------- ---------
Total liabilities (1,911.5) (2,161.9)
-------------------------------------------- ----- --------- ---------
Net assets 2 576.1 585.4
-------------------------------------------- ----- --------- ---------
Equity
-------------------------------------------- ----- --------- ---------
Share capital 1.0 1.0
-------------------------------------------- ----- --------- ---------
Share premium 418.0 408.5
-------------------------------------------- ----- --------- ---------
Capital redemption reserve 2.7 2.7
-------------------------------------------- ----- --------- ---------
Retained earnings 13.5 41.7
-------------------------------------------- ----- --------- ---------
Cash flow hedge reserve (1.7) (2.2)
-------------------------------------------- ----- --------- ---------
Translation reserve 5.6 (2.9)
-------------------------------------------- ----- --------- ---------
Merger reserve 134.8 134.8
-------------------------------------------- ----- --------- ---------
Equity attributable to owners of the parent 573.9 583.6
-------------------------------------------- ----- --------- ---------
Non-controlling interests 2.2 1.8
-------------------------------------------- ----- --------- ---------
Total equity 576.1 585.4
-------------------------------------------- ----- --------- ---------
(1) Restated for impact of revision to the acquisition
accounting of the Mouchel Group, see note 8.
Consolidated cash flow statement
For the year ended 30 June 2016
2016 2015
Notes GBPm GBPm
-------------------------------------------------------------- ----- ------- -------
Cash flows from operating activities
-------------------------------------------------------------- ----- ------- -------
(Loss)/profit before tax - continuing operations (15.4) 39.5
-------------------------------------------------------------- ----- ------- -------
- discontinuing operations (11.0) (25.8)
-------------------------------------------------------------- ----- ------- -------
Non-underlying items 127.4 54.5
-------------------------------------------------------------- ----- ------- -------
Net finance cost 27.1 21.4
-------------------------------------------------------------- ----- ------- -------
Share of post-tax trading results of joint
ventures (14.2) (7.9)
-------------------------------------------------------------- ----- ------- -------
Normal cash contributions to pension fund
in excess of/(less than) pension charge 1.2 (0.1)
-------------------------------------------------------------- ----- ------- -------
Equity settled share-based payments charge 5.6 3.4
-------------------------------------------------------------- ----- ------- -------
Amortisation and impairment of intangible
assets 27.8 13.6
-------------------------------------------------------------- ----- ------- -------
Other non-cash items (4.7) (4.6)
-------------------------------------------------------------- ----- ------- -------
Depreciation charges 21.8 28.9
-------------------------------------------------------------- ----- ------- -------
Profit on disposal of joint ventures (2.6) (14.8)
-------------------------------------------------------------- ----- ------- -------
Loss on disposal of property, plant and
equipment and intangible assets 7.2 2.1
-------------------------------------------------------------- ----- ------- -------
Operating cash flows before movements in
working capital 170.2 110.2
-------------------------------------------------------------- ----- ------- -------
Deficit contributions to pension fund (25.1) (18.7)
-------------------------------------------------------------- ----- ------- -------
Decrease/(increase) in inventories 57.8 (205.5)
-------------------------------------------------------------- ----- ------- -------
Decrease in receivables 8.7 88.0
-------------------------------------------------------------- ----- ------- -------
Increase in payables 39.7 192.8
-------------------------------------------------------------- ----- ------- -------
Decrease in provisions (3.7) (28.3)
-------------------------------------------------------------- ----- ------- -------
Cash inflow from operating activities before
non-underlying items 247.6 138.5
-------------------------------------------------------------- ----- ------- -------
Cash outflow from non-underlying items (83.0) (18.8)
-------------------------------------------------------------- ----- ------- -------
Cash inflow from operating activities 164.6 119.7
-------------------------------------------------------------- ----- ------- -------
Dividends received from joint ventures 2.8 3.5
-------------------------------------------------------------- ----- ------- -------
Interest received 0.8 1.7
-------------------------------------------------------------- ----- ------- -------
Income taxes paid 4b (1.8) (3.5)
-------------------------------------------------------------- ----- ------- -------
Net cash inflow from operating activities 166.4 121.4
-------------------------------------------------------------- ----- ------- -------
Cash flows from investing activities
-------------------------------------------------------------- ----- ------- -------
Proceeds from sale of property, plant and
equipment 10.6 2.0
-------------------------------------------------------------- ----- ------- -------
Proceeds from sale of joint ventures 8c 20.4 13.9
-------------------------------------------------------------- ----- ------- -------
Purchases of property, plant and equipment (14.1) (19.8)
-------------------------------------------------------------- ----- ------- -------
Purchase of intangible assets (38.1) (22.6)
-------------------------------------------------------------- ----- ------- -------
Divestment/(investment) in assets held
for resale 29.8 (12.6)
-------------------------------------------------------------- ----- ------- ---------
Acquisition of subsidiaries 8a - (262.6)
-------------------------------------------------------------- ----- ------- -------
Investment in joint ventures (61.9) (35.6)
-------------------------------------------------------------- ----- ------- -------
Cash acquired 8a - 32.2
-------------------------------------------------------------- ----- ------- -------
Net cash used in investing activities (53.3) (305.1)
-------------------------------------------------------------- ----- ------- -------
Cash flows from financing activities
-------------------------------------------------------------- ----- ------- -------
Issue of shares 4.5 334.1
-------------------------------------------------------------- ----- ------- -------
Interest paid (19.5) (15.6)
-------------------------------------------------------------- ----- ------- -------
Cash outflow incurred raising finance (0.6) (2.6)
-------------------------------------------------------------- ----- ------- -------
Inflow from finance leases on property,
plant and equipment 3.1 16.9
-------------------------------------------------------------- ----- ------- -------
Inflow from new borrowings 75.8 199.9
-------------------------------------------------------------- ----- ------- -------
Finance lease repayments (17.4) (32.2)
-------------------------------------------------------------- ----- ------- -------
Repayment of borrowings (184.5) (94.0)
-------------------------------------------------------------- ----- ------- -------
Dividends paid to equity holders of the
parent (49.7) (39.1)
-------------------------------------------------------------- ----- ------- -------
Dividends paid to non-controlling interests (0.4) (2.3)
-------------------------------------------------------------- ----- ------- -------
Net cash (used in)/from financing activities (188.7) 365.1
-------------------------------------------------------------- ----- ------- -------
(Decrease)/increase in cash, cash equivalents
and overdraft (75.6) 181.4
-------------------------------------------------------------- ----- ------- -------
Effect of change in foreign exchange rates 8.3 -
-------------------------------------------------------------- ----- ------- -------
Opening cash, cash equivalents and overdraft 254.0 72.6
-------------------------------------------------------------- ----- ------- -------
Closing cash, cash equivalents and overdraft 9 186.7 254.0
-------------------------------------------------------------- ----- ------- -------
Notes to the consolidated financial statements
1 Accounting policies
There have been no significant changes to the accounting
policies in these financial statements. They have been prepared in
accordance with International Financial Reporting Standards as
adopted by the EU.
2 Segmental reporting
The Group operates four divisions, Property, Residential,
Construction and Services which is the basis on which the Group
manages and reports its primary segmental information. Corporate
includes unrecovered overheads and the charge for defined benefit
pension schemes.
Segment information is based on the information provided to the
Chief Executive, together with the Board, who is the chief
operating decision maker. The segments are strategic business units
with separate management and have different core customers and
offer different services. The segments are discussed in the Chief
Executive's review.
Year to 30 June 2016 Property Residential Construction Services Corporate Group
Continuing operations GBPm GBPm GBPm GBPm GBPm GBPm
----------------------------------------- -------- ------------- ------------ -------- --------- ---------
Revenue(1)
----------------------------------------- -------- ------------- ------------ -------- --------- ---------
Group and share of joint
ventures 176.3 352.9 2,025.3 1,656.1 - 4,210.6
----------------------------------------- -------- ------------- ------------ -------- --------- ---------
Less share of joint ventures (78.2) - (10.3) (9.8) - (98.3)
----------------------------------------- -------- ------------- ------------ -------- --------- ---------
Group revenue 98.1 352.9 2,015.0 1,646.3 - 4,112.3
----------------------------------------- -------- ------------- ------------ -------- --------- ---------
Profit
----------------------------------------- -------- ------------- ------------ -------- --------- ---------
Group operating profit/(loss) 6.8 20.3 45.7 85.6 (25.6) 132.8
----------------------------------------- -------- ------------- ------------ -------- --------- ---------
Share of post-tax results
of joint ventures 12.0 - 1.7 0.5 - 14.2
----------------------------------------- -------- ------------- ------------ -------- --------- ---------
Profit on disposal of joint
ventures 2.6 - - - - 2.6
----------------------------------------- -------- ------------- ------------ -------- --------- ---------
Underlying operating profit/(loss) 21.4 20.3 47.4 86.1 (25.6) 149.6
----------------------------------------- -------- ------------- ------------ -------- --------- ---------
Underlying net finance (costs)/income(2) (5.4) (10.2) 1.8 (10.0) (0.9) (24.7)
----------------------------------------- -------- ------------- ------------ -------- --------- ---------
Underlying profit/(loss)
before tax 16.0 10.1 49.2 76.1 (26.5) 124.9
----------------------------------------- -------- ------------- ------------ -------- --------- ---------
Non-underlying items:
----------------------------------------- -------- ------------- ------------ -------- --------- ---------
Amortisation of intangible
assets relating to contract
rights (0.1) - (0.4) (21.0) - (21.5)
----------------------------------------- -------- ------------- ------------ -------- --------- ---------
Non-underlying finance costs - - - (2.4) - (2.4)
----------------------------------------- -------- ------------- ------------ -------- --------- ---------
Other non-underlying items (5.3) (0.8) (31.1) (59.5) (19.7) (116.4)
----------------------------------------- -------- ------------- ------------ -------- --------- ---------
Profit/(loss) before tax
from continuing operations 10.6 9.3 17.7 (6.8) (46.2) (15.4)
----------------------------------------- -------- ------------- ------------ -------- --------- ---------
Balance sheet
----------------------------------------- -------- ------------- ------------ -------- --------- ---------
Total assets excluding cash 177.0 314.6 627.0 539.9 624.2 2,282.7
----------------------------------------- -------- ------------- ------------ -------- --------- ---------
Liabilities excluding borrowings (41.7) (111.8) (690.5) (631.7) (136.6) (1,612.3)
----------------------------------------- -------- ------------- ------------ -------- --------- ---------
Net operating assets/ (liabilities)
excluding assets held for
sale (3) 135.3 202.8 (63.5) (91.8) 487.6 670.4
----------------------------------------- -------- ------------- ------------ -------- --------- ---------
Cash, net of borrowings (77.2) (177.2) 277.1 26.7 (148.2) (98.8)
----------------------------------------- -------- ------------- ------------ -------- --------- ---------
Net assets excluding assets
held for sale 58.1 25.6 213.6 (65.1) 339.4 571.6
----------------------------------------- -------- ------------- ------------ -------- --------- ---------
Assets held for sale - - 4.5 - - 4.5
----------------------------------------- -------- ------------- ------------ -------- --------- ---------
Net assets/(liabilities) 58.1 25.6 218.1 (65.1) 339.4 576.1
Other information
----------------------------------------- -------- ------------- ------------ -------- --------- ---------
Inter-segmental revenue
(4) - 8.4 49.1 115.7 17.0 190.2
----------------------------------------- -------- ------------- ------------ -------- --------- ---------
Capital expenditure 4.9 0.2 2.5 2.3 4.2 14.1
----------------------------------------- -------- ------------- ------------ -------- --------- ---------
Depreciation of property,
plant and equipment - (0.3) (3.0) (13.6) (4.9) (21.8)
----------------------------------------- -------- ------------- ------------ -------- --------- ---------
Amortisation of computer
software - - (0.5) - (5.8) (6.3)
----------------------------------------- -------- ------------- ------------ -------- --------- ---------
Geographic split of Revenue
---------------------------- ----- ----- ------- ------- -------
United Kingdom 176.3 352.9 1,774.3 1,547.8 -3,851.3
---------------------------- ----- ----- ------- ------- -------
Americas - - 21.0 - - 21.0
---------------------------- ----- ----- ------- ------- -------
Middle East - - 168.2 - - 168.2
---------------------------- ----- ----- ------- ------- -------
Far East - - 61.8 108.3 - 170.1
---------------------------- ----- ----- ------- ------- -------
(1) Revenue is stated after the exclusion of inter-segmental
revenue.
(2) Interest was (charged)/credited to the divisions at a
notional rate of 4.0% (2015: 4.0%)
(3) Net operating assets/(liabilities) represent assets
excluding cash, borrowings and interest bearing intercompany
loans.
(4) Inter-segmental pricing is determined on an arm's length
basis.
2 Segmental reporting continued
Year to 30 June 2015 Property Residential Construction(6) Services(6) Corporate Group
Continuing operations GBPm GBPm GBPm GBPm GBPm GBPm
----------------------------------------- -------- ------------- --------------- ----------- --------- ---------
Revenue(1)
----------------------------------------- -------- ------------- --------------- ----------- --------- ---------
Group and share of joint
ventures 126.2 257.2 1,732.2 1,235.6 - 3,351.2
----------------------------------------- -------- ------------- --------------- ----------- --------- ---------
Less share of joint ventures (66.8) - (7.8) (0.7) - (75.3)
----------------------------------------- -------- ------------- --------------- ----------- --------- ---------
Group revenue 59.4 257.2 1,724.4 1,234.9 - 3,275.9
----------------------------------------- -------- ------------- --------------- ----------- --------- ---------
Profit
----------------------------------------- -------- ------------- --------------- ----------- --------- ---------
Group operating profit/(loss) 2.1 11.2 36.6 57.0 (25.9) 81.0
----------------------------------------- -------- ------------- --------------- ----------- --------- ---------
Share of post-tax results
of joint ventures 5.8 - 1.8 0.3 - 7.9
----------------------------------------- -------- ------------- --------------- ----------- --------- ---------
Profit on disposal of joint
ventures 14.8 - - - - 14.8
----------------------------------------- -------- ------------- --------------- ----------- --------- ---------
Underlying operating profit/(loss) 22.7 11.2 38.4 57.3 (25.9) 103.7
----------------------------------------- -------- ------------- --------------- ----------- --------- ---------
Underlying net finance (costs)/income(2) (2.5) (11.0) 8.2 (6.6) (5.9) (17.8)
----------------------------------------- -------- ------------- --------------- ----------- --------- ---------
Underlying profit/(loss)
before tax 20.2 0.2 46.6 50.7 (31.8) 85.9
----------------------------------------- -------- ------------- --------------- ----------- --------- ---------
Non-underlying items:
----------------------------------------- -------- ------------- --------------- ----------- --------- ---------
Amortisation of intangible
assets relating to contract
rights (0.1) - (0.4) (10.7) - (11.2)
----------------------------------------- -------- ------------- --------------- ----------- --------- ---------
Non-underlying finance costs - - - (3.6) - (3.6)
----------------------------------------- -------- ------------- --------------- ----------- --------- ---------
Other non-underlying items - - (0.5) (8.0) (23.1) (31.6)
----------------------------------------- -------- ------------- --------------- ----------- --------- ---------
Profit/(loss) before tax
from continuing operations 20.1 0.2 45.7 28.4 (54.9) 39.5
----------------------------------------- -------- ------------- --------------- ----------- --------- ---------
Balance sheet(3)
----------------------------------------- -------- ------------- --------------- ----------- --------- ---------
Total assets excluding cash 128.2 320.5 674.7 547.0 629.0 2,299.4
----------------------------------------- -------- ------------- --------------- ----------- --------- ---------
Liabilities excluding borrowings (24.7) (59.6) (741.1) (587.0) (186.7) (1,599.1)
----------------------------------------- -------- ------------- --------------- ----------- --------- ---------
Net operating assets/ (liabilities)
excluding assets held for
sale (4) 103.5 260.9 (66.4) (40.0) 442.3 700.3
----------------------------------------- -------- ------------- --------------- ----------- --------- ---------
Cash, net of borrowings (73.9) (243.9) 289.8 (43.9) (68.9) (140.8)
----------------------------------------- -------- ------------- --------------- ----------- --------- ---------
Net assets excluding assets
held for sale 29.6 17.0 223.4 (83.9) 373.4 559.5
----------------------------------------- -------- ------------- --------------- ----------- --------- ---------
Assets/(liabilities) held
for sale 20.3 - (7.4) 13.1 (0.1) 25.9
----------------------------------------- -------- ------------- --------------- ----------- --------- ---------
Net assets/(liabilities) 49.9 17.0 216.0 (70.8) 373.3 585.4
Other information
----------------------------------------- -------- ------------- --------------- ----------- --------- ---------
Inter-segmental revenue
(5) 1.9 - 19.3 123.6 14.0 158.8
----------------------------------------- -------- ------------- --------------- ----------- --------- ---------
Capital expenditure 0.1 0.3 2.2 5.9 11.3 19.8
----------------------------------------- -------- ------------- --------------- ----------- --------- ---------
Depreciation of property,
plant and equipment - (0.1) (7.7) (15.0) (6.1) (28.9)
----------------------------------------- -------- ------------- --------------- ----------- --------- ---------
Amortisation of computer
software - - 0.3 (2.6) (2.5) (4.8)
----------------------------------------- -------- ------------- --------------- ----------- --------- ---------
Geographic split of Revenue
---------------------------- ----- ----- ------- ------- -------
United Kingdom 126.2 257.2 1,592.4 1,212.2 -3,188.0
---------------------------- ----- ----- ------- ------- -------
Americas - - 30.5 - - 30.5
---------------------------- ----- ----- ------- ------- -------
Middle East - - 70.2 - - 70.2
---------------------------- ----- ----- ------- ------- -------
Far East - - 39.1 23.4 - 62.5
---------------------------- ----- ----- ------- ------- -------
(1) Revenue is stated after the exclusion of inter-segmental
revenue.
(2) Interest was (charged)/credited to the divisions at a
notional rate of 4.0% (2015: 4.0%).
(3) Restated for the impact of revision to the acquisition
accounting for the Mouchel Group, see note 8a
(4) Net operating assets/(liabilities) represent assets
excluding cash, borrowings and interest bearing intercompany
loans.
(5) Inter-segmental pricing is determined on an arm's length
basis.
(6) Restated to reflect the reallocation of Mouchel Consulting
from the Services division to the Construction division.
Notes to the consolidated financial statements continued
3 Non-underlying items(1)
2016 2015
GBPm GBPm
Continuing operations
---------------------------------------------------- ------- ------
Amortisation of intangible contract rights (21.5) (11.2)
---------------------------------------------------- ------- ------
Acquisition discount unwind (2.4) (3.6)
---------------------------------------------------- ------- ------
Other non-underlying items:
---------------------------------------------------- ------- ------
Transaction, integration and restructuring
costs following the acquisition of the Mouchel
Group (49.9) (21.9)
---------------------------------------------------- ------- ------
Provision relating to Environmental Services
recyclate costs (35.6) -
---------------------------------------------------- ------- ------
Provision relating to Biogen investment (5.0) -
---------------------------------------------------- ------- ------
Provision for closure of Caribbean operations
and related contract final accounts (23.1) -
---------------------------------------------------- ------- ------
Construction Workers Compensation Scheme and
related costs (4.5) -
---------------------------------------------------- ------- ------
Gains/(costs) relating to the disposal of
Fleet & Passenger Services 1.7 (3.4)
---------------------------------------------------- ------- ------
Costs associated with cessation of the Kier
Group final salary pension scheme - (6.3)
---------------------------------------------------- ------- ------
Total other non-underlying items (116.4) (31.6)
---------------------------------------------------- ------- ------
Total non-underlying items from continuing
operations (140.3) (46.4)
---------------------------------------------------- ------- ------
Associated tax credit 26.1 6.9
---------------------------------------------------- ------- ------
Charged against profit for the year from continuing
operations (114.2) (39.5)
---------------------------------------------------- ------- ------
Discontinued operations
-------------------------------------------------- ------- ------
Assessment of UK Mining provisions (11.0) (22.9)
-------------------------------------------------- ------- ------
Associated tax credit 6.0 1.1
-------------------------------------------------- ------- ------
Non-underlying items from discontinued operations (5.0) (21.8)
-------------------------------------------------- ------- ------
Charged against profit for the year (119.2) (61.3)
-------------------------------------------------- ------- ------
(1) Exceptional items.
Notes to the consolidated financial statements continued
4 Taxation
a) Recognised in the income statement
2016 2015
---------- -------------- ------ ---------- -------------- ------
Non-underlying
items Non-underlying
Underlying (note Underlying (note
items(1) 3) Total items(1) 3) Total
Continuing operations GBPm GBPm GBPm GBPm GBPm GBPm
----------------------------------- ---------- -------------- ------ ---------- -------------- ------
Current tax expense
----------------------------------- ---------- -------------- ------ ---------- -------------- ------
UK corporation tax 22.3 (21.8) 0.5 5.1 (2.9) 2.2
------------------------------------ ---------- -------------- ------ ---------- -------------- ------
Adjustments in respect of
prior years 3.5 - 3.5 10.0 - 10.0
------------------------------------ ---------- -------------- ------ ---------- -------------- ------
Total current tax 25.8 (21.8) 4.0 15.1 (2.9) 12.2
------------------------------------ ---------- -------------- ------ ---------- -------------- ------
Deferred tax expense
----------------------------------- ---------- -------------- ------ ---------- -------------- ------
Origination and reversal
of temporary differences 1.6 (4.3) (2.7) 12.6 (4.0) 8.6
------------------------------------ ---------- -------------- ------ ---------- -------------- ------
Adjustments in respect of
prior years (4.9) - (4.9) (10.4) - (10.4)
------------------------------------ ---------- -------------- ------ ---------- -------------- ------
Rate change effect on deferred
tax - - - (0.4) - (0.4)
------------------------------------ ---------- -------------- ------ ---------- -------------- ------
Total deferred tax (3.3) (4.3) (7.6) 1.8 (4.0) (2.2)
------------------------------------ ---------- -------------- ------ ---------- -------------- ------
Total tax charge/(credit)
in the income statement 22.5 (26.1) (3.6) 16.9 (6.9) 10.0
------------------------------------ ---------- -------------- ------ ---------- -------------- ------
Reconciliation of effective
tax rate
----------------------------------- ---------- -------------- ------ ---------- -------------- ------
Profit/(loss) before tax 124.9 (140.3) (15.4) 85.9 (46.4) 39.5
------------------------------------ ---------- -------------- ------ ---------- -------------- ------
Add: tax on joint ventures
included above 0.4 - 0.4 0.3 - 0.3
------------------------------------ ---------- -------------- ------ ---------- -------------- ------
Adjusted profit/(loss) before
tax 125.3 (140.3) (15.0) 86.2 (46.4) 39.8
------------------------------------ ---------- -------------- ------ ---------- -------------- ------
Income tax at UK corporation
tax rate of 20.0% (2015:
20.75%) 25.1 (28.1) (3.0) 17.9 (9.6) 8.3
------------------------------------ ---------- -------------- ------ ---------- -------------- ------
Non-deductible expenses 0.6 2.3 2.9 0.1 2.7 2.8
------------------------------------ ---------- -------------- ------ ---------- -------------- ------
Effect of change in UK corporation
tax rate - - - (0.4) - (0.4)
------------------------------------ ---------- -------------- ------ ---------- -------------- ------
Profit on disposal of Fleet
& Passenger Services - (0.3) (0.3) - - -
------------------------------------ ---------- -------------- ------ ---------- -------------- ------
Capital gains not taxed (0.5) - (0.5) (0.3) - (0.3)
------------------------------------ ---------- -------------- ------ ---------- -------------- ------
Utilisation of tax losses (1.0) - (1.0) - - -
------------------------------------ ---------- -------------- ------ ---------- -------------- ------
Effect of tax rates in foreign
jurisdictions 0.1 - 0.1 0.3 - 0.3
------------------------------------ ---------- -------------- ------ ---------- -------------- ------
Adjustments in respect of
prior years (1.4) - (1.4) (0.4) - (0.4)
------------------------------------ ---------- -------------- ------ ---------- -------------- ------
Total tax (including joint
ventures) 22.9 (26.1) (3.2) 17.2 (6.9) 10.3
------------------------------------ ---------- -------------- ------ ---------- -------------- ------
Tax on joint ventures (0.4) - (0.4) (0.3) - (0.3)
------------------------------------ ---------- -------------- ------ ---------- -------------- ------
Group tax charge/(credit) 22.5 (26.1) (3.6) 16.9 (6.9) 10.0
------------------------------------ ---------- -------------- ------ ---------- -------------- ------
(1) Stated before non-underlying items, see note 3.
The Company and its subsidiaries are based predominantly in the
UK and are subject to UK corporation tax. The Group does not have
an aggressive tax policy and since 1 July 2012 Kier has not entered
into any tax avoidance schemes which were or should have been
notified under the Disclosure of Tax Avoidance Scheme rules.
The tax charge before non-underlying items shown in the table
above equates to an effective tax rate of 18% (2015: 20%) on
adjusted profit before tax of GBP125.3m (2015: GBP86.2m). This
effective rate is lower than the standard rate of corporation tax
of 20% (2015: 20.75%) due to a number of items shown in the table
above. The non-deductible expenses mainly relate to acquisition
costs on Mouchel and permanent differences on provisions.
In accordance with UK tax legislation, capital gains arising on
disposal of certain investments, including some of the joint
ventures disposed of during the year, are not subject to tax.
Tax relief on expenses not recognised in the income statement
includes the impact of the tax deduction received in respect of the
cost of shares exercised under the Group's employee Save As You
Earn Scheme and Long Term Incentive Plan.
The net credit adjustment of GBP1.4m in respect of prior years'
results arise from differences between the estimates of taxation
included in the previous year's financial statements and the actual
tax liabilities calculated in the tax returns submitted to and
agreed by HMRC.
b) Recognised in the cash flow statement
The cash flow statement shows payments of GBP1.8m during the
year (2015: GBP3.5m).
Notes to the consolidated financial statements continued
4 Taxation continued
c) Recognised in the statement of comprehensive income
2016 2015
GBPm GBPm
------------------------------------------------------ ----- -----
Deferred tax expense (including effect of change
in tax rate)
------------------------------------------------------ ----- -----
Share of fair value movements on joint venture
cash flow hedging instruments - 0.2
------------------------------------------------------ ----- -----
Fair value movements on cash flow hedging instruments 0.2 -
------------------------------------------------------ ----- -----
Actuarial gains/(losses) on defined benefit
pension schemes 9.1 (6.8)
------------------------------------------------------ ----- -----
Total tax charge/(credit) in the statement
of comprehensive income 9.3 (6.6)
------------------------------------------------------ ----- -----
d) Factors that may affect future tax charges
Changes to the UK corporation tax rates were announced in the
Chancellor's Budget on 16 March 2016. The change announced is to
reduce the main rate to 17% from 1 April 2020.
Changes to reduce the UK corporation tax rate to 19% from 1
April 2017 and to 18% from 1 April 2020 had already been
substantially enacted on 26 October 2015.
As the change to 17% had not been substantively enacted at the
balance sheet date the effect is not included in these financial
statements. The overall effect of that change, if it had applied to
the deferred tax balance at the balance sheet date, would be to
reduce the deferred tax asset by an additional GBP0.2m with GBP0.7m
being credited to the income statement and GBP0.9m being charged
directly to the statement of comprehensive income.
The deferred tax balance as at the year end has been recognised
at 18%.
e) Tax losses
At the balance sheet date the Group has unused tax losses of
GBP172.5m (2015: GBP177.3m) available for offset against future
profits. A deferred tax asset has been recognised in respect of
GBP23.3m (2015: GBP43.2m) of income tax losses.
No deferred tax asset has been recognised in respect of the
remaining losses due to the unpredictability of future profit
streams against which these losses could be offset. Under present
tax legislation, these losses may be carried forward
indefinitely.
5 Dividends
Amounts recognised as distributions to owners 2016 2015
of the parent in the year: GBPm GBPm
----------------------------------------------- ----- -----
Final dividend for the year ended 30 June 2015
of 36.0 pence (2014: 39.6 pence) 34.2 27.0
----------------------------------------------- ----- -----
Interim dividend for the year ended 30 June
2016 of 21.5 pence (2015: 19.2 pence) 20.5 13.2
----------------------------------------------- ----- -----
54.7 40.2
----------------------------------------------- ----- -----
The proposed final dividend of 43.0 pence (2015: 36.0 pence)
bringing the total dividend for the year to 64.5 pence (2015: 55.2
pence) had not been approved at the balance sheet date and so has
not been included as a liability in these financial statements. The
dividend totalling circa GBP40.7m will be paid on 2 December 2016
to shareholders on the register at the close of business on 30
September 2016. A scrip dividend alternative will be offered.
Notes to the consolidated financial statements continued
6 Earnings per share
A reconciliation of profit and earnings per share, as reported
in the income statement, to underlying profit and earnings per
share is set out below. The adjustments are made to illustrate the
impact of non-underlying items.
2016 2015
------- ------- ------- -------
Basic Diluted Basic Diluted
GBPm GBPm GBPm GBPm
--------------------------------------------- ------- ------- ------- -------
Earnings
--------------------------------------------- ------- ------- ------- -------
Continuing operations
--------------------------------------------- ------- ------- ------- -------
Earnings (after tax and minority interests),
being net profits attributable to
equity holders of the parent (12.6) (12.6) 28.4 28.4
---------------------------------------------- ------- ------- ------- -------
Impact of non-underlying items net
of tax:
--------------------------------------------- ------- ------- ------- -------
Amortisation of intangible assets
- net of tax credit of GBP3.9m (2015:
GBP2.3m) 17.6 17.6 8.9 8.9
---------------------------------------------- ------- ------- ------- -------
Acquisition discount unwind - net
of tax credit of GBP0.4m (2015: GBP0.7m) 2.0 2.0 2.9 2.9
---------------------------------------------- ------- ------- ------- -------
Other non-underlying items - net of
tax credit of GBP21.8m (2015: GBP3.9m) 94.6 94.6 27.7 27.7
---------------------------------------------- ------- ------- ------- -------
Earnings from continuing operations 101.6 101.6 67.9 67.9
---------------------------------------------- ------- ------- ------- -------
Discontinued operations
--------------------------------------------- ------- ------- ------- -------
Earnings (after tax and minority interests),
being net loss attributable to equity
holders of the parent (5.0) (5.0) (24.0) (24.0)
---------------------------------------------- ------- ------- ------- -------
Other non-underlying items - net of
tax credit of GBP6.0m (2015: GBP1.1m) 5.0 5.0 21.8 21.8
---------------------------------------------- ------- ------- ------- -------
Earnings from discontinued operations - - (2.2) (2.2)
---------------------------------------------- ------- ------- ------- -------
million million million million
--------------------------------------------- ------- ------- ------- -------
Weighted average number of shares
used for earnings per share 95.2 95.2 70.7 71.0
---------------------------------------------- ------- ------- ------- -------
pence pence pence pence
--------------------------------------------- ------- ------- ------- -------
Earnings per share
--------------------------------------------- ------- ------- ------- -------
Earnings (after tax and minority interests),
being net profits attributable to
equity holders of the parent (13.2) (13.2) 40.2 40.0
---------------------------------------------- ------- ------- ------- -------
Impact of non-underlying items net
of tax:
--------------------------------------------- ------- ------- ------- -------
Amortisation of intangible assets 18.5 18.5 12.6 12.5
---------------------------------------------- ------- ------- ------- -------
Acquisition discount unwind 2.1 2.1 4.0 4.1
---------------------------------------------- ------- ------- ------- -------
Other non-underlying items 99.3 99.3 39.2 39.0
---------------------------------------------- ------- ------- ------- -------
Earnings from continuing operations 106.7 106.7 96.0 95.6
---------------------------------------------- ------- ------- ------- -------
Discontinued operations
--------------------------------------------- ------- ------- ------- -------
Earnings (after tax and minority interests),
being net profits attributable to
equity holders of the parent (5.3) (5.3) (33.9) (33.9)
---------------------------------------------- ------- ------- ------- -------
Other non-underlying items 5.3 5.3 30.8 30.8
---------------------------------------------- ------- ------- ------- -------
Earnings from discontinued operations - - (3.1) (3.1)
---------------------------------------------- ------- ------- ------- -------
Total earnings/(loss) per share
--------------------------------------------- ------- ------- ------- -------
Statutory (18.5) (18.5) 6.3 6.1
---------------------------------------------- ------- ------- ------- -------
Underlying 106.7 106.7 92.9 92.5
---------------------------------------------- ------- ------- ------- -------
Notes to the consolidated financial statements continued
7 Retirement benefit obligations
The amounts recognised in respect of the Group's defined benefit
pension schemes are as follows:
2016 2015
--------- -------- -------- --------- -------- -------- -------- ---------
Kier May Kier May
Group Mouchel Gurney Group Mouchel Gurney
Pension Pension Pension Pension Pension Pension Total
Scheme Schemes Schemes Total Scheme Schemes Schemes GBPm
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
-------------------------- --------- -------- -------- --------- -------- -------- -------- ---------
Opening (deficit)/surplus (75.2) (74.9) (3.5) (153.6) (63.1) - 3.3 (59.8)
-------------------------- --------- -------- -------- --------- -------- -------- -------- ---------
Acquired deficit - - - - - (68.6) - (68.6)
-------------------------- --------- -------- -------- --------- -------- -------- -------- ---------
Charge to income
statement (3.6) (4.9) (0.4) (8.9) (13.8) (0.3) (0.1) (14.2)
-------------------------- --------- -------- -------- --------- -------- -------- -------- ---------
Employer contributions 15.5 9.7 1.9 27.1 24.7 0.7 0.3 25.7
-------------------------- --------- -------- -------- --------- -------- -------- -------- ---------
Transferred to assets
held for resale - - - - - - (2.6) (2.6)
-------------------------- --------- -------- -------- --------- -------- -------- -------- ---------
Actuarial (losses)/gains 39.8 11.8 (4.0) 47.6 (23.0) (6.7) (4.4) (34.1)
-------------------------- --------- -------- -------- --------- -------- -------- -------- ---------
Closing deficit (23.5) (58.3) (6.0) (87.8) (75.2) (74.9) (3.5) (153.6)
-------------------------- --------- -------- -------- --------- -------- -------- -------- ---------
Comprising:
-------------------------- --------- -------- -------- --------- -------- -------- -------- ---------
Fair value of assets 1,065.4 422.8 72.4 1,560.6 919.4 356.3 66.4 1,342.1
-------------------------- --------- -------- -------- --------- -------- -------- -------- ---------
Net present value
of defined benefit
obligation (1,088.9) (481.1) (78.4) (1,648.4) (994.6) (431.2) (69.9) (1,495.7)
-------------------------- --------- -------- -------- --------- -------- -------- -------- ---------
Net deficit (23.5) (58.3) (6.0) (87.8) (75.2) (74.9) (3.5) (153.6)
-------------------------- --------- -------- -------- --------- -------- -------- -------- ---------
Related deferred
tax asset 4.2 10.5 1.1 15.8 15.0 15.0 0.7 30.7
-------------------------- --------- -------- -------- --------- -------- -------- -------- ---------
Net pension liability (19.3) (47.8) (4.9) (72.0) (60.2) (59.9) (2.8) (122.9)
-------------------------- --------- -------- -------- --------- -------- -------- -------- ---------
Notes to the consolidated financial statements continued
8 Acquisitions and disposals
a) Revision to acquisition accounting on Mouchel Group
On the 8 June 2015 the Group purchased the entire share capital
of MRBL Limited ("Mouchel") for a total consideration of GBP260.6m.
Mouchel is an international infrastructure and business services
group and the acquisition positions Kier as a sector leader in the
growing UK highways maintenance and management market.
Due to the proximity of the acquisition of Mouchel to the 2015
year end, a provisional assessment was made of the fair value of
the net liabilities acquired of GBP40.7 million. These provisional
assessments were finalised in 2016, leading to the recognition of
additional goodwill of GBP13.3m.
The reconciliation of the provisional goodwill recognised to the
revised goodwill recognised is shown below.
Provisional Revised
fair value fair value
to the to the
Group Amendments Group
GBPm GBPm GBPm
-------------------------------- ------------ ----------- ------------
Intangible assets 145.2 - 145.2
--------------------------------- ------------ ----------- ------------
Property, plant and
equipment 7.4 (0.3) 7.1
---------------------------------- ------------ ----------- ------------
Investment in
joint ventures 0.4 - 0.4
--------------------------------- ------------ ----------- ------------
Deferred tax
assets (2.3) (2.3) (4.6)
--------------------------------- ------------ ----------- ------------
Inventories 76.7 (4.1) 72.6
--------------------------------- ------------ ----------- ------------
Trade and other
receivables 49.3 (0.3) 49.0
--------------------------------- ------------ ----------- ------------
Cash and cash equivalents 32.2 - 32.2
---------------------------------- ------------ ----------- ------------
Trade and other
payables (156.4) (1.2) (157.6)
--------------------------------- ------------ ----------- ------------
Borrowings (94.0) - (94.0)
--------------------------------- ------------ ----------- ------------
Corporation tax
payable (11.5) - (11.5)
--------------------------------- ------------ ----------- ------------
Retirement benefit obligations (68.6) - (68.6)
---------------------------------- ------------ ----------- ------------
Provisions (19.1) (5.1) (24.2)
----------------------------------- ------------ ----------- ------------
(40.7) (13.3) (54.0)
-------------------------------- ------------ ----------- ------------
Goodwill 301.3 13.3 314.6
----------------------------------- ------------ ----------- ------------
Total assets
acquired 260.6 - 260.6
Satisfied by:
Cash consideration 260.6 260.6
--------------------------------- ------------ ----------- ------------
The movements in the fair value of net assets and goodwill
acquired were primarily due to the continued assessment of contract
positions changing as a result of additional information becoming
available regarding the position at the acquisition date of 8 June
2015. There was no change to consideration or total assets
acquired.
As the adjustments to the provisional amounts recognised in 2015
are within the measurement period, prior year comparatives have
been restated by the amounts included in the table above.
b) Disposal of subsidiary
On 1 July 2015, the group disposed of its investment in Kier
Fleet & Passenger Services Limited ("FPS"), as referred to in
note 3. Disposal costs of GBP3.4m had been incurred in the year to
30 June 2015, and a gain of GBP1.7m has been recognised in the year
to 30 June 2016. The net loss on disposal is therefore GBP1.7m.
c) Disposal of investments in joint ventures
During the year the Group, through its subsidiary Kier Property
Investment Limited, disposed of its interests in Justice Support
Services (Norfolk and Suffolk) Holdings Limited (a subsidiary),
Salford Village Limited (a joint venture) and part of its interest
in Kier (Newcastle) Investments Limited for a total consideration
of GBP20.4m. The profit on disposal recognised in the year was
GBP2.6m.
Notes to the consolidated financial statements continued
9 Cash, cash equivalents and borrowings
2016 2015
GBPm GBPm
----------------------------------------------------------- ------- -------
Cash and cash equivalents - bank balances and cash in hand 186.7 254.0
----------------------------------------------------------- ------- -------
Borrowings due within one year - -
----------------------------------------------------------- ------- -------
Borrowings due after one year (303.2) (394.8)
----------------------------------------------------------- ------- -------
Impact of cross currency hedging 17.7 -
----------------------------------------------------------- ------- -------
Net borrowings (98.8) (140.8)
----------------------------------------------------------- ------- -------
10 Statutory accounts
The information set out above does not constitute statutory
accounts for the years ended 30 June 2016 or 2015 but is derived
from those accounts.
Statutory accounts for 2015 have been delivered to the Registrar
of Companies and those for 2016 will be delivered following the
Company's annual general meeting and will be made available on the
Company's website, www.kier.co.uk. The accounts have been prepared
on a going concern basis which the directors consider appropriate.
The auditors have reported on the 2016 and 2015 accounts, their
reports were unqualified and did not contain statements under
section 498 (1) or (2) of the Companies Act 2006.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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