TIDMKIE
RNS Number : 6744B
Kier Group PLC
09 October 2020
9 October 2020
Kier Group plc
Publication of the 2020 Annual Report
The Company has today made available on its website at
https://www.kier.co.uk/investors/annual-report-2020/ its annual
report and accounts for the year ended 30 June 2020 (the "Annual
Report"), The Annual Report will be submitted to the National
Storage Mechanism shortly, where it will be available for
inspection at https://
data.fca.org.uk/#/nsm/nationalstoragemechanism .
The Company announced its results for the year ended 30 June
2020 on 17 September 2020. Additional information has been
extracted from the Annual Report and is included in the Appendix to
this announcement for the purposes of compliance with the
Disclosure Guidance and Transparency Rules.
For enquiries, please contact:
Phil Higgins
Deputy Company Secretary
Phil.higgins@kier.co.uk
The Company's Legal Entity Identifier is
2138002RKCU2OM4Y7O48.
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 of
companies of which the Company is the holding company 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. 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. Important factors that could cause these
differences include, but are not limited to, general economic and
business conditions, industry trends, competition, changes in
government and other regulation, changes in political and economic
stability and changes in business strategy or development plans and
other risks. Other than in accordance with its legal or regulatory
obligations, the Company does not accept any obligation to update
or revise publicly any forward-looking statement, whether as a
result of new information, future events or otherwise.
APPIX
The information in this Appendix has been extracted as unedited
full text from the Annual Report, subject to certain non-material
amendments,
Principal risks and uncertainties
The Board's assessment of the principal risks and uncertainties
facing the Group and a summary of the key controls and mitigating
actions are each summarised below. The Board considers these to be
the most significant risks facing Kier. Not all risks facing the
business are listed and the risks are not listed in any order of
priority.
Principal Description Mitigating actions
risk
Health and Failure to maintain a safe
safety and sustainable environment * Continued focus on the five basics of SHE risk
and prevent a major incident. management;
The Group's operations are
inherently complex and potentially
hazardous and require the * Implementing the Group's new sustainability framework,
continuous management of 'Building for a Sustainable World'; and
safety, health and sustainability
issues.
* Setting a tone from the top, through activities such
COVID-19 impact: high. as senior management visible leadership tours.
During COVID-19, the Group
has worked closely with
its people, clients and
suppliers to ensure that
its sites and offices are
able to continue to operate
safely and in accordance
with Government guidelines.
------------------------------------- -------------------------------------------------------------
Legislation Failure to manage effectively
and regulation changes in legislation and * Regular engagement with Government and Government
regulation. agencies with respect to the Group's performance;
The sectors in which the
Group operates are subject
to increasing scrutiny from * Monitoring of, and planning for, the impact of new
stakeholders, oversight legislation and regulations; and
from regulators and requirements
introduced by new legislation
or regulation. * Collaborative engagement with external stakeholders.
COVID-19 impact: no material
effect.
------------------------------------- -------------------------------------------------------------
Funding Failure to maintain adequate
funding or liquidity. * Effective cash forecasting and working capital
Reduced availability of management;
financing options resulting
in an inability to maintain
adequate funding or financial * Following COVID-19, the Group has agreed waivers with
liquidity and an inability its lenders in respect of the financial covenants for
to execute the Group's strategy the test period ended 30 June 2020 and has agreed
effectively. revised financial covenants which will apply for the
going concern period;
COVID-19 impact: medium.
The Group has worked with
its clients and supply chain * Collaborative engagement with customers, HMRC,
to maintain liquidity during pension scheme trustees, banks, lenders and sureties;
COVID-19. The Group has and
agreed waivers and revised
financial covenants with
its lenders and worked with * Exit, substantial exit or restructuring of non-core
other stakeholders to ensure businesses to reduce net debt.
sufficient flexibility under
its principal finance facilities
remains available.
------------------------------------- -------------------------------------------------------------
Market sector A general market or sector
performance downturn may materially * Evaluate markets, including the impact of
and adversely affect the macroeconomic factors and the associated market risk
Group's ability to secure of specific events (for example, Brexit);
work.
The Group's performance
is affected by macroeconomic * Review the Group's pipeline of future work to
factors which affect UK identify market trends and plan accordingly; and
business in general and/or
the markets in which the
Group operates. * Maintain a broad sector focus to mitigate against the
decline of a particular sector.
COVID-19 impact: high .
COVID-19 has resulted in
high levels of macroeconomic
sector uncertainty and volatility
and has resulted in the
UK entering a recession.
This has, in turn, adversely
affected the Group's financial
performance.
------------------------------------- -------------------------------------------------------------
Contract Failure to manage contracts
management effectively at each stage * Adhere to the Group's contract risk governance
of a project's lifecycle. framework;
The Group has a number of
large and complex contracts
in progress at any one time. * Identify early warnings of under-performing
Failure to manage the risks contracts; and
associated with these contracts
could materially and adversely
affect the Group's financial * Timely and accurate reporting of contract
performance. performance.
COVID-19 impact: medium.
COVID-19 has resulted in
certain projects being delayed
or suspended and the Group
incurring additional costs
as a result.
------------------------------------- -------------------------------------------------------------
People Failure to retain key employees
and identify future leaders. * Focus on skills development and retention plans for
The Group's employees are the talent pipeline;
critical to its current
performance. The Group needs
to identify, retain and * Create an effective, inclusive work environment,
motivate people with the through our Performance Excellence culture; and
right skills, experience
and behaviours and to identify
tomorrow's leaders. * Clear and effective communication with the workforce.
COVID-19 impact: high.
The Group has implemented
a number of measures relating
to its employees, including
temporary pay reductions,
furlough and requiring more
agile working practices
(including working from
home).
------------------------------------- -------------------------------------------------------------
Supply chain Failure to maintain effective
working relationships with * Develop long-term relationships with critical
the supply chain; following subcontractors;
COVID-19, supply chain insolvencies.
The Group relies on its
supply chain for the delivery * Continue to seek to reduce supply chain payment
of its projects. Maintaining terms; and
close and effective working
relationships with the supply
chain is therefore a priority * Review the supply chain to ensure alternative
for the Group. Following delivery mechanisms are available and appropriate
COVID-19, the risk of insolvencies contingencies are in place.
in the supply chain has
increased.
COVID-19 impact: medium.
The Group has worked closely
with its supply chain to
ensure that projects can
be delivered. There has
been an increase in the
number of insolvencies within
the supply chain as a result
of COVID-19
------------------------------------- -------------------------------------------------------------
Strategy The Group fails to deliver
its strategy. * Delivery of our Performance Excellence culture;
The delivery of the Group's
strategy is of fundamental
importance to its future * Continued focus on cash management; and
performance.
COVID-19 impact: low. * Effective communication with stakeholders.
The Group believes that
COVID-19 has affected its
short-term performance,
rather than the longer-term
delivery of its strategy.
------------------------------------- -------------------------------------------------------------
Brexit The UK left the EU on 31 The Group has identified
January 2020, with a transition potential risks relating
period currently running to, for example, the
to 31 December 2020. Currently, supply chain, the
the UK's long-term relationship workforce and the
with the EU remains unclear. supply and cost of
materials and has
set up contingency
plans in respect of
these risks. The Group
keeps these plans
under review, in the
light of political
developments. In particular,
the Group continues
to work with its supply
chain to develop plans
to ensure continuity
of potentially critical
supplies and has developed
plans with respect
to those members of
its workforce who
are nationals of EU
member states and
wish to continue to
work in the UK.
------------------------------------- -------------------------------------------------------------
COVID-19 The COVID-19 pandemic has As the UK continues
had, and may continue to its exit from lockdown,
have, a material and adverse Government restrictions
effect on the Group's results and requirements are
of operations and a number closely monitored
of the Group's stakeholders, so as to ensure continued
including its employees, compliance. Particular
clients and supply chain. areas of focus include:
The extent of the effect Compliance with the
of COVID-19 on the Group Group's site operating
and its stakeholders depends procedures;
on a range of factors, including Ensuring the continued
its effect on the wider supply of materials
economy in general, measures and availability of
taken by Government in response the supply chain,
to it, including the proposed wherever possible;
increase in UK infrastructure and
investment, and the effects Supporting the Group's
of any re-occurrence of workforce to continue
the pandemic. to operate as effectively
as possible in the
circumstances.
------------------------------------- -------------------------------------------------------------
Emerging The Group has identified
Risks the following as principal,
emerging risks:
The continued impact of
COVID-19 on the Group's
sites and operations;
The UK's recession, following
COVID-19; and
The operational, financial
and commercial effects of
climate change disruption
on the Group.
------------------------------------- -------------------------------------------------------------
Related party transactions
Identity of related parties
The Group has a related party relationship with its, key
management personnel, the pension schemes in which its employees
participate and the joint ventures listed below.
Transactions with key management personnel
The Group's key management personnel are the Company's Executive
and the Non-executive Directors. Transactions with these
individuals are identified in the Directors' Remuneration Report on
pages 101 to 121 of the Annual Report.
In addition to their salaries, the Group also provides non-cash
benefits to the Directors and contributes to their pension
arrangements as disclosed on page 113 of the Annual Report. Key
management personnel also participate in the Group's share option
programme (see note 28 of the consolidated financial
statements).
Key management personnel compensation comprises:
2020 2019
GBPm GBPm
------------------------------------------------------ ----- -----
Emoluments as analysed in the Directors' Remuneration
Report 2.2 5.2
Employer's national insurance contributions 0.3 0.6
------------------------------------------------------ ----- -----
Total short-term employment benefits 2.5 5.8
Share-based payment charge 1.8 0.7
------------------------------------------------------ ----- -----
4.3 6.5
------------------------------------------------------ ----- -----
Transactions with pension schemes
Details of transactions between the Group and pension schemes in
which its employees participate are detailed in note 9 of the
consolidated financial statements.
Transactions with joint ventures
2020 2019
GBPm GBPm
------------------------------------ ----- -----
Construction services and materials 237.1 278.2
Staff and associated costs 10.2 10.0
Management services 13.4 16.0
Interest on loans to joint ventures 0.8 0.6
Plant hire 1.4 1.3
------------------------------------ ----- -----
262.9 306.1
------------------------------------ ----- -----
Equity loans due from joint ventures are analysed below:
2020 2019(1)
GBPm GBPm
-------------------------------------- ----- -------
Kier Cross Keys Holdco 1 LLP 35.0 35.0
Kier Community Living Topco 1 LLP 32.1 32.1
Kier Trade City Holdco 1 LLP 17.6 12.7
Solum Regeneration (Twickenham) LLP 14.5 14.2
Kier (Newcastle) Investment Ltd 10.1 10.1
Kier (Southampton) Investment Limited 10.0 10.0
Kier Richmond Holdings Limited 9.9 9.9
Watford Health Campus Partnership LLP 9.7 7.0
Solum Regeneration (Bishops) LLP 7.2 5.0
Kier Cornwall Street Holdings 1 LLP 6.5 6.5
Kier Cornwall Street Holdings 2 LLP 6.5 6.5
Solum Regeneration (Guildford) LLP 6.2 3.4
50 Bothwell Street Holdco 1 LLP 5.6 5.2
Easingwold Holdco 1 LLP 4.7 2.9
Stokesley Holdco 1 LLP 4.2 2.7
Driffield Holdco 1 LLP 2.5 2.5
Winsford Holdings 1 LLP 2.4 1.2
Solum Regeneration (Kingswood) LLP 2.2 0.1
Solum Regeneration (Epsom) LP 1.4 5.3
Solum Regeneration (Redhill) LLP 1.4 1.2
Solum Regeneration (Maidstone) LLP 0.7 0.6
Solum Regeneration (Surbiton) LLP 0.3 0.1
Solum Regeneration Holding 1 LLP 0.2 0.2
Solum Regeneration Holding 2 LLP 0.2 0.2
Solum Regeneration (Walthamstow) LLP 0.1 2.0
Solum Regeneration (Haywards) LLP 0.1 0.4
KCK Peterborough Holdco 1 LLP - 4.8
Strawberry Percy Holdings 1 LLP - 1.6
Strawberry Percy Holdings 2 LLP - 1.6
Tri-link 140 Holdings 1 LLP - 1.4
Notaro Kier LLP - 1.3
Black Rock Holdco 1 LLP - 1.2
Kier Sovereign LLP - 0.8
191.3 189.7
-------------------------------------- ----- -------
1 The comparative figure for Kier Cross Keys Holdco 1 LLP has
been restated by GBP3.9m from GBP38.9m to GBP35.0m to reflect the
equity loan provided to the joint venture by Kier only.
2
Trading balances due from joint ventures are analysed below:
2020 2019
GBPm GBPm
----------------------------------------- ----- -----
Kier Community Living LLP 12.7 4.2
Kier Cross Keys Dev LLP 0.8 6.0
Stokesley Devco LLP 0.6 3.3
Hackney Schools for the Future 2 Limited 0.6 -
Easingwold Devco LLP 0.4 0.5
Kier (Southampton) Investment Limited 0.3 -
Driffield Devco LLP 0.2 0.4
Black Rock Devco LLP 0.1 -
Dragon Lane LLP 0.1 -
Kier Trade City LLP 0.1 -
Tri-Link 140 LLP - 3.8
Hackney Schools for the Future Limited - 1.4
Winsford Devco LLP - 0.8
Kier Richmond Limited - 0.3
Team Van Oord Limited - 0.1
KCK Peterborough Devco LLP - 0.1
15.9 20.9
----------------------------------------- ----- -----
Directors' responsibility statements
The Directors consider that the Annual Report, taken as a whole,
is fair, balanced and understandable and provides the information
necessary for shareholders to assess the Group and Company's
position and performance, business model and strategy.
Each of the Directors, whose names and functions are listed in
the Annual Report confirm that, to the best of their knowledge:
-- the Company financial statements, which have been prepared in
accordance with United Kingdom Generally Accepted Accounting
Practice (United Kingdom Accounting Standards, comprising FRS 101
'Reduced Disclosure Framework', and applicable law), give a true
and fair view of the assets, liabilities, financial position and
loss of the Company;
-- the Group financial statements, which have been prepared in
accordance with IFRSs as adopted by the European Union, give a true
and fair view of the assets, liabilities, financial position and
loss of the Group;
-- the Directors' Report in the Annual Report includes a fair
review of the development and performance of the business and the
position of the Group and Company, together with a description of
the principal risks and uncertainties that it faces; and
-- so far as the Directors are aware, there is no relevant audit
information of which the Group and Company's auditors are unaware;
and they have taken all the steps that they ought to have taken as
a Director in order to make themselves aware of any relevant audit
information and to establish that the Group and Company's auditors
are aware of that information.
Ends.
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