In the final of our quick fire guides to recent changes at major contractors, we look at Kier
Recent changes:
In a dramatic move last month, with services firm May Gurney, by making a rival 拢221m bid for the company.
Costain has since withdrawn its proposal, with the way now clear for Kier鈥檚 acquisition to proceed, which Kier says will create around 拢20m of synergies, double the amount identified by Costain, and with a return on investment for Kier shareholders of 15% by 2015.
If approved the deal would create a business turning over 拢2.8bn and result in around 200 job cuts from overlapping services. The deal will see Kier combine its 拢445m services business with May Gurney to create a 拢1.1bn turnover services arm deriving two-thirds of its revenues from local authorities (see chart below). In addition the acquisition would add a 拢180m turnover utilities business, mainly in the water industry, and a 拢36m fleet business.
Sheffield says the deal will enable the business to offer an 鈥渆nd-to-end鈥� service to local authority clients, allow it to bid for highways and other contracts that it had previously had to decline.
Sheffield says: 鈥淏etween us there will be nothing we can鈥檛 do for local authorities, giving us a really compelling story around integration.鈥�
Earlier, in March, Kier announced it will with different parts of the business brought under one roof, in a bid to cut costs amid the ongoing contraction in the construction industry.
Kier chief executive Paul Sheffield says the restructure, which is expected to cost the firm 拢12m this year, will see the business consolidate its 鈥渧ery extensive network of offices鈥� across the UK, although the existing structure of eight regions will be retained.
Kier鈥檚 construction business operates across eight regions, with 28 offices, while the services business comprises 33 offices. A further seven offices serve the firm鈥檚 infrastructure and engineering businesses (see map below).
Sheffield says: 鈥淭here is a slightly more efficient way to run the business that we believe will not weaken our regional presence.
鈥淲e won鈥檛 be reducing the regional structure. But we鈥檝e obviously also got a services division and in some parts of the country we might have a services office 15 miles away from a construction division office and actually by putting them both into one office we will get savings and efficiencies.
鈥淪o in terms of the regional network of construction companies we鈥檙e not going to move away from the eight that we currently have but there will be some rationalisation of some of the offices.鈥�
Sheffield says the restructure, which will be complete by the end of the financial year, will inevitably involve redundancies, but the firm will not be drawn on the number of job losses.
He says the shake-up is aimed at making Kier 鈥渁 leaner and more efficient business鈥�, but the firm has declined to give a figure on the annualised savings it is targeting.
Latest results:
In its results for the six months to 31 December 2012, Kier reported interim profit of 拢20.9m, down by 35% on the 拢32.3m recorded in the same period in 2011, on revenue of 拢976m, which was down by 6.8%.
Kier鈥檚 construction business had a 2.1% operating margin over the period, down on the 2.5% recorded at the same point last year, with revenue also down by more than 10% to 拢627m.
Operating profit in the construction business for the period stood at 拢13.5m, down from 拢17.8m over the same period last year.
Results for six months to 31 December
Kier Group
Revenue 拢976m (down 6.8%)
Pre-tax profit 拢20.9m (down 35%)
Kier Construction
Revenue 拢627m (down 13%)
Operating profit 拢13.5m (down 24%)
Operating margin 2.1% (2011: 2.5%)
What the company says:
Kier chief executive Paul Sheffield: 鈥淲e are having to approach this as every business is: the building market in the UK is very tough, it鈥檚 been difficult for a couple of years and it鈥檚 going to be very tough for the next two years.
鈥淲e have to do what every professionally run organisation does and constantly review our cost base and I don鈥檛 think any of our staff would expect us to do anything different. We just need to mindful of how we deal with it.
鈥淭he message is it鈥檚 going to be a really difficult couple of years. There is a genuine drive from the government to get investment into the economy and the construction sector and we want to be there to benefit when that work comes through in a couple of year鈥檚 time.鈥�
No comments yet