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Kier has reported a strong performance last year, with profit of 拢70m across the group on revenue of 拢2bn, with an operating margin in its construction business of 2.5%.

Reporting its results for the year ended 30 June 2012, the firm said the group turned over 拢2.07bn, down 5% from 拢2.18bn the previous year, with pre-tax profit up 2% on the previous year to 拢70m.

Revenue in the firm鈥檚 construction business stood at 拢1.38bn, down 4% on the previous year, which the firm said 鈥渞eflected the challenging UK building market鈥�.

The firm said half its contract awards were in the public sector, with it predicting that the balance of public-private work would stabilise at that level.

Operating profit within Kier鈥檚 construction business fell 10% to 拢35.2m - but the firm said its operating margin of 2.5% represented a 鈥済ood performance鈥�.

Speaking to 好色先生TV, Kier chief executive Paul Sheffield said it had been a 鈥渧ery tough year鈥� but the firm had come through it with 鈥渁 good set of numbers鈥�.

He said the strong margin performance was largely the outcome of work secured in 2009-10 as well as high proportion of 鈥済ood quality work鈥� - around two thirds- secured through frameworks.

鈥淏ut you can鈥檛 avoid competitive bidding altogether - around a third of the work we are doing is secured through the ultra competitive market place - but even there we try to secure jobs where there is a big technical content rather than just lowest price,鈥� he said.

鈥淭he competitive market is not a comfortable place to be. In the construction market place what we see this year is going to repeat itself for the next couple of years.鈥�

鈥淲e also have a very prudent and conservative profit recognition policy in the business and we don鈥檛 trade profit pretty much towards the end of our contracts, which is very different to many of our competitors,鈥� he said.

However, Sheffield said he expected to see the construction margin fall to around 2% next year as market conditions remained challenging. 鈥淭here鈥檚 no doubt that the next 24 months are going to be difficult as well, but we鈥檝e got a lot of bright spots,鈥� he said.

He said infrastructure and civils comprised around 拢180m of the construction revenue - about 13% of total revenue - which he said was expected to rise to 拢250m next year.

Overseas revenue hit 拢70m - about 5% of total construction revenue - with the firm expecting to push that to 拢150m by June 2014 and 拢200m by 2015.

Sheffield welcomed the government鈥檚 recent announcements on infrastructure, but said a lot of detail remained to be worked through, with challenges remaining in unlocking pension fund cash to drive investment. 鈥淚鈥檓 delighted the government has picked out our industry as a key driver of growth, but we need to actually get flesh on the bones on how it鈥檚 going to work,鈥� he said.

However, he said he was frustrated with the slow progress in bringing schools work, through the 拢2.4bn Priority Schools 好色先生TV Programme, to market, with the 拢2bn PFI element of the programme not now expected to come to market until early next year, nearly a year later than planned.

鈥淚t鈥檚 a frustration to everybody. I鈥檓 not factoring any of that into my future order book. My personal feeling is every Tom, Dick and Harry is waiting for it and it could be a very competitive battle to win that work,鈥� he said.

The firm said 37% of its construction revenue came through education work - down from 43% last year - but this was predicted to fall to 28% next year.

Sheffield said he was particularly pleased with the strength of the order book - with a construction order book worth 拢2.2bn and a service order book of 拢2.1bn giving a combined order book of 拢4.3bn -as well as the firm鈥檚 strong cash position, with net cash of 拢129m (2011: 拢165m) after investment of 拢50m during the year.

He said the firm鈥檚 property division had performed above expectations, with revenue down 4% to 拢241m but operating profit up 44% to 拢22m (2011: 拢15.3m).

He said that following the award of the 拢240m Watford Health Campus contract in August, the property division鈥檚 pipeline of 拢750m at year end was now approaching 拢1bn.

The results showed revenue in the services business was down 8% on last year at 拢445m, which was dragged down by a fall of 20% in revenue in the maintenance arm to 拢280m.

Sheffield said this was expected and was largely due to local authorities cutting their budgets. However, he said he expected service to be a growth area in 2013 and 2014.

He said: 鈥淲e have been pretty cautious about when we saw growth coming in services. A lot of our peers were more enthusiastic about that growth than we were.

鈥淲e always thought it would be more 2013-2014 purely because of the difficulties local authorities were going to have in assessing what their budgets were and how they were going to procure work in the future.

鈥淏ut we are actually seeing a huge amount of tender work right now, but these tenders do take time, so I think we鈥檙e still pretty confident that the sector will grow in 2013-14. I think it is going to be growth story over the next few years.鈥�

Operating profit across the services business fell slightly to 拢20.1m (2011: 拢21.7m), with an operating margin of 4.5%.

The firm reported redundancy costs of 拢7m for the year, including 拢5m in its maintenance division, which Sheffield said was an outcome of the drop in local authority work.

He said: 鈥淚n anyone area of output if you have a 拢20m contract in one area and then the next year the client reduces the 拢20m to 拢18m then you鈥檝e got to do a little bit of trimming of the workforce to suit the budget. It鈥檚 been little by little across the country but it鈥檚 just part of good business practice.鈥�