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John Dodds to sign off with Kier boasting increased margins

Kier has boosted its half-year profits despite a slip in turnover, aided by increased margins across both its construction and support services divisions.

The company - which has increased its margin for support services to 4.4 per cent from 4 per cent a year ago - said maintaining its margins would be an “essential part of our activities over the coming months as the political
landscape begins to unfold”.

Kier’s construction margin sits at 2.5 per cent, up from 2.4 per cent at the start of 2009, and was described as “robust and holding up well” in the current climate by outgoing chief executive John Dodds.

While many contractors have seen their profits squeezed in the recession, Kier said it wanted to further improve its support services margin to 4.5 per cent this year.

Mr Dodds added: “In construction our focus is on continuing to win work at the right price.” He said that Kier would also continue to look at its cost base in order to maintain its strong margins.

The contractor last week reported a 21 per cent rise in underlying half-year pre-tax profit, despite turnover falling 9
per cent. Kier’s profits for the six months to 31 December 2009 totalled £31.9 million, up from £26.4m a year
earlier. The results, however, were somewhat blighted by the £18m provision made for the company’s Office of Fair Trading fine.

Kier was last year fined £17.9m following the OFT’s cover pricing investigation. The penalty is being appealed
and any fine determined after this will not need to be paid until next year.

Meanwhile the group’s order book has increased to £4.5 billion - up from £3.7bn a year earlier, with the construction division having already secured its 2010 target turnover and 73 per cent of its target for 2011.

Mr Dodds said he was “very pleased” with his final set of results at Kier.

He said: “When you look across the business, each of the divisions has performed well - we’ve increased our pre-tax profits, cash is strong and order books are in good shape.”

The construction division’s revenue did fall by 14.6 per cent from £794.2m to £678.3m. “We see that coming back up,” said Mr Dodds.

“We think that by the time we get to the end of June it will come back up again and be within 5 per cent of last year’s figure.”

As the downturn continues to hit medium-size contractors, Mr Dodds said Kier would be keeping its eye out for contracts to acquire.

“At the end of the last recession we saw a number of opportunities arising from businesses that had gone insolvent,” he said. “We didn’t buy the businesses but secured the work instead.

“We haven’t seen many of these opportunities yet, but if they did come up then we would be very interested in picking up the work.”

Speaking for the first time about Kier’s decision to withdraw from Tesco’s retail framework late last year, Mr Dodds described the supermarket giant as a “very difficult” client.

Tesco last year came under fire from the Association for Consultancy and Engineering, which claimed the supermarket was forcing its construction suppliers to cut fees by up to 40 per cent.

“We have persevered with them for a very long time and we have made a mutual decision to part company with them for a while,” Mr Dodds said.

“We are currently trying to help them on their other mixed-use schemes. Whether any future work will come out of that I don’t know yet.

“But in the meantime we have been focusing on our work with Sainsbury’s and Morrisons, who we find much easier to work with.”