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Kier to simplify operations as £120m contract ended early

Kier chief executive Haydn Mursell has outlined plans to simplify the company, with a focus on construction growth in the UK. 

Mr Mursell told Construction News the Bedfordshire-based property, building and services group was exiting certain international markets and would be leaving a waste deal four years early.

Mr Mursell said: “A group of our size is always evolving.

“We are continuing to simplify the group – we sold Mouchel Consulting, we are going to exit the Caribbean.”

Mr Mursell revealed that the company was to end its £120m 10-year environmental services contract in East Sussex four years early.

The deal was signed by Kier in 2013 and covered waste and recycling collections for four councils in East Sussex until 2023, but will now come to an end by mutual consent in June 2019.

Kier this morning published interim results that saw underlying operating profit rise by 3.9 per cent year on year to £56.5m in the six months to 31 December 2016, while underlying revenue slipped 0.6 per cent over the same period to £2bn.

Despite the solid results, Mr Mursell admitted the company was still being affected by problem projects abroad.

Kier has two multi-million-pound rail projects – one station and one rail tunnel – in Hong Kong that have been beset by delays, while its exit from the Caribbean market has cost the group in excess of £116m.

Mr Mursell said the company’s final contract in the Caribbean would be completed in the next six months.

He added that the Hong Kong project had been handed over just after Christmas and and the high-speed tunnel was in the final stages of completion.

Mr Mursell said the experiences had led to a refining of its focus outside of the UK.

“We are very much focused on the Dubai and Middle Eastern construction market and I would expect that from a construction point-of-view to be the only territory in operation in the medium term,” he said.

“I think as a group we are much more focused on growing business in the UK: we have great client relationships, so we see much more scope with those in the UK than necessarily internationally.”

Mr Mursell said the UK business was looking healthy, with revenue breaking the £1bn mark.

On Tuesday Construction News reported that Kier’s infrastructure managing director Jag Paddam had left the business after an internal review of management, with executive director for infrastructure Sean Jeffrey taking on his role.

Mr Mursell said the changes were part of the firm’s evolution.

“We have a large utilities business that is growing off the back of work with Anglian Water and Thames Water, and really that structural change reflects us evolving the structure that best suits our operating model – nothing untoward whatsoever.”

He added that the infrastructure arm would have more of a regional focus, with managing directors for the North and South reporting to Mr Jeffrey.

The firm also revealed today it had agreed a joint venture with housing association and care service provider Cross Keys Homes.

Kier said it would transfer part of its landbank and a number of its residential developments in the East of England – valued at “up to £97m” – into the JV.

Mr Mursell said this could be the first of many similar tie-ups in a bid to free up cash.

“This deal is [a form of] disposal and us simplifying the group in residential,” he said.

“Inevitably there will be more of that going forward – it is the group simplifying the company and focusing on our main verticals: regional building and associated FM; infrastructure; and mixed-tenure housing.”

Next month will see the government’s apprenticeship levy come into force, with firms having to pay 0.5 per cent of any payroll bill above £3m into the government pot. This is alongside the existing skills tax run by industry training board the CITB.

Six per cent of Kier’s 25,000 workers are graduates or apprentices, according to Mr Mursell.

He said: “We are self-sufficient, we know we need graduates and apprentices and therefore the apprenticeship levy and CITB is more of a cost to us because we do it naturally.”

He said that while the company understood the CITB levy, he wanted to see more clarification over how the apprenticeship levy would work.

Kier today announced chairman Phil White was to step down. He will leave in November to be replaced by Philip Cox, the current chairman of electricty generator Drax. 

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