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Kier profits hit by housing turbulence

Kier’s varied business model has helped it overcome the blow of its housebuilding division diving into the red, to finish the year with pre-tax profits of £63 million.

The building and civil engineering group’s pre-tax profit, before exceptionals, for the 12 months to 30 June was up 12.2 per cent to £87 million from £78 million.

Revenue for the whole group was up 11.6 per cent to £2.37 billion from £2.1 billion the previous year.

But profits were hit after bosses had to wipe £31 million off the value of Kier’s land bank as well as incurring £9.5 million in redundancy and reorganisation costs.

The housebuilding division dived into the red to the tune of £23 million with 18.6 per cent fewer sales achieved and a continuing deterioration in reservation levels.

The homes division sold 1,438 homes in the year compared with last year's 1,767 homes with the credit crunch having a significant impact on the second half of the financial year resulting in 35 per cent fewer unit sales than in the same period in the previous year.

Chief executive John Dodds said: “The benefits of operating a hybrid model have been particularly highlighted this year as the four principal legs of our business experience different market fundamentals.

“Continued demand in our construction and support services businesses has contrasted with the sudden and dramatic effect of the credit crunch on the demand for private housing and development properties.

“We have successfully extended our range of long-term contracting framework agreements, partnership programmes and negotiated and repeat business both in the public and private sectors.

“These relationships contributed strongly to record combined forward order books for construction and support services providing us with excellent visibility of revenue for a number of years.”

Kier’s forward order books for both construction and support services are running at a record level and cash generation is strong with the group ending the period with a net cash balance of £144 million.