Profits rise at UK construction group Kier despite fears of rising costs

Construction companies could be hit by rising inflation and a lack of skilled laborers, pushing the cost of materials and wages higher, the CE of Kier has warned.

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Haydn Mursell Chief Executive said inflation, which jumped higher than expected in February to 2.3pc, was increasing its costs, along with the devaluation of sterling, which has made importing materials more expensive.

He said that the company would have to increase its wages if the UK’s negotiations to leave the European Union result in fewer EU workers. “It will be more costly, but whether that is 2pc or 10pc, I don’t know yet,” he added.

However, Mr Mursell said that he was confident about the firm’s outlook for the rest of the year, as the latest figures showed that Kier enjoyed a 12pc jump in profits in the first half of its financial year.

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Haydn Mursell, Chief Executive Kier

 

The lower oil price has kept other costs down for the time being, he added.

In the six-month period ending December 31, profit before tax increased to £46.3m, up from £41.5m a year ago.

Underlying operating profit came in at £56.5m, a 4pc rise on the second half of 2015, while revenues of £2bn were 1pc lower.

The company has proposed raising its dividend by 5pc to 22.5p per share.

It also announced a joint venture with the Cross Keys housing association that will see it receive a cash payment of £64m for transferring around 60pc of its land bank and a number of its residential developments in the east of England.

Kier has sealed more than £5bn in new contracts since the vote to leave the European Union in June, while it was also boosted by the news that the Hinkley Point C Project – for which it is building infrastructure – would go ahead. It has an order book of approximately £9bn.

 Mr Mursell said the group’s “breadth” made it resilient in times of economic uncertainty, but added that the Government needed to push ahead with awarding major infrastructure contracts, such as the High Speed Two rail line.

“Some of the bigger projects have been slower coming to the market than we expected,” he said. “HS2 is going to be awarded in June, but it was originally planned for last year.”

The Telegraph reports Kier announced today that chairman Phil White would be stepping down from his role at the group’s annual general meeting in November. He has served as chairman since January 2008.

Mr White will be succeeded by Philip Cox, the chairman of FTSE 250 energy group Drax, and Global Power Generation.