Kier: cladding costs taint soaring revenue

Inflated cladding remediation costs have taken the shine off Kier’s booming revenue, as the contractor posts its interim results.

The firm tabled an additional £7.2m of cladding remediation costs in its results for the six months to the end of 2023. Kier said the fund will cover projects where it has “confirmed liability”.

It added: “The group continues to review all of its current and legacy constructed buildings where it has used cladding solutions and continues to assess the action required in line with the latest updates to government guidance, as it applies, to multi-storey and multi-occupied residential buildings.”

Kier is one of a growing number of contractors, including Willmott Dixon and Lendlease, to put aside provisions to deal with dangerous cladding.

The contractor put its soaring revenue down to a large number of contract wins for its infrastructure and construction branches, which also led to “multi-year revenue visibility”. Its revenue came in at £1.88bn, up nearly a quarter on the £1.54bn it reported for the same period in 2022.

Pre-tax profit also rose to £27.0m from £25.4m the year before. Kier said that amounted to a “strong operational and financial performance”, combined with “continued confidence over further progress” in the future.

It has since reinstated an interim dividend of 1.67 pence per share.

Kier chief executive Andrew Davies said the firm had achieved “significant operational and financial progress” over the past two-and-a-half years, which made it possible to reinstate a dividend.

“The contracts within our order book reflect the bidding discipline and risk management now embedded in the business,” he added.

Kier’s construction division was boosted by five education projects totalling around £182m, a further four projects in healthcare worth £81m, and a job to build a new houseblock at HMP Elmley worth more than £100m.

Kier said it had already secured 97 per cent of its revenue for this financial year, and completed a refinancing of its principal debt facilities last month.

The strong financial showing follows Kier’s reinstatement last month into the FTSE 250 after a five-year absence.

Contractors have been bracing themselves for increased cladding costs as clients announced they would try to claim back substantial monies from those lower down the supply chain, and via the courts if necessary.

Last month, Unite Students said it plans to recoup up to three-quarters of its cladding remediation costs from contractors.

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