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Kier Group's FD on finding a balance

Haydn Mursell, group finance director of Kier Group

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Kier group finance director Haydn Mursell is in the midst of a quarterly process of getting the business to reforecast three years ahead. But without knowing the detail, one thing is already apparent: as recessions go, the construction, services and property group seems to be having quite a good one.

Revenue grew just over three percent to £2.1 billion in the year to end of June 2011, lifting net income 13.2 percent to £53.2 million before exceptional items. Since then, the company’s half-year performance, published in February, saw the top line dip by almost 5 percent but the bottom line not only held up but grew – increasing 15 percent – to allow for a rise in the interim dividend.

While the rest of the sector and the country is worried about contracting, Kier seems to be continuing to build. So does this really feel like a double-dip recession?

“I can’t say in construction that we’ve necessarily noticed an improvement and then another revisit of a recession,” says Mursell.

“Because we are laggards of the economic cycle, it takes about three years before we start to feel the real recession – and we are in that phase now.”

In fact, if he were to draw a graph of the building cycle on the back of a cigarette packet, it would look like a bathtub, he explains, and right now the industry is running along the bottom.

“We don’t pick up for another two to three years because we are still completing work that we won during the [last] recession and therefore it’s on tighter margins, tighter terms and conditions.”

Unfortunately, he tells us, City analysts and investors don’t always see things like that. “Patience in the City isn’t something that naturally follows,” Mursell admits.

Over the last three years Kier’s UK construction business (schools, hospitals and offices) has seen a fall in volumes of perhaps 30 to 40 percent, Mursell explains, but the drop has been largely offset by major infrastructure spending on projects such as the London transport link Crossrail – described as the largest addition to the southeast rail network for half a century. That change in the work mix has been achieved through some nimble reallocation of resources.

More than that, he says, “we keep articulating that for every pound invested in construction it generates £2.84 of GDP and employs a whole cross-section of people on-site”.

“And that’s a good thing for the economy,” he argues, which is why Kier regularly exhorts the government to keep up public expenditure. “I don’t fully support the ‘Spend your way out of the problem’ line, but there is some merit in doing it in construction.”

He would also like to see an end to the “mired” debate about the public finance initiative (PFI) which, he says, will otherwise prevent major projects from being undertaken unless the issues are resolved.


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