Independent auditors’ report
to the members of Kier Group plc
Report on the audit of
the financial statements
Opinion
In our opinion:
– Kier Group plc’s Group nancial
statements and Company nancial
statements (the ‘nancial statements’)
give a true and fair view of the state of
the Group’s and of the Company’s affairs
as at 30 June 2023 and of the Group’s
prot and the Group’s cash ows for
the year then ended;
– the Group nancial statements have
been properly prepared in accordance
with UK-adopted international accounting
standards as applied in accordance with
the provisions of the Companies Act 2006;
– the Company nancial statements have
been properly prepared in accordance
with United Kingdom Generally Accepted
Accounting Practice (United Kingdom
Accounting Standards, including FRS 101
‘Reduced Disclosure Framework’,
and applicable law); and
– the nancial statements have been prepared
in accordance with the requirements of
the Companies Act 2006.
We have audited the nancial statements,
included within the Annual Report and
Accounts 2023 (the ‘Annual Report’),
which comprise: the Consolidated and
Company balance sheets as at 30 June 2023;
the Consolidated income statement, the
Consolidated statement of comprehensive
income, the Consolidated and Company
statement of changes in equity and the
Consolidated statement of cash ows for the
year then ended; and the notes to the nancial
statements, which include a description of
the signicant accounting policies.
Our opinion is consistent with our reporting
to the Risk Management and Audit Committee.
Basis for opinion
We conducted our audit in accordance with
International Standards on Auditing (UK)
(‘ISAs (UK)’) and applicable law. Our
responsibilities under ISAs (UK) are further
described in the Auditors’ responsibilities for
the audit of the nancial statements section
of our report. We believe that the audit
evidence we have obtained is sufcient and
appropriate to provide a basis for our opinion.
Independence
We remained independent of the Group in
accordance with the ethical requirements
that are relevant to our audit of the nancial
statements in the UK, which includes the
FRC’s Ethical Standard, as applicable to
listed public interest entities, and we have
fullled our other ethical responsibilities
in accordance with these requirements.
To the best of our knowledge and belief,
we declare that non-audit services
prohibited by the FRC’s Ethical Standard
were not provided.
Other than those disclosed in note 4 to the
nancial statements, we have provided no
non-audit services to the Company in the
period under audit.
Our audit approach
Overview
Audit scope
– The Group is primarily UK-based and we
have conducted audit work across all four
of the Group’s segments and achieved
coverage over 98% (2022: 99%) of
Group revenues.
Key audit matters
– Contract accounting (Group)
– Presentation of the Group’s nancial
performance (Group)
– Impairment of goodwill (Group)
– Carrying value of investments in Group
companies and recoverability of amounts
owed by subsidiaries (Company).
Materiality
– Overall Group materiality: £11.8m (2022:
£11.0m) based on 0.35% of total revenue.
– Overall Company materiality: £11.2m
(2022: £9.9m) based on 1% of total
assets limited by the application
of component materiality.
– Performance materiality: £8.9m
(2022: £8.3m) (Group) and £8.4m
(2022: £7.4m) (Company).
The scope of our audit
As part of designing our audit, we
determined materiality and assessed
the risks of material misstatement
in the nancial statements.
Key audit matters
Key audit matters are those matters that,
in the auditors’ professional judgement,
were of most signicance in the audit of the
nancial statements of the current period
and include the most signicant assessed
risks of material misstatement (whether or
not due to fraud) identied by the auditors,
including those which had the greatest
effect on: the overall audit strategy; the
allocation of resources in the audit; and
directing the efforts of the engagement
team. These matters, and any comments
we make on the results of our procedures
thereon, were addressed in the context of
our audit of the nancial statements as a
whole, and in forming our opinion thereon,
and we do not provide a separate opinion
on these matters.
This is not a complete list of all risks
identied by our audit.
The key audit matters below are consistent
with last year.
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Key audit matter How our audit addressed the key audit matter
Contract accounting (Group)
Refer to page 108 (Risk Management and Audit Committee report)
and page 179 (Accounting policy).
The Group has signicant long-term contracts in its Infrastructure
Services and Construction businesses. The recognition of revenue
in relation to construction contracts is in accordance with IFRS 15
where for the majority of contracts revenue is recognised over time.
Where this is the case the measure of progress is based on the
‘input method’ which is based on the stage of completion of
contract activity based on the actual costs incurred to date compared
to the estimated forecast costs at completion. For other contract
arrangements, including for cost plus and ‘schedule of rates’
contracts, revenue is recognised as costs are incurred and
does not involve signicant levels of estimation uncertainty.
Contracts accounted for on a stage of completion basis involve
estimation uncertainty as management are required to accurately
forecast the costs to come for each project. They are also required
to assess whether revenue recognised to date is highly probable
of not reversing.
Revenue recognition on contracts accounted for on a stage of
completion basis is a signicant risk for our audit due to the inherent
uncertainty in preparing accurate estimates of the forecast costs
and revenue on contracts. An error in the contract forecast could
result in a material variance in the amount of prot or loss (including
for any onerous contracts) recognised to date and, therefore, the
current nancial year. This is also the case in respect of the Group’s
long term maintenance contracts for the maintenance of Private
Finance Initiative (‘PFI’) lifecycle assets.
These estimates include the determination of the expected recovery
of costs arising from, for example, variations to the contract
requested by the customer, compensation events, and claims made
both by and against the Group for delays or other additional costs
arising or projected to arise.
The Group’s accounting policy is to recognise additional contractual
revenue from customers only when these amounts are considered
highly probable of having no signicant reversal. Amounts
receivable from third parties (other than the Group’s customers),
suppliers or insurers are recognised only when they are determined
to be ‘virtually certain’.
Our work focused primarily on those contracts with the greatest estimation uncertainty over the nal contract values
and, therefore, prot or loss outcome. We selected a risk-based sample of contracts for our testing, based on both
quantitative and qualitative risk criteria, including (for example):
– contracts with high levels of revenue recognised in the year;
– low margin or loss-making contracts;
– contracts with signicant work in progress balances and/or other balance sheet exposure; and;
– contracts identied through our discussions with management, review of Board minutes, review of legal reports
and review of publicly available information.
Our audit procedures were then tailored according to the specic risk prole of each contract and included,
but were not limited to, the following procedures:
– Obtaining an understanding of the relevant contractual clauses and terms and conditions and agreed forecast
revenue to signed contracts, signed variations, agreed compensation events or other corroborative and
supporting documentation;
– Challenging management’s forecasts, in particular assessing the appropriateness of the key assumptions, which
included the expected recovery of variations, claims and compensation events from clients, to determine the basis
on which the associated revenue was considered to be ‘highly probable’ of not reversing;
– Challenging those assumptions in respect of estimated recoveries from subcontractors, designers, and insurers
included in the forecasts, to determine whether these could be considered ‘virtually certain’ of recoverability;
– Substantively testing a sample of actual costs incurred to date to ensure that these had been recorded accurately;
– Performing a margin analysis on the end-of-life forecasts (‘ELFs’) to assess the performance of the contract
portfolios year-on-year;
– Assessing the forecast margin for the Group’s PFI lifecycle contracts by testing the forecast cash ows supporting
the recognition of these amounts;
– Inspecting correspondence and meeting minutes with customers concerning variations, claims and compensation
events, and reviewing third party assessments of these from legal or technical experts contracted by the Group,
where applicable, to assess whether this information was consistent with the estimates made;
– Reconciling revenue recognised with amounts applied for and amounts certied by clients and agreeing
on a sample basis the amounts received to cash to ensure any reconciling items were appropriate;
– Agreeing forecast costs to complete to supporting evidence (such as orders signed with subcontractors,
performing look back testing and assessing the appropriateness of forecast run rates) and applying industry
knowledge and experience to challenge the completeness and accuracy of the forecast costs to complete,
including any cost contingencies held;
– Attending certain contract review meetings virtually or via conference call, and inspecting minutes of meetings
that considered value cost reconciliations (‘VCRs’) in order to understand the controls operated by management;
– Reviewing the outcome of prior year forecasts against current year outcomes to assess management’s
judgements and forecasting accuracy;
– Discussing the status of certain third-party claims with the Group’s internal legal counsel, external solicitors and,
where relevant, external experts, and assessing the objectivity and independence of these third parties; and
– Inspecting correspondence with insurers relating to recognised insurance claims as well as assessments of
these undertaken by the Group’s external solicitors and other advisors, where applicable, to assess whether this
information supported the nancial position taken. This included assessing whether contract provisions included
appropriate provision for remediation and other costs, where required.
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Key audit matter How our audit addressed the key audit matter
Contract accounting (Group)
continued
On the basis of the signicant estimates, judgements and inherent
uncertainty involved in determining the appropriate revenue
recognition and associated prot, we have identied Contract
Accounting as a Key Audit Matter and are particularly focused
on the existence/occurrence and accuracy of revenue recognition.
For the residual contract population (‘the tail’), we performed targeted risk-based procedures including,
for example, testing costs to complete, material unagreed change, reviewing the contract forecast for unusual
items and recalculating the percentage of completion.
For all contracts selected for testing our work included:
– Assessing the impact of other identied risks including the impact of the current inationary environment
and the associated impact on the forecast cost at completion;
– Assessing whether any material contracts exhibited heightened risk associated with climate change that needed
reecting in the end of life forecast;
– Considering the adequacy of the disclosures in the nancial statements in relation to specic contracts and also
the disclosures in respect of signicant judgements and estimates;
– Considering any signicant write-offs of contract assets during the year and obtaining evidence to demonstrate
that the write-offs were driven by events during the 2023 nancial year.
Based on all of the evidence obtained from the above procedures, we concluded on the appropriateness of
the recognition of contract revenues and prots/losses and of the amounts held as contract assets and liabilities.
Given the degree of estimation, we also reviewed the disclosures regarding signicant ongoing contracts included
in note 1 to the nancial statements.
Presentation of the Group’s nancial performance (Group)
Refer to page 108 (Risk Management and Audit Committee report)
and page 181 (Accounting policy).
Consistent with the prior year, the Directors present in note 5
to the accounts, the Group’s principal Alternative Performance
Measure as ‘Adjusted Operating Prot’ such that the Group’s APM
is consistent with how management reviews the performance
of the business.
The Group’s adjusted prot from operations of £131.5m is stated
after charging:
– £19.2m of amortisation of acquired intangibles;
– £13.0m of restructuring and related charges; and
– £17.8m of other adjusting items.
The determination of which items are treated as ‘adjusting’ is
judgemental and needs to be consistent with how the Directors
review the segmental performance of the business. Users of the
nancial statements could be misled if amounts are not classied
and disclosed in a transparent manner and consistent with the
way in which the Board is reviewing segmental performance.
We considered whether the presentation of Adjusted Operating Prot is appropriate. In doing this we performed
the following procedures:
– We obtained the latest internal Board reporting to evaluate whether the nature and quantum of the adjustments
presented, for the Group and in respect of the segments, was consistent with those highlighted and adjusted
in the nancial statements;
– We ensured that the Group’s APMs were appropriately reconciled to the relevant statutory measures;
– We reviewed the denition and classication of adjusting items in the Group’s Annual Report, including the
sub-categorisation of these items. In particular:
– We challenged whether immaterial items, for example redundancy costs and costs incurred resizing the
international operations, were adjusting in line with the Group’s accounting policy. We accepted the treatment
on the basis that these items are excluded in the results reported to and reviewed by the Board (the Group’s
Chief Operating Decision Maker) and the costs are not dissimilar to those that are often excluded from headline
prots. We also assessed whether income arising from any one-off transactions, including within the Property
segment, should be considered as adjusting items;
– We tested the completeness and accuracy of the £12.6m of re and cladding costs recorded as adjusting items
to ensure there was sufcient evidence to support the positions taken and that their classication as adjusting
items was appropriate. Where any economic outow was not considered probable we ensured that sufcient
contingent liability disclosure was included in the accounts; and
– We reviewed management’s APM disclosures and ensured that sufcient disclosure was provided to justify
why individual items were treated as adjusting.
Overall based on these procedures we were satised with the presentation of the Group’s prot before adjusting
items, and that the reasons for the use of these APMs have been appropriately disclosed. We also considered
whether there was appropriate balance in the Group’s Annual Report between references to adjusted prot
measures and the Group’s statutory prot and were satised that this was the case.
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Key audit matter How our audit addressed the key audit matter
Impairment of goodwill (Group)
Refer to page 108 (Risk Management and Audit Committee report)
and page 180 (Accounting policy).
The Group has £536.7m of goodwill on its balance sheet at
30 June 2023 of which £516.3m related to the Infrastructure Services
segment and £20.4m related to the Construction segment.
The audit of goodwill was a focus area given the value of the Group’s
assets in comparison to its market capitalisation.
The carrying value of goodwill is required to be supported by the
higher of future cash ows (value in use) or the fair value less cost
to sell. There is a risk that the assets will be impaired if the cash
ows do not meet the Group’s forecast projections. The impairment
reviews performed by the Group contain a number of estimates
including discount rates, long-term growth rates and expected
changes to revenue and operating margins during the forecast
periods. Changes in these assumptions could lead to an impairment
to the carrying value of the assets.
We determined there to be a signicant audit risk that the carrying
value of goodwill allocated to Infrastructure Services may not be
supportable when compared to its recoverable amount. The
headroom in management’s assessment is £166.3m (2022: £153.0m).
In evaluating the Directors’ annual impairment assessment for goodwill in respect of Infrastructure Services,
we performed the following procedures:
– We tested the integrity of management’s model and assessed the allocation of goodwill and acquired intangibles,
and considered the Directors’ conclusion that the signicant majority of goodwill related to the Infrastructure
Services segment and that this represented the lowest level at which goodwill is monitored for internal
management purposes;
– We evaluated whether the basis of allocation of corporate assets and central costs was reasonable;
– We obtained the Board-approved three year forecasts which formed the basis of the model used in the Directors’
impairment calculation. We considered whether the planned growth rates and expected operating margins in the
impairment model were consistent with the Board-approved cash ows;
– We tested certain contracts in the Group’s order book to provide evidence of the associated revenue forecast
in the cash ow model;
– We challenged management’s forecasts and compared future cash ow performance to historic levels, as well as
to industry forecasts as part of our assessment as to whether the planned performance was considered achievable;
– We challenged the assumption within the forecasts that the business’s cash ows would be earned into
perpetuity, including considering whether the impact of climate change posed a risk to the Group’s long-term
operations and associated impairment assessments;
– We challenged management’s assumptions in respect of ination and how the potential impact of climate change
had been reected in future cash ows;
– We tested the discount rate and long-term growth rate applied with the support of our internal valuation experts; and
– We sensitised key assumptions including, the short-term and long-term growth rates applied to revenue, forecast
operating prots and margins, the discount rate and established the impact of reasonably possible changes
in these assumptions; we then ensured that these sensitivities were appropriately disclosed in accordance
with IAS 36, ‘Impairment of assets’.
Based on the procedures performed, we were satised that no impairment of goodwill allocated to Infrastructure
Services was required, and that the associated disclosures included in the nancial statements were appropriate.
Carrying value of investments in Group companies and
recoverability of amounts owed by subsidiaries (Company)
Refer to page 109 (Risk Management and Audit Committee report)
and page 240 (Company notes to the nancial statements).
The Company holds investments in subsidiaries of £446.2m
(2022: £437.8m), the largest of which is in Kier Limited of £415.5m
(2022: £415.5m) and net amounts owed by subsidiary undertakings
of £1,469.4m (2022: £1,291.8m).
We focused on these areas due to the magnitude of the investments
in, and net amounts owed by, subsidiary undertakings, when for
example compared to the Group’s market capitalisation (which
remains below the carrying value of the investments in subsidiaries).
The Directors’ assessment of the carrying value of investments
was that no impairment was required. Similarly, all amounts owed
by subsidiary undertakings were assessed as being recoverable.
We reviewed the Directors’ impairment assessment of the carrying value of the investment in Kier Limited
and net amounts owed by subsidiary undertakings.
In respect of the investment in Kier Limited, we agreed the forecast cash ows used in this assessment to the
forecasts used in the assessment of impairment of goodwill and other intangible assets. Our work performed
on those cash ows is set out in the Goodwill Key Audit Matter above.
We veried that the amounts owed by subsidiary undertakings were recoverable based on counterparty cash
balances and/or expected future cash ows.
As a result of these procedures, we were satised with the Directors’ conclusion that no impairment was required
against the carrying value of the investments in subsidiaries or the net amounts owed by subsidiary undertakings.
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How we tailored the audit scope
We tailored the scope of our audit to ensure
that we performed enough work to be able
to give an opinion on the nancial
statements as a whole, taking into account
the structure of the Group and the Company,
the accounting processes and controls,
and the industry in which they operate.
The Group’s operations and reporting
process are structured into four segments
represented by Infrastructure Services,
Construction, Property and Corporate.
The Group audit partner, supported by other
UK engagement leaders, led UK-based
teams responsible for the audit of each of
these segments. The four segments include
a number of reporting units in the Group’s
consolidation, each of which is considered
to be a nancial component.
Except for inconsequential revenue in Kier
International, the Group’s operations are
entirely within the UK. Our audit approach
was designed to obtain coverage over 98%
of the Group’s revenue. We are satised
that we obtained appropriate audit coverage
over the Group’s income statement, balance
sheet and cash ows through our audit work
on the UK and overseas operations.
The impact of climate risk on our audit
As part of our audit we made enquiries with
management to understand the extent of
the potential impact of climate change risk
on the Group’s nancial statements.
Management concluded that there was no
material impact on the nancial statements.
Our evaluation of this conclusion included
challenging key judgements and estimates
in areas where we considered that there
was greatest potential for climate change
impact. We particularly considered how
climate change risks (and opportunities)
could impact the assumptions made in
areas such as goodwill impairment,
recoverability of contract assets (see key
audit matters above) and the valuation of
investment property. We also considered
the consistency of the disclosures in relation
to climate change in the other information
within the Annual Report with that of the
nancial statements and our knowledge
from our audit.
Materiality
The scope of our audit was inuenced by
our application of materiality. We set certain
quantitative thresholds for materiality.
These, together with qualitative
considerations, helped us to determine
the scope of our audit and the nature,
timing and extent of our audit procedures
on the individual nancial statement line
items and disclosures and in evaluating the
effect of misstatements, both individually
and in aggregate on the nancial
statements as a whole.
Based on our professional judgement,
we determined materiality for the nancial
statements as a whole as follows:
Financial statements – group Financial statements – company
Overall materiality £11.8m (2022: £11.0m). £11.2m (2022: £9.9m).
How we determined it 0.35% of total revenue 1% of total assets limited by the application of component materiality
Rationale for benchmark applied We considered different benchmarks based on a number of
prot measures and revenue, taking into account the uctuating
performance of the business over the last few years and the overall
scale of the business. This gave us a range within which to
determine materiality. Based on our professional judgement,
we concluded that an amount of £11.8m was appropriate,
representing 0.35% of the Group’s revenue.
The Company primarily holds intercompany receivables,
investments in subsidiaries and debt. Accordingly we considered
that total assets is the primary measure for shareholders when
assessing the nancial statements of the ultimate holding
Company of the Group.
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For each component in the scope of our
Group audit, we allocated a materiality that
is less than our overall Group materiality.
The range of materiality allocated across
components was between £0.8m and
£11.0m. Certain components were audited
to a local statutory audit materiality that was
also less than our overall Group materiality.
We use performance materiality to reduce
to an appropriately low level the probability
that the aggregate of uncorrected and
undetected misstatements exceeds overall
materiality. Specically, we use performance
materiality in determining the scope of our
audit and the nature and extent of our
testing of account balances, classes of
transactions and disclosures, for example in
determining sample sizes. Our performance
materiality was 75% (2022: 75%) of overall
materiality, amounting to £8.9m (2022: £8.3m)
for the Group nancial statements and
£8.4m (2022: £7.4m) for the Company
nancial statements.
In determining the performance materiality,
we considered a number of factors – the
history of misstatements, risk assessment
and aggregation risk and the effectiveness
of controls – and concluded that an amount
at the upper end of our normal range
was appropriate.
We agreed with the Risk Management
and Audit Committee that we would report
to them misstatements identied during
our audit above £0.6m (Group audit)
(2022: £0.6m) and £0.6m (Company audit)
(2022: £0.6m) as well as misstatements
below those amounts that, in our view,
warranted reporting for qualitative reasons.
Conclusions relating to going concern
Our evaluation of the Directors’ assessment
of the Group’s and the Company’s ability to
continue to adopt the going concern basis
of accounting included:
– Reviewing management’s going concern
paper to ensure it was based upon the
latest Board approved forecasts and
that the cash ow assumptions were
consistent with our understanding of
the outlook for the Group’s businesses
and the wider market;
– Testing, on a sample basis, signicant
contracts in the Group’s pipeline to obtain
evidence in support of the revenue
forecasts in the going concern model;
– Performing sensitivity analysis over
management’s forecasts, including with
respect to the current inationary and
interest rate environment, in order to
determine whether under severe but
plausible scenarios the Group’s peak
debt could exceed its lending limits and/or
the Group could breach covenant limits.
This included consideration as to whether
management has mitigating actions
available to it, and within its control,
to prevent such a situation occurring;
– Comparing the prior year forecasts
against current year actual performance
to assess management’s ability to
forecast accurately;
– Reviewing management’s covenant
calculations, covering the period from
30 June 2023 to 31 December 2024,
ensuring that the covenant thresholds
and denitions were consistent with
the nancing agreements;
– Inspecting lending limits and availability
of nance, ensuring that the accounting for
these arrangements is appropriate, and;
– Holding discussions with management
to understand the plans for and progress
in relation to the renance of the Group’s
revolving credit facility which expires on
31 January 2025, outside of the formal
going concern period.
Based on the work we have performed,
we have not identied any material
uncertainties relating to events or conditions
that, individually or collectively, may cast
signicant doubt on the Group’s and the
Company’s ability to continue as a going
concern for a period of at least 12 months
from when the nancial statements are
authorised for issue.
In auditing the nancial statements,
we have concluded that the Directors’ use
of the going concern basis of accounting in
the preparation of the nancial statements
is appropriate.
However, because not all future events or
conditions can be predicted, this conclusion
is not a guarantee as to the Group’s and
the Company’s ability to continue as a
going concern.
In relation to the Directors’ reporting on
how they have applied the UK Corporate
Governance Code, we have nothing material
to add or draw attention to in relation to the
Directors’ statement in the nancial
statements about whether the Directors
considered it appropriate to adopt the going
concern basis of accounting.
Our responsibilities and the responsibilities
of the Directors with respect to going
concern are described in the relevant
sections of this report.
Reporting on other information
The other information comprises all of the
information in the Annual Report other than
the nancial statements and our auditors’
report thereon. The Directors are
responsible for the other information, which
includes reporting based on the Task Force
on Climate-related Financial Disclosures
(TCFD) recommendations. Our opinion on
the nancial statements does not cover the
other information and, accordingly, we do
not express an audit opinion or, except to
the extent otherwise explicitly stated in this
report, any form of assurance thereon.
In connection with our audit of the nancial
statements, our responsibility is to read the
other information and, in doing so, consider
whether the other information is materially
inconsistent with the nancial statements
or our knowledge obtained in the audit,
or otherwise appears to be materially
misstated. If we identify an apparent material
inconsistency or material misstatement,
we are required to perform procedures
to conclude whether there is a material
misstatement of the nancial statements
or a material misstatement of the other
information. If, based on the work we have
performed, we conclude that there is a
material misstatement of this other
information, we are required to report that
fact. We have nothing to report based on
these responsibilities.
With respect to the Strategic Report
and Directors’ Report, we also considered
whether the disclosures required by the UK
Companies Act 2006 have been included.
Based on our work undertaken in the
course of the audit, the Companies Act
2006 requires us also to report certain
opinions and matters as described below.
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Strategic Report and Directors’ Report
In our opinion, based on the work undertaken
in the course of the audit, the information
given in the Strategic Report and Directors’
Report for the year ended 30 June 2023
is consistent with the nancial statements
and has been prepared in accordance with
applicable legal requirements.
In light of the knowledge and understanding
of the Group and Company and their
environment obtained in the course of
the audit, we did not identify any material
misstatements in the Strategic Report and
Directors’ Report.
Directors’ Remuneration
In our opinion, the part of the Directors’
Remuneration report to be audited has
been properly prepared in accordance
with the Companies Act 2006.
Corporate governance statement
The Listing Rules require us to review the
Directors’ statements in relation to going
concern, longer-term viability and that part
of the corporate governance statement
relating to the Company’s compliance
with the provisions of the UK Corporate
Governance Code specied for our review.
Our additional responsibilities with respect
to the corporate governance statement
as other information are described in the
Reporting on other information section
of this report.
Based on the work undertaken as part
of our audit, we have concluded that each
of the following elements of the corporate
governance statement is materially
consistent with the nancial statements and
our knowledge obtained during the audit,
and we have nothing material to add or
draw attention to in relation to:
– The Directors’ conrmation that they
have carried out a robust assessment
of the emerging and principal risks;
– The disclosures in the Annual Report
that describe those principal risks,
what procedures are in place to identify
emerging risks and an explanation of how
these are being managed or mitigated;
– The Directors’ statement in the nancial
statements about whether they
considered it appropriate to adopt the
going concern basis of accounting in
preparing them, and their identication
of any material uncertainties to the
Group’s and Company’s ability to continue
to do so over a period of at least twelve
months from the date of approval of the
nancial statements;
– The Directors’ explanation as to
their assessment of the Group’s and
Company’s prospects, the period this
assessment covers and why the period
is appropriate; and
– The Directors’ statement as to whether
they have a reasonable expectation that
the Company will be able to continue in
operation and meet its liabilities as they
fall due over the period of its assessment,
including any related disclosures drawing
attention to any necessary qualications
or assumptions.
Our review of the Directors’ statement
regarding the longer-term viability of the
Group and Company was substantially less
in scope than an audit and only consisted
of making inquiries and considering the
Directors’ process supporting their
statement; checking that the statement
is in alignment with the relevant provisions
of the UK Corporate Governance Code;
and considering whether the statement is
consistent with the nancial statements and
our knowledge and understanding of the
Group and Company and their environment
obtained in the course of the audit.
In addition, based on the work undertaken
as part of our audit, we have concluded
that each of the following elements of the
corporate governance statement is materially
consistent with the nancial statements and
our knowledge obtained during the audit:
– The Directors’ statement that they consider
the Annual Report, taken as a whole,
is fair, balanced and understandable,
and provides the information necessary
for the members to assess the Group’s
and Company’s position, performance,
business model and strategy;
– The section of the Annual Report that
describes the review of effectiveness
of risk management and internal control
systems; and
– The section of the Annual Report
describing the work of the Risk
Management and Audit Committee.
We have nothing to report in respect of our
responsibility to report when the Directors’
statement relating to the Company’s
compliance with the Code does not properly
disclose a departure from a relevant provision
of the Code specied under the Listing
Rules for review by the auditors.
Responsibilities for the financial
statements and the audit
Responsibilities of the directors
for the financial statements
As explained more fully in the Statement
of directors’ responsibilities, the directors
are responsible for the preparation of the
nancial statements in accordance with
the applicable framework and for being
satised that they give a true and fair view.
The Directors are also responsible for
such internal control as they determine
is necessary to enable the preparation
of nancial statements that are free from
material misstatement, whether due to
fraud or error.
In preparing the nancial statements,
the Directors are responsible for assessing
the Group’s and the Company’s ability to
continue as a going concern, disclosing,
as applicable, matters related to going
concern and using the going concern basis
of accounting unless the Directors either
intend to liquidate the Group or the Company
or to cease operations, or have no realistic
alternative but to do so.
Auditors’ responsibilities for the
audit of the financial statements
Our objectives are to obtain reasonable
assurance about whether the nancial
statements as a whole are free from material
misstatement, whether due to fraud or error,
and to issue an auditors’ report that includes
our opinion. Reasonable assurance is a high
level of assurance, but is not a guarantee
that an audit conducted in accordance
with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements
can arise from fraud or error and are
considered material if, individually or in
the aggregate, they could reasonably be
expected to inuence the economic decisions
of users taken on the basis of these
nancial statements.
Irregularities, including fraud, are
instances of non-compliance with laws and
regulations. We design procedures in line
with our responsibilities, outlined above,
to detect material misstatements in respect
of irregularities, including fraud. The extent
to which our procedures are capable of
detecting irregularities, including fraud,
is detailed below.
Based on our understanding of the Group
and industry, we identied that the principal
risks of non-compliance with laws and
regulations related to UK pensions and
employment legislation, data protection
legislation, the Health and Safety Executive
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Independent auditors’ report to the members of Kier Group plc continued
legislation and equivalent local laws, Fire
Safety Act 2021, anti-bribery and corruption
legislation, environmental legislation,
construction laws and regulations applicable
to overseas operations, and we considered
the extent to which non-compliance might
have a material effect on the nancial
statements. We also considered those laws
and regulations that have a direct impact
on the nancial statements such as the
Companies Act 2006, Listing Rules and tax
legislation. We evaluated management’s
incentives and opportunities for fraudulent
manipulation of the nancial statements
(including the risk of override of controls),
and determined that the principal risks were
related to fraudulent nancial reporting and
management bias in long-term contracting
accounting estimates. The Group
engagement team shared this risk
assessment with the component auditors
so that they could include appropriate audit
procedures in response to such risks in their
work. Audit procedures performed by the
Group engagement team and/or component
auditors included:
– Discussions with management, Internal
Audit and internal legal counsel, including
consideration of known or suspected
instances of non-compliance with laws
and regulation and fraud;
– Assessment of matters reported to the
Board, including those raised through
the Group’s whistleblowing helpline;
– Review of external press releases;
– Challenging assumptions and judgements
made by management in the estimates
involved in accounting for long-term
contracts, and where applicable
inspecting correspondence with
external advisors; and
– Identifying and testing journal entries,
in particular any journal entries posted
with unusual account combinations.
There are inherent limitations in the audit
procedures described above. We are less
likely to become aware of instances of
non-compliance with laws and regulations
that are not closely related to events and
transactions reected in the nancial
statements. Also, the risk of not detecting
a material misstatement due to fraud is
higher than the risk of not detecting one
resulting from error, as fraud may involve
deliberate concealment by, for example,
forgery or intentional misrepresentations,
or through collusion.
Our audit testing might include testing
complete populations of certain transactions
and balances, possibly using data auditing
techniques. However, it typically involves
selecting a limited number of items for
testing, rather than testing complete
populations. We will often seek to target
particular items for testing based on their
size or risk characteristics. In other cases,
we will use audit sampling to enable us to
draw a conclusion about the population
from which the sample is selected.
A further description of our responsibilities
for the audit of the nancial statements
is located on the FRC’s website at:
www.frc.org.uk/auditorsresponsibilities.
This description forms part of our
auditors’ report.
Use of this report
This report, including the opinions, has been
prepared for and only for the Company’s
members as a body in accordance with
Chapter 3 of Part 16 of the Companies Act
2006 and for no other purpose. We do not,
in giving these opinions, accept or assume
responsibility for any other purpose or to
any other person to whom this report is
shown or into whose hands it may come
save where expressly agreed by our prior
consent in writing.
Other required reporting
Companies Act 2006
exception reporting
Under the Companies Act 2006 we are
required to report to you if, in our opinion:
– we have not obtained all the information and
explanations we require for our audit; or
– adequate accounting records have not been
kept by the Company, or returns adequate
for our audit have not been received from
branches not visited by us; or
– certain disclosures of Directors’
remuneration specied by law are not
made; or
– the Company nancial statements and
the part of the Directors’ Remuneration
report to be audited are not in agreement
with the accounting records and returns.
We have no exceptions to report arising
from this responsibility.
Appointment
Following the recommendation of the
Risk Management and Audit Committee,
we were appointed by the members on
24 September 2014 to audit the nancial
statements for the year ended 30 June 2015
and subsequent nancial periods. The
period of total uninterrupted engagement
is 9 years, covering the years ended
30 June 2015 to 30 June 2023.
Other matter
As required by the Financial Conduct
Authority Disclosure Guidance and
Transparency Rule 4.1.14R, these nancial
statements form part of the ESEF-prepared
annual nancial report led on the National
Storage Mechanism of the Financial
Conduct Authority in accordance with
the ESEF Regulatory Technical Standard
(‘ESEF RTS’). This auditors’ report provides
no assurance over whether the annual
nancial report has been prepared using
the single electronic format specied in
the ESEF RTS.
Andrew Paynter
(Senior Statutory Auditor)
for and on behalf of
PricewaterhouseCoopers LLP
Chartered Accountants
and Statutory Auditors
London
13 September 2023
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Strategic report Corporate governance Financial statements Other information
www.kier.co.uk | Kier Group plc Annual Report and Accounts 2023 | Independent auditors’ report to the members of Kier Group plc
Note
2023
£m
2022
£m
Continuing operations
Revenue 2
Group and share of joint ventures
1
3 3,405.4 3,256.5
Less share of joint ventures 3 (24.7) (112.6)
Group revenue 3,380.7 3,143.9
Cost of sales (3,074.4) (2,879.9)
Gross prot 306.3 264.0
Administrative expenses (240.0) (245.5)
Share of post-tax results of joint ventures 16 1.1 26.6
Other income 6 14.1 –
Prot from operations 3, 4 81.5 45.1
Finance income 7 9.4 0.7
Finance costs 7 (39.0) (29.9)
Prot before tax 3 51.9 15.9
Taxation 10 (10.9) (3.2)
Prot for the year 3 41.0 12.7
Attributable to:
Owners of the parent 41.1 12.7
Non-controlling interests (0.1) –
41.0 12.7
Total earnings per share
– Basic 12 9.5p 2.9p
– Diluted 12 9.3p 2.8p
Consolidated income
statement
For the year ended 30 June 2023
Note
2023
£m
2022
£m
Supplementary information from continuing
operations
Adjusted
2
operating prot 5 131.5 120.5
Adjusted
2
prot before tax 5 104.8 94.1
Adjusted
2
basic earnings per share 12 19.2p 16.8p
Adjusted
2
diluted earnings per share 12 18.8p 16.4p
1. Group revenue including joint ventures is an alternative performance measure, see page 243.
2. Reference to ‘adjusted’ excludes adjusting items, see notes 1 and 5. These are alternative performance
measures, see page 243.
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Note
2023
£m
2022
£m
Prot for the year 41.0 12.7
Items that may be reclassied subsequently to the income statement
Fair value movements on cash ow hedging instruments 2.1 6.4
Fair value movements on cash ow hedging instruments recycled to the income statement 7 1.2 (7.4)
Deferred tax on fair value movements on cash ow hedging instruments 10 (0.8) 0.2
Foreign exchange translation differences 0.3 3.9
Total items that may be reclassied subsequently to the income statement 2.8 3.1
Items that will not be reclassied to the income statement
Re-measurement of retirement benet assets and obligations 9 (107.8) 136.3
Tax on re-measurement of retirement benet assets and obligations 10 26.5 (34.7)
Total items that will not be reclassied to the income statement (81.3) 101.6
Other comprehensive (loss)/income for the year (78.5) 104.7
Total comprehensive (loss)/income for the year (37.5) 117.4
Attributable to:
Equity holders of the parent (37.4) 117.4
Non-controlling interests (0.1) –
(37.5) 117.4
Consolidated statement of
comprehensive income
For the year ended 30 June 2023
Strategic report Corporate governance Financial statements Other information
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Note
Share capital
£m
Share
premium
£m
Capital
redemption
reserve
£m
Accumulated
losses
£m
Cash ow
hedge reserve
£m
Translation
reserve
£m
Merger
reserve
£m
Equity
attributable to
owners of the
parent
£m
Non-
controlling
interests
£m
Total equity
£m
At 1 July 2021 4.5 684.3 2.7 (610.8) (0.1) 5.0 350.6 436.2 (1.2) 435.0
Prot for the year – – – 12.7 – – – 12.7 – 12.7
Other comprehensive income/(loss) – – – 101.6 (0.8) 3.9 – 104.7 – 104.7
Total comprehensive income/(loss) for the year – – – 114.3 (0.8) 3.9 – 117.4 – 117.4
Issue of own shares – – – – – – – – 0.6 0.6
Share-based payments 27 – – – 8.6 – – – 8.6 – 8.6
Purchase of own shares 27 – – – (7.0) – – – (7.0) – (7.0)
At 30 June 2022 4.5 684.3 2.7 (494.9) (0.9) 8.9 350.6 555.2 (0.6) 554.6
Prot/(loss) for the year – – – 41.1 – – – 41.1 (0.1) 41.0
Other comprehensive (loss)/income – – – (81.3) 2.5 0.3 – (78.5) – (78.5)
Total comprehensive (loss)/income for the year – – – (40.2) 2.5 0.3 – (37.4) (0.1) (37.5)
Issue of own shares – – – – – – – – 0.3 0.3
Changes in ownership of subsidiary – – – (0.9) – – – (0.9) – (0.9)
Share-based payments 27 – – – 8.4 – – – 8.4 – 8.4
Purchase of own shares 27 – – – (11.9) – – – (11.9) – (11.9)
At 30 June 2023 4.5 684.3 2.7 (539.5) 1.6 9.2 350.6 513.4 (0.4) 513.0
The numbers in the table above are shown net of tax as applicable.
Consolidated statement
of changes in equity
For the year ended 30 June 2023
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Note
2023
£m
2022
£m
Non-current assets
Intangible assets 13 645.0 669.1
Property, plant and equipment 14 29.8 32.7
Right-of-use assets 23 105.4 80.6
Investment properties 15 98.4 60.4
Investments in and loans to joint ventures 16 78.6 82.3
Capitalised mobilisation costs 17 6.3 11.6
Deferred tax assets 18 128.8 108.8
Contract assets 19 43.7 31.2
Trade and other receivables 20 18.5 17.0
Retirement benet assets 9 129.3 199.2
Other nancial assets 29 9.7 8.5
Non-current assets 1,293.5 1,301.4
Current assets
Inventories 21 72.9 56.8
Contract assets 19 358.2 366.3
Trade and other receivables 20 189.2 202.9
Corporation tax receivable 13.4 10.0
Other nancial assets 29 1.0 3.7
Cash and cash equivalents 22 376.9 297.7
Current assets 1,011.6 937.4
Total assets 2,305.1 2,238.8
Current liabilities
Borrowings 22 – (40.5)
Lease liabilities 23 (36.2) (25.9)
Trade and other payables 24 (1,075.0) (1,065.7)
Contract liabilities 19 (90.5) (67.3)
Provisions 25 (38.2) (22.2)
Current liabilities (1,239.9) (1,221.6)
Note
2023
£m
2022
£m
Non-current liabilities
Borrowings 22 (319.1) (266.5)
Lease liabilities 23 (146.4) (131.7)
Trade and other payables 24 (36.9) (34.1)
Retirement benet obligations 9 (24.8) (4.5)
Provisions 25 (25.0) (25.8)
Non-current liabilities (552.2) (462.6)
Total liabilities (1,792.1) (1,684.2)
Net assets 3 513.0 554.6
Equity
Share capital 26 4.5 4.5
Share premium 684.3 684.3
Capital redemption reserve 2.7 2.7
Accumulated losses (539.5) (494.9)
Cash ow hedge reserve 26 1.6 (0.9)
Translation reserve 26 9.2 8.9
Merger reserve 26 350.6 350.6
Equity attributable to owners of the parent 513.4 555.2
Non-controlling interests (0.4) (0.6)
Total equity 513.0 554.6
The nancial statements of Kier Group plc, company registration number 2708030,
on pages 166–241 were approved by the Board of Directors on 13 September 2023
and were signed on its behalf by:
Andrew Davies Simon Kesterton
Chief Executive Chief Financial Officer
Consolidated
balance sheet
As at 30 June 2023
Strategic report Corporate governance Financial statements Other information
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Note
2023
£m
2022
£m
Cash ows from operating activities
Prot before tax 51.9 15.9
Net nance cost 7 29.6 29.2
Share of post-tax trading results of joint ventures 16 (1.1) (26.6)
Pension cost charge/(credit) 9 0.1 (0.4)
Equity-settled share-based payments charge 27 8.4 8.6
Amortisation and impairment of intangible assets
and mobilisation costs 13,17 33.9 30.3
Change in fair value of investment properties 15 (11.4) (0.2)
Research and development expenditure credit 10 (22.8) (20.7)
Depreciation and impairment of property,
plant and equipment 14 6.1 10.7
Depreciation and impairment of right-of-use assets 23 43.7 35.2
(Prot)/loss on disposal of property, plant
and equipment and intangible assets (1.8) 0.8
Operating cash inows before movements in
working capital and pension decit contributions 136.6 82.8
Decit contributions to pension funds 9 (9.9) (10.8)
Increase in inventories 22 (18.8) (2.1)
Decrease in receivables 20 12.2 7.3
Increase in contract assets 22 (4.4) (31.6)
Increase/(decrease) in payables 22 26.1 (12.4)
Increase in contract liabilities 19 23.2 7.4
Increase in provisions 25 15.2 0.2
Cash inow from operating activities 180.2 40.8
Dividends received from joint ventures 16 1.8 32.5
Interest received 7 1.6 0.7
Income tax paid (0.1) –
Net cash inow from operating activities 183.5 74.0
Note
2023
£m
2022
£m
Cash ows from investing activities
Proceeds from sale of property, plant and equipment 2.6 4.2
Purchase of property, plant and equipment 14 (3.9) (6.0)
Purchase of intangible assets 13 (2.7) (0.7)
Purchase of capitalised mobilisation costs 17 (1.8) (10.2)
Acquisition of joint venture debt 16 (0.9) –
Investment in joint ventures 16 (35.7) (16.8)
Loan repayment and return of equity
from joint ventures 16 17.1 27.5
Net cash used in investing activities (25.3) (2.0)
Cash ows from nancing activities
Issue of shares net of associated transaction costs – (6.1)
Issue of shares to non-controlling interest 0.3 0.6
Purchase of own shares 27 (11.9) (7.0)
Interest paid (39.5) (28.8)
Principal elements of lease payments 23 (45.6) (33.8)
Drawdown of borrowings 22 56.8 –
Repayment of borrowings 22 (43.2) (101.8)
Settlement of derivative nancial instruments 4.7 7.5
Changes in ownership interests of subsidiaries (0.9) –
Net cash used in nancing activities (79.3) (169.4)
Increase/(decrease) in cash and cash equivalents 78.9 (97.4)
Effect of change in foreign exchange rates 0.3 3.9
Opening cash and cash equivalents 297.7 391.2
Closing cash and cash equivalents 22 376.9 297.7
Supplementary information
Adjusted cash inow from operating activities 5 207.2 82.0
1. Reference to ‘adjusted’ excludes adjusting items, see notes 1 and 5. This is an alternative performance
measure, see page 243.
Consolidated statement
of cash flows
For the year ended 30 June 2023
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1 Significant accounting policies
Kier Group plc (the ‘Company’) is a public limited company which is listed on the London
Stock Exchange and incorporated and domiciled in the UK. The Company’s registered
number is 2708030. The consolidated nancial statements of the Company for the year
ended 30 June 2023 comprise the Company and its subsidiaries (together referred to
as the Group) and the Group’s interest in joint arrangements.
The consolidated nancial statements were approved by the Directors on 13 September 2023.
Statement of compliance
The Group’s consolidated nancial statements have been prepared in accordance with
UK-adopted International Accounting Standards effective for accounting periods beginning
on or after 1 July 2022 and with the requirements of the Companies Act 2006 as applicable
to companies reporting under those standards.
The Company has elected to prepare its parent company nancial statements in accordance
with the FRS 101 ‘Reduced Disclosure Framework’. These are presented on pages 236–241.
Basis of preparation
The nancial statements are presented in pounds sterling. They have been prepared
on the historical cost basis except for investment properties, dened benet pension plans
and derivative nancial instruments which are stated at their fair value, and the IFRS 2
share-based payments charge which is based on the fair value of the options granted.
Kier Group plc is a company incorporated in the United Kingdom under the Companies Act.
The address of the registered ofce is 2nd Floor, Optimum House, Clippers Quay, Salford,
England, M50 3XP.
The following new amendments to standards are effective for the nancial year ended
30 June 2023 onwards:
– Narrow-scope amendments to IFRS 3, IAS 16, IAS 37 and annual improvements
on IFRS 1, IFRS 9, IAS 41 and IFRS 16 (published May 2020).
None of the above amendments to standards has had a material effect on the Group’s
nancial statements for the current period nor is expected to do so for future periods.
The following new standards and amendments to standards have been issued but were
not yet effective and therefore have not been applied in these nancial statements:
– IFRS 17 ‘Insurance Contracts’
– Amendments to IAS 1 ‘Presentation of Financial Statements’ on classication of liabilities
– Narrow-scope amendments to IAS 1, Practice statement 2 and IAS 8
(published February 2021)
– Amendments to IAS 12 ‘Income Taxes’ on deferred tax related to assets and liabilities
arising from a single transaction and international tax reform (pillar two model rules)
– Amendments to IFRS 16 ‘Leases’ in relation to the lease liability in a sale and leaseback
– Amendments to IAS 7 & IFRS 7 (not yet UK adopted) on supplier nance arrangements.
IFRS 17 will replace IFRS 4, which currently permits a wide variety of practices in
accounting for insurance contracts. IFRS 17 will fundamentally change the accounting by
entities that issue insurance contracts. The new standard will rst be applied by the Group
in the accounting year ended 30 June 2024. Whilst the Group does have its own captive
insurance company, Tempsford Insurance Company Limited, this company does not issue
insurance contracts to parties outside of the Group and therefore the Group has concluded
that this arrangement will not have a material impact on the Group’s consolidated nancial
statements. However, the widely drawn denition of an insurance contract means that a
number of relatively common contracts entered into by non-insurers may be considered
to be insurance contracts, even if they are not typically thought of in those terms. Some
contracts that provide a service for a xed fee may meet the denition of an insurance
contract, where the level of service provided depends on uncertain future events (for
example, reactive repair and maintenance services). The Group has reviewed its xed fee
service contracts and determined that there would be no material effect on the Group’s
nancial statements under IFRS 17.
No signicant net impact from the adoption of the above amendments to standards is
expected. The Group has chosen not to adopt any of the above standards or amendments
earlier than required.
Going concern
The Directors continue to adopt the going concern basis in preparing the Group’s nancial
statements.
The Group performed well through the year ended 30 June 2023 and produced results
in line with the Board’s expectations.
The Group continues to win new, high-quality and protable business in its markets on
terms and at rates which reect the new bidding disciplines and risk management practices
introduced under the Group’s Performance Excellence programme. At 30 June 2023, the
order book was £10.1bn (2022: £9.8bn).
As at 30 June 2023, the Group had £569.4m of unsecured committed facilities and £18.0m
of uncommitted overdrafts. During the year the Group repaid the nal amount of £49.8m of
uncommitted supply chain nancing facilities (‘KEPS’) and as at 30 June 2023 the Group
had no outstanding invoices on these facilities.
Notes to the consolidated
financial statements
For the year ended 30 June 2023
Strategic report Corporate governance Financial statements Other information
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1 Significant accounting policies continued
Financial covenant certicates for June 2023 have been prepared with no breaches noted.
The Directors have reviewed the Group’s cash ow forecasts for the period to 31 December
2024, which are included in the Group’s three-year strategic plan, on the basis of certain
key assumptions and including a number of stressed but plausible downside scenarios.
These scenarios included the consideration of risks which may arise to the Group’s
available liquidity and its ongoing compliance with nancial covenants within the Group’s
principal debt facilities as a result of or in light of the following factors or circumstances:
– Potential reductions in trading volumes;
– Potential future challenges in respect of ongoing projects;
– Project ination and subcontractor insolvency;
– Reduced investment/delays in Property transactions and cost of adoption of green legislation;
– Plausible changes in the interest rate environment; and
– The availability of mitigating actions that could be taken by management in such a scenario.
During the year there has been a signicant increase in bank base rates which directly
impacts the cost of the Revolving Credit Facility (‘RCF’). Rates have increased from 1.0% at
June 2022 to 5.0% at June 2023. Ination has remained higher than expected which could
potentially put further upward pressure on interest rates. The increase in interest rates has,
however, been partly mitigated by entering into xed rate swaps at advantageous rates.
The RCF facility extends to 31 January 2025. Working with lenders and its advisors,
the Board is condent in the Group’s ability to access a number of available funding markets
to achieve an appropriate capital structure to support the Group’s strategic objectives; and
would expect to complete a renancing in the current nancial year.
The Board also considered the macroeconomic and political risks affecting the UK economy,
including the availability of labour and inationary pressures leading to increased supply
chain costs. The Board noted that the Group’s forecasts are underpinned by a signicant
proportion of revenue that is either secured or considered probable, often as part of
long-term framework agreements, and that the Group operates primarily in sectors such
as infrastructure, health, education and utilities, which are considered likely to remain largely
unaffected by macroeconomic factors. Although inationary pressures remain a risk, both in
the supply chain and the labour market, this is partly mitigated by c.60% of contracts being
target cost or cost plus.
The Board has also considered the potential impact of climate change and does not
consider the Group’s operations are at risk from physical climate-related risks such as
hurricanes and temperature changes in the short term. In the medium term the Board has
concluded that any adverse nancial impacts from required changes to operations in line
with ESG requirements will be offset by opportunities which present the Group with additional
volumes and prots, such as replacement of non-sustainable buildings, construction of new
‘clean’ power plants and ‘green’ building conversions. As such, the longevity of the Group’s
business model means that climate change has no material adverse impact on going concern.
Having reviewed the Group’s cash ow forecasts, the Directors consider that the Group
is expected to continue to have available liquidity headroom under its nance facilities and
operate within its nancial covenants over the going concern period, including in a severe
but plausible downside scenario.
As a result, the Directors are satised that the Group has adequate resources to meet
its obligations as they fall due for a period of at least 12 months from the date of approving
these nancial statements and, for this reason, they continue to adopt the going concern
basis in preparing these nancial statements.
Basis of consolidation
(a) Subsidiaries
The consolidated nancial statements comprise the nancial statements of the Company
and subsidiaries controlled by the Company drawn up to 30 June 2023. Control exists when
the Group has direct or indirect power to govern the nancial and operating policies of an
entity so as to obtain economic benets from its activities. Subsidiaries are included in the
consolidated nancial statements from the date that control transfers to the Group until
the date that control ceases.
Business combinations are accounted for using the acquisition method as at the acquisition
date, which is the date on which control is transferred to the Group. Control is the power to
govern the nancial and operating policies of an entity so as to obtain benets from its
activities. In assessing control, the Group takes into consideration potential voting rights
that currently are exercisable.
If a business combination is achieved in stages, the acquisition date carrying value of the
acquirer’s previously held equity interest in the acquiree is remeasured to fair value at the
acquisition date; any gains or losses arising from such remeasurements are recognised
in prot or loss.
The Group measures goodwill at the acquisition date as:
– The fair value of the consideration transferred; plus
– The recognised amount of any non-controlling interests in the acquiree; plus
– If the business combination is achieved in stages, the fair value of the existing equity
interest in the acquiree; less
– The net recognised amount (generally fair value) of the identiable assets acquired
and liabilities assumed.
When the result is negative, a ‘bargain purchase’ gain is recognised immediately in the
income statement.
Provisional fair values allocated at a reporting date are nalised within 12 months of the
acquisition date.
Notes to the consolidated financial statements continued
For the year ended 30 June 2023
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The consideration transferred does not include amounts related to the settlement of
pre-existing relationships. Such amounts are generally recognised in the income statement.
Costs related to the acquisition, other than those associated with the issue of debt or equity
securities, that the Group incurs in connection with a business combination are expensed
as incurred. Any contingent consideration payable is recognised at fair value at the
acquisition date. Subsequent changes to the fair value of the contingent consideration
are recognised in the income statement unless the contingent consideration is classied
as equity, in which case settlement is accounted for within reserves.
Accounting policies of subsidiaries are adjusted where necessary to ensure consistency
with those used by the Group. All intra-Group transactions, balances, income and expenses
are eliminated on consolidation.
(b) Joint arrangements
A joint arrangement is a contractual arrangement whereby the Group undertakes
an economic activity that is subject to joint control with third parties.
The Group’s interests in joint ventures are accounted for using the equity method. Under
this method the Group’s share of the prots less losses of joint ventures is included in the
consolidated income statement and its interest in their net assets is included in investments
in the consolidated balance sheet. Where the share of losses exceeds the Group’s interest
in the entity and there is no obligation to fund these losses the carrying amount is reduced
to nil, following which no further losses are recognised. Interest in the entity is the carrying
amount of the investment together with any long-term interests that, in substance, form part
of the net investment in the entity.
From time to time the Group undertakes contracts jointly with other parties. These fall under
the category of joint operations as dened by IFRS 11. In accordance with IFRS 11, the
Group accounts for its own share of sales, prots, assets, liabilities and cash ows measured
according to the terms of the agreements.
Foreign currencies
Transactions denominated in foreign currencies are recorded at the exchange rates in
effect when they take place. Resulting monetary foreign currency denominated assets and
liabilities are translated at the exchange rates ruling at the balance sheet date. Exchange
differences arising from foreign currency transactions are reected in the income statement.
Items included in the nancial statements of each of the Group’s subsidiaries are measured
using the currency of the primary economic environment in which each entity operates
(the functional currency). The consolidated nancial statements are presented in GBP,
which is the Group’s presentation currency.
The assets and liabilities of overseas subsidiary undertakings are translated at the
rate of exchange ruling at the balance sheet date. Trading prots or losses are translated
at average rates prevailing during the accounting period. Differences on exchange arising
from the retranslation of net investments in overseas subsidiary undertakings at the
year-end rates are recognised in other comprehensive income. All other translation
differences are reected in the income statement.
Revenue and profit recognition
Revenue comprises the fair value of the consideration received or receivable, net of value
added tax, rebates and discounts and after eliminating sales within the Group. It also
includes the Group’s proportion of work carried out under jointly controlled operations.
The general principles for revenue and prot recognition across the Group are as follows:
– Provision is made for any unavoidable future net losses arising from contract obligations,
as soon as they become apparent. These are accounted for under IAS 37 and are shown
as onerous contract provisions in note 25;
– Additional consideration for contract modications (variations) is only included in revenue
(or the forecast contract out-turn) if the scope of the modication has been approved by
the customer. If the scope of the modication has been approved but the parties have not
yet determined the corresponding change in the contract price, an estimate of the change
to the transaction price is made and included in calculating revenue to the extent that it is
highly probable that a signicant reversal of the amount in cumulative revenue recognised
will not occur;
– Contract modications are treated as separate contracts if the scope of the contract
increases because of the addition of promised goods or services that are distinct,
and the price of the contract increases by an amount of consideration that reects the
Group’s stand-alone selling prices of the additional promised goods or services and any
appropriate adjustments to that price to reect the circumstances of the particular contract;
– Variable consideration amounts (gain-share amounts, KPI bonuses, milestone bonuses,
compensation event claims, etc.) are included in revenue (or forecasts to completion) only
to the extent that it is highly probable that a signicant reversal of the amount in
cumulative revenue recognised will not occur;
– Refund liabilities (liquidated damages, pain-share amounts, KPI penalties, etc.) are
accounted for as a reduction in revenue (or in forecasting contract out-turns) as soon
as it is expected that the Group will be required to refund some or all of the consideration
it has received from the customer;
– Where revenue that has been recognised is subsequently determined not to be
recoverable due to the inability of a customer to meet its payment obligations, these
amounts are charged to administrative expenses as a credit loss;
– Claims against third parties (such as insurance recoveries and claims for cost
reimbursements) outside of normal supplier price adjustments are recognised only
when the realisation of income is virtually certain. The associated income is accounted
for as reduction in costs rather than revenue; and
– Contract mobilisation is not considered to be a separate performance obligation in
most situations, as the customer receives little or no benet from mobilisation activities.
Any consideration received from the customer in relation to the mobilisation phase of
a contract is deferred and recognised as additional revenue relating to the performance
obligations in the contract that benet the customer.
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1 Significant accounting policies continued
If the timing of payments agreed with the customer provides the Group or the customer with
a signicant benet of nancing the transfer of goods or services, the amount of consideration
is adjusted for the effects of the time value of money. The Group does not make an adjustment
for the time value of money in the following circumstances:
– When the Group expects, at contract inception, that the period between the entity
transferring a good or service and the customer paying for it will be one year or less; or
– Where the timing of the payments is for commercial rather than nancing reasons, e.g.
construction contract retentions, where the payment terms are to provide the customer
with protection from Kier failing to adequately complete some or all of its obligations
under the contract.
Revenue and prot recognition policies applied to specic businesses are as follows:
(a) Construction contracts
Revenue is recognised on construction services over time as the benet is transferred
to the customer. The Group uses an input method to measure progress. The percentage
of completion is measured using cost incurred to date as a proportion of the estimated full
costs of completing the contract and is applied to the total expected contract revenue to
determine the revenue to be recognised to date.
The assessment of the nal outcome of each contract is determined by regular review
of the revenues and costs to complete that contract. Consistent contract review procedures
are in place in respect of contract forecasting.
(b) Services
Revenue and prot from services rendered, which include facilities management, highways
maintenance, utilities maintenance, street cleaning and recycling, is recognised over time
as the service is performed.
Progress on capital works and infrastructure renewal projects in the Highways and Utilities
businesses is measured using costs incurred as a percentage of the estimated full costs
of completing the performance obligation.
Where the contract includes bundled services, and those services are distinct, the
transaction price is allocated to each performance obligation identied in the contract based
on the relative stand-alone selling prices of each of the performance obligations. Revenue
is then recognised independently when each of the performance obligations is satised.
Any variable consideration (e.g. performance bonus) attributable to a single performance
obligation is allocated entirely to that performance obligation. Where variable consideration
is attributable to the entire contract and is not specic to part of the contract, the consideration
is allocated based on the stand-alone selling prices of each of the performance obligations
within the contract.
Service contracts are reviewed monthly to assess their future operational performance
and protability.
(c) Property development
Revenue in respect of property developments is recorded on unconditional exchange
of contracts on disposal of nished developments. Prot taken is subject to any amounts
necessary to cover residual commitments relating to development performance.
Where developments are sold in advance of construction being completed, revenue and
prot are recognised at the point of sale, reecting the transfer of control to the customer
in its current stage of completion. Thereafter, revenue for construction services provided
to the customer to complete the property is recognised over time in line with the percentage
of completion, consistent with the Group’s accounting policy for recognition of revenue on
construction contracts (see above).
Where consideration is paid in advance of the development’s construction phase at a price
less than market value, revenue is recognised on a discounted basis to reect a nancing
component of the transaction. This revenue and forward funded interest unwinds as the
construction takes place.
(d) Private Finance Initiative (‘PFI’) service concession agreements
Revenue relating to construction or upgrade services under a service concession
agreement is recognised based on the stage of completion of the work performed,
consistent with the Group’s accounting policy on recognising revenue on construction
contracts (see above).
Operation or service revenue is recognised in the period in which the services were
provided by the Group. When the Group provides more than one service in a service
concession agreement, the consideration received is allocated by reference to the relative
stand-alone selling prices of the services delivered.
Pre-contract and contract mobilisation costs
Pre-contract costs to obtain a contract that would have been incurred irrespective of whether
the contract was obtained are recognised as an expense when incurred, unless those costs
are explicitly chargeable to the customer irrespective of whether the contract is obtained.
Mobilisation costs incurred in respect of a specic contract that has been won or an
anticipated contract that is expected to be won (e.g. when the Group has secured preferred
bidder status) are carried forward in the balance sheet as capitalised mobilisation costs if:
the costs generate or enhance resources of the Group that will be used in satisfying
(or in continuing to satisfy) performance obligations in the future; and the costs are expected
to be recovered (i.e. the contract is expected to be sufciently protable to cover the
mobilisation costs).
The vast majority of contracts incurring signicant mobilisation costs are contracts
that exceed 12 months in duration. The Group’s policy is therefore to show its capitalised
mobilisation costs as a non-current asset, amortised over the expected contract duration.
Notes to the consolidated financial statements continued
For the year ended 30 June 2023
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Warranties and rectification costs
The Group does not offer extended insurance-type warranties at an additional cost to the
customer (which would represent separate performance obligations). Standard industry
assurance-type warranties are provided and are accounted for as rectication cost
provisions based on the estimated costs of making good any latent defects.
Alternative performance measures
IAS 1 permits an entity to present additional information for specic items to enable
users to better assess the entity’s nancial performance. The Directors have considered
the requirements of applicable accounting standards, along with additional guidance around
alternative performance measures (‘APMs’) and believe it is appropriate to inform users
regarding various items and disclose those items which are deemed one-off, material or
non-recurring in size or nature, in alignment with the Group’s internal management reporting.
As such, the Group is disclosing as supplementary information an ‘Adjusted Prot’ APM
which is reconciled to statutory prot in the notes to the nancial statements and is consistent
with IFRS 8 segmental reporting.
Separate presentation of these items is intended to enhance understanding of the nancial
performance of the Group in the particular year under review and the extent to which results
are inuenced by material unusual and/or non-recurring items. The Directors review segmental
results under an adjusted items basis to analyse the performance of operating segments.
The Directors exercise judgement in determining the classication of certain items as adjusting
using quantitative and qualitative factors. In assessing whether an item is an adjusting item,
the Directors give consideration, both individually and collectively, as to an item’s size, the
specic circumstances which have led to the item arising and if the item is likely to recur,
or whether the matter forms part of a group of similar items.
Amortisation of acquired intangible assets and certain nancing costs are also included
as adjusting items on the basis of being ongoing non-cash items generated from
acquisition-related activity.
A full reconciliation from statutory numbers to adjusted prot measures has been presented
in note 5.
The Group presents revenue including from joint venture arrangements as an alternative
performance measure. The Directors believe this is a useful measure as it provides visibility
over the scale of the Group’s operations, particularly within its Property business where a
signicant proportion of developments are set up in joint ventures.
The Group also presents adjusted cash ow from operations, free cash ow and net debt
as alternative performance measures. The Directors consider that these provide useful
information about the Group’s liquidity and debt prole.
A glossary of alternative performance measures is included on page 243.
Finance income and costs
Interest receivable and payable on bank balances is credited or charged to the income
statement as incurred using the effective interest rate method. Interest receivable is
presented within operating cash ows in the cash ow statement.
Borrowing costs are capitalised where the Group constructs qualifying assets. All other
borrowing costs are written off to the income statement as incurred.
Borrowing costs incurred within the Group’s jointly controlled entities relating to the
construction of assets in PFI and PPP projects are capitalised until the relevant assets
are brought into operational use.
Notional interest payable, representing the unwinding of the discount on long-term liabilities,
is charged to nance costs.
Taxation
Income tax comprises current and deferred tax. Income tax is recognised in the income
statement except to the extent that it relates to items recognised directly in equity, in which
case it is recognised in equity.
Current tax is the expected tax payable on taxable income for the year, using tax rates
enacted or substantively enacted at the balance sheet date, and any adjustment to tax
payable in respect of previous years.
Deferred tax is provided using the balance sheet method, providing for temporary
differences between the carrying amounts of assets and liabilities for nancial reporting
purposes and the amounts used for taxation purposes. The deferred tax provision is based
on the expected manner of realisation or settlement of the carrying amount of the assets
and liabilities, using tax rates enacted or substantively enacted at the balance sheet date.
A deferred tax asset is recognised only to the extent that it is probable that future taxable
prots will be available against which the asset can be utilised. Deferred tax assets are
reduced to the extent that it is no longer probable that the related tax benet will be realised
or where other temporary differences are available.
The Group participates in the UK Government’s Research and Development Expenditure
Credit (‘RDEC’) tax incentive scheme. Credits receivable under the RDEC scheme are
recognised within operating prot and are treated as taxable income. Amounts receivable
in respect of RDEC claims are included on the balance sheet within the corporation tax
receivable balance or as a reduction in the corporation tax payable balance, as appropriate.
Goodwill and other intangible assets
Goodwill arising on consolidation represents the excess of the consideration over the
Group’s interest in the fair value of the identiable assets and liabilities of a subsidiary.
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Goodwill is recognised as an asset and reviewed for impairment at least annually. Any
impairment is recognised immediately in the income statement and is not subsequently
reversed. Negative goodwill is recognised in the income statement immediately. On disposal
of a subsidiary or jointly controlled entity, the attributable carrying amount of goodwill is
included in the determination of the prot or loss on disposal.
Other intangible assets which comprise contract rights and computer software are stated
at cost less accumulated amortisation and impairment losses. Amortisation is charged to
administrative expenses in the income statement on a straight-line basis over the expected
useful lives of the assets, which are principally as follows:
Contract rights Over the remaining contract life
Computer software 3–10 years
Internally generated intangible assets developed by the Group are recognised only
if all of the following conditions are met:
– An asset is created that can be identied;
– It is probable that the asset created will generate future economic benets; and
– The development cost of the asset can be measured reliably.
Other research expenditure is written off in the period in which it is incurred.
Software as a service
Costs incurred relating to software as a service (‘SaaS’) that provide future benet to the
Group are included within prepayments and written off over the period to which they relate.
All other costs in respect of SaaS are expensed to the income statement as incurred.
Property, plant and equipment and depreciation
The cost of an acquired asset comprises the purchase price, any directly attributable
costs and the estimated costs of dismantling and removing the item at the end of its life.
Depreciation is based on historical or deemed cost, including expenditure that is directly
attributable to the acquisition of the items, less the estimated residual value, and the
estimated economic lives of the assets concerned. Freehold land is not depreciated.
Other tangible assets are depreciated to residual values in equal annual instalments
over the period of their estimated economic lives, which are principally as follows:
Land and buildings 25–50 years or period of lease
Plant and equipment 3–12 years
Leases
Assets and liabilities arising from a lease are initially measured on a present value basis.
Lease liabilities include the net present value of the following lease payments:
– Fixed payments (including in-substance xed payments), less any lease incentives receivable;
– Variable lease payments that are based on an index or a rate, initially measured using
the index or rate as at the commencement date;
– Amounts expected to be payable by the Group under residual value guarantees;
– The exercise price of a purchase option if the Group is reasonably certain to exercise
that option; and
– Payments of penalties for terminating the lease, if the lease term reects the Group
exercising that option.
Lease payments to be made under reasonably certain extension options are also included
in the measurement of the liability.
The lease payments are discounted using the interest rate implicit in the lease. If that rate
cannot be readily determined, which is generally the case for leases in the Group, the lessee’s
incremental borrowing rate is used, being the rate that the individual lessee would have to
pay to borrow the funds necessary to obtain an asset of similar value to the right-of-use
asset in a similar economic environment with similar terms, security and conditions.
Most Group companies do not have any recent independent third-party nancing to use
as a starting point for the incremental borrowing rate. Therefore, the Group uses a build-up
approach that starts with a risk-free interest rate adjusted for credit risk, lease term, country,
currency and security.
The Group is exposed to potential future increases in variable lease payments based on an
index or rate, which are not included in the lease liability until they take effect. When adjustments
to lease payments based on an index or rate take effect, the lease liability is reassessed
and adjusted against the right-of-use asset.
Lease payments are allocated between principal and nance cost. The nance cost is charged
to prot or loss over the lease period so as to produce a constant periodic rate of interest
on the remaining balance of the liability for each period.
Right-of-use assets are measured at cost comprising the following:
– The amount of the initial measurement of lease liability;
– Any lease payments made at or before the commencement date less any lease
incentives received;
– Any initial direct costs; and
– Any restoration costs.
Right-of-use assets are generally depreciated over the shorter of the asset’s useful life and
the lease term on a straight-line basis. If the Group is reasonably certain to exercise a purchase
option, the right-of-use asset is depreciated over the underlying asset’s useful life.
The Group has elected to use the following recognition exemptions, as permitted
by the standard:
– Leases of low-value items – The Group has dened low-value items as assets that
have a value when new of less than c.£5,000. Low-value items comprise IT equipment
and small items of plant.
– Short-term leases – Leases with a lease term of less than 12 months at inception.
Notes to the consolidated financial statements continued
For the year ended 30 June 2023
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For leases in the above categories, a lease liability or right-of-use asset is not recognised.
Instead, the Group recognises the related lease payments as an expense on a straight-line
basis over the lease term.
Contracts may contain both lease and non-lease components. The Group allocates the
consideration in the contract to the lease and non-lease components based on their relative
stand-alone prices.
Leased properties that meet the denition of investment properties are presented within
‘investment properties’ rather than ‘right-of-use assets’ on the balance sheet.
The Group enters into lease agreements as a lessor with respect to its investment properties.
Leases for which the Group is a lessor are classied as nance or operating leases.
Whenever the terms of the lease transfer substantially all the risks and rewards of ownership
to the lessee, the contract is classied as a nance lease. All other leases are classied
as operating leases.
When the Group is an intermediate lessor, it accounts for the head lease and the sub-lease
as two separate contracts. The sub-lease is classied as a nance or operating lease by
reference to the right-of-use asset arising from the head lease.
Rental income from operating leases is recognised on a straight-line basis over the term
of the relevant lease. Initial direct costs incurred in negotiating and arranging an operating
lease are added to the carrying amount of the leased asset and recognised on a straight-line
basis over the lease term.
Amounts due from lessees under nance leases are recognised as receivables at the
amount of the Group’s net investment in the leases. Finance lease income is allocated
to accounting periods so as to reect a constant periodic rate of return on the Group’s net
investment outstanding in respect of the leases. Finance lease income is calculated with
reference to the gross carrying amount of the lease receivables, except for credit-impaired
nancial assets for which interest income is calculated with reference to their amortised cost
(i.e. after a deduction of the loss allowance).
When a contract includes both lease and non-lease components, the Group applies
IFRS 15 to allocate the consideration under the contract to each component.
Investment properties
Investment properties, principally ofce buildings and land, are held for the purpose
of earning rentals and/or for capital appreciation and are not occupied by the Group.
Investment properties are measured using the fair value model. Gains and losses arising
from a change in the fair value of investment properties are recognised in the income
statement in the period in which they arise.
Rental income and costs in respect of investment properties are included within
administrative expenses and are disclosed in note 15(b). Where the investment property
has come about through vacating corporate ofces following the restructure of the Group’s
property portfolio, amounts in the income statement are treated as adjusting items.
Inventories
Inventories, including land held for and in the course of development, are valued at the lower
of cost and net realisable value. Cost comprises direct materials and, where appropriate,
labour and production overheads which have been incurred in bringing the inventories and
work in progress to their present location and condition. Cost in certain circumstances also
includes notional interest as explained in the accounting policy for nance income and costs.
Net realisable value represents the estimated selling price less all estimated costs of
completion and costs to be incurred in marketing, selling and distribution.
Inventories are valued on a rst in, rst out (‘FIFO’) basis.
Land inventory is recognised at the time a commitment to purchase the land is made,
generally at exchange of unconditional contracts.
Property inventory, which represents all development land and work in progress, is included
at cost less any losses foreseen in completing and disposing of the development less any
amounts received or receivable as progress payments or part disposals. Where a property
is being developed, cost includes cost of acquisition and development to date, including
directly attributable fees, expenses and nance charges net of rental or other income
attributable to the development. Where development property is not being actively
developed, net rental income and nance costs are taken to the income statement.
Contract assets and liabilities
When the Group transfers goods or services to a customer before the customer pays
consideration or before payment is due, the amount of revenue associated with the transfer
of goods or services is accrued and presented as a contract asset in the balance sheet
(excluding any amounts presented as a receivable). A contract asset represents the Group’s
right to consideration in exchange for goods or services that the Group has transferred to
a customer.
Contract assets are reduced by appropriate allowances for expected credit losses
calculated using the simplied approach (as with trade receivables).
If a customer pays consideration, or the Group has a right to an amount of consideration
that is unconditional (i.e. a receivable), before the Group transfers a good or service to the
customer, the amount is presented as a contract liability on the balance sheet. A contract
liability represents the Group’s obligation to transfer goods or services to a customer for
which the entity has received consideration (or an amount of consideration is due) from
the customer.
The Group has allocated contract assets and liabilities due within 12 months of the balance
sheet date to current with the remainder included in non-current.
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1 Significant accounting policies continued
Assets held for sale
Assets classied as held for sale are measured at the lower of their carrying amount
and fair value less costs to sell.
Assets are classied as held for sale if their carrying amount will be recovered through a sale
transaction rather than through continuing use. This condition is regarded as met only when
the sale is highly probable, and the assets are available for sale in their present condition.
Share capital
The ordinary share capital of the Company is recorded as the proceeds received,
net of directly attributable incremental issue costs.
Merger reserve
Where equity raises are effected through a structure which is eligible for merger relief under
section 612 of the Companies Act 2006, the Group transfers the excess of the net proceeds
over the nominal value of the share capital issued to the merger reserve.
Provisions
Provisions are recognised when the Group has a present legal or constructive obligation
as a result of a past event, and where it is probable that an outow will be required to settle
the obligation and the amount can be reliably estimated.
Contingent liabilities
The Group discloses a contingent liability in circumstances where it has a possible
obligation depending on whether some uncertain future event occurs, or has a present
obligation but payment is not probable, or the amount cannot be measured reliably.
Government grants
Government grant income is recognised at the point that there is reasonable assurance that
the Group will comply with the conditions attached to it, and that the grant will be received.
Employee benefits
(a) Retirement benefit obligations
For dened contribution pension schemes operated by the Group, amounts payable are
charged to the income statement as they fall due.
The Group accounts for dened benet obligations in accordance with IAS 19. Obligations
are measured at discounted present value while plan assets are measured at fair value.
The operating and nancing costs of such plans are recognised separately in the income
statement; current service costs are spread systematically over the lives of employees and
nancing costs are recognised in full in the period in which they arise. Remeasurements
of the net dened pension liability, including actuarial gains and losses, are recognised
immediately in other comprehensive income.
The net nance cost is calculated by applying the discount rate to the net balance of the
dened benet obligation and the fair value of plan assets. This cost is included in nance
costs in the income statement.
Where the calculations result in a surplus to the Group, the recognised asset is limited
to the present value of any available future refunds from the plan or reductions in future
contributions to the plan that the Group has the unconditional right to realise.
(b) Share-based payments
Share-based payments granted but not vested are valued at the fair value of the shares
at the date of grant. This applies to the Sharesave, Conditional Share Award Plan and
Long-Term Incentive Plan (‘LTIP’) schemes. The fair value of these schemes at the date
of award is calculated using the Black-Scholes model apart from the total shareholder return
element of the LTIP which is based on a Stochastic model. Awards that are subject to a
post-vesting holding period are valued using the Finnerty model.
The cost to the Group of awards to employees under the LTIP scheme is spread on a
straight-line basis over the relevant performance period. The scheme awards to senior
employees a number of shares which will vest after three years if particular criteria are
met. The cost of the scheme is based on the fair value of the shares at the date the
options are granted.
Shares purchased and held in trust in connection with the Group’s share schemes are
deducted from retained earnings. No gain or loss is recognised within the income statement
on the market value of these shares compared with the original cost.
Financial instruments
Financial assets and nancial liabilities are recognised in the Group’s balance sheet when
the Group becomes a party to the contractual provisions of the instrument. An assessment
of whether a nancial asset is impaired is made at least at each reporting date. The principal
nancial assets and liabilities of the Group are as follows:
(a) Trade receivables and trade payables
Given the varied activities of the Group it is not practicable to identify a common operating
cycle. The Group has therefore allocated receivables and payables due within 12 months
of the balance sheet date to current with the remainder included in non-current.
A trade receivable is recognised when the Group has a right to consideration that is
unconditional (subject only to the passage of time before payment is due). Trade receivables
do not carry interest and are stated at their initial cost reduced by appropriate allowances
for expected credit losses.
The Group applies the simplied approach to measurement of expected credit losses
in respect of trade receivables, which requires expected lifetime losses to be recognised
from initial recognition of the receivables.
Notes to the consolidated financial statements continued
For the year ended 30 June 2023
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Trade payables on normal terms are not interest-bearing and are stated at their nominal value.
Trade payables on extended terms, particularly in respect of land purchases, are discounted
and recorded at their present value.
Amounts owing under supply chain nance arrangements are included within trade
payables rather than bank debt. The purpose of supply chain nance is purely to grant
subcontractors and suppliers access to credit and improve their cash ows. There have
been no changes to the underlying terms of the supply chain nance arrangements.
The designation in trade payables is due to the assignment of invoice rather than a novation,
the Group acting as an agent with fees related to supply chain nance being borne by the
supplier and the nal payment date to the bank being set by the Group with interest accrued
for any late payments.
(b) Cash and cash equivalents
Cash and cash equivalents in the cash ow statement comprise cash at bank and in hand,
including bank deposits with original maturities of three months or less, net of bank overdrafts
where legal right of set off exists (to reect the substance of cash pooling arrangements).
(c) Bank and other borrowings
Interest-bearing bank and other borrowings are recorded at the fair value of the proceeds
received, net of direct issue costs. Finance charges, including premiums payable on settlement
or redemption and direct issue costs, are accounted for on an accruals basis in the income
statement using the effective interest method and are added to the carrying value of the
instrument to the extent that they are not settled in the period in which they arise.
(d) Private Finance Initiative (‘PFI’) assets
Under the terms of a PFI or similar project, where the risks and rewards of ownership
remain largely with the purchaser of the associated services, the Group’s interest in the
asset is classied as a nancial asset and included at its amortised cost within investment
in joint ventures.
(e) Derivative financial instruments
Derivatives are initially recognised at fair value on the date that the contract is entered into
and subsequently remeasured in future periods at their fair value. The method of recognising
the resulting change in fair value depends on whether the derivative is designated as a
hedging instrument and whether the hedging relationship is effective.
For cash ow hedges, the effective portion of changes in the fair value of these derivatives
is recognised in the cash ow hedge reserve within equity. Any ineffective portion is
recognised immediately in the income statement. Amounts accumulated in equity are recycled
to the income statement in the periods when the hedged items will affect prot or loss.
If the hedging instrument no longer meets the criteria for hedge accounting, expires
or is sold, terminated or exercised, the hedge accounting is discontinued prospectively.
The cumulative gain or loss previously recognised in equity remains there until the forecast
transaction occurs. When the forecast transaction is no longer expected to occur, the
cumulative gain or loss and deferred costs of hedging that were reported in equity are
immediately reclassied to prot or loss.
The Group enters into forward contracts in order to hedge against transactional foreign
currency exposures. In cases where these derivative instruments are signicant, hedge
accounting is applied as described above. Where hedge accounting is not applied, changes
in fair value of derivatives are recognised in the income statement. The fair values of derivative
instruments have been derived from proprietary models used by the bank counterparties
using mid-market mark to market valuations for trades at the close of business on the
balance sheet date.
Significant accounting estimates and critical judgements
Management considers that their use of estimates, assumptions and judgements in the
application of the Group’s accounting policies are inter-related and therefore discuss them
together below with the major sources of estimation uncertainty and signicant judgements
separately identied:
(a) Revenue and profit recognition
The estimation techniques used for revenue and prot recognition in respect of property
development, construction contracts and services contracts require forecasts to be made of
the outcome of long-term contracts which require assessments and judgements to be made
on the recovery of pre-contract costs, changes in the scope of work, programme of works,
maintenance and defect obligations and changes in costs. The estimates and judgements
in respect of construction contracts are considered to be critical.
There are a small number of contracts that the Group considers require signicant
accounting estimates and, as at 30 June 2023, the Group has included estimated recoveries
from customers and other third parties with a combined value of £74.0m (2022: £76.6m).
These recoveries are recognised in line with the Group’s stated accounting policies.
However, estimation uncertainty exists and there are a number of factors which will affect
the nal outcome once these contracts are nalised. The Group estimates that the nal
outcome on these contracts could collectively range from an upside of £82.8m (2022: £42.1m)
to a downside, including the risk of counterclaims being levied against the Group, of £47.0m
(2022: £40.1m).
Over 400 construction contracts (2022: over 500) were income generating during the year
within the Group’s Construction and Infrastructure Services operating divisions. Of these,
three (2022: none) individually had a material impact on operating prot.
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1 Significant accounting policies continued
The key judgements and estimates relating to determining the revenue and prot of material
contracts are:
– costs to complete;
– achieving the planned build programme; and
– recoverability of claims and variations in accordance with IFRS 15.
Each contract is treated on its merit and is subject to a regular review of the revenue and
costs to complete that contract, determined by a combination of management judgement
and external professional assistance, backed up by accounting position papers for the
contracts that have a material impact on the income statement.
The level of estimation uncertainty in the Group’s construction businesses is reduced by
the effect of its substantial portfolio and signicant experience of the division’s management
team. The level of estimation is further reduced by the combination of the modest scale and
short contract durations of the majority of the Group’s projects. Nevertheless, the prot
recognition in the Construction business is a critical estimate, due to the inherent
uncertainties in any construction project over revenues and costs.
The level of estimation and uncertainty differs between the Group’s construction
businesses, particularly between Regional Building, Major Projects – Building and
Infrastructure. Regional Building operates around 300 sites (2022: 350) each year with
an average project size of £15.8m (2022: £12.9m) and with average revenue in the year of
£4.4m (2022: £3.3m). These projects typically operate under framework contracts where
costs are known with a greater degree of certainty. Infrastructure manages around 30 sites
with projects ranging from a relatively small number of higher value major Infrastructure
civil engineering projects to a larger number of more modest minor signalling upgrades
and replacements.
The major infrastructure civil engineering projects typically include two stage Design and
Build, Construct only and Target Cost contracts. The nature and length of these contracts
means there can be a greater level of estimation and uncertainty. The blended portfolio
risk of the overall construction businesses is mitigated by the relative sizes of the Regional
Building, Major Projects – Building and Infrastructure businesses.
Construction revenue for the year was £1.7bn (2022: £1.4bn) with an associated adjusted
operating prot margin of 4.2% (2022: 4.2%).
The historic prot margins in the construction businesses typically range from 3.2% to 4.2%.
A potential downside risk in margin would be 1.0% (2022: 2.4%). Given the short-term average
duration of the construction portfolio, the impact of such a decrease in margin across projects
in delivery at the year-end would be a decrease in operating prot of £16.5m (2022: £34.6m).
(b) Lifecycle assets
The Group has a number of ongoing contracts where lifecycle funds are established to meet
contractual obligations. At the 30 June 2023 the carrying value of these non-current contract
assets was £43.7m, offset by a provision of £4.9m. The key sensitivity in the calculation is the
percentage of the funds build-up required for future maintenance. A reasonably likely change
would be an increase or decrease of 10% in the percentage of funds build-up required.
Such a change would result in a prot impact of approximately £2m in any one year.
(c) Defined benefit pension scheme valuations
In determining the valuation of dened benet pension scheme assets and liabilities,
a number of key assumptions have been made. The key assumptions, which are given
below, are largely dependent on factors outside the control of the Group:
– expected return on plan assets;
– ination rate;
– mortality;
– discount rate; and
– salary and pension increases.
Details of the assumptions used and sensitivity to changes in these assumptions
are included in note 9.
(d) Goodwill
Determining whether goodwill is impaired requires an estimation of the value in use of
cash generating units (‘CGUs’) to which the goodwill has been allocated. The value in use
calculation requires an estimate to be made of the timing and amount of future cash ows
expected to arise from the CGU and the application of a suitable discount rate in order to
calculate the net present value. Cash ow forecasts for the next three years are based on
the Group’s budgets and forecasts. Other key inputs in assessing each CGU are revenue
growth, operating margin, discount rate and terminal growth rate. The assumptions
are set out in note 13 together with an assessment of the impact of reasonably
possible sensitivities.
In undertaking the assessment, the potential net impact of climate change on the forecasts
has been considered. At present, it has been concluded that it will not be signicant.
Other accounting estimates and judgements
The consolidated nancial statements include other areas of judgement and accounting
estimates. While these areas do not meet the denition under IAS 1 of signicant
accounting estimates or critical accounting judgements, the recognition and measurement
of certain material assets and liabilities are based on assumptions and/or are subject to
longer-term uncertainties.
Notes to the consolidated financial statements continued
For the year ended 30 June 2023
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(a) Joint ventures
In accordance with IFRS 11 paragraph 7, joint ventures are identied where the control of
an arrangement is shared and decisions around activities require unanimous consent if the
action signicantly affects the investee’s return. The key judgement involved in determining
joint control is that the Board structure and the mechanisms in the reserved matters do not
give any one party majority control over relevant activities, regardless of the economic split
between partners.
(b) Adjusting items
Adjusting items are items of nancial performance which the Group believes should be
separately presented to assist in understanding the nancial performance achieved by the
Group in accordance with the accounting policy set out on page 175. Determining whether
an item is classied as an adjusting item requires judgement.
Total adjusting items of £52.9m were charged to the income statement in respect of continuing
operations for the year ended 30 June 2023 (2022: £78.2m). The items that comprise this
are set out in note 5 together with an explanation of their nature and consideration points
as to why the Directors have treated these as adjusting items.
(c) Property leases
The Group continues to rationalise its property portfolio and exited its leased corporate ofces
in Foley Street, London and Fountain Street, Manchester during prior years. The properties
are now being sublet for the remaining period of the lease and the associated right-of-use
asset is classied as an investment property. Given the length of the underlying leases and
the uncertainty in the property market, in calculating the fair value of the right-of-use asset
judgement has been exercised. These areas of judgement are detailed in note 15.
(d) Taxation
The Group is predominantly UK-based and all entities are UK resident for tax purposes
and therefore subject to UK tax regulations.
Deferred tax liabilities are generally provided for in full and deferred tax assets are recognised
to the extent that it is judged probable that future taxable prot will arise against which the
temporary differences will be utilised. In particular, the Group has exercised judgement in
recognising a deferred tax asset of £106.2m (2022: £105.6m) in respect of tax losses.
The key judgements in assessing the recoverability of the deferred tax asset relate
to the taxable prot forecasts. These forecasts are based on the same Board-approved
information used to support the going concern and goodwill impairment assessments.
The critical judgements related to these forecasts are the same as those described in the
goodwill section of this note. In assessing the recoverability, the Group has considered
various sensitivities regarding future protability, those of which are also disclosed within
the goodwill section of this note.
The basis for recognising this tax asset is set out in note 18 together with the period in which
it is expected to be utilised.
(e) Land and property valuations
The recoverability of property development work in progress is an area which requires
signicant judgement due to the ongoing volatility in property valuations. An assessment
of the net realisable value of inventory is carried out at each balance sheet date and is
dependent upon the Group’s estimate of forecast selling prices and build/development costs
(by reference to current prices), which may require signicant judgement. Where applicable,
third-party valuations are used to support the position as at the balance sheet date.
In valuing work in progress at the lower of cost and net realisable value the Group has
already recognised any expected downside, and any upside is contingent on the Group’s
continued development of the projects as it is not in the business of selling partly developed
sites. At 30 June 2023, the value of land and work in progress held for development,
included within inventory on the balance sheet, was £59.6m (2022: £43.0m).
(f) Fire and cladding
The Group has undertaken a review of 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. The buildings, including the cladding works, were signed off by approved
inspectors as compliant with the relevant Building Regulations at the time of completion.
In preparing the nancial statements, currently available information has been considered,
including the current best estimate of the extent and future costs of work required, based
on the reviews and physical inspections undertaken.
Where an obligation has been established and a reliable estimate of the costs to rectify
is available, a provision has been made (see note 25). No provision has been made where
an obligation has not been established.
These estimates may be updated as further inspections are completed and as work
progresses which could give rise to the recognition of further liabilities. Such liabilities,
should they arise, are expected to be covered materially by the Group’s insurance
arrangements thereby limiting the net exposure. Any insurance recovery must be considered
virtually certain before a corresponding asset is recognised and so this could potentially
lead to an asymmetry in the recognition of assets and liabilities.
2 Revenue
Revenue is entirely derived from contracts with customers.
Infrastructure Services
The Group derives revenue from capital infrastructure projects as well as the maintenance
of infrastructure assets across various sectors including highways, rail, water, gas and
domestic bre installation.
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2 Revenue continued
Capital projects can range from the construction of power station infrastructure, roads,
railways, bridges and tunnels, over a period of several years (e.g. Hinkley Point C, Sellaeld
SRP and HS2), to small schemes completed in a matter of days. Revenue is recognised
over time as the construction services are rendered to the customer. Each capital project
is typically treated as a single performance obligation.
The Group also provides maintenance services for the UK road, rail and utilities infrastructure
through both routine, preventative maintenance as well as reactive repairs. These services
are generally delivered under framework contracts of between ve to eight years; however,
individual performance obligations under the framework are normally determined on an
annual, monthly or ad hoc basis. Revenue is recognised over time as the maintenance
services are rendered to the customer.
Where multiple services are supplied under a single contract they are treated as separate
performance obligations and revenue is recognised separately as each performance
obligation is satised.
Infrastructure services are normally invoiced monthly in arrears under normal commercial
credit terms. Under some contracts, amounts are held back as a retention for periods that
can exceed 12 months. However, as the purpose of the retentions is to ensure that the
performance obligations on the contract are carried out to a satisfactory standard, the Group
does not deem there to be a signicant nancing component in the timing of the cash ows
on these amounts.
The Group’s obligations to make good faulty workmanship under standard industry warranty
terms are recognised as provisions (see note 25).
Construction
The Group undertakes over 300 building projects each year, providing construction services
in the private, education and health sectors and on public sector frameworks. Projects range
from minor extensions costing less than £0.5m to the construction of major strategic assets
costing hundreds of millions of pounds. The construction of a building, including any associated
design work, is normally accounted for as a single performance obligation as the services
provided are normally highly interrelated. Revenue is recognised over time as the
performance obligation is satised.
Invoices are typically raised monthly, based on valuations of the work completed, and have
normal commercial payment terms. It is common in the construction industry for an amount
to be held back as a retention for periods that can exceed 12 months. However, as the
purpose of the retentions is to ensure that the performance obligations on the contract are
carried out to a satisfactory standard, the Group does not deem there to be a signicant
nancing component in the timing of the cash ows on these amounts.
Whilst the bulk of consideration associated with construction contracts is usually xed,
variable consideration elements can exist (milestone bonuses, gain share, event claims, etc.).
The Group only recognises revenue for these amounts if they are highly probable not to reverse.
Liquidated and ascertained damages (‘LADs’) clauses are often present in construction
contracts. Where it is anticipated that a LADs clause will be triggered (e.g. through
overrunning works), revenue is constrained to reect the expected amount of the deduction.
Modications to the scope of construction work are agreed in principle with the customer
before additional work is carried out. However, the price is not always determined until the
nal account stage. In these circumstances the Group treats the revenue associated with
the modication as variable consideration and only recognises amounts that are highly
probable not to reverse.
The Group’s obligations to repair building faults under standard industry warranty terms
are recognised as provisions (see note 25).
For the Group’s construction activities in the Middle East, in some circumstances, customers
pay upfront amounts to protect the Group against payment default. Payments on account
are not normally made more than 12 months in advance of the service delivery.
The Group also provides maintenance services to local authorities and private landlords
with large housing portfolios. Revenue for maintenance services is recognised over time as
the services are rendered. Services are either invoiced monthly or shortly after completion
of individual performance obligations. Normal commercial payment terms apply.
The Group also provides facilities management and maintenance services for commercial
property owners, and waste and recycling collection services for local authority and
commercial customers.
Facilities management and maintenance services revenue is recognised over time
as the services are rendered. Invoices for services rendered are typically raised monthly.
Normal commercial payment terms apply, with the exception of the PFI lifecycle contracts,
as noted below.
The Group has a number of long-term PFI lifecycle contracts to maintain properties over
periods of 25–30 years. A fund is established at the start of the contract and amounts are
drawn down by the Group as maintenance work is performed. The Group is also entitled
to share in any surplus left in the fund at the end of the contract. Revenue is recognised
over time to reect the rendering of the service including an assessment of the appropriate
proportion of the likely surplus in the fund, subject to being highly probable not to reverse.
As the surplus amount will not be paid until the end of the contracts, the contract asset
associated with the surplus recognised to date is shown as a non-current asset in the
balance sheet. Due to the length of time between performance of the services and payment
of the surplus, the Group considers there to be a signicant nancing component within this
element of the transaction price and has therefore adjusted for the time value of money
in measuring the revenue recognised in respect of end-of-contract surpluses.
Notes to the consolidated financial statements continued
For the year ended 30 June 2023
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Environmental services contracts with local authorities, for domestic waste and recyclate
collections and operation of household waste and recycling centres, have a typical duration
of between 7 and 10 years. Contracts with commercial customers are typically for
12 months. Revenue from environmental services contracts is recognised over time as
the services are performed. Invoices are raised monthly in arrears and normal commercial
payment terms apply. Revenue for the sale of recyclate materials is recognised at the point
in time that the materials are transferred to the customer.
Property
The Group undertakes property development on its own sites as well as a service
for customers.
Revenue in respect of property developments is recorded on unconditional exchange
of contracts. In most cases payment is received on legal completion.
Where developments are sold in advance of construction being completed, revenue and
prot are recognised at the point of sale, reecting the transfer of control to the customer in
its current stage of completion. Thereafter, revenue for construction services provided to the
customer to complete the property development is recognised over time as the construction
services are rendered. Construction services are normally invoiced monthly based on
valuations under normal commercial payment terms.
Occasionally the Group will sell land that it has previously acquired for potential commercial
property or housing developments. Revenue from land sales and land exchanges is
recognised on the unconditional exchange of contracts.
Transaction price allocated to remaining performance obligations
The following table includes revenue expected to be recognised in the future related to
performance obligations that are unsatised (or partially unsatised) at the reporting date.
At 30 June 2023
2024
£m
2025
£m
2026
onwards
£m
Infrastructure Services 958.3 872.1 1,930.0
Construction 1,196.0 322.8 6.8
Property – – –
Total transaction price allocated to
remaining performance obligations 2,154.3 1,194.9 1,936.8
At 30 June 2022
2023
£m
2024
£m
2025
onwards
£m
Infrastructure Services 955.4 676.5 493.7
Construction 752.9 255.8 2.0
Property – – –
Total transaction price allocated to
remaining performance obligations 1,708.3 932.3 495.7
The above transaction prices only include variable consideration if it is highly probable not
to reverse and exclude any estimate of revenue from framework contracts for which a rm
commitment or order has not been received at the reporting date.
The Group applies the practical expedient in paragraph 121 of IFRS 15 and does not
disclose information about remaining performance obligations that have original expected
durations of one year or less.
3 Segmental reporting
The Group operates three divisions: Infrastructure Services, Construction and Property,
which is the basis on which the Group manages and reports its segmental information.
Corporate principally includes unrecovered overheads and the charge for dened benet
pension schemes.
Segment information is based on the information provided to the Chief Executive, together
with the Board, who is the Chief Operating Decision Maker. The segments are strategic
business units with separate management and have different core customers and offer
different services. The segments are discussed in the Operational Review on pages 24–31.
The accounting policies of the operating segments are the same as those described in the
summary of signicant accounting policies (note 1). The Group evaluates segmental
information on the basis of prot or loss from operations before adjusting items (see note 5),
interest and tax expense. The segmental results that are reported to the Chief Executive
include items directly attributable to a segment as well as those that can be allocated
on a reasonable basis.
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3 Segmental reporting continued
Year to 30 June 2023
Continuing operations
Infrastructure
Services
£m
Construction
£m
Property
£m
Corporate
£m
Group
£m
Revenue
1
Group and share of joint ventures 1,712.3 1,652.5 37.6 3.0 3,405.4
Less share of joint ventures – (2.4) (22.3) – (24.7)
Group revenue 1,712.3 1,650.1 15.3 3.0 3,380.7
Timing of revenue
1
Products and services transferred at a point in time 3.9 0.8 21.5 – 26.2
Products and services transferred over time 1,708.4 1,651.7 16.1 3.0 3,379.2
Group and share of joint ventures 1,712.3 1,652.5 37.6 3.0 3,405.4
Prot for the year
Operating prot/(loss) before adjusting items
2
79.8 69.5 12.8 (30.6) 131.5
Adjusting items
2
(22.6) (23.1) 1.5 (5.8) (50.0)
Prot/(loss) from operations 57.2 46.4 14.3 (36.4) 81.5
Net nance income/(costs)
3
1.4 (4.3) (0.6) (26.1) (29.6)
Prot/(loss) before tax 58.6 42.1 13.7 (62.5) 51.9
Taxation (10.9)
Prot for the year 41.0
Balance sheet as at 30 June 2023
Operating assets
4
973.7 413.1 188.5 342.3 1,917.6
Operating liabilities
4
(511.7) (732.7) (18.5) (210.2) (1,473.1)
Net operating assets/(liabilities)
4
462.0 (319.6) 170.0 132.1 444.5
Cash, cash equivalents and borrowings 456.6 594.5 (134.1) (859.2) 57.8
Net nancial assets – – – 10.7 10.7
Net assets/(liabilities) 918.6 274.9 35.9 (716.4) 513.0
Other information
Inter-segmental revenue 31.5 0.1 – 40.5 72.1
Capital expenditure on property, plant, equipment and intangible assets 0.7 0.1 – 5.8 6.6
Depreciation of property, plant and equipment (0.9) (0.4) (0.2) (4.6) (6.1)
Amortisation of computer software (1.4) (0.8) – (5.4) (7.6)
Notes to the consolidated financial statements continued
For the year ended 30 June 2023
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Year to 30 June 2022
Continuing operations
Infrastructure
Services
£m
Construction
£m
Property
£m
Corporate
£m
Group
£m
Revenue
1
Group and share of joint ventures 1,666.6 1,440.8 144.3 4.8 3,256.5
Less share of joint ventures – (3.1) (109.5) – (112.6)
Group revenue 1,666.6 1,437.7 34.8 4.8 3,143.9
Timing of revenue
1
Products and services transferred at a point in time 5.3 1.5 90.7 – 97.5
Products and services transferred over time 1,661.3 1,439.3 53.6 4.8 3,159.0
Group and share of joint ventures 1,666.6 1,440.8 144.3 4.8 3,256.5
Prot for the year
Operating prot/(loss) before adjusting items
2
70.0 60.8 17.6 (27.9) 120.5
Adjusting items
2
(21.9) (39.0) (0.9) (13.6) (75.4)
Prot/(loss) from operations 48.1 21.8 16.7 (41.5) 45.1
Net nance income/(costs)
3
2.1 (4.1) (1.6) (25.6) (29.2)
Prot/(loss) before tax 50.2 17.7 15.1 (67.1) 15.9
Taxation (3.2)
Prot for the year 12.7
Balance sheet as at 30 June 2022
Operating assets
4
925.5 442.6 144.0 416.8 1,928.9
Operating liabilities
4
(466.0) (706.2) (25.9) (179.1) (1,377.2)
Net operating assets/(liabilities)
4
459.5 (263.6) 118.1 237.7 551.7
Cash, cash equivalents and borrowings 440.2 504.0 (90.3) (863.2) (9.3)
Net nancial assets – – – 12.2 12.2
Net assets/(liabilities) 899.7 240.4 27.8 (613.3) 554.6
Other information
Inter-segmental revenue 25.7 – – 43.6 69.3
Capital expenditure on property, plant, equipment and intangible assets 2.6 0.4 – 3.7 6.7
Depreciation of property, plant and equipment (0.9) (0.4) (0.2) (5.1) (6.6)
Amortisation of computer software (0.7) (1.2) – (4.1) (6.0)
1. Revenue is stated after the exclusion of inter-segmental revenue. 100% of the Group’s revenue is derived from UK-based customers. 15% of the Group’s revenue was received from High Speed Two (HS2) Limited (2022: 10%).
Group revenue including joint ventures is an alternative performance measure, see page 243.
2. See notes 1 and 5 for adjusting items.
3. Interest was (charged)/credited to the divisions at a notional rate of 4.0%.
4. Net operating assets/(liabilities) represent assets excluding cash, cash equivalents, bank overdrafts, borrowings, nancial assets and liabilities, and interest-bearing inter-company loans.
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4 Profit from operations
Prot from operations is stated after charging/(crediting):
Note
2023
£m
2022
£m
Auditors’ remuneration:
Fees payable for the audit of the parent company and consolidated nancial statements 2.3 1.9
Fees payable to the Company’s auditors for other services
1
:
Audit of the Company’s subsidiaries, pursuant to legislation 1.2 1.2
Audit-related assurance services 0.2 0.2
Amortisation of intangible assets 13 26.8 25.7
Impairment of intangible assets 13 – 2.2
Loss on disposal of computer software 13 – 0.9
Depreciation of property, plant and equipment 14 6.1 6.6
Prot on sale of property, plant and equipment (1.8) (0.1)
Impairment of property, plant and equipment 14 – 4.1
Depreciation of right-of-use assets 23 43.7 30.0
Impairment of right-of-use assets 23 – 5.2
Fair value adjustment to investment properties 15 (11.4) (0.2)
Amortisation of capitalised mobilisation costs 17 7.1 2.4
Expenses relating to short-term leases and leases of low-value assets 23 115.6 98.9
Net Research and Development Expenditure Credit receivable
2
10 (21.2) (18.6)
Net prot from operations related to mining – (0.2)
1. The auditors’ remuneration relates to amounts paid to PricewaterhouseCoopers LLP (‘PwC’). A summary of other services provided by PwC during the year is provided on page 110. Included in the 2023 audit fees are £0.2m for
prior year work (2022: £0.2m). In 2023, the fees relating to other assurance services primarily related to the review of the interim statements. Also included are £2,000 (2022: £2,000) for a subscription service providing factual
updates and changes to applicable law, regulation or accounting and auditing standards.
2. Includes £22.8m of receipts (2022: £20.7m) and £1.6m of fees payable to consultants (2022: £2.1m).
Notes to the consolidated financial statements continued
For the year ended 30 June 2023
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5 Adjusting items
The Group’s policy in respect of adjusting items is described in note 1. These items are explained in detail below:
Prot from operations Prot before tax
2023
£m
2022
£m
2023
£m
2022
£m
Reported prot 81.5 45.1 51.9 15.9
Amortisation of acquired intangible assets 19.2 19.7 19.2 19.7
Restructuring and related charges 13.0 40.0 13.0 40.0
Other
1
17.8 15.7 20.7 18.5
Adjusted prot 131.5 120.5 104.8 94.1
1. Operating prot adjusting items exclude net nancing costs of £2.9m (2022: £2.8m), see note 5(c).
(a) Amortisation of acquired intangible assets
The Group has amortised contract rights, acquired primarily through the acquisitions of MRBL Limited (Mouchel Group), May Gurney Integrated Services PLC and McNicholas
Construction Holdings Limited.
Note
2023
£m
2022
£m
Amortisation of acquired intangible assets 13 (19.2) (19.7)
(b) Restructuring and related charges
The Group has incurred signicant restructuring charges relating to costs of organisational change associated with the Group’s cost saving programmes and the Group’s Strategic Review.
These are discussed further in the Financial review and are considered to be adjusting items on the basis of their size and the fact that they relate to signicant changes to the Group’s
activities or workforce.
2023
£m
2022
£m
Redundancy and other people-related costs
1
(7.6) (6.5)
Professional adviser fees and other costs incurred implementing non-people initiatives
2
(4.9) (7.1)
Impairments and other costs relating to investment properties
3
(0.5) (4.2)
Restructure of Regional Southern Build business
4
– (22.2)
Total charge before tax (13.0) (40.0)
1. Costs of £4.8m in respect of roles made redundant as a result of the ongoing implementation of cost saving programmes and from strategic decisions taken to reduce headcount in a number of the Group’s principal operating
divisions, see note 8. The current year charge also includes £2.8m of costs incurred in the re-sizing of the International operations. The Directors consider this to be an adjusting item due to its nature and size.
2. This includes £1.6m of vacant property costs along with a further £4.8m of non-people related initiatives undertaken in the year. This is offset by a credit of £1.5m as a result of the nalisation of aborted acquisition costs from
the prior year.
3. Investment property costs include £1.5m in respect of its investment properties vacated as part of the corporate review of Group premises. This is offset by a credit of £1.0m due to revaluation of the land at the Pure recycling plant.
4. In the prior year the Group completed its strategic restructuring of its Regional Southern Build business.
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5 Adjusting items continued
(c) Other adjusting items
Other adjusting items are analysed below:
2023
£m
2022
£m
Net nancing costs
1
(2.9) (2.8)
Legal and other compliance
2
(14.1) (8.8)
Insurance-related items
3
(5.3) (5.2)
Prot on sale of previously impaired land
4
1.6 –
Software impairment
5
– (2.2)
Pension credit
6
– 0.5
Total charge before tax (20.7) (18.5)
1. Net nancing costs relate to IFRS 16 interest charges on leased investment properties previously used as ofces.
2. The Group has provided for an additional £12.6m of costs in the year in complying with the updated re compliance regulations, resulting in a year-end provision of £15.5m. In addition, following the Health and Safety Executive
(‘HSE’) decision in January 2023 to ne the Group for historical safety issues, the Group provided for a further £1.5m to cover these costs.
3. A provision of £8.0m has been made for additional costs associated with an insurance-related receivable. Offsetting this is a credit of £2.7m in relation to insurance proceeds received in respect of the re at the Group’s recycling
plant in Warwickshire, to offset the prior year impairment and associated costs.
4. In June 2023 the Group sold some of its land that was previously impaired through adjusting items. The prot of £1.6m has been credited to adjusting items so as to be consistent with the original accounting treatment.
5. During the prior year, the Group impaired some software related to one of its design businesses. This impairment has been treated as an adjusting item due to its nature.
6. During the prior year, a Pension Increase Exchange (‘PIE’) exercise was undertaken which generated a £0.5m credit to the income statement.
(d) Taxation
Adjusting items in respect of taxation are analysed below:
2023
£m
2022
£m
Deferred tax credit as a result of the change in tax rate
1
2.0 5.1
Tax impact of adjusting items
2
9.1 14.8
Other tax charges
3
– (3.6)
Total tax credit 11.1 16.3
1. Additional benets arising from change in tax rate to 25%.
2. The tax impact of the adjusting items charged to continuing operations has also been included as an adjusting item.
3. During the prior year, historical tax balances were identied mainly as a result of historic acquisitions and were written off.
(e) Adjusted cash flow
Note
2023
£m
2022
£m
Reported cash inow from operating activities 180.2 40.8
Add: Cash outow from operating activities (adjusting items) 5f 27.0 41.2
Adjusted cash inow from operating activities 207.2 82.0
Notes to the consolidated financial statements continued
For the year ended 30 June 2023
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(f) Cash outflow from operating activities (adjusting items)
2023
£m
2022
£m
Adjusting items reported in the income statement 52.9 78.2
Less: non-cash items incurred in the year (39.0) (38.4)
Add: payment of prior year accruals and provisions 13.1 1.4
Cash outow from operating activities (adjusting items) 27.0 41.2
6 Other income
Note
2023
£m
2022
£m
Insurance proceeds 5(c) 2.7 –
Fair value gain on investment properties 15 11.4 –
Other income 14.1 –
7 Finance income and costs
2023
£m
2022
£m
Finance income
Bank deposits 0.5 –
Interest receivable on loans to related parties 1.1 0.7
Net interest on net dened benet surplus 7.8 –
9.4 0.7
Finance costs
Bank interest (29.0) (18.9)
Interest payable on leases (9.5) (6.5)
Forward funding interest – (0.5)
Foreign exchange gains/(losses) on foreign denominated borrowings 2.5 (9.9)
Fair value (losses)/gains on cash ow hedges recycled from other comprehensive income
1
(1.2) 7.4
Net interest on net dened benet surplus – 1.0
Other (1.8) (2.5)
(39.0) (29.9)
Net nance costs (29.6) (29.2)
1. Foreign exchange (losses)/gains arise from movements in cross-currency swaps which hedge the currency risk on foreign denominated borrowings, see note 29.
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8 Information relating to Directors and employees
2023
No.
2022
No.
Monthly average number of people employed
during the year including Executive Directors
by geographical location was:
United Kingdom 9,909 10,018
Rest of world 55 249
9,964 10,267
Monthly average number of people employed
during the year including Executive Directors
by segment was:
Infrastructure Services 5,714 5,895
Construction 3,631 3,780
Property 75 62
Corporate 544 530
9,964 10,267
Note
2023
£m
2022
£m
Group staff costs by geographical location
are as follows:
United Kingdom 646.3 602.8
Rest of world 1.7 4.2
648.0 607.0
Group staff costs by segment are as follows:
Infrastructure Services 346.1 328.2
Construction 246.2 222.3
Property 13.7 10.5
Corporate 42.0 46.0
648.0 607.0
Comprising:
Wages and salaries 562.4 522.8
Social security costs 59.0 53.3
Dened benet pension scheme net credit
to the income statement 9 (7.7) (1.4)
Contributions to dened contribution
pension schemes 25.9 23.7
Share-based payments charge 27 8.4 8.6
648.0 607.0
The amounts disclosed above are in relation to the entirety of the Group’s Directors
and employees.
Information relating to Directors’ emoluments, pension entitlements, share options
and LTIP interests appears in the Directors’ Remuneration report on pages 120–153.
Redundancy costs incurred during the year of £4.8m (2022: £4.7m) have been classed
as an adjusting item, see note 5, and are included in the disclosures above.
Notes to the consolidated financial statements continued
For the year ended 30 June 2023
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9 Retirement benefit obligations
The Group operates a number of pension schemes for eligible employees as described
below.
For the dened benet schemes, the assets of all schemes are held in trust separate from
the assets of the Group. The Trustees are responsible for investing the assets and delegate
day-to-day decisions to independent professional investment managers. The schemes are
established under UK trust law and have a corporate trustee that is required to run the
schemes in accordance with the schemes’ Trust Deed and Rules and to comply with all
relevant legislation. Responsibility for the governance of the schemes lies with the Trustees.
The Group has agreed decit recovery plans with the Trustees of each of its dened benet
schemes which constitute minimum funding requirements for the purposes of IFRIC 14.
These minimum funding requirements do not give rise to any additional liabilities on the
Group’s balance sheet as the Group has determined that it has a right to benet from any
surplus created by overpaid contributions, through either a reduction in future contributions
or refunds of the surpluses on winding up of the schemes. Details of the contributions agreed
for each of the schemes are provided in the individual scheme information sections below.
The pension obligations of the Group are valued separately for accounting and funding
purposes. The accounting valuations under IAS 19 require ‘best estimate’ assumptions to
be used whereas the funding valuations use more prudent assumptions. A further difference
arises from the differing dates of the valuations. The accounting pension decit or surplus is
calculated at the balance sheet date (30 June) each year, whereas the actuarial valuations
are carried out on a triennial basis at 31 March, or in the case of one scheme, 31 December.
The differing bases and timings of the valuations can result in materially different pension
surplus or decit amounts. The date of the latest triennial funding valuation for each scheme
is noted in the individual scheme information sections below.
The Group incurred fees totalling £2.9m (2022: £4.2m) in respect of the running and
administration of the dened benet schemes.
Kier Group scheme
This is the principal scheme and includes a dened benet section and a dened
contribution section. The dened benet section of the scheme was closed to new entrants
on 1 January 2002; existing members continued to accrue benets for service until the
scheme was closed to future accrual on 28 February 2015.
As at 30 June 2023, the scheme had 2,102 deferred members (2022: 2,178), and 2,852 retirees
(2022: 2,874).
The most recent triennial valuation of the Kier Group scheme was carried out by the Trustees’
independent actuaries as at 31 March 2022. At the valuation date the pension scheme’s
assets were greater than the technical provisions and therefore the scheme was in surplus.
As a result, in May 2023 the Trustee agreed that decit contributions for this scheme would
cease with effect from 1 June 2023.
Other defined benefit schemes
Acquired with the May Gurney Group
The May Gurney dened benet scheme was acquired with May Gurney on 8 July 2013
and is closed to future accrual.
As at 30 June 2023, the scheme had 269 deferred members (2022: 278) and 290 retirees
(2022: 290).
The most recent triennial valuation of the May Gurney scheme was carried out by the
Trustees’ independent actuaries as at 31 March 2022. At the valuation date the pension
scheme’s assets were less than the technical provisions and therefore the scheme was in
decit. However, contributions made between the date of the valuation and nalisation of the
funding valuation in May 2023, were sufcient to eliminate the funding decit and therefore
the Trustee agreed that decit contributions would cease for this scheme with effect from
1 June 2023.
Acquired with the Mouchel Group
The Group acquired four dened benet pension schemes with the Mouchel Group
on 8 June 2015: the Mouchel Superannuation Fund, Mouchel Staff Pension Scheme,
Mouchel Business Services Limited Pension Scheme (Final Salary Section) and
EM Highways Prudential Platinum Scheme.
These schemes were closed to new entrants in 2001 and were closed to future accrual
between 2010 and 2017, with the exception of the EM Highways Prudential Platinum
Scheme which remains open to future accrual.
As at 30 June 2023, the Mouchel schemes had a total of 5 active members (2022: 18),
1,583 deferred members (2022: 1,638), and 1,691 retirees (2022: 1,646).
The EM Highways Prudential Platinum Scheme is a multi-employer scheme; however,
Kier’s share is separately identiable. Therefore, the movements in the period are determined
by reference to the change in valuation of this separate subsection. The EM Highways
sub-scheme was formally valued by independent actuaries as at 31 December 2021. At the
valuation date the assets of the pension scheme were greater than the technical provisions
and therefore the scheme had a funding surplus and, as a result, decit contributions are
not required.
The most recent triennial valuations of the remaining Mouchel schemes were carried
out by the Trustees’ independent actuaries as at 31 March 2022. At the valuation date the
assets of the Mouchel Superannuation Fund and Mouchel Staff Pension Scheme were less
than the respective technical provisions and therefore the schemes were in decit.
Schedules of contributions for revised decit recovery plans were agreed with the schemes’
Trustee in May 2023. At the valuation date the Mouchel Business Services Limited Pension
Scheme was in surplus and therefore decit contributions were no longer required with
effect from 1 June 2023.
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9 Retirement benefit obligations continued
Acquired with the McNicholas Group
The McNicholas dened benet pension scheme was acquired with the McNicholas Group
on 12 July 2017. The scheme is closed to new entrants and no benets have accrued since
30 April 2012. As at 30 June 2023, the scheme had a total of 53 deferred members
(2022: 56) and 83 retirees (2022: 80).
During the prior year, the Group launched a member options exercise, offering a Pension
Increase Exchange (‘PIE’) to members of the McNicholas pension scheme, in order to
provide more exibility and choice for members, reduce risk, and reduce cost in the Group’s
dened benet pension schemes. The offering included a bulk PIE exercise, offering
members who are already drawing a pension a one-off increase in pension in lieu of future
annual increases on part of their pension and the introduction of a PIE option at the point of
retirement. The terms are such that the IAS 19 pension liabilities are reduced if pensioners
take up the PIE option. A combined gain, based on an assumed rate of take-up for both the
bulk PIE exercise and the introduction of the at retirement option, of £0.5m was recognised
as a past service gain in the year to 30 June 2022.
The most recent triennial valuation of the McNicholas scheme was carried out by the
Trustees’ independent actuaries as at 31 March 2020. At the valuation date the pension
scheme’s assets were less than the technical provisions and therefore the scheme
was in decit. Consequently, a decit recovery plan has been agreed with the Trustee.
The triennial valuation as at 31 March 2023 has not yet been nalised.
Contributions to defined benefit schemes
The aggregate contributions payable in the year ended 30 June 2023 in respect of the
Group’s dened benet pension schemes amounted to £9.9m (2022: £10.8m), which
included regular past service decit contributions of £9.8m (2022: £9.9m) and current
service employer contributions of £0.1m (2022: £0.2m). In the prior year, the Group also
made additional decit payments totalling £0.7m in respect of the proceeds received from
the Group’s June 2022 equity raise.
The Group agreed revised decit recovery plans with the Trustees of the Kier Group
scheme, May Gurney scheme, Mouchel Superannuation Fund, Mouchel Staff Pension
Scheme and Mouchel Business Services Limited Pension Scheme (Final Salary Section)
on 25 May 2023, and agreed the latest schedule of contributions for the McNicholas
scheme on 26 May 2022. Based on these contribution plans, the Group expects to make
the following contributions over the next ve years:
2024
£m
2025
£m
2026
£m
2027
£m
2028
£m
Decit contributions 8.9 8.1 5.5 3.5 0.9
In addition to the above contributions, the Group has agreed with the Trustees of the
Kier Group scheme, May Gurney scheme, Mouchel Superannuation Fund, Mouchel Staff
Pension Scheme and Mouchel Business Services Limited Pension Scheme (Final Salary
Section) that additional decit contributions will be payable in certain circumstances,
including in the event of the Group meeting certain nancial targets.
The Group has also agreed with the Trustees of the May Gurney scheme, Mouchel
Superannuation Fund, Mouchel Staff Pension Scheme and McNicholas scheme to meet
each of the scheme’s expenses including the Pension Protection Fund levy. As the Kier
Group scheme and Mouchel Business Services Limited Pension Scheme (Final Salary
Section) were in surplus at the last funding valuation date, the Trustees agreed that Kier
would stop paying the expenses for these schemes with effect from 1 July 2023. If either
of these schemes subsequently move into decit, on the basis determined by the schemes’
actuary at a 31 March measurement date, Kier will recommence payment of the scheme’s
expenses from 1 July the following year.
Contributions to defined contribution schemes
Contributions are also made to a number of dened contribution arrangements. The Group
paid contributions to these arrangements of £25.9m (2022: £23.7m) during the year.
The Group makes contributions to local government dened benet pension schemes
in respect of certain employees who have transferred to the Group under TUPE transfer
arrangements. The Group is unable to identify its share of the underlying assets and liabilities
in the schemes on a consistent and reasonable basis and consequently the pension costs
for these schemes are treated as if they were dened contribution schemes.
IAS 19 ‘Employee Benefits’ disclosures
The Group recognises any actuarial gains or losses through the statement of comprehensive
income as required under IAS 19.
The weighted average duration of the schemes’ liabilities is approximately 13 years
(2022: 15 years).
The IAS 19 accounting valuations at 30 June 2023 of the Kier Group scheme, May Gurney
scheme, Mouchel Business Services Limited Pension Scheme and the EM Highways
Prudential Platinum Scheme, indicated that the assets of each of these schemes exceeded
their respective scheme liabilities. The Group has recognised these surpluses as retirement
benet assets on its balance sheet under IAS 19 and IFRIC 14, as the Group has determined
that it has a right to benet from any surpluses, through either reduced contributions or
a refund of the surpluses on winding up of the schemes.
The principal assumptions used by the independent qualied actuaries are shown in
the following table. This set of assumptions was used to value all of the dened benet
schemes, and has been based on the weighted average duration of the schemes’ liabilities
with the exception of CPI assumptions, which for 2023 have been based on the expected
durations of each individual scheme.
Notes to the consolidated financial statements continued
For the year ended 30 June 2023
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2023
%
2022
%
Discount rate 5.30 3.90
Ination rate (Retail Price Index (‘RPI’)) 3.20 3.15
Ination rate (Consumer Price Index (‘CPI’)) 2.30–2.75 2.65
Rate of general increases in pensionable salaries 3.20 3.15
Rate of increase in pensions payments liable for Limited Price Indexation
– RPI subject to minimum of 0% and a maximum 5% 2.90 3.05
– RPI subject to minimum of 0% and a maximum 2.5% 1.85 2.15
The mortality assumptions used were as follows:
2023
Male years
2023
Female years
2022
Male years
2022
Female years
Life expectancy for a male/female currently aged 60
– Kier Group scheme 26.7 28.7 27.4 29.2
– Acquired schemes 25.4–27.0 28.1–29.2 26.8–27.7 29.2–30.0
Life expectancy for a male/female member aged 60, in 20 years’ time
– Kier Group scheme 27.9 29.8 28.7 30.6
– Acquired schemes 26.9–28.2 29.5–30.7 28.2–28.8 29.8–31.0
The assets, liabilities and net pension liabilities for the dened benet arrangements are shown below. The assets are invested with professional investment managers and are measured
based on quoted market valuations at the balance sheet date.
2023 2022
Kier
Group
£m
Acquired
schemes
£m
Total
£m
Kier
Group
£m
Acquired
schemes
£m
Total
£m
Equities 100.4 53.1 153.5 152.1 74.1 226.2
Corporate bonds 93.3 62.8 156.1 187.9 97.0 284.9
Cash 40.8 49.7 90.5 21.1 94.6 115.7
Land and property 15.6 1.1 16.7 19.8 1.3 21.1
Absolute return 62.9 27.9 90.8 64.4 34.6 99.0
Annuity policies – 0.5 0.5 – 1.0 1.0
Multi-asset 95.0 44.8 139.8 92.7 44.7 137.4
Liability-driven investments 442.9 156.9 599.8 510.0 161.7 671.7
Total market value of assets 850.9 396.8 1,247.7 1,048.0 509.0 1,557.0
Present value of liabilities (733.4) (409.8) (1,143.2) (877.8) (484.5) (1,362.3)
Net surplus/(decit) 117.5 (13.0) 104.5 170.2 24.5 194.7
Related deferred tax (liability)/asset (29.4) 3.3 (26.1) (42.6) (6.7) (49.3)
Net pension asset/(liability) 88.1 (9.7) 78.4 127.6 17.8 145.4
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9 Retirement benefit obligations continued
Amounts recognised in the nancial statements in respect of these dened benet schemes are as follows:
2023 2022
Kier
Group
£m
Acquired
schemes
£m
Total
£m
Kier
Group
£m
Acquired
schemes
£m
Total
£m
(Charged)/credited to operating prot in the income statement
Current service cost – (0.1) (0.1) – (0.1) (0.1)
Past service gain – – – – 0.5 0.5
Net interest on net dened benet surplus 6.6 1.2 7.8 1.5 (0.5) 1.0
Pension income/(expense) recognised in the income statement 6.6 1.1 7.7 1.5 (0.1) 1.4
Remeasurement in comprehensive (loss)/gain
Actual return less than that recognised in net interest (193.4) (122.0) (315.4) (208.4) (131.5) (339.9)
Actuarial gains due to changes in nancial assumptions 135.7 94.8 230.5 302.7 182.4 485.1
Actuarial gains due to changes in demographic assumptions 17.8 10.7 28.5 0.9 0.6 1.5
Actuarial losses due to liability experience (19.8) (31.6) (51.4) (5.6) (4.8) (10.4)
Total amount recognised in comprehensive (loss)/gain (59.7) (48.1) (107.8) 89.6 46.7 136.3
Changes in the fair value of scheme assets
Fair value at 1 July 1,048.0 509.0 1,557.0 1,273.2 636.7 1,909.9
Interest income on scheme assets 40.0 19.7 59.7 23.8 12.0 35.8
Remeasurement losses on scheme assets (193.4) (122.0) (315.4) (208.4) (131.5) (339.9)
Contributions by the employer 0.4 9.5 9.9 0.5 10.3 10.8
Net benets paid out (44.1) (19.4) (63.5) (41.1) (18.5) (59.6)
Fair value at 30 June 850.9 396.8 1,247.7 1,048.0 509.0 1,557.0
Notes to the consolidated financial statements continued
For the year ended 30 June 2023
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2023 2022
Kier
Group
£m
Acquired
schemes
£m
Total
£m
Kier
Group
£m
Acquired
schemes
£m
Total
£m
Changes in the present value of the dened benet obligation
Fair value at 1 July (877.8) (484.5) (1,362.3) (1,194.6) (669.1) (1,863.7)
Current service cost – (0.1) (0.1) – (0.1) (0.1)
Interest expense on scheme liabilities (33.4) (18.5) (51.9) (22.3) (12.5) (34.8)
Past service gain – – – – 0.5 0.5
Actuarial gains due to changes in nancial assumptions 135.7 94.8 230.5 302.7 182.4 485.1
Actuarial gains due to changes in demographic assumptions 17.8 10.7 28.5 0.9 0.6 1.5
Actuarial losses due to liability experience (19.8) (31.6) (51.4) (5.6) (4.8) (10.4)
Net benets paid out 44.1 19.4 63.5 41.1 18.5 59.6
Fair value at 30 June (733.4) (409.8) (1,143.2) (877.8) (484.5) (1,362.3)
Amounts included in the balance sheet
Fair value of scheme assets 850.9 396.8 1,247.7 1,048.0 509.0 1,557.0
Net present value of the dened benet obligation (733.4) (409.8) (1,143.2) (877.8) (484.5) (1,362.3)
Net surplus/(decit) 117.5 (13.0) 104.5 170.2 24.5 194.7
Related deferred tax liability (29.4) 3.3 (26.1) (42.6) (6.7) (49.3)
Net pension asset/(liability) 88.1 (9.7) 78.4 127.6 17.8 145.4
The net surplus/(decit) above is split between retirement benet assets and obligations in the statement of nancial position based on whether the individual pension schemes have a net
surplus or decit, as follows:
2023 2022
Kier
Group
£m
Acquired
schemes
£m
Total
£m
Kier
Group
£m
Acquired
schemes
£m
Total
£m
Retirement benet assets 117.5 11.8 129.3 170.2 29.0 199.2
Retirement benet obligation – (24.8) (24.8) – (4.5) (4.5)
Net surplus/(decit) 117.5 (13.0) 104.5 170.2 24.5 194.7
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9 Retirement benefit obligations continued
The movements in the net retirement benet surplus/(decit) are summarised as follows:
2023 2022
Kier
Group
£m
Acquired
schemes
£m
Total
£m
Kier
Group
£m
Acquired
schemes
£m
Total
£m
Opening net surplus/(decit) 170.2 24.5 194.7 78.6 (32.4) 46.2
Current service cost – (0.1) (0.1) – (0.1) (0.1)
Past service gain – – – – 0.5 0.5
Net interest on net dened benet surplus 6.6 1.2 7.8 1.5 (0.5) 1.0
Contributions by the employer 0.4 9.5 9.9 0.5 10.3 10.8
Actual return less than that recognised in net interest (193.4) (122.0) (315.4) (208.4) (131.5) (339.9)
Actuarial gains due to changes in nancial assumptions 135.7 94.8 230.5 302.7 182.4 485.1
Actuarial gains due to changes in demographic assumptions 17.8 10.7 28.5 0.9 0.6 1.5
Actuarial losses due to liability experience (19.8) (31.6) (51.4) (5.6) (4.8) (10.4)
Closing net surplus/(decit) 117.5 (13.0) 104.5 170.2 24.5 194.7
History of experience gains and losses for dened benet schemes in aggregate:
2023
£m
2022
£m
2021
£m
2020
£m
2019
£m
Fair value of scheme assets 1,247.7 1,557.0 1,909.9 1,937.9 1,789.4
Net present value of the dened benet obligation (1,143.2) (1,362.3) (1,863.7) (1,899.1) (1,769.9)
Net surplus 104.5 194.7 46.2 38.8 19.5
Related deferred tax liability (26.1) (49.3) (12.6) (7.4) (3.3)
Net pension asset 78.4 145.4 33.6 31.4 16.2
Difference between expected and actual return on scheme assets (315.4) (339.9) (26.6) 177.6 113.9
Experience (losses)/gains on scheme liabilities (51.4) (10.4) 19.2 40.2 (5.6)
Notes to the consolidated financial statements continued
For the year ended 30 June 2023
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Risk exposure
As IAS 19 actual assumptions are driven by market conditions, there is a risk that signicant
changes in nancial market conditions could lead to volatility in the dened benet obligation
disclosed in the balance sheet from year to year. In addition, the asset position may also
be volatile as it will be inuenced by changes in market conditions. However, the risk of
signicant changes to the overall balance sheet position has been mitigated to an extent
due to the risk management strategy used by the schemes as described below.
The following schemes: Kier Group Pension Scheme, May Gurney Pension Scheme,
Mouchel Business Services Limited Pension Scheme (Final Salary Section), Mouchel
Superannuation Fund and Mouchel Staff Pension Scheme (together the ‘Schemes’),
have aligned their investment strategy and risk management process, providing a
consistent framework across the Schemes to achieve their long-term objective. The liability
hedging instruments are managed by Columbia Threadneedle Investments (‘CTI’) using
cash, physical gilts, gilt repurchase agreements as well as interest and ination swaps.
In combination, the liability hedging assets are designed to hedge each Scheme’s sensitivity
to changes in interest rate and ination. All Schemes have a relatively high hedge ratio; the
Kier Group Pension Scheme and Mouchel Business Services Limited Pension Scheme
(Final Salary Section) hedge 100% of the technical provisions liabilities, with other Schemes
hedging 100% of assets.
The growth assets portfolio is managed by using a combination of underlying pooled funds
providing diversication and dynamism. In addition, the Schemes also explicitly use equity
downside protection strategies to provide a more balanced and risk managed portfolio.
The Schemes also have allocations to cash ow matching assets that are designed to fully
match scheme benet cash ows over the next ve years. This reduces the risk that the
Trustee will need to divest from assets to meet cash ow needs.
The Schemes primarily use GBP hedged share classes to manage their currency exposure.
Any unhedged currency exposure is small in value relative to the size of the Schemes.
Pension sensitivity
The following table shows the change in the net surplus or decit arising from a change in the
signicant actuarial assumptions used to determine the Group’s retirement benet obligations:
2023 2022
Kier Group scheme:
+0.25%/+1 year
£m
-0.25%/-1 year
£m
+0.25%/+1 year
£m
-0.25%/-1 year
£m
Discount rate (+/-0.25%) 33.3 (35.2) 47.6 (48.4)
Ination rate (+/-0.25%) (18.6) 18.6 (36.5) 35.2
Mortality (+/-1 year) 32.3 (32.3) 40.0 (39.8)
The sensitivity analyses above have been determined based on reasonably possible
changes in the respective assumptions occurring at the end of the reporting period, based
on a change in a key assumption while holding all other assumptions constant, and may not
be representative of the actual change. When calculating the sensitivity to the assumption,
the same method used to calculate the liability recognised in the balance sheet has been
applied. The ination sensitivities shown above include the impact of both RPI and CPI
ination. The methods and types of assumptions used in preparing the sensitivity analyses
did not change compared with the previous year.
10 Taxation
Taxation in respect of continuing operations is analysed below.
(a) Recognised in the income statement
2023
£m
2022
£m
Current tax
UK corporation tax 8.4 5.1
Adjustments in respect of prior years (1.1) 3.4
Total current tax charge 7.3 8.5
Deferred tax
Origination and reversal of temporary differences 3.2 0.6
Adjustments in respect of prior years 2.4 (0.8)
Rate change effect on deferred tax (2.0) (5.1)
Total deferred tax 3.6 (5.3)
Total tax charge in the income statement 10.9 3.2
Reconciliation of effective tax rate
Prot before tax 51.9 15.9
Less: Income from joint venture companies (3.6) (0.8)
Prot before tax excluding income from joint ventures 48.3 15.1
Income tax at UK corporation tax rate of 20.5% (2022: 19.0%) 9.9 2.9
Non-deductible expenses and unusable tax losses 3.1 0.8
Income not taxable (1.2) –
Impact of Group relief and consortium relief (0.1) 0.2
Effect of change in UK corporation tax rate (2.0) (5.1)
Share-based payment 1.5 1.6
(Utilisation and recognition of tax losses)/deferred tax
not recognised (1.6) 0.2
Adjustments in respect of prior years 1.3 2.6
Total tax 10.9 3.2
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10 Taxation continued
Kier Group and its subsidiaries are based predominantly in the UK and are subject to UK
corporation tax. The Group does not have an aggressive tax policy and since 1 July 2012
Kier has not entered into any tax avoidance schemes which were or should have been
notied under the Disclosure of Tax Avoidance Scheme (‘DOTAS’) rules.
The Group tax charge excluding joint ventures of £10.9m (2022: £3.2m) shown in the table
equates to an effective tax rate of 22.6% (2022: 21.2%) on prot before tax excluding joint
ventures of £48.3m (2022: £15.1m). This effective rate is different from the standard rate of
corporation tax of 20.5% (2022: 19.0%) due to items shown in the table. The non-deductible
expenses mainly relate to depreciation on non-qualifying assets, disallowed provisions,
entertaining and legal and professional fees not eligible for tax relief. Income not taxable
relates mainly to the reversal of impairments, insurance receipts and foreign exchange
gains. Deferred tax not recognised/(Utilisation and recognition of tax losses) relates to
deferred tax on losses not previously recognised less deferred tax on losses not expected
to be recoverable.
In accordance with UK tax legislation, capital gains arising on disposal of certain investments,
including some of the joint ventures disposed of during the year, are not subject to tax.
Tax relief on expenses not recognised in the income statement includes the impact of the
tax deduction received in respect of the cost of shares exercised under the Group’s employee
Save As You Earn scheme and Long-Term Incentive Plan.
The Group provides for future liabilities in respect of uncertain tax positions where additional
tax may become payable in future periods and such provisions are based on management’s
assessment of exposure. At the balance sheet date, a deferred tax liability of £2.0m
(2022: £2.0m) has been recognised in respect of uncertain tax positions.
The net charge of £1.3m (2022: £2.6m) in respect of prior years’ results arise from
differences between the estimates of taxation included in the previous years’ nancial
statements and the actual tax liabilities calculated in the tax returns submitted to HMRC.
On 20 June 2023, Finance (No.2) Act 2023 was substantively enacted in the UK,
introducing a global minimum effective tax rate of 15%. The legislation implements a
domestic top-up tax and a multinational top-up tax, effective for accounting periods starting
on or after 31 December 2023. The Group has applied the exemption under the IAS 12
amendment to recognising and disclosing information about deferred tax assets and
liabilities related to top-up income taxes.
(b) Recognised in the cash flow statement
The cash ow statement shows cash of £14.0m, in respect of RDEC credits and foreign tax,
was received during the year (2022: £20.0m). See note 22.
(c) Recognised in the statement of comprehensive income
2023
£m
2022
£m
Deferred tax (credit)/charge (including effect of change
in tax rate)
Fair value movements on cash ow hedging instruments 0.8 (0.2)
Actuarial (losses)/gains on dened benet pension schemes (24.5) 34.7
Total deferred tax (credit)/charge (23.7) 34.5
Corporation tax credit in respect of pension contributions paid (2.0) –
Total tax (credit)/charge in the statement
of comprehensive income (25.7) 34.5
The £24.5m credit (2022: £34.7m charge) in deferred tax movements on the dened benet
pension scheme of comprised of a £20.1m credit (2022: £25.9m charge) on current year
actuarial movements and a £4.4m credit (2022: £8.8m charge) in respect of the movements
in tax rates at which deferred tax is being recognised.
(d) Factors that may affect future tax charges
The deferred tax balance as at the year-end has mainly been recognised at 25.0%
(2022: 25.0%), which is the enacted corporation tax rate effective from 1 April 2023.
Deferred tax at 30 June 2022 included an adjustment for timing differences expected
to reverse prior to 1 April 2023.
Further disclosures in respect of the recoverability of the deferred tax asset have been
included in note 18.
(e) Tax losses
At the balance sheet date, the Group has unused tax losses of £612.7m (2022: £639.4m)
available for offset against future prots. A deferred tax asset has been recognised on
£425.0m (2022: £430.1m) of these losses.
No deferred tax asset has been recognised in respect of the remaining losses as it is
unlikely that there will be future taxable prot on which these tax losses could be utilised
against. Under present tax legislation, these losses may be carried forward indenitely.
(f) RDEC
The Research and Development Expenditure Credit (‘RDEC’) of £22.8m was included
in operating prot during the year (2022: £20.7m). Included in the corporation tax asset
at 30 June 2023 were RDEC receivables of £16.1m (2022: £12.0m).
Notes to the consolidated financial statements continued
For the year ended 30 June 2023
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11 Dividends
The Group’s focus on cash generation and reducing net debt has required a suspension in
dividend payments. No interim or nal dividends have been declared during the year (2022: £nil).
The Group intends to pay a dividend in FY24.
The parent company of the Group, Kier Group plc, is a non-trading holding company
which derives its distributable reserves in part from dividends received from its subsidiaries.
In determining the level of dividend payable in any year, in addition to the stated policy,
the Board considers a number of other factors, including the following:
– the level of distributable reserves in the parent company, Kier Group plc;
– the level of distributable reserves in Kier Group plc’s subsidiaries that are available
to be distributed to Kier Group plc;
– the availability of cash resources;
– the Group’s borrowing covenants;
– future cash commitments and investment plans to support the long-term growth
of the Group; and
– potential strategic opportunities under consideration.
The Board reviews the level of distributable reserves in the parent company at least twice
a year ahead of announcing proposed interim and nal dividends. As at 30 June 2023, Kier
Group plc had distributable reserves of £111.1m (2022: £79.7m). Distributable reserves can
be signicantly impacted by movements in pension liabilities. The reserves of Kier Group plc
are not directly affected by these movements as the pension surpluses and liabilities are on
the balance sheets of a certain number of the Company’s subsidiaries. However, movements
in the pension liabilities do have an effect on the level of distributable reserves in Kier Group
plc’s subsidiaries that are available to be paid up to the parent. Actuarial gains only increase
the distributable reserves to the extent that they represent reversals of previous actuarial
losses; otherwise they are treated as unrealised and are not distributable.
12 Earnings per share
(a) Reconciliation of earnings used in calculating earnings per share
Prot attributable to the ordinary equity holders of the Company used in calculating basic
earnings per share.
Note
2023
£m
2022
£m
Continuing operations
Prot for the year 41.0 12.7
Less: non-controlling interest share 0.1 –
Prot (after tax and minority interests),
being net gains attributable to equity
holders of the parent (A) 41.1 12.7
Adjusting items (excluding tax) 5 52.9 78.2
Tax impact of adjusting items 5 (11.1) (16.3)
Adjusted prot after tax (B) 82.9 74.6
(b) Weighted average number of shares used as the denominator
2023
million
2022
million
Weighted average number of shares used as the
denominator in calculating basic earnings per share (C) 431.2 443.3
Adjustments for calculation of diluted earnings per share
Impact of share options 10.3 11.8
Weighted average number of shares used as the
denominator in calculating diluted earnings per share (D) 441.5 455.1
The weighted average number of shares is lower than the number of shares in issue
(per note 26) primarily due to shares that are held by the Group’s employee benet trusts
(see note 27), which are excluded from the calculation.
Options granted to employees under the Sharesave, CSAP and LTIP schemes are
considered to be potential ordinary shares. They have been included in the determination
of diluted earnings per share if the required performance obligations would have been met
based on the Group’s performance up to the reporting date, and to the extent to which they
are dilutive. The options have not been included in the determination of basic earnings per
share. Details relating to the share option schemes are set out in note 27.
(c) Basic earnings per share
2023
pence
2022
pence
Total basic earnings per share attributable to
the ordinary equity holders of the Company (A/C) 9.5 2.9
Adjusted basic earnings per share attributable to
the ordinary equity holders of the Company (B/C) 19.2 16.8
(d) Diluted earnings per share
2023
pence
2022
pence
Total diluted earnings per share attributable to
the ordinary equity holders of the Company (A/D) 9.3 2.8
Adjusted diluted earnings per share attributable to
the ordinary equity holders of the Company (B/D) 18.8 16.4
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13 Intangible assets
Goodwill
£m
Intangible
contract rights
£m
Computer
software
1
£m
Total
£m
Cost
At 1 July 2021 538.8 259.4 132.8 931.0
Additions – – 0.7 0.7
Disposals – (7.2) (0.9) (8.1)
At 30 June 2022 538.8 252.2 132.6 923.6
Additions – – 2.7 2.7
Disposals – (16.5) (9.6) (26.1)
At 30 June 2023 538.8 235.7 125.7 900.2
Accumulated amortisation
and impairment
At 1 July 2021 (2.1) (155.7) (76.0) (233.8)
Charge for the year – (19.7) (6.0) (25.7)
Disposals – 7.2 – 7.2
Impairment – – (2.2) (2.2)
At 30 June 2022 (2.1) (168.2) (84.2) (254.5)
Charge for the year – (19.2) (7.6) (26.8)
Disposals – 16.5 9.6 26.1
At 30 June 2023 (2.1) (170.9) (82.2) (255.2)
Net book value
At 30 June 2023 536.7 64.8 43.5 645.0
At 30 June 2022 536.7 84.0 48.4 669.1
1. Computer software mainly relates to the Group’s ERP software and is being amortised.
Goodwill largely relates to the group of cash generating units (‘CGUs’) in the Infrastructure
Services segment and has been built up through acquisitions, primarily MRBL Limited
(Mouchel Group) (£299.2m), May Gurney Integrated Services PLC (£194.7m) and McNicholas
Construction (Holdings) Limited (£42.8m). These balances have been subject to an annual
impairment review based upon the projected cash ows of each CGU.
Notes to the consolidated financial statements continued
For the year ended 30 June 2023
The intangible contract rights were recognised on the acquisition of:
– May Gurney Integrated Services plc – Cost £106.8m (2022: £106.8m). Net book value
£30.1m (2022: £37.7m).
– MRBL Limited (Mouchel Group) – Cost £127.1m (2022: £127.1m). Net book value £33.5m
(2022: £45.0m).
– Certain business and assets of Babcock Civil Infrastructure Limited – Cost £1.6m
(2022: £1.6m). Net book value £1.2m (2022: £1.3m).
Contract rights on May Gurney and Mouchel are amortised on a straight-line basis over
the expected total contract duration. All other contract rights are amortised on a straight-line
basis over the remaining contract life.
Carrying amounts of goodwill and intangible contract rights by CGU
For impairment testing purposes, goodwill has been allocated to the Infrastructure Services
and Construction segments, being the lowest level at which management monitors goodwill.
There is no goodwill attributed to the Property segment. The recoverable amount of the
goodwill and intangibles has been determined based on value in use calculations, which
use cash ow projections based on the Group’s forecasts approved by management,
covering a three-year period.
The resulting cash ows are discounted to present value, with the discount rate used
in the value in use calculations based on an industry average cost of capital.
The cost of equity is calculated using observable market data from the Group’s competitors.
This data is used to calculate an average unlevered beta value after excluding any outliers.
The average beta is then applied to the UK’s equity risk premium and a risk-free rate added.
The cost of debt is calculated by taking the expected renewal costs of the Group’s debt
and adjusting for the tax rate.
The cost of equity and cost of debt are then combined using our competitors’ average
debt/equity split. The after-tax discount rate is then used to calculate the pre-tax discount
rates. The pre-tax discount rates, which have been applied to the cash ows for each CGU,
are of 13.1% (2022: 11.1%).
The Infrastructure Services segment impairment review is sensitive to changes in the
following key assumptions: discount rate, revenue growth rate, operating margin and perpetual
growth rates. Management considers that a reasonably possible change in any single
assumption could give rise to an impairment of the carrying value of goodwill and intangibles.
Goodwill allocated to the Construction segment is not signicant in comparison to the Group’s
total goodwill and is not sensitive to changes in assumptions.
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2023 2022
Goodwill
£m
Intangible
contract rights
£m
Total
£m
Goodwill
£m
Intangible
contract rights
£m
Total
£m
Infrastructure Services 516.3 63.6 579.9 516.3 82.7 599.0
Construction 20.4 1.2 21.6 20.4 1.3 21.7
536.7 64.8 601.5 536.7 84.0 620.7
Infrastructure Services
Forecast revenue growth rates and operating prot margins are based on historical experience, adjusted for the impact of expected changes to contract portfolio and protability.
Based on the value in use calculation, these assumptions detailed below derived a recoverable amount for the Infrastructure Services segment that is £166.3m (2022: £153.0m)
above the carrying value of the assets, an increase of £13.3m from the prior year.
The pre-tax discount rate used is 13.1% (2022: 11.1%). An increase in discount rate of 2.9% (2022: 2.2%) would eliminate headroom. A 0.5% increase in discount rate would reduce
headroom by £34.9m (2022: £41.3m).
A terminal revenue growth rate of 2.0% (2022: 2.0%) has been applied into perpetuity. This would need to reduce by 3.7% (2022: 2.3%) to eliminate headroom. A 0.5% reduction would
reduce headroom by £28.7m (2022: £41.7m).
Forecast revenue growth rates from FY24 to FY26 range from 2.4% to 2.7% (2022: FY23 to FY25 range from 4.1% to 7.7%). A reduction of 9.6% (2022: 5.6%) to the average growth rate
would be required for headroom to be eliminated. A 0.5% reduction in growth rate in each year would reduce headroom by £9.1m (2022: £18.4m).
An operating margin of 5.5%
1
, consistent with the margin in FY26, has been applied into perpetuity (2022: 5.0%). A reduction of 1.2% (2022: 0.9%) in margin would be required to eliminate
headroom. A 0.5% reduction in operating margin would reduce headroom by £72.3m (2022: £87.0m).
Forecast operating margins from FY24 to FY26 range from 5.5% to 5.7% (2022: FY23 to FY25 range from 5.0% to 5.3%). A reduction of 0.8% (2022: 0.8%) in operating margin would
be required to eliminate headroom. A 0.5% reduction in margins would result in a reduction in headroom by £98.6m (2022: £84.2m).
In terms of the possible impacts of climate change, the two key assumptions that could be sensitive to this are the growth rate and discount rates noted above. If climate change
has a negative impact on revenues and/or the operating costs of the Group, there could be a potential impact on the discounted cash ow growth rates used within the valuation model.
Lower future growth rates would reduce the level of the discounted cash ow valuation and hence the amount of headroom available to the Group above an impairment trigger. At present,
the material short- to medium-term risks presented by possible climate change impacts are considered to be factored into the growth and discount rates where they are known and can
be quantied. Using the current assumptions, no reasonably foreseeable change in the assumptions used within the value in use calculations would cause an impairment. Therefore,
at present, changes in the long-term assumptions due to the impact of climate change would also not be expected to trigger an impairment.
1. Prot before interest and tax for the Infrastructure Services segment, prior to the value in use calculation taking into account an allocation of the Group’s corporate overheads.
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14 Property, plant and equipment
Land and
buildings
£m
Plant and
equipment
£m
Mining
asset
2
£m
Total
£m
Cost
At 1 July 2021 32.3 57.4 4.8 94.5
Additions 0.3 5.7 – 6.0
Disposals (5.3) (9.8) – (15.1)
Transfers
1
(2.4) – – (2.4)
Currency realignment – 0.7 – 0.7
At 30 June 2022 24.9 54.0 4.8 83.7
Additions – 3.9 – 3.9
Disposals (1.0) (14.0) (4.8) (19.8)
Transfers
1
– 0.7 – 0.7
At 30 June 2023 23.9 44.6 – 68.5
Accumulated depreciation and impairment
At 1 July 2021 (9.2) (37.2) (4.8) (51.2)
Charge for the year (0.8) (5.8) – (6.6)
Impairment – (4.1) – (4.1)
Disposals 2.0 9.0 – 11.0
Transfers
1
0.4 – – 0.4
Currency realignment – (0.5) – (0.5)
At 30 June 2022 (7.6) (38.6) (4.8) (51.0)
Charge for the year (0.2) (5.9) – (6.1)
Disposals 0.4 13.5 4.8 18.7
Transfers
1
– (0.3) – (0.3)
At 30 June 2023 (7.4) (31.3) – (38.7)
Net book value
At 30 June 2023 16.5 13.3 – 29.8
At 30 June 2022 17.3 15.4 – 32.7
1. Includes transfers between asset classes as follows:
– Net book value of plant and equipment transferred from right-of-use assets was £0.4m (2022: £nil).
– There were no transfers from land and buildings to investment properties (2022: £2.0m).
2. The mining asset represented the stripping activity at the UK Mining operations site. The asset has been disposed of in the current year now that the mine has been decommissioned.
Notes to the consolidated financial statements continued
For the year ended 30 June 2023
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15 Investment properties
(a) Reconciliation of carrying amount
Owned
assets
£m
Right-of-use
assets
£m
Total
£m
At 1 July 2021 8.3 41.3 49.6
Transfers 2.0 6.1 8.1
Additions – 2.5 2.5
Fair value gain/(loss) recognised
in administrative expenses 2.7 (2.5) 0.2
At 30 June 2022 13.0 47.4 60.4
Transfers 2.7 – 2.7
Additions 22.8 1.1 23.9
Fair value gain/(loss) recognised
in other income 14.4 (3.0) 11.4
At 30 June 2023 52.9 45.5 98.4
Investment properties comprise ofce buildings and commercial land/properties that were
formerly utilised by the Group that have been vacated, along with a student accommodation
property held by the Group (previously held within a joint venture). They are leased out
(or intended to be leased out) to third parties under operating leases and/or are held for
capital appreciation. The investment properties include properties held as right-of-use
assets, as well as a property owned by the Group. The investment properties are carried
at fair value. Changes in fair values are presented in the prot or loss within other income
(2022: immaterial net fair value gain of £0.2m was presented in administrative expenses).
(b) Amounts recognised in the income statement
Year to 30 June 2023:
2023
£m
2022
£m
Rental income from operating leases 5.1 2.4
Direct operating expenses for property that generated
rental income (2.7) (1.4)
Direct operating expenses for property that did not generate
rental income – (0.6)
Fair value gain 11.4 0.2
Total net income recognised in the income statement 13.8 0.6
(c) Leasing arrangements
The investment properties are leased to tenants under operating leases with rentals
payable either monthly or quarterly. Lease payments for some contracts include provisions
for RPI increases. One contract entitles the Group to an element of variable lease rentals
(in addition to the base rent payments) based on a share of the tenant’s revenue in carrying
out their business of providing serviced ofces and hot desking space at the premises.
Although the Group is exposed to changes in the residual value at the end of the current
leases, the Group intends to enter into new operating leases and therefore will not
immediately realise any reduction in residual value at the end of these leases. Some of the
leases include a tenant option to renew the lease for a further period. Expectations about
the future residual values are reected in the fair value of the properties.
Minimum lease payments receivable on leases of investment properties are as follows:
2023
£m
2022
£m
Less than one year 3.0 2.8
One to two years 2.3 3.0
Two to three years 2.1 2.3
Three to four years 1.3 2.1
Four to ve years 1.1 1.3
Over ve years – 1.1
Total 9.8 12.6
(d) Measurement of fair values
The fair value of the owned investment property was determined as at 30 June 2022
by external, independent property valuers, having appropriate recognised professional
qualications and recent experience in the location and category of the property being
valued. The fair values of the right-of-use investment properties have been determined
by the Group without the use of an independent valuer. The fair value measurements
for all of the investment properties have been categorised as Level 3 fair values
(as dened in note 29), based on the inputs to the valuation techniques used.
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15 Investment properties continued
Investment
property
Valuation
technique
Signicant
unobservable inputs
Inter-relationship between key unobservable inputs
and fair value measurement
Owned assets Market approach: The fair values have
been determined by adopting an investment
approach and assuming continued use
as ofces/student accommodation/future
use as a wind farm.
External valuations are performed every two years.
The last valuations were carried out as at 30 June
2022, using the following inputs:
Ofces
– Expected market rental growth of 0% (2022: 0%);
– Occupancy rate average of 95% (2022: 95%);
– Void periods of 24 months to 36 months
(2022: 24 months to 36 months); and
– Rent-free periods of 12 months on a 5-year lease
(2022: 12 months on a 5-year lease).
Student accommodation
– Expected market rental growth of 10% (2022: 3%);
– Occupancy rate average of 98% (2022: 98%); and
– Expected market yields of 5.8%-6.0%
(2022: 5.3%-5.4%).
Wind farm
– Expected electricity price of £55 MW/h; and
– Expected market yields of 7%.
In years where no valuation is performed, the fair
value is reviewed taking into consideration any
changes in market conditions and any offers
received on the property and adjustments made
accordingly.
The estimated fair value would increase/(decrease) if:
– Expected market rental growth were higher/(lower);
– The occupancy rate was higher/(lower);
– Void periods were shorter/(longer);
– Rent-free periods were shorter/(longer);
– Expected market yields were lower/(higher); or
– Expected electricity price was higher/(lower).
Right-of-use assets Income approach using discounted cash
ows: The valuation model considers the
present value of net cash ows to be
generated from the property, taking into
account the expected rental growth rate,
void periods, occupancy rate, lease
incentive costs such as rent-free periods
and other costs not paid by tenants. The
expected net cash ows are discounted
using risk-adjusted discount rates.
– Expected market rental growth of 1% to 2%
(2022: 1% to 2%%);
– Occupancy rate average of 92% to 99%
(2022: average of 93% to 99%);
– Rent-free/void periods of 6–9 months at the
end of each tenancy (2022: 6–9 months); and
– Risk-adjusted discount rate of 4.2% (2022: 4.2%).
The estimated fair value would increase/(decrease) if:
– Expected market rental growth were higher/(lower);
– The occupancy rate was higher/(lower);
– Rent-free/void periods were shorter/(longer); or
– The risk-adjusted discount rate was lower/(higher).
Notes to the consolidated financial statements continued
For the year ended 30 June 2023
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16 Investments in and loans to joint ventures
(a) Movements in year
2023
£m
2022
£m
Investments in joint ventures
At 1 July 82.3 98.9
Additions 35.7 16.8
Acquisition of joint venture debt 0.9 –
Disposals (22.5) –
Loan repayments (11.3) (7.5)
Share of:
Operating prot 1.3 26.4
Finance (costs)/income (0.1) 0.4
Taxation (0.1) (0.2)
Post-tax results of joint ventures – continuing operations 1.1 26.6
Dividends received (1.8) (32.5)
Return of equity (5.8) (20.0)
At 30 June 78.6 82.3
(b) Analysis of investments in and loans to joint ventures
2023
£m
2022
£m
Non-current assets
Investment properties 28.2 42.5
Other non-current assets 3.2 –
Non-current assets 31.4 42.5
Current assets
Cash and trade receivables 127.1 130.4
Current assets 127.1 130.4
Total assets 158.5 172.9
Current liabilities
Trade and other payables (17.0) (19.8)
Current liabilities (17.0) (19.8)
Non-current liabilities
Borrowings (62.9) (70.7)
Deferred tax liabilities – (0.1)
Other non-current liabilities – –
Non-current liabilities (62.9) (70.8)
Total liabilities (79.9) (90.6)
At 30 June 78.6 82.3
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16 Investments in and loans to joint ventures continued
(c) Interests in joint ventures
Set out below are the joint ventures of the Group as at 30 June 2023 which, in the opinion of the Directors, are material to the Group. See note 32 for the full list of joint ventures. All of the entities
are private entities and therefore do not have a quoted fair value. The country of incorporation or registration is also their principal place of business. All are measured under the equity method.
Name of entity
Place of business/country
of incorporation
% of ownership
interest/voting rights
2023
% of ownership
interest/voting rights
2022
Nature of
relationship
Carrying amount
2023
£m
Carrying amount
2022
£m
Kier Trade City
1
England and Wales 90%/50% 90%/50% Property division 6.5 6.8
Solum Regeneration
2
England and Wales 50%/50% 50%/50% Property division 21.1 21.3
Kier Cornwall Street
3
England and Wales 90%/50% 90%/50% Property division 23.2 7.2
Kier (Newcastle)
4
England and Wales N/A 75%/50% Property division – 8.4
Kier (Southampton)
5
England and Wales 75%/50% 75%/50% Property division 3.4 11.3
Watford Health Campus
6
England and Wales 50%/50% 50%/50% Property division 8.9 9.9
Kier Richmond
7
England and Wales 90%/50% 90%/50% Property division 8.0 7.7
Winsford
8
England and Wales 50%/50% 50%/50% Property division 0.1 0.4
Kier Maidenhead
9
England and Wales 90%/50% 90%/50% Property division 0.1 0.7
Kier PGIM Logistics
10
England and Wales 25.5%/25.5% 25.5%/25.5% Property division 6.7 7.4
Immaterial joint ventures 0.6 1.2
78.6 82.3
1. Kier Trade City consists of Kier Trade City Holdco 1 LLP, Kier Trade City Holdco 2 LLP and Kier Trade City LLP.
2. Solum Regeneration consists of Solum Regeneration (Bishops) LLP, Solum Regeneration (Epsom) Limited Partnership, Solum Regeneration (Guildford) LLP, Solum Regeneration (Haywards) LLP, Solum Regeneration
(Kingswood) LLP, Solum Regeneration (Maidstone) LLP, Solum Regeneration (Redhill) LLP, Solum Regeneration (Surbiton) LLP, Solum Regeneration (Twickenham) LLP, Solum Regeneration (Walthamstow) LLP,
Solum Regeneration Epsom (GP Subsidiary) Limited, Solum Regeneration Epsom (GP) Limited, Solum Regeneration Epsom (Residential) LLP, Solum Regeneration Holding 1 LLP and Solum Regeneration Holding 2 LLP.
3. Kier Cornwall Street consists of Kier Cornwall Street Holdings 1 LLP, Kier Cornwall Street Holdings 2 LLP and Kier Cornwall Street LLP.
4. Kier (Newcastle) consists of Kier (Newcastle) Investment Limited, Kier (Newcastle) Operation Limited and Magnetic Limited.
5. Kier (Southampton) consists of Kier (Southampton) Development Limited, Kier (Southampton) Investment Limited and Kier (Southampton) Operations Limited.
6. Watford Health Campus consists of Watford Health Campus Limited, Watford Health Campus Partnership LLP, Watford Riverwell (Family Housing) LLP and Watford Woodlands LLP.
7. Kier Richmond consists of Kier Richmond Holdings Limited and Kier Richmond Limited.
8. Winsford consists of Winsford Holdings 1 LLP, Winsford Holdings 2 LLP and Winsford Devco LLP.
9. Kier Maidenhead consists of Kier Maidenhead Holdings 1 LLP, Kier Maidenhead Holdings 2 LLP and Kier Maidenhead LLP.
10. Kier PGIM Logistics consists of Kier PGIM Logistics Holdco Ltd, Kier PGIM Logistics (Bognor) Ltd, Kier PGIM Logistics (Bracknell) Ltd, Kier PGIM Logistics (Knowsley) Ltd, Kier PGIM Logistics (St. Albans) Ltd,
Kier PGIM Logistics Propco 4 Ltd, Kier PGIM Logistics Propco 5 Ltd, Kier PGIM Logistics Propco 7 Ltd and Kier PGIM Logistics Propco 8 Ltd.
(d) Borrowing facilities and guarantees to joint ventures
The Group has provided guarantees to support borrowing facilities of joint ventures as follows:
2023 2022
Borrowing
facility
£m
Guarantees
£m
Drawn
at 30 June
£m
Borrowing
facility
£m
Guarantees
£m
Drawn
at 30 June
£m
Kier Trade City LLP 17.8 3.5 8.4 17.8 3.1 7.6
Kier PGIM Logistics (Bognor) Ltd 24.4 – – 27.0 1.4 2.8
42.2 3.5 8.4 44.8 4.5 10.4
Other than as disclosed above the liabilities of the joint ventures are without recourse to the Group. Details of the Group’s interests in joint ventures are given in note 32.
Notes to the consolidated financial statements continued
For the year ended 30 June 2023
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(e) Summarised financial information for joint ventures
The tables below provide summarised nancial information for those joint ventures that are material to the Group. The information disclosed reects the amounts presented in the nancial
statements of the relevant joint ventures and not the Group’s share of those amounts. They have been amended to reect adjustments made by the entity when using the equity method,
including fair value adjustments and modications for differences in accounting policy.
Kier Trade City Solum Regeneration Kier Cornwall Street Kier (Newcastle)
Summarised balance sheet
2023
£m
2022
£m
2023
£m
2022
£m
2023
£m
2022
£m
2023
£m
2022
£m
Current assets
Cash and cash equivalents 0.4 0.3 1.2 0.6 – 1.8 – 0.7
Other current assets 16.4 16.0 44.8 51.7 37.2 34.4 – 2.8
Current assets 16.8 16.3 46.0 52.3 37.2 36.2 – 3.5
Non-current assets – – – – – – – 25.1
Current liabilities
Other current liabilities (1.2) (1.3) (3.9) (9.7) (1.2) (3.2) – (5.2)
Total current liabilities (1.2) (1.3) (3.9) (9.7) (1.2) (3.2) – (5.2)
Non-current liabilities
Financial liabilities (excluding trade payables) (8.4) (7.5) – – (12.3) (25.0) – (12.1)
Other non-current liabilities – – – – – – – (0.1)
Total non-current liabilities (8.4) (7.5) – – (12.3) (25.0) – (12.2)
Net assets 7.2 7.5 42.1 42.6 23.7 8.0 – 11.2
Reconciliation to carrying amounts:
Net assets at 1 July 7.5 12.3 42.6 63.4 8.0 13.9 11.2 10.9
Capital introduced – 4.5 7.8 9.4 19.4 – 16.3 –
Disposals – – – – – – (30.1) –
(Loss)/prot for the year (0.3) 20.3 (0.4) (2.0) (3.7) (5.9) 2.6 0.3
Loan repayments – (8.3) – – – – – –
Return of equity – – (7.9) (27.8) – – – –
Dividends paid – (21.3) – (0.4) – – – –
Net assets at 30 June 7.2 7.5 42.1 42.6 23.7 8.0 – 11.2
Group’s share (%) 90% 90% 50% 50% 90% 90% N/A 75%
Group’s share 6.5 6.8 21.1 21.3 21.3 7.2 – 8.4
Capital introduced on behalf of joint venture partner – – – – 1.9 – – –
Investment in joint venture 6.5 6.8 21.1 21.3 23.2 7.2 – 8.4
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Kier
(Southampton)
Watford
Health Campus
Kier
Richmond
Summarised balance sheet
2023
£m
2022
£m
2023
£m
2022
£m
2023
£m
2022
£m
Current assets
Cash and cash equivalents 0.7 1.1 0.7 0.4 0.7 0.4
Other current assets 2.4 2.7 50.1 36.7 15.4 15.6
Current assets 3.1 3.8 50.8 37.1 16.1 16.0
Non-current assets 38.5 31.5 – – – –
Current liabilities
Other current liabilities (3.4) (2.4) (17.8) (7.2) (0.3) –
Total current liabilities (3.4) (2.4) (17.8) (7.2) (0.3) –
Non-current liabilities
Financial liabilities (excluding trade payables) (33.0) (17.9) (15.2) (10.2) (7.5) (7.5)
Other non-current liabilities (0.7) – – – 0.6 –
Total non-current liabilities (33.7) (17.9) (15.2) (10.2) (6.9) (7.5)
Net assets 4.5 15.0 17.8 19.7 8.9 8.5
Reconciliation to carrying amounts:
Net assets at 1 July 15.0 14.5 19.7 18.4 8.5 8.6
Capital introduced – – – 1.1 – –
Prot/(loss) for the year 4.5 0.5 1.7 2.8 0.4 (0.1)
Loan repayments (15.0) – – – – –
Return of equity – – (3.6) –
Dividends paid – – – (2.6) – –
Net assets at 30 June 4.5 15.0 17.8 19.7 8.9 8.5
Group’s share (%) 75% 75% 50% 50% 90% 90%
Investment in joint venture 3.4 11.3 8.9 9.9 8.0 7.7
Notes to the consolidated financial statements continued
For the year ended 30 June 2023
16 Investments in and loans to joint ventures continued
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Winsford
Kier
Maidenhead
Kier
PGIM Logistics
Summarised balance sheet
2023
£m
2022
£m
2023
£m
2022
£m
2023
£m
2022
£m
Current assets
Cash and cash equivalents 0.1 0.4 0.1 – 0.6 4.0
Other current assets – 0.7 0.1 1.0 43.6 54.2
Current assets 0.1 1.1 0.2 1.0 44.2 58.2
Non-current assets – – – – 2.5 –
Current liabilities
Other current liabilities – (0.4) (0.1) (0.2) (0.4) (1.5)
Total current liabilities – (0.4) (0.1) (0.2) (0.4) (1.5)
Non-current liabilities
Financial liabilities (excluding trade payables) – – – – (20.1) (27.7)
Total non-current liabilities – – – – (20.1) (27.7)
Net assets 0.1 0.7 0.1 0.8 26.2 29.0
Reconciliation to carrying amounts:
Net assets at 1 July 0.7 4.7 0.8 3.5 29.0 –
Capital introduced – – – – 4.7 29.1
Prot/(loss) for the year 0.7 11.1 – 8.3 (7.5) (0.1)
Return of equity – (4.8) – (3.6) – –
Dividends paid (1.3) (10.3) (0.7) (7.4) – –
Net assets at 30 June 0.1 0.7 0.1 0.8 26.2 29.0
Group’s share (%) 50% 50% 90% 90% 25.5% 25.5%
Investment in joint venture 0.1 0.4 0.1 0.7 6.7 7.4
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Kier Trade City Solum Regeneration Kier Cornwall Street Kier (Newcastle)
Summarised income statement
2023
£m
2022
£m
2023
£m
2022
£m
2023
£m
2022
£m
2023
£m
2022
£m
Revenue 0.5 50.1 24.3 35.3 – 0.6 – 1.9
Finance income – – – – – 0.4 – –
Finance costs – – – – (0.1) – – –
Taxation – – – – – – – (0.1)
Loss/(prot) for the year from continuing operations (0.3) 20.3 (0.4) (2.0) (3.7) (5.9) 2.6 0.3
Loss/(prot) for the year (0.3) 20.3 (0.4) (2.0) (3.7) (5.9) 2.6 0.3
Total comprehensive (expense)/income (0.3) 20.3 (0.4) (2.0) (3.7) (5.9) 2.6 0.3
Dividends received from joint ventures – 19.2 – 0.2 – – – –
Kier
(Southampton)
Watford
Health Campus
Kier
Richmond
Summarised income statement
2023
£m
2022
£m
2023
£m
2022
£m
2023
£m
2022
£m
Revenue 3.1 2.7 12.4 19.0 0.9 4.3
Depreciation and amortisation – (0.1) – – – –
Taxation (1.3) (0.1) – – 0.3 –
Prot/(loss) for the year from continuing operations 4.5 0.5 1.7 2.8 0.4 (0.1)
Prot/(loss) for the year 4.5 0.5 1.7 2.8 0.4 (0.1)
Total comprehensive income/(expense) 4.5 0.5 1.7 2.8 0.4 (0.1)
Dividends received from joint ventures – – – 1.3 – –
Notes to the consolidated financial statements continued
For the year ended 30 June 2023
16 Investments in and loans to joint ventures continued
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Winsford
Kier
Maidenhead
Kier
PGIM Logistics
Summarised income statement
2023
£m
2022
£m
2023
£m
2022
£m
2023
£m
2022
£m
Revenue – 22.7 – 19.6 0.3 –
Taxation – – – – 2.5 –
Prot/(loss) for the year from continuing operations 0.7 11.1 – 8.3 (7.5) (0.1)
Prot/(loss) for the year 0.7 11.1 – 8.3 (7.5) (0.1)
Total comprehensive income/(expense) 0.7 11.1 – 8.3 (7.5) (0.1)
Dividends received from joint ventures 0.7 5.1 0.7 6.6 – –
(f) Individually immaterial joint ventures
In addition to the interests in joint ventures disclosed above, the Group also has interests in a number of individually immaterial joint ventures that are accounted for using the equity method.
2023
£m
2022
£m
Aggregate carrying amount of individually immaterial joint ventures 0.6 1.2
Dividends received from individually immaterial joint ventures 0.4 0.1
Aggregate amounts of the Group’s share of:
Loss from continuing operations (0.1) (0.3)
Total comprehensive expense (0.1) (0.3)
17 Capitalised mobilisation costs
2023
£m
2022
£m
At 1 July 11.6 3.8
Additions 1.8 10.2
Amortisation (7.1) (2.4)
At 30 June 6.3 11.6
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18 Deferred tax
The following are the major deferred tax assets and liabilities recognised by the Group and movements thereon during the current and prior reporting year:
Intangible
assets
£m
Property,
plant and
equipment
£m
Short-term
temporary
differences
1
£m
Retirement
benet
obligations
£m
Tax
losses
£m
Total
£m
At 1 July 2021 (23.6) 36.3 29.3 (12.6) 108.6 138.0
Credited/(charged) to income statement – continuing 3.8 (1.5) 8.0 (2.0) (3.0) 5.3
Credited/(charged) directly to comprehensive income – – 0.2 (34.7) – (34.5)
At 30 June 2022 (19.8) 34.8 37.5 (49.3) 105.6 108.8
Credited/(charged) to income statement – continuing 3.9 (10.6) 3.8 (1.3) 0.6 (3.6)
Acquisitions and disposals – (0.1) – – – (0.1)
Credited/(charged) directly to comprehensive income – – (0.8) 24.5 – 23.7
At 30 June 2023 (15.9) 24.1 40.5 (26.1) 106.2 128.8
1. Included in short-term temporary differences are deferred tax assets of £15.8m (2022: £13.3m) in respect of RDEC Step 2 amounts carried forward and £23.3m (2022: £21.9m) in respect of the restricted interest amount caught
under the UK Corporate Interest Restrictions (‘CIR’) tax rules.
Deferred tax assets and liabilities are attributed to temporary differences relating to the following:
Assets Liabilities Total
2023
£m
2022
£m
2023
£m
2022
£m
2023
£m
2022
£m
Property, plant and equipment 24.1 34.8 – – 24.1 34.8
Intangible assets – – (15.9) (19.8) (15.9) (19.8)
Retirement benet obligations – – (26.1) (49.3) (26.1) (49.3)
Other short-term timing differences 40.5 37.5 – – 40.5 37.5
Tax losses 106.2 105.6 – – 106.2 105.6
Total 170.8 177.9 (42.0) (69.1) 128.8 108.8
Set-off tax (42.0) (69.1) 42.0 69.1 – –
Net tax assets 128.8 108.8 – – 128.8 108.8
When considering the recoverability of net deferred tax assets, the taxable prot forecasts are based on the same Board-approved information used to support the going concern
and goodwill impairment assessments. More information on these forecasts and the methodology applied are included in notes 1 and 13.
The following evidence has been considered when assessing whether these forecasts are achievable and realistic:
– The business traded in line with Board expectations in 2023;
– The Group has substantially completed its restructuring activities and is focusing on the achievement of the medium-term growth strategy; and
– The Group’s core businesses are well-placed to benet from the announced and committed UK Government spending plans to invest in infrastructure and decarbonisation.
When considering the length of time over which the losses are expected to be utilised, the Group has taken into account that generally only 50% of prots in each year can be offset
by brought forward losses.
Based on these forecasts, the Group is expected to utilise its deferred tax asset over a period of approximately 10 years (2022: 10 years).
Notes to the consolidated financial statements continued
For the year ended 30 June 2023
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19 Contract assets and liabilities
(a) Current contract assets
2023
£m
2022
£m
At 1 July 366.3 335.7
Transferred to receivables (342.6) (313.3)
Revenue adjustments recognised in the period for performance
obligations satised in previous periods due to changes in
the transaction price arising from changes in estimates
of variable revenue (0.5) –
Balance remaining in relation to contract assets at the start
of the year 23.2 22.4
Increase related to services provided in the year 335.0 343.9
At 30 June 358.2 366.3
(b) Non-current contract assets
2023
£m
2022
£m
At 1 July 31.2 30.7
Increase related to services provided in the year 12.5 0.5
At 30 June 43.7 31.2
Non-current contract assets relate to Kier’s share of the funding surpluses receivable
at the end of long-term PFI maintenance contracts.
(c) Current contract liabilities
2023
£m
2022
£m
At 1 July (67.3) (59.9)
Revenue recognised in the year that was included in contract
liabilities at the beginning of the year 60.0 50.5
Contract liabilities repaid 4.4 –
Balance remaining in relation to contract liabilities at the start
of the year (2.9) (9.4)
Increase due to cash received or invoices raised in the year
for performance obligations not recognised in revenue (87.6) (57.9)
At 30 June (90.5) (67.3)
20 Trade and other receivables
2023
£m
2022
£m
Current:
Trade receivables 50.5 72.2
Construction contract retentions 52.4 72.4
Amounts receivable from joint ventures 2.1 4.0
Other receivables 26.0 15.8
Prepayments 53.5 30.2
Accrued income 4.7 8.3
189.2 202.9
Non-current:
Construction contract retentions 18.5 17.0
18.5 17.0
Construction contract retentions are amounts withheld by the customer until they are satised
with the quality of the work undertaken.
21 Inventories
2023
£m
2022
£m
Raw materials and consumables 13.3 13.8
Land and work in progress held for development 59.6 43.0
72.9 56.8
As at 30 June 2023, there were no provisions held against inventory relating to land and work
in progress for development (2022: £1.5m).
22 Net cash
2023
£m
2022
£m
Cash and cash equivalents – bank balances and cash in hand 376.9 297.7
Borrowings due within one year – (40.5)
Borrowings due after one year (319.1) (266.5)
Impact of cross-currency hedging 6.3 12.2
Net cash
1
64.1 2.9
1. Net cash’ is an alternative performance measure, see page 243.
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22 Net cash continued
Average month-end net debt was £232.1m (2022: £216.1m). Net cash excludes lease liabilities.
Cash and cash equivalents are subject to Group-wide cash pooling arrangements. On a gross basis, cash and cash equivalents were £1,389.5m (2022: £1,546.4m) and overdrafts were
£1,012.6m (2022: £1,248.7m).
Cash and cash equivalents include £76.9m (2022: £74.4m) being the Group’s share of cash and cash equivalents held by joint operations and £92.3m (2022: £39.9m) of bank balances
that are not part of the Group-wide cash pooling arrangement.
Information on borrowings is detailed in note 29.
(a) Reconciliation of working capital between the consolidated balance sheet and consolidated cash flow statement
2023 2022
Inventories
£m
Contract
assets
£m
Trade and other
payables
£m
Inventories
£m
Contract
assets
£m
Trade and other
payables
£m
1 July balance sheet 56.8 397.5 (1,099.8) 54.7 366.4 (1,133.0)
30 June balance sheet 72.9 401.9 (1,111.9) 56.8 397.5 (1,099.8)
Movement per balance sheet 16.1 4.4 (12.1) 2.1 31.1 33.2
Transfers 2.7 – – – – –
Forward funding interest – – – – 0.5 –
Discount unwind
1
– – – – – 0.7
Unpaid adviser fees in respect of the equity raise
2
– – – – – (6.1)
Net RDEC receipts – – (14.0) – – (20.0)
Other – – – – – 4.6
Movement per cash ow statement 18.8 4.4 (26.1) 2.1 31.6 12.4
1. Discount unwind primarily relates to onerous loss-making contracts and deferred consideration.
2. Prior year unpaid adviser fees of £6.1m in respect of the equity raise have been disclosed within the issue of shares net of transaction costs, on the cash ow statement.
(b) Reconciliation of movements in net cash
Cash and cash
equivalents
£m
Borrowings due
within one year
£m
Borrowings due
after one year
£m
Impact of
cross-currency
hedging
£m
Total
£m
Net cash/(borrowings) as at 1 July 2021 391.2 (38.2) (362.3) 12.3 3.0
Cash ows (97.4) 38.2 63.6 – 4.4
Transfers – (40.5) 40.5 – –
Foreign exchange movements 3.9 – (8.3) (0.1) (4.5)
Net cash/(borrowings) as at 30 June 2022 297.7 (40.5) (266.5) 12.2 2.9
Cash ows 78.9 40.5 (54.1) – 65.3
Foreign exchange movements 0.3 – 1.5 (5.9) (4.1)
Net cash/(borrowings) as at 30 June 2023 376.9 – (319.1) 6.3 64.1
Notes to the consolidated financial statements continued
For the year ended 30 June 2023
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(c) Reconciliation of movements in liabilities arising from financing activities
Borrowings
£m
Hedging
derivatives
£m
Lease liabilities
£m
(Liabilities)/assets as at 1 July 2021 (400.5) 13.4 (163.8)
Changes from nancing cash ows:
Repayment of borrowings/principal elements
of lease payments 101.8 – 33.8
Settlement of derivative nancial instruments – (7.5) –
Non-cash movements:
Net lease additions – – (27.6)
Foreign exchange movements (8.3) – –
Changes in fair values of derivatives – 6.3 –
(Liabilities)/assets as at 30 June 2022 (307.0) 12.2 (157.6)
Changes from nancing cash ows:
Drawdown of borrowings (56.8) – –
Repayment of borrowings/principal elements
of lease payments 43.2 – 45.6
Settlement of derivative nancial instruments – (4.7) –
Non-cash movements:
Net lease additions – – (70.6)
Foreign exchange movements 1.5 – –
Changes in fair values of derivatives – 3.2 –
(Liabilities)/assets as at 30 June 2023 (319.1) 10.7 (182.6)
(d) Free cash flow
Note
2023
£m
2022
£m
Net cash at 1 July 22 2.9 3.0
Net cash at 30 June 22 64.1 2.9
Increase/(decrease) in net cash 61.2 (0.1)
Adjusted for:
Payments in respect of adjusting items 5 27.0 41.2
Pension decit payments and fees 9 12.8 15.0
Equity raise
1
– 6.1
Purchase of own shares 11.9 7.0
Other items 19.4 (14.6)
Free cash ow 132.3 54.6
1. The £6.1m settled during the prior year relates to the payment of accrued costs previously recorded in equity.
See glossary of alternative performance measures on page 243.
23 Leases
(a) Group as a lessee
The Group has lease contracts for various properties, and items of plant, machinery,
vehicles and other equipment used in its operations and for administration of the Group’s
business. Leases of properties have durations of between one and 44 years. Leases of
plant and machinery and other equipment generally have lease terms between one and
three years, while motor vehicles generally have lease terms between three and six years.
Lease terms are negotiated on an individual basis and contain a wide range of different
terms and conditions. The lease agreements do not impose any covenants other than the
security interests in the leased assets that are held by the lessor. Leased assets may not
be used as security for borrowing purposes. A number of property leases contain extension
or termination options. In these circumstances, the Group makes a judgement about the
period for which it is reasonably certain to lease the property.
The Group’s accounting policies for leases are set out in note 1. The Group has elected
not to recognise right-of-use assets and lease liabilities for short-term leases and leases
of low-value assets. The expense included in the income statements relating to these leases
was £115.6m (2022: £98.9m). The assets leased under short-term leases are predominantly
small items of plant and equipment and therefore are also of low value. The utilisation of
these assets varies depending on the nature and levels of the Group’s activities.
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23 Leases continued
(b) Right-of-use assets
Set out below are the carrying amounts of right-of-use assets recognised in respect
of the Group’s leases and the movements during the year:
Land and
buildings
£m
Motor
vehicles
£m
Plant and
equipment
£m
Total
£m
At 1 July 2021 64.6 19.6 12.3 96.5
Additions 2.8 13.2 17.1 33.1
Depreciation (7.9) (11.8) (10.3) (30.0)
Impairment
1
(5.2) – – (5.2)
Transferred to investment
properties
1
(6.1) – – (6.1)
Disposals (0.9) (1.7) (5.1) (7.7)
At 30 June 2022 47.3 19.3 14.0 80.6
Additions 5.4 11.8 80.4 97.6
Depreciation (8.1) (9.5) (26.1) (43.7)
Transferred to owned assets – – (0.4) (0.4)
Disposals (1.9) (2.1) (24.7) (28.7)
At 30 June 2023 42.7 19.5 43.2 105.4
1. During the year ended 30 June 2022, the Group vacated its property in Fountain Street, Manchester, which
resulted in an impairment of the associated right-of-use asset. As the property was no longer occupied by
the Group and was being held for the purpose of earning rental income, the asset was reclassied as an
investment property.
(c) Lease liabilities
2023
£m
2022
£m
Current 36.2 25.9
Non-current 146.4 131.7
182.6 157.6
The maturity prole of the contractual cash ows associated with the lease liabilities is
presented in note 29. The interest expense in respect of lease liabilities is included within
nance costs in the income statement and is disclosed in note 7.
(d) Amounts recognised in the statement of cash flows
2023
£m
2022
£m
Principal elements of lease payments
1
45.6 33.8
Interest paid
1
9.5 6.5
Payments for short-term leases and leases of low-value
assets
2
115.6 98.9
Total cash outow for leases 170.7 139.2
1. Included within cash ows from nancing activities within the statement of cash ows.
2. Included within operating cash ows within the statement of cash ows.
24 Trade and other payables
2023
£m
2022
£m
Current:
Trade payables
1
310.0 354.2
Accruals 585.1 527.4
Subcontract retentions 22.5 32.7
Other taxation and social security 138.4 122.1
Other payables and deferred income 19.0 29.3
1,075.0 1,065.7
Non-current:
Trade payables 5.1 11.0
Subcontract retentions 31.8 23.1
36.9 34.1
1. There are no outstanding payments due to suppliers who are on bank-supported supply chain nance
arrangements (2022: £49.8m).
Notes to the consolidated financial statements continued
For the year ended 30 June 2023
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25 Provisions
Insurance
claims
£m
Restoration
of mining sites
£m
HSE
regulatory
£m
Onerous
contracts
£m
Redundancy and
site closure
£m
Warranty,
rectication and
other contractual
obligations
£m
Total
£m
At 1 July 2021 21.8 0.8 2.5 5.5 3.4 13.8 47.8
(Credited)/charged to income statement (3.4) (0.5) 0.5 3.7 0.9 5.1 6.3
Utilised – (0.1) – (0.4) (2.7) (3.5) (6.7)
Unwinding of discount – – – 0.2 – – 0.2
Currency realignment – – – – 0.4 – 0.4
At 30 June 2022 18.4 0.2 3.0 9.0 2.0 15.4 48.0
(Credited)/charged to income statement 5.1 – 1.5 6.2 1.0 12.4 26.2
Utilised – (0.1) (4.5) (5.5) (1.6) (4.6) (16.3)
Unwinding of discount – – – 0.2 – – 0.2
Transfer from creditors 3.9 – – (0.8) – 2.1 5.2
Currency realignment – – – – (0.1) – (0.1)
At 30 June 2023 27.4 0.1 – 9.1 1.3 25.3 63.2
Expected utilisation
Within one year 6.8 – – 6.5 0.6 24.3 38.2
After one year 20.6 0.1 – 2.6 0.7 1.0 25.0
At 30 June 2023 27.4 0.1 – 9.1 1.3 25.3 63.2
Within one year – 0.2 3.0 6.4 0.8 11.8 22.2
After one year 18.4 – – 2.6 1.2 3.6 25.8
At 30 June 2022 18.4 0.2 3.0 9.0 2.0 15.4 48.0
Insurance provisions are held in the Group’s insurance captive in respect of legal and other disputes in various Group companies. Due to the nature of the provision for insurance claims,
the timing of any potential future outows in respect of these liabilities is uncertain and as such they are classied as due after one year.
Restoration of mining sites provisions represent the cost of restoration of opencast mining sites. The cost of restoration is recognised as a provision as soon as the restoration liability arises.
The amount provided represents the present value of the anticipated costs. Costs are charged against the provision as incurred and the unwinding of the discount is included within nance costs.
HSE regulatory provisions are in respect of potential nes arising from changes to safety, health and environmental legislation and regulation.
Onerous contracts provisions are for loss-making contracts that the Group is legally obligated to complete.
Redundancy and site closure provisions are in respect of redundancy costs and ofce closures.
Warranty and rectication provisions are for potential claims against work completed by the Group. This includes provisions in respect of re compliance and cladding.
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26 Share capital and reserves
Share capital
The share capital of the Company comprises:
2023 2022
Number £m Number £m
Authorised, issued and fully-paid ordinary shares of 1 pence each 446,314,435 4.5 446,241,682 4.5
The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Company.
During the year, 72,753 shares were issued under the Sharesave Scheme (2022: 75,983).
Cash flow hedge reserve
This reserve comprises the effective portion of the cumulative net change in the fair value of the cash ow hedging instruments related to hedged transactions that have not yet occurred,
net of any related deferred tax.
Translation reserve
This reserve comprises the cumulative difference on exchange arising from the retranslation of net investments in overseas subsidiary undertakings. In accordance with the transitional
provisions of IFRS 1, this reserve was set to nil at 1 July 2004.
Merger reserve
£134.8m of the merger reserve arose on the shares issued at a premium to acquire May Gurney on 8 July 2013. In addition, a further £215.8m relates to the issue of share capital
on 18 June 2021.
27 Share-based payments
The Group operates a number of share-based payment schemes for eligible employees as described below.
Sharesave Scheme
Options over the Company’s ordinary shares at 30 June 2023 were as follows:
Sharesave
Scheme
13 November
2019
Sharesave
Scheme
15 February
2021
Sharesave
Scheme
29 October
2021
Sharesave
Scheme
2 November
2022 Total
Number of awards outstanding at 30 June 2023
Directors – – 11,250 9.818 21,068
Employees
1
113,294 6,735,438 5,370,885 8,348,029 20,567,646
113,294 6,735,438 5,382,135 8,357,847 20,588,714
Exercise price (pence)
1
86.4 56.5 96.0 55.0
1. Where the options were granted before the share issue that completed on 18 June 2021, the numbers of options and the exercise prices have been adjusted to take account of the dilution resulting from the new shares.
Notes to the consolidated financial statements continued
For the year ended 30 June 2023
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Options to acquire shares in the capital of Kier Group plc have been granted to eligible employees who enter into a Sharesave (‘SAYE’) contract. The number of options granted to each
participating employee are the number of shares which have an aggregate option price not exceeding the projected proceeds of the employee’s Sharesave contract. Participation in the
Kier Sharesave Scheme is offered to all employees of the Group who have been employed for a continuous period determined by the Board. Under the Sharesave contract, participating
employees save a regular sum each month for three years up to a maximum of £500 per month.
8,730,264 options were granted in the year (2022: 7,943,643) under the Sharesave Scheme, which will all be equity settled.
72,753 Sharesave Scheme options were exercised during the year (2022: 75,983). The weighted average market price of Kier Group plc shares at the date of exercise of Sharesave
Scheme options during the year was 66.9p (2022: 103.0p).
Conditional Share Award Plan
The Group previously operated a Conditional Share Award Plan (‘CSAP’), under which senior employees receive awards of shares subject only to service conditions, i.e. the requirement
for participants to remain in employment with the Group over the vesting period. Participants were entitled to receive dividend equivalents on these awards. Awards under the CSAP were
all equity settled.
There were no outstanding CSAP awards at 30 June 2023.
No new awards were granted under the CSAP in the year (2022: no awards granted) and no shares vested under the CSAP during the year (2022: 650,951 shares vested plus a further
9,777 shares equivalent to the dividends that would have been received during the vesting period). The market price of Kier Group plc shares at the date of exercise of the CSAP options
during the prior year was 108.2p.
Long-Term Incentive Plan
Awards over the Company’s ordinary shares at 30 June 2023 were as follows:
LTI P
award
18 December
2020
LTI P
award
28 October
2021
LTI P
award
20 April
2022
LTI P
award
21 October
2022 Total
Number of awards outstanding at 30 June 2023
Directors 2,095,166 2,313,430 – 3,601,875 8,010,471
Employees
1
14,010,761 4,432,654 305,871 9,836,333 28,585,619
16,105,927 6,746,084 305,871 13,438,208 36,596,090
Exercise price (pence)
1
nil nil nil nil
1. Where the options were granted before the share issue that completed on 18 June 2021, the number of options has been adjusted to take account of the dilution resulting from the new shares.
The Group has established a Long-Term Incentive Plan (‘LTIP’) under which Directors and senior employees can receive awards of shares. Awards made under the scheme are normally
able to vest following the third anniversary of the date of the grant. Vesting may be in full or in part (with the balance of the award lapsing) and is subject to the Group achieving specic
performance targets. Participants are entitled to receive dividend equivalents on these awards. Awards under the LTIP are all equity settled. The awards made to Directors are subject
to a two-year post-vesting holding period and malus and clawback provisions.
15,492,751 new options were granted under the LTIP scheme in the year (2022: 8,570,392) and 8,432,381 shares vested during the year (2022: nil). The weighted average market price
of Kier Group plc shares at the date of exercise of LTIP options during the year was 62.3p (2022: n/a).
Further description of the above share schemes and the terms and conditions of each scheme are included in the Directors’ Remuneration report on pages 120–153.
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27 Share-based payments continued
Shares held in trusts
The CSAP and LTIP awards, which are taken as shares, are intended to be satised from shares held by the Kier Group 1999 Employee Benet Trust and May Gurney Group Trustees Ltd
Employee Share Ownership Trust or the issue of new shares. The shares held by the trusts are accounted for as a deduction from equity within retained earnings. The movements in the
number and historical cost value of shares held by the trusts are as follows:
2023 2022
Number
of shares
Historic cost
value
£m
Number
of shares
Historic cost
value
£m
At 1 July 7,555,030 7.7 708,965 2.6
Acquired during the year 18,607,232 12.4 7,942,521 7.5
Issued in satisfaction of share scheme awards (8,432,381) (8.0) (650,951) (2.0)
Issued in satisfaction of dividend equivalents for share scheme awards – – (9,777) –
Issued in satisfaction of deferred bonus schemes (776,920) (0.9) (435,728) (0.4)
At 30 June 16,952,961 11.2 7,555,030 7.7
The market value of these shares at 30 June 2023 was £12.7m (2022: £5.1m).
The shares acquired by the trusts in the year at a cost of £12.4m (2022: £7.5m), net of cash received by the trusts in respect of the deferred bonus schemes of £0.5m (2022: £0.5m)
is reected in the statement of changes in equity as a net purchase of own shares of £11.9m (2022: £7.0m).
Fair value of share-based payments
The fair value per option granted has been calculated using the Black-Scholes model for all options apart from the total shareholder return (‘TSR’) element of the LTIP which is based
on a Stochastic model. For awards made to the Directors which are subject to a two-year holding period post-vesting, the Finnerty model is used. The following assumptions were used
in calculating the fair values:
Sharesave Scheme
Date of grant
18 November
2019
15 February
2021
29 October
2021
2 November
2022
Share price at grant (pence) 86.5 77.5 106.8 58.2
Exercise price (pence) – at grant 101.0 66.0 96.0 55.0
Exercise price (pence) – adjusted for share issue 86.4 56.5 96.0 55.0
Expected term (years) 3.3 3.3 3.3 3.3
Expected volatility 68.5% 80.2% 82.7% 62.1%
Dividend yield 0.0% 0.0% 0.0% 0.0%
Risk-free interest rate 0.49% 0.01% 0.73% 3.13%
Value per option (pence) – at grant 37.0 44.6 61.9 27.6
Value per option (pence) – adjusted for share issue 31.7 38.1 61.9 27.6
Notes to the consolidated financial statements continued
For the year ended 30 June 2023
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Long-Term Incentive Plan
Date of grant
18 December
2020
18 December
2020
(Directors)
28 October
2021
28 October
2021
(Directors)
20 April
2022
21 October
2022
21 October
2022
(Directors)
Share price at grant (pence) 81.0 81.0 108.4 108.4 80.8 60.0 60.0
Exercise price (pence) nil nil nil nil nil nil nil
Expected term (years) 3.0 3.0 3.0 3.0 2.5 3.0 3.0
Holding period (years) n/a 2.0 n/a 2.0 n/a n/a 2.0
Expected volatility 90.7% 92.4% 83.2% 66.6% 83.2% 53.7% 44.5%
Risk-free interest rate 0.00% 0.00% 0.67% 0.77% 0.67% 3.83% 4.14%
Value per option (pence) – at grant
– Market condition (25%) 58.4 50.6 85.2 76.3 63.5 41.2 38.1
– Non-market condition (75%) 81.0 70.1 108.4 97.0 80.8 60.0 55.6
Value per option (pence) – adjusted for share issue
– Market condition (25%) 50.0 43.3 85.2 76.3 63.5 41.2 38.1
– Non-market condition (75%) 69.2 59.9 108.4 97.0 80.8 60.0 55.6
The value per option represents the fair value of the option less any consideration payable. The fair value of the proportion of the awards subject to performance conditions that are market
conditions under IFRS 2 ‘Share-based Payments’ (the TSR – total shareholder return element) incorporates an assessment of the number of shares that will vest.
The performance conditions linked to adjusted earnings per share, adjusted operating prot, the net debt to earnings before interest, tax, depreciation and amortisation ratio
(Net Debt:EBITDA) and free cash ow, are non-market conditions under IFRS 2. Therefore, the fair value of these elements do not include an assessment of the number of shares
that will vest. Instead, the amount charged is based on the fair values factored by a ‘true-up’ for the number of awards that are expected to vest.
The expected volatility is based on historical volatility over the period of time commensurate with the expected award term immediately prior to the date of grant. The risk-free rate of return
is the yield on UK Government securities over a term consistent with the expected term.
A charge of £8.4m relating to share-based payments has been recognised in the income statement as employee costs (2022: £8.6m). Included in other payables is an amount of £1.0m
(2022: £1.0m) relating to the accrual of employer’s national insurance in respect of share-based payments expected to vest in the future.
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27 Share-based payments continued
Summary of movements in the number of options
A reconciliation of option movements is shown below:
2023 2022
Number
of options
Weighted
average
exercise price
Number
of options
Weighted
average
exercise price
Outstanding at 1 July 57,273,676 26.3p 47,929,960 23.9p
Granted 24,223,015 19.8p 16,514,035 46.2p
Lapsed or forfeited (15,806,753) 39.0p (6,443,385) 61.5p
Exercised (8,505,134) 0.5p (726,934) 7.5p
Outstanding at 30 June 57,184,804 23.9p 57,273,676 26.3p
Exercisable at 30 June 105,434 66.8p 294,805 81.7p
The options outstanding at 30 June 2023 have a weighted average remaining contractual
life of 1.42 years (2022: 1.43 years).
Notes to the consolidated financial statements continued
For the year ended 30 June 2023
28 Guarantees and contingent liabilities
The Company has given guarantees and entered into counter-indemnities in respect
of bonds relating to certain of the Group’s own contracts. The Company has also given
guarantees in respect of certain contractual obligations of its subsidiaries and joint ventures,
which were entered into in the normal course of business, as well as certain of the Group’s
other obligations (for example, in respect of the Group’s nance facilities and its pension
schemes). Financial guarantees over the obligations of the Company’s subsidiaries and joint
ventures are initially measured at fair value, based on the premium received from the joint
venture or the differential in the interest rate of the borrowing including and excluding the
guarantee. Subsequent to initial recognition, nancial guarantee contracts are measured
at the higher of the initial fair value measurement (adjusted for any income amounts
recognised) and the amount determined in accordance with the expected credit loss model.
Details of nancial guarantees provided to support joint ventures are disclosed in note 16(d).
Performance guarantees are treated as a contingent liability until such time as it becomes
probable that payment will be required under its terms.
Provisions are made for the Directors’ best estimate of known legal claims, investigations
and legal actions relating to the Group which are considered more likely than not to result in
an outow of economic benet. If the Directors consider that a claim, investigation or action
relating to the Group is unlikely to succeed, no provision is made. If the Directors cannot
make a reliable estimate of a potential, material obligation, no provision is made but details
of the claim are disclosed.
Fire and cladding review
As disclosed in note 1 of the nancial statements, the Group has undertaken a review
of 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. The buildings,
including the cladding works, were signed off by approved inspectors as compliant with the
relevant Building Regulations at the time of completion.
In preparing the nancial statements, currently available information has been considered,
including the current best estimate of the extent and future costs of work required, based
on the reviews and physical inspections undertaken.
Where an obligation has been established and a reliable estimate of the costs to rectify
is available, a provision has been made (see note 25). No provision has been made where
an obligation has not been established.
These estimates may be updated as further inspections are completed and as work
progresses which could give rise to the recognition of further liabilities. Such liabilities, should
they arise, are expected to be covered materially by the Group’s insurance arrangements
thereby limiting the net exposure. Any insurance recovery must be considered virtually
certain before a corresponding asset is recognised and so this could potentially lead
to an asymmetry in the recognition of assets and liabilities.
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29 Financial instruments
The following table summarises the Group’s nancial instruments as at 30 June 2023:
2023 2022
Financial
assets at
amortised cost
£m
Financial
liabilities at
amortised cost
£m
Derivatives
£m
Financial
assets at
amortised cost
£m
Financial
liabilities at
amortised cost
£m
Derivatives
£m
Financial assets
Trade and other receivables (less prepayments) 154.2 – – 189.7 – –
Cash and cash equivalents 376.9 – – 297.7 – –
Equity loans provided to joint ventures 101.8 – – 105.4 – –
Other nancial assets – – 10.7 – – 12.2
Total 632.9 – 10.7 592.8 – 12.2
Financial liabilities
Borrowings – (319.1) – – (307.0) –
Lease liabilities – (182.6) – – (157.6) –
Trade and other payables
1
– (971.8) – – (977.3) –
Total – (1,473.5) – – (1,441.9) –
Net 632.9 (1,473.5) 10.7 592.8 (1,441.9) 12.2
1. Trade and other payables exclude other taxes and social security and deferred income.
Capital risk management
The Group’s capital management objectives are to ensure the Group’s ability to continue as a going concern and to optimise the capital structure in order to minimise the cost of capital
whilst maintaining a strong balance sheet to support business development and tender qualication. The Group’s capital management strategy is to use a blend of capital types with
different risk, return and maturity proles to support the operating divisions and deliver the Group’s capital management objectives.
The capital structure of the Group comprises: equity, consisting of share capital, share premium, retained earnings and other reserves as disclosed in the consolidated statement of changes
in equity; and cash, cash equivalents and borrowings as disclosed in note 22 and described further below. The Group forecasts and monitors short-, medium- and longer-term capital needs
on a regular basis and adjusts its capital structure as required through the payment of dividends to shareholders, the issue of new share capital and the increase of repayment or borrowings.
All investment decisions typically require a pre-tax annualised return of at least 15.0% to ensure such investments are value enhancing for shareholders.
Financial risk management
Financial risk management is an integral part of the way the Group is managed. In the course of its business, the Group is exposed primarily to credit risk, market risk and liquidity risk.
The overall aim of the Group’s nancial risk management policies is to minimise any potential adverse effects on nancial performance and net assets.
The Group’s treasury team manages the principal nancial risks within policies and operating limits approved by the Board. The treasury function is not a prot centre and does not enter
into speculative transactions. Derivative nancial instruments are used to hedge exposure to uctuations in interest and exchange rates.
Where all relevant criteria are met, hedge accounting is applied to remove the accounting mismatch between the hedging instrument and the hedged item. This will effectively result in
recognising interest expense at a xed interest rate for the hedged oating rate borrowings and elimination of exchange rate movements in the income statement relating to the hedged
foreign currency denominated borrowings.
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29 Financial instruments continued
Credit risk
Credit risk arises on nancial instruments such as trade receivables, short-term bank
deposits and interest rate and currency hedges. Policies and procedures exist to ensure that
customers have an appropriate credit history. The Group’s most signicant clients are public
or regulated industry entities which generally have high credit ratings or are of a high credit
quality due to the nature of the client.
Short-term bank deposits and hedging transactions are executed only with highly
credit-rated authorised counterparties based on ratings issued by the major ratings agencies.
Counterparty exposure positions are monitored regularly so that credit exposures to any
one counterparty are within acceptable limits. At the balance sheet date there were no
signicant concentrations of credit risk.
Trade and other receivables and contract assets included in the balance sheet are stated
net of expected credit loss (‘ECL’) provisions which have been calculated using a provision
matrix grouping trade receivables and contract assets on the basis of their shared credit
risk characteristics.
An analysis of the provision held against trade receivables is set out below:
2023
£m
2022
£m
Provision as at 1 July 2.1 2.3
Credited to the income statement (1.4) (0.6)
Charged to the income statement 1.5 0.5
Utilised in the year (0.6) (0.1)
Provision as at 30 June 1.6 2.1
There were £12.4m (2022: £19.7m) of trade receivables that were overdue at the balance
sheet date that have not been provided against, of which £3.7m (2022: £8.2m) had been
received by the end of August 2023. There are no indications as at 30 June 2023 that the
debtors will not meet their payment obligations in respect of the amount of trade receivables
recognised in the balance sheet that are overdue and unprovided. The proportion of trade
receivables at 30 June 2023 that were overdue for payment was 25% (2022: 28%). Credit
terms vary across the Group; the average age of trade receivables was as follows:
Infrastructure Services 5 days (2022: 7 days)
Construction 9 days (2022: 13 days)
Property 186 days (2022: 4 days)
Overall, the Group considers that it is not exposed to signicant credit risk.
Equity loans to joint ventures of £101.8m (2022: £105.4m) are considered under the general
ECL model and have been compared to future cash ows and net assets of the joint venture
to ensure that they are still expected to be fully recoverable.
Market risk
Interest rate risk
The Group has borrowing facilities to nance short-term working capital and term loans to
nance medium-term capital requirements, which carry interest at oating rates, at a margin
over SONIA. The Group’s borrowings, excluding the effect of derivatives, can be analysed
as follows:
2023
£m
2022
£m
Fixed rate 80.8 131.2
Variable rate 239.6 177.9
Cost of raising nance (1.3) (2.1)
319.1 307.0
The Group has entered into oating to xed interest rate swaps in order to mitigate the
Group’s exposure to movements in interest rates. One of the Group’s joint ventures has
also entered into interest rate swaps in order to mitigate its own interest rate risk.
Interest rate risk arises on the Group’s borrowings where they are not at xed interest rates
and are not hedged. A 50 basis point increase/decrease in the interest rate would lead to
a c.£2.1m increase (2022: £1.8m) or £2.1m decrease (2022: £1.8m) in the Group’s net
nance cost.
Notes to the consolidated financial statements continued
For the year ended 30 June 2023
224
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Foreign currency risk
The Group operates primarily within the UK such that its exposure through its trading
operations to currency risk is not considered to be signicant. Where material foreign
currency exposures are identied, these are hedged using forward foreign exchange
contracts or swaps.
Changes in foreign exchange rates affect the carrying amount of the liability relating to
foreign currency denominated debt on the Group’s balance sheet. The utilisation of derivatives
ensures that the movement recognised in the prot and loss is offset by movements on the
derivative which are recycled from other comprehensive income. As at 30 June 2023 the
Group had the equivalent £25.2m (2022: £45.7m) of debt denominated in US dollars at xed
currency rates using derivatives. A 5% increase/decrease in the US dollar to sterling exchange
rate combined with a 5% increase/decrease in the euro to sterling exchange rate would lead
to a £2.7m decrease (2022: £2.8m) or £2.9m increase (2022: £2.9m) in the carrying amount
of the liability on the Group’s balance sheet, with the movement recognised in other
comprehensive income.
As at 30 June 2023 the Group had unhedged debt outstanding of US$35.9m (2022: US$39.1m).
A 5% increase/decrease in the US dollar to sterling exchange rate would lead to a decrease
of £1.4m/increase of £1.3m (2022: decrease of £1.7m/increase of £1.5m) in the carrying
amount of the liability.
Liquidity risk
The Group’s policy on liquidity risk is to ensure that sufcient borrowing facilities are
available to fund operations over the medium term. The Group’s principal borrowing facilities
are provided by a syndicate of relationship banks and established investors, and in the
case of a number of the loan notes, in the form of unsecured committed borrowing facilities.
The amount of committed borrowing facilities available to the Group is reviewed regularly
and is designed to exceed forecast peak gross debt levels.
Details of guarantees provided by the Group to support the borrowing facilities of its joint
ventures are given in note 16(d). The Group provides no other nancial guarantees other
than those provided to its joint ventures.
Derivative financial instruments
As at 30 June 2023, the Group had the following cross-currency and interest rate swaps:
– One cross-currency swap taken out in 2014 to hedge the currency risk on a US dollar-
denominated loan, nominal value US$40.0m.
– One oating to xed interest rate swap taken out in 2022 to hedge the interest rate risk
on part of the Group’s revolving credit facility, nominal value £100.0m.
– One oating to xed interest rate swap taken out in 2023 to hedge the interest rate risk
on part of the Group’s revolving credit facility, nominal value £100.0m, reducing to £75.0m
in 2024 and £50.0m in 2025.
As at 30 June 2022, the Group had three additional cross-currency swaps, two with a total
value of $20.0m and one with a value of $10.0m. They all expired during the year.
The Group has assessed the effectiveness of these swaps and concluded that they are highly
effective. No amount in relation to hedge ineffectiveness has been charged or credited to
the income statement in relation to any cross-currency or interest rate swap.
The following table indicates the periods in which the cash ows associated with cash ow
hedges are expected to occur and the fair value of the related hedging instruments:
Expected cash ows
Continuing operations
Fair value
£m
Total
£m
0–1 years
£m
1–2 years
£m
2–5 years
£m
Cross-currency
swaps: asset
Gross settled
inows 33.7 1.5 32.2 –
Gross settled
outows (26.8) (1.1) (25.7) –
6.5 6.9 0.4 6.5 –
Interest rate swaps:
asset
Net settled 4.2 2.6 1.7 0.6 0.3
In addition to the above, one of the Group’s property joint ventures has entered into
an interest rate derivative as a means of hedging interest rate risk. The interest-bearing
debt and associated interest rate derivative with this joint venture expires in May 2026
and is without recourse to the Group. At 30 June 2023, the aggregate amount outstanding
on this interest-bearing debt against which an interest rate derivative is held is £12.3m
(2022: £15.0m). The Group’s share of the total net fair value asset of this interest rate
derivative at 30 June 2023 amounted to £0.3m (2022: £0.1m) which have met the criteria
for hedging accounting.
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29 Financial instruments continued
Financial liabilities – analysis of maturity dates
At 30 June 2023, the Group had the following nancial liabilities at amortised cost together
with the maturity prole of their contractual cash ows:
Continuing operations
30 June 2023
Trade and other
payables
1
£m
Borrowings
£m
Lease
liabilities
£m
Total
£m
Carrying value 971.8 319.1 182.6 1,473.5
Contractual undiscounted
cash ows
Less than one year 935.0 23.2 44.2 1,002.4
One to two years 31.4 325.2 35.7 392.3
Two to three years 6.1 – 24.5 30.6
Three to four years 2.1 – 16.0 18.1
Four to ve years – – 11.6 11.6
Over ve years – – 97.9 97.9
974.6 348.4 229.9 1,552.9
Continuing operations
30 June 2022
Trade and other
payables
1
£m
Borrowings
£m
Lease
liabilities
£m
Total
£m
Carrying value 977.3 307.0 157.6 1,441.9
Contractual undiscounted
cash ows
Less than one year 944.3 55.5 31.5 1,031.3
One to two years 25.4 9.4 24.2 59.0
Two to three years 8.0 269.2 17.4 294.6
Three to four years 1.7 – 13.1 14.8
Four to ve years 0.2 – 11.4 11.6
Over ve years 0.7 – 106.7 107.4
980.3 334.1 204.3 1,518.7
1. Trade and other payables exclude other taxes and social security and deferred income.
There is no material difference between the carrying value and fair value of the Group’s
nancial assets and liabilities.
Fair value estimation
The table below analyses nancial instruments carried at fair value, by valuation method.
The different levels have been dened as follows:
Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2 – Inputs other than quoted prices included within level 1 that are observable for the
asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices).
The Group uses cross-currency and interest rate swaps for hedging. These derivatives
are classied as level 2. The prices of derivative transactions have been derived from
proprietary models used by the bank counterparties using mid-market mark to market
valuations for trades at the close of business on 30 June 2023.
Level 3 – Inputs for the asset or liability that are not based on observable market data
(that is, unobservable inputs).
The following table presents the Group’s nancial assets and liabilities that are measured
at fair value at 30 June 2023:
Level 1
£m
Level 2
£m
Level 3
£m
Total
£m
Assets
Derivatives used for hedging –
Cross-currency swaps – 6.5 – 6.5
Derivatives used for hedging –
interest rate swap – 4.2 – 4.2
There were no transfers between levels 1 and 2 during the year ended 30 June 2023.
The following table presents the Group’s nancial assets and liabilities that are measured
at fair value at 30 June 2022:
Level 1
£m
Level 2
£m
Level 3
£m
Total
£m
Assets
Derivatives used for hedging –
Cross-currency swaps – 12.2 – 12.2
Derivatives used for hedging –
interest rate swap – – – –
There were no transfers between levels 1 and 2 during the year ended 30 June 2022.
Notes to the consolidated financial statements continued
For the year ended 30 June 2023
226
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Borrowings and borrowing facilities
As at 30 June 2023, the Group had the following unsecured committed facilities after
the effect of derivatives:
– Revolving credit facility of £495.0m (2022: £535.0m), at a margin over SONIA, due for
renewal on 31 January 2025, £229.9m drawn at 30 June 2023 (2022: £177.9m); and
– Two loan notes, principal amounts of £21.0m, US$75.9m, with xed coupons of between
5.2% and 5.4% repayable in January 2025, fully drawn at 30 June 2023, totalling £74.4m,
which includes elements at both xed and oating currency rates (2022: £111.1m).
In addition, the Group has unsecured overdraft facilities of £18.0m (2022: £18.0m),
at a margin over base rate, repayable on demand, undrawn at 30 June 2023 and 2022.
Included within borrowings are capitalised loan fees of £1.3m (2022: £1.9m).
The Group repaid and reduced total available facilities by £83.8m (2022: £38.2m) in the year
ended 30 June 2023.
30 Financial and capital commitment
2023
£m
2022
£m
Commitments for capital expenditure 7.8 18.9
7.8 18.9
Capital commitments recognised during the year ended 30 June 2023 relate to capital
contributions to a joint venture.
31 Related parties
Identity of related parties
The Group has a related party relationship with its joint ventures, key management
personnel and pension schemes in which its employees participate.
Transactions with key management personnel
The Group’s key management personnel are the Executive and Non-Executive Directors
as identied in the Directors’ Remuneration report on pages 120–153.
In addition to their salaries, the Group also provides non-cash benets to Directors and
contributes to their pension arrangements as disclosed on page 130. Key management
personnel also participate in the Group’s share option programme (see note 27).
Key management personnel compensation comprises:
2023
£m
2022
£m
Total xed pay as analysed in the Directors’ remuneration report 2.0 1.9
Bonus as analysed in the Directors’ remuneration report 1.5 1.2
Employer’s national insurance contributions 0.6 0.4
Share-based payment charge
1
1.8 1.1
Total key management personnel compensation 5.9 4.6
1. Share-based payment charge is calculated under IFRS 2 ‘Share-based Payments’ as described in note 27.
Transactions with pension schemes
Details of transactions between the Group and pension schemes in which its employees
participate are detailed in note 9.
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31 Related parties continued
Transactions with joint ventures
2023
£m
2022
£m
Construction services and materials 0.9 23.2
Staff and associated costs 2.5 2.4
Management services 1.3 1.0
Interest on loans to joint ventures 0.4 0.7
Plant hire 0.2 0.2
5.3 27.5
Those joint ventures which the Directors consider to be material to the Group are disclosed
in note 16.
Equity and other shareholder loans due from joint ventures are analysed below:
2023
£m
2022
£m
Kier Cornwall Street Holdings 1 LLP 16.2 6.5
Kier Cornwall Street Holdings 2 LLP 16.2 6.5
Kier Richmond Holdings Limited 9.9 9.9
Kier PGIM Logistics Holdco Limited 8.6 7.4
Solum Regeneration (Twickenham) LLP 8.5 9.2
Solum Regeneration (Guildford) LLP 7.5 8.7
Solum Regeneration (Bishops) LLP 7.5 6.7
Watford Health Campus Partnership LLP 7.2 9.0
Kier Trade City Holdco 1 LLP 6.8 6.8
50 Bothwell Street Holdco 1 LLP 5.2 5.2
Solum Regeneration (Redhill) LLP 3.1 2.3
Solum Regeneration (Epsom) LLP 1.6 1.5
Solum Regeneration (Surbiton) LLP 1.0 0.8
Kier (Southampton) Investment Limited 0.9 12.2
Solum Regeneration (Maidstone) LLP 0.7 0.7
Solum Regeneration Holding 1 LLP 0.7 0.7
Solum Regeneration Holding 2 LLP 0.2 0.2
Kier (Newcastle) Investment Limited – 11.1
101.8 105.4
Trading balances and other loans due from/(to) joint ventures are analysed below:
2023
£m
2022
£m
Kier Trade City LLP 0.4 (0.3)
Dragon Lane LLP 0.1 0.1
Kier Reading LLP (0.4) (0.4)
Kier Cornwall Street – 2.0
Kier Maidenhead LLP – (0.4)
Lysander Student Operations Limited – (0.5)
Solum Regeneration (Twickenham) LLP – (6.7)
Winsford Devco LLP – –
Kier (Southampton) Investment Limited – –
Watford Health Campus Partnership LLP – –
Hackney Schools for the Future 2 Limited – –
Team Van Oord Limited – –
Kier Richmond Limited – –
0.1 (6.2)
Notes to the consolidated financial statements continued
For the year ended 30 June 2023
228
Kier Group plc Annual Report and Accounts 2023 | www.kier.co.uk
32 Subsidiaries and other undertakings
A full list of subsidiaries, branches, associated undertakings, and joint arrangements as at
30 June 2023 is detailed below. Unless stated otherwise, all undertakings are wholly owned
and held indirectly by Kier Group plc.
Subsidiaries
Company name
Registered
ofce
1
Share
class(es) held
% held
by Group
2020 Liverpool Limited 1 Ordinary 100%
A C Chesters & Son Limited 1 Ordinary 100%
AK Student Living Limited 1 A Ordinary 100%
B Ordinary 100%
Arena Central Developments LLP 1 – 100%
Arena Central Management Limited 1 A Ordinary 100%
25%
3
Caribbean Construction Company Limited 2 Ordinary 100%
Caxton Integrated Services Holdings Limited 1 Ordinary 100%
ClearBOX Limited 1 Ordinary 100%
Dudley Coles Limited 1 Ordinary 100%
FDT (Holdings) Ltd 1 Ordinary 100%
FDT Associates Ltd 1 Ordinary A 100%
Heart of Wales Property Services Limited 3 Ordinary 50%
J L Kier & Company (London) Limited 1 Ordinary 100%
J L Kier & Company Limited 1 Ordinary 100%
Kier (Catterick) Limited 1 A Ordinary 100%
B Ordinary 100%
Kier (Kent) PSP Limited 1 A Ordinary 100%
B Ordinary 100%
Kier (Malaysia) SDN. BHD. (in liquidation) 4 Ordinary 100%
Kier (Newcastle) Investment Ltd 1 Ordinary 100%
Kier (Newcastle) Operation Limited 1 Ordinary 100%
Kier (NR) Limited 1 Ordinary 100%
Kier Asset Partnership Services Limited 1 Ordinary 100%
Kier Benets Limited 1 Ordinary 100%
Kier Build Limited 1 Ordinary 100%
Kier Business Services Limited 1 Ordinary 100%
Kier Caribbean and Industrial Limited 1 Ordinary 100%
Kier CB Limited 1 Ordinary 100%
Kier Commercial Investments Limited 1 Ordinary 100%
Company name
Registered
ofce
1
Share
class(es) held
% held
by Group
Kier Commercial UKSC Limited 1 Ordinary 100%
Kier Construction Limited 1 Ordinary 100%
Kier Construction Limited 5 Ordinary 100%
Kier Construction LLC
9
6 Ordinary 49%
Kier Construction SA 7 Ordinary 100%
Kier Developments Limited 1 A Ordinary 100%
B Ordinary 100%
C Ordinary 100%
Kier Dormant Holdings Limited (in liquidation) 1 Ordinary 100%
Kier Dubai LLC
9
8 Ordinary 49%
Kier Education Investments Limited 1 B Ordinary 100%
M Ordinary 100%
Kier Education Services Limited 1 B Ordinary 100%
M Ordinary 100%
Kier Energy Solutions Limited 1 Ordinary 100%
A Ordinary 100%
Kier Ewan Limited 1 Ordinary 100%
Kier Facilities Services Limited 1 Ordinary 100%
Kier Finance & Treasury Holdings Limited 1 Ordinary 100%
Kier Finance Limited 1 Ordinary 100%
Kier Fleet Services Limited 1 Ordinary 100%
Kier Green Investments Limited
(formerly Kier Thurrock Limited) 1 Ordinary 100%
Kier Group Trustees Limited
2
1 Ordinary 100%
Kier Harlow Limited 1 A Ordinary 100%
B Ordinary 100%
Kier Holdco 2 Limited 1 Ordinary 100%
Kier Holdings Limited 1 Ordinary 100%
Irredeemable
preference 100%
Kier Infrastructure and Overseas Limited 1 Ordinary 100%
Kier Infrastructure and Overseas Limited
– Hong Kong Branch
Kier Infrastructure and Overseas Limited
– Jamaica Branch
Kier Infrastructure and Overseas Limited
– Trinidad Branch
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Company name
Registered
ofce
1
Share
class(es) held
% held
by Group
Kier Infrastructure Pty Ltd 9 Ordinary 100%
Kier Insurance Management Services Limited 1 Ordinary 100%
Kier Integrated Services (Estates) Limited 1 Ordinary 100%
Kier Integrated Services (Holdings) Limited 1 Ordinary 100%
Deferred 100%
Kier Integrated Services (Trustees) Limited 1 Ordinary 100%
Kier Integrated Services Group Limited 1 Ordinary 100%
Kier Integrated Services Limited 1 Ordinary 100%
Kier International (Investments) Limited 1 Ordinary 100%
Kier International Limited 1 Ordinary 100%
Kier International Limited – India Branch
(in liquidation)
Kier International Limited – Jamaica Branch
Kier International Limited 10 Ordinary 100%
Kier Islington Limited 1 Ordinary 100%
Islington 100%
Kier Jamaica Development Limited 1 Ordinary 100%
Kier Limited
2
1 Ordinary 100%
Kier Management Consulting Limited 1 Ordinary 100%
A Ordinary 100%
B Ordinary 100%
Kier MBS Limited 1 Ordinary 100%
Kier Midlands Limited 1 Ordinary 100%
Kier Minerals Limited 1 Ordinary 100%
Kier Mining Investments Limited 1 Ordinary 100%
Kier National Limited 1 Ordinary 100%
Kier North Tyneside Limited
5
1 B Ordinary 100%
80%³
Kier Overseas (Four) Limited 1 Ordinary 100%
Kier Overseas (Nine) Limited 1 Ordinary 100%
Kier Overseas (Seventeen) Limited 1 Ordinary 100%
Kier Overseas (Twenty-Three) Limited 1 Ordinary 100%
Kier Parkman Ewan Associates Limited 1 Ordinary A 100%
Kier Parkman GB Limited (in liquidation) 1 Ordinary 100%
Kier Parkman ServiGroup Limited (in liquidation) 1 Ordinary 100%
Company name
Registered
ofce
1
Share
class(es) held
% held
by Group
Kier Plant Limited 1 Ordinary 100%
Kier Professional Services Limited 1 Ordinary 100%
Kier Project Investment Limited 1 Ordinary 100%
Kier Property Developments Limited 1 Ordinary 100%
Kier Property Limited 1 Ordinary 100%
Kier Property Management Company Limited 1 Ordinary 100%
Kier Rail Limited 1 Ordinary 100%
Kier Recycling CIC 1 Ordinary 100%
Kier Services Limited 1 Ordinary 100%
Kier Shefeld LLP 1 – 80.1%
Kier South East Limited 1 Ordinary 100%
Kier Southern Limited 1 Ordinary 100%
Kier Stoke Limited 1 A Ordinary 100%
Kier Sydenham Limited 1 Ordinary 100%
Kier Trafc Support Limited 1 Ordinary 100%
Kier Transportation Limited (formerly Kier
Highways Limited) 1
A Ordinary
B Ordinary
100%
100%
Kier UKSC LLP 1 – 100%
Kier Ventures Limited 1 Ordinary 100%
Kier Ventures UKSC Limited 1 Ordinary 100%
Kier York Street LLP 1 – 100%
Liferange Limited 1 Ordinary 100%
Magnetic Limited 1 Ordinary 100%
McNicholas Construction (Holdings) Limited 1 Ordinary 100%
McNicholas Construction Services Limited 1 Ordinary 100%
MPHBS Limited 1 Ordinary 100%
MRBL Limited 1 Ordinary A 100%
Ordinary B 100%
Deferred B 100%
Parkman Consultants Limited 1 Ordinary 100%
Parkman Holdings Limited (in liquidation) 1 Ordinary 100%
Parkman Kenya Limited 11 Ordinary 100%
Parkman Nigeria Limited 12 Ordinary 100%
Pure Buildings Limited 1 Ordinary 100%
Pure Recycling Warwick Limited 1 Ordinary A 100%
Notes to the consolidated financial statements continued
For the year ended 30 June 2023
32 Subsidiaries and other undertakings continued
230
Kier Group plc Annual Report and Accounts 2023 | www.kier.co.uk
Company name
Registered
ofce
1
Share
class(es) held
% held
by Group
Ordinary B 100%
Saudi Kier Construction Limited (in liquidation) 13 Ordinary 100%
T Cartledge Limited 1 Ordinary 100%
T H Construction Limited 1 Ordinary 100%
T J Brent Limited 1 Ordinary 100%
Ordinary B 100%
Ordinary C 100%
Tempsford Insurance Company Limited
2
14 Ordinary 100%
The Impact Partnership (Rochdale Borough)
Limited 1 Ordinary 80.1%
Tor2 Limited 1 PSP Shares 100%
80.01%³
TradeDirect Logistics Limited 1 Ordinary 100%
Turriff Contractors Limited 15 Ordinary 100%
Turriff Group Limited 15 Ordinary 100%
Ordinary A 100%
Ordinary B 100%
Usherlink Limited 1 Ordinary 100%
W. & C. French (Construction) Limited 1 Ordinary 100%
Wallis Limited 1 Ordinary 100%
Wallis Western Limited 1 Ordinary 100%
William Moss Construction Limited (in liquidation) 16 Ordinary 100%
William Moss Group Limited (The) 1 Ordinary 100%
1. See list of registered ofce details and explanatory notes on page 235.
Listed below are subsidiaries controlled and consolidated by the Group, which under
Section 479A of the Companies Act 2006 (the ‘Act’) are exempt from the requirements of
the Act relating to the audit of accounts.
Company name
Company
registration
number Year-end
2020 Liverpool Limited 04782302 31 March 2023
Arena Central Developments LLP OC305452 30 June 2023
Caxton Integrated Services Holdings Limited 01531034 30 June 2023
ClearBOX Limited 08658406 30 June 2023
Kier (Catterick) Limited 07372563 30 June 2023
Kier (Newcastle) Investment Ltd 09978111 30 June 2023
Company name
Company
registration
number Year-end
Kier (Newcastle) Operation Limited 10609470 30 June 2023
Kier Asset Partnership Services Limited 06928701 30 June 2023
Kier Build Limited 01551959 30 June 2023
Kier Commercial Investments Limited 04002798 30 June 2023
Kier Education Investments Limited 06458919 30 June 2023
Kier Education Services Limited 05457729 30 June 2023
Kier Finance Limited 05887689 30 June 2023
Kier Green Investments Limited
(formerly Kier Thurrock Limited) 08922437 30 June 2023
Kier Harlow Limited 05961079 30 June 2023
Kier Holdings Limited 05887559 30 June 2023
Kier International (Investments) Limited 01463191 30 June 2023
Kier Islington Limited 03922885 30 June 2023
Kier MBS Limited 11632543 30 June 2023
Kier Minerals Limited 02099531 30 June 2023
Kier Overseas (Nine) Limited 01531039 30 June 2023
Kier Overseas (Seventeen) Limited 01462100 30 June 2023
Kier Overseas (Twenty-Three) Limited 02127112 30 June 2023
Kier Plant Limited 04233359 30 June 2023
Kier Professional Services Limited 08881783 30 June 2023
Kier Recycling CIC 03153490 30 June 2023
Kier Stoke Limited 06391459 30 June 2023
Kier Sydenham Limited 08486944 30 June 2023
Kier Thurrock Limited 08922437 30 June 2023
Magnetic Limited 07775665 30 June 2023
MPHBS Limited 05916368 30 June 2023
Pure Buildings Limited 06290364 30 June 2023
T H Construction Limited 01532971 30 June 2023
TradeDirect Logistics Limited 11400572 30 June 2023
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32 Subsidiaries and other undertakings continued
Joint ventures
Company name
Registered
ofce
1
Interest
held
Property
3 Sovereign Square Holdings 1 LLP 1 50%
3 Sovereign Square Holdings 2 LLP 1 50%
3 Sovereign Square LLP 1 50%
50 Bothwell Street Holdco 1 LLP 17 50%
50 Bothwell Street Holdco 2 LLP 17 50%
50 Bothwell Street LLP 17 50%
Dragon Lane Holdings 1 LLP 1 50%
Dragon Lane Holdings 2 LLP 1 50%
Dragon Lane LLP 1 50%
Kent LEP 1 Limited 1 80%
Kier (Southampton) Development Limited 1 75%
Kier (Southampton) Investment Limited 1 75%
Kier (Southampton) Operations Limited 1 75%
Kier Cornwall Street Holdings 1 LLP 1 90%
Kier Cornwall Street Holdings 2 LLP 1 90%
Kier Cornwall Street LLP 1 90%
Kier Countryside Holdings 1 LLP 18 50%
Kier Countryside Holdings 2 LLP 18 50%
Kier Foley Street Holdco 1 LLP 1 90%
Kier Foley Street Holdco 2 LLP 1 90%
Kier Foley Street LLP 1 90%
Kier HGP Devco 1 LLP 1 50%
Kier HGP Devco 2 LLP 1 50%
Kier HGP Holdings 2 Limited 1 50%
Kier HGP Holdings LLP 1 50%
Kier Maidenhead Holdings 1 LLP 1 90%
Kier Maidenhead Holdings 2 LLP 1 90%
Kier Maidenhead LLP 1 90%
Kier PGIM Logistics (Bognor) Ltd 1 25.5%
Kier PGIM Logistics (Bracknell) Ltd 1 25.5%
Kier PGIM Logistics (Knowsley) Ltd 1 25.5%
Kier PGIM Logistics (Milton Keynes) Ltd 1 25.5%
Company name
Registered
ofce
1
Interest
held
Kier PGIM Logistics (St. Albans) Ltd 1 25.5%
Kier PGIM Logistics Holdco Ltd 1 25.5%
Kier PGIM Logistics Propco 5 Ltd 1 25.5%
Kier PGIM Logistics Propco 7 Ltd 1 25.5%
Kier PGIM Logistics Propco 8 Ltd 1 25.5%
Kier Reading Holdco 1 LLP 1 90%
Kier Reading Holdco 2 LLP 1 90%
Kier Reading LLP 1 90%
Kier Richmond Holdings Limited 1 90%
Kier Richmond Limited 1 90%
Kier Sydenham GP Holdco Limited 1 50%
Kier Sydenham GP Limited 1 50%
Kier Sydenham LP 1 50%
Kier Sydenham Nominee Limited 1 50%
Kier Trade City Holdco 1 LLP 1 90%
Kier Trade City Holdco 2 LLP 1 90%
Kier Trade City LLP 1 90%
Kier Warth Limited 1 50%
Lysander Student Properties Investments Limited 1 75%
Lysander Student Properties Limited 1 75%
Lysander Student Properties Operations Limited 1 75%
Penda Limited 1 50%
Premier Inn Kier Limited 1 50%
Saltbox Business Park (Management) Limited 1 16.75%
Solum Regeneration (Bishops) LLP 1 50%
Solum Regeneration (Epsom) Limited Partnership 1 50%
Solum Regeneration (Guildford) LLP 1 50%
Solum Regeneration (Haywards) LLP 1 50%
Solum Regeneration (Kingswood) LLP 1 50%
Solum Regeneration (Maidstone) LLP 1 50%
Solum Regeneration (Redhill) LLP 1 50%
Solum Regeneration (Surbiton) LLP 1 50%
Solum Regeneration (Twickenham) LLP 1 50%
Notes to the consolidated financial statements continued
For the year ended 30 June 2023
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Company name
Registered
ofce
1
Interest
held
Solum Regeneration (Walthamstow) LLP 1 50%
Solum Regeneration Epsom (GP Subsidiary) Limited 1 50%
Solum Regeneration Epsom (GP) Limited 1 50%
Solum Regeneration Epsom (Residential) LLP 1 50%
Solum Regeneration Holding 1 LLP 1 50%
Solum Regeneration Holding 2 LLP 1 50%
Transcend Property Limited 19 50%
Tri-Link 140 Holdings 1 LLP 1 50%
Tri-Link 140 Holdings 2 LLP 1 50%
Tri-Link 140 LLP 1 50%
Watford Health Campus Limited 1 50%
Watford Health Campus Partnership LLP 1 50%
Watford Riverwell (Family Housing) LLP 1 50%
Watford Riverwell Management Company Limited 1 50%
Watford Woodlands LLP 1 50%
Winsford Devco LLP 1 50%
Winsford Holdings 1 LLP 1 50%
Winsford Holdings 2 LLP 1 50%
Construction
Kier Graham Defence Limited 1 50%
Services
2020 Knowsley Limited 1 80.1%
Hackney Schools for the Future Limited 1 80%
Team Van Oord Limited 20 25%
1. See list of registered ofce details and explanatory notes on page 235.
Strategic report Corporate governance Financial statements Other information
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Notes to the consolidated financial statements continued
For the year ended 30 June 2023
Joint operation name Description Trading address
UK
Crossrail Contracts
300/410/435
a joint arrangement between Kier Infrastructure and Overseas
Limited, BAM Nuttall Limited and Ferrovial Agroman (UK) Limited
BAM Ferrovial Kier JV C435, The London School of Beauty,
18-19 Long Lane, London, EC1A 9LP
Deephams a joint arrangement between Kier Infrastructure and Overseas
Limited, J Murphy & Sons Limited, and Aecom Limited
Deephams Sewage Treatment Wales, Pickett’s Lock Lane,
Edmonton, N9 0BA
Devonport a joint arrangement between Kier Infrastructure and Overseas
Limited and BAM Nuttall Limited
St. James House, Knoll Road, Camberley, Surrey, GU15 3XW
EKFB a joint arrangement between Kier Infrastructure and Overseas
Limited, Eiffage Génie Civil, Ferrovial Agroman (UK) Limited and
BAM Nuttall Limited
5th Floor, Exchange House, Midsummer Boulevard,
Milton Keynes, MK9 2EA
Hercules a joint arrangement between Kier Construction Limited, Kier Living
Limited and Balfour Beatty
Hercules Site Ofces, The Wessex Building, MOD Lyneham,
Calne Road, Lyneham, Chippenham, SN15 4PZ
Hinkley Framework a joint arrangement between Kier Infrastructure and Overseas
Limited and BAM Nuttall Limited
J23 P&R HPC Postal Consolidation Centre, Huntsworth Business
Centre, North Petherton, Somerset, TA6 6TS
Kier BAM JV a joint arrangement between Kier Integrated Services Limited and
BAM Civil Limited (company number 17543, registered ofce Kill,
County Kildaire)
2nd Floor, Optimum House, Clippers Quay, Salford, M50 3XP
KCD a joint arrangement between Kier Integrated Services Limited and
Clancy Docwra Limited
Thames Water Ofces, Clear Water Court, Vastern Rd,
Reading, RG1 8DB
Luton People Mover a joint arrangement between Kier Infrastructure and Overseas
Limited and VolkerFitzpatrick Limited
Hertford Road, Hoddesdon, EN11 9BX
Mersey Gateway a joint arrangement between Kier Infrastructure and Overseas
Limited, Samsung C&T ECUK Limited and FCC Construccion S.A.
Forward Point, Tan House Lane, Widnes, WA8 0SL
RAF Lakenheath a joint arrangement between Kier Construction Limited and
VolkerFitzpatrick Limited
Hertford Road, Hoddesdon, EN11 9BX
Tarmac Kier JV a joint arrangement between Kier Highways Limited and
Tarmac Trading Limited
2nd Floor, Optimum House, Clippers Quay Salford, M50 3XP
International
The following joint operations, in which the Group participation is between 30% and 65%, operate overseas in the territory indicated:
MTRC Contract 824 a joint arrangement between Kier Infrastructure and Overseas
Limited and Kaden Construction Limited
Tower B, 6/F, Manulife Financial Centre, 223 Wai Yip Street,
Kwun Tong, Kowloon, Hong Kong
MTRC Contract 901 a joint arrangement between Kier Infrastructure and Overseas
Limited, Laing O’Rourke Hong Kong Limited and Kaden Construction
Limited
Room 905, 9/F, King’s Road, North Point, Hong Kong
Saadiyat Rotana Hotel and Resort Complex a joint arrangement between Kier Construction LLC and Ali and
Sons Contracting Co LLC
P.O. Box 2153, Abu Dhabi
Kier ACC a joint arrangement between Kier Dubai LLC and Arabian
Construction Co.SAL
P.O. Box 24461, Dubai
32 Subsidiaries and other undertakings continued
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Registered office addresses
Number Address
1 2nd Floor, Optimum House, Clippers Quay, Salford, M50 3XP, UK
2 Harbour Head, Harbour View, Kingston 17, Jamaica
3 Unit 31, Ddole Road Industrial Estate, Llandrindod Wells, Powys, LD1 6DF, UK
4 9-5 & 7-5, Jalan 8/146, Bandar Tasik Selatan, Kuala Lumpur, 57000, Malaysia
5 c/o Grant Thornton, Cnr Bank Street and West Independence Sq Street,
Basseterre, Saint Kitts and Nevis
6 Unit 869, Al Gaith Tower, Hamdan Street, PO Box 61967, Abu Dhabi,
United Arab Emirates
7 151 Angle Avenue, Jean Paul II et Impasse Duverger, Turgeau,
Port-au-Prince, Haiti
8 905, 9th Floor, Thuraya Tower, Tecom, P.O. Box 24461, Dubai,
United Arab Emirates
9 Pinsent Masons, Level 46, 101 Collins Street, Melbourne, VIC 3000, Australia
10 6th Floor, Emperor Commercial Centre, 39 Des Voeux Road Central, Hong Kong
11 5th Floor, Agip House, P.O. Box 41425, Nairobi, Kenya
12 9, N/Azikiwe St., Lagos, Nigeria
13 Ofce No 5, 3rd Floor, Building No 8122, street 4A, 5323 Prince Muhammad Ibn
Soud Dist, P.C. 32241 Dammam, Kingdom of Saudi Arabia
14 PO Box 33, Dorey Court, Admiral Park, St Peter Port, GY1 4AT, Guernsey
15 Campsie House, Buchanan Business Park, Cumbernauld Road, Stepps,
Glasgow, G33 6HZ, UK
16 1 More London Place, London, SE1 2AF, UK
17 Renoir House, 135-137 New Bond Street, Mayfair, London, England, W1S 2TQ, UK
18 Countryside House, The Drive, Brentwood, Essex, CM13 3AT, UK
19 1 Kingsway, London, WC2B 6AN, UK
20 Bankside House, Heneld Road, Small Dole, Heneld, West Sussex, BN5 9XQ, UK
Explanatory notes
1. The share capital of all entities is wholly owned and held indirectly by Kier Group plc unless indicated otherwise.
2. Shares held directly by Kier Group plc.
3. Total interest in entity held by the Group as there are other share class(es) held by a third party.
4. In some jurisdictions in which the Group operates, share classes are not dened and in these instances,
for the purposes of disclosure, these holdings have been classied as ordinary shares.
5. The Group has entered into a partnership arrangement with North Tyneside Council whereby the Council has
a participating ownership interest and receives a minority share of the prots of Kier North Tyneside Limited.
6. Joint operations are contracted agreements to co-operate on a specic project which is an extension of the
Group’s existing business. Joint ventures are ongoing businesses carrying on their own trade.
7. Interests in the above joint ventures are held by subsidiary undertakings.
8. The joint ventures where the Group has an interest in excess of 50% are still considered joint ventures
as the Group has joint control.
9. Accounted for as a subsidiary as control is achieved through an agreement between shareholders.
10. Where companies are shown as being in liquidation, in all cases this is either a members’ voluntary liquidation
or a strike-off application.
33 Post balance sheet event
On 4 September 2023, after the year-end, the Group agreed to acquire substantially all of
the rail assets of Buckingham Group Contracting Limited (‘in Administration’) and their HS2
contract supplying Kier’s HS2 joint venture, EKFB for a total consideration of up to £9.6m.
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Note
2023
£m
2022
£m
Non-current assets
Investments 5 446.2 437.8
Deferred tax assets
1
6 3.1 3.3
Amounts due from subsidiary undertakings 7 1,525.4 1,467.5
Other nancial assets 9 9.7 8.5
Non-current assets 1,984.4 1,917.1
Current assets
Other nancial assets 9 1.0 3.7
Current assets 1.0 3.7
Total assets 1,985.4 1,920.8
Current liabilities
Bank overdraft (444.3) (415.8)
Creditors: amounts falling due within one year 8 (2.5) (42.4)
Corporation tax payable
1
(15.2) (9.9)
Provisions for liabilities (2.2) (1.2)
Current liabilities (464.2) (469.3)
Non-current liabilities
Creditors: amounts falling due after more than
one year 8 (309.4) (266.5)
Amounts due to subsidiary undertakings 8 (56.0) (60.9)
Provisions for liabilities – (2.2)
Non-current liabilities (365.4) (329.6)
Total liabilities (829.6) (798.9)
Net assets 1,155.8 1,121.9
Note
2023
£m
2022
£m
Shareholders’ funds
Called up share capital 9 4.5 4.5
Share premium account 684.3 684.3
Merger reserve 350.6 350.6
Capital redemption reserve 2.7 2.7
Prot and loss account 111.1 79.7
Cash ow hedge reserve 2.6 0.1
Total equity 1,155.8 1,121.9
1. Deferred tax asset of £3.3m and corporation tax payable of £9.9m have been re-presented in the
comparative information to be shown separately on the face of the balance sheet and to present deferred
tax in non-current assets.
The prot for the year was £34.9m (2022: £20.6m).
The nancial statements of Kier Group plc, company registration number 2708030,
on pages 236–241 were approved by the Board of Directors on 13 September 2023
and were signed on its behalf by:
Andrew Davies Simon Kesterton
Chief Executive Chief Financial Officer
Company
balance sheet
As at 30 June 2023
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Called up
share capital
£m
Share
premium account
£m
Merger
reserve
£m
Capital
redemption
reserve
£m
Prot and
loss account
£m
Cash ow
hedge reserve
£m
Total
equity
£m
At 1 July 2021 4.5 684.3 350.6 2.7 57.2 0.9 1,100.2
Prot for the year – – – – 20.6 – 20.6
Other comprehensive expense – – – – – (0.8) (0.8)
Total comprehensive income/(expense) for the year – – – – 20.6 (0.8) 19.8
Purchase of own shares – – – – (6.7) – (6.7)
Share-based payments – – – – 8.6 – 8.6
At 30 June 2022 4.5 684.3 350.6 2.7 79.7 0.1 1,121.9
Prot for the year – – – – 34.9 – 34.9
Other comprehensive income – – – – – 2.5 2.5
Total comprehensive income for the year – – – – 34.9 2.5 37.4
Purchase of own shares – – – – (11.9) – (11.9)
Share-based payments – – – – 8.4 – 8.4
At 30 June 2023 4.5 684.3 350.6 2.7 111.1 2.6 1,155.8
Included in the prot and loss account is the balance on the share scheme reserve which comprises the investment in own shares of £11.2m (2022: £6.9m) and a credit balance
on the share scheme reserve of £12.8m (2022: £15.5m).
Details of the shares held by the Kier Group 1999 Employee Benet Trust and of the share-based payment scheme are included in note 27 to the consolidated nancial statements.
Company statement
of changes in equity
For the year ended 30 June 2023
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1 Accounting policies
The principal accounting policies are summarised below. Other than where new accounting
policies have been adopted (as noted below), they have been applied consistently
throughout the year and the preceding year.
Basis of preparation
The nancial statements have been prepared in accordance with Financial Reporting
Standard 101 ‘Reduced Disclosure Framework’ (‘FRS 101’) and the Companies Act 2006.
The nancial statements have been prepared under the historical cost convention, except
for derivative nancial instruments which are stated at their fair value.
Kier Group plc is a company incorporated in the United Kingdom under the Companies Act.
The address of the registered ofce is 2nd Floor, Optimum House, Clippers Quay, Salford,
England, M50 3XP.
The Company’s nancial statements are included in the Kier Group plc consolidated
nancial statements for the year ended 30 June 2023. As permitted by Section 408 of
the Companies Act 2006, the Company has not presented its own prot and loss account.
None of the standards, interpretations or amendments effective for the rst time from
1 July 2022 have a material effect on the Company’s nancial statements.
The Company has taken advantage of the following disclosure exemptions in preparing
these nancial statements, as permitted by FRS 101:
– The requirement of paragraphs 45(b) and 46–52 of IFRS 2 ‘Share-Based Payments’
– The requirements of IFRS 7 ‘Financial Instruments: Disclosures’
– The requirements of paragraphs 91–99 of IFRS 13
– ‘Fair Value Measurement’
– The requirement in paragraph 38 of IAS 1 ‘Presentation of Financial Statements’
to present comparative information in respect of paragraph 79(a)(iv) of IAS 1
– The requirement of paragraphs 10(d), 10(f), 16, 38A, 38B, 38C, 38D, 40A, 40B,
40C, 40D, 111 and 134–136 of IAS 1 ‘Presentation of Financial Statements’
– The requirements of IAS 7 ‘Statement of Cash Flows’
– The requirements of paragraphs 30 and 31 of IAS 8 ‘Accounting Policies,
Changes in Accounting Estimates and Errors’
– The requirement of paragraphs 17 and 18A of IAS 24 ‘Related Party Disclosures’
– The requirements in IAS 24 ‘Related Party Disclosures’ to disclose related party
transactions entered into between two or more members of a group
– The requirements of paragraphs 134(d) to 134(f) and 135(c) to 135(e)
of IAS 36 ‘Impairment of Assets’.
These nancial statements are separate nancial statements.
Where required, equivalent disclosures are given in the Annual Report and Accounts
of the Group as shown in notes 1–10.
Going concern
The Directors have made enquiries and have a reasonable expectation that the
Company has adequate resources to continue in existence for the foreseeable future.
For this reason, they adopt the going concern basis in preparing the nancial statements.
See also pages 171 and 172.
Fixed asset investments
Investments in subsidiary undertakings are included in the balance sheet at cost less
any provision for impairment.
Taxation
Income tax comprises current and deferred tax. Income tax is recognised in the income
statement except to the extent that it relates to items recognised directly in equity, in which
case it is recognised in equity.
Current tax is the expected tax payable on taxable income for the year, using tax rates
enacted or substantively enacted at the balance sheet date, and any adjustment to tax
payable in respect of previous years.
Deferred tax is provided using the balance sheet method, providing for temporary
differences between the carrying amounts of assets and liabilities for nancial reporting
purposes and the amounts used for taxation purposes. The deferred tax provision is based
on the expected manner of realisation or settlement of the carrying amount of the assets
and liabilities, using tax rates enacted or substantively enacted at the balance sheet date.
A deferred tax asset is recognised only to the extent that it is probable that future taxable
prots will be available against which the asset can be utilised. Deferred tax assets are
reduced to the extent that it is no longer probable that the related tax benet will be realised.
Provisions
Provisions are recognised when the Company has a present legal or constructive obligation
as a result of a past event, and where it is probable that an outow will be required to settle
the obligation and the amount can be reliably estimated.
Notes to the Company
financial statements
For the year ended 30 June 2023
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Financial instruments
Financial assets and nancial liabilities are recognised in the Company’s balance sheet
when the Company becomes a party to the contractual provisions of the instrument.
The principal nancial assets and liabilities of the Company are as follows:
(a) Cash and cash equivalents
Cash and cash equivalents comprise cash at bank and in hand, including bank deposits
with original maturities of three months or less, net of bank overdrafts where legal right
of set-off exists. Bank overdrafts are included within nancial liabilities in current liabilities
in the balance sheet.
(b) Bank and other borrowings
Interest-bearing bank and other borrowings are recorded at the fair value of the proceeds
received, net of direct issue costs. Finance charges, including premiums payable on settlement
or redemption and direct issue costs, are accounted for on an accruals basis in the income
statement using the effective interest method and are added to the carrying value of the
instrument to the extent that they are not settled in the period in which they arise.
(c) Amounts due from subsidiary undertakings
Amounts due from subsidiaries are initially recorded at their fair value. Subsequent to
initial recognition, the loans are measured at amortised cost. In accordance with IFRS 9,
the Company has undertaken an exercise of calculating the expected credit losses on the
amounts due from subsidiaries. The Directors regard the relevant subsidiaries as having
a relatively low probability of default on the loans and do not consider that there has been
a signicant increase in credit risk since the loan was rst recognised. By virtue of their
participation in Group bank pooling arrangements, the subsidiaries had access to sufcient
facilities to enable them to repay the loans, if demanded, at the reporting date. Only immaterial
amounts of expected credit losses were calculated and, therefore, the Company has chosen
not to adjust the value of the loans for any expected credit loss provisions.
(d) Derivative financial instruments
Derivatives are initially recognised at fair value on the date that the contract is entered into
and subsequently remeasured in future periods at their fair value. The method of recognising
the resulting change in fair value depends on whether the derivative is designated as a
hedging instrument and whether the hedging relationship is effective.
For cash ow hedges, the effective portion of changes in the fair value of these derivatives
is recognised in the cash ow hedge reserve within equity. Any ineffective portion is
recognised immediately in the income statement. Amounts accumulated in equity are recycled
to the income statement in the periods when the hedged items will affect prot or loss.
If the hedging instrument no longer meets the criteria for hedge accounting, expires
or is sold, terminated or exercised, the hedge accounting is discontinued prospectively.
The cumulative gain or loss previously recognised in equity remains there until the forecast
transaction occurs. When the forecast transaction is no longer expected to occur, the
cumulative gain or loss and deferred costs of hedging that were reported in equity are
immediately reclassied to prot or loss.
The Company enters into forward contracts in order to hedge against transactional
foreign currency exposures. In cases where these derivative instruments are signicant,
hedge accounting is applied as described above. Where hedge accounting is not applied,
changes in fair value of derivatives are recognised in the income statement. The fair values
of derivative instruments have been derived from proprietary models used by the bank
counterparties using mid-market mark to market valuations for trades at the close
of business on the balance sheet date.
Share-based payments
Share-based payments granted but not vested are valued at the fair value of the shares
at the date of grant. This applies to the Sharesave, Conditional Share Award Plan and
Long-Term Incentive Plan (‘LTIP’) schemes. The fair value of these schemes at the date of
award is calculated using the Black-Scholes model apart from the total shareholder return
element of the LTIP which is based on a Stochastic model. Awards that are subject to a
post-vesting holding period are valued using the Finnerty model.
The cost to the Company of awards to employees under the LTIP scheme is spread on
a straight-line basis over the relevant performance period. The scheme awards to senior
employees of the Company a number of shares which will vest after three years if particular
criteria are met. The cost of the scheme is based on the fair value of the shares at the date
the options are granted.
Shares purchased and held in trust in connection with the Company’s share schemes are
deducted from retained earnings. No gain or loss is recognised within the income statement
on the market value of these shares compared with the original cost.
Critical accounting judgements and key sources of estimation uncertainty
In the application of the Company accounting policies which are described above,
the Directors are required to make judgements, estimates and assumptions about the
carrying amounts of assets and liabilities that are not readily apparent from other sources.
The estimates are based on historical experience and the factors that are considered to
be relevant. Actual results may differ from those estimates.
The estimates are reviewed on an ongoing basis. Revisions to accounting estimates
are recognised in the period in which the estimate is revised.
There are no critical judgements, apart from those involving estimates, that the Directors
have made in the process of applying the Company’s accounting policies and that have
a signicant effect on the amounts recognised in the nancial statements.
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1 Accounting policies continued
Valuation of investments
The Company tests annually whether its investments have suffered any impairment.
The recoverable amounts of subsidiaries are determined based on value in use calculations
or fair value less cost to sell, if held for sale. These calculations require the use of estimates.
Considerable headroom exists when comparing the book value of the investments with their
recoverable amounts. Therefore, the Directors have determined that the investment value is
not particularly sensitive to changes in the assumptions used in the value in use calculations.
Any reasonable adjustment to any of the assumptions would not result in an impairment
of the investments.
2 Profit/(loss) for the year
As permitted by section 408 of the Companies Act 2006, the Company has elected not
to present its own prot and loss account for the year. The prot for the year was £34.9m
(2022: £20.6m).
The auditors’ remuneration for audit services to the Company was £0.1m (2022: £0.1m).
3 Information relating to Directors and employees
Information relating to Directors’ emoluments, pension entitlements, share options and LTIP
interests appears in the Directors’ remuneration report on pages 120–153. The Company
has no employees other than the Directors.
4 Dividends
No dividends have been paid by the Company (2022: £nil). See note 11 to the consolidated
nancial statements.
5 Investments
2023
£m
2022
£m
At 1 July 437.8 429.2
Capital contributions 8.4 8.6
At 30 June 446.2 437.8
Details of the Company’s subsidiaries at 30 June 2023 are provided in note 32 to the
consolidated nancial statements.
Capital contributions of £8.4m were made during the year ended 30 June 2023 in relation
to share-based payments on behalf of subsidiaries (2022: £8.6m).
Certain subsidiaries of the Group have opted to take advantage of a statutory exemption from
having an audit in respect of their individual statutory accounts. Strict criteria must be met
for this exemption to be taken and it must be agreed to by the directors of those subsidiary
companies. Listed in note 32 are subsidiaries controlled and consolidated by the Group where
the directors have taken advantage of the exemption from having an audit of the companies’
individual nancial statements in accordance with Section 479A of the Companies Act 2006.
In order to facilitate the adoption of this exemption, Kier Group plc, the ultimate parent
company of the subsidiaries concerned, undertakes to provide a guarantee under
Section 479C of the Companies Act 2006 in respect of those subsidiaries.
6 Deferred tax assets
2023
£m
2022
£m
Deferred tax 3.1 3.3
3.1 3.3
7 Debtors
2023
£m
2022
£m
Amounts falling due after more than one year:
Amounts due from subsidiary undertakings
1
1,525.4 1,467.5
1,525.4 1,467.5
1. The amounts due from subsidiary undertakings incur interest at 4.0%, loans are contractually repayable
on demand or in a period of up to 4 years but no amounts are expected to be repaid within 12 months.
8 Creditors
2023
£m
2022
£m
Amounts falling due within one year:
Borrowings – 40.5
Other creditors 2.5 1.9
2.5 42.4
Amounts falling due after more than one year:
Borrowings 309.4 266.5
Amounts due to subsidiary undertakings
1
56.0 60.9
365.4 327.4
1. The amounts due to subsidiary undertakings incur interest at 4.0% and are repayable after one year.
Further details on borrowings are included in note 22 to the consolidated nancial statements.
Notes to the Company financial statements continued
For the year ended 30 June 2023
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9 Other financial assets
The Company has the following cross-currency and interest rate swaps:
– One cross-currency swap taken out in 2014 to hedge the currency risk on a US dollar-
denominated loan, nominal value US$40.0m.
– One oating to xed interest rate swap taken out in 2022 to hedge the interest rate risk
on part of the Group’s revolving credit facility, nominal value £100.0m.
– One oating to xed interest rate swap taken out in 2023 to hedge the interest rate risk
on part of the Group’s revolving credit facility, nominal value £100.0m, reducing to £75.0m
in 2024 and £50.0m in 2025.
In FY22, the Company had three additional cross-currency swaps, two with a total value
of $20m and one with a value of €10m. They all expired during the year.
The Company has assessed the effectiveness of these swaps and concluded that they
are highly effective. No amount in relation to hedge ineffectiveness has been charged
or credited to the income statement in relation to any cross-currency or interest rate swap.
The following table indicates the periods in which the cash ows associated with cash ow
hedges are expected to occur and the fair value of the related hedging instruments:
Fair
value
£m
Total
£m
0–1 year
£m
1–2 years
£m
Expected
cash ows
2–5 years
£m
Cross-currency
swaps: asset
Gross settled
inows – 33.7 1.5 32.2 –
Gross settled
outows – (26.8) (1.1) (25.7) –
6.5 6.9 0.4 6.5 –
Interest rate swaps:
assets
Net settled inows 4.2 2.6 1.7 0.6 0.3
Fair value estimation
The table below analyses nancial instruments carried at fair value, by valuation method.
The different levels have been dened as follows:
Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2 – Inputs other than quoted prices included within level 1 that are observable for the
asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices).
The Company uses cross-currency and interest rate swaps for hedging. These derivatives
are classied as level 2. The prices of derivative transactions have been derived from
proprietary models used by the bank counterparties using mid-market mark to market
valuations for trades at the close of business on 30 June 2023.
Level 3 – Inputs for the asset or liability that are not based on observable market data
(that is, unobservable inputs).
The following table presents the Company’s nancial assets and liabilities that are
measured at fair value at 30 June 2023:
Level 1
£m
Level 2
£m
Level 3
£m
Total
£m
Assets
Derivatives used for hedging –
Cross-currency swaps – 6.5 – 6.5
Derivatives used for hedging –
Interest rate swaps – 4.2 – 4.2
– 10.7 – 10.7
The following table presents the Company’s nancial assets and liabilities that are
measured at fair value at 30 June 2022:
Level 1
£m
Level 2
£m
Level 3
£m
Total
£m
Assets
Derivatives used for hedging –
Cross-currency swaps – 12.2 – 12.2
Derivatives used for hedging –
Interest rate swaps – – – –
– 12.2 – 12.2
There were no transfers between levels 1 and 2 during the year.
10 Called up share capital
Details of the share capital of the Company are included in note 26 to the consolidated
nancial statements.
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