Paul Sheffield may be leaving Kier in good shape but the contracting sector as a whole is not entirely out of the woods
As Kier chief executive this summer, he was keen to emphasize that the firm was in 鈥渞eally good shape鈥.
The argument certainly seems to have been accepted by the City, with Kier鈥檚 share price 鈥 which remained flat on the news 鈥 having risen more than 10% over the last three months. And there鈥檚 no denying that when you compare the contractor to where it was when Sheffield took up his post, back in April 2010, things look decidedly rosier.
Under Sheffield鈥檚 leadership, the company has increased its group profit by 70%, and made a major play to diversify its business into the services sector with the cannily handled acquisition of May Gurney last July. Meanwhile, the market - which back then was about to be hit with a new government鈥檚 cull of public spending - is now steadily improving.
But, as a slew of companies鈥 results show this week, the contracting sector is unlikely to be entirely out of the woods by the time Sheffield鈥檚 successor, current finance director Haydn Mursell, takes the reins.
for the last six months of 2013 this week, said the construction market 鈥渃ontinued to be challenging鈥, even though the pipeline of opportunities was increasing.
Meanwhile, this week as a result of writedowns on four problem contracts related to its acquisition of Amec鈥檚 construction business in 2007, reported a drop in its underlying margin to just 1% even when the writedowns were taken out. And for the year to September 2013, drew attention to the 鈥渟till relatively difficult market鈥.
The diversification of Kier鈥檚 business that took place under Sheffield鈥檚 leadership will no doubt help it to ride out these last waves of the storm, but for many contractors, the next 12 months look set to continue to provide a bumpy ride.
Sheffield himself warned this week that although the market was 鈥渨ithout doubt improving鈥, the continuing margin pressure on contractors risks making them 鈥渂usy fools鈥, servicing turnover for little return. With the Office of National Statistics recording that construction output remains more than 12% below its 2007 peak, there is still strong temptation to throw resource at chasing work as it comes to market. But it鈥檚 a habit that quickly needs to be broken, if firms are to avoid the risk of prolonging the difficulties they are still facing as a legacy of recession.
Sarah Richardson, editor
Don鈥檛 ignore flood warning
News that shows a welcome recognition that longer-term planning is needed to avoid a repeat of the current situation. But, as Chris Wise points out on page 28, tackling flooding is not as complex as some politicians would like us to believe.
The UK is feeling the effects of decades of poor infrastructure planning, in which both individual authorities and national government have ignored existing advice on building in areas at risk of flooding. If this crisis is what was needed to make the issue central to future planning decisions, then it should at least help to protect some of the 250,000 extra homes the Climate Change Committee believes will now be at risk by 2035.
The lesson from history is to make sure that the work of these experts does not gather dust once the crisis has passed - a move which would render it as ineffectual as the work of other engineers and architects who have tried to get the government to see sense in recent years.
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