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Expanding root and branch

Kier is preparing to jump ahead in the civils contracting field, reports Judith Cruickshank

Paul Sheffield is sanguine about the prospects for Kier Construction's civil engineering division of which he is managing director. Or perhaps it is more a case of that particular brand of level-headedness which comes with Kier's Scandinavian ancestry. Figures submitted for this year's NCE Contractors File show turnover up by 28% on the previous year and profit up by a healthy £1.5M to £3.5M. But the value of work in hand has dropped to £50M as compared with £80M a year ago.

So, what happens next?

Sheffield has a simple explanation. The previous year's figure for work in hand was distorted by the hangover from a £140M Railtrack contract for station renovation. This year's figure is more in line with anticipated forecasts, he says.

He adds that the initial turnover forecast has been revised downwards, but this does not seem to have affected a highly positive assessment of Kier Group and its civil engineering division, issued by Deutsche Bank analysts at the beginning of July. And Sheffield says there are 'currently more opportunities being explored in this office than has been the case for several years'.

The reduced figure for work in hand and downgrading of the turnover forecast reflect Government policy in respect of one of Kier's core businesses. The power generation sector has always represented a healthy share of the company's workload and this has been hit by Government strategy and the moratorium on building gas fired power stations. However, prospects are brighter for roadbuilding - another of the traditional key sectors.

Kier recently arrived at an agreement with consultant Gibb on a partnership to bid for road contracts on a design and build basis.

The partners plan to submit bids for four of the Government's recently announced road schemes. And Kier will bid for at least one more scheme with another partner.

But, says Sheffield, bidding for these schemes is an expensive and time-consuming business and the Highways Agency is passing a large proportion of the risk involved to the contractor.

'You have to take a careful look before committing yourself.'

Not surprisingly Kier names roads as a growth area for the next two years. Rail is the company's other tip and it is bidding for two contracts on the second stage of the Channel Tunnel Rail Link. Further ahead Sheffield is looking at railheads. If the planned increase in rail freight takes place there will be a need for more and better road/rail interchanges. In the design, construction and management of these facilities Sheffield sees the kind of opportunity which would make use of both the civil engineering skills of the group as well as some of the non-traditional expertise.

For Sheffield the days are gone when a contractor's work was 'digging holes and filling them with concrete'.

'Changes in the industry over the past few years have made us look hard at ourselves to find what we are good at doing, ' he says. Kier reached the conclusion that 'managing programmes' was a skill which had been developed to an especially high degree, perhaps as a result of its extensive experience in rail and power station work. 'We have learned how to work around other trades, ' he says.

So the company is now looking at possibilities in a number of fields, most of which Sheffield, for obvious reasons, is unwilling to expand on. One area he is happy to talk about however is power generation from household waste, something he describes as 'a much maligned industry'.

People are worried about plant emissions, smells and health hazards. 'The reality is very different, ' he says. 'It's a very clean and efficient industry'. The problem lies with overcoming planning restrictions and changing people's perceptions.

Kier is looking to form alliances with equipment manufacturers to build, equip and run the facilities 'managing the programme and the process', as Sheffield expresses it. And this kind of operation chimes well with one of the Kier Group's expanding divisions: facilities management.

'We are looking at niche markets, ' Sheffield explains, adding that his aim is to get the division into the position where it is not necessary to compete for traditional work against 'the same old faces'. But he adds a caveat: 'We don't want to get away from our roots.'

A recent award which perhaps typifies Sheffield's approach was for the construction of a wind farm in Scotland. Civil engineering, yes. Power generation too, but in a new form.

Civil engineering is at the bottom of the trough, he reckons, and Kier for one is preparing to jump forward. But it will do so at its own speed. 'We're not driven by the need to buy work, ' says Sheffield. 'The right job at the right price' is his aim and he is making sure that the division is positioned to achieve just that.

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