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We don't run the contracts, that's operations. We just count the beans. Or as it was described to me many years ago,
'go in after the battle and stab the wounded'.
Come on you don't seriously think major contractors survive on the 2% or 3% margins. It's what we do.
Who do we think the buyer is?
Another Housebuilder - unlikely, although the land bank would be attractive
Hedge Fund - maybe
Management Buyout - could be, but they would need to raise the finance which could be an explanation as to the delay.
Construction is a low margin business. outwardly anyway. It's about the ability of your staff to make better returns.
Nothing wrong with lower margins, it's all about the risk profile.
In your opinion then what sort of work would you consider higher margin in the construction industry?
why are people reading so much into their joint venture works, it represents approx 6% of total revenue.
Their main bread & butter is being a good regional local contractor with presence all over the UK. Whilst they have had their fair share of howlers the construction side is doing ok & once rid of the peripheral nasty add ons will pull Kier back to where it should be. I think its a shame they're having to loose housing to pay for the stupid mistakes the previous board made.
Hi TripHop, some Frameworks already demand shorter payment terms. Scape 4 that Kier are on is 28 days to their suppliers, this is even a KPI to Scape. Obviously Kier get paid in a similar period.
As for your other post I am currently 27 months into a traditional JCT project. Had to re-train myself. Been nothing but D&B lump sum projects for years.
I know quite a few people that still have the original 10p shares which peaked (albeit briefly) at £25.00, most are retired & have probably lost a packet.
Good morning Matlot, just referring to your last post,
low margins are not good and dont take much to erode that tiny margin to zero it may not even be a fault of the framework but just kier being kier.......
Welcome to the dark art of Quantity Surveying, they'll be fine.
Hi Matlot, I'm with Gold on this. I'm not sure what Framework Agreements you have experience of within the construction industry but you seem to be talking another language. This is not a £750m contract, the actual spend through the contract 'could be' in this region, maybe more maybe less. The hard work is done in winning the initial; pre-qual stages of the framework & then the final stages all within OJEU rules. Once Kier are in the framework they along with others in the same price banding will be asked to look at various council schemes. This is how virtually every public sector building is procured (schools, leisure centres, care homes, libraries, university bidgs, student accommodation etc etc). The work is generally lower risk due to the subsequent 2-stage process on the projects. Each project will cost what it costs, the framework simply sets the rules of engagement & mark up. As for bricks, these are not price fixed for 5 years, but Kier will be buying bricks either directly or indirectly within the framework. As I said each project will cost what it costs when it comes to market. Kier as well as other major contractors are on several frameworks, other examples & key ones to win are Scape, Southern Const Framework, EFSA Framework to name a few.
You may be right about chasing turnover but back in the day the Kier model was enviable. Construction produced the cash for the housing arm to build houses with, result sp over £20.
Once upon a time before the Management Buyout Hanson owned Kier after buying it from Beazer. But even he did not understand how you could turnover such vast sums for a relatively small margin but somehow make even more. Welcome to contracting.
Why do you say this is a waste of space? This is not a contract, it is a Framework which all contractors fight very hard to get on. Once on for a period of time, 5 years, you are then either solely or selected from one of two to negotiate a project in the banding your are in.
These projects are generally negotiated 2-stage tenders where the risk is vastly reduced. These Framework wins are big positives.
Don't read too much in to this, a lot of main contractors probably have similar schemes but only the top tier pay a fee 1.5% - 2.0%. If done well & the service, opportunities, respect & collaboration in terms of training, best practice & minimum standards Supply Chain get back in return, many would say it is value for money.
The fee is generally not upfront but probably deducted on each payments so it only becomes due once a Supply Chain starts working for the contractor.
Hi everyone, I'm new to this site but have a particular interest in Kier.
Like everyone was quite annoyed at the sudden SP drop following the recent RI. But (hopefully) playing the long game they should / will recover somewhat. Not to where they were but more than they are now. I even remember when they were £25. So fingers crossed.
Even though the SP has dived what do people think about the level of dividend they pay out. To date the yearly amount has been 60-70p, most top rated stocks don't get anywhere close to this.
Is this a strong reason to hang on?