With Kier set to cut 1200 jobs as it seeks to streamline its business and reduce its debt, we used Porge’s Illuminator spend analysis system to gain a public sector view of some of the figures and patterns behind these latest developments.
In a statement released last week, the company announced that it will look to simplify its portfolio “by selling or substantially exiting non-core activities”, including its Kier Living homebuilding business together with property, facilities management and environmental services. This will leave Kier focusing on regional building, infrastructure, utilities and highways, with chief executive Andrew Davies stating that these changes will reinforce the foundations from which Kier’s core activities “can flourish in the future”
On the surface, the overall public sector picture painted for Kier by Illuminator appears to be fairly good, with spend with the company steadily increasing over recent years.
Highways Maintenance & Civil Engineering is Kier’s largest Illuminator market category by quite some way, accounting for over 41% of all public sector spend with the company in 2018/19 (data currently up to the end of Feb 2019). This is followed by Property Construction (20.69%) and Property Maintenance (17.61%). However, by drilling a little deeper into Illuminator’s data, we can see that Highways Maintenance & Civils is the only one of these three categories in which the company’s public sector earnings have seen sustained growth over the last five financial years. Property Construction earnings for 2018/19 are well below the levels of the previous financial year whilst Property Maintenance earnings, despite being up on 2017/18’s figures, are less than they were five years ago.
Property Maintenance is the area in which local government spends the most with Kier, representing 33.51% of council spend with the company in 2018/19. However, this spend, along with local government spend with Kier as a whole, has been steadily declining over recent years. In terms of central government spend, Highways Maintenance & Civils is by far the largest service area, with spend by the company’s biggest public sector client - Highways England - accounting for over 32% of its entire 2018/19 public sector earnings by the end of February 2019. From a Highways England perspective, annual spending with Kier has increased by well over £520M since 2014/15 and makes up over 16% of its total spend with the private sector.
Total central government spend with Kier has increased by over £650M per annum since 2014/15. With the data above showing how this is being largely driven by highways/civil engineering works, as well as revealing how spend with Kier in its two largest local government markets, Property Maintenance and Property Construction, has failed to keep up, it is perhaps no surprise to see the company re-focusing its efforts on the areas in which it is achieving the greatest growth.
Illuminator can help councils to better identify critical supplier relationships and provides insight that enables council staff to better manage the risk associated with external service providers. The system makes use of over 130 million public sector invoices to provide clear, accurate and actionable spend data and helps public sector organisations to make better commissioning decisions. Contact us today to find out how it could help you.