Building on strong foundations

Country house headquarters and excellent staff facilities make FTSE-listed construction company Kier one of The Times’ 100 best UK companies to work for. At its management buy-out from the Hanson Group in 1992, it became the UK’s first major employee-owned contractor, with everyone from the managing director to the tea-ladies receiving a stake in the company.

Kier floated on the London Stock Exchange in 1996 and has since cemented its position as a FTSE Small Cap company valued at around £225m. To look after its financial future, Kier recently promoted 36-year-old Deena Mattar, a former KPMG advisor to the company, to the position of group finance director. “Getting out of KPMG was quite a big step,” she says. “But I joined Kier because I knew it was a great environment to work in. The people were good and there were great prospects for career progression. It was obvious that senior people were going to start moving on.”

Mattar first joined the company in 1998 as FD of Kier National, the company’s major projects division. She was then brought onto the board as company secretary in September 2001 for a short breaking-in period before she took over as group finance director from Duncan Brand when he retired that November.

The events of September that year did not make the life of the FD-designate easy, but Kier shrugged off an initial dip in market value and has since seen its share price rise from 400p to 650p.

“When I joined the board in September 2001 I wasn’t really concerned even though it was a very worrying time generally. In fact, people at that point realised we were still hugely undervalued. Investors were starting to look at construction as a safe sector to invest in. After all, we deal in bricks and mortar,” she says.

Much of Kier’s success is down to its diversification into profitable businesses such as land acquisition and property development.

But the dust and sweat of construction is still the life-blood of its business model.

“Following the MBO, Kier was just a construction company. But construction doesn’t generate great margins. It does generate vast amounts of cash, however. So we now use that cash to invest in property development that does generate the margins,” Mattar says.

SAFE AS HOUSES
Kier’s strategy has delivered year-on-year growth in profits of 25%. On cash revenues of £1bn in 2001, the company invested heavily in a lucrative land portfolio and estimated profits for 2002 are £27m. The house-building arm alone generated 30% annual profit growth, and at time of going to press Kier was in talks to acquire rival Laing’s house building division for £55m.

Kier’s source of cash is safeguarded by the size of most of its contracts.

“We minimise risk by operating the major part of our construction business through regional departments in 27 offices throughout the UK. The average size of a contract is small, at about £3m. So, if we lose on a job the downside is limited,” says Mattar. In large projects, profits are protected because Kier’s strong reputation means it negotiates multi-million pound deals without having to partake in bidding wars to gain contracts.

Mattar also has the task of growing Kier’s involvement in the five public finance initiative contracts in which the company has already invested £10m. And, although the government’s decision to pull the plug on Railtrack last year caused Mattar to think carefully about Kier’s relationship with the government, she is unfazed.

“Railtrack is far removed from construction,” she says. “A lot is now down to the banks – they are still investing and so are we.”

Construction has formed the mainstay of Mattar’s career since she left university to join KPMG in 1986. She advised Kier management during the MBO when she was 26. “I had to stand up in front of 80 Kier directors at the time to explain how they had to sign up to the buy-out. I remember looking round the room and there was just one other woman present,” she says.

Subsequently, Mattar managed the accounting reports during Kier’s 1996 float, by which time she had solid relationships with the company’s management.

INDUSTRIAL RELATIONS
A few years later, she spotted her opportunity to move into industry. She been thinking of leaving advisory services for a while when a call came from Kier in 1998 inviting her to join the company. At the same time, Mattar had been approached by other construction companies and had been offered a partnership at KPMG. But, apart from being well acquainted with the financial health and stability of Kier, it was her knowledge of the board that swung her decision.

“Looking forward, I knew how old Duncan was and thought that in a few years he would be retiring,” she says. But the opportunities go further still. Mattar is 20 years younger than the other Kier directors and she is confident of future opportunities, even though she shies away from making a direct claim on her MD’s job.

“I need to settle down first. But going forward five years there is likely to be some change in the group,” she says. “I don’t believe FDs want to be FDs for ever. I would like to be an MD or CEO, not necessarily at Kier, but definitely in construction.”