IMS and AGM statement

RNS Number : 1596C

Kier Group PLC

09 November 2009

 



                    9 November 2009

KIER GROUP plc

INTERIM MANAGEMENT STATEMENT AND AGM STATEMENT

This statement covers the period from 1 July 2009 to the date of this announcement and constitutes Kier's Interim Management Statement as required by the UK Listing Authority's Disclosure and Transparency Rules.

Kier Group plc, the construction, support services, private and social housebuilding, regeneration and developments group, held its Annual General Meeting at the Group's head office at Sandy, Bedfordshire on Saturday, 7 November 2009 at 11.00am where the following comments were made regarding current trading, financial performance and the outlook for the financial year.  

Current trading

We are pleased to report that the Group has made a good start to the new financial year with first quarter trading in-line with our expectations and cash balances at healthy levels.  

Construction

Our Construction division has made an encouraging start to the new financial year, benefitting from strong, high quality order books which are generating healthy margins and cash balances. We are active on around 52 frameworks across the public and private sectors through which we continue to drive value for our clients as well as for Kier. These frameworks will help us to maintain our workloads at least through to 2011 and beyond. Our order books of secured and probable work remain at healthy levels securing 96% of our expected construction revenue for the year to 30 June 2010 and 55% of our targeted construction revenue for the year to 30 June 2011 which is in-line with previous years. 

We continue to secure projects from the public sector with education a major source of new work. We were delighted to have recently been announced preferred bidder for the £50m Bolton Academies project and by Telford & Wrekin Council for a £200m contract to build sports and learning communities across the borough. This Building Schools for the Future funded project represents Kier's fourteenth project secured through the Academies Framework, bringing the potential value of work secured under the framework to approximately £660m. We have also recently secured a position as one of 15 contractors on the Academies Framework 2, a £4bn framework across the entire country split into two regions, of which £500m of funding has already been confirmed. Kier achieved the highest score under the selection process and is one of nine contractors which qualified for both regions.  The Procure 21 (health) framework has had a strong period and we have been selected as preferred bidder on over £70m of work since the beginning of July.

In the power sector, where we are market leader, our major power station project for EDF at West Burton is progressing well. The much needed reinvestment programme in power generation in the UK will provide significant opportunity for Kier given our valuable experience and track record with gas, coal and nuclear technologies.  In the infrastructure sector both in the UK and internationally, we have prequalified for the early contracts for Crossrail in London and we are tendering for similar work with MTRC in Hong Kong.

Support Services

In Support Services we have good long-term visibility of revenues through our Building Maintenance division where we operate a number of large, long-term contracts for the repairs and maintenance of social housing units. Our £600m contract for North Tyneside Council started well in September and will see us working with the council for 10 years with a possible further five year extension.  A long list of potential new contracts is providing our bidding teams with ample choice and opportunity and we have recently been awarded a further £38m of work including an extension to one of our existing contracts. Our Facilities Services business is also performing well, benefitting from a large number of both public and private sector opportunities which have provided us with £23m of new work since 1 July 2009.

Partnership Homes

Our Partnership Homes division had a strong start to the year. The total order book of reserved and exchanged units at 31 October is 14% ahead of the same period last year. Completions to date together with our order book for this year represent around 73% of our full-year targeted unit sales which is a similar level to that achieved last year and is in-line with our expectations.

Although we remain cautious on the outlook for 2010, the private housebuilding market has now stabilised with price increases being experienced in selective locations. However the availability of mortgages, particularly for the first time buyer, remains limited and until it improves any recovery in the private sector market is likely to be fragile.  Our stock level of completed units has reduced significantly since 1 July 2008 and now stands at less than 100. We have recommenced construction on a number of developments and have started new sites in locations where there is evidence of stronger demand whilst, at the same time, enforcing rigid controls over expenditure.

Social housing demand remains high with long local authority waiting lists. We have seen an increase in social housing tender opportunities and welcome the Homes and Communities Agency (HCA) initiatives, particularly those which involve public/private sector partnerships for the development of public sector land holdings.  We have recently been awarded or selected as preferred bidder for £56m of work on a number of projects for local authorities and RSLs, utilising funding from the HCA. These projects are scheduled to start on site early in the next calendar year.

We have a diverse and valuable land bank of over 6,000 plots which will provide opportunities for both private development and social housing along with other initiatives including care homes and care villages. We have also seen some positive activity in the market for land and are actively seeking swaps to provide new outlets in areas where demand is strong. We are contemplating sales of certain sites, or parts of sites, to realise values at higher than current book values.

Developments

In our Property division, activity continues on a number of developments despite the general lack of liquidity and occupier demand in the market.  We disposed of the UK Supreme Court development in mid-September generating over £30m of cash. We are also exploring other potential development sales this year. Our joint venture with Network Rail is making good progress on its first development site with further sites coming on stream in due course.

Our portfolio of PFI projects totals 14 including the first phase of the Kent BSF schools project and the Police Investigations Centres on which we are preferred bidder. Our committed equity investment in these schemes stands at £29.5m of which £19.5m has been invested to date. The directors' valuation of the committed investment of £29.5m at a discount rate of 8% is £50.3m.

Office of Fair Trading

On 22 September 2009 Kier was fined £17.9m in respect of the Office of Fair Trading's investigation into cover-pricing in the construction industry. The fine was calculated by reference to Kier Group plc's worldwide group turnover for the year to 30 June 2008 (£2.3bn) and, as such, was the highest level of turnover to which the calculation of any of the fines was applied. The amount of the fine imposed does not relate to the culpability of any party but simply to its turnover on a certain date.

Kier is totally committed to ensuring that the practice of cover pricing and anti-competitive behaviour more generally is totally driven out of our business.

We are considering an appeal which would be required to be lodged by the 22 November 2009. Our results for the half-year to 31 December 2009 will reflect an exceptional charge of £18m in respect of the fine.

Chief Executive

It is widely known that John Dodds, our Chief Executive for over six years, has notified the Board of his intention to retire during 2010 after nearly 40 years with the Group. The process of selecting his successor is well advanced and details of this appointment and the appropriate hand over period will be announced as soon as a decision is made.

Conclusion

The Group's financial performance to date is in-line with our expectations; cash remains strong and we have healthy order books in Construction and Support Services.  Kier has a strong track record, a supportive client base and an experienced and talented workforce all of which puts us on track to achieve a good result for this financial year.

Ends

Contacts:

Deena Mattar            

Group Finance Director

Kier Group        01767 640111

Faeth Birch             

Conor McClafferty       

Finsbury          020 7251 3801

 

END

 

 

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