Interim Management Statement

RNS Number : 0135M

Kier Group PLC

17 May 2010

 



                                                           

KIER GROUP plc

INTERIM MANAGEMENT STATEMENT

This statement covers the period from 1 January 2010 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.

Current trading

We are pleased to report that the Group continues to perform well with trading to date as expected and net cash balances at healthy levels.  

Construction

Our Construction division continues to achieve good results in all of our key performance measures of cash, profits and order books. Our cash balances remain healthy, at broadly the same levels as at 31 December 2009, and our operating profits remain robust. Our order books of secured and 'probable' work provide all of our targeted construction revenue for the year to 30 June 2010 and 82% of our targeted revenues for 2011, slightly ahead of last year's position.

We remain active on over 50 frameworks across the public and private sectors through which much of our work is awarded, with education a major source of new work.  We were delighted to have recently been announced preferred bidder for a £20m academy in Peterborough which is likely to lead on to a further two academies with a combined value of £60m.  Construction on the first academy is scheduled to commence in the autumn of 2010. 

Power and infrastructure are market sectors that, we believe, are poised to grow significantly over the next five years. In the power sector, where we are market leader, our major power station project for EDF at West Burton is progressing well and we are involved, in joint venture, in bidding for the first of the major contracts for EDF on the Hinckley Point nuclear power station.  In the infrastructure sector we have started work on one of the enabling contracts for Crossrail in London and we are currently tendering for Crossrail tunnelling and station contracts and for similar work for MTRC in Hong Kong and in Saudi Arabia, where we are also currently working on a phosphate mining contract.

Support Services

In Support Services, where we operate a number of large, long-term contracts for the repairs and maintenance of social housing units through our Building Maintenance division, we continue to have good long-term visibility of revenues. Our £600m contract for North Tyneside Council, which started in September, is performing well. In April 2010 we commenced a five-year contract for Barnsley Metropolitan Borough Council at a value of £40m, excluding the five-year extension to the contract which would add a further £40m to our order book. Our bidding teams continue to exploit the opportunities provided by a long list of potential new contracts, together with re-tendering for contracts that are still currently in operation. Our Facilities Services business is also performing well, benefitting from a large number of both public and private sector opportunities as businesses consider outsourcing as an appropriate and cost effective solution for their services.

We were pleased to have completed the acquisition of Pure Recycling and Pure Buildings for £2.0m payable immediately with a further £5.1m which is contingent. These businesses own a materials recycling facility (a 'MRF') at Ettington in Warwickshire.  The MRF, which is under construction and is currently due for completion in March 2011, will be one of the largest in the UK able to process a minimum of 25 tonnes of recycled waste per hour.  This business will integrate well with our Street Services division which carries out waste collection and provides us with a total waste service capability to local authorities in a growing market sector.

Partnership Homes

The market for housebuilding has stabilised with prices remaining firm and visitor levels satisfactory. Our total order book of reserved and exchanged units at 30 April 2010 is in line with the same time last year. Completions in the year to date together with our order book for this year represent approximately 93% of our full-year targeted unit sales, which is a similar level to that achieved last year, albeit for a marginally lower level of targeted units.

Social housing demand remains high with long local authority waiting lists. Our model of providing mixed tenure affordable housing schemes at a blended construction and private development margin, coupled with helping local authorities to obtain long-term value from their land portfolios, is affording us good opportunities.  This is evidenced by recent contract awards, including the £8m award for Birmingham Municipal Housing Trust and the £15m award from Leicester Council.  We are also preferred bidder on a £24m project for Bolsover Council and are shortlisted as one of two bidders on the £50m mixed tenure housing PFI scheme at Woking.

We have a diverse and valuable land bank of nearly 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 considering sales of certain sites, or parts of sites.

Developments

We have seen little further sales activity in our Developments business in the second half of the year although we have been active on a number of projects which will benefit us in the near term.  Our joint venture with Network Rail is making good progress on several schemes, the first of which is Epsom where we have agreed pre-lets and pre-sales for the majority of the space for this mixed use development.  The occupiers include a major hotelier and a national food retailer.  We have also agreed terms with a number of other key occupiers in respect of other schemes within this joint venture.

Our portfolio of PFI projects now totals 14 including the first and second phases of the Kent BSF schools project and the Gloucester Fire Stations project on which we are now preferred bidder for a £40m PFI project. Our total equity investment in these schemes will be £35m of which £16m has been invested to date.  The directors' valuation of the total investment of £35m at a discount rate of 8% is £56m. 

Outlook

We remain in a period of economic uncertainty and the impact of the measures and policies of the incoming coalition government is as yet unknown. However, Kier, with its established client relationships and financial strength, is well placed to attract construction work through its wide network of local offices and through the numerous frameworks in which we are involved. In the outsourcing sector we are experiencing an increase in the number of opportunities as businesses, both in the public and private sectors continue to examine their cost bases.  We have a land bank that will provide us with future value and a portfolio of medium and long-term opportunities in our developments business.

The Group's financial performance to date is in line with our projections; our net cash position remains strong and we have healthy order books.  All of this means we are on track to deliver an encouraging underlying performance this year.

 

END

 

 

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