Interim Management Statement

RNS Number : 7776G

Kier Group PLC

18 May 2011

 



IMS 18 May 2011

KIER GROUP plc

INTERIM MANAGEMENT STATEMENT

This statement covers the period from 1 January 2011 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

Kier Group plc, the integrated construction, services, social housing and property group, is pleased to report a positive trading performance to date in line with our expectations. Our order books for Construction and Services remain strong and net cash balances remain at healthy levels following significant investment in the period.

Construction

Our Construction division continues to achieve encouraging results benefitting from high quality order books which generate good margins and healthy cash balances. Our presence on over 60 public and private sector frameworks and our collaborative approach to bidding puts us in a strong position to secure further high quality work, ensuring we maintain our operating margins firmly above 2%.

Having secured approximately £600 million of new work since 1^st January, our order books of secured and probable work remain at levels in line with previous years, securing all of our expected construction revenue for the year to 30 June 2011 and 80% of our targeted construction revenue for the year to 30 June 2012. Our flexibility and responsiveness to changing markets, combined with the diverse range of skills and experience within our workforce, has enabled the business to adapt to changing market and customer demands. This is best reflected in our recent contract awards which, as anticipated, show a shift towards the private sector.

In education, we have been awarded the £48m Isle of Sheppey Academy and the £13m remodelled Tudor Grange Academy in Worcester. We were recently announced preferred bidder for a £20m academy in Ellesmere Port and have received notices for follow on schemes approaching £50m. It has also been a very busy period for our NHS ProCure 21+ team and during April we were selected for five projects with a potential value approaching £70m.

In the private sector, commercial developments in London and the south-east are continuing to come to market with a £20m office refurbishment contract at 8-10 New Fetter Lane being one of several projects recently secured.

In infrastructure and power, we expect to grow significantly over the next few years. In infrastructure, following the major Crossrail contracts awarded to us in joint venture late last year, valued at approximately £480m, we have been awarded two further contracts in joint venture at Liverpool Street and Whitechapel Stations with a combined value exceeding £50m. We are also short-listed on five other Crossrail station projects valued at more than £1.2bn. In power, our gas-fired station project for EDF at West Burton is almost complete and we are bidding for major contracts for EDF on the Hinkley Point nuclear power station. We have recently been awarded a £40m energy from waste project in Plymouth and are actively bidding on two SCR (carbon reduction) projects at Eggborough and Aberthaw to clean up emissions from existing coal fired stations. 

Work on the MTR Corporation's Express Rail Line project in Hong Kong has started well and a further significant award has been secured on the MTR South Island Line (East) project with the award of Admiralty Station in joint venture (with Kier's share equating to £82m) under a target cost arrangement. In Jamaica we have secured a £6m infrastructure project for a 66MW power station in Kingston.

Services

The Services division has traded in line with our expectations over the period. We have maintained our £2bn order book, which continues to have good long-term visibility of revenues giving us confidence in the sustainability of our 4.5% operating margin.

We have secured a series of long-term contracts in East Northamptonshire (waste collection services), Gosport, Surrey and Waltham Forest as well as a framework contract in the East Midlands for housing maintenance. Four of these six contracts will be undertaken for new clients whilst the remainder represent extensions to previous contracts. The challenging environment within which our local authority clients are operating means that although we are currently negotiating a number of contract extensions we believe that the delay in the award of a number of larger new contracts will, as predicted, last into 2012.

Our Pure Recycling materials recycling facility in Ettington, Warwickshire, one of the largest in the UK, began operating ahead of schedule in March. This facility enhances our Environmental business which offers a fully integrated waste collection and recycling solution, assisting local authorities to achieve their recycling targets over the coming years.

We continue to offer local authorities innovative funding and development solutions and have a strong pipeline of opportunities and believe that over time, pressures on government spending will only increase our opportunity in this sector.

Developments

Our Developments business remains a key generator of integrated opportunities for the Group and has been very active during the period. In April we announced the acquisition of Lloyds Banking Group's 50% interest in our jointly owned property portfolio for £91m. The consideration will be paid in three tranches over a 30-month period; the first £35m was paid on announcement. Since the acquisition, two assets, the Cavendish Place office building in London and the retail development in Chichester, have been sold returning cash proceeds of over £27m to the Group.

The Solum Regeneration joint venture with Network Rail is also making good progress with the first scheme in construction at Epsom and planning permission being granted at Walthamstow. On a similar theme, we have been selected by National Grid as its partner to develop its dormant site at Sydenham during 2012 - 2014, valued at £57m.

Partnership Homes

In Partnership Homes, we maintain our focus on the development of mixed-tenure affordable housing where demand remains high. Our skills in marketing and selling private homes combine effectively with our established relationships with local authorities and housing associations in order to deliver these types of development.

The division continues to deliver its strategy with a number of framework successes and scheme completions in the period. These total more than £50m of awards for a range of customers such as West Mercia Homes in Worcestershire and Cross Keys Homes in Peterborough. We have also delivered regeneration projects worth £15m for Aspire Housing and their partners Stoke-on-Trent City Council and the Homes & Communities Agency.

Private housing volumes have improved throughout the period and we are selling from more sites which, as we stated at the time of our interim results for the current financial year, will mean the result for this division will be second-half biased. Weremain on track for more than 500 unit sales during the current financial year, but with sales coming from land acquired at historic prices, margins are still challenging. We continue with our strategy to reduce our cash investment in this division by developing our existing land bank of homes for sale, or disposing of land as the opportunity arises. We are currently progressing the sale of approximately 700 plots of land, spread throughout the country, to a number of buyers and expect to complete these by the year-end, thus starting the process of cash release. 

Outlook

The Group's financial performance to date is in line with our expectations, we have strong order books in Construction and Services and our net cash position remains healthy.

Our integrated business model serves the Group well in attracting a diverse range of work opportunities through our wide network of local offices, established client relationships and the numerous frameworks in which it is involved in both the public and private sectors.

We have a strong balance sheet, an excellent track record of service delivery and very talented and capable people, all of which keeps Kier on track to deliver a good performance this year.

 

ENDS

 

Contacts

 

Paul Sheffield
Chief Executive
Kier Group	01767 640111
Haydn Mursell
Group Finance Director
Kier Group	01767 640111
Faeth Birch
Conor McClafferty
Finsbury	020 7251 3801

 

END

 

 

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