Kier Group AGM Trading Update

RNS Number : 3943P

Kier Group PLC

17 November 2016

 

KIER GROUP PLC

AGM TRADING UPDATE

Kier Group plc, the property, residential, construction and services group, announces its trading update covering the period from 1 July 2016 to date, prior to its Annual General Meeting in London at 12 noon on 18 November.

Current trading

The Group remains on course to meet expectations for the current financial year, despite increased economic uncertainty in the UK following the EU referendum. The results will be second-half weighted in line with the prior year.

Financial position

The Group's average net debt position for the six month period to 31 December 2016 is expected to be in line with the prior year at £300m (2016:  £280m). This position reflects the proceeds from the disposal of Mouchel Consulting and an investment of £100m since 1 July 2016 in the Property and Residential divisions, so as to take advantage of opportunities in the current market. We expect to maintain a net debt to EBITDA ratio of less than 1x at 30 June 2017.

Portfolio simplification update

On 12 October 2016, the Group completed the disposal of Mouchel Consulting to WSP Global Inc for a total cash consideration of £75m.  The net disposal proceeds have been invested in the Property and Residential divisions. We anticipate that there will be additional exceptional costs in this financial year relating to the closure of our Caribbean operations, including those which relate to the settlement of a final contract account. It is expected that these additional costs will not affect the Group's net debt position at 30 June 2017. 

Operational update

Property

The division remains on target to deliver a ROCE in the current financial year in excess of our 15% target. We expect to increase investment in the division up to £175m in the current financial year and since 1 July 2016, we have invested in excess of £60m in new schemes, principally in the north of England and Scotland.  Reflecting a focus on rental income, the business secured a 50% equity stake in a fully-occupied 90,000 sq ft office building in Bothwell Street, Glasgow and bought an existing office building with short-term rental income and redevelopment potential at Headrow Court, Leeds. The pipeline remains healthy, with a valuation of more than £1bn.

Residential

The division is benefitting from the demand in the UK for all forms of housing.  We continue to recycle capital from our private land bank into our mixed-tenure business and improve the division's ROCE through the use of cash efficient joint ventures, including Kier Northern Ventures (which has already secured approximately 1,000 units) and the New Communities Partnership, which is evaluating local authority owned land capable of providing over 5,000 new affordable homes. Our private sales are performing well with sales, visitor and reservation rates exceeding those in the equivalent period in 2015.  The Group's housing maintenance capabilities, together with the Residential division's operations, provide the Group with a market-leading proposition in both mixed-tenure and private housebuilding.

Construction

The performance of the division is in line with expectations and the current order book represents 100% of targeted revenue for the current financial year. Key successes since 1 July 2016 include securing positions on the four-year £4bn Department of Health ProCure22 framework, two five-year construction frameworks worth up to £750m at Gatwick Airport and a two-year £500m University of Cambridge framework. In the infrastructure business, the UK Government's approval of Hinkley Point C nuclear power station was welcomed, with Kier already undertaking work at the site.  Internationally, our two Hong Kong contracts remain challenging; however, they are expected to reach completion during the first quarter of 2017 and work is underway to close the final accounts.

Services

The Services order book represents 100% of targeted revenue for the current financial year and margin performance remains in line with expectations.  A five-year extension to the Suffolk County Council highways contract worth more than £250m has been secured and we await the outcome of the tender process for selected Highways England Areas. Reflecting the continued focus on our integrated offer, we are the preferred bidder for a £100m ten-year contract with Powys County Council to provide property- related services, including housing maintenance, across council housing and other public and commercial buildings.

Outlook

The Group remains on course to meet expectations for the current financial year and deliver on its Vision 2020 targets.

We are encouraged by the recent Government announcements relating to Hinkley Point C and Heathrow airport, which reflect the UK Government's commitment to further investment in infrastructure, a key sector for Kier. With our broad offering and presence in sectors receiving Government focus, the Group is well-positioned for the future and looks forward to the Government's Autumn Statement on 23 November.

Financial calendar events

•    Kier will hold its Annual General Meeting at the Andaz Hotel, 40 Liverpool St, London EC2M 7QN at 12 noon on 18 November 2016.

•    Kier will hold an analyst and investor seminar at Numis Securities between 10.30am - 12.30pm on 30 November 2016. The event will include presentations from the Kier team, exploring the Group's residential offering, with a particular focus on its mixed-tenure housing delivery model. Please contact [e-mail] for further information.

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For further information, please contact:

Faeth Birch/Daniela Fleischmann, Finsbury                        [phone]

Kier press office                                                                              [phone]

Louise Turner-Smith                                                                      [phone] 

This announcement does not constitute an offer of securities by Kier Group plc (the "Company"). Nothing in this announcement is intended to be, or intended to be construed as, a profit forecast or a guide as to the performance, financial or otherwise, of the Company or any of its subsidiaries (together, the "Group") whether in the current or any future financial year. This announcement may include statements that are, or may be deemed to be, ''forward-looking statements''. By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future and may be beyond the Company's or the Group's ability to control or predict. Forward-looking statements are not guarantees of future performance. You are advised to read the section headed ''Principal risks and uncertainties'' in the Company's Annual Report and Accounts for the year ended 30 June 2016 for a further discussion of the factors that could affect the Company's or the Group's future performance and the industry in which it operates.  Other than in accordance with its legal or regulatory obligations, the Company does not accept any obligation to update or revise publicly any forward-looking statement, whether as a result of new information, future events or otherwise

 

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