PRE-CLOSE TRADING STATEMENT

RNS Number : 3535J

Kier Group PLC

28 June 2017

 

For release at 0700 hours on 28 June 2017

KIER GROUP PLC

PRE-CLOSE TRADING STATEMENT

Kier Group plc ("Kier" or "the Group"), a leading property, residential, construction and services group, provides a pre-close trading statement in advance of its year end on 30 June 2017.  Kier is hosting an analyst and investor seminar and site visit on 29 June, which will focus on its Property division.

Overview

·      Full-year underlying profit forecast to be in line with expectations;

·      Net debt anticipated to be c£150m, at the lower-end of market forecasts;

·      Two-year portfolio simplification programme nearing conclusion; and

·      Well-placed for FY2018, with growing order books of approximately £9bn and 85% secured revenue position for FY2018.

The financial impact of the portfolio simplification programme, together with certain other non-underlying items, on the Group's 2017 results is expected to be:

-     A non-underlying charge of c.£73m; and

-     Net cash generated of c.£69m, the significant majority of which has been, or will be, invested in the Property and Residential divisions.

Please see below for further information relating to the programme and the non-underlying items.

Current trading

The Group's core operations have traded in line with expectations since the announcement of its interim results on 23 March 2017, experiencing good organic growth and improved margins.

Operational highlights include:

·      Property - £60m investment in new developments since 1 July 2016, with an average capital employed in this division during the 2017 financial year of £120m; on target to deliver a full-year ROCE in excess of 15%, with an increased development pipeline of £1.4bn;

·      Residential - a strong second-half performance;  ROCE in excess of 10% for the full-year following the Cross Keys Homes joint venture; will deliver approximately 2,200 units in the financial year, with approximately two-thirds being mixed-tenure; £21m investment in new sites during the financial year;

·      Construction - a strong regional building performance with contributions from frameworks, for example in the education and health sectors, driving a margin of 2%; and

·      Services - organic revenue growth year-on-year, delivering a 5% margin; significantly increased activity with Highways England in the second-half.

Portfolio simplification and other non-underlying items

Since the acquisition of Mouchel in June 2015, the Group has undertaken a programme of portfolio simplification allowing it to focus on, and grow, its market leading positions in regional building, infrastructure services and housing. Since 1 July 2015, the Group has included certain non-underlying items in its financial statements.

Further details of this programme, and the non-underlying items, are:

·      the sale of Mouchel Consulting in October 2016;

·      the closure of the Caribbean business, following the agreement of a final account with a client on a challenging project. The majority of the cash outflow was incurred in our 31 December 2016 net debt position and has been fully accounted for in our 30 June 2017 net debt guidance. Completion of the project is scheduled to occur within the next three months;

·      the closure of the Hong Kong business and the expected settlement of a final account;

·      the sale of Kier's joint venture interest in Biogen, the renewable energy business, in April 2017;

·      the establishment of the Cross Keys Homes joint venture in March 2017, which releases cash for re-investment in new opportunities across the Group and enables our private house building business to deliver a significantly improved return on capital;

·      a provision relating to a likely increase in fines for health and safety incidents following the introduction of new sentencing guidelines; and

·      the effects of reduced recyclate income and the curtailment of the East Sussex environmental contract four years earlier than its stated termination date.

This portfolio simplification programme is nearing conclusion and, taking into account the other non-underlying items, will generate cash for the Group to enable it to focus on the future growth of its core operations.

A full breakdown of the total financial effect of the portfolio simplification programme and other non-underlying items since 30 June 2015 appears in the table "Financial effects of portfolio simplification programme and other non-underlying items" at the end of this announcement.

Financial position

The Group's cash performance continued to improve in the period, reflecting its ongoing focus on working capital and the receipt of proceeds from the portfolio simplification programme and the other non-underlying items. The Group expects to report a net debt position of c.£150m as at 30 June 2017, which is at the lower end of market forecasts and in line with our commitment to maintaining the net debt to EBITDA ratio of <1.  The average month-end net debt position for the period was £330m, as forecast, and in line with our investment strategy.

Outlook

Our Property and Residential pipelines continue to improve and our robust Construction and Services order books total approximately £9bn, providing an 85% secured revenue position for next year and giving us a strong foundation to deliver growth in 2018.

The Group has a balanced portfolio of businesses, with market leading positions in regional building, infrastructure services and housing. We continue to invest in the Group and remain well positioned to achieve our Vision 2020 goals.

- ENDS -

Analyst and investor trading update call - 28 June 2017

A conference call with Haydn Mursell, (Chief Executive), and Bev Dew (Finance Director) will be held for analysts and investors at 0800 BST today. Dial in details are as follows:

Dial in number(s)		United Kingdom Toll: [phone] PIN: 07353904# United Kingdom Toll-Free: 08003589473 PIN: 07353904#
	URL for international dial in numbers	http://events.arkadin.com/ev/docs/NE_W2_TF_Events_International_Access_List.pdf

Analyst and investor seminar, Reading - 29 June 2017

Kier will be hosting a seminar for analysts and investors on 29 June providing an overview of its Property activities, its integrated offer and an opportunity to visit one of the Group's developments in Reading, Berkshire.  A webcast of the analyst seminar will be available on www.kier.co.uk from 12 noon on 30 June.  During the seminar, comments on trading will be consistent with this update.

For further information, please contact:

Louise Turner-Smith, Kier investor relations                      [phone]

Kier press office                                                             [phone]

Richard Mountain/Nick Hasell, FTI Consulting                   [phone]

Financial effects of portfolio simplification programme and non-underlying items

The table below shows the total financial effect of the portfolio simplification programme and other non-underlying items since 30 June 2015.

	P&L £million				Cash £million
	FY16	FY17	FY18	3 year total	FY16	FY17	FY18	3 year total
Closure of businesses
Caribbean	(23)	(56)		(79)	(18)	(43)	(13)	(74)
Hong Kong		(23)		(23)		(11)	17	6
Sale of non-core operations
Mouchel Consulting		39		39		58		58
Biogen	(5)	(9)		(14)		10		10
Other
Cross Keys		(6)		(6)		66	(1)	65
HSE		(10)		(10)		(2)	(8)	(10)
Environmental	(36)	(11)		(47)	(9)	(7)	(7)	(23)
Other*	2	3		5	15	(2)		13
Total	(62)	(73)	-	(135)	(12)	69	(12)	45

* principally relates to a pension curtailment gain

 

END

 

 

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