Trading Update

RNS Number : 3519Z

Kier Group PLC

18 July 2008

 



18 July 2008

KIER GROUP PLC

TRADING UPDATE 

YEAR ENDED 30 JUNE 2008

Kier Group plc, the construction, services, housebuilding and property group is pleased to provide the following update to current trading in advance of the announcement of its Preliminary results for the year ended 30 June 2008, currently scheduled for 18 September 2008.

Despite very tough market conditions for both housing and property Kier Group plc expects to report full year underlying profit before tax in line with current market expectations and ahead of last year's result. We continue to see little evidence of a slow down in the markets for Construction and Support Services both of which continue to perform strongly and have record order books. These mixed market experiences reinforce the benefit of having a range of businesses operating in different sectors of the market. Net cash balances during the year have been strong, ending the financial year at over £140m (30 June 2007: £148m).

In Construction the level of tender awards has been very high during the year and our record order books reflect continued demand from both our public and private sector clients, much of which is generated through framework agreements. Cash generation from our construction activities has been excellent throughout the year with the division once again achieving record cash balances at 30 June 2008.

Support Services continues to grow, particularly in the Building Maintenance division where we now maintain around 220,000 public sector homes throughout the country. A number of new contracts have been awarded this year and a strong pipeline of good opportunities remain including a £40m per annum contract for North Tyneside on which we are shortlisted as one of two bidders.

The housing market continues to be tough and consequently our unit sales for the year were fewer than last year's 1,767 at 1,438 legal completions. Visitor levels and reservations continued to fall during the second half of the year and at 30 June 2008 our order book of exchanged contracts and reservations was around 45% less than at 30 June 2007.  We are very cautious on the outlook for 2009 and consequently we are taking appropriate action to reduce our cost base. We are closing four out of five of our offices and are planning to reduce the headcount in our Residential division by 60%. We have reinforced our controls over build expenditure and work in progress and, since the spring of this year, have ceased the use of part-exchange properties as a selling tool. Land expenditure in the last quarter of the year has been largely limited to settling land creditors, committed payments and exercising options and we will continue this approach until the outlook for the housing market becomes clearer. In the prevailing housing market, with reduced activity levels and the related impact on selling prices, we continue to review the carrying values of land and work in progress. 

Conditions for our Property business have continued to deteriorate over the last few months as yields have continued to shift upwards and occupier demand has slowed.  Notwithstanding these more difficult market conditions, we achieved all of our expected development sales for the year to 30 June 2008.  During the next few weeks we expect to reach financial close on our unique property regeneration partnership with Network Rail. This joint venture will work towards the sustainable regeneration of an initial portfolio of town centre sites which include Enfield Town, Epsom, Guildford, Maidstone East, Twickenham and Walthamstow and which have a gross development value in excess of £500m.  

Whilst the market for our homes has continued to deteriorate over recent months, we are responding to reduced demand by significantly reducing our Residential overheads. We will run a smaller, leaner operation in the future with our focus shifting towards affordable housing and regeneration. Our Construction and Support Services businesses continue their profitable, cash generative growth. Our balance sheet is strong and our cash balances remain high.  

- ENDS -

For further information, please contact:

John Dodds, Chief Executive
Deena Mattar, Finance Director
Kier Group plc	Tel: [phone]
Matthew Moth/Caroline Sturdy
Madano Partnership	Tel: [phone]

 

END

 

 

TSTGUUPWMUPRGQM