Trading Update

RNS Number : 5267V

Kier Group PLC

13 July 2009

 



                                    13 July 2009

KIER GROUP PLC

TRADING UPDATE 

YEAR ENDED 30 JUNE 2009

Kier Group plc, the construction, services, partnership homes and developments 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 2009, currently scheduled for 17 September 2009.

Despite the challenging market conditions for both housing and property development Kier Group plc expects to report full year underlying profit before tax in line with current market expectations. Net cash balances during the year have been strong ending the financial year at over £90m (30 June 2008: £144m). This shows an increase on the net cash balance at 31 December 2008 (£82m) notwithstanding our continued investment in the UK Supreme Court property development as well as the settlement of deferred land purchase payments during the year.

Our Construction division has traded well with strong operating margins and very healthy cash balances. We have continued to secure a high level of public sector work largely in the education and health sectors and in the regulated sector work continues to flow. We were pleased to announce the award of a £27m contract for Network Rail to renew the roof at Kings Cross station and, more recently, a £250m contract for United Utilities, in joint venture, for its Asset Management Programme Five (AMP 5) which extends our relationship with United Utilities to 2015. Our order books of both signed contracts and preferred bidder and negotiated positions secure over 85% of our targeted revenue for 2010 and nearly half of our target for 2011. This position is an improvement on previous years which we attribute to our comprehensive and widespread network of regional offices; our prominent position on both public and private sector frameworks; the quality and performance of our construction teams and, of increasing importance to our clients, the financial strength of Kier Group.

Our Support Services division continues its profitable and cash generative growth. We were delighted to have recently announced our position as preferred bidder for a £600m, ten-year, outsourcing contract for North Tyneside Council and are making good progress towards signing the contract which is programmed to commence in September 2009. This new contract will bring the total number of public sector homes we maintain to 240,000 and further strengthens the growth prospects for this division.  

Our Partnership Homes division has traded in line with our expectations this year, albeit at lower levels than last year; the restructured social housing and private development business sold a total of 1,140 units during the year (30 June 2008: 2,090 units). Selling prices remained under some downward pressure for most of the second half of the year but this has now started to ease and, in certain locations, prices have stabilised. Visitor levels have been steady over the last six months and reservations have held up accordingly. We are therefore recommencing construction on a number of developments and starting new sites in locations where demand has improved. We remain cautious on the outlook for 2010 but we believe the  difficult market conditions we have experienced over the last 12 months are beginning to ease and we are well positioned to take advantage of improvements in the housing market as it recovers. We have a diverse land bank which will provide private development and social housing opportunities, although we continue to review its value in line with our current unit selling prices. We are pleased to note the government's commitment to increased funding for social housing which  provides further support for our future strategy. 

We saw little sales activity in our Developments business this financial year but we are active nevertheless on a number of long-term opportunities. We completed and funded the development and conversion of the Middlesex Guildhall into the UK Supreme Court, during the year, which provides us with a high yielding, valuable  asset. On 1 July 2009 we commenced a contract with Sheffield City Council to supply corporate property and facilities management services under a £55m, seven-year contract with an option to extend for a further six years.  The contract includes the management of non-residential council buildings and land, which will provide opportunities for redevelopment and value creation for Kier Property, as well as the facilities management of many council properties being carried out by Kier Support Services.  We are making good progress on a number of projects in Solum Regeneration, our joint venture with Network Rail.  

Whilst the current markets for our Partnership Homes and Developments businesses  remain challenging we have a number of good quality long-term opportunities which will provide considerable value for the future. Our Construction and Support Services businesses are well placed to secure work and have healthy order books allowing them to continue their profitable, cash generative performance. Our balance sheet is strong and our cash balances remain high.  

Ends

Contacts:

Deena Mattar            

Group Finance Director

Kier Group                       01767 640111

Faeth Birch             

Conor McClafferty       

Finsbury                          020 7251 3801

 

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