Trading update

RNS Number : 1610P

Kier Group PLC

12 July 2010

 



12 July 2010

KIER GROUP PLC

TRADING UPDATE

YEAR ENDED 30 JUNE 2010

Kier Group plc, the integrated construction and property services group, is pleased to provide the following update to current trading in advance of meeting with analysts and investors later today.

Kier Group plc expects to report full year underlying profit before tax towards the upper end of current market expectations and ahead of last year's result. Net cash balances during the year have been strong ending the financial year at a record level of over £170m (30 June 2009: £93m) which reflects the quality and strength of our order books and our continued strategy to reduce our investment in the Partnership Homes business.

Construction

Our Construction division has traded well with strong operating margins and very healthy cash balances.  Our order books of both signed contracts and preferred bidder and negotiated positions secure nearly 90% of our targeted revenue for 2011.

During the year we continued to secure high volumes of work with a significant proportion in education. We are also seeing signs of the private commercial market returning as previously mothballed projects are being resurrected with private funding becoming available. Our exposure to the Building Schools for the Future programme is limited and, therefore, we anticipate that the reduction in the programme, announced last week, will not have a material impact on our order book and probable orders. Whilst we anticipate further cuts to public sector expenditure our strong and diverse business model will enable us to seek out a range of opportunities, including those in areas of non-discretionary investment, as follows:

•          Power - we are market leader in a growing market;

•          Utilities - growth is anticipated through our existing AMP 5 commitments;

•          Rail - expansion is expected in this area including Crossrail;

•          Waste - significant growth is expected;

•           Mixed-use developments - our diverse business model is already providing opportunities for developments which include residential, commercial and retail projects on both private and local authority owned land; and

•           International projects - our international revenues are at a low level this year but are expected to increase as we further establish ourselves in areas including Saudi Arabia, Abu Dhabi and Hong Kong.

Support Services

Our Support Services division continues its profitable and cash generative growth. We were delighted to have recently announced a contract award for Islington Council which was the result of rebidding for part of a contract on which we have been working for nearly ten years.  This award confirms both the quality and efficiency of our service provision. Our portfolio of homes, to which we provide building maintenance services, stands at around 240,000 which places us amongst the top five providers of this type of service.

Within Kier Building Maintenance our order books continue to provide long-term visible revenues to beyond 2020 at strong, consistent margins.  Whilst local government budgets are likely to be cut in the short to medium-term our strong relationships with local authorities, brought about by our positive approach to client service, are continuing to bring us some exciting opportunities. Our local authority partnerships, in particular, allow us to expand our activities through the involvement of other group businesses as our partners seek a one-stop, all-inclusive delivery model across their estates; a model that few others can offer.

Kier Building Maintenance has a strong pipeline of new business opportunities and is bidding for a number of major contracts including Hounslow, Warwickshire, St Georges Housing Association, Rotherham, Tower Hamlets, Catalyst Housing Group, Epping Forest, North East Lincolnshire, Braintree and Lewisham.  We are also short-listed for a number of framework opportunities including Procurement Lincolnshire Housing Refurbishment.

Partnership Homes

Our Partnership Homes division has traded broadly in line with our expectations and sold a total of 1,060 social and private homes during the year (30 June 2009: 1,140 units).  Selling prices have stabilised and visitor levels, whilst reducing since the election, have been steady over the last six months.

We are pursuing a number of opportunities to develop mixed-use projects, financed through the private sector, using land provided by local authorities and the Homes and Communities Agency. These regeneration and redevelopment sites require input and skills from across our businesses including construction, partnership homes, services and developments in order to plan, finance, construct, develop and maintain the properties. Kier is at the leading edge of these new initiatives which include housing for the elderly, smaller housing for first time buyers and mixed-tenure schemes.

We have a diverse and valuable land bank of around 6,000 plots which we are continuing to both develop and trade through land sales and land swaps.

Developments

Within the Developments division the £40m new headquarters office for Ordnance Survey in Southampton is expected to be completed this summer and will release a major development opportunity elsewhere in the city which will be undertaken by the Group.

We saw little sales activity in the second half of this financial year but we are active, nevertheless, on several medium and long-term opportunities.  We are making good progress on a number of projects in Solum Regeneration, our joint venture with Network Rail, and are expecting to commence construction this summer on our first project at Epsom which is already largely pre-let and pre-sold. This is expected to be the precursor to further station related developments commencing within the next 12 months.  Our public sector property management outsourcing business, which is working for Sheffield City Council, has also been selected as preferred bidder at Chesterfield and we believe this will be the first of many similar opportunities as local authorities look to reduce the costs of property management.

Directorate change

As announced today, Deena Mattar has informed the Board that she intends to leave the Group with effect from the close of Kier's Annual General Meeting in November 2010 in order to pursue other opportunities.  Deena joined the Group in 1998 and has been Group Finance Director since 2001.  Haydn Mursell, who is currently Deputy Group Finance Director of Balfour Beatty plc, will join Kier as Group Finance Director - Designate on 18 August 2010 and is expected to take over from Deena as Group Finance Director upon her departure.

Outlook

Whilst we continue to operate in a challenging environment, our integrated business model provides us with the ability to seek out and create new opportunities. By drawing on our strong relationships with clients, including local authorities, and bringing to them our development and financing skills we are able to offer solutions which few other single organisations are equipped to offer. These skills, combined with our comprehensive and widespread local network of regional offices; our strong track record of service delivery and the financial strength of Kier Group, continue to provide us with exciting new opportunities and give us confidence for the future.

Kier expects to announce its preliminary results for the year ended 30 June 2010 on 16 September 2010.

Ends

Contacts:

Deena Mattar              

Group Finance Director

Kier Group                    01767 640111

Faeth Birch                  

Conor McClafferty

Finsbury                       020 7251 3801

 

END

 

 

TSTUGUMUMUPUGMB