Trading Update

RNS Number : 2316N

Kier Group PLC

28 January 2016

 

KIER GROUP PLC

TRADING UPDATE

Kier Group plc, a leading property, residential, construction and services group, provides an update on its trading to date prior to announcing its interim results on 17 March 2016.

Current trading

Since the trading update on 12 November 2015, the Group's underlying trading performance has remained in line with management's expectations.

Financial position

The Group's net debt position at 31 December 2015 of £175m was ahead of expectations. This included the settlement of a number of final accounts and reflects an improved working capital performance. It is anticipated that this will continue and therefore the Group's net debt position at 30 June 2016 will be at the lower end of previous guidance. The Group remains on course to achieve its Vision 2020 goal of a net-debt-to EBITDA ratio of 1:1 by June 2017.

Divisional update

Property

The Property division is benefiting from a strong development market in its core sectors. Its national coverage and sector breadth provides considerable opportunity, as demonstrated by the range of non-speculative property developments in its portfolio. Completion was reached on a 222 bed hotel for Motel One in Newcastle and a 68,000 sq ft mixed-used scheme in Walsall. Further funding for development of the Thurrock Trade City and Logistics City schemes was secured through the Investec joint venture. The business sold its 100% investment in the Norfolk and Suffolk Police Investigation Centres PFI project and its 25% investment in the 1,300 bed student accommodation scheme in Salford.

The division has maintained its performance, with a pipeline of more than £1bn and a ROCE in excess of 15%.

Residential

On the back of increasing demand for all forms of housing, the Residential division is performing well.  The division is on track to generate revenue more than 30% ahead of last year and deliver approximately 2,200 completions by 30 June 2016.

The private housing business remains on course to deliver approximately 850 completions from Kier's own land bank and has a current forward order book that represents over 80% of the units forecast for completion by 30 June 2016.

The mixed-tenure housing business is forecasting approximately 1,350 completions by 30 June 2016. Preferred bidder status has been achieved in key developments, including the £40m mixed tenure housing scheme for Birmingham Municipal Housing Trust which provides approximately 300 new homes (including 148 affordable homes), and a £9.5m design and build contract for 71 new homes for Leeds City Council. The capital generated from developing on Kier's own land bank continues to be recycled to underpin growth in the mixed-tenure housing business. 

Kier welcomes the Government's announcement relating to the direct commission of house-building on publicly-owned land and the introduction of the Starter Home Fund, enabling house-building on brownfield sites. These measures are expected to mitigate the impact of the recent announcements relating to affordable housing rent reductions and "right-to-buy" and are anticipated to increase demand for greater private/public collaboration and therefore provide further opportunities for the Residential division.

Construction

Performance in the Construction division remains robust. More than £350m of new awards have been secured since mid-November 2015, as a result of a continued strong contribution from frameworks and the division's regional focus.  The current order book represents 100% of targeted revenue for the 2016 financial year and supports the division's forecast operating margin of around 2%.

Some key recent successes include:

·      Appointed as one of five contractors to two Defence Infrastructure Organisation (DIO) Frameworks for capital works projects under the Next Generation Estate Contracts (NGEC) programme. The two frameworks cover the design and build of up to £650m of MOD construction projects in the south-east and south-west of England, with individual projects valued at up to £12m;

·      Shortlisted to tender for all three HS2 phase 1 £900m Enabling Works Contract packages as part of a joint venture with Carillion and Eiffage. Contract award is scheduled for the end of 2016, with works scheduled to commence in early 2017; and

·      Internationally, the award of a further £25m contract award by Meraas Development for the Bluewaters Island development in Dubai; and the signing of a new joint venture with Shurooq, the investment and development authority of the Government of Sharjah, UAE.

Services

The Services order book represents almost all of the division's targeted revenues for the 2016 financial year. Underlying operating margins remain in line with management's expectations at approximately 4.7%, which reflects the continued decline in recyclate prices. Mouchel is performing well and the integration is on course to deliver £4m of synergies in the second half of the financial year, as expected.

Following the launch in 2015 of the ten-year strategic property partnership with Staffordshire County Council and the Police and Crime Commissioner to provide strategic estate management, a £20m ten-year contract has been secured to deliver total facilities management solutions to over 40 occupied police properties, including its headquarters, in the county.

With an increased presence in the highways and infrastructure sectors, Kier is playing a leading role in flood protection and restoration initiatives, particularly following the recent bad weather. For example, Kier has been appointed preferred bidder by Highways England to undertake £2m works to re-open the A591 in Cumbria, where Kier operates the Area 13 strategic highways contract. Over the Christmas period, Kier worked in a number of other flood-hit areas across the UK, including the Elland Bridge in Elland near Halifax, the Stainton Aqueduct in Kendal and a landslip on the Rochdale Canal.

Outlook

The integration of Mouchel, acquired in June 2015, is progressing well, with the expected synergies on course to be delivered. The Group continues to experience good underlying organic growth and an improving pipeline of opportunities, despite the ongoing pressure on public sector budgets. The combined Construction and Services order book, as at 31 December 2015, has been maintained at approximately £9bn, excluding potential further renewals and extensions valued in excess of £3bn.

- ENDS -

For further information, please contact:

Faeth Birch/Daniela Fleischmann (Finsbury)                     [phone]

Kier press office                                                             [phone]/ [phone]

Cautionary statement

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 2015 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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