Trading Update

RNS Number : 5788R

Kier Group PLC

30 June 2015

 

30 June 2015

KIER GROUP PLC

Trading Update

Kier Group plc, a leading property, residential, construction and services group, provides an update on its current trading.

Current trading and outlook

Underlying trading performance for all four divisions for the year to 30 June 2015 has remained in line with management's expectations.

Following the completion of the acquisition of MRBL Limited ("Mouchel") on 8 June 2015, and as a result of continued underlying organic growth, the total order book for the enlarged group has been maintained at £9.3bn at 31 May 2015 (Kier standalone order book: £6.5bn), excluding potential further renewals and extensions valued at up to £2bn. The integration of Mouchel's operations is progressing well with the smooth transition of operational management and with synergies on track.

Divisional update

Property

The Property division's performance continues to be strong, with a pipeline of opportunities in excess of £1bn. The division has exceeded its minimum requirement of 15% ROCE, with the average capital invested over the year being approximately £75m. The division continues to benefit from a buoyant property development market in its core markets and good occupier demand in the office and retail markets.

Residential

The number of completions within the Residential division for the year to 30 June 2015 across the private housing and mixed-tenure businesses is expected to be approximately 2,100 units. The private sale current forward order book represents 25% of the units forecast for completion in the next financial year. In April 2015, the division extended its operations in the north-west through the acquisition of parts of a regional affordable housing business, Southdale, which has new contracts worth up to £55m. In March 2015, Kier was awarded a 5* rating in the annual Home Builders Federation customer satisfaction survey, achieving the top score amongst house builders in the UK.

Construction

The Construction division has experienced significant year-on-year organic growth. Margins remain in line with management's expectations at approximately 2% and the order book of secured or probable work represents more than 80% of anticipated revenue for the year ending 30 June 2016.

Recent contract awards included re-securing a place on the North West Construction Hub medium-value framework for projects worth between £2m and £9m, all three lots under the £4bn Southern Construction Framework, significant new awards at the Argent development, King's Cross, and being named preferred bidder to deliver the £170m first phase of The Ram Brewery regeneration development in Wandsworth. As announced earlier in June 2015, the division was awarded more than £200m of contracts under the ProCure 21+ health framework.

As a result of our ongoing approach to capital discipline, our mining operations at Greenburn in Scotland have been prepared for sale and discussions are ongoing with a potential buyer. As a consequence, it is our intention to classify its operations and assets as held for sale at 30 June 2015. This will result in a non-underlying impairment charge in the current financial year, but will have no impact on the Group's cash position.

Services

Following contract wins in the first half of the financial year, second half revenues in the Services division have increased following the awards of a £200m four-year extension of the highways services contract with Northamptonshire County Council and more than £700m of awards as part of the AMP6 cycle. Margins have remained in line with management's expectations, towards 5%.

As previously stated, the environmental services contract with Bristol City Council ("BCC") has remained challenging. It is, however, anticipated that discussions with BCC about terminating the contract will conclude in the near future.

Following the acquisition of Mouchel, Kier is now the sector leader in a growing UK highways maintenance and management market. In particular, the acquisition enables Kier to capitalise on £17bn of investment in the strategic road network to be delivered through Highways England over the next five years. Specifically, the business is benefiting from the contribution of the Area 9 and Area 3 Highways England contracts.

New awards in the Facilities Management business have included a five-year £22.5m contract with the Royal Opera House for a wide range of hard and soft facilities management services.

Discussions relating to the potential sale of the fleet and passenger services business are ongoing.

Pensions and net debt

As previously stated, Kier closed the defined benefit section of its pension scheme to future accrual in February 2015, resulting in a total exceptional charge of £7m of which the cash impact was approximately £2m.

The Group's net debt as at 30 June 2015 is in line with management's expectations, improving as anticipated in the final quarter of the year.

 - ENDS -

Contacts:

Faeth Birch/Daniela Fleischmann (Finsbury):            [phone]

Kier press office:                                                         [phone]/ [phone]

 

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