Interim Management Statement

RNS Number : 2000S

Kier Group PLC

14 May 2009

 



KIER GROUP PLC

INTERIM MANAGEMENT STATEMENT

This statement covers the period from 1 January 2009 to the date of this announcement and constitutes Kier's Interim Management Statement as required by the UK Listing Authority's Disclosure and Transparency Rules.

As previously stated market conditions vary across our four trading divisions. Our more resilient businesses, Support Services and Construction, continue to benefit from good contract awards and preferred bidder opportunities enhanced by framework and partnering agreements as well as outsourcing opportunities and supported by a continued high level of public sector expenditure. Meanwhile Partnership Homes and Developments continue to operate in challenging markets but with some early signs of stabilisation beginning to emerge.

Construction

Our Construction division continues to perform well with strong cash generation and operating profit levels. Public sector contracts underpin our order books, particularly in the education and health sectors, and represent around 75% of our awards for the year to date. Our secured order book of contracted projects has reduced since the beginning of the year. However we have been appointed preferred bidder and are in advanced negotiations on a number of contracts which, together with committed order books, secure around 80% of our projected revenue for the year to 30 June 2010. This proportion is in line with the position we were in at this time last year. The Academies framework, in particular, has provided us with a number of awards and preferred bidder opportunities in the period including the £26m Falmer Academy in Brighton for which we have recently been identified as preferred bidder. In the last few months we have been appointed preferred bidder for £30m of projects under the ProCure 21 health framework. We were pleased to have recently been selected as one of three contractors to form the four-year, £275m East Midlands Property Alliance Intermediate Projects Partnering Framework for the procurement of new build and refurbishment projects.

In the private sector, airports, rail, power and utilities continue to provide a number of opportunities. We have recently won a £27m contract to renew the roof at King's Cross Station for Network Rail. This project will see Kier Construction installing a new glazed roof as part of the £450m upgrade and includes the repair, refurbishment and renewal of the main wrought iron structure to restore the 1850's Grade I listed building. This award followed Kier Construction's selection as one of a number of framework contractors appointed to carry out advanced works for the Crossrail project in London.

In the nuclear sector, where we have a long track record, Kier Construction has been awarded a framework agreement for AWE in an early contractor engagement role. The framework promotes collaborative working with AWE at conceptual and tender stages to deliver major infrastructure and building works within the Aldermaston and Burghfield facilities over the next five years. In Sellafield, where we have been continuously active for over 27 years, we have recently been awarded a £13.7m contract for a new facility. Our history in the nuclear sector, which includes work on Sizewell B, the last nuclear power station built in the UK, stands us in good stead to respond positively to the new, recently announced, nuclear build programme.

Support Services

The Support Services division overall continues to trade strongly and we are delighted that Kier Building Maintenance has been appointed as preferred bidder for the contract to repair and maintain around 16,000 social housing units and other council-owned property for North Tyneside Council. The contract, with total revenues of at least £600m, is for an initial ten years, extendable for a further five years. It will join our already well-established, large portfolio of local authority outsourcing work and bring the total number of social homes we look after to more than 240,000. The North Tyneside contract award will put the division well on its way to achieving annual revenues of £500m arising from resilient long-duration contracts at sustainable, reliable margins.

Partnership Homes

Conditions in the private housing market remain difficult. Mortgage availability, although easing marginally, remains an issue and first time buyers, in particular, are finding mortgage lending terms and criteria difficult to meet. Selling prices for the third quarter remained under some downward pressure, although there is some evidence that this is now beginning to ease. Our average selling price has continued to fall although our volumes are in line with our expectations. At 30 April 2009 our completions to date, together with our order book of exchanged contracts and reservations, secured around 95% of our projected volumes for the current financial year.  

2010 is difficult to predict but we believe the challenging 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. The reorganisation of our Partnership Homes division is now virtually complete. A new board has been appointed which includes a team experienced in social housing, regeneration and private development. The annual cost savings of £20m which we anticipated have been achieved and our work-in-progress levels continue to fall. 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 beginning to see signs of increased government spending on social housing which supports our strategy for the future.

Developments

We have seen little sales activity in our Developments business so far this year although we have been active on a number of projects and long-term opportunities. We successfully completed the development and conversion of the Middlesex Guildhall into the UK Supreme Court, in March this year, on time and within budget and we are actively progressing a number of projects in Solum Regeneration our joint venture with Network Rail. We were delighted to have been selected by Sheffield City Council as its preferred bidder 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 be carried out by Kier Property, and the facilities management of many council properties, which will be carried out by Kier Support Services. Other property development opportunities are anticipated to emerge from this contract in due course.

Outlook

Whilst the current markets for our homes and property developments remain challenging we have a number of good long-term opportunities which will provide considerable value for the future. Our Construction businesses are performing well with good opportunities identified for 2009/10 and 2010/11. We anticipate that our Support Services businesses will further benefit from more outsourcing projects in both the public and private sectors as businesses and local authorities continue to examine their cost bases. The Group's financial performance is in line with our expectations, cash is strong and we have healthy order books. All this means that we are on track to deliver underlying results in line with our expectations this year.

ENDS

Contacts:

Deena Mattar         

Group Finance Director

Kier Group                              01767 640111

Faeth Birch         

Conor McClafferty     

Finsbury                                 020 7251 3801

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