Interim Management Statement

RNS Number : 1646R

Kier Group PLC

15 November 2012

 



KIER GROUP PLC

INTERIM MANAGEMENT STATEMENT

15 November 2012

Kier Group plc, the integrated construction, services and property group, announces its Interim Management Statement covering the period from 1 July 2012 to the date of this announcement.

Current trading

Kier continues to be on course to meet its expectations for the current financial year with a bias towards the second half of the year as forecast.

Construction

Our Construction division has maintained its position in a challenging market, having secured over £400m of new work since 1 July 2012 much of which has resulted from our numerous frameworks and similar arrangements. The operating margins will remain in line with our expectations for this financial year.

As anticipated, our UK contract awards demonstrate a good balance between private and public sector work with a shift towards UK infrastructure. We are also seeing increased levels of bidding activity overseas. Our order book of secured and probable work, at £2.1bn, represents 98% of our forecast Construction revenue for the year to 30 June 2013 and 53% of our forecast Construction revenue for the year to 30 June 2014.

More specifically in education our awards totalled £80m and in health, projects secured through the P21+ framework exceeded £45m. The power and waste markets in the UK continue to provide opportunities, although new work is taking longer to finalise due to ongoing delays to the energy market reforms. We secured the £50m Plymouth energy-from-waste project during the period and overseas we have been awarded work totalling £80m in Abu Dhabi and the Caribbean.

Services

Our Services division is trading in line with our expectations and, during the period, has secured new work in excess of £200m, underpinning its £2.1bn order book. This provides visibility of revenues beyond 2020, with 95% of forecast Services revenue for the year to 30 June 2013 secured or probable.

New work secured during the period included major local authority maintenance contracts for Hampshire (£19m), North West Leicestershire (£12m) and Surrey (£9m), a significant contract for our environmental business in East Sussex with a value of £120m and we have achieved preferred bidder status to carry out planned maintenance work for the City of Lincoln, valued at £45m.

Bidding levels have been high in recent months, which we anticipate will translate into revenue growth in the year to 30 June 2014. Following our success in securing new work, mobilisation costs for the new major schemes will slightly decrease the operating margins that we have seen over recent years, as we expected.

Property

The Property division is progressing well with its combined £1.3bn housing and development pipeline and is trading in line with our expectations, with transactions weighted towards the second half of the year as anticipated.

There have been a number of successes during the period, and as announced in September 2012, we were appointed as preferred partner on the £240m Watford Health Campus project for a mixed-use development including hospital facilities, 650 homes, offices and a multi-storey car park.

In October 2012, we announced the disposal of our PFI investments in Bournemouth Library and Greenwich Neighbourhood Resource Centres for £5.4m, representing a valuation discount rate of approximately 7%, which follows our strategy of selectively realising the value from our PFI portfolio.

Our investment in Biogen, an anaerobic digestion business, in August 2012, is progressing well with four plants at advanced stages of planning, in addition to the two existing operational plants.

Across our housing businesses, we have maintained our focus on the development of mixed-tenure affordable homes and we now have a pipeline in excess of £300m, having secured a further £20m of work to build more than 100 new homes for Birmingham City Council, 235 new homes in Sandwell (£31m), 64 homes in Lydney, Gloucestershire (£8m) and a mixed-tenure scheme of approximately 100 homes in Sheffield through the HCA panel (£11m).

Our private housing business remains on track to deliver in excess of 500 completions this year.

Financial position

The Group's net cash position at 31 December 2012 is expected to have reduced by approximately £100m from 30 June 2012 as forecast. This is primarily a result of the timing of the Property division's investments including the £30m of deferred consideration paid to Lloyds Banking Group in October 2012. Property transactions scheduled for the second half of the financial year will supplement cash inflows across the Group's other divisions, so we anticipate the Group's net cash position to return to levels similar to 30 June 2012 by the end of this financial year. However, the working capital environment in Construction will continue to remain challenging.

Outlook

With our healthy order books and solid balance sheet, combined with our integrated, well-balanced business model, our trading performance will be in line with our expectations for the current financial year.

We are experiencing a good level of bidding activity across the Group, however today's trading environment remains difficult with little sign of improvement in the UK construction market. In light of this we are conducting a further review of our construction operations to ensure we remain as efficient as possible.

Ends

Today Kier is holding its Annual General Meeting at the Honourable Artillery Company, Armoury House, City Road, London EC1Y 2BQ at 12.00 noon.

Contacts:

Alan Smith

Kier Group 01767 640111

Faeth Birch

Conor McClafferty

RLM Finsbury 020 7251 3801

 

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