Kier Group’s £9bn order book, but debt rises

PROPERTY, residential, construction and services company Kier Group is reporting an order book across its business in excess of £9bn.

However, the company’s net debt position by December 31 is expected to rise to about £220m (December 31 2014: £156m) as a result of investment in its Property and Residential divisions and delays in receipts from public sector clients in Saudi Arabia until the first quarter of 2016 and the expected settlement of historic final accounts.

The company, which employs more than 1,000 people in offices in Manchester, Liverpool, Oldham and Wigan announced the news in a trading update ahead of its annual meeting in London today.

It said the Group remains on course to meet the board’s expectations for the current year and that good progress had been made on the integration of the Mouchel acquisition, completed in June. Thanks to the deal Kier is on course to deliver “£4m of synergies” in the second half of the 2016 financial year, it said.

The company said a £1bn pipeline of business was underpinned by strong occupier and investor interest, resulting in an annualised return on capital ahead of the Group’s target of 15% for the division.
Its developments business has acquired a 46,000 sq ft mixed-use retail site in Wakefield and the planning permission process is underway. It has also completed the purchase of a 34,000 sq ft building in Fitzrovia, London, in joint venture with Investec.

Occupiers have been identified for both schemes, reflecting our largely non-speculative approach.

In July, a 48,000sq ft office development, in joint venture with FORE Partnership, at 58 Victoria Embankment was forward sold ahead of practical completion for £51m and a land sale in Sutton Coldfield was completed with a value of £2m. In addition, a development site at Peartree in north Oxford was purchased and sold.
The Construction division secured more than £700m of new work during the period, reflecting its strong position on frameworks and its regional focus.

Meanwhile, Final terms have been agreed to deliver over £200m worth of enabling works for the first phase of the Hinkley Point C nuclear power station and Kier has been appointed as sole contractor to deliver up to £1.5bn of construction and maintenance work for leading built environment specialist, Scape Group.

There has also been the award of the Smart Motorway contracts worth up to £475m, in a joint venture, as part of the Highways England Collaborative Delivery Framework.

The trading statement predicted a bright outlook and said Kier Group was encouraged by the recent launch of the Government’s new National Infrastructure Commission which confirmed the allocation of £100bn for infrastructure spending by 2020, including a £15bn commitment to the UK roads investment strategy.
“Our combined Construction and Services order books of more than £9bn, together with a strong pipeline of opportunities, position the Group well for the future,” the company said.