KIER GROUP PLC
Trading & Acquisition Update
8 July2013
Kier Group plc, the integrated construction, services and property group, is pleased to provide the following update on current trading and on the status of the acquisition of May Gurney Integrated Services plc.
May Gurney
We are delighted to be able to announce the completion of the acquisition of May Gurney Integrated Services plc, the Court having approved May Gurney's scheme of arrangement on 5 July. With effect from this morning, May Gurney's shares have ceased to trade on AIM. We were also very pleased with the level of support shown by the shareholders of both groups at the general meetings held in June to approve the transaction.
In anticipation of completion, we have been working closely with May Gurney to ensure an effective integration of the two businesses. In particular, we have been focusing on ensuring that the delivery of services to clients by the enlarged group remains unaffected, risk management processes are adopted consistently across the entire business and that the available operational efficiencies are realised in line with the integration plan. Interaction with key clients has been very positive and we will continue this process in the coming months to ensure that the business meets their expectations and to explore further business development opportunities.
Construction
Trading is in line with the Board's expectations, with operating margins remaining at approximately 2%. In this financial year, we have secured in excess of £1.4bn of new contracts and our current order book of secured and probable work represents our entire forecast Construction revenue for the 2014 financial year. We continue to maintain our strong management of working capital, particularly across public sector contracts and framework arrangements, where payment terms are increasingly challenging.
In line with our strategy to continue to grow our Infrastructure business, we are particularly pleased to have recently been selected as the preferred bidder (as part of a three-way joint venture, Merseylink) to deliver the Mersey Gateway scheme (construction value of approximately £450m) which includes the construction of a new six-lane toll bridge over the River Mersey between Runcorn and Widnes. Financial close is expected later this calendar year.
Services
The trading performance is in line with the Board's expectations and our order book of approximately £2.1bn continues to provide long-term visibility of revenues, with 92% of our forecast Services revenue for the 2014 financial year secured or probable. In the current financial year, we have secured over £400m of new contracts.
Bidding activity remains high and, following our success in securing new work, mobilisation costs for new major schemes will, as previously set out, slightly decrease the operating margins to a level similar to those reported in the interim results in February 2013.
Key recent events include finalising our two Circle Anglia housing maintenance contracts for the Eastern Region (£75m) and Central Region (£127m) and securing a repairs and maintenance contract worth around £50m over 10 years for Grainger plc, the UK's largest listed residential property owner and manager.
Property
The combined £1.4bn housing and development pipeline is progressing well and trading to the end of June is as anticipated. As announced last week, we are pleased to confirm that we completed the disposal of a development scheme, valued at £46m, in Sydenham, London and in recent months we have also disposed of two of our PFI equity investments in Ipswich Hospital and Gloucestershire Fire, with proceeds totalling £7.6m, at a valuation discount rate of approximately 7%. We also achieved financial close on the £240m Watford Health Campus project, a mixed-use development including retail and leisure facilities, 650 homes, offices and a multi-storey car park.
Our mixed-tenure housing business is expected to deliver almost 400 units in the financial year, and has been successful in securing new schemes, which has taken our forward order book to £400m and equates to more than 2,600 new homes. We also anticipate that our private housing business will achieve approximately 550 completions in the financial year.
Outlook
The comprehensive spending review announced by the Government on 27 June is encouraging for both our Construction and Services businesses with planned expenditure on infrastructure and maintenance schemes likely to grow significantly.
The Group's order books in Construction and Services are robust and our trading performance is in line with the Board's expectations. Thecomprehensive review and restructuring of our business continues to make good progress and will deliver significant cost savings and improved organisational efficiency. The enlarged group is well positioned in its chosen markets and has a strong capital structure, all of which provides an excellent platform for future growth.
Enquiries
Kier Paul Sheffield, Chief Executive Haydn Mursell, Finance Director |
+44 (0)1767 640 111 |
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RLM Finsbury |
+44 (0) 207 251 3801 |
Faeth Birch |
+44 (0) 776 894 3171 |
Charlotte Whitley |
+44 (0) 776 850 5685 |
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About Kier
Kier is a leading construction, services and property group, specialising in building and civil engineering, support services, commercial property development, structured property financing and private and affordable housing. Kier employs over 10,000 people worldwide and has an annual revenue of £2.1bn. For more information, contact Kier's communications department on +44 (0)1767 640 111 or visit www.kier.co.uk.
