15th May 2014 14:33
LONDON (Alliance News) - Kier Group PLC saw its shares rise Thursday after it said its construction business was seeing more opportunities in the UK and overseas, its property unit had maintained its pipeline and won new contracts, and the business as a whole was "on course" in its current financial year.
In a statement, the company said its construction business was experiencing more opportunities as the market recovered in the UK. It said it was still being selective about bidding for contracts, but had won more than GBP500 million of new contracts so far in 2014. Operating margin in the UK business remains around 2%, it said.
It said its order book of secured or probable work stood at about GBP2.6 billion, representing all the forecast revenue for the financial year to end-June, 2014, and more than 80% of revenue for the 2015 fiscal year, an improvement on the situation a year ago.
Kier said it also had a strong pipeline overseas in its construction business, especially in the Middle East.
Finance Director Haydn Mursell said the Middle East has ?so much spend going on? that local contractors are keen to joint venture or use international resources to ensure delivery of their programme of work as well as ensuring quality and safety.
?The biggest potential for overseas growth is in the Middle East,? he told Alliance News. ?Two years ago that would have been at a very low base but what you are now seeing is continued growth, especially in Dubai and Abu Dhabi that precedes events like the Dubai Expo in 2020 where you will see lots of hotel building and infrastructure to support that.?
The order book in its services division stands at about GBP3.5 billion, with all of forecast revenue for the current financial year secured or probable and more than 80% for fiscal 2015. The unit has secured about GBP400 million so far in 2014, and its operating margin is expected to be above 4.5%, meeting expectations.
Kier said its services division has also been boosted by last year's GBP221 million acquisition of rival firm May Gurney.
Current finance head Mursell, who will replace outgoing Chief Executive Paul Sheffield in July, said the company is now able to win work it would have struggled to otherwise, such as a GBP130 million contract with Anglian Water also announced Thursday. The company has been made preferred bidder on two long-term contractors for infrastructure and water meters.
?May Gurney had a much stronger relationship with Anglian Water than Kier prior to the acquisition but the balance sheet and the scale that Kier provides behind the May Gurney badge really means that Anglian Water has opened the award to Kier at a much higher level in terms of capital value than perhaps May Gurney would have had historically,? Mursell said.
?We are really seeing a volume uptake as a result of that. And of course construction and services now have an order book in excess of GBP6 billion which gives us visibility over the next few years,? he added.
Its property business, meanwhile, has maintained its pipeline above GBP1 billion for property development and has delivered its targeted 15% return on development capital.
"We continue to invest working capital to grow the mixed tenure housing business, which has a pipeline at the end of March of approximately GBP450 million," the company said in a statement. "The private housing business performed well, supported by the Government's Help to Buy scheme, and remains on track to deliver approximately 600 completions this year."
"Kier's underlying trading performance remains on course. We maintain good visibility of earnings for 2015 and continue to invest for growth," it said.
Kier Group shares were up 1.88% at 1,676.97 pence per share Thursday afternoon, the third highest gainer on the FTSE 250.
Updated by Anthony Tshibangu; [email protected]; @AnthonyAllNews
Original story by Steve McGrath; [email protected]; @SteveMcGrath1
Copyright 2014 Alliance News Limited. All Rights Reserved.
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