4th Jul 2016 09:26
LONDON (Alliance News) - Kier Group PLC on Monday said it has not been impacted by the UK's vote to leave the European Union to date, as it tabled a number of proposals to simplify its portfolio over the coming months.
The FTSE 250-listed property, construction and services company said its underlying trading performance has remained in line with management's expectations and, whilst there was some uncertainty resulting from the vote for Brexit, there has been no impact on the business, thanks to its breadth of activities and strong order book.
Kier said the acquisitions of support services provider May Gurney and infrastructure and business services unit Mouchel have significantly increased the level of visible, long-term earnings from its construction and services divisions.
The property division, meanwhile, has a healthy pipeline of projects totalling more than GBP1.00 billion, Kier said, largely comprising non-speculative schemes, and the residential division's mixed tenure business has a pipeline of over GBP600.0 million.
Its net debt position on June 30 stood at GBP140.0 million, which was better than the forecast range of GBP150.0 million to GBP170.0 million, Kier said, and equated to a net debt to earnings before interest, tax, depreciation and amortisation ratio of less than 1, ahead of Kier's Vision 2020 goal of a ratio of 1 by June 30, 2017.
Kier said Mouchel is performing well and said the company's services operations have been integrated with Kier's facilities management operations, creating Kier Workplace Services. This should deliver cost savings of GBP4.0 million in the full year 2016 ended June 30 and GBP5.0 million in the following year.
Kier said a simplification of its business remained a priority and a review has been undertaken of those operations which do not meet the group's strict financial hurdles or do not provide a long-term strategic fit with Kier's core businesses.
Exceptional charges resulting from the changes are expected to total GBP53.0 million and be reported in its financial year 2016 results, for the year ended June 30, but said the total effect of the changes is expected to be cash positive by financial year 2017.
As part of this simplification, an evaluation of the strategic options for the Mouchel Consulting business, including a possible sale, will be undertaken in the coming months, it said.
In construction, whilst more than 85% of its targeted revenue for the next full year is covered by its current order book, Kier said the trading environment remains difficult in the Caribbean and, as a result, activities in the region are being wound down.
Kier said in its services division the financial performance of the environmental services business continues to be affected by the low oil price and, consequently, the price of recyclates, despite stable operational performance at contract level, Kier said. This has meant a provision of GBP35.0 million will be taken in its financial year ended June 30. As a whole, however, more than 85% of targeted revenue within the services division was covered by the current order book and underlying operating margins remain robust, Kier said.
During the year, Kier's property division benefited from a strong development market in its core sectors, it said, reaching a peak of GBP130.0 million capital invested, as anticipated, during the financial year, principally outside of London.
Kier said its regional coverage and sector breadth provided considerable opportunity, as demonstrated by the range of non-speculative property developments in its portfolio, although said the recent changes to stamp duty land tax have increased operating costs.
Kier said the contribution of the division to the company's overall financial performance was second-half weighted, as anticipated, and noted the healthy pipeline of projects at the year-end, of more than GBP1.00 billion.
Within the residential division, Kier said it performed well, with 2,200 completions delivered during the year, and said it continued to recycle its capital into the mixed tenure business to drive growth.
Shares in Kier were down 1.7% at 1,032.00 pence on Monday morning.
By Hannah Boland; [email protected]; @Hannaheboland
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