26 January 2017

KIER GROUP PLC

TRADING UPDATE

Kier Group plc, a leading property, residential, construction and services group, provides an update for the half year ended 31 December 2016 ("the period") prior to announcing its half year results on 23 March 2017.

Current trading

The Group's underlying trading performance for the period was in line with management's expectations, with the results for the full year expected to be second-half weighted in line with the prior year.

Financial position

The Group's net debt position for the six months ended 31 December 2016 was £179m (31 December 2015: £174m) which includes receipt of the proceeds from the disposal of Mouchel Consulting and an investment of £100m since 1 July 2016 in the Property and Residential divisions to take advantage of attractive investment opportunities and drive future growth for the Group. The average month-end net debt position for the period was in line with prior year at £300m (31 December 2015: £280m). We expect to maintain a net debt to EBITDA ratio of less than 1x at 30 June 2017.

Operational update

Each of the Group's divisions continue to perform well.

The Property division has maintained its good performance benefiting from the continued investment in new schemes. It has a pipeline of more than £1bn and continues to deliver ROCE in excess of 15%.  The period was underpinned by strong occupier activity and healthy investment sentiment across all sectors. We completed a number of disposals throughout the UK and a schedule of pre-lets were secured with additional lettings at an advanced stage and on track for exchanging before our financial year end.

The Residential division continues to benefit from the demand in the UK for all forms of housing. We continue to recycle capital from our private land bank into our mixed-tenure business and improve the division's ROCE through the use of cash efficient joint ventures. In early January, the division secured a £42m four-year allocation from the Homes and Communities Agency which will underpin the delivery of completions from 2019 onwards. Our private sales are performing well with strong sales, visitor and reservation rates. The division is on track to deliver more than 2,200 completions by 30 June 2017. 

The Construction and Services divisions continue to perform well, and we are continuing with the closure of our Caribbean operations. Total contract awards since mid-November 2016 have totalled more than £1bn, and the Construction and Services order books represent 100% of forecast revenue for the 2017 financial year.

Key contract awards since mid-November include:

·      three new highways maintenance contracts worth more than £300m covering Highway England's Areas 6, 8 and 13;

·      the award of a new 50/50 joint venture infrastructure contract with Severn Trent on the Birmingham Resilience Project worth £100m;

·      a £80m contract for the construction of the Cardiff University Innovation Campus;

·      a contract awarded to deliver phase 2 of the £85m extension to Eastbourne Arndale Shopping Centre for Eastbourne Borough Council and Legal & General; and

·      a £75m contract in Dubai to deliver a second staff accommodation project on behalf of Nshmi, a local developer and existing client. This project will be funded with the support of UK Export Finance. 

Outlook

The Group continues to experience good underlying organic growth. The strength of the Property pipeline, the good forward sold position in the Residential division and the combined Construction and Services order book, which has been maintained at approximately £9bn excluding potential further renewals and extensions valued in excess of £2.5bn, positions the Group well for the future.

- ENDS -

Cautionary statement

This announcement does not constitute an offer of securities by Kier Group plc (the "Company"). Nothing in this announcement is intended to be, or intended to be construed as, a profit forecast or a guide as to the performance, financial or otherwise, of the Company or any of its subsidiaries (together, the "Group") whether in the current or any future financial year. This announcement may include statements that are, or may be deemed to be, ''forward-looking statements''. By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future and may be beyond the Company's or the Group's ability to control or predict. Forward-looking statements are not guarantees of future performance. You are advised to read the section headed ''Principal risks and uncertainties'' in the Company's Annual Report and Accounts for the year ended 30 June 2016 for a further discussion of the factors that could affect the Company's or the Group's future performance and the industry in which it operates.  Other than in accordance with its legal or regulatory obligations, the Company does not accept any obligation to update or revise publicly any forward-looking statement, whether as a result of new information, future events or otherwise.