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Kier boosted by commercial revival

12 Nov 10 Kier remains bullish about the outlook for its construction division, after securing a string of new contracts during the second half of 2010, including £84m-worth of commercial work in London.

In a trading statement for the period from 1 July, the firm said it was “beginning to see signs of recovery in the UK commercial property market, both through our Developments business and through our long-standing client base”.

Kier said its construction division “continues to perform well”, helped by its presence on over 50 public and private sector frameworks.

It has secured nearly all its projected construction revenue for the year to 30 June 2011, and 51% of targeted construction revenue for the year to 30 June 2012.

Recently, Kier has been appointed as construction partner on the West Midlands Framework and on both the high and medium value frameworks in the North West Construction Hub (NWCH).

In education, it has secured two new academy school projects, (East Sussex and Worcester) valued at £28m, and reached financial close on a further £97m.

Kier has also been appointed as one of only six contractors on the NHS ProCure 21+ health framework, worth up to £4.5bn over the next six years. The contractor said it has won the first two contracts to have been awarded under this new framework, valued at £8m, and is currently “active on a further £100m of opportunities”.

It sees a “significant opportunity” in the energy market, and is currently working on an advanced works package for EDF at Hinkley, where it “expects the first significant packages of work for the new station to be awarded later this year”.

In infrastructure, Kier secured a place on the civil engineering, demolition and enabling frameworks for Crossrail, and has submitted submitted a number of bids (ranging from £250m to £400m) in joint venture, which it will hear the results of in the first half of 2011.

Kier said its Support Services division is trading “in line with our expectations” and the firm believes that pressures on government spending will increase our opportunity in this sector.

“We are offering our local authority partners innovative funding and development solutions, and assisting them in their desire to bundle several services into one contract,” it added.

The outlook is not so positive in its Partnership Homes business, where financing changes for new building social housing introduced by the Comprehensive Spending Review is likely to result in “a hiatus while these funding models are established”, according to Kier.

In private housing, the firm said a “continued lack of confidence coupled with the low availability of mortgage finance has resulted in a slow start to the year for our private sales”. It expects overall sales for the year to 30 June 2011 to be “second-half biased”.

Summarising the outlook, Kier said following the Spending Review it had identified “two key themes”: a greater focus on maintenance - including life cycle costs - than new building across all departments, which aligns well with the integrated service offering across our Construction and Support Services divisions; and local authorities' need to adopt a different business model to fund their social housing plans, which will provide us with further opportunities through the combination of our Developments and Partnership Homes divisions.”

It added: “We still see growth opportunities in a number of our construction markets that will counter the inevitable reductions in public sector expenditure.

“Kier's integrated business model continues to provide many unique opportunities brought about by our financing and planning skills as well as our strong track record of construction delivery and client service.

“We have a strong balance sheet, an excellent track record of service delivery and very talented, capable staff, all of which give us confidence that the Group will make further progress in this financial year.” 

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