Kier sees difficult economic conditions for next 18 months

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Kier sees difficult economic conditions for next 18 months

Thu, 23 February 2012
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Kier sees difficult economic conditions for next 18 months
Kier Group Quote more

Price: 1,164.00

Chg: -6.00

Chg %: -0.51%

Date: 16:35

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Price: 19,503.23 Chg: -63.19 Chg %: -0.32% Date: 16:49

Underlying interim profits may have risen at Kier but the construction, services and property group warned that the UK construction market looks set to remain depressed over the medium-term.

The company unveiled a 4.6% fall in total revenues for the six months to the end of 2011. Turnover eased to £1,046m from £1,097m in the second half of 2010.

Interim underlying profits (which exclude the amortisation of intangible assets) rose 8.6% to £34m, leading to underlying earnings per share of 70.3p, compared to 63.5p one year ago.

The above despite a fall in margins in its construction arm to 2.5%, from 2010 levels of 2.7%.

According to the company net cash at year end 2011 stood at £131m. That constitutes a drop versus the £165m that it had on hand at year end 2010, but was due to £33m of funds having been reinvested in the group.

As well, the company highlights that its construction and services order book is still over £4bn. Its construction order book already covers 68% of the revenues targeted for 2013, while in services the figure is 76%.

The company´s chairman, Phil White, expects the firm´s “good performance” to continue for the full year.

However, he adds that when looking to the medium-term conditions continue to be difficult in the UK construction market and that they are inevitably seeing greater pressure on their current operating margins.

Also of interest, he states that, in services, public sector outsourcing opportunities are taking longer to come to market and are often reduced in scale, which means the financial effect of any public sector outsourcing is not likely to be recognised until 2014.

Likewise, the company´s chief executive, Paul Sheffield, adds that, “the next 18 months will remain challenging as external macroeconomic factors weigh heavily on the public sector and the confidence of the private sector to invest. We will, however, continue to focus on those markets where we see the most potential for future growth.”

Despite the above Kier´s board has announced a 15% increase in the interim dividend, to 21.5p, which suggest a final dividend of around 43p is on the cards, given the board's policy of paying a final dividend that is twice as high as the interim divi.

As at 13:32 the shares were down 119p to £13.70p, having fallen as low as £13.58 in the first hour of the afternoon session.