Kier reports construction 'strong', but house prices down 10%-15%

Kier has reported that performance in the first quarter of its new financial year has been “in line with expectations – cash is strong and we have healthy orderbooks in construction and support services.”

John Dodds, chief executive, said: “Barring any further setbacks in our markets we are on track to meet expectations this year.”

Performance in the three months since 1 July 2008 is summarised as:

Construction

A strong start to the new financial year with a high level of turnover. The markets in which Kier operates are mixed, however, with private sector spend slowing in the commercial property market but this setback being compensated for by continued public sector expenditure, particularly in education.

The order books and pipeline of opportunities at preferred bidder stage remain at “healthy levels” and Kier has secured over 90% of its expected turnover for the year. 

Support Services

The Building Maintenance division operates a number of large, long-term contracts for the repairs and maintenance of social housing units. It is short-listed as one of two bidders for a £40m a year contract for North Tyneside for 10 years, with the option of extending to 15.

Kier has recently won an £11m a year contract for Surrey County Council to carry out maintenance and minor capital works on public buildings for two years, extendable for a further two years.

Homes

Now a combination of Kier Homes, the private residential operation, and Kier Partnership Homes, the social housing contracting business.

A satisfactory start to the year despite further deterioration in buyer sentiment and a lack of liquidity in the mortgage lending market.

The order book of reserved and exchanged units at 31 October is 60% below the same period last year. Even so, the work represents around 55% of the full-year targeted unit sales figure.

Selling prices have continued to fall and are running 10% to 15% from their peak.

“This is less than reported in some areas largely due to our lack of exposure to high-rise city centre apartments,” said Dodds. “Our housing work-in-progress remains higher than we would like but a number of our sites are being actively re-planned for social housing and other alternative uses reflecting our change in focus away from speculative house building.”

Property

Activity continues on a number of developments despite the general lack of liquidity and occupier demand in the market.