Kier exits Salford Uni consortium

Shares in Kier jumped more than 3% this morning after the diverse group showed steady progress in a trading statement to the stockmarket, with contributions from an asset sale in Salford and flood defence work in Cumbria.

Kier’s property division sold its 25% investment in a 1,300-bed student accommodation scheme in Salford. Peel Park Quarter, designed by Sheppard Robson, is valued at £81m and opened in September 2015. The project was delivered by University of Salford and Salford Village Limited, a consortium of Campus Living Villages, Graham Construction and investors Equitix and Kier Project Investment. The division has a pipeline of more than £1bn and return on capital employed is running at 15%.

Kier employs more than 1,000 people in the North West and North Wales across offices in Wrexham, Wigan, Liverpool, Manchester, and Northwich.

The residential division is on track to generate revenue more than 30% ahead of last year and deliver 2,200 completions by 30 June 2016.

Performance in the construction division “remains robust”. Kier added: “More than £350m of new awards have been secured since mid-November 2015, as a result of a continued strong contribution from frameworks and the division’s regional focus. The current order book represents 100% of targeted revenue for the 2016 financial year and supports the division’s forecast operating margin of around 2%.”

Kier is pushing increasingly into highways and infrastructure sectors, and has been appointed preferred bidder by Highways England to undertake £2m works to re-open the A591 in Cumbria, where Kier operates the Area 13 strategic highways contract. Over the Christmas period, Kier worked in a number of other flood-hit areas across the UK, including the Elland Bridge in Elland near Halifax, the Stainton Aqueduct in Kendal and a landslip on the Rochdale Canal.

On the integration of Mouchel, acquired in June 2015, Kier said this is progressing well, with the expected synergies on course to be delivered, £4m of cost savings in the second half of the year are expected.

The statement said: “The combined construction and services order book, as at 31 December 2015, has been maintained at approximately £9bn, excluding potential further renewals and extensions valued in excess of £3bn.”

The group had net debt at 31 December 2015 of £175m, which was ahead of expectations. Kier added: “This included the settlement of a number of final accounts and reflects an improved working capital performance. It is anticipated that this will continue and therefore the group’s net debt position at 30 June 2016 will be at the lower end of previous guidance. The group remains on course to achieve its Vision 2020 goal of a net-debt-to EBITDA ratio of 1:1 by June 2017.”

Shares in Kier were up 40p to 1257p.

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