Kier Regulatory News (KIE)

Kier Group plc

Trading update

Kier Group plc (the "Group"), a leading construction and infrastructure services group, today provides an update on trading since 1 April 2020 (the "period").

Andrew Davies, Chief Executive, said:

"The Group's underlying trading in the last quarter of its financial year has remained resilient, despite the adverse impact of COVID-19. The majority of our sites have remained open during the period, operating in accordance with the Group's site procedures which have been adapted to reflect Public Health England's guidance. Over the past few months, we have taken a number of decisive management actions, which are delivering significant benefits and are enabling the Group to maintain a good liquidity position. The new senior management team is working well together and continues to focus on driving a range of strategic and operational actions throughout the Group. I am delighted that we are now beginning to experience the benefits of the changes in the Group's culture which are being driven by Performance Excellence."

Trading update

In its trading update of 30 March 2020, the Group confirmed that trading since 1 January 2020 had been in line with the Board's expectations.

Since then, COVID-19 has adversely affected the Group's revenue and resulted in it incurring additional costs, some of which are expected to be treated as exceptional. However, the Group's underlying performance has remained resilient, as it has continued to deliver critical national infrastructure projects and provide services across a range of sectors with, on average, c.80% of the Group's sites remaining open during the period. Almost all of the Group's sites are now open and the Group is focusing on driving on-site operational efficiencies, whilst working in accordance with new site operating procedures.

Outlook

The Group continues to win high quality work in its key markets and across a range of sectors. As at 31 May 2020, the Group's orderbook was c.£7.6bn; c.60% of our core Construction and Infrastructure Services' businesses' orderbook relates to work for Government departments or quasi-governmental entities and a further c.25% relates to the provision of services to regulated entities.

On 15 April 2020, the Government issued the 'notice to proceed' for the next stage of the HS2 project, following which the Group (in joint venture) has been undertaking pre-contract mobilisation activities. Contracts awarded to the Group during the period include the £97m Heartlands Hospital project for University Hospitals Birmingham NHS Foundation Trust. The Group also secured places on a number of frameworks during the period, including Lots 1 and 2 of the £2.6bn Thames Water AMP7 Capital Programmes Framework (Runway 2).

The Group is a Strategic Supplier to the Department for Education and a leading provider of education facilities. The Group is therefore well-placed to identify opportunities under the new, 10-year capital investment programme announced by Government on 29 June 2020, which provides for c.£1.5bn of investment in building, repairing and upgrading the UK's schools.

Whilst the Group anticipates that the effects of COVID-19 will continue to affect volumes and result in additional costs as the Group adapts to operating in a post-COVID-19 environment, the strength of the Group's orderbook, its expertise in managing complex projects and its long-standing client relationships enable the Group to remain confident in its outlook for the financial year ending 30 June 2021.

Strategic actions

The Group has made good progress in relation to the delivery of the strategic actions announced in June 2019:

· Cost savings: the Group now anticipates cost savings of c. £100m in the financial year ending 30 June 2021, with costs associated with these savings having been incurred in the current financial year.

· Living: the new management of Living has re-organised the business into a smaller, more disciplined organisation, with a focus on cash generation.

· Property: the Group continues to take steps to ensure that the capital allocated to the business remains at an appropriate level and is effectively deployed.

· Non-core businesses: the Group has substantially exited its Environmental Services business and has rationalised its Facilities Management business, which now seeks to identify synergistic opportunities with the Construction business for the benefit of the Group.

Before COVID-19, the Group had made good progress in implementing a number of measures to reduce its net debt and strengthen its balance sheet. As a result of COVID-19, over the next 12-18 months, further actions will be taken, including: continuing to implement a range of self-help measures, driving a further increase in the Group's operating cashflows, continuing the process to sell Living and a potential equity issue.

Net debt

The Group continues to manage its net debt position closely and has introduced a number of disciplines to improve its working capital management and to continue to reduce the number of days taken to pay the supply-chain.  The reduction in the Group's revenue due to COVID-19 has resulted in a lower level of working capital inflow in the period than in the equivalent period in previous years. The Group's average month-end net debt for the current financial year is expected to be c.£440m.

Covenant waivers

In order to provide financial flexibility for the Group following COVID-19, the Group has agreed waivers with its lenders in respect of the Group's financial covenants for the test period ended 30 June 2020. The Group continues to engage with its lenders to ensure that sufficient flexibility under the Group's principal finance facilities remains available.

Pension schemes

The Group continues to engage with the trustees of its pension schemes in relation to a revised deficit repair plan following the latest triennial actuarial scheme valuation.

This announcement contains inside information for the purposes of Market Abuse Regulation (Regulation (EU) No. 596/2014). The person responsible for making this announcement on behalf of the Company is the General Counsel and Company Secretary.

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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 2019 and the Company's results announcement for the six months ended 31 December 2019 for further information about 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.