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Kier Group PLc

Kier Group plc Strong market-leading positions and record order books of £10.2bn

Kier Group plc (LON:KIE), a leading infrastructure services, buildings and developments & housing group, today announced its year end results for the year ended 30 June 2018

Underlying1

Year ended 30 June 2018

Year ended 30 June 2017

Change

%

Revenue2; 3

£4.5bn

£4.3bn

+5

Profit from operations3

£160m

£146m

+10

Operating margin3

3.6%

3.4%

Profit before tax3

£137m

£126m

+9

Profit for the year3

£113m

£100m

+13

Basic earnings per share

116.7p

106.8p

+9

Proposed full year dividend per share

69.0p

67.5p

+2

Net debt4

£186m

£110m

Statutory

Year ended 30 June 2018

Year ended 30 June 20171

Group revenue

£4.2bn

£4.1bn

Profit from operations

£134m

£8m

Profit for the year

Basic earnings per share

£88m

89.8p

£12m

11.1p

1 Restated to reclassify the profit on disposal of Mouchel Consulting within discontinued operations (see note 1 to the financial statements)

Group and share of joint ventures

3 Stated before non-underlying items (see note 3)

4 Stated net of the effect of hedging instruments

Good performance in line with our expectations

· Underlying revenue2 up 5%, underlying profit from operations3 up 10% and underlying EPS3 up 9%

· Record Construction and Services order book of £10.2bn

· Proposed full year dividend per share increased by 2% to 69.0p (2017: 67.5p) and on track for 2x cover target in FY20.

Future Proofing Kier (FPK) programme launched

· FPK launched in June 2018 to provide greater operational focus and efficiency; improve cash generation and profitability; accelerate the reduction in net debt and exit non-core activities

· Neutral annual profit and free cash flow effects in FY19

· Anticipated additional annual profit and free cash flow improvements of at least £20m in FY20, representing 10% of profit from operations

· Targeted proceeds of £30m-£50m from disposal of non-core businesses.

Debt improvement plan underway

· Annual free cash flow of £20m-£40m to service debt reduction in FY19 and thereafter supplemented by anticipated financial FPK benefits, stated above

· Investment in Property and Residential divisions stabilised and sufficient to deliver our Vision 2020 target

· Targeting average net debt of c.£250m and a year-end net cash position for FY21.

Good operational performance

· Property – 27% Return on Capital Employed (ROCE), development pipeline of more than £1.5bn providing 10-year visibility; improving capital efficiency through increased use of joint ventures

· Residential – achieved Vision 2020 ROCE target two years early (2017: 11%); development pipeline of more than £2bn; launch of a 10-year housebuilding joint venture with Homes England and Cross Keys Homes

·

· Construction – £2.7bn contract awards in the year with over 70% on frameworks generating a record order book of £5.0bn; stable margin of 2%; and 90% of target revenue secured for FY19

· Services – £1.9bn contract awards in the year generating an order book of £5.2bn; McNicholas integration complete; two three-year extensions secured for Highways England worth c.£250m per annum and two six month extensions on Areas 6 and 8 also secured; stable 5% operating margin and 90% of target revenue secured for FY19.

Commenting on the results,Keir Group,, Haydn Mursell, chief executive, said: “I am pleased to report a good set of results with all divisions performing well. We have launched the Future Proofing Kier programme which will streamline the business thereby enabling us to deliver a more efficient service to clients, respond to changes in our markets and capitalise on growth opportunities, whilst, importantly, also accelerating the reduction of the Group’s net debt position.

“Our strong market-leading positions, our record £10.2bn Construction and Services order books, and our £3.5bn property development and residential pipelines, will see the Group deliver on its Vision 2020 targets. In addition, the Future Proofing Kier programme positions the Group well for an improvement in operating margins and higher cash generation, culminating in a net cash position for FY21.”