Kier Group is to axe 350 jobs in its residential division and close four of its five offices because of ‘very tough’ market conditions.
In an trading update to the Stock Exchange announcement this morning the construction, services, housebuilding and property group said the housing market ‘continues to be tough’ and its completed unit sales had fallen from 1,767 last year to 1,438 this year. It said visitor levels and reservations continued to fall and its order book of exchanged contracts and reservations was around 45% less than at 30 June 2007.
It said it would reduce the headcount in its residential division by 60%. It said: ‘We are very cautious on the outlook for 2009 and consequently we are taking appropriate action to reduce our cost base.We have reinforced our controls over build expenditure and work in progress and, since the spring of this year, have ceased the use of part-exchange properties as a selling tool.
'Land expenditure in the last quarter of the year has been largely limited to settling land creditors, committed payments and exercising options and we will continue this approach until the outlook for the housing market becomes clearer. In the prevailing housing market, with reduced activity levels and the related impact on selling prices, we continue to review the carrying values of land and work in progress.’
Kier said conditions for it commercial property business had continued to deteriorate over the last few months as yields have continued to shift upwards and occupier demand has slowed but it said it achieved all of its expected development sales for the year to 30 June 2008. It said: ‘During the next few weeks we expect to reach financial close on our unique property regeneration partnership with Network Rail. This joint venture will work towards the sustainable regeneration of an initial portfolio of Town Centre sites which include Enfield Town, Epsom, Guildford, Maidstone East, Twickenham and Walthamstow and which have a gross development value in excess of £500m.’
However it said it despite very tough market conditions for both housing and property it expected to report full year underlying profit before tax in line with current market expectations and ahead of last year's result.
It said: ‘We continue to see little evidence of a slow down in the markets for construction and support services both of which continue to perform strongly and have record order books. These mixed market experiences reinforce the benefit of having a range of businesses operating in different sectors of the market. Net cash balances during the year have been strong, ending the financial year at over £140m.’
Tender awards high
It said its level of tender awards had been high in the construction division and ‘our record order books reflect continued demand from both our public and private sector clients, much of which is generated through framework agreements’.
‘Whilst the market for our homes has continued to deteriorate over recent months, we are responding to reduced demand by significantly reducing our residential overheads. We will run a smaller, leaner operation in the future with our focus shifting towards affordable housing and regeneration. Our construction and support services businesses continue their profitable, cash generative growth. Our balance sheet is strong and our cash balances remain high,’ it said.