UPDATE: Kier Confident For FY11 Despite Public Spending Cuts

12th Jul 2010 10:24

(Adds analyst comment, detail) By Rachael Gormley Of DOW JONES NEWSWIRES LONDON (Dow Jones)--U.K. construction firm Kier Group PLC (KIE.LN) said Monday it expects fiscal 2010 underlying pretax profit to be towards the upper end of current market expectations and ahead of last year, and remains confident for the fiscal 2011 despite expecting further cuts to public sector spending. The company said it has limited exposure to the recently scaled back government spending program, Building Schools for the Future, so the cuts won't hurt its order book. Kier said that while it is expecting further cuts to public sector spending, it will focus on securing projects in less discretionary areas of investment like power, utilities and waste. It also reported signs of the private commercial market returning as previously mothballed projects are resurrected with newly-available private funding. Analysts are currently forecasting pretax profit of between GBP52.6 million and GBP60.4 million for the year ended June 30, according to a FactSet poll of six analysts. For the previous fiscal Kier posted pretax profit GBP52.8 million. Kier ended the fiscal 2010 with record levels of net cash at over GBP170 million--compared with GBP93 million a year earlier--which it attributed to its order books and reduced investment in its Partnership Homes business. The company said its construction division traded well with strong operating margins and very healthy cash balances and said it has secured nearly 90% of its targeted revenue for the fiscal 2011. Kier also Monday announced that Finance Director Deena Mattar is leaving in November for other opportunities and will be replaced by Haydn Mursell, currently deputy group finance director of construction firm Balfour Beatty PLC (BBY.LN). He will join Kier as group finance director designate Aug. 18. Following the update analysts at Panmure Gordon, Numis and Oriel all reiterated their "buy" recommendations, with Numis saying Kier is well placed to take advantage of outsourcing work. In their opinion, shares are too cheap, with a 5.8% yield. At 0908 GMT, shares in Kier were up 38.5 pence, or 4.1%, at 981.5 pence, while the wider FTSE All-Share index was up 0.03%. -By Rachael Gormley & Iain Packham, Dow Jones Newswires; 44-20-7842-9308; [email protected] (END) Dow Jones Newswires July 12, 2010 05:24 ET (09:24 GMT)