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Kier ready to review construction arm in spite of new deals

KIER Group has warned it is conducting a further review of its construction operations despite securing more than £400 million worth of new work since July.

WORK TO BE DONE: Chief executive Paul Sheffield, top left, expects net cash at the end of 2012 to have dropped by £100m.

Kier bought Aberdeen-based Stewart Milne Construction in April this year for £1m in a bid to increase its presence in Scotland beyond existing sites in Edinburgh and Stepps.

Around 20 people transferred over as part of that deal.

However, Kier confirmed yesterday it was looking at its entire construction division "to ensure we remain as efficient as possible".

A spokesman said the review was in its very early stages. The company warned the working capital environment in construction remains difficult and there was "little sign of improvement" in the general UK market.

In a management statement covering the period between July and mid-November the business – based in Sandy, Bedfordshire – said operating margins in construction are in line with expectations.

The order book is at £2.1 billion with a shift towards infrastructure projects in the UK and greater bidding activity overseas with work won including £80m of contracts in Abu Dhabi and the Caribbean.

The services division – which includes sectors like recycling, waste collection, refurbishment and building maintenance – has added around £200m of new work. Its order book is also at £2.1bn with 95% of revenue for the year to June 2013 secured or probable. However, costs to get major new schemes off the ground may decrease operating margins slightly in the coming months.

The property arm said its housing and development pipeline is at £1.3bn.

The private housing business is predicted to deliver more than 500 completions across the year while its affordable home order book is at more than £300m with developments in Birmingham, Sheffield and Lydney, Gloucestershire.

Kier, headed by chief executive Paul Sheffield, said its net cash at the end of the year was expected to have dropped by around £100m as previously forecast.

However it expects that position to improve by June 30, 2013, due to property trans-actions which are scheduled next year and cash inflows from other divisions.

Kier's share price rose 37p to 1143p.

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