Kier Group PLC (LON:KIE) has said it is confident that the company will meet its full-year expectations, with the results being weighted towards the second half of the financial year.
In a trading update ahead of its AGM on Friday, the FTSE 250-listed infrastructure services, buildings and developments & housing group said it continues to focus on operational cash generation and net debt reduction, a key facet of its Future Proofing Kier (FPK) programme.
READ: Kier Group sees full-year profit, revenue rise thanks to new projects and contract wins, plans to simplify operations
The firm said it anticipates average monthly net debt of approximately £390mln for the first half of its current financial year, compared with approximately £410mln for the second half of last year.
Kier commented: “The level of net debt is increasingly a key focus for stakeholders in the industry and the Board recognises the importance of a strong balance sheet to take advantage of opportunities to underpin its future performance.“
The group said the FPK programme positions it well for an improvement in profitability and cash generation, and its order books and development pipelines remain strong.
As anticipated, the firm added, the costs of implementing the FPK programme in the first half of the current financial year are forecast to exceed the realised savings by approximately £10mln.
In said the full-year position is still expected to be earnings and cash flow neutral.
Liberum says update reassures
In a note to clients, analysts at Liberum Capital called Kier’s update reassuring and said they assume around a 70% weighting to the second half, as expected.
They noted that the firm’s average net debt will fall by £20mln in the first half but increase their “over ambitious FY average net debt from £342mln to £365mln”.
The analysts concluded: “We continue to expect sound revenue growth and margin progress at Residential. There is a lot of pent-up demand at Property, but Brexit may start to weigh on confidence.
Liberum repeated a ‘buy’ rating on Kier shares with a 1,400p price target.
In early morning trading, the stock was 3.2% higher at 851p.