Kier Group PLC (LON:KIE) shares shot higher after the construction group said trading in the first half was better than expected and that it is making progress with cost cutting and the sale of its housebuilding arm.
Statutory half-year profits will be “materially better” than a year ago, due to lower one-off items, while revenue will be “slightly above” the board’s expectations, the construction group said in a statement.
The order book was said to be slightly above the £7.9bn year-end level after a number of contract wins.
Average month-end net debt for the six-month period was said to be similar to the past full year, £436mln.
Operating cash generation is expected to be positive at the half year end and by the end of the year to end-June, the group said it expects to have made at least £105m of annualised cost savings and is looking for even more.
As for the sale of Kier Living, the housebuilding business, “progress” is being made and the board said it “remains focussed on driving an improvement in cash flows through a disciplined approach to appropriate capital allocation”, with potential equity raise also being considered, three years after carrying out a £250mln rights issue.
The shares jumped 12% to 84.46p in early trading on Tuesday.
Broker Liberum said the modest drag from lockdowns seemed to be offset by increased cost savings.
“We expect Kier to be a big beneficiary of the National Infrastructure strategy. Kier Living talks are ongoing and will help to ease the balance sheet pressure.”