Construction division performed strongly but group says housing market will determine whether profit expectations are met

Kier has said pre-tax profit for the year ended 30 June 2008 will be in line with expectations provided there is no further deterioration in its housing business.

The current consensus forecast is £92m on turnover of £2.35bn.

In a trading update the group said overall housing reservation levels for the last two months were 35% lower than last year. And last week chief executive John Dodds said private reservations at the end of April were running at a third of last year’s level.

The statement said: “Margins continue to be under pressure due both to volume reductions and selling prices as we endeavour to maintain a sensible balance between discounting properties and reducing work in progress.”

Kier said making predictions for 2009 was “very difficult” due to the uncertainties in the market.

Its property business has also suffered with the slump, the group citing rising yields and slowing occupier demands.

Meanwhile Kier said its construction division performed strongly, reaching record levels of cash and order books.

Its appointment on a series of framework deals boosted workflow and wins included a contract with BAA that will deliver £650m over five years.

Panmure Gordon analyst Andy Brown said the statement was a tale of two halves of the business.

Kier’s share price rose 2.5% to 1,200p in early trading.