March 23, 2017 / 10:49 AM / 5 months ago

UPDATE 1-Brexit delaying major UK infrastructure projects, Kier says

(Adds CEO, analyst comments, details, shares)

By Esha Vaish

March 23 (Reuters) - Britain's move to leave the European Union is delaying major UK infrastructure projects from tower blocks and power stations to new roads and rail lines, construction and services company Kier Group said on Thursday.

Peers such as Capita, Mitie, Interserve and Carillion have all reported tougher trading in their UK businesses since last June's Brexit referendum.

But whereas most firms have been reluctant to give details, Kier CEO Haydn Mursell highlighted specific areas of weakness as his company reported a 4 percent rise in first-half profit.

Construction contracts for high-rise buildings and large office blocks in major cities, as well as public funding and approvals for large-scale road, transport works and power stations are all being delayed, he told Reuters.

"Certainly job starts have gone back on large projects," he said, adding contracts for the HS2 high-speed rail project had been pushed back by about a year.

"I think Brexit has created a distraction for government," he added.

However, Mursell said the market was still buoyant for repeat public sector work, as well as smaller deals with an average value of about 10 million pounds ($12.5 million)- where Kier's regional business does a lot of its work.

Helped by this, Kier said its order book stood at about 9 billion pounds at the end of December, up from 8.7 billion at the end of June.

This means the company has secured 100 percent of its forecast revenue for the year ending June 2017, and about 70 percent for the next financial year, it said.

Kier's first-half underlying operating profit rose to 56.5 million pounds from 54.4 million a year earlier.

The company also announced a joint venture with CKH Developments, an east England-focused housing association, to free up funds to invest in other parts of its business.

"We believe the outlook for Kier is bright," JP Morgan Cazenove analysts wrote in a research note, lifting their share price target to 1,639 pence from 1,613 pence.

They have an "outperform" rating on the stock, which was up 0.8 percent to 1,464 pence at 0940 GMT. ($1 = 0.7995 pounds) (Reporting by Esha Vaish in Bengaluru; Editing by Mark Potter)

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