Kier Group, the commercial and residential property developer and contractor, is to cut more than half of the 600 employees in its residential division owing to the "very cautious" outlook for the housebuilding market next year.

Four out of its five residential offices are to close with a loss of about 350 jobs. Kier said that, in spite of "very tough" market conditions for both housing and property in general, full-year underlying profit would be in line with current market expectations and ahead of last year's result.

In a trading update on Friday, Kier said that its order book of exchanged contracts and reservations was about 45 per cent lower compared with the same period the previous year.

Unit sales for the year were 1,438, down from last year's 1,767, while visitor levels continued to fall during the second half.

Kier said that it had, in effect, stopped buying new land outside the take-up of existing options or payment of outstanding creditors, and had ended the practice of part-exchange of properties as a selling tool.

"We are very cautious on the outlook for 2009 and consequently we are taking appropriate action to reduce our cost base," said Kier.

"We have reinforced our controls over build expenditure and work in progress . . . In the prevailing housing market, with reduced activity levels and the related impact on selling prices, we continue to review the carrying values of land and work in progress."

Conditions for its commercial property business, it said, had also continued to deteriorate over the past few months as yields have continued to shift upwards and occupier demand has slowed.

But the company added that, notwithstanding more difficult market conditions, it had achieved all expected development sales for the year to June 30.

The company's broader business has been buttressed by the resilience of its construction and support services divisions, both of which continue to perform strongly and boast record order books. It said net cash balances during the year had been strong, ending the financial year at more than £140m, compared with £148m last year.

It has won a number of tenders in its construction business, with evidence of continued demand from both public and private sector clients. "Cash generation from our construction activities has been excellent throughout the year with the division once again achieving record cash balances," Kier said.

Shares in Kier rose 54½p to 965p.