UPDATE 2-Kier Group says Q1 roused by construction orders

* May contest 18 million pounds fine from OFT

* Says trading since July in line with its views

* Says 'well advanced' in search for new CEO

* Shares up 1.2 percent (Adds detail, analyst quote, share price)

By Lorraine Turner

LONDON, Nov 9 (Reuters) - British building company Kier Group (KIE.L) gave a robust first-quarter trading update, buoyed by new orders which helped offset the gloom from its 18 million pounds ($30.20 million) fine earlier in the trading period.

Kier, which focuses mainly on construction activity, added on Monday it is considering contesting the Office of Fair Trading fine, pushing its shares 1.2 percent higher by 1211 GMT.

"This is the strongest indication yet from any company that it will contest the fine," said Alistair Stewart at Investec.

"Kier's IMS was punchier in tone than we expected," he added.

Kier took an 18 million pounds hit in September when Britain's consumer watchdog handed out fines totalling 129.5 million pounds to 103 construction firms for colluding when bidding for work on projects such as hospitals, schools and housing refurbishments. [ID:nLM168755].

It added that any appeal must be lodged by Nov 22.

But the financial year has started positively for Kier in terms of orders and, with trading in line with its expectations, it has a healthy cash balance and strong orders in construction and support services on its books.

"Construction division has made an encouraging start to the new financial year, benefitting from strong, high quality order books which are generating healthy margins and cash balances," said Kier, following its annual meeting on Saturday.

Kier said it has secured 96 percent of its expected construction revenue for 2010, and 55 percent for 2011, bolstered by education public sector contracts.

This update will cheer the construction sector which continues to be mired by doubts over public sector spending cuts as well as a drop in private commercial and industrial new build.

Peer Galliford Try (GFRD.L) reported improved sales and income levels last week, but was not so optimistic in its outlook for the sector. [ID:nL5554378]

Meanwhile, Kier, which also has smaller operations in support services, housebuilding and property, said the order book at its Partnership Homes unit is up 14 percent year-on-year. But it remains cautious in its outlook for housebuilding in 2010, despite having significantly reduced its stock since July 2008 with fewer than 100 completed units left.

The company, with a market value of just under 400 million pounds, added it is "well advanced" in its search to replace chief executive John Dodds, who will retire next year. ($1=.5960 pounds) (Reporting by Lorraine Turner; Editing by Hans Peters and Mike Nesbit)