Kier in shock debt restatement

Aaron Morby 3 years ago
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Kier has revised up estimated net debt following an accounting error and warned it will take a £25m hit on its long-delayed Broadmoor hospital project.

Kier says it will soon handover phase one of the Broadmoor Hospital redevelopment
Kier says it will soon handover phase one of the Broadmoor Hospital redevelopment

In a surprise statement this morning Kier revealed it had revised up its average net debt for the six months to December by £50m after revisiting how it booked certain assets.

Group debt has been corrected from the previous reported level in its January half-year trading update, which also announced the immediate departure of chief executive Haydn Mursell.

The revision has raised net debt as of 31 December 2018 from a previously stated £130m to £180.5m.

This has raised average month-end net debt over the period from £370m to £430m.

Kier said it had revised debt after identifying a number of adjustments totalling £10.3m relating to the group’s hedging activities.

It also revised the classification of the debt associated with certain developments assets held for resale, coming to £40.2m.

In the stock market statement this morning, ahead of reporting half-year results next week, Kier also warned it would take a £25m hit on its long-running contract to redevelop Broadmoor hospital.

Shares fell by 12% in early stock market trading to £4.37 after the revelation this morning.

As reported by the Enquirer, the main part of the project is nearly two years late.

Kier said it had now reviewed the operational progress and cost recovery programme of the  project, as it prepared to hand over the first phase.

Remaining work on the project, which accounts for less than 10% of its value, would commence shortly, after this handover in April.

“The group has recently agreed a process with the client which is designed to reach agreement with respect to the group’s entitlement to the additional costs associated with the project’s delay,” said the firm.

The £25m hit will be recorded in Kier’s  2019 full year results.

It added: “While the board notes the current political and economic uncertainty in the UK, and the implications for third party investment, the group remains on course to meet its underlying 2019 expectations, with the full-year results being weighted towards the second-half of the financial year, as expected.” 

“The group continues to forecast a net cash position at 30 June 2019 and remains focused on reducing its average month-end net debt.”

 

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