Kier slumps to £35.5m loss as problem contracts continue

Grant Prior 3 months ago
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Kier racked up a pre-tax loss of £35.5m in the second half of 2018 after it was hit by problem contracts and mounting debts.

The losses compared to a pre-tax profit of £34.3m in the same period in 2017 as revenue stayed flat at £2,064m.

Kier was hit by a £25m provision on its problem Broadmoor Hospital job and £26m on a disputed waste collection contract which has been cut short.

Integrating the McNicholas business also cost £5.4m .

The Future Proofing Kier restructuring programme launched by former chief executive Haydn Mursell cost another £10m during the period.

It is expected to be “earnings and cash flow neutral” this year befoe delivering £20m of savings in 2020.

Kier also flagged-up “volume pressures” at its highways, utilities and housing maintenance markets.

The building division was a bright spot with an underlying operating profit increase of 74% to £30.8m (H1 FY18: £17.7m) as underlying operating margins rose to 3.4% from 2.1%.

Group net debt at the end of the year was £180.5m despite a £250m rights issue in December.

A large chunk of that was used to pay subcontractors and Kier said use of its supply chain finance facility has increased to an average during the period of £196m from £176m.

Group average payment terms were 55 days.

Philip Cox, Executive Chairman, said; “Our regional building and property development businesses continue to operate well, although we are experiencing some volume pressures in the highways, utilities and housing maintenance markets.

The Group has a significantly strengthened balance sheet following the completion of the rights issue in December 2018. 

“The Board continues to focus on simplifying the Group, improving cash flow generation and net debt reduction, and forecasts a net cash position at 30 June 2019.

“Whilst the Board notes the current political and economic uncertainty in the UK, and the implications for third party investment, the Group is maintaining its underlying FY19 expectations, with the full-year results being weighted towards the second-half of the financial year, as expected.”

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