Kier slides into £35.5m loss
Kier made a £35.5m pre-tax loss in the second half of 2018, down from a £34.3m profit in the same period the year before, as the group took hits on two problem contracts totalling £51m.
The loss came despite the fact that the group increased its turnover during the six months to 31 December 2018 by 3% to £2.2bn. Operating margin was 2.4%, down from 2.8% on the year before.
Kier revealed last week that it was making a £25m provision against the delayed Broadmoor hospital development in Berkshire, where it is transferring nearly all of the hospital’s operations into new clinical facilities. The news came at the same time as the company revealed that it had revised its net debt position as at 31 December 2018 upward to £180.5m, from £130m. The recalculation means that average month-end net debt for the six months ended 31 December 2018 now stands at around £430m, up from £370m.
Today, the company also reported that it was ending a loss-making waste collection contract early and has made a £26m non-underlying provision against phased settlement payments to the client from its 2020 financial year until 2026. It said the payments would be “more than offset” by savings resulting from the termination.
Kier’s regional building arm enjoyed a 10% increase in revenue over the period to £914.7m, while underlying operating profit increased by 74% to £30.8m. Meanwhile, turnover also increased in its infrastructure services division, rising 8% to £867.7m. Underlying operating profit fell 5% to £37.2m.
However, it was the developments and housing division where Kier performed less well, with a 19% drop in turnover to £419.1m and a 30% drop in operating profit to £18m.
Meanwhile, Kier’s order book was £10bn as at 30 June 2018, up from £9.8bn in the first half of the year.
The business spent £14m in the first half of its 2019 financial year on its Future Proofing Kier programme, designed at driving efficiency and improving profitability. That delivered associated savings of £4m and Kier said it expected the programme to deliver annual savings of £20m in its 2020 financial year.
Philip Cox, who assumed the role of executive chairman after former chief executive Haydn Mursell stood down in January, 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."