Kier takes £86m hit on overseas contracts
Kier has been hit by charges of £86m relating to problem contracts in Hong Kong and the Caribbean.
The firm said it had agreed a process to settle the final accounts on the two mass transit railway contracts in Hong Kong and expects practical completion of the Caribbean project in the next few weeks. Both the Hong Kong and Caribbean businesses have been closed.
The charges reduced Kier’s pretax profit for the 12 months to 30 June 2017 to £25.8m. This follows a £34.9m loss the previous year, which was chiefly down to £151.3m of costs involved in restructuring the business after its acquisition of Mouchel.
Kier said it had now concluded this two-year “portfolio simplification programme” and anticipates that no further material costs will be incurred.
Group revenue for the year was up slightly to £4.3bn (£4.1bn).
The construction division, which comprises UK building and infrastructure plus international construction, increased revenue 6% to just over £2bn (£1.9bn), and delivered an operating profit of £39.8m (£38.9m). Margin was flat at 2%.
Turnover in the services business was unchanged at £1.7bn (£1.7bn), and operating profit was up slightly at £87m (£86.1m).
Housebuilding revenue rose to £376m (£353m), with operating profit increasing £22.8m (£20.3m).
Kier’s property arm posted turnover of £182m (£169m) and operating profit of £25.8m (£21.4m).
Haydn Mursell, chief executive, said: “The process to settle the final accounts on the two MTR contracts in Hong Kong has been agreed and we expect the practical completion of the Caribbean project in the next few weeks. The closure of the Caribbean and Hong Kong businesses has resulted in non-underlying charges of £86m.
“In our international construction business, focus is on the continued delivery and development of the business in the Middle East. We are experiencing a steady number of schemes coming to market.
“The construction division continues to perform well. With its established framework positions and selective approach, it is able to take advantage of a broad range of public and private sector opportunities.
“Our strength in the education and health markets positions us for growth in these markets, particularly the tertiary education market. The division's short-term future performance is underpinned by the UK building business while the infrastructure business provides good medium-term prospects. The Middle East business provides some diversity to the cycle of the UK economy.”