Early trading today showed the share price at 153.60p after it closed at 163.80p, putting the spotlight back on public sector outsourcing after the well-documented demise of Carillion, plus challenges at Interserve, Amey, Mitie and Capita.
Kier’s annual report and accounts for 2018 had revealed “solid performances” with group revenue for the year ended 30 June 2018 at £4.5bn and underlying operating profit at £160m. Chairman Philip Cox said the business had delivered “a good performance with both revenue and profit growth in line with our expectations”.
In an update published on yesterday (3 June), however, the group, which is running high-profile contracts for the government including Crossrail and the roll-out of HS2, said it expects underlying operating profit will be £25m lower than previous expectations and that it is likely to report a net debt position at its year end on 30 June, which could have an adverse impact on the full-year figure.
The past 12 months have not been easy for the construction group. In September 2018, the then chief executive, Haydn Mursell, said the company’s debt position, backed by assets at a cost of £500m, remained a key area of focus for the business and had increased as a result of the acquisition of McNicholas in 2017 as well as reduced construction revenues over the winter due to bad weather.
This year, as the result of an “accounting error”, Kier had to revise up its net debt by £50m to £180.5m after it identified debt that had been misclassified and adjustments that needed to be made in relation to the group’s hedging activities.
The new CEO, Andrew Davies, who joined the firm in April, is leading a restructure of the business to consider ways of simplifying it as well as improve cash generation and reduce leverage. The costs associated with this turnaround review, which concludes in July, are now expected to be around £15m higher than previously forecast.