Kier has reported a £245m pre-tax loss after making huge writedowns to the businesses it is looking to sell.
The company reported £341m of exceptional charges for the year ending 30 June 2019. The bulk of this was a £172m writedown on the values of some of its businesses.
As announced in June, the company is looking to sell its Kier Living housing arm and property developments as well as exiting environmental services waste collection and facilities management.
Restructuring the business added £56m of costs during the year. The company slashed 650 jobs in 2019 with another 550 due to go in the current financial year.
Today’s results are a big decline since 2018 when the company reported a £106m pre-tax profit and are worse that some analysts expected, with Peel Hunt having forecast an £84m pre-tax loss.
Kier’s actual operations were profitable during the year, however. Operating profit stood at £124m, down from £187m last year.
Chief executive Andrew Davies said: “Kier experienced a difficult year, resulting in a disappointing financial performance.”
But he added that the company was “building firm foundations for the future” and that the sale of its housing business Kier Living is “progressing well”.
The firm’s building division saw results improve in the period, with operating profit up from £55m to £62m. The company was forced to take an exceptional charge of £43.5m related to its work on Broadmoor Hospital, which it announced earlier this year.
Kier’s infrastructure arm saw its operating profit slump, however, falling from £95m to £56m in 2019.
It had to restate its 2018 results for the division as well to reflect a £27m exceptional charge on the Mersey Gateway bridge project. A further £6m loss on the job was recorded for 2019.
The infrastructure arm was also hit by lower than expected work levels in the highways and utilities markets in 2019, which the company flagged up earlier this year. Lower work levels are expected for the current financial year as well.
Kier also took a £29.3m hit on McNicholas as it wrote down the value of the assets it acquired when it bought the company in 2017.
Kier has been battling to get control of its debt over the past two years and this morning it revealed its net debt peaked at around £560m between September and November last year.
The company was forced into a £264m rights issue in December, with some of the cash pumped into the balance sheet. The rest was used to speed up payments to suppliers and Kier’s average time to pay dropped from 57 days to 41 days in the year.
Average month end net debt was £422m, up almost £50m from £375m last year, with the higher debt level also pushing up the company’s finance costs from £23.1m to £26.5m.
The Kier group’s order book was £9.4bn at the end of June. This includes £1.5bn of expected work on HS2. Last year its order book was £8.5bn.
The loss revealed this morning caps a turbulent 12 months for the UK’s second largest contractor.
It became the most shorted stock on the FTSE 250 last December and saw its share price plummet after it launched the rights issue to try and repair its balance sheet.
By early January the company had lost more than 50 per cent of its value and three weeks later chief executive Haydn Mursell was removed. Four months later it was announced his number two, finance director Bev Dew, would leave after the full year results were released.
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