John Dodds attacks mortgage crackdown and undervalued shares as he reveals mixed results

Reckless lending by banks has exacerbated the slowdown in the UK housing market, according to Kier’s chief executive.

Speaking at the announcement of the contractor and housebuilder’s results for the six months to 31 December 2007, John Dodds said banks’ tightening of lending criteria was a “typical overreaction” after they had “thrown money around” at the start of last year.

He said: “Last year they gave mortgages to people they shouldn’t have and this year they are not giving mortgages to people they should.”

Turnover from housing at the firm fell from £151.8m to £143.2m over the period and the average sale price dipped from £175,200 to £173,200. Dodds said reservations to 1 February 2008 were 20% below the year before.

As a result of the slowdown, Kier is negotiating discounts of about 5% with its housing subcontractors and 10% with suppliers of housing materials.

Despite the weak figures, strong performances in Kier’s construction and support services divisions meant the group posted an overall 23% jump in pre-tax profit to £44.6m and turnover growth of 18% to £1.2bn.

Dodds describes the City’s valuation of Kier as ‘bloody ridiculous’
Dodds describes the City’s valuation of Kier as ‘bloody ridiculous’

Dodds said: “If all we did was houses I’d be worried, but these results vindicate the policy of having a spread of businesses.”

Turnover in its construction arm grew 21% to £816m and operating profit grew 51% to £14.3m; margins went up from 1.4% to 1.8%. Support services turnover grew 26% to £179.3m and profit rose by 41% to £7.2m.

The results were broadly welcomed by the City. Kevin Cammack at Kaupthing called them “very strong” and Andy Brown at Panmure Gordon said they were “better than expected”.

Dodds said: “The market’s been bloody ridiculous in undervaluing us. Our share price (see graph) shows what an ill-informed pack of sheep the City is.”