Debt goes up with housing sale expected in next 12 months
Getting rid of 500 more people than it said it would saw Kier rack up £150m of restructuring costs which helped keep the country’s second biggest contractor firmly in the red for the second successive year.
The firm had said it would be axing 1,200 roles by the end of June this year when then new chief executive Andrew Davies announced a strategic review last summer.
But this morning Kier revealed 1,700 roles had been axed which Davies said would produce annual savings of £100m from next June. Last year, the firm employed just under 18,700 people – down from 20,000 the year before – meaning 15% of staff will have gone in two years.
Kier said it had stripped away several layers of management while back office roles affected included those working in its IT and fleet management divisions which have now been outsourced.
Kier said it has spent £156m on the restructuring which includes £29.5m on redundancies, a further £61.5m on restructuring its Southern building business, nearly £32m on fees following the announcement of Davies’s strategic review and a further £11m on outsourcing its IT and fleet management activities.
It was also hit with a separate £5m charge following its acquisition of McNicholas Construction in July 2017 – although this has been accounted for outside the £156m restructuring cost.
Davies (pictured) admitted the covid-19 pandemic had put the brakes on the sale of its Kier Living housing arm, which he announced last June, with the firm now saying the disposal will be completed in the next six to 12 months.
Kier said the firm was in talks with bidders but added that due diligence caried out before the pandemic struck would have to be repeated.
Davies said: “The sales process is getting back up and running. We had to pause the process which in reality hasn’t been going on for that long.” The business, which has since been classified as a discontinued operation, made an after tax loss of £101.4m, compared to the £15.4m loss in 2019.
Covid was also held responsible for the firm’s revenue slipping and its year-end net jumping from £167m to £310m.
Group revenue slumped by more than £500m from £4bn to £3.4bn with the firm saying its key trading months of May and June had been badly hit with its biggest business, construction, seeing revenue fall 15% to £1.6bn with the business, which includes its regional building and strategic projects operations along with housing maintenance, nosediving to a £59m operating loss from a £23m profit last time.
Average month-end net debt went up, as forecast, from £422m to £436m, with the firm saying the rise was largely down to falling revenue caused by the covid-19 outbreak.
Kier said it had claimed £9m during the period from the government’s Coronavirus Job Retention Scheme for the 2,000 staff furloughed because of the pandemic, adding that none were on furlough by the end of July.
Around 6,500 staff took a temporary put cut for the three months to June of between 7.5% and 25%.
It said it had been hit with an extra £3.8m cost of furloughing staff while the cost of allowing staff to carry over holiday into the new holiday year was put at £10m “in additional holiday pay accrual”. It also spent a further £15m on the direct costs of dealing with the covid outbreak such as PPE and shutting sites down and remobilising them.
The firm said it had deferred nearly £79m in tax payments which included £25m of VAT.
In the year to June, pre-tax losses stood at £225m from £230m last time on revenue down 13% to £3.4bn. The order book remained stable at £7.2bn.