Construction group suffers £140m of writedowns but reports minimal referendum impact
Kier has slipped to a £15.4m pre-tax loss after making £140m of writedowns, but its chief executive Haydn Mursell says the underlying business is “strong” and “sitting very well” to dodge the fallout from the Brexit vote.
A string of major writedowns - including £49.9m of restructuring costs from integrating Mouchel, a £35.6m hit on two waste contracts, £23.1m from closing its Caribbean business and £4.5m from compensating blacklisted workers - dragged the firm to a pre-tax loss, compared to a £39.5m pre-tax profit the previous year.
But once these one-off costs were stripped out, underlying pre-tax profit increased 45% to £125m, up from £86m. Kier’s revenue also broke the £4bn mark - leaping 26% to £4.21bn, up from £3.35bn.
Speaking to Building, Mursell (pictured) said the underlying Kier business was performing as expected and had seen “minimal” impact from the Brexit vote, in part because of its focus on regional property and building work and long-term deals.
He said: “Fortunately we’ve been minimally affected. Our services division delivers everyday essential works like road repairs - those budgets exist and are ring-fenced. Construction is buoyant and we have positions on long-term frameworks.
“In residential, private sales are the same as pre-Brexit and as a year ago. In property, London has borne the brunt, but we have little exposure to property there. All in all we’re sitting very well.”
Mursell welcomed the government’s green light for Hinkley Point C - which he said would “act as a catalyst for more nuclear plants for the UK” - but urged for more infrastructure and housing spending in chancellor Philip Hammond’s first autumn statement in November.
He said: “There is a one-off opportunity to invest in infrastructure in the autumn statement. We need clarity on HS2 and airport capacity.
“I’m looking for commitment and the intent to invest in infrastructure, as well as the detail on how they will invest.
“If you like the second chapter should be all about housing, particularly how to stimulate affordable housing. We need a similar boost there to what we’ve seen in the private sale sector with Help to Buy.”
Mursell said the integration of Mouchel was advanced and that a review of whether or not to sell its management consulting arm Mouchel Consulting was “well progressed”.
Mursell said Kier had cemented its position as the “leading regional building business in the UK” over the year. The firm will open in Swansea next month.
Kier’s underlying operating margin grew to 3.6%, up from 3.1%.
Underlying pre-tax profit was up across three of its core divisions - residential, construction and services - while property reported a dip in profit.
The firm said it was “confident” of achieving its goal of double-digit profit growth on average each year to 2020.
Kier posted an order book of £8.7bn.
The group increased its dividend to 64.5p, up from 55.2p.