Firm says shutting Caribbean arm has cost £83m – five times the original estimate
Kier has taken an £86m hit on the closure of its Caribbean and Hong Kong operations.
The firm said the process to settle the final accounts on the two rail contracts in Hong Kong had been agreed at a cost of £26m, while it expected the Caribbean project to complete “in the next few weeks”.
The UK’s fourth largest contractor had originally said that the cost of closing its Caribbean arm would be £18m when it announced the move last July.
But the firm has been forced to concede that its final bill for getting out of the region will now be £83m – five times the original estimate.
It booked a £60m loss this year on the Caribbean business, following the £23m deficit it racked up in 2016.
The firm said: “We expect the practical completion of the Caribbean project in the next few weeks. We have received our completion certificates in relation to the Hong Kong contract and a final account process has been agreed.”
The firm, which earlier this summer bought McNicholas Construction, said the proceeds of the £75m sale of Mouchel Consulting to WSP last October would be ploughed into its property and residential divisions.
The group was speaking as it announced annual turnover up 5% to £4.3bn in the year to June on the back of a two-year programme to simplify its business portfolio.
The firm climbed back into the black with a pre-tax profit of £25.8m following the £35m loss it posted last time. Underlying pre-tax profit increased by 8% to £126m.
Chief executive Haydn Mursell said revenue had increased in all divisions, “whilst maintaining robust margins and a strong working capital performance”.
He went on: “Our underlying performance for the year was good. Having simplified our portfolio, we are more focused and able to pursue growth ambitions in our three core markets; building, infrastructure and housing, which now represent 90% of the group’s revenue and profit.
“We continue to invest in the business to improve our operational efficiency, providing a robust platform on which to take advantage of the strong long-term fundamentals in these core markets.”
Kier’s construction division, which contributed £2.02bn of the group’s total turnover for the year, saw operating profit of £39.8m, a margin of 2%. Work during the year included securing a position on the £6bn LHC Schools and Community Buildings framework and a place on the £1bn Notting Hill housing framework.
Services’ revenue was up 2% to £1.7bn, growth which Kier said reflected the increased expenditure by Highways England in the second half. Underlying operating profit was £87m.
Mursell said the group’s performance in 2017 backed its decision to focus on three core operations: building, infrastructure and housing operations. “To date these sectors have remained relatively unaffected by Brexit.
“Our construction and services order books of £9.5bn, together with our £2bn property development and residential pipelines, provide good long-term visibility of our future work,” he added.
Kier said it expected to hit double-digit profit growth next year.
Shares in the firm climbed 8% to £11.81.