Kier to tackle rising debt as profit jumps

Haydn Mursell

Kier has revealed that it aims to sell up to £50m worth of non-core businesses as part of a bid to tackle its £375m debt pile.

The news came as the contractor unveiled a 9% jump in pre-tax profit to £137m for the year to 30 June 2018. Revenue increased 5% to £4.5bn over the period.

Kier’s construction division recorded a 2% increase in revenue to £2bn for the year, with operating profit up 5% to £41.9m. That made its operating margin 2%, while its order book stood at £5bn.

The services arm saw revenue rise 10% to £1.85bn with a 7% increase in profit to £93m. McNicholas’s first full-year acquisition since its acquisition was “in line with expectations”.

Its property division increased revenue by 20% to £218m, while operating profit rose 11% to £125m. Meanwhile, turnover in its residential arm, combining both mixed tenure and private land, was flat at £374m. The company also hailed a record combined construction and services order book of £10.2bn.

But its net debt rose to an average of £375m during the year, up from £320m in the previous year, which it blamed on the acquisition of McNicholas and the creation of the Homes England venture.

In order to tackle that rising debt the company launched its Future Proofing Kier programme in June this year, aimed at making the business more efficient. It said the programme would save “at least” £20m in 2019 and that with £30-50m of non-core disposals, it hoped to reduce average net debt to around £250m by 2021.

Haydn Mursell, chief executive, said:  "I am pleased to report a good set of results with all divisions performing well. We have launched the Future Proofing Kier programme which will streamline the business thereby enabling us to deliver a more efficient service to clients, respond to changes in our markets and capitalise on growth opportunities, whilst, importantly, also accelerating the reduction of the Group’s net debt position.

"Our strong market-leading positions, our record £10.2bn Construction and Services order books, and our £3.5bn property development and residential pipelines, will see the Group deliver on its Vision 2020 targets. In addition, the Future Proofing Kier programme positions the Group well for an improvement in operating margins and higher cash generation, culminating in a net cash position for FY21."