Kier Group increases debt position after accounting error

Marco Green
March 12, 2019

The firm's shares almost halved in December on the news it was to sell new shares to existing investors at a knock-off one-third discount in a bid to raise £264m to slash into its net debt of more than £600m at the time.

The recalculation means that average month-end net debt for the six months ended 31 December 2018 now stands at around £430m, up from £370m, reports Construction Manager.

Shares fell as low as 431.8p in early trading, a 13 per cent drop.

Kier said it had revised debt after identifying a number of adjustments totalling £10.3m relating to the group's hedging activities.

It also revised the classification of the debt associated with certain developments assets held for resale, coming to £40.2m.

"While it is arguably not a huge impact on valuation (circa 3-4% estimate on EV), it is not reassuring that following the recent rights issue and update in January, a key financial item of net debt, which is under close scrutiny, is being restated ahead of the interim results".

As reported by the Enquirer, the main part of the project is almost two years late.

Kier said the first phase of the project is expected to be handed over "shortly" with the remaining work on the project, accounting for less than 10% of the project value, starting shortly afterwards.

Meanwhile, Kier announced that it would take a £25m hit in its 2019 results in relation to the delayed redevelopment of Broadmoor, which involves transferring almost all of the hospital's operations into new clinical facilities.

Kier also said it would incur a £25m non-underlying charge in its interim results from the Broadmoor Hospital redevelopment project following a review of the operational progress and cost recovery programme.

"The group continues to forecast a net cash position at 30 June 2019 and remains focused on reducing its average month-end net debt".

Kier also said it is on track to meet expectations for the full year, with results weighted towards the second half, despite "current political and economic uncertainty in the United Kingdom, and the implications for third-party investment".

Other reports by Click Lancashire

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