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You can find the current article at its original source at https://www.theguardian.com/business/2019/jun/03/kier-constrution-firm-shares-tumble-after-profit-warning
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| Kier shares plunge more than 40% after profit warning | Kier shares plunge more than 40% after profit warning |
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| The construction and services group Kier has issued a profit warning, sending its shares crashing by more than 40% to their lowest level in 20 years. | The construction and services group Kier has issued a profit warning, sending its shares crashing by more than 40% to their lowest level in 20 years. |
| Kier, which employs 20,000 people and works on large infrastructure projects such as HS2 and London’s beleaguered Crossrail, warned that its underlying full-year profits would be substantially below earlier forecasts, at about £129m rather than £169m. | Kier, which employs 20,000 people and works on large infrastructure projects such as HS2 and London’s beleaguered Crossrail, warned that its underlying full-year profits would be substantially below earlier forecasts, at about £129m rather than £169m. |
| Shares in the FTSE 250 company plummeted by 40% to 167p, their lowest level since February 1999, after they touched 158.6p at one point in morning trading. | |
| Kier builds and maintains infrastructure and buildings for the public and private sector, such as roads, rail, schools, hospitals, student housing, prisons, offices and homes. It took on Carillion’s share in HS2, the high-speed rail project that will connect London with other major cities. | Kier builds and maintains infrastructure and buildings for the public and private sector, such as roads, rail, schools, hospitals, student housing, prisons, offices and homes. It took on Carillion’s share in HS2, the high-speed rail project that will connect London with other major cities. |
| 20,000 | 20,000 |
| £4.5bn | £4.5bn |
| HS2 – in joint venture to build 80km of the new high-speed rail link between the Chiltern Tunnel and Long Itchington Wood. | |
| London’s Crossrail – Farringdon Station. | |
| Highways England – smart motorway programme including M6, M20, M23. | |
| Highways England regional road construction contracts worth £2bn (November 2018). | |
| Building part of Facebook’s new headquarters in London’s King’s Cross (December 2018). | |
| Luton Dart – new rail transit system from Luton Parkway to Luton airport. | |
| £253m contract to build Wellingborough prison in Northamptonshire (May 2019). | |
| Site preparation and infrastructure for the new nuclear power station at Hinkley Point C in Somerset. | |
| £98m contract at Heatherwood hospital in Ascot, Berkshire (January 2019). | |
| Ryanair hangar at Stansted airport. | |
| Restoring and extending the Grade A-listed Aberdeen Music Hall. | |
| North Wales Construction Framework 2 projects worth £108m (May 2019). | |
| Roads – Kier manages and maintains roads for Highways England. | |
| Housing – Kier maintains and repairs 350,000 homes every year for local authorities, housing associations and private landlords. | |
| Utilities – installs and maintains connections in water, energy and telecommunications. | |
| Waste collection – pulling out of contracts with local councils. Julia Kollewe | Waste collection – pulling out of contracts with local councils. Julia Kollewe |
| This is less than half the 409p a share investors paid in December, when Kier launched a £264m emergency fundraising in an attempt to avoid the same fate as Carillion, the construction and services company that collapsed into insolvency in January 2018. | |
| Kier investors shunned December’s cash call, with only 38% of the shares taken up, and financial institutions had to step in. Its chief executive Haydn Mursell quit the following month after eight years in the job. | Kier investors shunned December’s cash call, with only 38% of the shares taken up, and financial institutions had to step in. Its chief executive Haydn Mursell quit the following month after eight years in the job. |
| Ian Forrest, an investment research analyst at the stockbroker the Share Centre, said: “The shares are now down 85% over the past year and there are clearly fears in the market that the company could be heading for the same fate as Carillion.” | Ian Forrest, an investment research analyst at the stockbroker the Share Centre, said: “The shares are now down 85% over the past year and there are clearly fears in the market that the company could be heading for the same fate as Carillion.” |
| Kier, which took on Carillion’s share of the HS2 high-speed rail project and took sole ownership of Highways England’s smart motorway programme in Cheshire, is also the UK’s leading regional builder of schools and hospitals. It said revenue growth at its regional buildings business would be lower than forecast. | Kier, which took on Carillion’s share of the HS2 high-speed rail project and took sole ownership of Highways England’s smart motorway programme in Cheshire, is also the UK’s leading regional builder of schools and hospitals. It said revenue growth at its regional buildings business would be lower than forecast. |
| In March, Kier reported a first-half pre-tax loss of £35.5m and flagged up problems in its highways, utilities and housing maintenance divisions – these continue. It has been hit by Highways England cutting back maintenance spending and by delays in telecoms companies’ fibre roll-out. | |
| As a result, the company said underlying operating profit for the year to 30 June would be £25m lower than City forecasts of £169m, with revenues unchanged from last year at £4.5bn. | As a result, the company said underlying operating profit for the year to 30 June would be £25m lower than City forecasts of £169m, with revenues unchanged from last year at £4.5bn. |
| In addition, Kier is taking a £15m hit from higher restructuring costs this year. The company’s chief executive, Andrew Davies, who joined from Wates in March and had been lined up to take over at Carillion before the latter collapsed, is ramping up a programme to streamline Kier. | |
| The group also warned on its debt. Peel Hunt analysts had expected Kier to have £15m of net cash at the end of its year in June, but now forecasts net debt of £60m. That is still down from £186m in June 2018, which partly reflects proceeds from December’s fundraising. | The group also warned on its debt. Peel Hunt analysts had expected Kier to have £15m of net cash at the end of its year in June, but now forecasts net debt of £60m. That is still down from £186m in June 2018, which partly reflects proceeds from December’s fundraising. |
| The group will announce the outcome of a strategic review on 30 July, and is reportedly in talks to sell its housing maintenance arm. | The group will announce the outcome of a strategic review on 30 July, and is reportedly in talks to sell its housing maintenance arm. |
| John Moore, a senior investment manager at Brewin Dolphin, said: “Kier is in a dark place. At the turn of the year the business set out its financials, trading performance and future plans as part of its unsuccessful rights issue, only to now say that this information was largely wrong. It has broken trust with investors, which does not bode well. | John Moore, a senior investment manager at Brewin Dolphin, said: “Kier is in a dark place. At the turn of the year the business set out its financials, trading performance and future plans as part of its unsuccessful rights issue, only to now say that this information was largely wrong. It has broken trust with investors, which does not bode well. |
| “Comparisons will be made with the likes of Carillion and, indeed, Kier has lots of complex long-term contracts and individual subsidiaries, which makes for an opaque situation where clarity and stability are desired. Where it goes from here is hard to say.” | “Comparisons will be made with the likes of Carillion and, indeed, Kier has lots of complex long-term contracts and individual subsidiaries, which makes for an opaque situation where clarity and stability are desired. Where it goes from here is hard to say.” |
| Kier has been a beneficiary of the private finance initiative since the 1990s, along with other construction firms such as Carillion and Interserve. However, in recent years the sector has been tainted by a number of contract scandals and profit warnings, and Carillion’s collapse sparked worries that others would follow suit. Banks have become reluctant to lend to firms in the sector. | |
| Carillion’s demise resulted in a £150m bill for taxpayers, and its directors were accused of “recklessness, hubris and greed” by a committee of MPs. | Carillion’s demise resulted in a £150m bill for taxpayers, and its directors were accused of “recklessness, hubris and greed” by a committee of MPs. |
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