Thursday 19 September 2019 9:24 am

Kier Group turnaround 'heading in right direction' despite crashing to £245m loss

Kier Group’s stock recovered to finish up 1.1 per cent today as shareholders appeared cautiously optimistic about its pricey turnaround plan.

The struggling outsourcer staggered to a £245m loss in its latest full year, but trimmed its net debt by more than 10 per cent to £167m. 

Read more: Kier suspends dividend and unveils plan to cut 1,200 jobs

David Madden, analyst at CMC Markets, said this indicated the turnaround “is heading in the right direction”.

“The restructuring plan is moving slowing, but it is making progress nonetheless,” he added.

Nevertheless, the massive loss over the 12 months to the end of June came in stark contrast to a £106m profit this time last year.

Shares plummeted in early morning trading, but eventually rallied by the close on Thursday.

Kier also announced today that its chairman, Philip Cox, is stepping down from the board to retire from his position. He has been chairman for two years but will step aside when the board finds a successor to help deliver the firm’s new strategy.

That strategy includes cutting 1,200 jobs and quitting non-core businesses, such as its house building division Kier Living to pay down its debt.

Today Kier said the sale of that arm is “progressing well” as it targets £55m in annual savings from 2021 when it completes its bid to simplify. 

The figures

Kier fell to a huge £245m loss before tax in the 12 months to the end of June, down from a £106m profit.
Revenue also slipped from £4.24bn to £4.12bn as the company saw its adjusted operating profit margin narrow to 2.8 per cent, down from 2018’s 4.1 per cent.
Shareholders suffered a loss of 158.5p per share, compared to earnings per share of 89.3p last year.
Kier has already suspended its full-year dividend, but said it would have fallen to 4.9p per share. Last year’s was 69p per share.

However, AJ Bell analyst Russ Mould said the rally in share price may indicate that short sellers were buying up shares. 

“Kier is the second-most shorted stock in the UK market, on the basis of disclosed positions, so it may not take that much to create a bit of an upward squeeze.

“The new management team is getting to work on simplifying and focusing the business, but it looks like it is going to be a long slog.”

Read more: Short sellers circle Kier as contractor’s turmoil continues

Revenue for the full year slipped from £4.24bn to £4.12bn.

CEO Andrew Davies said: “Kier experienced a difficult year, resulting in a disappointing financial performance. However, we are building firm foundations for the future: we have a new management team in place, we have defined our strategic priorities and we are taking decisive actions to deliver them.”