Kier to take £53m hit on restructuring
Having swallowed up two big acquisitions in the shape of May Gurney and Mouchel, Kier’s indigestion has now become apparent.
Kier’s annual accounts for the year to 30th June 2016 will show a £53m black hole for exceptional restructuring charges.
“Simplification of the group's portfolio is a priority,” the board said today.
It is now looking to offload part of Mouchel after integration costs spiralled threefold from £15m to £44m.
Kier bought Mouchel in June 2015 for £265m, primarily for it its highway maintenance business. Mouchel’s historic core business is as a consulting engineer, before it started delving into the public services contracting market.
Kier has now put a ‘for sale’ sign on Mouchel Consulting, whose earnings before interest and tax last year were £8m and net assets were £25m at 30th June 2016. It said that “an evaluation of the strategic options for the Mouchel Consulting business, including a possible sale” is expected to be completed “in the coming months”.
The Environmental Services business, predominantly May Gurney’s bin rounds and waste recycling, is also proving costly.
In a trading update today, Kier’s board said: “The financial performance of the Environmental Services continues to be affected by the low oil price and, consequently, the price of recyclates, despite stable operational performance at contract level. As a result, a provision of £35m will be taken in FY16, which provides for all future cash outflows on two environmental contracts of eight and 10 years' duration, respectively.”
Of the West Indies, it said: “The trading environment in the Caribbean remains challenging and, as a consequence, activities in the region are being wound down. A one-off exceptional charge of £18m will be incurred in the results for FY16, which relates to a write down in asset values, work in progress and redundancy arrangements.”
Kier said: “Following the integration of recent acquisitions, simplification of the group's portfolio is a priority, and will provide focus on the businesses which will underpin the group's growth expectations in our core markets; infrastructure, building and housing.”
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This article was published on 4 Jul 2016 (last updated on 6 Jul 2016).