Kier Group PLC (LON:KIE), which on Tuesday appointed a new chief executive, has reported a drop in first-half profit but maintained its full-year guidance as the construction and outsourcing group continues its future proofing programme.
For the six months ending 31 December 2019, the company saw its underlying pre-tax profit fall by 21% to £39.0mln, down from £49.4mln a year earlier, although underlying revenue increased by 2% to £2.201bn, up from £2.149bn.
READ: Kier names Andrew Davies, the man who almost took charge of Carillion before its collapse, as its new CEO
The profit decline came as Kier’s operating margin eased to 2.4% from 2.8% a year earlier.
Kier saw its net debt at the period end reduced to £180.5mln, down from £238.5mln a year earlier, with the group having completed a £250mln rights issue in December to strengthen its balance sheet.
The company said the Future Proofing Kier (FPK) programme delivered savings of £4mln in the first half, with implementation costs of £14mln, and it forecasts the programme to be earnings and cash flow neutral in full-year 2019, with net savings of £20mln anticipated in full-year 2020.
As anticipated, the group chopped its interim dividend to 4.9p, down from the 23p it paid at the same stage a year earlier.
Commenting on the outlook, Philip Cox, currently Kier’s executive chairman, said; "Our regional building and property development businesses continue to operate well, although we are experiencing some volume pressures in the highways, utilities and housing maintenance markets.”
He added: “Whilst the Board notes the current political and economic uncertainty in the UK, and the implications for third-party investment, the Group is maintaining its underlying FY19 expectations, with the full-year results being weighted towards the second half of the financial year, as expected."
In early morning trading on Wednesday, Kier shares were 3.1% lower at 468.80p.
In a note to clients, analysts at Liberum Capital retained a 'buy' rating and 660p price target on Kier shares.
They said: "Today's working capital outflow is undoubtedly large. But we see this as part of the process of normalising the business after the December rights issue. We take comfort that guidance for the year is unchanged."
New boss to join on 15 April
On Tuesday, named Andrew Davies, the man who almost took charge of Carillion before the contractor’s collapse last year, as its chief executive with effect from 15 April.
Davies was previously CEO of Wates Group, a privately-owned construction and property services firm, from 2014 to 2018 and prior to that spent 28 years with defence contractor BAE Systems.
Back in October 2017, Davies was announced as the new CEO of Carillion, but the construction and outsourcing firm collapsed into insolvency before Davies could take up the role.
Kier’s previous CEO Haydn Mursell stepped down from the group with immediate effect on 22 January 2019 following a disappointing take-up for the group’s December fund-raising.
The company saw just 38% of its rights issue shares taken up by shareholders, although the underwritten cash call still netted the firm £250mln.
Kier was looking to issue 64.5mln new shares at 409p each in the 33-for-50 rights issue but just 24.3mln of the shares were taken up.
The rights issue was undertaken to cut debt and better position Kier in light of tighter credit markets and more stringent tender pre-qualification requirements.