Kier Group slides amid profit and dividend drop

Kier Group's shares dived on Wednesday after the company slashed its dividend and reported it had swung to an interim loss after a leap in administrative costs.

The UK construction, services and property group recorded a loss before tax of £35.5m for the six months to the end of December, down from a profit before tax of £34.3m in the same period in 2017, while revenue crept upward by 3% year on year to £2.06bn and administrative costs leapt by 35% to £202.0m.

Kier proposed an interim dividend of 4.9p per share, drastically lower than the 23.0p interim dividend seen last year.

Meanwhile, the business managed to slash £58m off its net debt to leave it at £180.5m, though underlying operating profit from operations was down by 15% at £51.8m as the FTSE 250 listed company's operating margin reduced to 2.4%, down from 2.8% a year earlier.

A future-proofing programme delivered savings of £4m, with implementation costs of £14m, and Kier forecast the programme to be earnings and cash flow neutral in 2019 before providing net savings of £20m in full-year 2020.

The Developments and Housing division saw revenue drop by 19% and underlying profit fell by 30% after a reduction in housing completions in the period and housing maintenance volumes.

Infrastructure Services saw an 8% revenue increase but a 5% dip in underlying operating profit, while the Buildings division's revenue jumped by 10% and underlying operating profit was up 74%.

Philip Cox, executive chairman of Kier, 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. The group has a significantly strengthened balance sheet following the completion of the rights issue in December 2018."

Cox added that the board was now to focused on simplifying the group, improving cash flow generation and net debt reduction, and forecasts a net cash position at the end of its full-year in June.

At 31 December, cash and cash equivalents stood at £434.0m, up from £415.0m at the same point the year before.

"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," said Cox.

A note from Canaccord analysts said: "Guidance is unchanged but we would not be surprised to see the top end edge lower and confidence around the numbers is likely to remain questionable given recent developments and first half underlying profits have missed. The shares look lowly rated on current consensus forecasts but we would not expect a near-term re-rating until evidence of reliable delivery is seen."

Kier Group's shares were down 8.22% at 444.20p at 0920 GMT.