Kier managed to reduced its average month-end net debt by 44% in the second half of 2023 and turn a £130m net debt a year ago to a £17m net cash position.
During the six months to 31st December 2023, Kier’s average month-end net debt was £136.5m, compared to £242.7m for the same period in 2022. Although the increase in interest rates added to the weight of debt, Kier generated operating profit and positive working capital that was used to pay adjusting items, tax and interest, pension deficit obligations, invest in its property business, purchase existing company shares on behalf of employees and acquire the rail assets of the Buckingham Group.
And after several sticky years for Kier, it is resuming the payment of dividends to shareholders and in February 2024 it completed a refinancing of its principal debt facilities.
With Kier’s financial year running to the end of June, it posted a first-half pre-tax profit up £6% at £27.0m (2022: £25.4m) on revenue up 22% at £1,862m (£2022: £1,526m).
Chief executive Andrew Davies said: "The past two and a half years have seen the Group achieve significant operational and financial progress and I am delighted that today marks a return to paying dividends. The first half has seen the group deliver strong volume and profit growth, increased orders and material deleveraging. This is testament to the hard work and commitment of our people who have enhanced our resilience and strengthened our financial position in line with the objectives set out in our medium-term value creation plan. Our order book remains strong at £10.7bn and provides us with good, multi-year revenue visibility. The contracts within our order book reflect the bidding discipline and risk management now embedded in the business. I am also particularly pleased to report that the group significantly improved upon its year-end net cash position with significantly lower average month-end net debt and has confidence in sustaining this momentum going forward.
“The second half of the financial year has started well, and we are trading in-line with expectations. The group is well positioned to continue benefiting from UK government infrastructure spending commitments and we are confident in sustaining the strong cash generation achieved over the last 18 months, allowing us to continue to significantly deleverage the group. We remain committed to delivering our medium-term value creation plan which will benefit all stakeholders."
Adrian Lunn, director at surveyors Eddisons, commented: “After years of hard work, Kier has demonstrated that it is back clearly back on track once again. Revenues jumped 23%, profits climbed by 13% and it has reversed a net debt position to end the half with £17m in cash on the balance sheet.
“That’s no mean feat for a business that was posting losses of nearly half a billion back in 2019 and has been plagued by a series of delayed projects, as well as its involvement in projects like Crossrail and HS2.
“Later this month, Kier will re-enter the FTSE 250 after a five-year absence, a momentous achievement for one of UK’s largest contractors. In a further sign of its confidence, the dividend is also back.
“With tentative signs that the property market is set to recover and positive commitments from the government on future infrastructure spending, some of the concerns on the backdrop are also falling away.
“So, with no sign that the first half’s momentum is waning and a strong order book of well over £10bn, Kier’s successful repositioning and improved visibility on future revenues leaves it in a great position to continue to deliver.”
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