Error sees outsourcer Kier uncover more debt
Another large outsourcing company has revealed a potential accounting error, with construction specialist Kier Group forced to revise its debt up by £50m in its latest trading update, less than two months after it first provided the figures
12 Mar 2019
In its latest statement Kier said: ‘The group has revised its net debt position as at 31 December 2018 to £180.5m (from c.£130m) and, accordingly, has re-calculated its average month-end net debt for the six months ended 31 December 2018 as being c.£430m (from c.£370m).
‘In the course of preparing its FY19 interim results and finalising the 31 December 2018 net debt position, the company identified a number of adjustments (in aggregate: £10.3m), principally relating to the group's hedging activities, and has revised the classification of the debt (in aggregate: £40.2m) associated with certain developments assets held for resale at 31 December 2018.
‘The group originally consolidated this debt balance within assets held for resale on its balance sheet; following the re-classification, the debt has been included within the group's net debt position.’
The company said of the £40.2m net debt, £9.8m relates to assets which have been sold since 1 January 2019, £14.1m relates to sales which are subject to binding sale agreements and expected to complete by 30 April 2019 and the balance of £16.3m relates to assets which are either being marketed for sale by 30 June 2019 or are under offer.
The contractor, which employs 20,000 people on work ranging from rubbish collection for local authorities to building houses and schools, failed to win support for a rights issue late last year. Speaking to the Financial Times, the company’s finance director, Bev Dew, said of the latest news: ‘It’s absolutely an error. The timing of this is absolutely unfortunate. In the wake of the rights issue, we are aware of the concerns around debt.’
The group said it continues to forecast a net cash position at 30 June 2019 and remains focused on reducing its average month-end net debt. It is set to release its FY19 interim results on 20 March.
The update also includes the latest news on the operational progress and cost recovery programme of its Broadmoor Hospital redevelopment project, which has been subject to delays and overruns. The first phase of the project is expected to be handed over shortly and the remaining work on the project, which accounts for less than 10% of its value, will commence shortly thereafter.
Kier says it has agreed a process with the client regarding the outsourcer’s entitlement to the additional costs associated with the project's delay. Following its most recent review, the board has concluded that a non-underlying provision of £25m will be included in the group's FY19 interim results in respect of future recoveries from the client and other third parties.
Kier’s statement concluded: ‘Whilst the board notes the current political and economic uncertainty in the UK, and the implications for third party investment, the group remains on course to meet its underlying FY19 expectations, with the full-year results being weighted towards the second-half of the financial year, as expected.
Report by Pat Sweet