Kier hit by council and housing association spending cuts
Kier’s revenues have been hit by a slowdown in spending among local authorities and housing associations for housing maintenance work, as well as by the conclusion of two major contracts.
The company published its half-year results on Wednesday. It said that its housing maintenance business, which delivers repairs and works to about 350,000 homes annually, had “experienced a reduction in revenue” compared with the same six-month period last year.
A deal to repair homes for Stoke-on-Trent Council ended and was not renewed, and the council opted to use its own housing company instead. A similar contract held by Kier to manage housing repairs for North Tyneside Council was also brought in house.
As a result, revenues across the developments and housing division, which covers Kier’s housebuilding, maintenance and environmental services activities, fell by 19% in the period, to £419.1m.
It said its future focus for the housing maintenance arm would be on “streamlining the business” and finding “operational efficiencies”.
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Kier’s group revenue for the six months rose by 3% to £2.06bn, and the business made a pre-tax loss of £35.5m, compared with a profit of £34.3m in the same period last year.
The second half of the year is expected to see a better performance, although Kier is still dogged by concerns about its financial strength after lacklustre fundraising last year.
As anticipated by analysts, the group cut its interim dividend to 4.9p, down from the 23p it paid at the same stage a year earlier.
Philip Cox, chair 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.”
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.”
On Tuesday, Kier named Andrew Davies, the man who almost took charge of Carillion before the contractor’s collapse last year, as its new chief executive. He will join the company on 15 April.
