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Kier takes £73m hit after closing Hong Kong and Caribbean arms

Kier has revealed it will take a £73m hit in its full-year results after the closure of its Hong Kong and Caribbean businesses.

In a trading update to the City this morning, the contractor is expected to reveal a total exceptional charge of £73m in its accounts for the year to 30 June 2017.

The firm is set to complete the closure of its Caribbean business following the agreement of a final account with a client on what Kier described as “a challenging project”. This project is expected to complete “within the next three months”.

In total, the closure of the Caribbean business cost Kier £79m, including £23m in FY16 and £56m in FY17.

The closure of its Hong Kong business is expected to cost the firm £23m in FY17.

In 2010, Kier secured £125m work as part of a joint venture with Hong Kong firm Kaden Construction and Spanish contractor Obras Subterraneas SA to construct a 2.6 km tunnel for the region’s high-speed line.

The project was due to finish in May 2015 but has been delayed by nearly two years.

Kier also worked alongside Laing O’Rourke on a four-year £200m deal to build Hong Kong’s Admiralty Station, which it signed in 2011.

Hong Kong Admiralty Station Entrance

Hong Kong Admiralty Station Entrance

Kier trading update: 5 things we learned

The UK’s third-biggest contractor is setting aside an increased amount to cover Health and Safety Executive fines, with exceptional costs rising from £2m to £10m following rule changes at the HSE in February 2016.

However, the sale of Mouchel Consulting to WSP in October last year is expected to generate a profit of £39m in Kier’s full-year results for 2017.

The group also revealed it had made a £60m investment in new developments through its property arm since July 2016, increasing its development pipeline to £1.4bn.

In its construction division, the firm reported a margin of 2 per cent, driven by regional building and frameworks, especially in the education and health sectors.

Frameworks Kier has won a place on include the £500m Prime healthcare deal, alongside fellow contractors Interserve, Speller Metcalfe, Vinci and Willmott Dixon.

In services, the contractor reported organic year-on-year revenue growth alongside a margin of 5 per cent.

Together, the order book for Kier’s construction and services businesses now stands at £9bn, with 85 per cent of revenue secured for FY18.

Overall, the group said its profit forecast would be in line with expectations, while net debt was expected to be around £150m.

City analysts Liberum said the exceptional charges were higher than expected, but underlying trading was in line with expectations, leading the analyst to maintain a ‘buy’ rating on Kier’s shares.

Kier takes £73m hit after closing Hong Kong and Caribbean arms

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