The Kier Group share price is higher on the back of the encouraging first-half numbers.
The company confirmed that its statutory operating loss fell to £24.4 million from £32.5 million last year. Operating profit jumped by 11.4% to £46.7 million thanks to an improvement in operating margin to 2.5% from 2%. Kier has had to tighten its belt and the cost savings in the six month period were £23 million, which is encouraging. The cost cutting scheme is expected to deliver benefits of at least £65 million by June 2021.
At the end of December, the net debt position stood at £242 million - in line with expectations. Capital invested in non-core businesses will be reduced – this tactic should pay-off in the long-term as capital will become more effectively used. When a firm is turning itself around, the markets wants to see that expenses, as well as debt, are under control, so it seems as it Kier are making all the right sounds.
The Kier Group (LON:KIE) share price took a huge knock in June of last year when the company warned on profits. The group registered a full-year loss of £245 million three months later. Stripping out one-off costs, the pre-tax profit slumped by 40% to £98 million. Exceptional items exceeded £340 million, and they related to loss-making contracts, restructuring costs as well as costs relating to the sale of businesses. In a bid to conserve cash, the company stated in June the final dividend will be scrapped. Keep in mind the interim dividend last year was slashed by nearly 80%, so it wasn’t a total shock the firm took the next step of stopping the cash payout altogether.
Last week it was announced that Nick Moore, the head of Kier Living - the house building division, stepped down. Mr Moore was only in the role seven months so the news came as a surprise, and it sent the Kier Group (LON:KIE) share price tumbling. Since last summer the home building division has been up for sale, but it is not a good look when the captain jumps ship.
Kier Group (LON:KIE) is keen to focus on construction contracts as well as civil engineering projects. This echoes the move by Galliford Try (LON:GFRD) who spun-off their house building unit. Many companies operating in the same field as Kier have slimmed down their respective businesses and became more selective in what contracts they take pursue.
The Kier Group (LON:KIE) share price has suffered a pullback from mid-February but while it holds above the 100p mark, the broader positive move of 2020 should continue.
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