Accounting error increases Kier Group's debt

Accounting error increases Kier Group's debt

Accounting error increases Kier Group's debt

Earlier in the year Kier was left disappointed with the response to its rights issue and was also hit by the resignation of its chief executive Haydn Mursell.

Kier Group said yesterday that its net debt stood at £180.5 million at the end of its half-year on December 31.

The firm's shares almost halved in December on the news it was to sell new shares to existing investors at a knock-off one-third discount in a bid to raise £264m to slash into its net debt of more than £600m at the time.

In the course of preparing its 2019 interim results and finalising the 31 December 2018 net debt position, the company 'identified a number of adjustments in aggregate of £10.3m, principally relating to the Group's hedging activities, and has revised the classification of the debt in aggregate of £40.2m associated with certain developments assets held for resale at 31 December 2018, ' Kier said.

Finance Director Bev Dew said an internal review led to an accounting restatement after the reclassification of 40.2 million pounds of debt associated with an asset resale.

Following the announcement, shares crashed by more than 13% in morning trade to 431p.

The group has recently agreed a process with the client which is created to reach agreement with respect to its entitlement to the additional costs associated with the project's delay.

The statement also said Kier Group would take a £25 million hit on its contract to redevelop Broadmoor Hospital but added: "Whilst the board notes the current political and economic uncertainty in the United Kingdom, 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".

Canaccord Genuity said that while underlying consensus earnings may not move materially, clearly expectations for average net debt will move higher.

'While it is arguably not a huge impact on valuation (c.3-4% estimate on enterprise value), it is not reassuring that following the recent rights issue and update in January, a key financial item of net debt, which is under close scrutiny, is being restated ahead of the interim results.

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