Mark Whitehead 06 June 2019

Councils exposed following Kier profit warning

Councils exposed following Kier profit warning image

Local authorities are heavily exposed to struggling construction giant Kier which faced a huge fall in its share price this week, according to the latest figures.

Market analysts Tussell say the firm is named on 80 local authority contracts signed since 2015, with a total lifetime value of nearly £600m.

The biggest is a £210m contract with Shropshire started last April to repair the county's highways, estimated to be worth £21m a year.

Wiltshire County Council has contracts with the company worth £63.9m, while the third biggest customer is Durham County Council with £50m of business.

Kier announced on Monday that its underlying full-year profits would be far below earlier forecasts, leading to its shares plummeting by 41% to their lowest level since 1999.

The FTSE 250 company, which employs 20,000 people, builds and maintains infrastructure and buildings for the public and private sector such as roads, rail, schools, hospitals, student housing, prisons, offices and homes.

Large infrastructure projects include HS2 and London’s delayed Crossrail.

In December Kier launched a £264m emergency fundraising in a bid to avoid the same fate as Carillion, the construction and services company that collapsed in January 2018 forcing many local authorities to find alternative suppliers.

Tussell's founder Gus Tugendhat said: ‘Kier’s financial woes have been apparent for many months now.

'Kier differs to other struggling suppliers in that its contract portfolio is much more heavily weighted towards the wider public sector, particularly local government and higher education bodies.

'Whatever happens with Kier, it is essential that central government is sharing the lessons it has learned in managing risk in its supply chain with colleagues across the wider public sector.’

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The ‘levelling-up’ Budget is era-defining and ambitious in scope – but we will have to wait until the summer Spending Review to understand the blueprint, says Localis’s Jonathan Werran.
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