黑洞社区

Kier Group has shot itself in the acquisition foot. It has played 鈥渕e too鈥� and pipped Costain to the post twice, first with May Gurney in 2013 for 拢221m and last year Mouchel for 拢265m (funded via a rights issue). These were both originally Costain ideas and it moved first only to be out-muscled by its domestic rival. What about an original idea guys? And, how much thought was put into either?

Check out, too, the fact Kier incurred 鈥渘on-underlying鈥� exceptional charges at the profit before tax level of 拢46.4m and 拢58.3m in both fiscal 2014 and 2015; and much of these charges was down to acquisitions. Note, too, that profit before tax from continuing operations of in these two years was 拢60.2m and 拢69m.

Yesterday, the group issued a trading update for the fiscal year 2015-16 just completed (to 30 June) but not yet reported. Herein, it said 鈥渢he acquisitions of May Gurney and Mouchel have significantly increased the level of visible, long-term earnings from our construction and services divisions鈥�. And added that Mouchel remains on track to deliver a return on capital employed 鈥渋n excess of our target of 15%鈥� in fiscal 2017.

However, it also said that the integration costs of Mouchel had increased by 拢29m to 拢44m and that these will be charged to the fiscal year just completed (but not yet reported) to 30 June 2016. My question, too, is by how much has the Mouchel capital employed been reduced?

I say stop buying companies, be more original and employ a strategy team. Alternatively bring back John Dodds

But that鈥檚 not all: 鈥渁n evaluation of the strategic options for the Mouchel Consulting business, including a possible sale鈥� is also being looked at. Mouchel Consulting鈥檚 earnings before interest and taxes (EBIT) in fiscal 2016 were 拢8m with net assets of 拢25m at 30 June 2016. 鈥淚t is expected that a profit would be realised on the completion of any disposal鈥�. Oh, and by the by, Kier is dumping its Caribbean building business, which will cost a further 拢18m in exceptional charges for the year just gone.

But that鈥檚 not all: in environmental services a provision of 拢35m will be taken - also in fiscal 2016 - which provides for all future cash outflows on two long-term contracts.

Kier says that 鈥渆xceptional charges from the above portfolio simplification, totalling 拢53m鈥�, will be reported in fiscal 2015-16. But this appears to exclude the Mouchel integration costs of 拢44m.

This, in my view, is profligate behaviour - and now over three years.

On Monday, Kier鈥檚 share price fell 6% to 987 pence; and at the time of writing it was off another 3.3%. In the year-to-date, too, the share price is off 26%.

I say stop buying companies, be more original and employ a strategy team. Alternatively bring back John Dodds.

Tony Williams is CEO of 黑洞社区 Value