Embattled outsourcer Kier shares plunge as ‘accounting error’ reveals higher net debt than previously thought

Construction outsourcer Kier Group spooked investors on Monday morning as it admitted an 'accounting error' had forced it to recalculate its net debt as £50m higher than previously stated.

The firm’s stock fell 13 per cent after it issued an update saying it has revised its net debt position as at 31 December to £180.5m, up from the £130m given in its last trading update.

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Kier, which is still bereft of a permanent boss after chief executive Haydn Mursell was ousted earlier this year by activist shareholder Neil Woodford, said it had “identified a number of adjustments” totalling £10.3m relating to the group’s hedging activities.

On top of this, it has “revised the classification of the debt associated with certain developments assets held for resale,” coming to £40.2m.

Liberum analyst Joe Brent said Kier's situation was down to an "accounting error", resulting in the "restatement of £40m of net debt from assets held-for resale to underlying net debt".

Kier, which builds and maintains highways, railway tunnels and houses, has said there is growing pessimism among bankers, who have cut their exposure to the industry after the high profile collapse of rival Carillion, affecting a rights issue last year.

The firm’s shares nearly 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.

Despite the rights issue flopping, with just 37.6 per cent of the new shares taken up by existing investors, it was underwritten by Kier’s bankers, who stumped up the rest, enabling the firm to shed the majority of its debt pile.

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Since then Kier’s stock has steadily risen, despite the ousting of its chief executive in January, as investors appeared to regain faith in the troubled construction firm, until plummeting again on Monday morning.

Shares fell as low as 431.8p in early trading, a 13 per cent drop.