Kier shares soar 40 per cent as it chips away at debt pile
Kier Group investors rejoiced this morning as they were treated to a rare piece of good news: that the firm is regaining control of its debt.
The firm also said it had attracted “significant interest” in its house building arm, which it is trying to sell to reduce its debt.
Read more: Kier shares plunge on housebuilding unit sale reports
The outsourcer, which has been severely under the cosh for the best part of a year, enjoyed a 40 per cent boost to its market value this morning. Shareholders were toasting its average monthly net debt for the financial year falling to £422m.
The figure is right at the bottom end of forecasts, which predicted it could be as much as £30m more than that. Furthermore, the firm said its debt at the end of June was just £167m.
Turnaround plan
For a company which has struggled to control its debt pile since last summer and has been likened to collapsed outsourcing giant Carillion, the news could indicate that it has turned a corner.
New chief executive Andrew Davies announced a major strategy overhaul earlier this summer, which included laying off 1,200 people and selling off parts of the business.
One of these parts, house building arm Kier Living, has attracted “significant interest,” allowing the company to start the sale process in earnest, Kier revealed this morning.
Davies has also tapped finance boss at packaging giant RPC Group Simon Kesterton as his new chief financial officer. Kesterton will take over from incumbent Bev Dew on full-year results day in September.
Davies said: “Simon has a broad range of finance experience across a number of sectors.
“In particular, he has played a key role in implementing programmes which focus on the disposal of non-core assets, the reduction of overheads and cost control. I would like to welcome Simon to Kier and I look forward to working with him.”
Revenue shortfall
Kier warned of a £100m revenue shortfall when it announces results. This is because of “property and land-led transactions which did not complete” in June, it said. However, it will only make a small dent, given last year’s turnover was £4.5bn.
Kier also reduced the average time it took to pay suppliers to 41 days, down from 57 days.
Read more: Construction in crisis: Where did it all go wrong for Kier?
CMC Markets analyst Michael Hewson said this indicates the firm “is regaining control of its cash flow”.
AJ Bell analyst Russ Mould said: “An improved financial position will ease fears that a weak balance sheet could restrict a firm’s ability to compete, win new business and complete existing contracts in the most efficient fashion possible. It will also lessen concerns of a possibly dilutive cash call upon shareholders.”
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