We often talk about incoming chief executives throwing the kitchen sink at company’s accounts when they come in – i.e. getting all the bad news out there in one go – well Kier’s (KIE) Andrew Davies looks like he’s thrown the whole kitchen at it.
The shares are down 10% to 118p as he announces the suspension of dividends, 1,200 job cuts and the sale of non-core businesses, including the housebuilding division, in a strategic review brought forward thanks to supply chain issues which are seeing the business haemorrhage cash.
Debt will be higher than previously guided, hitting £195m by its June year end up £140m and averaging up to £450m on a monthly basis from £365m. As a reminder it is around six months since the company launched a £264m rights issue which appears to have done little to solve its balance sheet problems.
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It feels very much like the business is in survival mode at this point. Two months into his tenure Davies has had precious little time to get his feet under the table.
In 2017 he was announced as the new CEO of Carillion just months prior to it collapsing into insolvency in January 2018 and before he'd even had a chance to take up the role.
Numis comments: ‘The expected actions are broadly as we would expect, and in our view could generate circa £260m of proceeds and entail a major reduction in the debt profile. However, this needs to be enacted immediately, as the supply chain squeeze could accelerate from here.’
AJ Bell investment director suggests the job done by Leo Quinn at Balfour Beatty (BBY) could offer a template for the company, adding: ‘Construction firm Kier’s decision to ditch its dividend should not be a shock given the company’s precarious financial position. The shares were yielding a scarcely credible 10% before this morning’s announcement.’