22-4-2020 05:41:16Kier's share price has been turbulent for the last couple of years. In 2018, the Kier share price stood at over 1,000p, but since then it has suffered a significant fall, dropping to under 80p in recent months before struggling its way back over the 100p level in the last month.
It’s hoped that the company is able to reassure investors that the bolstering of its finances is helping to put the business on a more stable footing.
Kier’s struggles reflect in annual results
Kier’s last annual results in September evidenced the company’s tough year. It fell to a pre-tax loss of £245m, compared with a profit of £106m the year before. Kier accumulated £341m worth of charges, comprising £39m to cover redundancies, £18m towards advisers for restructuring the business, and around £57m from failed contracts, including the Broadmoor Hospital and Mersey Gateway bridge projects.
Further setbacks included revenue for the year dropping to £4.12bn from £4.24bn, the average debt increasing 12% to £422m, and the order book decreasing by £600m at £7.9bn. Kier’s share price lost a third of its value immediately after the results were released, before recovering.
Kier Living up for sale
Kier Living, Kier’s housebuilding arm, is a division that the company has been trying to offload. Valued by the company at around £120m, it has been up for sale since June 2019. Chief executive Andrew Davies said the business was no longer viewed as a key element of the group, after the number of constructed homes fell 6% to 1,926 in the last financial year.
It’s reported that two private equity businesses are vying for the purchase. However, confirmation of the sale had been predicted for the end of last year, but December’s UK general election slowed the process. Management will be keen for the eventual transaction to go through sooner rather than later.
As Kier waits for progress on the sale, it’s having trouble keeping hold of a captain for the Kier Living ship. In July 2019, John Anderson, the executive director of the division, stepped down after 10 years. Mr Anderson’s successor, Nick Moore, has recently resigned after just seven months. That departure sent Kier’s share price falling 15%. It seems those who are involved with Kier Living are jumping off the dispersing vessel.
Kier share price boost
It’s not all been doom and gloom for the company after the approval of the controversial High Speed 2 (HS2) project briefly parted the clouds. Prime minister Boris Johnson recently gave the green light for the project, a planned high-speed railway that will run through the middle of the country, connecting London to the north.
Although controversial, not least due to soaring costs which were initially set at £56bn but are now expected to exceed £106bn, Kier’s share price rose by more than 33% after the approval. The company holds a significant contract for the project, reportedly worth £1.3bn. This contract can help to help turn around its recent financial problems, but the original launch date of 2026 is looking increasingly unlikely, with a 2028 launch more realistic. So it’s going to be a while yet before the construction group will be able to reap any benefit.
Having slimmed the business substantially, there are signs that the turnaround and restructuring strategy is starting to bear fruit. Will this show in Thursday’s half-year results, and how will it impact Kier’s share price?
Disclaimer: CMC Markets is an execution-only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although we are not specifically prevented from dealing before providing this material, we do not seek to take advantage of the material prior to its dissemination.