It’s not been a great 12 months for the Kier share price, which is down more than 80% over concerns about its solvency and ability to service debt levels.

This time last year the situation was far more positive, as the company reported profit-before-tax of £106m, as well as an improvement in revenue to £4.2bn, while a resilient order book of £10.2bn pointed to an outlook which looked rosy.

Soaring debt sinks Kier share price

But soon after last year's annual update, the wheels came off Kier's share price in spectacular fashion, when the company announced a ‘33 for 50’ £264m rights issue, in an attempt to get on top of its debt levels, as scrutiny over the sector started to increase, particularly on companies that have overly large balance sheets. At the end of June 2018, the company’s net debt levels stood at £180m, but as a result of various reclassifications, this was revised significantly higher at the end of October 2018, hence the need for the rights issue.

With suppliers of the sector reluctant to offer generous credit facilities, having been burnt by Carillion, Kier has been staggering from one crisis to the other this year, and in March had to announce that once again it had mis-stated its debt levels, from an original £130m at the end of December, back up to £180.5m.

Kier issues profit warning

This was followed in June by a profit warning, as the Kier said it expected profits to come in £40m below expectations, at £129m. This was the latest blow after the group swung to a £35.5m pre-tax loss in the first half of the year, with the company citing problems across its various divisions.

The announcement of 1,200 job losses appears to be the latest attempt to stem the bleeding, along with the possibility that the company was looking to spin off Kier Living, its housebuilding arm, as well as its property development unit. Most of the job losses are expected to affect its head office, with the rest coming in the form of shutting or selling the recycling businesses.

Kier share price rebounds from record low

This week’s full-year update is likely to offer an insight into how much progress has been made since the Kier share price touched a record low in July, and whether we’ve seen the worst of the bad news as new CEO Andrew Davies grapples with turning the business around.

Kier's share price has rebounded somewhat from their summer lows, helped by the fact that unlike Carillion, the business is profitable, and that there won’t be any more unpleasant surprises. Expectations are for revenue to come in at £4.36bn, with earnings before interest, tax, depreciation and amortisation (Ebitda) of £146m.



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.