Even before the Covid-19 lockdown, Kier chief executive Andrew Davies was on a turnaround mission for a company in crisis; the parlous state of the economy now has added to the challenge.
But after losing 90% of its value in the past five years, Kier shares are now starting to climb again.
This is based on the fact that 85% of the company’s £7.6bn order book is in public works and regulated markets – regarded as solid, dependable revenue streams. It has largely exited the environmental services business and has rationalised its facilities management business, both based on flawed acquisitions in an attempt to diversify.
However, there is still more work to be done and with the sale of the house-building business not moving, the board is now considering a rights issue to tackle its £440m debt burden.
In a trading update today, Kier said that it had “made good progress in relation to the delivery of the strategic actions announced in June 2019”.
This year’s results, for the year to 30th June 2020, won’t look too pretty because of the cost of restructuring, but next year overhead costs will be down by £100m and all the costs associated with these savings will have already been incurred in 2020.
Kier Living, the house-building division, has been up for sale for a year now. Covid-19 has not helped. The new management of Kier Living has cut the business back to “a smaller, more disciplined organisation, with a focus on cash generation”.
In its trading statement, Kier said: “Before Covid-19, the group had made good progress in implementing a number of measures to reduce its net debt and strengthen its balance sheet. As a result of Covid-19, over the next 12-18 months, further actions will be taken, including: continuing to implement a range of self-help measures, driving a further increase in the group's operating cashflows, continuing the process to sell Living and a potential equity issue.”