Kier scraps its dividend – how much lower can its share price go?

Kier Group construction site © Getty Images

Shares in construction services company Kier Group (LSE: KIE) hit a fresh low today, as the company scrapped its dividend payout and announced plans to cut 1,200 jobs in the UK, and to sell its house-building and property businesses.

More importantly, the company’s net debt was a good deal higher than analysts had expected, coming in at an average of £420m to £450m, versus market’s expectations for £360m. This, reports the Financial Times, was blamed on “customers losing confidence because of ‘external commentary’ about the state of its finances”.

The company will be hoping that decisive and drastic action can help it to draw a line under the situation before confidence collapses altogether.

Kier warned on profits a fortnight ago under its new chief executive, Andrew Davies. Davies is restructuring the group with the aim of focusing on infrastructure (including HS2 and London’s Crossrail), regional construction (of schools and hospitals, for example), utilities and road maintenance.

“At the heart there is a great business in Kier, particularly around the four core groups. We will administer self-help to this business,” said Davies.

The share price has now lost around 90% of its value in a single year. In December, the group was forced to launch a £264m fundraising (at 409p a share – it’s now trading closer to £1) which flopped.

Investors are understandably jittery after the collapse of heavily-indebted rival outsourcer Carillion last year.

To add insult to injury, troubled fund manager Neil Woodford owns a significant stake in Kier in his funds.