Will it be a case of "Kier today, gone tomorrow"? asks Alistair Osborne in The Times. New chief executive Andrew Davies, who has only been in the post for eight weeks, has been forced to rush out the publication of a strategic review a month early to calm markets still reeling from this month's profit warning. High debt levels have left the engineering group looking "increasingly rickety" and have prompted comparisons to failed outsourcers Carillion and Interserve. The group's net debt at the end of June will be between £420m and £450m. "Not bad for a company now valued at just £175m".
The share price has slumped by more than 85% over the past year. Now management will cut 1,200 jobs, with 650 to go at the end of this month. Kier will dispose of its homebuilding division amongst other units as it focuses efforts on infrastructure.
The new strategy to concentrate on core, cash generative businesses and sell the rest was the only option left on the table, says Jim Armitage in the Evening Standard. Yet doubling down on infrastructure seems "extremely high-risk". Building highways is a fiercely competitive business and this approach also looks like a "nerve-jangling bet on HS2 and Crossrail 2 happening." What's more, the suspicion that it is a forced seller means that Kier may not get a good price for its housebuilding and property operations. The most likely endgame of all this is not administration, but a merger with a rival "in this troubled industry".
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
"A Carillion-style collapse does not look imminent", agrees Lex in the Financial Times. Freezing the dividend and investment and disposing of the housebuilding division should bring debt down to more manageable levels in due course. Kier has a more diversified contract base than defunct support-service peers, while generous bankers mean that a liquidity crunch is unlikely.
Dividend shocker
Once again, income investors have fallen victim to a "dividend trap", says Robert Smith in the Financial Times. Vodafone's drastic dividend cut last month wrongfooted many. Kier's dividend yield was approaching 40% before this week's suspension a reminder that returns that look too good to be true probably are. Balance sheet analysis by managers at Henderson's International Income Trust suggests that one in five listed stocks looks like a "potential dividend trap". Kier will not be the last to serve up a nasty surprise.
-
Lloyds, Halifax and Bank of Scotland to shut another 45 branchesLloyds Banking Group, which includes Halifax and Bank of Scotland, is set to close a further 45 branches in 2024 - find out if a branch near you is closing.
-
US stock trading app Robinhood launches in the UK
The low-cost trading platform has opened another waiting list for British investors - following two failed attempts to launch in this country - and is hoping to be fully operational next year.
-
Why you should keep the faith in Kier Group
Features Engineering firm Kier Group has hit trouble, but the core business looks sound, says Matthew Partridge.
-
After the Woodford fallout, is it time to buy Hargreaves Lansdown and Patient Capital?
Features Two of the biggest casualties from Neil Woodford’s fall from grace are his investment trust - Woodford Patient Capital - and broker Hargreaves Lansdown. John Stepek looks at whether you should snap them up or leave them well alone.
-
Is Kier Group worth buying after its post-profit-warning share-price plunge?
Features Shares at construction and outsourcing contractor Kier Group have taken a nosedive. Matthew Partridge examines why and asks if now is a good time to buy.
