British Builder Kier Group to Cut 1,200 Jobs

(Bloomberg) --

Kier Group Plc plans to cut 1,200 jobs, exit businesses and suspend dividends as the British engineering company struggles to rein in debts piled up during a rapid expansion.

Chief Executive Officer Andrew Davies is pulling Kier out of homebuilding and property maintenance to focus on construction of other buildings and infrastructure such as roads and railways. The job cuts represent over 13% of the current workforce, according to its most recent annual report.

Shares of Kier fell as much as 13% to their lowest since the firm’s 1996 initial public offering after the company issued new debt figures that deepened concerns over its balance sheet.

What Bloomberg Intelligence Says

“Kier’s higher average month-end net debt of 420-450 million pounds is very disappointing, especially on the heels of previous negative surprises on debt, and demonstrates that the 2018 rights issue failed to stabilize its balance sheet and restore investor trust.”
--BI analyst Iwona Hovenko
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Read more about market fears over Kier’s debt warning

Davies, who took over in March, is trying to stop Kier suffering the same fate as industry rivals Carillion Plc and Interserve Plc, which collapsed after taking on projects that offered only thin profit margins and exposed them to heavy liabilities in case of delays or unforeseen problems.

On an investor call Monday, he said the group’s debt is too high and it has a number of businesses that are incompatible with its new, simplified strategy. It also plans to exit facilities management and environmental services.

“At its core, Kier is a great company,” Davies said. “But we do need to administer self help.”

Woodford Woes

The firm’s troubles deal another blow to British stock-picker Neil Woodford, whose fund owns a 9.6% stake in Kier, according to data compiled by Bloomberg. The beleaguered fund manager sold part of his stake in the company earlier this month, as he seeks to provide more liquidity to meet investor redemptions.

Kier’s stock has collapsed since a botched rights issue last year and after it was forced to revise its debt figure in March due to an accounting error. Earlier this month the firm issued a profit warning, blaming struggles at its utilities and highways businesses.

Shares of Kier had already plunged 87% over the past year before Monday, valuing the company at 212 million pounds ($267 million). Last year’s rights issue, which forced underwriters to buy shares at a loss, raised 264 million pounds for the firm.

Speculation about the health of the company’s finances is having an “adverse effect on confidence,” and hurting its capital position, according to a statement Monday from the company, which maintained it has “liquidity headroom” to absorb the volatility.

Kier aims to trim 55 million pounds in costs from 2021. Around half of job cuts will come before the end of this month, while the other half will be completed by the end of the calendar year, the company told analysts on the call.

--With assistance from Joe Easton.

To contact the reporters on this story: Lucca de Paoli in London at gdepaoli1@bloomberg.net;Andrew Noël in London at anoel@bloomberg.net

To contact the editors responsible for this story: Anthony Palazzo at apalazzo@bloomberg.net, Rebecca Penty, Marthe Fourcade

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