2018–2021 financial difficulties
After the liquidation of rival Carillion in January 2018, Kier took on some Carillion staff and contracts: 150 Carillion workers employed on smart motorway joint ventures became Kier employees; 51 Carillion employees working on seven HS2 civil engineering packages awarded to the CEK joint venture were allowed to join Kier/Eiffage.[27][28][29] However, because Kier shared characteristics that contributed to Carillion's collapse – problem contracts, rising debts, and use of reverse factoring supply chain finance – City hedge funds began to 'short' Kier's shares; 10.9% were shorted by 30 August 2018,[30] later rising to 18%,[31] though Kier's position was not seen to be as risky as Carillion's.[32] The 2018 results were in line with City expectations – showing a pre-tax profit of £137m from stable revenue of £4.5 billion – with Kier outlining clear debt reduction plans.[33][34] On 15 November 2018, Kier announced the £24m sale of its Australian road assets business KHSA to joint venture partner Downer, saying sale proceeds would help reduce net debt[35] – £624m at 31 October 2018.[36]
However, on 30 November, Kier announced a £264m rights issue, priced at 409p, to pay down net debts;[36] Kier shares dropped almost 33%,[37] cutting Kier's stock market value by £329m to £492m.[38] The slide continued;[39] on 5 December, Kier was demoted from the FTSE 250 Index,[40] and its share price dropped below the rights issue price,[41][42] making it cheaper for investors to buy shares in the open market than in the rights issue, and leaving underwriters (Numis
After the failed rights issue,[46] shares fell by 13% to a 15-year low of 335p, but later recovered,[47][48] trading at 529p on 11 January 2019, when some shareholders sought changes in Kier's leadership team.[49] CEO Haydn Mursell subsequently resigned on 22 January[50] (his successor, former Wates Group CEO Andrew Davies,[51] took up the post on 15 April 2019).[52] On 28 January 2019, Kier shares dropped 4% after reports it would sell its housing maintenance arm to cut debt,[53]
On 11 March 2019, Kier revised its average net debt for the six months to December 2018 by over £50m from £130m to £180.5m, raising average month-end net debt over the period from £370m to £430m. These revisions followed £10.3m in adjustments to the group's hedging activities, and £40.2m in relation to development assets held for resale. It also warned of £25m of additional costs on its Broadmoor Hospital redevelopment. Shares fell by 12% to 437p.[55][56] (Kier's auditor PwC was later investigated by the Financial Reporting Council over a £40m accounting error,[57] and in June 2022 was fined £1.96m for failing to adequately challenge revenue and costs recognised by Kier's management on large, complex long-term construction contracts.[58])
On 20 March 2019, Kier's half-year results showed a pre-tax loss of £35.5m in the second half of 2018 with revenues flat at £2,064m. As well as the Broadmoor provision, Kier lost £26m on a disputed waste collection contract, while integrating the McNicholas business and Kier restructuring added a further £15.4m to costs. Kier also highlighted "volume pressures" in its highways, utilities and housing maintenance markets.[59] In a 3 June 2019 profit warning, Kier said operating profits would be £25m lower than previously expected,[60] causing its share price to fall over 40%[61] – trading at about 150p, less than half the rights issue price, on 6 June.[62] Shares fell by over a third on 14 June, closing at 130.8p, after reports that Kier was looking to sell its housebuilding division.[63]
On 17 June 2019, Kier confirmed the housing division sale, plans to wind down its property business, and a planned exit of the facilities management and environmental services markets. CEO Andrew Davies's business review included 1,200 job cuts.[64] Kier's share price fell 17% to 108p, a level not seen since the company's 1996 flotation,[65] and its shares were subject to renewed 'shorting' with one analyst saying "the consensus in the market is that Kier will go bust";[66][67] on 15 July 2019, Kier shares were the most 'shorted' on the London Stock Exchange, with shares falling 12.7% to 72.95p.[68] Amid concerns about Kier's future, the company was dropped from two major development schemes, in Leeds and London.[69]
In a trading update on 1 August 2019, Kier said average month-end net debt for the 2019 financial year was £422m, with revenues £100m lower, and, after significant interest in its housing division, said it had started the sale process[70] (Guy Hands' Terra Firma Capital Partners was later reported to be among the bidders to acquire Kier Living).[71] It also announced the appointment of a new CFO, Simon Kesterton (adept at "the disposal of non-core assets, the reduction of overheads and cost control").[70][72]
On 19 September 2019, Kier announced a £245m pre-tax loss on revenues of £4.5bn for the year to 30 June 2019, resulting from £341m in impairment costs and write-downs related to preparing businesses for sale, restructuring and loss-making contracts. The continuing restructuring had resulted in over 751 lay-offs, with a further 450 roles set to be axed.[73] Group chairman Philip Cox stepped down,[74] replaced by former Royal Mail FD Matthew Lester from 1 January 2020.[75] In October 2019, Kier announced it was selling its Tempsford Hall headquarters in Bedfordshire to raise cash from its property assets.[76] At the group's AGM in November 2019, shareholders objected to CEO Andrew Davies's £2.6m annual remuneration package and an associated long-term incentive scheme.[77]
Half-year results announced on 5 March 2020 showed Kier made a pre-tax loss of £41.2m in the final six months of 2019 (marginally better than 2018's restated £45.3m loss); revenues were down 9% to £1,866m (2018: £2,053m). The cost-cutting process begun in 2018 had cut 1,200 jobs with another 50 set to leave by 30 June 2020. The sale of Kier Living was in progress, as was the process of closing Kier's head office,[78] set to complete in June 2020.[79] On 24 March 2020, as the financial impacts of the COVID-19 pandemic became clear, Kier's board of directors took a three-month 20% pay cut,[80] then, on 30 March, announced all 6,500 Kier employees would have their base salary reduced by between 7.5% and 25% for three months; it stepped up its cost reduction programme, bringing forward the closure of Tempsford Hall to 30 April[81] (head office functions were transferred to Manchester in mid April),[1] and paused the sale of its housebuilding business, Kier Living[82] (though Terra Firma revived talks about buying Kier Living in December 2020).[83]
On 1 July 2020, Kier announced it was considering a further rights issue to raise cash as average net debt had risen due to COVID-19 impacts; average month-end net debt was up from £395m in December 2019 to £440m, and could rise to £485m.[85] Further job cuts were also likely.[86]
On 17 September 2020, Kier announced a £225.5m loss on the year to 30 June 2020, on revenues down 15% to £3,476m, with the fall partly due to COVID-19 impacts. Group headcount had been reduced by 1,700.[87] Following this announcement, Kier shares sagged to 51.40p.[88] In a January 2021 trading update, Kier said average monthly net debt remained around £436m; progress with the sale of Kier Living continued, with Kier hoping to receive around £100m for the business to help reduce debt; and Kier was aiming to make at least £105m in cost savings by the end of the financial year.[89] Kier Living's sale came ahead of the company's (delayed) half-year results in April 2021.[90]
On 6 April 2021, Sky News reported that Kier Living would be sold to Terra Firma,[91] for £110m, subject to agreement at a meeting of Kier shareholders in early May, with completion of the sale by mid-June 2021.[92] Kier Living was bought by a new company owned by Terra Firma founder Guy Hands,[93] and was rebranded as Tilia Homes.[94] However, the sale would not significantly improve Kier's debt position, and analysts predicted an equity raise;[95] on 21 April 2021, CEO Davies confirmed a planned equity raise to address its net debt position, unchanged at £436m.[96] On 13 May 2021, Kier launched a £241m fund raise, with shares offered at 85p (a 17% discount to their then trading price).[97]
