Kier Group (LON:KIE) shares sank on Monday as the group announced a strategic review and the suspension of its dividend.
The group said it would shift focus to regional building, infrastructure, utilities and highways by selling or exiting its non-core businesses such as Kier Living and environmental services.
Shares in Kier Group were down over 14% in Monday afternoon, trading at a little over 110p. Shares in Kier Group have fallen from highs around 1,400p in 2017.
The company now has a market capitalisation of just £183m, the lowest in the FTSE 350.
The strategic review is the result of debt levels the group today said were ‘too high’ and low levels of cash generation accentuating the companies debts.
Andrew Davies, Chief Executive of Kier, commented:
“Since becoming Chief Executive on 15 April, I have visited many of our key locations and spent time with all of our businesses, meeting the leadership teams and many of our dedicated people in the process. I have also met with many of our clients. Kier has a number of high-quality, market-leading businesses, in particular Regional Building, Infrastructure, Utilities and Highways. I believe that these businesses will deliver long-term, sustainable revenues and margins and are inherently cash generative.”
“As previously announced, I have been leading a strategic review which has resulted in the actions being announced today. These actions are focused on resetting the operational structure of Kier, simplifying the portfolio, and emphasising cash generation in order to structurally reduce debt. By making these changes, we will reinforce the foundations from which our core activities can flourish in the future, to the benefit of all of our stakeholders.”
The problems that led to the collapse of Carillion will be fresh in the minds of investors and there are significant similarities with the problems Kier Group are facing.
Kier Group will be aware of this and have taken drastic steps to reduce head count by 1,200 – whether this provides a base to rebuild is to some extent out of Kier’s hands and will ultimately depend on government contracts.