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Kier CEO ‘has thrown kitchen sink’ at turnaround plan

Kier’s £245m pre-tax loss  is a sign that chief executive Andrew Davies was taking drastic action to turn the business around, industry analysts have said.

The bulk of the firm’s loss for the year ended 30 June was due to writedowns to some business values and restructuring costs as Mr Davies tries to overhaul the debt-laden outfit.

Applied Value analyst Stephen Rawlinson said the big writedowns showed Mr Davies had “thrown the kitchen sink at” his turnaround plan.

CMC Markets analyst David Madden said the writedowns were a “necessary evil”, which would help “clear the house” for better performance in the future. He added that Kier’s underlying business appears “generally sound”.

“If the losses were related to operations, that’s more worrying,” Mr Madden said.

Kier’s core businesses of building and infrastructure reported a combined operating profit of £118m for the year.

Selling Kier Living is key to Mr Davies’ turnaround plans, with Kier valuing the business at around £173m.

The CEO said the company was in talks with a “handful of very engaged buyers”. He has also had to discuss the sale with Kier’s joint venture partners and pension trustees, who would need to approve any deal.

Progressive Equity Research analyst Alastair Stewart said it was “hard to judge” how far along Kier was with its turnaround with “so many moving parts”.

He also questioned how strong the demand was for Kier’s housebuilding assets.

“They talk about a ‘handful of very engaged buyers’, which I would take to mean about five. But the question is, if they’re so engaged, why hasn’t an offer been made yet?”

Mr Rawlinson warned that Kier faced a challenge to get the amount it wants for the business.

“It’s not a straightforward transaction – Kier’s a forced seller in a buyers’ market for residential development assets,” he said.

Mr Stewart added that most housebuilders are “long on land”, with large landbanks, which made acquiring Kier Living’s stakes a less attractive prospect.

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