Kier cuts more jobs on top of previously announced 1,200

Kier has made more staff redundant on top of the 1,200 it has already said were leaving the business.

Building understands that the majority of the extra losses have already been made and that at least 100 more jobs have gone.

The redundancies are part of the tranche of staff cuts announced last summer by chief executive Andrew Davies with those losses being split into two parts – 650 went at the end of June 2019 and a further 550 by the end of last month.

The firm said it expected to make costs savings of £100m this year – against a previously trailed £55m when it announced the cuts last June – although not all of the extra savings have been made by cutting headcount.

Kier, which has completed the move out of its historic Tempsford Hall headquarters which it owns and where it has been since the 1960s, yesterday said it might need to raise more money to bolster its balance sheet through a rights issue as it creaks under the weight of its debt pile.

One source described making a potential equity raise public as “a bombshell and madness by management to flag it before getting some sort of pre-pacing done. It will simply undermine the share price until a re-financing is done.”

In a trading update to the City yesterday, the firm said its average month-end net debt for the year to June 2020 was £440m – up from the £395m it posted for the six months to December 2019 and £18m more than its 2019 year-end.

Cenkos analyst Kevin Cammack said: “The latest update is quite positive in one sense but the market’s enthusiasm might wane when it notes the stubbornness of net debt to decline.”

The firm blamed covid-19 for the increase and added: “The reduction in the Group’s revenue due to covid-19 has resulted in a lower level of working capital inflow in the period than in the equivalent period in previous years.”

Analysts gave a mixed reaction to the latest update which came after its year-end closed on 30 June with the firm due to unveil its full year results on 17 September.

Peel Hunt said it expected covid-19 to have hit the firm’s 2020 pre-tax profit by one third, with the problems caused by the virus dragging profit down to £41.5m.

But its analyst Andrew Nussey added: “Although covid-19 has disrupted the anticipated pace of recovery and management’s strategic actions to reduce indebtedness we are encouraged by the underlying operational financial and strategic progress.”

In a note on the firm, Numis analyst Jonny Coubrough said the firm was “operationally well placed” but warned: “We have argued previously that until the balance sheet weakness is resolved (of which disposal of [housing arm Kier] Living remains a key aspect) the share price will not attain a re-rating to reflect operational quality of business. Introducing the possibility of an equity raise (in part due to C19) adds another element of uncertainty to the investment case.”

Kier Living has been on the block since last June and some had been hoping for a sale by Christmas. One source said: “My sense is that the buyer they were moving to NDA with has gone cold due to the current environment and worries over the land bank values. I think there is a chance that it may not be a salvageable relationship. It is clear that Kier management have restructured this business again since Q1 which I think is on the view that it will have to start the whole process again in due course.”

Kier said its order book remains at £7.6bn with around 85% of that from the government and quasi-public sector through regulated entities.