Kier Group shares plummet as broker lowers target price to £1
Kier Group shares fell nearly nine per cent this morning after a note by broker Jefferies lowered its recommended price to 100p.
The construction group’s stocks have been hovering around 100p for five months, since it announced it would be making 1,200 people redundant in June, and that it would look for a buyer for its housebuilding arm.
Read more: Kier suspends dividend and unveils plan to cut 1,200 jobs
Shares hit a low of 95.20p this morning, 8.8 per cent down on its opening price of 104.40p. They recovered to 97.23p by midday.
The embattled contractor is looking to sell off “non-core” parts of its business. Its housebuilding division, Kier Living, is up for grabs, while its property business is also being targeted by US private equity firm Lone Star, according to reports.
The sell-off comes as part of new chief executive Andrew Davies’s attempt to turn the company around. But progress has been slow, and the firm is yet to find a suitor for the division, with industry sources questioning whether it a buyer will emerge before the end of the year.
Analysts said the next two years would be “crucial” for Kier, and that despite attempts to restructure the firm they thought it will still have net debt in 2022.
“If the divestments complete in line with our assumptions, we estimate Kier would have c£26m year-end net debt in in full-year 2022,” they said.
“While this would represent a material reduction from Kier’s current leverage, we believe contractors are best positioned when operating with average daily net cash.
“With our estimates implying c£274m average daily net debt in full-year 2022 once disposals complete, we believe Kier may have to find more ways to accelerate debt reduction to sufficiently rebase in the mid-term.”
The struggling outsourcer staggered to a £245m loss in its latest full year, with net debt of £167m.
Last week, it was reported Kier’s lenders are trying to offload its debt to hedge funds. HSBC and other lenders are reportedly marketing the debt for as little as 70p in the pound, as they try to cut their losses in case the firm meets the same fate as fellow outsourcer Carillion.
Kier is one of the country’s biggest builders of roads, schools and railways, and carries out a significant amount of work for the government.
Read more: Kier lenders ‘try to offload outsourcers’ debt’
This includes two contracts worth £1.4bn to design and build major railway tunnels beneath Northamptonshire, which were originally part of a three-way joint venture including Carillion.
However, when Carillion collapsed early last year, Kier and French construction company Eiffage took on 50 per cent of the job each.