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It’s exactly that “net cash after the forecast sales of non core assets”
This assumes they will achieve those assets sales and for the prices they have forecast. Both IRV and CLLN said the same if you do you research, but never actually achieved it.
If they had started selling last summer they could have nailed this.
Thunder- I didn’t say Kier was the next Carillion, suggest you read my posts properly. Carillion has way to much issues, hence it wasn’t worth keeping afloat, and no hedge funds got involved unsurprisingly. Was merely pointing it out as it’s the sector as a whole that needs reform. As I have said many tines Kier is more of a IRV comparable in that there is long term value in the business, BUT who will own the company in the long term. I certainly don’t think it will be the current holders, and history tells us that. Look at Jarvis?
If the hedge funds see value they will certainly take equity and treble their money. Do you think they are there to save private investors?
I hold no position here as I have been burnt twice coincidentally by both IRV and CLLN so avoiding this sector like plague, especially given the circumstance here.
Any good luck
Would also add on D4E point, that interserve had net debt of £700m and Carillion way more than that at point of rescue/collapse, whereas Kier has forecast net cash after sale of non core assets.
At a forward p/e of 2.5 times, a £200m debt conversion to equity would dilute by circa 60% at current market cap, which would still give a forward p/e of well below 10 and net cash. As I said, this is not a comparable situation.
You don't bag off buying shares that have no risk. Your spin on things is credible but I disagree on a few key points - time will tell which of us is correct!
Old article but I would recommend you look at this:
https://www.tussell.com/insights/is-kier-the-next-carillion
It is clear to me that Kier is no Carillion but some people have decided it is and you seem to be one of them which is your choice. I would also ask that for the benefit of other readers you consider divulging if you are long, short or have no position?
I am long from 85p.
Thanks
Thunder- it’s the nature of the sector fortunately. The profit margin is so thin that a slight delay or issue, can turn a profitable contract into a toxic loss making one overnight. The sector is plagued with losses left right centre as the focus has been on increasing turnover for decades, rather than profits. Unfortunately they cannot go from a 2-3% margin to 10% margin overnight, this is where the sector needs to collaborate and reform. This is no different to IRV or Carillion in that respect, and I certainly wouldn’t class something as HS2 as smaller value or Lower risk.
With regards to D4E don’t expect the board to loom after the interests of shareholders. As I said in my
post yesterday don’t forget they get big bonuses to get a D4E through so you where their focus will be. Furthermore it’s far easier for them to do a D4E and start from scratch, blame previous board rather try to steady fast sinking ship. If push comes (which most likeky won’t) to shove the hedge funds can just call in their loans immediately , and put the company into a pre pack admin sale. The other option is a rights issue but after the flop in December, this is off the cards. It does look like a D4E I’m afraid.
There are just too much liabilities and the demise of Carillion has added to their woes.
You say you don’t want a fire sale in assets, but unfortunately this is what they will achieve in these circumstances. No one will them good money for anything as they know Kier is in distress. This is evident in the lack of bids for Kier Living.
Well I would prefer a measured sale at best price rather than throwing off assets at distressed prices...so not bothered by delay. If you listened to the last investor call you will know that the pension liability novation requires approval from the scheme trustees amongst other things.
Well I always respect another investors view when it is as well written as that, but surely you assume a further deterioration in cash and/or profit. I don't as the composition of the order book is very different to Carillion. Projects in Kier are smaller, lower value and shorter duration, which means you can rationalise a lot quicker. HSBC rebutted the article about selling the debt - if they want the best price, why deny they are selling and starve themselves of demand? D4E is a risk but if the board are worth their money that is a last resort.
Bottom line is this:
Debt is too high.
This is not scaremongering. Look to the words of the board following the strategic review, 17th June:
"the Group today has debt levels that are too high"
The boards words. Not mine. Not scaremongering.
To that end they decided:
"Kier Living is non-core and has commenced a process to sell the business."
What has followed has been a number of statements saying that there have been "expressions of interest" and such like.
But no sale.
I think the market has bought this for a while, particularly after the "Post Close Update" in August. But since then nothing.
No sale.
It looks as though the market has called the Boards bluff here. Kier Living has not been sold and no bid has been received.
Keep seeing people puzzling that 'the SP has gone down on no news'. Well that is EXACTLY the reason it has gone down. The market wants news that Kier Living has a bidder.
Anything short of this and I expect the market to draw the conclusion that the board will have to find another way of raising cash to deal with the problem that the "the Group today has debt levels that are too high". The SP will likely adjust accordingly.
Thunder- look at my post yesterday and you’ll see why some of the shorts are closing. The similarities here are too similar to both Carillion and IRV, neither of which left any value for shareholders even though one survived. Now that hedge funds involved with the debt, it’s the icing on the cake.
You may think everything has been kitchen sinked, but people thought the sane back in December when the RI was announced. We still don’t know about what liabilities are attached here and possible further right downs, as you have to remember they are having to deliver on Carillion projects where they were a partner.
By all means buy in if you’re willing to take the gamble, but history says this will not end well for shareholders. At this point this company is just a gamble rather than investment. There will be a heavy dilution or wipeout at some stage.
Recent share price action does not inspire much confidence that Kier is turning the corner, however I ask you all this - if the situation has deteriorated or risk increased so much recently - why have the shorts halved since the full year results were announced?
Why does mass infrastructure spending announcements from the two largest political parties (and likely the next chancellor) in the exact sectors that Kier operate in (Rail, Road, Hospitals and Schools) mean this is now a bigger risk? Surely this will lower the volume risks Kier have faced in Highways?
The banks don't like the sector anymore - but with interest rates crashing down a refinance does not look out of the question - as who exactly are they going to lend to to generate returns?
Some of the scaremongering and news articles doing the rounds are plain ridiculous. I expect the recovery to continue - its a long road but they kitchen sinked the exceptional items last time around - people should not be surprised to see a profit come around sooner than many expect.
Lots of keyboard warriors sniping and trying to sound clever by pointing at a graph of the share price crashing down in the last year - in fact half of them and the analysts that write the notes don't have a clue how to read a set of financial statements. The debt facility has bags of headroom. I recently saw one analyst suggesting that there should be no net debt - do they even understand how to leverage a balance sheet to increase ROE?
DYOR but I am buying this dip and will make a fair chunk when this recovers - patience and selective hearing required.