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I had the joy of assisting a ftse250 company divesting one of its divisions some 10 years ago. This ended up being a PE player funding a management buy-out, which is what I’m pretty sure we will see happen to KL. That’s not an easy job as the spun-off company never was a business in its own right, and the buyer isn’t somebody who will just bolt it on to their own operation, why all sorts of business systems has to first be split down the middle, and secondly the nex business entity need to be made whole and independent. No mean feat and takes a lot of legwork. Had a competitor bought KL, I reckon the split could have been done on 4-6 months. With a PE backed MBO, it’s a very diff story, hence I reckon thats whats going on. We will see....
‘Tight rope’ ? - not overly tight. Everybody needs a haircut once in a while, and if you as most construction companies negotiate survival on just a few % of margin, all fat has to go. Comparing Kier to Carillion or InterServe is in my opinion a mistake. Yes, same type of rot, but rather different in scale.
Meta84, Ans: 1. IMO not much longer than the end of this year. Ans: 2. There is nothing. The plan that Davies announced is the only plan; options are thin on the ground therefore they have none. Sell non core businesses and assets quickly, thus endearing themselves to lenders and shareholders, cut overheads and costs dramatically whilst sharpening (driving efficiencies) the business to be competitive and profitable. Whilst not dropping the ball big time on any projects and racking up more huge write downs by being tempted to inflate their percentage completions on jobs in order to fabricate margins short term. Summary: they are on a tight rope and have to walk across. At the moment they are inching along and will not get there before someone (lenders)start to shake the line. Bold steps required now - getting those sales done.
Reorganising office space, pulling out of their central London offices and sub-letting is surely to be commended in the current environment where reducing debt requires strict cost control today not tomorrow. At last these are the difficult decisions that needed to be taken being actioned so IMO a positive. Selling KL and the commercial property division is part of the debt reduction plan and also halts a drain on cash flows were these businesses to continue under Kier. I can’t fathom why the property division hasn’t been sold yet and announced. By far the easiest business unit to value and hence a sale is not difficult to do as pricing will not be hugely different from bidders; the only real difference will be speed of execution and deal certainty and that will be exactly what any bidder will be highlighting. I assume from earlier posts that Kier BOD are under a legal obligation to report any firm offers received for these businesses as they amount to a substantial % of the company’s overall valuation so if they are sitting on a bid and not announcing it this would be the BOD playing with fire. Why they would be dragging out the sale process so much when time is literally of the essence is unexplainable. Both these business units can sell at the right price, that is without question. Trying to pretend this would not be or is not a fire sale would be delusional. However the COO in charge of these two asset sales was let go with immediate effect on the day of the AGM so the reasoning may be because the process has been miss managed? It wouldn’t be impossible. The last Kier business unit sold was 12 months ago since then zip. Getting these sales done to use a Brexit term would free up cash flow, reduce debt and free up senior executive time to focus on the bread & butter businesses.
Mupp- and what if that means debt reduction comes at a cost to shareholders? Look at what IRV shareholders demanded and what the BOD gave them. You really are a muppet if you believe shareholders interests are the priority. Reality is SHs are at the bottom of the chain.
Kier among big winners on £8bn framework Kier, Bam and Morgan Sindall are the big winners on a new £8bn national framework. The trio were the only firms to win spots on all 20 lots of the new Procure Partnerships national framework, which will be used across 10 regions in England and Wales.
Nice to see a few new doomsters appear on this chat. It seems a few people on here now either have their own agenda or limited understanding of the business groups. Making assumptions on how the sale of different business units, is just that an assumption. Whilst you need to take time to understand how a construction company works and the risks/rewards, I see know reason why they Kier not be profitable in the UK construction sector. Shareholders, and potentially banks, have demanded that the debt be reduced and I don't see anything other than Andrew Davies looking to achieve just that, reducing assets has to be a sensible target in this process? Hopefully more concrete news on the sale of Living will come out soon, but has been confirmed as progressing, in the meantime I'm pretty sure there is very little sitting around going on under the reasonably new UK MD. Full disclosure, I do work for Kier and hold shares.
Davies can't shift property. This is the same property who hid £40m of off-balance sheet debt and mis-reported it to the stock market. The contracting business has a chance (as much as any other) albeit Davies will have to succeed where Mussell and before him Sheffield failed and fully integrate the businesses rather than letting them operate in silos, with huge egos doing battle. It is like a playground. Certain contracting divisions WILL NOT speak to each other. The Services division is probably still a basket case following the big acquisitions.
The big London office has been a resounding failure as well. spent tens of millions on all singing all dancing, break out areas, ping pong tables, standing desks the whole nine yards. Took I believe 3 floors on a nice long Sale and Leaseback. 15 years ish, I heard. They've sublet half the space, they're desk sharing, and in the new year will be slinking back to their cr*ppy old west end office (another long sale and leaseback done about 7 years ago to fudge the property year end profit - classic Property) which they've been marketing but were (unsurprisingly) unable to sub-let.