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Sure sign they are almost out of working capital. I expect they are getting squeezed both ends, clients not paying, work slowing down on site and subbies desperate for cash for work done.
Worked for this campany for nearly 10 years, quite a long time ago now. Absolutely gutted to see the management have made such a mess of things. Today's results may as well be a "for sale" sign hung outside the head office. Timing couldn't be worse given the macro environment and the sp got crushed. Probably going to get another hammering tomorrow and rightly so.
Totally agree with what slavetothewage and jkg53 have put as well. Budget is no boost to Costain, most decent civil projects are 1-2years lead in before the contractor gets a penny. Any mega jobs you can double that. Jam tomorrow and a book runner rights issue to boot.
Get the hell out of construction.
Haathi,
I agree with quite a lot of what you have said, particularly in regards to your points around the budget. I remember the 2008 crisis and being heavily invested (for me at least) in Costain, I closely followed the promises of investment at the time. I am not sure if you remember, but there was talk of billions of pounds of "shovel ready" projects that would be used to kick-start the economy. Ultimately very little was actually realised and investment remained flat or negative. I expect this will happen all over again.
Fundamentally, Kier is in the same position as much of the larger civil contractors over the past 15 years that I have followed the market. Too much debt and wafer thin margins. They may well win a bumper set of projects but the order book is not their problem. They simply don't make money on the jobs they have. Unless they finally sell Kier living, they will need another way to reduce their debt, which is realistically only some form of negotiation with creditors leading to dilution.
Day traders will continue to make great money on the share, that's not my game. Given the current turmoil I am holding cash only.
Would agree with this. Certainly short to medium term, govt funding will be diverted from all areas to health service. Banks likely to tighten lending criteria in an economic squeeze so I expect those heavily in debt to suffer.
Felieb,
I'd say the second sentance is still accurate. IRV has no rights issue option on the table and still has a debt of way over £600m. IRV has less assets as I believe Kier have a larger land/property bank. I'm not sure where your figure of £624m for Kier comes from as I think they were substantially below this before the proceeds of the rights issue.
As far as the bank support, Kier had only just reported that they had a credit facility of upto £760m until 2022 in their half year results. This is why I am saying the support was pulled from them very suddenly.
If the banks want a D4E swap on IRV then the dilution will be massive. To clear a debt of £600m is going to require wiping out all the existing shareholders. I'd be inclined to expect their first move would be profitable sections to be sold off (like RMD) and the core business substantially downsized.
Lastly, I keep seeing people on here stating this is a profitable company, but they made a half year loss of £6m as far as I see. Construciton is in for a very rough ride in the next year or so.
They lent money to them, but a bank can and will draw the line at some point. Loans can be called in or not extended. Kier had banking facilities withdrawn at virtually no notice it would seem. Interserve are in a worse financial position then Kier. Politically they are probably better off as they do more govt outsourcing and Carillion has set a precedent that contractors going under cost the client a lot as well.
The whole construction sector and particularly those with exposure to support services/FM are going to be seriously under pressure for all of 2019. If you have read the interview with the Kier CEO then it is hard to see how at least another couple aren't going to end up in the same situation as IRV.
https://www.constructionnews.co.uk/companies/contractors/kier/kier-ceo-four-rivals-facing-same-credit-cuts/
With such poor sentiment, what is to stop the banks walking away and letting IRV go to the wall? They are not interested in lending to a construction company, they surely have no interest in running one. I'd say its not a sector for private investors to be in unless they have specialist knowledge and can afford to lose on a speculative punt.