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Kier launches £264m rights issue to cut debt
Social housing contractor Kier has launched a £264m rights issue in a bid to raise cash to pay off the company’s growing debt pile.
The UK’s second biggest construction firm revealed to the stock market on Friday that it needed to raise the money through issuing new shares to help accelerate its debt reduction programme.
Kier has seen its debt levels rise in the past few years, with its net debt standing at £624m as of 31 October.
The company saw its share price plummet by more than 27% off the back of the rights issue from 759p at the start of the day to 505p at the close of the day.
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Kier is a major contractor in the UK social housing sector and is currently has repairs deals with associations such as Guinness Partnership.
The company also signed a 10-year joint venture with Homes England and housing association Cross Keys to supply its 5,400 homes.
The board said it had taken the decision to take out the rights due to increased risks around the company’s net debt position.
It said the increase in risk was due to lenders reducing their exposure to the construction sector, more stringent checks by clients on contractor’s balance sheets and increasing pressure on contractors to pay their subcontractors quicker.
The company said its rights issue would help the company mitigate these risks as well as accelerate its debt reduction programme and improve its balance sheet.
The company said that despite the rights issue, its trading outlook for 2019 remained in line with board expectations and the issue was undertaken to “reinforce Kier’s strong positions” in its growing markets.
In July the company launched the ‘Future Proofing Kier’ programme which aimed to streamline the business, drive efficiencies and dispose of non-core operations as a means of reducing debt.
Haydn Mursell, chief executive at Kier, said: “There has been a recent change in sentiment from the credit markets towards the UK construction sector, with various lenders indicating that they will be reducing their exposure to the sector.
“This has led to lower confidence among other stakeholders and an increased focus on balance sheet strength. The rights issue is intended to address these issues, better position Kier to continue to win new business and further strengthen our market leading positions.”
