April 15, 2019 / 6:42 AM / 7 months ago

Kier's new boss to lead strategy review

(Reuters) - British construction company Kier Group said its new boss Andrew Davies would lead a strategic review into ways to cut debt and simplify its structure, as it tries to dodge the problems that have toppled others in the industry.

In a statement issued on the day Davies took office, Kier, which builds and maintains highways, railway tunnels and houses, said the review would also look at how it uses capital and would seek additional steps to improve cash generation.

Conclusions of the review will be announced in July, Kier said on Monday.

Davies, who worked with defence group BAE Systems for 28 years in many senior roles, had been due to take over as CEO of Carillion before it collapsed in January 2018.

He was announced as Kier CEO in March after Haydn Mursell quit in January, a month after many of the company’s shareholders snubbed a new issue of stock.

Kier, whose shares fell more than 60 percent in 2018, has a market value of 564 million pounds ($739 million). Its shares were 4 percent higher at 362 pence by 0844 GMT.

Britain’s construction industry has been under pressure particularly since the collapse of Carillion, which forced regulators to tighten rules for private companies operating in the public sector.

The failure in March of Interserve, provider of public services from cleaning schools to building bridges, further highlighted problems in the sector.

Kier, which has contracts for major construction projects including London’s Crossrail rail link, ended 2018 on a sour note, as investors took up just 38 percent of its share issue.

Growing pessimism among bankers, who were cutting exposure to the industry after the collapse of Carillion, hit Kier’s share issue plan.

UK outsourcers reeling after high profile collapses: tmsnrt.rs/2XePQ0i

In March, Kier reported a 22.9 percent jump in average month-end net debt, partly due to a previously disclosed accounting error, and emphasised the need to rein in spending to avoid the fate of collapsed rivals.

Kier’s debt at the end of 2018 was 180.5 million pounds, down from 624 million when it announced the share sale last year.

Before Monday’s announcement, Kier’s combined credit score - which measures how likely a company is to default in the next year on a scale of 100 (very unlikely) to 1 (highly likely) - was “5”, Refinitiv Eikon data showed.

Kier, which last month reported a 14.5 percent slump in first-half underlying earnings, has been cutting costs and is looking to sell non-core businesses as part of a strategy to boost profits.

Reporting by Noor Zainab Hussain in Bengaluru; Editing by Bernard Orr and David Holmes

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