Kier warns of 'growing risks' as it plots £264m rights issue
Kier has secured backing to raise £264m in a rights issue to reduce borrowing as management see increased risks associated with its net debt position.
Construction & Materials
10,218.45
12:54 07/05/24
FTSE 250
20,392.11
12:55 07/05/24
FTSE 350
4,562.97
12:55 07/05/24
FTSE All-Share
4,515.63
12:55 07/05/24
Kier Group
139.80p
12:54 07/05/24
The FTSE 250 construction and services group 33 new shares at 409p per new share for every 50 existing shares to raise roughly £250m, net of fees, costs and expenses. The issue price represents a 34% discount to the theoretical ex-rights price, based on the previous day's closing middle-market price of 752.5p.
The rights issue has been fully underwritten by Numis, Peel Hunt, Citigroup, HSBC and Santander.
Although the majority of the Kier's banking facilities are committed until 2022, directors see growing risks around the company's level of debt as a number of lenders have indicated plans to reduce exposure to the construction and related sectors, while potential clients and customers are "increasingly" demanding service provider have a strong balance sheet in order to pre-qualify for the contract tendering process. Furthermore the company said it has received "increasing pressure from stakeholders" to shorten supply chain payment terms.
Kier said the rights issue would enable it to target a year-end net cash position, with an annualised average net debt below total EBITDA.
Strengthening the balance sheet would also "reinforce Kier's strong positions in its growing markets over the long-term" and allow the board to target dividend cover of five times underlying earnings per share in the current year and, thereafter, dividend cover of approximately 2.5 times.
In a trading update earlier this month, Kier said it continued to focus on cash generation and net debt reduction, expecting average monthly net debt of about £390m for the first half of full year 2019, compared with £410m for the second half of 2018.
The company also this month sold its interest in KHSA Limited to joint venture partner Downer Group for A$43.7m (£24m) in cash, to go towards cutting debt, and also won some sizeable contracts from Highways England, worth roughly £2bn over six years.