Kier / Interserve

Well, you dont want to be in charge of finance at any of these two. Its not been a good week / year for either. Kier shares have tanked by 33% in the last week where as Interserve’s share price has been on a steady decline since the spectacular collapse of Carillion. So what is going on?

Both these firms are massive. Kier turnover around £4.4bn and Interserve turnover around £3.5bn. So is it a case of being too big? Or not managing their cash properly, or losing large amounts of money on £200m+ projects.  What is it?

I would put the main reasons down to this;

1 – Massive pay-outs for Directors

2 – Lack of Accountability of Senior Managers / Directors

3 – Poor internal reporting / Covering up of ‘holes’ / Complacency

4 – Withdrawing of funding

There was an interesting article in CityAM a couple of days about the financing of Kier;

http://www.cityam.com/269983/kier-shares-plummet-asks-shareholders-264m-slash-debt

I am no financial wizard but when Hedge Funds start shorting (or essentially gambling on the value of your shares) then you know the ride ahead is going to be rough. I have also read that the City is becoming increasingly wary of investing in Construction full stop. Insurance companies are also having a pop at Construction as it is becoming a riskier investment.

I am still confused as to how the City views net debt but should either, or both, of these companies fail then the ripples in the pond will be massive. To paraphrase Oscar Wilde; To lose one company is a misfortune, to lose two can be seen as carelessness.

So as the banks took a battering a decade ago is it time for the same to happen to Construction and we start seeing the emergence of smaller less volatile companies. Which in fact are generally more volatile due to their size?

Or are the likes of MACE and McLaren the new business norm, or will they too have their time in the financial limelight and become headlines in CityAM