Bitter blow for Woodford as Kier crashes again: Construction group may launch cut-price sale of its housebuilding branch to pay off debt
- Troubled construction group’s share price fell by over a third this week
Kier shares have tumbled to a record low in yet another devastating blow for beleaguered fund manager Neil Woodford.
The troubled construction group’s stock crashed by more than a third, amid speculation that Kier may launch a cut-price sale of its housebuilding branch to pay off debt.
It is another setback for Woodford, who owns 15.9 per cent of the company. As Kier crashed by 35.5 per cent, or 72p, to 130.8p yesterday, wiping £116.7million off its market value, Woodford’s stake slid by £17.9million.
Bad to worse: Beleaguered fund manager Neil Woodford owns 15.9 per cent of construction group Kier which has crashed by more than a third
It is the second time Kier has suffered a sharp price fall, after diving 41 per cent on Monday last week as Woodford’s woes began.
Kier is said to have sounded out advisers regarding a potential sale of its housing division for between £100million and £150million.
But the tumbling share price suggests investors were hoping buyers would stump up more for Kier Living, which built 2,042 homes last year.
Woodford is in dire straits and has shut his fund to withdrawals after a stampede for the exit.
Kier’s problems could not have come at a worse time. The fund manager first notified the market that he had a stake in the contractor in 2018. At that point, shares were trading at 919.3p.
He gradually kept building his stake, but so far Kier has refused to pay any rewards. Its value has tumbled by 85.8 per cent from when he first invested in the firm. If he sells any shares in Kier, Woodford will crystallise a massive loss.
Jason Hollands, of investment company Tilney, said: ‘The bad news just seems to keep coming for Woodford, and this is another blow for his funds.
‘Kier is fast becoming yet another problem stock.’
Kier bosses’ move to sell parts of the business, which was first reported by The Times, comes as it struggles under growing financial pressure.
Results for the last six months of 2018 show the contractor had a debt pile of £180.5million.
This month it warned profits for 2019 would be £25million lower than expected.
And this week major credit insurers Euler Hermes and Tokio Marine HCC, which offer cover for companies’ suppliers in the event that firms go bust and stop paying their bills, withdrew their cover for businesses that are supplying Kier.
This could cause those suppliers to demand instant payment of their bills, further squeezing the company.
Kier has had a roller coaster year. In December, the firm launched an emergency fundraising to generate a vital extra £250million. But only 38 per cent of the new shares were picked up.
Kier declined to comment.
Nick Train warns of trouble on tracks
Fund manager Nick Train may have escaped the crisis engulfing Neil Woodford – but even he has sounded cautious in a letter to investors.
The stock picker, who runs the £7.1billion Lindsell Train UK Equity Fund, was ‘pleasantly surprised’ by its performance in May as holdings rose 0.8 per cent, compared to a 3 per cent fall in the All-Share index.
But Train, fund manager since 2006, said: ‘While we remain optimistic about the business prospects and long-term share price potential in these holdings, it is also true we have not been adding much to them of late.
‘We have to state the obvious: it would not at all be a surprise if such a highly concentrated portfolio that had performed well embarked on a period of poor performance at some point.’