微密圈

Just think. If Carillion had survived, then Andrew Davies would (probably) never have joined Kier.

He had been lined up to take charge of Carillion at the start of 2018 鈥� previous employer Wates had even let him leave their business a few months early in order for him to get cracking 鈥� but a week before he was due to arrive, it went down the pan 鈥� one of the biggest corporate failures in recent years.

So, instead of trying to plot a recovery of sorts at Carillion, he spent much of the next 12 months on an enforced sabbatical.

He kept himself occupied with non-executive and senior independent director roles and spent much of his time walking long-distance paths.

After the Carillion debacle, he was offered other jobs but he took the top one at Kier, attracted by the chance to turn around another well-known firm that had fallen on hard times.

More than a year had passed from Carillion collapsing to Davies joining Kier in the middle of April 2019. A few months later, presiding over his first set of annual results, he was forced to announce a 拢245m pre-tax loss. Average month-end debts would soon push towards the 拢500m mark.

On hearing this morning鈥檚 news that Davies was stepping down, one of his peers put it thus: 鈥淗e saved Kier from going bust.鈥�

Davies is a serious man and Kier needed a serious man for a serious situation. The firm had got rid of its previous chief executive after a botched rights issue appeared to seal Haydn Mursell鈥檚 fate at the firm.

Kier had got into a hole after going on a spending spree, shelling out more than 拢500m acquiring several businesses including Mouchel, May Gurney and McNicholas Construction. 鈥淭hey probably overstretched the balance sheet,鈥� Davies would say in 2021.

It鈥檚 difficult to overstate how real the threat of collapse was when Davies joined Kier. Carillion was still fresh in the memory and government, Kier鈥檚 biggest client, was spooked so much so that lines of communication were opened up with the Cabinet Office.

On his first day at the firm, Davies announced a strategic review which he said would be out that July. It was unveiled a month earlier, a sign that here was a man in a hurry with no time to lose.

It鈥檚 difficult to overstate how real the threat of collapse was when Davies joined Kier

His review included cutting thousands of jobs, moving out of its historic Tempsford Hall home, selling the housing business, shutting down non-core divisions like environmental services and closing offices. An equity raise in 2021 netted 拢241m and was done in nine hours and three times oversubscribed. The previous rights issue in late 2018 was only taken up by a third of shareholders, with the City having to take up the slack 鈥� never a good look.

Of his turnaround strategy, Davies put it like this when he spoke to 微密圈 last year. 鈥淔undamentally we changed our cost base to get margin into our operation to give us the credibility to go to the banks 鈥� and that was the grand bargain we did in 2021.

鈥淵ou need to put a plan in place which provides believability and stability. That鈥檚 what we did.

鈥淐reditors gave us time because they wanted their money back. The supply chain鈥� we paid them more progressively so they鈥檙e happy to work with you 鈥� and your employees, you give them faith.

鈥淚f you do get into these issues, you鈥檝e got to deal with them very quickly and you鈥檝e got to be very clear with all of your stakeholders what your plan is. And then you鈥檝e got to have some proof points as to why it works.鈥�

Maybe that鈥檚 why Kier survived and others haven鈥檛. With the housing business, Davies had an asset he could sell for a decent price 鈥� distressed seller or not. But his hand was stymied because he had to sell it during the covid lockdown but it eventually went for 拢110m. Davies had a plan which the City and his funders liked. Without their support, he was stuffed.

Analysts warmed to him when he arrived and they were impressed by his vision, outlined in his review, and grasp of detail. This is what Kevin Cammack, then an analyst with Cenkos, said of him in March 2020. 鈥淚 think he is very able. He does know the business and what needs to be done. People feel comfortable with him and he鈥檚 a man you can have a bit of faith in. He seems to get his hands dirty and people like that. The previous management were found wanting on the detail and nitty-gritty of running the business.鈥�

In some ways, his successor has been hand-picked since he arrived six summers ago. Stuart Togwell would become part of a revamped senior leadership team, swapping Wates, where he spent more than three decades, to take up the group commercial director role at Kier. Davies needed people he could trust if his plan was to work and recruiting Togwell was his first big move.

Others would follow including chief financial officer Simon Kesterton, Liam Cummins, who joined at the start of 2020 after 15 years at Laing O鈥橰ourke, to head up his construction business, and a new chairman, Matthew Lester, who also arrived in 2020, and was a former group chief financial officer at Royal Mail.

It was all part of the rebuilding process and sent the message loud and clear: this was a new Kier and things were going to be different.

With Togwell, Kier gets familiarity. 鈥淭he CEO retiring should not come as a complete surprise, with an internal candidate supporting likely continuity for the group,鈥� was broker Investec鈥檚 take on it all.

This was a new Kier and things were going to be different

Davies has not said what he plans to do next, other than that he is retiring. No doubt he will spend more time walking, ticking off long distance paths, and spending more time on his bike. But non-executive positions surely await.

Since he arrived, Kier has returned to the FTSE 250 list of the biggest quoted companies and begun paying out dividends for the first time in six years. The firm is expected to have wiped its debt clear some time in the first half of next year. In short, it has rebuilt its reputation.

A few months after Davies joined, Kier鈥檚 share price hit a 23 year low, falling to 160p. Last night, its shares closed at 210p a rise of close to one third. They actually fell in early trading this morning, despite a positive trading update. The impact of Davies going, no doubt. Carillion鈥檚 loss has very much been Kier鈥檚 gain.