KIER Rights Issue

[monabri]

Just announced.

33 for 50 fully underwritten approximately £264 million rights issue

https://www.londonstockexchange.com/exc ... 87421.html

[PinkDalek]

The Company has been building its dividend cover towards a 2.0x cover target, in line with its Vision 2020 strategy. Following the Rights Issue, the Company will adopt a dividend policy which takes into account the Company's earnings, balance sheet and future investment plans and target dividend cover of approximately 5.0x underlying earnings per Share in FY19 and, thereafter, dividend cover of approximately 2.5x underlying earnings per Share.

I'm sure someone else can estimate what that all means.

[Arborbridge]

Pretty opaque.

[teecee90]

It seems the shorters got it right again …..

[monabri]

Now do I take up the RI at £4.09 per share...I'm not sure I will.

[Arborbridge]

It seems the shorters got it right again …..

Unfortunately, not a reliable guide in my view. Look at Greene King which also had a similar percentage of shares shorted at one time.

I'm glad I sold out of Kier when I did, however - though I could arguably have done it earlier. Sold at 984p, January 22nd this year when shorting was zero or close to, - although I didn't notice at the time.

Arb.

[Arborbridge]

The press release is saying, in essence: "we ran up too much debt, now we want you to help us pay it down before it bites us in the bottom (line)".

It seems as though they weren't as well run as they thought they were! Maybe they've learnt a lesson and got away with it.


Arb

[idpickering]

Kier down 31% on close. That kind of a drop, irrespective of a rights issue, would make me ill. I don't hold, but good luck to those who do.

Ian.

[Dod101]

Anything much to do with property seems to be in trouble these days, Property companies, housebuilders, contractors. Not all of course but most seem to be.

Dod

[jackdaww]

another very poor investment in a low margin contractor that i got out of some time ago.

not really a HYP candidate with a market cap not much over a billion .

[Caterham]

Been a lurker for a while but finally joined so hello to everyone!

I’m still fairly new to investing and have never held any shares subject to a rights issue before and am wondering if people can help in clarifying a few things for me.

I have read the prospectus online but still have a few questions.

Am I right in understanding that for every 50 shares I own I will be offered the right to buy 33 at £4.09?

Hence if I own 100 I would be offered 66 and so on....

If this is correct out of interest what would happen to somebody who didn’t own the required number of shares, would they simply not be offered any at the new price?

Also it says the record date was the 30/11 but then in prospectus I read it that anybody buying shares up to the 5/12 would be eligible for the rights issue. If this is the case am I right in thinking if for example I owned 100 shares at present and bought another 50 on the 3/12 I would be offered 99 new shares?

Also I trade entirely online with iweb share dealing and am currently away from my home address, is it safe to assume I will receive notification online of the rights issue offer or would I need the paper copy?

On a different note I understand the new shares will dilute the current share price which has already taken a large fall. Generally once the new rights are issued does the market price fall to reflect the dilution or generally does the fall in price at the time of announcement already reflect the new diluted price.

I,m glad this happened on a weekend and I have time to take it all and whilst I still believe in the long term future of the company I am very nervous of throwing good money after bad.

Thanks in advance and apologies for asking what might seem like basic questions to some.

[Arborbridge]

Kier down 31% on close. That kind of a drop, irrespective of a rights issue, would make me ill. I don't hold, but good luck to those who do.

Ian.

You don't mean that? - "would make you ill". If so I recommend you give up the stock market, or at least direct share investment. You are bound to suffer the occasional massive fall or even a write-off. One must develop a Zen sanguinity to such inevitability.
Knowing you, I expect it was just a turn of phrase

Arb.

[idpickering]

Kier down 31% on close. That kind of a drop, irrespective of a rights issue, would make me ill. I don't hold, but good luck to those who do.

Ian.

You don't mean that? - "would make you ill". If so I recommend you give up the stock market, or at least direct share investment. You are bound to suffer the occasional massive fall or even a write-off. One must develop a Zen sanguinity to such inevitability.
Knowing you, I expect it was just a turn of phrase

Arb.

Your diagnosis is probably correct Arb, my comment was just a 'turn of phrase'. I get that nothing is certain in investing, and one might suffer the occasional fall. Regarding the likes of Kier though, I'm more cautious where I place my bets nowadays.

Ian.

[Raptor]

Been a lurker for a while but finally joined so hello


Also I trade entirely online with iweb share dealing and am currently away from my home address, is it safe to assume I will receive notification online of the rights issue offer or would I need the paper copy?
.

Welcome. I do not own Kier but have an account with iWeb. You should be ok as long as you keep an eye on the "corporate actions" tab.

Raptor

[monabri]

Been a lurker for a while but finally joined so hello to everyone!

I’m still fairly new to investing and have never held any shares subject to a rights issue before and am wondering if people can help in clarifying a few things for me.

I have read the prospectus online but still have a few questions.

Am I right in understanding that for every 50 shares I own I will be offered the right to buy 33 at £4.09?

Yes.

Hence if I own 100 I would be offered 66 and so on....

If this is correct out of interest what would happen to somebody who didn’t own the required number of shares, would they simply not be offered any at the new price?

If the person owned 49 shares, currently, then they don't receive the rights offer.

Moderator Message:
Because of incorrect quoting, I cannot tell whose are the red comments. Please use the correct quoting procedure so that others can tell who wrote what.

The comment above is incorrect.

TJH

Also it says the record date was the 30/11 but then in prospectus I read it that anybody buying shares up to the 5/12 would be eligible for the rights issue. If this is the case am I right in thinking if for example I owned 100 shares at present and bought another 50 on the 3/12 I would be offered 99 new shares?

. If the Record date was 30/11 then I would have thought that you would have needed to have bought Kier shares a couple of days before this date. I'm guessing that the ex rights refered to as 5 Dec are for the new shares.

Why is this?well you are being offered a chance to buy a share at a 34% discount ( see below).




Also I trade entirely online with iweb share dealing and am currently away from my home address, is it safe to assume I will receive notification online of the rights issue offer or would I need the paper copy?

It would probably be done online. With my broker I receive an email along the lines of " let us know if you wish to take up the rights issue".
The broker wont be spending money sending documents to you. There might be a nominal charge if you participate in the offer of 10 quid perhaps

On a different note I understand the new shares will dilute the current share price which has already taken a large fall. Generally once the new rights are issued does the market price fall to reflect the dilution or generally does the fall in price at the time of announcement already reflect the new ...

On the day it goes live , it should be close to the Theoretical Ex Rights Price (TERP) of approx 620p. ( the offer price of 409p is a 34% discount to the TERP). The TERP calculation is based on the price of old shares of 752.5p "watered down " by the addition of new shares resulting in a share price reduction from 752.5p to 620p. The Rights Issue incentivises you to buy something theoretically with a value of 620p for 409p.

Quote from the announcement:The Issue Price represents a 34 per cent. discount to the theoretical ex-rights price based on the closing middle-market price of 752.5 pence per Share on 29 November "


I,m glad this happened on a weekend and I have time to take it all and whilst I still believe in the long term future of the company I am very nervous of throwing good money after bad.

Thanks in advance and apologies for asking what might seem like basic questions to some.

So, if you had 100 original shares and then bought 66 participating in the RI, you should theoretically have 166 shares at 620p. I'm not sure it will bounce back to 620p on the day though...unfortunately. If the " problem " is considered by the market to be resolved then maybe but......

[monabri]

When an offer is deeply discounted.(as this offer is)..it ain't good news...

[88V8]

1. Am I right in understanding that for every 50 shares I own I will be offered the right to buy 33 at £4.09?
Hence if I own 100 I would be offered 66 and so on....
If this is correct out of interest what would happen to somebody who didn’t own the required number of shares, would they simply not be offered any at the new price?

2. Also it says the record date was the 30/11 but then in prospectus I read it that anybody buying shares up to the 5/12 would be eligible for the rights issue. If this is the case am I right in thinking if for example I owned 100 shares at present and bought another 50 on the 3/12 I would be offered 99 new shares?

3. Also I trade entirely online with iweb share dealing and am currently away from my home address, is it safe to assume I will receive notification online of the rights issue offer or would I need the paper copy?

4. On a different note I understand the new shares will dilute the current share price which has already taken a large fall. Generally once the new rights are issued does the market price fall to reflect the dilution or generally does the fall in price at the time of announcement already reflect the new diluted price.

I don't hold and haven't read the details but in general:

1. 33 for 50 is just a way of expressing a round figure. It's a 66.66666% issue. There is no minimum holding to qualify. One cannot hold fractions of a share so somewhere in the small print it will clarify what happens to the cash equivalent of the fraction.

2. Usually the record date is the cutoff, but as they only announced it on the record date they are giving enthusiastic new investors the chance to get on board. Hmmm. The phrase 'fully underwritten' btw, means that they already have the necessary support from institutions.

3. Depending on the customs of your online stockbroker, you may just get a tick in the Corporate Actions box and/or a letter in the post.

4. As soon as the issues is announced, the price will fall to reflect the dilution. If it falls to that level before the announcement there has been a leak.

The price will also subject to any other considerations which would have affected the price anyway. If there were negative influences this might mean that the price could fall to a level that makes the rights issue unattractive. For that reason, it is always a good idea to keep one's decision under review until the last moment. There will be a final date by which you have to choose - 'elect' is the word - to take up the rights, but you can elect and then change your mind any time up to that date.
There is a default position if you do nothing, the default is that you do not take up your rights. In this case you will be 'diluted' that is to say your percentage ownership of the company will be proportionately reduced.

You can also opt to take up some or your rights, rather than the whole lot. This brings us to something known as tail swallowing, which involves selling enough of your nil-paid rights, to pay for taking up a proportion of your rights; this allows you a degree of participation without putting in any new cash.

V8

[Arborbridge]

V8

Have a "thank" for a nice clear explanation of the main points.


Arb

[Caterham]

Thank you monabri and 88v8. Still haven’t made my mind up what I want to do but at least have a clearer idea of the process now.

[tramrider]

The Company has been building its dividend cover towards a 2.0x cover target, in line with its Vision 2020 strategy. Following the Rights Issue, the Company will adopt a dividend policy which takes into account the Company's earnings, balance sheet and future investment plans and target dividend cover of approximately 5.0x underlying earnings per Share in FY19 and, thereafter, dividend cover of approximately 2.5x underlying earnings per Share.

I'm sure someone else can estimate what that all means.

Nobody seems to have tackled this important point, so I will have an untutored guess!

It looks to me as if they are going to reduce the dividend for FY19 by roughly the ratio 2.0x / 5.0x , so it will be down to 40% of the current level (absolute dividend and relative yield prior to the recent fall in share price). Then in FY20 it may rise back again by 5.0x / 2.5x, so back up to roughly 80% of what it was.

I think this may be what happens as the earnings per share EPS are unlikely to rise, so the dividend has to fall to give the increased cover. Also, a withholding of 60% of the dividend next year would also help to reduce the debt, the object of the rights issue.

I suspect that this explains the over large drop in the share price which seems much more than would be expected just by the price of the rights issue.

p.s. A very unhappy Kier shareholder.