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Andrew Davies has one or two things that he wants to get off his chest. The industry is not broken, as others have claimed, and it鈥檚 just not true that the industry can鈥檛 build large projects.

鈥淭his industry is absolutely fine,鈥� Kier鈥檚 chief executive says. 鈥淚 do get a little bit irritated. This industry is not broken. People should stop saying that. I get frustrated by people saying this stuff because it鈥檚 simply not true.

鈥淲e鈥檙e trying to attract people into the industry, trying to portray it as a great industry with career prospects 鈥� and there are great career prospects.鈥�

It鈥檚 a really good time to be a tier one contractor in the UK now. We have stability with the government, we鈥檝e been through the Budget

He goes on: 鈥淭hese bland statements, 鈥榯he industry is broken鈥�, it鈥檚 simply not true. The proof points are our performance, Morgan Sindall鈥檚, Balfour Beatty鈥檚, I would suggest.

鈥淚 would say it鈥檚 a really good time to be a tier one contractor in the UK now. We have stability with the government, we鈥檝e been through the Budget. There are lots of known knowns now, as opposed to unknown unknowns.

鈥淵ou look at our recovery, look at Morgan Sindall, Balfour Beatty. Look at the public companies who are contractors for government and the responsible way the big three are driving performance. This industry is absolutely fine.鈥�

What about the county鈥檚 perceived problems building large-scale contracts? 鈥淧eople jump to conclusions about large projects. 鈥楾he UK can鈥檛 do it.鈥� Not true.

鈥�Look at the Elizabeth line 鈥� it was a massive success. Yes, it had its issues and there鈥檚 a lesson to be learnt, no question about that in terms of systems integration. HS2 needs to learn those lessons. Look at what we鈥檙e doing at Hinkley. But we do have to stop this dismal language that the industry is broken.鈥�

Davies is not one to lecture or court the limelight, but he speaks from a position of strength, having painstakingly brought Kier 鈥� one of the 鈥渂ig four鈥� UK builders along with Balfour Beatty, Morgan Sindall and privately-owned Laing O鈥橰ourke  鈥� back from the abyss over the past few years. And that makes him well worth listening to.

Before arriving at Kier, he had been due to take up the post of Carillion chief executive 鈥� his previous employer, Wates, had let him go early in order to help out their teetering rival 鈥� but a week before he was due to start, Carillion went bust. Carillion鈥檚 loss, then, was very much Kier鈥檚 gain.

The company鈥檚 woes came hard on the heels of the Carillion collapse and at his first annual results presentation with Kier, Davies was forced to preside over a 拢245尘 loss for the year to June 2019. At his most recent one, in September this year, he was able to say that the firm鈥檚 recovery was complete, the symbol of which for many was the payment of its first annual dividend in six years.

The firm鈥檚 average month-end net debt at one stage stood at close to 拢550m,  but it has since been hacked down to 拢116尘. Analysts are expecting the company, which returned to the FTSE 250 list of the UK鈥檚 biggest quoted companies earlier this year, to return to a net cash position by early 2026.

Last week, in a trading update, Kier said it expected a 鈥渟ignificant improvement鈥� on the debt this current financial year.

鈥淲ith Kier, I got in early enough to stabilise things,鈥� Davies says. 鈥�The share price had collapsed, basically. Confidence was shot at that point.鈥�

Within the space of a few weeks towards the end of 2018, the firm had dropped out of the FTSE 250 and bungled a rights issue to tackle its mounting debt. It was not fully taken up, leaving City institutions to pick up the slack.

They were trying to overgrow the business, acquiring companies using the balance sheet to do that

These setbacks eventually forced the board to act and chief executive Haydn Mursell went at the start of 2019 after four years as boss.

Under Mursell, the firm had gone on a spending spree, which left it with a near 拢400m debt pile from the cost of the acquisitions. May Gurney cost 拢221m, highways engineer Mouchel cost 拢265m and utilities contractor McNicholas, also known as Green Macs, was rumoured to cost a further 拢15m-拢20m.

On his first day in the job in April 2019, Davies ordered a strategic review of the business. He says of the situation he inherited: 鈥淭hey were trying to overgrow the business, acquiring companies using the balance sheet to do that. They were not well integrated.

鈥淭here was northing wrong with the operating businesses in Kier. They just needed, frankly, to be tightened up and run properly.鈥�

>> See also: Kier debt: how can a new boss restore its fortunes?

>> See also: Man with a plan: How is Kier faring under Andrew Davies?

>> See also: New phase begins at Kier as confident Davies looks to future after travails of past

So he put a plan in place which, bit by bit, saw a refinancing, its housing business sold, non-core divisions like environmental services shut down, problem contracts worked through, offices closed and staff numbers cut.

鈥淜ier was paying its supply chain later than it should have been,鈥� Davies says. 鈥淭hat was one of the first things we sorted out. You have to get a supply chain that wants to work for you.鈥�

A second equity raise in 2021 brought in 拢241m, Kier Living went for 拢110m, a host of businesses shut down 鈥� 鈥渨e exited a lot,鈥� Davies admits 鈥� and problem contracts were dealt with. 鈥淲e had some poor quality contracts because discipline had gone. It was not a well-run company.鈥�

Among its problem jobs were the Broadmoor hospital scheme, the Mersey gateway bridge and a hotel project in the Caribbean. 鈥淲hat we were doing building a hotel in the Caribbean is beyond me,鈥� says Davies, aghast. 鈥淭here was a whole set of smaller projects that, when added up, were significant.鈥�

Closing or selling off bits of the business took revenue down by around 拢1bn. 鈥淲e took the cost base down further and faster as a percentage,鈥� Davies says.

When he arrived, Kier鈥檚 workforce was around 19,000 people. Today it is nearer 10,000. While staff at the non-core business were TUPE鈥檇 across to new employers, the firm made around 1,700 staff redundant as well.

This included hundreds of staff at its former headquarters, Tempsford Hall, its historic home of more than 50 years which it left in 2020. 鈥淚 think I went there twice,鈥� Davies says.

The firm still owns the country house near Sandy in Bedfordshire 鈥� which once had 800 of its staff there 鈥� but now leases it to other businesses.

The redundancies saved over 拢100m. 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�

He says the steps taken to fix its balance sheet in 2021 led to clients coming back. 鈥淚t鈥檚 no coincidence that at that point in time our order book absolutely rocketed because people returned to Kier. That鈥檚 what happened.鈥�

London is a minority [of our work] but it鈥檚 deeply important to us and we value those clients enormously

Davies adds that he was in regular contact with the Cabinet Office as soon as he began righting the ship. 鈥淲e [later] got letters from very senior Cabinet Office officials saying how pleased they were when we did the [2021] equity raise and restored our balance sheet to health.鈥�

Around 70% of its income, which stood at 拢4bn in the year to this June, is from the government. A further 23% is from regulated industries, such as water, with the remainder from the private sector 鈥� including its work for clients such as Derwent and Stanhope in London.

鈥淭hey鈥檙e top-quality developers,鈥� he says. 鈥淟ondon is a minority [of our work] but it鈥檚 deeply important to us and we value those clients enormously. To have a good quality business in London, you need a good mix of public and private.鈥�

But Kier鈥檚 mainstays are public sector jobs like schools, hospitals, defence, water, roads, rail. 鈥淲e鈥檙e the biggest supplier to government in the UK. [With the Budget] the government has put certainty into our marketplace.

鈥淗ospitals, schools, defence, justice 鈥� our end markets have all been mentioned. There is loads to go at.鈥�

At last week鈥檚 trading update, Kier said its order book stood at 拢10.9bn, with 95% of its revenue in its current financial year already secured.

One area where Davies wants to see Kier get into more is property. 鈥淏ecause of the issues Kier had, we鈥檝e been unable to allocate the capital to it. But, by generating strong cashflow, you can allocate more money to it.鈥�

Its property business buys up land for developments such as residential, logistics and offices. It either flips the land to another developer or builds it out.

鈥淲hat we don鈥檛 do is hold onto land. We鈥檙e not a property company,鈥� Davies says.

Nor does it automatically follow that Kier鈥檚 construction divisions will be whistled up to build new homes or offices. 鈥淲e don鈥檛 use our property business to feed the other businesses.鈥�

He is expecting group revenue to grow by something like 5% every year, which on a 拢4bn revenue is 拢200m and more again as income goes up. 鈥淵ou can only grow as fast as your markets grow.鈥�

Nevertheless, he is pleased with what he has seen in the Budget. 鈥淲e鈥檝e got a stable government who have set out their priorities and how they鈥檙e going to pay for it. If you look at where I am as a company, I鈥檝e got a sustainable growth strategy and a client who has got a demand for what I do.鈥�

Kier has been working on a 72km long stretch of railway on HS2 and Davies has some timely words on how the industry 鈥� and especially clients 鈥� deal with risk and risk transfer in general.

鈥淭he country decided it wanted to build a high speed rail network, and to do that it had to let a certain type of contract,鈥� he says. 鈥淥therwise, it could let a contract that was risk bearing onto the industry.

鈥淏ut, frankly, the industry couldn鈥檛 take those risks because there were so many unknowns 鈥� so many planning unknowns, so many environmental unknowns, inflationary unknowns, protestor unknowns, ground condition unknowns.鈥�

The project has come in for criticism for its spiraling costs, with the implication that contractors are picking up easy money. Davies says this is unfair and, anyway, contractors can鈥檛 just be expected to take on a heap of risk and told it鈥檚 all on them if it goes wrong.

鈥淲hat the UK needs to learn to do is manage within an affordability environment and not announce these projects too early without due diligence and what the cost may actually be. We have to learn to manage expectations of cost and risk, that鈥檚 the issue we鈥檝e got to learn better as a country.

鈥淵ou can鈥檛 just dump risk. You think you鈥檙e transferring risk but, of course,  you鈥檙e not because it will come back to you.

鈥淚f you want to transfer risk onto industry, that鈥檚 fine. But industry may price it as such that it鈥檚 unaffordable because it has to mitigate against all those risks and it may not understand all those risks.

If you look at the public companies who are contractors for government and the responsible way the big three are driving performance, this industry is absolutely fine

鈥淎s a chief executive of a public company, I wouldn鈥檛 accept unbounded risk. I wouldn鈥檛 do it. I鈥檒l only get into fixed price contracts when I understand the risk and, by the way, in [Kier] construction we鈥檙e overwhelmingly on fixed price contracts. But 99% of them we get there through a negotiated process of risk allocation.

鈥淯ltimately, if the risk breaks [a] company, it goes straight back to the client with bells and whistles, because they then have to start again.鈥�

Davies is speaking two months after ISG sank into administration, the most high-profile collapse of several in the past year or so 鈥� including Buckingham last September which saw Kier pay 拢10m for its rail business and 180 staff. Kier has taken on around 70 former ISG staff and is being sounded out about picking up some of ISG鈥檚 government contracts. 鈥淎bsolutely no private,鈥� Davies adds.

鈥淭his is not a systemic failure,鈥� he says of ISG鈥檚 implosion. 鈥淭his is a company failure. This industry is not broken.

鈥淚f you look at the public companies who are contractors for government and the responsible way the big three [Kier, Morgan Sindall, Balfour Beatty] are driving performance, this industry is absolutely fine. These are responsible companies with excellent balance sheets, excellent liquidity, they pay their suppliers on time. My point is that the government has now 鈥� in those three 鈥� a totally reliable, trustworthy set of suppliers.鈥�

He ends by reeling off a list of figures: there are around 35,000 people working on its sites every day; it has around 1,000 contracts of which 400 will be live. 鈥淚t鈥檚 an awful lot,鈥� he admits.

But Davies, who turned 61 last month, says he is undaunted and, Kier shareholders might be relieved to hear, is not going anywhere. 鈥淚t鈥檚 still huge fun, it鈥檚 a good time to be in this industry,鈥� he says. 鈥淚t鈥檚 a great time to be a CEO of a tier one contractor, it really is.鈥�

Kier鈥檚 recovery, he underlines, is complete. 鈥淚t鈥檚 all behind us,鈥� he says of the turnaround.

Davies鈥檚 attention has now turned to shaping the future, rather than fixing the past. But he is not taking his eye off the ball.

鈥淵ou鈥檝e got to consistently deliver, deliver, deliver. It is now all about performance. Keep recruiting great people and keep training great people 鈥� it鈥檚 common sense.鈥�