Kier has revealed plans to sell off its housebuilding arm Kier Living, while it also planning an exit from three other business areas – property, facilities management and environmental services.
The announcement came after new chief executive Andrew Davies accelerated a strategic review of the embattled group, which has been under pressure to improve its cash generation and reduce its level of debt.
Kier identified its regional building, infrastructure, utilities and highways businesses as core areas that are expected to deliver “long-term, sustainable revenues and margin”.
But it admitted that after acquisitions in recent years, the group’s portfolio was “too diverse” and that a number of businesses are “incompatible with the group’s new strategy and working capital objectives”.
Davies plans to “fundamentally restructure” Kier, with plans to cut jobs by 1,200 in order to deliver annual cost savings of £55m from 2021.
Kier has already begun the process of selling Kier Living, the housebuilding arm, with a price tag of around £120m. It claimed it had received several expressions of interest. The sale is expected to include Kier’s interests in its joint ventures with Homes England.
Meanwhile, Kier will accelerate a reduction in its investment in its property development business, ahead of a possible sale, and will exit its facilities management and environmental services businesses “in due course”.
Job cuts
As far as job cuts were concerned, 650 full-time employees will already have left Kier Group by 30 June under Davies’ accelerated Future Proofing Kier programme, with another 550 expected to leave during 2020.
Kier also gave an update on its debt, reporting that it has committed debt facilities of £920m, while net debt at 30 June will be higher than current market expectations, with an increase in average month-end net debt to £420m-450m.
Davies said: "Since becoming chief executive on 15 April, I have visited many of our key locations and spent time with all of our businesses, meeting the leadership teams and many of our dedicated people in the process. I have also met with many of our clients. Kier has a number of high-quality, market-leading businesses, in particular Regional Building, Infrastructure, Utilities and Highways. I believe that these businesses will deliver long-term, sustainable revenues and margins and are inherently cash generative.
"As previously announced, I have been leading a strategic review which has resulted in the actions being announced today. These actions are focused on resetting the operational structure of Kier, simplifying the portfolio, and emphasising cash generation in order to structurally reduce debt. By making these changes, we will reinforce the foundations from which our core activities can flourish in the future, to the benefit of all of our stakeholders."
