Kier to sell off housing arm and shed 1,200 jobs
Kier Group is to cut 1,200 UK jobs and sell-off of its house-building arm as part of its plans to simplify the business and save on costs.
Outlining the conclusions of its strategic review, Kier said a “significant refocusing” of the business see the firm concentrate on its traditional core business of construction and civil engineering.
The affordable-focussed housebuilding business Kier Living will be sold while its Property, Facilities Management and Environmental Services businesses will be exited “in due course”.
Kier’s latest results revealed the group suffered a £35.5 million loss in pre-tax profits as a result of problem contracts and mounting debts, while a £40m profit warning was issued earlier this month.
The strategic review to cut debt and simplify the company’s structure was accelerated by new chief executive Andrew Davies when he joined in April.
As a result of the accelerated programme, around 650 full time employees will have left the group by the end of this month. An additional 550 are expected to leave during the next financial year.
The cuts are designed to save £55m a year from 2021 but will cost £57m over the next two years. The review is designed to bring down debt levels which have risen again to an average month-end level of £420m-£450m.
Publishing the conclusions of the review today, the firm said: “Kier has a number of high-quality, market-leading businesses, in particular Regional Building, Infrastructure, Utilities and Highways, which are valued by our customers. The performance of these businesses is underpinned by long-term contracts and positions on frameworks for government and regulated clients. Together these businesses are expected to deliver long-term, sustainable revenues and margins and, with a renewed focus on their inherently cash generative characteristics, will be the core activities of the group in the future.
“In recent years, the group has grown substantially, including through acquisitions. This strategy added a number of highly attractive businesses to the group, including Highways, Utilities and Rail. However, the strategic review concluded that, during this period, there was insufficient focus on cash generation and that the group today has debt levels that are too high. It also concluded that the group’s portfolio is too diverse and contains a number of businesses that are incompatible with the group’s new strategy and working capital objectives.”
Kier added that its new strategy for the group will:
- focus on Regional Building, Infrastructure, Utilities and Highways
- simplify the group’s portfolio by selling or substantially exiting non-core activities: Kier Living, Property, Facilities Management and Environmental Services
- fundamentally restructure the Group to reduce headcount by c.1,200 and deliver annual cost savings of c.£55m from FY2021
- embed a culture of performance excellence with a particular focus on cash generation to deliver reduced average net debt.
Chief executive Andrew Davies said: “Since becoming chief executive on 15th 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.”