Troubled Kier axes 1,200 jobs and exits housebuilding
Kier will simplify its structure
Construction company Kier Group is axing 1,200 jobs in a shake-up of the business aimed at cutting £55m from costs.
Chief executive Andrew Davies’s strategic review has been confirmed that the firm would be selling or substantially exiting non-core activities including its housebuilding division Kier Living. It is also scaling back or pulling out of property, facilities management and environmental services. Kier has received interest in Kier Living from potential buyers.
Kier said the restructuring work has been accelerated over the last month due in part to the ongoing speculation regarding the group’s financial position. It aims to better allocate capital resources across the group and identify additional steps to improve cash generation and reduce leverage.
The company says it growth through acquisitions was achieved with “insufficient focus on cash generation” and that its debt levels 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 new strategy and working capital objectives.
The company will now focus on regional building, infrastructure, utilities and highways which are underpinned by long-term contracts and positions on frameworks for Government and regulated clients.
It says 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.
Kier Living is a housebuilding business which operates across England and Wales, with a principal focus on the affordable segment of the housing market. In 2018 it completed 2,042 units and in the six months ended 31 December 2018, the business completed 842 units. At 31 December 2018, Kier Living had a land bank of 4,739 plots.
The review means 1,200 full time employees have left or will leave the group, with 650 leaving by the end of this month and 550 over the next year.
The group has committed debt facilities of £920m, with its bank debt not maturing until June 2022 and the majority of its private placement debt maturing between 2021 and 2024.
Kier is in regular dialogue with its largest customers who continue to be supportive during this period of volatility. Kier understands that certain suppliers have experienced a reduction in the level of trade credit insurance available to them and the company is working with those suppliers to mitigate the impact of this.
The board is suspending dividend payments for FY2019 and FY2020 and will continue to review dividend policy for future financial periods.
Mr Davies, who has visited many of the company’s key locations and met with many clients, said: “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.”