Kier Group has announced it will be restructuring its business, which will involve cutting 1,200 jobs, selling off its Kier Living arm, and reducing its investment in Kier Property which “may extend to its sale”.
Recently-hired chief executive Andrew Davies has been conducting a review of the business, following news that its predicted profit had dropped by £25m, while managing a debt of £450m.
Around half of the jobs are expected to go by the end of this month, and the rest by the end of the year, with the aim of making £55m in savings by 2021. However the cost of the restructuring, largely in paying redundancy packages, is expected to be £56m.
A statement to the stock market from Kier Group said that in recent years there had been “insufficient focus on cash generation and that the Group today has debt levels that are too high”.
The review also concluded “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”.
This resulted in the decision to “substantially exit non-core activities” such as Kier Living, facilities management, and environmental services, while keeping its regional building, infrastructure, utilities and highways divisions.
Kier Living has a landbank of more than 4,000 plots, and is in several joint ventures, including with Homes England. The report said that any interests in these JVs would be sold along with the business, which has a net asset value of £120m.
Residential sites in the region include Taylor’s Green in Darwen, and Alston Grange in Preston.
The future of Kier Property is more ambiguous. While the board said that “the investment requirements of the Property business are incompatible with the Group’s capital requirements”, the response is to reduce the level of capital being invested in the business, from £180m a year to £100m, and this “may extend to its sale”.
Projects in the North West include the £200m Pall Mall being led by Kier Property in partnership with CTP and Liverpool City Council. At this stage, progress on Pall Mall is not expected to be affected by the restructuring. A spokesperson from Kier Property said “all projects are going ahead as planned”.
Aside from Pall Mall, other schemes include the delivery of 125,000 sq ft of warehouses at Winsford Industrial Estate, and 11 York Street in Manchester, an office forward funded by Aviva Investors.
Kier Property has been contacted for comment.
Following the announcement, shares in Kier Group dropped by 10% to 112p.