To boost cash generation and reduce debt, large UK contractor Kier Group is to shed 1,200 jobs and sell off its housebuilding business, Kier Living, it said this morning.
It will also exit other sectors that have "limited operational synergies" with its core business, naming property development, facilities management and environmental services as units to discontinue over time.
The housing maintenance and Middle East construction businesses are being kept.
Around 650 full-time employees will have left Kier by 30 June, the company said, with 550 more expected to leave in 2020.
Kier also revealed that net debt at 30 June would be higher than current market expectations. It said average month-end net debt in 2019 was £420-450m.
The Board is suspending dividend payments for this year and next.
In future Kier will focus on regional building, infrastructure, utilities and highways.
These enjoy "long-term contracts and positions on frameworks for government and regulated clients", Kier said.Â
"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."
Initial market reaction was nervous, with Kier’s share price falling by just under 13% to 115p by 9.05am today. This followed a plunge of 35% on Friday, 14 June after The Times newspaper reported that it was considering selling Kier Living.
The newspaper also reported that trade credit insurers Euler Hermes and Tokio Marine HCC had withdrawn from insuring Kier’s suppliers, which would place extra pressure on the group’s supply chain.
Today Kier said it "understands that certain suppliers have experienced a reduction in the level of trade credit insurance available to them; Kier is working with those suppliers to mitigate the impact of this."
Today’s moves are part of a strategic review launched by chief executive Andrew Davies when he took over the post in April.
He said the strategy aimed to deliver annual cost savings of £55m from 2021.
Kier also sought to quell doubts about its financial position, blaming "recent external commentary" for eroding confidence.
It said the company had 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.
It the group’s "liquidity headroom is able to absorb the volatility" of its debt position.
Kier Living built 2,042 units in 2018, and had a land bank of 4,739 plots as of 31 December 2018.
Kier called it "a strong business" but said it had "limited operational synergies" with other parts of the group, and would require "significant ongoing funding" to deliver future growth.
It added that, in recent weeks, it had received "a number of inbound expressions of interest in Kier Living".
Image: In future Kier will focus on regional building, infrastructure, utilities and highways (Kier Group)