UK construction, services and property group Kier will axe 1,200 jobs and sell its housebuilding division to cut its costs and stabilise the business, according to a trading update released today.
The business said 650 employees would leave by the end of June and the further 550 employees to leave by 2021, targeting a cost saving of £55m per year, as part of a strategic review.
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It will also seek the sale of its Kier Living house building division valued at £120m in June 2018 and exit from the facilities management and environmental services businesses that it operates.
Earlier this month, Kier issued a profit warning £40m below-target that sank its share price and caused alarm from analysts.
In the trading update, it referenced the reaction from the press and markets, stating that it would be able to absorb the effect of the negative reaction, despite its committed debt facilities of £920m, which mature in June 2022. The majority of its private placement debt matures between 2021 and 2024.
“While some of the recent external commentary has had an adverse effect on confidence, with a consequential impact on the Group’s working capital position, the Group’s liquidity headroom is able to absorb the volatility that this has caused,” wrote Kier.
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By GlobalData“However, it will result in reported net debt at 30 June 2019 being higher than current market expectations and an increase in FY2019 average month-end net debt to £420m-£450m.
“The disposals and other actions outlined above are expected to deliver a material reduction in the overall indebtedness of the Group. They will also reduce the historical volatility in the Group’s working capital profile.”
Andrew Davies, chief executive of Kier, said: “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.”
