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Kier to sell housebuilding business to fix debt problem
Construction company Kier is set to sell its housebuilding business to try to reduce its massive debt pile, it has announced.
The country’s second-biggest contractor made the announcement to the stock market today following a two-month strategic review. It also revealed that it plans to sell or substantially exit the property investment, facilities management and environmental services sectors.
This, Kier said, will result in 1,200 employees leaving the group, delivering estimated annual cost savings of £55m from 2020/21.
In future, it added, Kier will focus purely on regional building, infrastructure, utilities and highways, also retaining its housing maintenance business, which is used by a number of social landlords.
It said it will also keep its Middle East construction business.
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Kier Living, the group’s housebuilding arm, which has a special focus on affordable housing, built 2,042 homes in the financial year 2017/18 and 842 in the six months to 31 December 2018.
The group’s statement said: “Kier Living is a strong business but has limited operational synergies with other parts of the group and would require significant ongoing funding from Kier to deliver future growth.
“The board has therefore determined that Kier Living is non-core and has commenced a process to sell the business. In recent weeks, Kier has received a number of inbound expressions of interest in Kier Living.”
Kier Living has a number of joint ventures, notably including a 10-year deal with Homes England and Cross Keys Homes to build 5,400 homes. Kier said that all its joint ventures will be transferred to whoever buys the housebuilding business.
Meanwhile, Kier said that it will aim to substantially reduce the amount it invests in Kier Property, its property investment business, which also has a number of joint ventures with public bodies.
It plans to reduce the amount it has invested in this business to £100m during 2019/20. Eventually, Kier said, it may sell this business as well.
The plan is intended to deal with Kier’s committed debt facilities, which are currently worth £920m, with many of them set to mature between 2021 and 2024.
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.”
