Kier Group is to cut 1,200 jobs, suspend dividend payments and sell its housebuilding and property businesses as it struggles with soaring debt levels.
The results of the company’s Future Proofing Kier review had been due to be announced at the end of next month. But Kier, which has seen its share price plummet in recent weeks, said it had been “accelerated over the last month due in part to the ongoing speculation regarding the group’s financial position.”
Around 650 of the planned 1,200 jobs will be lost by the end of the month, with a further 550 expected to go by the middle of next year. The firm, which currently has around 20,000 staff, said the cuts would mean annual savings of £55m from 2021, although the redundancy programme will cost £56m to carry out.
The firm said the decision had been made because the firm had bought too many businesses in recent years and that it’s new strategy will see the company focused on regional building, infrastructure, utilities and highways.
Kier said: “The performance of these businesses is underpinned by long-term contracts and positions on frameworks for government and regulated clients. 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. The strategic review concluded that 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.”
The group estimated its average month-end net debt at £420m to £450m – higher than the £360m expected by analysts. It also said two insurers had stopped providing trade credit insurance to some of its subcontractors and that it was working with its suppliers to mitigate the impact.
Kier had previously shocked the markets with a £25m profit warning earlier this month and its shares had fallen a further 12% today, after crashing 35% on Friday, as it’s financial struggles drew comparisons with Carillion, its former rival that collapsed last year.