Construction giant taken on to deliver HS2 to axe 1,200 jobs

Kier Construction

The construction giant taken on to deliver the long-awaited HS2 rail link has announced it is to axe 1,200 jobs and save £55m a year.

Kier Group, one of the largest building firms in the UK, has been struggling with debt in recent months.

The struggling firm, whose shares have slumped by a third, has also announced it is to sell its housebuilding division.

Kier, who employs almost 20,000 workers, said it expected around 650 will have left the business by the end of this month with a further 550 roles going in the next financial year.

The company has been at the centre of constant speculation over its financial health in the wake of the collapse of Carillion.

Chief executive Andrew Davies has been carrying out a review of the business in recent months.

Mr Davies came from the construction group Wates in March and had been lined up to take over at Carillion before its collapse.

The company is blaming higher costs and persistent pressure on its highways, utilities and housing maintenance businesses for its tumbling share value.

The strategic review has been speeded up in recent months partly in response to the ongoing speculation regarding the firm’s financial problems.

The company said its regional building, infrastructure, utilities and highways are performing well and will be at the centre of the firm’s business in the future.

Kier has grown in recent years due to a number of acquisitions.

The strategic review found that there has been a lack of focus on cash generation and that debt levels are too high.

It also 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.

Kier is therefore today announcing a new strategy for the Group that will:

•Focus on Regional Building, Infrastructure, Utilities and Highways;

•Simplify the Group’s portfolio by selling or substantially exiting non-core activities: Kier Living, Property, Facilities Management and Environmental Services;

•Fundamentally restructure the group to reduce headcount by 1,200 and deliver annual cost savings of £55m from 2021

The firm said it has received a number of enquiries about Kier Living.

As at 30 June 2018, Kier Living had a tangible net asset value of £120m.

The value excluded certain land assets which were on the group balance sheet at £60m but which are not expected to be included in the sale perimeter of Kier Living.

The Kier Living business operates a number of joint ventures with Homes England. It is expected that any sale of the business will also include Kier’s interests in these.

The company is also considering selling off its property division.

Kier said it is in regular talks with its largest customers who continue to be supportive.

Andrew Davies said “Since becoming chief executive, I have visited many of our key locations and spent time with all of our businesses, meeting the leadership teams and many of our dedicated people in the process.

“I have also met with many of our clients. Kier has a number of high-quality, market-leading businesses, in particular Regional Building, Infrastructure, Utilities and Highways. I believe that these businesses will deliver long-term, sustainable revenues and margins and are inherently cash generative.

“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.”