The decision follows a strategic review by chief executive Andrew Davies and speculation about the company’s financial position. The review concluded that when it was growing and diversifying "there was insufficient focus on cash generation" leaving the company with too much debt. It also concluded that "the group’s portfolio is too diverse" and contains several businesses that are incompatible with the group’s new strategy and capital spending policies.
In a statement to the London Stock Exchange, Kier Group, said the board had decided that Kier’s Facilities Management and Environmental Services businesses "have limited operational synergies with Kier’s core businesses" and "Kier will seek to exit these businesses in due course".
It has started the process of selling Kier Living, which built 2,042 homes in 2018, and had "received a number of inbound expressions of interest". Any sale is expected to include current joint ventures, including with Homes England.
These include a contract to build 252 homes in phase one of The Avenue, a major remediation and regeneration project in Chesterfield, Derbyshire. Some 1,100 properties are planned to be built by 2033.
Meanwhile it will slash the money it invests in Kier Property, which delivers mixed-use developments through joint ventures with Government or regulated partners, including the Watford Health Campus, a joint venture with Watford Borough Council, and Solum Regeneration, a joint venture with Network Rail, a strategy which may lead to its sale.
The changes mean the loss of 1,200 full-time posts are being cut. The company expects to save about £55 million annually by the end of 2021.
Kier is keeping its Regional Building, Infrastructure, Utilities and Highways businesses which are underpinned by long-term contracts and positions on frameworks for Government and regulated clients.
Kier chief executive Andrew Davies said: "I believe that these businesses will deliver long-term, sustainable revenues and margins and are inherently cash generative."
He added: "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."