Kier to exit FM business

It follows a strategic review, led by the company’s recently appointed chief executive, Andrew Davies, to simplify the Group, better allocate resources and identify additional steps to reduce cash generation and reduce leverage.

It concluded that Kier’s Facilities Management and Environmental Services businesses have limited operational synergies with Kier’s core businesses, and as a result, Kier will seek to exit these businesses in due course.

The new strategy for the Group will focus on Regional Building, Infrastructure, Utilities and Highways, which are underpinned by long-term contracts. The Group’s portfolio will be simplified by either selling or substantially exiting non-core activities which include: Kier Living, Property, Facilities Management and Environmental Services.

The Group will be fundamentally restructured to reduce headcount by c.1,200 and deliver annual cost savings of c.£55m from FY2021.

In recent years, Kier Group has grown substantially, including through acquisitions.

The strategic review concluded that, during this period, there was insufficient focus on cash generation and that the Group has debt levels that are too high. It also concluded that the Group’s portfolio is too diverse and contains a number of businesses that are incompatible with its new strategy and working capital objectives.

Moving forward, Kier has said it will focus on “managing its retained businesses to deliver long-term profits and a sustained reduction in the Group’s underlying debt levels rather than targeting lower debt positions at reporting dates”.

The Group has committed debt facilities of £920 million, with its bank debt not maturing until June 2022 and the majority of its private placement debt maturing between 2021 and 2024.

Andrew Davies, chief executive of Kier, said: “Since becoming Chief Executive on 15 April, 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. 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.”