Kier to exit the housing, property investment and facilities management sectors.

Kier to exit the housing, property investment and facilities management sectors.

With the focus now on their core services Kier are moving to simplify their portfolio by selling, or substantially exiting, Facilities Management and Environmental Services as well as Kier Living. This will deliver approximately £55 million in annual cost savings by 2021 and focus on cash generation in order to reduce their average net debt.

In a surprise announcement, Kier announced that Kier Living is up for sale. This is part of the restructuring plans that will see the company move towards focussing on its traditional core businesses of construction and civil engineering.

Kier launched a strategic review last year, with around 650 full-time employees expected to have left the company by the end of this month, and a further 500 set to follow in the next financial year. The review has been accelerated since the appointment of Andrew Davies as chief executive in April this year. The conclusions of the review have been published today detailing the reasoning behind some of the big decisions that have been made:
“Kier has a number of high-quality, market-leading businesses, in particular Regional Building, Infrastructure, Utilities and Highways, which are valued by our customers. 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.

“In recent years, the group has grown substantially, including through acquisitions. This strategy added a number of highly attractive businesses to the group, including Highways, Utilities and Rail. However, the strategic review concluded that, during this period, there was insufficient focus on cash generation and that the group today 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 the group’s new strategy and working capital objectives.”

With the focus now on their core services Kier are moving to simplify their portfolio by selling, or substantially exiting, Facilities Management and Environmental Services as well as Kier Living. This will deliver approximately £55 million in annual cost savings by 2021 and focus on cash generation in order to reduce their average net debt.
Kier has realised that some of the businesses they were in, particularly Kier Living, simply took too much cash to support. This took cash out of the business and, with the contraction in the construction industry and Kier Living seeing falling revenue, it makes sense to streamline the business.

This is the same for any business, particularly in the current uncertain economic and business climate. Poor cash flow is the biggest reason for businesses failing and streamlining your business to be more cash efficient makes sense. Looking at where time, resources and ultimately money could be made to work harder for the business is a good place to start, ensuring that the business has enough cash to survive is essential.
Predicting cash flow for some SMEs can be difficult, especially if they are caught in a late payment cycle on their invoices. This can lead to unpredictability around cash flow and limit the ability to expand or reinvest in the business. It also uses time and resources that would be better used elsewhere to generate new cash streams.

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