Construction and services firm Kier Group is to cut 1,200 jobs and non-core businesses as it seeks to turnaround its fortunes.
The company, which has been the subject of speculation over its financial health in the wake of the collapse of Carillion, launched a strategic review in April – weeks after chief executive Haydn Mursell was effectively ousted by shareholders.
His successor Andrew Davies told investors on Monday that he was taking a number of actions that would concentrate resources on core activities, simplify its portfolio and bring down debt at the same time.
The review found an insufficient focus on cash generation after years of expanding the company’s interests.
It said Keir would now focus on its regional building, infrastructure, utilities and highways arms – saying their performance was underpinned by long-term contracts and would deliver sustainable revenues and margins.
Keir said it would sell or substantially exit Kier Living along with its property, facilities management and environmental services businesses to allow a renewed focus on cash generation.
It hoped that cutting 1,200 full-time jobs across its businesses would help deliver annual cost savings of £55m from 2021.
Under an accelerated programme of cuts Kier, which employs almost 20,000 workers, said it expected around 650 staff would have already left the business by the end of this month with a further 550 roles going in the next financial year.
A capital-raising at the end of last year failed to attract enough investor demand – leaving banks to pick up the tab.
Kier said that media speculation relating to its financial position – which included claims that credit insurers were getting cold feet – had knocked confidence in the company and affected its working capital position.
It said that while its banking facilities were able to absorb the “volatility”, net debt at the end of this month would be higher than current market expectations.
The company expected average month-end net debt to come in at £420m-£450m.
It confirmed dividends were suspended for this current financial year and next.
Shares – down more than 65% in the year to date – were 3% up in early deals.
Mr Davies said: “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.”
Kier’s financial woes were partly of its own making in that an accounting error in the spring added £50m to its debt pile.