Cash-strapped Kier launches break-up and cuts 1200 jobs

Struggling builder Kier will axe 1200 jobs and sell several businesses to cut swelling debts and head off growing panic about its finances.

The battered firm, whose shares have fallen by two thirds this year, unveiled an earlier-than-expected break-up today after “ongoing speculation” over its balance sheet put pressure on day-to-day finances.

The shares crashed by more than a third on Friday after reports revealed the company was plotting to sell its housebuilding division and trade credit insurers had stopped insuring subcontractors due to fears about its health.

Kier confirmed plans to offload the division, known as Kier Property, but also unveiled plans to exit property development, cleaning and waste disposals businesses.

In separate cost-cutting, around 1200 staff will leave, 650 by the end of June and 550 next year. The dividend has also been suspended for two years.

The shares fell 11%, from 130.8p to 116.5p.

“We will administer self-help to this business,” said chief executive Andrew Davies. “We will right size the cost base and we will re-architect how we run this company. At its heart there are great businesses in Kier around the core businesses.”

The group will be much smaller in future, made up of regional property, infrastructure, utilities and highways arms.

Numis analyst Howard Seymour warned the shake-up “needs to be enacted immediately, as the supply chain squeeze could accelerate from here”.

The after-effects of Carillion’s collapse have sent a chill through construction and outsourcing markets over fears others could follow. Kier blamed the ill sentiment for driving debts much higher than expected over the past month.

Customers have been delaying payments over fears it could follow Carillion, a trend which has squeezed working capital and driven up debt. At the same time, subcontractors have been demanding earlier payments due to fears around the company, leading to a two-pronged squeeze on its finances.