Kier Group Shares Drop

Shares of Kier Group (KIE.L), a British construction and services firm, fell early Monday after the company set out plans to exit non-core activities, slash jobs and deliver annual savings by 2021 following a strategic review of the business.

The Sandy, UK-based group, which seeks to reduce overall indebtedness and historical volatility in its working capital by overhauling its operations, said in a statement that its board has decided to suspend dividend payments for fiscal 2019 and 2020, and will “continue to review policy for future financial periods.”

The firm said a root-and-branch evaluation revealed that in recent years it has had “insufficient” focus on cash generation and that debt levels were “too high.” Furthermore, it said its portfolio of businesses was “too diverse,” due in part to a string of acquisitions, and that some businesses were “incompatible” with its new strategy and working capital objectives.

As a result, the group plans to simplify its portfolio by “selling or substantially exiting” non-core activities, including Kier Living, Property, Facilities Management and Environmental Services. The fundamental restructuring will reduce headcount by about 1,200 and deliver annual cost savings of roughly 55 million pounds ($69.3 million) from 2021 at a cost of about 28 million pounds during fiscal 2019 and roughly 28 million pounds in the following year.

Kier Group said it has “committed” debt facilities of 920 million pounds, with its bank debt not maturing until June 2022 and the majority of its private placement debt maturing between 2021 and 2024. It expects to report net debt of 420 million pounds to 450 million pounds as of June 30, which is higher than current market expectations.