Kier eyes end-of-year deadline for housing sale
September 24, 2019 – Analysts expect disposal to rake in up to £150m
Kier is privately hoping to wrap up the sale of its housing business by Christmas with at least three bids on the table to buy it, Building understands.
The firm has not publicly said when it wants to complete the sale by but it is believed to be working to an end of year deadline.
Analysts expect the disposal, announced in June, to raise between £100m and £150m – although broker Peel Hunt suggested it could fetch as much as £180m – with Kier last week saying in its annual results the sale was “progressing well”.
Chief executive Andrew Davies (pictured) declined to say how many firms were running the rule over the business after the first round of bidding but added: “We’re hoping [for a sale] sooner rather than later [but] it takes two to tango.”
Getting rid of the housing business, which last year saw the number of homes it built drop 6% to just over 1,900 homes, is the key to Davies’s plan to turn the business into a company focusing on building and infrastructure services work.
Building understands bidders still left in the race include an MBO while interest from a housing association remains, attracted by the firm’s affordable housing operation.
“Internally, they have an ambition to complete the deal by the end of December,” one source said. “They haven’t signed [a deal] to the point where a purchaser is carrying out due diligence.”
The sale of the 550-strong business has been complicated by the value of its landbank which, in last week’s results, Kier said it had written down from £60m to just £10m.
And the firm’s joint venture agreements, such as those with government agency Homes England, mean it needs to consult with those partners ahead of any deal.
“They have to an agreement with those housing associations because they [the HAs] won’t want any old Tom, Dick or Harry partnering with them.”
Kier declined to break down the revenue of its housebuilding operation in its latest results, instead bracketing it in its developments and housing business, which includes its property, housing maintenance and environmental services business.
This business had revenues of £940m and a £56m operating profit although the division racked up exceptional items of nearly £125m.
As well as housing, the firm is pulling out of property, FM and environmental services although Davies added: “I’m still expecting a £4bn-plus business [after the disposals].”
At £341m, the scale of the exceptional items in last week’s results caught the market by surprise and Davies admitted: “It’s not a good set of results. The big number is the exceptionals [but] they really do relate to legacy issues under which we’re drawing a big thick line.”
The exceptional items meant Kier nosedived into the red in the year to June racking up a £245m pre-tax loss on turnover flat at £4.5bn.