Kier is considering a sale of its Mouchel Consulting business as part of a major restructure of the group that will cost £53m in exceptional charges.
In a trading update, the contractor said it was reviewing parts of the business that had either not met their financial targets or did not provide a long-term strategic fit within the main group.
As a result, the group is prepared to sell Mouchel Consulting, which carries out infrastructure and design consultancy work and employs around 2,000 people.
It will also close down its Caribbean construction division for a one-off charge of £18m. The company said this was due to a “challenging” trading environment.
Kier’s Environmental Services business, which was incorporated into the group following its 2013 acquisition of May Gurney, has also been affected.
The business has been hit by the recent drop in oil prices and the cost of recycling, which saw the division’s revenue decline.
The contractor said it has taken a £35m provision in 2016 for the cash outflows on two environmental contracts within the division, which span eight and 10 years respectively.
Mouchel Consulting’s EBIT for 2016 was £8m, with net assets of £25m at 30 June 2016. The group is expecting to make a profit on the completion of the sale, which would be reported in 2017.
The changes will cost the business a total of £53m in exceptional charges in 2016.
The company said it had not been affected by the EU referendum decision to date, although it admitted the result had caused “some uncertainty”.
Kier’s net debt position of less than £140m at 30 June 2016 is ahead of its forecast range of £150m-£170m.
This includes the cash expenditure of £44m on the integration of Mouchel – which it acquired in June 2015 – and £25m on new systems and upgrades.
The contractor has recently raised £82m of additional finance via the Schuldschein market, which is similar to a bond but less expensive and does not need to be registered at a stock exchange.
Kier said the finance diversifies its sources of funding and provides it with long-term, fixed-rate debt, which will reduce its exposure to increases in interest rates over the longer term.
The contractor said margins in its construction division remained in line with expectations, adding that more than 85 per cent of the targeted revenue for 2017 was covered by its current order book.
Its property division has a pipeline of more than £1bn, which includes largely non-speculative schemes, while the residential business has a pipeline of more than £600m.