Kier buys £23.5m landbank from regional housebuilder

Contractor Kier has bought the £23.5m landbank of Ashwood Homes, a regional housebuilder operating in Lincolnshire and Cambridgeshire.

The sale also includes work in progress and related assets.

The deal is part of Kier’s wider strategy to build up its housing division with the purchase of land in areas in which it operates.

The 389 plots will be integrated into two Kier subsidiaries, Allison Homes in Lincolnshire and Twigden Homes in Cambridgeshire.

Kier paid £15m on completion of the deal and will pay the rest in March next year.

John Dodds, Kier chief executive said: “This is sensible way for us to buy land for the business because it is essentially an off-market deal. There are some pretty fancy prices bid and paid in the open market.”

He said the company was looking out for similar off-market deals.

He said the construction side of the business was Kier’s “engine room” but housing was significant in terms of profit.

The company is expected to secure around 1200 completions for the year ending 30 June, about 4% more than the previous year. “We have a construction business of more than £1bn, with low margins,” he said, “but we put that money into the housing business, which consumes cash but makes profit.”

Dodds said despite the fact that contractors and developers such as Laing O’Rourke and Heron International were attempting to enter the housing market, he was not concerned that the market would be flooded by rivals: “I think the big volume boys are en route to more consolidation.”

He said his major concern was the economy.

Alastair Stewart, analyst at Dresdner Kleinwort Wasserstein, said that the Ashwood Homes acquisition was a "smart deal". He said it was "unlikely to impact numbers in the short-term but should be a low-cost boost to the landbank". "Although we remain concerned about the housing market, we believe that buying decent sized parcels off-market at reasonable prices reduces risk considerably."

In April, Robert Gregory, head of Kier’s housing division, resigned from the board. A replacement has yet to be appointed.