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Kier has agreed to sell its housing arm for 拢110m.

The contractor, which is due to report its interim results on Wednesday next week, has been trying to get rid of its Kier Living business since summer 2019 when then new chief executive Andrew Davies decided it was no longer core.

The Kier Living business has now been bought by Terra Firma, a private equity investment firm.

Commenting on the sale in a Stock Exchange announcement this afternoon, Davies said: 鈥淭he actions we have taken over the last two years have created a strong operational platform for sustainable profitable growth and free cash flow.

鈥淭he disposal of Kier Living delivers another key milestone in the group鈥檚 strategy to simplify the business and strengthen its balance sheet.鈥�

Kier said the deal would facilitate a material reduction in its debt and reduce the 鈥渧olatility鈥� of its working capital.

In a January trading update, Kier said average month-end debt for the first half would be around 拢436m.

Kier said Terra Firma had paid a non-refundable deposit of 拢40m, held in escrow and to be released on completion.

Once Kier鈥檚 shareholders have approved the sale the housing business will be renamed Tilia Homes.

The business will continue to be run by its existing senior leadership team including the division鈥檚 chief executive David Bridges.

Guy Hands, chairman and chief investment officer at Terra Firma, said: 鈥淲e believe the business, under a new, refreshed brand, has significant growth potential, and can play a critical role in delivering much-needed housing in communities across the UK.

鈥淲ith the acquisition being equity funded, Kier Living鈥檚 ability to compete in the land market will be significantly enhanced.鈥�

In its latest annual report, published last October, Kier valued the housing business at 拢110m, a fall of just over 拢51m on the previous estimate which it said it was taking as an impairment. It said it had revised the value down 鈥渄ue to the uncertainties in the market resulting from covid-19鈥�.

Kier Living鈥檚 latest accounts for the year to June 2020, signed off just before Christmas and filed at Companies House in January, show that pre-tax losses widened to 拢89.4m from 拢6.5m last time.

It said the bulk of the loss was caused by having to write off a 拢50m loan to another residential business, Kier Caledonia Homes, because the firm did 鈥渘ot have sufficient assets to repay the debt鈥�.

But it also took a 拢22.3m hit on exiting fixed-price building contracts while it said the cost of dealing with the covid-19 pandemic had racked up a 拢4.4m bill.