Kier (KIE) is doing a lot better than headline figures at the half-year mark suggest; add back amortisation, together with costs associated with the Mouchel acquisition, and underlying operating profits were up by more than a quarter to £57.1m.
The construction division, which accounts for nearly half of group turnover, delivered record growth, with revenue up by 15 per cent at £997m, while the £3.5bn order book means that it has already secured all the targeted revenue for the full year. The revenue stream is extremely diverse, covering public sector projects as well as office construction, motorways, nuclear work, rail, energy and utilities. New business wins are expected to be secured as spending on transport, power generation and utilities networks accelerates.
On the residential side, revenue jumped 80 per cent to £162m, with total completions up by 35 per cent at 959 units. Mixed tenure completions came to 582 units but government measures to reduce rents in affordable homes means that some schemes have been delayed as housing associations reassess their longer-term strategies.
The Services segment, which includes highways and utilities, property services and environmental work, was transformed by the Mouchel acquisition, which helped to boost revenue by nearly a half to £842m and operating profits by two-thirds to £39.9m. At £5.5bn, the order book was down slightly from a year earlier, but was as expected and reflected completion of AMP6 water and Highways England contracts. And all the targeted revenue for the full-year has already been secured. New work included a 20-month extension to highways work in Devon and Cornwall, while after the half-year end it secured a £160m four-year extension to the current Surrey highways contract.
Group finances remain in pretty good shape, and a close watch on working capital and strong operating cash conversion kept net debt at £174m, up from £141m a year earlier but including an extra £26m invested in future growth.
Analysts at Numis Securities are forecasting adjusted pre-tax profits for the year to June 2016 of £128m and EPS of 106p (from £85.9/95.6p in 2015).
| KIER (KIE) | ||||
|---|---|---|---|---|
| ORD PRICE: | 1,314p | MARKET VALUE: | £1.26bn | |
| TOUCH: | 1,309-1,314 | 12-MONTH HIGH: | 1,520p | LOW: 1,154p |
| DIVIDEND YIELD: | 4.4% | PE RATIO: | 55 | |
| NET ASSET VALUE: | 608p* | NET DEBT: | 30% | |
| Half-year to 31 Dec | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2014 | 1.56 | 27.8 | 31.9 | 19.2 |
| 2015 | 2.03 | 18.0 | 15.4 | 21.5 |
| % change | +30 | -35 | -52 | +12 |
Ex-div: 24 Mar Payment: 20 May *Includes intangible assets of £782m, or 814p a share | ||||
