Kier (KIE) is building on resurgent growth in construction markets. Revenues for the 2014-15 financial year are already in the bag thanks to a 5 per cent jump in the order book to £6.5bn, with the lion's share of orders coming from the group's transformed services division. This part of the business, which includes housing, highway maintenance and facilities management, secured £3.9bn of contracts from the likes of Anglian Water and Thames Water as it reaped the benefits of last year's acquisition of May Gurney.
Underlying operating profit remained flat at £44m in the first half, despite an 11 per cent increase in revenue. Management wants to achieve double-digit compound annual growth in operating profit through to 2020 - which will require maintaining margins at the very least - yet there were a few setbacks to contend with at the half-year stage.
For example, underlying margins in services, the group's most profitable division, fell 10 basis points to 4.2 per cent due to the mobilisation of larger, long-term contracts and the expensing of bid costs for recent wins. Chief executive Haydn Mursell is nonetheless confident that this segment can hit its full-year margin target of 5 per cent.
Mr Mursell points to the quality of recent contract wins as evidence of the improving economic backdrop and a reminder of how Kier's integrated service package is starting to come together. Broker Liberum forecasts full-year pre-tax profit of £83.9m and EPS of 120p (from £73.1m and 107p in 2013-14).
| KIER (KIE) | ||||
|---|---|---|---|---|
| ORD PRICE: | 1,716p | MARKET VALUE: | £952m | |
| TOUCH: | 1,715-1,723p | 12-MONTH HIGH: | 1,903p | LOW: 1,374p |
| DIVIDEND YIELD: | 4.3% | PE RATIO: | 35 | |
| NET ASSET VALUE: | 512p* | NET DEBT: | 55% | |
| Half-year to 31 Dec | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2013 | 1.43 | 6.30 | 7.60 | 22.5 |
| 2014 | 1.58 | 26.7 | 37.9 | 24.0 |
| % change | +11 | +324 | +399 | +7 |
Ex-div: 5 Mar Payment: 15 May *Includes intangible assets of £325m, or 586p a share | ||||
