These half-year results from Kier (KIE) show just how difficult the construction sector continues to be, as intense competition for a reducing pool of work drives down revenues, profits and margins year on year. The UK sector has seen a 25 per cent drop in available work over the past three years and things aren't predicted to materially improve for at least another 18 months or so - although Kier expects a stronger second-half performance due to the timing of its contracts.
The group has nevertheless managed to curtail the worst of the downturn by diversifying its revenue streams and focusing more on its property and support services divisions. Kier's order books also remain healthy at £2.1bn for construction (£2.2bn in 2011) and £2.1bn for services (£2.1bn in 2011) thanks to some new project awards. This has enabled Kier to maintain its attractive dividend, with the payout covered two times by earnings and 1.3 times by free cash flow.
Looking ahead, Kier's management expects another flat to mildly disappointing year ahead with the prospect of a return to significant growth only in 2015, although that depends on the government agenda for boosting infrastructure and investment. Broker Panmure Gordon forecasts EPS of 128.5p for fiscal year 2013 and 126.5p the year after, compared with 152p in 2012.
KIER (KIE) | ||||
|---|---|---|---|---|
| ORD PRICE: | 1,295p | MARKET VALUE: | £515m | |
| TOUCH: | 1,290-1,295p | 12-MONTH HIGH: | 1,449p | LOW: 1,089p |
| DIVIDEND YIELD: | 5.1% | PE RATIO: | 11 | |
| NET ASSET VALUE: | 352p* | NET CASH: | £12.1m | |
| Half-year to 31 Dec | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2011 | 1.03 | 32.3 | 67.1 | 21.5 |
| 2012 | 0.92 | 20.9 | 41.4 | 21.5 |
| % change | -11 | -35 | -38 | - |
Ex-div: 6 Mar Payment: 17 May *Includes intangible assets of £26.6m, or 67p a share | ||||
