Fundamental Insights About the Kier Group PLC (KIE.L)

  • Mar 04, 2019 GMT
  • Team Kalkine
Fundamental Insights About the Kier Group PLC (KIE.L)

Overview

Kier Group PLC (KIE) was incorporated in the year 1992 with its headquarters in Sandy, the United Kingdom. The company engages in four division: residential, property, services, and construction. It operates across a range of sectors including education, transport, utilities, defence, industrials, power, and housing. The company operates from the United Kingdom, the Americas, the Middle East, the Far East and Australia.

Division Overview 

The property division engaged in the building development, structured finance and operates over the various sectors like commercial, industrial, retail, public sectors and leisure sectors. The residential division engaged in mixed private house building, tenure housing partnerships and its clients include housing associations, local authorities and private rented sector. The construction division undertakes the UK infrastructure, the UK regional building and international businesses. The services segment works on the local highways’ maintenance, housing, utilities, and environmental services.

Key Management

  • PHILIP COX CBE, Executive Chairman
  • BEV DEW, Finance Director
  • CLAUDIO VERITIERO, Chief Operating Officer

Financial Highlights (for the year ended 30th June 2018, £ in million)

(Source: Annual Report, Company Website)

Financial Commentary – FY18

  • The underlying group revenue in the fiscal year 2018 increased by 3 per cent to £4,220.1 million against £4,111.7 million reported last year (FY 2017), with strong performance reported in all business division except the residential division.
  • Underlying Profit from operations increased by 10 per cent to £160.0 million as compared to £145.6 reported last year, due to the targeted proceeds of £30-50 million from the disposal of non-core businesses.
  • In FY 2018, underlying profit for the year surged by 12 per cent to £112.6 million as compared to £100.1 reported last year (FY 2017).
  • Basic EPS from continuing operations increased in the financial year 2018, up by 9 per cent to 116.7 pence, as compared to 106.8 pence reported last year, with the increase driven by the vesting of a share scheme.
  • A dividend per share of 69 pence was announced, in line with the company’s policy.
  • Cash and cash equivalents reported in 2018 were £330.9 million (FY 2017: £499.8 million).
  • Total debt reduced by £94.9 million to £9 million in FY 2018, as compared to £631.8 million reported last year.
  • Shareholders equity reported in FY18 increased by £91 million to £599.4 million as compared to £508.4 million reported in FY 2017.
  • The company order book grew by 15 per cent to £2 billion in FY18 against £8.9 billion reported last year. This would indicate the strong visibility with over 90 per cent of revenues forecast for 2019.

Ratios

(Source: TR)

Ratio Commentary

  • Kier EBITDA margin during FY18 was 3.4 per cent, lower than the industry average of 5.6 per cent and 10 basis points below its FY17 EBITDA margin.
  • Company’s Net Margin of 2.1 per cent during the FY18 was considerably lower against the industry median.
  • The return on equity (ROE) is the ratio between the profit made and own funds provided by the shareholders. Kier ROE in FY18 was 15.9 per cent, higher than the industry median.
  • The current liquidity ratio is a measure to assess whether current assets are enough to pay its short-term obligations. In Kier case, the current ratio of 0.99 in FY18 was below the industry average of 1.10.
  • In FY18, Asset to Equity ratio stood at 4.69, compared to the industry average of 4.04.
  • Reported Debt-Equity ratio in FY18 was 0.91, down by 36 basis points against its previous year. The company is highly leveraged as compared to the industry median.

Stock Performance

On 1st March 2019, Kier Plc shares closed at GBp 531.50, up by 1.92% against its previous day close. During the last one-year stock have reached a 52w high of GBp 1,109.47 and a 52w low of GBp 335.00. At the closing price, the share was trading 52.09 per cent lower than its 52w High and 58.66 per cent higher than its 52w low, that’s a positive signal. Stock’s average 5days daily volume was 10.53% lower against the 30days average volume. The company’s outstanding market capitalisation was around £865.50 million and a dividend yield of 12.76%. The company’s stock beta was 1.07 which indicates that stock is more volatile against the benchmark. On year-to-date basis, stock was up by 30.27% and on a three months basis, the stock was up by 6.47%.

Growth Prospects and Risk Assessments

  • The company launched the Future Proofing Kier programme, and it would help to deliver more efficient services to clients, capitalise on growth opportunities and respond to changes in global markets.
  • The outcome of the UK referendum on leaving European Union (Brexit) could have implications on economic conditions globally because of changes in policy direction, which might in turn influence the economic outlook for the eurozone.

Conclusion

The ongoing uptrend in the company’s stock price makes Kier stock’s hot and new highs could be seen in the near term. While the business fundamentals might look decent, the group has to work on its margin enhancement, and the market can thus keep a watch on the Kier stock going ahead given the mix of sentiments.

 

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