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Reaction to the release of the Kier Group’s (LSE:KIE) interim report for the first six months of their fiscal year was somewhat mixed this morning. Share price was down 8.4% and 125.00 pence per share although the actual results were quite positive. Shares were trading at 1,365.00 pence on very light trading as of 1:40 pm GMT.
Interim Results
The Board announced that although total revenues for the period had declined 4.6% to £1.04 billion, but their pre-tax profits increased 8.6% from £31.3 million in 2010 to £34.0 million as at 31 December 2011. Given the excellent results, the company increased its interim dividend from 14.0pps to 21.5pps. Their property division profits increased to £10 million from the previous year’s £3.4 million. Cash on hand at year end was £131 million, down from £165 million in the previous year. However, the difference was almost exclusively due to the reinvestment of £33 million into the company.
Outlook
The slightly negative market response is most likely based on the company’s forward looking statements, which, beyond the short term, the company sees as challenging in the UK construction market. The company statement indicates a realistic outlook of the potential negative impact of expected “external macroeconomic factors” and eroding confidence of the private sector towards investing. For the immediate short term – the balance of the current fiscal year – the board expects the company’s good performance to continue. In fact, Kier has more than £4 billion in secured and probable work moving forward. It is entirely possible that the wording of headlines reporting the company’s interim results could be negatively influencing retail investors, as the majority of news entity headlines emphasised the company’s conservative outlook versus their positive results.
CEO Comments & Company Plans
CEO Paul Sheffield clarified the Board’s outlook saying, “As we look to the medium term, conditions continue to be difficult in the UK construction market and we are inevitably seeing greater pressure on our current operating margins. We will, however, continue to focus on those markets where we see the most potential for future growth.”
The environmental business sector seems to be the best opportunity for short term growth. Sheffield noted that there also seems to be growing opportunities in the infrastructure business, “However, budget pressures on local authorities mean that some opportunities are taking longer to materialize and are often reduced in scale. In maintenance, it is now more likely that it will be 2014 before we see the financial impact of a number of these public sector opportunities.”
Company Spotlight
With over 11,000 employees and 50 regional offices worldwide, Kier offers a complete spectrum of industrial engineering and construction solutions for a broad array of market sectors. The company applies its expertise in major projects such as airport construction, and infrastructure development to more “modest” projects such as home construction, facilities management, and building restoration.
References
↑ Official company history
↑ Construction Enquirer
↑ Official company information
