US Edition Kier Group
£12.52 -7p
Questor says BUY
Of course, what the company does with the cash is key. Kier is looking for suitable acquisitions and yesterday revealed it has finalised the purchase of a small, but strategically significant, company.
The group said it had bought Beco Limited for £2.4m, which designs and installs renewable energy sources, principally involving solar panels.
Beco was one of the first organisations to become a government-approved installer of photovoltaic cells – and the Government is expected to launch its "green deal" in the near future, where householders are helped with funding to invest in energy efficiency and low carbon measures. It looks like a move in the right direction.
At its recent AGM, Kier said that the group has made a strong start to its current financial year, with first-quarter trading broadly in line with expectations. Almost all of the expected construction revenues in 2011 are covered by its order book and 51pc of expected orders in 2012, which provides a reassuring level of visibility.
The company's net cash position at the end of last year was £175.2m.
This should also benefit the company in an intangible way by reducing counter-party risk for clients. Customers are more likely to award contracts to companies that they feel sure will not be in financial difficulty.
The shares are trading on a June 2011 multiple of 10.5 times, falling to 9.9 in 2012. The prospective dividend yield, at 4.8pc rising to 5pc next year, is also very attractive.
The shares have been very volatile since they were first recommended at 899p on March 11 last year, but they are now up 41pc since then compared with a FTSE 100 up 52pc. The shares remain a buy.