Kier Group H1 profits and revenues rise thanks to strong housing demand
Property construction firm Kier Group saw its revenues rise 10.5% during the first half of the year driven by good performance in its property and construction divisions.
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The group decided to raise its dividend by 7% to 27p after reporting strong demand in its construction and services divisions, with order books at £6.5bn and revenues for 2015 "fully secured".
Revenues increased 10.5% to £1.57bn while profits before tax rose 323% to £26.7m, driving earnings per share to rise from 7.6p to 37.9p during the period.
Its residential division is benefiting from the UK housing shortage, the group said, with profits at £0.8m compared to £0.5m in the previous year.
Kier expects a return on capital of 15% by 2020 in the residential division, driven by a mixed tenure housing and public sector bodies investment in their housing stock.
However, Kier said the working capital environment "remains challenging" despite being more stable during the period.
The group is still in discussions to acquire Mouchel, an infrastructure and business services company, and said it cannot be certain if the purchase will be completed.
Chief executive Haydn Mursell said the results were helped by improving conditions and despite pressures in the supply chain.
Mursell said: "Significant positions on key frameworks, a disciplined approach to new work and an improving economy, position us well for the remainder of 2015 and over the medium term.
"A further increase in the interim dividend reflects our confidence in the future. We remain on course to meet the board's expectations for the full year."
Westhouse analysts said the results were "very much in line" with their expectations, giving a 'buy' recommendation and a target price of 2110p.
The broker added: "Net debt was better than management was expecting. This is despite a 'challenging working capital environment' – which we believe will have more impact on some of the group’s peers.
"We continue to believe it offers the best risk-return prospects in the sector.
Shares feel slightly 1.31% to 1710p on Wednesday at 08:46.