Release Date: March 11, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Kier Group PLC (FRA:10I, Financial) reported a solid set of results with revenue growth leading to an operating profit of £67 million, maintaining a margin of 3.4%.
- The company achieved a net cash position of £58 million, significantly reducing average month-end net debt to £38 million.
- The order book increased by 2% to a record £11 billion, providing multi-year revenue visibility with 98% of FY25 revenue secured.
- An interim dividend of 2p per share was declared, a 20% increase from the prior period, reflecting confidence in the business.
- A £20 million share buyback program was launched, indicating a commitment to increasing shareholder returns.
Negative Points
- The infrastructure services segment faces delays in the start of works for control period 7 in the rail market and the Road Investment Strategy 3 in the highways market.
- The group anticipates a further £20 million exposure related to fire and cladding costs due to regulatory changes.
- Despite revenue growth, the construction segment's operating margin was impacted by increased overheads to support additional site starts.
- The property business is expected to be second-half weighted, indicating potential volatility in returns.
- Cost inflation remains a concern, potentially affecting project budgets and causing delays, although the company has managed to mitigate its impact so far.
Q & A Highlights
Q: In the infrastructure segment, what level of visibility do you have regarding the transition from AMP7 to AMP8, and is there a risk of a bump during this transition? Also, can you provide insights on CP7 delays and the highways regulatory period?
A: Andrew Davies, CEO: The transition from AMP7 to AMP8 is about mobilization. We have positions on frameworks worth up to £15 billion with nine counterparties. Utility companies are accelerating their mobilization plans, and we are on track. Regarding CP7 and RIS3, there are delays as the Department of Transport works out its spending profiles, but we are not overly concerned. We have strong positions with national highways and anticipate that programs will come through once defined.
Q: Regarding the property segment, do you expect more completions in the second half, and what is your visibility on this? Also, when do you expect to reach the £225 million capital employed target, and would you consider increasing it if returns progress towards 15%?
A: Simon Keston, CFO: We have great visibility for the second half of the property business and are not concerned. As we approach the £225 million target, we will evaluate whether to enhance earnings or return value to shareholders, depending on the best opportunity.
Q: Can you provide some color on cost inflation and supply chain variances across different business segments? Also, could you elaborate on the types of project structures and joint ventures in the property segment?
A: Andrew Davies, CEO: 60% of our portfolio is on a cost-reimbursable basis, and the rest is secured through two-stage negotiated contracts. Inflation is not unduly affecting us. Simon Keston, CFO: In property, we focus on mixed-use residential, sustainable offices, and industrial logistics. We maintain a liquid portfolio with an average equity check of about £4 million per project.
Q: Is the HMP Glasgow project included in the £11 billion order book, and can you update us on other major projects?
A: Andrew Davies, CEO: Yes, HMP Glasgow is included. Other projects like Milsye have been completed and handed over. We have a strong pipeline in construction, including health projects and commercial work in London.
Q: Could you update us on HS2 activity and whether it is at peak run rate?
A: Andrew Davies, CEO: HS2 is around the peak run rate. We are on the critical path for the test regime and working with HS2 to achieve more certainty in their future cost base. Relationships are robust and positive.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
