Kier Group PLC (KIERF) (FY 2024) Earnings Call Highlights: Strong Revenue Growth and Strategic ...

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In This Article:

  • Revenue Growth: Over GBP560 million increase, reaching GBP4 billion, a 17% growth from the previous year.

  • Order Book: Increased by 7% to GBP10.8 billion, providing multiyear revenue visibility.

  • Adjusted Operating Profit: GBP150 million, with an adjusted operating margin of 3.8%.

  • Net Cash Position: Improved to GBP167 million from GBP64 million in FY23.

  • Adjusted Earnings Per Share: 20.6p, a 7% increase from 19.2p in 2023.

  • Dividend: Proposed final dividend of 3.48p per share, totaling 5.15p per share for FY24.

  • Infrastructure Services Revenue: Increased by 16%, driven by HS2 volume growth and acquisition of Buckingham Group's rail assets.

  • Construction Revenue: Increased by 15% to GBP1.9 billion.

  • Free Cash Flow: Operating cash flow improved to GBP217 million from GBP171 million last year.

  • Operating Cash Conversion: Improved from 130% to 145%.

Release Date: September 12, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

  • Kier Group PLC (KIERF) reported significant revenue growth of over GBP560 million for FY24, with improved profitability and strong cash generation.

  • The company's order book increased by 7% year over year to GBP10.8 billion, providing multiyear revenue visibility and securing over 90% of FY25 revenue.

  • Kier Group PLC (KIERF) successfully delivered the acquisition of Buckingham Group's rail assets and refinanced the group, enhancing financial resilience.

  • A final dividend of 3.48p per share was proposed, reflecting confidence in the business and a total dividend of 5.15p per share for FY24.

  • The company achieved an adjusted operating margin of 3.8%, surpassing its medium-term value creation plan target, and reported a 31% increase in statutory profit before tax.

Negative Points

  • Despite the positive financial performance, the company faced continued, albeit lower, inflationary pressures impacting profitability.

  • The construction segment experienced a year-on-year reduction in margin due to a change in mix and increased overheads to support additional site starts.

  • The property business faced a challenging environment with scheme evaluations, developments, and transactions being delayed due to market conditions.

  • The group's accident incident rate increased by 76% over FY23, indicating a decline in safety performance compared to the previous year.

  • The company anticipates a potential GBP20 million net exposure related to fire and cladding costs, following regulatory changes.

Q & A Highlights

Q: With 97% of FY25 revenue secured in construction, do you expect less work won in the year, and are there procurement delays due to government changes? A: We don't anticipate any change in bidding strength or pipeline opportunities across all regions and sectors. The government is evaluating its position, but we expect no long-term policy changes affecting spending. (Andrew Davies, CEO)

Q: Regarding working capital, do you expect a working capital inflow or outflow unless revenue changes? A: As a negative working capital business, growth results in an inflow. The average will mostly be impacted by the inflow already received, with incremental inflow based on further growth. (Simon Kesterton, CFO)

Q: On the updated long-term growth strategy, have you learned from the Buckingham acquisition regarding integrating acquisitions, and is there a focus on infrastructure services over construction? A: We've learned a lot from the Buckingham acquisition, and integration has gone well. While there's no direct preference, we see more opportunities in infrastructure services. (Simon Kesterton, CFO)

Q: What does the move to an average net cash position in FY26 mean for potential cash deployment in property or M&A? A: Once we reach a balanced sheet position, surplus cash can be deployed in property or M&A, with property offering a 15% ROCE as a benchmark for M&A attractiveness. (Simon Kesterton, CFO)

Q: Can you provide more color on expected divisional margin evolution, given the deviation last year? A: Construction margin softened due to a mix shift, but remains industry-leading. Infrastructure services margin is flattered by design work and a non-recurring claim, expected to soften slightly. (Simon Kesterton, CFO)

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.

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