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Kier's 1H25 results were robust, with revenue up 5.1% to £1.98bn, driven by 9.3% growth in Infrastructure Services (mainly HS2, water and nuclear) and 1.8% in Construction. Property revenue declined 41% to £13.1m due to fewer transactions as the division undergoes recapitalisation. Management expects new Property investments to materialise from 2H, when we expect the Group to deploy a maximum £225m capital in FY26, potentially driving substantial value as the return on capital employed (ROCE) moves towards Kier's 15% target. Free cash outflow of £49.8m reflected normalised working capital movements versus 1H24, which benefited from abnormally strong 2H23 volume growth. Average month-end net debt fell by 72% to £37.6m, supporting a 20% increase in the interim dividend to 2.0p, progressing towards its targeted 3x cover, and the launch of a £20m share buyback. The outlook is strong, with the order book reaching a record £11bn (+2% from FY24) and 98% of FY25 revenue secured. Despite significant contract wins across Water and Construction and maintaining a low-risk contract pricing structure, our forecasts remain unchanged and conservatively positioned, reflecting potential public spending delays in areas like CP7 Rail and RIS Road.
Kier Group plc
Our view The Group delivered a good increase in H1 revenue and profits as expected. Its balance sheet continues to improve as previously guided and expected. The strong order book of c.£11bn provides good visibility going forward with the Group confirming it is trading in line with expectations. We would not expect any material changes to FY consensus estimates with the results all in line. Interim results summary Revenue during HY25 increased by 5% to £1,979m (HY24: £1,883m) due to strong operational delivery across Infrastructure and Construction services. Adjusted operating profit increased by 3% at £66.6m (HY24: £64.7m), supported by volume growth from the Infrastructure Services and Construction segments. The adjusted operating profit margin remained unchanged at 3.4% (HY24: 3.4%). Reported operating profit increased by 4% at £45.7m (HY24: £44.1m). Adjusted EPS was flat at 8.7p (HY24: 8.7p). DPS stood at 2p, up 20% (HY24: 1.67p). Net Cash stood at £57.9m (HY24: £17m), as expected. Average month-end net debt materially improved by £99m to (£37.6m) (HY24: (£136.5m)) in line with the Board’s expectations which reflected a focus on operational delivery and cash management. Outlook and current trading update: Trading in the second half of the financial year has started well and is in line with the Board’s expectations. The high-quality order book increased by 2% to £11.0bn (FY24: £10.8bn), which provides significant visibility with 98% of the full year revenue secured. It continues to invest in the Property segment which also supports growth over the medium term. Valuation The shares are flat over the last twelve months. They trade on FY25E PE and EBITDA multiples of c.6.6x and c.2.3x respectively, with a c.4.6% dividend yield.
Interim results to Dec-24 provides further evidence that the Kier is in good shape. Despite the disruption from the change in government, the order book continues to move higher and is up 43% in three years. Over 98% of targeted FY25 revenues have already been secured. Combined with the strong pipeline, management has confirmed the business is “trading in line” with expectations and we are leaving our FY25 and FY26 earnings forecasts unchanged. Meanwhile, the business continues to de-lever, and we are forecasting Kier will reach an average net cash position in FY26. Despite this operational and financial momentum, the shares are trading on 6.4x P/E (this is a c50% discount to its peers).
Management continues to deliver. Deleveraging remains a key theme, but the focus shifts to attractive, compounding growth in returns (supported by dividend and current share buyback). Shares are trading at 6.5x June 2026E EPS and a 5% yield (3x cover). A compelling proposition, in our view - a key sector pick. We maintain our 200p TP and Buy rating.
Kier, the leading tier-1 contractor with key strengths in public sector and regulated industry construction, has been awarded a £684m contract by the Scottish Government to deliver a new prison in Glasgow. Completion is scheduled for 2028. This award, which was in the Dec-24 orderbook, reflects the team’s successful delivery of projects such as Five Wells and Millsike for the Ministry of Justice. These custodial projects were early adopter of modern methods of construction. This approach ensures budgets adherence, and timelines are more certain, thereby minimizing project risk. Consequently, despite the scale of the HMP Glasgow project, we see little project delivery risk.
Kier's 1H25 trading update confirms performance in line with Board expectations, with over 95% of FY25 revenue secured and the order book growing 2% since June 2024 to £11bn. Recent contract wins demonstrate momentum across key verticals, including an £850m Yorkshire Water framework, a £240m MOD accommodation contract, and positions on NHS decarbonisation and public sector facilities management frameworks. Strong free cash flow is accelerating the Group's capital allocation strategy: 1) deleveraging, with average month-end net debt improving to £38m (1H24: £136.5m), on track to deliver our month-end net cash forecast in FY26E; and 2) the announcement of a £20m share buyback programme to drive shareholder returns and reflecting management's confidence in the outlook. ISG's recent collapse continues to present opportunities to gain market share, particularly in Prisons, where Kier is one of three Tier 1 contractors, as well as in Education and Healthcare. Half-year results will be published on 11 March 2025.
Our view Consensus for FY25 looks well supported by this reassuring update and we would not expect any material changes today. The current order book is robust and provides good visibility. It is also encouraging to see that the Group has continued to de-leverage its balance sheet. Valuation looks relatively undemanding, and the shares should be well supported by the £20m share buyback. Trading update summary The Group has continued to trade well and in line with the Board's expectations in the first half of the financial year, with performance expected to be second half weighted like the previous year. As of 31 December 2024, the order book stood at approximately £11bn which is a 2% increase from the year-end position and 3% above the prior year comparative. The Group has secured over 95% of revenue for FY25 providing high visibility. De-leveraging is in line with the Board's expectations, with average month-end net debt of approximately £38m (HY24: £136.5m). The Group is expected to report a net cash position as of 31 December 2024, above the prior year comparative period (HY24: £17m). The Board has approved an initial share buyback of £20m, reflecting the strengthening balance sheet. The Group has announced some good recent contract awards, including being appointed by Yorkshire Water for its £850m infrastructure services framework and a £500m contract win with the NHS. The Group sees significant medium-term growth opportunities as a strategic supplier to key areas of the new Government's priorities, including transport, education, healthcare, justice, defence, and nuclear. Substantial investment plans in water are expected to benefit the Group. Valuation Shares are up by 11% over the last twelve months. They reside on FYPE and EBITDA multiples of c. 6.5x and c.2.5x respectively with a c.5% dividend yield.
Management continues to deliver strongly. Deleveraging remains a theme, but the focus shifts to the potential for consistent, attractive growth in shareholder returns (dividends and buybacks). In our view the stock is a compelling opportunity on 6.5x June 2026E EPS and 5% yield (3x cover). Kier remains a key sector pick. We reiterate Buy, TP 200p.
Kier’s 1H25 pre close update provides further evidence that the business is in good shape. Despite the disruption from the change in government, the order book continues to move higher and is up 43% in three years. Over 95% of targeted FY25 revenues have already been secured. Combined with the strong pipeline, management has confirmed the business is “trading in line” with expectations and we are leaving our FY25 and FY26 forecasts unchanged. Meanwhile, the business continues to de-leverage the balance sheet, and we are forecasting Kier will reach an average net cash position by FY26. Despite all this operational and financial momentum, the shares are trading on 6x P/E (this is a c50% discount to its peers).
Kier is a UK infrastructure services, construction and property group, with a high quality £10.9bn order book that provides strong visibility, with 95% of FY25 revenue secured. The group's transformed strategy is reflected in its significantly de-risked order book, combining target cost/cost reimbursable contracts (60%) with diverse smaller projects averaging £20m. Management looks well-positioned to deliver sustainable growth through the cycle, leveraging strong market positions and specialist expertise, while digital transformation and Modern Methods of Construction enhance efficiency. We initiate with a Buy and a 230p target price suggesting a 57% upside to the current share price, with its rating today reflecting historic challenges rather than the opportunity for it to capitalise on market tailwinds where it has strong penetration.
Our view A reassuring update confirming that the Group is trading in line with expectations. The current order book provides good visibility with c.95% of FY25 revenue secured. It is also comforting that the Group continues to de-leverage in line with expectations and expects a significant period-on-period improvement. All as expected and we expect no material changes to consensus estimates on the back of this reassuring update. Valuation looks more attractive after the recent share price fall and in the context of this solid update. Update summary The update confirms that the current financial year (FY25) has started well and the group is trading in line with the Board's expectations. Similar to the previous year, the group's performance is expected to be second half weighted. The order book currently stands at c.£10.9bn (30 June 2024: £10.8bn) and c.95% of FY25 group revenue is estimated to be secured, up from 90% previously announced which provides a high degree of certainty. The Group states that bidding discipline and risk management embedded across the business continue to drive the high quality and profitable order book. The update also lists some good contract wins across end markets. The group maintains its focus on operational delivery and cash management and continues to de-leverage in-line with the Board's expectations and anticipates a significant period-on-period improvement. The group is well positioned to benefit from UK Government infrastructure spending plans into areas where it offers market-leading services. Kier Group plc will host a Capital Markets Event for analysts and institutional investors on 3 June 2025. Valuation The shares are up c.35% over the last 12 months and reside on FY25E P/E and EV/EBITDA multiples of only c.7x and c.2.3x, respectively.
Management continues to deliver strongly. The focus shifts to the opportunity for consistent, attractive growth in shareholder returns. The shares offer what we believe is a compelling opportunity on 6.8x June 2025E EPS and a 5% yield. We retain our 200p TP and Buy stance.
Kier’s AGM update provides further evidence that the business is in good shape. Despite the disruption from the earlier-then-expected election, the order book continues to move higher and is up 42% in three years. 95% of targeted FY25 revenues have already been secured. Combined with the strong pipeline and the supportive political environment, management has confirmed the business is “trading in line” with expectations and we are leaving our FY25 and FY26 forecasts unchanged. Meanwhile, the business continues to de-leverage the balance sheet, and we are forecasting Kier will reach an average net cash position by FY26. Despite all this operational and financial momentum, the shares are trading on 6x P/E (this is a c50% discount to its peers).
Management continues to deliver strongly. Deleveraging remains a theme, but the focus shifts to the substantial opportunity for consistent, attractive growth in shareholder returns. In our view the shares remain undervalued on 7.3x June 2025E EPS. We increase our TP from 190p to 200p to reflect the rising visibility and reiterate Buy.
Our View. A sound set of results, all broadly as expected and in line with the recent update. Importantly they also reflect continued operational and financial improvement. The Group is currently trading in line with expectations with a strong order book of £10.8bn providing good visibility over FY25E with c.90% of revenue already secured. The Group has also announced a new long-term sustainable growth plan as expected, including revenue growth targeted to be GDP+ through the cycle with an adjusted operating margin target of 3.5%+ and cash conversion of c.90% targeted. We expect the Group to continue to enjoy good momentum and see good potential upside as it continues to deliver a strong operational and financial performance. We would not expect FY25 consensus estimates to move materially today. Results Summary. A solid set of results, in line with expectations and the recent July update. Revenue was up 17% to c.£4bn and adjusted operating profit up 14% to £150.2m. Profits growth was driven by a strong delivery in Infrastructure Services, helped by a one-off £6m claim. The adjusted operating margin declined slightly to 3.8% due to mix. Adjusted EPS grew 7% to 20.6p. Average month-end net debt reduced impressively to £116.1m (FY23: £232.1m) with reported net cash of £167.2m at the end of June. The Board declared a DPS of 5.15p. Estimates Changes. We tweak our estimates, with no material changes being made. We expect adjusted operating profit of £151.5m and £157.0m for FY25E and FY26E respectively. We expect the Group to continue to see good momentum, with the balance sheet continuing to improve. Valuation. The shares are up c.68% over the last 12 months and reside on FY25E P/E and EV/EBITDA multiples of only c.7.3x and c.2.7x, respectively.
FY24 results from Kier provide further evidence that the business is in good shape. Double-digit earnings growth was in line with our forecasts. Growth was driven by healthy performances across both Infrastructure and Construction. Cash conversion >100%, resulting in average net debt reducing by £116m. Kier’s £10.8bn order book (up c.40% in three years), the strong pipeline and the supportive political environment, underpin our comfort on future delivery (and we are leaving our FY25 and FY26 EBIT, PBT and FCF forecasts unchanged). The maiden dividend of 5.15p (1.67p interim, 3.48p final) was ahead of expectations. Despite all of this, the shares are trading on 7x P/E (FY25E).
Kier continues to deliver a strong operational performance. The FY24 cash outperformance (net cash c.£165m) highlights the profit/cash potential. In our view the shares offer material upside given the expected growth, cash and shareholder returns (including DPS). Despite recent outperformance (+46% YTD), we find them undervalued on 7.6x June 2025E EPS.
The General Election result provides a supportive environment for further growth. Kier’s £10.8bn order book (up c.40% in three years) and pipeline underpins our comfort on future delivery. Meanwhile, the FY24 pre close points to earnings trading in-line with expectations and deleveraging progressing slightly ahead of plan. The reinstated dividend is likely to be stronger than we had initially anticipated. Despite all of this, the shares are trading on c7x P/E (FY25E).
Kier, the leading Tier-1 contractor with key strengths in public sector and regulated industry construction, recently hosted a well-attended site visit at HMP Millsike. The event highlighted the need for additional prison places. In response, the Ministry of Justice is pursuing a collaborative approach to deliver new prison places. This is enabling projects to be delivered on budget and within pre-agreed timelines. Kier is a key beneficiary of this framework and is securing a healthy proportion of new build and refurbishment projects. Required investment into prisons: The prison population is rising and given sentencing trends, this growth is expected to continue. As a consequence, the Ministry of Justice is investing in expanding the prison estate. The department is expected to spend £4.0bn over the coming few years. This is expected to deliver 10,000 new places and materially enhance the existing estate. A further 10,000 are planned. However, government data shows that this investment will fail to eliminate prison overcrowding and we expect prison building will continue beyond the 20,000 places in the pipeline. Collaborative approach and adoption of modern methods of construction: To deliver projects effectively, the Ministry of Justice has adopted the collaborative framework advocated by the Mar-20 Construction Playbook. Under this approach, the government department is effectively partnering with Tier-1 contractors. Project design and processes allow early participation by the contractors and embrace modern methods of construction. This minimizes project risk and ensures budgets and timelines are more certain. In return, contractors are delivering projects with high levels of environmental and social outcomes. As an example, the HMP Millsike project has provided 50 sustainable jobs for prison leavers. Other government departments likely to follow the approach adopted by the Ministry of Justice: The collaborative approach and the utilisation of modern methods of construction are delivering positive outcomes for the Ministry of Justice. The department has been highlighting this to other government departments and we expect adoption of the Construction Playbook will increase. We anticipate this trend will benefit Kier, enabling the Tier-1 contractor to win further market share.
Site visit to Millsike prison highlights Kier’s capabilities. Prisons is one of Kier’s chosen five verticals for Construction. It is 8-9% of sales and can grow. In Prisons, like many other markets, there is a need for catch up investment. The visit illustrated Kier’s innovative approach to Construction. Kier can leverage its sustainability credentials to win more work. The learnings from Millsike can also be taken into future prison contracts and other sectors. BUY, TP of 160p; trading on an undemanding CY 24 PE of 6.8x, the shares are ready to breakout.
In our view the current management are proven custodians of shareholder capital. As flagged in our recent note, cash generation provides options to further enhance returns, both organically and inorganically. Customers, supply chain partners and employees are returning to Kier, and we expect investors will follow. We believe the June FY25E PE of 7.0x is undemanding. We retain our Buy rating and 190p TP.
The current management are proven custodians of shareholder capital. Cash generation provides options to enhance returns further, both organically and inorganically. Customers, supply chain partners and employees are returning to Kier, and we expect investors will follow. We believe the June FY25E PE of 6.1x is undemanding. We retain our 190p TP and Buy rating.
Kier’s H1 24 results were as expected. We make five key points about the business: 1) average total financial obligations have fallen from £582m at end FY 21 to £137m at H1 24, indicating a strengthened balance sheet which gives strategic options; 2) the order book increased to £10.7bn at the end of H1 24, which points to improving sales growth with little impact expected from HS2 and road delays; 3) at Construction, there is strength in prison building; 4) at Infrastructure, the outlook is positive and Buckingham has successfully integrated; and 5) the dividend was reinstated in H1 24, and in FY 26 we expect dividend cover to be in line with the target of 3.0x, which suggests a yield of 5.6%. BUY. Target price: 160p.
On a 12-month view, we anticipate that investors will price in the transformation of the balance sheet, and place increasing emphasis on the earnings growth being delivered. Given the valuations elsewhere in the sector, we see the shares trading on >10x prospective post-tax earnings. Consequently, we are raising our near-term target price from 170p to 250p. This represents 10.8x FY26e EPS. End-markets firm, Kier taking market share: Interim results (for the six months to Dec-24) demonstrate that demand within both the public sector and regulated industry segments of the construction market remains robust. Consequently, 1H24 revenues and (pre-central cost) contracting profits were up +22.0% and +15.9% respectively. Meanwhile, the order book continues to move ahead. It has now increased from £7.7bn (Jun-21), £8.5bn (Mar-22), £9.8bn (Sep-22), £10.1bn (Jun-23) to £10.7bn (Dec-23). This provides good revenue visibility into FY25 and FY26. The interim results confirmed average net debt was £137m during the six months to Dec-23. Given the strong order book, stable margins and positive free cash flow, we anticipate Kier will transition from having a net debt position to having a net cash position (average month end basis) by FY26. Valuation still impacted by historical issues, but these are conclusively being resolved: Currently Kier’s forward P/E (CY25) is only 6x, this compares with >10x for its broader peer group. As an example, Renew Holdings is trading on 13x. We believe this relative position is entirely driven by the historical balance sheets issues. Therefore, as Kier provides further evidence on the free cash flow transformation and sustains the transformation in the balance sheet, we believe, there is scope for another material re-rating of the shares. Macro environment providing useful catalysts: Crucially, over the coming 12-months we see two macro catalysts that will benefit investor sentiment. We anticipate the General election will materially reduce political uncertainty. Meanwhile, we expect that the transition from AMP7 to AMP8 in the water sector will result in the regulated utilities doubling their opex/capex spend. We expect Kier to be a major beneficiary of this uplift.
Our View. Kier Group has delivered solid half year results, demonstrating progress towards its medium-term targets. The company achieved significant deleveraging over the period and announced the resumption of its dividend, indicating improved financial strength and confidence in its outlook. Kier's order book remains healthy, providing strong visibility on its expected full year revenues. The group appears well positioned to benefit from the structural tailwinds related to the UK's infrastructure investment plans and decarbonisation efforts in the medium term. While on a promising trajectory, heightened macroeconomic uncertainty means we prefer more quality names in the sector. However, we acknowledge the strong upside potential if it maintains operational execution. Results Summary. Revenue was up 23% to £1.88bn and adjusted operating profit up 13% to £64.7m, driven primarily by growth in Infrastructure Services. The adjusted operating margin declined slightly to 3.4% due to a higher proportion of lower-margin Construction revenue. Adjusted PBT rose 7% to £49.0m, while adjusted EPS grew 2% to 8.7p. Average month end net debt reduced materially to £136.5m (HY23: £242.7m). The Board also resumed dividend payments, declaring an interim dividend of 1.67p per share. Estimate Changes. We increase FY24E Adjusted EPS by 4% to 20.1p, reflecting the better-than-expected top-line growth in the first half. We leave our earnings estimates for FY25E/26E broadly unchanged. We have also decreased average net debt to c.£135m for FY25E and now expect modest average net cash by FY26E. We increase our price target to 146p. Valuation. The shares are up c.85% over the last 12 months. Kier trades on a FY24E P/E and EV/EBITDA of 6.8x and 2.8x, respectively.
Our View. Kier has produced another high-quality set of results and it is promising to see continued operational performance and progress in meeting its medium-term targets by way of significant deleveraging over the period and the resumption of the dividend announced today. The order book is robust and provides virtually full visibility over full year revenues, and we continue to believe in the medium-term structural tailwinds relating to the positive UK infrastructure and decarbonisation outlook. Results Summary. Revenue was up 23% to £1,883m and adjusted operating profit up 13% to £64.7m, driven by growth in Infrastructure Services and Construction. The adjusted operating margin declined slightly to 3.4% due to a higher proportion of lower-margin Construction revenue. Adjusted PBT rose 7% to £49.0m, while adjusted EPS grew 2% to 8.7p. The Group ended the period with a net cash position of £17.0m, up from a £130.6m net debt position in HY23. Average month-end net debt also reduced materially to £136.5m (HY23: £242.7m). The Board resumed dividend payments, declaring an interim dividend of 1.67p per share. The order book grew 6% to £10.7bn, providing strong revenue visibility, with 97% of FY24 revenue already secured. Outlook. Management remains focused on delivering its medium-term value creation plan, which aims to generate revenue of £4.0bn - £4.5bn, an adjusted operating profit margin of c.3.5%, and a sustainable net cash position with the capacity to invest. The Group's performance in the half year demonstrates progress towards these targets. Valuation. The shares are up 91% over the last 12 months. Kier resides on a FY24E P/E and EV/EBITDA of 6.8x and 2.7x, respectively.
Management continues to perform well and estimates are well founded (across the horizon). The medium-term goals (set at the 2021 equity raise) look achievable this year. Confidence in deleveraging remains a key theme, but the focus is moving to the opportunity for consistent rising shareholder returns. The return of a dividend and FTSE 250 entry are notable, but we believe the shares remain undervalued on 6.5x June 2025E EPS and 19% FCF yield. We increase our TP from 180p to 190p (9x June 2025E EPS) to reflect progress and visibility, and reiterate Buy. Kier remains a key pick, with management proving careful custodians of shareholder capital.
H1 24 FD EPS was flat at 8.5p; broadly in line with our estimate, and the DPS was re-instated. Average net debt decreased from £243m in H1 23 to £137m in H1 24, in line with expectations. We increase our FY 24 and 25 FD EPS by 3% and 2% respectively due to higher EBIT and despite higher interest. We make three key points: 1) The order book has increased from £10.1bn at FY 23 to £10.7bn and helps to underpin our forecasts; 2) At Construction, there is strength in Prisons; and 3) At Infrastructure, the outlook is positive and Buckingham has successfully integrated. BUY, TP from 150p to 160p and trading on an undemanding revised CY 24 PE of 6.3x.
Kier's earnings growth and improved FCF drove a £106m organic de-levering in H1-24 to £137m average month-end net debt (guidance: £140m). Resumed dividends offer a 3.7% current year yield, growing to a 3-covered 5.1% next year, on our forecasts. This marks a new milestone in Kier delivering its med
Kier, the UK’s largest tier-1 contractor, delivered a solid performance in the first half. The order book continues to move higher, providing increased visibility for the full year. Management has confirmed the business is trading in line with expectations and that the “ongoing strengthening of the balance sheet” means Kier is returning to the dividend list. The 1.67p interim dividend is higher than the 1.29p we had expected. Despite this progress, the shares are only trading on a P/E of 6x. We reiterate our positive recommendation. Contracting EBIT up +15.9%, with Kier benefiting from the positive trading environment, market share gains and margin expansion: Demand within both the public sector and regulated industry segments of the construction market remains robust. Consequently, 1H24 revenues and (pre-central cost) contracting profits were up +22.0% and +15.9% respectively. Due to a change in revenue mix, contracting EBIT (pre-central costs) margins contracted from 4.4% to 4.2%. We believe, this reflects the benefits on ongoing contract discipline. Order book providing comfort: The order book continues to move ahead. It has now increased from £7.7bn (Jun-21), £8.5bn (Mar-22), £9.8bn (Sep-22), £10.1bn (Jun-23) to £10.7bn (Dec-23). This provides good revenue visibility into FY25 and FY26. Within Infrastructure, recent wins include a £30m gas pipeline contract with Evolve. Within Construction, recent awards include four education projects with a combined value of £150m; and another Ministry of Justice contract worth >£100m. Forecasts: Revenues and EBIT margins are trending ahead of our forecasts, offsetting a slightly higher interest change. Net net we are broadly leaving our PBT and EPS forecasts unchanged. Reiterate buy recommendation: Currently Kier’s forward P/E is only 6x. As Kier returns to the dividend list, we anticipate that the valuation will be (at least) on par with the peer group. We expect most of the re-rating will be achieved within the next 12 months, equating to a 170p target price. On a 18-24 month view we see the shares doubling again.
Kier continues to deliver. Consistent and strong management has established a robust operating platform that can deliver long-term, cash-backed growth. Despite the 12M share price performance (+70%), the investment opportunity remains substantial through cash generation (17% FCF yield), rerating (from current 5.6x June 2024E) and from earnings outperformance given the quality of the order book and superior execution.
Kier has published an inline trading update for the half year to Dec-23. The highlight of the update is confirmation that average month-end net debt fell by c.£100m y/y to c.£140m in H1. Given average net debt is usually lower in H2, we improve our FY24 average net debt forecast to £135m (from £145
Trading is ahead of last year but in line with expectations; we introduce an H1 24 FD EPS weighting of 45% and estimate c. £100m of de-leveraging. We maintain our headline earnings and net debt estimates given the in line statement. The order book has increased from £10.1bn at FY 23 to £10.7bn and helps to underpin our forecasts. At Construction, there is strength in Prisons. At Infrastructure, the outlook is positive and Buckingham has successfully integrated. At Property, there are signs of recovery and we expect FY 24 to be the trough for the market. BUY, TP 150p and trading on an undemanding CY 24 PE of 5.4x.
Kier, the UK’s largest tier-1 contractor, has issued a positive pre close update. The order book continues to move higher, providing increased visibility for the full year. Management has confirmed the business is trading in line with expectations and that the “ongoing strengthening of the balance” means Kier will resume dividends with an interim payment following the 1H24 results. Despite this progress, the shares are only trading on a P/E of 5x. We reiterate our positive recommendation. Order book providing comfort: The order book continues to move ahead. It has now increased from £7.7bn (Jun-21), £8.5bn (Mar-22), £9.8bn (Sep-22), £10.1bn (Jun-23) to £10.7bn (Dec-23). This provides good revenue visibility into FY25 and FY26. Within Infrastructure, recent wins include a £30m gas pipeline contract with Evolve. Within Construction, recent awards include four education projects with a combined value of £150m; and another Ministry Justice contract worth >£100m. Favourable macro environment: Looking beyond the General Election, we anticipate Kier will be a key beneficiary of a Labour government. Separately, we expect to see elevated demand within its water segment. Current estimates show water company investment doubling under AMP8, which commences at the end of this year. Elsewhere, there appear to be improving trends within Property, but the P&L benefit is likely to take 18 months to materialize. Balance sheet strengthening: Kier continues to make solid progress towards its plan for achieving a sustainable net cash position. The pre close update confirmed average net debt was £140m during the six months to Dec-23. Therefore, we continue to expect average net debt will reduce from £232m in FY23 to £130m in FY24. We anticipate, this paves the way for current facilities to be re-financed before Jun-24. Re-iterate buy recommendation: Currently Kier’s forward P/E is a mere 5x. As Kier returns to the dividend list, we anticipate that the valuation will be (at least) on par with the peer group. We expect most of the re-rating will be achieved within the next 12-18 months, equating to a 170p target price.
Kier continues to deliver. Consistent and strong management has established a robust operating platform that can deliver long-term, cash backed growth. Despite the YTD share price performance (+79%), we consider that the investment opportunity remains substantial through deleveraging (18% FCF yield), rerating (from current 5.3x Jun 2024E) and from earnings outperformance given the quality of the order book and superior execution. We believe Kier remains a key sector buy idea.
AGM trading statement guides to trading ahead of last year and in line. We expect EPS to be H2 weighted as normal and seasonally weak cash flow in H1. We maintain our estimates. We make 5 key points: 1) The order book has increased from £10.1bn at FY 23 to £10.5bn, helped by the inclusion of £1bn on Birmingham; 2) Management’s medium-term targets suggest EBIT of c. £150m which is 7% ahead of our FY 24 estimate; 3) At Construction, social infrastructure markets are strong; 4) At Infrastructure, HS2 is stable and local authority roads is strong; 5) At Property, there are signs of recovery and we expect FY 24 to be the trough. BUY, TP 150p and trading on a CY 24 PE of 5.1x.
Kier, the UK’s largest tier-1 contractor, has issued a positive AGM update. The order book continues to move higher, providing increased visibility for the full year. Management has confirmed the business is trading in line with expectations and that the “ongoing strengthening of the balance” means that Kier “remain[s] on track to resume dividend payments in FY24”. Despite this progress, the shares are only trading on a P/E of 5x. We reiterate our positive recommendation.
The FY 23 results were strong and ahead of our estimates. We make four key points: 1) our estimates suggest management’s medium-term target EBIT of c. £150m will be achieved in FY 25; 2) this was the fourth consecutive set of results to have met or exceeded the medium-term margin target of 3.5%, suggesting that it is conservatively set; 3) the order book remains robust at £10.1bn at the end of FY 23, which points to improving sales growth with little anticipated impact from HS2 and Road delays; and 4) the dividend should be reinstated in H1 24, and in FY 26 we expect it to be in line with the dividend cover target (3.0x), which suggests a yield of 7.2%. BUY; TP 150p.
Since the recapitalisation and equity raise in 2021, Kier has delivered its margin target, agreed significantly reduced deficit payments with the pension schemes, paid down its supply chain finance facility, and has now stated it intends to reinstate dividends at interims. We forecast this will equ
Margin of 3.9% above the target of 3.5% - FY 23 FD EPS increased 14.5% to 18.8p; 6% ahead of our estimate. Average net debt increased from £216m in FY 22 to £232m in FY 23 due to the elimination of KEPS. We maintain our headline earnings estimates but make changes in the mix and increase our DPS estimates. We increase our FY 24 average net debt estimate from £115m to £140m, to reflect the acquisition and a smaller construction working capital benefit. We make three key points: 1) The order book remains strong at the H1 23 level of £10.1bn, despite the burn on HS2, with 85% secured for FY 24; 2) At Construction, there was strength across the board and NAO reports highlight the need for investment in hospitals and schools; and 3) At Infrastructure, the highways business is ramping up and there are opportunities in rail and water. Balance sheet is strong enough. BUY, TP 150p and trading on a CY 24 PE of 4.2x.
Management is performing well, and estimates (earnings and cash) remain well founded. Management has reiterated its confidence in delivering the medium-term goals, underpinned by a supportive market backdrop. The news of a return to the dividend list (with a 1H24 payment) is likely to be the focus today – demonstrating the confidence in continued strong cash generation. However, we would not overlook the forecast EPS growth and long-term drivers. Materially undervalued on 4.4x June 2024E EPS.
FY23 results from Kier show good progress and were fractionally ahead of expectation: EBIT was up +9.1% to £132m vs PG estimate of £130m. Order book trends remain firm, providing increasing confidence in future earnings. Finally, underlying leverage is coming down. Given the rehabilitation of the balance sheet, management has stated that it is their “intention to resume dividend payments in FY24, commencing with an interim dividend.” We believe this will serve as an important catalyst for investor sentiment.
We view the acquisition positively and it will help accelerate the delivery of strategic and operational plans. Kier remains well positioned to consolidate its markets both organically and through modest M&A. The shares remain materially undervalued on 4.2x June 2024 EPS given both the growth potential and debt to equity transfers. We reiterate our Buy rating and 150p target price.
Kier, the UKs largest tier-1 contractor, has delivered a strong pre-close update covering the 12 months to Jun-23 and we reiterate our BUY recommendation, and 170 pence target price. The full year revenues and profits are in-line with expectations. The order book remains above £10bn, with the Construction segment performing particularly well. Finally, the balance sheet continues to strengthen. Average net debt was £230m, which was £15m lower than we had expected.
The FY23 trading update contains good news on multiple fronts: earnings are as expected, FCF and net debt (both spot and average) are better than expected, and the triennial review of the pension scheme has resulted in reducing deficit payments. The medium-term margin target was already delivered i
Kier continues to deliver a strong operational performance. The FY23 cash outperformance (net cash c.£60m) highlights the profit/cash potential. The shares offer material upside given the expected growth, cash and shareholder returns (including a DPS). Despite recent outperformance (+40% YTD), the shares are significantly undervalued, in our view, on 4.2x Jun 2024E EPS.
Kier’s FY 23 post close trading statement indicates revenue and profits in line; we leave our FD EPS estimates unchanged as lower debt off-sets higher interest costs. Average month end net debt was c. £230m at FY 23, ahead of our estimate of £243m with a reduction in debt like items, and pension deficit recovery payments. Management’s medium-term targets suggest EBIT of c. £150m which is 8% ahead of our FY 24 estimate. We make three key points: 1) The order book continues to be above £10bn vs the H1 23 level of £10.1bn, despite the burn on HS2, with 85% secured for FY 24; 2) At Construction, Prisons is driving revenue growth and NAO reports highlight the need for investment in hospitals and schools; and 3) At Infrastructure, the division has been re-aligned and we see a positive outlook despite ‘re-phasing’ and ‘descoping’. Balance sheet is strong enough. BUY, TP 150p and trading on a CY 24 PE of 4.1x.
Meeting Notes - Jun 01 2023
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Kier is a strategic supplier to the UK Government and with 90% of its contracts being with public sector and regulated bodies, it is benefiting from Government infrastructure investment. This is captured in the orderbook, which equates to 3.1x trailing revenue (vs 2.3x average over FY12-21). Whilst
We believe in a positive outlook for Infrastructure despite ‘re-phasing’ and ‘rescoping’, although there may be upward pressure on the interest cost. The Infrastructure Services division has been restructured to better align it with the evolving needs of its customers. The HS2 contract we visited show-cases Kier’s systems integration and partnering skills. We expect that Lots C2 and C3 (C23) are worth very material contracts. Kier has passed the stress test of high inflation. Delays on HS2 are unlikely to impact Kier for next two years. 2B or not 2B, that is the question – we expect 2B to be built eventually. Balance sheet is strong enough. BUY, TP 150p and trading on a CY 23 PE of 4.3x.
The rating (3.8x June 2024 EPS) fails to reflect superior management delivery as well as positive company and industry structural changes. The visibility on sustainable, attractive shareholder returns (underpinned by the high quality, growing order book) is far higher than is generally accepted. Given the likely positive catalysts ahead, in our view, it is time to Buy.
Management is performing well, but we believe the 3.7x June 2024E EPS fails to reflect the positive structural changes, to both the company and the industry. In our view the visibility on sustainable, attractive shareholder returns is far higher than is generally accepted. Given the likely positive catalysts ahead, we believe it is time to Buy.
Research Reels - Real Estate, Strategy update and FAQ from our roadshows, Kier Group, Wincanton, Atlantic Lithium, SMID Market Highlights
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Research Reels - Real Estate, Strategy update and FAQ from our roadshows, Kier Group, Wincanton, Atlantic Lithium, Market Highlights
The H1 23 results were strong and ahead of our estimates. We make four key points: 1) Management’s medium-term targets suggest EBIT of c. £150m and we expect this to be achieved in FY 25; 2) This is the third consecutive set of results to have met or exceeded the margin target, suggesting that it is conservatively set; 3) The order book increased to £10.1bn at H1 23, which points to improving sales growth with little anticipated impact from HS2 and Road delays; and 4) We expect a full dividend in FY 25, which suggests a yield of 11%. This indicates the share price could double. BUY. TP 150p.
Kier continues to deliver a strong operational performance and the visibility afforded by its secured, growing order book will reassure. Shares offer material upside given the double digit EPS growth and cash generation. Significantly undervalued, in our view, on 3.7x Jun’24E EPS.
H1 EBIT has shown good progress +7% y/y on an improved margin, despite lower contribution from Property disposals. Average net debt has increased as expected due to actions to pay down debt-like items KEPS and tax deferrals, leaving a cleaner base going forwards; FY24 is expected to show meaningful
The H1 23 results were strong with an EBIT Margin of 3.7% vs the target of 3.5% - H1 23 FD EPS increased 13% to 8.5p. Average month end net debt was £243m at H1 23, in line with guidance as the group focussed on reducing debt-like items. We decrease our FY 23 FD EPS estimate by 1% as increased interest costs are largely offset by a reduced share count. We reduce our FY 23 average net debt estimate from £251m to £243m due to slightly better cash flow and as management guides to a spot net cash position for FY 23. Management’s medium-term targets suggest EBIT of c. £150m which is only 8% ahead of our FY 24 estimate. We believe increasing material shortages and input costs continue to be managed but the pressure is easing. The order book has increased from £9.8bn at FY 22 to £10.1bn at H1 23, with 96% secured for FY 23. Balance sheet is strong enough. BUY, TP 150p and trading on a CY 23 PE of 4.0x.
Kier, the UKs largest tier-1 contractor, continues to win work and manage cost inflation to ensure it is trading in line with EBIT expectations. Interim results confirm the group is on target to deliver positive free cash flow in the year, which is an important tick in the box for investors.
Kier continues to deliver a strong operational performance and the visibility afforded by its secured, growing order book will reassure. The shares offer material upside given the expected growth, cash and shareholder returns. The shares are significantly undervalued on 3.2x June 2024 EPS.
Kier traded in line with expectations in H1 23 and we maintain our H1 23 FD EPS estimate of 7.2p. We maintain our headline earnings estimates. We also maintain our FY 23 average net debt estimate of £251m, given the expectation of stronger cash flow in H2. Management’s medium-term targets suggest EBIT of c. £150m which is only 8% ahead of our FY 24 estimate. We believe material shortages and input costs are moderating and continue to be managed. The order book has increased 3% since year end to c.£10.1bn. Balance sheet is strong enough. BUY, TP 150p and trading on a CY 23 PE of 3.6x
Kier, the UKs largest tier-1 contractor, continues to win work and manage cost inflation to ensure it is trading in line with expectations. The first half pre close also confirms the group is on target to deliver positive free cash flow in the year, which is an important tick in the box for investors.
Kier, the UKs largest tier-1 contractor, continues to win work and manage cost inflation to ensure it is trading in line with expectations. Management has confirmed the group is on target to deliver positive free cash flow in the year, which is an important tick in the box for investors.
Kier continues to deliver a strong operational performance and the visibility afforded by its 90% public/regulated exposure and secured order book will reassure. The shares offer material upside and a continuing commitment to invest in infrastructure in the Autumn Statement should be an important positive catalyst. The shares remain significantly undervalued on 2.9x Jun’24E EPS.
AGM trading statement guides to a good start to the year and trading in line, but we reduce EPS by 2% and 5% for FY 23 and FY 24 due to the government’s tax change. We maintain our FY 23 average net debt estimate of £251m, given the in line performance. We introduce H1 estimates, which assume a normal high H2 weighting of EPS and cash generation. Management’s medium-term targets suggest EBIT of c. £150m which is only 8% ahead of our FY 24 estimate. We believe material shortages and input costs are moderating and continue to be managed. The Q1 order book has remained flat at FY 22 level of c. £9.8bn. At Construction, the Prison outlook remains strong. At Infrastructure, we expect some cuts in the Autumn Statement, but no impact on forecasts. Balance sheet is strong enough. BUY, TP 150p and trading on a CY 23 PE of 3.3x.
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Another in-line set of results, despite macro challenges, shows that estimates are cautiously set. We have increased our average FY 23 net debt estimates, but that is largely due to the re-payment of KEPS and Covid loans. The balance sheet is strong enough. The 27% yoy order book growth is consistent with a strong outlook and management’s medium-term revenue target of £4.0bn-£4.5bn of sales. We estimate that the margin target of 3.5% will be met in Construction (LibE:3.5%) and exceeded in Infrastructure (LibE:5.1%) and Property (LibE:12.2%). We expect a full dividend in FY 25, which suggests a yield of 11%. That could easily halve. BUY. TP 150p.
FY22 results from Kier confirm that trading in the 12 months to Jun-22 was in line with expectations (+44% PBT growth FY22 vs FY21). The order book continues to expand, providing increasing confidence in future earnings. Finally, leverage is coming down. Healthy end markets, combined with Kier’s new disciplined approach, are clearly delivering a strong turnaround in the group’s earnings prospects and cash flow profile. Consequently, we are now forecasting that Kier recommences dividend payments in FY24.
FY22 EBIT has come in 3% ahead of our estimates and the orderbook is +27% to £9.8bn, equivalent to c.3x revs and providing visibility of medium-term targets, of c.£150m EBIT on Numis estimates. FY22 av. net debt is in line with expectations. Guidance for this to increase in FY23 is likely to attrac
Margin of 3.7% above target 3.5% - FY 22 FD EPS fell 33% to 16.4p and was in line. Average net debt decreased from £432m in FY 21 to £216m (Liberum: £215m), helped by the May 2021 raise and sale of Kier Living, and the balance sheet is cleaner with the payments of KEPS and HMRC Covid help. We maintain our EBIT estimates, with more from Infrastructure and less from Property, but reduce FY 23 FD EPS by 5% due to higher interest. We increase our FY 23 average net debt estimate from £169m to £251m, but expect an improvement in FY 24, making a dividend possible. The order book has increased from £8.5bn at Q3 22 to £9.8bn at FY 22, which points to improving sales growth. Balance sheet is strong enough. BUY, TP 150p and trading on a CY 23 PE of 3.9x.
Attractive valuation – The shares are trading on 3.6x our unchanged June 2024E EPS. The quality of earnings, as well as the growth potential, remain materially undervalued in our view. Management is delivering and we reiterate our Buy.
Take a look at what you are missing – 25p EPS in FY25? We believe Kier is well positioned to deliver long-term growth and a sustainable dividend. The de-rating to 3.6x FY23E EPS (a c.45% decline over the past 12 months, despite unchanged estimates) is in sharp contrast to the attractive company and market fundamentals. In this note we demonstrate how recent momentum provides earnings visibility, a path to delivering the organic growth targets, and reflect on where the potential for long-term EPS outperformance now lies. Improved behaviours make this an investible sector in our view, with Kier’s quality of earnings and undervalued free cash flow potential standing out. Andrew.Nussey@peelhunt.com 22-page note
Kier’s pre-close update confirmed that trading in the 12 months to Jun-22 was in line with expectations (implying +44% PBT growth FY22 vs FY21). The order book continues to expand, providing increasing confidence in future earnings. Finally, leverage is coming down. Healthy end markets, combined with Kier’s new disciplined approach, are clearly delivering a strong turnaround in the group’s earnings prospects and cash flow profile.
FY22 inline; +26% order book growth
FY22 in line, positive order book surprise, confident outlook Kier continues to perform well with FY22 trading in line. The recent work winning stands out (order book rising 26% YoY) and is fully consistent with bidding disciplines. Inflationary pressures remain manageable and are expected to remain so. FY spot net cash expected (PHe £23m), with average net debt in line. We retain our Jun 2022E PBT of £93.5m (cons £94.5m) to give EPS of 16.5p. The outlook remains positive, with operational momentum underpinning management’s confidence re the delivery of FY24 objectives. Quality of earnings as well as the growth potential remain undervalued on 3.9x Jun 2023E PE. Andrew.Nussey@peelhunt.com
Kier’s FY 22 post close trading statement indicates that trading is in line with expectations, and we continue to estimate FY 22 FD EPS of 16.9p. Average net debt decreased from £432m in FY 21 to estimated £215m in FY 22, helped by the May 2021 raise and sale of Kier Living. Inflationary pressures continue but remain well managed. The CMD in May 2022 highlighted the disciplined growth approach at Kier. Management’s medium-term targets suggest EBIT of c. £150m which is only 7% ahead of our FY 24 estimate. The order book has increased from £8.5bn at Q3 22 to in excess of £9.7bn at FY 22, which points to improving sales growth. Balance sheet is strong enough. BUY, TP 150p and trading on a CY 23 PE of 3.8x.
Six of the best We hosted a webinar on Tuesday to discuss the six stocks – Future, Grafton, Impax Asset Management#, Kenmare Resources, Kier# and Rank# – included in our recent “Six of the best” publication. For those that missed the chance to listen to our analysts discuss their stock ideas, we include the links to each video below. Charles.Hall@peelhunt.com, Clyde.Lewis@peelhunt.com Full webinar Future Grafton Impax Asset Management# Kenmare Resources# Kier# Rank# #Corporate client of Peel Hunt
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BISS 2022 Conference notes Management tone remains confident and the recent contract momentum continues to strengthen the order book and framework portfolio. In common with its peers, Kier continues to successfully manage cost inflation, materials availability and skills. We retain our long-standing estimates and expect continuing reassurance on 19 July (FY22 update). In an uncertain market, Kier is considered a safe haven given long term public sector investment commitments. We reiterate our 200p target price and Buy recommendation. Andrew.Nussey@peelhunt.com
A safer haven, time to revisit Kier is trading below the level of the equity raise in 2021 (at 85p), implying a September 2023 PE of 3.5x, despite a clear strengthening of the investment case and management’s continuing confidence in delivering its medium-term goals. The update (ahead of the upbeat CMD on 25 May) confirmed that trading was in line. Subsequent contract awards were also positive and further strengthen the order book. We expect reassurance on 19 July (FY22 update). In an uncertain market, Kier offers a relatively safe haven, given long-term public-sector investment commitments. We reiterate our Buy and 200p TP. Andrew.Nussey@peelhunt.com
Kier, the leading tier-1 contractor with key strengths in public sector and regulated industry construction, recently hosted a well-attended CMD. The event highlighted the significant contract opportunities in each of its chosen verticals, with demand underpinned by increasing government spending and regulation. Kier is a strategic supplier in each of its segments and is well placed to benefit from this favourable market environment. Finally, the new management team are clearly pursuing a disciplined approach, with a close focus on risk management and cash generation.
Capital Markets Event
As indicated yesterday, trading is in line with expectations. Kier has strong positions in all of it markets, with the exception of the small International and Environmental Services businesses. The business model is focused on disciplined growth. Risks are being carefully controlled through gating processes, but also through Modern Methods of Construction. The business has strong ESG credentials, which are a license to operate and a point of differentiation. The business faces into high growth markets. The margins target of 3.5% has been achieved but should be sustainable. Excess cash from Infrastructure and Construction can be recycled into the Property business to deliver a low risk 15% ROCE. Balance sheet strength, with strong prospects. BUY, TP 150p and trading on a CY 22 PE of 4.2x.
Initial CMD thoughts – professional execution Yesterday Kier hosted a CMD that clearly demonstrated significant operational and strategic progress. Despite manageable inflationary pressures, the addressable market opportunity is substantial and the focus on relationship-led frameworks, capability and continuous improvement further strengthens the investment case. The in-line update on Tuesday reflects continuing progress and management is confident in delivering the medium-term targets. On a Jun 2023 PE of 3.9x and a >20% FCF yield, the quality of earnings and cash generation remain materially undervalued in our view. Buy. Andrew.Nussey@peelhunt.com
Kier, the leading tier-1 contractor with key strengths in public sector and regulated industry construction, continues to win good levels of new work. The pre-CMD trading update confirmed that the Mar-22 order book was £8.5bn, up from £8.0bn in Dec-21 and £7.7bn in Jun-21. This expansion highlights the growth opportunities within Kier’s core verticals and provides further comfort on the team’s ability to deliver upon its medium-term objectives.
In line trading update, confident outlook The update confirms that trading remains in line. Work winning remains positive (order book rising 6%) and is consistent with bidding disciplines. Inflationary pressures remain manageable. We retain our Jun 2022E PBT of £93.5m (cons £94.5m) to give EPS of 16.5p. No change to cash assumptions (FY22 net cash £67m). The outlook remains positive, with management confident in the delivery of FY24 objectives. The CMD presentations on Wednesday should help demonstrate the quality of earnings, as well as the returns and growth potential. 3.9x Jun 2023E PE and >20% FCF provide an excellent entry point. Andrew.Nussey@peelhunt.com
Kier has performed well despite continuing inflationary pressures. We maintain our earnings estimates. Management’s medium-term targets suggest EBIT of c. £150m which is only 7% ahead of our FY 24 estimate. We maintain our FY 22 average net debt estimate of £190m. The order book has increased from the H1 22 level of £8.0bn to £8.5bn at 31 March 22. At Construction, the school and hospital programmes continue apace. At Infrastructure, it is a target rich environment with a good pipeline in Rail, Water and Nuclear. At Property, ROCE should start to improve after FY 22. Balance sheet strength, with strong prospects. BUY, TP 150p and trading on a CY 22 PE of 4.3x.
Kier, the leading tier-1 contractor with key strengths in public sector and regulated industry construction, has restructured, refinanced and refocused its business. Consequently, it is well placed to benefit from the government’s supportive policy initiatives. However, due to its poor free cash flow record and historical leverage, the shares trade on a >55% P/E discount to its peers. As investors see the free cash conversion return to historical norms and see further reductions in leverage, confidence will undoubtedly grow, and the valuation discount should disappear.
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The H1 22 FDS EPS of 7.5p was 4% ahead of our estimates and EBIT margins of 3.5% reached the target level, helped by Property. We maintain our EPS estimates. We expect more volatility in input prices but believe this can be mitigated. Management’s medium-term targets suggest EBIT of c. £150m, which is 7% ahead of our FY 24 estimate. We maintain our FY 22 average net debt estimate of £190m, having increased it slightly after the January trading update. The order book has increased from the FY 21 level of £7.7bn to £8.0bn at H1 22, with strength elsewhere offsetting the loss of Area 9. The CMD in May should shed more light on the operational progress and balance sheet strength provides scope for accretive acquisitions. BUY, TP 150p and trading on a CY 22 PE of 4.9x.
Stronger margin offsets lower volumes
Kier Group, Costain Group, TruFin, Mining LOWdown, SMID Market Highlights
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Kier Group, Costain Group, TruFin, Mining LOWdown, Market Highlights
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1H FY22 in line, n/c to outlook 1H FY22 PBT of £43.0m (vs PHe £41.0m) reflects the growing predictability (margin and cash) arising from the strategic and operational actions. No major surprises in the commentary, with industry pressures being successfully managed. The outlook remains positive (supported by the visibility from a growing, well-bid order book) and we retain estimates. Management remains confident in delivering the FY24 targets. The shares continue to offer excellent value given the potential for strong free cash flow growth. We look forward to the CMD (25 May), which could prove to be an important SP catalyst. Andrew.Nussey@peelhunt.com
The H1 22 results were slightly ahead of expectations with FD EPS of 7.5p and margins of 3.5%, at the target level, helped by Property. We maintain our EPS estimates. We expect more volatility of input prices, but we expect they can be mitigated. Management’s medium-term targets suggest EBIT of c. £150m which is only 7% ahead of our FY 24 estimate. We maintain our FY 22 average net debt estimate of £190m having increased it slightly after the January trading update. The order book has increased from the FY 21 level of £7.7bn to £8.0bn at H1 22, with strength elsewhere off-setting the loss of Area 9. Balance sheet strength, with strong prospects. BUY, TP 150p and trading on a CY 22 PE of 4.8x.
1H22 in line, positive momentum continues Scheduled update confirms that trading remains in line. Despite previously-flagged delays to some awards, the operational focus, mix and efficiencies have ensured another good EBITA performance. However, contract momentum has now accelerated (order book +4%) - underpinning a positive outlook. The financial goals have been reiterated. No surprises in the cash performance – we assume 1H22 av net debt of c.£190m. We maintain estimates, but momentum would suggest some upside risk building to FY23E EPS. No comment re Tilbury Douglas speculation. Shares remain a key Buy given FCF growth. Andrew.Nussey@peelhunt.com
Net debt reduction on track
Kier traded in line with expectations in H1 22 and we introduce an H1 22 FD EPS estimate of 7.2p. We maintain our headline FY 22 earnings estimates but make changes to the mix as some projects are delayed. No news on the potential strategically sensible and cost synergistic Tilbury Douglas deal. We believe increasing input costs continue to be mitigated and there are signs that they are easing. We increase our FY 22 average net debt estimate of £180m to £190m primarily due to lower KEPS and lower activity. The order book has increased from the FY 21 level of £7.7bn to £8.0bn at H1 22. Balance sheet strength, with strong prospects. BUY, TP 150p and trading on a CY 22 PE of 6.0x.
Speculation re Tilbury Douglas Last night Sky News reported that Kier is in ‘exclusive’ discussions to buy Tilbury Douglas (the rebranded construction arm of Interserve). There is currently limited and historic public financial information, but a company press release in March 2021 flagged an expected level of annual revenue of £500m across England, Scotland and Wales. We note the competitive and operational overlap with Kier (suggesting the potential for synergies if a transaction is undertaken). The next scheduled Kier news flow is the 1H22 update (to December) on Thursday. Kier is trading on 5.4x June 2023E EPS. Andrew.Nussey@peelhunt.com
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The FY 21 results demonstrated the scale of the turnaround. Having delivered what it said it would for FY21, we believe that management’s claims that EBIT will reach c. £150m in the medium term are credible. While sales and orders fell in the FY, we believe that more than £4.0bn is achievable medium term, given the strength in infrastructure and social infrastructure. A CY 22 and recovered P/E of 6.8x and 5.1x represent a distressed rating. However, the business is sound with spot net cash at the FY and average cash expected medium term. We expect to hear more about capital allocation at the CMD in 2022.
Delevering and delivering
FY21 slightly ahead, firmly back on the front foot FY21 results are consistent with the 13 July update. Improving activity mix, operational focus and cost efficiency drive EBITA of £100m (3.0% margin). Spot net cash position of £3m (post strong FCF, the successful equity raise and sale of Kier Living). Cost inflation remains manageable and management has reiterated its medium-term financial aspirations. We maintain our Jun’22E PBT of £93.5m (cons £96.6m) to give EPS of 16.5p. We believe the shares remain materially undervalued (6.2x FY23E PE and 14% FCF yield) given the improving quality of earnings and the resulting visibility on growing FCF cash flows. Andrew.Nussey@peelhunt.com
The FY 21 FD EPS increased 102% and was 5% ahead of estimates. We maintain our underlying FY 22 EBIT, but increase our interest charge resulting in a 6% reduction to our FY 22 FD EPS. We expect that increasing input costs can be absorbed as most contracts are cost-plus. Management’s medium-term targets suggest EBIT of c. £150m and we introduce an estimate of £140m in FY 24. We increase our FY 22 average net debt estimate from £111m to £180m primarily due to lower KEPS and lower activity. The order book has fallen from the H1 21 level of £8.0bn to £7.7bn at FY 21 due to selectivity and procurement delays. We expect Kier to be a key beneficiary of the National Infrastructure strategy. Balance sheet strength restored, with strong prospects. BUY, TP 150p and trading on a CY 22 PE of 7.0x.
Moderate improvement to our forecasts
Confident FY21 update, notable outperformance The scheduled update confirmed trading was ‘moderately’ ahead of expectations (in line with PHe). Notably, the operational focus and delivered cost efficiencies should ensure a margin of c.3% (PHe 2.9%). The cash performance is also better: we now expect a very modest spot net debt position. The order book was supported by a number of high quality new contract awards and management confidently reiterated the medium-term financial aspirations. We maintain our June 2022E PBT of £93.5m to give EPS of 16.5p. The shares remain materially undervalued given the growing visibility on future cash flows. Andrew.Nussey@peelhunt.com
The trading statement guides to trading ahead of expectations and we estimate FY 21 FD EPS of 23.5p, which reflects the increased guidance and changes to WANoS for the bonus element of the capital raise. Management’s medium term targets suggest EBIT of c. £150m and EPS of 24p. We expect that increasing input costs can be absorbed. Average month end net debt was ‘similar to the FY 20 level’ of £436m at FY 21 due to the timing of the Kier living disposal and capital raise. We estimate the order book has fallen £0.5bn to £7.5bn at FY 21 as Kier continued to win work but at a slower pace due to procurement delays. The balance sheet strength has been restored, with strong prospects. BUY, TP 150p and trading on a CY 22 PE of 6.8x.
Meeting Notes - Jul 07 2021
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In our view, Kier’s successful recapitalisation was the final major element of management's restructuring that has provided a platform for its market-leading businesses to capture the significant opportunities of the UK Government's 'levelling up' infrastructure programme. We now expect a period-en
New Kier: solid foundations to sustain FCF The successful equity raise gives this leading management team the necessary tools to generate sustainable, attractive equity returns, in our view. In this note we outline our confidence in management delivering its financial objectives (supported by the favourable market dynamics) and highlight how Kier’s strong positioning could accelerate achieving our free cash flow expectations, and hence the resumption of dividends. The shares trade on a 13.9% FY22E FCF yield and we see material upside. Andrew.Nussey@peelhunt.com 21-page note
c. £241m firm placing at the top of the target range of £190m to £240m at a 17% discount. As expected the raise will be used to reduce the debt and fund investment. This is the final milestone in the group’s strategy. There is no update on trading but as we wrote last month Kier is turning a corner. We show our key placing assumptions. We estimate 6% and 60% FD EPS dilution in FY 21 and FY 22 respectively. We expect net cash at FY 21 and close to average cash neutral in FY 23. TP unchanged at 150p given narrow discount, CY 23 P/E of 5.0x.
Proposed £241m equity raise Kier has announced that it proposes to raise c.£241m by way of a fully-underwritten firm placing, placing and open offer, and separate directors' subscription. Together with the recent sale of Kier Living, the transaction should raise approximately £351m of gross proceeds for the group. The issue price (85p) represents a discount of 17% to the closing share price of 102p. The proceeds should provide the group with the financial and operational flexibility to continue to deliver on its strategic objectives within its chosen markets. As corporate broker we remain restricted on Kier. Andrew.Nussey@peelhunt.com
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Operationally, Kier is performing strongly and benefits from a very attractive outlook. Its market-leading businesses in Construction and Infrastructure Services are expected to deliver good profitability this year, and the outlook is very good due to the UK Government's committed infrastructure sp
H1 21 results came in slightly ahead of expectations with FD EPS of 13.0p vs. Liberum 12.5p. We maintain our underlying FY 21 earnings estimates, underpinned by greater cost savings increased from at least £100m at FY 20 to £115m for FY 21. Average month-end net debt was in line and we maintain our undisturbed average monthly net debt. The big news was the proposed equity raise of £190m to £240m via a placing, and conditional RCF extension to 2025. Following the sale of KL last week, this will substantially de-risk the balance sheet. Medium term, we see £150m of EBIT as achievable. Assuming a £215m equity raise, and including the pension deficit and KEPS, we estimate a medium-term EV/ EBIT of 3.4x, which looks too cheap to us. BUY, TP 150p.
Medium-term targets & recapitalisation programme
Interims, medium-term targets and proposed equity raise The interims are consistent with the January update and reflect a material improvement in performance (despite Covid-19). Adjusted operating profit increased to £48m (2.9% margin). Average net debt was stable at £436m, despite further reduction in KEPS and reduced payment days. FY21 trading remains in line with management’s expectations. Revenue, margin and cash targets are introduced today with the cost-savings target increased to at least £115m by 2021. A proposed equity raise of £190-£240m expected in the coming weeks. Lenders’ agreement to extend RCF to 2025 (conditional on successful equity raise). Andrew.Nussey@peelhunt.com
The H1 21 results were slightly ahead of expectations with FD EPS of 13.0p vs. Liberum 12.5p. We maintain our underlying FY 21 earnings estimates, underpinned by greater cost savings. Average month end net debt was £436m at H1 21, up on H1 20 but precisely in line with estimates. We maintain our undisturbed average monthly net debt. Proposed equity raise of £190m to £240m and conditional RCF extension to 2025 will de-risk the balance sheet. Management’s medium term targets suggest EBIT £150m and EPS of 20p, assuming a £215m raise at a 30% discount. A medium term EV/ EBIT of 2.5x post the raise is cheap. BUY, TP from 120p to 150p pre the raise as financial risks are significantly reduced.
Kier has announced the much anticipated disposal of Kier Living (KL). The gross cash consideration is £110m, in line with book value and our valuation. The disposal also removes an undisclosed amount of JV debt from the balance sheet and reduces working capital volatility. Net debt will be reduced by £90m and gross debt by £75m. The price seems reasonable and the disposal will strengthen the balance sheet and improve focus. KL was already excluded from continuing EBIT, but we estimate 3% accretion to FY 22 FD EPS from reduced interest. We estimate a revised FY 21 covenant net debt / EBITDA of 1.9x, noting the other liabilities still on the balance sheet and hump adjustment. A CY 21 EV/ EBITDA of 3.7x is cheap, BUY, TP 120p.
Proposed sale of Kier Living On Friday (post market close) Kier announced the sale of Kier Living (its housebuilding operations). The consideration is £110m, payable in cash on completion. As at 30 June 2020, Kier Living was classified as an asset held for sale with a fair value of £110m. The trading update confirms that since the 19 January update, Kier has continued to perform well and in line with the board’s expectations (interim results due 21 April). Kier continues to consider a potential equity raise. Completion is conditional upon shareholders’ approval being obtained at a General Meeting. As corporate broker to Kier we are restricted. Andrew.Nussey@peelhunt.com
Reassuring update, n/c to estimates The 1H FY21 update confirms that trading was slightly ahead of expectations. Productivity improvement and recent work winning has been notable, despite Covid-19 restrictions. Cash generation in the period has ensured that 1H average net debt will be similar to FY20 (£436m), despite the higher Covid-19 starting point. Self-help progress and cash generation now suggests upside risk to estimates, but given the potential for some lockdown 3 disruption we conservatively make no change to our P&L or debt expectations. Strategic actions continue to progress and we see scope for outperformance. Buy. Andrew.Nussey@peelhunt.com
Steady progress
Scheduled trading statement indicates that Kier traded slightly above expectations in H1 21. We maintain our underlying FY 21 earnings estimates, with the modest drag from lockdowns off-set by increased cost savings. We expect interim average net debt of £436m, stable at the FY level. We leave our average monthly net debt estimate of £440m unchanged for FY 21 as tax deferrals unwind. We expect that the order book has increased from the FY 20 level of £7.9bn to £8.0bn for H1 21 with a number of contract wins. We expect Kier to be a big beneficiary of the National Infrastructure strategy. Kier Living talks are ongoing and will help to ease the balance sheet pressure. A CY 21 EV/ EBITDA of 6.5x is cheap, BUY, TP 120p.
FY 20 PBT was ahead, but there was £237m of adjusting items. We maintain our FY 21 estimates, which already reflect the £100m of cost savings. FY 20 spot net debt increased from £243m at H1 20 to £310m, due to lower Q4 sales and despite £80m of government support. We continue to expect average monthly net debt of £440m for FY 21 as tax deferrals unwind. Covenants and deficit recovery payments have been renegotiated. A CY 21 EV/EBITDA of 3.8x is attractive and the new arrangements give Kier time to resolve its balance sheet. BUY, TP 120p.
Adjusting for COVID costs taken above the line, PBT was ahead of our expectations, but there were £237m of adjusting items. We maintain our underlying FY 21 earnings estimates, which we updated in June to reflect the increased cost savings. FY 20 spot net debt increased from £242m in H1 to £310m, due the lower sales in Q4 and despite £75m of government support. We leave our average monthly net debt estimate of £440m unchanged for FY 21 as tax deferrals unwind, but pension payments have been reduced. Covenants have been renegotiated and the business is a going concern. The order book has remained stable at the H1 20 level of £7.9bn, and Boris Johnsons’ build program should be supportive. A CY 21 EV/ EBITDA of 3.9x is attractive and the new arrangements give Kier the most valuable commodity, time, BUY, TP 120p.
Unscheduled trading statement guides to underlying resilience, but an adverse impact from COVID on revenues and costs. There is a clear plan to cut costs and protect cash flows, and estimated savings have been increased from £65m to £100m.
Kier’s JV has been granted notice to proceed by HS2. This already represents c. 10% of Kier’s order book.
Sites at Kier were paused for a day, but 80% have re-opened. The government is the key customer and is supportive.
At the H1 20 results, EBIT increased 3% on a l-f-l basis to £47m and average net debt was £395m vs our estimate of £415m, but there were £71m of exceptionals. We cut our FY20 EPS estimate by 17% to eliminate discontinueds, but underlying trading is in line with expectations.
H1 EPS broadly in line, but £71m of non-underlying items. H1 net debt up on the FY, with a £76m working capital outflow, but average net debt better than expected. Other encumbrances remain significant, but will reduce with disposals.
Kier has issued an unscheduled trading statement that guides to trading in line and we therefore leave our estimates unchanged. We introduce estimates for H1 2020, when we assume a 40% weighting of PBT to H1.
AGM trading statement guides to trading in line with expectations, but now indicates at least £55m of savings in FY 2021. We continue to expect average net debt of £374m for FY 2020, which is clearly key.
Kier Group, Summit Properties, FW Thorpe, Time Out, SMID Market Highlights
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Kier Group, Rightmove, Summit Properties, FW Thorpe, Time Out, Market Highlights
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FY19 was broadly in line with revised guidance. But there were £341m of exceptionals, including £172m of disposal-related charges as management simplifies the business.
FY EPS in line with revised guidance, but £341m of non-underlying items. FY net debt down on the FY and H1 level as expected, but £219m working capital outflow. Other encumbrances remain significant.
Kier Group, RPS, Merlin Entertainments, Spirent, Smart Metering Systems, SMID Market Highlights
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Following this morning’s announcement, we leave revenues unchanged, given that we are already bottom of the consensus range, but reduce our underlying EBIT by £10m for FY19. Spot and average net debt are lower than expectations for FY19 at £167m and £422m, respectively.
Kier, Elegant Hotels, Safestore, Frontier Developments, Team17, GetBusy, SMID Market Highlights
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Kier, Elegant Hotels, Safestore, Infineon, STMicroelectronics, Ashtead, Frontier Developments, Team17, GetBusy, Market Highlights
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Kier has annnounced an accelerated strategic review. Future Proofing Kier has been increased and should yield £55m of gross savings in FY2021.
FY2019 FD EPS reduced by 30% to 62.1p. Highways seeing reduced levels of maintenance spend.
Kier, Ricardo, SMID Market Highlights
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Liberum's most insightful and high-value research and commentary published this past week.
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Kier Group, CLS Holdings, Keywords, Unite, SMID Market Highlights
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Kier Group, AMS, CLS Holdings, Keywords, Sanofi, Air France-KLM, Unite, Market Highlights
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Kier’s H1 19 results were below expectations as Resi suffered from a slowdown in sales and central costs spiked. A £220m working capital outflow was a cause for concern, but we expect to see a large part of this unwind in H2.
H1 FD EPS fell 17%, worse than we expected due to weaker unit sales at Resi, and there were £59.9m of non-underlying items. We make no change to our headline estimates for FY 2019, as Resi sales should pick up in H2.
Accounting error results in the restatement of £40m of net debt from assets held-for resale to underlying net debt. The Broadmoor contract results in a £25m non-underlying charge in H1 and a £25m reduction in future receipts.
Chief Executive to stand down. Trading statement accelerated and guides to trading in line with expectations.
Kier Group, Sirius Minerals, Ricardo, Assura, SMID Market Highlights
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Kier has a complicated but robust model. Its combination of businesses should result in stable earnings and a resilient B/S.
Rights issue announced on Friday to raise a net £250m. The purpose is to reduce leverage to levels more acceptable to stakeholders.
AGM statement guides to in line, and we assume c. 70% weighting to H2 as expected. Average net debt to fall £20m in H1 but we increase our over ambitious FY average net debt from £342m to £365m.
We perform a detailed analysis of Kier’s R&A. Contract profitability is relatively unvolatile. Divisional movements in cash show that Construction is actually cash generative.
Unless you are short of course. Kier's price rehabilitation that started a month ago (+15% in that period after falling 24% in the previous 11 months) can go further if the key is addressing the balance sheet/debt, whilst at the same time maintaining high single-digit EPS growth and low single-digit dividend growth through 2021. Management is certainly making the right strategy choices now and against potential upgrades for 2020, the rating is attractive (PE 7x, yield 7.8%, FCF yield 11%, debt reducing). I move to a Buy.
FY in line with 9% FD EPS growth, helped by McNicholas, and no exceptionals. Average net debt of £375m in line with expectations and the pension is now in surplus.
Kier is one of the most shorted stocks in the UK (10%). Are the bears onto something, like Carillion, or are they setting themselves up for a short squeeze, like Ocado? Given the amount of gratuitous mud that has been hurled at Kier recently, it is inevitable that some of it sticks.
Pre-close in line with expectations. We make no change to our FY 19 and FY 20 FD EPS estimates, but potential upside from the efficiency and stream-lining program. Efficiency and streamlining should generate a material benefit. Net debt a little better than consensus, average net debt a little worse. The order book increases to more than £10bn, helped by the two Highways extensions. The Cross Keys Homes JV should help Kier grow its mixed tenure house building. Construction expected to generate £38m of EBIT in FY 18. At Services, we assume Kier can hold its margin steady at c. 5% to FY 21. At Residential, we expect mixed tenure to continue to increase within the mix. Pent-up demand at Property and the pipeline has good visibility. TP of 1600p and attractive yield of 7.4%. BUY
The H1 was softer than we expected and cash flow was weak. The market is not in a forgiving mood. Our profit bridge suggests that H2 EBIT should be much stronger. The cash flow was largely due to paying creditors quicker; a good type of bad cash flow. We would expect much better cash flow in H2. While the strong JV dividend will not repeat, we expect capex to fall and no more exceptionals. This would be a catalyst for a re-rating from a CY 2018 P/E of 7.8x.
Interims a little weaker than expectations, but no exceptionals. Net debt increased from £147m at FY 2017 to £239m, as expected, but the pension deficit reduced. Management guide to 10% EPS growth, we leave our FD FY 2018 EPS unchanged with a 2% reduction to 2019 due to weaker Construction. Historic investments have depressed cash flows but management is now more focused on de-leveraging. The order book has remained broadly stable at the FY level of £9.5bn, and excludes the £0.5bn benefit from Carillion. At Construction, revenues were weak due to some delays and margins were restrained by a one-off £7.7m above the line hit on the Caribbean. At Services EBIT increased 19% YoY, helped by McNicholas. At Residential EBIT increased 7%, a little lower than expectations. At Property profits increased, better than expected. TP of 1600p and attractive yield of 6.6%, with yield cross in FY 2019.
Pre-close guides to in line, with no exceptionals. This follows an upbeat statement from Kier on Monday. A greater share of the Carillion JVs, which are trading well, should be positive. We expect average and net debt for this year to be broadly in line, but we expect c.£30m better cash generation after this year due to lower investments. Historic investments have depressed historic cash flows. We expect 6% L4L increase in the order book to c.£9.5bn at the interims, all due to McNicholas. At Construction, visibility and recent trading history provide some re-assurance. We expect YoY growth at Services to the H1. At Residential, expect margins to increase as Private trades through its old land and mixed tenure increases in the mix. Pent-up demand at Property which is a good market. Sensitive to higher rates, but lower investments only impacts 2021 onwards. Attractive yield of 7.4%. TP 1600p
AnimalCare—RTO of Ecuphar NV, a European animal health company. £30m raise. Ecuphar FY16 rev £68.4m, underlying EBITDA £8.9m. Due 13 July.| Angling Direct -Schedule 1 from the specialist fishing tackle retailer in the UK . Offer TBA. Expected mid July. | NEXUS Infrastructure—Offer TBA. Provider of essential infrastructure services to the UK housebuilding and commercial sectors. Expected 11 July. FYSep16 rev £135.7m. | Tatton Asset Management –Sch 1. Provider if services to FCA authorized financial advisers. Raising £10m at 156p. Secondary offer £41.6m. Due 6 July. | GYG—Intention to float by the superyacht painting, supply and maintenance company. Due 5 July. Raising £6.9m new plus vendor sale of £21.5m at 100p. Mkt Cap c. £47m. Revenue of €54.6m in FY16 and adjusted EBITDA of €6.7m. | Greencoat Renewables - Schedule 1. Targeting a portfolio of operating renewable electricity generation assets, initially investing in wind generation assets in Ireland. Offer TBC. Due Mid July. | FFI Holdings— Specialist in the provision of completion contracts to the entertainment industry for films, television, mini-series and streaming product. Raising £59m at 150p. Expected 30 June. | QUIZ— Omni-channel fast fashion womenswear Company intention to float. Due July 2017. Offer TBA | Ethernity Networks—Schedule 1 from Israeli based specialist in data processing technology used in high end carrier ethernet applications across the telecom, mobile, security and data centre markets. Expected 29 June. Raising £15m at 140p. Mkt Cap £45.5m. | Jangada Mines—Sch 1 advanced stage PGM exploration project containing what the Directors understand to be the largest PGM resource, and only pre-development PGM project, in South America. Raising £2.25m. Mkt Cap £9.9m. Expected 29 June. | Phoenix Global Mining— US Brown field copper play. Expected late June. Offer TBA | I3 Energy –Schedule 1. Independent oil and gas company with assets and operations in the UK. Offer TBC, 7 June admission. | Verditek— Sch 1 update. The Company's subsidiaries will be involved in advanced solar photovoltaic, filtration and absorption technologies specialising in providing environmental services. Issue price 10p. Admission late June | Hipgnosis Songs Fund investment company offering pure-play exposure to Songs and associated musical intellectual property rights. Prospectus yet to be published. | Impact Investment Trust—Exposure to a diversified portfolio of funds providing SMEs across developing economies with the growth capital they need to have a positive impact on the lives of the world's poorer populations. Raising up to $150m at $1.00 | Residential Secure Income - social housing REIT raising up to £300m Admission due c.12 July. | Curzon Energy—Report on Proactive Investors of intended LSE float this year with acquisition of coal bed methane assets in Oregon. Looking to raise £3m plus. | NLB Group—financial and banking institution based in Slovenia, with a network of 356 branches. Seeking Ljubliana Stock Exchange listing with GDRs on the LSE. Expected mid June. | Kuwait Energy— $150m raise plus vendor offer. Admission due June. 2p reserves 810.0 mmboe | Supermarket Income REIT– Up to £200m raise to acquire a diversified portfolio of supermarket real estate assets in the UK, providing long-term RPI-linked income. Due 21 July.
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Yesterday’s Autumn Statement appears to be: good for 'alternative' housing providers, UK-focused contractors and materials producers; potentially problematic for mainstream housebuilders; and bad news especially for lettings-dominated agents. Chancellor Philip Hammond’s key spending measures included an additional £3.7bn funding to boost new housing volumes and £1.1bn for roads. Shares in estate agents, however, have fallen in response to the threat to ban them from charging fees to tenants.
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Kier’s final results on 17 September, the first since the Mouchel acquisition completed in June, are likely to paint a confident outlook, including in roads, where the enlarged group has an expanded presence and the government has been stepping up investment. Our new estimates, reflecting the acquisition and rights issue, imply compound earnings growth of 13% over the next three years. Our new price target of 1,763p represents 17% potential upside and we restate our Buy recommendation.
