Does Kier Group plc have more investment potential than Persimmon plc, Taylor Wimpey plc and Berkeley Group Holdings PLC after results?

Is Kier Group plc (LON:KIE) (KIE.L) a better investment opportunity than Persimmon plc (LON:PSN) (PSN.L), Taylor Wimpey plc (LON:TW) (TW.L) and Berkeley Group Holdings PLC (LON:BKG) (BKG.L)?

Kier Group plc
Kier Group plc

Kier Group plc (LON:KIE) (KIE.L) has registered a 8% share price gain today after releasing its full year results. The company’s results are in line with expectations. Revenue has risen 5% to £4.27 billion, while underlying profit from operations is 3% higher at £146 million after £7 million interest and tax cost from joint ventures.

The company’s net debt level of £110 million is at the lower end of market forecasts, with it maintaining a less than 1x ratio to EBITDA. Underlying cash conversion was strong during the year, with the company reporting a figure of 113%. Underlying EPS was 7% higher at 106.8p, while the full year dividend has been raised 5% to 67.5p.

Kier’s performance was positively impacted by all of its divisions. In Property, ROCE was 23%, with a consistent performance. Residential’s performance benefitted from an investment of £21 million to grow the mixed tenure portfolio. In Construction, a record £3 billion of contract awards were won during the year, while in Services a strong operating margin of 5.2% was recorded.

In the last year the Kier share price has fallen 8%. This is a worse performance than other property-related companies such as Persimmon plc (LON:PSN) (PSN.L), Taylor Wimpey plc (LON:TW) (TW.L) and Berkeley Group Holdings PLC (LON:BKG) (BKG.L). The Persimmon share price is up 40%, Taylor Wimpey has gained 22% and Berkeley is up 35% during the same time period.

In my opinion, Kier is making good progress and I feel it has investment potential for the long term. I’m encouraged by the consistent performance across its major divisions and an increase in dividends may indicate its management is confident in its medium term prospects. With strong cash conversion, I think it could start to reverse its underperformance in the last year and could become a sound investment for the long run.

About Robert Stephens 3883 Articles
Robert Stephens is a CFA Charterholder and an Equity Analyst by trade. He is a passionate private investor who has been buying and selling shares for many years, owning a wide range of UK shares in the process. He has written for Citywire and The Motley Fool US and now runs his own business. To contact Robert, please email [email protected] or use one of the other contact methods available on the 'Contact Us' page