Is Kier Group plc a better buy than Persimmon plc, Bovis Homes Group plc and Barratt Developments Plc after trading update?

Does Kier Group plc (LON:KIE) (KIE.L) have more investment potential than Persimmon plc (LON:PSN) (PSN.L), Bovis Homes Group plc (LON:BVS) (BVS.L) and Barratt Developments Plc (LON:BDEV) (BDEV.L)?


Kier Group plc (LON:KIE) (KIE.L) has released a trading update today to coincide with its AGM. It has traded in line with expectations since 28 June, with its shares rising 2% following its release.

The company’s Property segment is performing well, with a ROCE of over 20% delivered on an increasing capital base.

In Residential, Kier has increased ROCE and benefitted from the recycling of capital from its private land bank into the mixed tenure business. Private sales and pricing remain strong and demand for mixed tenure housing continues. This has been further assisted by recent government initiatives, notably the extension of the Help to Buy scheme.

In the company’s Services division, margins have been consistent and it has an order book representing more than 95% of its targeted revenue for the current financial year. Following its acquisition, the McNicholas business is performing well, with good progress being made with its integration.

In Kier’s Construction division, margins have been in line with expectations. The current order book represents more than 95% of the division’s targeted revenue for the current financial year.

In the last year the Kier share price has fallen 26%. That’s a worse performance than other construction-related stocks such as Persimmon plc (LON:PSN) (PSN.L), Bovis Homes Group plc (LON:BVS) (BVS.L) and Barratt Developments Plc (LON:BDEV) (BDEV.L). The Persimmon share price has gained 52%, Barratt is up 29% and Bovis has moved 35% higher during the same one year time period.

In my view, Kier has investment appeal for the long run. Its performance as a business seems to be relatively sound, and its share price fall could present a buying opportunity. While I’d rather own housebuilders such as Barratt and Persimmon, Kier could deliver improved share price performance in future than it has done in the past. Therefore, I’m feeling relatively optimistic about its long term outlook.

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