Release Date: September 12, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Kier Group PLC (KIERF, Financial) reported significant revenue growth of over GBP560 million for FY24, with improved profitability and strong cash generation.
- The company's order book increased by 7% year over year to GBP10.8 billion, providing multiyear revenue visibility and securing over 90% of FY25 revenue.
- Kier Group PLC (KIERF) successfully delivered the acquisition of Buckingham Group's rail assets and refinanced the group, enhancing financial resilience.
- A final dividend of 3.48p per share was proposed, reflecting confidence in the business and a total dividend of 5.15p per share for FY24.
- The company achieved an adjusted operating margin of 3.8%, surpassing its medium-term value creation plan target, and reported a 31% increase in statutory profit before tax.
Negative Points
- Despite the positive financial performance, the company faced continued, albeit lower, inflationary pressures impacting profitability.
- The construction segment experienced a year-on-year reduction in margin due to a change in mix and increased overheads to support additional site starts.
- The property business faced a challenging environment with scheme evaluations, developments, and transactions being delayed due to market conditions.
- The group's accident incident rate increased by 76% over FY23, indicating a decline in safety performance compared to the previous year.
- The company anticipates a potential GBP20 million net exposure related to fire and cladding costs, following regulatory changes.
Q & A Highlights
Q: With 97% of FY25 revenue secured in construction, do you expect less work won in the year, and are there procurement delays due to government changes?
A: We don't anticipate any change in bidding strength or pipeline opportunities across all regions and sectors. The government is evaluating its position, but we expect no long-term policy changes affecting spending. (Andrew Davies, CEO)
Q: Regarding working capital, do you expect a working capital inflow or outflow unless revenue changes?
A: As a negative working capital business, growth results in an inflow. The average will mostly be impacted by the inflow already received, with incremental inflow based on further growth. (Simon Kesterton, CFO)
Q: On the updated long-term growth strategy, have you learned from the Buckingham acquisition regarding integrating acquisitions, and is there a focus on infrastructure services over construction?
A: We've learned a lot from the Buckingham acquisition, and integration has gone well. While there's no direct preference, we see more opportunities in infrastructure services. (Simon Kesterton, CFO)
Q: What does the move to an average net cash position in FY26 mean for potential cash deployment in property or M&A?
A: Once we reach a balanced sheet position, surplus cash can be deployed in property or M&A, with property offering a 15% ROCE as a benchmark for M&A attractiveness. (Simon Kesterton, CFO)
Q: Can you provide more color on expected divisional margin evolution, given the deviation last year?
A: Construction margin softened due to a mix shift, but remains industry-leading. Infrastructure services margin is flattered by design work and a non-recurring claim, expected to soften slightly. (Simon Kesterton, CFO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
