October 3, 2023

When the financial markets look uncertain, choose a business with a focus and a plan. Construction and Infrastructure Services Group Cyruswhich presented its interim results earlier this month, is trying to show that it has both.

The company went through a major restructuring that saw it cut jobs, suspend dividends and lose parts of its business, including housing construction.

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Kier currently focuses on two sectors: infrastructure and commodities. He has projects as diverse as renovating the Scottish Water sewer network and restoring Oldham Town Hall.

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Study: Kier dividend return should boost confidence

CEO Andrew Davies, who oversaw the restructuring, says the company’s increased order book provides investors with transparency. It is up 29 per cent to £10.1 billion with 96 per cent of Kier’s expected annual revenue already secured.

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Davies adds that 60 percent of the order book is in cost-reimbursable or “target value” contracts, meaning the company is less exposed to rising inflation risks for raw materials and payroll costs.

Davis aims to reassure investors. His statement during the tally was replete with phrases such as “bidding discipline” and “risk management is now built into the business.” Should investors be comforted by his words?

Those with good memories will remember why the company needed to restructure in the first place. When the current leadership came to power, Cyrus admitted to “accounting errors” and was heavily in debt.

Davis described the business as a “total mess” in one newspaper interview and revealed that he was close to collapse before being saved by HS2-related contracts.

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Analysts believe that the restructuring has largely strengthened the position of Kier. Joe Brent of Liberum notes that this is the third set of results where a business has met or exceeded the firm’s margin target.

Most forecast dividends from the group in 2024. Risks include delays in procurement and secured projects such as HS2. Shares have fallen 26% over the past 12 months, although they are up nearly 9% since January.

Midas’ verdict: The collapse of Carillion in 2018 shocked the infrastructure world and highlighted cracks at the very heart of the relationship between the government and the contractors that work for it.

Kier is still in debt and there is still concern about the sector and specifically Kier. However, it is possible to look into the future of Cyrus much further than in previous years, and it can be bright.

With Davis at the helm and a much more selective approach to contract bidding, the company’s valuation now looks undemanding. It trades at a forward earnings of 3.7 compared to a sector average of nearly seven. The return of its dividend should help build confidence. Buy.

Traded on: Main market Ticker: WHERE Contact: kier.co.uk or 01767 355000