Kier Group Plc – Value Analysis (LONDON:KIE) : December 19, 2017

Capitalcube gives Kier Group Plc a score of 41.

Our analysis is based on comparing Kier Group Plc with the following peers – Morgan Sindall Group plc, Carillion plc, Interserve Plc, Galliford Try PLC, Mears Group PLC, Henry Boot PLC and Balfour Beatty plc (MGNS-GB, CLLN-GB, IRV-GB, GFRD-GB, MER-GB, BOOT-GB and BBY-GB).

Investment Outlook

Kier Group Plc has a fundamental score of 41 and has a relative valuation of NEUTRAL.

Fundamental Score

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Company Overview

  • From a peer analysis angle, relative underperformance over the last year has improved more recently.
  • It’s current Price/Book of 2.06 is about median in its peer group.
  • The market expects faster earnings growth from KIE-GB than from its peers and also a turnaround in its current ROE.
  • KIE-GB has relatively low profit margins and median asset efficiency.
  • Changes in annual earnings (relative to peers) are better than the change in its revenues (relative to peers), implying the company is focused more on earnings.
  • KIE-GB‘s return on assets currently and over the past five years has trailed the peer median and suggests the company might be operationally challenged relative to its peers.
  • The company’s median gross margin and relatively low pre-tax margin suggest high operating costs versus peers.
  • While KIE-GB‘s revenues growth has been around the peer median in recent years, the market seems to see faster growth ahead and gives its shares a higher than peer median P/E ratio.
  • The company’s capital investment program and to-date returns suggest that the company is likely making big bets on the future.
  • KIE-GB might have enough interest coverage to take-on additional debt prudently.

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Leverage & Liquidity

KIE-GB might have enough interest coverage to take-on additional debt.

  • While KIE-GB‘s debt to enterprise ratio of 49.48% is on the high side compared to an overall benchmark of 25% (Note: The peer median is currently 50.40%), it also enjoys a relatively high interest coverage level of 4.85x which may give the company enough financial strength to support additional debt. Thus, the company is classified as having Some Capacity to raise more debt.
  • All 7 peers for the company have an outstanding debt balance.

KIE-GB has moved to a Some Capacity from a relatively high liquidity profile at the prior year-end.

  • KIE-GB‘s interest coverage is less than (but within one standard deviation of) its four-year average interest coverage of 6.10x.
  • While its interest coverage decreased to 4.85x from 5.77x (in 2016), its peer median increased during this period to 6.85x from 5.40x.
  • Interest coverage fell 2.38 points relative to peers (and is now lower than its peer median).
  • KIE-GB‘s debt-EV is its highest over the last four years and compares to a low of 25.74% in 2013.
  • The increase in its debt-EV to 49.48% from 29.39% (in 2016) was also accompanied by an increase in its peer median during this period to 50.40% from 26.21%.
  • Relative to peers, debt-EV fell 4.10 percentage points (and is now lower than its peer median).

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Key Liquidity Items

Company Debt/Enterprise Value (%) Current Ratio Interest Coverage (x) Cash Flow To Total Debt (%)
Morgan Sindall Group plc 3.57 1 11.55 301.89
Carillion plc 70.46 0.74 -2.49 8.5
Interserve Plc 80.93 1.15 2.43 -1.82
Galliford Try PLC 79.78 1.28 8.85 8.63
Mears Group PLC 18.65 1.3 15.81 47.53
Henry Boot PLC 13.83 1.67 28.76 74.55
Balfour Beatty plc 51.33 0.93 0.14 3.21
Kier Group plc 49.48 1.09 4.85 43.21
Peer Median 50.4 1.12 6.85 25.92
Best In Class 3.57 1.67 28.76 301.89

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Company Profile

Kier Group Plc is a property, residential, construction and services company which specializes in building and civil engineering, support services, residential and commercial property development and structured property financing, private and affordable housing. It operates through the following segments: Property, Residential, Construction, and Services. The Property segment encompasses property development and structured finance. The Residential segment includes private house building and affordable mixed tenure housing partnerships. The comprises the UK building and civil engineering businesses and the international business. The Services segment deals with the capabilities in highways maintenance, utilities, housing maintenance, facilities management and environmental services. The company was founded in 1992 and is headquartered in Sandy, the United Kingdom.


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