Kier reported a healthy rise in half-year profit and revenue this morning, while pointing to a positive full-year outlook.
More from: Kier’s half-year revenue up as debt grows
However, investors initially appeared spooked by the results as the contractor’s share price lost 54p, or around 5 per cent, in value at one point.
So how did analysts explain the discrepancy?
Cannacord Genuity’s Aynsley Lammin said the dip could be explained by a 7 per cent fall in revenue in Kier’s construction division and delays on some projects.
“Given this space [building] has been a difficult place to be in terms of all that’s gone on in last six months, the market’s quite jittery,” he said.
This factor, along with Kier’s working capital position in its construction business, has “made people nervous”, the analyst added.
But he said the initial fall in the share price was “probably an over-reaction” and overall the results looked “reassuring”.
Applied Value’s Stephen Rawlinson agreed that investors are wary of the sector at the moment, in the wake of Carillion’s collapse. “The market is looking for reasons to be nervous right now and few to be cheerful,” he said.
But he said that Kier’s results made “good reading” as it reported an 8 per cent rise in group revenue and 4 per cent increase in underlying pre-tax profit.
“As with Morgan Sindall and Balfour Beatty, there are few concerns about demand in the UK,” Mr Rawlinson added.
Liberum’s Joe Brent admitted the results were “a little weaker than expectations” but noted there were no exceptionals reported.
He added: “We should also take some comfort from Kier’s recent history. The last decade in construction has not been a picnic, but Kier’s worst performance was 2013, when profit fell 15 per cent.”
Kier has taken on a bigger share of three JVs that it was working on with Carillion – including HS2 and Smart Motorways projects. Kier said it is yet to factor in how the changes will affect its bottom line. However it is understood all three projects are profitable.
Kier’s net debt rose to £239m from £147m at the end of its 2017 financial year.
However analysts appeared unperturbed. Mr Brent said the rise was “as expected”.
Mr Rawlinson noted that net debt is expected to be less than one times EBITDA by the end of the year. “The business is making the investments needed to hit targets but not stretching the balance sheet too far,” he said.
Kier’s share price fall: Post-Carillion ‘jitters’ say analysts