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Investec downgrades profits forecast for Kier but says company is strong

A major investment bank said contractor Kier’s profits will lower than it previously predicted but said investors should buy its shares for longer term gain

In a statement to investors, Investec analyst Andrew Gibb said he expected Kier’s profit before tax in 2012 to be 2 per cent lower than it previously forecast. He said predictions for Kier’s profit before tax for 2013 would drop 18 per cent from £76.5m to £62.5m. He said he had taken a “similarly cautious view” about 2014’s figures.

Mr Gibb said the bank had downgraded its predictions for Kier because margins of 2 per cent or more in its construction business were “not achievable in the near term” and the support services business might not be able to do the amount of outsourcing business expected because opportunities in the UK sector were taking time to materialise.

Kier also warned of pressure on margins and a delay in outsourcing contracts coming through from local authorities when it issued its half year results last month.

However Mr Gibb recommended buying Kier’s shares for longer term gains because of the firm’s “strong business mix” and cash.

He said: “This remains a well-run company, has increasingly interesting property and international exposure and has cash on the balance sheet to fund growth.”

Kier Group chief executive Paul Sheffield said: “Three brokers have put out research notes in the last week (Numis, Liberum and Investec), all with a ‘buy’ recommendation having concluded that the recent price reduction has been overdone.  This note from Investec reflects the sentiment that we expressed at our half year results.”

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