Kier Group shares stable. Where next amid challenging outlook?

Kier Group shares are stable but have been wallowing around 82p levels since April, with the company benefitting from its core construction and infrastructure businesses continuing to operate amid the Covid-19 crisis.

The company is responsible for maintaining the UK’s highways, schools hospitals and key repairs to the water, gas, power, telecoms and rail sectors, with its employees retaining their key worker status to continue carrying out these activities.

In a trading update, Kier said that its overall performance remains in line with expectations, with around 80% of its sites and workplaces running as normal.

However, its homebuilder business has been impacted, with work paused at its Kier Living sites until recently, with the UK government opting to begin reopening the economy by easing lockdown restrictions in May.

Kier closed at 1.8% higher at 82p share on Wednesday.

Kier ramps up cost-cutting measures

To mitigate the impact of the Covid-19 crisis, the company has expanded its cost saving programme and focused its attention on reducing its debt pile.

As it stands, the company’s net debt is in line with management’s expectations, with average month-end net debt at £396 million for the six months to 31 December 2019. Kier also said that it remains on track to deliver cost savings of at least £65 million for the financial year ending on 30 June 2021.

In order to deliver on its cost savings, around 6500 employees, including its executive committee and board of directors will all take a reduction of 7.5% - 25% of their base salaries between April and June.

However, the process to dispose of Kier Living and the evaluation of the options for its property business have both been paused until further notice.

Analysts remain optimistic about Kier Group

In the latest broker round-up in April, analysts from Peel Hunt and Liberum Capital reiterated their ‘buy’ rating for Kier.

Liberum Capital even upgraded its target price for the stock to 120p per share, implying a potential upside for the construction services and property group of 46%.

Whether the company is able to see its share price make those gains will depend heavily on the impact of the Covid-19 pandemic, with investors eager for and update on its performance when Kier unveils its full-year results in June.

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