Kier Group - confident Interim Trading Update shows shares cheap at 220p, TP 277p

Today the Kier Group (LON:KIE), which is a leading UK infrastructure services, construction and property group, reported strong trading for the first half of the fiscal year, with full-year expectations remaining unchanged and a significant milestone achieved in its cash position.

The company's order book stands at a record c.£11.6bn as of 31st December, with 94% of FY26 revenue secured.

Recent contract wins include work with British Airways, Southern Water worth £44m, and extensions at Hinkley Point C, alongside £112m in education projects and an £85.5m contract for the Government Property Agency Hub in Darlington.

Kier achieved an average month-end net cash position of c.£15m for the period, a substantial improvement from the prior year's net debt of £(38)m.

The company also announced the combination of its Transportation and Natural Resources, Nuclear & Networks divisions into a single Infrastructure division.

Management Comment

CEO Stuart Togwell stated that:

"We performed strongly in the first half of FY26, in line with our expectations, taking good momentum into the second half of the year.

In particular, the achievement of an average net cash position for the period represents a significant milestone and is testament to our culture of operational delivery and focus on working capital management.

We start the second half of the year, structured for further success."

Broker's View

Analyst Max Hayes, at Cavendish Capital Markets, reacted to today's news by stating that:

"Kier's 1H26 trading update was positive, achieving a key mid-term strategy milestone by delivering average month-end net cash of c£15m (1H25: £38m net debt).

The Group reported robust order book growth of 5.5% YoY to £11.6bn, securing 94% of FY26E budgeted revenue.

Key awards across Heathrow, Water, Nuclear and Education included two early contractor involvement contracts in Water, supporting risk reduction by involving contractors earlier in the design process.

Positive developments within Property saw planning permission secured for one development and a Logistics City scheme delivered in Milton Keynes.

We expect further progress at interim results in March, with Property typically 2H weighted."

For the current year to end-June, he is estimating group turnover of £4,273.2m (£4,087.8m), with adjusted pre-tax profits of £142.5m (£132.4m), lifting earnings up to 23.1p (20.5p) per share and with an increased dividend of 8.1p (7.2p).

He has a Buy note out on the company with a 277p Target Price.

My View

The UK Infrastructure sector offers a massive upside in orders, sales and profits - and Kier Group is sure to be getting its fair share.

Its equity looks undervalued, with its shares at 220p.