Kier Group (LSE:KIE) shares are up 102% over two years. However they plummeted 11% in early buying and selling on 11 March after disappointing buyers. As such, a £10,000 funding within the infrastructure and development group two years in the past could be value round £20,500 now. That’s when dividends are accounted for. It is a very robust return on funding.

This FTSE 250 inventory hasn’t actually been on my radar in recent times. And whereas I don’t sometimes put money into firms that aren’t surpassing earnings expectations, I do discover Kier Group to be an attention-grabbing proposition.

What half-year outcomes instructed us

Kier Group’s shares fell 11% regardless of posting an increase in first-half revenue and income, in addition to lifting its dividend. For the six months to December 2024, adjusted pre-tax revenue elevated by 3% to £50.6m. In the meantime income grew 5% to £1.98bn. The corporate highlighted strong progress in its infrastructure providers and development segments. Its order guide reached a document £11bn, securing 98% of anticipated FY25 income.

Common month-end web debt dropped considerably to £37.6m from £136.5m the earlier 12 months, reflecting robust operational money circulation. Regardless of these optimistic outcomes, buyers responded cautiously, seemingly as a result of weaker-than-anticipated earnings mixed with profit-taking after a powerful run.

Kier’s CEO,Andrew Davies expressed confidence within the firm’s skill to maintain money era and profit from UK authorities infrastructure spending, however the share price decline suggests lingering uncertainty within the sector. This confidence additionally noticed administration increase the interim dividend by 20% to 2p per share.

Valuation is attractive

Kier Group’s present valuation has some enticing characteristic, with enhancing earnings per share (EPS) and a declining price-to-earnings (P/E) ratio. This alerts enhanced profitability and relative worth. The P/E ratio is projected to fall from 13.9 instances in 2024 to eight.5 instances in 2025, after which 7 instances by 2027, reflecting robust earnings progress as EPS rises from 0.09p in 2024 to 0.19p in 2027. 

The dividend yield stood at 3.9% for 2024, supported by a largely sustainable payout ratio of fifty.3%. Dividends per share are anticipated to develop steadily, reaching 0.08p by 2027 with the payout ratio falling to 40%. Financially, Kier has strengthened its stability sheet, reaching web money of £58m, bolstered by strong operational money circulation.

The underside line

The UK’s financial outlook for 2025 stays subdued, with forecasts suggesting GDP progress of 1.3-1.7% amid persistent geopolitical dangers and commerce uncertainties. Whereas a technical recession is unlikely, fears of a US downturn — pushed by weakened shopper demand and tightening financial coverage — might spill over into world markets, exacerbating the UK’s fragile restoration. 

Traditionally, governments have turned to infrastructure spending to stimulate progress throughout slowdowns, a technique strengthened by Labour’s latest Finances, which relaxed fiscal guidelines to allow £100bn in capital funding over 5 years.

Nonetheless, dangers linger. The corporate’s heavy reliance on public-sector contracts leaves it uncovered to potential delays in authorities spending or shifts in political priorities. Moreover, whereas infrastructure spending could cushion in opposition to home stagnation, Kier stays susceptible to broader macroeconomic shocks, together with inflationary pressures or a US-induced world recession that would derail fragile UK progress projections. It additionally seems to be very UK centered, having seemingly retreated from markets just like the Center East.

Personally, I’m protecting my powder dry, however I’ll be watching carefully.