Investment Column: Kier constructs a solid future

Shares in construction group Kier are a rare commodity. At flotation almost a year ago, employees held just over 80 per cent of the company's shares. Today about 70 per cent of stock is still in staff hands. So far, hanging on to Kier shares has paid off. The group floated at 170p and its share price yesterday closed at 221.5p, 6p up on the day following a strong set of preliminary results. Pre-tax profits for the year to June rose 17.8 per cent to pounds 8.6m.

Kier is less dependent on the vagaries of the property market than many companies in this sector. In the home and properties division, one-third of group pre-tax profits, Kier has two companies, house-builder Twigden Homes and commercial property developer Kier Ventures.

Though the ups and downs of the housing market clearly impact upon Twigden Homes, the company's property banks reduce its reliance on the open land market. Kier Ventures has a number of low-risk projects in the bag, such as the construction of a fully pre-let retail park in Canterbury, which reduces its exposure to cyclical fluctuations.

Kier's second arm is construction, consisting of three divisions. Kier Regional looks after small UK construction projects and, with a growing list of clients, is performing well. Kier National, which carries out larger projects, has been hit by a downturn in road-building, though involvement in the Private Finance Initiative could mean an inflow of profits in the medium term. The third division, property management, has had a good year and is growing quickly. Turnover is set to double following Tuesday's pounds 4.5m acquisition of FM Contract Services.

All in all, the future at Kier looks solid. Forecasts put the company on a forward rating of about 10.5 times, below average for the sector.

Given prospects, this looks like good value.