Why the Kier share price crashed 15% on Monday

• Kier finishes out Monday's session down 15.18% at 51.40p per share
• The building & materials sector dives 5.89%
• We unpack Kier's FY20 results, released to the market last week

Kier share price faces pressure, UK’s building & materials sector plunges

Construction and infrastructure group Kier (KIE) saw its share price crash on Monday, as broad market weakness weighed on the stock and investors likely continue to digest the company’s 2020 full-year results, released last Thursday.

Though investors appeared optimistic about Kier’s prospects last week, sentiment on the stock looks to have rapidly changed, with Kier closing out Monday’s session 15.18% lower, at 51.40p per share.

This bearish price action was likely exacerbated by general market weakness – with the FTSE 100 plunging 3.38% or 202 points, to finish out the session at the 5,804 point level.

Outsized weakness across the building & materials sector likely didn’t help matters, with the sector experiencing more pronounced losses on Monday than the broader UK market – falling 5.89% or 354 points.

Building materials and construction company CRH plunged 5.70% to 2,761p; construction and regeneration firm Morgan Sindall Group fell 4.88% to 1,208p; infrastructure group Balfour Beatty dropped 3.75% to 226p; while Billington Holdings saw its share price edge higher, rising 0.98% to 310p.

Unpacking Kier’s full-year results

Overall, investors are likely still mulling Kier’s full-year 2020 release, with the company last Thursday reporting substantially weaker revenues, lower profits and a significant post-tax loss, though flagging that trading in FY21 has been in line with expectations.

Examining these results, on the top-line and for the 12 months ending 30 June 2020, Kier reported revenues of €3.5 billion, significantly down from the €4.1 billion reported in fiscal 2019.

Despite stagnant revenues, the company described its order book as strong, currently standing at €7.9 billion, with it also being noted that the company is ‘Well placed to benefit from UK Government spending through established frameworks and other opportunities.’

In step with that weaker revenue performance, Kier reported a slump in profitability: Operating profits more than halved, coming in at €41.4 million. The company posted a loss before tax of €225 million against earnings per share of negative 106.2p.

Operating profit margins also continue to weaken – dropping from 2.1% in FY19 to 1.2% in FY20.

On a more granular level, both Kier's Construction and Infrastructure Services business segments witnessed significant declines across the top and bottom-line.

Kier’s construction segment in particular struggled in fiscal 2020, with revenues falling 15%, to €1,588 million; while operating profits plunged 46% to €36.1 million. These declines were attributed to both ‘challenging marketing conditions’ as well as the coronavirus pandemic – which drove both delays and inefficiencies.

The outlook

In spite of a year described as difficult, the company remains confident that progress has been made, with Kier's Chief Executive, Andrew Davies saying:

‘The progress made in the first nine months, despite challenging market conditions, reflected the successful execution of many elements of our strategic plan, as we began to experience the benefits of the decisive cost reduction actions taken.’

Regardless of that, management expects the impacts of the coronavirus will persist, with it being noted that:

‘The strategic actions being implemented by the new senior management team are designed to ensure Kier is well placed to benefit from the proposed substantial increase in UK infrastructure investment. We have a strong orderbook, and the current year has started in line with our expectations.’

Kier is down approximately 45% YTD.

How to trade Kier long or short…

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