Kier Group’s “hybrid” structure has been something of a conundrum to stock market investors of late. How do you value a housebuilder which also has a finger in civil engineering projects, operates big PFI contracts and helps local authorities to look after their social housing stock?

It was an issue highlighted earlier this year when fears of a slowdown in the housebuilding sector, prompted by a string of interest rate rises and compounded in July by a profits warning from Bovis Homes, took some of the wind out of Kier’s sails.

The group’s shares, which changed hands for 405p only four years ago, had risen to a peak of £25 in April, but have lost 20 per cent of their value since. City analysts suggest the multi-unit structure exacerbates the impact of perceived weakness in some of the company’s markets.

Kier’s attempts to reassure have previously been poorly rewarded, despite the management’s reputation for being conservative.

In July, the company told investors to expect full-year results “ahead of current market expectations”. City analysts upgraded their forecasts for this year and next, only for the shares to rise by an unenthusiastic 0.7 per cent on the day.

Yesterday’s full-year results may mark a turning point. The group’s upbeat assessment of its markets combined with pretax profits ahead of revised forecasts.

John Dodds, chief executive, said the outlook for UK construction was “probably the best that we have ever experienced”. He said he was having to turn away construction contracts, allowing the group to concentrate on the most profitable opportunities.

The unit contributed 66 per cent of revenues in the year, and 42 per cent of pretax profits. That strength can be expected to continue for at least the next three to four years, underpinned by the continuing strength in demand from the public and private sectors and additional work for the London 2012 Olympics.

The company said the homes market “continues to be sound”, with the group’s order book up 11 per cent on the year-end.

Its support services business, which maintains homes for local authorities, looks set to benefit from at least £100 million of additional revenues in the coming year, after the award of a number of new contracts in the year.

In PFI, the company is pursuing new opportunities in the prisons sector and switching its interest in the Government’s Building Schools for the Future programme to being the contractor, reducing the risk that it will be burdened with high bidding costs on lost tenders.

The group is also likely to be active in the secondary market for PFI projects, just as demand for the low-risk, steady income streams that such projects deliver is at a high.

The shares were up by as much as 2 per cent yesterday, closing 25p higher at £19.45 on the back of the results. A rebasing of the full-year, dividend from 26p to 50p, takes the yield to about 2 per cent. A 33 per cent jump in cash generation to £148.3 million should further aid growth. It is the cash generation capability of the construction business that allows the group to invest in PFI projects, which take longer to reap rewards.

This illustrates the value of the hybrid model. A sum-of-the-parts valuation suggests the shares are worth £23 to £24. That looks tempting. But amid uncertainties in the interest-rate environment, and an expected tightening of mortgage loan criteria for borrowers, only hold.

Jessops

The ailing camera retailer Jessops did not enjoy good exposure yesterday. The shares slipped 1¼p to 11p after the group revealed that Ian Harris, its finance director, was leaving after only ten months in the job.

Talk of a falling out with executive chairman David Adams, who joined Jessops in May, was brushed aside by insiders. Rather, they said, having negotiated a £66.5 million financing package – at a somewhat punitive price – with HSBC in June, Mr Harris, his work done, left “by mutual agreement”. Jessops has appointed headhunters to find a finance director better equipped to manage its hoped-for turnaround Even with Mr Adams, a former finance director at House of Fraser, in place, the lack of a finance head was enough to spook investors, already wary that Jessops has no margin for error. Like-for-like sales fell by 13 per cent in the third quarter and the group is expected to post a full-year loss of some £20 million. Jessops is struggling to find its feet in the digital age after an ill-timed expansion drive in the 1990s.

Plans to close 81 overlapping and unprofitable stores – a quarter of the total number – were welcomed by the City earlier this summer. But only on the proviso that Jessops must build revenues if it is to engineer a meaningful turnaround.

The onslaught of digital photography means that will be hard. People don’t get their snaps developed like they used to and while demand for cameras remains solid, it is not clear that people want to go to a specialist retailer for them.

The total cost of Jessops’s refinancing, organised by Mr Harris, is thought to be as much as £20 million over 18 months. That’s a marker of how risky a bet the bankers think they are making. Avoid.

Aggreko

Next year’s Beijing Olympics will no doubt provide some top-class headlines for Aggreko, as the sole provider of temporary power equipment to the event. But the real story behind Aggreko’s growth in emerging economies lies in the less glamorous reality of providing power for everyday purposes.

Yesterday’s half-year results revealed a 60 per cent jump in pretax profits to £47.5 million. A key driver of growth is rising demand from countries with power shortages or poor infrastructure. Aggreko can put up a temporary power station in five to ten weeks. A permanent one takes five to ten years.

Aggreko said full-year numbers would be well ahead of expectations, although the shares weakened slightly. At 19 times forecast earnings for 2008, the shares already trade at a premium to the sector. Hold.

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