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TWST: In order to start off the interview, would you give us a brief overview of the Kier Group (KIE.L) - its different segments and its core markets?

Mr. Busby: Essentially, we are a construction business. It’s a construction conglomerate, really, in some respects because we do pure contracting. We also have a support service business within that at the moment. We then use the cash that the construction and services division generates to invest in businesses where the margins are better but still in the construction sector. By that I mean homes and property particularly. So, we’ve got homes and property as well as construction services and then the final area where we have an involvement here in the U.K., we have PFI as a method of government procurement, and we also have money and people invested in what we call infrastructure investment. So, we’ve got 5 key areas of expertise within Kier, all of them within the construction sector and we believe it is a very strong business model. Both the construction business and the services business generate a huge amount of cash. When we last measured this at the end of June this year that was approaching 150 million Pounds of negative operating assets, i.e. cash that has been generated from those businesses. We then invest that cash – that construction business makes small margins admittedly but we’re in the low-risk area of the industry and so we’re getting one percent, with an ambition to get to 1.5% margins. But we use the cash to invest in homes and properties where the margins are 14%. Again, in June we had almost 170 million invested in that area plus infrastructure investment. We’ve got some cash tied up there, too, around 10 million. But if you put those businesses together as a business model, then what we’ve achieved since we floated six years ago is an average 25% per annum compounded growth in the last six years plus a return on shareholders funds which each year has exceeded 40% and in the last year was actually 42.3%. So we believe in that business model. It has been very successful for us since we became independent 10 years ago. Every year in that last 10 years we’ve grown our profits, and as I’ve said, in the last 6 years, since we’ve floated that growth, has been 25% per annum compound. So it’s a well-proven business model that we are still very much fans of. It’s tried and tested and we believe the message is that it gives in terms of the history are really there for us to go forward with in the future so we are very committed to it.

TWST: What does your competitive landscape look like and does Kier have some sort of strategy for distancing themselves from its competitors?

Mr. Busby: We have a number of things that we think make us slightly different. I suppose the first one is the bulk of our construction turnover – 750 million Pounds of it – is in what we call a regional business. So these are locally-based businesses doing bread and butter construction with an average contract value of around, just over 3 million Pounds. Now, we’ve gone down that route because we believe the risks are significantly lower and what we’ve found is that we’ve got the best coverage of any of the major contractors in this area of the industry. It generates a huge amount of cash. It is the cash machine that drives the overall strategy and it really does separate us significantly from pretty much anyone else in the UK. We’re getting a lot of benefits now through that process and 58% of our total workload was negotiated or partnered in the last year. That’s because we perform. We provide a service (we are service providers after all) that, because we have got this national coverage of doing relatively small value jobs, gets supermarket operators. So we’re very strongly retail at the moment, with the likes of Tesco, Sainsbury, ASDA, Waitrose. We will be partnering and performing for all of these major retailers because we can give them this one point of contact anywhere in the UK. And the same with, we’ve just finished a big job for Hilton. They’re putting in what they call this “living well” concept where they’re putting pools and gyms into their hotels and we’ve spent a considerable amount of money for them over the last few years putting in those sort of facilities. So we’re getting a lot of work at the small end but dealing with national organizations through a single point-of-contact approach and its low-risk. The industry over here has a reputation of being, at times, quite high risk. I understand why it has that reputation. I don’t actually believe it’s as risky as maybe some have a feeling for but for us it’s very much low-risk. You don’t lose much on a contract with an average value of 3 million Pounds. We’re very keen on this overall small value, low-risk strategy and we’re benefiting significantly through this national spread.

TWST: Pretend I’m an investor. Can you give me three reasons to take a hard look at your stock?

Mr. Busby: It is extremely good value. We have been growing at 25 percent per annum compound. We expect reasonable growth this year and next year and we’re on an earnings rating of about eight, seven, something like that. Well, whichever way you look at it it’s pretty cheap. We have a growing dividend policy and, if you look at our track record, what you’re buying into here is a quality stock in the construction sector. If you put our stock in any other sector, the rating would be much better than we presently have. So we believe that we are a quality stock, we’re in an unfashionable sector, we are a low risk business we believe, because that’s the way we run it, and we’ve got growth in both income (i.e., profits) and dividends going forward so it, I think, is extremely good value.