The recent buzz around infrastructure stocks, particularly Galliford Try and Kier Group, has caught my eye, and I must say, it’s a fascinating development in the context of the Burnham government’s rise to power. What makes this particularly intriguing is how these companies are thriving despite a challenging macroeconomic environment. It’s almost as if they’ve found a sweet spot in the market, and I’m here to unpack why this matters and what it could mean for investors.
The Burnham Effect: A Tailwind for Infrastructure
Andy Burnham’s ascent feels like a breath of fresh air for the infrastructure sector. His track record as Greater Manchester’s mayor, where he championed regional transport improvements and even proposed an underground rail network, suggests a leader who understands the value of infrastructure in economic growth. Personally, I think this is more than just political rhetoric; it’s a strategic move to address the ‘crumbling Britain’ narrative that has dominated headlines. What many people don’t realize is that infrastructure spending isn’t just about building roads and bridges—it’s about creating jobs, boosting local economies, and, crucially, winning voter approval.
But here’s the kicker: while Burnham’s plans sound promising, the execution will rely heavily on the private sector. Nationalization, as appealing as it may sound, is costly and complex. This means companies like Galliford Try and Kier Group are likely to remain at the forefront of delivering these projects. If you take a step back and think about it, this positions them as key beneficiaries of government spending, which is a rare defensive growth opportunity in today’s volatile market.
Galliford Try: The Steady Performer
Galliford Try’s recent performance is a testament to its strategic alignment with government priorities. With revenue growth of 3% and adjusted pre-tax profit at the top end of expectations, it’s clear they’re doing something right. What’s even more impressive is their cash position—a 21% increase in average month-end cash to £216.2 million. This isn’t just about financial health; it’s about resilience. In a world where inflation and geopolitical tensions loom large, having a robust cash buffer is a significant advantage.
One thing that immediately stands out is their consistent profit upgrades. This isn’t just luck; it’s a result of strategic planning and execution. From my perspective, Galliford Try’s ability to deliver on its promises makes it a relatively conservative choice for investors. Sure, contractor shares aren’t known for explosive growth, but their cyclically resistant nature offers a level of stability that’s hard to find elsewhere.
Kier Group: The Turnaround Story
Kier Group, on the other hand, is a bit of a wildcard. Historically, they’ve struggled with contract disruptions and riskier ventures, but their recent pivot towards major public sector contracts is paying off. Their order book has grown by 8% to £11.9 billion, and their cash position has improved significantly. What this really suggests is that Kier is finally getting its act together, and the market is taking notice.
A detail that I find especially interesting is their focus on qualitative progress. By aligning themselves with government priorities in water, defense, and energy, they’re not just chasing profits—they’re building a sustainable business model. This raises a deeper question: could Kier’s relative discount in the sector make it a more attractive pick than Galliford Try? Personally, I think there’s a strong case to be made, especially given their medium-term potential upside.
The Broader Implications
What’s happening with Galliford Try and Kier Group isn’t just about two companies—it’s about a broader trend in the market. Infrastructure spending is becoming a political necessity, and companies that can navigate this landscape effectively are poised to thrive. However, it’s not all smooth sailing. The Middle East conflict and inflationary pressures could temper progress, but I believe the impact will be less severe compared to sectors like private house-building.
If you take a step back and think about it, this is a rare moment where political ambition and market opportunity align. The Burnham government’s focus on infrastructure isn’t just about fixing roads; it’s about rebuilding public trust and economic stability. For investors, this presents a unique opportunity to capitalize on a sector that’s both defensive and growth-oriented.
Final Thoughts
In my opinion, both Galliford Try and Kier Group are worth considering, but if I had to choose, I’d lean towards Kier. Their turnaround story, combined with their relative discount, makes them a compelling option. However, timing is crucial—after the recent re-rates, investors should be cautious about summer volatility. On a two to three-year view, though, I’m upgrading both to a ‘buy’ rating.
What this really suggests is that infrastructure isn’t just a sector—it’s a reflection of our collective aspirations for a better, more connected future. And in that future, companies like Galliford Try and Kier Group could very well be the architects of change.
