Does Kier Group (LON:KIE) Have A Healthy Balance Sheet?

Legendary fund manager Li Lu (who Charlie Munger backed) once said, 'The biggest investment risk is not the volatility of prices, but whether you will suffer a permanent loss of capital.' So it seems the smart money knows that debt - which is usually involved in bankruptcies - is a very important factor, when you assess how risky a company is. We note that Kier Group plc (LON:KIE) does have debt on its balance sheet. But should shareholders be worried about its use of debt?

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When Is Debt A Problem?

Debt is a tool to help businesses grow, but if a business is incapable of paying off its lenders, then it exists at their mercy. Ultimately, if the company can't fulfill its legal obligations to repay debt, shareholders could walk away with nothing. While that is not too common, we often do see indebted companies permanently diluting shareholders because lenders force them to raise capital at a distressed price. Of course, plenty of companies use debt to fund growth, without any negative consequences. The first thing to do when considering how much debt a business uses is to look at its cash and debt together.

What Is Kier Group's Debt?

As you can see below, at the end of June 2025, Kier Group had UK£1.49b of debt, up from UK£1.40b a year ago. Click the image for more detail. However, its balance sheet shows it holds UK£1.69b in cash, so it actually has UK£204.1m net cash.

How Healthy Is Kier Group's Balance Sheet?

According to the last reported balance sheet, Kier Group had liabilities of UK£2.59b due within 12 months, and liabilities of UK£446.3m due beyond 12 months. On the other hand, it had cash of UK£1.69b and UK£520.4m worth of receivables due within a year. So it has liabilities totalling UK£825.5m more than its cash and near-term receivables, combined.

This deficit is considerable relative to its market capitalization of UK£917.4m, so it does suggest shareholders should keep an eye on Kier Group's use of debt. This suggests shareholders would be heavily diluted if the company needed to shore up its balance sheet in a hurry. Despite its noteworthy liabilities, Kier Group boasts net cash, so it's fair to say it does not have a heavy debt load!

See our latest analysis for Kier Group

Also relevant is that Kier Group has grown its EBIT by a very respectable 25% in the last year, thus enhancing its ability to pay down debt. There's no doubt that we learn most about debt from the balance sheet. But ultimately the future profitability of the business will decide if Kier Group can strengthen its balance sheet over time. So if you want to see what the professionals think, you might find this free report on analyst profit forecasts to be interesting.

But our final consideration is also important, because a company cannot pay debt with paper profits; it needs cold hard cash. While Kier Group has net cash on its balance sheet, it's still worth taking a look at its ability to convert earnings before interest and tax (EBIT) to free cash flow, to help us understand how quickly it is building (or eroding) that cash balance. Happily for any shareholders, Kier Group actually produced more free cash flow than EBIT over the last three years. There's nothing better than incoming cash when it comes to staying in your lenders' good graces.

Summing Up

While Kier Group does have more liabilities than liquid assets, it also has net cash of UK£204.1m. The cherry on top was that in converted 214% of that EBIT to free cash flow, bringing in UK£217m. So we are not troubled with Kier Group's debt use. When analysing debt levels, the balance sheet is the obvious place to start. However, not all investment risk resides within the balance sheet - far from it. Case in point: We've spotted 1 warning sign for Kier Group you should be aware of.

If, after all that, you're more interested in a fast growing company with a rock-solid balance sheet, then check out our list of net cash growth stocks without delay.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.