Kier Group plc

Right. Good morning, everyone. Thank you for joining us for our half year results presentation. For those of you here in person, I'd like also to extend a warm welcome to those joining us by the webcast and audio as well. So I'm Andrew Davies. I'm chief executive of Keir Group and I'm joined today by Simon Kesterton, our chief financial officer. So this morning I will talk you through the highlights of the last six months to 31st of December 2023, and then I'll hand you over to Simon to talk through the group's financial performance. And this will be followed by an operational review, an update on ESG, and we'll finish off with our outlook. Then there'll be an opportunity for questions and answers at the end, and we'll start, if that's okay, with questions in the room, and then we'll go to see if there's any questions online as well. So if we move through the disclaimer and the results summary highlight and we talk to on slide four now the half year 24 highlights. So the first half of the year seen the group delivering a strong set of results with increased orders, revenue and profit. We delivered revenue growth at 23% with strong performance across the business. We achieved an adjusted operating profit of £65 million, an increase of 13%. We continue to deliver an industry-leading adjusted operating margin of 3.4% despite the continuing inflationary pressures. As our performance tends to be second-half weighted, we expect full-year margin to be in line with our medium-term target. Group's net cash position at 31st of December was £17 million, and that's materially better than the £131 million net debt position we had at the half-year 2023, and that's due to our free cash flow generation, which itself has been driven by increased volumes, particularly in our construction business. This strong cash generation has allowed the group to materially deleverage. The group's average month-end net debt for the period improved by £106 million to £137 million average net debt. The future prospects of the Group also remain strong, with the Group's order book increasing by 6% to £10.7 billion, reflecting contract wins across our business and providing multi-year revenue visibility. So 97% of our FY24 revenue is now secured, and we therefore continue to have a high degree of certainty against a backdrop of wider economic and political uncertainty. Significant effort has been made to improve the quality of our order book and as a reminder since 2019 we've exited low and loss making contracts. We spent a lot of time de-risking the portfolio. We focused on winning work within the UK government and regulated authorities with negotiated terms and appropriate risk profiles. Our order book is supported by long-term framework positions, and frameworks are our route to market. We've maintained and grown our central and local framework positions. However, we exclude long-term framework positions from the order book number I've just mentioned, and therefore these represent an additional pipeline of opportunities to us. In September we completed the acquisition of substantially all of the rail assets of the Buckingham Group and their HS2 contract supplying Kier's HS2 joint venture EKFB for a consideration of £9.4 million. The acquisition was an excellent cultural fit and was an opportunity for us to accelerate our rail strategy. The acquisition I'm pleased to say has been successfully integrated into the business. In February we successfully completed a refinancing of our facilities. We issued £250 million of senior notes and extended our revolving credit facility. These revised long-term debt facilities completed the last stage of the Group's recapitalisation and provide us with both flexibility and optionality going forward whilst we continue to deleverage. At our FY23 full year results we committed to recommence dividend payments once we had a clear line of sight of a sustainable net cash position alongside an appropriate longer term debt structure. I'm therefore absolutely delighted to be able to declare an interim dividend of 1.67 pence per share with Kier rejoining the dividend list. And lastly, the group was notified last week of our admission back into the FTSE 250 after five years. This is a great achievement and a testament to the hard work and commitment of our people who have enhanced our resilience and strengthened our financial position in line with the objectives set out in our medium-term value creation plan. And I'd like to thank the entire Kier team for their dedication and contribution to the group's performance. And with that, I'm delighted to hand over to Simon who will take us through the detailed financial results.

Thank you, Andrew. Morning, everyone. Turning to slide six, this slide sets out high level income statement. Reviewing the period, as Andrew mentioned, is higher than half year 23 and reflects volume growth in both infrastructure services and construction. which I'll cover in more detail on the next slide. We delivered an adjusted operating profit of £65 million in the period, despite continued, albeit lower, inflationary pressure. The group achieved an adjusted operating margin of 3.4%, which when considering our usual second-half weighting of earnings, is in line with our medium-term value creation plan. Statutory profit before tax is 6% higher than the comparative period, as increased rates were partially offset by material reductions in debt. We achieved adjusted earnings per share of 8.7 pence. This represents a 2% growth when compared to the 8.5% pence achieved in half year 23, despite corporation tax rates rising to 25% from April 2023. Net cash is significantly better than prior period at £17 million compared to £131 million worth of debt for half year 2023 as operating cash flows from volume growth translates into working capital inflows, reductions in adjusting items and pension scheme payments. As expected, the group materially delevered. This has resulted in average net debt reducing by £106 million to £136.5 million. Turning to slide 7, starting on the left hand side, we start with half year 2023 revenue of £1.5 billion. Infrastructure services revenue increased by 16% primarily due to the continued ramp up of capital works on HS2 and the successful Buckingham acquisition. Construction revenue increased by 29% as the strong order book we entered the year with converted to revenue. We also saw small growth in the property revenue and these all resulted in the growth of the group's revenue of 22.5% in the period to £1.9 billion. Moving now to the adjusted operating profit bridge, we start with the previous half year's adjusted operating profit of £57 million. Volume mix and price changes resulted in an increase of £6.1 million. We have achieved management actions of 5.4 million during the year. We continue to see inflationary pressure given the macroeconomic environment, but also continue to manage and mitigate this. Over 60% of our order book is made up of target costs or costs for impossible contracts. And if we do choose to give price certainty to our customers, it will be done after key risks and opportunities are understood. The result is an increase in adjusted operating profit to 65 million pounds. Adjusting items excluding non-cash amortisation and interest amounted to £9.5 million in the period and are broadly in line with the £9.1 million costs in the comparative period. The main item remains related to firing cladding costs which are £3 million higher than the comparative period. Given the nature of the construction projects we typically engage in, and following regulation change, we estimate our net exposure to this could be between 10 to 20 million pounds. As a reminder, the amortization of 11 million relates to acquisitions, and has increased as a result of the Buckingham acquisition. The additional amortization is provisional, as acquisition accounting is for 12 months, and we estimate will be circa four million pounds per annum for the next 1.7 years. Of the smaller legacy items, legal legacy claims in the year relate to the disposal of Keir Living in May 2021. The other costs include some Buckingham costs in connection with the acquisition. The interest relates to IFRS 16 where leased office space has been exited. As previously guided, we haven't incurred any restructuring or related costs. Moving on to free cash flow, the results of all the hard work done over the past two and a half years with the group achieving significant operational and financial progress can be seen very clearly here with a material improvement in operating cash flow despite the usual seasonal working capital outflow. Looking at the detail, we can see that adjusted EBITDA in the period grew to £92 million. We then have £46 million of working capital outflow, a significant improvement when compared to HY23 outflow of £79 million, as expected due to the growth in construction which started at the end of the last year. This includes an improvement in our supplier payment days by one day to 33 days. CAPEX in the period amounted to £26 million, however 19 of this relates to payments made under leases now capitalised under IFRS 16. Net interest and tax increased by £2 million in the period, due primarily to corporation tax payments restarting on the group's return to profitability. This results in the group materially improving its cash conversion from minus 122% to plus 19% as we generated a small cash flow of £12 million in operating cash, significantly better than the usual H1 outflow, further demonstrating the plan is delivering a meaningful improvement in the cash position of the group. Turning over the page, we have the net cash bridge. We start on the left hand side with closing cash of £64 million at the end of June 2023. We then see a small free cash outflow that I've just talked through of £8 million. We had adjusting items of £16 million, which includes the payment of items accrued for in FY23. Pension payments of £5 million. As previously mentioned, we paid £9 million to acquire certain contracts of the Buckingham Group, which are performing well. We then have the purchase of Kier Group shares. This is in respect of the Group's Employee Benefit Trust, which acquires Kier shares from the market for use in settling long-term incentive plan share schemes when they vest. The net cost of this was £4 million. The other £5 million relates to deploying capital to the property segment. This will help drive future returns as the current market is affording some great opportunities. This results in a net cash position of £17 million. Moving to slide 12, this slide is now a pleasure to talk to as we move through 2024, as it really demonstrates the significant progress made by the group in reducing our net debt. If we look at the last 18 months, we've reduced our average month-end net debt and debt-like items by £149 million, with £80 million of this being reported net debt. For HY24, we've seen the operating cash generation lead to material deleveraging. The 136 million achieved across the period is 106 million lower than the comparative, now that free cash flow generation is almost entirely devoted to paying down reported average month end net debt. A key part of the medium term plan was to generate cash and strengthen the balance sheet. The previous slide demonstrates the material improvement in the cash generation and reduced debt. This success provided the opportunity to put in place a long-term capital structure to support our strategy of de-gearing business whilst retaining flexibility and optionality to deliver future growth. In February 2024, after the period end, we secured long-term financing of the Group through the issuing of a £250 million five-year bond and extending the revolving credit facility to 2027, both strengthening our debt maturity profile and diversifying our funding sources, an important step in the delivery of our medium-term plan. This slide shows the details of the debt structure and the changes we will see over the next few years. As of 31 December, we had committed debt facilities of £548 million, comprising of a £475 million revolving credit facility and 73 million of US private placement notes. Previously, these were due to mature in January 2025. Following the completion of our 250 million bond issuance, our 548 million of facilities now comprise of 250 million of bonds, 261 million of revolving credit facility and 37 million of US private placement notes. The next key date is January 2025 when all of the US private placement notes and 111 million of the RCF mature and this will leave our facilities comprising of a 250 million pound bond and 150 million revolving credit facility which mature in 2029 and 2027 respectively. The maturity profiles reflected in the chart on the right hand side of the page. Slide 14 sets out our order book position. As you've heard from Andrew, our order book is high quality and has further increased by 6% to 10.7 billion compared to June 2023. We've secured 97% of our 2024 full year revenue as we continue to win work in our chosen markets. Significant effort has been made to continue to improve the quality of the order book. We're focused on winning work with UK government and regulated authorities. We continue to focus on managing risk and reward when bidding, negotiating, and delivering work. 60% of our order book is under target cost or cost reimbursable contracts. Our infrastructure business has nearly 100% of its contracts agreed as target cost or cost reimbursable, and it's important to balancing our risk and reward profile. Within our construction business, the majority of our contracts are fixed, but circa 95% of these are fixed following a two-stage process to identify and mitigate the risks involved. Our average order size in the construction business is only circa £20 million. This relatively average small order size results in us regularly repricing contracts. The order book continues to be underpinned by significant long-term framework agreements. Our long-term framework positions are excluded from the order book. These represent further opportunities for the group. Moving to capital allocation, we're focused on optimizing shareholder returns. Accordingly, as we generate cash from operations, we expect to deploy that in a number of ways. CapEx is expected to continue to be minimal. Further deleveraging as you're aware we're targeting a sustainable net cash position. We plan to invest further in our property business in order to generate consistent returns over time. We will continue to do this in a disciplined and controlled manner. We have previously targeted a range of £140 million to £170 million of capital employed in the property division. The range has recently been under review and has increased to a range of between £160 million to £225 million given the growth of the group. We're targeting a dividend cover around three times earnings through the cycle. With regard to mergers and acquisitions, the group continue to consider value accretive acquisitions in core markets, where there's potential to accelerate the medium term plan. We've always recognized the importance of dividends to our shareholders and reinstatement of one is an important facet of the medium term value creation plan, which we launched June 2021. We said that we could deliver a dividend covered circa three times by adjusted earnings over the cycle. We expected that we would pay the dividends as approximately one third as an interim dividend and approximately two thirds final dividend. The results presented today show strong operating and financial performance and we have seen a material deleveraging in the period. A significant improvement with the strength of the order book and future prospects of the group allow us to declare an interim dividend of 1.67 pence per share. This represents a dividend cover of approximately four times as we progressively move to the medium term target of three times. It's very pleasing that the results of everyone's hard work at the company are now being shared with our shareholders who have been extremely supportive over recent years. And as Andrew said earlier, I'd like to thank the whole KIA team for being able to deliver these results. And now I'll hand back to Andrew for the operating review.

So many thanks, Simon. And if we now turn to slide 18, and we'll look at our infrastructure services operational review first. So infrastructure services segment saw significant growth of 16%, largely driven by additional high-speed to capital works activity. And just as a reminder, as part of the Eiffage, Kier, Ferroville and BAM or EKFB joint venture, Kier is delivering the longest section of civil works, 80 kilometres from the Chilterns to just south of Warwick. We have the lead on project management and programme integration in the project venture. And the contracts also acquired through the Buckingham acquisition have contributed to this revenue growth on HS2. Our adjusted operating profit increased 30% to £44 million and adjusted operating margin remained strong for the infrastructure services sector at 4.7% as the volume growth translated to profit. We also had positive momentum in the order book with a 16% increase to £6.7 billion compared to the prior period. In terms of significant awards, our Natural Resources, Nuclear and Networks Division was appointed to the £3 billion SCAPE Utilities Framework, aimed at delivering utilities, civils and infrastructure and transportation services work. And we're one of two contractors that were awarded a place on that framework. And with 96% of our revenue secured for FY24, with our recent wins, we can see an underpin to our future revenue in infrastructure services. The business is well positioned to benefit from anticipated increased opportunities afforded by the new water spending cycle AMP8, as well as opportunities in the rail, energy and environmental sectors. And if we just turn to the next slide, the rail asset acquisition, just an update on that. On 4th of September, 23, during the period we acquired substantially all of the rail assets of Buckingham Group, as well as their HS2 contracts, supplying, as I said, Kiers HS2 joint venture, EKFB. And we did it for a consideration of £9.4 million. The acquisition provided Kier with new rail clients and increased our capability across the UK. It also bought 180 employees with expertise in the rail sector, further enhancing Kier's talent pool. And as part of the acquisition, Kier achieved positions on various frameworks and projects, including the Control Period 6, or CP6, Northwestern Central Framework for Network Rail, Transport for Greater Manchester Framework, Transport for Wales Framework, West Midlands Combined Authority, the Willinghall and Darleston Project, an East Midlands Railway Etches Park Project, and Nexus Whitley Bay Project. And the acquisition accelerated Kier's multi-year rail strategy. And just as a note, the historical contractual liabilities prior to the completion date were not acquired as the rail assets were purchased out of administration. The acquisition has been successfully integrated into the group's transportation business and is performing ahead of expectation compared to the time of the transaction. Turn to construction. Our construction business comprises regional build, where we construct schools, hospitals, prisons and defence projects for the UK Government. It also includes our strategic projects business and care places, our housing maintenance and facilities management business. Construction volumes increased 29% to £915 million, which reflects the volume growth in our regional build business. Adjusting operating profit increased in absolute terms by 1% to £33 million. The business delivered an adjusted operating margin of 3.6%. The period-over-period reduction in margin was in line with expectations and driven by a change in mix as well as the increased overheads to support the additional site starts as a result of the growth. Despite the reduction in the first half of the year, the 3.6% margin remains industry leading. Within construction, our care places business saw volume growth across facilities management and housing maintenance. Again, as a reminder, the facilities management work is predominantly for the Ministry of Justice and the Home Office. The housing maintenance business delivers repairs and maintenance services for local authorities. We continue to grow our capabilities and customers in this area with a focus on decarbonising social housing through retrofit opportunities. The order book in this sector remains strong at £4 billion and we continue to win work in our chosen markets. The order book now is more normalised level following the initial increase previously. In the first six months of the financial year we've been awarded five education projects worth circa £182 million, four healthcare projects worth approximately £81 million as well as a new category A prison for the Ministry of Justice at HMP Elmley worth over £100 million. Examples of the type of projects we are winning include our appointment by the Department of Education or DfE to redevelop Bournemouth and Poole College's Bournemouth campus aimed at a range of students from school leavers to adult learners. Within healthcare we've been appointed by the Sussex Partnership NHS Foundation Trust to deliver a £60 million inpatient mental health hospital in Bexhill with 54 beds as part of its redesigning inpatient services in East Sussex programme. Our construction business has 99% revenue secured for FY24. We move to our property business. So our property business invests and develops primarily mixed-use commercial and residential schemes and sites right across the UK. The business is well established in the urban regeneration property development sector. We largely operate through joint ventures, both to manage risk and opportunities. As expected, operating profit slightly fell due to reductions in property transactions due to the difficult market conditions, which have continued from the prior year. We will continue to take advantage of market opportunities where possible in terms of land acquisition, timing of build and selling, and we do so within our disciplined approach to capital, as Simon mentioned. At the end of the year, Keir's capital employed in the property segment was £163 million, excluding third-party debt and fair value gains. This reflects Keir's cash investment in the property segment. Given the group's increased operating cash flows, the benefit of building out certain projects such as 19 Caldwell Street in Birmingham, and market conditions showing tentative signs of recovery, we can see a number of attractive buying opportunities. We've previously targeted a range of 140 to 170 million capital employed in the property division. The range, as Simon has mentioned, has recently been under review and has increased to 160 on the lower end to 225 million on the upper end. Again, as a reminder, the property division targets a return on capital employed of 15%. We also recycle the capital from our property transactions and therefore these provide a source of future capital to us. We believe that this will generate a return for our shareholders over the next few years, especially given the timing of the deployment within the cycle of the expected market recovery. As we mentioned before, the property division does have synergies with our wider business model, with the cash generated from our construction division being redeployed to generate higher returns for our property division, thereby smoothing the returns profile for the overall group. We believe it takes time to selectively invest in sites, season that capital, and then transact. And over the longer term, we expect to deliver a more consistent performance from the property group. And similar to the rest of Kier, the property segment has performed well in terms of activity, and highlights include our joint venture with the Housing Growth Partnership, acquiring a development site in Royal Tunbridge Wells, and selling a logistics scheme in Whiteley in Hampshire. If we move to sustainability now and our sustainability framework. So last year, following our success of our first sustainability framework, we introduced, we reinforced our commitment by issuing a refreshed framework. New framework better aligns our activity to our major customer, the UK government. And this evolved framework focuses on three pillars, people, places, and the planet. As a reminder, our purpose is to sustainably deliver infrastructure that is vital to the UK. As a key supplier to the UK government, ESG is fundamental, therefore, to our ability to win work and secure positions on long-term frameworks. In UK governments, contracts above £5 million require net zero carbon and social value commitments. In order to help achieve these goals, we're targeting our work firstly to build a workforce which has the relevant skills and capabilities to deliver these goals, ensuring where possible everyone receives equitable treatment and that our people reflect the communities in which we serve. Secondly, we want to leave a legacy, a positive legacy in the communities through the projects we deliver and the people we employ within them. Alongside this, we aim to further tackle inequality. And finally, as the stewardship of the planet is vital to all of us, we plan to reduce our carbon usage and support our customers with their infrastructure requirements as they manage climate change related events. And at sites we're aiming to protect and preserve biodiversity as well as the efficient use of resources on our projects. If we move to environmental progress, we see carbon reduction both as an obligation and an opportunity. So we aim to ensure that we do the right thing and operate as a responsible business. And from an obligation perspective, Kier's had its carbon reduction plan recognised by the science-based targets initiative, including our target to achieve net zero carbon across scope one, two and three by 2024. In addition, our infrastructure services and construction segments are now PAS2080 certified, the leading standard for carbon management solutions in buildings and infrastructure. And this demonstrates our commitment to designing and managing out carbon from the lifecycle of UK infrastructure projects that we deliver for our clients. And from an opportunity perspective, in February, Kier was awarded the London Stock Exchange Green Economy Mark. This is awarded to companies who can demonstrate that more than 50% of their revenues are generated by procuring green products and services. And in FY23, 64% of Kier's revenue was generated from green activities. Climate change has led to increased opportunities in Kier's and Kier's end markets and for example the demand for green buildings, green bridges, green tunnels, nuclear rail and water infrastructure as well. The combined achievements really are a key milestone in Kier's ESG strategy and it's great to see that this work is being recognised now externally. On the social side, Kier is and has always been committed to investing in training programmes to upskill our employees with a view to addressing the requirements of the industry for key skills. Kier is a people-based organisation and our performance depends on our ability to attract and retain a dedicated workforce And during this past period, we had over 720 apprentices participating in programmes, and that represents circa 7% of our workforce. In addition, circa 9% of the workforce are on a formal learning programme. As part of our drive to recruit diverse talent, Kier has placed 23 prison leavers and eight released on temporary licence, or ROTL, candidates in employment, either within our business or within our supply chain partners in the first half of the year. He also remains committed to offering employment opportunity to those who have served in our armed forces and has hired 24 veterans in the same period. Finally, if we move to the summary and the outlook. Our order book has remained strong at £10.7 billion and provides us with good multi-year revenue visibility. Contracts within our order book reflect the bidding discipline and risk management now embedded within the business. I am particularly pleased to report that the Group significantly improved upon its year-end net cash position and significantly lower average month-end net debt and has confidence in sustaining this momentum going forward. The second half of the financial year has started well and we are trading in line with expectations. Group is well positioned to continue benefiting from the UK government infrastructure spending commitments, and we're confident in sustaining the strong cash generation achieved over the last 18 months, allowing us to continue to de-lever the Group. And we remain committed to delivering our medium-term value creation plan, which will benefit, we believe, all of our stakeholders. And with that, I would like to open up the meeting to any questions. And we'll take the ones in the room first, and then maybe go onto line if there is any there later. Johnny.

Good morning. Johnny Cooper from Numis. Could I ask firstly on the property division, what investment opportunities are you seeing and how long is the investment cycle in these assets? And then also, how much of the portfolio is currently ready to divest if market conditions present opportunities to do that? Secondly, are you seeing much inflation in OPEX? And then thirdly, has peak debt within the year, has that reduced in line with the reduction in average net debt? Thank you.

Shall I take the first one, Simon? Yeah. So investment opportunities, we do see a lot of investment opportunities. As I said, we think the market is now beginning to turn like that. We've got real skill sets in urban regeneration in particular. So a number of our joint ventures are with local authorities, which is the obvious synergy we have with our operating businesses. And we do see the sort of the opportunities, as I mentioned, coming out of the climate change opportunity. A lot of offices now are moving to CAE offices. And therefore, if you're not in the CAE office in many of the regions, there's an opportunity to redevelop that. And we are seeing opportunities to acquire those offices with maybe residual rentals and then redevelop them for mixed use purposes. So, yeah, that's the sort of, you know, the primary opportunity space. On top of then the pre-existing opportunities we see in last mile logistics, we're seeing that continue as well. And then the more traditional office space in the larger conurbations. So, we do see good opportunities now emerging. And that's why we wanted to increase the capital available to the business should they wish to use that. Your second question, Johnny?

About 30% if you really, yeah. I mean, but you obviously miss the opportunity on the upside then. And the second question was OPEX inflation. Yeah, OPEX inflation. We've probably seen running at about between 3% to 4.5%. And peak debt, yeah, peak debt's moved pretty much in line with average of the reduction here.

Good morning. Joe Grant at Libra. I might ask them one at a time if that helps. So the first half revenues of 23% are clearly a big number. Have you got any sense of how that splits between volume and price?

Want me to take it or you want to take it? You go for it, Andrew, and then I'll correct you. The answer is both. So we have seen a lot of volumes. You recall we had a lot of growth in our order book a couple of years ago. As Kia recovered its position, strengthened its balance sheet, did the equity raise, sold living, et cetera, then a lot of the clients did move back towards Kia. Their natural home was operating with Kia. So you saw a lot of them. volume increased but obviously that then came at the same time as inflation we've always said the inflation did put a little bit of delay into that process of getting that order book converted into space in the ground and the revenue coming through so there's a little bit of inflation coming in there in terms of that that volume growth but that was always in the assumptions as well it may have been slightly higher you know but what we didn't see is a decrease in the volume coming through because of the inflation we just saw slight delays coming through so A specific number, Simon can probably give it to you, I can't, but there is a mixture of both.

Yeah, I think there's a mixture of both, but it would be very difficult, virtually impossible to go through it, because along with the delays that Andrew mentioned, the inflation pushed all of these projects up, but then what would happen is the customer couldn't get the budget, so you typically then had to value engineer it out. So I don't know how you want to articulate that. So there's a price benefit, but there's a volume reduction because of the fact that you had to value engineer out a lot of the content of the projects to get back into the original customer budget.

Thank you. Secondly, on working capital, you helpfully give the supplier days. Could you talk us through what's going on with data days?

Data days remain very good, typically about 14 days.

Thank you. And finally, on the order book, you talk about 60% being cost plus and target cost reimbursable. The balance of 40%, could you give us a sense of what the composition of that is?

The 40% that's fixed? Yeah, so the 40% that's fixed is 95% of it is fixed on a two-stage process. So whilst it's fixed, it's fixed after you've been working between six to 18 months, sometimes longer with the client. And sometimes you won't even fix all of it out. You'll have provisional sums in there.

The point is the route to contract is a negotiated route. There's no single stage. 95% of it is through a two-stage process and negotiations. You identify the risk, identify the... the contingencies you need to put in it, allocate the risk. As Simon said, some are just left to the client on provisional sums within those contracts. And then also remember the average size of those contracts is circa, I think, 30 million. 20 million. Circa 20 million. It's circa 20. So the repricing that goes on in those types of contracts is on a frequent basis. So if you are in an inflationary period, you can quickly reprice them for the next contract that comes along. So there's many mitigants to that, but it's the route to contracts is the key to this. And as Simon said, it's two-stage negotiations for those. And therefore, And the ones you can't get to a fixed price contract, as we've said, overwhelmingly in the infrastructure, you'll have cost reimbursable in those.

Thank you.

Okay. There's one at the back, right at the back.

Hi, it's Rob from Berenberg. Thanks for the presentation. Three questions for me. Firstly, just on the competitive environment in construction, how do you feel you're getting on in terms of are you winning more than your fair share of work or in line with market? Secondly, obviously really good progress in the revenue kind of progression. Could you help us think about the five-year view plus on care given progress towards those medium term targets? The revenue line has been very good in terms of how much risk appetite you'd like to take and the medium term thought process around that. And then thirdly, I guess relating to Johnny's question on ambitions in property, are there any parts of the property division you'd look to scale more quickly, namely urban regeneration, affordable housing, contracting, etc., particularly thinking about housing, how government targets could be delivered on a multi-year view and the focus on your skill set and affordable housing, etc.? ?

Right, I think I've got them all down.

Don't worry, go through them again if you need.

So competition first, how do we think of our competitive position? I think our competitive position is good, because I think the actions we've taken over the last sort of four or five years, right at the beginning of sort of sorting our cost base out, sorting our balance sheet out, has positioned us very well. And as I said, a lot of the clients, after we did many of those activities, did want to return to Kier, and they have returned to Kier. And then we've seen, despite the delays caused by inflation and everything else, and actually getting space into the ground through those two-stage negotiations in particular, we're now seeing that revenue come through. So I think our competitive position is good. I hope a £10.7 billion order book would support that. But the other point I'd make, you know, I'm thinking here of the sort of publicly listed companies who really do compete with, you know, the people. I mean, in all of those companies I see is a disciplined approach to contract management. You know, they're all entering through the similar sort of process of cost-reimbursable contracts on the larger, riskier contracts and infrastructure, and then where they can fix that contract, they're doing so through sensible two-stage negotiations off the frameworks very similarly to the frameworks we're on. We have a lot of common positions on those sort of frameworks. So I do think we're well positioned because of the actions we've taken. But I also think the market is still very, very attractive in these sectors in which those public companies work for. I can't speak to the commercial markets. We don't really operate there in that sort of sense. So we do feel pretty good about our competitive position. I think all the metrics do support that. In terms of revenue progress, I think the question was next five years. Again, I think it's a similar sort of answer I gave, Rob, because I do think whatever happens politically, there's a requirement in the country to recapitalise schools, hospitals, roads, to take the opportunities afforded by climate change, as I've mentioned, in terms of water, water management, flood alleviation. etc., nuclear build program, etc., etc. So I do think there's an awful lot of opportunities. I think our growth will more normalize going forward because we have had this slight recovery in the position it's come through. So I do anticipate normalized growth going forward. And that's pretty much what the outlook is. sort of says and again to the competitive position I think we're well positioned in all of those key markets and there's probably one additional market which I think probably both parties will turn to or main parties will turn to and that's affordable housing in the main and we're very well exposed to that. either through our property business in the urban regeneration activity, where we do a lot of property in the affordable or social sector, as well as in construction, contracting it out, and then obviously in our maintenance business places in the social housing maintenance. We feel we've got a good exposure to that, and I do think that will be a really good swim lane going forward. Property. I think I've given the answer. We do see good opportunities, and that's why we're positioning property in particular in the mixed-use regeneration capabilities. We think there's real opportunities there. Just take our joint venture with Network Rail, the Solum joint venture. Much of what we're doing is turning slightly redundant land around stations, in particular in the south-east, where our relationship in our JV is. into affordable housing for key workers, for example. And Guildford's a great example. We've just done it and we pre-let it and sold it to Granger, who then take it and do what they do with it. But that's all for key workers, all social housing, all PRS type activities. So we do see property, a good, good swim lane for property in that sector.

Andrew. Andrew. Good morning, Andrew Nussie from Peel Hunt. Two questions left. First of all, could we turn to Buckingham and give us a feel for what the contribution was in the period and more importantly, how the business is faced going into sort of CP7 and what sort of growth rates you think the business could deliver and equally the sort of potential timeline to getting margins up towards sort of infrastructure type averages. So the first question.

so buckingham um andrew with regards to buckingham yeah you'd get less than three months uh in in the period obviously so the turnover will be about 20 million pounds that's in there and the margin would not be dissimilar to our infrastructure margin and sort of the positioning going to cp7 getting those frameworks moved on from cp6

I think we're well positioned. We're the incumbent. We're building out a lot of capability as the Buckingham acquisition. So, yeah, I think we will be well positioned, but we will wait and see.

And sort of looking at the supply chain, clearly there's a lot of hiatus there. Can you just give us an update on the strength and resilience of your supply chain? Have you faced any issues and how you're looking to sort of mitigate those moving forward?

At the macro level, no. I think it's settled down. I think the supply chain that we operate with, don't forget, is quite a regionalised supply chain, in particular in the regional build business, where we are devolved out into the region, so we have very strong, long-standing relations. We have a great order book. They find that very attractive, as we do. They want to work with us, so we get, to a degree, first choice. We obviously have contingencies in place. At the micro level, you'll always get one or two issues coming up, and we do have one or two issues. And part of that is to manage it through the risk management processes we have in place. But at the macro level, no, we're not seeing issues affecting us. I can't, again, comment on the other sector, the commercial sector, which I think is probably a little different, but that hasn't spilt over and affected us.

Okay, thank you.

Adrian.

Sorry, Adrian Keirsey, Pamela Gordon. Two questions, one going back to property and the other to talking about the talent pool within Keir generally. On property, you've given us a flavour in terms of... what kind of projects, given the growth, given the opportunities, how much within that enlarged capital pool will you apply to any specific projects? And within that, perhaps to give some detail about what kind of relationships you will go for within joint ventures.

We tend to do joint ventures for a number of reasons. Manage the risk, manage the acquisition of debt into those things on a normalised basis in a disciplined way, market to market at all times, etc. That's just a technique, I think of it. But our preference, although it's not absolute, but we do have a preference, is working with synergistic clients, the local authorities, Network Rail, these sort of people who we talk about in the operational businesses. We also talked to in the context of doing JVs with them in property. Because we understand them, they have a need, which is both political and financial, to put sort of land and get land to use to start to generate revenue. A lot of the local authorities don't have the skill sets to do it, so they look to us to facilitate that. But the great thing about that is... is that the variability in the economic assumptions tends to be the valuation of the land that goes into it. So that's why it's attractive. It does mean it takes a little longer. It does mean the ROC is a little lower than you would have in the commercial sector. But that is a very attractive market to us. But it's not overwhelmingly where we operate. We do operate in last-minute logistics as well. We do operate in direct office, CA office buildings, as we said, on Cornwall Street. It's a classic example in Birmingham. So there's no absolute allocations, and then obviously we do as part of those regenerations with the local authorities of network rail we do affordable housing as well as PRS etc etc so we don't have any direct allocation that 50 million we haven't said we're going to spend on this this this and this you know but we are looking at a range of opportunities which we believe are available to us but we'll only do so in a disciplined way that's and in terms of the talent in the past you've you've sort of highlighted you know

a very large number of very skilled individuals that you have within the group. What's the ambition in terms of... Is that something you're going to keep stable, increase? And what's the project opportunity with having that investment?

So the core business... We'll always upskill and we'll always try to train our own and bring our own in. So 720 apprentices in the period, you know, 250 graduates, et cetera, either through the key graduate scheme with Sheffield Hallam University or coming in as cognitive graduates and we're training them up into various roles of operational management, surveying, you know, whatever it is. We'll always and we always have taken absolute maximum advantage and full use of all the levies we pay to CITB and the apprentice levy and getting that sort of reimbursed through the active training programmes we have. And we've got a fantastic team led by Ian Dickinson who does that for us and making sure we get the maximum bang for the buck. But it comes from our commitment to training in the first place, not our commitment to getting the money back. You don't train to get the money back, simple as that. We want to train because we want our own skill sets, our own culture, etc. So there's a lot of replenishment. We then have a lot of, I think, quite imaginative ways we do try and help our clients. And I mentioned in the piece, the prisoners released on licence, the veterans, etc. We will try and attract talent where we can. And we're a real believer that there's plenty of talent in all of these places. And a lot of people need a second chance in life. And that's what we do afford to them. So that's the sort of basic business. But you will increase your workforce in a lot of the maintenance contracts. So for example, Somerset Council, we've just taken on, I think it's a four or five-year contract with them to look after their regional roads. And you'll TP a bunch of people across with that. So you will increase your gene pool by doing that type of activity in one-off TP transfers in. And that's where it does increase remarkably on those types of contracts. But the base core business, we like to produce our own. And right to the top of the organisation, we're trying to get a culture where we continually replenish even the most senior positions on Exco from people who have come through the organisation. Most latterly, Louisa Finlay is our CPA. Hi, at the back.

Hi, Lewis Roxburgh from Investec. First one technical, more general in the second. So just what are your expectations on full year working capital? And just more generally, how do you intend to manage that alongside the leveraging the investments into the business and now the resumption of the dividend payment? And in the second one, just obviously great progress on sustainability metrics. I just want to sort of get more of an idea for the opportunity of green infrastructure and what constitutes green infrastructure.

Thanks. Yeah, so working capital for the full year, I mean, you typically see the seasonality, so activity will ramp up in the summer and we'll get a meaningful working capital inflow in the second half of the year, which is why if you look at consensus, it'll be around £150 million worth of net cash at the end of the year.

On green infrastructure, I gave a bunch of examples. I mean, the general sectors in which you're operating and which are being triggered by, you know, the government's policy and strategies, national infrastructure strategy, et cetera. You look through the nuclear programme. In the First Industry, you look to the rail, the various rail programmes. They're sort of promoting... You look to energy distribution programmes. You look to water... management programmes, flood alleviation programmes, all of these are generally being driven by climate change or the sustainability agenda, and they're all in sectors in which we operate. And then within those sectors, we're seeing more and more now schools being built to passive house standards, and we've got a good pedigree in that. Just down the road at Mulberry Dock, we're building a passive house school. We built St Sidwell's Sports Centre in Exeter to passive house standards. In Scotland, we're building two large schools to passive house standards as well. So it's a skill set, you know, about how you methodically build a building and evidence, you know, that you're building it to those higher passive house standards, which meets then to all the energy standards. There's a raft of sort of macro stuff, building nuclear energy facilities through to the methodology for building schools as well through passive house standards. And it has cost implications in terms of the first cost, but through life, you know, it easily pays itself off. So, you know, that's the trade-offs and the complexities which, you know, a lot of our clients are having to go through now as to how they trade off the through life decreased costs, you know, decreased carbonisation through the increased costs of building a passive house school in the first place. But no, we're seeing this is the obligation piece as well as the opportunity piece. They do really go hand in hand, and Kia has, I think, really got that message that this is more of an opportunity than obligation. That's what we're chasing. Are there any more questions in the room? Perhaps I'll ask if there are any questions then online. I'm not sure who I'm asking, but...

Okay, with that then I'd like to thank you all for coming.

Those of you in person, thank you for those of you who are online and have a good day. Thank you very much.