Kier Group plc

Good morning, everyone. And for those here in person, thank you for joining our half-year 2026 results. I'd also like to extend a warm welcome to those joining by webcast and audio. So I'm Stuart Tocqueville, Chief Executive of Keir Group. And before we begin, I want to take a moment to say our thoughts are with our nine colleagues and their families based in the Middle East. We are thinking of them at this difficult time and hope they remain safe and well. So turning to our half year results, I would like to start by saying I'm immensely proud and honoured and energised to be leading Kier as its Chief Exec and speaking to you today to update you on our half year results and the strategic and operational progress we are making. I'm also delighted to be joined by Tom, our Chief Financial Officer since the 1st of January. Okay. This morning, I'll walk you through our highlights and touch on the strategic progress we've been making. I will then hand you over to Tom to talk through the group and divisional financial performance. I will then come back and take the first opportunity as Keir's new chief exec to offer some colour and context around these results and share my perspectives on our operational highlights and where we're leading as a group. We will then finish with a group summary and outlook before opening the floor for any questions you may have. Starting then with the highlights from the last six months. The period saw the group deliver a strong first half with good growth in both revenue and profits. The future prospects of the group also remained strong with our order book increasing by 5% in the period to a record 11.6 billion, reflecting contract wins across our business and providing multi-year revenue visibility. For our order book, we secured 94% of a four-year 26 revenue and 78% before year 27 revenue. And we have seen the momentum continue into the second half with a number of appointments to frameworks in our key sectors. Our property division remains on track to deliver a road key target of 15% by 28. We are continuing to convert profit into cash with a net cash position significantly improved to 103 million. Most importantly, we have now delivered an average net cash position of $17 million for the first time in 13 years. Our shareholders have and will continue to benefit from this strong performance. Due to our robust cash generation and in line with our capital allocation framework, we have announced a proposed increase in interim dividend up to 2.6p per share. In addition, I am pleased that we are able today to announce the launch of a new share buyback programme, increased to 25 million. This follows the successful completion of our first share buyback program worth 20 million. We have also made a number of operational changes in relation to our new structure and leadership capability. If I may, I'd like to now take a moment to expand on this and reflect on the change we've made in line with the first few months since I became Chief Exec. Over the period, we've taken a number of steps to optimise our structure and leadership capability to maximise the market opportunities that exist for Kier, particularly in response to the government's 10-year infrastructure strategy announced in June 2025. We have strengthened our Executive Committee and been joined by Tom as Chief Financial Officer, Martin as the Group Managing Director for Construction, alongside the creation of new roles for Louisa as Chief Operating Officer, and James as group commercial director. They give us industry leading functional strength. We also brought together our two complementary divisions within infrastructure to form a combined infrastructure powerhouse to create a more integrated delivery platform to meet our customer needs. The group has also introduced its natural digital program to empower our people and improve productivity through access to the right digital tools and platforms. We are seeing strong operational delivery and opportunities within KIA's divisions, which we'll touch on later. And we're advancing our KIA 360 approach, which leverages the group's capabilities across the whole fund, design, build and maintain project lifecycle, and enables the most appropriate solutions to be achieved, tailored to meeting customer needs while meeting the environmental, social and digital requirements of national and local frameworks. These positive steps we are taking ensure we are poised for future sustainable growth. With that, I will hand you over to Tom to give our financial highlights for the period up to 31st December. Tom, over to you.

Thank you, Stuart. And I should firstly say that I am delighted to be presenting to you for the first time as Keir's CFO. It's my pleasure to take you through our performance for the first half of FY26. Let's begin with the financial highlights of the period. Revenue in the period, as you've heard, grew 2.6% and reflects good growth in activity levels. primarily in infrastructure services business, which I'll cover in more detail shortly. We delivered adjusted operating profit of 71 million, up 6.6%, representing a margin of 3.5% and a modest improvement of 10 basis points from that achieved in HY25. Allowing for our usual second half weighting of earnings, This margin is consistent with our target range of 4% to 4.5% on a full year basis. You'll see that the period end net cash position is materially better than the prior period at £103 million compared to £58 million at December 2024. This is despite increasing shareholder returns via our £20 million share buyback and the increase in dividends paid. As we targeted, the group achieved average net cash over the period of £16.8 million, a significant advance from the prior period average net debt of £37.6 million. This cash and profit performance is all underpinned by order book and framework positions, which provide us with the visibility over future revenue. Our order book currently stands at a record level of £11.6 billion, having grown by 5% from June 2025. It represents 94% coverage of this year's revenue and substantial coverage of next year's forecast revenue, currently standing at 78%. The order book continues to be underpinned by long-term framework agreements positions totaling £150 billion. And within this, we have £35 billion pipeline of work visible for this year and the next. You can see from the graph at the bottom of the slide how our order book, combined with our framework positions, provides revenue visibility covering a period of at least five years. Sure, we'll look at our pipeline, order book, and long-term opportunities in more detail later. Now, focusing on our revenue for the period, we delivered group revenue of £2 billion and £29 million, representing a 2.6% growth versus the comparable period last year. The main element of this growth comes from infrastructure services, which is up 4.9%, to 1.083 billion. This growth came primarily from the design and delivery of road capital projects, growth in rail work, including HS2, and a ramp-up of water activity under AMP8. Our construction segment delivered 920 million of revenue in the period, down slightly by 1.3% due to the recent transition to modular construction. Although as the off-site construction comes on-site, we'll see these revenues bounce back in the second half of the year to full-year growth. Property transactions grew modestly, although again we expect a busier H2, which is a familiar seasonal feature of this business. In the same fashion, I'll now take you through the adjusted operating profit in the period. The revenue growth that we saw in infrastructure services translated into the profit growth of 2.1 million to 48.2 million. We maintained our strong 4.5% margin in this business. The construction business also maintains its operating margin at 3.9%. The small increase in property volumes resulted in their operating profit growing £1.2 million, and we also saw lower corporate costs in the period. Overall, we delivered adjusted operating profit growth of 6.6% to £71 million. There are some specific costs excluded from our adjusted operating profit figure, which I'd like to take you through. Excluding non-cash amortization interest, the adjusted items amounted to 10.7 million in the period and are now solely related to fire and cladding compliance costs. This is an increase on the same period in the prior year and we expect this to result in a charge of around 30 million for FY26. We then expect this level of expenditure to continue into FY27 as we remediate any remaining cladding and internal fire remediation works under the Building Safety Act. These specific remediations are treated as adjusted items and are provisioned gross when the liability is recognised and can be reliably quantified. Further, we recognise insurance or third-party recoveries once they are confirmed, therefore creating a net provision in adjusting items. we expect this adjusting item to reduce post FY27 and for these claims to be resolved by the end of FY28. The interest costs here are recognised under IFRS 16 relating to the exit of leased office space. Turning now to free cash flow. Starting with adjusted EBITDA, which in HY26 was £101 million, working capital outflow in the half was £107 million, in line with HY25. Slightly lower effect. As you will know, we expect to see our usual working capital inflow in the second half, with the higher activity levels of the spring and summer months, combining with government spending and budgeting cycles. CAPEX in the period amount of £24 million, with the majority of this relating to lease payments capitalised under IFRS 16. Net interest and tax paid were just slightly above the prior period, with the group continuing to utilise its significant long-term deferred tax asset. You may remember that the tax asset of £130 million relates to past losses, allowing us to offset half of our tax charge any given year, which we anticipate to take around seven years to fully utilise. Altogether, this results in a free cash outflow of £42 million, slightly improved on that of the prior year period, in what, as we have said, is a seasonally disadvantaged half of the year. Then taking this free cash flow to the net cash flow, net cash movement in the period. We start the period on the left at the end of June 2025 with £104 million of cash. This free cash outflow of £42 million then reduces our cash balance significantly. The cash impact of the previously mentioned adjusting items equates to £4 million as our insurance recoveries offset a lot of the cash, fire and cladding costs in the period. We contributed £3 million in the period to our smaller pension schemes, which remain in deficit, which are schemes we inherited through acquisition around 10 years ago. The net cash bridge neatly shows a significant return to shareholders as well. £23 million of dividends paid in the period and £14 million of share buyback. We also purchased £15 million of shares for the Group's Employee Benefit Trust for share-based employee incentives. This resulted in a net cash position of £103 million, lower than at June 2025 due to the seasonal working capital outflow, but importantly, a significant increase over the last 12 months. compared to 58 million of cash at December 24th. The second half of the financial year has started well from a cash perspective, and we expect this uplifted cash position to roll into the full year net cash. So staying with cash, we consider the average net cash position to be a critical measure. It's been a key target for the business for several years, and I'm delighted to report that we achieved the milestone in this most recent period. We've always defined average net cash as the average month-end position. The average net cash is therefore the average over the month-ends in the half-year. You can see here how over the last four and a half years, we have steadily reduced average net debt and debt-like items significantly. by 600 million pounds, so that we now have 70 million of net cash. It represents a significant mark for the group and provides an excellent foundation for our growth plans. Looking now at our financing arrangements, this slide sets out the structures we have in place to provide flexibility and optionality as we pursue our growth strategy. Last October, we completed out the refinancing of our revolving credit facility with a new three-year £190 facility. This represented a £40 million increase on the size of the previous facility, including an option to extend for two more years as we strengthen further our debt maturity profile. In October, our credit ratings were reviewed with S&P upgrading us to BB+. And Fritch upgraded our outlook from stable to positive, maintaining us at double B+. This affords us the optionality as we review the financing requirements for the group. Now for my final slide, I thought I'd remind everyone of our capital allocation framework and its clear priorities. Overall, we are focused on optimizing shareholder returns while maintaining a disciplined approach to capital allocation and an ever-strengthening balance sheet. In short, our capital requirements are minimal. We target dividend cover of around three times earnings through the cycle. We plan to invest further in our property business to generate consistent returns over time. deploying up to 225 million of capital and targeting a consistent long-term row key of 15%. With regards to acquisitions, we will continue to consider value-accreted acquisitions in our core markets. And then lastly, having completed our first share buyback programme of £20 million in December, I'm pleased that we're now able to launch a new £25 million buyback programme, This, alongside the interim dividend, demonstrates that our shareholders will continue to benefit from Keir's significant financial improvement, as well as the renewed strength of the group's balance sheet. And now I'll hand back to Stuart for the market update.

Okay, thanks Tom. What I'm going to do now is give you some insights into how the business is doing and provide the confidence in terms of us, the long-term generation of cash, to give Tom loads of options in terms of what he's going to do with the money. So many thanks, Tom. Turning now to our operation update, it would be a good opportunity to reintroduce our divisions, particularly in light of the structural changes we have made, and to give a sense of their size and scale and how that gives us confidence of our ability to continue to meet our medium-term targets. I will share an update on the breakdown of our order book and the considerable pipeline of opportunities beyond that. And I really want to highlight is our capabilities and to remind you of those. And the way we leverage them together across the group positions us strongly to benefit from the opportunities in front of us. We really do have a resilient order book a healthy pipeline, and a set of complementary strengths that continues to support delivery in our chosen sectors. So, let's start with the Infrastructure Services. Infrastructure Services has an order book of $7.1 billion, which is up 6% and provides 92% of secured work for four-year 26. The business continues to win work across its chosen sectors. The most recent examples include National Highways Legacy Concrete Framework, that's over 900 million, where we're one of three. Projects Upgrade Thames Water Treatment Works at Maple Lodge, that's 280 million. In Nuclear, we've also been awarded a two-year extension on the Hinkley Point C. We've made progress in Aviation with an appointment to the British Airways Better Buildings Framework. And if you look at the new graphs we provide on the right, which go to explain the gap between the 150 billion framework position and the $11.6 billion order book. You can see the scale of further opportunity. By the way, pipeline includes further material work, even within preferred bidder stage and known tender opportunities. I've only included those that cover the next two years in terms of work opportunity winning. There is a clearer material pipeline emerging, particularly across water, defence and rail. which gives us real confidence as we move into the later stages of our HS2 delivery. Importantly, our 750-strong in-house design team gives us a fully integrated, design-led delivery model. It means we can engage early with customers and shape solutions around what they genuinely need. In addition, our infrastructure division is driving innovation, whether it's around how we manage environmental risks through sustainable drainage techniques or through digital innovations such as our QuickStats, which delivers high-accuracy digital data at scale, lowering strike risk, delivering measurable efficiency gains across major programs. Given the scale of the pipeline ahead and Kier's geographical footprint, we have robust strategic workforce plans in place to support us to pivot resources as required. Some of these capabilities are genuinely differentiators for Kia and strengthen both the value we bring to customers and the quality of work we convert into the order book. But it doesn't stop there. So, moving to our construction business. We have an order book of $4.5 billion, which is up 5% and 96% is secured for full year 26. Construction's approach to building long-term relationships and its track record means we have good visibility or repeat business on key infrastructure frameworks and also within the private sector, commercial sector. Recent wins include a place on the 37 billion new hospital programme, 2.0 alliance framework, a place on the DfE's new 15 billion CF25 framework for schools, universities, further and technical colleges to deliver high value projects over 12 million in the north and south of the country. Now, this is on top of the work we are delivering for the existing Department for Education, or CF21 framework, including eight schools within pre-construction agreements, awarded in quarter two alone, and they are not yet reflected in our order book. Other notable wins include the construction of the flagship government property agency hub in Darlington, worth £85 million. You can see that there is a strong pipeline visibility ahead with opportunities to convert frameworks to projects in health, education and defence and of course in the London private sector commercial market. Also part of construction is Kier Places. Now this represents 15% of the 26 revenue. It's an annuity type business providing long-term FM, housing maintenance and specialist critical small works under £10 million. often from existing frameworks and often from direct award. Keir Places also plays a central role in our 360 approach. A recent example is the way their operational footprint and proven delivery of the Heathrow quieter neighbourhood scheme directly strengthened our proposition and helped secure the BA Better Buildings win in infrastructure. This demonstrates how integrated model drives differentiated value for our customers. Our construction capability is anchored in our national coverage and regional delivery model and the strength of our long-term supply chain partnerships. The delivery projects from 1 million to 683 million. The strength of our dedicated clients and markets team and the access to call-off contracts under two-stage or direct award. The construction offering is further strengthened by our in-house mechanical and electrical capability which is supporting projects of circa 40% of the 26 revenue across all regions of the UK. Using in-house capability allows us to self-deliver complex projects, reducing risk and removing reliance on Tier 1 external self-contractors. It also enables better engagement with customers, coordinated solutions, ensuring a smoother transition from construction to operation, and our input to long-term building performance through our digital twinning capability. Finally, our product capability is critical to outcomes-led solutions and ensuring satisfaction and repeat business from our customers. I would draw your attention to our Days High School in Liverpool. It's a great example of how we do this. By taking an outcomes-led approach and working in partnership with the customer, KIA has delivered seven extra minutes of learning time per lesson. And we did this through the design of the school. It's also delivered energy-efficient performance well above target and has driven high levels of customer satisfaction. There is a video that is available on our website and it is well worth watching. Property. Lastly, let's look at our property business. Vesson develops commercial and residential sites, largely operating through public and private sector joint venture partnerships to deliver urban regeneration projects across the UK. As you can see from the slide, Property has a gross development value of 3 billion. There has been considerable progress made across the portfolio as developments move through their cycles. For example, 60% of sites now have planning permission. Six sites are in construction and four schemes that we are actively marketing for sale. There is considerable capability within the property division, which drives future opportunity and creates synergies with the other business divisions. Keir Property has trusted public sector relationships built on delivering outcomes-led development and regeneration. It also has a deep understanding to what is needed in terms of responding to changing market needs in business and retail that leads to the efficient recycling of funds. An example is the growing need for net zero and energy efficient office space. For example, our development 19 Cornwall Street in Birmingham. Looking ahead, these long-standing relationships with public and private joint venture partners will leverage funding that can be turned into delivery. Kia Property is also critical to our 360 approach. Their historical PFI and urban regeneration expertise will support Kia to influence the early-stage vision and structure of long-term investment models set out in the 10-year infrastructure strategy that is moving toward blended finance and PPP-type models. particularly in areas like community healthcare and environmental resilience, and from which Kier could create predictable, durable revenue streams. The momentum we currently have and the future opportunities that exist supports our confidence in delivering our target of 15% Roki by four year 28. I thought it'd be worth just touching on some of the things that I've spoken about in the past. So I would like to just give more of an explanation around our 360 approach. It's really cool. Simply put, it captures the breadth, depth and scale of Kier and enables us to leverage the group's capabilities across the whole fund, design, build and maintain project lifecycle. It enables the most appropriate solutions to meet customer needs while meeting the environmental, social, digital requirements of national and local frameworks. This drives tangible customer benefits because Due to the breadth of our national footprint, we can deploy capability consistently wherever it's needed. We combine that breadth with real depth because we can fund, design, build, and maintain. We solve customer needs end-to-end. We can offer customers choice of solution, what we call choice factory. That focuses on the flexibility needed to deliver true value for money and high-quality outcome-led solutions. One example is MMC. Now, Kier doesn't own a manufacturing facility. That means we don't need to keep it full. Instead, we have a broad supply chain and we can curate a choice of factory-based solutions. This allows us to select the optimum system for each project, improving value for money, managing risk, and delivering with greater certainty. Harnessing digital is also fundamental for improving customer experience. Digital processes and data-led approaches drive productivity, improving accuracy, program certainty, and building performance, e.g. digital twin. And crucially, our work delivers more than just assets. We support customers to generate social and economic benefits, such as creating jobs, training, supporting SMEs, and creating greater equality. This all reinforces our position as a trusted industry partner. strengthens repeat business and enhances margin certainty. I would also like to expand on the environmental and social benefits. As environmental and social performance, they're not an add-on, they're integral to long-term value creation. They are both a key requirement for government contractors and a direct driver in employee engagement. Clear recent highlights include achieving the first Carbon Disclosure Project A rating for climate disclosure, placing us in the top 4% of companies globally. First in sector in the FTSE Women's Leaders Review for women in senior leadership positions, strengthen our safety performance through care cares, our new health and safety wellbeing strategy, and through adopting predictive digital tools to help us prevent incidents even before they happen. Average supply of payments down to 32 days, and we achieved 95% of payments within 60 days. We have 532 people engaged in apprenticeship programs and we're included in the top 100 apprenticeship employers list. We are also signatories of the government's youth guarantee. For those who are financially within the room, I thank you for your patience of going through that slide. Moving on to drive shareholder value. That all points to how we now continue to drive shareholder value. Before I come to our summary, I thought just to remind everyone of our medium-term financial targets, which are set out here. And actually there's no reason to change these, they're still applicable today. So we target revenue growth above that of GDP, an adjusted operating margin of between four and four and a half percent. Cash flow around circa 90% conversion of operating profit, and an average net cash position. A sustainable dividend policy of circa three times earnings, cover through the cycle. And finally, in summary. The group delivered a strong first half. along with the significant achievement of average net cash for the first time in 13 years. And revenue, profit, and cash all continue to grow. Our order book stands at a record $11.6 billion, and we have further excellent visibility of future performance. Significant increase in shareholder returns. We're able to announce the launch of a new, larger $25 million buyback program and a 30% increase in our interim dividend payment to shareholders. Finally, in terms of outlook, building on our half-year 26 performance, we have seen this momentum continue into the second half, and we are trading in line with board expectations, for where expectations remain unchanged. We are building and leveraging capabilities through 360 approach, which underpins a 4% to 4.5% margin target range. We are confident in our ability to pivot at scale and poils for sustainable growth through delivering social and economical infrastructure that is vital to the UK. So, with that, I'd like to open up the meeting to questions and answers. Questions from the room first, please, and then we'll take questions from the call. Thank you.