Kier Group H2 2026 Earnings Report

Kier Group EPS Results

• Actual EPS: GBX 23.50
• Consensus EPS: N/A
• Beat/Miss: N/A
• One Year Ago EPS: N/A

Kier Group Revenue Results

• Actual Revenue: N/A
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Kier Group Announcement Details

• Quarter: H2 2026
• Date: 9/15/2026
• Time: Before Market Opens
• Conference Call Date: Tuesday, September 15, 2026
• Conference Call Time: 5:00AM ET

Kier Group (LON:KIE) is a leading infrastructure services, construction and property group based in the UK. Our purpose is to sustainably deliver infrastructure which is vital to the UK with a vision is to be the UK’s leading infrastructure services and construction company. We operate through three segments; Infrastructure Services, Construction and Property. Infrastructure Services comprises our Transportation and Natural Resources, Nuclear and Networks business. Transportation: builds and maintains roads for National Highways and a number of district and county councils as well as our rail, airports’ infrastructure and ports’ businesses. Natural Resources, Nuclear and Networks: delivers long-term contracts providing repairs, maintains and support capital projects to the water, energy, and telecommunications sectors. Construction — comprises of our Regional Building, Strategic Projects, Kier Places (Housing Maintenance and Facilities Management), and International businesses. Kier is a leading UK national builder, providing project delivery for the public and private sectors across a number of sectors including education, health, justice and defence. Property — Our Property business invests and develops schemes and sites across the United Kingdom. It concentrates on mixed-used commercial and residential development business delivered through joint venture partnerships

Kier Group H2 2026 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Kier reported FY2026 revenue growth of 7.5% to £4.4 billion and adjusted operating profit growth of 6.7% to £170 million, while its order book reached a record £11.9 billion.
• Positive Sentiment: Cash generation and the balance sheet improved materially, with £165 million of free cash flow, a first full-year average net cash position since 2012, and a target of more than £200 million of average net cash by FY2029.
• Positive Sentiment: Management introduced medium-term targets of mid-single-digit annual revenue growth, a 4%-4.5% adjusted operating margin, and double-digit EPS CAGR, supported by growth opportunities in water, energy, defense, and healthcare.
• Positive Sentiment: Kier will stop investing in new property developments and expects to release approximately £150 million from the existing portfolio over the next three years, allowing capital to be redirected toward the balance sheet, acquisitions, and shareholder returns.
• Neutral Sentiment: Management said FY2027 adjusted EPS should be at the top end of prior expectations, but acknowledged exposure to supply-chain and macroeconomic pressures; it expects cash conversion to normalize from FY2026’s unusually strong 121% while maintaining a target above 90%.

Presentation

[Stuart Togwell, CEO at Kier Group]

Okay. Good morning, everyone. Tom and I are excited to be taking you through an excellent set of results and introducing our new strategy. Welcome to you all, be it those here in person or online. I am delighted also to be joined by members of our executive team, as these results and strategy are, of course, a team effort. I am proud to be leading Kier at this time and excited about how we shift from recovery to value creation. Good morning. Last year, I spoke about the need for Kier to evolve. This year, I want to show how far we have progressed and how that progress puts us in a strong position to deliver consistent, sustainable growth. It was really important to me, as the new Chief Exec, that we delivered on 2026 as we evolved, and we did.

[Stuart Togwell, CEO at Kier Group]

Kier delivered both a strong 2026 performance, revenue up 7.5%, adjusted operating profit up by 6.7%, framework access up by GBP 50 billion, and monthly net cash up GBP 60 million. We did that whilst we evolved into a simpler business model through the seamless transition of two divisions into one infrastructure powerhouse and the adoption of our justice blueprint into defense and health. A new management team is in place whilst we delivered average net cash for the first time in a decade and strengthened our cyber protection and digital capability, all of which I believe are increasingly important in the delivery of sustainable growth. Kier is being recognized externally for its leading performance, including social value and creating employment, and being reported as one of the best places to work.

[Stuart Togwell, CEO at Kier Group]

Finally, to deliver this level of change and to report that 2027 earnings are expected to be at the top end of the board's prior expectations is outstanding and why I am confident this team can deliver on our new strategy. The scale of opportunity in economic and social infrastructure, delivered through longstanding customers who value Kier's capability, represents a compelling opportunity to drive long-term value for the group. To capitalize on this, we have identified three strategic priorities. Growth. There is a generational significant investment cycle in U.K. infrastructure, supported by strong underlying trends across markets. So we are simplifying the business to focus on our core infrastructure and construction divisions to capture that opportunity.

[Stuart Togwell, CEO at Kier Group]

In terms of resilience, our customer mix, disciplined bidding, and approach to risks contributed to our milestone net cash position in FY 2026, and we will continue to strengthen the balance sheet, targeting more than GBP 200 million of average net cash by FY 2029. Performance. A simplified model at scale with a stronger balance sheet and productivity will deliver a medium-term plan of mid-single-digit revenue growth at a margin of 4%-4.5% and a double-digit EPS CAGR. I will say that again, and a double-digit EPS CAGR. Before going further, there is an important strategic decision regarding our property business that I want to share with you. We have decided not to invest in new property developments, and instead, as each existing development comes to market, we will return capital to the group's balance sheet. This will be managed through a run-off process, balancing time and value realization.

[Stuart Togwell, CEO at Kier Group]

I will return shortly to provide more detail on the strategic rationale for the property capital reallocation and discuss our strategy. But first, hopefully Tom can stand. I will hand over to Tom to take you through the FY 2026 financial highlights. Good luck, Tom.

[Tom Hinton, CFO at Kier Group]

Good morning, all. I am delighted to be presenting Kier's FY 2026 financial highlights. It has been an excellent year for Kier, in which we have delivered strong growth in revenue and profits and continued order book momentum and a full-year average net cash position. I am going to go into all of these in more detail now. Revenue in FY 2026 grew to GBP 4.4 billion. It is up 7.5% on the prior year, and it is continuing a strong period of successive year-on-year growth in our top line, which has seen Kier's revenue grow by a third since 2022. You can see the top left-hand box here. High-quality, profitable growth is underpinned by a high-quality, well-bid, and commercially selective order book, such with pleased to see continued momentum this measure, which grew 8.2% year-on-year. It is now a record GBP 11.9 billion as of June 30.

[Tom Hinton, CFO at Kier Group]

This order book growth is a direct result of Kier's leading positions across more than 120 frameworks. It is a particular strength of Kier, and Stuart will bring it to life later. Casting your eye now down to the bottom three boxes, you can see the quality of Kier's recent growth, with strong flow-through of revenue to adjusted operating profit and then to EPS. So we have an AOP of GBP 170 million in FY 2026, representing a 6.7% increase year-over-year. We consolidated our AOP margin of 3.9%, and subsequently, adjusted EPS grew by 8.8%, reflecting both the strong operational performance and the impact of the two recent share buyback programs. Our revenue and profit growth is also felt in our cash position, where the strong cash generation is a defining characteristic of this business.

[Tom Hinton, CFO at Kier Group]

During FY 2026, we generated GBP 206 million of operating free cash flow and GBP 165 million of free cash flow, which represented a year-on-year increase of 6.2%. And it is this cash generative nature of the business which has allowed us to further strengthen the balance sheet and distribute capital to shareholders. Since 2022, Kier has generated more than GBP 650 million of free cash flow, and it is this free cash flow that has been fundamental to the sustained improvement in the group's average net cash position, which has been transformed over recent years from a significant net debt position to a positive and growing net cash position. The group achieved an average month-end net cash position of GBP 11 million in FY 2026, up GBP 60 million from an average net debt position in FY 2025.

[Tom Hinton, CFO at Kier Group]

Alongside this sustained strengthening of our balance sheet, we have maintained and enhanced shareholder distributions through the dividend and share buyback program. I am pleased to announce the board has approved a final dividend of 5.2 pence per share, taking the full year dividend to 7.8 pence. This is an 8.3% increase on FY 2025. During the year, we concluded the group's first GBP 20 million share buyback, repurchasing just under 11 million shares within the GBP 20 million allocation. In March, we launched a second GBP 25 million buyback, which as of the 30th of June, has seen just under 4 million shares repurchased. We expect the program to be completed by the end of the calendar year 2026. We continue to see share buybacks as an important option for enhancing shareholder returns. We will cover that approach to capital allocation a little bit later in the presentation.

[Tom Hinton, CFO at Kier Group]

Staying on cash, let us dive into it in a little bit more detail. The group's closing cash stood at GBP 232 million, the right block, at the 30th of June, a year-on-year increase of 14%. I will walk through from left to right and pull out a few of the key drivers which have contributed to this strong year-end cash position. Firstly, the group produced GBP 106 million of operating free cash flow. It is a cash conversion yield of 121%, well ahead of our 90% target of operating free cash flow conversion. The strong cash performance was driven by GBP 236 million of EBITDA and a small working capital inflow of GBP 10 million, less around GBP 65 million of CapEx, which includes the capital payments on finance leases. After the net interest payments of GBP 33 million and the tax payments of GBP 8 million, the group generated free cash flow of GBP 165 million.

[Tom Hinton, CFO at Kier Group]

Our adjusting items here relate to fire and cladding remediation costs, which are in line with our expectations and previous guidance. You can see in FY 2026, we invested GBP 22 million in our property JV businesses, down from GBP 51 million in FY 2025. Next step along you see we paid cash dividends of GBP 34 million during the period and then GBP 22 million of share buybacks, which as mentioned, included the completion of the first 20 million and the commencement of the latest 25 million share buyback program, which we launched in March. At the half year, I was pleased to report an average net cash position for the first six months of FY 2026, and I am delighted to announce that for the full year, we achieved an average net cash position of GBP 11 million. It is a significant milestone for the group.

[Tom Hinton, CFO at Kier Group]

The first time since 2012 that the group has achieved an average month-end net cash position for the full year. This transformation of the group's financial position from net debt to net cash has only been made possible by the quality of our core divisions, which have track records of multiyear growth and high levels of cash generation. I now turn to look at the FY 2026 performance by division. As you can see, our core powerhouse businesses of infrastructure and construction both demonstrate strong momentum. Infrastructure delivered an excellent performance in FY 2026 with 10% growth in revenues and 16% increase in adjusted operating profit, representing an AOP margin of 5.5%, up 30 basis points on FY 2025. This stand-out performance was led by our water business, which continues to benefit from the ramp up of the AMP8 investment cycle.

[Tom Hinton, CFO at Kier Group]

Alongside this has been good performance in rail as the sector transitions to Control Period 7. Construction delivered a strong performance in FY 2026, reaching nearly GBP 2 billion of revenues, up 4% year-on-year, and maintaining its top-end industry margin of 3.9%. The business benefited from a second half that saw the ramp up of work at HMP Glasgow to full delivery phase. Our regionally focused businesses continue to build on their market positions, particularly in the education and defense, where our framework positions are critical for success. Stuart will talk more about the breadth of capability and credentials in that segment in a moment. Turning now to our property business. This continued to be impacted by a subdued market, reflecting the wider macroeconomic turbulence. The division generated revenue of GBP 63 million, AOP of GBP 9 million, a ROCE of 4.3%.

[Tom Hinton, CFO at Kier Group]

Against this challenging backdrop, the business has made good operational progress during the year. Planning has been secured on around 80% of projects, including around 5,000 residential units. We secured tenancy or are actively marketing on four projects, including 270 residential units that are pre-funded. As we have progressed into the first quarter fiscal year, we are seeing continued strong momentum, and I am pleased to provide the following outlook and guidance for FY 2027. Recent significant contract awards and continued growth in the group's order book and further expansion of our pipeline gives us a high degree of visibility into FY 2027. As such, we have got confidence in FY 2027 adjusted earnings per share, and we will be at the top end of the board's expectations. Moving now to our strategy. Stuart has already laid out in broad terms the direction we are taking in regards to property.

[Tom Hinton, CFO at Kier Group]

I will now hand back to him and cover in more detail the rationale and the roadmap for realizing and reallocating the capital currently invested in the portfolio. Thank you.

[Stuart Togwell, CEO at Kier Group]

Thanks, Tom. There are some seats at the front if anyone wants to take them. Okay. Next slide, please. Thank you. Thanks, Tom. Let us return now to the three strategic priorities I outlined earlier, which underpin our approach to long-term value creation. To focus on growth in our core businesses, further strengthen the resilience of our balance sheet, and drive performance through double-digit EPS growth. Just turning to property. The decision we have taken on property directly supports these priorities. It does allow us to focus resources on our core growth businesses where we see the strongest opportunities to create long-term value, namely infrastructure and construction. As capital is returned from the existing property portfolio, it will strengthen the balance sheet and over time will also reduce the impact of more volatile transaction-led earnings and give us greater optionality over future capital allocation decisions.

[Stuart Togwell, CEO at Kier Group]

In terms of timing, I can confirm the following. From this point, we will not invest in any new property developments. Existing programs will continue to be delivered as planned, working with our partners to protect value and ensure continuity. As a result, total capital employed in property is expected to peak in December this year. We then expect to realize approximately the first GBP 150 million of capital over the next three years as individual developments mature and come to market, with that capital reallocated to further strengthen the group's balance sheet. I return now to focus on one of our three priorities, that is growth, before Tom Hinton will elaborate further on resilience and performance. Why am I confident in our ability to grow? We now have two powerhouse divisions in infrastructure and construction, both with the scale, capability, and market positions to capture the opportunities ahead.

[Stuart Togwell, CEO at Kier Group]

They are operating from an established platform that is already growing with existing customer relationships and long-term framework positions. We already have three years of work through our order book and PCSA and ECIs, secured on the same disciplined approach to risk that has underpinned our recent performance. We are active in sectors where there is clear visibility of work over, I think, the next 10 years-15 years, giving us confidence in the depth and duration of the opportunity. Four of our existing sectors, water, energy, defense, and healthcare, provide material opportunities for growth, supported by structural demand and Kier's proven delivery capability, and comfortably cover any rundown from High Speed 2 and Justice. Just turning to Water in a bit more detail. We are aiming to double our existing revenue from GBP 400 million-GBP 800 million by 2029.

[Stuart Togwell, CEO at Kier Group]

We have strong visibility over a growing market for the next 15 years. That coverage is underpinned by a position on 10 of the 12 major water frameworks, longstanding relationships with the Environment Agency and the Canal & River Trust, and hard-to-replicate credentials in the sector. Definitely, the structural trends are clearly supportive, even before allowing for potential AMP9 growth and major projects such as the strategic reservoir options. Our order book has grown to GBP 1.4 billion. We have visibility over GBP 3.5 billion of additional work in our pipeline. We have a strong delivery platform with around 140 live projects, more than 100 projects in Early Contractor Involvement, and we have approximately 150 in-house water and Mechanical & Electrical specialists. In Energy, we are aiming to more than double our existing revenue from GBP 170 million to GBP 400 million by 2029.

[Stuart Togwell, CEO at Kier Group]

Energy is a multi-decade growth sector, and Kier has hard-to-replicate credentials that position us well to capture that opportunity. Our growth currently is supported by the nuclear work visible within our order book of GBP 680 million, GBP 3 billion of frameworks, and GBP 900 million of pipeline opportunities. There is further opportunity beyond that with the current quoted, sorry, those quoted figures, including Sizewell C and STEP, and additional revenue I expect from complementary capability across construction and facilities management. This is a market with high barriers to entry, driven by the key credentials of a suitably qualified, experienced person, of which Kier have more than 400 in-house people. The STEP Fusion program was a massive win for us because it demonstrates our ability to act as a strategic delivery partner on nationally important mega projects.

[Stuart Togwell, CEO at Kier Group]

Longer term, I am confident we can leverage our capability to grow our share of other energy sectors, including transmission, resilience, decarbonisation, and battery storage. In Defence, we are also aiming to more than double our existing revenue from GBP 150 million-GBP 350 million by 2029. Kier is strongly positioned to grow its share, supported by our frameworks with both the Ministry of Defence and defense primes over the next 10 years. Our 2029 revenue target is already supported by the current order book of GBP 300 million, the PCSAs of GBP 500 million, and GBP 11 billion of framework opportunities, of which we can already see GBP 7.1 billion of pipeline to bid. Our credentials, again, are hard to replicate, in particular in security, as more than 700 of our people have the necessary security clearance to work behind the line and in our design because of our recent awarded Secured by Design accreditation.

[Stuart Togwell, CEO at Kier Group]

I am confident growth in a sector that has been previously hard to grow because the new MoD alliances are adopting principles from our Justice blueprint. Looking ahead, defense represents a very significant further opportunity across both infrastructure and construction, including facilities management. Bless you. Okay. In Healthcare, we are aiming to grow by 50%, from GBP 170 million-GBP 250 million by 2029. Healthcare represents at least a 10-year opportunity, and we are well-positioned for our role as an alliance partner on key frameworks. Because of this, we can see further growth coming after 2029 from our order book of GBP 600 million, framework access of GBP 57 billion, and known pipeline currently of GBP 12 billion. Again, our technical expertise is hard to replicate. In particular, I would point to our in-house M&E and hospital FM capability. Both are differentiators in this sector. Hinchingbrooke Hospital is a good example of this.

[Stuart Togwell, CEO at Kier Group]

We targeted and secured the opportunity for a New Hospital Programme because of our existing FM contract performance with that hospital. Now, just moving on to differentiators. Many of you in this room have asked me over the last year what really differentiates Kier. Today, I want to set out the strengths I believe already distinguish us before going through a few more of them in a bit more detail. Kier has a best-in-class capability in securing renewing frameworks across the U.K. This framework strength underpins the quality and visibility of our order book and pipeline and gives me confidence that growth will continue to be secured with the same disciplined approach to risk. Of the GBP 200 billion of frameworks available to us, this slide shows that a substantial proportion of these are aligned to our key sectors, importantly, including the areas where we have seen the strongest growth opportunities.

[Stuart Togwell, CEO at Kier Group]

I also expect in time that central and regional frameworks to become increasingly important procurement routes after devolution. I wanted to bring our national scale and coverage to life. Our model gives us the breadth of resources and capability to meet customer needs across the U.K. Our national approach provides consistent delivery, while our local presence gives us the insight and relationships needed to meet customers' social value priorities. We can also move resources quickly to where demand is strongest, giving customers confidence that we can respond at scale. In many regions, the scale of our local business is larger than the total revenue of some of our competitors, which gives us both reach and resilience. Moving on to end-to-end capability. Delivering value for money and social value are becoming an increasingly important priority for our customers.

[Stuart Togwell, CEO at Kier Group]

Kier is good at this because we can draw on our end-to-end capability at scale across the U.K. The metrics on this slide demonstrate our breadth and depth. 800 people in design, more than 400 projects delivering GBP 4.3 billion of revenue, and our facilities management business. This combined capability allows us to co-create solutions with customers that deliver outcome-led results. I would like to highlight the pre-construction phase, because this is where we shine by shaping the right solution with customers, aligning scope, risk, and value, and setting projects up for successful delivery. Finally, I wanted to highlight our culture because it is one of Kier's most important differentiators. Our connected, high-performing culture enables us to attract, develop, and retain the talent we need to deliver the opportunities ahead.

[Stuart Togwell, CEO at Kier Group]

It creates alignment across the business, supports disciplined execution, and gives our people a clear sense of purpose in the work we do for customers and communities across the U.K. That culture is a genuine source of competitive advantage. It is built over time through consistent behaviors, strong relationships, and pride in delivery, and is not something that can be quickly or easily replicated. As we move into the next phase of growth, I believe it will be central to how we sustain performance and create long-term value. In short, our differentiators matter on a national scale, regional presence, end-to-end capability, and connected high-performing culture gives us the agility to move resources to where demand is strongest, shape solutions early with customers, and continue to deliver with discipline as markets evolve.

[Stuart Togwell, CEO at Kier Group]

We are also building differentiators for the future, in particular, naturally digital, which I will bring back to you later in the year. To bring this section together, I want to step back and just summarize why I'm confident in the growth opportunity ahead of us. We are operating in markets with long-term structural demand, clear customer need. These are essential sectors for the U.K., and they provide Kier with a significant, accessible, and enduring growth opportunity. That opportunity is reinforced by the strength of our framework positions with access to around, I'll say it again, GBP 200 billion of frameworks, just in case you missed it, which is substantially aligned to our key sectors.

[Stuart Togwell, CEO at Kier Group]

It is also underpinned by favorable structural trends that are familiar to all of us, from the need for investment in water and energy to national security, healthcare capacity, and the wider renewal of U.K. economic and social infrastructure. The four sectors we have just discussed are expected to deliver around GBP 1 billion of revenue uplift over the next few years. Importantly, that growth is not dependent on a single market or a single client. It is supported by deep sector credentials, established customer relationships, disciplined bidding, and the ability to bring the breadth of Kier's capability to complex programs across the U.K. That concludes my section on growth. I will now hand you back to Tom, who will take you through the two closely connected priorities that support and enable that growth, resilience and performance. Tom?

[Tom Hinton, CFO at Kier Group]

Thanks, Stuart. Stuart's covered the growth pillar of our strategy, the extent of the opportunity ahead of us. I am going to cover the other two pillars of our strategy, resilience and performance. Starting with resilience, what is it that gives us confidence in our ability to deliver sustainable growth? It is in part due to the optimal mix of work across our customer types, our contract approach, and our deep long-term relationships. Firstly, our order book, which is building year-on-year and now stands at GBP 11.9 billion. The order book consists of either secured or probable work and gives us substantial visibility of not just the current year, but also the following year. That is before a considerable amount of the work, GBP 2 billion, which are in one-to-one customer discussions, and that we expect to shortly join the order book.

[Tom Hinton, CFO at Kier Group]

In fact, the GBP 500 million Hinchingbrooke Hospital award is one example that just missed the June order book cutoff. Our order book gives us confidence in FY 2027 revenues, with 95% cover for the following financial year. In fact, the construction business is at 100% cover for the coming 12 months. Didn't give you an extra target there, Martin. It is a great position for the business to be in. Moreover, more than 90% of the group's revenues come from repeat business, reflecting Kier's excellent customer delivery. In terms of the quality of our work, our commercial discipline means that 95% of our project revenues are now governed by contracts that are either cost-plus, where all costs are passed directly onto the customer, or two-stage, where the opportunity for renegotiation protects our margin.

[Tom Hinton, CFO at Kier Group]

This is, of course, a material improvement on where we were commercially just a few years ago. Lastly, in terms of assurance, almost 90% of our customers are either public sector or they are regulated entities, as you can see on the right-hand side of the slide, removing much of the commercial volatility from our portfolio. Still on the topic of resilience, let's look at how much capital we expect to generate in the next three years from our underlying cash flow. In the period FY 2027-FY 2029, we are targeting cumulative operating free cash flow of GBP 600 million-GBP 700 million on the left. During that same three-year period, we expect to realize net capital of around GBP 150 million from the current property portfolio.

[Tom Hinton, CFO at Kier Group]

Offsetting property capital against cash tax, interest payments, and the remaining cash outflows in respect to fire and cladding, we are left with a total allocatable capital of GBP 600 million-GBP 700 million, which is the middle block. From that total allocatable capital, we will continue to prioritize our core CapEx and our growing ordinary dividend. The residual, the GBP 450 million-GBP 550 million, will be allocated in line with the group's capital allocation framework, which I will look at now. Beyond the primary allocation for CapEx and dividend, the group will have the GBP 500 million, around GBP 500 million, of capital to deploy in line with the hierarchy of uses in points 3 to 5 on this slide. Firstly, we want to strengthen the balance sheet.

[Tom Hinton, CFO at Kier Group]

We are pleased with the substantial progress that has been made in recent years in this respect. We have achieved the average net cash target of average net cash of GBP 11 million in FY 2026, which, of course, was an important milestone. Over the medium term, we will focus on growing this further, reaching a target of more than GBP 200 million of net cash by FY 2029, which will provide the group with additional resilience, capital optionality, and continued balance sheet efficiency. We will also have scope to consider selective value accretive acquisitions in the core markets as compelling opportunities arise, and that is point number four. Then, subject to the above considerations and recognizing the role that share buybacks play in enhancing shareholder distributions, we will return excess capital via share buyback programs.

[Tom Hinton, CFO at Kier Group]

That covers our second priority of resilience, how we will strengthen our balance sheet and enhance capital allocation options. Let us now turn to the third pillar, which is performance. Starting with the key metric of EPS, more broadly, total shareholder returns. Driving EPS performance hinges on our two other strategic pillars of growth and resilience. Through growth, we are targeting a significant increase in AOP as we grow revenue through the considerable market opportunities that Stuart detailed, while simultaneously maintaining and augmenting our margin in the 4%-4.5% range. Secondly, through resilience and a stronger balance sheet, we will have the ability to repay our GBP 250 million bond. We therefore expect to see structurally lower net interest expense as the group's capital structure benefits from becoming debt-free. In FY 2026, the group recorded net interest expense of GBP 35 million.

[Tom Hinton, CFO at Kier Group]

We expect to see that rapidly fall in the medium term with significantly lower costs after we repay the 9% coupon bond. These two drivers, AOP growth and lower interest costs, give us the confidence to target EPS growth rate of greater than 10% CAGR over the medium term. This is before the added benefit via lower share count from any future share buyback programs. As mentioned earlier, we will continue to prioritize the ordinary dividend. We see the combination of this sustainable dividend and strong double-digit EPS growth as providing a balanced and attractive combined total shareholder return. Looking more broadly at performance today, we are updating our medium-term targets across a full range of metrics, reflecting the opportunity that we see for our business.

[Tom Hinton, CFO at Kier Group]

Starting with revenue, we intend to grow the top line by mid-single digits each year, blending through the significant opportunities in the growth sectors such as water, defense, energy, and healthcare that Stuart talked about earlier with our established businesses in our core markets. Next down, we retain our 4%-4.5% margin target for adjusted operating profit, and that is enabled, as Stuart discussed, by our differentiated end-to-end capability. Retaining the 4%-4.5% margin target, despite our strategic decision on property, reflects our confidence in the core infrastructure and construction businesses and Kier's differentiated offering. These top line and bottom line targets are key drivers of EPS, which we aim to grow at double digits. As already mentioned, we are targeting an average net cash position of GBP 200 million by FY 2029 while continuing to deliver our cash conversion of over 90%.

[Tom Hinton, CFO at Kier Group]

Finally, consistent with previous guidance, the group aims to grow the ordinary dividend in line with earnings and maintain the 3x cover. We see these medium-term targets as challenging, but we also see them as realistic. We also see delivering on these targets as a pathway to significant shareholder returns across the medium term, and I think truly delivering the performance component of the priorities for Kier. On that note, I'll finally hand back to Stuart to wrap up.

[Stuart Togwell, CEO at Kier Group]

Thank you. Good news is I've only got another 20 slides to go through. Okay. Thank you, Tom. Before we move to questions, I want to close today's presentation by bringing the investment case together, showing how the strengths we have discussed combine to create a compelling and differentiated proposition. Taken together, they leave Kier well-placed to generate substantial value for our stakeholders through a stronger, more focused business. There it is. The opportunity ahead of us is significant. We are entering a once-in-a-generation investment cycle in U.K. infrastructure, reflected in the scale of the frameworks we have secured and supported by clear structural tailwinds across our key markets. Kier is exceptionally well-placed to capture that opportunity given our leading positions in essential infrastructure and construction markets, our customer relationships, and our disciplined approach to risk. Our financial profile is strong and improving.

[Stuart Togwell, CEO at Kier Group]

We are growing well, delivering a top-tier industry margin, and continuing to generate significant cash. That gives us the resilience and opportunity to invest in the business, strengthen the balance sheet, and create value for shareholders. We have a clear path to enhance returns over the medium term, underpinned by the strategic priorities we have set out today, namely growth, resilience, and performance. The medium-term targets Tom outlined, from mid-single digit revenue growth to double-digit EPS CAGR, demonstrates our confidence in Kier's ability to convert these opportunities into sustainable growth and improved shareholder returns. As I reflect on my first year as Kier's Chief Executive, I am more confident than ever in the future of this business. We have strong foundations, a focused strategy, disciplined execution, and leading positions in markets that are essential to the U.K.

[Stuart Togwell, CEO at Kier Group]

Together, these give us a firm platform to grow, increase returns, and create lasting value for all of our stakeholders. Thank you very much for listening today, both here in the room and online. We'll now be pleased to take your questions. Thank you. Yeah.

[Jonny Coubrough, Analyst at Deutsche Numis]

Sit here.

[Stuart Togwell, CEO at Kier Group]

I will come around. Oh, you cannot move. Oh, sorry.

[Jonny Coubrough, Analyst at Deutsche Numis]

Yeah.

[Stuart Togwell, CEO at Kier Group]

That would have been good.

[Jonny Coubrough, Analyst at Deutsche Numis]

Jonny Coubrough from Deutsche Numis. Thanks for the presentation.

[Stuart Togwell, CEO at Kier Group]

Yeah.

[Jonny Coubrough, Analyst at Deutsche Numis]

A lot to get excited about in there. Could I ask firstly on how you will decide on the timing of things like buybacks? On slide 30, I think the quantum where you set it out very clearly and the implication is there could be about GBP 100 million a year surplus for buybacks. But when you are looking at that decision each year, how will you decide on it based on timing of capital coming out of property, and when you might repay the bond?

[Tom Hinton, CFO at Kier Group]

Yeah. I think you explained it very nicely there. Look, it is firstly we are a very cash generative business, and that comes across very nicely on, is it slide 30, where you can see the amount of cash that we are about to generate over the next three years. As I tried to outline in the allocation, capital allocation framework, our priority is we want to and we need to strengthen the balance sheet. So that is going to kind of help determine the pace at which we can do future either acquisitions or buybacks. So that is the determining factor, which is how fast the cash comes in through the core business and the pace at which we execute the sell down out of the property portfolio.

[Tom Hinton, CFO at Kier Group]

That is going to tell us how much cash we have got, and that is going to give us a good guidance of the pace at which we can do future buybacks.

[Jonny Coubrough, Analyst at Deutsche Numis]

Thanks very much, Tom. Just to follow up, in theory, it could be quite back end loaded then in terms of the surplus capital generation. Would you then look for a return program to be a sustainable one as opposed to a big one-off lump sum?

[Tom Hinton, CFO at Kier Group]

We haven't sat down and-

[Jonny Coubrough, Analyst at Deutsche Numis]

Sure

[Tom Hinton, CFO at Kier Group]

-said, "Let's do a big lump sum buyback." At no point have we had that kind of conversation.

[Jonny Coubrough, Analyst at Deutsche Numis]

Thanks very much. Just last question would be on the timing of the bond repayment and could that happen early, and if so, what would the benefit be to your LT?

[Tom Hinton, CFO at Kier Group]

Back to the cash point. We would not look to make that repayment early. You could repay from March 2028, which would be a logical time to do it. And that is nicely in line with the capital being released from the property business.

[Jonny Coubrough, Analyst at Deutsche Numis]

Thanks very much.

[Andrew Nussey, Analyst at Peel Hunt]

Good morning. Andrew Nussey from Peel Hunt. Couple of questions as well, please. I guess first of all, infrastructure had a very strong second half performance, both from a revenue and, in particular, margin performance. Water, you said, has been an influence to that strength. Should we read into that then that water as a sector, given that it is bringing in more Kier skills, is a higher margin opportunity than perhaps some traditional infrastructure sectors? That is the first question.

[Tom Hinton, CFO at Kier Group]

No, you cannot make that assumption from it. Water is a strong margin business. It is a higher margin than, for example, in the construction business. But it is in the middle of the pack in terms of infrastructure margins.

[Andrew Nussey, Analyst at Peel Hunt]

And secondly, in relation to water, just your ability to keep resourcing the opportunity there successfully, given it is quite a supply chain constrained sector.

[Stuart Togwell, CEO at Kier Group]

We always make sure that we do not take any work on unless we have got the resources to deliver it. We do have the benefit of that regional model. We have got long established relationships with key supply chain in those areas. If there are major capital works, again, we have the ability to move resources from the mega projects to where they are needed most.

[Andrew Nussey, Analyst at Peel Hunt]

And last question, a number of the growth ambitions stretch out to FY 2029. If you had to add Hinchingbrooke Hospital into the order book, what level of visibility would you hazard for FY 2029?

[Tom Hinton, CFO at Kier Group]

In terms of?

[Andrew Nussey, Analyst at Peel Hunt]

Revenue coverage. Greater than 95% for?

[Tom Hinton, CFO at Kier Group]

Well, we'd say for FY 2028, we're at 70%.

[Andrew Nussey, Analyst at Peel Hunt]

Yeah.

[Tom Hinton, CFO at Kier Group]

That trajectory kind of comes down. If you looked at 2029, we'd be about early 50s.

[Andrew Nussey, Analyst at Peel Hunt]

Okay

[Tom Hinton, CFO at Kier Group]

approximately.

[Andrew Nussey, Analyst at Peel Hunt]

That's great. Thank you.

[Stuart Togwell, CEO at Kier Group]

I would go back to the, if you look at the general order book is GBP 11.9 billion. If you look at the PCSA and ECI total of GBP 2 billion, you are looking at about three years' worth of work for there for us to convert and deliver. Past that, you have got, I think we have got about GBP 65 billion of pipeline opportunity. So they are tender opportunities. So they are either call off from existing frameworks, new frameworks or renewals or contracts that we can see. They generally take a time to win and convert, but they are looking at sort of two years hence further from that.

[Andrew Nussey, Analyst at Peel Hunt]

Okay, thanks.

[Stuart Togwell, CEO at Kier Group]

Five years work.

[Aynsley Lammin, Analyst at Investec]

Thanks. Aynsley Lammin from Investec. I think I have just got two, please. First of all, just going back to the net cash, the average of GBP 200 million. Just interested how you arrived at that GBP 200 million number. Obviously, lots of work already in the pipeline, margins discipline. Do you need that much? Why was it not GBP 300 or GBP 100 interest there? Related to that, if we were to think about average daily net cash, would there be a big difference between the month-end number, say, compared to the GBP 11 million you just delivered? That is the first question. Second question, just interest here, your views on the overall health of the kind of supply chain at the moment, what you are seeing in build cost inflation, just some general kind of pointers there.

[Stuart Togwell, CEO at Kier Group]

You do the first one, I will do the second one.

[Tom Hinton, CFO at Kier Group]

Yeah.

[Tom Hinton, CFO at Kier Group]

The GBP 200 million target, first thing I would say, it is definitely more of an art than a science. If I could say it was exactly GBP 200 million or exactly GBP 250 million, it is certainly a range. Where do we arrive at that range? There are two ways of thinking about it. One is you need to be somewhere near your peer group. If you look at my peer group, they have much more cash on the balance sheet. I do not want to go as far as some of them. They have got a lot. They have got a lot of cash, and you look at the commentary on them, it can be more nice to have some of that given back to shareholders. But there is a point where we are an outlier in the group, and we do get a lot of noise around that.

[Tom Hinton, CFO at Kier Group]

We do not get it from our customers, but we do get it from the investor community, look at us compared to our competitors. Then the other way of thinking about it is what is the size of your negative working capital, negative net working capital? Because we run large construction projects and we run our cash very, very well, our net working capital, negative net working capital, is about GBP 500 million-GBP 600 million. So that is money that we have of our customers that obviously does not sit on the balance sheet. How do you support against that? Well, we have got a great order book, we have talked about. We have got GBP 12 billion of order book. If you think about that GBP 12 billion of order book delivering at 4% margin, you have got about GBP 500 million worth of cash coming from your order book. We can feel comfortable about that.

[Tom Hinton, CFO at Kier Group]

But we want to have more against that negative working capital because that is effectively our customers' money. That is why we come to the conclusion of we would like a bit more cash, and GBP 200 million kind of gives you support against that negative working capital. So negative working capital has against it the order book and that incremental cash, which helps us get to the GBP 200 million level, which is then about, what, 4% of revenue? So that when you kind of triangulate those measures, you come to the art of about GBP 200 million, and that is how we come to that number.

[Aynsley Lammin, Analyst at Investec]

And the average daily versus average weekly?

[Tom Hinton, CFO at Kier Group]

Yeah. That is the working capital swing that you get in the month. That makes, I am looking at my treasurer over there, GBP 120 million-GBP 150 million difference per annum.

[Stuart Togwell, CEO at Kier Group]

Then supply chain. We are definitely not immune to what is going on in the market and the macroeconomics. But what we have is we mitigate it, and we mitigate that in a number of ways. Firstly, in terms of the sectors that we are in. We purposely stayed away from pure house building and high-end residential markets, which have been subjected to, certainly in terms of high increases in terms of inflation and difficulty in the supply chain. Our management of risk, Tom spoke about earlier in terms of either cost reimbursable contracts, which is about 60%, and the further 35% through the two-stage. We have a long period working with customers there in terms of working through design and agreeing who takes the risk on inflation. That is 95% of our revenue.

[Stuart Togwell, CEO at Kier Group]

I think thirdly, I will go back to our regional model, means that we are locally placed and have long-term relationships with the supply chain. They prefer to work with us. They know us well, our people know their people, and they trust in our ability to pay. We get their trust and their reliability through that. That is the way that we manage it. But we are not immune. Okay, seven minutes left. Oh.

[Adrian Kearsey, Analyst at Panmure Liberum]

Adrian Kearsey, Panmure Liberum. The MoJ was a good example of adopting collaboration.

[Stuart Togwell, CEO at Kier Group]

Yep.

[Adrian Kearsey, Analyst at Panmure Liberum]

In the presentation, there were a few comments where it seemed to indicate that that collaboration was rubbing off in other parts of your other clients. Could you perhaps give some examples of how that's evolved?

[Stuart Togwell, CEO at Kier Group]

Yes. So, there are two particular clients that have researched that alliance model and gone on to adopt it because they see the benefits of collaboration: the MoD frameworks and the New Hospital Programme. The New Hospital Programme is an alliance. They decided to go for a direct award allocation of projects rather than tendering call-off projects, which gave us the ability to position ourselves around the Hinchingbrooke Hospital, which I mentioned before, that we've had a longstanding relationship with that client, providing the FM facilities there. So we know the client well. They got to know us. So when it came to the allocation, we were allocated one of the first hospitals that came off the alliance. I'm looking at the MoD behind you to make sure I said that right. Any more questions?

[Stephen Rawlinson, Analyst at Applied Value]

Hi, Stephen Rawlinson from Applied Value. In terms of the margin accretion or the margin improvement, to what extent is that arising from a mix in the type of work you're doing? Because you've now got, say, 800 people in design. I don't know how you cost those into projects, which is one question. The second question is, are you expecting to increase that element of design in there, such that actually we would expect margin accretion from that, possibly above 4.5%? Could you just talk us through that a little bit?

[Stuart Togwell, CEO at Kier Group]

If you can imagine the number of conversations Tom and I had together to get to 4.5, and now we are already being pushing above it. Look, there is definitely an impact of mix, and I would point to the growth in infrastructure compared to construction, and infrastructure generally has a higher margin, so we will get some benefit through that. You have got the runoff of property. We still will have good returns from those projects. But the way I look at it, rather than, say, one individual component of the mix, I would say in terms of it is the end-to-end capability that we have at scale that has got to drive productivity improvements as we grow. Certainly in terms of our move around digitalization, we are seeing that we are quicker to make good decisions within the business, and that has got to drive some productivity going forward.

[Stuart Togwell, CEO at Kier Group]

Tom and I are baking in some of those benefits in future years that we can see that should be there. But mix and scale, I would say are the two. In terms of design, I would point to the fact that don't just think it is restricted to only the 800 people in terms of what they do. What we have is the capability to manage all the design. Because we have that continuity of sectors, we do school after school, hospital after hospital, road after road. That inbuilt knowledge means that alongside our own designers, we know how to manage other design to make sure that we get the benefits out of it. Okay. We need to go online as well for questions.

[Tom Hinton, CFO at Kier Group]

Oh.

[Stuart Togwell, CEO at Kier Group]

Is this the time we just need to go back and see if there is anyone online that wants to ask any questions?

[Operator]

At the moment, we currently have no questions on the telephone lines.

[Stuart Togwell, CEO at Kier Group]

There we are. Good. Any final questions in the room?

[Dan Cowan, Analyst at BNP Paribas]

Good morning, Dan Cowan from BNP Paribas. One question, please. Could you talk a little bit about what factors might drive cash flow conversion, please? You've just done 120%, and your target is above 90%. So what drives that range, please?

[Tom Hinton, CFO at Kier Group]

That was a very strong working capital in a couple of our large construction projects. When you have large construction projects, that can give you quite good incremental working capital at the beginning. That's where we can push it up quite high. So actually we've got good working capital coming in for those large construction projects. The reality is that when you're at 121 one year, you've got to expect it to come down a bit year after that. We want to keep it up at the 100% level with that target of over 90%. But we're also conscious that there might be a bit of an outflow. We've got to manage on that when you have large working capital inflow. As we continue to grow, we are a negative working capital business.

[Tom Hinton, CFO at Kier Group]

As you grow, that can keep that working capital coming in, and that pushes it up.

[Stuart Togwell, CEO at Kier Group]

Okay. Okay. Again, I would like to thank everyone that has joined us today. Anyone on the line, thank you very much.

Participants

Executives

• Stuart Togwell, CEO
• Tom Hinton, CFO

Analysts

• Jonny Coubrough, Analyst at Deutsche Numis
• Andrew Nussey, Analyst at Peel Hunt
• Aynsley Lammin, Analyst at Investec
• Adrian Kearsey, Analyst at Panmure Liberum
• Stephen Rawlinson, Analyst at Applied Value
• Dan Cowan, Analyst at BNP Paribas