Kier Group Stock

Good afternoon, everyone, who's joining the call. We'll just give a moment for people to come through me to start.

Great. I think that's pretty much everyone through at this point. So good afternoon, and welcome to the Kier Group call today following the release of full year results last week. My name is Robert Irvin, and I'll be hosting the call. With me from Kier are Stuart Togwell, CEO; Tom Hinton, CFO; Rory Elliott, Director of Corporate Development; and Ezra Bigland, Head of IR. For those who attended before, the format is slightly different today as we'll be heading through some pre-submitted questions, which should give an overview of the results and the changes in strategy.

Obviously, we'll be looking to cover the business and performance, starting at a high level before drilling down a bit and heading through strategy and the company's plans for long-term value creation through growth, resilience and performance. Notwithstanding that, do please put questions into the Q&A function at any time, and I'll try and slot them into the relevant section as we go through. You should all have a copy of the full year presentation in your inbox, but please do flag in a chat. If you don't, and we'll send it across. Obviously, the relevant slides will pop up on the screen as we need them.

So let's go under way and looking at recent performance first. The first question is that looking back at full year '26, what are you most pleased with as a management team?

I'm going to let you start with that.

I think the key thing about FY '26 was delivering our numbers in the face of quite a lot of executive change. So considerable change took place, new CEO, new CFO, new Construction Director. And it was very important that we kept a very stable ship throughout that period that we didn't have any challenges on our kind of key projects, that we continue to grow in the construction infrastructure and we managed through that organizational change.

So I think that kind of delivering FY '26 and then setting up the platform for further growth as we go into '27, '28 and beyond, I think was kind of a substantial achievement. And when we look at those FY '27 (sic) [ '26 ] results, we look at the fact that we grew at the revenue line, grew at the profit line, kind of really did continue to kind of build the core foundation kind of a good result in FY '26.

So I would add just on a couple of points on that. First of all, good afternoon, everyone. Really delighted to be talking to you. And also, I know some of you are long-term shareholders. So thank you for sticking with us through the last few years, and we're now getting to a point where we can see some really good growth. I would say my highlights are two. First one is Tom and I in terms of how we work so well together. And hopefully, that comes across in terms of these presentations. But it's also really important because we got to the strategy very quickly independently. So I gave Tom time to go and get to know the business. I knew it pretty down well and obviously knew this industry after 40 years.

But Tom being new to industry, I wanted him to form his own views. And we lined up really quickly in terms of what we want to do. And that allowed us then to put the effort into making sure that we have what I think is a very clear and decisive strategy going forward. And we are very excited to be starting to deliver on it. So that will be my additional highlights.

Great. Thank you very much. And you mentioned some people on the call, I think, have been long-term shareholders. I think some people are potentially a bit newer. And obviously, these results continue a multiyear improvement story for Kier. How would you characterize the biggest changes to the business over that time?

In terms of under my tenure, I'd say that putting together the two infrastructure businesses, unleashed sort of pent-up energy in our organization because they were feeling a bit frustrated too, that the market wasn't seeing them as being the powerhouse that they were. So that worked really well. And as a major part for us winning the STEP Fusion program, which is great for us to be able to see that we are -- have the capability and the belief of government in terms of being able to deliver one of these mega infrastructure projects. And that sets us aside from many of our competition. And it gives me confidence in terms of just that one project alone could run to 2040 in terms of its size and could be GBP 10 billion. So I think there was that.

The way the ExCo team has come together, we have made some changes, but some inside. When I took on the role, what the advice was given in terms of don't take too long to get your team. A lot of the chief execs said they waited too long to put the team in place, and that held back the delivery on strategy. So to move quickly on the team and to get a real mix of existing key people stepping up, bringing new talent in from outside in the industry and also bringing people in from outside of the industry was important to me to give a real blend.

And I can feel it now when going to the meeting of the ExCo that the commitment, the positivity and the support in terms of this strategy is tremendous. And it's contagious across the business. So the energy levels, 72% engagement level of our people. The amount of people that want to come and work for us now is we're not struggling to get people in, and I'm sure that will be one of the questions later about resources. And it just feels a great place to be, and it is.

Great. And then looking at the most recent year, again, obviously, we've seen revenue, profits, cash generation all increased. What were the most important drivers behind the performance?

Consistency. I've been in this industry for 40 years. And what you need to make sure is if you can get into that drumbeat of consistency, it makes the machine work so much easier because you don't get distracted with bad or difficult jobs. You can be really more time focused in terms of forward-looking. And I wanted to get the business out there talking to our customers and our supply chain and talking about all the great things that Kier do. And that certainly was one of the reasons why I was very keen this time with the results to answer some of the questions I've been faced around differentials.

And certainly, when we looked at the property business, it wasn't performing for us. And actually, it was dragging us back in terms of what we need to do, which is one of the reasons why we looked at it and just went, why would you want to try and continue doing that when you've got such a great business alongside it that you put your effort into that. So anything else, Tom?

I think that the strength of the growth and the strength of the business is built from the fundamentals of clients and markets and the very strong relationships that we've got to have built the frameworks and then the pipeline and then the order book. And those relationships that we've got with our core clients, whether they be regulated entities, commercial clients or most importantly, kind of government bodies, those relationships and those frameworks are the kind of the foundation and the bedrock of the business.

So I think if you look at the performance of FY '26 and flowing through FY '25 (sic) [ '27 ] I think that a lot of that comes from the strong frameworks, which has driven the order books, which then goes with what Stuart said, if we have the consistency of delivery, that then delivers the revenue, the margin and the cash. So I think when I reflect on it and I'm relatively new, I think those frameworks are kind of critical to that success.

Yes. And it may be easy in terms of decision because if you go back a year, we were waiting to hear in terms of what's going to happen with the New Hospital Program. We just got places on the water trust frameworks, and we needed to see how they were going. So it sort of overlaps in terms of them performing well in terms of the winning either winning or securing work call-offs from them. And with our view in terms of if we could run this business without property, it simplifies everything. And the upside we could see in terms of the saving on interest, which I'm sure Tom will talk about later, was just like a no-brainer.

Great. Thank you very much and I guess we'll probably on to profit a bit more as well. The next one is if we -- we'll talk about the medium-term targets in a moment, which include cash. But this year marked the first time in more than, I think, a decade that the business has achieved average net cash. Why is that an important milestone for the business? And practically, what does that mean?

I think it's just so pivotal in terms of the turnaround being almost completed in that if you look at where we were with GBP 583 million in deficit in 2021. So the organization, we always said, just imagine if we can get to net cash. And it also means that I stopped talking about it at some point because when I started a year ago and going around and talking to people, the first 2 questions normally were, how does your property business work because we can't quite understand it?

And secondly, why are you telling me that your model is more -- is better than some of your competitors where they all keep cash on the balance sheet. So it was important for us because it showed in terms of our turnaround being completed and the direction of travel that we want in terms of having cash on our balance sheet. Now I don't need cash on the balance sheet to win work. I've not had any questions from clients around our liquidity or anything like that for probably 2 or 3 years. But there is a sentiment of attachment to cash on the balance sheet in this particular sector.

So again, I just wanted to move us to that. So I don't have to talk about it anymore. And I could concentrate on talking about the 2 powerhouses and drawing on winning more work and market share of the frameworks we've got.

Is it worth taking a moment to talk about the kind of cash build or we talk about a bit already [indiscernible].

I think we'll come back to the cash a little bit later on, yes. But I think just while we're sort of sticking in this section, just sort of view, I guess, of sort of trading this year. Last element of this one is you've guided full year '27 earnings being the top end of previous expectations. What gives you confidence in that outlook?

Confidence. I did go back to the comments we made earlier. The confidence in that outlook is based on the strength of order book, which gives us 100% coverage of our revenue in construction, 95% coverage of our revenue in infrastructure. So that's the quality of the order book that we've got of secured and probable work. And we hope that even more may come in during the year. But that gives us a lot of confidence over the revenue.

And then as Stuart said, this is about consistency, delivery, really good kind of project management and delivering on your core projects for your clients. And that gives us confidence around both the profit number all the way through to earnings per share when you take into consideration the interest as well. And our guidance would be the top end of Board expectations for earnings. So particularly at the earnings per share level, we're at the top end of expectations.

Yes. I take a lot of confidence over the cash position, and we've made a strong start to the year. We're continuing to win great work. And the sectors that we're going to talk about later, we're increasing our market share in those sectors. And I just get more confident in terms of our ability to deliver the -- either the cost reimbursable fees or the jobs that we've converted into contracts through the two stage but strong start to the year helps.

Indeed. And then moving on to strategy, obviously, growth, resilience and performance. Could you just expand on that, please, and what your vision is for Kier over the next 3 to 5 years?

Yes. This is I really like because it's simple to remember, even Tom and I can remember when we go around. So the growth is -- and I've shown and demonstrated through the growth engines that we've got in terms of those 4 sectors that we built up -- we've got bottom-up forecast in terms of the businesses, and we can see the growth coming through off the back of the secured work in the order books, the call-off contracts we're seeing coming through the pipeline from the frameworks that we're on and our ability at the moment to perform.

So the growth is the first sort of leg of the stool that we can see. And from the growth, we get the AOP. We're satisfied at the moment in terms of being looked at that the 4% is here to stay. And we have confidence in terms of between 3 and 5 years with this sort of growth and this sort of cookie-cutting approach to the sectors that we're in, you can see margin improvement through productivity improvements and the sort of end-to-end capabilities driving margin.

So that's the sort of the growth bit. The resilience is really about how do we then improve our cash position on the balance sheet. And we are generating cash, and we're going to be generating some huge amount of cash over the next few years, which gives us options. The first thing we think is a benefit to the shareholders is to deal with the expensive bond that we've got, and that facility was really put in place to give us some coverage on the property. And if you think property hasn't made 9% return for a number of years, and the cost of having that bond was 9% the answer is I'll do better with the cash on the balance sheet and give me options to do other things with it. And I know Tom will go on that.

And then in terms of the performance. So in terms of the -- just on the resilience piece, we still believe that we can continue if it's the right thing to do in terms of share buybacks. So there is no reason why we're going to stop that. We're through the first one, but it's got to be the best use of our cash. And I think that's what Tom and I are going to be all about in the next few years is we will deliver, generate more cash and provide us with options with what to do. Certainly, we'll go through that in terms of the capital allocation, I guess, in terms of that.

And then finally, if you start looking at that, a real change for us in terms of the direction of the business is to concentrate on the double-digit growth potential in terms of EPS. Now if we can do that, then it's a very compelling story about what we're doing. And it gives a reason for the other two steps. So we grow in terms of revenue and the way we're looking at it in terms of sort of mid-single digit. So that should give everyone comfort that we're not going after the wrong work on the wrong terms. It's a steady, sustainable growth that we've got.

We'll put cash on the balance sheet. We've got some options, really looking forward to get rid of that expensive bond. And just by doing those two things, we see a nice easy route in terms of double-digit EPS, which is something we can offer, which we think others can't because they've already been through sort of the turnaround into general delivery stages. So it's a huge advantage for us.

Tom, anything else?

I think the only thing I would add to that is when we talk about performance, we talk about double-digit EPS but also because we are highly cash generative, and I talk about later on, hopefully, and it does mean that we can commit to our dividend as well. So we grow our dividend cover 3x, and we'll grow that in line with earnings, which is, as I said, double digits. So you see kind of a good growing dividend. And as Stuart mentioned, as we're cash generative, we will also continue the share buyback.

So in terms of kind of rewards to shareholders, there's a lot on this call, not only will we get growth in earnings per share, and that's already being recognized, right? The market is recognizing that in the re-rating that's taken place over the last 10 days. But they'll say you'll get a reward from EPS growth, and you'll also get a reward from dividend and share buyback. And when you put all that together, you actually end up kind of high teens. So you kind of [indiscernible] was very clear they were going, this is a high teens TSR performance, is a high teens TSR stock. I think that's why you've seen the share price go up quite substantially over the last 10 days.

Great. Thank you. I think we've covered the rationale for exiting property. But just looking at that in practice, can you talk about the shape of capital coming out of property? And is there a risk you're seen as a forced seller?

Yes. So the answer is no, we won't be seen as a forced seller. We spent a lot of time this year in terms of reviewing how we would approach this. And I'd say the benefit that we've had of having a sort of a disparate model in terms of being more like a spec developer, I would say, rather than a house builder, which we're not, is that we've got sort of access across different sectors.

And generally, you've heard me say this before through JV arrangements. So our JV partners will definitely not want us to do for ourselves. And it's just about running through the process. And as we get the capital back from these schemes, we're just saying we're not going to put it back into new ones. So previously, it's a well-used line by Kier that it takes 3 to 5 years to seed after we put money into development. So naturally, it's the reverse when you decide to take the money out. And I would add in terms of -- it was quite a difficult conversation we had to have with our property division. But the feedback from the people working with there was they agreed with our strategy. That says a lot.

So they could see that in terms of the group, it's the right thing to do, and they're committed in terms of working with us in terms of driving out and making those results. The smart bit that Tom has done this year is he's derisked this a little bit in terms of the targets that we're setting. So that creates time and space as well because it's a very volatile market. You don't need to be a chief executive construction or an infrastructure business or a developer to be able to see that. It's a very volatile market.

So we've got time to finish improving the value of our assets by getting through planning, by filling more bums on seats in terms of letting more space in the projects that are completed and building out the projects that we've got on the ground. So each time we do that in terms of the sort of the value of our internal asset goes up.

Great. Thank you. And then there's a follow-up been put in here about property, which I'll put now, which is why is property being fully closed and not just reduced in size? It's taken many years to build the management capability and market reputation, which will be lost. Also, how you ensure -- and I think I answer this, how you ensure a managed rundown of the property division given that clients and staff have little incentive to stay?

Yes. I mean in terms of are we going to lose that capability, no, because what I'm going to try and do is take that capability and put it back into the business elsewhere because we have a need for quality people. And at some point, some of that capability could be used to consider PPP, and we're already in sort of think tanks with government around how that could be. So I'm not convinced I'm going to lose that capability.

And in terms of the commitment to run it through, some of these schemes, we were just the funder. So you've got other schemes that are being built out by other people. So it's under their management capability to build out. I just have to wait to the schemes are finished so I can actually get my money back. So I think when you put those two things together, I don't think we have an issue.

And in terms of sort of taking a long time to build up to these things, that isn't the reason why to stay in the sector if it's not performing. And certainly, one of the powers that Kier had and we've seen over the last few years is the ability to pivot into the sectors that have got growth. So I can't just keep bits because there's some sort of legacy sentiment around doing that because that's not my duty to the shareholders to try and make the most value that we can out the skills that we have. So I'm certainly not going to lose the capability that we've got, and I think we can put it to good use elsewhere.

Great. And we will now indeed pivot into growth, which is you've identified water, energy, defense and health care as key areas of focus, your growth engines. Why have you picked those sectors in particular to push on?

Because the structural trend. If you look to the actual setup of the slide, if I just talk through that. So what we have done is to say, look, there's some structural trends that are going on. So there's a need. We've got access to it either through framework positions or call-off contracts and the strength of our order book is putting this in defining my position at the moment. And then I've got bottom-up work and just from the work we've got on the park already that shows that I've got the growth coming through.

And then on the sort of the left-hand side of the page, I've set out the reasons why I'm confident that we can continue to grow our market share in those areas because we've got quite distinctive differentiators in each of them that will allow us to be the partner of choice on those frameworks.

So I chose the structural trends. They've got a hell of a lot of money to spend. We've got an existing footprint in them that shows me that we're going to win the work and I've got the differentiators, which allows me to grow market share and growing markets. So why wouldn't you?

Sure. Thank you. And then another question which has been put in here, which is where do you face most competitive pressures within your end-to-end capabilities, where is the most upside within those capabilities? And is more design work a real focus and potential source of uplift to group AOP?

That was a very long one question.

It's [indiscernible].

I'll do my best to work my way through probably backwards. I would look at design and design management. So if you look at our design in-house design, of which we've got 700 or 800, it gives me roughly GBP 75 million a year revenue but the capability it brings to me is around learning how to design manage, particularly around these products and sectors that we've got. So we get very good at repeating water treatment plants. We get very good at repeating work we do around schools or defense. So that's where we get the added benefit of it because we have long-term knowledge about how these schemes work.

In terms of the other bits around sort of where do I see my strengths in terms of the capabilities end-to-end, I purposely put in the preconstruction area into that end-to-end piece this time around because it doesn't get enough focus. We always have something around GBP 2 billion mark that's running through the books, and it's where we can bring all our skills into one place to actually make sure that we come up with the right solution for the client, the right returns for us and generating the cash. So that's an area of specialism that Kier definitely has. And it's an area where we can pull on our in-house capabilities in terms of our knowledge about how buildings are designed, how they're going to be built and how they're going to be run to come up with, I'd say, the most appropriate solution for the clients and why we're sitting with 90% repeat business. You don't get to a 90% repeat business if you don't do that element of the work really, really well.

Great. Thank you. And we've touched on frameworks a couple of times, but just to make sure everyone is on the same page with that. The business sits on roughly 120 different public and private sector frameworks, which think about GBP 200 billion worth of work, which I think in itself was up 1/3 year-on-year. Can you talk about the importance of frameworks to the business and how they operate, please?

So the importance to the business is we always get asked about how do you maintain your discipline in all these tenders in the business that's so big. Well, the first way is if you do it through the frameworks, you actually pre-agree what your fee is going to be and you pre-agree your Ts and Cs. So there's two major risks that go out straight away. You also have the ability to say no on the call-off contracts. We have the ability to say no, either to tender the call-off contracts or when we're in the negotiation stage, if we're not happy with the program or we haven't got the resources, we have the ability to say no and frameworks give you that.

I think the other benefit of frameworks is what we've seen from learning from the justice, if you can get an alliance mindset on the customer side, you then can actually remove the other risk of actually tendering for work because you can get direct allocation. And certainly, we're seeing that through some of our frameworks where our performance in terms of KPIs is high. It's like a taxi rank.

So we go to the front of the queue and we get allocated work. I think the third point in terms of frameworks is it gives us that visibility about what's going on. And it allows us to be very careful in terms of the size of our order book, and we can look at the pipeline, and we can then pivot to where we think we can see that sectors are starting to grow because the structural trends are being backed by government money. We can certainly start looking at in terms of the regulated bodies, what is it they're trying to do. So when the AMP settlement figure got agreed, we can move our resources into that at speed. So you get greater visibility about what's happening in the marketplace through frameworks. Anything else, Tom?

I think the point you made very nicely at the very beginning was the kind of pre-agreed terms that are very important few. And that enables the consistency that we have.

Yes. And the last point I would say is you're going to hear a lot more. I was spent the morning yesterday with cabinet office and social value is going to be a big driver for this new administrative administration, sorry. And social value is something that Kier has always been really good at because of our regional model, means that we can give support in terms of apprenticeships and long-term employment because we're part of the community. And the change that every tender over GBP 5 million, including those call-offs frameworks, even if they've already been preset are going to be 20% of the mark is going to be allocated to social value, and that's definitely one of our strengths. And that should also give you confidence about maintaining the margin because work is going to be allocated more on quality than it is in terms of pricing.

Great. And then thinking about your slides there on those growth engines, they point to roughly a GBP 900 million growth in those 4 areas over the next 3 years. Do you have the capacity and resources to be able to service that growth? And what's the risk of trading too hot?

Yes, I'm not going to overtrade. I said it before, I've been in this industry 40 years. One thing you never do is overtrade. So in terms of a tendering process that we do, we don't sign up to any job unless we know that we've got resources either available or we've got time to get them in place. So some of these contracts under that PCSA, so GBP 2 billion worth of work working through the business is that they could be running in PCSA or early contractor involvement for 18 months, 2 years. So we then have the ability to either release some of our resources from elsewhere to do that or to go and source them. So I'm not worried about getting the resources.

The other factor here is that in the GBP 900 million, remember, it's also there to try and offset or it will offset the runoff from HS2. So on HS2, we do GBP 700 million this year. So I've got resources on GBP 700 million of work that I need to redeploy. So it's a reallocation of some of the capability we have into these new sectors and it's a really beautiful coordination between runoff from HS2 and the buildup of some of these sectors, particularly when I look at the health care and the water as they grow through '28, '29, '30, there is a good chance to reallocate those resources.

Super. Thank you. And then moving to the order book, and perhaps I'll pull the question out of it and merge that's been put in as well, which is you obviously touched on the framework positions. Can you talk about the scale and shape of the order book? How secure is it? And how does the public-private mix look? And just on the public-private mix, is there -- do you think there's potentially a risk at some point that you find that you become restricted because you become too big a counterparty for the government?

It won't be too big counterparty for government. If that was the case, they wouldn't be looking at doing European JVs on the mega infrastructure. So no, I'm not going to be in that position for a long, long time, if ever. But just going back there in terms of remember, we've got sort of roughly 60% public sector and then regulated body is sort of halfway house between public and private. So that's another 30% we've got there. And the private sector is restrained at 10%, predominantly more because there hasn't been that much work coming through, particularly in the London developer market. That model has struggled akin to the housebuilders that they just can't get the margin out of the scheme. So they haven't been building out.

But I can see in the future in terms of having a little bit more in private sector and eating into that public sector and regulated body as we grow in terms of the mix. But I do like having that sort of mix because I can get to learn from the private sector in terms of particularly how they approach to low-carbon buildings. And I can take those learnings and I can leverage it across the public sector really quickly under those frameworks. And I can do the other thing in terms of the social value capability we have on the public sector and the regulated body work. I can move that into the private sector because that's becoming more of an issue for them regarding planning, so I can help them in terms of where they're going to get their apprenticeships from and how they're going to leave a legacy of local employment. So it works really nicely to have that sort of mix.

Great. Thank you. And the next question is almost diametrically opposite, which is public sector work is clearly a big proportion of revenue. How do you think about customer concentration risk? And with Autumn budget in October, how discretionary do you think the spend is that you're exposed to? And lastly, to round that out, how cyclical do you think your markets are?

Well, individually, they're cyclical, but our skill is actually choosing the sectors that have the structural trends that we can see from the 10-year infrastructure plan where the money is going to go. And then we make sure that we have the positions on the framework ready for the call-off to go. And we move. If you look at Justice, we did circa GBP 500 million in justice last year. But we know that, that cycle of work is starting to reduce. So that's why over 2 years ago, we started warming up to the defense sector and having long conversations about the defense sector about how they could form new frameworks and alliances and learn the lessons from the justice. So that when their spend started coming through and then the structural trend was there, we called it before government started even talking about raising to 3% GDP, and we start moving our resources over.

In terms of the sort of the customer management, it's a good point. But if you think about it, we've got sort of 9 major sectors. And if you take the 120 frameworks, 25 of them give us about 80% of our revenue coming through. So we can focus very nicely around the customer needs. And a lot of these products we're doing -- we've been doing for decades. So we understand the products and the outcome needs very well with these clients. And we're seen as a trusted partner as they're giving you targets in terms of meeting in terms of how they can do it.

So more recently, there was a heck a lot around energy efficiency and reducing energy costs. But we've got the skills and capability that we can bring in to make sure that we can drive really effective, efficient buildings at value for money level because we understand in terms of how these things get funded and what approvals they have to go through. And you get, again, trusted, so you get the repeat business coming.

And just quickly coming on the concentration risk, Stuart. It's a question we've been asked many times actually because they look at a lot of investors and us look at HS2 as our largest contract. It's about 16% of revenue, about GBP 700 million of revenue for FY '26. It can continue about that level for FY '27. And it will kind of gradually come down kind of FY '30 and GBP 700 million, GBP 500 million about...

And so that's our largest concentration risk. And in fact, it often got flagged to us as a management team. So surely you have a risk when that comes off, your revenue is going to fall down. And that's why we deliberately illustrated to everybody and you'll see it in the presentation that our growth sectors substantially outweigh that decline in our kind of our largest contract. So GBP 1 billion. You see the reduction in HS2 over some time period is probably about GBP 400 million or so. So those two offset each other. To the extent that we've guided towards mid-single-digit revenue growth. So even with that reduction from our biggest customer, we still deliver mid-single digit because of the growth sectors and the kind of the spread and the diversity we've got.

Thank you. And I think we covered the cyclicality point of this question, but it's really around bidding discipline. And the question was, if your market rent were to enter a cyclical decline, how do you think your bidding discipline would fare? And would you be happy to see revenue fall?

Well, I wouldn't be happy to see revenue fall. But if the market did go into that cycle, which I don't think it's going to, by the way, then of course, we would respond. So we're not going to put you and us at risk. What I would say is, though, if it went into, say, after the budget, and I don't think this is going to happen. They said, okay, we are going to turn off all the commitments we've already made. We're not going to build any hospitals. We're going to let people -- we're going to let the waiting list grow, and we're not going to deal with that issue in terms of it.

We're not going to provide a clean water, drinking water, and we're going to allow people to pump stuff into the rivers as they wish. And we're not going to back the message that we've given to the world in terms of the growth around the defense. And actually, we're not interested in terms of energy resilience because we'll just pay the price that's available for -- to buy in whatever we need from outside of the country. And I can't see those things happening.

And I also can't see them stopping building schools, which we've got a 10-year program. And I can't see them stopping in terms of roads, whether it's other capital or filling potholes. I just can't see these structural trends changing enough there will be no work. And then that's where our scale comes in place in terms of the breadth that we have because we've got the coverage through different sectors. As I said before, we can pivot. So if they decided to trim highways and put it into defense, I don't mind and both. I'm well suited on both. And I have leading positions on both.

So if they are going to stop the work, they're probably going to affect other people on those frameworks rather than me more in terms of it because they still have to deliver, still got commitments to do. They still got regulators looking after them, and they'll put more pressure on them to make sure they've got the right people to deliver what they've got left over to do. And in terms of government is pretty good and regulated base, pretty good at managing the number of -- amount of market share they give to any one person, particularly off the back of ISG. They tend to keep any one share around sort of 8% to 15%.

So at the moment on these markets, I'm around about 10-ish. So I've got some headroom to go. But I've also got some capacity if they do give some haircuts in terms of -- it doesn't affect my short-term targets.

Great. Thank you. And then moving on to capital. With capital coming out of property, you've outlined that you have between GBP 450 million and GBP 550 million of capital available for strategic allocation. And I think one of the slides might be helpful here, sort of 30, 31. Could you walk us through the capital build and then also your capital allocation framework, please?

Let me take that one. One of the great strengths of this business is the level of cash generation and the cash conversion. So you can see in this chart here, the left-hand block, the operating free cash flow of GBP 600 million to GBP 700 million over just a 3-year period in '27, '28, '29. Add to that property capital and then you kind of take away your tax, interest, you kind of one-off and fire. I saw a question in the chat about fire and cladding costs. That's the net cost, by the way.

So the fire and cladding cost there is about -- that's the cash outcome is about GBP 70 million. That's the net post insurance recover. And that gives you GBP 600 million to GBP 700 million of total allocable capital. I've just said on the earlier in the call that we will -- we commit to a kind of growing ordinary dividend. And then when you kind of cover off your maintenance CapEx, the result is about GBP 500 million of capital that's available for allocation.

Now I'm now going to come back to a point from about 20 minutes ago or 30 minutes ago on cash on the balance sheet. So of that GBP 450 million to GBP 550 million, Stuart and I want to put GBP 200 million on the balance sheet. And we want to spend GBP 200 million on the balance sheet for a couple of reasons. One is to move closer to our peers. They will have much more cash on the balance sheet. And whether we like it or not, the feedback we get mainly from my algorithms is, well, you're not as strong as your competitors. So there is this point, which is the market can stay liquid for longer than you can stay rational, right? And so the market is telling us it wants more cash, okay?

So we're going to add a bit more cash to the balance sheet. And that takes us to about 4% of our revenue. Now some of our competitors are up at 10%. We don't be up at that level. We think that 2% is too low. And therefore, moving to 4% to 5% like a nice number. That's the kind of art side of it. The science side of it says if you get to GBP 200 million of cash as an average, you have enough cash to cover the working capital swings in the business, which means you can repay your bond. When you repay your bond, you've got a very large kicker for interest. So the interest in the bond is GBP 23 million.

Given that our earnings is about GBP 100 million, just over GBP 100 million, adding GBP 23 million to it is a lot. And you can add GBP 23 million to it by removing the bond in the first 3 years doing this. So I mean the math on that is that adds 6% earnings per share growth. So I commit to double-digit earnings per share growth, half of it if you pay that bond and using that GBP 200 million. So adding the GBP 200 million enables me to repay the bond. It also gives me offset by negative working capital, which is about GBP 550 million.

So kind of when you triangulate those 3 components, closer to my peers, negative working capital offset and need enough cash to repay my bond, you end up at about GBP 200 million. That feels about the right number for us. And as I said, it's kind of a [indiscernible] balance. So on that right-hand block there, I've got GBP 450 million to GBP 500 million, GBP 200 million of it I want to put towards cash, i.e., Tier 1 capital on the balance sheet. So I've got GBP 300 million left and that GBP 300 million, we'll be looking to either do value-added acquisitions in our core markets, that means infrastructure and construction.

So opportunities that would be value accretive and earnings accretive ideally to me or if we can't do that, then we will continue doing share buybacks. And as Stuart said earlier, we will do the share buyback, GBP 25 million per annum. We will continue that. But that GBP 300 million gives us the opportunity to continue those share buybacks to keep rewarding shareholders on this call.

Yes. So I would just add in terms of the acquisitions or mergers, if we are going to do, it's more likely to be in infrastructure than it is construction. Construction is a more difficult sector to buy in or acquire in. And if you want sort of an idea of the sort of things we may be looking at, just go back and have a look at what we did with Buckingham in terms of how we secured that very well. I think we've managed to pay off within 6 months. And then in terms of it brought capabilities and access to the rail market, which I think will be a future growth market in probably years 5 to 10 with Tom and I sort of term.

Great. I need crossed off the next question as well, which also came up directly. But perhaps if we look at the medium-term targets, and the margin in particular. Can you talk about the levers of moving the margin up to 4%, 4.5%? And then blending in a question that's been asked as well, which is, is it sustainable? Is 4.5% a cap? And is it really stretching from 3.9%?

I do like one question. So previously, the plan was property would take the margin from 4% to 4.5%. The issue that everyone had with that was the volatility of the property market in terms of how sustainable was that and how consistent could we be. So what Tom and I have done is looked at the businesses and gone, well, actually, you're going to get some growth in margin just by changing the mix because our infrastructure business is going to grow quicker than construction business. And the infrastructure business makes a better margin than construction business.

Construction business is still at the upper end of the quartile in terms of margin and it generates the cash, but infrastructure does deliver a lower margin. And then you've got the end-to-end capabilities in terms of what I spoke about before, where I'm not going to break it down in terms of how each of those will add the constituent parts, but it just does. When you have knowledge and capability across the lifespan of an asset, it does provide you with greater insight, either driving value or not losing margin because you -- again, you get that consistency of delivery.

And then when I look at some of the differentiators that we've got going forward and the difficulties to entry in some of the sectors that we're in, particularly around the nuclear area, that also shows me that I've got defense mechanisms to protect my starting position. And finally, if you've got that sort of growth, you'll be expecting to see productivity improvements coming through, and they can come from two areas. One will be in terms of digital and AI, which will either allow us to do more with less or drive some productivity improvements. And certainly, we're not investing in the Naturally Digital agenda without looking at how we can get our return on capital employed in terms of that work.

And finally, it's always a lever in anyone's toolbox in terms of Tom and I to make sure that your costs are under control. One to protect you in terms of something you said before in terms of market vacancies, but also it is an option here for us that if you do it where you're growing, then you'll make margin out of it rather than protecting yourself. So I think it's a combination of all those things that gives us confidence. But for the first few years, we're saying, let us deliver at 4%, still up a quartile and let us have consistency of cash coming through so we can get the resilience on the balance sheet because the price in terms of being able to pay off the bond in terms of returns we get there is significant and worth going after.

Then when we got that and we got cash, then we can start looking at the differentiators and the stuff I just spoke about in terms of moving the margin up. But we've also got cash. And I would hope that if we're going to use that cash, we're going to get some more margin off the back of it. In terms of its 4.5% cap, no. I'd love to get there first and then have a conversation. And in terms of what you're doing in terms of doing 4.5% across GBP 5 billion is exceptional work as well.

Super. Thank you. And then just for clarity's sake because different businesses talk about margins in different ways. When you talk about your margin targets, is that a divisional margin or a full fat margin? If you just clear that, please?

Full fat margin.

We wish everyone did it the same way.

The divisional margins we achieved this year, we achieved a full fat margin, 3.9%. That's also 3.9% achieved in Construction and 5.5% margin achieved in Infrastructure. So you add the 3.9% and the 5.5% and in property. And then you take away the kind of the corporate overhead costs, et cetera, then you get to that 3.9% we're talking full fat margin.

Great. Thank you. And then there's a question on cash conversion, which has been very strong at 121% this year. What drives that? And how should we think about the 90% medium-term target?

What drives that is this is a negative working capital cycle business. So when you -- particularly you're building large construction projects, you and the client will recognize the work, you invoice the client, you will see the cash payment terms kind of government and government payment terms. But it often takes a long time for the kind of contractors to bill you and then they get paid within 30 days. So you've kind of got this that you accrue, you can see our balance sheet accrue and then you get a trade payables, which is combined like 60 days. Those two offset each other. So you get kind of negative working capital of more like 45 days.

So as you build revenue, that brings in cash, particularly in the construction business and particularly in large construction projects. And it's not quite as pronounced in the cost-plus models, which you get more in the infrastructure space. So what we've had in FY '26 is very strong negative working capital driving up the cash in some of our large projects, and that's why we're above 100%. But what we say in the future is we expect some of that large positive we've experienced in FY '26 to unwind. As that unwinds, that will pull down my cash conversion. And so I feel confident in the 90%, but the reality is it will fall off to about 90% level in kind of next 2 years. And that's why we're kind of guiding there. But you should think about it on average at the 90% to 100% level.

Great. Thank you. And there's a couple of questions around shareholder returns. And the first one is on the dividend, which mentioned it should grow in line with earnings. The question is around the cover, which is, does it need to be 3x given the stability in the business?

We're currently 3x. And as I said, we are a huge cash business is a lovely problem to have in a year or two times. So a year or two's time where we've got the cash in from property when we have repaid the bond. And at that point, we were looking at what's the M&A opportunity, what's the share buyback, what's the dividend. And if we see that long term, that cash conversion just keeps coming, we may shift that multiple. So it may shift down to 2.5x. I can't just go to guide one. But yes, that is a possibility that that may shift in the future.

Great. Thank you. And then we've got a few more questions in the hopper about 7 minutes left, which should be enough time to get through them. And the next one -- sorry, just on finishing off on the capital returns, which is obviously, you've talked about buybacks. And the question spec is, would you consider tender offers as well?

I haven't really thought about that as an option kind of preferred buyback. I mean we haven't really explored it, but one that we can take away and think about.

Yes. As we said at the start, the beauty of the strategy is we've got choices, and we'll continue to make the right choices for all the stakeholders. So...

Understood. And then the next one is moving into inflation. Can I ask you to talk about inflation broadly and specifically around wage inflation as well?

Okay. I would say -- go back to the sort of starting point in terms of model. Remember, 60% of our work is cost reimbursable. So that's a straight pass-through. And a lot of that is public or regulated bodies. So that gets passed back to government in terms of spend. And then the 2-stage work that we've identified in terms of presentation, so 35% of our work, which is not cost reimbursable is negotiated on a 2-stage basis. So that allows us to do two things. It allows us to decide and evaluate the risk at the time that we convert the contract. Remember, we've been working on some of these sort of tenders in one-to-ones for 12 to 18 months.

So if we feel that the risk is too high on certain commodities, then we can leave that risk with the clients or make sure that we get paid adequately for it. And then quite often on the larger jobs, we hedge by the day that we sign our contracts with the client. We simultaneously sign subcontracts with the supply chain. So we transfer that risk down transparently with us and the clients, everyone knows where it's sitting, but that does allow us to derisk it.

So I'm not immune to inflation cost, but we do mitigate it particularly well. And of course, the one area, if you're going to pass over to Tom, he's made this point pretty well previously in the last couple of weeks, is that the area we did get exposed to in terms of inflation was property because we suffered because we had some lump sum pricing and it has affected the market in terms of the cost of the development appraisal. So our response to that is that we are going to move away from it because we believe that volatility is a risk that we don't need to take.

Great. Thank you very much. And the next question is on Kier Places. Kier Places has a strong operational capability and manages significant long-term assets and facilities, yet it appears to have lower market visibility than some of our competitors and other parts of Kier. What are your priorities over the next 3 years to strengthen the Kier Places brand and ensure that this translates into sustainable revenue and margin growth?

Yes. We don't do everything at once, do you. So in terms of the strategy was to simplify the model, deal with issues that we had around property, put a strategy in place that's going to generate that double-digit EPS. We don't stop there. I expect there is going to be new growth engines that come through over time. As the existing growth engines we spoke about become more mature, we'll be looking at others and places could be one of those.

But at the moment, what it brings to us is that end capability of FM. And also that we are working on a number of PFI contracts as the FM providers. So I like that capability because I'd like to see where the PPP market may go. But I would say comfort that I don't need that at the moment in terms of achieving this plan, but it's nice to know that I've got some other levers that I can look at in the future.

Great. Thank you. And the next ones are basically around political risk, which is, are you concerned that having U.K. taxpayer effectively as a major customer, share buybacks might be considered politically excessive?

Not at the level that we're at. Certainly, when we're a strategic supplier to the government. So we have more contact than most with them. And during many of my conversations I've had, I've not heard that as an issue to them thus far. In fact, yesterday, when I was with the cabinet office, they congratulated us on the results, and they were very keen to express back to my teams here in terms of keep doing what you're doing here. Now part of that will be the existing share buyback scheme that we've got, which at the moment is going to continue if it's appropriate thing to do at the levels that we've done for the last year.

So I'll keep an eye on it. If I do think it becomes an issue, then it's something I'll make sure that we'll make the appropriate choice and decision at the time, but I've not heard it.

That's great. Thank you very much. Well, that concludes the Q&A. There were a couple of supportive comments in the questions as well. And I think those have been noted. And before I hand back to Stuart for any closing remarks, there is a short feedback form that will pop up as you exit and the company really value your feedback. So please do take a moment to fill it in. Now I hand back to you, Stuart, for any closing remarks before we look to wrap up.

Well, first of all, thank you very much. I thought the questions were very insightful in terms of our business. So again, I'd say for those long term, thank you for those who joined, welcome. And I hope you're as excited as we are in terms of the opportunity that we have in front of us. And if there are any questions, then please come back to us and we'll do our very best to answer it. But thank you very much for your time, and I hope everybody enjoys the weekend.

Super. Thank you very much. Thank you to the team. Thank you to the attendees and for your questions, which are great. The last thing to say, save the date, which is the provisional date for the AGM and next trading update, is the 12th of November. So thank you very much. That concludes the call.

Good morning, everyone. Tom and I are excited to be taking you through excellent set of results and introducing our new strategy. Welcome to you all, be it those here in person or online. And I'm delighted also to be joined by members of our executive team. And these results and strategy are, of course, a team effort. I'm proud to be leading Kier at this time and excited about how we shift from recovery to value creation. 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 a new Chief Exec that we delivered on '26 as we evolved, and we did. Kier delivered both a strong '26 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 2 divisions into 1 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.

Now 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. Finally, to deliver this level of change and to report that '27 earnings are expected to be at the top end of the Board's prior expectations is outstanding and why I'm confident this team can deliver on our new strategy.

The scale of opportunity in economic and social infrastructure delivered through long-standing customers who value Kier's capability represents a compelling opportunity to drive long-term value for the group. To capitalize on this, we've identified 3 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.

In terms of resilience, our customer mix, disciplined bidding and approach to risks contributed to our milestone net cash position in full year '26. And we will continue to strengthen the balance sheet, targeting more than GBP 200 million of average net cash by full year '29. 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% to 4.5% and a double-digit EPS CAGR, I'll say it 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 runoff process, balancing timing and value realization. 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 full year '26 financial highlights. Good luck, Tom.

Good morning, all. I'm delighted to be presenting Kier's full year '26 financial highlights. It's been an excellent year for Kier, which we've delivered strong growth in revenue and profits and continued order book momentum and a full year average net cash position. And I'll go into all of these in more detail now.

Revenue in FY '26 grew to GBP 4.4 billion. It's up 7.5% on the prior year, and it's continuing a strong period of successive year-on-year growth in our top line, which has seen Kier's revenue grow by 1/3 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, we're pleased to see continued momentum in this measure, which grew 8.2% year-on-year. It's now a record GBP 11.9 billion as of the 30th of June. This order book growth is a direct result of Kier's leading positions across more than 120 frameworks. It's a particular strength of Kier, and Stuart will bring it to life later.

Casting your eye now down to the bottom 3 boxes, you can see the quality of Kier's recent growth. with strong flow-through of revenue to adjusted operating profit and then to earnings per share. So we have an AOP of GBP 170 million in FY '26, 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 2 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 the business.

During FY '26, 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's 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's this free cash flow that's 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 '26, up GBP 60 million from an average net debt position in FY '25. And alongside the sustained strengthening of our balance sheet, we have maintained and enhanced shareholder distributions through the dividend and share buyback program. I'm pleased to announce that the Board has approved a final dividend of 5.2p per share, taking the full year dividend to 7.8p. This is an 8.3% increase on FY '25.

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. And 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 '26. And we continue to see share buybacks as an important option for enhancing shareholder returns. We'll cover that approach to capital allocation a little bit later in the presentation.

Now staying on cash, let's dive into it in a little bit more detail. So 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%. So I'll 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. So firstly, the group produced GBP 106 million of operating free cash flow. It's 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. 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 '26, we invested GBP 22 million in our property JV businesses, down from GBP 51 million in FY '25. 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 GBP 20 million and the commencement of the latest GBP 25 million share buyback program, which we launched in March.

So at the half year, I was pleased to report an average net cash position for the first 6 months of FY '26. And I'm delighted to announce that for the full year, we achieved an average net cash position of GBP 11 million. It's a significant milestone for the 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.

So I'll now turn to look at the FY '26 performance by division. So as you can see, our core powerhouse businesses of infrastructure and construction both demonstrate strong momentum. Infrastructure delivered an excellent performance in FY '26 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 '25. This standout performance was led by our water business, which continues to benefit from the ramp-up of the AMP8 investment cycle. Alongside this has been good performance in rail as the sector transitions to control period 7.

Construction delivered a strong performance in FY '26, 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 HFP 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. And Stuart will talk more about the breadth of capability and credentials in that segment in a moment.

Turning now to our Property business. And this continues to be impacted by a subdued market, reflecting the wider macroeconomic turbulence as the division generated revenue of GBP 63 million, AOP of GBP 9 million and a ROCE of 4.3%. And 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 actively marketing on 4 projects, including 270 residential units that are prefunded. So as we progressed into the first quarter of this fiscal year, we're seeing continued strong momentum, and I'm pleased to provide the following outlook and guidance for FY '27.

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 '27. As such, we've got confidence in FY '27 adjusted earnings per share, and we will be at the top end of the Board's expectations. Now moving now to our strategy. Stuart has already laid out in broad terms the direction we're taking in regard to property.

And I'll now hand back to him and cover in more detail the rationale and the road map for realizing and reallocating the capital currently invested in the portfolio.

There are some seats at the front if anyone wants to take them. Okay. So next slide, please. Thank you. Thanks, Tom. Let's return now to the 3 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 transactionally led earnings and give us greater optionality over future capital allocation decisions.

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 3 years as individual developments mature and come to market with that capital reallocated to further strengthen the group's balance sheet.

I'll return now to focus on one of our 3 priorities, that's growth before Tom will elaborate further on resilience and performance. So why am I confident in our ability to grow? Well, we now have 2 powerhouse divisions in Infrastructure and Construction, both with the scale, capability and market positions to capture the opportunities ahead. They are operating from an established platform that is already growing with existing customer relationships and long-term framework positions. We already have 3 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 to 15 years, giving us confidence in the depth and duration of the opportunity. Four of our existing sectors, water, energy, defense and health care, provide material opportunities for growth, supported by structural demand and Kier's proven delivery capability and comfortably cover any rundown from HS2 and Justice.

Just turning to water in a bit more detail. We are aiming to double our existing revenue from GBP 400 million to GBP 800 million by '29. We have strong visibility over a growing market for the next 15 years. That confidence is underpinned by a position on 10 of the 12 major water frameworks, long-standing relationships with the Environmental Agency and the Canal and 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 and electrical specialists.

In Energy, we are aiming to more than double our existing revenue from GBP 170 million to GBP 400 million by '29. 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, in 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. Longer term, I'm confident we can leverage our capability to grow our share of other energy sectors, including transmission, resilience, decarbonation and battery storage. In defense, we're also aiming to more than double our existing revenue from GBP 150 million to GBP 350 million by '29. Kier is strongly positioned to grow its share, supported by our frameworks with both the MOD and defense primes over the next 10 years.

Our '29 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 secure by design accreditation. So I'm 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.

Okay. In health care, we are aiming to grow by 50% from GBP 170 million to GBP 250 million by '29. Health care 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 '29 from an 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'd 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. We targeted and secured the opportunity for a new hospital 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. So today, I want to set out the strengths I believe already distinguish us before going through a few of them in a bit more detail. Kier has a best-in-class capability in securing renewed 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. 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 increasingly important priorities for our customers. 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 preconstruction 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. 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 it's 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, our 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 win customers -- sorry, early with customers and continue to deliver with discipline as markets evolve. We are also building differentiated for the future, in particular, naturally digital, which I will bring back to you later in the year.

So 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, say, again, GBP 200 billion of frameworks, just in case you missed it, which is substantially aligned to our key sectors. 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, health care capacity and the wider renewal of U.K. economic and social infrastructure.

The 4 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 ability to bring the breadth of Kier's capability to complex programs across the U.K.

So that concludes my section on growth. I will now hand you back to Tom, who will take you through the 2 closely connected priorities that support and enable that growth, resilience and performance. Tom?

Thanks, Stuart. So Stuart has covered the growth pillar of our strategy, the extent of the opportunity ahead of us. So I'm going to cover the other 2 pillars of our strategy, resilience and performance. So starting with resilience. What is it that gives us confidence in our ability to deliver sustainable growth? And it's in part due to the optimal mix of work across our customer types, our contract approach and our deep long-term relationships. So 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. And that's before a considerable amount of the work, GBP 2 billion, of which are in one-to-one customer discussions and that we expect to shortly join the order book. In fact, the GBP 500 million Hinchingbrooke Hospital award is one example that just missed the June order book cutoff. So our order book gives us confidence in FY '27 revenues with 95% cover for the following financial year. And in fact, the construction business is at over 100% -- at 100% cover for the coming 12 months. I didn't give you an extra target there, Martin. It's 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.

Now 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 on the customer or to Sage where the opportunity for renegotiation protects our margin. This is, of course, a material improvement on where we were commercially just a few years ago. And lastly, in terms of assurance, almost 90% of our customers are either public sector or the regulated entities, as you can see on the right-hand side of the slide, removing much of the commercial volatility from our portfolio.

Now still on the topic of resilience, let's look at how much capital we expect to generate in the next 3 years from our underlying cash flow. So in the period FY '27 to FY '29, we're targeting cumulative operating free cash flow of GBP 600 million to GBP 700 million on the left. During that same 3-year period, we expect to realize net capital of around GBP 150 million from the current property portfolio. Offsetting property capital against cash tax, interest payments and remaining cash outflows in respect to fire and fladding, we are left with a total allocatable capital of GBP 600 million to GBP 700 million, which is the middle block. And from that total allocatable capital, we will continue to prioritize our core CapEx and our growing ordinary dividend. So the residual, the GBP 450 million to GBP 550 million will be allocated in line with the group's capital allocation framework, which I look at now.

So beyond the primary allocation for CapEx and dividend, the group will have the GBP 500 million, about GBP 500 million of capital to deploy in line with the hierarchy of uses in points 3 to 5 on this slide. So firstly, we want to strengthen the balance sheet. We are pleased with the substantial progress that's been made in recent years in this respect, and we've achieved the average net cash target -- of average net cash of GBP 11 million in FY '26, which, of course, was an important milestone. But 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 '29, which will provide the group with additional resilience, capital optionality and continued balance sheet efficiency.

We also have scope to consider selective value-accretive acquisitions in core markets as compelling opportunities arise, and that's 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. So that covers our second priority of resilience, how we'll strengthen our balance sheet and enhance capital allocation options.

So let's now turn to the third pillar, which is performance. And starting with the key metric of EPS more broadly, total shareholder returns. Driving EPS performance hinges on our 2 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% to 4.5% range. And then 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 '26, the group recorded net interest expense of GBP 35 million. We expect to see that rapidly fall in the medium term with significantly lower costs after we repay the 9% coupon bond. So these 2 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. And this is before the added benefit by a lower share count from any future share buyback programs. So as mentioned earlier, we will continue to prioritize the ordinary dividend. We see the combination of the sustainable dividend and strong double-digit EPS growth as providing a balanced and attractive combined total shareholder return.

So 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. So 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 health care that Stuart talked about earlier with our established businesses in our core markets.

Next down, we retain our 4% to 4.5% margin target for adjusted operating profit. And that's enabled, as Stuart discussed, by our differentiated end-to-end capability. Now retaining the 4% to 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. So 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 '29, while continuing to deliver our cash conversion of over 90%. And 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.

So on that note, I'll finally hand back to Stuart to wrap up.

So 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 combined 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. And there it is. So 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. 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 in sustainable growth and improved shareholder returns. So 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. Together, these give us a firm platform to grow, increase returns and create lasting value for all of our stakeholders.

So thank you very much for listening today, both here in the room and online. And we'll now be pleased to take your questions. Thank you.

Johnny Hubert from Deutsche Numis. Thanks for the presentation. A lot to get excited about in there. Could I ask firstly on how you'll decide on the timing of things like buybacks? Because 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're looking at that decision each year, how you decide on it based on timing of capital coming out of property and when you might repay the bond?

Yes. I think you explained it very nicely. So firstly, we're a very cash-generative business, and that comes across very nicely in Slide 30, where you can see the amount of cash that we're about to generate over the next 3 years. And as I tried to outline in the allocation -- capital allocation framework, our priority is we need -- we want to and we need to strengthen the balance sheet. So that's going to kind of help determine the pace at which we can do future either acquisitions or buybacks. So that's the kind of the determining factor, which is how fast the cash comes in through the core business and the pace at which we execute the kind of the sell-down of our portfolio. That can tell you how much cash we've got, and that's going to give us a good guidance of the pace at which we can do future buybacks.

And just a follow-up. I mean, 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?

We haven't sat down and said, let's do a big lump sum buybacks at no point if we have that kind of conversation.

And then 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...

Back to the cash point. So we wouldn't look to make that repayment early. It's -- you could repay from March 28 should be a logical time to do it. And that's nicely in line with the capital being released from the property business.

Andrew Nussey from Peel Hunt. A 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 it's bringing in more tier skills, is a higher margin opportunity than perhaps some traditional infrastructure sectors? So the first question.

No, you can't make that assumption. So I mean, water is a strong margin business. It's a stronger -- it's a higher margin than, for example, in the construction business, it's in the middle of the pack of infrastructure margin.

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

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

And last question. I mean, a number of the growth ambitions stretch out to FY '29. If you had to add Hinchingbrooke into the order book, what level of visibility would you hazard for FY '29? In terms of revenue coverage? So greater than 95%.

Well, for FY '28, we're at 70% and that kind of -- that trajectory kind of comes down. So if you look at '29, we'd be up early 50s, approximately.

I'd 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're looking at about 3 years' worth of work for there for us to convert and deliver. And then past that, you've got -- I think we've got about GBP 65 billion of pipeline opportunity. So they are tender opportunities. So they're 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're looking at sort of 2 years a hence from that. 5 years [ work ].

Aynsley Lammin from Investec. I think I've just got 2, please. First, 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, margin discipline. Do you need that much? Why wasn't there GBP 300 million or 100 million interest there? And 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 GBP 11 million you just delivered? That's the first question. And then second question, just interested to hear your views on the overall health of the kind of supply chain at the moment, what you're seeing in build cost inflation, just some general kind of points there.

I think you'll do the first one, I'll do the second one.

Yes. So the GBP 200 million target First thing I'd say it's definitely more of an art than a science. So if I could say it was exactly 200 or exactly GBP 250 million, it's certainly a range. And where do we arrive at that range? And kind of 2 ways of thinking about it. One is you need to be somewhere near your peer group. So if you look at my peer group, they will have much -- they have much more cash on the balance sheet. Now I think I don't want to go as far as some of them. They've 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.

Now we don't get it from our customers, but we do get it from the investor community, look at us compared to our -- and the other way of thinking about it is what's the size of your negative working capital, negative net working capital. And 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 to GBP 600 million. So that's money that we have with our customers that obviously doesn't sit on the balance sheet. So how do you support against that? Well, we've got a great order book, and we talked about GBP 12 billion of order book. And you think about GBP 12 billion of order book delivering a 4% margin, you've got about GBP 500 million worth of cash coming from the order book we can feel comfortable about that.

But we want to have more against that negative working capital because it's our customer money. And that's why we kind of come to the conclusion of we'd like a bit more cash and GBP 200 million kind of gives you support against that, that negative working capital. So negative working capital has against 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 when you kind of triangulate those measures, you come to the art of about GBP 200 million, and that's how we come to that number.

[indiscernible]

Yes. So I mean -- and that's the working capital swing that you get in the month. And that makes -- I look at our treasury over there, GBP 120 million to GBP 150 million difference per annum.

And then supply chain. So we're definitely not immune in terms of what's going on in the market and the macroeconomics. But what we have is we've mitigated it, and we've mitigated that in a number of ways. Firstly, in terms of the sectors that we are in. So we purposely stayed away from pure housebuilding 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. So Tom spoke about earlier in terms of either cost reimbursable contracts, which is about 60% and a further 35% through the 2 stage. So we have a long period working with customers there in terms of working through design and agreeing who takes the risk on inflation. So that's 95% of our revenue.

I think thirdly, I'll go back to our regional model, means that we are locally placed and have long-term relationships with the supply chain. So they prefer to work with us. They know us well. Our people know their people, and they trust in our ability to pay. So we get their trust and their reliability through that. So that's the way that we manage it. But we're not immune. Okay. 7 minutes left.

Adrian Kearsey, Panmure Liberum. The MOJ was a sort of good example of adopting collaboration. And in the presentation, there was a sort of few comments where it seemed to indicate that, that collaboration was rubbing off in other parts of your sort of other clients. Can you perhaps sort of give some examples of how that's evolved?

Yes. So there are 2 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 program. So the new hospital program is an alliance. They decided to go through a direct award allocation of projects rather than tendering call-off projects, which gave us the ability to position ourselves around the Hitchenbrook hospital. which I mentioned before that we've had a long-standing relationship with that client providing the FM facilities there. So we know the client well. They got to know us. So when it became to the allocation, we allocated one of the first hospitals that came off the alliance. I'm looking at the MD behind you to make sure I said that right.

Any more questions?

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 said 800 people in design. I mean 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%. But could you just talk us through that a little bit?

If you can imagine the number of conversations Tom and I get together to get to 4.5%, and then we're already been 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've got the runoff of property. We still 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's 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're seeing that we are quicker to make good decisions within the business, and that's got to drive some productivity going forward. So 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'd say, are the 2. In terms of design, I would point to the fact that don't just think it's restricted to only the 800 people in terms of what they do.

What we have is the capability to manage all the design. So 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.

We need to go online as well for questions. Just the time we just need to go back and see if there's anyone online that wants to ask any questions.

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

There we are. Any final questions in the room?

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?

That was a very strong working capital in -- of our large construction projects. So when you have large construction projects, that can give you quite good incremental working capital at the beginning. And that's 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 1 year, you've got to expect it to come down a bit kind of year after that. So we want to kind of keep it up at the 100% level.

We set 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. So as you grow, that keep that working capital coming in and that kind of pushes it up.

Okay. Okay. Again, I'd like to thank everyone that's joined us today, anyone on the line. Thank you very much.

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 Togwell, Chief Executive of Kier Group.

And before we begin, I want to take a moment to say our thoughts are with our 9 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 honored and energized 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 Kier's new Chief Exec, to offer some color 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 6 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 remains strong with our order book increasing by 5% in the period to a record GBP 11.6 billion, reflecting contract wins across our business and providing multiyear revenue visibility. Through our order book, we secured 94% of our full year '26 revenue and 78% of full 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 ROCE target of 15% by '28. We are continuing to convert profit into cash with a net cash position significantly improved to GBP 103 million. Most importantly, we have now delivered an average net cash position of GBP 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're able today to announce the launch of a new share buyback program, increased to GBP 25 million. This follows the successful completion of our first share buyback program worth GBP 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 optimize our structure and leadership capability to maximize 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 be 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 2 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 Naturally 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 Kier's divisions, which I'll touch on later.

And we're advancing our Kier 360 approach, which leverages the group's capabilities across the whole fund, design, build and maintain project life cycle 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'm delighted to be presenting to you for my first time as Kier's CFO. It's my pleasure to take you through our performance for the first half of FY '26. Let's begin with the financial highlights for 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 GBP 71 million, up 6.6%, representing a margin of 3.5% and a modest improvement of 10 basis points from that achieved in HY '25.

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 GBP 103 million compared to GBP 58 million at December 2024. This is despite increasing shareholder returns via our GBP 20 million share buyback and the increase in dividends paid.

As we targeted, the group achieved average net cash over the period of GBP 16.8 million, a significant advance from the prior period average net debt of GBP 37.6 million. This cash and profit performance is all underpinned by our order book and framework positions, which provide us with the visibility over future revenue. Our order book currently stands at a record level of GBP 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 GBP 150 billion. And within this, we have GBP 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 5 years. Stuart will 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 GBP 2.029 billion, representing a 2.6% growth versus the comparable period last year. The main element of this growth comes from Infrastructure Services, which was up 4.9% to GBP 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 GBP 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 will 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 GBP 2.1 million to GBP 48.2 million. We maintained our strong 4.5% margin in this business. The Construction business also maintained its operating margin at 3.9%. The small increase in property volumes resulted in the operating profit growing GBP 1.2 million, and we also saw lower corporate costs in the period. Overall, we delivered adjusted operating profit growth of 6.6% to GBP 71 million.

There are some specific costs excluded from our adjusted operating profit figure, which I'd like to take you through. Excluding noncash amortization interest, the adjusted items amounted to GBP 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 GBP 30 million for FY '26. We then expect this level of expenditure to continue into FY '27 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 recognized and can be reliably quantified. Further, we recognize insurance or third-party recoveries once they are confirmed, therefore, creating a net provision in adjusting items. We expect the adjusting items to reduce post FY '27 and for these claims to be resolved by the end of FY '28. The interest costs here are recognized under IFRS 16 relating to the exit of leased office space.

Turning now to free cash flow. Starting with adjusted EBITDA, which in HY '26 was GBP 101 million. Working capital outflow in the half was GBP 107 million, in line with HY '25, slightly lower in fact. As you'll 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 amounted to GBP 24 million, with the majority of this relating to lease payments capitalized under IFRS 16. Net interest and tax paid were just slightly above the prior period, with the group continuing to utilize its significant long-term deferred tax asset. You may remember that the tax asset of GBP 130 million relates to past losses, allowing us to offset half of our tax charge in any given year, which we anticipate to take around 7 years to fully utilize. Altogether, this results in a free cash outflow of GBP 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 started the period on the left at the end of June 2025 with GBP 104 million of cash. This free cash outflow of GBP 42 million then reduces our cash balance. The cash impact of the previously mentioned adjusting items equate to GBP 4 million as our insurance recoveries offset a lot of the cash fire and cladding costs in the period. We contributed GBP 3 million in the period to our smaller pension schemes, which remain in deficit, with the schemes we inherited through acquisition around 10 years ago.

The net cash bridge neatly shows a significant return to shareholders as well. GBP 23 million of dividends paid in the period and GBP 14 million of share buyback. We also purchased GBP 15 million of shares for the group's employee benefit trust for share-based employee incentives. This resulted in a net cash position of GBP 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 GBP 58 million of cash at December '24.

The second half of the financial year has started well from a cash perspective, and we expect this uplift in 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 a 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 4.5 years, we have steadily reduced average net debt and debt-like items by GBP 600 million, so that we now have GBP 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 3 year GBP 190 facility. This represented a GBP 40 million increase on the size of the previous facility, including an option to extend for 2 more years as we strengthen further our debt maturity profile. In October, our credit ratings are reviewed with S&P upgrading us to BB+ and Fitch upgraded our outlook from stable to positive, maintaining us BB+. This affords us the optionality as we review the financing requirements for the group.

Now to 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 3x earnings through the cycle. We plan to invest further in our property business to generate consistent returns over time, deploying up to GBP 225 million of capital and targeting a consistent long-term ROCE of 15%.

With regards to acquisitions, we will continue to consider value-accretive acquisitions in our core markets. And then lastly, having completed our first share buyback program of GBP 20 million in December, I'm pleased that we're now able to launch a new GBP 25 million buyback program. This, alongside the interim dividend demonstrates that our shareholders will continue to benefit from Kier'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 do 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 operational 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 GBP 7.1 billion, which is up 6% and provides 92% of secured work for full 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 GBP 900 million, where we're 1 of 3. Project to upgrade Thames Water treatment works at Maple Lodge, that's GBP 280 million. In nuclear, we've also been awarded a 2 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 provided on the right, which go to explain the gap between the GBP 150 billion framework position and the GBP 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 2 years in terms of work opportunity winning. There is a clearer material pipeline emerging, particularly across water, defense 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 QuikSTATS, 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 genuine differentiators for Kier 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 GBP 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 of repeat business on key infrastructure frameworks and also within the private sector commercial sector. Recent wins include a place on the GBP 37 billion new hospital program 2.0 Alliance framework, a place on the DfE's new GBP 15 billion CF25 framework for schools, universities further in technical colleges to deliver high-value projects over GBP 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 of Education or CF21 framework, including 8 schools within preconstruction agreements awarded in quarter 2 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 GBP 85 million. You can see that there is a strong pipeline visibility ahead with opportunities to convert frameworks to projects in health, education and defense 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 school works under GBP 10 million, often from existing frameworks and often from direct award. Kier Places also plays a central role in our 360 approach. A recent example is a way their operational footprint and proven delivery of the Heathrow Quieter Neighbourhood scheme directly strengthened our proposition and help secure the BA Better Buildings win in infrastructure. This demonstrates how our 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 with delivery projects from GBP 1 million to GBP 683 million, the strength of our dedicated clients and markets team and the access to call-off contracts under 2 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 U.K. Using in-house capability allows us to self-deliver complex projects, reducing risk and removing reliance on Tier 1 external subcontractors. 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 Deyes 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, Kier has delivered 7 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. Invest and develops commercial and residential sites, largely operating through public and private sector joint venture partnerships to deliver urban regeneration projects across the U.K. As you can see from the slide, property has a gross development value of GBP 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. 6 sites are in construction and 4 schemes that we are actively marketing for sale. There is considerable capability within the Property division, which drives future opportunity and create synergies with the other business divisions.

Kier 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. Kier Property is also critical to our 360 approach. The historical PFI and urban regeneration expertise will support Kier to influence the early-stage vision and structure 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 health care 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% ROCE by full 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 a 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 life cycle. 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 has allowed 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 economical 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 of employee engagement. The Kier 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 Leader's review for women in senior leadership positions, strengthen our safety performance through Kier Cares, our new health and safety well-being strategy and through adopting predictive digital tools to help us prevent incidents even before they happen.

Average supplier payments down to 32 days, and we achieved 95% of payments within 60 days. We have 532 people engaged in apprenticeship programs, and we were included in the top 100 Apprenticeship Employers list. We are also signatories of the government's Youth Guarantee. For those who are financing 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 4% and 4.5% cash flow around circa 90% conversion of operating profit and an average net cash position, a sustainable dividend policy of circa 3x earnings cover through the cycle.

And then 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 GBP 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 GBP 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. Full year 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 pile sustainable growth through delivering social and economical infrastructure that is vital to the U.K.

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.

Rob Chantry at Berenberg. Just 3 questions. I suppose, firstly, for both of you. Could you just share your views on the optimal balance sheet structure medium-term for Kier, I guess, in the context of the potential bond refinancing this year, the recent cash generation, the move to an average net cash, just how you see that evolving on a 3- to 5-year view?

Secondly, just touch on building safety costs. I think it's fair to say that's a step-up versus where the guys thought it was a year ago. I think you're now talking GBP 30 million this year, GBP 30 million next year, a bit of a balance in '28. Can you talk a bit about what's driven that change and happy it goes no higher thereafter?

And I suppose, thirdly, really interesting going through the different structural dynamics of your market share. Could you just kind of highlight to us, I guess, where you think you're a genuine market leader in these markets and where you think there is a gap to the top and how you might think about if that's a gap you want to fill with potential M&A or more investment?

Do you want to take the first 2?

Yes, a couple of questions there. Can everyone hear me okay? So let's start with the balance sheet one. I guess, firstly, let's reflect on where we are. So we're at this average net cash positive position, which I think everyone is very pleased with. It's been an enormous journey to get there. And then if you reflect on our cash flow, here we have strong cash flow, and we expect that to build over time. We've obviously come out there and said, we'd like to continue with the share buyback. So we've continued the share buyback.

So the implication there is that if you look at our cash flow, we are kind of returning the dividend. We're doing the share buyback. That does mean we have spare cash. So that does mean it will build. So we expect the cash to build over time, and that's what we'd like it to do. So we would like to continue to build -- we'd like to continue to strengthen our balance sheet in the medium-term. So what I can't say is here's the cash number we're going to aim towards. We haven't got that. What I can say is that we want to keep it positive, and we would like to continue to strengthen the balance sheet. That's our plan.

And then the point on the bond, I think you kind of reflected on the bond quickly. So we've got a bond. It's at 9%. Kind of I alluded to it in the slides that there is optionality around that bond, and we will look to potentially go to market on that at the kind of end of the first quarter. So like in the next few weeks, let's see what happens. But ideally, we'd like to come to the market with the bond later on. So that's the bond side, the balance sheet.

So fire and cladding. So you saw there in the half year that we've got GBP 10 million adjusting item for fire and cladding. And I also said that we expect that to be around GBP 30 million for the full year. So your question then was, well, how you got comfortable with this? So what we've done is look through every project that's got any exposure on fire and cladding. And each one is bespoke. Everyone is unique, each one is discrete, and it all has different insurance recoverability against it as well.

So -- and we have to wait to see if the liability is going to crystallize. So we're going through each one to try and work out, is there a liability? Is it going to crystallize? And then those numbers that I've kind of alluded to are an estimate on how that liability could crystallize over time and an estimate on how we could get recoveries on insurance against them. So that's a kind of net estimate against that.

And the challenge, of course, is that you can't take it all today because you don't know the liability is going to crystallize and you don't know the scale of it. So that's the best we can do is estimate what that adjusting item is going to be this year and next year.

If I pick up in terms of the market and the sectors, it's a great question. Thank you. If you think about it in terms of Kier stalwarts, that still remains around education, highways and at the moment, MoJ work that's passing through. We are seeing through the slides I put up there, the growth opportunity through the pipeline in defense, the water contracts are starting to come through and working with the water companies in terms of their cycle of funding coming through. Certainly, a huge opportunity in health, particularly off the placement in terms of the new Alliance framework, but there's also other health spend that's going on with the trust that haven't been privileged enough to be one of the 11 hospitals. And we're seeing entry into the nuclear sector, which is a slow burn. It takes time, but we are there and positioned well.

In terms of areas in terms of future, rail is an area that I'd like to do more in. There's certainly going to be some spend. Certainly, when the money starts being diverted onto HS2, we're looking about where that's going to go. The London -- the views out here, the London private sector is starting to wake up. And we have a dedicated team in London that is delivering very well at the moment, and I see further opportunity there.

And finally, the Places business. I made a point today, I've actually explained a bit more around that business particularly being annuity and the opportunity we have through FM, housing maintenance and also the specialized work we do around small works. As I said, that's often work that's coming through existing frameworks or direct award. It's critical work to the client and often it leads to either repeat business within places or across the group.

Longer-term, I've often said around, I felt the opportunity was going to be there for PPP and urban regeneration. And what we're doing about it? Well, we're starting to have conversations. We had a conversation yesterday with NISTA and cabinet office and other CEOs around how the construction industry can feed into the models going forward to make sure that we learn the lessons, the good and bad of previous PFI. But I also look to, at the moment, I've got a Property business that has expertise from the previous PFIs. We certainly have the ability to draw on funding and with the relationships with the public sector. And we have a Places business that is already currently working on 22 contracts under PFI arrangements. So we have all the bases covered.

Jonny Coubrough from Deutsche Numis. Can I ask perhaps on the change in mix within Infrastructure Services and it looks like water is clearly expected to be a big growth area also defense. How do you view the contract terms in those markets and also potential margins relative to transportation?

The second question would just be on central costs and why they fell in the period. And then third question on Kier 360. Do you think there are opportunities to broaden that out across your markets in terms of increasing your activities at the front end of projects and improving margins there?

So if I take 1 and 3 and leave you on 2. Yes, I leave you 2. So the margin risk in terms of these new areas, we've used the word pivot quite a lot. So what we look for is work that is procured on a similar basis through framework that it plays into our strength of having the U.K. coverage, plays in our strength in terms of that we have the local presence that we can bring the environmental and social benefits. Generally, in terms of the frameworks, the risks are going to be proportionate to what we do elsewhere. And it really plays into then us bringing -- being able to bring in the other capabilities we have across the group.

So I see those very much in terms of being just same as just a different sector. And that's the strength of the model that we have going forward is that we have the visibility where spend is going to be. We start thinking about those sectors way before they come to market in terms of frameworks. It gives us time to think about the capabilities that we need to understand the customer needs. And we also have a model now that we can really look at our workforce in terms of how we move it around to suit these new streams of work.

If I touch on the last point in terms of Kier 360, the answer is actually both. If you think about it in terms of the infrastructure business, our 750 strong designers predominantly are based on the highways business in terms of transportation. Now by combining those 2 organizations together, I've opened up that ability to move it quicker into serving things like water and defense going forward.

Now if I look in terms of the construction capability around M&E design, again, I'm looking at 40% of the construction business. But there's no reason why I can't start looking in terms of how do we help that, particularly around the water sector to drive better efficiencies and confidence around that. So both internally and externally. The feedback we had from our one government day when we're talking about the departments about ability to bring, say, environmental understanding into any scheme because most schemes at the moment will have some form of water problem in terms of how they deal with the current water or how they make sure it goes away.

Or they're going to have issues in terms of how do they get power in and make sure the energy supply is there sufficient for them. They might be looking for funding solutions because they haven't quite got the funding. And they might need be talking about, well, how do we maintain these buildings in the future? Are you Kier interested in doing the future maintaining? If you're not, can you make sure that the base specification reflects your knowledge of operating these buildings elsewhere?

And if you want to put it all together, go and have a look at the Deyes High School. So an outcomes-led design. And you can only do that by bringing all these skills together, look at it in terms of how the building works in terms of energy efficiency, how you actually transfer children more effectively around and teachers around the school classrooms. And that's delivered, as I said before, 7 minutes improvement per lesson. That's [ Kier 360 ] in work.

Okay. On the corporation costs, I mean they're relatively flat year-on-year. I think there's a slight improvement. I think the only change is kind of -- I think it comes down to things such as what's the level of bonus accrual you put into the corporate costs, Jonny. I don't think it's much -- there's not much more than that. There hasn't been a deliberate cost drive in the corporate center to date. So it's not different from that. It's more kind of smaller assumptions driving it.

Andrew Nussey from Peel Hunt. A couple of questions. Useful disclosure around sort of the pipeline. I did observe that you've got defense sitting in both sectors. How do you sort of draw the line? And does that create some inefficiencies having it sort of sitting in both buckets?

And secondly, in construction, modular construction is becoming a feature of the industry and there was an implication of being the revenue sort of slightly lumpy. Is that going to be an ongoing feature as one would imagine your projects get bigger and more modular? And is there any impact on the cash flow from that shift?

Okay. I'm happy to say both, and you can then correct me in terms of the second one. Good spot on the defense. The distinction is one is nuclear defense and one is anything else that isn't nuclear defense. Nuclear defense has a particular requirement in terms of your capability, obviously. And it tends to be more large infrastructure complex schemes like Hinkley. So that's why we keep that within that side of the organization. We do, though, share knowledge between the 2 and the relationships and make sure that if there is any joint learning or joint sharing of design or joint sharing of M&E that we do the crossover. But that's the reason we do that.

In terms of the MMC, I think you have to remember in terms of the big impact there is in terms of the Glasgow, in terms of the size of it, in terms of timing. I personally don't see it as being -- having a lumpy impact on us. And our approach to MMC really has been embedded in the organization from what we've learned around MoJ in terms of the mill site. And we will continue working through it. Anything else you want to add?

No, I think as you said, it does suppress the revenue a little bit on one side versus the other. But what it does do is large construction, you can actually achieve bringing that cash in slightly earlier, if anything. So if anything, it's positive from a cash perspective. So you've got kind of large construction activities, then that can be advantageous for cash actually.

Adrian Kearsey, Panmure Liberum. Three questions, if I may. In terms of water, which kinds of projects have you got in the pipeline and which looking beyond the current AMP do you see sort of coming through? Kier Places 15% currently in terms of revenue of the division, where do you think that can go? And what kind of -- do you think you need to expand your capability within Kier Places in order to grow that? Or is it more about just winning more -- just more of the same kind of work?

And then the last one, frameworks, your position within frameworks is not equal across all of the participants within the framework. Which particular frameworks do you think you'll win a greater share?

Okay. Again, I'll do my best. Yes, I thought you'd say that. Water, I like the [ time ] there in terms of pipeline. So capital works, we went to the water treatment works. Some of us went to the water treatment works. We're seeing more of that, which is what Maple Lodge is. So more around the capital works. In terms of places, no, we have the capability. It's more of the same. I held back in terms of housing maintenance because that became quite awkward in terms of price per property programs that were in the last 5 or 7 years. But definitely, there is going to be a need to upgrade in terms of housing maintenance properties across the country.

And the FM, generally at the moment, we're staying within public sector. I'd like to see if that opens up more opportunities around, particularly around the PPP work going forward. Frameworks, are we equal? There are some that we are more equal than others. That is correct. But generally, the approach with any framework that we go on that we've discussed this morning, we try to have a position in 1 of 3. So if we can get a position in terms of 1 and 3, you have the real opportunity to influence in terms of the customer. You start being able to bring forward your views around outcomes-led design, and it often allows you to work very closely in terms of the alliancing work about what's going forward.

Generally, if you look in terms of longevity in the past, education and highways are a stalwart of what we've done. Alongside that, I took a trip down to Bridgewater to look at the environmental work we were doing. We do somewhere between GBP 50 million and GBP 100 million a year on that. Smaller organizations will be talking about it because it will be a larger proportion of their works. But some of the work we do that in terms of our understanding in terms of the environment and how we work with local communities to make sure that we manage water, wildlife, et cetera, is a real strength that we have. And I can see us leveraging that expertise across the other divisions.

Max Hayes from Cavendish. So first, looking at the in-house design consultancy, just looking at the potential to sell these services externally. And then also the improvements in net cash and average net cash balance, has that supported access to any certain frameworks and help develop the pipeline?

Okay. In terms of cash, no. But what it has done is reduce the number of questions we've had about net debt with some of the people in the room. But I do see it as a positive sign in terms of where we are. Generally, the turnaround has been accepted. We've closed that off in terms of the frameworks. What this does do, though, is draw people into, okay, Kier, PPP, okay? You get into a position in terms of having surplus cash at some point in the future. We will have conversations with you in terms of how should we be thinking about Kier in those conversations. So, positive.

In terms of design, at the moment, we have so much internal. It's a benefit to us. We like to keep it internal. The other benefit we have in terms of the internal model is that when we go to customers, if you like, our outcome is revenue for the other divisions. It's not time on the clock. It brings a different focus in terms of what our design capability do. So I wouldn't want them to move away from that focus and all the work they do for us, moving into an external place where quite often it's time on the clock. So for now, internal.

Okay. I think this is the last question.

Alastair Stewart from Progressive. A couple of questions. First, following on from Andrew. Defense, very small in terms of the current order book as a percentage, but very big in terms of both pipelines. Have you been getting a sense that, that pipeline is getting more urgent from your clients? And specifically, have you had any incoming calls in the last few months and more particularly -- more particular in the last few days that could move that forward. So that's question one.

And question two, GBP 197 million capital employed in property. Given the move to average net cash and the comments on PPP, do you see that GBP 225 million ceiling moving up in the mid-term?

Do you want to take that one?

Yes, I'll do the last one first. So let's start with the -- you can talk to the defense kind of point, your phone is booming this morning or not. On the property, I said GBP 197 million at the moment. And we were quite clear, we want to get to a 15% ROCE. So we kind of need to prove that. We need to prove it to this room. We need to prove it to ourselves. We need to show that this business can get up to that kind of sustainable return level. And we're confident we can get there, but we need to kind of prove that.

I think once we prove that, then you can look to invest further. And to what Stuart said earlier, that doesn't necessarily mean that it's the current kind of design model. It could be slightly pivoted model into other investment areas. It could be a PPP. It could be a specific focus on urban redevelopment. But that's what we're thinking about it. It's about how do we use our cash, let's get the returns, let's prove the returns of the business, and then let's move from there.

There's a subtlety that I'm looking for is to make sure it generates revenue across the divisions. So we can actually see it more as in terms of being integrated solution we have. Just going back to defense, I've got to start by saying it's most important that we -- at this time, we think about our people, the 9 employees we have -- employees that we have over in the Middle East. And also, we have -- many of our staff have friends and family of that region.

In terms of the urgency, it's been urgent for a while in terms of the need they have, whether it's in terms of providing the nuclear safe havens for submarines or warships, along with improving the living accommodation for -- under the SLA or in making sure that we've got proper safe havens for storage in terms across the country. So there has been an urgency for probably the last couple of years. But what I would say is that Kier saw this as an area of undoubtedly, there was going to be some spend that was going into it, that they were going to start changing their way in terms of the way they approach more to an alliance in way and procuring work through frameworks. So it's a reason why we -- and we needed something to continue the work that we created in terms of the MoJ and defense became a natural place to start moving our resources probably a couple of years ago to be ready for this growth.

Specifically, is that urgency getting more urgent?

No. Okay. I think we are done. So thank you very much for coming. Thanks for your time. And I'd love to share a coffee with you next door if you've got time. Thank you very much.