Kier Group (KIE) Investor Update summary

Market Outlook and Order Book Strength

• UK government committed to a £725 billion infrastructure reinvestment program, with a three-year funded pipeline and strong visibility for contractors.

• Access to a £156 billion addressable market through frameworks, covering sectors like health, education, housing, water, and roads.

• Order book reached a record £11.0bn, securing 91% of FY26 and 70% of FY27 revenue, providing high confidence in future order book quality and visibility up to 10 years.

• Market demand driven by population growth, ageing infrastructure, and net zero commitments.

• Focus on vital, non-discretionary infrastructure (defense, housing, schools, hospitals) ensures resilience against government spending pressures.

Financial Performance and Capital Allocation

• Revenue grew 3% to £4,087.8m, with adjusted operating profit up 6% to £159.1m and margin rising to 3.9%.

• Profit before tax increased 15% to £78.1m, net cash improved 22% to £204m, and free cash flow was £155.4m, supporting deleveraging and balance sheet strength.

• Dividend per share increased 38% to 7.2p, with a three-time cover target, and a £20m share buyback was launched.

• Capital allocation prioritizes CapEx, dividends, property investment, opportunistic M&A, and share buybacks, with a cautious approach to cover and liquidity.

• £400m of debt facilities in place, including £250m Senior Loan Notes (2029) and £150m RCF (2027), with optimal cash level near zero and strong liquidity from property assets.

Sector Strategy, Risk Management, and ESG

• 70% of order book is government-funded, 15% regulated, and the rest private, with strict controls on private sector exposure.

• Frameworks are essential for market access, with a 98% success rate in construction; qualitative factors like ESG and community engagement are key to winning positions.

• 71% of FY25 revenue derived from green products/services, and a 4.3% reduction in Scope 1 and 2 carbon emissions achieved.

• Conservative approach to risk, avoiding overtrading and high-risk sectors like data centers and high-end residential until market conditions improve.

• Delivered £531m in added social value and increased employee engagement to 80.5%.