Average net cash achieved after 13 years: why Kier’s HY26 matters
Kier Group’s half-year numbers to 31 December 2025 show a business that’s getting fitter. Revenue and profits nudged up, the order book hit a record, and crucially, the Group delivered an average net cash position for the first time in 13 years. That is a meaningful shift in a sector where working capital can be lumpy.
Backed by that cash performance, the Board has lifted the interim dividend and launched a fresh £25 million share buyback, with full-year guidance unchanged. Here’s what stood out – and what to watch.
Key HY26 numbers investors should know
| Metric | HY26 |
|---|---|
| Revenue (including JVs) | £2,029m (+2.6%) |
| Adjusted operating profit | £71.0m (+6.6%) |
| Adjusted operating margin | 3.5% (up 10bps) |
| Adjusted profit before tax | £54.5m (+7.7%) |
| Adjusted basic EPS | 9.5p (+9.2%) |
| Reported EPS | 5.7p (+24%) |
| Period-end net cash | £102.9m (HY25: £57.9m) |
| Average net cash | £16.8m (HY25: net debt of £(37.6)m) |
| Free cash flow | £(41.9)m outflow (seasonal, improved vs £(49.8)m) |
| Order book | £11.6bn (record, +5%) |
| Interim dividend | 2.6p (+30%) |
| Share buyback | New £25m (after completing £20m in Dec 2025) |
Cash first: why the average net cash milestone matters
“Average net cash” is the month-end average of cash minus debt. It smooths out timing quirks and gives a cleaner read on balance sheet health than a single day’s number. Kier posted £16.8 million of average net cash versus net debt of £(37.6) million a year ago – a notable swing.
Yes, there was a normal seasonal free cash outflow of £41.9 million in H1, but management point to working capital inflows weighted to H2. Period-end net cash stood at £102.9 million and the Group also refinanced its Revolving Credit Facility to £190 million (option to extend to October 2030), adding flexibility.
Net result: the Board feels confident enough to increase the interim dividend to 2.6p and start another £25 million buyback within 12 months. That is accretive if cash generation holds up.
Record order book and exceptional visibility
Kier’s order book rose 5% to a record £11.6 billion, with 94% of FY26 revenue already secured and 78% of FY27 revenue secured. For a contractor, that’s gold – it underpins earnings and cash forecasting.
Big framework wins set the runway
Frameworks – long-term procurement routes used by public bodies – matter because they channel repeat work to pre-qualified suppliers. Kier’s HY26 landed several heavyweights:
- Hospital 2.0 Alliance under the New Hospitals Programme (advertised value £37 billion, 12-year duration).
- Department for Education Construction Framework 2025 (advertised value £15 billion, 6-year duration) plus eight projects under CF21.
- National Highways Legacy Concrete Roads Framework (£968 million).
- Thames Water’s Maple Lodge sewage treatment upgrade (worth up to £280 million).
- Southern Water ECI contracts worth £44 million under its £3.1 billion AMP8 framework and an extension at Hinkley Point C.
This is exactly the kind of public and regulated work Kier targets. It typically carries lower counterparty risk and better payment discipline.
How each division performed
Infrastructure Services: growth led by roads and water
Revenue rose 5% to £1,083 million with adjusted operating profit up 5% to £48.2 million and margins steady at 4.5%. Design work on National Highways (A66 dualling, M6 Lune Gorge) and local authority highways stayed busy, while the water business ramped up under AMP8 investment. Order book up 6% to £7.1 billion. That’s a solid platform.
Construction: resilient margins, legacy costs still a drag
Revenue dipped 1% to £920 million, but adjusted operating margin held at 3.9% and adjusted operating profit was broadly flat at £36.3 million. Reported operating profit fell to £25.6 million due to higher fire and cladding compliance costs of £10.7 million in the half (full-year expected to be around £30 million). Still, the order book grew 5% to £4.5 billion and 96% of FY26 revenue is already secured. Mix is supportive too – education, healthcare, justice and defence remain core strengths.
Property: progressing towards 15% ROCE target
Property generated revenue of £24.9 million and adjusted operating profit of £2.1 million. Capital employed stands at £197 million. The business says it is on track for 15% Return on Capital Employed (ROCE) by FY28, supported by a £3 billion gross development value pipeline and 60% of projects with planning consent (including a 5,500-unit residential portfolio). Six projects are on site and four are being actively marketed, including 19 Cornwall St (139,000 sq ft office). Not flashy in H1, but building blocks are in place.
Strategy, targets and ESG signals
Kier reiterated medium-term targets: adjusted operating margin of 4.0% to 4.5% in 3 to 5 years, c.90% cash conversion of operating profit, and maintaining an average net cash position. Dividend policy remains c.3x earnings cover through the cycle (one-third interim, two-thirds final).
On the people and planet front: a CDP A rating for climate disclosure (top 4% of c.22,000 companies), recognition as a Glassdoor Best Place to Work, and first in sector for women in senior roles per the FTSE Women Leaders Review. Over 500 apprentices are on programmes, and payment performance to the supply chain is improving. These are helpful differentiators in framework competitions.
Risks and watch-outs
- Legacy fire and cladding: £10.7 million charged in H1 and c.£30 million expected for FY26. This is a known overhang sector-wide; Kier notes insurance recoveries where virtually certain.
- Seasonality: cash outflow in H1 is normal for the model, with inflows typically weighted to H2. Execution needs to deliver that unwind.
- Safety metrics: 12-month Accident Incident Rate ticked up 10% and All Accident Incident Rate up 1%. Management has launched a three-year strategy to address this.
- Macro and political backdrop: the business is heavily exposed to UK public and regulated spend. That’s a strength for visibility, but it concentrates policy risk.
My take: steady execution, improving quality of earnings
This is a tidy set of interim results. Revenue and adjusted profits are up, margins edged higher, and the average net cash milestone after 13 years is psychologically and practically important. Record order intake across core public frameworks gives unusual visibility – 94% of FY26 revenue secured – which supports the decision to raise returns via a 2.6p interim dividend and a new £25 million buyback.
On the flip side, legacy fire and cladding costs remain a headwind and H1 cash outflow means H2 needs to do its usual lifting. But with Infrastructure Services growing, Construction maintaining disciplined margins, and Property laying the groundwork for higher ROCE by FY28, Kier looks better balanced than it has for years.
Bottom line: outlook unchanged and confidence warranted. If Kier keeps converting that record order book into cash while holding margins, shareholders should see the benefits through both dividends and buybacks.
Quick jargon buster
- Average net cash: the average of month-end net cash across the period – a cleaner indicator than a single day’s snapshot.
- Adjusted results: exclude one-off or non-underlying items (e.g. fire and cladding costs, amortisation of acquired intangibles) to show underlying performance.
- Order book: the value of contracted future work yet to be delivered.
- Framework: a pre-approved panel for public sector work that enables repeat awards without full re-tendering each time.
- ROCE: Return on Capital Employed – a measure of how efficiently capital generates profit.
- AMP8/CP7/RIS 3: regulated investment periods for water (AMP8), rail (Control Period 7) and roads (Road Investment Strategy 3).
