Good morning and welcome to the half-year results presentation for Hill & Smith . First of all, let me, for those who don't already know him, introduce Mark Else, who is joining me today. Mark is our Group Financial Controller and is acting as Interim CFO since Hannah's departure. Mark will continue to do so until Chris McLeese will join us as CFO in October this year. I will start today with the highlights of the period, and then Mark will talk in more detail on the financial performance. After that, I will update on the strategic progress, share a case study on our U.S. galvanizing business, and review performance against the financial framework in the first half. I will finish with our capital allocation framework, investment case, and the outlook. Let me start with the first half of the highlights.
First of all, we've seen positive trading with constant currency revenue growth of 4% and 11% in terms of profit. Strong performance was driven by continued strong infrastructure demand in the U.S., where we have record order books. U.K. markets continue to be challenging, in particular in the road end market. In that context, it's pleasing that we've seen further operating margin expansion to 17%. Our second half outlook remains positive, and therefore, our full-year expectations remain unchanged. Cash performance was strong with 85% cash conversion, and return on invested capital increased by 320 basis points to 25.7%, reflecting growth in the larger U.S. platform businesses. All of this translated to an EPS increase of 10%, and we declared an interim dividend of GBP 0.18, up 9%. An important part of our strategy is to continually evaluate our portfolio and to deliver inorganic growth through bolt-on acquisitions for our growth platforms.
To deliver that, we have an active pipeline, and there are multiple ongoing discussions. Portfolio evolution also means to review our current portfolio and the fit with our operating company and financial framework. This has resulted in the divestment of two non-core loss-making businesses in the first quarter of this year. Our approach to capital allocation remains clear and unchanged, with continued prioritization of investment in organic and inorganic growth, and to provide a growing dividend. However, having assessed the capital requirements to deliver those, the Board is confident that given the strong balance sheet and cash generation, we have the capacity to make an additional return of capital to shareholders and remain comfortably within our target leverage range of 1- 2x . Therefore, today we've announced a buyback of GBP 100 million over the next 18 months. With that, I would like to hand over to Mark.
Thanks, Rutger. Good morning, everyone. I'm pleased to report that the group has delivered another positive set of results for the first half of the year. Revenue was GBP 431.6 million, up 4% at constant currency and 2% on an organic constant currency basis, reflecting good performances in our U.S. engineered solutions and galvanizing services divisions. Operating profit of GBP 73.5 million was up 11% at constant currency, with operating margins increasing by 80 basis points to 17%, reflecting good growth in our higher margin U.S. platform businesses, better profitability in the U.K., and a positive impact from non-core divestments in the first half. Underlying profit before tax was 9% higher at GBP 69 million, and with an effective tax rate of 25.5%, earnings per share increased by 10% to GBP 63.9 .
Given the positive trading performance and our continued confidence in the group's prospects, we've declared an interim dividend of GBP 18 per share, an increase of 9%. Turning now to the group overview, as the charts at the top illustrate, the group continues to have strong positions in structurally growing U.S. infrastructure markets, with our higher margin U.S. portfolio generating 61% of revenue and 76% of operating profit in the period. Looking at the contribution from the divisions, U.S. engineered solutions delivered another strong performance, generating around half of the group's revenue and profit, with continued demand across our larger platform businesses and the positive contribution from prior year acquisitions. Galvanizing services generated around a third of group profit on a quarter of the revenue, reflecting the higher margins that the division continues to deliver.
Whilst revenue in UK and India engineered solutions fell slightly, highlighting the ongoing challenges in our UK markets, the share of profit was similar to 2024, reflecting an improvement in operating margins during the period. Moving on now to our divisional performance, starting with U.S. engineered solutions. The division delivered a strong performance with 10% revenue and 13% profit growth on a constant currency basis, reflecting continued demand across our larger platform businesses and the positive contribution from recent acquisitions. As a result, operating margins increased by 40 basis points to 17.9%. Our largest business, the Creative Composites Group, saw strong demand for its composite solutions across a range of end markets, again delivering revenue and profit ahead of the prior year.
V&S Utilities, our electrical transmission and distribution business, delivered a good performance and enters the second half with a record order book following strong order intake during the period. Several capacity expansion projects at our existing facilities are underway, and we continue to see transmission and distribution as an attractive growth market across the medium to longer term. The Paterson Group, our engineered supports business, delivered further growth against a strong comparator, driven by robust demand across a range of sectors. The expansion of our main site in Wagamin, Louisiana, is progressing well and will bring additional capacity towards the end of the year. Our road traffic safety product business saw improved profitability as a result of better product mix, with a stronger performance in higher margin temporary barrier rentals and crash attenuators and further adjustments to the cost base.
The outlook for these core product lines is encouraging, with demand supported by federal and state investment to upgrade road infrastructure. In off-grid solar lighting, we continued to see subdued activity in the first half, with ongoing soft demand from our largest customers as they continue to review their capital spending plans. We strengthened our commercial team during the period and continue to focus on broadening the product offering and further diversifying the customer base. Overall prospects for our U.S. engineered solutions businesses remain good. We expect market growth to be supported by investment to modernize the electric grid and multi-year federal and state funding to upgrade infrastructure, alongside private investment to onshore vital components. Revenue in our U.K. and India engineered solutions businesses was similar to the prior year on an organic basis and down 5% at constant currency, reflecting ongoing challenges in our U.K.
markets and the effect of the non-core disposals in Q1. However, operating profit was 19% ahead of the prior period at constant currency, reflecting the improved portfolio mix, project activity, and operational efficiencies. As a result, operating margins improved by 190 basis points to 9.6%. As expected, both revenue and profit in our U.K. roads operations were lower than the same period last year. Activity on major road schemes remains limited, driven by delays to the release of Road Investment Strategy 3, which is now expected in the first half of next year. We expect the challenges in UK roads to continue in the short term and have taken action to align the cost base accordingly.
Activity across our other UK businesses was generally subdued, although we saw good demand for data center projects, particularly in our high-security fencing business, where the audit book opportunity pipeline is strong and presents significant short to medium-term prospects. Output in our Indian engineered supports business was impacted by the timing of projects in the first half, resulting in lower revenue and profit against a strong comparator. However, wider market activity levels remain healthy, and we expect an improved performance in the second half. As previously reported, we divested our subscale Australian roads business in January 2025 and sold parking facilities to a small loss-making U.K. security business at the end of February, both further improving the quality of the portfolio.
Lastly, galvanizing services, the division delivered a good first-half performance, driven by volume growth in both the U.S. and U.K., with revenue up 6% and operating profit up 4% on a constant currency basis. Operating margins reduced slightly to 24.5%, but remain well within our expected range for the division. Our U.S. business delivered another strong performance with 6% organic revenue growth and record operating profit. The growth reflects a 6% increase in volumes, with good demand from a balanced mix of end markets. Margins were slightly lower than the prior year due to product mix, but remain high, with customers valuing the excellent quality and service provided by our local teams. We expect another good performance in the second half, and the medium to longer term remains positive, with ongoing U.S. infrastructure investment expected to support further volume growth.
In the U.K., revenue was 4% ahead of the prior year, reflecting a 12% increase in volumes, partially offset by lower pricing in certain end markets. The volume growth was ahead of the wider market, reflecting improved productivity and an enhanced customer focus across our business. The second-half outlook for U.K. galvanizing remains positive. Finally, for me on cash generation, the group continues to be highly cash generative with a very strong balance sheet and significant funding capacity. First half cash conversion was 85%, ahead of the group target of 80%. This included a working capital outflow of GBP 11.8 million, typical of seasonal trading patterns, and capital expenditure of GBP 12 million, representing a multiple of 1.1x depreciation and amortization.
In 2025, we're planning to invest a total of around GBP 40 million on capital projects, with key investments including capacity expansion in our transmission and distribution business, the completion of the engineered supports facility upgrade in Louisiana, and several ERP developments to support future growth. We continue to maintain substantial liquidity headroom and leverage capacity, providing significant flexibility in our allocation of capital. Net debt at the end of the period was GBP 55.3 million, including lease liabilities of GBP 42.7 million, with the ratio of covenant net debt to EBITDA reducing to 0.1x and borrowing facility headroom increasing to GBP 295 million. We also delivered further increases in returns, with return on invested capital for the period at 25.7%, a 320 basis point improvement, reflecting the faster growth in our larger U.S. platform businesses, which are typically lower in capital intensity.
I'll now pass you back to Rutger to provide you with an update on the strategy and the outlook.
All right, thank you, Mark. I'm pleased about our strategic progress in the first half. We introduced in March to you our refreshed operating company framework and enhanced focus on priority end markets. This has now been fully embedded in our annual strategy update process, as well as providing strong guidance for our M&A pipeline. Our operating companies are now focusing on alignment with the framework in terms of the market dynamics they are exposed to, how their business model can deliver increased differentiation, and the management and culture needed to underpin delivery of their strategies. In terms of our priority end markets, as a reminder, we identified 14 end markets across infrastructure and the built environment that we currently are exposed to.
These markets are all to different degrees impacted by mega trends and therefore vary in degrees of growth expectation and cyclicality. Based on that, we have categorized the end markets into four distinct groups. First of all, the high-growth emerging markets, which includes data centers, renewables, and gigafactories. We then have the resilient growth anchors, including electrical transmission and distribution and water infrastructure. We then have the stable growth markets, including transport products, transport infrastructure, and public construction. Lastly, the more cyclically sensitive markets, which include industrial, residential, and commercial construction. In March, I shared how for the group revenue splits across those four groups. At the time, I said that there is a significant difference in this split between the U.S. and the U.K. and India. On the next slide, I will share that with you, as well as the current group picture.
First of all, it's important to note that the shift between the four distinct groups will evolve over time, with continued focus from our operating companies on higher growth markets. It is encouraging to see that at the group level, revenue from the high and resilient growth categories increased from 23% to 32%. This was mostly driven by an increased contribution from resilient growth markets in the U.S., where its share increased by 9 percentage points. This reflects the strong organic and inorganic growth we've seen in our T&D and water infrastructure markets across our large and platform businesses. In the U.S., the high and resilient categories now almost represent half of revenue, and the more cyclical markets only around 20%. We expect there will always be some exposure to those markets, as for example, our galvanizing business benefits from a broader spread.
Historically, however, we have more significant exposure to these markets in the U.K. and India, and the more cyclical sensitive markets in this region are still significant at 45%. It is, however, good to see that in the first half, the share of the high-growth markets increased by 3 percentage points, driven by strong data center demand. Having shared with you the progress on our focus on priority end markets, let me now move on to how the operating company and financial framework can be applied in practice. For that, I will use our U.S. galvanizing business as an example. As a headline, I would say this business is closely aligned with our operating company and financial framework.
In terms of the market dynamics, we see growing exposure to priority end markets, market-leading positions in the markets we operate in, and a good opportunity for bolt-on acquisitions to drive further geographic expansion. The business model is built around a strong customer focus and differentiation through quality and customer-relevant industry-leading services. All of this enables the business to generate returns on invested capital well above the group target of 22%+. Management and culture underpin delivery of the results with strong entrepreneurial management that has many years of cumulative experience. In terms of the financial framework, there is a strong track record, consistently delivering numbers ahead of our financial targets, both through organic and inorganic growth. Let me share two examples of that. First of all, an example of organic growth with the greenfield investment in Owego, NY, which opened in January 2020.
With a greenfield investment, it's important to have baseload volumes provided through launching customers, in this case through several key existing customers. Now, five years later, this plant delivers operating margins ahead of the galvanizing services' divisional margin and return on invested capital significantly above the group cost of capital. In terms of inorganic investment, we acquired Korns Galvanizing in March 2023 for $11 million. The plant further strengthened our geographic position in the Northeast, and with further capacity investment and our operating experience, the business has delivered 30% compound revenue growth between 2022 and 2024 and increased operating margins by over 500 basis points, both well ahead of the acquisition expectations.
With a strong fit with our framework and with a positive market outlook, we continue to see growth potential for galvanizing services through share gains in its current markets, but also through geographical expansion, both via potential new build facilities and through acquisitions. Let me now move on to our performance against our financial framework. In the first half, we continue to deliver margin expansion and are delivering ahead of our framework in terms of return on invested capital and cash conversion. We're also well below our leverage target, and I will come back to that in the next slide on capital allocation. Total revenue growth in the half was the same as organic growth, reflecting that we did not acquire a business in the period, but as mentioned, we do have an active pipeline with multiple ongoing discussions.
Organic revenue growth at 2% was below our target of between 5% and 7% across the cycle. Our U.S. growth platform businesses delivered organic growth within the targeted range, but this was partially offset by the challenging U.K. environment, as well as in our off-grid solar business in the U.S. Let me now move on to an update on our capital allocation framework. Our approach to capital allocation remains clear and unchanged and provides significant flexibility for growth and returns. Our first priority is to invest in organic growth, where we focus on higher growth and higher return markets. This year, we expect to invest about GBP 14 million in capital projects, for example, in increased capacity for our transmission and distribution and engineered supports businesses in the U.S.
Secondly, we remain focused on enhancing our growth platform businesses through bolt-on M&A, utilizing our operating company and financial framework to prioritize, and where we target to invest on average between GBP 50 million- GBP 70 million a year. We have an active pipeline with multiple ongoing discussions and the resources to integrate acquisitions in parallel. We want to provide a growing dividend to our shareholders, and we declared a 9% increase in our interim dividend in the first half. Lastly, we are committed to return surplus capital if leverage is expected to remain low for a sustained period of time.
As mentioned in the highlights, having assessed the capital requirements for the business to fund organic growth, execute on acquisitions, and provide a growing dividend, the board is confident that given the strength of the group balance sheet and cash generation, we also have the capacity to make an additional return of capital to shareholders and remain comfortable and within our target leverage of 1- 2x . As a result, the company has today announced a buyback of GBP 100 million over the next 18 months. Before I conclude with the outlook, let me summarize again what I think is an attractive and strong investment case. The Hill & Smith investment case is underpinned by our purpose, operating company framework, and end market focus.
We focus on priority end markets, those with the most attractive growth prospects, with particularly noteworthy exposure to infrastructure spend, both in the U.K. and the U.S., as governments and private companies seek to upgrade the quality of national infrastructure to support economic growth. It is then about the market leadership in the niches in which we operate, allowing us to enjoy high barriers to entry and therefore strong operating margins. We do not want to be competing against commoditized players. Sustainability is core to our business model in terms of how we operate and the products we manufacture. Critically, then it is about an autonomous business model, which encourages and supports an entrepreneurial culture at the operating company level.
Our head office is there to ensure we have the right KPIs and controls, but is also there to support setting the ambition of each operating company and, as a result, help ensure our businesses deliver to their full potential. Finally, it is about ensuring we maintain a strong balance sheet capable of supporting organic growth while also allowing us to deliver on our M&A strategy. We see significant opportunities to use M&A to help us expand into new customers and end markets and into new technologies. Effective delivery of this M&A strategy is about ensuring that our regional organizations, supported by the group M&A team and our operating company MDs, source opportunities, build a relationship with owners supported by best-in-class execution and post-acquisition integration. Let me now finish with the outlook.
We expect trading in our larger US platform businesses to remain positive in the second half, underpinned by federal, state, and private investments to upgrade infrastructure, onshore manufacturing, and support technology change. The second half revenue outlook for our U.K. businesses is likely to remain challenging, given the broader economic conditions, budgetary pressures, and lack of road investment schemes. Overall, we expect that the group's positive first half trading will continue in the second half and anticipate that full year 2025 underlying operating profit will be in line with market expectations. In the medium to longer term, the group is well positioned in infrastructure and built environment end markets with attractive structural growth drivers. This strong position, together with our M&A strategy and the benefits of our agile operating model, provide confidence that the group will continue to make good progress in line with our strategic and financial framework.
To wrap up, I'm pleased we've seen a positive first half financial performance and we're making good strategic progress, including in terms of the M&A pipeline with multiple discussions ongoing. In addition to that, we've announced a 100 million share buyback, providing additional return to shareholders within our capital allocation framework, reflecting the group's strong balance sheet. With that, let us move on to Q&A.
Hi, Rob Chanti from Berenberg. Thanks for the presentation. Just three questions for me. Obviously, the background here is great, great first half and delivery, etc. On the medium term M&A target, I said $50 million- $70 million. You've clearly had a lot of time to think about whether that's the right level, and seemingly it is. How is that number, given your strategic end markets, not $100, $150, $200 million? There's not enough stuff to buy? Secondly, operating framework. It's pretty clear there's some great drivers in the business. There's also some stuff that doesn't fit. It's cyclical. It's lower margin. You can get margins up, as we've seen in the U.K. in the first half. Should we expect a period of more portfolio churn as you rotate out of those businesses?
Thirdly, again, going back to your strategic drivers, it's on page nine, you've got 7% of the business in semiconductors, data centers, another 25% T&D, water. I've had Balfour Beatty this morning actually talking about the strongest transmission distribution pipeline ever in the U.K. There's a huge water investment framework that all the firms are talking about. If you look at U.K. and India, it's a very small part of the portfolio. Why is the kind of the strategy not being a bit more proactive, trying to benefit from the U.K. T&D infrastructure opportunities, given the scale of what can be done? Thanks.
Right. All good questions. I'll probably take all three of them. Please ask some financial questions as well, because then Mark will have to. On the M&A, I think we're focusing on sort of bolt-on acquisitions in where we currently are, or maybe some adjacencies in some of the more attractive markets. We think that this is the right level given what we've proven we can do in terms of integration. It's on average $50 million- $70 million. I'm not saying that if the activity is a little bit bigger, it might be a little bit more at some stage. We feel comfortable with this at this stage for our business. If you look at the operating framework and the more cyclical businesses, clearly in the U.K., we have a higher exposure to that. We look at those businesses. Do they fit within our operating company framework?
We've got some businesses like our infrastructure business in the U.K. where we've got a very strong market share and basically a strong business, but is operating in a very tough environment. We expect that will come back. That's a good business. As we've said and we've proven, we'll continually look at our portfolio. If we feel that a business structurally doesn't fit with us, then we'll take the consequence of that. The last is a really good and interesting question. We clearly have looked at, we're very strong in T&D in the U.S. We see that as, and we've seen in the first half, strong growth there. We recognize there is a strong opportunity in the U.K. as well, but we don't have a business that operates in that market basically at the moment. You also have to, so you could look at, okay, was an acquisition there?
You could look at it. Would that be interesting? Then you look at what are the sort of the, what I would call the profit pools in the different parts. In the U.K., the market is more concentrated in terms of the electricity companies, the Tier 1 contractors that operate in there. If you compare that to the U.S., it's much more fragmented. There's a much bigger opportunity for us to create value for our customers. Therefore, the margins and the profit pools are more attractive in the U.S. We recognize this is also a good market in the U.K. At this stage, we don't have a significant product offering.
That's Harry Phillips of Peel Hunt. Sorry, three as well from me. Just looking at the guidance, you say in the statement, obviously in line of expectations and broadly even in the guidance slide you've got in the pack. I'm just curious as to if you think about U.S. should grow second half gathering momentum, galvanizing services should get better in the second half. Therefore, to keep it broadly even, it means U.K. has got to be a bit more subdued, which the commentary doesn't totally point to that. I'm just curious as to, you know, is this just Hill & Smith conservatism or is there something we should be aware of? The second is just looking at the U.K. galvanizing services mix. I mean, obviously volumes up 12%, but revenue up 4%. Clearly a bit of a mix there. Can you sustain that level of growth?
I mean, is that, you know, you've gone and got market share back clearly. Have you used price to do that? Therefore, there's a sort of that growth tails off and flattens out. Just a little thought about that. Maybe one for Mark finally, the buyback schedule for modeling purposes. I appreciate the real world is different. Is it best to assume an even flow over the 18 months as a model standpoint, please?
Do you want to do the guidance or?
Yeah.
I'm happy to pick up on all three of those. I think you're right in terms of the perception of the market. You know, the U.S. is strong in most areas. We've called out a couple of parts of the business that are a little bit softer. We've talked about off-grid solar. We've talked about the roads business in the statements, but overall good. I think galvanizing has had a strong first half. It's worth noting that in the U.K., comps were a little bit easier in the first half than the second half. That 12% volume growth that we saw in the first half in the U.K., I don't think we will repeat that in the second half because the comps are a little bit tighter there. We do see good momentum in the U.S. businesses. That U.K.
roads market is difficult. We said here, we don't expect to see any recovery or rebound in the second half. I think overall it feels about right that guidance is where it is right now. You also have to recognize there's an FX headwind in the second half compared to last year, certainly if rates stay around the rate that they are today. I think when you put all those factors together, overall guidance is about right where it needs to be. I sort of answered the second question as part of that, really, whether or not U.K. galvanizing is sustainable. Yeah, they've done well. They've taken market share. A lot of that is about internal management action. We had a new management team in that business roughly 18 months ago, and they've done well.
They've focused on customer service, focused on productivity in the business, all those kind of measures. As I say, they were on relatively easier comps for the first half, but I think they will continue to do well in the second half. I don't think they have necessarily chased high volume, low price work. Galvanizing tends to ebb and flow a little bit in terms of product mix over time, and I think we've seen a bit of that in the first half of the year. Certainly, our strategy is not to sort of go for vanity on volumes and not the profitability thereon. In terms of the buyback, yes, for modeling purposes, roughly we assume we'll be broadly even over that 18-month period. That's maybe GBP25 million or so in this year and the rest mostly in next year and a little bit into the early part of 2027.
For modeling, I would say yes, an even flow is the way to do it.
Hi, thanks, David Farrell from Jefferies, a few questions from me. Expanding a little bit from Rob's question, but thinking kind of slightly more broader within Europe. It looked like revenue in Europe was up 44% year- on- year. We've obviously got various countries looking to spend quite a lot on infrastructure over the next five years. What are the opportunities to export products out of the UK and into that European market?
Okay.
You do one at a time.
You do one at a time. We were writing down, but that's fine. The interesting thing is that if we talk about growth in data centers in the UK, actually quite a significant part of that goes into Europe. We've got a really good position with some of the big guys in data centers in that security fencing. We are benefiting from that. I think if you think about acquisitions, we are clearly very much a U.S.-U.K. focused business. We see opportunities mainly in the U.S., but galvanizing in the UK potentially, and maybe if there's a good opportunity in T&D in the U.K., we wouldn't say no to it. I think in the first instance, those are the two markets that we focus on. We feel probably culturally moving into another territory will mean another acquisition then.
It has to go through a couple more hurdle rates, I think, than those in the U.S. or potentially in the U.K.
Okay, thanks. I was interested to read that the U.S. off-grid solar business, you talk about it being cautiously optimistic for the second half of the year. Can you just go into a bit more detail about kind of what's driving that? Clearly, you know, you're trying to expand the product base and the customer base, but is there anything firm in the order book that supports improvement?
I think we're pretty, in the second half, pretty prudent still. We are broadening the business in terms of customers and products, but the reality is that takes time. We're still pretty prudent in the second half. We are clearly doing this for the more longer term, but don't see a significant uptick in the second half.
Okay, and then just kind of final question, coming back to kind of M&A and thinking about the kind of the refreshed company model and market exposure. Is there any reason why that might have impacted the cadence of M&A over the last kind of 12 months? They've got different hurdles to go through now than they would have done 12 months ago?
No, I don't think so, because if you look at the ones we did last year, they fit perfectly in that model because they're right in the hotspot in terms of the end markets, you know, T&D and water. I think the model helps us to prioritize. I think it's helpful, but you can sort of back, you know, use it for the ones that we did last year. I mean, these things, we're talking to family companies and all of that. We try to stay out of processes. It's not as predictable when it happens, but I think the key message here should be is, look, we are committed to this. We'll still want to do it. We'll feel comfortable we can do it, you know, with the buyback as well. Yeah.
Thanks.
Morning, thank you. It's Richard Paige from Deutsche Numis. Just a couple from me, please. Talking of these focus markets, could you just answer the question on what you've done to incentivize management teams and how you drive that? Are you actively pushing away business in the lower areas as well, or how we do that? Secondly, on the U.K. and India engineered solutions business, quite a lot of moving parts, quite difficult to model from a range of margin perspective. How should we think about that business in terms of no tailwind from the market, what the potential is given the margin accretion you've had in the first half and where you've got that to? Also, how we think about it from a market tailwind perspective as well, please.
I'll take the first one and maybe you'll have a start at the second one and we'll see where we get to. I think it's important to say that it will evolve over time in terms of the priority end markets, right? This is not something that happens directly. The way I've talked about it, that we've used it in our sort of annual strategy update, we looked at businesses, what is your current, let's say, footprint and what's your ambition for, we do sort of five years out, what's your ambition in five years out? That's how we use it to really look at, okay, what can you do? Some of the businesses, they have less opportunity in that, and that's also accepted, right?
We need to look at it business for business, but yeah, we don't specifically incentivize, but we try to see in the business what can you do to move more there. Because they're higher growth markets, we then try to push them for higher plans for the next five years. That's how it works. We'll use that update. If we go next year to our budget, then we'll, of course, have a bit of a look at what was your ambition and how much can you do? That's really where the incentive sort of kicks in on an annual basis.
I think on U.K. and India margins, you've seen growth in the first half, we're up to just under 10%. I think in the longer term, that division can get into double figures without a significant uptick in U.K. activity, particularly in the roads markets.
For example, we've called out India having a bit of a softer first half. If that performs in the second half the way we expect, that will push the margin a little bit as well. I think your low double figures, your 10%-11%, that business is capable of doing that. If it's then going to push more towards the group targets and into the mid-teens, it will need some recovery in some of those U.K. markets. The potential is there. You have to remember, for example, our U.K. roads business, certainly elements of that business are higher margin operations. You take the temporary barrier rentals, for example. That's a higher margin part of the business. There are very few road schemes around at the moment.
If more schemes come back on the road, and we still have a good share of what's there, what's there right now is limited, but we still have a good position in that market. If and when those schemes come back on the road, we expect to benefit from that, and that will drive margin as well. It's low double figures without anything. It's heading towards the mid-teens if we can get some tailwinds in the UK.
Just to add to that, if we look at the data center growth, that is higher margin as well. In the security fencing part, if we manage to get a bigger share within that business of the data center, then that in itself will improve margins as well. It's a couple of things in there that can help to get it closer to the group target.
Thank you. Sorry, just quick follow-up on U.K. roads. Obviously, you talked about RISC3 coming in in the first half of 2026. Realistically, for you guys, how long does that take then to filter through to actually an upturn in activity levels?
It won't be immediate. What tends to happen with those road investment strategies is there's an outline of what they expect to do over that period of time. In terms of individual schemes, there is a period where they need to go through design, they need to go through programming, they need to go through sourcing. I certainly wouldn't expect anything significant in the first half of 2026 in terms of our activity. We might start to see that come in towards the second half of 2026, but I think the largest share of that would likely be into the following year. It just takes time for those schemes to get out on the road.
No more questions? Yeah. Okay, I get the sign that we can wrap up now. Thank you for being here. If you've got any further questions, we'll stay around here. Thank you for joining us today. That's it.
Thank you.