Galliford Try Holdings (LSE:GFRD) — Full Year Results

0:00 Good morning, and welcome to the GALLIFORD TRY HOLDINGS PLC Investor Presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged and they can be submitted at any time using the Q and A tab situated on the right hand corner of your screen. Simply type in your questions and press send. The company may not be in a position to answer every question received during the meeting itself. However, the company can review your questions submitted today and publish responses, which is appropriate to do so. Before we begin, I would like to submit the following poll. And I would now like

0:30 to hand you over to CEO, Bill Hocking. Good morning to you. Good morning. Thanks, Alex. Good morning, everybody. I'm Bill Hocking, chief exec, and I've got Chris Hanson with me, CFO, who you can see on the other side of the screen there. So we've had a really good year, everyone. All of our metrics are heading in the right direction, and Chris will take you through those numbers in a bit. I was just planning to take you through a few of the headlines of sort of how we run the company and what we do, I suppose, for those of you who don't know us in in much detail, and then we'll go into the strategy a bit later and after Chris has done his numbers. So here's the first slide, which I I I think it's important that people understand. On the left hand side, there is is the philosophy of how we run our business. And it's quite simple, really, and we'd like to keep things simple, by the way. So we start with good people, 4,300 excellent people in GALLIFORD TRY, and we employ those people for attitude and values and and doing the right thing, fitting into our culture really.

1:28 And then, obviously, after that comes competency and experience and so on. But we really concentrate on bringing the right people into the business in the first place. Then on the left hand side there, we put a a strong culture of, discipline and risk awareness. We've got what we call our business management system, which is how you do stuff around here, I suppose. And and we and and that is, easy to access on any any device. It's intuitive to use. It helps you do your job, and therefore, people use the system. And from that comes consistency and predictability and so on. So that's really important to us as is a very strong focus on risk awareness and risk management. So that strong focus on risk means that everything we do at the top end there in our high quality order book is things that we can do in the right parts of The UK with the right people, the right supply chain, the right clients, terms and conditions, and so on. And that means that we we can perform consistently and predictably in the right hand side on all of our projects.

2:26 And we have a a scattergram of all of our hundreds of projects across The UK. The vast majority operate within a very narrow band of expectation. There's a few doing a bit better. There's a few doing a bit worse. They tend to contract each other anyway, and they're not material in the first place. So that attitude leads to a really strong consistent performance, which strengthens our already strong balance sheet and so the wheel turns. And Chris will come back to the balance sheet in a minute. On the right hand side, of course, once we're in contract, we have a very robust commercial control reporting system. And an important part of that is what we call peer reviews and or health checks, and and that's where some members of one part of the business can visit other parts of the business and have a look at at the projects or the business and and and tell them what they see. So it's like an internal arm on the shoulder. This is of how we see things, and we find that really, really important and and helpful, I suppose. So once we're in contract, we all have a very robust system of risk management through the tenancy of those projects.

3:28 This is what we do. I won't go through all of these, everybody, but on the top left hand side, environment is is water. So that's water and wastewater sits within the environment business, which, as you know, is a very topical subject at the moment, obviously, and a big part of our business. Defense is very buoyant at the moment. Infrastructure is very buoyant at the moment. Secure and custodial, you know, the building of prisons is very topical again at the moment as is affordable homes. So the simple message on all of this, everyone, is that there's an enormous amount of work out there. And everywhere I go, out and around the country, I just see massive opportunity for construction companies, both in replacing existing assets, renewing existing assets, strengthening them, hardening facilities against climate change and things like that.

4:18 There's an enormous amount of work, and the backlog of maintenance and the sort of state of our economy, I suppose, was not very impressive, means that for construction companies like us, it's a it's a good time. And I have to say, and I probably said a few times in this in this presentation that I've never seen a construction outlook like this in my career, and not just for the for the next sort of five years, for the next twenty five years or and the rest, actually. So moving on then, this is how we structure the business or the component parts of the business more accurately. We operate as GALLIFORD TRY in England, Wales, excuse me, and Morrison Construction in Scotland. And we keep the Morrison brand in Scotland. It's a very strong brand in Scotland. We've got a lot of heritage and so on, which is why we maintain that brand up there. And in the building sector, you can see I won't go through all of these things, everyone, but you can see all the things we do down the down the left hand side. As I said, defense and custodian in particular are really buoyant at the moment. Affordable homes, enormous pent up demand, a little less action going on there at the moment. You can come back to that a bit later.

5:21 Then we have some special services businesses to the right of building there, and you can see what they are. Digital infrastructure is just that. We used to call it telecoms, but actually it's moved on to private five g networks, EV charging, secure communications, things like that. FM's a good business, a really, really good profitable business. And then we've got a business that does fire remediation, facade remediations, and so on. And as a security business, it's all about pretty high-tech security detection around critical national infrastructure. That's water treatment works, energy plants, you know, military establishments, and so And then in infrastructure, what it says in the turn really, I think the important thing in infrastructure is that we're moving more into energy. The energy market is is is evolving now. So there's some of that going on. And in roads, we've sort of split the business over time to be about half concentrated on national highways and half on local authorities, homes, England, energy companies, and so on. So then it just diversifies that that market a bit for us.

6:30 And then the right hand side, we've got water. As I said, we call environments that water and wastewater. And within that, asset creation is about the big design and build functions within all of our our water clients. And beneath that, the more specialist strings to our bow. So we've got 208 now designers in the business. We've got some specialist businesses in capital asset maintenance, which you see below, and and and water tech, which we call our pretty high-tech manufacturing businesses in the water sector, making control panels, motor control centers, chemical dosing systems, screens, penstocks, things like that. So that's a a broad overview of of what we do and how we structure it. And a quick snapshot of our clients, as you'd expect, we work for every single of the major water companies in The UK. We work for all of the big public sector authorities, departments. You see in the top right hand side there, and lots of local authorities and some private clients as well, of course.

7:32 So we've got a very simple strategy to grow the business. We set off in 2021, £1,100,000,000 business, making 2% operating margin. This year, as Chris will take you through in a minute, we hit £1,900,000,000, and we hit our 3% margin target one year ahead of program, which was good because our original plan is for full year '26 to hit that target. And we've got an aspiration and an intent, of course, to be bigger than £2,200,000,000 and making 4% operating margins by 2030. And there's a few, if I press you, the the the strategy to to just for for clarity. To achieve that, we continue to grow the revenue and margin of three big core businesses. So that's building at about £1,000,000,000 a year for round figures, highways at about £3,350,000,000 a year, and the big design and build pot of water at about £450,000,000 a year or so. And we continue to grow those big businesses. They're the sort of core of the business that could do the mass, and we grow those businesses slightly in advance of inflation and growing to about three and a half percent operating margins by 2030.

8:38 Then we grow those specials. I took you through a few of those a minute ago. Those specials higher margin businesses in adjacent markets, and it's important to understand they are all in adjacent markets. They're all in in markets that are associated with markets we already know. So there's nothing new or shiny out there. It's all stuff we know and how you know how to do every day. So we grow those specialist businesses. We've been incubating these business now for some years. They're all growing in scale. They're all profitable. Some nicely profitable, and they and we expect these all to be sort of mid to high single digit margins, and we grow the revenues through to twenty thirty. So as we grow those businesses, the mix changes, you know, you're making the highest and also mid single digit margins, and the mix change in the business as we go forward, and that drives the three and a half up to 4% over the piece.

9:24 Alongside that, we we reentered the affordable homes markets. And this is a market that we were excluded from after we'd sold the house building businesses to history back in 2020. There was a restrictive covenant on us there for obvious reasons, but we're back in that market now. We've we've reestablished the team. We've reestablished relationships with our clients. You've welcomed us back with open arms, and we've we've established a really good position on frameworks to able to be able to access the affordable homes market. For various well publicized reasons, you know, the funding, the the funding mechanisms, the building fire safety review, planning issues, nutrient utility issues, etcetera, etcetera. The affordable homes market, which you all would have seen in the press, I'm sure, is probably a year behind where we thought it would be. Now it's not a big issue to us at the moment. We were coming from a standing start to get to about $202,150,000,000 pounds per annum by 2030.

10:19 So it's not affecting our performance, but it is probably at least a year behind where we thought to be on this or the market would be on this. But we're well placed to to get stuck into this market once it once it sort of gets going again. And and we we confident that that will also augment the the you know, it's a higher than than the three and a half percent margin in that business. So it helps the mix as well as we go to 2030. And then finally, we've leveraged our geographical and client footprint across The UK. So we operate from Inverness to Plymouth and all points in between. We've got 28 offices or locations around the around the country, And we've got great, obviously, geographical presence there, but also client presence in every major framework you could shake a stick at, and I'll show you a few of those in a minute. So we've got a great opportunity to leverage that presence, geographic and client presence across The UK and put more of our specialist businesses into play there, and that's the the simple sort of overview of that. And when we do all of those four together, we continue to grow the share of returns, and Chris will share some nice graphs in a minute.

11:27 So that's the strategy in a nutshell. Obviously, on route to do that, there's a few things we need to do. And the first thing is, like any company, is to make sure we have the right people in the business to continue to grow the business. So we've got a very simple strategy. On the left is retain our existing employees, make sure that we have strong succession planning, strong development, career development, and things like that to retain those existing good people. And we've got a a very good retention rate there. Our our churn rate is 10.6 10.7%, which is about half of the industry average. So that's good. Then on the right hand side is how do we bring more people into the business, and we have a very strong early careers program. We bring 150 young people into the year every into the company every year, graduates, degree apprentices, and apprentices.

12:14 And then we've got a strong sort of support mechanism to make sure we we we bring those people on. So a lot of work to get a lot of work on how we concentrate on having the right people, enough people in the business to sustain our growth. A few of the stats, I've just mentioned a few of them, about 4,300 people. Very pleased to get 87% employee advocacy score, same as last year, actually. So that means 87% of our of our people are strong advocates of the business. And we are very pleased as well to be voted number one for both graduates and in the job class interview earlier this year. We promote you can see they're going on 10% of our of our people every year, 400 promotions in the last year. So that's all about the career development side of things as well.

13:02 So a strong focus on people. The slide isn't moving on, Alex. Could you move?

13:16 Ladies and gentlemen, just give me a second. I'm just going to refresh your browser bill. Ladies and gentlemen, please do give me a second as we try to reconnect Bill into the room.

13:38 I'm happy to keep going, Alex. I'll keep going. Yeah. Feel free, Chris. Yeah. I'll just Hi. Everybody, it's a little technical issue there with Bill. We'll get him back. I think I'm just putting out the sort of ES and G credentials we have here. They're really important to us, We do it because we believe in it, and, actually, our clients believe in it as well. So we're we're very focused on it. Just a key couple of key numbers really out of here is sort the accident frequency rate at naught point naught three. So health and safety is the most important thing that we do. Sending our people home safely at the end of each day is really important there. Bill's talked about the employee advocacy score and the number one apprentices. And on the right hand side, we sort of talk about the twenty six days taken to pay our suppliers. So that's one of things that I I'm really focused on. Having the right supply chain is a fundamental importance to us and having a healthy and aligned supply chain is is utmost importance. So paying them on twenty six days is really important. If I move on then to my section and my numbers,

14:41 let's take you through the key numbers. So 1,900,000,000 in revenue. As I say, Bill said earlier, that's up 6%. That's on top of a 27% revenue increase in the year before. So that's a third in two years. Really strong performance. And the CAGR since 2021 when we separated the business is about 14% on revenue. So really strong continued revenue growth. We have a good pipeline in front of us that I'll come I'll come to in a minute. So really strong progress in there. That flows through to margins. We set ourselves a target target for 2026 back in '21 of 3% margin. We're really pleased to have achieved that margin a year early, up 42 basis points in the year. So strong continued margin progression, and that delivers £45,000,000 worth of PBT, up nearly 29% with a CAGR over the last same five years of nearly 50%.

15:36 So really strong profits up £10,000,000, which leads to a dividend of 19 p per share and a and a final dividend of 13.5 p per share. That dividend's up nearly 23%. Average cash and cash is cash and profit are the two most important metrics to us. That's what broadly the whole team is incentivized on and the ESG measures I talked to just a second ago about. Average cash up strongly to a £179,000,000 up 15%. So we're really happy with that, and we continue to turn our growing profits into cash at a consistent rate. So that's, you it's really, really good. In terms of forward looking a little bit, and this is perhaps one of the a couple of stats here we're sort of really pleased about, and Bill talked about the long term markets in front of us as strong as we've seen. Order book up nearly 8% to £4,100,000,000.

16:26 That's a strong increase there, reflecting AMP pay coming through and slightly stronger building work. And what we're really pleased about, I think, most of all is that we've got 92% of our work secured for the current financial year and seventy five percent secured for the the following financial year, so FY 2027. And that 75% is up five percentage points now on where we were a year ago. So visibility is increasing, and we could see further out. And we've probably got somewhere in the range of 50% of 2028 secured as well. So very strong order book, as Bill said, very strong market, and, you know, we've got pretty good visibility or excellent visibility, let's be honest, of revenues in the coming years. So we feel confident about the outlook, and that leads to a few other things across the board that I'll come to later. Moving on then into a little bit of the detail here.

17:19 You can see the progress we've got across each of the divisions. And so if you look down the right hand column there, you can see both building infrastructure, both our big core divisions, both up strongly, 2.8% in building and 11.3% in infrastructure. Infrastructure, as Bill said, had a really good time in highways, just strong robust performance there, and then the runoff of AMP seven was particularly strong in the water section. Moving into operating profit, you can see equally have flowed in all the divisions as well. So building up 17%, infrastructure up 36%, and in margins, strong margin progression, and you can see 50 basis points in infrastructure and 36 in building.

18:04 Overheads central overheads rose in line with inflation and revenue, and that's broadly inflationary costs, etcetera. Our investments business is a little bit lumpy, Bill. We'll talk to you, I think, a little bit more about it later, but it's you know, depends on when particular projects come to market, and and we haven't had any this year. But through some self help and self management, you can see we reduced the losses there from 1,000,000 to 9.4. So pretty tidy progress across the board from all of our divisions. So, you know, diversified order books, all driving forwards and giving wide ranging performance gains. If I take you through the building division, there's a couple of new slides we've added here so you can see just to give you a bit more granularity. I've talked through the financial numbers, but order book, they're very strong in building, up 7%, with 92% of the work secured for the current financial year. And you can see a nice spread, on in the pie chart on the right hand side across the the different sectors that we work in, and all of those order books are very nice and very strong. And perhaps, as Bill said, defense and custodial being the hottest two segments in there at the moment. All those segments, though, we choose them. There are segments that we, you know, you won't see there. We choose segments which are noncyclical, which have strong order books and strong demand.

19:18 And frankly, we need to carry on. We need to keep building schools. We need to keep building roads. For obvious reasons, defense is is pretty hot at the moment. So strong strong progress there in the building division and looking good for the future.

19:31 If I move on to infrastructure, you can then see how that's separated on the right side of the order book, 1,700,000,000, with 95% of the work there secured. And at the bottom, you can see progress on two of our biggest road pro projects, a 47 over in the East of the country in Norfolk and the Carlisle Southern Link Road, which is perhaps our biggest project up in in the Lake District, about a £140,000,000 road linkage there. Strong progress again on the order book there, up 9.2% and looking good for the future. And AMP seven is transitioning to AMP eight, sort of predominantly during this year. This will flatten revenues. The amps typically always do have sort of a modulation down and then back up again. It's slightly flatter this year, so we're expecting flat revenue.

20:17 But we're looking forward to AMPate, as you honest answer. AMPate, as you you may well know, has doubled from just over 50,000,000 to just over a 100,000,000, so that's broadly doubled. So we're pleased to get into AMPate and looking forward to it. We've got some good early work coming through there, the design work, which will get on the ground in the coming months. So we're up for that, and and and we believe we'll you know, the margins and the structure of AMPate is more attractive to us than AMP7. So we are keen to get into AMP8, and we're making good progress there. But overall, a really, really strong performance from infrastructure, strong order books, full for the next couple of years, and we go forward with confidence. As Bill said earlier, the balance sheet is really, really important. It's important to, it's important to our customers who know we'll be around to finish our jobs. It's important to our suppliers who know we'll be around to to pay them. It's in whatever more important to our colleagues actually who are more savvy about who they want to work for and, you know, having a safe company is definitely more attractive, and and clearly, it's attractive to to our external stakeholders as well. And what we have, I think, is actually a very simple and very strong balance sheet. If you look down at this, you know, intangible assets from the previous acquisitions, these are PPP assets. These are assets that we have, which are very liquid in nature.

21:34 You know, there's a strong marketplace for those. They generate about $3.53600000 pounds worth of interest a year. So strong cashback profits returning about 9%. So a really good strong asset. We take that 3.5 of interest a year, and we return that as as part part of of our our dividend cover. Our dividend cover is 1.8 times, which is almost certainly the strongest in our sector. So good cash generation allows us to do that, and the PPP assets are a big support there. In terms of assets, if you take the noncurrent assets and the IFRS and net them together because they sort of do, you've got about 15,000,000 worth of assets, very small, mostly servers and and and laptops and that kind of thing. We have no inventory. We have no pension liabilities. So a very clean balance sheet. Working capital and net cash, broadly balanced, and they go around very quickly.

22:19 We get paid by our customers in just under a month. And as we say, we play our suppliers in twenty six days, so a very clean, very tidy balance sheet that moves moves around regularly, and we're in good control of. So simple to understand. At the bottom, you can see both the net assets moving forward as we turn those profits into incremental net assets, and you can see our average monthly cash moving up strongly from a 155 to a 179. So all in all, a pretty simple to understand and clean balance sheet. And as Bill says, having that balance sheet allows us to be selective about the jobs that we want to do. We don't do stuff that we don't want to do. We don't chase revenue. We do the jobs that we know will grow our profits and grow our margins and make us a stronger company again in the future. And in doing so, I guess we come to capital allocation. As you can see, we are generating cash.

23:09 Spot cash at year end was £237,000,000. That was up 10,000,000 from 227,000,000. So we are generating real cash and included paying about £25,000,000 out in capital allocation last year through the standard dividend and the share buyback. And if you look over the last five years, by the time we've done the share buyback we have announced last week and the standard dividends, we will have returned nearly a £108,000,000,000 over the last five years, broadly equivalent to sort of 25% of our current market capitalization. So strong historic returns, and, you know, we have a belief in the future that we will continue to generate cash. It's what we said, strong market, strong model, and we just need to stick to that model, and we'll be fine. And so we have a clear capital allocation model. We'll invest organically first. We've opened two plants in the last twelve, eighteen months in our water sector and our specialist businesses that Bill will talk you through shortly and mentioned earlier.

24:06 You know, those those organic investments will return strong IRRs and drive us further forward. We've also done four acquisitions, so four inorganic acquisitions in the last four years. We are aiming to be a little bit more front footed on that going forward so we have clear strategies, clear markets we want to play in, and we have clear financial hurdles. And if those acquisitions come to market on our pipeline and they meet the hurdles, then then we would look to do that. We're not gonna be serial aggregators. We would think one or two bolt on deals a year is the only starter, and we have the free cash flow to fund those in the future. So that's the sort of reinvestment. I talked a little bit earlier about the dividend. We have this progressive dividend that will grow our profits at 1.8 times cover, strongest in the sector.

24:51 You know, we feel that's that's a good place to be. And finally, where we have excess cash, we will return it. And, you know, we just announced our third share buyback, as you can see, totaling 35,000,000, and we did a special divvy a couple of years ago of 12,500,000. So incremental excess returns totaling some nearly £50,000,000 over the last three years. Looking forward or looking backwards and looking forwards, then you can see the charts on the for all of our key metrics there, revenue, profit, EPS, order book, etcetera, they're all moving forward. Ten and a half years of progression on all the key metrics, so we're really proud of that. Five full years of strong revenue growth turning to profit, turning to cash, and with a strong forward looking order book, we feel really good. If you look at the black bars just for a second, you focus on those on the black bars on the charts. You can see on the left hand two charts, 2,200,000 billion, sorry, revenue and four percentage points of, divisional adjusted operating margin. If you translate those through to PBT and EPS and DPS, you can see that we still have a good road in front of us, to deliver those numbers. We've delivered 352% TSR.

26:00 We think there is a lot of TSR in front of us, a lot of opportunity. You know, with a strong order book and a strong model, we don't have to do anything complicated to get there. I think that's a really key point. We just gotta keep doing what we're doing. The market's incredibly strong. We've got a great team and a proven model, so we feel good about it. By '20 sorry. For 2030, effectively, we expect to double DPS from 2024. So still a lot of progress to make in front of us, and we go forward with increased confidence in the future, I guess, would be where I'd summarize. Bill, I think that's back to you.

26:33 Thanks, Chris. Sorry. I disappeared early on, everyone. I don't know what happened there. So we'll move on. So so the next question, of course, everyone asks as well, you know, taking from from Chris' slides as well, how do you get from three to 4%? And I've I mentioned sort of broadly in the early days early part of the slide, the sort of pace of how we do that. But let's go through that that margin growth in a bit more detail. There's four steps, essentially, that that we see contributing to that. One is about volume and growth leverage, which I I spoke broadly about. The second one is about a better contracting environment, and I'll talk to that in a bit more detail. The third one is about all the operational improvements in digital and tech and off-site and so on that we're seeing, which adds all adds grist to the mill. And the fourth one is the higher margin special services work.

27:22 So if we run through those in a bit more detail, there's a few slides on each. So when it comes to drives of revenue growth, obviously, as I said right at the start, there's an enormous amount of infrastructure out there that's old. It's a time expired. It needs a lot of TLC to keep it up to keep it doing what it's supposed to be doing, and a lot of it needs to be replaced. There's been, I think, systematic underinvestment in our in our social and our in our economic infrastructure for a considerable period of time, and there's so those chickens are coming home to roost. So the the sheer quantum of work in all of our markets out there is astounding. And I and I've said quite a few times over the last few weeks in these road shows that I've never seen a market like this in my career.

28:09 So that's the first the first big driver. The second one is climate change, and people sort of roll their eyes a bit sometimes when we talk about this. But I can tell you that climate change when it comes to big infrastructure is very real, and the impact on that infrastructure is very real. So what we see now are more very intense storms, very locally intense storms, and the impact of those storms is quite is is quite severe in some cases. That's what causes the overwhelming of sewage treatment works, and they and the and the works can't handle these massive flows, and you get spillages into ribbon and so on. We see the same on roads with the drain just can't handle the the flow, and it all backs up and the roads flood, and that's dangerous, obviously. And we see areas that are more prone to flooding, so we're having to protect, I suppose, installations against the possibility of flood.

28:58 So climate change, when it comes to infrastructure, is very real indeed. And then, of course, there's a population growth and the change in demographics and so on, which which creates its own growth more in the socially part of in in the structure, of course. To address that, we work mostly in frameworks. I'll come on to that in a bit more detail in a minute. And that's because frameworks give us a long line of sight into the future and allow us to get our ducks in a row well in advance. And then we're looking at expansion to adjacent markets we just spoke about earlier on. If you have a quick snapshot of what I mean by the market that's out there, these are just a few of the numbers in some of our sectors. So environment, AMP seven was £59,000,000,000.

29:44 AMP eight is 104,000,000,000 at the moment, but there are quite a few water companies looking for a bit more. We'll see what happens there. And I can tell you that already AMP nine is looking bigger than AMP eight. So it's gone from 59 to a 104, and AMP nine, which is twenty thirty to twenty forty five, is looking like it'll be even bigger. And it's fascinating that we've just sort of ink still dry on the AMP eight frameworks, which came to force in May March this year. Sorry. And we've already got four big water companies talking to us about amps nine, ten, 11. So looking to get their supply chain into place for 2030 to 2045. I've never seen that before in my career, people looking that far into the future.

30:28 And looking to secure, as I say, the a team to be with them on that on that journey. So water and wastewater is very, very, very, very strong and will be for a considerable period of time. And, of course, that is that is funded by our bills. That's this isn't government expenditure. This is regulated expenditure funded by by our water and wastewater bills. Highways, risk three is has been published at about 24,000,000,000. There's still some detail to come as to exactly how that's gonna be spent. But the the focus of risk three is more on maintenance and operations. It's more about pinch points and junction improvements than it is about big roads, and that and that plays to our strengths. As I said at the start, we've sort of diversified our highways portfolio to be about 50% national highways and 50% others, local authorities, homes, England, private companies, energy, things like that.

31:20 Education is perennial sector for us. It's enormous sector. You know, we we build lots of schools every year. We've been on the states DFE framework for for many, many years, and we see that continuing into the future. The school's estate is in a there's a nice new school. Of course, they are, but but there's lots of schools that are beyond the sell by date and need replacing. And that program will carry on for donkey's years to come. Defense, you know, obvious reasons, it's it's a lot of money being spent in in defense at the moment, and we do a lot of work for for the MOD. We're on the defense estates optimization program. A lot of that work is is sort of single limit accommodation for people and fairly standard infrastructure, hangers and sheds and things like that. But there's an awful lot of money being spent in defense at the moment. And, we can see a long way into the future on on that deal program.

32:15 Prisons, again, well publicized. I think there's something like 20,000 a shortfall of 20,000 prisoner places over the next decade. And so the MOJ has to has to address that, and they're doing that in three ways, really. The one is the big new super prisons. I think there's five of them. We're not involved in those, and we have no intention to be involved in those. The the second one is the new house box. So you can see that photograph there, actually. That's a new house box that that we built at one of the prisons. So we specialize in that new house blocks adjacent to existing prisons or so we sort of build them up just outside the fence. And once it's all ready to permission to be then just extend the security fence and and and and take the old one out, and so the whole thing remains secure. So we do that, and we also do lots of refurbs of existing prisons for fire safety and and and and general upgrades and things like that. And that is a very buoyant market at the moment.

33:09 And then finally, homes, I mentioned that earlier on. £39,000,000,000 was was announced last year, and and and and I think some of the detail of how that's gonna flow through is yet to really arrive. But we do see affordable homes. My sense is that affordable homes will start to move in the next six months or so as the roadblocks get get get pushed out of the way, and and and be in a really good place to take advantage of that when the time comes.

33:40 Excuse me. So when we look at volume and growth, just carrying on that, Chris has mentioned some of these already. But just to just for clarity, about 90% of our work is done in the public regulated sector, and and about 10% of Brexit wins a bit, of course, but about 10% in the private sector. The important thing for me, which Chris mentioned earlier on, is that 7550% for '28 already visible. And I think if you go back a couple of years, the work is secured for the following year would have been in the order of 50%. And that just gives you an idea of this this huge backlog of work coming down the line that we have the visibility that we have now for for sort of two years out. I've never seen before in my career. And there's a there's a question here that says, does having over 90% of the order book in public regulated sectors present a risk if the government tightens their budget?

34:30 We don't think so, and I don't wanna sound blase, but the £725,000,000,000 that was announced earlier this year in the ten year infrastructure plan is is capital expenditure, and it's ring fenced. So it doesn't fall into the the government's sort of day to day expenditure like welfare does and pensions and things like that. This is ring fence CapEx. So I don't wanna sound blase, but I don't lose any sleep about the fact that this money's got going to be spent and it has to be spent.

35:02 Let's move on there. So frameworks. So this is about a better contracting environment and and the fact that clients are being far more sensible about how they procure, and all the tier one listed contractors are being far more and and private, let's be fair, are being far more sensitive about the about the risks that accept or not. So what this just shows is that we've got frameworks in all of our sectors that give us visibility way out to 2030 and beyond. The the darker shade of the existing frameworks, the lighter shade is when the these frameworks are expected to be renewed. Sometimes they get extended. Sometimes they get renewed. And it's an ongoing process, but we're very confident that that, you know, we've got a very high success ratio in renewing these frameworks. So the frameworks are, as I said before, give us long term visibility. We know our clients. They know us. It's a very collaborative environment, and it's a sensible operating environment in terms of the risk profile and and and the terms and conditions.

36:03 Just just to make a point here that once you're in these frameworks, all of the work is is negotiated. So you get onto these frameworks on the right hand side here by by putting in they let on 80 typically, 80 or 70% quality and the rest commercial. And you can see their typical sort of scoring matrix on the right hand side. Once you're on these frameworks, all of the work is negotiated.

36:30 So you can see on the left hand side there, the split between negotiated target cost work, which is all in the infrastructure and water environment, and the two stage work, which is typically in the building, and the and the light gray is just straight up negotiated. So the point is here that 99% of everything we do is negotiated. It's not tended, so to speak. And the next slide just looks to to clarify this a bit more because I keep saying it, and and, you know, a lot of people still think that we tender hard tender things, we get awarded work on lowest cost. That is simply not the case. So the top bar there shows the olden days of contracting where we'd have very little or zero input into the design, a big stack of papers, the bid documents would land on your desk, and you'd have a pretty short period of time generally to to bid to decide what your price was.

37:25 And then there'd be award a contract award you'd be expected to start the following week, and it was all a bit hand to mouth and high risk. And you come down to where we are now, which is in the bottom bar, and this is how 99% of our work through frameworks is delivered. So the client always has an idea of some sort of the scope. You know, do you wanna build a school? Yes. We're gonna build up here. But we get involved in the scope to say, you know, what's the orientation of the school? Could you move it down the road a bit or up the slope a bit or whatever it might be? We get involved in the scope for the school or in this example or the scope of whatever it is we're building. Then we get paid to design it. We that's a that's a collaborative process where the client has his or her input into the design as well. We then price it in a transparent manner. That price includes risk and contingencies, inflation, and all those good things. And then at a point in time, we'll go into construction.

38:18 And as you saw in the previous slide, in the building arena, once you end up at the end of the price bar, then the the contract does become a fixed price, but it's arrived at through negotiation. In the infrastructure environment and environment businesses, it's it becomes a contract, and then you then execute the contract on the target cost cost reimbursable basis. So the the the the risk is dramatically different in this environment to what it was in in the past. And that is why I think that us and, to be fair, most of the big contractors are heading in the right direction as is shown on the next slide here. So when you come to operational improvements, you've got two things. I've talked about the first two, mature mature client relationships, mature client procurement methods on the left hand side with robust risk attitude from ourselves being very selective about what we do, what we don't do. Once you're in the frameworks, it's all worth it we can do all day every day. They still remain the mainstay of our operational improvements, our margin improvements.

39:19 But then on the right hand side here, you've got a whole lot of things which all add grist to the mill. You've got a huge amount of work going through sort of digital processes now. So everything we design now is designed digitally. It's designed in three d. You can put the goggles on and walk through the building or over the bridge or whatever it is that you that you're building, And you can build the thing half a dozen times in virtual reality with your supply chain and your clients to make sure that it's all regimental. And what that means is that we drop the ball less often on-site. So this so the Hi there, Bill. We have just lost you. Just gonna refresh his browser.

40:09 Ladies and gentlemen, please do give me a second as we reconnect with Bill. I'll carry on, Alex, until he gets here. So Thanks very much, Chris. Okay. So sorry about this, guys. I've got some technical issues. But yeah. So it drives the margin growth there. Bill's talked about the two on the left being the most important, the client procurement and the robust risk management. But I think you've heard that from us throughout the throughout the presentation today. And on the right hand side, I think you'll see we talk about digital tools at high margin adjacent markets. If I move on, really, then I think to perhaps the most interesting of the adjacent markets, it's really water. We've got a fabulously strong position in water, arguably leading across The UK. We work with all the 13 major water and sewage companies, so really strong position there. We've got AMP pay contracts with all of those moving through, and there's still some AMP sevens rolling off, as I said earlier, but we've got really strong one. I think if you look to that chart on the left hand side, the 55 of which, yeah, is a split between AMP seven and AMP eight, that number will come down slightly as the AMP sevens roll off.

41:19 There's still a couple to negotiate into AMP eight. But I think if you look to this a couple of years ago, the design and build in the red, that would have been most of of the pie chart in reality. We've picked up really is the capital maintenance and the water technologies businesses that came through the Lintot and NMCN acquisition back in 2021, and we've really we've really driven those businesses forward. And just to give you an example of, you know, what those businesses are, you can see at the bottom the the control panel from Lintop there. We build these huge control panels. Oh, Bill's back. Bill, was just talking about the control panel, mate, on the left. I can sort of talk about do you wanna pick up? Yeah. Thanks, Chris. Sorry about that, everyone. I don't know what's going on here. Right. I've done the majority of the slide, Bill. I was just talking about where here's the control panels and where we can take them.

42:08 Okay. So just to to finish where I was, if you haven't seen the video that we had in our presentation, it's on the Internet. It's on the it's on our website. And I think that video about our Guildford Crescent project sort of embodies everything I was saying about modern method of construction or site manufacturing and so on. So I've I've have you said it really, Chris? Sorry. But I'll I'll point you towards that if you haven't seen it. So Chris has started off on this side this slide. I'm sure you can you can read all the stats there. Yeah. The panel on the left hand side, bottom left is is a a panel that we we manufacture. So we write the code. We design these things. We manufacture them. We deliver them to site. We build the building that they're in there, obviously. And there's there's two of them, massive panels. I can tell you that on this particular sewage treatment works, the existing control panel is like something out of the movie Chernobyl.

43:02 It's it's fantastic. It's it's like stepping back in time into the fifties, but it's just symptomatic of the quality and the state of our infrastructure. And and jobs like this, where we put in pretty high-tech bits of kit into existing water and wastewater plants to upgrade them to make sure that they're fit for purpose is is enormous market across the whole of The UK. So we've got a very good position in water, and and the the the water market is a huge market we've discussed in the past. And the the fact that we can take far more of a higher margin business into play here is really important. So you can see in the top round there, we've got 20 frameworks now in water technologies. That's the sort of bits of kit you see there and lots of others. And then 14, capital maintenance frameworks.

43:51 So capital maintenance is something that we're growing as well. It's a higher margin business, and this is an adjunct to our existing water and wastewater business. So at the moment, we design, build, and commission water, wastewater treatment works, but we don't maintain them or look after them thereafter. And that's an obvious opening for us to to move into to do more of that. So we've we've established a really good footprint in those 14 maintenance frameworks where we can start to expand our presence through this AMP in capital maintenance. There's a question of which I might as take seem to be on water here, which is how is invest how should investors think about growth during the MCM to AMPH transition? So as as you saw earlier on, 59,000,000,000 versus a 104,000,000,000, so AMPH is broadly double the size. I can tell you that I won't be that GALLIFORD TRY won't be growing by doubling water because we need to make sure that we are very disciplined about about what we do. We don't bite off bone. We can chew. We're not gonna overtrade, and there are constraints through the supply chains, through the equipment manufacturers, and so on. So we need to be very sensible about how we grow. We will grow, and we'll grow quite significantly, but it won't be double, I can assure you.

45:00 The AMP eight send to AMP eight transition, I'd say, is looking fairly traditional now. We had a good strong end to AMP seven. But remember that AMP seven projects, if they let the day before the end of AMP seven, can run on for eighteen months in parallel with AMP eight. So there is a big crossover here, but we are seeing the typical sort of modulation between the amps of flattening off of the workload in the first year. And the upside to that, of course, is that yours down the line are are already looking extremely busy. So we move on. So going back to the high margin work then, what we've done here, and and it's the same as the framework slides in the in the in the rest of the business, is we've established a very strong foundation in in frameworks through the specialist businesses that can grow those specialist businesses. They can see their water and wastewater, FM, security, affordable homes. Actually, on the affordable home, very hopeful that we can announce another two frameworks imminently to add to that list. So what we established there, everyone, to support that growth through 2030 is a very strong foundation of opportunity through frameworks to grow those specialist businesses as I've described earlier on in the presentation.

46:15 And then finally, Chris has pretty much covered all of this, but, you know, we had a really good strong year. And and we end the year and move into next year with a a fantastic order book, fantastic bunch of people, great client base, and an outlook, as I said before, that I I haven't seen before. So we're feeling very, very confident about the future. There's one question there, which are sort of half addressed, I think, about people, which says how are you addressing skill shortages and retaining talent specialist areas like water and defense? Well, I hope I sort of answered that earlier on. We work very hard in retaining our existing good people through career development and and and opportunities to broaden their careers and grow, of course, and then bringing new people into the business. We're growing our design function. We've got 208 designers now. We intend to continue to grow that so we can do more work internally on the design front.

47:06 And we continue to be an attractive employer. And I'll I'll sort of results that we had this year, our results, our reputation, the outstanding industry continues to grow, and that means we can attract good people. And and and we're doing just that. We've attracted some really good senior people to the business just recently. Notwithstanding that, of course, we have very strong succession planning, and and we work very hard on on on promotions from within wherever possible. Okay. Well, that's it. Thank you very much. I don't see any other questions on my list here. So unless there's any other questions, we'll call it a day. Alex, can you see any? No. That's correct, Bill. You have addressed all those questions. And if I may, Bill, just ask you for a few closing comments to wrap up. Okay. Thanks, Alex. Well, firstly, thanks all for attending. I hope it was informative.

47:52 We're in a very strong position. We will continue our growth through 2030. We think we've got a sensible, achievable strategy, and the market, I've saying this a few times there, is there in spades to support. So thank you all very much. Have a good day. Bye bye. That's great, Bill. Chris, thank you very much indeed for updating investors today. Could I please ask investors not to close the session as you'll now be automatically redirected to provide your feedback in order that the board can better understand your views and expectations? This will only take a few moments to complete, and I'm sure will be greatly valued by the company. On behalf of the management team of GALLIFORD TRY HOLDINGS PLC, we would like to thank you for attending today's presentation, and good afternoon to you all. Thank you.