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

0:01 Good morning, ladies and gentlemen, and welcome to the GALLIFORD TRY HOLDINGS PLC full year results investor presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged. They can be submitted at any time via the q and a tab that's just situated on the right hand corner of your screen. Please just simply type in your questions and press send. The company may not be in a position to answer every question it receives during the meeting itself. However, the company can review all questions submitted today, and we'll publish those responses where it's appropriate to do so. And before we begin, as usual, we would just like

0:32 to submit the following poll. And if you could give that your kind attention, I'm sure the company would be most grateful. And I would now like to hand you over to the executive management team from GALLIFORD TRY HOLDINGS. Bill, good morning, sir. Morning. Thank you, Jake. Morning, everybody. Thank you for joining. I'm Bill Hocking, chief exec, and and I'm here with Chris Hansen, our new CFO. And you'll hear from Chris in a minute. So I'll start off with the the highlights, and then Chris will take us through the numbers in a bit more detail, then I'll get a bit of an update on the strategy. So here's a here are the highlights for the year. We've had a really, really good year, everyone. Revenue, £1,800,000,000, which is up 27% in the previous year. There are some reasons for that revenue growth, which I'll come back to, in a minute.

1:18 As a result of that, we've we've raised our operating margins to two and a half percent on route to our, our original target of four of 3% in 2026 and our new target of 4% in 2030. But just for everyone's clarity, we are still aiming at 3% in '26 as a way mark along the way to 4% in '30. So really good performance on PBT level, £32,700,000, up 40% in the previous year, and a really good dividend of 15.5 p for the whole year, up 48% in the previous year. So lots of happy shareholders out there. Chris will talk about cash and so on and and our huge £10,000,000 share buyback, which we announced last week. The order book is in really good state of £3,800,000,000, up a £100,000,000 in the previous period last year. And, again, I'll go into that in a bit more detail later on in the presentation.

2:11 Just going back to that £1,800,000,000 revenue number,

2:17 we had good underlying revenue growth in the year, and that was augmented by two things. Firstly, if you'd cost your mind back to 20 back in the 2022, the mini budget and sort of a hiatus that followed that and inflationary spike that followed that. Through that period, we were very, very disciplined in not taking on work until we knew that we had protection against inflation or would properly price it and things like that. So we we held off, and that produced a bit of a hiatus in awards in that period. And so part of the of the of the growth over and above, the good underlying growth last year was that were coming through because it all sort of fell into place early early twenty three and now and that's washing through now. So that was one reason.

3:03 Another reason was a really good, year in AMP7 in water. So if, you know, you we're going to walk in a bit more detail later on the presentation, but, obviously, as you've all seen, there's an awful lot going on in water at the moment. So really, really good start to our 2030 strategy, really strong year, and over to Chris for a bit more detail than numbers. Thanks, Chris. Thank you, Bill, and, it's really nice to be here. Had a great from everyone to the company. So let me take you into the numbers in a little bit more detail. We'll start with the segmental analysis. So as Bill said, really strong year of revenue growth, up 27% to 1,773,000 sorry, billion. So really good strong growth. Building grew by 17.7% and infrastructure by 38.8% for those reasons that Bill just pointed out, strong underlying growth, and those two tailwind tailwinds helping us along.

4:00 Investments grew strongly. We completed the financial close of our first PR scheme in Cardiff, so that was very helpful on the investment revenue as well. Moving to profits, you can see that we grew profits in line. Each of the divisions growing the two big divisions, building infrastructure, growing their profits in line with their revenues. Investments moved backwards slightly from plus 1.4 to minus one. There was a onetime 3,600,000 JV disposal in the prior year. Our investments portfolio and interest has an annuity income of about 3,800,000. It is worth pointing that that falls into the interest line, so below operating profit. But if you add that back in, the investments makes profit overall.

4:47 Central overheads slightly up in line with revenue. So in terms of margins, I think worth pointing out a really strong performance from building, moving its performance forward 23 basis points. Infrastructure held it flat. It made good gains last year, held them this year. There were a couple of projects that we delayed, which held the margin back from improving. But overall, the group margins moved forward by 13 basis points, which is a good step forward. So from my point of view, this is a relatively new starter. It's worth saying that, you know, we grew revenues by 27%, profits followed, and margin accretion. The margin accretion comes from two points, good operational cost control, and also from our robust risk framework and contract selection model.

5:34 With bills and the team have been very tight on that, I'm sure you've heard about it before, but just fundamentally, we choose where to play and where not to play, where we understand the risks and where we can manage and mitigate those risks and price for those risks. And if you do that, then it comes down to execution risk, and the team have executed brilliantly, as you can see, to drive revenues and margins forward. Worth just touching on the left hand side, exceptional costs in the period of two point six million. Those exceptional costs we reported at the half year relating to the implement implementation of our digital strategy, the ERP system that we've implemented. That is now complete. There were no further exceptional costs in h two, and we expect no further exceptional costs relating to that investment going forward. Pleased to say we've reported our numbers on the ERP system, so that's always a good measure of success. And we're now moving forward into the optimization phase of that where we try and sweat that asset for what it's worth.

6:34 I would just point out, not on the slide, but our tax rate, 14.6%. We had some onetime deferred tax asset gains in the year. We expect the tax rate to normalize going forwards. And we also had treated as exceptional a £9,600,000 corporation tax refund relating to 2019. We had confirmation of that alongside associated interest of naught 800,000 and a confirmation of that in June. So we booked that as an exceptional credit in

7:06 June. The cash was received during the month of August. So just to be clear, we booked the gain in the period as exceptional, but the cash was received in the 2425 financial year. If I move on to the next slide, you will see effectively two bridges on the right. I will just pick the bones out of that. The top one is the profit chart. You can see last year, we had the JV game that I mentioned earlier. So if you take that, the ongoing profit in 2023 was about £18,000,000. We grew £9,000,000 from the volume flow through at the prior year margins. The operational leverage delivered another 2,200,000, so effectively an extra just slightly more than 10% extra profit in the year. And then we completed the acquisition of AVRS in quarter four of twenty twenty three. That was profit and margin accretive in the period, and that drove the operating margin up to £29,600,000.

8:02 If you move to the chart below, what's really pleasing to see is that we turned that profit of 29,600,000 into cash from operating activities of 33,000,000. So more than pound for pound cash conversion into operating profit. So, again, just to repeat that point, we've grown revenues, we've grown profits, we've grown margins, and we've turned that into cash in the period. As a result of tight cash management, our month end cash average month end cash, sorry, has risen from a 135,000,000 to a 155,000,000. That's roughly a 15%. And that tight cash management can be seen in the working capital movement of plus 7,000,000. That comes from two points, really, that tight monthly focus on this, which is absolutely critical. And secondly, as you grow, you get some payments on account, and that helps drive working capital forward. So £7,000,000 there.

8:53 £3,000,000 net of interest and tax, stronger cash balances in this strong high interest environment allows us to generate interest returns. So that netted £3,000,000, which, in our view, effectively funded the £2,600,000 for the digital ERP implementation in the period. So those two net to zero. Then we returned £29,000,000. So we generated million pounds of profit, £33,000,000 of operating cash, and we returned £29,000,000. The £29,000,000 is broadly made up of the normal dividends, so a growing dividend in the period on the growing profits. You'll remember we announced a policy last year of 1.8 times cover, so that's the dividend in there.

9:39 So we paid that dividend. We also paid a £12,000,000 special dividend on the 10/06/2023 in relation to a claim we'd successfully received. And then during the period, we completed the 2022 share buyback of 15,000,000, about £5,000,000 in the period. So that adds up to 29,000,000. To the right, we spent a couple of million pounds on share purchases for employee benefit trusts and so on. And then there's a net of the £4,000,000 cash consideration for AVRS offset 2,000,000 for the disposal of rock and alluvium. That moved the overall year end cash from 220,000,000 to 227,000,000. Worth pointing out just a couple of points. Also, we have no bank debt at all, so clear of any bank debt, and we have no pension liability. So in reality, we show a net cash balance on the balance sheet, and we're in a great position.

10:35 We have a PPP portfolio. I mentioned the investment annuity income earlier. That's a we have an asset of 41,800,000. It's a very liquid asset. If we needed to dispose of it, we could, but it generates roughly 1010%. So it's very strong for us, and and that's why we keep it. However, we do return all of that 3,800,000 to to shareholders each year, so our dividend is broadly made up of the annuity income from the PPP portfolio plus about half of our operating profits. I think just the other point worth making really in a year where we've implemented an ERP system, which is always very, very, you know, a very big project, we have managed to continue to pay our suppliers on time. 96% of invoices paid within sixty days and twenty six average days to pay.

11:27 The strong balance sheet we have is really, really crucial. It's crucial to our customers. I'm sure Bill will talk about or you'll we'll have a question at some point on ISG and so on, but it's very critical to our customers they they know they have a supplier who can who can deliver the project on time. And it's also very critical to our supply chain. Suppliers want to work for customers who will pay them, and I think we can demonstrate repetitively that that we we do do pay them, and we pay them on time and in full. So a really strong cash message, a really strong balance sheet. We've got the ERP system in place now. That is working. That's, you know, a really big foundation block for us to go forwards towards our 2030 targets of 2,200,000,000 of revenue and 4% divisional operating margin.

12:16 In terms of capital allocation, I guess, really, two or three points, very quick points to make here. One, as a new CFO, I'm gonna confirm that we are not changing our capital allocation policy as we go forwards to 2030. So no big change there. You'll be pleased to know. And I think as you look across the three boxes below, we have that sustainable dividend policy, and that 1.8 times cover, which is very strong in the industry. And we also allocate in two other ways. We invest in businesses. We fought bought four businesses over the last few years, generating north of a £120,000,000 of revenue per year. Those are in our services businesses, the higher margin businesses that we're moving towards, and Bill will tell you more about that. And then where we have excess cash, and just a reminder, our definition of excess cash, we expect to have average month end cash in the tram lines of eight to 12% of annual revenues at 9% at year end. But where we have excess cash, we will return that. And so worth pointing out that we have just announced a second share buyback of £10,000,000 maximum. That £10,000,000 broadly equates to the corporation tax refund that I referenced earlier.

13:25 And so in the last three years, we will have done two share buybacks and one special dividend that I also mentioned earlier. So you have a clear picture of our capital allocation model. We prefer to invest it for growth where we can, but where we can't, and where we have excess cash, we will return it either as a share buyback or as a special dividend. So a very clear message on capital allocation. And we're saying we're gonna be as robust about our capital allocation as we are about our contract selection model. So I think those will be the key points I'd make. And I think, Bill, at that point, Keith, back to you to talk about how the strategy and the engine works. Great. Thank you, Chris. Okay, everyone. So on the on the left hand side here is is the philosophy of how we run the business. So we start in the middle there with 4,200 really good people.

14:12 And on the left side and from the left, we embed a a culture and very strong processes around risk awareness. So hydrogel selectivity of what we do and what we don't do, as Chris said earlier on, the clients who work for the ones who don't work for, all that sort of thing. Over time, that becomes a culture, as I've said. And, actually, just to reinforce that the incentive mechanism GALLIFORD TRY do not include revenue. So our incentives are about profit. They're about cash. They're about ESG measures. There's not a single revenue incentive in GALLIFORD TRY because it can drive the wrong behaviors. So that person that culture then leads to a very high quality order book with sensible clients, sensible terms and conditions in the right geography, with the right people, the right supply chain, etcetera, etcetera. And what that means is that we deliver our projects consistently and predictably, and and we make, the profits that we expect to make and generate the cash we expect to generate.

15:11 That strengthens our really strong balance sheet, and so the wheel turns. And and if you go back to the sort of link between selectivity and a balance sheet, when you've got a very strong balance sheet and a very good order book, you don't need to go scrambling around taking on work that you're gonna regret later. And that's a really, really important thing to bear in mind for for any construction company. Having the discipline not to take on work, you're gonna regret later, and we're very, very good at that. Then, of course, on the right hand side, I've talked about the the top bit, but then we have very robust commercial control reporting through the tenancy of our projects. The strategy through 2030 is in is simplistically is made up of of three main strands on the left there. The first one is to grow our big revenue generators, building infrastructure and environment. So so building is is is schools and defense establishments and health establishments, prisons, things like that.

16:08 And and infrastructure is mainly highways at the moment, and environment is mainly water, water and wastewater, which, of course, is very topical at the moment. I'm sure we'll come back to that later. So the the simple plan is to grow revenue and margin in the three core businesses through to 2030, and then simultaneous with that, grow our specialist businesses in a higher margin adjacent markets. So we have eight specialist businesses now. We have four in the water industry that we've acquired over the last couple of years. And all of those are either in in capital maintenance and asset optimization of the water industry or in manufacture of free high-tech bits of kit for the water industry. The more building orientated ones are in FM. They're in security high-tech aspects of security and and in fire related issues like fire doors and and and facade medials and things like that.

17:03 And so these businesses are fairly small at the moment. We've been sort of incubating them over the last few years. They're gonna grow

17:10 up to critical mass over the period and at the sort of so so further out towards the back end of the strategy period, these businesses will be will be coming of age and producing those higher margins to augment the the the the margins in the big revenue generating businesses. Another plank is to reenter the affordable homes market. So when when we sold our house building operations back in 2020, there was a restrictive covenant on affordable homes. That covenant came to an end last year, and so we're back into this market because it's a very big and it's a very attractive market. Our definition of affordable homes, just to be perfectly clear, is that it's sort of mid rise blocks of flats for councils and for residential providers and so on. It's not houses per se. So that's really important to understand that.

17:56 So this isn't a a quick fix, obviously. We need to reestablish ourselves. The construction side of it we have in spades, but we've got a a newish team now that's reestablishing our relationships with our prospective clients. Getting onto frameworks, we won four good framework or positions on four good frameworks now, and we have to start to bid and win on those frameworks, which means the revenues through this team won't will also be fairly back end loaded. It's you know, if you want a job today, then it's, you know, designed for six months or so, and then build it is gonna take a further eighteen months, two years. So it is a few years before we start to see revenues start to come through the affordable homes stream. Then when you put all that together, we we cover the whole country. We have offices from Inverness to Plymouth and all points in between. So we can leverage that geography, that enormous framework presence in through all our public sector, regulated sector, and private sector clients, and we can sell and cross sell more GALLIFORD TRY services to those clients.

18:55 Excuse me. And all that, of course, then continues to generate those shareholder returns. The same strategy in a bit more detail just about what we really concentrate on. So if I start on the top left there, we spend a huge amount of time on people, making sure that we retain our 4,200 good people, and we attract more good people to the company to sustain our growth. We take on about a 150 young people every year. Chris and I actually went to the welcoming ceremony the other day, and it's a really, really good day out. About half graduates and half trainees and apprentices. And as I say to to to anyone who listen, this is my favorite day of the of the year. The energy and the enthusiasm in that dream is tangible, and it really for me anyway, I'm not looking to patronize anybody. It restores your faith, in in in young people that we've got some absolutely brilliant young people coming through. And, of course, we do that every year, and these people are coming through the business and doing really well.

19:54 Huge focus in health and safety as as you'd expect from any responsible construction company. And our AFR accident frequency rate is down at 0.04, which is less than half of last year's and certainly in the in the top few in the construction industry. But, nevertheless, we'll never be happy until that is zero, and we work very, very hard to make that zero. On the on the right hand side there, everything we do, we try to do in a in a responsible manner. So we've got our our carbon our carbon targets scope one and two through to 2030, so net zero in 2030. To be fair, that's the easier of the targets. The big ones, of course, are embedded carbon, mainly in steel and concrete and things like that. And our target for the net zero there is 2045.

20:40 So we spend a lot of time on that. And, actually, you know, when you go back to what's good for your business in terms of ESG, actually, when you when you look at driving carbon out of projects, you you're driving you're driving cost out, you're driving program out, you're you're driving quantities of materials out. So it's a it's a good driver of efficiency as well. And then, of course, in the communities in which we operate, we employ local people as best we can. We we procure goods and services through the local companies as best we can. And that's really important to us and to our clients. On the bottom right hand side there, we look to improve the quality of what we deliver through through using modern method construction, more digital tools so we can, you know, design a building in virtual reality and build it half a dozen times in virtual reality before we go into it in in anger. And that means that we do it right first time. We spend less time and money on rework and things like that, and the quality is better.

21:39 We do more more construction in factories now, of course, and bolt them together on sites, which also adds to that. We've got a good supply chain. We treat our supply chain well. As Chris said, we pay them on the button, and and we've got an initiative called advantage to alignment where they can get access to our training, to our our pipeline, all those sorts of things. So we we try to help our supply chain. And, of course, having a a really good supply chain is important because a high degree of what we do is deliver through the supply chain. And as Chris said, a strong balance sheet is very, very important to our clients and to our supply chain, of course, to our people as we go through this. Excuse me. So that's it. And when we get all that together, of course, we continue that nice trend of of growing revenues and profits through the business.

22:31 So here are just a few of the drivers of revenue growth. Obviously, you know, apart from the slide, all you gotta do is drive around the country looking around, and you can see the extent of the issue. So a huge amount of the infrastructure in this country is old, and it's it's it's it's struggling to maintain, you know, its use under the pressure of growing population. A lot of change in climate change, you know, intensity of rainfall, and all these things making some of what we built in the past really no longer fit for purpose. And and the the good thing for us is that, you know, everything all the sectors we're in address this issue. So those are the drivers of revenue growth as well as, of course, for us, expansion into adjacent markets, which I explained a minute ago.

23:19 Drives of margin growth, the most important two there on the left hand side. I've I've discussed those really, I suppose. Clients I think I think one thing that the market still misses in the construction industry or the listed construction industry anyway is that clients have changed the attitude to procurement significantly over the last sort of four or five years now. The construction playbook really started to change this in some angle. It was, it was produced in 2020. We and all of our competitors would have been, a consultant, of course. And the and the playbook basically just moves the oath the onus on procurement from the big public sector clients from price to quality, essentially. So we will now work based predominantly on on quality now. And by quality, we mean the quality of our people, the quality of of our our balance sheet, the quality of our reputation, our specific proposals, our our carbon credentials, our safety credentials, all of those things come into the the quality aspect. And then and then commercial will be an element of price and an element again of supply chain, payment terms, balance sheet, etcetera, etcetera.

24:24 And when you marry that attitude to the attitude of all the tier ones in my view now, where where all of them are being far more selective about what we do and not doing silly things, means that the whole industry is moving in the right direction, and that's exactly what we want. So those two left hand boxes, I think, are the are the main driver, and then that's augmented by the things I spoke a little bit about, off-site construction, modern method construction, you know, digital tools, things like that. That'll help us to drive margin growth. Then on the right hand side there, we've got our higher margin businesses being margin accretive at the back end of the strategy period. And And as the business grows, of course, our overhead leverage gets better. So here's a slide that just shows how we wouldn't work. On the right hand side, there you see a typical example. This is a real example, actually, of a client scoring criteria.

25:12 So that's the sort of thing that they look at in terms of quality. And we regularly now win work from the most expensive price because we're the best on quality, and so it is working. On the left hand side there, you can see that 99% of everything we do is procured through some sort of negotiating position. So in the white, the 43%, that's all in building, public sector building. And what happens there is when you're on a framework, there's either some sort of quality driven mini competition between typically two of the companies in the framework. So it's not a commercial competition. Or in some some points, it's just a direct award. It's just we'd like you to build the school, please. Let's negotiate the price and be honest with it. So environment, you there is no competition. You build up the the design. You build up the the price for the scheme, which includes, of course, allowances for risk and inflation and and markup and all those things.

26:06 But and then that that in that sector, it becomes a lump sum fixed price at that point, and we're very happy with that. In the gray, it's just pure negotiator when clients turn us up and just say, can we build the source, please? We negotiate the price. Get on the And then in the red, that's all in the water industry and the highways industry. Those are target cost cost reimbursable projects. So, again, in water, once you once you're onto a framework, you typically have a geographical patch and you do all of the work in that patch. There is no competition. The client pays us to design the schemes. We build up the target price. It's slightly different because it is a target price, and it include includes inflation and risk and and and all those things. And then when you go to build that scheme, a a water or waste for the treatment plant, you get paid your actual cost plus your fee against the target. And if you bring the the the project in below the target, you share the the gains. And if you bring the target in above the the project above the target, you you take you share the pain.

27:09 So it's a very good set of terms and conditions in terms of making sure that people work together to mitigate issues that might arise and keep the keep the keep the project below the target price. And even if you go above the target price, it dilutes your margins as opposed to producing a loss making project. So it's a very good way of way of working. And that's all of our work in in water and and in infrastructure is done on that basis. So the order book, £3,800,000,000, a 100 of million pounds up on last year, and you can see where it is on the left hand side there. Typically, $90.10 for our figures in terms of public and regulated versus private. And and the private sector clients we work for are all clients we work for for a long time, and and and I have sensible terms and conditions and things like that, and that's why we work for them.

27:58 And you see there, we came into this year and search in the June numbers with 92% secured and 70% already secured for for the following year. And I see there's some questions which I'll I'll come back to on on that. So really good position in the order book and everything in there, high quality work that we can execute with a high degree of confidence every day of the week. So here's just a a a sort of visual representation of some of the frameworks we have. We've got, you know, every framework we want to be on, we are on pretty much. And you can see that that that gives us great visibility for donkey's years out into the future. You know? And often, of course, these frameworks will be new as they go. That's the lighter green color, and we have a high success rate in in in in winning positions on new firm as we go go through.

28:48 If you take the second one down environment, they can see m seven and m eight, and the s r 21 is the Scottish equivalent. And on on that slide, you'll see two bars going out to twenty thirty. Well, that probably goes out to twenty thirty five in the first place. But when you look behind those, this is what we've actually got in water. So we work for every single of the major water companies. We've got 54 live frameworks. Some of them will be AMP7, which will roll off over the next few years while while AMP8 ramps up, of course. 21 of them in in the big design and build frameworks. But going back to those specialist business I spoke about and some of the acquisitions, we're establishing a really good footprint in in the capital maintenance asset optimization side of it, is the the white there, and in the in the in the water technologies, the high-tech bits of kit we sell into the water industry in the gray. So we're making good progress in establishing our presence in these adjacent markets, a higher margin adjacent markets that we wanna expand into.

29:47 And that sort of picture sits behind lots of the others other green bars you see there as well. Just a comment on ESG here. So I've I've just picked a few of our ESG measures, but the main point everyone is that our ESG measures are sewn through the fabric of the business. We do them whether we had had to report them or not. It makes no difference. All of our measures help us be a better business, help us be, yeah, a a greener, more efficient, more inclusive employer, all of those sorts of things. And, of course, good people want to work for good, inclusive, green, responsible companies. So I'll pick out a few of these. 93% of our cars, we've got about 2,000 company cars now. And a few years ago, we decided that we just we'd only buy or lease a pure electrical plug in hybrids from that time. And and so as the leases, of course, are renewed, all the cars come out of the fleet are are very low carbon, and I think our average carbon per kilometer is done at something like 15 grams, which is very, very good.

30:46 So that's just a good example of how you can take a fairly straightforward decision really and and drive carbon out of the business. Accident frequency rate, I spoke about safety. So that 0.04 is very good compared to, you know, the industry. But as I said, we will not be happy until that zero and work very hard to make that zero. We we do a staff survey every year and very pleased that 87% of our employees are strong advocates of the business, which is really important. And I talked about all those young people. Last year, we were number one for graduates and number two for apprentices. This year, we're number one for apprentices and number two for graduates. So that's fine. I'll take either of those. So those are just a a snapshot. In the appendix to our main presentation, there's a much fuller list of all the ESG measures that we measure ourselves against.

31:34 So in summary, everyone, before we move on to questions, we're in very, very good shape. We had a cracking year last year. We've had a really good start to this year. You know, typically, as you come into a a year with a political change or a new government, we'll see a bit of a hiatus. This year, to be fair, we've seen absolutely nothing. That was that was helped by, you know, a fairly short process in the first place, of course. But often, new government will come in and then, know, just put their foot in the ball for a while and decide where to spend the money. We've seen none of that so far. Certainly, terms of justice, in terms of education and defense, it's just been business as usual. Just get on with it. So that's been really good to see. Another thing where we've had a really good start this year is is we often see a bit of a transition through the amps in water, and we've not really seen that yet. There's a bit of time yet to go, but so far, so good.

32:24 So really good really good position, everyone. You know, great bunch of people, great order book, great balance sheet, and a very, very good outlook. So So thank you. That that concludes the summary. Perfect. Bill, Chris, if I'm if I may just jump back in there, and thank you very much indeed for your presentation this morning. Ladies and gentlemen, please do continue to to submit your questions just by, using the q and a tab that's situated on the right hand corner of your screen. But just while the team take a few moments to review those questions that were submitted already, I'd just like to remind you that a recording of this presentation along with a copy of the slides and the published q and a can all be accessed via your investor dashboard. Bill, Chris, as you can see there, we have received a number of questions throughout your presentation this morning. Thank you to all of those on the call for taking the time to submit their questions. But, guys, at this point, if I may just hand back to you just to read out those questions and give your responses where it's appropriate to do so. And if I pick up from you at the end, that would be great. Thank you. Great. Thanks, Jake. Chris, do you wanna take the first one? Yep. First question from Gary. Thank you very much, Gary.

33:26 Question was what drove the decision to implement the buyback at this stage and how to balance this with other potential uses of capital such as organic growth or m and a opportunities? So I think there's a couple of three points I'd make on that one. One, I talked to earlier about the tram lines that we have, the eight to 12% of annualized revenue, so that's how we see our definition of the amount of cash we should have. At year end, we were 9%. So our average month end cash of 155,000,000 is just about 9% of our revenue of 1,770,000,000. So we were comfortably within our tram lines. If you take so take that position and you consider how strong our cash conversion was during the period, we took those profits to save about 30,000,000 and turned it into operating cash flow of about 30,000,000 as well.

34:17 So we have strong cash flow. So when we received the cash refund for the corporation tax, our view was, well, that feels one time in nature. It feels like something that we should have returned to shareholders some period of time ago. We were comfortably in our tram lines, bearing in mind that 9% of 1,800,000,000 of revenue is a much bigger number than 9% of our previous revenue of 1,400,000,000. So we were comfortably in that. And our view is in reality, if we continue with our strong robust risk framework and strong operational framework, generate the sort of same 10,000,000 in about five or six months. So by the half year, we would have generated that cash anyway. So our view was it felt like excess cash. As we have in the past, we've done special dividends and share buybacks.

35:03 Our Our view was this time the share buyback made more sense. It builds more strength in the balance sheet, more firepower in the balance sheet should we ever should we ever wish to do. A bigger m and a, and we needed to issue share capital, you know, over the last two share buybacks. We would have bought back about 10% of the share share capital, 7% last time on a share price that was sort of circa one seventy, 3% this time on a share price of about £3. So our view is balance sheet's in great shape. This felt one time we were comfortable within our trend lines, and we feel like we can going to continue to generate cash. We're working on acquisitions. You will see we've done four, so we have a, you know, a good track record of that. And all acquisitions will be considered in the light of our strategic hurdles, and Bill's talked about where, you know, where the targets are going and and hitting the higher margins. So we're not gonna chase revenue. We're not gonna chase volume. We don't need to do that. So it needs to pass the strategic hurdle, and then, of course, it needs to pass the capital allocation hurdle.

36:03 Does it make accretive returns to us? If it doesn't, we shouldn't spend our money there. So we've got a very clear view of capital allocation, a very clear view of when and where we'll do acquisitions. And so if you consider all of those all of those elements, the share buyback made the most sense at this point in time, and and that's where we put it out there. Bill, by chance. Thanks, Chris. I'll I'll just add as well there that it's quite a strange market out there at the moment. You know, our our acquisitions, as Chris said, are likely to be bolt ons, And and there's a bit of a rush for the door for the end of October going on at the moment. So we're not gonna be pushed in terms of, you know, a a a limitation on due diligence. So so I think we'll just let the dust settle and go back in when common sense returns.

36:57 Right. So, Rob question, Rob. You referenced yet 92% of full year '25 revenue in secured. Yes. Could you provide some more common sectors and the village visitor visibility beyond 25 and how you're managing any potential risks in these contracts? Can I get back to that slide? So so, Rob, you can see the sectors there. So the the biggest sector, yeah, by some some wise environment, which is water at £905,000,000, and then highways at 640. And then most of building ones are fairly close, I suppose. Education, 634. Defense, 437. Custodial, I can read the number, 329. The interesting one there, and then commercial, 483. You'll see the FM order book there at 324,000,000.

37:45 That's a sort of long slow burn order book. All their all their projects are sort of ten years in duration, so that's that's that's quite a lot slow burn order book. The visibility beyond 25, if I go to this the framework slide there, we've got great visibility beyond 25 through the framework. So we might not know exactly which school we're gonna be building starting well, in '25, we probably will know now, by the way, but in '26, '27. But we will know based on the geographical presence we have around the country and where the schools are. We will know that, you know, we'd likely be building a few schools here and there. I mean, typically, we're building something like 35 schools somewhere in the country at in some stage of of of the evolution at any time, for example.

38:32 So we get really good visibility through, a long way into the future and actually in water, we we, visibility years into the future. And then your comment about managing risk on these contracts, bear in mind that whilst these frameworks lost to five years, we price every project on its own merits at the time. So if we're pricing something now, we're looking at inflation now, we're looking at at at risk now, and if we're processing something in 2026 or '7, we'd be doing the same thing. So everything we do is priced on current current pricing. And and so all we ever looking at really through the tens of our projects on for inflation, for example, is a differentiation between or the difference between, you know, what we thought would happen to inflation, what's actually happening, which is and we're normally pretty accurate in that. So I hope that answers that one.

39:19 Then David s, as you shift from AMP seven to the larger AMP eight water plan, what measures are being taken to ensure a smooth transition, capitalize on the opportunities in this new phase? Well, I tell you, in my entire career, we've been trying to get the regulator and the water companies to stop the the the the sort of hiatuses between amps. And to be fair, we've made steady progress over over the over the amps. So far, as I said a minute ago, so far this year is the smoothest I've ever seen. Now there's still somewhere to go, of course. But there's such an enormous backlog of work that the regulators allowing the companies to sort of merge m seven and eight better to sort of m eight earlier and and things like that. So it is important for us that to keep those sort of resource histograms as level as we can.

40:10 With regard to opportunities, well, you know, the AMP is doubling pretty much from 57 to 88 is the latest number. I think it'll go up a bit. But the amount of work out there is is enormous. The important thing for us is that we're not gonna bite off more than we can chew. We'll work within the constraints of good people and good suppliers and so on. Biting off more than you can chew is normally end up regretting it later on. So there's a big opportunity out there, but we will be sensible. We will grow strongly in water, but we won't double. That's for sure. I hope that answered that question. Then one from Nicholas. The FM business is positioned as a complementary offering within the billing segment. Are they planning to scale this further or expand the FM business into new regions or sectors?

40:56 Yeah. The the FM business is a good business. It's mainly looking after the hot the fabrics that we do hard FM only. We don't do soft FM. We don't do cleaning or cooking or stuff like that. It is complimentary. We can so the first thing is what we mainly do now is look after assets we've built in the in the past. How do we scale that up? Well, there's a few things we can do. We can offer everything we build, we can offer FM service to our clients, and we do. In many cases, they you know, if you got if the DFU or something, they already have frameworks for FM, so it's quite hard to get in. We do do some, but but there's opportunity for growth as the frameworks come up for renewal. We offer commercial clients opportunities for sort of soft landings. In other words, we do the the the construction for the whatever takes two years, and then we'll look after building for two or three years after that to just get into steady state.

41:47 And sometimes that leads to a longer term contract and sometimes not. But the biggest opportunity, I think, in FM, the hard part of FM, of course, is is the is the fact that there's lots of PFI portfolios that are are coming to maturity recently and and over the next few years as the sort of typical twenty five year period. If you think back to the old PFI days, They're all coming to to to conclusion. So they are packages of work that have been managed by by concession companies that are gonna come back onto the market in the next few years, and we understand that market because we played it, of course. And and so we we feel well placed to pick up some some more FM work as as that evolves as those packages get handed back. So I hope that answered that question, Nicholas.

42:37 Peter, can you expand more on your risk management strategy for contract selection? Let me go back to that slide. This one. So we we have what we call a heat map. I I need to keep this relatively high level, I suppose. And the heat map at its highest level says, who is a client? Have they got sensible terms and conditions? Have can they pay? Do we have the people? Do we have the supply chain? Is it in the right geography? Now you might think geographies are funny to say in The UK, but, for example, I've got nothing against the Middle Of Wales, but we don't have any presence in the Middle Of Wales. So if someone would say said to to us, us, can you go and build something in the middle Of Wales? We'd probably say no. You know, we're the best place people. There'd be better place contractors for us. We don't have a supply chain. We don't have people there. So so geography does come into occasion.

43:31 So so at a high level, we have this heat map. And if any one of those triggers goes red, regardless of the size of the project, then it'll come up to the exec for discussion about should we be doing this job. Everything above 25,000,000 comes to exec for a discussion even if it's got no red flags. And sometimes it's quite a short discussion. If it's a if it's a very standard school in a very standard geography and we've we've done, you know, we've done we do them all the time, then it's gonna be a fairly short discussion. And, occasionally, something come comes through, Peter, where on the face of it, the product doesn't look very good. So I won't mention the client, but what came through a few years back now, which was glowing red, and we couldn't really understand why the management team brought it to us. And they said, well, it's such a cracking job, but, you know, the terms and conditions are are unacceptable. And what we did in that case, we went back to the client, and we said, look. It's a nice job in principle, but your terms and conditions are unacceptable. If you change these things and be more sensible about it, then they'll bid it. And to be to their credit, they did. They they changed they they heard us. They changed the terms and conditions, and we've been in in that particular instance, we came second actually and didn't do the job.

44:41 But the point is that the the risk management process works. So so we do those sorts of things at a at a very high level. That that that's what we look at, Peter. Second question was about the debt in the labor market challenges. Well, we've always been a real working wage or real living wage employer, London living wage employer. And so, yes, the sort of ripple effect of a of a minimum wage will ripple up a bit. But going back to what I said earlier on is that we price everything on current current numbers means that, you know, there's a very narrow slither of of of impact there, and that's not gonna be significant at all to us. In terms of the of the changes to the broader labor market in terms of, you know, sick pay from day one and all those things, we pretty much do most of that already.

45:31 And I don't anticipate a huge a huge impact. You know, 99.9% of people are are sensible, and a tiny tiny minority will will try to take advantage of it. And you've just gotta brush that off and move on really is my view. So so I don't think there's gonna be much much of an impact on our business there. Bill? So those are all the questions I can see, Jake. Absolutely. Bill, Chris, if I may just jump back in there. Thank you very much indeed for being so generous of your time then addressing all of those questions that came in from investors this morning. And, of course, if there are any further questions that do come through, we'll, of course, course, make these available to you immediately after the presentation has ended, just for you to review to then add any additional responses where it's appropriate to do so. And we'll publish all those responses out on the platform. But, Bill, perhaps before really just looking to redirect those on the call to provide you with their feedback, which I know is important to yourself and the company. If I could please just ask you for a few closing comments just to wrap up with, that'd be great.

46:27 Yeah. Thanks, Jake. I think, you know, in summary, we we're in really, really good shape. As I said before, great bunch of people, very strong order book, very strong balance sheet, and the outlook is is phenomenal, actually. We've got great positions in in in water, in roads, defense and education, in justice. Those are the big the big markets, health, etcetera. And our ability to augment those construction margins through the higher margin specialist businesses is is gonna be the an exciting bit over the next few years to continue to grow the big ones and grow the margins, but grow the specials faster and and add, of to the middle and improve our margins through that route as well as, of course, getting back into the affordable housing market. So we're very well set, and and I think stability in government, you know, regardless of political views will be good for for the company. And just as an aside, by the way, labor governments historically have always been better for the construction industry than conservative governments.

47:34 And and I think if if the chance does get a bit more headroom in terms of capital spending to invest, that will do our industry good as well. So overall, I'm very positive about the future. There's lots of noise out there, but as far as our business is concerned and I think for the the broader construction industry, the outlook is very positive over the next decade and more. Thank you very much for joining. Really appreciate it. Take care. Perfect. That's great. Bill, Chris, thank you once again for updating investors this morning. Could I please ask investors not to close this session as you will now be automatically redirected for the opportunity to provide your feedback in order the management team can really better understand your views and expectations. This will only take a few moments to complete, but 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.

48:23 That now concludes today's session. So good afternoon to you all. Thank you.