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

0:00 Good morning and welcome to the GALLIFORD TRY HOLDINGS PLC Investor Presentation. Throughout this quarter presentation, investors will be in listen only mode. Questions are encouraged and they can be submitted at any time. Just by using the Q and A tab that's situated in 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 it received during the meeting itself. However, the company can review all the questions submitted today and publish responses where it is appropriate to do so. Before we begin, I'd like to submit the following poll. I'd now like to hand you over to Bill Hocking, CEO. Good morning to you, sir. Morning. Thank you very much for the introduction. Morning, everyone. I'm Bill Hocking, chief exec. I'm here with, Chris Hanson. Good morning, everyone. CFO. Excuse me. What we thought we'd do this morning is run fairly quickly through the presentation. You may have already viewed it on on on the web.

0:48 So go through it in a fair bit of speed, then we go straight to questions, I think, where the real value is.

0:56 So quick agenda there, some highlights, a bit on strategy, Chris will do the financial overview, and then a bit on where we're going in the future. So what we do for those of you who aren't familiar with us, I'm not gonna go through each of these, but you can read it yourself. We we we do the social and economic infrastructure this country needs, and we build new infrastructure, we improve existing infrastructure, and we refurbish old infrastructure across all of those sectors. So just a little bit of explanation. Top left air environment, that is 99% water and wastewater, and I'll come to that in a bit more detail later on. Defenses around single living accommodation and and this built infrastructure for for defense establishments.

1:44 Health is self explanatory, although we don't do the big one off hospitals. We do smaller

1:50 new wings and new acute centers and so on in existing hospitals. We don't do the big one offs. Infrastructure is predominantly roads at the moment, but we we're venturing into energy as we speak. Education is what it is, lots of schools, custodial and judicial prisons and immigration detention centers and the like, affordable homes. The picture there is a block of flats, and that's because our definition of affordable homes is mid rise blocks of flats for for social providers. A bit on that later. And then, obviously, commercial developments and so on. Private rental sector, again, blocks of flats essentially, and then facilities management. So that's a very quick snapshot of what we do. And this is how we organize. So we we trade as GALLIFORD TRY in England and as Morrison Construction in Scotland, and we split across those four divisions, as I said, broadly earlier on. So building sectors down the left hand side, we've got special services businesses in the middle there, is broadly building orientated special services, the infrastructure, which is highways and water. And within water, we have design and build, which is asset creation.

2:59 We have design services, which is what it says in the tin really. And then we have a new capital maintenance capability, and water technologies are a number of specialist manufacturing businesses of high-tech kit in the water industry. Quick snapshot of some of our clients you see there. All of the big water companies in The UK, all of the big public sector bodies, and a number of private sector clients and councils and so on as you'd expect. This slide's important, I think, for for people to understand. On the left hand side, there's what we call our engine for sustainable growth, and it's the philosophy of how we run the business. So we start in the middle layer with 4,300 now, very good people, and we put around those people on the left hand side a really good process of how we run the business and how we how we run our our our risk management process and our attitude to risk.

3:55 So the the the the BMS, what we call the BMS, a bill business management system is how you do stuff around here in GALLIFORD TRY, and the risk management side of it is being very selective about what we do and what we don't do, for our clients, bearing in mind that the vast majority of what we do is in long term frameworks, which has evolved over time. So being very selective of and having a very robust risk process means that everything in the top round there, our order book, is a high quality, is high quality work that we can do in the right geographies with the right clients, the right supply chain, etcetera, day in and day out with a high degree of predictability and consistency, which is on the right hand side. And that means that that further strengthens our already strong balance sheet and so the real terms.

4:41 So that's the simple philosophy of how we run the business. Very selective about our our work, gives you a high quality order book, means you perform, which means you strengthen the balance sheet, and so on. A quick overview of our strategy to twenty two thousand and thirty. Our original strategy went to 2026, and our plan was to be at one point six billion and three percent operating margin in '26. In in '23, actually, we are already ahead of that. And last year at a capital markets event, We we extended our our our strategy out to 2030. So you've seen the half year results for yourselves, and if you and and you've you've heard our our confidence in our in in the outlook for the full year. And if we if you extrapolate that, what our original 3% in '26, we are still on track for that. So we we were at 2.7% operating margins in the first half, and we're on track for 3% in in the next financial year.

5:39 En route to that more than 2,200,000,000 at 4%. And I think it's important to say more than 2,200,000,000 because, you know, we are more margin focused and revenue focused. We're we're big enough. We've got plenty of critical mass. And so if the revenues go beyond 2,200,000,000, that's fine, but it's the 4% that's important to us. And then within the strategy, there's four main main streams on on the in the top box there. So starting from the left hand side, we continue to grow revenue and margin in the big core businesses, which is building about a billion pounds, highways when and infrastructure about 350,000,000, and water probably about 500,000,000 at the moment. And growing those businesses through the strategy period, both in both revenue and in margin up to about three and a half percent, we reckon.

6:27 So that remains the core, the critical mass of the business. Then in parallel with that, we grow our special services business, which are all higher margin, higher tech businesses in adjacent markets. And by adjacent markets, we mean markets that we know and understand. So for example, we we we want to move into the capital maintenance of water and wastewater treatment works. At the moment, we design them, we build them, we commission them, but we don't do the maintenance. So so, obviously, we understand them very well, and going into the maintenance market isn't a huge step for us in terms of understanding. So that's what we mean by that. And we're also gonna reenter the affordable homes market. So when we sold the housing businesses back in 2020, there was a receipt restrictive covenant for a few years on us not playing in that market that's that's finished now. So we're going back into the market.

7:13 It's a huge market, and it's a core skill set of ours building blocks of flats, essentially. So we're going back in there. We've reestablished the team. We're re reestablishing ourselves on on on the various frameworks, and we're pretty much where we thought we'd be at this moment in time. We expect revenues to start coming through next year with a fairly sensible target through the 2013 in terms of our growth in that market. And then finally, we leverage our geographical and client footprint across the whole of The UK. So we work we've got offices from Inverness down to Plymouth and all points in between, and we work for clients across that whole geography. And and there's an opportunity as for us to to sell more GALLIFORD TRY services to existing clients across that geography, more more internal trading, and more cross selling.

8:01 So that's the that's the emphasis on the on the fourth box there. And if we do all of that, then we continue to generate growing shareholder returns. I'm just looking at the questions here. I think we'll we'll pick up those questions as we go through, and and so I'm not ignoring them. We will pick them up a little bit a little bit later. Right. So that's the strategy through 2030, and we're on track. We're making good progress as you saw in the half year results. So we asked what drives the continued revenue growth of the business, and and here it is in a nutshell. Aging social and economic infrastructure, everywhere you look, there's infrastructure that that needs to be replaced, renewed, made bigger, etcetera, etcetera. And and that's exacerbated by population growth and climate change. And where I mean, climate change across the country, of course, but population growth and demographics change all the time. So those are the key drivers of revenue growth as well as our leading position in frameworks and sectors. For example, in AMPH, which I'll come to you in a bit more detail later. We've had a really good, a really good, winning work winning, session running to AMP eight, and that's given us a fantastic, revenue position for the next decade, I'm I'm gonna say.

9:14 And then as I said earlier on, expansion into adjacent markets. So those are the key drivers of revenue growth in the business. And then margin growth, how do we continue that trajectory that you've seen over the years? And Chris will come to you in a minute. Well, the two key things on the left hand side there is that the game has changed dramatically in in the big construction markets. So all the big clients, be it public, be it be it public sector, be it regulated sector, be it private sector, are procuring in a far more mature, responsible way, which means that, they they they're procuring for quality over cost. And long term relationships, long term collaboration, valuing the balance sheet, for example, valuing our social value credentials, our safety credentials, our carbon credentials, all those sorts of things come into the procurement cycle, and I'll come to that in a bit more detail later on. But that attitude alongside far more robust attitude to risk and being very selective about what we do both in GALLIFORD TRY and across the industry actually is driving margins and the whole industry in the right direction.

10:17 And in a nutshell, the government and the big clients have realized through various pretty high profile failures over the years that oh, I've gone blank. What's happened here? Right. Sorry. There's high high profile failures over the years that they need a sustainable construction business or industry, should I say, to do all the huge amount of stuff that we need to do in the in this country to sustain the built environment. And then there's a whole lot of smaller things that add grids to the mill. Quality getting the things right first time. We do that through modern methods of construction at the bottom there, more off-site manufacture, building more things in factories, and assembling them on-site.

11:00 Digital tools that allow us to build whatever it is in in in virtual reality and build it half a dozen times in virtual reality before we do it for real, which means we save we can debug the the designs and so on, and we save money by not by reducing the amount of rework and and so on. The high quality supply chain is really important. We look after our supply chain. We pay them on average in twenty six days. So they like working for us. They like the strength of our balance sheet, and that means that we attract the best supply chain, which means we will perform and and and and everyone's a winner. And then those increasing capabilities, growing those higher margin adjacent market businesses faster. And at the end of the day, as we grow the overage leverage increases as well. So that's what drives the margin growth in a nutshell.

11:48 And over to Chris for some of the numbers. Yeah. Morning, everybody. I'll just take you through the numbers. We've got a couple of questions on the on the numbers as well, so I'll try and I'll try and weave those answers in. So really strong revenue growth in the period at the group level, up nearly 13% to £920,000,000, so strong. Where does that come from? Well, it's come from our, you know, our core businesses and the specialist businesses in there. So building is up nearly 5%. Really strong performance across the building sector. Bill's Bill's talked about those sectors, but prisons and custodial going very strongly, schools going very strongly, defense going very strongly. So all in all, you know, really good continued progress in that space. Infrastructure, which, as Bill said, is highways and also water has gone very, very strongly, up nearly 25.

12:35 Two elements in that. Road's going very strongly, some big projects getting off the ground. So that that's really important for for the highway side. And then in water, AMP seven, which finishes in two weeks from today, is going great, Ganz. It's it's really going helpful ever, actually. So that's really strong. So we're very, very pleased with that. AMP eight starts, you know, just in two weeks' time, and so we're ramping up. Historically, we've seen a dip, but we haven't seen AMP seven tail off. So that's why the first half has been particularly strong in there. So ramping up for AMP8, and we'll see how that goes. But, of course, there's only three months of AMP8 in our in our water sector in '20 in f y twenty five, so we'll see most of the improvement for AMP8 in in next year. In terms of, you know, how we feel the full year revenue numbers and so on, if read you read our our announcement, we've we've guided we put some guidance in that. But we're expecting broadly fifty fifty revenues and profits between the two halves. So, you know, we continue we expect to continue the trading trajectory into h two. And as Bill said, we've we've we've guided to stronger numbers for the full year on the outlook.

13:40 Turning to profit. What's really pleasing to see for, finance director is that our profits are growing faster than our revenues, so, our adjusted operating profit is up nearly 26% to £17,700,000. Again, that's across all of the divisions or the big divisions. So building terms, 5% of revenue growth to 17.9% profit growth with a 29 basis point improvement in margins to 2.7%. Infrastructure does the same, 25% revenue growth to 32% profit growth. And, again, 2.7% margins, that's up 15 basis points, which overall takes the group up to 2.7, maybe 2.5% at the full year and 2.5% half last year, so 24 basis points for the for the total group. So strong revenue growth turning to strong turning into profit, but also improved margins. Investments in there, you'll see, is just a there's a slight dip. It's a lumpy business. The last year, we had the financial close of our first PRS scheme, but I'll talk you a bit more through the progress on that in a minute, but that first close. And depending on when that those financial closes happen. If they happen on the December 31, they're in one period. If they happen on the January, the first and second period.

14:49 So they can be a bit lumpy. So it's effectively a non repeat, of what happened last year. So, all in all, revenue growth, strong profit growth, and strong margin growth, so we're we're very pleased with that. Moving on to the balance sheet. Look. The the number on the bottom right hand corner, ironically, is the one we're we're most keen on. That's the average month end cash. Really strong progress in the average month end cash. So we're a £155,000,000 in the twelve months to June. That's moved up to a £176,000,000. So we're taking that revenue. We're turning it into more profit. We're turning it into cash. That's a really good news. Little bit of a tailwind in the one seven six, I would say. Just we had a corporation tax refund of £10,000,000 in early August. From October, we started handing that back for the share buyback. But on an average monthly basis, it's been sat on our balance sheet for most of the first half. So a little bit of a tailwind of 5 or £6,000,000 there, but even taking that away, really, really strong growth.

15:46 And the balance sheet remains incredibly strong. So the average cash, the period end cash of £210,000,000, a little bit up on last year. We have no debt. We have no pension liabilities. We have our PPP assets worth about £40,000,000. About £3,600,000 of annualized interest, and they're highly marketable and highly liquid. So, you know, we're we're really pleased to have those on our balance sheet. They are a differentiator. Investors, customers, colleagues, suppliers all really, really straight rate the strength of our balance sheet because it gives security, consistency, and predictability that we'll finish jobs, right, and we can pay our bills. And a little bit of housekeeping as we prepare for for growth for those twenty thirty targets. We've put an RCF in housekeeping, positioning, preparation for the future. It's on a very good commercial terms, and and we see it as a voting confidence in us from the credit sector and and in the industry. So really, really pleased. Extra strength on the balance sheet, and and we continue to move forwards.

16:51 Capital allocation model, you can see there we have a very clear capital allocation model. Firstly, we're gonna invest in ourselves. We believe we can generate stronger returns in doing so. So that will be organically. As Bill talked about, we've gotta grow our specialist businesses, grow them across The UK. We'll be investing in new branches, not physical properties. We have those physical properties, but in the people, etcetera, to grow those businesses. So internal operational organic investments. And then m and a, we've done four m and a deals over the last four years, adding at date of acquisition about a 125,000,000. Those deals are margin accretive. They're higher margins. They are growing. They are being integrated. So we have a very clear message there. And I think in the appendix of the slides, we've we've put a slide on our m and a investment strategy.

17:40 There will be strategic hurdles. Bill's talked about adjacent markets. We're you know, we'll be very specific about what we want to buy. They will be buying capability and technology. We're not chasing revenue and volumes. So we'll buy there, and they will have to meet our strategic hurdles, and they will have to meet our financial hurdles, obviously. So we will you know, we are looking to that. Acquisitions are not in those strategic targets that Bill talked about, the 2.2, more than 2,200,000,000 of revenue and 4% margins. So where we define those, we will they they will be accretive to that. So a clear view on what we wanna do internally and then a clear view externally. Our dividend cover is about 1.8 times, so that's pretty strong. That's the strongest in

18:23 the industry. How do we get to that 1.8 times? It's effectively, we return all of the interest income from the PPP assets, that $3.3700000 pounds, and then about half of our adjusted PBT. So we have a very clear, sustainable, ordinary dividend, and that's our strategy going forward. And then if we have excess cash, we will return that excess cash. We do that we've done that in two ways over the last few years. We've done share buybacks and a special dividend. Those to date have been closely tied to one off returns that we've had. So we talked about the £10,000,000 corporation tax refund. We've given that back as a share share buyback. We have tramlines that we talk about for when what we think is excess cash. So we take that average month end cash, the 176,000,000 that I talked about on the previous slide.

19:12 We express that as a percentage of our revenue. At December, that's about 9.7%, and our tram lines are eight to 12%. So we are bang in the middle of those tram lines, exactly where you'd expect us to be. Our view is as we go forward and we generate higher profits, we will move up that. And at that point, we will look to return excess cash. And just on the right hand side, it's worth pointing out we have delivered £84,000,000 of shareholder returns. £46,000,000 is the ordinary dividend and the balancing number through £25,000,000 worth of share buybacks and £12,500,000. And worth just stressing that, you know, repeat the point, the strong balance sheet is critical. It's in that wheel that Bill talked about, the strategy wheel of how we drive the business. It's important to our customers. Important It's to our colleagues, and it's important to our clients. So we, you know, we have a very clear capital allocation model. We've demonstrated that's what we do. And if I go to the next slide, you know, we have a strong view of going forward. We've delivered 250 TSR over the last four and a half years. Have we done that? We've got a clear strategic model. We are sticking to that strategic model. We've built a track record now nine consecutive halves of of growth, And we also have strong macro factors. Bill talked a little bit about those in the revenue growth slide. We'll talk about it a bit more going forward. And so our view, actually, if you put that, you know, strategic track record together and the macro factors, there is as much road in front of us as there is behind us. So we fully intend to go and do that again over

20:42 the strategic periods. I think that's one of the key messages. You know? There's really, really strong visibility of revenue, profit in front of us, and and we feel confident about the outlook and the momentum. Bill, back to you. Thank you. I just make the point in that slide that that order book at 3,000,000,000 3,900,000,000 is a is a conservatively run order book. You know, we don't we don't we run it on a conservative basis. Okay. So mod I mentioned modern bits of construction. What does it actually mean? Well, you can see in this photograph here, the building you see on the right was previously on the ground on the left. Now to make this work, of course, you need a a huge amount of very detailed design and planning and logistics and expediting and so on because, you know, the precise part on the ground there needs to arrive on-site at a precise time to be lifted into place in the right order. So it all it's all pretty military logistics there, but but getting it right, which we do, this is the fourth or fifth building we've done in this manner, it really works. So that photograph you see there on the right hand side was taken about three weeks ago, and we're already three or four stories higher than when we took it because we're going up at a rate of six and a half days per floor at the moment. And those units go in with a with a with a glass in them, with the balconies in them where where there are balconies, etcetera etcetera. They all go up in a, and it's a really, efficient way of of, of building, a high rise building.

22:12 We spend a lot of time on people. We've got a plan to obviously retain our very good 4,300 very good people and to attract more good people to the business as we grow. I'm very proud of the fact that our churn rate voluntary churn rate is probably half the average in the industry. Our employee advocacy score is 87%, so 87% of our people are strong advocates of our business. And this year, we're number one for apprentices, number two for graduates in the civil engineering sector. Last year, it was the other way around actually, but I'll take either. So a huge amount of effort on attracting good people to the business and keeping our existing good people. Our ESG measures, I won't go through all of these everyone, but our ESG measures are really fundamental to us. We focus a lot obviously on people, on carbon, on safety as you'd expect in the businesses of this of this nature, on our social value credentials, and things like that. So we measure all of these things, and the key message here is that all of these measures, help our business to improve. So we don't measure these for any ESG reason. We measure these things to help us improve the business, and we do them anyway even if there was no ESG reporting.

23:21 I think it's the important thing just to to to show. But we are triple a MSCI rated. You see down the bottom, there's all the accreditations and so on down the bottom.

23:32 This is a really important slide, everyone, because I get frustrated sometimes that people still think that the construction industry or the or the big tier one construction companies still bid against each other for work, and that's not the case. We we bid against each other to get places on on frameworks, and once we once we're on those frameworks, there is very little further competition. In fact, in water and highways, there's no further competition. So we get allocated projects. We then go and design those projects. We pay to design the projects. We build up the target cost or the or the price, whatever it might be. We we build in risk and contingency and inflation, all those things, and our fee, then we agree it. So on the left hand side there, you can see that 99% of our order book is made of of some sort of negotiation is built up through some sort of negotiation.

24:24 On the left hand side in the red, there is is many infrastructure and water, and all of that work is done on a target cost cost reimbursable basis. So, again, if in the water industry, we we generally once you've won a personal framework, and we've been very successful in AMP page and in AMP 70, by the way, you get a generally geographical patch, and we do all of the work within that patch. There's no further competition. So all of the work there is negotiated one way or another. On the on the right hand side in the gray is probably the building sector, and those jobs typically end up as a as a fixed price, but you arrive at that fixed price through negotiation and without any competition. So, again, you build in all of the contingencies that that you need to. I think that's a really important message for for prospective investors is that we do not hard bid any of our work. The 1% you see there where by the way, that's not quite right, because the 1% you see there is hard bid.

25:21 So lump sum fixed price, that is all in our smaller business units in the North Of Scotland where this is actually a more appropriate procurement method because the jobs are smaller, typically a million to couple of million pound size projects. And so you don't have the administrative burden of the target cost cost reimbursable type of thing. And, actually, those two business units are are are most profitable two business units as it happens. So it proves that you can if you've got the discipline to put in the right price and to stick to your guns, then it can be a profitable and sensible procurement route, but the vast majority of the industry has moved away from that now, especially in the big stuff. So that's a really important point, everyone. Moving on to the order book. £3,900,000,000 as I said I won't go through all the detail there, you can see it yourself.

26:08 Roughly ninety ten public regulated and private and that wax doesn't wanes a bit depending on timing but that's broadly what it's going to be. The important things for me are the work secured numbers. So at the half year, so at December, we had 98% of this year's work already secured, so you'd like to think we're there by now. And at December, we also had 81% of next year's work already in hand, and that it will be higher now. So very good positions. And actually, as we speak, we somewhere somewhere around 50% for full year '27. So we've got a really good forward visibility of of our work. Just before we move on, Bill, there's a couple of questions on the right. I think it might be worth taking this one. The first one is, how is the ISG impacting the the business or the the failure of ISG? And how does that impact here, which I think goes with some of this? And then how how are some recent government policies about infrastructure investment?

27:00 Yeah. Okay. Maybe we'll just touch on those as what's in and what's out and how we feel about it. So ISG was another sedentary lesson to to clients that you wanna contract with companies with a good balance sheet, a good reputation, and a good attitude to risk. Because when a company and and by the way, I take no pleasure in the fact that we've actually employed quite a few of their people. But it's it's a disaster for for clients when a when a when a contractor goes bust halfway through and you got a half built whatever it is you're building. And to get it handed over to somebody else and built will, a, cost you a lot more and take a lot more time. So it's not good for anybody. So on the back of ISG's failure, we have picked up a number of of projects in the custodial sector, a number of projects in the education sector, and one framework in the custodial sector.

27:51 And only one of those projects was on the ground and halfway through as I described a minute ago. We don't like taking those projects because they are generally troublesome. And so but but, of course, our clients want us to help them out. So we do that. So So the project the one project we've taken up for ISG was taken on a on a straight up cost reimbursable basis, the actual cost plus a fee. So we'll finish the job. We'll get it done. We'll take down what what what doesn't pass must finish the project, the client will pass the actual cost plus plus our fees. So there's no risk in that, which is the important thing. On all other projects, aren't on the ground yet, we'll corroborate the design, we'll corroborate the pricing, and so on before we start work on the ground. And and in frameworks, they'll be on the same terms of as the existing framework as our existing frameworks.

28:40 So so the the profitability is is included in the in how you build up the you know, in in how clever your design is and how you build up the cost and include the risk factors that I mentioned earlier on. And until we contract them, they're not in our order book yet, so the picture of that goes on top. Yeah. So I reckon we'll get upwards probably more than £400,000,000 worth of work out of the failure of ISG. Government policies, well, to be fair, they're making some good progress. They've they've acted in the roads market to to prevent, the sort of cycle of appeals for for roads, and so there's only one appeal allowed now, and that's it. And that'll take probably a year of the average gestation period of roads. That's very positive for us and the whole industry. They are looking at how they shorten the planning process. I saw yesterday before, and if it was, there's a view a to to reducing the input from local councils to planning and even for the planners in certain certain certain projects. So so that that I think will help, but also they're showing signs of of of being a bit more bullish about shortening the whole planning process and getting rid of some of the hurdles that we face. So for example, in high rise buildings, the new safety the the build the new building regulator is finding his feet, finding the sort of way he operates. The industry is trying to understand how it operates. We don't have any projects in that system at the moment, by the way, but there is a bit of a hiatus there in terms of getting those projects through the

30:12 new regulator. The government again has has has woken up to that and is is now trying to fix that as is the industry. So I think that logjam will will will see itself good in in the not too far distant future. And then the things like water neutrality and and and nutrient neutrality, which we still need to deal with. So there are a few self imposed hurdles here, which we still need to get through. But overall, the government is showing willing in in in driving change too, which is good to see, actually. Okay. So why are we so keen on frameworks? Well, frameworks give us really good long term visibility. They give us long term relationships with our clients. That visibility allows us to get our ducks in row in terms of our people, our supply chain, materials, all those good things, balancing our our resource histogram is a long way into the future.

30:58 So that's why we're so so keen on frameworks, and we do, you know, upwards of 90% of our work in frameworks, long term frameworks. And just as an example, the top three bars there, the top three green bars in environment is AMP seven and eight in England, a d v two and s r 20 on just Scottish frameworks in water. So you see three bars there, but when you dig beneath the skin of that, you get to this slide. Excuse me. So we have currently 55 frameworks in the water industry. We work for every single of the big water companies in The UK and the environment agency, and you can see the spread there on right hand side in terms of the design big design and build frameworks, and and most impressively for me, our our progress in establishing a footprint on the on the smaller capital maintenance and water technologies frameworks.

31:50 So a really good position in in Ampate. And you can see down the bottom there, obviously, as Chris said earlier, I mean, the crossover at the moment between AMP7 and AMP8, or will be in the crossover shortly. Remember that a contract letter on the last day of AMP7 will take eighteen months to two years to build, and and the contract letter in the first day of AMP eight will take at least six months to get onto the ground. So so there is a quite a long merge of AMP seven and AMP eight. As Chris said, there's typically a bit of a dip in that merge, but so far, so good. And as you said, in AMP's in in in AMP seven, we tend to see a tail off at this point, and we've not seen that. It's just been carrying on. But you can see as well there that the the split between those frameworks in AMP seven and AMP eight is pretty much double in AMP eight. You know, we've gone from 19 frameworks in AMP seven, which will which will finish, and and s r 21 finishes next year, up to 36 frameworks going forward. So we've made a really good progress there.

32:44 And, of course, AMP eight goes to twenty thirty. I can tell you that that that we'll be doing the same thing in in AMP nine and AMP 10. So most of our frameworks, you go back to the previous slide, in water are extendable for five years. It's generally five plus five five years. There are a few variations, but I reckon we've got a very solid foundation of work in water for the next decade and more as a betting man. So really good progress there. So all in all, everyone, we had a we had a really good start to the strategy period. We've had a really good half year. And and as we've said, and as Chris said, we we think that the second half, will will be broadly flat, on on the first half. So so that's where we are. That 3% I mentioned at the start of the presentation is still our waypoint next year, next financial year, en route to our 4% in 2022, and we and we're sure we can get there.

33:40 So thank you. We have any questions. One more question. Any exposure if Thames water fails? Well, we've looked into this, obviously. So a few things here. Firstly, TEMS are being very good at talking to us and keeping us appraised of the situation. They're paying us on the nose every month. We've had no issue with them at all in terms of payment. And all of our work with TEMS is a target cost cost reimbursable basis, which means that at the start of the month, we forecast what we're gonna spend in the month, and we tell TEMS Water that in this example. And then at at that at that point in time, they pay us. So, actually, we only have a month out of pocket at any one time. And and but the most important thing here is is that the government have an obligation under the special administrative regime to step in if a critical national infrastructure company like Thames fails.

34:28 So there's been a lot of preparation, I'm sure, behind the scenes that if Thames does fail, the government steps in, and you carry on pretty much as usual. The contracts are just novated. In fact, the government will just step in above Thames Water Utilities, I guess, and and carry on. So I don't wanna sign blase. There might be a bit of a hiatus, but that's all. I'm not worried about it at all. And by the way, I think I'd well, I don't know. Maybe I'm too much of an optimist. I think I think they'll get it through. So any other questions, anybody? What we'll do is we'll wait a moment. If not, we'll just ask you for a few closing comments, but we'll give it a minute. Okay. Thank you. Okay. Can't see any.

35:20 Okay. Well, thank you everyone for listening. Appreciate your time. Just in closing, we're in really good shape. We got a really good bunch of people. We've got a really good order book. We've got a really good balance sheet. You know, no debt, no pension fund liabilities, strong cash, and and the outlook looks really good. I suppose the other theme when Chris and I have been going around the the road show after half year results has been concerned about the government's ability to spend and and will they divert money into defense. And my very strong view is not from our sectors. So our sectors are custodial where there's not enough prisoner places now and there's forecast not to be for some considerable time, so that remains a very strong sector. Education, we're still not building enough schools in this country to stand still, so that the condition of the asset continues to deteriorate overall, despite all the schools that we are building.

36:09 So a massive market there pretty much in perpetuity, I think. Defense, we're big in defense, and if there is more spending there, we'll be a beneficiary of it. So and then roads, everywhere you go, and roads, you can see the state of the roads are not very good everywhere you go. So there's an enormous spend still to come in roads, and risk three is is on the way. Hopefully, we'll know about a bit more about it in the not too far distant future next year. Think it's out. And that will be a big number too. I don't know where it'll be, but it'll be $2,030,000,000,000 pounds. So I'm very confident that the sectors we're in are critical to maintaining the the productivity of this country, maintaining the social and economic infrastructure of this com country to be productive, and it won't it won't be, affected by government cuts. They'll go looking somewhere else. So we're in really good shape, everyone, and we're very confident in our ability to to achieve our strategic goals after 2030 and indeed beyond.

36:58 Thank you very much for listening. Bye bye. Thank you. Bill, Chris, thank you for updating investors today. Could I please ask investors not to close the session as you now be automatically redirected to provide your feedback in order that the management team can better understand your views and expectations? This will then take a few moments to complete, so I'm sure it'll be greatly valued by the company. On behalf of management team of GALLIFORD TRY HOLDINGS PLC, we'd like to thank you for attending today's presentation, and good morning to you all. Thank you.