Galliford Try Holdings plc (3WC.F) Earnings Call Transcript & Summary

Good morning, and welcome to the Galliford Try Holdings plc Investor Presentation. [Operator Instructions] And I would now like 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 Kris Hampson with me, CFO. You can see on the screen -- so we've had a really good year, everyone. All of our metrics are heading in the right direction, and Kris will take you through those numbers in a bit. I'll just plan 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 much detail, and then we'll go into the strategy a bit later on after Kris has done his numbers. So here's the first slide, which I think it's important that people understand. On the left-hand side there is the philosophy of how we run our business. And it's quite simple really, and we try to keep them 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 doing the right things fitting into our culture really. 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 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 that is easy to access on 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 U.K. with the right people, the right supply chain, the right clients, terms and conditions and so on. And that means that we can perform consistently and predictably on the right-hand side on all of our projects. And we have a scattergram of all of our hundreds of projects across the U.K. The vast majority operate within a very narrow band of expectation. There's a few doing a bit better, a few doing a bit worse. They tend to counteract 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 real turns. And Kris 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 that's where some members of one part of the business go into other parts of the business and have a look at the projects or the business and tell them what they see. So it's like an internal arm on the shoulder. This is how we see things, and we find that really, really important and helpful, I suppose. So once we're in contract, we will have a very robust system of risk management through the tenancy of those projects. This is what we do. I won't go through all of these everybody. But on the top left-hand side, environment 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, building of prison 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. There's an enormous amount of work and the backlog of maintenance and the sort of state of our economy, I suppose, whilst not very impressive, means that for construction companies like us, it's a good time. And I have to say, and I've probably said a few times in this presentation that I've never seen a construction outlook like this in my career and not just for the next sort of 5 years, for the next 25 years and the best 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 and Morrison Construction in Scotland. And we keep the Morrison brand in Scotland. It's a very strong brand in Scotland, got a lot of heritage and so on, which is why we've maintained that brand up there. Then 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 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. We can come back to that a bit later. 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 5G networks, EV charging, secure communications, things like that. FM is a good business, really good profitable business. And then we've got a business that does fire remediation, facade remediations and so on. And the asset security business is all about pretty high-tech security detection around critical national infrastructure. That's water treatment works, energy plants, military establishments and so on. And then in infrastructure, what it says in the tin really. I think the important thing in infrastructure is that we're moving more into energy. The energy market 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. And that just diversifies that market a bit for us. And then on the right-hand side, we've got water. As I said, we call environment, that's water and wastewater. And within that, asset creation is about the big design and build functions within all of 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 water tech, which we call pretty high-tech manufacturing businesses in the water sector, making control panels, motor control centers, chemical dosing systems, screens, [ penny ] stocks, things like that. So that's a broad overview of what we do and how we structured and a quick snapshot of our clients. As you'd expect, we work for every single of the major water companies in the U.K. We work for all of the big public sector authorities, departments you see on the top right-hand side there and lots of local authorities and some private clients as well, of course. So we've got a very simple strategy to grow the business. We set up in 2021, GBP 1.1 billion business, making 2% operating margin. This year, as Kris will take you through in a minute, we hit GBP 1.9 billion, and we hit our 3% margin target 1 year ahead of program, which is good because our original plans for full year '26 to hit that target. And we've got an aspiration and an intent, of course, to be bigger than GBP 2.2 billion and making 4% operating margins by 2030. And there's a few -- if I place the strategy just for clarity. To achieve that, we continue to grow the revenue and margin in our three big core businesses. So that's building at about GBP 1 billion a year for round figures, highways at about GBP 300 million, GBP 350 million a year and the big design and build part of water at about GBP 450 million a year or so. And we continue to grow those big businesses. They are the sort of core of the business, the critical mass, and we grow those businesses slightly in advance of inflation and growing to about 3.5% operating margins by 2030. Then we grow those specialists. I took you through a few of those a minute ago. Those specialist higher-margin businesses in adjacent markets. And it's important to understand they are all in adjacent markets. They're all 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 to do every day. So we grow those specialist businesses. We've been incubating this business now for some years. They're all growing in scale. They're all profitable, some nicely profitable, and we expect these all to be sort of mid- to high single figure-digit margins, and we grow the revenues through to 2030. So as we grow those businesses, the mix changes, you're making the high mid-single-digit margins and the mix change in the business as we go forward, and that drives the 3.5% up to 4% over the past. Alongside that, we reentered the affordable homes market. So this is a market that we were excluded from after we sold the housebuilding businesses to Vistry back in 2020. There was a restrictive covenant on us there for obvious reasons. But we're back in that market now. We've reestablished the team. We've reestablished relationships with our clients. We welcomed us back with open arms, and we've established a really good position on frameworks to be able to access the affordable homes market. For various well-publicized reasons, the funding, the funding mechanisms, the building fire sector review, planning issues, nutrient issues, et cetera, et cetera. 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 GBP 200 million, GBP 250 million per annum by 2030. So it's not affecting our performance. but it is probably at least a year behind where we thought we'd be on this or the market would be on this. But we're well placed to get stuck into this market once it sort of gets going again. And we're confident that, that will also augment the -- it's higher than the 3.5% 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 U.K. So we operate from Inverness to Plymouth and all points in between. We've got 28 offices or locations around the country. And we've got a 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 U.K. and put more of our specialist businesses into play there, and that's the simple sort of overview of that. And when we do all of those 4 together, we continue to grow the shareholder returns, and Kris will share some nice graphs in a minute. 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 very good retention rate there. 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 about 150 young people into the year -- into the company every year, graduates, degree apprentices and apprentices. And then we've got a strong sort of support mechanism to make sure 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, but 4,200 people. Very pleased to get 87% employee advocacy scores, same as last year actually. So that means 87% of our people are strong advocates of the business. And we are very pleased as well to be voted #1 for both graduates and apprentices in the job crowds interview earlier this year. We promote, you can see there going on 10% of our people every year, 400 promotions in the last year. So that's all about the career development side of things as well. So a strong focus on people. slide isn't moving on, Alex...[Technical Difficulty]

Feel free, Kris...

[indiscernible]. I think just point out the sort of ESG 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 very focused on it. Just a couple of key numbers really out here is sort of the accident frequency rate at 0.03. So health and safety is the most important thing that we do, our people home safely at the end of each day is really important there. And Bill talked about the employee advocacy score and the #1 apprentices. And on the right-hand side, we sort of talk about the 26 days taken to pay our suppliers. So that's one of the things that 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 utmost importance. So paying on 26 days is really important. If I move on then to my section and my numbers. let's take you through the key numbers. So GBP 1.9 billion in revenue, as I say, Bill said earlier, that's up 6.3%. That's on top of a 27% revenue increase in the year before. So that's third in 2 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 to in a minute. So really strong progress there. That flows through to margins. We set ourselves a 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 GBP 45 million of PBT, up nearly 29% with a CAGR over the last same 5 years of nearly 50%. So really strong profits up GBP 10 million, which leads to a dividend of 19p per share and a final dividend of 13.5p per share. That dividend is up nearly 23%. Average cash and cash is -- cash and profit, the 2 most important metrics to us. That's what broadly the whole team is incentivized on and the ESG measures I talked just a second ago about -- average cash up strongly to GBP 179 million, 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 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 GBP 4.1 billion. So a strong increase there, reflecting AMP 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 75% secured for the following financial year, so FY 2027. And that 75% is up 5 percentage points 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 we've got pretty good visibility -- 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. 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 and 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 AMP7 was particularly strong in the water section. Moving to operating profit. You can see equally profits have flowed in all the divisions as well. So Building up 17% Infrastructure up 36%. And in margin, strong margin progression. And you can see 50 basis points in Infrastructure and 36 in Building. Overheads, central overheads rose in line with inflation and revenue, and that's broadly inflationary costs, et cetera. Our Investments business is a little bit lumpy. Bill will talk to you, I think, a little bit more about it later, but it depends on when particular projects come to market, 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 GBP 1 million to GBP 0.4 million. So pretty tidy progress across the board from all of our divisions. So diversified order books, all driving forward 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 there, very strong in building, up 7% with 92% of the work secured for the current financial year. And you can see a nice spread in the pie chart on the right-hand side across 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 2 segments in there at the moment. All those segments, we choose them. There are segments that you won't see there, we choose segments which are noncyclical, which have strong order books and strong demand. And frankly, we need to carry on. We need to keep building schools we need to keep the roads and for obvious reasons, defense is pretty hot at the moment. So strong progress there in the Building division and looking good for the future. If I move on to infrastructure, you can then see how that's separated. On the right-hand side, the order book, GBP 1.7 billion, with 95% of the work the secured. And at the bottom, you can see progress on 2 of our biggest road projects, the A47 over in the East of the country in Norwich and the Carlisle Southern Link Road, which is perhaps our biggest project up in the Lake District, about GBP 140 million road linkage there. Strong progress again on the order book there, up 9.2% and looking good for the future. AMP7 is transitioning to AMP8 predominantly during this year. This will flatten revenues. The AMPs typically always do have sort of modulation down and then back up again. It's slightly flatter this year, so we're expecting flat revenue. But we're looking forward to AMP8 is the honest answer. AMP8 as you may well know, has doubled from just over GBP 50 million to just over GBP 100 million. So that's broadly doubled. So we're pleased to get into AMP8 and looking forward to it. We've got some good early work coming through there, the design work, which we get on the ground in the coming months. So we're up for that. And we believe we'll -- the margins and the structure of AMP8 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 still 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 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 pay them. It's ever more important to our colleagues actually who are more savvy about who they want to work for and having a safe company is definitely more attractive and clearly, it's attractive 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 intangible assets from the previous acquisitions, our PPP assets. These are assets that we have, which are very liquid in nature. There's a strong marketplace for those. They generate about GBP 3.5 million, GBP 3.6 million worth of interest a year. So strong cash back profits, returning about 9%. So a really good strong asset. We take that GBP 3.5 million of interest a year, and we return that as part of our dividend cover. Our dividend cover is 1.8x, which is almost certainly the strongest in our sector. So good cash generation allows us to do that and the PPP assets are there. In terms of assets, if you take the noncurrent assets and the IFRS 16 and net them together because we sort of do, we've got about GBP 15 million worth of assets, very small, mostly servers 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. We get paid by our customers in just under a month. And as we say, we pay our suppliers in 26 days. So a very clean, very tidy balance sheet that moves around regularly, and we're in good control. 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 month end cash moving up strongly from GBP 155 million to GBP 179 million. 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. spot cash at year-end was GBP 237 million. That was up GBP 10 million from GBP 227 million. So we are generating real cash that included paying about GBP 25 million out in capital allocation last year through the standard dividend and the share buyback. And if you look over the last 5 years, by the time we've done the share buyback we have announced last week and the standard dividend, we will have returned nearly GBP 108 million over the last 5 years broadly equivalent to sort of 20%, 25% of our current market capitalization. So strong historic returns. And we have a belief in the future that we will continue to generate cash. 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 2 plants in the last 12, 18 months in our water sector and our specialist businesses that Bill will talk you through shortly and mentioned earlier, those organic investments will return strong IRRs and drive us further forward. We've also done 4 acquisitions, so 4 inorganic acquisitions in the last 4 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 we would look to do that. We're not going to be serial aggregators. We would think 1 or 2 bolt-on deals a year is the only answer, 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 1.8x cover, strongest in the sector. We feel that's a good place to be. And finally, where we have excess cash, we will return it. And we just announced our third share buyback, as you can see, totaling GBP 35 million, and we did a special dividend a couple of years ago of GBP 12.5 million. So incremental excess returns totaling some nearly GBP 50 million over the last 3 years. Looking forward -- looking backwards and looking forward, then you can see the charts on the -- for all of our key metrics there, revenue, profit, EPS, order book, et cetera, they're all moving forward, 10.5 years of progression on all the key metrics that we're really proud of that, 5 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 chart, you can see on the left-hand 2 charts, GBP 2.2 billion, sorry, of revenue and 4 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 delivered 352% TSR. We think there is a lot of TSR in front of us, a lot of opportunity. And 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 got to keep doing what we're doing. The market is incredibly strong. We've got a great team, a proven model, so we feel good about it. And by -- sorry, 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. And Bill, I think that's back to you.

Thanks, Kris. Sorry, I disappeared early on everyone. I don't know what happened there. So we'll move on. So the next question, of course, everyone asked as well, taking from Kris' slides as well, how do you get from 3% to 4%. And 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 margin growth in a bit more detail. There's 4 steps essentially that we see contributing to that. One is about volume and growth and leverage, which 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 good to the mill. And the fourth one is the higher-margin special services work. So if we run through those in a bit more detail, there's a few slides on each -- so when it comes to drivers 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 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 social and economic infrastructure for a considerable period of time, and those chickens are coming home to roost. So the sheer quantum of work in all of our markets out there is astounding. 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. So that's the first big driver. The second one is climate change and people sort of roll their eyes 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 severe in some cases. That's what causes the overwhelming of sewage treatment works and the works can't handle these massive flows and you get spillages into rivers and so on. We see the same on roads with the drains just can't handle 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. So climate change when it comes to infrastructure is very real indeed. And then, of course, there's the population growth and the change in demographics and so on, which creates its own growth more in the social part of infrastructure, 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 into adjacent markets, which I 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, AMP7 was GBP 59 billion. AMP8 is GBP 104 billion 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 AMP9 is looking bigger than AMP8. So it's gone from 59 to GBP 104 and AMP9, which is 2030 to 2045, is looking like it will be even bigger. And it's fascinating that we've just sort of ink still dry on the AMP8 frameworks, which came into force in May -- March this year, sorry. And we've already got 4 big water companies talking to us about AMP9, 10, 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. And looking to secure, as I say, the A team to be with them on that journey. So water and wastewater is very, very, very strong and will be for a considerable period of time. And of course, that is funded by our bills. This isn't government expenditure. This is regulated expenditure funded by our water and wastewater bill. Highways. Risk-free has been published at about GBP 24 billion. There's still some detail to come as to exactly how that's going to be spent. But the focus of RIkree is more on maintenance and operations. It's more about pinch points and junction improvements than it is about big roads, and that plays to our strength. 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. Education is perennial sector for us. It's an enormous sector. We build lots of schools every year. We've been on the state's DFE framework for many, many years. And we see that continuing into the future. The schools estate is in -- there's some nice new schools, of course, there are, but there's lots of schools that are beyond the sell-by date and need replacing. And that program will carry on for years to come. Defense, obvious reasons, it's a lot of money being spent in defense at the moment. And we do a lot of work for the MoD. We on the Defense Estate optimization program. A lot of that work 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 again, we can see a long way into the future on that program. 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 address that, and they're doing that in 3 ways really. The one is the big new super prisons. I think there's 5 of them. We're not involved in those, and we have no intention to be involved in those. The second one is the new house block. So you can see that photograph there actually. That's a new house block 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 just outside the fence. And once it's all ready to commission, we then just extend the security fence 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 general upgrades and things like that. And that is a very buoyant market at the moment. And then finally, affordable homes. I mentioned that earlier on, GBP 39 billion was announced last year. And I think some of the detail of how that's going to 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 6 months or so as the road blocks get pushed out of the way. And we're in a really good place to take advantage of that when the time comes. So when we look at volume and growth, just carrying on that, Kris has mentioned some of these already. But just for clarity, about 90% of our work is done in the public regulated sector and about 10% or we a bit, of course, but about 10% in the private sector. The important thing for me, which Kris mentioned earlier on is at 75% and 50% 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 huge backlog of work coming down the line that we have the visibility that we have now for sort of 2 years out. I've never seen before in my career. And 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. We don't think so, and I don't want to sound blase, but the GBP 725 billion that was announced earlier this year in the 10-year infrastructure plan is capital expenditure and it's ring-fenced. So it doesn't fall into the government sort of day-to-day expenditure like welfare does and pensions and things like that. This is ring-fenced CapEx. So I don't want to sound blase, but I don't lose any sleep about the fact that this money is going to be spent and it has to be spent. Let's move on then. So frameworks. So this is about a better contracting environment and the fact that clients are being far more sensible about how they procure and all the Tier 1 listed contractors are being formed and private are being far more sensitive 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 darker shade of the existing frameworks, the lighter shade is when 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 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 the terms and conditions. Just to make a point here that once you're in these frameworks, all of the work is negotiated. So you get on to these frameworks on the right-hand side here by putting in -- they let on 80% typically 80% or 70% quality and the rest commercial. And you can see there typical sort of scoring metrics on the right-hand side. Once you're on these frameworks, all of the work is negotiated. 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 2-stage work, which is typically in the building and the light is just straight out negotiated. So the point is here that 99% of everything we do is negotiated. It's not tendered, so to speak. And the next slide just looks to clarify this a bit more because I keep saying and a lot of people still think that we tender hard tender things and we get awarded work on lowest cost, and that is simply not the case. So the top bar there shows the olden days of contracting where we'd have very little or 0 input into the design, a big stack of papers, the bid documents with your desk and you'd have a pretty short period of time generally to decide what your price was. And then there'd be award -- a contract award 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. Do you want to build a school? Yes, we're going to build over here. But we get involved in the scope to say 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 in this example or the scope of whatever it is we're building. Then we get paid to design it. 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 and inflation and all those good things. And at a point in time, we'll go into construction. 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 contract does become a fixed price, but it's a through negotiation. In the infrastructure environment and environment businesses, it becomes a contract and then you then execute the contract on a target cost reimbursable basis. So the risk is dramatically different in this environment to what it was 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 2 things. I've talked about the first 2, mature client relationships, mature client procurement methods on the left-hand side with robust risk attitude from ourselves being very safe about what we do and what we don't do. Once in the frameworks, it's all work and we can do all day every day. They still remain the mainstay of our operational improvements, our margin improvements. But then on the right-hand side here, you've got a whole other things, which all add good 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 3D. You can put the goggles on and walk through the building or over the bridge or whatever it is 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 resimental. And what that means is that we drop the ball less often on site. So the [Technical Difficulty]

I'll carry on until he gets -- so I'm sorry about this, guys. I've got some technical issues. But yes, so driving the margin growth there, Bill 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 presentation today. And on the right-hand side, I think you'll see we talk about digital tools, high-margin adjacent markets. If I move on really, I think to perhaps most interesting of the adjacent markets, it's really water. We've got a fabulously strong position in water, arguably leading across the U.K. We work with all the 13 major water and sewage companies. So really strong position there. We've got AMP contracts with all of those moving through. And there's still some AMP7 rolling off, as I said earlier, but we've got really strong. And I think if you look to that chart on the left-hand side, the 5 of which split between AMP7 and AMP8 and that number will come down slightly as the AMP7 roll off. There's still a couple to negotiate into AMP8. But I think if you look at this a couple of years ago, the design and build in the red, that would have been most of the pie chart in reality. What we've picked up really is the capital maintenance and the water technologies businesses that came through the Lintott acquisition back in 2021. And we've really driven those businesses forward. And just to give you an example of what those businesses are, you can see at the bottom, the control panel from Lintott there. We build these huge control panels built back. Bill, I was just talking about the control panel on the left and sort of talk about -- do you want to pick up?

Yes. Thanks, Kris. [indiscernible] what's going on here.

I've done the majority of the slide, Bill, I was just talking about the control panel and where we can take them.

Okay. So just 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 our website. And I think that video about our Guildford Crescent project sort of embodies everything I was saying about modernness of construction also manufacturing. So he says ridquous, sorry. But I'd point you towards that if you haven't seen it. So Kris has started on this slide. I'm sure you can read all the stats there. Yes, the panel on the left-hand side, bottom left is a panel that 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 2 of them massive panels. I can tell you that on this particular treatment works, the existing control panel is like something out of the movie Chernobyl. It's fantastic. It's like stepping back in time into the 50s. But it's just symptomatic of the quality and the state of our infrastructure. And jobs like this, where we're putting 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 an enormous market across the whole of the U.K. So we've got a very good position in water and the water market is a huge market we've discussed in the past. And 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. 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 and wastewater treatment works, but we don't maintain them or look a them thereafter. And that's an obvious opening for us to move into to do more of that. So 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 which I take on water here, which is how should investors think about growth during the AMP7 to AMP8 transition. So as you saw earlier on, GBP 59 billion versus GBP 104 billion. So AMP8 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 what we do. We don't bite a born, we can chew. We're not going to overtrade, and there are constraints through the supply chain, 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. The AMP8 transition, I'd say, is looking fairly traditional now. We had a good strong in AMP7. But remember that AMP7 project as they left the day before the end of AMP7 can run on for 18 months in parallel with AMP8. So there is a big crossover here. But we are seeing the typical sort of modulation between the AMP a flattening off of the workload in the first year. And the upside then, of course, is that years down the line are already looking extremely busy. So we move on. So going back to the high-margin work then what we've done here, and it's the same as the framework slide and the rest of the business is we've established a very strong foundation in frameworks through the specialist businesses that can grow those specialist businesses. You can see there water and waste, water, FM, security, affordable homes, actually on the affordable homes, very hopeful that we're going to announce another 2 frameworks imminently to add to that list. So what we established there, to support that growth through 2030 is a very strong foundation of opportunity through frameworks to grow those specialist businesses, as I described earlier on in the presentation. And finally, Kris has pretty much covered all of this, but we had a really good strong year. And we end the year and move into next year with a fantastic order book, a fantastic bunch of people, great client base and an outlook, as I said before, that I haven't seen before. So we're feeling very, very confident about the future. There's one question there, which I sort of half addressed, I think, about people, which says, how are you addressing skill shortages and retaining talent in specialist areas like water and defense. Well, I hope I sort of answered that earlier on. We worked very hard in retaining our existing good people through career development 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. And we continue to be an attractive employer. Now our 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 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 we work very hard 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 today. Alex, can you tell me?

No, that's correct, Bill. You have addressed all, those questions. And if I may, 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. 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'm saying this a few times there, is there in Spain to support. So thank you all very much.

Have a good day. Bye-bye.

That's great. Bill, Kris, thank you very much indeed for updating investors today. Could I please ask investors not to close the session as you'll now 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.