Galliford Try Holdings plc (GFRD) Earnings Call Transcript & Summary

So good afternoon, everyone. Welcome. Thank you all very much for coming to see us this afternoon here. The purpose of this session is to give you a deeper understanding of parts of the business, introduce you to some of the management team that are here today, and I'll do that in a sec, and to give you a deeper understanding of where our controlled revenue and margin growth is going to come from. As we said in our RNS this morning, we're trading in line with expectations, and there's no price-sensitive information coming through this afternoon. So here's the protagonists for today. I'll sort of top and tail the presentation today, everyone. And these are the speakers. We've got Steve Slessor over here. Steve is the MD of our Environment division. And by that, we mainly mean water. When we say environment, it's predominantly water and wastewater for the big, regulated water companies. There's some flood alleviation stuff in there as well, but mainly water. Andrew will talk to us about the numbers and our financial strength. Ian will talk about the sectors, and then Poppy will talk to us about carbon and why it's so important to us and to our clients. We've also got Peter Ventress, our Chairman, over there, who can be available for questions and so on later. And so we're aiming for about 1.5 hour presentation followed by Q&A and then a glass of wine. So I'd just like to give you all a bit of context about how we've arrived in the good position that we have and the firm foundations from which we can grow. In 2016, we set out a very simple and straightforward strategy to overhaul and improve the business. Very simple strategy: retain what was good and enhance what was good about the business, that is our people, our geographical presence, our position in frameworks, our regional presence, things like that, and then improve a lot of things that needed improving in the foundations of the business, our business management system, our processes, HR, IT, safety, et cetera. And most importantly, risk. Our perception of risk, our management of risk culturally and from a process perspective. And all of that, retain what's good, improve what need improving so we can deliver for our shareholders. This was successful and have culminated in a reorganization of the construction business in May '19, which was fortuitous really in terms of timing because when the demerger of the housebuilding businesses went through in the January of 2020, the dust had sort of settled on that reorg. The business was operating efficiently, and the culture of the business was embedded. The demerger then saw us very well capitalized with no debt, no pension liabilities and things like that. And this, on the firm foundation I've just described, left us in a really good place to go forward and to grow the business. Then of course came the challenges of COVID that we all went through. We dealt with that well, and we emerged from COVID stronger, I think, and in good shape. And with the confidence in those firm foundations and the balance sheet strength to set off on our new sustainable growth strategy. So this is our template for running a good construction business, in our view, a construction business that can perform consistently and predictably. It evolves around the core of good people in the center there. And we start on the left with a culture, a culture of discipline, a culture that means that we walk away from projects that aren't the right projects for us. where we have good processes to manage risk and so on. It's really important that our incentive models for the business mirror that attitude. So our incentive models are predicated around profit. cash and ESG measures, and there's no revenue driver in our revenue, in our bonus arrangements, which means nobody is scrambling around for work just to meet a revenue target. So this, in turn, drives a really high-quality order book. And we've got a great order book of GBP 3.4 billion, GBP 3.5-odd billion. And it's good in terms of its quantum, its longevity through frameworks, its good repeat client base, good, embedded cash and margin profiles, et cetera. And that's important because it's work that we can execute day in and day out with a high degree of confidence that will make our margins. We also get out of that order book a good, long visibility of our pipeline. And that's really important so we can align our people, we can align our supply chains. And again, adds grist to the mill in terms of performing consistently and predictably. And that, of course, goes on to strengthen our balance sheet, and so the cycle turns. So that's a very simple sort of engine for growth that we have that we believe is the right way to run a construction business and, as I say, produces a good, consistent performance. People are at the heart of any good business, of course. And we're lucky to have a great bunch of people in the business, and we strive to be a people who already had a progressive business that's led by our values. Led by Vikki, our HR Director, who is here somewhere, where's Vikki? We all spend a huge amount of time developing our 3,300-odd good people and looking to retain those people, obviously, and to gain new, good people into the business. I'm not going to go through all of those things up there. But we're working hard on all the things you expect us to work hard on. Our gender pay gap is good in the earlier careers, not so good in the later careers. We've got 7.2%, I think, it is at the moment, of our people are early careers people, which is really good. We're members of the 5% club, you see there. We've got really good succession management processes in place, and it's real. In fact, looking around most of the people, the GDP in this room have come through the succession planning process. And every single one of the last 6 of our managing directors to be promoted on based on retirements of the previous incumbents have been internal. And actually, Dave and Steve are the 2 latest ones here, along with Eddie up in Scotland, of course. So it is real. We work hard on getting ex-Armed Forces members into the business. That's part of the Armed Forces covenant. And those people are really good people that really fit our culture in terms of knowing their onions and sticking -- having the discipline to stick to what you know is right. So we do an awful lot in people. And these scores here are the results of our employee engagement survey in October last year, which we're really pleased with. So 85% of our employees [ are adverts to ] the company, which is really good. 72% of our employees or 70% overall engagement score, which is also pretty good. But really importantly for me and the rest of the exec team, 94% of our people are motivated by the type of company we aspire to be by our vision for the future. And that's a really good place when you're trying to keep those good people and retain new good people to the business. You've seen the slide before. We've got a very simple, like the last one, actually, a very simple, straightforward strategy to deliver high-quality products to our clients in a socially responsible manner so we can deliver for you, our shareholders. These 4 main planks. On the top left-hand side there, we aspire, as I said before, to be a people-orientated, progressive, values-driven business. And that's all about people, which I've spoken about really already, and it's about safety. And in the construction business, safety is always really, really important. Our AFR at the moment is 0.06, which is actually the lowest it's ever been, but we are not resting on our laurels. I can assure you we'll never be happy until that number is zero. The next plank there on the bottom left is about delivering in a socially responsible manner. And this one is really important, a, because it's the right thing to do anyway; and b, because our clients demand it of us. And Poppy will talk to us in a minute about why carbon is so important in both of those respects. We launched our net zero carbon aspirations last year, zero net carbon across our own operations by 2030 and across all of our operations, so that includes embedded and operational carbon by 2045. And that's a big challenge, but we're up to that challenge and we're making good progress, as you'll see in a minute. And then down the bottom, it's about the social value that we bring to communities. Again, something that our clients measure and rate highly and how we go about winning work. And again, in this part of our strategy, it's just the right thing to do as well as being an imperative to winning work. On the top right here, we have delivering excellence for our clients. That's about quality. It's about innovation, digital, modernness of construction, all the things that make us more efficient, deliver a high-quality product and more profitable. And if you can do all of those things, we earn a good return to our shareholders. A reminder of our targets for our strategy. At our last full year, we had a revenue of GBP 1.1 billion and we made a margin of 2%, and we aspire to GBP 1.6 billion at a margin of 3%. So the markets are there to support this aspiration, and there's 2 main areas that we're growing. It's doing more of what we already do in our existing markets. The markets are there to support that. We have the bandwidth to grow in our existing geographies and our existing business units. So that's mainly around highways. It's about the building sector that Ian will talk to in a minute, and it's about the sort of traditional design constructive commission part of water, which Steve will talk about in a minute. That's the growth in existing markets. And then we grow into adjacent markets. And by that, we mean markets that are pretty close to what we already do. So we're not stepping into unknown. It's stepping into known territory in a slightly different guise perhaps. And there are 3 main things in adjacent markets. There's a PRS sector, there's green retrofit, and there's the capital maintenance asset optimization part of water, which Steve will talk about again in a minute. And those are all higher-margin businesses, which will augment the sort of standard construction margins in the existing markets. So those are our targets. I'll touch -- by the way, I'll touch at the end of the presentation briefly on the progress in the PRS and the green retrofit part of the strategy. So this is the current shape of our business. You can see on the left-hand side there that infrastructure is about 30% of the business, and we expect that to grow to about 40% of the business over the planned period. So there's more bandwidth to grow in infrastructure than we see in building, although building will grow quite significantly as well from about GBP 800 million to GBP 1 billion for round figures. The order backlog is more skewed toward infrastructure. You'll see there, the backlog is more 40% infrastructure, 60% building at the moment. And that's because of the long AMP cycles in water and RDP cycles in national highways. That's what skews that a bit. We are talking outside and there's a sort of sense that there are some economic headwinds, I suppose, coming our way. The government has a huge focus on the construction of social and economic infrastructure to boost the economy post Brexit, post COVID, et cetera, et cetera. And with 90% of our work in the public sector and the regulated sector, we feel that we are reasonably insulated against any headwinds that may come along. We're well placed to continue to perform despite any headwinds that may come along. So that's a quick introduction, and I'll hand over to Steve to talk to us about water. Thank you, Steve.

Thanks, Bill. Good afternoon, everybody. My name is Steve Slessor. I'm the Managing Director of Galliford Try's Environment business. As Bill says, I'm a product of some good succession planning. I've been with Galliford Try for 15 years. Started here as a project quantity surveyor up in Scotland. I really had a successful and fulfilling career with them. And it's great when we're talking to new people coming into the business and those in early careers about the opportunity to grow and develop and get all those kind of things that Galliford Try. So David and a few others that are here today will -- are a real testament to that. So it's really exciting to come along and actually be able to speak to you all in this opportunity to talk about the water sector and share a bit about more what we do. So as Bill already outlined, the water is such a really big market for us going forward. Our market share is increasing following the successful acquisition of nmcn. And as we head into that journey towards net zero and low-carbon, which Bill talked about, it's a real, real big topic for our clients. And one of the reasons for that is low carbon really effectively means lower pound in the ground, more efficient service delivery and making that connection between low carbon and savings is really what drives our client forward. And it also gives us a real big opportunity to really drive that for us as well. So the picture on the screen there is a project called Uttlesford. It was a project for one of our water clients. It is the U.K.'s biggest off-site water construction project. And its whole ethos is to improve water quality for 120,000 people in Essex. Now this particular project was mainly constructed, [ used and ] offsite. And you can see on the [ fore ] on the left is one that is the virtual reality model, which is all done in the planning and the digital rehearsals that we use. The one on the right is what we actually constructed and that was in the factory environment and moved on to site in one single block. And we use digital tools, such as 3D laser scans and virtual models, quite often these days. And it gives us a really efficient product, but it also helps with things like quality and safety helps drive those marginal gains in terms of improvements on the bottom line margin. And you can see from that virtual model there, what's actually -- we actually constructed. So what does that really mean for us as Galliford Try? What does it mean for our clients? So like I say, we've really improved quality in offsite delivery, less time we spend in site, the more efficient we can come, the more improvement we can get to the bottom line. So what is really exciting market is in a really good place just now. You'll have seen quite a lot of headlines recently about store mover flows in the news, a really hot topic, and that's driving significant investment. And the market at the moment already is about GBP 5 billion a year, and that's split GBP 4 billion into what we call design and build capital programs and then about GBP 1 billion per year across what we call capital maintenance. And capital maintenance is effectively going out and fixing smaller problems on a more reactive basis around mechanical and electrical equipment that really drive and help protect the water networks. So it's a really, really big market for us. And the water sector is regulated, so it's regulated in what they call AMP periods, which is asset management plans. And they'll last typically for about 5 years. And in Scotland, we have an equivalent which lasts around 6 years. And these frameworks do give us a fantastic opportunity and platform for growth and being able to take the business forward on a really sensible, low-risk footing because most of the projects that we get through are all negotiated. We do very, very little actual competitive bidding. Most of it is allocated to us. And so that helps us address some of the challenge we've seen at the moment in the market around inflation, around resources. It really helps manage that risk and keep it in a sensible part for us as a business. And so these drivers that you can see here on the left, that's what's really shaping opportunities as we seek to move into those adjacent markets Bill described earlier, but also the ones where we've got the existing markets, and we can really shape our position and sharpen up in that space. So a very quick overview on these is we've got what they call an aging asset base. So that's the existing plant and equipment that's sitting in the water network just now. And believe it or not, we're actually still heavily reliant on Victorian infrastructure in this country. And as time has gone on, even though there's been huge investment over the last 30 years since privatization, it hasn't kept up with this pace of renewal. And so there's effectively a real giant sticking plaster over a lot of assets just now. And there's a lot of work, time and effort that goes into maintaining these assets. So every time you turn the tap on, you get a nice, clean glass of drinking water in front of you. Cabin reduction is really, really important to the -- [ what I said ] just now. And as Bill said, we've got our own ambitions to reach net zero by 2030 and 2045, which matches our clients' aspirations. And then our Poppy's going to talk about that in a bit more detail when she gets to her time. But Uttlesford is a really good example of what we're doing on the ground in water to reduce carbon. And our clients really need to start optimizing their existing assets because they don't understand them very well. They're quite old. They're not sure how they operate. And there's a real cost of living squeeze going at the moment. So anything that we can do to support clients in that space really helps address those challenges. And traditionally, operation and maintenance. It's an area that's really not been available to us because we've not had really a lot of skill set in that space, but the nmcn acquisition's really open that market. Mark Shadrick joins me today, who's one of our new partners in the team that's come over from that part of the business. And that's an area that's really going to significantly grow beyond what we see here. And as clients start to digitize and start moving into future direction and optimize their assets, it's going to be really, really important to us. Asset optimization is another key driver for translating low carbon into lower cost equal better margins for us. That's really important. So all combined, for me, I think it's a really exciting place to be and a really good picture. So a little bit more detail as to where we are at the moment. So you can see there what the size of the market looks like and how it's split up. And you can see to the pie chart on the right there, that's how we're currently sitting and you can see the big red chunk of the pie. It's design and build. It's our bread and butter. It makes up the lion's share of our business currently. But it's also going to be a big part of our future as well because you can see the opportunity around those adjacent markets there on capital maintenance around off-site build. These are things that are really going to supercharge our growth and really help go into these new markets. You can see here where we want to be to help drive that growth potential. And accurately say, the acquisition has been a real game changer for us. It's brought in quality order book. It's brought in quality people and skills and resources that we hadn't have. But this is all about strengthening our bottom line performance. We're not incentivized to do any top line growth. And the reality is here is that this is the available market to us and we've grown into those sectors in a way we understand no one can manage because we've already started our footprint in that space. So as we move into the next 3 to 5 years and develop and pursue these opportunities, the capital maintenance of offsite build in particular are areas where we feel that we can add significant value to our clients and help realize those enhanced margins that Bill was talking about earlier as part of the wider business development. And asset optimization, again, is an area where it fits somewhere between capital maintenance and off-site build and technical service. It transcends these things. This is a really quite a new area, and Galliford Try really at the front of this. We've done a lot of research, and we're getting on really well with our clients in terms of trialing some new and exciting technology that's really going to help drive that. And the importance of that is that it gives us an opportunity to actually negotiate and actually address higher margins instead of trying to work on the traditional design and build space. So this is all underpinned, the design and build really underpins being able to get access to these because it's our bread and butter. It covers our day-to-day running costs, and we get into the space where we can actually make a steady, consistent return. And I hate to tell you, but it will be boring predictability, I'm afraid, is what you'll get to -- from me. But most importantly, these adjacent markets will give us a sensible risk profile, which will really help us grow and help meet those challenges. So again, just delving a little bit deeper into D&B because it's such a big market for us. it's going to be a huge lever for us to actually grow because we get automatic entry into our clients' order books and their capital programs. And because you've got some of the design and build off-site manufacturing capability that we have now through the acquisition of nmcn, we can build that into our designs, into design and build, and actually keep the money in-house and actually at higher margins. That money doesn't go back to the client. They don't get the savings. That stays within our business. And our preferred -- that -- the Lintott acquisition comes with another business which does fabrications, which come through nmcn, and that will help develop our off-site build range and product lines to really drive that through. And we've almost got a huge internal market that is going to really help us supercharge that growth into that space. And our position on these frameworks is between 5 and 10 years. So we've got a really good, solid, steady order book ahead of us and that's low risk. We can manage inflation. We can manage our people and resource challenges. And that also helps with our cash position. Because we've got these long-term relationships, I would say 95% of our business is repeat business year-on-year with the same clients. We work for 10 out of the 11 major water and sewage companies in the U.K. And we've invested quite a lot in digital tools. So if you look at Uttlesford, the digital rehearsals is a real important part of how we do business now because it eliminates a lot of potential rework and quality and safety issues, and it makes sure that we're really efficient when we get to site. So both Bill and I have talked already about the nmcn acquisition. And to quote Bill in today's article in Construction News, I don't know if you've seen it, but it's a really good read, "It's been a cracking acquisition." It really has. And I generally mean that because it's actually brought us a real significant position. You can see here what our environment business now looks like and where we work. We're absolutely across the U.K. We had one overlap in Yorkshire. And we are starting to do a little bit of work doing capital maintenance already in Anglian. So we do cover everywhere, but -- and that's a really good base for us to actually grow and actually realize our positions on these adjacent markets that we've already talked about. And it's also brought an additional revenue in anywhere between about GBP 100 million to GBP 110 million a year. But it's really accelerated. It's that supercharged our engine in terms of growing and it's getting in there and helping us reach these new markets. And all the frameworks that we've got here are all on target costs, so they're all relative low risk, negotiated, risks are shared, we can manage inflation, we can manage our cash really, really well. And we're also getting really good feedback from our clients in terms of how we integrate in those 2 businesses. So we've now got a single environment business. We've made top line management structures where we've got quite a lot of our new colleagues joining the business in a single management team, and we're coming together really strongly now. And a really important part of this is actually the 900 people that come into our business and the skills and passion of that population is actually really incredible. It's an absolute pleasure for me to sit and see people coming to me and say, "I really like what Galliford Try are doing. I really like their vision," because they can buy into it. Especially the low carbon agenda, it's really, really important to a lot of people, and especially those that are in the early careers. They see low carbon as a positive destination choice as an employer. And I don't think that any other people that are in this space can give people those great opportunities that we can. And so for me, we're in a really fantastic position. And yes, we have challenges, but I think we're in a great place to do that. And I think the big differentiator for us in this market and following that unique position is our balance sheet. It's really strong just now. And that helps us in a lot of ways. It helps us with our credibility with our supply chain. It helps us use that credibly with our clients. And actually, it makes it much easier for us to have those one-to-one negotiations knowing the strength of that's behind us. I think the other thing that's in there as well, which is we've touched on the acquisition of Lintott. And Lintott are a manufacturing company, and they make control panels, make equipment for the water industry. But again, using that leverage of the design and build frameworks to really harness that and maximize their opportunity because they do operate on higher margins than the rest of the business is what will help us realize some of these things going forward. And we've just had our first wins as Galliford Try and Lintott in [ Northland Midwater ] and [ Southwest Water ] for the product. So the feedback has been really, really good. So as we come into an end, I just wanted to recap on some of these margin-enhancing capabilities and how we're going to do this. So first of all, we've got like engineering services. And what we found is, as part of the acquisition, we've got a lot of, what I call, high net worth individuals. These are a skill set that sits in the business that can attract higher margins for the skills and capabilities that they do. And so what we're trying to do is actually redeploy them, so they're focused on achieving those higher-margin activities instead of being deployed in transactional activities that don't generate the kind of revenue that we'd like at bottom line. And then we've got the off-site solutions about growing those fabrications by leveraging the existing framework. So for example, a lot of the steel gantries that we might find in a highways project or steel access platforms in the building project or grid flooring [ in wall project ] can all be done in-house now, that can be retained in-house, can be grown, developed and extended. Capital maintenance is a really, really big part of our future. We do a moderate amount of capital maintenance just now. We've got opportunities ahead of us in the very immediate and medium term we're trying to realize. And a lot of our organic growth will come from that spoke and hub model of how we develop the existing capability that we acquired through nmcn. And if we get a chance and the market's right, the risk's right and the proposition's right, we may consider a further bolt-on acquisition in that space. And finally, that aging asset base and that adjacent market around asset optimization obviously developing Lintott's products and services, but we have got other partnerships with other providers that can offer higher margin, lower risk opportunities to try and move that forward and realize our ambition in those adjacent markets. And remember, we've got that real big order book around design and build, which helps us leverage and realize all these and really get us into a place where we can be. And again, making that link back to carbon and asset optimization, so, so important because if you only need to look anywhere at the moment, most clients are looking for low carbon [ matics ] and was desperate to get low carbon. So anything that we're doing in helping them achieve that, it's not fueling massive top line growth, but it's fueling really good bottom line growth, which is what's really important to us. So that's me, and I'll hand over to Andrew.

Thanks, Steve. I think it's a really good introduction to the Environment business and just to the opportunities there, the ambition of that business and the capabilities we've got. So thanks, Steve, for that. Afternoon, everybody. So what I want to do is just spend a few minutes just talking about the financial strength of the group and in particular, how that impacts with our work with the supply chain and also then what that means in terms of us navigating the current inflationary environment. So Bill and I, we've talked about the importance of a strong balance sheet many times before, and that still remains an absolute priority for the Board to keep that balance sheet strength. And we've also talked in the past about our returns policy. So we're returning 2x COVID dividend. So we'll return 50p in the pound that we earn. And of course, the value of that will grow as we grow the business. And we've also talked about looking to return additional excess cash as we grow the business. and that remains absolutely the case. But what I think Steve's presentation really demonstrated is the competitive advantage of having a strong balance sheet and what that brings to the group. And I think [ Mark Dixon ] echoed that from a client perspective as well. So -- and I think what that also means is the opportunities to add to our capabilities and to grow the business really kind of accelerate the strategy that we've set out. And we've seen that in Steve's presentation with regards to the Environment business. But we can also see that in the other areas that we're looking to grow the business, in particular, in PRS and in the green retrofit businesses, which Bill will touch on a little bit later on. And that strong balance sheet is also really important for our supply chain and particularly at the moment. And I guess we saw firsthand through the nmcn acquisition what happens when a supply chain loses confidence in the financial strength of the parent company and how quickly that can make a difference. So that, again, shows the importance of retaining that strong balance sheet position. And I think for Galliford Try to grow for us to meet our revenue targets, to meet our profit objectives, then it's really important that we continue to deliver high-quality products for our clients. And to do that relies on the supply chain. So that's why it's quite rightly, we want to treat the supply chain properly and fairly and to pay the supply chain properly as well. And this slide just shows the improvements we've made to our payment performance over the last 3 years. And I think it is fair to say that the sector, as a whole, has improved in this regard. And you can see the gray line on the graph there is the Build U.K. average performance over those same 3 years. So I think the performance there, you can see, has been driven by U.K. government, being driven by Build U.K., really putting some pressure on the sector. But what we've sought to do over that 3-year period is to outperform the sector and to improve ahead of the sector. And you can see our performance on the red bars there. So by the end of December '21, we were paying, on average, in 26 days and paying 98% of our invoices within 60 days. So we've gone from lagging the sector to being ahead of the sector. And that investment in our supply chain relationships, if you like, that's one example of the investment. And what we've also then looked to do is to invest in our program that we call Advantage through Alignment. So -- and this is important because something like 75% to 80% of our work is delivered through the supply chain. So that's why the supply chain investment is so important for us. And we've got something like 350 accredited suppliers, or we call them line suppliers who've come through the Advantage through Alignment accreditation process. They account at the moment for about 60% of our subcontract spend. And whilst we're looking to grow that up towards 70% and above, I should say this is a difficult program for our supply chain to get accredited on. The hurdle is deliberately high. And once people are accredited, there's then a 360-degree feedback process to make sure that we keep the right behaviors and the right supply chain in that aligned program. So this is, if you like, a really important program for us -- has been an important program to keep as a distinguisher for the most important members of the supply chain. So the premise of this program is that effectively working closely with the supply chain can deliver improved outcomes for us both. And as much as we want to be the contract of choice for our clients, we also want to be the customer of choice for our supply chain. If we can do that, then we drive better outcomes for both ourselves and our supply chain. And you can see some of the elements of the program on the slide there. So we know that our supply chain values prompt payment. I've already covered that. We know that our supply chain values the investment that we give in their learning and development opportunities. We know that our supply chain values early engagement with us so they can see the pipeline of projects. That means they can plan and manage their own businesses, and we want our supply chain to be profitable and successful in their own right. And in turn, we get continuous benefit and improvement from our supply chain as they invest and are able to invest in their businesses. And a little bit later, Poppy will show a video where you'll see some of the supply chain talking about the way that they're working on that kind of continuous improvement program. So this is a really important program for us. I think it's achieved that shared goal. It aligns our cultures and behaviors with the supply chain. And I think over the last year, this has been -- the last few years, this has been a really important program for us but, particularly, in the last year when we've had those supply chain pressures that we all know about. And we know that in the last year, we, in the supply chain, have been operating in an inflationary environment. And so we've worked hard with our clients and with our supply chain to mitigate the effects of that, and we've done that. So there's been no overall impact of this on our results for this financial year. And we showed this slide in March with our half year results. And again, it's important to stress our strong balance sheet. It really helps us here. It helps us maintain our bidding discipline. It's making sure that we only take on projects with the right level of risks, and we're not taking undue inflation risk, and Ian will talk a little bit more around our bidding process in a moment. We also said in March that we thought inflation would be here for much of this year. I think that's still the case. And I think one impact that we have seen is there has been an extended period of some delay between being in preferred bidder and getting contracts signed and starting on-site. And that delays those clients that have to go and get -- maybe get budgets reapproved or, in some cases, maybe looking at a design and seeing if they can reengineer elements of the design to take some of the cost out. But again, it comes back to our strong order book that Bill mentioned at the start. What that means is that we've been able to kind of take that time, and that doesn't take away the work in the business. It doesn't take away any -- put any inefficiency into the business. And I think importantly as well, and again, Ian will touch on it, we're still seeing a really good flow of work in the pipeline coming into the top of the hopper as well. So that strong balance sheet, strong order book really help us to manage inflation. We also then, in terms of our bidding process, we include inflation allowances in all of our jobs, in all of our tenders. And we also look to include contractual protections where we can. So that might include, for example, indexation clauses. It might include doing work on target cost, cost reimbursable basis. There's an example of a recent job that we've signed on a fixed price contract, current pricing, but the client has retained all of the inflation risk. So if inflation is higher than expected, I guess that's to their detriment. If inflation is a bit lower than expected, that's to their benefit. But the important thing for us is that the client has retained that risk themselves. We also focus on procuring early with the supply chain. And that has 2 benefits. Firstly, it locks in the pricing. Secondly, it also guarantees availability of the materials when we need them, so it protects the program on the job. And we encourage our supply chain also to procure early. And if necessary, we'll store materials for them. And I think one of the things you would see, if you go to any of our sites now compared to, probably, 2 or 3 years ago, you would see more materials held on site, and that's part of that inflation mitigation strategy kind of inaction, if you like, as you go around the country. I think the other thing that we focus on in terms of tendering is around our early procurement. So if you look at a typical fixed price job in our Building business, the last proportion of the cost of that job will be based on specific quotes that we've had in from the supply chain in terms of doing that bid and pushing that price to the client. And when we sign the head contract, we'll look to sign those subcontracts with the supply chain at the same time. And what that means is that at any moment in time, our inflation risk is limited to the unprocured elements of a particular job and only then to the extent that, that inflation runs higher than the allowances that we allowed for in the job. So I've tried to show this on this slide is kind of schematic and admittedly in a relatively simplistic way. But if you bear in mind, at any one time, we've got, say, 250 jobs on the ground, each of those jobs has got multiple supply packages in them. And each of those jobs is at a different stage of maturities. There's a whole portfolio effect of different inflationary cycles across each of those different jobs. So some on the left-hand side, we'll have some jobs that we tendered. We took the prices, and we procured them before the current inflationary cycle. And so those, to a degree, if you like, are insulated from the current inflationary cycle. We're kind of in the middle section of the graphic at the moment. So we're bidding at the moment in an inflationary cycle, and we're including that in our bids. So we're including -- we're reducing the time the bids are open, if necessary. We're basing it on current pricing, and we've increased some of the risk allowances in the tenders that we're bidding for at the moment. And then, of course -- so what that means is that, again, there's that relatively small element of unprocured packages on jobs that are procured pre the inflation spike. That's the challenge that we've been working hard to mitigate this year. And of course, that challenge will reverse at some point as we come onto the downslope in inflation. I don't know when that's going to come, but I mean it will come at some point. So this is the challenge that we're mitigating. I mean that challenge has been managed by our site teams up and down the country day in, day out in terms of them managing the projects, procuring materials, procuring packages early. And I think, if you like, what this is just trying to show is that portfolio effect across all of our contracts helps mitigate the inflation. That's one of the reasons that we're able to say that inflation, overall, hasn't had an impact on our financial results for this financial year. So that's really what I wanted to cover in terms of supply chain and inflation. And so with that, I'm just going to hand over to Ian, who's the Managing Director of our Building business.

I feel very low tech with my bit of [indiscernible]. As Andrew said, I'm Ian Jubb. I'm the Managing Director of the Building business. I'm also a member of the Executive Board, and I have responsibility for the centralized precon and technical services. I've been in the industry for 40 years, and none of you in the room believed that. I know that. And I also need to point actually, I am a Sunderland fan. So obviously, I had a good night last night. Sunderland are going to Wembley in the first division playoffs. The ticket is going on sale shortly. So if I disappear, you know where I've gone. Just interested, the picture is Newman school in Carlisle. The reason I chose that is because it will come up in Poppy's presentation about carbon. It forms a real plank of our carbon strategy, and Poppy will explain more about that shortly. What I'm going to do is I'm going to take you through a journey through our sectors, other sectors. Steve's done an excellent job of explaining our Environment business. Today, I'll explain, in high-level terms, the sectors that we're in, the clients that we have in those sectors, what's underpinning the growth in those sectors, how we win work in those sectors, how we select the right work in those sectors and how we're going to make those select sectors more profitable for us to drive towards our strategic objectives. So if I pick a few key sectors out. Defense, our #1 client is the Ministry of Justice (sic) [ Ministry of Defence ] through the DIO, Defence Estates Organisation (sic) [ Defence Infrastructure Organisation ]. We do some work in adjacent markets for the likes of BAE systems, but our key clients is the MOJ -- is the MOD, sorry. In judicial, our client is primarily the MOJ. In education, we have a real mixed bag of clients. That includes the Department for Education, Scottish government. I think it's worth pointing out that particularly in Building, 30% of our work is done currently in Scotland. And then we do work for the higher education establishment, the universities. We have a long-standing relationships with the likes of Durham University and Leeds University (sic) [ Leeds Beckett University ]. In health, primarily, we work for the NHS, underpinned by all the different frameworks that we're on. We just reprocured onto P23, which is the follow-up to P22. The other key sector I will pick on is highways, where we work generally for national highways and the local authorities. And that is a real area of spend for the government and a real opportunity for us for organic growth. All of the sectors that you see on there are real opportunities for organic growth. What underpins that growth? The drivers to the market, I think, are well known. The government's investment in the U.K. social infrastructure, the urgency of the climate crisis, the Levelling Up agenda. Examples of funding streams that underpin those key drivers for government are the New Hospitals Programme, the Defense Estate Optimisation program. That's basically where the defense estates have numerous sites all over the country, and they're rationalizing that. They've got this huge program of work. They're basically going to close down a number of their facilities, sell the land off of various different uses and consolidate on to 3, 4, 5, 6 major areas where they will do all of their operations. That's a huge opportunity for the industry. Department of Education rebuilding program, that is an ongoing program. We've just reprocured onto the DfE framework. It's a massively ongoing program. But what's very exciting for us is that the split of our work, obviously, it varies between 85 and 15 and 90-10 public sector and regulated and the private sector. So all of those funding streams and all of those drivers are very important to the growth opportunity that we have. The government procurement aims very much underpin what we're trying to achieve and what our strategy says. They're much more moving now towards equitable sharing of risk. We've paid programs of work, standardization of details, everything that we want. And the key for us is that procurement policy is moving much more to where risk and reward are in balance. That's not always been the case in the government's procurement, but now we're seeing at the moment where those 2 things are coming much more in line, very much driven by the Construction Playbook. So from all that, why do we -- we are not building. I do often see we enjoy delivering our work through frameworks. They're very much driven by frameworks. So why do we enjoy delivering work through frameworks? It gives us the opportunity to build long-term relationships. It gives us pipeline visibility. We get to work on the standard terms and conditions. And once again, the key criteria for us is we understand the balance between risk and reward. I think this is the key slide for people in the room. How do we make sure that the opportunities that we take on meet our strategic criteria, our risk profile, if you like? And so we all come to a simplistic slide to try and describe how our process works. And actually, if you follow the process all the way through, it looks like we did nothing, but that's obviously not true. What I was trying to highlight is that we're faced with a lot of opportunities. If you look at all the different sectors that we're in and all the different opportunities we have, we're faced with a lot of opportunities. Before we even get anywhere near what I'll call our BMS process, our true governance process, opportunities are considered for many different things: geography, client, sector, technical difficulty, and they don't even make the starting gate of our true BMS process. They just don't fit what we're looking to do. They don't risk out -- they don't fit our risk-reward profile. If we make that first criteria, we then generate what we call a heat map. And that heat map analyzes in much more detail each one of those risks and is actually the first plank in our risk management process because a lot of the risks in projects we generate through that heat map process. And then that heat map goes to, initially, the actual business units. Like, for example, the Environment business, we'll go to their Board for approval. That heat map will demonstrate whether the risk and reward and that project are in balance. Certain projects then have to go to the exec for approval. That's based on size, technical complication or those sort of things. There's some specific requirements that take them to the exec. I think what's really great from the executive's perspective is that very little gets refused by the executive because we'll pay you. It's so clearly understood now what's important to us, and the selection is made prior to getting anywhere near the executive team. And what we're often faced with is the right opportunities, with the right margin profile against the right risk profile, and that just demonstrates the culture of the business that we take -- the business has gone on that cultural journey that it's not about volume and all those other great things that the construction industry talk about. It's about ensuring that our bottom line is always there. And as I said, very exciting for us that we turn down so little because people understand what's important to us. The other thing is once we've selected a project, one of the key criteria first is the split between quality and price. And I know we often [ understand ] that Bill and Andrew often said talk about quality bids. And I thought I'd give you a bit of an understanding as to what that actually means. So the criteria that I'll put up there, 80-20, that's just notional because sometimes the criteria, 80%, 90% of the market is based on the quality score and 10% on cost, and other times, it's 70-30. But it's an indicative split of the sort of quality competition that we like to be engaged in. And that's just some of the metrics that we're measured against. Management is our people, the [ CVs ] of our people that we put forward to deliver the project, the quality of our people. Project delivery is how we're going to deliver that project, and all the other one's self-explanatory. What we have found is the sustainability and carbon, I put here at 6%, is actually moving up the table now. That's often -- it can be as high as 20% now with the -- how we would address embedded or operational carbon has moved right up the chart. But I think what's exciting for us, if you look at it from a quality perspective, it aligns exactly with the slide that Bill put up earlier, and what's important to us aligns with what's important to our client. So that gives us a real big advantage in terms of winning work from a quality perspective. And the final thing I was going to touch on was margin. Well, how are we going to drive out that improved margin in those existing sectors? We've sort of turned it on its head, if you like, the discussion about margin a little bit because if you think if going from 2%, notionally to 3%, that's a 50% increase in margin. But when you actually look at it the other way around, it's actually driving down your cost base. It's me spending GBP 1 less of every -- 1p less of every pound that I spend. So if you look at the waste and inefficiency in the construction industry, if you concentrate on driving those out, which is what we're doing, driving out process inefficiency, design inefficiency, those sort of things -- that's the target is to try and improve that efficiency so that we can retain more of the money that we use to spend. And process inefficiency is people time. The amount of process waste that we have, people time, so the industry has people time, those sort of things. Great opportunity to enhance margin. What's changed and what allows the industry to do that is the tools that we now have available to us. The digital tools, modern methods of construction, i.e., things that the more that we can construct offsite takes an awful lot of that process inefficiency, those sort of things. So the industry has never been better placed to attack that long-held sort of the inefficiency of what we do. As I said, we would do different things every time, not that. So I think the current environment has never been better for us to drive down our cost base. So that's what we're looking to do. We're looking to getting that 1% sliver on the 98% we currently spend. I put 2 example projects we'll pay just to give you some flavor of the sort of things that we're doing. Winchburgh is our most advanced digital scheme. It utilizes BIM 2, what the fancy people call level 4, which is a 4-BIM model linked to the program. Next step is level 5, which is to bring money in, and that's where we're trying to drive the business to. And what that allows you to do is build things virtually. The industry has been plagued with rework, mistakes, errors because you're doing something for the first time. What these tools allow you to do and what we're certainly learning with some really great results is that you can build them -- you make the mistakes in the machine for simplistic terms. We don't -- we're not making these mistakes in the project. We're making them in the machine. And we're looking at the buildability and all those sort of things. So rework and all that is already doing that. And that's a margin opportunity for us. The -- same at the bottom, which is Guildford Crescent, which is one of our -- which we're working in partnerships with our development team. That's modern methods of construction. That building goes up completely in precast, including all the elevational treatments, everything, it goes up completely together. The internal walls group is fair-finished concrete. So there's no intervention from anything that comes out of the yard. It comes into there. We erect it. Windows are in. External cut-in is on. All we do is abseiling, just to do some mastic ceiling. Other than that, it's straight out the factory, 20-odd stories. Mark knows better than me. 31 stories, that's right. Thanks, Mark. So really exciting, potted bathrooms. Our labor on site will, instead, go from that to that. We're not quite sure yet when the number's out. But in the world of skill shortages and other things,-- that's really important. And I suppose to give you a flavor at Winchburgh as well because of the better planning and other things, a similar skill that we built 3 years ago, Winchburgh will lose some -- will use something like a peak 30% less labor, which is enormously important in an industry which is short of people. So that's all I was going to say on those sort of key drivers. And with that, I'll pass over to Poppy to talk to you about carbon.

Go back to the technology notes, which hopefully will behave themselves. Here, see it. Hi, everyone. My name is Poppy Parsons, and as has been mentioned a few times, I think, already, I'm here talking about how we're managing and measuring carbon, moving Galliford Try and where we are on our journey to net zero. So I joined Galliford 9 years ago now as a design manager within our Building business, and I'm now the Low Carbon Construction Lead working out of our central technical services team. So my role is to lead the company's strategy for the assets that we build. And then we've been in across all of our construction business, the carbon considerations through all of our systems and processes until it becomes business as usual. So I'm hoping to give you a bit of an overview on the great work that we've done already and where we're going. And the managing of carbon and why it's so important for growing our business and by understanding carbon and responding to the carbon agenda, how we can use that knowledge to drive down costs, not only to the environment but also in the pounds and pence of the work that we do. So carbon is not new to Galliford Try. We've been measuring our carbon impact for 10 years now. The -- initially, our focus has been primarily on what's called Scope 1 and 2 in company reporting. So that's the energy that we use, the fuels that we've burned. And we've already -- by 2020, we'd already achieved a 62% reduction on the energy, the -- on new carbon that we're producing, which has been absolutely brilliant. And over the last few years, we've been adding to that reporting elements from what's called the Scope 3, the much bigger part of the puzzle, including commuting, business travel, most recently waste. And we're -- by pushing through our requirements for renewable energy supplies, our electric and hybrid fleet policy and our agile working, we've actually been able to maintain that downward trend now into 2021, even with the lifting of COVID restrictions, which has been absolutely brilliant. So going forward, as Bill mentioned, I think, a couple of times already, we've got our net-zero commitments as a business. By 2030, we want to be net zero within our own operations and, by 2045, across the entire of the business. And we see this really as a moral duty to be doing this and understanding our own impacts and making a difference. The build environment accounts for up to 35 -- 38%, sorry, of the world's carbon. So it's extremely important, and that's not just to our clients, but it's also to our people, as Bill mentioned with -- when asked company feedback from our employees, they believe in what we're doing, and that's extremely important to make sure that we retain the talent that we already have but then also that we're attracting the best talent going forward. The graduates that we've got coming through are really keen on the carbon agenda, and it's a really big part of what they're learning about at university and through their apprenticeships as well. So it's been great to see all of that positivity and that drive coming through from them. So to achieve the -- our 2045 target, we're developing a wider understanding of carbon and developing our skills within that. And that will allow us to align also with our clients' drivers as well. So when we're talking about carbon in terms of a build asset, we have slightly different terminology, just to make sure everyone's paying attention and to keep it interesting. I can't keep things simple. So when we're talking about a building, it's embodied and operational carbon. So operational carbon is the energy that goes into running an asset. If you're talking about a building, that means the power that goes into keeping the lights on, keeping the building warm and the energy that goes into producing the water and for transporting all the waste. And then when we're talking about embodied carbon, that's emissions that go into the materials. So from the extraction of the raw materials from the ground or possibly from recycled sources, putting it through all that processing, getting it to site through the transports, then the building of it, the maintaining of the building, retrofitting, upgrades through the life of it and then the end-of-life deconstruction. More and more often, we're seeing this a driver for carbon reduction coming from our key clients. And so our investment in understanding and reducing carbon is really important to our business growth. A number of our building clients, in particular, are focusing on net-zero carbon in operation. And given the rising cost of energy at the moment, we only expect this to continue and for clients to become more and more interested in their operational energy and where that's taking them. Along with the clients and the rest of the industry, this is obviously a journey where we're looking for getting better understanding on where we're going and what we can do. And so I've just got 3 examples of how we're developing our capabilities that I'd like to share with you. So first one is with one of our key clients within England, which is in the building business, which is the Department for Education. So back in 2017, the Department for Education set how the -- how to put specification, sorry, to which we developed our Optimum School solution that is being part of that framework. Towards the end of the framework in 2020, they launched their pilot sustainability schools. And each of those having slightly different requirements, obviously, testing out different ideas and agendas. So we were lucky enough to work on 2 of those schools. One of them, Marjorie McClure is a low-carbon, timber-framed project in London with a special education needs. And other one is a net zero carbon in operation block replacement for a technology college in Huddersfield, Greenhead College. So as we were working through the process on these projects, the DfE was already distilling this information they've got from our pilots and those of our competitors, bringing it all together into a new 2021 framework with a new sustainability-led school specification. So as we were going into that bidding process to understand the design and the buildability and the requirements -- the cost requirements that we were going to have to respond to, we, Galliford Try, took the opportunity to invest in research and development of our Optimum Schools solution to create our Optimum School Zero. And I led the team of Galliford Try's staff and key consultants to put that together. And we were able take one of our recently completed schemes, which Steve mentioned earlier, Newman School, and redesigned it to become a net zero carbon in operation project. And this gave us the tools and information that we needed to be successfully reappointed to the 2021 framework, but then also gave us the tools that we needed for our first bid, which has just gone in under that framework as well. And we've also been looking ahead now to 2025, which will be the next framework. And the DfE have already highlighted that embodied carbon will becoming a much more important part of that framework. And they're already mandating that we measure as part of the current framework. But they'll start setting targets and we expect those to be coming through sooner rather than later. And so we're developing our in-house capability for measuring and managing embodied carbon, which I'll come on to a little bit later. So that Newman scheme that I spoke about for developing Optimum School Zero solution, what did that actually show us? So reducing carbon doesn't necessarily mean making radical changes or taking risks on new technologies. We worked with our FM business who have really good picture of how schools that we've built in the past are actually operating in use in reality. And with our new Optimum School Zero design, we've been able to more than half the use of -- the end use energy of a secondary school over the last 5 years as you can see in the graph there. We've also been able to achieve a 24% betterment over the DfE 2021 targets, which is great. The largest reduction you can see there and the big step change that is available to the industry at this point is the red section there at the bottom, which is the heating system. So by employing what's called a fabric-first approach, we look at making sure that the air tightness is up to scratch. The thermal envelope of the building is performing really, really well. And that means that all of those inconsequential losses, unintended losses through the fabric are minimized. So you've driven down the energy that your heating system is demanding. And then after that, we switch over to fossil-fuel-free alternatives. So for our Optimum School Zero solution, that's an air source heat pump. The largest section we're now left with, that white one, is actually now going to be the small power is now the biggest load on the building. And those sections are now going to take a little bit longer to chip away. This is the biggest step change that we're expecting to see for a while now. So there's obviously the perception that net zero carbon costs money. And in this situation, when you're looking to offset the entire of your energy on site with PV, the answer is ultimately that it does. But it does save significantly on the operational cost of the school before even taking into account the renewables that are on site. We've driven down the operational cost by 25%. And when you add in the renewables, that's more down at 45%, 50% depending how much the sun shines in any given year. And what part of the country even you're in, and the further north you go, obviously, a little bit less that's there to be used. But the point of net zero is about the monetary cost, it's a completely different type of value. We're looking at the value to our environment. And from day 1, these schools will be producing up to 65% less annual carbon within their operation and that saving is instantaneous. And as the grid decarbonizes, obviously, that percentage will get more and more along the way. So the principles we've learned in this exercise, having just gone into our educational projects, they've allowed us to develop our offerings across all the sectors. In our building and infrastructure business when it comes to operational carbon where that's the most important. And we've also been working very closely with our FM business when looking -- helping them develop their green retrofit strategy as 80% of the buildings that will be in place by 2050 have already been built. So that's a huge opportunity and market there for us to expand into. The second example that I'd like to give you is, again, steered towards education. But this is -- the driver that we're seeing from our Scottish business. And there, there's been a real drive for passivhaus. So the Scottish education funding system is slightly different in terms of their maintenance budgets are directly linked to their energy and use, both in design and then going forward. So they are really looking for energy use certainty in their designs. And that has led a lot of the Scottish Councils to be looking towards Passivhaus, which is a voluntary standard for energy efficiency designed by a German professor back in the '90s. So it's been around for quite a while, but it's one that's taken a little bit come to fruition in the U.K. So we've already completed our first passivhaus project, which is Blackridge Early Years Centre as you can see here. And we finished that last year. And the experience of the Scottish Central team had gained on this project and the upscaling that has allowed them to already win a further 3 passivhaus projects. And they're in the final negotiations on a further 2 at the moment. So it's been a fabulous project from that perspective. But we've also had some other really brilliant opportunities out of there as well that have allowed us to develop our strong ties with the Scottish Futures Trust, but then also develop a new relationship with the Passivhaus Trust as well with further research. So a couple of things that we've been doing with them. When we built Blackridge, we had really unique opportunity to build a sister project Queen Mary's at the same time, which is virtually identical except for the fact that Mary's was built with traditional building techniques. So that's given us this opportunity to monitor and measure 2 identical buildings and actually prove this energy performance in reality. And we're working with Hub South East and the West Lothian Council to even arrange staff swaps as the earlier centers are so close together and they're run by the same council. We'll actually get that user perception element to it as well, which will be really interesting to get that feedback. So that's underway at the moment. We've also been looking with the Passivhaus Trust about upscaling. Passivhaus, traditionally, it has tended to be smaller buildings, 1, maybe 2 stories and predominantly timber frame has the tradition. And we've been looking to try and push that into the steel frame envelope to allow us to grow those building sizes in line with the Scottish Council's interest and desires going forward. So we've been conducting testing of steel frame and envelope combinations and detailing and the Passivhaus Trust has already issued a preliminary guidance based on this research. And they're looking to publish a white paper on it later this year, which has been really great. And as part of that work, Allan Smith of our Morrison Central team has actually been shortlisted as a finalist for the Carbon Reduction Champion by the Construction News Awards. And you'll hear a bit more from Allan shortly in our last video. So I've spoken a lot about operational carbon. But there's also embodied carbon is really important part of what we're looking to do. So my final example here is about how we're looking at developing our embodied carbon measuring going forward. So we began measuring upfront embodied carbon back in 2016 with our Highways business for National Highways. Meanwhile, our Environment and Building businesses have looking a lot more towards measuring in design. And that's allowed us to take those loans from all the different parts of our business and bring a bit of cross-pollination going on to take all of that learning and develop of what we're doing. And using digital tools, we're able to improve the accuracy. And we're looking to add a bit more automation to the processes as well to reduce the burden on the project teams. So on screen is an example calculation that's actually been taken from one of our environment projects at design stage. So we interfaced the 3D modeling tool with the carbon calculator tool, which allowed all of the material quantities to be pulled directly in, saving a lot of time. And then we were able to allocate the materials within the tools and within just a few clicks of the button, then you can start to compare different design options. So the white and red columns there on the graph just indicate 2 options that we looked at. And with just a few clicks of the button from switching to some concrete solutions to some precast solutions, that instantaneously save, 6.5 tonnes of CO2. And to put that in perspective, that's the equivalent of driving 21,000 miles in your average car or the annual electricity use of 8 U.K. homes. So just kind of puts that in perspective. So by understanding the materials, we can identify, obviously, carbon hotspots where we need to do retargeting and reducing the embodied carbon. And by having this in-house, it allows us to drive that design efficiency and also drive down the cost in the materials. Going forward, by having this detailed data, we'll be able to understand further learning opportunities. A really good example would be by having a detailed design stage calculation and comparing it to an as-built calculation, we'll be able actually understand where our wastage is in a lot more detail than we do currently. A metals skid, we know how many metals skids maybe have gone out the door, we don't necessarily know that the metal in there has come from offcuts, from a structural frame or from a dry lining or from petitionings or possibly some duct work that's damaged. It will give us that much better understanding. And again, that gives us the opportunity to drive down costs in the future. So the last bit I'd like to comment to, obviously none of this is going to be possible without the skills of our supply chain. We've developed our Net Zero Partners initiative. And the idea is to empower our supply chain as both our consultants and our subcontractors to be more proactive about the decisions that they're making around their own carbon strategies and then obviously how that -- we work together to build that into our projects. The initiative focuses on carbon literacy, quality, upskilling and continual improvement and how we want to collaborate with them in the future for their own journeys and our own. We're holding our first Net Zero Partners launch event with Morrison Central later this week. And then we'll be looking to roll out across the rest of the business in the coming months. So I hope I've given you a better flavor of where we are and where we're heading and an understanding why carbon is such a key point to our business and our growth. And I now hand back to Bill for summing up.

Okay. Thanks, Thanks, Poppy. Thanks all. So I'll sit and come back to the slide just to pick up PRS and green retrofit. And I'll do that very briefly. Mark Baxter is in the audience somewhere. There he is. And if you have any more detailed questions, you can grab Mark afterwards. So the 2 Mark, that we haven't spoken about PRS, private rental sector. It's a big sector. It's a growing sector in the U.K. And as you know, we spoke about at the last half year, we have our first pilot project about to go into the ground. We're just in process of finalizing -- our closing at the moment and hope to close this quarter. And then we'll be on the ground next quarter. And you saw the photograph and the intersection there. It's a fantastic project in terms of Modern Method of Construction. When you think that, that building 31, 32 stories high is going to go up as no scaffolding. It goes up finished, so to speak, apart from a few massive joints. It's fantastic. And that just gives you an idea of what we can achieve through innovation and efficiencies we can gain and the profit margins that we can get by doing things differently. So that's Guildford Crescent in Cardiff. That will be on the ground hopefully in Q3 this year. We've got 2 other projects in the PRS world that we are now in a one to one negotiating position. One of them is in Sheffield one of them is in Nottingham. They do have quite a long gestation periods as these things once get into through planning and design and so on. But it's good to have now 3 in a fairly good state of advancement. And just to reiterate, we'll sell these projects at financial close, take the development margins and go and to construct the project for the buyer. And we expect the blended margin to be typically double our construction margins -- normal construction margins. In other adjacent sector also marks patches of the green retrofit sector. And that is also a growing sector. We've put a number of proposals to our clients now, and they're with them for consideration on which of the various permutations or interventions they'll adopt. There are a couple of emerging themes, really, that's putting photovoltaics on the roof. That's pretty obvious really, and changing of the lights to LEDs on the 2 that save the most carbon and, hence, cost and have the quickest payback period. That's where we expect the most clients to go in the first stage anyway. And then I just like to reiterate the point that we talk about revenue growth and we talk about revenue not being incentive. And just to make sure people understand that our growth in our existing markets is there because the market exists for us to go into within our existing risk framework, risk appetite. So there's no discontinuity there. Just wanted to reiterate this over here, our virtuous circle that we have here and the fact that this is what we think drives a good construction business and gives us the consistency and predictability of outcome that you all expect. What we have in the business is a median contract size of less than GBP 20 million, 250-odd jobs at any one time. And what that means, when we look at the performance of those projects is the vast majority are in a very narrow band with an expectation. And there's a few doing a bit better and a few doing a bit worse. But the ones doing a bit worse are offset by the ones doing a bit better and, in any case, not material in the scheme of things. And that's the whole ethos behind this. A quick update on where we are on our targets. So you've seen these targets before for 2026 and a quick update on where we are. At the half year, our margins was up at 2.2%. The trajectory there was 1.6% in the previous half, 2% in the previous full year and 2.2% at last time out. So that's showing a good trajectory as we head towards our target of 3%. Revenue is up 10%. That's controlled, disciplined revenue within our risk appetite and doesn't actually include much at all for the MMC acquisition there, which as Steve said, it will be GBP 110-odd million on an annualized basis. That revenue will be coming through this half to some extent, but in full steam ahead in the next full financial year. Good operating cash inflow. And you saw the half year dividend up, interim dividend up as well. And we've [indiscernible] cover of 2x from a range of 2.5x down to 2x beforehand. So a good dividend performance there as well. So in summary, we're on track with regards to our sustainable growth strategy. We have great people. I've got the wrong glasses actually. We've got a great bunch of -- sorry, I picked up the wrong biggy ones. We've got a great bunch of people. I forget the [indiscernible]. We've got a great bunch of people. We've got excellent processes, an excellent balance sheet, an excellent order book. And all these things come together to add real boost in our ambitions for the company here. Our performance in terms of dividends and earnings is well covered. And as we said in RNS this morning, we're trading in line with expectations for this year, and we're confident of achieving our strategic targets through 2026. So thanks all for coming today. That concludes the presentation. I hope it's given you a better insight into some parts of the business. We all available to have a chat afterwards, of course. So we'll move now to Q&A. I'd now invite the team to grab a seat. There are also microphones. We don't actually need microphones in this room, I don't think. But just for the recording, we will use microphones, if you don't mind. And I'll sort of choreograph the questions and ask the team to field them. So would anyone like to kick off? Andrew?

Andrew Nussey from Peel Hunt. A number of questions. You started in the water sector. I mean this historically has been notoriously cyclical. As you look forward, do you see that cyclicality reducing and whether that's driven by the regulator or clients or actually the evolving mix of business within Galliford Try? And then on the Lintott business, just curious in terms of the size that, that business is now and whether perhaps it been constrained because of the financial issues facing its previous owner and how that might develop within the group. And is it output primarily to GT clients? Or does it go to the broader market? And then a question in terms of the building heat map, could you just sort of delve into some of the criteria that features on that heat map? And I'll [ do 3 one ].

Thank you, Andrew. You field all of those. The first 2 to Steve. And the last one to Ian, please.

I'll kick off. Thanks, Andrew. So in terms of your first question around the cyclical nature, what we found is that we've actually got quite an even spread across our clients at the moment. And so what's happened over the last 2 investment cycle is that a lot of clients have rolled over and some have gone to market. So what we actually found is that those that we've been successful in, they come to market and they've indicated they're going to roll over. And you've also got -- the Scottish market is in a different regulatory cycle to England and Wales. So as the Scottish market is peaking, the English and Wales ones is ticking slightly. And so because of the mix in our pipeline of work, it's actually quite a flat line for us. And so we managed to mitigate that sort cyclic effect. And I think going forward as well, the intention is for most of the clients to roll over because they're not getting too much value from that short-term thinking in the regulatory cycle, can't get the innovation investment that they made from the supply chain to help realize the efficiencies that they desire. In terms of your second question, I don't think there's been any real constraint on Lintott as a business around any sort of financial issues. It's been more around capacity. But what we are finding now is that actually the increased balance sheet -- the strength of our balance sheet is making our clients more secure in terms of how they want to work into it, how they want to place orders, they know that they can perform and complete order book. And in terms of its client base, yes, some of it is through GT. But if you look at that internal market, when we look to increase the growth, we can actually increase a lot of that growth is internal already secured pipeline, whilst at the same time, maintain that good balance of risk and enhancement around margin with other parts of the water sector because they do work on frameworks similar to ours as well.

Okay. Thanks, Steve. In terms of the heat map, the heat map has lots of criteria to start with the type of project. So for example, you can imagine the heat map doesn't generate score or anything like that. What it is as a sort of a visual representation of the risk portfolio of a project. So if you start with the say the type of project, if it was an education project, a school, that would ultimately be green. Because we build maybe 20, 30 schools a year very successfully, profitably, all those sort of things. If it was a more tricky scheme in the center of London, say, that would probably warrant a number of red. Let me go down a lot of other things, technical criteria, i.e., any particular performance criteria that building may have. It could be high air tightness or -- which we will then study to say, will this building actually ever achieve the air tightness. So if we come, we will not say that risk. And it goes to geography. so there are certain schemes in certain locations that you just would not want to take on. Some live examples are some of the prison schemes that have been built recently out in the wilds of Norfolk and beyond out to the course, where there's no real supply chain, movement of material is difficult. That would flag a red on our heat map. And then what happens in the approval process, that heat map is reviewed. And based on whether we think we can manage those risks that have come up, that it'll either go or it will move to its next step. So there's lots of criteria. But it's all about trying to understand the risk and whether we can manage the risk and the rewards in kilter with that risk, if that makes sense.

Great. John -- Joe, sorry.

Joe Brent from Liberum. Three questions, maybe one at a time. You given the success you appear to have had with MMC, which I think describes a cracking deal. Are you tempted to do other deals? And what sort of deals would you be looking to do?

Well, I think I preferred your description, Joe, which it's a belter. I really like that because I thought you had it spot on there. Yes, the short answer is we are looking at the possibility of -- we're not close to the possibility to further bolt-on acquisitions to bolster particularly, I think, the capital management, asset optimization part of the business going forward. The MMC acquisition has been really good for us. Mark is in the room here. He looks after for the whole of England now for Steve on the operations. So it's a big patch. But as Steve said, we brought 900-odd really good people into the business. And so to be frank, our appetite is weathered to some extent through that acquisition. But it has to fit all of our criteria, of course.

And the second question. Your target GBP 1.6 billion of revenue, could you remind me if that includes acquisitions? Does that include MMC and other acquisitions you might make?

It included a forecast of growth within water, but the MMC acquisition has accelerated that, Joe. So I think the GBP 1.6 billion is still relevant. The growth through water has come earlier than we would have otherwise expected through the acquisition.

And finally for me. On the commercial side of the business, could you remind me how big that is and what you think the outlook is for commercial building?

I'll ask Ian to pick that up.

The commercial side of our business is around 10% of the building turnover in month figures. It's very London-centric. It can vary between 10% and 15%. The rest of it is in the public sector and regulated sector. We're still opportunity rich. We're very selective about what we do. Some of the risk profile of projects, the commercial projects don't fit our model at all. So I would say in the commercial sector, we turn down more projects than in any other sector that we look at. So I'd say that -- it still looks -- the pipeline still looks full to us, particularly in the M25, and that's where the predominance of our commercial work is anywhere.

Alastair?

Alastair Stewart from Shore Capital. A kind of a broad question on working capital. I can't see what the 2 last point dates were. But I think you went on 36 days to 26 days payment. And right just now, it's no secret quite a lot of subcontractors are struggling, and no doubt, you possibly are sort of holding their hands. As well, there's the question of forward purchasing of materials. For the time being, do you think that it's going to make an appreciable impact on your working capital changes in the cash flow going forward?

If I pick that up. So those 26 days average days to pay, Alastair, was as at the period through to December 2021, so that was in the numbers that we reported at December. So...

Was in [ 36-day ] [indiscernible]?

Yes, it's come down. It's come down significantly. And that has been important for all the reasons I said. I mean let's be clear, there's not a lot of room for improvement now. So that will now flat line, and that's fine. But what we're also looking at, you're quite right, we're looking at supply chain strength is really important. It's one of the things that we spend a lot of time doing, making sure part of the process through the aligned supply chain program, but more broadly. And if necessary, we can do things around procuring materials directly, so that helps us get the materials. It also help protect the subcontractor's cash flows because we'll be procuring, investing those materials ourselves directly. So there is various things that we can do to make sure that we mitigate the impact of any kind of supply chain risk there, Alastair. And there are examples. And again, in our numbers at the end of December, I mean, if you take our PRS scheme in Leeds where we bought all the bricks for that scheme at the start of the job. So there are examples of us buying materials early, and that's already in the working capital numbers that we're looking at through December.

But the trend going forward, is that going to be until all of this inflation sort of balanced off? Is it going to be more likely to be sort of low or negative cash flow -- working capital changes in cash flow?

I think it will vary. So we look at this job-by-job as we go through. So there's no kind of one size fits all as we go through. So we look at the individual jobs in the regions, the particular materials, the particular subcontractors on each job.

I was going to add was in terms of the effect on capital, for example, it's a great example of bricks on mount bricks we bought for a major scheme, we bought all the bricks. We've vested those bricks with our clients. So our clients paid for them. So that hasn't impacted our cash flow. And I'll go...

So you just went in a direct...

Yes, that's what's called vested, so they actually own them now. We call them in as Galliford is part of that. They pay for them for that even though they stored in a yard on the other side of the road from where we're constructing and most of our clients as long as they have titles and the materials will pay. So it doesn't really impact our cash position too much.

Just out of interest, is that common with other materials? You mentioned bricks a couple of times. But other, are you doing it with concrete?

So we're doing that with plasterboard or -- yes. So again, it depends on the particular job that we're doing that across the pitch.

You'll see more if you go past construction projects at the moment you'll see almost marquees and you wonder what's that marquee for. You'll find in there that we've created more tight environments to bring in materials because you've got take your allocation when it comes. And that's the way to protect yourself is to take your allocation and store it and create the facilities to store it whether that be on project or off project.

The [indiscernible] school that you saw had a sports hall in the middle of it. And for a long part of the project, that's sports hall is full of materials on site. So we bought them.

We accelerated that piece of the project and then used it as a storage.

And just one related question in terms of the subcontractors, kind of if you're holding their hands as it were in terms of cash flow, do you get them to provide a quid pro quo in terms of sharpening their pencils in terms of the actual contract margin?

Yes. So when you say holding their hand. I mean a lot of our supply chain -- we check their financial strength. So it's not a question of having to hold their hands through. So most of our supply chain are financially resilient. But of course, we look at the overall piece. But as Ian say, when you're buying materials early, then actually, that's not necessarily changing those dynamics.

It's a protection thing. Rather, we're trying to protect our supply chain rather than. As we said, we do regular financial checks. So we're encouraging them to buy their materials early because it's no point in us kidding ourselves that we've bought something with our supply chain, but they haven't ultimately bought it from the original manufacturer of the material. So we're trying to ensure that the whole supply chain is protected as much as we can.

Adrian Kearsey, Panmure Gordon. Three questions for me, 1 financial and 2 for carbon. The financial is what sort of level of inflation are you assuming currently in your contracts bidding? Does that change much over time? And does that change sector-by-sector?

Ian or Andrew?

I mean it changes. It varies depending the project -- depending on the nature of the project where it is and the materials in there, it will vary depending also. We look at that depending on specific projects. I don't know, Ian if you want to fill in more detail.

Yes. What we tried to do in the old days, pre the current inflationary rise, we were able to calculate inflation quite easily. But as you can imagine, at the moment, you see some significant rise in particular commodity, so predicting that is quite hard. So what we try and ensure is that we build in the actual cost and buy it within the first, so we contract and then we contract to buy so that we're securing it at that price. There's only some of lower packages, if you like to be build inflation into, which is actually quite a small portion of what we do. We buy an enormous amount very early on to make sure that we're not exposed. I think Andrew's graph showed that very well that we try and buy as early as possible. The answer is it depends on the package. We analyze it a lot more than a general allowance. We would look at every individual piece and try to project the inflation against those individual elements. It's not -- allow 5%. That will be fine. It's a much more finite calculation on that.

Right. And the 2 carbon questions is, first of all, on your Scope 1 and 2 emissions chart, there was a big step down 18 to 19. Is that a like-for-like? What caused that? Was it sort of methodology coincide with sort change in the structure of the business? What was sort of causing that there? And others, you're starting to build up quite a lot of data on the operational carbon footprint of properties, of buildings. And you rightly pointed out, 80% of buildings in existence in 2050 have already been built. To what extent will we have to knock down do you think those properties in order for them to have an acceptable operational carbon footprint sort of fast forwarding 30 years?

You want to take pick that up?

Can I pass back to 2018, because I've got that one's.

Yes, that was on AWPR. So that was a massive construction project. And that's the fuel from running hundreds of massive built some machinery around the North of Scotland. And it was a Queensferry Crossing as well. So those are 2 mega projects. Of course, we don't do those anymore. But that's caused that spike. So the whole carbon sort of trajectory is skewed by that. I think it's a difficult one. Maybe 2 for like-for-like analysis, because we don't do those sorts of jobs anymore, maybe should take those out of the equation. But that's just the raw data that you see there, Adrian. Yes, that's the reason for that. Yes.

And so yes in terms of the operational carbon you've seen and in terms of where do you draw the line in terms of knocking down. I think, it's a difficult one. And again, you have to deal with it on a project-by-project basis, really. And we're looking at whole life carbon up to 60% of the embodied carbon that we're building is in the superstructure, so in the envelope in the frame. And as we drive those that operational carbon down and as the grid decarbonizes, that embodied carbon starts to become a much bigger piece of the whole life carbon pie as it were. And so actually, being able to do something somewhere in the middle is probably going to be more what we'll see going forward. But It is going to be a passivhaus of course, if you've got an office building say that's operating really well, still has that client base and really is just looking for something that's a light-touch, instantaneous improvement, you're going to be looking at the lights, maybe adding the PV. If you've got a building that the windows are leaking, they're already reaching the end of their life and you might be looking at doing something a bit more substantial with the fabric. And there, you can start doing your air tightness and your U-values. But it's going to be assessing each building and understanding what are its good points and what are its bad points, and where you go. I think knocking it down should be our last resort really wherever possible.

We have -- I do have a few examples at the moment. 280 Bishopsgate was one where we basically gutted the entire building down to its frame and then the cladding was left.

Yes, it's a big [ steel ] frame because obviously the carbon is already spent.

Yes. Exactly.

So to knock it down and redo it, you just spend in the carbon again. So you might spend it to a lesser degree. But that's exactly the model build going forward is to take them back to the frame and then bring in much more efficient carbon systems and those sort of things exactly like Bishopsgate.

Yes. So I think that will be an increasing trend if the floor plans work.

It's Greg Poulton from Singer Capital Markets. I've got 2 questions to Andrew, Poppy. Could you remind us what the cash inter-year cash flow point was last year? And how is your view on returning cash moved on a 10% inflationary environment, and what can you do to preserve the value of that cash?

Yes. So last year, so through calendar 2021, we were above GBP 100 million every day. So we're averaging in the last 6 months, GBP 180 million at the month end, and it was above GBP 100 million. That was the band that we're operating in, Greg. And then, yes, so the inflationary environment, you're right, there's an issue in terms of valuation. Cash position is also the issue in terms of confidence in terms of growing the business in that environment and making sure we've got the resilience in the business, which I think is also really important. That balance sheet is one of those elements of that virtuous circle. So from an operational perspective, I think the balance sheet strength is important and is growing the business in this kind of environment.

That's great. John?

John Fraser-Andrews, HSBC. I have 3, please. The first is in water. Could we have an indication as to where AMP7 funding is versus AMP6? Is it flat, increasing or increasing or is flat in real terms? And on water, can we have a comment on why Balfour exited from that sector? Second question is the GBP 500 million revenue growth, where is it coming from? Perhaps an indication, Bill, of roughly where we know the water acquisitions are just over GBP 100 million. The other GBP 400 million, is it sort of half-on-half existing businesses doing more and the other half adjacent? And then finally, in PRS, you said, Bill, double the margin. Is that 4% or 6%? And could you clarify in PRS, is some of that profit taken in the PPP business as you put the scheme together and then the construction part in your building business.

Okay. So Steve, do you want to answer the first AMP7 funding question. I can talk about the Balfour and I'll take the GBP 500 million. And then if we take the PRS all together.

Okay. So between AMP6 and AMP7, there was a slight increase in terms of the market size around what the regulator would allow the water companies to invest. But AMP6 is quite a long go in the past. And what's happened is actually the first year or so of AMP7 has been a little bit flatter than what we've expected. We managed to mitigate that to a large extent because of the change in regulatory cycles, which I explained earlier. I think the interesting really part for me is actually the market is going to increase significantly as we head into AMP8, and AMP8 starts really to bidding starts in the next 6 months, and that will take us through till 2030. And really, at that point, I mean, a lot of that growth is being driven by a reduction in storm overflows, which is a real key environmental requirement from DEFRA. And also, this is obviously needed to be -- the existing infrastructure is leaving a significant investment. And so the way that the charges that are calculated by the regulator is changing during their [ PR24 ] review just now. So our expectation is actually the market size will grow significantly over the next couple of years as we head into AMP8.

Okay. I don't know why Balfour has exited. But what they did was different to us, John. So as far as I'm aware, Balfour's water business was predominantly utilities, underground pipers, laying blue pipes in the ground. And it was not -- they only had, as far as I'm aware, one AMP program was with TEMs. It was [ 820 ] lines which was disbanded at the end of AMP6 or 7. I couldn't remember. So they're in a different game in to us, John, in terms of what they did in water in the first place. The GBP 500 million, I'd say it's sort of 2/3 in existing markets, 1/3 in new markets. That will depend on quite a few things. So for example, Steve talked about where the funding streams come from in AMP8 and so on. I think regardless which way the funding goes, I think we good have opportunity. But it might arise in more in the business usual side of the business than the capital markets side. Because perversely, if the funding was restrained, to use a word, that actually spend more on the capital maintenance asset optimization. So it's just where it arises is moved really. But for APM6 things, I'll say it's 1/3. And then PRS, it's 6 not 4. And Andrew, the segmentation of the profit?

Yes. So there's 2 things in there, John. So one is the development gains which the investment business are generating, and that's one. But there's also in the building piece because we're designing these schemes, we're designing these for higher-margin in construction as well. So we're designing them to build, if you like. And that's important because that helps us drive the sort of the construction margin into higher-margin construction projects as well. So the benefit is in both the operational business and in the investments piece. It's in both.

The design that we've seen, for example, in Cardiff, you're getting a good margin here because this is MMC and it can go up quickly and the client -- everybody is happy. Is that why you're getting a good margin?

It's all of the above really, John. What we do is we utilize our balance sheet to a fairly modest effect and taking the options of the land, getting the thing designed, getting through the statutory process and building -- emissions and so on. But as Andrew said, what we tried to do or not we tried, what we do, do is have a big involvement from Ian's side of the business, the building side of the business to design something that's straightforward and easy and efficient to build. And therefore, we should make better construction margins. We lock in the development gains at the front end. And the whole scheme managed to clear the hurdle, which it has to in terms of being a viable project.

The development gain, just to be clear, that is in the PPP business, Andrew, is that...

The development gain is in the investment business. Yes, that's right.

And that the margin you talk about, I can imagine those development gains can be super high margins. So we might be talking about a blend here of a higher margin in the PPP and a lower margin in build, is that...

Well, what we'd say is that the blend would be, I've said, double our normal construction margins. We aspire to 3%. But yes, of course, we always aspire to, but more than that, John. Stephen?

Stephen Rawlinson from Applied Value. Just a couple on water if you don't mind and then one about green retrofit. Just on the water side of life, you now seem to be working for nearly all of the water companies in the United Kingdom. And you've got a bit process starting, you already mentioned AMP8. So you'll be working for nearly all of them. What sort of stresses and strains is that put on your bid capacity? How well have you planned for that? But also from the point of view of the water companies, would they be content for you to work for quite a number of them? And how content is the regulator with the dependence of the water sector on Galliford Try looking forward after the acquisition of MMC?

So in terms of the AMP8 cycle stresses and strains, again, because we've been quite successful in AMP7 programs, those programs are actually going to roll over 2 cycles. So we'll get an AMP7, AMP8 out of some of our clients. Where some of our existing frameworks have to come to a natural end due to the procurement cycle. At the moment, they seem to be staggered. So some of our clients are actually coming to market early. Some are going to be plan to come into market later. We know this because we talk to them on a regular basis. We engage with them on a regular basis, and so we can plan pretty effectively. So our bidding resources are effectually planned and managed. I think what we also do is actually some of the frameworks that we may have worked on the past or may consider -- we maybe wouldn't consider again because the risk profile is changed. And so we take a really considered view on that on an opportunity to opportunity base, like what Ian described earlier. In terms of the consolidation in the market, I think it's not just our acquisition of MMC. There's been other outfits that have come together in terms of their strategy in the water sector. But the regulatory itself doesn't really touch our position. It reacts directly with clients. And so our feedback from clients have been really, really positive because what they're looking for is a client that can sort of contract, that can deliver. We've got a really good solid track record of doing that. And actually, most of our clients are actually really, really keen to keep working with it. And that's borne out by having honest conversation about things like inflation and resources, being able to manage those in a regular basis by having those kind of relationships. And that to me is probably the key part of that. And I think through that if we manage to do that, the regulator tends to be quite content with that.

And just again sort of more on water, but also sort of sidetracks into MMC generally. I think if I remember the chart correctly, it said that 20% of the demand from the water side AMP7 is for design manufactured per offsite and it's only about 5% of your current revenue, if I recall correctly, just talk us through that. And an allied question to that, is that down to the way you've done the work? Or is it a supply chain issue? And allied to that, would you consider going upstream yourself if there are supply chain problems? I mean the problem with Bison and Caledonian are well chronicle. So just sort of talk us through your thinking on that, if you don't mind. Would you go into a factory situation yourselves in the way that, say, some of the house builders have with manufactured product?

And so the acquisition of Lintott and the fabrication business that came with MMC in that market just now. But in the water sector, it is a little bit different to MMC for like in the building sector because we're quite well protected because our clients tend to specify specific suppliers are working in specific areas. So Lintott is our framework partner and its own right across many water sector clients in the U.K. And so our ability to sort of supercharge that is comes from deploy in our own design and build frameworks and keep that margin in-house. So in some respects, those 2 things across over with that moving upstream and the DfMA content. And one of the reasons why it's low at the moment is that the water sector market is not as mature as the building market in terms of its competence and capability to deploy the DfMA. We recognize and our clients recognize that this is a really untapped opportunity. And so one of the reasons for deploying Lintott is actually to help grow and help grow that business will help us react to that way of reducing carbon by doing more offset manufacturing capability. And if you look at Uttlesford, for example, Uttlesford, which is the project we had in the short course at the beginning, is really optimizes that. And so for us, if we're moving to that space, it'll be on a considered basis to help manage and grow in that area rather than actually going and say, "We need to do this because we need to hit a target."

I was going to say, and just to add to what Steve said there, those 2 businesses, the fabs business and Lintott came with MMC acquisition, there's significant scope to grow those businesses.

And just final for me, if you don't mind, one further one. But it's around the retrofit carbon. Just set me right on how you expect to get paid for that because early days in those schemes you were paid by results and by expected savings and so on. Are you expecting to get paid on a conditional basis in that way? Or are you expecting to get paid upfront for the work that you've done, leaving these savings that might arise to the client in the future?

Yes. We're not taking risk on energy consumption or cost of energy anything like that, Stephen. We'll be paid for what we do. There is an option that we will have a look at -- we're talking to Mark about at the moment, again, in coming up with a package to fund some of these things, but on a very straightforward basis. So in other words, where a client budget doesn't stretch to do doing some of these interventions, we might look at how we might facilitate that in a risk-managed basis to allow the way to continue and to get a return.

Will that be out of your own balance sheet? Or would you expect it through some other vehicles?

That's what we're thinking about, Stephen. Okay. Alastair?

Alastair Stewart again. Just keeping on the MMC theme. There's been a lot of focus on MMC in the housing market with government focusing on it for years. And a lot of production capacity, but not necessarily the take-up from the potential end users, and that's causing a bit a problem. Just how come -- we've talked about water, but across whole piece in the nonresidential MMC market, how do you see the uptick from the actual client side maybe with 2 or 3 sector examples?

Do you want to go?

I think it's a maturing part of the market, I'd say. So a primary example of that probably for offsite, I'll come to offsite because that's what people really think of as MMC offsite. So the DfE have their offsite framework, so they have their main contractors framework, which is more traditional build, and they have their offsite framework. The offsite framework has actually struggled to deliver what's required on numerous parameters because the Modern Methods of Construction, in my view, is too focused on offsite. Where Modern Methods of Construction is moving to is component-led design. So bringing components together a bit like Galliford Try if you like, we're not bringing into -- we're not building modular apartments. We're bringing flat pack components together, windows in, ready to go. So we're putting components together. And I think that is, but first of all...

[indiscernible] angle than in offsite.

It's bringing together premanufactured components rather than trying to build it traditionally offsite. So as it's also what I call it Lego-brick construction. You're bringing the Lego bricks together and you're building the bricks in the park. The problem with all of the modern methods of trying to -- and Caledonia, hit this issue and many others hit the issue, is it's very hard to scale up those sort of things for schools and because Caledonian were on the schools framework, and they've really struggled to meet their model fit schools model, [ spans ] and lots of other things come into play. Where components is, in my view and this is what we're focusing on, is where the Modern Methods will go.

And any of the subsectors of non-resi, just in a word, who's most ahead and who's the -- which sector is the most advanced and which is the least advanced in MMC segment?

In terms of our sector -- education is fairly advancing I think and I would say.

And the least?

I would probably say the DIO, I would say, it's probably at the least. If I was [indiscernible] much moving towards component sales, so the flat pack sales and those sort of things, so not erecting on projects. I would say probably the DIO, but that's only because that project is a little bit more different, I would say, to everybody else's. They have much more varied program than prison cells or prison cells at the end of the day and those sort of things, so it's a bit more difficult to bring that component like design into that work.

Just one more follow-up from the question just to hear about the cash, Andrew. Can you -- what sort of income return can you get on your cash? And have you got any tricks obviously to hedge against inflation?

Well, not as much as you'd like. So -- John. But the rates are changing and we do work with our banks on that. So we're working with our banks to maximize that. But as I say, yes, there is a -- the return is one piece. There is, of course, I come back again to, we're not going to do anything which puts the security of that capital at risk. And obviously, it's important that we retain the capital for supporting the operational growth of the business as well.

Great. Okay. Thanks all. I think I bring this to a close. So there's lots of wine outside, and you're very welcome to stay and have a chat to the team. Here is the team that with us today, you've seen some of them and not the others. We've got Peter, as I said, over there. Peter is our Chair until he steps down after the September results. Then Alison Wood will succeed him. And unfortunately, Alison couldn't be here today. You've met Kevin, he's over there in the corner. General Counsel, Company Secretary. Vikki, Vikki is over there, Head of HR. Mark Baxter looks after investments and the green retrofit and the PRS and so on. You've met Steve and Dave Lowery, MD of Highways is over there. You've met Poppy, Guy Cotton. Pre-Con Directors over there, next to Claire Jackson, Education Director; Mark Shadrick, I mentioned a minutes ago. And Babita is in the corner Head of Communications. So thanks all for coming. Really appreciate your time. Let's go have a glass of wine. Thank you.