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

Good morning or good afternoon all, and welcome to the Galliford Trading Update. My name is Adam, and I'll be your operator for today. [Operator Instructions] I will now hand you over to CEO, Bill Hocking, to begin. So Bill, please go ahead, when you're ready.

Thanks, Adam. Good morning, all, and welcome. I'm Bill Hocking, Chief Executive as you just heard, and I'm here with Andrew Duxbury, Finance Director. I'm sure you've all seen the update. So I'll just go through the highlights fairly quickly and then we'll go straight to questions. We're really happy with our performance in the year. We've had a strong performance across all of our operations and have seen increased revenue, increased PBT -- sorry pre-exceptional profit and operating margin, with full year pre-exceptional PBT expected to be at the upper range of consensus. And the important thing there is really good, encouraging progress against our margin improvement targets. Really good performance on cash, strong balance sheet, GBP 218 million of cash at the end of the year, our financial year that is 30th of June and average month-end cash of GBP 174 million. So I'm really happy with this, and I think it corroborates our strategy, our culture of discipline that we have in the business and we talked about that before. Really confident in the outlook for the future. We've got a really good order book in terms of its quantum and of its quality, GBP 3.4 billion, and we see a really strong future pipeline of all this coming through. 90% of this year's revenue is secured. And that, of course, gives us the confident that we have in our every time approach you guys say the same thing. If we keep that culture of discipline, if we secure a good quality work that we can execute, reliably, that gives us consistency and predictability. And that's what we're demonstrating again today. We're keeping close to our supply chain and to our clients and through a lot of hard work and agility and careful management, we successfully mitigating the risks of labor material shortages and the impact of inflation without any material impact on our performance. And I would say, at the same time, those things are starting to abate, I think it may have some sort of annoyances, I'd call them, more than fundamental issue at the moment. And then, of course, after the year-end, we announced the acquisition of MCS Control Systems, and that is a very similar business to the Lintott business that some of you might have seen in our acquisition earlier in the year, and that adds [indiscernible] to the mill for the growth of Lintott in a higher margin areas of capital management, asset optimization in the water industry. And that acquisition will basically double the size of our activities in that sector. So I think that's what I would see as the highlights and will move straight into questions.

[Operator Instructions] Our first question comes from Alastair Stewart of Shore Capital.

Just it's quite clear your guidance on FY '22, but just maybe a bit more color on the trajectory for FY '23 and beyond.

Good morning, Alastair, it's Andrew. I pick that up. So as also we've got our targets, financial targets are published through to 2026. And so we're very happy that we're making really good progress on those and particularly in terms of margin improvement in the year just finished. So at the moment, we started the new financial year, as Bill said, in really good shape, really confident in terms of the outlook for 2023 in terms of the order book, in terms of the number of bids and bidding opportunities are still coming into the business and the ability to continue to develop against those financial targets through 2023. So at the moment, we're happy with the market expectations for 2023. We're only 2 weeks into the new financial year. But as said, we're confident that we're making good progress against the 2023 outlook and the wider target for 2026.

And then in terms of [indiscernible] in terms of sustainability in zero carbon, are you seeing that not so much of a cost base for a revenue opportunity?

Alastair, operating sustainability reduces your cost, it doesn't raise it. As we said before, there's a number of aspects of sustainability. Firstly, it's just the right thing to do in order to drive carbon with everything that we do. In doing that, it saves money. At the moment, I haven't got the figures at hand at the moment, but we're saving hundreds of thousands of pounds a year on fuel costs compared to -- as our feet electrifies, for example. So by electrifying our cost, you can save a lot of carbon and you save a lot of money. So that's the cost -- there's no issue with regard to cost. And then on the other side of the coin, on the business -- the work winning side of the coin, our clients all of them now demand a high level of sustainability and then carbon reduction in our ongoing operations. So you need to do both. It's the right thing to do and it helps us to win work.

The next question comes from James Loan of [ J. Hamburg. ]

Just a couple of questions on acquisition, the other day looked very interesting. Can you just give us a context of how you've managed to buy that presumably was at for administration, how much actually you've got to put in and what it could make on a sort of 3-year view? And then secondly, might your statement as you've been there to over handling inflation, there seems to be another acceleration about in certain sectors that we've had the balance statement today from 10% to 12% inflation in their business. So can you just give us an update on what happened more recently and how you continue to mitigate against that into the current new year?

Sure. Good morning, James. Yes. So I'll start with the MCS. We said back in our business briefing that we are open to bolt-on acquisitions to accelerate our strategy where it made sense. And this opportunity came to our notice fairly recently, actually. And we moved as ever quickly, and we took it as a growing concern, James. There's some positive comes on all these things, but we took it as a growing concern and deduction is probably about GBP 2 million of funding we need to put into it. I think it will be earnings neutral in the first year and this year, and I think that will start to contribute after that. Yes. And also I'd be looking at something like going up to 10% operating margin is what we're looking at, which is what we expect on the Lintott business. So very, very similar these to Lintott brands, and we're going to combine those 2 businesses, how we're getting the synergies and it really adds risk to the mill. And this is a sector of the water sort of subsector of the water sector, that's consolidating quite a bit at the moment as it actually.

Okay.

So I'm very pleased with acquisition funds. On inflation, it's a mixed bag really. We see something is going down. We've seen steel starting to show signs going down. We see [ rebound ]. Obviously, I like that going down, and we see plasterboard actually starting to go down. So I think there's something that are going up but if you took inflation across the piece, I'd say that it's plateaued, it is actually ups and downs. And we expect it to -- we don't expect it to come down in accordance with some of the forecast of inflation, we expect it to probably stay pretty -- to stick there and stick it for some time. But it's all priced into our work. Now obviously gains from going back 6 months or more, we've been pricing in the level of inflation you're seeing into our jobs. So in that respect, we are protected by mitigating that. And I would also say that -- our clients have been sensible in their reaction to inflation in a number of cases where previously, there weren't inflation clauses in various contracts. And we spoke to our clients and inflation clauses have been inserted because in a nutshell, either price inflation or you're putting the clause and most clients see that putting in a clause that protects it sort of keeps it neutral, so to speak, as opposed to 1 party or the other being advantage or disadvantage.

[Operator Instructions]

Clear. I'm going to take this as a really good sign if you've got a nice really clear statement, [indiscernible] questions everybody. We'll give another a little while, then we'll close. Okay. I think we'll take out there's no more questions if it's okay for you. So just to finish off then. We do move into those financial deals with a high degree of confidence. We're very well placed to deliver against our targets. We see a vibrant market, a good pipeline of opportunity, and we're confident in the outlook. So thanks very much for joining, everyone, and we'll speak to you again on 21st of September for our results. Thank you. Take care. Bye-bye.

This concludes today's call. Thank you very much for your attendance. You may now disconnect your lines.