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

All right. Good morning, everyone. Welcome to Galliford Try Holdings' trading update for the year ending June '24. I don't intend to trawl through the whole paper you've got -- all got the RNS. So I'll just pick out a few highlights, I think, and then we'll go straight to questions. So really pleased with progress in the year. We have made good progress against our targets. And as you see full year revenue and PBT, pre-exceptional PBT expected to be above the upper end of our current analyst forecast. Balance sheet remains really strong, GBP 227 million of cash at the year-end with average maintenance cash across the financial year of GBP 155 million there or thereabouts. Really good outlook driven by our very high-quality order book of GBP 3.8 billion, up GBP 100 million on the previous period. And that's about 92% of this year's revenue already in hand. And importantly, I think more than 60% of revenue already in hand for full year '26. So that's a really good position to be in. We announced our new growth strategy out to 2030 at the Capital Markets event in May. And just to remind you of those targets, revenue in excess of GBP 2.2 billion and 4% operating margin in 2030, retaining, of course, our strong balance sheet and retaining our dividend cover of 1.8x. And just to remind you that 1.8x is 2x cover on normal activities and 1x cover or full cover on the interest from our PPP activities or investments and that gives you a blended 1.8x. So a really good position there, really good targets and a good start against those targets. And just going back to the highlights, Kris Hampson, will join us as CFO on the second of September this year. So he'll be around for the full year results on the 19th of September, which is really good. Going down the balance sheet, I've spoken about the cash. But in addition to that, of course, we have about GBP 42 million of public private partnership assets. And just to remind you, no pension liabilities and no debt or associated covenants, which is important to us. And of course, the balance sheet remains really important to our clients and to our suppliers and our people and remains a differentiator. We've won some really good work recently across the last year -- or last half, sorry, since December. And the list is there, I'm not going to go through them all, but really good progress overall, the community and housing investment consortium was really important for our reentrance to the affordable homes market. There's plenty of water work there. I'm sure we'll talk about water more in a minute. And I suppose just touching on politics, I'd say that so far, so good all the music coming out of the new government is positive. And historically there the governments have been good for the financial -- sorry, for the construction sector. So all in all, everyone, we're in good shape. We expect another good year of performance, which we'll announce in September, and we're well set for the year in front of us. I think that's a good place, and we should go straight to questions.

[Operator Instructions] Our first question today is coming from Andrew Nussey calling from Peel Hunt.

Yes. I wanted to just follow up on that water point. Obviously, you saw the Ofwat draft determinations this morning. Obviously still healthy levels of investment. Just if you had any observations around that particular end market? And then sort of secondly, when we sort of look out to FY '26 and obviously, you've given us a feel for the visibility but in terms of new governments or any particular areas where you see that level of opportunities to fill that level of revenue coverage?

Yes, thanks Andrew so the water market, I haven't had that much time, but I've seen the headlines, of course. So I saw GBP 88 billion was the headline number coming out of Ofwat this morning, which I'm really encouraged by. And of course, as you know, Andrew, that's the start of the dance there will be all sorts of negotiations now with the regulator through to the back end of the year. But I thought that was a really good start. And whilst it's slightly down in the -- well the GBP 92 billion, GBP 97 billion, that was publicized it's still a big, big increase. That must be GBP 30-odd billion increase on the previous AMP. So I'm encouraged by that initial number. And I think that the water companies too, I haven't seen a breakdown of the individual approaches to which water company's happy and which ones aren't yet. On the full year '26, so from a government perspective, I think that the emphasis on affordable housing that we've seen will at [indiscernible] in terms of our activities, albeit even if we were successful in winning new projects now, those projects won't be on the ground for some time, given planning and the statute process and so on. But there's a good emphasis on affordable housing. And then, of course, I've just mentioned planning, there's also quite well publicized already the fact that they're going to look at easing planning constraints. So let's hope that, that does that can succeed there because lots of governments have talked about easing planning, and it is a difficult thing to do. But if the will is there, then hopefully that will start to free up some of these blockages in the system.

Got it. Got it. That's great.

[Operator Instructions] We'll now go to Alastair Stewart calling from Progressive Equity Research.

Bill, a couple of questions from me. Andrew picked up on water and almost a great priority for the new government seems to be present they're supposed to run out of spaces by, I think, today. And I heard on the today program that the average cost of building a new prison is GBP 600,000 per cell. And I just wondered, a, how you saw -- have you been in touch with the new administration about your Prison side? And b, is there any way of getting those prices per cell down by off-site manufacturer or whatever the interest in color there. And the other question more specifically was in terms of the latest PPP valuation, are there any moving parts there in terms of the cash flows and the discount rates?

Okay. Thanks, Alastair. Yes, so on Prisons, I mean, it's not new news that there aren't any prison places, Alastair. I think this is just the government to make sure that they get that news out quick while it was somebody else's fault. But we are active in this space. We're busy building a prison as we speak at Rye Hill. We're busy building 2 immigration detention centers. for the Ministry of Justice. And we've got, I would say, I don't know the exact number Alastair, I'd say, but probably up to half a dozen sort of refurb schemes in existing prisons that are going on. So we do, do a lot of work for the Ministry of Justice already. We're on their frameworks and they're a good client and yes, I see that, that market will continue. There are, of course, I think it's four big new prisons already in construction. And we're not -- and deliberately, we're not on that framework. But -- and more Prison places will be coming down the line in the fullness of time, although it will take some time. So in terms of pricing, that's all new modern prisons are built using modern methods of construction the one we're building in Rye Hill is exactly the same thing. And actually, the more you look around the industry, you see that more and more. I saw it on what looks like in a residential scheme in London another day. We're using the same thing on our residential scheme done and our POS scheme on Cardiff. So it is becoming more and more of the norm, that, Alastair. So that will help to keep prices down. On the PPP valuation -- sorry say again?

Sorry, I forgot about the PPP.