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

Everybody. I'm Bill Hocking, Chief Executive Galliford Try. I'm here with Kris Hampson, CFO. So welcome to this presentation. What I'm going to do is I'm going to run through the presentation, the sort of the front end of it, give you a general overview of the company for those who aren't that familiar with us. Then Kris will go through some of the numbers, and I'll go through some of the strategy. But the important thing, of course, is for questions. So I'll try to go through at a [ favorable ] pace and we'll get to questions. Okay. So the first thing, I think, which is really important to understand about Galliford Try as a contracting business is what we call our engine for sustainable growth. This is a philosophy of how we run the company. And as you can see on the left-hand side there, we start with everything revolves around people. So we've got about 4,500 permanent employees at the moment and growing all the time. And we employ those people for attitude, for values, for ethics, for all of those things, safety that we find really important in our business and any contracting business, to be honest. And then around those people, we put a really good strong foundation of process, how we do stuff around here. And the most important part of that for Galliford Try is our attitude to risk and our risk awareness and how we manage risk, both on projects and before we decide what we're going to be doing. So that high degree of selectivity comes to play in our order book. And the top round you see there demonstrates that. So this high selectivity means that everything in our order book is work that we can do with a high degree of confidence in the right geographies with the right people, with the right supply chain, with the sensible clients. And that means that we perform consistently and predictably all the time, which is the right-hand side. And that consistent predictable performance then, of course, leads to strengthen our already strong balance sheet, which Kris will talk about a bit later. So that's the general philosophy of how we run the business. And of course, on the right-hand side, we obviously have very good commercial controls and reporting systems and so on [indiscernible] once we in contract. But I think that philosophy is really important in how we run the business, and it underpins everything we do. And as you see in the chart in a minute, it underpins our performance over the last 5, 6 years. So these are the sectors in which we operate. I'll just go through them fairly quickly, so you understand exactly what we do. Top left there, we've got environment. That's water and waste water is probably 95% of that along with a bit of work for the environment agency and people like that. We are the biggest contractor in the water industry in the U.K. We work for every single of the big water companies throughout the whole of the U.K. And we've grown this business through organically and through acquisition over the last 5 years and very successfully. You may know that AMP8, which is the current 5-year regulatory period of water, is broadly double the size of AMP7. AMP7 was about GBP 59 billion. AMP8 was GBP 104 billion and has grown a bit since then with some deferrals to the CMA. And what we see is an enormous amount of work, obviously, through that growth, but also looking forward to AMP9, 10, 11, which is out to 2045, that growth continues. So the water and wastewater industry will be a big part of our business and of the construction industry for a long, long time to go. And our focus on water was really borne through a conviction some time ago now that the regulator had kept his sum on the water -- on our bills actually, but on the water companies [ and our ] bills for too long, and that's resulted in the asset -- the quality of the asset diminishing. So there's a huge amount of work to be done in the industry. And hence, the increase is now water bills to pay for all, of course, but an enormous amount of work out there for a long time to come. So that's a big part of our business, probably about 1/4 of our business [ if we ] round figures. Alongside the next right then is defense. We work for the DIO and the MOD. It's the biggest part of our order book in the building part of the business. And we build things like single living accommodation and other facilities for the various arms of the military. And as you can imagine, that's quite a robust sector at the moment. So that's a big part of our business. Health, next to the right, is not such a big part of our business. We do not do the new hospitals. We didn't bid or go for the new hospitals program because that's not our cup of tea. Our cup of tea is to build new awards, new [indiscernible], expand existing hospitals. That's our cup of tea. So GBP 20 million, GBP 30 million, GBP 40 million schemes. And that's where we'll stay. It's the smallest part of our order book. And I see that possibly starting to grow in future years, but not just yet. Infrastructure on the right-hand side there, that's predominantly roads for us at the moment, although we're expanding into energy as well. And we work there about half, half for local authorities and regional councils and so on and half for national highways. It's a good sector. Our order book in the sector is full for the next 2 years [ for our figures ]. And by which stage the constituents of RIS3, which is the next 5-year program for National Highways, will be clear and that I expect to be in excess of GBP 20 billion over the period. And I think reading between the lines that the type of work in RIS3 will be more attuned to what we like, which is smaller schemes. We do big schemes, of course. Our biggest road schemes, GBP 190 million. But I'd say our bread and butter schemes are between sort of GBP 60 million, GBP 70 million in roads. And RIS3, I think we'll have more of that in terms of addressing pinch points, junction improvements, surfacing things like that as opposed to the big road schemes. Then going down to education. The second biggest part of our building portfolio and probably the one which is the most steady over many, many years. We've just renewed our education framework with the Department of Education and very pleased with the outcome of that, we won a place on the major projects framework throughout the whole of England. There were 2 lots, North and South. We won both of them and a place on the smaller projects in the Midlands and the South. So a very good footprint in education for the next 6 years, that framework runs, and we're very well placed to continue our good performance there. We are typically always in the top 3 of the DFEs contractors in terms of performance. So that's a big and steady sector for us, and it's a sort of we call it evergreen sectors that carries on for a long time because, again, the condition of the asset and education means that it needs constant renewal. Then across to custodial. Again, that sector is very busy at the moment. There's a long-term shortage of prisoner places in the U.K., and that's forecast to carry on for the next decade. Again, we don't go for the big mega prisons. We didn't go for that framework, but we were on lots of other custodial frameworks for the Ministry of Justice. And as you see in the photograph there, our typical work is to build new house blocks in existing prisons and they range -- there is about GBP 100 million and GBP 150 million type of contracts and then lots of refurbishment and renewal contracts within existing prisons, which are typically sort of GBP 50 million, GBP 60 million contracts. And we've probably got, I don't know, a dozen of those as we speak. So that's another sector that's set to continue for a long time to come based on the need for new prisoner places and the need to refurbish old, tired, existing prisons. On to affordable homes then. When we sold our housebuilding businesses to Vistry back in 2020, there was a restrictive covenant on us going back to the sector. That covenant expired 18 months, 2 years ago now, I think it was. And so we've reestablished our team here. We've reestablished a position on some very good frameworks in affordable homes. And we've just won actually on Monday, our first affordable home scheme for carry and housing up in Chester, and there's a few more in the wins coming through behind that. Just to be clear, our definition of affordable homes is sort of mid- to high-rise blocks of flats for residential providers, local councils and so on. We're not going to mixed tenure, and we're not going to houses per se, it's blocks of flats. I think that's important. Then asset intelligence and digital infrastructure on the right-hand side there. AI does sort of high-tech security and fire detection. So we do a lot of work, again, for the various parts of the military, but also for critical national infrastructure, so [ team water ], in particular, all over the country. And this business also includes our fire business. So you may have seen last week, we announced the acquisition of Nene Valley Fire adds another string to our bow here. We have an existing passive fire protection company. We're wrapping those together to give them a big sort of or more balanced, should I say, approach to fire doors and passive fire protection. And then Asset Intelligence provides a dynamic fire protection. So this is a full service fire offering, and there's an enormous demand for this type of offering across the country. And we believe that by increasing our presence here and giving our smaller businesses access to all of our frameworks and our client base across the whole of the country, is a great opportunity to grow these smaller higher-margin businesses. And I'll come back to that in a bit. Commercial, it's sort of we go with the flow here. Commercial comes and goes. We build office blocks all over the place, but only for clients that we know and love and have sensible terms, conditions and so on. PRS, that building is actually one we did in Birmingham a few years ago. A more modern one, which is on the internet now, is The Rise in Cardiff, which is a 31-storey building in Cardiff. It was flat pack, so to speak. So it was all precast, it was built on the ground and then lifted into place. So we go up one floor a week using all precast elements and modular bathrooms and so on. So it's worth a look, if you haven't had a look, everyone, it's on our website, and it's quite certainly a few minutes long, and it's a good video, which sort of brings to life when we talk about modern net of construction and off-site manufacturing and all those sorts of things, it brings to life what we actually mean. But it's a very good way to build high-volume buildings, particularly high-rise, but we also use for prisons and we also use for single limit accommodation in the military. Our Investments business has a portfolio worth GBP 40 million. So round figures goes up and down a bit depending on the discount rate. And that holds our PFI investments in predominantly roads, hospitals and schools that are fairly historical to be fair. When we sold the housebuilding businesses and PFI came to an end, the dynamic around turning our investments also sort of came to an end. These investments, as Kris will tell you, are good investments for us. They create -- they give us a good return. So we're holding on to them for the time being. But there is some talk now of PFI in some guys anyway coming back into health care. We did a lot of that in the past very successfully. And so of course, if that does come back, then we look at how we turn these assets back into new PFI or whatever they call it, projects. And then finally, FM on the right-hand side there is what it says in the tin. We only do hard FM, so that's the sort of care of the structural fabric of buildings. And these are mainly buildings we've built in the past as well. So that's a good business, GBP 60 million, GBP 70 million a year, high single-figure margins. So that's broadly what we do, everyone. Let's move on. I've probably gone through all of this, but that's how we structured. We got the building part of the business, the special services guys, infrastructure and then the water businesses, which also include some what we call water tech companies, higher-margin specialist businesses. I'll talk about those a little more in a minute. Snapshot of our clients. So as I said before, we work for all of the big water companies. We work for all of the big public sector procurement bodies, you see on the right-hand top right there and for lots of other local councils and private companies and so on. This here is a [indiscernible] of our strategy through to 2030. So we've got an ambition to grow the business to more than GBP 2.2 billion at 4% or better, of course, by 2030. And we say more than GBP 2.2 billion because we are not a revenue-driven business. We are a margin-driven business. So the revenue -- I don't want to sound [indiscernible], I don't think it will be what it will be. It will be big enough. But whether it's GBP 2.1 billion or GBP 2.3 billion, I don't lose too much sleep over. It's the 4% that's important to me. So that's the broad ambition that we have everyone, and we do that in 3 or 4 main ways at the top of the screen. So starting on the left-hand side there, we grow revenue and margin in our big core businesses. So building is about GBP 1 billion a year at the moment. Infrastructure is GBP 300 million, GBP 350 million at the moment and water sort of GBP 550 million, GBP 600 million at the moment. And we grow those businesses in terms of revenue and in terms of margin through the tenancy of the strategy. And we believe those big businesses should get to 3.5% or better in that period. And actually, we're making good progress in that part of the business as we speak. So those big businesses are the core Galliford Try, they'll always be the big critical mass of Galliford Try, and we intend to grow them, as I said, to 3.5% margin or better. And then alongside that, we grow our specialist businesses in the high-margin adjacent markets. And by adjacent markets, we mean things we know. So if you can build -- design, build and commission of water treatment works, you can do the maintenance on that treatment works. So that's an adjacency, which is pretty obvious really, and we have similar things like that. So we have a number of businesses in water where we manufacture pretty high-tech bits of kit, motor control centers, chemical dosing systems, sewage inlet screens and things like that and some highly engineered fabricated items for the water and wastewater industry. And we've got a number of businesses that we've acquired over the years, Lintott, MCS, Ham Baker, AVRS over the past few years and then just more recently, of course, Nene Valley Fire. These are all higher-margin businesses that operate. We can provide a platform for ourselves, of course, a base of work for ourselves because we use all this kit ourselves, but we also sell, of course, to our clients and to our competitors. So that's the water side of it. And then -- sorry, the fire side is more on the building side, alongside FM and alongside what we call Digital Infrastructure, which is a high-tech sort of communication systems, both for private companies looking for private 5G networks and also for more secure communications for the government. So those are some of our high-tech business -- specialist businesses. They all make good sort of mid- to high single-figure margins. They're all performing well, but there's a great opportunity here, as I mentioned earlier on in the fire example, to take these businesses, give them access to all of our clients and our frameworks and so on in a more structured manner and grow them faster than the sort of big critical mass businesses. And so that's the plan. We grow those businesses faster, both organically, and I'll come to an example of that in a minute and through probably further bolt-on acquisitions. And those businesses then grow much faster than the rest of the business proportionately and the mix changes. So the higher-margin stuff gets bigger, and hence, the mix drives up from 3.5% to 4% over the strategy period. Then the third stream to our [indiscernible] is getting back into affordable homes. I mentioned that earlier on that we're [indiscernible] from this market. We're back in now. It's starting to gain momentum. This whole market, I would say, is 18 months or so behind where we thought it would be on the back of macro factors really, on the back of planning issues, on the back of funding issues from Homes England and on the back of fire issues, which, a, delayed these schemes being approved for construction and increased the cost of them through new regulations in terms of fire, which means that the viability of some schemes is more difficult and that goes back into funding and so on. So there's been a bit of a hiatus here, but I sense that it's starting to move now, and we expect to be up at something like GBP 250 million a year in this part of the market by 2030. So that was our original target. By the way, we've kept it the same, notwithstanding the fact that we're a bit behind or the market more accurately is a bit behind. So they are the main big key things. And then the fourth one there, which is a general sort of item, which I've discussed already for our specialist business is just leverage our presence across the whole of the U.K., our client footprint, our positioning framework across the whole of the U.K. better and generate a bit more work for our specialist businesses. And if we do all that, we continue to generate growing shareholder returns. Of course, we spent a lot of time on people. If we look at the constraints on the industry and the constraints in our growth, it's do we have the people to grow. And the short answer is yes, we do. But of course, we work very hard to retain excellent people that we have and then, of course, attract more good people to Galliford Try. So I'm not going to go through that whole slide there, everybody, but you can see broadly what we do about making sure we nurture people, people can have a good fulfilling career with Galliford Try. And we're pretty successful. On the next slide, I think it is -- it shows some of our stats. So the [indiscernible] has gone up a bit since our acquisition last week. But we've got 87% employee advocacy, which is a very high score. And our churn -- our voluntary churn rate in the business is 10.7%, which is probably around about half of the industry average. So I'm very pleased with that. And also very pleased to be voted #1 for both graduates and for apprentices by the workforce awards last year. So we work hard to be an attractive employer and essentially having some good momentum there. So moving on. ESG. ESG, to be blunt, has fallen down the agenda for most of our investors over the last year or so. But the point I want to make here, everyone, and this is just a snapshot of a few of the things we look at from an ESG perspective, there's loads more. But the point I make always is that everything we do with the ESG badge unit makes us a better business, makes us a more attractive business, makes us a more efficient business, makes us a safer business, et cetera, et cetera. And so everything we do on the ESG front, we would do anyway regardless of any external drivers from that perspective. I think that's an important thing just to state. Okay. So I'll hand over to Kris for the numbers.

Thank you, Bill, and good morning, everybody. Just pausing for a second on this slide, you can see our biggest project that Bill mentioned earlier, the Carlisle Southern Link Road, GBP 190 million project, linking the M6 to the A595 out of Carlisle. And you can see some of the complicated structures we've got there crossing railway lines, rivers and bridges and other road bridges. So that's our biggest project due to come to completion middle of this calendar year by end of our financial year. Moving on then to the numbers, just the highlights. We had a really strong year last year. As you'll remember, we hit our margin target of 3% a year really, having grown by 33% over the previous 2 years. We signaled that we'd grow a little bit flatter this year, the transition in our environment business from the AMP7 cycle to the AMP8 cycle we call a flattening, and we have seen that. But still pleasingly, we're a little bit ahead of where we thought. So revenue of GBP 935 million in the first half, up 1.3% on last year. Our divisional adjusted operating margin, we flagged that, that will continue to move forward from the 3% at the full year. And indeed, we're now at 3.2%. I'll come back to that a little bit on the divisional slides, but fundamentally driven by an improved contracting environment, quality delivery, so focusing on our quality agenda, which is one of the key stepping stones and then just volume and leverage as we grow. So moving margins up by 54 basis points year-over-year to 3.2%. That flows through to adjusted profit before tax, up by more than 20% to nearly GBP 25 million, and that in turn flows through to a high dividend at 6.5p per share, up 18.2% in line with EPS. So we have one of the strongest dividends in the sector at 1.8x cover, and we continue to deliver cash, as you can see there, to support our dividend, the average 12-month cash. So we focus more on the average month-end cash than we do with spot cash and that average month-end cash was up to GBP 190 million. That included the impact of about GBP 6 million of the share buyback at the half year. [ GBP 3 million to GBP 9 million ] now, but strong cash, up from GBP 179 million last year. Bill will talk you through the order book in a little more detail when we get back to the strategy section. But pleasingly, the order book is also up versus last half year by GBP 200 million to GBP 4.1 billion. And perhaps more importantly than just the absolute number because we have a very prudent number in our order book, as Bill will explain. The work secured for this year is at 98%, and that was at Christmas. So it will be beyond that now. So broadly done for this year. We've got 80% of the work secured for '27. And that's 80% of a bigger number as we move forward towards our targets. And you can see at the bottom of the page there are our targets, as Bill said, GBP 2.2 billion or 4%. So we feel we are well on track for those numbers as we stand at the moment. Into a little bit more detail, I think the thing to point out really on this slide is just the broad-based progress we've made across our big businesses in both Building and Infrastructure, both divisions up in revenue, up in margin and up in profit. Central costs moving in line with revenue broadly. And our Investments business that Bill mentioned earlier, is back a little bit, but that's a lumpy business. It depends on when we have financial closes on projects and because some of the macro issues that are well publicized, that bit of the business is running a little bit slower. We cut our cost accordingly, and we are managing the cost base there very tightly. So all in all. So if I focus a little bit more on the divisions. Building revenue forward by 2%, so steady progress, as Bill talked; defense, good; education, good; custodial and justice, very good. And you can see that in the pie chart to the right, defense is over GBP 600 million, custodial nearly GBP 600 million and education, GBP 450-odd million in the order book. Margins in Building moved forward 54 basis points to 3.1%. That's a record performance for them. Drivers of that really, I say, the quality delivery enable sort of more attractive contracting environment. And as we go forward, we're pushing those margins on the contracts a little bit forward. So 3.1%, a very good result. Order book up GBP 0.1 million, 75% of the work already secured for the next financial year. So Building in a really sort of robust shape actually looking forward to the second half and 2027 with some confidence. Moving on to the Infrastructure division, also moving forward very nicely. Revenue a little bit flatter. So as you see, 0.6% revenue growth in the period to GBP 454 million. The drivers of that really environment with the change from AMP7 to AMP8 that I talked about earlier, moving back slightly as expected, as happens pretty much with all AMP transfers. Offsetting that was a very strong performance from our Highways division. We talked a little bit about Carlisle before, and you can see in the bottom right-hand corner, South East Aylesbury Link Road, another one of our big roads projects. The long sort of dry summer and dry autumn really allowed those roads projects to make some significant progress as such the division moved forward. Strong progress in operating margins there, 62 basis points forward to 3.3%, again, a record performance for the division. So as we move into AMP8, the early AMP8 there, we see good design work coming through, good quality delivery. The AMP frameworks have higher hurdle rates and a more balanced risk sharing than the old AMP. So all those things give us confidence for further margin progress in the second half. Indeed, we guided the market to an uplifted full year performance, reflecting our stronger view of performance based on H1 and what we can see about H2. So strong progress in the Infrastructure division. As Bill mentioned, we're moving into the energy sector. So we've got the high-voltage DC framework with the National Grid. We've already secured our first 2 roads projects there as well as we move into that sector. So good wins across the board, Infrastructure and Building moving forward nicely. Moving on to the balance sheet now. I think the first thing I'd say about the balance sheet is what a simple balance sheet it is. There are no complicated structures on our balance sheet. You can see on the right-hand side, we have some intangible assets from our previous acquisitions, a very small amount of fixed assets, noncurrent assets and the IFRS 16 offset for a net balance of about GBP 10 million and very light on CapEx. We don't own a lot of equipment, and we don't have a lot of outflows on cash flows. Our PPP assets are worth about GBP 38.5 million. As you can see, that is slightly down on the year-end. These are very liquid assets. They generate about 8% returns each year. It's low-risk cash-backed returns, and we really like those as they provide significant strength to our balance sheet. Beyond that, working capital is negative as it is. It's a little bit down from the full year, and that is largely covered by the cash of GBP 211.7 million. That's the spot cash. And the thing I'd say about that working capital is it cycles very, very quickly. So every month on our major projects, we certify for the months work and the clients typically pay us that within 30 days. And [indiscernible] we pay our suppliers around the same sort of time line. So that working capital goes around very, very quickly. There are very, very few aged balance and very limited exposures on contracts in that number. Beyond that, we've got a tiny other number, and that takes you to the net assets, which moved backwards slightly, but that moving back, as you'll see, is really a function of the shareholder returns that we made during the period that I'll talk about. The other thing I'd say about our balance sheet really is no bank debt, no pension liabilities, and we have an RCF, which has remained undrawn since its inception. So we've got significant resilience and strength around our balance sheet. I've already touched on the average cash at the bottom there. As I said, that's the most important metric, and that's strongly forward versus year-end, and we expect that to move forward slightly as we go through the balance of the year. In terms of capital allocation there, you can see we have a very clear capital allocation model. We will invest for growth first. So we believe the best returns we can give our shareholders are organic and M&A acquisitions that are in the right place, and we'll talk a little bit -- Bill will talk a little bit more about that. We've made 5 acquisitions since 2021, the most recent one being Valley at GBP 10 million. We've also done 4 in the water sector, and we'll come back to that. And we've also made various organic investments. You can see there we refer to the cloud-based system that we put in 3 years ago. But we've also opened various manufacturing facilities in our water technology specialists. We've opened our most recent one in the last couple of months, and Bill will talk you through that. So strongly prefer to return our capital generated into organic investments and acquisitive investments. They have the highest returns and therefore, the best return for our investors. Where we -- once we've done that, we'll then look at our shareholder returns. As I say, we've got the strongest dividend cover in the sector, 1.8x. How do we get to that 1.8x? It's basically 2x our adjusted EPS. And then the 0.2x, which brings it down to 1.8x is the interest income that we received from our PPP assets we give back in full every year, and that drives it down to 1.8x. A very strong sustainable ordinary dividend. It's been growing strongly as we grow our revenues and our profits. And finally, then we'll return excess cash. We have a view of where our cash should be. We expressed that as our average cash is within the trend line of 8% to 12% where we have excess cash above -- typically above the midpoint, but certainly if we approach the top end, we'll return that. And of course, we try to manage ourselves towards the midpoint. And if you look to the right-hand side, you can see how we've done that over the last 5 years. So we've done 3 share buybacks. We're just about to complete the last one. That will total GBP 35 million. We did a special dividend 2 years ago in 2024 for GBP 12.5 million and our 1.8x cover standard dividend, nearly GBP 70 million means we've returned GBP 114 million over the last 5 years. That's broadly 20% of our current market capital. So really, really strong returns along a very simple balance sheet and gives us confidence to do that. Looking forward then a little bit looking backwards, a little bit forward. You can see the chart, 11 half year periods of consecutive growth across all of our key financial metrics. And clearly, we're very pleased with that. And as I say, our guidance for the full year suggests that we're well on track for 12 periods -- half year periods of growth. TSR over the 5-year period -- same 5-year period is 402%. That's up roughly 52% from the full year in June. So strong TSR progress. The CAGR, you can see, revenue, 12% CAGR over the last 5 years and adjusted PBT up 40%. I think the last thing I'll say before I hand back to Bill, really is if you look at those black bars, those are our target bars on the right-hand side of that. It's a function of the GBP 2.2 billion and the 4% divisional adjusted operating margin target. If you flow this through to expected EPS and expected DPS on the right-hand 2 charts, you can see there is plenty of room in front of us, plenty of road to travel to get there. The sort of DPS by 2030 will be double what it was in 2024. So I think a good plan in front of us. Bill will talk you through the order book in front of us, but the order book is very, very strong. We've got a clear model. You've seen the engine for growth. We've got a clear model to do that. We've got a track revenue of turning revenues into profits and profits into cash very quickly. And with our strong dividend and clear trend lines on capital allocation. We can either reinvest that in attractive acquisitions or organic investments or we can indeed return it. So I think we're in good shape, clear model and plenty of road in front of us. And Bill, I think that's back to you.

Okay. So the first thing about the strategy is how do we get from 3% to 4%. And of course, we're only at 3.2% in the half year. So we're making progress here. There's 4 stepping stones, and they're not all equal, I add, but the 4 main stepping stones. We've spoken a little bit about volume and growth and an overhead leverage that comes with that. That's a fairly obvious thing. And more importantly, much more importantly is the second, the better contracting environment. So what we have here is an environment and there's a slide on this in a minute, but basically, our big clients are far more intelligent about how they procure. They procure now for quality and long-term value, long-term collaboration, not just for lowest price wins. So that's a really big change in the industry over time. And that means that obviously, we can -- we wouldn't work based on quality rather than lowest price, and we can get better, more sustainable margins into the business. And I'd say alongside that, I would say that all of the listed Tier 1 contractors are much more disciplined about saying no to bad contracts and letting them go somewhere else. And so overall, I think that the environment overall in the industry, which we benefit from, of course, is much better and much more sustainable in the long term. Then, of course, we've got all sorts of operational improvements. We spoke a little bit about them, about off-site manufacture, [indiscernible] of construction, digital technology whereby we design things and build them digitally in virtual reality often a dozen times before we actually go to site and do it [indiscernible]. On the back of all of that, we get it right first time much more. We spend less money, less time repairing things or doing things twice, and that all adds good to the [indiscernible] in terms of our margins as well. And then finally, the higher-margin work I talked about, the higher tech, higher-margin specialist businesses that we grow and help by affordable homes as well. And that -- those things in combination take us up to the 4% by 2030. So what's driving the revenue growth? Well, everywhere you go, you can see what drives the revenue growth. The roads in the shopping state, the water and wastewater treatment works, we don't all see it, of course, but they're not in the best condition. The same with hospitals and schools and prisons and defense establishments. There's an amount of work out there to be done. And it's important to the productivity of this country, it's important to economic growth, and it's a fundamental point of focus, I think, from government. So the government have allocated GBP 725 billion in the budget last year to the type of work that we do. It's CapEx budget. So it's ring-fenced and it underpins economic growth. So some people say, well, has the government got the money to do all this. And the short question is, yes, all of these make sense as an investment in the first place. And the net report from a few years ago now demonstrates a multiplier of GBP 2.84. So GBP 2.84 generated in the local economy for every pound spent in Infrastructure. So this is a key government plan for economic growth. And there's an enormous, enormous amount of work out there to be getting on with. That's all exacerbated by climate change and the fact that, as you all know now, you get short of much more intense storms. They have impacts on water, on roads and all sorts of things, and that's only going to get worse that needs to be dealt with as well. And then we've got the population growth and the changing demographics which come alongside that. And we address that by making sure that we've got really good positions in frameworks and all the sectors that we want to be in and that we're expanding into those adjacent markets that I spoke about. So there's some questions coming up here. I'm going to wait until the end, everyone just to pick up these questions, and I might answer some along the way. Then what drives the margin growth, I've taken you through the stepping stones. The biggest things are the maturing client procurement that you see on the right-hand side and this robust attitude to risk that we have and to be fair, I think all of the big Tier 1 contractors have. So that's -- those are the 2 big changes in the industry over the last few years. And then, of course, there is all these more incremental things you see to the right-hand side, and I've spoken about most of these in the first place. So that's what drives margin growth and will continue to drive margin growth. Just a bit of an indication of the size of the markets there. So I won't go through all these numbers, everyone, but you can see the scale of numbers there is enormous and all backed, as I say, by the GBP 725 billion that was announced by the government. Our order book. So there you have it there. So you can see -- I won't go into too much detail, but we are predominantly public and regulated sector in the middle there. The private sector sort of wax and wanes a bit depending on what's going on. I would have said typically it was 90-10. Maybe I need to change it now, maybe it's going to be 95-5 or something like that until things change perhaps but a really good consistent order book. And as Kris said, we measure this and we report this order book very conservatively. The important thing for me, as Kris said, is that at Christmas time, we had 98% of this financial year's work in hand. So that's done now. At Christmas, we already at 80% of next year's work in hand. That number is going to be higher now. And we've also got a significant proportion of '28 year work already in hand now. So for me, the order book number is one thing, but it's that big bar wave of work that we've got secured that runs ahead of us at all times, which is really important to me because that means we can get our ducks in a row in terms of our people, our supply chain, our materials and all of those good things and it supports our risk policy. So being very selective is much easier when you've got a full order book, obviously. So that's the simple philosophy of how we run the business coming into play. That bar wave of work ahead of us is really important. Moving on to frameworks. The majority of our order book is in frameworks. And you can see that -- I'm not going to go through all of these everyone, but you can see that we've got frameworks that run out to 2030. And to be honest, we could have had to 2035, but it becomes a little bit meaningless. But the point here is that the vast majority of our work, 87% you see there is done through long-term frameworks of long-term clients, 93% return clients. So we know and know these clients and they know us and [indiscernible], hopefully. And that's a really good position, which perpetuates that bow wave of work in front of us. On that slide there, until a few years ago, we just had the green bit, which is the big sort of design and build frameworks. And over the last few years, we've concentrated really hard on getting our specialist higher-margin businesses into long-term frameworks as well. And that's in the blue down the bottom there. So you can see there that over the last few years, we've had a really good push and all our specialist businesses have fantastic positions in long-term frameworks as well. And we expect that to continue to add [indiscernible] to them in terms of those margins as we go forward. So we target frameworks because of that sensible clients, long-term relationships. And alongside that, of course, come our supply chain who we treat well. We pay our supply chain promptly. We have an initiative called Advanced to Alignment for our top 300, 400 suppliers or subcontractors and they get access to our systems and our training and our pipeline, all those sorts of things. So we keep our supply chain close because they're very important to us, of course. We deliver a high proportion of work through our supply chain. And so it's really important for us to keep that supply chain on site. And particularly when -- not at the moment, I hasten to add, but particularly when there's a shortage of any particular trade perhaps or high inflation, things like that, that's when you want your supply chain on site and choosing to work with us as opposed to other people. Okay. Water, as I've mentioned this before, but I think the important thing here is to point out on the top left there, our framework position. So a few years ago, all of our work would have been in the red, big design and build frameworks for all of the same water coming [indiscernible]. But we've deliberately moved now into the capital maintenance, which is the maintenance of water and wastewater treatment works. We now have 15 frameworks in that arena, and we're growing strongly into that part of the business and then 21 frameworks in water tech, which is about this provision of high-tech bits of kit. So we're moving and rebalancing our portfolio. The big volumes, as I said, still come through the red bit, the design and build, but higher margins come through the 2 gray bits. Okay. And I think the really important thing on this slide, everybody is just to show how we would work now. So on the right-hand side is just a typical example of how we get scored when we bid to go into these frameworks and it's predominantly quality and probably normally 20% or 30% commercial. And of that commercial, it's things like the strength of your balance sheet, how quickly you pay supply chain, are all things that come into the commercial side as well as your fee. And then on the left, you can see that 99% of everything that we do is negotiated in one form or another. So in the environment and highways businesses, you get allocated projects through frameworks and then you build up those -- you design and you get paid to design the scheme, you just get allocated. There's no competition as such. You get paid to design the scheme, you agree a target cost with the client and that target cost will include contingencies for inflation and risk and things like that. And then you go and you build whatever it is, a road or a bridge or water treatment works for actual cost plus a fee against the target. And then there's a pay and game mechanism whereas if you bring the scheme in below the target, which, of course, we aim to do, you get -- you share the upside. If you bring the scheme in above the target, you share the downside. From a risk perspective, it's a very good form of contract, and it's a much more mature sensible form of contract. And I think the fact that all of our work in Infrastructure comes to that route now is behind us, the increase you see in our results. In Building, it's a little bit different. Again, you get into the frameworks, you get allocated a scheme or sometimes there's a bit of a mini competition, but it's not about money. It's about have you got the people, have you got the supply chain, what's your track record and this type of work and so on. But then once you've chosen and it's just a choice really, then it's much the same. You get paid to develop a scheme, to design the scheme. Again, you build at the price that includes all your contingencies, risk, inflation and so on. The only difference is in Building when you agree the price, that becomes a lump sum fixed price provided nothing changes, of course, and off you go and you build it. And that's also proved really successful over time. So 99% of what we do is negotiated in one form or another. This just says what I've just said actually, the topic is the old way of doing things and the bottom half of the chart is how we do things now, which is what I've just explained. In terms of organic growth, we're going into affordable homes. I mentioned this earlier on, and there's a few examples of all the frameworks we've got places on. And the market, as I said, now is showing signs of movement. We've got our first scheme on the way and a few more to come. So this is good. That's all organic. There's no investment in this our own people and a [indiscernible]. In the water business, we've opened, as Kris said earlier on, a new facility in Paisley last year that supports our fabrications business and some of our water tech businesses. And then we've just opened our fourth facility in New Yorkshire, which manufactures, as you see in the photo there, these pipe specials. These are all one-off bespoke bits of kit, mainly for the water and wastewater industry, but also for food and defense sometimes. And these are all, as I say, one-off bespoke made to measure bits of kit and they can have -- they can be configured in a way you want in all sorts of pipes and valves and things coming off the side. So high demand for these sorts of things. We're just sort of building ahead of steam now, but this is going to be a good business. And I can see a further facility, our fifth one, we'll be having a look at probably next year now, somewhere down the M4 corridor. So we'll continue to invest organically where it makes sense. And again, we can feed businesses like this with a base of work for our own operations and then, of course, top that up to be really efficient with work for external customers. I've spoken about Nene Valley. This is the fire door company that we bought other day, and that's just a very simple example. They go into existing buildings. They check the existing fire doors. 9 times out of 10, they're going to be replaced. Sometimes they can be repaired and remediated and so on. But in every hospital, in every prison, in every school, every barracks, every block of flats in the country, there are hundreds of -- millions of fire doors and every single one of them needs to be checked, replaced, repaired. It's an annuity revenue type of business really, and we intend to grow considerably into this market. That's just a flavor of the ones we've done over the last few years. So you can see the acquisitions that we've done. We've got some hurdles, of course, that we apply to -- are we going to buy businesses or not. And of course, there will also be some more strategic views that we'll take occasionally on whether a business will be a catalyst for something else. But in the main, we expect them to clear our strategic and financial criteria and then off we go to play. I think it's important that we've got -- we've done, as you see there, all those acquisitions on the right-hand side. We've got the balance sheet to support them. We've got the reputation to support them. We've got the experience to integrate them. So this is a good stream to our [indiscernible] as we go forward. So finally, everybody, we've had a really good performance in the first half. We've signaled that, that's going to continue into the second half through our guidance at the half year. You can see there our progress over the last 5 years and the fact that, that's 11 periods, as Kris said, we've signaled a 12th on the way. I've never seen a market like it. So when I look forward into the future, '27 and '28 in terms of our pipeline already look very strong indeed. And I see no reason why that won't continue as we update our 3-year sort of look ahead. But our 2030 strategy is valid, and we're making very good progress towards it. So I'll wrap up then we'll move to questions. [indiscernible] glasses there.

Okay. So the first question is how are our operations and performance impacted by the significant increase in oil prices? I think the answer here, everyone is it's too soon to know, of course. But what we might see is inflation coming through -- trickling through increased energy prices. I think there's a few things to be cognizant of here. The first one, of course, is that we forecast inflation into our bids in the first place. So if you just took -- let's take 3% as a round figure, we take 3% for the first year of a contract. Our contracts are typically 2 years, sometimes 3. So we have 3% in the first year, compound that into the second year, compound it against the third year if you need to. And again, looking at when you're going to be buying things, whether you could buy for not all of those mitigation strategies. So the important thing in the first instance is we're only looking at the differential of what we thought would happen to inflation, what's actually happening to inflation. The second important thing, I think, is that we are very, very disciplined about not signing contracts until we know what's happening. So in an environment like this and before this, in a very inflationary period post the Liz Truss debacle, we were very disciplined in just not signing things until we knew how to manage and mitigate our risk. So for example, in those days, when things were going -- very inflationary environment, if you took steel as an example, if we're going to build a high-rise building with a steel frame, we'd say to -- with our supply chain, we'd say to our client, okay, we've allowed -- I'm choosing a number here, GBP 2,000 a tonne for steel. That's going to our bid. If we have to pay GBP 2,200 of steel, you pay the difference. If inflation falls, we pay GBP 1,800 of steel, we'll give you the difference back. So that's one way to -- a simple way to mitigate your risk. Most of our contracts have some sort of inflation mechanism in them. So they're index linked. So there's a little bit of a lag there, of course, of 3 to 6 months in some cases, but the indexes catch up with you. So that's another way of mitigating it. And then -- the other really important thing is we've got 500 or 600 projects on the go at any one time. So we've got 500 or 600 micro inflationary cycles. And that in itself moderates the impact of inflation. We've got some contracts that are just starting that may be the most affected. We've got some that are in flight and are mainly procured, which won't be much affected. We've got some in the last knockings of completion, which won't be affected at all. So again, that moderates the impact of inflation. So I think the wrap-up to that question is I'm not overly concerned at the moment. Hopefully, all this will not carry on for too much longer and things will die away. But at the moment, we've not seen any impact. Okay. Next question is, which government departments are most difficult to deal with and why? The construction playbook was issued in October 2020, and that was basically an instruction to government departments on a compliance explained basis to adopt a more modern, more progressive means of procurement, as I explained earlier on. So a much greater emphasis on quality and less so on price. And all of the government departments have embraced that. Some more quickly than others, I'd say. But I think all of them now are pretty robust in adopting those sorts of methods. I think that the drivers, maybe the urgency does drive a bit of momentum perhaps. So what we see at the moment is justice and defense are easier to deal with and quicker to get the contract. Not all the time, by the way, but if a facility is needed quicker, then that obviously creates a bit of urgency. I'd say schools are steady away. They're the same as they've always been. And health, so we don't have much of an exposure there really. I'd say they're all much of a muchness. They're all pretty good and pretty sensible to deal with. Next one there. What proportion of order book sits in framework agreements? Okay. I mentioned that's 87% of everything we do is through frameworks. Visibility. We all get that fantastic visibility. I spoke about that more than 80% of next year's work already in hand. I'm going to say 50% or 60% of '28 work already in hand. So that those framework position give us a great long-term visibility of work and the fact that we're working for clients that are sensible and value what we bring, not the lowest price means that it helps to move our margins in the right direction. So I would say that the other part of it -- of the question is how does the risk and margin profile compared to previous years. I'd say it's pretty similar. But as we renew these frameworks, we will put a slightly higher hurdle into them. So I'd say that overall, the state of the industry, the enormous amount of work out there and the fact that it's a precipitator of growth in the economy means that the whole industry is in a very good place at the moment and Galliford is certainly in a very good place at the moment. So those are all the questions that I can see.

Yes, that's correct, Bill, Kris. Thank you for addressing those questions from investors today. But Bill, before we direct investors to provide you with their feedback, which I know is particularly important to you and the company, could I just please ask you for a few closing comments?

Yes. Thank you. Look, we're in a great position, everyone. I won't go on for too long. We've got a cracking bunch of people, great bunch of people. Everywhere I go in the country, I visit lots of sites, I find enthusiastic, energized, great people enjoying their job and enjoying contributing to our economy and to the social and economic infrastructure that underpins our day-to-day lives. So that's the first thing, great bunch of people, which is a starting point for any successful company. Then we've got a fantastic order book, as Kris said, and we've got a very strong balance sheet. You put all those 3 together with the market out there, the likes of which I've never seen, and I'm very, very confident about the future. So I think we'll leave it on that point. Thank you all very much for joining, and have a nice rest of your day. Take care. Bye-bye.

Fantastic. Bill, Kris, thank you once again for updating investors today. Could I please ask investors not to close this session as you'll now be automatically redirected to provide your feedback, which will help the company better understand your views and expectations. On behalf of the management team, we would like to thank you for attending today's presentation, and good morning to you all.