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

Good morning all. Nice to see you. Welcome to Galliford Try's full year '26 results. I suppose just having to think about the video reel that you saw a bit of there was running outside. It really even now inspires me to watch the sort of stuff that we do all around the country every day and the contribution we make to the search and economic countries, the productivity of this country, I think is fantastic. One of the great things about construction, you can see the fruits of your labor generally for the rest of your life, and it's a great tangible thing that brings good people into the business and gives us a lot of job satisfaction. Okay. So again, the agenda for today, standard agenda, I'll do the highlights. I'll still some Kris' thunder, at the front end then he'll take you through the numbers in a bit more detail. I'll do a quick update on the strategy, then we'll go to questions. So the first thing is everybody really pleased that we've delivered 6 now consecutive years of improvement in all of our key metrics. And I suppose the key message from this slide is that we're absolutely confident in that trajectory continuing into the future. All the ingredients are there for us to continue to grow that order book. We've got a long sort of line of sight into the future. We're well aligned with the government priorities of where they need to spend their money and where we need to improve the infrastructure of this country. And that gives us a huge opportunities going forward. produce the goods as we have done for the last 6 years and to have more capital allocation optionality in that time. So in a nutshell, we are very well on track for our 2030 targets that you see down the bottom there. Okay. So here's the headlines. Very pleased to -- you've all seen this already, I presume, on the RNS. But revenue up at GBP 1.9 billion, up 3%. If you remember this time last year, we said revenue would be slightly flatter than the growth we've seen in the previous years, and that's how it panned out, but still 3%, we have to adapt. More importantly, of course, because we are a bottom line-driven company, another top line driven company, much happier that the 3 years now or 2, sorry, at the half year is now 3.5% at the full year and up from 3% in the previous full year. So that's a really good performance. and well on track, as I said earlier on, towards our 2030 targets. That produces adjusted PBT of GBP 55.9 million, up 24% and a really good full year dividend of 23.5p. Which is up again, similar to the number actually we should have treated. You have 23.5% and 23.5% really. But anyway, up a very site number, 23%, 24% up on the same period last year. Cash has performed really well. in average month-end cash up 21%, cracking order book. And I'll come back to the order book in a bit more detail as to what's in it, but a really good high-quality order book, and of course, the new GBP 15 million share back that we announced this morning. So all in all, everyone, we're in very good shape rather progress, and I'll hand over to Kris to give you more detail on the numbers.

Thank you, Bill, and good morning, everyone. I'm going to leave the tweaking numbers comment in the past, I think. So I'm really pleased to stand up here today and present our full year results, and as Bill said, to report a sixth consecutive year of growth. It's a hugely positive set of numbers. I'm surely agree, demonstrating continued execution of our strategy and resulting in better than expected revenue growth, strong profit and margin improvements and continued 100% cash conversion. But before I get into the financials, let me talk about the right here, a project completed and handed over to the client in July. This tower adopted off-site construction fabrication, modular integration and digital tools to enhance build quality and efficiency. This is Cardif's new tallest building. And what I've really liked about it, it's fitted into a really tight site between the mainline train from London and between major roads in really tight site. And it really demonstrates how our capabilities and innovations can make previously unviable land available for great construction. So turning to the financials and getting into a bit more detail through the P&L to try and help you understand the story of the year. As I referred to earlier, we have delivered revenue growth ahead of expectations, up 3%, up to more than GBP 1.93 billion. With the APPH transition smoothly navigate an exceptional outperformance from our highways team giving us our sixth period of total top line growth. And exactly as we predicted, both of our core divisions of building and infrastructure, turn the revenues into higher profits through strong margin progression. At 3.5%, the divisional adjusted operating margin was up by 53 basis points, predominantly driven by commercial discipline and improved commercial terms in those newer frameworks, quality delivery projects from our risk-managed order book and a growing contribution from our Specialist Services businesses. And so the key point for me here is that the diversification of our chosen markets means we're in more control of our overall revenue and profit outcomes. Let me take some highlights from the slide. Adjusted operating profit of GBP 49.5 million increased by 21.9%, materially ahead of revenue growth. And there were no exceptional items in the year. for the second consecutive year. The 53 basis point improvement in divisional adjusted operating margin is particularly encouraging for us and gives us further confidence in our operating model as we move towards our 4% margin target for 2030. Net interest income has increased to GBP 6.4 million, up 45%, reflecting improved cash management on higher average cash balances. And as previously guided, the adjusted effective tax rate for the year was 25.0%, broadly in line with statutory corporation tax rates. And as Bill said, even after that higher tax rate and adjusted basic earnings per share increased by 23.1% to 42.4p per share. And this means that adjusted EPS CAGR has grown by 33% since 2021. We remain confident in delivering higher earnings going forward, and I will talk later about how we intend to use the cash we generate to drive accretive EPS accretion going forward. Moving now to our Building division. The team have delivered another disciplined performance with commercial focus and high-quality operational delivery, driving margins in new highs. These strong profit results and an order book up more than 8% have been delivered against the backdrop of some delayed decision-making, meaning some revenue has moved into 2027. This leaves less building revenues slightly down at GBP 95 million for the year. But more importantly, adjusted operating profit increased by 17.8% to GBP 33.1 million with adjusted margins up by 57 basis points. This reflects the quality of our contract selection and bidding discipline. Our risk-managed order book and the quality of work we've delivered across 94 completed projects in the year, including the rise at Cardiff with total project revenues of over GBP 700 million. As you know, we are selective in the revenue we take on and delivering continuing and sustainable increases in profit and cash for our shareholders is the story here. And the order book does tell the forward story, up nicely to GBP 2.7 billion, driven by strong demand against defense and custodial. High levels of work are secured for the upcoming financial year with 93% of revenue secured for '27 and 50% for the following year already. As Bill said, we are supportive of the new Prime Minister's intention to play up planning regulation and to live deliver on the government's new Affordable Homes commitments. So all in all, another strong year for the Building division, with all sectors in good shape and an order book that sets up well for '27 and beyond. And it is a similar story in our Infrastructure division, where FY '26 was a very strong year. The division comprises our highways and environment businesses, and this includes a higher-margin specialist and capital maintenance businesses. Revenues increased to GBP 971.6 million, up some 7.7%, reflecting a smooth transition to AMP8 and an exceptional year in highways. We talk about highway for a second, they delivered 3 major projects opened for traffic in the year. The Melton Mobay distributor Road, which you all now know is the Pork Pyway is open, the 8-kilometer Carlisle Southern Link Road and the A47 at Blowfield Norfolk. These 3 projects completed some 12 miles of road, 16 major structures and finalized project revenues of in excess of GBP 400 million at attractive gross margins. As I said, the transition from AMP7 to AMP8 was relatively smooth in the year with environment growing revenue slightly where we had expected them to be flat. Looking forward to FY '27, and paid project revenues are building now for both the men contracting businesses and for the smaller specialist water and capital maintenance businesses. as early design work turns into construction and manufacturing work. Within the overall division, the mix of revenue will swing back to environments in FY '27. As those highways teams move on to the earlier stages, the earlier lower revenue stages of their new projects, and this will have a flattening impact on the aggregated infrastructure revenues in FY '27. In FY '26, margins increased by 49 basis points. again to 3.5%, and this was driven by the quality first time delivery, improved commercial terms on our new frameworks, accelerated delivery in the long hot and dry summer, which we all enjoyed, and the tightly close outs on those major road projects. Consequently, adjusted operating profit for the division increased by 25.2% to GBP 34.3 million. And I think for me, the key thing to take from both of those 2 slides for the building infrastructure that both businesses and now delivering 3.5% up from 3% a year ago. The forward order book for infrastructure has held at GBP 1.7 billion, weighting towards environment at GBP 1.17 billion, we secured revenues for next year or the current financial year at 87% and nearly 2/3 of FY '28. And the ongoing commercial and operational discipline we have shown and the new improved framework terms on our AMP8 framework gives us confidence in margin progression going forward. Let's turn now to our balance sheet, slide you've all seen before, strong trading and continued discipline and balance sheet management have maintained a very robust cash position and increasing net assets. Year-end cash was GBP 259 million up 9.0%. The number I would really point you to is the average month end cash at GBP 216.2 million, up 21% on the prior year, broadly tracking profits. And the group continues to have no bank debt, no pension liabilities. Our GBP 25 million RCF remains undrawn, and we're pleased to have taken the first options to extend this by year to 2029. The PPP assets valued at GBP 37.2 million generated annuity income of GBP 3.7 million in the year. And this is a portfolio of assets which generate strong cash back returns, and there is a liquid market for such assets. We keep this portfolio under review. And should we find a use for this capital with a higher return for shareholders, we can look to divest individual assets as necessary. And lastly, on lease on the slide, we are proud to and committed to paying our suppliers on time with average days to pay at 27 days and 97% of invoices paid within 60 days we are comfortably in line with their payment requirements. And so in summary, we maintain a straightforward, resilient and strong balance sheet, and this remains a key differentiator for our people, our clients, our suppliers and investors. I turn now to the cash flow, the spud of the balance sheet. You can see on the left, our FY '26 cash bridge explaining the movements in our net cash over the last 12 months. Cash from operating activities was GBP 56.1 million, including IFRS 16 lease payments, and that was ahead of our adjusted operating profit at GBP 49.5 million. Working capital was essentially neutral across the year at GBP 0.9 million of inflow. What this means is that the seasonal outflow that we reported in March reversed in full as we did in the prior year. Net positive interest income of GBP 6.4 million, up from GBP 4.4 million a year ago on higher cash balances. And putting together the trading cash flows and the over of minus GBP 2.5 million, that gave us circa GBP 16 million of net info Against these inflows, we have invested GBP 8.1 million against the Nine Valley Fire acquisition that we announced at the half year. Alongside this, we have made shareholder returns of some GBP 30.3 million being GBP 20.3 million of cash dividends in the year and the GBP 10 million share buyback completed in April. Alongside this, we've made some smaller organic investments in our Citi fabrication facility and in upgrading our commercial reporting suite of systems. These totaled GBP 1.1 million. All in all, the total capital allocation in the year equaled GBP 39.5 million, all generated from trading cash flows and representing some 70% of the adjusted PBT for the year -- in the year, there was no corporation tax outflow largely due to the use of historic tax losses. But as previously guided, we will return to paying corporation tax from 2027 as these losses have now largely been used up due to recent successive years of profitability. And we felt on the right-hand side, it was worth showing the aggregated cash flows over the last 3 years to demonstrate the consistency and similarity with which our model generates and uses cash. For me, the first key point here is the tight control of working capital. As you can see on the slide, over the 3-year period, working capital has been a net inflow of circa GBP 5 million. We feel this clearly demonstrates the high quality of our profits. We turn working capital into cash broadly every month, and we have done so for more than 3 years now. Secondly, beyond the prime conversion to cash, the 2 bridges clearly demonstrate the broad range of our accretive capital allocation policy in play year-on-year with more than GBP 120 million of capital allocated over the last 3 years. And as we look forward to 2030, we are focused on maintaining this track record and then ensuring we allocate capital that we generate as optimally as possible. When we look at our capital allocation policy. The first thing to say on this slide is our capital allocation priorities remain unchanged. And you can see progress against each of these on the bottom half of the slide, as I just discussed on the cash rate. And as we look to 2030, with a strong pipeline of work, high visibility of revenues and our track record of converting revenues to profits to cash, we believe we can continue to deliver sequential cash performances that will give us plenty of capital allocation optionality. Let me talk you through our thinking here. We will continue to grow our sustainable dividend at 1.8x adjusted EPS cover. That's a market-leading cover in our sector. The 1.8x cover represents circa 2x cover on our normal operations and improved to 1.8x when we also returned the annual interest earned on our PPP assets. Even after these dividends over the next 4 years, there will still be plenty of free cash flows to invest. We can do that organically for revenue growth with examples in the last couple of years being our paisley in key prefabrication facilities and acquisitively in bolt-on M&A in higher-margin adjacent sectors like our Nine Valley acquisition in February. We all know that M&A can be lumpy, and there may be periods where there are fewer deals to complete or organic investments to make. In these periods, the mix of capital allocation activities may lean towards further incremental returns. Typically through share buybacks. Either way, further EPS improvements are obtainable above and beyond our sustainable growth targets. It's also worth being clear that our decisions on returns of capital will be made while retaining adequate financial capacity for the transactions coming through our active M&A pipeline. We are pleased to have announced the GBP 15 million share buyback today but it's been made very much in line with these concepts. And so 2026 was a strong year for capital allocation with nearly GBP 40 million deployed. We are continuing to build our M&A pipeline and organic pipelines for the future. Moving on to M&A opportunities. I'd like to explain a little bit more about we're building this pipeline and what we're thinking. And our views on M&A can be expressed in 3 simple points. Firstly, we have the track record, capability and experience to deploy capital successfully in M&A. We actively learned from previous deals and we implement the learnings in our new deals. As an example of this, we are pleased to say that our recent acquisition of mean Vale is ahead of business case, and the integration is going well, with cross-selling underway and geographical expansion underway, including the hiring of our first technicians in the northwest of England. Secondly, acquisitions will be bolt-on and adjacent. We will only buy specialist businesses in specific sustainable markets where we already operate and where we understand the risk. We're focusing our efforts on a limited number of target areas. You can see on the slide in a environment, it's capital maintenance technologies and for Specialty Services, it's fire protection, asset security and Hart FM. These are structural but fragmented growth markets, where our differentiation is that we have the client list to drive faster revenue growth and margin increases. Our team in Nine Valley Fire are really starting to benefit from this already. Thirdly and finally, we'll be very disciplined about the process. Our active pipeline is regularly screening the sectors that I've mentioned. However, deals would only be considered where they meet both our strategic financial and operational hurdles. You've seen them before, and you can see them again to the right of the slide. So simply put, our rigor and discipline in capital allocation decisions is matched by our rigor and discipline in contract selection. And we recognize for both of these discipline remains crucial to all of our stakeholder communities. That being said, we are excited by the scale of opportunity in these spaces and how they strengthen the investment case of the group. Turning to my final slide before I hand back to Bill. We look forward to 2027 with some anticipation. We expect similar levels of revenue growth and continued margin progression towards our targets. And as the journey develops towards the Black Basel to 2030, we continue to believe in a simple and compelling story of sustainable and increasing returns generation based on that disciplined delivery of our proven model in our attractive chosen sectors. And there's plenty of capital allocation optionality to be had on top. So we've taken another successful stride along our journey. Our ambition remains bright, and there's plenty of exciting rope to travel in front of us. Bill will now take you through the operational side of the strategy delivery in more detail. Thank you.

Okay, everyone. So a bit like Kris, you're going to see quite a few -- some of the slides you're going to see now you've seen before. And I'm really pleased with this because what it shows is our strategy is robust and is unchanged and our delivery is really consistent. So let's just reprise the strategy in a nutshell. This is a one-page representation of the strategy. And we started on the top left there, growing revenue in our core businesses. So that's building the highways in the design and build part of water. This is the big engine of Galliford Try, is where the vast majority of the revenues come through. And the ambition here is to grow those businesses in advance of inflation and get into 3.5% and beyond. That was our original plan at Dakota on the strategy. And we're making good progress here, as you've seen today. Next one is the grass cashless businesses in the higher-margin adjacent markets. Chris has touched on some of those. These business are doing well. These are the water tech businesses, so manufacture of high tech, it's a kit in the water and wastewater industry and then hard FM fire security, things like that in the building part of the business. These are all high-margin businesses. And as we grow them, and they are doing well, then the mix starts to change, and that's what helps to drive us from the 3.5% up towards the fall. We into the affordable homes market. Now we all know that this part of the market is probably 18 months or perhaps even a bit more behind where we all thought it might be. But what we do see here is a bit more impetus now. We've all seen the GBP 10 billion funding that's been allocated in the last couple of weeks. Prior to that, there were some planning issues. There are some fire safety issues, viability issues which are improving, I think, would be the right thing to say. So I do think that the GBP 10 billion now allocated will provide a stimulus to the affordable housing market overall. And I expect to see it a bit more action out of the next 6 to 9 months, I suppose. And then Kris mentioned the further bolt-on acquisitions are possible to those and actually the acquired companies. If you take a company in Vale fire, and you give that business access to our client base, our geographical base, our offices all over the country. That's a really, really good foundation for significant growth. And that's the simple philosophy of how we take higher-margin bolt-on acquisitions, giving them access to our client base, our geography offices and really grow them in some style. And when we do all of that, we continue to grow our earnings, our capital allocation optionality, our returns to our shareholders. So that's it in a nutshell, everyone unchanged now for some time. And then we talk in a bit more detail about how we carry on moving up towards the 4% margin. So pleased to how that last time I was standing up at growth of 3.2% and before it was 3%. So the left-hand side is improving and starting at 3.5, which is nice and the target is still 4%, and we're making good progress, as you can see. But these stepping stones we call them haven't changed 1 iota. And I'm going to go through these in a bit more detail in a minute. But before I go to that, another slide you've all seen before, I just wanted to remind you of the philosophy of how we run the business because I think as we grow, maintaining the discipline of why we've done so well is really, really important. So the simple philosophy is we start with a core of brilliant people. We've got 4,300-plus very good people in Galliford Try. And around those people, we put strong distillate culture of process or risk management and being very selective about what we do and what we don't do. And having the courage to walk away from projects where we don't think they're the right projects for us. What that means is that everything in our GBP 4.3 billion pipeline is work that we can execute day in, day out with the right people in the right areas with the right supply chain with the right clients and so on and so on. which means that we performed consistently as is reflected through our performance and our numbers, and we continue to strengthen our already strong balance sheet. And so the real terms. And that's the simple philosophy of how we in the business and it is -- that will absolutely remain. Going back to people, I just want to put a bit more color around people because we spend an awful lot of time and effort making sure that we can retain those 4,300 good people and attract more good people to Galliford Try to sustain our growth. So here the some of the things that we do, I won't go through all of them, 85% employee advocacy scores. So every year, we do an employee engagement survey -- and we're really pleased that 85% of our employees think Galliford Try a great place to work and would recommend that to their peers and their friends as a great place to work, which is a really strong score and well above the industry average has had 45 career moves is interesting. So that's just in the year overall, through our EXPLORE program. We've moved 154 people around. And this is simplistically, if somebody wants to move geographically into a different business sector within Galliford Try, they can do that. if somebody's partner gets transferred to Scotland, and they want to go move then they can go and transfer to Scott with Galliford Try, they don't need to leave. So it's about retaining good people and making sure that -- and we operate pretty much everywhere through the U.K. So this is a really good program. So that helps us to retain our good people. We promoted broadly 10% of our people in the year, which is fantastic. So people see career opportunity with Galliford Try. And people do get in the industry, I'd say, not just with Galifi, a lot of responsibility pretty young in the construction industry. So people do get a lot of job satisfaction, as I said right at the start through the construction industry, and we really pushed that in Galliford Try. 10% of our people are in some -- on our early careers as they're defined in some sort of training, graduates, apprentices, degree apprentices, trainees, people like that. And that's a very high percentage. So the infancy there is on growing our own growing people from within, and it's really good to see. And those people are going to the last one, number one. Those people vote, and what's it unprompted by us edit. They vote through this job crowd. They voted us #1 in our sector for [indiscernible], which is really nice to see. So a lot of empa people, everyone. So going back to the stepping stones. The first 1 is about volume and growth and so on. You've seen this slide before. We haven't changed the numbers. But this is just to demonstrate there's a mountain of work out there in social and economic infrastructure both in the public sector, so taxpayer funded work that you can see up on the screen, but also build payer funded in the regulated industries, water and energy and so on where we pay the bills. There's a mountain of work out there. And there's not a lot of optionality in there. A lot of this work just has to be done. We've seen in this last summer, we've seen drought and hosepipe bans and the trend developments because the lines are walking and so on. And in 5 minutes' time, there will be flooding and all sorts of things. So the bottom line is our infrastructure has to be more resilient and there's very little optionality about how to do a lot of this stuff, which is, of course, all encompassed in the GBP 725 billion of CapEx funding that was announced last year and ring-fence. Just an odd to the volume of work out, everyone. So that leads, of course, to our order book, which is in really good shape. 95% of the order book, as you see there. is in the public sector and the private sector. It's actually a range of it, but it's something like that normally. We're always going to a new year with 90-odd percent of our work in hand, which is really good from a number of perspectives. We can obviously get a lot of ducks in a row in terms of people and supply chain and materials and so on. But also in terms of risk management, when you've got a very full order book, there's no need to go up and do things that you shouldn't do. So that nods to both of them. But more importantly to me on this chart is full year '28 and full year '29 because we already can see these are -- these numbers are a few months old now, so it'll be a bit different now a bit higher. We can already see best part of 2/3 or full year '28 work already in the bag and heading towards half of full year '29s work already in the bag. So that's really, really good in terms of this long line of sight for the business, keeping this bar wave of work ahead of us at all times. I've said to some of you before, we already have clients in the water industry talking to us about AMP9, 10 and 11. That's 2030 to 2045. And looking forward to getting a quality supply chain in place now to sustain the enormous growth that we forecast going into AMP9, and we think AMP9 going to be considerably bigger than AMP8 already. So a very good position with regards to the order book, everyone. I'm not going to go through all of these, but just to point out that the job that we win in these are changing every single day. But when you run your eye through the list, you see defense, you see education, you see affordable homes, energy, water, specialists. It's across the board is the point I'm making here. And then we're going to a better contracting environment. We've spoken about this quite a bit about plans of procuring in a far more mature manner for long-term value and long-term collaboration and efficiency are hating to add. and this leads to what you see out here that 99% of everything we do is negotiate in one form or another. So once we're on the frameworks, and you do need to be on the framework first, of course, most of the work is negotiated. So the raise target cost, cost reimbursable work mainly in the water and highways business infrastructure. The black is 2-stage work where you appointed in early stage and you negotiate a final price, you do end up with a lump sum fixed price through negotiation. -- and that price includes inflation and risk and all those sorts of things. And then in the Life away, we just need clients to ask us to come and negotiate something and get on and do it. So that's a really good place to be, everyone. Secondly then, we've talked in the past about quality price split. And typically, it's 80-20, 70-30 in favor of quality. And what the government is saying now in terms of government projects, a public sector projects, is that the social value element of the quality mechanism will rise to up to 20%. It was 10% previously. So that's fine by us because we put a huge amount of effort into social value. And there's a slide here. And again, I'm not going to go through all of these stats. But social economic value in the locality of where you're working is simply around employing people locally, training people locally, employing local companies to do work, things like that. And there's a formula, which the government mandate that we measure. So we measure here 39 of our projects with a value of more than 5 and that completed in the year, achieved that GBP 527 million worth of social and economic value in the locality. And you can see there the sort of things that we measure. I won't go to more, but jobs, training, access for on people who come and have a look at construction, things like that. And that's something, it's the right thing to do. People love doing it. Our people love doing this. and it helped us to win work. Okay. Operational improvements. I won't go through all of this, but we said in the past that the sort of technology that we use in terms of 3D modeling and 5G modeling, the fact that we can build things in 3D and in virtual reality, you can walk through buildings and hospitals and prisons and whatever you can debug them, you can treat and you build them half a dozen times in virtual reality. So when you go and build them in reality, you get it right first time. Therefore, our rework costs are lower, we are more predictive in terms of program, et cetera, et cetera. lots of small accretive sort of incremental improvements, which you can see reflected through our numbers. And the only probably newer one and more germane at the moment is bottoms is AI. So we are starting to use AI in a very considered and circumspect way. I hate to add. We're using it at the front end to help us sort of condense documents and scan documents and things like that. We're using things like safety, whereas before you might have to go through a process and understand what you need to do to do a certain task. Now you can push the button or talk to it. And it will say these are the things you need to do without having to go and pull through the processes. So it is still in its infancy with us. My personal view is it will help us to be a bit more efficient, a bit more productive, but we are pretty circumspect about how we're implementing it, and we're testing it very thoroughly with human beings before we trust it too much. So that's operational improvements. And then we move on to the last one, which is really about higher margin work. So you might wonder why put the frame up there. But the real story I want from this slide is we target frame all the things we've talked about in the past. The long line of sight, long client relationships, ability to innovate and to be more effective for our clients to drive costs down without driving margins down has. A few years ago, this slide was entirely green. Now when you look at our strategy, which is about grow the big businesses, that's the green grow the specialist businesses, that's the blue and go into affordable housing, that's the orange and the scale is different obviously fit them all in. But what we've done is we've maintained the quantum of the green. And over the last couple of years, we've got a really, really good presence in the specialist business frameworks and in the affordable housing framework. So you can't just get on a frame it. You have to wait for them to mature. You have to ask it to be renewed. So it's a never-ending process really. But the real story I wanted to get to you across in this slide is that the framework presence now reflects absolutely the strategy. That's the simple message on this slide. And it's much the same in water on a more granular basis. You can see there that in 2021, we had design and build frameworks in water. And then through all the acquisitions that we've made over the years, we now work for every single of the major water companies in the U.K. for an average of 19 years. As you can see there on the left-hand side how we've improved our presence in water. So not only in the big design and build frameworks, but more importantly, in terms of the higher-margin part of the strategy, the grave it's the capital maintenance and water technologies, where we've gone from nothing to a very good presence in both of those higher-margin areas, which really are going to help us drive through and more into AMP9. So a good story there in terms of the favorite presence underpinning the strategy. And then this is just only infographic to show you. On the top, it is waste water -- sorry, there's water in the bottom of space water that would never happen in reality, by the way. But as an infographic, it's just to show you where we operate in water and wastewater. So the dark grade Bristol black, whatever color that is, is where we currently have full capability in water. And the red is where we interface and we have some capability in water. But the real message I wanted to get across shares. As we continue to develop our water business as we continue to probably buy a few more bolt-on acquisitions in the sector, we expect to get more and more end-to-end capability, which will be really good. for our clients for us to provide good services and efficient services to our clients. So finally, everybody in summary, we've had a really good year, very proud of another good year send us again to all of our people for all the hard work they put in to get to these numbers. We're making really good progress towards our 2030 targets. We've got a great bunch of people a great order book at the market is really, really supportive, and we've got a strong balance sheet which supports further returns to our shareholders, of course, and capital allocation optionality. So that's it, thank you very much. We'll go to questions.

Greg Poulton from Singer Capital Markets. On M&A, obviously, the messaging seems to step up a bit there. Could you just talk about is there any specific access where you primarily focused on hiring. I don't see adjacent sectors, but that's quite a wide net. And where are you sort of seeing the most opportunities coming?

The answer is it's sort of -- as Bill showed on that sort of infographic, it will be the vertical slide. So handbag will build distributor arms. You can see those going around. We'll be picking individual bits of capability across clean water and wastewater. So it will be products and manufacturing, I think, will be the particular targets we sector then we'll look at capital maintenance businesses as well there. In terms of sort of the building ones, warfire businesses, as I say, these markets are very fragmented. So we're looking to grow organically across the U.K., but if a business far door business came up in Scotland. We might consider that in Edinburgh or Glasgow, for example. Active Fire, we're trying to build out a sort of full fire service offering. So in the same way in water, we're trying to get to full service offering across water, they'll try and build our capability and maybe suppression maybe Active fire as well. Hard FM will sort of be more of the same. So those sort of sectors as you'd expect.

And then just on water. Obviously, there's been a lot of design work coming through this year. Can you talk about the expected ramp-up in construction work as FY '27 progresses?

Yes, that is happening. natural progression isn't it, Greg, as you go through. So we're seeing that now. And we're also seeing an uptick in orders to the water tech businesses, which also goes through a little bit of a modulation as you go from through the AMP transition process. So we're seeing that ramp up as well. So it's all panning out as expected, I think, into AMP8. I think more importantly, you look at AMP9 and you see even more work coming through AMP9. The nature of it might be slightly different. We expect the capital maintenance aspect of AMP9 to be significantly bigger than AMP8. And that's natural, I suppose, the assets are getting older. They need more TLC to keep them going until they can be renewed.

I think in terms of numbers on it, our original 8 frameworks you saw on that slide were probably GBP 100 million, GBP 120 million worth of revenue. We've bought about another GBP 120 million of revenues through the acquisitions, the 4 water acquisitions. So call that GBP 250 million, and we've disclosed, we think sort of through the peak of AMP8, we'll be doing GBP 600 million-ish. So that's the sort of scale of growth that we've delivered through those acquisitions.

Andrew Nussey from Peel Hunt. Two questions, if I may. First of all, on water and you're engaging with clients with a view to AMP 9, 10, 11, as you sort of said, they're keen to build their supply chains. How are you able to build your supply chains to ensure that you're in a position to deliver over that longer-term horizon? And secondly, in terms of the margin bridge, how much more of an influence do you think the better contracting environment is going to be in your overall goals?

With regard to supply chain. So what are we doing, is, firstly, we continue to be an attractive employer. So you saw the stats up there. The supply chain like our strong balance sheet. They like our framework presence. They like the fact that Chris pays me 27 days. So we are a good employer, and we are attracted to the supply chain. That's really important that we maintain that. What we're doing is we're setting in place more and more back-to-back agreements. Andrew. So we already have a number of back-to-back agreements through plant hire and things like that. What we're doing now, and it's more regional because the type of companies often that we want in a back-to-back range are more regional suppliers. So if you took somewhere a bit further away, let's just say, Wessex Water for this example, we'll be talking to some of our suppliers in Westwater about a back-to-back framework through AMP8 and post to AMP9 so that we can secure that supplier, and that supplier can invest as well in people and plant and whatever it is they need to do. So we are trying to get more and more back-to-back agreements into place with that regard.

Just to follow up on that point. And does that change at all if there is more of a shift in AMP9 to capital maintenance activity?

It might. But I think the underlying -- the capital maintenance will be in addition to, not instead of, I think, Andrew. So it will just be accretive.

And the second one, I write down the better contracting environment is sort of margin driver over the sort of medium term? So it feels like we're already in a good contracting environment.

We are. I mean we -- as I said, we saw the bit of a modulation between the AMPs for the specialist manufacturing businesses. That's picking up nicely now. But the strategy is working out well, and we see significant revenue growth in those specialist over the next few years, and therefore, the mix will start to move. So we think that it's going to evolve pretty much as we forecast.

Joe Brent from Panmure Liberum. Three questions, if I may. Firstly, [indiscernible], what are your first thoughts? Have you seen some delays in government procurement as there's been that inevitable reshuffle of ministers? You seem to have good energy. Are you feeling that in your businesses? Secondly, could you tell us a little bit more about the trajectory in roads, highways? Clearly, a very strong FY '26 and clearly, going forward, environment is going to be stronger. But to just maybe get some rough numbers around what's happening in highways. And thirdly, on capital allocation, I guess you've got a pretty good sense of your organic investment. If you bundle M&A and buybacks together, both in FY '26 and over the last 3 years, you've tended to spend GBP 10 million to GBP 20 million on buybacks and M&A. Is that the sort of number you'd expect going forward? And obviously, we're not going to model that, but we should be thinking about it in terms of accretion over and above the growth you're expecting?

So I'll take the first 2, and you can take the last one. So Mr. Bernum, well, he seems to be very quiet, doesn't it? But I think the important thing for us is we've seen action on the affordable homes, I said a minute ago, which is welcome, not before time 2, I would say, but nevertheless, welcome. Let's see what happens on the 28th of October, of course. But what we see a little bit, Joe, every time there's some sort of political activity like a new leaders. We see a little bit of public services sitting in their hands a little bit, waiting to see which way the wind is going to blow. So we do sometimes see some minor delays creeping in and projects slipping a bit to the right, but nothing of any substance really, and they all come back later. So that's what we see so far. Overall, I do think things are -- feel a little bit more positive. But I do think we need to get past the 20th of October before we know what's going to happen. It's pretty obvious. Road trajectory, it just shows how in some parts of the business, we are still wed to the weather. So the roads, if you remember, the first 2 months of this year didn't rain -- rain for 2 months. Luckily, you don't do much earthmoving in those periods anyway in roads. But since then, to the dismay of the water companies, it hasn't rained enough. which means that we've had a cracking year in roads because you can actually make hey, nothing is holding you up because normally weather that holds you up on the roads. So that is, I'm being a little bit blar, but that's a factor behind the roads as well as, of course, great performance by our people. So we have a little bit of -- because those jobs are finished a little bit ahead of time, there's a little bit of a hiatus until the next ones kick off. We've got a really good backlog in roads. And remember that it's probably less than half of our backlog in roads now is national highways and the rest is in ah local authority roads. So we've got a really good order backlog. That's -- it's a bit like the AMP transition really. It's in the design phase, and we'll kick off on the ground shortly and get moving. So we expect that to recover quite quick.