Kier Group plc (KIE) Earnings Call Transcript & Summary

[Audio Gap] so results in lower sales of GBP 18 million, and a further GBP 18 million is driven by lower Property sales where capital deployed is being reduced. This will result in the current first half of this year's revenue being GBP 1.9 billion. Now moving to the profit bridge. We again start on the left-hand side with last year's operating profit of GBP 42 million. The accounting change from IFRS 16 has increased profits by GBP 3.4 million. Amending for this amount results in 6 months profit like-for-like growth of 3.4%. The volume mix and price declines have resulted in a decline of GBP 23 million. And in addition, we see Property results being GBP 8 million lower than last year. Inflation is a minimal amount of GBP 1.2 million. All of these have been mitigated by the decisive management actions that Andrew has talked you through earlier. Cost savings of GBP 23 million have been realized in the period as headcount reduces, and the exiting of FM and ES contracts has resulted in a GBP 10 million improvement from last year. The result is GBP 46.7 million operating profit. Moving on the slide to Slide 11, we look in more detail at the exceptional costs. The GBP 3 million previous acquisition costs relate to double running costs as a result of the McNicholas acquisition in 2017. Business divestment-related expenditure for costs related to exiting ES and FM contracts and impairing of the ERP system as well as fair value adjustment to one of our smaller businesses. The main expense relates to the costs incurred to access the cost savings of GBP 49 million, and the next slide breaks these costs down further. Noncash cost amortization was GBP 12 million. Of the total, GBP 71.9 million exceptional items before tax, circa GBP 35 million are noncash. A final point to highlight is there is no exceptional contract losses in the period. This slide breaks down the GBP 49 million of cost-saving programs costs in more detail. GBP 17 million relates to staff redundancy as we reduced headcount. A further GBP 17 million relates to professional adviser fees required to divested businesses and other adviser fees connected with strategic activities. The moving of the London office from Foley Street to Cavendish has resulted in a net lease impairment of GBP 10 million, which is noncash. Costs preparing for the outsourcing of IT and Fleet were GBP 3.8 million. And finally, there were some other transitional costs of just GBP 0.9 million to make up the GBP 49 million. Below, you can see a breakdown of the GBP 65 million annual run rate savings that we realized by the end of our financial year 2021. These are: wages and salaries of GBP 52 million; outsourcing benefits, GBP 3 million; and footprint savings of GBP 10 million. Now we move on to the cash flow. We have tried here to simplify the comparison by removing impacts from IFRS 16, and you can see those impacts on the bottom right of the slide. This gives us a like-for-like comparison. We can see over the short period of time an improving cash flow achieved, while improving payment terms [ which was updated to ] our suppliers at the same time from 57 to 38 days, albeit our H1 is still cash outflow. EBITDA for the period is GBP 55 million, offset by a working capital outflow of GBP 76 million, which reflects the usual seasonality in our working capital and also includes a further reduction of our KEPS supply chain finance facility of GBP 13 million. Our usage of this facility has reduced GBP 43 million since December 2018 and is in line with our objectives. We are now committed to a maximum usage of GBP 150 million compared to GBP 195 million last September with further reductions planned. CapEx has been paused. The business has been previously well invested. And a managed pause can be achieved with combining better working capital management, and lower tax payments will allow a small amount of capital to be deployed on solid return projects in our Property business, which was in danger of losing critical mass and hence, returns if it remained without any investment. While still negative cash flow conversion is significantly improved on HY 2019 and full year 2019, despite the current period reflecting the usual working capital outflow in the first half, this outflow has been managed better than average in prior periods. Interest payments in the period of GBP 60 million have been partly offset by a tax refund received. Turning over the page to Page 14. We then have a debt bridge. We start on the left-hand side with the closing year-end debt of GBP 167 million. We then see EBITDA, working capital and interest & tax effects that I've just talked about, totaling an outflow of GBP 30 million. Cash flows related to exceptional costs of GBP 36 million as payments are made to achieve the ongoing cost savings. These were predominantly GBP 17 million on severance payments, GBP 13 million on payments to -- and GBP 13 million on payments to advisers. Proceeds from the sale of properties have yielded GBP 14 million and the Living business as an outflow associated with the GBP 8 million. Other includes FX movements on foreign currency and pension payments. This leaves net debt at the end of the period of GBP 242 million. On Page 15, we can see the closing debt position of GBP 242 million, the group has significant facilities of GBP 912 million. And on the right, we can see the majority of these facilities are due for repayment in July 2022. Page 16 shows the results of Kier Living business, which has been classified as discontinued and is now held for resale. The results presented here exclude some historical losses associated with the Northern division. The sales process continues, and we are very pleased to have appointed a new experienced management team who are focused on delivery. We've impaired the net assets by circa GBP 60 million to a carrying value of GBP 125 million. The other segment includes the Property, Environmental Services and Facilities Management business. The results have improved as there has been good cost control in all of the businesses, especially the ES business as we wind it down. We continue to exit Facilities Management contracts, and we should have substantially exited the business by the end of the financial year once we exit more contracts during the second half of this year. Our strategy included a reduction of capital that we would invest in our Property business. Capital has been reduced by a further GBP 16 million in the period to GBP 168 million. The business is reaching a point where it is difficult to extract further capital without damaging what is a quality business that fits strategically within the group and can have quantifiable synergies with our Utilities, Construction and Design businesses. It is felt at this point, it's currently a range between circa GBP 140 million and GBP 170 million depending on timing projects. A restated order book on more prudent assumptions is largely flat over the period. And with that, I will hand back to Andrew Davis for the operational review.

Okay. Thank you, Simon. We now turn our attention to the operational review of the business. We'll start with the Construction business. It remains well positioned to benefit from the anticipated increased spend across its major public sector markets of education, health, defense and local authorities. However, it is in a transitionary place where volumes have been impacted by the decrease in the availability of opportunities due to the macro reasons I outlined earlier. This has resulted, as you can see, the decrease in revenues of 7% in '19 to '20 over '18 to '19. Our operating margin has decreased by 60 basis points as we retain capability in anticipation of the upswing in demand, specifically in response to the public sector infrastructure policies outlined following the election. We continue to perform well on major contracts, and the FY '20 revenue is now 100% secured. Future workflow will be supported by recent framework awards, including 23 out of 24 lots on the Crown Commercial Services, as 23 out of 24 lots we bid on the Crown Commercial Services Framework. And so far, in this financial year, we've won positions on GBP 36 billion worth of frameworks. If we look at Infrastructure Services, it's made up of Highways, Utilities and Infrastructure business units. Revenues, again, have been under pressure due to some highways contracts or investment programs reaching their natural end point. Our Utilities business has been focused on margins, and the Infrastructure business volumes have been reduced due to later phasing on new projects. On the work winning side, we're delighted with the decision to proceed with HS2, and we've secured several new utilities contracts and customers in the telco sector with Openreach, in the water sector with Yorkshire Water as well as contract extensions with Anglian Water, Virgin and Northampton County Council in Highways. We're particularly pleased to win the GBP 150 million Regional development -- Delivery Partnership scheme with Highways England on Windy Harbour and the 15-month Highways maintenance contracts with Birmingham City Council. Revenue in the sector is all but secured for FY '20, with 73% coverage in FY '21, pending HS2 and reflecting our prudent view, as Simon said, on our order book. If we turn to HS2, just to provide some color. We're in a JV with a company called Eiffage, a French company. In 2018, Eiffage had more than 100,000 construction sites in France and internationally. It's one of the European leaders in construction and infrastructure concessions. The 70,000 employees of its group carry out activities through its construction, real estate, development, civil engineering, metal, road, energy systems and concessions businesses. It built, most recently, the [indiscernible] high-speed railway track, a 200-kilometer line that opened in 2016. On HS2, we've been delivering design and early works since early 2018. And as you see from the diagram, the circled area is the C2 and C3 contracts. They span 80 kilometers between [indiscernible] in the South and Southam in the north. We'll construct 15 viaducts, 6.5 kilometers of green tunnels. They're not actually tunnels. They're constructed in open cut and then backfilled. 30 million cubic meters of excavated material will be dug, and that's the equivalent, for those of you into these metrics, of 12,000 Olympic-sized swimming pools. And it makes it the most significant earthworks contract in the U.K. to date. If you now look at strategic progress, let's turn our attention to that. On my first day at Kier, I started -- bring these slides up, a strategic review that announced the results of it in June last year. It addresses strategic imperatives that the group faced. And this has been our focus, to restore the group to firm foundations. It's about a back-to-basics approach where we capitalize on our strengths of quality, long-term contracts and frameworks, 70% of them in the public sector; size and the quality of the order book, as I said, 99% secured for the year; strong positions in core sectors; talented people; strong [ SI ] performance; and a deserved reputation for project delivery, which is manifested in the numbers of repeat customers we get. As part of simplifying the group, we implemented a new operating structure. We looked to the business through strategic lens, and 3 factors were identified: Strength of the businesses' market position, whether they were inherently cash-generative or whether they benefited from long-term tendering frameworks. The businesses in our operating structure are strong businesses, inherently cash-generative based on those long-term tendering frameworks, providing stability of revenues. The long-term frameworks themselves provide both high barriers to entry, long-term visibility of orders, and therefore, opportunity for long-term visibility of earnings and opportunities for higher margins, which, by way of example, is what we've traditionally enjoyed in our Regional building business. They also provide the basis for sensible risk management in our portfolio of projects coming from repeatability at an average size of construction projects of around GBP 8 million. We're also creating a leaner and flatter organization structure with clear lines of accountability, reducing management layers with our core businesses reporting directly to me. And this has now been achieved, as I mentioned earlier in the presentation. And achieved through a cost-reduction program and as part of simplifying the group, reducing net debt and improving cash management. We introduced this program when I started at Kier. Our headcount-reduction program, as seen, our headcount reduced by circa 1,200 since the launch, and we expect a further approximately 50 people to have left the business by the end of this financial year. These reductions in headcount will result in cost savings, as Simon said, of at least GBP 65 million by the end of 2021. As I said earlier, 1,222 people have left to date, overwhelmingly, in support functions and overheads. And we've retained our first-line capability in core business unit skill sets during this process. We've also put in place a strategic framework which now articulate very clearly in one place the strategy of Kier. And it starts with a purpose to substantially deliver infrastructure, which is vital to the U.K. Supported by a vision, which is to be the U.K.'s leading construction and infrastructure services company, that vision -- to deliver that vision, our strategy is to focus on government-regulated or blue-chip client base, operate in business-to-business markets, contract through long-term frameworks. And our strategy is underpinned by business plans, which are written and most importantly, owned by the business units who are accountable also for their delivery in our new culture and structure. And they're supported by a set of strategic actions, as I mentioned earlier, simplify and focus the group, improve cash generation and strengthen the balance sheet. All of these in foremost business plans I referred to. And finally, underpinning all of this is our new culture of performance excellence. Performance excellence is an enduring and continuous process to guide us on how we do the job to run the business effectively. From contract delivery to project management, from financial reporting to cash collection, from leadership to people performance is about establishing the governance, policies, the processes and most importantly, the behaviors we need to be efficient, effective and productive. It includes the core processes of performance-centered leadership, our people, the teams bring to our projects to life, and we're making sure all our employees have the behavior and skills to do an excellent job. So new operating framework, here it is. It's published. We have it. The governance of our processes are observed to create consistent performance in all of our activities. Project execution from risk and contract management, to day-to-day compliance and safety on site, we have to be efficient, precise and rigorous, and again, consistent in how we manage and deliver all of our projects. And finally, cash management to finding a set of actions and targets to manage our cash effectively across the business. We're reinforcing expected behaviors through a new code of conduct and the operating framework. We're embedding a performance management and measurement approach, and we're encouraging the sharing of best practice and continuous improvement across the group. And all of this, again, is supported by a foundation of refreshed values: collaborative, trusted and focused. As I said, we worked hard to produce the operating framework, and it sets out how Kier will do business versus what we will do, which is contained in our strategy: provide clarity of roles and responsibilities and provide a corporate culture and identity. It's a framework for our company's policies and professional standards and procedures and supporting documents. It's underpinned by a new code of conduct and delegation of authorities, and in many ways, I refer to as our instruction manual of how to operate Kier. It will be assured again twice a year to drive standards and performance. Its aim is to minimize risk, maximize performance, provide consistently, eliminate duplication and misunderstanding and most importantly, provide a reference document all in one place. It also provides a platform for the culture of performance excellence and is available to every single one of our colleagues in hard or soft copy. So in summary, we have taken decisive actions and are continuing to reshape the group, which allows us to concentrate on those core businesses I mentioned. We're focusing on executing our strategic priorities. We have -- significant reductions have been made in the group's cost base, at least GBP 65 million. HS2 early works and contract mobilization commenced, and we anticipate starting construction later in 2020. The second half has started positively with significant orders received, and the culture of performance excellence will allow us to drive significant value from our order book and our pipeline. And the key is to get back to basics and get Kier to back what it really is. Thank you very much. Simon and I will be very happy now to take questions.

Andrew Nussey from Peel Hunt. A couple of questions, if I may. First of all, looking at the Property activities and obviously you're acknowledging the risk of lack of scale there. But equally, it's obviously not part of the strategic framework moving forward. Does that mean really there's greater emphasis now being looked at the other options in terms of where the portfolio of assets sit? And secondly, looking at the Construction activities, can you just give us a feel for behavior amongst the Commercial customers at the moment and their take on life? And also, is there any update on those legacy contracts, which you obviously took provisions for at the end of last year?

[indiscernible]

And on the [indiscernible]. They've been exposed to, say, [indiscernible]. Obviously [indiscernible] of the -- our strategies very much. [indiscernible] having collaborations with [indiscernible] worked our way through the contracts [indiscernible] all about [indiscernible]

[indiscernible] just wondering [indiscernible] general point in terms of building cost savings [indiscernible]. I'm just trying [ to get further on ] how do we [indiscernible ]. [ Because several properties are going down so fast ]. Do you expect [ to see all in ] the operating margins [indiscernible]?

Yes. I think you'll see a combination of the two. So what I would call overheads or central costs last year was actually over GBP 200 million. Albeit, I think you saw central costs shown as GBP 50 million. So I think you'd expect that GBP 50 million to come down -- to have around GBP 25 million, to be about half. And then the rest of the savings that we make would be allocated to the associated businesses.

Sorry, [indiscernible] that point [indiscernible]. Do you expect the positive margin [indiscernible] [ cost savings ]?

There'll be cost savings going in, but then, of course, there is volume. So does the volume increase enough to -- or does the volumes shrink further? So then it's about your volume assumption that you model going forward.

Just to temper that a little bit to the earlier question. In Commercial, people are moving into our territory in Construction. It's deemed to be a reasonably safe haven moving into frameworks in public sector. Therefore, competition has risen a little bit over the past period, and that obviously will then have a bearing on margins as well. But we're well positioned. We are the market leader. But that has been an impact as well. So it's puts and takes on that point.

Stephen with Applied Value. Three, if I may. Firstly, on the Highways area. You talked about a 15-month contract with earnings and [indiscernible] capital before, and that's a particular contract for working Highways [indiscernible] about GBP 300 million. Can you just sort of talk to us about what's the difference about what you're going to be doing there and what happened historically? Second, on Page [ 22 ], I recognize the slide on what you're saying there about [indiscernible] in the area. But a couple of footprints on the ground in the U.K. at the moment. But can you just outline how to take risk and how they get their share of the work after the joint venture? And thirdly, a more general remark. With regard to your observations around operational IT within the business, it becomes quite significant in some areas, such as Housing Maintenance [indiscernible] Can you make a general comment or review on that, please, and what might need to be done?

Okay. Birmingham City Council, it's an interim contract. They've terminated with Amey, and they have a 15-month residual period. We've entered into that on appropriate commercial terms, which you wouldn't expect me to divulge, but they are appropriate commercial terms. And you also wouldn't be surprised to know I've been through them fairly carefully with my commercial director as well. So we're delighted with that. We won it in competition. We foresee a good relationship with them and the BHL Limited who are actually their client on that. So second point, HS2, I think, I mean, Eiffage, they have a lot of capability and a lot of knowledge. That was the point, I think, I was making. They built the most -- recently built high-speed railway in Europe, so they bring a lot of engineering knowledge and skills and capability to that. We bring a lot of knowledge and capability on the supply chain in the U.K. and the -- I think the point you're saying in terms of the risk is protected under the contractual terms under which we will contract, and we obviously haven't contracted yet. That's an ongoing process. We're working to the notice to proceed, having been given the political go ahead. So we will look to protect ourselves and come to an equitable solution with the clients on HS2. IT on Housing Maintenance, we are predominantly a planned maintenance business where IT plays less of a predominant role. It's the reactive maintenance. It's where you need heavy investment in IT. Our strategy is a lot around the high regulations in that business, which is all part of the planned program of maintenance. That's where we want to rebuild the capability of the businesses around that area. It will have investments in IT. It will have needs. There's no doubt about that. But it's not the heavy investments, I think, you're referring to, it's much more on the reactive side so.

Saravana from Jefferies. If I can just briefly talk about Infrastructure Services. So there's an impact from the change in mix of work that was noted. Do you see this -- and this is a trend that seems to be occurring for a while now. Do you see this mix stabilizing anytime soon? Is there any more visibility that you have?

So we've had a very strong work winning period in Utilities. I'm looking at Barry McNicholas, who's over there. Very successful repeat customers, contract reorders, as I mentioned. We see that mix broadly staying the same. Telco is coming more predominant because of the fiber rollout, which is great. And Barry and the team have won great new clients and repeat orders with Openreach and Virgin. So that's all good. Obviously, the infrastructure project side is, by its very nature, a little lumpy. It's full of projects like HS2, Hinkley, DART, et cetera. But again, I think when you look at government rhetoric, they do want to recapitalize the infrastructure. So I think we're well positioned, but we'll be very circumspect of how we get into contract. To Stephen's point earlier, we don't want to repeat some of the legacy contract mistakes which we've made in the past on that. And in Highways, the mix is changing, but we are still well positioned. We have come off a high because of Smart Motorways. We're still delivering out the remaining Smart Motorways, M20, M23 and M6. We'll continue to do that. RDPs are now coming to the fore with RIS2 coming along -- it comes in March. We don't see the programs really building up probably until later on the year. So there's a bit of a pause there, which just really explains why volumes are under a bit of pressure. But on the maintenance side of Highways England, we're still very strong. And I think -- I still believe we're the biggest supplier to Highways England of the regional maintenance program. So not -- I think I'm saying not really, but HS2 will skew things slightly when it comes full on stream.

Sam Dindol from Stifel. A few for me. Firstly, you say 99% revenue secured for the year. So do you assume a similar level of revenue decline in the second half in that figure? Secondly, on the restructuring cost, could you give an indication of the cash cost in the second half, then looking into 2021?

Yes. Could you just repeat the first question. It was difficult to hear. Sorry.

Sorry. You say your revenue secured 99%, does that assume a similar level of revenue decline in the second half for FY '20?

Yes. I mean, I think the second half revenue secured is very strong. So over 90% in the majority of the businesses. And then in terms of restructuring costs, in terms of cash exceptionals we mentioned in the statement there, we expect it to run in the second half at a similar level to the first half, which was GBP 36 million. And then we expect it to tail off quite significantly from there. Albeit, clearly, if there's more cost-saving opportunities, there might be some more costs associated with that, but then you'll get a payback on that expenditure.

And finally, on -- it must have been quite a transitional period for the business. Have you've seen a change in turnover, the voluntary turnover of frontline staff as you've gone through sort of the change over the past 6 months in terms of strategy?

No, I don't think so. I mean I'll let Andrew maybe...

Sorry, turnover?

In terms of voluntary turnover of staff, given the strategy change in terms of frontline staff, has there been a change in that over the past sort of 6, 12 months?

Not in the last -- no, not in the last 6 months, no, no. It's -- the industry is quite a high turnover industry, both systemically because you onboard and you demobilize contracts anyway, so you do a lot of tubing, et cetera. So it's a great turnover there, but that's contractual turnover. In the voluntary turnover, we've seen it stabilize. And the point I made earlier about the headcount reductions, we've been very, very careful. I mean Helen is here. We're very careful to make sure that we don't compromise frontline delivery, which does beg the question, how can you remove 1,200 people without doing that? But that's a different question. But that's what we've done, reduplication, discretionary, et cetera and increased efficiencies by delayering the organization in many ways. And so I said the outsourcing has accounted for many of those people as well. So we have been very careful to that point to reassure people, that's not where we've been looking. There are efficiencies. Sure, there are. But that's not where the systemic reduction of 1,200 people come from.

Gareth Hayward from Charles Stanley. Immigration in general, not Kier-specific necessarily, though you can comment if you want. The supply chain, how do you think it's going to affect the government's ambition to recapitalize the infrastructure, as you so wonderfully put it?

So I'll give you the -- the official, I guess, position is that we don't know until the government publishes the specific details of what it wants to do. Okay. I'll give you a personal view now. That you got to remember where Kier fits in the supply chain. We're, in many ways, a professional services company with the skill sets that under the published documentation we've seen would mean that we don't foresee any issues impacting on Kier by that immigration policy, and I think that's consistent with what my peers would probably say as well. The second point, I think, you've got to look at is where Kier operates and where the predominance of perhaps that immigrant labor in the supply chain would be. So to the point, our strategy has always been to be in Construction, for example, a regional-based business with regional supply chains operating off either nationally negotiated frameworks or local frameworks, et cetera. Our focus in London, we do have a very big Construction business in London focusing on that strategy rather than the very large multiyear projects and major schemes in London, which are more beholden to the Brexit issues and the immigration -- the requirements for immigration to be able to feed the supply chain that actually delivers those projects. So strategically, we are not as exposed to that issue as others may be. I'm not going to say we're immune from it. But in terms of our thinking and in terms of the longevity of our programs, we think we're at the lower end of risk in terms of both Brexit issues and from resulting immigration changes to policy. And that's how we think about it. We're alert to it. It is a risk. But that's how we think about it. I think our strategy means that it's largely mitigated.

Alastair Stewart from Shore Capital. Could you give a bit more detail on Other, in particular, the -- how the operating assets split between the Property side, and I think it's GBP 321 million total operating assets in the division. I presume Property's the great majority of that.

Property's GBP 168 million of that.

GBP 168 million. Can you split that into -- very roughly, into offices, retail, industrial stroke and logistics? I mean how much is retail, basically, of GBP 168 million?

Very little is retail. I don't have the number off the top of my head. Sorry [indiscernible ], but it's not very much.

So what's in the -- can you just have a quick run through the make-up of those gross assets -- gross operating assets?

I can't do it by numbers.

No, no, but roughly, which is bigger? Which is smaller?

So it's dominated by urban regeneration, which is another way of saying housing with a degree of mixed use, and that's largely in the joint ventures, which we do. So for example, things like taking the railway station being redeveloped with network rail in our Southern JV, circa 300 units going up on land brought to party by Network Rail. That's a typical development. Others would be the health hub in Watford, for example, regeneration of -- regeneration scheme there. That's the predominate. Others are in office redevelopment. So Arena Central, for example. So I'd say it's dominated by urban regeneration, either through JVs or directly, which is, in other words, for housing plus mixed use and office regeneration schemes in city centers. Retail is really quite a small part of it. Absolutely accommodation, I've just been corrected, is the other part. But again, that's not a majority by any means.

As I recall, and this is going back 2, 3 years, you used to have sort of a small network of many retail hubs. Do you have those anymore?

I don't think so. We're de minimis. I know where you're going. We are [ sort of ] de minimis on retail.

Fine. [ If you know about it and did not go through ].

Yes, yes, yes.

Andrew Nussey again. If I could sneak in with another one. On HS2, the National Audit Office is suggesting a target cost plus incentive-type mechanism for the contractors. What do you foresee or expect if we do go down that route? What working capital requirements will be further contract when you get up and running?

The structure of the current contracts, which is not fully signed and agreed, wouldn't involve any working capital from the Kier side. You would be looking at an impact mainly of just you get your fee and equivalent cash for that fee out on a yearly basis. But there also wouldn't be a positive working capital benefit either.

Have we got any questions from the audio?

[Operator Instructions] We have one in the queue so far. That's from the line of Joe Brent, Liberum.

Joe Brent. Slight problem listening to the call actually, but maybe we can come back to that. But 3 questions, if I may. And apologies if the repetitions because I couldn't hear the whole call. But the first one is about Residential profits, which are a little bit weaker than I thought. Could you talk around that? Secondly, on the Construction margin, can you give some indication of where that goes -- go to in the full year and beyond? And finally, can you talk a little bit about any potential for further cost savings once Kier Living has been sold?

So was the first question Residential profits?

Yes.

Yes. Yes. So I mean, the Residential profit, I think the margin actually improved. If you excluded some historical cost from the northern region there, which has historically not been a great performing region. Having said that, the volumes were lower. So you saw the reduction there was really volume-driven. Margins actually improved. You'd hope there's obviously seasonality in that business. So you would expect the second half performance to be better than the first half performance. In terms of Construction margin, Andrew talked about that earlier, there's puts and takes. So there is increased competition in that area. Having said that, we have -- there has been cost savings already delivered in that group in their overheads. So despite their volume being down 7%, you see the profit was, given the overheads, including that business, quite actually a strong performance at 3.4% still. And that then depends on your view of volume. So volumes moving forward, there will be some cost savings that go into that division, incremental cost savings. But in terms of volume, we imply here our current outlook is that would be flattish effectively through the second half. And then finally, it was further cost savings, wasn't it?

Yes.

So yes, we've got at least GBP 65 million. I'd say we've got circa GBP 10 million of those to deliver incrementally still. And obviously, saying at least, that means we are working on further potentials, and we'll update you in the future as to when we think those will be realized, if realizable.

[Operator Instructions] And there seems to be no further questions from the phones at this time.

Thank you very much for coming and listening, and have a good day.