Kier Group plc (KIE) Earnings Call Transcript & Summary

Okay. So we kick off then, ladies and gentlemen. So good afternoon to everyone, and welcome to Kier Group plc's Capital Markets Day. And it's fantastic to see so many of you here in person. I'm Andrew Davies. I'm the Chief Executive of Kier Group, and I'm joined today by Simon Kesterton, our Chief Financial Officer, as well as our senior leadership team. A little bit of housekeeping, if I may, just to start. Firstly, if there are no fires planned, I should say. No fire drills planned. There's certainly no fires planned. So if it goes off, I think, assume it's real, and the escape routes are that way and that way, where there's clearly marked Escape Route and you get down the stairs and convene outside by the church at the front. That's the fire drill. So we're excited to share with you an overview of the business and, most importantly, allow you to hear from the managing directors of our business units and our functional leaders. We also have some activities and fly-through video footage to help you learn about the projects we undertake. And these range from significant earthworks currently in process and high-speed rail 2 in our infrastructure projects business to building HMP Prison Five Wells prison in Wellingborough using Modern Methods of Construction or MMC. I'll walk you through the agenda for today and our equity story. I'll then hand over to Simon and he'll walk you through our medium-term plan. And this will be followed by breakout sessions with our senior leadership teams across the 5 stands to my right and to my left. And we'll wrap up the day with some Q&A, followed by some wine tasting and canapes. So with that, I will turn to Slide 3, which hopefully you can see. So a short introduction before we start. I joined Kier in April 2019. Prior to that, I was Chief Executive Officer of Wates Group, the Construction Development and Property Services Group. And prior to leading Wates, I spent 28 years with BAE Systems, defense company and taking a range of senior roles, including Group Strategy Director, and latterly, the Managing Director of their Maritime division. And I'll allow Simon to introduce himself when he speaks later. I'll just wait for these gents to turn around. Excellent. Thank you. So we set out our objectives for today. Firstly, you'll hear from us about Kier's purpose. And our purpose is to sustainably deliver infrastructure, which is vital to the U.K. as set out in our group strategy. We'll then share with you why we have confidence in our medium-term plan and significant market opportunities available to us through U.K. government spending commitments that underpin the plan. And most importantly, after spending time with our senior leadership team, I'm hoping you'll see the breadth and depth of our operational capability that will deliver that plan. So the agenda. This Slide 5 sets out today's agenda. After hearing from Simon and myself, you'll have the opportunity to rotate around our 5 stands. On Stand 1, we have ESG. Stand 2 is our regional build in Kier Places business. Stand 3, infrastructure projects and risk management. Stand 4, highways and utilities, and Stand 5, urban regeneration and property development. You should all have been given a number on your name badge when you arrived, so please head to the stand with that number when we finish up with the formal introductory presentations. So for example, if you have #1 on your name badge, please go to Stand 1. If you have #2, please go to Stand 2, and so on. If you don't have a number on your badge, please, could you just head straight for -- Sophie, can you stand up, Sophie, please? You can't miss Sophie, and she will allocate you to a stand. So apologies if we missed the odd number out, but Sophie will sort you out, so please do that. What we'll do, we'll move around in groups around the stands and we'll change order every 25 minutes, so all guests will get an opportunity to spend time with each of our stand-holders and hopefully get some quality time to ask questions on their respective businesses or ESG in respect of Helen and Sophie. So with that, we'll turn to this slide, the current trading. We issued a trading update yesterday morning ahead of today's Capital Markets Day. Kier has performed well over the last 4 months through 30th of April 2022, despite the inflationary pressures we're seeing. We are trading in line with expectations. Our order book has grown to GBP 8.5 billion, an increase of 6% from that we announced in 31st of December 2021. Our recent contract awards include an early works contract at Alderney Water Treatment works in Bournemouth, which will lead to a GBP 75 million contract; a place on the GBP 30 billion Procure23 Framework in our construction business; and we're also selected as a partner by Valley District Council on the GBP 350 million urban regeneration scheme for Leatherhead Town Center. And these recent awards and others support why we believe the medium-term plan targets are achievable. But we have seen a steady increase in cost inflation through the year. At present, we've not experienced any supply chain problems in the business. However, we are seeing certain projects being reappraised and, therefore, delayed due to cost pressures. And there are a number of mitigations we can deploy in these circumstances. In terms of protection against cost inflation, 55% of our order book is under target cost or cost reimbursable contracts, for example, HS2. The remainder of our contracts are negotiated contracts, including those on fixed prices. And those fixed price contracts are often fixed at a point in the project cycle when procurement risk has passed, thereby protecting against inflation risk on the project. Another mitigation is the average contract size in our Construction business of GBP 12 billion. They tend to be relatively short in duration, over 12 months, so therefore, tend to get renegotiated and therefore repriced regularly. We also look to pass through any cost inflationary pressures up to our customers under the long-term frameworks but also down to our supply chain partners, where we're able to and where they're best able to mitigate and manage that risk. And if we look at the economic and political landscape in the U.K., we see the U.K. economic and political landscape as a set of short-term issues and long-term positive fundamentals. Short-term headwinds include cost inflation, Ukraine, fears of economic downturn as well as supply chain and labor supply challenges. In the long term, however, the business is underpinned by the U.K. government's commitment to spending the Levelling Up agenda, the commitment to net zero carbon and the desire to create a Global Britain. And given our business is countercyclical and clear as a strategic supplier to the U.K. government, over the medium term, we believe there's significant opportunity to drive growth and successfully execute in this market. We also believe we are proactively addressing the supply chain and, in particular, the labor supply issues through the positive approach we have to the ESG agenda. So if we look at Kier Group, an overview. This is -- this summarizes for those of you not as familiar with the Kier Group as others, what we do, how we do it as well as showing a few key metrics on the business. We are an infrastructure and construction services supplier with approximately 100 years of experience. We integrate all aspects of the project, our predominant capabilities being in design, project management, commercial, supply chain and build as well as in people and resource management. We have simplified our business over the last 2 years so it is well positioned to take advantage of the market opportunities, which I'll outline in this presentation. Here, we set out our 3 reporting segments: Infrastructure Services, Construction, and Property. Infrastructure Services is made up of 3 businesses: infrastructure projects, which are high-value, highly complex civil engineering projects, HS2. Highways, which designs, constructs and maintains roads; and Utilities, which repairs, maintains and supports capital projects. Our Construction business has 2 business units, Regional Build and Kier Places. And last but not least, we have our Property business, which is focused on urban regeneration and redevelopment. But Kier has been on a journey over the last 3 years. And this slide summarizes the significant work done to turn around the business and address the legacy issues of the old Kier business and business culture, cost control, contracts and the balance sheet problems. These were addressed through decisive management actions that I set out in the June 2019 strategic review, whereby we targeted 3 strategic areas: firstly, to simplify the business; secondly, to generate cash; and finally, to strengthen the balance sheet. We've had a number of senior management changes over the past 24 months and refreshed both the executive team and the Board. Secondly, operational improvements ranging from addressing the legacy contracts through to contract tendering processes to portfolio rationalization. We simplified the business and we went back to basics, substantially exiting from commercial FM, environmental services, international and the Housebuilding business. Indeed, we sold the Housebuilding business, Living, and thereafter recapitalized the balance sheet with an equity raise and extended the maturity of our debt facilities, thus fixing the immediate balance sheet issues. Our focus is now strongly on delivering the medium-term plan through growth in our core markets, supported by, as I said, U.K. government spending commitments. This is Kier Group's strategic framework, and it sets out our strategy. That's the blue bit, the roof at the top, as well as setting out the strategic actions that underpin the strategy and the key enablers. Our strategy has not changed since it was originally drawn in 2019. But the 3 strategic actions originally set out, as I mentioned earlier, have been delivered. So we have 3 new actions to support the medium-term plan. In summary, we are focused on U.K. government, regulated and blue-chip client base. We operate in business-to-business market and we contract through long-term frameworks. Our new strategic actions are disciplined growth, consistent delivery and cash generation. Our core business units are aligned to our strategic objectives and our core competencies. And our strategy supports our investment proposition set out in Slide 14. We plan to create value in the medium term through our business model, our attractive market positions, our strong order book and execution by our experienced management team. So firstly, let's talk about the business model. In the model, the Infrastructure Services and construction businesses generate free cash flow from their long-term enduring and sustainable relationships. This cash gets invested in our Property business in a disciplined manner to generate enhanced returns, and the Property business leverages its business model of synergies with the operating divisions of the group and then returns those enhanced cash back returns to the group for investment or return. And building on that previous slide, there are a number of synergies across our business: firstly, commercial synergies, given we contract through long-term frameworks across the portfolio; secondly, operational synergies as we leverage our knowledge and experience in the public sector; and thirdly, project management synergies as we deliver programs across business units and market opportunities as we leverage our combined group capability to win work across our chosen sectors. And our senior leadership will go into live examples on their stands where we've been successful in doing this. And above that, we have an executive committee of all of our senior leaders who oversee the strategic and synergistic and integrated opportunities and approaches. Kier is a truly and uniquely national contractor. We differentiate ourselves through this regional footprint. We have a national capability yet execute locally. At any given time, we typically have approximately 500 contracts, predominantly with central government and local authorities. Our business is supported by circa 10,000 employees and 6,000 supply chain partners and Kier matters to the U.K. government and the U.K. economy and the communities in which we operate. So let's just focus now a little bit on the market drivers that underpin our medium-term growth strategy. The U.K. population is expanding. People are living longer. There's net migration and birth rate spikes. This all bodes pressure on already aging social and housing infrastructure. However, whilst the U.K. economic growth is expected to slow down and the cost delivering is rising, the construction industry has historically been used to stimulate the economy. Separately, roads, rail and airports are becoming more congested with more people and increased travel. And politically, the U.K. government is committed to its Levelling Up agenda, which involves increasing -- increased spending in the previously deprived parts of the U.K. It's also committed to net zero carbon, which recently further increased in importance given the energy supply and demand issues. So looking into the U.K. government spending commitments, how does this translate into U.K. spending? And the MDs will provide focus on this in their sessions on their stands. In Infrastructure, which this slide relates to, the U.K. government is committed to spending GBP 650 billion over 10 years as part of the National Infrastructure Strategy. Initiatives within this include GBP 27 billion investment in roads under the RIS2 program; GBP 50 billion for water as part of AMP7; GBP 37 billion to GBP 53 billion spend on HS2 2a, 2b; and GBP 138 billion investment in energy infrastructure by 2028. If we look the equivalent construction spending commitments, accelerated funding into our core sectors has been announced. Within education, there's a 10-year school rebuilding program. Within health, there's a GBP 1.5 billion for hospital maintenance and building and GBP 3.7 billion for the new hospitals program, which is set to be delivered by 2025. In justice, a GBP 4 billion spend over 4 years with 20,000 new prison places required. And in defense, the GBP 3.2 billion capital expenditure program. And we do anticipate increased and further opportunities through our established positions on all the various frameworks we're party to. So we have a significant addressable market opportunity in our core markets. In the year ended 30th of June 2021, our addressable market was estimated at GBP 46 billion, of which approximately GBP 23 billion related to Infrastructure Services and GBP 23 billion for Construction. We have won positions on frameworks worth up to GBP 101 billion based on the official journal of the European Union or OJEU values. These framework positions are typically over a 6- to 10-year period. More than 60% of our revenue is derived from projects delivered under frameworks in the last financial year. We do not include the value of these frameworks in our order book unless we have a probable or secured contract. So the frameworks sit on top of our order book as a pipeline of opportunity. So we have an attractive market position across the industry. Within infrastructure projects, we deliver complex, high-value infrastructure across nuclear, defense, rail and water. An example, obviously includes HS2, where we're the delivery partner on the longest section of the project. Within Highways, we have a leading market position, our top 3 provider to strategic highways. We've established relationships with clients on long-term frameworks. We have embedded design, construction and maintenance expertise in strategic as well as local road networks. And in utilities, we're a key contractor in the water and energy sector. We install and maintain connections in water, energy, telecommunications as well as rail. And the majority of our contracts are delivered under cost reimbursable contracts. In Construction, we provide project delivery in England, Wales and Scotland, across key sectors, including education, health, justice and defense. 78% of our projects are for repeat customers. Our Kier Places business includes profitable facilities management contracts and affordable housing maintenance. We have brought the 2 capabilities together as we pursue a strategy to manage built assets through life with housing associations, local authorities and central government clients. And our Property business provides mixed property development focused on sustainable urban regeneration for public and private clients. The business leverages public sector relationships across the group to access local authority land banks. And we're well positioned in our core businesses, therefore, to win our fair share of work. This chart summarizes our view of our competitive position and market attractiveness of our chosen sectors. The size of the bubble represents our revenue for the last financial year. We have a strong competitive position across all of our chosen sectors. Not surprising, given it reflects the results of our delivery against those strategic actions set out in the 2019 strategic review to exit the weaker markets. Our focus is firmly on these core sectors as they are supported, as I've said, by long-term procurement frameworks and will benefit from the U.K. government infrastructure spending commitments. And given the market attractiveness of this sector, the bubbles are clustered, therefore, on the upper right-hand side of the chart. The exceptions to this are Environmental Services and International, where we've run down the Environmental Services business, and our UAE-based international business is managing its cost base in line with the continued weakness in that market. So this highlights our strong customer relationships we have across the piece with the U.K. government and the regulated sector clients who, together, represent 85% of our revenues. We are a strategic supplier to the U.K. government, and the relationships are further enhanced through the local authorities through the regional presence. And to my favorite slide, we've got an experienced leadership team focused on delivering the medium-term plan and I'm very pleased to be joined by them all today. They will introduce themselves individually at their stands when you visit them. But I will make one introduction, however, of Alpna Amar. Where are you, Alpna? Just wave like that, who is known to many of you but doesn't actually have a speaking part today. Alpna has over 20 years of experience and heads our Strategy for us, M&A and Investor Relations. And Alpna successfully led the sale of our Housebuilding business, Kier Living, and also our recent equity raise. So to summarize, we believe our medium-term plan is supported by U.K. government spending, both into the future as well as existing spending and projects like HS2. The industry continues to use framework agreements ahead of major spending programs. The long-term engagement and visibility of these agreements is beneficial for Kier. We have attractive positions in our chosen markets with national capability and yet with a regional footprint, leading to repeat business with public sector bodies. Our progressive approach to ESG plays well to positioning us with all our key clients, mostly government and the utility sector and also in securing roles on those frameworks. And the group is supported by a high-quality order book of GBP 8.5 billion, which provides excellent visibility over future revenues. And we have an experienced management team with operational capability to deliver the medium-term plan. So with that, I'm very pleased to hand over to Simon, who will now talk to that medium-term plan.

Thank you, Andrew. Good afternoon, everyone. I'm Simon Kesterton, the CFO of Kier. I joined the company in 2019, just a short time following Andrew's appointment. Prior to that, I've been CFO of a number of high-growth businesses, the most recent of which was RPC Group plc. Turning to Slide 29. This slide provides a reminder of our medium-term value creation plan, which remains the same as that outlined over 1 year ago when we presented our half year 2021 results. It provides visibility over the direction of the group. We are targeting revenue of GBP 4 billion to GBP 4.5 billion, driven by the attractive market dynamics Andrew has already outlined, combined with our market-leading positions. You'll hear and see a lot more detail about our markets and our positions within them from the rest of the team today. Our portfolio of businesses are targeting to generate an adjusted operating margin of circa 3.5%. We target this margin converting to cash at circa 90%. This will lead us to a sustainable net cash position with the capacity to invest and also allowing a sustainable dividend policy of around 3x through the cycle. Disciplined growth is key, and you'll hear in detail from Stuart Togwell, our Commercial Director, on how we ensure that discipline is maintained across the group. Combining this discipline with: the attractive markets that each of our focused businesses operate in; strong customer relationships they all maintain; the protections afforded by our positions on key frameworks; and increasing barriers to entry driven by our customers' ESG requirements, we can see a clear way to disciplined revenue growth from GBP 3.3 billion in FY 2021 to GBP 4 billion to GBP 4.5 billion in the medium term as we access the material investments already announced by the government in infrastructure. Slide 31 sets out our order book position. Our order book is high quality and has increased by about 6% to GBP 8.5 billion compared to the 31st of December and over 10% higher than June 2021. We've secured 95% of our FY '22 revenue as we continue to win work in our chosen markets. Significant effort has been made to improve the quality of our order book. We've exited low and loss-making contracts, and we are focused on winning work within U.K. government and regulated authorities. We continue to focus on managing risk and reward. Approximately 55% of our order book is under target cost or cost reimbursable contracts. And within Construction, our average project size is circa GBP 12 million. The order book, as Andrew has mentioned, is underpinned by positions on long-term frameworks, which I'll explain in a little more detail on the following 2 slides. Places on frameworks are key to winning government work, but what is a framework? Frameworks are a contractual umbrella that enable clients to invite tenders or directly award work to preselected suppliers on mostly already-agreed preselected terms. The benefits they provide are many. For example, an efficient tendering process and quick access to quality assured partners for clients, collaborative R&D and continuous improvement targets are common features that drive best value for money delivery. Suppliers gain access to pipelines of work with a reduced pool of competitors. Increased risk share. They are predominantly quality-based selection rather than lowest price and, therefore, the key principles of collaborative frameworks align well to the construction playbook objectives. All major public sector work is awarded through to those companies who have won places on frameworks. This means frameworks provide long-term revenue streams at acceptable terms to both parties with appropriate risk share and a disciplined market. Working with framework providers consistently, as Kier had done, leads to a strong long-term customer relationship, which underpins our order book and future orders. Just to be clear, as Andrew mentioned earlier, we don't include framework values within our order book number. We only include specific projects for which we have an order or over 90% sure will sign an order. We have places on agreements with an advertised value of up to GBP 101 billion and across all of our core markets, covering both national and regional geographies and market sectors. They typically last 4 to 8 years, although some highways frameworks can be for as long as 11 years. What are the drivers behind our medium-term margin target? When Andrew and I joined in 2019, we enacted and implemented a significant number of management actions, including divestment of businesses, exiting low and loss-making contracts, significant headcount reductions and outsourcing. This has driven a significant increase in profitability, which is represented on this slide. Whilst resolving these issues, we're able to deploy capital into our Property business, which you will see more of when Lee present later. We can now give the team certainty of funding, so they can develop opportunities, which will further enhance the returns of the group. And within the next 18 to 24 months, they should be able to consistently deliver a 15% return on capital employed. The opportunities in other core markets that we've already talked through should deliver the further disciplined volume growth that completes the bridge to the medium-term value creation plan. Next, a reminder of the income statement for the period ended 31st of December. Revenue was 5% down, and as expected, that reflects the procurement delays that we had previously highlighted. We delivered adjusted operating profit of GBP 54 million in the first 6 months of the year, driven by business mix and management actions. The group achieved its management -- its medium-term planned margin target of 3.5%, although this was flattened slightly by the mix swing towards our Property business, which had an exceptional first half of the year. The business has made a statutory profit of GBP 10 million after adjusting items, amortization and tax. We achieved an earnings per share of 7.8p. This compared to 10.4p in the last period. EPS was impacted by the increased number of shares issued as part of the recent capital raise. On a like-for-like basis, this would have been a 3p increase. Net debt of GBP 131 million reflects the traditional seasonal working capital outflow that occurs during the first half of the financial year and further reductions in KEPS. Average month-end net debt was significantly lower than the previous period, reducing to GBP 191 million. Moving to the financing and liquidity. This slide shows the debt structure of the business. As a reminder, our facilities were extended last year and mature in January 2025. You can see the gap between our average month-end net debt and spot net debt is GBP 60 million. Cash generated through achievement of the medium-term plan will see average debt heading towards an average monthly net cash position and will allow us to invest further in growth. The free cash flow slide is familiar to many of you. This slide shows the free cash flow generation of the group since the half year 2020. I'm not going to talk to all the numbers as that's for the results presentations. Key messages to take away from this slide is that absent COVID or any of the macro event, activity levels in May and June should be higher compared to the winter months of November and December. This means there will ordinarily be a working capital outflow in the first half of the year and an inflow in the second half of the year in our negative working capital businesses, which is the bulk of our turnover. The one business that differs from this is our Utilities business, which consumes working capital as it grows. Last year was a strong -- very strong year with regard to cash flow conversion. We have repaid the bulk of the GBP 80 million of deferred HMRC, PAYE, national insurance and VAT, and we've materially reduced our KEPS utilization. Moving on to capital allocation. We are focused on optimizing shareholder returns. Accordingly, as we generate cash from operations, we expect to deploy that in a number of ways. CapEx is minimal but we plan to, in a disciplined way, invest more into our capital business -- get new capital into our Property business, which will allow it to generate consistent annual returns. Further deleveraging, as you're aware, we are targeting a sustainable net cash position in the medium term. We are targeting dividend cover of around 3x through the cycle. With regards to mergers and acquisitions, the group will consider value-accretive acquisitions in core markets where there is strategic logic and where there is potential to accelerate the medium-term plan, including achieving a net cash position. Finally, a reminder of our investment proposition, which is an earnings-led model in attractive end markets already underpinned with a strong order book to be delivered by an experienced management team with a proven track record that you're all going to see later on. Thanks a lot.

Good afternoon. My name is Helen Redfern and I'm the Chief People Officer at Kier. I've worked in the business for coming up to 10 years. Three years ago, I was appointed as the Group HR Director. And last year, my role was broaden to include health, safety, well-being and sustainability. Before Kier, my career was in Sainsbury's Retail and also in Wolseley, which is part now of the Ferguson Group. I'm delighted to talk to you today about our ESG strategy in Kier, which has to be at the front and center of everything that we do. There's a lot of ground to cover today and we're not going to go through all of the information in the pack, as this will be provided to you after. However, what I really want to highlight, as we frame the conversation, is there will be a lot of consistent themes that the managing directors in all of the businesses will cover on their stands. We're a trusted partner to our clients and a strategic supplier to government. And therefore, how we focus on ESG has to be at the heart of everything that we do. We need to secure positions on our frameworks and convert our pipeline of projects into live programs. There's a strong theme in a world of growing complexity around net zero carbon, and we have the skills and capabilities, through our people, to help our clients and ourselves deliver on the targets that we have set to support and deliver a sustainable, safe and profitable project and program. We are a responsible business. We are committed to making a positive impact on the communities that we support and work within. Social value and purpose has always been a very key priority for Kier. And we have clear targets set around areas such as our social value and purpose, diversity and inclusion, employee well-being, supporting our spend through our supply chain and protecting human rights. We have the best people in Kier with the capabilities and the commitment and passion to deliver for our clients every day. So I'm now going to hand over to Sophie Timms.

Thanks, Helen. Good afternoon, everyone. I'm Sophie Timms. I'm Kier's Corporate Affairs Director, and I'm responsible for our engagement with the government as well as internal and external communications. I joined Kier in October 2020, and prior to that, spent 20 years in the financial services sector, so it's a bit like coming home to be in the city today to talk to you all. So as well as sustainability being a key driver for Kier as a responsible business, it's also a critical obligation for us as a strategic supplier to the U.K. government. To be able to bid for major contracts now means that we have to be ready to respond to the ever-tightening public procurement policy around sustainability. Public Procurement Notices 06/20 and 06/21 ensure that all government departments and executive agencies are making sure that bidders can help them deliver on stretching social value and net zero targets. And as part of that, we need to publish a Carbon Reduction Plan throughout the life of the contract. The construction playbook as well, which is a joint government and industry initiative, also embed sustainability as a key principle that helps to build a much more progressive and consistent-built environment. And 300 local authorities have declared climate emergencies and set stretching ambitions to reach net zero often by 2030. This presents then both an obligation and an opportunity for companies like Kier to help co-create solutions with our public sector clients.

Thank you, Sophie. Last year, we launched our sustainability framework, Building for a Sustainable World. We have 10 pillars which address both social and environmental matters. Our environmental commitments are aligned to the Science Based Targets Initiative. And as you can see, environmental targets are set around net zero carbon; zero avoidable waste; biosphere protection, reducing water in the long term; and sustainable procurement. Since our baseline of 2018/'19, we've reduced our Scope 1 and 2 carbon emissions by 58% against a target of 38%. Our target for net zero carbon Scope 1 and 2 is to be achieved by 2039, and each business has a pathway to deliver against this plan. We're working hard to make ourselves greener using initiatives such as renewable energy, electric vehicles, getting involved early in design to reduce the thickness of slab, which reduces embodied carbon, the use of telematics and upgrading our premises to include areas such as LED lighting. We also recognize that Scope 3 emissions represent a significant proportion of our overall carbon emissions. And we work closely with our clients and supply chain partners to reduce the impact of those emissions. And we continue to work with the Supply Chain Sustainability School on achieving this as well. On zero avoidable waste, we have a target to reduce 10% year-on-year, and we are within that target. Whilst doing this, we're also developing our zero waste strategy with The Green Construction Board, and this will help us to achieve our overall target of net zero avoidable waste by 2035. We're working with supply chain to reduce use of packaging, to complete skip audits, to upskill our teams on waste segregation and use of Modern Methods of Construction. And again, our early involvement in design can ensure that we're reusing materials that are on site. We're committed to transparency in our ESG disclosures and we'll produce our first report this year in line with the Task Force on Climate Disclosures. You can see here some examples of how we're working to influence a greener and more sustainable future. One of the projects I'll just pick out as a highlight is our work with community with recycling, where over the last 10 years, we've had a really strong partnership. And we've reduced and recycled and reused wood of 9,170 tonnes, and this has saved 347 tonnes of carbon emissions, created 7 jobs and trained people as well. And this demonstrates our commitment to joining up across the social and environmental targets that we have. I'm now going to hand back over to Sophie Timms.

Thanks, Helen. So let's talk a bit about measuring social value. So since the Social Value Act of 2012, measuring social impact outcomes has been a key driver for the public sector. And as part of Kier's Building for A Sustainable World framework, we are committed to addressing social issues and creating GBP 5 billion worth of social value spend before 2030. But to do this, we're also investing in new tools that help us calculate. Earlier this year, we launched Thrive, which is our new social value calculator. And the main benefit of Thrive is that while clients all use different methodologies and calculations of social value, Thrive can generate that calculation in any format needed. The tool is currently live on over 1,200 projects. And this year-to-date, we've already delivered over GBP 570,000 worth of social value. But we've taken this a step further and testing another tool, LM3, which maps our local spend in Thrive to areas of social deprivation as measured by the government's 2019 Indices of Deprivation. This gives a much more granular view of spend and where we can better distribute that. And we've already used it in a number of bids and with clients. And it helps us and them to really, really deliver strategic social value to the geographies that need it the most. Critical too is our commitment to our extensive supply chain. This includes supporting collaboration and training through the Supply Chain Sustainability School, of which Kier is a founding member. The school's vision is to deliver world-class collaboration on sustainability within the built environment. And through that, we are providing training and discussion around a number of topics, including waste and carbon, inclusion and modern slavery. But it's also vital that our commitment to prompt payment to our supply chain is on it. We are signatories to the Prompt Payment Code, which means that all of our business streams are accredited and committed to paying 95% of invoices within 60 days. Now I'll hand back to Helen.

Thank you, Sophie. We've been talking about the importance of social value within Kier, and we have our own registered charity, the Kier Foundation. We've donated more than GBP 2.4 million since it's been established over 10 years ago to over 600 causes, and you can see some of those represented on screen now. I'm going to talk through our people strategy, which is absolutely key to all of our businesses in terms of the strategic priority of attracting and retaining people. We have to have a strong employer brand and proposition offering for all of our people. This has been demonstrated in the improvements that we've made through our internal engagement measures and also externally through measures such as Glassdoor ratings. We've worked on a number of initiatives and programs to really enhance the offering and benefits that we have for our people. And ESG is really at the front and center of this agenda. For example, you can see on screen here, we've just signed up as part of a consortium with RefuAid to support refugees with language skills and provide employment opportunities. We've also introduced the Real Living Wage and our culture of driving to be diverse and inclusive. We've established our diversity and inclusion road map and launched our Expect Respect campaign, which is fully understood across all of the business. Just here, I'll pick out a couple of highlights in other programs that we use to support people. So for example, we work with prison leaders to provide placement and employment support as they leave prison. We're also a member of the Armed Forces Covenant, where we have our Gold Award. And these are achievements that we're really proud of in Kier. Another area I want to touch on, which is very core to our offering is how we develop people. I'm really proud that we have just under 7% of our workforce on apprenticeship programs, and we have a range of development opportunities and programs that we offer across the business. And we see this as a real strategic priority in terms of growing the capabilities of our people and addressing the skills gap in the sector that we have. So I want to recap now on the key points and takeaways from this session on ESG today. Firstly, ESG is a strategic priority and enabler for us to win work and secure positions on the frameworks and convert our pipeline into live projects. Secondly, we have strong capabilities that enable us to work with our clients and support ourselves in achieving our net zero carbon targets, which we've continued to make good progress against. Generating social value is a priority for our business, and we have market-leading tools to measure and track our social value spend. And finally, our ability to attract and retain talent is a key priority for us, and we have developed a compelling employee proposition to enhance and develop our own internal capabilities. I'm now going to switch over to a short video on ESG. Thank you. [Presentation]

Good afternoon. My name is Liam Cummins. I'm Group Managing Director of Kier Construction, which comprises our regional build, 4 business units and also Kier Places, our services business. I'm joined this afternoon by Mark Whittaker. Mark Whittaker leads our Kier Places business, and Mark will introduce himself a little bit later on. Just a little bit of an introduction on me to start with. I've been in the construction sector, all of my career. I have an operational and a commercial background, and I've spent the last 20 years as an MD Exco level working in both large privately owned businesses and public businesses here in the U.K., down in the Middle East and even further down in Australia. Mark and I have a brief presentation today covering our Regional Build and Places business. You've all got hard copies of that. And what we'd also like to do is bring you inside the real frontline delivery of our business, and we have some technology that we'll show you on live projects out in the field. I'm going to start with just giving an overview on our regional build business. We're a leading national builder. That's very important. Our footprint covers the entire country, and we're delivering today around 277 projects. As those projects -- our average project size is GBP 12 million. And generally, we complete those projects within 1 year, which is a very important characteristic in terms of the risk profile of the business. In terms of our operational footprint, this is what gives us real credibility in our 4 primary sectors to government. We've built GBP 5 billion worth of schools over the last 15 years. We've delivered over 100 hospitals to 80 NHS Trusts across the U.K. We have a 12-year relationship with the MoJ and we're currently delivering or in the process of second stage, GBP 600 million worth of prison work. Recently completed her Majesty's Prison Five Wells in Wellingborough, which went live operationally earlier this year, and I'll be talking a little more about that later on. We're also a strategic department to DIO, the defense infrastructure organization. And we're on site at the moment at RAF Lakenheath in Suffolk, redeveloping the assets there in preparation for the U.S. Air Force, bringing their F-35 fighter planes. So we've got a really strong, long history of successful operational delivery to our primary sectors in government. Moving on to how does the policy and the capital pulls that Andrew and Simon have referred to earlier on, start to translate to real live project pipelines for us as an operating business. What's important is that, that capital spend that Andrew has referred to translates to strong visible pipelines with sensible procurement methods that allow us to underpin our midterm strategy. And the good news, the positive news is we see real momentum in that for our business. The replacement schools program and the leveling up agenda that sits inside that is very visible. We can see over 60 schools today in the business that we're able to target through that regional network, I described, and that's to both DfE and to local authorities. And we have 15 live projects on site today across the U.K. If we turn to the hospital program, there's the upgrade needed across hospital estates and NHS Trust, which our regional businesses very much sit inside and target. And then there is the, the GBP 3.7 billion program that's been launched by government for more major projects inside that space. We have 29 active projects today across the U.K. in the health care sector. You may have seen recently, we just started on site at Luton & Dunstable Hospital, which is a GBP 93 million new acute services award as part of the Bedfordshire Trust. Turning to prisons. As Andrew said earlier, there is a huge demand for prison spaces, 18,000 is the declared number from government. We've been awarded a place on a prison alliance by the Ministry of Justice, 1 of 4 partners to deliver a GBP 1 billion program of new prison work, and that will be 4 prisons, and that will be during the lifetime of our midterm strategy. With regards to defense, there's the GBP 3.2 billion Defence Estates Optimisation Programme, the DEO, as it's referred to as an acronym, and we're seeing the pipeline of projects coming through for that, and that's a 25-year horizon of investment in Defence Estates across the U.K. And finally, turning to the commercial sector. We are seeing demand from high-quality blue-chip clients for zero carbon commercial buildings in London and some of the other major cities in the U.K. We're currently working with Stan Hope, with Argent, with Crown Estate delivering those types of projects, and that's very much part of our strategy. So I guess we're seeing the rubber is hitting the road from the policy commitments and the capital pools into real-life projects that support our midterm plan. So if we move now to our overall market positioning and what I'd like to do with this is just concentrate on 3 aspects of our operating model, which I feel really differentiate us out there in the market. First of all, we face our primary sectors with an expert markets and clients team. So we have individuals who are familiar with those government departments that I've talked about earlier on, can look at a 10-year horizon of where those departments are going and composition care in the context of that. We also have great teams that can develop and bid frameworks and manage those relationships then over the long term. The second facet is that we deliver through these fantastic regional delivery units. And I call them regional ecosystems. So they've got great leadership teams, proud to live and work in the areas that they operate with strong relationships with clients, with strong relationships with our SME supply chains that very much support those businesses. I'm very proud to be able to drive social value and make a difference to the local community. So that second facet is the real anchor that we deliver the business on. And finally, the third aspect is that, as Andrew and Simon have highlighted earlier, our future pipeline is underpinned by long-term frameworks. We've got great visibility of that work. We've got a great track record of having delivered that work over many, many years. It also means that 72% of our work is actually delivered for repeat clients with all the benefits that come off by, in terms of learning fast and taking that into being safer, being more productive in how we deliver our programs going forward. And finally, in your pack, you will see 4 project examples of projects that are live today across the primary sectors that I've just run through that really evidence our capability. I'll let you read the detail of those, but I want to highlight 3 common threads across all of those projects that really, really come out at you. First of all each one of them is secured through long-term framework-led relationships, which, as we've said, is the absolute bedrock of the visibility of future pipeline that we can see. The second point is that our capability in supporting our customers' zero-carbon agendas, is very clear on all 4 of those projects and very important for us to be able to participate in that pipeline of projects going forward. And finally, in all of those projects, we're deploying design for manufacture and assembly. So we're leveraging our design capability, our digital capability and our supply chain with off-site manufacturers. And we're taking the opportunity to take site -- projects that would normally be constructed on site into a factory environment and assembling them in the field in a completely different way. And all of those have great evidence of that as a business. Thank you very much. I'm now going to hand over to Mark, who will talk you through our Kier Places business.

Thanks, Liam. My name is Mark Whittaker, I am the Managing Director of Kier Places. I've been at Kier for 10 years where I've held senior operational leadership roles in both our housing maintenance and our facilities management businesses. Just over a year ago, in March '21. we brought together our housing maintenance and our facilities management operations under a single business entity, Kier Places. This was done after a period of consolidation where we exited our non-core commercial maintenance activities, reshape the business to capitalize on some of the obvious operational and commercial efficiencies that existed. Both our housing maintenance and facilities management businesses, work across a broad range of local and central government clients. And within our facilities management business specifically, the [ blue light ], the education and the health sectors. Our operating model has a national footprint and provides a variety of reactive and planned maintenance, technical hard FM compliance, building safety, passive and active compliance measures, predominantly in the places that people work and the places that people live. So moving on to the next slide. The Places business model is different to that of Construction. The Places business operates on a national footprint and specializes in the live environment, which in this context means the places that people live. We interact directly with the public during the course of operational delivery. However, the customer core base is strategically aligned and the business is now enabled to operate on a larger platform with a broader set of capabilities and wider reach into our core markets. Kier Places are an early adopter of the building a safer future charter, which is a voluntary charter sponsored and endorsed by the MHCLG. And this gives Kier Places the credibility to grow and develop a market-leading building safety opportunity. In addition to this, the business is well strategically linked to be able to adapt and capitalize on emerging opportunities such as the retrofit and decarbonization agenda. As with Liam, I'm conscious that the case studies that we'll be referring to within our pack are there, and they're available for you to read at your own leisure. However, there are a few points that I would like to extract. Firstly, Kier Places is an annuity-type business. The case studies referenced to contracts that are 15 years and 6 years in length. And this is consistent with the procurement of maintenance contracts within the local government and central government arena. In addition to this, these contracts are specifically designed to deal with medium-term market fluctuations, and as such have indexation causes that protect our business from inflation. And finally, the projects that we deliver through these contracts at generally a low value and have a preconstruction and construction period of less than a year. Thank you.

Hello. I'm Stuart Togwell, Group Commercial Director. I have functional responsibility for commercial, risk, legal and procurement. I've been in the industry for 36 years, and I joined Kier 3 years ago. My skill is in growing profitable, sustainable construction businesses. The slide before you sets out how Kier manages its risk through the use of its operating and risk management frameworks. It was introduced 3 years ago as part of our overhaul of the strategic review. It's constantly used across the group to help drive discipline on how we bid, win and deliver projects and services to our customers within our chosen sectors. It's embedded in the business, and it's how we manage risk, including, of course, increased costs and availability of labor and materials. Although we face uncertain times, we have faced into these risks for quite a while now. And we manage increased costs through being selective on the work that we bid, sticking to our knitting and negotiate in appropriate terms and risk share with our clients. You'll see through the presentations of the group, how we've limited our exposure further through the construction business, having average projects of only GBP 12 million, which are delivered within a year. And excluding this risk or using indices to value them on our longer and larger infrastructure contracts. We have been relentlessly building trust with our supply chain partners since COVID, which has allowed us to have excellent market intelligence over the cost of -- cost and lead in times of materials and labor, which means we can, through early involvement of our clients, provide appropriate advice to help them effectively deliver their projects. I'm now going to pass you over to Mark, who's going to bring the [indiscernible] to life through his introduction to the infrastructure business. Thank you.

Thank you, Stuart. Good afternoon. I'm Mark Pengelly and I'm the Managing Director for our Infrastructure business, part of the infrastructure business stream. I am a charted civil engineer, and I joined Kier back in 1984, as a sponsored undergraduate. I've been with the Group for 38 years, and I pretty much worked in every part of the group and across all of the market sectors. And I've been a director with operational and delivery responsibility for the past 18 years. In Kier Infrastructure, we deliver highly complex, high-value civil engineering projects. And we have a real credibility in this area. We've delivered some of the largest projects in the U.K. in the last decade. We drove the twin-bore tunnels on Crossrail from Paddington to Farringdon. We constructed the Farringdon [ box ], which is 40 meters deep and is effectively the same as constructing a 12-story building below ground. We fitted out the station and hand it over to London Underground, and we were the first contractor to do so on the entire Crossrail line. We've also been at some Hinkley Point C nuclear power station. We've been there since 2011 and at the peak, we delivered 4.5 million cubic meters of earthworks. And currently, we are involved on HS2, as part of the EKFB joint venture, we're delivering the longest section 80 kilometers from the Chilterns to just south of Warwick. We're well respected in the industry and with regards to our core values and our engineering excellence, regardless of whether we are actually leading projects on our own as a single entity or whether we're part of a bigger joint venture. We always put the project leasing, we lead on the project management, and we lead as a program integrator. We work in highly-regulated environments. We work in rail, we work in nuclear. And as such, where quality management is at the forefront of everything that we do. With regards to design management, we have a number of strategic external relationships. But I think more importantly, we have an in-house capability, which adds real value and helps us enhance the offering that we give our clients. And as Stuart has amply demonstrated already, all of this is underpinned by very robust risk management and commercial procedures. Currently, the infrastructure sector is benefiting from continued investment by the government. Andrew in his presentation earlier, has already talked about an expenditure profile of GBP 650 billion over the next 10 years. And with the construction press and the information that we now get through the national infrastructure pipeline, through the Energy white paper and through build back better, we have far greater visibility of the phasing and timing of this pipeline. Right here, right now, we're very focused on 4 particular market sectors. So within rail, we're benefiting from the investment within HS2. And we're already involved in HS1, as I mentioned earlier. But HS2 Phases 2a and 2b are estimated to be somewhere between GBP 37 billion and GBP 53 billion. We've already been awarded the early works contract on Phase 2a as a sole entity as just Kier. In addition, we have Network Rail. Network Rail is the biggest asset owner in the U.K. with an asset base even greater than National Highways. In the last control period, Control Period 6, Network Rail had a spend profile of GBP 50 billion. Within the nuclear sector, the government has committed to GBP 20 billion of funding for new nuclear. And within the Energy white paper, they've committed to one more nuclear power station this term. And again, we're very well positioned, having been down at Hinkley since 2011, and we're also working up at Sellafield for the nuclear decommissioning authority. Within the water sector, we're currently working with Thames Water, Anglian Water and South West Water. And across their control period, which is AMP7, they've had a spend profile of GBP 51 billion, and we're also the sole provider of the framework for the Canal & River Trust, which is a national framework and for the environmental agency down in the Southwest. And both of these frameworks have been going in excess of 15 years. And finally, the defence sector. Back in 2021, the spend profile was GBP 42 billion. And this is a very strong market for Kier. We've been down at the Royal Devonport Dockyard since 1972, and we're currently carrying out works on 12 dock, 14 dock. And we're in the tender process for a GBP 300 million framework to refit 10 dock to take the Astute class of submarines that are coming in, in 2025 for a refit and a refuel. We very much changed the way that we transact as Kier infrastructure over the last 4 years. We've become far more customer focused and have a far more key account management approach to our clients. And very specifically, we look for 2 types of clients. Firstly, we look for clients that have a large asset base or a large portfolio of projects. such as the water companies and Network Rail. And then secondly, we look for clients that have major programs of work to deliver and are looking for a strategic partner with implementation skills such as Crossrail and HS2. And we do this for a very good reason. These clients are looking for strategic partners. They're looking for long-term relationships, repeat business again and again and again. And they have a far more mature approach to risk management, risk mitigation and risk sharing. We effectively come to market through 3 particular routes. We come to market as a sole entity as Kier Infrastructure, as we have done on the A13, which is GBP 100 million road widening scheme for Thurrock or for the recent GBP 60 million award that we've just had from Network Rail on the Oxford redevelopment. We also come to market on very large schemes through external joint ventures. And we do this in 2 ways. We do it with well-established contractors that we have a long-term relationship with, such as BAM Nuttall, where we do this through the new nuclear environment, and we've been working there for 20 years. And we also do it where we think a particular contractor can bring additional capabilities and add to our value offering to our clients just as we did with Eiffage on HS2, where Eiffage bought their European high-speed experience to align with our project management and program integrator skills. And we do this for a very good reason. We do it to balance the resourcing and revenue profile risk that always goes with very large infrastructure projects. And thirdly, we come to market by leveraging the existing relationships that exist within the bigger Kier Group. By bringing our major projects capability and our engineering excellence, we can support our Kier colleagues in highways and utilities. To bring to their clients on their existing frameworks, a broader range of services and offerings. And in return, this opens the door to higher-value capital projects. And a very good example of that would be lower terms crossing. So this new road scheme is the biggest road scheme to be delivered in the U.K. since the M25 was constructed back in 1985, GBP 1.5 billion. Kier Highways already has a strategic relationship with National Highways as one of their top 3 service providers by aligning our major project capability to that strategic relationship enables Kier to give the client a far greater offering. And we do exactly the same in utilities. What we're doing is we're leveraging Kier Utilities relationships with Thames Water, with Anglian Water and with Southwest Water. And we've already won and been awarded a GBP 40 million pipeline in Oxford Farringdon. We've also been awarded the Mogden Sewage Treatment Works at GBP 70 million and the early works contract on the GBP 70 million water treatment works at Alderney. So by leveraging these existing relationships in this manner, Kier Infrastructure has identified an additional GBP 4 billion worth of pipeline opportunities that we can go for. And all of this -- I'll finish the presentation as I started it. All of this is underpinned by very robust risk management and commercial processes. Thank you very much.

So first, let me start by telling you what the highways business does? Highways matters. So the highways asset in the U.K. is worth about GBP 500 billion, making it one of the most valuable assets to the nation. About 80% of all journeys are made on U.K.'s roads, and about 90% of the freight moves on U.K.'s roads. We, at Kier Highways maintain about 27,000 kilometers of roads and maintaining means during things like cutting the grass, keeping the roads free of ice and snow, clearing puddles. But we also carry out a whole range of improvement, enhancements and upgrades to the highway networks that we work upon. One of the things that sets us apart in highways is that we employ over 500 designers. Those 500 designers came across as part of the acquisition of Mouchel and we're very happy that we retained that capability in the business, and it remains in the business today. That enables us to offer an end solution where we design, build unmaintained roads across the U.K. for both National Highways and a whole range of local authorities. We're an integrator, which means that we bring supply chain partners, clients, and our capability together to deliver infrastructure for the U.K. So in terms of market opportunities, looking at National Highways first, the U.K. has a plan to invest GBP 650 billion over 10 years. And in roads, that manifests itself as the Road Investment Strategy. Road Investment Strategy 2, which runs from 2020 to 2025 has got GBP 27 billion of funding secured. And Kier is well positioned to deliver our capability and services as part of delivering that Road Investment Strategy for National Highways. Looking at local highways. The local highways market is about 1.5x the size of National Highways, but it's much more fragmented than the National Highways marketplace. Kier has positioned on a number of frameworks across local highways and a number of contracts in local highways where we can deliver our design, build and maintain services. Project Speed has been quite an interesting development over the last few years where we're trying to build faster, leaner and greener for the nation. And we're very proud to be one of the partners delivering the A66 up in the northwest of England, and as part of the A66 build under Project Speed, we're halving the construction time from 10 years down to 5 years. And clearly, climate change is feature in large in the way we deliver our services to our clients. And there's a great example in the notes that you'll be able to refer to, which shows on one of our schemes in the Midlands, how we reduced carbon emissions by some 25%, and that's becoming a recurring theme really on all the works that we do across the business. In terms of market approach, the key thing to bring out here is that the business has been through quite a significant transition, where we've successfully moved from being a highway maintenance provider into being a major project delivery partner. That's alongside being a highway maintenance provider. So we've got a range of major projects, which are listed on the right-hand side of this slide, and also primarily for National Highways. Because of that design, build and maintain capability and that integrated scale. It positions us very strongly to be able to move into that area, and it allowed us to leverage the wider capability that exists in the Kier Group. From a highway maintenance perspective, we have the ability to leverage our footprint. And you'll see in a later slide, we've got over 70 depots and offices across the country, where we can position our capability to go and deliver services to unlock authority of National Highways' clients. So in summary, from a market positioning perspective, we are the leading provider of highway services in the country. We are an integrator where we can bring together that unique blend of design, build and maintenance expertise to deliver sustainable infrastructure for our clients. We've got long-term collaborative relationships that are established both with our clients and with our supply chain partners. And we've got a marketplace where the asset itself, the GBP 500 billion asset of the U.K.'s roads drives demand and a need for the services that Kier provides. So we feel very strongly positioned as Kier Highway to continue to furnish that market with our skills and capability.

Thank you. Hi, I'm Andrew Bradshaw, the Group Managing Director for the Utilities business. I have 35 years civil engineering experience in commercial and operational roles. And for the last 8 years, I've been with Kier, where prior to joining Utilities, I worked with Joe in the Highways business. But in my short time in Utilities, it's quite clear that the Group businesses of Utilities, Highways and Infrastructure all have a market-leading proposition to deliver. The slides are in the handouts, and I won't talk you through all of the detail on the slides. But what I want to show you today is I would take rainwater from the sky, power from source and deliver it into a million of homes across the U.K. today. That's just a small snapshot of our 24/7 delivery service. That enables 18 million homes access to clean water and connects and maintains electricity to 10 million homes. We deliver an end-to-end solution, design, build and maintain so that when you fill that kettle or you switch on that TV, the myriad of mechanical and electrical components, pipe, stop valves and breakers all remain 100% functional. In telecoms, we're delivering 5,000 new homes a month in -- as part of the U.K. superfast broadband. And every 4 minutes, we undertake a maintenance activity that's 23,000 telephone mass that are part of the 5G rollout. Utilities is at the heart of the national infrastructure strategy with solid funding coming from government and private investment, GBP 50 billion is invested in the water sector over a 5-year period, GBP 32 billion is invested into the superfast broadband rollout until 2027. And there's a further GBP 40 billion that's invested in the energy market that connects new and existing infrastructures. Beyond this, the government funding extends into the GBP 5 billion investment into the [ leveling up] agenda to deliver telecoms into rural areas. And there's the U.K.'s carbon -- decarbonization strategy, where utilities have newly formed our decarbonized solutions offer that gives us access to EV charging, hydrogen installations and off-grade capacity through the energy clients. From this secured investment, it allows us to invest in our skills and our people and the supply chain that's required to deliver today, tomorrow and deliver the medium-term plan. Our key market position from a local and national presence is built up of a culture of trust and collaboration. But it's not just with our clients. It's with our peers where alliance of working brings the industry together to deliver a truly focused delivery, shared on successes, knowledge and innovation. But in the frameworks, outperforming peers with high-performing teams provides us with greater shares. With the long-standing relationships we have with our clients, it moves us into wider capital markets, utilizing the strength of the group in Highways and Utilities and Infrastructure. And in Infrastructure, we have partnered to deliver an early order for South West Water for the GBP 75 billion water treatment works at Alderney near Bournemouth. All of this positions us well to maximize our current builds and gives us a solid foundation into the growth markets around telecoms, EV charging and hydrogen. We have a national footprint where over our 15 clients, we have 43 local delivery teams that supports the medium-term objectives as an integrator and as an intelligent supplier. As an example, in the Southwest, we delivered 212,000 task orders per year for the South West Water client to make sure that the water flows through into our homes across the Southwest area. In the slide deck, there are example projects for South West Water, firmus gas and CityFibre for you to look at.

Thank you. Good afternoon. My name is Leigh Thomas, I'm the Group Managing Director for Kier Property. I'm a [ Chartered] Surveyor, I've been doing property development and acquisitions for more than 30 years. I've been with Kier for 17 years now, and I've been the current Managing Director for 7 years. I'll be taking you through the Kier property strategy and the key macroeconomic drivers of the business. In a minute, I'll introduce Lee Howard, who's our Finance Director. He will be taking you through the Group synergies and the public sector relationships. So our strategy across our core sectors really relate to 3 main areas: climate change, population growth and changing consumer trends. There's been a real change in legislation around climate change, the new government white paper coming through next year will actually mean that by 2030, nearly 80% of commercial property may be obsolete as they don't reach the minimum EPC standards of Class B. We also have corporate pressures around ESG and well-being and the drive for net zero carbon. All of these are great opportunities for the business. We have significant population growth and in particular, huge urban population growth. In the last 40 years, our cities have got 12 million people bigger. And actually, that's a great opportunity for urban regeneration. We've got huge demand in terms of the supply of residential. So we're not keeping up with delivering the amount of homes that people need. And actually, on top of that, we've got big demand for build-to-rent properties and an increase in single households, all of which is driving the demand for residential. And lastly, we have a change in consumer trends. Before COVID, we actually did 19% retail shopping online. Post-COVID, that's 26%. These huge changes in consumer behaviors are driving a large demand shift for last-mile logistics and industrial properties. We also have things like global supply shortages and global supply crises, which is driving the need for reshoring, onshoring data centers and actually automation and AI. All of this is driving demand for industrial and the vacancy rates for industrial at an all-time low of 3%. So how do property respond to this? Well, we're a commercial and urban residential property developer. We've structured the business around 3 core areas; urban edge mixed-use residential, sustainable offices in core U.K. regional cities and industrial and last-mile logistics. The capital allocations across these 3 asset class are broadly balanced. And actually, the aim is to grow the property portfolio and investment up to GBP 170 billion -- GBP 170 million capital. The property business through joint ventures has access to GBP 1.7 billion gross development value pipeline. And actually, JV is a core to what we do, and we have a 70 strong in-house team, which is multidisciplined, which is really what our joint venture partners, really value the business for that expertise in helping deliver urban regeneration. By delivering things through joint venture, it helps us manage risk and delivers increasingly steady fee income. The property mix between public and private joint ventures is currently 60-40 in favor of public sector, which delivers really strong synergies to the rest of the group. You see in front of you here a slide that shows the 5 steps of our value creation model. Once you control land, which is the first step, which our access to GBP 1.7 billion of value pipeline demonstrates we have -- you use the in-house experience and the multi-discipline team that we've got to deliver planning permission and then use the relationships that are being long established to secure the occupiers. And once you secure planning and occupiers, actually, those create most of the value in this value chain. We can then forward fund the opportunity and use other people's capital to actually deliver the scheme therefore, driving very high IRRs. Within the build-and-sell a phase, we have the opportunity to leverage up some really strong build experience within the rest of the Group to help us mitigate risk. And then on the sell stage, understanding your market and understanding what your customers want to buy helps us deliver product that is highly sustainable and is in high demand, therefore, driving the best price. I'll now hand over to Lee Howard to talk you through the JV public sector model.

Thank you, Leigh. I'd now like to spend a few moments to take you through our public sector JV model and how we mitigate risk. Firstly, the model on the left hand side is the traditional approach to development, where land is acquired first before planning is secured, construction tendered with the full risk of market movement borne by the developer. As Leigh has said, 60% of our development pipeline is secured through long-term public sector joint ventures. The public sector JVs are procured on a fixed price margin for the developer with the land price being the adjusting factor up until the point of land drawdown. The public JV model allows land to be contractually secured, but crucially, the price is only set after the project is significantly derisked and several conditions have been met. These conditions include planning, funding and construction costs. At this point, the land price is set and the development phase may commence. This insulates and protects the fixed margin and market conditions of inflation with land reducing if the costs increase. The JV shares the upside if the project outperforms, whereas the downside risk is borne by the price up until that point of drawdown. This structure not only insulates the projects from margin protection, but also allows a much more capital-efficient structure with land acquired further [ audit ] development process. This model is particularly required for our long-term multiphase projects where land is drawn down a number of years and phases. I'd now like to take you through some of the key group synergies that property enjoys with the render of group. Property enjoys many synergies with the other group divisions, providing a wealth of opportunity. Leigh has articulated the core property sectors of office, industrial and urban residential and these sectors cross over with the target sectors of other divisions where strong relationships already exist. -- many of these relationships are government departments and local authorities who in their own rights, are significant landowners with vast portfolio. And through these existing relationships, we are able to understand the strategic aims of the clients and a system to unlock value within their estates. By leveraging our existing established group relationship, we have access to a huge opportunity to provide additional services to clients where we are already a key trusted partner. As well as these upstream synergies, there are also many downstream synergies with Kier Construction able to tender for further work within these joint ventures on a fixed basis. Okay. I'd now like to take you through some of the key partnerships that Kier property already have in existence. We have a number of existing public sector joint ventures across our core Southeast and Regional city target market, including Liverpool, Birmingham, Watford and Southeast-focused JV with Network Rail. These JVs are all long term in nature, ranging from 10 to 20 years and provide a strong pipeline of opportunity with contractual access to land on fixed margins. The JVs are procured through a bid and scoring process where the score in [ matches ] includes not just the financial return, the authority but also the track record, partner fit, ESG credentials, ability to flex to the client needs and deliverability are all key parts of the scoring process, which sets care aside from many of its peers. I'll now pass you over to Leigh.

Thank you, Lee. I'd just like to talk you through the market opportunity. So you've heard from other group managing directors about the huge opportunity in terms of the government leveling up program and investment in the U.K. infrastructure. So there's GBP 650 billion of committed investment across the U.K. By working together with the other managing directors of Kier, we can understand where this investment is being targeted as a property development business really try and actually leverage up the best places to actually invest your capital before you see the values go up. So a great opportunity of sharing intellectual property and information to drive returns. The urban regeneration issue. What are we doing with the high streets, Local authorities are really struggling with actually regenerating the high street, generating revenues through council tax and business rates. So actually by helping them do that and increasing the revenue streams, we are delivering housing, employment but also helping the local government agenda. And lastly, we mentioned on the top of the presentation, there's a huge supply shortage of homes. Most local authorities are struggling to deliver a 5-year housing land supply. In fact, 1/3 of them are actually failing on this measure. So there'll be a huge push in terms of delivering urban houses in terms of catering for that macroeconomic supply issue we talked about earlier. And lastly, we talk about the levering up agenda. The evolution, city mayors, combined authorities are all really pushing the agenda around the regions. A good example of this is the government property advisories hub program and Kier property, we've delivered a pre-let 240,000 square foot office building in Arena Central to HMRC, 2 years ago, which is a great example of using the contacts around the group and the public sector relationships to find the occupiers and deliver derisked property development. So our market positioning. We have access to a very large land bank worth GBP 1.7 billion gross development value. And 60% of this is with the public sector joint ventures which, as Lee described, is largely insulated to inflation. And these joint ventures help us manage risk and generate fees as well as profit. We have a really experienced multi-disciplined in-house team, which actually delivers a fantastic track record across all these sectors and which is why our joint venture partners look to do business with us. The strong group synergies allow us to invest capital wisely knowing where government investment is being targeted, but also leverage up the great relationships around local and central government to deliver more for our clients and also great opportunities for the businesses to work together on an arm's length basis to help actually improve revenue streams within the group. So the aim really is to actually deliver stable investment in the property business, allow that capital to season, which will ultimately produce a 15% consistent ROCE return in the medium term. Thank you.