Kier Group plc (KIE) Earnings Call Transcript & Summary

Everyone, thank you very much for joining us for our Half Year 2025 Results Presentation for those of you here in person and I'd also like to extend a warm welcome to those of you who are joining us by the webcast and the audio as well. I'm Andrew Davies, I'm the Chief Executive of Kier Group. And I'm joined today by Simon Kesterton, our Chief Financial Officer. This morning, I'll walk you through the highlights for the 6 months to the 31st of December 2024 and then I'll hand you over to Simon to talk you through the group's financial performance and this will be followed by an operational review, an update on ESG and we'll finish off with our outlook. And then there'll be an opportunity for questions and answers at the end of the presentation. So there's the disclaimer and there's the title slide. So moving to the highlights of the year on Slide 4, this slide here. The last 6 months have seen the group deliver a solid set of results demonstrating further operational and financial progress. We've delivered revenue growth, which resulted in an operating profit of GBP 67 million representing a margin of 3.4%, which is consistent with the prior period. We continue to convert these profits into cash with a net cash position of GBP 58 million at December and significant reduction in average month-end net debt now down to GBP 38 million. Future prospects of the group also remain strong with the group's order book increasing by 2% in the period to a record GBP 11 billion reflecting contract wins across our business and providing multiyear revenue visibility and around 98% of our FY '25 revenue is now secured in the order book. Our order book is supported by long-term framework positions. And given the significant progress that the group has made in recent years and given our continuing confidence in the business, an interim dividend of 2p per share has been declared, a 20% increase on prior period dividend of 1.67p. This equates to an earnings cover of circa 3.5x and we anticipate improving over the following periods as we move to a 3x earning cover. We're also very pleased to announce in January the launch of an initial GBP 20 million share buyback program. We also increased investment in Property as we seek to deliver increased shareholder returns. And overall, we're in great shape. Our strategy has progressed well supported by great people, excellent long-term order book and strengthened balance sheet as we continue to deliver against our long-term sustainable growth plan. This slide provides a reminder of our long-term sustainable growth plan. It provides visibility over the direction of the group. We're targeting to grow revenue above GDP growth driven by the attractive markets combined with our market-leading positions. Our portfolio of businesses are targeted to generate an adjusted operating margin of 3.5% or above. Cash conversion of 90% and an average net cash position, which allows us to invest surplus cash into those areas which will deliver increased shareholder returns. And this includes a targeted sustainable dividend policy of circa 3x cover throughout the cycle. So with that, I'll hand over to Simon, who will take you through the detail financial results.

Thank you, Andrew. Good morning, everyone. Now moving on to our half year financial performance. Revenue in the period, as Andrew mentioned, is higher than half year '24 and reflects volume growth in both our Infrastructure Services and Construction segments, which I'll cover more in detail in the next slide. We delivered an adjusting operating profit of GBP 67 million, up 3% in the period despite continued albeit lower inflationary pressure. The group achieved an adjusted operating profit margin of 3.4%, which is consistent with that delivered in the same period of the prior year. And as usual, we expect the current year's profitability to be second half weighted. Net cash is materially better than the prior period at GBP 58 million compared to GBP 17 million for half year 2024 despite working capital outflows returning to more normal levels and increased capital being deployed to our Property business. As expected, the group materially delevered. This has resulted in the average month-end net debt reducing by circa GBP 100 million to GBP 38 million from GBP 136.5 million despite dividend payments and the capital being deployed into our Property business. Turning to Slide 8. I'll walk you through the group's revenue growth. Starting on the left hand side, we start with half year '24 revenue of GBP 1.9 billion. Infrastructure Services revenue increased by 9% primarily due to continued volumes across HS2, nuclear and water. Construction revenue increased by 2% as we deliver out our strong order book. Overall, group revenue increased by 5%. Moving now to the adjusted operating profit bridge. We start with the previous period's adjusted operating profit of GBP 64.7 million. Volume, mix and price changes have resulted in an increase of GBP 3.5 million. This is offset by lower property transactions, which we expect will be second half weighted this year. Management actions of GBP 5.2 million during the half year continued to more than offset continued albeit lower inflation. The improvement reflects the impact of our Performance Excellence projects. During the half, the largest contributors to this were supplier onboarding and site setup optimizations. Over 60% of our order book is made up of target costs or cost reimbursable contracts. And if we do choose to give price certainty to our customers, it is only done after key risks and opportunities are understood. The result is an increase in adjusted operating profit up 3% to GBP 66.6 million. Adjusted items, excluding noncash amortization and interest, amounted to GBP 9.6 million in the period, in line with the same period last year. The main item gains related to fire and cladding costs, which is GBP 7.5 million in the period. Given the nature of construction projects, we typically engage in following the regulation change. We estimate our net exposure of this could be in the region of a further GBP 20 million. The property costs relate to the sale of a mothballed legacy office in Manchester and the interest relates to IFRS 16 where leased office space has been exited. Slide 11 sets out our order book position. Our order book is high quality and has further increased by 2% to a record GBP 11 billion compared to June 2024. We have secured nearly all of our FY '25 revenue, circa 98%, and we continue to win work in our chosen markets. Significant effort has been made to improve the quality of the order book. We're focused on winning work with U.K. government and regulated industries. We continue to focus on managing risk and reward when bidding, negotiating and delivering work. 60% of our order book is under target cost or cost reimbursable contracts. Our infrastructure business has nearly all of its contracts agreed as target cost or cost reimbursable. Within our Construction business, the majority of the contracts are fixed; but our policy is to fix these after following a 2-stage process to identify, mitigate, retire or exclude the risks involved. Our average order size is only GBP 21 million and this relatively small average order size results in us regularly repricing contracts. The order book continues to be underpinned by significant long-term framework agreements. Our long-term framework positions are excluded from the order book and total GBP 158 billion of advertised value. The combination of our strong order book and our framework positions provides good revenue visibility. Moving on to free cash flow. The adjusted EBITDA in the period grew 9% to GBP 101 million in half year '25. We then have GBP 91 million of working capital outflow. Last half year saw a 22.5% increase in revenue, which reduced the usual working capital outflows, which occur with lower activity in the first half of any year. In order to provide a normalized comparator, we've included HY '23 alongside the half year 2024. You can see the half 1 working capital outflow this year is similar to half year 2023 levels as revenue growth has stabilized. We expect to see our usual working capital inflow with higher activity in the summer months during the second half. We have increased the capital employed within our Property division in the period, including investment in property work in progress of GBP 19 million, significantly higher than the GBP 2 million in the comparative period. CapEx in the period amounted to GBP 27 million. However, GBP 23 million of this relates to payments made under leases now capitalized under IFRS 16. Net interest and tax reduced by GBP 1 million in the period due to interest payments due to new bondholdings starting in August 2024 offset by lower corporation tax payments as the group utilizes its significant deferred tax asset. The group has a deferred tax asset of GBP 141 million, which relates to losses made by the group in previous years and allows us to offset half of our tax charge in any given year. We anticipate it will take around 8 years to fully utilize this asset. Turning over to Page 13. We have the net cash bridge. We start on the left hand side with closing cash of GBP 167 million at the end of June 2024. We then see the free cash outflow of GBP 50 million that I've just talked about. We had adjusting items of GBP 15 million, half of this, GBP 7 million related to items accrued for in previous periods. GBP 17 million relates to deploying capital to the joint ventures within the Property segment. This will help drive future returns as the current market is affording some great opportunities. We also paid GBP 4 million to our smaller pension schemes, which remain in deficit. We then have the purchase of Kier Group shares. This is in respect of the group's employee benefit trust, which acquires Kier shares from the market for use in settling long-term incentive plan share schemes when they vest. The net cost of this was GBP 7 million. FY '24 saw the group declare our first final dividend in many years and the payment of this dividend was GBP 15 million in the period. This results in a net cash position of GBP 58 million, a material increase on the HY '24 result of GBP 17 million cash. Moving to Slide 14. This slide is a reminder of the significant progress made by the group up to the point where we've effectively eliminated our month-end average net debt and strengthened the balance sheet. If we look at the last 36 months, we've reduced our average month-end net debt and debt-like items by GBP 250 million, a significant improvement resulting in just GBP 38 million of reported average month-end net debt during the first half of this year. During the period, we've seen the operating cash generation used to materially delever. The GBP 38 million average achieved across the half is GBP 99 million lower than the comparative. This slide sets out our long-term capital structure that we have in place to support our strategy whilst retaining flexibility and optionality to deliver future growth. In February 2024, we secured long-term financing in the group through the issuing of GBP 250 million of 5-year senior notes. I believe we were the first debut issuer in that market for 2 years and we now have access to a reliable long-term debt capital market. We also took the opportunity to extend our revolving credit facility to 2027. These actions strengthened our debt maturity profile and diversified our funding sources. In January 2025, we fully repaid all the outstanding USPP notes and GBP 111 million of the RCF matured, both in line with their agreements. This leaves our facilities, as you see on the page, comprising of a GBP 250 million bond and GBP 150 million revolving credit facility, which mature in 2029 and 2027, respectively. We are focused on optimizing shareholder returns and maintaining a disciplined approach to capital allocation. Accordingly, as we generate cash from operations, we expect to deploy that in a number of ways whilst maintaining our strong balance sheet. We're targeting a dividend cover of around 3x earnings through the cycle, as Andrew mentioned earlier. We plan to invest further in our Property business in order to generate consistent returns over time. We anticipate deploying up to GBP 225 million of capital in that business. Our disciplined approach to the projects we undertake and partners we choose mean that we are targeting the segment to deliver consistent long-term return on capital employed of 15%. With regard to mergers and acquisitions, the group will continue to consider value-accretive acquisitions in core markets. Our consistent material reductions in average month-end net debt has given headroom to consider other ways to deliver returns to our shareholders, including the consideration of share buybacks when appropriate. In January, we announced an initial GBP 20 million share buyback program further increasing returns to our shareholders. This framework complements the evolved long-term sustainable growth plan ensuring our commitments to our evolve targets whilst maintaining a strong balance sheet with a sustainable month-end net cash position. And now I'll hand back to Andrew for the operational review.

Many thanks, Simon. So if we go on to Infrastructure Services to start with turning to Slide 19. So our Infrastructure Services segment saw revenue growth of 9% largely driven by additional High Speed 2 capital works activity as well as volume growth in the water and nuclear sectors as previously announced contracts wins convert into revenue. Adjusted operating profit increased 4.8% to GBP 46.1 million. Adjusted operating margin remained strong for Infrastructure Services at 4.5% as we continue to see our revenue mix weighted towards higher margin design work in the first half of the year. It should be noted that the segment remains affected by delays to the start of works in Control Period 7 in the rail market and the Road Investment Strategy 3 or RIS 3 in the highways market has yet to be agreed. The portfolio effect of our Infrastructure Services segment means we're able to effectively manage these risks and returns. The order book continues to consist of high quality and profitable work in our market reflecting the bidding discipline and risk management embedded in the business. Our Natural Resources, Nuclear & Networks or NRNN business within our Infrastructure Services segment has continued to grow its position in the water market as the operating companies start the next investment cycle of AMP8. And Kier has been appointed by Yorkshire Water to their GBP 850 million AMP8, which is 2025 to 2030, complex non-infrastructure works framework to support their investment in water processing and waste networks. Has also been appointed to an Early Contractor Involvement or an ECI by Severn Trent to design and build a replacement sewage treatment plant in Worcester worth GBP 20 million. Overall, I'm pleased to say that 97% of our FY '25 revenue is secured, which combined with our recent wins underpins our future revenue in Infrastructure Services. Turning to the next slide, which looks specifically at our position in the U.K.'s water sector. The AMP8 investment cycle is due to start in April 2025 with the regulators and water companies having broadly agreed to deliver a significant larger investment determination worth GBP 104 billion, which is double that of AMP7. As the market is due to double, we expect Kier's volumes to grow in line with that market. The AMP8 program is driven by aging asset base which needs replacing or refurbishing, increasingly stringent environmental regulations and the focus on extending the life of existing facilities through maintenance. The water companies are turning to Tier 1 contractors for long-term support, particularly those with specialist mechanical and engineering skills such as Kier, to help them deliver these upgrade and maintenance program given the large increase in the CapEx requirements. And this slide sets out our U.K. footprint in water. We're one of the largest Tier 1 contractors supporting regulated water companies with their asset optimization. As at the 31st of December, we're on 15 frameworks with 9 companies with an advertised value of GBP 15 billion. Moving to our Construction business. The business comprises regional builds where we construct schools, hospitals, prisons and defense projects for the U.K. government as well as delivers projects for the private commercial sector. It includes our Kier Places business and Kier Places includes our Workplace Solutions business formerly known as Facilities Management and Residential Solutions business formerly known as the Housing Maintenance business. Construction revenue increased 2% to GBP 932 million in the period. The adjusted operating profit grew by 10% to GBP 36.5 million. And the prior period margin was impacted by increased overheads to support additional site starts in our regional build business and accordingly, in the first half of FY '25 we saw the benefit of those costs, which we put in last year. Within Construction, our Kier Places business saw volume growth across Workplace Solutions and Residential Solutions. As a reminder, Workplace Solutions is predominantly facilities management work for the Ministry of Justice and Home Office. On the other hand, Residential Solutions delivers housing repairs and maintenance services for local authorities. We continue to grow our capabilities and customers in this area with a focus on decarbonizing social housing through retrofit opportunities. The construction order book grew by 7.5% to GBP 4.3 billion as we continue to win work in our chosen markets. Construction business has successfully won a number of recent awards. This included being appointed by the Scottish government on a GBP 684 million contract to deliver HMP Glasgow, a major new prison project that will provide a much needed replacement for Scotland's largest prison, HMP Barlinnie. Justice remains a key sector for the business as we utilize our extensive experience to provide high specification, safe and secure facilities that are focused on reducing reoffending. We've also been appointed under a PCSA to deliver a new improved Army infrastructure at Rock Barracks, MOD Woodbridge, Suffolk to be delivered as part of the MOD's Defense Estate Optimization Portfolio, which is a 6-year alliance to create 16,000 bed spaces for the armed forces in single living accommodation. Our Kier Places business has been awarded a place on the GBP 814 million Facilities Management framework by Pagabo to provide a range of services to various public sector organizations, including education, health care and local authorities. And our Construction business has 99% or circa 99% revenue secured for FY '25. Moving next to our Property business. Our Property business invests and develops primarily mixed-use commercial and residential schemes and sites across the U.K. The business is well established in the urban regeneration and property development sectors and we largely operate through joint ventures to manage risk and opportunities. The performance of the Property business reflects its recapitalization as we prepare for future growth. Transactions, as Simon said, are expected to be second half weighted. We're focused on the disciplined expansion of the Property business through select investments and strategic joint ventures while the market provides buying opportunities. At period-end, Kier's capital employed in the Property segment was GBP 194 million and this reflects the group's cash investment in Property. Given the group's increased operating cash flows, we can see a number of attractive buying opportunities leading us to further increasing capital deployed to GBP 225 million. We're targeting the Property division to deliver a consistent return on capital employed of 15% and we also recycle the capital from our property transactions and therefore these provide a source of future capital for the group. So we believe our Property business will generate returns for shareholders in the next few years especially given the timing of the deployment within the cycle and expected market recovery. The Property division has synergies with our wider business model and the cash generated from our Construction and Infrastructure Services divisions being deployed to generate higher returns in our Property business thereby smoothing the returns profile for the group. We believe it takes time to selectively invest in the sites, season the capital and then to transact. And over the long term, the Property business will deliver a more consistent return as a result. Moving on to sustainability. As a key strategic supplier to the U.K. government, ESG is fundamental to our ability to win work and secure positions on long-term frameworks. U.K. government contracts above GBP 5 million require net zero carbon and social value commitments. Our sustainability framework is focused on 3 core pillars: people, places and the planet. Firstly, looking at our environmental progress. We're on track to deliver our Scope 1, 2 and 3 carbon reduction targets. We're committed to helping our supply chain reduce their carbon footprint, an example being that we're working with the supply chain sustainability school to support the use of low-carbon HVO. We're seeing increased demand from customers for Kier to deliver environmentally conscious projects and this is reflected in our Green Economy Mark accreditation. Kier is a people-based business and our performance depends upon our ability to attract and retain a dedicated workforce. The group has 12% of our workforce in formal learning programs as we help the industry skills gap through developing people ensuring we better reflect the communities we work within and we serve. And this has been recently acknowledged by Kier becoming a platinum member of the 5% Club. And we're also pleased to be included in the 2024's Top 100 Apprenticeship Employers list. As part of our drive to recruit diverse talent, during the period, Kier has offered 28 prison leavers or those released on temporary license opportunities for employment either within our business or within our supply chain partners in the first half of the year. And Kier also remains committed to offering employment opportunities to those who've served in the armed forces and has offered 57 veterans positions in the period. And turning to suppliers. Our supply chain partners are clearly highly valued by us. They help us deliver solutions that both benefit our clients and reflect the communities that we're working in reflecting the fact that circa 55% of our subcontractor spending is with small and medium-sized enterprises. Moving on to the summary and outlook on Page 24. We've delivered a strong set of results for the first 6 months of the year as we continue to demonstrate further operational and financial progress, which is reflected in our improved average month-end net debt. It's very pleasing to be able to share the proceeds of this progress with our shareholders through increased dividends and we further increased shareholder returns through the launch of our first share buyback program at the start of 2025. Our order book remains strong at GBP 11 billion and provides us with good multiyear revenue visibility. The quality of the contracts in this order book reflects the bidding discipline and risk management now embedded within the business. The second half of the financial year started well and we're trading in line with expectations. The group is confident in sustaining the strong cash generation achieved over the last few years and is well positioned to continue benefiting from U.K. government infrastructure spending commitments. And Kier operates in markets which are vital to the U.K. We remain committed to delivering our long-term sustainable growth plan, which will benefit all of our stakeholders. Before we move to questions, just a reminder to everyone that we are holding our Capital Markets Day on 3rd of June 2025. It will be a great opportunity to meet our operational leadership team from each of our core businesses. And we'll confirm details in due course and look forward to seeing as many of you there as possible. And with that, I would like to open up the meeting to questions and answers.

We'll take the questions from the room first, please, and then we'll move on to those online. And I've been asked to sit down to take the questions.

Andrew Nussey from Peel Hunt. Couple of questions, if I may. First of all in the Infrastructure segment, the transition from AMP7 into AMP8, what level of visibility do you have at the moment in terms of those AMP8 volumes beginning to ramp up and is there a risk of maybe a bump over that transition? And secondly, again in infrastructure with CP7 delays and highways regulatory period delays, can you give any sort of high level thoughts on what you think might happen there in terms of when activity will come in and what RIS 3 may or may not look? And I've got a further one on property, but maybe do those 2 first.

Look, on AMP7 to AMP8, it's about mobilization. As I said, we've got positions on frameworks I think I said up to sort of GBP 15 billion with 9 counterparties. It really is about mobilization now and we're seeing the utility companies or the water companies are moving to accelerate through to April their mobilization plans. Some are further ahead than others, you naturally expect that. So the programs where we have pre-existing relationships with those clients, for example Severn Trent, we've seen a dramatic buildup in volumes coming from Severn Trent. Those who are new to us so for example Southern Water, Wessex, United Utilities; we're now building up that portfolio of work which they're allocating to us. So it's a slight mixed bag, but we're very happy where we are in terms of mobilization. We're bang on plan and we feel confident that we will see those volume increases coming through over the next sort of 12, 18 months in water. CP7 and RIS 3, it's more delays than anything as the Department of Transport works out its spending profiles. We're not overly concerned about it. We still have strong positions on RIS 3 with the National Highways. We're a major supplier, top 3 supplier international highways. As we said, the mix in highways at the moment is slightly geared toward design; but we do have large volumes coming through on the A417 missing link program and we are in the design phase of the A66 in the north as well. So there are slight delays in the visibility of that coming through as they define their procurement strategy in National Highways for the next iteration of capital projects as well as the maintenance projects, but we're not unduly concerned. CP7 is a relatively small part of our portfolio, very important part of our portfolio, came with the acquisition of Buckingham Group and we've got plenty of work going through at the moment and we do anticipate that will come through once they define the programs.

On Property, which is normally Simon's bag. Just sort of line of sight, you obviously referenced you expect more completions in the second half. What degree of visibility do you have those in terms of what might be negotiating at the moment? And secondly, targeting the limit of GBP 225 million of capital employed, when do you think you might get there? And equally let's say returns on capital start to progress towards a 15% level, would you consider increasing the level of capital employed beyond the GBP 225 million?

Yes. I mean the Property second half, I think we've got great visibility. So we're not at all concerned about the second half performance of the Property business. And with regard to the GBP 225 million; yes, I mean I think as we get there, we've said really in our capital allocation probably, we're not going to put large amounts of cash on the balance sheet. We're going to use that cash to either enhance earnings going forward and 15% ROCE isn't a bad option, but also return value to shareholders as well. So it's just a trade-off really what represents the best opportunity to increase earnings or return value to shareholders.

Adrian Kearsey, Panmure Liberum. Just 2 questions from me. Firstly, could you give us some color in terms of what are you seeing in terms of cost inflation and the supply chain and are there many sort of variances across the different parts of the business? And then going back to Property, would you be able to sort of give us a feel for the types of project structure that you're putting into Property, the kind of joint ventures, the kind of partners that you've got and how that sort of is affecting how much money you're putting into each project?

So cost inflation, I think the response we typically give is don't forget 60% of our portfolio is on a cost reimbursable basis. And I think as Simon mentioned, the other 40% is pretty much all secured through 2-stage negotiated contracts and the average size of those contracts, they predominantly sit in construction, is relatively small notwithstanding I mentioned the GBP 680 million prison project in Scotland. But again that's through a 2-stage negotiation so you've allocated risk, you've allocated cost risk, et cetera, et cetera, and you understand the project. So we're not seeing inflation unduly affect us. As ever the thing that inflation tends to affect is the budgets and therefore, that may put a slight delay into projects. And that was happening 2 years ago at the height of the Ukraine inflationary issues, which were coming through. We did see some delays coming through, which then slowed up the growth in our construction business, which then eventually came through very strongly last year. But we're not seeing it unduly impact our projects at the moment, Adrian, and we feel we can manage -- within the structure of how we contract anyway, we can manage that well within those contracts. Do you want to take the Property?

Yes. So on property, Andrew, I mean we've really got a quite focused strategy. We're looking at mixed-use residential, sustainable offices and industrial and last mile logistics and we want to keep it kind of an even balance across those sectors with our projects. Two things we look at really is the size of the equity check and really the liquidity in the portfolio. So it's important to us to maintain a relatively liquid portfolio. And it's also important to us to not have too much of a focus on any 1 project so not get overexposed. So on average, our equity check is only about GBP 4 million to any 1 individual project. So you can imagine we do have quite a lot of projects going through there. I think there's some slides, if you look at 30 to 34 in the appendix, that does give us an overview. In the relationships in there, you can see Network Rail, Lloyds Bank, Investec. You can see there Birmingham City Council, Watford is in there as well of course. So we've got a broad range of relationships and partners that we work with often in JV.

Adrian, do you want to pass the microphone to the right?

Jonny Coubrough from Deutsche UMS. Can I ask firstly on Construction? HMP Glasgow, is that included in the GBP 11 billion order book at the end of the half that is? And then could you give us an update on other projects within the portfolio in terms of timing on other major projects coming through such as Millsike and [ Devon ] and if you've got any smaller projects in there?

Well, Millsike is completed and it's been handed over to GPC. So that one is completed in the order book. I mean we mentioned a few coming through; single living accommodations are coming through. We've got a few health projects, which we're not able to announce yet, which we've been down selected into a 2-stage negotiation and we're bidding quite as part of the national hospitals program, which has now been reconfigured by the government to prioritize those rack hospitals and those hospitals which are in advanced stage planning. So we're heavily participating in those. So the pipeline in Construction is pretty strong actually at the moment as well as the judicial schools and other local authority activity that comes through. And London, the commercial work is reasonably strong in London in our chosen sectors, which is obviously dealing with blue chip clients with strong pipeline. So we're quite confident in Construction. The pipeline is very strong.

So just to follow up. If we see the working capital impact of Millsike end in the first half and then should you see the benefit of Glasgow in the second half?

Yes, effectively, yes. But of course the overall working capital number is just on absolute volumes in terms of what you'll see. But of course Millsike for sure, that working capital unwind has happened. And then as we ramp up activity in Glasgow, that working capital inflow will come in.

And then just you called out HS2 growing activity in the first half. Could you give us an update on where you are with HS2 and is that at peak run rate now?

Yes, it's around about the peak runway. We're on the critical path in the center for the test regime. We're working very hard with HS2 to ensure we can sort of get a program that actually works for them and works for us as well in that sense. HS2 wish to go through a reset program where they want to get a degree more certainty into the residual elements of that. That's perfectly natural in this sort of phase of a program. It's what we do in all of our other projects and we've been very clear with HS2 that we'll be very committed to the joint venture to try to help them achieve a degree more certainty into their future cost base. So relationships are robust, but pretty good.

Rob Chantry from Berenberg. Just 2 questions from me. I suppose firstly, just on the Property division, you mentioned the 3 main areas and I guess at scale they're roughly GBP 70 million to GBP 80 million in each of mixed-use, sustainable offices and industrial, et cetera. Can you just help us understand the financial profile between each of them? So is there a big difference in how you make money in terms of equity share or development management fee, et cetera? And then secondly, have you seen any change in the competitive environment in those specific end markets at that scale over the past 2 or 3 years? Have you seen more people coming in or do you see it relatively consistent in that area?

Yes. In terms of the exposure, you're absolutely right. So we're keeping it balance, GBP 70 million to GBP 80 million, in each sector. And then it's really -- I mean, unfortunately, it's project by project. So you can see a complete mixed bag depending on who the client is, who the JV partner is and who the other partners are as to what the structure and how we make money is split between fees and of course returns due to getting planning permission, building out and then of course letting spaces.

So I mean the pictures you see on Page 30. I mean the Watford, they'll be sold on an individual basis and we have a retail capability that actually delivers against that and you take margin as and when you sell those properties. If you sell land into a joint venture with a housebuilder, you'll take certain profit out at the point of sale of the land into it and the residual profit you'll take out when you sell each individual house. So that's the profit profile there in that sort of sense. If you take Bracknell on the right, that's a single logistics facility and obviously you're going to sell it or rent it to a single user. Offices are somewhere in between depending on the type of office. So it depends, as Simon says, on the project.

Max Hayes from Cavendish. So you discussed higher margin phases in Infrastructure. Just wondering, do you expect this trend to continue? And where do you think this could get to?

Well, the higher margin comes from the design phase. We are a D&B, design and build contractor when it comes to roads. So we're heavily involved in the design of the A66 so that's where you get the increased margin. So yes, as and when RIS 3 gets published and they get more into the design phase of future projects, we would anticipate that the margin there is slightly higher than in the operational phase where it's slightly lower, but volumes are bigger. So the margin as an absolute stays roughly the same. But it depends where you are in the cycle. So with RIS 3, we do see some more maintenance-orientated CapEx capabilities coming through like Lyn Gorge where we've been down selected to replace 7 bioducts on the M6 north of Preston. It's a maintenance project. It's replacing existing capability, but requires a lot of design input and that's what we will be bidding to do in those phases. And that's where we think RIS 3 will be probably moving towards in terms of orientation. It's more maintenance-orientated CapEx. Any more from the room? Okay. So should we offer any questions online or on the audio? Are there any?

[Operator Instructions] We currently have no questions. So I'll hand back to Andrew and Simon for closing remarks.

Okay. Look, thank you very much for all your questions today and for coming along and we'll catch up soon. So thank you very much.