Mears Group plc (MER) Earnings Call Transcript & Summary

Okay. So yes, first slide. I mean undoubtedly, 2020 has been a torrid year for everyone certainly in regard to COVID. I don't really want to turn this into a COVID presentation, but I think it'd be really remiss of me not to at least look back, as I assume everyone's pretty focused on going forward. But yes, looking back is obviously quite important. I'm delighted, however, that we as a group met those challenges and managed to deliver all our strategic goals, which is -- which was great. I guess having achieved that, it was obviously key. Now I'll touch on some of those areas that make it possible, though as I say, I think in reality -- I clearly have 5 or 6 slides just on COVID alone. But yes, we should not lose sight of the fact that our historical performance with customers, service delivery have been well respected. The amount of support we gained over decades, so it's not saying you can gain in a week or 2, so the decades that we've been operating, I did think, made a big difference when the challenge did come. So it wasn't trying to reach out to customers for the very first time and ask what we're going to do. We do them well. We've worked for many years between us and the clients, and I know we managed to get through COVID. And ironically, I'd actually say, with that challenge and that headwind, I think the relationships are actually stronger now than they've ever been. So yes, so I can sort of look back and so on it stretched those relationships. I think both parties have come together, see what can be achieved through adversity. And those relationships are better now than ever. I think I said very true, the workforce as well, yes, those people working on the front line had it tough and is also any good lots of people that could work from home or do their work in a different way, for those people that are going out and repairing things, they still needed to go out and repair things. So I certainly think that made a big, big difference as well, making sure that we're on the journey with this. We delivered strong cash performance and have shown strong financial resilience across all the areas. And yes, in doing so, we also reduced our indebtedness as well, which I guess exceeds my expectations. So when we set our sort of key things for this year, that was obviously one at the very top. And along come COVID, and I thought that may be a reason why we wouldn't necessarily get there, but I actually hope ewe exceeded everyone's expectation on that basis. I think on the basis of all the things I just mentioned, I think we're very keen to reinstate company guidance for the full year 2021. I'm sure we can give you all some confidence. And I guess for me, just to complete this particular slide and really where we are today, we're in a really strong position. I think being a very focused housing solutions business is the right place to be. I read nothing, I see nothing that says housing U.K. is not where everyone should be. And there's a massive demand for our type of services throughout the U.K. And good-quality affordable housing, I think it's featured quite a lot yesterday in the green speech. So yes, I do think the slimmed-down focus means on housing along with what we've achieved during COVID does put us in a great place to move forward. Okay, next slide, please. Okay. Turning specifically to operational delivery. And as I sound -- I repeat myself occasionally, I'll make no apology for that. But I don't think we can't address the very importance of delivering great service. Whether it's COVID or not COVID, service is absolutely everything when it comes to winning new work, retaining work and everything else, it forms a big part. And I'll cover some of the larger opportunities later on in the presentation and really stark of how high customers are putting service in their decision-making process. I think certainly, on the things that are potentially changing post-break sit around sort of procurement regulations and such like -- all of our clients, I think our contradiction are very much focused on making sure they award contracts on the back of service, not necessarily the most advantageous price, which is helpful. I'll start in the customers on the left. Yes, whatever measures you look in the marketplace, Mears are always in the upper quartile, normally way above even the high level set within sector. So yes, and you'll see even during what is a torrid time, we still have kept way above sector and everything else. So yes, delighted with that as an element. Once again, that public domain. It's not just something that me and Andrew just cobbled together. But today, it's what clients see every day and every week. So our service levels, they are shared between all local authorities and all government departments. So it's really important that Mears remain -- retain that particular position. Client relationships, I mentioned that on the previous slide, but one thing I'll just touch on this one as well. I think a lot of people pre-COVID spoke very much around, "Oh, we've got the most latest IT systems and we can deal with this and we can deal with that." Yes, and COVID obviously comes along, and maybe some of those commitments about remote working, the ability to receive job tickets and work all this remotely, obviously people have found wanting. And I actually think that Mears, and I'll point out once again, we knew we'd be fine because we'd been doing it for years. We could actually demonstrate that the system actually does work. And -- yes, and hopefully, once again, that will help. It certainly helped us retain the number of contracts in the period. I think clients did recognize that having great IT and the ability to work remotely very quickly is something they could rely on and trust Mears to do. And they -- and the contract extensions received on the back of that were -- yes, were gratefully received. I guess operational delivery, I think a lot of you saw [ location ]. Everyone understands certain bits of work would reduce during COVID, which we say, look, you do need to balance out against other areas of work absolutely increased during COVID. And running the asylum contract and the MOD contract, we saw no letup. In fact, we saw quite a massive increase on new asylum contract by way of what we needed to do during the period. And yes, I can confirm that we've done great here in those areas, so once again, there's no sort of legacy operational issues that going forward we've really copied in a way -- upset a client on the back of COVID. And once again, even on those larger contracts, we've -- again, we've done well. Moving now to workforce. Yes, we -- once again, we had a number of elements of the business that required various different solutions to make sure the workforce retained employment, which is #1 priority for us. We did on the maintenance side furlough 2,200 employees in the peak of the pandemic. The good thing is nonetheless we're financially disadvantaged. We sure take a great deal of comfort from that. So whether it was Mears or the clients or a bit of both, done top-up payments and everything else, maybe between what they would have received through furlough and what their normal pay would be. And once again, I hope that -- and it's quite unique in most sectors and certainly within housing. So I hope that we'll have payback in confidence and the workforce recognizing that we're all in this together. Once again, I think we're in good shape. For completeness, just on the pandemic, I won't go on and on. I will -- I'll probably make sure I'll move through that. But yes, just to say Mears, on the back of our systems processes and how we dealt with PPE and making sure it was available, we had no outbreaks of note within our workforce or complete branch or location shutdowns. And that's an achievement. As you can imagine, when people are doing an average of 5 or 6 repair jobs a day going into 5 or 6 different properties, to actually -- sort of making sure that those people remain safe throughout that period was a priority for us. And yes, hopefully, we got through that really well. And once again, hopefully, we'll get some positivity on the back of it. Last one for me is also I think good [ to meet here today, and ] we've done this and we've done that. We've got a fair bit of recognition externally as well. I'll touch on some details, but there's so many others that also could fill the page with what we did achieve during that period. But yes, we reached the 25 best large companies to work for in Sunday Times. That's 3 years on the chart. So once, quite unusual, maybe 1 year but 3 years. So -- and yes, once again, hopefully, all the stuff that we've done re customers, clients and workforce, there is some recognition that those investments have been worth making. Okay. On Slide 4, please. Okay. Turning to work volumes. I know all of you on this call, so look, today, we're not too fast around what's been before. And I recognize that. So really I've put them up there for completeness so you see type of work we're doing during the whole of last year and pandemic peaks and everything else. Undoubtedly, you'll all be focused on very much this year. And for completeness, I wanted to get out what quarter 1 looks like. The really positive news I want you to leave with in relation to this is we are seeing a return to normal. I think a lot of -- the rest of the population are. But what was worrying me at the time is whether the speed of management returning to normal-type levels versus maintenance, whether there's going to be a bit of a disconnect. And that could create quite a strong headwind if management returned quicker than the maintenance did. Yes, I'm delighted to say they've absolutely tracked each other, so I'm really confident now that actually I was reinstating guidance. I'm absolutely clear that as management does decrease back to normal levels, maintenance will increase back to those levels. So that's a real -- yes, real big thing for me. And certainly, come H2, I do expect all revenue streams to have returned to -- yes, return to normal. You may see us being a bit cautious. I'm [ often ] like we were cautious because I think it was coming under a fair bit of pressure by a lot of people around what it's going to do in quarter 1 and [ whence ] we're going to return to normal business issues and all these other words. And we're so lucky we did not. So yes, we -- obviously, because we didn't know lockdown 3 was around the corner. And if we had, had to meet and said to the client, "Look, we want to go back to normal payment terms, and we don't want to stay on sort of a cost-only arrangement," yes, we'd be in quite a difficult position now if we had made that big decision. So places like North Lanarkshire, a huge amount of support we've had from the client there. And if we add -- and we're already getting back to normal now. So if we try to get back to normal come January, we'll have incurred huge losses. So hopefully, as it all conservative, steady, trusted approach shouldn't be underestimated, that we've done well being consistent and steady because I think when we do get back to normal in H2, I would very much think that the lockdowns are unlikely to come to the same sort of quantity and size that we've seen recently. Last thing for me, and once again, not to leave last because it's not important. Yes, importantly, we did achieve net cash at year-end, which I think should and would have exceeded most people's expectation. And certainly, we had strong cash performance going forward as well. So it wasn't just a one-off window-dressing exercise. We've -- yes, we're doing okay on cash as well in the first quarter. So yes, all bodes well for full recovery coming into H2. Okay. Next slide, please. Okay. So yes, this is really an important slide for me. And the last one was very easy, I think, to sort of gloss over and forget where we were at the start of 2020. So what I'll try to do on this slide is simply say, look, as a team, we set some strategic objectives, as you can imagine we would, very short term, medium and long term but very much focused on the short-term ones. And I just wanted to make sure everyone is really clear that how we -- what we achieved and did we achieve and when have we fallen short. And I'd like here to say that yes, 2020 was a bit of a standout year for us to achieve all our strategic objectives even against the backdrop that was COVID. So yes, first one, obviously, we made -- we obviously desire to return Mears to a simple housing-focused business. And in doing so, obviously, we said that we would review any noncore activities, which we've done. And yes, in the period, we obviously disposed of Terraquest, a bit of a heavy heart, that one. And I think we got a good price. It was a great business. And also, we exited dom care. So yes, both of those were completed, and we are now very much a stand-alone housing business. We said that we'd look to significantly reduce debt. Well, hopefully, as I've just said, having net cash at year-end, yes, shouldn't be underestimated because once again, really a big tick. We've kept our promise in relation to that. We said we'd improve returns on invested capital. And once again, I think a really big tick. We've got positive working capital through the pandemic. We still got the unwinding in the development funds that are tied up over the -- maybe the next 2 years. So once again, a big tick for me. Like I said -- I sort of said, look, we'd be well placed for long-term growth opportunities. Two elements I'll focus on that. Once again, I think that would warrant a slide on this. So I think there is actually a massive opportunity to deal with affordable housing when you share demand and quantity for it. But equally, I think how Mears have transitioned themselves over the recent year to start being a housing specialist, they may be getting certainly government to look at potentially moving away from having all-encompassing contracts to housing-only contracts. You start looking at sort of the key work and the MOD, the asylum piece. I think that where these multi-sort of state opportunities come from going forward, I think Mears are really well placed to make the most of those. I will touch on those in a bit more detail later on. But yes, for me, it's very much a slide of, we made some promises and hopefully, all of you recognize that we've kept our promises throughout 2020. Okay. Next slide, please. Okay. So for me, this one, I guess in reference to sort of the strategic pillars that make up Mears. The Board had done a lot of work in this area and certainly around sort of future growth and where we are. And as I said, I think it become a tad easier on the basis now it is purely housing and housing-focused. But I won't cover margin drivers in detail because I'd be stealing Andrew's thunder, and Andrew's obviously got some detail on that. But I just do want to cover a few elements that are almost all operational biased. And the first one is the Social Housing White paper, recently come out in November last year. And I think if you read that paper, too, you will see, oh, now it's Mears. So what everyone is trying to achieve, an increase in good-quality homes, well maintained, well managed is what we do, so one's game. That hopefully should be quite a good springboard to say, yes, the market drivers are all positive. And I think we all read the newspapers that talk around demographic pressures and local authority coming under a fair bit of pressure to deal with homelessness and probably more social dwelling. So the market drivers for me are really, really positive. I've not picked up anything at all that's remotely negative. So I do expect -- yes, market for me once again is a real positive. Growth drivers. Well, I think once again, we've seen quite a lot of leverage that we've used to -- or see on the position we've got. And we have got some big gap between us and the competition when it sort of comes to maintenance and cross-selling and up-selling to various clients. I do think that we're well placed in that regard. And we've got some real good examples now where we've taken people on that journey. And so North Lanarkshire, and I'll cover later on, so great example, something that started off in interest as a relatively nonperforming, relatively smaller type of contract and something that it could become. So nothing that's really, really important. And then talking about sort of margin drivers, again specifics, I guess there's 2 elements there. I think the whole digital piece has enabled clients and us to think what we're going to do post-COVID. I think pre-COVID, clients were really prescriptive saying, "Look, David, you must have an office in the borough to which you serve. And you must have, and you must have, and you must have." And I think they've now realized that being local is important for certain parts of the service. It doesn't need to apply to the entire service. So there is some stuff that could be done more digitally and remotely. And I think that will give us some real opportunity to look at margins and -- yes, and make the most. And that's being driven as much by the clients and by us. And that's really helpful when it's on that basis because when we're trying to sell something to the clients, and the client [ says always ], oh, I see, we're trying to benefit ourselves here, the clients are actually saying exactly the same thing. Do they need big town halls and big offices and such like? And can stuff be done in a different way? [ Everything needs ] to return to normal. And that's -- I guess that's the theme, the message I'm hearing a lot across the piece and not only the local authority and housing association. I'm hearing that from government as well. And they're pleased to not return everything to normal because there are some certain things that actually have performed better in this current guise. And I guess the last thing I will touch on it again, but this returning to normal mechanisms is important. And as I say, I think we're now ready to do that. And -- yes, and actually getting back to being charged and being paid for the work we're doing, yes, I'm excited by that. And I'm hoping, once again, that should give us some opportunity certainly by way of work volumes and how we do things and everything else. But yes, I'm glad we held off [ as it is ]. So what you may see is quite a late stage, but to last year, it was -- yes, it was absolutely the right thing to do. And yes, look forward very much to go forward from here. Okay. Next slide, please. Okay. So I'll jump around a bit on this slide. So I know a number of you will be more focused on the larger opportunities than all the other bits and pieces on that slide. So I'll start with those. So MOD, I get a phone call every week from someone -- yes, hello, David, a bit of an update on MOD. We're still waiting to -- as you know, there's 2 bids. There's an FDIS bid, which is the one that we should hear about the soonest, and that should really be anytime soon. Don't read into that any negativity, i.e., I still remain very hopeful. We've got a -- we're down to final 2, and we've got a really good chance. So I'm -- yes, the period of waiting is infuriating, but it's not in any way causing me concern. Lambeth was the last one that we talked a lot around. And once again, I'm positive on that because 6 areas, you can only win 2 areas. Mears already won 1 of the 6, and I'm hoping that we will pick up the second shortly. So yes, once again, I'm hoping Lambeth once again should be a tick, I hope. And then North Lanarkshire is a large one, again, which everyone talks about. That's now out. It's a tender. So I'm -- yes, I'm delighted, at long last, it's out there. It's in the public domain. We've now got the documents. It's a tad better than even I had hoped for really. Yes, it's 25 years in duration. That's made up of a 20-year fixed term contract with a 5-year extension, so it's GBP 25 million. The figure quoted is now GBP 210 million per annum, but that is what they call reoccurring, so it will be spent every year. And then obviously, on top of that, if there is any development or any other opportunities, it will be funds on top of the GBP 210 million, which is helpful. The thing that I was absolutely delighted about and, I guess, resonated what I said a little earlier in the presentation is that they've gone from an 80% quality percent -- 80% quality score, 20% price. And that's unheard of certainly of a contract of that size and scale. I think most people obviously, it's going to be 50-50 between quality and price. But 80% quality, 20% price is -- yes, is awfully helpful. And on the basis that we have performed for many, many years and done a good job for many, many years. I hope when it comes to getting a quality score, I'm hoping that we can get as close to 80% as we possibly can. So yes, really quite upbeat about that. Just returning to the latter part of 2020, it would be remiss of me not to mention that. We have had a really good success rate on new bid opportunities. And Exeter, Hammersmith, Islington, Cornwall, yes, some really good stuff. And the same is true going into the start of this year, Redbridge and Angus and some Leeds work. So yes, so we've -- our win rate at the moment is really, really good. The problem with win rates and order books -- and that is when you get something so material in size and shape as North Lanarkshire, you can imagine they all become [ trade binary ]. And if we were a success with North Lanarkshire, I think we can all do the maths and you realize sort of your order book then triples. And yes, it just sort of doesn't really reflect, yes, this one contract. So I'll need to give that a bit of thought going forward. So the key to these things is to win them first and worry about how we deal with the order books or values. But yes, a real uplifting side, and that's really been achieved during what has been a torrid period. Okay. Just a couple of slides to go for me. Yes, so Slide 8, next, please. Yes. I apologize for the quantity of detail on this slide. And trust me, this is actually about 1/3 of what I started with, and it was even more confusing than what I've got up there now really. I suppose this is a bit of criticism in other ways because I get slightly bemused by the city's sudden sort of obsession with all things ESG. And every presentation I see from every company, everyone's suddenly become an ESG company and everyone should be investing in that. Ironically, we've been doing ESG for decades. It is not new to us. It may not be called ESG, but yes, it's part of our culture, it's part of our DNA. Yes, and it's -- that's what we do, and it's a massive piece of the work we do for our customers. Importantly, the customers are people living in those homes. So I mentioned -- I'm sure you all know that. I know a lot of you have reached out to me, so look, David, [ crush ] will be perfect for ESG events. And I agree with you. I don't know whether I've missed the trick or I haven't presented ourselves in the appropriate way. But see, I do struggle [ to make ] Mears most properly without fear of contradiction, compared with any other plc and company, must be at the very top when it comes to what we do certainly by way of social element of that. And I mean you can't work in the markets we work, in local authority or government without having superb governance and doing things right and scrutiny and all those other things. So yes, but environmentally, equally, when you are winning that type of work, environmental scores play a big, big, big part. So yes, I struggle a bit, but I just thought it's worth mentioning today. There's no point in me sitting here on my [ pedestal, and I'm struck, and ] we do nothing about it. Myself, Andrew, Joe and team will look at how we position ourselves and how we maybe communicate better and we let more people know what we do with ESG. But -- say, yes, I do think we do know it. We just need to make sure that we demonstrate it. Last bit for me on the slide. I've just let you put a couple of the logos along the bottom of the slide, just for reference, yes, just to give you some idea of the sort of recognition we do get externally for the work we do in those 3 areas. And I certainly know the Board are very keen to understand how the city measures ESG and talk with reporting back in that regard, which I'm going to do. Okay. Next slide. Okay. So yes, last slide for me. Obviously quite important one. So yes, quarter 1 this year, been very resilient. Clearly, activity levels have still been impacted by the lockdown restrictions, but I think we got that balance absolutely right, not being too hasty in returning. I do see improvements. And as I said a little earlier in the presentation, I'm very confident. And importantly, you're seeing maintenance and management return in line with each other. So as one tracks down, the other tracks up. So -- and that unwinding process, very, very comfortable where we are today. Cash continues to be strong. And I've got no reason why that would not be the case throughout 2021. Hopefully, you now see on the basis of all of that, hopefully, all the presentation I just gave, I feel really confident and really happy now to reinstate company guidance for the full year in our market expectation. I know a lot of you asked that pre this presentation. "So look, David, are you going to do that?" And I'm delighted to confirm we absolutely will. Positively, we've repaid any furlough payments that we've made this year. It's around GBP 2.1 million, so it's not a small sum of money we've repaid. That's government, paid it back, which is important. And I think therefore, in doing so, it's provided us with the flexibility to relook to reinstate the dividends as well in due course. So yes, so that was quite important to me that I didn't have that as a sort of a noose around my neck. So we have actually paid that back, and it does give us some flexibility, which is good. And I guess lastly, in terms of sort of capital allocation and some major investments, I can confirm that we are not looking to acquire -- invest in anything or -- it was all around -- any cash that we get through profits, we are still looking to pay down debt. So we'll not in any way spend all this time to get us to become very singular-focused housing business, and overnight, we're going to go off and do something different. So yes, for us, it's all around paying down debt and certainly not looking at any acquisitions. But anyway, yes, thanks. So now I will come back at the very end of this call, but yes, at this point, I hand over to Andrew.

Thank you, David. Yes, fine. So I think I'll give you a couple of overviews prior to getting into the detail. I've intentionally kept the finance section fairly short, so I will try to canter through this fairly quickly. 2020 was unique as David's already described, and I don't think there's much point in trying to make comparisons between 2020 and 2019. So you'll actually find the slide deck is looking forward more than it normally would rather than looking back. A couple of key messages that I wanted to just pull out before I move on to the slides and things that you'll have seen in the prelim itself. The word restatement gets mentioned on numerous occasions. And just to flag up the drivers behind that, clearly, the P&L has been restated to exclude Terraquest from the comparatives. And I think that would be expected from you all in that respect, although they're not numbers that you've seen previously. But also a key adjustment, which is detailed within the notes, is a prior year adjustment to the balance sheet. And that's a reduction in the right-of-use asset and a reduction in the lease obligation relating to IFRS 16. So I will pick that -- up on that briefly later in the slides. But there is a lot of detail also in the prelim deck, which is, yes, if you're minded to, it's worth going into -- yes, into the note itself. So starting with the P&L. As I've said, 2020 was a unique year. Whilst I think the numbers in isolation read pretty poorly, I personally believe these reflect exceptional performance given the circumstances. Positively, the numbers are in line with expectations. They were expectations that we put in place as we left the first lockdown that happened. And I'm delighted to have closed out the year in line with that guidance. Looking at the detail on the slide, we've reported a 19% reduction in our maintenance-led revenues. There's a mix of factors there, but roughly half of that is contract attrition and the other half is a direct impact from COVID. I'd signpost to you additional detail within the prelim statement. I think we've gone to the lengths of showing you revenue by quarter, which really does show the impact of COVID quite starkly. So I would signpost you to look at that. That's not in the deck. Whilst activity levels fell by as much as 80% during the first national lockdown, revenue was actually relatively resilient, down circa 50%. And that was underpinned by the interim cost recovery mechanisms, which David already referred to earlier in the presentation. And whilst those interim measures protected the business and -- but it's naturally a drag on the margin, we recovered local costs. We recovered contract-related costs, but typically, it left us with a shortfall when it came to central cost recovery and profit recovery. Where we sit today, the majority of those maintenance-led contracts have reverted back to normal mechanisms. In fact, I would say almost all of them, barring actually one which David flagged at North Lanarkshire, which is what -- which is my largest single contract on the maintenance side. So that is significant. And where we sit today, we are still on a simple cost recovery basis on North Lanarkshire. We -- and there's no bells and there's no whistles on top of that. So -- but that will shortly revert back itself to a mechanism where hopefully we can start generating, yes, some profits on that. As David's already referred to, management-led activities saw actually an increase in work levels. I would say the increase was almost entirely asylum. And the increase you see on this slide is clearly the full year impact from the asylum contracts as well because it only mobilized in August, September 2019. So in summary, for the management side of the business, I mean operationally, it was extremely challenging. But actually, from a financial point of view, things held up quite well. There's a reference to development on the slide. We flagged up in August we generated a loss, quite a chunky loss, at the half year stage. And that's pretty much where the business ended for the full year. We also made reference in -- on the slide to incremental costs of COVID. And again, David's already flagged up a number of those, the furlough top-ups being the largest part of that at around GBP 3 million, but additional PPE also came in at just shy of GBP 2 million as well. So there is a GBP 5 million incremental cost of COVID, and that's absorbed in the numbers. Okay. Flicking over on to the next slide, please, Joe. Well, an excellent year on cash. There's a lot of moving parts within the cash flow. And this slide tries to carve those out for you because there's operating versus investing, there's continuing versus discontinued. And it's what I would call temporary versus what I'd call permanent. So I'll -- hopefully, that -- this slide does that justice. Now I'll just -- I'll talk you briefly through this. So this slide presents on a pre-IFRS 16 basis. The post-IFRS 16 basis wouldn't change the key message, but clearly, the EBITDA would be higher and there would be a lease payment in the bridge as well. I think the bridge highlights very strong underlying operating cash flows. I would focus your attentions on the cash inflow from operations of GBP 16.6 million versus the EBITDA of GBP 7.7 million. And I think in there is the 200% of cash conversion. And I think that's the true underlying performance for the business in 2020. Then on the slide, I showed the elements which are below the operating cash line on the cash flow, no tax, CapEx, interest, dividends. I think they're all as you would expect them to be. Then as you move across to the right, I've -- I'm showing the cash inflow from the discontinued operations and importantly the inflow from the disposal of the Terraquest and the care businesses. So the GBP 67.8 million number for me is, I think, the most important number on this slide because for me, that is the permanent reduction in net debt that we achieved last year. So that's a permanent reduction. And hence, why the numbers that we're talking about now when it comes to net debt is significantly lower than numbers we've referred to in the past. In order to balance my cash flow, I then include 2 further items on the right. And this is what I would call the temporary benefits of COVID, one being the VAT deferral, one being the payments that we've received on account and in advance from our clients. I suppose I'm keen not to take the credit for those in the year just gone because that GBP 40 million of green is going to turn into GBP 40 million of red when it comes to 2021 bridge. And if I'm not going to take the credit for it now, then I hope you won't take the negative for that unwinding when it comes to looking at the '21 position. The VAT has already unwound. I paid it back. I paid it back early. The payments on account have actually been slow to unwind, slower than I probably envisaged. And that's part of the reason that the average daily number which we've given for quarter 1 '21 of GBP 17 million is actually substantially better than I would have envisaged. Flicking over again. And then yes, the last of the backward-looking slides, which is for completeness really, I've included the balance sheet. I think the balance sheet wasn't weak before. It is significantly strengthened now, linked directly to the GBP 68 million of permanent net -- of debt reduction, which I've just emphasized on the last slide. IFRS 16 continues to have a significant impact on the balance sheet. I'll pick that up in a moment. I think pensions is always worthy of note. We do have a lot of pension schemes. They are very well managed. They're derisked. I don't lose any sleep around them, but it is something that investors quite regularly ask us. So flicking over again. So having looked backwards, I'm now going to look forward, and I'll start with revenue. David has already talked about the GBP 2.6 billion order book. He's already stressed his confidence in the order book, his confidence in the pipeline, his confidence of hitting the market expectations. I think what this slide endeavors to do is to give you some of the moving parts. And hopefully, by looking at the moving parts, you reached a conclusion, as do I, that the numbers which are currently forecast for '21 and the numbers that you've currently got forecast for '22 are sort of recognizable and sensible. I'll start with the GBP 791 million revenue on the left. That excludes development. And that's the number that was -- the GBP 791 million being the number that was delivered in 2020. As I implied earlier, there is some contract attrition last year. And naturally, therefore, the bridge has the full year impact of that. Moving the other way is the sort of the impact of COVID. And that's -- you can see the sharp decline in '20, and that sharp decline in quarter 2 of '20 is a bounce back when it comes to the comparable period in '21. So that's sort of GBP 50 million of bounce back for '21. There's small amounts of new business. There won't be a lot of new business this year. I mean clearly, the speed on which opportunities have come through the pipeline have been relatively slow, but it works both ways. That's worked for also the contracts which I've had for rebid. The most notable new contract award, new growth opportunity, new contract, new business is Longhurst Group. And that was around GBP 10 million of annual revenue. Indexation is a normal part. You know a lot of our contracts -- in fact, almost all of our contracts enjoy indexation. So I think all those moving parts are recognizable. And it gets -- that moves across to the gray column in the middle, which is, I think, confirms that we actually don't have too much that we need to do in order to deliver the revenue number, which is currently out there in the market. I've then rolled it forward and done the same theme for '22. David has already referred to Lambeth, and [ both in part ] victims of their own success. We had over time secured all the revenue at Lambeth, and naturally on the rebid, we're always going to lose some. So the contract attrition in '22 is just Lambeth. I don't envisage much more than that. But the -- and the dotted boxes are key to this slide. And David's already referred to a number of them, and I'm not then going to -- sort of going through them a second time. But green is growth. The red dots are where we need to really secure something to stand still. I think David has already talked about certainly the 2 big ones, if not a bit more. But it does lead me to a positive conclusion for '22. There are clearly things that we need to do to achieve that number, but there's clearly an opportunity for us to grow also. Moving over on to -- oh, sorry, Joe. We've gone through 2 slides. I've got my slides out of order. I'll -- yes, no, that's fine, Joe. I'll deliver the margin one next. That's fine. That's fine, Joe. That's fine, sorry. So okay, having looked at revenue, we'll -- I've now got a slide on looking forward on margins. I think margin has become slightly counted in recent years given the strategic activity, the acquisition of MPS, the disposals of care, disposal of Terraquest. So I think all that has changed the margin somewhat. The introduction of IFRS 16, I think, has been unhelpful. I think when people ask questions around margin now, they don't necessarily know whether they're asking it on a pre- or post-IFRS 16 basis. I would confirm, I think today, that we will continue to deliver the key metric being operating margin pre-IFRS 16. Clearly, you'll be able to derive the other metric from our numbers because that's the statutory measure. But I think it's important for us to continue to show the pre-IFRS 16 measure when we report our numbers to you. I think it's the measure that we internally understand best. I actually think it's also the measure that stakeholders also understand best. So we'll continue to do that. The left-hand side of the slide shows the continuing house -- margin for the continuing housing business. Yes, it shows a decline in margins. I think that could be largely explained by the acquisition of MPS in '18 was -- I think you all know, was margin dilution. Mobilization of the asylum in '19 is a factor. The decision to accelerate and unwind the development of -- accelerate the unwind of development is a factor. Clearly, 2020 pandemic is -- sort of wipes up the number for that year. So I think the progression on the left-hand side is understandable. I think more important, I think looking forward is as we emerge from the pandemic, what can we expect to see when it comes to the -- to our reported margin? And clearly, there's a number of drivers. David's already referred to a number of them. And hopefully, on the right, we've detailed a number of the drivers that can hopefully move us in the right direction on the margin. I won't go through line by line. I think the top section are factors which will drive the margin up towards 5%, and the bottom ones are factors which will drive the margin away from 5%. Certainly, where we sit today, the current year's margin will start with a 3%. I would hope that moving forwards, the margin will start with a 4%. Where I'm sat today, I won't make -- yes, I won't be any more ambitious in my forecasting than that. Okay. Going over, Joe, which I guess is a cash slide. I don't know why I have my slides in a different order. So picking up from my comments on the previous cash slide, I think we can be very confident as to our future cash performance. It's a far simpler business now anyway. Yes, we've still got development, but the development activities are at such a late stage now that it can only be a cash inflow. And the question mark is simply, how quickly will it be a cash inflow? The average daily net debt for last year that we confirm today is GBP 97 million, so you can see that in the third of the gray columns. And what the middle section of this chart does is simply tries to convert that GBP 97 million into an underlying measure. And it does that by adjusting for Terraquest because as you remember, Terraquest was late in the year. In fact, I didn't get the cash from Terraquest until mid-December. So that's not reflected in the GBP 97 million. So there's a GBP 53 million adjustment to the GBP 97 million for that. And going the other way and linked up with the GBP 40 million of temporary cash inflows, I flagged up there's the VAT deferral and the payments on account from clients. Clearly, there's a -- given this is an average number, it's the part year impact. So the VAT is sort of 9%, 12% and a similar sort of methodology when looking at the other COVID impact. So that gets you across to the GBP 65 million number, which is a number that I've repetitively quoted as what I see is my underlying net debt balance as we enter 2021. And when you're modeling, I'm keen for people to have that as their starting point because the other starting points, if you're using the spot measure for December '20, just it won't get you to the right answer. So I think it's important to sort of recognize -- given the short-term uplifts I've had in my cash numbers, I think it's important to model using the GBP 65 million number. The right-hand side of the slide gives you some key cash flow assumptions. I don't think there's anything contentious there. I think they're all numbers that you would probably model without my direction. But we are very confident on our future cash performance. So the 100% EBITDA, I'm comfortable to sign up to. That 100% doesn't include the inflow from development, so that's an addition. CapEx, we've never been a high CapEx business. And I think those numbers would, you would recognize, ditto tax, ditto interest. So yes, you all run your models in different ways, but I think it will bring you to the same conclusion as it does me that by the time you get through to the financial year '23, yes, I'm not sure whether we're talking net debt or net cash. And that's the average daily position, not the spot balance. Any company can deliver any spot balance if they feel minded to, but this is the average daily position. And I think that's a really, really strong message. Now maybe the Board then decide there's changes we can make to the capital allocation strategy. But where I'm sat today as CFO, I'm just trying to get that balance down to 0 as quickly as I can. Going over -- okay, there's a couple of slides -- it's just my last couple of slides now, and this now is focused on IFRS 16. And I don't want this to be too technical. There is loads of detail in the prelim on IFRS 16. And I -- in fact, I doubt any companies there to give a more qualitative detail in addition to the technical detail on this topic. So if you're minded to use it, I'm -- I don't want to go through lots of detail in this forum because I don't think it's the right forum for that. If anyone wants to have a discussion with me on this topic, then I'm really happy to have that one-to-one. Just reach out. It's such an important area. Some investors aren't fussed by this area. Others are. And if any are, I'm really, really happy to spend the time to take them through the detail. But there is a lot of detail in the prelim without me holding their hands [ and through ]. Now the crux of the issue in IFRS 16 is the standard way to approach IFRS 16 in a totally different way than investors are approaching it. The standard way to focus is on the right-of-use asset. The stakeholders are clearly focused on the lease obligation, and it's frustrating because it's misleading. Lease obligation would imply a liability. And often it's not a liability and it wouldn't fall into the definition of -- the historic definition of what a liability is. As I say, we've given a detailed explanation within the prelim of the various lease types. I have on the slide deck -- Joe, if you flip through on to the next slide, I have given a summary of some of the detail that's included in the prelim. I've given a RAG rating against various of my lease types. And the RAG rating is clearly [ various ], for a simpleton in that respect, but it grades the financial risk associated with both the lease but also the underlying customer contract in that respect. Green will often reflect that we've got an ability to break at short notice. That's certainly the case on the top one. And the top one is 30 days' notice, so I've got -- and I've got a liability on my balance sheet of GBP 32 million, which is I could break because I say at 30 days' notice at net -- no cost, well, that's not a debt. And hence, my comment in terms of a lease obligation is not a debt instrument, you need to look beyond the simple IFRS 16 accounting if you're going to count my lease obligation within my net debt. A is certainly of that category. I think category E is also of that category. No 2-way no-fault break, I mean that's not a liability, although fortunately, on category E, IFRS 16 actually agrees with me. Green also, though, reflects where we've got nominations agreements with our customers in a number of instances. I've got my local authority customers underwriting my rental stream. So if my property is empty, they'll pay me. And if there's a bad debt, they'll pay me. So I recognize why those might be on the balance sheet, but it is important for people to look beyond simply the lease obligation. It's underwritten by my client. Category C is an example, an example of that. And there are some oranges on there. And the oranges are -- does reflect where the group is tied in for an extended period. But the extended periods are always tied back-to-back with my underlying contracts. So by putting -- making it orange, I'm accepting that they're not watertight, but they're still well covered in that respect. Hopefully, the number of greens and the very few oranges and the absence of any reds would highlight my view on this, which is our financial risks are -- around leases are very well managed. I won't labor that anymore, though, for today. And I'll pass back to David.