Severfield plc (SFR) Earnings Call Transcript & Summary

So good morning, everyone, and thank you for joining us here in London this morning. Just as a reminder, I'm Paul McNerney. Chief Executive of Severfield, and I'm pleased to be presenting our first full year results, having joined the business last November. I'm here with Andrew Page, our CFO, who joined me in February of this year. So let me briefly run you through what we'll cover today. I'll start with our financial highlights, commenting on how we've performed in what has been a challenging market and describe our plans for how we wish to take this business forward over the medium term. I'll then hand over to Andrew again, who will take you through the financials in more detail. After that, I'll come back and lay out our refreshed strategy and describe how that responds to the prevailing market conditions and indeed, how that will drive our medium-term ambitions. And at the end, we will open up for some questions. So let me start with the year in review and my initial observations having joined the business 6 months ago. I've spent that time really getting to know the business. and I've been very encouraged by the engineering excellence pedigree of the firm and our client confidence, which we never have and never will take for granted. We are the leading structural steel group in the U.K., Europe and India, with an unparalleled reputation for delivering complex, high-quality projects and structures. That differentiation comes from our engineering expertise, our scale and our delivery experience. Across our 3 main geographies, we're well positioned in sectors with both positive long-term growth and countercyclical drivers, including defense and energy and data centers. As a new leadership team, we've intervened to drive efficiency and improve productivity. And indeed, we've taken early action to address our cost base. What is clear to me is it this -- is that we need to sharpen our focus on quality of earnings, prioritizing margin, cash generation and, therefore, shareholder value. This requires a refresh of our strategy, which will bring less reliance on volume, more discipline in project selection and a focus on the right geographies, sectors and clients and making greater use of partnerships to improve our agility and capital efficiency. Before I talk about our performance, I did want to comment on a few operational highlights. In Bridgewater, Somerset on the left, we work with Robert MacAlpine to deliver the Acuitas major battery factory. Over 22,000 tonnes of steel delivered in just 26 weeks representing the latest example and a long track record of massive scale, highly engineered structures that we've delivered. And on the right, at the EUR 4.5 billion project 1 in Belgium, we're working for Ineos, demonstrating our ability to deliver efficiently, fabricate in Europe and control multi-country logistics to deliver program reliability. Both projects are a good example of the type of work we are increasingly focused on, larger, more complex schemes where our engineering capability and delivery track record are valued and where we can be selective. They also showcase the integrated U.K. and European manufacturing capability. We expect to secure projects of a similar scale and nature to this in the coming months. In India, we are seeing increasing exposure to higher-margin sectors with data centers and commercial property, particularly increasing. Two of our current projects include on the left, 14,000-ton hyperscale data center in Navi Mumbai. And on the right, 15,000-ton project that we're delivering for the government in Amaravati. These projects demonstrate our ability to secure and deliver large critical projects in India in attractive high-growth sectors. Combined with a strong order book, expanding capacity, partners and client sentiment. This reinforces our confidence in India and that it will be an increasingly important part of the group as we move forward. So turning to our performance in FY '26. Having walked in the door in November last year, we immediately set to work on ensuring our market commitments were met. And despite a challenging backdrop, we have delivered a resilient performance in line with expectations. As such, our underlying profit before tax was GBP 1.5 million, and our cash was significantly ahead of expectations. As of today, our order book is GBP 507 million, close to peak levels for this organization. In India, our joint venture, JSSL, delivered a record performance with an output of 125,000 tons in the year. This reflects the high levels of economic growth and investment being seen across India together with increasing demand for steel in preference to concrete, owing to its delivery and program certainty. We brought a laser focus to cash generation and working capital discipline. And I was pleased that we were able to reduce net debt and strengthen our balance sheet. This will remain a key feature of this leadership team. Importantly, the actions that we've taken during the year position the group well to improve margin, quality and performance as we move into FY '27 and beyond. So the previous few years have been challenging in terms of market conditions and a number of significant headwinds, particularly in the U.K., have bitten. We've seen ongoing macroeconomic and geopolitical uncertainty, including the impact of the Middle East war. More broadly, cost inflation and high interest rates have led to weaker traditional construction markets output in the U.K., and this has led to pricing pressure and has impacted upon margins in the period. In the U.K., we see an increasing competition and the size of available market has contracted. While in Europe, our presence is becoming established. In India, our position is growing as we keep pace with the growth of that geography. Therefore, in response, we have refreshed our strategy to acknowledge and deal with the changed and evolving nature of our industry. We will be leaning into a broad geographic footprint and diversified sector approach, allowing us to be more selective, prioritizing work with better margin and cash while reducing exposure to lower-quality volume. This will position the business for improved performance as market conditions evolve. In the first 6 months, we focused on delivering this FY '26 results, launched a strategic refresh and at the same time, we've taken decisive action to strengthen the business with a clear focus on productivity and performance. We've acted with pace and clarity, making a series of important interventions while continuing to operate the business effectively and drive the order book with the right type of work for future periods. We are strengthening our leadership and commercial focus with new executive hires and established a clients and markets function to deepen our client relationships, strengthen our market positions in our chosen sectors and drive early engagement. And we're seeing early successes such as our increased number of preconstruction service agreements, PCAs and the recent signing of an MOU with Global Engineering Group. Alongside this, you can see from the slide, we've simplified our portfolio and operating model, reorganizing our structure to suit and have moved to action in exiting noncore activities such as modular solutions. We're also driving greater discipline through our operational and cost actions with a sharper focus across the business in how we execute and perform with the introduction of our weekly business plan review. Taken together, these actions are creating a simpler and more agile business, providing a strong platform for improved performance and returns. And later, you'll hear more from Andrew on the actions that have been taken around the balance sheet and cash. Our program to become match fit has real momentum. We have more planned, and we will continue through FY '27. I'd now like to hand over to Andrew to talk through the financial performance.

Well, thank you, Paul, and good morning, everyone. Let's start with a summary of the results for FY '26. Revenue was broadly flat year-on-year at GBP 454 million. Underlying PBT was down from the prior year at GBP 10.5 million, in line with expectations. Broke was similarly lower at 7.3%. Cash conversion was strong, as Paul has outlined, benefiting from a tight focus on cash collection, which remains a key priority in everything we do. Net debt was much improved at GBP 28 million, representing leverage of 1.2x and well within our target range. We'll come on to talk about this later. The U.K. and Europe order book now stands at GBP 507 million, giving good visibility of activity levels for FY '27 and beyond. And in India, JSSL achieved record performance, both in terms of output and profitability, delivering a material contribution to the group's results in FY '26 with continued growth expected going forward. We'll come back to each of these over the next few slides. So looking at revenue in a little more detail. Overall, revenue was broadly flat with a strong performance in H2 as a result of the actions we've been taking despite the challenging market backdrop. Revenues from our Nuclear and Infrastructure division increased driven by higher activity on several nuclear projects including Hinkley Point C and Sellafield, continued progress on a number of significant bridge projects and ongoing work for Orsted. This more than offset the decline in commercial and industrial revenue where volumes were impacted by macro uncertainty and the resulting delays to major project awards. We also saw lower revenue from Modular Solutions at GBP 12 million versus GBP 16 million in the prior year following the decision to discontinue the business. Note that this will be classified as discontinued in FY '27 once the business is fully closed. Turning to underlying PBT. Here, you can see the component parts of the year-on-year movement, which shows a reduction from GBP 18.1 million to GBP 10.5 million overall. Despite broadly flat revenue, Underlying operating margin declined from 4.8% in the prior year to 2.8% in FY '26, reflecting the challenging market backdrop and previous volume-led strategy. Results for the modular business have been treated as nonunderlying following the decision to discontinue the business, leading to the year-on-year decline compared to the small profit recognized last year. Partially offsetting this the strong performance from JSSL, which made a record GBP 3 million contribution from our 50% share, up from broadly breakeven last year. We recorded around GBP 50 million of nonunderlying costs in the year, generating a statutory loss before tax of GBP 39.9 million. The key items are listed here in the table. GBP 22.2 million related to non impairment of the goodwill on our infrastructure business and our investment in the CMF joint venture, following a prudent review of the carrying values for these businesses. GBP 12.6 million was recorded in respect of the Modular Solutions exit, including closure-related costs and an onerous lease provision and a further GBP 8.3 million was recorded in relation to the Bridge Remedial works program, which is net of the GBP 7.5 million insurance recovery received in the year. We expect to complete the factory-based remediation work by the end of July and to have substantially completed all works by the end of FY '27, and the balance relates to other one-off restructuring-related items. Turning next to the U.K. and Europe order book, which, as we've seen currently stands at GBP 507 million. Whilst the progressive roll-off of older, lower-margin projects will continue to create a headwind in FY '27. Tendering activity remains encouraging, and there is an attractive pipeline of large-scale, higher-margin opportunities, particularly for FY '28 and beyond. The sector showing the strongest growth in the order book are in transport and infrastructure, including the Old Oak Common station project for HS2 and data centers across a broad range of geographies. It's also encouraging to see a strong pipeline of high-quality commercial office developments coming through. And we are currently engaged in preconstruction service agreements across a number of large projects, representing more than GBP 100 million of potential future project value should these opportunities progress to contract award. In India, JSSL has performed particularly well, as Paul outlined, with new record levels of output and performance. With output reaching a record 125,000 tonnes in FY '26, JSSL has now achieved material levels of profitability generating over GBP 14 million of EBITDA and GBP 7 million PBT on a gross basis and contributing GBP 3 million of profit for our share of the JV after tax. The order book has also stepped up considerably, now standing at a new record of GBP 344 million, with particularly strong growth in higher-margin commercial offices and data centers. Overall, we see significant opportunity for further growth in JSSL, which Paul will speak more about in a moment. Looking next at our cash flow for FY '26. The chart shows the key components split between recurring and nonrecurring cash flow items and the resulting movement to net debt over the year. As shown on the left-hand side of the chart, working capital movements had a significant positive impact reflecting the unwind of previous contract positions and also the strong focus on cash collection, as mentioned previously. CapEx was GBP 2.1 million, which is lower than our typical maintenance CapEx level of around GBP 8 million per annum, and we expect to return towards these higher levels going forward. And taxes were, of course, low given the loss-making position. On the right-hand side are the nonrecurring items, namely an GBP 11 million outflow relating to exceptional items and a GBP 3 million cash inflow relating to the sale of the previously Mothboard former Harry Peers Nuclear factory in Bolton. Overall, net debt reduced by GBP 15.1 million over the course of the year. Bringing this all together, the balance sheet is in a good position. The reduction in net debt means that our year-end leverage of 1.2x is well within our 1.0x to 1.5x target range. And this, in turn, is significantly below the 3x limit set under our facility covenants. Earlier this month, we were pleased to secure a 3-year extension to our banking facilities on improved terms and with two 1-year extension options. The facility also has a GBP 30 million accordion facility providing further financial flexibility. And we no longer have a requirement for the JSSL option agreement that was previously in place. Therefore, when the option agreement expired earlier this year, it has not been replaced. Most importantly, our strong focus on cash and working capital continues. Note that we expect cash outflows in FY '27 of around GBP 20 million relating to the nonunderlying provisions recognized in FY '26, the vast majority relating to the bridge remedial work as the year-end provision flows into cash flow in the coming year. These will be partially offset by a GBP 10 million contract advance payment that we've already secured, and we will continue to actively manage working capital and other cash opportunities. This supports our objective of maintaining net debt at broadly similar levels to the end of FY '26 and keeping leverage within our target range. This slide summarizes our capital allocation framework, illustrated by looking at sources and uses of funds for the group. The level of operating cash flow recorded in FY '26, before working capital movements is sufficient to cover the underlying cash flow requirements of the group, maintenance CapEx, financing costs, lease payments and tax. It would also cover the repayments on our term loan facility which continue through FY '27 and '28. Incremental cash flow from growth in the business underpins future capacity for both growth CapEx and dividends. as well as creating incremental debt capacity under our financing facilities. It is our intention to reinstate the dividend when it is appropriate to do so, underpinned by sustainable cash generation of the business. We recognize that the dividend is an important component of the overall return for shareholders. And this all needs to fall within our financial framework with a target leverage range that is well within the limits set out in our covenants and with a clear requirement for any growth CapEx to be value accretive. In addition, as Paul will outline shortly, our strategy is designed to minimize capital requirements, both through tight working capital management and the use of strategic partnerships to underpin growth. In summary, in FY '26, we demonstrated resilient performance in line with expectations. Our strong cash generation, improved liquidity and extended banking facilities provide long-term financial flexibility. India is now making a material contribution to the group with further significant growth opportunities to come. The order book and pipeline provide further confidence for the medium-term outlook. However, we continue to operate against the subdued U.K. market backdrop and unwinding previously secured low-margin projects. FY '27 is therefore a transition year. In line with guidance, we expect to deliver GBP 12 million to GBP 15 million of underlying PBT. Our medium-term ambition is to improve profitability in excess of the peak levels seen in recent years, but in a more controlled manner and less acceptable to individual market weaknesses. I'll now hand back to Paul who will outline how we intend to do this.

So thank you, Andrew. And given that context, I will now set out our strategy refresh, describe how that responds to what we've heard so far and confirm those medium-term ambitions for the firm. As we said we would, we've refreshed the strategy and we've reset the plan with a clear focus on creating reliable shareholder returns and delivering growth. At its core, First, our strategy is built around four goals. The first of those is delivering profitable growth and improved margin with disciplined project selection and strong cash conversion. Secondly, harnessing our recognized leading engineering partner status for complex high-value projects. Thirdly, building a high-performance culture within the business, where our people are safe, engaged and accountable for operational excellence; and finally, doing good and building communities. Underlying this is a fundamental shift on how we think about this business. Historically, we've operated more as a linear left-to-right value chain, creating singular value through manufacturing to delivery. From today, following client demand and discussion, we're building from our core strengths, our engineering expertise, our experience, our delivery capability to enable us to move further up the value chain. This will involve earlier engagement in projects through areas like feed, front-end engineering and design, and the use of increasing PCSA's preconstruction service agreements and deepening our project presence upstream into project integration and management to focus more on our clients' needs. We're also much clearer on where we're focusing. We're prioritizing on 3 core geographies, the U.K., Europe and India each with distinct economic characteristics and opportunity. The U.K. is clearly our established base. However, it remains subdued. Europe provides significant scaling opportunity particularly in major projects and local country presence. And in India, we can see substantial growth opportunity. Delivery of this strategy is being driven through 4 transformation projects: clients and markets, manufacture 360, engineering excellence and performance and productivity. Taken together, these programs are fundamentally about how work comes into this business, how we execute it and how we continue to strengthen our capability. So we're refreshing our manufacturing approach. We're doubling down on engineering, and we're improving overall performance and productivity across all aspects of the group. The actions we've taken so far have built momentum. We are now focused on harnessing this energy to accelerate the pace of this transformation through FY '27. The next step in describing our strategy is to explain how that translates into how we will operate. I've touched on earlier, at the core of this is an evolution in our operating model in response to our clients' needs and their request for us to evolve beyond the traditional linear manufacturing to delivery approach. This client-led approach will see us engage earlier, stay involved for longer and ultimately capture more value across the life cycle of projects. This is structured across 4 service quadrants, which can be taken individually or as a group. They combine to give us more flexibility and optionality in how we deliver for our clients and how we allocate our capital. At the top of the diagram, project management, we are moving further up the value chain, taking on a more holistic approach and earlier stage roles such as project integration. This gives us a higher return, lower risk opportunities, stronger client engagement and evolves a positioning of the business, and we're doing this more through a partnered and collaborative basis. In design and engineering, we intend to grow our design offering for both clients and partners to support and strengthen our engineering excellence offering, both in early-stage project definition and in delivery. In manufacturing, we are seeking agility and flexibility in how we operate. We will focus on higher value-add fabrication, optimizing our footprint, and leveraging partnerships to improve efficiency without being constrained by fixed capacity. And in delivery, we will enhance our offering in project execution, plant and equipment complex lifting, logistics and marshaling. Importantly, this model allows us to decouple growth from full utilization of our own facilities reducing the reliance on volume-driven, low-margin work and instead focusing on value. Ultimately, this is all supporting margin progression, stronger cash generation and a more capital-efficient, less leveraged operating model. Turning to U.K. and Europe. We have a leading structural steel position in the U.K. and an expanding footprint in Europe. And the focus now is on how to evolve this in a more strategic manner. In the U.K., the emphasis firmly on margin and quality of earnings. We're focusing on higher growth, higher-margin sectors, particularly where projects are complex and engineering-led because that is where our capability differentiates most strongly. Examples would be defense and energy. In Europe, the opportunity is different. Today, we are an emerging presence in that geography. Therefore, the focus is on major projects such as Project 1 and hyperscale data centers and expanding our presence in a disciplined, capital-light way country by country where the opportunity exists and building off our established presence in Netherlands. Across both, the common thread is discipline, not chasing volume and focusing on opportunities aligned with our capabilities and for stronger returns. In India, we have an offer a very specific opportunity. As I said at the top of this presentation, JSSL is now acting as a significant growth platform for the group. The market itself is compelling with a GDP growth of circa 8% per annum, a massive uptick in demand for infrastructure and buildings and increasing national skill shortage and a recognition of the benefits of steel versus traditional approaches. Our partner, JSW Steel, continues to expand at an accelerating rate with a total steel production likely to exceed 62 million tonnes per annum by 2032. Against that backdrop, our order book and delivered tonnages are scaling rapidly. We are seeing increasing exposure to high-margin sectors such as commercial buildings, data centers, advanced manufacturing and transport infrastructure, all of which create opportunity to unpack our engineering capability. Our growth is being delivered in a capital-efficient way with our second facility at Good Duract now online and a contract manufacturing model being deployed to flexibly support growth and avoid overloading fixed capacity. So overall, India has reached a tipping point. It has always represented a significant long-term growth opportunity. We are now seeing that come forward and therefore, it figures so firmly and squarely in our strategy. So our medium-term ambition is to grow underlying profit before tax from the GBP 10.5 million of today, to between GBP 40 million and GBP 50 million in the medium term. That step change will be driven by the coordinated delivery of the strategy I've just outlined and the steps to close that gap can be broadly grouped as follows from left to right. Through improved efficiency and productivity across the business, particularly as we optimize factory utilization, and embed the changes we've already started, through more disciplined project selection and better sector mix as we focus increasingly on higher-margin work, by leveraging a more flexible capital-light delivery model, allowing us to scale without being constrained by fixed capacity or capital intensity and enacting our 4 quadrants and finally, through continued growth in India. So this is not 1 single lever. It's the combination of these to bring cash-generative growth. In summary, and to conclude, we're building on our core strengths while sharpening where we play and how we deliver through greater selectivity a more flexible, capital-light model and continued expansion in geographies like India and Europe. That underpins a clear set of medium-term ambitions. A business of GBP 500 million to GBP 550 million of revenue, 7% to 8% of operating margin, a step change in profitability from GBP 40 million to GBP 50 million, including India, cash conversion above 90%, leverage in the 1 to 1.5 range and a ROCE above 15%. We are setting out how we plan to improve profitability in excess of the peak levels seen in recent years. But importantly, in a more controlled manner with less susceptibility to individual market weaknesses, this will deliver stronger, more consistent returns with greater capital efficiency over the medium term. Thank you for listening. We'll now open the room up to some questions. I might sit down as we take these.

Three quick questions, please, if I may. Can you expand a little bit more about the PC SA opportunity? You talked about GBP 100 million, which is clearly a nice big number. What exactly is that? How do you get there? What do you guys have to do to deliver it? And then secondly, 2 questions on the, I guess, the evolving business model and the kind of the evolution more towards service. Firstly, what's driving that from a customer perspective? Is it less that they need to do? Are you going into a new world, taking on new people who aren't maybe doing a good job. So why are you and secondly, from an internal perspective, the capability of doing that. I mean, clearly, we talked about designer manufacturer before. But how much evolution do you guys need to put through your business to have a kind of first strict world-class offering?

Great. I might have a stub PSAs are the common way in which most of the Tier 1 contractors in this industry would procure work these days. And the whole point of the PCA is that you brought into the client conversation very early might be a year ahead of entering main contract. And that allows the main contractor client consultants to work in a very disciplined way and define design program cost, contract risk and reward mechanisms, so this is a very deliberate strategy to insert ourselves in that conversation and to signpost and signal to the market that we have the desire and the skill to be able to partake in those types of arrangements. Now this is entirely new. When I was sat in Lungo Rock, we brought Severfield into the PCSA for Everton and that turned out to be a very successful project. So now that I sit inside Severfield, this is a very deliberate strategy to do that in many places and get the same returns. The specific opportunity is there are a number of PCSA that we have running. One is relating to a football stadium, two are relating to commercial opportunities here in the city of London. All three are likely to reach maturity in the first half of the year and progress into a formal construction contract and therefore, be added to our pipeline. In terms of the second question, the new strategy and where we're moving to. This is about spotting gaps and opportunity for our clients. A lot of it through lift experience. We're working on a particular renewables project right now where what we do is actually secondary and of a very small value to the end customer, yet it's impact on the scheme is critical. And if we don't turn up, the scheme fails. So therefore, we've seen an opportunity whereby we could do more of that on behalf of the clients and actually take a greater role in managing and overseeing how that work happens, not just for our scope, but for others. So this is about increasing a bit of market share. It's about blending client skills with our skills. For them, they would need to have slightly less people in their team. They'll be able to lean into the capability that we have. And then, I guess, your third question about how does this stress or stretch the capability of the business. This has been quite a deliberate piece in identifying where we have skills today that could be sold and leveraged in a different way. So in the main, it is about repurposing or reusing the capability that we have, for sure, as we grow and develop, we would absolutely see this also as an opportunity to add capability and welcome new people into the team.

Does the product management side add additional risk to serve fields earnings? Are you on the hook for projects now that maybe you wouldn't have been before, for example, from a profit perspective?

Well, no, look, I think there are lots of models where the risk associated with delivery actually flow down to the end producer, things like delayed damages, et cetera. So this would be more about professional services with appropriate caps and safeguards around them, yes.

Joe Brent from Pammi Liberum. Three questions, again, if I may. Firstly, I'd be interested to hear which 3 projects in the pipeline you're most excited about at the moment? Secondly, I appreciate your 27% debt is flat, but obviously, your EBITDA is growing. So you are deleveraging. What do you think about capital allocation? At what point do acquisitions maybe in Europe come back onto the agenda. And finally, on the strategy, I mean, a very clear strategic statement there. Interested in your views as to what areas still need further work and what we can expect in the next 6 to 12 months as the strategy gradually evolves?

Shall I name 2? Do you name one. We'll share it around. I mean, look, you look at Old Oak that's just hitting site currently in our facility under fabrication at the moment, huge scheme, huge tonnages involved, extremely complex. And in the period since we last spoke to you at half year we've also been extended further packages of work from the HS2 clients. So we've now taken on the scope to do all of the roof lights structure as well. So I think that's exciting because of what it does for society, but it's also exciting from a point of view of we like those anchor projects where we can put our best engineering skill to work and then maybe not to describe one project, but just the scale of data centers being rolled out in the U.K. now. I've spent the last in that world. And generally, we were building 10 megawatts at a time. We're now seeing significantly bigger developments entering the pipeline both in terms of singular scale, but also multi-phased. And again, that's really good for us to be able to plan the business and to be able to work with clients and out continuous improvement and be able to get better each time that we go into the field with them. So the whole data center market may here in the U.K. and in Europe and in India, it's happening everywhere, very compelling.

As sort of an add-on to that, I was going to mention India and just say what extraordinary opportunity there. Poland by both go out quarterly. It's just a different operating environment. There's huge amounts of growth, very different from certainly the U.K. and the pace of delivery, the pace of growth for me is the exciting alongside U.K. and Europe and great to have 3 areas of the business, all moving in their own different ways, but the excitement of India is pretty special.

Do you want to do capital allocate?

Yes. So Yes. So we took the opportunity really to set out some thoughts around capital allocation, give some sort of financial framework, which starts with where we are now, which is we're very pleased with the balance sheet, having worked hard on cash collection, delevered, we're in a good place. And I think we want to stay there towards that sort of 1 to 1.5x range. As we look, first of all, near term, again, we've been fairly explicit on the guidance around FY '27, staying flat with some headwinds offsetting growth and then further work on working capital to help balance that off would keep us broadly in the same sort of area. As the business goes forward, with growth that should develop additional cash flows, deliver additional cash flows, which is clearly helpful. That then gives you choices for the future. The potential to say, to invest for growth and to invest in -- or to return dividends to shareholders, we would like to do both. It's not either or -- but both of those require additional cash flow to be generated. However, it's not just about spending cash. A lot of the -- the way our strategy is set up is to say we should be doing more in partnerships, greater use of subcontractors, so it breaks what might otherwise have been a linkage between you have to own capacity to grow. That's no longer the case under our strategy, which I think is important. All of that baked into a financial framework, which hopefully is sensible, is clear, give some sort of guidance around it, but it really just gives us the space to make those choices for the future.

In terms of strategy, can you expect to see momentum, energy focus. We're very serious people and we're very serious about bringing this plan forward. You will see examples of partnerships being formed, partnerships, both in terms of executing work, but also this concept of contract fabricating, particularly in India. So we will have examples of that, that will start to show up through H1 and into H2. And then the slide that we put up where we described the walk-through from 10.5 to 40 to 50 million broken into various boxes, you will see momentum and delivery against each of those through the year. What we would like to do, and we'll take some counsel on this and then share this with the market. But we would like to organize some specific moments where we just go a little deeper into various topics. And I think that might be able to give those in the room and those aren't in the room today, more appreciation and more understanding of how we're operating. I think that might well be welcomed.

Toby Thorrington from Equity Development. I've got 2 sets of questions rather than 2 questions. I think first of all, on operating facilities in the U.K., can you just remind us what you have at the moment, Sharon's gone, Bolton II has gone as well. And as a supplementary to that, remind us or perhaps tell us what you've done in terms of pulling those facilities closer together?

Sure. Yes. So our current U.K. footprint is our facility in BalanaMallad, and skill, Northern Ireland. That is a full fabricating painting coating facility. We then have our Lostock facility in Northwest of England Bolton, particularly focused on very complex, highly engineered products. So most of the stadium work, a lot of the bridge type work goes through that facility. Dolton first, which is our high capacity. It's the mothership of the organization. It's where the whole story started so obviously, Crown in our jewel or deal in our crown, sorry. And then we have a facility in Carnaby, which we acquired as part of the dam structures purchase. Sherbin was a rented facility in which we were servicing the modular business from, so we have -- as that lease has rolled off, we've let that fall away. We then have capability in Ryzen in Holland, and then we also have our place near Rotterdam in Breda. So those locations all connect as a network. They have particular specialisms. As I described, Lostock is high engineering. It's also where all of our nuclear grade work is done. It has a particular licenses and permits to allow it to do so and skill set of the workforce, actually. So they operate seamlessly as a holistic. We do flex depending on volume and supply and demand. But we're also very clear on the fact that they bring different skills and therefore, they talk to different markets. And then our whole logistics network connects all of that together from a delivery and a field point of view, you might often have blended products that comes from more than one location. Our engineering design teams all work at center and can work across all the facilities.

Okay. So no major changes in the last 7 months in terms of reallocating work between facilities and operational change or anything like that?

Nothing of significance. We've made some fine tuning. We tried to do a bit of nuclear work in Carnaby and actually, we decided better to keep that in loss stock. So there's been a bit of fine-tuning, but nothing of any significant nature. Okay.

And Andrew, next question, please. So GBP 28 million net debt at year-end, just to investigate that in the first instance. Are there any advances on the balance sheet at the close FY '26?

Yes. So the cash advance that we referred to in the presentation of GBP 10 million landed post year-end. So that's the one material one. So now at year-end, and it's between year-end and now.

Okay. That's clear. And just on the payables movements. I think it was off the top of my head, GBP 16 million in for the year, which is a fine number, not too different to the receivables going the other direction. But it's the second consecutive year of two big cash ins from that line. Has that been sort of squeezed, pushed, anything we need to know about?

So I think the way to think about it is that we work hard on, particularly, first of all, on debtor collection of getting the cash in from the projects and work really hard to get that through. In terms of the creditor position and the amount of stretch, I think it's important that we you don't just pull the stretch lever to push too far. That wouldn't be appropriate. There's an element of stretch there, but well within the usual range. I think probably just one -- this sounds like a detailed point, but it's actually fairly important to it. because our year-end fell on the 28th of March, a lot of bills would become payable on the 31st. So there's a bit of natural timing just the way it happens -- so a little bit of a technical 1 there, but I think, broadly within expectations.

Okay. That's fine. And lastly, I think consensus seems to be that net debt will be flat this year from what I can gather. Just to clarify the presentation, I think you're saying GBP 20 million gross nonunderlying outflows?

Correct. Yes, that's right. Yes. Yes. Okay. And then offsetting that by -- with the GBP 10 million cash advance we've already received offsetting it also with growth from the business that flows through to cash flow and also then our drive to continue to work hard on working capital to make up the gap, which is about GBP 5 million if you model all those through, net debt broadly flat year on year.

Greg Poulton from San Capital Markets. Three for me, please. Could you talk a bit more about the ramp-up in India of your sort of medium-term horizon and how that splits between revenue and margin enhancement? And then on the U.K. and Europe, what the profile of margin recovery will look like in terms of -- will it be a step-up early on or be back-end loaded? And then finally, on the dividend return, what are the key gain items for that? And has the Board got a framework in which it decides whether pay or not pay dividends?

Okay. Thanks. I might take the first question. The way to look at India is it's been driven by a number of factors that are driving the growth. We have Modi that's committed to develop nation status by 2047, which is creating a huge momentum. A lot of the private sector industrialists dominated by several major families, major industrial businesses are leveraged into everything you can imagine, concrete steel paint, electric cars, solar. Our partner is providing a significant amount of our volume, maybe about 1/3 of it through their own expansion. So that is building out of new facilities. You might have noticed on the map actually, we flagged Orissa, which is the next main geographic expansion in that country. Four new blast furnaces. It's a huge scale. The rest of the volumes have been driven then through data center build-out programs. We've got 3 that are in the pipeline currently. We're about to sign a major contract with a car producer to build a new car manufacturing plant. We're working on battery plants. We're working on major commercial developments. So we use the word tipping point because we now find ourselves sat on a weekly basis with the team looking through sales targets, and it's a growing list. There's a growing range of sectors and clients and the tonnages have moved significantly from where they were. I think the guys were reflecting with us to get excited about chasing 5,000 to 10,000 tonne projects and now they're chasing 35,000, 40,000, 50,000 tonne projects. So the nature size, complexities increased as well. So all of that has created this momentum, year delivered 125,000, year ahead, we'll have significant growth on top of that, and we have ambition for that to continue. In terms of the profitability associated, there's a linear connection, of course, the big you are, the more that that's dropping through. But also as we reach scale we're able to flex the overhead that's been built. And we are at that point that we can take more on without further investment in overhead and also the geography starting to help us and particularly as Orissa opens up as an area. We won't be tracking steel quite as far as we are. So I actually think we'll end up with some overhead efficiency gains. I think we'll be able to drive a little out of our cost base, albeit it's a very low-cost market anyway. And then the final point that will support margin growth is that tipping point I described in terms of steel being seen as a credible alternative to concrete. Incredibly, for me at least, India has a skill shortage did not expect to step into India and find that, that was an issue. And that's because this generation have moved into services and IT, and therefore, there isn't the workforce to build in traditional techniques so for the country to achieve what it needs to achieve it has to build in steel. So we, therefore, now need to start pricing steel as the enabler, not as a competing product.

I take margins for Europe Yes. And then the dividend. So U.K. and Europe margins, really, what we're saying there is that the book as it currently stands, continues to have the headwind of the lower margin work that was contracted during those tighter times, and that will progressively take time to unwind. So if you're thinking about that through FY '27, that would have -- progressively that drag will lessen. So therefore, more of an H1, H2 split, it would be the improvement will be more weighted towards H2 and beyond. So I think is the sort of clear way that would pan through. And then thinking about the dividend and the gating items. Again, looking at our guidance around FY '27, we're saying that there's significant head with cash outflows from the nonunderlying items so we'll have to manage those and then guiding to that sort of flat net debt type position. Going beyond that, I think it's really the guiding principle to stay within the 1 to 1.5x range. So we don't want to pay a dividend to deviate from that. However, you would expect the capacity for it to start to arise as the business grows thereafter. But FY '27, we really have to digest the headwinds first. And then these are all decisions for the Board in the future, which we will take at the appropriate time. But hopefully, that gives us enough of a framework around it.

We're very clear that a series of our investors invest for the dividend. That's very clear to us.

A couple of questions. First of all, 1 of the first points you made, Paul, was contract discipline. Could you give a bit more color on that? What you would have bid in the past or under which terms you'd bid in the past, wouldn't you do know is that -- is it a job of educating your contract managers, your bid teams on that? Then pretty soon after that, you said Europe is becoming more established, looking at the slide 24, you had 7 sector icons and higher-margin focus the U.K. a few sectors and the focus on major projects. How will that play out presume fewer bigger projects, but also are you more focused on sort of anchor clients as it were?

Great. So in terms of contract discipline, the first comment to make about our teams who've been negotiating these contracts and delivering them is they're first-class people, and I'm very clear that it starts at this table, and it is about setting forward real clarity on strategy, the plan, how people fit inside of that plan and what they're being asked to do and what outcomes we're looking for. So very much sat here in terms of leadership. I think what we're referring to is the discipline in understanding as we take work into this business, do we fully understand the scope, how to price it, do we understand the engineering complexity involved? Are we comfortable that we have the capability, the experience? Are we selling this on a responsible program that is both encouraging for the client, but responsible in terms of delivery and ultimately, is there a risk and reward wrapper around that project, which is balanced and fair. What we tend to find is clients who most value or differentiation, the most value that skill set capability are willing to enter into contracts that have that set of characteristics and have that balance -- the place that I would be looking to avoid playing is in those parts of the market where customers maybe their end customers are operating in very margin-constrained operations, environments. And therefore, what they're really trying to do is in a very transactional manner, drive out lowest cost available at any given moment. That's a very different appreciation of your own capability and where it should be deployed. So that's what we mean in terms of contract discipline. I will also take every opportunity to talk about our business plan review process, too. This is a to our meeting, every single Wednesday, every contract under delivery, single dashboard, whole of leadership with our senior operations people, and we take a walk through all operations and test and check where we are in terms of performance and what can we be doing more or different to either improve our performance or deal with anything that's emerging as an issue. It's a culture that I'm very used to, and it's building, again, real momentum within the business. And then the question about U.K. I think you're right to see it through the lens of major projects. We are very active today in the Nordics, building out major data centers. We're on to our fifth or sixth in a series for a number of clients, the big American developers. Obviously, we're at Project 1 in Belgium, and there is a huge amount of opportunity in energy transformation transition projects, nuclear new build, nuclear decommissioning, defense. They're the sort of sectors, I think we're dealing with blue chip clients, some of them global, some of them may be leaning into EPC contractors like a Jacobs or a Becta, might be the governing body. And therefore, they're the types of relationships and places that would like to take our capability. I think we got a fairer hearing. There's a deep appreciation for what we do. And therefore, we get that balance I just described but notwithstanding that, U.K. is a country, Europe is a continent, and therefore much bigger with much more opportunity. So a country-by-country understanding I think Western Europe very developed, very mature markets. Unlikely, there's too much that we could bring to that that's different. Although having said that, there are organizations talking to us about some of our IP and specialism. So maybe there's some partnering opportunity in that space. And then further east and further north in Europe, I think this concept of being able to enter a market, take some market share by bringing that specialism in a local country setting, that would make sense. But to think that we looking to fully replicate the U.K. approach in Europe. That isn't the plan. Any more questions in the room.

Harry Kilby Edison. So you said you're going to be more selective on the products that you take on looking for obviously higher margin. Could you probably give a bit more color about how you think you're going to avoid the potential for underutilization if markets remember where you sort of revert back to taking those sort of lower-margin projects? And then just another one on India. Again, it would be interesting just to get your thoughts on how you're going to sort of balance the growth versus potential execution risk out there? And how that sort of flexes as things move and develop?

Yes. I'd like to take the capacity piece, and you do the India piece. Look, I think the question you asked there is actually the fundamental of the whole strategy we've just laid out. This was a business that had a very U.K. core U.K. focus and does have significant capacity in that market. if it's simply looking at that one market and it's weak, then that creates a dialer for us, which is exactly what you're asking. And therefore, as we move forward, this is about being exposed to more than one set of economic factors, so U.K. and Europe, moving into those sectors that we feel are a little more countercyclical. So I think we'd all sit here to agree that defense going to have significant spend and that will continue. That will be countercyclical same with energy transition. So it's a deliberate strategy to be exposed to more markets, more sectors drive into partnerships with both clients and suppliers and similar organizations that are operating in the same markets, and therefore, we can have a little more protection from the movements in the market as an outcome. And then the final piece is to just describe whilst we talk about the footprint of our factories. Traditionally, they've been very heavily geared towards fabrication and fabrication only or predominantly. What we've seen over recent years, and this will be a continuing trend, regulations here in the U.K. and in Europe are requiring a significant increase in the amount of coatings, fire protection, painting that happens. That did use to respond just to 1 or 2 asset classes, but we're seeing that across the whole breadth of what we do these days. So that's putting significant demand into the business actually for capacity and footprint. Some of that is being serviced from outside of the organization. So I think the other big lever that we have to pull here is a rationalization and a balancing of how we use our facilities such that we don't ever get back to a place where we're tempted to push in the wrong type of work.

On India growth? Yes. So I think there's lots of facets to it. So -- and it's a great question because it's all about not only how do you grow, but how do you grow well in a well-controlled manner. That's both operational and financial, operational, there's clearly there's recruitment of the people you need. They all the health and safety, just maintaining the rig or the discipline and doing things well. I think I would say it's a market that is familiar with growth so it's not a new thing. And so that concept of doing it properly is front and center, both for our partners for us. So it will -- it's naturally doing the right thing in that respect. Just to pick up on the financial point, how do you grow well financially. It's where you have to stay absolutely focused on working capital management, collect the cash. And as the business gets bigger, there's more of a price but equally more of a risk if you don't. So again, we've been working really closely with our JV partners there to make sure that, that does get the discipline and rigor and laser focus that it needs. I think also in the market, there's already a very well-established use of subcontractors. Again, that's not a new concept. So it continues to be -- you have to do it well, but it is well established. And that can be something that lets you grow -- almost lets you prime the pumps on your expansion as you then seek to grow build out capacity. So there's a point there about subcontractors. Maybe a point as well about the value of that customers that our clients see in our -- in steel versus concrete. I think the two have historically been just which 1 is cheaper, but we're actually saying if you want to have a good build program, a fast build program, that meets the requirements, then steel is the way to go, which obviously should attract then more of a premium valuation and break that linkage between the costs. So all of those are the how do you grow well type pieces that all have to come together. And linked to that is where do we add value in the build program then for clients of saying, well, if you're using steel, you could do this to make it more efficient on how much steel or on the timing of that build. So all of these were just serving to sort of give examples of good growth is what it's all about, but exactly the right question. So thank you.

Anymore? We might have exhausted the questions. I think we have. So we might call it there. Thank you for attending, and thanks for your interest.