Severfield plc (SFR) Earnings Call Transcript & Summary

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 [indiscernible] 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 have been 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 and 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 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 McAlpine to deliver the Agratas 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 ONE 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-tonne hyperscale data center in Navi Mumbai. And on the right, 15,000-tonne projects 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 10.5 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 tonnes in the year. This reflects the high levels of economic growth and investment being seen across India, together with increasing demand for steel and 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 condition 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've seen increasing competition and the size of available market has contracted. Whilst 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, PCSAs, 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. ROCE 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, 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 and 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 was 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 noncash impairments 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 high 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 mothballed 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 1.0 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 4 goals. The first of those is delivering profitable growth and improved margin with disciplined project selection and strong cash conversion; secondly, harnessing or 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 ONE 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 the 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 on 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 Gujarat 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 one 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.

[indiscernible] And obviously, [indiscernible] during the Q&A. So our first question is the order book still looks strong, but how much of that is actually firm and how much could realistically slip or be delayed if the economy softens?

Should I take that one?

Yes, please.

So well, first of all, good morning, everyone. Just to introduce herself briefly. I'm Andrew Page, the CFO at Severfield, and just say thank you very much for joining us this morning. So pick up that question about the order book. So as we said, our U.K. and Europe order book, GBP 507 million. We're really pleased with how the order book is progressing Obviously, that large number, that GBP 507 million gives us good coverage as we look at FY '27 and beyond in terms of the total volume, albeit, as we said, it's a mix between some of the previously contracted lower-margin work and then some of the newer work that we've contracted more recently coming through, and all of that will progress through that we deliver. But to your specific question about how firm is it. I think actually, it looks good. So the key points I think to call out would be a number of our really big contracts that are coming up are just about to start. So if you think of the Vista commercial development in London, that is really not far away now. Old Oak Common for HS2. That was actually previously delayed, which I guess is partly behind the question. But actually, that's now had its slippage and that is also just ready to go. And then the third example I'd probably give you is data centers. These ones, there are by definition, there's a decision point. But once the project goes ahead and materials get purchased, it really is full steam ahead to get the data center built and underway. So I think for all of those reasons, those are just examples. It does feel that there is strong momentum that will mean or these projects just that we get on. So pleased with how it's developing, more to come. And we're in a good position right now as we head into FY 2017.

Thank you, Andrew. Our next question is, can you give a bit more color on how competitive the market feels right now? Are you having to bid more aggressively to win work?

Sure. Let me take that one as well, and then we'll make sure Paul get the word and actually answer the next one, right? So how competitive is the market? So I think, look, the answer is the market is competitive, and this is something that has been developing over the last few years. Fair and square, it's a competitive market. However, that competition principally is the toughest, the tightest in the typically lower margin areas of work. And I think you'll have picked up from our strategy, but that's not where we want to compete, making a conscious decision not to be competing against others down in that lower margin work, where we want to differentiate ourselves is in the high-quality, high-margin work. which by definition is where you see less competition or rather more suited to our skills and what we can bring to those projects. So that's really how we encourage you to think about it.

Thank you. Our next question is, the U.K. construction market has been patchy. Are you relying more on certain sectors or customers that you were a couple of years ago? On the international side, particularly India, how confident are you in the long-term opportunity there? And what are the main risks we should keep in mind?

Great. Thanks, [indiscernible]. Just to echo Andrew's comments. Thank you to our net started in this morning and/or indeed interfaces with the business we're doing appreciate your interest indeed your support. I am Paul McNerney, Chief Exec of the business, joined last November. It's been an extremely fast pace, 6 months as we get to [indiscernible] business. In terms of sectors and customers, hopefully, from that presentation that you've just watched you can see this sense of a business that's looking to not leave its rooms in the U.K. completely lean in actually to the experience, the history, the brand, it's our license to operate. But at the same time, a business that is responding to the fact that as the question suggests this is a market that has contracted. It's a market where it is at the audits of low capital budget, both private and public sector, and therefore, the potential for growth and higher margin extraction is a bit more difficult. Two comments to make. We can see more than enough pipeline and opportunity in those sectors that suit our expertise. And commercial in London still has a life. There are a couple of major towers in the market today. similarly, stadia building, there's 3 or 4 of those opportunities in the market today. But as we move forward and actually has already happened over the past 6 months or so, a real focus and discipline in leaning into those factors that we see to be a little of 3-cycle countercyclical, defense, nuclear, whether that's new build or working in existing facilities. And as we've said in the presentation, a flex towards different geographies. If we do just touch on India as a question as requested of us, at peak output of 125,000 tonnes in the year just gone, the year that we're within, we see significant growth on that figure and that trajectory will continue. And we have very strong confidence that it will continue to grow for several factors. The economy is growing at 8% in India. There's a government-led ambition to redevelop nation status by 2047. That's driving infrastructure. It's driving industrial build-out programs. Our own partner is growing at a rapid rate. It's an expanding rate actually. And therefore, all of that is creating this velocity and momentum in that business. What should we look out for as risks as both for investors and those that are running the business? As we scale, can we keep hold of the quality and the discipline that's needed to be successful in that area. The response to that is we have plans in place. We will be hiring additional support, particularly operationally. So that's one lens. And I think the other lens that we've looked at this through is as we keep pace with the growth we don't want to be gearing the business into 100% leverage of our facilities. So we absolutely will take this opportunity to bring forward a franchise contract fabricating approach whereby we have partners that can help us take the key counts of the markets and, therefore, have a more balanced approach.

Thank you, Paul. [Operator Instructions] our next question is, how should we think about dividends? Is there scope to grow them steadily? Or will they stay more linked to the cycle?

Okay. Great question. So dividends, first of all, just to say, the dividend is a really important part of our return for shareholders and particularly the retail shareholder base within that. We've given, as you've seen in the announcement, a commitment to recommence the dividend. Of course, it was put on hold a year or so ago. To restart, when it is supported by the cash flow of the business, it's more of cash flow. And I think the key as well as you look at our strategy, which is very much a growth strategy, as we see the growth coming through in earnings, you'll also see the growth coming through in cash flow, which will support returns of turning that dividend back on and indeed for ongoing growth in the dividend. And maybe the second point to add, which is really directly to the question, is that -- our strategy by its nature, which takes us really to say rather than being predominantly focused with a U.K. focus on the business and then smaller amounts elsewhere. We already are and are progressively moving towards more of 3-geography model across the U.K., Europe and India, which means that we're not at the mercy of any one economic backdrop in one country. You have all 3 and because of the targeted strategy of going for those high-margin areas or sectors that give us higher margins and we do some of which are countercyclical, if you think of things like nuclear, defense, energy. So all of those should be developing us into a business that's got a more stable stream of -- or rather less volatility in the earnings growth and therefore, in the cash flows. So in other words, a long way of saying, growth in earnings, growth in cash flows, growth in the dividend is what we are setting out to achieve.

Thank you, Andrew. Next, we have, if we look 2 to 3 years out, do you expect the competitive landscape to consolidate or stay fragmented?

Great. I think I'll take that one. Yes, that's -- it's an interesting point, observation. I think all sectors, as they [indiscernible] as they become more sophisticated, there's a degree of consolidation. Can I foresee it in steel fabrication? I think I probably can actually. The U.K. environment is one in which we have always been and remain the largest, most capable organization of the industry outside of a couple of our key competitors that you then get into a very long table. I think we can all see some of the pressures that are facing businesses in the U.K., cost of employment, cost of energy, cost of doing business, increasing tax base. So yes, would we be surprised if we saw a degree of consolidation, probably not. Some of that has been factored into the strategy that we bring forward here, which is to create a business with much more breadth and much more diversification.

Thank you, Paul. We have quite a long one next. So we've got, it's clear the team has taken some decisions -- sorry, it's clear the team has taken some decisive actions this year to simplify the business and exit the modular division, which I think many of us support. Given that management has identified FY '27 as a transition year, what are the most critical internal KPIs you're tracking month-to-month to ensure that the new higher-margin project strategy is actually gaining traction, and how will you signal as retail investors that this transition is firmly on the right track.

Great. Fulsome, but a great question. In [indiscernible], I might just come at that through a few different angles. First and foremost, the point about gaining traction -- just one second. Apologies. That was an unscheduled [indiscernible]. It's all about being able to be dexterous. So -- yes, the success of embedding any strategy in the business for me is about being able to articulate that through the organization and really clearly link up for all of our people and indeed, those connected with the business. What is the strategic intent, how we're going to get there, what's the plan, what's my role in this organization and how can I impact and have influence on that plan? That's a piece that we have spent a lot of time considering and putting steps in place. And from that fall out a whole series of KPIs that we can then use to track and manage both the delivery of the business and the shift in strategy. The question asks what's the monthly cadence? Well, actually, I would play back the cadences weekly, we set at 3 different points in the working week to look specifically at clients to market, so therefore, size of pipeline, near-term opportunities, what are we doing to be able to get in early with customers, how we're shaping and building our relationships. We have a separate moment in a week where we drill into projects, every project in the U.K. on a dashboard, [indiscernible] green, anything is moving into that amber position, how can we use the resources of the business to deal with that. And then towards the end of the week, we then have a similar cadence where we are monitoring in each of the transformation programs, the steps and actions that we've agreed to take, how we're progressing and how they embedded. So there's a real momentum and a real discipline to how this has been rolled out and embedded in the business. How can you see that? And how will we keep you briefed? We really like the style of what we're doing today. We'd like to do more of this. And indeed, in the early autumn, we intend to do a specific topic-based webinar. I think we're going to choose India is our suggestion. Maybe you could feed back through Camarco if there are any other areas that you'd like to see as deep dive on in the business. But the intent is that we want to start creating more cadence and more transparency. And some of the KPIs I've referred to around transformation, we will report out. We will do that in our normal reporting rhythm, but we will also use the R&S system to signposts and describe some of the successes that we're having on the way to embed in this strategy.

Thank you, Paul. Our next question is you've highlighted data centers and complex infrastructure as higher-margin sectors. As these projects become a larger proportion of the order book, should investors expect a structurally higher group operating margin than Severfield has historically achieved? Or are the benefits mainly improved resilience and project quality rather than materially higher margins?

Yes. So higher margins, yes, versus what we've recently delivered. So if you think in FY '26 just gone 2.8% margin, that is clearly not what we're targeting. We're targeting instead of 7% to 8% margins. is that higher than what's been done historically? Actually, no, it isn't. So as we think about that overall target of us reaching GBP 40 million to GBP 50 million of underlying PBT, that compares to sort of a recent peak of underlying PBT of GBP 36 million, which was recorded just a couple of years ago. And if you take the 5-year average, that sort of recent 5-year average, it's about GBP 28 million or GBP 29 million. So the sort of numbers and actually the margins at that time were similar. They were from memory around 7% or 8% at that time. So it's a level that has been seen actually quite recently, albeit the market's moved on, but then so has our focus, which will enable us to get back there. And indeed, as you look at the total and particularly thinking about India as well, that would be additional PBT on top of that or as part of the overall package that we've set out.

And I think, [indiscernible], if I might just add a comment to that. I think the way for those dialed in this morning, to think about this, GBP 40 million to GBP 50 million as a medium-term ambition does indeed take us back to and beyond the previous peak [indiscernible]. Obviously, the upper end of that range takes to significantly beyond. But there's a very fundamental difference in how that PBT is being made up. Three different geographies, multiple different sectors and a number of those are through cycle or countercyclical, so defense, nuclear, in particular. And therefore, this is a business that is being set up to be far more resilient to and less impacted by individual market economic cycles. And I think all of those have followed the ever field story over the medium to long term, we'll recognize that this has previously been a very U.K. dominate and therefore, quite cyclical profit return in organization. So I think that's just an important point for people to understand that's where we're coming at this front.

Thank you, both. Next, we have, given the current valuation, how are you thinking about capital allocation between debt reduction, investment in growth and potential shareholder returns?

Great question. And it was -- you recall that this slide that we included in the presentation pack, it's a topic that I was really keen to cover and I think is important. So first of all, all of the hard work that was done earlier this year in terms of our really focused -- really laser focus on working capital and getting cash in meant that we finished last year as you saw with the net debt down to GBP 28 million. That's a leverage of 1.2x if look at net debt to EBITDA, which is just nicely within our range of 1 to 1.5x. So we've already got it down in terms of that leverage position and it is our firm intention to continue the laser focus on cash and working capital and to maintain the low levels of -- relatively low levels of debt both in FY '27 and beyond. So that's sort of very clear baselines for everything we do. In terms then of what happens next, again, as the business grows, both on earnings and cash flow, that opens up the opportunity to give us additional cash flows, which we can then put to work in terms of growth CapEx and dividends. And very much we'd like to do both of those. So it's not either or. Clearly, there will be choices to make along the way as to the exact timing and quantum of each, but it's the intent to do both, but really still keeping us with those lower levels of leverage. But I think probably one final point to add, which is super important is for us to achieve those medium-term ambitions that we set out is that it doesn't require a lot of new capital to be deployed. That's really, really key. And a lot of what we're saying, you'll see the uses are were capital light. What do we mean by that? Well, that's really us using more of subcontract partnerships deliberately using the word partnerships because it's a real high-quality relationship, which means that you can take on additional work without us necessarily having to own more capacity on the ground. I think historically, there was a very close linkage, pretty much one-to-one language between the volumes they could do and the capacity that we are adding. Going forward, we can use this much more capital-light approach to help us through that journey. So which again lends itself to maintaining the lower levels of leverage and making best use of resources available. Anything else to add that, Paul?

It was great. You covered that?

My next question is how much of Severfield's long-term growth do you expect India to contribute relative to the U.K. business? And could India eventually become a major profit driver for the group?

Yes is the answer -- is the quick answer. So we're really excited about the opportunity that India presents. So in our targets there, you'd have seen that we're seeing the India could generate GBP 10 million of underlying PBT. And just again to reference, that compares to $3 million in FY '26, just gone, so significant growth from 3% to 10%. And indeed, that GBP 3 million in FY '26 is really the first year that India has made a material contribution previously. It was about $1 million. It's been 10 years in the making of the JV agreement. It's now got the critical mass, the critical scale and indeed, the trajectory that it is growing at pace already. So we have strong conviction behind that GBP 10 million target. So that, therefore, does become a bigger part of the group. But I would say it's not the only source of growth. I think we expect the rest of the U.K. and Europe to deliver growth as well. I think in terms of the -- just to help sort of underpin some of that growth trajectory for India. If you look at the order book, in round numbers, it's about 340,000 tonnes worth in the order book. So last year, we did 125,000 tonnes. You're looking for significant growth again, you can immediately see that, that growth aspiration is already supported by really big, sizable chunky contracts at good margins in the order book. So it's off to a really good start with an expectation of more to come.

Thank you. We are now moving on to our final question for today. If you have any further questions, please e-mail [email protected], and the team will respond to any questions that weren't covered this morning. So our final question is, as a long-term shareholder, I've seen the share price weaken significantly despite Severfield retaining market leadership. What evidence should I look for over the next 12 to 24 months that would demonstrate the business is genuinely turning a corner?

Yes, great question. I suppose there are many levels to this. The first of which would be the strategy reveal itself. The fact that the business is deliberately focusing on being more diversified, more shielded from individual market vacancies as said. And therefore, I think your first reference point is, do you recognize that cyclical nature of the U.K. and feel that that's impacted the share price. And if you do, then looking to this strategy and plan should give you a very high degree of confidence that the future we'll have a different feel to it. The signposts as to how successful in delivering that order book is a good sign, particularly in each of the geographies, and we're going to be very deliberate and intentional in keeping the market briefed us to significant wins and progress being made in specific sectors and geographies so that you can see that this rollout program is gaining traction. So I think that's one place to look. I think listening hard whenever we're updating around the transformation programs, how is that driving efficiency in the business, how is that improving delivery capability and then I think the final point would be obviously keeping a very close watch on where PBT is moving year-on-year. But there sources and locations of where about PBT is coming from. And if that continues to look like it's a broad and diversified geography that, that's coming from. I think thought should give some real confidence. I think the final point I'd make is we, as the incoming leadership team, are very aware conscious that the bridge issue, in particular, created real harm, particularly for the longer-standing investors or even though it came just before. And we're very cognizant that, that is a difficult period that this business needs to now move beyond. I'm very clear as Chief Exec of this business that for an engineering-led project delivery organization that should never have happened and will absolutely not happen again in the future. And we've taken some significant steps in the background around engineering control and disciplined rigor to ensure that indeed the case.

Thank you, Paul. That's all the questions that we have time for today. So I hand back over to you, both for any closing remarks.

Yes. Andrew, do you want to take some [indiscernible].

Yes. So first of all, thank you all for joining, and it's a really exciting time for the business. Certainly, for me coming in fresh, it's generally an excitement to the time that builds on all the great strengths and capabilities that Severfield has to offer, but takes it through with a really refocused strategy that I think gives us those more stable, resilient but yet exciting growth trajectory for the business ahead. but from my perspective, thank you for your interest. Thank you for the really good questions today, and we look forward to doing more of these events in the future.

Great. Thanks, Andrew. And I would echo that comment of thanks to people for being investors, but also being active in these types of forums, we appreciate it, and it helps it helps at the tone of the business, and it helps us cause correct and refining our plans as we move forward. I think I'll just leave you with 2 commentary. The first is, I made a very active and deliberate choice to join this business. I wanted to be here. I wanted to take all of that experience and network that I have from my previous 27 years of the industry and use that to drive this business forward. Severfield was a customer of mine for many, many years, and I have huge confidence in admiration of the business and that's increased in [indiscernible]. And the other thing I'd like to do is call out, in particular, our people. This is a very human business. We build the infrastructure that society relies upon. We do it with a workforce and professional teams, many of whom are very long-standing. They're here because they care, they're proud of who they work for and what they do and they are massively committed. And actually, it's those people that create the returns that we're talking about today. So I wanted to call out our people, and I wanted to shine that light on them on your behalf to understand just how much efforts and commitment and passion goes into an organization for us to be able to talk to you about it in this manner. So thank you for dialing in. Stay cool. This is probably the hottest webinar we will ever do. Have a great weekend, and thank you for your attention.

Thank you to Paul and Andrew for joining us today. That concludes the Severfield Retail Investor Webinar. Please take a moment to complete a short survey following this event. The recording of this presentation will be made available on Engage investor. I hope you enjoyed today's webinar.