Speedy Hire Plc (SDY) Earnings Call Transcript & Summary

[Audio Gap] today to hear from Speedy Hire who announced their results yesterday morning. If you have been following the story, you will have also seen that this morning they announced a contract win with Amey, which goes to reinforce the message within the results of the market share gains that are being achieved. We are going to start off with a video and then we're going to hear from the management team who will take us through the presentation and then there will be time at the end for Q&A. Please feel free to submit questions as we go along. But without further ado, here we go with the video. [Presentation]

Thank you. Well, that was the video. And now I'm going to hand over to the management team to take us through the presentation. Over to you, Dan Evans.

Thank you, Hannah, and good morning, everybody. Nice to be speaking to you today on the back of our results yesterday and yes, to Hannah's point, the additional announcement that we made this morning that Paul and I will come on to through the presentation. We are going to try and talk through a decent pace to allow as much time for questions and interactions as we possibly can. I've asked myself and Paul if you haven't met us before. So Dan Evans is the Chief Executive and Paul Rayner, our Chief Finance Officer. So just to talk you through the highlights of where we're at. So in July last calendar year, we launched our 5-year growth strategy called Velocity at our Capital Markets Day in our National Innovation Center in Milton Keynes. What we explained is over the 5 years within years 1 to 3, that is our enabling phase where there are some things that we need to do throughout the business in order to get the benefit of that in later years. Some of that is using technology systems and data in order to get that benefit in the margin; some of it around people, properties, assets, logistics. But there was 2 very distinct phases, we are in year 1 of our enabling phase. We continue to invest in our strategy despite the challenging market backdrop. That is a choice and we choose to continue to drive that investment in our strategy so that we are setting Speedy up despite the challenging macro to make the most of opportunities now and in years to come. We see our resilient performance across U.K. hire with performance positive from our National customers with some tougher conditions and challenges in our Regional customer base that we'll come on to. We've re-engineered our Trade & Retail proposition that you may have heard referred to as consumer strategy or B&Q if you followed Speedy in the past. We've done what we said we would do at our interims and we'll cover that and there are a number of significant contract wins and renewals underpinned by what we've announced this morning as Hannah commented on. Some positive investment in our specialist business growth engine articulated at our CMD. The acquisition of our battery storage business called Green Power Hire and the world's first hydrogen electric powered access machine that we went into a sole supply partnership with Nifty that is performing really well. And more laterally, we formed a JV with a company called ASC Energy to form a business called Speedy Hydrogen Solutions. It's very early stages. It was not material at all last year and will not be material to our performance this year, but an opportunity for time to come. In terms of the financial overview, Paul will take you through the numbers that you can see on the bottom there around some of the areas where we've had some challenge, what we've done to mitigate that and then where we see that end in terms of free cash flow, net debt and ultimately the dividend that was supported by the Board.

Good morning, everybody. I'm Paul Rayner, I'm the Chief Financial Officer, been with Speedy just over 18 months working with Dan. The results are on the slide there. Revenue was down year-on-year, a lot of that was linked to challenging market conditions. I'll talk a bit about our different types of customers. But for those of you who don't know us, our hire revenue is the business which is our most profitable segment and therefore, it declined 1.7% and therefore that impacted the bottom line dramatically by operational gearing. Overall, however, we managed to maintain our margin, our gross margin and our EBITDA margins, across the business. Dan will talk in a minute about how we're looking at pricing and customers. Within our service business, our revenue was down about 1.6% and that's linked to the market in essence. We do sell fuel to our customers and we buy fuel on the wholesale market. So its revenue is dictated by the cost of fuel. So last year say fuel was GBP 2 a liter, it's now GBP 1.50 a liter. So your costs are lower and therefore your revenues lower and we make a very small turn on that margin. We do call it out here so you can see the impact on revenue. The gross margin is slightly ahead of last year and that's linked to the way we manage our business. We have very strict control of overheads. Now obviously we all know about the inflationary pressures. In the 1st of April 2023, start of our new financial year which we just finished, we gave our colleagues a 7% pay rise, roughly 1% or GBP 1 million. So GBP 7 million, that was in response to inflation; but we managed to control the overheads everywhere else such that they are flat. On the 1st of April 2024, we've given our colleagues a 2% pay rise plus implementing the government's living wage minimum. So overall, we control overheads well, we maintain our EBITDA margins. In the appendices, you'll see we have a joint venture in Kazakhstan with a Scottish company that's in oil and gas. We own 45% and they own 55%. Its profits last year were a record. This year at GBP 2.9 million, that's more normalized profitability. They pay quarterly dividends to us in the U.K. The cash isn't tracked in Kazakhstan. Our share of its balance sheet is about GBP 9 million. So it's a very nice returning business. We did increase our interest rates year-on-year because interest rate's going up. We bought a business in October for cash because we have the facilities to do it, which resulted in higher interest. One thing you'll see to the PBT there down year-on-year linked to the decline in the revenue and the operational gearing impact. However, I focus very heavily within the business on managing our balance sheet and cash flow and it's really pleasing to see we've more than doubled our free cash flow. Our free cash flow definition is all our cash before returns to shareholders and M&A because we as a Board do not want to borrow to pay dividends. And part of the decision why we held our dividend was because it's 2x covered by free cash flow. As long as we keep generating cash flow, it supports payouts to shareholders. In the appendices there is a capital allocation policy, which over the medium term says we look to pay out up to 50% of our aftertax profit. We temporarily deviated from that given the cash flow we've been generating and also it's linked to the outlook where we said where our trading for the first couple of months of the year is in line with our expectations and we are winning contracts and I'll let Dan talk about the contract we announced yesterday and we talked about yesterday along with the one we just won this morning. Our debt at the end of the year is about GBP 100 million, it's 1.5x levered. We have a very good and strong bank relationship. We have facilities of GBP 180 million. which expire in July 2026. No covenant testings and we are comfortable where our debt sits. If I move on to the next page and talk a bit about our customers and how they work. We differentiate our major customers either National or Regional. National customer, we have about 200 of those. Those will be in the likes of Balfour Beatty, customers who've got to range all over the U.K. Regionals tend to be regional smaller businesses. 53% of our business is National customers, 46% Regional. National customers grew a little bit in the year and clearly with the contracts we're just about to talk about, that should grow into fiscal 2025. There has been recession in the markets and it's well documented I think coming out of it technically. We have seen over the last 6 months or so a significant increase in insolvencies in Regional customers, which haven't impacted us dramatically because we keep a very close eye on what we do and it seems in the last few weeks to have quietened down a bit. So our Regional customers are down 6% year-on-year by volume and across the piece. That is almost the same number as it was in September, which is our half year. It's not gotten any worse and since the year-end, it's probably [ aged ] a little bit better. In the National and Regional, our rate that we're getting with those customers actually has increased. So as we look at the business, we don't want to chase volume and that's not what we've set out to do and that's how we can maintain our margins. Our last segment is our Trade & Retail segment. It's the smallest piece as you can see there. We expect a lot of time this year restructuring how we do it. We had concessions within B&Q stores, which at the end of March we've closed completely and have now gone to a purely digital model. Once again Dan can talk through what we're doing with PEAK, our AI partner. We can move on. This is just a profit bridge from last year to this year. Gross margin is linked to the revenue. Last year in fiscal '23 we made about GBP 1.5 million profit on disposal of assets because we take assets to auction which are near the end of their life and we feel that we're better off just churning them. This year as the recession came and it motored through the last calendar year and into this year when we've been to auctions, everybody else is doing exactly the same thing. So the prices you get reduce and this year we lost about GBP 1.5 million. So that's a P&L bridge from 1 year to the other. Clearly as we were talking about EBITDA, that doesn't impact that, but it's a financial P&L hit. For those of you who have followed us, last year when Dan and I first started working together, we announced a rather large stock in our balance sheet and wrote off GBP 20 million in January, February of 2023 calendar. One of the things that I've done is to increase the rate we depreciate these nonitemized assets from 15 years to 7 years so that way you get an additional charge in year. I'm pleased to say having spent last year looking at how to recount stock, controls on stock, we have counted stock since January 2023 to the end of March 2025 group-wide 5x, the wall-to-wall stock count. At the end of March 2024, it was fine and that's what we've got referenced it in here. We do perpetual counts every week on our itemized and our nonitemized. We have a steering group that sits every 2 weeks going through it. So we have really tightened up on controls and if you looked at last year, you would have seen lots of conversations about it but it's not in here. There's the base pay increase, GBP 7 million, but we've controlled our overheads across everywhere and that's my job and that's what Dan and the team focus on. We lowered joint venture profits after last year's record and higher interest gives you the final number you have there. On the balance sheet and I'm particularly pleased with just the way we've got our balance sheet now. It's in a good place. For those of you who read sets of accounts, when you see our full posted set of accounts, you'll see our 31st of March balance sheet is unqualified. Last year was qualified because of the issue we had on stock and that's a good place to be. Our hire fleet is made up of our itemized assets and itemized assets are anything that's got a unique individual number on it. Nonitemized will be scaffold, poles, fencing and matting. GBP 180 million of it relates to itemized. We bought the business in October called Green Power Hire, which is a battery storage unit business. And at the end of March 2024, we had about GBP 16 million worth of assets in that category in the itemized hire fleet. Nonitemized 12% down on last year at GBP 28 million. Most of that is because of increased depreciation, but also enhanced operational controls. I'll make no bones about cash and working capital. We've got strong collections. We have the lowest overdues in the business that I've gone back 3 or 4 years looking through and it's about focus. We will not, however, take our eye of the ball because you can get bad debts out of nowhere. We have about 1% of revenue bad debt provision and that is comfortable. We've got the debt and we've got the banking facilities there. If I move on to cash. which is one of my favorite topics. Our operating cash flow is the conversion of EBITDA into cash, it's 98% converted from EBITDA. Last year it was 85%. We set a target of 90% so I'm pleased it's way above that. I don't think it could be much more because we have short-run business hires, we don't have long-term contracts. But that's good. The beauty of that is when you get that level of cash, you can afford CapEx, et cetera, et cetera. We guided the market yesterday that fiscal '25, we would have about GBP 55 million of CapEx. That will be about GBP 10 million more than depreciation. So we're growing the business and with flexibility to support further growth. Now the contract we announced this morning, it may well be that GBP 55 million is slightly higher as we get towards the end of our fiscal year. But we can support it because of our facilities and our cash flow. Cash flow of GBP 24 million more than doubled last year funds our dividend and that's one of the reasons why we held the dividend that we announced yesterday. We set out, and Dan will talk about the strategy in a minute, at our Capital Markets Day in July of last year that we wanted a suite of metrics to monitor the business; whether it's profitable growth, cash flow, utilization, ROCE and then shareholder returns. That's really just to show that we will continue to show this as a suite of metrics rather than 1 figure. And finally, my last slide. We set out some targets last July and this reiterates them. We think by the end of FY 2028, 4 years' time, we want to grow this business from the GBP 420 odd million now to GBP 650 million by just doing the right thing for the business and taking market share is one of them. We want to grow our EBITDA margins from the current 23%, 24% to 28% and I think we can do that whilst maintaining sensible leverage. Now if we continue the cash conversion, we can afford the growth within our leverage target. This will, however, cost us money. And this 5-year strategy, which we just finished year 1; in the enable phase of the strategy, we spent about -- we expected over 3 years to spend between GBP 13 million and GBP 15 million and in year 1 we spent GBP 3 million. So I suspect we will be near the lower end of the GBP 13 million rather than the higher end of the GBP 15 million. But that just shows and we'll continue to monitor that and show you that every time we announce. And that finishes my little section. Over to Dan.

Thanks, Paul. So just generally in terms of the market. There's lots of different pieces of data out there to underline and demonstrate how we would think the general market is performing. We seem to be inextricably linked to construction, but we do not only service the construction market. So whilst it's positive to see that the PMI data has improved and is the highest in and around 2 years. To provide that with a little bit of balance, construction output is estimated to have decreased over a similar period. We tend to monitor things like contract awards, which is great. People being ordered a contract, customers being ordered a contract. And then contract starts, i.e., that contract's awarded, when is that work going to commence. We serve a diverse range of customers across a diverse range of sectors with a diverse range of products. So whichever type of output you look at, I think we know that we are in a relatively subdued market. We have an election coming up, but we are happy that the diversity that we have across the business offers us opportunities to make the most of where those improvements come from the market. And then generally we referenced in our trading update towards the end of the last financial year the impact of seasonality. It was a relatively mild winter. We had had a significant wet season and post Speedy communicating that, that seemed to be picked up in a number of other companies and more generally across publications like Construction News, Construction Enquirer. It was tough and did have an impact on our third and fourth quarter trading. We were pleased to say that we took market share in a market that shrunk, our National customers grow. We have an encouraging pipeline that we'll come on to that we're executing as well as what Hannah mentioned earlier around the RNS that we put out this morning. Across the sectors that we serve, it's undoubtedly the residential and nonresidential commercial construction areas that have been challenging and continue to be challenging. I think that's a theme that you would have expected to see as frustrating as it is, but there will obviously be opportunities to come as we go forward with hopefully some further commitment around what's going to happen around housebuilding and opportunities across the general construction sector. Infrastructure remains positive for us. We've always done very well over the annals of time across the infrastructure sector. The rail sector has just moved from Control Period 6 into Control Period 7. Significant phase of investment across the rail where I'm pleased to report that we're performing well and there is further opportunity there that we're looking to work with our customers to make the most of. Similarly with AMP8 in the water where not only in our hire business, but in our testing inspection and certification business, Lloyds British, there are opportunities for growth in there that we're excited about. And then across the nuclear sector not just the obvious [indiscernible] and hopefully the opportunities to come with Sizewell as we progress, but things around small modular reactors and the decommissioning that we can continue to work with our key customers and their supply chain partners on there that are exciting growth opportunities for the business. In terms of the contract wins, why are these important? We said that we've won in excess of GBP 40 million of new business. This is not the GBP 40 million. It's a bit of a cross section that we are able to talk to you about today. It has been challenging mobilizing generally, but there's nothing specific that we can draw your attention to there as a reason. We just haven't managed to mobilize them as fast as we would like to. But Aggregate Industries, we're delighted to have won in more the quarrying and material sector. Vistry, as a significant housebuilder, we're delighted to be working with. Cadent more from a utilities and natural infrastructure perspective that we have talked about last year and has mobilized and progressed during the year. And then Algeco are more in the space of modular equipment side of things that we are delighted to have won as the year progressed. All of those contracts are at different stages of mobilization. There are others that we're not able to go through today, but we're excited by the pipeline of contract wins that hopefully continue to demonstrate the diversity of sector that we're looking to work across and we're delighted to be working with those businesses and others. Complemented by the announcement that we've been able to put out today post year-end that we have secured a new long-term agreement with Amey as a new contract that we will mobilize towards the latter part of our financial year. We look forward to the opportunity to work with them going forwards and the growth that can offer the business. Contract renewals in the customers that we enjoy working with today are equally as important to us and there's some key contract renewals that we've drawn out there specifically around Morgan Sindall, Babcock and Balfour Beatty that are large customers of ours that we've renewed for extended periods of time. We look to enhance value to our customers every time we seek to renew those contracts. We do not take them for granted. And we're very proud to have secured those for those extended periods focused on innovation, ESG, sustainability and how we can collaborate and share in success going forward; all of which by enhancing value to the customer and value to Speedy ultimately. In terms of people, I don't wish to sound cliche, but people are the most important asset to Speedy. We have a fantastic Chief People Officer in our business, Ellie Armour, who has worked really hard in this space as part of our strategy. We've invested just over GBP 7 million in base pay at the beginning of last year as Paul commented on. That's important and that is a well-placed investment because we work so hard to train and develop and infuse our people as part of the strategy as well as ensuring that we are continuing to roll out and trial flexible working, which I'm pleased to say we have now got around 1/3 of our colleagues enjoying. But that investment in base pay, that flexibility that we're providing to our colleagues along with some other things that we're doing has seen attrition reduce on a voluntary perspective from just over 20% to slightly over 16%, which is a record low level of attrition for the business and a credit to what we're doing as part of the people part of our strategy complemented by the work that we do around people in earn and learn roles; graduates, apprentices; that are supported by how we work with the 5% club and our Investors in People rating. We continue to try and be a place where we can ensure that more females can be successful across our business. It's improved. It's not as diverse as I would like it to be yet, but it's a core part of our strategy across our people agenda as is what we're doing around race and ethnicity so that we can ensure that we are in a place where everybody can thrive and be successful. And from a health and safety perspective, ultimately we are an operational business and this is very important to us. I was delighted to attend the ROSPA awards recently with our Health and Safety Director, Andy, where we were awarded the President's Award for 10 consecutive years of the Gold ROSPA award, a fantastic credit to our business. We implemented our STOP campaign, which stands for stop, think, organize, proceed where we encourage culturally everybody across the business to stop any activity that they think is not right whether that be health, safety, well-being; whatever that may be to foster that culture that everybody can challenge that. Starting with the leadership team where we have continued to roll out cultural awareness training as the year progressed. And as part of one of our technology development, every company device throughout the business has the ability to engage with our leading indicators technology. There's a QR code in every location where any colleague, visitor could log on any device, hazard a positive observation or an asset integrity inspection. And it's great to see those record high leading indicators. That's a good stat to demonstrate that hopefully we are preventing incidents or encouraging positive behavior before anything negative may have happened. That is leading to our lost time injury rate trending down. It's never good enough if somebody has gone home hurt. So we are always looking for continued improvement in that space. In terms of ESG, I'm not going to read through all of these, but it is a core pillar of our strategy. We continue to invest in eco or more sustainable assets as we go forward. We are the first in hire to have our net 0 targets validated and we continue to focus really strongly on our Scope 1, 2 emissions as well as helping our customers with their Scope 1, 2 and 3 emissions. We have a CDP A- business, which is great progression from where we were last year. And we continue to invest environmentally in our service centers, which I'll talk to when we get to our strategy. That's underpinned by being an EcoVadis Gold business places us in the Top 5% of businesses for sustainability and we've been recognized for the last 2 financial years by the Financial Times as a European climate leader. So if we just move on from the business into the strategy. So when we launched our CMD last year, which is all available on our website, we said that the strategy was over 5 years and in years 1 to 3 whilst we expect to continue to grow, there were some enabling side of things that we needed to do to get into the business and move it forwards. So we have continued to invest in our Velocity transformation strategy. That is a choice that we're delighted that the Board has continued to support some. And it's really important that we can't just sit back and say, "Well, okay, we'll just control our costs a bit more and we'll move forward". We need a strategy that is clearly communicated internally to our people, clearly to our customers and clearly to our investors. We brought in a new customer voice platform where we can measure how we're performing at every point where we touch a customer from delivery and collection right through to invoicing and payment across the channels that we serve. We've got testing and inspection business as you've heard Paul and I mention Lloyds British that we have restructured and we've got a new system into that business so that we're not treating it as a hire company. We've worked on it for a period of time and we're delighted to have that system now in place to hopefully start to get a bit more benefit of scalability where it's not quite so much overhead first. And we can use that system for the benefit of margin growth and customer experience as we go forwards. And similarly, you've heard a lot around what we've done around technology and AI. A guy that we had in the business for a long time, our CIO, has done some fantastic work here that we're very proud to continue. And that goes through to our D365 Customer Solutions model where in the business where we rehire, you may have heard us call it partnered services in the past. That module allows us to systemize the partners that we work with and how we select how our equipment is allocated to our customers making that an easier experience. Even though we don't own the asset, it's a significant part of our business. But because we don't own the asset, it's complementary to driving our return on capital growth. Paul mentioned how we've changed our Trade & Retail business. We have been a concession-led business in partnership with B&Q, part of the Kingfisher Group for quite some time. We have exited all of those concessions. We are now a digital business in that space where we are digitally in store for hire in circa 300 B&Q and Trade Point stores as well as being available in both B&Q's website diy.com and tradepoint.co.uk for hire that we can then deliver to a customer to their home or their job site within 4 hours. It's not a B&Q and Trade Point strategy. We're very, very proud of that relationship, but is a Trade & Retail strategy where we want to continue to grow with them and why they're into that space as Speedy Hire for the opportunities that offers us digitally and we have now in a more cost-like opportunity heavy going forwards. I mentioned, I want to just stay on that slide a second, around the work that we've done with PEAK over a period of time. I mentioned our CIL earlier. We've worked really passionately in that space. We've strengthened that relationship and we are looking to continue to use AI across multiple areas. Paul mentioned pricing earlier, things like regional dynamic pricing, pricing within our Trade & Retail area right the way through to right equipment in the right place at the right time, which I will touch on. And then in our service centers, we've got 8 service centers now where we have closed some depots to amalgamate and opened new ones in our National Innovation Center at Milton Keynes right the way through to our new one at London Gateway. What we can tell you now is they are more environmentally efficient, they are better for our customer experience and they are engendering greater levels of colleague retention and satisfaction. But we are using in excess of 60% less energy at those sites. And from a pound notes perspective, that means that we're saving circa GBP 40,000 per site fully loaded when you look at it in terms of the cost of that energy. So it's a great position from an ESG perspective, but also financially that has started to perform for us too, which Paul and I are really pleased with. When you look at year 2 of the strategy, i.e. in terms of the year that we're going into now to give you an idea of some of the things we look at. We need to continue to enhance our digital channels. That's our website, that's our app and that is our things like our customer solutions technology, Microsoft CS, D365 CS that we spoke to on the previous slide. That's not to say that they're poor now, but we want to enhance them and improve them for all customers going forwards from National right the way through to Trade & Retail. We are going to launch a new CRM. I think Speedy has grown and improved over the years, but we have not had an effective CRM in place that we've been happy with that we can link into effective marketing data and a customer experience platform that we spoke to on the previous slide. It offers us a massive opportunity to systemize our interactions with our customers and the benefit that comes from that we expect to be very positive for the business. We are going to integrate an order management system so rather than it being people-led where assets come from and what assets we allocate to what order in its simplest form, we are going to systemize that. We have a fully embedded ERP system across the business that gives us an opportunity through the technology that we've already invested in to bolt things on to that and use that as an enabling platform for our future success. And that work that's been done in the background will allow us over the next 2, 3 years as part of our enabling phase to change the way that we look after customers' orders. And then we throw that through on to the right hand side, I've said all along the slide is in the appendices here. We cannot drive utilization by just sweating assets. We must link our asset data to our logistics data and performance and our service center network. And those are the 3 areas supported by data and technology and powered by our people that will drive our performance there. We are working on a predictive CapEx model that will need to be linked to our CRM and to the work that we're doing with PEAK to improve that going forwards. We are always working on price optimization to enhance the value for Speedy as I've spoken about as well as continuing to offer value that doesn't mean cheap. It means there's value to our customers to ensure that we're always looking at all the right things supported by our AI and data. We'll continue to explore partnership opportunities. I'm delighted with the partnership that we've got with PEAK, I'm delighted with the partnership that we've got with Nifty with the world's first hydrogen electric power access machines and how that's performing and with the JV that we more recently formed with AFC and the opportunities whilst it's immaterial this year for us, that it should offer for us in the future. And we are looking to continue to diversify and I think we've demonstrated that in specialist businesses, products and services, whether that be things around hydrogen and energy sources, [ peak] solutions, rail. We are looking organically at the opportunities that are available to us to grow. So just finally from Paul and I in terms of outlook. It is a challenging and nervous market out there, but we are happy that is manageable. We are serving a diverse range of customers and sectors with a diverse asset base and we believe we're well positioned to capitalize on infrastructure opportunities and other opportunities to open up as the market improves going forwards. We've demonstrated bullishly that we are winning business. That's really important to us to be a customer-focused business as we go forwards both now and in the future executing well on our Velocity strategy and demonstrating putting those investments to work. We're pleased with the dividend that we've managed to maintain supported by free cash flow as Paul has articulated. And we've started the beginning of the current trading year in line with the Board's expectations. But we do expect there to be some second half weighting as you would have seen before with the relative seasonality of the business as we build the mobilizations of the contract wins that we've talked about. So thank you. That's the overview from us. I'll now hand back to Hannah for questions.

We have a number so let's make a start. ROCE is 9.9% as you just reported. If Velocity is a success, where should ROCE be in year 5 and would this be higher than current industry peers?

I would anticipate by the end of FY '28 we should be in mid-teens ROCE, which was always a target of my predecessors. It is lower this year because it's a factor of [indiscernible], but we didn't suddenly decide to sell GBP 30 million or GBP 40 million worth of assets just to maintain the ROCE target. But I would think midteens ROCE is perfectly achievable.

Okay. And compared to industry peers?

So I think we're happy to focus on what we're doing. And as Paul said, we could have improved ROCE this year by selling half the fleet and we managed to improve ROCE last year by there being a stock write-off that Paul and I had to deal with. So as part of a balanced suite of metrics, I think continuing to enhance return on capital employed against Speedy Hire strategy is what's most important to us.

Perhaps I should read when we get a Labor government, are there any aspects of policy in their manifesto, which gives you even more optimism or pessimism about the future than the current situation?

We have no political allegiances, but we would love to see whoever is in government follow through with the commitment to full expensing for leased assets. I think that would be very important to us. I think it is unfair how it is positioned at present. So we would love to see with whatever color government that is follow through. I think in terms of whatever government comes in next, we're all looking for the confidence to be returned whether that be in infrastructure, housing, construction, the labor market having enough people and enough support for developing skill to do what needs to be done. I don't think there would be anything in any current manifesto that is generally putting us off.

I would say another thing, which is apolitical really, a reduction over the next 6, 9, 12 months of interest rates will clearly help the economy generally. And I know there's an MBC at 12:00 today and let's see. But when interest rates start to reduce, I think you'll get that linked with a change in government, which way whatever it is, then it will help reduce uncertainty.

Helpful. Trade & Retail and particularly B&Q, what are the early indications of the impact on sales levels following the implementation of B&Q's digital strategy?

Yes, it's a great question. We've lost money in previous years in the setup that we've had because of the cost of the concessions. I'm pleased to say as we've made the decision that we have that's no longer the case. The upturn in digital is pretty significant because it is now the channel. We don't have physical concessions so you can order digitally in store, whether that is at a [ TIL ] or a trade counter or via diy.com, trade-point.co.uk or Speedy Hire's website. So the increase in digital is significant, is encouraging. We'd like it to be faster and we are working in partnership with them to do that. But we have shifted it from a proposition that didn't make money to a proposition that is now profitable. First 2 months of the year it's profitable, first 2 months of last year we lost money. So the FP is happier now than he was a year ago.

Have you been pulling the price lever to win recent contracts or are you differentiating on other factors? And if it's the latter, what are the most important factors?

By the price lever, I'm going to assume I'm being asked if we are cheap. No, I think it's really important that whether it is in retaining valuable customers or offering value to new customers that it is about value. Now that value is determined in a lot of ways. We always have to be competitive. The market is competitive. But ESG and commercial sustainability has been very important. What do I mean by commercial sustainability. We could replace just about every asset in the company with a more sustainable product or service. But if our customers aren't prepared to pay for it or it doesn't offer the right returns to shareholders, why would we do that? So we work really hard in collaborating with our customers to ensure that we offer value to them and their wider supply chain. ESG and health and safety are very, very important for that. We also enjoy collaborating from a people perspective. Can we share ideas around skill, apprenticeships, graduates in order to ensure that we are keeping talent in the industry? But it has been pleasing as well that some of the things that we've done align to the strategy, the work with Niftylift, with the battery storage units and more laterally the joint venture with AFC Energy and Speedy Hydrogen Solutions have I think encouraged people that we have got our finger on the pulse around innovation and some of the challenges our customers face. That's not to say that any bid isn't competitive, but no, we are not out there eroding value for Speedy or our shareholders.

The new contract we just won will be in line with our current group margin so it's not a diluted contract just for winning the contract.