Van Elle Holdings plc (VANL) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen, and welcome to the Van Elle Results Presentation. Before we begin, we would like to submit the following poll, which you will see on your screens. [Operator Instructions]. The company may not be in a position to answer every question it receives during the presentation today. However, the company will review all questions and publish responses where appropriate. These will be available by your Investor Meet Company dashboard. Finally, I would like to remind you that this presentation is being recorded. I would now like to hand you over to Chief Executive, Mark Cutler; and Chief Financial Officer, Graeme Campbell. Gentlemen?

Thanks, Tom. I am Mark, this is Graeme. Thanks for joining us. We'll quickly run through a series of slides that talk about the FY '24 results. Hopefully, you can see the screen. And then we'll spend a little bit more time than in previous presentations on the outlook in growth markets that we've built in our opinion, very strong positions in because we think that will really help all of us to understand the potential as we move into stronger market conditions that I think we will expect will return in the near future. FY '24 was certainly a challenging year in terms of the wider construction industry confidence, delays, inflationary pressures, a gap between investment cycles in infrastructure and the cost-depressed housing market, all conspire to pretty much come at the same time. All very much as expected, a little bit worse in a couple of areas, but also 1 or 2 things that went ahead of plan. But in the round, we've delivered exactly what we said. So there shouldn't be any surprises in the results, I hope and we've come in with a set of numbers that are in line with expectations and certainly as we signed posted as we approach the year-end. So consistent profit margins with last year. We'd like to be growing faster. We certainly feel we will be. But in the circumstances, we think we've done very well. And we've developed strong positions in the growth areas that I'll come on to later. We've been busy investing time and effort with customers and, indeed, diversifying overseas as well as with the capability in the U.K. again, I'll come on to later on. And really in terms of the balance sheet and the dividend, no surprises whatsoever. We're very much as forecast and hopefully, that's all appreciated. In terms of the markets that we operate in, just a quick summary in the -- all in the U.K. really on the face of it, a good balance between residential, which includes traditional housebuilding, open market and partnership housing, but also taller residential schemes often for the same customers, depending on which part of the country, lots of taller stuff in London, of course. And infrastructure, which is a combination of railroads and to a lesser degree, some of the utility sectors, water and energy. But of course, rail is a niche area for us. And regional construction, which is effectively building and building a combination of commercial schemes, mixed-use schemes, manufacturing and industrial warehouses and prisons, a whole mixture of things that very much take place through regional construction companies. And the dynamics do vary around the country, much, much wider, more fragmented marketplace. But the point is we're diversely spread across all 3. That gives us a certain protection against cyclical investment pressures. And what we saw in FY '24 was pretty similar trends to what we've seen in previous years. We are deliberately pushing more into infrastructure. We are more selective in construction because that's where we see the biggest commercial and credit risks with some of our customers. And we see the least mature procurement processes, quite frankly. And in housing, we've done more than probably we thought we might do at the start of the year and some of the bigger resi has been more resilient. We would expect that to typically be a bit lower than 41% on a similar level to regional construction because the margins are a bit lower. And that mix in the round gives us a very good spread to manage our workforce and manage our workload. But as I said, nearly all of those sectors really struggled to some degree with the wider macroeconomic climate during the course of FY '24. So we've had to work hard to deliver the revenues that we've reported. Graeme, do you want to take up from here?

Thanks Mark. So probably I'll take a quick run through the P&L balance sheet and a quick review of the divisional performance. As Mark said, really, no real surprises down the face of the P&L. A decline in revenues as we expected, revenue down 6%. And you may be aware that we acquired Rock & Alluvium from Galliford Try at the end of November. So we've got 5 months' worth of trading in there, which accounted for about GBP 8 million. So on a like-for-like basis, revenue is down 12%, which I won't reiterate the points that Mark just made the challenging markets. Very pleasing to see the gross profit performance improving. There are 2 major factors in there, one being the positive mix impact, which benefited from lower -- sorry, a decline in the housing volumes. So we had a very strong first quarter within our Housing division. And then as has been widely publicized, much more challenging following 3 quarters. And of course, our Housing division is at the lower end of our margin range. So when the revenues decline, a slightly higher proportion of our higher-margin work, and that's had a positive mix impact. But more importantly, I think we've had better contract execution. Fewer issues on site. What teams have delivered really efficiently, really well in the year, and that's delivered a margin improvement overall. Of course, we've still got some inflationary pressures. You don't have to go back too far to recall days of inflation running up at 10%. So there have been some inflation challenges, and we're working hard to keep those under control, particularly around efficiency projects and some cost saving measures. But overall, it's delivered a reasonably healthy looking EBITDA and broadly an underlying profit before tax broadly in line with last year, just slightly down, which overall, I think given the market challenges and the decline in revenue, we're reasonably pleased with. I'll just touch briefly on finance costs. We are importantly now in a very low debt position. We inherited a modest amount of debt from the acquisition of Rock & Alluvium. They are higher purchase contracts and at the end of the year, we have 2 contracts remaining. So overall, total HP debt is GBP 0.5 million. That will clear within the next 12 to 18 months. So very modest levels of debt, which, of course, you can see there the impact of finance cost reducing. We have cash on the balance sheet, which I'll come on to very shortly. And that, of course, we're now in a position with a stable cash balance to invest that money and gain some interest for probably the first time the business has been able to do that is in the last 12 months. In terms of the 3 divisions that we report against, General Piling, Specialist Piling and Rail, and Ground Engineering Services. Just very briefly in turn, General Piling has seen an improvement in revenue, but an underlying reduction. Of course, this division has had Rock & Alluvium integrated into it. And with 5 months of trading that delivered, as I mentioned, GBP 8 million revenue. So overall, on a like-for-like basis, there has been a reduction in revenue, but more importantly, coming back to the margin performance, what we've seen, good strong margins delivered right across the General Piling division, and that's showing operating profit improvement year-on-year. In the prior year, we benefited from 2 very, very large contracts, which were slightly below normal margin levels. This year, we've done more contracts, but we delivered them efficiently and got a better return. Specialist Piling and Rail, ScrewFast forms part of that division. That ScrewFast solution, that's where we report it. Broadly, a small reduction in revenue. Two very different stories. Specialist Piling had a very challenging first half with a drop-off in activity levels, but come back very strongly in the second half as we signposted at the interim results announcement. Rail has had the opposite impact, which is a solid start to the year. But as we've a CP6, Network Rail's Control Period 6 has come to an end of the second half of the financial year has been much more challenging. And we don't really expect to see the volumes in CP6 ramp-up and CP7 ramp up until 2025. Mark will touch on a bit more detail around the Rail sector on a later slide. Overall, margins have held relatively flat and the impact there and the reduction that you see in operating profit is primarily the investment that we've made into the Canadian rail business, and we'll touch on that on a later slide. In our Ground Engineering Services division, we've got -- formed 2 parts, 80% to 90% of revenues come from our Housing division. And of course, the housing market has been very challenging. We saw a very strong first quarter, as I mentioned, -- and the team has done actually very well, I think, over the remaining quarters to achieve breakeven while the market conditions have still been very difficult. But what we have importantly done is retain all of our capability in people. So as the market recovers, and we expect it will, we're well placed to take advantage of that growth and return back to more historical levels. So the challenge really here has been a reduction in volumes, and you can see that flow right through into the operating profit reduction. Strata, which is about an GBP 8 million turnover business, ground investigation part of the business performing very well. Historically, we delivered sort of 50% gross margin. So it's a high-margin part of the business. Lots and lots of small contracts, a good addition to the group structure, a lot of cross working across some of our other divisions. And I'm pretty pleased with the performance there overall. In terms of the balance sheet, not a huge amount to say here other than it's clearly backed by a significant fixed asset balance. So the backbone of our balance sheet is a heavy investment in our assets. And we see that as a growth year-on-year, and that is a capital spend internally of GBP 5.5 million. And as part of the acquisition that I mentioned, we brought on the books, plants and equipment of GBP 2.9 million as well. So continuing to invest in the fleet of the business. Working capital is up a little bit primarily due to a very strong end to the year. We had a very big revenue performance in April. And of course, that hits our receivables position. We've also got an R&D tax claim there, which is very normal, slightly bigger because the scheme that HMRC offer has improved. And so we made a big claim that sits in debtors and causes a bit of a working capital increase. But overall, we're trading at a normalized historical working capital levels when you look over a rolling 12-month basis. And the final point really is, I think from a balance sheet position -- funds position, we're in a comfortable place. Lots of businesses out there in our sector are struggling. We're sitting with a healthy cash balance, GBP 6 million at the year-end, very low debt, GBP 0.5 million, as I mentioned earlier. And really, the only other -- the number that brings us to a GBP 1.6 million net debt, which most people discount anyway is the IFRS 16 lease liabilities, and we've got GBP 7.1 million of those. And importantly, we still have the GBP 11 million funding facility, which for those that have joined this call before would be familiar, undrawn during the year, a very important safety net that provides us great scope for growth and managing working capital ebbs and flows if we -- should we need it. There's a bridge here on the cash flow. We've moved from GBP 8.9 million down to GBP 6 million, as I just mentioned, just the closing cash position. You can see there a healthy operating cash flow. The normal things we've seen, working capital growth, which I've talked through, a significant amount of net CapEx. The acquisition cost there is twofold. It's the first tranche of the Rock & Alluvium payment which is GBP 1.8 million. And then the final tranche of our acquisition of ScrewFast Foundations, which we completed in April 2021. Normal levels of repayments of loans and borrowings there and, of course, the dividend, which we returned to the dividend role a couple of years ago post pandemic. So I think broadly, cash is looking really sensible. There's a capital allocation model here. We haven't published this before. I'll just touch on it very briefly, but clearly, our priority is to maintain that strong balance sheet, disciplined cash management, keeping debt low and making sure we've got enough cash to fund the normal working capital cycles. In terms of second priorities, investment for growth. So giving us the capacity really to use our cash to grow organically, Canada would be an example of that, but also to reinvest in the fleet and make sure we've got that market-leading fleet that we have. We have 132 rigs and make sure that they are operating efficiently, they're modern rigs. And also give us the capacity for strategic bolt-on acquisitions. Clearly, we have -- we don't have huge volumes of cash, but we have enough to be able to complete small bolt-on acquisitions from cash resources, which is what we've demonstrated over the last 2 to 3 years. Third priority, remain on the dividend distribution, we expect dividends to grow in line with earnings, but it is a prudent dividend distribution simply because we see strong opportunities out there in the market, both for organic and acquisitive spend. And then as a final priority we've got to distribute ex cash. I think we're not in that position at the moment, and with the opportunities that you will see on future slide -- on the next few slides, I think you'll see we've got plenty of opportunities for spending our cash. A quick reminder of our strategic targets there on the left-hand side. Priority really operating margin getting up to 6%, return on capital, 15% to 20% is our target. We're obviously at the leverage. And many more recent years, annual revenue growth, we've got into the 5% to 10% compound growth rate. And a quick reminder there of the 2 acquisitions that I've just mentioned, ScrewFast in April '21 and Rock & Alluvium earlier in this financial year.

So it's probably worth actually, Graeme, reminding where we are right now. In terms of these results, the operating profit margin is 3.9% and flat with last year and return on capital does put that into the presentation, did we? But we're somewhere between...

Yes. I mean we've progressed from the pandemic years to grow our operating margins. We're currently 3.9%, as Mark said.

In terms of the growth segments that we are focused on, these are effectively all of our sectors, really. We see growth in all of them. The housing market is no doubt reasonably well reported and won't be any surprises here to see that the new government and commitments around housing volumes and easing the planning restrictions, the potential for reduced mortgage rates are all very positive signs that will stimulate the construction of new housing around the U.K., both open market sales and major volume house builders and partnership at affordable house builders, we work for both and we're resilient as a result of that. We also have a very smart system for Smartfoot, which allows house builders to complete schemes faster and modularizes the foundation, construction process to get out of the ground with less risk, less resource. And in brownfield locations, that's got distinct benefits. It has as well, even in greenfield locations, but we think the benefits of our system will be exacerbated. And we've been busy developing initiatives to prepare ourselves for the growth ahead. We announced just before our results, expanded facilities at for our precast factory to deal with higher volumes of precast pile manufacturer, a collaboration with M&J Evans, who are a like-minded national groundworking business where we see the benefits of integrating our capabilities on major housebuilding sites and a big scheme for Keepmoat in Nottingham that will be the trailblazer for that, which were both awarded too. And early indications within our own business in terms of order intake are very positive. We are 30% up on Q1 last year in terms of orders so far. Very early days, those orders don't necessarily translate into starts on site with any real absolute firm time frames, but it's all moving in the right direction. We're expecting increased activity levels materially from FY '26. If we see some of it in the balance of this year, then fantastic. I split the Rail, our views on the Rail sector 2, one for the U.K., one for Canada. In terms of the U.K., obviously, Network Rail are the dominant procurer of rail contracting services and we've been transitioning as Graeme explained from Control Period 6 to Control Period 7. Control Period 7 started in April 2024, but it is normal to spend a year in the first year designing and scoping projects because all of the regions in Network Rail's world on the right-hand side, reprocure our frameworks at every control period. So the deck shares move around and the procurement models change and our customers change as a result. Now good news is that the winning contractors for the CP7 awards, and they haven't all been announced yet, are household names, and we have developed deep relationships with during CP6. There are not many surprises to us, and that will take us quicker into CP7 than we would have done 5 years ago, where we were still, in my opinion, developing some of those relationships better. We've also been diversifying our customer base and secured a major framework direct to network around in the Southern region. That is mobilizing. We should start first projects in September, that's a 10-year deal potentially. And we have a major project that is spanning, almost spanning the transition period on the TransPennine Route Upgrade, which is now underway at a reasonable scale, and will only get bigger and will extend for 3 or 4 years and we are in a very good position in terms of scope of services we're providing across Manchester across to Leeds and either end as well. It ultimately goes to York and out to connections out to Liverpool, very important program for us. And in our horizon is the next major electrification program in the U.K. This is very stop-start, unfortunately with Network Rail, and this will be in the Midland Main Line electrification extension to Sheffield, which is long-awaited in the industry. But I think it's fair to say all of those things together, once they come through, including the stations I referenced here, look good. But I think we're looking at FY '26 and FY '27 for it to really gain full traction, if you'll excuse the pun. But at the end of the day, I feel a lot happier going into CP7 than I felt going into CP6. Now the other initiative that we undertook was to diversify further beyond just the U.K. into Canada because we felt that the cyclical spend in the U.K. and the lack of confidence that not just us, but the wider supply chain in the rail industry felt with patchy investment meant that we needed to do something much more sort of radical to allow us to achieve what we wanted to achieve. And as I explained in previous presentations, we selected Canada after an international review of opportunities. And the conditions in Canada absolutely fit very well our capabilities and the timing for us providing these expanded services. So 12 months ago, we mobilized into Toronto. On the face of it initially to become the delivery partner for the Toronto network expansion pictured on the right, which is enormous far more than we could do on our own, by the way. But of course, we're faced, as may be predictable, faced with delays and disruption that really made FY '24 quite a challenge. We've invested and reported a lot of just over GBP 1 million here operationally during FY '24. So the results that you've seen have absorbed this investment. And we are now in a position coming to the end of Q1, where workload has ramped up significantly. We have a diversified customer base as a result of not waiting around for the GO Expansion program. We're on the verge of being finally the preferred bidder for the latter and have developed a customer base of industrial customers that's proved to be much, much more easy than we thought it might be and that has proved a very attractive contracting environment for us, and we're delivering services that frankly don't exist in North America, let alone in Ontario. And the pictures at the bottom here are the sort of things I'm talking about, which is road rail-based equipment delivering line side works. It doesn't have to be piling and foundations. And this technology is not at the -- as advanced as we've developed in the U.K. off the back of our experience in CP5 and CP6, let's say, and is in high demand already. We only have 4 machines in the country and a team of 8 people, but they are now flat out. And we're planning the next shipping of equipment and the building of our team over the rest of FY '25. We have a CAD 40 million bid pipeline, we're winning 80% of what we're bidding and really pleased with progress. We'll deliver a profit in Canada this year, we expect and start to demonstrate the investment we've made has been well worth it. The water sector is not a sector we've talked about frequently in these presentations because we've not had a real focus on it, if I'm honest. We bid projects all the time, but haven't really invested dedicated resource into the -- a deep understanding of the needs of the sector and the relationships both with water companies and the Tier 1 contractors. The good news regarding the contractors, is there's a lot of read across from rail to highways to water in terms of the infrastructure divisions of our major contractor customers. So it is quite achievable for us. And we've used the opportunity of the arrangement that we have put in place with Galliford Try to accelerate our progress. It was part of the rationale of the Rock & Alluvium acquisition, and particularly thinking about water, and that is progressing well. And we've been building up schemes and developing designs, planning projects, and as Galliford's are getting visibility on the schemes that are coming through, either at the back end of AMP7 and/or into early stages of AMP8, we are now there with them and indeed, 1 or 2 other customers who have similar scale of ambitions in the water sector. So we're quite pleased with progress. This is in the context, of course, that the spending and pay, it is almost double what it was in AMP7 for again, well-publicized essential reasons why more infrastructure needs to be built or improved across the U.K. And it's equally important for Scottish Water who are regulated slightly differently and working all across the country in every region of -- with every water company at the moment it looks like. So we're really pleased with progress. One thing that we do in water, and this is a theme is that we have differentiators that are different than our competitors. And right in the middle of this are 2 initiatives. One is the ScrewFast acquisition from April 2021, which was always very strong for highways, but as I'll come on to that hasn't quite worked out as we'd hoped in terms of that market growth, but works very well in water in terms of modular steel foundations that are speedy and efficient in -- with repeat standardized designs. But also our civils capability, which we've developed organically goes hand-in-hand with the foundations work that we do, because these works interface with each other. We've been doing this in Rail for a couple of years, and it works very well. And sometimes customers want the combined service a bit like what I described with M&J Evans in the housing sector earlier. It reduces the interface of people tripping over each other, working on simple stuff that could be done by 1 for party. The stuff we do is more complicated, so we're starting from a strong position to do ancillary civil engineering works around us. An even more exciting, in our opinion, growth area is energy. There is a, again, well-publicized commitments from Ofgem and the asset owners to upgrade, replace, provide new connections for the transmission network and indeed, the more local distribution networks, bringing green energy connections on the shore is behind a lot of this, as is replacing worn-out infrastructure, often 50 years or more old. We're doing quite a few transmission towers that are -- where the foundations are failed, for example, at the moment. And effectively creating the capacity for the country's security and low carbon needs into the future. This is, again, essential infrastructure, it's not optional. We're pretty confident that the frameworks that we're seeing announced almost on a week-by-week basis in different parts of the sector are going to proceed at pace. We've developed frameworks of the -- back-to-back of some of these major announcements with the Tier 1s that are going to be delivering a lot of this work. Not everybody because we're selective about who we will work with. Again, we're focusing on customers where we have a read across from other infrastructure sectors where we're familiar, and we have a good level of trust and understanding of the relationships, but we also have a good track record in transmission and energy infrastructure. We've done over 100 substations, for example, within the group, quite a few -- the majority of which were done by ScrewFast over the years. And we have done a lot of transmission-related work and onshore wind farms, for example. And you put all that together, we've got a pretty good combination alongside our unique capabilities, which are very similar to water with having the ability to do all foundation types and civils in difficult locations with complex foundation techniques as required. And we are quite different in that respect and then so confident that we'll be in a leading position going forward. Again, this work isn't really going to start in earnest until FY '26. There's a lot going on now in terms of early design and planning with the partners that we're working with. I wanted to mention highways because perhaps contrary to popular belief, I mean, it's been difficult for us in the last couple of years in highways. And we are very disappointed, of course, that the Smart Motorway Alliance didn't turn out to have the potential that we thought it would have at first. We've ended up properly delivering 10% to 15% of the volumes that we would have expected at one stage. But we delivered them very well, and we've made the most of our position on that framework nationally. The photo left is one scheme, for example, of a retaining structure we've done on the side of the M1 recently, and we've done several others. We do all the gantries now on the Smart Motor Alliance using our ScrewFast Foundation solution. And Strata, our ground investigation business are out doing ground investigation on highways all over the place of a national framework with National Highways that's been growing during the course of FY '24. As we look forward into what the highways or National Highway called RIS3, which is their investment program, we're -- I feel more confident than I would have felt 12 months ago. Part of that is helped by Galliford Try's presence on several schemes that are visible to us and have been through the delays and environmental challenges affected many highways projects over the last year or 2. And those are -- that's a greater level of visibility than we normally get if I'm honest. And we have 1 or 2 other partners of a similar pedigree in which we've emerged as their -- not their sole delivery partner, but certainly one of their preferred and that gives us a lot of confidence that we're making good progress with those customer relationships. And again, those are the same sort of customers that we're seeing in the other sectors I mentioned earlier, BAM being one of those, for example. And then finally, in regional construction, which is a more fragmented market, more nebulous, difficult to focus on consistent customer relationships nationwide because the delivery of the enormous amount of building work that goes on the U.K. is spread across regional offices of building contractors or regional contractors that only operate within certain geographies. And there are many, many different projects and project types. So a very diverse customer base. We're very careful here with customer credit and their ability to make good -- the payments to us as we deliver the work. So we put a lot of effort these days into governance around creditworthiness. But we do see areas of growth here. Again, compared to 12 months ago, the acquisition of Rock & Alluvium gives us a much stronger position in London in the Southeast, which is a bigger market by fact. And our pipeline in London Southeast has grown significantly as a result by combining Rock & Alluvium with a wider Van Elle capabilities, but also there are emerging trends of strong investment in data centers, industrial schemes, battery factories. Warehousing is still strong. Our expanded precast factory helps us with that as well. And also prisons, the MoJ program for prison construction, again, gets a lot of press, but we are seeing now the start of the new prison program starting to hit early site works. We are involved with Wates who are the leading framework partner in multiple frameworks that exist with delivery of several of their schemes on a quota-close partnership basis, which we're very pleased with. Again, we've put a lot of time into that. So we see opportunities here that are a bit more structural than perhaps some of the high volumes of bidding that we've always done without really maybe seeing the progress in individual segments. So looking forward to further progress in this sector as well. And if I was to rank all of these, this might be further down list it's still moving in the right direction. Near the top would be energy and water and rail in Canada as the fastest-growing segments, but all of the ones I've just mentioned should be -- should be delivering increased revenues as we go forward over the next 3 to 5 years.

Just a brief update here. I won't go through is a very detailed slide. Obviously can use it for reference. I mean just showing our commitment to our CO2 reduction plan, sustainability, our efforts in the year have ramped up significantly on sustainability over senior work level working group with representatives right across the business looking at our sustainability policies. I think we we've had a huge amount of activity in the year that I won't cover off here. But a couple of highlights. We held a sustainability open day in our head office at Kirby. Customers and suppliers visiting, demonstrating products, their sustainability efforts, sharing ideas. And I think I'll just touch briefly on social value, social efforts. We have, I think, punched well above our weight for the size of company that we are in the local area. We've got a huge amount of our team here have contributed to local -- local schools, local parks, local council initiatives. So much, much greater profile within the company. And as I say, there's a reference there to our targeted reductions on the route to 2030. Much of that in the left-hand column 2022 is delivered now, and we're now focusing on 2025 as we move into next year.

Okay. Yes. So in summary, we've achieved a lot, we feel in the year that we're reporting a resilient set of results. We would like to go faster. But [Audio Gap] with market conditions starting to align towards the ambitions that we have for the business. We're still looking at -- we are constantly assessing acquisitions and monitoring smaller piling contractors that might be feeling that the time has come to call it a day. We bought some acquisition -- bought some assets recently from some people, Fussey piling, which fitted in perfectly to what we wanted to do. We're mindful that we need to keep a handle on working capital as we grow, but we believe we've got the funds to do all the things we want to do organically and through potential bolt-on acquisitions over the next few years, all towards delivering and no doubt, hopefully outperforming the medium-term financial KPIs that we've listed here that if everything falls into place, there's no reason we can't do these by FY '27, but certainly in the range of FY '27 to FY '28, allowing a bit of wiggle room is certainly achievable.

[Operator Instructions] And Mark, if I could start with you, we've got a couple of rail questions and a bit like question a sport. We got one home and one away. And we'll start with the home one, if we can. [ John ] asks, did Sunak's decision to act the northern leg of HS2 reduce expected future prospects?

Yes, it did. Yes, it did, [ John ]. Unfortunately, it did. We expect -- we would have expected to have put in place the embedded delivery partner position that we did not get the chance to do for Phase 1 because those decisions were made in 2014, '15, '16, we were not ready as a company at that stage. We were certainly ready by the time Phase 2 came along. I would have expected we'd have teamed up with one of the leading bid teams and been successful. We had already won a ground investigation framework for the whole of Phase 2 direct to High Speed 2 in only a couple of weeks prior to these things being canceled. So that unfortunately came to nothing. That would have transformed the size of structure, perhaps double it. So we were pretty disappointed but yes, it had an impact on us.

Okay. And the away question. How quickly can you scale operations in Canada?

Well, -- we can go pretty quick. We are the only U.K. business, probably international business that has figured out how to adapt the technology of the sort of kit that I was talking about to work on the Metrolinx network, which is not a straightforward process, involves quite complex engineering and adaptions to the equipment. We've done that. We have 4 rigs out there at the moment. We've trained operators, and we've achieved all of the essential licenses that are needed to work on the Metrolinx network unsupervised by anyone else and built a team that's absolutely amazing. Nobody else has done that. There are domestic contractors, obviously, that have licenses, but don't have the kit that we have, all the operators that we have and don't know how to do the training. We have 7 new more machines from our U.K. fleet that we are prepared to send across because this ends up being an excellent opportunity to maximize utilization of the assets that we have. And we have 3 more machines coming into the U.K. anyway that we ordered 12 months ago. So we have plenty of options for rigs. We have a workforce we can build on. We've got the unions right behind us working with us, and we've got a customer that's pulling us into more and more work all the time. I'm hoping to convert the preferred bidder on the GO Expansion project into an award in the coming few weeks. And that will then give us the ability to plan with a funded commitment -- a reimbursed commitment put some of this extra investment in place. What I won't do is repeat the learning that we had in FY '24, where we thought the work was there, we sent the kit and then the work just was delayed. We ended up struggling a bit. We think this time, we're in more control with timing of that, but we can do it quite quickly.

Great. A question for you Graeme, balance sheet based from [ David ]. What are the GBP 8 million of provisions under current liabilities? And the second part of this question is what was the pounds quantum of the legacy contract dispute?

Yes, it's a good question, [ David ]. I'm pleased that somebody is reading the detail of our Annual Report. So look, the majority of the GBP 8 million provisions on the balance sheet is largely a gross up for the -- in relation to the legacy contract dispute that we have. This is a claim from a contract dating as far back as 2014. So very old legacy contracts, certainly predates Mark and myself. It's been long disputed. The challenge here, the judgment here was whether the claim against us would fall within the insurance program that we have under RPI cover, and that's the judgment that we've been making over the last 4 years. Our view has always been that it would fall within the insurance cover. And so the accounting treatment has been to grow, effectively gross up the balance sheet. So you'll see a corresponding debtor for the amount that we estimated would be settled out and a corresponding provision that is the majority. There are some smaller provisions within there that make up the total GBP 8 million. I guess the key point to say here is this is now resolved and it did resolve in line with the judgment within the insurance cap. So when you look at our interim accounts, you should see that provision number dropping down to much more normal levels. Of course, there will be some normal provisions, as you would expect, in any business, but the big gross-up will drop off by the next time we report.