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. However, the company will review all questions submitted today and published responses are appropriate. These will be available via your Investor Meet Company dashboard. Finally, we 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.

Thanks, Tom. Good afternoon, everyone. I'm just going to run through a fairly familiar set of slides. And if I just go to the overview first. In summary, a resilient performance, we feel in quite difficult market conditions. It's not like this for quite a while. I fully understand that we keep feeling that improvements are on horizon and they are. But we spent 12 months here and time before that really weathering quite uncertain market conditions and delays. And that's been the case, in fact, in the early weeks of Q1 as well, although now we're feeling a bit more optimistic. So during on, I think we've done quite well. Canada has been quite a challenge in amongst that as well. And we've made a decision now as a Board that we've tried at very, very best, but we just can't take full advantage of the opportunities that will undoubtedly come. So we have announced previously that we are reviewing our strategic options here. As those discussions, negotiations continue, I am optimistic of a sensible outcome within the next few months. And for accounting purposes, we've treated it as a discontinued operation because we won't be repeating the exposure position that we've had up from now. And so on a continuing basis, though, our revenue is still down around about 6%, we're fighting hard in a competitive market with a lot of projects being delayed or uncertain in terms of their progress. And we know because my COO chairs the Federation of Piling specialists that we are bucking the trend in terms of the market share that we're holding. We've managed to uphold reasonable and not embarrassing levels of operating margin, albeit down on last year. And of course, we're aiming for 6% plus, and we know we can get there but those aren't disastrous margins by any count and the same with return on capital. And we'll talk later perhaps about some of the initiatives we're taking to further sort of improve return on capital as well as growing our profits but a dip there as well commensurate with a dip in profits as well. But our target there is 15% plus again, we're confident we can achieve that. Having said that, our order book is up. And although we haven't necessarily mentioned that on the front page, we've reported in our RNS, a strong growth in our order book. We are quite optimistic about the prospects ahead of us in FY '26, and we are on with some bigger projects now. But the softness in the market around particularly the Building Safety Act and the uncertainties in the commercial building market, the slowness of the housing market to perhaps respond to very welcomed government initiatives, a definite slowdown that's been the case for a while now in several infrastructure sectors because of budget constraints or other challenges has been quite a challenge for us. But as we'll go on later, we'll explain how we're going to come through that, particularly with non-optional investment opportunities in energy and water and other areas. And some of the actions we've taken strategically, such as the acquisition of Albion drilling that we completed in the period are, we feel quite intelligent moves to give ourselves a capacity and market position and relationships to maximize some of those opportunities, particularly in Scotland in the energy sector. We continue to have a good balance sheet, strong balance sheet that gives us strength to do things, whether that's acquisition or capital purchases or support some of the bigger programs and projects that we're bidding for. We manage our operational commercial risk very well. We've managed to avoid any major credit problems with customers in very difficult times in the wider industry, and we're holding the dividend as we forecast.

Thanks, Mark. So just a very quick run through the financials. First slide really just presents the range of the 3 sectors that we operate in residential infrastructure and regional construction. And this has been broadly consistent with a slightly growing emphasis on the infrastructure sector. So broadly, we're at 40% and 40% residential and infrastructure split with about 20% historically in regional construction. As I say, what we've seen is growth in infrastructure, and that is the most exciting area, which we'll come on to talk about in a little bit more detail as we look at the outlook moving forward. In terms of P&L, presented this as an underlying result and on a continuing basis. So this -- the numbers that you see on this slide exclude Canada, which is classified as a discontinued operation. And it's also on an underlying basis, and you can see in the bottom left, there's a table there just showing the items that we've classified as non-underlying. There shouldn't be any major surprises there. It's acquisition-related costs and some modest restructuring costs. Overall, I think the highlights here are that pleasingly, the gross margin return has improved again further. No major issues on a contract-by-contract basis. We've had good site execution. but we've also benefited from the mix impact of greater proportion of infrastructure works. You'll see from the next slide that we've got positive performance, particularly in the Specialist Piling & Rail segment of the group. A healthy looking EBITDA, albeit down from last year, which is volume related. And overall, I think to Mark's point, in very challenging markets, we're reasonably pleased that on a continuing basis, we've produced a positive profit before tax. And I think as we sort of look forward and we can address the challenges that we've got in Canada and we start to see the issues that we face with the Building Safety Act, we can sort of bridge from where we're at to quite a positive outlook. The last thing I will say is that we're taking actions to drive our return on capital after a number of years of sort of stabilizing the business, we've taken quite a number of steps to look at low utilized assets, including our property portfolio, our noncore activities, which is the transport fleet and some of you may have seen the RNS that we released post year-end outsourcing our transport fleet. And that took the HGV fleet off the books, which is about GBP 2.5 million. And we're now constantly looking at rationalizing the rig fleet as well, particularly where we've got aged fleet or low utilization. So a lot of activity around there to sort of bolster the cash position and reduce the level of capital employed in the business. The 3 segments that we operate in, this is a relatively straightforward picture. You can see quite clearly that the biggest challenge we faced this year is in the General Piling division. And a substantial drop-off in revenue with a knock-on impact of a significant operating profit decline. I suppose you might wonder why having GBP 10 million or GBP 11 million less revenue could have that much of a knock-on impact through to the group operating profit -- sorry, the divisional operating profit. And the fact is here that as a business, you'd be aware that we carry relatively high fixed costs. So when revenues increase, we do very, very well as a business. When revenues decline, though, you can sometimes see that drop off quite sharply in operating profit, so the throughput to the bottom line. What are the issues here? Well, the issue we faced over the last 12 months is no very large jobs. Any jobs of 5 million plus we would consider to be very positive for the group. It gives us a baseline of revenue and being able to leverage our cost base. There's been very few of those opportunities. That is changing as we move into FY '26. We've got our first job -- first very large job for a while at Sheffield Forgemasters, which is of the scale of sort of GBP 10 million. So that -- we're on site there now. The work is going very well, and that will provide a good baseload of work. But also in the General Piling division, this is the division that's been most impacted by the delays to the Building Safety Act. And that has had a huge impact in the year both in reduced revenues. And the expectation that it will unlock at some point, we've kept our resources to be able to deliver. But unfortunately, only a couple of schemes have come out the other side of that, and we still have quite a backlog of order book still to be delivered in that area. In terms of the other 2 divisions, Specialist Piling & Rail, heavily exposed to infrastructure, a very strong part of our business because it's highly skilled work and typically delivers good margins. And you can see that have had an excellent year. So slightly increased revenue, but a very strong return. No real project, no real project issues within the division. That's gone very, very well and continues to do so even post year-end. And Ground Engineering Services, the last division is probably 80% or so of our housing business and then sort of 15%, 20% of ground investigation. And you can see there broadly flat revenues and broadly flat operating profit. We're operating in a fairly subdued market within housing, and you will have no doubt seen recent announcements from the likes of Barratt Redrow, Keepmoat that the market remains subdued. We started to see a bit of a recovery. We were very positive at the first half when we reported a significantly increased order book. And unfortunately, as we progress through the second half of the financial year, we just saw a weakness return to the market and our order book for housing, particularly decline. We're seeing some very early signs of the market coming back though. We've had a good solid level of orders in the last couple of months, and we're starting to get a little bit busier. Difficult to say how quickly the market will recover here. I think in the medium term, it looks to be a very attractive end market for us, but the pace of recovery may be slower than we would have all hoped. The summary on the balance sheet. There, I won't touch on too many details here. We've carried on investing significantly in our fixed assets and the rig fleet in particular. Working capital is up slightly. That's primarily down to Albion being acquired in November -- sorry, October of last year. So we brought in the working capital. And we've touched on this before in the previous presentation, but we had an HMRC inquiry to our R&D claim, which took a very long time to resolve. So that was sitting on the balance sheet at the period end. Pleased to say that was resolved post year-end and paid in full. So we had a successful inquiry all completed just with the main issue of a delay to receiving the payment. The last thing I'll say here on the slide is the assets held for sale. That is twofold. We announced post year-end that we outsourced the transport fleet. So it's relevant we classify those assets as assets held for sale. That's GBP 2.5 million and the balance there, the balance within that number as we've reported Canada as a discontinued operation. The fair value of Canada is also reported under that position. The last slide on the finance is really just a reconciliation of the cash flow position. You can see the relatively healthy operating cash flow. And I think the majority of those bars are relatively self-explanatory. Significant capital expenditure, as you would expect within the business. And we've also had some fairly substantial payments outgoing for acquisitions. As a result of that, we've taken on some modest amounts of debt which is the green bar, about GBP 5.9 million. A portion of that has been paid back, GBP 1.5 million has been paid back post year-end. But ultimately, we try to maintain a strong balance sheet with a healthy cash position. And in order to do that, we've taken on modest amounts of debt on a variable basis. So as the business -- as the markets recover and we start to generate healthy cash again, we've got an opportunity to repay that debt back. v

Thank you, Graeme. The title of this slide says it all. And genuinely, we can now report some positive progress certainly in energy anyway and the early recovery, we feel of the housing sector opportunities. So what we've done here is on the right-hand side is the caption that we used in the last set of results. It's an indication to scale of the relative growth in each of those sectors listed. And updating against those since then, I think in summary, we would say that energy is moving faster. Housing is a little bit slower. Rail perhaps hasn't quite got the legs that we might have first expected given government appetite for spending in transport. And industrials and the wider commercial building sector has got a lot of potential as well, which we're starting to see. And I've summarized here in energy, faster progress. We've talked about our results of achieving GBP 40 million revenues from less than GBP 5 million today within a couple of years. Those are scheduled projects that we've had allocated by Tier 1 contractors who we have frameworks with now. Water, a bit slower getting going in AMP8 than we hoped just yet, but customer partnerships in place that give us good medium-term confidence here. It's just going to be a bit slower than energy, which seems to go mad. Rail, slow start to CP6, really slow, very disappointing. The whole sector is disappointed. We've come through this very well actually without needing to go backwards because we've had such a strong position on the Transpennine Route Upgrade framework that we won 3 or 4 years ago that we are doing very, very well on. I just wish there were more programs like that. But there just is not enough opportunity in rail for us at the moment, which, of course, is the reason we diversified into Canada a couple of years ago, thinking that, that would really complement very well and it's a great idea. It just hasn't quite worked as we hoped. Housing, I've mentioned, too residential will definitely come through. I mean the Building Safety Act has caused absolute carnage here in the whole industry, and we've felt our sort of respective pain from that. But it has to be unblocked, it is becoming unblocked. It's going to be a trickle rather than a surge. But we don't need too many jobs to get going for our London operations to resume normal sort of revenues. And once the revenues are up generally in the business, we're in good shape. Remember, we don't have anything like the operational sort of mishaps that we might have had 5 years ago. We're pretty reliable now in our gross margin performance. Once the revenues are up in all of our divisions, we convert to profit very, very reliably, touch wood. We do. The operational capability of the business has strengthened significantly over the last few years. Commercially, we're in great shape. And then finishing off with industrials and social infrastructure. Some of our biggest project opportunities are coming from manufacturing and data centers. Some of our biggest schemes at the moment are in that area. And also prisons, as mentioned in the final bullet point, we've got some partnerships with Tier 1 customers affecting the prison sector. That's a growing area. Schools and hospitals are also expected to boom and we've got some partnerships there to lean on as well. We spent a lot of time on customer partnerships. You'll remember this is something that we mentioned often. We've invested a lot of effort in moving away from being a bidding machine into closer embedded partnerships with Tier 1 contractors who value our early involvement and our technical capability. And that is starting to pay off. As we get a bit busier, that will have a bigger knock-on effect on the amount of work that we have site on earlier. And that we start to negotiate rather than bid. It's not a quick process, but it's notable in the proportion of frameworks that we have, which is a stat that we should publish. And then really the next few slides are just building on these. I'm not going to present all of the next ones in detail, but there's a slide here on residential and housing and some detail around Smartfoot and why that's beneficial in the housing sector. Our partnership with M&A Evans as mentioned as well, that's helping us in regions where we were previously perhaps a little bit weaker like the Southwest. On the next slide is a bit more detail on energy. A quite important point here is that we -- apart from the customers that we've negotiated frameworks with and 3 more that we're discussing, we've been quite conservative with the volumes that we're talking about. And what really differentiates us here, and we've got differentiators in every sector, which is important. We're not just another piling contractor. We've evolved far beyond that. In energy, the sector is playing fantastically to our strength of having an end-to-end integrated capability from the early investigation of the ground to the design of the different solutions into the construction of any solution that needs to emerge to suit the best for project technical challenges. And of course, these are remote locations with challenging ground conditions plays absolutely into our strength. And the ability to come in early, 2 years ahead of construction sometimes to do the ground investigation locks us in -- the design locks us in further. The design activity is significantly greater than the levels we've taken on before, which is infinite ROCE because you don't need any piling rigs. You just need designers as professional services at high, high margins. And we're building a design organization to meet this. It's going to become a very important part of our structure going forward. And then the construction capability is a combination between specialist piling and Albion that we've acquired and ScrewFast. These acquisitions that we've made all play into this space because they're specialist capabilities we never used to have, but they've become very, very attractive in the basket of solutions that you might use for transmission towers or substations. And in fact, ScrewFast had been chosen as the #1 choice for transmission towers by National Grid and substations by National Grid and others because of the off-site manufacturing element. I could talk all afternoon about it, but I won't. And on top of this, our major hydro schemes, our big substations programs, all overlaying and coming through the pipeline of announcements all the time in terms of frameworks that are coming out of the big transmission companies. Next one. Water, as I said, a bit slower again going into paper, I'm not worried about it. The schemes are coming through. We're on site doing some projects now in most regions. Our partnership with Galliford Try and VolkerWessels that we've just announced is going to really be valuable here. We have a similar looser arrangement with [ Keller ] who have -- I think [ Keller ] and Galliford, VolkerWessels have the biggest share of the U.K. water market, but I don't mind because we support both. And the early projects indicate that we've got a very good relationship building there with these sorts of organizations, costing as well, actually. Rail, I've touched on. I've got nothing more to add there. We do have a 10-year framework now with Network Rail in the Southern region, which has been really slow again. But it's a, it's direct to network rail, b, it's for 10 years. Those are both big advantages compared to the normal cyclical misery of the control period dips where we get stuck under Tier 1 contractors who themselves don't know what work they're getting. So that will help us pretty much in the same timing as TRU starts to be completed. I'm hoping to get a strong position on East West Rail as well, but I got to figure out how to do that yet. High Speed 2, I think, is a busted flush. Unfortunately, we've tried and tried and tried to get on to High Speed 2 from every angle we can think of. We're just too late for the party by the time we're a mature enough business. Those joint ventures were set in 2015, '16, '17. Unfortunately, we've missed that. And then in summary, just to finish off, current trading is improving. It's fair to say that the first 2 months, a little bit of a continuation of how Q4 was. But as we're going in now July, August, we're feeling pretty happy with the volumes that are ramping up in the business. We still got a lot of work to do to get Rock & Alluvium up to the levels we need in London with the Building Safety Act stuff we've talked about, but the industrial schemes in general piling are starting to make a big difference. Our ground investigation business is at almost record revenues because of the amount of work we're already doing in the energy sector. And housing is steadily improving all the time, profitable, but not yet at the levels that we know we can deliver, which will achieve significant material profit contributions, but I think that will be more next year. But we're pretty confident on delivering this year's consensus. Thank you...

Thank you, Mark. Thank you, Graeme. Now if we can turn to the questions, we've had a number of questions that were submitted ahead of the presentation. [Operator Instructions] What we might do quickly, there's a question here which talks a little bit in intro terms, which I wonder if we can just address first and foremost, because it might help those who are relative newcomers to Van Elle. Martin asked 2 questions. Why are you differentiated from, let's say, Keller? And who are your main competitors?

Okay. Right. So I'll answer the second one first. So our main competitors are Keller, who are independent, big plc, of course, global plc, but they are independent. And by that, I mean, they are not owned by a Tier 1 construction contractor. All of our other major contractors are, our competitors are, Balfour Beatty Ground Engineering, Bachy owned by the VINCI Group. In housing, Roger Bullivant, owned by the VINCI Group, Expanded Piling owned by Laing O'Rourke, Cementation owned by Skanska. Those are our major competitors. And then we compete in every region with all sorts of small and medium-sized Piling contractors that want to have a go as well. And unfortunately, some of our customers like to get the cheapest price they can. And these are the guys we're moving away from into the sort of frameworks I described earlier so that we can elevate ourselves above that. But we play right across the spectrum, big projects to small projects, an unrivaled volume of work that we look at and capabilities that we have means that our competitor field is very, very wide, but then so is our customer base. The guys you bump into most often probably would be the likes of Bachy and Keller on a national basis. And in some cases, we can collaborate and come together. We come together with Bachy on some opportunities in the energy sector, and we keep a wary eye on Keller. If you want to compare our results with Keller, don't look at the plc results, go and look at Keller U.K. and you'll find that they found the market as difficult as we have, Keller Limited. I think it would be. But of course, in a big group like that, you can never be certain what's happening in the corporate structures of the balance sheet. But you'll see how they've reported year-on-year, and I think we match up pretty well. What differentiates us is, a, scale; b, the fact that we are independent is definitely very valuable for most of our customers who are not the Tier 1 contractors I mentioned. They don't have a piling contractor as a subsidiary. Our breadth of capability end-to-end that I've described earlier, our innovation and our depth of expertise, the scale of the business operationally, the experience that we have. And there's no part of the end-to-end capability of the industry that we don't deliver. The only people that really can do pretty much almost everything under one roof. And we tend to be very, very productive and agile and responsive when we get going. We're renowned for our productivity.

I think that probably helps to fill in a couple of gaps for newcomers. There's one other intro style question that might help and Gavin has asked what's your typical average contract value that might help to set a bit of scene too.

Yes. It's in the -- I mean, it fluctuates slightly, but it's typically in the GBP 100,000 to GBP 150,000 range, but it range but it can go from GBP 10,000 or GBP 20,000 for a small ground investigation project or a small project of any type, right through to GBP 10 million for a big piling scheme using the sorts of big rigs that you can see picture there. So very diverse, diverse customer base, diverse project size, diverse sector exposure. literally in every sector of the built environment in the U.K., which means that we can ride out the cyclical pressures. Unfortunately, in the last few years, most of them have been headwinds rather than tailwinds, but that's changing.

Okay. So that's very helpful setting the scene. So now looking at some of the slightly more specific questions. The Ofgem announced GBP 24 billion investment in the grid will rise spending by 4x current spending and allow for 80 transmission projects and associated works within 5 years. How is Van Elle expected to benefit? And how ready are you to take on the work, both personnel and plants?

Okay. So that is a typical announcement, which are relatively frequent affecting the energy sector investment programs and is very much factored into the planning that we've been doing for several years now. So we have a pretty good handle on the delivery programs that flow down from these big announcements that lead to transmission lines and other big infrastructure schemes mapped across the country for the next 2 to 5 years. Obviously, it's a bit fuzzier as you get to 5 years. But the planning that we've done allows us to see which schemes will be involved in with which customers, and we've been working very hard to secure frameworks with those customers that allow us to negotiate and be allocated those projects. And that's what our forecasts are based on. It's not based on we might win 1 out of 3 or 1 out of 4 of those projects. We know which jobs we'll be doing because we've been brought in as partners on an allocated basis. And we've got the strongest position in the sector to deliver the most work. Our biggest rivals here is Bachy that I mentioned earlier, where we share -- we are sharing the portfolio with [ N Group ] but their portfolio is massive, [ N Group ] -- we're doing all of Wood's program, and I expect to be doing 3 other parties embedded delivery work as well, either alongside someone else or up until the point that we just can't possibly do any more. And what we've done to prepare our resources for this is we've bought, for example, Albion Drilling last year for exactly this reason. Nobody else in our peer group was thinking along these lines. We have now the only established Scottish business that's got a track record in this area in Sterling, ready to go, involved in some of this work now, and we're using that as a nucleus for building out a resource that we're also sort of exporting from the Midlands and North on a more visiting basis. You put the 2 together, we've got the capacity that we need already planned. And then our customers have got the option, whether they use Albion or Van Elle, we've got the local relationships. We've got 16 rigs ready to go in this marketplace, CapEx plan for more alterations for rigs already in the pipeline, manufacturing capacity secured for the ScrewFast grillage in a new facility we opened up 6 months ago that allows us to grow for 3 years out. So we've been doing quite a bit of preparation.

Super. Ben asks, with the increased order book and strategic partnerships like the one with VolkerWessels, what specific initiatives are you prioritizing to translate this momentum into the targeted 6% to 7% underlying operating margins and 15% to 20% ROCE in the medium term?

Yes. Well I think in a steadfast order the biggest -- the 2 most important KPIs we've got a 6% to 7% underlying operating margin and 15% to 20% ROCE. I'll take the second one first. I think I touched on that a little bit earlier. We are -- I mean clearly, there's 2 things we can drive here. One is to improve the profits. And I think if you bridge from the challenges that we faced over the last 12 months, particularly around Canada and the Building Safety Act issues, you can bridge to a much healthier looking operating profit number, so the numerator of the ROCE calculation. And I've already touched on the areas that we're looking to reduce our capital employed, which is the biggest one of those will be outsourcing of the transport fleet, but we're also looking at low utilization assets and reduce that number overall. We have had a growing rig fleet in recent years. We've got to make sure now that we can review that rig fleet to make sure we've got the capital employed in the highest utilized and best returns assets across the group. In terms of 6% to 7% underlying operating margin, so the second part of the question, well, a lot of this is around, firstly, some of the markets, it's volume really. It's about the markets coming back and getting behind us. We have such a high fixed cost base because we carry so many assets that when revenues drop off, we do feel a bit of pain. But the converse is also true that actually we've got enough assets and people in our business to deliver GBP 200 million of revenue. If we can get somewhere towards that, you start to see a very quick leverage of the cost base. And I think that will be supported as well by the most exciting areas for this business at the moment we are in the energy sector and water sectors because that's a highly skilled subset of our business, you tend to see strong gross margins being delivered. So we get a positive mix impact as well.

Yes. Great. And you mentioned the transport outsourcing. David asked, how is the transport outsourcing going?

Very well. We're very pleased with it. Yes, I think we've chosen the right partner at the right time.

Great. Okay. Super. Another question which focuses on housing. Beyond the direct impact of the Building Safety Act, what are the primary lingering impediments preventing broader government initiatives from stimulating a more robust and immediate recovery in housebuilding volumes? Do you see green shoots in this sector?

Yes, we do. Our inquiries are up. Our order intake is up. Our average order size is up in housing, which is probably a very important measure because what's been happening is that housebuilders have lacked confidence to proceed with projects not only starting, but proceeding at pace and at scale. So they've kind of drip fed the plots according to how quickly -- of course, this is what you do, how quickly you can sell them. And so we might do a few here and a few there and come back, which is a bit of a nightmare. We're noticing that housebuilders are now more confident to release the entire scheme and get going as well as more schemes. So we're feeling cautiously optimistic. We're not at the levels yet that we've seen in earlier years. So it's almost a no-brainer to figure out that we will return to those levels relatively soon, albeit might be next year or this year and then go beyond that because if you look at historical housebuilding volumes, it's never reached the levels that are being planned and promised by everybody. And so when we do, we're going to outperform earlier years. There's no reason not to. The products that we offer are as desirable today, if not more desirable because of build speed off-site manufacturing credits, lower resources needed because you're not so labor-intensive. There's a resource shortage in housing and construction, et cetera, et cetera. And more sites are going to be complex sites are going to need ground engineering solutions in the first place because if they didn't, we wouldn't be involved. There are not going to be so many easy greenfield sites around. There will be more brownfield and gray zone sites. So I don't know if that answers the question, but we just need house builder confidence. And we have the customer base with those housebuilders. 1 or 2 of them we do nearly all of their work. We just need them to be more confident to get sites moving.

Great. Super. Keith asks, there is currently significant hiatus in the water sector, both government and the media have very negative views on the management of all water companies. How is Van Elle approaching the industry? And what is the likelihood of delays to projects? And what steps are being taken to ensure that serious external scrutiny doesn't negatively impact on the company?

Yes, water companies are under a lot of pressure, but their investment programs in their infrastructure are pretty well set now. And in my opinion, very unlikely to be reversed or reduced, much more likely to perhaps be added to. Those construction programs are getting moving. So they are going through the process of prioritizing projects, getting design started and getting on to site. All their framework contractors are appointed for AMP8, sometimes for longer. The relationships that we have with those guys are set very well. And we're starting to see early projects coming through for AMP8. We've got a range of solutions, a bit like I described in energy that are going to be very helpful to help those be built faster or cheaper or with lower carbon, which is also increasingly important for those business cases to be signed off project by project. I'm really not expecting the political changes to regulators and water company corporate matters to affect the infrastructure delivery programs that have now been pretty well locked in unless I'm missing something. I think we should be okay. And I'm not expecting any scrutiny or problem regarding our work in this area at all. We -- all of our pricing is competitively checked and what have you. We're fairly happy that we are not likely to be affected by anything like that.

Joseph asks, on energy, of the GBP 40 million revenue signaled in financial year '27, it sounds like some of this could be services work, which is capital light. Roughly what proportion of the GBP 40 million is likely to be the services-based work? And do your margin and ROCE targets now hinge on this energy work? Or can these be achieved without this skew to energy?

So the proportion of work that we will do in professional services will be GBP 5 million per annum. So enough to make a difference, but not going to materially change the outcome beyond the targets that we've already set for ourselves. All of the work we do in energy is going to be in the higher-margin parts of our business, i.e., either Strata Geotechnics, our ground investigation business, which will be doing GBP 5 million to GBP 10 million per annum in energy or Specialist Piling, which is a combination of Specialist Piling overall plus Albion plus ScrewFast that will sit in the same basket of that division, which is all at margins in the 40% to 45% range, upper end of our general sort of range of things. So yes, it makes a big difference to the achievement of our targets. Joe, if you're asking, if all of that goes to plan or ahead, can we outperform those targets? Yes, that is achievable.

Great. Thank you. Philip asks, encouraging order book increase between April and June. Which end markets have provided the uplift?