Vp plc (VP) Earnings Call Transcript & Summary

[Audio Gap] and then there'll be an opportunity for questions at the end. But before that, we are going to kick off with a video. So we shall play that, and then we'll move on to the presentation. [Presentation]

Right. Bear with me. Beg your pardon there. Okay. Here we go. Going through to the results presentation. Okay. Well, over to you, Anna.

Please go back up one slide, please, Hannah. Great. Back up one, please, just stick with the name of this -- thank you. Great. All right. Thank you, Hannah, and good morning, everybody, and thank you for joining us. I'm Anna Bielby, and this is my first full year results presentation as CEO of Vp, and I'm joined today by Keith Winstanley, who joined the business back in January as our CFO. I'm going to start with a brief introduction, and Keith will then cover the financial review, and then I'll update on our strategy and also our operational review. And as Hannah mentioned, there will be time for Q&A at the end. So moving on to our investment case. I think Vp is a great business, and I was really excited to step up into the CEO role back in September. I think there are 3 key differentiators that make Vp special. The first one is the specialist nature of our rental model, which sits at the heart of everything we do, whether that's the specialist nature of our assets, the specialist end markets in which we operate or the specialist way in which we deliver our projects and our solutions. The second area is the diverse and resilient revenue streams that we have. And that happens principally due to the different end markets in which we operate. And we've seen that really clearly this year where we've had challenges in the construction market but we still managed to record a good strong overall performance. I'm really excited about the growth prospects of Vp. I think we're aligned to market with really good growth potential, particularly infrastructure. I think there's an opportunity for us as a business to work better across our divisions, and I think that can drive growth. And we've also got a refreshed corporate development plan, which we'll cover later in the presentation. All of those differentiators are underpinned by a really good, strong financial profile. Over the years, Vp has delivered really good strong returns. We have a target return on average capital employed of 15%, and we've got a 30-year uninterrupted dividend track record. We also have a really strong balance sheet. We've got disciplined capital allocation, we're highly cash generative, and we completed our refinance during the year. Our strategy, which we'll talk about in a bit more detail later, is focused on delivering growth, driving operational excellence. And that's underpinned by people, by digital and by ESG. So moving on to FY '24 and our highlights. Overall, we recorded a solid performance during the year, with revenue in line with last year, and our profit slightly down. This represents a good performance, and it reflects the strength of our business model and our different end market exposure. From a market perspective, infrastructure was really strong with good demand from rail, transmission and from water. Construction was more challenging, which particularly impacted our Brandon Hire Station business, and that led to a noncash impairment charge of GBP 28 million, which Keith will talk to later in the presentation. We continue to invest in our asset base. This year, we invested GBP 63 million in our fleet. And we continue our transition towards cleaner, greener solutions. Our return on capital remains strong, slightly above the prior year at 14.5%. And that really demonstrates the earnings quality that we have as a business. As I've mentioned, our balance sheet continues to be robust. Our refinance is complete, and our net debt is trending downwards. All of those things give the Board confidence in the future. And we increased our proposed final dividend by 4% to 25.5p (sic) [ 27.5p ] per share, which results in a full year dividend of 39p per share. So before I hand over to Keith to go through the financial review, I just wanted to acknowledge that FY '24 has been a year of change for Vp. When I became CEO in September, my first priority was to make sure I had the right team around me to drive Vp forward. We've brought some fresh talent into the business. We've got Keith, who you'll hear from today, and we've brought another few fresh faces in. I think we've got a really good blend of new ideas but also really good knowledge and experience of the business and of our market. We also established an executive team, which sits underneath the PLC Board, and we simplified the management structure. We also put a new team into the Brandon Hire Station business. And again, we'll talk about that in a bit more detail later on in the presentation. As a new team, we have looked at refreshing the strategy. Our strategy absolutely builds on our successful history and our successful heritage, but there are a few areas that we're turning our attention to. The first one is exploiting opportunities for our specialist divisions to work more collaboratively and work better together as a group. The second one is around digital and ensuring that we drive principles of simplicity and consistency through how we work. And the third one is refreshing our corporate development plan to ensure that we're alert to opportunities around growth. And that, in turn, may lead to things like M&A. All of those things give us confidence in the future, and we believe we are well positioned. I'm now going to hand over to Keith, who will talk through the financial review.

Thanks, Anna, and hello, everyone. So this is my first results presentation here at Vp after joining the business in January. I think I've joined the business in a really great time. As Anna has just pointed out, we saw some big changes last year. We've got some exciting plans as well, which we'll touch on a little later. But for now on to the financial results. So here are the highlights. The main message I want to tell on this slide is that our key metrics, be the revenue, EBITDA, adjusted PBTAE or return on capital, they're all broadly in line with last year, and we think that's a good result. We wouldn't have been able to deliver that result had we not operated in diverse end markets. But as Anna has just said, we did see some softness in the general construction market this year, and the general construction market particularly impacts the performance of our Brandon Hire Station business. After taking into account that performance, we've impaired some intangible assets, which were initially recognized on the Brandon acquisition back in 2017 by about GBP 28 million. This is a noncash impairment that doesn't impact any of our key financial metrics. And we'll touch on our plans for Brandon a little later, including those that we've already implemented. We've also incurred about GBP 5.8 million of restructuring costs this year. These relate to Board and senior leadership changes as well as branch closure costs, the majority of which were in Brandon Hire Station. So on to the balance sheet. Despite those impairments, our balance sheet remains strong and robust, which positions us well for future opportunities investment. In fact, we increased the investment in our rental fleet to about GBP 60 million in the year. In what remains a challenging environment, we maintained our focus on working capital. We saw an overall improvement in working capital last year, and there was a slight improvement in DSO as well. And pleasingly, net debt reduced by about GBP 9 million. And I'll go on to net debt in a bit more detail over the next couple of slides. So this slide shows the movement in net debt over the year, really only shows 2 main points. Firstly, we are a cash-generative business with operating cash flows of around GBP 81 million. The second thing it shows is that we are disciplined with allocating our capital. So we invest for growth by investing back into our rental fleet. We pay interest in our taxes, and we continue to return funds to our shareholders via a progressive dividend. So our year-end debt sits comfortably within our facilities. As a reminder, back in November, we were pleased to announce that we refinanced our revolving credit facility on good terms. That RCF sits alongside 2 fixed-rate, low-cost private placements. The first of these will mature in 2027. Including overdrafts, we have facilities of around GBP 190 million. We operate with significant headroom and well within our covenants. We have the funds available, but we'll only spend them with discipline. We're in a strong position. So I just wanted to give you a little bit more detail around our fleet investment. So we increased the investment in our fleet this year, either on a gross basis or consider the investment net of disposals. As a reminder, we actively manage our fleet through the full life cycle, including disposal at end of life. And those fleet disposals generated about GBP 7.5 million of profit in the year. In terms of how we invest in the fleet, we are selective. And we consider a range of metrics, including things like opportunity size and expected returns. Over recent years, we've worked more collaboratively with our customers and our suppliers as we move our fleet to greener and cleaner technology. And around 80% of this year's fleet investment was either zero emission at point of use. So that means it doesn't need any power to operate, or it was powered by a cleaner technology. And just to call out one example from our fleet. Up on the screen, we have a solar-powered charging station. It's a new offering in Brandon Hire Station. It generally does what it says on the tin. Well, because this doesn't require any power to be operated, it's classified in our zero-emissions-at-point-of-use category. But what this does is it also drives the adoption of cleaner technology. So it facilitates the move to battery power. So moving on to our returns and our dividends. These are 2 areas that have been and will always continue to be key underpins of our investment case. The top graph shows our ability to deliver remarkably consistent and strong returns over several years. The bottom graph shows our history of delivering a progressive dividend. And in fact, we have an uninterrupted dividend history stretching back over 30 years. And reflecting our confidence in the business, the Board has just recommended a final dividend of 27.5p per share, representing a 4% increase over last year. So just to summarize that section, we've seen a year of resilient trading. We've seen that we operate well within our finance facilities, positioning us well for the future. And we've just seen a group -- we're just seeing the group's ability to generate strong returns and its history of a progressive dividend. And with that, I'm going to hand you back over to Anna.

Thanks, Keith. So moving on to our strategy. When we presented our interims back in November, I set out the refreshed group strategy, and we've been spending the last few months working through more of the detail and fleshing out some of those areas. The overarching aim is to make Vp more straightforward and greater than the sum of its parts. And the key elements in the strategy are delivering growth and driving operational excellence. From a growth perspective, we will continue to drive organic growth within the business through our investment in our fleet. And as Keith mentioned, we spent GBP 63 million in fleet investment in the current year. We will invest in those areas where market opportunity is strongest and where we can generate good, strong returns. I also think there is a growth opportunity for our divisions to work better together to exploit customer opportunities. And thirdly, I think there are opportunities from an acquisition perspective from our refreshed corporate development plan. And as Keith mentioned, we've got the balance sheet strength to enable us to deliver that. From an operational excellence perspective, Vp has always had a keen eye on costs, and that's how we've managed to deliver those consistent return on capital over the year of 14.5%, 15%. That said, I do think there is opportunity in our operating model for us to be a bit more simple and a bit more consistent in the way we operate. And I think some of our plans around digital will be a good enabler for that. I also think there are opportunities for us to use the group's scale to drive value. And examples of that are around areas such as procurement and property, where I think a more group-wide approach will deliver us some bottom line savings. Those areas of growth and operational excellence are then underpinned by people, by digital and by ESG. I'll talk about digital and ESG in a bit more detail. But just to touch on people, we've got new HR leadership in the business, and we're focusing on refreshing our people strategy. It's really important that we can attract and retain the best people to serve our customers because the people are the greatest asset that we've got within the business. So I'll now talk a bit more about some of the other areas of the strategy. So moving on to corporate development. We've done work over the last few months to refresh this plan and come up with a clear set of criteria. On organic growth, I've already talked about our plans there, so I won't say anything further other than just to reinforce the message that our investment there will be based on those areas where we see much opportunity and where we see good, strong returns. From an acquisition perspective, I think that will be a part of our growth strategy, certainly in the medium term. So I think it's really important that we set out what the criteria are and what sort of businesses we will be interested in. The most important thing from my perspective is that we are focused on those businesses that are specialists because that's what served us so well over the years. It's also important that any acquisition targets have really good growth potential. Acquisitions would likely provide us with access to or extension to different geographies, assets or sectors. But as Keith said, any activity in this area will be disciplined and will be sensible. And therefore, we need to have really important strict financial hurdles around things, and they must be value-accretive. So from a financial hurdle perspective, we need -- they need to be comfortably within our gearing ratio. And at the moment, we're at 1.4 gearing, and I think we would go up to a level of 2 but no higher than that. And that return on capital employed of 15% remains very important. Clearly, risk is important, and anything that we did look at would have to be comfortably within the group's risk appetite. When we look at acquisitions, there are 2 areas. The first is bolt-on, and that would likely be smaller acquisitions, which would serve to be extensions to existing divisions; or strategic acquisitions, which would likely be slightly larger and may well represent a new division. One other point that I think is worth a reference, albeit it's nothing that's in flight in the moment, would be the need to look at selective disposals. And I think it's really important that we continue to monitor each of our businesses against a number of criteria. The first one is the level of return that they're generating. And as we've mentioned, that 15% return on capital is very important. The second point is the growth potential of each of our divisions. We're looking for businesses that can grow and can exploit market opportunity. And the third area is the group strategy, so making sure that each division fits nicely into the group strategy and it makes sense in the wider story of Vp. There are a few more details of some of the nature of assets that we'd be interested in, in the appendices of the presentation. But I've been encouraged by some of the opportunities that have come our way in recent weeks and months. So moving on to our digital road map. Again, this was something that I mentioned when we shared our strategy with you back in November. And in the last few months, we've been working with a third party to do a detailed review of all of our divisions to understand those areas where the use of digital tools and digital techniques will help us drive growth and improve our performance. From a digital perspective, our approach is pragmatic, and it's absolutely about building on what we've currently got. And we expect our investment in that area to be relatively modest with strong payback and returns. Our initial road map is 18 months long, which we think is a sensible length given the fast pacing -- the fast-paced change of technology in this area. There are a number of things we're working on, but a few of note include harmonizing our systems and processes. And this is about making sure that wherever possible, we drive simplicity and consistency throughout our business. This is also something that will facilitate cross divisional working and make it easier for our businesses to work together. The second area is around a new configure, price, quote tool, or CPQ tool. And this is something that will help improve our process and controls around pricing whilst also making it simpler for our customers to work with us. The third area is improved data and analytics. Now I'm not going to sit here at this stage and talk about AI because we're not ready for that at this stage. We have a lot of good data, and we have a lot of good information at Vp. But I think there's opportunity for us to improve that, and better information and better analytics will help us to drive better business decisions. And the final area is around cloud resilience, so making sure that we leverage modern cloud capability to ensure that our systems are reliable, safe and stable for both our people and our business internally and also for our customers. So in summary, we've got a plan. It's pragmatic. It builds on what we've already got, but I do believe it will help drive revenue and make our business more straightforward and more efficient. So the final point of our strategy that I want to touch on is ESG. This is a really important part of our strategy, but our approach is pragmatic, and the financials must work. ESG is embedded in the way we work on a day-to-day basis. There are people, there are customers, and there are supply chain. As Keith mentioned, we continue to work closely with our customers, and those conversations are very much part of our CapEx decision-making and our investment planning. During the year, we were pleased to have our science-based targets validated by the SBTi. And across our business, we're actively focusing on carbon reduction. We're also continuing to develop our social value strategy, and we've recently had a Responsible Business Health Check with Business in the Community. It's also important that we take our people with us on this journey and our people in the process of being trained on carbon literacy. So we see ESG as an important part of how we do business, and we take our responsibilities in this area very seriously.

Thanks Anna. So, so far, we look at our financial highlights as well as our new strategy. But now we're just going to spend a few minutes walking through our operational review. So one of our key differentiators is our diverse revenue streams, mitigates risk in any specific area. We operate 9 specialist divisions across a range of geographies, which are aligned to 4 principal markets. Up on the screen, the graph on the left splits our division's revenue by these markets whilst the graph on the right shows how our total revenue is made up. As you can see, our major end markets continue to be infrastructure and construction. As we've touched on already, last year, infrastructure was supportive with a good level of project activity. The construction market was more challenging, particularly in nonresidential. As a lot of you all know, housebuilding was subdued, but the energy markets grew. And Anna's going to now talk you through what all that has meant for us.

Thanks Keith. So our infrastructure market during FY '24 was very supportive, and we were really pleased with our performance in this market, and our Groundforce business was the standout performer. Our TPA and Torrent businesses also managed to perform well and record good growth, but they were impacted to some extent by some of the industrial action on the railways. The particular areas of activity for us that were successful during the year were rail, both CP6 and HS2; water, and that was principally AMP7; and also transmission, both in the U.K. and also even Germany. As we move into FY '25, we started the year well, and we still got a good visibility of projects, and therefore, we've got a level of confidence in our performance in infrastructure in the current year. So moving to construction, and it was a slightly different story for us, particularly in nonresidential, where our Brandon Hire Station was most affected. As we've already mentioned, in Brandon Hire Station, we took decisive action, and we've now got a new management team in place in that division, and we're refocusing the business. We reviewed the physical footprint of Brandon, and we closed a number of branches, and we focused on simplifying our branch structure. We also performed a review of our customers to ensure we were focusing our efforts in the right place and in our sweet spot. We kicked off a clear set of initiatives around pricing, around cost reduction and also process and control. Whilst the market there remains challenging, we believe that these actions are starting to have an impact, and the business is well positioned to capitalize on any upturn in market performance. Our other businesses in construction have had a better experience than Brandon Hire Station. MEP performed very well during the year, benefiting from a number of redevelopment projects and activities in the commercial office fit-out space. That business was, however, impacted by a more challenging credit environment. And our ESS business also had a good year. It had a slow start at the start of FY '24, but took a few management actions, and it ended the year strongly. As we look into FY '25, we think the construction market does remain subdued. But we remain cautiously optimistic that the actions that we're taking, particularly in Brandon Hire Station will improve performance. In housebuilding, the market has also been challenging with reduced activity levels. Our UK Forks business has been impacted but performed well as a result of rightsizing its fleet, generating profits on disposals, thanks to some good strong residual values. In FY '25, we've seen -- we're seeing a subdued start to the year, which we expect to continue throughout the first half, but we do think prospects are more optimistic over the medium term. And the final market is energy. The energy market has been really supportive for us during the year, helped by the strong high oil prices. Our Airpac business has had a good year, benefiting from a number of major projects, particularly around pipeline and LNG. And that business performed particularly well in Asia. Airpac has started the new financial year well, and the supportive markets look set to continue. So in summary, we think that FY '24 represents a good solid performance. And we continue to perform strongly in our specialist markets despite some of the challenges that we talked about. As a reminder, we've now got the new leadership team in place, and our focus is on delivering the fresh strategy, building on the group's successful history of focusing on exploiting those opportunities for our divisions to work closely together, driving simplicity and consistency enabled by our refreshed digital road map and pursuing corporate development strategy. We've got an excellent track record of navigating difficult market. We started '25 -- FY '25 well, and we've got a good level of confidence in the future. That concludes the presentation, and Keith and I would now be happy to take any questions that you may have.

Well, thank you very much for that helpful canter through. And now let's take a few questions. Could you please give some more specific reasons for the causes of the large noncash write-off of Brandon Hire Station? Are you satisfied that there are no more similar potential issues in the various businesses?

Keith, do you want to take that one, please?

Yes, sure. So in terms of the assets that were impaired, these -- it's predominantly goodwill. So goodwill is what we call an asset with an infinite life. So what you have to do in accounting work is you have to assess these assets for impairment annually. And so obviously, we do that as part of our year-end process. And when you do these impairments, the models that you use are quite formulaic. So they take the future cash flows, and you compare them against the asset base of a cash-generating unit. All those kind of future cash flows have got to be connected to kind of the current year performance so that they are an extrapolation into the future of what is happening today or yesterday. And as we touched on, Brandon's current year performance was particularly impacted by the general construction market. So that was the primary reason why it struggled so much. In terms of is there more to come elsewhere, well, you do the same assessment across the other cash-generating units for these types of assets. And all of those have got significant levels of headroom. So we are comfortable elsewhere.

Okay. Well, if we could lead on from that then, on. The M&A side, you touched on, say, acquisitions but also a little bit disposals. Given the write-offs and the industry that Brandon is operating in, construction not being as strong as the rest, does Brandon remain core to the Vp offering going forward?

I think Brandon Hire Station is a good business, and I think it needed a bit of a refocus and a bit of a back-to-basics approach. And I think the refreshed, refocused Brandon is absolutely part of Vp. Some of the key reasons for that are, firstly, it supports some of the group's biggest, most strategic customers. Secondly, I think it gives our other divisions breadth, and our divisions working together is an important part of our strategy, and what Brandon can do is give us the breadth to and allow us to deliver more breadth in the projects and solutions to our customers. So I think it has a role to play both in terms of supporting the bigger customers, supporting our other group businesses. And also now the business is more focused on who its target customers are and what these target geographies are, I think it can become a good, strong, profitable business for the group. So I do think it has a role in Vp.

Helpful. Okay. Let's move on to CapEx. We've got a couple here on that subject. Of the GBP 63 million, how much was fleet growth? And how much was fleet maintenance? And how would you define maintenance CapEx?

Yes. I'll take that one up. So I would -- I'm used to kind of your business' depreciation costs being roughly in line with its maintenance CapEx levels. And our depreciation rounded about GBP 45 million for last year. So if you look at it that way, the investment into the fleet was GBP 63 million. And so you can -- in one way, you can look at that difference and say that, that was the investment for growth. And in terms of how we do that and where we put that, we have this kind of target group return on capital rate of around 15%. And we are -- all the businesses will kind of run somewhere a little bit below that, somewhere a little bit higher than that. And we will be looking when the businesses come to us, and as for funds, we are looking at where those kind of best levels of return are, and we will -- we prioritize our deployment of funds in those areas.

And it's fair to say that during the year that's just gone, Brandon Hire Station, for example, have slightly lower CapEx, and some of those businesses aligned to more supportive markets had slightly higher CapEx. So the spend absolutely aligned towards supportive markets, market opportunity and, as Keith mentioned, strength of return.

Very sensible. A bit more on that subject. What level of asset sales do you expect? And what is the average age of the equipment fleet?

The age it's really hard to kind of to give an age because of how the fleet differs for each of our divisions. So if you take something like our portable roadways businesses, which the fleet in that area is greatly huge sheets of metal really -- they just get pumped on the floor. These things can last for years rather than saying our fleet is old, old, old bits of metal, but it can. Whereas if you're in Brandon Hire Station and you look at perhaps a cement mix or something like that, that is kind of destroying itself as it whizzes around. And that's not going to last much longer. So it's very hard to say what the average life is across the board, and it is dynamic. It depends where we are investing our funds over time. There was a second part of that question, Hannah. Wasn't that -- I've forgotten the other part of that question.

That's quite a write-down. That's what I'm here for. And what level of asset sales do you expect?

I would expect something similar. The -- our Forks business, which is aligned to housebuilding, that is quite a nimble business, and it can kind of move up and down quite quickly relative to where the market is. So the market -- as the markets kind of tailed off towards the end of last year, that business was quite good in terms of rightsizing its fleet and rightsizing its fleet quickly. So potentially, that's caused a little jump up in terms of disposal proceeds this year compared to where it might be last year. But I would expect some in ballpark similar.

I think the point I'd make on our assets is we're really good asset managers, and we manage the assets throughout the whole life cycle. So we continue to invest in the front end, and the plan is to do that into the future. But we look after our assets throughout their life cycle, and that includes the disposal process. And the fact that we generate good proceeds and profits on disposal at the end is testament to the way those assets have been looked after.

Let's move on to M&A, plenty on that subject. What's hot? What's cool? But perhaps, why don't we start with one on geographies. Where do you think your focus geographically is? And of the -- which of the 4 sectors that you identify are you seeing the strongest opportunities in?

Yes. So from a geography perspective, we are principally a U.K. business, and a lot of our activity is within the U.K. I think when it comes to M&A activity, so definitely, things closer to home feel like they would be lower from a risk appetite perspective. But clearly, if we're in markets that are saturated within the U.K., there is potentially need to look elsewhere and look outside of the U.K. But I think where we do that, it will be in areas that are kind of adjacent markets to the U.K. Transmission is an area we think there is a lot of opportunity. We're in Germany there. So that feels like it's a kind of a low risk to where we are in terms of its market priority, and we know there's market opportunity. Areas like Ireland are also of interest on the basis that the language is the same, and they are adjustment in terms of geography. We absolutely see M&A being in markets that are supportive and that would sort of err towards some of those areas of infrastructure that we've mentioned. But the key thing from my perspective is that we retain -- or we retain an interest in businesses that are specialists, and I think what we've shown this year is the more specialist our businesses are, the more they are able to ride the economic headwinds that come our way, and therefore, investing in those areas is what will be successful for us in the future. So it's really good specialist businesses with growth potential that are low-ish risk and, therefore, probably in geographies that would be, if not in the U.K., pretty close from an adjacent market perspective. The other thing that we look at is where we rehire assets that we don't have within the group because if we're consistently rehiring assets, then maybe it's something that we would benefit from owning ourselves. So we pay a lot of attention to what we'll be spending a lot of money on rehiring and would that fit within the portfolio of assets that we currently have. So we're looking far and wide for the right opportunities that will fit within the group, but it has to be measured, low risk, appropriate specialism and good growth potential.

What about quantum? You talked about strategic and bolt-on, but what does that mean in terms of pounds and pence?

Pounds and pence. So at the moment, we've got quite a lot of things to do on the to-do list. We're very excited about the organic growth opportunities. We're very excited about things like our digital road map. And we don't want to bite off more than we can chew. I think, therefore, our approach on M&A would be -- we would only be interested in things that fall within our current debt facility. When we renewed the RCF back in November last year, we retained that at GBP 90 million. We don't need that to run the business. Net debt is trending downwards. But what that gives us is optionality and balance sheet strength to execute on that. So we would only do something that we can comfortably do with our current facilities. Gearing is obviously really important. At the moment, we're operating at a gearing level of 1.4. Our covenant level is 2.5. I think Keith and I and the Board would be comfortable moving up from 1.4 towards 2 to facilitate the right sort of acquisition, but we wouldn't have any appetite to go above that point. I think -- I'm not necessarily going to talk about specifics, but I think that would mean that an acquisition of the size of Brandon that was the probably the largest group has done would be outside of risk appetite at the moment, and we would probably be looking at smaller businesses that had good growth potential because I think that's a -- that would sit more closely within our current risk appetite.

Helpful. I think this one is for you, Keith. What do you estimate your WACC to be? And what is your average cost of debt?

It's up on one of the slides actually. It's -- there's a little line going through the...

Do you remember which one?

The one with the 2 graphs on it, which might be -- I don't know, 12?

Slide 11, Hannah.

There we go. Brilliant.

So there you go. There's the WACC bundling around 10% or so versus returns of 14.5%. In terms of the cost of debt, I wouldn't give you a specific figure, but what I will say is that we've got these kind of 2 buckets of debt. We've got these private placements, which are fixed rates, low cost. They were taken out a few years ago when the cost of debt was cheaper, and we've got an RCF, which is on a variable rate. But around 75% of our year-end borrowings were on these fixed, low-cost private placement.

Okay. And perhaps a follow-on from that. Why is the company not tied up a large proportion of the debt portfolio for longer-term periods to further strengthen your financial position?

I mean the RCF goes until 2026, and the private placements start to mature into 2027. The private placements were -- they were taken out a few years ago now. They were kind of medium-term debt at that point. So it wasn't short. In terms of length of time and periods of time, I think the RCF that was redone in November is for a 3-year period. It does have a plus 1 option on the end. That kind of gets us into this area where the private placements are maturing. So would probably consider all the debt at a similar point in time. I think I would say that our banking club is supported. And when it does come to refinance time, we would be optimistic about getting some decent rates.

Okay. This is probably a broader question. Just on the direction of the business, obviously, the FSP when it -- last CEO went through that process, and the company put themselves up for sale. Obviously, since then, the share price has fallen back. It has recovered some way since then. Can you explain why you think the M&A group with all its potential issues is the way forward and how and when you can see a meaningful increase in the share price, which I know you don't control with the potential overhang from the churn?

So in terms of our growth strategy, we're not saying that's all about M&A. What we're saying is we think there are a number of areas that we can grow this business. I think the things around our businesses working better together will give us revenue. I think that our organic investment plans will give us revenue. And I think it will be wrong of us not to exploit market opportunity where that presents itself in acquisitions, given our strong balance sheet and given some of the good stuff we've done in the past. And if you were to look at Vp over a sort of 25-year basis, a lot of our story is around M&A, and it's been a good mix of organic and M&A, and that's served as well. We also think as well as the growth story around revenue, there are things we can do around the operating model. So I've mentioned some of the stuff we're doing on digital and also some of the opportunities around areas like more central procurement, which we think can reduce the cost base. So we think there are revenue opportunities, and we think there are also efficiency and cost opportunities. All of these things, we hope, will drive the business forward and impact the share price. I suppose when it comes to the structure of Vp, the liquidity of Vp and the FSP, a lot of those things are kind of outside of our control. What I do know is that the trust that has the 51% stake in Vp is supportive, certainly in the medium term of the current plan and continuing to run the business on public markets. And I think the activities that we're doing and the strategy that we've got is the right strategy for Vp and is the right strategy to drive value. And we've been encouraged by some of the recent share price movements. And I would hope that, that continues when markets pick up and the actions we're taking from a refresh strategy perspective start to come to fruition.

You give me a nice segue there. Thank you, Anna. And we do have a question here on -- about the opportunities for simplifying the business structure and a little bit more on the sort of procurement. And what are the benefits you can harness from that? And when do you expect to see some of these harmonized savings coming through?

Yes. I mean I'm very clear as to why Vp has been successful over the years, and the specialism and the local agility and the local decision-making is really, really important. And I and the new management team will not do anything that will risk that. And it's really important that the MDs of our businesses remain in control, remain with the level of autonomy and are close to customers and close to market opportunity. But I do think that Vp has to be more than an aggregation of businesses. And I think if we can look at certain areas where we can turn the [indiscernible] without risking any of the really good stuff, we should exploit them. I think procurement is a really good example. If I look at our asset procurement, so the purchase of our fleet, that's something that I absolutely think should be done locally because that's where the knowledge is, it's where the market is. And it's not something that we at the center can do different -- can do better. But I do think there's a lot of cash that we spend on assets that -- a lot of cash that we spend that isn't on our fleet. Whether that's petrol, whether it's uniforms, whether it's other areas, we're actually, for a business of our scale, a more joined-up approach to procurement, and managing and working with one supplier base more closely, I think, will drive some value. And I think even if we just say 1% or 2% in some of those cost base, that will have a meaningful impact on our bottom line numbers. So I think it's something absolutely worth going at. Obviously, a bit of a lag with these things because you come up with the plan, then you need to execute the plan. So I think we will start to see things coming through in the current year. But I think the full year effect of all of these initiatives will fully show itself within FY '25, '26, so the year after. But I think the activities have started, and we're moving in the right direction, but inevitably, the cost comes before the benefits on some of these initiatives.

Really helpful. A follow-up on Brandon Hire, are you confident that the actions you've taken are improving the performance?

I think the phrase I would use is cautiously optimistic. The new team has been in place sort of 5, 6 months now, and we're happy that the plan is the right plan, and we are starting to see some green shoots. It would be nice if the general construction market were a bit more supportive. But we are cautiously optimistic that we are seeing positive impacts of the initiatives that we've taken. And I think on ground, what we're hearing is that Brandon Hire Station feels busier and activity levels are increasing. So yes, we think we are seeing green shoots, and we believe we are well positioned to capitalize on that market upturn as and when that happens.

Super. Well, that's it from the audience. So thank you all for joining us. Thank you to you, too, for your presentation today and taking all the questions. We look forward to an update in 6 months' time.

Great. Thanks, Hannah.

Thank you.

Thank you.