ADT Inc
NYSE:ADT
ADT Inc
Once upon a time in American business history, a company emerged with a focus on safeguarding homes and businesses. ADT Inc., which initially began as a telegraph delivery company in the 19th century, gradually transformed into one of the leading providers of security and automation solutions. With innovation and strategic growth as its driving forces, ADT shaped its offerings to meet the evolving needs of its customers. The company became synonymous with security by providing essential services such as alarm monitoring, video surveillance, and smart home technology. By integrating advanced technology with customer-centric services, ADT tapped into the ever-growing desire for safety and convenience, embedding itself into the everyday lives of millions of Americans.
At the core of ADT's operations lies a robust subscription-based model, which ensures a steady stream of revenue. Its business thrives on offering bundled packages, allowing customers to choose from entry-level systems to more sophisticated setups involving cameras, thermostats, and digital locks. Customers pay regular fees for monitoring services, which are facilitated through ADT's extensive network of monitoring centers staffed 24/7. This continuous surveillance ensures prompt responses to emergencies, cementing ADT's value proposition. Furthermore, ADT has ventured into business security solutions, thus broadening its market reach while maintaining strong customer retention through updated tech offerings and reliable service, creating a consistent and trusted brand in the realm of security solutions.
Earnings Calls
During the earnings call, the company announced a 10% revenue increase and a 73% jump in pre-exceptional profit. The operating margin rose to 2.2%, with a target of reaching 3% by 2026 as revenue aims for £1.6 billion. An interim dividend of £0.022 was declared, reflecting an 83% increase year-over-year. The CEO emphasized strong cash generation and a well-structured balance sheet, enabling strategic investments and potential shareholder returns through excess cash. Significant growth in both the Building (up 3%) and Infrastructure (up 25%) sectors was also noted, driven by robust project deliveries.
You don't have any saved screeners yet
Good
morning, all,
and
welcome
to
Galliford
Try
Holdings
Half Year
Results
to
December
2021.
I'm
Bill
Hocking,
Chief
Executive.
And
I'm
here
with
Andrew
Duxbury,
our
Finance
Director.
Here's
the
normal
agenda
for
today.
I'll
spend
a
few
minutes
on
the
highlights,
Andrew
will
take
us
through
the
numbers,
I'll
give
an
update
on
our
Sustainable
Growth
Strategy,
and
then
we'll
take
questions.
We've had
a
good half
year.
Thanks
to the
skills
and
agility
of
our
staff
and
supply
chain,
and
of
the
cooperation
of
our
clients,
we've
managed
the
challenges
of
inflation
in
materials
and
labor,
and
produced
a
good
result.
The
integration
of
the
nmcn
business
is
going
well,
and
we're
very
pleased
with the
acquisition
and
the
900 or
so
excellent
people
that
joined
Galliford
Try
through
it.
We're
making
progress
across
our
suite
of
ESG
measures,
and
we
have
momentum
in
the
business,
which
is
reflected
in
the
order
book,
our
controlled
revenue
growth,
and
in
the
figures
you
see
here.
Profit
for
the
half
year
is
£7.1
million,
up
from
£4.1
million
in
the
same
period
last
year.
Operating
margin
is
2.2%,
up
from
1.6%
same
time
last
year.
And
the
interim
dividend
is
£0.022,
up
from
£0.012
previously.
All
of
these
figures
demonstrate
good
progress
in
the
period,
and
we're
on
track
for
full
year
2022
and
the
longer-term
strategy.
So, over
to
you,
Andrew,
to
give
you
more
detail
on
the
finances.
Thank
you,
Bill. Good
morning,
everyone.
So,
the
picture
on
the
screen
there,
you're
seeing
Invercannie
Water
Treatment
Works. It's
a
£52 million
project
for
Scottish
Water
that
will
produce
60
million
liters
of
drinking
water
each
day
once
it's
completed.
So,
let
me
start with
some
headlines.
As
Bill
said,
we're
very
pleased
with
the
performance
in
the
half
year
and
the
progress
that
we're
making
against
our
strategic
targets.
You
can
see
that
all
the
key
metrics
on
the
slide
show
improvement
compared
to
the
same
period
last
year.
In
particular,
revenue
is
up
10%,
our
divisional
operating
margin
has
increased
to
2.2%,
and
pre-exceptional
profit
before
tax
is
up
73%.
And
we
continue
to
be
very
strong
on
cash
performance,
which
I'll
come
back
to.
Our
interim
dividend
per
share
of
£0.022
is
83%
higher
than
last
year.
So,
let
me
go
through
the
results
in
a
little
bit
more
detail.
Revenue
is
up
10%
in
the
period,
and
it's
worth
remembering
that
neither
this
period
nor
the
comparative
were
disrupted
by
COVID,
so
that
increase
is
real
growth.
Building's
revenue
is
up
3%
as
we
continue
to
deliver
more
across
our
existing
businesses,
and
Infrastructure's
revenue
is
up
25%,
with
increases
in
both
highways
and
environment.
The
main
driver
of
the
increase
is
the
improvement
in
the AMP7 revenues
in
our
water
business,
as
we
anticipated
when
we
reported
in
September.
And
about
£12
million
of
that
growth
in
Infrastructure,
so
about
7
percentage
points,
relates
to
nmcn.
And
nmcn's
contribution
will
be
more
in the
second
half
year,
around
£60
million
in
H2
as
that
business
begins
to
get
back
to
delivering
at
full
capacity.
Operating
profit
before
amortization
is
up
77%
at
£6.9
million,
and
the
divisional
margin
improvement
to
2.2%
is
very
good,
progressing
in
line
with
our
margin
improvement
targets.
You
can
see
that
the
margin
has
increased
in
both
Building
and
Infrastructure,
driven
by
good
contract
performance.
Central
costs
of
£5
million
are
around
half
of
the
last
full
year
figure,
as
you
would
expect.
And
we
continue
to
focus
on
cost
efficiency
across
the
business.
We've
reported
exceptional
costs
of
£9.7
million
as
flagged
in
our
January
trading
update.
None
of
this
is
contract
related.
£6
million
relates
to
the
acquisition
and
integration
of
nmcn,
and
£3.5
million
relates
to
our
investment
in
cloud-based
ERP
systems.
This
ERP
investment,
which
is
upgrading
our
previous
10-year
old
Oracle
platform
to
the
latest
cloud
version,
will
continue
through
2022
with
a
similar
spend
in
the
second
half
year
and
completion
around
the
turn
of
the
calendar
year.
Our
tax
rate
is
lower
than
the
standard
due
to
brought
forward
losses.
So,
our
£7.1
million
pre-exceptional
profit
before
tax
translates
into
£6.5
million
profit
after
tax
and
its
earnings
per
share
of
£0.059.
Our
strong
balance
sheet,
both
our
cash
and our
PPP
assets,
continue
to
help
us
in
the
market
in
winning
work
and
engaging
with
our
supply
chain.
I've
said
it
before
and it's
worth
repeating,
we've
got
no
pension
liabilities
and
no
debt,
and
that's
even
more
relevant
now
in
a
period
where
interest
rate
rises
are
more
likely.
Our
month-end
average
cash
increased
to
£180
million, with
period-end
cash
of
£211
million.
The
PPP
assets
are
valued
at
£48
million
at
a
blended
7%
discount
rate
with
the
same
as
we
used
at
June,
and
that
reflects
the
active
market
for
these
assets.
And
that
portfolio
contributed
£2 million
of
interest
income
in
the
period.
Our
intangible
assets
and
goodwill
increased
by
£11
million
pounds
as
a
result
of
the
acquisition
of
nmcn.
And
these
intangibles
will
be
amortized
over
3
to
10 years,
with
an
initial
annual
charge
of
around
£1
million.
On
the
cash
bridge,
you
can
see
that we
have
an
operating
cash
inflow
before
exceptional
items
reflecting
a
very
strong
collections
performance
in
the
period.
Month-end
average
cash
of
£180
million
in
the
daily
low
point
in
the
year
remained
above
£100
million,
providing
real
resilience
to
the
business.
And
very
importantly,
our
supplier
payment
performance
improved
again,
with
now
98%
of
invoices
paid
in
60
days
and
an
improved
average
days
to
pay
of
25
days. As
I
said
in
September,
working
closely
with
the
supply
chain,
paying
them
properly
is
the
right
way
to
operate.
And
it's
been
especially
important
in
these
last
few
months
of
a
tighter
supply
market.
So,
now, I'll
just
spend
a
moment
talking
through
our
capital
allocation
framework,
the
principles
of
which
are
consistent
with
what
we
said
at
September.
So,
most
importantly,
we
continue
to
prioritize
a
strong
balance
sheet.
So,
firstly,
our
balance
sheet
provides
a
competitive
advantage,
which
will
help
us
to
deliver
our
sustainable
growth
plans.
It's
valuable
to
our
clients
who
see
the
importance
of
financial
stability
in
their
contractor,
and
it's
also
important
to
ensure
we're
the
partner
of
choice
for
our
supply
chain.
On
top
of
that,
it
allows
us
to
invest
in
our
people,
in
digital
assets,
in
adjacent
markets,
such
as
PRS,
and
in
other
opportunities
or
bolt-on
acquisitions
that
arise
which
support
our
strategy.
Our
ability
to
transact
with
the
administrators
of
nmcn
is
an
example
of
that
agility.
Secondly,
a
strong
balance
sheet
provides
mitigation
against
any
future
adverse
market
conditions
and
provides
confidence
that
we
can
deliver
our
strategic
plan.
As
an
example,
we
don't
need
to
chase
the
wrong
terms
or
pricing
on
contracts
just
to
generate
cash
flow,
as well
as short-term
decisions
that
would
harm
margin
and
performance
in
future
years.
Thirdly,
the
balance
sheet
provides
us
the
confidence
that
we
can
pay
sustainable
and
regular
dividends.
With
today
improving
our
annual
dividend
cover
policy
from
a 2 times
to
2.5
times
cover
range
to
a
straight
twice
covered
policy,
so
returning
50%
of
our
annual
earnings
to
shareholders
as
dividends.
As
we
deliver
our
strategy,
with
revenue
growth
and
margin
growth
combining
to
provide
faster
earnings
growth,
our
dividends
will
increase
accordingly.
And
we
do
also
continue
to
review
our
future
cash
requirements
in
the
context
of
the
market
conditions
and
outlook.
We
don't
anticipate
cash
requirements
will
need
to
grow
proportionately
with
our
revenue
growth
through
the
period
of
our
strategic
plan.
And
when
there
is
a
sustainable
excess
cash
in
the
business,
then
we'll
seek
to
return
that
excess
to
shareholders.
So,
to
summarize,
overall,
we're
very
pleased
with
the
results
we're
announcing
today.
The
excellent half
year
performance,
strong
balance
sheet,
and
the
quality
of
the
order
book
have
given
the
board
the
confidence
to
declare
an
interim
dividend
of
£0.022,
which
is
83%
higher
than
last
year.
And
we've
improved
our
policy
such that
we
now
plan,
this
year
and
going
forward,
to
pay
full
year
dividends
that
are
twice
covered
by
pre-exceptional
earnings.
And
with
that,
I'll
hand
back
to
Bill.
Thanks,
Andrew.
And
now, it
is
progress
on
the
strategy.
[indiscernible]
(08:28)
of
our
strategy
to
deliver
high-quality
buildings
and
infrastructure
in
a
responsible
manner,
and
provide
a
good
return
to
our
shareholders.
There
are four
main
pillars
to
the
strategy:
Culture,
safety
and
people
at
the
top
left.
Responsible
delivery,
net
zero
carbon,
social
value
and
so
on,
bottom
left.
Quality,
innovation,
digital
and
supply
chain,
top
right.
And
the
result
in
good
financial
returns,
bottom
right.
And
I'll
cover
each
of these
pillars
in
a
bit
more
detail
later
on
in
the
presentation.
We
have an
action
plan
to
grow
the
business
to
£1.6
billion
of
revenue
and
3%
margin
in
2026,
as
we
have
previously
announced.
Part
of
that
growth
comes
from
doing
more
in our
existing
markets
and
part
from
growth
into
higher-margin
adjacent
markets,
primarily
PRS,
retrofit
of
existing
buildings
to
lower
their
operational
carbon,
and
the
capital
maintenance
asset
optimization
in
the
water
industry.
In
PRS,
we
will
develop
or
co-develop our
own
projects
using
our
balance
sheet
to
acquire
land
or
options
on
land,
designing,
and
obtaining
planning
permission
for
the
project,
and
then
selling
that
project
to
a
forward
fund.
This
locks
in
the
development
gain
on
the
project,
and
then
we
then
go
on
to
construct
a
scheme
on
behalf
of
the
buyer.
The
blended
margin
from
this
approach
is
significantly
higher
than
normal
construction
margins.
In
FM,
which
is
a
higher-margin
business
in
the
first
place,
we
look
to
help
our
clients
reduce
their
operational
carbon
by
refurbishing
their
buildings
with
more
efficient
heating,
lighting,
glazing,
and
so
on.
And
in
water,
in
addition
to
our normal
activities
of
designing,
constructing
and
commissioning
water
and
wastewater
facilities,
we
intend
to
move
into
higher-margin
capital
maintenance
and
asset
optimization
of
treatment
plants.
Our
acquisition
of
the nmcn
water
business
adds
momentum
to
this,
and
here
is
a
bit
more
color
with
regards
to
that
acquisition.
In
the
first
place,
the
acquisition
is
very
complementary
and
aligned
to
our
strategy.
It
provided
an
excellent
geographic
fit
with
our
existing
water
business
as
there
was
virtually
no
overlap
between
the
two
operations.
As
a
result,
we
now
have
a
long-term
framework
with
virtually
every
water
company
in
the
UK,
and
have
gained
a
portfolio
of
new
long-term
clients.
The
acquisition
also
brought
new
skillsets
into
Galliford
Try,
a
significant
design
function,
offsite
build
capability,
and
the
design
software
and
manufacture
of
control
panels
and
chemical
dosing
systems
for
the
water
sector,
all
of
which
adds
momentum
to
our
growth
strategy.
And
of
course,
and
very
importantly,
it
brought 900
excellent
people
into
Galliford
Try.
Our
balance
sheet
strength
and
our
knowledge
of
the
water
industry
enabled
us
to
move
very
quickly
when
the
acquisition
opportunity
arose,
and
the
integration
is
going
well
with
a
new,
bigger
business
restructured
in
January
and
settling
down
nicely.
As
Andrew
said,
there
was
limited
contribution
to
revenue
in
the
first
half,
but
we'll
see
revenue
and
operating
profit
come
through
in
the
second
half,
along
with
opportunities
to
leverage
our
new
capabilities
across
the
whole
of
Galliford
Try.
As
well
as
a
business
rationale
for
the
acquisition,
it
ensured
continuity
of
important
water
and
wastewater
projects
across
the
UK,
and
safeguarded
the
livelihoods
of
a
great
many
people,
both
in
terms
of
staff
and
in
the
supply
chain.
It
is
our
intention
to
do
a
more
detailed
presentation
on
the
environment
business
to
our
investors
later
in
the
year.
Moving
on
to
the market.
We
continue
to see
a
robust
pipeline
of
work
through
the
medium
term,
driven
by
government
spending
across UK
and
by
private
commercial
organizations
in
the
regions.
And
you
can
see
here
examples
of
very
significant
programs
of
work
in the
sectors
in
which
we
are
very
well-placed
to
perform.
Our
order
book
has
grown
by
£100 million
pounds
to
£3.4
billion,
and
you
can
see
here
the
split
between
Building
and
Infrastructure,
and
the
constituent
parts
of
each
sector.
90%
of our
order
book
remains
in
the
public
sector;
and
at
the
half
year,
we
had
95%
of
this
year's
revenue
secured,
of
which
87%
is
in
long-term
frameworks.
Very
importantly
to
me,
we
already
have
just
over
80%
of
full year
2023's
revenue
in
hand,
which
is
a
very
good
position.
You've
seen
this
slide
before.
And
just
to
remind
you
that
our
risk
management
process
is
unchanged
and
incorporates
robust
contract
selection
procedures
and
product
commercial
controls
and
oversight.
There's
a
lot
of
focus
and
effort
on
managing
the
effect
of
materials
and
labor
shortages,
as
well
as
inflation.
Our
strong
order
book
and
cash
position
supports
our
disciplined
attitude
to
risk
and,
as
Andrew
said,
allows
us
to
walk
away
from
the
wrong
projects. And
that's
really
important
to
us.
Our
supply
chain
is
aligned
to
our
business.
We
engage
them
early
and
we
pay
them
promptly,
which
is
important
in
retaining
the
best
suppliers
and
subcontractors.
We
allow
for
risk
and
current
inflation
in
our
tenders,
and
so
we're
only
looking
at
the
differential
between
what
we
allowed
for
in
the
first
place
and
the
actual
inflation
through
the
tenancy
of
our
projects.
There's
also
a
lead-and-lag
cycle
in
inflation,
which
tends
to
balance
out
over
time,
in
my
experience.
We
procure
materials
early
to
mitigate
possible
inflation
and
material
shortages,
and
we
have
increased
our
lead
times
to
provide
more
of
a
buffer.
And
most
importantly,
the
culture
of
risk
management
across
the
business
is
good,
and
our
management
incentives
are
aligned.
So,
going
back
to
our
strategy,
here
are
some
of
the
metrics
we
use
to
monitor
our
progress.
You'll
see
in
the
appendix
the
full
suite
of
metrics
which
you
report
on
an
annual
basis.
Our
AFR
at
0.07
is
significantly
better
than
the
industry
average;
and
notwithstanding
that,
we
always
work
very
hard
towards
aspirational
zero.
Early
careers
people
make
up
6.2%
of
our
staff.
Our
considered
contractors
score
is
well
above
the
industry
average.
And
93%
of
our
clients
are
repeat
clients.
We
have
a
huge
focus
on
people
and
career
development,
with
an
emphasis
on
retaining
our
excellent
people
and
attracting
new
high-caliber
people
to
the
company.
We
did
our
staff
engagement
survey
last
year,
and
we're
very
pleased
to
get
an
overall
engagement
score
of
72%,
with
85%
of
respondents
being
strong
advocates
of
the
company
and
94%
of
our
staff feeling
motivated
by
our
vision
for
the
future
of
the
business.
We've
made
good
progress
towards
our
zero
net
carbon
goals
in
the
period,
both
in
terms
of
general
business
processes
and
practical
actions.
We've
resourced
up
on
appropriately
qualified
people,
and
invested
in the
tools
we
need
to
drive
and
measure
our
progress
in
carbon
reduction.
On
the
practical
side,
we've
converted
all
of
our
piling
rigs
and
associated
equipment
to
run
on
hydrotreated
vegetable
oil,
which
dramatically
reduces
their
carbon
emissions.
And
our
fleet
average
across
all
of
our
cost
is
down
to
67
grams
of
carbon
per
kilometer.
We
continue
to
invest
in
the
technology
that
we
need
to
collaborate
digitally
with
our
clients,
designers
and supply
chain,
which
helps
us
to
enhance
site
efficiency
and
site
safety,
reduce
rework
and
capture
high-quality
data
to
monitor
quality
and
progress.
And
all
of this
drives
an
excellent
financial
performance.
We've
maintained
a
robust
risk
position,
prioritizing
the
bottom
line
over
top
line
growth.
And
we're really
pleased
to
see
the
progression
in the
margin
to
2.2%,
en
route
to
our
3%
target.
Revenue
is up
10%
and
cash
generation
is
good,
and
we're
producing
a
good
return
for
our
shareholders.
So,
in
summary,
everyone,
we're
in
good
shape.
A
strong
balance
sheet,
excellent
order
book,
and
we're
making
good
progress
against
our
strategy,
with
improved
financial
performance
across
[indiscernible]
(16:28). We're
on
track
for
full
year 2022
and
the
strategy
period.
And
my
thanks
go
to
all
of
our
staff
and
supply
chain
for
their
excellent
contribution.
So,
that
concludes
the
presentation,
and
I'll
hand
back
to
the
operator
to
take
any
questions.
Thank
you.
Thank
you.
[Operator Instructions]
We
will
now
take
our
first
question
from
Joe
Burnett (sic) [Brent] (17:01)
from
Liberum.
Please
go
ahead.
The
line
is
open.
Good
morning,
gentlemen.
Morning, Joe.
Morning,
Joe.
Congratulations
on
some
very
good
numbers.
If
I
may be
greedy
and
just
start
with
three
questions,
if
that's
okay.
Firstly,
on nmcn,
can
you
give
us an
indication
of
what
sort of
margins
that
business
is
achieving
and
what
it
can
achieve
relative
to
group?
And
secondly,
given
that
that
looks
such
a
fantastic
acquisition,
are
there
other
acquisitions
that
you
can
make?
And
could
you give
us
some
indication
of
the
areas
you
might
be
looking
to
add
to?
And
thirdly,
you
touched
on
the
very
important
subject
of
shortages
and
inflation.
I'm
very
interested
to
hear your
perspective
on
which
parts
of
that
are
most
worrisome.
On
the
inflation
side,
I
imagine
that
your
principal
issues
is
labor.
And
on
the
shortages
side,
I'm
sure
it'll
be
certain
building
materials. So,
interested
in
a
bit
more
color
on
what's
going
on in
the
ground
in
those
areas.
Okay.
Thanks,
Joe.
Yeah, we're
really
pleased
with
our
acquisition
of
nmcn.
It's
settling
in
really
well.
And
on
a
margin
basis,
it's
–
on
the
business
as
usual
stuff,
so
that's
the
design
commissioning
and
construction
of
water
and
wastewater
plants,
we
see
the
margins
sort
of
typically
where
we
expect
them to
be,
2.5%
to
3%.
And
then
they've
got
some
other
parts
of
the
business,
for
example,
the
[indiscernible]
(18:29) business
who
make
the
control
panels
and
the
chemical
dosing
systems
and so
on,
where
margins
can
be
significantly
higher.
So,
on
a
blended
basis,
they're
very
supportive
of
where
we
intend
to
be
in.
On
other
acquisitions,
it's
certainly
been
a
good
experience
for
us,
our
first
acquisition,
and
we –
whilst
our
strategy
doesn't
rely
on
acquisitions,
we
are
certainly
open
to
acquisitions
if
something
sensible
comes
along.
And,
of
course, our
balance
sheet
gives
us
the
agility
to
do
just
that.
So,
we
will
keep our
eyes open,
Joe,
for
the
right
opportunities
here.
On
shortages,
things
are
stabilizing
across
the
piece,
I
think.
Inflation
has
stabilized.
I
think
it's
not
going
down.
It's
stuck
at
probably
4%
to
4.5%
is
my
guess.
But
it
has
stabilized.
Labor,
again,
has
stabilized.
And
again,
that
depends on
which
part
of
the
country
you're talking
about,
Joe.
The
labor
issue
is,
more
general,
an
issue
in
London
in
the
southeast
than
it
is
in other
parts
of
the country.
And
the
same
thing
in
materials.
They're
almost
stable.
We are given
more
predictable
supply,
I
suppose.
And
I'd
say
the
odd annoyance
is
more
than
anything
fundamental
in
the
material
supply.
Looking
forward
and
with
the
issues
happening
elsewhere
at the
moment,
there
might
be
further
inflation
caused
by
energy
prices
and
so
on
perhaps.
But
of
course,
we have
prices
into
our
tenders.
We
forecast
what
we
think
inflation
will
be
and
we
take
a
view
of that
in our
tenders.
And
so,
as
we
go
through
the
tenancy
of
those
projects,
we're
only
looking at
the
differential
between
what
we
thought
would
happen and
what
is
actually
happening.
And
just
following
up
on
that
[indiscernible]
(20:12)
what
you
are
budgeting
for
energy
prices going
forward,
roughly?
We
don't
budget
the
energy
prices,
per
se,
Joe.
We
look
at
what
the
impact
of
that
will
have
on
material
prices.
So,
it's
obviously,
if
you're
looking
at
steel
or
glass, these
are
more
[indiscernible]
(20:27)
energy
prices
into
that
commodity.
If
you're looking
at
something
else
like
a
timber,
for
example,
then
that's
not
necessarily
affected
by
energy.
Thank
you.
Thank
you.
We
will
now
take
our
next
question
from
Andrew
Nussey
from
Peel
Hunt.
Please
go
ahead.
Hi.
Good
morning,
Bill.
Good
morning,
Andrew.
A
question
from
me.
Just
in
terms
of
the
commercial
activity
and
obviously
[ph]
conscious
of (20:58)
about
10%
of
sort
of
the
order
book,
the
business
now,
but
your
thoughts
on
that
end
market
over,
I
guess,
both
the
sort
of
near
term
and
what
you
might
be
sort
of
seeing
in
terms
of
customer
hesitancy.
But
perhaps
more
interestingly,
how
you
see
that
in
the
runway
to
your
FY
2026
growth
objectives,
please.
I
think,
Andrew,
it
depends
on
where
you
are
in
the
country.
So,
in
the
regions,
we
see
quite
a
bit
of
commercial
activity, particularly
in
PRS,
student
resi and some commercial
offices,
and
it
does
vary
by
region
quite
a
bit
actually.
And
it
is
variable,
yes.
It's
reliant
on
individual
private
companies
taking
a
view
on
what
they
think
is
going
to
happen.
So
far,
we've
seen
it
fairly
constant.
We've
not
seen
any
diminishment
in
appetite.
The
pipeline
of
tenders
coming
through
is
fairly
constant.
And
for
us,
it's
mainly,
as
I
say,
PRS,
student
resi.
The
only
change
that
I'd
say
is
perhaps
increasing
a
touch,
but
that
might
be
a
bit
early
to
say
– call
it
a
trend,
is
the
refurb
of
offices.
So,
you'll
see
more
and
more
offices
being
taken
back
to
the
structural
shelves,
so
to
speak,
and
then
completely
recabined
and
refitted
internally.
And
part
of
that
is
just
to
modernize,
I
mean,
part
of
that
is
to
lower
their
operational
carbon
and
have
an
office
building
that
clients
want
to
be
in
because
of
their
new
credentials.
Got
it.
And
just
sort
of
follow-up.
In
terms
of
the
investments
portfolio
and
sort
of
the
opportunities
that
you're
seeing
there
to
invest,
I
mean,
should
we
think
over
sort
of
the
next
couple
of years?
Actually, we
probably
see
a
degree
of
net
investment
in
terms
of
the
portfolio
moving
forward.
Maybe
that's one
more
for
Andrew,
but
just
curious
on
how
you
see
the
shape
of
the
investments
portfolio,
the
investments
activity
developing
in
the
group.
Yeah,
of
course. Good
morning,
Andrew.
So,
the investments
portfolio
on
the
books
are
£48
million.
Of
course,
it's
largely
PFI-type
assets,
so
we
don't
see
big
–
there'll
be
some
movement,
but
obviously
the
PFI
market
in
England
is
not
– is
closed
effectively.
But
what
we
are
doing
is
repointing
that
business
into
private
rented
sectors,
into PRS,
and
you'll
see
in
the
first
half
year,
we
got
our
first
PRS
scheme planning
permissions
that
will
go
on
to
site
later
this
calendar
year.
So,
there
is
opportunity
for
us
to
continue
to
invest
into
the
PRS
space,
which –
yeah,
which
will
then
help
us
drive
some
of
our
margin targets
as
well
as
we
go
forwards.
Okay.
Great.
Thank
you.
Thank
you.
We
will
now
take
our
next
question
from
John
Fraser-Andrews
from
HSBC.
Your
line
is
open.
Thank
you.
Morning,
Bill
and
Andrew.
Hi,
John.
I'll
have
three,
please.
Firstly,
can
we
come
back
to
the
PRS?
Do
I
understand
correctly
that
the
investment,
the
planning
permission,
the
stages
before
securing
the
construction
of
the
building
that's
undertaken
within
the
PPP
business
and
then
the
construction
business
will
then
undertake
the
constructions
on
behalf
of
the
investor,
the
forward
funding
investor?
Is
that
right?
So,
that
profit
and
margin
that
you've
referred
to
earlier,
Bill,
that's all
within
the
PPP
business.
So,
that's
the
first
one.
The
second
is
on
cash.
You've
stated
that
if
Strategy
2026
plays
out,
you
won't
need
to
commensurately
increase
the
average
month
in
cash,
and
surplus
cash
will
be
returned
to
shareholders.
If
you
could
explain
some
parameters
of
what
surplus
cash
is,
that
would
be
really
helpful.
And
then
thirdly
and
finally,
in
terms
of
the
pace
of
margin
accretion
and
Strategy
2026,
how
do
you
see
that
playing
out?
Is
that
a
steady
progression,
or
do
we
see
a
jump
in
the
near-term.
Possibly,
some
thoughts
on
that
would
be
also
useful.
Thank
you.
Okay.
Thanks,
John.
I'll
take
the
first
one,
and
Andrew
can
pick
up
the
second too.
The
PRS
market
is
a
very
much
joint
effort
right
from
[indiscernible]
(25:52)
because
what
you're
trying
to
do
here,
John,
is
first identify
a
parcel
of
land
that's
good
for
PRS
scheme,
and
then
looking
to
design
and
build
a
scheme
that
is
easy
and
efficient
and
safe
to
build.
So, as
I
always
say,
you
can
generally
keep
the
planners
happy
by
putting
any
skin
they
want
on
the
outside
of
the
building
and
changing
the
shape
of
it,
but
the
inside
of
it,
the
fundamentals
should
be
repetitive,
easy,
straightforward
to
build,
and
that
makes
it
efficient
and
makes
it
a
better
and
more
profitable
venture.
So,
it's
very
much
a
joint
effort
from
the
investment
side
of
the
business
and
the
building
side of
the
business
right
from
the
start,
and
making
sure
that
we
get
those
things
aligned.
And
of
course,
the
construction
cost
has
to
– is
one
of
the
most
important
things
in
making
sure
that
you
can
get
these
things
over
the
line
in
the
first
place.
So,
very
much
a
joint
effort
all
the
way
through,
John.
Over
to
you,
Andrew.
Yeah.
And
then
– so
on
the
second
[indiscernible]
(26:50)
question, John,
so
on
cash.
So,
I
mean,
I
guess the
first
point
is
we're
very
happy
with
the
level
of
cash
and
where
our
balance sheet
is
today.
So,
that
is obviously
the
first
and
most
important
point.
You'll
see
our
average
cash
balance
in
the
first
half
year
is
around
about
15%
of
turnover
on
an
annualized
basis.
And
what
we're
saying,
John,
is
as
we
grow
the
business
from
£1.1
billion
in
June
2021
to
£1.6
billion
by
June 2026,
so
50%
growth
in
revenue,
that
we
don't
need
our
cash
position
to
grow
50%,
so
that's
why
we
see
potentially,
there
will
be
some
opportunity
for
us
to
return
the
excess
cash
as
we
grow
the
business.
What
we
do
though,
John,
is
we
look
at
that
level
in
the
context
of
the
climate,
the
macro
position,
the
uncertainties
in
the
market
and
all the
rest
of
it.
So,
it's
not
a
question of
sort
of putting
a
precise
number
out
for
where
we'll
be
in
a
year's
time or
two
years'
time
because
we
just
need
to
obviously
look
at
that
in
the
context
of
the
current
market
conditions
all
the
time.
In
terms
of
the
second
point – in
terms
of
margin
growth,
so
we're
very,
very
pleased.
We've
moved
from
2%
in
last
full
financial
year
to
2.2%
in
the
half
year.
So,
that's
good
progress
towards
the
3%.
We
do
think
there's opportunity
for
the
gross
net
margin
to
accelerate
as
the
adjacent
market's
part
of
the
strategy
comes
on
board,
and
some
of
that
will
be
towards
the
latter
part
of
the
five-year
period.
So,
those
adjacent
markets
are
margin
enhancing,
so they
will
help
us
increase
that.
So,
I
don't
think
we
should
expect
the
margin
to
grow
to
3%
in
the
first half
of
the
period.
We'll
expect
that
to
grow
towards
the
back
end
as
those
adjacent
markets
come
through.
Thanks,
Andrew.
That's
clear.
Perhaps
more,
like,
I've
got
your
attention.
There's
one
further
question
that
sprung
to
mind,
and
that
the
current
building
safety
crisis,
fire
safety
crisis
that
the
government
is
wrestling,
the
residential
development
industry
and
the
building
products
manufacturers,
the
contributions
to
remediating
the
problem.
Firstly
on
that,
are
yourself
involved
in
that?
Is
there
any
cost
to
yourself
in
terms
of
past
projects,
or
is
it
providing
a
source
of
revenue
to
help
be
part
of
the
solution?
Well, the
first
thing,
John,
is
that
we're
not
covered
by the
residential
property
tax
because
we're
not
a
developer
as such.
That's
the
first
thing.
And
in
the
same
breath
[indiscernible]
(29:42) that
we
agreed
that
leaseholders
should
not
have
to
bear
the
brunt
of
this.
It
should
be
the
industry.
But
we
are
not covered
by
the
tax,
so
we
don't
have
to
pay
it.
And,
of
course,
the
type
of
work
we
do
and
did
in
the
run
up, because
this
goes
back
a
few
years,
is
very
limited.
So,
we
have
a very
limited exposure
in
the
first
place.
And
notwithstanding
that,
we
did
identify
a
handful
of
projects after
that
dreadful
night
at
Grenfell
and
– which
had
this
ACM
cladding
material
on
it.
And
we
convened
a
task
force
the
very
next
day. We
identified
every
building
we
built
in
the
last
12
years.
As
I
said, there
were
a
handful
of
ACM
buildings
in
there.
We
approached
the
clients
and
we
remediated
all
of
those
buildings
over
the
past
few
years.
And
from
a
cost
perspective,
in
some
cases,
the
client
paid;
in
some
cases,
our
insurance
paid;
in
some
cases,
the
subcontractors
paid;
in
some
cases,
we
contributed
as
well.
But
that
was
all
dealt
with
as
normal
business
as
usual.
And
we
don't
expect –
there
are
a few
ongoing
inquiries,
John,
but
they're
not
material,
and
we
don't
expect
them
to
be
material
going
forward.
Okay.
Thanks,
Bill.
Is
it
providing
work
for
you
in
remediating
for
others?
It
seems
to
be
that
[indiscernible]
(31:03)
in
the
construction
industry
to
get
the
work
done
seems
to
be
an
issue.
On
very
small
basis,
John,
yes.
We
have
one
of
our
smaller
companies, dry
lining,
does
some
work
in
this
field
and
they
do
retailing
of
lower
rise
buildings
where
it's
appropriate
and the
associated
fire
protection
work.
So,
yes,
we
will
benefit
from
a
little
bit
of
work
coming
through,
but
nothing
of
any
substance.
Great.
Thanks,
Bill.
Thank
you.
We
will
now
take
our
next
question
from
Greg
Pluton
(sic) [Poulton] (31:37) from
Singer
Capital
Market (sic) [Markets] (31:37).
Please
go
ahead.
Yeah.
Morning.
It's
Greg
Poulton
from
Singer's
here.
Hey.
Most
might
have been
asked,
but
just
on
the
labor
shortages.
I
think,
Andrew,
you
said
it
was
more
[indiscernible]
(31:50)
in
London
in
the
southeast. So, if you
could
expand a
bit
on
how
you're
managing
that
and
if there's
any
impact
on
build
schedules
and
things?
And
then
secondly,
on
the
exceptional
charges,
I
think
it
was £6 million for
that
nmcn acquisition
integration.
Is
that
the
extent
of
it
for
the
year?
I
think
on
the
ERP
system,
you've
got
another
sort
of
stock of
3.5%
in
the
second
half,
is
that
right?
Yes.
So,
just
picking
those up,
Greg.
So, on
the
exceptionals,
yes,
so
that
is
broadly
with
[indiscernible]
(32:27)
integration,
as
Bill
said,
it's
progressing
very
well,
very
pleased
with
that.
And
those
costs
included
some
of
the
downside
costs immediately
post the acquisition.
So,
[indiscernible]
(32:37)
brought
it
up
for
nmcn.
You're
right,
the
investment
in
IT systems
will
continue,
so
we'll
expect
more
cost
sort of
right
in
the
second
half
year.
But
just
to be
very
clear, that's
a
positive
strategic
investment
we
make
in
our
IT
systems,
which,
two
years
ago
really
capitalize
those
costs. We're
not
allowed
to
do
that
anymore.
So,
that's
the
only
reason
those
are
going
through
as
exceptional,
but
that
is
a
positive spend
by
the
group.
Do
you
want to get
on
labor,
Bill?
Yeah. Yeah. So,
on
labor,
Greg,
as
I
said
earlier
on,
it's
more
accentuated in London
in
the
southeast
than
elsewhere
in
the
country,
and
that's not
across
the
piece
that
generally
is
specific
trade
at
any
one
time.
So,
we
mentioned
dry
lining
a
minute
ago.
That,
for
example, at
the
moment
is
one
there's
a
bit
of
a –
seems to
be
a
bit
of
a
shortage.
But
we
get
around
these
things
by
reprogramming
contracts
and
by
giving
forward
visibility
of
what's
coming
up
to
our
supply
chain
so
that
they
can
plan network,
and
we
generally
manage
our
way
through
it.
So,
I
think
it's
settling
down
a
bit
now.
And
as
I
said
earlier
on,
it
isn't
having
a
material
impact
on
the
business.
So,
we're
managing
through,
and
I
think
it'll
continue
to
stabilize
[indiscernible]
(33:47).
Okay.
Thanks
a
lot.
Cheers.
Thank
you.
We
will
now
take
our
next
question
from
Alastair
Stewart
from
Shore
Capital.
Please
go
ahead.
Morning,
gentlemen.
[indiscernible]
(34:02)
balance
sheet-related
question
from
me.
The
first is,
you
mentioned
quite
rightly
that
a
strong
balance
sheet
is
becoming
a
key
differentiator
for
you,
and
one
or
two
other
companies
are
saying
similar
things.
But
are
your
clients
kind
of
looking
principally
at
the
net
cash,
the
average
net
cash?
Are
they
drilling
down
deeper
to,
say,
your
bonding
cover?
The
reason
I
asked
was
I'm
hearing
word
from
the
industry
that
some
of
the
less
well-capitalized
contractors
are
cutting
corners
because
of
build
cost
increases
and
reducing
their
bond
cover.
Is
that
something
you're
seeing
and
have
you
changed
your
surety
considerations?
That's
the
first question.
Should
I
take
that
one
Alastair
before –
sorry.
Good
morning
by
the
way.
Sure.
I
mean,
so
clients
obviously
look –
different
clients
look
in
different
ways.
I
think
the
commonality
is
the
value
of
a
strong
balance
sheet
and
the
value
of
a
contractor
who
they've
got
confidence
will
be
able
to
deliver
the
projects as
required
is
common,
but
they
will
have
slightly
different
ways
that
they
look
at
it.
I'm
not
seeing
that
feature
you
mentioned,
the
bonding
market
is
not
something
I
see.
We've
got
very good
relationships
with
our sureties.
Yeah,
we
continue
to
use
the surety
market
as required.
With
our
clients,
that's
not
a
feature
that
I
particularly
see
Alastair.
Yeah.
I
think
just
to
point
out,
having
talking
to
that
section
of
the
industry,
and
they
say
it
is
beginning
to
happen
and
stirring
up
trouble
potentially for
weaker
companies,
but
that's
an
observation.
And
my
second
question,
it
kind
of
follows
on
from
John's
question
on
capital
returns.
Perhaps
looking
at
this
from
another
direction.
You
said,
Andrew,
that
if
your
revenue
went
up
50%,
you
wouldn't
need
to
get
to
keep
hold –
you
wouldn't
need
to
keep 50%
more
average
net
cash.
And
you
said,
it's
currently
15%.
In
terms
of – I'm
not
looking
at
it
in
terms
of
how
much
you
pay
out,
more
in
terms
of
how
one
should
look
at
adjusting
enterprise
value. The £180
million
of
average
net
cash,
which
is
almost
your
market
cap.
Obviously,
some
of
that
should
prudently
be
taken
off
a
cash-in
enterprise
value.
I
mean,
you
mentioned
the
figure
15%.
Would
it
be
more
like
10%
before –
even
before
you
consider
this as
operational
opportunity?
Just
in
terms
of
your
prepayment.
Is
there
a
magic
figure
in
your
head
that
you
wouldn't
want
to
go
down
a
percentage
of
revenue,
you
wouldn't
want
to
go
below?
So,
I
think, Alastair,
the
point
is
what
we
look
at
all
the
time
is
the
context
of
the
market
and
the outlook
as
we
see
it.
And
so,
yeah,
and
the
absolute
priority
for
us
is
maintaining
a strong balance sheet,
strong
balance
sheet
for
all the
reasons
that
we've
set
out
is
really
important
to
us
now.
The
point
is
that
what
we
don't
need
is whether
it's
surplus
cash,
and
that's when
we
would
look
to
return
that.
But
we
wouldn't do
anything...
Yeah.
...to
put
a
strong
balance
sheet
at
risk.
No,
I
understand
that,
but
is
there
a
kind
of
just
the
rule
of
thumb
–
I've
kind
of
always
thought
of
it
as
being
about
10%
without
any
great
scientific
evidence,
but
is
there
some
percentage
of
either
revenue
or
net
worth,
whatever,
that
you
[indiscernible]
(38:31)?
So, Alastair,
I
mean,
we
haven't
put
a
number
in
the
statement
because
we
look
at
that
in
the
context.
No,
I...
So,
[indiscernible]
(38:42)
yeah,
if
you
like,
drawn
into
giving
a
figure,
which
is,
I don't
say
arbitrary,
but
which
is
we
have
to
look
at
it
in
the
context
of
the
market
as
we
find
it,
and
that's the
context
or
the
lens
through
which we
need
to
look
at it.
Yeah. All
right. Fair
enough.
Thanks
very
much.
Thank
you.
We
will
now
take
our
question
from
Jonny
Coubrough
from
Numis.
Please
go
ahead.
Good
morning,
and
thanks
for
taking
my
question.
Two,
please.
Firstly,
[indiscernible]
(39:17)
if
you're
seeing
any
impact from
the
decision-making
process
from
your
building
customers
as
a result
of cost
inflation
driving
up
the
fees,
the
cost
of
projects,
whether
that's
potentially
delaying
decisions
or
anything
else?
And
then
secondly,
just
a
follow-up
question,
please,
on
the
nmcn
acquisition
costs.
Appreciate
that,
Andrew,
you
said
that
there's
been
some
downtime,
but
would
also just
be
grateful
if
you could
just give
a
breakdown
maybe
of
what
the
£6.3
million
was
and
also
whether
that
was
expected
at
the
time of
the
acquisition.
Thanks
very
much.
Okay.
Thanks,
Jonny.
I'll take
the
first
one,
and Andrew
can
pick up
the
second
one.
Yes,
we
have
seen
a
bit
of
slippage
in
decision-making,
both
in
the
public
sector
and
the
private
sector
actually.
In
the
private
sector,
it's
more
about
inflation
where,
for
example,
we
might
put
in
a
price
and
win
a
project.
And
if
it takes
the
client,
for
example,
a
month,
to
say
yes
and
then
the
price has
gone
up
in the
meantime.
So,
it
is
an
iterative
process.
We're
very
upfront
with
our
clients
with
regard
to
the
impact
of
inflation
and
the
validity
of
the
prices.
And
so
in
a
few
instances,
it
has
delayed
projects
only
by
a
couple of
weeks,
possibly
maybe
a
bit
more,
as
that
sort
of
iteration
goes
on
a
few times.
In
all
cases
so
far,
we
have
arrived
at
a
landing
point,
which
is
acceptable
to
us
because
obviously
we
won't
allow
our
margins
to
be
to
be
diminished
or
our
risk
to
go
up
as
a
result
of
that
process.
So,
we
are
being
pretty
robust
here.
Our
clients
understand
that.
And
as
I
say,
we've
not
lost
any
projects
on
the back
of it, some have been
delayed
by
[indiscernible]
(41:04).
In
the
public
sector,
again,
things
just
seemed
to
take
a little
bit
longer
at
the
moment.
If
you'd
asked me
the
question
a
month
ago,
I
probably
would have
been
a
bit
more
frustrated.
But
in
the
last
couple of
weeks,
actually,
we've had
a
whole
tranche
of
projects
that
we
preferred
better
on
come
through
to
contract.
So,
it
seems
to be
picking
up
pace
again
now.
So,
yeah,
there's
been
a
bit
of
slippage,
but
they
seem
to
come
through
in
the
end.
And
then –
morning, Jonny.
Just
on
the
acquisition
costs.
So,
yeah,
we
did anticipate
there
would
be
cost. I think
we
said
in
October
that
we
thought
there'd
be
some
additional
costs,
and of
course
put
that
in
the
context
of
the
headline
consideration
in
October was
£1
million.
So,
yeah,
that
was
always
anticipated
to be
some
additional cost
to
be
spent.
The
£6
million,
Jonny,
is
a
mixture
of legal
and
professional
fees.
It's
got
integration
costs
and
restructuring
costs
in
there,
as
well
as
the
cost
of
the
– the staff
costs
at
the
time
the
sites
were
closed,
and
therefore we
were –
mostly
carried
on
paying
our
staff,
but
they
weren't
productive
in
the
sense
of
generating
revenue.
So,
it
is
a
mixture
of
all
of
those
features.
That's
great.
Thanks
very
much.
Thank
you.
That
will
conclude
our
Q&A
session.
I
will
now
turn
the
call
back
to
Bill
Hocking.
Thank
you.
Okay.
Well,
thanks
to
all
for
attending
today
and
for
your
questions.
Much
appreciated. Just
to
reiterate,
we're
in
good
shape.
We're
really
pleased
with
the
progress
we've
making
towards
our
targets,
and
we
look
forward to
see
you
again
in
September.
Thank
you
all
very
much.
Bye-bye.