Severfield (LSE:SFR) — Investor Presentation

0:00 Good afternoon, and welcome to the SEVERFIELD PLC investor presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged and could be submitted at any time by the Q and A tab situated in the right corner of your screen. Just simply type in your questions and press send. The company may not be in a position to answer every question it received in the meeting itself. However, the company will review your questions submitted today and publish responses where it's appropriate to do so. Before we begin, I'd like to submit the following poll.

0:24 And I'd now like to hand you over to Alan Dunsmore, CEO. Good afternoon, sir. Good afternoon, and welcome, everybody, to our inaugural investor meet presentation. I'm Alan Dunsmore, chief executive for SEVERFIELD, and I am accompanied by Adam Semple, our chief financial officer. First of all, I I by way of backgrounds, SEVERFIELD PLC is the The UK's largest structural steel company. We design, fabricate, and direct structural steel for a wide range of construction projects, and you'll see some examples of the sectors that we deal in as we move through move through the presentation. So I'd like to start with the the five pillars of our investment case. It starts with the exciting growth prospect. We've we've we've aligned the business with sectors of strong growth potential in both The UK and Europe. We're well positioned to win projects supporting the low carbon economy, and we have an Indian joint venture, which we believe is well placed to grow significantly and build a lot of value in India over the next next few years.

1:30 We've got a resilient business through the economic cycle. We've got a good sector, geographical and client diversity, and good earnings visibility from a strong order book. We've demonstrated this resilience over the past the past few years. The whole business is building a platform of operational excellence. We continually invest in our production footprint, our processes, systems, technologies, and so on. And during the the past past financial year, we've launched our group wide digitization project, which we're calling Project Horizon. The business model generates strong returns. The cash generation is good, and we now have an average five year average return on capital employed exceeding 15%.

2:15 Now Adam will say a bit more about the the cash model a little bit later on. And finally,

2:21 we have a strong focus on sustainability, and that's becoming more common for many businesses now. It's been part of our DNA for quite some time, and we'll see more of that as well. So five key pillars of the investment case. And as we as we go through the slides, you'll see supporting evidence for all of these all these points. So moving on to the headlines of the results. It was a good set of results for the last financial year. Revenue up 22% to £492,000,000. Underlying profit before tax up 20% to £32,500,000, which was slightly ahead of expectations due to some strong operational delivery on some key some key projects. Our cash flow for the year was strong. We improved working capital, and we finished with net funds of £2,700,000.

3:10 What's important for us, though, is maintaining the strong order book. So we've delivered some good results for last year, but we've also got a good order book of £510,000,000, which gives us lots of work ahead of us and good visibility of the next financial year as well. India, I mentioned that we're continuing to build value there. Our share of profit from that joint venture is a fifty fifty joint venture. Our share of profit at it 1,300,000 reflects a record EBITDA of £11,000,000 from the joint venture business and record output of 108,000 tonnes as well of structural steel, and that compares well with our UK volume output of about a 115,000 tonnes in a year. So India is a is growing strongly, and the volumes are are strong there.

3:57 All of that gives us underlying basic EPS of 18% to 8.5p per share, and the total dividend will be up 10% to 3.4p per share. So those are the headlines. I'll now hand over to Adam for a little bit more detail on the financials, and I'll come back and go through the rest rest of the presentation. Thanks, Alan, and good afternoon, everybody. I'll just take you through a bit more detail on the profit and loss account. You can see that the results this year were excellent. We recorded record revenues. And as Alan said, our profits were ahead of expectations. It's also the first time since 2009 since the group has recorded profits of more than £30,000,000, which is an important milestone for us. Revenue for the year was £492,000,000 and that was an increase of 22% of the previous year, reflecting an increase in production activity and steel prices and also an output for the year of 115,000 tonnes, including subcontracted work.

4:54 Underlying operating profit was £33,100,000 up 23% over the previous year. And the increase in profit, as Alan said, reflects strong operational delivery on a number of ongoing projects, but also highlights our ability to offset ongoing inflationary cost increases through a combination of operating efficiencies, higher selling prices and contractual protection as steel is a pass through cost for the group. The operating profit or operating margin of 6.7% is unchanged from the previous year, and this continues to reflect the impact of the higher steel prices that are passed on to clients at zero margin. So in reality, our margin has slightly ticked up because of the impact of the higher steel prices. The share of profit from JVs and associates of GBP 1,900,000, that includes GBP 1,300,000 from JSSL, which is our India joint venture, and GBP 600,000 from CMF, our cold rolled steel businesses, which forms part of our modular solutions division.

5:51 The increased profits in India reflect revenue growth, improved margins and also a record EBITDA for the business of £11,000,000 So overall, underlying PBT of £32,500,000 is up 20% in the previous year and the dividend of 3.4 p per share, which includes the proposed final dividend of 2.1 p is up 10%, and that's allowed us to retain a healthy dividend cover of between 2.4 and 2.5x. Looking ahead to next financial year, our expectations remain unchanged, and this takes into account our high quality order book, good earnings visibility and encouraging prospects, but also retaining an element of caution giving a softer UK distribution market and some delays in client decision making, which Alan will pick up later on.

6:39 So turning over to India, a bit more detail on the joint venture. And as Alan said, this is a nonconsolidated company, and so we don't consolidate these numbers, but we account for 50% of its share of profits. The business has continued to recover well post pandemic and has reported a profit after tax of £2,600,000 of which our share was £1,300,000 This reflects revenue of £138,000,000 which represents an increase of nearly 40% over the previous year, reflecting an increase in output to 108,000 tonnes from 58,000 tonnes in the previous year, again, including subcontracted work. This is a record for the business and means that our Indian joint venture's output for the year was almost equivalent to that of our entire UK and Europe operations. The improved result for India also reflects operating margins of 6.3% compared to 5.2% in the previous year due to an improved work mix and also strong operational delivery.

7:35 Unfortunately, some of GSSL's operating profit of £8,700,000 has been offset by finance costs of £5,100,000 which are over 50% higher than the previous year. This is unusual for the business and reflects a higher level of borrowing due to inflation on working capital and increased letter of credit costs on steel purchases, which have more than doubled over recent years, and we would expect these finance costs to reduce in future periods.

8:04 Turning to the balance sheet. The balance sheet shows an increase in net assets, $218,000,000 from two zero four million pounds in 2022, reflecting the profit for the year, a decrease in the pension liability offset by normal dividend payments. The pension liability is relatively small. It's decreased again by £1,500,000 to £12,900,000 since March 2022, reflecting another increase in the discount rate and also the ongoing deficit contributions made during the year. Towards the end of the financial year, March 2023, we also increased our revolving credit facility from GBP 50,000,000 to GBP 60,000,000 as part of the acquisition of Vertman, which Alan will touch on later in the presentation, and this provides us with enhanced liquidity and extra long term financing for our growth strategy.

8:55 On to cash flow, which is a real strength for the group. Just as a bit of an overview, we normally our normal working capital percentage of sales range is 4% to 6%, and this reflects the fact that we only buy steel and specifically for contract purchases, and we don't we do not carry high levels of steel stock. We also credit insure our receivables book to mitigate risk. So overall, you can see our balance sheet and cash position remains healthy. We had a year of strong cash generation and our operating cash conversion, which is the percentage of our operating profit that we convert into cash, was 145%, and that increased it resulted in increased year end net funds, excluding the IFRS 16 liabilities, of £2,700,000 and this represented gross cash of £12,000,000 offset by outstanding acquisition loans of £9,000,000 Our overall improved cash position reflects an operating cash inflow of £38,000,000 an inflow from working capital of GBP 40,000,000, which largely represents an unwinding of a high working capital position coming into the year and also some advanced payments from customers.

10:04 Year end working capital was around 5% of sales within the 4% to 6% range that I talked about previously. This has been offset by some deferred and contingent consideration payments of £8,500,000 relating to an acquisition in 2021. And we have also spent money on CapEx of 6.2, which I'll come back to you, dividends 9,000,000 or £9,900,000, and tax and interest of £6,000,000.

10:32 Finally, for me, in terms of investment, we've invested £6,300,000 CapEx in 2023, which includes site improvements and new production machinery of £4,600,000 mainly to improve operations at Dalton, our main site, Lostock and Ballon Mallard, purchase of more construction site equipment of £900,000 to reduce our reliance on leased equipment from third parties and office improvements of £800,000, including the recent relocation of our head office from Dalton to Thursk. As Alan said, we've invested more than £60,000,000 in CapEx over the past ten years, making the business more resilient and operationally efficient. And I will now hand back to Alan for the rest of the presentation. Thank you, Adam. I've now got four slides covering strategy and some overall group statements before we take a deeper dive into The UK and Europe element of the business and then also our Indian joint venture.

11:30 So we've been following the same strategic priorities for the last few years, and and these these remain unchanged. First and foremost is to drive drive growth. Most recently, we've been we've improved our market position in Europe with an acquisition of Wirtman Steel Construction, and and and and we've aligned the business to with with market with strong growth potential, and we'll see more about that shortly. Our nuclear infrastructure business has secured important frameworks in the the nuclear sector, which we will come back to. And we've all we're we're also developing a a module solutions business, which is smaller than the core structural steel business, but we believe has good growth and potential. I mentioned at the outset the the strong operational platform. We continue to drive operational efficiency across all areas of the business, and the big event during the year was the launch of Project Horizon, our digital transformation project, which I'll come back to you as well.

12:26 India has been a core part of the business strategy of for several years. India has largely been a concrete construction market for for many years. It's now beginning to convert to steel and is growing strongly, and there's very significant growth growth ahead there. And finally, on ESG, it really encompasses all parts of the business. We were spent a lot a lot of time in this before it became fashionable more recently in areas like health and safety, reducing emissions. We were doing that five, six, seven years ago, and is a strong part of what we what we do in this core to our strategy going forward. So just to say a bit about project, horizon. We launched this during the year. The the the the end objective is to digitize or automate as much of the business as we possibly possibly can, specifically in areas of estimating, design, production, contract delivery processes, all core parts of the business for us. It's a long term project, but we've we've we've developed more than a 100 individual short, medium, and long term projects as part of this road map. And we now have a full time team of 14 people working on this on this program. We believe it's quite exciting. It's already self financing.

13:49 It will transform the business in the medium to long term, and we believe we'll to see net service and efficiency benefits over the next two to three years.

14:01 As I said, on ESG, we've been working this for for many years, and I'm not gonna go through all the individual points here, but it gives you a flavor for the the level of external validation that we're getting for our efforts, whether it's on emissions reduction or the 5% club, which is all about earning and learning, investing in training training of employees, whether it's in social value for contract tenders or supporting local communities. There's lots, you know, in every every part of the business, and it's really central to our our our thinking, and we'll be driving that very much going forward. What's particularly interesting for us, though, is when we join the the ESG themes with our top strategic objective of of growth, we get into this area of green investment and what we call the the the the green transition of the of the economy.

14:59 There's five five examples here, more nuclear power, battery plants for electric car batteries, renewable wind turbine plants and so on, decarbonate decarbonisation of the transport network, that's real electrification and so on, along with the move towards low carbon buildings. All of these are areas which involve a lot of capital investment, which we are well well prepared to to supply and support, and we believe these will generate strong themes of demand for the business in the coming the the coming years. In addition to this, you've got carbon capture, electricity storage, and things like the the upgrade and development of of the electricity grid. Again, all all areas which we believe will be able to support as well. So that whole green transition of the economy, we think, represents a strong theme for the business going going forward.

15:54 So if we now take a deeper dive into The UK and Europe, we reorganized the business at the beginning of the financial year just just finished into three market focused divisions, commercial and industrial, nuclear infrastructure, and modular solutions. Now commercial and industrial five years ago would have been the core of the business, but with recent acquisitions, we've developed the nuclear infrastructure division and also the the modular solutions division. They each have different dynamics, the different market dynamics, each of their own management teams driving improved customer service, efficiency, and strategy, and it's all underpinned by centralized group manufacturing, which optimizes the production footprint that we have across seven facilities and also allows us to optimize production efficiency initiatives across the whole group as as well.

16:50 Looking externally to general market conditions at the moment, we are generally positive based on our order book and the pipeline that we're seeing and also the the trends in the markets. But equally, we are sensitive to some of the short term economic pressures, which are are evident in the the news and news every day. We're seeing a bit of softness in the distribution sector just now. We believe that's short term softness because there's still a strong pipeline there, and we're seeing one or two delays in client decision making, I guess, or waiting from inflation to stabilize and such like. But, generally speaking, we are quite positive about our outlook. We are seeing inflation stabilize compared to twelve, eighteen months ago, where we had quite strong steel inflation and energy price inflation. So we're seeing a more stable backdrop already, and we're seeing continued stable steel supply, which is very important for us.

17:49 This just puts our current order book in a bit of context showing the total level historically, also how much of that total of five ten is for delivered within the next twelve months, and you can see it gives us good short term visibility. And you can see the divisional split as well on the left hand side of the slide. The the next slide

18:12 presents us slightly differently and shows how that we have developed the business and broadened the business over the past the past five years. Five years ago, we were most susceptible to one or two sectors dominating the order book. But now with the acquisitions, another effort we've made with a much broader order across several sectors, which gives us both resilience and opportunities for growth when demand is particularly strong in one area or another. We have the capacity to support that support that growth.

18:47 So looking at the commercial industrial order book makeup in a little bit more detail, That is particularly strong at the moment in the industrial industrial distribution sector, and that's more industrial than distribution as per my earlier comments in the softening distribution. Industrial for us is the start of some of the the green energy transition projects, car battery plants and wind turbine plants and so on, and we see that sector remaining stable for the foreseeable foreseeable future. Stadium leisure, we are well advanced with the the Everton New Everton Stadium. We're well advanced with the Co Op Live Arena in Manchester, and we're building some quite large film studios in the South, Southeastern England as well. And we see demand there remaining fairly steady for the foreseeable future as well.

19:33 Commercial offices is a little bit lower, but we see a a good pipeline good pipeline there. We're tending for several jobs in London and elsewhere just now, and we see that pipeline building. Data centers at 5% is lower than it's been for us in the past, but, again, demand for these is fairly consistent, and we see a strong pipeline of future work there there also. So I think that the that's the order book makeup, and I think that the we're seeing a fairly fairly good medium term demand characteristics, which will drive the order book in this in in this division further in the coming the coming years ahead. If we move on to the nuclear infrastructure division, a very positive development for us during the year. We're securing a position as a key delivery partner on SEVERFIELD's long term PPP program.

20:29 That should run for the next sixteen to seventeen years and gives us a position position on most of the steel work they were doing as part of the decommissioning program at at Sellafield. We also have some shorter term framework agreements for ancillary steel work at Hinkley. And the importance of these framework agreements is it gives us site of demand, which sits outside the order book. So the order book here is only part of the overall picture, but we see

20:58 strong demand from these framework agreements as well. Also in here is transport infrastructure. We're now doing quite a lot of HS2 work and bridges that are now being done after many years of waiting, but we're now well on with that, and there's some more in the pipeline there. There's some stations in the pipeline, and they're also doing work for Network Rail and Highways England on road and rail upgrading expansion as well. So we see this as being a a good strong division with good long term demand characteristics.

21:34 The acquisition of we completed just after the the year end. We're very pleased with it. It's our first Mainland Europe acquisition, and it's a really, really good strong business. It's well managed. It's got a good strong position in the domestic Dutch market. It's well invested. It's operationally efficient, it also gives us a kind of a good collaboration with the other part of the, which is our one of the world's leading manufacturers of steel fabrication equipment. So the so the the both parts were family owned. We bought the the steel construction business. They're retaining the other bits, so we have an ongoing collaboration agreement there. And what this business gives us is growth opportunities in in three areas. One is the steel construction business, which is very similar to our coexisting business that we we had already in The UK.

22:35 There is also a a smaller turnkey design and build business where clients like the suppliers of the steel work supply cladding and roofing and some of the dry works as well. That involves a skill set that we didn't previously have and is more important for Mainland Europe. So we now have that, which we think we can grow and develop. And finally, they have a a small business which fabricates steel transformers for the for the Dutch electricity grid, and that's about to undergo significant expansion development as well to support the green the green economy. So three different sec elements of the business there, all with opportunities for growth and development.

23:12 And when we combine that with our existing position in Europe, we've had a a sales and project delivery office in Europe for the last the last six years or building its own pipeline of work. So if we combine that with development of that acquisition, it gives us a very strong platform to sort of grow and develop further both organically and through possible acquisition further acquisition in Mainland Europe. So that's a that's a very good and important development for the for the group.

23:41 The final division in UK and Europe is SEVERFIELD Modular Solutions, which we broke out for the first time in the last year, and we'll and we'll we'll be reporting on separately in the future. Three separate elements to it. One is the SEVERFIELD product range, which makes steel containers or housings for critical electric equipment for remote and external environments such as and and and and we do a lot for the electrification of the rail network. We do a lot for nuclear power stations, data centers, and so on. The second element of the module is is supply chain, which involves the supplying of steel frames for the growing modular construction market, either commercial construction or residential construction. A lot of these modular buildings require steel frames,

24:39 cold rolled steel or hot rolled steel or a hybrid of hybrid of both. And for our CMF joint venture, we are very well placed to develop our position in that supply chain. And thirdly, bulk handling solutions. We have a product called Rotoflow, which is a niche product. It's a a silo discharge a silo discharge product, which, in the past, before we took it on, was focused mainly for Indian paint manufacturers and UK water treatment manufacturers. What we are now doing with that is broadening market sectors and geographical exposure, and we think there's good opportunities there. So it's all quite new and quite small, but the the the the these are different product ranges to the the core structural steel business, and we are pretty pretty positive with the growth the growth prospects for all of these in the years ahead.

25:34 So if we turn now to our Indian joint venture, just to recap again, it's a fifty fifty joint venture. We've it's been in place for several years. The original objective was to try and help convert the Indian construction market from concrete to steel. That's beginning to happen. We we started to see real progress in two thousand seventeen, eighteen, and '19, and then it's it's been a bit more difficult, as Adam said, during the past couple of years with the impact of the pandemic, but we're now returning to pre pandemic growth rates in India as you can see in the in the results. And for us, what's quite interesting here is the EBIT down £11,000,000, because when we look at valuations of comparable businesses in the infrastructure space in India, market multiples tend to be nine times or more. So we believe that what we've built in India already has quite significant value, but we also believe it's just a it's just a start.

26:36 We have a strategy and business plan to increase volumes there from about a 108,000 tonnes to somewhere between two hundred and fifty and three hundred thousand tonnes over the next few years, and we've revalidated that in recent recent months and believe that that objective is very much achievable. And and that would help move our move the PBT of the business up to £20,000,000 plus and move that EBITDA number up to around 30,000,000 and and and and beyond. So you can see why we believe there's quite significant opportunity for growth and value creation there and, you know, all underpinned by this broad growth in use of steel and construction for 5,000,000 tonnes in the current year to between sixty and eighty million tonnes in 2028.

27:23 And we're we're quite close to buying some additional land for a new plant in India. So all very exciting with strong prospects ahead. The order book is is stable, but as I've seen before with some of the other divisions in The UK and Europe, what's more important for us is the is the pipeline and the medium term, long term demand characteristics. And if we move on to this slide, you can see that we've refreshed this following recent work. You can look at all these different steel construction sectors, all of which we can supply and all of which are presenting very, very good and exciting opportunities for growth in the coming in the coming years.

28:14 So I believe our challenge would would be to make sure that we choose those sectors and those clients where our whole value proposition is recognized to really maximize the profit growth that will accompany the volume growth over the next four, five, six years and the and and beyond. So, really, lots to look forward to in India now that we're beyond the impact of the of the pandemic. So in summary, I think we've had another very good year financially with revenue and profits up 20%. Final dividend up again, and strong cash generation supporting the strong cash generation model in in in in dynamics of the the business as Adam Adam outlined.

29:01 We've launched Project Horizon, which continues our drive for internal efficiency and digitization, automation, and transformation. And we've also continued our geographic expansion with the acquisition of after the the year end. So all of that, we believe, gives us a strong outlook. The strategy is is unchanged. The order book gives us good short term visibility. Many of the sectors we're in have a good medium to long term outlook. There's a good pipeline of short shorter term opportunities in The UK as we've talked about. We've reaffirmed in recent months the kind of a the strategy and plan for for India, and we expect the current year results to be in line with in line with expectations.

29:47 So, overall, it's been another strong year for the group with more more to come. That marks the end of the formal presentation. I'm gonna hand back briefly to our hosts, and then we'll walk through some of the questions that have been submitted. Perfect. Alan, Adam, thank you very much for your presentation. Ladies and gentlemen, please do continue to submit your questions just by using the q and a tab, which is situated on the top right hand corner of your screen. Just while the company take a few moments through those questions that have been submitted today, I'd like to remind you that recording of this presentation along with a copy of the slides and the published Q and A can be accessed via your investor dashboard. Alan Adam, as you can see, received a number of questions throughout today's presentation. If I could just just read out those questions and give response to where it's appropriate to do so, I'll pick up from you at the end. Okay.

30:33 I'll let Adam take the the first one, and I'll take the second one. I have a question here from C, which says, with a strong order book, what visibility do you have for 2024 revenue and profit number? With the order book, you can see in one of the slides Alan presented, the amount for delivery in the next twelve months was GBP $374,000,000, and that was from June onwards. What that translates into is revenue and profit coverage of around 75% for 2024. And the second question is asking, can we break down the concentration of the order book and revenue by by client, I think what I would do is refer back to the commercial, industrial, and nuclear infrastructure slice, which breaks it down by by sectors I went through. We tend not to break down by client because clients can vary depending on contract structure and project wins and so on, but we we we generally serve we work with most pretty much all the main contractors in The UK, and we also sometimes deal with clients directly. So I think that the the the order book breakdown we have in under commercial, industrial, and nuclear infrastructure gives the best visibility of that sectoral breakdown.

31:57 The next question is asking about how we manage inflationary pressures in pricing new business and managing existing contracts. The for me to go on a new contract or when we secure a new contract, we make sure that all the costs we have are fixed for the duration of that, either material costs with fixed duration or overheads. And if it'll for a longer term contract, we either have a little allowance for inflation or inflationary terms in the in the contract, but we don't take particularly steel price risk in individual contracts. How we'll be managing all of that is that the we've been updating our costs pretty regularly as as as as they move along. It was really quite hard work, as you can imagine, twelve, eighteen months ago when both steel and energy were increasing quite significantly. We had a quite regular frequent conversation with clients even during tender processes.

32:59 But for us, once we've once we're awarded the contract, the costs are fixed, that gives clients certainty. It gives us the control, and allows us to deliver without worrying about inflation. So that's how we go about that. And I say what's helpful now, as I mentioned earlier on, is that the relatively speaking, the inflationary environment today is a lot better than it was twelve, eighteen months ago, albeit it's still high, and we hope it comes down further over the over the coming months. The next question, is the company disappointed by its valuation, which doesn't really recognize current levels of of growth. I I think it's interesting. I think that the we would always like the the share price to be to be higher.

33:49 But but I think in general, there's factors impacting the whole of the The UK stock market. A lot of these are quite topical in the press quite often, but pension fund investments and so on. And also on the construction sector in recent years has been derated a little bit, and we've tended to follow that. So I think that, Dave, when you look at what what we've done with the business, the risk profile, and so on, we'd always like it to be higher, but we understand that the factors which are have impacted that at at at the moment, and there's things out with our control, obviously, there. So that's probably all I, need to say on that. The next question is about India and the cumulative capital that we have deployed in the region and plans for further land acquisition.

34:53 So I think I think, as we said before, there are plans for further land acquisition, which we're close to finalizing to help expansion. Adam will just summarize the capital investment. Yeah. We've we've invested £24,000,000 to to date in India. And for the next expansion, we'd expect another 2 to £3,000,000 to go in to help fund that, but investment beyond that will come from within the the the joint venture. So and I think that to going back to the earlier comments and the growth potential over the next few years, we'll see a lot of further investment by the business to get volumes up to two fifty, 300,000 tons and possibly possibly beyond. But you can see also with with the volume we believe that will create that would that that that will create value for the The UK business and eventually cash returns.

35:49 The next question is about a recent strike and impact in future staff costs. Yeah. The strike is resolved, thankfully, and we we we managed to sort of a contain staff costs around about the current levels of inflation across the whole business, and and we're very happy for both the those employees that were striking and the business with the with the agreement that we reached. So I think managing costs in a high inflation environment is always difficult, so I'm glad we've resolved that. I we can move on and keep remaining competitive. The next question is around this competitive landscape and now with an expanded footprint in Europe, which should be the sustainable margin potential of the group relative to the six circa six and a half percent currently.

36:52 I think as we as we expand geographically, the competitive landscape evolves. I think The UK competitive landscape has been reasonably stable over the over the last few years. I think we've got we've got a good range of competitors and who compete strongly in different sectors, but we very few competitors cover all the sectors that we're in. But we we we we've got good competition in The UK, but it's generally stable. I think as we do more in Europe, we'll learn more about that landscape. And it's a bit more change that it varies it varies by country, but we think with the scale of the projects we see in the pipeline there, some of the strengths we have in The UK are starting to be valued by clients for certainly bigger projects, more complex projects in Mainland Europe, but it's still relatively early days. We're positive about the the competitive advantages that we bring to clients in Mainland in Mainland Europe. In terms of margins, the to some extent, it depends on where steel prices are. I think if steel prices today with the levels that we're at two years ago, our margins would be up at 8% plus, which is within our target range.

38:10 So we're not unhappy with the 6.5, 6.7 we're at just now, and we're still trying to prove all of that, but it will the actual number will depend on the impact of steel prices, which are are passed through for us, as I mentioned earlier on. Steel prices, we don't take steel price risk, and we pass these through as part of our contract prices. I think I've said I've mentioned there's another question of the strike and how we avoid the repetition. I think I've said a lot about that, and I think we we we need to keep engaging constructively with the workforce that he wasn't striking. Just to put it in context, it was one one area of the workforce with just over 200 employees out of a total workforce of 1,900 now. So that just with a bit of context on there, and we will continue to sort of work towards more constructive engagement with the whole the whole workforce.

39:11 There's a question on interest rates, and is there any debt exposed to continued increase in interest rates? That's one for Adam, I think. Yes. We the current the current revolving credit facility is based on floating rates. So to answer the question directly, we would be exposed to continued increase in the interest rates, but the more important point is that our debt is very low. So at year end, when I talked about net funds of £3,000,000, only 9,000,000 of that related to loans. As I say, there was £12,000,000 of cash. With the verbal acquisition, we have borrowed more money, another £19,000,000. But to give some indication of how relatively small this is to the company, a 1% increase in interest rates would only make around £200,000 profit impact. So it's not something we're particularly concerned about.

40:01 And the final question I have at the moment is how much are the pension deficit contributions and when is the next valuation? The contributions at the moment are £2,500,000 a year. The next trial evaluation is as at the 03/31/2023, so it's in progress at the moment. But our expectation, without prejudging anything, is that the deficit, the actuarial deficit, will reduce from the last valuation, that will possibly mean continuing contribution at the current level, but but but perhaps a shorter recovery period. But that it's in this prejudging the outcome of it, but the the next valuation is March as of March 23, and we would expect it to be lower than the the one last one three years ago.

40:55 Adam Adam, thank you very much for that. I think you've actually addressed every question from investors. And of course, the company will review all questions submitted today and will publish those responses on the Investor Meet company platform. But just before redirecting investors to provide you with their feedback, which I is particularly important to you both, Alan, could I just ask you for a few closing comments? Thank you. Yeah. I'd just like to thank everyone for their their time and attention in attending today. As I it's it's new it's new for us, I hope you found it useful. And we would expect to be doing more of these in the future to try and access a wider range of investors than we do during our normal institutional roadshow. So thank you for your attention. We believe we've got a good story, which we've outlined and a lot to look forward to, and we look forward to updating you next time around.

41:43 Thank you very much. Alan, Adam, thanks once again for updating investors today. Could I please ask investors not to close this session? As you know, we automatically redirect to provide your feedback in order that the management team can better understand your views and expectations. This will only take a few moments to complete, but I'm sure we'll greatly valued by the company. On behalf of the management team of SEVERFIELD PLC, we'd like to thank you for attending today's presentation, and good afternoon to you all.