Van Elle Holdings (LSE:VANL) — Introduction to Van Elle and review of Interim Results and Prospects

0:04 Good afternoon, ladies and gentlemen, and welcome to the introduction to VAN ELLE HOLDINGS PLC and the review of the interim results to October 31 and prospects. To start with, if we could cover a couple of housekeeping items. Before we begin, we would like to submit the following poll, which you will see on your screens. Throughout this presentation, investors will be in listen only mode. However, questions are encouraged and can be submitted at any time via the Q and A tab situated on the right hand corner of your screens or if anyone has dialed in via vannellwarbrookpr dot com. The company may not be in a position to answer all the questions today. However, the company will review more questions submitted and published responses where appropriate.

0:51 These will be available via your Investor Me company dashboard. Finally, we would like to remind you that this presentation is being recorded.

1:00 We anticipate that there will be some newcomers to VAN ELLE attending today. So we will take a moment to introduce the business. And I would now like to hand you over to Executive, Mark Cutler and Chief Financial Officer, Graham Campbell. Thank you, Tom. Good afternoon from me. I'm Mark. Good afternoon, everyone. I'm Graham. We'll run you through the overview of the company fairly quickly just to give you some background, and then we'll we'll go through in more detail the key points around our interim results and the outlook and strategy for the business. Just to just to let you know, I'm I've been chief executive now since autumn two thousand eighteen, and, you know, we've been through quite a transition program. So very much looking forward to telling you a bit more about it.

1:54 First thing I probably need to explain is regarding what happened last week. So apologies that we had to cancel the session last Thursday. As you may have seen, some of you may not, we had a serious incident during the course of Thursday on one of our sites. It did result, unfortunately, in a fatality to a subcontractor in and around some of the operations that we were involved in. So extremely serious incident. Obviously, it's under investigation by several third parties and ourselves. We're all devastated with what's happened, and it involved a a an operation that very much a one off equipment failure that we've never seen before. So I just wanted to explain that upfront, and, hopefully, that explains why we had to cancel last week. I'm sure you understand the importance that we we attach to health and safety in the business.

3:00 So perhaps linked to that, I just wanna give you an idea of what we're all about. We're The UK's largest geotechnical contractor, which means we do piling primarily and many, many different types of geotechnical work and foundation work from the early beginnings of site investigations through to the biggest types of piling in The UK. We've been listed on AIM since late two thousand sixteen, and we've been the largest in The UK for the last two or three years. We work only in The UK at the moment. Our biggest competitors are actually several big European players who are active on some of the bigger bigger infrastructure schemes in The UK, because we work right across the board in a very diverse set of sectors and a very broad set of capabilities.

3:51 So our vision of total foundation solutions is is true. This has been born out of the early beginnings of the company. It still stands today in terms of we are very much a one stop shop in terms of geotechnical engineering, and we, therefore, have tremendous technical and engineering depth. We deliver 25 different types of foundation and and pilot engineering and a very strong brand across The UK. And our values, which support our work, begin with safety, and and that has been the case ever since we've been in business. Really important to us, the way we operate and the culture within business. I've been busy building a a team to modernize the business, create a more collaborative culture, and a more professional approach to our customers as we seek to grow into the next phase of our strategy, which we'll tell you about on the following slides.

4:51 So there's a quick reminder of the three main sectors that we work in. A reasonable balance across the three. The residential market is house building and larger residential projects. Infrastructure is very broad approach to highways and railways in particular, but also we do a lot in the energy and flooding sectors and other activities around utilities. So a wide range of infrastructure work. And regional construction entails buildings in city centers and also out of out of town industrial and mixed use developments. A quick overview on one page of what our strategy looks like. So down the left hand side are the three sectors that I've just mentioned.

5:44 Our exposure across those three is reasonably well balanced. Historically, we've done a bit more in residential. But as the last year or so has evolved very much in line with our strategy, we're expecting infrastructure to probably be the dominant area of where we are targeting our future business. So I'd expect infrastructure to continue to balance upwards slightly. We have a blue chip customer base, which in my experience of, well, thirty two years in civil engineering and construction markets for tier one contractors is as attractive customer bases as as I've ever seen. Very, very strong, broad customer landscape.

6:29 Our task is to make sure that we've got the depth of relationships that we need to support our strategy going forward because, our markets are backed by very positive long term dynamics that we've, listed here. And, all of you will be aware that we're expecting increased investment in housing, certainly in infrastructure. And post Brexit and post COVID, we do anticipate the wider building market to improve that we haven't had the benefit of in the last two years. And our business units, and there are five of them, cover the segments very, very well and interface with each other to cover off the 25 capabilities I mentioned earlier in quite a seamless way. We've set out medium term financial targets on the right hand side of this slide.

7:20 We first, put these in the public domain in the, market placing that we undertook in April, where we, moved early to protect ourselves against the potential worst downsides of COVID. But back then, we were we were committed to these midterm objectives, and these are very much now part of our strategic plan. We've undertaken a full strategic review and satisfied ourselves that we're in the right markets with the right skills, and these blended targets are achievable across our divisional mixes in in the markets I've mentioned. So in summary, you know, we are very much an organization that is capable of growth and premium performance because of our diverse capability.

8:15 That's helped us be resilient through the last few years of very difficult trading. I mean, the construction market has been pretty challenging for the whole time I've been here. But whilst one division or one segment is a little bit subdued, usually, we find that we have a compensatory uplift in other areas. And what we're expecting as the markets improve further is that more of those business units and and areas, you know, are going into a growth mode as we look to improve our margins as well in our premium niche areas. And so that market leading capability is already there. What we need to do now is take more advantage of the very strong asset base that we've got and the 500 or so direct employees who are long term, you know, loyal team that we've managed to retain through the COVID pandemic.

9:10 And then finally, in terms of just explaining what the business does, this slide gives you a nine box summary of the different things. So lots of orange rigs, a 120 rigs approximately across the business, in all sorts of different environments. Some of these, very specialist, and some of the rail activity in particular, quite unique. So and and as a whole, these capabilities work together in a in a in a blended, as I say, one stop shop that is unrivaled in The UK.

9:52 So introductions are completed. I will now just go on and give you a quick overview of what the period that we're reporting meant to us and how we did, and then we'll go on to talk about the financials in a little bit more detail. So in overview, it's been a really, really tough six months. So we're reporting here our interims to the end of October. You you you'll all be aware that COVID hit at the end of March twenty twenty with six weeks of our previous financial year to go, wiped out 80% of our revenues in April. In the same month, we moved very quickly to secure the capital placing that I mentioned earlier, and that gave us significant balance sheet strength going into what might we might be facing in the year ahead.

10:48 What we saw was a steady recovery during Q1 and into Q2 that was slightly ahead of our expectations. And we returned to normal levels of activity in September and October and returned to profit during those two months. But not surprisingly, in the round, we were behind the activity levels of last year, just over 20% behind.

11:15 What what I can say, and we're delighted on this, is that we've managed to hold our margins through these difficult months. So despite revenues being down, gross margins, which is a contribution from our projects going in towards central overheads and profitability, held up. So operational performance, despite being disrupted by COVID working practices and all of the other challenges that our workforce were were dealing with, we kept working all the way through. Our lads and ladies were coming into the office, which has been open throughout, working away from home all week to deliver projects for customers without complaint and generally without interruption. We've had our fair share of people with COVID and self isolating like everybody. We've managed to move resources around. And despite this, our margins have stayed consistent with last year.

12:09 And that's because we've managed to improve operational performance as we hoped in certain parts of our business, particularly general planning. And we've enjoyed strong margins in specialist planning. But that's been mitigated downwards by a relatively negative work mix and that we still see less rail work coming through than we expect in future years. So despite lower rail work, I think we've done quite well with operational performance. That's led to a nominal loss at half year, slightly ahead of, I think, what most people expected and our own expectations, a strong cash position because, as Graham will go on and say, we've done a great job of hanging on to our cash. We're still paying our suppliers, but our cash management has been much improved, supported by the balance sheet strengthening and further enhanced by future liquidity provided by a new asset based lending facility that gives us quite a strong resilience going forward, and that's been secured in October.

13:17 So we finished the year with net funds. We've been in a net debt position in for for many years, actually. Our our debt levels are coming down primarily around high purchase of rigs, and we're in net funds position, which is great. We'll go on and talk a little bit more about that shortly. I think I've covered probably the the worst aspects of COVID being very much a period of survival. My whole business is we're no different. We've had to fight for every every project to get started and and, you know, really manage. A lot of people furloughed. 50% of our workforce were furloughed at peak. A lot of anxiety amongst that that group in terms of whether the jobs will still be there or not.

14:07 In the end, we made less than 20 redundancies in total, which, you know, is unfortunate, but, actually, it's allowed us to be a bit more efficient in certain areas. And and and this is common, I think, in in in a lot of businesses that you find that you can find ways of being more efficient with less people sometimes, and we've seen a bit of that. So we've done some trimming, but we've also been recruiting because we're confident about the future. We've been recruiting estimators, commercial staff and one or two senior team members ready for FY 'twenty two in particular. And this next slide, slide 12, really, at a glance, shows you the sort of roller coaster that we've had over the last twelve months or so.

14:53 Wouldn't really want to have a revenue profile looking like that very often. There are built in cyclical pressures in our business anyway because every winter, the weather, you know, obviously, conspires against us to some degree, and we have a two week Christmas closed down in the construction sector. That always leads to a weaker December. And and before that, in November, and after that, January, they're weaker than than normal. And then we rebound again into the spring and through the autumn. And, of course, we lost all of that usual opportunity in the period we were just talking about. Going forward, I expect, as I say in a minute, you know, to see a much more normal profile during the course of the balance of FY '21 and into FY '22.

15:43 I'll just point out on that last bullet point that inquiry levels, despite everything, inquiry levels have held up quite well. I mean, we weren't really getting any inquiries in the first two or three months of the year. Everybody was shut down. You know, everyone was working from home for the first time. Procurement officials were, you know, adjusting to to to new processes. So the fact that we're still doing roughly on an annual basis 5,000 bits is pretty much in line with normal levels, slightly behind, but bodes well for the future. So we think that demand is there. And as we're going to say, we think the demand is going to increase given investment in major infrastructure and housing markets that very much in the public domain that I'll touch on later on.

16:33 Thanks, Mark. So I'll just take us through the next few slides, just reflecting on the divisional performance across the first half. You'll see from slide 14, the income statement really displays the revenue decline that we saw year on year, with all of that really caused by the shortfall in revenues in quarter one, May, June and July as a result of COVID. As Mark mentioned, fairly pleasing to see the margins holding up. We have concerns, of course, around new site operating procedures that would be put in place and have been put in place to support the challenges that every business in construction is facing around the COVID, some new measures around social distancing and hygiene measures, etcetera. I'm pleasing to see that the margin has has has held up broadly consistent with with last year.

17:26 I think importantly, we've we've worked very hard across the business in our divisions where we felt we could improve margins. And so the story is that we've seen some improvement around specialist filings, Mark mentioned, the housing division, and unfortunately, that's been offset by a rather subdued period in rail. Although looking forward, we have a degree of optimism in that in that area as well. The order book closed the period at beginning of January. The latest position, 23Point6. On year end, order book was 21Point4000000. So broadly happy that that's remained stable as my growth on the year on the year end position, and particularly given the challenge we faced over the last nine months since the the onset of COVID. We're we're probably happy with where that is. That gives us reasonably good visibility of two to three months out, and then we'll have some long term contracts in place, which will which will impact that by '22.

18:21 So to Mark's original comments around the underlying operating loss, a a relatively modest loss in the period despite the COVID challenges of four hundred thousand. And we next three slides cover off the the different divisions. General Piling is our unrestricted access large piling division, largest of our divisions, and you'll see that the the revenues declined period on period. And, again, all of that is down to the shortfall in in quarter one with the lower activity levels. We mitigated some of that activity some of that lower activity by by cutting back on costs, and that's had some part time working in the office. And we've obviously taken advantage of the government job retention scheme. Some senior leadership team took care temporary pay decreases, and we've and we've had general cost mitigation measures and be very, very prudent in our spending period.

19:15 So what that's been able led us to do is to deliver a broadly similar underlying operating profit year on year despite the shortfall in revenues.

19:27 The next division, we group together specialist piling and rail. Specialist piling is the more challenging, typically restricted access piling at work, and rail is the on rail activity. What we're seeing here is a combination of specialist piling operating near capacity, really for the majority of the first half of the year. So really positive performance, and we're very pleased with how specialist piling has performed and continues to do so. The the rail division, largely as a result of the impact of network rails, that CP six delays, and and in particular, what we've seen is some work where we typically would benefit as a business to the electrification programs. The spend that they are spending money, but unfortunately, the money that's being spent is not specifically in the areas yet that's benefited VAN ELLE. Although we do expect and we're starting to see some of those tenders coming through. So we're still optimistic in that area, And and and and on the back of that, we've we've made a recruitment to lead our rail division, and David Buckley joined the business early January. And that's really a reflection on our confidence in the in the future. Although we're we're unlikely to see significant impacts in FY twenty one. We think that the work will start to come through in FY twenty two.

20:48 And ground engineering services, the final grouping of our the housing division. So you'll see the picture on the right hand side of the slide is a smartphone installation. So housing really is the modular smartphone solutions for houses, coupled with Strata, which is our brand investigation business. Of course, the house was fairly well known that the house builders' activity closed almost overnight at the end of March twenty twenty and and stayed closed for a reasonable period of time. We started to see house building activity pick up again, but not really before June. And we've seen a gradual and steady recovery since then,

21:30 and and the housing division is operating near capacity today. So we're we're certainly, the market has recovered ahead of our expectations, but not without a significant hit in quarter one to our revenues. And you can see that significant decline from 16.9 down to 11.7 year on year. Strata, as a business, has been largely unimpacted. It's typically the first of our divisions that's out on-site, largely unimpacted by COVID. But unfortunately, it forms only 4,500,000 of our group revenues annualized. And so despite the fact that that's progressed well, we don't see a significant change in the in the full year group numbers. I'll just touch briefly on the balance sheet and net funds. I think Mark's covered off the key points already.

22:17 During the year, we obviously had the capital raised back in April 2020. That raised 6,700,000 gross funds and added to the cash balance. And and that's one of the reasons we've we're into a net funds position at the end of the year at the end of the half year. In October 2020, we also established a asset based lend facility, which is effectively an RCF facility of up to 11,000,000. It, of course, requires us to maintain a good quality debtor and asset book. It provides a, I think, a substantial amount of headroom for the works that we expect to come in in 2022 and beyond. F y twenty two and beyond, and it gives us that headroom and liquidity headroom to take advantage of those opportunities as they arise.

23:05 And so what what we can see there is a a cash finishing the the half year at 9,800,000, Couple that with the 11,000,000 headroom, are broadly comfortable where the where the the balance sheet currently stands. We've done some work in the period to to work through our aged debtors, and that's that's led to boosting cash position as well. We had some challenges of twelve months ago, and we worked through the majority those and probably happened in the working capital position. You'll note that working capital has increased since the end of the year, and that's really just a reversal of the sharp decline that we saw in working capital in April 2020 as our revenue activity dropped off. And final point is that we are now approaching very low debt as a business. The only remaining debt we have is higher purchase, which is probably previously purchased all of our rigs, vans, and and transport equipment.

23:58 And that's gradually being paid down. So at the end of the half year, we were down to 5,300,000 capital outstanding. So the only debt that the group has by the end of the year, that will be down to 3,500,000, assuming we take out no further higher purchase. And as that unwinds further in FY '22, we'll be down to a very small amount by the end of the end of the next year.

24:20 And finally, the cash flow slide, I think we've covered off the main points here, talked about the working capital movement. The only real point to highlight here is that we've kept capital tightly under control during the first half, mainly for cash preservation, making sure we got through COVID and came out the other side stronger. We have some capital committed in the second half, probably 1.5 to 2,000,000, and the timing of that will be either in the second half of f y twenty one or early f y twenty two depending on the the timing of new deliveries. So, again, probably happy with where the cash position has ended up with nearly 10,000,000 in the back of the end of the period. Okay. Right. So, that I meant that comment on the on the previous slide, actually. It's, it's a good, summary of how I feel.

25:09 You know, our strategy is is unchanged. We first launched our revised strategy in early twenty nineteen after I joined. I had a chance to look at things, and it's been consistently reported and delivered against since then. Certainly, it's had a few challenges along the way. But, you know, in summary, we we we are embarking on a consistent strategy with a very clear focus on on where we're going, and we still see, hopefully, a degree, considerable opportunity in the markets that we're we're well positioned in. And, you know, building a team to take full advantage of those opportunities has has been quite important to the work we've been doing.

25:56 And the next slide very much just summarizes that strategy at a glance. I I don't propose to go through every line, but happy to take any questions. The first phase has been all about stabilizing the business, rebuilding a bit of confidence,

26:14 and restructuring the team, addressing operational weaknesses, addressing future capacity weaknesses. And, you know, there's been quite a lot to do, quite frankly. Being assisted by a team that is 80% new and 20% of tremendous talent that was already here. And in so doing, we've brought everyone together in one single collocated premises. Previously, we were siloed across multiple offices, quite old fashioned set up. We're now a much more collaborative, a progressive business with a bit of buzz about the place. And so phase one is substantially complete, although only recently have we still put in place some of the further strengthening around commercial roles. But that's because we're coming through COVID, and we see the importance to get some of these key personnel on board now.

27:14 Phase two, we started at the same time, but takes longer. It's putting in place the the longer term growth foundations for the business. And by that, I mean, maturing our

27:28 our business development, marketing, bidding capabilities, and our customer relationships partnerships across the country. Right? So it's a never ending task, actually, and one that we're all enjoying doing because we're seeing the results of increased awareness of what VAN ELLE can do and closer relationships with customers who, ultimately, we expect will work more closely with us at an earlier stage of of project development. And the the evidence of this will be more repeat business and improving margins and growth. And then phase three is is pretty much talking about the single strategy on a page slide that we showed earlier where, you know, the the the the the definition of market leadership is the is the points I've made here plus the the midterm financial objectives that that we outlined earlier.

28:28 So to wrap up after all of that, and I hope that's not too much of a gallop through things, we are continuing to trade slightly ahead of what we expect. You know, we've had we've had Christmas and, you know, the worst of the winter, I I hope, is is now behind us. You know, we we go into February, March, April, traditionally, you know, quite sort of, you know, buoyant months for us with decent momentum in terms of our order book and customer customer needs across the board. So housing and specialist piling are still working at capacity.

29:14 General piling has got a series of key projects that will be starting in the next month. The rail guys are starting to see opportunities

29:23 coming through. We've got a busy quarter ahead in terms of some of the important tenders that are going to set us strong for FY 'twenty two, and we might see the start of some of that before our financial year finishes, but I don't wanna make any promises. But we do believe we see now the the the the workload starting to manifest itself ready for FY twenty two. And and assuming that we don't have further disruption and and we shouldn't from COVID, that is is any different than what we've been coping with over the last six months or so. We should get through q two sorry, q four with strong momentum, a reasonable momentum going into FY twenty two.

30:11 And we've got a strong financial position in terms of, you know, the capability and resources going forward to take full advantage of the opportunities that are starting to come through. So all in all, we're we feel we've come through things quite strongly, and we feel well placed for the opportunities ahead. And we've given a slight tickle upwards to the expected result for FY '21, which is never gonna be a year to to judge us by. But nonetheless, we we do expect to finish slightly ahead of the the the single number that's out in the market at the minute. And we'll come on to that perhaps in a second in terms of how we reinstate guidance. Yes, it's worth mentioning this final slide, which is appears at the end.

31:01 And again, happy to take questions. So we're keen to make sure that we're transparent in terms of some statistics in the business. Now H1 of twenty twenty one is not you know, a glorious set of KPIs to to reflect on. But there are a few a few points in here that are worth noting. Certainly, the you can see the reduction in CapEx. You can see the margins holding up, actually two lines above that gross margins. You can see the rig fleet being fairly stable, but we've made disposals as well as we've ordered some rigs the next financial year. Poor utilization, as you'd expect, given the circumstance that we've described, but that will improve. And a note at the bottom, we're going to change the way we measure utilization to be more reflective of the asset values rather than just a flat measure across our entire fleet because there's a whole mixture of big and small and older new rigs as you would expect.

32:10 Still delivering the best part of a thousand projects a year. So extremely busy business bidding four to 5,000 bids a year. We have to bid for everything we do. We don't have a parent company that gives us any work unlike some of our competitors. So we are extremely competitive and innovative in the way that we, you know, we we operate in order to win as much as much work as we do. We are going through a little bit of a safety challenge, not not least because of what I described at the start of this presentation, but we also know we've got work to do here. So that's one of our improvement plans is to see some of those stats heading the right way. I will point out the near miss reports are a positive thing. Okay? These are hazard identifications. They're proactive interventions before accidents take place. So it's good to see those trending upwards, and that's part of our engagement process with our workforce.

33:06 And then just to finish off, you can see that we've got more than 5% of our workforce under training or apprenticeships, which is something we intend to absolutely maintain. Great. Okay. Well, thank you, Mark. Thank you, Graham. And if we could turn to the questions, we've had a number of questions that were submitted ahead of the presentation. However, please do continue to submit your questions using the Q and A tab situated on the top right hand corner of your screen. I'd like to remind you that there is a recording of this presentation along with a copy of the slides that will be published on the investment company platform along with the published Q and A, which will appear after the event. Additionally, your feedback is important to the company. So immediately after the presentation has ended, you'll be redirected for the opportunity to provide feedback.

33:58 If you could, that'd be much appreciated. And while you're submitting questions, if we could just have a look at a couple of those that were pre submitted and we've got a number that are focused on the rail division and the rail division's activities. It might be a good opportunity, Mark, maybe if you could even just add a little to that just in terms of the dynamics of rail and the breadth of the activities within the division. And if you could add into that, Simon's asked who the main competitors are in the rail division and what makes VAN ELLE the compelling choice. And also Stephen's asked what it is that gives you the confidence that your rail business is set for this recovery.

34:45 Maybe we could start with that slightly rounded question. Yes. Right. So look, this is a much bigger question we get asked. Tell us a bit more about your rail business and what does it do and why is it different. So we just look back to the cover sheet because there is one of our rail rigs. So by by the rail business, we mean specifically the on track geotechnical and piling fleet. Right? We do an awful lot in the rail sector generally away from the track. We've started, by the way, our one hundred and seventieth rail station projects recently, much of which doesn't involve being on the track at all. And Gatwick Station that you saw earlier is a good example of that.

35:34 But our rail business, business unit is our on track capability, which is unrivaled. We have a whole series of 18 in total, very heavy coal mark road rail piling rigs equipped with heavy piling masts, many of which we've innovated and developed ourselves with our specialist rig and mast builders. And we undertake a range of geotechnical services from track mounted equipment that is unrivaled compared to anyone else. And that includes line side piling, track bed piling, which which is a stabilization technique, which is unique, by the way, in Europe, anchors and nails to the side, sheep hiding to the side, all sorts of things. And we do ground investigation as well off the track, and nobody does all of those things, And nobody does any any of them individually to the level that we do. We have few competitors, but nonetheless, they are worthy of being sort of careful of.

36:44 Our biggest rival in this arena was Aspen, who went into administration in 2019, and they've been, they've been in trouble for a little while before then, and that left us as a clear market leaders. A couple of other competitors that we we are wary of or we work with occasionally, Celtbrae have a rail piloting team, but that's linked primarily to their vertical vertically integrated electrification delivery in the rail sector, we we're on good terms at CalPre. We rarely bid against them apart from an electrification project. But with the schemes ahead of us, we we intend to potentially work together a little bit more closely. And then there are some smaller players who do, you know, smaller projects. And there are also some rail systems contractors, like VANLKA and one or two others who like to do a bit of piling themselves in house, but have a limited geotechnical experience.

37:45 We are a geotechnical company through and through that works in the rail sector as well as others, rather a rail contractor that's trying to do a bit of piling, and there's quite a difference. And then the only other competitors are plant hire companies who will claim to put a piling mast on a rig, but, again, they're not geotechnical specialists. So that's the number of things. Very quickly, where we are with our rail activity. The the reason things have been subdued is because we've been going through a transition in network rails control periods and investment cycles from CP five to CP six. CP six for us has been slow in the first two years for the geotechnical work to come through. It's typically delivered through regional frameworks that are awarded to tier one contractors. Network Rail have reorganized their entire structure in that transition period. The tier one contractors are being reprocured.

38:37 Designs are being delayed. That work starting we're starting to see those pipelines coming through. At the same time, electrification projects have been stopped in The UK after major cost overruns on the Great Western Main Line that you might have read about. But now we're at the point where we know that electrification is going to restart, and there are several projects in our pipeline that we are bidding in the next two or three months, starting next month. And so once we see both of those two dynamics returning as well as what we've done to diversify our rail team in the period, we increasingly put our rail rigs on smart motorways projects as well because they're super powerful and very agile.

39:24 We feel we've got the right ingredients for a more resilient performance going forward FY 'twenty two onwards than we've seen over the last two or three years. Thank you, Mark. That's perfect. Graham, maybe I can just ask these three questions to you. Bill's asked, could you define what you mean by medium term when it comes to your financial targets? And is there a chance of the company paying a final dividend at the end of the current financial year? And if we could just couple that with a question when you anticipate reintroducing guidance to market? Sure. I think I'll take those in terms the medium term targets. We've gone through an internal process recently to revalidate those those assumptions and those strategies to make sure that they are achievable.

40:14 We've taken a look top down at what the what we think will happen in each of the market sectors. We've taken a look bottom up of what rig capacity, gang capacity we have to make sure that we we we can deliver to those to those levels. I think we've been deliberately vague, but the intention was sort of three to five years would be would be what we class as medium term. And if the market comes back a little bit stronger, particularly in rail, and and COVID gets past we get past COVID more quickly, then then we might be towards the front end of that. But, you know, if if if the current challenges endure for a bit longer, perhaps that might be towards the back end of three to five years of the range we were thinking. Terms of the dividend question, look, I think this year, it it's it's obviously a board discussion that will take place as we approach our year end results.

41:08 And my I can give you my view at the moment, which is this in this year, we have just the introduction of the year to the capital raise, and we've also taken advantage of the job protection scheme claimed and further monies of around about £2,000,000. So I think in with with that sort of backdrop, I I think it would be optically challenging to to pay a dividend in this in this current financial year. We have said is that we'll revisit the dividend strategy, the dividend plans, once we get through the current period of disruption. So I think we want to get a little bit more certainty. That's probably the time we'll look to to to move on. Terms of reinstating guidance, the final point there, I think, at the moment, the only guidance that's out there in the market is with our house broker.

41:55 That is that's currently sitting at so Mark mentioned, we've just improved that slightly. It is still a loss for the year of 1,300,000, but I think that given the backdrop of the challenge we faced in q one, the significant losses that we suffered, that's that's that's probably a reasonable target. If the market comes back with a bit more pace than we expect, then we we, you know, we'd like to think that's a a reasonable target that we can we can hope to do with the competitive advantage. In terms of reinstating formal guidance, I think it's very difficult in our sector at the moment with the the level of uncertainty that we still see. We still haven't seen when the wider market conditions stabilize and we still don't know what time scale for lockdown ending. So I think it will be a judgment call on when we become confident enough looking forward in all of our divisions.

42:48 Okay. Super. And if I could just follow-up with one asset based question for you, Graham. How much of your kit do you own outright? What is the lifespan? And over what period do you write it off in the accounts? So we own all of the kit. Although I should be clear on that and say that some is still some has been purchased under under higher purchase agreements. So the only debt that the group carries is 5,300,000 at the end of the half year, which is the outstanding capital balance on mainly rig purchases with some vehicles in there as well. And it's not the it's not necessarily the always the cheapest form of finance. So that's why one of the reasons we have the RCF now in place. But effectively, the kit is the kit is ours as long as we continue to meet those high purchase obligations.

43:34 We'll continue to pay those down as I mentioned with the numbers I described earlier. In terms of the lifespan of the kit, we depreciate assets rig assets over twelve years. If they're very well maintained, they can last a little bit longer than that. If they're very hard work, they can they they will be slightly less than that. So the twelve years is broadly If you look at our annual report, you'll know that we we mentioned that the business has invested 50,000,000 in the last six years. So we've got a relatively modern fleet. It's well maintained.

44:24 It's clearly a market leading fleet. And as of the period end, we have we have hundred and fifteen hundred and fifteen rigs. And they range from very, very large general pilot rigs right down to very small, you know, 50,000 pound rigs at smaller end, which are only used periodically. So fixed asset valuation, Greg? Yes. It's it's worthy of note, isn't it? Yes. So the net book value of our of our rigs is currently around 26,000,000. Obviously, the replacement value of those would be, yes, that would be to 20 higher than that. But a very, very well invested on the site more than that. Thank you. And Mark, I think just one more for you back in the rail sphere. How big could HS be? And is it more general piling than on rail?

45:15 Yes. That's a good question. So HS2 geotechnical works, I'll take that to me, is expected to add 20% to 30% more demand into The UK geotechnical space. Now that won't all be met by UK contractors, unfortunately, because as some of you may know, there are multinational joint ventures active on High Speed 2. And nearly all of the Tier 1s have got in house piling subsidiaries, whether they be French, British or Spanish. But it does create quite a significant resource drain potentially in the whole industry.

46:02 So HS2 is very big. Hundreds of millions of geotechnical work. For us, the work you're 100% right initially for the first couple of years, the work will primarily be big piling for bridges and structures. It looks like an awful lot of ground improvement work along the route of the track and a lot of ancillary works of sheet piling of things, you know, you can imagine interfaces and the like. And also importantly, perhaps slightly towards the back end of the phase one construction, the rail interface work, which is where we will have strong position.

46:50 But we expect to be active on almost every technique that is required. We're currently delivering works on ISP two now, ground investigation. So right at the early start of things on the central section and ground improvement, five grossed and columns on the southern section. And we're bidding a pipeline of 100,000,000 to $150,000,000 of general pilot schemes for different joint ventures in different places. And some will be put out to the market, some won't. We'll see. We're all very much in a at the early stages of sort of feeling each other out. But yes, things are already starting to get busy. Super. Thank you. One question in and around growth opportunities. You have a strong balance sheet. Does this open up M and A opportunities?

47:42 Yes, it should. Our sorts of targets, though, will be very selective. We, you know, we we do consider things every now and again. We have clear areas where we would like to potentially target niche bolt on capabilities if there are opportunities coming on in our higher margin areas, so specialist piloting and rail. We're not looking at transform transformative big acquisitions, and we're not looking at just regional bulking up either. We would we would very much want to play to the higher margin specialist areas if if if the opportunity comes along. Great. Okay. Well, that's super. We're coming up to the hour. So I think that's been a comprehensive update. Thank you both for updating investors today.

48:37 Could I ask investors not to close this session as you will now be automatically redirected for the opportunity to provide your feedback? If you are accessing this meeting from your from our website, the feedback page will appear. If you accessed it from the link sent to you by email, you'll be asked to log in to submit your feedback. If anyone has any further questions or would like additional information on VAN ELLE, please do get in contact via vanel@wilbrookpr.com. Alternatively, many thanks for attending today's presentation.