Van Elle Holdings (LSE:VANL) — Review of 2023 Results and Prospects

0:02 Good afternoon, ladies and gentlemen, and welcome to the VAN ELLE results presentation. To start with, if we could cover a couple of housekeeping items. And 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 screen or if anyone has dialed in via VAN ELLE at wallbrookpr.com. Now the company may not be in a position to answer every question it receives during the presentation. However, the company will review all questions submitted today and publish responses where appropriate. These will be available via your investor.me company dashboard. Finally, we would like to remind you that this presentation is being recorded.

0:50 I would now like to hand you over to Chief Executive, Mark Cutler and chief financial officer, Graham Campbell. Gentlemen. Thank you, Tom.

0:58 Good afternoon, everybody. We're gonna follow a very similar template to previous reporting periods. We'll run through the results fairly swiftly, including the financial review, and then we'll wrap up with updates on strategy, market conditions, and our outlook for the business going into the into the medium term.

1:22 So in summary, we're very pleased with performance in f y twenty three. You you'll have seen the headline numbers by now, I'm sure, but record revenues. But but most importantly, improving metrics in terms of profitability and return on capital. The the kind of, I suppose, two measures there that are part of our medium term objectives are both moving forward, we believe, in in line with the timetable and, vision that we have for, 6% target return on operating operating margins and a and a 15 to 20% return on capital. So we're we're it feels like we're about halfway there, actually, after, you know, some some challenging years. And don't forget our revenues dropped to around 85,000,000, and we were marginally loss making in in in two years because of the because of the pandemic. So we thought we made some good progress in the last two years, not just f y '23 in isolation.

2:29 And and also importantly, to kind of hopefully give some confidence that we are capable of growth. We are embarking on on several initiatives that that support us into the medium term that give us confidence that these are these results are stepping stone to the to the outcomes that we're we're looking for ultimately. And some of the highlights of those areas of progress include the our growing presence in energy infrastructure

3:00 markets with tangible progress already in terms of work winning and and customer development, expansion of our housing sector activities with the launch of a new product and and also some geographical expansion. And also, very importantly, in the rail sector to protect against the inevitable dip between c p six and c p seven, diversification, of our niche capabilities into Canada, specifically Ontario, where we hope to start our first project in only only a couple of weeks. So that helps all of us be be confident that we can deliver on the promises we've made into the medium term, And we've got the diversity and the initiatives and innovation to not just depend on the on the same markets that we've we've always been in, although we remain an extremely diverse business.

3:58 We've also and it's been part of our improvement plan over the years to improve our commercial acumen and controls, procurement capabilities, etcetera. We've managed the impact of inflation on both materials and wages through our contract pricing mechanisms quite successfully during this this year and the year before. And we've seen certainly an increase in the risk of customer bad debt during f y twenty three. And, you know, touch wood, we haven't yet been caught by anything material. And, you know, that's credit to our, excuse a pun, to our commercial team for the rigor that we put into our pre contract checks and and reviews.

4:48 I'll hand over to you, Graham. Sure. I mean, the balance sheet, I suppose, in summary, we're very pleased with where it where it currently is at. Certainly, progress over the last three to four years has has been very good. We're in a net funds position at the end of the period and grown further from from the previous year end. So we exclude the the the lease liabilities as as most do. We're sitting with a a 7,500,000 balance and about 8,900,000 in cash at the at the end of the period. We sit there with that cash balance and an undrawn bank facility of 11,000,000. So it gives us a a good amount of headroom, I think, for for for growth initiatives, or or m and a or for capital investment as as we see fit. The only remaining debt we have on the books now is the at the period end is 1,300,000 of higher purchase debt remaining, and that's the that's the pure debt balance.

5:45 And we took that out during the year, took out 1,500,000 during the year on a couple of assets just when we had a bit of a working capital squeeze and just to give ourselves a little bit more headroom. It was on a variable rate basis, so it was repayable without termination costs. And indeed, in June of this year, we've repaid, 1.1, 1.15 of that total. So as I stand here today, we're effectively, to all intents and purposes, debt free. There's a very, very small amount remaining on one on one asset, which will leave probably to run to its its conclusion. We've increased capital spend in the year. And and and for those that have been on these calls before, we were very cautious during the the two pandemic years. We spent only £2,000,000 in each of the in each of the two years, f y twenty and twenty one.

6:34 And we returned to a bit more normal spend last year of about 4,500,000. And this year, again, we've increased the spend. So we really are replenishing the the rig fleet, particularly focused on areas of growth, upgrades to the existing fleet, and that's typically midlife overhauls to make sure that they are, you know, they stay as as a sort of market leading fleet. And we've also modernized the the the the heavy haul HGV fleet, and that's the fleet that we own and we use to transport our rigs around the country. That was an aging fleet. It it was we we did not spend money on that fleet during the the pandemic. And so we've gone through, over the last eighteen months, a complete renewal of the fleet. So we should start to see significant improvements there on on maintenance costs and some sustainability credentials as well.

7:21 The order book is is down slightly year on year. Not not necessarily anything to be too concerned about in in particular. You know, the the the order book has bounced around from anything from 20,000,000 up to up to a peak of 50,000,000. And the sort of short term nature of many of our contracts means that that number can be variable. But importantly, we we present it on the most prudent basis possible. This is signed contracted work, and we don't include in that number, as some businesses do framework agreements or or preferred, bidder positions, of which there are numerous. And so we're expecting that of those, we estimate annual revenues of of 30 to 40,000,000 from that work. And, of course, on a framework agreement, it does depend on it on the work being allocated and drawn down.

8:09 But there is a substantial level of of baseload baseload of work there to to sustain us through the foreseeable future. Earnings per share is presented. I'll I'll come on to that shortly. And I'm pleasingly, we're able to declare or rather recommend a dividend of of naught 0.8p per share. So that takes with the interim dividend of naught 0.4p per share. That will take us to full year of 1.2, which is a 20% growth on on the prior year. In terms of p and l, I think most of these points Mark touched on, but 19% growth on prior year, and that that was on top of 48% growth that we've achieved in in f y twenty two. So huge amount of effort to to deliver at those revenue levels.

9:00 Our our headcount has increased from around two years ago, around 510 people, employees to, to about 650 as we stand today. So big effort to grow the team and deliver at that level. Margins have stayed reasonably robust. So across general piling and grand engineering services, we've seen very strong growth, and those margins have stayed, very stable. A lot of work gone into operational efficiency, and we've obviously had the headwinds and challenges of raw material and wage inflation, which is, of course, impacting everyone across the across the sector. That's been managed, in my view, very well by the divisions, repricing, retendering, and and making sure that we have contract clauses that allow inflationary cost increases to be passed on where where that can be done. And that that's helped that's helped us to to sustain a healthy a healthy gross margin position.

9:54 Of course, inflationary pressures have impacted overheads, and you'll see that if you sort of do the work the numbers through. And, of course, you know, we have seen inflation tracking at above 10%, and that and that has naturally hit us. So we've been working very hard on the internal efficiencies, looking at cost saving initiatives where we can to manage that as well as possible. And the only last thing really to mention on this slide, I think, is the finance cost being down, and that is just a a measure of the lower average debt right across the across the business, across the year. The the EPS measure here of 4.4 versus the prior year of 1.7. In in the interest of transparency, it is worth saying, we did say this in the last presentation, that the prior year number was was subdued slightly by a one off deferred tax charge as a result of the changing corporation tax rate from 19 to 25%.

10:49 And so if you are to compare like with like, the 4.4 is more comparable to the 2.7 that we declared as an adjusted EPS last year. But even so, I think it's a it's a really positive story and and, you know, good good growth levels on that number. The next three slides touch on each of the divisions. I'll I'll I'll very quickly counter through these because most of them are are success story. General piling, very strong revenue growth, and that's come through in the operating profit improvement. We've seen stable performance across two of our sectors, residential and regional construction, and we've seen very strong growth in the infrastructure segment. So two major energy contracts were delivered in the year. We're coming towards the end of the second now in in in quarter one of the next financial year. So but the bulk of that 26,000,000 has been won and delivered during the year. Very challenging contracts, but both being delivered very well so far.

11:52 The next division specialist and piling and rail, I've I've separated those out to look at them separately because it's a slightly different story for both. In specialist piling, very strong activity levels in half one as we as we discussed at the interim results. Slightly softened in the second half by some delays in in highways work, and we've seen a a number of delays or cancellations of activities in in in in the second half of the year. But I think in the long term or medium term, you know, the sector still looks very, very positive for us. We're expecting a return of of highways opportunities, and we're also looking at growing our presence, as Mark touched on, in the energy infrastructure sector. I think that's a could be a very important area for us as we move into into FY '24 and beyond.

12:38 Quite a lot of spend across the country in in that sector, and we're we're we're gradually increasing our presence and and and building some some strong customer relationships. In rail, very good performance throughout the year with some challenges early on with the rail strikes. They've been managed much better since the first round of rail strikes, but that hit us quite hard in the first half.

13:02 Subsequent rail strikes have not hit us quite as hard quite as badly. Certainly, the network rail have managed considerably better after the first round. So that is that is pleasing, very pleasing performance across the year. However, to Mark's point around c p six and see the transition into c p seven, we do expect softer market conditions over the balance of this this year, and that's one of the reasons that we've we've now embarked on our Canadian subsidiary. And as Mark said, we'll be on the ground, hopefully, within a couple of weeks delivering our first contract. And we'll be doing that with sensible contract conditions without taking any significant risks across the across the business. The final division, Grand Engineering Services, made up of housing, which forms about 40,000,000 of that 47,000,000 revenue and strata the balance.

13:51 Housing has been incredibly buoyant throughout the whole of the year. Very, very high and record activity levels operating often above above our capacity. We've had to bring in precast piles or beams or even higher rigs to deliver the levels that we've delivered at. So we've seen in in terms of moving into f y twenty four, you you'll have obviously all seen in the press the what we're expecting in the house building sector. And as we stand at the moment and potentially impacted by increased accelerated activity before the new building regs come in, we've seen a continued very, very strong demand in the division. So we are absolutely not expecting that to continue over the balance of the year, but q one has been very strong, slightly defying gravity in terms of what we what we see reading out there in the in the house building sector. But inevitably, we will see a decline and softening of this market, and we've got those built into our internal forecasts.

14:52 And we'll manage our costs accordingly. And Strata, to wrap up the divisions, Strata has performed very well, building strong positions in highways and rail and is and is and is adding a a healthy profit to the to the bottom line.

15:09 I'll perhaps leave this slide, I think, as a as one that happy to take any questions on. But but in summary, as I said, low debt position, healthy cash position. There's a reconciliation of lease liabilities there, which obviously is is is built into the the the underlying numbers. But overall, I'm very happy with the the debt position four or five years ago. Was up around 18,000,000, and and that's, you know, that's been a drain on cash for several years. So it's very pleasing, I think, be getting to be in a position now where we'll no longer have that level of drain on cash, and it gives us another level of of stability in the business. And the final slide on the financials is is the cash flow position, and that just reconciles from opening to closing. And you'll see there a very healthy operating cash flow, which we're pleased with.

15:58 Impacted, of course, by cash impacted by a working capital increase with the higher volumes. So there's a bit of a reduction there. The the investment that I mentioned, over 6,000,000 invested in the year and offset by some disposals. We've rationalized some of our aging fleet. But overall, that brings it down to cash before financing of 11.3. I mentioned that we've taken out the 1,500,000 of of new HP finance, which has then subsequently been repaid post year end. And there's the there's the servicing of the debt, 2,800,000 of lease repayments. And what this has allowed, I think, is confidence to to continue with the dividend policy and dividend dividend payment, and 1,500,000 has been paid out during the year. So overall, a gradual steady increase in cash position overall, and I'm I'm fairly happy we've, you know, we've got to a good good position by the end of the year.

16:53 I'll let Mark wrap up on the strategy highlights and the outlook. Thank you, Graham. I've touched on some of these, but just to go into a bit more detail, we've been determined for two or three years to increase our presence on long term frameworks and and larger projects that are not necessarily riskier, but certainly give us greater visibility, high utilization opportunities, and more embedded customer positions than, you know, a a them being mainly a tactical bidding business that receives thousands of inquiries and and and bids bids everything. And we've we continue to make quite good progress here, to be honest, so that, our revenues are underpinned by much more reliable, consistent terms and conditions and perhaps a a more select customer base than than, the the very, very broad range that we've we've typically had.

17:48 And this is this is because we we we won't grow easily without this backbone of workload, and then all of the other smaller projects coming and going on top of that allows us to to scale up. Otherwise, I think we'd we would plateau. So the Smart Motorways Alliance and the Transparent Transparent route upgrade and two or three larger highway schemes that are effectively multiyear framework contracts have have all been progressed in the year and, you know, remain very important areas for us to grow into this year and beyond. Because the the truth is we haven't yet been able to get going. We've been tied up in design, budget reviews, political machinations, particularly in smart motorways, and all of these opportunities ahead of us, I'm pleased to say. We should be catching the back end of FY twenty four with some of it, but it certainly makes a material impact in FY twenty five onwards.

18:49 And we're bidding others, so we should be announcing a major framework in the energy sector as well soon associated with high voltage transmission, infrastructure as we as we referenced earlier, and and indeed as mentioned just further below. We've talked about Canada a little bit. We have a team now embedded in Canada. Our subsidiary is is is fully up and running from a, an operational and, business point of view. Very high customer interest in in in what we're bringing to Ontario at this stage. Two rigs have been exported and are ready to go. And team that we've recruited have been over here for training and and are back ready to start our first project in in a couple of weeks.

19:39 We're we're quite excited that this will grow quicker than we first thought, And we've also been able to agree very benign terms and conditions in terms of effectively operated plant hire and cost plus arrangements that allow us the confidence to, you know, go through the natural learning curves that we will do over the next few months. I think I've mentioned point three. Point four, we still see enormous opportunity in housing. Notwithstanding the current dip. It is, you know, potentially our most reliable long term opportunity amongst all of the opportunities we have because it's it's such a structural need for new housing as we're all well aware. Government sort of pronouncements this week are are are helpful, and we remain reasonably confident that come FY twenty five, the market will normalize to a degree to allow us to make more confident predictions regarding the the the volumes that that that we would do compared to f y twenty four.

20:44 We have modeled a 33% drop in revenues for f y twenty four. So we, you know, we we've lost a year really in terms of the growth that we we might continue to build on in housing. But we've diversified our capabilities ready for the inevitable bounce back, including the the smart deck system that we announced a couple of months ago that sits alongside our smart foot beam system. And we're we're using the opportunity now of investing in sales effort and preconstruction effort with our housing customers to maximize the opportunities when they do come back and making sure we put enough focus into the into the affordable and social housing markets, not just be overdependent on on on private house builders.

21:32 It's worth noting, of course, the demise of the two biggest modular builders in The UK recently, both Ilkka Homes and LNG Modular, has not been helpful. And we'd invested quite a lot of time with Ilkka in particular developing solutions that were ready to go and would have been rolled out on a national basis. So that goes to show that, you know, we haven't been we haven't been lucky there, but we what we haven't done either is caught a bad debt. And compared to others, we we feel we've we've handled that as well as we possibly could in the circumstances. We've also grown something that we we we sometimes talk about in passing, but it's it's increasingly important to us, which are ground improvement capability. This is alternative to piling, strengthening the ground. We still use piling rigs, but it's a very quick, relatively cost efficient, process using either, concrete columns in the ground rather than piles or stone.

22:26 And, we recruited a team back in 2020, and they've done very, very well from a standing start to grow that business to 10%

22:35 $10.10 10,000,000 revenues at margins that are better than the average that we we we earn in the in the residential sector where they they do quite a bit of their work. So So very pleased with that, and that continues to be an area of investment for us. Graham's invest mentioned the investment in rigs and fleet, HGV fleet, but that continues to be important, including, our first rig in the ground improvement sector mentioned above. And, also, in terms of nonfinancial priorities, we've invested, more time and and, commitment into succession planning and talent development than we've ever done before. We've launched our leadership program, which, the first of its kind in in VAN ELLE, 14 high potentials going through, very structured mini MBA type program, sponsored by us as individuals, and then another group going through

23:31 in in about nine months time for the first time as well. So really trying to bring through the succession planning in the business that that we we we need given that there's still a resource shortage in the in the industry overall. And we've done a great job of retaining our people in the last six months, and we fought off the the the poaching from HS two, I'm pleased to say, quite well. And, you know, now we've kept up people. I'm I'm determined to to, you know, get the very best out of their potential. And, not to be missed, we've we've also invested and and, you know, planned expansion to our facilities at Kirkby and the taking back under our control a our our ex premises at Pinkston that we sublet for three years because we need the space, and we're expanding with other other ideas for investment.

24:22 Not least some of this fast fabrication opportunities that we see coming in the next two to three years where we need bigger facilities at Kirkby to deliver in house.

24:31 So we're quite excited by what we've the work we've done there at Pinkston to bring it back into the portfolio. Current trading, as we've referenced, is is very good. We're ahead of our own plan, which is which is encouraging, but we do know there's a dip coming. So we we are remaining cautious in our outlook for the year and, you know, standing by the forecast that we've previously issued.

25:00 We do expect revenues to be down overall in f y twenty four, unfortunately, due to the the reasons I mentioned earlier. But, partly due to work mix and partly due to continuous improvement, we're expecting margins to keep improving. So we we expect to make progress, not least because we're we're poised, ready for the growth that will come through in f y twenty twenty five as well, which won't happen if we just sit back and wait for it. So there's an awful lot of work going on to make sure we're we're we're we're we're ready to go when when our markets improve, particularly highways and and housing. Very, very confident about the the market conditions going forward, into the long medium and long term supporting growth in excess of the five to 10% sort of indication that we've previously given. We've got tremendous opportunities. We just need to make the most of them. And I've touched on some of the newer areas that we're putting putting some effort into. I haven't mentioned the water sector where we are also putting, a fair bit of effort into, and and you'll all be aware that that is another sector where increased spending is is almost going to be mandated, and we expect to be an important part of that.

26:14 I've touched on Canada. We're we're we may well have six rigs in Canada by the end of the financial year or soon after if things go to plan, which is, you know, potentially a third of our current fleet involved in work in Canada. So gives you an indication of the potential there that could come through quite quite quickly. And and as I've also mentioned, we are certainly confident of achieving our medium term financial targets, which we've listed then again for for absolute clarity.

26:47 And the next two slides really are more for reference, I suppose. It's a reminder of our targets on the right hand side and some commentary on on the sectors as we see them. Opportunities mixed with, you know, some, you know, some realistic assessment of the current of the current challenges that we face. I guess the only one I haven't mentioned is HS two where, you know, candidly, we needed to be organized back in two thousand and sixteen, seventeen to have had a an embedded partnership role. We've tried extremely hard over the last couple of years to, you know, barge our way in. We haven't made the progress I would like to have made despite our best efforts. So we we continue to undertake occasional projects on phase one.

27:34 But at the same time, we're we're able to see from a distance the impact of the pause and the delays and the difficulties, around, you know, the budgets on on the program. But what we are able to do and have done well is position ourselves for phase two, which I know is also delayed, but certain aspects of this will start early, not at least the ground investigation, aspects where we've been bidding, for for frameworks direct to HS two and hope to give an update in the in the near future. And we have customer partnerships ready for the construction phases as well with some of our preferred tier one partners. So in a much better shape, again, in

28:15 the future rather right now, to to, you know, benefit more strongly from the high speed to investment in in The UK. I think we've touched on key risks and challenges. They they are fairly common sense, but we are, I think, doing well at managing them. But they remain, and they are a drag on us sometimes. But nonetheless, we're we've got a team in place that's that's doing well and is very experienced commercially in particular and and financially.

28:49 And just to round up, corporate activity is very much, you know, near the top of our strategic agenda. So, you know, really, in summary, a twin strategy of of pursuing growth in markets where we we know there is additional investment coming through in in terms of UK commitment and also accelerating

29:15 bolt on acquisitions to complement what we do today. There are three areas that we would consider. Anything to do with rail and specialist piling, you know, is is important to us, so we continue to to to meet several companies in that field.

29:31 Scaling up strategy of techniques is something I've said before and is is a live strategy that we're working on and also regional expansion potentially in areas where we see pockets of the country where we expect growth but haven't got a sufficient permanent presence. And the obvious area is the Southeast and the South where we've been considering that for some time, and, you know, that's still very much part of our assessment as well.

30:02 And some statistics to finish, which we're happy to take any questions on, but very, very useful to notice not just the financial measures. Often, you know, utilization stats are of of great interest. You can see there's still capacity in our utilization stats to do more, and that's reflective of the delays and frustrations that we've seen in h two in some areas that, you know, we could we could have been doing more in in some parts of our business. You can see the number of inquiries coming through, but you can also see our accident frequency rate has improved significantly along with our headcount going up. So we're controlling safety better and getting, you know, getting more people trained and competent as well. If you look, for example, at the growth in training days delivered, all of that's in house.

30:47 We were quite proud of the progress we've made with our our approach to safety and and competence in the business.

30:56 Thank you. Super. All right. Well, look, thank you, Mark. Thank you, Graham. If we could now turn to the questions, we've had a number of questions 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. Additionally, your feedback is important to the company. So immediately after the presentation has ended, you'll be redirected for the opportunity to provide that feedback.

31:22 But maybe we can just pick up where you left off, Mark, in and around acquisitions. James asked, and you have answered it, but I'm just, for reference, read it out. Would you look at acquisitions at this stage or continue to build the balance sheet and be debt free, which I think you've answered? But another question we had was what would you ideally spend on a bolt on acquisition? Don't know if you can just add some detail there. Well, we're our our current thinking, and I'm sure we'll be told if we've got this wrong, is that we don't don't intend to raise capital for acquisitions in the in the in the near term. We don't believe the appetite is sufficiently there for that, and it doesn't doesn't feel like the right thing to do. We believe having improved our balance sheet and not least cash position, we we should be able to finance self finance maybe with a little bit of debt from the facilities available.

32:23 The the the the scale of acquisitions that we're considering that can still be transformational enough, you know, we're not looking here at acquisitions that are so small that they won't make any difference

32:36 from our own from our own resources. Right. Okay. So we would look and and in terms of scale, we would we would look at considerations of up to $56,000,000 at this stage. Yep. Great. Okay. A couple of questions for for you, Graham, which are more financially led. Nick asked, what are the typical payment terms for your contracts and cash flow characteristics?

33:06 Well, they they do vary. They vary by by sector, and they carry the normal characteristics of a construction contract, which on the larger agreements can lead to protracted final account negotiations, which can take some time if it if it's a very large contract. But, ordinarily, we would we would be working on norm normally sort of thirty anything between thirty and sixty day terms, and that would be on measured work. So one of the advantages of our of our sector, our little sub sector of the construction industry is that we a lot of what we do is is measured works. Number of piles in the ground, meters of pile in the ground, multiplied by the the the rate that we charge for the for the work. And so that's relatively relatively straightforward and and uncontentious.

33:56 So So we we tend to see relatively sensible cash flows on our contracts. We typically carry anything between working capital of sort of six between 69% typically of of of revenue, and that's stayed fairly flat over the last two to three years. One

34:16 point that's possibly worth highlighting is on is on the debt collection. Again, we are it is important to know that we are typically first up on-site on a on a construction site, and that and that brings with it considerable advantage. It means that the the project typically has sensible cash reserves at that stage, not necessarily towards the end of contracts where cash can become tighter. We also we also warrant our piles and and and warrant our our work. And often that's that's aligned to pile testing. So we test we can test the piles or piles can be tested externally. And and then ordinarily, we would hold the warrant back, the warranty back until we've received payment. So one of the reasons that VAN ELLE has not suffered from significant bad debts in the past is is is for that very reason alone.

35:05 Most most companies would agree a final account position, settle up, and we'd issue the warranties concurrently. Great. Okay. And just one other financials question. And you did talk earlier about the fact you've been able to successfully pass on increases in the underlying cost, but maybe you could add a little on the trends. The question is, are you able to update on input costs and supply chain? So there's a number of factors at play here. One is the availability of raw materials, and that has been a challenge certainly over the last two years. Pleased to say that that challenge has largely moderated. We're seeing much more sensible supply chain in terms of availability of the products that we use, and that's typically steel ready mixed concrete.

35:55 And and and that was really challenging eighteen months ago. That that has become much more normal. In terms of the inflationary aspects, I think on raw materials, it's still there is still some volatility out there, but we're seeing those cost those input cost stabilize considerably. When I talk about volatility, we've seen some cost reductions in the last couple of months. Equally then, we've seen some increases as well, and that's why we're having to be so agile in terms of repricing and and getting our tenders right and as close to placing the order for raw materials. So we would we would typically try to sign a contract with a customer concurrent with placing the order for raw materials. So we we we we absolutely limit our exposure there. The the inflationary challenge, think, that hasn't gone away is wage inflation.

36:43 That still remains a a concern and a challenge. What what what steps have we taken there? Well, again, for direct cost, we price into the contract. But more importantly, think, is to make sure that we, you know, Mark touched earlier on retaining our workforce. And so one of the one of the things we've done there is to make sure that in terms of salary increases, we've targeted the the lower salary levels, and we've we've we've given higher pay increases. So typically, at the bottom end of the salary range, we've we've issued in the last twelve months around about 10% pay increases. In the mid range of salaries was probably more than sort of five to 7% increases, And at the senior end, the most the highest paid, we're we're we're at sort of 4% over the last over the last twelve months. So we've tried to be sensible there and look at and also look at sort of employee benefits, regular salary reviews to make sure that we are doing everything we can to keep to keep our people.

37:39 I don't think the wage inflation issue will go away for a few more months yet, but it's it's just something we keep a very close eye on. Great. Super. A couple of questions on the international aspects, Mark. How big could the Canada opportunity be? Well, there's there's no reason why it could not be of an equivalent scale to what we do in The UK, assuming we do it well. The certainly, the size of the market is there and the lack of competition is confirmed, and the customer interest is quite extraordinary, we found. It surprised us. But we've just got to execute and do so safely and, you know, financially responsibly, both of which we've yet to sort of, you know, deliver deliver, you know, on the ground as it were. So we're we're we're quite excited by by the prospects.

38:38 Could be three years in in in building that sort of scale, but that but that is achievable. Great. Okay. And and Nick asked, you mentioned Canada going live. What other markets would you look at, and how competitive are these opportunities? Well, the to the final point as the the the of of the of your question, Nick, We are own we are in Canada because there's no competition. And we are picking what we do to make sure there's no competition, which is so it's rail led, track mounted, piling, and geotechnical works. We'll complement that in due course with stuff next to the track when we've got the customer base sort of surrounded and and locked in with us and trusting us. So we'll expand our our works adjacent to the railway, but with the same customer base.

39:30 And there's nobody out there that can do that sort of work in Canada. The the risk would be some of the other British companies copy what we do, which might take two years to to establish any rival credentials. We'll see if they do manage it at all. When we looked around the globe, we we we are we are seeing the same thing. You know? There's there is a there is there's a a lack of capability compared to what we've pioneered in The UK anywhere else in the world. Our track bed stabilization system, for example, is unique. We've just got to find the customers that that that haven't worked out yet. They need it. So but we're not gonna go crazy. Our plan is to expand and grow in Canada for the foreseeable future beyond Ontario when we're ready and possibly be considering going just south of the border under under under cautious arrangements with some of those customers if if the if the terms are are appropriate, and we feel we've got capacity to manage it. We've already been asked whether we'll license our track bed stabilization system into The USA.

40:43 We may or may not one day, but it's great to be having those conversations. And it's such early days. And and and one of you might ask me, would we do an acquisition in Canada, you know, to close the loop on the earlier question? Yes. We could. We've certainly got two two options that we're already aware of that that could accelerate our progress and embed us more permanently in the in the sort of Ontario region. But it's all ahead of us, all to be all to be considered. We're gonna we're gonna spend the next three to six months just evaluating how much we've gone through that learning curve and and kind of built up our our early our early success. Great. Okay. Super. Well, look, just ahead of asking you just to to wrap up the presentation, we've got a question from Keith, which is slightly closer to home.

41:30 Government policy on housing would appear to favor greater development on brownfield sites. Does this type of work create greater challenges than greenfield sites that are more likely to be larger areas in less congested communities? Yes. It's the answer to that. That's that's that's probably good news and and common sense, you know, statements by the government. So brownfield sites will will always typically need a level of remediation and, you know, more complex foundation work than greenfield sites. House builders, if they can, will build simple foundations in greenfield sites that don't require piling because it's more expensive and it's complex.

42:22 But that you know, the opportunities for that hopefully will be less and less. And in in you wouldn't be building low rise, low density housing in city centers. You're more likely to have, you know, taller buildings, you know, not necessarily all great big great big skyscrapers, but but the chances are you're gonna need piling and more complex foundation solutions. So it suits the the opportunity suits us. Absolutely. It also makes us realize we probably need to be stronger in London and Manchester and Birmingham than we are. So we we probably need to, you know, to orientate our our efforts better to some of those city center opportunities and the and the house builders that are specialized in in some of those compared to the more the more sort of, you know, suburban regions that we that we concentrate on more at the moment, I think it's fair to say.

43:18 Great. Okay. Well, would you like to give a a little postage summary of of of where you where you find yourselves in? Yeah. Well, look. I think we're in really good shape. We've come through, you know, some some challenging times. I think we've stuck to the strategy that we've previously outlined. We've got a stable management team who are delivering very well. I think we've got a diverse range of capabilities that we've proven are important to withstand, you know, whatever ups and downs the industry might throw at us. And we are financially very good shape. We have an increasingly loyal customer base that is looking to work with us in longer term programs, and we see significant opportunities in our in our markets, so which we've said many times before. But even when one or two are dipping, we still see opportunities to grow and and sort of, you know, respond to to new new priorities.

44:15 So we're quite agile and and capable of of of withstanding, I think, any short term disappointments in in the markets we've discussed. And certainly, in the in the growth areas, we we can see that we can kick on quite quickly. So, yes, we're we're very excited by the prospects ahead and very confident about achieving those medium term financial KPIs that we've mentioned. Great. Okay. Well, thank you, Mark. Thank you, Graham, updating investors today. Could I ask investors not to close this session as you will now be automatically redirected for the opportunity to provide your feedback? If anyone has further questions or would like additional information on VAN ELLE, please do get in touch via vanel@walbrookpr.com. Many thanks for attending, and we look forward to updating you again soon. Thanks, everyone.