Van Elle Holdings (LSE:VANL) — Review of 2025 Results and Prospects

0:02 Good afternoon, ladies and gentlemen, and welcome to the VAN ELLE results presentation. 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 vanl@walbrookpr.com. The company may not be in a position to answer every question it receives during the presentation. However, the company will review all questions

0:33 submitted today and public publish responses where appropriate. These will be available via your investment company dashboard. Finally, we would like to remind you that this presentation is being recorded. I would now like to hand you over to chief executive, Mark Cutler, and chief financial officer, Graham Campbell. Thanks, Tom. Good afternoon, everyone. I'm just going to run through a fairly familiar set of slides. And if I just go to the overview first, in summary, a resilient performance we feel in in in quite difficult market conditions. It's felt like this for for quite a while, and I fully understand that, you know, we we keep feeling that improvements are on the horizon, and they are. But, you know, we've we've spent twelve months here and and time before that really, you know, weathering quite uncertain market conditions and delays, and and that's been the case, in fact, in the early weeks of of q one as well, although now we're feeling a bit more optimistic.

1:41 So soldiering on, I think we've done quite well. Canada's been quite a challenge in amongst that as well, and, you know we've made a decision now as a board that, we've we've we've tried our very, very best, but we just can't, take full advantage of the opportunities that, will undoubtedly come. So we have announced previously that we are reviewing our strategic options here. Those those discussions, negotiations continue. I'm optimistic of a sensible outcome within the next few months. And and for accounting purposes, we've we've treated it as a discontinued operation because we won't be repeating the exposure position that we've we've had up till now.

2:27 And so on a continuing basis, though, our revenue is still down, round about 6%. You know, we're we're fighting hard in a competitive market with a lot of projects being delayed or or uncertain in terms of their their progress. And we know because my COO chairs the Federation of Piling Specialists that we are bucking the trend in terms of the market share that we're we're holding. We've managed to uphold reasonable, and not embarrassing levels of operating margin, albeit down on last year. And and, of course, we're aiming for, you know, 6% plus, and and we we know we can get there.

3:14 But those aren't disastrous margins by any any count, and the same with return on capital. And we'll talk later perhaps about some of the initiatives we're taking to further sort of, improve return on capital as well as growing our profits. But, you know, a dip there as well commensurate with the with the dip in profits as well. But our target there is 15% plus. Again, we're we're confident we can achieve that. Having said that, our order book's up. And although we haven't necessarily mentioned that on the front page, we've we've reported in our in our in our r and s a a a strong growth in our order book. We're quite optimistic about the prospects ahead of us in f y twenty six, and we are on with some bigger projects now.

4:04 But, you know, the the softness in the market around particularly the building say safety act and the uncertainties in the commercial building markets, the slowness of the housing market to to perhaps respond to, you know, very welcome government initiatives. The the a a definite slowdown has been the case for a while now in several infrastructure sectors, because of budget constraints or other other challenges, you know, has been has been, you know, quite a challenge for us. But as we go on later, we'll we'll explain how we're going to come through that, particularly with, you know, non non optional investment opportunities in energy and water and and other areas. And some of the actions we've taken strategically, such as the acquisition of Alvin Drilling that we completed in the period, are, we feel, quite intelligent moves to give ourselves a capacity and market position and relationships to maximize some of those opportunity, particularly in Scotland, in the energy sector.

5:11 We continue to have a good balance sheet, strong balance sheet that gives us, strength to do things, whether that's acquisition or capital purchases or or or support some of the bigger programs and projects that we're bidding

5:23 for. We manage our operational commercial risk very well. We've managed to avoid any major credit problems with with customers in in in very difficult times in the wider industry, and we've we're holding the dividend as as we forecast. K. Great. K. Thanks, Mark. So just a very quick run through the financials. I first slide really just presents the range of the three sectors that we operate in residential infrastructure and regional construction. And this has been broadly consistent with a slightly growing emphasis on the infrastructure sector. So broadly, we're a 4040% residential and infrastructure split with about 20% historically in in regional construction.

6:10 As I say, what we've seen is growth in infrastructure, and that is the most exciting area which we'll come on to talk about in a little bit more detail as we look at the outlook moving forward. In terms of the p and l, presented this as an underlying result and on continuing basis. So this the the numbers that you see on this slide exclude Canada, which is classified as a discontinued operation. And it's also on an underlying basis, and you can see in the bottom left, there's a table there just showing the the items that we've classified as as as non underlying. There shouldn't be any major surprises there. It's acquisition related costs and some modest restructuring costs. Overall, I think the highlights here are that, pleasingly, the gross margin return has has has improved again further.

7:02 No major issues on a contract by contract basis. We've had good site execution, but we've also benefited from the from this from the mix impact of greater proportion of infrastructure works. And so you'll you'll see from the next slide that we've got positive performance, particularly in the specialist pine and rail segment of the group. A healthy looking EBITDA, albeit down from from last year, which is which is volume related. And overall, I think to Mark's point, in very challenging markets, we're reasonably pleased on a continuing basis. We've we've we've we've produced a positive profit before tax. And I think as we sort of look forward and we can address the the challenges that we've got in Canada and we start to see the issues that we face with the Building Safety Act, we can can sort of bridge from where we're at to a to to quite a positive outlook.

7:59 The last thing I will say is that we're taking actions to drive our return on capital after a number of years of sort of stabilizing the business. We've taken quite a number of steps to look at low utilized assets, including our property portfolio, our noncore activities, which is the transport fleet. And some of you may have seen the r and s that we released post year end outsourcing our transport fleet, and that took the that took the HGV fleet off the books, which is about two and a £500,000. And we can we're now constantly looking at rationalizing the the rig fleet as well, particularly where we've got aged fleet or or low utilization. So a lot of activity around there to sort of bolster the cash position and reduce the, reduce the level of of capital employed in the business.

8:47 The three, segments that we operate in, this is a relatively straightforward picture. You you can see quite clearly that the biggest challenge we faced this year is in the general piling division and a substantial drop off in revenue with a knock on impact of a significant operating profit decline. I I suppose you might wonder why having 10 or 11,000,000 less revenue could could have that much of a knock on impact through to the group, operating profit also the divisional operating profit. And and and the fact is here that, you know, as a business, be aware that we carry relatively high fixed costs. So when revenues increase, we do very, very well as a business.

9:32 When our revenues decline, though, you can sometimes see that that that drop off quite sharply in in operating profit, so the the throughput to the bottom line. What are the issues here? Well, the issue we faced over the last twelve months is no very large jobs. Any jobs of 5,000,000 plus, we would consider to be very positive for the group. It gives us a baseline of of revenue and and been able to leverage our cost base. There's been very few of those opportunities. That is changing as we move into f y twenty six. We've got our first job first very large job for a while at Sheffield Forge Masters, which is of the scale of sort of 10,000,000. So that we're on-site there now. The work's going very well, and that will provide a good base load of work. But also in the general planning division, this is the division that's been most impacted by the delays to the Building Safety Act, and that that is that that has had a huge impact in the year both in reduced revenues and the expectation that it will unlock at some point. We've we've kept our resources to be able to deliver, but unfortunately, only a couple of schemes have come out the other side of that, and we still we still have quite a backlog of of order books still to be delivered in that area.

10:49 In terms of the other two divisions, specialist piling and rail, heavily exposed to infrastructure, a very strong part of our business because it's highly skilled work and typically delivers good margins. And you can see that they've had an excellent year, So slightly increased revenue, but a very strong return. No real project no real project issues, within the division. That's gone very, very well, and continues to do so even post year end. And and grand engineering services, the last division is, probably 80% or so of our housing business, and then sort of 15% 20% of grand investigation. And you can see they're broadly flat broadly flat revenues and broadly flat operating profit. You know, we're operating in a fairly subdued market within housing, and you will have no doubt seen recent announcements from the likes of Barrett, Red Row, Kepmo that, you know, the the market remains subdued. We we started to see a bit of a recovery. We were very positive at the first half when we reported a significantly increased order book. And, unfortunately, as we progressed through the second half of the financial year, we just saw the weakness return to the market, and our order book for housing particularly declined.

12:04 We're seeing some very early signs of the market coming back though. We've had a good solid level of orders in the last couple of months, and we're starting to get a little bit busier. Difficult to say how quickly the market will recover here. I think in the medium term, it looks to be a very attractive end market for us, but but the pace of recovery may be may be slower than we would have all hoped. The summary on the balance sheet there, I won't touch on too many details here. We've carried on investing significantly in our in our fixed assets and the the rig fleet in particular. Working capital is up slightly. That's primarily down to Albion being acquired in November sorry, October of last year. So we brought in the working capital.

12:49 And we've touched on this before in a previous presentation, but we had an HMRC inquiry into our r and d claim, which took a very long time to resolve. So that was sitting on the balance sheet at the at the period end. Pleased to say that was resolved post year end and paid in full. So we had a successful inquiry all completed just with just with the main issue of a a delay to to receiving the payment. The last thing I'll say here on the slide is the assets held for sale. That is twofold. We announced post year end that we we'd outsourced the transport fleet. So it's right that we classify those, assets as assets held for sale as 2,500,000. And the balance there the balance within that number, as we've reported Canada as a as a discontinued operation, the fair value of Canada is also reported under under that position.

13:42 The last slide on the finances is really just a reconciliation of the cash flow position. You can see they're relatively healthy operating cash flow, and I think the majority of those those bars will relatively self explanatory. Significant capital expenditure as you would expect within the business, and we've also had some fairly substantial payments outgoing for for acquisitions. As a result of that, we've taken on some modest amounts of debt, which is the the green bar, about 5,900,000. A portion of that's been paid back. Another 1.5 has been paid back post year end. But but, ultimately, you know, we try to maintain a strong balance sheet with a healthy cash position. And in in order to do that, we've taken on modest amounts of debt on a on a variable basis. So as the business as the markets recover and we start to generate healthy cash again, you know, we've got an opportunity to repay that that debt back.

14:42 So I'll hand back to Mark. Thank you, Graham. The title of this slide says it all. And, genuinely, we can, now report some positive progress, certainly in energy anyway, and and the early early recovery we we feel of the of the housing sector opportunities. So what I've what we've done here is on the right hand side is the caption that we used in the last set of results. It's an indication to scale of the relative growth in each of those those sectors listed and updating against those since then.

15:27 I think in summary, we we would say that energy is moving faster. Housing's a little bit slower. Rail perhaps hasn't quite got the legs that we might have first expected given given government appetite for spending in transport and and industrials and and wider commercial building sector has got has got a lot of potential as well, which we're starting to see. And I've summarized here in energy, faster progress. We've we've talked throughout our results of of achieving 40,000,000 revenues from less than 5,000,000 today within within a couple of years. Those are scheduled projects that we've had allocated by tier one contractors who we have frameworks with now.

16:20 Water, a bit slower getting going in AMPH than we'd hoped just yet, but customer partnerships in place that give us good medium term confidence here is just going to be a bit slower than energy, which seems to be going mad. Rail, slow start to c p six. Really slow. Very disappointing. The whole sector's, you know, disappointed. We've come through this very well, actually, without needing to, you know, go backwards because we've had such a strong position on the Transpennine route upgrade framework that we won three or four years ago that that we are doing very, very well on. I just wish there were more programs like that, but there just is not enough opportunity in rail for us at the moment, which, of course, is the reason we diversified into Canada a couple of years ago thinking that that would really complement very well, and it's a great idea. It just hasn't quite worked as we'd hoped.

17:14 Housing, I've mentioned. Tall residential will definitely come through. I mean, the Building Safety Act has caused absolute carnage here in in the whole industry, and we've felt our our sort of respective pain from that. But it has to be unblocked. It's becoming unblocked. It's gonna be a trickle rather than a surge, but we don't need too many jobs to get going for our our London operations to resume normal normal sort of, revenues. And and once the revenues are up generally in the business, we're in good shape. Remember, we don't have anything like the operational sort of mishaps that that we might have had five years ago. We're pretty reliable now in our gross margin performance. Once the revenues are up in all of our divisions, we we convert to profit very, very reliably, touch wood.

18:09 We do. The operational capability of the business has strengthened significantly over the last few years. Commercially, we're in shape.

18:17 And then finishing off with industrials, and social infrastructure. Some of our biggest project opportunities are coming from manufacturing, and, data centers. Some of our biggest schemes at the moment are are in that area, and also prisons mentioned in the final bullet point. You know, we've got some partnerships with tier one customers affecting the prison sector. That's a growing area. Schools and hospitals are also expected to to boom, and we've got some partnerships there to to lean on as well. We spent a lot of time on customer partnerships. You'll you'll remember this is this is something that we mention often. We've invested a lot of effort in in, moving away from being a bidding machine into closer embedded partnerships with with tier one contractors who value our early involvement and our technical capability.

19:09 And that that is starting to pay off. As we get a bit busier, that will have a bigger knock on effect on the amount of work that we have sight on earlier and and that we we start to negotiate rather than bid. It's not a it's not a quick process, but it's it's it's notable in the proportion of frameworks that we have, which, is a stat that we we should publish. And then, really, the next few slides, are are just building on these. I'm not going to present all of the next ones in detail, but there's a slide here on residential and housing and some detail around SmartFoot and why that's that's beneficial in the housing sector. Our partnership with MJ Evans has mentioned as well. That's that's helping us in regions where we were previously perhaps a little bit weaker like the Southwest.

19:58 On the next slide, is a bit more detail on energy.

20:04 Quite important point here is that we apart from the customers that we've negotiated frameworks with and three more that we're we're discussing, We've been quite conservative with the with the volumes that we're talking about. And and what really differentiates us here, and we've got differentiators in every sector, which is important. We're not just another piling contractor. We've evolved far beyond that. In energy, the the sector is is playing fantastically to our strength of having an end to end integrated capability from the early investigation of the ground to the design of the different solutions into the construction of any solution that needs to emerge to suit the the best for project,

20:50 technical, challenges. And, of course, these are these are remote locations with challenging ground conditions, plays absolutely into our strengths. And the ability to come in early, two years ahead of construction sometimes and do the ground investigation locks us in. The design locks us in further. The design activity is significantly greater than the levels we've taken on before, which is infinite rookie because you don't need any piling rigs. You just need designers as professional services at high, high margins. And we're building a design organization to to meet this. It's gonna become a very important part of our structure going forwards. And then the construction capability is a combination between specialist piling, and Albion that was acquired and Screwfast.

21:35 These acquisitions that we've made all play into this space because they're specialist capabilities we never used to have, but they've become very, very attractive in the, basket of solutions that you might use for transmission towers or substations. And in fact, Screwfast are being chosen as a number one choice for transmission towers by National Grid and substations by by by by National Grid and others because of the off-site manufacturing element. I could talk all afternoon about it, but I won't. And on top of this are major hydro schemes, you know, big substations programs, all overlaying and coming through the pipeline of announcements all the time in terms of frameworks that are coming out of of the big transmission companies.

22:22 Next one. Water, as I said, bit slower getting going into AMPAPE, but I'm not worried about it. The the schemes are coming through. We're on-site doing some some projects now in most regions. Our partnership with Gallifrey Tri and Voca vessels that we've just announced is is gonna really be valuable here. We have a similar looser arrangement with Kia who have I think Kia and Gallifrey is both claiming to have the biggest share of The UK water market, but I don't mind because we we support both. And the early projects indicate that we we've got a a a very good relationship building there with with these sorts of organizations. Costain as well, actually. Rail, I've touched on. I've got nothing more to add there. We do have a ten year framework now with network rail in the Southern Region, which has been really slow again.

23:12 But it's, a, it's direct to network rail, b, it's for ten years. Those are both, big advantages compared to the normal cyclical misery of the control period dips, where we get stuck under two long contractors who themselves don't know what work they're getting. So that will help us, pretty much in in the same timing as TRU starts to to be to be completed. I'm hoping to get a strong position on East West Rail as well, but I'm gonna figure out how to do that yet. High speed two, I think, is a busted flush, unfortunately. You know, we've tried and tried and tried to get onto high speed two

23:47 from every angle we can think of. We're just too late to the party by the time we were we were a mature enough business. Those those joint ventures were set in two thousand fifteen, sixteen, seventeen. Unfortunately, we we've missed that. And then in summary, to finish off, current trading is improving. It's it's fair to say that the first two months, you know, a little bit of a continuation of of how q four was. But as we're going in now, July, August, we're we're feeling pretty happy with the volumes that are ramping up in the business. We still got a lot of work to do to get Rock and Alluvium up to levels we need in London with the building safety act stuff we've talked about, but the industrial schemes, in general piling are starting to make a big difference.

24:37 Our ground investigation business is at almost record revenues because of the amount of work we're already doing in the energy sector. Hand housing is steadily improving all the time, profitable, but not yet at the levels that we know we can deliver, which will achieve achieve, you know, significant material profit contributions, but I think that'll be more next year. But we're pretty confident on the on the on on delivering this year's consensus.

25:05 Thank you. Lovely. Thank you, Mark. Thank you, Graham. Now if we could turn to the questions, we've had a number of questions that were submitted ahead of the presentation. But please do continue to submit your questions using the q and a tab situated on the top right hand corner of your screen. What we might do quickly, there's a question here which talks a little bit in in intro terms, which I wonder if we can just address first and foremost because it might help those who are new relative newcomers to to VAN ELLE. Martin asked two questions. Why are you differentiated from, let's say, Keller, and who are your main competitors? Okay. Right. So I'll ask answer the second one first. So our main competitors are Keller, who are independent, or, big PLC, of course, global PLC, but they are independent.

26:00 And by that, I mean, they are not owned by a tier one construction contractor. All of our other major contractors are. Our competitors are.

26:09 Balfour Beatty Ground Engineering, Bashi owned by the VANCHI Group, in housing, Roger Bullivant owned by the VANCHI Group, expanded piling owned by Lang O'Rourke, Cementation owned by Skanska. Those are our major competitors. And then we compete in every region with all sorts of small and medium sized piling contractors that want to have a go as well. And, unfortunately, some of our customers like to get the cheapest price they can, and these are the guys we're moving away from into into the sort of frameworks I described earlier so that we can we can elevate ourselves above that. But we play right across the spectrum.

26:45 Big projects to small projects, An unrivaled volume of of work that we look at and capabilities that we have means that our competitor field is is very, very wide, but then so is our customer base. The guys we bump into most often probably would be the likes of Bashi and Keller on a on a national basis. And in some cases, we can collaborate and come together. We've come together with Bashi on some opportunities in in the energy sector, and we we keep a wary eye on Keller. If you want to compare our results with Keller, don't look at the don't look at the PLC results. Go and look at Keller UK, and you'll find that they found the market

27:30 as difficult as we have. Keller Limited, I think it would be. But, of course, in a in a big group like that, you can never be certain what what what's happening in the corporate structures of of the balance sheet, but you'll you'll see how they've, reported year on year, and and I think we match up pretty well. What differentiates us is a, scale, b, the fact that we are independent is definitely very valuable for most of our customers who are not the tier one contractors I mentioned. They they don't have a planning contractor as a subsidiary.

28:07 Our breadth of capability end to end that I've described earlier, our innovation, and our our our depth of expertise, scale of the business operationally, the experience that we have. And there's there's no there's no part of the end to end capability industry that we don't deliver. The only people that really can do pretty much almost everything under one roof, and we tend to be very, very productive and agile and responsive when we when we when we get going. We're we're renowned for our productivity. Super. I think that probably helps to fill in a couple of gaps for newcomers. There's one other intro style question that might help, and and Gavin has asked what's your typical average contract value that might help set a bit of scene too.

28:53 Yeah. It it's in the I mean, it fluctuates slightly, but it's typically in the 100,000 to a £150,000 range. But it range but it can go from 10 or £20,000 for a small ground investigation project or a small project of any type right through to £10,000,000 for a big piling scheme using the source of big rigs that you can see pictured there. So very diverse. Diverse customer base, diverse project size, diverse sector exposure.

29:25 We're literally in every sector of the built environment in The UK, which means that we can we can ride out the cyclical pressures. Unfortunately, in the last few years, most of them have been headwinds rather than tailwinds, but that's changing. Yeah. Great. Okay. So that's very helpful setting the scene. So now looking at some of the slightly more specific questions. The Ofgem announced £24,000,000,000 investment in the grid will rise spending by four times current spending and allow for 80 transmission projects and associated works within five years. How is VAN ELLE expected to benefit, and how ready are you to take on the work, personnel and plant?

30:08 Okay. So that is a typical announcement which are relatively frequent affecting the energy sector investment programs and is very much factored into the planning that we've been doing for several years now. So we we have a a pretty good handle on the delivery programs that flow down from these big announcements, that lead to transmission lines and other big infrastructure schemes mapped across the country, for the next two to five years.

30:50 Obviously, it's a bit fuzzier once you get to five years. But the the the planning that we've done allows us to see which schemes will be involved in with which customers, and we've been working very hard to secure frameworks for those customers that allow us to negotiate by and being allocated those projects. And that's what our forecasts are based on. It's not based on we might win one out of three or one out of four of those projects. We know which jobs we'll be doing because we've been brought in as partners on an allocated basis, and we've got the strongest position in the sector to deliver the most work. Our biggest rival's here at Bashi that I mentioned earlier, where we share we are sharing the portfolio with m group, but their their portfolio is massive, m groups that is. We're doing all of Wood's program, and I expect to be doing three other parties embedded delivery work as well either alongside someone else or or or alone up until the point that we just can't possibly do anymore. And what we've done to prepare our resources for this is is we've bought, for example, Albion Drilling last year for exactly this reason. And nobody else is in the peer group is thinking along these lines.

32:02 We have now the only established Scottish business that's got a track record in this area in Stirling ready to go, involved in some of this work now, and we're using that as a nucleus for building our resource that we're also, sort of exporting from the Midlands and North on a more visiting basis. You put the two together. We've got we've got the capacity that we need

32:23 already planned. And then our customers have got the option whether they use Albion or VAN ELLE. We've got the local relationships. We've got 16 rigs ready to go in this marketplace. CapEx planned for more. Alterations for rigs already in the pipeline. Manufacturing capacity secured for the Screwfast grillages in a new facility we opened up six months ago that allows us to grow for three years out. So we've been doing quite a bit of a preparation. Great. Super. Ben asks, with the increased order book and strategic partnerships like the one with VOLKA vessels, what specific initiatives are you prioritizing to translate this momentum into the targeted 6% to 7% underlying operating margins and 15% to 20% ROCE in the medium term?

33:16 Can we turn that on? Yes. Okay. Yeah. Well, I I think and there's two parts there. The the the biggest the the two most important KPIs, we've got a six to 7% underlying operating margin and 15 to 20%. Rocky, I'll take the second one first. I think you touched on that a little bit earlier. We are I mean, clearly, there's two things we can drive here. One is to improve the profits. And I think if you bridge from the challenges that we faced over the last twelve months, particularly around Canada and the Building Safety Act issues, you can you can bridge to a much healthier looking, operating profit number. So the numerator of the ROCE calculation. And I've already touched on the areas that we're looking to reduce our capital employed, is, you know, the biggest one of those will be outsourcing of the transport fleet.

34:03 But we're also looking at low utilization assets and and and reduce that number overall.

34:09 We have had a growing rig fleet in recent years. We've gotta make sure now that we can review that rig fleet and make sure we've got the capital employed in the highest utilized and best returns assets across the group. In terms of six to 7% underlying operating margins, so the second part of the question. Well, a lot of this is around, firstly, some of the markets. It's it's volume, really. It's about the markets coming back and getting behind us. We have such a high fixed cost base because we carry so many assets that when when revenues, drop off, we we do feel a bit of pain. But the converse is also true that actually we've got enough assets and people in our business to deliver 200,000,000 of revenue. If we can get somewhere towards that, you start to see a very quick leverage of the cost base. And and and I think that will be supported as well by the, you know, the most exciting areas for this business at the moment are in the energy sector and water sectors. And because that's a high highly skilled subset of our business, you tend to see strong gross margins being delivered. So we get a positive mix impact as well.

35:16 Yeah. Right. And and you mentioned the the transport outsourcing. David asks, how is the transport outsourcing going? Very well. I'm very pleased with it. Yes. I think we've chosen the right partner at the right time. Right. Okay. Super. Another question which focuses on housing. Beyond the direct impact of the Building Safety Act, what are the primary lingering impediments preventing broader government initiatives from stimulating a more robust and immediate recovery in house building volumes?

35:51 Do you see green shoots in this sector? Yes. We do. Our inquiries are up. Our order intake is up. Our average order size is up in housing, which is probably a very important measure because what's been happening is that house builders have lacked confidence to proceed with projects, not only starting, but proceeding, you know, at pace, at and at scale. So they've kind of drip fed the plots according to how quickly this of course, this is what you do, how quickly you can sell them. And and so we might do a few here and a few there and then come back, which is a bit of a nightmare. We're we're noticing the house builders are now more confident to release the entire scheme and get going as well as more schemes.

36:45 So we're we're feeling cautiously optimistic. We're not at the levels yet that we've seen in earlier years. So it's it's almost a no brainer to figure out that we will return to those levels relatively soon, albeit it might be next year or this year, and then go beyond that. Because if you look at historical house building volumes, we've never reached the levels that are being planned and promised by everybody. And so when we do, we're going to outperform earlier years. There's no reason not to. This the the products that we offer are as desirable today, if not more desirable, because of build speed, off-site manufacturing credits, lower resources needed because, you know, you're not so labor intensive. There's a resource shortage in housing and construction, etcetera, etcetera.

37:38 And more sites are gonna be complex sites. They're gonna need ground engineering solutions in the first place because if they didn't, we wouldn't be involved. You know, not gonna be so many easy greenfield sites around. It could be more brownfield and gray gray gray zone sites. So I don't know if that answers your question, but we we just need house builder confidence, and we we have the customer base with those house builders. One or two of them, we do nearly all of their work. We just need them to be more confident to get sites moving. Great. Super. Keith asks, there is currently significant hiatus in the water sector. Both government and the media have been very negative views on the management of all water companies.

38:23 How is VAN ELLE approaching industry, and what is the likelihood of delays to projects, and what steps are being taken to ensure that serious external scrutiny doesn't negatively impact on the company? Yes. Water companies are under a lot of pressure, but their their investment programs in their in their infrastructure are pretty well set now. And, and in my opinion, very unlikely to be reversed, or reduced, much more likely to perhaps be added to. Though those those construction programs are getting moving.

39:10 So they are going through the process of prioritizing projects, getting design started, and getting getting getting onto site. All their framework contractors are appointed for AMP8, sometimes for longer. The relationships that we have with those guys are set very well. We're starting to see early projects coming through for AMP8. We've got a range of solutions a bit like I described in energy that are going to be very helpful to help those be built faster or, cheaper or with lower carbon, which is also increasingly important for for those, business cases to be signed off project by project. I'm really not expecting the political changes to regulators and water company corporate, matters to affect the infrastructure delivery programs of of now being pretty well locked in, unless I'm missing something.

40:09 I think I think we should be okay. And I'm not expecting any scrutiny or problem regarding our work in this area at all. We we you know, all of our pricing is competitively checked and what have you. We're we're fairly happy that we are not likely to be affected by anything like that. Great. Super. Joseph asks, on energy, of the 40,000,000 revenue signaled in financial year '27, it sounds like some of this could be services work, which is capital light. Roughly, what proportion of the 40,000,000 is likely to be the services based work? And do your margin and rocky targets now hinge on this energy work, or can these be achieved without this skew to energy? So the proportion of work that we will do in professional services will be $55,000,000 per annum. So, enough to make a difference, but but not gonna materially change the the the outcome beyond the targets that we've already set for ourselves.

41:17 All of the work we do in energy is gonna be in the higher margin parts of our business, I either strategy or techniques or ground investigation business, which you'll be doing 5 to 10,000,000 per annum in energy, or specialist piling, which is a combination of specialist piling overall plus Albion plus Screwfast. They will sit in the same basket of of of of that division, which is all at margins in the 40 to 45% range, upper upper end of our general sort of range of things. So, yes, it makes it makes a big difference to the achievement of our targets. Joe, if you're asking, if all of that goes to plan or or or ahead, can we outperform those targets? Yes. That is that is achievable.

42:11 Great. Super. Thank you. Philip asks, encouraging order book increase between April and June, which end markets have provided the uplift? It it is it is across the board. We're not we're not seeing we did see an increase. I'll I'll I'll sort of quickly run sector by sector. We we did see an improvement in the order book in housing during the towards the end of the first half of the financial year. That, as I mentioned earlier, weakened towards the towards the back end of the year, and we sort of ended up almost where we started from. It's been in the last couple of months we've seen a little bit of recovery in housing, but the growth that we've reported is is is is relatively flat in in that area.

43:00 I think the growth areas where we've got I haven't got the statistics to to hand. I'm happy to put some some notes in to respond to this a bit more accurately. But, I mean, effectively, we're talking about a complete absence at the end of last year of of larger contracts. So typically, in the sort of industrial space, it's a support services, the, you know, manufacturing. Not none of that really. We we had a a complete absence of that of those types of work in the previous financial year, and, obviously, the order book that was brought forward was missing those as well. So when we report a 53,000,000 order book today, that includes a one one large contract, which we're on-site delivering and we've talked about, but a number of others sort of in the rage, you know, sort of between 1 and 5,000,000, which we just didn't have in the previous financial year. And that really is a sweet spot for VAN ELLE. So we we we certainly are a business that's very agile and delivers lots of contracts of low value.

44:01 But when we can get high high production capability on-site for jobs that are, you know, in excess of a million pounds, that's when we can do very well because we can really use our skills, our people, and our kit to to get very good site efficiencies. But I'm happy to provide a bit more detail after afterwards if necessary. Super. Thank you. A number of questions on Canada, so I'll string those together if I can. John asked, with respect to Canada, has a decision now been made to close this business, and will there be further terminal losses in 2526? Well, a decision has been made to discontinue the business, and we're in discussion with several parties about the best way to achieve our objectives in in that respect.

44:55 There there will be before we complete that deal, hopefully, there will be some there will be some additional discontinued cost that that sit in the FY '26 accounts, wouldn't it? Yeah. Great. Okay. So this leads on. So Marcus then asked, Canadian rail operations are in the accounts as discontinued operations. What date did this on the ground operations cease in this subsidiary? And, clearly, it hasn't as yet. It hasn't yet. No. No. We haven't ceased operations. We've we've simply announced that it is to be treated as discontinued because that is that is the outcome of the review that we're doing one way or the other. Indeed. Yep. So David asked, if you do liquidate all assets and liabilities in Canada, what will be the total loss in Canada? I'm confident of the management and prospects for the company. It's just Canada I worry about.

45:44 Yeah. Well, I think quantifying the the the future potential losses is difficult because we're still in the middle of a strategic review and looking at all opportunities to get the best outcome for the for the business. What we have got in Canada is a a set of I mean, our Canadian business really is made up of some desirable fixed assets, which which I think are we're we're confident so that the market value that's they could we could achieve for them is is is is is at least as good as the book value. And then some working capital, which ordinarily you would expect to fully recover. The other thing we've got in Canada is a future opportunity with frameworks and arrangements with with with Metrolinx and on express where that that should carry some value. So as part of our ongoing discussions, we're looking to maximize that value and and minimize any further write downs. Of course, that's all subject to the strategic review and the the outcome of that.

46:47 And as Mark's mentioned, we've got ongoing discussions. So a bit too early to say what that could look like, but a bit more work to do. Hopefully, we'll have we'll be able to provide a more thorough update within the first half of the of FY '26. Great. Thank you. James says, bought into VAN ELLE in part because of the upside presented due to Canada. What lessons have been learned from this experience? I could write a book. The biggest lesson, I think, is we should have set this up with a Canadian partner. Despite our niche skills being unique, we found it very difficult from such a distance to manage everything to do with a new business in a in a in a in a in a a different country as a as a as an as an ongoing business. We went, of course, to do one big project that was massively delayed almost the minute we turned up.

47:46 You know? Do I kick myself for not, you know, doing even more due diligence with the customer for a lot longer period before being certain that the the the things were not gonna be delayed. Of course, I do. And if I'd known that, we we wouldn't we would've we would've been more cautious before sort of committing a team and and getting going, but but we were badly let down in that respect. So there's two two big lessons. Great. Thank you. Gavin says on BSA, there are several thousand buildings needing review. Is your work on new build, not retro? Yes. It's all new build. Yeah. Okay. Martin asks, a number of housing industry experts have doubts that the government volume targets are achievable because of a lack of capital, skilled labor, etcetera. If the increase in house builds doesn't eventually match the government's ambitions, can you still hit the margin targets? How do you think about the risks around the different potential house build volume scenarios?

48:51 Yeah. Well, I agree. There is doubt that that the industry will hit those sorts of levels. The good news is we don't need to to deliver the the returns that we need expect in terms of our overall objectives, KPIs. So if we return to the levels of FY '23, we we we presented this in a previous set of results, actually, then that that alone delivers what we what we need within our business plans. The the chances are pretty high that would exceed those prior year levels. But we might not achieve the, you know, very, very high levels that have been set by the government. I I admit that, but we we don't need to.

49:42 And I agree. I'm not sure the industry can do it. By the way, our smartphone system addresses the problem of skill shortage because it, it modularizes the the entire foundation delivery. And that's that's the sort of conversation we're having with the likes of Barrett and others because it's a good opportunity for them to, you know, to sort of derisk that that the riskiest part of the project. Okay. Which leads a little bit into this next question, which we may have answered already, but can you give some examples of your innovation? Well, the the the the one of the biggest areas is the fact that we hold two of the the most highly recognized modular off-site manufactured foundation systems in in in the industry. One is the SmartFoot system for housing, which you can also apply to to other sort of repeatable low rise buildings.

50:36 And the other is Screwfast. Smart foot, by the way, is precast concrete. Screwfast is structural steel, which is also an off-site manufactured modular foundation system developed historically for rail and highways. It's now become under our ownership the default foundation solution for motorway gantries just in time for the whole of the Smart Way to Way program to be canceled, but is now becoming a very similar default solution for substations and water treatment tanks and dosing stations and things, which is what we've been working on. And so there's two there's two for you. You know, off-site manufacture is is is increasingly important in construction, and not really anybody else does it for foundations and and piling. Great. Super. Thank you. A couple of other last questions. Are there any changes in industry technology that can help raise margins?

51:35 Good question. I have to think about that, to be honest. K. Construction industry is not known for it's eye catching technology, I have to admit. But the things I just mentioned, let's call it innovation, certainly certainly do. And and I think we we we would have a lot of examples that will enhance margins that we'd call innovation. Yep. Great. Okay. Last question from Martin who's been busy on the keyboard today. How do you handle variability in the manpower workload requirements when there are gaps between projects? Well, that is a constant challenge, Martin. As a first as a first plan, we we move people around now very seamlessly between our different divisions. Everyone's co located here in Kirkby. It works very well. Our operational managers meet every week to move resources from different parts of the business. We've multiskilled a lot of people to enable that to happen more easily, and they like it.

52:35 If that doesn't work, unfortunately, we we have flexible terms agreed with the guys to stand down for short periods of time within their employment contracts, and we try to minimize that and share it around. And failing that, we we downsize our our our number of employees, which we've done this year as well. We you know, we're we're 50 headcount down on on this time last year. You know, to resourcing and managing of resources is a is a a big task for the teams out here because we directly employ everybody. We don't use agency work workers. I'm dead against this model of using agency labor to, you know, deliver construction projects. I I hate it. I think it's a flawed model.

53:23 We don't go down that road at all. Some of our competitors do. We we won't. The standards that we get in safety and delivery and performance are so much higher with our own own teams, and they'll they'll go anywhere for us. We're very proud of them. Great. Okay. That's super. Many thanks indeed. Thank you, Mark Graham. 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 vanl@warbrookpr.com. Many thanks for attending today's presentation. Thank you.