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

0:03 Good afternoon, ladies and gentlemen, and welcome to the VAN ELLE results presentation. And before we begin, we would like to submit the following poll, which you will see on your screens. And 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 WALTBROOK PR dot com. The company may not be in a position to answer every question it receives during the presentation. However, the company will review

0:33 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. I would now like to hand you over to Chief Executive, Mark Cutler and Chief Financial Officer, Graham Campbell. Gentlemen. Thank you, Tom. Good afternoon, everyone. We'll get straight into the results presentation. So a challenging first half of the year, perhaps no surprise to anybody on this call. Most of our markets are suffering from some form of delay or investment constraint.

1:19 And and in the round, we believe we've delivered a pretty resilient set of results because we we've got capacity to do so much more. But early signs of improvement in several areas, and we'll we'll come on to that later. But we've already reported during the in fact, you know, for some time that housing is already starting to to move steadily forward. And, before we finish this financial year, we believe we'll be at near near capacity in our in our housing division. There's been, we've had several questions about the rail sector, so, it's worth just reflecting that the the dip between control period six and control period seven was always going to be, a challenge for for all contractors in the sector. We're we're we're no different, but we we the actions we took to diversify our position in rail, including a major project on the Trans Penine route upgrade, has has meant that we've come through that relatively unscathed, and and we're saying is now seeing growth in in rail. Again, I'll touch on that later.

2:24 And we have, contract awards coming through in our growth sectors, that started to happen in the period and have and have continued into the into the second half and and fill us with a lot of confidence going forward. Again, more detail on that towards the end of the presentation. Overall, revenue was down slightly, you know, disappointingly. We've rightsized the organization accordingly because, you know, we were not so long ago. We're you know, doing a 150,000,000 per annum, and we we think we'll go back through that, soon enough, but we've downsized anyway. So we're running, you know, a lot leaner. Gross margins have held up,

3:02 and sometimes that affects is around work mix, but also that's a reflection on operational, delivery performance. You know, very rarely do we have a a significant operational problem, touch wood. You know, we've got a good team in place, and they they've been long serving and and well established in the business now since the changes we made five or six years ago. And EBITDA's flat. So that's a reflection when you when you look at our operating profit down, slightly and our margins down slightly, a reflection of additional depreciation in the business. Partly due to the acquisition of Albion, at the end of the period, Albion Drilling, a leading Scottish specialist piling contractor, fits very well into the group and is already helping us with local presence, local knowledge and relationships, and resourcing for some of the growth opportunities in energy, in particular, north of the border.

4:02 And we've we've confirmed a 0.4p interim dividend. K. Thanks, Mark. So I'll just take the usual run through our our financials. Very quick summary there of the sectors that we're we're operating in. 2810000043% residential. That's a combination of new build housing, so foundations for residential housing, plus an element of that is also the sort of taller schemes, so taller resi buildings as well. In infrastructure, historically, we've had exposure to rail and road. And and and more recently, we've expanded our capabilities and really focused heavily on energy and water sectors, and they're forming a a reasonable level of our 40% of total group revenues in the first half.

4:54 And probably excitingly, those two sectors, residential and infrastructure are the two areas we see real potential for growth, which Mark will talk to on some of the upcoming slides. In regional construction, a subdued period only representing 16% of total group revenues, really reflecting some of the challenging conditions that we're seeing out there in the market, the extremely competitive pricing that we're seeing, and a little bit also down to lack of work partly through some some delays to contracts that we've got in our order book.

5:33 P and l, not a great deal to say here. I think relatively self explanatory and driven by the, 4% reduction in revenue that, that Mark just touched on there. I think very pleasing to see the the margins holding up strongly. And if you were to look back four or five years, you'll see that that's shown quite a positive progression, over time, currently at 30.9%. And that's partly impacted by, a favorable mix, so an increased proportion of, higher margin works, particularly in the infrastructure sector, and and and arguably subdued work in our slightly lower margin work in the in the residential sector. But also operational performance, good operational performance really right across the business, showing it further progression there.

6:21 Mark's already mentioned the flat EBITDA performance. We've got a relatively small number of non underlying costs in the in the p and l. Cost of acquisition, we acquired Albion Drilling at the end of October, and that came with a modest level of legal costs. And as Mark touched on, managing our cost base, so there has been some continued restructuring to make sure with their absolute right size as the business and the market start to start to come back and recover. So we've cut costs reasonably hard this year, this half, and that sort of changed the run rate from the exit the exit run rate from the previous year. We will need to resource up again as the as the market start to come back.

7:11 In terms of business structures, the three segments that we report against general piling, specialist piling and rail, and grand engineering services just touch on these briefly. Clearly, in in general piling, that sits right across our three end markets, and the markets have all been challenging in their own ways. Rock and Illuvium, our acquisition from Gallifertri sits within this sector and and has suffered as a result of primarily the the Building Safety Act. We've got approximately 40 contracts where we're in negotiations, with with customers, all being held up because of, delays to the BSA.

8:00 And that's about delays to getting planning approval to get on with the work. Rock and Illuvium also have about £10,000,000 worth of work in the order book, and and a substantial proportion of that is also being held up by, by by delayed planning. So a real challenge for our industry at the moment, and we're doing what we can to lobby government, and and get get these unlocked. But once they do get unlocked, we'll start to see a real throughput of of that work, coming back through. So the challenge here is more about delay than than than a lack of work. But across general planning there, you can see the the the drop off in revenue has has come flow through to reduced operating profit number in the period. Specialist piling and rail, a bit of a mixed bag here.

8:48 Specialist piling coming back very strongly, certainly towards the end of the first half, and you can see there's some positive uptick in the revenues. Rail, Mark's already touched on this, so I won't go into any detail. But we are finally starting to see some revenues coming through, which is a little bit of an upturn in c p seven. But the the important point here is that we've got a a bedrock of work through Transpana route upgrade where we're on a the framework there, and we're still continuing to do works work in the rail station sector, which we've got a a long track record of doing. So pleasingly, this is heavily exposed to the infrastructure markets. It's good margin work. It's good specialist skill techniques. And you can see that with a slight uptick, we've got a healthy return and improvement in our operating profit numbers.

9:41 Grand Engineering Services is largely the SmartFoot. So it's a housing business, a housing division with some some work from Strata, which is our ground investigation division. Clearly, you won't be a surprise to anyone to see the the drop off in revenues half one versus of last year versus this year. Half one benefited last year benefited from some changes to the building regulations. And what we saw in the first quarter of the prior year was a real acceleration of activity in the housing sector, and we benefited from that for two to three months of the year. Since then, though, since really from August 2023, the market has been very difficult in housing. Low much lower volumes.

10:28 Obviously, this is widely publicized with the with the house builders. And and I suppose the story really is that we're slowly starting to see this come back. I don't think the market's at the level it will be. I think we'll see continued improvement, but we are now seeing much stronger orders. Our order book in housing has gone from 5,400,000 at the end of April last year to just over 11,000,000 at the end of December. So much more inquiries coming in, and we've now got a relatively full order book, which will see us right through to the year end. So we expect to operate it close to capacity for the remaining four months of the year in our housing division. Strata, seeing the impacts of the more challenging market as well. But, they've got a relatively full order book now to take them through to the end of the year. So a a very difficult and challenging first half in the in that division resulting in much lower operating profit, but but a a fairly optimistic outlook,

11:24 both in the housing sector and, and GI. And GI usually bring being the precursor to the market improving. So we start to see an uptick in activity in strata. Usually, the piling divisions tend to follow. In terms of the balance sheet, again, relatively self explanatory here. You can see the upturn in fixed assets, and that's primarily through our continued investment. We're we're focusing on investing in rigs where we can get high utilization, high return, but also the acquisition of Albion drilling right at the end of the period, bringing in 2,700,000 of of assets into the into fair value. The working capital, we've seen further growth here. Nothing really worrying.

12:11 I will just note that we've got a delay to the r and d tax credit payment. Very standard at the moment, I think, is that there's a lot of inquiries going on. We to give you some comfort on this, we outsource the the r and d claim with the with experts who do this, you know, do hundreds of claims every year. So this is a standard inquiry, but the the return times for HMRC to complete their inquiries is on average eight months. So that's caused a bit of an upturn in in our our working capital, about 1.3 to 1,500,000 of our working capital is sitting there waiting to be waiting to be settled. So nothing particularly worrying in working capital. We still do very well with our debt collections. We have very low levels of bad debt. So I I think that's that's all fairly sensible.

13:01 Net debt has declined. Oh, sorry. Our net funds position has declined as you can see. Again, of course, we've continued to invest in the fleet. We've continued to invest, in m and a, and that's caused some of the cash to be to be used up, over the period.

13:19 The deferred consideration that remains is the final payment on Rock and Illuvium. That's now been settled post period end. And then we've got some remaining amounts to be paid on the Albion acquisition, which we've for cash management purposes, we spread those out over the next over the next twelve months or so. I suppose importantly, there there's a breakdown of the net funds position. You can see there, cash is sitting reasonably healthy, modest amounts of higher purchase. So we've remained low debt to the end of the half year. And IFRS 16 lease liabilities stay have stayed broadly broadly the same. But importantly, we still have the 11,000,000 facility with ABN AMRO that's that's available to to give us that headroom that we we need. The next slide is just simply the usual cash flow you can see there. I think I've touched on the key points though, which is given the market conditions relatively healthy operating cash flow, the working capital increase I've talked about, You you can see the continued investment both in m and a, and and capital, and, of course, the, the dividend payment there. So, hopefully, that's all fairly, fairly self explanatory bridge.

14:28 Thank you, Graham. I'm gonna talk now about some of the growth initiatives and answer the question of how do we go from a 130 to a 140,000,000 up to 200,000,000 over the next two or three years, which is what our consensus forecast would indicate. And as you'd expect, we've got a plan behind the scenes to to to do more than that. It won't all come off, of course, but, we're we're still happy with the forecasts that are are are published. This is a deliberately, you know, slightly opaque comparison of the relative growth rates from a a baseline position in f y twenty five of our of our key sectors that we've we've touched on already in some part. And you can see the relative size of those as well in in the group. So the the first the first f y twenty five bar, you can take that as being f y twenty five revenues.

15:33 And so circa $1.30, $140,000,000, and then the the light blue bar on the right accumulates to, circa 200,000,000, by f y twenty eight. And that's how we get there. And different different dynamics in all of those sectors, different speeds and challenges, and opportunities. But, there's there's two or three things worth pointing out. First of all, in residential and housing, you can see what an important part of our business this is. You can probably there visualize the the delays in the building safety act that that we mentioned and what that might do going from f y twenty six onwards because I don't think we'll see too much in the balance of f y twenty five coming through, unfortunately. And then you can probably also visualize the growth in domestic housing and the smart foot impact of that for for new build housing as we as we as we our capabilities, which we'll need to do to keep pace with what we think the market demand will be.

16:36 So good solid growth rate of growth in in housing and residential touching on two of our divisions primarily. The energy sector is is is is is growing fastest of all of our sectors from a reasonable base in FY twenty five. We we already have, 20,000,000 of awards in substations and other non Asti related infrastructure in in in the last twelve months. And we've, we've announced on top of that the wood framework in the last few weeks, and we have two or three others that we expect to put in place behind that. Those those start to ramp up very quickly from from 2026 onwards. Initially, there'll be grand investigation and design, then we go into the full blown construction.

17:24 This is why we needed, resources in Scotland because a lot of it starts in the Highlands and then works its way down the East Coast as you get into other programs. Water starts from a particularly low base and grows, you know, more than steadily.

17:39 This is, supported by our partnership with Gallifrey Tri and others, where we are being embedded early with with unique capabilities to redesign their their traditional sort of approach, that's been that's been they're crying out for change and and and modular approach to foundations. But we have a breadth of capabilities again that works very well in the water sector, and the spend, of course, from AMP seven to AMP eight is is significantly increased. I'm very happy with where we are going into AMP eight, which starts in April April next year properly. Of course, all the all the water companies and their contractors now know what they've got to spend and are getting on with allocating the work and and starting the the the priority schemes. Rail, is steady growth, and then we we've we forecast that getting too carried away that we'll we'll reach a peak in C p 7 where perhaps we may be capacity constrained given that a lot of this work is is weekend focused, and there's a limit to how many resources we can we can put at this unless we see big electrification schemes come through that have midweek working. So high margin, we'll make the most of it. We we think we've got plenty of opportunity to to continue growth for next next three years. Highways is flat.

18:54 Spending highways is is challenging. We've now seen the the completion of our works on the Smart Motorway Alliance, which has been very, very good for us. I'd hope for it to be massively bigger than it has been, of course, but no new ones have been built. But the retrofit programs have gone very well. We've performed excellently, but we finished them. And this now gets replaced by discrete regional projects with our typical tier one partners. Again, Galliford Tri feature strongly here, and and and one or two others as well. And we have a good pipeline of those schemes. And then building and industrials is going to grow because of commercial build. See as interest rates come down, we'll see increased confidence in this area. And industrials, logistics, manufacturing, and data centers are all expected to be growth areas, and we've we've widened our capabilities and partnerships to take more advantage of those going forward, and and increase the the scale of our precast factory, which will help as well for big sheds.

19:56 And then I've got a couple of slides that just I don't need to go through all of these in detail because I think I probably touched on it. But there there, you can see a summary of of the dynamics in housing already nearing capacity in q four this year, which is which is interesting. And then we we need to expand capacity to keep pace with the opportunities ahead of us. Previously talked about our partnership with M and J Evans that's starting to yield opportunities to embed with customers a bit earlier, and help us expand into the Southwest as well. There are there are distinct advantages to our system. It's probably worth mentioning that help with the growth in housing starts and, you know, more more more sites needed to get built faster and and opening up work fronts where there's resource shortage in the industry because because, of course, this is a modular approach that speeds things up. So we do expect smart foot to become more popular in addition to housing

20:59 growing in terms of volumes, if that makes sense. So so we we feel like we we, you know, feel like there are good opportunities for us to to grow our position as a as a housing market improves. The energy sector, there's there's a a a diagram of all number of different transmission lines and interconnectors. Lots and lots of big substations dotted around as well, which is a a key area for us where Screwfast is increasingly popular. We've already, you know, on we're on several schemes now, and we can see some big frameworks here. We we have a £200,000,000 target pipeline. This isn't just everything that we're aware of. This is with customers that we expect to convert some or all of those opportunities in partnership in due course, whether we have to share them with other other partners because we won't be awarded everything solely ourselves.

21:55 But it's, you know, really is a very exciting pipeline of growth for us, and we've got off to a a pretty good start with Wood. And that will, we think, with them, into another one. And there were two or three others like this not far behind, hopefully, over the next six to nine months that we'll be able to announce as well.

22:13 I've mentioned the acquisition of Albion, which was which was, you know, designed specifically to support us given that a lot of this work will be initially in the Highlands. In water, we again, I've touched on the growth between AMP7 and AMP8, our partnership with Galliford Tri. You can see on the right hand side what a typical water treatment plant looks like and the modular structures and the different techniques that are needed to to deliver, you know, a lot of this work during AMP8. And we've got the breadth of skills that help us help us with that.

22:49 A lot of this work is early contractor involvement where we get embedded at an early stage and help redesign the foundation solutions to something that not just suits us, but is more efficient and and differentiates us. And and those partnerships are Galliford's a very important one, of course, and it's a key part of their growth. We will do all of their ground engineering work, I hope, in this in this area, but we have two or three others that have a similar intent towards us that that that we expect to to to make progress with.

23:23 And in rail, CP seven spend is is is slightly more biased towards our strengths than CP six. There's there's a lot more sort of drainage and climate change related infrastructure works that are needed. We've got a good diverse portfolio, including TRU, as Graham mentioned, but also, big stations and and Canada. The, the works that we've started so far during in this period of of of we're happy with. We started our ten year framework in the Southern Region with network rail. Albeit slow, we can see the opportunity, and and that is that's the biggest framework, longest framework we've had ever in the rail sector, and it hasn't really even got properly started yet.

24:12 In Canada, we we're we're being we're a bit more cautious than perhaps six months ago. We've seen further delays to the the the big major program that we mobilized for disappointingly. But on the on the other hand, we've been very successful at securing frameworks direct with Metrolinx for other associated works. So we're kind of, you know, we're we're in a stable but not yet fully profitable position. We're sort of roughly breakeven. And, you know, we know I wanted to be making a bit of a profit this year, but I don't think don't think I'll be able to do that. But we won't be repeating the scale of the investment losses that we made last year. And we're gonna review after after this quarter, really, how how the landscape looks, and we'll we'll go from there.

25:04 So all in all, we're we're we're absolutely continue to be very optimistic about the future. Fully appreciate that it there's there's always reasons why things are not moving forward as fast as they should be. We are in a very challenging market right now. I don't think there's any doubt about that. I think we're coming through through quite well, if I'm honest with you, and the and the growth opportunities ahead of us are are are fantastic. I think we've positioned ourselves really well for those. I've run through them in in in enough detail, hopefully, to give you all a a good update as to as to what we're up to. We'll continue to make bolt on acquisitions where appropriate to help us accelerate things, but we won't be building up significant debt in doing that. We're trying to fund this through the way we structure it and through our own cash reserves.

25:53 Our order book is already up materially, and we expect to see quite a bit of that delivered in q four, which is gonna help us with the second half weighting that, that's implied in our in our, confidence that we're gonna hit this year's results. And we're certainly confident of of hitting our medium term objectives in the time frames we've laid out.

26:16 Thank you very much. Great. Alright. Well, thank you, Mark. Thank you, Graham. If we turn to the questions, we have a number of questions, but please do continue to submit your questions using the q and a tab in the top right hand corner of your screen. If we could start, Lawson has submitted a couple of questions. His first is, you state that cost savings have been implemented, but admin costs are up 4.5% on the comparative period in line with inflation. So where are the savings? Yeah. That's a good question. So there's a number of factors at play here. If you compare to the

26:55 previous half year, you're absolutely correct. But two two things happened in the second half of the year, which increased our run rate. So if you look at the second half of the previous financial year, you'll see a ramp up in our overhead cost base. One of that was because we acquired Rock and Illuvium and brought in their run rate of overhead costs. And the second part was that we were seeing increased confidence in the market, which pre pre and post general election, I think, was dampened. So if you look at our end of the previous financial year in April, we saw very, very strong ramp up in activity levels. That unfortunately wasn't sustained, and we were gearing up to to really go for it. Of course, the market's been very subdued. You've seen across many of our, many of our competitors, and and our customers.

27:44 So therefore, what we've done is we've taken steps to, reduce that cost base. So if you look at the run rate in the second half of the previous financial year versus the first half, you'll see a you'll see a relatively healthy reduction. And that's even taking into account the inflation inflationary increases that we've seen. That's reduced our overall cost base. We've continued to do that. We continue to do that even into the second half, so we'll we expect to see some further reductions. But I think that puts us in a much better place for the level of revenue that we're currently delivering.

28:18 Super. Thank you. And another question for Lawson. Good improvement in specialist piling, but the other two divisions have shown a reduction of 2,800,000 in operating profits on a drop in turnover of just 5,800,000. Seems very high. You refer to issues with strata, but given the quantum or color, are these issues ongoing? Are the loss making margin on these two divisions is just 1.9%?

28:45 So could you add some color to that? Yeah. Look, again, a good question. I think there's, again, a few factors here to mention. One is that, yes, you're absolutely right. A drop off in operating profit is disappointing. But in a capital heavy, you know, capital heavy business where we've got fixed fixed overhead costs, a drop off in revenue can hit the bottom line quite quite severely. We're we're not operating at the levels we need to be to deliver those those higher returns that we promised. Now we think the market's coming back to allow that. And what you'll see is that on relatively modest increases in turnover, you'll see that profit come back relatively quickly. You are right that we know the strata contract.

29:34 The reason that we haven't put any quantum to it is it's a it's a challenge that has brought the blended margin down. It is very, very rare for our business to have loss making contracts. I'm not saying they don't happen, but I I can't remember the last time we had a significantly loss making contract in the business. All that's happened here is we've got a large proportion of our strata business, had a had a decent sized contract that normally would deliver around 50% gross margin, and in this circumstance, has delivered around 20% gross margin. So we were, as a business, disappointed with that performance, but it's it's brought the blended margin down rather than caused us a major problem for the future. The contract is finished. We're in final account negotiations. We've made sensible provisions in the balance sheet, so I don't think there's any ongoing issues there to talk through.

30:21 Okay. And talking on provisions, a question here. Provisions at the 04/30/2004 were over 8,000,000, but that seems to have reduced to under 2,000,000 at 10/31/2024. Where has this reduction gone? Yeah. So we've got a most of this was in our in the in the public domain through our r and s releases. This is a legal matter that has been in relates to a contract dating back to 2012. It was a insured matter, and therefore, the balance sheet was grossed up. So So what you would have seen is an increase a a a gross within the balance sheet within our debtors, but also within our provisions. And that was effectively to show the amount that we expected to come in from our insurer and then paid out to the customer. This is a a contract 12/12 at least twelve years ago. This was well before our time that we we failed to deliver and have been going through the legal challenge ever since.

31:32 Very pleased to say, and we did put a note out on this, that the matter was closed off. I think it was in May. I need to go back and check the exact date. Within our insurance limit and and is now fully settled. So as a result of that, at the end of the year, the at the end of the last financial year, the position was still in play. It wasn't settled until post year end. We've now netted down the balance sheet, so there's nothing particularly sinister there around the movements in provisions. So thank you. John has a question on the HMRC r and d tax claim. Given the delays in HMRC r and d tax claim receipts, do you foresee any further impact on working capital, and what measures are in place to mitigate such risks? Well, yeah, if working capital in general, no.

32:21 I I think we've got we've got the normal procedures in place that you would expect to have, which is around, you know, debt collection, managing our payment terms, all all of that sort of stuff is is is robust. I think the question is specifically around our r and d position. This is a standard inquiry, that HMRC are now becoming far more active in, particularly in the r and d space and particularly for construction companies. We employ an external expert to do our our calculations. They do hundreds of these or they have done hundreds of these claims. They're a reputable business, who who specialize in this. We are probably two thirds of way through that inquiry. It's not unusual, of course, for HMRC to query taxes, claims, etcetera, and this is just a standard inquiry rather than focusing on it, anything that they see as a particular problem.

33:15 We are working with them to resolve their queries. At the moment, I'm expecting that to be resolved, hopefully, in advance of the year end. But normally, you wouldn't expect HMRC having gone through a a query to then make further inquiries unless they find a problem. We're not aware of any issues that they found to date, but we it is certainly the case that they are being more aggressive in chasing down those customers who are not sorry. Those taxpayers who are not necessarily following the due process, but we feel that we have. I would say, we pay a a robust fee for a a professional service to do this claim for us. Right. Okay. So thank you. Paul asks, I'm I'm slightly puzzled by your confidence in meeting market expectations of 6,000,000.

34:01 Your paid for research analyst has cut his estimates to 5.5. He then adds that this downgrade might be temporary, but it's pretty unsatisfactory. What is the number? 6,000,000 or 5.5? Well, the the the the answer is that the analysts have formed a view. You may not have access to all of the notes. You'll find that Peel Hunt have remained and and kept kept their numbers flat. You'll find that Darget who've initiated have come in at a slightly a slightly lower numb a lower number reflecting their assessment of a number of factors, including what the economy is likely to do over the next few months and how how swift that recovery will be.

34:49 Zeus have looked to their numbers and kept those kept those flat for the current year. And and our paid for research, as you as you mentioned there, I think you're referring to Progressive, have taken a slightly more cautious view. So the range at the moment is 5.5 to 6,000,000 in a very difficult market. And I think that they are all taking a sensible view given the uncertainties around the the balance of the year. Our confidence is really about future periods and the all sectors that Mark just talked through look look very positive as we as we move forward. But there is no doubt that we are suffering from contract delays at the moment. And if they continue, that will cause us a challenge. But as we sit here today, we have got work scheduled and a healthy order book for delivery through to the end of the year.

35:42 Super. Thank you. On the point of the broker, why did you feel the need to appoint a joint broker? Do want tell him? Yeah. Go for it. Yeah. Well, I think there's a lot of factors here. We've got a number of investors who've been in with us since since IPO. And and if we're completely honest, the market has been difficult for the last five years. And if we're really transparent, the company underperformed post IPO. And we've got a number of those who are looking at their investment, understandably. Of course, they would be. And we've had redemptions in the market where shares have become available, and that's just a factor of the market mechanics.

36:34 And so we've been working very hard as a team to make sure that we, firstly, work with Peel Hunt to find a home for those shares, people who see the opportunity that VAN ELLE has. We've worked very hard on on on retail, make sure that we've been open through, whether it's mellow presentations or through through this forum to present and create that create that market for our shares. And Dowgate bring a slightly different approach to to to to their looking at investors. And so we felt that a combination of Peel Hunt plus Dowgate for a sensible, you know, sensible cost overall, we felt that might might drive a better performance.

37:19 What can I tell you other than, at the moment, we've got a very full schedule of investor meetings over the next three to four days, which we have not had for the last five years? Generating the level of interest has improved, and and and I and I think it'll be a I think it'll be a good partnership. Great. Thank you. John asks, if Rock and Illuvium are not trading very strongly, does that reduce the payments to Galliford Tri? No. It doesn't. The it reduces the the the price that we paid for rock and alluvium was you may recall, it was a fixed price deal with a deferred element to it. But it is important to note that the price that we paid was not greatly in excess of net asset value. So we felt that the price we were paying, we were effectively paying for the assets that we acquired, which is broadly their their their rigs.

38:18 And that that really backed the that was really the basis for the deal. Alongside that, obviously, we have a a trade five year trading agreement with Galliford Tri, and that's delivering healthy revenues over the over the year. So overall, they are finding life difficult at the moment because of the Building Safety Act, I but think once that unlocks, we'll get back to normal normalized levels of training. Great. Thank you. Ben asked, government spending on highways remains below expectations. How does this affect your infrastructure division, and are there alternative projects to offset this slowdown? Can you find that again? Where's that going? Yes. Well, reference my the the earlier diagram, we we expect highways to be flat rather than a growth area. That's not uncommon amongst peers and customers.

39:13 And we anticipate that the, the the other sectors mentioned, energy, water, rail, housing, will will, more than offset the, the flatness in highways with with the growth prospects that we're we're looking for. Okay. Okay. Super. Thank you. David asked, do you still get orders related to insurance claims, for example, subsidence, landslip claims? If so, do you have any idea of current volumes of this business area within the relevant sector? I I could take that one. I mean, it I suppose there is we so so typically, we we as a business, we are more about new projects than than responding to insurance claims. Insurance claims tend to be of a relatively relatively low value, not an area that we've we've focused on as part of our core strategy.

40:19 Yeah. However, do we do we get do we get to respond to landslip claims? Yes. Absolutely. That might be part of highways. It might be part of the rail sector, but on infrastructure, we would respond to those. Not typically linked to an insurance claim there, though that would be more about just delivering short term works for it to to respond to to particular issues. Yeah. Yeah. Answer. There's a there's a big landslip at the moment on the on the Manchester Metro that we're looking at, for example. And and we get called out to look at landslips in rail all the time as emergency projects. It's very much part of our sort of customer portfolio. Yep. Super. Thank you. John asked what is the anticipated impact of the recent budget on the company? Well, there's two parts to it, really. One is the the point that's impacting everybody, which is the NI increase.

41:11 And, of course, for those of you that have followed VAN ELLE before will know that we employ a we have a fully employed workforce. That has great advantages, making sure that we have a fully trained workforce. We that that that part of the team, we know exactly the people that we're putting on jobs. We don't use agency as a as a matter of course. Of course, that means that we are gonna suffer from the from the national insurance increase, and that is that is about 900,000 total. Now we will take steps to mitigate that. Naturally, everyone in our industry is gonna be looking at pricing as a result of this. We'll we're also obviously having a look at our cost base, looking at recruitment recruitment freeze in place at the moment. Only four key roles would we would we recruit, and we're having to be sensible around inflationary annual increases. So quite a an element of that will be mitigated, but absolutely, it's not, you know, it's not particularly helpful as we move into f y twenty six. The second part of it, I think, is just the the market confidence. Yeah. It has take you know, the market has taken a dent in confidence since the end of October.

42:19 I'm sure everyone on this call has has read multiple articles around how challenging the the markets are post post that budget. It was not a business friendly budget. And and and as a result of that, we've already touched on it, but we've continued to see delays. People customers are just looking at their contracts and pushing them further back down the track, and that has an impact on a subcontractor. But also public sector spending has been, you know Yeah. Obviously held back and is under review. HMRC claims are being delayed, aren't they? There's all sorts of things that we're we're we're we're seeing. Yeah. Super. Alright. There's a question here from Keith, but it may be slightly difficult to answer. So if it is, do do let us know.

43:04 In each of the sectors that you operate in, what is your position in the list relative to your competitors? You know, I don't know whether that's an easy one to address or not. No. It probably is quite difficult, but look, Keith, I I'm I'm pretty confident that we sit in the top three, and I'm saying that on a prudent basis in in in all the sectors that we operate, possibly with the exception of industrial warehouse sheds where where perhaps we would be top top five. But otherwise, you know, I think we're market leaders in in in a few, not least rail. Top two in housing. But yeah. So so, yeah, top three top three across the board and and top five in in in warehousing.

43:54 Okay. And guess that plays slightly into a question from Paul, which is your pricing power seems poor. What is your market share? And do you see some scope for price increases as your turnover moves to the targeted 200,000,000? Well, we think we we think we have 15% market share. My my chief operating officer is also the chair of the Federation of Piling Specialists, and we have a pretty good view of the the wider market. The pricing is quite aggressive because there's a there's a long tail of smaller regional piling contractors out there that that nip at at our heels on on, you know, in every in every corner of the country. And too many of our customers, unfortunately, still purchase on a lowest price wins basis, which, you know, the more the more enlightened of of moving away from that as capacity starts to become a concern. And that's what we're seeing in in energy and water. And we do see it in rail quite often. And and with some of our customer partnerships, we're not really pricing so competitively.

45:01 We're involved early, and we're we're perhaps negotiating work with benchmarking along the way rather than, yeah, at a a lowest price wins at the eleventh hour type thing. So that's how pricing power will will evolve. It's starting to evolve already as capacity starts to concern the, you know, the the upstream customers. They and they'll move to companies like us, stronger balance sheets, wider resource capability, more capability to get out of particular technical challenges that come along or provide alternative solutions, which is really what we're all about. Great. That's super. Thank you. Final question. You sound considerably less confident about operations in Canada than was the case previously. What do you think are the options for the business in Canada?

45:50 Okay. Well, look. I I'm disappointed with delays in Canada. I am. Because I've been out there, and I've kind of you know, it is a very, very exciting landscape, but there's there's quite a lot of politics going on at the minute in in Ontario. The the the options, we've got we've got several options. I'm probably not really feeling like I want to go through those today, but we are gonna go through them as a team and and and come up with with the right answer. But then we're gonna do that, you know, maturely and sensibly over the next few months. Yeah. Super. That's great. Thank you, Mark. Thank you, Graham. Could I ask investors not to close this session as you'll now be And if anyone has further questions or would like additional information on VAN ELLE, please do get in touch via vaneelwarbrookpr dot com. Many thanks for attending today's presentation.

46:42 Thank you. Thank you.