Kier Group H2 2025 Earnings Call Transcript

Quartr
Provided by Quartr
September 16, 2025

Key Takeaways

  • Positive Sentiment: Record order book reached £11 billion, covering 91% of FY 26 and around 70% of FY 27 revenue, underpinning strong multiyear visibility.
  • Positive Sentiment: Adjusted operating profit rose 6% to £159 million with a 3.9% margin, exceeding expectations and moving towards the 4%–4.5% long-term target.
  • Positive Sentiment: Net cash improved to £204 million (average net debt down to £49 million) and free cash conversion hit 125%, enabling a 38% dividend increase and a £20 million share buyback.
  • Positive Sentiment: Infrastructure Services revenue grew 7%, driven by water, nuclear and HS2 capital works, supported by framework positions worth £156 billion.
  • Neutral Sentiment: Property transactions rose notably in FY 25, with capital deployment in joint ventures aiming for a 15% ROCE by 2027 through disciplined project investment.
AI Generated. May Contain Errors.
Earnings Conference Call
Kier Group H2 2025
00:00 / 00:00

There are 7 speakers on the call.

Operator

Okay. We'll start then. So good morning, everyone, and thank you for joining our full year twenty twenty five results presentation for those of you who are here in person, and a welcome to those joining us today by webcast and by audio as well. I'm Andrew Davies. I'm Chief Executive of Keyr Group.

Operator

And somewhat poignantly for me, this marks my last Keyr results presentation. I'm joined today by Simon Kesterton, our Chief Financial Officer and also by Stuart Togwell, currently our GMD for Construction, who will become the Chief Executive on the November 1. So just quickly before we go through the results, Stuart, if I can invite you to introduce yourself to those who you may not have yet met. Stuart?

Speaker 1

Good morning, everyone.

Operator

I'm

Speaker 1

Stuart Togwell. I'm delighted to see you all this morning, and I'm really proud and excited to become the next Chief Exec of the KIR Group. I've worked in this industry that I love for over thirty nine years now, The last six years of which has been working closely with Andrew and Simon in KIA. Initially, I came in as a Group Commercial Director, where I introduced the risk management and the operational discipline that we still use today. The last two years, I've been the GMD for the construction business and I've also been a member of the main board.

Speaker 1

I'm looking forward to talking to some of you here in person after the presentation. But in the meantime, back to you, Andrew.

Operator

Okay. Thank you, Stuart. And let's move on now to our FY 'twenty five results. So firstly, I'll walk you through the highlights from the last financial year and then hand you over to Simon to talk through the group's financial performance. And this will be followed by an operational review, an update on ESG, and we'll finish off with our outlook and recap of the long term sustainable growth plan.

Operator

And then, of course, there will be an opportunity for questions and answers at the end. So working through the disclaimer, and we move on to the results summary and highlights. So starting with the highlights for FY 'twenty five, which is the first year of the long term sustainable growth plan that we launched last September. In the year, the group's order book grew to a record £11,000,000,000 reflecting contract wins across our business and providing us with multiyear revenue visibility. Specifically, the order book currently covers 91% of our targeted FY 'twenty six revenue and around 70% of FY 'twenty seven's.

Operator

Group saw continued overall revenue growth of 3%, which delivered an adjusted operating profit of £159,000,000 And this result represents a margin of 3.9%, which is above our own initial expectations and also progressing well towards our long term target level of between 4% to 4.5%. This higher level of profitability continues to convert strongly into cash at a rate above our long term target, leaving us with a net cash position of GBP $2.00 4,000,000 at June 2025. We also saw a significant improvement in average month end net debt for the year to GBP 49,000,000. So given the continued progress that our group has made, I'm pleased to say we've significantly increased our returns to shareholders in the year. We're proposing to pay a final dividend of 5.2p per share, representing a full year dividend of 7.2p, 38% higher than last year.

Operator

We also launched a £20,000,000 share buyback during the year, which, as we speak, is roughly 50% complete. Additionally, we increased the capital deployed in our Property business, where we're on track to deliver our long term target of 15% ROCE, thus further enhancing shareholder returns. So overall, I'm pleased to say, as leadership of Keyr now transitions to Stuart, that we're a business in very good shape. Our strategy is progressing well, driven by our great people and now underpinned by our high quality order book and strengthened balance sheet. We're progressing well to deliver against our long term sustainable growth plan.

Operator

So for what is now my last set of results, I thought it's worth reflecting on Keyer's track record of consistent delivery in the past few years and how that performance underpins our conviction in our ability to deliver our long term plans. In recent years, we've proved that we can deliver for our customers and shareholders alike. As you can see from these figures, we've seen significant growth in revenue, profits and earnings since 2021. This has been achieved with growing levels of cash flow and as a result, improvement in the levels of debt, whereby we are now touching in touching distance of reporting average net cash. At this point, I'll hand over to Simon, who will take you through the detailed financial results.

Operator

Simon?

Speaker 2

Thank you, Andrew. Good morning, everyone. Turning to Slide seven. This sets out our high level results. Revenue in the period, as Andrew mentioned, is higher than FY 'twenty four and reflects strong performance across the group, especially in the Infrastructure Services segment, which I'll cover more in detail in the next slide.

Speaker 2

We delivered an adjusted operating profit of £159,000,000 up 6% in the year and at a margin of 3.9% as we progress well towards our long term sustainable growth plan target of 4% to 4.5%. We continue to generate significant levels of operating cash flow, with net cash at the June 2025, as a consequence, materially improved year on year, rising to $2.00 £4,000,000 compared to £167,000,000 at June 2024. This performance includes a strong working capital performance as inflows follow revenue growth to normal levels, allowing us to deploy additional capital to our Property business, which will drive future earnings growth. In terms of average month end net debt, this has improved to just £49,000,000 from £116,000,000 in FY 2024. The group has also been able to significantly increase dividend payments and further grow returns to shareholders through the launch of our initial share buyback as well as invest in the Property business, as mentioned.

Speaker 2

Turning to Slide eight. I'll walk you through the group's revenue growth. Starting on the left hand side, you can see FY 'twenty four revenue of £4,000,000,000 Infrastructure Services revenue grew by 7%, primarily due to growth from Water and Nuclear, supported by continued HS2 activity. Construction revenue was steady with continued delivery of Justice projects. We have worked to increase the quality and profitability of our Keyer Places business, resulting in us exiting some lower margin contracts.

Speaker 2

Finally, for Property, we saw a significant increase in transactions compared to the prior year, although the positive impact of this is only seen in operating profit given the mix of transactions, with our property business being a return on capital business rather than a return on revenue business. So overall, growth was 3%, and if you adjust for property and the FM contracts, closer to 4%. Moving now to the adjusted operating profit bridge. We start on the left hand side with the previous year's adjusted operating profit of £150,000,000 Overall, volume, price and mix have resulted in an increase of £600,000 As we just mentioned, we saw an increase in the volume of property transactions in the year, which resulted in increasing profit by £6,000,000 Cost inflation was more than offset by management actions that delivered £11,600,000 during the year. These savings related to projects such as improving supplier onboarding, site setup optimization and Keyer three sixty and reflect the success of our Performance Excellence program as we demonstrate sustainable growth across our businesses.

Speaker 2

In terms of cost generally, it's worth reminding you all that more than 60% of our order book is made up of target cost or cost reimbursable contracts. And if we do choose to give price certainty to our customers, it's only done after key risks and opportunities are understood. The overall result is growth in adjusted operating profit of 6% to £159,000,000 and a margin of 3.9% and is progressing well towards our long term target of 4% to 4.5%. Adjusted items, including excluding noncash amortization, amounted to £26,000,000 in the year, pounds 1,000,000 lower than the previous year. The main element relates to fire and cladding costs, 17,000,000 in the year.

Speaker 2

The property costs relate to the sale of a legacy office in Manchester, which completes our corporate office space reorganization. This slide illustrates how our sizable attractive market opportunity flows ultimately into our strong order book and the visibility that we have on it. The government has committed to improving and renewing The U. K. Infrastructure and in June reaffirmed its ten year strategy, setting out total spending to 2,035 of £725,000,000,000 Also in June, as part of their comprehensive spending review, the government detailed their priorities in the next three to five years.

Speaker 2

This strategy and projected spend map to the markets served by our business via frameworks. Keyera is well placed to benefit as we currently hold positions on frameworks worth £156,000,000,000 These frameworks cover key areas of government focus such as health, education, defense, water and nuclear, as you can see on this slide. It is these frameworks from which projects are awarded to preselected contractors that provide the path by which we fill our order book, driving revenue growth, giving us confidence in the successful delivery of the long term sustainable growth plan. This slide considers our order book in more detail, standing now at a record £11,000,000,000 as Andrew mentioned. This order book gives us a clear view of future revenue and cash flows, representing 91% of FY 'twenty six revenue already secured and around 70% of FY 'twenty seven revenue.

Speaker 2

As I've just said, 60% of our order book is under target cost or cost reimbursable contracts or otherwise subject to a two stage pricing process, which reduces considerably a contract's risk profile. Furthermore, as we've just seen, our order book is fed by our sustainable long term framework agreements, where the value of the positions that we hold amount to £156,000,000,000 As you can appreciate, the combination of our strong order book underpinned by these framework positions illustrated here provides us with considerable visibility of future revenue streams and cash generation. Now let's turn to our cash flow. Adjusted EBITDA in the year grew 10% to £228,000,000 We then have £28,000,000 of working capital inflow, a great performance. It's worth noting that last year saw 17% revenue growth, which drove a higher working capital inflow, while FY 2025 saw revenue growth on our expected GDP plus levels.

Speaker 2

CapEx in the period amounted to £65,000,000 with £48,000,000 of that relating to payments made under leases now capitalized under IFRS 16. Net interest and tax increased by 13,000,000 in the year due to interest payments to new bondholders, which commenced in August 2024. The group's deferred tax asset of £137,000,000 relates to losses made in previous years, allowing us to offset half of our tax charge in any one given year, we anticipate it will take around seven years to fully utilize this asset. All this means that we generated significant free cash flow of £155,000,000 in FY 'twenty five with a conversion of 125%, significantly above our long term sustainable growth target. This strong cash generation has allowed the group to grow our cash balance while significantly increasing shareholder returns.

Speaker 2

Starting on the left hand side, with closing cash of £167,000,000 at June 2024, we then have the FY 'twenty five free cash flow of £155,000,000 that we've just seen on the previous slide. Next, we have the adjusting items of £18,000,000 significantly lower as we've seen in the £37,000,000 paid in FY 'twenty four, followed by the payment of £8,000,000 to our smaller pension schemes. The level of cash generation after these items provides us with considerable scope for capital allocation. Firstly, regarding dividends, it's notable that FY 2025 is the first year to include payment of both interim and final dividends totaling here £24,000,000 Then we have £51,000,000 of capital deployed to the property business. Lastly, we have the purchase of Keyr Group shares, both the shares bought under the share buyback program as well as the shares for the group's employee benefit trust.

Speaker 2

As a reminder, this trust acquires key shares from the market for use in settling the long term incentive plan scheme shares and the share size schemes when they vest. This results in a net cash position of $2.00 £4,000,000 a significant improvement, as we've mentioned, compared to the £167,000,000 at the start of the year. Now moving to Slide 15 and as a reminder of the significant progress we've made by effectively eliminating our average month end net debt. Over the last four years, we've reduced our average net debt and debt like items by over £500,000,000 a significant improvement resulting in just £49,000,000 of average net debt in FY 'twenty five. This slide sets out our long term funding arrangements that we have in place to support our strategy while retaining flexibility to deliver future growth.

Speaker 2

The long term financing of the group is provided through the £250,000,000 of five year senior notes expiring in 2029 combined with our £150,000,000 revolving credit facility, which runs to 2027. In January 2025, we fully repaid all of the outstanding USPP notes and £111,000,000 of the revolving credit facility matured, both in line with their agreements. For my penultimate slide, I'd just like to remind everyone of our capital allocation priorities. Overall, we're focused on optimizing shareholder returns while maintaining a disciplined approach to capital allocation and maintaining our strong balance sheet. In short, we target dividend cover of around three times earnings through the cycle.

Speaker 2

We plan to invest further in our Property business to generate consistent returns over time, deploying up to £225,000,000 of capital, targeting consistent long term return on capital employed of 15%. With regard to acquisitions, we will continue to consider value accretive acquisitions in core markets. Lastly, in January earlier this year, we announced an initial £20,000,000 share buyback program, further increasing returns made to our shareholders. I'll finish with a look at our shareholder returns. As we saw earlier, Key has an astonishing record of delivery in the period under Andrew's stewardship.

Speaker 2

Material improvements have been made to grow the order book, improve profits, grow cash flow and reduce net debt. All this combined with the substantial revenue visibility now provided by our order book and the pipeline of growth opportunities gives us confidence in the group's future prospects. It allows us to propose a final dividend of 5.2p or 7.2p in total for the year 2025, an increase of 38 versus the prior year and representing earnings cover of 3x, in line with our long term sustainable growth targets. This, combined with the £20,000,000 initial share buyback, shows that shareholders will continue to benefit from Keyer's significant financial improvement as well as the renewed strength of the group's balance sheet. And now before the last time I hand over to Andrew for his operational review, I'd just like to say thank you very much to Andrew.

Speaker 2

Thank you for his efforts, for his hard work in leading and putting together a great team, which has been very successful. And thank you very much for being a pleasure to work with. Congratulations for all of that success. And then, of course, finally, to wish him all the best for the future. And now for the last time, back to you, Andrew.

Operator

Thank you, Simon, and a real thank you to you as well for all you've done for the company. So if we move now to the operational update, and we'll start with Infrastructure Services first. In 2025, we saw revenue growth of 7%, driven by HS2 Capital Works as well as growth from water and nuclear projects, where our previously announced contract wins are now converting to revenue. In particular, our Natural Resources Nuclear Networks, or NRNN business, has continued to build on our strong position in water market as the operating companies in the sector commence the next investment cycle of AMP8. Adjusted operating profit was £111,000,000 representing underlying growth of 4%, allowing for a one off £6,000,000 customer gain in the prior year.

Operator

It's widely acknowledged that the industry remains affected by delays at the start of the works under control period seven for Rail and the deferred announcement of the RIS3 program for Highways. Nevertheless, the strength and breadth of our design and build business in Highways, where we maintain and build national and local Highways, and our excellent customer relationships, combined with our strong order book, allows us to continue to effectively manage risks and return in this segment, providing us with good current throughput and future visibility of revenues. If we turn to a slide which emphasizes the strong position Keyr has across The U. K. Water sector.

Operator

So here, we have a clear growth opportunity in what is a regulated market, which, of course, sits outside the public spending envelope. The AMP8 investment cycle is now well underway with operating companies set to deliver a significantly larger investment worth circa £104,000,000,000 to 2,030, and that's double of AMP7. As we said in the past, with the market doubling, we expect Cares activity to match that growth, thus doubling in the same time frame. The momentum and determination behind this level of investment is clear. An aging asset base, which needs replacing or refurbishing increasingly stringent environmental regulations and the focus on extending the life of existing facilities through maintenance.

Operator

The operating companies are thus turning to Tier one contractors to deliver these upgrade and maintenance programs, particularly those with specialist mechanical and engineering skills, where KIR is demonstrably well placed to take advantage of this opportunity. This slide sets out our UK footprint in water. We're one of the largest Tier one contractors supporting the regulated water companies with their asset optimization. As you can see, at June, we held positions on a total of 17 frameworks with nine water companies worth a combined £15,000,000,000 of spend opportunity. Moving next to our construction business, where we build schools, hospitals, prisons and defense projects for government as well as projects for the commercial sector.

Operator

Also included here is key places, our facilities management and housing maintenance business. Construction revenue remained steady overall at £1,900,000,000 During the year, we successfully delivered significant levels of work for the ministries of both justice and education, alongside starting work for HMP Glasgow for the Scottish Government, where activity levels will ramp up through 2026. We also acted to better position keyer places for enhanced future returns through the exit of some of the lower margin contracts, which Simon mentioned. The adjusted operating profit grew 8% to GBP 75,000,000, seeing the benefit of an improved business mix. And lastly, let's look at our Property business, which invests and develops commercial and residential sites, largely operating through joint venture partnerships to deliver urban regeneration projects right across The UK.

Operator

Operating profit grew significantly, driven by the higher volume of transactions Simon mentioned in the year compared to 2024 FY 'twenty four. Indeed, many transactions were achieved in the second half of the year as we continue to build momentum and scale in this business, and we expect this seasonal profile to repeat in FY 'twenty six. So just a reminder, we remain focused on the disciplined expansion of the Property business through selective investments and strategic joint ventures, with capital employed totaling 198,000,000 at June 2025. Our long term plan is to increase capital employed to £225,000,000 and we expect that this stable capital and the maturing partnerships will result in the business exiting 2027 on or around its targeted ROCE of 15%. So let's turn to our sustainability framework.

Operator

It's through this framework that we align our activity to our major clients, the UK government and regulated companies, by focusing on three key pillars: people, places and planet. As a reminder, our purpose is to sustainably deliver infrastructure, which is vital to The UK. As a strategic supplier to the UK government, ESG is fundamental to our ability to win work and secure positions on long term frameworks. UK government contracts above £5,000,000 require net zero carbon and social value commitments. And in order to help achieve these goals, we focus on our people pillar, which targets to build a workforce which has the relevant skills and capabilities to deliver these goals, ensuring where possible that everyone receives equitable treatment that our people reflect the communities where we live and we operate.

Operator

Secondly, leave a positive legacy in our communities through our places pillar. We do this through the projects we deliver and the people we employ within them, mindful always in addressing the challenges of inequality. And thirdly, as the stewardship of the planet is vital to all of us, we're reducing our carbon emissions and supporting our customers with their infrastructure requirements as they adapt to climate change. Our sites aim to protect and enhance nature as well as efficiently use resources on our projects. So just review our environmental progress as we see carbon reduction as both an obligation and an opportunity.

Operator

Overall, we're seeing increased demand from customers to deliver projects sustainably, which is reflected in our green economy mark accreditation. Our net zero targets for Scopes one, two and three have been validated by SBTI. And in line with these, we have reduced Scope one and two emissions by 4% in FY 2025 and by 71% since FY 2019, which is our baseline year. We continue to reduce our emissions according to our carbon reduction plan. In terms of our efficiency, we achieved a 3% reduction in our waste intensity overall in the year.

Operator

And secondly, we reflect on our social responsibility. Safety as ever is our license to operate, and we're pleased to report a 26% reduction in our accident incident rate in FY 2025. Keyer's performance depends ultimately on our ability to attract and retain a dedicated skilled workforce. During the year, this included five ninety apprentices with over 10% of the workforce in formal training and development or earn and learn programs. Furthermore, over 40% of our graduate intake in the year were female as we focus on making care a diverse and inclusive place to work, reflecting the communities we work within and we serve.

Operator

And turning to our supply chain partners. In FY 2025, over 60% of our subcontractor spend was with small and medium sized enterprises, while we continue to adhere to the prompt payment code. So before we come to our outlook, I thought I'd just remind everyone of our long term growth plan, which is laid out here and provides clear visibility of the direction of the group. We target revenue growth above GDP, driven by the attractive market dynamics, combined with our market leading positions. We're targeting to reach an adjusted operating margin of 4% to 4.5%.

Operator

For cash flow, we target around circa 90% conversion of operating profit and the achievement of average net cash position to allow us to invest surplus cash in those areas that will deliver increased shareholder returns. This includes a targeted sustainable dividend policy of circa 3% earnings cover through the cycle, which we have, of course, now delivered for this year. I'd now like to finish with a short summary and our outlook. The group has continued to make significant operational and financial progress in the year, delivering revenue growth with margins ahead of expectations and progressing well towards long term target range. We've continued to grow our order book to a record £11,000,000,000 providing us with significant multiyear visibility.

Operator

This has allowed us to significantly increase the proposed dividend payment, and we're well progressed with the initial £20,000,000 share buyback program launched in January 2025. And building on our outperformance in FY 2025, the group has started FY 2026 financial year well and is trading slightly ahead of the Board's expectations. And on a personal note, it's been a privilege to lead Keira over the last six point five years and to see the group transformed into a strong and sustainable business with enhanced resilience and a reinforced financial position. That transformation has only been possible due to the capability, professionalism and frankly, hard work of Keyur's teams and the support of our clients and our partners. I'd like to thank them all for their support and commitment in ensuring Keyers' continued success in delivering infrastructure that is vital to The UK.

Operator

And in particular, I'd like, of course, to wish Stuart and Simon the very best for the future and thank them both. And with that, I will open up the meeting to questions and answers. And I suggest we do questions first from the room, and then we'll take questions from the conference call. Thank you.

Speaker 3

Rob Chanchi at Berenberg. Thanks for the presentation. Obviously, congratulations on the delivery and your time in the business, Andrew. So three questions for me. So firstly, thoughts around, I guess, the debt position.

Speaker 3

Obviously, tremendous increase in delivery in recent years and kind of business moving towards an average net cash position. The 29 bond is trading well. Can you just remind us of the options available on the Refine? Any longer term thoughts around capital structure given the cash delivery? And I think secondly, clearly, you've been successful on getting on the GBP 15,000,000,000 of frameworks in Water, and Water revenue is set to double.

Speaker 3

Can you just talk, I guess, a bit more anecdotally around what surprised you about the evolution of that market in the past years? Has it been more competitive? Has it been things where you've done best than you might have expected, things that might be more challenging? Just how that market has evolved in terms of the contracting structure? And then thirdly, property, clearly, kind of a good step up this year.

Speaker 3

You're talking about 15% ROCE by '28, so that's 30,000,035 million pounds of EBIT. Could you just give us an indication of kind of what's working particularly well in that division at the moment, any indication of the shape of going from £12,000,000 EBIT this year towards 30,000,035 million pounds three years out would be very helpful. Simon,

Operator

do want to take the first and the third maybe? Yes. I'll do the middle one.

Speaker 2

Absolutely. So thanks, Rob. In terms of debt position, I mean we're very happy with the balance sheet, 49,000,000 of monthly average net debt is pretty much there, plus or minus zero. And as I've mentioned previously, I think we're comfortable really in going up to probably half a turn, plus or minus, on the balance sheet of EBITDA in terms of monthly average net debt. In terms of the refi, yes, we did that in February 2024.

Speaker 2

So the first time we could re fi the bond would be in February 2026. And you're right, it's trading very well. So that would give us an opportunity. And of course, we've got our half year results probably out March that year in 2026. So that might be a good opportunity if things remain the same to refinance.

Operator

And do property?

Speaker 2

I can cover off property as well first. So in terms of shape, it's probably going to be back end weighted, Rob. So I'd expect a small increment in this current financial year on last year before we really start towards the back end of FY 'twenty seven, delivering that 15% return on capital employed. And that's just sort of the nature of when you invest, it takes three years before you start to see the returns.

Operator

Rob, just on the microphone on. On the water question you're asking, I mean we do see our revenues doubling We've got material positions on all of the frameworks, circa GBP 15,000,000,000 by advertised values, positions on the frameworks which we've won. So we feel we are confident that we will double alongside Ampere. The competitive environment is they have sought out the water companies sought out Tier one contractors to deliver some of the larger schemes, and that's why we've been selected by many of the larger water companies to deliver out those.

Operator

But there are there is plenty of space within this sector for other companies to operate. But I think we're probably one of the leading Tier one companies operating in that sector. So yes, we're very confident over the next five years, certainly on AMP8 and probably thereafter, but we'll see what happens on AMP line, that water is going to become a mainstay of this company. There's no doubt about it.

Speaker 2

Andrew?

Speaker 4

Andrew Nussi from Peel Hunt. Two questions. First of all, Simon. When we look at the profit bridge, obviously, inflation and management actions are pretty big chunks there. What are the thoughts in terms of 2627% in the ability to keep driving management action offset those inflation pressures is the first one.

Speaker 2

Okay. Yes. So firstly, I think inflation, the number that you're seeing there, obviously, our projects are quite long term. So you're seeing the impacts of prior, a couple of years ago, inflation there. So I would expect firstly the inflation number to start to tail off a little bit.

Speaker 2

And then in terms of management actions, I don't think for any question, we'll be able to continue to more than offset that.

Speaker 4

Okay. Thank you. Second question is actually for Stuart. Obviously, you've led the construction division, which has been a leader in terms of modern methods of construction and digital tools. I'm just curious, when you move into the CEO role, what other opportunities can you see for those developments across the group?

Speaker 4

And what might that mean?

Speaker 1

Okay. I'll stand up. I was enjoying sitting in the audience. I think the most important thing to start with is in terms of we're not being complacent, although we're already sitting with £11,000,000 order book. I'm a big fan in terms of AI and digital, first of all, in particular, the work we've been doing around Digital Twin in terms of how that drives energy efficiencies and also product improvements.

Speaker 1

But alongside that, in terms of Simon's team is already using bots at weekends to run around to look at our administration improvements. Alongside that, to make sure it's really important with AI that we create a safe environment for us to use. So we're working with our IT providers in terms of how we can do that. And even more importantly is to make sure that when we do have that technology in the business, we have a workforce that is comfortable and can embrace that technology to make the most of it. Regarding MMC, again, we haven't been complacent.

Speaker 1

And what we've been looking at is rather than just concentrating on volumetric, we've been looking at all forms of MMC to ensure that we can come up with the appropriate solution for our customers. And there are two key themes that I would take around from MMC. First of all, if you don't have the design right, you lose the benefits of MMC. So one of the huge benefits we have across the group is we were already sitting with 700 designers that can help us. And the other point in terms of that is just to remember that provides us the opportunity to working with new clients like the defense when they're bringing out volumetric and single limb accommodation in terms of two d models, we can provide very cost effective designs for them to actually start working through at scale.

Speaker 1

The other key factor on MMC is you've got to have integration with the M and E. So again, in terms of care, we have our own in house M and E company that can help bring those both design and M and E to the forefront of any MMC solution. Thank you.

Speaker 5

Thanks very much. Johnny Kubra from Deutsche Numis. Could I ask firstly on Living Places? You mentioned exiting some underperforming contracts. Were those always underperforming?

Speaker 5

Or has something changed there? And how does the portfolio look today? Follow-up another question would be on property. What was driving the increase transactions? Was there any particular sector there?

Speaker 5

And then last one, probably a follow-up on MMC, where you're able to access R and D tax credits. Is that predominantly in where you've been using MMC?

Speaker 3

And a bit of detail there, please.

Operator

On I'll take the first one, Simon, but I'll take the second and third. On the living places, the key to getting efficiencies in housing maintenance is density. So you may have some very effective contracts, but if you don't have the density, you won't get the utilizations you need to make the monies you need. So we elected to exit certain contracts where we didn't feel we could get the density around those contracts to make it profitable. We're focusing now on areas where we can get the density in both reactive and planned maintenance as well.

Operator

So I think that was a fairly straightforward set of actions, which the team just delivered very effectively. So we're pretty pleased where we find ourselves now. We do think in the future that, that will be an area of growth as society seeks to upgrade affordable housing, in particular. So we want to stay heavily connected to that. Simon, do you want to take the one on property, the Australian transactions?

Operator

Yes.

Speaker 2

I mean property, John, it's just across the board really. So the three segments that we serve really pretty much equal in transactions, so nothing really standing out. And then in terms of R and D tax credits, this isn't just focused on MMC. Mean Stuart touched on it, 700 designers go to it, and it's between one hundred and two hundred projects a year that it's spread across. So it's not one big chunky claim.

Speaker 2

It's lots and lots of new claims.

Operator

Okay. Adrian?

Speaker 6

Adrian Kearsey, Permulibrum. Another question on property, if I may. Simon, you talked about the lead time for property being sort of three years in order to get projects sort of from start to finish. And so therefore, you've got a building visibility. Could you give us some idea within that sort of three year sort of timeframe, what types of property are you looking to develop and deliver?

Speaker 6

And also what kind of development relationships you have and perhaps give us an indication of how much JVs are going to be used within that context?

Speaker 2

Yes. So as in JVs, we use extensively. That allows us to keep the amount invested in any one project small and hence spreads risk and helps keep liquidity in the portfolio. So we intend to use JVs extensively. Where we focus on is last mile logistics, mixed use residential, redevelopment projects and, of course, environmentally friendly offices as well.

Speaker 2

And so those are the three sectors that I think we'll continue to focus on going forward.

Operator

You mentioned the three year gestation. That's what gives us the confidence because we're putting the increased capital into that. That will take a period to gestate whether three years or slightly more, slightly less. It's never a precise number like that, but that's where we get the confidence. And where we're getting the performance is out of the preexisting financial investments we've made.

Operator

So we put more money into that in the same strategy in the similar sort of areas, which are paying well for us. That's why we're confident that this thing will grow to 2027, hitting the 15% ROCE target. Any more questions? Are there any questions online? No?

Speaker 3

At present, we have no questions on the conference call.

Operator

Then with that, can I Can I just stop you there? I

Speaker 4

just thought, as perhaps one of the elder statesmen in the room, really just like to acknowledge all your efforts on behalf of the city over the last few years. 2019 seems like quite a long time ago, but Slide five clearly articulated the progress. So I appreciate it's a team effort, but you put the band together. So on behalf of the city, well done.

Operator

Andrea, it's very kind of you. Thank you. That's probably why I have the gray hair I have hanging in there. But could I thank everybody in this room and my team, present and past, for their enormous efforts and support. And thank you for your help and advice over the years.

Operator

It's been hugely appreciated. And I think we've got a great company back to exactly where it needs to be. And I again wish Simon and in particular to Stuart the very best of luck in the future. They won't need luck. They're a great team, and they'll continue to do the great work.

Operator

So thank you all very much.

Powered by Quartr